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Volume 523, May 1 – May 4, 1942
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Volume 523, May 1 – May 4, 1942
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 523
May 1-4, - 1942
- A -
Book Page
Agriculture, Department of
See Financing, Government: War Savings Bonds
Airplanes
Aircraft despatched, week ending April 28, 1942 -
British Air Commission report - - 5/1/42
523
119
Shipments to British Forces, week ending
April 28, 1942 - Kamarck report - 5/4/42
302
Argentina
See Latin America
Atlantic and Pacific Tea Company, Great
See Inflation
- B -
Baltimore, Maryland
See Financing, Government: War Savings Bonds
Business Conditions
Haas memorandum on situation, week ending May 2, 1942 - -
5/4/42
286
- C -
Casaday, L. W.
See Financing, Government: War Savings Bonds
# United Kingdom
China
HMJr's messages to Chiang and Kung immediately upon
return of Fox - 5/1/42
127,129
(See also Book 525, page 322 - 5/7/42)
Adler told Treasury prefers that November 1 agreement
continue in effect - 5/1/42
130
Economic report from Adler - 5/1/42
132
New Accounts with Federal Reserve Bank of New York:
Titles of confirmed - - 5/4/42
308
Civil Aeronautics Administration
See Procurement Division
Coast and Geodetic Survey
See Procurement Division
Correspondence
Mrs. Forbush's resume' - 5/1/42
72
Customs, Collector of
See Puerto Rico
- D -
Denmark
Gift Service with Greenland - cable concerning transmitted
by State Department - 5/4/42.
314
Durning, Harry
Gaston recommends for Maritime Commission - 5/1/42
3
Dutchess County
See Financing, Government: War Savings Bonds
Regraded Unclassified
- 1 -
Book Page
Ecuador
See Latin America
Exchange Market
Resume's 5/1/42,
523
148
- 7 -
Farm Security Administration
Budget cut - HMJr opposes to Senator Russell,
Agricultural Subcommittee - 5/1/42
82
a) Russell inserts in Congressional Record -
5/19/42: See Book 529, page 278
Financing, Government
"Treasury War Borrowing and the Banks" - report by
Economic Policy Commission, American Bankers
Association - 5/1/42
91
Government Securities - recent changes in prices
and yields - 5/1/42.
94
War Savings Bonds:
Increased Earnings and Savings:
Reviews by Odegard and Gamble - 5/1/42
32,42
Baltimore Area:
Review by Likert (Department of Agriculture and
Office of Facts and Figures) - 5/1/42
46,224
(See also Book 524, page 31; Book 530, page 272;
Final complete report: Book 531, page 3 Book 532, p.247)
a) Conference; present: HMJr, Haas, and
Likert: Book 531, page 240
Ruml, Beardsley: Suggested by HMJr and Gaston
to make study - 5/22/42: Book 530, page 273
a) Conversation with. - 5/22/42:
Book 530, page 276
Kitchell, Alma: Experience reviewed by Callahan -
5/1/42
52
Issuing Agents: Abbot L. Mills reports on Federal
Reserve Districts - New York, Philadelphia,
Cleveland, and Chicago - 5/1/42
54,264
Progress report - 5/1/42
60
Payroll Savings Plans - analysis of exposure to -
5/1/42.
71
British Voluntary Savings Campaign:
Casaday's first report on - 5/2/42,
169
.
second # = 5 Book 525, page 327
a) HMJr thanks Casaday: Book 524, page 109
Odlum, Mrs. Floyd: HMJr disapproves of as speaker in
Chicago - - 5/4/42
225,230
Conference; present: HMJr, Henry III, Gamble, Kuhn,
Tickton, Mills, Haas, Bell, Kilby, and Ziegenfus -
5/4/42
228
Dutchess County: Special representative to be
stationed there - 5/4/42
254
Four-page letter returned by FDR with advice to cut
to 12 pages - 5/4/42
258
- 1- (Continued)
Book Page
Foreign Funds Control
Latin America: Report on experience of representatives
there - Towson, Mann, and Timmons - 5/4/42
523
299
- G -
Glasser, Harold
Return from Ecuador on May 19 approved - 5/4/42
312
Great Britain
See Iran
Greenland
Gift Service with Denmark - cable concerning
transmitted by State Department - - 5/4/42
314
- H - -
Haas, George C. - Colonel
Patterson and HMJr discuss after Stimson turns down
HMJr's request - 5/4/42
281
- I -
Inflation
For Increased Earnings and Savings study by Likert in
Baltimore area, see Financing, Government: War Savings
Bonds
Atlantic and Pacific Tea Company, Great: Sales
conditions reports - 5/1/42.
30,188
(See also Book 524, pages 62 and 214; Book 525,
page 55; Book 526, page 52; Book 527, page 16)
J. C. Penney, Safeway Stores, Incorporated, Sears-
Roebuck asked reaction to price ceiling order -
5/4/42
219
a) Safeway Stores, Incorporated: See Book 526,
page 53 - - 5/8/42
b) Sears-Roebuck: Book 526, page 54; Book 527,
page 18; Book 528, page 387
Iran
"Great Britain paying E5 million a month to keep
neutral" rumor discussed at 9:30 meeting - 5/1/42
13
British-Iran agreement concerning purchase of Iranian
rials - 5/4/42
319
(See also Book 528, page 276 - 5/14/42)
- J -
Japan
Pilot Supply - Kamarck report - 5/4/42.
306
Johnson, "Nucky"
See Tax Evasion
- K -
Kitchell, Alma
See Financing, Government: War Savings Bonds
- L -
Book Page
Latin America
See also Foreign Funds Control
Argentina:
Axis Assets: Monthly review of developments on
freezing, etc. - 5/1/42
523
124
Ecuador:
Glasser, Harold: Return on May 19 approved - -
5/4/42
312
Lend-Lease
Report for week ending May 2, 1942
189
United Kingdom:
Dollar position discussed by Phillips, Bewley, and
White - 5/2/42
161,163
Likert, Dr. (Agriculture Department and Office of Facts and
See Financing, Government: War Savings Bonds
Figures)
- M -
Mann, James H.
See Foreign Funds Control: Latin America
Merillat, Herbert
Editorial Opinion on the Home Front: The Seven Points -
5/1/42
112
Military Reports
British operations - 5/1/42, etc
149,193,
195,313
Coordinator of Information reports:
British Political Warfare Executive Weekly German
Directives - 5/1/42, 5/4/42
150,324
Italian Directive of British Political Warfare
Executive - 5/1/42
152
Home Intelligence report for week ending
April 29, 1942 - 5/1/42
155
French Directive - 5/4/42
322
Kamarck summary - 5/1/42
158
Mills, Abbot L.
See Financing, Government: War Savings Bonds
- 0 -
Odlum, Mrs. Floyd
See Financing, Government: War Savings Bonds
- P -
Penney, J. C.
See Inflation
Procurement Division
Coast and Geodetic Survey and Civil Aeronautics
Administration: Procurement of commercial vehicles
for - 5/1/42
104
Puerto Rico
Collector of Customs reserve now $800,000; disposal
discussed at 9:30 meeting - 5/1/42.
2
- R -
Book Page
Reader's Digest
Article on case of "Nucky" Johnson - tax evasion -
5/1/42
523
110
Revenue Revision
Conference on way to office; present: HMJr, Paul,
and Blough - 5/1/42
22
a) Excess profits tax plan worked out by Treasury
and Joint Committee,
24,26
b) 94% excess profits decided upon after
Executive Session of Ways and Means Committee
27
Roosevelt (Frenklin D.) Library - Hyde Park, New York
Notes on - 5/1/42,
111
Ruml, Beardsley
See Financing, Government: War Savings Bonds (Increased
Earnings and Savings)
Russell, Richard B. - Senator
See Farm Security Administration
- S -
Safeway Stores, Incorporated
See Inflation
Sears-Roebuck
See Inflation
Silver
Supplying silver market with approximately 5 million
ounces of "free silver" held by mints and classified
as "Silver Ordinary" to alleviate present severe
shortage - Foley memorandum - 5/1/42
1,01
Stabilization Fund
Status of as of May 2, 1942
192
Switzerland
Financial situation as result of blocking of funds in
United States - 5/1/42.
143
- T -
Tax Evasion
"Nucky" Johnson - article on case in Reader's Digest -
5/1/42
110
Taxation
See Revenue Revision
Timmons, B.E.L.
See Foreign Funds Control: Latin America
Towson, Norman E.
See Foreign Funds Control: Latin America
- U - U -
Book Page
United Kingdom
See also Lend-Lease
British Voluntary Savings Campaign:
Casaday's first report on - 5/2/42
523 169
.
second #
# : See Book 525, page 327
a) HMJr thanks Casaday: Book 524, page 109
- W -
War Savings Bonds
See Financing, Government
1
May 1, 1942
9:30 a.m.
GROUP MEETING
Present: Mr. Gaston
Mrs. Klotz
Mr. Sullivan
Mr. Buffington
Mr. Bell
Mr. Thompson
Mr. Schwarz
Mr. Kuhn
Mr. White
Mr. Haas
Mr. Foley
H.M.JR: George, when do I get this thing again? This
is April 22.
MR. BELL: You get it next Monday, don't you, every
week?
MR. HAAS: No, this is a monthly thing.
H.M.JR: Monthly?
MR. HAAS: Yes.
H.M.JR: All right.
MR. HAAS: Shall I take it back?
H.M.JR: Well, you had better leave it here until I
get a new one.
MR. HAAS: All right. You will get it about the - I
Regraded Unclassified
2
- 2 -
think they do that about twenty days after the close of the
month. You see, those reports come in from each company.
H.M.JR: Herbert?
MR. GASTON: Our Collector in Puerto Rico has accumu-
lated a reserve fund anticipating that the collections
might fall off. She has accumulated a reserve fund of
eight hundred thousand dollars which I think is 8. pretty
large reserve fund. You know, the surplus collections
according to law in Puerto Rico are paid from time to
time to the Territorial Treasury. They pay the Treasury
out of their collections and remit the balance to the
Treasury. The collections have increased in the last year
and a half and she has hiked her reserve fund from a total
of a hundred and ten thousand dollars to a total of eight
hundred thousand dollars. They have enough money to run
the shop for three years if collections should fall off
completely. We are taking up with Dan Bell's department
a little better system for accounting there, but I also
think that we want to cut her down on that reserve fund.
I don't think that any such sum is necessary. I think
five hundred would probably be 8. great plenty.
H.M.JR: I didn't know there was such a thing.
MR. GASTON: It is rather interesting.
H.M.JR: Anything else, Herbert?
MR. GASTON: I sent out the message to Detroit to get
that information Biddle wanted about the German film being
shown out there. I haven't gotten 8. reply yet.
H.M.JR: You will be amused that the President sent
me yesterday a complaint against the Coast Guard over his
own signature.
MR. GASTON: He did?
H.M.JR: But I didn't think he would appreciate my
humor so I just forwarded it directly to Waesche.
3
- 3 -
MR. GASTON: I got a telegram here day before yester-
day from a naval officer up in Alaska saying, "Revoke your
order of so and so about the hours that they entered certain
ports there." Of course the Secretary of the Navy can re-
voke it but we can't revoke it. I noticed some gossip about
a change in the Maritime Commission, the suggestion that Joe
Kennedy might replace someone over there. I have got a
suggestion of a man who would be good.
H.M.JR: Who?
MR. GASTON: Harry Durning. He knows the people and
he is a real driver. He is really loyal to the Adminis-
tration. He could handle it.
(Mr. Graves entered the conference.)
H.M.JR: It is an idea. The President hasn't asked
me.
Mr. Foley?
MR. FOLEY: We are working on a contract with the
Defense Plant Corporation. You wanted the commitment in
regard to the return of its commitment guaranteed by the
RFC because the commitment guaranteed by the Defense Plant
Corporation doesn't mean very much. They balked a little
bit but - they are a little gun shy now, so I think they
are coming through.
H.M.JR: Did you make a move on your Crowley matter?
MR. FOLEY: I did. I had a conference yesterday after-
noon, and they are studying the papers.
H.M.JR: They are studying it?
MR. FOLEY: Yes. Our receipt and their order appeared
in the Federal Register yesterday morning. They were pub-
lished together.
H.M.JR: You (Buffington) might ask Purcell the next
time you talk to him - you see I wouldn't call him up for
Regraded Unclassified
4
- 4 -
this, George, but Crowley opposes break up of Standard
Gas System, you see. That was in yesterday's Times on
the financial page. Ask him how they feel about that.
The interesting thing, "Because of high position in
Administration circles, Mr. Crowley's stand on the inte-
gration of the death sentence provision of the Holding Act
was considered of prime importance, particularly in view
of the fact that last week the SEC in its final report to
Congress said there should be no moratorium on the death
sentence because of the war." I just wondered - you are
talking to him all the time and when he calls you up -
get this thing, because I want to keep this one for my-
self and ask him whether he is in tune with Crowley.
MR. BELL: I suppose there might be some accounting
problems to work out on that silver thing. I would like
to see that contract before it goes through. We ought to
have some time to work out how we are going to show that on
our statements.
MR. FOLEY: I will show it to you as soon as it is in
shape.
H.M.JR: Mrs. Klotz asked me to ask you, "What about
the President sending us over this letter?"
MR. FOLEY: I called Grace and she wasn't there, and
her assistant wasn't there and Forster wasn't there, and I
am going to call them this morning.
H.M.JR: I have got to clear that one way or the
other this morning.
MR. FOLEY: I think that that was that is the
original of Jesse's letter, a copy of which he sent to us
ten days ago. I think they just got around to sending it
over. You see, the President's notewas dated the twenty-
ninth and the letter was dated about the twentieth.
H.M.JR: Will you clear it this morning, Ed?
MR. FOLEY: I will clear it this morning.
Regraded Unclassified
5
- 5 -
MR. SULLIVAN: You recall that college, a colored
beauticians' school in Chicago?
H.M.JR: I do not.
MR. SULLIVAN: Mrs. Roosevelt was interested in it.
They owed us fifty thousand dollars in taxes. Last May
we compromised it for seventeen thousand. They have only
paid four of that, and they are not cooperating in any
way at all, and the Commissioner wants to go after them.
H.M.JR: It is all right with me.
MR. SULLIVAN: You had had some correspondence with
Mrs. Roosevelt and that is why I am telling you. We are
going ahead on it.
H.M.JR: Do I get a report, Norman, on what Mr.
Spingarn did?
MR. THOMPSON: Yes, I gave you a report.
MRS. KLOTZ: It went to Mrs. Roosevelt.
H.M.JR: The one I read was the one that went to Mrs.
Roosevelt?
MR. THOMPSON: Yes, sir.
H.M.JR: There has been no subsequent one?
MR. THOMPSON: There was one ahead of that saying
practically the same thing.
MR. FOLEY: Steve Spingarn has received a commission
as a captain.
H.M.JR: In what?
MR. FOLEY: Well, they actually issued it in the Air
Corps, but he is going to be assigned to General Carter,
who is in Ordnance.
6
- 6 -
H.M.JR: We know General Carter. He is an accountant.
MR. FOLEY: He is going to be General Carter's lawyer.
H.M.JR: He is an accountant, isn't he?
MR. BELL: Yes, I understand he is.
H.M.JR: Yes, he was the head of some accounting firm.
MR. FOLEY: Oh, I know him, too. He used to be
Colonel Carter.
H.M.JR: Some New York accounting firm.
MR. FOLEY: Yes, that is right. I went turkey shoot-
ing with him a few years ago, yes.
H.M.JR: Could he hit a bull's-eye?
MR. FOLEY: Sure, he is a good shot.
H.M.JR: I don't know--
MR. BELL: He is a big shot now. (Laughter)
H.M.JR: He is the fellow that had this cost plus
business.
MR. FOLEY: I didn't connect it to him at all. He
is a nice fellow.
H.M.JR: Well, he is "General Carter, CPA." That
isn't a British decoration, either.
MR. SULLIVAN: Do you remember we got a hundred and
eighty-one of those big war contractors' names from Nelson?
H.M.JR: Yes.
MR. SULLIVAN: I have phoned three times since over
the last six days, and we haven't the others, so I am ask-
ing George, who does more or less business with Nelson's
Regraded Unclassified
7
- 7 -
fellows over there, to get the rest of them. We talked
yesterday afternoon, and I asked him to wait until this
morning to see if they came in, and they haven't come in.
I don't understand it.
H.M.JR: Isn't that funny. Want me to call?
MR. SULLIVAN: No. I have talked to him twice, and
I have talked to his secretary. They said they were getting
them ready. That shouldn't take six days.
H.M.JR: Is that all?
MR. SULLIVAN: That is all.
H.M.JR: George?
MR. BUFFINGTON: Nothing.
H.M.JR: George is heading up a new sales organization
without quotas. The sky is the limit. He is sales manager,
publicity manager, radio manager, and--
MR. SULLIVAN: Have you got any tires to sell?
H.M.JR: He has got fifteen thousand high-powered
salesmen working under him, plus Eccles. (Laughter) It
is entirely separate. It is the Security Dealers of
America.
MR. KUHN: We really have those films of the Town
Meeting. They last for six minutes.
H.M.JR: How much?
MR. KUHN: I am told six minutes. I haven't seen
them myself.
H.M.JR: Maybe I can see them right after lunch.
MR. KUHN: I am not sure that the theater is - I think
the soldiers use it after lunch.
Regraded Unclassified
8
- 8 -
H.M.JR: They last six minutes? Well, I will have
Stephens figure it out.
MR. KUHN: There are some OCD people that are very
anxious to see those. Can I ask them to come over some-
time this morning?
H.M.JR: Well, you run it independently. I may get
a chance to do it, you see.
MR. KUHN: But you wouldn't mind if I asked them over
here to see it before you did?
H.M.JR: I would be delighted. I am not a first-
run theater man. Stay behind, will you. I want to talk
to you about something.
Harold?
MR. GRAVES: Nothing.
H.M.JR: Harold, at lunch today will you bring up to
me, what system we are using. Now, I have got this book
of the five hundred companies, you see.
MR. GRAVES: Yes.
H.M.JR: Now, the first five are U. S. Steel, General
Motors, Bethlehem, Pennsylvania, General Electric, on the
basis of number of employees. What can I do to get U. S.
Steel, for instance, to put in a plan similar to General
Motors? Or Bethlehem Steel or Pennsylvania to put a drive
on?
MR. BELL: You mean a program like that?
H.M.JR: Yes, not a fiscal agency, a program.
MR. GRAVES: Bethlemen Steel has included a drive.
It was in the New York Times of yesterday.
H.M.JR: I saw it.
9
- 9 -
MR. GRAVES: That is involved in this proposition
that I have told you about for us to take the road and go
to these big states and talk with our people in each state.
We are taking with us lists of all the corporations in
each state.
H.M.JR: Yes, but that all revolves around you, and
you won't be getting to it next week, as far as I know.
There are some things I can do, for instance, like U.
S. Steel or something.
Well, the whole list of five hundred. I mean, I
would be willing to send a telegram to the presidents of
the companies or something. I don't want to - I can not
wait so long, Harold.
MR. GRAVES: We might communicate--
H.M.JR: May I give you an assignment. When you come in
at noon today at lunch, talk it over. I want a definite
suggestion from you what I, as Secretary of the Treasury,
can do to contact the presidents of these companies and ask
them whether they won't put in a plan, and say, "What can
we do to help? We could make available the General Motors
plan, or the people, for you. What can we do to help," you
see. Here it is the first of May and - I mean I am perfectly
willing to send a telegram to every one of these fellows and
then a copy goes to the state administrators. I would like
to send a telegram to every company that hasn't got a plan
in to go after the ten-percent quota.
MR. GRAVES: Every company that has a plan?
H.M.JR: No, that has not.
MR. GRAVES: No, they all have plans, Mr. Secretary,
except about ten of that five hundred.
H.M.JR: Let me say it over. To the four hundred ninety
on this list, I would like to send a telegram asking them to
put on a drive to get the ten percent.
MR. GRAVES: Yes, that is right.
H.M.JR: And I am perfectly willing to start & barrage of
telegrams and telephone calls right from this desk, Harold.
MR. GRAVES: Yes.
10
- 10 -
H.M.JR: But until you fellows get around on your visit -
you are not going to do it next week, it is a week after,
and I can't wait.
MR. GRAVES: This doesn't meet your point very well,
but you will remember that we sent out, two or three days
ago, to every one of our twenty thousand companies this
letter of yours over your name.
1
H.M.JR: Now, I want to send a personal telegram
which would be on this fellow's desk Monday morning,
very personal. "My dear Mr. President: President of
the U.S. Steel. As far as I know your company has
not inaugurated a plan to bring up the average pay-
roll deduction to ten percent. What can I do to help
help you get it started?" See?
MR. GRAVES: Yes.
H.M.JR: What can I do to help them get started.
"I would appreciate an answer from you. What can I do
to help you?" I think that would be the approach. Be-
tween now and lunch time.
MR. GRAVES: I will have something at twelve forty-
five.
H.M.JR: I am getting 8 little restless. Have you
got something?
MR. GRAVES: No, I have nothing.
H.M.JR: George?
MR. HAAS: The only thing I have, would you like to
take a few minutes to look at some lay-outs of charts
we are working on for this room?
H.M.JR: When?
MR. HAAS: Any time, Mr. Secretary.
H.M.JR: I can do it right after this meeting if you
are ready.
MR. HAAS: All right.
11
- 11 -
H.M.JR: I would just like to report that Mr. Bell
and Mr. Haas and Mr. Henry Murphy did a very fine job
all week for me on this new financing. If you haven't
seen it, it is quite new and we have hopes it will be
successful. The principal change in it was that the
Federal Reserve, for about two months, were recommending
that we sell tap issues which would be demand issues.
Isn't that right?
MR. BELL: That is right.
H.M.JR: And they have changed from the recommendation
of demand issues to - what do you call it, bearer?
MR. BELL: No, registered.
H.M.JR: Registered, which is all the difference between
day and night, and we are now going, starting Monday -
anybody can buy any quantity of - it will most likely be
a 20-25 year two and a half percent bond but it is not
salable to the banks for the first ten years. We will
see what happens. That is what the salesmen are going
to go to work on.
MR. GASTON: It is a registered issue not transferable
to a bank?
H.M.JR: A bank can't buy it for the first ten years
it is outstanding.
MR. SULLIVAN: Will they take it as collateral?
MR. BELL: They can take it as collateral. They
have to dispose of it if they take it--
MR. SULLIVAN: I see.
MR. BELL:
under fault, the same as they have
to dispose of other assets not eligible for bank holding.
MR. GASTON: Freely transferable between other indivi-
duals and corporations?
Regraded Unclassified
12
- 12 -
MR. BELL: That is right. It is a marketable
security just like any other registered security
except the banks can't own it.
H.M.JR: They can't transfer it for sixty days.
MR. SULLIVAN: All banks or just national banks,
Dan?
MR. BELL: All banks accepting demand deposits.
H.M.JR: And then the other important thing is,
the Federal Reserve guarantees to maintain the bill
rate at not higher than three-eighths of one percent.
Graves, you wanted to see those charts, didn't you?
MR. GRAVES: I would be glad to.
H.M.JR: When George brings them, just take a minute.
Where are they, George?
MR. HAAS: I can get them started.
H.M.JR: Why don't you phone them? Chick?
MR. SCHWARZ: I have nothing.
H.M.JR: Mr. White?
MR. WHITE: Phillips was here day before yesterday
and left a memorandum giving their concept of how the
British Lend-Lease in reverse procedure should operate.
The policy that they would like to see initiated is -
I have it here and I think you might like to glance at
it over the week end, or devote fifteen minutes or so
sometime next week to go through it.
H.M.JR: I would rather have you come in and sit
down with me, Harry, next week.
MR. WHITE: Bewley was in to show me some telegrams
that he received with respect to the Persian matter.
Regraded Unclassified
13
- 13 -
One of the things that they have requested of us, the
State Department requested of us and he repeated, was
whether we would purchase through the Stabilization
Fund Egyptian pounds and then sell those Egyptian
pounds to them. It is an operation which would cost
us nothing. There is no risk involved. The Stabilization
Fund has never done anything of that character. I said
I thought we would, but I would take it up definitely
when they came to a definite agreement with the Persian
Government. Apparently it is going to cost them less
than they thought it was. They thought it would be
five million a year.
H.M.JR: We just act as a sort of a clearing house?
MR. WHITE: That is all, for the peculiar reason
that they think it will save their face if we buy the
Egyptian pounds and sell it to them rather than if they
buy it directly, because they have taken the position
with the Egyptian Government that they would not do so
and they don't want to be placed in the position before
the Egyptian eyes of having to retract their former
statement. I don't think it will fool anybody.
H.M.JR: Well, before you do it will you clear it
with me once more?
MR. WHITE: Yes, and I will clear it with others
as well. There was an embargo placed on silver--
H.M.JR: You wouldn't know it but my understanding
is that the British Government are paying somebody in
Persia five million a month to stay neutral, isn't that
it?
MR. WHITE: I don't know as you would want to put
it that way. They are not neutral in any case. I don't
think five million pounds will make them neutral. They
hate the British guts and five million won't buy them
off, but they have been insisting on getting gold in-
stead of sterling and they have reached an impasse be-
cause the British absolutely had to have Egyptian currency
with which to pay their soldiers.
H.M.JR: What is the five million for?
14
- 14 -
MR. WHITE: Five million was going to be to give
them gold, not to keep them neutral, but so the British
could get currency with which to pay their soldiers.
H.M.JR: Pay whose soldiers?
MR. WHITE: British soldiers.
H.M.JR: Oh, British soldiers?
MR. WHITE: And pay some other expenses.
H.M.JR: I thought this was a straight payment to
the Persians.
MR. WHITE: It is a payment. Persia will give them
the paper currency and has been giving it to them hitherto,
but now it refuses to give them any more unless they get
gold. They will not take any more sterling. Now, it
is true that it is partly to keep them neutral or to keep
them in as good humor as is possible under the circumstances.
H.M.JR: But this payment goes to English soldiers in
Persia?
MR. WHITE: No, it goes to the Egyptian Government
who in turn gives them Egyptian currency, and the currency
goes for British expenses in Persia.
H.M.JR: Say that again.
MR. WHITE: The Egyptian Government gives the British
Government local currency. The British Government gives
the Egyptian Government gold, or they will give them gold
instead of sterling as they have been giving them hitherto.
Sterling balances which the Egyptians justly say they
can't use anyway. The Egyptians - the British Government
then takes the local currency and pays their expenses in
Egypt.
H.M.JR: Pays whose expenses?
MR. WHITE: British Government's expenses.
15
- 15 -
H.M.JR: In Egypt?
MR. WHITE: Yes, soldiers and supplies.
H.M.JR: What has that got to do with Persia?
MR. WHITE: Oh, did I say Egypt? I meant Persia
right along, Iran. Forget Egypt. Egypt is another
matter.
H.M.JR: You said Egypt right along.
MR. WHITE: I was in error. There was another
story about Egypt. That is why I had it in my mind.
Egypt has got nothing to do with this.
MR. BELL: Say it again.
(Discussion off the record.)
MR. WHITE: There has been an embargo placed on
silver exports by the Board of Economic Warfare some
time ago. I thought you would be interested in knowing
that. There is also being contemplated priorities in the
use of silver in the United States. In fact, some of
it has already started, though I don't think it is
official. Did Mr. Baldwin get in touch with you?
H.M.JR: Yes, the letter is in the process of being
written.
MR. WHITE: Good.
H.M.JR: Most likely it won't be what he wants,
but it will be as good as the letter I wrote for NYA.
MR. WHITE: It should be better, Mr. Secretary,
for you to be consistent.
H.M.JR: I will be consistent.
MR. WHITE: Well, if you are consistent it will be
a good letter because you took a very definite position
on Farm Security.
Regraded Unclassified
16
- 16 -
H.M.JR: We are going to quote that. Is that right,
Dan?
MR. BELL: Yes, sir.
MR. WHITE: Would it be asking too much if I could
take a look at it before you sign it?
H.M.JR: No.
MR. BELL: You can write it if you want to.
MR. WHITE: If Mr. Bell is too busy I would be
glad to write it. (Laughter ) Or even if he isn't
too busy.
MR. BELL: It came out after all.
H.M.JR: I think with this Egyptian connection,
you had better let Bell write it.
MR. WHITE: Well, I will see it before it goes?
H.M.JR: Yes, Mr. Bell says he will be delighted
to let you see it.
MR. BELL: I certainly will.
MR. WHITE: The Cuban report was handed to the
Cuban Government. We have now sent one man from the
Treasury and one man from Farm Credit down to Cuba
to prepare the draft of the agricultural bank and
we probably will now have to send somebody to Guatemala,
because we promised we would do so after the Cuban
report was ready, but I will let you know when that
time comes. I think the time may be ripe--
H.M.JR: How long are you going to have somebody
down in Guatemala?
MR. WHITE: Oh, not long, a few weeks.
H.M.JR: My candidate won't do.
MR. WHITE: We can keep them as long as you want.
(Laughter)
H.M.JR: All right.
17
- 17 -
MR. WHITE: I am wondering whether you might not
think it wise to appoint a small committee to prepare
both legislation and a report for the cessation of
expenditure on armaments the moment either armistice -
whenever the President sees sit. We are spending a
hundred million dollars a day. There doesn't seem to
be any earthly use for those expenditures. The moment
the war stops - last war I think we spent a lot of un-
necessary funds, and something could be worked out to
take care of the people who would be unemployed, and
still save the Treasury an awful lot of money. Now,
when that will be necessary, I don't know; but I should
imagine there is a lot of preparatory work to be done
before you could get an appropriate plan tucked away to
bring out when--
H.M.JR: Well, give me a little memo on it, just
what you have in mind.
MR. WHITE: All right. That is all I have.
H.M.JR: Dan?
MR. BELL: I have nothing.
MR. THOMPSON: I have a couple of deferment cases
for Harold Graves.
H.M.JR: All right. We will do them right away.
MR. FOLEY: Mr. Secretary, on the silver thing, I
sent in a memorandum last night saying that we could
sell about five million ounces of silver that we have
on hand. We acquired that silver over a period of time
now at an average price of around forty-three cents an
ounce, and the suggestion was made that we probably
would want to talk with the "silver Senators," because
when we were talking with them the other day, we didn't
think that the amount was that large; and we were talk-
ing merely about the Philippine silver, and this silver
is--
MR. WHITE: We said several million.
18
- 18 -
MR. FOLEY: This silver is what you get when you
refine gold and some of the other metals.
H.M.JR: Well, you and Harry handle it, and be
sure and let the committee know before you do anything.
MR. FOLEY: Yes. We made the suggestion that perhaps
you might want to sell it to the Metal Reserve Corporation,
and then they could market it at any price that wouldn't
upset the market price and absorb the loss.
MR. WHITE: Would you be willing to sell silver and
take a book loss?
H.M.JR: No. If we sell it to Metal Reserve, I
would want--
MR. FOLEY: At the average price, forty-three cents
an ounce.
H.M.JR: Well, then Jones would normally add two
cents for legal fees and overhead, so I would sell it
to him for about forty-five cents.
MR. FOLEY: And let him take the loss?
H.M.JR: Yes.
MR. WHITE: Well, that is appropriate if it is going
to be sold for war purposes.
MR. BELL: Where do you get your authority to sell
it?
MR. FOLEY: Well, it is the same authority, Dan,
that we have always had. The prohibition in the Silver
Purchase Act applies to silver that we got under the
Silver Purchase Act, and there is no prohibition against
selling this kind of silver.
H.M.JR: Average price.
MR. FOLEY: The average price is forty-three cents.
Regraded Unclassified
19
- 19 -
H.M.JR: If there is any question--
MR. FOLEY: We sell it for medals and things like
that all the time.
H.M.JR: Dan doesn't know what happened on the
Hill. Why don't you go in and talk to him for five
minutes now?
MR. FOLEY: I will.
20
May 1, 1942
12:32 p.m.
HMJr:
Hello.
Randolph
Paul:
Hello. This is Paul.
HMJr:
This 18 Morgenthau.
P:
Yeah. Look, I wanted to be sure before I
went to lunch that that memorandum got to
you. We couldn't get it to Mrs. Klotz, be-
cause she was in with you, and we got it
to Miss Chauncey's office, and I wanted to
be sure that you had it before we got out
of touch with you. We were going over
HMJr:
No. I appreciate it, but it's - I have it
actually in my hand this minute. I have it
in my hand.
P:
Oh, that's swell. Now, I'll just tell you,
as long as you're on the wire, that shortly
after we assembled this morning
HMJr:
Yeah.
P:
the committee went into orivate session
HMJr:
Yeah.
P:
excluding Stam and us
HMJr:
Yeah.
P:
80 we're just working on the next thing.
HMJr:
Good.
P:
And I suspect they be in session all day
today on it.
HMJr:
Good.
P:
All right.
HMJr:
Thank you. Good-bye.
Regraded Unclassified
21
May 1, 1942.
Roy Blough
Secretary Morgenthau
Please give me a memo of our Conference
Thursday morning of the recommendations you and Paul
made, and what I said. Be sure and do that today and
give it to Mrs. Klotz. If I remember rightly, you had
a memo with you, but you didn't leave ne a copy of it.
You can attach your memo of our conversation to that,
if I'm correct. Be sure and do it today. I would like
to have a memo of what happened in the Committee after
you left no on the matters that we discussed earlier in
the morning, also.
Given to Mrs. Klotz 5/1/42-
Regraded Unclassified
22
May 1, 1942
MEMORANDUM FOR THE SECRETARY
Subject: Conversation on taxes, 8:30 a.m., Thursday,
April 30, 1942.
At Secretary Morgenthau's request Mr. Paul and
Mr. Blough rode to the office with the Secretary.
Mr. Paul outlined the corporation tax plan shown in
the attached undated memorandum. This plan was drawn
up Wednesday afternoon in conference between Mr. Paul
and members of nis staff and Mr. Stam and members of
his staff, at the request of the Committee on Ways and
Means.
The excess profits tax proposals contained in
the plan are also described in today's memorandum, a
copy of which is attached.
With respect to the excess profits tax proposals,
Mr. Paul explained that he and Mr. Stam were in full
agreement. They were also agreed that if the war sur-
tax rate was made as high as 16 percent ( Bo that the
combined normal and surtax rates totalled 40 percent
or more), the war surtax relief proposed by the
Treasury should be provided for those corporations
whose earnings had declined since the pre-war period.
They also agreed on the amount of the relief, which is
shown in the memorandum but which Mr. Paul did not go
into in detail.
Mr. Paul explained that he and Mr. Stam were not
in agreement on the rates at which the war surtax
should be applied. Accordingly, it was agreed to set
up a schedule of such rates ranging from 12 to 31 per-
cent (which would make the combined normal and surtax
rates range from 36 to 55 percent.) This schedule was
to be submitted to the Committee 80 that it could
decide which rate schedule it wished to adopt.
The Secretary asked about the basis for computing
excess profits, saying that Mr. Sullivan had indicated
recently that the Government should have the option of
Regraded Unclassified
23
- 2 -
average earnings or invested capital, instead of the
taxpayer having this option. Mr. Paul pointed out
that the Committee had shown great hostility to any
change from the present method of giving the taxpayer
the option of average earnings and invested capital
credits. He said he thought we would have a long
fight on our hands if any attempt was made to disturb
this option or to give the option to the Government
instead of the taxpayer.
The Secretary approved the presentation of the
plan to the Committee. He said that he did not under-
stand all of it and did not have time to go into it
in more detail; then said, perhaps facetiously, that
if it turned out well he would be for it while if it
did not he would say it had never been really explained
to him.
RoyBlough
Regraded Unclassified
24
Excess profits tax plan
(1) Impose a flat 90 percent tax upon every dollar of
adjusted excess profits net income.
(2) Reduce the normal and surtax net income by the amount
of the adjusted excess profits tax net income, and
impose normal and surtax on the balance.
(3) Raise specific credit to $10,000.
(4) Rates for invested capital credit:
8 percent on first $5,000,000
7 percent on next
5,000,000
6 percent on next 190,000,000
5 percent on the balance
Alternative excess profits tax rate for No. 1
100 percent tax on income in excess of 200 percent of
credit or $10,000,000 whichever is greater.
90 percent on the balance
(5) Normal tax - 24 percent (no change for small corporations)
Var surtax (including normal tax)
Large corporations - total normal and surtax
Query, whether rate should be 55 percent
#
#
.
50 percent
#
#
.
45 percent
.
#
#
.
40 percent
.
-
-
36 percent
Agreed, that if the total normal and surtax is left at
36 percent, no relief from surtax will be necessary. Other-
vise certain relief will be necessary in distressed corporations
in the case of surtax.
Regraded Unclassified
25
- 2 -
Appropriate relief under war surtax for any
rate of 40 percent or more, as follows:
If surtax 8
War surtax relief
rate is #
should be
31$
10% of the difference between the
taxable year surtax net and
base period surtax net but not
in excess of 20% of the current
year surtax net
26
10% and 12%, as above
21
10% and 9%, as above
16
10% and 6%, as above
Small corporations
Agreed, that if 40 or 36 maximum is adopted, surtax on
small corporations will be 10 percent. If the rate for large
corporations is 45 percent, the small corporation rate should
be 12 percent; if 50 percent, 14 percent; if 55 percent, 16
percent.
4/29/42
Regraded Unclassified
26
May 1, 1942
MEMORANDUM FOR THE SECRETARY
Re: Excess profits tax plan jointly presented to
Ways and Means Committee by Mr. Paul and Mr. Stam,
April 30, 1942.
1. Rates of excess profite tax.
The excess profits tax would be imposed at a flat
rate of 90 percent on excess profits up to the point
where the corporation earnings were double the pre-war
earnings (or double the invested capital credit); and
would be at a rate of 100 percent on excess profite
above that point. However, the 100 percent rate would
not apply in any case to the first $10,000,000 of
excess profits,
(At the present time the excess profits
tax rates range from 35 percent on the first
$20,000 of taxable excess profits to 60 per-
cent on taxable excess profits above $500,000.)
2. Excess profits would be subject only to the
excess profits tax; the normal tax and war surtax would
not be imposed on excess profits.
3. The specific exemption for excess profits tax
would be increased from $5,000 to $10,000.
(This would reduce the number of corpora-
tions affected by the excess profits tax and
would somewhat offset for small corporations
the elimination of graduated rates.)
4. The optional invested capital credit which is
now 8 percent on the first $5 million and 7 percent on
the balance would be:
First $ 5 million
- OR percent
Next $ 5 million
- 7 percent
Next $190 million
- 6 percent
All over $200 million - 5 percent
5. The average earnings credit would remain the
same as under existing law.
Regraded Unclassified
27
May 1, 1942
MEMORANDUM FOR THE SECRETARY
Subject: Action in Ways and Means Committee up to
3 p.m. Friday, May 1, 1942.
Immediately after the opening of the executive
session at 10 a.m. Mr. Boehne told the Committee that
he thought it should meet in private session with all
the experts excluded. This was agreed to by the
Committee. The Committee sat until nearly 1 p.m.
before recessing.
The Chairman and members of the Committee reported
after the morning session that the Committee had
decided not to take either the 90 percent or the
100 percent excess profits tax rates but had adopted
94 percent. The 94 percent excess profits tax would
be the only tax applied to excess profits. This method
of tax computation was the one submitted jointly by
Mr. Paul and Mr. Stam on Thursday.
The Committee also adopted the proposal of Mr. Paul
and Mr. Stam for lowering the invested capital credit
in the case of large corporations and also the recom-
mended increase in the specific exemption from $5,000
to $10,000. The Committee readopted the present normal
tax rate scale.
The Committee did not act on the war surtax rate
scale in the course of the morning session. Congress-
man Cooper reported to Mr. Paul that the proponents of
the 40 percent combined normal tax and surtax (that 18,
a. 16 percent war surtax and 24 percent normal tax),
appeared to have a majority of votes but that he was
hopeful of getting 45 percent and was going to try
strongly for 50 percent a.8 & means to that end.
The Committee reassembled at 2 p.m. There has
been no further word from the Committee at 3:20 p.m.
RoyBlough
Regraded Unclassified
28
May 1, 1942
4:39 p.m.
Randolph
Paul:
Yes, sir.
HMJr:
I'm leaving in five minutes. What's on your
mind?
P:
I wanted to tell you, merely, that they took
a vote.....
HMJr:
Yeah.
P:
they took their final vote and they
decided on a total surtax and normal tax
rate of forty per cent.
HMJr:
Yeah. Well, somebody gave me that. Stephens
gave me that.
P:
All right. Well, I wanted to report to you,
that's all.
HMJr:
What are you going to do this week-end?
P:
Oh, I'm going to be around here.
HMJr:
Aren't you going to get a little rest?
P:
Well, I can't go away, because I can't get
back if I do.
HMJr:
How's that?
P:
You can't go up to New York, because you
can't get back from the place.
HMJr:
Well, take it easy.
P:
Okay. Thanks.
HMJr:
Good-bye.
V
29
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 1, 1942.
TO
Secretary Morgenthau
FROM
George Buffington G.B.
The securities people have contacted every market
in the United States and as of 3 o'clock, sales meet-
ings are being held by all organizations throughout the
country in connection with the Treasury offering
Monday, May 4, 1942.
5/1/42
30
Telegram received this morning from John A. Hartford, President,
Great Atlantic and Pacific Tea Company, New York:
"Re Treasury Department's telephone inquiry:
Wholesalers and food chains are curtailing purchases and
reducing inventories to take advantage of new low prices.
Manufacturers and processors attitude, we believe, will bring
about March levels in many cases before May 11. Have surveyed
commodities affected, and believe order not too burdensome.
The few obstacles can be easily surmounted. Think retail
operation will run smoothly when prices become effective. We
have already reduced number of lines to avoid making drastic
drop in retails and lessen shock. Think other distributors
will follow.
Favorable consumer reaction is outstanding. Have checked
cross section of our stores in five areas to determine reaction
of consumers. Generally consumers are found to be very con-
scious of ceilings and grateful measures being taken to freeze
living costs. Hoarding materially diminished last ten days.
Practically none noted today except in tea and coffee. Summary
of comments by areas are as follows:
Pittsburgh: Buying normal. Cannot say price ceiling
announoement stopped hoarding since no hoarding evident in
last week. Considerable comment in stores by customers, largely
good-natured remarks such as "You'll have to get your prices
down now." Most interest in meats. Many questions asked as
to effect on meat prices, but no noticeable holding up on
buying. All comment by consumers indicates they think they
have been paying too much for food and welcome change. Coffee
hoarding started last Tuesday but notable drop-off noted
yesterday and today.
New York and Westchester County: Comments heard in stores
all favorable toward price ceilings. Business slow today but
attributed to other causes, including extra warm weather,
stoppage of sugar sales, and fact that much moving is taking
place around first of month. Little hoarding noted in last
two weeks except of tea and some coffee; no change in this
noted today. Small percentage of customers have asked, when
are we going to post our ceiling prices.
Philadelphia: Sales this week less than last but
Wednesday showed smaller loss against week ago than Tuesday.
Buying about normal today. One organized womans group commented:
ceiling is more necessary on dairy products than on many com-
modities announced. This especially true of butter. Have noted
extra run on tea all this week, and no apparent change today.
Regraded Unclassified
31
- 2 -
Chicago: Customers generally aware of ceiling announce-
ment but somewhat confused and have asked many questions.
General attitude is one of pleasure, in fact cost of living
will be reduced. Have had numerous inquiries on whether
our prices will be lower and on what items. A few said they
would be careful about buying now because prices are coming
down. Business slightly off but also attributed to no selling
of sugar, unusually warm weather and month-end buying. More
characteristic of large cities than small, and similar to
New York.
Jacksonville: Few expressions heard in stores but all
comments reflected appreciation on part of customers that
prices will be lower. Inquiring when reductions will be
made. Sales normal. No apparent hoarding for last two weeks."
(m Edegansis
approx 5/1/42
There are in the United States upwards of 50,000,000 persons gainfully
employed and therefore receiving income at more or less regular intervals.
These constitute the basic market for War Savings Bonds.
Our problem is to increase from 7,000,000 to at least 30,000,000 the num-
ber of such persons buying War Savings Bonds more or less regularly.
To accomplish this, the following plan and program is suggested;
I. PAYROLL SAVINGS.
We must by the 1st of July increase the number of workers participating
in payroll savings plans from approximately 9,000,000 to 25,000,000.
The machinery for accomplishing this has already been worked out. Funda-
mentally, it involves the application in upwards of 55,000 firms of promotional
methods similar to those now employed in General Motors and General Electric.
The payroll savings job involves 8. two-fold task. First, to increase the
total number of employees participating in this form of purchase, and Second,
to increase the average monthly saving per employee.
If this is to be accomplished and we are to maintain a high level of saving
and participation, we must reduce the problem of promotion and follow-up to
manageable proportions. In every plant persons must be designated to act as
representatives of the War Savings Staff, each of whom will be held responsible
for a. small number of his fellow-workers. Only in this way can we be sure of a
more or less continuous supervision in the operation of payroll savings plans.
II. INCOME RECEIVERS NOT COVERED BY PAYROLL SAVINGS PLANS.
Outside of those persons who can and will be reached through payroll SATH
ings plans in the larger establishments there are upwards of 30,000,000 income
Regraded Unclassified
33
-2-
receivers in the United States who must be induced to purchase War Savings
Bonds systematically. The major task of our organisation will be to enlist
this great army of savers.
HOW IS THIS TO BE DONE?
A. ORDER OR PLEDGE FORMS.
It is proposed that the Treasury provide pledge or order forms to
authorized agents or solicitors of the War Savings Staff. These order forms
would be in triplicate and would in every case indicate the name of the is-
suing agent suggested by the prospect from whom he says he will purchase his
bond or bonds. That is to say, the solicitor would in the proper place write
in the name of the particular bank, post office, or other/issuing agent pre-
ferred by the purchaser. These forms would indicate of course the denomination
and
of the bond or bonds,/the intervals at which the prospect agrees to make his
purchases.
The original of the signed form will be retained by the prospect; the
duplicate will be delivered by the solicitor to the designated issuing agent;
the triplicate will be retained in the files of the local War Savings Committee.
The prospect purchaser will then either in person, by mail or messenger,
deliver the original signed form, together with the amount due, to the designated
issuing agent; whereupon a. bond or bonds will be issued to him. When the pur-
chase has thus been completed the issuing agent will thereupon remove the dupli-
cate order form from his files and dispose of it. The original form, delivered
by the purchaser will be retained by the issuing agent as an order for the regu-
lar purchase of War Savings Bonds at stated intervals and/or as a record of a
Regraded Unclassified
34
single completed transaction.
If, after a reasonable time as indicated on the duplicate form held by
the issuing agent, the prospective purchaser fails to deliver the original
with his remittance and thus complete the transaction - the designated issuing
agent, will send him a. reminder suggesting that he fulfill his agreed pledge
at the earliest possible time. Until the transaction is completed the dupli-
cate form will remain in the files of the issuing agent.
At regular intervals of say once a week, employees of the War Savings
Staff will call at the Office of issuing agents to check their duplicate forms
against the originals representing completed transactions. These checks will
notify the issuing agents of those to whom reminders should be sent. In those
cases where such reminders have failed to elicit a response from the pledgor -
the War Savings Staff either directly or indirectly will make a personal appeal
to the pledgor to learn why he has failed to fulfill his pledge.
Some such plan would insure the necessary follow-up which is so essential
to the success of this type of solicitation.
B. METHODS OF SOLICITATION.
The first step in reaching the millions of employed persons who are not
participating in payroll savings plans is to make personal contact to persuade
them to sign a phedge, order or authorization form. To carry on this "grass
roots" promotional activity, it is vitally necessary that War Savings Committees
or their representatives be appointed to take responsibility for a limited number
of people and to see to it that they invest as much of their current earnings as
possible in War Bonds and Stamps every week or month throughout the year. For
example, in every factory, department store or other place of business, commit-
tees or agents should be designated who can apportion the total personnel among
Regraded Unclassified
35
themselves 80 as most efficiently and conntinuously to carry on the person-to-
person promotional work that is 80 vitally necessary.
Ideally, this might mean a War Savings Committee or Agent for every 10 or
20 workers in a. plant; for every 15 or 20 farmers, and for a similarly limited
number of teachers, doctors, lawyers, salesmen, employers, and every other wage
earning and income-receiving group. Ideally, too, such committees and such
agents should be recruited from among the group for which they have responsi-
bility. Thus, a War Savings Committee, to reach every lawyer, should be made
up of members of that profession. The War Savings Committee to promote the
sale of War Bonds among workers in mines and factories should likewise be com-
posed of men who themselves are employed in those mines and factories, and hence
are in daily association with their fellow employees. Committees so composed
will not only be in a position to carry on a continuous promotional effort, but
because they enjoy the friendship and confidence of those to whom they appeal,
their efforts are more likely to be successful.
If this is done, we shall not only insure success for the initial campaign
itself, but we shall have an organization which can follow through to the end
that these Pledges and/or order forms may be fulfilled,
It is not intended to lay down any hard and fast rules for the conduct of
the canvass throughout the Nation. In each State, the responsibility for the
success of the program will rest with the State War Savings organization, in-
cluding the local and county committees. These groups will be expected to design
methods to meet the varying problems and conditions found in the different local
communities. While it is not intended that the canvass start throughout the
Regraded Unclassified
36
-5-
simultaneously, it is suggested that the campaigns be Statewide unless some
exceptional condition should prevent all parts of the State from beginning at
the same time. The date for each State's program shall be left to the disore-
tion of the State Chairman and State Administrator. Thoroughness in planning
and conducting the campaign is more to be desired than speed.
The first step in the organization is to arrange a meeting with the local
committee heads, or a series of meetings throughout the State with all members
of the local committees, including any additional permanent appointees thatare
necessary to give you full representation of every section of the State. In-
cluded, too, should be representatives or heads of any labor, social, civic, com-
mercial, or patriotic groups that are not now represented on your local committees.
You may then decide to set up special Committees for this purpose. Each such
Committee in each community (city, town, county, parish, or district) would then
set about to district its area and secure workers. The number needed will depend
on the geographic area and the population involved. The organizations listed in
Section 6 of "Suggestions to State Administrators" (page ) have recently offered
their services to the Defense Savings Program. In addition there are many groups,
such a.s the D.A.R., Rotary, Kiwanis, Lions; fraternal orders such as Masons, K.of
C., I.O.O.F., Elks, Moose; professional associations, such as medical societies,
bar associations, numerous neighborhood and community clubs, citizens, associa-
tions, Labor Union Auxiliaries, Parent-Teacher organizations, and numerous women's
clubs. All these can be called upon to take part.
The following suggestions for the actual conduct of the canvass are offered
for your serious consideration;
1. Group-Occupation Canvass.
This canvass would be conducted by having a committee set up to handle
Regraded Unclassified
37
⑉6⑉
each of the major occupational groups which, together, include a. majority of
the people with regular income in the Nation. This committee would contact
every person within its group at his place of business or employment. In towns
and cities where Community Chest, community drives, or centralized annual charity
drives are held, similar plans of contact with the employee at his or her place
of employment have been successfully carried out. In every factory, store,
office or other place of business, committees or agents would be designated
within the firm to carry out the Canvass. These committees could then serve as
permanent War Savings Committees in these places and among these groups. A list
of such groups and places of employment, showing the number of workers in each,
is available in every town and city.
Persons employed in Manufacturing and Mechanical industries, Transportation
and Communications, Trade, Forestry, Fishing and Mining, and Clerical groups
total nearly 30,000,000. Practically all of these can be reached at their place
of employment through a systematic occupational canvass, by committees or agents,
each responsible for B. limited number of persons. Some groups can best be
reached through arrangement with their central headquarters or through their cen-
tral mail depots by committees or agents designated by the Postmaster or by an
official of their own organization. Similar arrangements might be made in the
case of Telephone Operators, Railway Employees, and Mine Workers.
It would be possible, in like manner, to reach all public and governmental
employees. Professional groups, such as Teachers, Doctors, Lawyers, Dentists,
and Nurses can most effectively be canvassed through committees of their own
professions. Those relatively few people whose income consists wholly of divie
dend, rent or interest payments could most effectively be solicitors of the
Investment Bankers Association.
Regraded Unclassified
38
-7-
2. Rural Canvass.
The United States Department of Agriculture has volunteered to handle
the campaign among all farmers and ranchers in every State in the Nation. The
rural canvass will be conducted through the active cooperation of the State and
County U.S.D.A. War Boards, which are composed of representatives of most of the
governmental Agriculture agencies operating in the State and counties. The
Chairmen of the War Boards are the ranking Agricultural Adjustment Administra-
tion officials, in each State and county. the AAA has requested that these
Agricultural War Boards be given the exclusive responsibility for the rural can-
vass so that there will be no conflict of duties, or duplication of effort by
other farm organizations.
It is very important that each State Administrator contact the State Chair-
man of the U.S.C.A. War Board and arrange for proper contact between the local
War Savings Chairman and the County U.S.C.A. War Chairman. Together they can
work out the details of the canvass, distribution of forms and literature, as
well as the collection of forms after the canvass.
Thus, through the "Group-Occupation" and Rural Canvass, 44,860,763 persons
can be given an opportunity to sign a Pledge Card. If well planned and conducted,
such a canvass need not involve any serious duplication.
3. House-to-House solicitation.
Note: I have tried to outline below some of the arguments
against house-to-house solicitation. For certain
limited purposes such as launching our campaign and
for more sustained promotion in small towns it has
considerable merit.
Regraded Unclassified
39
-6-
A nation-wide house-to-house canvass of every employed person in the
United States would be a task of gigantic proportions. Only the national
decemial census compares with it in magnitude. To "rin every door bell" in the
country would necessitate the organization and training of well over & million
solicitors. This of course can be done, but it would be extremely difficult to
keep such B. vast organization of volunteer workers together on anything like a.
permanent basis. This would not be made easier by the competition for volun-
tary community workers among various war agencies like OCD, OPA, USOA, War
Boards and others. Nor could we hope to enlist the aid of these other agencies
except upon a temporary or opisodic basis. Yet a comparatively stable and per-
manent organization is vitally necessary for our bond program if we are to have
continuous effort and effective follow-up.
Solicitation by house-to-house canvassers would necessarily be of a miscel-
laneous and impermanent character. That is, the solicitors by and large, except
perhaps in small towns, would be strangers or at most casual acquaintances of
their prospects. It is highly improbable that they would be on a first name basis,
a basis of friendship and common interest, with those upon whom they called.
As a. general rule the house-to-house canvass would bring together as solicitor
and prospect people who are not in continuous or daily association with one another
and who do not have a. common interest based on association through group or
occupational organization.
The analogy of the Fuller Brush salesman is only partially valid. House-
to-house salesmen of this kind are hired employees, working for a living and paid
by the company in regular wages and/or commissions. Our solicitors or salesmen
Regraded Unclassified
-9-
40
would be volunteers. Fuller Brush salësmen carry on cash transactions with
their customers. Under no circumstances could we run the risk of authorising
hundreds of thousands of volunteer workers to accept money on behalf of the
Treasury.
It is important to note also that the house-to-house salesmen, whether of
Fuller brushes or any other such commodity, is in no position to exert coerciom
or compulsion upon his prospective customers. No one can be accused of being an
unpatrictic "slacker" because he refuses to buy Fuller brushes or Wear Ever
aluminum, or Hoover Vacuum Cleaners. This is not 80 in the case of those who
refuse for any reason to buy War Savings Bonds. The dangers of over-zealous pro-
motion of this kind would be greater under a. house to house plan of solicitation.
than under the group occupation plan. This would be 80 because the house to
house solicitors would, as I have said, be strangers, not on a first name basis
with their prospects and not in continuous and friendly association with them.
They would consequently be less reluctant to exert pressure of this kind than
if they were fellow workers in the same shep or fellow members of the same group,
profession or association. The effect of such coercive methods of promotion would
inevitably tend to increase redemptions and would certainly not improve public
morale. A nation does not achieve unity of will and purpose by promoting a nation-
wide game of hounds and hares.
Finally it is my impression that the American people do not like house to
house salesmen. Anyone who has had experience in this field knows the latent
and often active hostility with which the average householder greets the house to
house salesmen. I suspect that this hostility helps to explain the almost
universal dislike which house to house salesmen have for their jobs. I am not
Regraded Unclassified
41
-10-
suggesting that this would be true of salesmen or solicitors for War Bonds,
but it is one aspect of the problem which should not be overlooked.
submittedly m gamble
approx 5/1
42
List of the approximately 50,000,000 persons who receive some
type of income in the United States:
Billions
A.
(1)
Firms of over 100
(34,168)
19,190,040
39,5
(2) Reilroads
( 167)
1,400,000
3.1
(3) Federal Government
1,700,000
3.5
(4) State and Local Government
3,200,000
4.0
25,490,040
(5) Firms with 50-100
(39,619)
2,723,479
5.7
(6) Firms with 10-50
(295,538)
5,926,015
12.3
34,139,534
B. (7) Farmers
7,000,000
11.0
C. (8) Profession groups, such as
doctors, dentists, lawyers,
teachers, nurses, clergy,
technicians, musicians, etc.
3,500,000
10.4
D. (9) Employees of firms with less
than 10 persons; self-employed,
other than professional; small
groups of persons who do not work
but have regular income: armed
forces
6,000,000
15,0
50,639,534
104.5
Our procedure in reaching these people, in the order of their
importance, to this program, should be as follows:
1. Under Group A, employees of firms over 100, the railroad workers,
the Federal, State and Local Government employees, totaling 24,890,040
persons, should receive our first and most energetic consideration. At
the present time, about 10,000,000 of these persons are on Payroll Sav-
ings Plans setting aside approximately $8.50 per month for the purchase
of War Savings Bonds. We must immediately see that Payroll Savings Plans
are installed in every place where more than 100 people are employed in
the country. Our success in installation to date would indicate that
43
-2-
this goal can be achieved within the necessary time limits. It is
equally important that the extent of salary by the individual employee
be raised from slightly over 5% to a minimum of 10% in the same period
of time. This whole operation is of paramount importance if our
voluntary War Savings Program is to succeed and should take precedence
over all phases of our program until it is in hand.
Second of importance in our program are sections 5 and 6 under
Group A. While it will naturally show that a great many of these persons
will be brought into our plan simultaneously with our work in the above-
mentioned groups, special facilities for handling these people should be
established at this time. This can be accomplished by either an ex-
pansion of our Payroll Savings Committees or by the organization of new
groups to concentrate on these firms now and take advantage of the in-
creased activity of our overall campaign. Certainly, it is desirable to
reach a very high percentage of all of these people through Payroll
Savings Plans as they are now in operation or some slight modification
of same, as against any other method of contact for two reasons: (1) The
ability to keep them on this type of purchasing plan; (2) The physical
problem of follow-up and actual issuance of the Bonds.
2. It is recommended that, in all States where the Pledge Campaign
has not been started (except the State of New York) we abandon this
activity as such; that we utilize the organizations that have been con-
ceived for this work wherever pratical to solicit all of the remaining
16,500,000 people (except in the armed forces) for signature to an agree-
ment tantamount to a firm purchase of Bonds on a regular basis. In
instances where these persons have bank accounts, this purchase agreement
Regraded Unclassified
-3-
44
could amount to an order on their bank for the purchase of "X" Bonds.
In other instances, and it is believed that the higher percentage of them
will not have bank accounts, it is suggested that these persons indicate
the issuing agency that they prefer to use for the purchase of their
Bonds. This would be any one of the following: banks, post offices,
building and loan and savings and loan associations, investment banks,
insurance companies, pay stations, etc. These orders would be signed
in triplicate; the original going to the issuing agency so designated
by the signed order, a copy remaining with the signer, and the third
copy to the War Savings Staff. Arrangements would be made with the
issuing agency to follow up the purchase agreement. In cases where this
did not result in a consummation, a report would be received by the local
War Savings office and a call-back would be made. Where the pledge organi-
zation as such would not be available or practical for this work or where
the Pledge Campaign had been completed, our War Savings Committees would
be extended for this solicitation. Such extension would provide for
workers representative of these groups to take care of the actual con-
tact. The farmers would be reached through the U. S. Department of
Agriculture Local War Boards, A.A.A., Dairy Associations, etc.; professional
groups through medical associations, teachers' unions, dental associations,
etc.; self employed and small firms through retailer groups, commercial
clubs, salesmen, delivery men, etc.; dividend groups through American
Institute of Banking, etc.
Because of the urgency of this whole task, it is imperative that no
step of the proposed national effort be eliminated.
Regraded Unclassified
45
+
As soon as all details for launching this program from the national
point of view have been completed, it is recommended that regional
meetings be held in the ten important industrial States where 65% of
our payroll sales possibilities are to be found. So much effort has been
put forth by our people in the field and so many outstanding pieces of
promotion have supported our work to date that we must employ every con-
ceivable plan to bring our field morale to an all-time high. Objectives
of these regional conferences would be several:
1. To duplicate all of the national activities within each
of the States, such as suggested in the radio campaign,
to have governors, mayors and officials re-state the
need and value of the voluntary savings program;
2. The use of every possible promotional aid;
3. The formation of new management-labor groups to aid in
getting this job done in a short period of time.
All of the ammunition required to fire this job properly has been
adequately covered by the heads of the several departments in their sug-
gested support to the quota campaign.
One further suggestion is that the use of "at least 10% of salary"
become synonymous with all of our publicity, advertising and promotion
until it becomes an American by-word.
TREASURY DEPARTMENT
46
INTER OFFICE COMMUNICATION
DATE May 1, 1942
TO Secretary Morgenthau
FROM Mr. Kuhn
Here are the first results of interviewing done for
us in the Baltimore area this week under the direction of
Dr. Likert of the Department of Agriculture.
1. Attitudes toward buying. Workers apparently
have considerable latent enthusiasm for buying War Bonds.
They understand its connection with the war effort and
they do not regard the payroll-deduction plan, where it
is working, as dangerously coercive. They seem ready to
accept that amount of discipline to guide and stimulate
their purchases.
On the other hand, this must be modified in the case
of certain groups. Those who are less well paid (non-
defense workers, white-collar employees in defense plants,
etc.) have a feeling that the first obligation to buy lies
with those who are better remunerated. The responses,
"I'd take wage-increases in War Bonds," or "I would not
mind buying if I felt I really had any extra money" are
common. Baltimore seems to be, on the whole, a low-wage
area; and one man in & position to see the general
Regraded Unclassified
-2-
47
situation told our interviewers that the biggest obstruc-
tion to the campaign in Baltimore is its unsatisfactory
wage level.
Furthermore, there is hesitancy on the part of those
who either do not understand that their bonds can be
converted in case of personal financial emergency, or
that they (in paying, say, ten per cent of each pay check
into savings) would undergo greater hardship than workers
with smaller families, fewer debts, or more security
generally. The flat proportion urged for investment is
seen as needing some flexibility or "exemptions."
The plans-in-operation that our interviewers have
so far seen came from management's strong suggestion --
and it is interesting that this has not aroused antagonism
from workers. Labor seems to feel that a payroll savings
plan is not coercive -- is patriotic, and group-voluntary --
but it is opposed to a Government-enforced plan, which it
feels would be dangerously coercive. Some workers see
as an advantage of the existing plan the possible
avoidance of later Government coercion.
2. Management's Attitudes. Among the number of
managers who have not instituted the plan, we find
several attitudes responsible. Quite important seems to
be the case in which a labor union, known to be enthusiastic
-3-
48
for the plan, would gain prestige if the plan were under-
taken, and in which management is unwilling to confer this
prestige. An excuse from management often heard is that
there are already many deductions from workers' pay check --
for social security, group insurances, repayment of per-
sonal loans, etc. -- and that one more sizeable deduction
would break the camel's back. Frequent again is the
attitude that the plan would have to be sold in terms
of putting "extra" money into savings, and that would
make workers think they needed higher wages and would
make for demands and trouble.
Another attitude in the Baltimore area is that of
general anti-New-Dealism. "They did a darned good job
of trying to sell us the plan," said one manager, "but
of course I didn't swallow it. It's just another
New Deal idea, and I'm against the New Deal."
3. Successful and Unsuccessful Appeals. The two
most effective appeals from labor's point of view are
these:
a) Buy bonds to win the war -- specifically, buy
bonds to give the Government money to buy war
materials -- ships, guns, tanks, planes.
b) Invest your money in bonds, because there's a
depression of fearful proportions coming after the
war, and you'll then be glad of every cent you've saved.
-4-
49
Appeals based on the concept of inflation will
probably fall flat with workers. They may occasionally
use the term, but their context for it is confused and
illogical -- as our studies show is true of the American
public generally. Above all there is no appreciation
of the purpose of "limiting purchasing power" or any
similar phrase. Some people even think that spending in
this period is a public duty -- to keep business healthy!
Money is regarded as something which (some) people have
a good deal of, and which the Government needs to buy war
materials; and the appeal must be close to that conception.
Workers complain that the campaign thus far strikes
them as ineffective in two ways: (1) there has not been
enough emphasis on what your money does when you invest it
in bonds, and why it is absolutely crucial to invest, and
(2) there has not been enough direct personal approach to
workers -- down to the point of being talked to by
Government people in meetings and rallies rather than
through printed media.
4. Minor Obstructions. There is some evidence that
even where there is no payroll-deduction plan, purchase
of stamps and bonds could still be mechanically
facilitated. Some workers complain that they find that
the places where they were told that stamps and bonds
-5-
50
would be available really haven't got them, or the
desired denominations. Management finds difficulties
with the plan where there is a fairly high rate of
labor turnover.
All these statements are naturally tentative. They
are based on two or three. days' interview with a few
managers and with a couple of dozen workers. But they
include generally those points which are either striking
or pretty unanimously mentioned.
51
TREASURY DEPARTMENT
WASHINGTON
War Savings Staff
May 1, 1942
MEMORANDUM
TO: Secretary Morgenthau
FROM: Mr. Callahan
Attached herewith is additional
information about Alma Kitchell.
Vincent 7. Callahon
FORDEFENSE
BUY
UNITED
STATES
SAVINGS
BONDS
ARD STAMPS
52
ALMA KITCHELL
Alma Kitchell is now in her 15th year of radio
broadcasting - with more than 5000 individual broadcasts to
her credit.
For the past five years she has written, produced and
delivered her own radio programs for women on NBC and the Blue
Network. In these five years she has created and presented:
"Streamline Journal"
"Alma Kitchell's Brief Case"
"Pin Money Party"
"Meet Your Neighbor"
She is a well known concert singer, having started her
radio career in this field. She sang on the National Broadcasting
Company networks for the first ten years of her broadcasting work.
Although she is now confining her work to programs of interest to
women, she still does concert stage singing.
She lectures throughout New York State and the New England
States. One lecture recital for which she is constantly in demand
is known as "Alma Kitchell's Radio Scrapbook."
She has a home in Larchmont, N. Y., and another in Vermont.
She is active in community affairs in both places.
At the present time she is, in addition to her regular
lecture work, filling speaking engagements in Westchester County
to acquaint clubwomen with the War Savings Bond and Stamp program.
Mrs. Kitchell is known as the woman with six jobs - wife,
mother (she has two sons), writer, singer, lecturer, and broadcaster.
She is a native of Wisconsin and a graduate of the
Cincinnati Conservatory of Music.
53
STANDARD FORM No. 14
APPROVED BY THE PRESIDENT
FROM
TREASURY DEPARTMENT
MARCH 10, 1926
BUREAU
TELEGRAM
CHG. APPROPRIATION Defense Savings -
OFFICIAL BUSINESS-GOVERNMENT RATES
Expenses of Loans
& - - -
10-1758
MAY 1, 1042
Mr. David Sarnoff,
Radio Corporation of America,
Radio City,
New York City.
THE TREASURY IS ANXIOUS TO ARRANGE SPECIAL COAST-TO-COAST
BROADCAST EVENING OF MAY 17th WHEN MRS. ROOSEVELT SPONSORS
"I AM AN AMERICAN DAY". WE SHOULD LIKE TO BUILD THIRTY-KINUTE
PROGRAM AROUND THE NEW ROOSEVELT CANTATA FEATURING PAUL ROBESON
AS SOLOIST WITH L GOOD SYMPHONY ORCHESTRA AND STOKOWSKI OR
SOME OTHER EMINENT CON UCTOR. MRS. ROOSEVELT RERSELF WOULD COME
TO STUDIO FOR THIS BROADCAST AND MIGHT BE WILLING TO SPEAK ON
PROGRAM. IT WILL BE AR DACENSE SERVICE IF YOU CAN ARRANGE TO
HAVE NBC PRESENT THIS PROGRAM. EVERETT OPIE OF OUR RADIO
STAFF WILL COMMUNICATE WITH YOU SHORTLY TO DISCUSS DETAILS
OF PROGRAM. Thanks and best regards
Henry Norgenthan, Jr.
Secretary of the Treasury.
FK/cgk
Regraded Unclassified
53
STANDARD FORM No. 14
APPROVED BY THE PRESIDENT
FROM
TREASURY DEPARTM m
MARCH 10, 1926
BUREAU
TELEGRAM
CHG. APPROPRIATION Defense Savings .
OFFICIAL BUSINESS-GOVERNMENT RATES
Expenses of Loans
a. - - -
10-17%
MAY 1, 1042
Mr. David Sarnoff,
Radio Corporation of America,
Radio City
New York city.
THE TREASURY IS ANXIOUS TO ARRANGE SPECIAL COAST-TO-COAST
BROADCAST EVENING OF MAY 17th WHEN MRS. ROOSEVELT SPONSORS
"I AM AN AMERICAN DAY". WE SHOULD LIKE TO BUILD THIRTY-MINUTE
PROGRAM AROUND THE NEW ROOSEVELT CANTATA FEATURING PAUL ROBESON
AS SOLDIST WITH A GOOD SYMPHONY ORCHESTRA AND STOKOWSKI OR
SOME OTHER EMINENT CON UCTOR. MRS. ROOSEVELT RERSELF WOULD COME
TO STUDIO FOR THIS BROADCAST AND MIGHT BE WILLING TO SPEAK ON
PROGRAM. IT WILL BE AN DAIENSE SERVICE IF YOU CAN ARRANGE TO
HAVE NBC PRESENT THIS PROGRAM. EVERETT OPIE OF OUR RADIO
STAFF WILL COMMUNICATE WITH YOU SHORTLY TO DISCUSS DETAILS
OF PROGRAM. Thanks and best regards.
Henry Morgenthan, Jr.
Secretary of the Treasury.
FK/cgk
Regraded Unclassified
54
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 1, 1942.
TO
Secretary Morgenthau
FROM Abbot L. Mills, Jr.
-
Subject: Report Re Issuing Agent Activities New York,
Philadelphia, Cleveland, and Chicago Federal
Reserve Banks.
Summary
All of the Federal Reserve Banks visited report that
they are well situated to handle their present volume of
bond issuance and also that they can expand their organiza-
tions to carry 8. considerably higher load should necessity
arise. Generally speaking, the work of recruiting large
corporations to become issuing agents appears to be making
good progress. With the exception of Chicago, personal
contact has been the customary approach in enlisting the
cooperation of the larger corporations. Contact has been
made, as a rule, through the public relations representa-
tives of the various Federal Reserve Banks, supplemented
by whatever support has been necessary from senior officers
in the Banks. Personal contact is believed to be the most
effective approach to the problem, and the process requires
follow-up calls and gradual persuasion until corporate
acceptance of the issuing agency function is obtained. In
view of the somewhat prolonged approach necessary to enlist
many important corporations, the work of obtai ning their final
agreement has proceeded in reality further than statistics
reveal. Final agreement in many cases should be forthcoming
shortly.
It is of course difficult to estimate, but with the
effort to be placed behind greater participation in Payroll
Savings Plans, it is reasonable to anticipate 8. substantial
increase in the issuance of War Savings Bonds. This tendency
is already apparent in Cleveland where the Federal Reserve
Bank's April total in number of bond pieces issued has risen
materially and is attributed to this cause. To keep pace
with the increase predicted and to avoid any future possi-
bility of congestion and delay in issuing bonds by the
Regraded Unclassified
- 2 -
55
Federal Reserve Banks it seems desirable that further
energetic efforts be made to complete their enrollment of
large corporations as issuing agents. As an example of
the necessity for advance preparation by the Federal Reserve
Banks, the possibility exists that some commercial banks
that are now issuing bonds for corporation customers will
find the work beyond their capacities to handle, in which
event the Federal Reserve Banks would have to take over.
It should be pointed out that as corporations become
issuing agents, Treasury and Federal Reserve Bank control
over their issuing functions will be limited, and to the
extent that it will be difficult to compel their prompt
issuance of bonds if there should be any inclination among
them to delay. Criticism arising from such delays will
inevitably fall on the Treasury, which seems to be unavoid-
able. In any event, any inconvenience from this direction
is believed to be outweighed by the larger advantage of
having broad scale participation by larger corporations in
the issuing agency function. To the extent that issuing
delays may be anticipated more in small than in large
corporations, it may become desirable to refrain from
recruiting too many of the smaller corporations as issuing
agents. Also, by concentrating on enlisting the larger
corporations, and obtaining their participation, the Federal
Reserve Banks should be able to relieve themselves of any
future possibility of issuing congestion in their offices
as they should then be in a position to comfortably handle
such volume as may reach them from the smaller concerns in
their districts. As an illustration, the early qualification
as an issuing agent of the U. S. Steel Corporation and sub-
sidiaries will relieve the Federal Reserve Bank of Cleveland
of its largest account and permit it to comfortably take over
a large volume of new accounts if they should eventuate.
Similarly, the Federal Reserve Bank of Philadelphia will be
assisted by the anticipated qualification of the Bethlehem
Steel Company.
All things considered, the continued effort by the
Federal Reserve Banks to recruit large corporations as
issuing agents is to be desired and where their present
efforts are divided between recruiting large and small
corporations, concentration on the former would seem prefer-
able.
- 3 -
56
Mr. Frank N. Isbey's unavoidable absence from Detroit
has made it necessary to postpone contact with representatives
of the Detroit motor industry, etc., until the middle of next
week. The writer will plan to join Mr. Isbey Wednesday,
May 6th, together with Mr. Alfred Sihler, Vice President of
the Federal Reserve Bank of Chicago.
Abbot L. Mills, Jr.
ADDRESS OFFICIAL COMMUNICATIONS TO
57
THE SECRETARY OF STATE
WASHINGTON, a &
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
May 1. 1942
EA
Dear Henry:
I have gone through the material enclosed with
your letter of April 25, 1942, regarding pay roll
savings plans for Savings Bonds with a great deal
of interest.
I have no particular suggestions or criticisms
to make of the material, but I do wish you all success
in your Savings Bonds campaign.
Sincerely yours,
Consealshee
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Regraded Unclassified
58
Kiei
May 1, 1942
FOLLOW-UP FOR THE SECRETARY:
Mr. Haas is to have ready for you today a report
on the attached memorandum.
s
59
April 28, 1942.
George Hass
Secretary Morgenthau
Please get in touch with Mr. Benjamin Namm in New York,
Head of the Retailers Association, and ask him what effect
on sales Leon Henderson's statement had this morning. My
own guess is that people are going to stop buying, waiting
for May 15th, but I'm interested, also Mr. McKeachie, chief
buyer of the Atlantic & Pacific Tea Company - you can reach
him through Clif Mack. I'd like to know not later than
Friday morning what effect Henderson's statement has had on
the buying habits of the people. Get $ through these two
organizations, and we'll know. Friday noon is the dead-
line for the answer.
Regraded Unclassified
60
May 1, 1942
TO: HAROLD N. GRAVES
SUBJECT: PROGRESS REPORT FROM WAR SAVINGS STAFF
QUOTA CAMPAIGN
Announcement of the May Quota figures resulted in
front page news stories carried by the press associations
nationally, in hundreds of radio broadcasts, local newspaper
stories, special editorial cartoons, and editorials. Samples
of the cartoons from leading papers are attached.
Telegrams received from State Administrators indicate
an over-all enthusiastic reception to the setting of quota
figures.
Indiana reported it expects to over-subscribe its
May quota figure of $10,925,800 before the first week of the
campaign closes. Four Indiana counties have already over-
subscribed their quotas. Indiana, Oregon and Connecticut have
boasted each would be the first state to "go over the top".
A four page tabloid newspaper "The War Savings Staff
News", copies attached, was distributed through State Adminis-
trators to all workers in the War Savings Campaign.
ENB-14
61
-2-
PLEDGE CAMPAIGN
Twenty-two Pledge Campaigns were in progress during
the week. Tabulation of the number and amount of pledges has
not been completed, but general reports indicate that the cam-
paigns were highly successful. In one county in Pennsylvania,
incomplete returns indicated that 60,000 pledges for a total of
$3,000,000 were secured. In another county in the same state
100,000 pledges from a total population of 179,000 were expected.
PAYROLL SAVINGS
The Payroll War Savings Plan has now been installed by
67,546 companies throughout the nation. These concerns employ
20,155,995, or 66 per cent of the 30,400,000 employees in private
business. An additional 1,425,576, or 32 per cent of the
4,400,000 employees of Federal, State and local governments now
may purchase Bonds through the Payroll War Savings Plan.
More than 97 per cent of the 234,000 General Motors
employees have subscribed to the plan of that corporation as a
result of a drive which opened on April 16.
The Wage and Hour Division of the Department of Labor
released an announcement on April 27 which stated that although
employees may not waive their rights to the minimum wages or the
Regraded Unclassified
62
-3-
PAYROLL SAVINGS (continued)
overtime compensation required under the Fair Labor Standards
Act, they may accept part of the wages due them in cash, and
the balance in War Bonds or Stamps. In addition, the Wage and
Hour Division approved the Payroll War Savings Plan, even though
the savings made for employees' accounts may reduce the cash
wage below the minimum wage set by the Act. The release also
states that where the Division has obtained restitution for
employees of unpaid wages due under the Act, such payments may
be in War Savings Bonds and Stamps, provided the employee
voluntarily agrees to accept such payment.
RETAILERS
65,000 retail drug stores throughout the nation began
a promotional sales drive for War Savings Stamps on May 1.
Promotional display material, copies attached, was distributed
to each drug store along with suggestions for window displays,
etc. This campaign is built around a slotted card into which a
quarter from change given to a customer may be inserted. The
cards have printed on them the following message: "This quarter
will buy twelve bullets. Prescription - use it to buy a 25¢
War Stamp here -- right now."
Regraded Unclassified
63
-4-
RETAILERS (continued)
A "Retailers for Victory" meeting is scheduled for
Monday, May 4, in Chicago, with an attendance of approximately
2,000 anticipated.
The Victory Display Committee of the National Asso-
ciation of Display Men is appropriating $5,000 for the construction
of model displays which will be exhibited at the Chicago
retailers meeting. These displays will serve as models to inter-
pret and suggest what can be done through adapting themes for
use by retailers, in both large and small stores of every type,
everywhere.
May has been designated as "Take Part of Your Change
in War Savings Stamps Month".
Comment on this nation-wide retail effort to sell
more War Savings Stamps was made by Mrs. Roosevelt in her "My
Day" column on April 27. A copy of this column is attached.
The large window in the Sloane Building, headquarters
of the War Savings Staff, has been decorated by Woodward and
Lothrop Department Store and is built upon the theme of the "Take
Part of Your Change in War Savings Stamps" campaign.
The first edition of the new "Retailers for Victory"
magazine, published by a retail advisory committee as a contri-
bution of the National Cash Register Company, is attached.
Regraded Unclassified
64
-5-
RETAILERS (continued)
This publication will be printed regularly and will be distributed
to a selected retail list and to all State Administrators on the
first and fifteenth of every month. Publication contains news of
retailers' activities and suggestions for increased Bond and
Stamp sales.
SPECIAL
The War Savings Program emblem - "Buy United States War
Savings Bonds and Stamps" - is printed in the upper left-hand
corner of every gasoline rationing card which will be issued by
the Office of Price Administration during the latter part of May.
A sample reprint of one of the cards is attached.
NEWSPAPER CARRIER SALES
A total of 251,017,899 ten-cent War Savings Stamps or
their equivalent in Bonds or Stamps of larger denominations has
been sold by newspaper carriers of 873 newspapers. Sales during
the week of April 23 - 30 total 12,118,876 ten-cent Stamps.
65
-6-
PRESS
Announcement of the Quota System was front page news
in virtually all newspapers on Thursday afternoon, April 30, and
on Friday morring, May 1. In addition to carrying straight news
stories, hundreds of papers carried the maps of their states with
the figures for each county written in; editorials and editorial
cartoons.
Approximately 25 of the nation's leading cartoonists
drew special cartoons around the Quota Campaign as a result of a
personal contact appeal made by Ed Reed, chairman of our cartoon-
ists' committee. More than a dozen originals of these drawings
have already been forwarded to the War Savings Staff to be
reissued by the Press Section to all daily and weekly newspapers.
A survey of some of the nation's leading daily papers
for April 30 and May 1, also the labor press and the foreign
language press for the last week, shows the use made of the quota
maps, one column boxes, cartoons, news stories and the Secretary's
letter, sent out by the Press Section, as well as some of the
leading editorials and original cartoons. Tear-sheet booklets
from these newspapers are attached.
66
-7-
RELIGIOUS PRESS
War Bond editorials of Chief of Chaplains W. R.
Arnold, U. S. Army, Catholic; Charles E. Diehl, Moderator of
the General Assembly of the Presbyterian Church in the United
States; and Rabbi Solomon Goldman, Chicago, which were prepared
at the request of the War Savings Staff, appeared in various
religious weeklies last week.
During April these publications devoted front covers
to the War Savings Program; The Jewish Criterion, Pittsburgh;
The Pulpit Digest, Great Neck, New York - a publication going to
15,000 protestant ministers; and the Catholic Forester, Chicago.
Special War Bond articles appeared in the following:
Pulpit Digest, Church Management, Cleveland; Extension Magazine,
Chicago; St. Joseph Magazine, St. Benediot, Oregon; the Commonweal,
New York City; and B'nai B'rith News Service.
Our Minute Man religious pictorial appeared in many
Catholic and Protestant weeklies and in nearly every Jewish weekly
of the country.
Pulpit Digest, which publishes sermons and circulates
to 15,000 protestant preachers, has volunteered to carry a July
4th sermon in its June issue. The editors are asking ministers
to compete in a sermon contest, "The Place of the Church in Winning
the War -- And The Peace". Prizes are War Bonds.
67
-8-
MAGAZINES - SPECIAL PUBLICATIONS
Managers of the International News Service and the
United Press advise that our articles by leading American
authors are scheduled for regular release over their wires
shortly. In addition to this service, numerous other articles
by prominent writers will be syndicated to newspapers from the
Press Section. New contributors of articles last week were
Harold W. Dodd, President of Princeton University; J. C. Furnas
and Ogden Nash.
Walter G. Douglas, chairman of the Music Publishers'
Protective Association, advises that 150 song publishers will
use War Bond seals and emblems on all sheet music published.
Fred Parks, Secretary of the National Steeplechase
and Hunt Association, has supplied us with a complete list of
American race tracks and hunt race meetings, and a letter has
been sent to all race officials requesting the use of War Bond
slogans on every race program to be printed throughout the duration.
Attached are page proofs from the Curtis Publishing
Company's children's magazine "Jack and Jill", showing features
devoted entirely to the War Bonds and War Stamps theme.
68
-9-
BUSINESS PUBLICATIONS
Returns to date show that 360 business publications
have requested our half-page ads "Target for Tonight" and "The
Axis Wants Your Business". New ads in this series are now being
prepared featuring the change of name to War Bonds and the
inclusion of the Ten Per Cent Payroll Plan.
We have also received in the first week since the
advertisement "Next to the Stars and Stripes" was released, reply
cards from 150 publications advising us that they will run the ad.
COMPANY PUBLICATIONS
Robert Stokes, Editor of "Telephone Topics" for the
New England Telephone and Telegraph Company, has been named for
membership on our house publication committee, replacing Merrick
Jackson. Mr. Jackson has resigned to accept a new assignment with
the War Department, as reported last week, and Mr. Alexander
assumes Mr. Jackson's chairmanship; Mr. Stokes now becoming the
third committee member. Mr. Stokes has been most active in pro-
moting War Bonds and Stamps in his publication and is now conducting
a drive that has raised employee participation from 23 per cent
to 83 per cent. Score sheet as used in his publication is attached.
69
-10-
RALLIES
Dorothy Lamour, picture star who is serving the War
Savings Program as "Uncle Sam's No. 1 Minute Maid", made a per-
sonal appearance at a rally in the Burbank, California plant of
Lockheed-Vega before the employees' "Buck-of-the-month-for-
Victory-Club".
Negroes of Richmond, Virginia invested more than
$400,000 in War Bonds at a rally there April 26. As part of the
promotion for the rally, a parade was held featuring negro troops,
e band from Camp Lee, school children, fraternal organizations,
war workers and trade groups.
The "Ship Ahoy" M*G-M starlets, Jetsy Parker and Dorothy
Schoemer, sold more than $56,000 in War Bonds and $7,000 in War
Stamps to guests attending the Victory Scoop Dinner of the St.
Paul, Minneapolis newspaper guild.
COMMUNITY SING
The Lucy Monroe Community Sing in Jackson, Mississippi
on April 28 climaxed that city's "Extra Million for MacArthur"
campaign.
70
-11-
EDUCATION
A playlet entitled "You Can Count on Us" is being
distributed through State Administrators to all high schools,
junior high schools and private schools.
An illustrated pamphlet, "Stamps - How They Can Help
Uncle Sam", is being distributed to elementary schools through
State Administrators. The pamphlet explains for elementary
school children what stamps are and what they do.
Ten million special pledge cards for school children
of the nation to sign before Summer vacation begins were mailed
to State Administrators on May 1 for distribution to schools.
******
71
Analysis of Exposure to Payroll Savings Plans
April 25, 1942
Number exposed
Total number
Percent
to payroll
in the
of total
savings plans
country
exposed
(estimated)
Part A - Summary by Number of Organizations Exposed
I. Business organizations
(1) Large railroads
158
167
95
(2) Other firms with 500 employees or more
5,890
7,334
80
(3) Other firms with 100 to 499 employees
15,727
26,879
59
(4) Subtotal - large firms
21,775
34,380
63
(5) Firms with less than 100 employees
45,771
*
#
(6) Total business organizations
67,546
*
#
II. Governmental organizations
*
*
#
III. Grand total
67,546
*
+
Part B - Summary by Number of Employees Exposed
I. Business organizations
1,273,260
#
*
(1) Large railroads
(2) Other firms with 500 employees or more
14,417,763
#
*
(3) Other firms with 100 to 499 employees
3,385,905
*
#
(4) Subtotal - large firms
19,076,928
*
*
(5) Firms with less than 100 employees
1,079,067
*
+
(6) Total business organizations
20,155,995
30,400,000
66
II. Governmental organizations
(1) Federal Government
397,981
1,700,000
23
(2) State and local governments
1,027,595
2,700,000
38
(3) Total governmental organizations
1,425,576
4,400,000
32
III. Grand total
21,581,571
34,800,000
62
May 1, 1942
Office of the Secretary of the Treasury,
Division of Research and Statistics.
Excludes agricultural employees, military personnel, employees on WPA or NYA or CCC projects,
proprietors, firm members, self-employed, casual workers and persons in domestic service.
+ Data not available.
Regraded Unclassified
72
MEMORANDUM FOR THE SECRETARY.
May 1, 1942.
Mail Report
Of course, the Secretary's statements in regard to
house to house canvassing, and 10% deduction for Bond pur-
chases dominated the comments in the "fan mail" this past
week.
There were 4 exceedingly pleasant letters praising
the radio program of April 23, and a great many which
mentioned it favorably, but briefly, and went on to other
matters.
Of 21 comments on the 10% deduction for Bond purchases,
11 were favorable, 10 unfavorable.
This week, the comments in favor of the Sales Tax out-
numbered those against it by 5 to 3.
There were a number of abusive letters, mostly
anonymous, and a number violently attacking Labor and urg-
ing the taxation of Unions.
The recent newspaper statements in regard to 8. ceiling
on wages were mentioned in 20 letters. One from the Holly-
wood Rogue, Sportswear Company of California, was favorable.
All the others were unfavorable, and most of them came from
organized labor in the form of resolutions or official
protests.
There were 23 similar copies of resolutions from
federated women's clubs of West Virginia. These all urged
drastic legislation to withhold inflation, and pledged
support of measures which will reduce the disparity between
present buying power and supply of consumer goods.
yet Fortush
73
- 1 -
General Comments on Present Emergency
John W. Gurley, Clovis, N.M. 48 % Enclosed I am sending
a photostatic wpy of a draft, which is now in the mail,
for $1,518.72 to the United States Treasury for the
A.T. & S.F. Railroad shops' employees of this city.
These employees have voluntarily contributed this amount
by each donating one day's wages to aid the U. S. war
effort. # # # Mr. Wilson and I, as well as others con-
nected with the contribution plan, believe that with a.
little pushing, the idea can be made to blanket the
nation to such an extent that many millions of dollars
can be promptly gathered in for the all out war effort.
The idea should appeal not only to wage earners, but to
all income earners without in any way disturbing the sale
of War Bonds. #
Thos. W. Osborne, Chairman, North Hollywood Home Owners,
North Hollywood, Calif. We home-owners of this community
seek your support against any freeze-order or ceiling on
wages and small, office-force salaries. * * % This class
is 100% behind the Government's fight to prevent any
"increase in the cost of living". A freeze-order affect-
ing his present small salary will decrease his right to a
living. He asks nothing more than an opportunity of main-
taining the level. We sincerely and respectfully solicit
your interest and support of our opposition to any ceiling
on present low-bracket salaries and wages among office
workers.
Geo. M. Craig, President, Merchants National Bank, Port
Arthur, Texas. Enclosed you will find a clipping from
The American Banker of the 20th. It is not only the New
York Banks which are in this shape, but all banks. (Stock
below "lowest low".) If Government competition continues,
there may be another bank holiday as was declared by the
President in 1933, and some more purchases of preferred
stock of banks by R.F.C. or your Department. Bank state-
ments of April 4th, that I have seen, show comparatively
very small earnings.
Regraded Unclassified
74
- 2 -
Philip J. Bernstein, Vice President, National Silver Co.,
N.Y.C. (Telegram) Pending preparation by Treasury Dept.
of proposed legislation to cancel present Silver Purchase
Act, we urge that you find some legal means for lending
to arts and industries part of the silver stocks now
being held by the Govt. Govt. silver hoarding is contri-
buting to present panic in silver market. Holding of
these large silver stocks by Govt. does not contribute
to war effort in any way and prevents the functioning of
manufacturers and industries which now afford livelihood
to thousands of men and women who are not equipped for
more essential defense jobs. It is senseless to deprive
such persons of their livelihood and to close such in-
dustries while 8. surplus amount of material is available
to keep these industries and employees at work. ***
Honorable Frank Knox. * There is enclosed herewith
Govt. check in the amount of $100 which has been forwarded
to the Navy Dept. by Kwan Chan Au, civilian machinist,
Navy Yard, Pearl Harbor, T.H., the proceeds of which he
requests be donated to the crew of the plane that dropped
the first bomb on Japan. ***
Honorable Frank Knox. # # There is transmitted herewith
check of Oscar Modes, 77 Middle St., Portland, Maine,
dated April 22, 1942, for the sum of $25, which has been
donated by Mr. Modes "for naval defense for Pearl Harbor".
Clarence Olson, The Sheridan Hotel, Minneapolis, Minn.
I talk to farmers daily and have wondered what is being
done to bring him into the tax program. He is one of
the greatest beneficiaries of this war. The average farmer
with 160 acres receives about $250 benefit check. Of this
he returns about $50 in income taxes, leaving him a net
profit of $200 from his subsidy. No payroll tax will
catch him. Out here the farmer gets $14.25 for hogs,
$13.00 for cattle, $2.40 for flax, 70¢ for corn, (yielding
70-80 bushels an acre), $1.05 for wheat; 300 hens bring
him $100 a month. In my many years of contact with the
farmer, I have never seen so much big money in circulation
as at the present time.
Regraded Unclassified
75
- 3 -
Favorable Comments on Bonds
John A. Ross, Detroit, Mich. It was with a tremendous
amount of pleasure that I read your telegram to the
Detroit News newsboys and carriers. # # # Only 8. man
with & great love of human nature on his heart and deep
spiritual understanding could write such 8. splendid
telegram, which brought 80 much happiness to our boys.
It was sincere, honest praise at its best. # # # To
them you are just as swell a guy as Babe Ruth. I am
sending you a baseball - I hope you can use it. ***
Edward P. Chapman, Findlay, Ill. I am sending you a
little slogan of my own creation, which I trust may be
used to increase the sale of War Bonds. In my opinion
it is a self-evident truth, and needs no explanation:
BONDS OR BONDAGE. # # # We, the people of the United
States, must take our choice of one or the other of the
following: U.S. BONDS OR AXIS BONDAGE.
Jerome E. Klein, N.Y.C. My wife and I feel that you're
being too easy on people in asking them to invest only
10% in their Government. That's assuming that the American
people want to keep on living "as usual". This is war, and
I'm sure that we're all willing to sacrifice our "living
as usual" in order to help win the war. What's more, we
stand to gain by investing in such good Government Bonds.
# * That'll leave us enough for insurance, rent, and
other normal expenses. I'll have to cut down 8. number of
our entertainment expenses, and cut out a number of frills
and luxuries, but
this is war. I won't be able to go
on vacation this year
I wouldn't take a vacation if it
were offered, and my wife won't go far, or to an expensive
place. We're making the neighborhood movie do us for the
duration, with the exception of her birthday
we're
splurging then. We're finding that less expensive cuts
of meat can save a lot in our food budget; I'm bringing
the paper home instead of leaving it at the office
and
there are hundreds of other ways in which we are saving
some of them we just drifted into unconsciously. ###
Regraded Unclassified
76
- 4 -
Edith M. Kempthorne, N.Y.C. I am B. naturalized New
Zealander. Having one brother who has already lost his
only son on the sands of Libya, 8 sister with one RAF
son crashed on the Mediterranean, and a. second a prisoner
in Germany, and two more nephews fighting in Egypt, it
seemed at first as if all I had must go to my home folks
or to help Britain in her need. However, I know the
Pacific and its vastness. I know what it means to my
people to have those fine U. S. boys to share with them
the dangers of the Pacific. In gratitude for this help,
I invested today 10% of this year's salary. I realized
this country should come first. What I wish to give to
other countries must be in addition, and no sacrifice is
too great. I hope all other naturalized citizens will
feel the same.
M. M. Kelly, N.Y.C. Although we do not have the bookkeep-
ing facilities for handling investments in War Bonds as
a unit, I can inform you that the nine members of the
staff of the American Welding Society are pledging them-
selves to invest 10% of their salaries in War Savings
Stamps and War Bonds.
Miss Ray Abrams, Principal, Joseph A. Maybin School for
Graduates, New Orleans, La. # # # Throughout the country,
school teachers will soon be on vacation. From June 1
until September 1, an army of intelligent patriotic men
and women will be at leisure. In this group, there are
many who would willingly give their time, energy, and
ability toward furthering our Nation's cause. Could you
not conscript the services of this group in 8. summer
campaign to sell United States Bonds? Teachers from all
communities might be authorized to address club and church
meetings, give radio talks, meet key individuals, and tap
all possible sources of investment revenue. There is no
group of people in the country with a stronger sense of
loyalty to Government than teachers. There is no group
with a better understanding of the need for retaining the
Four Freedoms than teachers. We, who have taught genera-
tions of youth, realize the importance of the continuance
of the Democratic way of life. By our years of service
to the youth of the nation, we have earned the respect of
the country.
Regraded Unclassified
77
- 5 -
Unfavorable Comments on Bonds
Mrs. Eric G. De Flon, Chadron, Neb. # I live
in
&
town of 4,000. Stamps and Bonds can be procured only at
the Post Office. To reach it, one must climb about 8
stone steps and push through a couple of heavy double
doors. Whenever I go out, I have to take my baby with
me in his carriage, and I cannot navigate the stairs
and the doors with the carriage. Whenever I have a couple
of quarters left over from my shopping, and would be will-
ing to put them into Stamps, the stairs stymie me, and I
go home with the quarters and eventually spend them on
something else. Why not have the mail carrier sell Bonds
and Stamps? He goes past every door, works shorter hours
with better pay than the average person, and no doubt
would be willing to make this contribution of extra work
and time for his country. *
#
Ed Carmical, Houston, Texas. # Most people would con-
tinue on the salary saving plan, but would like some part
in an offensive or victory loan campaign. The people
keenly feel the lack of parades and patriotic rallies which
were so much a part of the last war. We want patriotism,
we want to see our public muscles flexed, we can use the
old time parade to promote a victory loan. We don't need
the soldiers to take time off from necessary training, but
we could use the newer men who could be spared to take
part in such demonstrations. Please believe me when I
tell you that Americans are not ashamed of their patriotism,
but rather are willing and ready to engage in an all-out-
victory loan drive whether it is for twelve billion or
twenty-four billion, the amount estimated for 1943.
S. F. Hopkins, N.Y.C. I wonder if you know why you are
not realizing the amount on the sale of Defense Stamps and
Bonds that you had hoped to realize. I can tell you! It
is because while American people place winning this war
before everything else, their sense of justice is utterly
scandalized at the thought of sacrificing to the utmost
when the New Deal Govt. is squandering the very money they
are paying in, on unnecessary bureaus and New Deal propa-
ganda. #** * Until we have honest dealings at the source of
Regraded Unclassified
- 6 -
78
our Government, there is going to be resentment and
confusion in the ranks. The heart of the people of our
country is not in the movement to raise money to win this
war in the face of the schemes and methods that are being
carried out by the Administration.
H. Albert Young, Wilmington, Delaware. In June of this
year I will be entitled to a full year's interest payment
on the United States Savings Bond - Defense Series G, in
the sum of $1,000.00, and on account of which I have not
received any interest payment to date. I mailed you the
application and affidavit in reference to my failure to
receive the first semi-annual interest payment. This
matter was first brought to your attention on February
17, 1942. I desire to purchase more Bonds of this type,
but I must say that your delay in forwarding the interest
payment to me is certainly not encouraging me to do so.
Herbert Payne, N.Y.C. On behalf of the members of the
Textile Workers Union of America employed in the plants
of the Bemis Bag Company in all parts of the country, I
should like to call once more to your attention the posi-
tion of that company in opposition to the use of the pay-
roll allotment plan for the purchase of War Bonds and
Stamps. We first raised the question with the company for
its Indianapolis plant more than four months ago, and met
with outright refusal. In each instance after the re-
quest had been refused, the national office of the union
has notified the Treasury Dept. In some cases local repre-
sentatives of the Defense Savings have been present at the
time of the refusal. * # During the past few months the
labor movement has been accused of all kinds of crimes
against the prosecution of the war. The press has been full
of misleading information, tending to discredit labor. The
Bemis case is an evidence of the real patriotism of American
workers. Unfortunately, it also represents an all-too-
common attitude taken by textile manufacturers who have been
continuing their reactionary "business as usual" policy in
the face of increasing national crisis. # # # The situation
has reached such a point that it has become destructive of
morale among the workers in the several mills. The company
is working on war orders. In order to assist the company
to meet deadlines for orders, some of the workers have
Regraded Unclassified
79
- 7 -
been working as much as 16 hours daily, and there are
even instances of workers who have worked 24 hours
straight through, in order to keep war production going.
You can easily see the reaction of these workers to the
company's refusal to aid the war effort by installing the
payroll allotment plan. In view of the serious need of
the nation for war funds, and in view of the flagrant
attitude taken by the Bemis Company, I should like to
urge that the Treasury Dept. use its every effort to
correct this situation.
Larry T. Gavin, Minneapolis, Minn.
#,#
#
I
note
that
you
are now in favor of voluntary War Bond buying. Honestly,
Mr. Morgenthau, I cannot for a minute understand how a
man in your position can really think that the voluntary
purchasing of Government Bonds will do half the job that
is necessary. $ # I also note you are going to have &
door to door campaign and undoubtedly you will come pretty
close to having 100% subscription, but I am satisfied that
the percentage of salary invested will be far below even
the 10% which is admitted necessary. # # # We put up
traffic signals at corners to protect the pedestrian in
crossing the street, but they insist on crossing against
the red light, and you still think they will voluntarily
subscribe to Bonds. Verily, you are a trusting soul!
This is a time for stern realities and it seems to me
that our Secretary of the Treasury should be 8. little
more realistic. How can you expect the people of the
country to realize that this is an all-out war when appar-
ently you don't?
J. W. Hoopes, Vice President, Mercantile National Bank at
Dallas. I have been watching with a great deal of interest
the campaign for the sale of Defense Bonds. I was execu-
tive manager of the Eleventh Federal Reserve District
during the first four campaigns. Notwithstanding the fact
that the greater portion of the District was undergoing
one of the worse droughts in history, subscriptions were
received, in all of these campaigns, in excess of the quota
assigned the district. # The experience I got in this
work leads me to believe that your sales are never going
to be satisfactory under present methods. You have to get
80
- 8 -
the people aroused and get them to believing that if
they will "lick the stamps, the boys will lick the Japs",
except their purchases, of course, will have to be in
larger amounts than stamps. This "please-pussy-foot"
campaign will never get anywhere, I am certain of that.
There is a world of people who must be made to buy bonds.
The public opinion has to be aroused to such a pitch that
even the misers are afraid not to do their share.
John L. Meyer, Chicago, Ill. My wife and I are "elderly
people". We have four children, and four grandchildren.
We wish to remember their birthdays, wedding anniversaries
and during the holidays by sending them War Bonds. We
cannot afford large ones, but believe we can manage $25
expiration ones. It figures out that we would be buying
one per month through a year, although the anniversaries
are not "one per month". Upon my request you sent
me forms on "regular purchases". However, we cannot use
them. In our case there would be eight names of owners
and eight co-owners, in remembering our children and
grandchildren, not to mention ourselves. I wonder if
many others are thinking also of using War Bonds for
birthday gifts, wedding anniversary remembrances, etc.
But, the use of this idea would necessitate a new
kind of "regular purchase plan" form. No doubt your office
can devise one to fit the case. I may add that I am not
situated so that I can send one check for all these Bonds
we want to give in our family, at one time.
Alfred I. Warren, N.Y.C. In view of the current newspaper
reports, may I take the liberty to inquire what constitu-
tional clause authorizes you to dictate to me what per-
centage I shall save of my income, or when or how I shall
invest that saving? I am struggling to decently support
a family of seven and am investing my savings in the
education of my children with the view of preparing them
to be useful citizens to their Country, and I am just
making the grade in my attempts to do so, together with
meeting the payments of my taxes. The Government certainly
has no moral, much less legal right to force me to sub-
stitute that policy for one dictated by them. I don't sup-
pose any such attempt would be made and the fact that it
would not be made should be stated to the public.
81
- 9 -
Mrs. Ben Neiwendorp, Sanborn, Iowa. We are assuming you
are interested in not only the sale of offense bonds,
but in the kind of pressure applied and the repercussions
to the method. A sort of "Court of Appraisel" has been
set up here. One for each rural and town community.
This court consists of those who would ordinarily be
called "influential citizens". Incidentally, not one
served in the last World War. These persons have stipu-
lated the amount of U. S. Bonds each head of the house
should buy. During World War I the same plan was used.
The result was threatened and actual mob action. Then,
as now, the fear psychosis created got results. People
who did not have the money to buy the required amount,
borrowed at the bank to do 80. Thus they created debts
at 8% that in the contracting economy that soon followed,
made many of them paupers. * * Each man on the "Court
of Appraisal" is a BIG farmer -- that is, he uses modern
equipment, which is run, at times, both night and day.
On the seat of this equipment is a man paid $45 to $55
per month. He is asked to pledge $5 each month toward
8. Bond. If his employer asks it, can he refuse? # * #
If you must resort to selling Bonds in this fashion,
make it nation-wide. We would gladly submit to 8. Federal
law, confiscating all earning above a bare living, with
no interest, no return of principal, as a war measure.
But as it is, please call off these lip-patriots. I can
see this policy producing just the kind of moral stamina
that would delight Corporal Schicklegrubber. My husband
enlisted the day after war was declared in 1917, his
brother and my brother a few days later. It is nauseat-
ing to have those who became sleek sucking eggs then, to
determine the price of our patriotism now.
Geo. J. Carpenter, Jacksonville, Ill. (Copy of letter ad-
dressed to the President.) * # # Saturday afternoon I
went to the local Post Office, Jacksonville, Ill., to pur-
chase some Stamps and to mail some letters. I am new here,
having recently moved from Calif. to operate my farm and
orchard, so I did not know that the Post Office was closed
to patrons on Sat. afternoon. While I was making my first
survey of the closed windows, a farmer came in expecting to
buy 8. Bond. He did not, and the only thing lacking was the
opportunity. Yes, banks are closed here on Sat. afternoons
also. # # #
Regraded Unclassified
82
- 10 -
Favorable Comments on Taxation
R. E. Lucas, President, Missouri Store Company, Columbia.
I have just read a statement of Randolph Paul, tax adviser
to the Secretary of the Treasury, before the House Ways
and Means Committee, and I was particularly interested
in his paragraph 7 on "Additional Examples- of Special
Privileges", paragraph A, "Tax Exempt Corporations Engaged
in Business. I must admire Mr. Paul for his frank state-
ments as here is a source of revenue that has never been
taxed but should be, and I hope this recommendation is
given serious consideration.
William M. Mill, Thomas Smith Co., (Punch Press Products),
Worcester, Mass. * # At present it would be possible
for us to send you $5,000 on our next tax installment.
However, instead of that, we bought tax bills, whereas
we could have saved the cost of the tax bills and given
you the money without any interest. If the system could
be waived when people wanted to pay in advance, and if it
did not require too much bookkeeping, I think you could
get quite a little money in ahead of time. If this sug-
gestion meets with your approval, we will try to pay our
taxes sooner than the regular time.
Regraded Unclassified
- 11 -
83
Unfavorable Comments on Taxation
Daniel Nugent, Santa Barbara, Calif. In re your campaign
to sell more War Bonds. As the owner of sound common
stocks, how can you expect me and several millions like
me to buy War Bonds if you confiscate our savings? # # #
I don't want or expect to make money out of the war, as
you are permitting some individual businessmen, some
farmers, and some wage earners to do. But when you take
such a share of corporate profits that dividends must be
reduced far below their pre-war level, you are putting a
capital levy on stockholders. Tragically enough, this
capital levy does not transfer our capital to the Treasury,
but simply causes it to vanish into thin air. * % * Before
it is too late, Mr. Morgenthau, please consider carefully
the methods England has used in taxing corporate profits.
Certainly England, in its war taxation, cannot be accused
of being tender or gentle with wealth. It may well be
that the tax experts of England are saner and juster and
wiser than is Mr. Randolph Paul.
Regraded Unclassified
84
- 12 -
Letters from Senators, Congressmen, and others
who received the copies of War Bond letters and leaflets,
are in the main, highly commendatory. These have been
abstracted as separate from the usual bond mail, and
both favorable and unfavorable quotations follow:
Favorable Comments
Harry L. Haines, Pennsylvania. I desire to compliment
you for making this contribution at a time when it is so
essential to our own existence. I am rather confident
that posterity will approve this effort on your part more
than the present generation. To urge men and women to
save is most wise indeed, and it is more necessary in
this day to those of us who cannot bear arms, permitting
us to make our contribution in the War effort so as to
bring victory to our arms.
William M. Colmer, Mississippi. I think the defense
savings program is being handled very effectively and
assure you of my cooperation in putting it over.
Thomas A. Jenkins, Ohio. I want you to know that I sup-
port your efforts most loyally and will be glad to do
anything I can to help out with any reasonable program
that you might adopt. We must win the war and this is a
splendid way for the people to help.
J. Edgar Chenoweth, Colorado. I like this literature very
much, and feel certain it will accomplish results. I am
sure that the voluntary method of raising money through
the sale of defense stamps and bonds is preferable to any
compulsory plan.
Senator Arthur Capper, Washington, D.C. * * I thank
you
for bringing this campaign to my attention, and I give it
my full endorsement. If I can be of any help to you by
press or radio, or by personal appearance, please let me
know at any time. I shall be glad to serve in any way.
I was greatly interested in the detailed account of the
Regraded Unclassified
85
- 13 -
Pay-roll Savings Bond Program of the General Electric Co.
I sincerely hope its success will be duplicated and im-
proved upon many times throughout the country. You have
my best wishes in the matter.
J. J. McEntee, Director, Civilian Conservation Corps.
* # In connection with this and similar campaigns--both
with large and small organizations--one thought which may
be of interest to you occurs to me. That thought is this--
Though requiring considerable skill, it is relatively
easy to generate mass enthusiasm during a campaign similar
to the one executed by General Electric. In saying this,
I do not under-rate the effort put forth or the initial
results. However, I believe that an even greater job re-
mains to be done on follow-up campaigns because it is
inevitable that initial enthusiasm will, in some measure,
die out and that initial sales, in the normal course of
events, will tend to decrease with the passage of time.
Such a process is normal unless counteracted by repeated
skillful follow-up campaigns. Only because you have spe-
cifically asked for my suggestions do I presume to suggest
that you may desire to give immediate attention to this
matter of follow-up campaigns. In making this suggestion
I also recognize that action may already have been taken
on it, but I think there is general agreement that the job
of maintaining enthusiasm and achieving favorable sales
results is even more difficult than the job of launching
an enthusiastic campaign.
Hon. Emanuel Celler, House of Representatives. Your sug-
gestion is a most excellent one. It has the decided merit
of being practicable, and cannot fail, in my opinion, to
meet with the approval of all interested in furthering our
war effort. This method of borrowing from the people
directly can be put into practice without setting into
motion any cumbersome machinery, making effortless the
purchase of Bonds, and eliminating a much used excuse of
delinquent purchasing.
L. S. Rowe, Director General, Pan American Union. I want
to thank you for your kindness in sending to me 8. copy of
the admirable circular letter. % * * You have set forth
the situation with such convincing clearness that I can
add nothing thereto. I feel certain that you will have a
most enthusiastic response. With renewed felicitations on
this splendid campaign.
Regraded Unclassified
- 14 -
86
Unfavorable Comments
Frederick Gigax, Editor, East Lansing-Meridian News,
East Lansing, Mich. Your letter advising us regarding
the intensified War Bond sales campaign was received
the other day, and I was struck by the use of the word
MUST in two separate paragrapha.of that letter. Judging
by the newspapers I see, the command must need not be
used to get them to support the Bond sales campaign.
They have all done this in every issue since the sales
started. # # # Due to the lessening of advertising at
this time, many newspapers will be compelled to suspend.
If you must have the newspapers' support to put over a
Bond sales drive now, what will you do when many of them
have been forced to suspend?
Clarence M. Fincke, President, The Greenwich Savings Bank,
N.Y.C. # # While I agree with you that it is fitting
and perhaps possible that 8. payroll deduction of ten per
cent might be collected from those who are benefitting
greatly from increased pay due to the Defense effort, it
certainly would not be equitable to expect any such per-
centage to be taken from the many thousands whose earnings
have not increased, but on the contrary, because of it,
are struggling under increased costs of living, and at the
same time are called upon to pay income taxes in many
cases double or triple what they have ever paid. I think
you need have no fear of inflation from these. Also, I
cannot help being 8. bit fearful of what might happen at
the close of the war with the Government facing the demand
obligations of 80 many billions in the hands of the public.
May not this be a real problem?
Hon. John Taber, Congressman, 36th Dist. New York. I can
see no objection to the circular. However, I believe I
could get one up that would be much more effective, and
this is the line that I would proceed on. I would go over
the Treasury Department set-up with the idea of weeding
out all unnecessary help in connection with the bond program
and the income tax program; get some economist in who really
understood some of the effects of some of these taxes; start
in and get rid of the payroll tax designed to pile up a
surplus on unemployment insurance, for the duration, be-
cause it will not be needed; substitute a sales tax which
87
- 15 -
would be 8. burden on each group of our people in place
of the unemployment tax; get rid of the hurdy-gurdies
and frills. Then I would make a straight forward state-
ment to the bond purchasers, telling them just what I
had done and what I had recommended; that I had tried
to eliminate every foolish expenditure and anti-defense
activity out of the Treasury; and that I wanted and
needed their cooperation; that I did not like the idea
of forced loans and did not want to suggest them to the
Congress or the President, but that it was absolutely
necessary that we raise a certain amount of money. I
think you would find the response to this suggestion
enormous. You would find that it would be way beyond
what will come from the way we have been operating.
Senator D. Worth Clark. I think you have done a
fine job. However, in this regard I am taking the liberty
of enclosing a letter from 8. friend of mine in Idaho who
is interested in the bond sales program. What he says may
be the general reaction of the people in this vicinity.
(Comments from letter addressed to Senator Clark
signed by C. L. Billings, Vice President, Potlatch Forests,
Inc., Lewiston, Idaho.) "It seems to me that the posters
put out for various purposes in this War, fail by an
enormous margin to do justice to our War effort. Recruit-
ing posters are generally good, but those intended for the
influencing of civilian opinion and attitude, are lament-
ably weak. In Lewiston we have had nothing to look at
except a picture of a statue of a man with 8. gun and a
plow, a dismembered hand inserting a coin in a slot cut
on the face of an outline map of the United States, two
dismembered hands clasped together, and that is all. 48
Yesterday when I signed a pledge for the purchase of War
Bonds, I was handed a little blue and white slip which
seemed to me to reach nearly to the depth of ineffective-
ness. * # The people do not understand why the Government
thinks it is necessary to feature savings and thrift and
soft-pedal the realities of War in the advertising and sale
of War Bonds. Why can't something be done about this?
When I think of the thrilling, inspiring, rugged, he-man
posters of the other War, it makes me wonder what kind of
men are handling our War Bond advertising.
#
Regraded Unclassified
88
Regraded Unclassified
May 1, 1942.
Ky dear Senators
I understand your Subsommittee has under consideration the bill
providing appropriations for the 7am Security Administration's program
during the fiscal year 1943, and that the report of the Joint Comittee
on Reduction of Non-sesential Federal Rependitures, of which I MA a
member, has boen called to the Subcommittes's attention, In this con-
nection I would like to state that last winter I submitted several
recommendations to the Joint Committee on Reduction of Non-essential
Federal Expenditures and among such recommendations I urged that ve
should nake dractic outs in our Agricultural expenditures,
In making this recomendation I stated that I 41d not refer
to the bulk of activities undertaken by the Yarm Security Administration
and that I believed there should be no reduction in our help of the
chare-croppers and form tenants who are in urgent and contimuing need
of economic rehabilitation. It was my feeling thene and it is still my
feeling, that substantial reductions could be mde in our Aprioultural
expenditures without striking out those parts of the Agricultural
program which are helping the undernourished and which Are doing w
much for the share-croppers, farm tenants and other persons who osa
only be rehabilitated with the continuing assistance of the Government
through the activities which are being carried on by the Para Security
Administration.
Purthermore, I feel that the Farm Security Administration's
program has now assumed a nev importance because of the var and our
enti-inflation efforts, in that it is assisting a sizenble group of
our low-income faming population to expand agricultural production
and thereby help increase the food supply and avoid inflated prices.
I would appreciate it, if the occasion arices, that you would
make my position clear.
Very truly yours.
(Signed) He MORGENTHAU, JR.
Secretary of the Treasury.
Honorable Richard 3, Russell,
Chairman, Agricultural Rubsomittee,
Appropriations Committee,
United States Senate,
Washington, n. c.
00 to Hon. c. 1. Baldvin, Administratory Farm Security Administration.
WTHtalb 5-1-42
appointment Request
CBBaldevin, Harm administrator Security
Today
To ask you tu write write a letter
to Sereator outlining
your Parm stand Security du approp cutting below the
the budget estimate
Baldwin pays Sea. Byrd
Cur. He wants prove you
indicates you favar puch a
are against this reduction
Committee on Saturday to
when he appears before the
Senator Byrds proposal he
defend his bureau against
Told Beel who said wauld
take upwith you
From: MR. FITZGERALD
90
May 1, 1962.
Dear Dr. Burgeoss
For the Secretary I - acknowledging
the report compiled w the Becamic Policy
Commission of the American Bankers Association,
entitled, "Treasury Var Berrowing and the
Banks", which you vaze 99 good as w send his
with year card.
Thank you for thinking of Mr. Resignation
in this commetion. I as wase he will -
through the report with a great doel of interest.
Sincerely yours,
(Signed) H. S. Klotz
Reta, w of
Private Secretary.
Dr. N. Randolph Burgees,
Vice Chairman of the Beard,
The National City Bank of Bev York,
New York, New York.
Have it seen book.
GEF/dbs
Regraded Unclassified
91
0
W. RANDOLPH BURGESS
VICE CHAIRMAN
THE NATIONAL CITY BANK
OF NEW YORK
haik't 92
As S THIS REPORT comes from the
printer, the Director of the Budget an-
nounces an increase of 14 billion dollars
in estimated expenditures for the fiscal
year 1943. This increases correspondingly
the figures shown in this report both for
expenditures and for the sums to be raised
by taxes or borrowing. It does not change
the principles set forth in the report but
redoubles the need for vigorous efforts to
avoid excessive credit expansion and dan-
gerous inflation.
Regraded Unclassified
93
*
*
*
*
*
TREASURY WAR BORROWING
*
AND THE BANKS
*
*
*
*
*
*
*
Report by the
ECONOMIC POLICY COMMISSION
AMERICAN BANKERS ASSOCIATION
********
Treasury
War Borrowing
and the
Banks
REPORT BY THE ECONOMIC POLICY
COMMISSION OF THE AMERICAN
BANKERS ASSOCIATION, APRIL 1942
*
American Bankers Association
ECONOMIC POLICY COMMISSION
The
W. Randolph Burgess, Vice Chairman of Board National City
he banks of the United States are eager to do
Bank, New York, N.Y., Chairman
their full share in financing the war. This is their special area.
Winthrop W. Aldrich, Chairman of Board The Chase Na-
Their responsibility lies not simply in doing what is requested
tional Bank, New York, N. Y.
by the agencies of government, but in understanding the prob-
F. M. Farris, President Third National Bank in Nashville,
lem and themselves initiating plans and cooperative efforts
Nashville, Tennessee
for carrying out so vast a project. The 14,400 commercial
A. P. Giannini, Chairman of Board Bank of America N.T. &
banks, 55° mutual savings banks, and 2,800 investment bank-
S.A., San Francisco, California
ers of the country have the capacity and mechanism to meet
A. George Gilman, President Malden Savings Bank, Malden,
this responsibility.
Massachusetts
The decisions made now as to methods of financing and
Richard S. Hawes, Vice President First National Bank, St.
the energy with which they are pursued will influence the
Louis, Missouri
success of the nation's war effort and will react upon the
Rudolf S. Hecht, Chairman of Board Hibernia National Bank,
well-being of the people for many years to come.
New Orleans, Louisiana
The two ways of financing war are by taxation and by bor-
Harold H. Helm, Vice President Chemical Bank & Trust
rowing. Broadly speaking, the more the taxation and the less
Company, New York, N. Y.
the borrowing, the less will be the danger of harmful inflation.
William M. Massie, Vice President Fort Worth National
A country at war must tax to the greatest extent consistent
Bank, Fort Worth, Texas
with maximum production, which in turn depends on the
William A. Mitchell, Vice President J. P. Morgan & Co.,
maintenance of morale and incentive and the preservation
Incorporated, New York, N. Y.
of the economic structure. These necessary limitations make
E. S. Woosley, Vice President Louisville Trust Company,
it practically impossible for a country to finance a major war
Louisville, Kentucky
wholly out of taxation; some borrowing is usually unavoid-
John C. Wright, Vice President and Cashier American Na-
able. In practice the tax policy, for political reasons, usually
tional Bank and Trust Co., Chicago, Illinois
falls far short of the desirable goal,-as to amount, timing,
Dr. Paul F. Cadman, Economist A.B.A., 22 East 40 Street,
and character. As a major means of avoiding inflation, taxes
New York, N. Y., Secretary
should draw back promptly into the Treasury a large part
of the huge funds poured out as war expenditures. To the
extent this is not done borrowing must fill the gap.
Beyond this preliminary comment this memorandum will
In the preparation of this report the Economic Policy Commis-
not discuss taxation but is limited to presenting facts and
sion acknowledges the cooperative aid of the Research Council
of the American Bankers Association, the Committee on Federal
principles as to the Treasury war borrowing program and
Fiscal Procedures of the Reserve City Bankers Association, and
the place of the banks in that program. No attempt will be
many individual bankers. Helpful suggestions were also received
made to suggest a specific financing pattern but rather the
from national and state public officials.
broad principles which underlie detailed methods.
[s]
Regraded Unclassified
Amount of Borrowing
and England are devoting over 60 per cent of their capacities
In the fiscal year 1941 Treasury public financing totaled
to war, and Canada approximately 50 per cent. Our resources
5½ billion dollars. In the fiscal year 1942 the amount will be
of industry, labor, and wealth are vastly larger and were not
close to 19 billion dollars, and present estimates place the
fully employed when the war began, thus greatly easing the
amount in the fiscal year 1943 at about 331/2 billion dollars.
shift to a war basis. War has found us also with a sound bank-
These estimates are shown in the following table, based upon
ing position and enormous gold reserves. While the expendi-
the President's budget message of January 4:
tures and borrowing contemplated are huge, they are within
our capacity.
TABLE I
We can finance this vast undertaking, but the choice of
RECEIPTS-EXPENDITURES-PUBLIO FINANCING
methods,-the way it is done-will affect directly the efficiency
(IN MILLIONS OF DOLLARS)
of our war effort, the extent to which that effort disorganizes
Fiscal
Fiscal
Fiscal
our economic and social structure, and our capacity to re-
1941
1942
1943
cover prosperity after the war.
Actual
Budget
Budget
Total expenditures
Before discussing the borrowing program it should be noted
(excluding debt retirement)
12,711
30,576
58,928
Total net receipts
that its size, as estimated above, is dependent on such variables
(excluding social security)
7,607
11,944
23-487°
as the actual expenditure, and the amount of taxes collected.
Budget deficit
5,103
18,632
35-441
Add. govt. corp.-net outlays
1,149
2,220
Table I assumes expenditures and the collection of taxes in
#,941
Total cash requirements
6,252
20,852
38,382
accordance with the President's budget message of January
Less trust funds receipts-net
1,385
2,018
4,764**
4, 1942. For the avoidance of inflation it is most desirable
Net cash requirements
4,867
18,833
33,618
that at least these amounts of taxes be raised and that the
Change in cash balance
+708
-15
-3
amount of borrowing be kept to a minimum, but for the pur-
Total public financing
5-575
18,818
33,615
pose of this memorandum we use the estimates of borrowing
*Includes proposed $7 billions increase in taxes.
*Includes proposed $= billions increase in social security taxes.
given by the President.
These figures are staggering compared with anything ever
Sources of Funds
done before in this country or in any other country and they
The problem of inflation has been well summarized by the
may have to be revised upward. The largest amount of public
Secretary of the Treasury: "Our economy today resembles an
financing by the United States in any one year of World
overloaded steam boiler. The fire under the boiler is being
War I was the 1919 figure of 131/4 billion dollars.
fed by billions of additional purchasing power in the hands
The estimates of expenditure for the fiscal year 1943 call
of the public. The fire is growing hotter and is generating
for the devotion of about half of our national productive
more steam than the boiler can safely hold. If we are to pre-
effort to war, as compared with a maximum of about one
vent the boiler from bursting, we must damp down the fires
quarter in the last year of World War I.
by diverting spending away from those articles or commodi-
However, other nations have been carrying a burden as
ties in which there is a shortage, actual or potential."
great or greater than this in relation to their productive
In the application of this principle to war borrowing, the
capacity, national income, and financial resources. Germany
first rule is that the Treasury should borrow as much as it
can from the current income of the people which might other-
[4]
[5]
Regraded Unclassified
wise be spent. The great danger of inflation arises from spend-
Fourth, and worst, from the Federal Reserve System.
ing power in excess of the amount of goods available to be
It is in the interest of the banks, the enterpriser, the worker,
bought, and when the Treasury taps this spending power
through tax collections or through the sale of government
the farmer and everyone else who suffers from the blight of
inflation that every possible dollar be borrowed from the first
securities it reduces the inflationary forces. The sale of war
source.
bonds through payroll deductions does exactly this. The
The following table shows in the first column actual sources
greatest increase in purchasing power in this war effort is
of funds borrowed by the Treasury through public issues dur-
arising from swelling industrial payrolls. To the extent that
ing the fiscal year 1941; and in the second and third columns,
these new funds can be drawn off in taxes and bond pur-
chases, the danger of inflation will be lessened.
estimates for the fiscal year 1942, and projections for 1943 on
the basis of certain assumptions and the continuance of recent
A second source of funds is idle money in the hands of
trends.
individuals and corporations. The use of this money is not
TABLE II
as anti-inflationary as the tapping of current income, but it
ESTIMATED CHANGES IN HOLDINGS OF PUBLICLY HELD DIRECT AND
is less positively inflationary than the purchase of bonds by
GUARANTEED DEBT BASED ON CONTINUANCE OF RECENT TRENDS
banks. The use of idle money by the government gives this
(IN MILLIONS OF DOLLARS)
Fiscal
Fiscal
money greater activity; the purchase of securities by banks
Fiscal
1941
1942
1943
tends to create new money, that is, it increases bank deposits.
Actual
Estimated
War savings bonds
Projected*
+1,409
6,500
Both of these steps are somewhat inflationary, but the second
Tax anticipation notes
+12,000
2,700
Insurance companies
1,000
is much more so than the first. The finding of idle money,
600
Mutual savings banks
1,500
1500
312
Other (excl. coml. banks)
300
500
however, is the next best thing to tapping current income,
300
2,400
2,400
and it should be sought with all possible diligence.
Subtotal
+2,021
Commercial banks
+13.100
+17,200
The worst way to finance a war (short of greenbacks which
+3554
5.400
+16,400
Total
are unthinkable) is by the Treasury's borrowing at the cen-
*Assumes: (a) war savings bond sales at rate of $1 billion a month, the +33,600 Treas-
+5.575
+18,800
tral bank-the Federal Reserve banks. The reason for this is
ury's objective; (b) tax notes sales of $1 billion in excess of redemptions; (c)
two-fold: first, it adds both to bank deposits and to bank re-
purchases by other holders (except commercial banks) at the same rate as
estimated for 1942; and (d) absorption by commercial banks of the balance of
serves and has potentialities for inflationary credit expansion
the increase in publicly offered debt.
several times the amount actually borrowed; and, second, it
is a far too easy method of borrowing, capable of grave abuse.
It will be seen that on the basis of these figures, out of a total
Witness the experience of Germany and France after the last
increase of $52 billions in publicly held debt in the fiscal years
war when borrowing at the central bank became the mecha-
1942 and 1943, the commercial banks would be called upon to
nism of inflation.
take something like $22 billions, or over 40 per cent. To the
The underlying principle may be summarized by saying
extent that sales of war savings bonds and purchases by other
that the desirable sources for Treasury borrowing are, in order:
non-commercial banking holders may have been overstated,
First, and best, from the current income of the people which
the portion to be taken by the commercial banks, of course,
would otherwise be spent;
would be even larger. While allowance must be made for a
Second, from idle money in the hands of non-bank holders;
wide margin of error in any such estimates and projections,
Third, from the commercial banks;
the figures are nevertheless useful in giving some idea of the
magnitude of the problem.
[6]
[7]
Regraded Unclassified
These various sources of funds will be discussed in more
the war period with a good program already well under way.
detail later on, but they show in general that war savings bonds
This plan like all such plans has some weaknesses; something
constitute the major channel now open for drawing off the
more ideal could perhaps be devised, but no new plan could
current income of individuals into the Treasury, though pur-
be inaugurated and put into active operation without many
chases by life insurance companies and mutual savings banks
months' loss of time. The wise course is to use with our utmost
do so indirectly, but just as effectively. A substantial part of
vigor this instrument which we have. The results achieved
the war bond sales, however, represents putting idle money to
thus far indicate the potentialities for the sale of these bonds.
work rather than savings from income.
But only a beginning has been made, and vigorous sales efforts
A rough inspection of these sources of funds shown in
will bring much larger results. The banks have had a substan-
Table II indicates rather clearly that far too small a part of
tial share in the success of this program thus far and have the
the total, perhaps one-third, represents a diversion of current
contacts and machinery to carry it much further.
income which would otherwise be spent. Perhaps two-thirds
It should again be noted that only part of the purchases of
represent either the use of idle money or the extension of bank
savings bonds have been made out of current income. It may
credit. In fact, unless new methods and efforts are intro-
be assumed that purchases of F and G bonds represent largely
duced into the borrowing program, half the new money bor-
the employment of idle balances rather than of new income,
rowing in the fiscal year 1943 is likely to come from bank
but on the other hand, that a substantial part of the purchases
credit expansion. While the banks are prepared to lend the
of E bonds are out of current income. Sales divided between
Treasury the amounts it needs, not raised elsewhere, it is in
the three types are shown in the following table.
the national interest that these amounts should be as small as
possible because of the inflationary effect.
TABLE III
An additional point should be made here that may seem
SALES OF SAVINGS BONDS, BY MONTHS
theoretical but is of real importance. Other forms of addi-
(IN MILLIONS OF DOLLARS)
tional saving, refraining from spending, are helpful in avoid-
Series E
Series F&G
Total
ing inflation as well as specific saving through war savings
May, 1941
100.6
249.2
349.8
bond purchases. Such saving tends to offset war spending in
June
102.5
212.0
314.5
its effect on prices. Our program should be broad enough to
July
145-3
196.9
August
342.2
117.6
148.0
recognize and encourage varied forms of saving. Excessive
September
265.6
105.2
127.1
spending is the enemy to be overcome on this front.
October
232.5
122.9
147.8
November
270.7
109.5
124.0
December
233-5
341.1
187.5
January, 1942
528.6
Reaching Current Income -
667-4
February
393.1
1,060.5
398.0
March
305.2
703.8
War Savings Bonds
337.6
220.3
557-9
Total
The first step in reaching current income is to promote
2.547.7
2,311.1
4.858.8
vigorously the sale of war savings bonds and stamps. These
bonds have back of them an educational campaign of several
It is to be expected that the proportion of sales of E bonds
years' duration and have demonstrated real effectiveness in
will rise as payroll deduction plans are more widely adopted,
their appeal to the investor. Thus we fortunately come into
and become effective. It is still true, however, that the amounts
of current income absorbed by these bonds are small compared
[8]
[9]
Regraded Unclassified
with the additional income created by war activities, largely in
come and making them available for war use.
the form of industrial payrolls, and available for consumer
With normal outlets for their funds likely to become more
spending. The active promotion of purchases of these bonds
out of current income is a first duty of bankers and others
restricted under a war economy, insurance companies may
have as much as 11/2 billion dollars a year available for the
interested in avoiding destructive inflation.
purchase of government securities. Insurance companies are
For the foregoing reason sales efforts up to now have been
among the few willing buyers of bonds of long maturity.
largely concentrated on the E bonds, and properly so. While
purchases of Series F and G have been substantial for trust
They are more interested in the rate and will take the longest
bonds offered.
funds and large accounts, there has been no vigorous selling
campaign for these series. Such a program could now be under-
As noted earlier, the savings banks have been sizeable buyers
taken without confusion or interference with E bond sales,
of government securities, but it seems unlikely that they can
and the banks are in the best position to do it. It should bring
be counted upon for much this year. The savings banks as a
forth substantial subscriptions, not so much out of current
whole have not been gaining deposits, partly because their
income, but out of idle balances, and reduce by that much the
customers have been buying war savings bonds. There is no
amount of government borrowing from banks.
advantage in depositors withdrawing money from savings
One feature of the war bonds which has caused concern to
banks to buy war bonds if this results in forcing the savings
many people is the fact that these bonds are redeemable on
banks themselves to sell some of their own holdings. A recent
option of the holder, thus constituting a floating debt or de-
tendency in this direction further emphasizes the desirability
mand liability for the Treasury which might prove embar-
of directing the campaign for the sale of war bonds primarily
rassing. Our experience with this type of obligation is limited.
to the absorption of current income.
The bonds have been carefully designed, however, to discour-
With building reduced, building and loan organizations are
age redemption, and a large portion is evidently being bought
likely to have funds available for investment in governments.
with the intention of holding to maturity. There are unavoid-
The objective is to gather up the newly created income of
able dangers in any large increase in government debt. The
the people through every available channel. In the long run
question of demand liability is one that should be reviewed
it would impair the program if the war bond drive were so
from time to time as the amount increases. In the meantime
narrow as to damage such savings agencies as savings banks,
every effort should be made both in the sales campaign and
building and loan associations, and insurance companies. To
later to encourage the holding of bonds to maturity.
avoid this the war savings bond publicity program should be
a coordinated effort recognizing the place of these different
Other Ways of Reaching Savings Funds
collecting agencies as media through which large amounts of
of Individuals
savings will reach the government.
Further sources of savings funds of individuals aside from
Tax Anticipation Notes. Tax anticipation notes for indi-
those reached by war savings bonds are insurance companies,
viduals have not produced any substantial amount of money.
savings banks, thrift departments of commercial banks, and
There must be large amounts of funds held by individuals for
building and loan associations. These agencies provide an
the payment of taxes which might be reached by some modifi-
indirect channel for gathering up savings from current in-
cation of the program. It might be wise, for example, to raise
the limit on the A Series of notes from $1,200 to $10,000 or
[10]
[ii]
Regraded Unclassified
more. Since taxpayers will return to the government a sub-
stantial part of interest received, the net interest paid even at
especially if large amounts are involved. To leap this hurdle
2 per cent would not be large after deduction of taxes. The
the banker will need a somewhat new point of view-which the
present plan furnishes little incentive for the individual tax-
new situation justifies. He will recognize that deposits are
payer, and there are large amounts of funds available which
bound to increase in any case, and that the self-interest of
should be reached.
banking is best served by his energetic cooperation in meas-
ures to place as much as possible of the increased government
Bankers and Depositors. In recent years there has been a
debt in the hands of non-banking holders. Not only is this in
remarkable increase in bank deposits which is likely to con-
the interest of banking, but is equally in the interest of the
tinue. To the extent that depositors use these deposits for the
country a: large, both for the reason that bonds placed outside
purchase of government securities the amounts which banks
the banking system are less inflationary than bonds sold to
themselves must buy are reduced. While withdrawals from
the banks, and because the broader the distribution of such
these deposits may compel adjustments of position for some
securities among the people the greater the likelihood of
banks, deposits for the banks as a whole are not reduced. For
public support for sound fiscal policies.
not only are funds collected by the government soon spent and
thus returned to the banks, but aggregate deposits are certain
Hoarded Money. A further substantial source of funds of
to increase greatly with the expansion of bank investments in
individuals that remains untapped is hoarded currency. The
government securities.
present amount of money in circulation is about 111/2 billion
In this process of the flow of deposits into government bonds
dollars, as compared with around 41/2 billion dollars at the
and the return flow of funds back into the banking system,
peak of the 1929 prosperity. A part of this is accounted for by
some individual banks and some sections of the country will
higher wage rates and larger incomes of lower income groups
lose funds and others will gain. For example, funds have for
not accustomed to having bank accounts. A substantial
some months been flowing out of the money centers and into
amount represents hoarding. It should be possible to devise
munition-making areas. Only experience can show the amount
some appeal which would bring forth some of these funds for
of stresses and strains resulting from this process. It seems
the use of the government. This again is a special problem
likely that this problem can be met without serious difficulty
requiring individual analysis.
by first providing a larger volume of liquid short securities,
In this whole program of reaching current savings and idle
such as the certificates of indebtedness sold in April, which
investment funds it should again be emphasized that the banks
can be a means of reserve adjustment between banks; secondly,
and investment bankers of the country, under the guidance of
the purchase and sale of federal funds between banks; and,
the Federal Reserve banks, constitute, as was demonstrated in
third, by the intervention of the Federal Reserve banks in
World War I, the agencies best qualified to aid the Treasury
buying government securities from individual banks or in
in the distribution of its obligations.
specially affected areas. This possible danger should certainly
not stand in the way of a vigorous sales campaign.
The banker who has been constantly engaged in trying to
Reaching Corporation Funds
build up his deposits may naturally hesitate to suggest to a
In the past year the Treasury tried successfully an experi-
depositor the use of that deposit to buy government bonds,
ment in reaching the current income of corporations, in the
form of Series B tax anticipation notes. These performed the
[18]
[13]
Regraded Unclassified
valuable service of bringing over 21/2 billion dollars into the
ments of position between banks. The recent issue of Treasury
Treasury perhaps a year earlier than its normal payment in
certificates is a sound step in this direction.
taxes. This is, of course, an anticipation of future receipts
rather than a new source of funds, and any future increase
depends largely on further rises in corporate income and its
Distribution of Maturities
taxation.
Another principle to be considered in determining a bor-
In addition to tax reserves many corporations hold substan-
rowing program relates to the distribution of maturities of the
tial amounts of cash. While borrowing this is not as useful as
public debt. By June, 1943, the national debt is likely to be
tapping current inconte otherwise expendable, funds from
well over 100 billion dollars. It is desirable that the maturities
this source at least reduce the amount to be borrowed from
of this debt should be spread out over a sufficient number of
banks.
years so that the Treasury would not have to refund too large
There are differences of opinion as to the amount of cor-
an amount in any one year, particularly during the period
poration cash which might be reached. Industries doing de-
when large amounts of new money have to be raised. Table IV
fense work will need most of their cash and some will have to
on page 16 shows the distribution of the present Treasury
borrow. On the other hand, in non-defense industries inven-
debt in terms of maturities.
tories will be liquidated and depreciation reserves and main-
It must be recognized that there is here a conflict in interest.
tenance funds cannot be fully employed in plant and equip-
All lenders would like to avoid the risk of fluctuations in the
ment because of priorities. Without dogmatism as to amounts
market values of holdings, a protection they ordinarily obtain
available, they are at least substantial and should be reached.
by holding short maturities. On the other hand, both from the
In Canada corporations are heavy buyers of War Loan Bonds
point of view of the Treasury and because of the effect on the
partly as temporary underwriters and partly to hold.
money market, security markets, and the whole economy, it is
Most corporations consider it necessary that securities which
undesirable for the Treasury to face too large maturities in
they purchase should be liquid and not subject to substantial
nearby years. It is the old problem of a floating debt which
fluctuation in price. This means that they are ordinarily in-
proved so disastrous to France after World War I. This con-
flict of interest between what most borrowers want and the
terested in obligations with maturities up to two years, though
some corporations might go longer than that if they can always
Treasury's position, is always one of the difficult problems for
realize on the securities promptly.
Treasury financing.
Fortunately, the Treasury for some years has been follow-
Treasury bills have been sold at such a low yield basis that
ing a policy of selling long term bonds whenever possible with
after taxes they are only worthwhile for buyers who have a
the recognition that it was desirable to leave the nearby years
special requirement for them. But whenever the Treasury bill
reasonably open for financing in an emergency. This policy
rate has gone above 1/4 per cent, corporations have begun to
leaves the Treasury much more free at this time to meet the
buy. An immediate logical step in reaching corporations
needs of investors than would otherwise be true, though it is
would be to supply the market with enough bills and other
still desirable to spread out new financing as much as possible
short maturities so that this market will no longer be starved
without sacrificing other objectives, and especially the objec-
and corporations can fill their needs. The banks also need a
tive of putting the debt into the hands of investors other than
broader market of short term securities to facilitate adjust-
banks.
[14]
[15]
Regraded Unclassified
TABLE IV
General Place of Commercial Banks
MATURITIES OF UNITED STATES DIRECT AND GUARANTEED SECURITIES
OUTSTANDING AS OF DECEMBER 31, 1941
In this whole program the banks have an important func-
(EXCLUSIVE OF "SPECIAL ISSUES" SOLD TO VARIOUS FEDERAL TRUST FUNDS)
tion as distributors of securities to investors. Banks are will-
(IN MILLIONS OF DOLLARS)
ingly doing millions of dollars' worth of work in connection
Classified by year
Classified by year
with the war savings bond campaign for which they receive
in which issues are
5-Year
in which issues
5-Year
no reimbursement. This is in conformity with the practice
Year
first callable*
Average
mature
Average
established for many years in this country by which the banks
1942
5.125
5,908
have performed for the Treasury a substantial number of free
1945
6,336
4,481
services in connection with Treasury financing operations.
1944
6,798
5,201
3410
3,631
1945
4-575
4,008
Bankers as individuals are also accepting a large measure of
1946
3.175
2.350
responsibility for their community organizations to sell war
1947
1,879
3,884
bonds. Their special knowledge of the problems and prin-
1948
3,849
1.975
1949
3,084
3,603
2,460
3.048
ciples of war finance, as well as of local conditions, qualify
1950
2,185
#,686
them for this leadership.
1951
7017
4,206
Hitherto the banks have acted, in a sense although not
195%
1,043
3-233
1953
816
technically, as underwriters of government security issues,
#.995
1954
707
1526
3.713
2,629
pretty much regardless of maturity. Their subscriptions have
1955
2,632
2,034
1956
2,431
1,170
insured the initial sale of every issue and they have later dis-
1957
tributed over a period a considerable amount of the securities
1958
919
1.449
so purchased to investors and institutions. For some years these
1959
491
98%
1,018
1960
1,485
2,611
undertakings have been attractive because of the market's
1961
50
50
reception of spaced new offerings and the rising trend of bond
1961
prices.
1963
919
1964
In approaching the expanded program of borrowing for
1965
95
500
1,485
war, bank policy in this connection should be reexamined. To
1966
a greater extent than heretofore, bond offerings will be
1967
x,666
1968
directed to special needs of groups of investors and institu-
1969
tions. It is probable that banks will not be expected to perform
1970
an underwriting function in support of issues bearing longer
1971
maturities than the range considered suitable for their own
1971
2,666
investment. Within that range, however, their responsibility
Total
56.770
56,770
will be continued and even increased.
able *Fixed maturity issues are classified by year in which due, Those non-market-
years issues in which that due. are redeemable at any time at option of owner are classified by
Banks' Own Purchases
Source: Daily Treasury Statement-Dec. 31, 1941.
In the fiscal year ended June 30, 1941, holdings of govern-
Treasury Bulletin-January. 1942.
ment securities by commercial banks were increased by 31/2
[16]
[17]
Regraded Unclassified
billion dollars. In the current fiscal year this increase is likely
An Inflationary Trend. A first observation from these facts
to be over 5 billion dollars, and in the fiscal year 1943 it may
is that they indicate a highly inflationary tendency. They show
be three times or more that amount unless purchases by other
an increase of about 25 per cent in bank deposits and an even
buyers are very largely increased.
larger percentage increase in total loans and investments from
Table V is designed to show the effect of any such large addi-
December 31, 1941 to June 30, 1943, a period of 18 months,
tional purchases on the general condition of the banks. The
and the war may last years beyond that time. With such a
data used are for member banks only, for which recent reports
huge addition to purchasing power at a time of great activity,
are available, and the table assumes for illustrative purposes
the maintenance of stable prices would be most difficult.
the changes in government security holdings indicated in
Added to the actual increase in bank deposits is the expectancy
Table II; that bank loans and holdings of securities other than
of an increased rate of turnover of existing deposits. Even if
governments will remain practically stable in 1943, and bank
inflationary effects were resisted in the war period, post-war
deposits will increase along with holdings of government
stability would be endangered.
securities, except to the extent that money in circulation
increases.
A first conclusion is that ways must be found to finance the
TABLE V
war more largely from taxes and from bond sales to the people.
EFFECT OF GOVERNMENT SECURITY PURCHASES ON ALL MEMBER
A second conclusion is that each bank must be prepared to
BANKS, ASSUMING PURCHASES AS INDICATED IN TABLE II
take into its own portfolio its fair share of the bonds which the
(IN BILLIONS OF DOLLARS)
banking system will itself be called upon to absorb.
June 30
Dec. 31
June 30
June 30
1941
1941
1942
1943
Capital Position and Government Holdings. It will be seen
TOTAL LOANS & INVESTMENTS:
Loans
16.7
18.0
Governments
18.5
18.5
that under conditions assumed in the foregoing table the
18.1
195
22.6
Other Investments
36.5
ratios of bank capital to deposits and to loans and investments
5.8
6.0
6.0
6.0
would be considerably reduced. There does not seem to be
Total
LIABILITIES:
40.6
43-5
47.1
61.0
any reasonable way by which capital could be increased as
Deposits
58.5
Capital Funds
61.7
644°
76.1**
rapidly as government security holdings, since the banks must
CAPITAL FUNDS RATIOS:
5.8
5-9
6.0
6.2
be expected to pay their share of the added tax bill. The table,
To Deposits
To Loans & Investments
9-9%
9.6%
9.3%
8.1%
therefore, assumes that bank capital will only increase at
June 30, 1942.
*Allows for increase of $1.1 billion in money 14-3% in circulation 13.6% 12.7% Dec. 31, 1941 10.2% to
slightly more than the rate of the last two or three years,
June 30, 1943-
Allows for increase of $2.6 billions in money in circulation July 1, 1942 to
namely, about 200 million dollars a year. This will be dis-
cussed later.
shown in April 1 bank statement, reduced by 15% to apply to member banks.
Currency increase in both cases calculated at annual rate indicated for country
However, since the increase in the assets of the banks is
It has been assumed in Table V as a working hypothesis that
likely to be mainly if not wholly in cash and in government
the Federal Reserve System would maintain adequate bank
securities, their ultimate soundness is not seriously impaired
reserves by open market operations or by reducing reserve
by even the changes contemplated above. The principal imme-
requirements. Thus the banks would be constantly supplied
diate question aside from inflationary dangers is with respect
with the additional reserves needed to finance the expansion
to fluctuations in market value of the securities and possible
of loans, investments, and deposits required in this program.
loss in case these securities should have to be liquidated.
It is difficult now to anticipate circumstances under which
[18]
[19]
Regraded Unclassified
such liquidation would be necessary in important volume.
flow of funds through the market incident to the enormous
The Federal Reserve System is ready to discount notes secured
transactions of the war period. The Treasury, moreover, would
by governments at their par value and it may safely be assumed
be handicapped in its financing program if succeeding issues
that this practice will continue during the war period. More-
of bonds appeared at sharply rising interest rates. Investors
over, the Treasury and the Federal Reserve System have ample
would be tempted to wait for better rates. Such a tendency
power to keep the banks supplied with cash; so that there need
would be natural in view of the fact that the present interest
be no occasion in the banking system as a whole for liquida-
rates are the lowest in the history of this or any other country.
tion of securities. It is to be expected that the Treasury and
The experience of England and Canada, however, has
the reserve system would be active in attempting to avoid
shown that it has been possible to finance their war effort at
severe fluctuations in the market.
fairly steady rates. For this purpose the fundamental necessity
Nevertheless, since conditions change rapidly and unfore-
is the general understanding on the part of the market, the
seen post-war conditions will succeed the war, and much of the
banks, and the government that rates will be maintained at a
war-created debt will be outstanding for years to come, it seems
fairly steady level within a moderate range of fluctuations. To
unwise to take for granted that the Treasury and the central
attempt to peg a rate firmly would defeat the purpose for it
bank can underwrite fully and indefinitely against such fluc-
would take away freedom of trading in the market, which is
tuations. One proposal, therefore, to safeguard this situation
essential both to confidence and to the usefulness of the mar-
is that the securities offered the banks should be wholly of very
ket for adjustments between investors and institutions.
short maturities of perhaps one to five years and hence subject
For the maintenance of a broad and dependable market for
to only modest fluctuations even with a considerable change
government securities, the prime necessity is cooperative un-
in the market. The difficulty with this proposal is that under
derstanding between the Treasury and the Federal Reserve
it the Treasury would have a huge floating debt which has
System on the one hand, the banks and other buyers on the
to be renewed embarrassingly often, at the same time that large
other.
additional issues for new money are being floated.
Reserve Position. Closely related to the question of the
A more realistic suggestion would be the sale to the banks
maintenance of steady interest rates is the reserve position of
of maturities ranging from one year to about ten years. This
the banks. For a number of years the banks have held huge
would have the effect of spreading out Treasury maturities
amounts of excess reserves and this excess has been largely
and would give the banks well distributed portfolios with a
responsible for a continuous decline in interest rates. It has
fair yield and some market outside the banks. With obliga-
made Treasury financing very easy, for as rates fell, bank earn-
tions up to ten years and an average maturity of less than five
ings fell also, and the banks were under pressure to use excess
years the banks would not be exposed to serious fluctuations
in values.
funds to buy more government securities.
Now this situation needs to be reexamined for it is necessary
Interest Rates and the Market. The foregoing shows the
that securities be distributed widely among investors and the
need for financing the war on a fairly steady level of interest
banks take only what cannot be sold to others. The banks
rates. Serious fluctuations in rates would cause concern and
ought to have less inducement to invest; others should have
interfere with the maintenance of a broad and active market,
more. This object would probably be achieved more easily if
which is necessary as a means for effecting adjustments between
individual banks and other institutions and taking care of the
excess reserves declined somewhat. But they should not be
allowed to decrease enough to place pressure on the market.
[80]
[81]
Regraded Unclassified
The current increase in deposits together with currency
withdrawals will normally lead to some decrease in excess
DEPOSITS, LOANS & INVESTMENTS,
reserves. It may be assumed, however, that the Federal Reserve
CAPITAL FUNDS AND PROFITS
OF ALL MEMBER BANKS
System and the Treasury will provide for sufficient excess
BILLIONS OF DOLLARS
reserves to maintain interest rates within their recent general
range. Such approximate stabilization of rates should not be
1929
30
31
'32
"33
'34
'35
36
37
38
39
'40
1941
70
70
impossible to attain under somewhat smaller excess reserves,
especially if we assume, first, some redistribution of reserves as
between banks, resulting from a larger supply of short
60
80
TOTAL
securities in the market, and second, mutual cooperation with
DEPOSITS
respect to the market between the Treasury and the reserve
50
50
system, and the banks.
However, it is clearly impossible to be dogmatic as to the
40
10
most desirable amount of excess reserves. That must be
worked out from experience, having in mind, however, the
30
30
desirability of selling the maximum amount of government
securities to investors other than banks.
20
LOANS
&
20
Bank Capital and Earnings. The recent history of the banks
INVESTMENTS
with respect to their capital and earnings is shown in the
10
10
diagram on page 23 for member banks.
These data may be summarized by saying that in the period
0
0
from 1929 through 1933 the banks absorbed very large losses
7
7
so that their capital funds were reduced by about 1,750 million
dollars, or 26 per cent. Since that time they have restored out
6
6
of earnings and recoveries about half of this loss, but their
capital funds, even including about 300 million dollars of
5
5
R.F.C. contributed funds, are still 12 per cent less than in
4
CAPITAL
1929, and their loans and investments 17 per cent larger. Their
4
FUNDS
earnings in this recent period have not been sufficient to build
3
3
their capital as rapidly as their assets and liabilities have in-
creased. Neither their earnings nor their earning prospects
2
2
have been good enough to enable them to sell additional cap-
NET PROFITS
1
ital stock to the market. The typical bank has been paying
1
dividends equal only to about 3 per cent of its capital funds.
0
0,
So this emergency finds the banks with clean assets but with
reduced capital.
Deficit
1
1929
30
31
82
33
34
35
36
'37
38
29
40
1941
[=2]
[23 ]
Regraded Unclassified
As indicated above, this capital, taking the banking system
as a whole, is probably sufficient for the need, but in order to
neighborhood are the people specially qualified to lead the
way in selling bonds to the public.
maintain unquestioned public confidence in the face of great
increases in assets and liabilities some further steady increase
Bankers have not neglected this problem. They were already
in capital seems desirable. With the increase in security hold.
hard at work on it before Pearl Harbor and have had a large
ings, increased earnings are normally to be expected, and it is
share in the successes so far achieved. But if the findings of
important that enough of these earnings remain in the banks
this report are correct our work has only just begun. To do
a useful job in this war we do not have to get into uniform
after taxation to allow a moderate but steady increase in cap-
ital funds. Similarly it would seem a wise policy for the banks
or go to Washington. Each one of us has a task right at home
demanding his full energy.
themselves to strengthen their positions by a thoroughly con-
servative policy as to building up reserves and as to the pay-
ment of dividends. This is not a long term solution but ade-
Summary
quate for the present emergency.
1. The present budget program calls for public financing of
$18,800,000,000 in fiscal 1942 and $33,600,000,000 in fiscal
A Critical Year and Task
1943. Still larger sums may follow.
2. The way this huge sum is raised will influence our whole
This report has dealt with many technical questions. It
economic and social structure.
should close with a broader outlook.
These are days of disappointment and regret,-regret that
3. To help avoid damaging inflation the greatest part of this
our preparations for war have been so tardy and so inadequate.
sum should be borrowed from the current income of people
As in France and in England, so it has been with us in the
who would otherwise spend it,-and next best from funds
now idle.
Philippines, at Pearl Harbor, and on the high seas. Our sin
has been "the unlit lamp and the ungirt loin." We have done
4. Banks and bankers are offered the opportunity of assisting
too little, too late.
the Treasury in the sale of war savings bonds and other
Wars are not won by armies and production alone. They are
government securities to investors, of acting in effect as
fought also in the area of finance; for bad finance may mean
underwriters of government issues, and providing them-
inflation and disorder, which in their turn delay production
selves what additional funds may be required by the
at vital points where a week or even a day's difference in de-
Treasury, all with the support of the Federal Reserve Sys-
liveries of guns and ships might lose a battle or a campaign.
tem acting only as the lender of last resort.
Today there is growing recognition that in the fight against
5- Even with the best efforts to place securities with other
inflation and economic disorder there is danger of doing too
investors, the Treasury's needs will require a large increase
little, too late. In this area the banker shares with government,
in bank holdings. Each bank must be ready to take its fair
share of these securities.
responsibility for an orderly financial program. Bonds must
be sold outside of the banks. The people who should buy them
6. To avoid disturbed markets and uncertainties a fairly
live in our neighborhoods. Many of them have money in our
steady level of interest rates is desirable, and it can be main-
banks. We see them constantly. They consult us and respect
tained with the cooperative effort of the banks, the Treas-
our judgment on financial questions. The bankers in each
ury, and the Federal Reserve System.
7. The sale of government securities to investors other than
[24]
[25]
Regraded Unclassified
banks might be encouraged if excess bank reserves were
allowed to decrease somewhat as deposits expand. A smaller
amount should be adequate to maintain reasonable sta-
bility of money rates.
8. During this period banks cannot expect to maintain as high
capital ratios as in the past nor does this appear to be neces-
sary as long as their expansion of assets is mainly in cash
and government securities. Banks should be allowed to
earn enough, however, to increase their capital at a mod-
erate rate.
9. In the fight against inflation the banker, by virtue of his
position in the community, has a special task at his own
doorstep in selling bonds to investors. He shares responsi-
bility with government to see that in this area there is no
repetition of "too little" and "too late."
[ 26 ]
Regraded Unclassified
94
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 1, 1942
TO
FROM
Mr. Haas
Secretary M Morgenthau
Subject: Recent changes in prices and yields of Government
securities.
All sectors of the market have lost ground during
the past week, although slight recoveries were shown
yesterday. Both partially tax-exempt bonds and taxable
bonds showed approximately similar losses but wholly
tax-exempt notes declined less than taxable notes. The
declines in taxable bonds during the week ranged from
5/32 in the case of the 2's of 1951-55 to 12/32 in the
case of the 2's of 1948-50. The 2-1/2's of 1967-72
declined by 6/32. The declines in the taxable notes
were much smaller running from one to 4/32.
All taxable bonds and notes are now below the March 19
prices. As a result, a comparison of the yields of taxable
bonds and notes on March 19 and as of last night's close
shows the level of yields has increased, particularly in
the case of short-term securities.
The average rate on this week's issue of Treasury
bills increased again for the fifth successive week. The
average rate this week was .34 percent as compared to the
recent low of .20 percent in the case of the issue of
March 18. Certificates of indebtedness lost ground during
the past week, the quoted yield rising from .44 percent
last Thursday to .48 percent early this week, where it
stood at last night's close.
During the week ended last night, the Federal Open
Market Account purchased $68 millions of Treasury securities,
of which $49 millions consisted of bills. The other
purchases consisted of taxable bonds including $6.5
millions of the 2-1/2's of 1967-72. No sales were made
by the Account during the week.
Regraded Unclassified
95
Price and Yield Changes of United States Securities
March 19, 1942 to April 30, 1942
:
Prices
:
:
Yields
Security
:
March 19,
April 30,
1942
1942
Change
:
March 19,
April 30,
:
1942
:
1942
Change
:
(Decimals are thirty-seconde)
(Percent)
Billo
Average rate last issue
-
-
-
.20
.34
+.14
Certificates
1/25
11/1/42
-
-
-
-
.48
-
Tasable Motes
TAX
3/15/43
100.12
100.06
-.06
.37
.53
+,16
3/4
9/15/44
99.31
99.22
-.09
.76
.88
+.12
3/4
12/15/45
99.21
99.09
-,12
.84
.98
+,11
1
3/15/46
99.29
99.21
+.08
1,02
1.09
+.07
Tarable Sonde
C
3/15/46-50
101.28
101.12
-,16
1.67
1.75
+.08
2
6/15/49-51
101,04
100.23
-,13
1.83
1,89
+.06
2
12/15/51-55
100.12
100.10
-.02
1.96
1.96
.00
8-1/2
3/15/52-54
103.23
103.17
-.06
2.09
2,10
+.01
2-1/4
6/15/52-55
101.06
100.31
-.07
2.12
2,14
+.02
3-1/2
3/15/56-58
103.05
102,18
-.19
2.24
2.28
+.04
2-1/2
9/15/67-72
100.27
100,21
-.06
2.46
2.47
+.01
Wholly Tax-exempt Notes
25
9/15/42
101.04
100,26
-.10
5/32*
2/32*
-3/32*
1-3/4
12/15/42
101.11
101.01
-,10
2/32*
.10
-4/32*
1-1/8
6/15/43
101.04
100.29
-.07
.22
.32
+.10
I
9/15/43
101,03
100.28
-.07
.26
.36
+.10
1-1/8
12/15/43
101,16
101.06
-,10
.26
.39
+,13
1
3/15/44
101.10
101.04
-,06
.34
.40
+,06
1/4
6/15/44
100.27
100.23
-.04
.37
.41
+,04
i
9/15/44
101.16
101.10
-.06
.39
.44
+.05
3/4
3/15/45
101.00
100.29
-.03
.41
.43
+,02
Partially Tax-exempt Bonds
3-3/09
6/15/43-47
103.21
103.07
-,14
.41
.50
+.09
3-1/4
10/15/43-45
104.06
103.23
-.15
.57
.68
+.11
3-1/11
4/15/44-46
105.06
104.23
-,15
.72
.81
+.09
4
12/15/44-54
108.11
108.02
-.09
.91
.88
-.03
2-3/4
9/15/45-47
106.06
105.29
-.09
.94
.97
+.03
P-1/2
12/15/45
105.28
105.17
-.11
.90
.94
+.04
3-3/4
3/15/46-56
110.08
109.29
-.11
1,11
1.13
+.02
6/15/46-48
107.28
107.19
-.09
1.09
1.11
+.02
3-1/8
6/15/46-49
108,08
108.00
-.08
1,13
1.13
.00
4-1/4
10/15/47-52
115.20
115,12
-.08
1.33
1.32
-.01
2
12/15/47
104.23
104.21
-.02
1.15
1.14
-.01
2-3/4
3/15/48-51
107.28
107.22
-.06
1.38
1.38
.00
2-1/2
9/15/48
107.07
107.02
-.05
1.33
1.34
+.01
2
12/15/48-50
104.21
104,18
-.03
1.28
1.26
.00
3-1/8
12/15/49-52
110.22
110.24
+.02
1.65
1.62
-.03
2-1/2
12/15/49-53
106,16
106.13
-.03
1.60
1,60
.00
2-1/2
9/15/50-52
106.20
106,18
-.02
1,66
1,66
.00
2-3/4
6/15/51-54
108.18
108,16
-,02
1.74
1.74
.00
3
9/15/51-55
110,20
110.17
-.03
1.76
1.78
.00
2-1/4
12/15/51-53
104.29
104.26
-.03
1.70
1,71
+,01
2
6/15/53-55
103.10
103.13
+.03
1,68
1,66
-.02
2-1/4
6/15/54-56
104.28
104.27
-,01
1,80
1.80
.00
2-7/8
3/15/55-60
110,00
109.28
-.04
2.00
2,00
.00
2-3/4
9/15/56-59
109.10
109.02
-.08
2,01
2.02
+,01
2-3/4
6/15/58-63
109.12
109.09
-.03
2,07
2,07
.00
2-3/4 12/15/60-65
110.00
109.25
-,07
2.10
2.11
+.01
Treasury Department, Division of Research and Statistics.
April 30, 1942.
*
Excess of price over zero yield,
Regraded Unclassified
96
Secret Service man carried to White House
1:00 p.m., 5-1-42
97
MAY 1 - 1942
MEMORANDUM FOR THE PRESIDENT:
I don't think the attached letter of April 21
of Secretary Jones requires any reply.
This is the situation as i understand it.
Donald Nelson wrote Secretary Jones on April 22 (copy
of which letter is also attached) to the effect that
Defense Plant Corporation rather than Treasury 8 hould
bear the risk of less involved in the use of the free
silver stocks in its plants as a substitute for copper.
Donald Nelson tells as that after Cabinet last Friday
(April 24) Secretary Jones handed you Nelson's letter
of April 22 and you told him to go ahead in accordance
with Nelson's letter and indicated your approval by
endorsing "O.K. F.D.R." on the bottom of the letter.
This apparently settled the matter 80 far as
Secretary Jones is concerned as we are proceeding with
the contract along the lines indicated in Nelson's letter.
(Signed) H. Morgenthau, Jr.
EHF :mdm
5/1/42
E.H.7.Jr.
m.s.
Regraded Unclassified
98
C
0
THE WHITE HOUSE
P
Washington
Y
April 29, 1942.
MEMORANDUM FOR THE
SECRETARY OF THE TREASURY:
FOR PREPARATION OF REPLY.
F.D.R.
Regraded Unclassified
99
Regraded Unclassified
THE SECRETARY OF COMMERCE
C
Washington
0
?
Y
April 21, 1942
Dear Mr. Presidents
You will recall at Cabinet a week ago the
question of Defense Plant Corporation using silver
in lieu of copper in the construction of aluminum
plants.
Defense Plant Corporation is prepared to
bear the cost of transporting the silver to fabri-
cating plants, the cost of fabricating this silver
into bus bars and conduits, the restoration of the
silver to bar form, and its return to the Treasury,
less incidental weight lessage due to abrasion and
fabrication, when requested by the President or the
Secretary of the Treasury.
I think this is all that should be expected
of Defense Plant Corporation.
If you concur, please advise the Secretary
of the Treasury and no.
Sincerely yours,
(signed) Jesse H. Jones
Secretary of Commerce
The President
The White House
100
Regraded Unclassified
P
I
April 22, 1942
Dear Jesses
I as in receipt of a. letter from Henry Morgenthau dated
April 16, 1942, enclosing copies of his recent correspondence 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 mt-
ter, I as writing you directly and am sending a copy of this letter
to Mr. Morgenthau.
Mr. Morgenthau, in his letter, referred to the fact that
the Treasury Department concluded there was legal 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 concurring in the Treasury's view and that the President
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 General, and
possibly another approval from the President.
It is of the utmost importance that these arrangements be
completed promptly, if we 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 M. Nelson
The Honorable
The Secretary of Commerce
001 Secretary of Treasury
LML:ECHine
101
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE MAY 1 - 1942
TO
Secretary Morgenthau
FROM Mr. Foley
The question Las arisen as to whether there
is authority to supply the silver market with approx-
imately five million ounces of "free silver" held by
the mints and classified as "Silver Ordinary", in order
to alleviate the present severe shortage.
Part of the silver under consideration was ac-
quired in deposits of gold, and part was purchased as
bullion for coinage. U.S.C., title 31, secs. 327, 328,
360, 362. There appears to be no statutory limitation
on the use which can be made of this type of silver.
Section 4 of the Silver Purchase Act of 1934 (48 Stat.
1178, U.S.C., title 31, sec. 734b) authorizing the sale
of silver under certain circumstances which are not now
in existence, applies only in connection with the sale
of silver acquired under that Act. Section 2 of the
Silver Purchase Act of 1934 provides as follows:
"It is hereby declared to be the policy
of the United States that the proportion of
silver to gold in the monetary stocks of the
United States should be increased, with the
ultimate objective of having and maintaining,
one fourth of the monetary value of such stocks
in silver."
Regraded Unclassified
102
- 2 -
It is apparent that this provision is merely a declaration
of policy and not a limitation on powers which were exer-
cised prior to 1934 with respect to silver held in the
Treasury.
Before the passage of the Silver Purchase Act
of 1934 it was the practice of the mints to furnish silver
out of "Silver Ordinary" for medals struck for Government
agencies. Shortly after the passage of that Act this prac-
tice was discontinued, apparently on the assumption that
section 4 of the Silver Purchase Act prohibited such sales,
but in 1940 it was pointed out that this assumption was
erroneous and the practice was resumed. Since the authori-
ty to sell "Silver Ordinary" existed prior to June 19, 1934
and the provisions of the Silver Purchase Act are not in-
consistent therewith, it is my opinion that such authority
still exists and may be exercised with respect to all or
any part of this type of silver.
The total amount of "Silver Ordinary" now owned
by the United States is 4,957,025.61 ounces which is carried
on the Daily Statement at its average cost price of 43.33
cents per ounce. Should all of this silver be sold on the
open market at the prevailing price of 35.375 cents per
ounce, a net loss of almost 8 cents per ounce would result.
Regraded Unclassified
103
- 3 -
There is no appropriation act which would authorize such
an expenditure. However, the value at which this silver
is carried is determined by averaging the prices at which
its component parts were purchased, and since there are
approximately 1,300,000 ounces which were purchased at
prices lower than the present market price, the Treasury
would suffer no loss should this latter portion be sold
at the prevailing rate. Should it be found necessary to
dispose of a larger amount than that which could be sold
without the Treasury suffering a loss, an arrangement might
be worked out with the Metals Reserve Company. That Company
could place silver on its list of critical and strategic
materials, purchase the silver under consideration at 43.33
cents per ounce, and sell it to industrial users at the pre-
vailing price, thus absorbing the excess cost of an important
material in order to make it available for the production
of articles and commodities essential to the war effort.
In view of the statement of policy in section 2
of the Silver Purchase Act with respect to silver in the
monetary stocks, I feel that it would be wise to present
this plan to the Special Silver Committee of the Senate
for its approval.
9.1~7h
Regraded Unclassified
104
May 1, 1942
by dear Mr. Hinckley:
Reference is made to your letter of April 28,
1942, concerning the procrement of commercial motor
vehicles for the Coast and Geodetic Survey and the
Civil Aeronautics Administration by the Procurement
Division of this Department.
The policy of consolidating purchases of major
items of supply and equipment in the Procurement Divi-
sion was established at the request of and in conjunc-
tion with the Division of Purchases, Office of Produc-
tion Management. One of the objectives of this policy
is the avoidance of competition for supplies and
equipment among the various agencies of the Government
by channelising essential requirements through certain
agencies of the Government. The Procurement Division
was selected as the agency to handle certain purchase
transactions for all of the executive departments and
agencies with the exception of the Har and Navy Depart-
ments, the Marine Corps and the Maritime Commission,
pursuant to authority granted by Executive Order 6166,
dated June 10, 1933.
It is realized that delay was encountered dur-
ing the period when the procedures for carrying this
policy into effect were being formulated. However,
since this procedure was established, we have been able
to render prompt and efficient service in the procure-
ment of equipment. All requisitions received since
April 1, 1942 have been cleared without delay.
Regraded Unclassified
105
- 2 -
It is assumed that the comparison of prices
mentioned in the fourth paragraph of your letter is
based on prices formerly paid to manufacturers. Under
present conditions, since the manufacture of commercial
motor vehicles has been terminated by order of the War
Production Board except for special orders, it has been
necessary in some cases to procure vehicles from
dealers' stocks. Equipment purchased from dealers nor-
mally carries higher prices than those paid to manu-
facturers.
Due to these facts and to the fact that the
granting of exemptions would seriously affect the above
stated policy in both this office and the War Produc-
tion Board, it is felt that exemptions should not be
granted.
Sincerely yours,
(Signed) B. Morgenthan, 12.
Secretary of the Treasury
The Honorable
The Assistant Secretary of Commerce
Washington, D. C.
Phase file n.m.c
Tele to Hompan
Regraded Unclassified
THE ASSISTANT SECRETARY OF COMMERCE
WASHINGTON
April 28, 1942
dear Mr. Secretary:
Circular letter No. 538 issued by the Procurement Division
of the Treasury Department states that that organization exclusively
will undertake the purchase of automotive equipment for all govern-
mental agencies except the Army and Nevy, Merine Corps and the
Maritime Commission. A memorandum dated April 14, 1942, and
addressed to the Coast and Geodetic Survey and the Civil Aeronoutics
Administration and others, signed by Mr. Frnest Kanzler, Chief,
Automotive Branch, War Production Board, and approved by Mr.
Clifton E. Mack, Director of Procurement, states that the Procurement
Division, exclusively, will be the purchasing agent for commercial
automotive equipment for, among others, the two agencies mentioned
above.
All field units of the Coast and Geodetic Survey are
engaged in essential war activities and the activities of the Civil
Aeronautics Administration are also related to the war effort. The
War Production Board has placed both of these bureaus in the same
classification as the Army, Navy and Maritime Commission with respect
to priority regulations for the procurement of equipment and supplies.
The control and distribution of new automotive equipment
is a function of the Automotive Branch of the War Production Board.
The needs of the Coast and Geodetic Survey and the Civil Aeronautics
Administration for the remainder of the fiscal year 1942 and for
the fiscal years 1943 and 1944 have been reported to the War
Production Board and a definite quota has been established to take
care of their requirements. The use of government exemption permit
Form PD-322 by these hureaus in reporting directly to the Var
Production Board will serve the required purpose of controlling
quotas and it should not be necessary to forward this form to and
to make the nctual purchases through the Procurement Division. This
automotive equipment can be purchased in the field throwch the
existing facilities of these agencies without recourse to the
Procurement Division, which will exyedite the acquisition of these
necessary units.
Recent experience has indicated that the purchasing of
commerciel automotive equipment through the Procurement Civision has
resulted in delays of several months, seriously hampering the wer
Regraded Unclassified
(2)
to of both of these agencies, and that the final acquisitions
at prices from $200 to $400 in excess of that which would have
required had these individual agencies made the purchases
By using their own facilities.
Due to the serious delays to the war effort of these
scies, as outlined above, caused by the procedure required, it
sired that the Coast and Geodetic Survey and the Civil
nautics Administration of this Department be excepted from the
ision that purchases of commercial automotive equipment must be
más
through the Procurement Division and that existing instructions
be
amended to permit this action.
Sincerely yours,
Robert H. Hinckley
The Honorable,
The Secretary of the Treasury,
Machington, D. C.
Regraded Unclassified
April 28, 1942
My door Mr. Nelson:
Reference is made to your memorandum of April 14, 1942,
to the Coast and Geodetic Survey and the Civil Aeronautics
Administration and others regarding procedure to be followed in
procuring commercial automotive equipment during the remainder of
the current fiscal year and until further notice. Recent
transactions with the Procurement Division, Treasury Department,
in purchasing automotive cars and trucks for these agencies
resulted in delays of several months before this essential equipment
was received, which seriously hompered their wer effort. For many
of the purchases the cost of individual items W&S Dome $200 to $400
in excess of that which would have resulted had these agencies made
these purchases using their own existing facilities.
The Coast and Geodetic Survey and the Civil Aeronautics
Administration are engaged in essential war activities. This has
been recognised by the War Production Board in that these buresus
have been placed in the same classification as the Army, Navy and
Maritime Commission with respect to Mar Production Board regulations
for the procurement of equipment end supplies. It 1a my understanding
that your organisation has assigned definite quotes of automotive
squipment which may be purchased during this fiscal year and for
fiscal years 1943 and 1944, based on estimated needs as reported to
you by these two organisations.
It is believed that e. request directed to you for the
government exemption permit Form PD-322 for individual purchases
of commercial automotive equipment allowing the same procedure as
outlined in paragraphs 2, 4 and 7 of your memorandum by either of
these agencies without recourse to the Procurement Division end the
issuance of this certificate directly to these organizations 50
that they may sake the purchases through their own organizations
will facilitate delivery and otherwise be more economical and
efficient. It is intended that each of these organizations would
unke the necessary reports to you through their Rashington offices
thout going through the Procurement Division and you would be
able to control quotas of commercial vehicles assigned to these
designated agencies.
Regraded Unclassified
(2)
It is requested, in order that the Coast and Geodstic
Servey and the Civil Aeronautics Administration my effectively
expeditiously prosecute their war activities, that the
astrustions contained in your memorandum of April 14 be ausoded
that these organisations will not be required to purchase
conservial automotive equipment through the Procurement Division
bet say make the necessary purchases through their existing
facilities and nake the necessary reports directly to your office.
Sincerely yours,
Robert N. Hinckley
Mr. Donald 1. Helson,
Chairman, Mar Production Board,
Fashington, D. C.
Regraded Unclassified
21st YEAR OF PUBLICATION
5-1-42
110
Reader's Digest
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6
Sympathy Is What You Make It
Our Minor Freedoms" 10
Detroit: Million Man Arsenal
Forbes 13
Church of the Penitent Thief
Baltimore Sunday Sun 19
Shall It Be We - Or They?
Nation 22
It's Our War - Pitch In
American Legion Magazine 26
Germ-Killers from the Earth
Harper's 29
Fooling Enemy Airmen
Air Facts 33
We Discover the Japanese
Liberty 36
The Japs Discover Us
New Yorker 38
How Far Will Our Rubber Stretch?
Kiwanis 42
A Working Cure for Athlete's Foot
By Paul de Kruif 46
She Sounded Forth the Trumpet
St. Louis Post-Dispatch 49
From A to Zyzzogeton
Saturday Review of Literature 51
Biddle: Praying Colonel of the Marines
American Meroury
55
Classes as Usual
Intercollegian 59
Dreams - The Guardians of Sleep
Your Life 61
A Call for Young Workers on the Land
Survey Graphic 66
Nothing But the Tooth
Inside Benchley"
73
Dately
76
That's How They Got Nucky Johnson
By Jack Alexander
79
The Terrible Midget
86
Come Hell or High Water
Nautical Gazette 91
Uncle Sam's Prettiest Battalion Christian Science Monitor 95
Industrial Strife - Or Production for Victory?
By William Hárd 97
"Time Brings All Things"
Time 102
Jungle Doctor
Opportunity 103
Paradoxical Peru
Inside Latin America" 107
The Peril That Confronts Us
New York World-Telegram 111
Three Million Amateur Bankers
Rotarian 113
Aunt Chloe's Reward
Saturday Review of Literature 117
The Case of the Murdered Vegetable
Parents' Magazine 119
From John Doe to the Russian Front By Lois Mattox Miller 122
Book
Section
Falling Through Space
By Richard Hillary 125
Picturesque Speech and Patter, 65
MAY 1942
1
Regraded Unclassified
That's How They Got Nucky Johnson
By
Jack Alexander
WHEN agents of the U.S. Bureau of Internal Revenue
concluded their amazing five-year investigation of rackets
in Atlantic City, they summarized their findings in a de-
tailed report to Secretary of the Treasury Morgenthau and
Commissioner of Internal Revenue Helvering.
Through Elmer L. Trey, Chief of the Treasury Depart-
ment's Intelligence Unit, this confidential report was made
available to The Reader's Digest, and supplied the facts
for an inside story of graft and political corruption which
otherwise could not have been told.
I'
1936, Enoch L. Johnson was
the choosing of jury panels was his
sitting pretty. He had been Re-
brother Al. Enoch L. Johnson
publican boss of southern New
Booster Clubs in every precinct
Jersey for decades and his constitu-
delivered half the county's votes;
ents, some admiringly, some despair-
in a pinch, he could always swing an
ingly, said nobody would ever "get"
election with floaters.
Nucky; he was too powerful.
It was a perfect setup.
Atlantic City was the jewel of his
No public road or building con-
domain. Visitors on holiday are its
tract could be let without first seeing
chief means of livelihood, and even
that Nucky was taken care of. Not
its staid citizens agreed that any
a horse-race betting room, brothel,
taint of puritanism would painfully
gambling casino, numbers banker
shrivel the crowds on the Boardwalk.
or petty racketeer could operate
And so Nucky ran the place wide
without "cutting in" the boss. In
open. There were two big businesses
magnitude these rackets, daily shak-
in America's most famous resort -
ing down tens of thousands of citi-
the hotels and the rackets. The rack-
zens and visitors to the famous
ets were the bigger. The Board-
seashore resort, compared favorably
walk hotels were in the red and
with those of Al Capone in his prime.
10 of 14 banks had failed, but gam-
Technically, the Atlantic City
bling, the red light district and minor
system was a beautiful thing to
rackets grossed $10,000,000 a year.
behold. There were none of the
Of this, $250,000 a year went to
bloodstains that blotch most racket
Nucky. Every cop held his job
landscapes. Racketeers shoot only
through Johnson. He personally
when outsiders try to "muscle in,"
picked the county board and the
or when they get into competition
judges. The sheriff who supervised
with each other. In Atlantic City,
Regraded Unclassified
THE READER'S DIGEST
THAT'S HOW THEY GOT NUCKY JOHNSON
if a New York or Chicago racketeer
He kept four 16-cylinder automo
Atlantic City. The immense
set up a casino or bordello, the local
biles, a large staff of servants includ-
tacket industry was operated on
RACKETS similar to those uncovered in
lads merely complained to the police
ing a valet-bodyguard, and a succes-
a word-of-mouth basis, with all
Atlantie City are still permitted to exist,
vice squad, which drove the inter-
sion of flashy mistresses. For the
transactions in cash. Neither
in some degree, in many communities
where citizens are not alert to their civic
lopers out of town. And there was no
occasional use of his No. I blonde he
Johnson nor his satellites had bank
duties.
unseemly competition. When the
leased a Central Park South apart-
or brokerage accounts. Numbers
Such rackets, which divert a shocking
numbers men started an undignified
ment in New York, at $2200 a year.
game bankers burned their slips
proportion of a community's income into
cut-rate war in 1935, Johnson quickly
For a long time the Treasury had
at the end of each day's busi-
the hands of racketeers, are an intolerable
cracked down. He made them set up
been receiving complaints that in-
ness. The horse rooms did the
drain upon the financial lifeblood of the
nation's gigantie war effort.
a cooperative syndicate with a cen-
come tax evasion was rife among the
same. So it was through all the
For that reason the inside story of this
tral office in the Little Belmont Ho-
resort's underworld barons. Now
rackets - mountains of graft and
case - one of the most notable investiga-
tel. Each numbers banker put his
Secretary of the Treasury Henry
corruption, but not a pebble of
tione in the history of the Bureau of
Internal Revenue - has unusual sig.
daily "take" into the pool; profits
Morgenthau, Jr., had given personal
proof,
nificance at this time.
were equally divided at the end of
orders to clean up the situation. So
Even worse, there was a com-
the week. Each contributed $150
in November 1936, at the direction
munity-wide conspiracy to shield
a week for "ice." Every Monday a
of their Chief, Elmer L. Irey, Intelli-
Nucky. Time and again, racket
Secretary of the Treasury
"bagman" delivered the ice, $1200
gence Unit Agents William E. Frank
underlings went to jail rather
in cash, to Johnson.
and Edward A. Hill went to Atlantic
than reveal the simplest fact about
Another bagman delivered $2880
City and began quietly poking
the boss. They knew that if
might loosen the racketeers' tongues,
from the horse-betting rooms. A
around.
Nucky fell their easy-money days
persuading them to testify about
third brought in the ice from eight
The government income tax in-
would be ended. Perjury, deceit,
their graft payments to Johnson,
houses of prostitution- - $50 a week
vestigators, seasoned by a series of
jury-fixing, lack of cooperation even
the agents' real quarry.
from each madam in winter and $100
prosecutions that had landed scores
from reputable citizens were the
After five months of staying under
in summer, when trade was brisker.
rule. Adverse court decisions wiped
cover, the federal men began calling
of big-time racketeers and crooked
The bagman for the bordellos was
politicians in jail, were accustomed
out the work of months. It seemed
in underlings for interrogation. That
Undersheriff Raymond R. Born, a
to tough cases. But this one, they
at times that the prosecution of this
same day, a nervous little man rang
subordinate of Nucky's brother.
flamboyant grafter must fail.
the doorbell at Johnson's villa. Ush-
soon learned, was unique. They
found Atlantic City wide open. No:
But the Intelligence Unit agents
ered into the boss's presence, the visi-
For 25 years Nucky's ostensible
blugged on, with relentless thor-
tor said: "Listen, Boss, that man who
income was $6000 a year as County
body suspected their identity. The
Treasurer. Yet he lived with riotous
frequented horse rooms and played
oughness. There were never more
comes around once a year on March
extravagance. He was drunk four
the numbers. They trailed Johnson
than eight of them. More often there
15. that man with the whiskers -"
were only three, and a stenographer
"Well?" Johnson growled. "They
nights out of five and slept regularly
on his binges, and they identified by
until four in the afternoon. The tall,
or two. They labored 12 to 18 hours
are in town," said the man, and put
their auto license plates the cops and
bald, fiftyish man was a conspicuous
racketeers who visited his villa.
a day, with no vacations.
on his hat and went out.
figure in the cabarets of Atlantic
Agent-in-charge William E. Frank
Johnson assigned police detectives
City and New York, drinking only
T
HE agents thought they could
decided to base his case on proving
to shadow the agents, and stationed
champagne and 18-year-old brandy,
clean up the case in a year. Ac-
graft in four major directions - (i)
a detective near the entrance to the
tually, it took them five years.
public contracts, (2) the vice racket,
federal grand jury room to let gov-
and flinging $100 tips around.
Johnson lived in a beach-front
(3) the numbers racket and (4) the
ernment witnesses know they were
Ledgers and canceled checks had
villa and a suite in the adjoining
been the basis for most income tax
horse-room racket. The agents thought
recognized when they came in to
Ritz-Carlton Hotel - rental, $5200.
prosecutions; there weren't any in
that indictments and jail sentences
testify.
Regraded Unclassified
THE READER'S DIGEST
THAT'S HOW THEY cor NUCKY JOHNSON
U
NLIKE the racketeers, the con-
a $60,000 "legal fee" to one loseph
did not, in themselves, establish a tax
stores and bars on the main streets,
tractors who did public jobs
A. Corio in 1935. And Corio, in his
revasion case against him.
bets were accepted for tracks in the
had to keep books and use banks. A
1935 tax return, had listed his gross
United States, Canada, Mexico and
checking job in the stifling base-
income at only $20,800. He was a
T
THE AGENTS next took up the vice
Cuba. Downstairs, the 50-cent and
ments of two closed banks showed
Common Pleas judge and a creature
racket. Few of the madams had
dollar betters were accommodated;
that Morrell B. Tomlin, a favored
of Nucky's. The agents called 00 him
bothered to file tax returns. How to
upstairs were rooms for women and
road builder, had deposited $1,-
and asked about that $60,000 "fee."
prove their income without benefit
for the $2-$10 players. The joints
654,590 in seven years. Yet he had
Corio said he had spent $40,000 on
of records? The Treasury men de-
held from 100 to 75° players. Some
never filed an income tax return.
"business expenses" - office rent,
vised a homely bookkeeping system
of the tonier ones served tea and
His father, John Tomlin, a county
electricity, clerk hire.
of their own.
coffee at 4 o'clock, on the house.
freeholder, had banked $561,560 in
When requested to itemize the ex-
At the laundry which the bordel-
The agents knew that business was
three years, reporting only a nominal
penses, Corio flew into a first-class ju-
los patronized, the agents carefully
booming, and the horse-room pro-
net income.
dicial rage and roundly scored the
checked on the weekly poundage of
prietors - Doc Cootch, Wallpaper
When the Tomlins refused to ad-
agents' "impudence." This only in-
linen. By accurately weighing a sin-
Willie and the rest - reflected their
mit paying part of their profits to
tensified their interest in Corio's af-
gle towel and doing some division,
prosperity in flashy clothes and ex-
Johnson, their prosecution for tax
fairs. And now they got their first
they were able to tell how many units
pensive cars. All were reporting
evasion was recommended and they
"break." The bank he dealt with was
were used up in each establishment.
incomes of from $3000 to $5000,
were granted a hearing in Washing-
the only one in Atlantic City which
Each unit stood for a visit from a
obviously faking, yet no assets could
ton before final action on their case
kept a photographic record of all
customer and the prostitute's stand-
be found recorded in their names.
was taken. Father and son came in
checks. In a few days they con-
ard honorarium was $1, of which
The agents offered the horse-room
threadbare clothing and pleaded
fronted Corio with evidence that he
she retained 50 cents. The rest was
operators informal hearings on their
poverty. The agents produced a
had spent nowhere near $40,000 in
simply multiplication. followed by
income tax liabilities, hoping to gain
newspaper photograph which showed
1935. The judge changed his tune;
subtraction for operating expenses.
damaging admissions. The gamblers
the elder Tomlin, clad in evening
he wanted to "settle the thing." and
"Well, you've got the straight fig-
accepted. The information they gave
clothes, at a political banquet a few
"get it off his mind." But the agents
ures, all right," one of the bewil-
on their businesses tallied with gov-
nights before. They also proved that
refused; either be would fully ex-
dered madams conceded. She con-
ernment estimates - up to a point.
he owned 30-odd parcels of good At-
plain his expenditures, or charges
fessed to cheating on her income
Then the gamblers balked, making
lantic City real estate and $30,000
would be filed. Corio was indicted,
tax and, equally mystified, the
vague claims of unusual conditions
worth of securities. The Tomlins
and straightway went to a sanitar-
thers followed suit. But the sublime
which cut into their profits. The
were indicted, but they refused to
iúm, suffering from a convenient
confidence that Nucky would take
agents were unable to prosecute for
talk about graft.
nervous breakdown.
care of everything remained un-
tax evasion because few juries would
Three partners who had the city
Months after he came out he ad-
shaken; despite the threat of a stiff
be likely to convict on mere esti-
garbage removal contract were more
mitted that $28,000 of the money
prison term, the madams kept on
mates, no matter how well reasoned.
talkative. All had cheated on their
had been paid to Johnson as graft.
swearing they had not paid any graft.
income taxes and two admitted hav-
But Johnson, who had made some
ing paid $10,000 a year to Johnson.
unwise realty investments in Board-
The only large construction job in
walk property, was able to report a
L Sunday punch who lands his
I
INVESTIGATION next turned to the
numbers game. Despite its ob-
repeatedly only
vious prosperity, the operators had
Atlantic City for years had been a
bona fide net loss of $56,000 in his
to see his opponent stand there grin-
paid trivial income taxes, or none at
$2,400,000 railroad terminal. The
1935 return; the proved garbage re-
ning, the Treasury's little deputa-
all. The numbers lottery is supported
books of Anthony P. Miller, Inc.,
moval and terminal graft payments
tion next jabbed at the horse-room
almost entirely by the poor. It is the
the builders, disclosed they had paid
totaled only $48,000; therefore they
racket. In the back rooms of cigar
meanest gyp of all.
Regraded Unclassified
THE READER'S DIGEST
THAT'S HOW THEY GOT NUCKY JOHNSON
The investigators decided their
5° to 60 percent of their take. The
prce them, with stiff jail sentences
Al Johnson let them run their horse
best chance was to start at the bot-
agents wondered. At headquarters
as the alternative, to admit paying
rooms by remote control and order
tom, with the vendors of the tickets
night after night, with plenty of
Johnson graft. This difficult court
their meals from their favorite res
- the "writers." There are 1500 re-
sharpened pencils and coffee, they
battle was undertaken by a special
taurants. When Undersberift Born.
tail stores in Atlantic City: 800 of
covered reams of paper with calcu-
prosecutor, Joseph W. Burns, a bril-
bagman for the bordellos, was con-
them were selling numbers tickets.
lations based on mathematical for-
liant young assistant in the Attorney
victed, he got only a year-and-a-day
Bets were dimes, nickels, pennies.
mulas of chance and probability. If
General's office. From now on, in an
sentence. In underworld jargon, he
For instance, customers would buy a
they could prove that not nearly
impressive demonstration of coöper-
could do it "standing on his head."
12-cent loaf of bread and take the
this amount was paid out, their tax-
ation between government depart-
He grinned derisively at the govern-
change in the form of a numbers
evasion cases became far stronger.
ments, Burns was to handle 21 trials
ment prosecutors and didn't even
slip. There was no concealment; the
The agents submitted their final
and 18 contempt hearings. He was
appeal.
agents, from the window of their
figures to an eminent mathematician
the government's swing man for the
The grand jury achieved nothing
apartment, used to watch a collector
in Camden and to a government
rest of the investigation.
except seven citations for contempt
call at the cigar store across the
statistician. The experts placed the
The first numbers banker to go on
and five indictments for perjury.
street, emerge with a sheaf of tickets
probable percentage paid out at 46.4
trial was convicted on June 7. He
Perjury on a wholesale, organized
in his hand and pause for a chat with
- instead of 50 to 60. But a detailed
was fined $2000 and sentenced to
scale was wrecking the investigation.
the cop on the beat.
study of hits actually paid out over
three years. The verdict demon-
Yet on technical grounds, two of the
The storekeepers, it turned out,
more than three years indicated that
strated that Johnson's underlings
perjury indictments were quashed.
were mostly sick of the racket. Many
the true laws of chance were not al-
could actually be convicted; and the
The government was in the agoniz-
of them said they had to write num-
lowed to operate, that some form of
government, in making an income
ing position of being right, but un-
bers or see their customers trade else-
fixing was employed. The actual
tax case stick without benefit of rec-
successful because a district judge
where. The job of interviewing 839
amount paid out had been only 35
ords, had set a legal precedent. Two
had made an incorrect legal ruling -
writers almost wore the agents' legs
percent. Obviously the numbers men
other bankers were soon behind the
later reversed by the Supreme Court.
out. The Negro district saw Agent
were making far greater profits than
bars. But, confident that Johnson's
A Negro numbers banker, Leroy
John C. Cheasty so regularly that the
they reported, and the government
influence would win early paroles for
B. Williams, went on trial, repre-
inhabitants good-naturedly began
had ample proof of tax evasion.
them, they went willingly to jail
sented by a Negro attorney, Isaac
calling him "Mayor of the North
In two and a half years of tedious
rather than come clean about Nucky.
Nutter. Throughout the trial Nutter
Side," and 222, the number of the
jigsaw-puzzle work, the agents had
Attorney Burns and the Intelli-
clutched a rabbit's foot in his pocket
agents' office in the Post Office
questioned more than 2000 person
gence Unit agents next resorted to
and once he "hexed" Prosecutor
Building, became a favorite bet.
and had bad scores indicted. Yet
the grand jury inquiry and use of the
Burns by dropping a pinch of salt
But it was worth the trouble.
none of those had cracked, and there
potent contempt-of-court weapon.
behind him. It must have been a
Scores of writers gladly gave affi-
was no legal proof of large graft pay-
As usual, the horse-room racketeers,
powerful hex, for Williams was
davits which supplied an accurate
ments to Johnson. Something had to
the numbers men and the bordello
acquitted.
picture of the "bankers" gross take.
be done to shake the mob's almost
madams all refused to talk about
Then came a break. Williams
Two more items were needed: the
religious belief in the Boss's magic
graft payments, even when cited for
didn't pay Nutter's fee. Nutter.
banks' expenses- rent and payroll
ability to thwart the law.
contempt.
thoroughly sore, became an ally of
-and the money paid out to win-
The government soon found out
the government. He furnished valu-
ners. The bankers were called in and
A
CAMDEN, in May 1939, the
why. Two bookies had quietly
able inside information.
gave reasonable estimates of their
government opened a court
pleaded guilty. They were serving
And sex unexpectedly came to the
overhead expenses. On hits, they es-
campaign to convict the racketeers
four months' sentences in the Mays
government's aid. On a plea of guilty
timated paying our anywhere from
on income tax evasion charges and
Landing jail, where friendly Sheriff
to a charge of income tax evasion
Regraded Unclassified
THE READER'S DIGEST
another Negro numbers banker had
The jury fixing was strong indica
gone to prison in 1939. His pretty
tion that Nucky Johnson was becom-
high-yaller wife, who had been an
ing frantic. The investigation had
entertainer in a night club he owned,
swept an Atlantic City reform group
started running around with a num-
into office and the new mayor,
bers banker named Joseph Fried-
Thomas D. Taggart, Jr., was raiding
man. Friedman, a fragrant character
the joints. The numbers syndicate
whose own wife was an Atlantic City
ceased operation entirely, the bor-
madam, not only stole the high-yaller
dello and horse-room trade dropped
gal but also her husband's bank. Nut-
off to a whisper. While sources of
ter told the husband and, in revenge,
graft thus were drying up, fines and
the convict went before the grand
defense counsel fees were mounting.
jury and spilled the whole numbers
Many of the boys were grumbling.
syndicate story, graft and all. Then
Among the grumblers was Austin
a second Negro banker talked.
Clark, who had gone to prison rely-
The stories these two told about
ing upon Johnson's assurance that he
graft payments went straight to the
would soon be paroled and that his
point, but no jury would believe
business would be waiting intact
their assertions if all the other
when he came out. The parole hadn't
numbers bankers contradicted them.
arrived and Clark's numbers bank
Another conference in Washington
had been hijacked by loving col-
resulted in a decision to pound away
leagues. Outraged, Clark joined the
at the bankers as a group. Finally 14
ranks of bankers who spilled; and so
numbers operators were indicted on a
did still another. That made four
charge of conspiring to commit per-
converts out of 14.
jury before the grand jury. They went
Then Friedman was convicted of
on trial at Camden in April 1940.
income tax evasion, and sentenced to
10 years. Evidently the jury-fixing
T
HE EVIDENCE against them was
game was up. Immediately the at
overwhelming - but the jury
torney for another banker, Jack
disagreed. At a retrial the second
Southern, offered to plead his client
jury voted for outright acquittal!
guilty on three indictments in ex-
Prosecutor Burns was suspicious.
change for a one-year sentence. The
Sure enough, an investigation by the
government turned down the bar-
Intelligence Unit agents confirmed
gain. That night Southern visited
tips about jury tampering. The gov-
Johnson at the villa for a showdown.
ernment convicted the jury tam-
The boss laid his cards on the table.
perers but, ironically, was unable to
Southern, he agreed, faced "a lot of
retry the 14 perjury conspirators be-
time," but he, the once all-powerful
cause of the constitutional guarantee
boss, could do nothing for him.
against double jeopardy.
It was a staggering admission from
Regraded Unclassified
THAT'S HOW THEY GOT NUCKY JOHNSON
Ote longer protect his own. The
invulnerable boss. Nucky could
a champagne party on the night be-
fore he was sentenced.
racketeers had lost their trump card.
All told, the amazingly dogged in-
vestigation, in the face of baffling
S his chan pleaded guilty and took
difficulties, resulted in the convic-
got five years
tion of 47 persons. The government
and a $3000 fine. Singly and in
is suing to recover $1,000,000 in ad-
groups, the holdouts straggled in,
ditional taxes and fraud penalties.
pleaded guilty and talked freely
The investigation cost $200,000.
about graft payments - - the num-
During all the years the agents
bers men, the bookies and the
had been in town, Nucky Johnson
madams. Now it would be Johnson's
had refused ever to see them. But
word against that of his whole army
the educational effect of the Intelli-
- if he chose to deny getting the
gence Unit's work was not lost upon
"ice." The trial of Johnson, the final
him. When Louie Kissell, Johnson's
chapter in an investigation now com-
valet-bodyguard, was implicated in
ing to the end of its fifth year, was
jury fixing he was arrested at the
set for July 14, 1941.
villa by Agent Snyder and a deputy
The government's proof of graft
U.S. marshal. While being taken to
was so convincing that Johnson was
an automobile, Kissell broke away
forced to admit having. received it,
and ran back to the yard, shouting,
in order to lend the slightest credi-
"Boss! Boss!"
bility to his phony defense that he
A pair of French doors on the sec-
had spent much of it for political and
ond floor opened and Johnson
charitable purposes and was entitled
stepped out on a balcony.
to large deductions. It took a jury
"Boss," cried Kissell, raising his
only five hours to bring in a verdict
handcuffed arms in outraged protest,
of guilty. On August I, Circuit
"they can't do this to us! Tell "em,
hdge Albert B. Maris sentenced
Boss, they can't do this!"
Johnson to serve TO years in Lewis-
Johnson somberly looked down.
burg Penitentiary and pay a fine of
"Louie," he said sadly, "the gov-
$20,000. As a final, gay fillip Nucky
ernment can do anything," and
Johnson married his No. I blonde,
walked back through the French
Flossie Osbeck, and celebrated with
doors.
Copyright 1942, The Reader's Digest Association, Inc., Pleasantwille, N. Y. Printed in U. S. A.
Regraded Unclassified
111
DE
hours THE ANORIVES /934 STATE A 1
The National Archibes
Inshington, B.O.
NOTES CONCERNING THE FRANKLIN D. ROOSEVELT LIBRARY AT HYDE PARK, N. I.
Papers recently transferred to the Franklin D. Roosevelt
Library by the President include White House files of correspond-
ence relating to the following subjects: modification of the
Volstead Act and repeal of the Eighteenth Amendment, 1933, ad-
ministration of the National Industrial Recovery Act, and proposals
for its restitution, 1933-37, veterans' compensation legislation,
1933-39, regulation of radio broadcasting, 1933-40, the "pump-
priming" program of 1938, and the President's proposal of April 14,
1939, for a European peace. Also received was part of one of the
President's personal files consisting of letters received from the
general public commenting on the radio addresses made by him from
October 23, 1940, to December 9, 1941.
Dr. John S. Curtiss, Assistant Archivist, has been granted
leave of absence from the Library for the duration of the war to
work in the Office of the Coordinator of Information, Washington.
Dr. Curtiss will serve in the Division of Special Information as
an expert on Russian affairs.
May 1, 1942
Regraded Unclassified
112
TREASURY department
INTER OFFICE COMMUNICATION
DATE May 1, 1942
TO Ferdinand Kuhn, Jr.
FROM Herbert Merillat
EDITORIAL OPINION
ON THE HOME FRONT:
THE SEVEN POINTS
Good in principle, disappointing in detail -- that
is the typical editorial judgment on the President's
seven-point anti-inflation program. A few papers,
including such eastern metropolitan leaders as the
Philadelphia Inquirer and Baltimore Sun, gave the
President's message to Congress and radio address high
praise as a courageous and realistic program to combat
inflation. Most commentators throughout the country give
full support to the President's thesis that all seven
points are interdependent and must be put into effect
without delay. At the same time, however, they feel
that the President's recommendations are not specific
enough, particularly in the fields of wage-control and
taxation. Few have echoed the despairing tone of the
New York Times, which feels that the President's program
utterly fails to come to grips with the inflation problem.
Regraded Unclassified
-2-
113
In the view of most editorial writers the two
gravest shortcomings of the President's plan of attack
are: (1) the failure to recommend effective legislative
control of wages, and (2) the failure to propose taxes
on low incomes or compulsory savings to drain off
swollen mass purchasing power which threatens to break
down the dams of price control.
Papers in the Midwest and South have been especially
critical of the President's insistence on retaining the
basic 40-hour week and on leaving wage stabilization to
administrative rather than legislative action. Editorial
comment from those sections has been fairly cautious and
reserved, but there is a noticeable undertone of pique
that the President should propose to lower the ceiling
on farm prices by legislative action and yet oppose
legislative restrictions on labor. In the words of the
Greenville (South Carolina) News: "It certainly seems
logical to hold that if action which would decrease the
earnings of any industrial worker is to be opposed, a
similar attitude should be taken against action which
would decrease the earnings of the farmer."
The Seven Points
1. Taxation. "We must tax heavily and keep
personal and corporate profits at a reasonable rate."
We agree, say the editorial writers, that no one
Regraded Unclassified
-3-
114
should be allowed to make excessive profits in this war,
but they add that taxes on corporate profits and high
bracket incomes have nothing to do with checking inflation.
The only taxes that will effectively help to curb infla-
tion are taxes that hit the mass purchasing power of the
nation. The purchasing power which threatens to bid
prices up, they say, is found in the three-quarters of
the population who are not in the income tax base. Lower
income tax exemptions, or a sales tax, or compulsory
savings, or some combination of these, is necessary to
close the inflationary gap. In failing to recommend
such measures, say his editorial critics, the President
has neglected the basic method of combating inflation.
Commentators are generally agreed that the proposal
to limit individual incomes, after taxes, to $25,000
was added as political sweetening to a recipe for inflation-
control which called for sacrifices from various sections
of the public. Reaction has been mixed. Many writers,
while pointing out that the income ceiling has little
significance as a revenue measure or 8. check on inflation,
think it may be a desirable symbol of the sacrifices
which rich and poor alike must make for the duration.
Others reject the proposal violently even as a symbol
and attack it as a pointless, revolutionary measure which
would serve no good purpose and undermine the capitalist
system.
Regraded Unclassified
-4-
115
2. Price Control. "We must fix ceilings on the
prices which consumers, retailers, wholesalers and
manufacturers pay for the things they buy, and ceilings
on rents for dwellings in all areas affected by war
industries.'
The O.P.A. order fixing prices in general has been
accepted by the press with few complaints, but with
definite reservations. A general price ceiling is
regarded as a necessary item in the anti-inflation
program, but editorial writers have renewed their
insistence that wages and farm prices be strictly con-
trolled by legislative action. It is widely recognized
that the sudden freezing of a multitude of prices will
result in many inequities which must be removed. Many
writers show particular solicitude for retailers who
must replenish stocks at inflated wholesale prices which
will cut down or wipe out their margin of profit.
Most editorial criticism is of details of the plan.
Some influential papers and writers, however, feel that
the general price-pegging, without taxes to sop up
purchasing power, is an oppressive measure and represents
8 major blunder on the part of the Administration. The
Administration, they say, relies too heavily on price
controls to do a job which only taxation can effectively
Regraded Unclassified
-5-
116
do. In the words of the New York Times: "By imposing a
blanket ceiling on prices at the same time as it fails to
withdraw excess consumer purchasing power from the nation,
the Administration has undertaken an 'anti-inflation
program' that threatens the maximum of complications,
disruptions and Government controls with the least promise
of successful results."
3. Wage Stabilization. "We must stabilize the
remuneration received by individuals for their work."
As already noted, the President's failure to propose
a legislative formula for stabilization of wages is the
most universally criticized feature of his program.
Farmers, management, income taxpayers, landlords,
merchants -- these, the editorial critics point out, are
to have their sacrifices written into law. Labor, on
the other hand, is to be held in check only by administra-
tive action, and the press is far from trusting the
Administration, particularly the War Labor Board, to
impose strict wage controls.
4. Parity Farm Prices. "We must stabilize the
prices received by growers for the products of their
lands."
Most papers have praised the President for his
-6-
117
courage in defying the farm bloc by proposing that "the
ceiling on farm prices should be set at parity."
This is one recommendation which meets a long-standing
demand of the press in general. More than any other of
his proposals, it impressed editorial writers with the
seriousness of the President's purpose to check inflation.
Papers in the farming regions, however, show little
liking for a lower ceiling on farm prices as part of a
program which, in their eyes, fails to deal equally
strictly with labor.
5. War Bonds. "We must encourage all citizens to
contribute to the cost of winning this war by purchasing
War Bonds with their earnings
"
The press is 100 per cent behind the drive to
increase sales of War Bonds. There is a widespread
feeling, however, that the Administration is relying too
heavily and too hopefully on voluntary bond purchases to
close the inflationary gap. Even if the sales campaign
is remarkably successful, say many commentators, the
public will retain billions in purchasing power which
can be immobilized only through compulsory savings or
much heavier taxes on low incomes. The list of editorial
advocates of compulsory savings continues to grow.
Regraded Unclassified
118
-7-
6. Rationing. "We must ration all essential com-
modities of which there is a scarcity."
There is almost complete editorial agreement that
rationing of scarce goods is an essential and democratic
feature of an anti-inflation program.
7. Installment Buying. "We must discourage credit
and installment buying, and encourage the paying off of
debts, mortgages, and other obligations."
This proposal has provoked little editorial comment.
Those writers who mention the matter agree that it is a
desirable measure, but of minor importance.
To summarize: The press thinks the President has
laid down a reasonable and comprehensive general plan of
attack on the inflation problem, but has failed to
recommend adequate specific measures to achieve success.
It is felt that compulsory sacrifice on the part of
labor and those who have new purchasing power must be
written into law if the battle against inflation is to
be won.
Regraded Unclassified
"
119
BRITISH AIR COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON, D.C.
TELEPHONE HOBART 9000
PLEASE QUOTE
REFERENCE NO
With the compliments of British Air Commission
who enclose Statement No. 31 - Aircraft Despatched
- for week ended April 28, 1942.
The Honourable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
May 1, 1942.
120
FLIGHT mið
XT 634
Airesobra
U.E.
U.K.
4
Partress II
U.K.
Canada en reute
2
AT 17 Crame Is
Genada
Canada
5
CORROLIDATED
12D
U.K.
Canada on reute
1
M Later ster II
U.K.
Canada on route
7
CURTISS
Kittyhouk IA
New Zealand
Wellington
13
8. Africa
Durben
8
LOCKBEED
Redson 12A
U.K.
U.K.
,
A29A AC 151
U.K.
Canada on route
11
Venture
U.K.
Canada on route
19
Seltimore
Russia
Baarch
16
1250
U.K.
Canada on reute
2
U.K.
U.K.
14
TO"
Canada
Ganada
21
TOTALS
58
42
26
British Air Commission
May 1st, 1942.
Regraded Unclassified
121
Treasury Department
Division of Monetary Research
Date
5/2/42 19
To: Miss Chauncey, Room 285
From: Mr. White
This probably does not have to be
called to the Secretary's attention.
MR. WHITE
Branch 2058 - Room 2141
C
122
0
P
Y
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
FD 835.51/1496
May 1, 1942.
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
transmits herewith a copy of despatch No. 4679 dated
April 8, 1942 from the American Embassy, Buenos Aires,
Argentina, concerning renewal by the Argentine Government
of the loan of 40,000,000 Swiss francs from a Swiss
banking syndicate.
Enclosure:
/From Embassy, Buenos Aires,
No. 4679, April 8, 1942.
123
Buenos Aires, Argentina, April 8, 1942.
No. 4679
Subject: RENEWAL BY THE ARGENTINE GOVERNMENT OF LOAN OF 40,000,000
SWISS FRANCS FROM A SWISS BANKING SYNDICATE
CONFIDENTIAL
The Honorable
The Secretary of State,
Washington.
Sir:
Referring to the Embassy's despatches No. 2001 of April 22,
1938, and No. 505 of February 27, 1940, in regard to a two-year loan
of 40,000,000 Swiss france obtained from a Swiss banking syndicate,
I have the honor to report that this loan, which was renewed in 1940,
has been renewed for a further period of two years, i.e., until May
5, 1944. The interest rate, according to announcements published in
the local press on March 27, has been reduced from 3-1/2 to 3-1/4%.
The loan, which is in the form of Treasury bills, will be payable at
the rate of 4.46 francs to the dollar, which, at the existing rate,
is favorable to Argentina by soveral percent. The Credit Suisse, it
is reported, is being paid 400,000 Swiss francs as a commission.
It is understood that in early 1940, Doctor Ceferino Alonso
Irigoyen, then Financial and Economic Counsellor to the Argentine
Embassy in Washington and now Under Secretary of Finance, was unable
to obtain funds in New York with which to pay these bills whenthey
matured that year (it was reported that the Swiss banking syndicate
then asked for payment, although it later agreed to renew the loan).
The ability to renew the bills at a reduced interest rate at this
time is, of course, evidence of the improved foreign-exchange
situation. Reference is made in this connection to the Embassy's
despatch No. 4504 of March 20,1942, covering the 1941 annual report of
the Central Bank, which shows a "positive balance of payments" in
1941 of 472 million pesos.
Respectfully yours,
For the Ambassador:
Edward L. Reed,
Copy to Legation at Bern
Counselor of Embassy
File No. 851
JWG:cee
Copy:bj:5-1-42
Regraded Unclassified
C
124
o
P
Y
Buenos Aires, Argentina, May 1, 1942.
No. 4926
Subject: MONTHLY REVIEW OF DEVELOPMENTS IN ARGENTINA REGARDING
THE FREEZING OF AXIS ASSETS AND OTHER CONTROL MEASURES.
STRICTLY CONFIDENTIAL
The Honorable
The Secretary of State,
Washington.
Sir:
With reference to the Department's circular telegram of April 7,
9 p.m., requesting monthly reviews of developments in Argentina con-
cerning the freezing of Axis assets and other control measures, I
have the honor to report the following:
In a despatch dated April 4, 1942, the Embassy summarized the
then-existing situation here with respect to cooperation in the
severance of commercial and financial relations with the Axis countries.
There have been no important developments in this field since that
time. The only freezing measure adopted by Argentina thus far was
that provided for by the Central Bank's circular No. 262 of December
11, 1942, which suspended transfers of funds and securities between
Argentina and Japan and froze accounts of persons and firms domiciled
in Japan (Embassy's despatch No. 3744 of December 24, 1941, and
previous telegrams).
Within the last several weeks, it has come to the attention of
the Embassy that the local representative of the Domei News Agency
has been obtaining funds from the Banco de la Provincia de Buenos
Aires for the expenses of his office, as well as for charges for the
transmission of news; that these payments have been authorized by the
Central Bank; and that the Central Bank considers that it is obliged
by standing instructions of the Argentine Government to authorize the
release of funds for such purposes inasmuch as they are regarded as
funds needed for "legitimate purposes" irrespective of the factor of
Axis propaganda (Embassy's despatch No. 4873 of April 24, 1942).
As toother measures, a Government decree (No. 110,790) of January
8, 1942, reported in the Embassy's despatch No. 3865 of January 13,
Regraded Unclassified
125
-2-
1942, purported to give the Central Bank a greater control over the
transfer of payments abroad, including the granting of control over
"internal movements of funds which may have a direct or indirect re-
lation" to transfers abroad. However, whenever this Embassy or the
British Embassy has referred to this decree in conversations with
officers of the Central Bank and has suggested that the decree be in-
voked to control movements of funds relating to such Nazi activities
as the notorious El Pampero, there has consistently been the reply
that the Central Bank does not e naider that it can act in matters of
this kind without the Government's express authorization. About the
middle of April, the Central Bank even declined to take any action
against the sale of certain United States securities which gave every
indication of having been confiscated in the occupied countries of
Europe (Embassy's despatch No. 4908 of April 30, 1942).
On April 9, 1942, the Embassy made representations at the Foreign
Office regarding the remitting of certain funds to France outside of
the Franco-Argentine payments agreement and in violation of assurances
previously given (Embassy's despatch No. 4874 of April 27, 1942), and
on April 23 the Central Bank stated that no further remittences had been
authorized. However, it was learned yesterday through the British
Embassy that certain banks have recently been informed orally by the
Central Bank that they may malce remittances to France in amounts of not
more than 10,000 pesos (presumably outside of the payments agreement).
The Central Bank has confirmed this but stated that the banks authorized
to make such operations were told that they would have to employ the
privilege speringly. Notwithstanding the small amounts involved, the
measure constitutes another violation of the assurances previously given,
and while there may be legitimate needs for family remittances, pro-
vision should have been made for these from the large accumulation of
French francs, most of which were apparently used for other purposes.
Representations were also made at the Foreign Office on the same
date (April 9) regarding the release of 250,000 pesos from 8. blocked
account of the Reichabank in order to enable the "Inag" Fabricas
Reunidas de Utiles Sanitarias, a subsidiary of the Siemens Company of
Germany, to repay certain bank loans here (Embassy's despatch No. 4690
of April 9, 1942). An aide memoire was furnished the Foreign Office
in each of these two cases and copies were sent to the Central Bank.
More recently it has come to the notice of the Embassy that the
Province of Buenos Aires, through the Banco de la Provincia, recently
made a substantial remittance to Switzerland for payment to German
interests on & Swiss-franc loan of the Province. It having appeared
that there were various similar instances, a memorandum in the matter has
been sent to the Foreign Office pointing out the inconsistency of these
transactions with Resolution V of the Rio de Janeiro Conference (Embasay's
despatch No. 4925 of May 1, 1942).
As to the application of financial control to undesirable persons
and to persons and firms on the Proclaimed List, there is no evidence
that the Government or the Central Bank is distinguishing between such
Regraded Unclassified
126
-3-
parties and other parties. Although Executive Decree No. 110,791
of January 8, 1942, provided that any person found obstructing the
exercise of the foreign-funds control by the Central Bank should be
removed to a designated point within the country, unless he should
leave the country, and gave the Ministry of the Interior broad powers
for enforcing the measure (Embassy's despatch No. 3880 of January 15,
1942), there have not come to the attention of the Embassy any cases
in which the decree has in reality been enforced.
There are no interventors appointed by the Argentine authorities
for the management of controlled firms.
With reference to the concluding paragraph of the Department's
circular telegram of April 7, 9 p.m., and referring also the Department's
telegram No. 553 of April 20, 11 p.m., arrangements have been made for
the services of a confidential investigator for work in the field of
Axis funds.
In general, the situation with respect to foreign-funds control
remains as heretofore. The Central Bank continues to evidence that
it wishes to cooperate in a high degree but that its freedom of action
is restricted by the Government. As has been previously reported, the
Government's position in the matter of financial relations with or for
the benefit of the Axis countries is closely connected with its general
policy of neutrality, and until that general policy is modified there
will probably be little change with respect to financial control.
Nevertheless, it is reported from different sources that the Central
Bank is pursuing a strict policy in regard to most kinds of remittances
to Europe. The Embassy is now awaiting the receipt of figures promised
by the Central Bank showing financial remittances to the principal neutral
European countries in recent months.
Respectfully yours,
NORMAN ARMOUR
File No. 851
JWG:je
A true copy of
the signed original. (1) j.e.
Cony:bj:5-26-42
Regraded Unclassified
127
MAY 1 1942
Dear Generalissimo Chiang:
I as taking the occasion of the return of
Mr. Fox to China to send to you a personal 208-
sage. The good will and friendship between our
two Governments during times of peace have now
under the stress of our common war united us as
members of the same family fighting side by side
for the preservation of those things which we
all hold dear.
The American people -- in the armed services,
in the factories, on the farms, in offices and
in the schools -- are engaged in a mighty effort
to bring the present war to a quick and successful
conclusion. Our people take pride in the valor
and courage of their comrades-in-arms, the Chinese
people. We shall not forget that for five years
your country -- the first victim of Axis aggression
-- has held the Asian front in the struggle for
freedom. In the past months, during which ay own
country has suffered attack from our common enemy
Japan, we have had reason even more keenly to
realize the strength, ability and courage of your
armies and of your people. China is to us a
symbol of what can be accomplished by a determined
effort and & united national will.
The people of the United States have pledged
all their resources to the attainment of victory.
Our armed forces and equipment, which are appearing
Regraded Unclassified
128
in increasing strength on the battlefields
throughout the world, will grow at an over faster
rate. The growing offensive strength of the
United Nations is striking ever more powerful
blows at the centers of Axis strength. We are con-
fident that the tide of battle has turned against
the Axis and that victory will not long be denied
the United Nations. In this drive for victory,
China is playing a vital role.
The friendship which links our two countries,
born long in the past and now strengthened in the
fires of war, is our best assurance for a lasting
peace and prosperity based on freedom for the
peoples of all nations. I shall do everything in
ay power to continue to help China, not only now
but also during the period of resonstruction.
Sincerely yours,
(Signed) bodry Norgentway, JP.
Secretary of the Treasury.
Generalissimo Chiang Kai-shek,
Headquarters of the Generalissime,
Chungking, Ssechman,
China.
n.m.c.
Copies to Dr.W
10ah
5/1/42
Regraded Unclassified
129
MAY 1 1942
Dear Dr. Kung:
I as nequesting Mr. Fox to convey to you
the following personal mossage from me.
Xr. Fox's return to Chungking to continue his
duties as American member of the Stabilization
Board of China is a further testimony of the
spirit of cooperation which has long charae-
terized the relations between the Ministry of
Finance and the Treasury of the United States.
I appreciate having had Mr. Fox with us. I
have had the opportunity to discuss with him
the many difficult economic and financial
problems which confront China, I can well
appreciate the difficulties which face a
country which has been continuously at war
for nearly five years. If at any time the
Treasury and its facilities can be of any
help to you, I shall be glad to have you call
upon 20.
I trust that your health is greatly im-
proved and with kind personal regards, I an
Sincerely,
(Signed) Bobig Jr.
Secretary of the Treasury.
Dr. H. M. Kung,
Minister of Pinance,
Chungking, China,
n.m.c
Capies WD, Like
10sh
5/1/42
Regraded Unclassified
130
May 1. 1942
Mr. Livesay
Mr. Districh
will you please cond the attached cable to the American Robacay,
Chungking. "For Adler from the Secretary of the Treasury".
FDish
Regraded Unclassified
131
May 1st, 1942
To Adler
From the Socretary of the Treasury
Reforence your cable dated April 27, 1942.
1. Treasury and Fox believe, on the basis of information available,
that the November 1st agreement should continue in effect. We wish it
nade clear to the Chinese that the Treasury is prepared to sec the full
utilization of the funds made available under the April let Agreement.
lie cannot understand from your cable whether or not the Exchange Control
Commission or the Chinese Government has any objection to the continuation
of the November 1st agreement.
2. With reference to the anticipated derletion of the sterling
assets of the Board, if sterling 1a not available from other sources,
Treasury has no objection to the Board using its dollar assets for the
purchase of sterling. Treasury is concerned above all that the
Stabilization Board should do all nossible to help the Chinese war
effort.
3. With regard to relations between the Stabilization Bcará and
the Exchange Control Commission, Mr. For is returning to China in the
nos, future and, if possible. no decision regarding your proposed new
arrangement or any other matter involving the relations between these two
agencies should be taken prior to his errival in China.
153/efe
5/1/42
Regraded Unclassified
132
MJL
Chungking via N.R.
This telegram must bE
paraphrased before being
Dated May 1, 1942
communicated to anyone
other than a Governmental
Rec'd 8 p.n.
agency. (BR)
SECRETARY of State,
Washington.
489, May 1, noon, (SECTION ONE)
FOR THE SECRETARY OF THE TREASURY AND FOX
FROM ADLER. WEEKLY ECONOMIC.
(1) Sales of saving certificates April 1,
April 25 en dollars 16,000,000.
(2) Receipts and Expenditures for fiscal
and calendar year 1941 according to most recent
but still incomplete data. (All figures given to
nearest cn dollars million) Receipts: taxation
379, revenues from administration and public enter-
prises 73, other 876, receipts from loans 8806.
Expenditures: ordinary 1952, reconstruction 2055,
extraordinary 2684, emergency orders 2708, balance
on hand 733. Total 10,131 or 2597 greater than
estimated. Net revenue 1328, net expenditure 9398,
net deficit 8070, or, respectively 100 (?) 1864 (?)
and 1964 more than estimated. Actual revenue except
vague residual item "other" consistently less than
estimated. On expenditure side ordinary 436,
reconstruction 166
133
-2- #489, May 1, noon, (SECTION ONE) from
Chungking via N. R.
reconstruction 166 and extraordinary 240 less than
estimated, respectively, but unbudgeted for emergency
orders exceeds these pluses by 1,865. Total borrow-
ing of 8803 16 2,697 more than estimated.
Note;
(a) Several items on both sides ledger ob-
scure.
(b) 1941 receipts do not include land tax
collections.
(c) Estimated revenues for 1942, 5089 without
estimated yield of land tax would appear much too
rosy especially as they are nearly quadruple actual
1941 revenues and as 1941 actual revenues fell short
of estimated.
(d) Net expenditures 1941 almost 21 times
actual 1940 about 25% greater than estimated 1941
and about 55% estimated 1942.
(e) Impossible with available data to calculate
months military to net expenditures in 1941, a guess
estimate based on assumption that "emergency orders"
were equally divided between military and non-
military expenses would indicate that about 5450
or roughly 60% were devoted to war purposes as
compared with
134
-3- #489, May 1, noon, (SECTION ONE) from
Chungking via N. R.
compared with about 55% in 1940 and nearly 50 of
1942 estimated expenditures.
Detailed analysis of 1941 receipts and expend-
itures following by pouch.
VINCENT
WSB
135
LSH
This telegram must bE
Chungking via N. R.
paraphrased before b Eing
communicated to anyone
Dated May 1, 1942
other than a Governmental
Agency. (BR)
Rec'd 5:35 p.m.
Secretary of State,
Washington
489, May 1, Noon (SECTION TWO)
(OnE) In the last WEEK the EXECUTIVE Yuan:
(A) Announced scheme whereby Government; Kuomintang,
and Educational officials in Chungking and Envirous
will bE able to buy specified amounts of necessaries
at substantially less than market prices. Scheme
which is a logical Extension of rice allowance scheme
alrendy in operation is to go into Effect in about a
month. Something of this nature had become Essential
to protect officials with fixed incomes against ravages
of inflation.
(b) RECOMMENDED appropriation of a further CN dollars
250,000,000 to bE allocated to provincial governments
most of whose sources of revenue have been taken over
by Central Government.
(Two) War time consumption tax went into Effect
on April 15. This Central Government tax corporative
provincial transit and miscellaneous taxes and will bE
levied on goods not already taxed unless specifically
EXEMPTED. RATE of tax is 5, 10, 15, and 25% on necessaries
non-necessaries
136
-2- #489 May 1, 1942, from Chungking via N. R.
(SECTION TWO)
non-necessnries, semi-luxuries and luxuries, respectively.
It will bE collected by the Maritime Customs and is
officially estimated to yiEld CN dollars 250-300
million which is probably too high. Tax reflects progres-
sive centralization of Chinese revenues; abolition
of many provincial nuisance taxes a step forward fiscally
and Economically.
(END OF MESSAGE)
VINCENT
WSB
MATHION of ROUGGELA Security 137
8002 5744
1275
Miss Chauncey,
amount
To be placed in Secretary's file.
10318 (DL
for Some
F.A.Southard,Jr.
200 2020 RS come
risense STD 00
AL 110,000
and
grajes
WAY anteret
N
138
BR
Quito
This telegram must bE
paraphrased before being
Dated May 1, 1942
communicated to anyone
other than a Governmental
agency. (BR)
Rec'd 6:32 p.m.
Secretary of State,
Washington.
352, May 1, 11 a.m.
FOR HARRY WHITE TREASURY FROM GLASSER
Minister of Finance has agreed to termination of
my assignment in Ecuador as of May 15. Friedman may
thus bE transferred to public 63 as of that date.
I have plane reservation leaving Ecuador May 19. Cable
if satisfactory.
LONG
RR
Regraded Unclassified
139
Beg 1. 1940
Mr. F. Livesey
Mr. Biotrich
will you please cond the attached cable to the American Lenden.
'Per Caseday free the Secretary of the Breasury".
Bich
Regraded Unclassified
140
%
L. W. Gasaday
American Embassy
London, Magland
From the Secretary of the Treasury
Please send by air pouch *Consuner Rationing during March® and
"The Black Market in Food Products", listed in recent weekly
summaries of reporting activities. Until further notice send by
air pouch all such reports having a bearing on rationing as seen
as they are available.
KJH-ef 4/30/42
Regraded Unclassified
141
TELEGRAM SENT
IM
May 1, 1942
This telegram must bE
paraphrased before being
4 p.m.
communicated to anyone
other than a Governmental
agency. (BR)
AMEMBASSY
LONDON (ENGLAND)
1901
TO CASADAY FROM THE SECRETARY OF THE TREASURY.
Please send by air pouch "Consumer Rationing
during March" and "The Black Market in Food Products",
listed in recent weekly summaries of reporting activities.
Until further notice send by ir pouch all such reports
having a bearing on rationing as soon as they are avail-
able,
HULL
(FL)
FD:FL:MLB
Regraded Unclassified
142
Treasury Department
Division of Monetary Research
Date
...1.19
From: as 4 fas
To: Mrss Channery
not worth calling to
Scertary's attention.
C
143
C
0
P
Y
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
May 1, 1942.
FD
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
transmite herewith a copy of despatch No. 706 dated
March 31, 1942 from the American Consulate General,
Zurich, Switzerland, transmitting a translation of an
editorial in the FRANKFURTER ZEITUNG entitled "Endan-
gered Dollar".
Enclosure:
From Consulate General, Zurich,
No. 706, March 31, 1942.
Copy:ime
5/4/42
Regraded Unclassified
144
C
o
By air mail pouch from Lisbon.
P
Y
No. 706
Zurich, Switzerland, March 31, 1942.
Subject: Transmitting translation of editorial in
FRANKFURTER ZEITUNG entitled "Endangered
Dollar"
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to transmit, in translation, an
editorial which appeared in the FRANKFURTER ZEITUNG of
March 26, 1942, entitled "Endangered Dollar", with regard
to the financial situation of Switzerland as a result of
the blocking of Swies funds in the United States.
Respectfully yours,
Maurice W. Altaffer
American Consul
Enclosure:
Article, as stated.
In quintuplicate.
Copy to the American Legation, Bern.
Copy to the Division of Commercial Affairs.
500/MWA/df.
A true copy of the signed original.
Copy:ime
5/4/42
Regraded Unclassified
145
0
O
P
Y
"Endangered Dollar"
(Translation of editorial appearing in FRANKFURTER ZEITUNG no. 156
of March 26, 1942)
As a proof of the manner in which the United States intends to
fight for right and freedom, the American Government, in the summer
of 1941, not only froze assets in America of hostile Axis Powers,
but also those of neutral European countries, the assets of which are
considerably greater. The term "freeze" is, of course, merely a
misnomer for the harsher but more pertinent word "confiscate", with
the added advantage that it permits those concerned to carry the
items in question as assets in their accounts. Of course any
illusion as to the ultimate value of these assets exists only in
those countries where for various reasons the fiction of the honesty
of the Anglo-Saxon policy must be upheld at any price. But, as a
matter of fact, this conception rightfully appears to be just as
questionable as the hope of a British-American victory.
For 8 witzerland, this American contravention of law - for this
unilateral step in the existing exchange agreement between Switzer-
land and the United States cannot be designated otherwise - has
created a particularly difficult situation. Although Switzerland
suffered a capital loss of more than 1 billion france in its American
assets and investments through the devaluation of the dollar, during
the first year of the war 9 billions (dollars 1) flowed from the
Continent into the "strong box" of the United States. An official
indication of the total Swies assets which have been placed in "safe-
keeping" with the Americans is lacking, and in view of the fact that
a part of this capital was exported in devious ways, the exact
amount will be difficult to establish. Estimates which appear highly
probable set the figure at the respectable sum of 5 billion Swise
france, which includes deposits, shares, bonds, stocks, et cetera.
This means that, calculated according to the number of inhabitants,
a per capita sum of approximately 1,250 Swies francs is frozen in
the United States, which some day will be claimed by that country as
"Switzerland's contribution" to the American cost of waging war for
"European freedom".
That this prospect is not readily entertained by those concerned,
who include not only Swiss capitalists but also the trade unions with
their hard earned membership contributions, is comprehensible, but
that does not relieve them from considering how these assets will have
to be written off, namely, whether as amortization or as a loss. Of
course, as stated, it is largely a question of personal opinion how
high
Regraded Unclassified
146
- 2 -
high the loss risks are estimated and certainly the war barometer
plays a very important part. The Zurich tax officials, who need
not be guided by the same sentimental considerations as the
politicians, have now for the first time assessed this risk, The
tax office of the Canton of Zurich, a few weeks ago when the tax-
payers were spending sleepless nights filling out their tax
declarations, laid down a ruling on this question. Instructions
for cotimating the loss on American assets permit at this time,
that is for the first risk year, a deduction of a 30 percent die-
count. For every $1,000 of frozen assets the taxpayer is
authorized to consider $300 as lost. From the standpoint of the
tax office, this is certainly a generous offer. It is quite
another question whether the tax officials would be prepared to
buy from the taxpayers the remaining 70 percent of their frozen
assets at this official rate, or at least guarantee these amounts.
Fortunately, the tax officials can point out that they are not
competent to give any such guaranty and that the taxpayer who had
more confidence in the integrity of the American Government and
the dollar than in his own Government and the Swiss franc, must
not only be responsible for his taxes but also for the exchange
risks.
rs/df
Copy:ime
5/4/42
147
INCOMING CABLEGRAM
Date: May 1, 1942
From: Moscow
Federal Reserve Bank of New York
#22
With reference to your cable of April 24, charge our
account, pay to yourselves $26,445.14.
(Signed) State Bank of the U.S.S.R.
(Received by telephone from Federal Reserve Bank of New York,
N. Y.
5:50 p.m.
May 1, 1942)
10:vw
148
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
Chaunges
DATE May 1, 1942
TO
Secretary Morgenthau
FROM Mr. FOI White
confidential
Registered sterling trensactions of the reporting banks were as follows:
Sold to commercial concerns
£61,000
Purchased from commercial concerns
£ 3,000
Open market sterling remained at 4.03-3/4. with no reported transactions.
The Canadian dollar discount widened to 12% at the close, as compared with
11-7/8% yesterday.
The Venezuelan bolivar advanced 15 points to a final quotation of .2885.
In New York, closing quotations for the foreign currencies listed below
were as follows:
Argentine peso (free)
.2365
Brazilian milreis (free)
.0516
Colombian peso
.5775
Mexican peso
.2064
Uruguayan peso (free)
.5295
Cuban peso
1/16% premium
The 'free' Swiss franc rose to a new high of .2740, or two cents higher
than the quotation of April 28. The 'commercial' Swiss franc remained at about
.2331.
In order to increase the Stabilization Fund's gold balance, we purchased
$10,100,000 in gold from the General Fund through the New York Assay Office.
No new gold engagements were reported.
In London, spot and forward silver remained at 23-1/2d, equivalent to 42.67#.
The Treasury's purchase price for foreign silver was unchanged at 35$.
Handy and Harman's settlement price for foreign silver was also unchanged at
35-1/8#.
We made no purchases of silver today.
Regraded Unclassified
149
COPY NO. 13
BRITISH MOST SECRET
(U.S. SECRET)
OPTEL No. 142
Information received up to 7 A.M., 1 May, 1942.
1. MILITARY
BURMA. The majority of our forces successfully crossed to the north
bank of the IRRAWADDY on the night of the 28th/29th,
RUSSIA. On the MURMANSK Front a seaborne Russian force reported
several thousand strong has made a landing behind the German lines on the southern
shore of the MOTOVSKI GULF northwest of the mouth of the River LITSA,
2, AIR OPERATIONS
WESTERN FRONT.
29th/30th. Over 150 tons of H.E. and incendiaries were dropped on
the PARIS factories named yesterday. Several direct hits are claimed, 30th,
Twenty-four Bostons, eight Hurricane bombers and eight Whirlwinds escorted by
forty-three squadrons of Spitfires attacked docks, aerodromes and & railway centre
in HOLLAND and Northern FRANCE and shipping off the coast of BRITANNY where a direct
hit was obtained upon one of three destroyers, In addition twenty squadrons of
Spitfires carried out sweeps over Northern FRANCE. Six enemy fighters were des-
troyed, six probably destroyed and seven damaged. We lost seven Spitfires (two
pilots safe).
30th April/1st May. 35 enemy aircraft operated against this country.
8 were destroyed by our night fighters over ENGLAND and two over FRANCE, two were
probably destroyed and two were damaged.
MALTA. Between 1520/29 and 1145/30 57 bombers escorted by fighters
attacked, Aerodromes were hit and two aircraft on the ground were damaged. Our
fighters and A.A. destroyed three aircraft and damaged four.
3. HOME SECURITY
30th/1st. Bombing was chiefly over TYNESIDE but was not concentrated,
No great damage was done and casualties were not heavy.
Regraded Unclassified
150
UNITED STATES GOVERNMENT
STATE SOUTH
COORDINATOR OF INFORMATION
WASHINGTON, D.C.
May 1, 1942.
The Honorable
The Secretary of the Treasury
Washington, D. C.
Dear Henry:
The attached is from the British Political
Warfare Executive Weekly German Directive.
Sincerely,
Biu
William J. Donovan.
151
Hitler's speech was his first since September; 1939
which actually lowered morale and confidence. The Germans
were given discouraging answers or none at all to nearly
all the vital questions troubling them.
It may no longer be possible to attribute to the
Propaganda Ministry responsibility for all that appears
as "propaganda", since the acute internal conflict in
Germany is now producing such serious divergencies. It
may be difficult to find a thoroughly consistent purpose
or closely integrated picture.
The Nazi party is being given increased prominence.
This seems to be a permanent trend. Hitler, having defin-
itely cast in his lot with radical extremists, is now
doing everything to strengthen the party organization.
Making terrible examples of a few party officials, such as
those known to be corrupt, may be included in this program.
Regraded Unclassified
152
UNITED STATES GOVERNMENT
AFRICA
COORDINATOR OF information
WASHINGTON, D.C.
May 1, 1942
The Honorable
The Secretary of the Treasury
Washington, D. C.
Dear Henry:
The attached is from the Weekly
Italian Directive of the British Politi-
cal Warfare Executive.
Sincerely,
Bill
William J. Donovan
153
Italy:
a. Worsening of the internal situation. Weakness of
Germany means heavier calls for manpower on Italy, planes
for Malta, troops for Russia, thus increasing domestic dif-
ficulties in Italy and making basic problems of food pro-
duction and distribution more acute;
b. Fascist propaganda seeks to divert the attention
of Italians from the German internal situation as revealed
by Hitler's speech;
C. Rumours of political crises must be treated with
utmost caution. In the past, hopes of the crown's taking
the initiative have so often been frustrated that it would
be dangerous to indulge in comments and deductions without
convincing evidence. It may be that rumours of constitutional
crises have been deliberately set afoot to put pressure on
the crown to commit itself even more deeply to the Fascist
regime.
d. The meeting of Mussolini with the prefects was
probably concerned with food problems. The powers of military
tribunals and prefects have been greatly extended, and
Mussolini seeks shelter behind their authority. This decentra-
lization evidently is aimed at local solution of food problems,
which further confirms the breakdown of the Fascist system;
e. That the Fascists are anxious is confirmed by the
greatly increased jamming of foreign broadcasts.
France:
Hitler's current favorite is Laval, not Mussolini. We
must expose the failure of Mussolini's policy indicated by
the significant silence which is maintained by Fascist
propaganda on Italian claims on Tunis, Corsica, etc. and re
internal affairs in France.
Regraded Unclassified
154
-2-
Mediterranean:
Roosevelt's statement on American warships in the
Mediterranean whenever news permits should be repeated.
Hint at fact that American Navy has access to Mediterranean
because of American base in Eritrea, and via Gibraltar.
155
DEPARTMENT CODE STATES
UNITED STATES GOVERNMENT
COORDINATOR OF INFORMATION
WASHINGTON, D. c.
May 1, 1942
The Honorable
The Secretary of the Treasury
Washington, D. C.
Dear Henry:
The attached is from the Home Intel-
ligence report for the week ending April 29.
Sincerely,
Bill
William J. Donovan
156
The dominant note in all regions is expectancy,
ranging from "more active warfare in Europe" to
"firm conviction that this year we invade the west."
The Commando and R.A.F. raids have had a tonic
effect. Speculation on "coming Allied offensive"
has been caused by German precautions in the west,
by Beaverbrook's demand for a second front and by
the Marshall-Hopkins visit.
Vichy - There is anxiety as to the future of the
fleet. Laval is still hated and hopes of a success-
ful attempt on his life are expressed.
Russia - There is little comment but gratitude,
confidence and admiration persist. "Russian talks
and films are still the major incentive to increased
production.'
Far East - There is continued satisfaction on the
Tokyo bombing, otherwise interest has declined. Only
a minority indicated anxiety on Burma.
Malta - There is admiration for the defense and
for the people's spirit coupled with the demand to
bomb Rome.
Hitler's Speech - "He has a pack of trouble on
his own front." "Nothing in it to discourage us."
"Bath - "The population stood up well. No sign
of fright. There was pride in having taken it."
157
-2-
There was an exceedingly good response to the Ministry
of Information loudspeaker van announcements. "People
immediately hurried to do as they were told.
Industry - There are fewer stories of slackness and
idle time and less criticism of management.
Budget - There continues to be favorable comment
with protest against beer and tobacco taxes.
Proposed fuel rationing. Public has reacted very
unfavorably.
Food - There is general satisfaction over the immi-
nent control of luxury feeding and restaurant meals.
TREASURY DEPARTMENT
158
INTER OFFICE COMMUNICATION
DATE May 1, 1942
TO
Secretary Morgenthau
Mr. Kamarck
FROM
Subject: Summary of Military Reports
R.A.F. Activity
During the night of April 27/28, 91 tons of high
explosive were dropped on the German fleet at Trondheim.
The next night, Wednesday, 29 heavy bombers were sent
to Trondheim and dropped 56 tons of bombs and mines.
The results were mainly obscured by haze and smoke,
but one bomber claims to have straddled the Tirpitz
with mines. The bombers also succeeded in shooting
down two Messerschmidt 110 night fighters.
On Thursday night, the main attack was on Paris
factories working for the Nazis. Eighty-eight bombers
were used in this attack which, according to preliminary
reports, was very successful. The plants bombed from
A low altitude. (The ability of the British to make
roof-top attacks on the plants in Paris and on Rostock
shows almost complete absence of anti-aircraft protection
and even of barrage balloons around many important
targets.)
(U.K. Operations Report, April 30, 1942)
Voice of the Chief Broadcasts
Better Air Raid Protection is Needed
The Voice of the Chief praises the Luftwaffe's
"successful raids" against England, but bemoans insuffi-
cient air raid precautionary measures in Rostock, Luebeck
and other cities.
Regraded Unclassified
159
- 2 -
"Well, finally we have gotten around to
busting up the joints of the dirty English
just as they did to us", the Chief says. "That
is something at least: Retribution for Luebeck,
Rostock, Hamburg and Essen. I have seen what
those dirty dogs did there, and I say, give them
the works, tear up their streets, stuff them into
their cellars, just as they did to us.
"But that 1s not enough. With us, too, "in
our bombed cities things must be done differently.
It 18 not enough to block off heavily hit districts
in order to spare our compatriots such sights or
to interrupt the postal service to stymie the bad
news.
"It is much more important to show some
concern for the health of the working population
in the cities which have been bombed. For, in the
plants that remain unhit, double and triple the
work must be done now in order to make up for the
damage done by the enemy and to avoid interruptions
in the supply of material."
(Federal Communications Commission,
April 28, 1942)
160
- 3 -
OF POSSIBLE INTEREST
The Commanders of the Russian Air Force
Col. General Zhigarov 18 the Deputy for Aviation of the
People's Commissariat of Defense. That is, he is
both the commander of the air force and head of the
air defense department. Zhigarov was Soviet Air
Attache in China in 1936 and later commanded the
Far Eastern air force.
Lt. General Novikov was recently appointed first deputy
commander as a result of his successful air defense
of Leningrad.
Lt. General Petrov is the second deputy commander of the
Red Air Force. Petrov was formerly a test pilot and
head of the Russian air research institute.
Lt. General Proskurov, third deputy commander for Aviation
is also a member of the Soviet Supreme Council, 1.e.,
equivalent to an American Senator. Proskurov fought
in Spain as a Russian volunteer against Franco in
1937.
(Source: British Military Magazine, "The Fighting Forces",
April 1942)
Regraded Unclassified
161
Conference of Sir Frederick and kr. Bewley
with Mr. White and Mr. Hicks in Mr. White's office
May 2, 1942
10:00 A. M.
Sir Frederick and Mr. Bewley called upon Mr. White to discuss
Britain's dollar position. Sir Frederick said that negotiations for
the take-over of ordnance contracts were proceeding satisfactorily
and that $90 million might be realized. He said that the facilities
were being discussed with Major Dyson, and that the 11 cases remain-
ing in the list of plants recommended for purchase by the President
might be purchased by the Army at a price of about $60 million. These
plants included $35 million of aircraft plants and $25 million of
other plants.
Sir Frederick said that he intended to see Mr. Acheson early
next week on reciprocal aid. He said that it appeared that expendi-
tures on account of American troops abroad would approximate $20 per
month per man, but that costs incurred under reciprocal aid on account
of American troops abroad would probably be between $25 and $30 per
month per man in the United Kingdom and perhaps a little more in
Australia.
He said that when the analysis of these costs was completed, and
the advantage of reciprocal aid to the United States was determined,
it might be more possible to obtain from government agencies or even
Congress the funds with which to purchase some of the remaining
British contracts. The principal remaining contracts, if other plans
succeed, will be the aircraft contracts, the total value of undelivered
materials on which is $450 million: $250 million remains to be paid,
and $200 million stands as advance payment.
Sir Frederick left with Mr. White a copy of a memorandum review-
ing the prospect of Britain's dollar position for the 12 months
beginning April 1942. He said the memorandum indicated that Britain's
deficit on current account during that period would be between $250
and $300 million, and he said that the take-over arrangements now
being discussed were not sufficient to cover that deficit.
Mr. White suggested to Sir Frederick that more than $450 million
might be obtained from the take-over of aircraft contracts, since
there is at any time, a large volume of aircraft, engines, and frames
that have been delivered to the British, and thus do not appear in
the value of undelivered materials, but which have not been shipped
from the United States, and are therefore available for take-over.
Mr. Hicks said that a British document submitted to the Treasury in
March indicated that the volume of such material, particularly engines,
was very large.
Regraded Unclassified
162
Division of Monetary
Research
- 2 -
Sir Frederick said there was nothing new to report on the Iranian
situation, but that he would like to report that a similar situation
might arise in Portugal. He said that the Portuguese appeared to be
unwilling to accept either sterling or dollars. Mr. White said that
the United States had no objections to paying gold on earmark in New
York rather than dollars, but that he did not think it would be will-
ing to ship gold to countries in the proximity of the Axis.
J.E. Hicks
Regraded Unclassified
163
MEMORANDUM
1.
British holdings of gold and dollars (excluding the
Belrien loan) rose from about 8190 millions on March 31, 19/1 to
0615 -illions a year later. The increase in the year ended March 31,
10/2, thus anounted to $425 millions. During the year the position
of the United Kingdom worsened by about billions, of which nearly
billions represented the growth of overseas balances in London,
which will have to be repaid some day.
An approximate analysis of the increase in the balance
during the year is shown by the following figures:
Millions
Gold, net acquisition *
505
Special receipts:
from RFC loan
390
from direct investments
(Viscose and B.A.T.)
80
from market securities
90
from South African securities
(special sale for gold)
130
from sale of wool stock
40
730
Net credit on current 8 account
90
1,325
less Net payments on British Government
contracts in the U.S. **
900
125
* Excluding special purchase of gold from South Africa shown
under capital receipts. The soquisitions of newly-mined
gold from South and other Africa was $455 millions, Austral-
asian gold (mainly sold direct to U.S. before Pearl Harbor)
was about 860 millions, other acquisitions of gold (from
dishoarding, Russia, etc.) WAS $60 millions. Of the total
of 8575 millions, $70 millions was sold direct to countries
other than U.S., giving R. net acquisition of 8505 millions.
Sales to U.S. (including direct Australian sales) amounted
to approximately $100 millions, included in the figure of
9505 millions.
**Deducting sales of capital facilities (e.g. Tennessee Powder)
and refunds on contracts taken out by the United States.
Regraded Unclassified
164
-2-
2.
It. may be noted that if there had been no old contracts
to may for, and no special receipts, the year would have shown a small
gain of $90 millions, apart from newly-mined gold. Had this state of
affairs continued for the rest of the war, the newly-mined gold would
have accumulated as F. small but useful reserve against the liabilities
represented by the growth of overseas sterling balances. But the ster-
ling area, since the entry of the United States into the war, no longer
brings 118 in e favourable balance of dollars.
The loss of Malayan exports alone amounts to $300 millions
n. year. There is A. lerge but as yet unknown fall to be faced in Indian
and Burmese exports. Meanwhile, United Kingdom exports, not only to
the United States but to all destinations, are steadily falling owing to
lack of shipping, labour and raw materials. Instead of a small net gain,
there will be a large current deficit in the coming year which might
amount to as much es 250 - 2300 millions.
British Government contracts still outstanding in the
United States on the 1st April last required payments of about $430
millions before they run out early next year. Taking account of rising
costs (not fully allowed for in this figure) and of administrative ex-
penses, we have at least $450 millions to pay during the year.
The sterling Tea may, thus, need to find dollars to an
amount of $700 to $750 millions during the coming year, with a continuing
though smaller deficit thereafter.
3.
The liabilities of the United Kingdom to sterling area
and other countries outside the United States are already very large and
the present British gold holding is but a small reserve against them. We
had been at war more than two years before December 7th last and had
been fighting the United Nations' cause practically alone for over 18
months. For 8. considerable time more than half of the national income
Regraded Unclassified
165
-3-
of the United Kingdom has been spent on the war. But, as a result of
the burden carried so long alone, British investments in the United
States have been largely sold or pledged while British indebtedness
to India, South Africa, South America and other countries has grown to
large proportions.
The present British gold holding must, therefore, be
maintained against liabilities outside the United States.
1.
This is, however, not the end of the story. Additional
licbilities to countries other than the United States are being incurred
on an increasing scale. It is estimated that additional liabilities
during the coming year will amount to 6500 millions, or $2,000 millions,
even when we allow for the Canadians' generous gift. The net acquisition
of gold will almost certainly fall short of the amount received in the
oast year, especially if mining equipment is not forthcoming from the
United States in sufficient quantities to maintain output end since
some sources (e.g. New Guinea) have been cut off and others threatened
by the mer. lie can count on less than $500 millions 8. year, i.e., less
than one-cuarter of the additional liabilities we expect to incur. The
British Government is, therefore, most concerned that the current gold
output should be retained as 8 partial reserve against currently incurred
liabilities.
5.
In the circumstances described the British Government
nsks that arrangements should be made which will make it unnecessary
for any further gold or other capital assets (other than capital facil-
ities mentioned above) to be sold to the United States. In this event
how is the dollar deficit of $700 to 8750 millions to be found in the
coming year ?
Special receipts will comprise only the balance of the
RFC loan and EL little to come from special wool sales, say 8/0 millions
altogether. No further special purchase of South African gold, other
Regraded Unclassified
166
-4-
then of the output of newly-mined gold is possible. Sale of capital
facilities might come to 890 millions (of which 860 millions for the
eleven cases covered by the President's directive, and $30 millions for
not cases). For airplanes handed over after Pearl Harbour we have
received 870 millions; the balance to come is not yet known. This
reduces the figure to 8500 millions - 8550 millions.
b.
The most appropriate method for enabling us to meet
this expected deficit is A bulk take-out of our remaining dollar
contracts. Planes and munitions supplied from our pre-lend-lease
contracts are now regarded as being at the disposal of combined boards
and are allocated by these boards in accordance with strategic needs.
The move towards A. pool of overseas resources is further emphasised
by the recinrocal lend-lease proposals. The United States Government
has already agreed to take over our outstanding ordnance contracts and
we should hope to obtain assistance by this means of some $90 millions.
It will be seen that if the estimate in this memorandum is correct, this
is far from enough. The value of the deliveries still to be made under our
air contracts is about 8450 millions, 8250 millions of this represents
payments still to be made under the contracts and the remaining $200
millions represents payments made in advance. Both because of the nool-
ing of supplies and because of our need of additional reserve we nsk
that the air contracts as well as the ordnance contracts should now be
taken over.
7.
As indicated above there may be further receipts in
respect of airplanes, etc., taken over after Pearl Harbour or for Russia
and China. Moreover, the presence of United States troops in the sterling
area will produce some dollars. But the latter will hardly exceed $200
F non a year, and this source of dollars would only reach 8100 millions
on the basis of 500,000 men in the sterling area on the average throughout
Regraded Unclassified
167
-5-
the year. The effect of reverse lend-lease itself, which the
United Kingdom hope to make as generous as possible, is somewhat adverse
to our dollar position.
The principle we seek to establish is that there should
be no further transfer of capital assets or gold, and that we should
not attempt to build un anything beyond a working balance in dollars.
Willard Hotel,
Washington, D.C.,
May 2, 19/2.
Regraded Unclassified
For Miss Chauncey
168
TREASURY DEPARTMENT
OFFICE OF - SECRETARY
May 2, 1942.
CONFIDENTIAL
Received this date from the Federal
Reserve Bank of New York, for the confi-
dential information of the Secretary of the
Treasury, compilation for the week ended
April 22, 1942, showing dollar disbursements
out of the British Empire and French accounts
at the Federal Reserve Bank of New York, and
the means by which these expenditures were
financed.
(Initialed) R. H.
dm:5/2/42
Regraded Unclassified
169
TREASURY department
INTER OFFICE COMMUNICATION
DATE May 2, 1942
TO
Mr. White
FROM
Mr. Hoflich
Subject: Mr. Casaday's first report on the British Voluntary Savings
campaign.
We have received Casaday's first cable report on the British voluntary
savings campaign, in response to the instructions in our cable no. 1730 of
April 22, 1942.
Casaday has visited Ipswich, an industrial port city of 90,000 popula-
tion in the Eastern region. This region is predominantly rural, but includes
many commercial and industrial centers as well. The following is a digest of
Casaday's report on the organization and operation of the voluntary savings
campaign in this region. A copy is being sent to Mr. Graves.
1.
Composition of the savings committees.
a. The regional commissioner, his office staff and deputy com-
missioners (one in each county) are paid full-time civil serv-
ants. Most of the other workers are unpaid and voluntary.
Everyone interviewed emphasized the importance of voluntary
workers and considered it desirable to keep the movement free
from the appearance of undue control by the Treasury or other
government agencies.
b. The local committees are made up of representatives of the
various types of business and industry, professions, and other
special interests and organizations. Those interviewed em-
phasized that the local committee should be large and include
representatives of every section of the population. Local com-
mittees are working organizations, not policy-forming. The
chairman is usually the mayor or some other influential citi-
zen. The heaviest burden falls on the secretary, who is the
principal organizer of savings groups.
2. Selection of the local committees. Officers and members are sometimes
elected at public meetings in smaller communities. Sometimes individuals
volunteer. Organizations frequently elect representatives. In selection, the
regional officer, and if necessary the national committee tries to exercise a
guiding influence. Tactful weeding-out is sometimes necessary where local
committee members lack energy and ability.
Regraded Unclassified
170
Division of Monetary
- 2 -
Research
3. Local savings groups. These groups, organized under the direction or
with the aid of the local committee, constitute the basic units of the savings
movement. In towns the most common basis of membership is place of employ-
ment. Employee groups are organized at meetings on company time if possible,
to assure a good attendance.
The payroll deduction scheme is urged for employees. But individuals
tend to pledge the minimum rather than the highest possible amount, and many
employees fear wage cuts if their employers know how much they are saving.
Consequently the group secretary solicits the members weekly for extra savings.
Sometimes kiosks are set up near pay windows on pay-day. Posters and cir-
culars are liberally used.
Other bases for saving groups include local trade unions, clubs, churches,
etc. Experience with school savings groups indicates that schools are often
the outlet for much adult saving.
Street groups consist of residents of a single street or block. In rural
areas the entire village and nearby farm population may be the basis of a
savings group.
The savings league has been instituted by numerous employers, by organ-
ising departments or other sub-groups into competing savings teams, and giv-
ing saving certificates to the winning teams, the members of which draw lots
for ownership of the certificates awarded. This plan has recently been ex-
tended to an inter-company basis.
4. The savings center. This is formed in each town or locality, serving as
headquarters for the campaign workers.
5. Special campaigns, such as Warships Weeks. During such periods all ef-
forts are greatly intensified, and some alterations in organization occur.
Local sub-committees on publicity, schools, industries, etc. are set up. More
posters and campaign literature are put out. The aid of the press is enlisted.
Targets are set up for each locality and usually for each savings group on a
percentage of wage basis. Banks and other institutions are asked to partic-
ipate heavily as this tends to stimulate small savers.
In order to arouse interest and enthusiasm, various devices are used,
such as pageants, athletic contests, ploughing contests, dog races, raffles,
etc. These are used also to help defray the expenses of the special cam-
paigns. Government allowances for the special campaigns are never sufficient
to cover all expenses incurred.
The radio is not used locally, due largely to the national ownership of
the broadcasting system, but it is used nationally.
Regraded Unclassified
171
PH
PLAIN
London
Dated April 30, 1942
Rec'd 3:30 p.m.
Secretary of State,
Washington.
2281, Thirtisth.
FOR SECRETARY OF THE TREASURY FROM CASADAY
Department's 1730, April 22.
For general background please refer to a
memorandum Entitled "the war savings campaign"
prepared by the British Treasury and forwarded under
cover of my letter dated September 26. 1941.
A visit has been made to Ipswich, an industrial
port city of 90,000 population located in the
eastern region and later to Cambridge, the regional
headquarters of the Eastern region comprising BEd-
fordshire. Cambridgeshire, Isle of Ely, Hertfordshire,
Huntingdon, Norfolk. Suffolk and ESSEX. The Eastern
region is predominantly rural but includes many
commercial and industrial centers as well and thus
provides a good cross-section of the different
problems and techniques found in the several types
of community. The Extent to which the information
reported
172
-2-#2281, Thirtisth from London,
reported herein 1s representative will appear only
after other localities have been visited.
The regional commissioner, his office staff
and the deputy commissioners (one for Each county)
are paid full-time civil servants. With some
Exceptions, all other workers are unpaid and
voluntary, some full-time and some part-time.
All persons interviewed Emphasized the importance of
the voluntary workers and considered it desirable
to keep the movement free from the appearance of undue
control on the part of the Treasury or other government
agencies.
The local committees are officered by a chairman
commonly the mayor or some other. influential citizen,
& deputy chairman and a secretary. Its membership
comprises representatives of the various types of
business and industry such as banking, manufacturing,
retailing. representatives of the professions and
representatives of special interests and organizations
such as trade unions, women's clubs. churches, schools,
the womens voluntary service, Et cetera. It is
Emphasized that the local committee should bE large
and include representatives of EVEry section of the
population. Essentially the committee is a working
organization
173
-3-#2281, Thirtisth from London.
organization rather than a deliberative. policy-
forming body.
The officers and members of the local committees
are selected in various ways. Sometimes, in the
smaller communities a public meeting is hEld and
the committee Elected by the general populace.
Sometimes individuals volunteer their services.
Organizations frequently Elect their representatives.
In the process of selection, the regional officer
and if necessary the national committee tries tactfully
and unobtrusively to EXERCISE BOME guiding influence.
In response to questions it was reported that represent-
ative are sometimes ElEctEd on the basis of popularity
who lack the necessary drive or are in other ways not
well fitted to the job. The same may bE true of
volunteers. Also it was found that some of the workers
long associated with the movement (for the savings
movement has been continuously in Existence since
the last war) WEIE not able to CODE with the vestly
broader scope and more intensive Effort required in
the present circumstances, Consequently the initial
step frequently is that the regional office or the
national committee invite prominent and able local
persons to
Regraded Unclassified
174
#2281, Thirtisth from London.
persons to serve as officers. These. in turn, may
invite or persuade those whom they feel to be
representative of their respective sections of the
local community to serve ns members of the committee.
Sometimes a tactful weeding out process has to bE
undertaken to overcome the difficulties suggested
above.
The heaviest burden falls on the secretary of the
local committee. HE is the principal organizer of
the savings groups. The chairman and deputy chairman
confer with him and hElp to detemine policy but do
not devote a large proportion of their time to active
organizing. A chartered accountant in Ipswich who WAB
local secretary for two years stated that fully half
of his time and that of his office staff was taken up
by organization work and the personal visits, telephone
calls, correspondence, record keeping. and reporting
incidental thereto. The secretary must know practically
Everybody in the town. bE a good organizer and "salesman"
well liked and above all able and willing and able to
devote much time to the job. In a few localities the
national committee has provided funds for the hiring
of clarical hElp for the local secretary and most
persons
Regraded Unclassified
175
-5-#2281, Thirtisth from London.
persons interviewed advocated that this practice
be Extended.
The savings groups organized with the direction
or aid of the local committee constitute the basic
units or "CEPIB" of the savings movement. The
composition of the savings groups varies greatly.
In towns the commonest unit is the place of Employ-
ment. In such cases the localsecretary or others on
the local committee approach the Employer and seek
permission to hold a meeting of Employees on the
premises and on company time. In this way 100 per-
cent attendance rather than 25 or 30 percent can bE
achieved. One or two good speakers from the regional
commissioner's office address the meeting. hand out
literature and obtain pledges. The meeting is then
asked to Elect a group chairman to preside at future
meetings and a group secretary who makes weekly contacts
with the membership. The Employees of a single
establishment are referred to ns one group but 1f,
as in some CASES in the district visited. there are
several hundred or several thousand Employees, a large
number of sub-groups on a shop or departmental basis,
Each with its chairman and secretary, may bE created.
Employees
Regraded Unclassified
176
-6-#2281, Thirtisth from London.
Employees are invariably urged to pledge a
regular weekly amount and to authorize deduction of
SAME from their wages: this enables the local
committee to make SOME Estimate of future savings
and introduces an Element of dependability and
continuity in the movement. But the regular weekly
deductions are not sufficient and must bE supplemented
by other methods. First, because of the uncertainties
of the future the individual tends to pledge the
minimum rather then the maximum hE thinks hE can SAVE.
Second. many Employees do not want their employers
to know how much they are saving or could save as
& maximum fearing that wage cuts may result or
legitimate raises be withhàld in the future. Consequently
the group secretary contacts all Employees weekly for
extra savings usually by personal solicitation.
The company must bE persuaded to allow this on
company time. Often kiosks are SET up near the pay
window on pay day or in other likely spots and the
group secretary does a certain amount of "hawking"
to attract extra savings. Posters 'rnd circulars
issued by the national, regional or local committee
are also liberally used.
Other bases
Regraded Unclassified
177
-7-#2281, Thirtisth from London.
Other bases for aavings groups include schools.
local trade unions, clubs, churches and the like. In
one town the propristor Employees and the "pay-day
regulars" of a public house were organized into a
savings group. In schools the group secretary 18
usually the teacher. The multiplicity of groups
enables the individual to SAVE without his Employer
or neighbors knowing the amount. Instances were given
where a school of several hundred children saved
hundreds or EVEN thousands of pounds in special
weeks, indicating that the school was the outlet for
much adult saving.
As supplements to the work of the various types
of savings groups mentioned above. the street groups
are important and much Effort is being made to
develop these in the communities visited. The group
consists of the residents of a single street or block.
The secretary SELECTED in any of the ways previously
outlined. is almost invariably a woman frequently from
the women's voluntary service. She personally
canvasses the homes in her zone regularly to obtain
extra savings from housewives. children. domestics and
others. She must have the confidence of the people
in her
Regraded Unclassified
178
#2281, Thirtisth from London.
in her neighborhood and bE not given to personal
gossip although it is reported that most street
group secretaries are WElcomed in the homes and
that the residents often Enjoy and look forward to
the weekly friendly chats
In rural areas the Entire village and nearby
farm population is likely to be the basis of the
savings group. Groups are also formed in schools,
churches and clubs if such Exist. Group secretaries
usually canvass from house to house and from farm
to farm on bicycles. WEEKLY socials are held in
most villages.
Group secretaries are commonly members of the
local committee.
It is obvious that the BAME family and EVEN
the same individual is often affiliated with more
than ONE group. None of the persons interviewed
believed that there was much Evasion of saving through
the device of saying "I am already saving through
my club" or "my husband 18 already saving all WE can
through his shop group". It is assumed that the
SUCCEBS of the movement must rest on a positive desire
and willingness to SAVE. Either on personal or
patriotic grounds and that the main task is to
present
179
-9-#2281, Thirtisth from London.
present the CASE forcefully and overcome inertia. rather
than to plug up loop-holes for possible Evasion. This
task is best accomplished by utilizing EVEry possible
avenue of approach, regardless of duplication.
It was Emphasized that local secretaries must
be called together periodically for conference,
entertainment and renewal of Enthusiasm. The SAME
is true of group secretaries. These individuals are
the driving force of the movement and SUCCESS depends
on their ability and zeal.
SEVEral Employers in the localities visited have
introduced a scheme called the savings lengue. The
various sub-groups or departments within a given
plant are designated as teams and the Employer donates
weekly or monthly a specified number of savings
certificates to the winning team and to the team
making the most spectacular gains during the period.
The basis of the award is not the amount saved but
the proportion of the total number of Employees in the
unit who are pledged regular savers. The individual
members of the winning team then draw lots for
individual ownership of the donated certifcates.
RECENTLY this plan has been Extended to an inter-company
basis. the
181
-11-#2281, Thritisth from London.
devotes considerable space to news and. Editorial
comment on the prograss of the campaign. A
Arget 18 SET for Each locality usually for each
savings group and often for Each individual on
a percent of wage basis.
Banks and other institutions are insked
to participate heavily both to Engender Enthusia.sm
by swelling the total figures and because many
people are said to be prone to ask "what 16 the
b1g money doing?" Warship WEEKS and similar
drives Emphasize also sales of the so-called "large
savings" invested in by banks 1.E. national war
bonds and savings bonds ns well ns "omall savings"
that is certificates "baby" bonds onc savings bank
deposits.
The activities sub-committee organizes pageantry
using school children. nearby military personnel and
Equipment where available and other resources. Dances,
athletic contests, ploughing contests. whist drives,
dog races. raffles. darts, contests and innumerable
other ingenious and Entertaining devices suited to
the locality and designed to reach and Enthuse all
sections of the community are also used.
Another
Regraded Unclassified
182
-IB #2281, Thritisth from London.
Another purpose of these activities is to raise
money to defray the EXPENSE of local propaganda.
For warships WEEKS an allowance from government
funds when approved by the regional commissioner
18 made to Each community on the basis of population
but this is never sufficient to cover all EXPENSES
incurred. Frequently the various activities result
in raising more money than is spent, in which CASE
the surplus may bE presented to the Exchequer as a
gift or kept by the local committee to meet future
overhead EXPENSES.
The variety and ingenuity of devices used
locally during these special campaigns 18 amazing
and sometimes amusing. Illustrative material from
Ipswich, Cambridge and the Eastern region 16 being
forwarded by air pouch. The radio is not ивед locally
owing largely to the national ownership of the broadcast6
ing system but it isused nationally. Almost
invariably local warships WEEKS feature speeches
locally by nationally Eminent personages.
As more areas ATE covered SOME general consideration
and criticisms of various aspects of the savings
movement will bE indicated.
From my
Regraded Unclassified
183
-13-#2281, Thritisth from London.
From my brief Experience on this assignment
I anticipate requests from local regional and
national organizations for reciprocal material
concerning the savings movement in the United
States. All persons Encountered thus far are
avid for new ideas and seem anxious to know what
methods are being used in the United States. Any
material you can send ME on the American campaign
will prove useful to ME in obtaining full cooperation
from the British and it is assumed bE of benefit
to the British movement.
MATTHEWS
WSB
b
OFFICE OF FACTS AND FIGURES
184
WASHINGTON
THE DIRECTOR
May 2, 1942
;
Dear Henry:
Thanks for yours of the twenty-
eighth with copies of letters from William
Green. I am delighted to see these.
Faithfully yours,
kw.
Archibald MacLeish
The Honorable
Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
DVS mr
0
OLLICE
185
BOARD OF GOVERNORS
( 8 STATE 2
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
****
o
May 2, 1942.
DATE :
Guid?
Dear Henry:
00
Address
Thank you for your letter of April
25 enclosing copies of the letter and leaflet
D
ILA
I
which have been sent to some twenty thousand
companies employing nearly twenty million
workers.
I have not as yet had an opportunity
to go over this material very carefully, but I
wanted you to know that I appreciated your in-
viting my suggestions and if I have any, I
shall not hesitate to pass them along to you.
Marimer Sincerely yours,
off
Honorable Henry Morgenthau, Jr.,
EXT
Secretary of the Treasury,
Washington, D. C.
VW ZV61
SECRE
186
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Business Day of May, April and March 1942
(May 1, April 1, March 2)
On Basis of Issue Price
(Amounts in thousands of dollars)
:
:
Amount of Increase
:
Percentage of Increase
:
Sales
:
or Decrease (-)
:
or Decrease (-)
Item
:
:
:
:
May
:
April
:
May
:
April
:
May
:
April
:
March
:
over
:
over
:
over
:
over
:
:
:
:
April
:
March
:
April
:
March
Series 1- Post Office
$ 3,219
$ 2,476
$ 5,811
$ 743
-$3,335
30.0%
- 57.4%
Series 1- Banks
9,460
10,517
15,868
- 1,057
- 5,351
- 10.1
- 33.7
Series 1- Total
12,679
12,993
21,678
-
314
- 8,685
- 2.4
- 40.1
Series I - Banks
1,479
2,380
2,043
- 901
337
- 37.9
16.5
Series G - Banks
5,824
9,608
8,726
- 3,784
882
- 39.4
10.1
Total
$19,981
$24,980
$32,447
-$4,999
-$7,467
- 20.1%
- 23.0%
Office of the Secretary of the Treasury, Division of Research and Statistics.
May 2, 1942.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclass
186
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Business Day of May, April and March 1942
(May 1, April 1, March 2)
On Basis of Issue Price
(Amounts in thousands of dollars)
:
:
Amount of Increase
:
Percentage of Increase
:
Sales
:
or Decrease (-)
:
or Decrease (-)
Item
:
:
:
:
May
:
April
:
May
:
April
:
May
:
April
:
March
:
over
:
over
:
over
:
over
:
=
:
:
April
:
March
:
April
I
March
Series 1- Post Office
$ 3,219
$ 2,476
$ 5,811
$ 743
-$3,335
30.0%
- 57.4%
Series 1- Banks
9,460
10,517
15,868
- 1,057
- 5,351
- 10.1
- 33.7
Series I - Total
12,679
12,993
21,678
-
314
- 8,685
- 2.4
- 40.1
Series 7 - Banks
1,479
2,380
2,043
- 901
337
- 37.9
16.5
Series G - Banks
5,824
9,608
8,726
- 3,784
882
- 39.4
10.1
Total
$19,981
$24,980
$32,447
-$4,999
-$7,467
- 20.1%
- 23.0%
Office of the Secretary of the Treasury, Division of Research end Statistics.
May 2, 1942.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclass
187
CONFIDENT
UNITED STATES SAVINGS BONDS
Daily Sales - May, 1942
On Basis of Issue Price
(In thousands of dollars)
Post Office
Bond Sales
Bank Bond Sales
All Bond Sales
Date
Series I
Series E
Series 7
Series G
Total
Series I
Series I
Series G
Total
May 1942
1
$ 3,219
$ 9,460
$ 1,479
$ 5,824
$ 16,762
$ 12,679
$ 1,479
$ 5,824
$ 19,981
Office of the Secretary of the Treasury, Division of Research and Statistics.
May 2, 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 Uncla ssi
Miss
May 2, 1942
Telegram received this morning from John A. Hartford, President,
Great Atlantic and Pacific Tea Company, New York
"Survey all areas today reveal decidedly less consumer com-
ment in stores than yesterday, probably due to less newspaper
comment. Remarks largely confined to questions as to when
new low prices will be in effect. Occasional remark made to
effect "I wont buy much until I see what happens, but sales
figures are about normal considering suspension sugar sales,
and do not reflect such an attitude generally. Better able to
judge this after Saturday when country people usually make
heavy weekend purchases of staples. Occasional inquiry noted
as to whether ceiling prices will be alike on same commodity
in all stores.
"Retail and wholesale distributors mostly concerned where
manufacturers' prices advanced in February and retails did
not advance until April, resulting in selling at March re-
tails much lower than March costs, particularly in heavy lines
such as soaps. This may result in merchants discontinuing
May lines showing losses."
John A. Hartford, President
Great Atlantic and Pacific Tea Company,
New York
189
TREASURY department
H
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
(Confidential)
May 2, 1942
MEMORANDUM TO THE SECRETARY:
There is submitted herewith the operating re-
port of Lend-Lease purchases for the week ended May
2, 1942.
Immediately following the embargo on shipments
for Russia, information as to supplies in transit was
furnished the War Department in order that a prompt
survey could be made with the thought in mind of pro-
viding selective cargo for the fewer ships which will
be available, estimated to be about fifteen for the bal-
ance of this month. We have accordingly diverted steel
for Russia to intransit warehouses and have an accumu-
lation now sufficient to take care of all boats to be
made available for Russia for the balance of this month,
which can be shipped immediately upon obtaining releases
from the War Department.
Included in the shipments to go forward for
Russia are diversified materials for Arctic bases sched-
uled for steamers sailing May 25th.
Mork
Clifton E. Mack
Director of Procurement
190
LEND-LEASE
TREASURY DEPARTMENT, PROCUREMENT DIVISION
STATEMENT OF ALLOCATIONS, OBLIGATIONS (PURCHASES) AND
DELIVERIES TO FOREIGN GOVERNMENTS AT U. S. PORTS
AS OF MAY 2, 1942
(In Millions of Dollars)
ADMINISTRATIVE UNDISTRIBUTED &
Total
U. K.
RUSSIA
CHINA
EXPENSES
MISCELLANEOUS
Allocations
$1402.4
$684.6
$257.2
$ 55.2
$ 1.6
$403.8
(1402.3)
(682.0)
(247.0)
( 55.2)
( 1.6)
(416.5)
Purchase Authoriza-
tion (Requisitions)
$ 920.5
$621.8
$250.3
$ 44.0
-
$ 4.4
( 922.1)
(619.5)
(252.4)
( 45.9)
-
4.3)
Requisitions cleared
for Purchase
$ 866.3
$597.3
$223.6
$ 41.6
-
$ 3.8
( 858.4)
(590.4)
(220.7)
( 43.5)
-
( 3.8)
Obligations (Pur-
chases)
$ 836.6
$577.3
$216.5
$ 39.0
$ .9
( 825.9)
(571.5)
(209.8)
( 40.8)
( .9)
$ 2.9)
*Deliveries to For-
eign Governments
at U. S. Ports
$ 335.1
$270.7
$ 44.6
$ 18.6
-
$ 1.2
( 320.2)
(263.2)
38.1)
(
17.8)
-
1.1)
Deliveries to foreign governments at U. S. Ports do not include the tonnage that is either in
storage, "in-transit" storage, or in the port area for which actual receipts have not been re-
ceived from the foreign governments.
Note: Figures in parentheses are those shown on report of April 25, 1942.
Regraded Uncla
191
EXPLANATION OF CHANGES
Allocations, Requisitions Cleared for Pur-
chase, Obligations, and Deliveries to Foreign
Governments at U. S. Ports increased in total
for the week.
The decline in Chinese Purchase Authoriza-
tions, Requisitions Cleared for Purchase, and
Obligations of approximately $1,900,000 is the
result of cancellation of funds applicable to
a contract for 17,000 tires and tubes.
The decline in Russian Purchase Authori-
zations is the result of processing requisitions
at a rate greater than they have been received.
Regraded Unclassified
192
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 2, 1942
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Status of Stabilization and Gold Purchase Agreements.
1. Stabilization Agreements in Operation.
Amount
Country
Dated
Expires
Commitment
Outstanding
Collateral
Brazil-
7/15/37
7/15/42
$60,000,000
None
None gold
China
7/14/37
6/30/42
50,000,000
$19,112,500
$19,379,000gld
China
4/1/41
6/30/42
50,000,000
None
None required
2. Stabilization Agreements Concluded
but not yet effective
gentina 1/1/41 6/30/41 $50,000,000
None
None required
mexico 11/1/41 6/30/43 40,000,000
None
None required
Ecuador
3/1/42 6/30/43
5,000,000
None
None required
3. Gold Purchase Agreements
Delivery Commitment Gold still
Advance still
Country
Dated
by
to buy
undelivered
outstanding
Russia
10/10/41
6/8/423
$31,605,000
$11,866,0004/
$ 9,803,000
Russia
1/3/42
7/2/42
21,070,000
21,070,000
20,000,000
1/ This agreement also provides for sale to Brazil of up to
$60,000,000 in gold, of which $29,465,000 has been sold.
Argentines informed agreement can be revived on ratification.
3/ In April, original delivery date of 4/8/42 was extended by 60
days.
4/ But against this amount, Russia recently delivered about
$11,250,000 in gold which is now being assayed to determine
exact value.
This balance due will be canceled by the gold mentioned in
footnote 4.
193
COPY NO. 13
BRITISH MOST SECRET
(U.S. SECRET)
OPTEL No. 143
Information received up to 7 A.M., 2nd May, 1942.
1, NAVAL
On the afternoon of the first a homeward convoy from RUSSIA was at-
tacked by three destroyers which were driven off. One ship of the convoy was sunk
and one of H.M. Destroyers slightly damaged. At ten fifteen P.M. an outward convoy
to RUSSIA was unsuccessfully attacked by six Junkers 88 one of which was shot down,
2, MILITARY
LIBYA. 30th. An operation was carried out by some of our armoured
forces to reconnoitre enemy dispositions and test his strength in the TENGEDER Area,
Final reports have not been received but the operation was hampered by severe dust
storms,
3. AIR OPERATIONS
WESTERN FRONT. 1st, 12 Bostons and 8 Hurricane bombers, escorted
by 21 Squadrons of Spitfires attacked ST. OMER Railway Station and factories at
CALAIS and MARQUISE, 13 Squadrons of Spitfires carried out sweeps over Northern
FRANCE. One enemy fighter was destroyed, five probably destroyed and five damaged.
We lost 8 Spitfires, one pilot safe. lst/2nd. 26 Coastal Command aircraft were
sent to attack shipping off NORWAY. Preliminary reports state that a Hudson
obtained two hits on a destroyer. One Hudson is missing.
MALTA. Between two fifteen P.M. 30th and two P.M. 1st about 50
bombers and fighters attacked or patrolled the Island causing very slight damage.
Cur anti-aircraft and fighters destroyed three and damaged four.
4. HOME SECURITY
At BATH, NORWICH and EXETER, good progress has been made in restora-
tion of public services. At BATH it is expected that gas will be available from
BRISTOL in about a fortnight. Meanwhile, producer gas has been installed in most
factories affected.
Regraded Unclassified
-COPY-
194
WUWE1 61 GOVT NT COLLECT
TD WD BEACON NY MAY 3 1942
HAROLD GRAVES
OFFICE OF SECY OF THE TREASURY
THE TWELVE PRESIDENTS OF THE FEDERAL RESERVE BANK AND THE HEADS
OF SECURITY DEALERS OF AMERICA WILL MEET IN WASHINGTON
THURSDAY. BEFORE THEN I WANT YOU TO WORK OUT AND SUBMIT TO
ME A PLAN FOR INTENSIVE SELLING OF F AND G WAR BONDS. PLEASE
CONSULT WITH DAN BELL AND GEORGE BUFFINGTON. COPY TO MRS
KLOTZ AND MR TED GAMBLE
HENRY MORGENTHAU JR.
731 AM May 4.
195
COPY NO,
13
BRITISH MOST SECRET
(U.S. SECRET)
OPTEL No. 1/4
Information received up to 7 A.M., 3rd May, 1942.
1. NAVAL
One of H.M. Cruisers was hit by two torpedoes on the afternoon of the
30th April off NORTH CAPE, whilst escorting a homeward convoy from HUSSIA. On the
2nd May, when in tow in thick weather, she was attacked by three Destroyers about
1.50 miles North of MURMANSK, Two of H.M. Destroyers and two Naval Minesweepers
engaged the enemy, one enemy Destroyer was sunk and one damaged, The Cruiser was
hit by one torpedo and had to be abandoned and finally sunk by one of H.M. Destroyers,
Casualties from the Cruiser were two Officers and about 56 ratings killed.
2. MILITARY
LIBYA. The operation reported yesterday was completed, Some con-
centration of enemy mechanical transport, tanks and armoured cars was reported six
miles east and east-south-east of TENGEDER,
BURMA. IRRAWADDY FRONT. The Japanese have captured MINYWA and have
progressed towards YEU (twenty miles north west of SHWEBO). The road and river
bridges across the River MYITNGE have been blown up.
CHINESE FRONTS. No further reports.
3, AIR OPERATIONS
WESTERN FRONT. 2nd/3rd. One hundred and nineteen aircraft were
despatched - Sea mining in BAY OF BISCAY and BALTIC 96; Leaflets BRITTANY 11, an
ALTMARK Class Tanker AALESUND HARBOUR 12. Two aircraft are missing. The tanker
way hit and set on fire.
MALTA. Between 2.15 P.M. 1st and 1.15 P.M. 2nd, about forty aircraft
ttacked. Two were destroyed for the loss of one Spitfire, pilot wounded,
EGYPT. 30th/1st. Fifteen Junkers 88 bombed PORT SAID. About fifty
mbs were dropped in the Harbour area and two merchant vessels were damaged. One
my aircraft was destroyed and another damaged.
Regraded Unclassified
196
May 4, 1942
MEMORANDUM FOR THE FILES:
The Secretary telephoned me on May 3, and suggested the
idea of obtaining from the files and other sources a complete
story of his record on inflation and additional taxes. He
suggested beginning with his Boston speech and showing in detail
recommendations he had made by way of combating inflation and
by way of additional taxes, including the truncated recommenda-
tions of November. 1941.
He also wants to show the record of others, like Leon
Henderson, Marriner Eccles, Harold Smith, etc. The facts, if
properly garnered, should show that the Secretary was an infla-
tion early bird, and that none of the others proposed higher
taxes than the Secretary previous to March 3, but rather went
along with what was being developed by the President or had
even lower ideas of tax necessity.
On May 4, at 9:45 a.m., I instructed Mr. Merillat to
proceed with the collection of this data, and to drop all other
work in the meantime.
REP
Regraded Unclassified
197
May 4, 1942
10:18 a.m.
HMJr:
Hello.
Operator:
Mr. Rouse.
HMJr:
Hello.
=
Robert
Rouse:
Good morning, sir.
HMJr:
Hello, Bob.
R:
Yes, sir.
HMJr:
Well, how are they feeling in New York?
R:
Well, I think - I found all the bond salesmen
were not on the train this morning, so I think
they were out selling bonds.
HMJr:
(Laughs) I see.
R:
And there's a little confusion. There's a few
people, of course, who want to sell to make a
showing in buying the new bonds that are offered.
HMJr:
I see.
R:
We're discouraging that a little bit, or en-
couraging the dealers to discourage it.
HMJr:
Yeah, I see.
R:
In the meantime, we're keeping the outstanding
2's and the 2-1's at seventy-two, about where
they were Saturday.
HMJr:
I see.
R:
And it's a little early to have much judgment
about it, but all the people we've talked to
have liked the new offerings.
HMJr:
Good.
R:
And I think you'll find them out doing a job.
198
- 2 -
I see Mr. Schram has just called the Stock
Exchange together for a meeting this afternoon
HMJr:
I see.
R:
referring to the fact that a direct assign-
ment to our industry by the Secretary, Mr. Morgen-
thau, we plan to organize our maximum efforts
HMJr:
Good.
R:
and so on. So the start's fine.
HMJr:
Good.
R:
Now we'll have to wait for the results. And a
couple of banks called in, trying to gauge what
they should do, trying to interpret the removal
of the ceilings. I pointed out to them that they,
of course, were responsible for customers' sub-
seriptions
HMJr:
Yeah.
R:
and that they had to be practical about that.
If a man only had a dollar and wanted to sub-
scribe to ten dollars' worth of bonds, that meant
if he got them, they'd have to be sold in the
market.
HMJr:
Uh huh.
R:
That we were looking for investment subscriptions.
HMJr:
Yeah.
R:
But I think the thing will work itself out, and
we'll have a much clearer idea by noontime.
HMJr:
Good. Good.
R:
You're back in Washington?
HMJr:
Yes, I am.
R:
Good.
Regraded Unclassified
199
- 3 -
HMJr:
All right.
R:
Thank you, sir.
HMJr:
Thank you.
200
May 4, 1942
11:05 a.m.
GROUP MEETING
Present: Mr. Thompson
Mr. Schwarz
Mr. Bell
Mr. Kuhn
Mr. Foley
Mr. Buffington
Mr. White
Mr. Haas
Mr. Sullivan
Mrs. Klotz
MR. THOMPSON: I have got some various types of
easels for across the hall. You might like to look at
them.
H.M.JR: Well, I decided on all of that very carefully.
MR. THOMPSON: I understood Banyas was suggesting
building out some--
H.M. JR: Graves and I approved that. What is in
there isn't what I want.
MR. THOMPSON: You have seen those?
H.M.JR: I went over the whole thing once with Graves
and Banyas and Tickton. Have they changed their mind?
MR. THOMPSON: I haven't talked with them.
H.M.JR: I O. K.'d it several days ago. They came
in, and Graves and Tickton and Banyas were all in there
together.
MR. THOMPSON: Fine.
201
- 2 -
H.M.JR: Unless they have changed their minds, I
haven't.
MR. THOMPSON: No, I don't think they have. I
had one easel there that is in the form of turning leaves
over which you might like.
H.M.JR: They had the thing all worked out and
drawn and the scale drawn, and I initiale it. It must
have been three days ago. You are behind time.
MR. THOMPSON: I have a sample here of what to use
on the citation on those donations. There are thousands
of those coming in, and many of them are ten cents and
twenty-five cents apiece, and I didn't know whether you
would want to go that far or not. There may be millions
of school children coming in. Mr. Bell has been signing
the more important ones as Under-Secretary.
H.M.JR: No, I have--
MR. THOMPSON: And I have been signing the routine
ones.
H.M.JR: Why not say anything over a dollar?
MR. THOMPSON: Give them a citation?
H.M.JR: I don't like the citation. I mean, I don't
like the printing.
MR. THOMPSON: Well, that was done on a typewriter.
We would get it done in the Bureau of Engraving and
Printing the same as the citations you gave the radio
people. It would be in script.
H.M.JR: I don't like the way this is done. Did
the Bureau of Engraving do that?
MR. THOMPSON: No, we did that on a typewriter.
H.M.JR: Oh, let the Bureau of Engraving--
202
- 3 -
MR. THOMPSON: I can get one from the Bureau if
you would like.
H.M.JR: Yes. I would like to acknowledge them
myself.
MR. THOMPSON: And then all the letters under it
are for your signature.
H.M.JR: Yes. May I see it again before they do
it finally?
MR. THOMPSON: Yes.
H.M.JR: Give it to Mrs. Klotz.
MR. THOMPSON: That is just a photostat of the
typewritten one.
H.M.JR: What else?
MR. THOMPSON: That is all.
H.M.JR: Mr. Bell?
MR. BELL: Here are--
H.M.JR: You know, I didn't see any publicity
in the newspapers whatsoever of the transfer of the
stock of Aniline and Dye. Did you?
MR. FOLEY: Not a word. It was registered last
Wednesday, but I haven't read anything on it, or heard
any comment on it.
H.M.JR: I was - do I sign this thing?
MR. BELL: Yes.
H.M.JR: What are these things?
MR. BELL: These are the circulars for the two
issues we are putting out today. These go in the Federal
Regraded Unclassified
203
- 4 -
Registers. These are the two letters for that donation
that you sent in the other day, one to Patterson.
H.M.JR: Anything else?
MR. BELL: The market in the last few minutes
appears to be satisfactory, and the Federal has bought
some of the short bonds and only a quarter of a million
of the long bonds. It is a little easy, but it is
quite an active - the certificate issue that we had in
April brought our average rate on the public debt down
to two point three sixty-eight, 80 that now we will have
to be issuing special securities to the investment funds
at two and a quarter. That is the old age and the
unemployment. I wondered if you wanted to take some
of this new issue for some of the old age.
H.M.JR: Oh, yes.
MR. BELL: At two and a half?
H.M.JR: Yes, and somewhere these special funds--
MR. BELL: Yes. There aren't very many of those,
but we will be getting in this month possibly two hundred
and fifty or three hundred million dollars for old age.
This is the month for payment.
H.M.JR: How much are these special two's we got
out?
MR. BELL: Oh, I don't know, probably five and
a half or six billion dollars. Oh, the special two's
you mean?
H.M.JR: Like the postal savings.
MR. BELL: Oh, about a hundred million. I was think-
ing of the special two's to the investment accounts.
H.M.JR: Well, when you get it all together, why
don't you and I sit down and let's go over it together.
Regraded Unclassified
204
- 5 -
MR. BELL: All right.
H.M.JR: I haven't seen it in 80 long--
MR. BELL: Well, we got those down in the last issue,
you remember. I think it is about a hundred million, and
I would be inclined to leave most of that there.
H.M.JR: Well, what you are going to buy - you are
not going to buy any of the 7-9?
MR. BELL: Oh, no.
H.M.JR: Before you do anything, will you go over it
with me?
MR. BELL: Yes, sir, I will. We had a telegram from
the Federal Reserve Bank of Dallas. It says, "The Inter-
national Brotherhood of Boiler Makers, Iron Ship Builders,
and Helpers of American Local No. 74 of Houston, Texas,
affiliated with the AF of L, desires to be qualified as
issuing agent for the sale of War Savings Bonds to its
members. It advises, many members wish to purchase bonds
in this manner to show that organized labor is buying
its share of War Savings Bonds. Please advise if satis-
factory to qualify this organization.'
My people, I think, after talking with Graves, turned
it down. They said, "Offer appreciated; but in view of
Treasury's position in promoting establishment of pay-
roll savings plans by employers, qualification of labor
unions would appear to create possible conflict with such
position and general qualification of labor unions should
not be made." Do you agree with that?
H.M.JR: Well, I would like Houghteling to have a look
at it.
MR. BELL: Houghteling hasn't initialed it. Graves has.
H.M.JR: But I would like--
MR. BELL: Ferdie and I talked about it, and we
thought that they might get peeved at that.
H.M.JR: Who?
205
- 6 -
MR. BELL: The labor unions. Maybe we should
qualify them.
H.M.JR: Well, that is why I referred you--
MR. BELL: I think no harm would be done if we did
it.
H.M.JR: That is why I would refer it to Houghteling.
Will you, before it comes to me?
MR. BELL: Well, it doesn't come to you unless you
particularly want it back.
H.M.JR: Well, I don't want it settled - I don't
want to turn them down without my being consulted.
MR. BELL: All right.
H.M.JR: I don't want to turn them down.
MR. BELL: All right. Well, I didn't either, if
you would like to qualify them.
H.M.JR: You do?
MR. BELL: Yes, I think we should, unless Graves
has some particular thing against it.
H.M.JR: Well, how do you know how that thing may
work? You may have a situation down there, if you
looked into it, there may be some company that doesn't
want to be qualified,
MR. BELL: Well, I take it there might be several
companies involved. The local union might work for
several companies.
206
- 7 -
where is it?
H.M.JR: Well, I would like Houghteling, if necessary -
MR. BELL: Houston, Texas.
H.M.JR: If necessary, I would send somebody down
there from Houghteling's office to find out what it is
all about. Don't turn them down without talking to me.
MR. BELL: All right.
H.M.JR: And if necessary, send somebody down.
MR. BELL: That is all.
H.M.JR: I don't know whether they will come, but I
have asked Henderson, Eccles, and Nelson, and Bell and
White and Haas to have lunch with me on Thursday. I have
told each of these people to discuss the cost of living,
so if any of you fellows have got any bright ideas, let
me have them before then, see. Those cables, for instance,
that you are getting, Haas, from the department stores, or
anybody that has got anything else.
MR. BELL: That is all.
H.M.JR: Harry?
MR. WHITE: The first reply to your cable to Casaday
about the investigation of the British voluntary savings is
in. It is a very long cable. We have digested it, but I
think it is interesting enough and you are sufficiently
interested so that I think you might want to read the whole
cable.
H.M.JR: Yes, sir.
MR. WHITE: I think he worked fast, and I think he
has done a good job on it.
H.M.JR: Good.
MR. WHITE: A copy has gone to Mr. Graves. Mr. Bell
207
- 8 -
already received a copy. If there is any one else you
would like to get copies, we will send them if you will
let us know.
MR. BELL: George Haas ought to have one.
H.M.JR: Kuhn wants one.
MR. WHITE: O.K.
The Polish Counselor, Financial Counselor of the
Polish Embassy, called to see me at his request, and said
that they had been negotiating with the State Department
for a financial loan or aid, which they had expected to
get much before this. The Prime Minister had negotiated
it when he was here. He informally learned, I don't think
he was informed, that the matter had been referred to the
Treasury. He hoped that progress would soon be made, since
they are much in need. I told him I hadn't heard anything
about it.
H.M.JR: Neither have I. Why don't you call up Dean
Acheson. You call up Dean Acheson. I can't see--
MR. WHITE: Is it Acheson or Berle? I think it is
Berle's bailiwick.
H.M.JR: Is it?
MR. WHITE: I think so.
H.M.JR: I thought Acheson looked after it.
MR. WHITE: It is financial arrangements.
MR. FOLEY: It is probably Berle. There is some con-
fusion, but I think Berle is handling most of it.
MR. BELL: Berle signs the letters on thosematters.
MR. WHITE: It is Berle, I think.
H.M.JR: When I get down to business, by God, I warn
Regraded Unclassified
208
- 9 -
you I am going to talk to Acheson. If you want to talk to
Berle, it is O.K. with me.
MR. BELL: Well, that will straighten it up.
MR. WHITE: Sir Frederick and Bewley were in again.
They have submitted some other statements. I think that
sometime this week you will want to review what has happened
and what they would like in the way of further assistance.
They are making more progress than seemed likely a week ago.
H.M.JR: Well, what about Assistant Secretary McCloy?
MR. WHITE: They are giving him more, I think, than he
suggested here. They are now finding ways of giving him a
hundred and ten million.
H.M.JR: When will I know that?
MR. WHITE: Definitely? They were in Friday and
Saturday and said they were negotiating. Maybe we will
hear sometime this week. They are also taking advantage of
General Meyers' comments, and are dealing with Meyers, and
they apparently are able to make much more progress and for
much more money than they had been with Jones, and they
seemed to be quite pleased, and now they feel that maybe
they can handle & lot of the things that have been turned
down before, so sometime - do you want to wait until there
is definite information before you reexamine the whole busi-
ness?
H.M.JR: They tell me that this fellow is known as
Benny Meyers, and he is a smart boy.
MR. SCHWARZ: The aviation people tell me he is the
best over there. He gets things done.
MR. WHITE: He has been jumped very rapidly. The
Canadians - the Canadian Legation called to say that these
men--
H.M.JR: Talk louder, Harry.
209
- 10 -
MR. WHITE: The Canadian Legation called.
H.M.JR: I didn't know whether you were talking about
Egypt or Canada.
MR. WHITE: Canadian Legation.
H.M.JR: ISST
MR. WHITE: I only make one mistake a week. This is
Monday. (Laughter)
H.M.JR: God, you are conceited. A week! That is
something.
MR. WHITE: That is my quota.
H.M.JR: All right. I make one every morning and one
every afternoon.
MR. WHITE: No, just once a week.
H.M.JR: I was talking about myself.
MR. WHITE: You do so much more than I. (Laughter)
Apparently they have the idea - they have got an idea which
may cost this Government very considerable sums. Now, you
are meeting them Wednesday. I think that you would want
to go over it ahead of time.
H.M.JR: You, Bell, and I have got to sit down on
Canada beforehand.
MR. WHITE: Beforehand, that is right. Now, if you
want to make it now for Wednesday morning, we will have the
material ready. I think it is Wednesday lunch, you said.
H.M.JR: Will you be ready Wednesday morning?
MR. WHITE: Yes, definitely. We will be ready tomorrow
morning if you prefer.
H.M.JR: Don't bluff. (Laughter)
Regraded Unclassified
210
- 11 -
MR. WHITE: That was my mistake for this week. (Laughter)
MR. SULLIVAN: It would have been if you had set it
for tomorrow.
H.M.JR: He has had his mistake.
What else, Harry?
MR. WHITE: You remember you wanted that document which
the Lend-Lease brought over for you to initial with respect
to aid to the British, and you didn't want to sign that
document. It was changed and you asked for a copy of it.
I looked in our files and we didn't have it. I called them
up. They said they never left it, and when I said that we
would very much like a copy for our files, he said he thinks
he destroyed it, but he would try to reconstruct it. He did.
H.M.JR: What is that?
MR. WHITE: A memorandum which they had both got to-
gether to ask you to sign and which you were asking the
President to--
H.M.JR: Oh, I think Miss Chauncey found that.
MR. WHITE: She did later?
H.M.JR: I think she photostated it and sent it back
to them.
MR. WHITE: That is very interesting, because he re-
constructed it, and my recollection of it is not the same
as his reconstruction, but I will get together with Miss
Chauncey.
H.M.JR: Miss Chauncey brought something in which I
think is what it is, and I told her to photostat it and send
it back.
MR. WHITE: I will check with her, but if that is not
so, the reconstruction doesn't check with my memory, but there
is nothing we can do about it.
211
- 12 -
H.M.JR: Just 8. minute, please. Are you all through?
MR. WHITE: Mr. Foley, I imagine, will tell you about
the progress of silver. We have a letter from Nelson.
H.M.JR: Yes.
MR. WHITE: That is all I have.
H.M.JR: Chick?
MR. SCHWARZ: I have a cartoon here I think you
would like to see. I showed it to some of the people
outside. Berryman is sending over his original cartoon
for yesterday.
H.M.JR: What was it?
MR. SCHWARZ: He had hurdles for the quota campaign.
You were the pole vaulter.
H.M.JR: Incidentally, I never saw the picture of
Stimson and myself in the movies.
MR. SCHWARZ: On, that one that was made over there?
H.M.JR: You might inquire if they could get it and
send it downstairs.
George?
(Discussion off the record.)
Regraded Inclassifie
- 13 -
212
H.M.JR: George?
MR. HAAS: Here is a wire. This came in Friday.
They have got nine hundred stores out there. As to
form, this is a little bit different. It is practically
the same. There is another one, too, that I don't have
with me. I can send that in.
H.M.JR: We are getting these daily wires from A & P.
I will read this one:
"Survey all areas today reveal decidedly less consumer
comment in stores than yesterday, probably due to less news-
paper comment. Remarks largely confined to questions as
to when new low prices will be in effect. Occasional re-
mark made to effect 'I won't buy much until I see what
happens,' but sales figures are about normal considering
suspension sugar sales, and do not reflect such an attitude
generally. Better able to judge this after Saturday
when country people usually make heavy weekend purchases
of staples. Occasional inquiry noted as to whether
ceiling prices will be alike on same commodity in all
stores.
"Retail and wholesale distributors mostly concerned
where manufacturers' prices advanced in February and re-
tails did not advance until April, resulting in selling
at March retails much lower than March costs, particularly
in heavy lines such as soaps. This may result in merchants
discontinuing May lines showing losses.
What else, George? You have got an assignment from
me.
MR. HAAS: I have got one?
H.M.JR: Last night I gave you one.
MR. HAAS: Oh, yes, I am working on that and also
I have a thank-you letter to Hartford.
H.M.JR: All right. Ferdie, on this Third War Edition
of the U.S. Defense News, as far as we know, it hasn't gone.
- 14 -
213
MR. KUHN: I haven't seen it.
H.M.JR: Will you check? What else have you got?
MR. KUHN: I have nothing beyond those memos I sent
you this morning.
H.M.JR: We sent out a - tell them about it.
MR. KUHN: There were two things. First of all, we
took a little telegraphic poll of opinion last week to
find out whether people in this country would be just
as likely to want to see and hear a British or Chinese
or Russian war hero as an American. Nobody knew and
there were lots of guesses. It turned out that fifty-
nine percent of the people asked in a scattering of
cities around the country said they would be very
likely to want to go to hear an American aviator, war hero
from the far east. Fifty-four percent said they would
be very likely to want to go to hear a British flier who
had bombed Germany or another British war hero. In fact,
they were practically even. On the Australian-Russian-
Serbian and Chinese, they were less interested, in that
order. I think it bears out something the Secretary was
talking about last week.
H.M.JR: Here is a hero, if we can get him. He is
evidently in this country.
MR. KUHN: The second of these surveys had to do with
what people were doing with their extra money, and this
was made last week. As I remember it, about a third of
the people asked, felt that they and their neighbors were
spending their extra money on essentials. About a third
of them felt that the neighbors and themselves were
spending - were putting the extra money into savings.
Of that third, most of them felt the people were putting
the savings into War Bonds. The other third had varying
answers, luxury buying, foolish spending. Only three
percent of the last third felt that the extra money was
being absorbed by the rise in cost of living.
Regraded Unclassified
214
- 15 -
H.M.JR: Now, you ought to explain that these are
not yes or no. It is Dr. Likert's people going into the
home and sitting down and talking with the people. There
was no fixed questionnaire.
MR. KUHN: This was based on actual interviews in
about two hundred homes of different geographical and
economic characters. There will be more complete results
this week, I hope.
MR. WHITE: Three percent of their extra expenditures
are absorbed by the cost of living?
MR. KUHN: No, only three percent of those asked in
the last third, which is less than - about one percent,
felt that extra money was being used up by the rise in
cost of living.
MR. WHITE: The others pay for the rise in cost of
living out of what?
MR. KUHN: But they felt they had money left over
after the rise in cost of living.
MR. WHITE: You mean that their incomes had increased
more than the cost of living?
MR. KUHN: That is right. They were more conscious
of increased income than they were of rise in cost of
living.
MR. HAAS: That checks with the figures.
MR. KUHN: The war hero one was surprising to me and
I thought it was significant. They don't make any dis-
tinction between nationalities so long as they kill
Germans and Japs in combat.
H.M.JR: Give me the National City Bulletin at my
home, will you? On the first of May we were to have
a check on a thousand families and five hundred families.
MR. HAAS: They will have that on the eleventh.
Regraded Unclassified
- 16 -
215
They said, however, that if you absolutely needed it
they could make a shorter tabulation prior to that,
but it would upset them quite a little, 80 if you can
wait until the eleventh they would like to have that
much more time.
:-H.M.JR: Tell them no because by the eleventh they
will have another excuse. Tell them no. I want it for
that luncheon Thursday.
MR. WHITE: There was a National Industrial Conference
Bulletin that came across my desk within the last week
or two which spoke in its first few lines of the failure
of the bond sales program in mopping up savings. Did
somebody see that and check up on it?
H.M.JR: It was sent to me by Professor Brown at
Princeton.
MR. WHITE: Well, it goes everywhere.
H.M.JR: He sent me & copy of it.
MR. WHITE: Yes, but I mean it has a pretty wide
circulation. I didn't read the thing through. It
just occured to me that somebody ought to check. If
they are wrong we ought to put them straight.
H.M.JR: Get hold of it, George.
MR. SULLIVAN: The Commissioner wanted me to advise
you about the Greenbrier income tax situation, the foreign
diplomats. I think you asked him to have them checked up.
H.M.JR: No, somebody else must have.
MR. SULLIVAN: He wanted me to report to you that
that had all been straightened out.
H.M.JR: It was somebody else.
Regraded Unclassified
- 17-
216
MR. SULLIVAN: Both he and I are & little bit con-
cerned about some of the renegotiations of Army and
Navy contracts.
H.M.JR: Paul talked about that yesterday. You
had better get together with him.
MR. SULLIVAN: what I thought I should do is get
in touch with Patterson and Forrestal--
H.M.JR: Now, wait a minute, Paul has got an in-
formal memo on that from me. Before you do anything will
you talk with Paul?
MR. SULLIVAN: Yes. He hadn't mentioned it to me
and I doubt if it is the same thing.
H.M.JR: I think it is because he said they set
up a board. He spoke to somebody yesterday morning and he
wanted to talk to me about it. I will see the two of you
this afternoon if you will get together.
MR. SULLIVAN: I think he is probably on the Hill.
H.M.JR: I think it is the same. He is very much
disturbed and the people in the Navy are very much dis-
turbed.
MR. SULLIVAN: I think I know how to straighten it
out. I will find out.
H.M.JR: Talk to Paul first and then--
MR. SULLIVAN: Have you already had a memo?
H.M.JR: No, it was to come today.
MR. SULLIVAN: I will ask to have a copy of it made.
H.M.JR: I was talking to him yesterday morning.
Did you get the balance of your three-fifty?
- 18 -
217
MR. SULLIVAN: No, but we have a very good list on
the Navy. Patterson hasn't yet got his list in.
H.M.JR: Could you use more names?
MR. SULLIVAN: No, I think we have plenty.
H.M.JR: Tickton has got & lot of names.
MR. SULLIVAN: Who?
H.M.JR: Tickton.
MR. SULLIVAN: That is the list we are using, you see.
We never did get but a hundred and--
H.M.JR: Didn't Nelson ever come through?
MR. SULLIVAN: He came through with one first lot of
a hundred and eighty-one and then another small lot
and he said he would send the others as he got them so
we took Tickton's list and went ahead on that. There
were five hundred on that one, I think, George.
MR. HAAS: You can get more than that. He has got
the complete list.
MR. SULLIVAN: I know he has, but that gives us plenty
with these contractors in addition to them.
H.M.JR: Well, what I gather the Army and Navy are
going to do is, they are going to see that there will be
no excess profits so they don't have to be criticized.
MR. SULLIVAN: I think there is no doubt that that
is what they are after. That was perfectly apparent the
morning you had the conference and Patterson was reluctant
to have this made until he had an opportunity to straighten
out some situations.
H.M.JR: I don't blame him.
Regraded Unclassified
218
- 19 -
MR. SULLIVAN: I don't either.
H.M.JR: Because the situation stinks to heaven.
MR. SULLIVAN: And I don't--
H.M.JR: And the very fact that he knows we are
going after them may accelerate him.
MR. SULLIVAN: It may very well, but that doesn't
affect what we are doing on the other end, Mr. Secretary.
H.M.JR: Where I differ from you and Paul, if there
are no war problems I am happy and I don't care how it
is arrived at.
MR. SULLIVAN: I don't know why you say that is how you
differ with me.
H.M.JR: I thought you said you didn't want the Navy
to renegotiate.
MR. SULLIVAN: Oh, no, I want them to and I think the
more they do it and the more publicity is given to it,
the better it is and I am all for helping them do it.
H.M.JR: Then you and Paul and I had better sit down.
MR. SULLIVAN: I think so because I don't think
what I have in mind is what Randolph has talked to you
about.
H.M.JR: What else?
MR. SULLIVAN: That is all.
MR. FOLEY: We had a silver meeting on Saturday
morning and we are in the process of preparing a reply
to Nelson and we will be ready to talk to you about it
before it goes.
H.M.JR: When?
219
NDARD FORM No. 14A
PROVED BY THE PRESIDENT
TREASURY DEPARTMENT
MARCH 10. 1925
WASHINGTON
TELEGRAM
CHARGE TREASURY DEPARTMENT. APPROPRIATION FOR
Contingent Expenses,
OFFICIAL BUSINESS-GOVERNMENT RATES
Treasury Department, 1942.
(The appropriation from which payable must be stated on above line)
. a - - -
3-14117
May 4, 1942
E. C. SAMS, PRESIDENT,
J. C. PENNEY COMPANY,
330 WEST 34th STREET.,
NEW YORK CITY
AM INTERESTED IN PUBLIC REACTIONS TO OPA PRICE CEILING ORDER
AND ITS EFFECT ON RETAIL SALES. WOULD GREATLY APPRECIATE YOUR
WIRING ME COLLECT EACH DAY FOR ONE WEEK A SUMMARY OF SITUATION
BASED ON YOUR DAILY SALES REPORTS.
OF
HENRY MORGENTHAU, JR.
SECRETARY OF THE TREASURY
Regraded Unclassified
220
NDARD FORM No. 14A
PROVED BY THE PRESIDENT
TREASURY DEPARTMENT
MARCH 10. 1925
WASHINGTON
TELEGRAM
CHARGE TREASURY DEPARTMENT, APPROPRIATION FOR
Contingent Expenses,
OFFICIAL BUSINESS-GOVERNMENT RATES
Treasury Department, 1942,
(The appropriation from which payable must be stated on above line)
. a - - -
9-14117
May 4, 1942
L. A. WARREN, PRESIDENT,
SAFEWAY STORES, INCORPORATED,
RENO, NEVADA.
AM INTERESTED IN PUBLIC REACTIONS TO OPA PRICE CEILING ORDER
AND ITS EFFECT ON RETAIL SALES. WOULD GREATLY APPRECIATE YOUR
WIRING ME COLLECT EACH DAY FOR ONE WEEK A SUMMARY OF SITUATION
BASED ON REPORTS FROM YOUR STORES IN PACIFIC COAST AREA.
HENRY MORGENTHAU, JR.
SECRETARY OF THE TREASURY
MD:jm 5/4/42 MA
Regraded Unclassified
221
ANDARD FORM No. 14A
PROVED BY THE PRESIDENT
TREASURY DEPARTMENT
MARCH 10. 1926
WASHINGTON
TELEGRAM
CHARGE TREASURY DEPARTMENT, APPROPRIATION FOR
Contingent Expenses,
OFFICIAL BUSINESS-GOVERNMENT RATES
Treasury Department, 1942.
(The appropriation from which payable must be stated on above Name)
5. . - -
9-14117
May 4, 1942
T.J. CARNEY, PRESIDENT,
SEARS, ROEBUCK AND COMPANY,
CHICAGO, ILLINOIS,
AM INTERESTED IN PUBLIC REACTIONS TO OPA PRICE CEILING ORDER
AND ITS EFFECT ON RETAIL SALES. WOULD GREATLY APPRECIATE YOUR
WIRING ME COLLECT EACH DAY FOR ONE WEEK A SUMMARY OF SITUATION
BASED ON YOUR DAILY SALES REPORTS.
HENRY MORGENTHAU, JR,
SECRETARY OF THE TREASURY
- 5/4/42 MA
Regraded Unclassified
222
May 4. 1942
Dear Mr. Hartford:
I - vriting to say that I greatly appreciate your
courtesy in emding se telegraphic summaries of reports
from your various stores, showing the effect of the
general price coiling order on your retail trade. Your
first vire, sent last Thursday. I took with no to the
cabinet meeting on Friday, and the President read 11 with
such interest.
Sincerely.
(Signed) H. Morgenthau, Jr.
Mr. John A. Hartford, President,
The Great Atlantic and Pasific Yes Company.
420 Lexington Avenue,
New York, New Tork.
n.m.c.
Capie to Thompson
GCH1wv2
5/4/42
Regraded Unclassified
TREASURY DEPARTMENT
223
INTER OFFICE COMMUNICATION
DATE May 4, 1942
TO
Secretary Morgenthau
FROM
Mr. Ferdinand Kuhn, Jr.
We now have evidence showing that the American
people would be just about as happy to see 8. British
war hero as one of their own.
A telegraphic poll made in scattered cities of
over 10,000 last week showed that 59% would be "very
likely" to go to see an American war hero if he visited
their town. Fifty-four percent would be "very likely"
to go to hear 8. British war hero who had just taken
part in the bombing of Germany. A British Commando
also would be a big drawing card according to this poll.
Australian, Russian, Serbian, and Chinese war heroes
would be somewhat less popular, in that order.
I think the 59-54 ratio of American-British
popularity is very significant and exciting, in view
of your talk with the Air Marshal last week. It shows
that our people make practically no distinction between
an American and 8. British fighting man, so long as he
has done a good job of killing Nazis or Japanese in
combat.
I'll send you the detailed results of this poll
as soon as they arrive, I hope within the next twenty-
four hours.
7.k.
Regraded Unclassified
224
TREASURY department
INTER OFFICE COMMUNICATION
DATE May 4, 1942
TO
Secretary Morgenthau
FROM
Mr. Kuhn
Here is some information from Dr. Likert on
the subject of what people are doing with their
increased earnings. It represents the result of
about two hundred interviews in homes in cities
and rural areas in this part of the country.
1. 9/10 of those interviewed felt that more
money is being earned now than before the war.
Of these 9/10:
1/3 felt the extra money was being spent
on essentials like food, clothing and house-
hold furnishings;
1/3 felt the public was saving its
increased earnings, and most of these
(22% to be exact) said the extra money was
going into War Savings Bonds.
Of the remaining 1/3, 23% felt the
extra money was being spent on luxuries;
only 3% said the extra money was being
absorbed by the rising cost of living, and
8% felt the extra money was going to pay
off debts.
This breakdown involves some duplication, since
some of those who were interviewed gave more than
one explanation of where the money was going.
F.K.
Regraded Unclassified
225
May 4, 1942
2:47 p.m.
Operator:
Mr. Gamble.
Ted
Gamble:
Hello.
HMJr:
Hello, Ted.
G:
Yes, sir.
HMJr:
Why in God's name do they put a woman like
Mrs. Floyd Odlum on in Chicago - I've just
got the ticker - after she made such a perfect
ass of herself in New York?
G:
I think you'd have to charge that up to Major
Namm, sir.
HMJr:
Well, I don't know how many times people have
got to make mistakes. God, we're having
troubles enough selling our bonds - after a
woman makes a perfect jackass out of herself,
they put her on again.
G:
Yes.
HMJr:
And I'd like - if it's Namm, I'd like to get
word to them I'm very much displeased and I'm
willing to sign the letter.
G:
All right, sir, I'll see that he gets the
word.
HMJr:
It's perfectly asinine. I mean, here we are,
starting off now for the month of May - we're
off fourteen per cent off with April, and here
I'm wearing myself to the bone, and this woman
Odlum makes a jackass out of herself and we
put her on a national meeting.
G:
Yes.
HMJr:
Now, I want that kind of thing stopped.
G:
Well, it does not have the blessing of our
organization.
Regraded Unclassified
226
- 2 -
HMJr:
Well, it'll have to be stopped if we've got
to fire Namm.
G:
Well, I'll see that this
HMJr:
I'm not - I mean, I'm not going to stand for
all of these mis takes any more.
G:
Well, I agree on that point, sir.
HMJr:
And I'm sick and tired of it, and I wish you'd
call up Harold Graves out in Chicago and tell
him 80.
G:
I'll do that, sir.
HMJr:
I'm sick and tired of it, and if he wants to
talk to me, I'll talk to him.
G:
Well, I think he'll subscribe to your thoughts
on
HMJr:
Well, she's - they've just got to stop it. If
it means that Namm goes, Namm can go.
G:
Fine.
HMJr:
But here we are - we're getting off to a lousy
start, and we put a woman like that on that
made a - that criticized everything that I'm
trying to do here
G:
Yeah.
HMJr:
in New York, and then we put her on a
national meeting in Chicago.
G:
Well, she has no place in our program, I agree
with you, sir.
HMJr:
Well, I'm not going to stand for it any more,
and you can call up Harold Graves and tell him
80; and tell him that if it - I positively want
to have that woman stop talking.
G:
Right. Well, I'm for it.
Regraded Unclassified
227
- 3 -
HMJr:
What?
G:
I'm for it, Mr. Secretary.
HMJr:
And I'm - I mean, I can't sit here wearing
myself to the bone. I've got now two days,
and we're off to a bum start.
G:
Yes, sir.
HMJr:
And then I've got to listen to a woman like
that.
G:
Well, I'll see that he gets the message
immediately.
HMJr:
Okay.
G:
All right, sir.
Regraded Unclassified
228
May 4, 1942
3:00 p.m.
WAR SAVINGS BONDS
Present:
Mr. Gamble
Mr. Kuhn
Mr. Mills
Mr. Tickton
Mr. Haas
Mr. Henry Morgenthau, III
Mr. Bell
Mr. Kilby
Mr. Ziegenfus
H.M.JR: Look, I would like a list so I could see
all of last April, you see, I mean what the sales for
April were.
MR. HAAS: By days?
H.M.JR: Yes, so I can look down--
MR. HAAS: Oh, I see. We can have one column for
all the days and then start in the new month coming
down. I see.
H.M.JR: Yes. We have got to go seventy million
dollars more than April. There may be something about
this two day business. Does anybody know the explanation
why the F and G's were off so badly for two days?
MR. BELL: One reason might be - off from last month,
you mean?
H.M.JR: Yes.
MR. BELL: No. 1 was going to say maybe they were
smart boys and waited until the end of the month.
H.M.JR: No. Has an body got an explanation? Well,
give me something to look at, George, so I can see all
of April, you see. This thing here is all right for one
day, but there are an awful lot of figures to look at,
Regraded Unclassified
- 2 -
229
George. This sheet, I don't give a damn as between the
post office and the banks. All I would like to know is
that E bonds - on the E bonds we are seven hundred
dollars ahead. All I really want is this. I really don't
care about that. I mean, all I want is really the total,
E, F, and G.
MR. HAAS: Yes.
H.M.JR: How we are running against April. I don't
care about the other months. Give me E, F, and G totals
as against April. Doesn't that make it simple?
MR. HAAS: Yes.
H.M.JR: Do you want to know anything else besides
that? Was that all you wanted to know?
MR. Gamble: Yes.
H.M.JR: Total E, F, and G for May as against April
and then if you could see what you did all through April,
you could kind of look ahead.
MR. HAAS: O.K.
H.M.JR: I saw these figures and Mrs. Odlum together
and that is why I got 30 annoyed. (Laughter)
MR. KUHN: Was she in?
MR. GAMBLE: I could agree with you on both counts
but this time lag might be some indication.
H.M.JR: You don't mind me using you as a shock
absorber?
MR. GAMBLE: No, sir. But isn't that a little too early,
the time lag on that report, to reflect any effect of last
week end's publicity attendant to the quotas? In other
words, this is really the end of the sales.
MR. HAAS: It is quite a lag.
Regraded Unclassified
230
- 3 -
H.M.JR: Well, when the last three days of April went
ahead, I said, "That is wonderful. That is due to Roosevelt
coming in." Now it is running behind and I don't know what
to say. When is Harold Graves coming back?
MR. GAMBLE: Well, I won't know that for another hour
and I can tell you. He has a meeting in New York on Wed-
nesday of the savings banks.
H.M.JR: Tie a tin can on that Odlum woman, will you.
MR. GAMBLE: All right, sir.
H.M.JR: He most likely said she would give a wonderful
speech out there.
MR. KUHN: Was she here?
H.M.JR: No, but she goes on in New York and makes a
great speech and gets hysterical about the word "War Bonds,"
and then they put her on in Chicago again. I can't, as I
told Ted Gamble, sit here wearing myself to the bone and
make one bull after another. I mean, I am not going to
stand for it any more. I have reached the limit, that is
all. I am going to give flat orders. I used Ted as a
shock absorber, he is such a nice fellow. How old are you,
Ted?
MR. GAMBLE: I am thirty-six, sir.
H.M.JR: You can take it. All right, I will be good
now. You go ahead. Do I know you?
MR. BELL: This is Mr. Ziegenfus.
MR. ZIEGENFUS: I met you last year, but of course you
don't remember it. That was in the line.
H.M.JR: Well, I will know you next year.
MR. BELL: I thought I might bring him up.
H.M.JR: That is all right. Go on.
Regraded Unclassified
231
- 4 -
MR. GAMBLE: Specifically this is to deal with our
problem of reaching the sixteen and a half million people
that we can't reach on the pay-roll savings plans, and we
propose--
H.M.JR: Sit right up in front of me.
MR. GAMBLE: We propose to reach them through a can-
vass and instead of canvassing with the pledge as we
originally had planned to do with the whole nation, we are
going to canvass them with a firm purchase agreement. In
instances where they have bank accounts, this purchase
agreement would amount to a bank draft order.
Now, we have done that in a number of states already
and have found it impractical from the standpoint of the
banks, and they have not - we have had no problem of bank
cooperation in connection with the bank draft order, but a
great percentage of these people would not have banking
accounts, so the problem as to who We were going to get a
real savings of their firm agreement to purchase has been
the problem we have been trying to solve.
H.M.JR: I don't know what a bank draft is.
MR. GAMBLE: It is merely an order on the bank to
charge to the person's account each month for the bond and
make delivery, but a great percentage of these people, a
great percentage of these sixteen and a half million people,
farmers, doctors, lawyers, self-employed and other pro-
fessional people such as musicians and engineers and
technicians would not have bank accounts, so our problem
has been, as I said, to try to keep the finger on them
until this matured into a bond purchase, this agreement,
is consummated into a bond purchase. The matter has been
presented to the bankers of New Jersey, Connecticut, and
New York, and they have approved it. We have received from
them a letter stating that they had approved the plan that
we have asked them to follow up. Mr. Graves presented that
to them. It also has been presented to the bankers of
Illinois, and they have approved the plan. In each instance
they were representatives of the Federal Reserves, they were
there, I mean, and all of the bankers, including some small
Regraded Unclassified
232
- 5 -
independent bankers. The plan calls for taking this
agreement in triplicate. The original goes to the bank
and the copy remains with the signer and a copy goes to the
War Savings Staff worker to go into the War Savings head-
quarters. If after 8. reasonable period of time this bank
does not receive a call from these people, the War Savings
office will check with them and follow this up.
Now, in the direct instance of New York, because of
the size of the city and the problems attendant to handling
the millions of people, they are not going to be able to
make an individual check on each person who signs the pur-
chase agreement, but the bank has arranged, and through
our organization in New York, Mr. Madden, they have pre-
pared a series of follow-ups, the first of which would be
directed to the person signing the agreement saying,
"Dear Mrs. Smith: We are happy to note that you have
selected the Corn Exchange Bank as the agency through which
you intend to make your purchase. The entire personnel
of the bank is at your disposal." Thirty days later, with-
out taking into regard whether or not this purchase has
been made, they send a second mailing, general in nature,
50 that it will not hurt the feelings of the person in
case they have bought the bond there or elsewhere, simply
commenting on the fact that the bank has safety deposit
vault that they have made available and are in some way
serving as a reminder. It has all been put into copy. I
am sorry I do not have it here, but it was a reminder.
MR. KUHN: I think you missed one point, Ted. In
telling about these triplicate forms, did you say what was
done wi th the people who had no bank accounts, that they
were invited to state the place - the issuing agent which
they preferred?
MR. GAMBLE: He was telling about the banks because the
banks and the post offices are the only way at the moment
that we can absolutely follow those up and we have just
gotten - just solved a little problem with the post offices,
it was very simple, as to how to follow it.
MR. KUHN: Then forget my interruption, I am sorry.
233
- 6 -
H.M.JR: The post office will cooperate?
MR. GAMBLE: Only in this way, sir. The post office
is to keep a duplicate set for this bond, and they will make
those sets available to us for checking. In other words,
we can go in and check the names of the persons buying bonds
at any post office any week and put them against the pledges
or agreements to purchase; and at the end of the month, for
example, we can take all of those that have not resulted in
a purchase and recheck them and follow them up. It will
require a little more work on the part of the War Savings
Committee as & result of the post office not being able to
do it, but I presume if we asked the post offices to do it,
we would have to pay for it, and we probably can do it
better by adding some one person to our organization to
look after it. New York is the only exception to a very good
plan of follow up. In other words, they are going about it
a little differently there. They are going to canvass all
thirteen and a half million people in New York without re-
gard to whether or not they are on pay-roll savings plans,
whether they are buying bonds.
H.M.JR: In other words, they are going ahead with
the pledge campaign.
MR. GAMBLE: No, sir, they have changed the pledge
campaign. It is a house-to-house solicitation of one and
a half million people in New York State.
H.M.JR: When?
MR. GAMBLE: They are going to start it on June 14.
In order to determine the full value, Mr. Secretary, of the
house-to-house canvass or house-to-house solicitation, we
have decided to let them go ahead and do that. Now, in
the other states they will only make solicitations of the
people that are not available in pay-roll savings. In other
words, the sixteen and a half million people, they will
separate them by groups; and, as a result of your call to
the Secretary of Agriculture, they have agreed to permit
Triple A and the county boards to do the same thing for us
in the rural areas, to ask for firm purchase agreements from
these people.
234
- 7 -
H.M.JR: He is modest. I make the appointment and he
goes over to see him. It is the first I had heard of his
success.
MR. GAMBLE: They have agreed to do that for us. They
were very cooperative in the pledge campaign. They pulled
their punches a little bit, but they have decided now to
go all out in this program and to send these people out to
make a firm solicitation of every farmer. Then we would
have the three and a half million people, the seven million
people, and some states where we have already experimented -
we have had good results in northern California with the
lawyers through the bar associations. We make those ap-
proaches through bar associations, medical associations,
teachers and so forth.
H.M.JR: Let me interrupt you a minute. You have
done this in just New York and Chicago. It is such a
big country, how can we get the banks and the rest of the
country to doing it?
MR. GAMBLE: I will come to that, sir. We have gone
a little further than that.
H.M.JR: This isn't just limited to New York, is it?
MR. GAMBLE: Oh, no, the reason I mentioned New York
and Illinois is because we had the pledge campaigns already
to go there involving canvassing of about one-fifth of the
people in America, and we were very much interested in what
the banks and post offices would do to help us and to find
out whether we should attempt the solicitation or abandon
that and go to work on the pay-roll plans and solicit those
people not available on pay roll. That would leave about
six million people in the United States, self employed and
those who have some income without work, small merchants we
can reach and will have to reach through permanent canvass-
ing organizations and the same plan would apply to the
people in New York State. For instance, if they had bank
accounts, we would secure bank draft orders from them and,
if not, we would have them designate the agency through
which they wanted to buy this bond. Now, the bank would be
a very simple follow-up. In the instance of savings and loan
Regraded Unclassified
235
- 8 -
institutions, savings banks, and other issuing agencies
such as branch insurance offices or utility pay stations,
the War Savings Committee would have to pick up from those
places the orders and follow them up. We have already
prepared a series of three checkups, believing that that
would be sufficient to bring the desired result in these
purchases. There are a number of elaborations we will
probably have to make in this plan, but briefly that is the
plan, and if any of you have any questions to ask about
it or there is any part of it you don't understand, I
probably could answer & little more specifically and directly
if you would ask your questions.
Now, you have had some experience on this, haven't you?
(Mrs. Klotz entered the conference.)
MR. MILLS: Well, from--
H.M.JR: May I interrupt a minute? Have your men at
all seen this?
MR. BELL: No, I don't believe SO.
H.M.JR: Well, who from the Treasury can take a look
at it and make sure that there are no bugs in it?
MR. GAMBLE: Any bugs in it?
H.M.JR: In the Treasury.
MR. GAMBLE: Well, of course our safety valve has been
our issuing agents. The bug would rest with the issuing
agency. This plan does not involve any departure from our
present method of distributing bonds.
H.M.JR: Do you see any danger in this?
MR. BELL: No, I can't so far. We have an understand-
ing with the Defense Staff that whenever any of these matters
involve the operating end that the literature and the
memorandum go through the Public Debt Service.
236
- 9 -
MR. GAMBLE: That is why there has been a delay, Mr.
Secretary, because we have had to check with the people
that are going to be charged with doing this job.
H.M.JR: Who are those people?
MR. GAMBLE: The banks, post offices, and the issuing
agencies.
H.M.JR: And before it leaves the Treasury it will go
through the Public Debt Service?
MR. GAMBLE: Well, it would not normally be necessary
for it to.
MR. BELL: If it involves the issuing agents or in-
structions of that character on the operating end, it would
go through the technical people, that is my understanding.
MR. GAMBLE: Yes.
H.M.JR: Well, does this?
MR. GAMBLE: The only thing that this involves is 8.
service on the part of the issuing agent which will have
to be obtained by the War Savings Committee.
MR. BELL: Well, if that is all there is to it, it doesn't
need to go through the technical people.
H.M.JR: When you go out, let Broughton thumb it through
and if he says this is all right, that is why I invited him
in. Broughton is the man, isn't he?
MR. BELL: Yes. I have got Kilby in here.
H.M.JR: I meant Kilby.
MR. BELL: Same organization.
H.M.JR: Couldn't they justthumb it through when they
go out of the room here? If they say, "This doesn't interest
us, this is O.K."
MR. BELL: They could or they could wait until we get
Regraded Unclassified
237
- 10 -
it in proper form.
H.M.JR: He wants to shoot tonight, don't you?
MR. GAMBLE: It won't be ready until Thursday, sir.
H.M.JR: We will just let them say, "We are not
interested.'
MR. GAMBLE: Yes.
H.M.JR: Just as a extra safeguard.
MR. GAMBLE: There are some states where We have
already discussed this with them. There is one in Missouri
wants to take a liberty with this plan that We would have
to submit to Mr. Bell. It has to do with not only the
solicitation but the collection by the people, the can-
vassers, have checks made out to the Treasury and that
would be--
H.M.JR: The thing that interests me the most is
when will this thing start to function in forty-eight
states.
MR. GAMBLE: When will it start to function in forty-
eight states?
H.M.JR: Yes, sir. You say you have got to get it
out Thursday.
MR. GAMBLE: I should say that it would be three weeks
before it is functioning.
H.M.JR: Go on. Why three weeks?
MR. GAMBLE: I will tell you why three weeks, Mr.
Secretary. In our instructions to the people we have put
another job out in front of this one, and we have given
them until June 15 to have every pay roll in the nation
signed up to ten percent of the total pay rolls of the
company, and that is the reason why we have told them
specifically that that is to take precedence over every
Regraded Unclassified
238
- 11 -
phase of their operation. At best, this sixteen and a
half million represents not to exceed ten percent of the--
H.M.JR: When willitbein the hands of the state chairmen?
MR. GAMBLE: Inside of five or six days.
H.M.JR: How does it get in the hands of the county
chairmen?
MR. GAMBLE: Well, they have, in most instances, almost
daily communication with those people.
H.M.JR: I mean, you don't deal directly with the county
agent?
MR. GAMBLE: We do not deal directly with them.
H.M.JR: Well, if a state wanted to go ahead with this?
MR. GAMBLE: If 8. state wanted to go ahead with it,
they will have full authority and full instructions from us
to do it much sooner than that.
H.M.JR: I think you fellows letting everything go
until June is terrible.
MR. GAMBLE: Well, I don't think we are, Mr. Secre-
tary. Perhaps I told the story very poorly.
H.M.JR: I think letting everything go to June - here
we are getting off to & bum start this month and you say
June and there is always reasonable excuses, and then the
first thing you know it is July.
MR. GAMBLE: This is not an excuse, sir.
H.M.JR: Well, I say reasonable excuses. Let's say
you set the fifteenth of June, and I still can't get it
through my head why it takes the State of New York so long
to get going.
MR. GAMBLE: We have charged New York with the responsi-
bility of lining up every firm in the State of New York by
Regraded Unclassified
239
- 12 -
June 15, not only every employee on pay-roll savings but
ten percent of the pay roll and that is a much more im-
portant phase of this job.
H.M.JR: Are you going to tell me about that today?
MR. GAMBLE: I was going to tell you a few things
about it.
MR. BELL: Did you say it would be three weeks before
all the states would be functioning or before it would get
going at all?
MR. GAMBLE: It would be at least three weeks, Mr.
Bell, before the people could put such a plan in operation.
MR. BELL: In any state?
MR. GAMBLE: Yes, excepting in the states where they
are all set to go. California is doing this job on May
23. Illinois is doing this job and Michigan is doing this
job - one on May 11 and one on May 15.
H.M.JR: Well, Ted, where are you going to get the
extra seventy million dollars this month.
MR. GAMBLE: I will tell you where I think we are
going to get it, Mr. Secretary. I think we are going to
get it largely through an immediate response, and increase
in our pay-roll savings plans. That perhaps sounds a
little bit general to you, but you read all of these
wires, or most of them that came from these people.
Now, they have been on this job for eleven months. They
have been pretty well disciplined, and I don't think that
any of them have gone off half-cocked in making these
assurances that they are going to reach it. It would be
a very simple job for many of them to reach it with the
added sale of F and G Bonds, and I dare say that there
are many times that amount of money, probably three times,
available in the United States if they all went out and
concentrated on the sale of F and G Bonds, but that market
would soon peter out, and what we are trying to do here is
Regraded Unclassifie
240
- 13-
is to bring our whole army up to the line ready for the
attack at one time instead of to concentrate on the month
of May or the month of June or the month of July, but we
are trying to come up to the point of realization of this
billion dollars 8. month, and we are confident it can be
done, but we believe it can only be done one way, and that
is to take the most important thing first and level on it
until we get it done, and the indications are from the
reactions around the country, from the announcement of these
quotas and the establishment of this ten percent goal that
the state organizations are going to be able to get enough
people enlisted in pay-roll savings plans to do this job.
We can raise approximately five hundred million dollars a
month from the pay-roll savings plan, and I believe we can
beat that point by July.
H.M.JR: Had you finished on your check thing?
MR. GAMBLE: I had finished that because it was - I
just high-lighted it to see if any of these gentlemen had
any questions,
H.M.JR: Do you want to know any more about that?
MR. BELL: No, I think I understand it pretty well.
H.M.JR: Do you want him to talk with you tomorrow
about it or let him talk with your two men?
MR. BELL: I would rather he would talk to the two men
if he is going to get it out this week.
H.M.JR: Well, when they are through they can go down
to your office and take a look at it. Have you got some-
thing for them to look at?
MR. GAMBLE: I can give them a copy of this plan.
H.M.JR: All right.
MR. KUHN: Dan, the whole purpose of this was to fill
& gap there in the pledges which had no follow-up, provide
some kind of & pinning down for every person.
H.M.JR: But that is the point. As I get it, it will
be three weeks before this - before you have a man that can
go out and ring a doorbell and take an order.
241
-14 -
MR. GAMBLE: No, Mr. Secretary, we have some of
them that will be doing it all during the month, but
you asked me how soon we would be able to have this plan
ready for the forty-eight states. I said the states -
meaning that a state that had not conceived of this job--
H.M.JR: Let's put it another way. How long before
the ten important states will have this thing going?
MR. GAMBLE: The ten important states?
H.M.JR: Yes.
MR. GAMBLE: Well, the ten important states will be
three weeks, because of their size. Their job is multi-
plied, and they couldn't do it. I mean, you can start
this plan in a week in the state of Arizona, but it will
certainly take three weeks to start it in the state of
Michigan.
H.M.JR: What are you doing outside of New York and
Chicago?
MR. GAMBLE: What are we doing? We have contacted
everyone of the forty-eight states regarding this plan,
have made arrangements for them - we have discussed this
plan with them. You asked us to call off the pledge cam-
paign, and we immediately had to contact some thirty odd
states, and then we contacted the additional states
where they had already conducted their pledge campaigns,
or where they had not set a date for their pledge cam-
paigns to tell them of this problem of reaching people
that they could not reach any other way and the necessity
of reaching them regularly in this program.
H.M.JR: Graves went personally to New York and
personally to Chicago. Who is going to clean up Baltimore
and Detroit?
MR. GAMBLE: Our state administrators. Our state
administrators from California, from Michigan, from Georgia,
and from Missouri, all report favorably on the plan.
Regraded Unclassified
242
- 15 -
H.M.JR: Now, who watches that particularly?
MR. GAMBLE: Well, that would be watched by Mr.
Graves particularly.
H.M.JR: Now, while we are right on that, can I
just switch a minute? Your issuing agent thing, how
many issuing agents did you add last week, do you know?
MR. MILLS: I can't answer. They run about two
hundred increase a week, is my memory on it.
MR. TICKTON: That is right.
MR. MILLS: And the larger part of that increase is
in the corporations, but that doesn't tell the story,
because some of the corporations are small, and a small
corporation with five hundred employees doesn't mean
nearly as much as a large corporation that is added as
an issuing agent and will cover & hundred and fifty-
seven thousand like the New York Central Railway, sir,
that comes in shortly, as soon as they can get the
equipment.
H.M.JR: Well, how often do I get that, George?
MR. HAAS: Once a week on Wednesdays.
MR. TICKTON: Tuesdays. You will have tomorrow
afternoon. The telegrams come in this afternoon.
H.M.JR: And I will have it tomorrow?
MR. TICKTON: Yes, sir.
H.M.JR: When that comes in, Tickton - I mean, if
Haas wants to come, he is always welcome, but I would
like you (Mills) to walk it in here, you see, and show
it to me in terms of number of employees who have come
in. Will it list them by companies, who come in?
MR. TICKTON: We have it if you want it that way.
The Federal Reserve Banks sent us a list.
Regraded Unclassified
243
- 16 -
H.M.JR: Let me take a look at the whole thing
tomorrow, will you?
MR. TICKTON: O.K.
H.M.JR: You say you will be ready tomorrow?
MR. TICKTON: At this time tomorrow.
MR. MILLS: Well, for example, Mr. Secretary, there
are reports here from the more important Federal Reserve
Districts, but you would find it very tedious to go
through, and they cover the larger corporations.
H.M.JR: I have Iceland at three thirty. Having
settled Iceland at three thirty, we will settle issuing
agents at three forty-five tomorrow.
MR. TICKTON: O.K.
MR. HAAS: You can set up a special table for this
purpose.
H.M.JR: Well, come in and let me see what you
fellows are doing. Give me some idea what is growing on
this thing. Three forty-five tomorrow.
MR. MILLS: All right.
H.M.JR: Are you interested, Mr. Bell?
MR. BELL: Yes.
H.M.JR: Do you want to come in and defrost me at
three forty-five?
MR. BELL: I think after Iceland you won't need to
be defrosted.
(Mrs. Klotz left the conference.)
MR. BELL: It seems to me, Mr. Secretary, there
ought to be an appointment of some of those corporations
Regraded Unclassified
244
- 17 -
which are just about to come in, but which Tickton
probably hasn't got in his statistics. I understand
they are coming in, but--
H.M.JR: Well, it is worth while once a week for me
to get my teeth into this issuing agent thing.
MR. BELL: Several of them agreed to come in, but
they haven't settled it with their subsidiary companies,
like Bethlehem and New York Central and United States
Steel.
H.M.JR: Oh that, I cut out something - we will see
if my figure system works.
MR. HAAS: In some cases subsidiaries came in, but
the parent corporation didn't.
H.M.JR: Now, here is a clipping about the Steel
Institute. I will give this to you. (Mills) I wondered
if you might not tackle a representative of the American
Steel Institute, and that gives you - now don't you want
to get all the members of the Steel Institute - the two
of you get together, see.
MR. MILLS: All right, sir, the steel industry is
pretty well covered.
H.M.JR: Well, get hold of the secretary in Pittsburgh
of the American Steel Institute and ask him, one, how many
of your meinbers are on the pay-roll allotment plan, and two,
how many of them are issuing agents; and if that is a good
hunch, you have got the secretary of the airplane industry
right here in Washington, Colonel somebody, who is a so
and SO. Everybody belongs but Glenn Martin. You might
try that by associations, just try a couple of them.
MR. MILLS: Glenn Martin is the outstanding one of
the companies that is an issuing agent. None of the others
are.
MR. HAAS: Colonel Jouett.
H.M.JR: Now, just for fun - you take this assignment,
see, Take the American Steel Institute and Jouett of the
245
- 18 -
airplane industry, and then I will give you a third one.
The machine tool people have an institute. Miss Chauncey
can give you the name of the secretary. He comes from
Indianapolis. Just try those three and let them check
their own industries for pay-roll deduction, issuing
agents. If it works, then let's take other associations.
MR. MILLS: All right, sir.
H.M.JR: Just try three and see how it works. "We
want to know, one, have all your members got pay-roll
deduction, two, are they all issuing agents; and if they
are not, will you, as secretary of the institute, get them
for us?" If it works, take other associations. But I
know that the machine tool fellows, God, they must be
rolling in money, if Randolph Paul hasn't got it all.
Just try it - I am sitting here, and nothing has happened
on the NAM, and nothing has happened on the United States
Chamber of Commerce, so try it this way for me, will you?
I mean, if this works, then let's go at it through the
associations. O.K.
MR. GAMBLE: Speaking of the Steel Institute-
H.M.JR: Did you get it?
MR. GAMBLE: Yes, sir.
H.M.JR: O.K.
MR. GAMBLE: You will be interested in knowing that
the Jones and Laughlin people sent a man here today. Have
you heard about it?
H.M.JR: No.
MR. GAMBLE: They said the president of the Company
had not received your April 25 letter, but they received
your wire on Friday, and they had & man here this morning
to find out how to do this job.
H.M.JR: Wonderful.
Regrad Unclassified
246
- 19 -
matter of fact.
MR. GAMBLE: He called on you personally, as a
H.M.JR: Who was it, the President?
MR. GAMBLE: No, a gentlemen by the name of Mitchell
from the Jones and Laughlin Company.
H.M.JR: You got what I meant when I was trying to
associate--
MR. GAMBLE: When you mentioned NAM, yes, sir. Mr.
Secretary, you asked how we expected to get this seventy
million dollars in order to make the six hundred million
in May. I would like to point out to you one way that
we could get it and very easily and perhaps permanently.
We are getting at the present time that we know of about
eighty-eight million dollars a month on pay-roll savings
plans, eleven million people buying a little less than
five percent. If those people, or a substantial part
of them, going into the new plan that will be installed
this month, can be brought in at ten percent, it would
mean - at the average rate of pay of a hundred and sixty-
five dollars a month we would get bond purchases in time
to reach that amount of money.
H.M.JR: How much are we getting through pay rolls
now?
MR. GAMBLE: Eighty-eight million dollars that we
know of. We have & record of the eleven million people,
and we may be getting twice that amount, but we know we
are getting eighty-eight million dollars, and it only
represents eleven million people, and it only represents
four point eight percent of their income.
H.M.JR: That is very low.
MR. GAMBLE: And certainly from the reaction that
we are getting from all over the country, and I think
maybe sometimes here we don't appreciate how much effect -
what has happened here in the last couple of weeks has
caused out in the country, I don't think it is an
Regraded Unclassified
247
- 20 -
optimistic statement to say that we are going to be able
to get the number of people on the pay-roll savings plan
doubled and that we are going to get the percentage up.
Here is a wire that came in this morning that I think
perhaps you would like to hear. "The latter portion of
Lux Theater Program, Columbia Network, six to seven
tonight, Monday, May 6, will feature following dialogue:
"Miss Joan Fontaine: 'What's the news from the front
on Hollywood's all-out battle of bonds, Mr. DeMille?'
"Mr. Cecil B. DeMille: 'I was talking with head-
quarters just today, Joan, and the noon communique is:
"We're advancing on all fronts." The goal for the entire
industry - you know - is ten percent - or more - of every-
one's income - for War Bonds.
"Mr. Brian Aherne: 'That should buy a lot of tanks
and planes.'
"c. B. DeMille: 'About three hundred thousand
dollars worth every week, Brian. Perhaps a hundred bombers
a year will be paid for by bonds Hollywood will buy through
our voluntary pay-roll savings plan. That doesn't count
our regular cash sales of bonds either.'
"Fontaine: 'It sounds like a system that every business
might adopt, Mr. DeMille. How was it organized?'
"DeMille: 'The Motion Picture Committee for Hollywood
was formed at the request of the Treasury Department to
represent every part of the motion picture industry - labor,
management, and creative branches. The producer, with four
telephones and three secretaries, is no more important
than the carpenter who builds the set or the electrician
who lights it. We need everybody. D'you know, at a meet-
ing the other day, the two best suggestions were made by a
lovely extra girl who'd just come from the set in makeup,
and a man who'd just come from the same set in overalls.
"Aherne: 'In other words, Hollywood's pay-roll savings
plan is democracy at work to sell War Bonds.
Regraded Unclassified
248
- 21 -
"DeMille: 'Like that carpenter I was talking about,
Brian, you hit the nail on the head. In a few weeks we
expect to tell the Treasury Department that every actor,
stenographer, writer, makeup man, costumer, hairdresser,
executive cameraman, sound technician, director, carpen-
ter, clerk, electrician, and set dresser has signed up,
that every man and woman who works in motion pictures,
and the allied branches of the industry is in the pay-
roll savings plan and is voluntarily putting at least ten
percent of his or her salary in United States War Bonds.
Not just this week, or this month, but every payday for
the duration of the war.'
"Fontaine: 'And it's one production with a starring
part for everyone.'
H.M.JR: What is the pay roll of the movie industry,
Ted?
MR. GAMBLE: What is the pay roll?
MR. MILLS: Is it a hundred and ninety million?
MR. GAMBLE: Yes, close to two hundred million.
MR. KUHN: And they haven't had pay-roll plans up
to now?
MR. GAMBLE: Well, they have had them. They have
been installing them for a couple of weeks. This ten
percent thing has been contagious throughout the nation.
H.M.JR: Well, I don't want to tie up all these
people. Bell, do you want to ask some things?
MR. BELL: No.
H.M.JR: Now, one other thing. Do you want to ask
anything? This doesn't interfere with your sales in any
way?
MR. BUFFINGTON: No.
Regraded Unclassified
249
- 22 -
H.M.JR: Did you see my telegram? I want to get
together with you babies before Thursday. Did you get
a copy of my telegram?
MR. BUFFINGTON: No, sir.
MR. GAMBLE: He wasn't supposed to, sir. You asked
Mr. Graves and myself to get in touch with Mr. Bell and
Mr. Buffington.
MR. BELL: Oh, you mean about the Federal Reserve
meeting.
MR. GAMBLE: Yes.
H.M.JR: Well, before Thursday I want to get in
touch with you and his organization before we see the
president of the Federal Reserve Banks, how we are going
to do this thing. Incidentally, Dan, the presidents of
the Federal Reserve are coming here. I will talk to them.
So have a room. The meeting is in the Treasury. I am
just carrying out your policy. They are my fiscal agents.
I am serious. Let them come over here. If they are going
to do this - I don't know whether you were here.
MR. BUFFINGTON: I put that in a memorandum.
H.M.JR: I don't know whether you were here, but I
told Allan Sproul and Marriner Eccles, both of them, that
these men would act in their capacity as my fiscal agents,
and they agreed to it.
MR. BELL: Yes, that is right.
H.M.JR: So they come here. I am only carrying out
the Daniel Bell policy.
MR. BELL: All right, I am willing.
H.M.JR: So start the meeting here. They might just
as well-
MR. BELL: You see what--
Regraded Unclassified
250
- 23 -
(Discussion off the record.)
MR. BELL: You don't want them to meet over there?
You see, what they planned to do was to meet with the
board.
H.M.JR: That is all right.
MR. BELL: And the security dealers were going to
meet by themselves, and they were going to get together.
Now, they get together here, is that right?
H.M.JR: That is the point.
MR. BELL: I understand now.
H.M.JR: They get together here, and you throw
Eccles out the window. Anyway, did any of the telegrams
come back yet from the big five hundred?
MR. GAMBLE: Only this one I just told you about.
H.M.JR: That isn't responsible for the script?
MR. GAMBLE: No, that was the job of the southern
California association.
H.M.JR: All I want to get from you is that you
have a plan, and these men will look after it and see
whether they have got the checks and so forth.
MR. GAMBLE: I would like to send these gentlemen
a copy, but we also have a new plan for stepping up pay-
roll savings which I will see that everybody gets a copy
of.
H.M.JR: That, I am tremendously interested in. When
could I take that to read?
MR. GAMBLE: Well, you could have it this evening.
H.M.JR: If I have it the first thing in the morning,
it will be all right. I don't read much at night. What
251
- 24 -
you are telling me really is, for the month of May I
have got to rely on the increase in pay-roll savings.
MR. GAMBLE: Not entirely, sir. There has already
been, like this one county that wired you they had already
made their quota, these fellows will go out and catch
enough citizens to sell seventy million dollars, but they
are not going to do that every month, and that is why we
are not as concerned with June as we are in July.
H.M.JR: Well, I want to make the six hundred in May.
MR. BELL: You will have somebody going to the
President if you don't make it.
H.M.JR: This letter on the front of the Hudson Valley
Country Courier, I want to send that over to the President.
MR. KUHN: Herbert Gaston wrote that.
H.M.JR: Well, the suggestion I have got to make is,
sleep on it. I like to have the movies once a week.
What would you think of putting this on the screen, this
letter, to each state, and then I was thinking I could
read it or my voice or someone else's voice, and then
just have softly in back something like "America The
Beautiful," and let the people read it.
MR. GAMBLE: It is too long for that use.
MR. KUHN: You can take excerpts from it, can't you?
H.M.JR: Is it too near what I said? I don't think
it is.
MR. GAMBLE: No, I don't think SO.
H.M.JR: Would you think about it and come back at
me with it?
MR. GAMBLE: Yes, sir.
H.M.JR: I need this thing, but I was just thinking,
to get it in to everything - and I thought to try to
Regraded Unclassified
252
- 25 -
personalize it to the people in the state of New York -
I know the New York City papers ran this. The only way
I saw it was through the local papers. But I was think-
ing if it--
MR. KUHN: Is that the Poughkeepsie paper you have
there? They ran it on the front page.
H.M.JR: It is a good story.
MR. KUHN: Fine.
H.M.JR: And on that, don't forget I want a special
man in Dutchess County.
MR. GAMBLE: He has been employed, sir, already.
H.M.JR: Why didn't he come and see papa?
MR. GAMBLE: I couldn't answer that.
H.M.JR: Why not suggest that both our chairman and
the special fellow come and see me. I will be up on the
farm next Saturday and Sunday. I have never seen our
county chairman and whoever the special man is. I would
like him to come. I hope to be up there.
MR. GAMBLE: This man was recommended by the New York
state committee, and was told that--
H.M.JR: I would like to see both of them. I will
tell you what let's do. Let's see - why not let's see
this man we employed, say, on a Saturday, and the county
chairman on Sunday, so I would get the dirt on Saturday,
you see.
MR. GAMBLE: All right.
MR. KUHN: I asked Dick Patterson, Ted, to let the
Secretary see this man before he was put on.
MR. GAMBLE: I didn't know that. I know the man
was employed.
Regraded Unclassified
253
- 26 -
H.M.JR: Here is a little poem I think is pretty
good. Maybe I will have Irving Berlin write a little
music for it.
MR. KUHN: Fair.
H.M.JR: O.K. Now, you are going to let me see
that - what you are going to do on the pay-roll deduction?
MR. GAMBLE: Yes, sir.
H.M.JR: I think you had better put it in my own
hand tomorrow morning.
MR. GAMBLE: All right, sir.
H.M.JR: Thank you all.
5/4/42
254
At Defense Savings Meeting today, Gamble
said that Patterson has employed this man
and he is already working. HM Jr asked that
he come to the farm Saturday so he can talk
to him.
255
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
April 28, 1942
TO
Secretary's files
FROM
Mr. Kuhn
Col. Patterson in New York has been asked
to recommend a suitable man for a paid position as
War Savings representative to help in Dutchess County.
I have asked for some names within 48 hours.
256
April 28, 1942
FOLLOW-UP FOR THE SECRETARY:
You have requested that a man be stationed in
Dutchess County to work with the County Chairman to
make sure that we have a success in Dutchess County,
particularly Hyde Park and East Fishkill.
Has this been done?
capy given Granes at Granp-
Came back without Comment-
Follow up 5/4/+2-
Regraded Unclassified
-
257
April 21, 1942
TO:
MR. GRAVES
FROM:
THE SECRETARY
I want to remind you to have a man stationed
in Dutchess County to work with the County Chairman to
make sure that we have a success in Dutchess County,
particularly Hyde Park and East Fishkill.
Fallowed. of with
Irans 4/23-
Regraded Unclassified
THE WHITE HOUSE
WASHINGTON
May 4, 1942.
MEMORANDUM FOR
THE SECRETARY OF THE TREASURY
One of our good friends
sends the enclosed with the
suggestion that the four pages
should be cut to about a page
and a half. The recipient of
this letter said it was too
long and that he did not under-
stand it after he had read it.
A good advertising man would
do the trick.
F. D. R.
Regraded Unclassified
THE SECRETARY OF THE TREASURY
WASHINGTON
RdV 2761
Gentlemch:
2
Sinc: viars DE VIS Launched In May 1941.
events of .0 presurve out
very exaction :00 to upon for-flungo
battle lines. Pressient has said that
during
1412
tanks;
20,000
anti-aireraft ou ml 10 vilition to nobi-
lizing, trinks THE of finating men. Upwards
of 50% of our 10th extuative ciracity and n 0:071 chare of our
national incore nust to diver'st to withing sar materials.
This lias 5017 a the intend increase in the magnitude of the
financial program the invorment. Reliable estimates indi-
cate that durine the net fises year, that is from July 1, 1942 to
June 30, 1943. de shall spend in the neighbornood of 60 billion
dollars.
The Revenue 102 10 i: comes from Contress will determine how
much of the money needed to finance the war 13 to be raised by tax-
ation. The painnce must be borrowed by the reasury. In all prob-
ability, we shall have to borrow upwards of 35 billion dollars
between now and this time next year.
If the Government la compelled to go to the commercial banks
for the bulk of these funds. the result will be to increase infin-
tionary tendencies which are already serious. This is, true because
when commercial banks buy Government Bonds they do not pay for them
rith actual cash taken from their vaults, but by placing on their
books newly created deposits to the credit of the Government. When
the Government draws upon these deposits to pay for the goods and
ervices it buys, the purchasing power of those to whom these pay-
ents are made is increased without any decrease in the purchasing
ower of those from whom the money is borrowed.
When bonds are purchased with savings out of current income, on
She other nand, such savings nelp to reduce excess consumer income
hich if spent for a limited supply of consumer goods would tend to
orce prices up. I't is for this reason, among others, that we are
joing directly to the people for as much as possible of the money
eded for the war.
Regraded Unclassified
It would be difficult to say exactly now much we can borrow d1-
reatly from the people. We cannot. of course, hope to borrow in this
way all that will DO negist. New some definite objective
desirable 15 me it': to 16V4 a standard by which to measure our
success.
We nove, therefore, net 38 our 1/03 for the twelve month period
beginning July ist. to: 31.4 if itates Savings Bonis. Series E,
F and G, having an initial cost value of not less than $12,000,000,000.
This will De equa: to allently more than 10% of our estimated national.
income during this period.
Sales of efence Robis during the period May 1941, through March
1942, amounted to -3, 100% 10,21, or an average of approximately
$440,000, III per month. : WL if to reach our goal, an average of a
billion dollars a mont. we shall have to increase this rate of sale
by approximately 2, Slied. this should not be difficult to 10 In view
of the rapidly increasing national Income and in view also of the fact
that the supply of sany commolities upon which people would normally
spend their income will De restricted by the lemands of war production.
The seeing of a :-finite goal or quota does not mean an abandon-
ment or basic change -n our Fundamenta: objectives and methods. It
does mean an intensification of activity all along the line. it does
mean that penceforth our savings campaign must move on a war basis.
If we are to achieve the goa. outlined for the nation as a whole, It
will be necessary to establis subsidiary goals or quotas for states
and countles. This we intend to do.
The nost effective, single rethod for promoting the systematic
purchase of United States Savings Bonds is through the payroll savings
Plan. Alrents nearly 50,000 firms in the United States employing a
total of almost 20,000.000 people have made such plans available to
their employees. You are among those who are cooperating in this pro-
gram, and 1 37 writing to you. not only to thank you for your nelpful
cooperation up to date, out Lo ASA for your increased effort in the
future.
TIME 13 SHORT. The ever-Increasing demands of our war machine
create an urgency that we cannot escape or evade. io raise the
billions which we now need to win the war, and to do all in our power
to check inflation, we must raise our sights. I am suggesting, there-
fore, as a total or quota for those administering the payroll savings
Dian. that AT LEAST 10% of gross payroll be set aside by the employees
for the purchase of United States Savings Bonds.
Regraded Unclassified
:-
We are still a long way from that goal. Among the nearly 50,000
fires having a payroll savings plan the average participation at the
present time is about 45% of the employees. The average monthly saving
is about $7.50 PER CAPLIA, representing in the neighborhood of 1.8% of
the pay of those participating. In other words, If we consider ALL of
the employees of all the perticipating firms, only a bit more than 2%
of the gross payroll is now being invested in Vafenge Bonds.
Considering the difficulties Involved in the initial Installation
of payroll sevings plans this Ls a 8001 record. But we pust go forward
now on two fronts: F1331, we must increase the percentage of employees
participating in payroll savings plans from approximately 45% to at
least 90% of the total number. SECOND, we must encourage all partici-
pating employees to increase their average monthly allotment from about
$7.50 per capita to an iverage of nearly $20 per capita,
To help achieve this new goal 1 am sending you herewith the story
of one successful ethod for accorplianing this. This La the first of
a series of "case mistorles" which we hope to send to you from time to
time. This campaign conducted by the General Electric Company has not
succeeded in reaching our new goal, but it seens to me that it is along
lines such as are here outlined that we can most quickly and simply
succeet.
You will. of course, realize that a flat 10% allotrent of indi-
vidual waves and galaries by al- employees will not accomplish this
purpose. It does not take account of individual differences either as
to Incore receive: or personal and family responsibilities. Some
individuals will be able to set aside a 2003 dea. more than 10% of
their pay: others less. The overall result, however, should equal 10%
of the gross payroll. I also realize that the formula according to
which the savings quota is distributed awong the employees will vary
from place to place. To help in making such a distribution, 1 am en-
*losing a savings schedule for the systematic purchase of United
States Bonds for persons at different income levels. The allotments
indicated are based on national averages and will serve merely AS a
guide In setting 10 a surgested schedule to fit your own payroll.
In conducting a drive for Increased participation at higher rates
or saving, the friendly active cooperation of the workers themselves
is of the utmost importance. Organized Labor - Including the American
ederation of Labor, the Congress of Industria. Organizations, the
Railroad Brothernoods and their constituent unions almost without ex-
caption - has pledged its full all-out support of this program. Em-
loyers must remember that it is the money of their employees which is
Regraded Unclassified
being Invested In Savings Bonda through payroll savings plans and must
encourage in every way possible - by joint committees or other methods
of cooperation - a spirit of partnership and joint loyalty among all
the good American citizens participating. Working together, manage-
ment and labor can not only insure the success of this most important
war effort, but can lay the foundations for Improved industrial rela-
tions which will bear increasingly rich fruit in the years to come.
Many questions will undoubtedly occur to you concerning this new
and intensified program. 1 should be glad to hear from you and I shall
welcome any inquiries or comments you may wish to make.
I want to express my appreciation again for your generous cooper-
ation thus far. I know that In the months ahead you will not fall.
Sincerely yours,
Secretary of the Treasury
Regraded Unclassified
263
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 4, 1942.
TO SECRETARY MORGENTHAU
FROM ABBOT L. MILLS, JR.
10
SUBJECT: ISSUING AGENCY STATUS OF LARGE CORPORATIONS
264
PROGRESS REPORT FOR THE PERIOD SINCE THE LAST STATISTICAL REPORT ON
THE STATUS OF LARGE CORPORATIONS ENGAGING AS ISSUING AGENTS. THE
PROGRESS REPORT COVERS COMPANIES HAVING 5,000 OR MORE EMPLOYEES WHICE:
(1) HAVE NOW QUALIFIED AS ISSUING AGENTS
(2) WILL SHORTLY QUALIFY AS ISSUING AGENTS
(3) HAVE MADE SATISFACTORY ARRANGEMENTS FOR OBTAINING
BONDS FROM COMMERCIAL BANKS OR CREDIT UNIONS.*
(1) NOW QUALIFIED AS ISSUING AGENTS
Name of Company
Number of Employees
Southern New England Telephone Co., New Haven
5,343
William Filenes Sons Company, Boston
5,000
First National Stores, Sommerville
12,000
Waldorf System, Inc., Boston
6,000
American Chain and Cable Company, Bridgeport
5,871
L. Banberger & Co., Newark
5,159
Prudential Insurance Company, Newark
38,444
Commercial Investment Trust, Inc., New York
6,687
Consolidated Coal Company, New York
9,998
Continental Baking Company, New York
12,011
Delaware and Hudson Railroad, Albany
8,070
Endicott Johnson Corporation, Endicott
19,324
General Aniline & Film Corporation, New York
5.994
Great Atlantic & Pacific Tea Company, New York
61,083
Crane Company, Chicago
16,711
Allis Chalmers Manufacturing Co., West Allis
18,710
Detroit Edison Company, Detroit
9,300
Mountain States Telephone & Telegraph Co., Denver
8,726
(2) WILL QUALIFY AS ISSUING AGENTS
John Hancock Mutual Life Insurance Company, Boston
11,555
Hygrade Sylvania Corporation, Salem
5,200
Norton Company, Worcester
6,010
New England Power & Service Company, Boston
20,319
Colgate, Palmolive, Peet Co., Jersey City
6,843
American Brake & Shoe Foundry Co., New York
7,200
American Woolen Company, New York
27,883
Consolidated Edison Company, New York
32,554
Continental Can Company, New York
15,562
Delaware, Lackawanna & Western Railroad, New York
15,300
General Baking Company, New York
9,614
Rand Union Company, New York
5,288
New York Central System
118,000
Phelps Dodge Refining Company, New York
15,699
Sperry Corperation, New York
30,000
U.S. Steel Corporation and Subsidiaries
298,000
1. G. Budd Manufacturing Company, Philadelphia
11,314
Bethlehem Steel Company
Over 100,000
265
(3) HAVE SATISFACTORY EXISTING ARRANGEMENTS FOR OBTAINING BONDS
Name of Company
Number of Employees
Electric Boat Company, Groten
7,200
The Stanley Works, New Britain
6,757
Jordan March Company, Boston
5,000
Pacific Mills, Boston
5,700
Pepperell Manufacturing Co., Boston
9,000
United Fruit Company, Boston
(1)
Bath Iron Works, Bath
6,491
Nashua Manufacturing Co., Nashua
5,261
Brown & Sharpe Manufacturing Co., Providence
10,500
Bridgeport Brass Company, Bridgeport
6,316
Remington Arms Company
18,087
Bausch & Lomb Optical Company, New York
7,800
Bond Stores, Inc., New York
8,808
Cluett-Peabody & Oo., Inc., Troy
6,136
Curtiss-Wright Corporation, New York
30,700
Crucible Steel Corporation, New York
24,172
Dun & Bradstreet, Inc., New York
5,700
Eastman Kodak Company, Rochester
22,000
Gruman Aircraft & Engineering Corporation
10,000
Savage Arms Corporation, Utica
5,568
American Rolling Mill Company, Middletown
40,246
Hoover Company. North Kenton
11,303
Kroger Grocer & Baking Co., Cincinnati
20,000
Container Corporation of America, Chicago
5.300
Continental 011 Company, Ponca City
6,300
Humble 011 & Refining Company, Houston
13,183
*The information presented in this progress report has been as-
sembled from reports obtained from various of the Federal Reserve Banks.
Reports from all of the Federal Reserve Districts are not as yet in,
but sample results to date reveal a general similarity which should
indicate the pattern for all of the Federal Reserve Districts. Generally
speaking, the recruitment of large corporations as issuing agents is
making reasenable progress when considered in the light of the substantial
number of employees represented among the corporations which have or will
shortly qualify or have existing arrangements for satisfactorily obtain-
ing bonds outside of the Federal Reserve Banks.
Attention is called to the considerable mumber of corporations now
obtaining bonds from commercial banks or credit unions. Inassuch as
these methods of obtaining bonds are sufficient to relieve the Federal
Reserve Banks of their issuance in the cases affected, no change has
been suggested in existing arrangements, and the Federal Reserve Banks
properly are concentrating on the enlistment of those corporations which
now make extensive use of Federal Reserve issuing facilities. With the
step-up in payroll savings plan participations the bond-issuing function
may overtax the facilities of some commercial banks and credit unions,
266
in which cases the services of the Federal Reserve Banks may be called
upon. By that time, however, it may be hoped that the Federal Reserve
Banks will have enlisted enough large corporations as their own issuing
agents as to permit their assuming an additional lead without any serious
prospect of delay in issuing bonds. In the meanwhile, it should be
desirable to encourage the Federal Reserve Banks to proceed with their
enlistment program as rapidly as possible and in that manner be prepared
for future eventualities.
It will be observed that the bare statistical reports periodically
submitted cannot show the full issuing agency picture, which is in reality
more favorable than the figures reveal for the reason of the substantial
number of corporations which will shortly qualify as issuing agents or
which have perfected satisfactory bond-issuing arrangements outside of the
Federal Reserve Banks.
ABBOT J. L. MILLS, JR.
267
WAR PRODUCTION BOARD
WASHINGTON, D. c.
OFFICE OF
DONALD M. NELSON
May 4, 1942
CHAIRMAN
Dear Henry:
I have your note of April 28
and am very happy to know of the co-
operation of the AF of L with the
War Savings program.
Sincerely yours,
wh Whom
Donald M. Nelson
The Honorable
The Secretary of the Treasury
Washington, D. C.
DESTRIBER
82 82 9 MA B YAM SARY VAM SAE
DE AVENTOBA
268
May 4, 1942.
Dear Steve:
Thank you very much for your letter of
April 30 and your suggestion with respect to
publicity on the letters sent out by President
Green to the member unions, officers and organ-
izers of the A. F. of L. These letters were
read on the A. F. of L.'s national radio program
Saturday night and, as a result of your suggestion,
will be included in Phil Pearl's clipsheet that
goes out tomorrow.
We have also arranged with the C. I. 0. and
the officials of the Railroad Brotherhoods for
similar letters to be made public by them.
I agree with you heartily that these letters should
be very helpful when read by the people on the Hill
and should like you to know of our appreciation of
your thoughtfulness in passing on such suggestions
to us.
Sincerely yours,
(Signed) Hearg
Secretary of the Treasury.
Mr. Stephen Early,
Secretary to the President,
The White House,
Washington, D. C.
Filinamic.
By Messenger Turges 5:25
CS
copy to thompson
PS: Les me have some more
good suggestions
Regraded Unclassified
269
THE WHITE HOUSE
WASHINGTON
April 30, 1942
Dear Henry:
Many thanks for your memorandum
of April twenty-eighth, with the attached
copies of letters sent out by President
Green of the A.F. of L. Why shouldn't
Schwarz or some of your helpers suggest to
Phil Pearl, who handles publicity for Bill
Green, that these letters be released to
the Press.
And, when the C.I.O. and Railroad
Brotherhood officials write their letters,
their press representatives might use them
in the same way. The letters from the labor
leaders would make excellent material and
their release might be effective in a helpful
way on the Hill.
Sincerely Steven yours,
STEPHEN EARLY
Secretary to the President
Honorable Henry Morgenthau, Jr.,
The Secretary of the Treasury,
Washington, D. C.
270
May 4, 1942
Dear Mr. Anderson:
Thank you very much for sending me
8 desk set of your Bond Drive promotion
material.
As you know, I feel that you have
set a magnificent example to other
companies throughout the country, and
we are already making effective use of
your plan in our attempt to reach every
company and every employed worker in our
payroll savings campaign.
Sincerely,
(Signed) 1. Morgenthau, in
Mr. H.W. Anderson,
Vice President,
General Motors Corporation,
Detroit, Michigan.
FK/cgk
n.m. C. file
Copies to Thompson
Deak ses put with Simp books
Regraded Unclassified
271
GENERAL MOTORS CORPORATION
DETROIT, MICHIGAN
April 30, 1942
Honorable Henry Morgenthau, Jr.
United States Treasury
Washington, D.C.
Dear Mr. Morgenthau:
I am sending you herewith your personal copy of a small desk
size easel presentation of the General Motors Employes Bond
Drive for Victory.
One thousand copies of this presentation are ready for dis-
tribution and Mr. Jerpe will be in communication with Mr. Gamble,
of your Staff, to work out the shipping details.
Very truly yours,
W. Anderson
Vice President
1845
VA
272
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Two Business Days of May, April and March 1942
(May 1-2, April 1-2, March 1-3)
On Basis of Issue Price
(Amounts in thousands of dollars)
:
:
Amount of Increase
:
Sales
: Percentage of Increase
:
or Decrease (-)
:
or Decrease (-)
Item
:
:
:
:
May
:
April
:
May
:
April
:
May
:
April
:
March
:
over
:
over
:
over
:
over
2
:
:
:
April
:
March
:
April
:
March
Series 1- Post Offices
$ 6,359
$ 5,476
$ 8,786
$ 883
-$3,310
16.1%
- 37.7%
Series 1- Banks
17,904
18,780
24,327
- 876
- 5,547
- 4.7
- 22,8
Series 1- Total
24,263
24,256
33,112
7
- 8,856
0.0
- 26.7
Series 1- Banks
2,480
4,499
3,672
- 2,019
827
- 44.9
22.5
Series G - Banks
12,687
17,178
17,506
- 4,491
- 328
- 26,1
- 1,9
Total
$39,430
$45,933
$54,290
-$6,503
-$8,357
- 14.2%
- 15.4%
Office of the Secretary of the Treasury, Division of Research and Statistics.
May 4, 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
273
CONFIDE
is
UNITED STATES SAVINGS BONDS
Daily Sales - May, 1942
On Basis of Issue Price
(In thousands of dollars)
Post Office
Bank Bond Sales
All Bond Sales
Date
Bond Sales
Series I
Series I
Series I
Series G
Total
Series I
Series I
Series G
Total
May 1942
1
$ 3,219
$ 9,460
$ 1,479
$ 5,824
$ 16,762
$ 12,679
$ 1,479
$ 5,824
$ 19,981
2
3,140
8,444
1,002
6,864
16,309
11,584
1,002
6,864
19,449
Total
$ 6,359
$ 17,904
$ 2,480
$ 12,687
$ 33,071
$ 24,263
$ 2,480
$ 12,687
$ 39,430
Office of the Secretary of the Treasury, Division of Research and Statistics.
May 4, 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
274
May 4, 1942
3:50 D.M.
HMJr:
Hello.
Operator:
Mr. Sproul.
HMJr:
Hello.
Allan
Sproul:
Hello, Mr. Secretary.
HMJr:
How are you?
9:
Fine, thanks.
HMJr:
How's the thing going?
S:
I think it's going very well.
HMJr:
Well, I'm seeing the press at four o'clock.
What can I tell them?
S:
Well, I think you could tell them that the
outlook is that the subscriptions for the new
two per cent bond will be good, and that the -
although it's too early to tell on the two
and 8 half per cent, because that obligation
will be purchased largely by insurance com-
panies and others where it's necessary to
have 8 meeting of an executive committee and
where they have additional time anyway -
nevertheless, the character of the incuiries
and the indications are that there'll be a
substantial response to that issue, also,
and that it has taken place - it is taking
place without any real pressure on the out-
standing 2-1's, which, indicates that there's
a continuing market for those among the banks
and others who can't buy the new registered
issue.
HMJr:
What happened to the long 2-1's that they were
80 worried about?
5:
They haven't done much of anything. They're
now par 16-17. We bought about a million of
them, two million of them, earlier this morning
when there was a little pressure. It dried up
Regraded Unclassified
275
- 2 -
and there hasn't been any selling of them
all afternoon.
HMJr:
Well, then, your advice was pretty good.
S:
So far I think it was excellent. (Laughs)
Just as I was telling you about it.
HMJr:
(Laughs) Well, I just wanted to let you know
I recognized it.
S:
Thank you.
HMJr:
Well, can we close the 7-9?
S:
Well, I think you'll get a better indication
of that from some of the other districts,
because I think they're going to come in
relatively heavier than New York on those.
I should say you could, but I don't know what
the figures from the other districts are going
to look like, and we're going to be relatively
lighter and the other districts heavier than
usual I should say.
HMJr:
I see. Okay.
S:
But that's all to the good, and that was to
be expected, I think.
HMJr:
Thank you.
S:
All right.
HMJr:
Ah
S:
Yes.
HMJr:
All right.
S:
All right, sir.
HMJr:
Thank you.
S:
Good-bre.
276
May 4, 1942
3:55 p.m.
Operator:
Go ahead.
HMJr:
Hello.
Daniel
Bell:
Four hundred and seventy-four million.
HMJr:
From where?
B:
Since three o'clock.
HMJr:
Four seventy.
B:
Yes. And that's, two hundred and fifty-two
million of that was in New York.
HMJr:
I see.
B:
And that's lower than we've ever closed one,
and I wonder if we shouldn't wait until the
four o'clock report.
HMJr:
I think 80.
B:
Yeah.
HMJr:
I think 80.
B:
Well, that ought to be along about four-thirty.
HMJr:
I think we better wait. I'm seeing Will Hays
at four-thirty. I'll be here anyway until
a quarter of five or five-thirty.
B:
All right. Well, I'll telephone you just as
soon we get it.
HMJr:
Well, I tell you - do you get a report from
Chicago?
B:
Only got two hundred and twenty-two million
from all the other banks, because Continental
can't be in there - that's two hundred and
fifty million.
Regraded Unclassified
277
- 2 -
HMJr:
Why don't you call up Young on the phone
and find out.
B:
All right.
HMJr:
I'd call him up on the phone.
B:
All right. I'll do that right away.
HMJr:
If you please.
B:
All right.
278
May 4, 1942
3:57 p.m.
Randolph
Paul:
Hello.
HMJr:
Randolph.
P:
Yeah.
HMJr:
Good afternoon.
P:
Yes, sir.
HMJr:
I'm seeing the press at four o'clock. Is
there anything that I could tell them, or
should I just keep my mouth shut? Hello.
P:
Well, I'm just thinking.
HMJr:
I don't know what happened.
P:
Well, what happened this morning was that by
a very even vote they turned down our sug-
gestion that the capital stock tax be repealed.
HMJr:
Yeah.
P:
We're now talking about the post-war funds,
but I don't think I'd say very much about
that because it's very incipient as so far.
HMJr:
Yes.
P:
The discussion is very incoherent and incipient,
and I don't think I'd say much about that.
HMJr:
Yeah.
P:
You might express regret that they turned
down our proposals on the capital stock tax.
We asked that they put an extra one per cent
on the surtax and get rid of that rather cumber-
some nuisance tax.
HMJr:
No, I wouldn't want to comment on those things
unless you were here.
P:
No, I don't think - and in the second place,
Regraded Unclassified
279
- 2 -
I wouldn't criticize the committee either.
HMJr:
Well, what about what they've done 80 far
that we're running behind on our income?
P:
Well, we're running behind about five hundred
million on the corporate gross; but, of course,
against that must be offset - some say that
we'll get more on the individual taxes, so
that I should say the net was around three
hundred or three hundred and fifty million.
HMJr:
Well, do you think I ought to say anything
on that?
P:
Well, you might exoress some hope that they
won't fall behind on the individual.
HMJr:
Well, the trouble - then they'd say, "Where
would you raise it, Mr. Morgenthau?"
P:
Then you'd be up against the sales tax.
HMJr:
Yeah. I think I'd better simply say this,
that I'm watching the thing very closely.
I don't care to say anything this afternoon,
but I may have something to say later on.
P:
Yeah. Well, I think that's safe.
HMJr:
What?
P:
I said I think that's safe.
HMJr:
Well, I don't want to shoot from the hip on
this thing, because if I say something and
criticize Doughton at this time I mean, when -
when I get - I think whatever I say we should
weigh very carefully.
P:
Yeah, I do, too.
HMJr:
What?
P:
I do, too. I agree with you.
HMJr:
I mean - don't you?
280
- 3 -
P:
Yeah, I agree with you.
HMJr:
All right. I just wanted to make sure.
P:
Okay.
HMJr:
Thank you.
281
May 4, 1942
4:19 p.m.
HMJr:
Bob.
Robert
Patterson: Yeah.
HMJr:
This is & different kind of a call than I've
ever made before. Hello.
P:
Yeah.
HMJr:
I have a cousin by the name of Colonel George
C. Haas, H-a-a-s, of 63 Wall Street. He's a.....
P:
What 18 the name?
HMJr:
George C. Haas, H-a-a-s.
P:
Yeah.
HMJr:
Sixty-three Wall. He was a Colonel in the last
war, and if you'll look him up, you'll see that
he had a damn good record. He's about fifty-
four, I think, or fifty-five. I wrote Mr. Stimson
about it, and he turned me down. I was urging -
well, Haas will take, oh, he'll take most any-
thing. I mean, he's crazy to get in this, see.
He's a product of the last - First Plattesburg -
and if you'll look up his record you'll see during
the war he really was good.
P:
Yeah.
HMJr:
And here's a man crazy to do something. He'd
make 8. wonderful instructor, and it seems a
shame, really, not to use his services.
P:
Yeah.
HMJr:
He's really a soldier.
P:
Yeah.
HMJr:
And I say - well, Stimson turned me down in a
letter May 2nd. I'll send you over a copy of it,
BO if you want to see it.
282
- 2 -
P:
Yeah.
HMJr:
What?
P:
Yes, I would like to.
HMJr:
Supposing I send you over my letter to Mr.
Stimson and his turning it down.
P:
Well, I can find those here.
HMJr:
Can you?
P:
Yes.
HMJr:
Well - as I say, I wouldn't - I know that you
people can't take him for active service. I'll
take that for granted, but certainly as an
instructor in artillery, the man is really
good. He unfortunately gave up his Reserve
Commission three or four years ago. He was
a full Colonel.
P:
Yeah.
HMJr:
And he let it slide. That's his trouble.
P:
Of course, the Secretary already having acted
makes it rather difficult.
HMJr:
I know. Well, this is what he says, "I assure
you that this is not to be considered a permanent
rejection. Colonel Haas' qualifications have
been recorded," and 80 forth.
P:
Yeah.
HMJr:
He says it's not a permanent rejection. I
don't know who wrote the letter for Stimson,
but it doesn't look like his signature.
P:
(Laughs)
HMJr:
It doesn't.
P:
Well, all right, I'll take a look at it.
Regraded Unclassified
283
- 3 -
HMJr:
Do you mind?
P:
Not at all. Not at all. I'll look it up.
HMJr:
I say - I know it's sort of after the horse
is gone, but.....
P:
I'll look it up.
HMJr:
.....he is good material.
P:
Right.
HMJr:
Thank you.
P:
Right.
HMJr:
Will you let me know?
P:
Yes. Yes.
HMJr:
One way or the other.
P:
Yes, you bet.
HMJr:
Thanks.
P:
Good-bye.
284
May 4, 1942
4:55 p.m.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Hello.
Mr. J. L.
Houghteling: Lawrence Houghteling talking.
HMJr:
Go ahead.
H:
In the matter of the - that space problem
of the C.I.O.
HMJr:
Yes.
H:
I spoke to you about it Saturday.
HMJr:
Yes.
H:
It seems that Jesse Jones agreed to let them
have the ground floor of the - that building
HMJr:
Yeah.
H:
which 18 pretty badly broken un and the
RFC Mortgage Company were going to use for
storage space, which only had five thousand
feet and wouldn't do for them at all. They
told him so, and he said he'd talk it over
with Husbands, the head of the RFC Mortgage
Company, which he's doing now.
HMJr:
Good.
H:
And they asked if - they said they thought
a word from you would just turn the scale
if you were willing to do it.
HMJr:
Well, I don't want to do it tonight. If
nothing happens in the morning
H:
Yeah, all right.
HMJr:
I think - let me think about it.
285
- 2 -
H:
Yeah, fine. All right.
HMJr:
All right. Thank you.
H:
All right, sir.
HMJr:
Good-bye.
TREASURY DEPARTMENT
286
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE May 4, 1942
TO
FROM
Mr. Hase
Secretary SH Morgenthau
Subject: The Business Situation,
Week ending May 2, 1942.
Summary
(1) The general OPA ceiling order, which marks a drastic
step in wartime price control, has already begun to affect
retail prices. Various retail store chains have adjusted
prices to the ceiling levels to avoid a slow-up in sales, and
competition will doubtless compel others to reduce prices be-
fore May 18.
(2) Some slackening in retail sales had occurred in
advance of the OPA order. Department store sales in the week
ended April 25 were 13 percent above 1941, 8.6 compared with
an average gain of 26 percent in the four weeks of March.
Previous heavy stocking by consumers, particularly of cloth-
ing, was & contributing factor, as well as the earlier
Easter. Sales by men's clothing stores in March, for example,
were 78 percent higher than in March 1941.
(3) Prices of primary farm products, which are not
directly affected by the OPA ceiling order, continued to rise
in April, carrying the farm price index to a new war-period
high of 150, as compared with 146 in March. Costs of goods
bought also rose, and farm prices in April averaged 99 per-
cent of parity.
(4) Factory employment rose less than seasonally in
March, partly due to & further moderate decline in the number
of workers employed by the automobile industry. Factory pay-
rolls, however, showed a further gain of more than 2 percent
to a new record high. Estimated average weekly earnings of
factory workers also continued to rise, and in mid-March
stood nearly 24 percent above year-earlier levels.
(5) Despite the recent seasonal improvement in the flow
of steel scrap, the President of the Bethlehem Steel Company
predicts that the scrap problem will be worse next winter
than last. Ae a consequence, it is urged that nothing be
allowed to interfere with the expansion of facilities for
pig iron production.
287
- 2 -
General price control order to stem rising living costs
Dominating business developments last week was the OPA
general price ceiling order, instituted as one part of the
President's program to combat the rising cost of living. The
regulation will place ceilings on retail prices, effective
May 18, and on prices at other stages of distribution, effec-
tive May 11, all at maximum levels of March. The supplemental
rent control order, effective July 1, will extend control of
rents from the present coverage of areas housing 7 percent
of the country's population to areas housing 64 percent.
The steep rise since early 1941 in wholesale prices and
living costs, and their levels prevailing just before the
general price order was issued, are shown in the upper half
of Chart 1. Unless prices of farm products exempted from
direct control by the order continue to rise, the regulation
should have the effect of lowering the all-commodity wholesale
price index somewhat, as has been the experience in Canada.
It will be noted (lower section of Chart 1) that the all-
commodity index in recent weeks has risen somewhat above the
highest March level, recording a gain of 1.2 percent in the
week ended April 25 as compared with the level in the week
ended March 28.
Administrative problems
Major problems of administration are raised by the price
order. They include, among others, the alleviation of the
price squeeze on retail firms which stand to suffer from the
lag between retail and wholesale prices, and the devising of
a formula for use in pricing seasonal goods. As a means of
enforcing the retail ceilings, 350 "professional shoppers"
under the Bureau of Labor Statistics will make sample checks
of prevailing prices for comparison with the maxima recorded
in March. Additional shoppers will be trained to cooperate
with each of the 10,000 local price and rationing boards.
Independent food dealers protest price squeeze
Certain groups of retailers have taken strong exception
to the failure of the OPA to provide for the price squeeze
which will result from the delay of retail prices in catching
up with replacement costs. Plans for mass meetings to seek
relief have been announced in the press by the National
Association of Retail Grocers and the New York State Food
Merchants Association. Protests have been made also by the
National Retail Dry Goods Association.
Regraded Unclassified
288
- 3 -
Trade estimates of the lag between March retail food
prices and wholesale replacement costs range from 9 to 12 per-
centage points. This range would seem to be borne out by the
relative wholesale and retail price increases from January 1941
to March 1942, the period during which most of the rise in
living costs has occurred. (Refer to Chart 1, upper half.)
In that period the BLS wholesale price index for foods in-
creased 30.4 percent, whereas the food component index of the
BLS cost-of-living series, based on retail prices, increased
21.3 percent.
In issuing the order, the OPA admitted the existence of
a retail price lag, but stated that no single remedial formula
could be found, since the lag 18 neither uniform nor universal.
Remedial action by adjustments of manufacturers' and whole-
salers' prices, and other means short of raising retail prices
were promised. On the other hand, the OPA stated that retail
prices on some items have had a relatively greater increase
than wholesale prices; and that the various other costs of
retailers have not increased as rapidly as wholesale prices.
Government subsidies likely
Meanwhile, there are indications that the Government
will carry some of this burden through subsidies, as have
the British and Canadian Governments in their price control
programs. In establishing ceilings on coal prices, the OPA
announced last week that plans were being formulated with the
RFC to provide for increases in transportation costs, 80 as
to prevent retail prices from rising above the level in the
base period.
In the canned foods industry, prices paid for important
fruits and vegetables to stimulate this year's production
will make it difficult to maintain the retail price ceilings
effective under the new order without some form of subsidy.
Some stores adjusting retail prices now
Many stores, on the other hand, have acted quickly to
make their prices conform to the May 18 ceiling level. A
press report states that all Montgomery Ward & Company
stores and mail order houses will open for business today
with every price in agreement with the OPA order. The summer
"flyer" to be mailed this week, it was stated, will be priced
in strict compliance with the order, as will the general
fall and winter catalogue which will be issued in July.
Other companies in the retail, wholesale, and manufactur-
ing fields reported to have adopted the ceilings ahead of
schedule include the Kresge department store at Newark;
Regraded Unclassified
289
- 4 -
Butler Brothers, Chicago dry goods wholesalers; Kramer
Brothers, manufacturers and distributors of hosiery; and
Cluett, Peabody and Company, manufacturers of Arrow shirts.
Eastern Cooperative Wholesale, Incorporated, the largest
wholesale cooperative in the East, has announced immediate
adoption of the ceiling level, and has recommended similar
States. action to the 230 retail cooperatives which it serves in 11
Basic commodity prices hesitate
Prices of basic commodities were somewhat unsettled
last week, awaiting announcement and clarification of the
maximum price regulation. The net result was a further
levelling out of the two basic price indexes. (See Chart 2.)
A deoline in hog prices brought the average down to $14.02
from the 16-year high of $14.40 three weeks ago. Steer
prices also declined noticeably. Butter prices, on the other
hand, continued their broad rise, buoyed by a renewal of
Government buying.
Grain prices advanced moderately, wheat rising in response
to announcement of the Department of Agriculture's loan rate
for the 1942 crop. The basic rate will be $1.14 a bushel at
the farm, 16 cents higher than the rate for the 1941 crop. The
actual loan rate for No. 2 hard winter wheat at Kansas City
would be $1.27, compared with a price range of $1.12 - $1.19
on Friday.
The BLS all-commodity index, covering wholesale prices
of nearly 900 commodities, rose 0.3 percent in the week ended
April 25, to 98.6. The index has advanced 31.5 percent since
the pre-war month of August 1939.
Higher prices paid farmers in April; parity prices up
Average prices received by farmers as of April 15 were
substantially above those of March, exceeding even the high
January levels. The weighted average price index of the
Department of Agriculture advanced to a new war-period high
of 150, as compared with 146 in March. It was 36.4 percent
higher than in April 1941.
Prices paid by farmers on April 15 also were somewhat
higher than in March. As a net result, prices of farm pro-
ducts averaged 99 percent of parity, 2 points higher than in
March, and the same as in February. The index of farm wages,
which are not included in the index of prices paid, advanced
6.0 percent in April.
Regraded Unclassified
290
- 5 -
The price movements for farm products as a group and for
important individual commodities in the first four months of
1942, and in the full years of 1940 and 1941, are shown in
Chart 3. The April rise for all farm products reflected
marked price increases for meat animale, cotton, and fruit.
Prices for truck crops also advanced strongly.
Employment and payrolls higher
Factory employment rose slightly in March, but the gain,
amounting to less than 1 percent, was less than seasonal.
One factor tending to retard the normal seasonal rise was a
further moderate decrease in employment in the automobile in-
dustry for the fourth consecutive month. As a result, employ-
ment in automobile plants in March was 182,000 below year-
earlier levels.
On the other hand, total civil non-agricultural employ-
ment in mid-March was more than 2,500,000 higher than in the
corresponding period of 1941, and approximated 40,300,000.
Since March 1941 all states except Michigan have shown gains
in non-agricultural employment. The largest gains were shown
by Washington and Arkansas, with increases of 27 and 24 per-
cent, respectively.
Due in part to the dislocations caused by conversion of
production facilities such as in the automobile industry,
total factory employment in March was still below the peak
reached last October. In contrast, however, factory payrolls
have continued to rise substantially and in March reached a
new record high. (See Chart 4.) Thus, since last October
factory payrolls have risen 9 percent in the face of a
slight deoline in employment. This has been due to longer
working hours, overtime payments and higher wage rates of
those employed.
Average weekly earnings of factory workers have con-
tinued to expand, and for mid-March they are estimated at
nearly 24 percent above year-earlier levels and 47 percent
above the pre-war levels of August 1939. (Refer to Chart 4.)
The extended upswing in factory workers' incomes has been an
outstanding factor in the rising tide of national income pay-
ments since the Defense program got under way. The President,
in his message to Congress, listed the stabilization of
worker's remuneration as one of the cardinal objectives of
present national economic policy. However, it remains to be
seen whether the program thus far envisaged for wage stabili-
zation will in fact achieve the objective indicated. A
great deal would appear to depend on the attitude of the War
Labor Board.
Regraded Unclassified
291
- 6 -
Department store sales gain narrows
After running 26 percent above year-earlier levels in
March, department store sales in the 4 weeks ended April 25
were only 9 percent above the corresponding period in 1941,
Sales during the latest period available, the week ended
April 25, were 13 percent above year-earlier levels. (See
Chart 5.) This gain was less than the intervening advance in
prices, thus indicating a moderate decrease in the unit volume
of goods sold.
While last week's sales figures are not yet available,
Dun and Bradstreet reports that the recent price freezing
order had little effect on retail trade, although a decided
lull 1s said to have occurred in advance wholesale buying.
Some press reports over the weekend, however, indicated that
an appreciable slackening in retail sales had occurred.
Clothing stores led March retail sales gains
Some slackening of retail buying, particularly of cloth-
ing, could probably have been expected shortly in any event,
in view of the unusually heavy volume of sales in March by
certain types of stores. The increases in sales of inde-
pendent retail stores in March 1942 over March 1941, based on
Census Bureau figures, are shown in Table 1, attached. Al-
though all store groups except motor vehicle dealers and
filling stations showed gains, the extent of the gains varied
widely. Heading the list were men's olothing and furnishing
stores, with a gain of 78 percent. Next in order came family
clothing stores and shoe stores, with increases of 43 and 37
percent respectively. At the other end of the list, motor
vehicle dealers' sales were 75 percent below year-earlier
levels as a result of the production restrictions and
rationing schemes in effect. This served in large part to
reduce the gain to 12 percent for all groups.
Further steel scrap difficulties predicted
Although the flow of steel scrap has shown seasonal in-
provement, and has contributed to the recent moderate gain
in steel operations, the President of the Bethlehem Steel
Company last week predicted that the steel scrap problem
would be even worse next winter than last. Consequently it
was emphasized that the steel industry will be dependent more
than ever on an increase in pig iron production to maintain
steel ingot output.
Regraded Unclassified
292
- 7 -
As a result of this situation, the hope was expressed
that nothing would be allowed to interfere with the expansion
of facilities for the production of pig iron. The latest
development in this connection occurred last week, when a new
blast furnace was blown in by the Tennessee Coal and Iron
Company, which will increase that company's pig iron capacity
by 17 percent. Indicative of the heavy demand for steel
scrap, consumption of scrap rose to a new high of 4,840,000
tons in March -- an increase of about 4 percent over the
corresponding month in 1941.
233
Table 1
Retail sales by selected independent store groups
(Percent change, March 1942 over March 1941)
Percent change
Type of store
March 1942
over March 1941
Men's clothing and furnishing stores
78
Family clothing stores
43
Shoe stores
37
Hardware stores
34
Women's ready-to-wear stores
32
Dry goods and general merchandise
28
Heating-plumbing equipment dealers
27
Department stores
26
Sporting goods stores
26
Jewelry stores
26
Liquor stores (packaged goods)
25
Radio and musical instrument stores
22
Lumber-building materials dealers
20
Furniture stores
19
Eating and drinking places
17
16
)rug stores
Food stores
12
Household appliance dealers
8
- 2
Filling stations
Motor-vehicle dealers
- 75
+ 12
Total
COMMODITY PRICES AND COST OF LIVING
1926=100
PER
CENT
PER
CENT
Monthly
100
100
West Ented
April 25
96
96
92
92
88
88
Cost of Living, N.I.C.B.
84
84
80
80
76
889 Commodities, B.L.S.
76
72
1936
1937
1938
1939
1940
72
1941
1942
PER
CENT
PER
Weekly
CENT
106
106
104
104
102
102
100
100
889 Commodities, B.L.S.
98
98
96
96
94
94
92
92
90
90
28 Basic Commodities, B.L.S.
88
88
86
86
84
OCT.
NOV
DEC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
84
1941
JULY
AUG
SEPT.
OCT
NOV
DEC.
1942
294
- of the Secretary of the Treasury
- of - - -
P-196-0
Regraded-Unclassified
MOVEMENT OF BASIC COMMODITY PRICES
AUGUST 1939=100
PERCENT
PERCENT
PERCENT
PERCENT
Weekly Average
Daily
220
220
200
200
200
200
190
12 Foodatuffa
190
12 Foodstuffs
180
180
IBO
180
160
160
170
170
140
140
160
16 Row Industrial
160
16 Row Industrial
Materials
Materials
120
120
150
150
100
100
140
140
JUNE
AUG.
OCT.
DEC.
FEB.
APR.
JUNE
AUG.
OCT.
DEC.
21
29
,
all
21
28
4
"
-
25
,
#
#
=
so
a
-
1941
1942
FEB
MAR.
APR.
MAY
JUNE
1942
PERCENTAGE CHANGE FOR INDIVIDUAL COMMODITIES
Aug. 1939 to May I, 1942
Dec. 6. 1941 to Apr. 24. and May I. 1942
PERCENT
Cottonesed Oilisaax
PERCENT
12 Foodstuffs
12 Foodstuffs
+40
Hoge asx
Tallow 118.7%
120
Hoge 117.4%
Lard 110.1%
+30
Cocoo MN.7X
Barley 906%
Com 86.6%
Lard 17.7%
80
Coffee 77.2%
+20
Barley 120%
Wheat 444X
Com 12.9%
Butter 648%
Butter 12.3%
Steers 62.1%
Steens 122%
+10
Tollow 7.9%
40
Sugar 6.9%
Cottonwed Oil 6.2%
Sugar 30.8%
o
Wheat 1.1%
Coffee 0%
Cocoo -.#%
0
AUA
-10
Mayl
Dec.6.
Apr. 24
May I
1939
1942
1941
1942
1942
PERCENT
PERCENT
16 Raw Industrial Materials
16 Raw Industrial
Materials
+40
Flameed 34.0%
120
Cotton 118.6x
Shelling s
Burlap 100.4X
+30
Print Cloth aux
Zinc 40.5%
Cotton 15.7%
80
Flaresed 64.8%
+20
Load IIIX
Wba/ 47.1%
Print Cloth 4.7x
Hides 36.7X
Roain LOX
St. Scrap,dom. JS.FX
Rubber 34.6X
+10
tZino 2X
Albain 04/1
0% Change
40
Load 29.0%
Shelloc. Tin,
St. Scrapesp. 17.9%
Copper
o
Hides, Silk,
Copper 16.0%
St. Scrap dom.
Silk /EXX
Rubber,
Tin 4.6%
St. Scrapexp.
o
-10
Aug
May I
Dec.6.
Apr. 24
May
Wbo/ -1.9%
1939
1942
1941
1942
1942
Buniqp -4.5%
"Black lines indicate commodities under price ceilings or other centrol
295
- di - family of -
-
I
P-294-11
Regraded Unclassified
AVERAGE PRICES RECEIVED BY FARMERS: GRAPHIC SUMMARY FOR THE UNITED STATES
INDEX NUMBERS ( AUG. 1909-JULY 1914=100)
175
175
175
ALL FARM PRODUCTS
GRAIN
COTTON AND COTTONSEED
150
150
150
1941
125
1942
125
125
100
100
100
1940
PERCENT
75
PERCENT
75
PERCENT
75
175
MEAT
DAIRY PRODUCTS
CHICKENS AND EGGS
ANIMALS
150
150
150
125
125
125
100
100
100
75
75
J.
F
M
A.
M.
J.
J
A.
1.
o
N.
D.
J.
F.
M.
A.
M.
J.
J.
A.
5.
o
N.
D.
J.
F.
M.
A.
1
J.
J.
A.
5.
0.
N.
D.
ACTUAL PRICES
90
140
180
CORN
WHEAT
RICE
80
120
150
CENTS PER BUSHEL
1941
1942
70
CENTS PER BUSHEL
100
120
64.2
88.4
60
80
CENTS PER BUSHEL
90
81.3
1940
50
60
60
20
COTTON
WOOL
BUTTERFAT
CENTS PER POUND
PER POUND
40
12.4
30
CENTS PER POUND
40
15
30
10
26.3
5
20
18.3
12
HOGS
12
20
PER 100 POUNDS
CENTS PER DOZEN DOLLARS PER POUNDS CENTS
BEEF CATTLE
LAMBS
10
10
100
8
DOLLARS PER 100 POUNDS
10
8
8
7.32
6
6
6
5.21
5.87
CENTS PER POUND DOLLARS
4
4
4
CHICKENS
EGGS
APPLES
16
40
14
30
CENTS PER BUSHEL
110
96.0
90
12
21.5
11.4
20
10
70
J.
F.
M
A.
M.
J.
J.
A.
5.
o
N.
D.
J. F. M A. M. J. J. A. $ o. N. D.
J. F M A. M J. J. A. 5. o N. D.
YEAR AVERAGE. AUGUST 1909 JULY 1914
296
Regraded Unclassified
FACTORY EMPLOYMENT, PAYROLLS AND WAGES
FIRST 6 MONTHS OF 1939 = 100, UNADJUSTED
1939
1940
1941
1942
PER
PER
CENT
CENT
220
220
200
200
180
180
PAYROLLS)
160
160
Est.
140
140
EMPLOYMENT
120
C
120
100
100
AVERAGE WEEKLY EARNINGS
OF FACTORY WORKERS
80
N
M
80
J
M
M
J
$
J
M
J
$
N
J
M
E
J
5
If
J
M
M
J
$
N
1939
1940
1941
1942
SOURCE: B.L.S.
297
to Chart
Office of the Secretary of the Treasury
Division of Research and Statistics
C - 414
Regraded Unclass
Chart 5
298
DEPARTMENT STORE SALES
1935 - '39 . 100, UNADJUSTED
JAN.
MAR.
MAY
JULY
PER
SEPT.
NOV.
CENT
PER
CENT
Weekly
260
260
240
240
220
220
200
200
180
180
160
160
140
140
120
120
'41'
'42
100
100
80
80
'40
60
60
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
Office of the Secretary of the Treasury
I . 1 1 I
C - 390
TREASURY DEPARTMENT
299
INTER OFFICE COMMUNICATION
DATE May 4, 1942
TO
Secretary Morgenthau
FROM
Mr. Foley
Subject: Experience of Foreign Funds Control Representatives in
Latin America
Three Treasury representatives have recently returned from Latin
America, where, in conjunction with representatives of the State
Department and Board of Economic Warfare, they worked with our diplo-
matic and consular missions in an effort to ascertain to what extent
our program of economic warfare is succeeding in Latin America. The
reports of these three representatives (namely, Norman E. Towson who
visited the countries on the east coast of South America - Venezuela,
Brazil, Argentina, Uruguay and Paraguay; James H. Mann who visited
Central America - El Salvador, Honduras, Nicaragua, Costa Rica and
(
Panama; and B. E. L. Timmons who visited Mexico and Cuba) indicate
the following:
(a) Experience of mission in South America.
With respect to the countries visited in South America,
it was observed that with the notable exception of Argentina,
they had all adopted decree laws designed in form to carry
out the objectives of economic warfare outlined in the reso-
lutions adopted at the Rio conference. It was perfectly
clear, however, that the steps being taken to administer and
implement these decrees were such as to make the decrees sub-
stantially ineffective. Contributing factors were the absence
of any expert technical knowledge on the part of the respective
government officials administering the decrees, lack of cap-
able personnel available to administer the decrees (including
the lack of satisfactory persons who could act as supervisors
of Axis firms), and obvious intention (particularly in the
case of Paraguay) to withhold further action pending the dis-
closure of what further reward might be expected from this
country. Argentina, of course, for political reasons designed
to maintain strict neutrality" and due to lack of good faith,
has taken no constructive action and has, in many instances,
collaborated with or at least condoned acts designed to aid
the enemy.
Regraded Unclassified
- 2 -
300
Our Proclaimed List program has of course had some
favorable effect in its relation to the activities of
Axis firms in these countries. However, it is clear that
our program of economic warfare in Latin America will not
be really successful unless and until we obtain the whole-
hearted cooperation of the Latin American countries, in
adopting and effectively administering real local control.
We are not getting this wholehearted cooperation from any
of the South American countries visited.
(b) Experience of mission in Central America.
The Central American countries, with the possible
exception of Panama, are not aware that measures taken
to carry out a program of economic warfare against the
Axis are designed to protect their own security. Rather
they have the attitude that such measures are being taken
merely as a favor to the United States. Furthermore, these
countries feel that they have complied with the provisions
of the resolutions adopted at the Rio conference, recommend-
ing severance of financial and commercial transactions with
the Axis powers, by the mere adoption of laws or decrees.
It appears that little thought is given to administration.
Of course the local government officials gave glowing re-
ports concerning the administration of their laws. However,
investigation did not bear out such reports.
It was the observation of our Central American Mission
that many of the local governments, after enacting measures
designed to effectuate the purposes of the Rio resolutions,
were unable to determine just what steps should be taken to
put such measures into effect, and that our diplomatic missions
were unable to give them much guidance concerning the steps
which should be taken.
The local government officials appeared reluctant to
resort to rigorous measures to break the influence and acti-
vities of those persons known to be engaged in activities
inimical to our war effort. There appeared to be considerable
reluctance to adopt the "vesting" technique or the "forced
sales" method to eliminate these undesirable persons from
their economy.
Regraded Unclassified
- 3 -
301
(c) Experience of mission in Mexico
The mission to Mexico found that the Proclaimed List was
having little or no effect on the large number of German firms
included therein. Many of these firms are large and play an
important part in Mexican economy. Because of their economic
power and active support of the Axis cause, it is essential
that they be controlled and their power broken. The Mexican
government has in a few cases installed interventors in such
firms but there is no indication that such action has resulted
in any effective control of the activities of such firms. It
is the belief of the American Embassy in Mexico that the Mexi-
can government has only installed interventors in such firms
for the purpose of making representations to have such firms
deleted from the Proclaimed List. It should be remarked here
that the Embassy in Mexico had little or no knowledge as to
the efficacy of the Proclaimed List in general and the re-
porting by the Embassy of individuals and firms for addition
or deletion from the Proclaimed List has been very inadequate.
It was the opinion of both the Embassy and the travelling
mission that the local freezing decree promulgated by the Mexi-
can government has had practically no effect. To start with,
the decree is far too narrow in scope proporting to control
only banking transactions (in fact only approximately 1,000,000
pesos - $200,000 - has been frozen). Of more importance, the
Mexican government has no administrative machinery at its dis-
posal at the present time to effectively administer the in-
adequate decree that has been issued.
th 48 *
As an overall observation it should be emphasized that
our diplomatic and consular missions do not have personnel
with sufficient experience and background in the field of
economic warfare so as to be able to render real assistance
and advice to the local governments of the Latin American
republics in connection with the adoption and carrying out
of real local controls.
What is needed immediately is to have men on the spot in
these countries who will be able to obtain the information
needed, to see what is going on, to render such technical and
other assistance to these countries as may be needed, and, what
is more important, to spur these countries on and affirmatively
furnish them with real ideas as to what to do.
9.1.7L
Regraded Unclassified
302
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 4, 1942
TO
Secretary Morgenthau
Mr. Kamarck
FROM
Subject: Shipment of Planes to British Forces, Week Ended
April 28, 1942
1. In the week ending April 28, 1942, a total
of 110 planes of all types (84 combat planes) were
shipped to British forces.
2. Except for the movement of 21 pursuit planes
to the British forces in the Pacific, all of the
combat planes leaving the United States in this week
went to the United Kingdom.
3. Shipments of planes to the British in 1942
have now crossed the 2,000 mark. The United Kingdom
received over half of the combat planes (55 percent),
or a total of 916; the Middle East received a fifth
(22 percent) and the Pacific received a sixth (16
percent). The other combat planes (7 percent of the
total) went to Canada and India. Practically all of
the trainers (313 out of a total of 321) were sent to
Canada.
Regraded Unclassified
- 2 -
303
Table A - Shipments by Area
Week
Total shipped
Total shipped
Ending
in 1942
since
Apr.28,1942
to date
Jan. 1, 1941
To the United Kingdom
Light and medium bombers
35
225
1,386
Heavy bombers
10
45
149
Naval patrol bombers
0
8
110
Pursuit
18
579
890
Army cooperation
0
59
90
Trainers
0
0
24
Total to the United Kingdom
63
916
2,649
To the Middle East
Light and medium bombers
0
192
522
Heavy bombers
0
0
5
Pursuit
0
166
1,014
Army cooperation
0
12
12
Trainers
0
8
150
Total to the Middle East
0
378
1,703
To the Canadian Forces
Light and medium bombers
0
32
200
Heavy bombers
0
1
1
Naval patrol bombers
0
23
31
Pursuit
0
30
72
Trainers
26
313
1,554
Total to the Canadian Forces
26
399
1,858
To the British Pacific Forces
Light and medium bombers
0
121
216
Naval patrol bombers
0
0
27
Pursuit
21
148
316
Trainers
0
0
105
Total to Pacific Forces
21
269
664
To the British Indian Forces
Pursuit
o
40
40
Total to Indian Forces
0
40
40
Totals
Light and medium bombers
35
570
2,324
Heavy bombers
10
46
155
Naval patrol bombers
0
31
168
Pursuit
39
963
2,332
Army cooperation
0
71
102
Trainers
26
321
1,833
Grand Total
110
2,002
6,914
Regraded Unclassified
- 3 -
304
Table B - Shipments by Types
Week
Total shipped
Total shipped
Ending
in 1942
since
Apr.28,1942
to date
Jan. 1, 1941
Bell Airacobra
4
311
465
Boeing B-17
2
11
31
Boston III
0
5
29
Brewster Buffalo
0
0
: 168
Cessna Crane I-A (AT-17)
5
36
36
T-50
o
86
700
Consolidated Catalina
o
31
168
Liberator
8
35
124
Curtiss Kittyhawk
21
348
730
Tomahawk
o
0
544
Douglas Boston I and II
o
0
82
Boston III
0
0
410
Fairchild 24 R-9
o
61
83
Glenn Martin Baltimore
0
195
263
Maryland
0
0
150
Grumman Martlet II
0
45
86
Lockheed Hudson
14
267
1,237
Lightning
0
3
3
Ventura I
0
12
12
Ventura Bomber
19
85
85
North American B-25B
2
6
6
Harvard II
0
51
948
Mustang
14
256
336
Pitcairn Autogiro
0
0
5
Stearman PT-27
21
148
149
Vought-Sikorsky Chesapeake
0
0
50
Vultee Stinson 0-49
0
10
14
Grand Total - All Types
110
2,002
6,914
Regraded Unclassified
- 4 -
305
Table C - Plane Shipments to the British by Weeks
Week
Light and
Heavy
Naval
Army
Ended
medium
bombers
patrol
Pursuit
Coopera-
Trainers
Totals
bombers
bombers
tion
Weekly average
of shipments
in 1941
36
2
3
28
1
30
100
January 6,1942
24
0
0
5
30
4
9
72
January 13,1942
3
58
0
42
105
January 20,1942
8
0
0
14
0
60
82
January 27,1942
24
0
1
100
5
13
143
February 3,1942
9
0
3
10
4
4
30
February 10,1942
33
0
3
59
0
4
99
February 17,1942
12
o
2
41
7
0
62
February 24,1942
33
0
2
86
7
1
129
March 3, 1942
26
0
1
80
6
0
113
March 10, 1942
29
2
0
78
1
0
110
March 17, 1942
34.
1
0
94
8
0
137
March 24, 1942
94
9
12
79
0
84
278
March 31, 1942
49
1
0
58
4
10
122
April 7, 1942
69
2
0
8
4
5
88
April 14, 1 942
55
7
0
86
6
29
183
April 21, 1942
55
11
0
43
15
34
158
April 28, 1942
35
10
0
39
0
26
110
Total shipments
since Jan. 1,1941
to date. *
2,324
155
168
2,332
102
1,833
6,914
# These totals include a few aircraft shipped prior to March 17, 1942, which are not listed in the
weekly figures. Due to a mistake by the source of the data, Lend-Lease aircraft flight deliveries
were not included in the weekly statements. The correction has now been made in the totals.
Regraded Unclassified
306
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 4, 1942
TO
Secretary Morgenthau
FROM
Mr. Kamarck
Subject: Japanese Pilot Supply
(This memorandum is based on conferences with Colonel
Dusenberry, Japanese section of Military Intelligence, and
Major Moore, Japanese section of Air Intelligence, and
material secured from: the U.S. War Department's "Handbook
on Japanese Military Forces"; U.S. General Staff study,
"Survey of the Far East"; the British air magazines, "The
Aeroplene" and "Flight"; Max Werner's "Military Strength
of the Powers"; and articles by Lucien Zacharoff in
"Aviation".)
Conclusion
It is generally agreed that the Japanese supply of
pilots 1s large enough to man their limited output of air-
planes. The bottleneck in the Japanese air force is in the
small production of raw materials used in building planes.
1. The Japanese are believed to have had around 10,000
oilots on December 7, 1941. Training of pilots has recently
been speeded up from 1,000 to over 3,000 a year. The losses
of pilots in the war to date have been less than the number
of new pilots trained. The Japanese Air Force, therefore,
has more pilots now than at the beginning of the war.
2. In order to expand the program, the training period
has been curtailed from almost two years to less than a
year. As a result, the new pilots are not A8 good as the
earlier-trained pilots. A similar deterioration in quality
has resulted in the American Air Force for the same reason.
3. The Japanese differentiate between their earlier
and later-trained pilots. The Japanese pilots are separated
into two classes, Division I and Division II. The Division
I pilots number 1,500 and are the Japanese crack pilots.
Each of these men usually has had four years of combat
experience in China and displays high combat ability.
Division II pilots are used for the less vitally important
missions and do not compare in ability with the Division I
men.
Regraded Unclassified
307
- 2 -
4. The Japanese should not have any difficulties in
manning their limited output of airplanes. According to a
U.S. Census study, both Germany and Japan have 11,000,000
males in the age-group, 18 - 35, while the Germans have had
to provide pilots for an air arm triple the size of the
Japanese air force. There is no reason to believe that
the proportion of Japanese who can make good pilots 1s much
lower than that of any other race. From combat experience,
our pilots agree that the Japanese have earned respect as
good fighters.
5. The Japanese have shown good staff-work in their
campaigns. It is not likely that they would produce more
planes than they would produce pilots to fly them. This is
especially true since the Japanese airplane production is 80
small in relation to population.
6. If the Japanese were confined to Japan, the necessary
encroachment by airfields on the small amount of arable land
available might result in a limitation on the size of the
air force. However, with the free use of the broad level
plains of Manchuria for training schools, it is not likely
that limitations of space would constitute a bottleneck.
308
MAY 4 1942
Dear Dr. Soong:
Reference is made to your letter of
April 23, 1942 enclosing telegram from
Dr. H. H. Kung dated April 22, 1942.
I approxiate your forwarding Dr. Kung's
telegrem to se and pointing out the changes
in the titles of the two new accounts.
Sincerely yours,
(Signed) H. Morganthau, Jr.
Secretary of the Treasury.
Dr. T. V. Boong,
Minister for Foreign Affairs,
Republie of China,
Chinese Embassy,
Washington, D. c.
By Measures Simmons 5:00
Iff/efe
file & Dr whete
Photo file n.m.c.
4/28/42
Return to Secy's office
Regraded Inclassified
CONFIDENTIAL
MINISTER FOR FOREIGN AFFAIRS
REPUBLIC OF CHINA
April 23, 1942
Dear Mr. Morgenthau:
I have received the enclosed telegram from Dr. H. H.
Kung for you in reply to your telegram of April 15th, and hasten
to convey this to you.
May I bring to your attention the fact that Dr. Kung
in his telegram refers to the two new accounts 86: "The Chinese
National Government Allied Victory U. S. Dollar Bonds Account"
and "The Chinese National Government 11. S. Dollar Sevings
Certificates Account", whereas in your telegram of April 15th
these accounts were designated 851 "The Chinese National Government
Allied Victory U. S. Bonds Account" and "The Chinese National
Government U. S. Savings Certificates Account."
Yours sincerely,
tatring
Enclosure
The Honorable
Henry Morgenthau, Jr.
Secretary of the Treasury
Regraded Unclassified
CONFIDENTIAL
TELEGRAM FROM DR.H. H. KUNG FOR SECRETARY MORGENTHAU
DATED CHUNGKING, APRIL 22nd.
I thank you for your messuge of April 16th, which has been
forwarded to me by Dr. T. V. Soong. I sum grateful thet, in accordance with
our request and pursuant to our agreement of March 21st, you have transferred
$200,000,000 to the Federal Reserve Bank for credit to an account opened
and maintained by the Federal Reserve Bank as fiscal agent of the United
States, in the name of the Central Bank of China as fiscal agent of the
Government of the Republic of China, and that, in accordance with our request,
you have directed the Federal Reserve Bank to open two new accounts designated
follows:
"The Chinese National Government Allied Victory U. S. Dollar Bonds
Account" and "The Chinese National Government U. S. Dollar Sevings Certificates
docount".
I have the honor to confirm the+ your understanding as stated by
the following two paragraphs is correct:
(a) The Minister of Finance her desirented the Central Bank of
China as the agency of the Government of the Republic of China in whose name
fiscal agent of China an account or accounts will be opened in the Federel
serve Bank of New York to which transfers will be made from the credit
tablished on the hooks of the Treasury in the name of the Government of the
spublic of China: and
(b) That the Minister of Finance has designated the Central Benk
China as the agency which is authorized to draw upon and to give all ma-ner
instructions respecting such an account or accounts.
Regraded Unclassified
- 2 -
I have thr honor further to confirm that all the accounts mentioned
above are established pursuant to Article I of the agreement of March 21st,
and that the Central Bank of China is authorized to draw upon and to give all
manner of instructions respecting these accounts.
As requested in the concluding paragraph of your message, I beg to
state that the request in my telerram of March 27th was made in view of
possible cases where domestic banks micht, upon the maturity of the bonds and
certificates, effect repayment in fani in accordance with the wishes of the
holder. In such cases, the equivalent amount in U. S. dollars should be paid
upon request from the accounts with the Federal Reserve Bank to the Chinese
Government's fiscal agent for the reimbursement of domestic banks effecting
such payments.
Regraded Unclassified
312
C o PY
May 4, 1942
To:
Mr. Livesey, State Department
From:
Mr. H. D. White, Treasury Department
Will you please send the following cable to Harold
Glasser in Quito, Ecuador:
YOUR RETURN BY PLANE MAY NINETEENTH IS SATISFACTORY.
FRIEDMAN'S TRANSFER TO PUBLIC SIXTY-THREE ON MAY FIFTEENTH
IS BEING REFERRED TO THE GENERAL COUNSEL'S OFFICE.
FAS:esh
Init. by HDW
5/4/42
COPY:lap-5/4/42
313
TELEGRAM SENT
PMV
May 4, 1942
This telegram must bE
paraphrased before bEing
2 p.m.
communicated to anyone
other than a Governmental
agency. (BR)
AMEMBASSY,
QUITO (ECUADOR)
293
FOR GLASSER FROM WHITE.
QUOTE. Your return by plant May 19th is satis-
factory Friedman's transfer to Public 63 on May 15th
is bEing referred to the GENERAL CounsEl's office.
HULL
(FL)
FD:FL:BNcB
Regraded Unclassified
314
C
0
P
I
BRITISH EMBASSY,
By Safe Hand
WASHINGTON, D.C.
T.F. 5.
May 4th, 1942.
Dear Dietrich,
I thought I would send you a special
copy of our memorandum BIN 15640/42, seeing that the
writer from Copenhagen on March 16th, 1942 desires to
start up a gift service with Greenland. The letter was
condemned by our eenscrship.
Yours sincerely,
(Sgd.) H. W. Auburn
Mr. Frank Dietrich,
U.S. Treasury Department,
Stabilization Office, Room 279,
Washington, D.C.
HWA:YD
Copy:ime
5/6/42
315
C
0
P
Y
May 2nd 1942.
BIN. 15640/42
It is understood from a delicate source that Gave -
Telegram A/S, Tordenskjoldsgade 3, Copenhagen K, Denmark wrote
in Danish on 16th March 1942 to Kolonib Estyrer N. Binzer,
Godhavn, Greenland,
Writers wish to draw addressees' attention to their
Gift service; orders for gifts are now dealt with exclusively
by post and can be sent by senders to writers, and it is
writers' hope that it will be possible to do this with Green-
land. Payments are to be made telegraphically.
A list of Standard Gifts which are always available
is given as follows - Flowers, Chocolate, Perfume, Silver
Spoons, China, Furs, Dresses, Linen, Cooking utensils, Hardware,
Radio Apparatus, Jewellery, Umbrellas, etc.
Writers ask addressee to circulate this information
and they will as before, see that every order is satisfactorily
carried out.
Attached also are similar letters from writers.
To 1.
Kolonibestyrer H. Dan Moller,
2.
#
(Egedesminde, Greenland.
(Aage Knudsen, Jacobshavn,
Greenland.
3.
.
S.A. Andersen.
Julianehaab, Greenland.
4.
I
T.H. Hedemann
Godthaab, Greenland,
5.
Telegrafbestyrer Johs. Nielsen.
Ivigtut, Greenland.
Note:- It appears that writers are acting as agents for
some other firm.
"H"
Copy:ime
5/6/42
316
LM
ILAIN
London
Dated May 4, 1942
Rec'd 5:14 p.m.
for
Secretary of State,
Washington.
2363, Fourth.
Department's 1468, April 8, 12 midnight and sub-
sequent.
American bankers here indicate that they have En-
countered considerable delay in the replacement of
individual checks drawn on the Treasurer of the United
States and cashed locally as & commercial transaction
which have been lost at SEA due to EnEmy action. They
inquire if it would bE possible to clear such checks
through the Embassy in somewhat the same manner as SET
forth in point two of the Treasury's suggested procedure
for checks negotiated by disbursing officers acting in
their official capacity EXCEPT that the telegram to
Treasury and payment to appropriate banks in the United
States would not bE applicable. If Department and
Treasury so desire, Embassy could establish a procedure
for accepting such checks and transmitting them under
separate despatch.
WINANT
CSB
Regraded Unclassified
317
MJL
GRAY
Bombay
Dated May 4, 1942
Rec'd 8:52 a.m.
Secretary of State,
Washington.
309, May 4, 1 p.m.
Department's 68, to Calcutta.
Total amount of United States Treasury
checks cashed by National City Bank of New York
at Bombay and delivered to this Consulate is
$1,111.70.
INFORM TREASURY.
DONOVAN
RR
318
May 4. 1942
Mr. Livesey
Mr. 9. V. Dell
wall yes please read the following cable to the American Consul.
Calcutta:
"Free Treasury.
Reference your No. 302, April 24, 4 p.m.
In view of matters nov under consideration the Treasury
.... not concider 10 advisable to extend check precedure. For
your information National City Bank of See York, Benbay, has
procedure for both checks and U. s. currency and Recerve Bank
of India, has procedure for U. s. currency."
14/5/92 - 2
Regraded Unclassified
319
C
o
P
Y
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
May 4, 1942
FD
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and trans-
mits herewith paraphrases of telegram No. 137, dated
May 3, 1942, from the American Legation, Tehran, Iran,
coneerning British purchases of Iranian rials.
Telegram No. 127 from Tehran under date of April
29 was transmitted to the Secretary of the Treasury in
this Department's letter of April 30, 1942.
Enclosure:
From Legation, Tehran,
No. 137, May 3, 1942.
Copy:ime
5/4/42
Regraded Unclassified
320
C
0
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, Tehran, Iran.
DATE: May 3, 1942, noon,
NO.: 137
The following is an urgent message.
The legation refers to its telegram No. 127, noon, under
date of the 29th of April.
An informal and tentative agreement has been reached by
the Iranian Government and the British Legation acting under
instructions. This agreement provides that the Iranians will
guarantee the supply of rials which will be issued against
holdings of sterling. It also provides that the British will
convert Iranian sterling into gold to meet Iranian imports
payable in dollars. The British are also to convert into
gold 35% of the remaining sterling holdings of Iran. The
rate of exchange is to be fixed at 128 rials per pound and
32 rials per dollar.
The plan was approved last night by the Iranian Council
of Ministers. The Council, however, has requested alteration
of the rate of exchange to 124 to the pound sterling. The
foregoing has been telegraphed to London by the British
Legation which is now awaiting final instructions from London.
DREYFUS
sper
do189as.H to Holsivia VIRIAGOM YAM
Copy:ime
5/4/42
Doaraded Unclassified
13
321
COPY NO.
BRITISH MOST SECRET
(U.S. SECRET)
OPTEL No. 145
Information received up to 7 A.M., 4 May, 1942.
1. NAVAL
24th April - One of H.M. submarines hit a 4,000 ton merchant ship in
the GULF OF GENOA and considers the ship sunk.
2. MILITARY
BURMA. CHINDWIN FRONT - MONYWA was reported clear of Japanese at
1300/2 but fighting with rebels continued in the town. Japanese were moving up the
" ver in motor boats towing flats. Part of our forces moving back by mechanical
transport towards KALEWA had reached KADUMA early on the 3rd but the state of the
word made progress (group omitted).
MANDALAY Sector - Chinese main body reported in the area WETLET -
WATHA with rearguards on main road and railway ten miles East North East. of MANDALAY.
AIR OPERATIONS
WESTERN FRONT. 2nd/3rd. 238 sea mines were successfully laid. A
argo vessel off AALESUND is believed to have been set on fire. A small vessel off
BREST is believed sunk and two others damaged. 25 R.C.A.F. and 9 N.Z. aircraft
operated without loss.
3rd. 6 Boston and 8 Hurricane bomburs successfully attacked DUNKIFK
docks and ABBEVILLE aerodromo. About 420 fighters provided escorts and carried out
offensive sweeps. 4 enemy aircraft were destroyed, 3 probably destroyed and 5
damaged. We lost two Spitfires and three Hurricane bombors, 1 pilot safe.
3rd/4th. 123 aircraft were gent out - HAMBURG 81, offensive patrols
22. Five are missing and one 1s down in the sua. About 30 enemy aircraft attacked
EXETER. 6 bombers including two over FRANCE were shot down and two others probably
destroyed.
MALTA. Betwoen 1315/2 and 1130/3, 21 aircraft attacked. One Me 109
na destroyed and two others damaged.
MEDITERRANEAN. 2nd/3rd. A diroct hit was made on a 5,000 ton merch
vessel entering PANTELLARIA harbour and near misses probably damaged a destroyer. 1-
of thought that a 6,000 ton merchant vessel was hit by torpedo off LAMPIONE.
HOME SECURITY
3rd/4th. EXETER - About 60 high explosive bombs besides incendiari.
vore dropped. Serious fires were started at a number of places including the Southurne
Pailway Central Station, the A.R.P. Control Centre, the GPO and Telephone Exchange
AND the City Hospital. The Southern Railway is temporarily blocked by a large crater.
and the Great Western Railway by debris.
Regraded Unclassified
322
UNITED STATES GOVERNMENT
COORDINATOR OF INFORMATION
WASHINGTON, D.C.
May 4, 1942
The Honorable
The Secretary of the Treasury
Washington, D. C.
Dear Henry:
Attached is the weekly Political
Warfare Executive French Directive.
Sincerely,
Bill
William J. Donovan
Attachment
323
n. Problems:
a. Laval is consolidating his position. The initial
shock occasioned by his appointment has not caused a lasting
reaction amongst the French.
b. Laval is continuing the purge of the prefects and
other administrative officials as part of his plan to insure
internal security before making a further move. May be soon
extended to North African territories.
c. As Laval is anxious to preserve good relations with
the United States, he may swallow his pride to guard against
a break.
d. Laval is preparing a left wing appeal to peasants
and workers by putting himself forward as a "socialist", ready
to cooperate in the New Order. Doriot and Deat are backing this
campaign.
2. Tasks:
a. Show the French people that the ultimate result
of Laval's game will be the loss of their rights, freedom,
security as slaves of the German Reich. Laval's traditional
cleverness must be shown up as short-sighted opportunism.
The myth of "le Malin Laval" should be broken.
b. Petain's equivocal position must be forced to a
head. The French people must realize that traitors to France are
using Petain as a cover. Build up a "mise en demeure" of
Petain. The Petain myth should be broken.
C. The left wing appeal must be counteracted by
positive propaganda. The "socialist New Order of Europe" should
be debunked.
d. Listeners should be convinced that they cannot
remain outside the war. Counteract peace dreams and war
weariness.
e. Drive home the fact that France is still in the
war. General Giraud should not be mentioned.
Regraded Unclassified
324
DID DEPARTMENT
UNITED STATES GOVERNMENT
COORDINATOR OF INFORMATION
WASHINGTON, D.C.
May 4, 1942.
The Honorable
The Secretary of the Treasury
Washington, D. C.
Dear Henry:
The attached is from the British Political
Warfare Executive Weekly German Directive.
Sincerely,
Biu
William J. Donovan.
325
"anpower crisis:
a. Show that the background of the conflict leading
up to the Reichstag speech was war weariness and manpower
shortage.
b. Emphasize that Hitler, against the advice of the
home front experts, has backed S.I.S. and Parteiapparat who
have assured him that they can achieve a production increase
by another turn of the screw. Show that Bormann and Himler's
efforts will have opposite effect.
C. Stress the contrast between the principles of
"Gangsterstaat" and "Rechtsstaat". Stress that men who have
no respect for law in international affairs show the same
characteristics at home.
d. Using the example of Norway and other occupied
countries, show that it is possible for an unarmed civilian
population to resist successfully.
e. Appeal directly to the four million prisoners and
foreign workers in Germany.
RAF offensive:
a. React in a light-hearted manner to the German
"Baedeker raids". There should be no moralizing about van-
dalism. Taunt them for ineffectiveness.
b. Emphasize that the guilt for terror bombing is
Hitler's.
Western nerve war. Keep going the theme of Laval and
Rundstedt-Politik where there is no panzer. Avoid using mere
isolated stories of resistance. They should either be used
as illustrations of effective unarmed resistance or should
be strategically linked to the western front.
Regraded Unclassified