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Volume 630, May 1 – May 3, 1943
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Volume 630, May 1 – May 3, 1943
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 630
May 1 - 3, 1943
- A -
Book Page
Africa, North
See Occupied Territories
- B -
Bartelt, Edward F.
See War Department
Bombs
See Financing, Government: War Savings Bonds
Brown, J. Douglas (Princeton University)
For compulsory savings advocacy see Revenue Revision
Business Conditions
Haas memorandum on situation, week ending May 1, 1943 -
5/3/43
630 338
- C -
California. Southern
See Financing, Government: War Savings Bonds
Canada
Fourth Victory Loan (opened April 26) report 5/1/43..
107,109
China
See Post-War Planning: International Stabilization Fund
Citations
See Financing, Government: War Savings Bonds
Compulsory Savings
See Revenue Revision
- D - D -
Deferments, Military
Cabinet discussion reported to HMJr by Bell - 5/1/43.
2
a) Ickes pleads for statement by FDR
Dependency Benefits, Office of
See War Department
Durant, Will
Thanked by HMJr for words of encouragement 5/1/43...
112
- I -
Economic Stabilization Authority
Inflation: For Paul's statement on compulsory savings
see Revenue Revision
- I -
Federal Reserve Banks
See Financing, Government: War Savings Bonds
(Organization Plans)
Regraded Unclassified
- 7 - (Continued)
Book Page
Financing, Government
Federal Reserve operations in Government securities -
5/1/43
630
105
War Savings Bonds:
Office of Dependency Benefits: For slowness in
delivery of bonds see War Department
War Savings Stamps pasted on bombs for Germany
discussed in memorandum prepared for FDR - 5/1/43.
66
LeRoux, Robert A.:
Southern California report sent from Los Angeles -
5/1/43
70
Northern California report sent from San Francisco -
5/7/43: See Book 632, page 135
Oregon (Portland) report - 5/13/43: Book 633, page 187
Shipyards (New Jersey and Pennsylvania) reported on
by Waldman - 5/1/43
79,211
(See also Book 632, page 192 - 5/8/43)
Progress report by Graves - 5/1/43
91
2nd War Loan Drive:
Report of $16,500,000,000 sales as drive closes on
May 2
122,124
Newspapers thanked through Allied Newspaper Council
(Frank E. Tripp, Chairman) - 5/3/43
192
a) Chester LaRoche thanked - 5/6/43: Book 632,
page 77
Investment Bankers' Association thanked - 5/8/43:
See Book 632, page 169
Eccles and Federal Reserve System thanked - 5/8/43:
Book 632, page 171
a) Eccles' reply - 5/11/43: Book 633, page 3
b) Correspondence to be released to contradict
rumour of dissension - 5/13/43: Book 633,
page 123
Citations to workers discussed - 5/3/43
194
Organization Plans:
Discussion by HMJr, Bell, Gaston, and Robbins -
5/3/43
126
a) Federal Reserve place in set-up discussed
b) HMJr advocates "strong State organizations
with strong State men"
1) Robbins advocates heading up to Federal
Reserve Banks; doesn't consider strong
State organizations as important as
HMJr does
137
c) Compulsory savings plan as advocated by
Byrnes discussed (see also Revenue Revision)
133
Conference; present: HMJr, Bell, Gaston, Robbins,
Buffington, Graves, Gamble, Peabody, Odegard, and
Miss Elliott - 5/3/43
148
a) Graves presents plan (page 173) on which he
and Gamble agree and compromise plan
b) Robbins plan (page 176) discussed
c) Buffington plan discussed - 5/5/43: See Book 631,
pages 191 and 194
- 1- - (Continued)
Book Page
Financing, Government (Continued)
War Savings Bonds (Continued):
Organization Plans (Continued):
Sproul's (Allan) letter on future organization
based on experience of 2nd War Loan Drive -
5/3/43
630
189
(See also Book 633, page 62 - 5/12/43)
a) One organization strongly advocated; prefers
district rather than State organization
1) Discussed by Treasury group - 5/5/43:
See Book 631, page 176
2) Robbins: "Well known that Treasury is
not favorably inclined toward banking
fraternity": Book 631, page 181
Pulliam (Indiana War Savings Chairman) also advocates
one organization - 5/5/43: Book 631, page 207
Conference of Treasury group - 5/4/43: Book 631,
page 13
#
#
If
#
- 5/5/43: Book 631,
page 176
.
If
"
" - 5/12/43: Book 633,
page 23
a) HMJr's thinking clarified by recent trip
1) Each State and county to have director
responsible for sale of all Treasury
securities
a) HMJr will select: See Book 633,
page 42
b) Miss Elliott protests: Book 633,
page 43
c) Graves protests: Book 633, page 50
2) Executive manager in each Federal Reserve
District
a) HMJr appreciates Federal Reserve
cooperation to date: Book 633, page 53
b) Gamble-Coyne plan for establishment of single
sales organization: Book 633, page 59
Young (Federal Reserve Bank of Chicago), C. S.:
Plan for "one unified War Finance organization" -
5/12/43: See Book 633, page 65
a) Chart and memorandum: Book 633, pages 67 and 69
Conferences - 5/13/43: Book 633, pages 128 and 172
a) Gamble-Coyne plan discussed
Conferences of Treasury and Federal Reserve groups-
5/14/43: Book 633, pages 210 and 265
a) Gamble plan for single sales organization
as presented to group: Book 633, pages 253
and 254
b) Robbins' resignation announced and discussed:
Book 633, page 270
c) Federal Reserve plan as presented - 5/14/43:
Book 633, page 271
- 1- - (Continued)
Book Page
Food
See Foreign Funds Control
Foreign Funds Control
Jewish Joint Distribution Committee: Licenses covering
food parcels from Portugal to Poland revised - Paul
memorandum - 5/1/43
630 114
- G -
Gamble, Ted R.
See Financing. Government: War Savings Bonds (Organization
Plans)
General Counsel, Office of
Report for March - 5/3/43
212
George, Walter F. (Senator, Georgia)
See Revenue Revision: Compulsory Savings
- I -
Inflation
See Revenue Revision: Compulsory Savings
International Stabilization Fund
See Post-War Planning
- J -
Jewish Joint Distribution Committee
See Foreign Funds Control
Joint Distribution Committee, Jewish
See Foreign Funds Control
- L -
Lend-Lease
Silver: Three million ounces of Treasury free silver to
British Treasury discussed in White memorandum - 5/3/43..
357
(See also Book 631, page 148)
LeRoux, Robert A.
See Financing, Government: War Savings Bonds
Los Angeles, California
See Financing, Government: War Savings Bonds
- N -
New York Authority, Port of
See Revenue Revision
Newspapers
See Financing, Government: War Savings Bonds (2nd War
Loan Drive)
- N - (Continued)
Book Page
North Africa
See Occupied Territories
- 0 -
Occupied Territories
North Africa: Report on purchases and shipping - 5/3/43.. 630 352
Office of Dependency Benefits
See War Department
Organization Plans
See Financing, Government: War Savings Bonds
- P -
Paul, Randolph
See Revenue Revision: Compulsory Savings
Poland
See Foreign Funds Control
Port of New York Authority
See Revenue Revision
Portugal
See Foreign Funds Control
Post-War Planning
International Stabilization Fund:
Response to Treasury letter to Finance Ministers
analyzed in White memorandum - 5/3/43
358
Chinese reaction analyzed in White memorandum -
5/3/43
360
U.S.S.R. - HMJr suggests a letter to - 5/4/43:
See Book 631, page 69
- R -
Revenue Revision
Tax-exempt Securities: Port of New York Authority case
discussed at 9:30 meeting - - 5/1/43
5
Withholding Tax: Physical equipment in Bureau of Internal
Revenue discussed by Sullivan at 9:30 meeting - - 5/1/43.
7
Compulsory Savings:
See also Financing, Government: War Savings Bonds
Paul's memorandum on conference with Byrnes upsets
HMJr; discussion by HMJr, Bell, Haas, Paul, Blough,
and Sullivan - 5/1/43
9
a) HMJr considers that he (Paul) overstepped his
authority
b) "Patriotic stimulation" lacking in compulsory
savings - Sullivan
20
c) Second revenue bill in 1943 - nothing to be
done on present bill in Senate to jeopardize this
24
d) George (Senator) given breakdown on $17 billion
2nd War Loan Drive - 5/3/43
146
- R - - (Continued)
Book Page
Revenue Revision (Continued)
Compulsory Savings (Continued):
George (Senator), in Chamber of Commerce speech,
opposes - 5/5/43: See Book 631, page 177
1) Wider Treasury publicity requested by Secretary -
5/6/43: Book 632. page 30
2) Speech as inserted in Congressional Record -
5/8/43: Book 632, page 209
Brown, J. Douglas (Princeton University) advocates
compulsory savings - 5/5/43: Book 631, page 224
Washington Post editorial: "Need Revealed by 2nd War
Loan Drive" - 5/12/43: Book 633, page 80
1943 Act: FDR's assistance in House enlisted - 5/1/43.
630
52
a) Memorandum for FDR
54
b) Questions and answers prepared by Paul for FDR:
See Book 633, page 1
c) Treasury announcement of complete support for House
bill
58
Robbins, W. M.
See Financing, Government: War Savings Bonds
(Organization Plans)
- S -
Shipyards (New Jersey and Pennsylvania)
See Financing, Government: War Savings Bonds
Silver
See Lend-Lease
Sproul, Allan
See Financing, Government: War Savings Bonds
(Organisation Plans)
- T -
Taxation
See Revenue Revision
Tax-exempt Securities
See Revenue Revision
Tripp, Frank B. (Chairman, Allied Newspaper Council)
See Financing, Government: War Savings Bonds (2nd War
Loan Drive)
- U - -
U.S.S.R.
See Post-War Planning: International Stabilization Fund
- W -
Waldman, Emerson
See Financing, Government: War Savings Bonds
- W - (Continued)
Book Page
War Department
Office of Dependency Benefits:
Newark situation reported on by Bartelt - 5/1/43
630
111
Further complaints concerning War Savings Bonds
referred to Patterson - 5/3/43
203
a) Analysis of complaints by Bartelt - 5/6/43:
See Book 632, page 83
- Y -
Young, C. S. (Federal Reserve Bank of Chicago)
See Financing, Government: War Savings Bonds
(Organization Plans)
1
May 1, 1943
10:00 a.m.
GROUP
Present: Mr. Bell
Mr. Graves
Mr. Sullivan
Mr. Buffington
Mr. Odegard
Mr. Thompson
Mr. Schwarz
Mr. Haas
Mr. Paul
Mr. Blough
Mr. Robbins
H.M.JR: I just thought I would kind of get acquainted
again. I had nothing special. At our end everything was
all right. It was more like a campaign trip than anything
else I was ever on.
MR. ODEGARD: It sounded good on the radio.
MR. PAUL: Any rough weather?
H.M.JR: Lots of it. The men are going to feed me a
teletype to the speaker's desk - to give me the speech -
type it as I read it. (Laughter)
MR. ROBBINS: I hear you had some lightning photo
finishes.
H.M.JR: Yes. We left the Palace Hotel with a speech at
seven minutes past eight, with the ink not dry on it, and
went on the air at eight-thirty. While they introduced me,
I read it. (Laughter)
MR. PAUL: That is like me before the committee, some-
times. (Laughter)
Regraded Unclassified
2
- 2 -
H.M.JR: It was all right. I was glad I didn't go
to San Francisco first. They gave us a wonderful reception
there. They went over the top with the worst grace I ever
saw. (Laughter) But at least they did it, 80 I think the
joke is on them instead of on us. I guess what's-his-name
told you some of it.
MR. ROBBINS: That is right. I spent two very interest-
ing hours with him last night.
H.M.JR: But it is interesting and it is worthwhile.
You can't get it sitting here. But some spots in the country
are wonderful and some aren't 80 good. But the drive is
all right. That is the main thing.
MR. ROPBINS: The volume is fine, sir. I still think
we have plenty of room for improvement.
H.M.JR: I am not going to do very much this morning.
After this meeting I want to see Paul, Bell, Blough, and
Suilivan. I will get around Monday or so to talking about
deferments.
MR. THOMPSON: I have a list all ready. There are
about twenty-nine names which can be boiled down, I think.
MR. BELL: The subject came up yesterday at Cabinet
meeting. Ickes made quite a plea for & statement by the
President on this whole subject of deferment. He said that
everybody was being criticized, particularly the boys where
the heads of the departments had asked to have them deferred.
They were getting ashamed and asking to go into the service.
He thought it was quite necessary for the President to make
8. statement. The President asked Ickes and Biddle, I
believe, to get together and see if they could draw him
up a statement.
H.M.JR: If he is going to do something like that, we
had better wait, hadn't we?
MR. BELL: I should think you might.
Regraded Unclassified
3
- 3 -
MR. THOMPSON: This group was all 3-A and 3-B. It
isn't urgent except for two cases which might need action
next week.
H.M.JR: Is Monday time enough?
MR. THOMPSON: Plenty, yes. I went over the list with
Mr. Gaston first.
H.M.JR: Three-A and 3-B?
MR. THOMPSON: Yes.
MR. BELL: They were complaining about the Costello
committee. Apparently Ickes had been taken over the coals
up there at these hearings. The curious thing about it was
that the State Department, which probably had more deferments
than any other department, got a clean bill from the committee.
MR. PAUL: Mr. Prentiss Brown asked yesterday how old
Costello was.
MR. BELL: I don't know.
MR. PAUL: I met him; I wouldn't say he was over thirty-
five. He is pretty sore about Ginsburg and Nathan.
MR. THOMPSON: I think he was sore about some of the
Interior Department employees who were very young - eighteen
and twenty years old - six months' service, and put up as
indispensable men.
H.M.JR: I am not worrying about the public at all.
I mean, I think what we have done here I don't have to
explain, but I am just thinking about the future. I am
satisfied inside that what I have done is all right, so I
am not worrying about what anybody else thinks. I thought
Ickes' statement was one of the stupidest statements he has
made, and that is saying a lot. (Laughter)
MR. THOMPSON: lie had some very poor cases.
H.M.JR: Dan?
MR. BELL: - Nothing.
Regraded Unclassified
4
- 4 -
H.M.JR: Bill?
MR. ROBBINS: No, I haven't anything. I think you
have seen the figures.
H.M.JR: Yes, they are thrilling - they were last
night. If I get any time this morning I want to go in the
Chart Room and see how they look in there.
MR. BELL: By the way, we are writing a statement for
Monday morning's papers - the figures up to last night.
Would you like to see that?
H.M.JR: Yes.
MR. SCHWARZ: Would you care at all, Mr. Secretary,
to have a conference today?
H.M.JR: I would rather not.
MR. SCHWARZ: You still can make some more comment on
Monday.
MR. BELL: This statement will be for quote.
MR. PAUL: I think I will send you a little memorandum
for your press conference Monday about Knudsen's reply to
our statement, 80 if they ask you about it you can be
prepared.
H.M.JR: Have you got to make another statement for
Monday?
MR. BELL: Vie thought we ought to, and that was the sort
of schedule
H.M.JR: You mean through tonight?
MR. BELL: Through last night we have sort of followed
a schedule. You have given out figures at your regular
press conferences and I have sort of followed that since you
went away - given it to the boys each Monday and Thursday.
Now, tonight is the first statement following that schedule.
Regraded Unclassified
5
- 5 -
H.M.JR: When do you want to bring it in?
MR. BELL: I think George wanders has it.
MR. BUFFINGTON: It is ready now.
H.M.JR: We will get around to it later on. It is
for Monday morning?
MR. BELL: Yes.
H.M.JR: There is no hurry this morning?
MR. BELL: No.
MR. ROBBINS : I have nothing.
H.M.JR: Harold?
MR. GRAVES: Nothing.
H.M.JR: Chick?
MR. SCHWARZ: Nothing.
MR. HAAS: I have nothing that can't wait. You sent
a letter around you received from Vaughn.
H.M.JR: There is no hurry about that. I want you
(Blough) to stay for this meeting.
MR. BLOUGH: Would you like to hear a very short story
from this trial in New York?
H.M.JR: Yes.
MR. BLOUGH: The judge is Clarence Opper - the
tax-exempt security case; and Opper is doing a very fine
job as judge, but he excluded some evidence that Leming,
our attorney, wanted to put in. So Leming quoted from
St. Mark and said he was going to be reversed on this,
Regraded Unclassified
6
- 6 -
and that it would be & case of the stone that the builder
rejected that had become the head of the corner. During
the recess Phil Wenchel dropped in to see Opper in his
chambers, and Opper said to Wenchel, "You tell Leming if
he is going to quote any more from the scriptures that he
should use the Old Testament." (Laughter)
H.M.JR: I don't get the significance of that. It is
over my head.
George, I think you had better stay for the tax meeting,
on second thought.
MR. HAAS: All right.
H.M.JR: Peter?
MR. ODEGARD: I haven't anything, Mr. Secretary.
H.M.JR: Did you get a telegram from me?
MR. ODEGARD: Yes.
H.M.JR: Are you going to have some stuff for me?
Mk. ODEGARD: Monday morning.
H.M.JR: Have I excited the enemies at all?
MR. ODEGARD: Only one reference to the earlier speech.
The report on the other just came in today.
H.M.JR: OWI certainly went to town on those three
talks.
MR. PAUL: An OWI man came over to see me following the
conference with you - Rogers. I am talking more with them.
OWI wants to do some publicity work to help us on taxes.
H.M.JR: Anything else, Paul?
Regraded Unclassified
7
- 7 -
MR. PAUL: No.
MR. BUFFINGTON: I have nothing.
H.M.JR: It looks as though your estimate is going to
be reached, doesn't it?
MR. BUFFINGTON: I think it will.
H.M.JR: was there any question of reaching seventeen?
MR. BELL: It will be close to seventeen. We are over
the sixteen, now.
MR. BUFFINGTON: You saw the savings bonds yesterday -
a hundred and forty-five?
H.M.JR: Yes.
MR. SULLIVAN: Wednesday was the deadline on which we
could purchase paper if we were to have our forms out for
withholding by July first. We bought two hundred and
fourteen thousand dollars' worth of paper, and there is a
memo for you from the Commissioner describing that. I
think that it might be well--
H.M.JR: What does he want me to do - approve it now
that he has bought it? (Laughter)
MR. SULLIVAN: No, I told him I would approve it and
you wouldn't have to. (Laughter)
H.M.JR: What is this, a schedule? (Memorandum, undated,
signed by Mr. Heivering, handed to the Secretary.)
MR. SULLIVAN: Yes, and the correspondence with the
Public Printer and the whole story. Now, we have had photo-
stats made of that. I thought, to protect ourselves, it
might be well if Guy and I gave copies of this memorandum to
the chairmen of the ranking Republican members of the Ways
and Means, Senate Finance, and both Appropriations Committees,
Regraded Unclassified
8
- 8 -
so they know we are doing everything we can to be physically
equipped to handle whatever goes through.
H.M.JR: Yes, sir.
MR. SULLIVAN: You recall the correspondence you had
with Jere Cooper over the salary stabilization matter, and
you wanted me to talk with him on the phone rather than
write him. I talked with him on the phone, and he said,
"That is all right, John, but give me a letter 80 I can send
it down." I have such a letter.
H.M.JR: You sign it.
MR. SULLIVAN: I have it right here for my own signature.
H.M.JR: That is O.K.
MR. SULLIVAN: I didn't want to send it until--
H.M.JR: That is what he wants?
MR. SULLIVAN: Sure.
H.M.JR: All right.
Anything else? O.K.
rde
9
May 1, 1943
10:15 a.m.
TAXES
Present: Mr. Bell
Mr. Haas
Mr. Paul
Mr. Blough
Mr. Sullivan
H.M.JR: Mr. Paul, I read your memorandum of your
meeting before Justice Byrnes; and as far as the tax thing
is concerned, nothing I have read has upset me as much as
your memorandum and what you did. (Memorandum attached.)
MR. PAUL: Nothing what?
H.M.JR: Nothing has upset me as much on taxes as
your memorandum on how you represented the Treasury. I
don't see how you get that way. Certainly there is nothing
that has ever taken place--
MR. PAUL: What upset you?
H.M.JR: I mean, you so far overstepped your authority -
you are speaking for the Treasury. I don't see how you
get that way.
MR. PAUL: I don't see how I exceeded authority, I
didn't take any position.
H.M.JR: What is more, you go over there as the
General Counsel and tax person and then take this position,
that there is no chance of getting any additional taxes for
this year.
MR. PAUL: I was asked for a political judgment, and
I had to give the best judgment I could.
Regraded Unclassified
10
- 2 -
H.M.JR: Why didn't you talk the thing over with Bell
before you went over?
MR. PAUL: I spoke to Dan before I went over.
H.M.JR: You didn't discuss what you were going to say.
MR. PAUL: I didn't discuss what I was going to say
because I hadn't the slightest idea what I was going to be
asked.
H.M.JR: I am certainly not going to back you up on
this thing. "We discussed the subject of compulsory
savings. I stated that this was one of the items in the
broad tax program which the Treasury had been discussing
within its own walls earlier in the year. A number of
questions were asked as to details of the compulsory savings
and as to the Treasury attitude on the question. I stated
that the political situation was now such that there could
be no hope of securing any additional taxes on 1943 income--"
MR. PAUL: That isn't the opinion--
H.M.JR:
"but that there still remained some
possibility of collections out of future 1943 income by way
of compulsory lending."
How do you know there is no chance?
MR. PAUL: I was asked that question; that is a
matter of judgment. I was asked what my opinion was.
H.M.JR: "I stated that the political situation was
now such that there could be no hope of securing any
additional taxes--"
MR. PAUL: On '43 income.
H.M.JR: Yes. Well, how do you know? Have you talked
to George?
MR. PAUL: I didn't know; I was asked for my judgment.
Regraded Unclassified
11
- 3 -
H.M.JR: You didn't say this was - I mean, anybody
reading that would say, "Well, you have been consulting
on the Hill. That is what the Hill feels."
MR. PAUL: I have no doubt that is what the Hill
feels.
H.M.JR: How do you know that?
MR. PAUL: Because I have talked with Doughton. I
talked at times with George, and I talked to Barkley -
everybody on the Committee. It is the opinion of Stanley
Surrey, and it is Roy's opinion. It is the opinion of
everybody who has been up there. I was asked what my
judgment was on that.
MR. BLOUGH: The only exception I can see to it is
in case they adopt the Ruml plan and forgive '42. They
might then be willing in exchange for it--
H.M.JR: You were asked the Treasury attitude - I am
just reading from your own memorandum. Did you say, "This
is the way I feel personally; I don't know now the Secretary
feels or how Mr. Bell feels"?
MR. PAUL: I was only talking personally there.
H.M.JR: That whole crowd--
MR. PAUL: If you want to repudiate it - I was there--
H.M.JR: Look, the position you place me in with all
those people there - every one of them. I mean, they will
take it for granted that you have discussed the thing with
me and that is the way I feel.
MR. PAUL: I said nothing about discussing it with you.
The only thing that I was asked on that particular point
was, "What do you think about the possibility of getting
any additional taxes?" That was a very vital point to
them because of their interest in inflation.
Regraded Unclassified
12
- 4 -
Now I might have said, "I am not capable of giving you
any political judgment," but that would have been pretty
silly, I think.
H.M.JR: I don't think it would have been silly,
because I don't think you know. Why didn't you say what
you and Bell and I said beforehand, that we were going to
go after sixteen billion plus four, which is twenty billion
dollars?
MR. PAUL: I didn't want to reveal all the details.
H.M.JR: You revealed it to Eccles; you revealed it
to the other people; and you never told me that.
MR. PAUL: I did; I sent you a memorandum on it.
H.M.JR: That you told Eccles?
MR. PAUL: I don't remember particularly Eccles, but
I certainly did Byrnes and Smith. I remember that.
H.M.JR: You told them that?
MR. PAUL: I gave you a file and memoranda when you
came back disclosing that whole story.
H.M.JR: I never read it.
MR. PAUL: It certainly came to your office.
MR. BELL: Is the Committee report out yet on the
agreement?
MR. PAUL: It is being printed.
MR. BELL:Have they said anything about '43 taxes in
that?
MR. PAUL: No, I don't think SO. They didn't put in
the statement that - we tried to keep them from putting in
that statement.
MR. BELL: There was some indication that--
Regraded Unclassified
13
- 5 -
MR. PAUL: That was the discussion during this com-
promise business, that the rates would De frozen.
H.M.JR: Do you mean to say that you feel now that we
are going to rely for the rest of this year on compulsory
savings entirely for any additional revenue?
MR. PAUL: You understand, of course, that this present
bill before Congress increases the revenue for the fiscal
year of '44 by two billion seven?
H.M.JR: No, I didn't understand it.
MR. BLOUGH: Yes.
H.M.JR: All right.
MR. PAUL: Apart from that - now when you mention the
fiscal year '44 you have got to bring in beginning January 1,
1944--
H.M.JR: But let's stick to what the President asked
for, the sixteen billion dollars. Where do we stand in
relation to that?
MR. PAUL: We stand in this position, that we have
probably about three billion dollars of it in this present
bill.
H.M.JR: After you have deducted what we lose through
this bill?
MR. PAUL: We don't lose any revenue through this bill.
MR. BLOUGH: We don't lose any receipts. You pick up
in collections about three billion this year.
MR. PAUL: That leaves thirteen, approximately, of the
sixteen, and the point is that there isn't the slightest
chance of getting any of that thirteen out of the '43 income.
That doesn't mean you wouldn't get some of the thirteen out
of the '44 income, because you are on a current basis, but the
effect of the Ruml plan discussion was to take valuable time away
Regraded Unclassified
14
- 6 -
and put Congress in a mood not to impose any additional
tax.
MR. BLOUGH: I still think we should try with Congress
to get something out of '43.
H.M.JR: With this group Paul went before yesterday
there isn't one chance that the thing - I am not going to
go before the people of the United States, and--
MR. BLOUGH: Senator George has already announced
publicly that he is against it.
MR. PAUL: He made 8 speech Friday against it at the
Chamber of Commerce.
H.M.JR: Sure, they are all a gainst it, but that doesn't
mean the temper of the people--
MR. PAUL: I didn't say that I didn't want taxes.
H.M.JR: You didn't say once that you did.
MR. PAUL: I certainly did.
H.M.JR: There is nothing in this report here.
MR. PAUL: Well, I can't put in every remark in the
two and a half hour discussion in a memorandum.
H.M.JR: The impression that this thing - all I can get
out of this thing - anybody else can read - is you went
before them and said that there was no chance of getting any
additional taxes this year; the only thing left is to go
for compulsory savings.
MR. PAUL: If you want collections, yes - the only
thing on '43 income, not fiscal '44,
H.M.JR: You didn't talk a bout '44.
MR. PAUL: We did talk about '44. I said that you
couldn't get any additional taxes until you came to the
'44 income.
15
- 7 -
Now if you are dissatisfied with the thing or with me -
of course, you realise that my feelings aren't in it. If
I wasn't right, then you can put somebody else in the picture--
H.M.JR: But Randolph--
MR. PAUL:
...
a man that would act--
H.M.JR: You didn't have to act - I mean, you didn't
have to. I am now in exactly the position where the
Director of the Budget was, or else you are; and the only
thing left is to come out for a sales tax.
MR. PAUL: We discussed the sales tax at great length.
H.M.JR: I mean, let's be honest with each other on
this thing. If you put me in the position just where the
Director of the Budget was and we fought him--
MR. PAUL: I don't follow you there.
H.M.JR: I mean, how can I go on Monday before these
people and make the fight when they all know that you are
not for this thing?
MR. PAUL: No, they don't know I am not for taxes.
H.M.JR: Somebody read it. I mean, just read this
thing; read the memorandum. You have read it, haven't you?
MR. BELL: Yes.
H.M.JR: Well, Dan, you can think for yourself. What
impression did you get?
MR. BELL: I got the same impression that you did, that
he was against. - that it was his judgment that they won't
get any more taxes out of '43 incomes, but then I think that--
MR. PAUL: You didn't get the impression I was against
taxes?
Regraded Unclassified
16
- 8 -
MR. BELL: You said nothing there except that you
were reporting what you said before this group.
Now I think that Randolph was under pressure over there
to say something. Maybe this memorandum doesn't reflect
all of your conversation over there. What have you said
on the Hill, anything?
H.M. JR: Well, gentlemen, let's just stick to the
impression you get from what he said over there. I can
only read his own report; I wasn't there.
MR. PAUL: That is right; it is my own report. I
dictated the report. I don't say that it says everything
I said in two hours, but I certainly did not say I didn't
want taxes. Everybody who was there and talked with me
knows that I do want taxes - additional taxes.
(Miss Chauncey entered the conference and handed the
Secretary the file on taxes, and left the conference.)
H.M.JR: I haven't read this. You referred me this
morning on the phone to 8. statement I made in the House.
What I talked about in the House was sixteen billion plus
four net, or twenty billion dollars additional revenue.
MR. PAUL: That is right, we didn't discuss amounts
there.
H.M.JR: That is one thing to talk about, and another
thing is to get down to a lousy - to kick over all
additional revenue and get down to a question of compulsory
saving.
MR. PAUL: I am not kicking over all additional
revenue for the fiscal year '44. I am saying that it is
utterly impossible to get any additional taxes on 1943
income.
MR. BELL: Do you think it is possible to get additional
revenue through enforced savings on '43 income?
Regraded Unclassified
17
- 9 -
MR. PAUL: I think that is very possible, because you
have some very powerful support for it. George made a
speech on it before the Chamber of Commerce Thursday in
which he came out very strongly for it.
H.M.JR: Do you know what our E bond sales have been
this week, or this month?
MR. PAUL: This week? I have only heard that they are
four hundred million a month.
H.M.JR: Well, you see, you don't know. If you would
talk with Bell you would have known what was happening
in the Treasury. You just don't know.
MR. PAUL: I have nothing to go on.
H.M.JR: Why didn't you get posted before you
went over half-cocked like this?
MR. PAUL: Well, I think I had better step out of the
picture if you feel that way. I will be very glad to do
it. I am only trying to do my best. Then you will be
perfectly free to repudiate me.
H.M.JR: No. I am in the position - I don't know what
I am going to do myself. You have this whole gang with you
now.
MR. PAUL: You seem to have the impression that I am
against taxes. I haven t said anything agai nst taxes.
H.M.JR: I mean, coming down - there is no use talking
that way. It is a question of what are you going to do.
The only thing that is left for me to do - the shoe is
on the other foot. I can't buck that crowd after you have
gone over there. I have nothing to buck them with. I mean,
you can go up, and you can go up on the Hill and present
the Byrnes picture or let Jimmy Byrnes do it. I can't do
it, because I don't believe in it. I mean, we are going to
sell between nine hundred and a billion dollars worth of
Inclassifiod
18
- 10 -
E bonds alone this month. Now, I have no technical staff,
I have no position. I have nothing left. I mean, the
shoe is on the other foot. I am certainly not - after
what the men and women who worked in the factories of this
country have done this month - going to go up and sell them
down the river before the public. I am just not going to
do it. You and Jimmy Byrnes can do it.
MR. PAUL: Well, I don't seem to be able to get across
to you the distinctions involved in this picture. Everybody
that I have ever talked with on the Hill or at that meeting
or anywhere else knows that I am for additional taxes, and
the only thing I said was not what I wanted or what the
Treasury wanted, but what it was possible to get politically
on '43 income. I wasn't even categorical about that, but
I don't think there is anybody that has been up on the Hill
that thinks there is any reasonable chance of getting any
appreciable amount of additional taxes on '43 income.
H.M.JR: You have - now look, you got me in the posi-
tion where I had to back publicly Doughton on a straight
twenty-percent withholding tax. We went to town on that,
and we had some breaks, and we got the thing through.
Now, we have another thing where we have - what is it,
about forty-percent forgiveness?
MR. PAUL: No, about ten percentage points - forty
percent of the total, nine five.
H.M.JR: About forty percent. Everybody said they
weren't going to have any forgiveness, and you have a
forty-percent Rum1 plan.
MR. PAUL: That isn't a forty-percent Ruml plan at
all; it is entirely different. You are talking in terms of
total forgiveness, whereas, that is not the point. The
Ruml plan distributes the forgiveness wholly different.
Regraded Unclassified
19
- 11 -
H.M.JR: But after all the speeches on the Hill
against any forgiveness and everything else - now it will
be a forty percent - the difference between '41 and !42
taxes.
MR. PAUL: Forty percent of the total, but that is
the whole point of the discussion.
H.M.JR: Well, anyway - and then Smith and Byrnes -
that whole crowd said right along, No more income tax
this year - we can't increase it. Isn't that right?
That has been their position.
MR. BLOUGH: No.
MR. PAUL: No, their position has been for income tax.
They wanted to make & whole lot of recommendations.
H.M.JR: Does Smith want income tax?
MR. BLOUGH: Yes.
MR. PAUL: Smith has been after us right along.
H.M.JR: Anyway, you now have the country going over
the top and people digging down into their jeans the way
they never have before in the history of any country any-
where, and the day that is over, or the day after, I am
put in the position that it is no good - and opposite the
President. I mean, it leaves me in an impossible position.
All I would have to do is to just - I mean, if it isn't
already done - tell about yesterday's meeting, and the
bill wouldn't pass Monday or Tuesday.
But I can't go into it with what's-his-name acting
more or less as assistant to the President - with that
whole gang that way, it doesn't leave me a foot to stand
on.
20
- 12 -
MR. BELL: Do you think that group over there would be
against asking for additional taxes?
MR. PAUL: No.
MR. BELL: They would not?
MR. PAUL: No. They would be for it.
MR. BELL: You think if the Secretary went up and
proposed additional taxes immediately, that they would be
for that?
MR. PAUL: Well, the question is not doing it immediately,
Dan.
MR. BELL: I say '43 incomes.
MR. PAUL: What they were afraid of is that there won't
be another tax bill this year, and in the Senate this is
the last chance to get any additional collections. that is
a perfectly reasonable fear. Nobody can--
MR. SULLIVAN: Has Doughton made any expression of
opinion about another tax bill?
MR. PAUL: Not a very definite one. He said he gets
tired sometimes and says, "Let's have a sales tax and for-
get it all."
MR. BLOUGH: Well, there has been no disposition on
the part of anybody up there to say we aren't going to have
another tax bill this year, has there? I haven't noticed
that. I have certainly heard a good deal of comment.
MR. PAUL: Probably the opposite, that they vaguely
intend to have one sometime.
MR. BLOUGH: I think they can be forced into having
another tax bill this year. I don't doubt that a bit. I
think there certainly ought to be, and every pressure should
be brought on them. And everybody I have talked to--
Regraded nclassified
21
- 13 -
MR. PAUL: This year?
MR. BLOUGH: This year the bill would have to be passed -
this year in any event.
MR. PAUL: That is different. I didn't say they
wouldn't have a tax bill this year. I said they wouldn't
have a tax bill that would impose taxes on '43 income.
MR. BLOUGH: I misunderstood that. I think we should
even ask for that with respect to that period of time which
remains after the bill is passed.
MR. PAUL: That would be what?
MR. BLOUGH: Would be probably three or four months of
the year. But I think your assessment of the political
situation is quite right, that they are not going to retro-
actively impose income taxes on the income of '43 up to the
time the bill passes.
H.M.JR: Well, now, look - go ahead, you finish.
MR. BLOUGH: And that there ought to be a strong effort
made to get those taxes, but that it is a correct statement
of the political situation that they aren't going to pass
them.
H.M.JR: Now, look - may I interrupt? Don't use the
word "political" for heaven's sake, because if you think,
in a presidential year, you are going to pass an income
tax increasing taxes, you are crazy.
MR. BLOUGH: It has to be passed this year, of course.
H.M.JR: that is what I am saying.
MR. BLOUGH: But whether it applies to this year's
income, is another question.
Inclassified
22
- 14 -
H.M.JR: All right, then you are going to sit back and
kill a perfectly volunteer program to possibly get four
billion dollars of people's savings out of the savings
banks, and then think next year you are going to get a tax
bill - with a presidential year on - if you are going to
talk politics, I know something. I mean, I have learned
something from being with Mr. Roosevelt for fourteen years.
I have never heard Doughton say that he wouldn't give me
another tax bill.
MR. BLOUGH: Isn't the point that you have got to have
a tax bill this summer, and that they will pass 8. tax bill
this summer? The only question is, will they apply that
tax to the income which has already been received in 1943?
H.M.JR: I don't know, Roy. I don't know until I sit
down and talk with these people. I don't believe - I mean,
there is nothing - there is no sense - I can talk in this
room, straight and frank, and I think that Paul ought to
be able to take it.
MR. PAUL: I can take it.
H.M.JR: Because I am the man that is on the spot - he
isn't. He has got this whole group with him.
MR. PAUL: I have no group with me.
H.M.JR: Randolph, let's be - what chance have I got
after the testimony - your testimony yesterday - to go over
there? Everybody would laugh at me. They will say, "All
Morgenthau is interested in is his bonds. I mean, the
Director of the Budget feeds it all the time to Cissy
Patterson and all the rest of them. I mean, he fed the
remark to them that the only reason I wasn't for the Forml
plan was because I hadn't thought of it first. And in
the Saturday Evening Post, if you didn't read the article -
they had the meeting - did you read that article?
MR. BLOUGH: Yes.
MR. PAUL: This week's?
Regraded Unclassified
23
- 15 -
H.M.JR: Where he said everybody was for compulsory
savings except Morgenthau, and the reason we got inflation,
and so forthand 80 on - direct quotes - and the author said
he got it directly from Smith.
I called >mith on it and he said, "Now, wait a minute
before you go too far. I want to speak to the author."
He never called me back.
I mean, I go over there and those people, the Chamber
of Commerce and Jesse Jones and O'Neal - and I say I want
taxes, that I don't want compulsory savings, and then the
whole thing appears in the press.
Now, I think that--
MR PAUL: The last conversation I had with you on the
subject was at your house and Dan was there.
H.M.JR: That is right.
MR. PAUL: You said then that you did accept the idea
of compulsory savings.
H.M.JR: What I said was this - and that was January
14 and this is May 1 - it is here; it is signed by both of
you. What we talked about WAS sixteen billion dollars'
worth of revenue and four billion dollars' worth of savings.
We were talking about twenty billion dollars.
MR. PAUL: That is right.
H.M.JR: I said what I wanted was - in order to close
the gap, I wanted twenty billion dollars, and I didn't care
very much how I got it. Now we are talking about - you
still can't get more than four.
MR. PAUL: We didn't talk amounts yesterday. The only
reference to the amount was afterwards when I went on the
record - Prentiss Brown said, "How about twenty billion?"
I didn't say anything.
Regraded Unclassified
24
- 16 -
H.M.JR: Now, look, all I can go by is what you said
here, yourself. I don't know what you said other than what
you wrote down. But what chance is there for me to go over
there Monday and say I want - I am going to stick by what
the President said in his budget Message. And to get the
thing tacked on--
MR. BLOUGH: "hat did the President say in his Budget
Message?
H.M.JR: Why ask me?
MR. BLOUGH: He said sixteen billion of taxes or
savings, or both.
H.M.JR: But why try to tack something in the Senate
on this thing?
MR. BLOUGH: I didn't get to that. Is that in here?
MR. PAUL: That is another matter. That is based on
the fear there won't be another tax bill this year, and
should something be done? They raised the question and it
was not answered.
MR. BLOUGH: I am opposed to that.
MR. PAUL: I didn't express my opinion on that.
MR. BLOUGH: It would hold up the bill indefinitely, I
think, to try to put it in the Senate.
H.M.JR: The three things where you and I - I mean,
where you didn't represent how 1 feel, are: One, I think
we should have another tax bill this year because we haven't
got the chance of a snowball in hell of getting another
one.
MR. PAUL: I agree with you there.
H.M.JR: Number two, I don't think anything should be
tacked on in the Senate because there isn't one chance - the
25
- 17 -
thing will be held on and on and on, and we won't get this
thing through quickly.
MR. PAUL: There was no expression of opinion by me
on that point at the meeting.
H.M.JR: Yes, but when the thing is held up again, I
can only say that you didn't say, "Don't put anything on
in the Senate."
MR. PAUL: I didn't express an opinion, because I
think it is a very grave question. I certainly did
say--
H.M.JR: But it was left that way - the impression
you get from Byrnes and the rest - the thing to do is to
tack this thing on this compulsory savings thing in the
Senate.
MR. PAUL: I didn't express an opinion on that.
H.M.JR: And the third thing is that certainly a man
is entitled, after five months, to take a fresh view of
compulsory savings.
MR. PAUL: Certainly.
H.M.JR: I can't be held for something I said on the
14th of January.
MR. SULLIVAN: That is what you can say Monday, Mr.
Secretary. You have taken thirty-seven or thirty-eight
billion dollars out of the American people in five months.
You have got almost thirteen billion dollars in December -
the first three months of this year you got five - you got
eight and a half billion dollars in bonds and in taxes; and
you got your sixteen or seventeen billion this month. That
will run up to thirty-seven or thirty-eight billion dollars
in five months. I think that that is beyond anything we
expected and I think that it does entitle you to change
your position.
Regraded Unclassified
26
- 18 -
H.M.JR: What I want to say is, anything that is said
in this room is absolutely sealed - it never goes out of
this room, see, for anybody. Now, I can talk and Paul
can talk just as hard at me as he wants, but we are in this
thing until the war is over, through thick and thin. No
question of anybody - I am not going to offer to tell Byrnes
I am going to quit because he is against me on compulsory
savings, and you are not going to tell me you are withdraw-
ing because you and I--
MR. PAUL: I wouldn't on that account. The only thing
is that I would want you to feel that I was ready to
step right out at any moment.
H.M.JR: Well, don't let's - listen, we are in the
middle of & war.
MR. PAUL: I know it, but I just don't want to embarrass
you.
H.M.JR: You are not going to embarrass me, I mean, but--
MR. BELL: Is there a meeting Monday? Is that the
Byrnes meeting?
H.M.JR: Yes, they want him to come back. Let me just
get down--
MR. HAAS: It seems to me there are two things here:
One is on the position you should take for the Secretary
of the Treasury on taxes, and the related situation is
what is your judgment as to whether or not that position
should be accomplished. You discussed the possibility of
accomplishment. That does leave the Secretary free and
you (Paul) free - both of you are together on what should
be done. If there is a meeting Monday - they may have
misunderstood those two situations - couldn't that be
straightened out on Monday?
MR. PAUL: I don't think they did.
H.M.JR: I don't, either.
Regraded Unclassified
27
- 19 -
MR. PAUL: On another tax bill - the first point of
the Secretary was another tax bill this year - the only
thing I said is that there was something to be said for
the thought that it was problematical whether you would
get one. That was relevant to the question of whether
you should try to move in the Denate for compulsory savings..
Nobody can say anything categorical. I didn't say anything
categorical, but I did not disagree with the thought
there was doubt whether you would get one.
MR. HAAS: Couldn't that be straightened out?
MR. PAUL: Another thing - nothing on in the Senate
that tied in with the first question. If you are not going
to get a tax bill, it is a reasonable thought that you
might want to put something on in the Denate. It certainly
isn't to be despised. But other than that, I took no
position.
H.M.JR: May I interrupt you? If you do put it on in
the Senate, your chances of getting a tax bill are practi-
cally nil. That would be a good way to kill a tax bill.
MR. BLOUGH: I think that is probably correct.
MR. HAAS: Isn't this true, that irrespective of
whether it goes through Congress, doesn't the Secretary
of the Treasury have to come out for more taxes? There
is criticism in the papers only for that thing on this
inflation; they are going to switch around and say that the
fiscal part wasn't even pushed strongly enough, and the
Secretary, irrespective of whether he gets it or not, he
has to say, "I am for it." That is what it looks like to me.
H.M.JR: That is the way I feel.
MR. BELL: But I would understand that Randolph feels
the same way. I don't think you are far apart, Mr. Secretary.
Regraded Unclassified
28
- 20 -
MR. PAUL: That is the way I feel. That is a wholly
different matter from--
MR. BELL: From getting it.
H.M.JR: Look, there are two things here. I have
gone up on the Hill I don't know. how many times, talking
about taxing municipals. You don't get it. But I think it
is right; I think some day we will get it. I think you
have got to keep talking about it.
MR. PAUL: That is why we are having this case in
New York, now.
H.MJR: We wouldn't fool anybody if we tried to get
the compulsory savings amendment on in the Senate - we
were just ducking the tax issue. I don't know how you
feel--
MR. PAUL: I am not - as to whether we should do it,
I expressed no opinion yesterday. I said it was a question-
H.M.JR: All right, are you in the position that you
can go back Monday and intellectually and honestly say
that the Treasury's position, after consultation with me
and with the rest of the people here, is that nothing should
be done in the Senate which would in any way impede or re-
tard a presentation of an additional tax bill as soon as
Mr. Doughton is ready?
MR. PAUL: I am certainly in the intellectual position
Regraded Unclassified
29
- 21 -
to do that because I didn't express an opinion on that.
H.M.JR: That is number one.
MR. PAUL: The only place where you and I have different
views is on the question of compulsory savings.
H.M.JR: Well, all I am saying to you on that is,
after the figures come in, I would like you to be brought
up to date.
I would like people like Mr. Accles to be brought
up to date. I would like everybody to take a fresh look
at it.
MR. PAUL: I certainly want to keep up with it.
H.M. JR: I want everybody to take a fresh look at it.
Bell said before you came in - he said that nobody has
presented a plan to him where he can see there would be in
any way a net gain - isn't that what you said?
MR. BELL: Yes, I have heard no compulsory savings
program that will do the trick.
All I have ever heard talked of is four or five billion
dollars, and nothing has been suggested about locking up
past savings or taking care of eighteen billion dollars of
savings bonds, and I just don't think it will work - what
has been proposed.
30
- 22 -
MR. SULLIVAN: I think you have something even
deeper than the fiscal--
MR. PAUL: That has been Dan's view right along.
MR. SULLIVAN: I think you have something even more
important than the fiscal picture here, Mr. Secretary.
I think that before the end of this year it will be
apparent to everybody that the American people - the
ordinary fellow in the street - are more completely in
partnership with Uncle Sam in financing this war than
the common people of any country in any war in history.
And they enjoy doing it. They think that that is the
way that gets them into the war along with their fellows
who are fighting, and I think compulsory savings will
rob them of the thing that gives them the greatest
patriotic stimulus that can ever reach them in the
course of this war.
H.M.JR: Of course I am just one hundred percent
with you. And after this trip which I made around the
country, which was a terrific physical killer, the people
have no idea how far the working man is ready to go. And
I don't give a damn what the Senators or Congressmen
think, the only hope to fight this war for is to look for
something a little bit better, and these people - it isn't
true everywhere, but they love to give this money. We
didn't hear a murmur about taxes.
I got the feeling that there is no - that as far as
the working men and women - and those are the ones they
keep talking about all the time, the people they want to
get - they say there is no trouble at all as far as they
are concerned in getting this.
MR. PAUL: There was one person who did express an
opinion, which I didn't put in. They got to talking about
the tax on the stenographer here in Washington - and we
have got some figures on them - I think it was the fourteen
or sixteen hundred - and Mrs. Perkins expressed the opinion
that the taxes were too high now on them.
Regraded Unclassified
31
- 23 -
H.M.JR: Well, Mrs. Perkins - she doesn't know what
is going on in the country. She has demonstrated right
straight along that she doesn't. That isn't the person
they are worrying about. It is the man getting from fifty
to 8. hundred dollars a week they are worrying about.
MR. PAUL: Sure, the inflation question.
H.M.JR: And what they do with the money.
MR. PAUL: But there is the other difficulty in
the picture, the people living in Washington.
H.M.JR: I stood and faced eight thousand men and
women at the lunch hour at one shipyard. It was a great
experience, and in between I had their labor leader talk.
I wish you could have heard him talk - AFL. A Washington
stenographer of fourteen hundred dollars - the Washington
atmosphere is all wrong, anyway.
MR. PAUL: What I said to Mrs. Perkins in response
to that was that that was one of the difficulties in the
tax picture, that the tax didn't bear equally on urban
and rural communities.
H.M.JR: Let me just sum up for the immediate on this
thing. Let's see, in the first place, if we can agree on
one thing - a couple of things.
Is there anybody in disagreement here that we should
try to have another tax bill and go after the sixteen
billion dollars that the President asked for?
MR. PAUL: You mean involved in that question is that
we should not do it by tacking anything onto the Senate
here?
H.M.JR: Well, I will put it the other way. I was
going to put it this way, that if we try to do anything
on the Senate it will kill the chance to get another
tax bill.
Regraded Unclassified
32
- 24 -
MR. PAUL: I think the only reason - yes, I agree
with that, and the only reason for putting it on in the
Senate is that you won't get another tax bill. That
accepts that fact. That is 8. reason for doing it.
H.M.JR: Well, I--
MR. BELL: We shouldn't accept that as a fact,
should we?
MR. PAUL: That is what I want to get at.
H.M.JR: I can get hold of Doughton and Cooper and
get a promise out of them that they will have another
tax bill.
MR. BLOUGH: I am not a political E. rognisticator,
but I don't see how Congress can stand the pressure. If
the Executive departments want another tax bill, they
can't stand up against it.
H.M.JR: Damn it, shouldn't we want one?
MR. BLOUGH: Sure.
H.M.JR: Then are we going to be 80 insincere as
these people are across the street and tack something
on that we know is going to kill that? I don't want
part or parcel of it.
MR. BLOUGH: I am not in favor of doing it. I
said do. I thought in January that the pay-as-you-go
and the sixteen billion dollars should be hooked together
in one bill, and I still think that is what should be
done.
That wasn't done, but it seems to me that since it
wasn't done the thing to do is to get that pay-as-you-go
out of the way and start to work very earnestly on the
sixteen or twenty billion dollars.
33
- 25 -
H.M.JR: Let me put the question the other way
around, if that is what Paul wants. Does anybody here
think we should try to tack anything on in the Senate
other than what is in the Doughton bill now?
MR. PAUL: Well, that was the question on which
I did not express an opinion yesterday. Now you are
asking me for my opinion. In answering the question
I have to appraise these alternatives. On the one hand
there is a strong probability we won't get any tax on
'43 incomes in the 1943 tax bill. There is, on the
other hand, a possibility you could get something in
this acute inflation situation if you tack something
on in the way of compulsory savings, possibly a large
amount.
Now, you take a risk if you make a decision for
another tax bill - you take a risk that you won't get
anything. What is the answer to that question?
H.M.JR: That is a very--
MR. PAUL: I can't feel too categorical about it.
MR. SULLIVAN: I can.
H.M.JR: I can.
MR. SULLIVAN: I can, because if you have only
two choices, Randolph, which are compulsory savings and
no tax bill or no tax bill and no compulsory savings, it
is a very easy decision for me.
MR. PAUL: You have always been against compulsory
savings.
MR. SULLIVAN: That is right, Randolph, but the
things that have been happening in this country in the
last three or four months make me feel so much stronger
about it. I think if you reviewed the question you would
be in accord with it.
Regraded Unclassified
34
- 26 -
MR. PAUL: If I were against compulsory savings
then there wouldn't be any question in my mind.
H.M.JR: No, but, you see, the thing is - let's say
that we got four billion dollars through an amendment to
the Doughton bill in the Senate and then no tax bill.
MR. PAUL: Then I have no hesitation in answering
it.
H.M.JR: That is what we are facing.
MR. BLOUGH: If it isn't ten billion dollars it
isn't worth mentioning.
H.M.JR: You won't get it.
MR. PAUL: If you ask the question that way, I
haven't any doubt.
H.M.JR: You won't get it. What you are worrying
about is additional--
MR. PAUL: I would go higher than Roy. I wouldn't
think it was worth while fooling with ten billion.
H.M.JR: But what have you got when you get this
compulsory savings? You are simply adding a load on
the postwar. You are going to have to repay in taxes
or repudiate, one or the other.
MR. PAUL: There is no question in anybody's mind
that taxes are better than compulsory savings. I think
that is the question on which I certainly wouldn't say
that it should be done.
H.M.JR: Well, the matter as far as my own mind
is concerned is this--
MR. PAUL: So I haven't embarrassed you.
35
- 27 -
H.M.JR: As far as I am concerned, I certainly
would want to sit down with the Democrats in the House
and find out where they stand. I don't see why there is
all this rush about it, why this thing has to be done
Monday. This thing will leak. I don't see why they
can't wait until the bill passes in the House.
MR. PAUL: They want to do that. Byrnes enjoined
that very strictly.
H.M.JR: What?
MR. PAUL: Not to say anything until the bill passes
the House.
H.M.JR: Listen, if there are leaks right out of
the Cabinet room and Cabinet meetings, why shouldn't
there be leaks out of Byrnes' room?
MR. PAUL: The leak will only be that the subject
has been under discussion.
H.MJR: There must have been leaks because I was
cross-examined on this thing of compulsory savings in
San Francisco the way I haven't been cross-examined in
I don't know when.
MR. PAUL: It wouldn't be as a result of a leak
there.
H.M.JR: Well, something was very funny, why these
men were hammering me on compulsory savings. I couldn't
understand it.
MR. PAUL: That must have been something else. What
time was that?
H.M.JR: Wednesday.
MR. BELL: They asked me Monday. I had a press
conference Monday.
36
- 28 -
H.M.JR: There is something cooking.
MR. PAUL: Maybe Byrnes had said something before.
MR. SULLIVAN: That isn't the feeling of the country,
Mr. Secretary.
MR. PAUL: I think Byrnes has talked with some of
the leaders, but I don't know that.
MR. SULLIVAN: I talked with people the last month
in Boston, in New Hampshire, in Ohio, and people come
out and say they have been very strong for compulsory
savings and now they are against it; and they have
expressed the opinion and the hope that it was dead.
H.M.JR: The only thing that the President can
count on today where he has got unity of action between
labor and management and production is on this volunteer
bond program. There isn't another thing and there
isn't another organization in the United States that
will go to town for him. There isn't.
MR. SULLIVAN: That is right.
H.M.JR: And there is complete disunity, comple te
dissatisfaction, and department after department cutting
each other's throat; and this is the only one that the
people stand up together shoulder to shoulder, banker,
working men, labor, and everything else, and they go to
town on it. And we are getting the money.
MR. BLOUGH: Are you going to have an analysis
made of where that money comes from?
H.M.JR: George can answer that.
MR. HAAS: We have it currently.
MR. BLOUGH: I mean as far as the lower income
levels are concerned.
37
- 29 -
MR. PAUL: You can't do that, can you?
MR. HAAS: Yes.
MR. BLOUGH: I am perfectly willing to let the
compulsory savings rest on the record of the bond
campaigns; and it has been my opinion, which I am
willing to express now and I will be proved wrong,
probably, next week - but it is my opinion that when
you analyze these statistics you will come to exactly
the opposite conclusion Mr. Sullivan has come to.
H.M.JR: Well now, let's just say that you are
right and let's say we are not getting the money. This
thing doesn't - this decision, as far as I am concerned,
doesn't have to rest today on whether I am for or against
compulsory savings.
MR. BLOUGH: .I agree on this decision.
H.M.JR: Now wait a minute, let me just argue with
you. This question of compulsory savings doesn't have
to be settled today or tomorrow, in my opinion, or until
this bill is passed.
MR. BELL: That is right.
H.M.JR: Now, the decision that has to be made is,
do you want another tax bill? Can you get another tax
bill? Paul said no. I don't know whether he is right
or wrong.
MR. PAUL: No, I didn't say you couldn't get another
tax bill. I said you couldn't get a tax bill taxing
'43 incomes.
H.M.JR: Yes, that is right.
MR. PAUL: That is quite different.
Regraded Unclassified
38
- 30 -
H.M.JR: Yes, but if we put on - I think everybody
is agreed here if you put on a compulsory savings
amendment in the Senate to the Doughton bill you won't
get any kind of a tax bill this year.
MR. PAUL: The very theory of doing it would be
you are not going to get more.
H.M.JR: You don't get any additional revenue, and
I say you won't get one next year, either. This is your
last chance of this Roosevelt administration to get a
tax bill through on income of corporations and individuals -
increased tax.
MR. PAUL: They were very hostile to that. I urged
that there should be an additional tax on corporations.
H.M.JR: Look, would Jesse Jones want it? No.
Would Jimmy Byrnes? No.
MR. PAUL: Jimmy Byrnes, no. The man that argued
most against it was Eric Johnston.
H.M.JR: Chamber of Commerce. (Laughter)
And the fellows you had for it were who?
MR. PAUL: Green and Patton.
MR. SULLIVAN: O'Neal?
MR. PAUL: No.
H.M.JR: Who for it, Green, Patton of the Farmers
Union, and who else? Wasn't Davis for it?
MR. PAUL: I don't think he expressed a view. I
may be wrong.
MR. BELL: I thought Jones was a little in favor
of it.
39
- 31 -
MR. PAUL: Davis, to my surprise, expressed himself
strongly against the sales tax.
MR. BELL: He is a labor man.
MR. PAUL: His history doesn't show that, Dan. He
is a very successful patent attorney in New York City,
one of the biggest ones there.
H.M.JR: But very pro-labor.
MR. BLOUGH: I don't think, personally, that it is
very hard to answer the questions you have put up.
H.M.JR: How would you answer them?
MR. BLOUGH: What was the first one, should there
be another tax bill? Of course there should be another
tax bill. We have always assumed it from the beginning.
H.M.JR: All right. Should we try to do anything
in the Senate now?
MR. BLOUGH: My answer to that, for the third time,
is no. I don't think if you put something on in the
Senate it means you have accepted the idea there won't
be a tax bill. I don't believe anybody is accepting
that idea. I think everybody is expecting a tax bill.
I think the country would laugh at the administration
if you didn't get one, and I think that the pressure can
be put so strongly on Congress that you will just have
to have one.
MR. PAUL: When you say "tax bill" do you mean a
tax bill taxing all '43 income?
MR. BLOUGH: I mean a tax bill passed in '43. I
didn't say what it applied to. I think that such a bill
should be passed and such a bill can be passed.
MR. PAUL: If you put it that way, I think it can.
Regraded Unclassified
40
- 32 -
MR. BLOUGH: I see no reason why this compulsory
savings, if it is going to be in the picture, can't be
put in that bill just as well as being hooked onto pay-
as-you-go. I think that pay-as-you-go should have been
in conjunction with the tax bill. That is water over
the dam. I am opposed at this time to messing up this
pay-as-you-go any more by hitching anything onto it in
the Senate.
H.M.JR: I am perfectly willing to sign my name to
what Roy just said as to what my policy is.
MR. BELL: You would say that you want a tax bill
this year?
MR. PAUL: Certainly.
MR. BELL: Everybody would agree with that. Now,
the question is whether you can get taxes on '43 incomes;
if you can get those, yes.
H.M.JR: At least try it.
MR. BELL: Try it, and that makes the record clear.
H.M.JR: On the record, try.
MR. BLOUGH: That is the thing Paul said he didn't
think could be done, and I agree with him.
MR. BELL: He didn't say "shouldn' t"be.
MR. PAUL: I wasn't asked that question.
MR. BELL: You still feel that an attempt should be
made to get taxes on '43 incomes? When the Secretary
goes up and recommends taxes should he talk about '43
incomes?
MR. PAUL: I think there should be taxes on '43
incomes. I don't think you have a Chinaman's chance to
get them.
Regraded Unclassified
41
- 33 -
H.M.JR: I should recommend it.
MR. BLOUGH: I have some doubts in my own mind. I
don't mean to take the policy position here--
MR. PAUL: That is all right.
MR. BLOUGH:
but I have some doubts whether the
Secretary of the Treasury from here on ought to ask for
income tax increases retroactively.
MR. PAUL: That is my view.
MR. BLOUGH: I think it got us into trouble, that
the Ruml plan agitation is largely due to that retroactive-
ness of the '42 act.
H.M.JR: That doesn't have to be settled today.
MR. BLOUGH: That is right.
MR. BELL: That may settle itself. It may be SQ
late when you make your statement that it would be
ridiculous to ask for it.
MR. PAUL: The other point was compulsory savings,
wasn't it?
H.M.JR: Any amendment.
MR. SULLIVAN: I think we have been talking about
whether or not we would be willing to accept an amendment
in the Senate. I think our position has to be very much
firmer than that, that we have to be resolutely opposed
to anything over there.
It is going to be touch and go as to whether we
can get these forms printed and out by July 1st, and if
there is any discussion of anything else - anything new -
in the Senate, I think the chances of putting withholding
into effect on July 1st are so remote we can dismiss them
from our minds.
Regraded Unclassified
42
- 34 -
H.M.JR: I personally feel this way. I take it we
are going to get the Doughton bill through the House.
MR. PAUL: I am not sure of that.
H.M.JR: Let's go on that assumption for the sake
of this argument. Then we come to the Senate, and I
haven't the foggiest idea of what the Senate will do,
but if the administration comes along and begins to make
amendments, in the first place you have got a picture
now - I am out on the end of a limb on this thing; I
put my name to your statement - you have a picture now,
after all of this discussion, of suddenly introducing
something entirely new.
MR. PAUL: I don't think we should introduce it,
anyway.
H.M.JR: No, but I think we should be against it.
MR. SULLIVAN: That is right.
MR. PAUL: If we came in now--
MR. SULLIVAN: Anything.
H.M.JR: Anything. I think we should stick by the
Doughton bill before the Senate and say, "Let's get that
on the books."
MR. HAAS: And give this reason, that you have to
have it fast in order to get it effective.
H.M.JR: We will lose it.
MR. PAUL: If you want a forecast, the information
I get is there is a very strong chance the Robertson bill
will pass because the Republicans may flop for it.
H.M.JR: But, Randolph, I feel here - and I think
that e verybody here is with me - I don't know where you
Regraded Unclassified
43
- 35 -
(Bell) stand - that we should oppose anything at this
time other than the Doughton bill or something in the
form - a bill which will get this country current, and
don't let's introduce something entirely different.
Where do you and I stand on that?
MR. PAUL: Certainly I don't think the Treasury
should introduce anything.
H.M.JR: No, but opposite this committee over here.
MR. PAUL: I didn't express an opinion there. I
am trying to think now.
H.M.JR: But you have to go back Monday, and just
to say we are taking a position--
MR. PAUL: That is right, I am trying to give the
question consideration. You are asking me, and for the
first time I am trying to make up my mind about it.
H.M.JR: Well, take your time.
MR. PAUL: Certainly it is clear that the Treasury
should not introduce anything because the Ways and Means
people would be very sore if you did and you would be
accused of being late in introducing anything. If it
were to be done it should be done by George, and I am
not sure it won't be done by George. The situation is
very much tied up with inflation.
The only reason I hesitate is that if you don't
get it now I am fearful you won't get anything, and
then I am afraid of the inflation situation.
MR. BLOUGH: Suppose the administration does
nothing, absolutely nothing, it is assumed that this
pay-as-you-go is what is going through the Senate, and
then the question really comes down to this: If George
Regraded Unclassified
44
- 36 -
succeeds in getting an amendment under active con-
sideration in the Senate committee, then should the
administration actively oppose it.
MR. SULLIVAN: That is right. That is exactly
it, Roy.
MR. BLOUGH: You could answer the first question
that the administration should not try to get this
thing through.
MR. PAUL: That is clear. I don't feel we should
move in at this time to the Senate.
MR. BLOUGH: Nor should we let anybody else in
the administration move in in our place, should we?
MR. PAUL: Not in the administration.
11
MR. BELL: Shouldn't we oppose the first attempt to
tack anything onto this Doughton bill?
MR. SULLIVAN: That is the question.
MR. BLOUGH: That becomes the real question, what
should be the attitude if through spontaneous action
in the committee the matter comes up.
MR. BELL: We may have to change our position
and go along with it. If it gets so strong, oppose
it in the first instance.
H.M.JR: Oppose it vis-a-vis Byrnes, that is the
question. On Monday you are facing that.
MR. SULLIVAN: Oppose it all the way through.
(Discussion off the record.)
Regraded Unclassified
45
- 37 -
MR. BLOUGH: I think it is all a little bit of mis-
understanding.
H.M.JR: I think Randolph had better take a historian
with him next time - he doesn't do himself credit - to write
up your minutes for you. (Laughter)
MR. PAUL: I don't have time to editorialize those
memos I write to you. You have to write them under a good
deal of pressure. I don't consider it necessary to make a
record or go into all the refinements. I try to dash some-
thing off so you will be able to know approximately what
went on. I think that - my judgment is that for a variety
of reasons it would be unwise to tack anything on in the
Senate - and I say that without prejudice - on compulsory
savings. I mean - I am assuming I am for it - and I also
say it in full realization of the risk involved, what the
Treasury revenues will suffer, what the Treasury collections
will suffer - might suffer - I don't say they will, but
they might very well. You are taking 8. risk.
MR. BELL: If we lose altogether, you have taken that
risk - if you lose out on a tax bill - subsequent tax bill--
MR. PAUL: Here the risk you are taking - there are
certain collections which would be going on from, say,
July 1st, or August 1st through the rest of the year. If
you succeeded in the Senate, you won't get it. That is your
risk.
Now, I certainly expressed no opinion yesterday on
this question at all, so I am not at all precluded from
taking a position Monday.
H.M.JR: Just restate it. It isn't quite clear in
my mind what you propose to say.
MR. PAUL: Maybe it isn't inmy mind. I am addressing
myself to the question of whether we should be in favor--
I won't say introduce - be in favor of adding something to
this present pending bill in the Senate or whether we should
rather be in favor of quickly disposing of this present
Regraded Unclassified
46
- 38 -
bill limiting that bill to what now is contained in it.
On that question my judgment is that we should not be in
favor of complicating the bill with any additions in the
Senate, and I say that with realization that we are taking
8. risk that the Treasury collections will suffer.
H.M.JR: But that means in my language that if we
actively oppose any amendment to the Doughton bill it passes
in its present form.
MR. PAUL: I don't know what I would feel on that.
Suppose George comes up - I am trying to think about it
practically - suppose George comes up in favor of the
twenty billion dollars - it is hard to answer that question
unless you know what the addition is.
H.M.JR: Let's just put it across the street - Monday.
We don't have to - I mean, the President might do something
without asking us at all. Then that would be something else
again. But you haven't answered it to my satisfaction. It
is one thing to say we will get the bill through quickly;
another thing is, across the street Monday are we in favor
of adding an amendment to the bill, or say, "No, we want
this bill passed in order that we can get on a pay-as-you-
go basis as rapidly as possible."
MR. PAUL: Putting it that way, we ought to be in
favor of passing it quickly and not putting it lightly.
But the other question was that if somebody introduced -
if George came in with an amendment, say, twenty-billion-
dollar compulsory savings, I am not so clear that--
H.M.JR: I am not asking--
MR. PAUL: No use having any ten-billion-dollar com-
pulsory savings, because you would lose income. What you
would get wouldn't be worth it.
H.M.JR: I talked to George in terms of the bigger
one. When you get out and figure it, it is ridiculous.
Regraded Unclassified
47
- 39 -
MR. PAUL: Fifteen is the figure George mentioned to
me.
H.M.JR: All you have to do with George is take out
your pencil and say that so much is your withholding, so
much this, and 80 much that, and then ask him - say, I am
not asking you to commit yourself whether you are for or
against compulsory savings. We are talking about unknown
quantities, four billion or twenty billion."
All I am saying is the Treasury's position - where I
would like to have the Treasury's position is that we are
for the Doughton bill, to get it through just as quickly as
possible without any amendments.
MR. PAUL: That is true with any amendment.
MR. BLOUGH: You mean hitching on anything that doesn't
involve pay-as-you-go?
H.M.JR: That is right, or put it through in E way--
MR. PAUL: I am for that.
H.M.JR:
to get this country on a pay-as-you-go
basis just as promptly as possible without introducing any-
thing new. Now, are we together on that?
MR. PAUL: I think that is the wisest thing to do, and
there is nothing there to prevent my taking that position,
because I didn't express myself on that question yesterday.
MR. SULLIVAN: I think you ought to know that Senator
George's position on forced savings is based upon the feeling
that if thereare very widely held Government bonds the people
would prevent any subsequent administration from repudiating
in any way the repayment of our securities, and I think that
when Senator George discovers how widely they are now distributed
he will find out that his own objective has already been
accomplished.
H.M.JR: Well, I am sorry that they had to bring this
thing up while the bond drive isn't even over and we don't
Doaradod i
48
- 40 -
know what the results are, and also before we have even
gotten this bill through the House, because you know - we
all know in this room - that with the exception of the
Treasury, you just can't go out and sit down with a cross
section of the people like that Chamber of Commerce fellow--
MR. PAUL: That is the reason I didn't want to mention
any figures.
H.M.JR: The Chamber of Commerce fellow will tell his
board of directors, and O'Neal his, and Patton tells his
board, and we will all be in the dope sheets over the week
end which you will get Monday - Goidsmith, and Whaley-Eaton,
and Kiplinger, and all the rest of them.
Shall we leave it? Have we covered the ground, Dan?
MR. BELL: I think SO.
MR. PAUL: The program.
MR. BELL: Can't Randolph say over there Monday that
he would like to impress upon everybody that this bill is
pending, and that we are discussing this in a confidential
way, and nothing should be said to interfere with that bill?
MR PAUL: Byrnes said that.
MR. BELL: Can't you reiterate it?
MR. PAUL: Sure.
H.M.JR: Is this a full meeting of the committee?
MR. PAUL: I don't know.
MR. BELL: They weren't all there, but it is practically--
H.M.JR: I mean Monday.
MR. PAUL: I think 80. It wasn't made entirely clear.
H.M.JR: I mean, I could go if I wanted to?
Regraded Unclassified
49
- 41 -
MR. PAUL: I don't know what the views are about that.
MR. BELL: There is a meeting of the committee Monday
to hear you on forced savings?
MR. PAUL: No, Marriner was pressing for going on the
record right then, and there he was, talking about com-
pulsory savings vaguely, and he didn't know what he was
talking about - which kind of a plan. So I said, "What do
you mean" - this, or that, or the other thing. There were
several kinds of plans. Whereupon they decided they couldn't
make it a blanket endorsement. They wanted to consider
specific plans.
H.M.JR: But you told me when they invited you that they
said they called me first, and then you went through the
rigmarole.
MR. PAUL: They called you first, Byrnes said. I
don't know whether he did. Byrnes told me he tried to get
you. I will show you the conversation on that.
H.M.JR: Well, it is not - look-
MR. PAUL: I suppose he did what he said he did.
H.M.JR: I could go there because I am 8 member of the
committee, but I am not going to go. I will let you rep-
resent me.
MR. PAUL: If you would rather.
H.M.JR: No, we will leave it just that way.
MR. PAUL: The proposition is to particularize their
minds on what forced savings means and say, "If you want
forced savings, here is what you can have. One plan, of
course, is a flat thing like our spendings tax. Another
one is the one we drew up early this year, Roy, and they
didn't understand any of that. I didn't want them to vote
on it.
H.M.JR: But the point is, we decide here now we don't
think that this is the time to discuss it. The time to
Regraded Unclassified
50
- 42 -
discuss that thing is when we take up another tax bill, and
not in connection with this pay-as-you-go bill. We are
together on that, aren't we?
MR. PAUL: That is right.
H.M.JR: That is all I am trying to say.
MR. PAUL: That means, of course, that if you are going
to collect on '43 incomes the quicker the tax bill is taken
up the better, because it will take months to pass. I don't
think you should ask for a tax on income already earned.
H.M.JR: The opinion here is that that is a question we
didn't discuss, and no commitments were made anywhere here
on compulsory savings. I want to take a fresh look at it.
MR. PAUL: I do, too. I am not being categorical about
that. I expressed no opinion on compulsory savings.
MR. BELL: Why shouldn't you try to avoid a vote on
this thing? That is unusual anyway for this committee to
take 8 vote. It is not a voting committee. They never
express their opinions for the record at all. The whole
discussion is advisory to Byrnes. He makes up his own mind
on what the board does, and the meetings and everything are
advisory.
So I don't see why we should get a vote or an expression
of opinion from this group on forced savings at this time.
Why can't we suggest that after you go over all these plans
the Treasury would like to discuss this at a later date when
the tax bill is up for discussion?
MR. BLOUGH: I would like--
MR. BELL: As well as when it goes into the tax bill.
MR. PAUL: It might be possible to postpone it until
after the tax bill is passed.
MR. BLOUGH: May I take the opportunity to say here that
it seems to me we owe it to the country to make a very strong
campaign for a very strong tax bill the minute this pay-as-
you-go business is out of the way, and that we
Regraded Unclassified
51
- 43 -
ought to be laying our plans ahead of time; that we ought
not to let Stam or Doughton or anybody else try to shove
this thing over until August; that regardless of our own
personal comfort in the matter, the situation is getting
bad 30 far as this fiscal picture is concerned; and that we
need to get at the tax bill immediately. I don't think we
should say anything publicly until the pay-as-you-go is out
of the way, but the minute that is out of the way, I think
we ought to work and work hard.
H.M.JR: I am in total agreement. That is what I
would like to do.
MR. SULLIVAN: When these Congressmen get back home
after talking with the ordinary fellow on the street, they
will be much more receptive to a new tax bill than two weeks
ago.
H.M.JR: I was coming down this morning to have a nice
time and B. nice chat, and I am exhausted. So, if there is
no more, I would like to stop here.
MR. HAAS: wouldn't this meeting be postponed? Is that
a legitimate question?
MR. PAUL: I might be able to postpone it until Wednesday.
H.M.JR: I think that would be good.
MR. HAAS: I mean, after they pass the bill.
MR. PAUL: They will want to--
H.M.JR: Why don't you try for a postponement?
MR. PAUL: I don't think there will be any trouble until
Wednesday, but I don't think you can postpone it until after
the whole bill is passed.
H.M.JR: No, no; that is all right. O.K.
MR. PAUL: I will call Byrnes and suggest it be put over
to Wednesday.
H.M.JR: Will you do that?
MR. PAUL: The bill will be voted on Tuesday.
52
May 1, 1943
12:38 P. M.
Grace
Tully:
How are you, sir?
HMJr:
Fine. How are you all?
T:
Very well indeed, thank you.
HMJr:
How do you like Mexican food?
T:
Well, the food was very good.
HMJr:
It was?
T:
Uh huh.
HMJr:
Good. Look, I'm sending you over after lunch a
letter to the President which gives him a descrip-
tion of this tax bill that's coming up Monday be-
fore the House
T:
Yes.
HMJr:
and I thought he might like to glance at it over
the week-end.
T:
Uh huh. Fine.
HMJr:
If - if you'd give it to him.
T:
Indeed I will.
HMJr:
And if you'd say to him that any help he can give us
in the House to get the thing through will be greatly
appreciated by us.
T:
Yeah.
HMJr:
And last time he called Lyndon Johnson
T:
Yeah.
HMJr:
lthough - which was very helpful
T:
It was?
Regraded Unclassified
53
- 2 -
HMJr:
Yeah.
T:
Should he call Lyndon again or has he any other
ideas?
HMJr:
No, Lyndon Johnson - - if he'd call him Monday -
that will be - and I think maybe John McCormack.
T:
Yes.
HMJr:
Those two.
T:
All right.
HMJr:
Well, there're three really - I don't want him to call
all - but it's Rayburn, McCormack and Lyndon Johnson.
T:
Right.
HMJr:
And if he has time Monday, - it would - it would be
helpful. Because we haven'
T:
Might even do it Sunday.
HMJr:
Sunday would be fine.
T:
Yeah. All right, fine, Mr. Secretary, I'll make
a note of it and if you will send that over to me
I'll take it up with him as soon 8.8 I have a chance.
HMJr:
It will be over right after lunch.
T:
Right, sir.
HMJr:
Thank you.
T:
All right. Goodbye.
Regraded Unclassified
5-1-42
TO:
54
This Channeery.
This was sent to The
white House at 1:10pm
From: MR. PAUL
Regraded Unclassified
55
May 1, 1943
My dear Mr. President:
I am sending you herewith a summary
of the Tax Bill which will come up before
the House on Monday and Tuesday.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
The President,
The White House.
Regraded Unclassified
56
May 1, 1943
MEMORANDUM FOR THE PRESIDENT:
Subject: The Ways and Means Committee Bill
(H. R. 2570) for current payment
of the individual income tax
The Committee Bill, to be debated in the House on
Monday, May 3, inaugurates current collection for the
latter half of 1943 beginning July 1 and disposes of the
1942 tax liability over a three-year transition period.
Payments made in March and June, 1943, are not treated as
1942 tax payments, but as current payments of the tax on
1943 incomes. Collection at source from the wages and
salaries of 34 million out of a total of 44 million tax-
payers begins July 1, 1943, at a rate of 20 percent above
exemptions -- sufficient to cover the Victory tax, the
normal tax, and the surtax at the first bracket rate.
Current payment of the liabilities not collected at source
will be made quarterly beginning with September, 1943, by
about 14 million taxpayers on the basis of estimates of
current income.
To facilitate the transition to current payment,
the Bill reduces the tax on 1942 income in accordance with
& schedule which, in effect, restores the 1941 rates and
exemptions for the taxable year 1942. The reduced 1942 tax
is spread over & three-year period: One third is payable
by March 15, 1944, one-third by March 15, 1945, and one-
third by March 15, 1946. Discounts are provided for prompt
payments 6 percent of the reduced 1942 tax if paid in full
by March 15, 1944; and 2 percent of the reduced 1942 tax
if one-third is paid by March 15, 1944, and the balance
Regraded Unclassified
57
Regraded Unclassit
- 2 -
by March 15, 1945. These discounts are equivalent to an
interest rate of 6 percent por annum on the prepaid amounts.
Restoring the 1941 rates and exemptions for 1942
incomes will cancel $4.7 billion of the aggregate 1942
tax liability of $9.5 billion which remains after taking
account of the special reliefs for military personnel.
Payment of the $4.8 billion balance will provide $1.6
billion a year of added collections during 1944, 1945, and
1946. Discounts may speed up payments so as to concentrate
more of the increased collections in 1944 and 1945. Allow-
ing for the advancement of 1943 and 1944 tax collections
it is estimated that the Bill will add at least $2.7 billion
of tax collections in the fiscal year 1944.
The tax bills of both the majority and minority of
the House Ways and Means Committee have identical provisions
for current collection at source and current payment of
liabilities not collected at source. Controversy centers
on the transition problem of how to treat the 1942 tax. All
are agreed that some forgiveness is necessary, but the amount
and distribution of forgiveness are in dispute. The majority
bill, as indicated, would forgive about 50 percent of the
aggregate 1942 tax liability of $9.5 billion in accordance
with a schedule which would permit a distribution of tax
increases substantially paralleling the distribution of tax
forgiveness. The minority bill would forgive an entire
year's tax, subject. to only partially effective safeguards
against undeserved windfalls. It would result in a redistri-
bution of wealth from the lower to the higher brackets since
subsequent tax increases on high incomes would not be suf-
ficient to parallel the tax forgiveness.
The Bill also gives extensive relief to persons in
the armed services.
58
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Press Service
Friday, April 30. 1943
No. 36-40
Secretary Morgenthau announced today that the Treasury fully
supports the current tax payment plan introduced by Chairman Doughton
and recently reported by the Ways end Means Committee to the House of
Representatives. If this bill becomes law, American taxpayers will be
paying their income taxes currently before the end of 1943. In order
to make the shift from the present system to the new system without over-
burdening taxpayers, the bill proposes to reduce the 1942 tax to 1941
levels and to give the taxpayer three years in which to pay the reduced
tax. The March and June instalments payable in 1943 will be treated
S.B current payments of 1943 income tax, and withholding of the income
tax from wages and salaries will begin at a 20 percent rate on July lot.
The 20 percent withheld is not an additional tax, but is merely a means
of collecting the regular income and Victory taxes.
The bill, in effect, recomputes the tax on 1942 incomes at 1941 rates
and exemptions, and cancels the difference. Treasury figures indicate
that the bill will cancel $4.7 billion of the aggregate 1942 tax lia-
bility of $9.5 billion which remain after taking account of the special
provisions for militery personnel.
The remaining $4.8 billion will be collected over the period from
1944 to 1946, thus providing $1.6 billion B. year of the added collections
needed to finance the war. Discounts provided for paying taxes shead of
time will probably speed up payments 80 that the increase in collections
for 1944 and 1945 will be even greater.
Regraded Unclassified
59
- 2 -
Restoring 1941 rates and exemptions for 1942 incomes and holding off
the application of 1942 rates and exemptions until 1943 will cancel the
entire 1942 tax for 7 million new taxpayers at the bottom of the income
scale and substantially reduce the 1942 tax for the great bulk of the
remaining taxpayers. For a married person with no dependents, the tax
reduction on a $2,500 net income is 63 percent' of the 1942 tax; at $5,000,
it is 52 percent; at $10,000, it is 40 percent; at $25,000, it is
26 percent; at $100,000, it is 18 percent; and at $1,000,000, it is
14 percent, Taxpayers in the lower brackets, who are least able to
provide in advance for taxes, are given the most relief in percentage
terms.
All members of the armed forces will be entirely exempt from income
taxation on service pay up to $3,500.
The reduced 1942 tax will be payable in three instalments, the first,
by March 15, 1944; the second, by March 15, 1945; and the third, by
March 15, 1946. However, taxpayers amdous to pay up their 1942 taxes
will be given the incentive of discounts for payment in advance of this
schedule, The person who pays the full amount of his tax on or before
March 15, 1944, will get a 6 percent discount. Those who pay the full
remaining amount on or before March 15, 1945, will get a discount of
2 percent of their total liability, or 6 percent of their remaining
liability. In cases of hardship, the Commissioner of Internal Revenue
is authorized to grant extensions totalling 3 years for any instalments
of the reduced 1942 tax,
The reduced tax and the effects of the discount provisions are shown
in Table 1, while total income and Victory tax payments in 1944 are shown
for selected levels of income in Table 2.
As a convenient means of paying income taxes currently, the bill
provides for collection at source, or withholding, from wages and salaries
to begin on July 1 at a rate of 20 percent, This rate consists of
3 percent for the Victory tax and 17 percent for the income tax, and
applies only to the excess of the total wage above exemptions and an
allowance for deductions. The Victory tax exemption will remain at $624
for all individuals, and the exemption in withholding income taxes will
be the regular $500 for a single person, $1,200 for a married person, and
an additional $350 for each dependent, each increased by 10 percent to
allow for average deductions,
Employers will be provided with special tables to simplify their
withholding task, These tables will indicate the combined tax to be
withheld for each wage bracket according to the exemption status of the
employee. While collection at source applies generally to wages and
salaries, remuneration paid to domestic servants, men in the armed forces,
farm labor, and a few other limited classes are not subject to withholding.
Such employees will pay their taxes directly to the Government on the basis
of current estimates of income.
Regraded Unclassified
60
- 3 -
A separate system of current payment is provided for incomes not
subject to withholding under the Committee Bill, Such incomes, excepting
farm income, must be estimated on March 15 of each year and the taxes
thereon must be paid in quarterly instalments or carlier. In computing
the tax on the ostimated income each year, allowance will be made for
amounts, if any, to be collected at source. The taxpayer will be per-
mitted to revise his estimate of tax during the year and to increase or
decrease his remaining instalments for the year,
A special rule permits farmers to pay their taxes at any time before
December 15 of the taxable year on the grounds that they do not have
a reliable basis for forecasting their income. They are, however, given
the option of paying their taxes in instalments.
Penalties will be applied for gross underestimates of current income
and tax, Taxpayers other than farmers are required to pay currently at
least 30 percent and farmers at least 66-2/3 percent of the final tax
liability. To the extent that payments fall short of these percentages,
a penalty of 6 percent is applied.
The system of current payment of taxes not withheld at source will
come into operation during the third quarter of 1943 to parullel the
new withholding system which begins July 1.
In the opinion of the Treasury, the Committee Bill will make income
taxes far easier to pay. At the same time it will strengthen the Federal
revenue system. It will fit tax payment directly into the budgets of
the millions of small income recipients, Taxes will rise and fall as
income rises and falls from week to week and month to month and will
stop when income stops.
By providing a true pay-as-you-go system, the bill will bring in
revenue more certainly and more promptly, thus helping to curb inflation.
Without excessive doubling up and without permitting undeserved windfalls,
the Committee Bill will definitely improve the tax system for both the
taxpayer and the Government.
Regraded Unclassified
61
Table 1
Reduced 1942 income tax 1/ after discounts under H. R. 2570 if paid
by various dates
Married person - no dependents:
: Reduced 1942 :
Net income : tax under
:
Reduced 1942 tax after
before
: H. R. 2570 :
discounts in Section 6
personal
:
if paid by
:
of H. R. 2570 if paid by
exemption
:larch 15, 1946: March 15, 1944 : March 15, 1945
2/
: (No discount) : (Discount of 6%) : (Discount of 2%)
$
1,200
-
-
-
1,500
-
-
-
1,800
$
22
$
21
a
21
2,000
40
38
39
2,500
86
81.
84
3,000
132
124
129
4,000
236
222
231
5,000
358
337
351
6,000
505
475
495
8,000
861
809
844
10,000
1,292
1,214
1,266
15,000
2,705
2,543
2,651
20,000
4,581
4,306
4,489
25,000
6,824
6,415
6,688
50,000
20,393
19,169
19,985
100,000
52,703
49,541
51,649
500,000
345,394
324,670
338,486
1,000,000
732,874
688,902
718,217
5,000,000
3,922,844
3,687,473
3,844,387
Treasury Department, Division of Tax Research
April 20, 1943
1
Exclusive of Victory tax.
2/
Maximum earned income assumed.
3
The exact amount payable would be 021.56.
Regraded Unclassified
62
Table 2
Tax payments and effective rates under H.R. 2570 at selected levels of net income
in calendar year 1944 assuming (a) taxpayer avails himself of no discount and (b)
taxpayer avails himself of the 6% discount
Married person - no dependents
Net income:
Income
: Victory : Reduced 1942 tax payable :
Total tax pay-
before :
tax
: tax after:
in 1944
:
able in 1944
personal
:
liability:
post-war
:
If
no
dis-
:
If 6%
:
If no
I
If 6%
exemption :
on 1944
:
credit
: count is taken:
discount:
discount
:
discount
1/
:
income :
2/
: (One-third of
:
is taken: 1s taken : is taken
:
:
:
reduced tax)
:
5/
--
:
Amount of Tax
$
1,200
-
$
21
-
-
$
21
$
21
1,500
$
48
31
-
1
79
79
1,800
103
41
$
7
$
21
151
6/
165
2,000
140
48
13
38
201
226
2,500
232
65
29
81
326
378
3,000
324
81
444
124
449
529
4,000
532
115
79
222
726
869
5,000
746
148
119
337
1,013
1,231
6,000
992
181
168
475
1,341
1,648
8,000
1,532
248
287
809
2,067
2,589
10,000
2,152
315
431
1,214
2,898
3,681
15,000
4,052
481
902
2,543
5,435
7,076
20,000
6,452
648
1,527
4,306
8,627
11,406
25,000
9,220
815
2,275
6,415
12,310
16,450
50,000
25.328
1,747
6,798
19,169
33,873
46,244
100,000
64,060
4,524
17,568
49,541
86,152
118,125
500,000
414,000
26,747
115,131
324,670
555.878
765.417
1,000,000
854,000
45,000
244,291
688,902
1,143,291
1,587,902
5,000,000
4,374,000
125,000
1,307,615
3,687,473
5,806,615
8,186,473
Effective rates
1,200
-
1.8%
-
-
1.8%
1.8%
1,500
3.2%
2.1
-
-
5.3
5.3
1,800
5.7
2.3
0.4%
1.2%
8.4
9.2
2,000
7.0
2.4
0.7
1.9
10.1
11.3
2,500
9.3
2.6
1.2
3.2
13.0
15.1
3,000
10.8
2.7
1.5
4.1
15.0
17.6
4,000
13.3
2.9
2.0
5.6
18.2
21.7
5,000
14.9
3.0
2.4
6.7
20.3
24.6
6,000
16.5
3.0
2.8
7.9
22.4
27.5
8,000
19.2
3.1
3.6
10.1
25.8
32.4
10,000
21.5
3.2
4.3
12.1
29.0
36.8
15,000
27.0
3.2
6.0
17.0
36.2
47.2
20,000
32.3
3.2
7.6
21.5
43.1
57.0
25.000
36.9
3.3
9.1
25.7
49.2
65.8
50,000
50.7
3.5
13.6
38.3
67.7
92.5
100,000
64.1
4.5
17.6
49.5
86.2
118.1
500,000
82.8
5.3
23.0
64.9
111.2
153.1
1,000,000
85.4
4.5
24.4
68.9
114.3
158.8
5,000,000
87.5
2.5
26.2
73.7
116.1
163.7
Treasury Department. Division of Tax Research
April 28, 1943
See footnotes next page.
Regraded Unclassified
63
Table 2 (dont.)
Meximum earned net income assumed. 1944 net income assumed to be same
as 1942 net income.
2/ Assuming gross income to be ten-ninths of net income. Net Victory tax
is used on assumption that taxpayer receives current benefit of postwer
credit.
3/ Taking into account maximum effective rate limitation of 90 percent on
combined net income and Victory tax.
4/
The exact amount payable would be $7.33.
5/
The discount of 6 percent is allowed if the entire amount of the reduced
tax for 1942 is paid on or before March 15, 1944.
6/
The exact amount payable would be $151.33.
Regraded Unclassified
64
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 1, 1943.
TO
Secretary Morgenthau
FROM
Harold Graves
If you have not already seen it, you might like to look at
Tuesday's issue of the Cedar Rapids Gazette, attached.
cliffing com so Days peray Gook.
65
treasury DEPARTMENT
WAR SAVINGS STAFF
FFICE OF STATE ADMINISTRATOR
April 28, 1943
SUU Walnut Bldg.
Des Moines, Iowa
Hon. Harold N. Graves
Assistant to the Secretary
Treasury Department
Main Treasury Building
Washington, D. C.
Dear Mr. Graves:
At Mr. Clark's request I am enclosing a copy of the
Cedar Rapids Gazette which carries considerable
coverage of the appearance of Secretary of the
Treasury, Henry Morgenthau, Jr., at Cedar Rapids.
We thought you would be interested in seeing this.
Sincerely,
S.R. tudles
CRD:HA
C. R. Dudley
Publicity Director
(Iowa Office)
War Savings Staff
Treasury Department
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
66
May 1, 1943
MEMORANDUM FOR THE PRESIDENT.
In accordance with your request of April 19, I an
returning to you the memorandum submitted to you by
Mr. John Franklin Carter. Mr. Carter passes on a sug-
gestion originating in Canada in regard to War Stamp
purchases for pasting on bombs to be dropped in Germany.
Mr. Carter's interest in passing on this suggestion
is much appreciated. As it happens, a similar plan was
proposed at a regular meeting of the War Savings Staff
some time age. It was rejected at the time because it
was felt that War Savings Stamps thus purchased and
pasted on bombs would represent gifts made by the
purchasers, who would not be able to secure any return
on their investment.
Furthermore, in any campaign of this kind it is
usually the ones who cannot afford it that make the
contribution, while those who can afford to donate usually
take interest-bearing securities. Also, the public debt
accounts cannot accurately reflect the reduction in the
debt resulting from such action on the part of the owner.
It has been felt that these are valid reasons for
not adopting & promotional idea of this type.
(Signed) H. Morgenthau, Jr.
File in Diary
Initialed copy to Bell
By Sturgie 4:45 5/3/43
GEF:DWB:ik
(initialed by S.P. and DWB)
Regraded Unclassified
67
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
April 21, 1943
TO
Secretary Morgenthau
Stuart Peabody S.P.
FROM
A plan, similar to the one here discussed by John Franklin
Carter, was proposed at a regular meeting of the War Savings
Staff some time ago. The idea was rejected because the War
Savings Stamps purchased and pasted on bombs would be contribu-
tions by the purchasers and there would be no return available
to the investors.
This seems to me to be a valid reason which I will be glad
to pass along to Mr. Carter if you 80 desire. On the other hand,
if you wish to reopen the matter for reconsideration, we will be
glad to do so.
charges. to your 4/24
mind AWB suggrated
Retypel and suggested
S.P
APR 28 RECD
Regraded Unclassified
68
THE WHITE HOUSE
WASHINGTON
April 19, 1943.
MEMORANDUM FOR THE
SECRETARY OF THE TREASURY
FOR YOUR INFORMATION AND
RETURN FOR MY FILES.
F.D.R.
69
COPY
JOHN FRANKLIN CARTER
1210 National Press Building
Washington, D. C.
April 13, 1943.
REPORT ON BRITISH WAR-FUND METHODS.
While in Ottawa last week, Lewis Clark, our Charge d'Affaires,
suggested to me that our Treasury might make use of a method employed by
the British Government in raising war-funds. They put a large empty
air-bomb in some public place and invite the public to buy war-stamps
and paste them on the bomb. When the bomb is covered with the stamps,
it is filled with explosive and dropped on Germany. In this way,
not only is the public given a sense of active cooperation but no
charge is incurred by the Treasury.
Perhaps Mr. Morgenthau would be interested in this suggestion of
Mr. Clark.
s/ J.F.C.
Regraded Unclassified
XXX
70
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 1, 1943
TO:
Secretary Morgenthau
FROM: Robert A. Le Roux
LOS ANGELES
While the situation in Southern California was dismal up
to two weeks ago, there are two factors being credited with the
gratifying results in the Southern California Second War Drive.
The report by the President as to the execution of American
pilots of the Doolittle brigade gave a strong impetus to the
campaign, and then came the visit to the State of California of
Secretary Morgenthau and his presence added to the enthusiasm
of the workers in the state generally.
On Friday night, April 30th, the closing date of the Drive,
Southern California had exceeded its goal of 221 million dollars.
Reports were being received from many organizations and industries
and business firms as to additional purchases and when these
reports are compiled, the over-quota subscriptions may exceed two
million dollars. Credit for this devolves on the splendid staff with
which State Administrator Mills has surrounded himself. All are
tireless in their efforts and their enthusiasm is unbounded.
The splendid showing in Southern California is the more re-
markable when one considers the serious handicap occassioned by
reports of alleged coordinated efforts to extend aid in the fight
against Hitler to the detriment of the Pacific War effort. Naturally,
California is extremely vulnerable and therefore is very sympathetic
Regraded Unclassified
71
- 2 -
with the expression that General MacArthur in Australia and the
North Africa front were being sacrificed. This situation
necessarily entailed "smoothing" salesmanship.
The Los Angeles War Savings Staff has done 8. remarkable
"selling" job among the workers, contractors, the airoraft
manufacturers and other industries.
It was pointed out by Mr. Hodge that of 77,000 employment
units in Southern California, with a total of 1,355,000 employees,
the Payroll Savings Plan is in effect in 4,849 units, covering
984,334 workers. It will thus be seen that approximately 97%
of all employers of 106 or more workers are now enrolled. Mr.
Hodge further stated that his office is now working for the en-
rollment of 58,000 units of from 1 to 5 employees, thus covering
an estimated 162,400 workers.
The difficulty in the enrollment of these small units, is the
turn-over among workers. The Los Angeles office is now endeavoring
to perfect a plan whereby itinerant workers will be placed on a
Payroll Deduction Plan and should their employment be so brief as
not to allow sufficient earnings to purchase a bond, the payroll
deduction will then be transferred to the future employer. Thus
the workers might be employed during the month by four or five
firms, but deductions would have been made by each one and the
worker finally has earned sufficient funds for the purchase of a Bond.
(It should be stated that these men are not affected by the
freezing order, because their employers are operating on subcontracts
of brief duration.)
Regraded Unclassified
72
- 3 -
Worthy of mention is the cooperation being extended to the
War Bond Payroll Deduction Plan by the Southern California Chapter
of the Associated General Contractors of America. Five hundred
contractors are operating under this plan and the Board of
Directors, through Mr. F. J. Connolly, Manager, has provided all
employers with a detailed plan of operation for payroll deductions.
A mimeographed letter has been prepared instructing the head of the
firm as to how he should proceed in the operation of the plan.
Cards are provided to all contractors so that employees can be
signed up immediately on their acceptance of employment.
Colonel Putman of the U. S. Engineers, has prepared a special
letter which he sends to the contractor with the notice of his bid
acceptance and the Colonel also attaches a copy of a letter, signed
by Manager Connolly, as to the suggested procedure for installation
of the plan.
While in Los Angeles I had interviews with international
representatives of the United Automobile and Aircraft and Agri-
cultural Implement Workers of America (U. A. W. - CIO); with the
Council of Electrical Workers, Painters and Decorators; the Steel
Workers of America; the Motion Picture employees (AFL); the Building
Trades and Construction Council and the Ship Builders. All of these
labor organizations are pledged to the Payroll Deduction Plan and
they state that their individual locals are insisting that the
companies by which their members are employed have the plan in
operation. Heads of various councils (AFL) were particularly
proud of their organizations in the War Bond drive. For instance,
Regraded Unclassified
- 4 -
73
the Boiler Makers have purchased $200,000 in Bonds through the
union treasury, and the Teamsters Union and the Carpenters and
Joiners have each done likewise.
The Musicians Union has bought Bonds totaling $150,000, while
the head of the Screen Actors Guild stated that its treasury had
purchased in excess of $200,000, and he stated that it had always
been the policy of his organization, and others in the A. F. of L.
to invest in Government Bonds and thus keep its money in circulation.
"Now we are putting the money in airplanes and bombs to circulate
to the Japs and the Germans."
As is natural in a city which has enjoyed such tremendous growth
as has Los Angeles, with its war contracts in excess of $4,000,000,000
and where more than one and a quarter million men and women are em-
ployed in aircraft plants alone, both criticism and praise of the
War Savings Bonds program are heard from leaders of organized labor,
officials of corporations, workers in the war plants and in business
establishments, and employers and employees engaged in general
construction work. And from those interviewed, one also receives
suggestions as to how the program could be operated more satisfactorily
and with consequent greater volume of bond purchases.
Analyzing the situation generally, the conclusion is reached
that despite the criticisms, Southern California is enthusiastically
back of the war program and the method of its financing; that it
realizes the tremendous cost of the war will necessitate further and
regular War Bond drives, and that it stands ready and eager to
continue such financing. These leaders, workers and the citizenship
Regraded Unclassified
74
- 5 -
generally comprehend that a program entailing expenditures of
approximately one hundred billion dollars per year will not be
possible under any plan of payroll deductions approximately 10%,
and they express themselves as fully prepared for increases to
15%, 20% and even 25% should this become necessary.
Here are some statements from labor leaders who were
interviewed:
(a) "We can't be shy in putting down the coin, although we
would like it much better if Washington could see the light and
put more pressure on the Pacific war. We out here feel this is
our war. We don't know what Russia and England and the other
Nations will do, but we know what Japan intends to do, and that's
our great menace."
(b) "Taking these Japs from evacuation centers and putting
them to work on some of these swanky farms in the East certainly
gets our goat. These fellows lived on our land and made their
money here, and for years they've been busy cutting our throats.
When it's all over, I say clean them all out."
(o) "The differential between wages, even of highest skilled
mechanics, and prices of commodities is out of all reason. The
workers in our aircraft industry would be perfectly willing to
have the freezing of both wages and commodities got back to March
first."
(d) "I believe they should institute a policy of compulsory
bond purchases from one's earnings. Too many of these fellows are
holding off altogether and it's not right for one fellow to dig
down for a couple of bonds each month and the worker alongside of
Regraded Unclassified
- 6 -
75
him not putting up a dime. This is everybody's war and everybody
should take part in winning it."
(e) "You'll hear considerable talk about absenteeism and
loafing on the job, but the system itself, favored by the Army and
Navy, is responsible. For instance, the military services are
dictating the policy prevailing in the awarding of contracts and they
are insisting that contracts be awarded to firms whose workers are for
the greater part in the lower pay brackets. If the Army and Navy
would discontinue discriminating against the Coast manufacturers
which employ a larger percentage of experienced and skilled workers,
then you would find production speeded up."
(f) "The overall planning for aircraft production is all wrong.
The Army and Navy have great pets in the East and they are the boys
who find no difficulty in obtaining materials and contracts."
(g) "No better evidence of our loyalty and enthusiasm could
be brought forth than the fact that here at C. I. O. Regional Head-
quarters, our organizers and the office staff are participating
100% in payroll deductions, with an average better than 20%."
(h) "It's to be hoped that an adjustment will be made to
equalize the cost of living with wages. For instance, the Little
Steel formula made possible in increase in wage of 15%, but here in
California, it is conservatively figured that living costs have
increased from 28% to 31%."
(1) "For many months, it has been the practice at all meetings
of the Trades Council to have savings stamps on sale, and it's
surprising the total that comes in that way."
Regraded Unclassified
- 7 -
76
(j) "In my Trades and Construction Council, we have nine
separate regional units, with 360 Locals, and at no time have I
heard the suggestion that the payroll deduction plan would be more
satisfactory if it were made compulsory. While you can lead a
horse to water, you can't force it to drink, and it's more
satisfactory to operate under a voluntary plan."
(k) "As a whole, the operation of the war program by the
Army and Navy in the fighting, and the Treasury Department in its
financing is satisfactory. Criticism by the rank and file of our
membership is against the War Labor Board and the O. P. A. If
the W. L. B. would act on disputes and the O. P. A. control prices,
then things would right themselves. If they'll freeze the prices,
we'll freeze the wages."
(1) "With our Electrical Workers, Painters and Decorators,
we encounter very little trouble in getting the men on the payroll
deduction plan. When we are sending them to their new jobs, we
inquire if they wish to be included in the payroll deduction. And
when assured they do, we stamp the card: 'Bond Deduction Ten
Per Cent,' and the job is complete."
And here are some statements from the workers themselves:
(a) "Here at Hollywood, they have the right system. All of
the studios clear their payroll deductions through 20th Century Fox.
I may put in two and three days each month for ten separate studios,
but my Bond money goes from one to the other, and I get my Bonds
regularly immediately when there is sufficient money."
Regraded Unclassified
77
- 8 -
(b) "The last war was a pink tea compared to this one, and
as a World War veteran, I'm making sure that the fellow working
next to me is not a slacker in the financing of this struggle for
freedom. In our shipyard, we don't think a compulsory plan is
necessary because we see to it that if the fellow wants to stick,
he's buying his Bonds regularly. We have our own method of
salesmanship and it's working effectively."
(c) "When we get some complaint from a fellow that ten
percent of his wages are being withheld without his having
signed a pledge card, we inquire: 'Why in the hell haven't you
signed?'. And he signs."
(d) "While there have been some difficulties among workers
for the sub-contractors, this has been caused by some men going on
three and four separate jobs within a very short time. However,
we're remedying that through our unions and through the con-
tractors themselves. Ours is quite a problem when you consider
that most of these sub-contractors employ from but three to five
men."
(e) "You hear a lot these days about the very high wages
received by the men in the aircraft industry and the shipyards.
This high wage level comes from overtime and working steady six
days a week as compared to the 1940 average of but four days."
(f) "The War Bond people sold many of us in the shipyards
on their statement that Bonds are easy to redeem if urgent need
presents itself. I'm convinced that if every worker could be
educated on that score, Bond sales would jump rapidly. The fear
of lack of ready cash in emergencies has held many of our workers
back from making any purchases."
Regraded Unclassified
78
- 9 -
(g) "In our yard, we have a Bond Squadron, and if the new
worker has not enrolled, we get after him right away. I'm proud
to say most shipyards have their flags and that's because of the
policy of signing 'em as you hire 'em."
In a survey of retail stores in Los Angeles, the fact was
brought out that these employees, most of whom are in the lower
wage brackets, are not enlisted in the payroll deduction plan but
buy stamps regularly from their employing establishments or
through the post office or banks.
- 0 -
Regraded Unclassified
79
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 1, 1943
TO:
Secretary Morgenthau
FROM: Mr. Waldman
Working men at the New York Shipyards (approximately
33,000 workers), in Camden, New Jersey; the Sun Shipyards
(approximately 34,000), in Chester, Pennsylvania; and the
Cramp Shipyards (approximately 15,000) in Philadelphia,
Pennsylvania made the following important statements in con-
versation with me:
1. There is a wastage of man hours, causing the workers
to feel that our war needs cannot be so very serious.
(This statement was made only of the Sun Shipyards, by
Sun workers.)
2. Safety precautions in the Sun Shipyards are very in-
adequate; five men were killed in March...not to mention
those who were crippled in serious accidents.
3. Labor relations are very bad in the Sun Shipyards and
the CIO men feel that there is discrimination against
them, which discrimination is evidenced in handing out
"pink slips": The first such "pink slip" handed to a man
is a warning. The second pink slip means that the man is
laid off for a week's time. The CIO men say that there is
indiscriminate handing out of pink lay-off slips, which
again causes the men to feel that our war needs cannot be
so serious.
Regraded Unclassified
80
- 2 -
4. A Negro versus white situation has arisen at the Sun
Shipyards. There are 10,000 Negro workers at the Sun Yards,
and the Negro housing situation is extremely bad, which has
caused a worsening of Negro morale. According to the CIO
this housing problem is due to local politics which is
extremely prejudiced against Negro housing. But the CIO
blames the Negro versus white situation at the plant mainly
on the management, which the CIO characterizes as reactionary.
The CIO says that the management is surreptiously backing
the formation of a "Negro" union within the plant.
Previously, says the CIO, there was harmony between Negro
and white members of the union, which was achieved only
after a long struggle with white shipyard workers who re-
sented Negro membership in the union. But this was overcome
... at the loss of many white workers who refused to become
reconciled to membership of Negroes in the union. Now, says
the CIO, this new "race" problem has arisen, at the
instigation of the management, to keep unionization out.
5. What's going to happen after the war? This question
was made vocal by the Sun Shipyard workers with whom I spoke.
The moment that one Sun worker brought forth this question
all the others (six or seven) repeated this thought and
agreed that this weighed heaviest in the minds of the workers
at the Sun plant. (If I may add this note here: I got this
same inference in conversations with workers in Baltimore,
Norfolk and Pittsburgh. However, the Sun worker was the
Regraded Unclassified
81
- 3 -
first to put this thought into words. It seemed to me
that, elsewhere, working men hesitated to open up this
subject for fear that I -- as a Government representative --
would think them selfish and unpatriotic.) The Sun worker
who asked "what's going to happen after the war?" answered
his question in this manner: "There'll be a long stretch
of unemployment for us. These shipyard jobs are going to
dry up. There's not much use in putting every dollar into
saving for a 'rainy day' because, no matter how much you
save, it won't be enough I cannot help but feel -- as
a result of my conversations with working men and women in
the areas I've been -- that it is vitally important, not
only to post-war America but to America-at-war, that every
effort be made to draw up and legalize a plan to guarantee
decent post-war employment to every American man and woman
who is willing to work. Such a plan in being, I think, would
tremendously stimulate production and morale and be of in-
calculable aid in winning the war.
At the present time I find the following feeling almost
universal among those working men and women with whom I've
spoken: "Sure we'll win the war ... It'll take time, but
we'll win. Of course
1" I cannot help but think that, since
the working men and women feel this way and, too, since they feel
a great insecurity for the time after the war -- as compared with
their job security during the war -- that, subconsciously, they
may not be doing their jobs or buying War Bonds as speedily or
Regraded Unclassified
- 4 -
82
wholeheartedly as they might. They have no such "spur" as
bombing raids, the immediate threat of invasion or actual in-
vasion of the homeland. As yet, the casualty lists have not
been tragic enough to have such an effect. So far, the only
such spurs have been sporadic: Pearl Harbor, the shelling of
the Pacific Coast by a Jap submarine, and the execution of
American flyers by the Japanese.
6. At all three shipyards there was a complaint against
the long delay in getting Bonds through the payroll savings
plan. The men I talked with said that many among them have
stopped buying Bonds -- or are buying much less than former-
ly -- through the payroll savings plan due to the inefficient
way in which the plan was operating. (At the Cramp Shipyards,
where the plan now operates very efficiently, the men who
dropped out are very hesitant to come back to the payroll plan.)
7. Two other important complaints were voiced against the
payroll savings plan operation, by the Cramp Shipyard workers.
Said the Cramp Shipyard workers: "If a man is out sick for
four days out of the week -- which means he only gets a pay-
check for two days work -- the management still deducts his
full Bond payment. This may mean that a man gets as little
as $1.25 for his weekly pay. Because of this, many men have
dropped out of the payroll saving plan..."
The men said that
they thought, if the management would institute some rule
whereby a man would have no money deducted for Bonds during
the week in which he drew only two or three days pay then
Regraded Unclassified
- 5 -
83
many more men would sign up in payroll savings.
The other complaint voiced was in connection with a
a special drive, during which the men were asked to buy "another
Bond this week in honor of Pearl Harbor." The men were asked to
buy their Bond by signing up to have the money deducted from their
pay; in the same manner as their payroll savings deduction.
But the management would not remove the "special" Bond purchase
at the end of the week. Instead, this was lumped with their
regular payroll savings deductions. This seemed to the men to
be deception and, in many cases, worked hardship on them. As a
result many of them dropped out of the payroll savings plan.
8. At all three shipyards the rate of pay was considered
quite reasonable. A not-unordinary wage is $100 a week.
As a result of this there was no talk at the New York
Shipyards and at Cramp of the high cost of living; and this
was but barely mentioned by the Sun workers.
9. There was the greatest understanding of the war among
the workers at the New York Shipyards; next at Cramp and
last at Sun. At the New York Shipyards, the local union of
the CIO has spent $139,000 on athletic equipment, cigarettes,
etc., for the men in service. The working men have voted to
give 50 cents a month to such a fund. In addition, the men
have complained, at union meetings, that they were not doing
enough for the men in service. The CIO local at New York
Shipbuilding has bought a house, is furnishing it for
service men.
******
Regraded Unclassified
- 6 -
84
THE SUN SHIPYARDS
Following are direct and indirect quotes gained during a
conversation with four working men:
"The workers don't like management methods which result in
8 loss of man hours of work. These lost man hours are due to the
fact that the management insists on running the plant as it was
run before the war. of course this situation is spotty and it
may be due to the fact that some materials are not available at
a time when they are needed. Or lost man hours may be due to the
fact that one department is way ahead of the others and has to
hold back ... but the management doesn't take the trouble or has
not the means to tell the workers why these man hours are lost.
As a result, the workers get the idea that -- if man hours are
that valueless -- the war can't be so serious
Another worker said that "the management could tighten up
these lost man hours if it wanted to but it knows the Government
is paying for them so it doesn't bother
One brought up and all chimed in on the discussion of lack
of safety precautions, which was mentioned earlier in this report:
"There's an average of one man a week killed at the Sun Shipyards
and you ought to see the cripples walking around this town,
who were injured in accidents at the plant
"The straw bosses and their 'pink slips' are enforcing
absenteeism not preventing it. Those straw bosses give out those
pink lay-off slips mainly to union men
The workers can't
...
understand how the Government needs ships so badly if the
Regraded Unclassified
- 7 -
85
management is allowed to lay-off men for 8. week so freely ...
Only a representative of the Government should have the power to
lay men off..."
"Just how bad the labor situation here is, and how 1m-
portant that 'pink slip' angle is, you can see from the fact that
three weeks ago there was a spontaneous walkout of 15,000
workers -- because of the way the straw bosses were handing out
those lay-off slips."
If
The War Bond situation at Sun is good. The Company has
done a good job on its payroll savings plan set-up. But it takes
too long to get your Bonds It takes from one month to a couple
of months after you pay for your Bond before you get it."
the morale among the Negro workers would be better if
they had housing. They don't have any housing developments in
Chester, while housing is all right for white workers."
"And the way the management is trying to split up the Negro
and white workers is causing a highly combustible, dangerous
situation."
"At the Sun plant there are workers from all of the 48 states.
There are Negroes and whites. There are 1,800 coal miners. There
are Negroes from the deep South who made $100 a year before they
came here. Now they're making as much as $100 a week. There's
a surprising number of middle-class workers who gave up their
jobs and came here to make a contribution to the war..."
"The morale of the workers would be a lot higher at Sun if
the management would explain to them as well as just tell them;
Regraded Unclassified
86
- 8 -
like the management just telling them that there's going to be
a reduction in the work week. Why that is, I don't know --
maybe it's because this yard is ahead of other yards, or there's
a material shortage, or something else reasonable. But, anyway,
there's no explanation and the workers feel that the war cannot
be so serious after all..."
"The workers don't seem to feel 8.8 though their War Bonds
are savings..." (At this point this man was on the verge of
saying that "the workers did not seem to feel that they'd ever
get their money back".) They buy War Bonds out of patriotic
reasons because their wages are so much higher than formerly.
War Bond sales would be a lot better if the workers
could see something good happening to them after the war
...
like regular jobs. Then they'd have a reason for buying War
Bonds with every dollar they could
=
"
You'd be surprised at the way John L. Lewis' stock has
come up since the coal miners' strike. The workers at Sun and
everywhere I know feel that the coal miners got a real case and
Lewis is sticking up for them against the big shots ... The
miners deserve their raise and, because Lewis is championing
their cause, the workers feel that Lewis is their friend."
*****
THE CRAMP SHIPYARDS
Quotes from a conversation with seven Cramp Shipyard
workers:
Regraded Unclassified
- 9 -
87
"In the beginning 88% of the men were buying Bonds through
payroll savings. But they had to wait so long for their Bonds
that they started dropping out. This was not the fault of the
management but, instead, was due to the fact that the Navy Yard
was buying the Bonds for them at first. Now, Cramp is its own
issuing agent and the Bonds are delivered promptly, but the men
haven't forgotten how long they used to wait ..."
"...I'll tell you why I buy Bonds! If 8. man has $25,000
and that American flag stops flying then his $25,000 is not worth
anything. What good would $25,000 be if the Rising Sun flag was
put up instead? We got to lend our money to our Government.
That's the only way our money will be any good to us. Our
Government needs this money right now to build and provide our
boys with ships and other stuff... The only way to keep that
American flag flying and to keep your money safe so you can get
it back and use it when you need it is to put it in War Bonds
We got to do everything to keep that American flag flying because
if it ever stops then we'll see what worry is..."
"I think the management ought to be investigated by the FBI
for the way the 'boys at the mahogany table' (management) play
favorites in handing out blue buttons." (The award of such a
button to a man means that he is a "leader" and thus entitled to
a higher rate of pay.) "Leadership buttons are handed out to
favorites and experienced workers are passed by... Lots of good
men quit because of that and lots of others would quit now if they
could "
"Lots of men make $100 a week..."
*****
Regraded Unclassified
- 10 -
88
THE NEW YORK SHIPYARDS
Nine New York Shipyard workers joined in the conversation
which produced the following statements:
"The only aim of our union local is to bring this war to
a successful end. There are many points in our union-management
which, in other times, might have been objected to. But not in
these times If
"The payroll savings plan at the plant is very inefficient.
Sometimes you wait three months for your Bond and sometimes they
lose the record of your payments That's why lots of the men
have lost enthusiasm for the payroll savings plan
If payroll
savings worked better Bond sales would go up
"
we never have gotten any cooperation from the management
on payroll savings. The union signed up every worker who's
buying Bonds.
"
"Sure
I quit buying Bonds through payroll savings. I had
to wait too long. Now I buy my Bonds at the post office and get
them right away
"
If
I'm buying Bonds to help win the war. It's the best
use for your money today
"
"On Bond pledges for the Second War Loan, many departments
in the plant pledged $9,000 for Bonds and the shop stewards took
the money right away and got the Bonds at the bank..."
"I'm a saloonkeeper along with working as a mechanic at the
plant. I work on the four to twelve midnight shift and look
after my bar after that. At my bar the men talk about the war
Regraded Unclassified
- 11 -
89
and about their production record for the day and about what
their production record is going to be for the night 11
(The latter, explained the saloonkeeper-mechanic, had nothing
to do with war industry.) Also, said the saloonkeeper-mechanic,
"on paydays the boys come into the bar waving a Bond in their
hands, saying 'well, here's another one!' And lots of them
get me to cash their checks ... ask me to hold back part of their
money so they won't spend it and will have it to buy a Bond
the next day
=
"I buy Bonds
and I guess this goes for lots of the
men first, to help win the war. Next, to save. Say -- I
remember how it was right after the last war
At the New York Shipyards they have what is known as the
"incentive system." All the men spent some time discussing this
and agreed that this system was a good one for production and
better labor-management relations. The only point of disapproval
concerning the "incentive system" concerned the fact that it
applied to some departments and not to others. (Under the
incentive system a man gets "paid" so many hours time for a
specific job done, even though he may do the job in fewer hours
than estimated for him.) Due to the incentive system, last year,
many men made between $6,000 and $7,000.
a
We got to do even more for the boys in service
We don't forget that when the boys go out of our plant they're
still union men even if they wear a uniform..."
Regraded Unclassified
- 12 -
90
"...I don't want my year's deferment even if it is coming
to me because of my job and the fact that I'm a skilled
mechanic. I'll go when they call me. I can do a job on an
aircraft carrier. Sure I can be replaced
If
"...When one of our boys from the local sees a service
man in a bar, he buys him a drink ... right off."
- 0 -
Regraded Unclassified
91
May 1, 1943
TO:
HAROLD N. GRAVES,
En
SUBJECT: WEEKLY REPORT FROM WAR SAVINGS STAFF
FIELD DIVISION
Education Section
Fifty of the best posters from Virginia's
statewide poster contest will be on exhibit in
Fredericksburg, Hampton, Williamsburg, Bristol, Winchester,
Richmond and Alexandria schools.
Ninety-four teachers of Rockbridge County,
Virginia, have invested approximately 20% of their salaries
during the first semester of the current school year in
War Bonds. Eighteen in the Lexington District have
averaged over 400 per teacher during the same period of time.
The Sacred Heart School in San Jose, California,
reports January War Savings sales totaled 372.70, February
stilys
Regraded Unclassified
- 2 -
92
FIELD DIVISION
Education Section (Continued)
518.70, March 9,139.95, with the Jeep Campaign responsible
for the huge increase in March sales. District of Columbia
shut-in children who are taught in their homes and hospitals,
contributed $2,939.25, covering the cost of three jeeps.
Twenty-three states have sent in scrapbooks from their
"Schools At War Program". Some of the unusual schools which are
represented by the reports are the Virginia School for the Blind
whose book is written in Braille; the 36-pupil Chinese School of
Cleveland, Mississippi; the Navajo School of Window Rock, Arizona;
the Alexander Graham Bell School for the Hard of Hearing in Chicago;
and the one-room, ten-pupil school of District 99 in Barton County,
Kansas, where every pupil owns at least one Bond and many Stamps.
Payroll Savings Section
Attached is a list of companies that have been reported
as having achieved the goal of 10% during the past week. (Attachment
No. 1)
Attached is the analysis of exposure to Payroll
Savings for April 17, 1943. (Attachment No. 2)
Motion Pictures and Special Events Section
Cole Brothers Circus reports sales of over $800,000
in War Bonds during their first five days on the road this season.
The Bond Premiere of the Warner Bros. Air Epic, "Air Force",
at Jacksonville, Florida, April 12, brought sales of $750,000 in
War Bonds.
- 3 -
93
FIELD DIVISION
Motion Pictures and Special Events Section (Continued)
Universal Newsreel carried a shot of the Atlantic City
style show which featured the War Bond and Stamp Corsages.
Field Memoranda
Recent memoranda sent to the Field include numbers
594, 595, 596, 597 and 598. (Attachment No. 3)
Retail Section
Again during this past week retailers made heavy War
Bond advertising expenditures. Throughout the country special
oditions of papers containing only Bond advertising were still
appearing.
At the preview of the Saturday Evening Post "Four Freedoms"
exhibit April 26 at The Hecht Company in Washington, speakers
included Associate Justice of the Supreme Court William O. Douglas,
Under Secretary of the Treasury Daniel W. Bell, Lowell Thomas, and
members of both local and national War Savings Staffs.
Some outstanding War Bond retail advertising is contained
in the attached April 20 edition of Women's Wear Daily. (Attachment
No. 4)
Attached is booklet from the Meyer Both Company displaying
retail War Bond advertising. (Attachment No. 5)
The attached promotional booklet and special posters have
been distributed by the Chicago Retail Committee. (Attachment No. 6)
Regraded Unclassified
94
-
FIELD DIVISION (Continued)
Agricultural Section
Speed Riggs of tobacco auctionsering radio fame
officiated at & recent auction at Winchester, North Carolina,
which netted a total of nearly $1,500,000 worth of War Bonds
in that one evening.
North Dakota, the only state which derives more
than 50,. of its total income from agriculture, strengthened
its already enviable two-year sales record of $60,000,000
worth of War Bonds by again exceeding its non-banking quota
of 10,756 in the April Drive.
The Arkansas War Savings Staff is presenting "War Bond
Champion" certificates to 4-H Clubs, Home Demonstration Clubs,
FTA chapters, PTA Organizations and other groups in each county
which have done an outstanding job in the promotion and sale
of War Bonds.
The second issue of "Farm-Bond-Aids", containing
War Bond radio news and advertising material with an
agricultural slant, has been mailed to all state administrators
and agricultural deputy administrators.
Women's Section
In a conference last week on "Payroll Savings for
Womon" the following resulted: In the future, the Women's Section
will work more closely with the Payroll Savings Section, and &
program will be initiated with new materials prepared for women
--5-
95
FIELD DIVISION (Continued)
Women's Section
factory workers and wives of factory workers. Miss Elliott will
represent the Women's Section on the permanent Payroll Savings
Committee.
The REA Agency has offered its services to the War
Savings Program.
A letter was sent to all state women chairmen, urging
them to cooperate with their state administrators in carrying
out the Retail Store Survey, and also the distribution of the
now decal stickers.
A Beta Signa Phi representative is cooperating with
the Women's Section full-time on a War Savings Program to be
presented to the various chapters of that organization. The
organization is paying travelling expenses.
A representative of the Women's Section addressed the
annual meeting of the DAR Congress on April 20 and 21 in
Cincinnati, Ohio. To date this national organization has
purchased over $32,000,000 in War Bonds.
Additional pictures of celebrities buying Bonds were
distributed through the Negro Section of OWI, to labor papers
through WLB, and to selected trade publications.
Information on the War Bond activity of old people will
be incorporated in an article in the "Townsend National Weekly".
- 6 -
96
FIELD DIVISION
Women's Section (Continued)
Articles have been prepared and sent to the
publications of the American Dental Hygienists' Association
and the National Association of Women Artists.
Special Activities Section
-
on April 22, New York State and the rest of the
Second Federal Reserve District passed their quota of
$3,000,000,000 by the purchase of 475,000,000 in War Bonds.
A new $4,000,000,000 goal was set.
The 12th Federal Reserve District branch at Salt
Lake City announced that Utah also has gone over its Second
War Loan Drive quota of $19,829,500 by the amount of $2,500,000
in War Bond purchases. This represents per capita purchases
averaging 40.00.
In Oklahoma City and County on April 22 a one-day
cruiser campaign resulted in Bond sales of 40,000,000.
After more than a month's trial in the Richmond,
Virginia, area, it has been announced that plans are now being
made to have the Milk Check Deduction Plan statewide in its
application.
With a $10,000 goal, the Brown County, South Dakota,
schools' War Bond Barrage Balloon Campaign resulted in sales of
$40,000 in War Bonds.
- 7 -
97
press, RADIO AND ADVERTISING DIVISION
Advertising Section
The Advertising Checking Bureau estimates a
minimum of 25,000 tear sheets on the Second War Loan is to
be expected. Two-thirds of these tear sheets represent
advertisements reproduced from Treasury copy, and the remaining
third are local adaptations of Treasury copy, advertisements
prepared by national advertisers, or local retail advertisements.
In response to a wire sent to all Federal Reserve
publicity men, almost every locality in the country is represented
with advertisements tying up the "Jap executions" with the
campaign.
Attached are proofs of the new advertisements for
newspapers beginning May 1st (Attachment No. 7)
Attached is a portfolio for general magazines, to be
mailed this week, which meets the problem of paper restrictions
directly, and suggests & logical solution. In addition to the
full size magazine advertisements, "This man was taught not to
drink water", and you'll always have tobacco in your old
tobacco box!", and "What kind of a house would you put here?, the
portfolio provides various sized adaptations of these advertisements,
as well as smaller sized copy, and slogans. (Attachment No. 8)
During the week of April 19, we received 92 War Bond
mentions and 6 complete ads, giving a total of 98 in the attached
list of seven leading weekly magazines. (Attachment No. 9)
- 8 -
98
PRESS, RADIO AND ADVERTISING DIVISION
Advertising Section (Continued)
Attached is a list of the advertisers and the
publications used during the week of April 19. (Attachment No. 10)
Arrangements have been completed for the production
and distribution of 70,000 transit card dividers. These are EL
specialized type of car card which occupy the space between the
regular sized car cards, and is entirely new in transit advertising.
The transit card dividers will have a duration period of three
months, instead of the usual one month limit.
Attached are photographs of the illuminated War Bond
bulletin board in the center of downtown Albany, sponsored by
the Tobin Packing Company, Inc., and of the indoor and outdoor
painted Second War Loan bulletins of the American Bank and Trust
Company of New Orleans, La. (Attachment No. 11)
Radio Section
During the last week of the drive, April 26 through
May 1, Cary Grant, Shirley Temple, Fred Astaire, Joe E. Brown
and Pat O'Brien, stars of stage, screen and radio, made personal
appeals in behalf of the Second War Loan on popular network programs.
Secretary Morgenthau was heard over the Mutual Broadcasting
System, Wednesday, April 28, 11:30 to 12:00 P.M., EWT, from
San Francisco, California, where he addressed the workers on the
Second War Loan in the 12th Federal Reserve District. Mayor Rossi
of San Francisco introduced Mr. Morgenthau.
- 9 -
99
PRESS, RADIO AND ADVERTISING DIVISION
Radio Section (Continued)
Horace Heidt and His Orchestra's regular Treasury
show, will now be heard Saturdays, 5:00 to 5:45 P.M., EWT,
over the Blue Network, instead of Sundays from 1:00 to 1:45 P.M.
Guy Lombardo and His Orchestra have replaced Alvino
Rey and His Orchestra on their regular Treasury show over the
Mutual Broadcasting System, on Wednesdays 11:30 to 12:00 P.M.,EWT.
"The Saturday Night Bondwagon" of May 1 will be
extended 15 minutes -- 10:15 to 11:00 P.M., EWT. It will
originate as usual from New York, but has been selected
officially to open the new WOR Mutual Playhouse -- the Guild
Theatre. Special guests will be Rose Bampton of the Metropolitan
Opera, Ralph Morgan and his daughter Claudia, Alec Templeton,
Bob Ripley and Alfred Wallenstein and His Orchestra. Mr. Harold
N. Graves, Assistant to the Secretary of the Treasury, will speak.
"Truth or Consequences", famous radio show, sold
$6,118,129.25 worth of War Bonds in Denver, Colorado. It has
already sold $29,985,498.29 to date. The goal set for their
fourteen week tour ending June 14th was $20,000,000.
The preview of The Saturday Evening Post's "Four
Freedoms" show was broadcast over the Blue Network, Monday,
April 26, 10:35 to 11:00 P.M., EWT.
- 10 -
100
PRESS, RADIO AND ADVERTISING DIVISION
Radio Section (Continued)
NBC reports a total of $10,190,045 in War Bonds
purchased by ticket holders to the Easter Sunday Treasury
Department concert of Arturo Toscanini and the NBC Symphony
Orchestra.
Press Section
The May issue of POPULAR PHOTOGRAPHY carries a three
page spread entitled "Photography Sells War Bonds" by
Victor Keppler (who is an Expert Consultant on the War Savings
Staff). Tear sheets are attached. (Attachment No. 12)
Attached is the May Press Book for Company Publications
containing editorial material, suggestions, pictures, cartoons,
and information for Industrial Editors to aid in the sale of
War Bonds. (Attachment No. 15)
A statement has been prepared by the Press Section
on the May 1st, Second Anniversary of the War Savings Program,
for Harold N. Graves, to be used by the Office of War Information
Overseas Division for broadcasting purposes.
Ten stories resulted from the five releases prepared
by this section and sent to local papers on the preview and
opening of the Saturday Evening Post Treasury War Bond Show at
Hecht's.
A radio speech was prepared for broadcast by Mr. Harold
N. Graves over "The Saturday Night Bondwagon".
Regraded Unclassified
- 11 -
101
PRESS, RADIO AND ADVERTISING DIVISION
Press Section (Continued)
The May issue of AMERICAN MAGAZINE carries a full
length story with a War Bond theme, entitled "Behind the
Counter at the World's Biggest Bargain Sale". This issue also
carries a cartoon contest, a clipping of which is attached.
(Attachment No. 14)
The AMERICAN MAGAZINE for March carries a short
paragraph dealing with War Bonds in their feature, "Minutemen 76-43",
& war Stamp mention in their regular "Why Don't They
11 columns,
and another cartoon contest. (Attachment No. 15)
Attached are tear sheets from current popular
publication magazines which carry cover seals, and inside War
Bond mentions. (Attachment No. 16)
Releases Nos. 331, 330, and 329 are attached.
(Attachment No. 17)
The April issue of CHARM carries an Easter War Stamp
corsage mention. (Attachment No. 18)
War Bond promotion appears in a full-length story "Meet
Three Army Air Corps Wives", and in the feature "If You Ask Me",
by Eleanor Roosevelt, in the April issue of THE LADIES HOME JOURNAL.
(Attachment No. 19)
NATIONAL ORGANIZATIONS DIVISION
Labor Section
A $100 War Bond was the admission price for the labor
representatives who attended a Labor War Bond Luncheon at the
Bismark Hotel in Chicago, April 28.
- 12 -
102
NATIONAL ORGANIZATIONS DIVISION
Labor Section (Continued)
The Order of Railroad Telegraphers of the Seaboard
has purchased $6,000 Second War Loan securities, while the
Seaboard Air Line Employees Credit Union of Savannah has
invested $10,000 in War Bonds.
Business and Trade Association Section
Attached is a report received from trade associations
of additional funds being invested in Second War Loan Securities.
(Attachment No. 20)
Attached is a list of additional associations which
have joined in promoting the Second War Loan. (Attachment No. 21)
The American Match Manufacturers Association reports
that its members have invested over $2,000,000 in War Bonds;
better than 10% of estimated gross production of the industry
for the year 1943.
Foreign Origin Section
It has been reported that the French-Canadian Liberty
Ship Campaign in New England has now reached $10,000,000 in Bond
sales.
Fraternal Section
The attached list of Knights of Columbus jurisdictions
with reports still incomplete had exceeded their state quotas in
the War Bond campaign as of April 20. (Attachment No. 22)
The Tampa Rotary Club with a membership of 165, and &
War Bond goal of $500,000, has to date purchased $475,000 in War
Bonds.
Regraded Unclassified
103
- 13 -
NATIONAL ORGANIZATIONS DIVISION
Fraternal Section (Continued)
The Grand Rapids Rotary Club of Grand Rapids, Michigan,
had earmarked for itself 124% of the city's $8,000,000 campaign
to purchase a destroyer for the Navy by April 30th.
The Lions Club of Birmingham, Michigan, is conducting
a drive to purchase a bombing plane.
Inter-Racial Section
Members of the Uptown Chamber of Commerce (Negro) of
New York have purchased to date 370,000 worth of Second War Loan
securities.
OFFICE OF THE EXECUTIVE DIRECTOR
Promotional Research Section
Attached is a copy of the latest report on Sales of
War Savings Stamps by Newspapers using the Carrier Plan, as of
April 22, 1943. (Attachment No. 23)
Attached is a summary of War Savings Stamp sales
compiled as of April 29,1943. (Attachment No. 24)
The analysis of sales of Series E War Savings Bonds
in March, 1943 is attached. (Attachment No. 25)
104
Room 278
Under Secretary's Office
Exp. of Loans-War
Finance Committee
May 1, 1943
To Presidents, all Federal Reserve Banks:
My congratulations on the success you and the
members of your committee have attained in this drive
and my sincere thanks to all for the fine cooperation.
Just as soon as we have had an opportunity to
study the results of this campaign we will be prepared
to discuss what improvements we should make in our
selling organization based on the additional experience
gained in this Second War Loan Drive.
H. MORGENTHAU, JR.
105
105
FEDERAL RESERVE OF
TIONS
VERNMENT SECURITIES
her 1
Column A shows Federal Reserve
Marketable Insurer
Special one-tay certificates g/1
Column B shows price changes La Made
operations is millions of
Market purchase V
Net increase.
7
for all securities essept certificates.
dollars as follows:
Market sales y
Net decrease.
1
For certificates, Column 3 shave
STRICTLY CONFIDENTIAL
Direct purchases free Treasury +d.
yield changes is decimals.
Naturities,
1
Last Vesit
This Vesk
Menday
Tuesday
Velnesday
Toursday
Priday
Naturday
Index
Description
Monday
Turoday
Velancing
Thursday
Friday
Saturday
Fall West
Fall Yest
19
R
21
22
25
2%
Agr. 26
27
25
R
30
May 1
Apr.
-
,
A
3
A
3
&
a
3
&
,
A
3
A
3
à
1
à
3
A
1
1. transary
A
B
&
A
3
A
A
Marketable insure:
+23.9
+67.4
+76.9
Holiday
+113.2
+406.7
Market purchases
+44.0
+95.5
+114.4
+17.3
+146.4
+263.6
+761.2
+105.3
-104.8
-85.3
-69.0
-21.3
-89.6
-370.0
Market sales
-47.1
-65.7
-98.2
-125.3
-32.5
-30.2
-422.1
Direct purchases from Treasury
+6296.8
H4296.8
-a122.5
m122.5
Maturities
-113.1
-m296.0
-409.9
Special one-lay certificates: Bet change
Total net increase (+) or decrease (-)
+253.4
+226.0
-61.4
-104.1
+55.6
+23.6
-85.0
-3.2
+9.8
-37.0
-51.0
*113.9
*.5
6328.9
Volnesday report of total pertfelio
6346.9
II. Tanable securities
Bills all Issues combined
+87.4
+76.9
+113.2
+406.7
Market purchases
+44,0
495.5
*114.4
+76.3
+145.7
+278.5
+754.4
+105.3
+23.9
-99.8
-82.3
-69.0
-21.3
-19.6
-362.0
Market sales
-7.1
-85.7
-98.2
-128.3
-31.5
-26.4
-417.3
a122.5
€122.5
Maturities
mill.1
el13.1
-104.1
+55.6
+23.6
-77.8
Total
increase
or decrease (-)-
-58.4
-3.2
+9.8
-97.0
-52.0
+114.2
*252.1
+224.0
+5.5
Certificates
-.05%
-.05%
-.10%
e
1
.65% 5-1 43
-292.3
-292.3
-.015
-.01%
-.02%
o 2
7/8
1. 6-1 43
+.015
-.015
+.01%
+,01%
+.01%
+.015
+.015
-.03%
c
3
7/8
D - 11-1 43
-.025
15.0
+5.0
-.02%
+.02%
*.02%
o
&
7/6
1 - 12-1 43
-,02
+,02%
.02%
-.02%
-.01%
+.015
+.015
+.015
c
5
7/8
1- 2-1 like
-,015
+,015
-.02%
-.025
06
7/6
1- -1 44
c 7
7/8 C - 5-1 isla
-1.0
.01%
+4296.8
+4296.6
-.015
Special one-day certificates
-3.0
-4.0
Treasury notes
+1
-1
If 1
3/46 D - 9-15 -
-1
-1
. 2
1-1/4 3-15 V5
*1
+1
. 3
3/4
3 12-15 45
=1
-1
=1
-3
, is
1
3-15 46
-1
-1
-1
-3
+1
-1
. 5
1-1/2
12-15
46
=1
&
Treasury bonds
+1
+1
11
25
3-15
48-50
-1
-1
+1
+1
7
12
1-3/4
. 6-15 48
-2
+1
4
7
3
3
2
- 6-15
49-51
-1
=1
=
+1
+1
+1
&
+1
+3
3
and
2
-
9-15
49-51
-1
+1
â
+2
15
2
- 12-15 49-51
-1
+2
+1
+1
+1
-1
+1
3
6
2
- 3-15 50-52
2
4
372
- 9-15 50-52
--5
+1
-1
--5
B 8
2
12-15
B5
+1
41
+2
+1
-1
+)r
+3
39
2-1/2
3-15
=1
-2
7
+2
-3
6-15
52-55
-1
-1
7
oh
-1
7
=
+1
+2
-1
+3
3 10
2-1/4
-
+1
+1
+1
+3
11
I-1/2
- 3-15
56-58
A
7
+3
7
$ 12
Z-1/2
- 6-15
62-67
1
+
B 13
2-1/2
-
12-15
63-68
-1
+1
7
&
914
2-1/2
- 6-15 6-69
-.5
+2
+1
+1
-1.0
1
--5
$15
2-1/2
- 9-15 67-72
+3
+3
Dearanteed securities
+1
0 1
000 1-1/85 2-15 45
+1
o 2
RFC 1-1
7-)
43
o 3
MPC 1
#
All texable securities
Marketable Insues:
*67.*
+76.9
+113.2
+406.7
Market purchases
+44.0
*95.5
+114.4
+16.3
+145-7
+283.5
+759.4
+105.3
+23.9
-49.6
-363.5
Market sales
-47.1
-85.7
-48.2
-128.3
-32.5
-29.4
-421.3
-100.8
-2.1
-69.0
-21.3
Direct purchases prom Treasury
+4296.8
+4296.#
-122.5
m122.5
Maturities
-113.1
-=292.3
-405.5
Special con-bay certificates: In change
+4,5
-54.9
+55,6
423.6
-19.3
Total set increase (+) or decrease (-)-
-3.2
19,8
-97.0
-52.0
+113.2
+258.6
+229.4
-104,1
Office of the Secretary of the freesury. Division of Research and Statistics,
r Original figures revised.
. Less this $50,000.
Purchases and sales recorded M of day of transaction and set day of delivery. Transactions after 1 s'cleck are included is the nest day.
2/ Transmations are entered as of the day following that 14 which they apply. since data are set available until the following seraing.
Note: Data are required and say not add to the joials.
Regraded Unclassified
106
106
FEDERAL RESERVE OPERATIONS IN SECURITIES
7ugy 2
Column A shows Federal Benerve
Market purchases 1/
Column , shave price changes is 32ads.
operations is millions of
Market sales y
STRICTLY CONFIDENTIAL
dollars as follows:
Maturities
Last Vest
This Vesk
Monday
Toweday
Velnesday
Thurstay
Friday
Naturday
Index
Description
Montay
Tessday
Vednesday
Theretay
Triday
Naturday
Fall Yesk
Full Vesit
Agr. 19
R
as
22
23
24
Apr. 26
27
28
22
30
May 1
3
3
A
3
A
3
&
3
A
3
A
,
&
3
A
3
&
.
A
B
&
3
A
3
A
A
3
&
m. Tax-creept securities
Treasury notes
Holiday
If 101
1-1/85 A 6-15 43
-1
2
, 102
1
c - 9-15 43
I 103
1-1/8
» 12-15 43
-1
-1
A
If 104
1
a - 3-15 late
-1
-1
7
-1
-1
If 105
3/4
A 6-15 We
-1
-1
I 106
1
C - 9-15 late
-1
-1
+1
+1
I 107
3/4
A 3-15 -5
-1
-1
4
Treasury bonds
-1
7
-3
3 101
3-3/05
-
6-15
43-47
&
=2
3 102
3-1/4
- 10-15 43-45
-1
-1
Y
7
&
3 103
-
- 4-18
-
-1
-1
+.7
+.7
4
3 104
&
12-
-
-1
7
-1
+1
+1
3 105
2-3/4
- 9-15 45-47
-1
el
+1
-1
+1
+1
3
106
2-1/2
- 12-15 is
+1
+1
8,107
3-3/4
- 3-15 46-56
-1
-1
+1
-1
- 6-15 46-48
+1
+1
+1
+1
1
106
3
+1
+1
3 109
3-1/8
- 6-15 46-49
-1
-1
&
1°
+1
3 110
4.1/4
10-15 47-52
-1
-1
+1
+2
+3
) 111
2
. 12-15 N7.
-1
+1
+1
3 112
2-3/4
- 3-15 48-51
-1
+1
+2
+2
+1
+2
$
+1
$
3 113
2-1/2
- 9-15
48
-1
-1
+1
+1
-5
3
114
2
12-15 48-50
-1
=1
+1
+1
+1
+2
+1
+1
+1
&
+1
1
3 115
3-1/8
12-15 49-52
+1
-1
1+
-1
+1
3
116
2-1/2
. 12-15 49-53
-1
-1
+1
-.5
+3
-.5
+3
3
117
2-1/2
- 9-15 50-52
+1
7
-.5
+2
-1
A
-.5
&
3 118
2-3/4
- 6-15 51-54
+1
-1
3
+3
*2
+2
+7
3 119
3
- 9-15 51-55
+1
-1
22
-1
7
+2
2-
-1
&
B 120
2-1/4
- 12-15 51-53
+3
-,6
+3
-1.0
+1
7
-1.8
+2
3
121
2
- 6-15 53-55
-1
4
+1
7
+1
-3
3 122
2-1/4
- 6-15 54-56
=1
-1
-1
2.
â
&
4
13
$
+1
4
A
+6
1 123
2-7/8
- 3-15 55-60
+3
-1
2
2-
+1
&
3
124
2-3/4
- 9-15 56-59
+1
1-
-1
1
1
-
-1
+1
-2.0
1,
3 125
2-3/4
. 6-15 58-63
-1
-1.5
-.5
--7
ols
-1.0
-2
12
:
-1.7
3
3 126
12-20
60-65
+2
-1
1.
+1
+
-.8
-1
-,8
2
2
-
Guaranteed securities
9 101
COC 3/46 7 5-1 43
i
i
-2
4 102
TTWC 3-1/4
3-15
44-64
-2
&
-
-2
-2
20
0 103
TTNC 3
- 5-15 44-49
&
1.5
el
+.5
7
7
&
-2
o
104
BOLO 3
A 5-1 44-52
7.5
+,6
+1
0
105
HOLD 1-1/2 x - 6-1 45-47
1+
L
-1
0 106
TPSA 1-3/8
2-1
lafe
-1
-1
-
All tax-exampt securities
Market purchase
%1
+,1
+1.8
-6.5
sales
+1.0
--
--
-4.0
-2.5
Maturities
-04.5
-04.5
-6.5
Total net Increase (+) or decrease (-)
+1.0
+.7
-5.2
-3.5
-4.0
-2.5
Office of the Secretary of the Treasury, Division of Besearch and Statistics.
, Original figures revised.
. Less than $50,000.
1/ Purchases and sales recorded as of day of transaction and and day of delivery. Transactions after la s'aleck are included in the next day.
Note: Data are rounded and my not add to the totals.
Regraded Unclassified
107
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE MAY 1
1943
TO
Secretary Morgenthau
FROM
Subject: Fourth Victory Loan Opened April 26.
Mr. Canadian Hass
The Canadian Fourth Victory Loan, by which it is
planned to raise a minimum of $1.1 billions (the equiva-
lent of raising a $12.5 billions loan in the United
States), was opened on Monday, April 26, to continue
for three weeks. Two issues are being offered:
3-1/2 year
14-year
maturity
maturity
Dated:
May 1, 1943
May 1, 1943
Due:
Nov. 1, 1946
May 1, 1957
Date callable:
Not callable
May 1, 1954
Issue price:
100
100
Interest rate:
1-3/4 percent
3 percent
The new campaign is the sixth offering of public bond
issues since September 1939. A total of $3.1 billions of
new money has been raised in previous drives. This repre-
sents approximately 70 percent of net borrowing from all
sources, which amounted to $4.4 billions from the out-
break of the war through 1942. Another 5 percent has been
raised from War Savings Certificates, while the remaining
25 percent has been raised from the sale of securities to
banks (which have also purchased in the market some of
the Victory Loan securities originally sold to nonbanking
purchasers).
The following table shows the goel and allotment for
each of the public bond offerings:
Regraded Unclassified
108
Secretary Morgenthau - 2
:
Amount
Number of
: Goal
:
Allotted
subscribers
(Millions of
:
(Thousands)
dollars)
First War Loan -
Jan. 1940
200
200
178
Second War Loan -
Sept. 1940
300
300
151
First Victory Loan -
June 1941
600
730
968
Second Victory Loan -
Feb. - Mar. 1942
600
843
1,681
Third Victory Loan* -
Oct. - Nov. 1942
750
992
:
2,042
Totals
2,450
3,065
*
In this loan only the amount of the goal was allotted.
In the remaining loans all subscriptions were allotted
in full.
##
Preliminary figures.
The goal of $1.1 billions for the present loan is an
increase of nearly 50 percent over that of $750 millions
for the Third Victory Loan and is about $100 millions more
than was actually raised in that loan.
Regraded Unclassified
109
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE MAY 1 1943
TO
Secretary Morgenthau
FROM
Mr. Haas SOR
Subject: Subscriptions to Canadian Victory Loans by
Individuals and Nonindividuals.
The quota for individuals in the Fourth Canadian
Victory Loan, which opened Monday, April 26, and has a
minimum objective of $1,100 millions, has been placed at
8500 millions -- 25 percent more than was subscribed by
individuals in the Third Victory Loan. In setting this
quota, it was stated that the $600 millions subscribed
in the last loan by nonbanking financial institutions
and industrial organizations represented about the maximum
amount that could be expected to be subscribed by this group
in any loan campaign.
Individuals' subscriptions to the first three Victory
Loans amounted to $1,082 millions, or 42 percent of the
total of $2,565 millions of new money raised in these loans.
Business firms and corporations, exclusive of insurance
companies, subscribed about 37 percent of the funds raised
in the Victory Loans, their subscriptions totaling $955 mil-
lions.
Insurance companies were the source of approximately
15 percent of the funds borrowed in the Victory Loans.
Their subscriptions aggregated 3389 millions.
Chartered bank subscriptions to the several loans have
been negligible, since in each loan the government requested
that banks refrain from participation on their own accounts.
The Bank of Canada - the central bank - purchased none of
the loan offerings during the three drives.
The breakdown of subscriptions to the three Victory
Loans, by classes of subscribers, 18 shown in detail in a
table attached to this memorandum.
Attachment
Regraded Unclassified
110
Estimated Sources of New Money Subscriptions
to Canadian Victory Loans
(Millions of dollars)
:
Second Victory
Third Victory
:
First Victory
Loan
:
Loan
Loan
:
Oct. - Nov. 1942:
Total
June 1941
Feb. - Mar. 1942.
(Preliminary)
:
All new money subscriptions
:
730
843
992
2,565
Individuals 1,
:
316
365
401
1,082
NonindividuaTs
414
479
590
1,483
Individuals:
Special names
37
29
26
92
All others 1
280
336
375
991
Nonindividuals:
Business firms and
corporations
281
306
368
955
Insurance companies
96
126
168
390
Life insurance companies:
89
115
155
359
All other insurance
companies
7
11
12
30
Banks - own account
7
-
1
8
Chartered
7
I
1
8
Bank of Canada
I
-
-
-
Government accounts
32
47
55
134
Federal
10
20
23
53
Provincial, municipal
:
and school
22
28
32
82
1
Includes small commercial and nonprofit bodies, the aggregate subscriptions from
which would be relatively unimportant.
2/ Investors believed to be capable of buying $25,000 or more par value of bonds.
Red ded Unclassified
771
TREASURY DEPARTMENT
FISCAL SERVICE
BUREAU OF ACCOUNTS
WASHINGTON
OFFICE OF THE COMMISSIONER
May 1, 1943
FOR THE CONFIDENTIAL INFORMATION OF THE SECRETARY:
In my report to you regarding the Office of Dependency
Benefits at Newark, I expressed alarm concerning the serious
consequences which would arise in case the building at Newark
should be bombed in an air raid.
I am very glad to report that the War Department has
decided to lease a building in Cincinnati, Ohio, to which will
be sent the so-called check-issue cards which are used in
Newark for the purpose of preparing allotment and dependency
checks. This move will serve two purposes: (1) it will make
possible a continuation of payments without interruption in
case the Newark office should be bombed or otherwise seriously
damaged; and (2) it will provide a means of building up a
historical record of all payments to beneficiaries, the need
for which may become increasingly important as time goes by.
We are now working on the feasibility of a plan of
stocking approximately 20 of the Treasury's regional disburs-
ing offices with blank checks, to which offices the check-issue
cards at Cincinnati could be immediately forwarded in case of
disaster.
OGRantee
POPVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
112
May 1, 1943.
Dear Mr. Durant:
I have your pleasant letter of April 29,
and such appreciate your words of commendation.
Thank you for taking the time and trouble to
write me as you did.
with cordial regards and all good wishes.
Sincerely,
(Signed) H. Morgenthau, Jr.
Mr. will Durant,
81 Despdale Drive,
Great Beek, New York.
KP/dbs
File in Diary
Regraded Unclassified
WILL DURANT
113
51 DEEPDALE DRIVE
GREAT NECK, N.Y.
TELEPHONE GREAT NECK 1991
4-29-43
Dear Mr Morgenthau:
May we of the Durant family tell you
that we think your are doing 8 magnificent job? We have
an inkling of the size of your task, the difficulties
and complexities that have encompassed you, and the
heroic patience you have shown in the face of unjust
criticism and persistent misunderstending. You are on
the front like our boys, and are fighting a good fight.
Sincerely,
Will Durant Do
to
114
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
MAY - 11943
TO Secretary Morgenthau
FROM Randolph Paul
You will recall that the American Jewish Joint
Distribution Committee experienced severe difficul-
ties in its program of shipping food parcels from
Portugal to Jewish communities in Poland. This was
largely due to the breakdown of arrangements whereby
the parcels were to be distributed by welfare organi-
zations in Poland. Apparently the Axis authorities
objected to any program which might strengthen the
prestige of such welfare organizations in enemy ter-
ritory, and insisted that such packages be distri-
buted directly to individuals.
On March 20, at the request of the J.D.C., we
brought this situation to the attention of the State
Department and advised them that we were prepared to
make appropriate changes in the Treasury license cov-
ering this food package program if State agreed. We
proposed to amend the license to provide that packages
could be sent from Portugal to individual recipients
provided the designation of such individuals was made
by appropriate authorities in Portugal from the Bri-
tish Board of Deputies List.
Under date of April 21, Governor Lehman's organi-
zation advised us that they had no objection to the
revised procedure, and we have amended the license
accordingly so that the J.D.C. can proceed with the
program.
Ar
Regraded Unclassified
115
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
May 1, 1943
FROM Frances McCathran
CONTROVERSIAL ISSUES BEFORE CONGRESS
(Summary Covers the Past Week)
1. Silver - Hearings on silver legislation before the Senate
Banking and Currency Committee ended Thursday morning and
the committee is now faced with the problem of reconciling
the various proposals submitted to it. The Green Bill,
favored by the Treasury Department, would authorize the
Secretary of the Treasury, upon the recommendation of the
WPB, to sell or lease silver for the war effort or essen-
tial civilian use. The selling orice of silver in this
bill was set at 50 cents per fine troy ounce at the request,
Senator Green said, of the Treasury Department. Senator
McCarren, however, who last year filibustered silver legis-
lation to death, objected to the Green measure and submitted
a bill which would fix the price of silver at 71.11 cents
and would limit the sale of unpledged free silver by the
Treasury to 100,000,000 ounces. McCarren estimated this
amount as the maximum needed for the war effort and said
he would set a limit so that "an excessive amount of silver
would not be placed on the market, and force the orice of
silver down, which occurred after the last war. it He and
the rest of the silver bloc would also set a. higher selling
price on silver in order to protect the mining interests
of their states. Other Senators, however, felt that silver's
importance as a monetary metal is at present being exceeded
by its place as an essential war commodity. Senator Green
asserted that silver, which can be used for such ourposes
as, for instance, bar in electrical setups, is now as much
a war weapon as the copper or steel it would release. "To
keep thousands of tons of silver locked up in the Treasury's
vaults at West Point is like locking un ammunition, tanks,
and airplanes for the duration of the WPI, if he said. His
bill, Green added, would not "affect the status of silver
in our national currency system" but only its place in the
war effort. Answering charges that his price of 50 cents
an ounce would encourage speculation in silver, he retorted
Regraded Unclassified
116
he considered this a small issue in the light of America's
urgent need now. He further Justified the 50 cent price
by citing the WPB claim that "the lower the price at which
silver can be sold, the wider will be its use and the more
will be the wartime economy of strategic and critical
materials." Meanwhile, the Special Senate Silver Committee
refused Lend-Lease Administrator Stettinius' proposal to
lease 1,000,000 ounces of silver to Great Britain a month,
but agreed to lend her 5,000,000 ounces between now and June,
to be returned in full after the war.
2. Tax: Pay-As-You-Go - As the time for the second phase of
the "battle of taxes" approaches with the reconvening of
the House on Monday, Secretary Morgenthau announced yester-
day his full support of the Ways and Means Committee's new
tax bill on the grounds that it would both make taxpayers
current and bring more revenue into the Treasury. This ar-
gument is expected to carry weight in House debate next week.
Representative Knutson, however, disputed the Treasury state-
ment and claimed, "When they say the. bill will place all
taxpayers on a current pay-as-you-go basis 'by the end of
1943, I they are either trying deliberately to mislead the
public and the Congress, or élse they themselves have been
grossly misinformed." Continuing in the same vein, he said,
"Personally the Doughton Plan is so confusing that I, in a,
more charitable frame of mind, might say that Messrs. Mor-
genthau and Paul have been confused by it." As one boint
in their strategy, Republican leaders olan to amend the
anti-windfall provisions to the Carlson-Ruml Bill with an
eye to enticing the 20 Republicans who voted against the
Ruml Plan before. This amendment would lower from $20,000
to $5,000 the income level beyond which taxpayers would
be required to pay either 1942 or 1943 taxes, whichever is
the larger. Lining up with the Administration, CIO Presi-
dent Murray told both Republican and Democratic Representatives
in a letter that his organization would switch their support
from the Forand-Robertson Plan to the Doughton Bill as an
"effective compromise." Minority and Majority statements on
the Bill will be issued today.
3. Reciprocal Trade Agreements - Another matter slated for
early House debate, after the tax issue has been disposed
of, is the Reciprocal Trade Agreement Act approved by
the Ways and Means Committee last Tuesday, April 27, minus
any of the restricting amendments which Republicans sought
Regraded Unclassified
117
to include. The committee did approve one amendment, how-
ever, granting the President further powers to suspend
agreements with countries who are members of cartels opera-
ting to the detriment of the United States. Amendment
most urged by Republican members in committee discussion
and most likely to be strongly advocated on the House floor
would grant Congress some form of veto power over the agree-
ments. This has been objected to, however, as leaving the
bill wide open to pressure from various "interest" groups.
Priorities: Rubber vs. Aviation Gasoline - The Truman Com-
mittee started an investigation last Tuesday of the charges
of Undersecretary of War Patterson that the priorities
directive in obtaining essential materials given Rubber
Director Jeffers by the WPB is impeding the production of
high-octane gasoline, so necessary to the Allied Air Of-
fensive. First witnesses were WPB Chief Nelson, Petroleum
Administrator Ickes, and Undersecretary of the Navy For-
restal, with the two chief contestants, Patterson and Jeffers
slated for an early appearance. The committee heard Nelson
claim that the North African campaign plus too low estimates
from the Army on their Aviation gasoline needs were responsi-
ble for the shortage, not the priority he had granted Jeffers.
His remark that the affair is chiefly a "clash of personali-
ties" has been reflected in newspaper editorials, claim-
ing the dispute should have been settled quietly within
the WPB. Ickes, however, although claiming the Petroleum
Administration has done a. good job, asserted it could have
done a better one if it had received equal treatment with
the synthetic rubber program from the WPB. Even the latest
scheduling from the WPB, he said, grants rubber 45% of the
critical components and Aviation gas 35%. Asked if he agreed
with Patterson that such a balance is responsible for the
shortage, Ickes replied he was no military expert, he could
only rely on what the Army said they need, and he didn't
think they'd ask for what they didn't need. He added, how-
ever, that it had been almost impossible to get estimates
of their high-octane needs from the Army and that when these
were finally obtained, the Petroleum Industry on its own
initiative set a higher goal.
5. Government Information - The Senate Judiciary Committee, which
is considering the O'Mahoney resolution for a full-fledged
investigation of news dissemination by government agencies,
expects to sit in on press conferences held by Secretaries
Stimson and Knox, following up their recent committee session
Regraded Unclassified
118
with CWI Davis both at a press conference held at the Capi-
tol and in a. closed meeting afterward. Secretary Stimson,
however, on receiving the committee's "invitation" suggested
they attend his press conference in the Pentagon Building
SO they could see it under "normal circumstances. If
FCC Investigation - The House Cox Committee investigating
the Federal Communications Commission threatened last Tues-
day to use its "ample lawful power" (according to its
attorney) to force Federal Communications Commissioner Clif-
ford Durr to furnish them with a record of his banking
transactions, any investments made in the past five years,
and other phases of his private financial affairs. In his
letter of refusal last week, Durr said, "While I have abso-
lutely nothing to conceal
it seems to me that the infor-
mation requested is of an entirely personal nature unless
it is for the purpose of ascertaining whether I have been
guilty of accepting bribes or of similar misconduct in the
performance of my official duties." If such is the case,
he suggested the committee refer the matter to the FBI.
Background of the case involves a long-standing dispute
between the FCC and Chairman Cox of the committee, who was
himself investigated by the Commission for accepting a.
$2,500 fee, although a congressman, from a Georgia radio
station for representing it in its application for a broad-
casting license.
T. Labor - In the face of a Lewis coal mine strike,
the Senate agreed Thursday by voice vote to consider next
Monday, May 3, the Connally Bill authorizing government
seizure of any plant, mine or other industrial activity
essential to the war effort and closed by a strike. The
measure also would freeze employer-worker relations until
the dispute could be settled by a. wage board established
by act of Congress to supersede the WLB, which was created
by Executive Order. Although this bill would give the Presi-
dent new powers in taking over essential industries stopped
by strikes, the elimination of the War Labor Board reportedly
is just what John L. Lewis wants.
Regraded Unclassified
119
54
NOT TO BE RE-TRANSMITTED
U.S. SECRET
BRITISH MOST SECRET
SECRET of OFICE TREASURY
01
TRE TREASURY SUP.Y DEPARTMENT
COPY NO.
1943
OPTEL No. 142
Information received up to 7 A.M. 1st May, 1943.
1. MILITARY
TUNISIA: During evening 28th U.K. troops made a
successful local attack North-West of Ksartyr, (9 miles
E.S.E. of Medjez El Bab) destroying ten enemy tanks.
Confused fighting continued throughout 29th with heavy
casualties on both sides. Two enemy battalions supported
by about forty tanks counter-attacked our positions North-
West of Crich El Oued (5 miles N.E. of Medjez El Bab)
capturing a hill one mile North of Longstop Hill on Medjez
El Bab - Tebourba Road. Forces are in contact eight miles
North-East of Medjez El Bab. During night28th/29th, United
Kingdom Infantry secured Western slopes of hill three miles
North-East of Sebkret El Kourzia.
2. AIR OPERATIONS
ESTERN FRONT: 30th/1st. Aircraft were
despatched - Essen 305 (12 missing) and
Bocholt (North of Duisburg) 12 (1 missing)
Preliminary reports indicate heavy cloud at both places
but large fires were reflected on the cloud.
EASTERN FRONT: 28th/29th. Russian bombers
raided Koenigsberg. Large fires reported.
TUNISIA: Full reports for 29th not yet received.
Escorted bombers made four attacks on enemy positions North
of Enfidaville.
MEDITERRANEAN: 29th. Escorted light bombers
sank a 3,000 ton ship and one E-Boat set fire to another
3,000 ton ship, damaged two E-Boats and a Siebel Ferry.
Enemy casualties, 7, 4, 2. One Spitfire missing. South-
West of Sicily, Malta-based Spitfires set fire to a large
schooner.
BURMA: 27th. Mitchells (B.25) dropped ten tons
of bombs at Thazi Junction (80 miles South of Mandalay).
28th. Mitchells successfully attacked
railway installations at Monywa and in Katha area.
Regraded Unclassified
120
BE RE-TRANSMITTED
TMERSURY NOT TO
COPY NO.
13
U.S. SECRET
BRITISH MOST SECRET 03
m
OPTEL No. 145
n
Following -Co supplementary resume of operational events covering the
period 24th April to lst May, 1943.
1. NAVAL
In home waters H.M. light forces sank an E-boat, 2 ships totalling
8,000 tons and 3 armed trawlers.
MEDITERRANEAN. One E-boat was sunk, another probably sunk and 4
more damaged by H.M. light forces, who also sank 2 petrol-carrying lighters and a
small merchantman. H.M. Submarines reported sinking one destroyer, one liner, one
escort ship, 4 merchantmen and EL small tanker, 3 other ships were probably sunk.
Convoy traffic to TUNISIA decreased by 4,000 tons. Destroyers are again believed
to have carried German troops to TUNIS.
SUBMARINE WARFARE. Week ending 28th. 54 attacks on U-boats. Of
7
promising attacks 3 were by surface craft. U-boat activity concentrated mainly
south of GREENLAND and between GREENLAND and ICELAND (c). Although over 50 U-boats
have operated against 4 convoys in this area, shipping losses have notably declined.
8 ocean convoya in week ending 25th reached their destinations with only 3 ships
lost in all.
SHIPPING CASUALTIES. During the week 24th to 30th, 9 ships were re-
ported to have been torpedoed. One United States ship sunk and one British ship
(which reached port safely in convoy) east of GREENLAND, 1 U.S. ship in the AZORES
1 U.S. ship in W. ATLANTIC, 1 British tanker southeast of CAPETOWN, one British
ship southeast of DURBAN, and one U.S. and 2 British ships off Eastern AUSTRALIA.
In the MEDITERRANEAN, a French ship was sunk by mine and a British ship was mined,
but reached port. The British ship damaged by air attack at MILNE BAY has reached
CAIRNS, QUEENSLAND. A British tanker is overdue at CAPETOWN.
ITALY. 2 Italian submarines reported being converted at BORDEAUX for
cargo carrying to JAPAN. Air reconnaissence SPEZIA recently showed 2 French contre-
torpilleurs of "Tigro" class and & third believed to be "Lion" from TOULON.
ENEMY SHIPPING. Recent large increase of enemy shipping from ROUMANIA
to Crimean ports and of small craft across KERCH STRAIT.
TRADE. Imports in convoy into UNITED KINGDOM week ending 24th -
1,004,000 tons, of which 309,000 oil.
2. MILITARY
TUNISIA. 2nd United States Corps. In Coastal area, French Colonial
troops have reached general line running south from coast 4 miles east of KEF ABBED,
Difficult move by United States forces from MAKNASSY area carried out with remark-
able speed and smoothness. United States forces have made useful advance over most
difficult mountainous country creating threat to JEFNA.
First Army. French Sector. Main portion enemy's forces and all his
armour concentrated to prevent break through by either First or Eighth Army enabled
French to make valuable advance through difficult mountainous country in DJEBEL
MANSOUR and DJEBEL CHIRICH areas.
Eighth Army. Enemy massed considerable proportion of his whole force
to prevent a break through in direction of HAMMAMET. Strong pressure on enemy main-
tained and several counter attacks repulsed with considerable losses. Activity
mainly confined to artillery exchanges and our patrols pushed forward several miles
on left flank making contact with French.
General. No appreciable change German strength. Italian approximately
1 very week armoured division and 2 infantry divisions. Estimate serviceable tanke
90, of which approximately 20 Italian. Believed practically all enemy forces now
committed in fighting. Lack of reserves and supply difficulties caused by Allied
attacks on sea and air supply routes may have drastic effect on enemy's ability to
maintain present bridgehead. So far, however, no signs of evacuation.
Regraded Unclassified
- 2 -
121
RUSSIA. Warm and dry April has helped dry the ground and near future
may see resumption of large-scale operations, at any rate south of MOSCOW.
SATELLITE AXIS FORCES. Number of satellite divisions in RUSSIA
greatly reduced since January, 1943. Present estimates are:
(a) Italian. Believed all original expeditionary force now withdrawn
from active operations. Some 50,000 troops may still remain
in RUSSIA.
(b) Hungarian. Still about 50,000 troops in RUSSIA, but these are
engaged on lines of communication duties only.
(c) Roumanian. Some 20,000 troops probably still ungaged in TAMAN
Bridgehead. Elsewhere equivalent of 5 divisions being remants
of routed divisions, probably remain in RUSSIA, but are not
engaged in active operations.
BURMA. ARAKAN. On 27th, 2 further Japanese attacks in area south
of BUTHIDAUNG were repulsed. Japanese have 4 battalions forward on ARAKAN Front.
Total enemy strength this area now believed 7 battalions, of which 6 are half-
strength.
3. AIR OPERATIONS
WESTERN FRONT. Night. Out of 1308 bombor aircraft which operated
night during week, 64 are missing. Heavy attack on DUISBURG. Results believed
very successful and much damage caused in town and neighbourhood. Heavy raid also
on ESSEN, results not yet known. Nearly 400 aircraft employed on sea-mining, which
is returning increasingly high dividends.
Day. Our attacks directed mostly against enomy shipping - 2 ships of
3,000 and 2,500 tons hit by bombs and one of 4,000 tons torpedood off NORWAY. Con-
voy attacked off TEXEL, when 2 large ships set on fire and 2 mine-sweepers and a
trawler were damaged.
TUNISIA. Intense air activity in support of our troops. In one day
alone, offensive sorties totalled 1371. 3,000 ton ship was set on fire and 3
lending craft destroyed at TUNIS. Enemy lost 18 aircraft certain. We lost 9.
Following attacks on shipping. 6,000 ton ship sunk off MARITTIMO. Off CAPE BON
one ship destroyed and another damaged, 3 Siebel ferries destroyed and 1 damaged
and an escort vessel sunk. In Gulf of TUNIS, 3,000 ton ship and an E-boat des-
troyed and another ship and 2 E-boats damaged. Large schooner set on fire south-
west of SICILY. In all these operations onemy lost 12 aircraft destroyed. We lost
5.
RUSSIA. Russian Air Force fairly active, ospecially in south. Rus-
sians bombed KOTKA on Gulf of FINLAND 3 times, made an effective attack on an un-
specified airfield on central front, gave considerable support to their troops
attacking TAMAN bridgehead and continued their long range bombing of East Prussian
toms. German Air Force operated in force over Toman Peninsula and against Russian
troops threatening NOVOROSSISK, but their operations declined during course of week
and at no time did the German Air Force succeed in gaining definite local air
superiority.
4. EXTRACTS FROM PHOTOGRAPHIC AND INTELLIGENCE REPORTS ON RESULTS OF AIR ATTACKS
ON ENEMY TERRITORY IN EUROPE.
STETTIN. Photographs following day show 40 acres of chemical product.
factory Pommerndorf burnt and important damage to industrial buildings. Central
districts of town still hidden by smoke.
STUTTGART. Reported over 100,000 pounds damage in a ball-bearing
factory. About 40 industrial and commercial concerns affected. Severe damage to
town power station, barracks and over 400 houses destroyed or damaged.
MANNHEIM. Besides damage in I.G. Farbenindustrie, 5% acres devastated
in factory making tank and armoured vehicle components. Severe damage in docks area
to warehouses and timber yards.
GENERAL. German propaganda statements insisting that German morale is
unaffected by R.A.F. raids is completely bolied by letters found on German soldiers
captured on the Russian front.
BILLANCOURT. United States daylight attack on Renault achieved con-
siderable success and several direct hits on different shops are confirmed, wrecking
many machine tools and damaging and destroying several finished lorries. Estimated
at least 3 months necessary to resume normal production.
5. HOME SECURITY. Estimated civilian casualties week ending 28th killed 41,
seriously wounded 60.
Regraded Unclassified
122
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Press Service
Sunday, May 2, 1943.
No. 36-46
5/1/43
Washington, D. C., May 1, -- In a tremendous financial
response to the needs of our armed forces, more than
$16,500,000,000 has been invested by the American people in
securities offered by the Treasury during the Second War
Loan Drive, which closes at midnight tonight, Secretary
Morgenthau announced today, Although the final tabulation
will not be completed for some days, it already is evident
that the $13,000,000,000 original goal has been exceeded by
more than $3,500,000,000, making this borrowing operation the
greatest in history, he said,
"I am greatly pleased by this entirely voluntary invest-
ment by the people in victory, n Secretary Morgenthau said.
"The unprecedented sum borrowed in this campaign reflects the
earnestness and vigor of our national war effort. In this,
as in other ways, a crushing superiority of United Nations
armaments is assured and the defeat of our enemies made in-
evitable.
"The campaign now ending marks another milestone in our
move toward sound borrowing from ultimate investors, rather
than from commercial banks. The banks were limited to pur-
chases of approximately $5,000,000,000, and other buyers thus
subscribed to more than $11,500,000,000 of the securities,
I am especially pleased that the increase in total subscrip-
tions over the initial goal has come entirely from non-
banking sources. This is the highroad of non-inflationary
borrowing.
"But even this performance must be bettered in the fu-
ture. Both during the Drives and in the intervals between
them, it is important that all who have regular incomes or
Regraded Unclassified
123
- 2 -
accumulated funds make steady purchases of the several issues
of Savings Bonds and Tax Savings Notes which are available at
all times.
"The Treasury was assisted in the Drive by an army of
volunteers and to all of these participants the thanks of
the Government are due. I should like to add to this my own
heartfelt appreciation of the freely given aid of solicitors
from the financial, insurance and other fields; of adver-
tisers; of the press, magazines, radio, outdoor and other
modia; of department stores, retailers, theaters and others
who contributed ingenious displays, and of all who joined in
the effort in any manner whatsoever."
(NOTE -- Detailed figures, through Friday, April 30, will be
announced later in the day.)
Regraded Unclassified
124
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Press Service
Sunday, May 2, 1943
No, 36-47
Secretary Morgenthau late this afternoon announced de-
tails of subscriptions in the Second War Loan Drive to the
close of business April 30 as follows:
(In millions of dollars)
Funds from non-banking sources:
Individuals
$2,504
Insurance companies and
Mutual Savings Banks
:
3,331
Other corporations
4,869
10,704
Funds from banking sources
5,000*
...
Funds from other sources:
Dealers and Brokers
831
Federal Trust Funds
373
1,204
Total
$16,908
*Includes estimated allotment for 2% Bonds to banks.
-000-
Regraded Unclassified
SECRETAR OF 3 OFFICE
1943 MAY
MAY
TREASURY
125
1943
NOT TO BE RE-TRANSEITTED
COPY NO. 13
&
BRITISH MOST SECRET
U.S. SECRET
OPTEL NO. 143
TREASURY
a
THEASURY DEPARTMENT
OFFUL
Incormation receive up to 7 8.00 2nd Way, 1943.
1. NAVAL
SECRETA
1943
EWATERS. lst/2nd. Dover batteries fired on two
heavily escorted ships eastbound from BOULOGNE. One escort probably sunk,
Enemy replied by shellfire for about three hours on DOVER-FOLKESTONE-DEAL
Area. Damage and casualties slight.
2. MILITARY
TUNISIA. 1st Army. Central Sector. 30th. After bitter
fighting with heavy losses on both sides, our troops withdrew about two
miles from SIDI ABDULLAH to area of SIDI MEDIEN, 8 miles east-southeast of
MEDJEZ EL BAB. Other enemy attacks held. Estimated at least 12 enemy tanks
destroyed during night of 29th/30th. 8th Army. 29th/30th. Our troops re-
gained ground which had been lost as a result of enemy infiltration during
29th.
3. AIR OPERATIONS
WESTERN FRONT. 30th/lst. 793 tons of H.E. incendiaries
dropped on ESSEN. 1st. 48 United States Fortresses (B.17) out of 78 des-
patched bembed ST. NAZAIRE through heavy cloud. 7 missing. 18 Torpedo
Beaufighters, escorted by 40 Beaufighters, despatched to attack Cruiser
NURNBERG, previously sighted off BERGEN, No shipping seen but heavy anti-
aircraft from shore and many fighters encountered. 7 Beaufighters missing.
lst/2nd. 30 aircraft despatched to sea mining off French Atlantic ports.
TUNISIA. 29th. Targets in LASSICAULT Area bombed by
189 Allied aircraft.
SICILY. 30th. United States Liberators (B.24) dropped
24 tons H.E. on LESSINA.
LEDITERRANFAN. 29th/30th. A Beaufighter destroyed 5
JU 52's South of SARDINIA. 30th. 599 medium and fighter bomber Sorties
despatched against shipping in SICILIAN Channel. Despite record defensive
effort by enemy fighters, 1 destroyer, a large launch and an E-Boat were
sunk; & light cruiser, a 1,500 ton ship, 6 Siebel Ferry and an E-Boat set
on fire. Enemy air casualties 7, 2, 2. Ours - 6, o, 0.
Regraded Unclassified
126
May 3, 1943
11:15 a.m.
FINANCING-ORGANIZATION PLANS
Present: Mr. Bell
Mr. Gaston
Mr. Robbins
H.M.JR: Isn't there one man in the Federal Reserve
especially for the Treasury?
MR. BELL: It.is the fiscal agency department.
H.M. JR: Isn't there such a title as fiscal agent?
There is some one man in the Federal Reserve who is supposed
to be there for the Treasury.
MR. BELL: There are e good many of them whose salary
we pay.
MR. GASTON: The man who is the head of the fiscal
agency in the bank might be a vice president of the bank
or he might be some other officer.
H.M.JR: Is he called fiscal agent?
MR. BELL: No, he would be head of the fiscal agency
department, and they are not all the same names throughout
the service.
H.M.JR: But there is a fiscal agency department?
MR. BELL: That is right. It may not be called as
such - that name - but there is such a department.
H.M.JR: There is some one man - he may be a different
person in a different bank, but there is such a man, and
there is such a department.
MR. BELL: You can pick one, and in some cases two
people, that handle our business for us.
Regraded Unclassified
127
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H.M.JR: I will tell you what I am groping for. It
may not be any good. Let me just put it this way: There
will be a succession of discussions. We will start here
and do more when necessary. If I understand the mechanism
correctly, we do need the Federal Reserve to do the fiscal
agency business for us, that is to handle these securities.
That is the setup now, isn't it?
MR. BELL: Yes, the mechanical end.
H.M.JR: Yes, the mechanical end. I mean, there is
no question about the mechanical end. But in my mind I
don't see why the president of the Federal Reserve Bank
should necessarily be the Treasury's representative in a
district in charge of sales and promotions and so forth,
and so on.
Let me spill this - it is sort of in the air. What I
am thinking about is this: After this trip I am more sold
than ever on the idea that we should have strong State
organizations with a strong State man. Let's put it this
way: Idaho, I think, comes under San Francisco. The man
in San Francisco has no more business to be supervising
Idaho than the man in Chicago has. I mean, they are just
as far apart, emotionally, their interests, and everything
else. I mean, there is no connection between Idaho and
San Francisco.
MR. ROBBINS: In any subdivision of geography you
have to have further subdivisions below any logical, large
breakdown; and where possible, according to my thought,
State lines should be preserved.
H.M.JR: I think they should. For example - I don't
have 8 map of the United States - Seattle, Washington, and
Oregon sort of bunch up together. I wonder if there isn't
some way of approaching this, that we build the thing on
State lines, and whoever is in charge of the State is in
charge of everything that goes on in that State which has
to do with selling securities.
Then the question is - let's say we take three or
four States and have a supervisor over them - does that
Regraded Unclassified
128
- 3 -
necessarily - does that person necessarily have to be the
president of the Federal Reserve Bank? I don't think SO.
MR. BELL: I don't suppose it has to, but it seems to
me you are going to rely to a large extent on your banking
system to put over these drives. It certainly is the
Federal Reserve - I agree you should keep your State lines
where possible, but in some cases where you have. a Federal
Reserve setup it would not be possible to keep strictly to
State lines.
H.M.JR: I have changed, Dan.
MR. BELL: Have you?
H.M.JR: Yes, and I will tell you why I have changed.
This thing is all very fluid, and I am just beginning to
think out loud. I am sort of groping for something. I
want to answer Bell. I have said right along just what
you said, that we need the banks - need the Federal Reserve
with the banks. I don't think that that is necessarily
true, and I will tell you why. I think future drives,
when we want money from banks, should be separate from the
drive where we want money from the people, and we should
separate the two. I think it gets all mixed up in people's
minds, and they think they are buying 8 seven-eighths
certificate and they are being patriotic, or they are
buying a tax note and they are being patriotic, and they
are not. It doesn't mean anything. It is just an out.
I don't see that if and when we want to raise some money -
four or five billion dollars in the banks - that we can't
do it as a straight banking operation.
MR. BELL: Sure, we can do it.
H.M.JR: I am going to be very, very frank here. The
banks have got to take this, no argument about it.
MR. ROBBINS: We don't need promotion to sell them.
H.M.JR: That is the point, and we don't need the
Federal Reserve- we need it for the mechanics. There is the
Regraded Unclassified
129
- 4 -
fiscal department, which we here in the Treasury completely
pay for - maintain. I don't know whether you are conscious
of that, but there is a Mr. X in each bank Who is the
Treasury man, and he is the fellow who we pay for. That
fellow has to do what we like; and if we don't like him,
we say, "Put somebody else in." But again he is the mechanics
and he isn't a salesman. Right?
MR. BELL: That is right.
H.M.JR: But he does the thing. Now, the important
thing - I have to make a little speech here to get it out
of my system. The important thing, as I see it, isn't the
four or five billions that we have to get from the banks
periodically and which we could get because the banks have
to take it, but is this very, very difficult task of selling
outside the banks. And what I looked forward to - 88 I say,
in most every community that I have been to where they may
not be necessarily friendly to the Treasury or friendly to
the Administration, which is the same thing, but in the
community there is more or less cohesion in that particular
community.
Therefore, it is very important that in that community
we have a leader who is friendly to the Treasury. And that
may not be the person who is the president of the Federal
Reserve Bank.
Now, the thing that I am kind of leaning toward - and
as I say, I want plenty of discussion and plenty of time
and thought on it - is something like what we had at the
Farm Credit where we had twelve agents, each agent in charge
of four States, with lots of authority, you see. They were
very carefully picked.
MR. GASTON: Those were in the Federal Land Bank
Districts, which differed somewhat from the Federal Reserve
Districts, although there was the same number of them.
Regraded Unclassified
130
- 5 -
H.M.JR: Herbert, I can't help it - the fact that
the Federal Reserve Districts are thirty years old, or
whatever they are, are antiquated - and the best example
is that Detroit thirty years ago was an unimportant place.
Today I say it certainly is as important as Chicago, if not
more so, but still they are subordinate to Chicago. I
mean, all kinds of things have happened in the last thirty
years.
Who would dream that the hundred twenty thousand ship-
workers would move into Portland, Oregon, in a year. I
mean, Portland, Oregon, the city of roses, has become a
city of ships.
All of these things are happening. I would like to
get - this is the kind of thing I am thinking of in 8 way -
if I could get 8 man, twelve good stout-hearted - what is
that song - good stout-hearted men who thought right, who
felt right, to supervise each four States. Then have the
Federal Reserve in sort of an honorary position - the
president of the Federal Reserve - but not much more than
that, you see.
Then the State chairmen - have each State chairman
in complete charge of all sales of securities within the
State, but with some sort of honorary chairman position
in relationship of the Federal Reserve over these fellows.
As the thing gets tougher - now, let's take this
fellow Gilbert, for instance, in Dallas. If this thing
gets tough - I mean, Gilbert is 8 nice fellow, and he most
likely is trained to run his Federal Reserve Bank well; he
is interested in shifting of currency from one bank to
another; he is interested that the banks are having their
loans paid off; but he has no social conscience. I mean -
and the thing that I. feel, and you can say, "Well, Mr.
Morgenthau, that isn't what this is for. That is right,
but this is what I want to make it for.
I think this bond-selling thin is one instrument
where it can be completely united between the people and
Regraded Unclassified
131
- 6 -
the Government, and can be used as an instrument of war
spirit to help win the war on the home front. Not to use
it would be just criminal. God knows the President needs
all kinds of help, and when you can go to some of the places
that I did and see this magnificent spirit in some places -
and others not - but when you can get it at 8 certain pitch
then that is the pitch we ought to aim for all over, and
the presidents of the Federal Reserve Banks haven't got
what it takes. There is no use criticizing them or getting
mad at them, because they weren't put in there for that
purpose. Is that right?
MR. ROBBINS: That is true.
H.M.JR: They just weren't put in there for that
purpose. I mean, if I talked on any of these things -
management-labor - to Mr. Day in San Francisco he would
have no idea of what I was talking about. It isn't his
interest, and there is no reason why he should be interested.
There is no use wasting one's energy in getting angry
at fellows like that, but there are people in that community
who are leaders and there are people who are making this
thing go. Those are the people I would like to have as
leaders for us.
Now, as + say, this isn't something you can put down
on 8. chart, but this is the way I feel, and I don't think
it is unworkable.
What do you think, Bill?
MR. ROBBINS: I think that the variation that you are
developing here for us from the plan or suggestion that I
have submitted is not very great.
My whole thought hinges about the selection of these
twelve men, just as yours does.
Regraded Unclassified
132
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Now, geographically I would put them in the twelve
Feds, and I would have the Federal System involved in
this financing operation in a more important - to a more
important degree than you would, but I certainly would
be equally as keen about the selection of the proper twelve
men.
I think there is where your whole plan will hinge. I
feel so sure that our success or failure in this field
organization will hinge upon the quality, the character,
the philosophy, and the leadership of those men.
Now, I am not 80 concerned about taking them and saying,
"We will take four States to a man and set six or eight men
up in offices." That seems unnecessary. They should tie in
with the Fed. The Federal Reserve System will handle our
securities and will provide a community leadership when it
comes to organizing the banking profession, and we will need
them. If this man is good and strong - I am not going to
worry about the Paddocks and the Gilberts.
As 8 matter of fact, it is interesting that you picked
Gilbert. He has the best record on individual securities
of any district in the United States.
MR. BELL: Sure. The two districts that we thought
might be the worst were the best, Atlanta and Dallas - a
hundred and fifty-nine percent.
MR. ROBBINS: Yes, for Dallas, and almost a hundred
and fifty percent for Atlanta.
H.M.JR: That is in dollars?
Regraded Unclassified
133
- 8 -
MR. ROBBINS: Percentage of dollars sold to individuals.
H.M.JR: Then the question gets down to who the indivi-
duals are. I mean, it gets down to how many of the people
in Pallas in that airplane plant that they have there - I
think it is Consolidated - how many of those people have
bought. The reason that I was - you might as well get the
whole picture - Bell knows it, but you two men don't know
it - this is confidential.
They had a meeting which Jimmy Dyrnes called of his
committee. They asked me to come and I couldn't come, and
they had Paul come. That group there, without knowing a
blankety-blank thing about this drive - and that goes for
Paul, too, and I blame ourselves - why we don't sell our
own Treasury people, I don't know - that group has pretty
well made up their minds that they are going to get an
amendment for compulsory savings on this present tax bill
when it goes over to the Senate.
Well, we had a pretty tough fight here for two hours
Saturday morning. I came down just to say hello to every-
body. While 1 couldn't un-sell Paul on compulsory savings
I did un-sell him on the idea of trying to put anything on
the bill when it got to the Senate, and for heaven's sake
let's get this country on a pay-as-you-go basis and not
begin to add amendments.
I sold him on the political wisdom of that rather than
trying to put on a compulsory savings. But Byrnes and his
crowd over there - the Chamber of Commerce man - the fellows
that aren't for it are the farmers' union man, who is
interested, Davis of the Labor Board, and one other.
MR. BELL: O'Neal?
H.M.JR: Patton was with us. but I mean, you never
know - you go along here in the middle of the drive and you
think you are going to come home - you haven't even had the
fun of tasting seventeen billion dollars when these fellows
begin to talk about compulsory savings. So the answer that
they give - they say everything is lovely. You just don't
know what is happening.
Regraded Unclassified
134
- 9 -
But here we are right here in the Treasury - Paul
thought we were selling four hundred million a month of
E Bonds.
So what I am getting at is this fellow down there may
have sold a hundred and fifty percent of his quota to indi-
viduals, but they come right back and say, "Who are the
individuals?" And we have got to be able to answer it.
Are they the fellows they are aiming for with around three-
thousand-doliar incomes? I don't know. But we have got to
be prepared to answer it.
MR. ROBBINS: Yes, we have never had records that will
give us that answer.
H.M.JR: If they give us compulsory savings, what they
are talking about - twenty billion dollars of compulsory
savings - there isn't much use of talking here about what
kind of an organization we are going to have. Right?
MR. ROBBINS: That would change the picture awfully
fast.
MR. GASTON: Of course, they can't get any twenty
billions of compulsory savings. It just cannot be done, and
what they can't see is that you cannot get, by the compulsory
saving method - you can't answer the problem by the compulsory
method. You get a part of it and still have to go along
with your volunteer organization.
H.M.JR: Herbert, I am with you a hundred percent, but
here I walk in Saturday, really very excited about this
thing, and I get this thing between the eyes because Jimmy
Byrnes is no mean person to conjure with.
They postponed the next meeting until Wednesday, and
the fellow I want to work on is Walter George. I want to
see George tomorrow because if we get him sold we are all
right. But you just come back and you don't know where you
are and what is happening.
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135
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But that all revolves down again, that the kind of
fellow that I want in these States, and I don't care -
give me my State organizations plus twelve good supervisors,
and it isn't terribly important where it heads up other than
the psychological effect.
Did anybody hear Drew Pearson last night? He went on
the air and he said, "There is 8. big fight going on in the
Treasury and Morgenthau has pretty much sold out to the
bankers.
(The Secretary held 8 telephone conversation with
Mr. Doughton.)
EngL H.M.JR: He will come by in the morning or for lunch.
He is the key man, and John Sullivan says if we show him
these figures and show the distribution, that would answer
his question. He wants & big/distribution so that when
this war is over there are a lot of stockholders who are
interested.
MR. ROBBINS: That is right. Now, we can't give a lot
of detail about the distribution.
MR. BELL: We can give what we get out every day from
the chart.
MR. GASTON: I heard Drew Pearson. I also talked to
Leon Pearson for sometime on the phone in the afternoon.
H.M.JR: Oh, you are the leak, are you? (Laughter)
MR. GASTON: Drew was apparently all set to say you had
sold out to the bankers - and he didn't say that - and that
the whole War Savings organization was going to be scrapped.
I told him there were two different types of operation.
There was the question of selling to the banks and to the big
corporations, and that we had had a special committee for
that purpose; that we had endeavored to combine them and
coordinate them for this drive. I told him that the sale
Regraded Unclassified
136
- .11 -
of War Savings Bonds was an essential part of our operation
and that it would continue.
You notice he said, "I am privileged to state that the
War Savings organization will be continued." That is the
way he ended his broadcast.
H.M.JR: What he said was that we sold out to the
bankers, but he was going to predict on the thirteen billion
dollar drive - he didn't even have the figures right - that
the three hundred and fifty thousand volunteers would prevail.
MR. GASTON: No, I am very sorry to say that is not
what he said. I am sorry to correct you. He said that the
War Savings organization would be continued. He was pre-
pared to say just the opposite.
H.M.JR: I didn't hear it. Did you hear it?
MR. GASTON: Yes.
H.M.JR: And that is what he said? Do you want to bet
on it?
MR. GASTON: It was substantially that. I will get his
script.
H.M.JR: That is all right.
MR. GASTON: He was prepared to say just that very
thing, that we were going to scrap the volunteer sales
organization.
H.M.JR: Somebody confused me. That isn't going to
influence me.
But Dan, isn't there a way - you can think about this,
and I am going to have another talk - I take it you are with
me on a strong State chairman. Right?
Regraded Unclassified
137
- 12 -
MR. ROBBINS: I think that if subdivisions can be made
of any large breakdown of geography where State lines can
be followed, that is what we should do.
H.M.JR: Then I am thinking in terms of maybe twelve,
maybe fifteen - I don't know - for a better term, I called
them supervisors, then the question is, where do they
head up?
MR. ROBBINS : That is where I go for the bank. That
is where I think the Fed is the place.
H.M.JR: Let me argue. They could head in here.
MR. BELL: Sure they could.
MR. ROBBINS: Don't forget the thought, however, that
our success will be largely dependent on our ability to
decentralize, push out, push down.
H.M.JR: Yes, but you could still do this. I mean,
whether they head in here, or head in here through the
presidents of the Federal Reserve Banks, doesn't make an
awful lot of difference.
MR. ROBBINS: I think we need the Federal neserve System.
They have a very real part.
MR. BELL: I wasn't thinking of the federal Reserve
Banks and their doing the bank financing, but thousands of
these people on your various local committees are bankers.
That seemed important to me in selling bonds to your indivi-
duals through those groups, that it was important that they
tie in with the Federal Reserve Banks. They have that con-
tact.
H.M.JR: Dan, the bankers can sell bankers, but the
bankers and the security salesmen cannot sell the farmers
and the labor people. They just can't do it, and it is
bad public relations to have them do it.
Regraded Unclassified
138
- 13 -
MR. ROBBINS: You need all kinds of people to sell
all kinds of other people.
Mr. GASTON: You have two different things, steady
canvass among working people and all classes of people, and
then you have this question of the banks. That is negligible.
You can handle that through the routine machinery. The
insurance companies could also be handled through the routine
machinery. And you have the large corporations and in addi-
tion to that, the individual large investors who are on
the lists of the banks and of the investment security people.
MR. ROBBINS: I don't think I put as much importance in
my thinking upon the absolute necessity for the maintenance
of strong State organizations as you do. I think that where
it is logical and natural, that that would be the easy,
normal way to put your subcivisions together of any larger
classification. But I don't think that in terms of relative
importance the organization leadership established at the
State level is as important as that at the community level.
It is communities that do this job, really.
H.M.JR: Well, we won't fight over that, but on the
other hand, when you go to a meeting, the governor comes
down, and SO forth, and 30 on. It certainly is an advantage
or an asset which I don't think can be thrown away.
MR. ROBBINS: I don't think we have to throw it away.
H.M.JR: I don't think we should. That is the way I
feel. The first case, the man in charge of the State, it is
going to be terribly important to get the right man and then
the fellow above him, and I don't think the fellow above
our State chairman should be the president of the Federal
Reserve Bank.
MR. ROBBINS: I don't, either. I think the fellow above
your State chairman should be 8. man who would give his com-
plete total time, and then I, of course, tied him into the
Federal and had the Federal Reserve maintain its general
authority over the whole organization.
Regraded Unclassified
139
- 14 -
H.M.JR: Well, I was thinking in some sort of honorary
capacity. How much time do the presidents give to this
thing?
MR. BELL: During the drive period they give an awful
lot of time.
MR. ROBBINS: Practically a hundred percent.
MR. BELL: After a drive period they wouldn't give a
lot of time.
MR. ROBBINS: I should say Allan Sproul spent seventy-
five percent of his time.
MR. BELL: I would say AL Williams, too. AS a matter of
fact, A1 Williams just dropped the bank stuff and went to
work on this.
MR. GASTON: Where is Williams?
MR. BELL: Philadelphia.
H.M.JR: You see here so many things keep cropping up
which are wrong.
I sent you (Robbins) a note. I read this last report
of waldman. I used to get each week how many days behind
each issuing agent used to be, and when they were back I
used to raise hell and follow it personally and get the
thing. He goes up to the Sun Shipyards and these other
places, and we just don't get the bonds out. I ought not
to have to watch it but somebody is falling down on the job.
I sent a memo to you. Haas used to send me once a week -
where they were over ten days old, we used to call them up -
in some cases I would write the president of the company a
letter, personally. "Chrysier can do it in three days; why
does it take you thirty?"
There are things like that which show weakness in our
own organization.
Regraded Unclassified
140
- 15 -
MR. BELL: Haas used to follow it through the Federais
and the Federals are just about as current as they can get
them, now. The issuing agent is another thing. I asked
Waldman - I never knew the man existed until you sent me a
note about him - I asked him if he would give me a report.
He went around and found these cases we could follow. He
couldn't give me any specific instances in the Pittsburgh
area.
H.M.JR: He is just back on the Sun Phipyards, but
again there are complaints of delay. But I am just using it -
that is 8. thing which should be handled on the State level.
I mean, if the Sun Phipyards in Philadelphia are - I don't
know how many weeks behind - then the State administrator
should be the fellow to go after them.
MR. ROBBINS: I don't think that example really is
controlling in the question of whether you have State or
otherwise. I think--
H.M.JR: No, no, I am just using it to show that there
are weaknesses in our present organization.
MR. ROBBINS: Yes, but what we need are these managers;
we need twelve very good managers. That is the cardinal
thing we need in the field. I think we have some good men.
H.M.JR: Oh, we have; and as far as I am concerned, it
is the individual man that I want, irrespective of what his
background is. But the fellow has got to have - the fellow
on this thing has got to feel the war first. he has got
to have a burning desire to win this war. And he has got to
have a social sense; he has got to be able to sit down with
a fellow in overalls and talk it over; he has got to appre-
ciate the fact that we have got to use women - which I
didn't get anywhere on this trip. I mean, they give - the
women take an awful back seat in this thing.
MR. ROBBINS: Did you get into some of the offices and
see how they are set up and operating? I guess you didn't
have a chance to do that.
Regraded Unclassified
141
- 16 -
H.M.JR: At the banquets they didn't even invite them.
I couldn't get them to invite Mrs. McAdoo to come to the
banquet.
MR. ROBBINS: They sure have been operating.
H.M.JR: But also the labor people. I mean, both in
San Francisco and in Dallas, just straight bankers or in-
vestment men. I never saw a labor man there.
MR. GASTON: There was no labor man at our dinner in
Portland.
H.M.JR: That fellow from the AF of L - wasn't he
there?
MR. GASTON: I don't know. I don't think he was.
H.M.JR: No, there was no labor man and no women there,
I guess that is right.
Well, let's let this be the first talk and let's think
about it. If I get a little time this afternoon, we will
have another talk and I will keep at this thing until we
get it settled.
I mean, it would be better to give you no promise than
not to keep a promise. But as I get time, we will keep
doing it over and over all week, hoping we can settle it
this week if possible.
MR. ROBBINS: I have to go to New York to make a talk
at the National Association of Savings Banks on Thursday.
That is the only out-of-town engagement I have.
H.M.JR: You will go up there Thursday?
MR. ROBBINS: I will go Wednesday. I am going to try
to go to a directors' meeting in New York.
H.M.JR: Do you want to stay over the week end?
Regraded Unclassified
142
- 17 -
MR. ROBBINS: No, it isn't necessary. If this problem
can be handled, it is the number-one problem.
H.M.JR: I will keep on it.
MR. ROBBINS: But if we are so fixed that it won't be
discussed, then I would stay, because I haven't anything to
do, really, until this die is cast. I am not at all busy,
and I have inspected the "hite House lawn, now, continuously.
It is in very good shape. (Laughter)
MR. BELL: From your window?
MR. ROBBINS: Yes, I am not at all busy.
H.M.JR: One thing, Herbert, I think this - well, I
wish I could say the same (laughter) - Ian perfectly willing
to have my four-thirty press conference, but I would like to
give the boys - tell them that about six o'clock tonight
we will give them the figures as of tonight - the ones that
come in today.
MR. BELL: At your four o'clock press conference you
can give the Saturday's figures including today's reports
of eaturday on savings bonds, tax notes.
H.M.JR: won't you have another series of reports
tonight?
MR. BELL: Yes, but that will be about six o'clock, and
we intended to get the final figures in tonight on the two-
percent bonds and allot tomorrow morning. We can give them
the total subscriptions, if you want to, tonight.
H.M.JR: I would like to wait because you will only
get one play and 1 would like to have the figure, whatever
we have succeeded in today, letting that go in for the story
for tomorrow.
MR. BELL: It will be a little late.
Regraded Unclassified
143
- 18 -
H.M.JR: That is all right; they can wait.
MR. BELL: Do you want to give out anything on the
two-percent bonds?
H.M.JR: Why not?
MR. BELL: We can give out the total subscriptions and
say that allotments will be approximately 80 much, if you
want to. I suppose we can make ailotments if you want me
to give you 8. ring on the telephone about six.
H.M.JR: Yes, do the whole thing.
You (Robbins) seemed busy enough in Bell's office
Saturday morning, but you haven't got enough to do?
MR. ROBBINS: No, I really haven't. The organization
now goes back to its former operating status, and aside from -
we are putting on a market research job, and a few things
of that kind.
H.M.JR: I want to get the advice of other people in
the Treasury as we go along. I mean, I want to invite
Graves and Gamble in, and a few of those people, and hear
what they have to say.
MR. ROBBINS: It might be a thought for me to give
Mr. Gaston a copy of that report 1 gave you.
H.M.JR: I wish you would.
MR. ROBBINS: Dan had seen it.
H.M.JR: I wish you would. If I get some time this
afternoon - I will say it now - we will continue this
around three.
Before I went away I asked Haroid Graves to be studying
this thing and to have suggestions. I will ask him if he
has anything. I haven't seen him.
(The Secretary held a telephone conversation with Mr.Graves)
Regraded Unclassified
S
144
- 19 -
H.M.JR: No private audiences: there is no use.
Have you shown this (indicating Robbins' plan) to any
of the people?
MR. ROBBINS: Just to Bell, today.
(Lt. Comdr. Stephens entered the conference.)
H.M.JR: You will all have to loosen up a bit.
Who was on what I call the War Finance group?
LT. COMDR. STEPHENS: Bell, Robbins, Peabody, Graves,
Buffington, Gamble, Miss Elliott, and Gaston.
H.M.JR: Let's tell them to be here at three o'clock.
We will put all the cards on the table.
MR. ROBBINS: Stuart Peabody has seen that. he helped
me a little bit with it.
MR. BELL: And Eccles?
H.M.JR: No, this is entirely - do you want Peabody?
MR. ROBBINS: It doesn't really matter. He has not made
any trips. He has been confined to his one activity.
H.M.JR: Read that again.
LT. COMDR. STEPHENS: Bell, Robbins, Peabody, Graves,
Buffington, Gamble, Miss Elliott, and Gaston.
H.M.JR: I think SO. Do you see any reason why I
should see each group alone?
MR. BELL: I don't think so.
H.M.JR: Well, I am not going to. I am going to do it
the way it is easiest for me.
MR. BELL: If you see them alone you will get a lot
of kicks they have gotten over the telephone from anybody.
Regraded Unclassified
145
- 20 -
H.M.JR: I will do it this way. Robbins has a plan. I
am joing to ask him to put his plan on the table and while
it is going to be uncomfortable for a couple of days, I
didn't want to do it while the drive is on. I will get the
benefit of each person, and we can all keep our good humor and
get something out of it.
MR. ROBBINS: I will stand on that. That is what I
think ought to be done.
LT. COMDR. STEPHINS: Three o'clock.
H.M.JR: Without Peabody.
MR. ROBBINS : He, of course, has a very level head and
is intimately associated with the group. It might be nice
to have him. ne has some ideas about internal organization
and part of that has to do with--
H.M.JR: Let's have this meeting without him, and later
on bring him in.
MR. GASTON: You might want both Odegard and Peabody at
a later meeting.
MR. BELL: Peabody is leaving the 15th.
H.M.JR: I am not going to have Odegard in and I am
not going to have Peabody; not at this one.
MR. ROBBINS: It isn't necessary. He is a good sound
lad.
H.M.JR: I agree with you.
We will see. I will keep plugging at it.
Regraded Unclassified
146
May 3, 1943
11:37 A. M.
HMJr:
Walter George?
Walter
George:
Yes, sir.
HMJr:
How are you? This is Henry Morgenthau.
G:
Yes. Fine, Henry. How are you, sir?
HMJr:
I'm fine.
G:
Well, you've closed up your bond sales?
HMJr:
We closed Saturday night and for your information, but
not for the public, it's going to go well over 17
billion.
G:
Well, that's fine. That's fine.
HMJr:
Now, what I'm calling about was I'd like to have 8 chance
sometime tomorrow at your convenience to show you how
this thing 18 distributed, because I know how interested
you are in getting this into the hands of & lot of people.
Hello?
G:
Yes. You mean the - how are the sales?
HMJr:
Yes.
G:
Fine. I'd like to have it, Henry.
HMJr:
Now, what time tomorrow would be good for you?
G:
Well, I just can't say at the moment, because I don't
know what schedule we've got over here in the Senate.
Un
HMJr:
Would you - would you want to do it around lunch time?
G:
It might be the most convenient time. I could run. by
there and see you sometime.
HMJr:
Well, I mean would you like to have lunch with me? Then
I could show it to you after lunch.
Regraded Unclassified
- 2 -
147
G:
If it's possible. That will depend on whether or not
some strike legislation known as the "Connally B111"
is up before the Senate. In view of the truce that's
called between the mine workers and operators for the
time being, I don't know what his disposition will be.
HMJr:
Well
G:
I think it's not likely that we'll be in session, but
I could have my secretary give your secretary a ring
this afternoon.
HMJr:
Fine. I - I'll keep it open and if you couldn't do
it, then would you want - would you care to drop by
on your way to the office in the morning?
G:
Yes, I could do it one or the other. And I - - I would
have my secretary call you.
HMJr:
Now, let me ask you this. Is - - 18 there anybody else
on your Committee besides yourself that you would like
to have hear this story?
G:
Well, I think that there are other members of the
Committee that might be interested in it. Anyone that
you might want to have it, why, suppose you just give
them a ring after we fix an hour.
HMJr:
All right. But I'd like to be advised by you who
you would like to have. You might - you know - I - -
I - I - you've got so many important Senators there.
Maybe, in the first instance, I'd better just give it
to you. How would that be?
G:
All right, Henry.
HMJr:
I think, in the first instance, I'll give it to you,
and then maybe if you like it, I could give it to your
whole Committee.
:
Fine. Fine.
HMJr:
Right?
G:
All right.
HMJr:
And then I'll hold myself open till I hear from you.
G:
All right.
HMJr:
Thank you.
G:
All right.
Regraded Unclassified
148
May 3, 1943
3:00 p.m.
FINANCING - ORGANIZATION PLANS
Present: Mr. Bell
Mr. Gaston
Mr. Robbins
Mr. Buffington
Mr. Graves
Mr. Gamble
Mr. Peabody
Mr. Odegard
Miss Eiliott
H.M.JR: Well, Harold, supposing you proceed. You
are amongst friends - I hope. (Laughter)
MR. GRAVES: Yes, sir. I have not attempted to make
any argument at all, but merely to state a plan. As you
suggested to me, I have two alternative plans, one of which
Mr. Gamble and I definitely favor The other I would
characterize as 8 sort of compromise plan.
H.M.JR: Which is the Gamble plan, the compromise?
MR. GRAVES: No. Mr. Gamble and I agree on what I
have described here as plan one - as the plan we recommend.
(Copy of Plan One attached.)
"Divide Treasury financing operations into two parts,
as follows: (a) sales to banking investors, dealers, and
brokers, and Federal trust funds; (b) sales to all others
(individuals, insurance companies, mutual savings banks,
corporations, associations, etc.). Entrust the responsibility
for item (a) to the Federal Reserve Banks--
MR. GASTON: That is financial banks and financial
corporations, is it not?
MR. GRAVES: That is banks, brokers, and dealers only,
not including insurance companies, which fall into the second
classification.
Regraded Unclassified
149
- 2 -
"Entrust the responsibility for item (a) to the
Federal Reserve banks and keep the sale of Government
securities to banking investors, dealers, and brokers,
etc., entirely separate and apart from special 'drives'
involving the general public.
"Entrust the responsibility for item (b)" - that is,
sales to the public, including, as well as individuals, all
corporate investors, mutual savings banks, insurance com-
panies, and so on - "Entrust the responsibility for item
(b) to the War Savings Staff, which will hereafter perform
two general functions as follows: (a) the continual promotion
of savings bond sales Series E, F, and G through pay-roll
savings, the farm program, the women's program, the school
program, etc.
"(b) the conduct of periodic drives for the sale of
such other securities as may be offered to the public, as
well as savings bonds. Create in the War Savings Staff at
all levels - National, State, and local - a new division,
possibly to be called the 'Special Drives Division, to
plan and conduct the periodic drives for the sale of
securities to the general public.
"In each State organization of the War Savings Staff
appoint a qualified person to serve as head of the 'Special
Drives Division.' These persons will serve either with or
without compensation, as may be arranged in particular cases,
and in part will be recruited from among the executives of
the district and regional Victory Fund Committees.
"Generally speaking, the Victory Fund Committees at
city, county, and local levels, will help to provide the
nucleus for the 'Special Drives Division' of the War
Savings Committees" - at those levels.
"At national headquarters" - that is, here in Washington -
"the War Savings Staff will be reorganized SO as to provide
machinery for planning and supervising the periodic drives.
A 'Special Drives Division' will be established to handle
this function exclusively.
Regraded Unclassified
150
- 3 -
"In order to provide more effective supervision and
coordination of the work of the War Savings Staff in the
field, in view of its increased responsibilities under
the proposed plan, the country will be divided into a
number of regions or districts. An officer will be designated
as supervisor or coordinator for such region or district.
This officer will have no administrative functions other
than to keep constantly in touch with the State organizations
of the War Sevings Staff in his district with B view to
insuring full success of the operations within each State.
The regional coordinators will report to the head of the
War Savings Staff at Washington.
"The War Savings Staff, as heretofore, will report to
the Secretary through an Assistant to the Secretary, as the
Secretary may designate."
Now, that concludes--
H.M.JR: You have to do it again; I didn't get it the
first time.
(Plan One read again by Mr. Graves.)
H.M.JR: It is open for discussion.
MR. BELL: That is about the same as Eccles suggested
the last time. Remember? He said, "Split this off and let
the Federal just handle the banking end of it and let the
War Savings be responsible for the other."
H.M.JR: Didn't he do that when he was a little peeved?
MR. BELL: He did it at the end when you couldn't get
the whole organization into one. He said that that might
be the way to do it.
MR. GRAVES: I was here when he made that suggestion.
I didn't think he was saying that in a moment of being
peeved. Did you, Dan?
H.M.JR: I thought it was for trading purposes.
MR. BELL: I thought he might be doing it to get out
from under the responsibility. I didn't know he was
exactly peeved.
Regraded Unclassified
151
- 4 -
H.M.JR: I got a most unusual letter this morning
from no less than Mr. Grant, who says he has been watching
this thing very closely in Michigan, and he has asked to
come in to see me. In this letter he sets forth that he
has reverted to his original idea that there should be two
seperate organizations.
MR. ROBBINS: He will be in town tomorrow.
H.M.JR: He has an appointment with me. He says he
goes back to the original idea of two separate organizations.
MR. ROBBINS: He has had that idea off and on, a little
cold, a little hot.
H.M.JR: He said, "Right now - I was off it, but after
watching it I am back. If you want the benefit of what
I have seen in Michigan, I would like to give it to you.'
MR. GASTON: What would be his idea of two separate
organizations, one organization for the drive and the
other for the steady pull, or one organization as Harold
suggests for the banks and another for the individuals?
H.M.JR: He doesn't say. It is just a very short
letter. He said, "I think you would like to know that I
am back where I started. If you are interested" - he
said, "I have watched the thing very closely in Michigan;
and if you care to have the benefit of my experience, I
would like to give it to you.'
MR. BELL: He has in mind the December setup, doesn't
he?
MR. ROBBINS: Yes, pretty much.
MR. BELL: One for the drive, and the War Savings Staff
to go along about as it has.
H.M.JR: George? You usually have some ideas.
MR. BUFFINGTON: One organization.
Regraded Unclassified
152
- 5 -
H. JR: Well, I think we are all agreed on that.
MR. BUFFINGTON: It is just a question of whether you
are going to go the State route or through the Federal
Reserve Bank setup. I got the impression from Eccles' talk
that he wasn't particularly displeased. He just thought
that if there was failure to get together on the one organiza-
tion permanently that it might be better to break off the
banking to the Federal and let the War Savings take the
rest.
In a conversation I had, Bill, with Mr. Grant when you
were on the Coast - or rather Hobbs had it and repeated it
to me - he was in favor of the two separate organizations
just about as they functioned heretofore.
H.M.JR: We never had the so-called Grant committee
during the drive, did we?
MR. ROBBINS: No. I have seen Grant on two occasions
and Bathrick also.
MR. BUFFINGTON: The suggestion about the organization -
I have yet to find anyone in the field I have come in contact
with who isn't in favor of the one organization. Most of
them are probably biased and are in favor of it on the
Federal Reserve basis rather than State.
H.M.JR: I will say here what I said this morning, and
I again say, for heaven's sake I don't want this thing
discussed outside of my office until it is settled. I put
off this discussion until after the drive was over 50 that
we wouldn't - there is no need for it to go outside of the
people in this room. The thing that I am groping for is
neither quite what Robbins has suggested - although I think,
if he wouldn't mind, I would like for him to outline his
in a minute - or what Graves has. I am just groping.
It is just the result of the high spots that I hit on the
trip. That is, that I don't see why in the future we have
to have the drive for funds from the banks simultaneously
with drives that we need for the people. You can get your
two billion dollars, two percents, or your two billion
Regraded Unclassified
153
- 6 -
seven-eighths - you can get those. You don't have to
have any drive. People buy some tax notes, and they think
how patriotic they are - or some seven-eighths.
MR. GASTON: I think it falsifies the picture.
H.M.JR: I think that that thing can be done through
any machinery. Just sit down and price the thing and send
out word that that is the thing end it is open for three
days. Just as long as we are at war I don't think there
will be any trouble selling those kinds of securities. I
mean, if we want to, for instance, raise four billion dollars
in September and then have the big drive for the people in
October, I think we could go out with four or five billion
dollars in September and do the other in October if we
wanted to.
I don't want to forget the fact that we need the
banks, but that isn't the same machinery that we need to
get the people's money. They are two separate things.
As of today, I think I would want to keep them separate.
I think it was five billion dollars we raised through the
banks. We could just as well do it next week if we have
to or next month. There is no great trick to it. The trick--
MR. GASTON: The same thing practically is true of
insurance corporations, isn't it?
H.M.JR: Yes. They know how much they do; they have
their directors' meetings. They do it in one day. It
doesn't take any salesmanship.
MR. GASTON: So what you have left in the picture that
does take salesmanship are the little investors with whom
the War Savings Staff has been working and the big investors
who are known to investment brokers, bond salesmen, and so on.
H.M.JR: They are known to them.
MR. GASTON: In addition to that you have the commercial
and industrial corporations.
Regraded Unclassified
154
- 7 -
H.M. JR: That is right, and the depositors of the
banks, like this man Adams sitting there at Dallas said -
he live some names out of people over five thousand dollars.
One man said, "I wouldn't lend this man five hundred dollars."
He had eighty thousand dollars in the banks. They also had
the names of people doing business in the black market.
They made good prospects. (Laughter) A fellow running 8
butcher shop illegally made thirty thousand dollars in three
months. I mean, there is that sort of thing.
Then again, as I say, I want a check made of how many
bells we really did ring this time. Somebody said to me
today that he wasn't solicited. lie lives here in town.
We can't go by one person, but we can check what kind of a
job we did at bell-ringing. So it gets down to that. The
Federal Reserve System is useful in its contacts with the
banks.
On the other hand, we have somebody in the Federal
Reserve System who fills the position of fiscel agent, whom
we pay for and who is our man in the Federal Reserve System
who is there to do the mechanics. I mean, there is no
question about the mechanics; the issuing of the bonds has
to go through the Federal Reserve System.
But the thing after this trip that I question - it is
bad enough in the country now. I mean, the feeling is that
you don't get the kind of leadership in the community - in
the president of the Federal Reserve Bank who can sit down
with the people and convince them they should invest - I
mean, let's just completely take our hair down. I have
kidded a lot about it, but every single director - for instance,
the director of the Federal Reserve Bank of New York was 8
hundred percent for the Ruinl plan, and on that had to be
opposed to the Treasury.
Now, I don't think it was a trap, because I think he
is 8 decent fellow, but harold Swift at the airport in
Chicago said, "Mr. Morgenthau, can't you and the Treasury
tell us what the policies of the Treasury are that we should
be for and what we shouldn't be for? We don't know which
things you are for and which things we should be for. We
hear SO much coming out of Washington. (Laughter)
Regraded Unclassified
155
- 8 -
Acting on my instinct I simply said, "When you stop
and think it over you really wouldn't want the Treasury
to say what you should or shouldn't think in the War
Bond organization."
He said, "It would be very helpful if you would get
out 8. bulletin saying you are for this and for that.
"I still say, after thinking it over, that I really
don't think that is what you want, and I don't think we
had best do it. We do give you public statements I make
that are supposed to be circulated both in and out of the
Treasury."
I am just using that to show - and I just want to
repeat what I said this morning before I heard Graves'
plan. Also, I want to give Robbins 81 chance to talk about
his. The thing that bothers me is this: I think the
heads of the Federal by and large are decent, honorable
citizens, but there is no reason in the world why in their
twenty-five or thirty years of experience they should be so
constituted that they can sit down with 8. labor leader or
with some women or with any foreign group and rub shoulders
with them and inspire them so that they will feel mad enough
about this war that they will invest their money. They just
haven't been trained that way, and there is no reason why
you should expect blood out of 8, turnip. After all, that
isn't their training.
Now the thing that I am groping for is this: It is
a strong State organization that can handle these things
on & kind of basis - people who have a social consciousness
of what the war is about, who realize that we can't win this
war unless the working people are with us heart and soul and
that all the elements that go into the melting pot that make
up America are with us, and at the same time that over this
would be, first, as far as the mechanics, yes, the Federal
Reserve : - to get the benefit of their thing - in kind of an
honorary capacity. That is the way I am leaning now, some
sort of an honorary chairman - ex officio is the word -
capacity, so that they still feel they will have a responsibility
That is as far as I have gone.
Regraded Unclassified
156
- 9 -
As I told Robbins and Bell and Gaston, I expect to
sit once or twice a day until I get the thing licked. It
isn't clear in my mind. The only things that are clear
are the things that I don't want, but that is negative.
It isn't clear what I do want.
MR. GASTON: The solicitation of all individuals, big
and little, is really one problem, isn't it - all indivi-
duals? I should say all corporations would go in with that,
too, other than financial corporations.
H.M. JR: No, Herbert, here is the trouble - I am going
to be just as frank as I know how, and everybody can be the
same. We can all keep good tempered about it. It isn't
the same problem, because I can send some of the so-called
Victory rund boys around who are trained to sell a minimum
of ten thousand dollars' worth of securities upwards to a
corporation and talk with them about investing 8 hundred
thousand dollars, but that fellow has never been trained,
and there is no reason - he can't afford to cross the
street to make a thousand-dollar sale in his own business.
That is right.
MR. BUFFINGTON: I am afraid there are some of them
that cross the street to do it.
H.M.JR: But you know, we are talking generally.
MR. BUFFINGTON: The average sale in the last few years
has gone down much below ten thousand.
H.M.JR: But, generally speaking, that fellow isn't
trained and hasn't been trained, and they don't hire a
fellow to sit down with another fellow and argue with
him about eighteen dollars and seventy-five cents.
MR. GASTON: That means your organization has got to
be diversified, specialists for the big fellows - specialists
for the big or little.
I think there is 8 danger in letting it be dominated
by the banking group and letting the working people feel
Regraded Unclassified
157
- 10 -
that the power of the Government with respect to asking
or demanding their subscriptions to bonds rests in the
hands of a limited group of bankers. It is 8 very real
danger.
H.M.JR: Herbert, I will go back to the same thing
that I discussed with Mr. Grant when I first talked about
it.
I suppose International Harvester is as good a sales
organization as there is in the country. International
Harvester has one kind of organization for a heavy line of
machinery and another one for a light line, both in the
same town. They have always had it. Mr. Grant would no
more think of sending 8 Chevrolet salesman to sell 8 five-
thousand-dollar Cadillac, or vice versa. That was my
original conception. But there is no reason why the
Chevrolet and Cadillac salesmen shouldn't have the same
boss in the same town and in the same State. But it
takes a different type of person.
The thing that Bill Meyers was talking about is, "For
God's sake, don't send a security salesman to sell a farmer."
MR. GASTON: Right.
H.M.JR: On the other hand, I wouldn't send a Federal
dealer who would be 8 good Borden's milk inspector and who
could sell a farmer - knows how to deal with a farmer - I
wouldn't send him around to go into the bank and try to
get the bank to buy a hundred dollars' worth of bonds,
because he wouldn't know what he was talking about. But
if the banker comes to the farmer and wants to sell him,
the dairyman's back is up right away because he most likely
owed him money all his life, and he is the big evil gene
that he has been afraid of.
I don't see why you can't have a specialist to sell a
farmer, a laboring man, and a foreign group, but have them
all head up somewhere under the same leadership.
MR. GASTON: But I don't think you have to have the
commercial bank subscriptions in that part, nor do I think
that you need to have the big insurance corporation
Regraded Unclassified
158
- 11 -
subscriptions in that part. You can go and get them when
you want them now and then. They are not part of the
continuing effort at all.
MR. BELL: As a matter of fact, if you split them
you might put out a continuous security - a security to
be on sale continuously - and they would like that.
MR. GASTON: Have a tap.
H.M.JR: I was thinking it wouldn't be crazy to keep
that two and a half open, for instance.
MR. BELL: They would like that.
MR. GASTON: Your continuing organization - that would
give something all the time to the man who has important
money to invest.
H.M.JR: I mean, stop your F and G's and keep your
two and a half open.
MR. ROBBINS: They would like it.
H.M.JR: Who is "they?"
MR. ROBBINS: Insurance companies.
MR. GAMBLE: This plan that Mr. Graves read contemplates
just such a special division as Herbert was speaking of.
MISS ELLIOTT: Mr. Morgenthau, haven't you had that
kind of an activity going on? I was thinking about Kentucky,
where Mr. Phillips, a banker, is head of the War Savings
Staff and has a group that specializes with certain people.
I was thinking of Mr. Norris here the other day, county
chairman for the War Savings but a banker there, who takes
care of the corporations and insurance companies.
That has happened in a good many States already in the
War Savings Staff where they have already had that experience
and are working that way.
Regraded Unclassified
159
- 12 -
MR. GAMBLE: In Indiana the "ar Savings Organization
took the whole responsibility for this drive. It was under
the leadership of the State administrator.
MISS ELLIOTT: The kind of thing you are thinking of -
you already have a pattern in several States.
Mil. GRAVES: That is an important thing to remember
when you are talking about corporations. Most of the money
invested in our securities from corporate sources is invested
by a handful of big corporations - a handful. Yet there are
three hundred and fifty thousand corporations in this country
that go right down into the grass roots community. And
usually these little corporations are made up of the common
people that could properly be approached by the same agency
which approaches the masses of people, generally.
If you exclude two hundred and fifty corporations of
the type of General Motors and Pennsylvania Railroad and
New York Central, while that group of two hundred and fifty
corporations probably invests ninety percent or ninety-five
percent of the total of corporate funds that are invested
in Treasury securities, you still have left a great mass of
small corporations which ought to be induced to make invest-
ment of their funds. And the proper people to approach
those small corporations and associations and organizations
in the grass roots territory is the same organization that
sells bonds to the farmers, the labor people, and so on,
because they are that same kind of people.
MR. GASTON: You take in Cedar hapids, there; you would
have your department store and your hotel corporation and
this concern that is making the bulldozers, and the corner
radio concern - strictly small corporations - small except
for the war orders.
H.M.JR: We had both sides. I thought it was good.
One of them was complaining that General roods in their
thing reallocated down to ten thousand dollars in each
community where they did business. I thought that was good.
They took a subscription and then - what do you call that,
a quota?
Regraded Unclassified
160
- 13 -
MR. BELL: Allocation.
H.M.JR: Some liked it and some didn't. I thought it
was good.
MR. BELL: It was a lot of work.
MR. ROBBINS: It caused a lot of work, but the corpora-
tions like to do that.
H.M.JR: Penney does that and Montgomery Ward doesn't.
MR. GASTON: It takes good local advertising to do it.
MR. BELL: They did. The Pennsylvania mailroad put
in a big subscription and it wanted to allocate a certain
amount to each railroad station - by-way station.
H.M.JR: Of course, I think it is good.
Now, let's give Peabody a chance to explain his plan -
give Robbins a chance to explain his plan.
MR. ROBBINS: I don't know quite how to handle it.
I don't think we want to go through that verbatim.
H.M.JR: I would describe it. "e have from now until
four o'clock.
(Copy of Mr. Robbins' plan P.176 attached.)
MR. ROBBINS: In approaching the problem I have started
off by posing certain questions and then talking pro and
con against the various possibilities of organization.
Perhaps the most important question to answer is
whether or not our future sales activity will be carried on
by one organization or by two organizations. There are
many important considerations in such 8. decision, and while
generally there is more to commend a unified organization,
it would be very shortsighted not to recognize that there
are certain factors in favor of two separate organizations.
Regraded Unclassified
161
- 14 -
Now, I am going to treat with this thing in terms of
what are the pros and what are the cons of the two-organi-
zation theory.
In favor of the two-organization theory, the following
are important factors: (a) The activities of the war Savings
Staff are continuous; those of the Victory Fund are periodic.
(b) The markets sold by the two organizations differ and,
generally speaking, the types of securities are not the same.
These are arguments in favor of maintaining two organizations.
(c) The war Savings Staff is a two-purpose organization;
money raising, and educational. The Victory Fund is primarily
a one-purpose organization interested especially in the
financial aspect of the job. The War Savings Staff is built
largely around Treasury Department field personnel. They
have used Internal Revenue, therefore it may be important
as a Treasury policy to maintain it as a separate organization.
The next point, the War Savings Staff activities are
organized with the state as the primary field unit. The
Victory Fund activities are organized with the Federal
Reserve district as the primary field unit. Merging the
two organizations would require adjustment in territorial
boundaries.
Great importance is attached to the -tate organizations
by the War Savings Staff, and likewise, Federal Reserve
boundaries cannot easily be changed. Therefore, if the two
organizations are merged under a unified leadership, both
in Washington and in the field, we almost certainly would
have to face a compromise action in establishing proper
field organization geographical boundary lines. These are
all quite evident points.
The next point is it would be difficult to find compe-
tent supervision and leadership of the two organizations
because they work in different fields, have different
methods, and have different types and groups of volunteer
workers. This argument, while important, should not be
controlling. Our interest should be pointed towards the
development of the best organization, without regard to the
Regraded Unclassified
162
- 15 -
assignment of personnel, provided, of course, we do not set
up impossible work loads for any of the supervisory or
operating staffs.
And finally, if it is decided to maintain our two
present organizations separately in the field, only a few
adjustments would be required at the washington level;
perhaps simply the appointment of a coordinator to head
up joint activities, the tightening of operating lines,
and the continuation of unified advertising and promotion.
Those are, broadly speaking, the arguments that occurred
to me as being important in favor of the two organizations
continuing.
I go on then to citing the argument on the other side.
Regardless of the compelling weight of the above arguments
in favor of the continuation of two separate selling organi-
zations, there are several important considerations in favor
of merging the two groups. The following factors are impor-
tant.
The first one, at the community level, which is by far
the most important center of activity, a single selling
organization is preferable to any arrangement, however
harmonious, involving two separate groups of volunteer
workers.
Even under our present dual organization plan, many
communities have more or less merged their activities be-
cause the leaders in the community recognize the inconsist-
ency of expecting to operate two bond-selling organizations,
each of which would automatically be more effective if
their forces were combined.
Elsewhere, in communities which have elected to operate
the two separate organizations, there is evidence of friction,
competition, and interference, especially immediately before
and during drive periods. In short, the Treasury does not
present a united front, nor does it join forces under united
leadership when we have the two organizations.
Regraded Unclassified
163
- 16 -
Another point, at the county level we find a repeti-
tion of the same problem which has been cited as a community
problem. The county problem is still further complicated
in many instances due to the fact that in many counties
a principal metropolitan city dominates the county in
importance. In these circumstances we may find as many as
four organizations interested in activities at drive time
in overlapping portions, if not all of the same county.
For example, Cleveland has headquarters staff in the
Federal Reserve Bank; Cuyahoga County Beadquarters in
another building; Vieveland city headquarters again officed
separately; and 8. fourth office removed from all three
serving as headquarters for the war Savings Staff. Ob-
viously, an arrangement of this kind can and should be
consolidated.
At the state level, we again find divided responsibility
and overlapping and conflicting interests. In the larger
states, the War Savings Staff has broken down the area into
sub-divisions with Deputy State Administrators operating
each sub-division. Likewise, the Victory Fund Committee
under the direction of the Federal Reserve Banks, has set
up regions and appointed operating heads for each region.
The territorial boundaries of these sub-divisions and
regions do not coincide - confusion, interference, and, in
some regrettable instances, definite friction frequently
has developed.
A unified management with one sales organization from
Washington headquarters down to the smallest community
would improve conditions at all levels. Such a unified
management would eliminate friction, increase efficiency,
eliminate confusion, and establish firm and uniform channels
of communication and control. Further, such unified man-
agement would coordinate the activities which frequently
conflict, especially during drive periods. The activities
of one group could be planned in such 8 way that would
complement the activities of the other group. Under unified
management, strong, authoritative control can be exercised.
Such control is desirable whether we plan to operate on
a highly decentralized basis or under a tight centralized
management policy.
Regraded Unclassified
164
- 17 -
A unified sales organization under strong decentralized
management will be better equipped to plan for periodic
drives by reason of the fact that the supervisor at each
point will have complete control of all activities. Our
experience in the current drive proves that coordinated
planning where we have obtained it at the community,
county, state or regional level is preferable to my system
of planning from Washington which must, of necessity, be
disseminated through two separate channels of communication.
The state adminis trators should not be required to report
to two bosses even during drives.
It is probable that a single sales operation will open
up opportunities for economy and possibly, also, improve-
ment in the caliber and ability of Managers at all levels
of operation.
A unified promotional organization will eliminate many
disturbing conflicts and duplications - multiple and annoy-
ing approaches to advertisers for support and to newspapers
for publicity; duplicating, and therefore wasteful distri-
bution of posters, leaflets, and other printed material.
Those, broadly speaking, seem to be the arguments that
have the strongest appeal on the other side of that question.
Now I go on, then, to present - well, perhaps I had
better just read through here for a little while. I don't
want to extend it too long, because I want to come to my
recommendations.
The weight of the argument seems to be in favor of a
single organization rather than the continuation of the two
organizations as at present. If, however, it should be
decided to continue operations of both organizations, then
only a few changes need be considered and these changes
would involve the Washington set-up primarily. If two organi-
zations are to be continued, the following problems should
be anticipated:
"At the community, county, and state level, as well as
the Federal Reserve District and regional level, many impor-
tant and valuable volunteer workers and leaders will be
Regraded Unclassified
165
- 18 -
disappointed. The merging of the two organizations during
the present campaign has been hailed by many &S the first
step towards the development of a single selling organiza-
tion, which, in the minds of many thoughtful and experienced
workers is desirable. If no change is made these people
will be entitled to an explanation which should be carefully
prepared and ready for release as soon as the campaign
closes.
We have to give it to them. That doesn't become &
very weighty observation, I don't think.
"The unfortunate friction whichhas developed between
the two organizations in the field, at many points, will
probably result in the resignation of some extremely valu-
able leaders from both groups who will have to be replaced
and whose experience will thus be lost. Such resignations
will come about because the individuals will ask to be
relieved rather than face another drive distracted by con-
flict and confusion.
"While it is admitted that several of the Federal
Reserve Presidents are not well-equipped to operate bond-
selling organizations some of the important ones are vi-
tally interested in preserving the Federal Reserve position
of leadership in a financial operation of this importance.
To the extent that opinions have been expressed by this
group, they have favored merging the two organizations and
they have strongly favored Federal Reserve responsibility
and control in the field.
"Leading citizens both from the banking profession and
from civilian life have worked in both the December and April
drives. Many of them have expressed dissatisfaction with
the Washington management of these campaigns. Most of them
expect a reorganization, perhaps consolidation, of our sales
activities and will be critical of the Treasury Department
unless a straightforward statement of policy on future
operating plans is issued at the close of the drive.
"If we decide that our best interests will be served by
merging the two organizations into one, we can proceed upon
one of two courses, as follows:
Regraded Unclassified
166
- 19 -
"Expand the War Savings Staff to embrace a Campaign
Department set-up to organize drives to sell to banks,
insurance companies, non-financial institutions, and im-
portant private investors; or--
H.M.JR: What page is that on?
MR. ROBBINS: That is on Page 5 - the bottom of the
page.
"Expand the war Savings Staff to embrace a Campaign
Department set-up to organize drives to sell to banks,
insurance companies, non-financial institutions, and impor-
tant private investors: or (b) To superimpose the leader-
ship of the Federal Reserve System over the field organiza-
tion of the War Savings Staff and develop within this or-
ganization the special activities of the banking and finan-
cial group which are necessary in the conduct of the
campaigns and special sales drives."
In other words, you can go one way or the other. Now,
commenting on the former of these two alternatives, that is,
the expansion of the "ar Savings staff to embrace a Campaign
Department set-up to organize drives to sell to banks,
insurance companies, non-financial institutions, and im-
portant private investors--
"If we expand the "ar Savings Staff we can maintain
state entities which are important in organizing and
operating large scale volunteer work of the war Savings
type.'
Now I am closing in on this thing because, as you can
see, I am ultimately coming to the recommendations for one
organization rather than two.
"The lines of communication between state level and
Washington headquarters would continue as at present without
'layering' through the Federal Reserve Dystem.
"The "ar Savings Staff activities are continuous and
the permanent paid organization of this group is larger; there-
fore, it offers going facilities for relatively easy expansion.
Regraded Unclassified
167
- 20 -
"As opposed to the above important arguments, the
following factors must be dealt with:
"Many of the State Administrators in the "ar Savings
Staff have been chosen from walks of life in which they have
developed neither interest nor contacts in the financial and
banking field of sufficient prominence to aid them in impor-
tant financial tasks of bank and corporate selling. While
this mi ht be corrected by changing personnel in key posi-
tions the size of the task and the loss of momentum on
regular War Savings activities would be important, perhaps
even critical.
"The rederal Reserve System is, of necessity, vitally
concerned and involved with bond-selling activities. The
res onsibility of the Federal Reserve Banks as fiscal agent
for the Treasury Department requires their participation
in bond-selling activities especially during drives and can-
paigns, but also, if less importantly, in clearing Government
securities sold between drives. As the war economy advances,
position of the Federal Reserve Banks becomes more important
and should be strengthened. This fact has already been
recognized by the appointment of the rederal Reserve Presi-
dents to act as Chairmen of the District War Finance Commit-
tees. Under any plan of organization, therefore, it is
doubtful whether we could or should take steps towards
eliminating the interest of the Federal Reserve System in
our work; likewise, we should not request the Federal
Reserve System to take a position of secondary importance
or authority in any unified plan."
That doesn't square with what you said a moment ago.
H.M.JR: Secondary?
MR. ROBBINS: Yes, or ex officio, as you put it. I
wouldn't feel that we could do that.
"Now, commenting on the second alternative, namely,
superimposing Federal Reserve control over the merged
activities of both groups important favorable considera-
tions are:
Regraded Unclassified
168
- 21 -
"The importance of the Federal "eserve Pystem in
Government war Finance and the necessity of their partici-
pation as well as the desirability of their enthusiastic
support. This is as cited in the preceding paragraph.
"The stability and prominence of the rederal reserve
System in the opinion of the public. Their leadership would
inspire confidence; attract hightype personnel; avoid any
threat of political implications; and would be accepted
enthusiastically by the citizens, thus obtaining public
support everywhere, both for the government and the Treasury
Department.
"Such an arrangement would however, create new problems
as follows:
"Reconciliation of conflicting territorial boundaries.
In meeting this issue, we should first maintain state
boundaries within Federal Reserve Districts wherever
possible; and secondly, create coordinated managements
where state boundaries are cut by Federal Reserve lines.
This latter will be a troublesome problem but its solution
and the attendant difficulties are less important than would
be the sacrifice involved in the elimination of Federal
Reserve field leadership.
"Some Federal Reserve Presidents are not well qualified
to operate the merged selling organization. In such cases,
a strong Executive Manager will have to be appointed. AS 8.
matter of fact, in every case, the Federal reserve Presidents
should be backed up by strong Axecutive Managers because of
their other important duties incident to the operation of
the bank.
This is, in my mind, almost the key of the whole thing.
In such cases, strong executive assistants, or managers -
call them what you will - will have to be appointed. I
think the success of this system, if it were to be adopted,
would depend almost entirely on the quality of the leader-
ship that we got at the Federal Reserve point, through the
selection of the proper people. And they need not, of
necessity, be bankers. They could be commercial men; they
could be drawn from the most appropriate field.
Regraded Unclassified
169
- 22 -
"Imposing the rederal Reserve System in the field be-
tween Washington and the state administrators will slow up
channels of communication. Offset against this however,
we will obtain tighter supervision and better control.
Furthermore, it is to be hoped that future activities will
be less of an emergency nature than has been the case in
the last two drives. We would plan to keep channels of
communication open between Washington and state offices for
all but policy decisions and definite instructions."
In other words, your communications could flow, but
your instructions would go through the line channel.
Now I am down to my recommendations and here is the
summary:
"That we permanently merge the two sales organizations
under single leadership, both in "ashington and in the field.
"That announcement of our intention to merge the two
organizations be sent to the field immediately at the close
of the drive.
"That the leadership of the field organization be
established through the Federal reserve Pystem.
"That capable operating management be attached to each
Federal Reserve Pank to relieve the rederal Reserve President
of all except policy responsibility."
That is the key to the success of this plan if it works.
It would all be tied up to the type of people we can get
on those jobs.
The next recommendation:
"That the state boundaries be preserved wherever possible
within Federal Reserve District territories.
"That coordinated state control be established after
consultation with the field managers where state boundaries
are out by Federal Reserve District boundaries.
Regraded Unclassified
170
- 23 -
"That Federal Reserve Branch Banks be established as
key field headquarters points in the larger Federal "eserve
Districts to the extent necessary for efficient operation."
I haven't specific recommendations on where that might
be, but there are thirty-six, I think, branches, and we
could use any of them.
"That we continue our policy of decentralized operation
and encourage Federal Reserve field managements to push down
responsibility to state, county, and community levels.
"That the management personnel for the new organization
be made up of individuals, chosen as far as possible from
both organizations, selecting the best person for each
position to be filled.
"That the rederal Reserve district field organization
devote its time primarily to planning, coordinating, policy
and key personnel matters with a minimum staff -- all paid
if necessary."
That goes very close to your thought, Harold.
"That the typical state organizations be set up accord-
ing to the attached organization chart. (See Exhibit "A"
attached)
"That channels of communication between Washington and
the state administrator's office be established for exchange
of information and advice, always, however, with postings
to the Federal Reserve District office and never dealing
with policy decisions, or instructions.
"That the Washington organization be revamped and con-
solidated as set forth in organization chart attached. (See
Exhibit "B" attached.'
That chart doesn't differ largely from the chart I have
nad right along, and I think all of you have seen it.
And the final recommendation is: "That the entire
Washington organization be officed together in one location --
not necessarily in the main Treasury Building."
Regraded Unclassified
171
- 24 -
I mean, if we had to move to get that officing to-
gether, I think that would be a desirable thing to accom-
plish.
H.M.JR: You mean out of washington?
MR. ROBBINS: No, no, I wasn't thinking of out of
washington. I think we are scattered too far and too wide;
that we would do better under one roof.
H.M.JR: Well, there is no use starting now. It is
five minutes of four. I don't know whether you people
could benefit any by rubbing shoulders with each other, or
whether you want to wait until tomorrow.
MR. ROBBINS: Really, we have just a couple of basic
questions that we will have to come to some conclusion on
to help us with our thinking, and one of them, of course,
is the one organization versus the two organizations.
MR. GASTON: I think everybody pretty well agreed on
one organization at the ordinary community level. The
only suggestion is for the elimination of the bank financ-
ing out of this picture - bank financing, itself. That is
a minor point.
I think everybody is agreed that on the community
level - the small community level - you have to have one
organization. It is a question of whether you are going to
build it around War Savings. That is one question; and
the question is whether you are going to tie it in to
Federal Reserve - the very vital question as to tying it
in to rederal reserve itself is this. It is very well to say
you can get assistants for the presidents, who will be
active men, but who is going to select them? Is it going to
be possible to make 8. Federal Reserve president ex officio
or honorary chairman without giving him the responsibility
of his men? If you give him the resconsibility of selecting
the men, he will select nothing but the banker or bond-
salesman type - investment broker type.
Regraded Unclassified
172
- 25 -
MR. ROBBINS: I don't think that necessarily would
follow.
MR. BUFFINGTON: I don't think SO.
MR. BELL: Everyone, right now, is approved by the
Secretary.
MR. BUFFINGTON: You are thinking of Walter llead.
H.M.JR: Well, I really have got to stop.
MR. BUFFINGTON: Could we have an exchange of these
things?
H.M.JR: Yes, I will start in again at nine-thirty
tomorrow morning with you.
MR. BELL: Are copies available?
MR. ROBBINS: I have a couple of copies.
H.M.JR: I will start at nine-thirty.
Regraded Unclassified
173
May 3, 1943.
PLAN ONE
(Recommended by Graves and Gamble)
1.--Divide Treasury financing operations into two parts,
as follows:
(a) Sales to banking investors, dealers and
brokers, and Federal trust funds.
(b) Sales to all others (individuals, insurance
companies, mutual savings banks, corporations, asso-
ciations, etc.).
2.--Entrust the responsibility for item (a) to the
Federal Reserve banks, and keep the sale of Government
securities to banking investors, dealers, and brokers, etc.,
entirely separate and apart from special "drives" involving
the general public (item (b)).
3.--Entrust the responsibility for item (b) to the War
Savings Staff, which will hereafter perform two general
functions, as follows:
(a) The continual promotion of savings bond
sales (Series E, F and G) through payroll savings,
the farm program, the women's program, the school
program, etc.
(b) The conduct of periodic drives for the sale of
such other securities as may be offered to the public,
8.8 well as savings bonds.
4.--Create in the War Savings Staff at all levels--
National, State, and local--a new division, possibly to be
called the "Special Drives Division," to plan and conduct
Regraded Unclassified
174
-2-
the periodic drives for the sale of securities to the general
public.
5.--In each State organization of the War Savings Staff,
appoint a qualified person to serve as head of the "Special
Drives Division." These persons will serve either with or
without compensation, as may be arranged in particular cases,
and in part will be recruited from among the executives of
the district and regional Victory Fund Committees.
6.--Generally speaking, the Victory Fund Committees at
city, county, and local levels, will help to provide the
nucleus for the "Special Drives Division" of the War Savings
Committees.
7.--At National headquarters, the War Savings Staff will
be reorganized so as to provide machinery for planning and
supervising the periodic drives. A "Special Drives Division"
will be established to handle this function exclusively.
8.--In order to provide more effective supervision and
coordination of the work of the War Savings Staff in the field,
in view of its increased responsibilities under the proposed
plan, the country will be divided into a number of regions or
districts. An officer will be designated as supervisor or
coordinator for each such region or district. This officer
Regraded Unclassified
-3-
175
will have no administrative functions other than to keep
constantly in touch with the State organizations of the
War Savings Staff in his district with 8. view to insuring
full success of the operations within each State. The
regional coordinators will report to the head of the War
Savings Staff at Washington.
9.--The War Savings Staff, as heretofore, will report
to the Secretary through an Assistant to the Secretary, as
the Secretary may designate.
Regraded Unclassified
176
Mr. Robbins' plan discussed on
5/3/43 at 3:00 pm in Secretary's office.
Regraded Unclassified
5/3/43
PROPOSED BOND SELLING
177
ORGANIZATION PLAN
1. It is of utmost importance that we have an organization
plan for the bond selling activities ready for conference with the
key people in the field immediately after the April drive terminates.
This need is accentuated by the present lack of coordination between
the Victory Fund organization and War Savings Staff which is acute
to the point of friction both in Washington and at several points
in the field.
Regardless of the importance of the April drive, we should
develop an organization plan between this date (April 16) and May
1st. No official announcement has yet been made about organization
plans after May 1st and questions are being raised at many points
which should be answered.
2. Perhaps the most important question to answer is whether our
future sales activity will be carried on by one organization or by
two organizations. There are many important considerations con-
cerning such a decision and while generally there is more to commend
8 unified organization it would be shortsighted not to recognize
that there are certain factors in favor of the two separate organi-
zations.
3. In favor of the two-organization theory are the following
factors:
(a) The activities of the War Savings Staff are
continuous and those of the Victory Fund periodic.
(b) The market sold by the two organizations is different
and, generally speaking, the types of securities
are not the same.
(c) The War Savings Staff is a two-purpose ization:
money-raising and educational - the Victory Fund is
primarily a one-purpose organization interested
in the financial problem.
(a) War Savings Staff was built largely around Treasury
Department field personnel, and Internal Revenue
staff - therefore it may be important as Treasury
policy to maintain its separate identity.
Regraded Unclassified
178
- 2 -
(e) War Savings Staff activities are organized with the
state as the primary field unit. Victory Fund
activities are organized with the Federal Reserve
District as the primary field unit. Merging the
two organizations would require adjustment in
territorial boundaries. Great importance is attached
to the state organizations by the War Savings Steff
and, likewise, Federal Reserve boundaries can not
easily be changed; therefore, if the two organizations
are to be merged, under unified leadership both in
Washington and in the field, we almost certainly
face compromise action in the establishment of proper
field organization geographical boundary lines.
(f) It will be difficult to find competent supervision
and leadership of the two organizations because they
work in different fields, have different methods, and
different types and groups of volunteer workers.
This argument, while important, should not be con-
trolling. Our interests should be pointed towards
the development of the best organization without re-
gard to the assignment of personnel, provided, of
course, we do not set up impossible work-loads for
the supervisory and operating personnel.
(g) Finally, if it is decided to maintain our two present
organizations separately in the field, only a few
adjustments will be required at the Washington level,
perhaps, simply the appointment of a Coordinator to
head up the joint activities, the tightening of
operating lines and continuation of 8. unified adver-
tising and promotion department.
4. Regardless of the compelling weight of the above arguments
in favor of the continuation of the two separate selling organi-
zations, there are several important considerations in favor of
merging the two sales groups into a single sales department, both in
Washington and in the field. The following factors are important
in this consideration:
(a) At the community level, which is by far the most
important center of activity, 8 single selling
organization is preferable to any arrangement, however
harmonious, involving two separate groups of volunteer
workers. Even under our present dual organization
plan, many communities have more or less merged their
activities because the leaders in the community
recognize the inconsistency of attempting to operate
Regraded Unclassified
- 3 -
179
two bond-selling organizations, each of which
would automatically be more effective if their
forces were combined. Elsewhere, in communities
which have elected to operate the two separate
organizations, there are evidences of friction,
competition and interference, especially immediately
before and during drive periods. In short, the
Treasury Department does not present 8 united front,
nor does it join forces under & united leadership.
(b) At the county level, we find a repetition of the same
problem which has been cited as the community problem.
The county problem is still further complicated,
in many instances, due to the fact that in many
counties a principal metropolitan city dominates the
county in importance. In these circumstances we
may find as many as four organizations interested
in activities at drive time in overlapping portions,
if not all, of the same county. For example, Cleveland
has headquarters staff in the Federal Reserve Bank;
Cuyahoga County headquarters in another building;
Cleveland city headquarters again officed separately;
and a fourth office removed from all three serving BS
headquarters for the War Savings Staff. Obviously,
an arrangement of this kind can and should be con-
solidated.
(c) At the state level, we again find divided respon-
sibility and overlapping and conflicting interests.
In the larger states, the War Savings Staff has
broken down the area into sub-divisions with Deputy
State Administrators operating each sub-division.
Likewise, the Victory Fund Committee under the
direction of the Federal Reserve Banks, has set up
regions and appointed operating heads for each region.
The territorial boundaries of these sub-divisions and
regions do not coincide - confusion, interference,
and, in some regrettable instances, definite friction
frequently has developed.
(d) A unified management with one sales organization from
Washington headquarters down to the smallest community
would improve conditions at all levels. Such E unified
management would eliminate friction, increase efficienci
eliminate confusion, and establish firm and uniform
channels of communication and control. Further, such
unified management would coordinate the activities
which frequently conflict, especially during drive
Regraded Unclassified
- 4 -
180
periods. The activities of one group could be
planned in such 8. way that would complement the
activities of the other group. Under unified
management, strong, authoritative control can be
exercised. Such control is desirable whether we
plan to operate on 8 highly decentralized basis or
under a tight centralized management policy.
(e) A unified sales organization under strong decentral-
ized management will be better equipped to plan for
periodic drives by reason of the fact that the super-
visor at each point will have complete control of all
activities. Our experience in the current drive
proves that coordinated planning where we have obtained
it at the community, county, state or regional level
is preferable to any system of planning from Washing-
ton which must, of necessity, be disseminated through
two separate channels of communication. The state
administrators should not be required to report to
two bosses even during drives.
(f) It is probable that a single sales operation will
open up opportunities for economy and possibly, also,
improvement in the caliber and ability of Managers
at all levels of operation.
(g) A unified promotional organization will eliminate many
disturbing conflicts and duplications - multiple and
annoying approaches to advertisers for support and
to newspapers for publicity; duplicating, and there-
fore wasteful distribution of posters, leaflets and
other printed material.
5. The observations set forth above lead to no quick and easy
conclusion. The weight of the argument seems to be in favor of &
single organization rather than the continuation of the two organi-
zations as at present. If, however, it should be decided to con-
tinue operations of both organizations, then only E. few changes
need be considered and these changes would involve the Washington
set-up primarily. If two organizations are to be continued, the
following problems should be anticipated:
(a) At the community, county and state level, as well
as the Federal Reserve District and regional level,
many important and valuable volunteer workers and
leaders will be disappointed. The merging of the two
Regraded Unclassified
- 5 -
181
organizations during the present campaign has been
hailed by many as the first step towards the develop-
ment of & single selling organization, which, in the
minds of many thoughtful and experienced workers
is desirable. If no change is made these people
will be entitled to an explanation which should be
carefully prepared and ready for release as soon as
the campaign closes.
(b) The unfortunate friction which has developed between
the two organizations in the field, at many points,
will probably result in the resignation of some
extremely valuable leaders from both groups who
will have to be replaced and whose experience will
thus be lost. Such resignations will come about
because the individuals will ask to be relieved
rather than face another drive distracted by conflict
and confusion.
(c) While it is admitted that several of the Federal
Reserve Presidents are not well-equipped to operate
bond-selling organizations some of the important
ones are vitally interested in preserving the Federal
Reserve position of leadership in 8. finandial opera-
tion of this importance. To the extent that
opinions have been expressed by this group, they
have favored merging the two organizations and they
have strongly favored Federal Reserve responsibility
and control in the field.
(d) Leading citizens both from the banking profession and
from civilian life have worked in both the December
and April drives. Many of them have expressed dis-
satisfaction with the Washington management of these
campaigns. Most of them expect 8. reorgaization,
perhaps consolidation, of our sales activities and
will be critical of the Treasury Department unless
a straightforward statement of policy on future
operating plans is issued at the close of the drive.
6. If we decide that our best interests will be served by
merging the two organizations into one, we can proceed upon one of
two courses, as follows:
(a) Expand the War Savings Staff to embrace 8. Campaign
Department set-up to organize drives to sell to banks,
insurance companies, non-financial institutions, and
important private investors; or
Regraded Unclassified
- 6 -
182
(b) To superimpose the leadership of the Federal
Reserve System over the field organization of the
war Savings Staff and develop within this organi-
zation the special activities of the banking and
financial group which are necessary in the conduct
of campaigns and special sales drives.
Commenting on the former of these two alternatives,
the following points are favorable:
(1.) If we expand the War Savings Staff we
can maintain state entities which are
important in organizing and operating
large scale volunteer work of the War
Savings type.
(2.) The lines of communication between state
level and Washington headouarters would
continue as at present without "layering"
through the Federal Reserve System.
(3.) The War Savings Staff activities are
continuous and the permanent paid
organization of this group is larger;
therefore, it offers going facilities for
relatively easy expansion.
As opposed to the above important arguments, the
following factors must be dealt with:
(1.) Many of the State Administrators in the
War Savings Staff have been chosen from
walks of life in which they have developed
neither interest nor contacts in the
financial and banking field of sufficient
prominence to aid them in important finan-
cial tasks of bank and corporate selling.
While this might be corrected by changing
personnel in key positions the size of
the task and the loss of momentum on
regular War Savings activities would be
important, perhaps even critical
(2.) The Federal Reserve System is, of
necessity, vitally concerned and involved
with bond-selling activities. The
responsibility of the Federal Reserve
Regraded Unclassified
183
- 7 -
Banks as fiscal agent for the Treasury
Department requires their participation
in bond-selling activities especially
during drives and campaigns, but also,
if less importantly, in clearing Govern-
ment securities sold between drives. As
the war economy advances, position of the
Federal Reserve Banks becomes more im-
portant and should be strengthened. This
fact has already been recognized by the
appointment of the Federal Reserve Presi-
dents to act as Chairmen of the District
War Finance Committees. Under any plan
of organization, therefore, it is doubtful
whether we could or should take steps
towards eliminating the interest of the
Federal Reserve System in our work; like-
wise, we should not request the Federal
Reserve System to take a position of
secondary importance or authority in any
unified plan.
Now commenting on the second alternative,
namely, superimposing Federal Reserve control
over the merged activities of both groups
important favorable considerations are:
(1.) The importance of the Federal Reserve
System in Government war Finance and
the necessity of their participation as
well as the desirability of their en-
thusiastic support. This is as cited in
the preceding mragraph.
(2.) The stability and prominence of the
Federal Reserve System in the opinion
of the public. Their leadership would
inspire confidence; attract hightype
?
personnel; avoid any threat of political
implications; and would be accepted en-
thusiastically by the citizens, thus
obtaining public support everywhere,
both for the government and the Treasury
Department.
Such an arrangement would however, create new
problems as follows:
(1.) Reconciliation of conflicting territorial
Regraded Unclassified
- 8 -
184
boundaries. In meeting this issue,
we should first maintain state boundaries
within Federal Reserve Districts wherever
possible; and secondly, create coordinated
managements where state boundaries are cut
by Federal Reserve lines. This latter
will be a trouble-some problem but its
solution and the attendant difficulties
are less important than would be the
sacrifice involved in the elimination of
Federal Reserve field leadership.
(2.) Some Federal Reserve Presidents are not
well qualified to operate the merged
selling organization. In such cases, a
strong Executive Manager will have to
be appointed. As a matter of fact, in
every case, the Federal Reserve Presidents
should be backed up by strong Executive
Managers because of their other important
duties incident to the operation of the
bank.
(3.) Imposing the Federal Reserve System in the
field between Washington and the state
administrators will slow up channels of
communication. Offset against this how-
ever, we will obtain tighter supervision
and better control. Furthermore, it is
to be hoped that future activities will
be less of an "emergency" nature than has
been the case in the last two drives. We
would plan to keep channels of communication
3
open between Washington and state offices
for all but policy decisions and definite
instructions.
7. Recommendations. As a result of the considerations out-
lined above, the following firm recommendations are made:
(a) That we permanently merge the two sales organizations
under single leadership, both in Washington and in
the field.
(b) That announcement of our intention to merge the two
organizations be sent to the field immediately at
the close of the drive.
Regraded Unclassified
185
- 9 -
(c) That the leadership of the field organization be
established through the Federal Reserve System.
(d) That capable operating management he attached to each
Federal Reserve Bank to relieve the Federal Reserve
President of all except policy responsibility.
(e) That state boundaries be preserved wherever possible
within Federal Reserve District territories.
(f) That coordinated state control be established after
consultation with the field managers where state
boundaries are cut by Federal Reserve District
boundaries.
(g) That Federal Reserve Branch Banks be established as
key field headquarters points in the larger Federal
Reserve Districts to the extent necessary for effic-
ient operation.
(h) That we continue our policy of decentralized opera-
tion and encourage Federal Reserve field managements
to push down responsibility to state, county, and
community levels.
(i) That the management personnel for the new organization
be made up of individual s, chosen as far as possible
from both organizations, selecting the best person
for each position to be filled.
(j) That the Federal Reserve district field organization
devote its time primarily to planning, coordinating,
policy and key personnel matters with & minimum staff
-- all paid if necessary.
(k) That the typical state organizations be set up accord-
ing to the attached organization chart. (See Exhibit
"A" attached).
(1) That channels of communication between Washington and
the state administrator's office be established for
exchange of information and advice, always, however,
with postings to the Federal Reserve District office
and never dealing with policy decisions, or instruct-
ions.
Regraded Unclassified
186
- 10 -
(m) That the Washington organization be revamped and
consolidated as set forth in organization chart
attached. (See Exhibit "B" attached).
(n) That the entire Washington organization be officed
together in one location -- not necessarily in the
main Treasury Building.
Regraded Unclassified
187
187
EXHIBIT A
CHAIRMAN
STATE WAR
FINANCE COMMITTEE
STATE
WAR FINANCE
COMMITTEE
STATE
ADMINISTRATOR
WAR SAVINGS
ADVERTISING AND PUBLICITY
CAMPAIGN DEPARTMENT
ADMINISTRATIVE
DEPARTMENT
DEPARTMENT
(Banks and Financial)
COMMERCIAL BANKS
BUDGETS AND ACCOUNTING
PAYABLE SAVINGS PLAN
PRESS
MUTUAL SAVINGS BANKS
STATISTICS
WOMEN'S ACTIVITIES
RADIO
INVESTMENT COMPANIES
REPORTS
FARM PROGRAM
OUTDOOR ADVERTISING
SPECIAL EVENTS
INSURANCE COMPANIES
PERSONNEL
LABOR
LARGE INVESTORS
MASS SALES
COUNTY AND LARGE CITY ORGANIZATIONS
Regraded Unclassified
188
188
EXHIBIT B
NATIONAL DIRECTOR
OF SALES
DEPUTY DIRECTOR
U. 8. THEASURY
ADVISORY
COMMITTEE
WAR FINANCE
COMMITTEE
(Neets on Call)
(Neets Weekly)
ADVERTISING AND PUBLICITY
FIELD CONTACT
PROGRAM AND PLANNING
ADMINISTRATIVE
FIELD DIRECTOR
HEAD
HEAD
AND
ADMINISTRATIVE
ADVERTISING
PLANNING
OFFICE OF
ASSISTANT FIELD
OFFICER
INTISING
SPECIALIST
SPECIALIST
WAR
DIRECTORS
XXCIL
INFORMATION
DISTRICT WAR FINANCE
BANKS
PAY BOLL
NEWSPAPER
PUBLICITY
AND
SAVINGS
EXECUTIVE MANAGERS
FINANCIAL
PLAN
BUDGETS
FEDERAL RESERVE DISTRICTS
AND
STATISTICS
MASS SALES
FINANCE
RADIO
MAGAZINES
AND
18T BOSTON
LABOR
PERIODICALS
PROFESSIONAL
2ND - NEW TORK
MIRCRLLANEOUS
3RD - PHILADELPHIA
RETAIL TRADE
PERSONNEL
COMINISTRATIVE
PORTERS AND
RECORDS
MATTERS
4TH - CLEVELAND
NEGRO AND FOREIGN
OUTDOOR
WOMEN" 8
ADVERTISING
SPECIAL EVENTS
5TH - RICHMOND
CARRIER BOTS
ACTIVITIES
OTH - ATLANTA
7TH - CHICAGO
8TH - BT- LOUIS
SCHOOL
PRODUCTION
FARM
MOTION
ACTIVITIES
DEPARTMENT
PROGRAM
PICTURES
OTH - MINNEAPOLIS
NOTH . KANBAS CITY
11TH - DALLAS
12TH - SAN PRANCISCO
STATE ORGANIZATIONS
COUNTY AND COMMUNITY ORGANIZATIONS
Regraded Unclassified
189
UNITED STATES TREASURY
war FINANCE COMMITTEE
Second Federal Reserve Dirtrict
WAR SAVINGS STAFF
VICTORY FUND COMMITTEE
FEDERAL RESERVE BANK OF NEW YORK
33 Liberty Street, New York, N.Y.
May 3, 1943.
Personal
Dear Mr. Secretary:
While my impressions of the Second War Loan drive are still fresh, I am
writing to give you my views about two or three questions which I believe are im-
portant. Other questions, perhaps of equal importance, will be covered in our
later official report, but this is & personal note concerning some of the things
which impress me at the moment. I am not going to tell you what I think you might
like to hear - in a position such as yours there are always plenty of people ready
to perform that service. My purpose is to give you frank opinions which may con-
tribute to an even better performance in future War Loan drives than in the one
just completed.
First, some general impressions. I do not think we should be misled by
words and phrases. This is a people's war, but that means all the people. Bankers
and investment bankers are people. They are not discriminated against when they
and their sons are called into the armed services. They should also be used on the
home front, along with all other Americans, in the places where they are best
qualified to serve. They are best qualified to serve in the Treasury's financing
program. It seems to me ridiculous that you should have to be bothered with stories
and complaints that you are "selling out" your sales organization to the bankers.
There can be no "sellout" when loyal Americans are asked to give their services to
their country in time of need in the places which they are best fitted to fill.
Nor can I agree that "this is B. job (selling bonds) that ought to be done
by unions, clubs, civic groups **** by neighbors calling on neighbors." The aid
of all such groups should be used, of course, but the job of organizing a selling
force and a selling campaign and of seeing that the bonds are sold is a job for &
group of citizens who will make it their main war job, if not their only war job.
Unions, clubs, civic groups have other interests, other things to do, and the
Treasury's financing program is just one of the many things with which they are
concerned. It is appropriate for the Treasury to call on the bankers and investment
bankers, employers and employees alike, to make its business their business for the
duration, just as it is appropriate for other branches of the government to call
on people with other specific skills and experiences to devote them to the war
effort.
With that preamble, I return to the recommendation I have made before
that there should be one volunteer organization charged with responsibility for
the sale of government securities. You have taken two steps toward that objective;
by appointment of a National Director of Sales, and by setting up the temporary
War Finance Committee organization for the April drive. These steps are not enough.
To fulfill the promise of his appointment, the National Director of Sales should be
the head of the organization in fact as well as in name, in full control of everyone
Regraded Unclassified
190
Secretary Morgenthau
-2-
5/3/43
in the organization and of all branches of its work. I have the impression, as B.
result of the April drive, that the top people went under, around and over the
National Director of Sales to you, and that in the field loyalties were still to
previously existing organization chiefs. Unless the National Director of Sales has
your full confidence, and unless full authority is reposed in him, and unless he can
make that authority felt down through the whole organizations, he cannot do his job.
I realize that Mr. Robbins came to work only shortly before the April drive - his
experience was too brief for full use of his abilities - but I am thinking in terms
of the pattern which is now being set for future drives.
My second observation is that a marriage of convenience, such as we have
had this past month between the War Savings Staffs and the Victory Fund Committees,
will not give us a wholly effective organization and will not achieve the full re-
sults we should be able to achieve. At the same time, it may well waste men's
energies and tempers in rivalries which do not carry us forward. I think we got
along fairly well in this district, but I never was in such full control of the
whole organization as to make me feel that it was knit together 88 a compact fighting
unit should be. This wartime financing organization must be put together as ruth-
lessly, for effectiveness, Army or Navy command. Past services, personal con-
siderations, political connections must be swept aside for present accomplishment.
There must be no doubt in anyone's mind that there is but one organization and that
the lines of authority run clearly and directly from the top to the bottom. That is
not the present situation and I am afraid cannot be so long as two separate organiza-
tions are maintained, no matter how many coordinating committees we may have. This
observation may not seem to be in keeping with the success of the Second War Loan,
but we have to do better next time, and the time after that; we have to reach more
of the people who are responsible for rising currency circulation and bank deposits
and we have to conserve our manpower and use it to the best advantage while reaching
them.
My own view is, of course, that a. district organization is preferable to
& State organization, and that the heads of the Federal Reserve Banks in the several
districts are the logical leaders of these field units. The districts are economic
areas; not political areas, and the Presidents of the Federal Reserve Banks are pub-
lic servants of standing in their districts, without political affiliations. They
are in touch with all aspects of the financing program and the mechanical operations
incident to it, and they can command the services of all groups of the community.
And I do not leave out labor, or women or negroes, or anyone else.
If you prefer a State organization, however, then I say you should have
it alone - get rid of your district organizations and run the whole job with the
War Savings Staff or its equivalent. Frankly, I do not think the set-up for the
job, and it has an air of politics about it, in some places, which is disturbing.
But I want you to know that when I talk about one organization, I eun not making B.
special plea for the organization based on bankers and investment bankers. I do not
care what organization you use, nor whether I have anything to do with it so long bonds as
it is the most effective organization for the job. We have got to sell more
to non-bank investors, or raise taxes, or both, if price controls are to be given a
chance to work. And if price controls break down, wages will have to go up, and we
shall be on our way.
with the best volunteer organisation which can be devised, we shall still
Finally, I would not be wholly frank if I did not say that, in my fall opinion,
Regraded Unclassified
191
Secretary Morgenthau
-3-
5/3/43
short of meeting our full responsibility on the anti-inflation front. We have had
two tremendous successes in terms of dollars in the First and Second War Loans, and
between December and April we have greatly improved our performance in terms of
numbers of subscribers. We should hope to do even better in the future, but I do
not think we shall get a full and equitable sharing of the load without some form
of refundable tax - such as was mentioned in the President's budget message. That,
I believe, should be the base on which a voluntary program is built. Much of our
payroll allotment effort is getting, by pressure and unequally as between man and man,
what should be gotten straightforwardly and equitably with a refundable tax. It is
only after the first 10%, say, that we should ask individuals who have the money
and the spiritto contribute more voluntarily. There would still be plenty of room
for such voluntary subscriptions.
Nor can we overlook two facts which may make trouble for us. First, with
heavier taxation, and greater sales pressure, we may experience heavier redemptions
of redeemable bonds and find ourselves doing a lot of paper work for relatively few
dollars. Second, a further piling up of bonds redeemable on demand may complicate
our post-war anti-inflationary program, whereas a refundable tax could be repaid
over a period with some control remaining in the hands of the Treasury as to when
repayment would take place.
I am writing you these views because I think it is only fair that you
should know what those who are working for you in the field are thinking. There
are many things I have not touched upon, which a fuller, less personal, report
would discuss. This letter could not wait for that. I would not want, however, to
have its aggressive character conceal my own satisfaction with the results of the
Second War Loan, nor the congratulations which are your due. I only want to see a
better job done in each succeeding drive, until this war is over.
Yours sincerely,
Allan Sproul,
Chairman.
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Regraded Unclassified
192
This letter mailed to:
Frank Tripp,
Chairman, Allied Newspaper Council
193
May 3, 1943
To the Newspapers of America:
The Second War Loan drive has ended. The final
tabulations have not been made, but it is evident that the
goal has been exceeded by a substantial amount - more than
4 billion dollars.
Our thanks are due to many people - workers,
advertisers, advertising media, retailers, theaters - all
who devoted themselves 80 wholeheartedly to this vital cause.
I wish to express to the Allied Newspaper Council and to
newspapers generally our sincere gratitude for the part they
played. The support they gave us in the handling of news,
in compelling and imaginative features, and in the promotion
of sponsored advertising was as invaluable as it was
unparalleled in promotional history.
(Signed) Henry Morgenthau, Jr.
Henry Morgenthau, Jr.
Copy in Diary
Sent "air mail"
Regraded Unclassified
194
UNITED STATES TREASURY WAR FINANCE COMMITTEE
WASHINGTON, D. C.
BULIETIN
May 3, 1943.
Presidents, Federal Reserve Banks:
We have reports from seven districts on plans for issuing citations
to workers, Digests of these follow, and the rest will be passed on to
you as they are received,
Second District - New York.
No definite conclusion reached, Considering rosettes in red,
white and blue similar to those used by the Sons of Revolution and
the French Legion of Honor but if impossible to obtain considering
small colorful buttonhole design in the style of a french knot,
Sixth District - Atlanta.
Undecided, Had considered certificates similar to one used by
Cleveland in last campaign (sample attached) but with large numbers
of workers involved, fear some would be overlooked and others given
awards who did not deserve them, Present plan is for Mr. McIarin
to sign personal letters to all members of War Finance Committee,
State Chairmen, County Chairmen, and Co-Chairmen, asking them to
express to their volunteer workers the appreciation of Mr. Mclarin
and Treasury for their efforts,
Seventh District - Chicago.
Because large mumber of workers (250,000) Mr. Young feels thank
you letters would be too common to be prized, Present plan is to
issue no citations now, but after the war to issue a limited number
signed by the Secretary to those who have done outstanding jobs for
the duration.
Eighth District - St, Louis,
Mr. Head plans to issue Cleveland type citation (sample attached)
to individuals on recommendation of Regional Chairmen. In St, Louis
and St, Louis counties all who participated will receive citations
and this practice will probably be followed in other metropolitan
cities, Consideration is being given to issuing special citations in
the names of counties which have over-subscribed their quotas, These
will be inscribed with the names of the county and state instead of
the names of individuals.
Regraded Unclassified
195
- 2 -
Ninth District - Minneapolis.
Mr. Peyton states that some 3500 special citations will go to
War Finance District Representatives, county, city, and town chair-
men (sample attached) and all bankers in the district, as the banks
in every instance have made major contributions, Each citation will
be framed in such a way that the certificate will be easily removable
from the frame. Diagonally across the lower left-hand corner goes
a red ribbon with the words "Second War Loan, April 1943". In
a letter to each recipient we will advise him that if he should serve
in additional campaigns, added ribbons will be sent to him which will
be placed directly alongside the red ribbon, with a notation on the
added ribbon of such service as he may perform in the future. In
addition to these certificates, which cover the major workers in the
campaign, it is our plan to prepare a less elaborate certificate of
service, Each chairman will forward these minor certificates to his
field workers over his own signature. These certificates will be
signed by the Chairman for the Ninth Federal Reserve District and
attested by the chairmen for the individual localities.
Tenth District - Kansas City.
Mr. Leedy plans to give certificate to each of the volunteer
workers suitable for framing but text not yet determined.
Eleventh District - Dallas,
Mr, Gilbert reports that a Cleveland type citation will be used
but it has not been fully decided whether or not it will be distrib-
uted to all workers or only to key people.
Stuart Peabody,
Head Advertising Specialist.
Copies to Publicity Directors, War Finance Committees.
Executive Managers,
ADV - 26
Attachments (2)
Regraded Unclassified
196
(WAR SERVICE CERTIFICATE
FOR COUNTY AND CITY CHAIRMEN)
THE UNITED STATES TREASURY
WAR FINANCE COMMITTEE
Ninth Federal Reserve District
hereby acknowledges the constructive and patriotic service
rendered to our Government by
in the successful financing of World War II, and in
recognition of such service, does hereby award this
WAR SERVICE CERTIFICATE
In testimony whereof, and on behalf of the committee, the
Chairman has hereunto affixed his signature.
Chairman
ATTEST:
Director of Sales
ATTEST:
Assistant Director of Sales
(RIBBON COPY)
SECOND WAR LOAN, APRIL, 1943
Regraded Unclassified
197
THE UNITED STATES TREASURY VICTORY FUND COMMITTEE
for the
FOURTH FEDERAL RESERVE DISTRICT
The Victory Fund Committee for the Fourth Federal Reserve
District issues this certificate to
a volunteer member of the Victory Fund Committee Organization,
who answered a call to service in a time of national crisis,
and without regard to self or personal convenience, devoted
his time and effort to help assure the success of
THE FIRST VICTORY LOAN DRIVE
This certificate is presented in recognition of his
unselfish and patriotic contribution to the nation's war effort
VICTORY FUND COMMITTEE
FOURTH FEDERAL RESERVE DISTRICT
John S. Fleek
M. J. Fleming
Chairman
Executive Manager
Regraded Unclassified
198
UNITED STATES TREASURY WAR FINANCE COMMITTEE
BULIETIN
May 3, 1943.
Publicity Directors, War Finance Committees:
For your information we engaged an advertising checking service
before the drive started to check and tabulate sponsored advertising.
We will have and will send you information by districts as to total
mmber of ads, broken down between those prepared here at Washington
and those prepared locally.
It will, therefore, not be necessary for you to send to
Washington a complete record or tear sheets of the sponsored ads which
appeared in your district,
Stuart Peabody,
Head Advertising Specialist
Copies to Presidents, Federal Reserve Banks
Executive Managers
ADV - 27
Regraded Unclassified
199
May 3, 1943
Dear Dave:
I was very much pleased to receive
your letter of April 30th.
I also have received many compli-
ments about the broadcast and I am sending
you a photostat of a letter from the
President of the Gulf Oil Corporation
and one from Elmer Davis.
The fact that the program was
evidently so successful was due, in my
opinion, to your superb direction. While
you worked me hard, I enjoyed every minute
of it. I feel that the show made & def-
inite contribution to the war effort.
Again thanking you for your able
assistance, I remain
Yours very sincerely,
(Signed) Henry Morgenthan, Jr.
Mr. David Levy,
Young & Rubicam, Inc.,
285 Madison Avenue,
New York, New York.
File in Diary
Regraded Unclassified
200
YOUNG & RUBICAM, INC.
Advertising
NEW YORK CHICAGO DETROIT SAN FRANCISCO - HOLLYWOOD MONTREAL TORONTO
NEW YORK 2015 Modison Avenué
April 30, 1943.
Mr. Henry Morgenthau, Jr.,
Secretary of the Treasury,
Treasury Building,
Washington, D.C.
My dear Mr. Morgenthau:
Now that I en back in New York, I want
you to know what a pleasure it was to meet you and
to work with you. I speak also for the members of
the staff of "We the People" who participated in the
Cedar Rapids broadcast.
On every side, we've heard favorable comments
about the program and particularly the manner in which you
handled a difficult assignment. All of us were deeply
impressed with your cooperative spirit, your kindness and
above all with your sincerity. And I do hope I will have
the pleasure of working with you again.
With kind personal regards,
Sincerely yours,
YOUNG MaidLing & RUBICAM, ING.
Director "Ne the People"
David Levy
egs
Regraded Unclassified
201
May 3, 1943.
Dear Mr. Blys
It vas very good of you to speak so
pleasantly of the recent radio program bread-
cast from Codar Rapide. I such enjoyed my
brief visit and the opportunity to neet both
those who participated and those who assisted
with the broadcast.
Thank you for the reprint which you cont
me as a monento of my stay is your city. I -
very glad to have this for, as I say, 12 vill be
an interesting seuvenir of this experience.
Sincerely,
(Signed) H. Morgenthau, Jr.
Mr. Heary s. Biy.
1261 Fifth Avenue East,
Coder Dapide, Iews.
GEF/dbs
File in Diary
Regraded Unclassified
202
Dear mr. Margenthan, 1261 CEDAR FIFTH RAPIDS, AVENUE IOWA EAST
4.25 1945
I am writing to say that we the
people of Cedar Rapids were
your public do. recognition of mhat we
program, and duply grate ful far
profoundly mored by your Thrilline
are Will trying to Kindly acept the
sourenie of your visit?
accompanying you reprint as a little
Cordially yours, Henry SEly
203
MAY 3 1943
Dear Bobs
Please accept my thanks for eending to MF. Bartelt copies
of the letters of complaint involving nonreceipt of dependency
benefit payments.
In this connection, I thought you might be interested in
n recent case which has come to the Department's attention.
It appears that Lieutenant John Porteous II (Serial 0-660195)
made a class " allotment of $140 6 month to the Comal National
Bank of Portland, Maine, with instructions to the bank to use
the money principally for the purchase of war Savinge Bonde.
A copy of the letter 10 enclosed for your convenient reference.
Upon inquiry. the Treasury learned that the allotment was
not of record in the Newark Dependency Benefits Office, but
there is a record in the Office of Chief of Finance, Var De-
partment, Washington, D. C., of deductions having been made
from Lieutenant Porteous' pay for the months of August, Sep-
tember, October, and November, in the amount of $140 for each
month.
In view of the fact that this 10 probably only one of
nany sisilar cases, I na vondering whether the Wer Department
has given convideration to the feasibility of checking the pay
roll deductions against allotments received in the Office of
Dependency Benefits. The effect of the situation referred to
1s that the officer will lose the benefit of interest on the
money which he would have received If the allotment had been
paid to the bank and invested in Government bonds in accor-
dance with his request.
Sincerely,
(Signed) Henry
Copy of reply to Mrs.
Morgenthau
Honorable Robert P. Patterson,
Copy of file in Diary
Under Secretary of war,
Nap Department,
Orig. file to Bartelt
B. Washington, S. of D. course c. I feel that the way is the Hav
inexusable Department handles these cases
By Sturgis 4:45 5/3/43
KFBical 4/30/43
Regraded Unclassified
204
April 29, 1943
Colonel H. N. Gilbert,
Director,
Office of Dependency Benefits,
213 Washington Street,
Newark, New Jereey.
Dear Colonel Gilbert:
I an enclosing herevith copy of a letter recently re-
ceived by Mrs. Henry Horgenthau, Jr., from Mrs. Florence
Cushman Porteous, regarding an allotment to the Cenal National
Bank of Portland, Maine, in the sum of $140 a month by her
son, Lieutenant John Porteous, who is now with the United
States forces in New Guinea.
In response to & long distance telephone inquiry of
your office yesterday, I learned that this allotment is
not of record in the Office of Dependency Benefits at Nevark.
Following the receipt of this information, I asked the Office
of the Chief of Finance, War Department, in Washington, if
a search could be made of the pay rolls to determine whether
they contained a record of such allotment. I vas advised
over the telephone this morning that the pay rolle show that
deductions have been made from the pay of Lieutenant Porteous
for the months of August, September, October, and November,
in the amount of $140 each month.
I understand that this matter wight be worked out if
you would send a cablegram to Lieutenant Porteous with a
view to obtaining his allotment authorization and the neces-
safy information as to whom the allotment payment should be
made. I would appreciate it if you would take such action
as you may consider appropriate.
with kind regards, I am
Sincerely yours,
(Sgd) E. F. Barteit
3. F. Bartelt,
Commissioner of Accounts
Enclosure - 1
EFB:hbw
Regraded Unclassified
C
0-
P
205
Y
April 29, 1943.
War Savings Staff
Dear Mrs. Porteous:
I am very glad you wrote me as you did, on behalf of your own son,
and with regard to possible similar problems of others in the service.
I can assure you that the Treasury Department is doing everything pos-
sible to speed up the difficult and complicated task of issuing War
Bonds to those who subscribe by regular monthly allotments. In the
case of those who are serving under the Army, checks in payment of such
allotments are issued by the War Department, rather than by the Treasury,
and I am sure you can understand the difficulties caused by the great
volume of such payments, and the constant shifting of the men in the
different branches of the service. However, we all want to see that
these matters are handled efficiently and promptly, and we are very
glad to follow through on any given case, in order to see if the cause
of the delay may be found.
I am sorry that I cannot give you any definite information at this
time but have been glad to do what I could to look up the matter of
Lieutenant Porteous' Bond purchases. Mr. E. F. Bartelt, Commissioner
of Accounts in the Treasury, has already called the War Department
Allotment Office at Newark, New Jersey, in order to start a tracer, and
the office has promised to call him back as soon as they have any in-
formation to give him.
Your letter would indicate that your son made the allotment
through the Canal National Bank, Portland, Maine, instructing the bank
to purchase the Bonds. Checks, as I say, are issued by the War Depart-
ment and we therefore shall have to obtain more detailed information
from that Department before we can take any further steps. You may be
sure that the matter will be carried through to a final conclusion
just as rapidly as possible.
I can well understand how proud you are of your son's record.
during the comparatively brief time he has been out of the country.
Let me congratulate you upon his well-carned decorations and also
upon his generous allotment to the War Bond campaign. Will you also
express to your husband my congratulations upon the record made by
his store, and by other members of your family?
Thank you again for writing me as you did.
Very sincerely yours,
(Mrs. Henry Morgenthau, Jr.)
Mrs. Florence Cushman Porteous,
28 Chadwick Street,
Portland, Maine.
GEF/dbs
Regraded Unclassified
206
28 Chadwick St.
Portland, Maine
My dear Mrs. Morgenthau
I am taking the liberty of writing to you rather than to
Mr. Morgenthau because I find that in many cases a wife can bring
matters to a husband far more clearly than anyone else. This
spolles in a lesser degree in our own affairs.
Our son - Lt. John Porteous II - 0-660195, is an aviator in
New Guinea. He has been out of the country since last August, and
was recently decorated by Gen. Kenney for achievements in over
twenty-five engagements. He has written us that he has sent allot-
ments of $140.00 per month to his bank the Canal Nat'l Bank here
in Portland, Maine since last August. He requested his father
(Louie Robert Porteous) to ascertain if these had all come o.k.
and requested that same be principally invested in Defense Bonds.
On investigating the matter Mr. Porteous found out that no
money has come at all.
Now Mrs. Morgenthau this son does not need the money 88 he
her considerable income other than he receives from his government
salary, nevertheless it 18 his by his own meritorious achievements
and as such should be his to utilize ae he sees fit. I am sure
John's ability as a flier of a P-40 against the Jaos over Pt.
Morsby, end his desire to serve his country by outting the money
into Defense Bonds would be a little impaired, shall we say, if he
knew he had never been paid. We hesitate to tell him you may be
sure, for his nerves are tense and his temper high end it might
cause such unfavorable reactions as to impair his life & even
those in his particular contingent.
Also, if this has occurred in John's case it must be 50 with
many others.
I am sure that Mr. Morgenthau is not personally cogniscent
of this situation, and he will I know do all he can to alleviate
it.
Mr. Porteous has found out to whom he should write and has I
believe written concerning John's personal case, but my letter is
a plea to you for all Service men and for the good of our country.
When you realize that the amount invested would bring
interest which John has now lost, it does make one think.
My husband has a large department store here in Portland.
They are over subscribed to the new War Bond Issue. His own
portion being $5,000.00 (mine $500.00). He has also bought bonds
Regraded Unclassified
206
28 Chadwick St.
Portland, Maine
My dear Mrs. Morgenthau
I am taking the liberty of writing to you rather than to
Mr. Morgenthau because I find that in many cases a wife can bring
matters to a husband far more clearly than anyone else. This
applies in 8 lesser degree in our own affairs.
Our son - Lt. John Porteous II - 0-660195, 1s an avistor in
New Guines. He has been out of the country since last August, end
was recently decorated by Gen. Kenney for achievements in over
twenty-five engagements. He has written us that he has sent allot-
ments of $140.00 per month to his bank the Canal Nat'l Bank here
in Portland, Maine since last August. He requested his father
(Louis Robert Porteous) to ascertain if these had all come o.k.
and requested that same be principally invested in Defense Bonds.
On investigating the matter Mr. Porteous found out that no
money has come at all.
Now Mrs. Morgenthau this son does not need the money 88 he
has considerable income other than he receives from his government
salary, nevertheless it 1s his by his own meritorious achievements
and 86 such should be his to utilize ae he seee fit. I am sure
John's ability 88 a flier of a P-40 against the Jape over Pt.
Moreby, and his desire to serve his country by outting the money
into Defense Bonds would be a little impaired, shall we say, 1f he
knew he had never been paid. We hesitate to tell him you may be
sure, for his nerves are tense and his temper high and it might
cause such unfavorable reactions as to impair his life & even
those in his perticular contingent.
Also, if this has occurred in John's case it must be BO with
many others.
I am sure that Mr. Morgenthau is not personally cogniecent
of this situation, and he will I know do all he can to alleviate
it.
Mr. Porteous has found out to whom he should write and has I
believe written concerning John's personal case, but my letter is
6. olea to you for all Service men and for the good of our country.
When you realize that the amount invested would bring
interest which John has now lost, it does make one think.
My husband has a large department store here in Portland.
They are over subscribed to the new War Bond Issue. His own
portion being $5,000.00 (mine $500.00). He he e also bought bonds
Regraded Unclassified
207
- 2 -
for our other two boys with their personal incomes. We are ardorous
in our efforts towards this faze of our strive for victory 88 we
are in our support of our President and his able associates and our
respect for you and Mr. Morgenthau knowe no bounds.
Sincerely,
(signed) Florence Cushman Porteous
(Mrs. Louis R. Porteous)
April 24th.
m
208
TREASURY department
FISCAL SERVICE
BUREAU OF ACCOUNTS
WASHINGTON
OFFICE OF THE COMMISSIONER
May 3, 1943
TO THE SECRETARY:
I received 109 letters of complaint from the War
Department in response to your letter to Under Secretary
of War Patterson, but I have not as yet had an opportunity
to read all of them. I will try to do this immediately.
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
The Secretary
APRIL FINANCING
(In millions of dollars)
Cumulative
Estimate of funds
to be raised
Up to
April 26
Anril 27
Anril 28
April 2°
April 30
Final
Anril 24
in April
May 1
Funds from banking sources:
800
600
Treasury bills
600
600
800
800
800
800
7/8% Certificates
2,100
2,138
2138
2.138
2.138
2138
2138
2.138
-
y
-
-
2% Treasury bond
2,100
-
2.062
est
--
Total banking
5,000
2,738
2.738
2,738
2.938
2.938
2.938
5,000
Funds from non-banking sources:
7/86 Certificates
1,750
2,564
2609
2658
2,741
2.804
2.896
2,969
26 Treasury bond
1,750
2,021
2,073
2132
2.197
2.292
2.377
2.545
2-1/26 Treasury bond
4,500
3,230
3,236
3.264
3.317
3.392
3.569
3,650
Series E 1007)
Savings bonds Series F - 116)
1,500
790
854
955
1.033
1,153
1,298
Series G - 353)
1,470
Tax notes
1,500
985
1078
1144
1.260
1,358
1,455
1,661
Total non-banking
11,000
9,590
9.850
10.153
10,548
10,999
11,595
12295
Grand total
16,000
12,328
12,588
12.891
13,486
13937
14,533
17.295
Subscriptions by banks 7. 2% bond $1.428m $3.765m $6.725m $9.368 At
209
Regraded Unclassified
The Sicretary
5/3/45
210
APRIL FINANCING
(In millions)
Cumulative
To
To
May 1
May 3
Funds from banking sources:
Treasury bills
$ 800
$ 800
7/8% Certificates
2,138
2,138
2% Bonds
2,039
2,039
Total banking
4,977
4,977
Funds from non-banking sources:
7/8% Certificates
2.969
3,077
2% Bonds
2,545
2,757
2-1/2% Bonds
3,650
3,738
Series E
1,079 )
Savings bonds
Series F
119
1,470
1,573
Series G
375
)
Tax notes
1,661
1,697
Total non-banking
12,295
12,842
Grand total
$17,272
$17,819
arus
Regraded Unclassified
211
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 3, 1943
TO:
Secretary Morgenthau
FROM:
Mr. Waldman EW.
In line with your request for information on whether
the shipyards I investigated were doing Maritime Commission
or Navy work, I secured the following facts, through
Mr. Houghteling:
The Sun Shipyard is working solely for the Maritime
Commission; the New York (Camden, New Jersey) and Cramp
(Philadelphia) Shipyards may be doing repair work for the
Maritime Commission but they are not doing any original
building for the Maritime Commission.
WRTN
Regraded Unclassified
212
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
MAY - 31943
TO
Secretary Morgenthau
FROM
Ir. Paul
In accordance with the existing instructions,
there is submitted herewith 8. summary report of
activities and accomplishments carried on by the
Legal Staff for the month An of March 1943.
Attachment.
Regraded Unclassified
213
IN THE OFFICE OF THE GENERAL COUNSEL
MARCH 1943.
The following matters received attention in the
Office of the Chief Counsel for the Bureau of Internal
Revenue:
1. Tax Evasions by Former Public Officers, Detroit,
Michigan (See June 1942 report, item 2). Duncan C. McCrea,
former prosecutor for Wayne County, Michigan, was indicted
by a local Special Grand Jury for having received pro-
tection money from operators of illegal enterprises, and
on September 30, 1940, he was ousted from office by order
of the Governor. McCrea was sentenced to serve 4 1/2 to
5 years in prison but is presently at liberty on bond
pending appeal. The total amount of taxes found to be due
from MoCrea for the years 1935 to 1939, inclusive, is
$23,617.90. Thomas C. Wilcox was employed by the Federal
Bureau of Investigation from 1917 to 1930 and was the
Special Agent in Charge of the Detroit office of that
Bureau. For several months in 1930 he served as Police
Commissioner of Detroit; in 1931 and until June of 1932,
Wilcox operated a private detective service. Wilcox was
Regraded Unclassified
214
- 2 -
elected sheriff of Wayne County and served a two-year
period, 1933 and 1934. After 8. recount in the 1934
election Wilcox was reelected but surrendered his office
as 8. result of a decision holding the recount fraudulent.
In 1936, he was again elected sheriff and was reelected
again in 1938. He was ousted by order of the Governor in
June 1940; and on March 5, 1940, he was indicted on charges
of conspiracy to obstruct justice, and after having been
found guilty was sentenced to serve 4 1/2 to 5 years in
prison. Wilcox has been at liberty on bond pending an
appeal. The total amount of Federal income taxes found to
be due from Wilcox for the years 1937 to 1939, inclusive,
is $2,522.26. On March 1, 1943, indictments were returned
against McCrea and Wilcox for wilfully attempting to de-
feat and evade their individual Federal income taxes for
the years 1936 to 1939, and 1937 to 1939, respectively.
Carl J. Staebler was indicted March 9, 1943, for
wilfully attempting to defeat and evade his Federal income
taxes for 1937, 1938, and 1939. He practiced law in
Detroit prior to 1934, at which time he was appointed to
215
- 3 -
a position in the Sheriff's office under Thomas C. Wilcox.
He worked for WPA from April 1935 to January 1, 1937, on
which date he returned to the Sheriff's office as Chief of
the Civil Division, where he continued until June 26,
1940. On March 5, 1940, Staebler, together with Wilcox
and others, was indicted on a charge of conspiracy to ob-
struct justice and collusion between law enforcement officers
and operators in illegal enterprises. He was convicted
May 14, 1941 and sentenced to serve from three to five
years in prison. He has, however, been at liberty on bond
pending appeal. Additional Federal income taxes and penal-
ties found to be due for 1937 to 1939, inclusive, aggregate
$27,434.03.
2. Tax Evasions by Lottery Operators. Joseph Hotze,
a well known lottery operator (numbers racket) of Boston,
Massachusetts, was indicted March 3, 1943, for alleged
income tax evasion for 1936 to 1939, inclusive. Taxes and
penalties of $403,045.23 for 1934 to 1939, inclusive, have
been recommended, approximately $350,000 of which falls
within the years covered by the indictment. This is the
216
- 4 -
second time Hotze has been indicted. In the previous
instance, he entered a plea of guilty on March 14, 1935,
to tax evasion charges for the years 1930 to 1933, inclusive,
which was pursuant to a compromise settlement whereby he
also paid $6,250 in full settlement of his civil liability.
He was sentenced and served three months in jail.
Harry S. Miller who was engaged in the numbers business
at Donora, Pennsylvania, has been indicted for wilfully
attempting to defeat and evade income taxes for 1936,
1937 and 1938. Additional taxes amount to approximately
$10,000.
3. Tax Evasions by Coin Machine Operators. Edward A.
Rademacher, proprietor of 8. restaurant in Shakopee,
Minnesota, has been indicted for wilfully attempting to
defeat and evade income taxes. Charge of evasion is based
upon his failure to report substantial amounts received
from the operation of slot machines maintained in his
restaurant. Deficiencies totaled $5,712.46 for 1936 to
1940, inclusive.
Regraded Unclassified
217
- 5 -
Benjamin Sterling, Jr. entered a plea of guilty on
February 26, 1943, to a charge of wilfully attempting to
evade and defeat part of his income tax for 1936. Sentence
was suspended by the District Court at Scranton, Pennsyl-
vania, and he was placed on probation for one year conditioned
on the payment of tax, penalty and interest of approxi-
mately $19,878.46. He was engaged in the sale of coin-opera-
ted music machines and failed to report commissions of
$13,297.50 received from the Rudolph Wurlitzer Company.
He also failed to report $74,718.45 received from the
operation of coin-operated music machines.
Marvin R. Bates was indicted March 16, 1943, by the
Federal grand jury at Meridian, Mississippi, for evading
his individual income taxes for 1936, 1937 and 1938. The
investigation revealed that Bates who had a net income of
more than $20,000 during each of the years 1936 to 1938,
inclusive, reported only about $1,400 for each year. His
income was principally derived from gambling and the opera-
tion of coin machines. Bates' defense is that he was of
218
- 6 -
the opinion that he had to pay income taxes only on the
cash on hand at the end of the year. Prior to the submis-
sion of the special agent's report, the case was informally
discussed with the United States Attorney at Jackson,
Mississippi, who expressed the opinion that criminal pro-
ceedings would be warranted. The investigation arose from
information furnished by 8. private detective who was employed
by 2 group of citizens in Meridian to investigate the
alleged illegal activities of Bates in order to determine
whether these operations were protected by the City admin-
istration and whether the mayor of Meridian was receiving
8. part of the profits therefrom. Although circumstantial
evidence indicated such an alliance, no proof thereof could
be established, and the investigation was discontinued
shortly after the mayor's reelection in 1940.
4. Tax Evasion by Dr. J. W. Tipton. On March 16,
an indictment was returned against Dr. Tipton in six
counts, charging him with wilfully attempting to evade his
individual income taxes for 1936 to 1941, inclusive. Dr.
Tipton is a prominent eye, ear, nose and throat specialist
Regraded Unclassified
219
- 7 -
in Danville, Virginia. The total taxes and penalties of
Dr. Tipton for the years involved is $31,693.99.
5. Tax Evasion by Sam Glick and Alex Harris. Sam Glick
and Alex Harris were indicted March 2, 1943, charged with
wilfully attempting to evade and defeat their respective
individual income taxes for 1936 to 1938, inclusive. Each
defendant was also charged with aiding and abetting the
other. Harris and Glick, who operate a successful meat
market as 8. partnership in Pittsburgh, Pennsylvania, sub-
stantially reduced income by padding the meat purchases of
the business with fictitious purchase invoices and ultimately
diverted to themselves partnership funds in payment there-
of. These payments were, revertheless, included in deter-
mining the cost of goods sold by the partnership for in-
come tax purposes, but the partners failed to report in
their individual income tax returns the additional income
they realized in this manner. Harris and Glick used in-
voices of a firm of wholesalers, The Homestead Provision
and Packing Company, 8. partnership. S. E. and H. S.
220
- 8 -
Jacobson, the partners, were convicted in 1942 of evading
their own income taxes.
The defendants pleaded guilty March 8, 1943, and were
given suspended sentences of a year and a day on each of
the charges, the sentences to run concurrently. They were
placed on probation for three years and 8. fine of $2,000
and one-half of court costs was imposed on each individual.
6. Tax Evasions Where no Return was Filed (See
February 1943 report, item 34). The indictment of Chin
Lim Mow is the first indictment which has been returned
since the United States Supreme Court decision in the case
of Murray R. Spies (See January 1943 report, item 6)
charging a wilful attempt to evade and defeat income tax
where no return was filed. It is affirmatively charged in
the indictment that, as means of attempted evasion of his
tax liabilities, Chin Lim Mow maintained and caused to be
maintained incomplete, false and incorrect books and records
reflecting his gross income and the sources thereof and
that he concealed and caused to be concealed from any and
all "proper officers of the United States his total gross
221
- 9 -
and net incomes in each of the years covered by the
indictment.
J. C. Exum was indicted March 1, 1943, for wilful
failure to file individual income tax returns for 1939 and
1940. Exum is the former president of the First National
Bank of Snow Hill, North Carolina, and former member of
the Board of Greene County Commissioners. He successfully
operated J. Exum and Company, a mercantile business in
Snow Hill, which was 8. part of the estate of his father,
Josiah Exum, deceased, of which he was administrator. He
had a net income of over $8,000 for each of the years in-
volved derived principally from the estate. The investi-
gation covered the years 1926 to 1940 for which additional
taxes totaling $3,379.98 have been recommended. Not only
did Exum fail to file returns for 1939 and 1940, but he
failed to file returns for any of the years involved either
for himself or for the estate.
On March 13, 1943, an information was filed in the
United States District Court for the Southern District of
222
- 10 -
New York charging Abbey Dreyfuss with wilfully failing to
file income tax returns for 1939 and 1940. He failed to
file income tax returns for calendar years 1927 to 1940,
inclusive. During this period he spent most of his time
traveling on steamships between the United States and
various ports of Europe and was what is commonly known as
an international professional card shark.
7. Preparation of False and Fraudulent Tax Returns.
Robert T. Jacob has been indicted for wilfully aiding and
assisting in, counselling, procuring and advising the
preparation and presentation of a false and fraudulent
income tax return for the Central Holding Company for the
fiscal year ended June 30, 1937. Jacob has been involved
in several cases which have been under consideration in
this office. At one time he is said to have been the
leading tax practitioner in Portland, Oregon.
8. Oath Requirement for Returns. The Director of
the Budget has requested that he be advised whether the
oath requirement for returns, other than individual income
tax returns, could be eliminated without detriment to
223
- 11 -
the service. In this connection, it has been noted that
there are more than 50 provisions in the Internal Revenue
Code which expressly require returns to be verified by
oath and there are approximately 30 other provisions in the
Code which require returns but do not expressly specify
verification by oath. Except in certain cases where the
tax covered by the return is not in excess of $10 (section
3330 IRC), the Bureau of Internal Revenue has required all
returns to be under oath. However, following section 136
of the Revenue Act of 1942, the regulations now provide
that individual income tax returns shall be merely verified
by a written declaration that they are made under the
penalties of perjury. The matter under consideration also
involves the question of whether the taxpayer should be
required by the regulations to verify under oath claims
for refund and claims for other relief.
9. Tax Evasion by Simensky & Levy Corporation,
Rubin Simensky, and Leo Levy. On March 11, 1943, indict-
ments were returned charging Levy and Simensky with wil-
fully attempting to evade and defeat their respective
Regraded
224
- 12 -
income taxes and those of the corporation for 1936 and
1937. The defendants are engaged in a fruit and produce
business in New York City. The allegation of fraud in all
of the cases is based on the practice of the individuals
to issue fictitious checks, charging them to purchases and
receiving the proceeds thereof. Proof is available to show
that many of the checks were deposited in the corporation's
bank account and a corresponding credit made on the loans
payable account of the individuals on the corporation's
books. The deficiency in tax for the years 1934 to 1938
in Levy's case is $12,074.34; in Simensky's case for the
years 1934 to 1938, $17,402.57; and in the case of the
corporation for the years 1934 to 1937, $22,756.66.
10. Tax Evasion by Sperry Candy Company, et al.
Indictments in the income tax case of the Sperry Candy
Company, Milwaukee, Wisconsin, were returned on March 11,
1943, by & Federal grand jury against Arthur L. Birch,
C. P. A., and Ray J. Pihringer and Fred F. Foster, secre-
tary-treasurer and president, respectively, of the
company. In the company's case, the indictment contains
Regraded Unclassified
225
- 13 -
five counts, two of which charged Birch, Pihringer and
Foster with aiding and assisting in the preparation and
presentation of false and fraudulent returns for the
company for 1936 and 1937, two of which charged attempts
to evade taxes for the same years, and the fifth of which
counts charged conspiracy to evade corporate taxes for the
years 1934 to 1937, inclusive, and individual income taxes
of Pihringer for the years 1936 to 1938, inclusive. As
shown in the indictment, the total taxes evaded are
$7,167.26. Warrants for the arrest of the individuals in-
volved will be issued after March 3lst.
11. Tax Evasion by Harry A Brown. Brown pleaded
nolo contendere on march 8 to charges of having wilfully
attempted to evade and defeat a large part of the income
and excess profits taxes of John E. Graybill & Company,
Inc. for 1936, and a large part of his individual income
taxes for 1936, 1937 and 1938. A sentence of two years
and a fine of $2,000 was imposed. The sentence was sus-
pended and Brown placed on probation for a period of two
years conditioned upon his payment of the fine and all
Regraded Unclassified
226
- 14 -
civil liability for the years covered by the two indictments.
John E. Graybill & Company, Inc., is 8. large concern of
York, Pennsylvania, doing electrical contracting work.
Brown is its president and principal stockholder. The
deficiency in tax in the case of the corporation amounts
to $18,558.61, and in the individual case to $4,444.53.
12. Tax Evasion by William S. Krasnow, Eli Yoffe,
Krasnow Wool Stock Co., Yoffe-Krasnow, Inc. This group
of cases was sent to the Department of Justice by the Com-
missioner of Internal Revenue, letter of January 7, 1943,
with a recommendation that Krasnow be prosecuted for tax
evasion for 1936 and 1937; that Yoffe be prosecuted on like
charges for 1936; that Krasnow be prosecuted for evading
the taxes of the Krasnow Wool Stock Company for 1937; and
that Krasnow and Yoffe be prosecuted for evading the taxes
of Yoffe-Krasnow, Inc., for 1936. On March 9, 1943, in-
dictments covering these charges were returned by a Boston
grand jury; and Yoffe and Krasnow were also indicted on
the same date on a conspiracy charge of evading the taxes
Regraded Unclassified
227
- 15 -
of Yoffe-Krasnow, Inc., for 1934 to 1936, inclusive. On
the same date Yoffe and Krasnow were arrested, released on
bail of $7,500 each, and their cases set for arraignment
March 16. They made large profits in a woolen rag business
in Boston and vicinity. The total additional taxes and
penalties of Krasnow for 1934 to 1937, inclusive, are
$313,320.27; of Yoffe for the same years $156,472.59; of
Krasnow Wool Stock Company for 1936 and 1937, $55,701.74;
and of Yoffe-Krasnow, Inc., for 1934 to 1936, inclusive,
$155,985.77. In the main, the fraud in question consisted
of suppressing sales and diverting the proceeds of the same
to these individuals.
13. Proposed Tax Refund to American Can Company. A
proposed refund of $178,240.75 income, excess profits and
defense taxes for the year 1940, has been approved by the
Chief Counsel's office and recommended for report to the
Joint Committee. More than one-half of this amount
($91,772.91) is the direct consequence of certain adjust-
ments made by the Revenue Agent to the years 1936, 1937,
1938, and 1939, whereby the net income for those years
Regraded Unclassified
228
- 16 -
was increased in the aggregate amount of $772,824.56.
These adjustments, of course, increased the tax liability
of the company for the four years involved, but also increased
the average base period net income for excess profits tax
purposes in the amount of $193,206.13 and thereby reduced
the excess profits tax liability for the year 1940 in the
amount of $91,772.91. The total amount of income, excess
profits and defense taxes paid by this company for the
year 1940 was in excess of six million dollars.
14. Post Review of Taxes of Indemnity Insurance
Company of North America. In a post review of the income
tax case of this company for the years 1938, 1939 and 1940,
the Income Tax Unit discovered that the Revenue Agent in
Charge had failed to follow the rule laid down in the case
of Pacific Employers Insurance Company (CCA 9, 1937; 89
Fed. (2a) 186; 1937-2 C.B. 312), as 8. result of which the
"losses incurred" for 1938 were overstated by more than
$4,000,000 and were slightly understated for 1939 and 1940.
As the result of a reaudit, the taxpayer has agreed to a
deficiency of $644,194.75 for 1938, and to overassessments
229
- 17 -
of $33,240.31 for 1939 and $75,889.93 for 1940. The
overassessments are being reported to the Joint Committee.
15. Excess Profits Tax Case Involving a Contract for
Sale of Supplies to a Foreign Government. The Excess
Profits Tax of 1940, section 719 IRC, provides (in cases
involving certain contracts for sale of supplies to foreign
governments) that "if such contract provides for advance
payment and for repayment by the vendor of any part of such
advance payment upon cancelation of the contract by such
foreign government" the "borrowed capital" of the vendor
(taxpayer) for any day shall include "the amount which would
be required to be so repaid if cancelation occurred at the
beginning of such day." During the year 1941, there was
an existing contract between Marmon-Herrington Co., Inc.
Indianapolis, Indiana, as vendor, and the Netherlands East
Indies Government, as purchaser, on which contract the
purchaser had during the year 1940 paid $4,177,000 (one-half
of the purchase price) in advance. But the purchaser re-
served no right to cancel the contract except for failure
Regraded Unclassified
230
- 18 -
on the part of the seller to deliver the goods purchased on
or before December 31, 1941, or in' the event the taxpayer
became bankrupt. The taxpayer claims that the entire amount
of $4,177,000 should be treated as "borrowed capital" in
determining invested capital for the entire year 1941, and
that claim has been allowed in the current audit. A
question has been raised as to why the Chief Counsel's
office should adopt the fiction that the entire amount of
the advance ($4,177,000) would, under the terms of the
contract, have to be repaid to the foreign government during
1941, if the foreign government should cancel the contract
during that year, when, in fact, the contract makes no
provision for cancelation by the foreign government at any
time during the year 1941, and of course does not provide
for repayment of the advance in the event the foreign
government should arbitrarily cancel or repudiate the con-
tract during 1941. The case is being considered.
16. Tennessee Gasoline and Cigarette Taxes; California
Gasoline Tax. In a memorandum dated March 24, 1943,
addressed to Deputy Commissioner Mooney, it was held that
Regraded Unclassified
231
- 19 -
the gasoline tax imposed by the State of Tennessee upon
distributors or dealers, whichever person first handles the
product in the State, is not a retail sales tax deductible
by the consumer under section 23(c)(3) of the Internal
Revenue Code. However, in view of the well established
position of the Bureau, the Chief Counsel's office approved
the conclusion that the gasoline tax imposed by the State
of Tennessee is deductible under section 23(c)(1) of the
Code as a tax imposed on the consumer. The Tennessee
tobacco tax was held not deductible by the consumer under
section 23(c)(3) of the Code substantially for the same
reasons that the gasoline tax is not deductible under that
section. The tobacco tax is imposed upon the first person
who receives the tobacco products in the State whether that
person be 8. distributor or a dealer. In those instances
in which a retailer does not receive his tobacco products
through the customary marketing channels he will occasionally
pay the tobacco tax. But inasmuch as the tax does not normally
fall upon retailers it is not a retail sales tax, and there-
fore the amount of the tax is not deductible by the purchaser
under section 23(c)(3) of the Code.
Regraded Unclassified
232
- 20 -
Similarly, in a memorandum dated March 24, 1943, the
question considered was whether section 23(c)(3) of the
Code, which allows consumers to deduct from their net in-
come retail sales taxes paid under certain conditions, was
applicable to the tax imposed by the State of California
upon distributors of motor vehicle fuel. It was held that
such tax was not deductible by consumers. The tax is not
imposed upon retailers, but is imposed upon refiners, manu-
facturers, producers, etc., or importers (or persons stand-
ing in the shoes of importers). It is not imposed 8.S &
retail sales tax and is not within the meaning of section
23(c)(3) of the Code. (GCM 23552 (unpublished) In re:
California Gasoline Tax, dated January 15, 1943, which held
that this tax was deductible by the purchaser, if the amount
of such tax is separately stated at the time of the purchase,
was revoked.)
17. Processing, Unjust Enrichment, and Floor Stocks
Tax Cases. On March 15, 1943, the Circuit Court of
Appeals of the 5th District entered its decision in the
case of Commissioner of Internal Revenue V. Bain Peanut
Regraded Unclassified
233
- 21 -
Company of Texas, reversing the United States Processing
Tax Board of Review and remanding the case to The Tax
Court of the United States for further proceedings. (The
Processing Tax Board decided that the Bain Peanut Company
of Texas bore the burden of processing taxes to the extent
of and was entitled to the refund of $38,847.25 out of total
taxes paid in the sun of $96,113.75.) The Circuit Court of
Appeals, in its decision, decided two important points in
favor of the Government. These two issues are involved in
practically all processing tax cases undisposed of at the
present time. The court held (1) that there is no election
permitted taxpayers as to the manner of determining the
cost of commodity processed for purposes of the margin com-
parison provided for in section 907 of Title VII of the
Revenue Act of 1936 - that actual cost must be used if
available - and (2) that where the Government offers evidence
establishing that the burden of the tax was actually shifted,
such evidence overcomes and rebuts an unfavorable margin
showing, and that the effect of such evidence is to recast
the burden of proof upon the taxpayer where "it existed in
the beginning.'
Regraded Unclassified
234
- 22 -
At the request of The National Biscuit Company,
arrangements were made to hold a conference in New York,
New York, on March 31st for the purpose of endeavoring to
execute a settlement of the company's claims for refund of
processing tax and floor stocks tax, similar claims of two
former subsidiaries, the National Milling Company and the
National Bread Company, and the unjust enrichment tax
liabilities of the company and its former subsidiaries.
The claims are the largest and most important claims with
respect to wheat remaining for disposition by the Bureau
of Internal Revenue, aggregating approximately $4,083,127.49,
and the National Biscuit Company is the largest bakery
upon which the assessment of an unjust enrichment tax has
been proposed. The Bureau will be represented at the
conference by Fred S. Martin, Acting Head, Unjust Enrichment
Division of the Income Tax Unit, Raymond F. Brown, Head,
Claims Division of the Chief Counsel's Office, Irene F. Scott,
Special Attorney, and A. J. S. Weaver, an economist, both
of the Chief Counsel's Office.
Regraded Unclassified
235
- 23 -
The Sellmayer Packing Company case, which involves
the right to a refund of $57,023.96 paid as tax on the
processing of hogs, was one of the first cases to come be*
fore the Tax Court of the United States since the Revenue
Act of 1942 conferred on it jurisdiction of all cases in-
volving refund of amounts paid as processing taxes. It
developed at the trial that the petitioner claimed that
the original sales invoices were lost. These invoices were
the only records from which gross sales value could be
determined in computing the shift of the burden of the
amount paid as tax. The second group of Bureau examiners
had found evidence that these invoices had been altered
before being submitted to them and that the majority of those
altered invoices disappeared without explanation during the
course of their examination. The principal controversy at
the trial involved the question of whether the petitioner
had laid & sufficient foundation for the submission of
secondary evidence of the contents of these invoices.
Ruling on this point was reserved. However, when the same
236
- 24 -
point was raised in the companion unjust enrichment tax
case, the trial of which followed the processing tax case,
Judge Opper ruled out the secondary evidence on the ground
that he was not satisfied that the original records were
missing or if they ere missing, it was not as a result of
affirmative action on behalf of the petitioner. The unjust
enrichment tax case involved the calendar years 1935 and
1936 and deficiencies totaling $19,013.42. The trial of
these two cases covered a period of five weeks.
18. Tax on Transfer of Realty by Consolidated Edison
Company of New York, Inc., et al. In 8. memorandum dated
March 19, 1943, addressed to Deputy Commissioner Bliss, the
question considered was whether section 3482 of the Internal
Revenue Code, taxing certain conveyances of realty, applies
to a proposed merger of certain subsidiary companies into
Consolidated Edison Company of New York, Inc., pursuant to
applicable statutes of the State of New York. GCM 22955
held that the transfer of real e state from one or more con-
stituent corporations to 8. continuing or new corporation,
pursuant to a. statutory merger or consolidation, constitutes
Regraded Unclassified
237
- 25 -
8. transfer of "realty sold" within the meaning of section
3482 of the Code. The consideration for such transfer was
the issuance of stock by a continuing or new corporation
to the merged corporation and the assumption of the liabili-
ties of the constituent corporation by the continuing or
new corporation. The instant case varies from the factors
considered in GCM 22955, supra, in that there is no issuance
of stock by the continuing corporation to the merged cor-
poration as 8. part of the consideration for the transfer of
the realty. However, there is an assumption of liabilities
of the merged corporation by the continuing corporation
which would constitute sufficient consideration for the
transfer of assets to the continuing corporation and the
conclusion of GCM 22855, supra, would be applicable.
Therefore, the transfer of realty in the contemplated merger
would be subject to the tax.
19. Documentary Stamp Tax Case of Charles K. Cole
Estate, (Chelsea-on-the-Hudson, New York). In 8. memorandum
dated March 15, 1943, addressed to Deputy Commissioner Bliss,
the questions considered were (1) whether 8. proposed
Regraded Unclassified
238
- 26 -
transfer of securities in the State of New York from
testamentary trustees to trustees of a power in trust for
certain minors will constitute a taxable transfer for docu-
mentary stamp tax purposes; and (2) whether a subsequent
transfer from the trustees of the power in trust to the
minors upon attaining majority will constitute a taxable
transfer for documentary stamp tax purposes. Under the
laws of the State of New York an attempt to appoint a
guardian of property given to an infant by one not its
parent is inoperative 8.S an appointment but is given effect
under the term "Trustee of 8. power in Trust" and is treated
the same as a guardian. A trustee of a power in trust does
not acquire legal title, hence legal title to the securities
in question is in the minors and one transfer tax will be
payable in connection with the transaction, i.e., B. tax
upon the transfer of legal title from the testamentary
trustees to the minors as provided in sections 1802(b) and
3481(a) IRC. A subsequent transfer from the trustees of
the power in trust to the minors upon attaining majority
will not be taxable as there is no transfer of legal title.
Regraded Unclassified
239
- 27 -
20. Compromise Offer of the New York, Ontario and
Western Railway Company. This company filed a petition
for reorganization under section 77 of the Bankruptcy Act
on May 20, 1937, and a Trustee has been operating the
company since that date, The Trustee is indebted to the
Government in the amount of $232,703.95 for taxes due under
the Carriers Taxing Act of 1937 and interest thereon to
August 31, 1942, of $38,202.83. The Department of Justice
on the recommendation of the Chief Counsel's office
accepted an offer in compromise of the entire liability by
the payment of the principal amount of the tax. This rail-
way is heavily in debt and has shown operating losses for
the past five years. The money to pay the Government was
obtained through the sale of capital assets. The Debtor
is making some progress towards a solution of its financial
difficulties and at the same time is rendering valuable
public service during this critical period.
21. Unemployment Tax Case of Integrity Trust Company.
The question whether the Integrity Trust Company, Philadel-
phia, Pennsylvania, is entitled to the credit extension
Regraded Unclassified
240
- 28 -
provided by section 1601(a)(3) of the Federal Unemployment
Tax Act was answered affirmatively by the Chief Counsel's
Office. The time for crediting against Federal unemploy-
ment taxes the amount of contributions paid into a State
unemployment fund is extended by section 1601(a)(3), supra,
provided the taxpayer's assets are in the custody of 8. re-
ceiver appointed by, or under the control of, a court of
competent jurisdiction. The Pennsylvania Department of
Banking, an executive department of the State Government,
is authorized under certain circumstances to liquidate insti-
tutions subject to its supervision with the Secretary of
Banking designated by statute to act as receiver. Although
the authority of the Secretary of Banking to act 8.S receiver
is not derived from any court, it appears that by statute,
State decisions and strong dicta in Federal decisions the
Secretary of Banking is responsible to 8. particular State
court, and that in matters pertaining to the collection, sale
and distribution of assets, settlement of disputes, confir-
mation of accounts and final discharge of the secretary as
receiver, the court takes an active part in the liquidation
proceeding.
Regraded Unclassified
241
- 29 -
22. Tax Refund Claim of Estate of Thomas C. Jenkins.
The Safe Deposit and Trust Company of Baltimore, executors,
brought suit in the United States District Court for the
District of Maryland to recover $886,211.90, alleged over-
payment of estate tax. There were two principal issues
(1) transfers allegedly made in contemplation of death, and
(2) whether property passing under certain powers of appoint-
ment exercised by the decedent was properly included in
determining the estate tax. The executor offered to accept
& refund of $443,105.95, plus interest, (which it will be
noted is exactly one-half of the amount sued for). After
extended consideration and voluminous written expressions
within the Bureau of Internal Revenue and the Department of
Justice, the Attorney General accepted the offer subject to
the approval of the Joint Committee. The Assistant Chief
of Staff of the Joint Committee criticized the proposed
settlement in a 15 page memorandum which concludes with the
following language: "In view of the foregoing discussion,
I am of the opinion that the proposed refund is more than
Regraded Unclassified
242
- 30 -
the plaintiff could reasonably anticipate in event of
trial. While the nature of the issues involved are such as
to make it desirable from an administrative standpoint to
stipulate the case, nevertheless to grant an excessive refund
merely to avoid the hazard of trial would not seem justified."
23. Alleged Gift Tax Liability of John Borg.
Sometime ago, & revenue agent was assigned to investigate
an alleged gift tax liability of John Borg, a prominent
citizen of Hackensack, New Jersey, publisher of the Bergen
Evening Record, and a Commissioner of the Port of New York
Authorities. After discovering some evidence of fraud, the
revenue agent became suspicious that his superiors were at-
tempting to protect Borg and prevent a complete investigation
and Borg's criminal prosecution on tax evasion charges. The
revenue agent addressed letters to the Federal Bureau of
Investigation, the Commissioner of Internal Revenue, the
Chief of the Intelligence Unit and the General Counsel, and
despite personal efforts by officials of the Bureau to re-
assure the revenue agent by explaining to him the procedure
Regraded Unclassified
243
- 31 -
in such cases, he thereafter wrote letters about the case
to the Secretary and to the Governor of New Jersey, and
recently, just before he became a member of the armed forces,
took the case up with a Federal Judge and a United States
Attorney. Because of the revenue agent's charges,
Mr. Wenchel, at the direction of the Commissioner, attended
a conference in New York at which were present all of the
investigating agents on the case, including the revenue
agent. After hearing all the various arguments, it was
concluded that, at that time, there was insufficient evidence
to warrant a recommendation for criminal prosecution of
Borg. Thereafter, the Intelligence Unit made a complete
investigation and did not recommend the institution of
criminal proceedings but forwarded its report to the Chief
Counsel's Office "for consideration and advice" a.s to the
disposition of the case. The evidence was carefully con-
sidered and that Office concurred in the indicated opinion
of the Intelligence Unit that a recommendation for institu-
tion of criminal proceedings should not be made to the
Regraded Unclassified
244
- 32 -
Department of Justice. In the meantime a. conference had
been afforded Borg in the Bureau at Washington and after-
wards he filed an offer in the amount of approximately
$87,000 in compromise of proposed gift taxes aggregating
approximately $157,000 for 1932 to 1938, inclusive, together
with fraud and delinquency penalties thereon, and in com-
promise of proposed additional income taxes aggregating
approximately $23,000 for 1929 to 1935, inclusive, together
with the fraud penalty thereon. This offer was carefully
considered and it was decided that although the case was one
for settlement, the amount of the offer was insufficient.
At 8. recent conference with Borg's representative, the
Commissioner indicated his willingness to settle the civil
liabilities for & flat sum of $125,000, and it is understood
that the offer in compromise will be increased to that
amount. The Secretary and Assistant Secretary Sullivan are
acquainted with this case and with its history.
24. Approved Overassessments. Overassessments were
approved by the Staff of the Joint Committee during
Regraded Unclassified
245
- 33 -
February in the following cases:
Hughes Tool Company - income tax $117,583.01
and interest
Estate of Clara Jay Keech -
91,550.66
estate tax
Estate of R. Bleecker Rathbone -
86,794.94
estate tax (including abatement of
tax and interest of $52,621.71)
25. Regulations. For the period October 21, 1942
(date of the Revenue Act of 1942) to March 13, 1943, in-
clusive, there were signed by the Commissioner and approved
by the Secretary 73 Treasury decisions and 1 regulationsnot
referred to as a Treasury decision (Regulations 113, Tax on
Transportation of Property, sec. 620, Revenue Act of 1942,
issued February 1, 1943). 62 of these Treasury decisions
were directly made necessary by the Revenue Act of 1942
(including 6 handled by the Alcohol Tax Unit). 22 more
Treasury decisions directly made necessary by the Revenue
Act of 1942 are to be issued. Only 2 of these pending
Treasury decisions have not yet been drafted, and they cover
sec. 507, Time for performing certain acts postponed by
reason of war, and sec. 230(a), Invested capital in connection
Regraded Unclassified:
246
- 34 -
with certain exchanges and liquidations. The other 20
Treasury Decisions to be issued have been prepared and are
now under review.
In addition to the regulations directly made necessary
by the Revenue Act of 1942, there are a number of other
regulations pending which include:
Regulations 111. This regulations will be 8. revision
of Regulations 103 - "Income Tax" (892 page volume). It
will be applicable to years beginning after December 31,
1941, and will incorporate the applicable amendments made
under Regulations 103 by approximately 100 Treasury decisions.
Since Regulations 103 was issued on January 29, 1940, the
income tax provisions of the Internal Revenue Code have been
amended by a number of Acts, including the Revenue Acts of
1940, 1941, and 1942.
Regulations 112. This regulations will be a revision
of Regulations 109 - "Excess Profits Tax" and will be appli-
cable to years beginning after December 31, 1941. Since
Regulations 109 was issued on May 3, 1941, it has been radi-
cally amended by reason of the "Excess Profits Tax Amendments
of 1941" and "The Revenue Act of 1942.
Consolidated Returns Regulations. It is proposed to
consolidate Regulations 104 - "Consolidated Returns of
Affiliated Railroad Corporations and Pan-American Trade
Corporations" and Regulations 110 - "Consolidated Excess
Profits Tax Regulations" and clarify the statements outlining
the rules governing the computation upon a consolidated
basis of the income subject to income tax and the income
subject to the excess profits tax. Both Regulations 104,
issued December 28, 1939, and Regulations 110, issued March 14,
1941, have been amended a number of times to reflect changes
made in the Internal Revenue Code by subsequent revenue acts.
Regraded Unclassified
247
- 35 -
Regulations 106. This regulations will be a revision
of Regulations 79 - "Gift Tax. Y Regulations 79 was issued
on February 26, 1936, under the Revenue Act of 1932 and
such regulations were later made applicable to the Internal
Revenue Code by Treasury decision 4885, approved February 11,
1939. The revision will be applicable to years beginning
after December 31, 1941, and will incorporate the applicable
provisions set forth in gift tax Treasury decisions issued
since 1936.
The following work was done under the supervision of
Assistant General Counsel O'Connell:
26. New Contract Form. Legal work has been completed
on a new contract form requested by Director Mack. Here-
tofore Procurement contracts have been full of conditions
both general and special. At Mr. Hill's suggestion the
general conditions have been classified and will be incor-
porated in the short form contract by reference, the special
conditions to be used whenever the facts justified. ÁS a
result of this a large amount of paper work, as well as
paper, is being saved.
27. Potomac Electric Power Company Rate Case. After
8. bitter fight in which each step was opposed, the Public
248
- 36 -
Utility Commission of the District of Columbia has ordered
a reduction of $310,000 under the sliding scale to the con-
sumers. However, an appeal will be taken from this order,
and in this appeal the Treasury Department will be joined
by the Office of Price Administration, the Office of
Economic Stabilization, and the Department of Justice.
It is Mr. Hill's considered opinion that the Department
shall ultimately secure a reduction in excess of $1,000,000
for the consumers. Since the Government buys [in revenue]
25% of the "juice" sold by Potomac Electric Power Company,
the savings in such an event will be substantial to the
Government.
28. Disposition of Surplus Property. One of the most
important problems facing the Procurement Division is the
matter of disposing of surplus property. Soon it will have
for distribution approximately $75,000,000 worth of property.
After the war surplus property may reach into the billions.
It has been determined that Government Agencies will not
request over 50% of the surplus property and, in order to
dispose of the balance quickly, procedure is being
pròmulgated to sell the surplus under proper safeguards to
the public.
Regraded Unclassified
249
- 37 -
29. Lend-Lease Purchases. Lend-Lease buying is con-
tinuing at a rapid pace. Contracts are now being let for
the purchase of power equipment, and it is understood
that the power program will call for an expenditure of
approximately $60,000,000. Contracts are being let for
architect-engineering services in relation to this program,
and some difficulty is being experienced in keeping the
fees within the Defense Plant Corporation's schedule.
However, it is believed that ultimately this can and will
be done, bringing about large savings in this direction.
30. Renegotiation of Contracts (See January 1943
report, item 54). Although Procurement Division to date
has played a minor roll in renegotiating contracts, in the
future it will negotiate a large number of Lend-Lease
contracts in which the Treasury Procurement has the pre-
dominant dollar value. Since joint regulations have been
agreed upon and procedure under the same adopted for Procure-
ment, work will proceed on the 38 cases now in process for
renegotiation and more will follow. Mr. James Hawthorne has
done 8. great deal of work on this matter.
Regraded Unclassified
250
- 38 -
31. Public Debt Act of 1943 (See January 1943 report,
item 41). At the request of Assistant Secretary Sullivan,
Mr. Speck attended the sessions of the House on March 11
and 12, and reported from time to time to Mr. Sullivan re
action taken on H. R. 1780, the public debt limitation
bill. On March 17 Mr. Speck discussed with Mr. Williamson
of Internal Revenue, the various amendments proposed to
the bill with reference to the salary limitation order, and
submitted a memorandum concerning possible administrative
difficulties of the Internal Revenue Bureau in handling
salary stabilization under the various amendments. It was
concluded that the Wolcott amendment would be the most
satisfactory in this respect. In response to 8. request
from the Bureau of the Budget for an expression of the
views of this Department with respect to enrolled enact-
ment of H. R. 1780, Mr. Speck prepared 8. letter, in which
it is stated that the Secretary of the Treasury had, on
March 24, at the suggestion of Justice Byrnes, communicated
to the President his views on those provisions of the bill
which relate to activities of the Treasury Department.
Regraded Unclassified
251
- 39 -
32. Bill to Regulate Prices and Stabilization of the
Value of the Dollar. A report to the Senate Committee on
Banking and Currency on S. 678, providing for the regula-
tion and stabilization of agricultural and commodity
prices and of our domestic economy through the regulation
and stabilization of the value of the dollar, which was
prepared in the Division of Monetary Research, was
revised by Mr. Casey. The report pointed out that the
bill would vest in the Board of Governors of the Federal
Reserve System certain fiscal controls and powers which
do not appropriately come within the scope of the Federal
Reserve System.
33. National Gallery of Art Bill (Permanent Loan). (See
February 1943 report, item 52). Mr. Speck contacted members
of the House Committee on the Library and urged a favorable
report on our proposed legislation (S. 319), to authorize
the Secretary of the Treasury to receive a permanent loan
to the United States from the Board of Trustees of the
National Gallery of Art and to pay 4 percent interest
thereon, and to permanently appropriate such interest for
payment to the Board of Trustees.
Regraded Unclassified
252
- 40 -
34. A Bill to Amend the Budget and Accounting Act,
1921 (See January 1943 report, item 44). Mr. Speck co-
operated with Mr. Davis of Procurement in the preparation of
a letter to Chairman )'Leary of the House Committee on
Expenditures in the Executive Departments, on H. R. 1610,
to amend the Budget and Accounting Act, 1921. This legis-
lation, sponsored by the Bureau of the Budget, would
authorize the transfer of surplus equipment and supplies
among the various departments and agencies of the Govern-
ment and authorize the sale or lease of Government buildings,
supplies, or equipment to non-governmental agencies
engaged in the activities essential to the prosecution of
the war. Mr. Speck attended hearings held by the House
Committee on March 2, 3, and 5 on this bill.
35. War Loan Accounts. Mr. Speck attended 8. hearing
held on March 25, 1943, of the House Banking and Currency
Committee on H. R. 1699, a bill to eliminate assessment and
reserve requirements in connection with War Loan Accounts.
A memorandum to Under Secretary Bell, giving 'an account of
the comments made by Mr. Crowley, Chairman of the Board of
Regraded Unclassified
253
- 41 -
Directors of the Federal Deposit Insurance Corporation, and
members of the Committee, was prepared by Mr. Speck.
36. Attachment, Garnishment, etc., of Wages and
Salaries of Federal Employees. Mr. Casey prepared a report
to the. Chairman of the House Judiciary Committee on H. R.
694, to provide for the attachment, garnishment, execution, or
trustee process of wages and salaries of civil officers and
employees of the United States, advising that the enactment
of the bill would retard the administrative operations of
the Treasury Department. On March 25, Mr. Casey attended,
with Mr. Birgfeld and Mr. G. F. Allen, hearings before that
Committee on the bill, and on March 30 Mr. Speck attended
further hearings, with Mr. Allen, who testified briefly
as to the adverse effect which the bill would have upon
the Government's mass production disbursement method,
explaining the scope of the Disbursing Officer's office.
The Celler subcommittee concluded its open hearings and
proposed to go into Executive Session to consider the
bill and certain amendments which will be proposed thereto.
Mr. Casey also prepared a report to the Bureau of the
Regraded Unclassified
254
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Budget on S. 213, relating to the garnishment of salaries
or other compensation of civil officers and employees of
the United States, its territories or possessions, or the
District of Columbia, which report incorporated a copy of
the report prepared on H. R. 694 and raised certain objections
to the form of S. 213.
37. Ted Vaughan Relief Bill. At the request of the
Senate Committee on Claims, Mr. Ranta prepared a letter
giving the views of this Department on S. 711. The letter
pointed out that if the bill were enacted in its present
form, the persons intended to be benefited would probably
not be entitled to the money appropriated by the bill due
to the provisions of the descent and distribution statutes.
38. Washington, Brandywine and Point Lookout Proposed
Bill. At the request of Senator Tydings, a draft of & bill
to authorize settlement of the indebtedness of the Washington,
Brandywine and Point Lookout Railroad Company to the United
States by payment of the principal of $50,000, was prepared
by Mr. Keith and Mr. Filachek.
Regraded Unclassified
255
- 43 -
39. Centralization of Legal Advice in the Department
of Justice. A preliminary report on the views of this
Department on S. 214, "To consolidate the function of fur-
nishing legal advice to Government agencies in the
Department of Justice" was prepared by Mr. Casey. The
report advised the Bureau of the Budget that the Department
would recommend against enactment of the bill.
40. Proposed Legislation to Eliminate Conflicting
Interests in Proceedings. Memoranda, which were prepared
by Mr. Speck, were sent to Messrs. Gilmore, Burrus,
Heffelfinger, Davis, Chambers, Tietjens and Aarons, request-
ing their comment on & draft of 8. bill to prohibit participa-
tion of Government personnel in proceedings in which there
may be private interests conflicting with those of the
Government. This proposed legislation was submitted by the
Department of Justice.
41. Transfer of Ration Book Investigative Functions
to Secret Service. Mr. Speck attended a meeting on March 18
in Chief Wilson's office, attended by Mr. Emerson and other
representatives of the Office of Price Administration
Regraded Unclassified
256
- 44 -
on the proposed transfer to Secret Service of 0. P. A. and
F. B. I. investigative functions in connection with counter-
feiting and bulk thefts of ration books. The Office of
Price Administration is desirous of having the Treasury
Department investigate such activities and will sponsor
the promulgation of the executive order. Mr. Ranta
prepared a revised draft of the order. On March 30, 1943,
Mr. Speck attended, with Mr. Irey, a meeting in Assistant
Secretary Gaston's office on this proposed transfer.
42. Manufacture of Distinctive Paper. At the request
of the Secret Service Division, Mr. Ranta prepared a
memorandum which discussed the law relating to the possession
of paper similar to that used to make obligations and
securities of the United States.
43. Withholding of War Savings Bonds. At the request
of the Secret Service Division, 8. memorandum was prepared
by Mr. Ranta which concluded that no action could be taken
by the Government to acquire the possession of War Savings
bonds which had been wrongfully taken by a landlord from 8.
tenant who had purchased the bonds.
Regraded Unclassified
257
- 45 -
44. Reproduction of War Savings Stamps. Mr. Ranta
prepared a memorandum to Chief Wilson which concluded that
the revised regulations on illustrations of War Savings
bonds and stamps were broad enough to permit illustrations
of War Savings Stamp corsages provided the use of such
illustrations was deemed administratively desirable.
45. Stamping of 50-cent Coins. At the request of
the Secret Service Division, Mr. Ranta prepared a memorandum
which concluded that the stamping of a certain inscription
on 50-cent coins by 8. numismatic club was probably 8.
violation of section 171 of the Criminal Code (U.S.C.,
title 18, sec. 285).
46. Claim of Raymond S. Hoover. A memorandum was
prepared by Mr. Ranta addressed to the Secretary recommending
that he certify to Congress for payment pursuant to the Act
of December 28, 1922, 42 Stat. 1066 (U.S.C., title 31,
secs. 215-217) the claim of Raymond S. Hoover in the sum
of $19.50 for damages to his automobile resulting from 8.
collision with a Treasury Department truck. The collison
was due to faulty brakes on the Treasury vehicle.
Regraded Unclassified
258
- 46 -
47. Litigation Case. Mr. Casey prepared a report to
the Department of Justice of the views of this Department
in the case of William H. Dunn V. William A. Parker and the
Secretary of the Treasury, and also suggesting material for
use of the Department of Justice in preparing the answer
of the Secretary of the Treasury.
48. Dismissal of Indictments. Mr. Ranta prepared
letters advising Assistant Attorney General Berge that this
Department had no objection to the dismissal of indictments
8.8 to Mike Shiojuk, Peter Charles Viotti, and Creed J.
Short and Mrs. Creed J. Short, for the violation of the
laws relating to counterfeiting; and James Williamson for
the manufacture of counterfeit coins, in the event wit-
nesses were not available due to the lapse of time.
49. Compromise Cases. Mr. Casey prepared letters to
the Secretary for my signature recommending acceptance
of the following offers in compromise: (1) offer of Frank
Crawford to pay $486.54 in compromise of the claim of the
United States against his wife, formerly Mrs. George W.
Holmes, in the sum of $809.52, (2) offer of B. L. Embry
Regraded Unclassified
259
- 47 -
to pay $100 in compromise of the claim of the United States
against George W. Snodgrass in the sum of $592.58, (3)
offer of United States Fidelity and Guaranty Co. to pay
$2,300 in compromise of the claim of the United States
against it as surety for Allene P. Thompson in the sum of
$2,764, (4) offer of United States Fidelity and Guaranty
Co. to pay $2,017.38 in compromise of the claim of the
United States against it as surety for Sidney C. Anglin,
in the sum of $2,570.86, (5) offer of North Bend Timber
Company to pay $2,500 in compromise of the claim of the
United States against it in the sum of $7,419, forest
fires suppression costs, (6) offer of Clarence 0. Steen
to pay $868.96 in compromise of the claim of the United
States against him in the sum of $1,846.70, representing a
coal trespass, (7) offer of Maryland Casualty Co. to pay
$6,359.65 in compromise of the claim of the United States
against it as surety for Legionnaire Uniform Co. in the
sum of $6,989.94, (8) offer of United States Fidelity and
Guaranty Co. to pay $1,000 in compromise of the claim of the
Regraded Unclassified
260
- 48 -
United States against it as surety for Reynolds W. Seeley
in the sum of $1,698.59, and (9) offer of Western Maryland
Railroad Co. to pay $400 in compromise of the United States
against it in the sum of $620.10 representing forest fire
suppression costs.
Mr. Ranta prepared letters recommending the acceptance
of offers of compromise in the following cases: (1) offer
of Oscar Marty, Big Sandy, Montana, to pay $325 for indebted-
ness of a like principal amount plus interest of $321.48,
(2) offer of James Lowe, Huff, Kentucky, to pay $203 for
indebtedness of a like principal amount plus interest of
$122.26, (3) offer of Thomas B. Row, Brady, Montana, to
pay $210 for indebtedness of a like principal amount plus
interest of $208.60, (4) offer of Charles J. Wolfe, Shelby,
Montana, to pay $50 for indebtedness of a like principal
amount plus interest of $42.34, (5) offer of S. O. Southall,
Jetersville, Virginia, to pay $365 for indebtedness of 8.
like principal amount plus interest of $191.15, and (6)
offer of D. A. Johnson, Flaxville, Montana, to pay $480.03
for indebtedness of 8. like principal amount plus interest
of $264.74.
Regraded Unclassified
261
- 49 -
Miss McDuff prepared letters recommending acceptance
of the following offers in compromise:
(1) The offer of the Minnesota Power and
Light Company to convey to the United States
certain property valued at $3,824.66 in compro-
mise of the Government's claim against it
amounting to $1,576.59, arising out of an
occupancy trespass; (2) offer of Lloyd McDonald
to pay the United States $400 in settlement of
all indebtedness arising from loans made to his
father on which there is due $770.06 principal
and $517.90 interest accrued to January, 1943;
(3) offer of John E. Moffatt to pay $120 in
compromise of the claim of the United States
against his father the principal amount of
$125 plus interest of $65.64 accrued to December,
1942; offer of the Maryland Casualty Company to
pay $6,359.65 in settlement of its liability
under the claim of the United States against the
Legionnaire Uniform Company in the amount of
$6,989.94.
The above-named offers were duly accepted by the Acting
Secretary of the Treasury and Miss McDuff prepared letters
advising the agencies submitting the offers of their
acceptance and a memorandum to the Commissioner of Accounts
requesting that the amount of the offers be covered into
the Treasury of the United States to the credit of specified
accounts.
Letters were also prepared rejecting the offers made
Regraded Unclassified
262
- 50 -
by the following proponents and returning the files to the
agencies submitting them:
(1) John S. Taylor Company (for Reason A. and
Ruby E. Whittle); (2) Smith-Wood Products, Inc.;
and (3) Candido Pisoni.
Miss McDuff also prepared a letter to the Commissioner of
Public Buildings, Federal Works Agency, declaring 40 acres
of land acquired in compromise settlement of a claim of the
United States against John Preuss, to be in excess of the
needs of the Office of the General Counsel and reporting
said property to the Commissioner of Public Buildings for
disposition under the provisions of the Act of August 27,
1935, 49 Stat. 885.
50. Congressional Action on Treasury-sponsored Legisla-
tion. (a) Medal for the President. On March 1, 1943, S. Con.
Res. 7, requesting that an appropriate medal be designed for
presentation to the President in connection with his recent
trip to Africa, was referred to the House Committee on
Coinage, Weights, and Measures.
(b) National Gallery of Art. Our bill, S. 319, to
authorize the acceptance of a permanent loan to the United States
Regraded Unclassified
263
- 51 -
by the Board of Trustees of the National Gallery of Art,
and for other purposes, was reported without amendment
in the House on March 23, 1943 (H. Rept. No. 281).
(c) Huntsville, Texas, First National Bank. On
March 30, 1943, the House Committee on Claims reported
favorably H. R. 1321, a bill for the relief of the First
National Bank of Huntsville, Texas. (H. Rept. No. 323).
(d) Public Debt Bill of 1943. On March 12 the House
considered and passed, without amendment, H. R. 1780, which
includes our bill to increase the debt limit of the United
States, and for other purposes. It was referred to the
Senate Finance Committee on March 16, 1943, and on March
19, it was reported with an amendment (s. Rept. No. 123).
The Senate passed H. R. 1780, with amendments on March 23.
On March 24, the House agreed to & conference, and on the
same day agreed to the conference report. On March 25,
the Senate agreed to the Conference report. The bill was
presented to the President on March 30, 1943.
Regraded Unclassified
264
- 52 -
The following work was done under the supervision of
Assistant General Counsel Tietjens:
51. Collection of Victory Tax and of any similar
taxes to be withheld by employers (See February 1943 report,
item 49(a)). Mr. Reeves conferred with Mr. Davis of the
Office of the Tax Legislative Counsel and Messrs. Batchelder
and Heffelfinger concerning the procedure to be followed in
connection with the collection of the Victory Tax and any
similar taxes which may be levied in the future. Mr. Davis
was primarily interested in the question of whether funds
derived from such taxes and withheld by the employers are
of such a character as to fall within the scope of the various
statutes relating to the receipt and deposit of public
moneys. Messrs. Batchelder and Heffelfinger were primarily
concerned in establishing a procedure whereby the funds in
question would be covered into the Treasury and made available
for expenditure with a minimum of delay. Among the proposals
suggested were (1) that the funds be remitted to the
Collectors of Internal Revenue at monthly rather than
quarterly intervals as is now the case; (2) that the employers
be required to purchase promptly tax certificates or war
Regraded Unclassified
265
- 53 -
savings stamps with the funds and to transmit such
certificates or stamps with their returns to the Collectors;
and (3) that the employers be required to deposit the funds
with Government depositaries directly to the account of the
Treasurer of the United States and to transmit the certifi-
cates of deposit with their returns to the Collectors.
52. Veterans' payments in Switzerland (See April 1942
report, item 46 and January 1943 report, item 29;). Mr.
Reeves was present at a conference in Mr. Bartelt's office
which was attended by representatives of the State Depart-
ment, the Bureau of Accounts, the Division of Foreign Funds
Control and Mr. Dietrich and Mr. Batchelder of Under
Secretary Bell's office. The subject of the conference was
a proposed procedure whereby payments of benefits to veterans
residing in Switzerland would be made through the facilities
of the State Department. Such payments are now being with-
held due to the impossibility of transmitting checks to
Switzerland, and the State Department is very anxious that
these payments be resumed. Under the proposed procedure 8.
credit would be established with the National Bank of
Doaraded
266
- 54 -
Switzerland by & deposit for the credit of that bank in a
special blocked account with 8. New York bank. From funds
so made available the payments in question would be made
by an officer of the State Department acting 8.S agent of the
Chief Disbursing Officer, Treasury Department. The representa-
tives of the Division of Foreign Funds Control stated that
there was no objection from the standpoint of that Division
to the adoption of the proposed procedure since the pay-
ments would be made either in Swiss francs or by checks
payable in Swiss francs. If the proposed procedure is
adopted with respect to veterans' payments in Switzerland,
it is probable that it will be extended to cover payments
by other governmental agencies and that similar procedures
will be established in Sweden, Spain and Portugal.
53. Request by Chartered Bank of India, Australia
and China for release of certain gold bullion (See November
1942 report, item 17). Mr. Reeves, along with Messrs.
Heffelfinger and Batchelder, conferred with Mr. Trickett,
8. representative of the Chartered Bank of India, Australia
and China, concerning 8. request by that Bank for the release
Regraded Unclassified
267
- 55 -
of certain gold bullion produced by the Itogon Mining
Company, P. I., and deposited with former High Commissioner
Sayre by the Director of Philippine Posts at the time of the
Japanese invasion. This gold bullion was subsequently
removed to the United States where it is now held in custody
by the San Francisco Mint. While it appears that it had
been the practice of the Itogon Mining Company to pledge
gold bullion to secure advances from the Bank, there is no
documentary evidence whatsoever to support a determination
that this particular shipment of gold bullion was pledged in
this manner. Mr. Trickett stated that in view of the circum-
stances his Bank would be perfectly willing to await the
cessation of hostilities or such time as definite evidence
might be secured before requesting further action by the
Department in the matter.
54. Custody of certain Government checks deposited
with former High Commissioner Sayre (See May 1942 report,
item 35). At the request of the Bureau of Accounts, the
question of the disposition to be made of certain Govern-
ment checks which were deposited for safekeeping with former
Regraded Unclassified
268
- 56 -
High Commissioner Sayre of the Philippine Islands at the
time of the Japanese invasion and which are now held in
custody by the Bureau of Accounts, was considered. It
appears that the General Accounting Office had suggested
that these checks should be transmitted to that office
for disposition and that such of the checks as are endorsed
in blank would be deposited into the Treasury to the credit
of a trust fund account. The Bureau of Accounts was advised
that (1) there is no statutory provision which would
require the checks to be transferred to the custody of the
General Accounting Office, and (2) since it appears to
have been the intention of the parties concerned that the
checks themselves rather than their proceeds should be held
by the Government, it would not seem that such proceeds
may properly be covered into the Treasury and credited to
a trust fund account.
55. Allowance of credit to the Chase National Bank for
checks lost in transit from the Panama Canal Zone to the
United States. Mr. Tietjens and Mr. Reeves conferred with
Mr. Church of the Treasurer's Office and Messrs. Batchelder
269
- 57 -
and Heffelfinger concerning the allowance of credit to the
Chase National Bank for certain Government checks which,
after having been paid by the Cristobol branch, & Government
depositary, and charged to the Treasurer's account, were
lost in transit to the United States. It was determined that
credit would be allowed for the amount of such checks on the
basis of information contained in copies of the transcript
which accompanied the checks at the time of their destruc-
tion, and that the Department would advise the Comptroller
General of the action taken.
56. Commodity Credit Corporation Obligations (See
November 1942 report, item 13(e)). Public Debt raised the
question of the authority of the Secretary to issue Treasury
obligations in exchange for outstanding guaranteed obliga-
tions of the Commodity Credit Corporation. Mr. Tietjens
advised that the Secretary had plenty of authority to make
such an exchange.
57. Fiscal operations of Alley Dwelling Authority. In
connection with the floating of an issue of bonds by the
District of Columbia Alley Dwelling Authority, Mr. Tietjens
and Mr. Reeves discussed with Mr. Simpson, of the legal staff
Regraded Unclassified
270
- 58 -
of the Alley Dwelling Authority, and various members of the
Fiscal Service of the Treasury Department, matters
relating to (1) the disbursing of funds of the Alley
Dwelling Authority by the Division of Disbursement,
Treasury Department, and (2) the manner in which funds
derived by the Alley Dwelling Authority from the present
issue of bonds and from other sources would be handled by
the Treasury Department.
58. Deposit and Custody of Funds of Alien Property
Custodian. At the request of Mr. Maxwell, Assistant
Commissioner of Accounts, consideration was given to the
legal aspects of a request by Leo Crowley, Alien Property
Custodian, that there be established an account with the
Treasurer of the United States in the name of the Alien
Property Custodian, in which funds coming into possession
of his agency would be deposited and held subject to his
order.
59. Revision of Department Circular No. 92 relating
to special depositaries. In collaborating with Messrs.
Batchelder and Frese of Under Secretary Bell's office, the
Regraded Unclassified
271
- 59 -
above Department Circular which provides for the designation
of special depositaries pursuant to the provisions of the
Second Liberty Bond Act, as amended, is being revised.
Such depositaries are permitted to make payment by credit
to 2. "War Loan Deposit Account" of amounts payable on sub-
scriptions made by or through them for bonds, notes,
certificates of indebtedness and Treasury bills of the
United States issued under authority of the Second Liberty
Bond Act, as amended. In connection with this revision,
Mr. Reeves and Mr. Wald, together with Mr. Batchelder
and Mr. Frese, conferred with Mr. Smead, Chief of the
Division of Bank Operations, and Mr. Cherry of the Office
of the General Counsel of the Board of Governors of the
Federal Reserve System.
60. Donations. (a) Abbott Laboratories to War
Savings Staff. Mr. Julian Street, Jr., of the War Savings
Staff, talked with Mr. Tietjens about working out a plan
whereby Abbott Laboratories would donate to the War Savings
Staff & collection of canvases which it has for use in the
Treasury's bond campaign. A telegram was drafted which the
Regraded Unclassified
272
- 60 -
Company would send to the Secretary offering the canvases
and setting forth the terms under which they could be used.
Among the conditions on which the paintings are to be donated
are that they be exhibited as part of a nationally circulated
art show and that they be donated to museums in communities
which make an extraordinary show in bond sales. This part
of the bond campaign is to be sponsored by the Special
Activities Division of the War Savings Staff of which
Mrs. Morgenthau is Director.
(b) Kellogg Foundation to Public Health Service. A
letter was prepared for signature by the Secretary in reply
to 8. communication from the Comptroller General requesting
the views of the Treasury Department with respect to a
proposal by the Federal Security Administrator that 8.
donation of $40,000 offered by the W. K. Kellogg Foundation
to the Public Health Service for use in training community
health educators be accepted on behalf of the United States
by the Secretary of the Treasury pursuant to Title XI of
the Second War Powers Act, 1942, and credited to the
appropriation "75-30333, Emergency Health and Sanitation,
Public Health Service (National Defense) 1943. If The
273
- 61 -
Comptroller General was advised that the Secretary of the
Treasury would be pleased to accept the donation if it is
determined by the General Accounting Office that the fore-
going appropriation, or any other appropriation of the
Public Health Service, is available to be expended for the
purpose of training community health educators so that the
intent of the donor would be effected if the amount thereof
were transferred to such appropriation.
61. Legislation. (a) H. R. 1872 - "For the relief
of J. E. McCoy and Son". A report, prepared by the
Treasurer's Office, to the House Committee on Claims, on
H. R. 1872, "For the relief of J. E. McCoy and Son" was
revised. This bill would direct the Secretary of the
Treasury to pay to J. E. McCoy and Son $131.03, the amount
of seven checks which, after being endorsed in blank by
the payees, were cashed and specially endorsed by J. E.
McCoy and Son. These checks were subsequently stolen
from the mails by 8. thief who erased the special endorse-
ments and negotiated the items. The report states (1)
that although the question is not entirely free from doubt,
it would appear that 8. check endorsed in blank by the payee,
274
- 62 -
though subsequently specially endorsed, remains payable
to bearer, and (2) quotes a statement from a letter of the
Comptroller General to the effect that it had been reason-
able for the Treasurer to assume that the endorsements had
been stricken by 8, holder having the right to do so, and
that the fact that erasures appeared on the checks was
not legally sufficient to put the Treasurer on notice of a
defect in the title of the banks which presented them for
payment. The report concludes that in view of all the
circumstances, it would seem that the granting of relief
in this case would be tantamount to a gratuity by the
Government.
(b) National Gallery of Art (Permanent Loan) (See
October 1942 report, item 25). A proposed letter to the
Secretary of the Treasury from the National Gallery of Art
was sent to Mr. Tietjens by Mr. Cairns. This letter was
prepared in anticipation of the passage of a bill permitting
the deposit of $5,000,000 by the Gallery as a permanent
loan to the United States. The letter was returned to
Mr. Cairns with a suggested change in language.
Regraded Unclassified
275
- 63 -
(c) Authorization of foreign exchange transactions
in connection with military activities (See November 1942
report, item 15). Mr. Reeves conferred with Col. Gilchrist
of the Office of Chief of Finance, War Department, and
Mr. Batchelder concerning the preparation of proposed legis-
lation which would authorize disbursing officers of the
United States to make exchange transactions of certain
types. Such legislation would authorize the exchange of
United States currency and coin and foreign currency and
coin for checks of disbursing officers drawn in their
official capacities, United States postal money orders,
or for such foreign currency, coin, checks, drafts, bills
of exchange or similar instruments as the Secretary of the
Treasury may from time to time approve. This matter was
discussed some time ago with representatives of the War
and Navy Departments, and at that time it was agreed that
the proposed legislation would be sponsored by the War
Department. It now appears that the Treasury Department
has informally, at least, advised the War and Navy Depart-
ments that it will sponsor this legislation.
Regraded Unclassified
276
- 64 -
62. Administration of Appropriation: "Bureau of the
Public Debt, Distinctive Paper for United States Securities".
At the request of Mr. Charles Schoeneman, Technical
Assistant to the Secretary, there was considered a. proposal
to transfer administrative control of the above appropria-
tion from the Bureau of the Public Debt to the Bureau of
Engraving and Printing. Mr. Schoeneman was advised that
there would appear to be no objection to the contemplated
transfer, since the appropriation would be expended for
the purpose intended by the Congress and would, in the final
analysis, be subject to the control of the Secretary of
the Treasury whether it were administered by the Bureau of
the Public Debt or the Bureau of Engraving and Printing.
63. Assumption of office by new superintendent of
Denver Mint. Mr. Tietjens and Mr. Reeves conferred with
Dr. Howard, Assistant Director of the Bureau of the Mint,
and Mr. Brenner of the Chief Counsel's Office of Foreign
Funds concerning the type of receipt which should be
required from a new superintendent of the Denver Mint for
bullion and money to be turned over to him by his
predecessor in office. It has been customary for
superintendents of mints upon taking office to receipt
277
- 65 -
for any money and bullion which has been previously
inventoried by 8. mint committee and placed under seal,
without requiring that a new inventory be taken of such
money and bullion. However, Mr. Smith, who was recently
appointed Superintendent of the Denver Mint, stated that
he wished 8. complete count made of all values held in
the Denver Mint including those under seal. In view of
the expense which such an inventory would entail, Under
Secretary Bell inquired whether Mr. Smith could execute
a receipt stating that he was taking custody of certain
sealed vaults said to contain stated quantities of money
and bullion. Dr. Howard was advised that while there is
no statutory provision which would preclude the acceptance
of such a receipt, it would probably be very difficult to
collect from Mr. Smith or his surety the amount of any
shortage which might subsequently be revealed with respect
to the values now held under seal, since it would be neces-
sary to establish that the loss actually occurred while
the values were in his custody.
Regraded Unclassified
278
- 66 -
64. Dies Committee hearing. Mr. Houghteling of the
War Savings Staff and Mr. Tietjens, as observers, attended
a hearing before a subcommittee of the Dies Committee on
April 2. William Pickens, also of the War Savings Staff,
testified as to his supposed Communistic participation
in various organizations from 1927 to 1940. A report of
the hearing was made for the file in memorandum form, copies
being sent to Messrs. Graves, Gaston, Houghteling and Harney.
65. Comptroller of the Currency - Litigation. (See
December 1942 report, item 23). On March 19 the United
States Circuit Court of Appeals for the Second Circuit
handed down its opinion in Michelson V. Penney, involving
the Receivership of the City National Bank in Miami,
Florida. The opinion reduces to approximately $1,100,000
the judgment of $2,444,301.99 given our Receiver by Judge
Knox.
66. Public Debt - Litigation, United States Savings
Bonds (See September 1942 report, item 24(a); January 1943
report, item 38(c) and (d). (a) The Gaverich case, which is
the first case brought directly in a Federal court raising
Regraded Unclassified
279
- 67 -
the question of savings bonds inscribed "A, payable on
death to B", was tried before the United States District
Court March 26, at Harrisburg. The Judge very clearly
indicated his opinion but required briefs from the other
parties and requested findings of fact and rulings of law.
The case was continued until April 12 for final argument.
A pending case in Chicago involving about $50,000
Series G bonds in which the same question is raised was
discussed with Justice. At their suggestion Mr. Fuller
was asked to confer with an attorney who had talked with
him previously about the case with a view to securing sub-
mission of the bonds with a request for payment from the
deceased owner's estate, with the understanding that pay-
ment would be refused and the Government would institute
proceedings in the Federal courts. Whether or not this
will be done has not been determined. Justice feels that
unless the bonds are in our possession we should not our-
selves institute proceedings.
Regraded Unclassified
280
- 68 -
(b) The Ohlin case, in which the Probate Court for
Cook County, Illinois, recently held that bonds registered
in the name of A or B belonged to B upon the death of A
rather than to A's estate, has been appealed to the Circuit
Court where 8. trial de novo will be had.
(c) The Killick case has not reached the court. Some
discussions are going on with a view to getting it into a
Federal court, but nothing definite has occurred.
(a) The Shields case (New Mexico) presents 8. community
property situation. It is claimed the wife used community
funds to purchase savings bonds in the beneficiary form
without the knowledge or consent of her husband and in
fact against his wishes. The wife is dead and the husband is
claiming an interest in the bonds on the ground that the
money used to buy them was community property. This case
has been discussed with Mr. Norr of Justice.
(e) The Maryland case, in which action has been brought
in the District Municipal Court, was presented by a Washington
attorney in a. conversation with Mr. Cunningham. There are
several collateral features in the case which may be of
interest and may affect the position the Department takes.
Regraded Unclassified
281
- 69 -
67. Public Debt, Financing. Mr. Tietjens and
Mr. Cunningham passed on the legal. sufficiency of the
following issues:
2% Treasury Bonds of 1950-52, dated April 15,
1943, maturing Sept. 15, 1952, amount
unlimited except $2,000,000,000 to commercial
banks.
2-1/2% Treasury Bonds of 1964-69, dated April
15, 1943, due June 15, 1969, amount unlimited.
Commercial banks not permitted to own bonds
until April 15, 1953.
7/8% Certificates of Indebtedness, Series B-1944,
dated April 15, 1943, due April 1, 1944, amount
unlimited, sales to commercial banks limited
to $2,000,000,000, or thereabouts.
68. Railroad Reorganization. (a) Seaboard Airline
Railway (See February 1943 report, item 51). On March
30th, at a conference, attended by Mr. D. W. Bell, Mr.
Heffelfinger, Col. Anderson, Co-Receiver of the Railway,
and Mr. Tietjens, a price of $1,750,000 was finally
agreed upon for the sale by the Treasury to the Receivers
of certain securities held by the Treasury as collateral
for loans made pursuant to $210 of the Transportation
Act, 1920. This offer is subject to the approval of the
District Court of the United States for the Eastern
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282
- 70 -
District of Virginia. A letter was prepared for Mr. Bell's
signature offering these securities at the price agreed
upon at the meeting.
(b) Wilmington, Brunswick and Southern Railroad.
On March 22 a conference was held in Mr. Heffelfinger's
office to consider the possible purchase for scrap of the
above railroad. Messrs. Heffelfinger, Proctor and Tietjens
represented the Treasury and a Mr. Irwin Geiger, a Washington
attorney, represented a client, the Machine Tool and
Equipment Company, who was interested in purchasing the
obligation of the railroad held by the Treasury Department
as he knew of the ordered sale of the properties, subject
to the approval of the Interstate Commerce Commission. A
letter was received from Mr. Geiger offering the Treasury
Department $15,000 cash for the note of the above railroad
and the collateral securing same, evidencing a loan made
pursuant to $210 of the Transportation Act, 1920. The rail-
road has petitioned the Interstate Commerce Commission for
permission to abandon its line and sell its properties.
A letter was sent to the Interstate Commerce Commission
Regraded Unclassified
283
- 71 -
setting forth the offer and requesting the advice of the
Commission. A letter was also sent to the Navy Department
asking if it had any further interest in the continuation
of the operation of the road.
The following work was done under the supervision of
Assistant General Counsel Roth:
69. A compilation of the legislative history of
section 403 of the Act of April 28, 1942 (Public Law 528,
77th Congress), 8.8 amended by section 801 of the Revenue
Act of 1942 (Public Law 753, 77th Congress), relating to
the renegotiation of war contracts. This compilation, which
was prepared by Mr. Bernard S. Meyer and Mr. Sylvan
Tobolawsky, sets forth the legislative history of each sub-
section of the Act of April 28, 1942, as amended, separately.
In addition, that part of the legislative history which
does not relate to any particular section of the Act of
April 28, 1942, but to the law generally, is included and
indexed with respect to subject matter.
70. Customs Regulations. The 1943 edition of the
customs regulations, which will supersede the 1937 edition,
Regraded Unclassified
284
- 72 -
has been completed. The preparation of this edition has
involved an enormous amount of work, a very considerable
part of which has been done by the Chief Counsel's Office,
Bureau of Customs. The contents will be divided into two
volumes, viz., the "Customs Regulations" consisting of
regulations which are of general applicability and legal
effect and concern the public, and the "Customs Manual"
consisting of regulations which are effective only against
persons in their capacity as officers, agents, or em-
ployees of the Customs Service and which do not prescribe
procedure which the public should know in dealing with
the Customs Service. The regulations will be made public,
but the manual will be issued only to employees. A memo-
randum has been prepared transmitting the new edition to
the Secretary and pointing out the substantial changes
that have been made.
71. Overtime Compensation (See February 1943 report,
item 40(c); March 1942 report, item 6). In Myers V.
United States, relating to overtime compensation of
285
- 73 -
Customs employees for regular tours of duty outside of
the hours of 8 a.m. and 5 p.m., in which the Court of
Claims rendered 8. decision against the Government on
February 1, 1943, an application for rehearing in the
Court of Claims has been made. Also a new proposed bill
to eliminate excessive future liability is being prepared
and there is pending an inquiry from the Comptroller
General as to steps for reimbursement from interested
parties under certain statutory provisions.
72. Duties on equipment purchased abroad for American
Vessels. An analysis was made in a letter to the Bureau
of the Budget of a bill proposed by the War Shipping
Administration to suspend during the war section 466 of
the Tariff Act of 1930 in certain cases. This section
providés for duties on equipment purchased or repairs made
abroad for American vessels.
73. War Production Board Directive No. 10 (See October
1942 report, item 18). A proposed order covering priorities
to conform with war necessities to be issued by the
Regraded Unclassified
286
- 74 -
Commissioner of Narcotics under authority from the Director
of the War Production Board is being revised.
74. Narcotic Compromise Cases. A study is being
made on simplification of the procedure for review of
narcotic compromise cases to reduce the amount of work.
75. Practice Before Treasury Department. There is
pending a proceeding to bar from practice before the Treasury
Department members of the firm of Travis, Brownback and
Paxson, New York attorneys for Howard C. Hopson and the
Associated Gas system, before its receivership, because of
participation in tax manipulations. This is an unusual
case in scope and interest.
The following work was done under the supervision of
Assistant General Counsel Luxford:
76. French North and West African Program (See February
1943 report, item 71). Lt. Col. Bernstein left on March
30th on his return trip to Africa. Prior to his departure,
8, substantial amount of material was prepared for him which
might be of future assistance in his work in North Africa.
Messrs. Rains and Murphy have arrived in Africa and have
Regraded Unclassified
287
- 75 -
taken up their assignments there. Mr. Du Bois of this
office has recently returned from North Africa.
(a) North African ad hoc and sequestration decree.
Treasury representatives in North Africa were successful in
persuading the French, after extended discussions, to adopt
8 flexible and effective decree with respect to blocking
of assets and imposition of other economic warfare controls
within the Algerian area. The adoption of this decree
represented a complete reversal of the earlier stand taken
by the French in favor of a decree which would have been
useless from the economic warfare standpoint and which
would have led only to abuses because of its failure to
provide for flexibility and an effective centralized
administration.
In this connection, & question still exists with respect
to the use of the Department's Proclaimed List in North
Africa. A cable has been sent to Treasury representatives
in North Africa designed to elicit sufficient information
upon which to base a decision whether the United States
Regraded Unclassified
288
- 76 -
Proclaimed List should be extended to North Africa. Messrs.
Aarons and Minskoff are handling this matter.
(b) Banknote Procurement for French Africa. As a
result of replies received to the cable sent to Algiers,
banknotes for West Africa and Morocco are now in the process
of manufacture or are ready for manufacture. The first
delivery of West African banknotes is expected to be made on
April 14th. Banknote paper and coloring matter ordered by
the Banque de l'Algerie has been procured by the Bureau of
Engraving and Printing and will be shipped during April.
Mr. Aarons handled this problem.
(c) Inter-Departmental meetings. Mr. Aarons and other
representatives from the Office of the Chief Counsel of
Foreign Funds Control participated in the regular meetings
of the Combined Committee for French North and West African
Affairs, assisted in the drafting of numerous cables and
served on a number of subcommittees dealing with French African
problems.
(a) Supply problems. A meeting at the Office of Lend-
Lease Administration concerning French payments for & part
of the supplies furnished by Lend-Lease to North Africa was
Regraded Unclassified
289
- 77 -
attended. The representatives of Lend-Lease and of the
Department of State indicated that it is the present policy
of this Government to maintain retail prices in North Africa
at the November 8th level and to charge the French for
supplies furnished accordingly. However, it was stated
that it is considered desirable to obtain the full landed
cost of goods wherever this proves possible without sacrificing
political or economic advantages, and it was indicated that
steps in this direction may be taken with respect to
particular commodities from time to time. The Lend-Lease
Administration requested the Treasury Department to
investigate the mechanics whereby payment in francs might
be obtained from the French and the francs converted into
dollars. A memorandum was prepared by Mr. Johnston upon
this procedure after discussion with Mr. Heffelfinger and
members of the Bureau of Accounts.
77. Problems Respecting Allied Occupation of Axis
Territory. Ten members of the Legal Division are now
engaged almost full time in confidential studies and prepara-
tion of legal material necessary to 8. full understanding of
the fiscal, economic, and banking background in eight Axis
Regraded Unclassified
290
- 78 -
and Axis-occupied countries. A series of intra-departmental
meetings were held to outline the types of problems which
are likely to confront the Allied forces upon any invasion
of Axis-held territory and to which careful study should
be given. Among the subjects being studied are:
1. Physical aspects of the area.
2. Population.
3. Government and administration.
4. Laws relating to civil economy and civil rights.
5. Laws relating to economic warfare.
6. Economy of the area.
7. Transportation and communications.
8. Currency.
9. Exchange rates and cost of living.
10. Banking.
11. Fiscal.
12. Labor.
13. Personnel.
14. Miscellaneous.
Messrs. Aarons, Minskoff, Golding, Daum, Parker, Locker,
Scott, Ackermann, Johnston, and Miss Mayer, in conjunction
with members of the administrative staffs of Foreign Funds
Control and Monetary Research are working on these matters.
A number of banking measures used by the Axis nations
in territories occupied by them were collected in order to
furnish background for measures contemplating the control of
banking in invaded territory. These decrees included:
Regraded Unclassified
291
- 79 -
1. Bank moratorium decrees. One decree declared
a 30-day moratorium on banking, and the other
extended the period of the moratorium and modified
its terms.
2. Decree describing the functions of the
Commissioner of the Bank of France. This is the
device employed for utilizing the existing
central bank and supervising its operation.
3. Decree establishing & bank of issue. This
method is useful where either there is no avail-
able central bank or other conditions make it
expedient to disregard what may be left of the
old institution.
4. Decree setting un a Bank Control Office.
5. Regulations and standards of conduct for
banks in occupied territories issued by the
German Commissioner-Administrator.
78. Latin America Problems (See February 1943 report,
item 76). (a) Argentina. The study of the Argentine
situation continued. No additional names were designated
as Special Blocked Nationals, notwithstanding the statement
of Mr. Bohan, Commercial Counsel of the Embassy in Argentina,
that the Embassy would recommend a considerable number of
names as part of the program to place pressure upon un-
desirable persons. Action with respect to the Proclaimed
List, however, is being vigorously pursued.
Regraded Unclassified
292
- 80 -
Thus far there appears to be no reaction to the plan of
export controls which the Embassy is presumably. putting into
effect in order to induce more effective cooperation from
Argentina.
After a. study had been made of all TFR-300 reports
filed in the name of persons recommended for inclusion on
the Proclaimed List, accounts of several such persons were
investigated by Messrs. Lawler and Moskovitz in conjunction
with the administrative staff. Information received from
various sources is collated from time to time and is sub-
mitted to the administrative staff for further investiga-
tion or for nomination of the persons involved for the
Proclaimed List or for designation as Special Blocked
Nationals.
(b) Licensing Problems. Proposed Public Circular
No. 18A was revised 8.S a result of further study of the
problems of establishing a standard of conduct for United
States concerns in Latin America with respect to transactions
involving blocked nationals. There was also prepared an
amendment to General License No. 53 to authorize any trans-
actions by any bank in the Generally Licensed Trade Area
Regraded Unclassified
293
- 81 -
for the account of a blocked national in that area 8.8 if
such transactions were solely for the account of such bank,
and provided that no payment or withdrawal is made from any
blocked account. In response to inquiry from the Federal
Reserve Bank of New York concerning this amendment to
General License No. 53, the view was expressed that this
amendment authorizes remittances from free accounts in the
United States to blocked nationals in the Generally Licensed
Trade Area, provided that the remittance is effected through
a bank in that area for the account of the blocked national.
A revised Circular Instruction to the Missions, dealing
with Public Circular No. 18A, the amendment to General
License No. 53, and related problems, was prepared by Messrs.
Aarons, Lawler, and Moskovitz in conjunction with a
representative of the State Department, and these documents
and instructions are presently receiving the consideration
of that Department.
(c) Special Blocked Nationals. During March eight
persons were designated as Special Blocked Nationals. In
conjunction with the administrative staff, a Confidential
Regraded Unclassified
294
- 82 -
Circular which set forth the procedure for dealing with the
definition of and distribution of lists of Special Blocked
Nationals was revised. It is planned to distribute lists
of Special Blocked Nationals only to financial Institutions
having substantial business connections with Latin America.
The question of publicity to be given to Special Blocked
Nationals and of the extent of distribution was sharply
raised by the attempted distribution of the list by an
export firm to its agencies in Latin America and by an
inquiry from a foreign traders' association concerning
Special Blocked Nationals. The administrative staff, in
conjunction with Messrs. Lawler, Moskovitz, and Miss Klein,
is engaged in working out these problems with the Board of
Economic Warfare and the State Department.
(a) Trademark Problems. Members of the Legal Division
cooperated with representatives of the State Department in
preparing instructions to all Missions concerning the
approach to be taken by the various governments of the other
American Republics to the problems presented by trademarks
owned by Axis enterprises. This also involved consideration
Regraded Unclassified
295
- 83 -
of the necessity of amending the Sterling Drug Inc.
representations in order to place Sterling Drug on an
even footing with other American enterprises in the acquisi-
tion of trademarks in the other American Republics presently
registered in the name of Axis enterprises. In this connec-
tion, Mr Lawler discussed with the State Department and
with representatives of Sterling Drug Inc. the proposals of
the Minister of Hacienda of Colombia and of the Minister
of Hacienda of Casta Rica envisaging the creation of local
government owned enterprises managed by Sterling Drug to
exploit local trademarks and patents in the pharmaceutical
field and to aid in building up 8 domestic drug business.
Final decision was not made on either matter, and our
Missions in both countries were instructed to obtain further
information.
(e) Sterling Drug Inc. - Latin American Investigation.
The report of the investigation of Sterling Drug Inc. in
the other American Republics, which was made by Mr. Moore and
Mr. Frohlich, has been completed, and the executives of the
company, together with their counsel, were called to the
Treasury Department and questioned concerning: (1) the
Regraded Unclassified
296
- 84 -
Costa Rican trademark situation; (2) the Colombian trade-
mark situation; (3) the absence of certain records in
Mexico; and (4) certain correspondence in Chile indicating
continued relations with Quimica Bayer. The ensuing action
with reference to (1) and (2) above was discussed in connec-
tion with trademark problems generally; and with reference
to (3) and (4) above, the officials of Sterling Drug Inc.
agreed to submit, in writing, complete information concerning
these items and concerning all contacts of any sort between
the employees of Sterling in South America and the employees
of I. G. Farben in South America since January 1, 1942.
The investigation in South America further showed
that A Chimica Bayer, of Brazil, furnished $900,000 in
excess of its normal requirements to the German Embassy
through surreptitious means within a period of 15 months,
during which William E. Weiss, Jr., formerly of Sterling
Drug, was 8. partner in A Chimica Bayer. A request for
further information and explanations was made of both the
Sterling officials and Mr. Weiss. Sterling officials
explained that Mr. Weiss' partnership was purely nominal
Regraded Unclassified
297
- 85 -
and that he had no active part in the business. The explana-
tion from Mr. Weiss has not yet been received. Mr. Lawler
and members of the administrative staff worked on this
matter.
(f) Insurance Problems. A request was sent to the
Mission in Peru for information concerning insurance
activities of the Atlas Insurance Company with Proclaimed
List nationals. Atlas has been insuring a number of
Proclaimed List risks without retaining any part of the
risks insured. In several cases, it has ceded the complete
risk to the Swiss Reinsurance Company. Unless a satis-
factory explanation is obtained, inclusion of the Atlas
Insurance Company on the Proclaimed List will be recom-
mended. An investigation has also been opened 88 part of
the Holborn Panamerican Corporation investigation to
determine if two Mexican insurance companies should be
included on the Proclaimed List. Mr. Kehl and members of
the administrative staff are working on these problems.
79. Hawaii (See February 1943 report, item 75). The
following developments took place with respect to the
freezing control program in Homaii:
Regraded Unclassified
298
- 86 -
(a) Revocation of currency hoarding prohibitions.
A letter was received from Mr. Tree in Honolulu, stating
that the revocation or relaxation of General Orders No. 51,
issued by the Military Governor, prohibiting the hoarding
of currency in Hawaii, was under discussion. Subsequently,
public announcement was made of the return to the civil
authorities in Hawaii of many of the functions hitherto
undertaken by the Military Governor, including the control
of banking and currency. Another letter from Tree stated
that General Orders No. 51 would be revoked, and asked
whether the Treasury Department wished to recommend to
the Civil Governor an amendment to the Regulations Relating
to Currency which would embody the substance of General
Orders No. 51. Tree was advised that the Treasury Depart-
ment did not desire to make such 8. recommendation.
(b) General License for Japanese in Hawaii. The
Department received a reply from the Secretary of War to
its letter of February 27, concerning the proposal that
treatment similar to that embodied in General License
No. 68A be accorded to Japanese subjects in Hawaii. The
Secretary of War stated that he desired to ascertain the
299
- 87 -
views of General Emmons on this question, and requested
that the Treasury representative in Hawaii discuss the
matter directly with General Emmons. A letter, which was
prepared by Mr. Johnston, was sent to Mr. Tree on March 16,
asking him to discuss this matter in full with General
Emmons or General Green.
(c) Vesting of Japanese Banks. The Department was
advised by the office of the Alien Property Custodian that
it intended either to vest or undertake the supervision of
the three Japanese banks in Hawaii at an early date. The
question of the exact procedure to be followed when this
should occur was discussed with Mr. Anderson of the office
of the Comptroller of the Currency. A tentative procedure
was then outlined, and drafts of all documents which would
be necessary were prepared by Messrs. Aarons, Alk and
Johnston. A meeting was then held between representatives
of the Treasury Department and of the office of the Alien
Property Custodian. The agreement of the office of the
Alien Property Custodian to the Treasury proposals was
obtained. Action in this matter has been delayed, however,
pending a decision by the office of the Alien Property
Regraded Unclassified
300
- 88 -
Custodian as to whether it will retain Mr. Brooks to
complete the liquidations.
(d) Internee Problems. Foreign Funds Control has
requested the Honolulu Office to handle withdrawals from
Hawaiian accounts of civilian internees interned in the
continental United States on 8. specific licensing basis,
rather than under General License H-17, issued in Hawaii
on January 18, 1943. This action was taken so as to bring
such accounts within the procedure established by Con-
fidential Circular No. 166.
(e) Securities Regulations. A letter was received from
Mr. Tree stating that an attempt is being made by certain
financial interests to secure the repeal or modification of
the Regulations Relating to Securities. Mr. Tree was
asked to keep the Department advised of any further develop-
ments in this connection. Meanwhile, consideration is
being given to the desirability of recommending a change
in the Regulations which would eliminate the requirement
that securities in Hawaii be deposited in 8. securities
custody account. The first draft of a general license
Regraded.
301
- 89 -
which would accomplish this result has been prepared by
Mr. Johnston and a meeting is to be held soon to discuss this
action.
80. Diplomatic Pouch Reports (See November 1942 report,
item 66). The British have complained informally to the
State Department concerning the "plethora of forms" which
the King's Messengers (British couriers) are required to
execute on their departure from and arrival in the United
States. Collectors of Customs have prepared such forms to
obtain information which our instructions of December 16,
1942 required to be submitted concerning all foreign
diplomatic pouches. Continuance of the reports is considered
desirable as 8. symbol of control over diplomatic pouches
and as a means of checking on errors made by Collectors of
Customs in granting diplomatic immunity in some cases.
However, in order to avoid undue delay of couriers, a.
standard form will be adopted for use in all ports. It is
contemplated that couriers carrying foreign diplomatic
pouches will be able to fill out part of the form before
arrival at the port. A draft of the form and of a circular
Regraded Unclassified
302
- 90 -
letter to Collectors of Customs explaining its use has been
prepared by Mr. Aarons and members of the administrative
staff and is under consideration.
81. Litigation Problems (See February 1943 report,
item 72). (a) Draeger Shipping Co., Inc. V. Alien Property
Custodian. In connection with the proposed appeal from the
decision of the District Court, detailed studies of the
following matters are being made: (1) The legislative
history of the Trading with the enemy Act, and particularly
section 9 thereof; (2) The legislative history of Title III
of the First War Powers Act, 1941, including the minutes
of committee meetings; (3) The minimum administrative
procedure required under the 5th Amendment; (4) The right
of judicial review of administrative decisions in the
absence of statutory provision therefor; (5) The neces-
sity of exhaustion of administrative remedies prior to
resorting to the courts.
The purpose of these studies, which are being made by
Messrs. Alk, Golding, and Smith, is to establish that the
remedy afforded by section 9 of the Trading with the enemy
303
- 91 -
Act is not applicable to action taken pursuant to section
5(b) of the Act, and that before resort to the courts is
had, it is necessary that the administrative remedies
afforded should first be exhausted.
(b) Watkins V. Morgenthau, et al (See January 1943
report, item 60(a)). A stipulation has been signed provid-
ing for the dismissal of the action 8.8 to Secretary
Morgenthau and Mr. Pehle. The Department wrote to the
attorneys for the plaintiff that if such 8. stipulation
were executed and filed, we would not require the filing
of any TFR-300 reports until after the termination of the
litigation. This action was taken because if the plaintiffs
are found to be American citizens, the Department will not
treat them as nationals of Japan and no reports will be
required. Mr. Alk handled this case
(c) Schnyder V. Frederick Draeger, et al (See
February 1943 report, item 72(c)). On appeal to the Appellate
Division from an order of Judge Carew holding that 8. good
equitable cause of action was stated, the order was reversed
on the grounds that the action W8.S at law and not
in equity and plaintiff was given ten days in which to
amend his complaint. The Department is following the case
Regraded Unclassified
304
- 92 -
closely but is not inclined to intervene as none of the
parties are questioning the validity of the directive
license issued by Treasury. The Department still has
under consideration the question whether criminal prosecu-
tion should be instituted against the company to which
the directive license was issued. Messrs. Lawler, Lesser,
and Alk are working on this case.
(a) Bank of Belgium V. Bank of France; Bank of
Poland V. Bank of France. Both the Bank of Belgium and
the Bank of Poland have commenced action against the Bank
of France based upon the alleged conversion of certain
gold deposited with the Bank of France for safekeeping.
In both cases it is claimed that the Bank of France failed
to follow the instructions of the depositing bank for the re-
delivery of the gold. The actions were instituted by
attachment of the funds of the Bank of France on deposit
with the Federal Reserve Bank of New York (a sum in excess
of $200,000,000); the Bank of France filing an answer
setting up, among other defenses, force majeure. An
order has been entered directing the Bank of France to
furnish an extensive bill of particulars of the defenses
305
- 93 -
interposed by it. An appeal from such order is now pending
in the Appellate Division.
One Jean Martial since February 1940 has been represent-
ing the Bank of France in this country, and prior to November
8, 1942 the Department had approved applications to transfer
from certain accounts of the Bank of France sufficient
funds to pay his personal and business expenses. However,
since November 8, 1942, the Department has refused to take
any action which might be construed as recognition of
Martial as the representative in this country of the Bank
of France. Mr. Martial has now asked the Department to
reconsider its action and has urged that in the interests of
the Bank of France his position as the bank's representative
should be recognized, particularly in connection with the
pending litigation. The French Military Mission has
expressed a similar point of view. Because of the political
implications involved, the views of the State Department
on this subject have been requested. Mr. Alk and members
of the administrative staff are handling the case.
Regraded Unclassified
306
- 94 -
(e) United States V. Helmut Weiner. An indictment was
returned in New York charging the defendant with violating
section 3(a) of the Trading with the enemy Act by taking
large bills from one of the German saboteurs and exchanging
them for bills of a smaller denomination. The defendant
moved to quash the indictment on the ground that under
General Ruling No. 11 such acts were no longer rendered un-
lawful. Judge Leibell held that the acts complained of were
a violation of section 3(a) and were specifically not
authorized by General Ruling No. 11. He construed paragraph
4 of the General Ruling, licensing certain acts rendered
unlawful by section 3(a), 8.S not including transactions
which fell within the definition of "trade and communication
with an enemy national", in the General Ruling. He adopted
the interpretation argued in the brief of the United States
Attorney which was filed after preliminary conferences
with this office. The decision is being studied by Messrs.
Alk and Golding in connection with the proposed revision of
General Ruling No. 11,
(f) Brown V. Morgan (See. November 1942 report, item 57;
Regraded Unclassified
307
- 95 -
September, item 48(d); April, item 58(b)). After examination
of the briefs presented to the Appellate Division of the New
York Supreme Court, it was concluded that it would be un-
necessary at this time for the Treasury Department to inter-
vene in the litigation or to present an elaborate statement
concerning the problems arising as a consequence of Mr.
Justice Eder's decision, inasmuch as the effect of
defendant's failure to apply for a Treasury license was ap-
parently not at issue in the appeal. Accordingly, the only
action taken was to issue Public Interpretation No. 11 on
March 8, which points out merely that it is Treasury Depart-
ment policy to permit any party to a transaction to apply
for a license to engage in such transaction. Thereafter
the Appellate Division reversed the lower court decision,
the opinion dealing solely with matters in which the Treasury
Department has no interest. It is expected that the
Appellate Division opinion will be appealed to the New
York Court of Appeals. Messrs. Aarons, Reeves, Alk, Golding
worked on this case.
(g) Luzon Stevedoring Company, Inc. V. Japanese s/s
Yuzan Maru et al. In connection with this lawsuit in New
Regraded Unclassified
308
- 96 -
York, the Department received 8. copy of an answer filed by
the National City Bank of New York asserting 2. lien against
so much of & fund on deposit with that bank as should be
determined by the court to be the property of Luzon Stevedor-
ing Company, Inc. A letter, which was prepared by Mr.
Johnston, was sent to Shearman and Sterling, attorneys for
the National City Bank, stating that the filing of such an
answer requires a license under General Ruling No. 10A, and
advising that no further action should be taken to assert
the lien claimed or to secure its adjudication until an
appropriate license has been obtained. A reply was received
from Shearman and Sterling stating that it was not intended
to take any such further action or to secure the adjudica-
tion of the lien claimed without first obtaining a Treasury
license.
82. Enforcement and Investigations (See February 1943
report, item 74). (a) Criminal Cases. Antonio Zavala
Valdes was indicted in the Eastern District of New York
in connection with his undeclared importation into the
United States from continental Europe of $19,500 in United
States currency on April 16, 1942. Zavala was charged with
Regraded Unclassified
309
- 97 -
violating section 35A of the Criminal Code (U.S.C., title
18, sec. 80) and section 593(b) of the Tariff Act of 1930
(U.S.C., title 19, sec. 1593(b)). Messrs. Lesser and Quint
worked on this case.
Plutarco Paz was convicted, after trial, in the United
States District Court for the District of the Canal Zone of
violating Section 5(b) of the Trading with the enemy Act,
8.S amended, in connection with his undeclared importation
into the Canal Zone from South America of $4,800 in United
States currency. The indictment was based on General
Ruling No. 5. Paz was fined $2,500, which was promptly
paid. The $4,800 are being held by the Canal Zone
authorities, and forfeiture proceedings in connection there-
with have been instituted.
A group of persons was arrested in the Northern District
of Illinois on 8. charge of conspiracy to violate the Trading
with the enemy Act, as amended, in connection with an
alleged scheme to export gold bullion in violation of
Section 1C of Executive Order No. 8389, 8.S amended. It is
alleged that the prisoners planned to deliver the gold to a
German submarine off the coast of Massachusetts. The
Regraded Unclassified
310
- 98 -
investigatory work was done by the Federal Bureau of Investi-
gation and the Secret Service. Foreign Funds Control was
consulted, however, by the Criminal Division of the Depart-
ment of Justice before the arrests were made. Mr. Lesser
is working on this.
(b) Investigations. At the request of the House Sub-
Committee on steel shortages, an investigation was instituted
by Messrs. Lesser and Schwartz concerning the Nirosta
Corporation, a patent holding company in which Krupp and
certain American steel companies were stockholders and which
is now vested by the Alien Property Custodian.
A field investigation concerning Lazard Freres & Co., and
Capital Maurice Boyer, United States representative of the
Banque de Paris et des Pays Bas, has been concluded by Mr.
Lesser and formal interrogation will be conducted.
A final report of the Topken investigation is being
prepared by Messrs. Lesser and Schwartz.
A final report of the Wegener investigation has been
completed by Messrs. Lesser and Carolan.
The investigation of Associated Minerals & Metals was
closed, and discussions were conducted with counsel for the
311
- 99 -
company and with the representatives of Senator Guffey. In
consequence of the findings of the investigation, the applica-
tion of the company to be unblocked was denied. Messrs.
Lawler and Kutash in conjunction with the administrative
staff handled this.
The investigation of the Ore & Chemical Company was con-
cluded and various conferences were held with representatives
of the company, the shareholders and the Alien Property
Custodian. The Alien Property Custodian's office stated
that the enterprises would be vested provided that 8. Treasury
license (permitting the sale from the "Swiss" holding company
to the three American shareholders) were removed from the
case. Documents were prepared by Messrs. Lawler and Warner
to annul this license, which was granted on September 19,
1941, on the basis of misrepresentation and failure to dis-
close material facts.
Mr. Lawler had a lengthy conference with Mr. Otto
Bemberg concerning ownership and relations between the
Bemberg enterprises in South America and the Bemberg enter-
prises in France.
312
- 100 -
A study of the Ciba, Sandoz and Geigy matter was contin-
ued by Mr. Lawler and various conferences were held with the
representatives of the company and the Swiss Legation con-
cerning remittances to Sandoz, Basle, for certain strategic
materials sold for its account in the United States.
Messrs. Lawler and Kutash continued the studies of the
Lanova Corporation; Charles Englehard and the twelve cor-
porations controlled by him (Englehard, whose connections
and conduct have brought him under grave suspicion, controls
the production in the United States of the highly strategic
material, platinum, and is generally described as the
"Platinum King" of America. The results of this study were
forwarded to the Alien Property Custodian, who has vested
a portion of the enterprises and is examining the rest,
and were also transmitted to the Board of Economic Warfare
and the Federal Bureau of Investigation); and Garcia &
Diaz, exporters and ships' agents, who are under suspicion
of subversive activity.
83. License Problems (See February 1943 report,
item 77). (a) Policy with Respect to the Withdrawal, Release
or other Disposition of Blocked Assets of Enemy and Enemy-
313
- 101 -
Occupied Countries and their Inhabitants. Many questions
have arisen with respect to the policy to be followed as
to the release of blocked assets of persons within enemy
and enemy-occupied countries. Many applications were
presented, based upon judgments entered in the United
States or upon documents executed in enemy territory.
The Treasury has consistently denied applications
for the release of such funds except under unusual
circumstances such as when a trust clearly was established
in favor of the applicant. However, the reasons motivating
the Department in taking such action were ordinarily not
disclosed. The Department has now decided that the
general public should be advised of the policy of the
Foreign Funds Control in this respect and the underlying
reasons. Conferences have been held with members of the
administrative staff which have resulted in clearing up
many confusing points pertaining to such policies. A
press release describing in detail the policy which is
being adhered to and the reasons therefor is being
prepared by Messrs. Lawler, Lesser, Reeves, Alk, Kehl,
Moskovitz and members of the administrative staff.
Regraded Unclassified
314
- 102 -
Many letters have been received inquiring why appli-
cations to release or withdraw blocked funds or to pay
judgments have been denied. An effort is being made to
answer such letters by assigning the reasons actuating the
Department in making such decisions. These letters are
initially prepared in the legal division by Messrs. Alk,
Kehl and others, and are routed through the administrative
staff. In addition, an effort is being made to have
members of the legal and administrative staffs present
at all important conferences with applicants or their
attorneys, 80 that persons coming to Washington for con-
ferences may know that their applications are receiving
prompt and careful attention. This policy both with
respect to letters and conferences appears to be working
successfully.
(b) Rohner-Gehrig Company (Hungarian Leather) (See
January 1943 report, item 65(d)). Rohner-Gehrig Company
has been acting as agent for certain Hungarian leather
interests and from time to time filed applications for the
payment of certain fees and expenses, the last application
315
- 103 -
being for certain attorneys' fees. The Swedish Legation
(Department of Hungarian Interests) complained to the
Department that the payments made by Rohner-Gehrig Company
were unauthorized. After conferences with the State
Department, it was decided to approve the application, after
the Swedish Legation had a reasonable opportunity to call
to the attention of the National City Bank (the depositary
of the funds) that Rohner-Gehrig Company had no authority
to draw upon the account. In view of the fact that
litigation may ensue, a letter was written to all the
parties calling attention to the fact that the Treasury
Department in issuing licenses did not pass upon questions
of private rights and liabilities, that the licenses were
merely permissive and removed only the prohibitions imposed
by the Trading with the enemy Act. Messrs. Alk, Kehl
worked on this.
(c) Licenses in connection with certifications under
section 25(b) of the Federal Reserve Act. The State Depart-
ment consented to the inclusion in certifications under
section 25(b) of the Federal Reserve Act, as amended, and in
Treasury licenses issued with respect to the accounts of
316
- 104 -
foreign governments and foreign central banks, of language
clearly indicating that the proceeds of investments and
reinvestments of these accounts are also certified and
licensed. This will reduce the number of certifications
and the number of licenses which will have to be issued.
Messrs. Aarons and Brenner handled this matter.
(a) Transfer of Earmarked Gold. The Bank for Interna-
tional Settlements asked the Federal Reserve Bank of New
York what its reaction would be if it were notified of an
agreement that the Bank for International Settlements would
transfer to the Swiss National Bank certain gold held on
earmark for it by the Federal Reserve Bank whenever
appropriate licenses were issued under the freezing control
and the gold laws. It was felt that this was an effort to
discharge a. Swiss franc obligation with dollar assets and
that it clearly came within the scope of General Ruling No. 12.
The Federal Reserve Bank was advised that it should inform
the Bank for International Settlements that if it received
notice of such an arrangement, it would reply that the
contract was void under General Ruling No. 12 and the
Regraded Unclassified
317
- 105 -
applicable provisions of the gold laws. Messrs. Aarons and
Brenner worked on this matter.
(e) Licenses involving ad hoc blocked nationals. The
applications of E. K. Halbach and F. W. von Meister for
unblocking were denied and all interested parties were noti-
fied of the decision reached. Mr. Lawler in conjunction
with Mr. O'Connell and members of the administrative staff
worked on this matter.
Mr. Lawler held discussions with representatives of the
Chilean Embassy and the National City Bank of New York con-
cerning the application for unblocking the accounts of
Arturo Lopez Perez and the sale of the Sudam properties. On
the basis of information supplied by our Mission in Buenos
Aires, it was decided to deny both applications.
(f) Reinhart Cotton Company. A reply to a question
raised by the Swiss Legation was drafted by Messrs. Lawler
and Kutash, dealing with the problem of excluding holders
of business enterprises operating licenses from the benefit
of the general license applicable to the country of which
the licensee is a national.
Regraded Unclassified
318
- 106 -
(g) General License re Living Expenses. Às 8. result
of study of reports under General License No. 11 and of
consideration of the problem by the Enforcement Committee,
draft of a revision of this general license is under con-
sideration by Messrs. Moskovitz, Cassoday and Miss Klein
so as to limit the amount which any one blocked national
and his family may withdraw from 8. blocked account to
$500 per month and to limit the withdrawals from any one
blocked account to the same figure.
(h) Miscellaneous. Conferences were held and an approval
wire was prepared on an application involving the payment
of fees and the transfer of funds from one bank to another
in connection with the sale of the ship Arena by 8. blocked
Panamanian corporation to the Irish Free State Government.
Miss Klein and members of the administrative staff worked
on this.
A final report is being prepared by Messrs. Lesser and
Minnick on the application of H. Peter Roessiger to be
restored to the privileges of General License No. 42.
Roessiger was formerly the United States representative of
the French dyestuffs combine.
Regraded Unclassified
319
- 107 -
Mr. Lesser held conferences with counsel on the appli-
cations of Jule and Suzanne Levee and David M. Van Buren
to be restored to the privileges of General License No. 42.
84. Hearings (See January 1943 report, item 74).
Hearings were conducted on several applications, two of
which were under General Ruling No. 13 and two for generally
licensed status. Messrs. Cassoday and Kutash participated
in these hearings.
(a) Ferro Metal & Chemical Corporation. A hearing
was conducted on the application for unblocking filed by
the Ferro Metal & Mineral Corporation, dealing in manganese
and other ores. The matter involves the problem of owner-
ship of a blocked domestic corporation by 8. Swedish cor-
poration, which in turn is alleged to be owned by &
generally licensed national within the United States.
(b) Dr. George J. Farber. A General Ruling No. 13
hearing was conducted on the application for unblocking
filed by Dr. Farber, radiologist at John Hopkins and at
one time President of the Baltimore Chapter of the Deutsche-
Americanische Berufsgenossenschaft. Denaturalization
proceedings against Dr. Farber have been authorized by the
Department of Justice.
Regraded Unclassified
320
- 108 -
(c) Dr. Julius Weltzien. A hearing was conducted on
the application for unblocking filed by Dr. Weltzien, former
president of the Schering Corporation of Bloomfield, New
Jersey, and before that, president of Schering A. G.,
Berlin, Germany.
(a) Herman Kollmar. A hearing was held on Herman
Kollmar's application to have his accounts unblocked.
Kollmar was formerly the Berlin representative of the
Chemical Bank & Trust Co. of New York.
(e) Jacob Cohen. A hearing was held on Jacob S.
Cohen's application to be restored to the privileges of
General License No. 42 by Messrs. Lesser and Cook.
85. Securities (See February 1942 report, item 78).
A proposed public circular has been drafted by Messrs.
Lesser and Ackermann which would prohibit sales of
securities out of omnibus accounts or the depositing of
securities into omnibus accounts unless the depositing bank
either has disclosed the identity of the beneficial owner,
or has certified that such beneficial owner is of the
same nationality as such bank and has agreed to disclose
the identity of the beneficial owner, on request, to the
Regraded Unclassified
321
- 109 -
United States mission. Exceptions are proposed for trans-
actions effected under the neutral general licenses or
pursuant to powers of attorney issued to the bank of deposit
prior to March 18, 1942.
86. Currency Control. Discussions were held with
representatives of the British Embassy and the State Depart-
ment concerning securities and currency control with respect
to passengers between the Western Hemisphere and Europe.
British regulations for passengers west bound from Europe to
the Western Hemisphere prohibit the taking of any securities
and of all except small amounts of currency. A declaration
to the effect that no prohibited securities or currency are
carried is presently required to be executed before a
British consular officer. It has been proposed that
passengers destined for the United States execute such
declarations before a United States officer and also that
the securities regulations be relaxed so 8.S to permit
persons to mail the securities to addressees in the United
Kingdom or the United States, where they would be subject
to local controls. Discussions were also held concerning
contemplated control of securities and currency carried
322
- 110 -
by passengers going from the Western Hemisphere to Europe
and passing through British or American ports. Mrs. Rogan
is working on this matter.
A study was made by Mr. Moskovitz of the decrees of the
Latin American republics relating to currency control and a
file was prepared containing the provisions of the decrees
of several countries having the better types of control.
A form of decree was prepared which was a. synthesis of the
best features of these decrees.
Mr. Moskovitz considered a proposed airgram to the
Missions, in conjunction with the Administrative Staff,
requesting information concerning the desirability of setting
& date after which no currency would be accepted by the
Treasury Department on a collection basis.
87. Patents Problems (See February 1943 report, item 85).
Upon request, the Lend-Lease Administration was presented with
drafts of a special patent regulation designed to assist the
transfer, under Lend-Lease agreements with Great Britain,
of British patent rights owned by persons in the United
States. The regulation, issued under Section 5(b), would
Regraded Unclassified
323
- 111 -
prohibit the transfer to any person outside of the United
States of rights with respect to British patents but provides
that such rights may be acquired by the United States for
Lend-Lease transmission to Great Britain. Mr. Kehl worked
on this matter.
88. Trade and Communication with Enemy Nationals (See
February 1943 report, item 79). The study of specific
problems and violations arising in connection with trans-
actions by American concerns in the European neutral
countries with enemy nationals has been continued by Messrs.
Lawler and Moskovitz. Letters involving these problems were
sent to General Motors Corporation, Acheson Grafite Company
and Eastman Kodak. After conferences were held with
representatives of General Motors Corporation, that concern
agreed to instruct its subsidiaries in Sweden and Switzerland
and its agency in Finland not to engage in any transaction
with an enemy national, to comply with General Ruling No. 11
in all respects as 8. standard of conduct, and to consult with
and obtain the advice of our Missions.
Regraded Unclassified
324
- 112 -
An explanation was requested of the Standard Oil Company
of New Jersey concerning insurance on oil sent to Spain,
effected with Hispano Americana de Seguros, a Spanish
insurance company which is presently being investigated 8.5
2. possible Axis cloak. Mr. Kehl is working on this.
Messrs. Lawler and Moskovitz are considering the proposal
by the State Department to revise the licensing practice
with respect to transactions by American firms in the
European neutral countries with firms in enemy territory 80
as to repose greater authority in the London Mission. Also
a study is being made, particularly with respect to Switzerland
and Sweden, of the necessity and advisability of retaining
licensing authority in Washington to be handled through the
parent offices of the American firms involved so 8.S to
avoid political and local repercussions. The study also
involves consideration of the pertinent local law.
The Circular Instruction to the Missions dealing with
the handling and processing of applications involving enemy
nationals who are not also proclaimed list nationals has
been revised by Messrs. Lawler, Aarons and Moskovitz after
conference with a representative of the State Department.
Regraded Unclassified
325
- 113 -
It delegates authority to the Missions to act in certain
types of cases and outlines those in which action may be
taken only in Washington.
89. Control of Traffic in Financial Instruments. Further
developments took place in the program contemplating control
of traffic in checks, drafts, bills of exchange, and
promissory notes which have been within various blocked
countries. Discussions were held with the representatives
of the State Department, Office of Censorship, and the
British Embassy concerning the General Ruling and the joint
Censorship Directive to be issued by the United States and
British Offices of Censorship. Mr. Aarons and Mrs. Rogan
cooperated with the members of the administrative staff in
studying end revising instructions to be sent by the State
Department to the United States Missions abroad, and in 8.
memorandum to the State Department explaining the purposes
of the General Ruling. Further drafting work is being done
in connection with the press release and customs instruc-
tions which will accompany the General Ruling.
90. Property Census Reports (See February 1943
report, item 87). Continued drafting work was done on
Regraded Unclassified
326
- 114 -
regulations, forms and instructions with respect to TFR-500,
and meetings held with representatives of various industry
groups, including bankers, brokers, importers, exporters,
insurance representatives, and railroads by Messrs. Arnold
and Reeves with representatives of Monetary Research
Division.
91. Alien Property Custodian Relations (See February
1943 report, item 86). Members of the administrative staff
and Messrs. Lawler and Warner worked on a. project looking
toward the solution of pending inter-custodian problems,
with particular reference to the problem of securities
physically located in one country and issued by a corpora-
tion domiciled in another country.
Conferences were held with representatives of the
Office of the Alien Property Custodian relative to the
procedure to be followed by the Treasury Department in
releasing control (1) of special accounts arising under
Alien Property Custodian General Order No. 11, in connec-
tion with patents of blocked nationals and (2) of interests
vested by the Custodian in estates in which there are
both enemy and non-enemy blocked interests. A proposed
Regraded Unclassified
327
- 115 -
amendment to Confidential Circular No. 180 relative to the
latter problem was prepared by Mr. Cassoday and Miss Klein.
Mr. Lawler held conferences with representatives of
the Alien Property Custodian and the Office of Special
Service who have under consideration the reopening of the
Silesian-American Corporation case, involving 8. loan of
$2,700,000 from IKAP to the Silesian-American Corporation.
92. Practice of Attorneys Before Foreign Funds Control
(See January 1943 report, item 65). A circular was prepared
by Messrs. Aarons and Brenner for distribution in the Federal
Reserve Banks and in Washington with respect to the practice
of attorneys and other representatives before Foreign Funds
Control. It instructs all officials and employees not to
recognize any attorney who has been disbarred from practice
before the Treasury Department.
93. Dutch Decrees (See January 1943 report, item 69).
Mr. Minskoff conferred with Mr. Hackworth of State Depart-
ment concerning the course to be adopted in connection with
the two recent Dutch Decrees. Various problems were dis-
cussed incidental to the type of recognition that should
be extended to such Decrees and whether the means for
328
- 116 -
extending the recognition should also be a vehicle for
clarifying the State Department's position on the original
Decree of May 24, 1940. Also considered were the problems
involved in dealing with requisitioned property of Dutch
nationals. A memorandum was written setting forth at
length the nature and subject matter of these discussions.
94. Miscellaneous Studies, Memoranda and Legal Problems
(See February 1943 report, item.80). (a) Post-war (See
February 1943 report, item 84). Continued consideration is
being given to international financial and economic post-war
problems.
(b) General Ruling No. 11 revision. Further drafting
work has been done and memoranda prepared by Messrs. Alk,
Moskovitz and Daum with respect to revision of General
Ruling No. 11.
(c) Standards of conduct. A public interpretation
and an amendment to General Ruling No. 4 were drafted by
Messrs. Cassoday, Locker, and Miss Klein, setting forth the
standard of conduct to be followed by persons dealing with
nationals of blocked countries resident in the United States.
329
- 117 -
In connection with this program, 8. study has been made by
Messrs. Lesser and Cook of administrative precedents and
legal sources 8.8 to the detail properly to be employed in
advising the public what steps need be taken or omitted in
order to avoid violating an ultimate prohibition.
(a) Preferences. In connection with the reconsideration
of the Department's "preference policy, If 8. study has been
made by Messrs. Lesser and Cook concerning the rights of
domestic creditors with respect to property of absent
debtors.
(e) Foreign Exchange. The study of applications for
licenses to make remittances to or receive remittances
from Switzerland in connection with current foreign exchange
problems is being continued by Messrs. Lesser and Carolan.
(f) Powers of Investigation and Enforcement under
Section 5(b) of the Trading with the enemy Act. Mr. Johnston
prepared a memorandum discussing in detail the subpoena
power and the power to conduct searches and seizures in
connection with the enforcement of section 5(b), as well
as various other legal and administrative avenues which are
available for this purpose.
Regraded Unclassified
330
- 118 -
(g) Form TFR-300 - Disclosure of Information. A
memorandum, dealing with the considerations involved in dis-
closing to the Dutch Government information contained on
Form TFR-300 regarding their nationals was prepared. by
Mr. Minskoff. Among the problems discussed were such
items as the legal liability likely to be incurred as a
result of such disclosure, the moral obligation owing to
the persons who risked much in order to comply with our
Order, the good will features of the problem, the Depart-
ment's past history in dealing with other similar requests,
the attitude of the British in handling the analogous
situation with respect to information secured by them, the
practical difficulties which beset the furnishing of such
information, particularly at the present time, and the
grounds for distinguishing the Dutch request from that of
the United Kingdom. On the basis of the analysis of the
various factors, the conclusion is reached that it would
not be advisable to comply with the request of the Dutch
Government that such information be made available to it.
(h) Dubonnet Interests. Plans for working out a
legal basis for the operations of the Dubonnet interests in
331
- 119 -
this country, both with respect to the Executive Order and
various state statutes with which they must comply, were
discussed by the representatives of the Dubonnet interests
and Mr. Lawler and Miss Klein.
(i) Rulings. Legal rulings on 8. variety of questions
were made, including the following:
A license is not necessary in order for 8. blocked cor-
poration to submit 8. plan of reorganization under Chapter 10
of the National Bankruptcy Act;
Government agencies making payments to firms in the
United States who are doing business on behalf of blocked
nationals need not inquire whether such firms have a
license to receive payment on behalf of such blocked
nationals;
The transmission of a power of attorney to Sweden on
behalf of an American heir of 8. Swedish estate may not be
effected pursuant to certification under General License
No. 49;
The proceeds of the redemption of United States Savings
Bonds registered in the name of a husband and wife, only
332
- 120 -
one of whom is a blocked national, should be deposited in an
appropriate blocked account, regardless of whether the
request for redemption is made by the spouse who is not
blocked;
The payment into a blocked account of the proceeds of
the redemption of bonds purchased in Hawaii but not bearing
the restrictive phrase "Subject to Executive Order No. 8389,
as amended" is not required by the mere fact that the
registered owners are Japanese nationals residing in 8.
war relocation center and are the owners of other bonds
bearing the restrictive phrase;
In view of General License No. 37, banking institutions
in the United States may continue to make all payments,
transfers and withdrawals from accounts of service men who
are reported missing or captured; and
No application for unblocking or request for 8. hearing
under General Ruling No. 13 will be entertained until
necessary TFR-300 reports have been filed.
Regraded Unclassified
333
- 121 -
95. Silver (See February 1943 report, item 89).
The War Production Board requested the views of the Treasury
Department with respect to the use of Treasury silver by
the Defense Plant Corporation in overhead high-voltage
power lines. After determining that such power lines
were a part of the plants of power companies, the Department
informed the War Production Board and the Defense Plant
Corporation that this use was within the scope of the
contract of May 6, 1942.
A contract was entered into between the Secretary of
the Treasury and the Metals Reserve Company which provides
for purchases by the Treasury for the account of the Metals
Reserve Company of silver contained in gold deposits. Às
8. result, the depositors will obtain the market price for
their silver but the Treasury will continue to quote 8.
price well below the market in order to discourage the sale
of silver to it. In addition, the stock pile for critical
war uses will be augmented by approximately 1,000,000 ounces
per year.
In its efforts to obtain an appropriation of $4,000,000,
to cover the accounting loss which will be sustained when
334
- 122 -
uncurrent silver dollars are melted, the Bureau of the Mint
met with resistance from the Senate Appropriations Committee.
In accordance with the Committee's suggestion, an amendment
was drafted which, instead of appropriating funds, provided
that the loss should be charged against the seigniorage
obtained when this material is coined into subsidiary silver
coin. Messrs. Aarons and Brenner worked on these matters.
96. Chinese Stabilization Agreement. The Stabiliza-
tion Board of China found that it had acquired larger
dollar balances under the Stabilization Agreement than it
needed. Consequently it wished to convert a portion of
these dollars into yuan but only if by doing so it would
not reduce the total amount of dollars which would be
available in the future. The Board was informed that the
Treasury felt that such a conversion would not reduce the
amount available in the future. It was also suggested
that the Board follow this procedure in the future since
it must pay interest to the Treasury on yuan balances
which the Treasury acquires in return for the dollars, end
this interest exceeds the earning which the Board can
obtain on its surplus dollar balances. Messrs. Aarons and
Brenner handled this matter.
334
- 122 -
uncurrent silver dollars are melted, the Bureau of the Mint
met with resistance from the Senate Appropriations Committee.
In accordance with the Committee's suggestion, an amendment
was drafted which, instead of appropriating funds, provided
that the loss should be charged against the seigniorage
obtained when this material is coined into subsidiary silver
coin. Messrs. Aarons and Brenner worked on these matters.
96. Chinese Stabilization Agreement. The Stabiliza-
tion Board of China found that it had acquired larger
dollar balances under the Stabilization Agreement than it
needed. Consequently it wished to convert a portion of
these dollars into yuan but only if by doing 80 it would
not reduce the total amount of dollars which would be
available in the future. The Board was informed that the
Treasury felt that such a conversion would not reduce the
amount available in the future. It was also suggested
that the Board follow this procedure in the future since
it must pay interest to the Treasury on yuan balances
which the Treasury acquires in return for the dollars, and
this interest exceeds the earning which the Board can
obtain on its surplus dollar balances. Messrs. Aarons and
Brenner handled this matter.
335
- 123 -
The following work was done under the supervision of
Mr. Klaus, Special Assistant to the General Counsel:
97. Investigation of Subversive Tax-Exempt Organiza-
tions. (See February 1943 report, item 9(a), page 120). The
preliminary work in Palo Alto on the America First Committee
has been completed and reports have been submitted, both on
the financial and other aspects of the America First
organization. Further instructions have been requested and
the proposal made that the field investigation, for which the
Palo Alto investigation was 8. necessary preliminary step,
should be undertaken in Chicago, New York, Philadelphia and
Washington, on which 8. considerable number of leads have
been found.
A study is being made of the reports and various docu-
ments, mostly in German, sent in for translation and analysis
from Chicago, New York, Philadelphia, Baltimore and Cleveland,
where more is being learned about the pattern of German
organizations and their relations to the Auslands Institute
in Stuttgart and the Volksbund fuer das Deutschtum in
Ausland in Berlin. Additional suspect American organizations
336
- 124 -
are under study, such as -- the National Gentile League
(Donald Shea), which has a tax exemption; Technocracy (for
which an application for exemption is pending); and the
Anglo-Saxon Federation. Mr. Klaus conducted oral examina-
tions of Fritz 0. Evers in Baltimore (connected with the
German cultural work) and Konrad Engelhardt in New York
(head of the International Geneva Association, consisting
largely of German waiters and hotel end restaurant employees).
98. Internal Security Liaison. Material derived from
studies has been distributed to other agencies; in particular,
the names of members of the Technologists Association who
are employed in the Federal Government were turned over to
the Attorney General. A study was completed of the employ-
ment files of the Board of Trade for German-American
Commerce, an organization actually controlled by the German
Government and the I. G. Farben, and incriminating letters
have been photostated and turned over to the FBI. Mr. Klaus
has acted. as an intermediary in turning over to the FBI,
OSS, BEW and other agencies various materials under study
in this Department which may be of importance in the
337
- 125 -
preparation of criminal cases or for studies in aid of
proposed military campaigns. Conferences were had with
representatives of the Department of Justice concerning
the making of criminal cases based on the activities in
this country of the Volksbund fuer das Deutschtum in
Ausland and the Auslands Institute.
99. Miscellaneous. A study was made for Mr. Harry
White of "Clarinada," an anti-American, pro-Axis sheet
published in Argentina. Close liaison was continued in
the interchange of intelligence information with agencies
such 8.8 OSS, FBI, MID, ONI, State and the War Policies Unit
of the Department of Justice. Thirteen persons from
Foreign Funds Control were agreed upon to have direct
access to confidential materials for use in Foreign Funds
investigations; this continues a practice which has been
in existence since the beginning of the exercise of freezing
controls against Axis nationals. In addition, Mr. Klaus has
continued to send to Foreign Funds suggestions regarding
the advisability of blocking individuals and enterprises
as Axis nationals.
338
TREASURY department
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE May 3, 1943
TO
FROM
Mr. Hase
Secretary all Morgenthau
Subject: The Business Situation,
Week /ending May 1, 1943.
Summary
Wage control: Refusal of the United Mine Workers to submit
to the jurisdiction of the WLB in demands for higher wages
is the most conspicuous but by no means the only evidence
of labor unrest over the workings of the hold-the-line
program. As an adjunct of wage control, the CIO, the AFL
and the railroad brotherhoods have demanded that living
costs be rolled back to the levels prevailing on May 15,
1942.
Price control: Although OPA's newly announced 4-point program
for price control 1s largely a reiteration of previously-
stated objectives, the roll back of prices of meats,
vegetables and coffee would represent a substantial
achievement if it can be effectively accomplished.
Commodity prices: Basic commodity prices continued to move
in a narrow range last week, although prices for hogs and
steers dropped for the fourth consecutive week. During
the month ended April 15, prices received by farmers rose
more rapidly than prices paid, and as a result farm prices
averaged 114 percent of parity as compared with 113 percent
on March 15.
Coal situation: Bituminous coal production thus far in 1943
has run about 7 percent above last year's levels, and
nation-wide stocks are estimated at about one month's
supply. However, due to uneven distribution of stocks,
cessation of coal output would force many plants out of
production much sooner, and some curtailments would be
necessary very quickly. Thus it is reported that production
at the Pittsburgh and Youngstown plants of the Carnegie-
Illinois Steel Company would show as much as a 10 percent
drop within 3 or 4 days after cessation of coal mining
operations.
Regraded Unclassified
339
- 2 -
Wage stabilization crisis nears
Increasing discontent of labor groups over the working
of the hold-the-line program rapidly moved toward a climax
last week, as refusal of the United Mine Workers to submit
to the jurisdiction of the WLB precipitated a temporary shut-
down of most of the nation's coal mines. In communicating its
attitude to the President, the UMW claimed that "the National
War Labor Board 1s circumscribed and prevented from making a
decision upon the basis of equity and justice by the policy
of restricting every decision to the basis of the Little Steel
formula." On this basis the UMW contends that all their
requests in the wage controversy would be denied.
While the coal strike overshadowed other developments,
discontent with wage and price stabilization policies was by
no means confined to the United Mine Workers segment of
organized labor. The CIO, the AFL and the railroad brother-
nooda jointly demanded last week that the Government immediately
put into effect a vigorous price policy 80 that living costs
can be rolled back to the levels prevailing on May 15, 1942.
Earlier, the United Automobile Workers, in a public advertisement,
contended that the OPA is failing to do its job, and advocated
the rolling back of prices to September 15, 1942. In addition
to other steps, the UAW also wants a restoration of WLB's
power to correct wage inequalities, and an equalization of wage
rates to avoid the need for job freezing.
OPA promises tough price policy
In an obvious effort to placate the demands of labor
groups and to rebut contentions of the striking coal miners,
Price Administrator Brown near the end of the week launched a
4-point program to control, and in many instances roll back,
the cost of living. Briefly, the program's objectives are as
follows:
1. To extend price control to every important commodity.
2. To roll back prices which have got out of hand. Among
others, the prices of meats, fresh and canned vegetables
and coffee will be rolled back.
3. To establish dollars-and-cents prices for foods.
4. To prosecute chiselers, racketeers and black market
operators.
While these objectives are largely a reiteration of previously
stated aims, the specifically-mentioned intention to roll back
prices of meats, vegetables and ooffee represents an advance which,
if accomplished, should go far toward quieting discontent over
soaring living costs.
Regraded Unclassified
340
- 3 -
In answer to claims of the striking coal miners, the
Price Administrator pointed out that in January of this year
average hourly earnings of bituminous coal miners were 22 per-
cent above August 1939 levels, while weekly earnings, in
reflection of longer hours worked, were 53 percent higher.
In contrast, the cost of living as measured by BLS data rose
only 22 percent during the same period. While it was admitted
that the BLS index understates the rise in living costs, the
Price Administrator contended that the miner's weekly pay
envelope in January would still buy 25 percent more goods
than in the summer of 1939.
No mention was made of the course of living costs and
coal miners' wage rates during the January 1941 - May 1942
period covered by the "Little Steel" wage formula. However,
it will be remembered that, following a strike in April 1941,
the basic daily wage for bituminous coal miners in the
northern Appalachian area was increased $1 per day to bring
the basic rate up to $7 per day, and miners in the southern
area received an even larger increase. These increases more
than made up for the 15 percent rise in living costs during
the period.
Coal strike would seriously endanger war production
Aside from the implications of the coal-wage controversy
in the struggle against inflation, if the coal strike should
be resumed after the 15-day truce it would gravely threaten
the war production program. Fortunately, coal production
in recent months has been running at a very high level, with
bituminous coal output since the beginning of the year
totalling about 7 percent higher than in the corresponding
period a year ago. (See Chart 1.) Nation-wide coal stocks
above ground at the present time are estimated to represent
about 30 days supply, although numerous plants, particularly
smaller ones, will exhaust their coal supplies in a much
shorter time.
One of the first and most important effects of a
stoppage of coal mining would be to cause a drop in steel
operations. While the U. S. Steel Corporation is reported
to have enough coal for 2 or 3 weeks, it 18 said that the
Pittsburgh and Youngstown plants of its Carnegie-Illinois
subsidiary would show as much as a 10 percent drop in
production within 3 or 4 days after suspension of coal mining
operations. At present unusually high levels of operation,
the steel industry requires large supplies of beehive coke.
These coke ovens are fed directly from the mines, 60 that
suspension of mining operations would be almost immediately
reflected in beehive output.
341
- 4 -
The threat to steel operations comes at a time when
steel output is running at an unprecedented rate. Steel
operations last week were scheduled to rise to 100 percent
of capacity for the first time this year. On a tonnage basis
this is the highest production rate ever attained in the
industry. Reference to Chart 2 will show that the coal
strike in April 1941 caused the steel operating rate to
drop 5 points in the course of the month.
Commodity prices ease
Commodity prices in the wholesale markets have recently
shown some evidence of stability. The BLS price index of
28 basic commodities has shown no important change since
early March, with the more recent tendency slightly downward.
(See Chart 3.) The BLS all-commodity index has held
practically unchanged in the last 4 weeks reported. Prices
in the commodity markets moved in a narrow range last week
and trading was quiet, with the index of 28 basic commodities
showing a loss of 0.1 percent. A decline of 1.6 percent in
the price of steers and 1.3 percent in hog prices were the
only noticeable changes.
Hog and steer prices have now declined for the fourth
consecutive week, or since Food Administrator Davis first
warned that ceilings on live hogs would be imposed if hog
prices did not reach a level in line with the ceiling price
on pork. At the end of last week the BLS reported hog prices
at $14.70 per hundredweight, representing a drop of $1.25
from the high reached at the beginning of April, but still
20 to 45 cents too high in relation to the pork ceiling.
Farm prices higher in April
Sharp price increases in the fruit group continued to
lead the rise in farm prices for all groups of farm products
in the month ending April 15, the Department of Agriculture
reported last week. (See Chart 4.) Largely 8.8 a result of a
seasonal advance in the price of apples the index of fruit
prices rose almost 10 percent during the month, and at 189
was 60 percent higher than & year earlier. Grain prices rose
moderately, dominated by the upward revision in the ceiling
price for corn. Although egg production in March was at
record levels, egg prices declined only fractionally from
mid-March to mid-April, and a seasonal increase in the price
of chickens raised the index of chickens and eggs over 1 per-
cent.
The only group index to deoline during the month was
truck crops, but this index still remained about 84 percent
Regraded Unclassified
342
- 5 -
above that of April 1942. In the miscellaneous group,
substantial gains were registered in the prices of
potatoes, sweet potatoes, flaxseed, wool, beans, and
peanuts.
The combined index of prices received by farmers rose
nearly 2 percent during the month ending April 15, and 18
now more than 23 percent higher than last year. Since the
gradual advance in prices paid by farmers (including interest
and taxes) lifted the index less than 1 percent last month,
farm product prices averaged 114 percent of parity as
compared with 113 percent in the preceding month and 99 per-
cent in April 1942. (See Chart 5.)
Cold weather damages crops in East
Abnormally low temperatures over the eastern half of
the country during the past few weeks have damaged early
fruit and truck crops in that area, delayed growth, and
hindered farm work, according to the latest reports of the
Weather Bureau. Frosts have caused serious damage to truck
crops in most sections from the Lake region to the Gulf
States, particularly affecting beans, tomatoes, potatoes,
and other hardy truok crops in the area from the Carolinas
northward to the lower Ohio Valley. The recent freeze
during the blooming season has largely destroyed the early
fruit crop in the Central Appalachian region, and early
apples were damaged considerably. Moreover, the cold
weather in the eastern portion of the country has delayed
corn planting and has retarded the growth of winter wheat
and the greening of pastures in that area.
On the other hand, conditions in the Great Plains
region during the past few weeks have been generally favorable
for growth, with recent temperatures above normal. West of
the Rockies the weather recently has been almost ideal for
all agricultural operations, especially in the Pacific area
where the season is well advanced and general prospects are
unusually bright. Winter wheat had made good progress in
the area west of the Mississippi, and corn planting has made
good progress in that area. Pasture conditions are largely
favorable in the west, except in the southwest where rain
is urgently needed.
Britain expands agricultural production
The success of British agriculture in supplying war-
time food demands is indicated by large increases in the
production of staple foods, and by shifts in production to
Regraded Unclassified
343
- 6 -
those foods which will save the largest amounts of essential
shipping space. Despite a decline of nearly 8,000,000 tons
in annual imports of feedstuffs, milk production has in-
creased over pre-war levels. The production of potatoes
and sugar beets is estimated to have increased about 80 per-
cent, and turnips and mangolds about 15 percent. Almost
the entire supply of green vegetables 1s now produced
domestically, and it 18 estimated that domestic consumption
has increased 30 percent.
The wheat acreage was expanded almost 50 percent between
1939 and 1942, and practically all the crop 18 now devoted
to making flour, unlike in the pre-war period when about
two-thirds was used for animal feeds. The increase in
production of wheat and its allocation to human consumption
has resulted in the saving of some 1,000,000 tons of shipping
space in the past year. The diversion of wheat to human
consumption, as well as the curtailment of importation of
feedstuffs in order to save shipping space, has necessitated
a great reduction in the numbers of livestock and poultry.
Combination of methods utilized
The various steps taken by the British Government to
stimulate agricultural production, according to a recent
issue of Foreign Agriculture, may be classified as follows:
(1) expanding acreage, (2) increasing efficiency, (3) ensuring
an adequate labor force, (4) improving marketing processes,
and (5) use of price inducements.
An energetic campaign was inaugurated to increase the
crop acreage by plowing up grasslands, swamplands, and
marginal land covered with thickets, the Government paying
a subsidy for every acre plowed and paying the entire cost
of drainage and clearing. Scientific methods were tested
on different types of land and brought to the notice of
leading farmers through special demonstrations. Farm
machinery, acquired by the Ministry of Agriculture and under
the control of the County Agricultural Committee, was used
to supplement equipment owned by farmers and plowing
contractors. It was the duty of the Committee to see that
all equipment, both private and Government-owned, was fully
utilized. The use of fertilizers was encouraged by loans
and subsidies.
The farm labor shortage has been met by various
expedients. In order to stop the migration of labor from
farms, wages were increased and a national minimum wage for
farm labor was fixed. This was followed by an order forbidding
344
- 7 -
industrial employers to engage farm workers, and making
former agricultural laborers who had accepted industrial
employment ineligible for reemployment in industrial
occupations. However, the most important source of
auxiliary farm labor supply has been the Women's Land
Army, composed of women who have enlisted for the duration,
which numbered about 50,000 in 1942.
Prices paid to British farmers have been designed to
encourage production. Prices have been revised upward as
costs of production have increased, or as the necessity
arose to stimulate production of certain crops. Since the
Ministry of Food controls the purchase of most basic
commodities, the Government 18 able to increase the farm
price while selling the products at prices low enough to
maintain retail ceilings.
Department store stocks rise less than seasonally
Although department store stocks increased 4 percent
in March, the gain was less than seasonal and the FRB
adjusted index of stocks continued the almost uninterrupted
decline that has been in progress since last July. (See
Chart 6.)
As a result of a further decline of 2 points in March,
the adjusted index at the end of the month was 35 percent
below the record high of last July. Moreover, at the month
end, stocks were 17 percent below last year's level, although
they were still 25 percent higher than at the end of March
1941.
A sharper drop in seasonally-adjusted stocks in March
was averted by the large contra-seasonal deoline in department
store sales during the month, following the heavy wave of
scare buying in February. (Refer to Chart 6.) Stimulated by
pre-Easter buying, department store sales turned upward last
month, and during the week before Easter they came within
1 percent of the peak of the February sales boom. Moreover,
sales were 4 percent higher than in Easter week of last year.
Commerce estimates of consumer expenditures for 1943
Recent estimates by the Department of Commerce indicate
that the physical volume of goods and services to be pur-
chased by consumers in 1943 will be "at least 10 percent"
under the 1942 level, a figure about in line with earlier
expectations. The decline would be greater were it not
for (1) the continued high volume of civilian goods output,
particularly of nondurable goods such as apparel and foods,
and (2) the high level of consumer goods inventories.
Regraded Unclassified
345
- OR -
The Commerce estimates of consumer expenditures
in dollar values, on the other hand, have been revised
upward to make more complete allowance for expected
price increases, hidden price rises (from black markets,
etc.) not reflected in reported prices, and the tendency
of consumers to buy articles of higher price and better
quality as incomes rise. The estimates indicate an
expenditure of $84 billions in 1943, an increase of
2.6 percent over the previous peak of $82 billions in
1942. Reported prices are estimated to increase 5 per-
cent over 1942. (The Commerce figures have been furnished
us on a restricted basis, and may be changed somewhat
before being finally released.)
Chart 1
346
BITUMINOUS COAL PRODUCTION
SHORT TONS
MILLIONS
2.4
43
2.0
42
1.6
41
1.2
'39
.8
.4
Bit. Coal Comm.
o
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
Office of the Secretary of the Treasury
Division of Research and Statistics
C-484
Chart 2
347
STEEL INGOT PRODUCTION
PER
CENT
Per Cent of Capacity
43
41
100
42
90
40
80
70
Amer. / and.6.,/net
60
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
Office of the Secretary of the Treasury
C-419
Division of Research and Statistics
Regraded Unclassified
MOVEMENT OF BASIC COMMODITY PRICES
1942
1943
PERCENT
PERCENT
August-1939-100
210
210
205
205
200
200
195
9 Uncontrolled Commodities
195
190
190
185
185
180
180
175
175
28 Commodities
170
170
165
165
160
ISO
19 Controlled Commodities
155
155
MAR.
MAY
JULY
SEPT
NOV.
JAN.
MAR.
MAY
1942
1943
PERCENTAGE CHANGE DEC. 6. 1941 TO APR.22 AND APR. 30. 1943
PERCENT
PERCENT
19 Controlled
9 Uncontrolled
Commodities
Commodities
+60
+60
+50
+50
Mage 4628
Comeast
+40
+40
Butter Jass
Lard ta ex
+30
+30
foriey 104%
Shellee 1233
#
(Lood n.ix
Rean rem
Print Cloth 78%
+20
Cotton as 2
+20
Sugar 69%
Cottonesed Oil 5.9%
Weel Tope 191
Zine JI
0% Change
+10
+10
Notes. Selh,
In, Rubber,
Coffee, Copper,
St Screptom.
St Scrap.exp
o
o
Coooo -.ex
Talkw 4.13
348
Bunkp -4.3%
-10
-10
Dec. 6
Apr. 22
Apr. 50
Dec. 6
Apr. 22
Apr.30
1941
1943
1943
1941
1943
1943
"20 Controlled and a Uncontrolled previous to June 26
Office of the Secretary of the Insury
P-244-43
Dwan of Presch and
Regraded-Unclassified
AVERAGE PRICES RECEIVED BY FARMERS
Indexes. August 1909 - July 1914=100
PERCENT
PERCENT
PERCENT
All Form Products
Grain
Cotton and Cottonseed
180
160
160
1943
1943
1942
160
140
140
1943
1942
140
120
120
1942
120
100
100
1941
1941
1941
100
80
80
80
60
60
J F M A M J J A 5 o N D
J F M A M J J A S o N D
J F M A M J J A S o N D
240
200
200
Meat Animals
Dairy Products
Chickens and Eggs
220
180
180
1943
1943
4943
200
160
160
180
140
140
1942
1942
1942
160
120
120
1941
140
100
100
1941
1941
120
80
80
J F M A M J J A $ o N D
J F M A M J J A $ o N D
J F M A M J J A S o N D
Office of the Secretary of the Treasury
Division of - Services
P-257
Chart 4
349
Chart 5
PRICES RECEIVED AND PAID BY FARMERS
350
1909-14-100
1939
1940
1941
1942
1943
PERCENT
PERCENT
180
180
160
160
Prices Paid
140
140
Prices Received
120
120
100
100
80
80
S N J M M J $ N J M M J s N J M M J S N J M M J S N
1939
1940
1941
1942
1943
RATIO
RATIO
120
120
100
100
Ratio of Prices Received
to Prices Paid
80
80
60
60
S
N
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
1939
1940
1941
1942
1943
- Prices Paid, Including Interest and Taxes
Office of the Secretary of the Treasury
P-252
Division of Research and Statistics
Regraded Unclassified
DEPARTMENT STORE SALES AND STOCKS
Dollar Values. 1923-25-100, Adjusted
PERCENT
PERCENT
160
160
150
150
140
140
130
130
120
120
110
110
100
100
Sales
90
90
80
80
Stocks
70
70
351
60
60
50
1936
1937
1938
1939
1940
1941
1942
50
1943
Source: Federal Reserve Board
9 Chart
Offer - - Secretary of - Treatmey
I 1 1 I 1
C-430
Regraded Unclassi
352
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
SECRET
May 3, 1943
MEMORANDUM TO THE SECRETARY:
Supplementing report to you of April 26, 1943,
the purchases against the African Program from April 26,
1943, to May 2, 1943, totaled $4,048,823.30 or a total
of purchases for the program thus far of $28,281,812.16.
Attached is report giving status of shipping
against these purchases.
JARI Clifton E. Xant Mack
Director of Procurement
FORVICTORY
BUY
(37861)
Regraded Unclassified
SHIPPING REPORT AS OF MAY 1, 1943
353
SECRET
Tonnage
Tonnage
Tonnage
Tonnage
Shipped to Date
Under Load
On Hand at Port
En Route
Commodity
From U. S. A.
At Port
Waiting Vessels
To Port
Aluminum sulphate
14.5
Asbestos sheet packing
2
Boiler tubes
17
Bone glue
33
24.98
Books & booklets
2
Brass rods & sheets
23
38.05
12.8
88.7
Babbitt metal
53.5
Brick
129
40
Calcium carbide
247
1715
1904.2
Cement
20
Cement, rubber
19.5
Chemicals
163.5
258.2
497.3
342.28
Coal cutters
12
Copper tubing
21.6
27.5
Corrugated boards
59
52.4
Clothing
2217.71
51.55
169.4
26.8
Copper sulphate
5697.75
47.5
Cotton thread
69.25
21.5
Cordage & twine
225
5
40
Drugs
6.5
Electrodes
12.9
Envelopes
9
1
9.18
Files, steel
15
15
Fullers earth
72
Gelatin
1
1
Glass, window
121.5
Glass lamp chimneys
17
Glycerine
12.75
Horse shoes & nails
125.9
20.8
71.05
10.75
Hosiery
26
3.5
8.5
1.5
Regraded Uncla
-2-
354
SECRET
Tonnage
Tonnage
Tonnage
Tonnage
Shipped to Date
Under Load
On Hand at Port
En Route
Commodity
From U. S. A.
At Port
Waiting Vessels
To Port
Light bulbs
8.5
Lithopone
10.2
Lumnite
30
Mach. finished book paper
2
Matches
389.75
4.6
70.15
Newsprint
892
21
190
72
Nipples, bottles, eye cups
9
Paper
5
83.8
263.6
485.97
Paper bags
115.9
78.1
Phonograph records
1000 Each
Piece goods, textiles
7735.5
603.7
3605.6
332.45
Pig tin
64
Powdered milk
119
Printers ink
.1
Raw sugar
1545
Refined sugar
4196.5
Sheet copper & rods
21.5
49
Shoe tacks
4
9.5
Spare parts for autos,
tractors & harvesters
232.25
45
153
17.35
Spark plugs
2
2.5
Storage batteries
47
4.8
6.95
13.5
Steel, pipe, bars, angles
27.5
62.5
1046
1536.6
Shoes, boots & soling
247.25
46.75
27.3
18.08
Sulphur commercial flour
27.91
323.2
Tin plate
845
Tires, tubes & tape
175.75
314.24
Tools
7.5
19
348.4
Tooth brushes
.75
Tea
171.5
Regraded Uncla
355
SECRET
Tonnage
Tonnage
Tonnage
Tonnage
Shipped to Date
Under Load
On Hand at Port
En Route
Commodity
From U. S. A.
At Port
Waiting Vessels
To Port
Typewriter ribbons
.5
Wire nails
100
22
Wire rope
71.25
17.75
X-Ray films
1
Paint pigments
15.5
40.7
7.1
Pig iron
350
Totals
25,772.71
1,798.71
8,217.75
6,574.93
Regraded Uncla
356
HDW said he spoke to Secy. orally
about this.
D
357
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 3, 1943
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Lend-Leasing of Silver to the British Treasury
The Lend-Lease Administration is now prepared to lend-
lease 3 million ounces of Treasury free silver to the British
Treasury for return to the U. S. Treasury on an ounce-for-
ounce basis after the war. The lend-leasing of this silver
has been approved by the Appropriation Committee and by the
Senate Special Silver Committee.
The Treasury will be paid 71.11 cents an ounce for the
silver turned over for lend-leasing. When the silver is re-
turned after the war it will be received by the Treasury for
the account of the Lend-Lease Administration. The Treasury
will then reimburse the Lend-Lease Administration for the
returned silver at 71.11 cents an ounce, unless the laws of
the United States at the time of receipt prevent such reim-
bursement.
The General Counsel's Office has cooperated in the
preparation of letters from Phillips to Stettinius and from
Stettinius to you, covering the entire agreement. The let-
ters have been cleared with the Treasurer's Office, the
Bureau of Accounts, the Bureau of the Mint and the General
Counsel's Office, all of whom have approved.
Regraded Unclassified
TREASURY DEPARTMENT
358
INTER OFFICE COMMUNICATION
DATE May 3, 1943.
TO
Secretary Morgenthau
FROM
H. D. White
Subject: Response to Your Letter to Finance Ministers
The response to date to your letter to finance ministers
asking them to study the Treasury's preliminary draft proposal
for an International Stabilization Fund and to send technical
experts to Washington for exploratory discussions has been
as follows;
1. The technical representatives of two countries have
already appeared and conversations have been held with them:
Canada, Netherlands.
2. Discussions with Australia, Paraguay and the
Phillipines are going forward this week.
3. Word has been received that technical representatives
of the following countries are coming soon:
Belgium
Czechoslovakia
Brazil
Greece
Chile
Luxembourg
China
Peru
Costa Rica
Poland
Cuba
Uruguay
4. We have also had expressions of interest and
announced intention to participate in discussions from the
following countries:
Colombia
Nicaragua
Ecuador
Norway
Honduras
South Africa
New Zealand
Venezuela
5. We have not yet heard from ten countries. They are
as follows:
Russia
Haiti
Dominican Republic
India
El Salvador
Panama
Guatemala
Union of South Africa
Mexico
Yugoslavia
Regraded Unclassified
359
Division of Monetary
- 2 -
Research
We did not send a letter to Russia nor have we contacted
them since Mr. Berle handed them a copy of the proposal several
months ago.
6. At the suggestion of the State Department, last week
we sent a copy of the proposal and a letter of invitation to
the following countries:
Egypt
Iran
Ethiopia
Iraq
Iceland
Liberia
We expect to hear from most of the remaining countries
shortly, as some of them have had inadequate opportunity to
receive and study your letter.
Regraded Unclassified
360
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 3, 1943
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Chinese reaction to International Stabilization Fund
proposal.
1. In reply to your invitation to Dr. Kung to send Chinese techni-
cal experts to Washington, Dr. Kung has replied, warmly accept-
ing your invitation. Dr. Kung says that he will inform you
later of the names and date of departure of the experts which
he intends to send to Washington.
2. In cable dated April 29, Adler reports that, at special meeting
of leading banking and financial experts called by Dr. Kung
to discuss the British and American international monetary
plans, practically all present agreed that China should join
in a plan for international monetary cooperation. Dr. Kung
also expressed the opinion that China must work closely with
the United States. Those present at the meeting were requested
by Dr. Kung to submit proposals to him to be integrated into
a plan for submission to the Generalissimo.
3. In cable dated April 30, Adler reports on Chinese press com-
ment on American and British schemes for international
monetary stabilization. For the most part, the reaction has
been favorable to the idea of China's participation in a
plan for international cooperation, while one of the leading
Chinese newspapers (Ta Kung Pao) praises the United States
for "attempting to bring forth the united efforts of Allied
nations towards world economic stabilization". As might
well be expected, however, the Chinese press 1s emphasizing
the desirability of China's not overlooking its own national
interests.
Regraded Unclassified
361
JMB
Chungking via N.R.
This telegram must be
paraphrased before being
Dated April 29, 1943
communicated to anyone
other than a Governmental
Rec'd 11:09 a.m.
agency. (BR)
Secretary of State,
Washington.
620, April 29, 4 p.m.
FOR THE SECRETARY OF THE TREASURY FROM ADLER.
TF 113. Re part one of your 434.
Dr. Kung has asked me to transmit the following
message to you.
"April 28.
TO MR. MORGENTHAU FROM DR. KUNG.
Your telegram transmitted through Mr. Adler
was received with thanks. Our experts are engaged
in studying your plan cerefully. I will soon send
experts to Weshington to discuss the plan with your
experts 88 you have kindly suggested end will inform
you as to their names and date of departure later.
Allow me to take this opportunity again to express
my gratification over our cordial relations in the
future".
VINCENT
NPL
Regraded Unclassified
362
PARAPHRASE OF TELEGRAM SENT
FROM: American Embasay, Chungking, China
DATE: April 29, 1943, 10:09 a.m.
NO.1 em
This 1s message TF-114 from Mr. Adler for the
Secretary of the Treasury.
A special meeting of leading banking and financial
experts was called on April 28 by Dr. Kung to discuss
British and American international monetary plans, I
was told by a reliable source. A realistic and intelligent
discussion took place. Practically all present agreed that
China should join in plan for international monetary
cooperation even if by so doing she has to surrender her
power to change value of her currency unilaterally. The
erucial importance of the quota to be fixed was repentedly
emphasized along with the necessity of transitional internal
rehabilitation and readjustment measures being taken before
China could effectively participate. One participant
thought the British plan superior to the American plan,
while several believed it to be more flexible in certain
respects. The Minister of Food, Haukan, reflected the
donsensus of opinion in saying that Ohina must realistically
weigh what she would gain against what she would lose as
long as idenliste were not conducting international af-
fairs even though China should expect infringements on her
seversignty after the unequal treaties are done away with.
Because of the beneficial effects to be derived from
monetary stabilization, Houken strongly favored Chinese
participation. Aritain, but not the United States, would
inevitably be hound to be a competitor of China as Chinese
trade develops, and for that reason he believed China
would gain more if she supports the United States.
In eventing up the Minister of Finance said that
Ohina must take part and must work closely with Ameried.
He seked that proposals that China could make on the lines
of the discussion be submitted to him by those present.
The Ministry of Finance will make these propossls into on
integrated plan to be submitted to the Generalissime for
his OK. He warned those present that these proposals
should not be too high.
VINCENT
Regraded Unclassified
363
KEM
PLAIN
Chungking via NR
Dated April 30, 1943
Rec'd 1:12 p.m.
Secretary of State,
Washington.
625, Thirtisth.
TO SECRETARY OF TREASURY FROM ADLER.
TF 115. Press comment on schemes for inter-
national monetary stabilization.
Article in the CHINA TIMES of April 12 points
out that while China should strive for international
cooperation, it should not overlook its national
interests or the peouliarities of its Economic position.
"Our main postwar currency problem will bE the selection
of a fixed or a flexible foreign Exchange rate". After
discussing pros and cons of a fixed, versus a flexible,
rate of Exchange article concludes "a free rate of
Exchange without any restriction 1s contrary to the
spirit of international cooperation. Such WE shall
not intend to carry out. WE shall bE willing to
maintain a fairly stable rate end if necessary shall
welcome international agreements for the maintEnancE
of such a rate. But when the balance of international
payments becomes unfavorable the rate must bE revised
and should
Regraded Unclassified
364
-2- #625, April 30, from Chungking via NR,
and should under no conditions bE bound by agreements.
The currency plans proposed by Britain and the United
States do not close the door to changes in the rate but
require negotiations before such change can bE affected.
WE should not accept postwar plans of whatever nation
if they try to link our currency directly or indirectly
to gold **** Economic changes in China after the war
will bE more complicated and heavier than those in
already industralized countries. Our need for currency
adjustment will also bE more frequent than theirs. The
Enforcement of any postwar currency plan must take into
consideration the different conditions Existing in the
different countries".
(A) An Editorial in HSIN SHU PÃO April 13 on
"Morgenthau's postwar currency stabilization plan" 18
largely confined to a discussion of the differences
between the plan and the tripartite accord of 1936.
Article Emohasizes Enormous power of Board of Directors
and Chairman of Board of proposed international
organization indicating that after the war an American
would bE the natural candidate for the position. It
also mentions advantages of a flexible rate for
Economically backward countries.
(E) Editorial
Regraded Unclassified
365
-3- #625, April 30, from Chungking via NR.
(B) Editorial in the TA KUNG PAO of April 17
with the hope of preventing the possible recurrence
of depreciation and depressions (as after the last war)
the United States is attempting to bring forth the united
Efforts of Allied nations towards world Economic
stabilization. This 18 certainly a worthy contribution,
America is the richest country in the world. Any step
taken by the US will influence the development of world
Economics. If the US takes the lead in adoption these
new policy of mutual hElp instead of the old practice of
individualistic competition it will give tremendous
assistance to the promotion of world Economics. Countries
with unfirm Economic foundation will also bE assured
of international cooperation of a most free nature *****
world prosperity and general welfare of all peoples must
bE kept in mind 80 that when the plan 1s carried out all
countries will bE benefacted instEad of only a fEW rich
ones. Furthermore WE suggest that EVEN the repentant
peoples of Germany, Italy and Japan should not bE Excluded
from consideration". The article then discusses the
problem of internal currency adjustment in China in the
postwar period and concludes with the belief "that if WE
can Effect our internal readjustment first and then call
for outside
Regraded Unclassified
366
-4- #625, April 30, from Chungking via NR.
for outside assistance WE will succeed in all problems
of international Economic cooperation".
(D) Editorial in the Catholic Social WElfare
of April 18. "Superficially these two (British and
American) plans SEEM to have the same object and purpose
of working towards international Economic cooperation
but if WE carefully study the contents WE can discover
the motive of selfinterest and the hope of capturing
the center of world financial markets. The main
differences consist of (one) the British plan aims
at the development of trade by a clearing of receipts
and payments, but the US plan tries to prevent com-
petition depreciation of currEncy by maintEnancE of
the value of gold and (two) Britian hopes by means of
the international clearing system to keep intact the
position of the Bank of England in the international
financial market. By linking the international currency
with the US dollar and with the support of here large
gold reserves US hopes to control the world financial
market. "The article continues that China's attitude
should bE determined by Sun Yat Sen's third principle
of the peoples livelihood and that particular attention
should bE given to China's interests and to the possibili ty
of utilizing
367
-5- #625, April 30, from Chungking via NR.
of utilizing foreign capital as suggested by Dr. Sun
Yat SEN. Finally China should try to limit the USE of
gold in such n way that Effects of variation in the
quantity of gold can bE Eliminated and should bE
reluctant to resign All restrictions on control of
foreign Exchange which may bE necessary in difficult
postwar conditions.
VINCENT
DD
Regraded Unclassified
368
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL NO. 144
Information dreived up to 7 a.m., 3rd May, 1943.
SECRETO OFFICE ASURY
1943 42
TREA TREASURY SUPY DEPARTMENT
1. NAVAL
Early on lst, 7 motor Torpedo Beats and Motor Gun Boats
sank 1 Auxiliary Vessel and left 2 others heavily on fire in action North of
TERSCHELLING. 3 of our craft were damaged and casualties were: 3 killed
and 9 wounded. One of H.M. Submarines is overdue in MEDITERRANEAN and must
be considered lost. A Dutch submarine sank a 7,500 ton ship in the MALACCA
Strait on 22nd.
2. MILITARY
TUNISIA. 1st. 8th Army. A small local counter attack by
the enemy in the Coastal Sector was repulsed. 1st Army. In the South, French
troops recaptured a hill Southeast of PONT DU FAHS, previously taken by the
in a small attack and successfully resisted a subsequent enemy attempt
enemy to retake it. In the Central Sector our treops have improved their positions
near DJEBEL BOU AOUKAZ and SIDI-MEDIEN.
U.S. SECTOR. In the North, U.S. ferces made slight gains
and resistance in this area is stiffening. During the day 641 Prisoners 66 of
passed enemy through a Divisional cage, majority captured by the French-only
them German.
3. AIR OPERATIONS
WESTERN FRONT. 2nd. 24 escorted Bostons and Venturas
THIONVILLE. Spitfires destroyed 6 F.W. 190's over FLUSHING. 4 Spitfires
attacked steel works at IJMUIDEN. 6 Mosquitos bembed Railway workshops at
missing.
TUNISIA. 130 Kittyhawks carrying bombs finding no shipping
attacked SIDI BAOUD, Southwest of CAP BON and a beached destroyer.
AEGEAN. Beaufighters bombed and set on fire a small South-
bound ship North of MILO.
BURMA. On 29th, 18 Mitchells bombed Railway installations and
and the Bridge at MYITINGH. On 1st, enemy aircraft bombed BUTHIDAUNG
MAUNGDAW. lst/2nd. 11 Wellingtons bombed TAUNGUP.
Regraded Unclassified
369
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 3,
1943
TO
Secretary Morgenthau
FROM Peter H. Odegard
Attached are some excerpts from reports of the Federal
Broadcast Intelligence Service containing comments by the
Axis powers on your San Francisco speech and other related
material in which I thought you would be interested.
You will note that considerable attention was given
by the Axis radio to your father's speech on his 87th
birthday.
The Treasury proposal for monetary stabilization con-
tinues to evoke considerable attention from the Axis powers.
AXIS SHORT-WAVE BROADCAST TO NORTH AMERICA
370
COMMENTS ON SAN FRANCISCO SPEECH, HENRY MORGENTHAU, JR.
On April 29 and 30, the Axis radio made several denials
of the charge made by Secretary Morgenthau on April 28 that
they had massacred Chinese civilians in reprisal for the
American air raid over Tokyo. Examples follow:
Tokyo, Broadcasting in English to the world (4/29):
"Evidently as a means to encourage the buying of War Bonds
among the numerous Chinese residents of San Francisco,
Henry Morgenthau, U. S. Secretary of the Treasury, made a
preposterous statement on April 28, charging that the Japanese
massacred all civilians, including women and children, at certain
Chinese towns where U.S. (pilots) landed following the unsuccess-
ful raid on Japan, declared observers here.
"They asserted that Morgenthau's statement, which quoted
a Chungking report, is too ridiculous to be taken seriously.
That Morgenthau took the trouble to reveal such information
from OWI, which hitherto issued all war reports, can be re-
garded as one of his efforts to increase the sale of U. S. War
Bonds, and also as evidence of typical American propaganda."
Berlin, Broadcasting in English to North America (4/30)
"Tokyo: 'I expressly deny assertions that Japanese
soldiers deliberately kill Chinese civilians,' the Government
spokesman Hori declared at Friday's (April 30) conference of
Regraded Unclassified
371
COMMENTS ON SAN FRANCISCO SPEECH, HENRY MORGENTHAU, Jr. , (Cont'd)
the foreign press representatives. He made this statement in
reply to a question on the subject of the note allegedly remitted
to the U. S. Government by Chiang Kai-Shek's ambassador in
Washington, which is said to refer to the alleged killing of
Chinese civilians by the Japanese in the districts where the
American airmen made a forced landing after their raid on
Tokyo last year. Hori added that he knew nothing about the
note in question."
Regraded Unclassified
372
COMMENTS ON HENRY MORGENTHAU, SR.
The Italian radio, on April 26, made frequent references
to Henry Morgenthau, Sr. 's 87th-birthday speech, as an indi-
cation of the seriousness of the Russian-Polish diplomatic
split. Occasionally, whether by accident or design, the
commentator neglected to add "senior" after the name,
referring simply to "Morgenthau". Here are a few examples
of the way in which this incident was handled:
Rome, Broadcasting in Italian to the Empire (4/26)
"Lisbon: Henry Morgenthau, Sr., on the occasion of
his 87th birthday has stated that the U. S. should increase
to the extreme limits its armed forces in order to win the
war, and in order to safeguard the nation from future wars.
He stated that the development of the war will depend on the
associates, and that hence the Russians must be consulted.
He added that this will be a complicated conflict whose
developments cannot be foreseen, and that hence the U. S. must
x
provide all to prevent
These statements and forecasts did not fail to alarm the
North Americans, since the old Morgenthau who has been Ambassador
to Turkey, enjoys among his fellow citizens a reputation as a
prophet, since for years he has backed the idea of military
preparedness, and since he predicted right after the other war
another war."
Regraded Unclassified
- 2 -
373
COMMENTS ON MORGENTHAU, SR. (continued)
Rome, Broadcasting in English to England (4/26)
"On his 87th birthday, Mr. Henry Morgenthau, Sr. has
tried his hand at reading the future. He has something of
a reputation in America, in this particular line, because
immediately after the last war was over, he predicted that
another and still greater world war was coming along.
Mr. Morgenthau has now stated that the present war will be
a complicated affair and that it is impossible to say what
may still happen. The only definite prediction he made,
was that the result of the war would depend on the Allies
and the United States. The Americans must realize,
Mr. Morgenthau, Sr. states, that they must hold themselves
ready for still another war."
Rome, Broadcasting in French to Europe (4/26)
(Speaking of the great impression made on America by
the Russian-Polish split, the commentator points out that
the incident gives Americans cause to think that London and
Washington might get the same treatment from Russia that
Poland did if they were to demand an explanation of some
incident they día not like. He goes on to say:)
"Mr. Morgenthau's warning invests this incident with
unmistakable importance. We recall that the latter invited
Regraded Unclassified
374
-3-
COMMENTS ON HENRY MORGENTHAU, SR. (Continued)
the North Americans to make spiritual preparations for war --
clearly, Mr. Morgenthau is not unaware of the grave of Katin
(Polish forest where Russians are supposed to have murdered
12,000 Polish officers), nor of its diplomatic consequences. "
Rome, Broadcasting in Spanish, to Latin-America (4/26)
"Lisbon:
If
In respect to the great question which
has arisen among the Allies (as to the dependability of Russia
after the Polish split), the statement made by the old
Henry Morgenthau is quite a serious one for North Americans.
Morgenthau incited the American people to prepare themselves
spiritually for another war. Evidently, Morgenthau has taken
advantage of the lesson that he learned from the Katin incident
If
and what this might mean for their diplomatic consequences
Regraded Unclassified
375
COMMENTS ON WORLD STABILIZATION
Berlin, Broadcasting in German, to North and South America (4/23):
"Berlin: The U.S. finance minister has worked out a
plan for the stabilization of an international currency which is
to be realized as the Morgenthau plan. This plan represents the
logical continuation of the lend-lease policy carried out by the
United States toward her allies. The core of the plan is the
creation of a so-called stabilization fund of at least five million
dollars, which demands the contribution of gold by the participat-
ing states. The wealth of the United States in gold supplies is
thereby to be put back into circulation. The states joining in
the plan would be forced to acquire the amounts of gold demanded
to be paid into the fund through borrowing from the United States.
Since they absolutely need this gold to pay in, they would also
be forced to accept every condition which the United States would
demand. Significant of the goals of the Morgenthau plan is its
limitation exclusively to the field of payments. The question of
future American tariff and commerce policy is not mentioned.
Thereby the United States apparently does not intend at all to
contribute her part through an extensive opening of the American
export markets, to put the machinery of world trade back into
376
operation. What she wants and what she is striving after is
rather the dependence of the other countries on American credit.
The amounts of gold gathered in the United States are to be made
into instruments for the enslavement of other countries. Here is
revealed the goal toward which Jewry, through its instrument,
Roosevelt has caused the new world war, a war which was begun for
the bare money interests of the plutocracies, above all of the Jews
Berlin, Broadcasting in English, to North America (4/22):
"Berlin: A most gigantic financial coup is being pre-
pared by Wall Street under the title of the 'Morgenthau Plan," de-
clared the DEUTSCHE ALLGEMEINE ZEITUNG. It is aimed at causing in-
flation in all the anti-Axis states for the purpose of plundering
them. Under the pretext of international stabilization of all
currencies, the U. S. is trying to make them dependent on Wall
Street.
The plan will certainly be successful, since the U. S.
was the only state able to raise the necessary gold reserves.
The effect of North American currency dictatorship is sufficiently
known. When Germany, after the first World War, glided into
inflation, the U. S. unscrupulously exploited the crisis in
Germany. French North Africa was likewise ruthlessly plundered
by the U. S. by fixing the quotations of the franc.
Although Great Britain is opposed to the so-called
Regraded Unclassified
377
Morgenthau plan, (she) will be too weak to assert herself against
Wall Street. The U. S. plan would come to nought if only, one
day, the people of the U.S. who are concerned were to rise against
it.
***
A German domestic broadcast describes Secretary
Morgenthau's plan for currency stabilization on a gold basis as
a vast scheme to enrich the Jews. It is stressed that the sta-
bilization fund would be supported by fixed contributions from
enemies of the Axis. Since American Jews have a monopoly on
gold, it is concluded, the plan aims at giving them a dictator-
ship over world economy.
Regraded Unclassified