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Volume 708, March 9 – March 10, 1944
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Volume 708, March 9 – March 10, 1944
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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Diary
Book 708
March 9-10, 1944
Regraded Unclassified
- A -
Book Page
Argentina
See Foreign Funds Control
Association of American Colleges
Executive Director asks to see HMJr concerning church
and charitable deductions - 3/9/44
708
23,27
a) Conference - 3/13/44: See Book 709, page 149
1) Paul memorandum on March 11 conference
with Joint Committee - 3/15/44: Book 710,
page 132
- B -
Baer, Frank L.
See Morgenthau, Henry, Jr.: "Washington Broadcast"
- C -
Colleges (American). Association of
See Association of American Colleges
Correspondence
Mrs. Forbush's mail report - 3/10/44
234
- D - -
Deferments, Military
Fletcher, Walter S.
McDavid, Rudolph M.
Pehle, John W.
Applications approved - - 3/9/44
17
- 1- -
Exports
See Strategic Materials
- F -
Financing, Government
Conference; present: HMJr, Bell, Murphy, Lindow, Haas,
and Tickton - 3/10/44
99
a) Haas memoranda discussed
1) Developing a Borrowing Program for the
Calendar Year 1944
122
2) An Exploratory Memorandum to Facilitate
Discussion of Problems in Money Market
Management during 1944
134
3) Outlook for Sources of Funds, for Federal
Borrowing during the Calendar Year 1944
156
Regraded Unclassified
- 1 - - (Continued)
Book Page
Financing, Government (Continued)
War Savings Bonds
4th War Loan Drive
State War Finance Chairmen thanked for cooperation -
3/9/44
708
52
Fletcher, Walter 8.
See Deferments, Military
Foreign Economic Commission
Thomas bill to establish discussed in Paul memorandum -
3/10/44
251
Foreign Funds Control
Argentina: "Show Cause" Order: HMJr suggests serving
on State Department as to why they should not apply
complete economic sanctions - 3/9/44
8
- G -
Gasoline
See Strategic Materials
Germany
Swedish exports of iron ore to Germany reviewed in
White memorandum - 3/10/44
255
- I -
International Migration Service Office
See War Refugee Board
- L - -
Latin America
Argentina: See Foreign Funds Control
Peru: See War Refugee Board
Lend-Lease
U.S.S.R.: Report on availability of cargo for March
sent to FDR - 3/9/44
58
United Kingdom: Federal Reserve Bank of New York
statement showing dollar disbursements, week ending
March 1, 1944 - 3/10/44
246
- M -
McDavid, Rudolph M.
See Deferments, Military
Messengers on Secretary's Staff
No replacements if any are drafted - HMJr's orders -
3/9/44
21
Morgenthau, Henry, Jr.
"Washington Broadcast": Comment on HMJr and the
authors (Wythe Williams and Frank L. Baer) discussed
by HMJr and Paul - 3/10/44
92
Regraded Unclassified
- II - -
Book Page
New Zealand
See War Refugee Board
- o -
011
See Strategic Materials
- P -
Pehle, John W.
See Deferments, Military
Peru
See War Refugee Board
Petroleum
See Strategic Materials
Poland
See Post-War Planning: Currency Stabilization
m War Refugee Board
Post-War Planning
Currency Stabilization
Poland: Proposal for United Nations Bank - reaction to -
3/9/44
708 60
- R - -
Refugees
See War Refugee Board
- S -
Scrap Iron
See Strategic Materials
Strategic Materials
Scrap Iron, Gasoline, Petroleum: HMJr wants exports
by months and by Ports for five years before
Pearl Harbor - 3/9/44
14
a) Haas report - 3/13/44: See Book 709, page 196
Sweden
See Germany
- U - -
U.S.S.R.
See Lend-Lease
# War Refugee Board
Unitarian Service Committee
See War Refugee Board
- W -
Book Page
War Refugee Board
New Zealand: Attitude on rescue and relief to
victims of Nazi persecution outlined - 3/9/44
708
68
U.S.S.R.: Attitude on rescue and relief to victime
of Nazi persecution outlined - 3/9/44
85
"Refugees, 1930-1942" - a report prepared by
George Warren (now with State Department: also
Executive Director of the International Migration
Service Office, New York City) - 3/10/44
256
Stettinius provided with memorandum on ways in which
he can help while in London - 3/10/44
272
a) Klotz-Stettinius conversation: See Book 711.
page 206
Winant provided with pattern of action to be taken by
Board to be used in conference with British
Government - 3/10/44
279
Warren, George
See War Refugee Board: "Refugees, 1930-1942"
"Washington Broadcast"
See Morgenthau, Henry, Jr., for authors thereof
Williams, Wythe
See Morgenthau, Henry, Jr.: "Washington Broadcast"
Regraded Unclassified
1
March 9, 1944
9:10 A.M.
Present:
Mr. Pehle
Mr. DuBois
Mrs. Klotz
Mr. Pehle: I read it to him, Mr. Secretary,
word for word. I read it to him and made him listen
to it. he said no; the thing as we drafted it would
stir up anti-Administration sentiment. I told him
why he was wrong. lie said, "You want me to agree with
you when I don't."
HM,Jr: What is the principal thing he left out?
Mr. Pehle: What he has done -- he hasn't left
out much -- instead of making it a declaration by the
President, it's 8. statement by the President. That's
the first thing. and the President probably requested
that after Rosenman put it in his mind. Secondly, in-
stead of being a statement on the systematic murder of
the Jews, it's now a statement on atrocities of all
kinds which mentions the Jews among others. We don't
think it is necessary to tell the people again about
how our soldiers were murdered. Everybody knows how
we feel. You don't have to tell the people how we
feel about the Japanese.
The thing we were trying to bring home is that
this country is opposed to the Hitler plan to extermin-
ate the Jews. That is buried in this statement. It's
there, À but buried, and it's buried by the statement
that In areas subjugated by the aggressors, innocent
Poles, Czechs, Norwegians, Dutch, Danes, French, Greeks,
Russians, Chinese, Filipinos -- and many others, are
being starved or frozen to death or murdered in cold
blood in a campaign of savagery".
2
-2-
HM, Jr: I am glad that in the second paragraph
he does not mention the Jews, because it's not mixed
with that and he says here, in a paragraph all by itself,
"One of the blackest crimes of all history -- begun by
the Nazis in the day of peace and multiplied by them a
hundred times in time of war -- the wholesale systematic
murder of the Jews of Europe goes on unabated every hour.
It is therefore fitting that we should again proclaim our
determination that none who participate in these acts of
savagery shall go unpunished." Now, there is a paragraph
by itself -- the whole business.
I would be delighted to see the President give
this thing out. It's 80 much better than nothing. You
people have been SO close and wanted the ideal, which you
can't get, but I would be upset if he brought the Jews
in with the second paragraph with all the others, but as
long as he has a paragraph entirely devoted to them, I
would let it go. I don't think we can stop it.
Mr. Pehle: I don't think we can stop it. As far
as the statement is concerned, I agree -- and I think the
most of us do -- it's much better than nothing.
But above and beyond that, the thing that is im-
portant to my mind is whether Rosenman's counsel on these
matters is going to carry.
HM, Jr: Supposing you were the Attorney General
and the President of the United States, after all these
years, beings in a personal Counsel -- or, to bring it
a little closer to home, supposing he brought into his
office George Harrison to advise him on public finance.
How would I feel? But he hasn't. But he did bring in
a personal counsel because he thought he needed one. But
if he brought in a man like George Harrison or Randolph
Burgess or anybody as his personal adviser on public
finance. But the Attorney General had to swallow it
and like it. Now you boys can't say to yourselves or
Unclassified
3
-3-
to me that the President of the United States can't have
an assistant
Mr. Pehle: We are not saying that.
HM,Jr:
who can review things for him.
Mr. Pehle: His choice of Rosenman is his choice.
HM, Jr: But it isn't like he brought a man in to
advise him on refugee and Jewish affairs.
Mr. Pehle: But he did bring him in to advise him
over three Cabinet officials. There is nothing we can
do about it, but I am just pointing out the importance
HM,Jr: The only reason you could take offense
would be if after this thing was started he brought in
Rosenman to advise him on this subject.
Mrs. Klotz: He's taking what he's going to do
from here on.
Mr. Pehle: If Rosenman is going to be his adviser
on these Jewish matters, it's going to very seriously in-
terfere. The question in my mind is if the President
ought to be told that Rosenman's counsel on these matters
is not good counsel and we prefer nothing even though we
recognize the merit in this thing. That's very strong
stuff, I realize.
HM, Jr: I think, inasmuch as this one paragraph
is entirely devoted to the Jews and stands out by itself,
I would let it ride. That doesn't mean that the Presi-
dent is even going to do this. Let her ride. And you
tell me why Rosenman should make a dirty remark about me.
I don't know.
Mr. Pehle: It wasn't a dirty remark. You ought
be proud. He feels you don't agree to his reaction to
this thing.
Regraded Unclassified
4
-4-
Mrs. Klotz: He has a guilty conscience because
he knows nobody else agrees with him. It's a natural
statement.
HM, Jr: There is nothing more difficult than
dealing with the White house, 80 my advice to you gentle-
men is to let nature take its course. I am not at all
sure that this will see daylight.
Mr. DuBois: I don't think it makes an awful lot
of difference whether it does or does not. In the case
of Europe, I don't think this is going to be very ef-
fective. I think it has lost 90% of its effect. If
the suggestion of camps in America is not in it, I think 90%
of what we can do is lost.
5
STATEMENT BY THE PRESIDENT OF THE UNITED STATES.
The United Nations are fighting to make & world in which
tyranny and aggression can not exist; a world based upon freedom,
equality and justice; a world in which all persons regardless
of race, color or creed may live in peace, honor and dignity.
In the meantime in most of Europe and in parts of Asia
the systematic torture and surder of civilians - men, women
and children -- by the Nasis and the Japanese continue unabated.
In areas subjugated by the aggressors innecent Poles, Caeehs,
Norwegians, Dutch, Danes, French, Greeks, Russians, Chinese,
Filipines -- and sany others -- are being starved or frozen to
death OF surdered in cold blood in a campaign of savagery.
The slaughters of Warsaw, Lidiee, Kharkev and Nanking --
the brutal terture and surder by the Japanese, not only of
civilians but of our own gallant American soldiers and fliers --
these are startling examples of what goos on day by day, year
in and year out, wherever the Nasis and the Japs are-h ha military
control and -- free to fellow their barbario purpose.
one of the blackest erimes of all history - begun by the
Masis in the day of peace and multiplied by them a hundred times
in time of war -- the wholesale systematic nurder of the Jews
of Europe good on unabated every hour. It is therefore fitting
that we should again proclain our determination that none who
participate in these note of savagery shall go unpunished. The
Regraded Unclassified
6
- 2 -
United Nations have made it clear that they will pursue the
guilty and deliver them up in order that Justice be done. That
warning [Is now repeated " that no one shall fail to hear and
understand. 1$7 applies not only to the leaders but also to
their functionaries and subordinates in Germany and in the
satellite countries. All who knowingly take part in the deporta-
tion of Jews to their death in Peland or Norwegians and French
to their death in Germany are equally guilty with the executioner.
All who share the guilt shall share the punishment.
Hitler is committing these crimes against humanity in the
name of the German people. I ask every German and every san
everywhere under Nasi domination to show the world by his action
that in his heart he does not share these insane oriminal desires.
Let his hide these pursued victims, help them to get over their
borders, and do what he can to save them from the Masi hangsan.
I ask him also to keep watch, and to record the evidence that
will one day be used to convict the guilty.
In the meantime, and until the vietory that is now assured
is won, the United States will persevere in its efforts to ressue
the victims of brutality of the Masis and the Japs, In ⑉ far
as the necessity of military operations permit this Government
will use all means at its command to aid the escape of Jove-and
all other intended vistims of the Masi and Jap executioner --
regardless of race or religion or color. We call upon the free
peoples of Europe and Asia temporarily to open their frontiers
7
- 3 -
to all victims of oppression. We shall find havens of refuge
for them, and we shall find the means for their maintenance and
support until the tyrant is driven from their homelands and they
may return.
In the name of justice and humanity let all freeden loving
people rally to this righteeus undertaking,
JWP:1hh 3/9/44
8
March 9, 1944
9:30 a.m.
GROUP
Present: Mr. Bell
Mr. O'Connell
Mr. DuBois
Mr. Gaston
Mr. White
Mr. Luxford
Mr. Blough
Mr. Thompson
Mr. Sullivan
Mrs. Klotz
H.M.JR: I wanted Luxford and DuBois to hear the
beginning of this part. After they hear it, I will
excuse them. This morning I got an idea which may
be good and it may not be good. I think you lawyers
call it a "show cause" order.
What I would like to have prepared in the Treasury
is a show cause order on the State Department as to why
they should not apply complete economic sanctions. Do
you see? We giving all the reasons. I don't want to
put it in the form of "I said this," and "I said that,"
but the basic reasons why. I think you call that--
MR. LUXFORD: We get the point.
H.M.JR: Which would be & different attack. We
apply this thing in getting ready - you can pretty well
tell what will come over today. What was the last
country this morning? Paraguay, I think.
Do you boys get the idea?
MR. LUXFORD: Yes.
Regraded
9
- 2 -
MR. DuBOIS: Yes.
H.M.JR: That kind of approach which I can serve on
the Secretary of State, why we think they should apply
complete economic sanctions.
The only thing I would like to introduce into this
thing, which would be a little bit different, I would
like to talk a little bit about post-war American
markets, and so forth and so on.
At the beginning of the war everybody was so worried
that the Germans were going to jump off from Dakar and
attack us. It seems to me that right now they are using
Spain, and that man Franco is Hitler's stooge, and from
ti ere it goes - instead of from Dakar, it goes from Spain
down to South America.
MR. LUXFORD: Did you see Moley yesterday? He took
that line - gold from franco down to Argentina.
H.M.JR: No, this was original.
You have got this fellow Mann, and who is the
Lieutenant Colonel with G-2?
MR. LUXFORD: Towson.
H.M.JR: I thought I would call up General Bissell
and ask whether Towson could come over and help us, and
give us the latest stuff.
Now going back again, I don't know whether it was
'38 or '39, the then Foreign Minister of Spain under the
Republic, who is here now - what is his name?
MR. LUXFORD: Del Veyo.
H.M.JR: He wanted at that time - and this is
interesting - to furnish the State Department with the
names of the people in South America that the Falangists
were using for propaganda purposes.
10
- 3 -
He said, "I can give them the names of all of them."
The State Department wouldn't even let him furnish
them with the names. He is in New York.
MR. LUXFORD: We saw him.
H.M.JR: If you wanted anything as to what is going
on down there, it is there. But I would like to approach
it from this standpoint and see what we can get.
MR. LUXFORD: I take it that this document will be a
political document.
H.M.JR: Political and economic.
MR. LUXFORD: That is all I wanted to be sure of.
It can be both.
H.M.JR: Oh, yes. It should be a kind of 8. document
that if you are going to go before a court and ask for
an injunction, why you should have an injunction on the
State Department to stop these people.
MR. LUXFORD: That is right.
H.M.JR: And you have to prove it from all angles
why we should get them to stop this thing from spreading
in South America, which is a little different approach
than slapping an order on me. (Laughter)
This ought to be good fun.
MR. LUXFORD: It will be. How much time do we have?
H.M.JR: I don't know. Not more than today. Enough
time to do a bang-up job.
MR. SULLIVAN: On the post-war foreign markets
there is an excellent article that is coming out in next
month's Fortune, by Janeway. He sent it to me. I will
be glad to get it to you. I think you should read that,
too, Mr. Secretary.
Regraded
11
- 4 -
MR. LUXFORD: It will be very helpful.
H.M.JR: I can't see, other than South America and
Russia, much markets for us.
So you like the idea?
MR. LUXFORD: Very much.
H.M.JR: Joe?
MR. DuBOIS: Very much.
MR. LUXFORD: I think we will need Harry's help
on part of it.
H.M.JR: He will be around. What is the fellow's
name you want?
MR. LUXFORD: Towson. Mann brought his files up
here. I don't know whether he told you that or not.
H.M.JR: No, I haven't seen Mann.
MR. WHITE: In other words, this is a document which
you are submitting as a Member of the Cabinet and not as
Secretary of the Treasury. The reason I say that is not
how you submit it, but it shapes how it is formed.
(The Secretary holds a telephone conversation with
Captain Easter in General Bissell's office)
Unclassified
12
March 9, 1944
9:38 a.m.
HMJr:
Hello.
Operator:
General Bissell is up in the Chiefs-of-Staff
office. I have Captain Easter in his office.
HMJr:
Right.
Operator:
Go ahead.
HMJr:
Hello.
Captain
Easter:
Yes, sir.
HMJr:
This is Mr. Morgenthau speaking.
E:
Yes, sir, Mr. Morgenthau.
HMJr:
Before General Bissell took over, Lt. Colonel
Towson used to come over once in a while and
talk to us about South America.
E:
Yes, sir. Well, he's still in this office and
he 18 General Bissell's aide.
HMJr:
Yes.
E:
And he just happens to be out at the moment.
HMJr:
Well, if it's agreeable to General Bissell,
could he be instructed to come over and see
Mr. Luxford, Assistant General Counsel, at
Treasury and bring us up to date on the South
American situation, particularly the Argentine?
E:
The South American situation, particularly the
Argentine.
HMJr:
Yes.
E:
All right, sir. I certainly will. I'm sure he
can come over any time you'd like.
HMJr:
Well, if it's all right, he can just contact Mr.
Luxford.
E:
Mr. Luxford?
Regraded Unclassified
13
- 2 -
HMJr:
Yes.
E:
All right, sir. Fine, Mr. Morgenthau.
HMJr:
Thank you.
E:
You are welcome, sir.
Regraded Unclassified
14
- 5 -
H.M.JR: He is still in the same position, 80 that
is that.
Now look, don't worry too much in what capacity I
do it. I want to do it as an American citizen.
MR. WHITE: The reason why I am suggesting that is
merely to make clear that the document should not be
confined to matters which are exclusively the function
of the Treasury, but should comprehend the whole situa-
tion.
H.M.JR: The document should be sufficiently inclu-
sive so that you could win your case in court.
MR. LUXFORD: It should be the document that State
should prepare.
H.M.JR: Right. Now, George, I have one thing I
want you to do. Make a pencil note. I want you to go
back to five years before Pearl Harbor and by months
I want to know how much scrap iron left this country
and from which ports they left, if that is available,
by months. I mean, you put the ports, most likely, on
one side, and the months, and then the totals at the
bottom. And then the same for gasoline and petroleum
products. I don't know whether they say gasoline is
separate from crude oil, in Customs, but if they do,
give me as much breakdown as possible.
Then after you get those figures, give me some kind
of a line showing - - so I can get some kind of & chart
to see whether the thing went up very rapidly or whether
it was a steady thing. It would be very interesting,
for instance, if the amount constantly increased up to
Pearl Harbor.
Those two things I would like to see.
MR. HAAS: Yes, sir.
15
- 6 -
H.M.JR: Or any other strategic exports to Japan
from this country.
If they showed what were the various grades of gaso-
line, it would be very interesting.
MR. HAAS: Do you remember, at your request we got
that - Pacific reports from the Customs Agents for a
period?
MR. GASTON: Yes. That is what we got into some
trouble about - Stone, you know, of The Nation - Ickes
showed him some of those reports and he printed some
stories about them. Do you remember that?
H.M.JR: Sort of vaguely.
O.K.
(Mr. Luxford and Mr. DuBois leave the conference)
H.M.JR: Now, Thompson.
MR. THOMPSON: I have three or four more cases on
the key list. They don't have to go to Puryear. They
go directly to the local Board.
H.M.JR: I thought you told me that he knocked out
some of the things that were on the key list.
MR. THOMPSON: Well, those caseswere gone over before
he put them on the key list. While pending before
the Doard, he approved them on the key list and disap-
proved them as individual cases.
MR. GASTON: If they had been on the key list be-
fore we sent them over, we wouldn't have sent them.
MR. BELL: See the article in the Post this morning?
There was an article in the Post this morning about these
disapprovals of WPB. Kind of hit the Committee pretty
hard.
Regraded Unclassified
16
- 7 -
MR. 0' O'CONNELL: Ernst told me this morning, if
this was a deferment matter, it might contrast what
happens in the Government as distinct from private
corporations. A steel company was quite upset over
having had the local Board turn down sixteen out of two
hundred-odd requests for deferments of pre-Pearl Harbor
fathers. If that were typical, it is worth the general
view that we had, that they are more lenient with
respect to industries than our Review Committee is with
respect to Government.
MR. THOMPSON: We haven't lost a case yet, before
the local Board.
H.M.JR: Rosenman the other night said, "When
anybody comes to me, I always say that the Treasury
only has eleven deferments.
I said, "What do you mean, 'comes to you'?"
He said, "Well, when they go above this Board,
they go to the President, and then they come to me."
I said that I didn't know that.
He said, "Well, the State Department asked for
twenty-three deferments and they got one." They then
went to the President and he wouldn't do anything about
it. But Hull called him directly from wherever he is,
on the telephone, and the President said, "Hold it up
until Hull returns, because the old man seems to be
angry about it."
But the point of my story is, you can go to the
President, and from the President to hosenman.
MR. BELL: There is still another appeal after the
President! (Laughter)
H.M.JR: I gave these boys a little lecture that they
had better leave Palace politics to me after twenty years.
17
- 8 -
I don't know how well I fared, but I think 1 fared
a little bit better than some of the others.
MR. WHITE: I might throw a little light on this
deferment business. This chap that was put in charge of
the Committee, Puryear, I think he is, is terrifically
overwhelmed by anybody who is either a Congressman or
a Senator, and he was told by one of the men--
MR. O'CONNELL: Costello.
MR. WHITE: That is right.
that he had better
not - he was reported to have said he better not have any
Government people on the deferment. When all these
deferments came before his Committee, he knocked them all
out with the exception of some very, very few. I think
the story is that out of some hundreds of Department of
Labor, he left one, or something of that kind. There
immediately began to pour in a terrific stream of protests.
They went to see Costello - other people - in response
to Puryear's statement that Costello said there shall be
no Government people deferred. Costello laughed loudly
and said that he never said anything of the kind, and if
they wanted to do it, it was all right with him. And he
treated the matter as a huge joke.
That has happened since these deferments have been
turned down. So whether that presages a new policy,
I don't know.
But that was the origin of turning all these
people down, because this fellow Puryear is apparently
a fourth-rate nit wit.
(The Secretary signs applications for deferment of
John W. Pehie, Walter S. Fletcher, and Rudolph M. McDavid)
18
- 9 -
H.M.JR: We will let you (Sullivan) ride up to the
Hill with me.
MR. SULLIVAN: Right.
MR. THOMPSON: That is something for Cabinet that
the Secretary wanted on the deferment question.
(Mr. Thompson hands the Secretary one-page docu-
ment entitled "Treasury Department Deferments.")
MR. BELL: Everybody is being hit, now, and Paul
is being called--
MR. THOMPSON: And that is for Judge Rosenman.
(Mr. Thompson hands the Secretary short memorandum
dated March 8, 1944, regarding cafeteria pass for
Judge Rosenman)
H.M.JR: This is an isolated case?
MR. THOMPSON: Yes, oh, yes, it is.
That is all.
MR. BELL: Just to tell you that we have got, up to
last night, two billion eight hundred and sixty million
of the exchange bonds in.
Are you going to see Harry and me sometime today on
the Russians?
H.M.JR: Yes. I am in a bad spot, today. I am
going up to see the Speaker at eleven, so it knocks my
morning into a cocked hat. I will put you down.
MR. BELL: It has been hanging fire since the 15th
of February, and we didn't get it from the War Department
until the 29th of February.
19
- 10 -
H.M.JR: All right. I would like to see you and
George sometime this week, if you are ready, about how much
money we need for the rest of the year. I read the
report last night. I want to go over it with you, this
question of expenditures, cutback, and all the rest of
that stuff. I would like a session.
MR. HAAS: We have done a lot of work on it.'
H.M.JR: When will you be ready?
MR. HAAS: I think almost any time. We have been
working with the Federal Reserve people to save you some
trouble trying to get a clearance.
H.M.JR: I mean on expenditures and that kind of
stuff.
MR. BELL: I have just got some new items. I am
ready to talk to you at any time on the cash position.
MR. HAAS: Any time.
MR. BELL: I think we ought to get started, because
we will probably want the Banking Committee in.
MR. HAAS: It is a very difficult problem this year.
H.M.JR: Nine-thirty tomorrow, the first appointment,
Bell, Haas, and anybody else.
MR. HAAS: All right.
H.M.JR: Now, that memorandum you sent me was about
the first of February. Have you a more recent one?
MR. HAAS: We have more recent information which we
have used in another memorandum on financing problems from
now to the end of the year.
H.M.JR: Let me have a run on that tomorrow, then.
20
- 11 -
MR. BLOUGH: Mr. Sullivan has the only item I am
interested in at the moment.
H.M.JR: I don't like to tell you when Paul isn't
around, but these meetings which are coming again this
afternoon-I have no reports on any of the meetings that
I asked for yesterday or the day before. If they are
important enough to invite forty people to, they are
important enough, I think, to let the Secretary of the
Treasury and the Under Secretary of the Treasury know
about.
MR. BLOUGH: You want a report direct to you on
them? I didn't know; I assumed that he was taking care
of that side of it.
H.M.JR: The reason I speak to you is because I asked
for something; the reports have your name on them.
MR. BLOUGH: Yes, they went from me to him. I send
them to Paul, but I will be glad to send them direct,
if you wish.
H.M.JR: No, I will say this to Paul when he gets in.
When is he coming back?
MR. O'CONNELL: He should be in at noon.
H.M.JR: I mean, if you are going to have thirty or
forty people in, the Office of the Secretary of the
Treasury, which includes me and the Under Secretary and
the Assistant Secretaries, should know about these meet-
ings, and nobody at the top knows.
MR. BLOUGH: Yes.
H.M.JR: You can pass it on to Paul, or I will pass
it on.
MR. O'CONNELL: You have been in the habit of making
a memorandum to Randolph.
MR. BLOUGH: I have responsibility there. They have
been at the technical level, which is the reason why I
haven't bothered you.
21
- 12 -
H.M.JR: But, supposing I am at a press conference
and there are forty people asking me questions and none
of us at the top knows anything about this.
MR. BLOUGH: You are right.
H.M.JR: I know I am right for once.
MR. BLOUGH: It is one of these cases where the thing
falls between and it doesn't get to you. I would rather
get them from three sources than no source. As I say,
I don't know. They may be very important, or very un-
important. I might not read hem when I get them, but
at least I should be served with the papers.
MR. O'CONNELL: You are very legal this morning.
H.M.JR: I am dealing with a lot of lawyers. Anyway,
I am talking now as the Office of the Secretary of the
Treasury, which includes Sullivan, Gaston, Bell, and
myself. We are part of the Treasury.
MR. THOMPSON: And twenty-seven messengers. The
twenty-seven messengers were put back yesterday. I don't
think we will get them all in conference, but we will get
half of them.
H.M.JR: Dowling was very much impressed; he was getting
very efficient. I asked him if he had read it. He said
he sure had.
MR. THOMPSON: They have all perked up quite 8. lot.
MRS. KLOTZ: They felt that they really had a workout.
H.M.JR: But my order still holds on Dowling; and if
any of the men are drafted, no replacements.
MR. BELL: There was one item that was discussed the
other day in these tax conferences on simplification. It
was a question of combining some of the rates which might
have the effect of lowering the normal tax, and increasing
22
- 13 -
the surtax. That has begun to seep around through the
market that this is another means of getting rid of
partially-tax-exempt. income on our securities. That
brings up the old question of your statement that nothing
would be done directly or indirectly.
H.M.JR: Paul has mentioned that to me a couple of
times. He said he wanted to talk to you about it.
MR. BELL: He did talk to me, and I said that we
ought to go rather slowly, certainly during this time when
our financing was getting harder and harder, that you
ought to know about it and see whether it was a violation
of your statement.
H.M.JR: Would you write a letter for me to Stettinius,
please, today, sending him & copy of the Press Department's
note on this Belgian currency business and simply say that
we take it for granted, in view of my conversation with
him Sunday, that I would like to point out that we are in
receipt of this memo from the President, and we take it
that is the last word.
MR. WHITE: I don't think that is necessary, in view
of subsequent developments.
H.M.JR: Stettinius has a peculiar way, and a very
good way. When these things are up, he writes letters on
the thingsto confirm them. In view of the thing, I
would like to have 8 letter go between us.
MR. BELL: Well, it has gone over there, hasn't it,
Harry?
MR. WHITE: A copy has gone over. Acheson called
you up, and they have already approved. The State Depart-
ment has approved the draft which we have handed the
Belgians; they have just approved it after holding it
three orfour days.
H.M.JR: Stettinius may not know about it. I mean,
Acheson didn't know, or--I still think it would be good,
if you don't mind.
22
- 13 -
the surtax. That has begun to seep around through the
market that this is another means of getting rid of
partially-tax-exempt income on our securities. That
brings up the old question of your statement that nothing
would be done directly or indirectly.
H.M.JR: Paul has mentioned that to me a couple of
times. He said he wanted to talk to you about it.
MR. BELL: He did talk to me, and I said that we
ought to go rather slowly, certainly during this time when
our financing was getting harder and harder, that you
ought to know about it and see whether it was a violation
of your statement.
H.M.JR: Would you write a letter for me to Stettinius,
please, today, sending him 8. copy of the Press Department's
note on this Belgian currency business and simply say that
we take it for granted, in view of my conversation with
him Sunday, that I would like to point out that we are in
receipt of this memo from the President, and we take it
that is the last word.
MR. WHITE: I don't think that is necessary, in view
of subsequent developments.
H.M.JR: Stettinius has a peculiar way, and a very
good way. When these things are up, he writes letters on
the things to confirm them. In view of the thing, I
would like to have a letter go between us.
MR. BELL: Well, it has gone over there, hasn't it,
Harry?
MR. WHITE: A copy has gone over. Acheson called
you up, and they have already approved. The State Depart-
ment has approved the draft which we have handed the
Belgians; they have just approved it after holding it
three orfour days.
H.M.JR: Stettinius may not know about it. I mean,
Acheson didn't know, or--I still think it would be good,
if you don't mind.
23
- 14 -
MR. BELL: I will refer to the conversation.
H.M.JR: You and White refer to Sunday's conversation
and simply say that there will be no misunderstanding
between the two departments; that is the way I understand
it.
MR. BELL: All right. What happened on that is,
Dean called me day before yesterday, I guess it was, and
said that they had considered that final, and I told them
that there seemed to be some doubt in Stettinius' mind,
but he thought the President had told him he thought he
agreed with the State Department.
He said, "Yes, that is true, but we have checked that
through Miss Tully, and Miss Tully said she didn't think
there was any doubt but what the President knew what he
was doing when he dictated the memorandum."
H.M.JR: Get it to Mrs. Klotz by two o'clock, will
you, White and Bell collaborating.
Is there anybody who wants a decision this morning?
MR. SULLIVAN: I do. The Executive Director of the
Association of American Colleges wrote you and wanted to
call. I called him and said that the reason I was phoning
was because his letter, although dated March 6, had just
arrived, and I noticed that he wanted a conference this
week and that you were committed for the rest of the week,
but I would be very glad to see him. He was very indignant,
insisted that he should see you, and couldn t understand
why you wouldn't be willing to meet with them.
I said, "Well, that is not the Secretary's position
at all; it is the fact that your letter arrived so late in
the week that he had no time left on his calendar."
"Well," he said, "we can come down next Monday to
see him."
I think you ought to see them for 8 few minutes.
Unclassified
24
- 15 -
H.M.JR: Can I get a degree out of it?
MR. SULLIVAN: He has six hundred colleges.
MR. BLOUGH: Chances are you will if you give him
what he wants.
H.M.JR: There is nothing I can give them; that is
why I thought I would let Sullivan see him.
MR. SULLIVAN: He wanted to know if Bell was around.
I said, "Yes."
"What is his position."
I said, "He is Under Secretary."
He said, "Can you talk to him right now?"
I said, "No, I can call him on the other phone. I
will be glad to do that. I think he will probably suggest
that you see me."
"Well," he said, "I am sick and tired of seeing
bookkeepers."
MRS. KLOTZ: Yes, he was terrible. He came in right
after the conversation.
MR. SULLIVAN: He has very definite ideas about it.
MRS. KLOTZ: He was mad, because he said he could go
to see the top people everywhere, and why weren't you
willing to see him?
H.M.JR: You (Sullivan) remember the story, because
it affected you, when we had the fellow, the President of
Consolidated Aircraft--he wanted to see me while this
thing was on. He said, "I have seen everybody in the
Cabinet but Morgenthau." I told him I wouldn't see him
until the thing was settled. He laughed finally. Do
you remember? He stood outside, and I wouldn't see him.
I said he had to settle it with you.
Regraded Unclassified
25
- 16 -
MR. SULLIVAN: That is right. He did. It was two
and a half billion dollars off of a twenty million dollar
contract.
H.M.JR: You think I should see him?
MR. SULLIVAN: I think you should.
MRS. KLOTZ: He handled it very well, the fact that
they asked for the meeting this week.
H.M.JR: All right, I will put it down for three
'clock on Monday. Will you be present, please? What
are the colleges?
MR. SULLIVAN: The Association of American Colleges.
What he is going to get is the president of one of the
local colleges, and the head--
MRS. KLOTZ: Tell the Secretary whom he is bringing.
MR. SULLIVAN: Bishop Hughes, and the head of the
Catholic Charities, and several charitable institutions
here in the District.
H.M.JR: I am going to put Sullivan down for two
forty-five so you can come in and coach me.
MR. BELL: I saw Bishop Hughes with you. Do you
remember that group on the tax problem?
MR. SULLIVAN: A couple years ago?
MR. BELL: No, no, before the tax went through.
MR. BLOUGH: The tax withholding business. You
brought them in while the Secretary was away.
MR. GASTON: Maybe it is the fixed credit deduction
of six percent.
MR. SULLIVAN: Randolph has been in on it.
Regraded Unclassified
26
- 17 -
MRS. KLOTZ: He said he was very mad at Randolph.
He wouldn't have anything to do with him.
MR. SULLIVAN: They were fraternity brothers, and
Randolph had brushed him off.
MR. HAAS: All in the name of charity, John?
H.M.JR: I am putting Paul down, too, Paul and you
at two forty-five.
MR. GASTON: This is what?
MR. SULLIVAN: The Association of American Colleges.
MR. GASTON: The other one is the major organization.
H.M.JR: This isn't worth getting a degree?
MR. GASTON: No. Am I right, Roy?
MR. BLOUGH: Yes. The ones you would like to have
the degrees from--
MR. BELL: Don't give in yet.
MR. GASTON: This is an association of fresh water
colleges.
Regraded Unclessified
27
March 9, 1944.
MEMORANDUM FOR SECRETARY'S FILES
FROM: Mr. Sullivan
The attached letter was answered by telephone call
to Mr. Snavely. I advised him that the Secretary had no
time available the rest of the week but that I would be
glad to meet with the group. Snavely was indignant that
the Secretary would not meet with them and I told him that
if he cared to postpone it until the following week I would
endeavor to get him an appointment. He agreed to such an
appointment and after consultation with the Secretary I
phoned him again and arranged for a meeting at 3 p.m. on
March 13th.
ssociation of American Colleges
19 WEST 44TH STREET
New York 18, N
OFFICERS FOR YEAR ENDING JANUARY 1945
ADDITIONAL MEMBERS BOARD OF DIRECTORS
2
President FRANCIS P. GAINES
JAMES B. CONANT
President, Washington and Lee University
President, Harvard University
Vice-President MILDRED H. MC AFEE
PERCY A. ROY
President, Wellesley College
President, Loyela University (New Orleans)
Treasurer LE ROY E. KIMBALL
FRANC L. MC CLUER
Comptraller, New York University
President, Westminster College
OUT E. SNAVELY
ELAM J. ANDERSON
Executive Director
President, University of Rediands
March 6, 1944
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Dear Secretary Morgenthaus
A group of representatives of the church,
educational and other charitable institutions should
like very much to have a brief conference with you in
the immediate future concerning the problem of assur-
ing adequate recognition of gifts to religion and
charity in present plans to simplify the Federal In-
come Tax returns.
If it is not too presumptuous we hope you
can arrange to see us early some afternoon in the pre-
sent week.
Faithfully yours,
Guys. Suavely
GES:D
March 9, 1944
29
2:30 p.m.
John L.
Sullivan:
....if I could get a memorandum to you.
HMJr:
Well
S:
I -- do you want me to walk in with it, or do
you want me to tell you. I have some people
in the office here with me.
HMJr:
Well, you'd better -- uh -- maybe I'd better
finish what I'm going to do first -- I'm
working on my tax. I'll finish that first.
S:
Right. I have to be out at a meeting at
three-thirty.
HMJr:
I'll see you before then.
S:
Thank you.
HMJr:
Don't leave the Treasury, though, without
seeing me first.
S:
No, sir.
HMJr:
All right.
March 9, 1944
30
2:40 p.m.
HMJr:
Ed, two things: first, social.
Edward R.
Stettinius: Yeah.
HMJr:
I wondered if you and Mrs. Stettinius were
free Monday night, whether you would care
to have just a quiet supper with us.
S:
Well, we would love it, sir, but for the fact
that I was -- I just have to be in New York on
Sunday and Monday both.
HMJr:
Oh.
S:
This is terrible bad luck as the President
asked me to dine on Sunday and I'm missing
that, and now you on Monday.
HMJr:
I see.
S:
But I -- I've got to -- for you, privately --
I've got a little hemorhoid business that I've
got to attend to before I go to England.
HMJr:
Oh.
S:
So, I'm going to have to take two or three days
next week to do that.
HMJr:
I see.
S:
I've just got
HMJr:
Well
S:
I've got to do it before I go.
HMJr:
Maybe when you get back.
S:
Maybe when I get back, before I go.
HMJr:
Pardon?
S:
I say, when I get back, before I go, maybe we
could have a visit.
HMJr:
Would you let me know when you come back?
Unclassified
- 2 -
31
S:
Yes, sir.
HMJr:
We can have very few appointments.
S:
Wonderful.
HMJr:
Now
S:
We'd love it.
HMJr:
Well, you -- well, I -- well, you give me a
ring when you get back.
S:
I will.
HMJr:
Now, the other thing 1s: I have the President's --
the memorandum from the President about Myron
Taylor, and the letter
S:
Yeah.
HMJr:
in which he says, "I am enclosing a
memorandum from Myron Taylor. Will you and
Ed Stettinius work it out with him?"
S:
Yeah.
HMJr:
(Laughs)
S:
Huh.
HMJr:
Now, I'm at your service.
S:
Well, I think it's a thing -- my suggestion
would be, at the next meeting or the Refugee
Board
HMJr:
Yeah.
S:
just raise that the President -- that Myron
Taylor has sent a memorandum to the President,
a copy of which he sent to me, which I have given
to Hull.
HMJr:
Yeah.
8:
And the President has given you.
HMJr:
Yeah.
Unclassified
- 3 -
32
S:
And that Myron Taylor emphasized the -- the
matter of the Inter-government Committee being
ignored, and then decide a policy as to the
War Refugee Board, maybe, communicating with
the Refugee Committee and asking it for its
suggestions and pledge cooperation.
HMJr:
Of course, that isn't what the President
suggested, but you'd rather not sit down with
Myron Taylor, is that it?
S:
Well, no. I don't -- no, the -- it's just a
matter of time.
HMJr:
I see.
S:
About my trying to -- I mean, if -- whether --
when we could do it, you see?
HMJr:
Yes.
S:
I'm -- I'm not -- I'm not trying to duck it.
It's just a question of doing it and having the
time to do it.
HMJr:
Yeah.
S:
I would think -- I don't -- I would think it
would be an easy way, though, to -- for you,
so that you don't have to get in a lot of
discussion about it -- to just deal with it at
a meeting of the Board. Don't you?
HMJr:
Well, if you think that that's easy, I don't
care. I'd just as leave bring it up.
S:
Yeah.
HMJr:
Get our policy established before I talk to
Myron Taylor. After all, it's not a personal
thing on my part.
S:
That's what -- my suggestion would be to bring
it up at the Board and get Hull and Stimson and
get a policy established and then just tell Mr.
Taylor what the policy 1s.
HMJr:
Okay.
Regraded Inclassified
- 4 -
33
S:
Because he's -- he's just -- he's peeved
that he has been ignored, as I told you.
HMJr:
But the letter didn't have the part that
you were afraid of -- that he, you know.
S:
That one....
HMJr:
The part about
S:
About you -- about you being
HMJr:
Jumping on -- about being excited and all
that.
S:
Well, that was in a separate one.
HMJr:
That's a separate one?
S:
That was -- that was a separate little note
that he wrote to the President
HMJr:
I
S:
....in addition to this one.
HMJr:
I see. Well, I can do it that way just as well
if that's going to save you time.
S:
I would think it would be better.
HMJr:
Okay.
S:
Righto.
HMJr:
Now, when am I going to get your Argentinian
memorandum?
S:
Well, I checked this morning and it looks like
it will not be until the end of the week.
HMJr:
Oh-oh.
S:
And it does not now look as if you will have
anything until -- I've instructed Acheson to
call upon you personally with this thing in hand
as soon as it was available.
Unclassified
- 5 -
34
HMJr:
I see.
S:
And I don't think he's going to -- the way things
are moving now with the Combined Chiefs-of-Staff,
and the Combined Boards that they are going to
have out the whole exhausted picture until the
end of the week.
HMJr:
This week?
S:
The end of this week.
HMJr:
End of this week?
S:
That's what they told me this morning.
HMJr:
I see.
S:
And I've said that you and the President and
Hull are to get -- are to get copies immediately.
HMJr:
Yeah. Okay. Well, when you get back from New
York, give me a ring.
S:
I will. I promise.
HMJr:
Take care of yourself.
S:
Righto.
HMJr:
Bye.
March 9, 1944
35
3:28 p.m.
HMJr:
Hello.
Operator:
I'm sorry, Mr. Morgenthau, I had to take Miss
Brady.
HMJr:
All right.
Operator:
There you are.
HMJr:
Hello.
Dorothy
Brady:
Hello, Mr. Secretary.
HMJr:
How are you all?
B:
Fine.
HMJr:
Got a pencil?
B:
Yes, sir, right in my hand.
HMJr:
Good. Now, look, I'm sending you a letter
addressed to the President with an enclosed
proposed letter to Congressman Doughton and
Walter George.
B:
Yes.
HMJr:
I have shown this correspondence to Jimmy Byrnes,
who has okayed it.
B:
Yes.
HMJr:
I have shown it to Vinson, and in the report
that I got back -- if you ve got a pencil --
he said -- I tell you what I'll do, the easiest
way is, I will send the memorandum from Sullivan
to me on it. I think that's the easiest way.
B:
All right.
HMJr:
Now, the catch in this thing is this: if we are
going to do this, I've got to get the President's
'Okay' by tomorrow night, because I've got to get
it up on the Hill by Saturday.
B:
Uh huh.
Regraded Unclassified
- 2 -
36
HMJr:
See?
B:
Well, why don't you get it right over and I'll
take it right in?
HMJr:
What could be better?
B:
All right.
HMJr:
And this memorandum from Sullivan to me doesn't
show that Jimmy Byrnes approved it; it just shows
what Vinson'
B:
All right.
HMJr:
....questions.
B:
All right.
HMJr:
Right?
B:
Fine.
HMJr:
Thank you.
B:
You're welcome.
37
As it went to President 3/9/44.
I
38
March 8, 1944
My dear Mr. President:
Yesterday afternoon we had a meeting in my office
with Senator Walter George, Congressman Robert Doughton
and Congressman Jere Cooper. Mr. Paul, Mr. Sullivan
and Mr. Nunan also were present.
At this meeting it was agreed that the Congress
of the United States would set out immediately to
enact & bill providing simplification of individual
income tax.
It was felt unanimously that this particular bill
should be confined solely to simplification, and that
the introduction of administrative changes, or of sug-
gested revenue increases, or of alterations in taxes
other than individual income tax, would serve only to
develop arguments and greatly impede the progress of
much needed simplification.
It was agreed by George and Doughton, therefore,
that all proposals that might arise in the Congress
to enlarge the scope of this particular bill would be
resisted by the Committee. It was suggested that the
Treasury agree to the same procedure.
I subscribe to this, as do all the people in the
Treasury. However, if we do agree, I believe we will
be promising, in effect, that no revenue or social
security message will be sent up at least while the
simplification bill is pending In the House. Since
there are to be no public hearings on the simpli-
fication bill. it appears that we would thus be tying
our hands until, at most, the latter part of April.
- 2 -
39
All of us here in the Treasury feel that any
possible disadvantages of this restriction are out-
weighed by the necessity and desirability of putting
through a bill -- and it should be ear-marked as a
Democratic party measure -- to simplify the individual
income tax system. We feel that this is & good move,
not only for the country, but for the Democratic party.
George and Doughton asked that I send them a
letter, which they can use in Congress to help keep
extraneous considerations out of the bill, and which
might be used as the basis of & press statement to
be released by them. Such a letter is enclosed.
I should like your approval.
Faithfully yours,
The President
The White House
78:mlf
Regraded Unclassified
40
March 8, 1944
My dear Mr. Chairman:
I understand that the staff of the Joint Com-
mittee and the Treasury tax staff are about to
complete their work on simplification of individual
income tax returns. I am tald they hope to be ready
to submit their joint recommendations to the Com-
mittee on Ways and Means of the House shortly.
Speedy enactment of the proposed legislation
seems to me to be of the very first importance.
Obviously here is one sphere within which we can
appreciably lighten the load of inconvenience which
the war has placed on American citizens.
It is my hope that in order to expedite passage
of this measure, your Committee will restrict this
bill solely to simplification. I wish to assure
you of the complete cooperation of the Treasury
Department in working with your Committee toward
the best possible simplification of our individual
income tax system.
Sincerely yours,
To be sent to:
The Honorable Robert L. Doughton,
Chairman, Committee on Ways and Means
and
The Honorable Walter F. George
Chairman, Senate Finance Committee
41
MEMORANDUM
March 9, 1944.
TO:
The Secretary
FROM: Mr. Sullivan
Judge Vinson called me at 1:30 to say that he had had
no opportunity yesterday afternoon to discuss with Justice
Byrnes your letters to Senator George and Congressman Doughton.
He stated that his view remained the same and that if we could
devise language which would indicate to George and Doughton
that we were not receding from our position that additional
revenue was needed, and if this could be done without indicating
to Congress a new revenue bill was impending, Be thought this
would improve the letter. However, he added that he had no
language in mind and he would not be displeased if after
considering it you decided to send the letters as they are
now written.
JT.St fw
Inclassified
42
March 9, 1944
3:30 p.m.
JEWISH EVACUATION
Present: Mr. Pehle
Mrs. Klotz
Mr. PEHLE: I wanted to tell you that I talked
to both Stettinius and Stimson. I wanted you to know
they have both seen the statement that Judge Rosenman
thought I wouldn't show to all the members of the
Board. I showed it to them 80 that we weren't play-
ing favorites.
H.M.JR: You went over?
MR. PEHLE: Sure. Stimson gave me forty minutes.
Stettinius said he had talked to the President about this
yesterday and that he strongly urged that the declaration
be sent.
H.M.JR: Stettinius--
MR. PEHLE: lie emphasized how carefully it had been
gone over, that it was carefully drafted, that Hull and
all these people had approved it, and he couldn't get
any place with the President. The President said it
was too pointedly on the Jews and he, Stettinius, didn't
know - I didn't think he knew - that Rosenman is the
one that counseled the President not to sign it. I
told him that. I generally--
H.M.JR: You counseled Stettinius it was Rosenman?
MR. PEHLE: I told Stettinius it was Rosenman that
counseled the President not to sign it. I told him,
generally, what the developments were.
43
- 2 -
He said he didn't see anything else that could be
done at this point. He said he didn't know whether any
statement would come out.
On the camp thing he thought we ought to push for-
ward. I can't say he thought it through. He is leaving
any time now.
H.M.JR: He has got to go to New York for a minor
operation before he goes. I just spoke to him.
MR. PEHLE: It is going to be very difficult over
there with him gone.
Then I saw Stimson. Stimson read the statement
through very carefully. It took about ten minutes.
lie said he feels it is much stronger than it was before,
and he said regardless of the motives involved and anybody
who changes it, he feels it is stronger and not to worry
about it. Which was of some comfort, because he was
obviously sincere and friendly. Now, that is just his
judgment; he doesn't know--
H.M.JR: I didn't go that far.
MR. PEHLE: He said it builds up to a climax, now.
H.M.JR: Don't underestimate Stimson in the morning!
MR. PEHLE: He was quite keen, Mr. Secretary, and
very friendly, and he insisted on going back and telling
me what happened during old Administrations, and so
forth. But he was all right.
Now, on the camp thing, he wasn't good on that. I
mean, he knew it would meet with objection. It wasn't
that, so much, but he didn't know whether he would favor
it. It was because of this, he said that if you brought
large numbers of people in here there would be extremely
strong pressure on the Congress later to change the
immigration laws to let them in. And he feit that we are
at a stage where we shouldn't have additional immigration.
Regraded
Unclassified
44
- 3 -
I gave him the argumentation. He was very friendly
and sympathetic. He is strongly against anti-Semitism.
He says he is, and I believe him.
H.M.JR: Did he go back to his days with Brandeis
with you?
MR. PEHLE: Yes, he did - about the wailing wall.
H.M.JR: His experience with Brandeis?
MR. PEHLE: He told me about the wailing wall thing
and something about what political pressure he thinks
the Jewish groups could organize. He is obviously
affected by that to some extent. He thinks they are a
very powerful political force.
H.M.JR: I wish they were.
MR. PEHLE: Sometimes they are and sometimes they
are not.
MRS. KLOTZ: They are going to be on this.
MR. PEHLE: For instance, he referred to the time
many years ago when the wongress unanimously passed a
resolution calling on the President to tell the Russian
Government - the Czarist Government - - that they should
treat the Jews better. Now he says, unanimously, the
Congress did that.
H.M.JR: Look that up.
MR. PEHLE: This is such an incident.
H.M.JR: I don't question it, but I would like to
see it.
MR. PEHLE: Now he said about the Palestine thing
that the State Department had asked him to take that line,
and were not willing to come out themselves and take the
line, but he said that he believed in the position the
War Department was taking.
45
- 4 -
This is quite confidential: He said the real
reason is that we want to pull out all our troops from
that whole region, even the ones that are there now for
use elsewhere, and that if there is any trouble, we
don't think we can. It was obvious that he felt sincere
about it. Whether he is being misled about it - he
feels that way.
Now, I asked him whether the War Department feeling
on the Palestine resolution extended to temporary immi-
gration, and he said no. He said the reason they feel
SO strongly on this is because it is such a propaganda
thing, that there is 80 much talk, and because it is
openly put up as & Jewish home in Palestine, which means
exclusion, ultimate exclusion of the Arabs, and the
War Department feels that that is going to cause trouble.
I am sure he feels that way. But he did say that the
State Department was using the War Department on that.
H.M.JR: I am awfully glad I told you - at least
I think I did - to go over and see those two people.
MR. PEHLE: You told me to, and I was going to. I
thanked him for the time, and he said he was delighted
to do it, that really the only time he got to think about
these things was when I came over, and he was delighted
to sit down and talk about them. He was very friendly.
He said that I should bring this matter up before
the Board. He said, "I haven't much of an alternative
to suggest, have IY"
H.M.JR: You?
MR. PEHLE: He said that he didn't - to the camp
idea. He said, "I haven't much of an alternative, have
I?"
I mentioned the Cyrenaica thing. He thought that
had some real possibilities.
Generally he was very friendly and sympathetic, but
he was worried about it.
Regraded
46
- 5 -
H.M.JR: You know, I drove a couple of hundred miles
through Florida this time, and before you made this sug-
gestion I said to my wife - I literally passed thousands
of acres of perfectly good land. I was thinking of the
resettlement there.
Now, throw this in your mind: Claude Pepper might
head a thing like that to invite some of these people to
come to Florida. They have only a million and a half
people in Florida - permanent population.
MR. PEHLE: Of course, when you talk about permanent
resettlement--
H.M.JR: No, I am not.
MR. PEHLE: Seems to me it would have major opposition.
First there is a strong feeling against immigration, and
second, these people, most of them, will not stay on the
land. They have done it in Palestine under the best con-
ditions, but every place else, the minute you settle them
in Brazil they flock to the cities, and if they are given
land, they sell it or rent it out to somebody.
H.M.JR: I meant, here was a place, anyway. I mean,
all kinds of land.
MR. PEHLE: I wanted you to know those things. I
think the thing to do - the statement is over at the
White House, they can decide what to do about it. At
least, everybody knows about it now. They have been
shown the re-draft and Stimson thinks it is stronger.
H.M.JR: I am glad he does. I told you I thought
that that paragraph, the second or third one on the
first page where it stood up by itself, was very strong.
Well, I needn't go over it again. I am glad you did
the thing. It is over there. Of course, with all
these Palestinians here in town, the President may do
something.
47
- 6 -
MR. PEHLE: I asked Stettinius if he was taking
Murray and Bowman with him, because I am not amiss to
telling him I think that - he said not on the Jewish
problem. The reason he is taking Murray is because
Eden insisted they bring him because they have nobody
that knows the problems in the Near East the way Murray
does.
He says Bowman is going on the general problem of
geographical boundaries and things like that, and that he
wouldn't take either one of them on the Jewish problem.
H.M.JR: But he is taking the two people who are sup-
posed to be the most unfriendly - or as unfriendly as any-
body - he is not taking anybody who is friendly.
MRS. KLOTZ: Exactly. Where is he going?
H.M.JR: London.
MR. PEHLE: I am just giving you that for what it
is worth. He said it would probably be the first of
May before he gets back, depending on what he runs into.
H.M.JR: He is making a major mistake by going.
He can very easily lose all the reputation he has built
up. He can't gain anything, he can only lose.
MR. PEHLE: Well, you asked Mrs. Klotz to have me
mention that some night you wanted me to talk to the
White House people.
H.M.JR: In view of this, there is no great hurry.
MR. PEHLE: Several of my people know some of the
White House people. There is no reason why they shouldn't
go ahead and talk. Abramson, for example, knows both
the political man over there - whatever his name is - and
one of the assistants very well. And Lauchlin knows
those people.
H.M.JR: Good.
Justle
48
WU2 48
RK NEWYORK NY MAR 9 1944 740P
Dis
10
HON HENRY MORGENTHAU JR
SEC OF THE TREAS
GREATLY APPRECIATE YOUR FINE TELEGRAM I HAVE ENJOYED THIS
SERVICE WITH YOU AS MUCH AS ANYTHING I HAVE EVER DONE AND I
LOOK FORWARD TO A CONTINUING INTEREST AND PARTICIPATION THE
ANNOUNCEMENT WAS WELL RECEIVED BY THE WAR FINANCE COMMITTEE
HERE THIS AFTERNOON AND EVERYTHING IS IN ORDER
W RANDOLPH BURGESS.
815 AM MAR 10 1944.
Regraded Unclassified
49
TED R. GAMBLE
WAR FINANCE DIVISION
EXPENSES " LOANS
MARCH 9, 1944
W. RANDOLPH BURGESS,
CHAIRMAN,
WAR FINANCE COMMITTEE,
1270 Sixth AVENUE,
NEW YORK 20, NEW YORK.
IN KEEPING WITH MY ORIGINAL UNDERSTANDING WITH YOU I ACCEPT
YOUR DECISION TO RETIRE AS CHAIRMAN OF THE NEW YORK WAR FINANCE
COMMITTEE. IT IS MY UNDERSTANDING THAT YOU WILL CONTINUE TO
GIVE US THE VALUE OF YOUR COUNSEL AND LEADERSHIP AS CHAIRMAN
OF THE EXECUTIVE COMMITTEE. WE AT THE TREASURY ARE DEEPLY
GRATEFUL TO YOU FOR THE SPLENDID HELP THAT YOU HAVE GIVEN US IN
THE IMPORTANT STATE OF NEW YORK. YOU HAVE EVERY RIGHT TO BE VERY
PROUD OF THE CONTRIBUTION YOU HAVE MADE TO THE DIFFICULT TASK OF
FINANCING THIS WAR IN A SECTION OF THE COUNTRY WHERE A SUBSTANTIAL
PART OF THIS JOB HAD TO BE DONE. THE SUCCESS ENJOYED BY THE STATE
OF NEW YORK UNDER YOUR ABLE GUIDANCE IS TANGIBLE EVIDENCE OF YOUR
EFFECTIVENESS. I AM SURE THAT MR. FORD AND YOUR ASSOCIATES WILL
BE PLEASED TO KNOW THAT YOU WILL BE ABLE TO GIVE THEM SOME OF YOUR
TIME IN THIS CONTINUED EFFORT.
HENRY MORGENTHAU, JR.
SECRETARY OF THE TREASURY.
kao
TRG:DFT
50
WU3 69
Samile
WURK NEWYORK NY MAR 9 1944 738P
10
HON HENRY MORGENTHAU JR
21
SEC OF THE TREAS
I AM DEEPLY APPRECIATIVE OF YOUR CONFIDENCE IN ME AND THE KIND
EXPRESSIONS IN YOUR WIRE I AM HONORED AND HAPPY TO ACCEPT THE
APPOINTMENT AS CHAIRMAN OF THE WAR FINANCE COMMITTEE FOR NEW
YORK YOU MAY COUNT ON ME TO SERVE WITH DEVOTION AND FIDELITY
TO THE UTMOST OF MY ABILITY THAT MR BURGESS WILL CONTINUE HIS
ACTIVE SUPPORT AS CHAIRMAN OF THE EXECUTIVE COMMITTEE IS MOST
PLEASING
-
nn 70 WII a
NEVIL FORD.
817 AM MAR 10 1944.
TED R. GAMBLE
51
WAR FINANCE DIVISION
EXPENSES OF LOANS
MARCH 9, 1944
NEVIL FORD
EXECUTIVE MANAGER
1270 SIXTH AVENUE
NEW YORK 20, NEW YORK.
YOU ARE HEREBY APPOINTED CHAIRMAN FOR THE WAR FINANCE COMMITTEE
FOR THE STATE OF NEW YORK. WE AT THE TREASURY ARE PLEASED TO
KNOW TTAT WE ARE GOING TO CONTINUE TO HAVE THE VALUE OF YOUR
GOOD SERVICES AND WOULD LIKE FOR YOU TO KNOW THAT THIS APPOINTMENT
IS IN A MEASURE AN ACKNOWLEDGMENT OF THE SPLENDID HELP THAT WEU
HAVE HAD FROM YOU SINCE THE INCEPTION OF THIS PROGRAM. I KNOW
YOU ARE PLEASED WITH THE ARRANGEMENT OF HAVING MR. RANDY BURGESS'S
CONTINUED SUPPORT AS CHAIRMAN OF YOUR EXECUTIVE COMMITTEE. EVERY
GOOD WISH TO YOU.
HENRY MORGENTRAU, JR.,
SECRETARY OF THE THEASURY.
TRG:DFT
Regraded Unclassified
52
March 9, 1944
Dear Mr. Williamson:
Now that the Fourth War Loan Drive is over and the smoke
of battle has cleared away, you can look back with pride upon
your accomplishment.
The fact that every State exceeded its overall quota was
in itself a magnificent achievement. The record sale of well
over 60 million E Bonds represents the fruits of a great, hard
and successful campaign.
The Treasury assigned to you as Chairman of the War Finance
Committee in your State a monumental task. It did so because it
had great faith in your capacity and your leadership. You have
more than justified that faith.
May I congratulate you on your achievement and thank you
for your fine, thoughtful and patriotic cooperation.
Sincerely,
(Signed) H. Morgenthau, Jr
Mr. Ben Williamson, Jr.
Chairman
War Finance Committee
808 Second National Bank Building
Ashland, Kentucky
Regraded Unclassified
December 27, 1943
53
STATE WAR FINANCE CHAIRMEN
Ed Leigh McMillan
W. W. McBachern
War Finance Chairman
War Finance Chairman
15252003 Coder Building
404-08 Federal Bldg.
Birmingham 3 Alabema
Jacksonville 1, Florida
Governor Ernest H. Gruening
Charles A. Stair
War Finance Chairman
War Finance Chairman
P. O. Box 110
1202 C&S Natl. Bank Bldg.
Juneau, Alaska
Atlante 3 Georgia
Walter R. Bimson
Fred H. Kanne
War Finance Chairman
War Finance Chairman
Room 215, New Post Office Bldg.
Young Hotel Bldg.
Phoenix, Arizona
1055 Bishop St.
Honolulu 9, Hawaii
W. W. Campbell
War Finance Chairman
John A. Schoonover
114 East Capitol Ave.
War Finance Chairman
Little Rock, Arkansas
423 Idahe First Natl. Bank Bldg.
Boise, Idaho
Charles R Page
War Minance Chairman
Harold H. Swift
7&2 nonsingck Flag,
War Finance Chairman
Ran Francisco 5 Valifornia
300 Illinois Bankers Bldg.
105 West Adams St.
Robert H. .oulton
Chicago 3, Illinois
War Finance Chairman
621 South Spring St.
Eugene C. Pullian
Low Angelos 14, California
War Finance Chairman
B16 Illinois Pldg.
Clarence H. Adems
Indianapolist Indiana
War Finance Cheirman
302 Colorado Bldg.
Vernon b. Clark Herberth
Dever 2 Colorado
War Finance Executive Hanager CA- chairman
800 Walnut Bldg.
Eugene E. Wilson
Des Hoines 8, Iowa
John Jairman
War Finance Chairman
36 Pearl St., Room 523
W. Laird Dean
Hartford, 3 Connecticut
War Finance Chairman
208 Federal Building
Henry T. Bush
Topeka, Kansas
War Finance Chairman
1064 Hotel BuPont Building
Ben Williamson, Jr.
Wilmington 99, Delaware
War Finance Chairman
808 Second National Bank Building
John A. Reilly
Ashland, Kentucky
War Finance Chairman
853 Washingto n Bldg.
S. Albert Phillips
Washington 5, D. C.
War Finance Chairman
510 Republic Building
Louisville 2, Kentucky
- a
Leon 0. Tujegue
Winthrop to Carter normin & Bean
War Finance Chairman
War Finance Chairman
512 Pan American Building
Bell Building
Camp and Poydras Sts.
922 Blm St.
New Orleans 6, Louisiana
Nanchester, N. X.
Phillips it. Payson
Franklin D'Olier
War Finance Chairman
Room 607, Bank of Commerce Building
War Room Finance 405, Federal Chairman Building 72 Broad Street
Portland 3, liaine
Newark 2, New Jersey
Howard W. Jackson
Cale W. Carson
War Finance Chairman
War Finance Chairman
601 Maryland Trust Building
101 Federal Building
Baltimore 3, Maryland
Albuquerque, New Mexico
F. Winchester Denio
W. Randolph Burgess
War Finance Chairman
War Finance Chairman
79 Milk Street
1270 Sixth Ave.
Boston 10, Lersachusetts
New York 20, New York
Frank N. Isbey
Clarence T. Leinbach
War Finance Chairman
War Finance Chairman
600 Union Guardian Bldg.
204 Sutton "ldg.
Detroit 26, Michigan
Greensboro, North Carolina
O. J. Arnold
F. L. Conklin
War Finance Chairsan
War Finance Cheirman
570 Northwestern Bank Bldg.
Neirling Block
Minneapolis 2, Minnesota
1084 First Street East
Jamestown, North Dakota
Rex I. Brown
War Finance Chairman
Phil J. Trounstine
1005-08 Lampton Building
War Finance Chairman
Jackson 196, Mississippi
536 Union Commerce Building
106
Cleveland 14, Ohio
Walter V. Head
Var Finance Chairman
A, 1. Bradshaw
200 Federal Commerce and Trust Badgel War-Finance Chairman
208 North Broadway
203 Drew Building
St. Louis 2, Nissouri
Tulsa 3 Oklahoma
À. T. Hibbard
E. C. l'emmone
War Finance Chairman
War Finance Chairman
303 Federal Building 28 Union Bank Blag 1233 American Bank Building
Great Helena Falls, Nontana
Portland, Oregon
W. Dale Clark
0. Ruhland Rebmann
War Finance Chairmen
War Finance Chairman
636 World-Hereld Building
1714 A y Sr Building
Omahat Nebraska
12 Bouth Twelfth St.
Philadelphia 7, Pennsylvania
Forest 3. Lovelock
War Finance Chairman
35 East 4th St.
Reno, Novada
Unclassified
- 3 -
54
G. Burton Hibbert
Walter Kasten
War Finance Chairman
WareFinance Chairman
1812 Industrial Trust Building
735 North Water Street
Providence 3, Rhode Island
Room 630
Milwaukke 2, Wisconsin
Christie Benet
War Finance Chairman
Fred W. Marble
Farm Credit Administration Building War Finance Chairman
1401 Ham ton Street
303 Federal Building
Columbia 29, South Carolina
Cheyenne, Wyoning
Walter H. Burke
War Finance Chairman
Post Office Building
Sioux Falls, South Dakota
G. Cecil Woods
War Finance Chairmah
330 Third National Bank Building
170 Fourth Ave.
Nashville, 3 Tennessee
Nathan Adams
War Finance Chairuan
Dallas Power & Light Co. Building
Dallas 1, Texas
Charles L. Smith
War Finance Chairman
Union Pacific Building Annex.
19 West South Temple Street
Salt Lake City 1, Utah
Levi P. Smith
War Finance Chairman
135 Nain Street
Burlington, Vermont
Francis P. Gaines
Wer Finance Chairman
214 North Fifth Street
Richmond 19, Virginia
Reno Odlin
War Finance Chairman
901 Federal Office Building
Seattle 4, Washington
A. C, Spurr
War Finance Chairman
608 Security Building
Charleston 1, West Virginia
Inclassified
March 13, 1944
55
0
Copies given to the following:
Mr. Paul
Dr. White
56
THE UNDER SECRETARY OF STATE
WASHINGTON
March 9, 1944
Dear Henry,
As it now appears that I shall be
away from Washington the first of next
week when the economic report on the
Argentine becomes available, I have asked
Dean Acheson to follow the matter with
D
you direct.
With best wishes,
Sincerely yours,
Ea
The Honorable
Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
57
March 9, 1944.
Dear Ed:
Following up our conversation of last
Sunday, I am sending you herewith for your records
a photostatie copy of the memorandum dated February 29,
1944, from the President to the Treasury, in which he
stated " # I have talked with Mr. Stettinius about
this and I think the position taken by the Treasury
Department is the right one."
I assume we can look upon this as the final
decision in the matter and proceed accordingly with
the Belgian Agreement.
Sincerely yours,
(Signed) Heary
Honorable E. R. Stettinius, Jr.
Under Secretary of State
State Department
Washington, D. c.
NWB
DWB:ew HOW
Inclassified
58
MAR 9 1944
My dear Mr. President:
There is attached a report of Lend-Lease
purchases made by the Treasury Procurement
Division for the Soviet government indicating
the availability of cargo for March.
The inventory of material in storage as of
March 1, 1944 was 380,242 tons or 45,207 tons
more than the February 1st inventory. Produc-
tion scheduled for March shows a decrease of
5,102 tons as compared with February.
Yours sincerely,
(Signed) H. Morgenthan, Jr.
The President
The White House
CC mr mack
531
you
SECRET
I'm
W.F.B.
59
TREASURY DEPARTMENT - U. S. S. R.
MATERIALS AVAILABLE FROM STORAGE AND PRODUCTION DURING MARCH, 1944
PRIORITY CARGOES
TO PORT AREAS
STORAGE
PRODUCTION
SPECIFIED TO DATE
COMMODITY
MARCH 1,1944
DURING MARCH
TOTAL AVAILABLE
FOR MARCH
agricultural MACHINERY
& IMPLEMENTS
68
68
ALUMINUM
2,413
4,250
6,663
2,650
AUTOMOTIVE EQUIPMENT
& PARTS
25
23
BEARINGS
269
112
381
246
BRASS & BRONZE
18,394
6,494
24,888
6,720
CHEMICALS
15,521
1,861
17,382
1,249
CLOTHING & TEXTILES
30
30
30
CONSTRUCTION MACHINERY
1,762
1,762
COPPER IN VARIOUS FORMS
45,010
6,467
51,477
6,608
FERRO-ALLOYS
508
508
CRAPHITE PRODUCTS
1,340
4,754
6,094
HAND AND CUTTING TOOLS
1,583
1,583
INDUSTRIAL MACHINERY
106,011
16,665
122,676
2,554.
LEAD & LEAD ALLOTS
1
1
LEATHER & LEATHER
PRODUCTS
1
1
NICKEL & NICKEL PRODUCTS
720
92
812
493
NON-FERROUS METALS, OTHER
304
6
310
310
PAPER & PAPER PRODUCTS
2,699
537
3,236
823
PLASTICS
4,373
4,373
RUBBER
3,227
2,568
5,795
1,568
STEEL, ALLOY & SPECIAL
42,334
7,897
50,231
3,584
STEEL, GARBON
58,644
6,750
65,394
1,848
STEEL, PIPE & TUBING
48,829
3,587
52,416
1,232
STEEL, RAILS
7,960
7,960
7,960
TIN PLATE
21,582
21,582
ZINC
1,120
103
103
103
TOTAL
380,242
65,507
445,749
39,098
*In addition, all available tonnage applicable to the 011 Refinery Program is canssed as
nclassifie
EMBASSY OF POLAND
60
IN THE
UNITED STATES
FINANCIAL COUNSELOR
NEW YORK 14 WALL STREET
K.10/44
March 9th, 1944.
Hon. Harry D. White
Assistant to the Secretary
U. S. Treasury Department
Washington, D. C.
Dear Mr. White:
Pursuant to our yesterday's telephone conversation,
I wish to enclose a letter of Dr. Ludwik Grosfeld, Minister
of Finance of the Republic of Poland to Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury, together with memorandum, regarding
the proposal for a United Nations' Bank for Reconstruction and
Development. I should appreciate your kindness in handing this
letter and enclosure to Secretary Morgenthau.
In connection with Secretary Morgenthau's letter to the
Minister of Finance, dated November 23rd, 1944, in which was
stated, amongst the others: "If any of your experts should
be in Washington, the technical experts of this Government will
be glad to discuss the tentative proposal with them", I wish to
inform you that Minister Grosfeld has authorized Dr. Zygmunt
Karpinski, Director of the Bank of Poland, and ne to dicuss with
you some additional points, which are not covered by the
enclosed memorandum,
Conforming to your suggestion, I shall communicate with
your secretary, in order to establish a definite time, when
we could come to Washington, for such purpose, during the week
beginning with March 20th, 1944.
With best personal regards,
Sincerely yours,
JZ:AZ
JANUSZ ZOLTOWSKI
Enc.
Financial Counselor
Copy:efc
3-17-44
Unclassified
MINISTERTWO SKARBU
61
POLISH MINISTRY OF FINANCE
Stratton House,
Piccedilly
London, W.I.
L.dz
26/Tjn./Fin/44
4-th February, 1944
Excellency,
I wish to acknowledge with thanks receipt of your letter of
the 23rd November 1943, accompanied by the preliminary draft of
8. tentative proposal for a United Nations' Bank for Reconstruction
and Development.
This proposal has been studied by me and my experts with the
greatest interest, and I should like to congratulate you and your
technical staff on initiating the discussion on this important and
far-seeing measure.
I strongly believe that the provision of foreign capital for
reconstruction and development will prove, from the political and
economic as also from the social viewpoint, to be one of the
crucial and urgent problems of the poet-war period. The project
of establishing an international agency for long-term credits is
particularly welcome by my country which being one of the capital-
poor countries, and therefore a much less active partner in
international trade than either her natural resources or the
number of her population would justify, attaches great weight to
the idea of organising and encouraging foreign investments.
I am taking this opportunity to express my appreciation for
your decision to submit simultaneously for examination both, the
project of United Nations' Stabilisation Fund and the project of
United Nations' Bank for Reconstruction and Development. It is
my firm belief that the operations of these international agencies
would bring about a much more tangible result if they were
established at the same time.
Following your kind invitation to make comments on the
proposal I consider that there are some points of importance
which I should like to bring to your attention, In my opinion
the problems of assuring the continuity in the flow of foreign
capital to the debtor countries, of the cost of credit and finally
of the financing of increasing imports of consumer's goods should
be further explored. I take the liberty of enclosing a note in
which these subjects are treated in greater detail.
Regraded Inclassified
62
-2-
I should be grateful if your experts could discuss these and
some other lesser points with the Polish experts, M. J. Zoltowski,
Financial Counsellor of our Embassy in Washington and Dr. z.
Karpinski, Director of the Bank of Poland, who are at present
in the United States and whom I have instructed to be at the
disposal of your experts.
Sincerely yours,
MINISTER OF FINANCE
GROSSFELD
His Excellency
Hon. Henry Morgenthau, Jr.,
Secretary of the United States Treasury,
WASHINGTON, D.C.
Encl.
Copy:ec
3-17-44
Regraded Unclassified
63
March 9, 1944
TO: Mr. Warren
FROM: J. W. Pehle
It will be appreciated if you will have the attached
cable to London dispatched immediately.
(Signed) J.W.Pehle
Attachment.
FH:hd 3/9/44
Regraded Unclassified
64
CABLE TO LONDON
Reference is made to your cable No. 1541, February 24, 1944, con-
cerning discussions with Dr. Nahum Goldman of World Jewish Congress.
1. One of first actions of War Refugee Board was to cable
International Red Cross for a report concerning what areas in occupied
Europe the International Red Cross could operate in to provide food
and medicines to the Jews and other persecuted minorities in those
areas and to advise Intercross that War Refugee Board is prepared to
see that funds are made available immediately for necessary operations.
As stated in our cable to you, No. 1020 of February 9, 1944, urgent
request of Intercross to Intergovernmental Committee for funds to pur-
chase foodstuffs in Hungary, Rumania and neutral countries for distri-
bution to internees in central Europe was expedited by War Refugee
Board and American Jewish Joint Distribution Committee made $100,000
available at once to Intercrose for this feeding program.
The War Refugee Board has not made any decision to approach
the blockade authorities concerning the shipment of supplies from this
country to the Jews and other persecuted people of Europe.
2. The World Jewish Congress license issued in December by the
State Department was later amended by the Treasury Department with the
approval of the State Department permitting rescue and relief operations
in enemy and enemy-occupied territories up to 8 total cost of $100,000
Regraded 1 Inclassified
65
2-
of which $25,000 have already been remitted to Switzerland. The Ameri-
can Jewish Joint Distribution Committee has been licensed to carry on
similar operations costing $600,000, of which $200,000 have been re-
mitted to Switzerland. Licenses have also been issued to several other
private organizations in the United States to carry on similar relief
and evacuation operations from Switzerland.
The War Refugee Board, as stated in cable No. 1503 of February 29,
is preparing for your information and for submission to the British
Government a detailed statement of the actions already taken and of
the programs initiated to bring rescue and relief to the persecuted
people of Europe.
The War Refugee Board has no objection to Jewish or other organiza-
tions in Great Britain appealing to the British Government for permission
to carry on and finance operations similar to those which have been
authorized by this Government.
FH:hd 3/8/44
Regraded I Inclassified
66
TELEGRAM SENT
BE
PLAIN
March 9, 1944
PLAIN
War Refugee Board
AMEMBASSY,
LONDON.
1792, Ninth
FOR SCHOENFELD FROM MR. PEHLE? ACTING DIRECTOR,
WAR REFUGEE BOARD.
We greatly appreciate the information contained in
your no. 30 March 1. We have already taken action along
the lines of most of the suggestions referred to by you.
Any further information or suggestions which you
can submit to us will be very welcome.
STETTINIUS
(ACTING)
(GLW)
WRB:GLW:KG
BC
3/8/44
67
Embassy
xxxxxxx
No. 1179
San Jose, Costa Rica
March 9, 1944
SUBJECT: Free Italy Proposals with respect to Re-
patriation of Political Refugees
STRICTLY CONFIDENTIAL
The Ambassador has the honor to report that it has
been learned from the Embassy's well-informed, confiden-
tial source that Dr. Francisco FROLA, President and Mario
MONTAGNANA, Secretary of Alianza Internacional Giuseppe
Garibaldi por la Libertad de Italia, Apartado 777, Mexico
has written to Adriano ARIE, President of Italia Libre
in Costa Rica stating the campaign for the return of
Italian political refugees to Italy initiated by the
"Alianza" is progressing successfully. However, they
state Allied authorities in Italy and the Department of
State are opposed to their return.
Ariè is requested to intensify his activities in
this direction and to collect signatures for a petition
requesting the intervention of President Roosevelt, Prime
Minister Churchill and Marshall Stalin, It is also
suggested that letters and telegrams be sent the Depart-
ment of State and that a delegation call upon the Embassy.
800 Free Italy
VCH/lkb
To Department: original and hectograph.
Regraded Unclassified
68
CM
AIRGRAM
Wellignton, New Zealand.
Dated March 9, 1944
Rec'd 3 p.m., 24th
Secretary of State,
Washington.
A-30, March 9, 9 a.m.
CONFIDENTIAL FOR DEPARTMENT USE ONLY.
Reference is made to the Department's circular
airgram of January 26, 1944 at 7:00 p.m. setting forth
the policy of the Government of the United States in
connection with the rescue and relief of the Jews of
Europe and other victims of enemy persecution.
In accordance with the instruction of the Depart-
ment, I approached the New Zealand Government in order
to explain the policy outlined in the Department's
airgram and to ascertain the degree to which it was
prepared to cooperate in obtaining the objectives of
the President's Executive Order.
In this connection the following note has been
received from the Prime Minister and Minister of
External Affairs (Mr. Fraser):
"CONFIDENTIAL
2nd March, 1944.
"My dear Mr. Charge d'Affaires,
"I have to acknowledge receipt of your letter
of the 18th February in which you inform me of the
policy of the Government of the United States of
America in connection with the rescue and relief
of the victims of enswpersecution.
"It is noted that the President has by execu-
tive order constituted a War Refugee Board in the
69
-2- #A-30, March 9, 9 a.m., from Wellington
United States whose function it is to ensure that
the policy of the Government respecting war re-
fugees is carried out.
"The New Zealand Government have always
viewed with the greatest sympathy the plight of
the many thousands of people who are suffering
persecution and hardship at the hands of the
enemy. The policy of the Government has been
and continues to be one of affording to these
people the maximum possible assistance consistent
with the resources and the security of the Dominion.
"In furtherance of that policy the Government
have associated themselves from the outset with
the activities of the Inter-Governmental Committee
on Refugees, which was initiated by the Conference
held at Evian in 1938 on the suggestion of the
President of the United States. More recently,
the Government have expressed their intention to
continue their association with the Committee on
the basis proposed by the Bermuda Conference.
"With regard to the specific enquiries made in
the final paragraph of your letter, I have to in-
form you that the admission to New Zealand of re-
fugee aliens, as of all other aliens, is governed
by the provisions of the Immigration Restriction
Acts which require that any person of other than
British birth and parentage wishing to enter the
Dominion must first obtain an Entry Permit from the
Customs Department. In the granting of such per-
mits during recent years it has been the practice
to look sympa on applications from per-
sons suffering persecution or displaced from their
country or residence, and in fact, considerable
numbérs of permits have been granted to refugees
including Jewish and other political refugees from
Europe, Chinese women and children and persons of
various nationalities (including natives of Pacific
Islands) displaced from their homes or threatened
by Japanese agression in the Pacific.
"As the refugees status of an applicant is not
necessarily apparent from his application papers,
it is not possible to state accurately the number
of refugees
70
-3- #A-30, March 9, 9 a.m., from Wellington.
of refugees admitted to New Zealand. It is
estimated, however, that during the years 1933
to 1941 inclusive, the total number of permits
issued was in excess of 3,700 (including 492
Chinese refugee women and children). This total
does not include evacuses from Pacific territories
afforded hospitality in New Zealand who are esti-
mated to number between 500 and 600; nor does it
include some 65 Poles from Japan to whom the
Government agreed to gige temporary refuge.
"The granting of permits after 1941 has of
course been affected by the spread of the war of
the Pacific, but I may say that within recent
months the Government hage agreed to receive and
provide accomodation for up to 700 Polish refugee
children from the Middle East.
"Yours faithfully,
(Signed) P. Fraser,
Minister of External Affairs."
It was requested in the instruction under reference
that the Legation submit a report concerning the exist-
ing situation in New Zealand. Insofar as the Legation
has been able to discover, the policy of the New Zealand
Government is, as the Minister of External Affairs points
out in his note of March 2, one of "affording the victims
of enemp persecution the maximum possible assistance
consistent with the resources and security of the
Dominion".
It is of course evident that the ability of New
Zealand to receive refugees is greatly restricted by
the sise of the country (103,416 square miles with &
population of 1,714,799 according to the New Zealand
Official Yearbook.)
Another factor to be taken into consideration in
connection with the settlement of refugees in the Domin-
ion is its isolation and distance from Europe.
It is the understanding of the Legation that there
have been no CASSE of refugees being turned back at New
Zealand ports of entry. If there are incidents of this
nature in the future, the Deparatment will be promptly
informed.
848
CHILDS
JJJ/drm
71
PARAPHRASE OF TELEGRAM SENT
FROM:
SECRETARY OF STATE, WASHINGTON
TO:
AMEMBASSY, LONDON
DATED:
MARCH 9, 1944
NUMBER: 1782
CONFIDENTIAL
We refer herewith to your telegram of February 23, 1944,
no. 1492.
As regards refugees on the Island of Rab, it is requested
that you inform us to what account the funds should be deposited
whether British Foreign Office or Finance Officer. The American
Jews Joint Distribution Committee is willing to make an initial
remittance of $25,000 when advised on this point.
Please inform us whether lire to cover cost of evacuations
will be transmitted to partisans in Yugoslavia or will be made
available to persons in Italy, if it is possible to ascertain
this.
STETTINIUS
Regraded
72
TELEGRAM SENT
HKL
PLAIN
March 9, 1944
AMERICAN CONSULATE GENERAL
JERUSALEM (PALESTINE)
40, ninth.
For David Schweitzer, Eden Hotel, Jerusalem, from
Isaac L. Asofsky, Hebrew Sheltering and Immigrant
Aid Society:
QUOTE In view our desire to give fullest coopera-
tion to War Refugee Board in its efforts to save
people from occupied countries we suggest you
proceed to Ankara as soon as possible to streng-
then HIAS Committee there and contact Ira
Hirschmann, Refugee Board's representative, Care
American Embassy, who may want utilize your
services stop You know HIAS agreed make availa-
ble its facilities including personnel to Refugee
Board. UNQUOTE.
STETTINIUS
(Acting)
(GLW)
WRB:GLW:EEH
73
International Committee of the Red Cross
in Geneva, Switzerland
Delegation to the United States
of America
1645 Connecticut Avenue, N. W.
Washington 9, D. C.
Ref. A/2/h
March 9, 1944
Mr. J. W. Pehle
Executive Office of the President
War Refugee Board
Washington 25, D. C.
Dear Mr. Pehle:
Referring to my visit at your office, I am
sending you herewith the copies of two letters add-
ressed by the International Red Cross Committee to
the "Directeur Intergouvernemental pour les Refugies"
in London, one of December 9, 1943, and the other of
February 25, 1944.
I suppose that these documents will answer
the question asked in your letter of March 2nd, but
if you need more information I am ready to forward
your request to Geneva.
Very truly yours,
MP/AL
Marc Peter
2 copies
Delegate of the International
Committee of the Red Cross
I
Inclassified
73
International Committee of the Red Cross
in Geneva, Switzerland
Delegation to the United States
of America
1645 Connecticut Avenue, N. W.
Washington 9, D. C.
Ref. A/2/h
March 9, 1944
Mr. J. 1. Pehle
Executive Office of the President
War Refugee Board
Washington 25, D. C.
Dear Mr. Pehle:
Referring to my visit at your office, I am
sending you herewith the copies of two letters add-
ressed by the International Red Cross Committee to
the "Directeur Intergouvernemental pour les Refugies"
in London, one of December 9, 1943, and the other of
February 25, 1944.
I suppose that these documents will answer
the question asked in your letter of March 2nd, but
if you need more information I am ready to forward
your request to Geneva.
Very truly yours,
MP/AL
Marc Peter
2 copies
Delegate of the International
Committee of the Red Cross
74
TRANSLATION FROM FRENCH
December 9, 1943.
G.59/2
G.59/4
G.59/7/W.J.C.
The Director of the Intergovern-
mental Refugee Committee
11 D Regent Street, London SW 1
By airmail
My dear Director:
We have been informed by our delegation in London that, follow-
ing an appeal of the World Jewish Congress, the American and British
Governments have charged the Intergovernmental Refugee Committee with the
task of investigating whether certain funds should be put eventually at
the disposal of the International Red Cross Committee so as to enable it
to purchase in Europe relief goods for certain groups of needy Jews in
Germany, in the occupied countries, and in Central Europe. We wish to
express our gratitude for this generous gesture in which we see a mark
of confidence and a valuable encouragement of our efforts to aid all
the victims of the war.
In this connection, we take the liberty of drawing your at-
tention to the following point:
When the World Jewish Congress has informed us a few months
ago of its intention to launch an appeal to the Allied Governments
requesting considerable funds be put at the disposal of the International
Red Cross Committee for help in Europe, we were very happy to see that this
action was to have been undertaken in favor of civilian victims of the war
without distinction of race or religion. It seems, however, that this
initial project has been abandoned and that it has been decided that the
action under consideration should be limited to certain groups of Jews
in Central Europe. We state with regret that this restriction renders
exceedingly difficult, if not illusory, the carrying out of this project.
It would have a better chance of acceptance by the other party, had it
been organized within the framework of a general action. We are convinced
that you will the better understand our remark since your committee, too, --
as would appear from an article in the Times of Friday, October 15 -- has
the intention of extending its activities to all populations which had to
leave their domiciles for racial, religious, or political reasons.
We could not be but happy over such an extension of the
contemplated relief action, since it would enable us to secure the aid
of certain circles whose concurrence in the circumstances is occasionally
indispensable and therefore to increase considerably our chances of
obtaining tangible results.
75
- 2 -
You certainly are not unaware of the difficulties which we
meet in certain countries when we wish to take action in favor of
Jews, arising from the fact that the authorities consider that this
issue relates exclusively to internal policy. Consequently, our relief
work is based only on permits usually restricted to concrete cases and
which never acquire the character of established rights. Moreover, we
must see to it that the gifts which are entrusted to us benefit those
for whom they have been intended and them alone. We must, therefore,
be able to exercise very serious control in order to justify the
confidence placed in us both by the donors and by the blockading
authorities. During these last years, we were obliged more than once
to refuse to undertake B. relief action which was asked of us, because
we did not think ourselves able to assume the responsibility in view
of the lack of sufficient opportunities for control. For this reason,
it is very difficult for us, at least for the present, to undertake
relief work in certain countries occupied by Germany, despite our
desire to help the Jews who ask it. of us,
On the other hand, we wish to notify you that on several
occasions, we could have undertaken relief action under satisfactory
conditions, had the necessary means been put at our disposal at the
right time. To quote a concrete case, we would have been able, a few
months ago, to get assistance to the Jews in Poland, since the control
which the German Red Cross was able to exercise contained all desirable
guarantees. Unfortunately, we did not have the financial means at that
time. At present, the German Red Cross is no longer able to assume the
control which we ask it to exercise, and we can, therefore, no longer
transmit any assistance to Poland.
It follows from our experience that it is unfortunately
impossible to establish in detail a long-term plan for action, since
it would probably remain a dead letter because of the frequency with
which changes occur and sudden and unforeseen decisions are taken.
If we indicate to you, below, the places in which, thanks to increased
funds, we could undertake relief, action, or extend work already in
operation, we do so only to give you a more precise idea of the domain
to which we would like to see you bring quick and generous help With-
out, however, being able to assure you that any particular action could
be taken at any given time. We shall gladly send you reports on each
action which we will take; they will permit you to judge whether you
wish to continue your efforts with our help and to undertake new
activities.
To insure that our action brings effective assistance to the
largest possible number of beneficiaries, we must be able to send relief
as soon as an opportunity arises and without waiting for months the
arrival of the necessary sums. We would, therefore, be very grateful to
the Intergovernmental Committee, if it could consider whether it might
Unclassified
76
- 3 -
not put the necessary sums at our disposal, leaving us to judge in each
particular case whether a given action is justified and whether it
could be accomplished under satisfactory conditions. Any other procedure
would risk the loss of a number of occasions for efficient action.
In this connection, we should like to draw your attention to
the fact that only those amounts are of practical value to us the use
of which is not limited to neutral countries, since the opportunities
for purchase in the latter countries are fairly restricted.
Permit me, my dear Director, to say 8. word about the Joint
Relief Commission of the International Red Cross, an agency of the
International Red Cross which has already been able to carry out various
relief actions in favor of Jews. It has been created in 1940, by the
International Red Cross Committee together with the League of Red Cross
Societies, and it has the task of coming to the aid of civilian popu-
lations which have been made victims of the war, more particularly of
women, aged, and children. The closest collaboration exists between
the International Red Cross Committee and the Joint Relief Commission
over which I have the honor to preside.
The Joint Relief Commission, among other things, has sent food,
pharmaceutical products, artificial teeth, spectacles, artificial limbs,
etc., to Jews interned in the camps of Southern France. Moreover, it has
insured the distribution in these same camps of several tons of clothing,
the gift of an American charitable organization. The distribution of
these gifts was supervised by the delegates of the International Red Cross
Committee.
I should like now to review the different countries in which
action in favor of Jews could be intensified or undertaken.
Rumania
About 70,000 Jewish deportees of Rumanian nationality -- men,
women, and children -- in Transnistria are now in a very precarious
position, especially from the point of view of clothing. A delegation
of the International Red Cross Committee was able to get into that region
(also into Odessa) and to investigate on the spot the opportunities for
helping them in cooperation with Jewish organizations in Rumania and with
the Rumanian Red Cross. All facilities have been accorded to us by the
Rumanian "overnment, and we believe that our delegates will not encounter
any difficulty in supervising the contemplated distribution. We don't
have reason to fear, therefore, that relief sent to needy Jews would be
utilized for the benefit of people other than those for whom it was
intended. In the first place, it would be necessary to find shoes, which
are lacking in Rumania for these Jews in need. If these deportees could
return in the near future to the territory of Rumania proper, it would be
necessary to be able quickly to procure for them clothing and shoes.
Regraded Unclassified
77
- 4 -
With this in view, we ought to dispose either of the goods or
of money to buy it. In the latter case, it should be "free" money,
that is, we should be able to spend it in continental countries, Germany
excepted. Food would also be necessary, but this could be bought partly
in Rumania. We add for your information that we have organized a relief
action on a small scale for these deportees, which could serve as a model
for similar actions in other countries. Jewish groups dispersed in
abaondoned or evacuated villages in Transnistria assume in close co-
operation with the National Red Cross the distribution of gift packages,
while the delegates of the International Red Cross Committee supervise
the functioning of this organization, control the purchases and verify
distributions on the spot from time to time. Their reports and bills
of sales permit us to judge whether the action is taking place in ac-
cordance with the intentions of the donors -- who in this instance are
Swiss -- and whehter it is appropriate to continue it.
Croatia
The same thing can be said of about 600 Jews who, as distinct
from the position in Rumania, are partly detained in three camps in this
country -- Jasenovac, Stara Gradiska, Gredjani-Salas. Our delegate in
Zagreb could be in a position to insure control of the action which the
Joint Relief Commission would be glad to undertake if sufficient means
would be placed at its disposal. Croatian authorities would certainly
permit the dispatch and the distribution of gifts. Some deliveries of
gifts have already been made to Jews in Croatia and in Slovakia by the
Joint Relief .Commission.
Slovakia
Certain Jewish circles in that country have asked us to secure
relief and especially to provide pharmaceutical products. Unfortunately,
we were unable to do so because of 8 lack of funds.
The International Red Cross Committee has not yet considered the
creation of a permanent delegation in that country, since the question of
organizing a relief action on a fairly large scale could not have been
envisaged in view of the reasons explained above. A delegation of the
International Committee which has visited that country a few months ago
has found, however, that the appointment of a permanent delegate would
be opportune in view of the difficult position in which certain categories
of the population find themselves. We would be happy to study this
Question, but here again, in order to be able to undertake a relief action,
we would have to be able to count on the cooperation of donors.
Hungary
We believe that a relief action in favor of Jewish refugees
in that country, who come mainly from Germany and from Poland, would be
necessary and that the authorities would lend it their assistance. We
78
- 5 -
have just sent a delegate to Hungary to study the situation and to report
to us, If we have not yet busied ourselves with the Jewish problem in
Hungary, this is because we did not have sufficiently large amounts to
spread our efforts. We have thought it correct to utilize our means to
help the Jews in Germany.
Germany and Occupied Countries
The outlook is less and less favorable, although the problem
appears there in a more acute form than elsewhere.
The Joint Commission has organized several deliveries, on a
small scale, to the Jews in forced residence in Theresienstadt /about
50,000 and coming from all the countries occupied by Germany. The
competent authorities have permitted the sending and distribution of
individual packages and of stimulants. Unfortunately these products
cannot be found in Switzerland without the greatest difficulty, and we
have asked the Federal Authorities to permit us to send some foodstuffs
which could be bought more easily. This activity of the Joint Commission
could certainly be pursued on & larger scale, if more considerable amounts
would be remitted to us.
Outside of Theresienstadt, we could try to send packages to the
labor camps of Upper Silesa where many Jews of different nationalities
are found. This brings up the question of supervision in occupied countries.
We don't believe that direct control such as is permitted in the countries
mentioned above could be obtained in the territories occupied by Germany;
it seems that only the German Red Cross could assume this task. The Jewish
circles with whom we have cooperated for years think, just as we do, that
distributions organized or supervised by the German Red Cross could be
considered as offering full guarantee. We know that the gifts which are
entrusted to it come into the hands of those for whom they are intended.
It might happen, of course, that these gifts benefit indirectly the de-
taining authorities, if they refuse to admit that these gifts are nothing
but a supplementary ration and if they take the outside gifts into account
in establishing the food rations of the persons under their administration.
As far as Poland is concerned, it seems unfortunate that for the
present at least one would have to renounce the sending of relief to that
country. Indeed, the German Red Cross has informed us that it could not
assume any responsibility for the distribution of such gifts among the
intended receivers. This does not mean that the situation could not change;
perhaps the Joint Commission could resume sending packages some day. We
add for your information that the Joint Commission has only now received
the receipts for the collective gifts sent several months ago. The re-
ceipts are signed by the President of the "Jüdische Unterst#tsungsstelle"
/Jewish Office of Assistance/ in Cracow. If the matter interests you,
you may take note of a report of the Joint Commission regarding its
activities in Poland, a report which is in the possession of our delegation
in London. It will give you a precise idea of the manner in which the
Joint Commission accounts for its activities.
Regraded
Inclassified
79
- 6 -
On the other hand, the opportunities for purchases by the
Joint Commission in Central Europe are as follows, (no other countries
come incconsideration for the moment for the purchase of food).
Hungary
Pengos
per kilogram
Dehydrated onions
II
7.15
If
#
#
7.
"
"
Julienne
Groen and yellow peas
II
205.
II
100 kilogram
String beans
If
125.
#
100 kilogram
"BB" soup, ready for cooking
"
5.50
"
kilogram
"Karamalt" nutritive flour for
children
If
9.
"
If
If
4.
"
Apples
If
Wheat flour
If
81.
"
100 kilogram
Pate of game
If
11.60
If
kilogram
Game conserves
If
Different prices, with
a basic price of 9.50
per kilogram.
Refined millet
If
100.
per quintal
Puree of game
If
12.35
If
kilogram
Hind part and breast of hare
If
12.95
"
If
Maccaroni
If
2.20
"
If
Rumania
Lei
per kilogram
Green and yellow peas
If
74.
n
#
Sunflower oil
If
297,361.
#
ton
"Acide gras" (?)
If
231,110.
If
"
Salt pork, lard and fat
"
370.
If
kilogram
These prices are subject to some variations.
In conclusion, basing ourselves on the experience which the
International Red Cross Committee and the Joint Relief Commission of the
International Red Cross had in the course of their activities in favor
of Jews in Europe during this war, we would like to submit to you the
following suggestion. We would be grateful if you could put at our
disposal a sun of about 300,000 francs to begin with, which would permit
us to act in the sense indicated above. It would be, of course, indis-
pensable that we should be able to utilize this sum for purchases in
Central Europe, notably in Hungary and Rumania, where we have indicated
above the opportunities for purchase are fairly extended. We would keep
you informed of our projects, of the system of control which could be
instituted, of the purchases and of the distribution which we would carry
out. If the activities thus put on 8. new and broader basis produce satis-
factory results, and if the reports of our delegates contain the promise of
Unclassified
80
- 7 -
an opportunity for extension, we shall submit new propositions with a view
to increasing the funds that would be put at your disposal*thanks to the
generosity of the World Jewish Congress and of the interested authorities.
Accept, my dear Director, etc.
(Signed) Carl J. Burckhardt
Member of the International Red Cross
Committee
* Probably missprint. Should read "at our disposal".
Regraded Inclassified
81
PARAPHRASE OF TELEGRAM SENT
FROM:
Secretary of State, Washington
TO:
American Consul, Geneva
DATED:
March 9, 1944
NUMBER:
107
SECRET
Given below is the substance of a telegram from Charles
Joy and Robert Dexter of the Unitarian Service Committee for
Noel Field, 2 Rue Vieux College, Geneva.
The War Refugee Board, concerning which infor-
mation can be supplied by the American Consul, desires
to make it possible for refugees to go to Switzerland
from all surrounding European territories. Every effort
is being made by the Board to satisfy the Swiss Govern-
ment's concern regarding the removal of refugees after
the war and arrangements are being made for their
maintenance while in Switzerland. Underground or any
other methods may be used. Is it possible for you to
speed up process in Switzerland if funds are made
available. We suggest that you consult Walter Fabian
and Rene Bertholet. Reply should be sent in the same
channels. Regards.
STETTINIUS
(Acting)
82
PARAPHRASE OF TELEGRAM SENT
FROM:
Secretary of State, Washington
TO:
American Legation, Bern
DATED:
March 9, 1944
NUMBER:
782
CONFIDENTIAL
License No. W-2137 has been issued by the Treasury to
Selfhelp of Emigres from Central Europe, New York City, for the
purpose of effecting relief and evacuation operations of enemy
and enemy-occupied territory. Information regarding this license
should be given to Mrs. Fanny Schultheise-Hirsch, Comite Pour le
Placement de Refugies Intellectuels, 7 Rue Gautier, Geneva. The
text of this license is the same as those issued to the World
Jewish Congress, the Union of Orthodox Rabbis, and the American
Joint Distribution Committee (please see our cable of February 21
No. 584) except that in paragraph (b) of the license to the Selfhelp
of Emigres from Central Europe that the total amount authorized for
the period ending August 31, 1944 should not exceed Swiss francs
93,618 or the dollar equivalent.
The operations which this license covers are approved by
Treasury, the Department, and War Refugee Board.
STETTINIUS
(Acting)
Regraded Unclassified
83
PARAPHRASE OF TELEGRAM SENT
TO:
AMERICAN LEGATION, Bern
FROM:
Secretary of State, Washington
DATED: March 9, 1944,
NUMBER: 784
CONFIDENTIAL
License W-2148 covering the following transaction has been
issued by Treasury to the Vaad Mahatzala Emergency Committee, New
York (hereinafter referred to as "Vaad").
There is desire on the part of Vaad to communicate with
Rabbi Chaim Szmulewicz, 21/3 Baikal Road, Shanghai, China, but it
is eager that such communication not be regarded by the authorities
as having originated in the United States. Consequently, there
should be delivered to Isaac Sternbuch, St. Gallen, Switzerland,
the following message with request that it be transmitted at once
to Rabbi Chaim Szmulewicz as having originated from him. While
you should of course deliver a paraphrase of the message, you
should take special care in this connection so that Rabbi Szmulewicz
will be able to understand the full implication of the message re-
ceived by him. Rabbi Samulewicz will understand the reference to
"50 rabbis" to mean $50,000.00. The following is the substance of
the message:
There is available from Kalmanowitz support
fifty additional rabbis. Therefore you should
arrange distribution to be among all scholars of
rabinnical colleges, together with rabbis, post-
graduate students, and their families. You are
requested to make suitable arrangements. A reply
is requested.
Isaac Sternbuch is to sign the foregoing message and the
Legation should immediately forward to the Department his reply.
STETTINIUS
(Acting)
Regraded Unclassified
84
PARAPHRASE OF TELEGRAM SENT
FROM:
SECRETARY OF STATE, WASHINGTON
TO:
AMEMBASSY, ANKARA
DATED:
March 9, 1944
NUMBER:
180
CONFIDENTIAL
War Refugee Board sends the following for Hirschmann.
We have requested Myron Black, the field director of
War Shipping Administration's Foreign Service Division, who
is now in Cairo, to proceed immediately to Ankara to survey
with you the entire shipping situation. Although Mr. Black can
remain in Turkey only a few weeks, he will arrange to have some-
one detailed permanently to Ankara from the Cairo office if it
is deemed necessary.
Please inform us at once of any and all developments
regarding shipping problems. This problem is a most important
one and it is hoped that we can solve it with the assistance of
the War Shipping Administration which has been most helpful
STETTINIUS
Regraded 1 Inclassified
85
PARAPHRASE OF TELEGRAM RECEIVED
COPY
FROM:
The American Embassy, Moscow
TO:
The Secretary of State, Washington
DATE:
March 9, 1944
NUMBER:
775
SECRET
The following message refers to circular airgram
dated January 26, 1944, 7 p.m., from the Department.
There are no private or public agencies in Russia
which are active in bringing war refugees into the country
so far as the Embassy can find out. The enormous refugee,
problem of taking care of the millions of Soviet citizens
whom the German invasion displaced is the one with which
Russia is essentially concerned.
The relief of the Jews and the Poles whom the Government
of the U. S. S. R. sent to Siberia and Central Asia from
the portion of eastern Poland which the Russian forces
occupied in 1940 is another of their problems. The breaking
of diplomatic relations between Poland and Russia has
complicated this problem. The Australian Legation which
represents Polish interests in the U.S.S.R. has been able
to secure exit visas for only a very few although many of
the persons mentioned above would like to get out of
Russia.
Steps to repatriate Russian war refugees from North
Africa were taken by the Government of the U.S.S.R. you
may remember.
The only immigrants who are likely to receive a welcome
here during the period of the war at least, would be persons
with a Communist background and entrance into the country
in all probability would be desired by very few others.
I do not believe it would be advisable under these
circumstances to approach the Government of the U.S.S.R. on
this subject unless in developing our own specific plan of
action we find that for its execution we need the cooperation
of Russia.
HARRIMAN
DCR:MPL
3/11/44
Regraded 1 Inclassified
COPY
House
86
CABLE TO AMBASSADOR HARRIMAN, MOSCOW.
M
TO HARRIMAN FROM THE WAR REFUGEE BOARD.
Our circular airgram of January 26 described the functions
of the War Refugee Board, composed of the Secretaries of State,
Treasury and War. This Board has been established by the President
to take action for the immediate rescue and relief of the Jewish
people of Europe and other victims of enemy persecution.
The Board 18 actively engaged in carrying out the policy of
this Government as announced by the President, and is seeking the
cooperation of all members of the United Nations in this tremendous
task.
The Board is fully conscious of the great work which the
Russian Government has done to date in saving the lives of untold
numbers of refugees, including Jews, from Hitler who were rescued
in the midst of battle from the jaws of the German army. At the
same time the Board 18 convinced that if it could secure the
cooperation of the Russian Government in some of the projects on
which this Government is working, the chances of saving many people
from death would be greatly increased. In view of the outstanding
record of the Russian Government in this whole matter we are not
suggesting that pressure be put on them to do more than they are
now doing. We feel, however, that if the Russian Government can
be convinced of the fact that we are sincerely determined to do
what we can to prevent the murder of the Jews and other persecuted
peoples by Hitler, they may be prepared to cooperate in some of
the programs which we have under consideration.
There are many ways in which the Russian Government might
be of assistance in connection with these programs. The repre-
sentative of the War Refugee Board in Turkey, Ira Hirschmann,
at the suggestion of Ambassador Steinhardt, has already discussed
two specific problems with Soviet Ambassador Vinogradov in Turkey.
Vinogradov was informed of our intention to exert pressure on
Bulgaria and other satellite countries and was requested to take
parallel action. Vinogradov was also informed of our efforts
to get the Turkish Government to give permission for the use
of a ship for evacuating refugees and was asked to support our
request. Although Vinogradov agreed to speak to the Bulgarian
87
- 2 -
Minister informally, he pointed out that on both of these
matters he could not act formally except through Moscow.
Vinogradov suggested that you should request the assistance
of his Government on these two problems and he agreed to do
likewise.
We feel that it 1s very important that you discuss this
whole matter with the Russian Government immediately. You should
make clear the policy of this Government and discuss frankly the
problems with which we are faced.
The following information concerning some of the things
we are working on and some of the obstacles we have encountered
is furnished for your information and use in connection with
your discussions with the Russian Government:
(1) The War Refugee Board is convinced that it 1s of
utmost importance to undertake at once an organized and con-
centrated effort to make clear, by all appropriate means, to
all Axis satellites that the Allied Governments view in a most
serious light their assistance in any form to Hitler's program
to exterminate the Jews, and other similar groups, regarding
all such action as criminal participation in organized murder.
The Board also believes it necessary to make clear to the satel-
lites, by all possible means, its intention to do everything in
its power to rescue such unfortunates who are in danger of death,
in order not only to give the satellites a clear view of the
attitude of this country in the matter, but also of the opportun-
ities which exist for assisting in the execution of our policy.
The Board feels very strongly that a campaign of this kind must
be made through all possible channels and be constantly repeated
at every available opportunity. The Board believes that parallel
action on the part of other Allied Governments would do a great
deal to assure the success of this endeavor. At the moment it
is important that pressure be brought to bear particularly on
Rumania, Bulgaria, and Hungary, because in those areas there
are many refugees in imminent danger of death who can be evacuated
to Turkey and other places if those Governments permit it.
In addition to making formal representations to the govern-
ments of the satellite countries, the Board feels that there
should be employed in this campaign all available means for
Regraded Unclassified
88
- 3 -
effecting the widest dissemination of our attitude not only
to the governments themselves but to the largest number possible
of the people of satellite countries. In this connection the
Office of War Information 1s cooperating with the War Refugee
Board in bringing home to the people in Germany and the satellite
countries the fact that we mean business in this matter.
(2) In addition to this program designed to bring about
a change in the actions and attitude of our enemies, the Board
is convinced that there 1s a. real opportunity for actually
bringing many of these peoples out of German controlled territory.
The Board is convinced that one of the greatest opportunities
for actually resouing such people exists in the areas adjacent
to Turkey and the Black Sea. It is known that in Transnistria,
Rumania and Bulgaria there are substantial numbers of refugees
in imminent danger of death. It also appears that arrangements
can be made with the Turkish Government to receive refugees
from these areas. There are strong indications that the Rumanian
Government at least will permit a substantial number of these
refugees to leave Rumania. It is indispensable that means of
transportation be found at once.
The Board 1s now trying to make arrangements for a small
Turkish vessel to proceed to the Rumanian port of Constanza
and evacuate approximately 1000 children to Turkey. The Board's
representative in Turkey reported that the charter of the S.S.
VATAN, a small Turkish ship, might be obtained if we could offer
to the Turkish Government a guarantee to replace the ship if
lost. This Government promptly offered such a guaranty. It is
possible that the Russian Government may be of some assistance
to us in our negotiations with the Turkish Government. We are
also taking up with the Swedish Government the possibility of
obtaining some Swedish ships for this purpose. In your discus-
sions with the Russians you should bear in mind that this trans-
portation problem appears to be the key to evacuations in the
Black Sea areas.
(3) It is one of the functions of the Board to find
places which will serve as temporary havens of refuge to which
persons now in danger of death in German controlled Europe may
Regraded Unclassified
89
- 4 -
be removed. In getting the cooperation of Spain and Turkey
the essential point 1s to make sure that we remove as soon
as possible the refugees coming into these countries and
transport them to other places. A camp has been set up in
North Africa to which refugees from Spain are being removed
in order that more refugees may enter Spain from occupied
areas. Refugees coming into Turkey are at present being re-
ceived into Palestine. In order to increase the flow of refugees
through Turkey from occupied areas the Government of that
country is being requested to relax border and other controls,
etc. The Board is offering to arrange for financing the
setting up of reception camps which would receive refugees
entering Turkey and would make it possible to take them on
to other places as rapidly as possible.
The Board believes that if a substantial number of persons
are to be evacuated it will be necessary to find at least temporary
havens of refuge in many places. Accordingly, the Board 1s present-
ly exploring all possibilities of this kind.
In the case of Switzerland the Swiss Government apparently
1s willing to accept refugee children if it can be guaranteed
that such children will be removed from Switzerland after the
war. Efforts are being made to satisfy Switzerland on this score.
If the Russian Government were prepared to accept immediately
Jews and other war refugees who escape to neutral countries from
German controlled Europe, or who could be transported from the
Balkan countries across the Black Sea to Russia, and give them
at least a temporary haven of refuge in Russia, the possibility
of evacuating large numbers of people would be greatly increased.
Also if the Russian Government were prepared to give assurances
to countries like Switzerland that she would be willing to take
refugees from them after the war, they might be willing to re-
ceive considerably more refugees than they are now receiving. If
as a result of your discussions with the Russians it appears
that they would be willing to receive such refugees at least
on a temporary basis, you should of course make all efforts to
secure their full cooperation.
Regraded
Unclassified
90
- 5 -
As can be readily seen from the above, by virtue of the
physical and time factors involved, Russia could be of tremendous
assistance to us in solving some of the obstacles which we are
encountering. Your prompt and personal attention to this matter
will be greatly appreciated.
This cable has been repeated to Ambassador Steinhardt at
Ankara.
JED:JBF:ecr
2/29/44
Inclassified
91
NOT TO BL RE-Invidual FIED
COPY NO
12
U.S. SECRET
BRITISH MOST SECRET
OPTEL NO 79
Information received up to 10 A.M. 9th March 1944.
1. NAVAL
S.W. Approaches. Early 9th one of H.M. Corvettes escorting
convoy, torpedoed and sunk by U-boat N.W. of CAPE FINISTERRE.
2. MILITARY
Russia In SHEPETOVKA Sector, Russians have reached CHERNY OSTRAV
10 miles N.W. PROSKUROV and outskirts of STARA KONSTANINOV, 30 miles North
of PROSKUROV.
Burma
a ARAKAN. East of MAYU range 7th Indian Division captured
four hill features 2 miles south of LETWEDET and repulsed subsequent
Japanese counter attack. On 6th/7th DADAN, on coast 12 miles south of
MAUNGDAW, occupied by one company.
Kaladan. In KY.UKTAW area Japanese have infiltrated immediately
North of junction of PICHANG and KALADAN RIVERS. Some
withdrawal of West African troops has taken place.
3. AIR OPERATIONS
Western Front 8th. 470 escorted Fortresses and Liberators
dropped 828 tons on ball bearing factory ERKNER
(16 miles S.E.S.E. of BERLIN). Visibility excellent, good results
claimed in early stages before dense smoke prevented accurate assessment
Enemy casualties by bombers 42:14:9 by supporting fighters 83:10:32
for losn of 38 bombers and 18 fighters. 215 escorted Marauders effectively
attacked airfields at VOLKEL and SOESTERBERG (HOLLAND). 46 light and
fighter bombers attacked military objectives in NORTHERN FRANCE.
8tn/9th. 8 enemy aircraft operated over ENGLISH CHANNEL of which
three flew over Coastal area of SUSSEX and HANTS. Slight damage. No
casualties.
Italy and Southern France 7th. Offensive operations by 1361
aircraft included dropping of 283 tons on
airfields in ROME Area, 245 tons on railway and other targets in Northern
ITALY and attacks by 48 ascorted Fortresses on harbour area of TOULON.
Regraded Unclassified
March 10, 1944
92
9:35 a.m.
HMJr:
Hello.
Randolph
Paul:
Hello.
HMJr:
Yes, Paul
P:
I wanted to give you the authors of that book,
HMJr:
Oh.
P:
There are two of them.
HMJr:
Yes.
P:
Wythe Williams is one.
HMJr:
Yeah.
P:
The other is Frank L. Baer. He was with that
Press Agent in Washington by the name of Shepp,
but before that he was with Hearst.
HMJr:
Yeah.
P:
And Williams is that -- the radio commentator.
HMJr:
Oh. Where did you get that information?
P:
Well, I got it through Morris Ernst. I saw
Morris late Wednesday afternoon and he -- he
had tried during the day to find out. You see,
he had to make it incidental to something else.
HMJr:
Yeah.
P:
And then we -- he couldn't find out -- then we
got hold of Frank -- of Louis Gannett, thinking.
he'd know and he couldn't tell -- he didn't know,
and yesterday -- late yesterday Morris called me
about it and he'd found out somehow and I don't
know how.
HMJr:
Did you read it?
P:
Yeah.
HMJr:
Nice stuff, isn't it?
Regraded Unclassified
93
- 2 -
P:
Yeah. Well, I think it's part of a general
political operation. I don't think it's any --
just the general thing that was going to come
along.
HMJr:
Well, you're lucky. You've got a good article
in Colliers, I see.
P:
Well, that's an old one. They -- I heard they
were -- they came to see me about it -- uh --
that was last summer.
HMJr:
Really?
P:
And I heard it was going to be unfavorable and
all I could do was see them and try to make it
as favorable as possible. I don't know. I don't
like it much.
HMJr:
You don't? Well, if they wrote it about me, I'd
think it was wonderful.
P:
Well, I suppose you have to take all these things
in comparison with what it might have been.
HMJr:
Yeah. Ah -- I got word last night, and I'm waiting
to get it -- the President has okayed my letters.
P:
I see. The one that you wrote to Doughton?
HMJr:
Yeah.
P:
And has he agreed not to send up any message?
HMJr:
Well, I just got it by word of mouth.
P:
Yeah.
HMJr:
And I'm waiting until it comes over and I'll send
Sullivan up on the Hill with it.
P:
Oh, it hasn't gone up there yet? I Bee.
HMJr:
No, I only got word late last night.
P:
You wanted to get his clearance before you sent
it up?
HMJr:
That's right.
94
- 3 -
P:
Well, I think that was a good idea.
HMJr:
The President's -- well, I wouldn't dream of
sending it without clearing it with the President.
P:
Yeah.
HMJr:
Okay, I'll see you later on.
P:
All right. Bye.
95
March 10, 1944
9:41 a.m.
HMJr:
Hello.
Colonel
Martin:
Hello.
HMJr:
Good morning, Colonel.
M:
Good morning, Mr. Secretary.
HMJr:
I hear you've inquired about the briefing I had
here the other day.
M:
Well, I wanted to be sure that when you came over
tomorrow, we gave you, as nearly as possible, just
what you wanted. I remember the presentations
that you've had in the past and I wondered -- just
wanted to be sure that the one that you were
interested in tomorrow here 1s along the same lines
or if you wanted it confined almost entirely to the
combined bomber-offensive in Germany.
HMJr:
No, I'd like to go around the world.
M:
Around the world?
HMJr:
And I'd like to know how many planes we have in
various areas and how many enemy planes are facing
us.
M:
Yes.
HMJr:
You see?
M:
Yes.
HMJr:
That's principally what I'd like to know.
M:
Oh, yes.
HMJr:
Around -- that's what you showed me the last time.
M:
That's right, Mr. Secretary.
HMJr:
Around the world.
M:
Yes.
HMJr:
Now, I forget this Lieutenant whom you sent me --
over to me the other day.
Inclassified
- 2 -
96
M:
That was Lieutenant Marvel.
HMJr:
Now, he gave me some information as to the size,
rather than as to the production of the factories
in Germany of both single and twin-engine planes.
M:
Yes.
HMJr:
And on reading the weekly summary of the Joint
Intelligence Committee, either Lieutenant Marvel
or this report -- they just don't "gee".
M:
Uh huh.
HMJr:
Do you get that report?
M:
I don't remember it.
HMJr:
It's just out. It's the March 8th report.
M:
March 8th. I'll check up on that.
HMJr:
I -- so not to -- I mean, what I'm saying can't
be understood by anybody
M:
Yeah.
HMJr:
He brought me over a chart which he showed, what
the production of the factories are estimated in
Germany as -- well, as of
M:
Yes. I know the chart. I know the chart you mean.
I know the figures that you are referring to.
HMJr:
And he said he was going to have it photostated
for me and let me
M:
Yes.
HMJr:
So that identifies it?
M:
Yes, that's right.
HMJr:
And, of course, I was delighted when I saw the
figures.
M:
Yeah.
HMJr:
Then last night I picked up this most recent
March 8th copy of the Joint Intelligence Committee
and those figures and what Marvel gave me just don't
seem to be -- I mean I -- I -- 18 Marvel -- are you
97
- 3 -
HMJr:
Cont'd.
sure of those figures -- 1s he sure of them -- or
wherever they got them from?
M:
Yes, sir, those -- those figures are the best
information that we have at the present time.
They are supposed to be right up to date. They
are a combination of British and U. S. figures.
HMJr:
I mean, you know the chart I'm referring to?
M:
Yes, I know the chart you are referring to, Mr.
Secretary. I'm perfectly sure I -- I know the one.
HMJr:
Well
M:
Well, I'm going to get this copy of the J.I.C.
report. I'll see what that says.
HMJr:
Yeah.
M:
And -- did it vary very greatly?
HMJr:
Well, in the impression that I get, it varies
radically.
M:
Are you sure they are talking about the same thing?
HMJr:
I'm not sure.
M:
Yes. Well, I will get that and we will clear that
up at the meeting tomorrow.
HMJr:
Would you do that?
M:
Yes, I'll be sure to do that.
HMJr:
Because that's another -- another thing I've asked
for was -- when I came over there, was the production
of German and Japanese and they've always given me
that, but Marvin's material -- and without, in any
way, trying to discredit Marvin, because he seemed --
heretofore, you've sent somebody over who has come
back from England, to me, who had that fresh viewpoint.
M:
Yes.
HMJr:
You don't have such a person?
98
- 4 -
M:
Well, I know I -- we haven't got anybody that 18
just back and 1s thoroughly familiar with the
situation. I think the trouble was that when
Lieutenant Marvel went over there, I hadn't seen
him before he went over and I'm afraid that he
didn't completely understand just what was
required.
HMJr:
Well, I don't
M:
I'm very sorry. I'm very sorry about that.
HMJr:
Well, I think it was unfair to him because he
had no instructions as far as I can tell. I
said, "Haven't they told you what I've been
getting?" And he said, "No." So,
M:
That was unfortunate and we all apologize.
HMJr:
Well, I don't want apologies. I just would like
occasionally to be brought up to date, that's all.
M:
Oh, yes. We certainly will try to do that.
HMJr:
Well, thank you so much.
M:
Thank you. We'll meet you then at nine-thirty
tomorrow at the river entrance.
HMJr:
Thank you very much.
M:
Thank you very much, Mr. Secretary. Goodbye.
Unclassified
99
March 10, 1944
9:45 a.m.
FINANCING
Present: Mr. Bell
Mr. Murphy
Mr. Lindow
Mr. Haas
Mr. Tickton
H.M.JR: Now, Mr. Bell?
MR. BELL: This one and the next one are a little
difficult to decide, I think. As I told you when you
were in Florida, I was experimenting a little with the
balances to see whether we could eliminate the Sixth
Drive this year. About the only place we could put
the Sixth Drive, unless you did a lot of bank financing,
would be in January. Of course, that is 8. bad month.
I guess that we shouldn't assume that there is
any possibility of a change in Administration, but I
suppose there might be. You couldn't have a drive in
January, with that possibility, because you would have
to make your plans prior to the election. So I elimi-
nated that. The only period available--
H.M.JR: I would be packing in January.
MR. BELL: We all would, maybe.
The only period available at all in there is
November 15, on. And I think that is the only thing we
can do. I have assumed in this estimate that the drive -
the Fifth Drive - will be in June and July for fourteen
billion dollars, and then I have extended it on, hoping
that we can rig up some scheme of partial payments -
Regraded
100
- 2 -
of instalment payments. I put seven hundred and fifty
million dollars a month in August, September and October.
Now, that is a total for the drive of sixteen billion
two hundred and fifty, which I think is conservative, and
is less than you got in the Fourth Drive.
Then I have done the same thing in the November
drive, extending the partial payments over into March.
H.M.JR: Can I look at the chart you are looking
at, or is it a military secret?
(Mr. Bell hands chart to the Secretary)
H.M. JR: What is that line across there?
MR. BELL: That is the financing line.
Then when you come to May, we would raise the cer-
tificate maturing at that time, of a billion six hundred
million dollars, by two billion dollars, making it three
billion and a half to three billion six. You would do
the same thing in August.
H.M.JR: That is what you call banking sales?
MR. BELL: Yes, banking sales.
Then in August you would have another certificate
maturing of two billion six, and you would raise that
a billion.
Then in September you would have to have some bank
financing in order to carry you through to the Sixth Drive
beginning about November 15. Then the next bank financing
would be over in February.
If you carry that through, you will have good
balances - you can see in the last line marked there at
the end of the month - good balances all the rest of this
101
- 3 -
fiscal year - seventeen billion going out of February;
fourteen and a half out of March; ten billion out of
April; seven and a half billion out of May; seven billion
six going out of June; nine billion eight in July; seven
billion three in August; eight billion seven in September.
Now they begin to drop, and this hits the low point,
four billion in October, and three billion six going
into November.
Of course, that can be adjusted by a little more
bank financing, or some other wrinkles that we have.
I talked to Burgess about the Fifth War Loan. He
doesn't think we ought to have any part of it, so far
as the organizations are concerned, in July.
H.M.JR: He would be willing to go through the 4th
of July?
MR. BELL: Well, he says that the banks are getting
in 8. critical situation 80 far as the labor is concerned.
H.M.JR: Yes, I spoke to him.
MR. BELL: So he suggested you have it May 15, on.
But this can be shoved either way.
H.M.JR: Well, that isn't - he must have changed.
But Decoration Day is on the 3lst.
MR. HAAS: The 30th.
H.M.JR:
...which is a Tuesday. When is tax payment?
MR. BELL: April 15 for the 1944.
H.M.JR: I personally would like to start the thing
on Decoration Day.
MR. BELL: And just take the month of June?
H.M.JR: Yes.
102
- 4 -
MR. BELL: That is all right. That will leave the
accounting period up to the 15th of July.
H.M.JR: I would like to get it as much - they
would want to do some recruiting.
Burgess wouldn't like it, but I would like it to
start on Decoration Day, and not necessarily run through
the 4th of July.
MR. BELL: I am not sure that isn't all right. I
think we had too much time last time.
H.M.JR: Start it on Decoration Day. I don't care
how long they run it.
MR. BELL: I would want to run it certainly to the
middle of July.
H.M.JR: He wanted to get the benefit of the mid-
month payment, which for the 15th is a Saturday. Would
a fellow take his pay check on the 15th and go and buy
a bond the same day?
MR. BELL: Mid-month payments?
MR. LINDOW: You mean the 15th of July? I suppose
some would, but it wouldn't get into the accounting
unless you ran to the end of the month.
H.M.JR: I should think if this drive started on
the 30th of May and ran until Friday, June 30 and closed -
I mean, as far as carrying over Saturday, July 1 - you see?
Then give them fifteen days for the accounting. What?
MR. LINDOW: Yes.
MR. BELL: I suppose there is some new money that
comes in around July 1, divident payments, that you might
try to get?
H.M.JR: Yes.
103
- 5 -
MR. BELL: That wouldn't be enough, just one day.
H.M.JR: The 4th is a Tuesday and that is a holiday.
Monday is the 3rd; people could put it in on the 3rd.
Well, anyway, I would like to start it, because I
want to get as much headstart ahead of the tax payment
as possible. I think it is a good day.
"Remember the soldiers who died" - and 30 forth.
MR. BELL: Good day to start it off.
H.M.JR: I would rather that day than July 4th
which is a celebration day.
MR. BELL: There would be a lot of speeches on that
day, or would you do your preliminary work on the 29th.
H.M.JR: I don't care, but I would like to start a
little bit earlier than these other people.
MR. HAAS: You might even push it two weeks earlier,
the 15th.
MR. LINDOW: Memorial Day, of course, has no signi-
ficance in most of the States south of the Potomac.
H.M.JR: Well, think about it. I would like to get
a little bit ahead of June 15.
MR. BELL: You might even start it a week before,
the 20th, or something like that.
H.M.JR: Be all right with me.
Now, I don't quite get this thing - new money. When
did you propose to get new money? How much did you pro-
pose to get?
MR. BELL: Two billion dollars of new money on May 1.
104
- 6 -
H.M.JR: How?
MR. BELL: By increasing the maturing certificate,
which amounts to one billion six, to about three billion
and a half to three billion six.
H.M.JR: Two billion of certificates, May 1?
MR. BELL: And a billion dollars in August.
H.M.JR: How much are you going to get in the drive?
MR. BELL: I was starting the banking first, but
all right, in the June estimate we get five billion
dollars, and the reason I did that, I patterned it after
the Fourth. Now, if you shove it back to May, you will
get more than that. And then nine billion in July.
You see, I split the month. The corporate, I thought,
might come July 1. Altogether, including the delayed
payments, sixteen billion two hundred and fifty million
dollars.
H.M.JR: I wouldn't count the two hundred and fifty.
Sixteen billion - I am going to put that down for the
drive.
MR. BELL: That is right. Then there is another
certificate maturing on August 1, of two billion six.
That would increase that by a billion dollars. It would
give you new money there. Then four billion dollars of
additional bank financing in September, note or certifi-
cate or bond.
H.M.JR: That will take us through?
MR. BELL: That will take us through with a three
billion six hundred million dollar balance going into
November. And that is lower than we contemplated.
H.M.JR: Of course, you could make that a five
billion balance.
Regraded Unclassified
105
- 7 -
MR. BELL: Oh, yes, but there is another program
that has to come into the picture, that is the bill pro-
gram. Heretofore we have discussed this matter with the
full Federal Reserve Board and we have never got any
place. They have had their minds closed before we ever
get there, and Eccles does most of the talking and there
isn't anything you can do to get him out of the decision
he has already made.
Starting out this time, George and his crew is
talking with Goldenweiser about this whole picture.
(To Haas) And the Federal Reserve of New York hasn't
been in on it yet?
MR. HAAS: Only except as we talk to Allan and
Rouse.
MR. BELL: Now, Roelse, who is Federal Reserve
Bank of New York man, will be in the picture and they
will keep it on the technical level until they can come
to some program, if they can.
George is recommending that we increase bills by
a hundred million dollars the first of April. Then -
what is the second date?
MR. LINDOW: Two hundred million beginning June 1.
MR. BELL: That raises seven billion dollars by the
end of the year. Nothing sacred, I think, about those
two dates.
H.M.JR: You mean the total bills outstanding will
be what?
MR. LINDOW: Twenty billion - about thirteen now.
MR. HAAS: It is all involved in another, more
complicated problem.
MR. BELL: Yes, the whole thing is complicated and
ought to be studied very carefully by the technical
groups before we go to the Board to discuss it.
Unclassified
106
- 8 -
H.M.JR: Before you come to me to discuss it.
MR. HAAS: We have been two or three months on it.
We are all right.
MR. BELL: The boys have written several memoranda on
this whole problem and we want to send to the Board
and the bank, copies of just two of the memoranda--
MR. HAAS: Three.
MR. BELL: That is right. as 8. basis for discus-
sion only, and say they are tentative, and 80 forth.
They are prepared to give you copies of them any time you
want to read them. They are quite long - all told, I
think about a hundred pages. (See Memorandum of March
10, from Mr. Haas, attached)
MR. BELL: If we start that bill program as contem-
piated, any time along in there, why that will either
increase your balances, or you can decrease your other
bank borrowing. And we may want to do a little of both.
H.M.JR: I want to study that, too. Don't commit
the Treasury to it until you have committed me.
MR. HAAS: We are not committing you, no. This is
just a discussion among the technical group.
But the point is - I don't want to interrupt Dan,
I would like to talk after he is through.
MR. BELL: Go ahead.
MR. HAAS: I was going to say, Mr. Secretary, that
we have been working on this thing for about two months.
It is something that I hope we will have time to seminar
with you. We are not going to make any commitments. We
don't know what your views on the thing are. But I hope
we can have some time to sit down uninterruptedly, maybe
for four hours, or a couple of sessions.
Regraded Unclassified
107
- 9 -
But if this is right - now, all our group, including
our outside consultants, feel that it is - if it is,
it handles your situation through this difficult politi-
cal period just like a clock. You have no hazard or
anything involved in it. If you don't do this, some
other action the Federal Reserve will have to take. You
will have to do some of this even if they do take some
action in regard to reserves.
MR. BELL: They have got the reserve problem, and
also you have the ratio of gold to deposits in currency
outstanding, also. It is now sixty-two, isn't it?
MR. HAAS: Yes.
MR. BELL: Dropped from a high of ninety-one. That
is gradually going down all the time. If it falls below
sixty, you may get some comment. If it falls below fifty,
you are certainly going to get some comment. The ques-
tion here as to what action you can take and cause the
least adverse discussion on the outside from people like
Spahr, and so forth, that Committee, is a thing that has
got to be decided. If you need legislation--
H.M.JR: I am ready, any time.
MR. HAAS: We are ready any time you are, r.Secretary.
As I say, we have been working several months.
MR. BELL: This group feels that the less said about
it until after November 7th, the better. We think you
can get by until after November 7th without much discus-
sion of the problem.
H.M.JR: You have to let me know what that does to
the debt limit.
MR. BELL: On the debt limit we will have, according to
the Budget, about twohundred and fifty-eight billion dollars
debt by the end of the fiscal year, 1945 - June 30.
Regraded Unclassified
108
- 10 -
Now, we have drawn a bill which ought to be handed
to Doughton right away, because I held it up due to this
tax controversy, which would increase the debt limit to
two hundred and sixty billion dollars.
H.M.JR: Do you need that?
MR. BELL: Yes.
H.M.JR: What is the debt limit ceiling now?
MR. BELL: Two hundred and ten.
H.M.JR: What is our debt limit? What will it be
on the first of January?
MR. BELL: Next year? It ought to be somewhere
close to two hundred and thirty.
MR. MURPHY: It is about one hundred and ninety.
MR. LINDOW: You would want to -- about two hundred
and thirty or two hundred and thirty-five.
MR. BELL: I didn't do this on this two hundred and
sixty because I had in mind we would have to go up, any-
how, in the spring and get it increased. So I thought
two hundred and sixty would certainly take care of the
debt limit.
H.M.JR: Sullivan has to go up on the Hill on a tax
matter for me to see Doughton and George. Why couldn't
he sound them out?
MR. BELL: He could. George has already been
sounded out by Tom Lynch who was head of the Legislative
Council.
H.M.JR: I would rather have Sullivan do it.
109
- 11 -
MR. BELL: O.K. But George said he would follow
Doughton. He doesn't want to do it before the House
takes action.
H.M.JR: When you leave the room, will you speak
to Sullivan? I would much rather let Sullivan handle it.
MR. BELL: O.K.
I started to give it to you the other day.
H.M.JR: I have got this February 3 thing from
Haas here. What I would like to know is this: These
figures, as I remember them, this fiscal year, get it
down to an expenditure of eighty five billion.
MR. HAAS: If Germany collapses in September.
MR. LINDOW: That wasn't this fiscal year, Mr.
Secretary, that is fiscal '45. The estimate for war
expenditures for fiscal '45 in the Budget is ninety
billion. If Germany goes out in September, that would
drop to about eighty-five, according to Stacy May.
Now, after sometime has elapsed from the German
collapse, and the war with Japan is continuing, the
level should drop to seventy to seventy-five billion.
H.M.JR: Of course, I think they have got to change
all their things, now, because I think that there is a
good chance of maybe Japan going out first.
MR. BELL: Isn't it funny? You hear that almost
every place.
MR. LINDOW: Those are very tentative figures, anyway,
because they can't get the military to tie themselves
down to a program which they think is realistic.
Inclassified
110
- 12 -
MR. BELL: As a matter of fact, I think his figure
is high, if Germany goes out, on the expenditures for
Japan. I think it ought to drop to between forty-five
and fifty. They think sixty-five or seventy.
MR. LINDOW: If they take the military programs
after the collapse of Germany, they would get a cut in
munitions expenditures alone of about twenty-five percent.
Now, they have raised that to thirty percent themselves,
figuring that some of the items are just overstated,
particularly the Navy items. And they think that that
may itself be too low an estimate of what the cut will
be, that is, thirty percent, but they can't tell, and
they are already five percent over what the military say.
They don't like to go any further, but knowing the con-
servatism of the military authorities, it is not sur-
prising.
(The Secretary talking to Admiral Leahy on White
House phone:)
Hello, Admiral Leahy
How are you?
Admiral, I would like to get you over here to the
Treasury to have lunch wi th me, if you would. I want
to tell you what I have in mind. We are planning our
financing for the rest of the year. There is a question
of when the Fifth War Loan will come. We get these
figures from the War Production Board, and they are
based on the percentage of when Germany might fall,
or when Japan might fall. There are a lot of military
items in there. I wondered if you could get authority
from the President to talk to me, or how freely you
could talk, 80 that I could in some way gauge this thing
as to how much we would have to borrow, and what the
best time will be to borrow it. I want to let you
know beforehand so you won't think I am on a fishing
expedition.
I think the President knows
Unclassified
111
- 13 -
He has paid me the compliment of saying I am one
of the few people in town who can keep my mouth shut
Well, I can have it either Monday or Tuesday to
suit your convenience
What time do you like to eat?
One. clock
I have my own little dining room here, and if you
could, as I say, give me as much of the picture
Just myself, nobody but myself
No, it would be me, and nobody else, and no memorandum
made of any kind
Well, I just thought I might
I will leave it to you, but if you could lift the
curtain for me, and, as I say, you will have my word
that it will not be repeated to anybody
Right
Yes
Yes
As I say, something to gauge this thing, you see.
It is awfully hard. So far the good Lord has been with
us
And a little hard work
But I don't wan t to make 8 bust of this year, anyway
That is right
Right
112
- 14 -
One o'clock
And if you come right across the street to my
private entrance
Right
Thank you
H.M.JR: He says he doesn't have to ask the President,
and he will do it. He says he will tell me anything he
knows. I mean, why should we guess about it?
MR. BELL: Yes. Well, we will probably guess about
it, anyhow.
H.M.JR: No, but there are certain things, you see,
gentlemen. I don't agree with Stacy May at all.
MR. HAAS: He is just guessing, like anybody.
H.M.JR: I will tell you why: This particular
thing here (Refers to chart attached to Mr. Haas' memo-
randum.) --I wish he were right, but here he has the thing
July, two years after the defeat of Germany, and after
the defeat of Japan, only four and a half million employed,
and two and a half million people in the armed forces, and
manufacturing still employing thirteen million people,
the same as July, '41.
MR. HAAS: That is Labor.
MR. LINDOW: That was based on the specific assumption--
I got that from Mr. Donald Davenport over at the Bureau of
Labor Statistics, who knows as much about the manpower
situation as anybody in town.
H.M.JR: That isn't very much.
MR. LINDOW: That is right, but that was based on
the assumption that economic activity would be the same
as in 1941. He is not really forecasting it, but he
is saying that if you can have that kind of 8 level, this
is the situation you face.
113
- 15 -
H.M.JR: Oh, I thought this was 8. forecast, because
I think it is absolutely cockeyed. I wish you people
would just follow out my trend and tell me whether I am
wrong or not. I believe that the day that Germany,
rather than Japan, collapses--I don't say which comes
first--that day we will have the damnedest cancellations
that you ever saw. Everything is just going to shut down.
MR. HAAS: That is right.
H.M.JR: And they are not going to be able--the
Congress of the United States isn't going to be able to
keep the soldiers, particularly--the Navy may be something
different--keep the soldiers in the Army. Every mother
and father is going to write his Congressman and say, "Get
the boy home, as I am. Sure, I want my boys home. I
don't want them fussing around when this war is over.
Everybody else is going to be in the same shape. Mrs.
Dickinson wants her husband home. Right?
MRS. DICKINSON: Right!
H.M.JR: Everybody is going to do everything they
can to get their family home.
MR. BELL: I think it is crazy, too, to assume that
this thing is going to extend over 8. two-year period.
H.M.JR: Take my hunch on this thing and do some
original figures. I am saying to you, then, if I am
right--I don t say if you people agree with me, but
at least follow my thought. Now, if I am correct, there
will be complete cancellation. They are going to get.
these people out just as fast as the ships can come home.
Don't forget, we have a lot of ships. They can pile
them on. My God, I saw them pile them on in World War I.
You did, too.
MR. BELL: Sure.
H.M.JR: I mean, they pile these people in like cattle.
They have them seven deep on the Queen Mary going over
114
- 16 -
now and in the summer time. They have two meals 8. day,
and the people sleep on the decks. If they took them
over that way, they will bring them back that way.
MR. BELL: They will bring them back the southern
way.
H.M. JR: This was a year ago, whenever I was up at
the port of embarkation--they were just piling them in
like cattle, and the boys will be glad to be piled in.
MR. BELL: I'll say they will.
H.M.JR:. Dan, after all, with the cancellations,
don't forget that present tax rates, or schedules, stay,
and these people--let's say that General Motors--I don't
know, they have four billion dollars worth of business,
I saw somewhere. Maybe it is two billion.
MR. LINDOW: More than that, I think.
H.M.JR: I think it is four billion. General Motors
gets cancellations, let's say, on three billion. Is that
too extreme?
MR. BELL: You mean if Germany falls?
MR. LINDOW: Well, if Japan is still going, it is
hard to tell.
H.M.JR: Let me say, because I am so extreme, that
it is fifty percent. I think it will be seventy-five
percent, but I think you should figure fifty percent
cancellation, and possibly seventy-five percent. The
present tax schedule stays. General Motors says they
can convert in six months. During that period they
are not going to make any money. What is going to
happen? How much money are we going to get from taxes?
MR. HAAS: They have that carry-back in there.
MR. BELL: How much are you going to pay out in
refunds?
Regraded
115
- 17 -
H.M.JR: They say the outside figure is four billion.
I think they are low. I can't guess that figure, but
what I am saying to you men is, for God's sake get away
from the Stacy May figures. I think he is cockeyed, and
should be fired. I don't think he has any brains or
imagination. I am talking extreme, but I am saying to
you, "Do it my way. Figure on fifty percent cancellations,
figure seventy-five percent cancellations," see?
MR. HAAS: And see what it works out to.
H.M.JR: I have been wanting to say this to you
ever since I read this memorandum; if you don't mind my
saying so, I don't think it is very good, because it
is based on Stacy May.
MR. HAAS: I misunderstood. I thought you wanted
us to get their views.
H.M.JR: But that doesn't mean, George, you can't
think yourself.
MR. HAAS: We had some thoughts.
H.M.JR: Well, put them down. Do it my way and see
what this means, and I will get some information, and I
will ask them how much I can pass along. But you can
make your own things. You can say the war is going
to last six months or nine months; it is going to last
a year and a half or two years. Do it in three-month
jumps, and then put it in three-month jumps.
MR. HAAS: We will figure out a very extreme situation.
That is what we have been trying to do to see what it
means on redemptions and all our financial operations.
H.M.JR: If the thing is going to be as bad as I
think it is going to be--
MR. HAAS: You should be able to handle it even
then.
H.M.JR: And then, what are the redemptions? Ted
Gamble says the movie crowd says we are going to have
116
- 18 -
good business for ten years. They are going to worry
about what is going to happen at the end of ten years.
I may be all wrong.
MR. HAAS: That is from Wall Street.
H.M.JR: Of course, you have to keep this in the
office. I em an extreme pessimist on what is going to
happen. Henry Wallace says two or three years, the way
it was in the last war. Well, it took from 1918 to
1920, and then we got the bump. Let me just throw
this stuff at you.
All of the food people said--I checked with Marvin
Jones last night, and I know what happened at Atlantic
City--UNRRA. Every one of those countries say that at
the end of one crop season they can either support
themselves, or they will have food for export. You fellows
had better wake up; you have been asleep. I checked it.
with Marvin Jones. Ask what's-his-name from White's
office.
MR. HAAS: I have seen that statement in the papers.
H.M.JR: I checked it last night. He said the same
thing happened at the food conference. Norway said, "Give
us a hook and line and 8 couple of vessels. At the end
of four months we will be exporting fish."
Poland said, "After one crop season we will export
potatoes.'
It is the same way with Czechoslovakia. There will
be a tremendous strain on us for food for one crop season.
Then, if the--
MR. HAAS: At the Dallas food conference they were
worried about the inflationary pressure for that short
period.
H.M.JR: Now, all this stuff--you fellows have to
do & little original thinking, if you will, along my
lines. Then you can tell me why I am wrong.
Regraded Unclassified
117
- 19 -
MR. HAAS: We are not as bad off as you think.
H.M.JR: Well, you are when you send me a memorandum
like that, George. It isn't worth the paper it is written
on. It is just following the usual channel.
I don't mind, after you come back and say, "Morgenthau,
you are cockeyed"--you can tell me that, but prove it.
I am willing to be proven wrong, but that thing is
crazy. Do you think I am crazy, I am cockeyed, Dan?
MR. BELL: No.
MR. HAAS: It isn't 8 matter of being cockeyed,
but I think what you say has possibilities, and we should
be prepared to meet that. I hope you are wrong, because
I think things should be arranged so that doesn't take
place that way.
H.M.JR: I have lived two-thirds of my life; I hope
I am wrong. But my boys have to start in life fresh, with
all their lives ahead of them. So everything in me says,
"I hope I am wrong."
MR. BELL: There is beginning to be a good deal of
talk.
MR. HAAS: There doesn't have to be a forecast; it
is & possibility, and we should say, if that happens,
"What can we do to take care of it. On the other hand,
what can we say to make sure it doesn't happen?"
H.M.JR: Let's get it first on the basis of a forecast.
MR. BELL: There is beginning to be a good deal
of talk around the Government service about the post-war
budget. Eccles made 8. speech not long ago in which he
said the budget would be twenty billion dollars. Someone
afterwards said twenty billion dollars. I think that is
a little dangerous and premature.
I don't want the soldiers who are overseas to think, "My
H.M.JR: The reason I don't want this to get out--
118
- 20 -
god, are these the conditions we will come back to?"
Nothing would be worse for their morale. But I also
agree that if we get the thing and look at it, then
what the hell will we do about it.
MR. HAAS: This do-nothing trend worries me, Mr.
Secretary, you know, politically, which is the real
question to the thing. If you get that sort of thing,
everything is all right, do nothing--
H.M.JR: Do you remember my statement here when
I talked about Hancock and his dismissal wages? I shocked
poor Mrs. Dickinson. I said, "Hancock's attitude was,
'Let the "sonsabitches" starve.'"
One of the principal criticisms of the Baruch-Hancock
report is that nothing on dismissal wages--nothing is
going to happen for the people who are laid off. It is
all for business.
MR. HAAS: That is right, take care of business.
And you won't have any business unless that part is
taken care of.
H.M.JR: I don't know what the answer is, but it
is my job to know what the worst could be and to be
ready for it. That is another reason why I don't think
I am going to go along with Bell and you fellows to get
down to three billion dollars.
MR. HELL: Three billion six.
H.M.JR: That is six.
MR. BELL: You mean the balance? Well, it won't
get down there if we get the program adopted. I will
have to admit that that is dangerously low.
H.M.JR: I would like to keep enough on hand 80 I
have thirty days to turn around in.
MR. BELL: I think that is good policy.
119
- 21 -
H.M.JR: Three billion six would not permit me to
turn around. What would I need to have a balance and
thirty days to turn around in?
MR. BELL: We ought to stick to our ten billion
dollars. That is right.
H.M.JR: It is like any other military reserve.
MR. BELL: What we need to do is propose the bill
program right on top of this, and you won't have any
excess balance any place along the line at the end of
the calendar year.
MR. LINDOW: That makes the other problem worse.
H.M.JR: Take a fresh look at this thing. I want
a thirty day--let's talk in terms of ten billion dollars
as a working balance. Have a fresh look, see, in view
of the way I feel. I feel good today. You wouldn't
know it.
All right?
MR. BELL: Yes, O.K.
H.M.JR: Come back and see me Monday or Tuesday.
MR. HAAS: But, Mr. Secretary, on this other problem
about what will happen at the collapse, to work that out
will take us some time. But you still have these
other problems in your lap which are even more urgent
than that which you could start on, immediate problems.
H.M.JR: But I am elling you now I want a ten
billion dollar balance.
MR. HAAS: We can fix that up.
H.M.JR: But that shouldn't take 50 long.
MR. HAAS: Well, as I say--
120
- 22 -
MR. BELL: If we adopt the bill program, our ten
billion dollar balance is all right.
H.M.JR: Aren't there any new men who have grown
up in universities in the last ten years? My God, there
ought to be somebody who has some brains, in business
schools, or some place or other. I mean, there must
be some place, somewhere, somebody who has some intel-
ligence.
MR. BELL: Well, I don't know. You get somebody
on this problem- we know more about it here than any-
body outside. It takes months to train them.
How about the bankers committee?
H.M.JR: What about them?
MR. BELL: ABA.
H.M.JR: I am seeing the other fellows on the 20th.
MR. BELL: The Chairmen?
H.M.JR: Yes, the 20th. They didn't put it down,
either. Do you want the bankers the 21st?
MR.BELL: Around that time, whatever is convenient
to you. Now, they are going to be here just one day?
H.M.JR: As far as I am concerned, one day. Why
don't you call up and let me have them for lunch down-
stairs on the 21st?
MR. BELL: All right. 'What day is that?
H.M.JR: Tuesday.
MR. BELL: O.K. It is a good day.
121
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 10, 1944
Mr. Secretary Haas GA
Morgenthau
TO
FROM
Attached are the three memoranda -
(1) Developing a Borrowing Program for
the Calendar Year 1944
(2) An Exploratory Memorandum to Facilitate
Discussion of Problems in Money Market
Management During 1944
(3) Outlook for Sources of Funds for Federal
Borrowing during the Calendar Year 1944
which we are using as a basis for discussion with
the research staffs of the Federal Reserve Board
and the New York Federal Reserve Bank.
Regraded Unclassified
122
Draft of March 8, 1944
Developing a Borrowing Program
for the Calendar Year 1944
SUMMARY
The following table shows the estimated amount of finan-
cial outlays by the Treasury in the calendar year 1944, and a
proposed borrowing program to take care of these requirements.
The figures are classified into three financing periods, each
period closing with a war loan drive.
Estimated Financial Outlays of the Treasury
and Proposed Borrowing Program
Calendar Year 1944
(In billions of dollars)
: Jan.-: Mar.-: Aug.- Total
: Feb. : July : Dec. :
Financial outlays:
Deficit
10.5
23.6
22.4
56.6
Redemptions and cash
maturities
1.2
5.5
5.6
12.3
Total
11.7
29.1
28.0
68.9
Borrowing program:
War loans
16.7
16.6
17.3
50.6
Direct bank financing
program:
2.6
4.4
7.0
Bills
-
Certificates
1.0
-
1,0
-
1.8
5.7
6.1
13.7
Other financing
Total
18.6
25.9
27.8
72.3
Change in working balance
+6.9
-3.2
-.2
+3.4
Note: Figures are rounded to nearest tenth of a billion and
will not necessarily add to totals.
Regraded Unclassified
123
- 2 -
It will be noted that financial outlays are estimated
at $68.9 billions for the year. This estimate is developed
in Section I of the present memorandum. The gross borrowing
program of $72.3 billions 1s discussed in Section II. This
total would cover the financial outlays of $68.9 billions and
would provide for an increase in the working balance of $3.4
billions during the year. The working balance would reach a
low for the year of about $3 billions on November 15.
It is assumed for purposes of this memorandum that the
Fifth War Loan will be held in June-July on essentially the
same lines as the Fourth War Loan; we estimate that sales
will amount to $16.6 billions. Similarly, the Sixth War Loan
is assumed for November-December, and our estimate of sales
1s $17.3 billions.
On this basis it will also be necessary to raise $8 b11-
lions in a direct bank borrowing program sometime during the
remainder of 1944. It is suggested that this take the. form
of weekly increases in Treasury bills beginning April 6,. pro-
viding $7 billions in all by December 31, and of new cash of
$1 billion in connection with the May certificate roll-over.
For the year as a whole it is estimated that nonbank
sources will absorb $38.1 billions of a total increase in the
public debt of $60.0 billions. This estimate is based on the
continuation of recent experience in security sales to nonbank
Regraded Unclassified
124
- 3 -
investors, as outlined in a separate memorandum on "Outlook
for Sources of Funds for Federal Borrowing During the Calendar
Year 1944". Bank sources will have to take up the remaining
$21.9 billions of Federal securities, unless sales to nonbank
investors can be Increasedover recent experience. Market pur-
chases will provide for more than half of the bank absorption,
with the remainder accounted for mainly by the suggested $8
billions direct bank financing program.
I. Financial Outlays
Financial outlays for the calendar year 1944 are estimated
at $68.9 billions, divided 88 follows:
(In billions
of dollars)
Deficit
56.6
Redemptions of savings bonds and
notes, and cash maturities
12.3
Total financial outlays
68.9
The derivation of these figures 18 discussed in the following
paragraphs. The figures include budgetary items and net Treasury
outlays to Government corporations.
The estimated deficit of $56.6 billions for the calendar
year 1s derived as follows:
Regraded Unclassified
125
- 4 -
(In billions
of dollars)
War expenditures
91.8
Interest
3.1
Other nonwar expenditures
4.3
Total expenditures
99.2
Net receipts 1/
42.6
Deficit
56.6
1/
Including Revenue Act of 1943.
These estimates are based principally on figures appear-
ing in the 1945 Budget, adjusted wherever necessary to reflect
changes made in the current analysis of Treasury cash position
prepared by the Under Secretary's office. The estimate of
receipts reflects the passage of the Revenue Act of 1943.
In addition to the deficit of $56.6 billions, it will
be necessary to cover redemptions of savings bonds and savinge
notes, and cash maturities of marketable securities, aggre-
gating $12.3 billions.
It 1s estimated that savings bond redemptions will
increase gradually on the basis of the past pattern, reaching
a total of $2.9 billions for the year. Redemptions of savings
notes are estimated at $7.1 billions redeemed for taxes and
$.7 billions redeemed for cash, making a total of $7.8 billions.
Cash maturities of marketable securities are estimated
at $1.6 billions. It is assumed that Treasury bills and
Unclassified
126
- 5 -
certificates of indebtedness will be rolled over as they
mature. In the case of certificates, incomplete exchanges
will call for an estimated $1.1 billions of cash payments.
It 1s assumed that notes maturing during the year and bonds
becoming callable for the first time will all be refunded by
exchange offers. This includes both direct and guaranteed
issues. Incomplete exchanges in the case of notes are expected
to amount to $.2 billion (including the full amount of the
Federal Public Housing Authority note which was paid off on
February 1), and in the case of bonds to another $.3 billion.
II. Blocking Out a Borrowing Program
As against financial outlays of $68.9 billions, it 1s
proposed that a borrowing program of $72.3 billions be planned
for. This would involve a net increase in the public debt of
$60.0 billions, which would cover the deficit and an increase
in the working balance of $3.4 billions required for reasons
discussed below. A separate memorandum on "Outlook for Sources
of Funds for Federal Borrowing During the Calendar Year 1944"
concludes that nonbank sources will absorb $38.1 billions of
the $60.0 billions increase in the debt, leaving $21.9 billions
to be absorbed by banks, 8.8 shown in the following table.
Figures for the calendar year 1943 are presented for purposes
of comparison.
Regraded Unclassified
127
- 6 -
1944
1943
(In billions of dollars)
Nonbank sources:
Individuals
16.0
13.2
Insurance companies and
savings banks
6.7
5.2
Other corporations and associa-
tions (including dealers and
brokers)
8.8
8.5
Federal agencies and trust funds.
4.8
4.7
State and local governments
1.8
1.2
Subtotal
38.1
32.7
Bank sources
21.9
24.4
Total
60.0
57.1
Note: Figures are rounded to nearest tenth of a billion
and will not necessarily add to totals.
The fact that bank sources will have to provide $22 b11-
lions of new funds during the calendar year may seem surpris-
ing at first thought. The sources of funds memorandum, how-
ever, analyzes the new funds accumulating in the hands of various
nonbank investors during the year as the counterpart of the
Federal deficit, and estimates the amounts of such funds which
may be expected to be placed in Federal securities on the basis
of the experience during our War Loans. If the bond selling
organization should sell considerably more securities than in
the recent past, the forecast of $38.1 billions of net absorp-
tion of Federal securities by nonbank investors may prove low.
It is to be hoped that nonbank sales may be considerably
increased from the estimates derived in the sources of funds
memorandum 80 that bank participation may be reduced, but it
1s not safe to plan on this possibility.
Regraded Unclassified
128
- 7 -
In blocking out a borrowing schedule for the calendar
year it is convenient to break the year into a number of
periods. These periods consist alternately of months in
which war loans are conducted and of months between loans.
It is assumed that the Fifth War Loan will be held in June-
July and that the Sixth War Loan will be held in November-
December. Accordingly, there are three periods with war
loans and two without them.
Table 1 analyzes the Treasury's financial situation in
these five periods, excluding direct bank financing other
than the limited participation associated with savings de-
posits. The table begins with the working balance at the
beginning of the period and closes with the working balance
at the end of the period. Gross borrowing within each period
is classified between different types or continuing sales of
securities on the one hand and war loans on the other; and
financial outlays are listed.
Sales in the Fourth War Loan reached $16.7 billions as
compared with the goal of $14 billions. It is assumed that
the Fifth War Loan will raise $16.6 billions and the Sixth
War Loan $17.3 billions, if the Fourth War Loan pattern 1s
followed.
It will be noted that the working balance shown in
Table 1 for the end of the Fifth War Loan will be insurficient
to carry the Treasury until the Sixth War Loan scheduled for
Regraded Unclassified
129
- 09 -
November-December. The estimates indicate that the working
balance will reach a negative figure of $1.2 billions by the
end of October, and will fall to about negative $3.6 billions
by mid-November, when the proceeds of the Sixth War Loan
might begin coming in.
Some of the funds required to maintain a satisfactory
balance might be obtained from nonbank investors by advancing
& portion of the Sixth War Loan program, as for example by
an offering of securities to corporations in August or
September. This would only be 8. temporary solution, however,
since the November-December sales would be correspondingly
reduced.
It 1e proposed instead that a direct bank borrowing
program be instituted to raise about $8 billions within the
next six or eight months. With such a program the working
balance could be maintained at a satisfactory level through
October and the first half of November until the proceeds of
the Sixth War Loan begin to come in.
In addition to this direct bank financing program,
banks will absorb securities through market purchases to the
extent of an estimated $13 billions, and will acquire about
$1 billion of securities through the limited purchases asso-
clated with their savings deposits. This would account for
Regraded Unclassified
130
- 9 -
the $22 billions of net absorption of Federal securities
by bank sources estimated for the calendar year.
The planning of the proposed $8 billions direct bank
financing program should be undertaken at once, since par-
ticular emphasis must be placed on the related problems
associated with bank reserves. These aspects are discussed
in "An Exploratory Memorandum to Facilitate Discussion of
Problems in Money Market Management During 1944". It is
concluded in the memorandum that bill offerings should be
increased in the near future in order to provide adequate
bills to the Federal Reserve Banke and commercial banks.
Accordingly, consideration should be given to the pos-
sibility of increasing bills by $100 millions a week for new
cash beginning April 6, and by $200 millions a week beginning
June 1. If the weekly increase of $200 millions 18 carried
through to the end of the year, a total of $7 billions of
new cash will have been raised from bills by December 31.
Most of these bills would, of course, be absorbed by bank
sources, BO the bill program would account for almost all of
the $8 billions direct bank financing program deemed desirable.
It is proposed that the additional $1 billion be raised by
increasing the May 1 certificate roll-over of $1.7 billions
to provide for additional cash of $1 billion from bank
sources.
Regraded Unclassified
131
- 10 -
Table 2 presents a revised analysis of the Treasury
financial situation during the calendar year on the basis
of the proposed bank program of $8 billions discussed above.
Under this program the working balance would drop to an
estimated $5.0 billions at the end of October, and to about
$3.0 billions on November 15 when the proceeds of the Sixth
War Loan would presumably begin to come in.
Regraded Unclassified
Daily Treasury Statement Basis
132
Table 1
Analysis of the Treasury Financial Situation, Calemdar Year 1944
Without Direct Bank Financing Program 1
(In billions of dollars)
Item
: Jan Mar June Aug. Nov. : :calemdar Total
Feb.
May
July
Oct.
Dec.
:
:
:
year
working balance, beginning of period
11.5
18.4
6.7
11.6
-1.2
11.5
Gross borrowing:
Contimuing sales of savings bonds
*
2.6
.1
2.6
.1
5.4
Continuing sales of savings notes
- 1.0
-
1.1
-
2.1
Security sales to Federal agencies
and trust funds
.9
1.1
is
1.1
1.0
5.1
Limited sales to commercial banks on
basis of savings deposits
-7
.1
.1
.1
.1
1.0
Miscellameous
.2
-.2
-
-
-
-
War loans
16.7
-
16.6
-
17.3
50.6
Total gross borrowing
18.6
4.7
17.6
5.0
18.4
64.3
Financial outlays:
Deficit
10.5
13.2
10.4
14.5
8.0
56.6
Cash maturities of marketable issues
.2
.6
.1
.6
.2
1.6
Redemptions of savings bonds
.4
.7
-5
.8
.6
2.9
Redemptions of savings notes
.6
1.9
1.8
1.9
1.6
7.8
Total financial outlays
11.7
16.4
12.7
17.7
10.3
68.9
Working balance, end of period.
18.4
6.7
11.6
-1.2
7.0
7.0
Working balance, November 15
-3.6
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: Figures are rounded to the nearest tenth of a billion and will not
necessarily add to totals.
.
Less than $50 millions.
Other than limited bank participation associated with savings deposits.
(n)
Principally increase in trust fund cash during January - February which
is assumed to be invested in Federal securities during March - May.
Regraded Unclassified
133
Daily Treasury Statement Basis
Table 2
Analysis of the Treasury Financial Situation, Calendar Year 1944
Assuming Direct Bank Financing Program of $8 Billions
(In billions of dellars)
:
Total
Jan
Mar
June-
Aug
Nov.
Item
:calendar
Feb.
May
July
Oct.
Dec.
:
:
:
:
year
Working balance, begianing of period.
11.5
18.4
8.5
15.2
5.0
11.5
Cross borrowing:
Continuing sales of savings bonds
*
2.6
.1
2.6
1
5.4
Continuing sales of savings notes
- 1.0
-
1.1
-
2.1
Security sales to Federal agencies and
trust funds
.9
1.1
.9
1.1
1.0
5.1
Limited sales to commercial banks on
basis of savings deposits
.7
.1
.1
.1
.1
1.0
Miscellaneous 2/
.2
-.2
-
-
-
I
16.7
-
16.6
Mar loans
- 17.3
50.6
Direct bank financing program: 1/
Treasury bills 3/
-
.8
1.8
2.6
1.8
7.0
Certificates of indebtedness
-
1.0
-
-
-
1.0
Total gross borrowing
18.6
6.5
19.4
7.6
20.2
72.3
Financial outlays:
Deficit
10.5
13.2
10.4
14.5
8.0
56.6
Cash maturities of marketable issues
.2
.6
.1
.6
.2
1.6
Redemptions of savings bonds
.4
-7
.5
.8
.6
2.9
Redemptions of savings notes
.6
1.9
1.8
1.9
1.6
7.8
Total financial outlays
11.7
16.4
12.7
17.7
10.3
68.9
Working balance, end of period
18.4
8.5
15.2
5.0
15.0
15.0
Working balance, November 15
3.0
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: Figures are rounded to the nearest tenth of a billion and will not
necessarily add to totals.
.
Less than $50 millions.
Other than limited bank participation associated with savings deposits.
Principally increase in trust fund cash during January - February which
18 assumed to be invested in Federal securities during March - May.
3/ Increase of $100 millions a week beginning April 6 and $200 millions a
week beginning June 1.
4/ Addition to certificate roll-over.
Regraded Inclassified
134
DRAFT OF MARCH 8, 1944
An Exploratory Memorandum to Facilitate Discussion
of Problems in Money Market Management During 1944
I. The Necessity for a Continued Increase in
the Credit Supply
As 1s indicated in an accompanying memorandum, # it will
probably be necessary for the Treasury Department to borrow
about $22 billions from commercial and Federal Reserve Banks
during the calendar year 1944. About $3 billions of this
would remain in the War Loan Account at the end of the year,
and so would result in no increase in the money supply in
the hands of the public. The remaining $19 billions of bank
borrowing, plus an estimated increase of $1 billion in bank
loans, would require a corresponding increase in the amount
of bank deposits and currency in the hands of the public.
Based on present trends, we estimate that a $20 bil-
lions increase in bank deposits and currency during 1944
would consist of about $5 billions of currency, $11 billions
of demand deposits, and $4 billions of time deposits in
commercial banks. During the same period, there may be &
Memorandum entitled "Developing a Borrowing Program for
the Calendar Year 1944."
Unclassified
135
- 2 -
reduction of $1 billion in monetary gold stock and an increase
of half a billion dollars in foreign deposits in the Federal
Reserve Banks. These projections for 1944 compare with esti-
mated 1943 figures 8.8 follows:
:
1943
:
:
1944
(Billions of dollars)
Bank holdings of United States securities*
+24.2
+22.0
War Loan Account
+1.8
+3.0
Bank loans
+.2
+1.0
Money in circulation
+5.0
+5.0
(Adjusted) demand deposits of all banks
+13.0
+11.0
Time deposits of commercial banks
+2.8
+4.0
Monetary gold stock
-.8
-1.0
Foreign deposits in Federal Reserve Banks
+.6
+.5
#
Including Federal Reserve Banks
The changes in the various factors which it 18 estimated
in the above table will take place in 1944 will require a
very substantial increase in the amount of bank credit during
the year. Unless this increase occurs readily and in such a
manner as to instil public confidence in its continuance 88
Regraded Unclassified
136
- 3 -
long as may be necessary, it will be difficult to effect the
necessary borrowing at the present pattern of rates.
The importance of & smooth increase in the credit supply
extends far beyond the $22 billions which may have to be bor-
rowed from banks this year. The rates paid on bank borrowing
largely set those paid on nonbank borrowing; and the entire
nonbank borrowing program 18, in turn, predicated upon confi-
dence in the stability of interest rates and, hence, in the
stability of the prices of Government securities. If this
confidence should be upset, the nonbank borrowing program
would, therefore, be seriously impaired and the amount of bank
borrowing would probably be increased rather than decreased.
Regraded I Inclassified
137
- 4 -
II. Adequacy of Credit at the Reserve Bank Level
In order to assure the continuance of a stable market
for Government securities, it is necessary that an adequate
volume of credit be available (1) at the Reserve Bank level,
and (2) at the member bank level.
Hitherto, it has been possible to concentrate attention
entirely upon the availability of credit at the member bank
level because the adequacy of credit at the Reserve Bank level
presented no problem. This year for the first time the
adequacy of credit at the Reserve Bank level will present a
problem also.
The limit on Reserve Bank credit is set by the statutory
requirement that the Reserve Banks must maintain a reserve in
gold equal to 40 percent of their note liabilities, and a re-
serve in gold or lawful money equal to 35 percent of their
deposit liabilities. While the two reserves thus required by
statute are separate and may be somewhat differently composed,
it has, for many years, been customary to combine them for sta-
tistical purposes in the computation of B. single ratio called
the Federal Reserve ratio, which is taken as the ratio of gold
and lawful money to note and deposit liabilities combined for the
twelve Federal Reserve Banks combined. This ratio has a legal
minimum value of about 37 or 38 percent, depending on the relative
Regraded Inclassified
138
- 5 -
amount of the notes and deposits of the Federal Reserve Banks.
Since the establishment of the Federal Reserve System,
the Federal Reserve ratio has been as low as 42.2 percent on
May 14, 1920, and as high as 91.3 percent on a number of 00-
casions in 1941.
Its course -- yearly since the establishment of the System
and monthly since the beginning of 1940 -- is shown on the
attached chart, where it will be seen that the ratio has been
falling fairly steadily since the spring of 1942. During the
year 1943, it fell 13.7 points -- from 76.3 to 62.6 percent.
If the changes in underlying monetary factors such as
bank deposits and money in circulation estimated earlier in
this memorandum take place in 1944 and no new monetary moves
(such 8.9 8. reduction in member bank reserve requirements or
The reserve ratios must, of course, be computed legally
for each Federal Reserve Bank separately. This caused
some difficulty in 1920 when the assets of the Reserve
Banks consisted principally of commercial paper, and BO
could not be shifted readily from bank to bank. At the
present time, however, when the earning assets of all the
Reserve Banks consist almost entirely of United States
securities, it is substantially accurate to treat the
System as a whole for the purpose of considering the legal
minimum of the ratio.
Regraded Unclassified
139
- 6 -
the issuance of Federal Reserve Bank notes) are made during the
year, it will be necessary for the Federal Reserve Banks to
increase their holdings of United States securities by $8.5 b11-
lions during 1944, in order to maintain the level of member bank
excess reserves existing at the end of 1943. This increase
would be required for the following purposes:
(Billions of dollars)
To offset the increase in money in circulation
5.0
To provide additional member bank required re-
serves
2.0*
To offset the loss of gold.
1.0
To offset the increase in foreign deposits at
the Federal Reserve Banks
.5
Total
8.5
*In computing this figure, account is taken of the fact
that not all of the deposit increase will be at member banks.
If the Federal Reserve portfolio should increase by $8.5
billions during 1944 and no other monetary moves were made, the
ratio would fall 14. points during the year and would stand at
48.2 percent at the close of the year. Such a decline might
occasion considerable skepticism in the market with respect to
the ability of the Treasury and the Federal Reserve System to
maintain the present level of money rates, unless the market were
convinced that adequate measures could and would be taken to
improve the ratio or check its decline before it reached the
statutory minimum.
Unclassified
140
- 7 -
The most fundamental question which arises with respect
to the planning of this year's financing 1s, therefore,
"Should any steps be taken during the year to improve the
Federal Reserve ratio?" The steps which could be 80 taken
under existing statutes and their likely effects will be
discussed in the next section of this memorandum.
it
Regraded I Inclassified
141
- OR -
III. Steps Which Could Be Taken Under Existing Statutes
To Improve the Federal Reserve Ratio
This section outlines five measures which might be
taken under existing statutes to improve the Federal Reserve
ratio. These five measures are as follows:
(1) Reduce member bank reserve requirements,
(2) Use gold in the Stabilization Fund,
(3) Monetize additional silver,
(4) Issue Federal Reserve Bank notes, and
(5) Include Federal Reserve notes as "lawful"
money in the 35 percent reserve required
for the deposits of the Federal Reserve
Banks.
These measures will be discussed briefly in the follow-
ing paragraphs:
(1) Reduce member bank reserve requirements. If member
bank reserve requirements were reduced during the
year to the statutory minima of 13, 10, and 7 per-
cent of demand deposits in banks in central reserve
cities, reserve cities, and other places, respectively,
and 3 percent of time deposits in all member banks,
the necessary increase in Federal Reserve holdings
of United States securities during the year would
be reduced from $8.5 billions to $2.4 billions, and
Inclassified
142
- 9 -
the reserve ratio at the end of the year would be
increased from 48.2 to 57.0 percent.
(2) Use gold in Stabilization Fund. If the $1 billion
estimated loss of monetary gold stock were restored
to the System from the gold holdings of the Stabi-
lization Fund, the necessary increase in the Federal
Reserve portfolio would be reduced from $8.5 billions
to $7.5 billions, and the reserve ratio at the end
of the year would be increased from 48.2 to 50.8
percent.
(3) Monetize additional silver. There are approximately
1.1 billion ounces of silver held in the Treasury at
cost value. If this silver were monetized at $1.29
an ounce and the resulting silver certificates
placed in circulation (thereby obviating a portion
of the necessary increase in Federal Reserve notes),
the required purchase of Government securities by
the Federal Reserve Banks would be reduced from $8.5
billions to $7.0 billions, and the reserve ratio at
the end of the year would be increased from 48.2 to
50.1 percent.
(4) Issue Federal Reserve Bank notes. The problem of
the Federal Reserve ratio could be permanently solved
143
- 10 -
if Federal Reserve Bank notes (which require only
a 5 percent gold reserve) were issued instead of
Federal Reserve notes (which require a 40 percent
gold reserve). There 1s legal authorization at
the present time for the issuance of an unlimited
amount of Federal Reserve Bank notes. A bill to
prohibit their issuance has passed the Senate,
however, and 18 now pending in the House Banking
and Currency Committee. Based on last year's ex-
perience, the issuance of Federal Reserve Bank
notes at this time would probably meet with wide-
spread public criticism.
If the Federal Reserve Bank notes were issued in the
same manner as a year ago -- 1.e., with a simultaneous
deposit of funde in the Treasury for their redemption --
their issuance would also obviate the necessity for
the purchase of Government securities by the Federal
Reserve Banks. This manner of issuance, however,
would doubtless increase the opposition which the
issuance of Federal Reserve Bank notes would arouse
in any event. If the notes were issued in the ordinary
manner - 1.e., as liabilities of the Federal Reserve
Banks and without the deposit of funds in the Treasury
for their redemption - it would still be necessary
144
- 11 -
for the Federal Reserve Banks to purchase $8.5
billions of Government securities during the year,
although the effect of such purchases on the re-
serve ratio would no longer need to be a matter
of concern.
(5) Include Federal Reserve notes as "lawful" money in
the 35 percent reserve required for the deposits of
the Federal Reserve Banks. Federal Reserve notes
are "lawful" money and could be counted as part
of the reserve behind the deposits of the Federal
Reserve Banks, but this has never been done in the
actual operation of the Reserve Banks. If it were
done and the reserve behind deposits came to con-
sist exclusively of Federal Reserve notes, it would
result in an "economy" of 60 percent in the gold
now required as a reserve behind Federal Reserve
deposits. If this device were used to the fullest
extent possible, it would still be necessary for the
Federal Reserve System to purchase $8.5 billions of
United States securities during 1944; but the reserve
ratio would rise 1.1 points during the year -- from
62.6 to 63.7 percent - and would decline much less
in 1945 than would otherwise be the case. The
use of this device, however, would probably result
in considerable adverse criticism.
145
- 12 -
IV. Further Consideration of the Advisability of
Action to Improve the Federal Reserve Ratio
In the preceding section, five types of measures which
might be taken singly or in combination under existing stat-
utes to improve the Federal Reserve ratio were outlined.
Two of these measures -- the issuance of Federal Reserve
Bank notes or the counting of Federal Reserve notes as part
of the reserve behind deposits in the Federal Reserve Banks ---
would probably cause such oriticism if taken during the
present year as to more than offset any beneficial effects
which they might have on market psychology by improving
the Federal Reserve ratio. Two other of the measures --
the use of gold in the Stabilization Fund and the mone-
tization of additional silver -- would have only a limited
efficacy in improving the ratio, and would probably also
cause considerable criticism - probably more than sufficient
to offset their beneficial effects on the ratio.
The remaining measure -- a reduction in member bank
reserve requirements - would appear, therefore, to be the
only feasible one for improving the reserve ratio during the
present year without securing new legislation.
146
- 13 -
There are a number of reasons in the field of central
banking policy for believing that a reduction in member bank
reserve requirements would be undesirable, provided that
the necessary additions to the supply of member bank credit
throughout the entire war period can be otherwise supplied.
We do not believe that these reasons are sufficiently impor-
tant, however, for discarding this instrument if its use
would make a genuine contribution to the problem of maintain-
ing the confidence of the market in the stability of the
present pattern of interest rates. The question then is
whether the substitution of a reduction in member bank reserve
requirements for a portion of the necessary $8.5 billions
increase in the Federal Reserve portfolio during 1944 would
increase this confidence.
It is important to note in this connection that the
adequacy of member bank credit during 1944 is not directly
involved in this decision. The necessary addition to member
bank credit during 1944 can be provided by the purchase of
Government securities by the Federal Reserve Banks as well
as by the reduction of reserve requirements. The question
is whether confidence in the continued adequacy of the member
bank credit base in future years would be promoted by an
improvement in the Federal Reserve ratio secured at the
expense of a reduction in member bank reserve requirements.
147
- 14 -
As a statistical background for the consideration of this
question, the following table shows the amount of Government
securities which it would be necessary for Federal Reserve
Banks to purchase during 1944, and the Federal Reserve ratio
at the end of the year under four different assumptions with
respect to member bank reserve requirements. The first of
these assumptions is the continuance of existing requirements,
and the last is the reduction of requirements to the statutory
minima.
:
Necessary Federal
Federal Reserve
Member bank reserve
:
requirements
Reserve purchases
ratio at end
:
of U. S. securities
of the year
(Percent)
(Billions of dollars)
(Percent)
20-20-14-6
8.5
48.2
18-16-12-5
6.4
50.9
15-13-10-4
4.4
53.8
13-10-7-3
2.4
57.0
As appears from the above table, if reserve requirements
were reduced during the year to the statutory minima, the
necessary purchases of United States securities by the Reserve
Banks during the year would be only $2.4 billions instead of
$8.5 billions; and the reserve ratio at the end of the year
148
- 15 -
would be 57.0 percent, instead of only 48.2 percent, as it
would be if reserve requirements were not reduced. The volume
of credit at the member bank level would be the same in either
case.
It would appear at first sight, therefore, that a reduc-
tion in member bank reserve requirements would bolster the
confidence of the market in the ability of the Treasury and
the Federal Reserve System to maintain the existing stability
of money rates. This appearance may be illusory, however,
since the market regards the potentiality of reduction in
member bank reserve requirements as part of the "ammunition"
which the monetary authorities have on hand for controlling
interest rates, and might view a ratio of 57.0 percent with
this ammunition all spent as no better than a ratio of
48.2 percent with the ammunition still in reserve. It seems
to us that the question of reducing member bank reserve re-
quirements in 1944 must be decided primarily in the light of
the market's probable reaction on this point.
If member bank reserve requirements are not reduced, the
reserve ratio will fall to about 48.2 percent at the close of
the year. Such a fall in the ratio will make it especially
imperative that excess reserves at the member bank level
should be fully maintained (the maintenance of such reserves
149
- 16 -
is provided for in the $8.5 billions of necessary Federal
Reserve purchases of United States securities), and that the
Treasury and the Federal Reserve System should make it clear
to the market, by the manner of handling questions asked at
press conferences or otherwise, that adequate measures with
respect to the maintenance of the Federal Reserve ratio will
be taken when and if necessary.
Whether or not member bank reserve requirements are re-
duced this year, it will probably be necessary during the
next 12 months to take some more permanent action with re-
spect to the Federal Reserve ratio, such as the issuance of
Federal Reserve Bank notes or the elimination (by legis-
lation) of all reserve requirements applying to the central
bank.
Regraded Unclassified
150
- 17 -
V. Selection of Securities for the 1944 Bank
Financing Program
As has been previously developed in this memorandum and
in an accompanying memorandum,* it will probably be necessary
for the Treasury to borrow $22 billions from commercial and
Federal Reserve Banks during the calendar year 1944. Unless
member bank reserve requirements are reduced during the year,
about $8.5 billions of this amount will be borrowed by means
of securities absorbed by the Federal Reserve Banks and the
remaining $13.5 billions by means of securities absorbed by
commercial banks.
A reduction in member bank reserve requirements during
the year would not change the total required borrowing of
$22 billions from commercial and Federal Reserve Banks com-
bined, but would increase somewhat the commercial bank portion
and decrease somewhat the Federal Reserve Bank portion of the
total. The bank borrowing program developed during the re-
mainder of this section is that which would be required in
the event that member bank reserve requirements are not de-
creased and would have to be appropriately adjusted to allow
for any decrease in member bank reserve requirements which
may take place.
The bulk of the $8.5 billions of securities to be acquired
by the Federal Reserve Banks, if member bank reserve requirements
Memorandum entitled "Developing a Borrowing Program for the
Calendar Year 1944".
151
- 18 -
are not decreased, ought to consist of Treasury bills, as
these highly-liquid low-yielding securities are ideally
suited for a central bank portfolio. This is especially true
in the present case as $6.0 billions of the total of $8.5
billions of estimated purchases by Federal Reserve Banks would
be for the purpose of offsetting an increase of money in
circulation and a decrease in monetary gold stock.
It would not be practical, however, to plan on the entire
increase in the Federal Reserve portfolio consisting of bills.
Ample leeway must be provided for the Federal Reserve Banks to
acquire other securities for the purpose of clearing up tempo-
rary weaknesses (1.e., weaknesses caused by other factors than
the need for additional reserves) in the yield curve, and to
provide "ammunition" for possible future adjustments of the
yield curve in the opposite direction.
Giving weight to these considerations, it would seem
reasonable to estimate that the increase in the Federal Reserve
portfolio during 1944, in the absence of a reduction in reserve
requirements, would consist of $6.0 billions of bills, $1.5
billions of certificates, $0.5 billions of notes, and $0.5
billions of bonds. This estimated distribution of the increase
in the Federal Reserve portfolio during 1944 is compared with
the actual increase during 1943 in the following table:
152
- 19 -
1943-Actual : 1944-Estimated
(In billions of dollars)
Bills
+5.8
+6.0
Certificates
+1.4
+1.5
Notes
-.7
+.5
Bonds
-1.2
+.5
Total
+5.4
+8.5
Note: Figures do not necessarily add to totals due
to rounding.
The next thing to consider is the appropriate distribu-
tion among classes of securities of a $13.5 billions increase
in commercial bank holdings of Government securities in 1944.
The primary consideration in determining this distribution
is the maintenance of the liquidity of the banking system
at a level at least as high as that which existed at the end
of 1943. The following table shows how such an increase in
commercial bank holdings of Government securities in 1944
would have to be distributed (1) in order to maintain the
same relationship between holdings of bills, certificates,
notes, and bonds as existed at the end of 1943, and (2) in
order to distribute the increase in total Government security
holdings in 1944 among these classes of securities in the
same manner as the increase in commercial bank portfolios
153
- 20 -
was distributed during the calendar years 1942 and 1943. The
last column of the table shows the mean between these two
distributions.
Hypothetical Distribution by Classes of Securities
of the Increase in Commercial Bank Holdings of
United States Securities During the Calendar Year 1944
:
:
Based on
:
Based on
:
December 31, 1943
1942-43
:
Mean
distribution
increase
:
:
:
(Billions of dollars)
Bills
+1.1
+1.4
+1.2
Certificates
+3.1
+4.8
+4.0
Notes
+2.1
+1.2
+1.6
Bonds
+7.2
+6.1
+6.7
Total
+13.5
+13.5
+13.5
Combining the mean column in the above table with the
distribution of the increase in the Federal Reserve portfolio
previously developed, a distribution of the entire $22
billions of Government securities to be absorbed by commercial
and Federal Reserve Banks during 1944 may be arrived at as
shown in the following table. This distribution 1s, of course,
based on the assumption of no decrease in member bank reserve
154
- 21 -
requirements during the year and would have to be adjusted
appropriately should such a decrease be decided upon.
:
Federal
:
:
:
Reserve
:
Commercial
:
Total
:
Banks
:
banks
:
:
:
:
(Billions of dollars)
Bills
6.0
1.2
7.2
Certificates
1.5
4.0
5.5
Notes
.5
1.6
2.1
Bonds
.5
6.7
7.2
Total
8.5
13.5
22.0
It 1s clear from the above table that, unless member
bank reserve requirements are going to be radically reduced
during the year, early action is required with respect to
increasing the outstanding amount of Treasury bills. More-
over, even if such a reduction is contemplated, a substantial
bill program would still be required. The $7 billions bill
program suggested in an accompanying memorandum calls for an
increase of $100 millions a week in the outstanding amount
of bills commencing on April 6 and of $200 millions a week
commencing on June 1.
Attachment
155
RATIO OF RESERVE HELD TO COMBINED DEPOSIT
AND NOTE LIABILITIES OF FEDERAL RESERVE BANKS
PERCENT
PERCENT
PERCENT
End of Year
Endef Month
110
110
110
100
100
100
90
90
90
80
80
80
70
70
70
60
60
60
50
50
50
40
40
40
30
30
30
20
20
20
10
10
10
0
1914
0
o
I9
24
29
34
39
44
1940
1941
1942
1943
1944
Office of the Secretary of the Treasury
Division of Research and Statistics
F-329
Regraded Unclassified
156
Draft of March 8, 1944.
Outlook for Sources of Funds for Federal Borrowing
during the Calendar Year 1944
A separate memorandum entitled "Developing a Borrowing
Program for the Calendar Year 1944" develops estimates of
receipts, expenditures, and the Federal deficit for the
calendar year. In that memorandum the deficit for the
calendar year 1s estimated at $56.6 billions, derived 8.8
shown below. The figures include both budgetary items and
net Treasury outlays to Government corporations.
(In billions
of dollars)
War expenditures
91.8
Nonwar expenditures
7.5
Total expenditures
99.2
Net receipts
42.6
Deficit
56.6
Note: Figures are rounded to nearest tenth of a billion
and will not necessarily add to totals.
1/ Including Revenue Act of 1943.
In planning a net borrowing program of the magnitude of
over $56 billions, it 18 necessary to bring together all of
the available information on the probable nonbank funds
which will become available during the year for the pur-
chase of Federal securities. This means that a searching
Regraded Unclassified
157
- 2 -
analysis must be made of the income producing activities of
the country, in order to trace the flow of incomes to the
broad groups of individuals and business receiving them.
The disposition of these incomes 8.8 between (1) tax payments
and amounts spent for goods and services, and (2) liquid sav-
ings and accumulations, is the final step before estimates of
the net absorption of Federal securities by investor groups
can be made.
This memorandum presents such an analysis of income for
the calendar year 1944. The analysis is divided into two
parts, as follows: (1) Value of production and gross income
flow, and (2) Liquid savings placed in Federal securities by
the various investor groups. It should be understood at the
outset that some of the data needed for the present analysis
are not complete. It has been necessary to fill in occasional
details with estimates which are fairly indicative of the
general magnitudes involved even though based on incomplete
underlying information.
I. Value of Production and
Gross Income Flow
The gross national product - or total output of goods
end services during the calender year 1944 18 tentatively
estimated at $197.7 billions. In Table 1, below, this total
output is classified by purchasers, namely, the Federal Govern-
ment, State and local governments, and private purchasers.
Regraded Unclassified
158
- 3 -
Table 1. Gross National Product, Classified
by Purchasers
Calendar Year 1944
(In billions of dollars)
1. Purchases by Federal Government:
a. War
88.4
b. Nonwar
5.9
C. Total
94.4
2. Purchases by State and local governments
6.9
3. Purchases by individuals and business:
a. Capital goods
2.4
b. Consumers' goods and services
94.0
C. Total
96.4
4. Gross national product
197.7
Note: Figures are rounded to nearest tenth of a billion
and will not necessarily add to totals.
The table shows that Federal purchases of goods and
services amounting to $94.4 billions are expected to account
for almost half of the total gross national product of $197.7
billions for the year. A total of $88.4 billions, or over
90 percent, of the Federal Government's purchases will go for
war purposes.
It 1s estimated that consumers' goods and services will
account for $94.0 billions of the output which 18 not absorbed
by the Federal Government. Private capital goods (including
construction, equipment, and increases in the volume of busi-
ness inventories) will account for another $2.4 billions.
The remaining $6.9 billions represents estimated purchases
Regraded Unclassified
- 4 -
159
of goods and services by State and local governments.
It will be noted that the estimate of $94.4 billions for
Federal Government purchases of goods and services 18 $4.8
billions less than the $99.2 billions total of estimated
Federal expenditures, cited in the table at the beginning
of this memorandum. The $94.4 billions represents only those
payments which are made in return for domestic goods and
services. In addition, Federal Government expenditures for
the calendar year include: (1) $3.1 billions paid out in
the form of pensions, relief, and dependency allowances, which
add to the current income stream but do not reflect the cur-
rent production of goods and services, and (2) $1.7 billions
of miscellaneous items, the payments for which do not contri-
bute to the current income stream. These latter items include
payments made outside the country for goods and services pro-
duced sbroad, purchases of existing assets here at home, and
prepayments on war contracts.
The production of $197.7 billions of goods and services
during the calendar year will result in the distribution of
8 like amount of money incomes. Governmental payments for
pensione, relief, and dependency allowances will add another
$3.7 billions to the consumer income stream. Of this amount,
$3.1 billions will come from the Federal Government, 88 noted
in the preceding paragraph, and $.5 billions will come from
State and local governments. The resulting over-all income,
Regraded Unclassified
160
- 5 -
which may be called the gross income flow, will amount to
an estimated $201.4 billions for the calendar year, 88 shown
in Table 2.
Table 2. Gross National Product and Other
Income Producing Factors
Calendar Year 1944
(In billions of dollars)
1. Gross national product
197.7
2. Governmental payments for pensions,
relief, and dependency allowances:
&, Federal Government
3.1
b. State and local governments
.5
3.7
3. Gross income flow
201.4
Note: Figures are rounded to nearest tenth of a billion
and will not necessarily add to totals.
Part of the gross income flow is diverted by business
for various purposes, and the remainder results in income pay-
ments to individuals. For the calendar year 1944, it 16
estimated that the gross income flow of $201.4 billions will
be divided between $47.4 billions diverted by business, $152.8
billions of income payments to individuals, and $1.2 billions
which cannot be allocated to either of these groups because
of insufficient date.
These categories are further anelyzed in Table 3. The
income diverted by business consiste of: (1) current allow-
snces for depreciation, depletion, and other business reserves,
Regraded Unclassified
161
- 6 -
(2) liabilities for direct texes on corporations and for
indirect taxes, (3) employment taxes less social insurance
benefits, and (4) corporate retsined earnings. Net income
from unincorporated business 18 included in income payments
to individuals, in line with the Commerce Department practice
for national income purposes. Similarly, throughout this
memorandum, individuals are defined to include partnerships,
personal trust accounts, and unincorporated business.
Table 3. Gross Income Flow
Classified by Major Recipients
Calendar Year 1944
(In billions of dollars)
1. Diverted by business:
8, Current allowances for business reserves 10,6
b. Business tax liabilities:
(1) Direct taxes on corporations
15.3
(2) All indirect taxes
13.2
c. Employment taxes less benefits
3.4
d, Corporate retained earnings
4.8
e, Total
47.4
2. Income payments to individuals:
a, Wages and salaries
108.0
b. Net income from unincorporated business
(1) Farm
13.5
(2) Other
11.6
C. Dividends and interest
10.8
d. Rents and royalties
3.7
e. Other income, including pensions, relief,
and dependency allowances
5.2
f. Total
152.8
3. Unallocated
1,2
4. Gross income flow
201.4
Note: Figures are rounded to nearest tenth of 8 billion and
will not necessarily add to totals.
Regraded Unclassified
162
- 7 -
The lower part of Table 3 shows that wages and salaries,
estimated at $108.0 billions, account for over two-thirds of
total income payments to individuals during the current
calendar year. Net income from unincorporated business (both
farm and non-farm), dividends and interest, rents and royalties,
and other income (including pensions, relief, dependency allow-
ances, and social insurance benefits, make up the remainder of
the estimated $152.8 billions of income payments to individuals
during 1944.
The next step in the analysis of the sources of funds for
Federal borrowing 18 an examination of the broad categories
of income in Table 3 to discover how much is spent, how much
is paid out in taxes, and how much 18 saved. Table 4 presents
this analysis for the calendar year 1944.
Regraded Unclassified
163
- 8 -
Table 4. Uses Made of Gross Income Flow
Calendar Year 1944
(In billions of dollars)
:
:
: Liquid :
:
:
: savings : Total
: Spendings : Taxes: and : income
:
:
:accumu- : flow
:
:
:lations :
1. Income diverted by
business:
8. Purchases of capital
goods.
1.8
-
-
b. Business taxes paid:
(1) Direct taxes on
corporations
-
15.6
-
(2) All indirect
taxes
-
13.1
-
C. Employment taxes
less benefits
-
3.4
-
d. Liquid corporate
accumulations
-
-
13.5
e. Total
1.8
32.1
13.5
47.4
2. Income payments to
individuals:
8, Consumers' spendings
94.6
-
-
b. Direct taxes paid by
individuals
I
20.8
-
C. Liquid savings of
individuals
-
- 37.4
d. Total
94.6
20.8
37.4
152.8
3. Unallocated accumulations
-
-
1.2
1.2
4. Gross income flow
96.4
52.9
52.1
201.4
The table shows that $96.4 billions of the gross income
flow is used for the purchase of goods and services by business
and individuals. A total of $52.9 billions 18 paid out in
Regraded Unclassified
164
- 9 -
taxes, and private liquid savings and accumulations account
for the remaining $52.1 billions.
The total for taxes must in turn be analyzed to determine
how much is spent and how much goes into liquid accumulations.
Table 5 provides such an analysis of spendings and savings for
three governmental categories, namely, State and local govern-
ments, the social insurance system (which 18 viewed 88 a sepa-
rate group in the present analysis) and the Federal Government.
Table 5. Uses Made of Taxes Paid from the
Gross Income Flow
Calendar Year 1944
(In billions of dollars)
:
: Liquid :
:
: savings : Total
: Spendings: and :
taxes
:
:accumu- :
:
: lations :
1. State and local governments:
8, Purchases of goods and
services
6.9
-
b. Pensions and relief
.5
-
c. Liquid surpluses
-
2.4
d. Total
7.5
2.4
9.9
2. Social insurance funds:
8, Current accumulations
-
3.2
3.2
3. Federal Government:
a. Purchases of goods and
services
94.4
-
b. Pensions, relief, and
dependency allowances
3.1
-
C. Deficiency
-
-57.7
d. Total
97.5
-57.7
39.8
4. Total.
105.0
-52.1
52.9
Note: Figures are rounded to nearest tenth of 8. billion and
will not necessarily add to totals.
Regraded Unclassified
165
- 10 -
The table shows that State and local governments will
have liquid surpluses of $2.4 billions and that social insur-
ance funds will have current accumulations of $3.2 billions.
The Federal Government, on the other hand, will be paying out
far more on expenditures contributing to the gross income
flow than will be received in taxes from the gross income flow.
The excess spending of $57.7 billions for the Federal Govern-
ment 1s labeled in the table 88 8 "deficiency", a term
selected for convenience to represent the Federal Government's
lack of balance in connection with the gross income flow.
The Federal deficiency of $57.7 billions shown in Table 5
is slightly higher then the Federal deficit of $56.6 billions
referred to at the beginning of this memorandum. The differ-
ence represents Federal operations not reflected in the gross
income flow. Federal receipts not arising from the current
income stream are estimated at $2.8 billions, mostly resulting
from contract renegotiation. Federal expenditures not con-
tributing to the flow of income are estimated at $1.7 billions.
There 18 thus a net excess of $1.1 billions of receipts in
this category, which explains the fact that the Federal deficit
18 $1.1 billions lower than the Federal deficiency.
The Federal deficiency of $57.7 billions is exactly
matched by the total of liquid savings and accumulations made
Regraded
166
- 11 -
throughout the economy. Private liquid savings and accumula-
tions shown in Table 4 aggregate $52.1 billions, while Table 5
shows that current surpluses of State and local governments
amount to $2.4 billions and social insurance accumulations
total $3.2 billions. The sum of these items is $57.7 billions.
The figures thus bring out the fact that the Federal deficiency
18 matched by the liquid savings and accumulations made by
everybody else. Table 6 summarizes this relationship, and
itemizes the amounts of liquid savings and accumulations by
investor classes. The uses made of these funds by the various
classes of investors will be discussed in Part II of this
memorandum.
167
- 12 -
Table 6
Relation of Federal Deficiency to Current Liquid
Savings and Accumulations,
Calendar Year 1944
(In billions of dollars)
A. Federal Government:
B. Individuals, business, and State
and local governments:
1. Expenditures producing income
97.5
1. Gross income flow
201.4
2. Less: Taxes received from gross
2. Less:
income flow
39.8
a. Federal taxes paid
39.8
b. Spendings:
57.7
(1) Individuals and
3. Equals: Federal deficiency
business
96.4
(2) State and local
governments
7.5
(3) Total
103.8 143.7
3. Equals: Current liquid
savings and accumu-
lations
57.7
C. Recapitulation of current
liquid savings and accumulations:
Individuals
37.4
Corporations
13.5
State and local governments
2.4
Social insurance funds
3.2
Unallocated
1.2
Total
57.7
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: Figures are rounded to nearest tenth of a billion end will not necessarily add to totals.
Regraded Unclassifie
168
- 13 -
II. Liquid Savings Placed in Federal
Securities, by Investor Groups
In this section, liquid savings of the various investor
groups are further analyzed in relation to the amounts of
Federal securities absorbed. Data are presented covering the
experience in the calendar year 1943, and schedules are set
out for the calendar year 1944 based on the borrowing program
of $72.3 billions discussed in the separate memorandum en-
titled "Developing a Borrowing Program for the Calendar Year
1944." It is assumed that the Fourth War Loan pattern 1s to
be followed in the Fifth and Sixth Loans, If the sales
organization should sell considerably more securities than in
the recent past, the figures would of course need to be changed.
It is to be hoped that this will occur but for planning pur-
poses it is more prudent to assume assured performance.
The borrowing program is as follows:
(In billions
of dollars)
Continuing program:
Savings bonds
5.4
Savings notes
2.1
Security sales to Federal
agencies and trust funds
5.1
Limited sales to commercial banks
on basis of savings deposits
1,0
Total continuing program
13.7
War loans:
Fourth War Loan
16.7
Fifth War Loan (June-July)
16.6
Sixth War Loan (November-December)
17.3
Total war loans
50.6
8.0
Direct bank financing program
72.3
Total
Note: Figures are rounded to nearest tenth of a
billion and will not necessarily add to totals,
Regraded Unclassified
169
- 14 -
The two calendar years under consideration divide them-
selves into five financing periods, each period ending with
a war loan as follows:
January - April 1943
Second War Loan
May through October 16, 1943
Third War Loan
October 17, 1943 through February 1944 Fourth War Loan
March - July 1944
Fifth War Loan
August - December 1944
Sixth War Loan
The analysis which follows considers the financing situation
in these five periods.
It is important to keep in mind the fact that the 1944
financing is planned with three war loans in view, as compared
with only two in the preceding calendar year. Each war loan
succeeds in mopping up part of a large volume of funds which
has been accumulating since the preceding drive, 80 that the
timing of the drives as well as their number has a significant
effect on the figures for any given financing period. This
effect is particularly marked in the comparisons made in this
memorandum between the full calendar years 1943 and 1944, since
drives are scheduled for the beginning, the middle, and the
end of the current year, in sharp contrast with the timing of
the two war loans in 1943. Most of the better showing made by
the 1944 estimates of the net absorption of Federal securities
by the various groups of nonbank investors must be attributed
to the difference in timing in the war loan program for this year.
1/ Figures include the war loan carryover into May.
Regraded Unclassified
170
- 15 -
1. Individuals (including partnerships, personal trust
accounts and unincorporated business).
Table 7 shows estimates of the amount of liquid savings
made by individuals in each of the five financing periods under
consideration and for the full calendar years 1943 and 1944.
Savings invested in insurance, savings accounts, debt repay-
ment, and non-Federal securities are listed. The total of
these specified items is then subtracted and amounts received
by individuale from conversions of non-liquid assets are added
to arrive at "net savings available". This estimate represente
the new savings which are either invested in Federal securities
or placed in currency and checking accounts. The size of net
savings available varies in the different financing periods,
depending on the length of time involved as well as on the
basic factors associated with the savings of individuals.
The net absorption of Federal securities is tentatively
estimated at 50 percent of the net savings available in the
most recent period, the four and one-half months running from
October 17, 1943 through February 1944. The details are
brought out in Part B of Table 7, in which an analysis 18
made of the net absorption of Federal securities by individuals.
Securities other than bills are analyzed in terms of gross pur-
chases from the Treasury and of maturities, redemptions, and
market sales. Net changes in holdings of Treasury bills are
shown separately, because it is convenient to treat bills on
a net change basis rather than to analyze gross transactions.
Regraded Unclassified
- 16 -
171
Table 7
Individuals: Current Liquid Savings and Federal Sec
rities Absorbed
By Financing Periods, 1943-1944
(In billions of dollars)
:
1943
: 1943-44
--
1944
:
Total
: Jan.-: May- : Oct. 17-
**
Mar.- : Aug.- :calendar year
:April:Oct. 16:
Feb.
July
:
Dec.
:
1943
:
1944
À. Relation of current savings to Federal
securities absorbed:
1. Total liquid savings of individuals
11.5
14.4
13.6
15.0
15.6
32.8
37.4
2. Less:
a. Insurance:
(1) Private life insurance
1.1
1.4
1,2
1.4
1.4
3.2
3.3
(2) Federal insurance
.1
.5
.3
.6
.4
.8
1.0
b. Savings accounts:
(1) Savings banks
.3
.4
.4
.6
.6
1.1
1.2
(2) Commercial banks (time deposits)
"a"
1.2
1.1
1.7
1,8
2.9
3.8
(3) Postal savings
.1
.2
.2
.2
.2
.4
.4
0. Debt repayment
.9
.4
.1
.3
.2
1.3
.7
d. Non-Federal securities
.1
-.1
-.1
-.1
#
-.1
-.1
e. Total
3.5
4.0
3.1
4.7
4.5
9.5
10.4
3. Plus: Conversions of non-liquid assets,
etc.
.6
.9
.2
.3
.3
1.7
.6
4. Equals: Net savings available
8.7
11.3
10.7
10.6
11.3
25.0
27.6
5. Percent invested in Federal securities
65%
60%
50%
52%
55%
53%
58%
6. Net absorption of Federal securities
5.6
6.8
5.3
5.5
6.0
13.2
16.0
B. Analysis of net absorption of Federal
securities:
1. Securities other than bills:
a. Purchases from Treasury:
(1) War loans
3.2
5.4
5.3
5.1
5.8
8.5
16.2
(2) Continuing
3.1
3.8
2.0
2.5
2.5
8.9
5.0
(3) Total
6.3
9.1
7.3
7.6
8.3
17.4
21.2
b. Less: Redemptions and cash maturities
.6
1.4
1.4
1.4
1.6
3.0
3.4
0. Equals: Net acquisitions from Treasury
5.7
7.7
6.0
6.2
6.7
14.4
17.8
d. Market transactions
-.1
-.9
-.7
-.7
-.7
-1.3
-1.7
e. Net absorption other than bills
5.6
6.8
5.3
5.5
6.0
13.2
16.0
2. Bills (net change in holdings)
#
#
*
*
#
*
*
3. Net absorption of Federal securities
5.6
6.8
5.3
5.5
6.0
13.2
16.0
Memorandum item: Funds placed in currency and
checking accounts by individuals.
3.1
4.6
5.4
5.1
5.3
11.8
11.6
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.
+ Less than $50 millions.
Principally military insurance.
3/ Comprises principally sale of land and buildings to the Government or to corporations, and the
Including savings and loan association shares.
run-off of inventories of unincorporated business; includes also a minor amount of unallocated items.
172
- 17 -
For the October 17 - February period, the table shows
that gross purchases of securities other than bills consisted
of 15.3 billions during the Fourth War Loan and $2.0 billions
before the drive, making total gross purchases from the Treasury
of $7.3 billions. Redemptions and cash maturities of securities
other than bills are estimated at $1.4 billions and market sales
at $.7 billion, leaving $5.3 billions as the estimated net
absorption. Net changes in holdings of bills are negligible.
The estimated net absorption of 50 percent in the
October 17 - February period reflects a continued decrease in
this ratio. In the January - April period last year, the ratio
was 65 percent. In the May - October 16, 1943 period, it fell
to 60 percent. The further decline to 50 percent brings out
the continued tendency of individuals to place 8 large volume
of new savings in currency and checking accounts.
For the March - July financing period this year it is
assumed that the ratio will be increased slightly to 52 percent
with a further increase to 55 percent in the August - December
period. This would call for sales to individuals of $5.1 bil-
lions in the Fifth War Loan, and $5.8 billions in the Sixth Loan.
It is to be hoped that these estimates may be improved.
From the point of view of controlling inflationary forces, it
is discouraging to contemplate the further large increases in
Regraded Inclassified
173
- 18 -
currency and checking accounts in the hands of individuals
which will take place this year under the schedule worked out
in Table 7. For the year 8.8 a whole, the increase 18 esti-
mated at $11.6 billions, almost exactly the same as the figure
for the calendar year 1943.
2. Insurance companies
The volume of sales of securities to insurance companies
is largely determined by the amount of new savings of individ-
uals placed in life insurance. Table 8 shows estimates of
individuale' net investment in private life insurance during
the financing periods under consideration, in order to develop
estimates of the amount of Federal securities which may be
absorbed by insurance companies. In addition, Table 8 shows
the net amounts placed in Federal securities by insurance com-
panies through conversion of other assets, including the full
amounts invested in Federal securities by property insurance
companies.
Conversions of other assete to Federal securities by insur-
ance companies seem to be declining. The figures for the calendar
year summaries shown in the table obscure certain conversion
operations which have taken place at the time of the war loan
drives. As savings are placed in life insurance regularly and
war loan drives are held only intermittently, insurance
Regraded Unclassified
174
- 19 -
Table 8
Insurance Companies: Current Liquid Savings
Received and Federal Securities Absorbed
By Financing Periods, 1943 - 1944
(In billions of dollars)
:
1943
: 1943-44:
1944
:
Total
:Jan. : May- :Oct. :Aug. :calendar year
:April:Oct. 16: Feb. :July :Dec. : 1943 : 1944
A, Relation of current accumula-
tions to Federal securities
absorbed:
1. Liquid savings of individuals
received
1.1
1.4
1.2
1.4
1.4
3.2
3.3
2. Conversion of other assets
into Federal securities 1/.
.7
.2
.4
.3
.2
.5
1.4
3. Net absorption of Federal
securities
1.8
1.6
1.6
1.7
1.6
3.7
4.7
B. Analysis of net absorption of
Federal securities:
1. Securities other than bills:
a, Purchases from Treasury:
(1) War loans
2.4
2.6
2,1
2.2
2.1
5.0
6.4
(2) Continuing
.2
.1
*
#
#
.3
#
(3) Total
2.6
2.7
2.1
2.2
2.1
5.3
6.4
b. Less: Redemptions and
#
.1
*
#
*
cash maturities
.1
.1
0. Equals: Net acquisitions
from Treasury
2.5
2.7
2.1
2.2
2.1
5.2
6.4
d. Market transactions
-.7
-1.1
-.5
-.5
-.5
-1.6
-1.7
e. Net absorption other
than bills
1.9
1.6
1.6
1.7
1.6
3.6
4.7
#
#
*
#
#
#
#
2. Bills (net change in holdings)
3. Net absorption of Federal
securities
1.8
1.6
1.6
1.7
1.6
3.7
4.7
Office of the Secretary of the Treasury,
Division of Research and Statistics.
Note: Figures are rounded to nearest tenth of a billion and will not necessarily
add to totals.
.
Less than $50 millions.
1/ Including property insurance companies.
175
- 20 -
companies are obliged to invest these savings in other assets
(principally cash) prior to drives, converting them into
Federal securities during the drives. Therefore, calendar
year 1944 conversions appear relatively large simply because
there are three war loans scheduled, regardless of the
declining trend.
In the lower part of Table 8, estimates of the gross
operations of insurance companies in Federal securities and
the net absorption of Federal issues by these companies are
shown. It will be noted that the estimates reflect a sub-
stantial reduction in market sales of securities by insurance
companies in the October 17 - February period as compared
with the May - October 16 period of last year. It is assumed
that market sales in the next two war loan periods will hold
at approximately the level which prevailed in the period end-
ing with the Fourth War Loan.
Estimated sales to insurance companies in the Fifth War
Loan amount to $2.2 billions, as compared with $2.1 billions
in the Fourth War Loan. The estimate for the Sixth War Loan
is $2.1 billions.
3. Savings banks
In Table 9, the analysis which was applied to insurance
companies in Table 8 is carried through for savings banks.
Regraded
Unclassified
176
- 21 -
Table 9
Savings Banks: Current Liquid Savings Received and Federal
Securities Absorbed, by Financing Periods, 1943-1944
(In billions of dollars)
:
1943
: 1943-44 :
1944
:
Total
:Jan.- May- :Oot. 17-: Mar.- : Aug.- :calendar year
:April:Oct. 16: Feb. : July : Dec. : 1943 : 1944
A. Relation of current accumulations to Federal
securities absorbed:
1. Liquid savings of individuals
.3
.4
.4
.6
.5
1.1
1.2
2. Conversion of other assets into Federal
securities
.4
.3
.2
.2
.2
.5
.8
3. Net absorption of Federal securities
.7
-7
.7
.8
-7
1.5
2.0
B. Analysis of net absorption of Federal
securities:
1. Securities other than bills:
a. Purchases from Treasury:
(1) War loans
1.2
1.5
1.3
1.4
1.3
2.7
4.0
.1
.1
#
*
it
.2
.
$
(2) Continuing
(3) Total
1.3
1.6
1.3
1.4
1.3
2.9
4.0
#
#
#
#
*
*
b. Less: Redemptions and cash maturities
.1
C. Equals: Net acquisitions from Treasury
1.3
1.6
1.3
1.4
1.3
2.9
3.9
d. Market transactions
-.6
-.9
-.6
-.6
-.6
-1.4
-1.9
e. Net absorption other than bills
.7
.7
.7
.7
1.5
2.0
2. Bills (net change in holdings)
#
#
*
#
#
*
#
3. Net absorption of Federal securities
.7
.7
.7
.8
.7
1.5
2.0
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.
*
Less than $50 millions.
Regraded Unclassified
177
- 22 -
It seems likely that the rate at which individuals now
appear to be adding to their savings accounts will continue
during the remainder of the year. For 1944 as B. whole, it
18 estimated that deposits will increase by $1.2 billions, a
figure which compares with an increase of $1.1 billions in
the calendar year 1943. Conversion of other assets to Federal
securities 18 expected to be a minor factor during the remainder
of this year, even though, 8.6 in the case of insurance com-
panies, the calendar year figures alone obscure this trend
because of heavy conversions during war loan periods.
The lower part of Table 9 shows that the net absorption
of Federal securities by savings banks will continue at a
high level. Gross purchases of Federal securities will be
partially offset by a fairly high volume of market sales,
although it is estimated that such sales will be considerably
lower than the peak reached in the period ending with the
Third War Loan. Estimated savings bank purchases in the
Fifth War Loan amount to $1.4 billions or about the same 88
in the Fourth War Loan. Purchases during the Sixth War Loan
are estimated at $1.3 billions.
4. Other corporations and associations
This class of investors 1s made up of the large non-
financial corporate group, various associations such as build-
ing and loan associations, fraternal benefit societies and
eleemosynary institutions.
Regraded Unclassified
178
- 23 -
Table 10
Other Corporations and Associations: Current Liquid Accumulations
and Federal Securities Absorbed
by Financing Periods, 1943-1944
(In billions of dollars)
:
1943
: 1943-44:
1944
:
Total
:Jan.-: May- :Oct. 17-: Mar.- :Aug.- :calendar year
:April:Oct. 16: Feb. : July :Dec. : 1943 : 1944
A. Relation of current accumulations to Federal
securities absorbed:
1. Total liquid accumulations of corporations 1/
6.4
6.9
7.7
4.4
5.3
17.2
13.5
2. Percent represented by net absorption of
Federal securities
70%
61%
44%
47%
50%
48%
64%
3. Net absorption of Federal securities
4.5
4.2
3.4
2.1
2.6
8.2
8.6
B. Analysis of net absorption of Federal
securities:
1. Securities other than bills:
a. Purchases from Treasury:
(1)
War loans
5.0
7.0
6.7
6.6
7.1
12.0
20.4
(2) Continuing
1.8
1.9
1.1
1.3
1.3
4.8
2.5
(3) Total
6.8
8.9
7.8
7.9
8.4
16.8
23.0
b. Less: Redemptions and cash maturities
1.6
2.9
2.3
3.9
3.9
6.3
8.4
C.
Equals: Net acquisitions from Treasury
5.1
6.0
5.5
4.0
4.5
10.5
14.6
d.
Market transactions
-.6
-1.9
-2.0
-2.0
-2.0
-2.5
-6.0
e. Net absorption other than bille
4.5
4.1
3.5
2.0
2.5
8.0
8.6
2. Bills (net change in holdings)
#
.1
-.1
.1
.1
.3
#
3. Net absorption of Federal securities
4.5
4.2
3.4
2.1
2.6
8.2
8.6
Memorandum item: Liquid accumulations of corporations
not represented by net absorption of
Federal securities
1.9
2.7
4.3
2.3
2.6
8.9
4.9
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: * Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.
Less than $50 millions.
No data are available on the current liquid accumulations of associations, but they are
negligible in comparison with the accumulations of corporations.
179
- 24 -
Table 10 presents data on new liquid accumulations of
corporations and on the absorption of Federal securities by
the broader group of corporations and associations just
described. Liquid accumulations of corporations are continuing
at a high level although 8. slight downward trend 1s expected
as tax payments catch up with tax liabilities and as inventory
liquidations become less significant. For the calendar year
1944, corporate accumulations are estimated at $13.5 billions,
as compared with $17.2 billions for the calendar year 1943.
No separate figures are available on the accumulations of
associations, but the amounts involved are negligible in com-
parison with the figures for corporations.
Table 10 shows that net absorption of Federal securities
by corporations and associations 18 estimated at approximately
44 percent of the net accumulations of corporations alone in
the financing period ending with the Fourth War Loan. This
percentage 1s sharply reduced from the 61 percent shown in
the May - October 16 period last year, and compares even less
favorably with the 70 percent figure for January - April 1943.
The declining trend 16 presumably due in large part to the
fact that the early war loans were able to drew on certain
nonrecurring old accumulations.
For the March - July period this year, it 18 assumed
that corporations will invest 47 percent of their new funds
Regraded Unclassified
180
- 25 -
in Federal securities. This 1e increased to 50 percent in
the August - December period. Sales to corporations and
associations in the Fifth War Loan are estimated at $6.6 bil-
lions, and in the Sixth War Loan at $7.1 billions, These
figures compare with $6.7 billions of sales in the Fourth
War Loan.
Although statistics are not available on the other ways
in which corporations have used their liquid accumulations,
it is known that significant amounts have been spplied to the
reduction of corporate debt and to the improvement of the
working capital position. The totals for such items 8.8 a
group are shown in the memorandum item at the bottom of
Table 10.
5. Deslers and brokers
It is convenient to classify dealers and brokers
separately in this analysis, although most of their purchases
of securities represent temporary scquisitions which are
designed for ultimate sale to other investors, Purchases of
securities in the Fourth War Loan by dealers and brokers
amounted to $.4 billions 88 compared with about $.9 billions
each in the Second and Third War Loans. This reduction
reflected a conscious effort on the part of the Treasury to
reduce speculation and indirect bank participation in the
Regraded Unclassified
181
- 26 -
Table 11
Dealers and Brokers: Federal Securities Absobed
By Financing Periods, 1943-1944
(In billions of dollars)
:
1943
: 1943-4:
1944
:
Total
: Jan. May- :Oct. 17: Mar. - : Aug.- calendar year
: April:Oct. 16: Feb. : July : Dec. : 1943 : 1944
1. Securities other than bills:
a, Purchases from Treasury:
(1) War loans
.9
.9
.4
.5
.5
1.8
1.4
(2) Continuing
.4
.1
#
*
*
.5
#
(3) Total
1.3
1.0
.4
.5
.5
2.3
1.4
*
#
#
#
#
*
#
b. Less: Redemptions and cash maturities
C. Equals: Net acquisitions from Treasury
1.3
1.0
.4
.5
.5
2.3
1.4
d. Market transactions
-.7
-.7
-.8
-.5
-.5
-2.1
-1.2
e. Net absorption other than bills
.6
-.4
#
#
.2
.2
.2
2. Bills (net change in holdings)
#
*
#
#
#
#
#
3. Net absorption of Federal securities
.6
.2
-.4
#
#
.2
.2
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.
*
Less than $50 millions.
The published figure was $.5 billions, which excluded $.4 billions distributed or earmarked by
dealers and brokers for distribution to nonbank investors.
182
- 27 -
Fourth War Loan, For the present analysis, it 18 assumed
that dealers and brokers will purchase about $.5 billions in
each of the next two war loans, 88 1s indicated in Table 11.
Market sales by dealers and brokers have sometimes been
less than acquisitions from the Treasury 80 that net increases
in holdings were shown, while at other times market sales
more than balanced new purchases. For the remainder of this
year it 18 assumed that market sales will exactly equal new
purchases from the Treasury. As shown in the table, only
negligible changes in bill holdings by dealers and brokers
have occurred during full financing periods, although under-
lying data indicate that weekly fluctuations have been rather
severe.
6. State end local governments
It was pointed out earlier in this memorandum that State
and local governments are accumulating substantial surpluses
as their revenues continue to exceed expenditures during the
wartime period. Table 12 shows the amounts of these surpluses
in the five financing periods under consideration and compares
them with the net absorption of Federal securities by these
investors. A significant proportion of the new surpluses 18,
of course, used to reduce State and local debts, as evidenced
by the fact that State and local securities outstanding are
Regraded Unclassified
183
- 28 -
Table 12
State and Local Governments: Current Surpluses and Federal
Securities Absorbed
By Financing Periods, 1943-1944
(In billions of dollars)
:
1943
:1943-44 :
1944
:
Total
:Jan.-: May- :Oct. 17-: Mar.- : Aug.- :calendar year
:April:Oct. 16: Feb. : July : Dec. : 1943 : 1944
A. Relation of current accumulations to Federal
securities absorbed:
1. Liquid surpluses
1.2
1.0
1.0
1.1
.6
2.4
2.4
2. Social insurance accumulations
#
#
#
*
#
#
#
3. Total current accumulations
1.2
1.0
1.0
1.1
.6
2.5
2.5
4. Less: Surpluses used to retire outstanding
debt or increase cash balances
.7
.3
.3
.4
.2
1.3
.6
5. Net absorption of Federal securities
.5
.7
.7
.7
.4
1.2
1.8
B. Analysis of net absorption of Federal securities:
1. Securities other than bills:
a. Purchases from Treasury:
(1) War loans
in
5
.8
.8
.8
.5
1.3
2.1
*
*
#
#
*
*
#
(2) Continuing
.5
.8
.8
.8
.5
1.3
2,1
(3) Total
#
#
#
#
#
#
#
b. Less: Redemptions and cash maturities
.5
.8
8
.8
C. Equals: Net acquisitions from Treasury
.5
1.3
2.1
*
-.1
-.1
-.1
-.1
-.1
-.2
d. Market transactions
e. Net absorption other than bills
.5
.7
.7
.7
.4
1.2
1.8
#
#
#
*
#
#
#
2. Bills (net change in holdings)
3. Net absorption of Federal securities
.5
.7
.7
.7
.4
1.2
1.8
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.
#
Less than $50 millions.
184
- 29 -
estimated to have decreased by approximately $1 billion
in the last fiscal year.
Gross purchases of Federal securities in the Fourth
War Loan by State and local governments amounted to $.8
billion and are forecast at $.8 billion for the Fifth War
Loan and $.5 billion for the Sixth War Loan.
7. Federal agencies and trust funds
Purchases of Federal securities by Federal agencies
and trust funds are not included in estimated sales in the
Fifth and Sixth War Loans. It is desirable, however, to
take account of the activities of this group of investors
in order to round out the entire financing picture.
Funds available for the purchase of Federal securities
are received by Federal agencies and trust funds from a
variety of sources, as is indicated in Table 13. First of
all, there are liquid savings of individuals invested in
Federal insurance. These comprise mainly military life
insurance but include interest on certain Federal trust
funds accumulated for the benefit of individuals. Individ-
uals' savings are also invested in postal savings deposits.
Further, there are net social insurance accumulations
Regraded Unclassified
- 30 -
185
Table 13
Federal Agencies and Trust Funds: Liquid Accumulations
Received and Federal Securities Absorbed
By Financing Periods, 1943-1944
(In billions of dollars)
:
1943
: 1943-44:
1944
Total
:Jan. :April:Oct. : May- 16: :Oct. 17-: Mar. - : Aug. - :calendar : year
Feb.
:
July
:
Dec.
:
1943
:
1944
A. Relation of current accumulations to Federal
securities absorbed:
1. Liquid savings received from individuals:
a. Federal insurance
.1
.5
.3
.6
.4
.8
1.0
b. Postal savings
.1
.2
.2
.2
.2
.4
.4
2. Social insurance accumulations
.8
1.5
1.4
1.0
1.4
2.9
3.2
3. Conversions of other assets of Federal
agencies and trust funds
.1
.4
.1
.1
.1
.6
.2
4. Net absorption of Federal securities
1.1
2.6
1.9
1.9
2.0
4.7
4.8
B. Analysis of net absorption of Federal securities:
1. Securities other than bills:
a. Purchases from Treasury:
(1) War loans 1/
.4
.7
#
-
-
1.1
#
(2) Continuing
1.1
2.4
2.0
2.0
2.1
4.5
5.1
(3) Total
1.5
3.2
2.0
2.0
2.1
5.6
5.1
b. Less: Redemptions and cash maturities
.2
.2
#
*
*
.4
#
0. Equals: Net acquisitions from Treasury
1.2
3.0
2.0
2.0
2.1
5.2
5.1
d. Market transactions
-.1
-.4
-.1
-.1
-.1
-.5
-.3
e. Net absorption other than bills
1.1
2.6
1.9
1.9
2.0
4.7
4.8
2. Bills (net change in holdings)
+
#
*
#
*
#
#
3. Net absorption of Federal securities
1.1
2.6
1.9
1.9
2.0
4.7
4.8
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.
*
Less than $50 millions.
Includes sales to Federal agencies whose investments are handled outside of the Treasury; these
sales have been included with sales to"other corporations and associations" in published reports
on the war loans.
186
- 31 -
as discussed in the first part of this memorandum, practically
all of which accumulate in Federal, rather than in State and
local, trust funds.
The various activities of certain Federal agencies also
result in further liquid accumulations. Under present con-
ditions, some Federal lending agencies are receiving sub-
stantial sums through the net repayment of loans made to
individuals and business. The conversion of other assets is
also adding to the available funds of these agencies.
For the calendar year 1944, it is estimated that total
funds available for the purchase of Federal securities by
Federal agencies and trust funds will amount to $4.8 billions,
almost the same as the total available in 1943. Practically
all of these funds will be invested in Federal securities
almost as they accrue. They may take the form of purchases
of special issues or of purchases of marketable securities,
but in one way or another virtually a 100 percent investment
may be expected.
8. Bank sources
Bank sources include commercial banks, which have not
been included in a war loan drive since the Second War Loan
in April 1943, and Federal Reserve Banks, which of
course do not buy securities directly from the Treasury.
Regraded Unclassified
187
- 32 -
Participation by bank sources in the Treasury's financing
program therefore has been occurring recently largely through
purchases in the market from other investors.
For the last two periods of this year, the financing
program discussed in the separate memorandum entitled "De-
veloping a Borrowing Program for the Calendar Year 1944"
envisages a direct bank financing program of $8 billions. A
program of this magnitude appears to be necessary because of
the fact that net absorption of Federal securities by non-
bank investors will fall far short of our borrowing require-
ments. For the calendar year, it is estimated that net
absorption by nonbank investors will aggregate $38.1 billions,
as shown in the following table. Figures for 1943 are shown
for comparison.
1944
1943
(In billions of dollars)
Nonbank sources:
Individuals
16.0
13.2
Insurance companies
4.7
3.7
Savings banks
2.0
1.5
Other corporations and
associations
8.6
8.2
Dealers and brokers
.2
.2
State and local governments
1.8
1.2
Federal agencies and trust
funds
4.8
4.7
Total nonbank sources
38.1
32.7
21.9
24.4
Bank sources
60.0
57.1
Total borrowing
Bank sources would thus absorb $21.9 billions of Federal
securities this year. It is estimated that about $13 billions
Regraded Unclassified
188
- 33 -
Table 14
Bank Sources: 1/ Federal Securities Absorbed,
by Financing Periods, 1943-1944
(In billions of dollars)
:
1943
: 1943-44:
1944
:
Total
:Jan.-: May- :Oct. 17-: Mar.- : Aug.- :calendar year
:April:Oct. 16: Feb. : July : Dec. : 1943 : 1944
1. Securities other than bills:
a. Purchases from Treasury:
(1) War loans
4.32/
-
-
-
-
4.3
-
(2) Continuing
1.3
5.9
1.0
1.2
.2
7.6
2.0
(3) Total
5.6
5.9
1.0
1.2
.2
11.8
2.0
b. Less: Redemptions and cash maturities
1.6
1.1
.3
.1
.1
2.9
.3
C. Equals: Net acquisitions from Treasury
4.0
4.8
.6
1.0
.1
8.9
1.7
d. Market transactions
2.8
5.9
4.9
4.5
4.4
9.4
13.1
e. Net absorption other than bills
6.8
10.8
5.5
5.5
4.6
18.3
14.9
2. Bills (net change in holdings)
3.4
2.9
.1
2.4
4.2
6.1
7.0
3. Net absorption of Federal securities
10.3
13.7
5.6
8.0
8.8
24.4
21.9
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.
Commercial banks and Federal Reserve Banks.
2/
Excluding bills.
189
- 34 -
will come from market purchases and approximately $1 billion
from limited purchases by commercial banks associated with
their savings deposits, leaving about $8 billions to be raised
from a direct bank financing program. Table 14 presents
estimates on the net new absorption of Federal securities by
bank sources as a group. The distribution of bank absorption
for 1944 between commercial banks and Federal Reserve Banks
is discussed in 8. separate memorandum entitled "An Exploratory
Memorandum to Facilitate Discussion of Problems in Money
Market Management During 1944".
9. Recapitulation
Table 15 brings together the information on transactions
in Federal securities by the various investor classes for the
calendar years 1943 and 1944, and shows the estimated net
absorption of the public debt by investor classes during these
years.
Regraded Unclassified
190
- 35 -
Table 15
Recapitulation of Transactions in Federal Securities, by Investor Classes
Calendar Years 1943-1944
(In billions of dollars)
:
Securities other than bills
:
:
:Less: e-:Equals: Net:
Bills
:
Net
Purchases
:
Net
:
from
demptions :acquisitions Market trans- :absorption
(net
:absorption
:
:
from
change in
of
: : Treasury
: and cash :
:
actions
:other than
:maturities:
Treasury
:
:
bills
holdings)
Federal
:
:securities
Calendar year 1943:
A. Nonbank sources:
1. Individuals
17.4
3.0
14.4
-1.3
13.2
#
13.2
2. Insurance companies
5.3
.1
5.2
-1.6
3.6
#
3.7
3. Savings banks
2.9
#
2.9
-1.4
1.5
*
1.5
4. Other corporations and
associations
16.8
6.3
10.5
-2.5
8.0
*
.3
8.2
5. Dealers and brokers
2.3
2.3
-2.1
.2
**
.2
6. State and local
governments
1.3
*
1.3
-.1
1.2
#
1.2
7. Federal agencies and
trust funds
5.6
.4
5.2
-.5
4.7
.
4.7
8. Total nonbank sources
51.5
9.8
41.8
-9.4
32.4
.4
32.7
1, Bank sources
11.8
2.9
8.9
9.4
18.3
6.1
24.4
C. Total
63.4
12.7
50.7
-
50.7
6.4
57.1
Calendar year 1944:
A. Nonbank sources:
1. Individuals
21.2
3.4
17.8
-1.7
16.0
#
16.0
2. Insurance companies
6.4
.1
6.4
-1.7
4.7
*
4.7
3. Savings banks
4.0
.1
3.9
-1.9
2.0
*
2.0
4. Other corporations and
associations
23.0
8.4
14.6
-6.0
8.6
*
8.6
5. Dealers and brokers
1.4
*
1.4
-1.2
.2
.2
6. State and local
governments
2.1
#
2.1
-,2
1.8
#
1.8
7. Federal agencies and
trust funds
5.1
*
-.3
4.8
#
5.1
4.8
8. Total nonbank sources.
63.2
12.0
51.2
-13.1
38.1
*
38.1
B. Bank sources
2.0
.3
1.7
13.1
14.9
7.0
21.9
C. Total
65.3
12.3
53.0
-
53.0
7.0
60.0
Office of the Secretary of the Treasury, Division of Research and Statistics.
Note: Figures are rounded to nearest tenth of a billion and will not necessarily add to totals.
Less than $50 millions.
191
March 10, 1944
10:45 a.m.
HMJr:
Hello, Ted.
Ted
Gamble:
I wanted to ask you if the 22nd would be as
agreeable to you as the 20th because of the
availability of several of our Chairmen.
HMJr:
Well, it's all right with me but I just told
Bell you were having it on the 21st, 80 I wish
you'd call him because he wants the Bankers in.
G:
Yes.
HMJr:
So, when you hang up from me, will you call him,
please?
G:
I'll call him, and that's the 22nd, Mr. Secretary.
That's Wednesday instead of Monday.
HMJr:
That's all right.
G:
All right, sir. Now, the second thing I wanted
to ask you if you have a moment
HMJr:
Yeah.
G:
is if you want to give us the green light on this
Illinois?
HMJr:
Oh, you'll have to see me about that.
G:
All right, sir.
HMJr:
Yeah.
G:
All right.
HMJr:
You'll have to see me about that.
G:
Fine.
HMJr:
All right.
G:
All right.
Regraded Unclassified
192
Mr. Pehle read 3/10/44 in Miss Chauncey's
office, per the Secretary's instructions.
March 10, 1944 193
10:46 a.m.
HMJr:
Hello.
Sam
Rosenman: Hello.
HMJr:
Sam?
R:
How are you?
HMJr:
I'm fine. There'll be a War Department -- new
War Department picture here tonight at nine
o'clock.
R:
Fine. Can I come?
HMJr:
You may.
R:
Can I bring Bobby?
HMJr:
Sure.
R:
Good. Thanks very much.
HMJr:
I thought that was a wonderful statement you wrote
for the President to give Dr. Wise and Dr. Silver.
R:
(Laughs) I -- I think I primed him. I don't know -- --
do you think it's all right?
HMJr:
(Laughs) Well, where does it leave Senator Wagner?
R:
Well, I don't know.
r)
HMJr:
What?
R:
I don't know why Wagner should have introduced the
thing, do you?
HMJr:
Well, I....
R:
Without talking to somebody first.
HMJr:
I don't know, but I'm delighted to see him give the
statement, but it's -- just diân't seem to "gee"
with what's been going on on the Hill.
R:
No. Well, he -- -- he could have gone much further...
Regraded Unclassified
- 2 -
194
HMJr:
Which way?
R:
And turned down the Commonwealth entirely.
HMJr:
Turned down the Commonwealth?
R:
Yes. I mean mention the Commonwealth unfavorably,
which he didn't do.
HMJr:
Were you there at the con....
R:
No. No, but I
HMJr:
He's a great guy. (Laughs) I'd like' to see him
once every hour.
R:
(Laughs) Well, he -- I wasn't there and I didn't
write any statement any more than I did the tax
veto, but I talked to him at great length and I
said I think your first -- your prime job is to
sell Silver the idea that your heart's still in
the right place.
HMJr:
Yeah.
R:
From what I've heard from people who have talked
with Silver after the conference, which I didn't
do myself
HMJr:
Yes.
R:
I -- uh -- think he did a very good job.
HMJr:
Good.
R:
With Silver.
HMJr:
Good.
R:
Now, Henry, I don't know what the status of our
statement 1s.
HMJr:
Yes.
R:
I gave the President the original of the copy that
you have and I haven't heard a word. He hasn't
issued it BO far as I know.
HMJr:
I see. Well, doesn't he have press today?
- 3 -
195
R:
He has press today.
HMJr:
Yeah.
R:
And he might issue it today. I don't know. The
last I saw it was yesterday morning in his bed
room.
HMJr:
Well
R:
I told him -- I fold him that Pehle doesn't agree
with this and that Pehle thinks it ought to be
devoted exclusively to Jews.
HMJr:
Yeah.
R:
But, I -- -- I don't think he agrees with that.
HMJr:
Well
R:
If he doesn't, the question arises in my mind as
to what the -- why it should be issued just now,
and whether it shouldn't be tied up with some
event.
HMJr:
No.
R:
I would like very much to see him -- I read -- you
know that notebook you sent over -- that loose-leaf
book?
HMJr:
You mean on clippings?
R:
On -- well, in addition to clippings -- over -- what
I'm thinking about is not in the book. I read that,
but your memo, or Pehle's memo
HMJr:
Yes.
R:
showing what had been done
HMJr:
Yeah.
R:
bout the -- for example, the Bulgarians and 80
forth.
HMJr:
Yes.
R:
Is it -- would it be a bad idea for the President
to say something like that at the press conference?
Regraded Inclassified
- 4 -
196
HMJr:
Well, that I don't know. I don't know how much
secrecy has to be attached to it. You know why
they want the President to issue this statement
or why we'd like to see him issue it, 18 that
just as soon as he issues it O.W.I. is going to
go to work and merchandise it.
R:
That's right.
HMJr:
And that's why the thing should be done as soon
as possible.
R:
Well, then I thought I ought to tell him what
Pehle said to me, that he thinks it ought to be
done exclusively for Jews.
HMJr:
Yeah.
R:
Now -- oh, I can see why he's not -- why he's not
releasing it -- he wants to clear it with the
British.
HMJr:
Oh, yeah, that's what you said.
R:
That's right.
HMJr:
That's right.
R:
Now, I don't -- Steve hasn't told me that it's been
sent to him to clear as it would be normally.
HMJr:
Yeah.
R:
I don't know what to do -- whether I should jack
him up on it....
HMJr:
Oh, I would jack up the President on it.
R:
Well, okay.
HMJr:
Yeah.
R:
All right.
HMJr:
Righto.
R:
Okay, see you tonight.
HMJr:
Right.
R:
Fine.
197
LC - 417
PLAIN
London
Dated March 10, 1944
Rec'd 11:50 a.m., 11th
Secretary of State,
Washington.
1971, Tenth
Today's TIMES published item from TIMES correspondent
Washington March ninth as follows "the question of Jowish
emigration to Palestine was discussed at the White House today
when President Roosevelt received Rabbi Stephen Wise of New York
and Dr. Abbe Silver of Cleveland co-chairman of the American
Zionist Emergency Council. After 8 long conference Rabbi Wise
and Silver said that the President had authorized them to say
that 'the American Government was never given its approval to
the White Paper of 1939' that Mr. Roosevelt 'is happy that the
doors of Palestine are today open to Jewish refugees' and that
'when future decision are reached full justice will be done to
those who seek a Jewish National Home.'
Simultaneously therewas a meeting in Washington of the
American Palestine Committee to urge the passage through Congress
of resolutions seeking the withdrawal of the British White Paper.
This meeting was addressed by the Assistant Attorney General
Mr. Litterly who appealed to Americans for a 'candid and realistic
recognition' of the fact that the Jews face persecution in the
United States. He urged his hearers to fight Jewish persecution
at home in the way the Americans fight everything - by a headon
attack. 'We have got to stop this thing in its tracks' he said.
Mr. Wendell Willkie telegraphed to the meeting supporting
the purpose for which it has been called and describing the
Balfour declarations 6 covenant of hope for the Jewish people of
Europe."
DAILY WORKER publishes item without date-line under title
"FIR disavows Palestine Policy" as follows "a promise of 'full
justice eye' to those who seek a Jewish National Home and a
disavowal of the British Government 1939 White Paper on Palestine
have been made by President Roosevelt.
Rabbis Stephen 8. Wise and Abba Silver of the Zionist
Palestine Movement announced in Washington yesterday that they
had been authorized to make public these views of the President".
Not carried by other morning papers.
BB
WINANT
Regraded
March 10, 1944 198
10:51 a.m.
Grace
Tully:
Hello.
HMJr:
Grace.
T:
Good morning, Mr. Secretary.
HMJr:
Good morning. Who 1s the third butler and who is
the cook?
T:
(Laughs) That was just one of them things. If you
can fathom it, you're all right, sir.
HMJr:
I always thought that -- I always admired Dorothy
Brady very much but I never knew she was a good
cook.
T:
(Laughs) You didn't know I was a good third butler
either, did you?
HMJr:
(Laughs) No. I've always done the waiting on you.
T:
(Laughs) Well, anyway, that -- I guess that was
approval. I don't know.
HMJr:
Yes.
T:
You have to figure that one out. Did you get it
back?
HMJr:
Yeah, and the "O.K., F.D.R." looks like a phony.
T:
Looks like a phony?
HMJr:
Is it all right?
T:
Yes. Uh huh.
HMJr:
Is that he?
T:
Huh?
HMJr:
It's so beautifully written.
T:
Oh. Well, he writes beautifully when he takes his
time. (Laughs)
HMJr:
I see. Well, this -- we're going to go. I just
called up to kid a little bit.
- 2 -
199
T:
Uh huh. How are you feeling?
HMJr:
Wonderful.
T:
I'm sorry to hear Mrs. Morgenthau has a cold.
That's a shame.
HMJr:
Well, she's better today, but she's got a really
bad head cold.
T:
I think it's the change of climate, probably, from
that nice warm climate, up here and then it'got 80
cold.
HMJr:
That's what she thinks.
T:
Yes.
HMJr:
But I certainly gave the President all the
arguments against this thing, didn't I?
T:
Yes. Uh huh.
HMJr:
So, I mean, he knows about it.
T:
Yes.
HMJr:
Righto.
T:
Fine, Mr. Secretary.
HMJr:
Goodbye -- what are you, the cook or the waiter
or the butler?
T:
I'm the butler.
HMJr:
You're the butler?
T:
Yeah. Mrs. Brady is the cook.
HMJr:
Okay.
T:
(Laughs)
HMJr:
I'm the engineer.
T:
(Laughs) Well, that's a good combination.
HMJr:
Okay.
T:
Goodbye, Mr. Secretary. Goodbye.
200
March 10, 1944
12:45 p.m.
TAX SIMPLIFICATION
Present: Mr. Paul
Mr. Smith
Mr. Gaston
Mr. Sullivan
Mrs. Klotz
H.M.JR: Well, John, what luck did you have?
MR. SULLIVAN: The Senator liked the letter.
Congressman Doughton is somewhere in his native State
on official business. He is supposed to be at his
son's house. I called him there and they didn't even
know he was coming down. So I don't know where we can
find him. He will be back Monday morning.
The Senator was satisfied with the letter. He
suggested that we draft a statement to be used by
Mr. Doughton and himself in which we would commend
Secretary Morgenthau's suggestion. He expressed com-
plete approval of the plan, and also expressed apprecia-
tion for the Treasury's cooperation on this most impor-
tant thing - that we all work together for 8. speedy
solution of this particular problem.
MR. PAUL: It is drafted.
H.M.JR: Have you got it drafted?
MR. SULLIVAN: No.
MR. GASTON: He wants us to draft it?
MR. SULLIVAN: That is right.
201
- 2 -
MR. PAUL: Hope he doesn't give it out to the press
that we drafted it.
H.M.JR: But you don't know where to reach Doughton.
We can't do anything.
MR. SULLIVAN: This statement couldn't be used
until Monday, anyway.
MR. PAUL: Monday is the day we go up.
H.M.JR: This has to be done today, rightaway. You
saw what the President said, didn't you?
MR. SULLIVAN: Yes.
MR. PAUL: That is emphasized by another fact, that
Monday is the day we present the plan to the Committee.
They have rushed us ahead.
H.M.JR: But this, after the President said that -
the President isn't going to wait. This has to be done
today.
MR. SULLIVAN: Well, I think there are different
ways of handling it. I think there are three ways you
can handle it.
You can say that you have written Senator George
and Congressman Doughton, and that you had learned that
the Congressman is out of town on official business.
H.M.JR: He won't like that worth a damn.
MR. SULLIVAN: He will if you say official business.
He only complains when you fail to mention that it is
official business.
H.M.JR: Looking over a new white-faced Hereford
bull for his son.
202
- 3 -
MR. SULLIVAN: I don't know that that is true.
H.M.JR: I don't either, but go ahead.
MR. SULLIVAN: and that you don't feel free to
comment on these letters until they have been received.
The other thing you can do, you can decide right
now whether you are going to forego any additional reve-
nue. I don't think you are in position to do that.
The third option is to say the Committee is about
to start on simplification and you would prefer not to
discuss the other matter until the simplification is
out of the way.
H.M.JR: What I would like to do, and it has to be
done today, is simply say that I have been in consulta-
tion with these people and the President, and we all
agree that this bill on simplification has got the green
light and we would like to get it out of the way as soon
as possible, and any plans for additional revenue will
have to wait, pending the passage of this bill on simpli-
fication.
MR. GASTON: Well, I think that is one sentence
too much.
H.M.JR: Why?
MR. SMITH: I think you have to say something.
H.M.JR: You have got to.
MR. PAUL: I think what he said sounds pretty good.
MR. GASTON: I think you are just adding an unneces-
sary sentence, that is all.
H.M.JR: If I see the President he will:say, "All
right, Mr. Morgenthau; and when the thing happens, then
what?" The President threw the ball to me. I have to
answer it.
203
- 4 -
MR. GASTON: The answer is that right now you are
considering simplification. That is what you have been
talking to the Members of Congress about, and that
you think all our attention and energy for the present
ought to be focused on the question of simplification.
H.M.JR: You are the fellow who has been carrying
the ball that I shouldn't recede from my position on
revenue. You have been carrying that.
MR. GASTON: Yes.
MR. PAUL: He says he is still carrying it. That
is what he means.
H.M.JR: I don't see how. What did I say, Fred?
MR. SMITH: You said that you had talked to the
President and to the Congressional leaders, and that it
was the consensus of everyone that the simplification
bill has the green light, and you have got to get that
out of the way before you can do anything else, and that
any considerations of increased revenue will have to wait
until that is done.
MR. GASTON: Yes, I would just drop the last sentence.
I don't think you need to bring the revenue into it at
all.
MR. SMITH: I don't think you are selling revenue
short. You have got to answer it.
MR. GASTON: I just think it is a little more than
you need to say. I don't know why you should say you
have been talking to the President. That seems to tie his
hands a little bit, too. It seems to me all you need to
say is--
MR. SMITH: I think one thing you could do with
this statement is convey the impression that the Secretary
has talked to Congress. He is on pretty good terms with
Congress, apparently; he is on pretty good terms with the
Unclassified
204
- 5 -
President, apparently; what is all this trouble and all
this talk about his not working with anybody? Here he
has got the thing all ironed out, and they have decided
on a very simple course, a course that everybody will
agree on and love. I think here is a good chance to
indirectly put in a wonderful plug for him.
People may begin to wonder what is happening across
the street. If they do, that is none of our business.
H.M.JR: I can't get Herbert. Why shouldn't I
say the thing will have to wait? Why shouldn't I men-
tion revenue?
MR. GASTON: I just think it isn't necessary.
H.M.JR: But why?
MR. GASTON: You have already said it when you say it.
There isn't a great deal of difference between the two
things. I was just not for volunteering any more about
revenue waiting. You have been talking to the people on
the Hill, and you have been talking about simplification,
and that is what you are concentrating your energies on
right now.
MR. SMITH: You wouldn't want to pad it by saying
we still believe - we still need additional revenue?
It has all got to wait--
MR. GASTON: If you want to go into the revenue sub-
ject, that is what I would say, Fred.
MRS. KLOTZ: There is something to what he says.
H.M.JR: I think the thing is, instead of one of
these typewritten statements, I think I should see the
press - I should see them after Cabinet. I don't think
I should have any prepared statement.
MR. GASTON: I like that much better - if they
make a demand and ask to see you - did you see them yes-
terday?
Regraded Unclassified
205
- 6 -
H.M.JR: I haven't seen them this week.
MR. GASTON: Let's have Shaeffer rig up a demand
that they see you.
MR. SMITH: Very logical. He gets them over here.
If they don't come, they are asleep.
(The Secretary talks to Mr. Shaeffer over the
inter-phone and asks him to come down to Mr. Smith's
office)
MR. GASTON: I think the play is, the boys want a
press conference and you grant it to them.
MR. SMITH: I think we ought to do that; I agree
with it. I think you can get across, just in the tone
of voice, that everything is just lovely. I mean, every-
body is very happy and I think that is one great advantage
of having a press conference.
MR. SULLIVAN: Doughton and George, of course, didn't
want it known that they were down here.
H.M.JR: I don't have to say they were here.
MR. GASTON: No.
MR. SULLIVAN: I was just pointing that out.
H.M.JR: The only thing that will happen is this -
the only thing I have on the record is my letter to them -
and you will try desperately to clear this answer which
they are to give, so that--
MR. SMITH: It would be very helpful if they could
give it out still this afternoon.
H.M.JR: I think it is bad ball to let the sun set
without my answering the President, don't you?
MR. SMITH: Very much 80.
Regraded Unclassified
206
- 7 -
H.M.JR: Herbert, have you any doubts on that?
MR. SULLIVAN: I still think that this statement
Monday - I mean, this is one story; let their statement
be another one.
MR. PAUL: If it comes out-Monday, John, it will be
merged and confused in the report of the first meeting
where this plan is submitted.
MR. GASTON: We have to write that statement yet,
haven't.we?
H.M.JR: It should be still this afternoon so the
Republican National Committee, or somebody interested -
who is this lobbyist?
MR. GASTON: Alvord.
H.M.JR: So that Alvord can't go to work and upset
this applecart. The thing should be just one, two--
MR. SMITH: I don't think you need to mention these
letters. You could say just exactly what you said. Say
nothing about the letters. Save the letters for the
other statement, see? And let them come back out with
the statement. Now, I don't think they will object. It
might look a little as though you were trying to steal
the play if the President hadn't thrown the ball to you
this way. You have a good alibi.
But if you don't talk about the letters, and do just
say that everybody agrees that the simplification ought
to have the green light, and we ought to go ahead on it,
then you are only saying what they want you to say,
anyhow.
H.M.JR: Well, I say this: If you can get the
statement, and you can get it O.K.'d and get George to
O.K. it, and my letter goes up, and that statement of
theirs could be given out for tomorrow morning's papers,
it would be perfect.
207
- 8 -
MR. SULLIVAN: Yes, but I am wondering how Doughton
will feel about giving out & joint statement when he
isn't here, that is all.
H.M.JR: He wan't mind. I think this, that I don't
want topop my letter until the statement is ready.
MR. SMITH: That is right.
MR. SULLIVAN: I don't think 80.
H.M. JR: I think you fellows should try to locate
Doughton. Get George to read it first, then him, and
say, "Will you agree with this, and let this office
give it out for Monday morning's papers?"
MR. PAUL: Monday morning is the latest, because the
Monday afternoon papers will have the report.
H.M.JR: Tomorrow morning will be much better, but
I think it best not to tip my hand. I don't want somebody
to drive a wagon between us and ruin it.
And I think, if you don't mind, John, I think we
should teil George, and Doughton if you can get him,
that in view of what the President said, I have to answer
it, and I am going to see the boys this afternoon.
MR. SULLIVAN: That is right. And tell them you will
say that any question of further revenue will have to
wait until after this is over.
H.M.JR: Do you have any doubts, now?
MR. SULLIVAN: No, I am to get a statement, and after
I have George's approval, try to get approval from Doughton,
and permission for Senator George to release it for them
both tomorrow morning.
H.M.JR: That is right.
Regraded Unclassified
208
- 9 -
MR. GASTON: My only doubts are of shoving this
revenue thing into the foreground 8.8 John is doing
right here when he tells what he is going to talk to
Doughton about, emphasizing the idea that we are in
some kind of an agreement not to present any demands for
new revenue.
MR. SULLIVAN: At this time.
MR. GASTON: That isn't the thing we want to
emphasize. We want to emphasize we are talking about
simplification, now.
H.M.JR: I agree with you.
MR. SULLIVAN: But this puts it--
MR. GASTON: But you are putting it right in the
light of an agreement by which we are not going to make
any demands for new revenue.
MR. SULLIVAN: Excuse me. The President did that,
Herb.
MR. GASTON: Oh, no. I don't think 80.
MR. SULLIVAN: Then I didn't hear it correctly.
H.M.JR: I agree with Herbert that in my press I
will stress the simplification, and simply say that if
they press me about the additional revenue - "Well,
this has to have the right-of-way over everything else."
MR. GASTON: Yes.
H.M.JR: They most likely will say something about
it.
MR. PAUL: That is a good way to put it - - right-of-
way, that is 8. good phrase.
209
- 10 -
H.M.JR: When can I see you men again? In order to
have a little extra time, shall we schedule the press
for four-thirty?
MR. SMITH: Yes.
MR. GASTON: We ought to have a draft of the state-
ment for George and Doughton.
MR. SULLIVAN: Suppose we get together at two
o'clock. I will call George in the meantime and make
sure he will be where I can reach him this afternoon.
H.M.JR: We will hold my letter. It can be up on the Hill.
MR. SULLIVAN: Those will have to be rewritten.
They are dated March 8. (Hands letters to the Secretary)
MRS. KLOTZ: Well, you can't erase them. They will
have to be rewritten. Chauncey is back. I will go
out. (Mrs. Klotz leaves office with letters)
MR. SULLIVAN: I think we can let those letters go
without reading them to Doughton. We will explain we
tried to reach him and couldn't.
H.M.JR: It will do no harm to read it to him.
MR. SULLIVAN: If we don't get him on the phone,
let the letters go, anyway.
H.M.JR: Oh, yes. The President is playing ball
with me. He has said for the first time that I know of,
that Secretary Morgenthau consulted - I mean, I am
doing the consulting. It isn't Vinson and Byrnes.
What Paul asked me to do when I went up on the Hill
last Friday was try to make things easier for him. I
have certainly accomplished that, haven't I?
210
- 11 -
MR. PAUL: Certainly have.
H.M.JR: He said to make the thing easier, and you
asked that I do this and that. I think everything you
have asked me I have been able to accomplish. Is that
right?
MR. PAUL: Sure.
H.M.JR: That is something. I am very happy that
I can get it over.
MR. SMITH: If you could think of something nice
to say about George and Doughton - you know, when it gets
out into the sticks - to make it look as though there is
absolutely no hard feelings.
H.M.JR: All right, I will say that we have been
working very well together.
MR. SULLIVAN: Well, the two staffs are working
together beautifully.
H.M.JR: That isn't the point.
MR. SULLIVAN: But if you are looking for a way to
get it in, and you are sure that this is evidence that
Senator George and Mr. Doughton have impressed on every-
body the necessity of getting along--
H.M.JR: I will try to do it the best I can.
O.K. gentlemen.
Regraded Unclassified
211
March 10, 1944,
4:08 p.m.
HMJr:
Hello.
Operator: Go ahead.
Senator
George:
Yes, this is Senator George.
HMJr:
Henry talking.
G:
Yes, Henry.
HMJr:
Good afternoon.
G:
How are you?
HMJr:
Fine.
G:
John is over here.
HMJr:
Yes, sir.
G:
And this statement that he has is okay in all
respects.
HMJr:
Fine.
G:
And if you wish to, you could say to the Press
this afternoon
HMJr:
Yes.
G:
.... that, on behalf of -- that the Chairman of
the Ways and Means and Finance will have a statement
which 1s available to them now.
HMJr:
Well, that's wonderful.
G:
And they can't get it from Mr. Doughton because
he's not in town.
HMJr:
Yes.
G:
But I -- I'm going to issue it right here.
HMJr:
I will tell them that when I see them at 4:30.
G:
All right.
HMJr:
Now, will you release the letters I wrote to you,
also?
- 2 -
212
G:
If you wish me to.
HMJr:
I think that would be fine.
G:
We refer to the letter in this statement.
HMJr:
Well, the letter 18 to you and I always think
it's much nicer if the recipient releases the
letter.
G:
Well, I'll be glad to and I'll say a similar
letter was addressed to Mr. Doughton.
HMJr:
And I was coached -- to not be too serious a minute --
to say that Mr. Doughton was away on official
business.
G:
Yes. (Laughs) All right, I'll say that an
identical letter was addressed to Mr. Doughton
and this statement is a joint statement from
Mr. Doughton as Chairman of the Ways and Means
and from me as of the Finance.
HMJr:
The reason I'm very happy about it is I've tried
for years -- I mean to, you know, to be a little
helpful and we're in a war and I think your
attitude and Doughton's has been fine and it is
a pleasure for me to be able to work with you.
G:
Well, that's fine. You can tell the boys that
we -- I'll be glad to furnish it to them this
afternoon.
HMJr:
Thank you so much.
G:
All right.
213
3/10/44
Returned. from the White House today
with President's approval indicated.
ok
oke
THE SECRETARY OF THE TREASURY
214
WASHINGTON
March 8, 1944
My dear Mr. Chairman:
I understand that the staff of the Joint Com-
mittee and the Treasury tax staff are about to
complete their work on simplification of individual
income tax returns. I am told they hope to be ready
to submit their joint recommendations to the Com-
mittee on Ways and Means of the House shortly.
Speedy enactment of the proposed legislation
seems to me to be of the very first importance.
Obviously here is one sphere within which we can
appreciably lighten the load of inconvenience which
the war has placed on American citizens.
It is my hope that in order to expedite passage
of this measure, your Committee will restrict this
bill solely to simplification. I wish to assure
you of the complete cooperation of the Treasury
Department in working with your Committee toward
the best possible simplification of our individual
income tax system.
Sincerely yours,
To be sent to:
The Honorable Robert L. Doughton,
Chairman, Committee on Ways and Means
REVICTORY
and
BUY
UNITED
STATES
The Honorable Walter F. George
WAR
BONDS
Chairman, Senate Finance Committee
AND
STAMPS
Regraded Unclassified
215
March 10, 1944
My dear Mr. Chairman:
I understand that the staff of the Joint Com-
mittee and the Treasury tax staff are about to
complete their work on simplification of individual
income tax returns. I am told they hope to be ready
to submit their joint recommendations to the Com-
mittee on Ways and Means of the House shortly.
Speedy enactment of the proposed legislation
seems to me to be of the very first importance.
Obviously here is one sphere within which we can
appreciably lighten the load of inconvenience which
the war has placed on American citizens.
It is my hope that in order to expedite passage
of this measure, your Committee will restrict this
bill solely to simplification. I wish to assure
you of the complete cooperation of the Treasury
Department in working with your Committee toward
the best possible simplification of our individual
income tax system.
Sincerely yours,
(Signed) Henry Morgenthau, Jr.
Honorable Robert L. Doughton,
Chairman, Committee on Ways and Means,
House of Representatives,
Washington, D. C.
Regraded Unclassified
216
March 10, 1944
My dear Mr. Chairman:
I understand that the staff of the Joint Com-
mittee and the Treasury tax staff are about to
complete their work on simplification of individual
income tax returns. I am told they hope to be ready
to submit their joint recommendations to the Com-
mittee on Ways and Means of the House shortly.
Speedy enactment of the proposed legislation
seems to me to be of the very first importance.
Obviously here is one sphere within which we can
appreciably lighten the load of inconvenience which
the war has placed on American citizens.
It is my hope that in order to expedite passage
of this measure, your Committee will restrict this
bill solely to simplification. I wish to assure
you of the complete cooperation of the Treasury
Department in working with your Committee toward
the best possible simplification of our individual
income tax system.
Sincerely yours,
(Signed) Henry Morgenthau, Jr.
Honorable Walter F. George,
Chairman, Senate Finance Committee,
United States Senate.,
Washington, D. C.
Regraded Unclassified
217
March 10, 1944
4:30 p.m.
Re: PRESS CONFERENCE
Present: Mr. White
Mr. Shaeffer
Mrs. Klotz
Miss Chauncey
Mr. Smith
Mr. Sullivan
H.M.JR: We got the breaks, you know.
MR. SHAEFFER: Yes, I know. You have the breaks
outside. You have every outstanding tax writer in
town here.
H.M.JR: My God, do you think I better have John
in here in case they fire something at me?
MR. SMITH: It wouldn't hurt. I think it would be
a good idea.
(The Secretary sends for Mr. John Sullivan)
MR. SMITH: I think we ought to decide, too -
John said that George said you could tell them to go
right over and get that statement. I wonder whether it is
80 wise to do that, because you will get a good story out
of this tonight and they will have a good story tomorrow
morning.
H.M.JR: George is sitting there waiting. I am
ninety percent sure. He made it very clear and he
repeated the thing - "Now you understand" - he said
it twice - "that if the boys come up here, I will give
them the letters."
I said, "You will give out my letters?" He said,
"Yes. Let's be satisfied. Now don't get greedy and ambitious.
Regraded Unclassified
218
- 2 -
MR. SMITH: I am not getting greedy - much. I am
not getting suspicious. I just want two stories, that is
all.
H.M.JR: Ambitious.
Now, what I am going to say if they ask about the
President's income tax--
(Mr. Sullivan entered the conference)
H.M.JR: John, you better sit down there and be &
good boy. If they ask me some questions--
MR. SULLIVAN: I haven't those figures.
H.M.JR: I have enough. We will do the thing sort
of catch-as-catch-can.
One thing, if they say to me, "Now, Mr. Morgenthau,
what about your own income tax?" - what am I to say?
That I am working on it? "Well, did you get any help?"
MR. SULLIVAN: No, you have finished it.
MR. SMITH: You can't be working on it because we
have been telling people to get them in two months ago.
H.M.JR: All right, I have finished it and mailed
my check. "Did you get any help?"
MR. SULLIVAN: "Yes, the man who takes care of my
accounts - the same man. I don't have time to take care
of my records, running this job. Taking care of the
record of the U.S. Treasury is enough for one fellow."
H.M.JR: Would you say, "I certainly needed help
with this Form 1040"?
MR. SULLIVAN: No.
Regraded Unclassified
219
- 3 -
H.M.JR: Simply say we have a family bookkeeper and
have had one for years; that I haven't time to keep my
own books?
MR. SULLIVAN: No. That is the fact of the matter.
H.M.JR: If they say that the President does his,
I will say, "You ought to see him do it, too!"
MR. SULLIVAN: I will bet that he doesn't say he
doesn't have help.
H.M.JR: He did this morning.
MR. SHAEFFER: In the paper.
H.M.JR: That is the trouble. As a matter of fact,
he does do them himself and usually gets them wrong.
MR. SMITH: Don't forget if they ask you about the
complications, we tested the short form on & thousand
different housewives and people, and we have had no com-
plaints on that. Time kept us from doing it to the big
ones.
MR. SULLIVAN: On the other one we have had many
letters saying that it isn't half as difficult--
H.M.JR: But the short is for three thousand or
less.
Regraded Unclassified
March 10, 1944 220
4:49 p.m.
HMJr:
Hello.
Operator:
Senator George.
HMJr:
Thank you. Hello.
Senator
George:
Hello, Henry.
HMJr:
Walter.
G:
Yes, sir.
HMJr:
My press conference went off very satisfactorily.
G:
Well, that's good.
HMJr:
And I told them to go up to see you.
G:
They are here now, some of them.
HMJr:
Well, I just wanted to make one point clear. They
said to me, "Now, what about additional revenue?"
So, I said, "Now, the agreement between the Congress
and the Executive end is that simplification gets the
right-of-way." And I said, "When this is passed, I
don't know what we are going to do."
G:
Well, that's another question. That's about what
I'll have to tell them.
HMJr:
And I simply said, "As far as additional revenue
is concerned," I said, "the Treasury has not
changed its position."
G:
Yeah.
HMJr:
Now, that's all I said.
G:
Well, all right, Henry.
HMJr:
I just wanted to let you know.
G:
Yes, thank you very much.
HMJr:
Thank you.
G:
All right.
Regraded Unclassified
221
The Epening Star
fee meeting
MAR 12 1944
3/13/44
11:25am.
Withholding Tax
eliminate entirely the filing of re-
timated that this may be abouthneg
turns by some taxpayers, Mr. Paul
as a special levy and consolidated
disclosed.
with the Income tax,
Results of a joint study in Income
300 Ald on Returns.
Receipt Instead
tax simplification, made by the
Some Federal tax experts are
Treasury, the Internal Revenue
known to be working on master
Bureau and the Joint Committee on
tables from which the average tax-
Taxation, will be submitted to Con-
payer, at a glance. could gain some
Of Return Urged
gress shortly, Mr. Paul's letter said.
Indication of how much he
would owe,
Meanwhile, the House Ways and
Means Committee will meet tomor-
Meanwhile, nearly 300 persons
are on duty in the local Income tax
row to work on aimplification of the
office to help taxpayers who are
Revenue Office Will
income tax law.
struggling with the complicated re-
Stay Open Longer
Prospects appeared bright last
turns due Wednesday,
night that some real religt for tax
Tomorrow and Tuesday, the doors.
For Next Three Days
headaches-in the form of easter-
in Room 1002 of the Internal Reve-
to-prepare tax returns by March,
nue Building. Twelfth street and
1945-may result from the current
Constitution avenue N.W., will be
While the local Internal Rev-
enue Office announced Jonger
discussions.
open from 8:15 a.m. to 6 p.m. On
Wednesday, the hours will be from
hours during the next three days
While Codgress and the Treasury
8:15 a.m. to midnight-the deadline.
to help harassed taxpayers meet-
have been at awords' points' over
A. Parks Rasin, head of the office,
the Wednesday midnight income
the recent tax bill which Congress
predicted tremendous crowds tomer-
tax deadline, a Treasury Depart-
passed over presidential veto,
row. He pointed out that the Mon-
ment official disclosed yesterday
spokesmen from both camps have
day prior to the income tax filing
that plans to simplify next
indicated they stready are drawing.
date "always brings in & flood of
closer to agreement on plans for
taxpayers who have done some fig-
year's tax contemplate adjusting
uring the day before."
the individual's withholding tax
1944 Declarations Due Soon.
receipt so that It can be used as
One Plan Calls for New Form.
To add to their woes, taxpayers
a simple tax return.
It was said in reliable quarterà
will face the necessity soon of mak-
The disclosure was made in a
one proposit would call for & new
ing out a declaration estimating
letter from Randolph E. Paul, gen-
how. much their 1944 incomes and
W-2 withholding tax form, which
eral counsel for the Treasury, to
taxes on them. will be. Forms for
Representative Brooks. Democrat,
the employer would make out and
this declaration have been prepared.
send to the Collector of Internal
will be sent to taxpayers shortly
of Louisians. Mr. Paul disgussed
Revenue, showing the amount of
after Wednesday, and must be filed
use of the withholding tax receipt
- due from the employe and
on or before April 15,
as "an extremely simple return,"
and said:
the Amount taken out by withhold-
Because of changes in the law.
ing. This plan would leave wage
nearly all taxpayers will have to
"Taxpayers whose tax is very
pay out additional cash to the
or salary earners with incomes
largely discharged by withholding
Government when they file this
of less than $5,000 free from making
declaration.
would be permitted to file this
any kind of tax return.
simple statement with the collectors
Although the withholding tax was
Should any such simple system
adopted to put payments on a "pay"
in lieu of any other return. The
be adopted. persons entitled to
as-you-go" basis, elimination of the
collectors would then compute the
large deductions and those with
earned income credit of 10 per cent
tax and either asséte additional tax
complicated business or professional
and of credit for taxes paid on
or tssue & refund, M the case might
affairs would. of course, be given
telephone and telegraph, automo-
be."
the opportunity of filing & regular
bile use, transportation and certain
Two Other Próposals.
return, simplified from its present exclse taxes, will make the amount
withheld Insufficient to cover the
Another plan would broaden the
form, Although there are still champions tax on the 1944 income in many
privilege of using the short form
of the Victory tax. It has been in-cases, experts said.
return (1040A), while a third would
Regraded Unclassified
222
March 10, 1944
MEMORANDUM FOR THE SECRETARY
From: Mr. Blough
Attached is a one-page summary report on the
"tax incentive" meeting held yesterday. The materials
considered at this meeting are also attached.
A more detailed report is being prepared for our
record and a copy will be transmitted as soon 8.8 it
is completed.
Copies of this material are being sent to
Messrs. Bell, Gaston, Sullivan and Paul.
RB
Attachment
Regraded
Unclassified
223
Third inter-departmental meeting on
incentive effects of taxation
The third in a series of inter-departmental meetings on
incentive effects of taxation was held on March 9, 1944, to
discuss business and corporation taxes. The first half of
the meeting was devoted to a further consideration of the
effects of an excess-profits tax in the period of reconversion.
With one or two exceptions the representatives of other
agencies argued that the excess-profits tax should be retained
during the period of transition in order to achieve the most
equitable distribution of the wartime tax burden. There was
general agreement that the tax should remain in effect at least
as long as other wartime controls. On the other hand, it was
agreed that, once normal conditions had been reestablished, an
excess-profits tax might seriously inhibit new investment,
particularly in new firms and growing firms.
Discussion was next directed to the case for a differential
tax on business income or corporation income per se. Some
strongly urged the need for a business tax on the so-called
public corporations of large size. These corporations, by
virtue of their enormous credit resources and going-concern
value, enjoy special economic advantages which can be appro-
priately reduced by the tax system. Other proponents of &
business tax stressed its usefulness 8.8 a means of controlling
the timing of investment during the course of the business
cycle. Special tax credits could be allowed for investment
undertaken in a period of depression, and could be reduced
or eliminated in periods of high business activity.
Attention was next given to changes which might be made
in the corporation tax 1f this form of business tax were to be
retained. It was pointed out that the present discrimination
in favor of debt financing could be reduced or eliminated by
not allowing the interest deduction. Although most of those
present were inclined to favor such a change, fears were expressed
that too rapid a movement in this direction would seriously
embarrass, 1f not bankrupt, some corporations.
Discussion of corporation taxes will be continued at the
next meeting. The agenda for these meetings, together with a
list of questions for discussion of the business tax, are attached.
Treasury Department, Division of Tax Research
March 10, 1944
Regraded Unclassified
224
Proposals to improve incentive effects of taxation
1. Excess-profits tax
a. Eliminate the excess-profits tax, to stimulate risk-taking
and to reward efficiency
b. Retain the excess-profits tax, to capture monopoly profits
C. Retain the excess-profits tax, to encourage monopolies to
adopt a more competitive-price policy
2. Corporation-income taxes
a. Narrow the corporation-tax base by allowing the deduction of
dividends, allocated earnings (including dividends), or all
earnings (i.e., no taxation of corporation income), to
reduce discrimination against risky ventures and to reduce
discrimination in favor of debt financing
b. Broaden the corporation-tax base to include interest expense,
to reduce discrimination in favor of debt financing
C. Reduce taxes on small enterprises or enterprises without
access to the capital market, to secure a more satisfactory
competitive structure
d. Reduce taxes on certain industries, to encourage the flow of
capital into them, by:
(1) Percentage depletion of minerals
(2) Special treatment of financial institutions
(3) Other kinds of special treatment
e, Reduce taxes on new enterprises, to encourage a higher level
of investment and a better competitive structure
f. Impose taxes on certain tax-exempt business enterprises, to
equalize competitive conditions and to encourage a better
distribution of capital among industries
B. Tax all dividend income (at the corporate level), and oliminate
the consolidated-return privilege, to penalize intorlocking
corporations
Regraded Unclassified
225
- 2 -
h. Change the methods of computing taxable income:
(1) Allow the use of inventory reserves or some other
method of inventory valuation, to eliminate the
distorting effects of price changes on income
(2) Permit taxpayers to adopt flexible depreciation
policies, to encourage expansion of investment
(3) Extend the averaging of income, to reduce risks
and to equalize the tax status of enterprises with
fluctuating as against stable income
3. Individual-income taxes
a. Reduce taxes on dividend and business income of all, or certain
taxpayers:
(1) To eliminate "double taxation" of corporation income
(2) To encourage additional equity investment in enterprise
(3) To encourage launching of new enterprises
b. Revise the definition of taxable income:
(1) Extend the averaging of income, to reduce the discrimina-
tion against fluctuating income
(2) Allow the deduction of construction outlays of
individuals, to encourage a higher level of
construction activity
(3) Give special allowances to workers or working wives,
to encourage their entry into the labor force and
to encourage additional effort
(4) Increase the dependency credit, to reduce the financial
impediments to a higher birth rate
(5) Eliminate the deduction of interest and real-property
taxes, to climinate the discrimination against renters
C, Revise surtax rates:
(1) Reduce surtaxes, to increase the volume of savings
(2) Increase surtaxes, to decrease the volume of savings
d. Replace the income tax by a tax on savings and a tax on
spendings, to control savings more effectively in a depression
and consumption expenditures in a boom
C. Adjust income-tax rates cyclically, to achieve a more stable
level of employment
Regraded Unclassified
226
- 3 -
f. Revise the taxation of capital gains and losses:
(1) Eliminate all taxes on capital gains and losses, to
encourage investment in equity securities and
a more stable level of stock prices
(2) Include all capital gains and losses in income, to
reduce savings
g. Eliminate the tax-exempt security privilege, to foster invest-
ment in industrial securities
4. Employment taxes
a. Expand payroll taxes, to increase the security of individuals
and thus to encourage a higher level of spending or invest-
ing
b. Reduce payroll taxes and substitute steeply progressive
individual-income taxes, to increase consumers' expenditures
5. Sales and excise taxes
a. Eliminate excise taxes, to achieve a better allocation of
resources to different industries and the maintenance of
a higher level of consumers' outlays
b. Use excise taxes, to influence positively the allocation of
resources to certain industries
C, Levy a permanent general sales tax, to reduce consumers' outlays
and encourage savings
6. Estate and gift taxes
a. Revise estate and gift taxes:
(1) Increase estate and gift taxes, to break up the economic
power of large fortunes
(2) Reduce estate and gift taxes, to stimulate risk-bearing
and investment
b. Shift from estate to inheritance taxes, to more carefully propor-
tion the tax to the financial ability of the recipient
C. Include all inheritance in taxable income, discriminating by
to reduce the economic power of large fortunes and to encourage
types of property inherited and by relationship to the deceased,
the accumulation of certain forms of savings
Regraded Unclassified
227
- 4 -
7. Sundry taxes
a. Impose a tax on hoarding, both at the corporate and
individual level, to increase the turnover of funds and
thus encourage a higher level of consumption and employment
b. Impose a tax on machinery, to discharge its use in competition
with labor
C. Impose a tax on idle machinery, to encourage its full
utilization
d. Impose a tax on business enterprises which decreases as
employment increases, to encourage a high level of
employment
e. Shift taxes at the State and local level to less
restrictive taxes, to increase the level of output
Treasury Department, Division of Tax Research
March 9, 1944
Regraded Unclassified
228
Incentive effects of the corporation-income tax
1. Is there justification for special taxation of business income
as such? For corporation income as such?
2. In levying taxes on business or corporate income should any
attempt be made to differentiate between different kinds of
income based on (a) the size of the business unit, (b) the age
of the business unit, or (c) the industry in which it operates?
3. Does the prewar corporation-tax system discriminate against
equity financing! Does this reduce the volume of equity
financing through the substitution of debt financing? Does
this reduce the volume of total financing?
L. Would the following changes in the corporation-tax base represent
desirable ways of removing such discrimination?
(a) Expanding the base by
1. Disallowing the deduction of interest expense
2. Disallowing the deduction of interest and other
payments for the use of capital (e.g., rent)
(b) Narrowing the base by
1. Giving the shareholder full credit for the
corporate-income tax when dividends are
distributed (British system)
2. Allowing the corporation a deduction for dividend
payments, but giving no credit to the individual
shareholder for the corporate tax on undistributed
earnings (undistributed-profits tax)
3. Allowing corporations a deduction for dividend
payments and for undistributed earnings but re-
quiring such earnings to be allocated to individual
shareholders
4. Eliminating all taxes on corporate income
5. Assuming an appropriate adjustment in individual-income taxes 60
that there would be no change in overall revenue yields, which of
these alternatives would be more favorable to equity financing?
Regraded Unclassified
- 2 -
229
6. What would be the respective effects of these alternatives on
the allocation of corporate income as between dividend payments
and undistributed profits? On total undistributed profits?
7. What implications underlie the choice between these alternatives
in connection with (a) the growth of monopolies, (b) the separation
between ownership and management, and (c) the expansion of business
investment into those fields offering the highest return?
8. What would be the effect of these alternatives on the price and
wage decisions of corporation management?
9. What would be the effect of these alternatives on the views of
business management with respect to the profitability of addi-
tional investment?
10. Which of these alternatives would contribute most toward a high
level of employment in the postwar period?
Treasury Department, Division of Tax Research
February 29, 1944
House
TREASURY DEPARTMENT
230
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
March 10, 1944
FROM
Randolph Paul
You may be interested in reading the attached
column by Robert Vanderpoel. The comments are wel-
come in the face of all the criticism that we have
received lately.
Mr
THE CHICAGO HERALD-AMERICAN
231
The Treasury has opposed one
or two tax proposals which migm
have been passed and Increased
the revenues, such as the sales
tax, but while we personally have
disagreed with the Treasury con-
MAR
1944
elusions tn this respect, the ar-
suments supporting Its position
have been strong and, in any case.
War Record
the ultimate responsibility rested
with Congress.
Banker Criticism
of Treasury
We know there has been some
ariticiam of Secretary Morgenthau
recently from bankers who have
felt that he has not accepted
Is Praised
banking advice as fully as they
believe he should and has driven
too close a bergain in some of the
Treasury financing Intended for
bank absorption,
Secretary Morgenthau,
It is difficult Yor an outsider
to judge fairly the merits of such
Randolph Paul
charges. Morgenthau is probably
8 bit afraid of the big bankers.
Deserve Thanks
He has never thought that the
Treasury should be subservient to
BY ROBERT P. VANDERPOEL,
Wall Street as IL was in certain
Financial Editor.
times gone by. Bank earnings,
Because Pres'dent Roose-
particularly those of the larger
banks, generally speaking. have
velt's veto of the tax bill
been adequate,
widened the rift between the
An overly cautious, at times
Chief Executive and Con-
possibly even suspicious man
gress there were those who
might be better for the country
as secretary of the treasury at &
recommended & "clean out" of the
period such as this than a high-
Treasury Department.
powered experienced banker in-
Secretary Morgenthau and Ran-
tent upon doing a good Job but
dolph Paul, general counsel, were
trained in private banking rather
signaled out for particular abuse.
than public finance.
Before throwing public servants
to the wolves it might be well to
Paul a Tax Expert
Inquire carefully as to whether or
not they have done a good Job.
As for Randolph Paul, he was
Secretary Morgenthau is one of
one of the leading private tax ex-
the most conscientious men We
perts in the United States before
have encountered. He has given
being Induced to accept a position
with the Treasury Department at
his efforts without stint during
& considerable personal financial
these last ten years.
sacrifice on the basis of public
Borrowing Cost Low
service in A time of emergency
He has been an indefatizable
The Treasury Department, un-
worker. He presented the Treas-
der his leadership. has financed
ury tax proposals to the House
the most expensive war in history
ways and means committee and to
at the lowest percentage of bor-
the Senate finance committee-
rowing cost in history.
covering the last two las bills. H
Throughout the period the cash
has won the respect and enjoyed
position of the federal govern-
the confidence of there con-
ment has been strong. The chiefs
gressional experts in tax matters
of staff never have had to worry
as to whether the money would be
Stumped the Country
available for the most expensive
Disregarding personal comfort
plans they might draw up.
he has virtually stumped the
The bond campaigns have been
country, responding to requests
disappointing in spots, but overall
that he ta'k to this organization
have been a great success.
and that explaining the need for
The loyal Americans who have
taxes if the nation's finances IF
bought government securities
to be kept sound. discussion the
have not found their value de-
destrability and difficulty in the
precisting as It did during the
way of simplification. presenting
other war.
t'.e good and the bad features of
various tax proposals.
Taxes Inadequate
It would be unfortunate if the
United prates lost or was unan-
The amount of money raised by
taxes has been inadequate. but
precietive of the -ervices of onle
genial. self-recrificing Ranco'ph
certainly this has not been. in
Paul.
the main, the fault of the Treas-
ury Department. Constatently
higher tax levies have been saked
Today's Thrught
and they have been pared by a
"No matter what one says in
Congress which apparently has
Mohie
kept one eye on the ballot bgxes
discussing enections be is certain to Ive
and voted for & soft war on the
home front.
232
Have
VICTORY
TREASURY DEPARTMENT
BUY
STATES
WAR
WAR FINANCE COMMITTEE
BONDS
I
ITAMN
NEW YORK
1270 Sixth Avenue
New York 20, New York
March 10, 1944
Hon. Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Dear Henry:
On the morning after carrying through our ar-
rangement, I want you to know that the announcement ap-
peared to be well received by our War Finance Committee
yesterday afternoon. Their reactions that have come in 80
far are very cordial to the appointment of Nevil Ford.
You were asking the other day about the perform-
ance of Upstate New York, and just by way of a preliminary
indication, I am enclosing a table which shows that the Up-
state record in this loan was extremely good, and was ahead
of the record made Downstate. In sales to individuals, the
Upstate regions were 16% ahead of their performance in the
Third War Loan, whereas New York City was behind. This is,
perhaps, not surprising because first, the curtailment of
speculative sales hits New York city hardest and second, the
Upstate industries are more heavily in war work. The results
show, however, that the Upstate people did 8. great job, and
all the facts as they come in bear this out.
Again, let me say how much I have enjoyed this
work and the personal relationship with you.
Rawdash Sincerely yours,
W. Randolph Burgess
Enclosure
Regraded Unclassified
233
DEPARTMENT OF RESEARCH & STATISTICS
NEW YORK, March 9, 1944
FOURTH LOAN INTRA-STATE RESULTS
INDIVIDUALS
ALL INVESTORS
"
OF THIRD
% OF THIRD
SALES
% OF QUOTA
LOAN SALES
SALES
14
OF QUOTA
LOAN SALES
:
UP-STATE
$155,151,001
102%
116%
:
$ 492,305,172
123%
93%
:
DOWN-STATE
686,042,493
90%
96%
:
4,172,866,457
110%
82%
:
GREATER NEW YORK
621,697,365
90%
97%
:
4,023,306,529
109%
82%
:
MANHATTAN
491,131,826
85%
91%
:
3,612,712,858
108%
81%
:
:
STATE TOTALS
$41,200,000
92.3%
99%
:
4,665,200,000
111.1%
84%
Of the State's 62 counties, 60 counties attained their all-investors' quotas, and 44 their individuals'
quota.
Of the State's 10 districts, 7 attained their individuals' quotas, and all districts made their all-inves-
tors' quotas. The leading District quota-wise re all-investors was #2 (Rochester) and re individuals was
57 (Westchester). Westchester's sales were 7% over Third Loan.
REDEMPTIONS
E, F, AND G were $178 million in February, versus $180 in January and $200 in December.
Regraded Unclassified
street
234
MEMORANDUM FOR THE SECRETARY
March 10, 1944
Mail Report
"Income-Tax Insanity", the editorial published in an
early March issue of Collier's, kindled quite 8. flame in
the tax mail which had been smoldering low. By Friday
morning, 152 copies of the article had come in from all
parts of the country and the quantity in each mail is in-
creasing rather than diminishing. Two-thirds of the
clippings were sent anonomously, but often carried threats
or criticism on the margins. The other third carried the
names of the senders and several were accompanied by letters
warmly supporting the editorial. The article by George
Sokolsky, in the New York Sun of March 6, was also frequently
called to the attention of the Secretary.
In the regular mail were many other demands for sim-
plicity of tax forms. These outnumbered letters in praise
of the new form by 7 to 1. A few correspondents bitterly
protested the necessity for submitting an estimate of 1944
income as early as April 15. Several writers asked for
a general postponement of the date for filing income tax
returns, while others requested individual extensions. As
in previous weeks, there were a few urgent appeals for im-
mediate refunds.
Bond mail increased, although not 80 greatly as the
tax mail. Publicity concerning the speech criticizing the
effect of the Bataan atrocity stories on the Fourth Drive
brought 8. few comments, but not as many as might have been
expected, and not very strongly pro or con.
The number of bonds submitted for redemption to the
Secretary jumped from last week's total of 64 to 80 this
week. Complaints about delays were fewer than for many
months. The total count was 21, with 14 of these from
personnel of the War Department.
The response to the radio program of March 2, sum-
marizing the results of the Fourth Drive, was extremely
light, although largely favorable.
Gabuelle E. Fortual
Regraded Unclassified
235
General Comments
Lucenda Mooman, Whittier, California. Enclosed
check for $30.00 to apply on my obligation for De-
fense for the duration. This pays up till Sept. 1,
1944. I wish to congratulate you and our Administra-
tion on the miraculous way we are carrying on this
war. Who could do better in such a short time?
God bless all of you and keep you in the hollow of
His hand.
Regraded 1 Inclassified
236
- 2 -
Favorable Comments on Bonds
Laud Payne, Editor, The Piggott Banner, Piggott,
Arkansas. I am enclosing a clipping from the
St. Louis Post Dispatch. I sincerely regret seeing
it in the paper, because I am positive that the
statement made by Mr. Gamble is not correct. I have
talked with boys back from the Southwest Pacific,
and in more than one instance they have told me ac-
counts equally as horrible as the Bataan stories.
It is my opinion that the letters received from the
various persons over the U. S. protesting the Bataan
disclosure of Jap brutalities, came from these various
types: Religious fanatics, Axis sympathizers, and
& very, very few, who do not believe the stories are
true. Here in my county, which is strictly farming,
when the stories came out, bond sales immediately
soared.
To those who blast your worthy depart-
ment with criticism, charging you let the story out
to aid the bond drive, may I say that it is my opinion
that they were seeking some excuse not to buy bonds,
and used this one.
Congratulations to you on your
good work.
L. L. Campbell, Elmhurst, Illinois. Last week in
a program about final results of the bond drive there
was 8 description of the Rocky Mts. Could you send it
to me or tell me where I could get it? I have lived
on the road to Estes Park forty years. This is the
best description I have ever seen. It is beautiful.
I have been ill many years -- had to have my leg ampu-
tated and my eyes are nearly gone -- cannot read
ordinary print. I would like to commit this to memory.
Thank you if you bother to read this.
Regraded Unclassified
237
- 3 -
Unfavorable Comments on Bonds
Mrs. Mary L. Strong, Sanford, Florida. Last August,
1943, I was in an automobile wreck, and at that time
my War Savings Bonds were lost. Ever since I got out
of the hospital my daughter has been writing to try
and procure duplicates of these Bonds. We have filled
out all applications several times and all information
has been added by local Post Office authorities. We
finally had & letter saying the applications had been
sent to Washington and the duplicates would be sent to
me. We have been writing for these Bonds for over six
months, now. My daughter is leaving soon to rejoin
her husband and I am at last recovered enough from the
accident to go with her. I would like very much to get
this all settled before I change my address. Can't
something be done to speed up this matter? I am 8 work-
ing woman and those Bonds were bought with hard earned
money. I have not been able to work now for seven months
and it may be seven months more, if ever, before I can
earn my living again.
Walter L. Lowry, New York 13, N. Y. On last Thursday
night, March 2nd, there was a half-hour program, the
purpose of which so far as we could tell was to advertise
to the Nation how successful you were in putting the
Fourth War Loan over the top. Inasmuch as the loan had
already been more than fully subscribed, I do not know
for what other purpose this broadcast was intended. Will
you kindly advise me at whose expense this broadcast was
made?
N. D. Whittington, Whittington Drug Store, Fort Worth,
Texas. In the past two years I have purchased some
War Bonds for a good cause and because I felt I was
doing the right thing and still feel that I was doing
the right thing, because I am still buying them. However,
Regraded
- 4 -
238
I had five bonds stolen from my store safe some two
or three months ago and so far I have found no one who
could advise me just what to do to get them back.
I have written to the Federal Reserve Bank in Dallas,
Texas, and they are not interested enough to answer my
letter. They are just small Bonds, but they happened
to be the only kind I could buy. *** Of course, every-
one says I will get them back, but if no one is doing
anything in regard to getting them back, I can't see
how I am going to do so. Please advise me as to what
I can do, if there is anything that can be done. I am
sure there is if I can find one who wants to help me.
Regraded Unclassified
239
- 5 -
Favorable Comments on Taxation
H. C. Hill, Florence, Arizona. The refund for my
wife and I on our tax returns for 1943 was $127.58.
Am applying this on my 1942 declaration and am en-
closing check for said amount as 8. gift to the war
effort. Our only boy is in Europe fighting so the
least I can do is & little more paying. This war
should be paid for as we go. Therefore, I think our
income taxes should be higher. More power to the
President in his veto of the 1944 tax bill.
W. G. Sims, Columbus, Miss. I filled out income
tax Form 1040 last night and presented it to one of
the income tax men today and asked him to tell me
what was wrong with it. He, courteously and oblig-
ingly looked the form over, up and down, crosswise,
back and forth, and said: There is not anything
wrong with it, just leave it with me and I will for-
ward it to headquarters for you". Frankly, irrespective
of all the adverse criticism of the form, I do not see
that the thing is so gosh awful. Of course, I did not
get much schooling and could not be expected to find
as much fault with it as, say, 8. Congressman, Columnist,
etc. There is & place on it for everything and, if
your heart's right, with a little mental concentration,
you can make headway. God bless our government, it's
B. darn sight nicer to me than I am to it.
S. B. Coleman, Lambert, Miss. There has been a lot
of unjust criticism passed on income tax Forms 1040A
and 1040. Considering the problems that had to be
dealt with, I consider that Forms 1040A and 1040 for
making reports on 1943 are plain and simple enough.
Most of the criticism has been passed by newspapers
and by people that have never made any study of work
preparing income tax returns. It would be impossible
Regraded
Unclassified
240
- 6 -
for your staff or any other group of men to study
out forms, 50 that each and every person could make
out their income returns. This was impossible, when
times were normal. One of the worst things that we
have to contend with today is that we have quite
8. number of street corner income tax experts. I con-
sider that your staff deserves lots of credit for
studying out Forms 1040A and 1040 for use in making
out the 1943 income tax returns.
It would be
impossible to get income tax forms simple enough for
each and every person to make out their returns. In
fact, it would be just as impossible as it would be
for each and every person to treat themselves in case
of sickness. As for the tenative reports that had to
be submitted in September and December of 1943, I do
not consider that part will work well, especially in
the agricultural sections of the country. I consider
that the pay as you go plan is one of the best systems
that was ever studied out. It enables the U. S.
Treasury Department to collect taxes that they might
lose. Lots of people working on jobs will spend their
money just as fast as they earn it. If it were not
for the withholding plan, lots of people would never
have money to pay their income taxes, when the time
came to file income tax reports. I consider that co-
operation on the part of one and all instead of criticism
through the columns of newspapers, we can make much better
progress with our tax problems.
Burt Housel, Rochester, N. Y. (Sends copy of letter to
Senator Barkley). Your petulant outburst has precipi-
tated 8. situation making us ridiculous in the eyes of
the liberal thinking people throughout the world and
seemingly indicates 8. complete lack of understanding
of the major problems of international relationships.
Your childish outburst points to a petty personal
conceit rather than deep economic concern and is entirely
- 7 -
241
out of place in an intelligent public official. All
of that applause -- applesauce -- that you received
on the floors of Congress -- that hysterical back
slapping and handshaking and those black headlines in
the controlled press came from elements with whom
a socially inclined, liberal minded lawmaker should
be ashamed to be found dead.
#
There isn't the
slightest doubt about the President's veto message
being completely justified and his statements 100%
correct. The President's veto message made specific
statements concerning the deficiencies of the tax bill
and nowhere have I heard any representative of the Ways
and Means Committee, or Congress, deny, refute or dis-
prove the truth of those statements. * When
the
President said the bill favored the greedy at the ex-
pense of the needy he made 8. bull's-eye. Just one
item - - the elimination of the 'earned income credit'
demonstrates the truth of that. Further, under the
Treasury Department's recommendation to eliminate the
Victory tax, retain the earned income credit and raise
the first surtax rate from 13% to 16% -- an average
New York State worker, (according to an analysis by
Mrs. Jean McKelvey, economist of Sarah Lawrence College),
whose weekly earnings are $43.40 and whose 1943 taxes
were $73.85, would pay $28.85. Under the bill passed
by Congress, according to the same economist, he will
pay $116.60. You are part of the same Congress that
passed the appropriation bills to spend the money --
which placed 42 billions of dollars in 'reserve profits'
in the treasuries of big business -- plus 81 billions
in 1943 profits -- and now you squawk to high heaven
when the piper presents his bill -- to the right people.
If there were any substance to the reports that the
grossly exaggerated publicity given strikes, gave 'aid
and comfort' to the enemy, then this violent outburst
of yours should be labelled treason. Already the British
and Russian press are headlining the silly episode *** as
a major break in American morale and unity.
(Acknowledged in the Secretary's Correspondence Division)
242
- 8 -
Unfavorable Comments on Taxation
Dwight W. Weist, Scranton, Pa. How you have the
people confused! They think because the $2,300,000,000
tax measure was not $10,000,000,000, therefore scmebody
is trying to cheat the Government. How lovely it has
been that you have "pussy-footed" the fact that we are
already paying $42,000,000,000 in taxes. You will have,
when this $2,300,000,000 goes into effect, about
$45,000,000,000 in taxes. The only difference, as
I see it, between the President's proposal and what
Congress finally gave is the difference between
$45,000,000,000 taxes, which you will now get, and
$52,000,000,000 taxes which you wanted. Why not clarify
this in the minds of the American people? These are the
"greedy" people who will now pay $45,000,000,000 annually.
Samuel A. Margulies, Brooklyn, N. Y. I am employed by
the City of New York in the Department of Welfare. As
yet, I have not received any information from the
Comptroller's Office as to my earnings and the taxes
that were withheld therefrom according to law. I con-
tacted the Branch Office of the Internal Revenue Division
at Brooklyn, New York, and spoke to a Mr. Campbell.
I asked him whether I was not entitled to an extension
of time to file my return since the Treasury Department
had seen fit to grant the Comptroller an extension of one
month to issue the necessary notices to the employees of
the City of New York. His answer was that there was no
one in his office authorized to grant an extension and
that the problem had been considered today and they were
granting no such extensions of time. I feel that since
the matter of receiving notice of income and taxes paid
is beyond my control and since the Comptroller was
granted an extension of time by the Treasury Department,
that I am entitled to the same consideration and that
I desire an extension of one month to file my income tar
return. Please reply before March 10th, as I am not de-
sirous of being delinquent in making my return.
Regraded Inclassified
- 9 -
243
Benjamin P. McNally, Brooklyn, N. Y. I paid my taxes
($75) about three weeks ago requesting a receipt for
same. As usual request was ignored. Now when 8. person
pays so promptly they sure are entitled to a little
courtesy. I don't care what their methods are I want
8. receipt. If I do not receive it in 8. weeks time from
now, I will telegraph FDR.
S. C. Kelton, Secretary, Rohm & Haas Company, Phila-
delphia 5, Pa. Our company and its associated and af-
filiated companies have sold to date approximately
$1,560,000 (face value) War Savings Bonds to their six
or seven thousand employees scattered throughout the
United States. Our current sales are running between
$85,000 and $90,000 (face value) per month. Our employees
frequently request advice as to the best form in which to
have their bonds issued, from the point of view of United
States Federal and State taxes which may arise upon death.
I have telephoned to both the War Bond Department of the
Federal Reserve Bank of Philadelphia and the Inheritance
Tax Division of the Treasury Department in Philadelphia
to see whether there is any simple booklet upon this
subject, and I was advised that none is available.
I suggest that the Treasury Department issue e. very
simple, small circular, in words of one syllable, clarify-
ing this situation. One instance of the necessity for
having such B. circular is evidenced by the following con-
fusing situation: A Treasury Department official in
Philadelphia who has had a great deal to do with the
sale of War Bonds told me recently that -- under a. special
ruling from the Treasury Department -- War Bonds issued
in the name of husband and wife jointly are not part of
the husband's estate upon his death, even though the bonds
were paid for by him; on the same day the Inheritance Tax
Division of the Revenue Department in Philadelphia told
me the exact opposite, and I assume that the Inheritance
Tax Division is probably correct.
It is our belief
Regraded Unclassified
244
. 10 -
that such a. circular should not be as complicated
as the Department's Circular No. 530 of June 1, 1942,
but should be brief and clear and confined to the
sole question of under what circumstances War Bonds
must be included as a portion of 8. decedent's estate.
Possibly a separate edition could be issued for each
state, with very brief reference to both Federal and
State inheritance taxes or estate tax exemptions.
H. Lemmons, Tyler, Texas. This article (Income-Tax
Insanity from Collier's) is 100% right. I haven't
the slightest idea how much I really owe, and don't
believe the government agents know either. I have
taken my books to the Post Office for one of your men
to figure out for me. This he did, but not before we
had a row. It seems to me that you could at least
hire polite men to help, we, the ignorant masses.
According to your agents' figures, I have $190 refund
due me. This is OK with me, and I'm not griping about
getting a refund, but I'd rather have paid the $190
extra than go through such 8. mess.
Regraded Unclassified
Cabinet
TREASURY DEPARTMENT DEFERMENTS
245
157 pre-Pearl Harbor father deferments were requested.
107 cases were disapproved.
Our requests for 157 deferments covered only about two percent of
the 7,000 pre-Pearl Harbor fathers in the Treasury.
Our requests covered trade positions such as pressmen, engravers,
bookbinders, and plate printers. Replacements in these trades do not exist.
The professional and administrative ranks included accountants,
lawyers, fiscal and tax economists, Internal Revenue agents, and
planning and personnel officers.
lie are supplying the Allied Military currency and stamps for the
occupied military areas as they are taken over.
We are financing the war through the collection of taxes and the
sale of bonds and are servicing other War agencies in many ways.
We cannot afford the risk of a breakdown in this responsibility
through the loss of our irreplaceable men in essential positions.
Our accountants are highly skilled in governmental accounting proce-
dures. Our lawyers are legal specialists in fiscal and tax matters, and
in fact all of the men concerned are qualified and able to TIT1 the
essential positions occupied by them only because of experience and
growth in the service. It is impossible to replace them principally
because those understudying them already are in the armed forces, and
without their services Treasury war operations would be seriously
crippled.
Regraded Unclassified
Cabinet
TREASURY DEPARTMENT DEFERMENTS
245
157 pre-Pearl Harbor father deferments were requested.
107 cases were disapproved.
Our requests for 157 deferments covered only about two percent of
the 7,000 pre-Pearl Harbor fathers in the Treasury.
Our requests covered trade positions such as pressmen, engravers,
bookbinders, and plate printers. Replacements in these trades do not exist.
The professional and administrative ranks included accountants,
lawyers, fiscal and tax economists, Internal Revenue agents, and
planning and personnel officers.
We are supplying the Allied Military currency and stamps for the
occupied military areas as they are taken over.
We are financing the war through the collection of taxes and the
sale of bonds and are servicing other War agencies in many ways.
We cannot afford the risk of a breakdown in this responsibility
through the loss of our irreplaceable men in essential positions.
Our accountants are highly skilled in governmental accounting proce-
dures. Our lawyers are legal specialists in fiscal and tax matters, and
in fact all of the men concerned are qualified and able to fill the
essential positions occupied by them only because of experience and
growth in the service. It is impossible to replace them principally
because those understudying them already are in the armed forces, and
without their services Treasury war operations would be seriously
crippled.
Regraded Unclassified
246
FEDERAL RESERVE BANK
OF NEW YORK
March 10, 1944.
CONFIDENTIAL
Lear Mr. Secretary:
Attention: Mr. H. D. White
I am, enclosing our compilation for the week ended
Varch 1, 1944, showing dollar disbursements out of the British
Empire and French accounts at this bank and the means by
which these expenditures were financed.
Faithfully yours,
/s/ L. B. Knoke
L. W. Knoke,
Vice President.
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington 25, D.C.
Enclosures
COPY
Regraded Inclassified
247
TREASURY DEPARTMENT
OFFICE OF THE SECRETARY
March 11, 1944
CONFIDENTIAL
Received this date from the Federal Reserve Bank
of New York, for the confidential information of the
Secretary of the Treasury, compilation for the week
ended March 1, 1944, showing dollar disbursements out
of the British Empire and French accounts at the Federal
Reserve Bank of New York and the means by which these
expenditures were financed.
EmB
Regraded I Inclassified
N.I.LYS OF CRITISH AND FREECH ACCOUNTS
Strictly
(In Fillions of Dollars)
Week Ended March 1, 1944
Confidential
BANK OF INCLAND (BRITISH covernment)
BANK OF FRANCE
PERIOD
DEBITS
CREDITS
Net Incr. (+)
Net. Incr. (+)
Gov't
Transfers to
Proceeds of
Transfers
Expendi-
Official
Sales of
from
Other
or Decr. (-)
Total
Total
or Decr. (-)
Securities
Official
Total
Other
Total
Credits
in $ Funds
Debits
Credits
in 5 Funds
tures
Canadian
(Orricial)
Australian
Debits
(a)
Account
Debits
Credits
Gold
(b)
Account
(c)
(d)
(e)
(e)
(d)
First year of war (g)
1,793.2
605.6
20.9
1,166.7
1,828.2
1,356,1
52,0
3,9
416.2
+ 35,0
866.3(f)
1,095.3(f)
+ 299.0
/ar period through
beember, 1940
2,782,3
1,425.6
20,9
1,335.8
2,793,1
2,109.5
108,0
14,5
561,1
+ 10,8
878.3
1,098.4
+ 220.1
Second year of war(h)
2,203.0
1,792.2
3.4
407.4
2,189,8
1,193.7
274.0
16.7
705.4
- 13.2
38.9
8.8
- 30.1
Third year of war (i)
1,235,6
904.8
7.7
223.1
1,361.5
21,8
5.5
57.4
1,276.8
+ 125,9
18.5
4.4
- 14.1
Fourth year of war (j)
764.0
312.7
170.4
280.9
1,072.3
-
0,5
155.1
916.7
+ 308.3
10.3
1,0
- 9,3
1943
September
49.4
16,8
10,6
22,0
86,2
-
-
15.0
71,2
+ 36,8
-
-
-
October
38,2
16.0
-
22,2
115,4
-
-
40.5
74.9
+ 77,2
-
-
-
November
65,9
42.4
5,9
17,6
89,0
-
-
3.5
85.5
+ 23,1
-
-
-
December
98.1
16.3
-
81.8
134.5
-
-
36.5
98.0
+ 36.4
-
-
-
1944
January
44,8
22.2
10,6
12,0
127.5
-
-
1.0
126.5
+ 82.7
-
-
-
February
143.8
14.3
2.1
127.4
144.5
-
-
29.C
115.5
+ O₂?
-
-
-
March
April
May
De
Gly
August
Week Ended
Fabruary 9, 1944
61.4
Tab
-
54.3
32,8
-
-
15.0
17.8
- 28.6
-
-
-
February 16, 1944
7+7
4.8
-
2.9
25.8
-
-
-
25.8
+ 18.1
-
-
-
- 6.8
03,1944
64.0
0.6
-
63.4
57.2
-
-
-
57.2
-
-
-
Int
14
201
5.7
19.2(k)
-
-
9.0
10.2(k
+ 10.0
-
-
-
Dat break of Dar
See attached sheet for footnotes.
(Through June 19, 1940) $19.6 million
England (through June 19, 1940) $27.6 million
England (through June 20, 1940 to Larch 12, 1941) 054.9 million
England (since March 12, 1941) $20.6 million
Regraded Unclassified
(a) Includes payments for account of British Ministry of Supply Mission, British Supply Board, Ministry of Supply Timber
Control, and Ministry of Shipping.
(b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the
proceeds of official British sales of American securities, including those effected through direct negotiation. In addition
to the official selling, substantial liquidation of securities for private British account occurred, particularly during the
early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According
to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation
of our securities through December, 1940 amounted to $334 million.
(a) Includes about B85 million received during October, 1939 from the accounts of British authorised banks with New York banks,
presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October,
1939 apparently represent current acquisitions of proceeds of exports from the sterling area and other accruing dollar
receipts, See (k) below.
(d) Reflects net change in all dollar holdings payable on demand or maturing in one year.
(e) For breakdown by types of debits and credits see tabulations prior to March 10, 1943.
(f) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day.
(g) For monthly breakdown see tabulations prior to April 23, 1941.
(h) For sonthly breakdown see tabulations prior to October B, 1941.
(1) For monthly breakiown see tabulations prior to October 14, 1942.
") for nonthly breakdown see tabulations rior to September 29, 1943.
Includes 3 6.7 million apporantly representing current and ACCU ulated dollar proceeds of sterling area services and
iroluding exporte,
Regraded Unclassified
ANALYSIS OF CANADIAN AND AUSTRALIA: ACCOUNTS
Strickly
(In Millions of Dollars)
Week Ended March 1, 1944
Confidential
BANK
OF
CANADA (and Canadian Government)
COLLONWEALTH BANK OF AUSTRALIA CREDITS (and Australian Government)
DEBITS
CREDITS
DEBITS
Transfers
Transfers
Transfers from Official
Proceeds
Net Incr.
to
Proceeds
Net Incr.
to
British A/C
Official
of
(+) or
%
Official
of
(+) or
PERIOD
Total
British
Others
Total
For French
Other
Decr. (-)
Total
British
Other
Total
Gold
Other
Decr. (-)
Gold
For Own
in Rinds (e)
Debite
A/C
Debits
Credits
Sales
A/C
A/C
Credits
in $Runds(e)
Debits
A/C
Debits
Credits
Sales
Credits
year of war (a)
323.0
16.6
306.4
504.7
412.7
20.9
38.7
32.4
181,7
31,2
3,9
27.3
36,1
30.0
6,1
+ 4,9
period through
460.6
57.9
14.5
43.4
62.4
50.1
12.3
+ 4.5
December, 1940
477.2
16.6
707.4
534.8
20.9
110.7
41.0
+ 230.2
Second year of war(b)
460.4
-
460.4
462.0
246.2
3.4
123.9
88.5
+ 1.6
72.2
16.7
55.5
81,2
62.9
18.3
+ 9.0
Third year of war (c)
525,8
0,3
525.5
566.3
198,6
7.7
360.0
+ 40.5
107.2
57.4
49.8
112.2
17,2
95.0
- 5.0
-
+ 3.4
Fourth year of war(d)
723.6
-
723.6
958.8
47.1
170.4
-
741.3
235.2
197.0
155,1
41.9
200.4
-
200,4
1943
September
47.2
-
47.2
70.1
-
10.6
-
59.5
+ 22,9
16.8
15.0
1.8
20.0
-
20.0
+ 3.2
32.1
71.3
+ 39.2
42.8
40.5
2.2
26.5
-
26.5
- 16.3
October
32.1
-
71.3
-
-
-
November
15.4
0,1
15,3
95,1
-
5.9
89.2
+ 79.7
6,6
3.5
3.1
18,2
-
18.2
+ 11.6
-
December
146.8
0,3
146.5
55.1
-
-
-
55.1
- 91.7
39.7
36.5
3.2
27.0
-
27.0
- 12.7
1944
32.3
-
11.3
Jamary
32+3
78.5
-
10.6
-
67.9
+ 46.2
6,0
1,0
5.0
11.3
-
+ 5.3
February
25.4
-
25.4
118,5
2301
2.1
-
93.3
+ 9302
32.3
29.0
2.3
28.6
-
28.6
- 207
March
Anril
May
Jul
July
August
Tack Ended
16.1
1.1
1.0
1.0
- 15+1
February 1944
2.9
-
2.7
44,4
23.1
-
-
21.3
+ 41.7
15.0
.
February 16, 1944
-
-
-
21,0
+ 13.5
-
-
-
1.1
-
L1
+ Ll
1.5
7.5
21,0
-
February 23. 1944
7.4
-
7.4
32.6
32.6
+ 25.2
-
-
-
7.5
-
7.5
+ 1.5
-
-
-
March 1, 1944
6.6(f)
-
6.6
18.4(f) -
2.1
-
16.3(g)+ 11.8
9a9
9.0
0.9
4.0
-
4.0
- 5.9
Average Weekly expenditures for
(a) For monthly breakdown see tabulations prior to April 23, 1941.
6,2 million.
(b) For monthly breakdown see tabulations prior to October 8, 1941,
8,9 million,
(c) For monthly breakdown see tabulations prior to October to 14, 1942.
10.1 million.
(d) For monthly
prior
to
September
29,
1943.
Fourth year of war
13,9 million.
(e) Reflects
or maturing in one year.
Fifth year of var (through March 1, 1944),
11.4 million.
(f) Does not reflect
(g) Includes 8.6
million deposited
and $ 1.5
million received from New York
Chartered Bank.
Regraded Unclassifi
TREASURY DEPARTMENT
251
INTER OFFICE COMMUNICATION
DATE
TO Secretary Morgenthau
MAR 10 1944
FROM Mr. Paul
Yesterday Senator Thomas introduced S. J. Res. 120,
which would establish a Foreign Economic Commission.
Representative Coffee introduced H. J. Res. 247, 8. com-
manion bill.
The Foreign Economic Commission is to provide the
President and Congress with information and recommenda-
tions respecting the opportunities for, and means of,
foreign economic collaboration and is to make a study and
investigation of the opportunities for such collaboration
in relation to the maximum use of economic resources of
the United States through expanded foreign trade, stabili-
mation of monetary systems, removal of trade barriers,
interchange of economic and technical data, and joint
development and use of facilities and resources.
The proposed Foreign Economic Commission is to be
composed of: (1) & chairman designated by the President;
(2) the President and Speaker, the majority leader, the
minority leader, the chairman and minority member of the
Committee on Foreign Relations of the Senate and House of
Representatives; (3) the Secretary of State, Secretary of
the Treasury, Attorney General, Secretary of Interior,
Secretary of Agriculture, Secretary of Commerce, Secretary
of Labor, Chairman of the United States Tariff Commission,
Chairman of the Federal Trade Commission, and the Adminis-
trator of the Foreign Economic Administration; and (4) 12
public members to be appointed by the President, representing
agriculture, labor, industry, and the consuming public.
me
Regraded
Treasury Department
Division of Monetary Research
252
Date March 9, 1944
19
To:
Secretary Morgenthau
From: Mr. White
you
1. We have heard from Currie that Foreign
Economic Administration is in favor of
granting the Government of India's
request for the immediate lend-leasing
of 10 million ounces of silver.
2. I am attaching suggested letter from
you to Mr. Mahindra, which you will
want to sign if you approve of the
Government of India's proposal.
H.D.W.
253
25
MAR 10 1944
Dear Mr. Mahimira:
It is my understanding that the 10 million
canses of silver, referred to in your letter of
March 3. 1944 to F. White, is part of the 100
million emees of silver which we have had under
dissussion during the past several months.
The Treasury would have no objection to
the immediate lond-leasing of this 10 million
curees, since, as you know, the Treasury has
already recomended to the Foreign Economic
Administration that the need of India for this
100 million cureen of silver should be not
from the stecks of the United States Treasury.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
- E. 8. Mahindra,
Supply Mission,
6357 street, B. Us,
Washington he Do 0.
ISF/NB/efs 3/9/44
Regraded Unclassified
- 800
GOVERNMENT OF INDIA
INDIA SUPPLY MISSION
635 F STREET, N. W.
WASHINGTON 4, D.C.
IN REPLY PLEASE QUOTE
TELEPHONE: EXECUTIVE 5484
March 3, 1944
Dear Dr. White,
Confirming my interview with you yesterday, I should like
to surgest for your consideration that an emergent supply of ten
million ounces of silver be made to the Government of India under
the procedures which were adopted at the time of the transfer of
twenty million ounces in September last year. I understand that
the State Department has agreed to such a transfer without prejudice
as to the nature of the agreement and that this sanction is accorded
because of the pressing needs of the Government of India for silver
for coinage purposes. You will recollect that the twenty million
ounces were likewise for coinage use. Please let me know if this
suggestion meets with your approval.
Yours sincerely,
K. C. Mehindra
Dr. H. D. White
Assistant to the Secretary
U. S. Treasury
Washington, D. C.
Regraded Unclassified
255
TREASURY department
INTER OFFICE COMMUNICATION
DATEMarch 10, 1944
TO
Secretary Morgenthau
FROM
Mr. White HOW
X
Subject: Swedish Exports of Iron Ore to Germany
(1) Sweden exported 8.6 million metric tons of iron ore to
Germany in 1942, and 10.2 million tons in 1943. Sweden
had agreed with us not to exceed the figure of 9,900,000
tons but actually did exceed the ceiling by almost 5%.
The total for 1943 was the highest since 1939.
(2) The German-Swedish Trade Agreement for 1944 provides for
a reduction in iron ore exports from 10 million tons to
7 million tons and for a reduction of more than 50 per-
cent in exports of ball bearings (from $10.7 million to
$5 million). Conversely, German exports of coal and
coke to Sweden will be reduced by approximately 20 percent.
(3) The real reason for the reduction in Swedish exports to
Germany appears to be the difficulties of receiving pay-
ment through the clearing and of receiving stipulated
imports of coal, rather than Allied pressure or a desire
to make a gesture of pro-Allied sympathy.
(4) Swedish exports of ball bearings to the Nazis were to be
held to normal exports, i.e., those in 1938. This figure
was in the neighborhood of 4,000 metric tons. Actual
shipments in 1942 were 7,600 tons. For 1943, Sweden
agreed to keep the value of ball bearing exports the
same 8.8 those in 1942. Actual shipments in 1943 showed
a 10,000,000 kroner increase. The largest increase in
ball bearing shipments took place after the first
Schweinfurt raids, or specifically, the last 4 months
of 1943.
Regraded Unclassified
256
EXECUTIVE OFFICE OF THE PRESIDENT
WAR REFUGES BOARD
INTER OFFICE COMMUNICATION
DATE 3/10/44
TO
Mr. Fehle
FROM Hr. McCormack
Appreciating that during the seven weeks the Board has been
enjoying life, mach history has been written figuratively and
literally. Nevertheless, as resource material worthy of reading
for a picture of activity in the field of refuges relief, I sub-
alt for circulation and staff conjumption this paper: Refugees
1930-1943, a report prepared by George Warren currently associated
with State and Executive Director of the International Migration
Service Office in New York.
I would call year attention to the bibliography and partion-
lary Sir John Hope Simpsen's "The Refugee Problem (Londen 1939)
and "Refugen, A Review of the Situation since September 1938"
(Londen 1939) both excollent serveys outlining shooosses and
failures in coping with the relief, reparadation and resettlement
of refugees.
001 Mive Chauncey(Beo'y), Aksin, Abrahamson, Bernstein, Cohn, DaBois
Friedman, Gaston, Hodel. McCormack. Paul, Pollak, Raines,
Mann, Laughlin, Lesser, Luxford, Standish, Stewart, H. D. White,
Files.
Regraded Unclassified
257
REFUGEES
1930
-
1942
The death of Fritdjef Banson in May 1930 was a distinct less to
the refugees whose problems had absorbed his attention during the
last ton years of his life. After a year of study and uncertainty
the League of Nations established in 1931 the Hansen International
Office for Refugees to carry on the work which Dr. Nansen and 10.
(ttated
The League of Nations while accepting responsibility for the
legal protection of refugees. had always considered its interest in
refuges problems to be of a temporary nature and had particularly
excided assuming responsibility for the relief of refugees. Conse-
montly the new Samen Office The autoblished as or intenence body
WAT The authority of the League of Entions with mislates :- con-
alois its affairs by 1938 and to restrict its humanisarian activities
to the coordination of the efforts of private organizations engaged
in administering relief to refugees.
In order that the legal protection of refugess might ba assured
after the closing of the Nansen Office. the League of Nations pro-
vided, through the medium of the Convention of October 29, 1933,
for the issuance of Hanson identity certificates y the Governments
signing the Convention and for rights of residence and employment.
and other benefits fer Russians, Antendens, and assimilated refugees
then under the protection of the Manage office
After the Plebiscite in the Bear in 1935 approximately 7,000
former residents of the Bear left that territory, most of them to
settle in France. This now group of refugres was added by League
action to those already under the protection of the Nansen Office
and a recommendation was made to the Governments that Hanson 1den
tity certificates be issued to them
In 1936 Judge M. Michael Hansson of Horway was appointed presi-
dent of the Nansen Office and carried the work forward with energy
and distinction until its close in 1938. He greatly simplified the
work and finances of the Office. reorganised its nine represente
tive offices in different European countries. and achieved a realis
tie accounting of the refugess remaining unsettled. AS the clase of
his work in 1938. Julge Nansser reported that 600,000 refugees,
Buseians, Amenians, Assyrians, Assyrian Chaldeans, Tarks and
Saarlanders remined under the sare of the Office. the depression
years from 1931 - 1938 had not eaced the task of settling refugees
and it TM significant that twenty years after the and of World War
I this substantial mmber of people remained in an unsettled state
They were destined later to join the streem of refugees from Central
Barepe and the war refugees of the western Buropean countries who
fled southward into France in advance of the German armies in the
spring of 1940.
Regraded Unclassified
258
2
The was in Ohina beginning in 1937 precipitated the largest
invered signation in recent history. It is estimated that approxi
- 30,000,000 Chinese fled before the Japanese armies in two
movements from the coast areas to the agricultural
Sucretant one from central China and the southeast to the south
vast and the other from the northeast to the northwest Skilled
industrialists, small merchants, government employees
and intellectuals participated in government afforts to
2014 intentry and cultural activities westward. Unakilled laborers
passents more closely tied to the land moved shorter distances
valleays and highways from areas of military action and were
DU proce to return after the Japanese occupation or the recepture
X the 12453 by the Chinese forces
further this westward movement will prove permanent or tempo
7477 has not yab become clear Before the Japanese invasion the 20 :
THE LA the export trade from the constal civies in the depres-
rests at the early thirties manial - advents from 10349 16
vimilar 10 that which Losk place be elder
a Costed Marks Offinial - Thisa ball -
socialization and any prove para accountive d'un the we
the 70% w the Chinage repulation 42
has - 105 of the Inlas LADA 0243 of the RECEIVED
Then the Basi Party assumed control of the German Government is
1970 Whomands of new refugees vere dispersed over central and wast
are Dirope in the beginning of a movement which gained somentum
seving the first years of World War II and finally developed into
at unpresedented pattern of dislooated groups and pegulations in
1941 and 1942. Those in Germany who opposed the Hapi political
philosophy, non Aryans according to the Nuremburg laws, acientiate,
intellectuals, authors, artists, the members of other liberal pro-
Tersions, and labor leaders, were first removed from government
posts and later from private positions in the universities. publich-
108 houses, and business, were arrestedand confined in concentra
11on camps, deprived of their property and citizenship. and finally
Ariven from Germany to find new places of livelihood as best they
sould in other countries
Neighboring countries, Anstria, Hungary, Poland, Cyecho
Carakia, Switserland Bergium, the Netherlands and France accepted
the refugees, often in flight over their borders at night, in the
arpectation of extending hospitality to them for B temporary period
until they could amigrate to places of permanent residence oversens.
Approximately half of the Jawish refugess who left Germany in the
sarly days of the persecution migrated to Palastine
In October 1933 the League of Nations sppointed James 6.
MaDonald as High Commissioner for Refugees (Jewis): and other) Coming
Tree Germany, but separated the office from the League to avoid the
Regraded Unclassified
259
sprearance of criticium of internal taken within Cormany,
- member of the Council ofthe League of Nations This separa
tion militated against affective trantment of the problem whinh grew
in proportion as Surmary intensified her persentions of the Jess.
acpanded her philosophy of the recial state, and drove increasing
from her borders To amphasize the nost of Lengue action in
suppling the flow of refugees at its and of organizing assis
CARRE 30 rufuguse under the authority of the Langue Itself Nr.
resigned in December 1955, reporting at the time thes approx
60,000 refugees had left Germany of whom 15,000 remained
De (not) of Live of Telephone U issury 1856
130 video ins --- FLx was
updisted Right Commissioner no Centrage team
"PR settem on behalf of refugens - restricted " store - M
King left their country of origin and to nagotiations with the
with respect to their legal status and to employment net
without Responsibility for the re:ef ⑇ refugence wee again
1051 to the private agencies
Through the Convention of February 1938 identity certificates
vara usda available to refugees from Cermany similar to those pro
vided for the Hansen refugess is the Convention of 1933. In May.
1934 refugees from Austria were included within the competence of
the 31gh Commissioner and within the provisions of the Convention of
for Gorman Assolues with Austria in March 1938 added non them
reads to the street of central European refugess who HOTS al ready
laxing the expecities of the countries of temporary refuge of west
on Europe In as affort to mbstitute planned migration for the
chairte dispersion of refugess which was proving disturbing to the
pages and comfort of other countries President Franklin D Roosevelt
remoned thirty two Governments to the Brian Conference of July 1938.
Haports received at Brian indicated that some 125,000 refugees
had ol ready left Cermany and Austria and that 700,000 additional
persons ware under the necessity of departing because of their
Tacial origins or their religious and political beliefs Neighbor
ing countries reported that they could not shoorb more refugees on
less they vare relieved of those already noospted. Offers to
receive refugees for permant settlement were not forthouming at
Ivlan Countries of issigration with large numbers of unemployed de
their large cities WORK fearful that the refugues from central
Europe yould add to their urban papulations and bring with them the
political conflicts of which they were the victime. The Contrican
Republic, in contract to the action of other Governments offered to
accept 100,000 for settlement in agriculture
260
The Governments at Ivian adjourned to a second mesting in London
in August 1938 and there organized the Intergovernmental Committee
with Lord Winterton, the representative of the British Government as
Chairman The first action of the Intergovernmental Committee was
to explore with Germany the possibilities of orderly amigration of
the refugees with sufficient capital in their possession to contri
Into to the costs of resottlement. The negotiations came to naught
of the German proposals proved unacceptable to the government Nom
born of the Intergovernmental Committee and to the refugest themselves
Thereafter commissions of exports were sent to explore the for
sibility of the settlement of refugses in northern and southern
Schodesia, British Guiana, the Dominican Republic, and Mindanso in
the Philippines. Costs of settlement in Africa proved high but the
settlement of experimental groups of 500 families was recommended in
the other areas. The outbreak of the war in Suptember 1939 resulted
la the cancellation of plans to settle refugees in British Guiana and
the Philippines but the Dominican project proceeded under the suspiose
of the Dominican Republic Settlement Association, a private corpora
Vion organized in New York, which entered into a contract with the
Dowinican Government. Over 500 refugess were received in the Sosoa
sattlement in the Dominican Republic before difficulties of trans
portation provented the transfer of additional numbers.
In November 1938 widespread riets against the Jews broke out in
may cities and towns in Germany and Austria Synagogues were
despoiled and burned, shop windows were broken. private homes were
looted and Jews were rounded up in the streets, loaded into trucks
and driven off to concentration camps The pattern of the disorders
YOR identical in timing and other features in so many different
cities and towns in Germany and Austria as to give rise to strong
empioion that they were organised with the full knowledge of the
government authorities. They followed the imposition of very heavy
fines on the Jewish communities of Germany as punishment for the
shooting in Paris of a German consular official by a Polish refuges
whose relatives had suffered from persecutions in Germany
During 1939 the countries of temporary refuge in western Europe
ware obliged to seal their borders against the further influx of
refugees. Palestine the United States, and South America had
abserbed approximately 270,000 refugees in about equal proportions
About 20,000 reached Shanghai and Havana, Cuba served as an open
port of distribution in the Western Hemisphere
During that year the forced process of dispersion was overseas
Roats were leaded at German ports for undesignated points in South
America. Refugees were charged for roundtrip protages. The Captain
261
5
proceeded from port to port until he DAd disposed of his cargo of
misery. Thispractice cause to an end in liag 1939 when the
5.8. SR LOUIS with over 900 passengers aboard who refused permis-
sion to disembark its passengers at Havana and returned to Europe to
distribute them in England, the Netherlands, Belgins, France and
North Africa Other boatloads of refugees left Mediterramen ports
to wander aimlessly for weeks in the eastern Mediterrensan seaking &
haven of hospitality. There was substantial illegal imaigration
into Palestine. Dispersoin in the Near last ended in February 1942
with the tragedy of the sinking of the 8 8. STRUMA, which was refused
permission to land at Istanbul, in which over 700 refugees lost
Their lives by drowning
The transfer of Sudetenland to Germany followingthe Manich
seillement of September 1938 and the occupation of the rest of
Osechoelovakia in March 1939 added 180,000 residents of Crecho
slorakia subject to the Nuremberg laws to the 5,000 refugees who had
excaped from Germany and Austria to the cities of Bohamia and
Noravia. These-latter exemplified the usual pattern of refugee 62
perience in thatthey were forced to flso again almost immediately
after their initial escape from Germany. Many in fact had reached
Brno and Prague by way of Visnna, and, uprooted & second time fled
westward to Switzerland, Belgium, and the Netherlands, md Frame: some
to escape from Barope eventually shrough Lisbon, others to be trapped
in vestern Europe again and deported back castward
In the brief period of months between the transfer of the
sudetenland to Germany and the occupation of Osechoslevakia the
British and French Governments attempted to assist the Oxechoslovak
Government to organize the emigration of refugues. The British
Government made an original loan of 10,000,000 Pounds for the par.
pose and later the British and french Governments made 16,000,000
Pounds available, half as a loan and half as & gift. Oat of the
8,000,000 Pounds loaned, 6,000,000 Pounds were earmarked for repay
sent of the original loan of 10,000,000 Founds and the balance of
4,000,000 Pounds of this loan was made available as & gift This
latter fund remained in London available for the expenses of the
amigration of refugees after the occupation of Caschoslovakia
About 2,500 Jewish refugses were assisted to emigrate to Palestine,
some 7,000 political refugees reached England and other unknown
nombers managed to escape to Poland, the Sonadinavian countries
Western Enrope, the United States, and South America.
In accordance with decisions taken in earlier years by the
League of Nations, the Kanson International Office for hefugees
(Enssians, Armanians, Assyrians, Assyrian Chaldeans, furks, and
Enarlanders) and the High Commissioner for Refugees Coming from
Germany (Germans and Austrians) concluded their activities in
December 1938. Logically. there was no reason for distinguishing
262
between the different groups of refugees It WBS also obvious that
the League could not cease its activities on behalf of refugees at
a time when their number was increasing rapidly. Consequently the
bly of the League in 1938 constituted a new High Commissioner
of the League of Nations to deal with refugees hitherto oning under
the Nansen International Office for Refugees and the Office of the
High Commissioner for Refugees Coming from Germany Sir Herbert
Emerson was appointed High Commissioner and established his office
in London
His duties were rigidly set forth in the resolutions estab
lishing his office, to provide for the political and legal
tion of refugees, to superintend the entry into force and the application
of the legal status of refugees as defined in the Conventions of October
28, 1933 and February 10, 1938, to facilitate coordination of humanitar
ium assistance, and to assist Government and private organizations in their
efforts to promote emigration and permanent sottlement. In February 1939,
Sir Herbert Emerson was elected Director of the Intergovernmental Committe
and thus was able to combine the work of both organizations in ODS office
The Assyrians in Iraq and Syria technically under the control
of the Nansen Office. some 30,000 in mumber, provided a specific example in
their experience of the many political racial and economic difficulties
inherent in the effort to settle refugees. Originally participants in
World War I on the side of the Allies in the Near East, they had taken
refuge after the war in Iraqi When the United Kingdom in 1933 relinquished
its mandate over that country they became refugees a second time and
their efforts to emigrate into Syria resulted in clashes at the Iraqi Syrian
border. The League organized contributions toward the expenses of
settlement from the interested Governments These funds were administered
by an autonomous body set up by the League, known asthe Trustee Board After
efforts on the part of the Nansen Office to find areas ofsettlement in
Brazil and British Guiana hadfailed plans were made in 1936 to settle the
Assyrians on the plain of the Ghab in Syria In 1937 this plan had to be
abandoned as - French Government notified the League of its intention to
relinquish its mandate over Syrea In the end the Trustee Board spent the
available funds in establishing 9,000 Assyrians who had entered Syria in the
Valley of Khabur where they had encamped in 1933, an area considered at the
time unsatisfactory because of its proximity to the Turkish border 20,000
Assyrians were assisted in establishing homes in northern Iraq as a minority
group because other plans for emigration and settlement had failed to
materialize. Those who migrated to Syria eventually acquired Syrian citizen
ship and thus lost their refugee status. The Trustee Board ceased its activities
in January 1942, twenty four years after the Assyrians entered the refugee
state, immediately after World War I. The original homeland of the Asayrians
in Kurdistan and Persian Azerbaijan had been lost to them in the peace
settlement and they belonged to no country which could give them protection
263
Ca the collapse of the Loyalist Army in Spain in February 1939
scas 340,000 refugses burst over the border into France The exodus
use disorderly. Soldiers, civilians, old men, Towen end children
troked along the roads undernourished, without equipment, many ill
and dying on the way. While at first there was indecision in France
with respect to admitting the refugees the final decision was to
intern than in refuges camps at Arjeles-sur-Mer and Cyprien.
Although families were separated, man sent to zoma camps and women
to others, there were comparatively few casualties Generally the
women and children were moved inland from the coast. Conditions in
the refuges comps were frightful in the early months because of the
lack of squipment, heat and sanitary provisions. Food was scarce
and inadequate Gradually these conditions improved.
is many of the refugees were flesing primarily from military
action repatriation to Upsin started immediately aski proceeded in
the early days of the movement at the rate of 400 daily. In March
1939, the refugee group was reported to consist of approximately
720,000 soldiers, 40,000 male cigiliane, 10,000 wounded aen in
hospitals, 170,000 vomen and children. Repatriation yas organized
Type all who were willing to return to Spain. However, some 40,000
political refuges who sould not return to Spain with safety
and were placed in labor camps and Absorbed in French La
dustry during the water Many joined the French Foreign Legion
Others migrated to Mexico, the Dominican Republic, Latin med. Bouth
American countries, and substantial mimbers proceeded to North Africa.
An unknown number of the total group was absorbed in Prench country
nities
The German invasion of Polaná in September 1939 precipitated All
eastward movement of refugees far larger in volume and more rapid
and violent in action than the westward movement which had been in
process since 1933 Poland's population of 3,000,000 Jews consti
tuted the majority of those affected by the advance of the German
armies sastword, but as the war was fought more bitterly distinctions
between the trentment of Jews and Poles at the hands of the Germans
became loss marload. Loss than 100,000 refugees from Poland escaped
into the Baltic countries end southward into Rumania, Hungary and
Bulgaria. Over 1,175,000 Jews became subject to German mntrol in
the area of former Poland that was incorporated into the German
Reich and in Goverment General Poland.
Unknown numbers of Polich and Jowish refugees who resided in
or fled into the area of former Poland which was occupied by the
forces of Soviet Russia were moved castward to Siberia and south-
eastern Asiatic Russia.
264
-8-
The conquest of Poland al so created mumercuscross currents of
population movements. The policy of the German Reich was to repa-
triate German minorities in eastern and southeastern Europe to the
Altreich. A treaty concluded with Italy in the Sall of 1939 pro-
viding for the return of some 270,000 Germans from the South Tyrol
was the first effort to implement this policy. Later similar
treaties were signed with Latvia and Esthonia for the return of ap-
proximately 75,000 3 Itic Germans, Some 300,000 Germans were also
repatriated from Bukovina, Bessarabia and Rouman 1a.
As the members of these German minoritiesin other countries
returned to Germany they crossed the paths of the 300,000 to
400,000 Jewish refugees from Germany, Austria and Crechoslovakia who
were constantly being deported castward to the ghettos established
in Warsaw, Lubling and Lwow. These constituted the remainder of the
refugees who had been unable to escape from central Europe before
the outbreak of the war. The last to escape had gone by boat to
Shanghai or through Poland and across Siberia to Harbin and
Vladivostock and thence on to the Philippines or to the Western
Hamisphere through Kobe and Tokohama.
As western Poland was incorporated into the Reich both Poles
and Jews were driven eastward into Government General Poland It
was estimated by Polish sources that over 1,200,000 Poles had been
moved into Government General Poland by Germany by the end of 1939
Germans in Government General Poland were returned to Germany
Germans were also moved from southern and eastern Poland occupied
by Soviet Russia to Germany. From this area Poles ad Jews
were evacuated far eastward into Ruesia to be replaced by & Russian
infiltration westward No accurate figures concerning any of these
movements will become available until after the war when theefort
to repatriate uprooted population groups will disclose their magni-
tude. There 1s little evidence thatany of the planned movements
were completely effected The task of accomplishing social
homogeneity in given areas has proven difficult even to totalitarian
authority. Germany pressed by cunstantly increasing demands for
labor to meet the production requirements of an expanding war could
ill afford to send suffisient Germans to the former western Poland
to colonise the area and to develop German racial predominance over
Poles on her new eastern border. Needless to say however the move
ments in eastern Europe were substantial and on a scale much larger
than their counterparts in World Var I. German reports in 1941 in
dicated that approximately 500,000 Germans had been repatriated from
eastern and southeastern Europe.
265
-9
At Soviet control was extended to Lattia, Esthonia and Lithuania
the refugees from central Europe who had escaped into the Baltic area were
moved eastward into Russia. Those who were fortunate enough to have secured
visas for Palestine or for countries in the Western Hemisphere were permitted
to proceed to their destinations. Soviet infiltration into the Baltic
countries coincided with the return of Swedes, Denos, and Norwegians to their
countries of origin
Finns from the Karelian Isthmus ceded to Rustia by the peace treaty
between Russia and Finland were rescttled in the diminished area of that
hard prouned country Over 400,000 people had to be placed on the land or
in industry at & time when the resources of the Finnish Government were
exhaunted by the war. Some assistance was provided by private funds raised
tas the UnitedStates.
Norway faced a similar problem of internal resettlement after the
Berman invasion Approximately 400,000 people were moved from the coast
directive ATUDE into the interior of the country including many who had resisted
the invasion to the short lived defense of their country.
The advace of the Cerman armiesinto the Low Countries of western
Europe in the epring of 1940 uprooted civilian populations on & scale comparable
to that precipitated but a few months earlier by the invasion of Poland This
morement of about 3,000,000 Datch, Belgian and French people in flight to
southern France in advance of the German armies was described dramatically in
the press which reported simultaneously the collapse of the allied armies in was
ern Europe Old men, women and children desperately clinging to their family
possessions clogged the highways impeding the movements of the armies attempting
to defend them Included with the resident civiliane were some 140,000 refugees
from central Europe who had found temporary respite in Holland Belgium and France
wille they sought places of final immigration overseas.
The great majority who had fled to safety from military actions returned
to their homesafter the signing of the armistice between France and Germany
illustrating the general ly temporary character of such war refugee movements
Political and racial refugees and those who had resisted the German advance as
goverment officials or asmembers of the armed forces, however, attempted to
escape with the British Army from Dunker or proceeded through southern Pr nce
to Spain and Portugal whose Atlantic po.
"AS the only exitafrom var torn
Europe
England after the n ight of her defeated army from Dunkerque found herself
harboring some 70,000 central European refugees in addition to the members of the
ailitary forces of her allies who had escuped with her own forces The threat of
an impending German invasion from the continent and the fear of "fifth columnists"
among the refugess induced by the recent experiences of Norway, the Netherlands,
Belgium and France understandably resulted in the internment of all of the
refugees. A previous attempt to classify them according to the degree of danger
which each presented individually had failed to esbablish confidence in the results
of the procedure
266
- 10-
During the period when all were interned some were transferred with
German prisoners of war to Canada and Australia. Later when the defenses
against invasion were strengthened the great majority of the refugees were
released after a second more careful classification had determined that they
could be counted on to participate loyally in the war effort against the
common foe. Many were returned from Canada and Australia for release in
England.
As a result of the air bombing of I ngland extensive plans were
developed for the evacuation of children from the cities to rural districts.
In Canada, the United States Had Australia arrangements were made to evacuate
British children oversous. Approximately 3,000 children were removed to
Canada, stout 3,500 to the United States and smaller numbers to Australia.
These plans had to be abandomed because of the lock of warships to protect the
transports at дек.
In the late summer and fall of 1340 Germany in her efforts to bind
allies in the Balkon countries more closely to the Axis cause did not besitate
so claimity groups as pawns in her strategy. In Vienna in August 1940,
Hungary was awarded part of the coveted area of Transylvania and approximately
two and a half million people. The fact that many Roumanians were included
in the transfer demonstrated again the difficulties involved in legislating
boundaries to schieve racial homogeneity in the confused pattern of racial
strains in southeastern Europe.
South Dobrudja WAS allotted to Bulgaria which agreed to repatriate 65,000
Bulgariens from the North Dobrudja. The transfer to Roumenia of Roumanions in
South Dobrudje was also plenned. Slovakia undertook to repatriate Slovaks from
the Protectorate of Bohemia and Moravia.
In the west Luxemburg and Lorraine were incorporated as provinces into
the German Reich. Again non-Aryan refugees, members of the Government of
Luxemburg, end political refugees were forced to flee. Some 20,000 of the French
population of Lorraine were expelled without warning into France and only
vigorous protest by the Vichy Government prevented the expulsion of larger
numbers from their homes, In November 1940, 10,000 Jewish refugees were driven
from Baden and the Palatinate into southern France to crowd the camps already
overpopulated with other central European refugess who had been interned after
the armistice in southern France.
As the war spread to the Balkans and Greece exit for refugees from
Europe became incressingly difficult, Spain refused to permit nen of military
age to pass through her territory and Portugal, fearing that she might be
forced to maintain increasing numbers of refugees permanently on her territory,
refused admission to all who lacked visas to overseas countries. Shipping from
Portuguese and Spanish ports was greatly reduced by the cancellation of the
sailings of French and American boats. The route through Algiers and Casablanca
became the only egress for those denied transit through Spain.
Regraded
Inclassified
267
- 11 -
In July 1941, the United States concentrated the examination of
visa applications at the State Department in Washington and most countries
in Latin and South America restricted entrants to those individually
approved by high administrative authorities.
Germany in November and December 1941 also refused exit westward to
the refugees still within the areas occupied by her armies. Deportations
eastward to ghattos in Poland were renewed, Old people previously considered
secure for the remainder of their lives were included among the deportees.
Reports of mass executions in Poland by shootings, hangings and burnings in
synagogues were increasingly persistent from the occupied areas. Individual
cities were frequently reported in the German press as "Judenrein". It was
estimated that at the close of 1941 approximately 200,000 Jews remained
in Germany, 70,000 to 80,000 in Czechoslovakia, 1,250,000 in Hungary and
Roumania, and 1,000,000 to 2,000,000 in former Poland.
The advance of the German araies into Russia drove before them
the greatest migration of a. decade in which the history of uprooted populations
had exceeded in stark tragedy all previous records of modern history. No
authentic figures have become available but conservative estimates place the
numbers driven eastward as between ten and twenty million.
In addition to political, racial and religious refugees, those who
fled before advancing armies to return later to their homes and population
groups exchanged or moved about as pawns in the development of political
and military strategy other dislocated groups consisted in prisoners of war
and those enlisted voluntarily or forcibly for labor in German's war industries.
Hopefully these migrations may prove also to be temporary in nature. Apart from
one and a half million prisoners of war, principally French employed on farms
and in industry, and excluding Poles not classified as war prisoners, the
Reichsarbeitsblatt of July 15, 1941, reported the following totals of foreign
workers employed in Germany us of April 1, 1941:
Poland
875,000
Protectorate of Bohemia
and Moravia
150,000
Italy
132,000
Netherlands
90,000
Belgium
87,000
Slovakia
69,000
Yugoslavia
48,000
Denmark
31,000
France
25,000
Hungary
21,000
Switzerland
17,000
Union of Soviet
Socialist Republics
10,000
Bulgaria
8,000
268
- 12 -
Roumania
4,000
Norway
1,400
Sweden
1,200
Spain
1,100
Greece
500
Finland
200
Portugal
100
Later German statements in January 1942 gave the number of foreign
workers as2,100,000 exclusive of prisoners of war. Since then the lebor
shortage in Germany has become increasingly acute as larger numbers of German
industrial and farm workers have been drawn ínto the army to replace losses
on the Russian front.
No statistics exist in any country of still another type of movement
resulting from internal evacuation to avoid anticipated military action such
as that from the Channel Coast in France or from the east coast of England.
Somewhat of this character was the evacuation in early 1942 of 110,000 persons
of Japanese origin from the Pacific Coast areas in the United States to intern-
went camps in the interior states. Nor are there any satisfactory estimates of
dislocations caused by the removal of industrial centers for military reasons
or the inevitable shifting of war production from one area to another. Such
movements may prove to be of a permanent character dependent upon the
vicissitudes of the war and the economic adjustments consequent upon the
peace settlements. They have been substantial in the United States and even
greatar in Europe because of the German effort under the New Order to integrate
the inductry and agriculture of Europe into a. Germanized whole,
In July 1942 news of mass arrests of Jews in Paris shocked the civilized
world. Men and women of all ages, children, and even patients in hospitals
were arrested at night and sent to concentration camps. Trainloeds of refugees
left occupied France immediately for unknown destinations in eastern Europe.
women with children under two years of age were spared. Many suicides were reported
and mothers turned their children over to people standing on the streets as they
were taken from their houses.
Befugees who evaded arrest fled in fright over the Swiss border and across
the demarkation line into unoccupied France. Arrests and deportations followed
a few weeks later in southern France. All exit permits for departure from France
were cancelled and none were available thereafter to Jews of other than French
nationality. Following the deportations from southern France some 5,000 refugees
managed to escape across the border into Spain where many were interned.
Public protests arose in France, particularly from church authorities, but proved
ineffective to stop the deportations.
269
- 13 -
It wes estimated that between 50,000 and 60,000 Jewish refugees
who had failed previously to emigrate from southern France were cought by
the cuddommers of these measures. Lesser numbers were trapped in occupied
France. Similar arrests and deportations were later reported from Belgium,
the Metherlands and Noresy.
On December 17, 1942, the Department of State of the United States
in concert with the governments of Belgium, Crechoslovakia, Greece, Luxembourg,
the Netherlands, Norway, Polend, Soviet Russia, the United Kingdom and
Yugoslavia and with the French National Committee issued a statement condemning
the deportations, mass executions and extermination of the Jews in Europe.
The statement included the following:
"From all the occupied countries Jews are being transported in
conditions of appalling horror and brutality to eastern Europe.
In Poland, which has been made the principal Nazi slaughterhouse,
the ghattos established by the German invader are being systematically
emptied of all Jews except a few highly skilled workers required
for war industries. None of those teken away are ever heard of egain.
The able-bodied are slowly worked to death in laber comps. The
infirm are left to die of exposure and starvation or are deliberately
massacred in mass executions. The number of victims of these bloody
cruelties 1s reckoned in many hundreds of thousands of entirely innocent men,
women, and children.
"The above-mentioned Governments and the French National
Committee condern in the strongest possible terms this bestial policy
of cold-blooded extermination.
The issuance of this statement was the only joint action of Governments
on behalf of refugees since the beginning of World Wer II. Action by the
League of Nations High Commissioner for Refugees and by the Intergovernmental
Committee was restricted by the spread of the war primarily to the coordination
and encouragement of the efforts of private agencies to essist the refugees
to escape from Europe or to provide relief in areas where they were permitted
to function, Interventions were usde by the offices perticularly with the
British Government on behalf of individual refugees and occesionally with
other Governments in the interest of special groups of refugees. An instance
of the latter was the successful intervention with the Retherlands Government
in November 1941, which resulted in the acceptance at Ouracao, Netherlands
West Indies, of eighty-three refugee passengers aboard the S.S. CABO de HORNOS,
who bad been denied admission to the Argentine and faced the threat of returning
to Spain and reinternment.
Most the group had left Marseilles in January 1941 shoard the S.S. ALSINA.
They were confined to the ship for four months in the harbor of Dakar, Frendh
West Africa, were later transferred to a concentration camp at Casablanca, and
were finally permitted to embark for South America ten months after their
Unclassified
270
- 14 9
departure from Marseilles. Arrived at Curacao they were accepted solely on &
temporary basis and thereafter required the services of private agencies for
relief and assistance in organising their departure to places of final immigration.
The occupation of southern France by Germany in November 1942 virtually
closed the exits of Europe to the refugees. The small mumbers who had managed
to escape into Spain and Portugal still entertained prospects of departure to
the Western Hemisphere, In December the Portuguese Government generously
regularized the status of all refugees then within her borders whether they
had arrived legally az not They were confined in residence as transit
travellers is the coastal village of Ericeira
in contrast the occupation of North Africa by American and British
forces in November 1942 raised new hopes for some 20,000 central European
refugees and a 1100 number of Spanish refugees confined in labor ano concentration
camps in Algiers and Marooso. There was every prospect that their release would
soon be effected
The further treatment of the refuges problems of Europe thus became E.
matter of post war reconstruction The League of Nations High Commissioner
to Refugees the Intergovernmental Committee and the International Labor
Office were engaged at the close of 1942 in pursuing studies of the problem
with a view to planning treatment as an essential part of the organisation
the peace settlement. Such plans naturally awaited the determination of
boundaries and of the possibilities of repatriation for dislocated population
groups and of the resapture of nationality particularly by the Gorman and
Austrian refugees most of whom had been denationalized by decrees of the German
Beich 12 November 1941 and earlier.
BIRLIOGRAPHY Sir John Hope Simpson, The Refuser Problems (London 1939) and
Refunces. 1 Review of the Situation since September 1938 (London 1939), issued
under we auspices of The Royal Institute of International Affairs; "Refugees"
The unle of The American Academy of Political and Social Belates (May 1939) 1
Loogue 1. Reibern, "The Legal Status of Political Refugees, 1920-1938"
of International Law Vol XXXII 1938 ppo 680-7031 Buseian, Arzanian
AMERICAN ASSYED Chaldean and Turkish Refugees. Report by the Secretary General
on the Future Organisation of Refugee Work. (A, 28.1930 XIII) (Ref. GAC 15.1930)
(Ser L.O.N.P. 1930 XIII.2) Convention Relating to the International Status of
Refugees Geneva, October 28g 1933 (0.650 M.311.1933) (Ser N.P.C Official Journal,
page 109); Latter of Resignation of James G McDonald High Commissioner for
271
- 15 -
Refuress (Jewish and Other) Coming from Germany addressed to The Secretary
General of the League of Nations, London, December 27, 1935, (0.13 M.12.1936 III,
Amex) (Ser.L.e.N.P. 1936. XXI B.2)
Manage Inter (1) Office Befuress Benor's the Liquidation the Office,
Geneva, June 14, 1937 (4.11.1937.211) (0.226.1937.XII.); Convention Concerning
the Status of Beforees Coming Fre Gerrauy, Geneva, February 10, 1938 (0.75.M.30.
1938,XII) (Ser,L.O.N.P.MI.B. International Bureaux 1938.XII.B.1.)
Jamary 5, 1943.
⑉ Miss Charnesy (telles'y) Messrs. Abrahamson, Aksin, Bernstein, Mrs. Cohn,
Messrs. DuBeis, Friedman, Gasten, Hiss Medel, Miss Laughlin, Messrs. Lesser,
Laxferd, Marm, Notermack, Paul, Pollak, Raines, Smith, Standish, Stewart,
N.D.White
272
MAR 10 1944
MEMORANDUM FOR KR,
Pursuant to your suggestion, there follows &
brief summary of those problems relating to the work
of the War Refugee Board, in connection with which I
feel that you can, while you are in London, help our
cause a great deal.
4a you will note these problems are of major
importance and are directly related to the question as
to the extent to which the British Government is prepared
to give us its wholehearted cooperation in this task.
For this reason, may I suggest that a frank discussion
of the whole matter by you with Mr. Eden might well
result in a tremendous contribution to our efforts.
(1) Convincing the British that we really man
business.
There is good reason to believe that the British
are not yet convinced that there has been a real change
in this Government's attitude toward this matter - rather
that they feel that the creation of the War Refugee Board
was primarily a political move in an election year.
It is most important that ve convince the British
Government, as well as other governments, of our sincerity.
In this connection, a citation of come of the significant
steps which we have actually taken may be most helpful.
I an attaching a resume of the highlights of our action
to date, and ve are keeping our Embassy in London informed
of developments.
(2) Cooperation with the British.
Our position on this was best expressed in
our cable to Vinant of February 29 (1503). As we pointed
273
Regraded Unclassified
- 2 -
out, it is our pelicy to encourage and participate
in effective cooperative efforts with other governments
in taking all pessible masures for the speedy reseue
and relief of the Jews of Europe and other victims of
Hitler's persecution. We hope that our actions will
not be unilateral and that the British Government will
actively cooperate in concrete measures designed to
earry out this policy.
Whether there will be wholehearted cooperation
between this Government and the British Government is
not dependent as much upon the expressions of policy
made by each Government as it is upon the actual steps
which are taken by each Government to put these policies
into effect.
In brief, are the British prepared to take the same
kind of measures ve have taken?
(3) Relations with the Interzovernmental Committee.
As in the case of our relations with the British,
I think that it is most important to convince the Inter-
governmental Committee that ve really mean business. Once
they realise that our purpose is not to outshine them, or
to cast aspersions on what they are doing, but to get the
job done and get it done quickly, there vill be a better
basis for cooperation.
In connection with your discussions on the relationship&
between the Mar Refuges Board and the Intergovernmental
Committee, I would like to make the following points:
(a) The War Refuges Board is an American organ-
isation net up to carry out the policy of the American
Government, The Intergovernmental Committee is an inter-
national organization, representative of over thirty
nations, and therefore ebviously in no position to carry
out effectively and premptly the policy of any one individual
nation.
274
- 3 -
(b) The War Refugee Board is prepared to
lend every assistance to any and all projects which
the Intergovernmental Committee has undertaken or
undertakes in the future, designed to bring about
the speedy resoue of victims of enemy oppression.
In so far as financing such projects is concerned, the
Board has already paid out $200,000 towards operating
expenses of the Committee.
(c) The War Refugee Board is determined to
carry out the policy of this Government as annetinced
by the President. In doing this the Board is not anxious
to take on any job which can be done just as quickly and
effectively by any other organisation, whether such
organisation be demestic, foreign or international. If
the Intergovernmental Committee is in a better position
than the Board to carry out with speed any particular
project designed to save the lives of refugees, the
Board will gladly look to and support the Committee
in the execution of such project.
(d) On the other hand, the Board has no
intention of referring to or clearing with the Inter-
governmental Committee any project which is necessary
to carry out this Government's policy, unless such action
would facilitate the speedy effectuation of such project.
In the less than two months it has been in existence, the
Board has already taken many steps designed to save people
from death. A mere examination of these steps, in the
light of the record of the Intergovernmental Committee
to date, will reveal that most of these steps would not
have been taken in this short time had they been referred
to that Committee.
(4) Palestine issue.
The War Refugee Board has not taken and has no
intention of taking a position supporting the establish-
ment of a Jewish national state in Palestine.
The Board's sole interest in Palestine lies simply
in the question as to what extent Jewish refugees can be
brought into Palestine, oven if only on a temporary basis.
276
275
Regraded Unclassified
to
finance
the
of
From the standpoint, with which vo are concerned
of saving the Jeva in Europe from death, bringing them
into Palestine and placing them in camps, to be returned
to their homelands at the end of the war, is just as
effective as admitting them to Palestine on a permanent
basis.
she
of
(6) Cyrensica and Tripolitania.
We have as intention of turning down any project
for the resoue of refugees facing death solely because
of the problems which may be involved in finding a temporary
place to put these people once they escape from Hitler.
However, the fact that ve do not now have a place
where we can assure that these people can 60. at least
temporarily in as large numbers AS possible is actually
interfering to A great extent with our efforts to bring
these people out of eseay territory.
As you know, one of the specific recommendations made
at the Bermuda Conference vas that the British Government
consider the question of admitting refugees to Cyrenaica.
Moreover, in July 1943, at the time the President and Prime
Minister Churchill agreed to the establishment of a refugee
camp in North Africa, the President expressed a definite
interest in the possibility of establishing refugee havens
in Cyrenaica and Tripolitania. Às recently as January of
this year, Mr. Long informally presented the matter to
Sir Ronald Campbell. Despite this long standing interest
in the matter, no agreement has been reached between the
two Governments.
In my letter to you of March 2 it was recommended that
a definite proposal be made at once to the British Government.
We pointed out that once an agreement has been concluded with
the British the matter can then be cleared with the Combined
Chiefs of Staff.
In discussing this urgent matter with the British
they might be advised that this Government is prepared to
share with the British Government the responsibility for
2/10/44
276
- 5 -
arranging to finance the establishment and mintenance
of refugee camps in Tripolitania and Cyrenaica, including
the cost of transferring refugees to such camps; and that
this Government is also prepared to handle the transportation
problem on & cooperative basis with the British. Thus,
a division of obligations and responsibilities between the
two Governments could be made in this case as in the case
of the transfer of refugees from Spain to Camp Lyautey in
French North Africa.
The importance of establishing refugee camps in Tripol-
itania and Cyrenaica can not be overestimated, The War Refugee
Board is convinced that there is a real opportunity for
actually bringing many people out of German controlled terri-
tory, particularly from areas adjacent to Turkey and the
Black Sea. The Board is determined to do what it can to
bring these people out in as large numbers as possible. Once
these people are evacuated to Turkey, it is essential that
areasbe found to which they can be removed without delay.
Camps in Tripolitania and Cyrenaica could be used for this
purpose.
(Signed) J.W. Pehle
Attachment.
JEDuBoisteer
2/10/44
COPY
277
March 10, 1944
Memorandum for the File:
While we all realize that the War Refugee Board in its
five weeks of operation has barely scratched the surface of
accomplishments: the problem, the following are & few of its more outstanding
1. The Bulgarian bottleneck has been broken by our ar-
rangements for the rail transportation of 150 children every
10 days from Bulgaria to Palestine via Turkey. This small
step may have important implications in the whole Balkan
refugee situation.
2. To open the way for a flow of refugees from occupied
areas into Turkey and Spain, we have asked our ambassadors to
request the Turkish and Spanish Governments to relax their
border and other controls and publicly to announce their
willingness to accept refugees. We have indicated that we
will arrange for the maintenance of refugees in Turkey and
Spain and for their transportation to other temporary havens.
3. To induce the Spanish Government to accept more
refugees, we are taking steps to expedite the removal on a
compulsory basis, if necessary, of refugees now in Spain to
Camp Marechal Lyautey near Casablanca which is ready to re-
ceive them, but still empty.
4. We received word that it might be possible to evacuate
1,000 refugees from Constanza, Rumania, across the Black Sea
to Turkey, if a guarantee could be made to the Turkish Govern-
ment to replace an available boat, in case of its loss. With-
in 24 hours the War Refugee Board obtained commitments from
War Shipping and Lend-Lease and our representative in Turkey
was authorized to give the necessary assurances to the Turkish
Government.
Mairal Land has ordered Myron Black, Field Director
of War Shipping, from Cairo to Ankara to assist Ira Hirschmann,
our representative in Turkey, on the Black Sea shipping prob-
lem,
5. Several actual evacuation operations within occupied
Europe are now under way as the result of our facilitating
the speedy transfer of funds, the use of free exchange in
enemy territory and the necessary communications with enemy
territory. Specifically, projects under the auspices of
private organizations have been commenced to bring refugees
from Poland and Slovakia, where they face imminent death,
into Hungary, a place of relative safety, and to transfer
persecuted people from France and Rumania into Switzerland,
Regraded Unclassified
278
- 2 -
6. O.W.I., at our request, has started a program to
bring home to the people in Germany and the satellite
countries our determination to forestall further extermina-
tions of the Jews and other persecuted minorities and to
facilitate their escape.
7. For the first time, this Government now has 25 pro-
fessional employees working full time on this problem.
8. At our request the State Department is making appre-
priate representations through neutral channels to the
Bulgarian, Hungarian, and Rumanian Governments to desist
from deporting Jews to Poland and to assist in their escape.
Similar representations are being made through the Vatican
to the President of Slovakia.
Regraded Unclassified
COPY
279
TELEGRAM SENT
LEG
PLAIN
All
March 10, 1944
AMEMBASSY
LONDON
1812, tenth
Following our cable no. 1503 of February 29 you may
wish to make clear to the British Government that the steps
which the War Refugee Board is taking and is prepared to take
are in accordance with the following general patterns:
(1) The Board realizes that its chances of saving
most of the Jews and other victims of enemy oppression
from death lies in the possibility of changing the
actions and attitude of the enemy, particularly his
satellites, subordinates and functionaries. The Board
18 convinced that it is of utmost importance to undertake
at once an organized and concentrated effort to make clear,
by all appropriate means, to all Axis satellites that the
Allied Governments view in a most serious light their
assistance in any form to Hitler's program to exterminate
the Jewa, and other similar groups, regarding all such
action as criminal participation in organized murder.
The Board also believes it necessary to make clear to the
satellites by all possible means, its intention to do every-
thing in its power to resoue such unfortunates who are in
danger of death, in order not only to give the satellites a
clear view of the attitude of this country in the matter, but
also of the opportunities which exist for assisting in the
execution of our policy. The Board feels very strongly that
a campaign of this kind must be made through all possible
channels and be constantly repeated at every available oppor-
tunity. The Board believes that parallel action on the part
of other Allied Governments would do a great deal to assure
the success of this endeavor. At the moment it is important
that pressure be brought to bear particularly on Rumania and
Bulgaria, because in those areas there are many refugees in
imminent danger of death who can be evacuated to Turkey and
other places if those Governments permit it.
In addition to making formal representations to the
governments of the satellite countries, the Board feels that
there should be employed in this campaign all available means
Regraded Unclassified
-2- #1812, tenth, to London
280
for effecting the widest dissemination of our attitude not
only to the governments themselves but to the largest number
possible of the people of satellite countries. In this con-
nection the Office of War Information is cooperating with the
War Refugee Board in bringing home to the people in Germany
and the satellite countries the fact that we consider this
matter to be of paramount importance and intend vigorously
to pursue all possible means of accomplishing our objective.
(2) In addition to this program designed to bring out
a change in the actions and attitude of our enemies, the
Board 1e convinced that there is a real opportunity for
actually bringing many of these peoples out of German con-
trolled territory. The Board 1a determined to do what it
can to bring these people out, in as large numbers as possible.
The Board is certain that this Government and its Allies can
find for these persons temporary havens of refuge. The Board
feels very strongly that some solution of any problems which
may arise in finding B. temporary, refuge for these people once
they have escaped from Hitler can and must be found by the
British and American Governments and that in any event such
problems must be subordinated to the program of rescue.
The following examples of measures which have already
been taken by the Board will illustrate the extent to which
this Government is prepared to go in actually bringing people
out of Hitler's control.
(a) This Government has requested the cooperation of the
neutral European countries in this endeavor. Thus, in order
to increase the flow of refugees from occupied areas the
neutral Governments are being requested to relax border and
other controls, etc. The Board 1e offering to arrange for
financing the setting up of reception camps which would receive
refugees entering those countries and would make it possible
to take them on to other places as rapidly as possible.
(b) This Government is actively engaged in trying to
solve the problem of getting ships to transport refugees.
Thus, one of the greatest opportunities for actually rescuing
such people exists in the areas adjacent to Turkey and the
Black Sea. It 1s known that in Transnistria, Rumania and
Bulgaria there are substantial numbers of refugees in imminent
danger of death. It also appears that arrangements can be
made with the Turkish Government to receive refugees from
Regraded Unclassified
281
-3- #1812, tenth, to London
these areas. There are strong indications that the Rumanian
Government at least will permit a substantial number of these
refugees to leave Rumania. It is indispensable that means of
transportation be found at once.
The Board, in this connection, is endeavoring to arrange
for a small Turkish vessel to proceed to the Rumanian port of
Constanza and evacuate to Turkey approximately one thousand
children. That the charter of the 8. S. VATAN, & small
Turkish vessel, might be obtained, has been reported by the
Board's representative in Turkey providing a guarantee to
replace the ship in the event of loss would be made to the
Turkish Government. Such a guaranty was promptly offered by
this Government. The possibility of obtaining some Swedish
ships for this purpose is also being taken up with the Swedish
Government. The Board is also exploring other possibilities.
(o) Licenses to six private organizations in the United
States have already been issued by this Government giving
permission to their representatives in Switzerland, in order
to carry on relief and evacuation operations in enemy terri-
tory, to engage in the required communication and financing
transactions. Our 242 of January 18, 1944 and also our A-139
of January 31, 1944, describe, in this connection, licenses
which now have been amended to permit the acquisitions, if
necessary, of lecal funds against payment in free exchange or
free currency notes, from persons in enemy or enemy-occupied
territory. Your additional private agencies have received
identical licenses. This Government concluded in issuing these
licenses that any danger involved in permitting the enemy to
acquire such relatively ineubstantial quantities of foreign
exchange was far outweighed by the saving of lives.
More complete details will be sent to you shortly oon-
cerning these measures as well as others which the Board has
taken or is planning to initiate.
HULL
WRB:ULW:NG
BC
SE
NEA
EH
(GLW)
3/3/44
Regraded Unclassified
282
AIRGRAM
American Embassy
Quito, Ecuador
Date: March 10, 12:15 p.m., 1944.
Despatched:
Rec'd.: 11:15 p.m.
SECRETARY OF STATE
WASHINGTON
No A-138, March 10, 12:15 p.m., 1944
Department's circular airgram February 29, 7:30 p.m. re-
garding program of the President's War Refugee Board.
Embassy has again discussed this subject with the Foreign
Office and has emphasized both the great importance of the work
undertaken and the value that would be derived from Ecuador's
collaboration. The Foreign Office again indicated that it would
welcome being furnished with a concrete proposal as to the further
aid that Ecuador might render (my despatch No. 1041 of February 7,
1944) but it agreed to make at this time a public statement of
Ecuadoran support of our program. This morning the two principal
Quito papers, El Comercio and El Dia published a Foreign Office
press release of which the following is & translation:
"The Ambassador of the United States, in the name
of his Government, has approached the Foreign Office in
order to inform it of the determination of the United
States to rescue and aid the victims of Nazi oppression
in Europe and in order to consult on whether Ecuador
would be disposed to cooperate in that policy.
"The Ministry of Foreign Affairs has replied that
Ecuador shares the humanitarian sentiments which inspire
the Government of the United States and that it is pre-
pared to lend the cooperation requested, in accordance
with the possibilities of the country, for which purpose
the two Governments will have to consult and define the
nature and means of the Ecuadoran assistance."
SCOTTEN
840.1
JWG/ec
283
EMBASSY OF THE
UNITED STATES OF AMERICA
Lima, March 10,1944.
No. 9203
Subject: Oral expression of view by a Foreign Office offi-
cial concerning admissibility into Peru of war
refugees.
STRICTLY CONFIDENTIAL
The Nonorable
The Secretary of State,
Washington, D.C.
Sir:
I have the honor to acknowledge the receipt of the Department's
circular airgram of February 29, 1944, 7:30 p.m., wherein, with
reference to the Department's circular airgram of January 26, 1944,
7:00 p.m., the President's War Refugee Board through the Department
requested the Embassy to make clear to the Peruvian Governement the
position of the United States Government in regard to war refugees
and to explain the desire for cooperative action.
Since no reply has as yet been received from the Foreign
Office to this Embasey' note no. 1662 of Februaryl, last, sent
in compliance with the Department's spove-mentioned circular air-
gram of January 26, I took occasion to invite the attention of the
Secretary General of the Foreign Office, on calling on him on March
9, to the continuingly deep interest of the United States Govern-
ment in alleviating the situation of sufferers from enemy persecu-
tion and to the hope of my Government that cooperative action
might be forthcoming from the Peruvian and other governments.
Dr. Correa recalled the Embassy's note and stated that the
Peruvian Government was and had long been deeply sympathetic with
the tragic situation of victims of persecution as well as of the
incidence of war on innocent populations.
However, the situation confronting the Peruvian Government in
respect of its obligations to the Peruvian people had not appre-
ciably changed since 1938 when the Government had informed the
Refugee Committee at London of the ability of Peru to absorb solely
refugee agriculturalists. It was unfortunate that 80 few of the
refugees appeared to fall within that category.
Moreoever, now that a war was on, all immigrants to Peru would
have to be especially carefully scrutinized to avoid the admission
to the territory of the Republic of dubious persons who might prove
to be Axis agents.
AIR MAIL
284
-2-
While the foregoing statement would not seem to constitute a
definitive reply to the Embassy's above-mentioned note, it does tend
to confirm to a certain extent the opinion expressed in the Embassy's
despatch no. 9017 of February 11, 1944, to the effect that any reply
to be received from the Ministry would be delayed and that it might
prove noncommittal or negative.
Respectfully yours,
Jefferson Patterson
Charge d' Affaires a.i.
711
JP bw
Regraded Unclassified
285
The Chetto of Warsaw
Two hundred Dutch Jews deported from Holland by the Germans
to work at clearing up debris in the ruined ghetto of Warsaw, are
now the only inhatitants of what once was Europe's greatest concen-
tration of Jews, according to an eyewitness report from Geneva printed
in the London JEWISH STANDARD. "The ruins of the ghetto are still
strewn with the corpses of Jews who lost their lives in the last
heroic resistance against the Germans," the report said. "The Dutch
Jews engaged in clearing up the debris are sheltered in specially-
improvised barracks and the exploding of time bombs they turn up is
the only sound that breaks the silence."
(Source: Netherlands News, 15 March 1944)
co:Miss Chauncey(Ses'y), Cohn, Hodel, Laughlin, Pehle, Abrahamson, Aksin,
Bernstein, DuBois, Friedman, Gaston, Lesser, Luxford, Mann, McCormack,
Paul, Pollak, Rains, Standish, Stewart, H. B. White, Files.
286
March 10, 1944
10:30 a.m.
TO: Mr. Warren
FROM: J. T. Pehle
It will be appreciated if you will have the attached
cable dispatched at once to Dr. Joseph Schwartz, Central
Council for Jewish Refugees, Upper Woburn Place, London.
Attachment.
FH:hd 3/9/44
Regraded Unclassified
287
CABLE TO DR. JOSEPH SCHWARTZ, LONDON
Thank you for your cable of March 2 from Lisbon. Programs
outlined therein being carefully studied by the War Refugee Board.
Would appreciate any information you can send me concerning
refugee problems in northern European area. J. W. Pehle, Acting
Executive Director.
Regraded Unclassified
287
CABLE TO DR. JOSEPH SCHWARTZ, LONDON
Thank you for your cable of March 2 from Lisbon. Programs
outlined therein being carefully studied by the War Refugee Board.
Would appreciate any information you can send me concerning
refugee problems in northern European area. J. W. Pehle, Acting
Executive Director.
288
Unitarian Service Committee
C
0
Lisbon, March 10th 1944
P
Y
FOR THE EXECUTIVE COMMITTEE
Letter No. 287
Urgent - Memo on conversation with representative
of the British Embassy -
I was told to-day that word has just been received
from London that the British Embassy here is to assume responsibility
in respect to refugees of all refugees of all nationalities. The
speaker believes that & fair number - some now here illegally in
hiding, some from Spain, and others who will arrive from France and
elsewhere,- will be in need of this protection. He has already
started conversations with the Chief of the International Police about
establishing another residence forcee, if possible nearer Lisbon than
Caldas and Ericeira, so that Consuls or relief workers can easily go
back and forth.
The question was put up to me t Was the Unitarian Service
Committee prepared to accept financial responsibility and general su-
pervision of such a residence forces] The expenses per person, he
assumed, would be about the same as at Caldas or Ericeira and no
blanket guarantee would be needed, only the care for each refugee as
he came along. He said that he would very much rather have us take
the responsibility for the whole thing than have it divided among the
different relief agencies, as he has come to the conclusion that we
have less red tape and more energy than the others.
I said that it would be necessary to get a re-allocation
of funds from home if any large number of new refugees were to be
provided for, but I believed this could be done and I would write 1n-
mediately. He asked how many we were prepared to take care of immedi-
ately. I shut my eyes, took a deep breath and said 40. Actually we
could not do this indefinitely without additional money, but we could
do it out of existing funds for & limited period and I don't doubt
that additional funds will be forthcoming if the need is manifest.
This is to an extent an unhatched chicken and I don't like
to count on it too much, but the 066 is at least a sunstantial one.
I feel it quite a compliment to have the British Embassy ask our aid
in this way, and I know that we could count on active and effective
cooperation from them as well as from our own people. I would suggest
that the ground be softened up, 80 to say, to see about sending addi-
tional funds in our direction. Meanwhile, as soon as I have anything
more definite I will let you know, either by letter or by cable. I
need hardly say that if this materialises it would keep one person
busy. However, we will take a chance on that and trust that Mr. Grieve
Regraded Inclassified
289
Unitarian Service Committee
C
0
Lisbon, March 10th 1944
P
Y
FOR THE EXECUTIVE COMMITTEE
Letter No. 287
- 2 -
will be here before very long. This possibility fits in with what I
have already heard and reported to you from Dr. Kullman and other
sources, about more refugees coming here.
I asked specifically whether any Spaniards would be in-
cluded in this plan. The answer was a tentative yes. I should doubt
very much that it could really be thrown open to Spaniards, but the
idea is at any rate not to exclude them automatically. It is pro-
bable also that the Jewish agencies would come in on this, but it
would be preperred if we agree to take the responsibility for the
whole thing and then see what arrangements could be made with them
later. I don't think there would be any difficulty at this end.
(sgd.) Elisabeth Dexter
Expenses - We allow 200$ ($8) a week per person, with
clothing and medical care extra. Say $40 a month or a little more,
for an average. But we will need something additional of course
for administration.
:
Unclassified
230
Mar 10 1944
12:10 p.m.
TO: Mr. Warren
FROM: J. W. Pehle
It will be appreciated if you will have the attached
cable to Bern dispatched at once.
(Initialed) J.W.P.
Attachment.
FH:hd 3/7/44
291
CABLE TO BERN
Reference our No. 659 of February 26.
Please advise Department immediately whether McClelland has
accepted the appointment as Special Representative of the War
Refugee Board and as Special Attache to the Legation on war refugee
matters.
Also please advise Department whether all consular officials
in Switzerland have been notified by you of the contents of our
cable No. 251 of January 25.
292
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Embassy, Ankara
TOs
Secretary of State, Washington
DATED: March 10, 1944
NUMBERs 409
CONFIDENTIAL
HIRSEY MANN SENDS THE FOLLOWING FOR THE AVTENTION OF
PHELE, WAR REFUGEE BOARD.
is regards the individual mentioned in the Department's cable
of March 6, 1944, no. 168, I urge you to take no action in the
matter unless there is a compelling reason for employing and
sending him to Turkey at this time. With respect to the statement
made by the applicant that he is familiar with refuges and shipping
problems in this area since a portion of his business consisted in carrying
refugees from Rumania and elsewhere to Palestine, I would be interested
in learning his name se that I may ascertain and report to the Board
the nature and scepe of his former activities,
It is recomended by me that pending by return to Washington no
action be taken on this application since I count on returning early in
April with a detailed report and recommendations concerning the situation
here, including the number and type of individuals needed to carry en the
Program of the Board in Turkey.
STEIPHANDT
001 Miss Thansey (Sec'y) Messrs. Abrahamson,
Aksin,Bernstein,Mrs.Cohn,DuBois,Friedman,
Claston,Miss Nodel,Miss Lenghlin,Lesser,Lxford,
Stewart,H.D.White,Pehle.
293
Mar 10, 1944
12:10 p.m.
TO: Mr. George L. Warren
FROM: J.W. Pehle
I should appreciate it if the attached cable
to Ambassador Steinhardt for our representative,
Mr. Hirschmann, were transmitted at once.
(Signed) J.W.Pehle
J.H. Murphy:dh 3/9/44
I
Inclassified
294
TO STEINHARDT FOR HIRSCHMANN FROM WAR REFUGEE BOARD
This is WRB Cable to Ankara No. 5 Please refer to your No. 80
of March 3, 1944.
Te very much appreciate the excellent and active cooperation which
Ambassador Steinhardt has found it possible to give you. We are like-
wise most appreciative of the steps which he and you are taking as well
as your full reports and suggestions for action. We are actively follow-
ing up the points made by you and will keep you promptly and currently
advised of our progress.
1. As previously indicated, we are contimuing our negotiations
with representatives of the Swedish Government in an effort to secure
its agreement to supply ships for this work. Up to now, however, our
immediate prospects are not encouraging. To will advise you of any
further developments in this picture.
We still feel it most desirable to take all steps possible to secure
Turkish ships. At the present we have under tenative (repeat tenative).
consideration a plan by which this government would make & ship available
to the Turkish Government at once, provided in your opinion the Turkish
Government would be willing immediately to make available an equal amount
of tonnage for the evacuation of refugees in accordance with the Board's
program. Please advise us whether you feel that such an offer on the part
of this Government would result in quickly making available & Turkish ship
for refugee work. If we receive & strong indication from you that such
an arrangement would be & substantial help, we will immediately take the
matter up with the appropriate authorities of this Government. Te have not
(repest not) yet taken the matter up with the War Shipping Administration
or other appropriate agencies of the Government and will await your reply
before doing so. Please advise urgently.
2. If arrangements satisfactory to you and Ambassador Steinhardt can
be made for the purchase of the NECAT", at & cost of approximately
$400,000. the vessel to be donated to the Turkish Red Crescent to become
its property, the nécessary funds will be forthcoming. The American Jewish
Joint Distribution Committee has manifested an interest in furnishing the
purchase price of this ship on condition that it appear reasonably clear
that the boat will be able to complete the transportation of the 5000 Jewish
refugee children from Rumania to Palestine as indicated in your cable under
reference. The J.D.C., however, wishes to know whether it will have to pay
the necessary additional expenses, such as those for wages, fuel, et cetera,
which may be involved in transporting these children. We all agree with your
view that it would be most desireable to press the Turkish Red Crescent to
continue the vessel in operation to carry additional refugees after the agree-
ment to transport the 5000 children has been carried out.
It is suggested that you contact Mr. Resnich, J.D.C. representative in
Turkey, with respect to this matter.
JHMurphy:dh 3/9/44
295
NOT TO BE RE-TRANSMITTED
COPY NO.
12
BRITISH MOST SECRET
U.S. secret
OPTEL No. 80
Information received un to 10 A.M., 10th March,
1944.
1. NAVAL
One of U.S. S. Destroyers escorting an eastbound
convoy torpedoed southwest of ICELAND (c) yesterdav. Aircraft
from one of H.M. Escunt-Carriers escorting homeward convoy
From RUSSIA sank L 11-boat in Northern waters on 6th.
2. .IILITARY
ITALY. Heavy rain 8th Army Sector where
grouping and reliefs have been taking place.
BURMA. ARAKAN. 7th Indian Division continue
to press their attack on Japanese north of BUTHIDAUNG.
KALADAN. Our troops have withdrawn to positions
northwest of KYAUKTA to meet Japanese encircling threat from
the LAST HUKAWING VALUEY. Chinese troops continue mopping up
operations south of MAINGKWAN inflicting heavy casualties.
3. AIR OPERATIONS
WESTERN FRONT. 9th. Out of 526 U.S. heavy
bombers despatched 331 dropped 602 tons on BERLIN through
cloud, 160 dropped 269 tons on HANOVER and 30 dropped 72 tons
on NACEN. One enemy aircroft destroyed, 6 hombers missing
and two in the sea end two fighters missing.
9th/10th Aircraft dospatched: MARIGNANE air-
craft factory near MARSEILLF 44, DUSSILDORF 8, Intruders 2.
All returned safely.
ITALY. 8th. 75 medium bombers attacked SAN
STEFANO Harbour and railway centres at ROME and ORTE. 1
bomber missing. 444 fighters attacked objectives near ROME
and in the battle arcas. Two fighters missing.
Regraded Unclassified