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    "title": "Volume 631, May 4 – May 5, 1943",
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        "Henry Morgenthau, Jr. Papers",
        "Diaries of Henry Morgenthau, Jr."
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    "ocrText": "122\nTHE UNDER SECRETARY OF THE NAVY\nWASHINGTON\n4 May 1943\nDear Henry:\nI am returning the file on the Martin plant.\nCaptain Eubank had quite a long talk with Glenn\nMartin - started at 5 minutes and went to hours.\nI think it was a profitable visit in many respects.\nI will use this opportunity to congratulate you on\nthe outcome of the campaign. From every indication\nI have, it was a splendid job of merchundising. I\nhope that a lot of small buyers got the bonds. From\nwhat I can learn in New York, this was true.\nSincerely yours,\ntonestal\nJames Forrestal\nHonorable Henry Morgenthau, Jr.\nThe Secretary of the Treasury\nWashington, D.C.\nRegraded Unclassified\n123\nCONFIDENTIAL\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE April 5, 1943.\nTO:\nSecretary Morgentheu\nFROM: merson Waldman\nAS per your instructions I interviewed Martin Aircraft\nworkers in the nearest thing to a natural, home atmosphere\nthat is possible in Essex, Md., and in the trailer camps\nabout the plant. (Could not attend union meeting due to fact\nthat none was being held over weekend.) I \"listened\" to about\n20 workers -- neither arguing with them nor asking any \"leading\"\nquestions which might cause them to feel that they were expected\nto give certain answers. Following is a summation of their\nreactions:\n1) They'd rather buy Bonds themselves then through the payroll\nsavings plan.\n2) All quoted \"higher prices\" as the reason for not buying\nBonds or for not buying more Bonds than they were buying.\n3) They said that they were buying Bonds or -- if they were\nnot buying Bonds -- they should buy Bonds for their own futures\nand to \"help win the wer.\"\n4) All expressed a willingness to do whatever the Government\nwanted them to do \"to help win the war. It was obvious, from\nthis, that the Martin plant workers would buy many more Bonds\n(their perticipation in the payroll savings plan is 40% at\ntwo per cent of the gross payroll) if there was a \"live\"\nRegraded Unclassified\n- 2 -\n124\nCONFIDENTIAL\norganization of foremen and/or management within the plant\nto itimulate and direct and explain the immediate necessity\nof buying Bonds with every possible dollar through the payroll\nsavings plan.\n5) All those with whom I spoke mentioned that there were\nBond-buying booths within the plant. Only a few mentioned\nthat their foreman had approached them on the idea of buying\nBonds through payroll savings. Those who told of being\napproached by their foreman said that he had \"asked them\nwhether they wanted to buy Bonds through the payroll savings\nplan\". The foreman had not urged them to do SO. The foreman\nhed not asked them to invest any certain percentage of their\npay. The foreman had mentioned that, if they did not want to\nbuy Bonds through payroll savings, they could buy their Bonds\nat the Bond-booths in the plant.\n6) None of the workers with whom I spoke had any reelization\nof or interest in inflation. None had any \"idea of the importance\nof Bonds in helping to keep prices down. None -- as A matter\nof fact -- seemed to have any idea of the importance of his\nindividual job in the war. Strangely, none introduced the war\ninto the discussion other than to say that buying Bonds \"helped\nto win the wer.\" In no case was there any sense of urgency\neither about their jobs or in buying Bonds to aid the men in\nthe front lines.\n7) The main thought motivating those with whom I spoke was\nequality of wages with others in the plant; with other workers\nin other aircraft plants.\nRegraded Unclassified\n3 -\n125\nconfidenti\nIn addition to speaking with workers of the Mertin plant,\nI interviewed minor executives of the CIO, in Baltimore, who\nhad had contact with workers in other airplone end war plants.\nAlso, 1 spoke with individuals who worked in other war industries\nin the Baltimore area. Their reactions on the war and on Bond-\nbuying were much keener than that of Martin plent workers.\n1) A woman whose husband worked at the Bethlehem steel plant\nin Bultimore said that her husband was a member of the plant's\nten per cent club\nthat they were keeping on with their\nBond-buying through the payroll savings plan even though prices\nare rising and they have five children to feed and care for.\nThey have 25 Bonds and \"no metter the sacrifices the war effort\nis worth it to me.\" She said that foremen contact all workers\nat the Bethlehem plant and contact them regularly after they\nhave signed up, to get them to increase their allotments.\n2) Herewith some reactions and quotes, following conversation\nwith CIO executives: a) \"I never saved any money before I\nstarted buying Bonds. Now I haven't any money to spend but\nI've got plenty of Bonds. It's a good feeling\nWar Bonds\n...\ngive American workers another reason to fight harder and work\nherder. They mean a better future\n\"\nSpeaker expressed\nthought of shareholder in democracy idea\npartners with\nUncle Sam idea\nsaid \"Wer Bonds give you a feeling that you\nare H pert of America that you own 8 hunk of these United\nStates.\" b) One of these CIO men asked about the rate of\n\"cash-ins\" of Zonds and I gave him the figures. It seems that\nRegraded Unclassified\n126\nCONFIDENTIAL\nthe story everywhere is that Bonds have been cashed in at a\ntramendous rate. The CIO men were pleasantly surprised at\nthe figures 1 gave them. They said that they could under-\nstand why such e small percentage of Bonds was being cashed\nIn: \"if you've got it in mind to buy something\nit takes\ntoo long to get your noney cut of Bonds\nso you don't\nbother and you don't buy that something. And there's the\nmoral reason, toc\nnobody wants to think of himself AS a\ncheap slacker who makes out he's buying Bonds up there with\nthe rest and then is cashing them on the side. And, then,\nthere's the idea of the future\na guy thinks of his Bonds\nfor after the war is over when he'll maybe went to start up\n\"d business of his own. A 25 Bond means R lot more than $18.75\nto 0 worker\n11\nc) One of the CIO men seid that \"workers\nwent to buy all the Bonds possible but prices are higher,\nwages are levelled off, taxes are going un\n\"\nThis man spoke\nas B result of his experiences in covering five states which\ncentered on the Maryland area. d) Another CIO executive\ngave en interesting insight on why many workers are holding\nonto their \"cash\" instead of investing every possible dollar\nin Bonds. Said he: \"There was a fellow named Smitty, who\nworked in Glen Martin's Number two plant. He was a union\nsteward. Smitty saved his money. He didn't spend on anything\nhe didn't have to. When Smitty had saved up $500 he quit his\njob. He said that his $500 was more than his father -- a\nfarmer -- had been able to save up in e lifetime. 30, Smitty\nRegraded Unclassified\n5\n127\nCONFIDENTIAL\nsaid, he was going home (to North Carolina) and buy himself\na farm with his $500. 'I'm going to retire for the rest of\nmy life. I won't be drafted because I'm going to be a farm\nworker\n1 H e) Another CIO representative, who had come\nto Baltimore from Buffalo (Curtis-Wright plant) only two\nweeks before, said: \"The workers in the Curtis-Wright plant,\nwhere I worked as 8 tool-maker, don't like the payroll savings\nplan. This plan is run by the financing branch of the company\nand it takes anywhere from two to five months for a worker to\nget his Bond, after he's paid for it. The workers feel that\nthe financing outfit is using the money they've paid in for\nBonds as 'loan money' -- money which this financing branch\nlends back to the worker and for which the financing outfit\ncharges him interest\nabout 2% a month. This same CIO\nman -- who is attempting to organize the Martin plant workers --\nsaid tnat, perhaps, one of the reasons the Martin workers were\nnot buying more Bonds was due to the fact that their wages\nwere lower than the wages in Baltimore's Eastern Aircraft plant\nfor the same work. This CIO representative also said that\nthe main reason, though, for Martin workers not buying more\nBonds through payroll savings, with a higher percentage of\ntheir pay, was lack of any systematic campaign within the\nplant, lack of any organization within the plant to educate\nthe workers to the meaning of War Bonds, to the meaning and\nworkings of the payroll savings plan. Here he brought the\nconversation back to the Curtis-Wright plant in Buffalo, citing\nthis plant where wages are essentially the same as at Martin\nes en exemple of what he meant. In spite of feeling within the\nRegraded Unclassified\n128\n- 5 CONFIDENTIAL\nCurtis-Wright plant against the handling there of the peyroll\nsavings plan, the workers were buying Bonds through this plan:\n\"The foreman contacts every new worker, the dey he starts\nwork, and asks him to sign up in the peyroll sevings plan\ngiving him a pep talk on Bonds. Three or four times a year,\nthe foreman contacts every one of the workers in his group\nand asks for an increase in the worker's allotment for Bonds.\nFollowing are individual reactions by Mertin plant workers:\n1) The wife of a Martin plant worker -- interviewed at a\ntreiler camp, her home, near the plant -- said \"No\nI'm not\nbuying and my husband is not buying Bonds. I wouldn't mind\nif he bought Bonds out of his pay at the plant. He's just\nnever done it\nYes\nthey ask you at the plant if you want\nto buy Bonds out of your pay\nIf\n2) Husband and wife (husband works at the Mortin plant):\nThey were not interested in dispussing Bonds. Wouldn't say\nwhether they were buying or not. Wife said \"they have a\nbooth at the plant.\n3) Martin plant worker from North Carolina\nis buying Bonds\n\"with what I can afford. No\nI'm not buying on the payroll\nplan. I'm buying them myself. I don't like enybody to take\nanything 'out of my time.' I like to 'pay it out myself.'\nI'm buying Bonds and sending them home for my four-year-old\nson\nand to help win the war.\"\n4) In connection with the above interview it is interesting\nto note that most of the workers with whom I spoke do not have\ntheir wives end families with them -- due to housing conditions\nend the high cost of living in Essex and other \"reas near the\nRegraded Unclassified\n29\n- 7 - CONFIDENTIA\nplant. \"Rooms For Rent\" signs mean one-fifth of 8 room is\nfor rent\nthere are five beds in most of these \"rooms\".\noften, these rooms -- in private homes -- are fixed-over\nattics.\n5) A Martin plant worker -- about 40 years old -- said \"no\npayroll savings plan for me. I buy Bonds when I get the\nmoney\nwhen I have the money to spare. I got obligations\nat home\nthe wife. That comes first.\" Said he had been\ncontacted by the foreman on buying Bonds through payroll\nsavings. Didn't like the plan because -- in addition to above\nreasons -- \"you got to wait from a couple of months to five\nmonths before you get your Bonds.\" As this man got to talking\nhe \"warmed\" to the subject of War Bonds -- in the abstract --\nseying that he's got two brothers in service. And he knows what\nWar Bonds do to help them. At one point in the conversation\nhe said that he had \"a few Bonds\", at another point in the\nconversation that he had no Bonds. He said that he \"wasn't\ngoing to work today\nI'm taking the wife to Baltimore\"\n(that was on Saturday). \"When I get well I'm going to buy\nsome War Bonds\nthey'll help my brothers, I know.\" 6) A\ndescendant of a man who arrived in America in 1732 was the only\none who seemed to have an understanding of the part his job\nwas playing in helping to win the war\n...\nin the part his War\nBonds were playing to help win the war. He said that there\nwas no campaign or drive in the plant to influence him to\nbuy Bonds through either the peyroll plan or at the booth.\nRegraded Unclassified\n130\n- 8 - CONFIDENTIAL\nHe'd heard about the payroll plan over the radio (Almost all\nthe Martin workers mentioned hearing about War Bonds over the\nradio. Due to dislocated housing conditions they depend on\nthe radio for their news as well as their entertainment.).\nHe was buying Bonds with five per cent of his pay. He was\npaying income taxes and the Victory tax, and would pay more\nand buy more Bonds \"if necessary\". Said he: \"If we lose\nthe war I lose everything. Money in Bonds helps to win the\nwar\nWar Bonds are the best investment I can make\nbecause if anything is good they are. If we lose the war\neverything isn't worth anything\nanyway\nI'm going\nback to the farm after the war. There won't be any airplane\njobs like this after the war\nWar Bonds will give me a\nstake on the farm after the war\nIt's the only way to save\nmoney\n\" He mentioned, as the reason he was not putting more\nof his pay into Bonds, higher prices. \"It's so hard to save\na penny these days\n\"\n7) A man who'd been working at the Martin plant for eight\nmonths said that he had not \"started buying Bonds yet. Been\nsick\n\" (almost all of those who were not buying Bonds or\nwere buying very few Bonds mentioned being sick or that their\nwives or other relatives were sick.) He knew very little about\nWar Bonds and said that nobody had asked him to buy Bonds out\nof salary, through the payroll plan.\nRegraded Unclassified\n131\n- 9 - CONFIDENTIAL\n8) This Martin plant worker had been buying Bonds himself.\nSaid he didn't like the payroll plan because he liked to\nsee his Bond when he paid over his money. He wasn't buying\nBonds now and had cashed in all his Bonds\n...\nto pay for his\nwife's illness. He'd start buying again, when his wife was\nwell and he'd paid all his bills. \"Bonds help to win the\neverybody is interested in buying Bonds ...\neveryone\nwar\nat home is willing to put into War Bonds and taxes all that\nthe Government feels is necessary to do the job ...\" He\nhad no ideas on whether a worker ought to buy Bonds with ten\n\"\nor any per cent of pay ... idea was \"what a man can afford\nRegraded Unclassified\n132\nAPRIL FINANCING\n(In millions)\nCumulative\nTo\nTo\nMay 3\nMay 4\nFunds from banking sources:\nTreasury bills\n$ 800\n$ 800\n7/8% Certificates\n2,138\n2,138\n2% Bonds\n2,039\n2,039\nTotal banking\n4,977\n4,977\nFunds from non-banking sources:\n7/8% Certificates\n3,077\n3,094\n2% Bonds\n2,757\n2,806\n2-1/2% Bonds\n3.738\n3,756\nSeries E... 1,132)\nSavings bonds Series F\n127)\n1,573\n1,662\nSeries G... 403)\nTax notes\n1,697\n1,697\nTotal non-banking\n12,842\n13,015\nGrand total\n$17,819\n$17,992\nMay 4, 1943\nRegraded Unclassified\n133\nMay 4, 1943\nOhio Schwarz\nSecretary Morgenthau\nWould you please work out a way that any releases\nthat are given out in the future be distributed all\nthrough the Treasury - - places like Internal Revenue,\nBureau of Engraving & Printing - 80 that all the import-\nant people in the Treasury get them. I think certain\nones ought to be mailed to key people throughout the\ncountry. I think one of the ways would be to start with\nevery Presidential appointee, wherever he 18 in the\nTreasury get a copy of Treasury releases. Work that up\nand see how many people would be involved.\nI know in the Var Bond organization where there are\nWar Bond releases given out from your office very few of\nthem get around in the War Bond organization -- which is\nanother story.\nBut work up a plan and submit it to me for my\napproval. At least I want to know how the people in the\nTreasury know what's going on, and in many cases I find\nthey don't,\nSee Schwary's memo 5/4/13-\nRegraded Unclassified\nTREASURY DEPARTMENT\nINTER-OFFICE COMMUNICATI\nDATE May 4, 1943\nSecretary Morgenthau\nMr. Schwarz\n@\nIn response to your memorandum this morning,\nI have made a survey and find that the majority of\nPresidential appointees in the Treasury Department re-\nceive our releases that emanate from Washington. It\nwould not require more than 50 additional name plates\nto cover the remaining people in the field. With a\nsecond addition of 50 names or thereabouts, we could\nalso cover important officers of the Secret Service,\nBureau of Narcotics, Alcohol Tax Unit, and Procure-\nment. I therefore request approval of the following\nsuggestion:\nThe Treasury's press release mailing\nlist should be expanded to include all Presi-\ndential appointees in the Treasury Department.\nIn addition to these, copies should be mailed\nto the supervising agents of the Secret Serv-\nice and the Bureau of Narcotics, the district\nsupervisors of the Alcohol Tax Unit, and Pro-\ncurement officers designated by the director\nof Procurement. State chairmen and state\nadministrators of the War Savings Staff and\nchairmen and executive managers of the Victory\nFund Committees should also receive regular\nTreasury releases, in addition to the War\nBond announcements which are now sent to\nthem.\nok.\nRegraded Unclassified\n135\nMAY 4 1943\nVy dear Mr. President:\nIn accordance with your request of April 26,\n1943 I an enclosing a proposed reply for your\nsignature to the letter of Senator Furdock dated\nApril 16, 1943.\nSenator Murdock's letter is returned\nherewith.\nFaithfully years,\n(Signed) H. Morgenthau, Jr.\nSecretary of the Treasury.\nThe President,\nThe White House.\nEnclosure.\nBy Mess. Manus 4:15 5/4/43\nOrig. file to Bartelt\nCopy of file in Diary\nEMB/grs\n4/29/43\nRegraded Unclassified\n136\nMy dear Senator:\nThis is in reply to your letter of April 16, 1943, regarding\nsection 2 of S. 991, relating to the power to alter the gold\ncontent of the dollar within the limits prescribed by the Gold\nReserve Act.\nI - informed by the Secretary of the Treasury that in the\nSenate Committee Hearings it because apparent that this provision\ncould not be extended without & long and bitter debate in the\nSenate, and that even if successful in the Senate, the provision\nwould almost certainly have been defeated in the House. The\nSecretary of the Treasury is in full agreement with your view\nthat it would have been desirable to continue the power to deter-\nnine She gold content of the dollar, and be is appreciative of\nthe support you gave to the Treasury position during the Hearings.\nYou say be sure that I welcome the opportunity to have your\nviews.\nSincerely yours,\nHonorable Abs Murdock,\nUnited States Senate,\nWashington, D. G.\nEMB:RB:nlf 5-1-43.\nRegraded Unclassified\nwhite\nTHE WHITE HOUSE\nWASHINGTON\nApril 26, 1943.\nMEMORANDUM FOR THE\nSECRETARY OF THE TREASURY:\nFOR PREPARATION OF REPLY\nFOR MY SIGNATURE.\nF.D.R.\nCustoms\nRegraded Unclassified\n38\nCOPY\nUNITAL STATES SENATE\nApril 16, 1943\nThe President\nThe White house\nMashington, D. C.\nby dear Kr. President:\n5. 991, which 1 enclose herewith, provides in Section 1 for the\ncontinuation of the stabilization fund until June 30, 1945. Section 2\nprovides for the continuation of your powers of devaluation or revaluation\nof the gold dollar until June 30, 1945. In my opinion, there are no powers\nmore necessary to you in the international picture than these. The stabili-\nsation fund and the power to further decrease the gold content of the dollar\nare absolutely necessary weapons in your hands during the continuance of\nhostilities, and they become of much greater importance inmediately upon the\nconvening of any international conference for stabilisation of international\nexchange.\nDecretary Morgentheu appeared before the Senate Banking and Currency\nConnittee this worning. 1 was disappointed in his apparent lack of enthusissm\nin support of your dollar devaluation power. No left with members of the\ncommittee the impression that he did not object too strenuously to the\ndeletion from the bill of the dollar devaluation powers provided the\nstabilization fund was continued. This, of course, is exactly what the\nRepublican members of the committee want. The Secretary, in my opinion, fell\nright into the lape of Senators Taft and Dansher. Both of tigee Senators\nknow that if your devaluation of the dollar power is separated from the\nstabilization fund they stand a much better chance to defeat it than if the\ntwo were considered together.\nwith my neagre ability I emphatically took the position that the stabili-\nsation fund and the power of devaluation of the dollar worked hand in glove\ntogether; that one supplemented and complemented the other; that to pass one\nand not the other would be attempting to fly on one wing. I also pointed\nout that for this country to rigidly have the dollar tied to gold in the face\nof an international conference on international exchange would be to place\nthe United States Government st & decided disadvantage with all other countries.\nIf there ever was & time when we needed the flexibility that we have under the\nstabilization fund and under the dollar devaluation power it Le now.\n1 was just advised & for minutes age by Senstor Wagner that Secretary\nMorgenthau had requested him to report out the bill with the dollar devalus-\ntion section eliminated. The Secretary's position seons to be that a debate\nin the Senate over the devaluation power might impede his present bond sales.\nFor that matter, the whole thing could 4° over until his bond drive is\ncompleted, and then the bill could be reported with both sections in it.\nRegraded Unclassified\n139\n- 2 -\nThere is nothing in your whole administration of which you have & right\nto be prouder than your monetary legislation. As a sember of the Senate 1\nconsider it the outstanding achievement of the New -eal.\nI an reluctant to bother you while you are getting a few days needed\nrest, but 1 would be derelict, looking upon this matter as I do, if I didn't\ncall it to your attention before it is too late. If you agree with no you\nshould contact either Senator Wagner or no by telephone at once.\nwith best wishes, I an\nRespectfully yours,\n/a/ AB MURDOCK\nP.S. Since dictating the foregoing, the bill referred to with the dollar\ndevaluation power deleted passed with the assurance of Senator Wagner that\nso far as he was concerned no further effort in this session would be made\nto continue your power of devaluation. Avidently there is nothing that\ncan be done at this time concerning the subject of the foregoing letter,\nbut I am sending it on for what it is worth.\nRegraded Unclassified\n140°\ntreasury department\nPROCUREMENT DIVISION\nOFFICE OF THE DIRECTOR\nWASHINGTON\nSECRE\né\nMay 4, 1943\nMEMORANDUM TO THE SECRETARY:\nThere is submitted herewith the operating report\nof Lend-Lease purchases for the week ended May 1, 1943.\nAppropriation hearings started this morning for\nthe Lend-Lease budget which covers the-period May 1,\n1943, to June 30, 1944, and involves $2,425,478,230\ninsofar as that portion of the budget is concerned\nwhich relates to the purchasing to be done through\nthe Treasury Procurement Division.\nJanes Clifton E. Mack\nDirector of Procurement\nFORVICTORY\nBUY\nUNITED\nSTATES\nBONDS\nAND\nFINDS\n(37861)\nRegraded Unclassified\n141\nSECRET\nLEND-LEASE\nTREASURY DEPARTMENT, PROCUREMENT DIVISION\nSTATEMENT OF ALLOCATIONS, OBLIGATIONS (PURCHASES) AND\nDELIVERIES TO FOREIGN GOVERNMENTS AT U. S. PORTS\nAS OF MAY 1, 1943\n(In Millions of Dollars)\nAdministrative\nMiscellaneous &\nTotal\nU. K.\nRussia\nChina\nExpenses\nUndistributed\nAllocations\n$3084.9\n$1595.7\n$1117.1\n$103.4\n$6.1\n$262.6\n(2961.0)\n(1545.7)\n(1097.1)\n(103.4)\n(6.1)\n(208.7)\nPurchase Authoriza-\n$2537.1\n$1413.3\n$991.5\n$41.6\n-\n$90.7\ntions (Requisitions)\n(2488.2)\n(1393.1)\n(965.0)\n(42.0)\n-\n(88.1)\nRequisitions Cleared\n$2398.3\n$1366.4\n$904.0\n$41.4\n-\n$86.5\nfor Purchase\n(2367.9)\n(1347.6)\n(898.6)\n(41.7)\n-\n(80.0)\nObligations\n$2322.7\n$1330.2\n$870.9\n$41.2\n$5.4\n$75.0\n(Purchases)\n(2288.7)\n(1314.0)\n(855.6)\n(41.5)\n(5.2)\n(72.4)\nDeliveries to Foreign\n$1026.0\n$ 749.8\n$247.7\n$17.6\n-\n$10.9\nGovernments at U. S.\n(1011.7)\n(744.9)\n(238.4)\n(17.5)\n(10.9)\nPorts*\n*Deliveries to foreign governments at U. S. Ports do not include the\ntonnage that is either in storage, \"in-transit\" storage, or in the\nport area for which actual receipts have not been received from the\nforeign governments.\nNote: Figures in parentheses are those shown on report of April 24, 1943.\nRegraded\nUnclass\n142\nSECRET\nEXPLANATION OF DIFFERENCE\nThe reductions in the China column result\nfrom transfers of material in storage to the War\nDepartment. This difference was previously\nabsorbed in the transferred amount.\nRegraded Unclassified\nCECUTIVE 2020\nBy dear White:\nI enclose copies of a statement of British Gold\nand Dollar Exchange Assets and of an estimated Balance of\nPayments for the Sterling Area for the next three months.\nAs you will see they follow closely the form of the notes\nprepared last January.\nNo doubt you v.111 be referring to the detailed\ncomments made in my letter of January 9th. You may care\nto have the following additional notes:-\nTABLE OF ASSETS\nYou will sue that we have shown both the gold\nnd dollar balances net, at the same time showing in the\nlote the further amount of gold and dollars held against\nliabilities which carry with them specific rights on gold\nand dollars res ectively. In the case of our gold holdings,\nthis follows the precedent of the gold borrowed from Belgium\n.nd not repaid. In the case of the dollar balances, this\nseems to us right and propér in view of the fact that a\nsubstantial part of these consist of dollars deposited by\nthe U.S. military authorities, or held on behalf of U.S.\nmilitary personnel.\nI gather that you have some doubts about showing\nthe figures net in this way, and are thinking that they\nshould be shown gross. On this I feel strongly that net\nfigures - with the additional amounts shown as in the\ntables - puts the figures both more fairly and in perspective.\nYe are always faced with the problem of stating our position\nin terms not only of assets but of liabilities. Our balance\nsheet position nas been deteriorating rapidly, and anything\nwhich lays -11 the emphasis on the assets and obscures the\nliabilities misrepresents the real position. For these\nreasons I en convinced that the figures should be so set out\nthat they co not give & false impression of our position.\nIn the case of Item 3, ne have revised our figure\nof U.S. securities to take account both of a rise in values\nand of late registrations, etc. This explains the increase\nshown as compared with the figure given you last January.\nH.D. White,\nrector of Monetary Research,\nUnited States Treasury,\nWashington, D.C.\nRegraded Unclassified\nAD\nthink\nof the\nfigures\nexplanation.\nYou\nmill\nSAB\nout\nany\nsmtedes\nreferring\nto.the\nproduction.\nSuch a sentence , would\nDe\nnool\nDE\nsince we do not know what.output in beli\nposumin\npresent :\ncircumstances and the proportion of it\nwhich we\nHd\nto acquire is even less certain\nVid\nthe think this covers all the additional points\nsay\nDate arisen since we took up the whole question\nJaquary, but of course if there are any other questions\nwould:wish\nto raise, Grant is at your disposition.\nYours sincerely,\nHillips\nEncls\nF. Phillips.\nRegraded Unclassified\ncorresponding\nconversion\ninto\nincrease in gold holdings\nsince\naccounted\nfor\nof\nrepatriated byrthe Covernment of\nRegil\nrepresents dere exchange of - one capi\ndollar balances\nBritish 'Government reports that in addition 10\namounting to 74 million against corresponding\ncistored\nling liabili ties to providesdollers on demand\nthe amount.\nSecurities\n173\nthese securities, the British estimate that only\nillion are readily marketable.\n315\nivate dollar balances\n(This figure is taken from U.S. Treasury data. The British\ntate tha dollar balances in the hands of British banks\nicting as authorized dealers in foreign exchange increased by\n$12\nmillion between January 31, 1942, when they were reduced\nNo an extremely low level owing to the stringency of the\ndollar position, and March 31, 1943.)\nissets pledged against R.F.C. loan (valuation as at date\nof loan)\n$ 500\nU.S. securities\n$205\nDirect investments\n295\nBranches of British insurance companies\n$ 200\n(The earnings of these companies are assigned to R.F.C.loan)\nTrusts in U.S. held for U.K. beneficiaries\n8 290\n(These trusts are established under United States law and\nhence the assets may be unavailable to the British Government.\nTogether with the direct investments pledged or to be pledged\nagainst the R,F.C. loan, including branches of British\ninsurance companies whose earnings are assigned to R.F.C.\nloan, and with Viscose and Brown and Williamson, they account\nfor the estimate of $900 million submitted to Congress in\nJanuary 1941. There are in addition some small investments\nin U.S. enterprises which, because of their size, the\nBritish regard as virtually unsalable.)\nNote: In connection with the foregoing data, the British state:\n\"British holdings of gold and United States dollars\nconstitute a partial cover for obligations and responsibili-\nties of great magnitude and worldwide character. Gold\ncurrently acquired differs from our original stocks in that\nit can be acquired only by further increasing our overseas\nindebtedness. The growth of $432 million during 1942 in our\ngold and official dollar balances must be looked at against\nthe background of a deterioration of nearly $3 billion, or\nover six times as great, in our net overseas capital\nposition in all other respects.\"\nMay 5, 1943.\nRegraded Unc\nUz.\nmillicii\nDollar\nto the United States by the United\nOn British Supply Missions commitments.\n(including administrative expenses\n(In addition $102 will fall due after-June 30\n1943 on B.S.M. commi tments now outstanding\npayment of $87 aillion of which, however\ndoubtful.)\n2. For shipping, interest, film remittances Ste.,2\n3. For other goods and services, urgent or\nineligible for Lend-Lease\nB. Payments to the United States by the rest of the\nSterling Area (principally Empire countries)\n75\nc. Payments to areas outside the United States\nrequiring gold or dollars\n35\nTotal dollar requirements\n295\nDollar Receipts\nA. Receipts from the United States by the United Kingdom:\n1. From merchandise exports\n$20\n2. From shipping and interest\n15\n3. From other items\n95\n130\nB. Receipts from the United States by rest of\nSterling Area:\n1. From merchandise exports\n75\n2. Other items\n85\n160\nC. Dollar receipts from Areas outside U.S\n15\nTotal dollar receipts, excluding newly-mined\ngold\n305\nTotal dollar surplus of Sterling Area\n(principally British Empire), April 1 to\nJune 30, 1943\n10\nTotal dollar requirements\n$295\nRegraded Inclassified\nresenting these figures, the British Treasur\nfollowing statement with respect to the ovuisition\ngold: JNO close estimate of our probable purcha\nOF can be made even for the current quarter\noutput of gold in the Sterling Area is likely to\ndecline\nto\nan extent depending on the demand of manpower\nthe availability of mining plants and stores.\nMay\nPar\nThese figures also include the dollar\nreceipts of non-British members of the\nnamely, Egypt, Anglo-Egyptian Sudan, Iraq,\nCongo and Ruandi-Urundi, Iceland, the Far\nand Fighting French territories in Africa\nSyria, and Lebanon. The net dollar expenditures\nreceipts of these areas are small.\ndosness\nby\nEAGE\nIVEK\nRegraded Unclassified\n148\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE May 4, 1943\nTO\nSecretary Morgenthau\nFROM\nMr. White\nSubject: Lend-Leasing of Silver to United Kingdom Treasury\nThese are the documents in connection with the agreement\nto lend-lease silver of which I spoke to you. The agreement\ncovers the lend-leasing of 3 million ounces of silver to the\nUnited Kingdom Treasury to be returned to the U. S. Treasury\nafter the war.\nIf you approve of this transaction, the Lend-Lease\nAdministration will inform the Senate Special Silver Com-\nmittee and then proceed with the actual transfer of the\nsilver.\nThe documents have been cleared with the General Counsel's\nOffice, the Bureau of Accounts, the Eint. the Treasurer's\nOffice, and with Mr. Bell.\nOrig. File went to White\nRegraded Unclassified\nMEMORANDUM FOR THE SECRETARY\nAs you know, we have been discussing with the Lend-\nLease Administration the question of the lend-leasing of\nsilver to Great Britain for coinage and industrial purposes.\nThe Lend-Lease Administration is now prepared to transfer\napproximately 3,075,000 ounces of silver to Great Britain\nunder the Lend-Lease Act from the stocks of Treasury free\nsilver; and will consider making other such transfers in\nthe future. The United Kingdom Treasury has agreed to\nreturn to the United States Treasury an equivalent number\nof ounces of silver as soon as possible after the end of\nthe existing emergency, as determined by the President of\nthe United States.\nThe silver in question will be transferred on the\nfollowing basis. For every fine troy ounce of silver\ntransferred to Great Britain, the Lend-Lease Administration\nwill transfer 71 1/9 cents from Lend-Lease funds to the\nGeneral Fund of the Treasury. The silver will be returned\nby Great Britain to the Treasury for the account of the\nLend-Lease Administration. The Treasury agrees to purchase\nany silver so returned from the Lend-Lease Administration at\na price of 71 1/9 cents per fine troy ounce unless the laws\nof the United States at the time of receipt of the silver\nprevent such purchase.\nThere are attached the form of letter of understanding\nwhich Phillips, British Treasury representative, will write\nto Lend-Lease and the form of letter which Lend-Lease will\nsubmit to you for your approval.\nIf you approve of this arrangement, Lend-Lease Adminis-\ntration will attempt to clear the matter with the Senate\nSpecial Silver Committee, and if the clearance of this Com-\nmittee is obtained, we will proceed to take the necessary\nsteps to transfer the silver.\nApproved:\n1 kay 5th\n1943.\nsuB\nSecretary of the Treasury.\nAttachments.\nRegraded Unclassified\n150\nThe Monorable 2. R. Stettinius, Jr.\nLend-Lease Administrator.\nSir:\nThe Government of the United Kingdom, through the\nBritish Ministry of Supply Mission, has filed certain\nrequisitions for silver bullion with the Office of Lend-\nLease Administration and may wish in the future to file\nother such requisitions. I understand that, because of\nthe short supply of newly-mined silver available for war\nuses in the United States, the war Production Board has\nrecommended that the requisition which has been filed for\nthree million and seventy-five thousand ounces of silver\nto be supplied before June 1943 or as soon thereafter as\npossible, be filled from the so-called free silver held\nand owned by the United States Treasury. I also understand\nthat if the shortage of new silver continues subsequent\nUnited Kingdom requisitions for silver may have to be filled\nfrom the same source.\nThe Office of Lend-Lease Administration has represented\nthat it is prepared to transfer approximately three million\nand seventy-five thousand ounces of silver to Great Britain\nunder the Act of March 11, 1941 from the stocks of Treasury\nfree silver, provided the United Kingdom Treasury agrees to\nreturn to the United States Treasury an equivalent number of\nounces of silver as soon as possible after the end of the\nexisting emergency, as determined by the President of the\nUnited States; and that your Office will consider making\nother such transfers under similar agreements in circumstances\nin which the criteria of the Lend-Lease Administration for\nproviding aid are satisfied.\nI hereby agroo, on behalf of the United Kingdom Treasury\nthat the United Kingdom Treasury shall return to the United\nStates Treasury, as soon as possible after the end of the\nRegraded Unclassified\n351\n- 2 -\nexisting emergency, as determined by the President of\nthe United States, an amount of silver bullion equivalent\nto the total number of ounces of silver transferred to the\nGovernment of the United Kingdom under the Act of March 11,\n1941 from the stocks of United States Treasury silver.\nVery truly yours,\nSir Frederick Phillips\nUnited Kingdom Treasury\nRepresentative in Washington.\n5/4/43\nRegraded Unclassified\n152\nMy dear Mr. Secretary:\nReference is made to previous correspondence\nbetween your Department and my Office and discussions\nbetween representatives of your Department and my Office\nrelative to the lend-leasing of silver to the Government\nof the United Kingdom for coinage and industrial purposes.\nThe Office of Lend-Lease Administration is prepared\nto transfer approximately 3,075, ounces of sllver to\nthe Government of the United Kingdom under the Act of\nMarch 11, 1941 from the stocks of Treasury free silver,\nprovided that the United Kingdom Treasury agrees to\nreturn to the United States Treasury an equivalent number\nof ounces of silver as soon as possible after the end of\nthe existing emergency, as determined by the President of\nthe United States; and this Office will consider making\nother such transfers under similar agreements in circum-\nstances in which the criteria of the Lend-Lease Administra-\ntion set forth in my letters to you of October 12, 1942,\nand December 23, 1942, are satisfled.\nI an enclosing a letter from Sir Prederick Phillips,\nUnited Kingdom Treasury representative in Washington,\nagreeing to the above arrangement between the Office of\nLend-Lease Administration and the United Kingdom Treasury.\nIt is my understanding that this silver will be trans-\nferred under the Act of March 11, 1941 to the Government\nof the United Kingdom on the following basis. The silver\nwill be delivered to the Procurement Division of the Treasury\nDepartment, for the account and at the expense of the Office\nof Lend-Lease Administration, at such places where the same\nis now held and at such times and in such quantities as the\nDirector of the Procurement Division, on behalf of the Office\nof Lend-Lease Administration, shall from time to time request.\nRegraded Unclassified\n153\n- 2 -\nFor every fine troy ounce of silver transferred to the\nGovernment of the United Kingdom, the Office of Lend-Lease\nAdministration will transfer 71 1/9 cents from Lend-Lease\nfunds to the General Fund of the United States Treasury.\nThe silver will be returned by the United Kingdom Treasury\nto the United States Treasury, at the United States Assay\nOffice in New York, for the account of the Office of Lend-\nLease Adm nistration. The United States Treasury will\npurchase such silver from the Office of Lend-Lease Adminis-\ntration from time to time as the silver is received from\nthe United Kingdom Treasury, at a price of 71 1/9 cents\nper fine troy ounce, unless the laws of the United States\nat the time of receipt of the silver prevent such purchase.\nThe proceeds of such purchases will be received by the\nOffice of Lend-Lease Administration in accordance with\nSection 6(b) of the Act of March 11, 1941.\nIf you approve the foregoing, I shall appreciate it\nif you will sign the attached copy of this letter and\nreturn the same to me.\nVery sincerely yours,\nE. R. Stettinius, Jr.\nLend-Lease Administrator.\nEnclosure.\nThe Honorable,\nThe Secretary of the Treasury.\nJEDuBois:ecr 5/4/43\nRegraded Unclassified\n154\nBRITISH AIR COMMISSION\n1785 MASSACHUSETTS AVENUE\nWASHINGTON, D. C.\nTELEPHONE HOBART 9000\nPLEASE QUOTE\nREFERENCE NO\nWith the compliments of British Air Commission\nwho enclose Statement No. 83 - Aircraft Despatched\n- for week ended April 27, 1943.\nMay 4, 1943.\nThe Honourable Henry Morgenthau, Jr.\nSecretary of the Treasury\nWASHINGTON, D. O.\nRegraded Unclassified\n55\nMOST SECRET\nSTATEMENT NO. 83\nAircraft Despatched from the United States\nWeek Ended April 27th, 1943\nASSEMBLY\nBY\nBY\nFLIGHT DELIVERY\nTYPE\nDESTINATION\nPOINT\nS.A\nAIR\nFOR USE IN CALADA\nCONSOLIDATED\nLiberator GR V\nU.K.\nU.K.\n2\nLiberator GR V\nCanada enroute\nCanada enroute\n6\nLiberator OR V\nBahamas\nMassau\n1\nCatalina IV\nU.K.\nU.K.\n5\nDOUGLAS\nDakota III\nU.K.\nU.K.\n1\nDakota III\nM.E.\nM.E.\n9\nDakota III\nIndia\nIndia\n7\nPAIRCHILD\nCornell PT 26\nCanada\nCanada\n9\nLOCKHEED\nHudson III A\nCanada enroute\nCanada enroute\n2\nGLENN MARTIN\nBaltimore IV\nM.E.\nM.E.\n19\nNORTH AMERICA\nHarvard\nS.'Africa\nDurban\n26\nSTINSON\nReliant\nTrinidad\n5\nTrinidad\nVULTEE\nVengeance\nAustralia\nSydney\n16\nTotal\n42\n57\n9\nBritish Air Commission\nMovements Division\nMay 1, 1943.\nRegraded Unclassified\n156\nMay 4, 1943.\nMy dear General Spalding:\nThe Secretary has received the confi-\ndential copy of \"Supplementary Request for\nSupply to the Union of Soviet Socialistic\nRepublics by the Government of the United\nStates during the Period July 1, 1943, to\nJune 30, 1944\".\nMr. Morgenthau has asked me to thank\nyou for your courtesy in sending this\nmaterial to him.\nSincerely yours,\n(Signed) H. S. Klotz\nH. S. Klots,\nPrivate Secretary.\nBrigadier General S. P. Spalding.\nUnited States Army,\nThe President's Soviet Protocol Committee,\nWashington, D. c.\nGEF/dbs\nFile in Diary\nRegraded Unclassified\n157\nTHE PRESIDENT'S SOVIET PROTOCOL COMMITTEE\nWASHINGTON\nMay 1, 1943.\nThe Honorable\nThe Secretary of the Treasury\nDear Mr. Secretary:\nBy direction of the Chairman of the\nPresident's Soviet Protocol Committee, there is\nforwarded a copy of \"Supplementary Request for\nSupply to the Union of Soviet Socialist Republics\nby the Government of the United States during the\nPeriod July 1, 1943 to June 30, 1944\" (Third Soviet\nProtocol).\nSincerely yours,\nS. P. SPALDING,\nBrigadier General, U.S.Army.\n1 Inclosure -\nSupl.Req.\n4-29-43\nCONFIDENTIAL\nRegraded Unclassified\n158\nCONFIDENTIAL\nSUPPLEMENTARY REQUEST\nFOR SUPPLY TO THE U.S.S.R.\nBY THE\nGOVERNMENT OF THE UNITED STATES\nDURING THE PERIOD\nJULY I, 1943 TO JUNE 30, 1944\n(Submitted April 29, 1943)\nRegraded Unclassified\n151\nCONFIDENTIAL\nSUPPLEMENTARY REQUEST\nFOR SUPPLY TO THE U.S.S.R.\nBY THE\nGOVERNMENT OF THE UNITED STATES\nDURING THE PERIOD\nJULY 1, 1943 TO JUNE 30, 1944\nProcurement Agencies:\nA\n- Dept. of Agriculture\nN\n- Navy Department\nWD\n- War Department\nWPB\n- Wer Production Board\nMaritime - Maritime Commission\nPAW\n- Petroleum Administra-\ntor for War\n(Submitted April 29, 1943)\nRegraded Unclassified\n160\nCONFIDENTIAL\nThe Government Purchasing Commission\nof the Soviet Union in the U. S. A.\n3355 16th Street, N.W.\nMajor General A. I. Belyaev\nWashington, D. C.\nChairman\nApril 29, 1943\nBrig. General Sidney P. Spalding, Acting Executive\nMunitions Assignment Board\nRoom 149, Combined Chiefs of Staff Building\n1901 Constitution Avenue, N.W.\nWashington, D. C.\nDear General Spalding:\nIn view of recommendations made by various United\nStates government agencies that details be specified with\nregard to some items of the Third Program recently sub-\nmitted to your Government by my Government, I am sending to\nyou herewith a list embodying these changes, additions and\nsome of the details requested.\nAgain I would like to emphasize that all equipment,\nrequisitions for which have been approved by the United\nStates Government during the Second Protocol period, but\ndelivery of which extends beyond the term of this Second\nProtocol, should be delivered during the period of the Third\nProtocol in excess of the items specified in the Third Program.\nI hope that this supplement will receive the favor-\nable consideration of your Government.\nSincerely yours\n/s/\nA. I. Belyasv\nMajor General, J.S.S.R. Army\nChairman\nRegraded Unclassified\n111\nCONFIDENTIAL\nsupplementary REQUEST\nFOR SUPPLY TO THE UNION OF SOVIET SOCIALIST REPUBLICS\nBY THE GOVERNMENT OF THE UNITED STATES\nDURING THE PERIOD JULY 1, 1943 TO JUNE 30, 1944\nThis supplementary request is made in response to recom-\nmendations of the Lend-Lease Administration, Army, Navy and\nothers who have recently considered the Third Program of\nSupply submitted by the Government of the U.S.S.R., for the\npurpose of determining the commitments to be made under this\nThird Program.\nGROUP I - ARMAMENTS AND MILITARY EQUIPMENT\nWD\nItem 1.\nChange to:- Spare Engines and Propellers for two-motor\nplanes - 30% per motor or 60% per two-motor\nplane;\nInstead of:- Spare Engines and Spare Propellers - 30% of\nnumber of planes.\nNaval Stores.\nAdd:-\nMar-\nItem 10.\nSchooners, Barges for Oil and Dry Cargo, and\nitime\nTugs - total of 180 units, as specified in\nlist attached hereto.\nN\nItem 11.\nMiscellaneous Equipment for U.S.S.R. Navy and\nMerchant Marine ships, as specified in lists\nattached hereto.\nGROUP II\nPAW\nItem 32. Petroleum Products.\nChange to read:- Quantity requested - 514,000 long tons,\nas specified in list attached hereto;\nInstead of:- 360,000 long tons originally requested in\nthe Third Program.\nWPB\nItem 27. Rails with Accessories.\nChange to read:- Quantity requested - 500,000 long tons\nof 75 lbs. per yard, for delivery in\nequal monthly quantities during the\nperiod July 1, 1943 to June 30, 1944,\nAlso, an additional quantity of 300,000 long tons of\nrails with necessary accessories are requested\nfor delivery to the U.S.S.R., in equal monthly\nquantities, during the period July 1, 1944 to\nNovember 30, 1944.\nThe above quantities of rails with accessories are re-\nquested instead of the carbon steel items indicated in\nthe original Program of Supply for the Third Protocol\nPeriod.\n- 1 -\nRegraded Unclassified\n162\nCONFIDENTIAL\nSupplementary Request\nGROUP III - INDUSTRIAL EQUIPMENT\nAdd:-\nWPB\nItem 10. Industrial Plants, in accordance with list\nattached hereto.\nAdd to Specification for \"Various Industrial Equipment\":-\nParagraph 10. Automatic Block Signal System for\n2,140 kilometers.\nGROUP V - FOOD PRODUCTS\nA\nItem 4.\nDelete Item 4, Meat Products, and instead increase\nquantity requested under Item 3, Canned Meat, to\n420,000 tons in place of 220,000 tons originally\nrequested.\nOther Products, as specified in list attached hereto -\n73,350 tons.\nTo be supplied against Item 1 of this Group.\nRegraded Unclassified\n163\nCONFIDENTIAL\nMar- NAVAL STORES - ITEM 10 - SCHOONERS, BARGES FOR OIL AND DRY\nitime\nCARGO, AND TUGS\nA. For Caspian Sea\n1. Steel seagoing standard tugs, with draft\n10-11 feet, power capacity 900-1,000 H.P\n7 units\n2. Steel self-propelled seagoing standard\nbarges for oil, with draft not exceeding\n12 fect, total cargo capacity 42,000 tons,\ncargo capacity of about 1,900 tons each\n22 units\n3. Steel seagoing standard barges for dry\ncargo, with draft not exceeding 11 feet,\ntotal cargo capacity of 38,000 tons, cargo\ncapacity of about 1,900 tons each\n20 units\nNote: All ships mentioned in this section \"A\"\nshall be delivered in fabricated products,\nfor assembly on the coast of the Caspian\nSea.\nB. For Far East\n1. Steel seagoing standard tugs, with draft\n15-16 feet, power capacity 900-1,000 H.P.\n3 units\n2. Steel self-propelled seagoing standard\nbarges for oil, with draft 15-16 feet,\ntotal cargo capacity of 6,000 tons\n3 units\n3. Steel self-propelled seagoing standard\nbarges for dry cargo, with draft 15-16\nfeet, total cargo capacity of 10,000 tons\n:\n5 units\n4. Wooden self-propelled seagoing standard\nschooners for dry cargo, with draft 15-16\nfeet, total cargo capacity of 120,000 tons,\ncargo capacity of about 1,000 tons each\n120 units\nNote: All ships mentioned in this section \"B\"\nshall be delivered fully complete.\nTotal\n180 units\nRegraded Unclassified\n164\nCONFIDENTIAL\nN NAVAL STORES - ITEM 11 - ELECTRICAL EQUIPMENT FOR\nU.S.S.R. NAVY\n1. Generators with Controllers, 1.5 - 25 KW\n500 units\n2. Generators with Controllers, 25 - 100 KW\n250 units\n3. Motor-Generators, with Controllers, 1 - 10 KW\n. .\n100 units\n4. Motor-Generators, with Controllers, 10 - 15 KW\n25 units\n5. Electrical Motors with Controllers, 0.5 - 25 HP. .1000 units\n6. Electrical Motors with Controllers, 25 - 100 HP\n25 units\n7. Storage Batteries for Submarines\n65 units\n8. Instrument Gages, Tachometers, Lighting Fixtures,\netc\n$1,000,000.\nTotal\n1965 units\nRegraded Unclassified\n165\nCONFIDENTIAL\nN\nNAVAL STORES - ITEM 11 - ELECTRICAL AND MISCELLANEOUS\nEQUIPMENT FOR MERCHANT MARINE\n1. Dicsel-Gonerators, D.C. 3.5 - 30 KW\n340 uni\n2. Diesel-Generator Compressors, 15 - 30 KW\n60 units\n3. Diesel-Generator Pumps, 1.5 - 3.5 KW\n145 units\n4. Steam Boilers, 90-120 pounds per inch 16 sq. meters,\nfor heating, complete with feeding pumps\n20 units\n5. Electrical Centrifugal Pumps, 10 - 70 ton/per hour. 210 units\n6. Electrical Piston Pumpa, 20 - 300 ton/per hour\n235 units\n7. Worm Driven Pumps for 011, electrically driven.\n100 units\n8. Hand Operated Compressors, 2 mt per hours\n700 units\n9. Engine Telegraphs - commercial type\n430 units\n10. Electrical Steering Engines, Windlasses, and Winches-\n300 units\nTotal\n2540 units\nRegraded Unclassified\n166\nCONFIDENTIAL\nPAW\nGROUP II - ITEM 32 - PETROLEUM PRODUCTS\na) Blending Agents for Aviation Gasoline\n204,000 long tons\nDelivery: two tankers per month\ncommencing July, 1943.\nb) 100-Octane Aviation Gasoline\n300,000\nIf\nn\nDelivery: three tankers per month\ncommencing July, 1943.\nc) Various Grades of Lubricating 01ls\n5,500\nIf\nIf\nd) Cerezine Wax\n2,000\n11\n\"\ne) Additives for Lubricating Oils\n1,500\nIf\n\"\nf) Tetraethyl Lead Liquid\n1,000\n11\n\"\nTotal Requested\n514,000 long tons\nTo effect delivery to the U.S.S.R. of the petroleum products\nin quantities as specified herein, the Government of the\nU.S.S.R. requests that the United States Government furnish\nto the U.S.S.R. 7 or 8 additional tankers, in excess of\nthose which have already been given to the U.S.S.R. during\nthe Second Protocol period.\nRegraded Unclassified\n167\nCONFIDENTIAL\nWPB\nGROUP III - ITEM 10 - INDUSTRIAL PLANTS\nI. Plants for the production of synthetic rubber and\nalcohol:\nWPB\n1) 20,000 tons per year of butadiene (divinil)\nfrom oil products and oil gases.\nWPB\n2)\n7,000 tons per year of styrene (sterol)\nWPB\n3) 25,000 tons per year of synthetic rubber \"Buna S\"\nWPB\n4) 10,000 tons per year of synthetic rubber -Neoprene\nWPB\n5)\n3,000 tons per year of butyl rubber\nWPB\n6) 20,000 tons per year of synthetic alcohol from\nethylene\nAll plants should include complete main and auxiliary\nequipment.\nWPB\nII. Plant for production of 47 tons per day of cord and\n8 tons per day of chefer.\nPAW\nIII. Plant for production of toluene, 20,000 - 30,000 tons\nper year.\nPAW\nIV. Two catalytic cracking units for the production of\naviation gasoline - 100,000 tons per year each unit.\nPAW\nV. 1 catalyst plant for the production of catalyst for\nHoudry units.\nPAW\nVI. Sufficient Petreco Desalting Units for the aviation\nlube oil plant and for those oil refinery plants\nordered in 1942 for which Petreco Desalting Units\nare needed.\nWPB\nVII. Plant for the production of Phenol.\nRegraded Unclassified\n168\nCONFIDENTIAL\nA\nGROUP V - FOOD PRODUCTS\nOTHER PRODUCTS\n73,350 tons\nTo Include:\na) Concentrated Soups and Cereals\n10,000 tons\nb) Dehydrated Vegetables\n10,000 If\nc)\nTomato Paste\n10,000 \"\nd)\nConcentrated Juices\n2,000 \"\ne) Cheese\n15,000 \"\nf)\nCondensed Milk\n12,000 \"\ng) Vitamins:\nAscorbic Acid\nRiboflavin\nAneurin\n---\n)\n50 If\nFish Liver Oil (Vit.\"A\")\n~~\n62 M.M. U.S.P. Units\nCarotene\n(or approximately\n100 tons)\nh) Yeast:\nBakery Yeast\nYeast Tablets (Vitaminized)\n--\n1,200 tons\n1) Vegetable and 011 Seeds\n2,100 tons\nj) Field Seeds\n10,000 tons\n1,000 tons\nk) Spices, miscellaneous\nTotal\n73,350 tons\nRegraded Unclassified\n169\n901 Mr. Livesey\nFrom Mr. White\nwill you please send the following eable to the American\nEmbassy, Changicing, Chinas\n\"FOR ADISE FREE THE SE CENTARE or THE THEASURY\nReference your cable of April 22, 1943, 22-210.\nFor your personal and confidential infermation and imediate\nreply, and not to be discussed with the Chinase Government authorities.\n1. Please describe in more details if pessible, the enrongemento\nreferred to in Paragraph (a) of your cable and elerify the maning\nof the last serbence, \"After the mp the account would be cottled.\"\n2. Yes the Doard approved the Ministry of Finance's properal?\n3. The Treasury would appreciate having your view w the Maistary\n1 I I 1 Y N E Promotes I E\nof this proposally have you thereity - - recerd - agreeding that\n1 $ I I 1 an & I\n1 Thanks r I In I 1 8 # and s I\n1 1 I I $ r 1 a s I\nthe granting of special - to special purposes?\nIEF/ete 3/4/13\nRegraded Unclassified\nis\n170\nNOT TO BI RE-TRANSMITTED\nASURY\n\"\nmy\nBRITISH MOST SECRET\nG\nU.S. SECRET\nOFFICE\nMAY DEP TREASURY\nCOPY NO. 13\nOPTEL NO. 146\nInformation received up to 7 a.m., 4th May, 1943.\n1. NAVAL\nThe cruiser NURNBERG, escorted by 2 destroyers was sighted\nyesterday morning by Coastal Command Aircraft 44 miles northeast of KIEL on a\nsoutherly course.\n2. MILITARY\nU.S. troops have occupied MATEUR. Details not yet available.\nOn remainder of front nothing to report except active patrolling and regrouping\nof forces.\n3. AIR OPERATIONS\nWESTERN FRONT. 3rd. 12 Venturas and 6 Bostons escorted by\nFighters were sent to attack objectives in HOLLAND, including the power station\nat IJMUIDEN, where bombs were seen to burst on the target. Our Fighters destroyed\n3 enemy Fighters in these operations and 2 more during a sweep over BELGIUM and\nNorthern FRANCE. 11 Bombers and 2 Fighters are missing, 3rd/4th. Aircraft\ndespatched: Leaflets - 8, Intruders - 9.\nTUNISIA. lst. 21 escorted Bostons attacked enemy positions\nsouthwest of MASSICAULT and 12 Spitfires bombed the railway south of the town.\n12 Spitfires met 15 ME 110's and 8 ME 109's approaching TUNIS. Enemy casualties\n7, 1, 3.\nBURMA. 29th. U.S. Liberators dropped 18 tons on RANGOON docks,\n30th. U.S. Mitchells dropped 10 tons on GOKTEIK Viaduct. 2nd. 11 Blenheims\nhombed oil installations in the INDAW area. 15 escorted enemy bombers attacked\nDOMAZARI Airfield near CHITTAGONG.\nRegraded Unclassified\n171\nMay 5, 1943\n10:22 A. \".\nHMJr:\nHello.\nOperator: Mr. Doughton. Go ahead.\nHMJr:\nHello.\nRobert\nDoughton: Hello, Henry. How're you feeling?\nHMJr:\nWell, I'm alive and kicking.\nD:\nWell, you - you're kicking pretty high as usual,\nI hope.\nHMJr:\nWell, we've - we've almost got 18 billion dollars\nin this drive, which makes me feel pretty good.\nD:\nThat's fine. That's fine, isn't it?\nHMJr:\nAnd\nD:\nWhat we raise in taxes won't be to pay beck, will\nit?\nHMJr:\nWell, uh\nD:\nYou made a wonderful success of your Bond Drive,\nand I want to congratulate you.\nHMJr:\nThank you. They told me you called me this morn-\ning.\nD:\nYes, I called you up. First I'd - I called Mr.\nPaul and he wasn't in and then I thought I'd\nspeak with you. I just wanted to see how you\nwere pleased with what happened yesterday.\nHMJr:\nWell, I'm kind of bewildered. I just haven't\nbeen able to analyze it yet.\nD:\nWell, I BPW that - from the morning papers that\nMr. Paul had already conferred on his blessing -\nhis blessing on it.\nHMJr:\nWell, I don't think he had because - as far 88\nI - A8 far as I know, we talked over things and\nwe decided, he and I, we wouldn't talk to any\nnewspaper men.\nRegraded Unclassified\n- 2 -\n172\nD:\nI didn't see it, but Mr. Stamm told me it was\nin the Times Herald this morning. That - Paul\nhad seid essentially, since we - the House took\naction yesterday, that the Forand-Robertson Bill,\nor whatever bill Was adopted, was acceptable to\nthe Treasury.\nHMJr:\nWell, I - - I ques\n- what paper was that in?\nD:\nThe Times Herald.\nHMJr:\nWell, never believe anything you see in that.\nBut Paul and I both agreed until we could catch\nour breath we wouldn't talk to any newspaper men,\nand he's always very careful to carry out those\nagreements.\nD:\nHe 18?\nHMJr:\nNow, I think that the - well\nD:\nI thought to make that\nHMJr:\nNo\nD:\nstatement that quick in view\nHMJr:\nNo.\nD:\nof the fect that some of us had to vote against\nthat yesterday was\nHMJr:\nDid you see the cartoon about you and me in the\neditorial in the Times Herald yesterday?\nD:\nNo. (Laughs) I didn't see it. I don't ever -\nhardly ever read those things, you see.\nHMJr:\nWell, that - that WAS AR nasty BB anything that I\never saw. They had 8 picture there of P building\nwith a pewn-broker's sign over it and one side WAB\na Doughton Annex and the other side was e Morgen-\nthau Annex\nD:\nYes.\nHMJr:\nand it was just about P8 dirty AB - no, I'm\nsure Paul didn't say anything - end - because he\nand I agreed that we wouldn't.\nRegraded Unclassified\n- 3 -\n173\nD:\nI've got 80 that I almost feel like that\nanything said against me in that paper and\nthe New York Times is about the highest com-\npliment that can be paid me.\nHMJr:\nYeah, you and me both.\nD:\nYeah. So you ought to be - they're so rotten;\nyou know, and 80 lying - of course, some of the\nnewspapers - yesterday in the - in the yester-\nday's New York Times said that I - when I was\nasked some question there by Hoffman, I said\n\"Oh, hell\", but I never thought of saying it,\nyou know, and everybody knew I didn't say it.\nHMJr:\nNo, frankly, I was 80 bewildered that I - and\nthe thing that I went home last night and I\nreally didn't know until this morning what had\nhappened.\nD:\nWell, the truth of it is, you know, that the\nRepublicans are 80 - were taking it so hard,\nthe defeat over the Ruml Plan, that they jump-\ned anything they thought would give them a\nhalf victory.\nHMJr:\nYeah.\nD:\nSee, they joined right in with a handful of\nDemocrate, you know, to pass the Robertson-\nForand Bill that they'd voted against every\ntime in the Committee, and it was doubtful\nto me that they ever would support it just\nvoluntarily. I never asked them, but they\nhad rough driving even much - much rougher\nthat I ever had.\nHMJr:\nNo.\nD:\nBut, Joe Martin, you know, ordered them to sup-\nport it, and they went along.\nHMJr:\nWell, you saw that statement the Treasury gave\nout to the press supporting your bill.\nD:\nI did, and I appreciate it very much.\nHMJr:\nWell, that was instigated by Paul - I mean he\ncalled me up from San Francisco and asked me\nwhether I wouldn't like to do that\n....\nD:\nYee.\nRegraded Unclassified\n- 4 -\n174\nHMJr:\nand he said it would be very pleasing to you,\nand I said, \"Well, if it will be pleasing to you,\nlet's do 1t\" - and that was hie idea and\nD:\nWell\nHMJr:\nfrom that day to this, I haven't said anything\nto any newspaper men and we work as 8 team at this\njob.\nD:\nI couldn't hardly think- if he did I- I thought Paul\nmust have done it rather hurriedly to say that - of\ncourse, it may be acceptable. I don't know.\nHMJr: No, no, no. Well, I don't even know what's in the\ndamn bill.\nD:\nThere's one thing that I - - if he's down on the Hill\nany time today that I would like to know - probably\ngoing, to, talk to you about it too, one of these days.\nThere's something been very mysterious about that pro-\nposition from the first, that I'm going to talk to you\nabout.\nHMJr: Well\nD:\nI think somebody's been fooling you and me both, try-\ning to.\nHMJr:\nReally?\nD:\nI don't know. I just haven't got the\nI\nknow that you and I can understand each other.\nHMJr:\nYeah.\nD:\nWe don't always agree but we can always understand\neach other and respect each other.\nHMJr:\nThat's right.\nD:\nWe always have and always will.\nHMJr:\nWell, would you like Paul to drop in and see you?\nD:\nI wouldn't care if he did.\nHMJr:\nYou\nD:\nI - I - are they - they're going to take that bill\nup tomorrow, ain't they?\nHMJr:\nYeah.\nRegraded Unclassified\n- 5 -\n175\nD:\nIf he could come down sometime today. We're going\nover this reciprocal trade report this morning- if\nhe could drop down some time\nHMJr:\nI'll tell him.\nD:\nthis afternoon. Tell him to call me a little\nwhile before 80 we can fix the time I - I'd better\nsee him over at - at the Committee Room in the\nCapitol.\nHMJr:\nI'll tell him. I'll get word to him.\nD:\nThank you, Henry.\nHMJr:\nAll right.\nD:\nThank you for calling.\nHMJr:\nThank you.\nD:\nGoodbye.\nRegraded Unclassified\n76\nMay 5, 1943\n10:45 a.m.\nFINANCING - ORGANIZATION PLANS\nPresent: Mr. Bell\nMr. Robbins\nMr. Peabody\nMr. Buffington\nMr. Gaston\nMr. Graves\nMr. Gamble\nMr. Odegard\nMiss Elliott\nH.M.JR: They are just pouring it on me. Sproul\nwrote me a letter about how we didn't give you (Robbins)\n8 chance, and people went around behind your back, and 80\nforth, and so on, a lot of stuff. Then he went after me\non my Portland speech. Now how would Sproul get my\nPortland speech?\nMR. GASTON: It was on the radio. I suppose he must\nhave gotten a transcript.\nH.M.JR: But how would he get the Portland speech?\nMR. ROBBINS: The Portland speech was circulated in\na mimeographed copy. I received a mimeographed copy.\nH.M.JR: He goes on - when I talk about getting the\nthing through unions - he quotes that part about clubs and\nsocieties and says, \"Don't bankers also send their sons to\nwar?\" I mean, it is a highly emotional letter, and, after\nall, I was talking to eight thousand laboring people and\nI wouldn't give them the same kind of speech I would when\nI appeared before the American Bankers.\nas 8 matter of fact, I didn't sleep last night on account of\nI think personally - as I say, this letter of Sproul's -\nit. This thing seems to be running awfully deep, that\nRegraded Unclassified\n77\n- 2 -\nbecause I want 8 State organization I am being political;\nbut just as long as I have ninety percent Republicans in\nthe organization it is all right. I am not being personal.\nBut just because I want a State organization, I am\nbeing political. I think it is just nonsense. I can't\ncombat this kind of thing unless I am physically well -\nfeeling well. I mean, I can't take on Sproul and all of\nthese people unless I am physically well, because it is\njust too hard work, that is all. But to write me a letter\nand say that because I want a State organization or am\nleaning toward a State organization, that is being political\nI just can't understand it.\nMaybe there are a lot of politics in this thing that\nI don't understand, because I am not a politician. And\nwhy somebody - I mean, the best news that happened - of all\npeople, the people I have working for me, why some people\ndidn't read Senator George's speech in advance of my seeing\nhim today is beyond me. I mean, with all the people I have\nworking in the Treasury, and why somebody didn't read Senator\nGeorge's speech before the Chamber of Commerce to me is\njust - it would have saved me a lot - let me read you one\nparagraph in here. He said he enlarged on this thing.\n\"A system of encouraging the purchase of war bonds out of\nthe current earnings is preferable to 8. scheme of compulsory\nsavings.\" This is in George's speech before the Chamber of\nCommerce.\nNow, with all the people on publicity and public rela-\ntions that we have, why somebody couldn't read a thing like\nthat and bring it to my attention is beyond me.\nMR. PEABODY: When was the speech made?\nH.M.JR: This is the New York Times of April 30. He\nwas in here for an hour and a half this morning, and we took\nhim in there - I had Gamble and Tickton, and took him all\nthrough the things. Of course, it made kind of an ass out\nof me not having had this brought to my attention. When we\ngot all through and done he said to me, \"Henry, I just want\nto let you know that I have come to my decision. I suppose\nRegraded Unclassified\n178\n- 3 -\nyou have seen my speech in New York\" - and I said, \"No,\nI am sorry I haven't,\" and he said, \"This thing has gone\nso far that as far as I am concerned compulsory savings\nis out of the window.\"\nHe said, \"In order to do compulsory savings and get\nthe results you get, we would have to go to twenty billion\ndollars, which, of course, is out of the question, because\nthe best we can get out of Congress is five billion.\"\nNow, it happened - but I mean, it sort of made me\nawful dumb, having him in here this morning and somebody\nin the Treasury not having brought that to my attention.\nI can't understand it.\nBut I was saying that this letter from Sproul has gotten\nme so mad. It came in late last night. I don't think I\nought to make any decision. I am mad, and I am tired, and\nwhen I am like that I don't want to make any decisions. I\nlay in bed this morning from three to four thinking how to\nanswer Sproul. I was going to have him come down Friday,\nbut I don't think I will have him come down. I could, for\ninstance, say to him - I would have just as much sense in\nmy statement as he had to say, \"well, when I went to Carnegie\nHall you had the loud-speaking system arranged 80 nobody\ncould hear me.\" That would have just as much sense 88 the\nthings he said in his letter to me. \"It was a plot. You\ndidn't want anybody to hear me, 80 you had the loud-speaker\narranged 50 they couldn't.\" It would make just 85 much\nsense as what he said.\nI just think - I mean, let me ask the people something,\nbecause I never make a decision when I am not on an even\nkeel. I am not on an even keel now, and the Sproul letter\nwas the last thing to upset me.\nI sent word to you (Graves) that I didn't want to see\nthis fellow from Indiana - there is no use my doing this stuff.\nSupposing for a week I rest on my oars? What would\nhappen, Bill, as far as pay-roll allotment and all that stuff\nin the War Bonds - what would happen?\nMR. ROBBINS: They are moving along just as they did\nprior to the April campaign.\nRegraded Unclassified\n179\n- 4 -\nH.M.JR: Will they go ahead and sell? Will that\nthing be pushed?\nMR. ROBBINS: Sure. Harold, everything is moving\naccording--\nH.M.JR: Since we gave them the quota?\nMR. GRAVES: Oh, yes, we will be as we were before.\nMR. ROBBINS: We are as we were before, aren't we,\nHarold?\nMR. GRAVES: Yes.\nH.M.JR: The tragic thing here is, we have gone out\nand gotten eighteen billion dollars; and instead of every-\nbody feeling fine and happy and letting me feel fine and\nhappy - as I did on the trip, and the way I am going to\ntry to tomorrow night if I can get myself in the frame of\nmind - they have got me feeling as though I had done\nsomething wrong, as though I was trying to be political,\nas though I was trying to fight somebody, and so forth, and\nso on.\nNow the whole time I was on the trip, you (Gaston)\nknow, and you (Peabody) know everything was nice, wasn't\nit?\nMR. PEABODY: Yes.\nH.M.JR: I even laughed at San Francisco, didn't I?\nI kidded, Herbert, and I said, Well, I think it is funny,\ndidn't I?\nMR. PEABODY: Yes.\nH.M.JR: I didn't take it to heart, did I? I mean,\nI laughed about it.\nMR. GASTON: No, you didn't.\nRegraded Unclassified\n- 5 -\nH.M.JR: I said, \"The best thing of all that happened\nat San Francisco was when they let me pay for my own break-\nfast,' and 1 kidded about it. I said, \"That makes me feel\ngood.\"\nMR. PEABODY: Wasn't that the morning I bought your\nbreakfast? (Laughter)\nH.M.JR: Not that morning.\nMR. PEABODY: That was Dallas.\nH.M.JR: That was the morning we almost left Herbert\nbehind. But Herbert was there, and when he didn't pay\nfor my breakfast I said, \"That really makes me feel good.\"\nNow I come back and there is this sudden animosity\nand all that. I don't understand it. I can't work in that\nkind of an atmosphere. If I did work, I would do something\nI might be sorry for. I can't think clearly because - I\nmean, this writing me, \"Don't the bankers also send their\nsons to war,\" and things like that - \"Aren't they people,\"\nand that kind of stuff--\nMR. GASTON: I think this, Mr. Secretary, that the\ngains of this cooperation that we had in practically all\nStates between the Victory Fund group and the War Savings\ngroup outweigh any minor friction that may have developed.\nI think there was a net gain in cooperation on this cam-\npaign. Don't you feel so, Bill?\nMR. ROBBINS: Of course I do very strongly, Herbert,\nand one of the reasons that I have continued to feel that\nwe want one organization rather than two is where I have\nseen the success of the merged groups.\nH.M.JR: I mean to say, there is some kind of an under-\ntone here which I don't understand, and I haven't got strength\nto send for Sproul and sit down and have a three-hour knock-\ndown drag-out fight with him. I just haven't the strength.\nI don't think I should do it.\nRegraded Unclassified\n101\n- 6 -\nMR. ROBBINS: Mr. Secretary, of course it is well known -\nhow and why I don t know - that the Treasury Department here\nis not favorably inclined towards the banking fraternity. I\nmean, that is 8 fact in the field today. Now maybe this is\njust a culmination of the recognition of that knowledge by\nthe bankers and manifests itself through the mouth of one\nindividual.\nH.M.JR: Well, there are so many things - I go up on\nthe Hill, and I have recommended for three years or four\nyears that we do away with bank holding companies, which I\ndon't believe in. Well, they fill up - here is the joke of\nit - the people in the War Savings Staff in New York - now\nI am talking about the War Savings Staff - out of the\nbiggest chain of banks that we have in the East - which is\nwhat, the Marine Midland? - and they load me down with that,\nand it is known, I mean, that I don't believe in it. I\nsay it is & menace. You take away your local interest,\nyour local control - I said all that, and they know it. I\nam just using that as an example. They know I won't issue\nany more branch banks in Michigan. We are talking here--\nMR. ROBBINS: By the same token, sir, you have never\nleft any impression with me other than you know that the\nbankers have 8 very definite and important part in this\nfinancial job.\nH.M.JR: And I have said to you that it would be the\nheight of stupidity not to use them where all of their\nincentive should be, to seil to individuals so that the banks\nwould buy less. I have never said anything in the room here\nthat I wouldn't say before the ABA.\nThe best thing - the first time that the bankers have\ngotten back in the good graces of the public is by riding\nthe back of War Bonds - I mean, going back 8 year and a\nhalf to two years ago, by getting on that and giving their\npublic service. I gave them the most marvelous thanks before\nthe American Bankers Association a year or a year and a half\nago, and I meant it. It put them back again in the position\nthat they were in before the bank crisis, and they know it.\nI told them so, and they admitted it.\nRegraded Unclassified\n162\n- 7 -\nI have no animosity. I have no feeling of animosity\nagainst the banker. I don't want them to run the country.\nI make no bones about it. I am here representing a hundred\nand thirty-five million people, and I an not going to turn\nthe control of the finances of this country over to them.\nMr. Roosevelt has been reelected three times on that platform.\nI am here as his agent, and I am not going to turn it back\nto them, but there is no feeling of animosity on my part.\nI told Bell that, and Bell knows it - that we have no\ndifferences. I don't believe there should be - I don't\nbelieve in bank-holding companies. I think it is bad.\nI don't believe when a bank like the Bank of America\ngets behind six hundred branches that they should have any\nmore. But the only kind word 1 had in San Francisco was\nfrom the Bank of America. (Laughter) The only pleasant\nword I had in San Francisco was from Mr. Kelly, senior\nvice president of the Bank of America.\nMR. ROBBINS: It seems to me you put your finger on\nthe whole crux of our whole organization problem here in\nthis discussion of the banks' attitude towards their parti-\ncipation in war finance and what they think the attitude of\nthe Treasury Department is toward them. I think that really\nis the nub of our organization problem.\nMR. GAMBLE: Don't you think that this implied threat\nby the leaders is a red herring? Don't you think that the\naverage American banker feels the same way about this\nprogram as the average American retailer?\nMR. ROBBINS: Sure.\nMR. GAMBLE: This is nothing but a question of wanting\nleadership.\nH.M.JR: This is like Mr. Ed O'Neal, whom I know\nintimately - talking here as though he represented the\nfarmers. Then you go into Iowa and sit down and talk\nto 8 farmer in Iowa who is a member of the American Farm\nBureau Federation - I am a member of the Farm Bureau\nFederation - have been for years. I talked for them just\nRegraded Unclassified\n183\n- 8 -\nthe way this fellow from California talks for the California\nGrowers.\nMR. ODEGARD: This animosity, Mr. Secretary, I am sure\nis confined to a very small segment--\nMR. GAMBLE: You can count them on your two hands.\nMR. ODEGARD:\n...\nbecause our cooperation from the\nbeginning of this program from the banks has been cordial\nand friendly and all-out. I am just perfectly confident\nthat you could name on the fingers of almost one hand -\ncertainly two hands - the source of all this animosity\namong the banking fraternity.\nMR. BELL: I have seen an awful lot of bankers in the\nlast year come into my office, just individually, to say\nhow do you do. I have yet to see one come in and criticize\nthe Treasury. They have nothing but praise for the way this\nfinancing has been handl and the way the banks have been\ntreated in the whole picture.\nMR. GAMBLE: My opinion is that they will work on any\nprogram you set forth, however you set it forth, and you\nwill have ninety-eight percent with you in any direction\nyou decide to go. You won't have the other two percent\nunless you do it their way.\nMR. BUFFINGTON: On the branch bank question, I don't\nthink if you checked with a hundred corporations that one\nof them would disagree with you on the holding system. The busi-\nnessmen of the country are with you a hundred percent.\nH.M.JR: I think most of the bankers are, too.\nMR. BUFFINGTON: Sure, the people and the bankers.\nH.M.JR: But you are asking what the things are.\nThe only public stands I have taken are on bank-holding\ncompanies and extending of branches in Michigan and\nCalifornia. Like all of these things - I mean, your\nposition is only tenable when you have the people that\nRegraded Unclassified\n184\n- 9 -\nmake the laws with you, and the Congress of the United\nStates knows just where I stand on branch banking, and\nhas done nothing - notwithstanding the high-paid lobby -\nto try to undermine me. You can take a position on all\nof these things, but your position can very quickly disappear\nin thin air if Congress says you are wrong. It is just the\nsame thing - here they had this meeting Friday in Jimmy\nByrnes' place, and the thing was absolutely stacked against\nme, that they were going to have compulsory savings.\nThe job that the combined effort has done here has\nfinally won out, and Doughton is in my corner one thousand\npercent. Walter George walks in here this morning and says\nto me, \"Henry, as far as I am concerned you people have\ngrown so in strength I think compulsory savings is out the\nwindow.\" That makes me happy. It means that all the work\nthat we have done here and the position that I have tak en\nagainst - what I call, for lack of a better name - the\nleft wing of the White House, which is against the President,\nhas finally prevailed. I think it is one of the most\nimportant things, because it still means the thing - you\nheard me in San Francisco at the press conference - it\nstill means that they are going to let the people invest\ntheir money at their own free will. We can go forth and\ntalk this stuff about war spirit, but the person has to\nmake up his mind in his own heart, and we know that that\nis going to prevail.\nAnd the way of American life and American economics -\nit is 8 question of freedom of thought. I think it is one\nof the most important victories that we have had. But, I\ncannot - I was going to send for Sproul. Here is the\nmemo right here to call up Sproul and have him come down\nFriday. I just don't have the physical strength to do it,\nand I don't think it is worth it.\nMR. ROBBINS: May I ask a question?\nH.M.JR: You can ask three.\nMR. ROBBINS: Is there any appreciable segment of the\nbanking fraternity that has an opinion against the E bond\ntype of issue - any feeling?\nRegraded Unclassified\n185\n- 10 -\nH.M.JR: Bell knows, because he handles deposits.\nYou answer that.\nMR. BELL: No, I don't think there is any banker that\nI know of who is against the E bond. The only thing they\nare against in the E bond is the twenty-five-dollar denomina-\ntion, which is expensive to handle.\nMR. ROBBINS: Not against the demand note feature of it?\nMR. BELL: No.\nMR. ROBBINS: When we were getting ready for this drive\nthere was considerable talk about the desirability of having\na small-denomination, long-term two and a half, and I wondered\nwhether the interests there were left-handed manifestations\nof their counter opinion against the E.\nMR. BELL: The only remark we have had from the bankers\nat all on the savings bonds is the elimination of the r and\nG on the ground that that is where your smart money gces.\nIt is expensive for the Treasury to pay two and a half percent\nfor a twelve-year obligation.\nH.M.JR: George Albee said he could come down. Wouldn't\nit be useful to have him here tomorrow morning?\nMR. PEABODY: Yes, I think it would, definitely.\nH.M.JR: This is dated May 5th, seven fifty-eight.\nHe says he can come down late this afternoon. I think I\nneed something from these two so-called happiness boys.\n(Laughter) They are. They are 8 breath of fresh air.\n(Laughter)\nMR. GASTON: I think George should be here.\nH.M.JR: Gawd, I need something. (Laughter)\nMR. PEABODY: I think Fred Smith would want him here,\ntoo.\nH.M.JR: I think 80. I need something badly. I don't\nknow what it is, but as I say, if 1 take three hours Friday\nRegraded Unclassified\n86\n- 11 -\nto have a knock-down drag-out fight with Mr. Sproul I\ncould find out - but I don't think I am going to do it.\nWhat would happen - supposing we let this thing go to\nnext week. Is anything going to happen?\nMR. ROBBINS: Not as far as 1 can see.\nMR. BELL: No, nothing will happen.\nMR. GRAVES: We will go on selling as before in the\nWar Savings organization.\nMR. BELL: You started that May 1?\nMR. GRAVES: That is right.\nMR. GASTON: And I think in many States the War\nSavings will get some help that they haven't had before.\nMR. GRAVES: That is right. I think that is t:ue.\nH.M.JR: What did you do with that letter from Sproul?\nMR. GASTON: I sent it back to Miss Chauncey with a\nlittle note to you.\nH.M.JR: What effect did it have on you?\nMR. GASTON: I think he is cockeyed. I think he is\nall wrong. I think he is sincere.\nH.M.JR: I think he is sincere, but I think he is all\nwrong.\nMR. GASTON: He advances the notion that bankers are\nis pretty plainly stated - the whole operation ought to be\nspecialists in selling securities and that - the inference\nturned over to the bankers.\nH.M.JR: I think he is sincere.\nMR. ROBBINS: Did Mr. Grant make any contribution to\nyour thinking?\nRegraded Unclassified\n187\n- 12 -\nH.M.JR: I was too tired. He is coming back again\ntomorrow. They are coming back at eleven.\nMR. ROBBINS: There is one other thing - we should\nfind ways and means of evaluating to help in our general\ngroup thinking - perhaps this market survey that we are\nthinking of might be used to that end - and that is to find\nout, if we can, exactly where the credit for whatever degrees\nof success we have had should lie in this closed drive\nperiod, find out who did the work, who did the organizing,\nand who did the actual contact work in a tangible, recorded\nway. It might help us all to understand better.\nI think, actually, Mr. Secretary, that the bankers\nare under the impression that they did 8 very fine job for\nthe Treasury Department in the drive just closed. Perhaps\nthey are taking unto themselves more credit than they are\nentitled to, but I think if we could get 8. real record of\nit we might, all of us, stop wondering and start looking at\nthe facts and really be better informed.\nDoes that appeal to you at all, George?\nMR. BUFFINGTON: Yes it does, if you can get it.\nMR. PEABODY: Some of that information will come out,\nbut, Peter, don't you think it would be a mistake to\ninject that particular phase into this thing as originally\nconceived?\nMR. ODEGARD: You can't do it. What they are planning\nto do is to ask people if they were solicited, and by whom.\nYou get a sample there in that way that will give you some\nindication, and that is all.\nMR. PEABODY: But this is directed at the end person,\nBill, you see, the person who bought something.\nMR. ROBBINS: It isn't a natural to include there, but\nthe question is very important in the minds of an awful\nlot of people.\nRegraded Unclassified\n88\n- 13 -\nH.M.JR: Something happened in Atlanta which was good.\nSomething happened in Boston which wasn't so good. Now,\nif you can tell me why people bought in Atlanta and why\nthey didn't buy in Boston, I would like to know.\nMR. ROBBINS: I can tell you why they didn't buy in\nBoston. That is because they weren't asked. They weren't\norganized.\nMR. ODEGARD: The Irish population has something to\ndo with that also, Bill.\nMR. BELL: They weren't organized.\nMR. ROBBINS: They weren't, and they said from the\nvery first that they weren't organized.\nMR. BUFFINGTON: Mr. McLarin contends that the commercial\nbanks did a great part of the job in that district. He has\ntalked about that several times, the fine support they gave\nhim.\nH.M.JR: As I say, I an at peace with the banks of\nAmerica. I have no war. There is no complaint here. We\ngot through this last bill which helped on the FDIC deposit.\nMR. BELL: Very much.\nH.M.JR: Except that little thing over at Agriculture -\nthat is the only thing the ABA had. Wasn't that fairly\nwell straightened out?\nMR. BELL: I don't know whether to their satisfaction,\nbut nevertheless we got them the contact, and there were\nchanges in the regulations.\nH.M.JR: That is the only thing, isn't it?\nMR. BELL: That is the only thing, but they couldn't\nlay that to you. They laid it to the Administration.\nH.M.JR: With the exception of that, Hemingway and\nthis other man, it is the only thing, isn't it?\nRegraded Unclassified\n189\n- 14 -\nMR. BELL: As far as I know.\nMR. ODEGARD: They are sensitive, too, Mr. Secretary,\non the fact that banking has not been classified as an\nessential industry and they are having difficulty holding\ntheir personnel.\nMR. BELL: As bad as the Treasury.\nMR. ODEGARD: They say they ought to be classified as\nessential.\nMR. GAMBLE: The banks do a good job twelve months of\nthe year and when the drives are on, and we know it.\nH.M.JR: I always remember what a little banker up in\nAmherst told me a year ago about what it meant to, him. He\nsaid that ever since the banking crisis he couldn t get the\nforeign population to come into his bank, because they didn't\ntrust him, and he had seen more new faces in his little\ncommunity in 8 mill town in Massachusetts than he had in\nten years because they - the new faces - came in to do business\nwith him and it gave him a chance to get acquainted again, &\nthing he hadn't had in ten years. And that is happening all\nover America.\nMR. GAMBLE: Every day.\nH.M.JR: And it gives him a chance to get them back\nas customers and get them back to get the money out of\ntheir socks. There is no banker who would say that this\nisn't good for him.\nMR. BELL: They all say it is the best public relations\nthey have ever had - no doubt about that.\nH.M.JR: Now, when it gets back it is a fight as to who\nis going to run the show. That is what it gets down to.\nMR. GAMBLE: That is the nub of it.\nMR. GASTON: The bankers are represented on every State\norganization and practically every local organization, aren't\nthey, Harold?\nRegraded Unclassified\n180\n- 15 -\nMR. GRAVES: Sure.\nMR. GASTON: And in a great many cases the men who\nwere appointed on Victory Fund Committees were already on\nthe War Savings Staff.\nMR. GRAVES: That is right.\nMR. GASTON: And in this case Joel Ferris, who was\npicked by Day to be the leader for the State of Washington\non this Second War Loan Drive, was--\nMR. GRAVES: Our State chairman.\nMR. GASTON:\nour State chairman of War Savings in\nthe State of Washington and vice president of the First\nNational Bank of Seattle.\nMR. GRAVES: You will find hundreds of cases of that\nkind.\nH.M.JR: Now, George, you said you had a two-minute\nplan.\nMR. BELL: I don't understand this - what is the\ncharge of Allan Sproul? - because I haven't seen any bankers\nwho wanted any particular credit over any other group of\ncitizens that worked in this campaign.\nMR. GAMBLE: I think that is largely Mr. Sproul's\ndesire for leadership. I think when the Secretary of the\nTreasury starts calling the signals his teams will go in\nany direction, and the banker plays as hard on one team\nas he plays on the other. There isn't anybody who can\nconvince me of the contrary.\nMR. BUFFINGTON: That is borne out in St. Louis where\nWalter Head has apparently done an excellent job - an\ninsurance man.\nI have a very brief memorandum. Do you want me to\nread it?\nH.M.JR: George said he had a plan. We will take that,\nand then we will quit.\nRegraded Unclassified\n151\n- 16 -\n(The Secretary held 8. telephone conversation with\nMr. Albee.)\nH.M.JR: He can only come down for tonight. He said\nwe could read it back to him.\nMR. BUFFINGTON: (Reading plan, copy attached.) \"The\ndesirability of providing a single organization for the\ndirection of the sale of all Government securities for\nfinancing the war effort was recognized in the creation\nof the United States Treasury War Finance Committee. In\norder to achieve & complete welding of the activities of\nthe War Savings Staff and the Victory Fund Committee, the\nfollowing is recommended:\n\"I. The sale of bonds for war financing (including\ncurrently offered securities during drive periods as well\nBS securities on continuous sale) be carried out by setting\nup three main divisions of the Treasury War Finance Committee.\n\"1. Payroll Savings Division: To operate under the\nleadership responsible for its growth and development.\n\"2. Special Names Division: To canvass more important\ncorporations, financial institutions, Governmental bodies,\nand larger individual investors, by experienced securities\nsalesmen and commercial bankers.\n\"3. General Sales Division: For widespread solicitation\nof the public during drive periods by volunteer personnel\norganized and trained for personal solicitation.\n\"II. In order to accomplish complete consolidation\nwith the greatest efficiency, the War Savings Staff and the\nVictory Fund Committee be dissolved immediately, and the\nbest qualified personnel from both organizations throughout\nthe country be reinstated in the Treasury War Finance\norganization under the Secretary's terms.\n\"III. In the interests of economy and efficiency, the\nTreasury War Finance Committee is to continue to operate\nthrough War Finance Committees in the twelve Federal Reserve\nBanks, Treasury Fiscal Agents, retaining State lines wherever\ndesirable and practicable.\nRegraded Unclassified\n52\n- 17 -\n\"IV. The presidents of each of the twelve Federal\nReserve Banks are to continue to serve as chairmen of\nTreasury War Finance Committees in their respective\ndistricts, but shall appoint within each bank an officer\nresponsible for the formulation and execution of plans for\nthe sale of Government securities through the three main\ndivisions mentioned above.'\nThat appointee might be a commercial banker, an\ninvestment banker, an insurance man, a State administrator,\nchairman, or any person.\n\"V. The Secretary requests the Federal Reserve Board\nto allow him to appoint an ex officio member of the Board\nto act as a personal representative on all matters relating\nto the war financing progrem.\"\nThat man would see to it that the interest and ideals\nand plans of the Secretary were carried out in the twelve\nFederal Reserve Districts.\nH.M.JR: Well, I wanted to give you a chance to say\nit, because coming down this morning you said you had it.\nI am going to excuse myself on the discussion of it, and\nI am going to - I might just as well - we won't discuss\nanything until next Tuesday or Wednesday. And will the\nthing just - will we go ahead? I mean, will there be\nsomebody selling?\nMR. GRAVES: Yes, indeed.\nMR. BELL: Sure.\nH.M.JR: Now that the compulsory savings goes - it\nhas been laid to rest for a while, which I think is terribly\nimportant - there is nothing very pressing. I don't have to\nappear before the Senate tomorrow, so I will work on my\nspeech with you (Gaston) and Fred around nine or nine-fifteen\ntomorrow. We will start in tomorrow when I am fresh, and\nI will give my speech tomorrow night. Then that is that.\nRegraded Unclassified\n193\n- 18 -\nMR. BELL: Do you know when you might have to appear\nbefore the Senate Committee?\nH.M.JR: No, but they want you up there tomorrow morn-\ning in case they want to ask anything on public debt. They\nmay not want you in the first instance. They are going to\nstart off by having somebody explain it. Sometime during\nthe discussion they may want to ask you about public debt.\nHe said he didn't think it was necessary to have anybody\ncome up and explain war bonds, but if it was necessary -\nespecially next week when we have the new pay-roll savings\nplan - he might invite us to come up before the Finance\nCommittee and explain it.\nMR. ROBBINS: Would that suggest that it might be 8\ngood thing for future relationships up there to offer -\ngo through the gesture of offering to give them a real\nreport?\nH.M.JR: I have, and he was very much inclined -\nPaul sort of didn't want it, but he was very much inclined\nto have us come up next week before this new pay-roll thing\ngoes out; and he wanted to know if when they had the final\nfigures Monday we would come up and explain to the committee\njust what happened. I think it would be 8 good thing to\ndo, because I think we have 8 swell story.\nGo up before the Finance Committee; and then if they\nlike it we can go before Doughton's committee and do the\nsame thing. I think it is distinctly worth while.\nSo if you will bear with me a little bit until I get\na little bit more vitality, a little more health, when I\nam nice and calm and judicial, I think I can settle this\nthing in a day or two.\nRegraded Unclassified\n194\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE May 5, 1943\nTO\nSecretary Morgenthau\nFROM George Buffington\nSubject: Consolidation of War Savings Staff and Victory Fund Committee\ninto a Single Organization - Treasury War Finance Committee\nThe desirability of providing a single organization for the direction\nof the sale of all Government securities for financing the war effort was\nrecognized in the creation of the United States Treasury War Finance Com-\nmittee. In order to achieve a complete welding of the activities of the\nWar Savings Staff and the Victory Fund Committee, the following is recom-\nmended:\nI. The sale of bonds for war financing (including currently offered\nsecurities during drive periods as well as securities on continuous sale)\nbe carried out by setting up three main divisions of the Treasury War\nFinance Committee.\n1. Payroll Savings Division: To operate under the leadership\nresponsible for its growth and development.\n2, Special Names Division: To canvass more important corpora-\ntions, financial institutions, Governmental bodies, and\nlarger individual investors, by experienced securities sales-\nmen and commercial bankers.\n3. General Sales Division: For widespread solicitation of the\npublic during drive periods by volunteer personnel organized\nand trained for personal solicitation.\nRegraded Unclassified\n195\n2 - Secretary Morgenthau - May 5, 1943\nII. In order to accomplish complete consolidation with the greatest\nefficiency, the War Savings Staff and the Victory Fund Committee be die-\nsolved immediately, and the best qualified personnel from both organiza-\ntions throughout the country be reinstated in the Treasury War Finance\norganization under the Secretary's terms.\nIII. In the interests of economy and efficiency, the Treasury War\nFinance Committee is to continue to operate through War Finance Committees\nin the twelve Federal Reserve Banks, Treasury Fiscal Agents, retaining\nState lines wherever desirable and practicable.\nIV. The presidents of each of the twelve Federal Reserve Banks are\nto continue to serve as chairmen of Treasury War Finance Committees in\ntheir respective districts, but shall appoint within each bank an officer\nresponsible for the formulation and execution of plans for the sale of\nGovernment securities through the three main divisions mentioned above.\nV. The Secretary requests the Federal Reserve Board to allow him to\nappoint an ex officio member of the Board to act as a personal representa-\ntive on all matters relating to the war financing program.\nRegraded Unclassified\n96\nMemorandum for the Secretary's file\nMay 5, 1943\nThe Secretary and I had & meeting this morning with\nSenator George. The first part of the meeting was devoted\nto an explanation to the Senator by Ted Gamble and Lindow of\nthe status of the bond campaign. Senator George expressed\nhimself as being very gratified with the results of the bond\ndrives to date.\nWe then went into Secretary Morgenthau's office and\ndiscussed the tax situation. This conference covered the\nfollowing items:\n1. Senator George definitely fixed the first meeting\nof the Senate Finance Committee for 10:30 a.m. tomorrow morning.\nHe said that he was against any appearances by witnesses other\nthan the Treasury witnesses and joint staff witnesses. In\nother words, he did not want to open the door to public witnesses\nbecause then he would have to hear Ruml testify and he did not\nknow how many others. He hoped to conclude the Senate Committee's\nconsideration of the bill very quickly.\n2. We then discussed the subject of the Secretary's\nattendance the first day. The Secretary volunteered to attend\nbut Senator George said it was not necessary. He invited the\nSecretary, if the Secretary so desired, to make & preliminary\ngeneral statement, but after some discussion it was agreed\nthat the Secretary would not appear since this was not & general\ntax bill.\n3. Senator George said he would like to have me make\na general statement in advance of any detailed statement by\nJerry Morgan. My statement would generally inform the Com-\nmittee as to the contents of the Forand-Robertson bill.\nParticularly, Senator George wanted information as to the\nmechanics of the collection at the source system in the bill.\nHe also said that certain revenue estimates would be necessary\nbut time would be given for their submission if we did not\nalready have them ready.\nRegraded Unclassified\n37\n- 2 -\n4. We had a discussion then of the question whether\nthe consideration of the bill by the Committee should depart\nfrom subjects considered by the House. I recalled to the\nSenator that I had urged him on the telephone the night before\n(a copy of my telephone conversation is attached hereto) that\nthe Senate Committee limit itself to pay-as-you-go matters.\nThe Senator agreed with this statement of the night before that\nthe bill should be so limited except for very minor matters\nwhich the House would not object to having the Senate originate.\nI then suggested the desire of the Commissioner to have two\nAssistant Commissioners as covered in & Joint Resolution re-\ncently submitted by the Commissioner and the Senator said this\nwould be all right.\n5. We then discussed the subject of compulsory saving,\nwhich, of course, was what both the Secretary and I had in\nmind when we discussed whether any additional matters should be\ntaken up by the Senate in the pay-as-you-go legislation.\nSenator George said he had changed his opinion about compulsory\nsaving and was now in favor of voluntary saving. He based his\nopinion on the fact (1) that we had gone 80 far with the\nvoluntary saving program, (2) that it had been successful, and\n(3) that no amount could politically be obtained in Congress\nat this time sufficient to make up for losses in the voluntary\ncampaign. The Senator did say that in the main tax bill\nadditional impositions might well take the form of partial\ncompulsory lending and that also attention should be given to\ncorporate compulsory lending.\nIn this latter connection, the Senator referred to his\nspeech before the Chamber of Commerce, which I had in my\npocket and produced. The Senator then pointed to & sentence\nin his speech which indicated his attitude toward the compulsory\nsaving situation. The sentence referred to reads as follows:\n\"A system of encouraging the purchase of\nwar bonds out of current earnings is preferable\nto a scheme of compulsory saving.\"\nRegraded Unclassified\n198\n- 3 -\nThe Senator said that in his actual speech he had somewhat\nelaborated on this prepared statement.\nAfter Senator George left, I remained in the Secretary's\noffice and he called Chairman Doughton. Chairman Doughton\nasked the Secretary what his reaction was to the bill and the\nSecretary replied that he was \"baffled.\" Not much more was\nsaid along this line, but the Chairman raised the point about\na statement attributed to me after the voting yesterday which\ngave my \"blessing\" to the Robertson plan. He said he had not\nread the statement but it was in the Times-Herald. The Secretary\ntold Mr. Doughton that he and I agreed not to make any state-\nment and I had supported the bill continuously. Indeed, the\nSecretary told the Chairman that I had suggested over the long\ndistance telephone to him in San Francisco that the Treasury\nissue the statement made in support of the bill. Doughton\nappeared satisfied except that he vaguely intimated that\nsomething was going on that he and the Secretary did not\nunderstand. The Secretary arranged for me to call on Doughton\nthis afternoon. Later in the morning I checked the item in\nthe Times-Herald which did not purport to give any blessing\nby me of the Robertson plan. On the contrary, it read as\nfollows:\n\"Although the Treasury never formally indorsed\nthe measure, Treasury Counsel Randolph Paul told\nthe House Ways and Means Committee he considered it\nan acceptable proposal. He figured it would for-\ngive some $7,500,000,000 of the $10,000,000,000\nestimated 1942 tax revenue.\"\nOver the telephone I called the Chairman's attention to my\nconstant support of his bill, including a conversation in\nGreer's presence with Jerry Voorhis, and various conversations\nwith Representatives Anderson, Lyndon Johnson, Poulson,\nMcMurray and others.\nIn the afternoon I called on the Chairman and had a\nvery friendly chat with him in which we shook hands several\ntimes and the Chairman seemed entirely satisfied. I told\nRegraded Unclassified\n199\n- 4 -\nthe Chairman in the morning conversation and again in the\nevening conversation that I expected to continue my support\nof his bill in the Senate but that I must say before the\nSenate, as I had said before the House, that I preferred the\nRobertson plan to the Ruml plan.\nthe\nRegraded Unclassified\n200\nMr. Paul's conversation with Senator George at 5:45, May 4, 1943\nP: The House just acted on the bill, I suppose you have heard\nthe news.\nG: I was over there when the announced the vote on Carlson's\namendment and heard the motion to recommit with instructions,\nbut I had to leave.\nP: The final vote was very high - 313 - 95. The reason I called\nwas I just wondered if you had any idea when you would get\nto it in the Senate Finance Committee.\nG: We've got to work very fast because the Trade Agreement Act\nprobably will come up in the House Thursday or Friday and it\nwill come right over to us because it will take only one day.\nThe date on which that expires is some date in June and\nwe've got both the tax measure and that matter, or will have.\nI thought we would start Thursday morning. I don't see why\nwe should have public hearings. I will do all I can not to\nhave any public hearinge beyond the appearance of official\nwitnesses on Thursday to give us certain information that\neverybody will ask about. What I think you will need to do\nis to be prepared to give us any estimates and tell us\nprecisely what this bill does. I imagine most of the members\nhave a general knowledge of it.\nP: Would you like a short statement prepared for the information\nof the Committee?\nG: Yes, giving us precisely the situation, and we are going to\nwant a statement on the collection at the source method. I\ndon't know how simple it is - whether it is simplified or\ncomplex and difficult.\nP: We improved it a great deal.\nG: I haven't studied it at all - I haven't even read that feature.\nIt's going to be 8. matter of some inquiry.\nP: Did you say you will not have public hearings?\nRegraded Unclassified\n201\n- 2 -\nG: It will be public on Thursday and Friday but largely\nofficial witnesses. I don't think we will be calling\ngeneral witnesses and don't think we will invite them to\ncome.\nP: I think that will be fine because the Bureau of Internal\nRevenue has a. tough problem to get it going by July 1.\nWe ordered quite a lot of paper taking a chance that some-\nthing would pass.\nG: If we get it out of Committee and through the Senate we've\nstill got the conference. Yes, I agree with you and I\ndon't feel like side-tracking the tax bill for the Trade\nAgreement Act but the Trade Agreement Act is going to\nexpire very soon.\nP: You can count on us to expedite it. If we put this one\nquestion through and don't get off on too many red herrings\nwe will be all right.\nG: Our Committee will deal only with the matter with which the\nHouse has dealt. We wouldn't get into a highly controver-\nsial field on what the House passed.\nP: We will be prepared to be up Thursday.\nG: Thursday at 10 o'clock.\nP: I am much obliged for your wanting to help us.\nG: Just give us an explanatory statement of what the bill does\ndo and we will want certain estimates that could be sent\ndown the following morning.\nP: We will have preliminary estimates unless you raise some\nrefinement that we don't anticipate.\nG: I think the House worked every phase of it.\nP: They pretty nearly worked us over.\nRegraded Unclassified\nH\n202\n4 470 70\nWU11 21 NL\n1943 MAY 5 AM 7 58\nWILMINGTON DEL MAY 4 1943\nHENRY MORGENTHAU JR\nDEAR MR SECRETARY WOULD IT DO ANY GOOD FOR ME TO COME\nDOWN LATE THIS AFTERNOON WEDNESDAY CAN DO THAT EASILY.\nGEORGE ALBEE.\n751A MAY 5.\nA T À G E H A R R T Y E P U E L S R E\nY\nRegraded Unclassified\n203\nMay 5, 1943\n11:15A.M.\nHMJr:\nHello.\nGeorge\nAlbee:\nGood morning, sir.\nHMJr:\nHow is the supply of oxygen in Delaware?\nA:\n(Laughs) I miss it.\nHMJr:\nYou mise it?\nA:\nI miss all of the good clean air in more ways\nthan one.\nHMJr:\nYeah. Well, everybody's been telling me that you\ncouldn't come down, you were too busy up there.\nA:\nWell, I can get down late this afternoon.\nHMJr:\nWell, I think it would be wonderful.\nA:\nAll right, sir. Could I - do you suppose I could\ncatch the train back tonight, 80 that I could re-\nport here for work tomorrow?\nHMJr:\nOh, no, no, no, no, no, that - I can't work on\nthat - no - I - I'm not going to work on the\nspeech until 9 o'clock tomorrow morning.\nA:\nOh, well, I have to be here tomorrow, Mr. Secre-\ntary.\nHMJr:\nWell, then that wouldn't do me much good, George.\nA:\nOh, I'm terribly sorry. I thought perhaps if I\nHMJr:\nNo.\nA:\ncame down this evening, they'd never know 8-\nbout it.\nHMJr:\nThe President of Bolivia is coming in and\nA:\nOh, dear!\nHMJr:\nand this afternoon and I - I'd be no good\nthis afternoon.\nRegraded Unclassified\n- 2 -\n204\nA:\nWell, if after the re-writing were done to-\nmorrow, sir, one of the boys would get me on\nthe telephone up here\nHMJr:\nYes, that could be done.\nA:\nand I could stand by for any last minute\npolishing that was necessary.\nHMJr:\nAll right, somebody will read the speech to you\nafter it's re-written.\nA:\nSwell. Well, I'm going to miss seeing all of\nyou again.\nHMJr:\nAll right. Well, we'll be in touch with you to-\nmorrow.\nA:\nI hope you won't forget me.\nHMJr:\nI have - I won't.\nA:\nBecause if this - if they should by any chance\nget too stern about this, why, I'll Just move out\nof here. I'll come down to Washington.\nHMJr:\nHow 1s the sale of explosives?\nA:\n(Laughs) I hope it's all right.\nHMJr:\n0. K. (Laughs)\nA:\nThank you, sir.\nHMJr:\nAll right, George.\nA:\nGood morning.\nRegraded Unclassified\n205\nMay 5, 1943\nHarold Graves\nSecretary Morgenthau\nIf that Administrator from Indiana can be stopped\nfrom coming in, I think I had better postpone seeing him\nuntil next week.\nWhen you get this message, please telephone me.\nTaken Care of\nRegraded Unclassified\n206\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE May 5, 1943.\nTO\nThe Secretary\nFROM\nHarold Graves\nI have the attached telegram from Mr. Pulliam, War\nSavings Chairman for Indiana, which I believe you will be\ninterested to read.\nI shall of course defer calling Pulliam in until you\ninstruct me further.\nRegraded Unclassified\n207\nG\n1943 1943 MAY 5 PM 12 30\nR\nA\nP\nH\nT\nWU30 187 GOVT COLLECT\nR\nE\nCHATTANOOGA TENN MAY 5 1943 1045A\nA\nHAROLD N GRAVES, ASST TO THE SECTY\nS\nU\nTREASURY DEPT\nR\nY\nT\nTHIS CONFIRM POSTPONEMENT OF APPOINTMENT BUT EARNESTLY\nE\nRECOMMEND THAT THE SECRETARY MAKE DECISION PROMPTLY TO AVOID\nE\nCONFUSION REGARDING RESPONSIBILITY OF BOTH ORGANIZATIONS FOR\nG\nMAY DRIVE/THERE / SHOULD BE ONLY ONE ORGANIZATION INTO WHICH\nA\nP\nTHE VICTORY FUND COMMITTEE CAN BE MERGED/FEDERAL / RESERVE\nH\nSHOULD HANDLE PURCHASES BY BANKS BUT RESPONSIBILITY FOR SALE\nOF ALL OTHER GOVERNMENT SECURITIES SHOULD BE GIVEN WAR\nT\nSAVINGS ORGANIZATION ON STATE RATHER THAN RESERVE DISTRICT\nR\nBASIS / VICTORY FUND LEADERSHIP HAS AND WILL EMPHASIZE VOLUME\nBUT WAR SAVINGS PLAN WILL REACH MASSES FOR INCREASED NUMBER\nINDIVIDUAL SALES AND THIS INCREASINGLY IMPORTANT IN FUTURE\nDRIVES THIS PLAN WORKED PERFECTLY IN INDIANA PRIOR TO\nORGANIZATION OF VICTORY FUND AND CAN BE MADE TO WORK IN\nEVERY STATE IF THE SECRETARY WILL ANNOUNCE THAT THIS IS THE\nTREASURYS PLAN AND THEN PERSONALLY SUPPORT IT/I HAVE\nASSURANCES BOTH FEDERAL RESERVE AND VICTORY FUND OFFICIALS\nOUR DISTRICT WILL COOPERATE IN ANY PRACTICAL PLAN OFFERED BY\nTHE SECRETARY / HE IS THE SECRETARY AND THEREFORE THE LEADER\nU T R L E A E H T P R A E U S R\nAND THIS PLAN WOULD NOT ONLY BE WELCOMED BUT WOULD BE\nFOLLOWED / YOU CAN REACH ME UNTIL SATURDAY CARE ROY SWANK\nLAGRANGE GEORGIA\nEUGENE C PULLIAM.\nRegraded Unclassified\nRADIO CORPORATION OF AMERICA\nRCA BUILDING\nno ROCKEFELLER PLAZA\nNEW YORK\nRQL\nDAVID SARNOFF\nPREMISMS?\nMay 5\n1943\nMr. Henry Morganthau, Jr.\nThe Secretary of the Treasury\nWashington, D. C.\nDear Mr. Morganthau:\nThank you for your thought-\nful note regarding the Easter Sunday Concert\nof the NBC Symphony Orchestra under Maestro\nArturo Toscanini at Carnegie Hall.\nThere can hardly be a more\ninspiring form of human endeavor than the\npresentation of great music in the service of\na great cause. For this reason, all who had\nany participation in the Easter Concert felt\nrewarded in the fullest measure for their\nefforts.\nSincerely yours,\nDandSandf\nRegraded Unclassified\n209\nMAY 1 1943\nDear Mr. Sarnoff:\nI want you to know how greatly I appreciate\nyour cooperation in making the Easter Sunday\nConcert at Carnegie Hall a success. It is very\ngratifying, both because of the resulting sales\nof Second War Loan Bonds and the enthusiasm with\nwhich the program WAS planned and received.\nSincerely,\n(Signed) H. Morgenthau, J1\nMr. David Sernoff\nPresident\nRadio Corporation of America\nNew York, New York\nVFC/mon\nCopies in Diary\nInitialed copy to\nCallahan\nRegraded Unclassified\n210\nMay 5, 1943.\nDear Henry:\nI. thank you for your letter of April 29\nenclosing Mr. Likert's report on the fear of non-\nredemption of War Bonds, with which you enclosed\na copy of your article in PM. It seems obvious\nthat we must give increasing attention to this\nmatter. So far it has been dealt with orally by\nworkers in the field and I think in most cases\nrather effectively. Most people when they raise\nthe subject are able to understand that as a pure-\nly practical matter no Congress or administration\nis likely to take the responsibility of repudiating\na security that is held by such a large number of\npeople and such a high proportion of voters.\nI am very glad to have Mr. Likert's sug-\ngestions, as well as your own, as to publicity tac-\ntics for dealing with the question.\nSincerely,\n(Signed) Henry\nSecretary of the Treasury.\nThe Vice President\nThe Capitol\nWashington, D. C.\nFile in Diary\nInitialed copy to\nGaston\nRegraded Unclassified\n211\nOFFICE OF THE VICE PRESIDENT\nWASHINGTON\nApril 29, 1943\nHon. Henry Morgenthau, Jr.\nSecretary of the Treasury\nWashington, D. C.\nDear Henry:\nEnclosed I am sending you a report from\nRensis Likert on the fear of non-redemption of war\nbonds and also an article I prepared for PM several\nmonths ago.\nOn page 2 of Likert's report a workman\nis quoted as saying, \"The Government is going to owe\nabout 300 billion dollars by the time the war is over.\nOnly about 30 billion of that will be owed for War Bonds\nand it's & damned cinch that the Government will pay\noff those rich that got the 270 billion coming\nbefore they pay off all the little potatoes that have\na few War Bonds. Most of the guys figure that the\nGovernment will just not pay it. I don't think those\nbonds will be worth the paper they're printed on.\"\nFrankly, I think we can carry the interest\nload after the war provided interest rates are kept\ndown and we have full employment and full national\nincome. The PM article has my reasoning in it and I\ndon't know the best way to get this kind of story to\nthe people of the United States. I have no doubt you\nhave been doing a good deal more thinking about this\nthan I have.\nSincerely yours,\nallace\nH. A. Wallace\nEnclosure\nRegraded Unclassified\n212\nUNITED STATES DEPARTMENT OF AGRICULTURE\nBUREAU OF AGRICULTURAL ECONOMICS\nWASHINGTON, D.C.\nVICE APR RECEIVED 24 1943\nPRESIDENT\nApril 23, 1943\nCONFIDENTIAL - NOT FOR PUBLICATION\nThe Honorable\nThe Vice President\nAttention: Miss Huss\nDear Mr. Vice President:\nHere is a copy of another of our reports which I\nthought you would like to see:\nFear of Non-Redemption of War Bonds\nReport No. 40.\nRespectfully yours,\nRensigLikert Rensis Likert\nRensis Likert\nHead, Division of Program Surveys\nEnclosure\nRegraded Unclassified\nPM'S DAILY PICTURE MAGAZINE\n3\nWhich Do We Want: Economy of Scarcity or Plenty?\nbillion. We had a net Federal debt of nearly 16 billion and State and local gov-\nernment debts of nearly 14 billion, with interest charges amounting to 1% billion.\nThese interest charges, totaling 6% billion, were the equivalent of 7% per cent of\nBy Eleanor\na national income of 83 billion dollars.\nAt present interest rates the annual carrying charge oñ a 200-billion-dollar\nRoosevelt:\nFederal debt would be 5 billion dollars, the carrying charge on a 100-billion-\ndollar long-term private debt would be 4 billion dollars, and the carrying charge\nWe Must Think\non & 20-billion-dollar state and local debt would be 600 million dollars, making\na total interest charge of 9 billion 600 million dollars. This would be equivalent\nIn World Terms\nto a little over 7 per cent of a 130-billion-dollar national income (our prospective\nI cannot see any name for going hungry\nincome for 1945) and would be approximately the same percentage of our na-\nsince I believe that there will be enough\ntional income as we devoted to paying interest on debt in 1929.\nnations able to produce food for the feeding\nThe real problem is to maintain full employment in peacetime production\nof the world at the end of the war, I do\nas we are now doing in war production.\nHank It will be necessary for us to book upon\nthe problems of the future, economic, politi.\nAs peacetime production expands and war production is contracted, the\ncal, cultural and spiritual, from the point of\nannual deficit will go down, and we\nview of the world as 3 whole. 1 think it is\nhighly important that we should not allow\ncan then begin to have substantial re-\noursilves to think only of what we may gain\nlief from the wartime burdens of tax-\nfrom the after the was situation, whatever\nation. But if 10 million people should\nit may be, but that we should take a long\nThan Roadwill\nbe thrown out of work, the result\nrange point of view and try to develop poli-\nwhich\nbe beneficial to the world\nwould be a reduction of national in-\nother than mane nation in the world.\ncome by perhaps 30 billion dollars, and\na proportionate reduction in both pri-\nBy James G. Patton:\nvate and corporation income tax pay-\nBy Sec. Wickard:\nments. The one criterion by which we\nSmall Farmers\nshould judge all fiscal, monetary, and\ntaxation policies is whether they bring\nSupplies Must Be\nabout an increased balanced produc-\nDivided Wisely\nMust Be Helped\ntion of useful goods.\nJames G. Patton, President of the Na\nTwo simple facts for all of us to\nClaude R. Wickard, Secretary of Agricul-\nbear in mind are these: first, that the\ntional Farmers Union, has long been di\nture, is not an agricultural theorist, but 4\nmore successfully private enterprise\nchampion of the mall farmer as against\nreal diet furmer. Hu 380 are Indiana, farm\nmaintains full employment, the less\ngrows whent, com and alfalta as well as\nthe large-scale commercial formure whom\ngovernment spending is required; and,\nHampshire hogs and Aberdeen Angua catile.\nlobby in Washington de one of the setton's\nsecond, that certain types of govern-\nHis job as Food Administrator is part of the\nmost powerful. Mr. Patton has supported\nment economy, if they bring on wide-\nAmerica compaign to \"un the war and\nthe Farm Security Administration and has\nspread unemployment, can actually\nwrite the place\" by producing more from\nfrequently worned againat the \"high-price-\ndrive us deeper into debt instead of pulling us out.\nour farma.\nthrough scarcity\" school of thought of reac-\nWe need not go hungry or unemployed If we follow sound polícios, if ex-\nIn REISWER to your question relating to our\ntionary farm organizations.\nperts in money and taxation match the technical competence of those who work\nwartime food supply I believe, as I said in a\nYou ask \"must We all go hungry to pay\non the farms and in the factories. As a matter of fact, the way to pay for the war\nradio talk Doc. 12, \"If we produce and con-\nfor the war?\" The answer is no. But in is\nserve food to the limit of our ability we\nis to utilize fully our greatly expanded fagm and factory facilities, and to con-\ncan and our military requirements, help\nlikely that many millions of consumers may\ntinue to expand the productivity arriculture and industry to the limit.\ngo hungry.\nfood our allies, build up Decreasary reserves\nIf we do this, it is quite possible, withingt few years after the war ends, in spite\nand still have enough food to give good diets\nIf en, it will be partly their own fault.\nof the war-created debts, for the people both in the United States and in most\nto people bero at home.\"\nIt will be the fault also of spokesmen for\nother parts of the world to have a higher standard of living than they have ever\nAs I added in a talk on Dec. 27, \"Many\ncommercialized agriculture who in the last\n75%\nfamilies won't got all of every kind of food\nsession of Congress ignored our warning of\nhad before.\nthey want to buy but that doesn't mean will\noncoming food shortages and turned down\npoorly fod SUCCESS or failure of our\nour proposals that $350,000,000 be appro-\nFOR BETTER LIVING\n-SO IF WE GO\nlistime food-program depends on how\npriated to expand food production by as-\nON PRODUCING\nwell we divide our supplies. If we divide\nsisting hundreds of thousands of low-income\nAFTER THE WAR\n1929\nPOST WAR\nthem better, we as a nation can be better\nunder-employed farm families. It will be\n76%\n120 ³\nfed than in recent years; if we divide them\nthe fault of the economy-howlers in both\nAT THE SAME\nbadly we are going to be in lots of trouble.\"\nHouses who are now preparing to\nRATE AS NOW\nBILLION\nBILLION\ntrate on the 5 per ent that is for our non-\n20\nDOLLARS\nDOLLARS\nmilitary, non debt servicer to the new bun-\ndred billion dollar bodget:\nAFTER\nAFTER\nINTEREST\nINTEREST\nFood Shortage\n-WHICH MEANS ALL\nFood needs in this global war are much\nALBE-BODIED WORKERS\ngreater than has been estimated. Eisenhower\nin North Africa is finding that food is a\nIN PRODUCTIVE JOBS\nweapon of kindness in holding what has\nbeen won and in winning more populations\nand armies. The Bow of food to him has\nbeen pitifully small, partly due, of course,\nWE CAN NOT ONLY\nto shipping difficulties. But, should we win\nPAY INTEREST ON\nthe military phase of the war in 1943 and\nliberate Europe, between four and five bil-\nOUR WAR DEBT, BUT\nlion dolllars worth of food would be needed\nWILL HAVE LEFT OVER\nto feed the starving populations and sta-\nFOR BETTER LIVING:\nbilize the situation NO that a rational peace\n120 BILLION DOLLARS\ncan be begun. That is roughly a quarter of\nOR 44 BILLION MORE!:\nour present food output.\nPresent quotas for 1943 food production\nTHAN WE HAD IN 1929\ndo not allow for additional food for North\nClaude Wickard\nAfrica and do not be-\ngin to meet the pules-\nMORE\nRegraded Unclassified\npm\nPost-War Forum No. 3\nHenry A. Wallace:\nPages\n2-4\nFIVE Daily\nHow We Can\nCopyright, MMI, by\nVOL. III\nMonday, January 1943\n* COMPLETE 12\nPay for War\nI Saw\nWITNESS\nAnd Still PM\nBerlin 13 Page\nBombed\nLive Better\nRussians\nEurope's®Jews\nPage\nPage\n6\nCapture 15\nMillerovo\nFear Massacre\nMiners Stay on\nWhen Hitler's\nPage\nStrike; Defy 11\nPM\nEXCLUSIVE\nArmies Crack\nLewis and WLB\nContinuing Howard Smith's Analysis of Nazi Anti-Semitism\n-From 'Last Train From Berlin'\nRegraded Unclassified\n215\nUNITED STATES DEPARTMENT OF AGRICULTURE\nBureau of Agricultural Economics\nCONFIDENTIAL - NOT FOR PUBLICATION\nFEAR OF NON-REDEMPTION\nOF WAR BONDS\nVICE PRESIDENT\nAPRECEIVED 241943\nFor Administrative Use Only\nStudy 65\nProgram Surveys Division\nReport No. 40\nApril 16, 1943\n216\nSUMMARY\nI\nFear that War Bonds may not be fully redeemed has intensified\nsharply within the last six months. Although only 7 percent of\nurban respondents spontaneously discussed this possibility during\na general discussion of bonds in September, 1942, the number had\nreached 21 percent by March, 1943.\nII\nThis fear is found particularly:\nIn the Mid-West and Far West\nAmong younger people\nAmong the higher income groups\nIII\nIt is especially aoute among larger purchasers who are now buy-\ning under social pressure. Unless it is soon alleviated, it may\nbe expected seriously to reduce purchases among these buyers.\nIV\nIt has already begun to deter bond-buying among people who deter-\nmine the size of their purchases relatively free from social pressure.\nV\nTo deal with this fear, it is recommended that War Bond publicity\nbe specifically designed to counteract its influence. Extremely\nindirect approaches are required, however, to avoid stimulating\nfurther fear. (Specific recommendations for such publicity are\npresented on page 9.) It is suggested that careful pre-testing of\nsuch publicity be employed to assure that the desired effect will\nactually be achieved.\nRegraded Unclassified\n217\nINTRODUCTION\nLate in March, the Division. of Program Surveys made a national\nstudy of perticipation in the War Savings Program among urban\ndwellers. Although no questions were asked directly concerning\nthe redemption of bonds, the interviewing situation was free\nenough to allow spontaneous comments to be made about this topic,\nThis report describes those aspects of the material which bear\nupon the fear that War Bonds may not be redeemed.\nA total of 590 full interviews was obtained from 16 sample points\nacross the nation. The following towns and cities comprised the\nsampling points for this investigation: New York, New York;\nChicago, Illinois; Los Angeles, California; Baltimore, Maryland;\nBoston, l'assachusetts; Seattle, Washington; New Haven, Connecticut,\nKnoxville, Tennessee; Durham, North Carolina; Waterloo, Iowa;\nOrlando, Florida; Geneva, New York; Martinsburg, West Virginia;\nSt. Charles, Missouri; Cloquet, Minnesota; and Napa, California.\nOther aspects of the larger investigation are discussed in other\nreports which may be obtained upon request from the Division of\nProgram Surveys.\n-\nThis study was conducted for the Treasury Department.\nRegraded Unclassified\n218\nFear That War Bonds May Not be\nFully Redeemed Is Influencing\nAn Ever Larger Number of People\nIn Maroh, one person out of every twenty spontaneously told\nthe interviewer that he feared that bonds might not be\nredeemed, although no direct questions about the redemption\nof bonds were asked. An additional 16 percent asserted that\n\"other people\" have this fear.\nConsidering these two groups together, one person out of every\nfive discussed spontaneously the possibility that bonds may\nnot be fully repaid, whereas, in a similar survey last\nSeptember, only one person in fourteen did 80.\nTable 1. Fear of Non-Redemption of Bonds\nSeptember\nMarch\n1942\n1943\nRespondent himself fears that\nbonds may not be redoemed\n2%\n5%\nRespondent says \"other people\"\nfear that bonds may not be\n5\n16\nredeemed\nNo fear of non-redemption\n93\n79\nspontaneously expressed\n100%*\n100%\nN-590\n. Percentages in this oolumn refer to the urban portion of\nthe September study. This represents about 70 percent of\nthe weighted sample of 535 interviews.\nRegraded Unclassified\n219\n2\n3\nThis Fear Exerts its\nQuotations from Interviews\nInfluence Even Among People\nReveal the Way in Which People\nThe do not Express it Openly\nExpress Their Misgivings\n\"When a man buys bonde, be 10 giving them an swful lot of\nThe possibility that bonds may not be fully redeemed has\nmoney to do with as they please. I have heard a lot of talk\noccurred to many of those who are now buying substantial\nthat they won't be any good after the war - you won't get your\namounts of bonde and who do not express it openly. That\nmoney back.\"\nthese people have not entirely overlooked the possibility\n1e indicated by the 10 percent of the respondente who feel\ncalled upon to justify their purchases on the grounds that\n\"People aren't buying bonds 'cause it's too long to wait, and\n\"if bonds are no good after the war, nothing else will be\",\nthey are afraid they won't get the money back. They wonder\nif the bonds will be any good after the war. I constimes wonder\nStill others show it through the high value they place on\ntoo. I don't see how the Government is going to pay it all\nthe security afforded by property or a home. They feel that\nbaok after it's all shot up.\"\nif the financial structure collapses they could still have a\nhome. \"Even if everything goos bust and money isn't worth\n\"Some don't believe there'll be any money in the Government\nanything you can have & place to live, if you own your home.\"\nafter the war. You can't cash then in at the post office and\nbanks now because you have to wait too long. They'd rather\nEspecially among younger people it is a part of & general\nhave the money where they know they cen get it.\"\nuncertainty about the future, expressed frequently in the\nphrase \"n don't know what things will be like tomorrow\".\n\"Bonde won't be worth a dam. Oh, I've gone along with the\nrest of them and bought a few bonds. Don't know what good\nThere is a relatively small group of people, however, who\nthey'll ever be though. Even if I come baok from the army\nview this danger as one of the necessary risks of winning\nsome day, I don't think I'll get anything out of 'em.\"\nthe war. For these people the necessity of winning the war\nis so important that they are willing to give up their band\n\"Some of us down at the yard were talking about bonds at\nmoney if it is required. A typical comment from this group\nlunch just the other day. Not one guy expected to ever get\nis: \"Re've got to win this war, and if they can't pay back\nany of that money. It's like one of 'em said, *The bonds is\nmy bond money that's better than having Hitler over here.\"\njust the Government's way of reducing our vages'. I guess\nthey figure the working stiff is enting too much. Another\nguy said that the Government is going to owe about 300\nbillion dollars by the time the was is over. He said that\nonly about 30 billion of that will be owed for War Bonds,\nand it's a damned oinoh that the Government will pay off\nthose rich that got the 270 billion coming before they\npay off all the little potatoes that have . few Mar Bonds.\nMost of the guys figure that the Government will just not\npay it. I don't think those bonds will be worth the paper\nthey're printed on.\"\nRegraded Unclassified\n220\n4\n5\nyear of Non-Hadsmption\nFear of Non-Redemption is\n10 Found More Frequently\nHigh in Mid-Nest and Far Meet,\nAmong Younger People\nLow in South Atlantic States\nExpressions of foot that bonds may not be redeemed comes\nAnalysis of presence of fear according to geographical areas\nmost frequently from people under 30 years of age and least\nshows that it 1s particularly prevalent in the Mid-Western states,\noften from those OTHER 45, Several reasons contribute to this\nespecially in the City of Chicago, and on the West Coast. The\ndifference. On the nierage, younger people are better educated\nSouth Atlantic states soon to display relatively little fear,\nand nore actively in contact with other people in situations\nThese areas of greater incidence of fear are the same ones\nwhere such matters are discussed and where rumors spread.\nwhich have shown more dissatisfaction with the Government's\ndomestic policy, including such matters as rationing, select-\nRegardless of the reasons for this concentration of fear among\n1ve service, price control, and the like.\nyounger people, however, it is important, for any campaign\ndesigned to sombat the fear, to know that it is found die-\nIn these oreas one encounters, not infrequently, & belief that\nproportionately among this group of people.\nthe war on the home front is a \"phoney\" war. People who have\nthis feeling assert that shortages are not real and that\nrationing is unnecessary. Among these people there cooms to\nTable 3. Fear of Non-Redemption of Bonds no Related to Age\nbe a lack of confidence in the trustworthiness of the Government\non several matters 80 that it is an easy step to transfer the\nfeeling to the repayment of vor bonds.\nAge Groups\nFear\n20-29\n30-14\n45-70\nIndicates fear\n28%\n22%\n16%\nTable 2. Fear that Mar Bonds May Not be Redeemed as\nRelated to Geographical Region*\n64\nIndicates no fear\n72\n78\n100%\n100%\n100%\nIndicates\nIndicates\nBagion\nYear\nNo Fear\nTotal\nNumber\nN=125\nN=221\nN=242\nMid-Weet\n29%\n71%\n100%\n183\nWest Coast\n29\n71\n100%\n66\nNew England\n22\n78\n100%\n100\nMiddle Atlantic\n16\n84\n100%\n149\nSouth Atlantic\n10\n90\n100%\n92\n590\na For purposes of regional analysis two types of expression\nof fear are combined: (1) those who exprese the fear\ndirectly as their own belief, and (2) those who assert that\nothers have this fear.\nRegraded\n221\n6\n7\nPeople Earning Larger Incomes\nThere le Evidence That Fear of\nAre More Likely to Express this Fear\nNon-Redemption Has Begun too\nThan Those With Smaller Incomes\nDeter Bond-Buying\nThose who earn more than $35 a week sore frequently indicate\nmiagivings about the redemption of bonds than do those making\nTo determine the influence of fear of non-redemption upon\nsmaller amounts. Several factors contribute to this difference.\nbond purchases, it in not sufficient simply to find out the\nPeople with larger Incomes are more sophisticated about\nstatistical relationship between the two items. It will be\nfinancial matters, especially about matters dealing with the\nfound in such analysis that people with lower incomes do not\nnational economy. They have invested larger amounts of money\nbuy many bonds and also that they have little fear of non-\nin War Bonds and have more to lose if bonds are not repaid.\nredemption. The fact that they are not buying more bonds 1e\nIn addition, they tend to be more vocal in expressing their\nrelated to their income and has little to do with their views\nopinions about matters of this sort.\nabout the possibility of repayment. In order to understand\nthe effects of the foar of non-rodemption, therefore, it 1s\nnecessary to exclude those with very small incomes.\nTable 4. Fear of Non-Redemption of Bonde\nA second factor requiring consideration is the influence of\nas Related to Weekly Income\nsocial pressure on bond sales. People who are buying bonds\nunder social pressure may be expected, on the whole, to\nexperience greater fear before outting their purchases than\nwill those who do not submit to this pressure.\nHeekly Income\nYear\n$35 or Less\n$35 or More\nIn Table 5, two groups are distinguished. Group I contains\nthose who assert that they decided for themselves on the\nIndicates fear\n16%\n24%\nbasis of their own needs and ability how much of their in-\ncome they are to put into bonds. Group II is composed of\nIndicates no fear\n84\n76\nthose who say that they are buying the amount of bonds that\n100%\n100%\nthey were asked to buy,\nN=230\nN-325\nIt is olear that in the first group (those not submitting to\nsocial pressure) fear of non-redemption is associated with\nsmaller purchases and is highest among those not buying bonds\nat all. Among this group fear has begun to deter purchases.\nRegraded Unclassified\n222\n9\nSpecial Publicity Designed\nTable 5. Fear that Bonda Will not be Redemmed as Related to\nPercentage of Income Spent for Bonds for Two Groupe\nto Counteract This Fear\nof Buyers -\nis Recommended\nGroup I. \"No Decided Bow Much to Buy\"\nThe evidence presented here indicates that fear of non-\nOwns DO\nBuying\nBuying\nBuying More\nredemption threatens to become a serious deterrent to band-\nBonds\n1-5%\n6-10%\nthan 10%\nbuying. It is certainly undermining morale. War Bond\npublicity, specifically designed to counterant the influence\nIndicatos Fear\n29%\n26%\n22%\n16%\nof this fear, would 200m, therefore, to be desirable.\nIn dealing with a fear such as this, however, extreme caution\nGroup II. \"We are Buying What They Asked\"\nis required lest attempts to counteract it boomerang into\nfurther stimulation, Still, various indirect approaches simed\nBuying\nBuying\nBuying More\nat heightening confidence should help appreciably.\n1-5%\n6-10%\nthan 10%\nSince the danger of kiok-baok is a real one, it is suggested\nIndicates Foar\n10%\n18%\n39%\nthat such publicity be carefully pre-tosted before it 1a\nreleased on & large scale. Further study of the nature of\nthis fear should also assist in afforts to overcome it.\nSince a disproportionately larber number of those earning less\nCertain observations and recommendations may be made on the\nthan #35 a week indicate no fear, this table includes only those\nbasis of studies now completed.\nearning a wookly income larger than $35,\n1. Material simed at stressing the stability and soundness\nof the United States Government should heighten confidence.\nSuch slogans as \"Founded 1776\", \"The Richest Nation in the\nWorld\" and \"Your Government Has Energed Stronger After\nAmong those who have submitted to social pressure (Table 5) a trend\nEvery Sterm\" could be used effectively.\njust opposite to that observed in group I is found. The larger the\npurchases the greater is the fear of non-redemption. Those who are\n2. Descriptions of a prosperous America manufacturing all of\nbuying larger amounts under pressure are more vulnerable to foar\nthe DEW inventions and trading with other nations after\nsince they have more to loss and since they have not decided to buy\nthe war would serve the two-fold purpose of strengthening\nthese large sums on the basis of their OWN conviction of its sound-\nconfidence in the Government and of reducing personal\nneas.\nanxisties about post-war unemployment.\nIt would seem extremely likely that unless this fear is reduced many\n3. More emphasis upon the difference between War Bonds and\nof those now buying large amounts under social pressure will soon\nthe Liberty Bonds should alleviate some of the fears now\nreact against It and reduce their purchases.\npresent. All people should know that War Bonds cannot\nmarket. Axie propaganda has pointed out the parallel\ndepreciate in value since they are not sold on an open\nbetween War Bonds and Liberty Bonds. This propaganda\ncan be rendered ineffective by pointing out the\ndifferences between the two types of bonds.\nRegraded Unclassified\n223\n10\nINTERVIEW SCHEDULE\n4. Since fear of non-redemption deems to be found predominantly\namong people who are hostile to the Domestic War Policies,\n1. Are you better off or worse off financially than you were a\nany measures to heighten genuine war involvement and\nyear ago?\nconfidence in the sincere administration of the war on the\nhome front will also reduce this fear.\n2. The way things are today, do you think it is better to save\nyour money or spend it?\n3. Why do you think that is best?\n4. (If spend) What sort of things would you buy?\n5. (If save) What form of savings would you prefer?\n6. What do you think about War Bonds?\n7. What do you think makes some people feel they don't want to\nbuy Was Bonds?\n8. We are interested in talking to people about how they got\nstarted buying bonds. Do you happen to own any bonds?\nIf no, anit 9-13\n9, How did you get started buying bonds?\n10. Do you have a regular system for buying bonds?\n11. About what percent of your pay do you put into bonds?\n12. How did you decide what percent to buy?\n13. Do you buy through the payroll deduction plan?\n14. You know the Government is putting on 8 compaign to sell the bonds.\nIn opinion, what is the most important thing bonds? for\nGovernment your to tell people to get then to buy nore\n15. When a person buys War Bonds how does be help himself?\n16. How does he help his country?\n17. Have you made any special plans for using the money from your\nbonds?\nRegraded Inclassified\n224\nMay 5, 1943\nMEMORANDUM FOR THE SECRETARY\nFrom: Mr. Blough\nIn a recent letter received from Professor\nJ. Douglas Brown of Princeton University, he\nexpresses the view \"that a good stiff program of\ncompulsory savings would help materially not only\nin the reduction of the gap between purchasing\npower and available goods and services, but also\nin preventing tensions in industrial relations in\nwar industries and a loss of incentive due to\ninsecurity.\"\nSince Professor Brown has kept in close touch\nwith labor problems, I think you may be interested\nin his letter and am accordingly attaching it.\nRB\nAttachment\nRegraded Unclassified\n225\nPRINCETON UNIVERSITY\nINDUSTRIAL RELATIONS SECTION\n(Department of Economics and Social Institutions)\nJ. DOUGLAS BROWN, Director\nHELEN BAKER, Auistant Director\nPrinceton, New Jersey\nHAZEL C. BENJAMIN, Librarian\nApril 19, 1943.\nMr. Roy Blough,\nDirector of Tax Research,\nTreasury Department,\nWashington, D. C.\nDear Roy:\nI am so much concerned about the present lack of\nbalance between consumer purchasing power and available\ngoods to be purchased that I am taking the liberty of\nwriting you again in regard to compulsory savings. As\nyou know, this is a well-worn line of thought for me,\nstarting first with the notion of dismissal compensation,\nand moving to compulsory savings a year or so ago. I\nhave enclosed 8 copy of my brief comment on dismissal com-\npensation at the November, 1940, meeting of the Academy of\nPolitical Science, and more recently my letter to Secretary\nMorgenthau February 17, 1942. I am all the more convinced\nnow that compulsory savings is not merely a device to reduce\nthe danger of inflation, but one vitally needed to prevent\nextreme tensions in our wage collective bargaining situation.\nA still further consideration is the post-war situ-\nation of insecurity which is faced by a great many war workers.\nThis is bound to reflect in their morale and incentive during\nthe war. Men who are uncertain of their future do not press\nas hard to get out current production but tend consciously\nor unconsciously to make their job last. A man running a\n100-yard dash race does not run quite so hard, especially\ntoward the end of the course, if he sees a yawning precipice\njust beyond the finish line.\nTo indicate the problems already affecting the mind\nof workers, I am enclosing EL confidential survey of the Office\nof Public Opinion Research of Princeton University. I would\nlike to call your attention particularly to the last few\npages of the survey checked in red which indicate the expecta-\ntions of workers as to whether they will have enough money\nsaved up by the end of the war to tide them over to a new job.\nI hope very much that you can call this survey to\nthe attention of the Secretary. If you would like to have\nme come over to discuss the matter with you, I would be very\nglad to do so.\nR7\nRegraded Unclassified\n226\nMr. Roy Blough - page 2 - April 19, 1943.\nMy present judgment is that a good, stiff program\nof compulsory savings would help materially not only in the\nreduction of the gap between purchasing power and available\ngoods and services, but also in preventing tensions in indus-\ntrial relations in war industries and a loss of incentive\ndue to insecurity.\nWith best wishes,\nYours cordially,\nP.S. Tuesday to Friday am at the War Department, Republic\n6-700, Extension 4204.\nB/no\nRegraded Unclassified\n227\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE\nTO\nSecretary Morgenthau\nMAY - 5 1943\nFROM\nRandolph Paul\nThe proceedings on the tax claims against Mrs. Eleanor\nElverson Patenotre may be of interest to you. On March 1, 1943,\nthe Commissioner, with your approval, set aside a closing agree-\nment entered into with her in 1932 for the year 1930 on the\nground that it was obtained by fraud. A lien for approximately\n$2,800,000 has been filed against cash and securities having &\nvalue of approximately $2,600,000 owned by Mrs. Patenotre and\ndeposited with J. P. Morgan & Co., Inc.\nIt appears that early in 1930 Mrs. Patenotre was the owner\nof 51% of the stock of the Philadelphia Enquirer, having acquired\nit by inheritance in 1929; that she made & record transfer of the\nstock to her son, Raymond Patenotre, 8. French citizen (reputedly\nclose to the present Laval government) who, within a few days\nafter the transfer, entered into 8 sale of the shares for\n$10,500,000, consummated in Montreal; and that $5,250,000 of\nthe price was paid in cash and the balance in notes. It was\nrepresented to the Bureau to induce the closing agreement that\nMrs. Patenotre had given the stock to her son prior to its sale\nand had never received any of the proceeds but evidence has been\nuncovered indicating that Mrs. Patenotre, even before the making\nof the representations, received the proceeds of the cash paid.\nThere is reason to believe that she obtained the benefit of the\nnotes through holding companies and that the sale was pursuant\nto oral arrangements made by Mrs. Patenotre with the purchaser\nbefore the purported transfer of the shares to her son. Her\nattorney is, and on the closing agreement was, Ellsworth C.\nAlvord, Esq., who resigned as Special Assistant to the Secretary\nof the Treasury on October 16, 1930.\nAn examination of documents in the possession of Harry P.\nFaulkner, a financial adviser to Mrs. Patenotre, was commenced\nby a Special Agent but terminated by Faulkner before completion\non the advice of Mr. Alvord. A hearing is to be held in the\nFederal Court in New York on May 7, 1943, testing the right to\nRegraded Unclassified\n228\n- 2 -\nexamine Faulkner and his records for the years from 1929 through\n1942. These proceedings have special significance because ques-\ntions have arisen under the applicable statutory provisions which\nmay also affect tax collection procedure generally and because\nof the particular character of this case which involves annulment\nof a closing agreement nearly eleven years old with tax claims\namounting to more than $2,800,000. In view of the importance of\nthe matter, and to assist in obtaining the best results, we have\nexpended considerable time in close cooperation with the Depart-\nment of Justice which, through its Tax Division and the United\nStates Attorney, is primarily handling the court proceedings. I\nam maintaining direct contact with the case and will advise you\nfurther with respect to it.\nArt\nRegraded Unclassified\n229\nTreasury Department\nDivision of Monetary Research\nDate May 5,\n1943\nTo:\nSecretary Morgenthau\nFrom:\nMr. White\nSubject: Visit of President\nPeñaranda of Bolivia.\nPresident Peñaranda arrives\ntoday for & five-day official\nvisit in Washington. If you have\noccasion to meet him, you may\nwish to read the attached memo-\nrandum on the current situation\nin Bolivia.\n230\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE May 5, 1943.\nTO\nMr. White\nFROM\nMr. deBeers\nSubject: Current situation in Bolivia.\nI. Current United States-Bolivian Negotiations\n1. Re-negotiation of the tin contract, which covers about\nhalf of Bolivia's 40,000 ton output, will commence on President\nPenaranda's arrival. The original price in November 1940 was\n48.56 a pound (later raised to 520); in June 1942 it was raised\nto 60c a pound, f.o.b. Chile. Presumably the labor clause and\nmining wages will now be re-examined, 88 well as the price.\n2. A Stabilization Agreement was considered in June, 1942.\nSignature was delayed pending action by the Bolivian Congress,\nbut no action has yet been reported.\n3. A reciprocal trade agreement was negotiated nearly a\nyear ago. Peñaranda may want to sign the agreement now, but\nthe State Department wishes to wait until renewal of the Trade\nAgreements Act. The agreement would reduce the U.S. tungsten\nduty and bind tin and antimony on the free list.\nII. United States-Bolivian Cooperation\n1. The Development Program involves $15.5 million in Ex-\nport-Import credits (none yet utilized), $2.1 million in advances\nby Rubber Reserve, and $1 million for health and sanitation by\nthe Coordinator of Inter-American Affairs. The Export-Import\nBank has also extended other loans of $1.9 million, under which\ndisbursements have totalled $1.8 million.\n2. Besides tin, Metals Reserve has purchase contracts for\ntungsten (May 1941), copper (April 1942), and antimony (early\n1943), and Rubber Reserve is buying Bolivian rubber.\n3. The United States sent a Military Mission to Bolivia\nand has signed an $11 million Lend-Lease Agreement, under which\nsmall shipments have been made.\n4. The Bohan Mission of ten U.S. experts was in Bolivia\nfive months in early 1942; most development plans are based on\nits report. Mining engineers and other technicians have also\nbeen sent to Bolivia. Last fall Bolivia requested a U.S. fiscal\nexpert, but Treasury has not yet met this request.\nRegraded Unclassified\n731\n- 2 -\nIII. Bolivia's Financial and Economic Situation\n1. Bolivia's prices are rising rapidly--some 30 percent\na year. This is due principally to the large demand for\nBolivian exports, which have increased much more than imports,\nthus leaving increased purchasing power in the hands of Boliv-\nians. In addition there has been an inflationary creation of\ncredits by the Bolivian banking system.\n2. Tin miners in Bolivia work for very low wages, usually\nunder unhealthful working and living conditions. Labor troubles\nbroke out in a strike last December, which was stopped by martial\nlaw. A United States-Bolivian Mission, established as a result\nof the discussion at a B.E.W. meeting which you attended, made\ninvestigations which confirm the existence of deplorable labor\nand social conditions.\n3. Bolivia's economic future depends chiefly on her rich\nbut untapped oil resources and on greater food production. The\ntin industry, now booming, 1s faced with rapid exhaustion of\nreserves. To develop the country 8. joint U.S.-Bolivian corpor-\nation has Just been set up, for which the United States will\ncontribute $18.6 of the first $29.1 million.\n4. In February 1943 Bolivia raised the value of its cur-\nrency from 2.20 to 2.46 (46 to 42 bolivianos per dollar). The\nchief purpose was to lower the boliviano cost of imports. The\nboliviano had fallen from 32d in 1931 to 2.20 by June, 1941.\n5. Bolivia's gold and foreign exchange holdings are in-\ncreasing. They were $20 million on December 31, 1942, $17 million\nat the end of 1941, and $11 million at the end of 1940.\n6. Exports rose from $39 million in 1939 to $81 million\nin 1942, producing the largest export surplus in two decades.\nTin constitutes about three-fourths of total exports. Most\nexports now go to the United States, although we took less than\n10 percent in 1939; our share in imports rose from 25-30 percent\nbefore the war to 42 percent in 1941.\n7. Apparently there were large budgetary surpluses in\n1941-1942, aside from capital outlays for Standard 011 proper-\nties and the Development Corporation. Government revenues\n(largely taxes on mining) reached all-time highs; expenditures,\nlagging somewhat, are also at record levels.\n8. Bolivia defaulted on its foreign debt (largely in\ndollars) in 1931 and has made little effort to resume payments.\nSome repatriations have been made in the open market during\nrecent years at very low prices.\nRegraded Unclassified\n232\nMAY 5 1943\nsty dear Mr. Leffingwells\nThis Thank youy for year letter of April 22, 1943,\nenclosing a memorandum dealing with the British Treasury\nproposal for an International Clearing Union.\nYour interest in presenting your views on the\nBritish preposal is appreciated. They are being care-\nfully studied by the members of the ?reasury staff who\nare working on this question. As you know, all of the\nplans now under consideration for neeting these problems\nare entirely preliminary and tentative. The are hopeful,\nwww.rtheless, that from the discussions and e tudies now\nin progress, practical plans may be evolved which will\nmake possible international cooporation for the stabilise-\ntion of exchange rates.\nThough you have undoubtedly read the text of the\nTreasury's preliminary draft proposal for the United\nand Associated Nations Stabilization Fund, I an enclosing\na copy which you may wish to have available for reference.\nSincerely yours,\n(Signed) H. Morgenthau, Jr.\nSecretary of the Treasury.\nMr. H. C. Leffingwell,\n23 wall Street,\nNew York, New York.\nPhoto file in Diary\nFile to Thompson\nEnclosure.\n5D8:lr 4-28-43\nRegraded Unclassified\n23 Wall Street\nNewYork\nR.C.LEFFINGWELL\nApril 22, 1943\nDear Mr. Secretary:\nThank you 80 much for your most\ngracious letter. It did me good. I am glad to see\nyou are going to Iowa too. I am sure you are wise\nto do it. I am sure it will bring good results.\nI enclose a memorandum of my views\nabout the Keynes International Clearing Union, which\nI hope you will think worth reading.\nFaithfully Relevance yours\nThe Honorable\nThe Secretary of the Treasury\nWashington, D.-C.\nEnclosure\nEAPE\nDiA\nBROEIAED\nRegraded Unclassified\nApril 19, 1943\nKeynes's International Clearing Union\nThe value of a nation's currency at home and abroad tends\nto vary with the quantity of that currency issued, and the velocity\nwith which it circulates. These in turn are controlled by taxation\nand expenditure, and the balance or unbalance between them, and by\nthe level of interest rates. The control of these matters rests\nwith each nation itself. No nation can be expected to surrender\ncontrol of its budget, of its taxes and spendings, or its level\nof interest, or of its currency issue, or of its domestic price\nlevel, to any foreign nation or group of nations. A. sound currency\nis one that is not being inflated by abuse of the printing press.\nYet the Keynes plan ignores all this. It undertakes to stabilize\nthe currency of any and every nation in foreign exchange regardless\nof the amount printed.\nThe value of a nation's currency in foreign exchange de-\npends, secondly, on its balance of trade and payments. Though bank\nloans and credits and gold shipments may for a time serve to main-\ntain equilibrium in foreign exchange of a sound currency when the\nbalance of payments is temporarily out of equilibrium, these are\nmerely temporary expedients and not permanent. Disequilibrium has\nto be corrected by more substantial measures such as increasing ex-\nports and reducing imports of goods and services, and inducing 18-\nports of permanent capital by showing capital a reasonable prospect\nof profit and of political monetary and economic security.\nNo nation can print money without limit without impairing\nits value. No nation can habitually maintain an adverse balance of\ninternational payments without impairing the value of its ourrent\nRegraded Unclassified\nin foreign exchange. It is not possible, nor is it desirable,\nto\nguarantee inflated currencies, or the currencies of nations which\nare chronic debtors on international account, at the expense of\nnations which maintain balanced budgets and balanced trade.\nThe Plan ignores the fact that weak exchanges are due\nprimarily to unbalanced budgets and the abuse by government of the\nprinting press, or to unbalanced international payments. The Plan\ntreats a disordered exchange as a disease in itself rather than M\nan effect of domestic inflation or unbalanced international pay-\nments. The Plan proposes to cure the symptom, to wit, the disordered\nexchange, which reflects bad internal conditions and unbalanced trade\nrelations of a nation, by giving the disordered nation the power to\ndraw on the credit balances of those nations whose currency policies\nare orderly and whose foreign balances are in credit.\nIn order to insure that a creditor nation, such as the\nUnited States, shall have little to say in the matter, the Plan de-\nclares (Preface 3) that management of the Credit Union must be\ngenuinely international with the preponderant power of veto not with\nany country or group, and that the rights and privileges of smaller\ncountries must be safeguarded. In consequence it would seem that\ncreditor nations would be helplessly at the mercy of the more numerous\ndebtor nations, and that the creditor's resources in gold and forei\nexchange would be continuously drained off for the benefit of debtor\nnations. Indeed it would seem also that the position of a debtor\nnation under the plan could best be improved by rapid unbalancing of\nits budget and brisk use of its printing press; and, that those ocun-\ntries that pursued the worst policies budget-wise and trade-wise\nwould soon possess themselves of the resources in gold and foreign\nexchange of the countries that were foolish enough to person\nRegraded Unclassified\n3.\npolicies. Indeed so great is the preoccupation of the author of the\nplan to impair the position of creditor countries, and of those who\npursue sound internal policies that he devotes his entire Article III\nto the question \"What Liabilities Ought the Plan to Place on Creditor\nCountries?\"\nThe author says (I 5) the idea underlying the Credit\nUnion is to generalize the essential principle of banking; and that as\nno credits can be removed outside the clearing system but only trans-\nferred within it, the Union can never be in any difficulty. However\nit has never been a general principle of banking, whether in a closed\nor open system, that a bank should be run by its debtors or that de-\npositors should not be allowed to withdraw their deposits. It is\neasy to see why a bank which would not have to pay out its deposits\ncould-not get into any difficulty. It is not so easy to see however\nhow a bank which had no obligation to pay out its deposits would get-\nany deposits paid into it.\nIt is an odd feature of the Plan (II 5) that quotas which\ndetermine each nation's share in the management and in the credit\nfacilities of the Union are suggested to be based on the sum of its\nexports and imports. This neans that a nation such as Great Britain,\nwhich habitually has an immense volume of trade and habitually has an\nadverse balance of trade, would have a great share in the management\nand at the same time the greatest right to borrow from the Union. If\nwe apply the banking analogy the Plan suggests this would mean that a\ndepositor whose account showed the greatest turn-over, i.e., the great\nest aggregate of checks drawn and checks deposited, though his balance\nwas in debit, would be entitled to add its debits and credits together\nand take the sum of them and so measure its vote in the management, and\nthe amount he was entitled to borrow by the sum of his debits and\nRegraded Unclassified\n4.\ncredits.\nThe Plan provides (II 3=, that if 1 nation's debit balance\nreaches half its quots the Governing Indrá 02 the inton ray require it\nto reduce the value of its currency, control cutward capital movements\nand surrender gold cr other liquid-reserves.\nThe Plan provides (II 9) that if a nation's credit balance\nexceeds one-half its quota the Governing Board may discuss (and shall\nhave the ultimate decision upon) measures for inflation or deflation\nof that nation's currency and credit, to reduce its tariffs and to\nmake international loans. Evidently the Governing Board would have\ncomplete control of the economic life of any nation whose credit\nbalance was in excess of half its quota.\nThe Plan (III 8) provides that the Clearing Union shall\ngive the creditor nation a choice between voluntarily curtailing its\nexports or accumulating credit balances in bancors with the Clearing\nUnion.\nIn IV 14 it is stated that \"Great Britain could offset\nfavorable balances arising out of her exports to Europe against un-\nfavorable balances-due to the United States or South America or else-\nwhere. How, indeed, can any country hope to start up trade with\nEurope during the relief and reconstruction period on any other terms?\"\nThis means the United States is to finance British exports to impoverisheo\ncountries unable to pay for them.\nIn V 19 it is said that though \"the Clearing Union may have\ndifficulty in disciplining a misbehaving country\", this can be urged with\nmuch greater force against a multiplicity of separate bi-lateral\nagreements. This overlooks the fact that in case of separate bi-\nlateral agreements, the creditor country may require good conduct of the\ndebtor as a condition of granting credit. However, in the following\nRegraded Unclassified\n5\nsection 20, it is stated that exchange dealing would be carried on\nas freely as under the golá standard without its being necessary\nto esk anyone to accept onerous conditions. It seems any debtor\nmay borrow regardless of his credit-worthiness or of his willingness\nto aut his house in order.\nThe following section 22 states that many States are\nlikely to wish to impose on their orn nationals control of the capital\nmovements. This is an old project of Keynes's. He goes on to say\nin the same section that in no care is control of capital movements\nto be by the Union but only by the member States. An entire article\n(VII) is devoted to the control of capital movements, yet creditor\ncountries are to be forced or pressed to grant credits and make in-\nternational loans. It does not appear why anyone should make a loan\nto a country which controlled capital outflow. Depositors will not\ndeposit money in a bank from which they cannot withdraw it. People\nwill not make long-time investments in a country which prevents or\njeopardizes the withdrawal-of such capital.\nSection 25 contemplates that the United Kingdom and the\nUnited States might agree together not to accept reserve balances of\nother countries in excess of normal working balances except in the\ncase of banks definitely belonging to a sterling-area or a dollar-\narea group. This is to prevent a flight from sterling to the dollar\nor vice versa.\nArticle VI 27 says that each currency would have a de-\nfined exchange value in terms of bancor and therefore in terms of\ngold. Apparently this would be expected to be true no matter how\nmuch bancor was printed. Section 27 goes on to say that the fact\nthat a member State is entitled to obtain credit in terms of bancor\nby paying gold into its account would insure a market for our gold\nRegraded Unclassified\n6.\nand for that of the gold-producing countries. However this would\nbe a market at a pegged price for paper money of account without\nany effective control of the amount of paper money printed. Section\n29 declares it essential that no member bank be entitled to demand\ngold; that thus between gold and bancor there would be only a one-\nway convertibility. That is to say, bancor would be inconvertible\nmoney of account.\nArticle IX 39 states \"the Union might become the pivot\nof the future economic government of the world\". It goes on by way\nof illustration to mention as within the possible field of activity\nof the Clearing Union: post-war relief, rehabilitation and recon-\nstruction; the duty of preserving the peace and maintaining inter-\nnational order; enforcing a financial blockade; financing stocks\nof commodities and ever-normal granaries; financing a Board for\nInternational Investment; maintaining the stability of prices and\ncontrolling the trade cycle; exercising expansionist or contraction-\nist influence on the system as a whole or on particular sections.\nIn section 40 it is pointed out that no particular member States\nhave to engage their own resources, but they only have to agree\nin general to let them be engaged by the Union; and that where\nfinancial contributions are required for some purpose of general\nadvantage, it is a great facility not to have to ask for specific\ncontributions from any named country. \"We have here a genuine\norgan of truly international government.\" In other words the\ncreditor nation has nothing to do with it. It just agrees to let\nits resources be exploited by this Credit Union for the benefit of\nmankind. One wonders what group of gods or supermen are to manage\nthis sublime agency for the re-distribution of wealth.\nTo finance this war the United States is not only in-\nRegraded Unclassified\n7.\nflating its currency and domestic debt. It is also paying gold\nand incurring foreign debt for the pay and maintenance of its over-\nseas forces. It already owed before we were at war tens of billions\non capital account representing flight money and other foreign in-\nvestments here. It would seem therefore that the United States will\nhave enough to do to maintain the integrity of the dollar without\nplacing its gold and exchange reserves, and its economic life at the\ndisposal of the Governing Board of the International Credit Union.\nStability of the foreign exchanges and lower tariffs\nwill be of vital importance to the recovery of the world after the\nwar. The former can only be achieved by each nation establishing\na proper balance between its taxes and expenditures; the latter by\njust reducing tariffs and embargoes. No nation will leave these\nmatters to the decision of any international Governing Board. No\nnation will submit to have its liquid resources drained off to sup-\nport the currencies of other nations which do not pursue sound-in-\nternal monetary policies.\nWe cannot make sound currencies first and sound condi-\ntions after. When victory comes the three great victor powers,\nGreat Britain, Russia and the United States, must unite to maintain\npeace and law and order throughout the world, to feed the famishing,\nto supply raw materials to those countries that need them and will\nuse them. For these purposes government loans or gifts, not currency\ncredits, will be needed. These great powers must then control their\nown currency issues by sound internal policies, and must feel their\nway to the establishment of an orderly but not too rigid equilibrium\nbetween their currencies in foreign exchange on the model of the pre-\nwar equilization fund between England and the United States. Then\nRegraded Unclassified\n8.\nalso gradually these three should invite the adherence to these our-\nrency equilization arrangements of other countries, as those other\ncountries put their houses in order, with the help of the three\ngreat powers, and fit themselves for participation in the sound\nmoney family of nations. Sound money is a by-product of sound\ninternal policies of each nation. It is not a gift which the\ngods of a super-central bank can present to spendthrift nations\nat the expense of the thrifty.\nR. C. L.\nRegraded Unclassified\nASURY\nm\nX nor TO BE RE-TRANSHITTED\nTREASURY\nCOPY NO.\nBRITISH MOST SECRET\nTHE\nU.S. SECRET\nSECRET\n1943\nOPT&L NO. 147\nInformation received up to 7 c.m., 5th May, 1943.\n1. NAVAL\nThree ships in an outward Atlantic convoy were sunk this\nmorning South of CAPE FAREWELL.\n2. MILITARY\nTONISIA. 3rd. United States troops entered MATEUR at 1100\nhours and continued their advance Northeast, Northwest of the town. 200\nprisoners were t-ken further South. They advanced to within 10 miles of\nrebourba. In the coastal sector, French troops are now within 15 miles of\nBIZERTA.\nBURMA. Our troops have made some further slight withdrawals\nin the MAYO Peninsula.\n3. AIR OPERATIONS\nWASTERN FRONT. 4th. 65 United States Fortresses dropped\n145 tons of H.E. at the Ford and Genoral Motors Assembly plants at ANTWERP.\nBombing is reported as \"good\". Enemy casualties by Fortresses (provisional)\nnd Fighters - 8, 5, 12. 3 Fighters missing. Mosquitoes bombed the power\nstation at the HAGUE, and escorted Venturas attacked ABBEVILLE reilway centre.\n4th/5th. Aircraft despatched:- DORTMOND - 596 (30 missing, 4 crashed in\nUnited Kingdom and 1 in the sea), RHeINE - 8, Leaflets - 28, \"Intruders\" and\nRailway Objectives - 10. Preliminary reports indicate perfect weather over\nDORTMUND with \"Marker\" bombs well placed and bombing concentrated.\nTUNISIA. 2nd. Escorted Light and Fighter Bombers attacked\nobjectives in the battle area and ship ing in the Gulf of TUNIS. Enemy\ncasualties - 3 destroyed. Ours - 4, 0, 2. 3rd. 55 escorted United States\nFortresses sent to attack BIZERTA ran into bed weather. 14 attacked the\nobjective. 5 Fortresses missing and 5 more crashed. 3rd/4th. Naval\nAlbscores torpedoad and set on firo - 1,000 ton ship in the SICILIAN Channel.\nBUKMA. 2nd. 23 United States Mitchells attacked transport\ntargets in the BAND-DAY Area.\nRegraded Unclassified"
}