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Volume 782, October 13 – October 17, 1944
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Volume 782, October 13 – October 17, 1944
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 782
October 13-17, 1944
Regraded Unclassified
- B -
Book Page
Basch, Antonin
See Foreign Funds Control
Budget, Bureau of
Transfer back to Treasury advocated by HMJr - 10/17/44... 782 204
Businessmen for Roosevelt, Inc.
See Speeches by HMJr
- C -
China
Yenan: American Military Mission - Adler reports on -
10/16/44
103,109
Correspondence
Mrs. Forbush's mail report - 10/14/44
61
- D - -
Democratic Campaign of 1944
See Speeches by HMJr
- E -
Engelhard, Charles
Commends FDR and hopes for re-election - 10/17/44
266
- If -
Financing, Government
War Savings Bonds: GI Bonds - Bell reports on - 10/13/44
19
Foreign Funds Control
See also Book 781
German-owned patents and patent rights - Foreign Economic
Administration's proposed statement by FDR - 10/16/44
149
Basch, Antonin: "Industrial Property in Europe" - White
summary of 10/16/44
155
- G -
Germany
Patents and Patent Rights: See Foreign Funds Control
GI Bonds
See Financing, Government: War Savings Bonds
- K -
Klaus, Sam
Transferring to Foreign Economic Administration - 10/14/44.
60
Regraded Unclassified
- L -
Book Page
Lending Agencies
Supervision by Treasury advocated by HMJr - 10/17/44
782
204
- N -
New York Herald-Tribune Forum
FDR decides against participation; recommends similar
action for Treasury - 10/14/44
42
- o -
Office of Price Administration
"Pricing Objectives in the Reconversion Period" -
Haas digest of Bowles memorandum - - 10/16/44
140
,
- P -
Pehle, John W.
See War Refugee Board
Post-War Planning
Surplus Property, Disposal of: Board set-up and effect
on Olrich's staff discussed by HMJr, Olrich, D.W. Bell,
C.S. Bell, O'Connell, and Lynch - 10/17/44
192
a) Olrich's own successor discussed
194
b) Separation of entire disposal feature from
Treasury again advocated by HMJr
201
c) Further discussion of Olrich successor and staff - -
10/30/44: See Book 788, page 2
- R - -
Roosevelt, Franklin D.
Health: Interviews on, etc., discussed in Shaeffer
memorandum - 10/17/44
246
- S -
Securities and Exchange Commission
Transfer back to Treasury advocated by HMJr - 10/17/44
204
Speeches by HMJr
Democratic Campaign of 1944
James Barnes and Robert Ramspeck request speeches by
HMJr - 10/17/44
230,233
Regraded Unclassified
- S - (Continued)
Book Page
Speeches by HMJr (Continued)
Democratic Campaign of 1944 (Continued)
a) Businessmen for Roosevelt, Inc., Waldorf-Astoria
Hotel, New York City, October 27, 1944, assigned
to HMJr: See Book 784, page 115
1) Draft 1, prepared by Research and Statistics
economists - 10/23/44: Book 784, page 160
2) Barth draft - 10/24/44: Book 785, page 34
a) Discussion by HMJr, White, Gaston, Blough,
Murphy, and Barth: Book 785, page 3
3) Barth revised draft: Book 785, page 44
4) White draft: Book 785, page 70
5) Barth revised draft, No. 2: See Book 786, page 16
a) Discussion by Treasury group - 10/25/44:
Book 786, page 1
6) Barth revised draft, No. 3: Book 786, page 6
a) Discussed at HMJr's home
7) Copy from which reading copy was made:
Book 787, page 21
8) Semi-final reading copy: Book 787, page 34
9) Gaston approved copy from which final copy was
made: Book 787, page 55
10) Reading copy - 10/27/44: Book 787, page 116
11) Businessmen for FDR, Inc., thank HMJr -
11/1/44: Book 790, pages 67,68
Hannegan consulted on type of speech to be made -
10/25/44: See Book 786, page 112
a) Recommends speech on Roosevelt accomplishments
for the businessman
Democratic National Committee thanked for material
sent down in connection with speech - 10/25/44:
Book 786, page 134
Stabilization Fund
Earnings and expenses for August and September, 1944 -
White memorandum - 10/16/44
782
148
Status of Stabilization Fund and Gold agreements as of
September 30, 1944 - 10/17/44
265
Gold transactions for three months ending September 30,
1944 - 10/28/44: See Book 787, page 270
Surplus Property, Disposal of
See Post-War Planning
- W -
War Department
Secret deposit of $12 million in checks with Federal
Reserve Bank of New York discussed by Stimson and
HMJr - 10/17/44
211
a) McCloy-HMJr conversation - 10/30/44:
See Book 788, page 24
War Refugee Board
Pehle address before Combined Jewish Appeal,
Boston, Massachusetts - 10/15/44
98
- Y -
Yenan
See China
Regraded Unclassified
1
October 13, 1944
Dear Miss Tully:
The Secretary asked me to send you the
enclosed speeches, with the thought that some
of the material might be useful to Judge
Rosenman and Mr. Sherwood. He delivered one
in Atlantic City on October 7th, one in New
Orleans on October 12th, and the third he
will deliver in Los Angeles on October 14th.
Sincerely yours,
(Signed) H.S. Klots
Miss Grace Tully,
Secretary to the President,
The White House,
Washington, D.C.
Regraded Unclassified
2
TREASURY DEPARTMENT
Washington
FOR RELEASE AT 1:30 P.M., E.W.T.
Press Service
Saturday, October 7, 1944.
No. 43-64
(The following address by Secretary Morgenthau
at a War Bond Rally at the Hotel Claridge,
Atlantic City, is scheduled for delivery at
1:30 P.M., EWT, Saturday, October 7, 1944,
and is for release at that time.)
You may not be aware of it but this meeting today is
a kind of birthday celebration -- a very important birthday in
my calendar. Just about ten years ago the first United States
Savings Bonds -- they used to be called Baby Bonds in those
days -- were sold to the American public. And in just a few
months -- next March to be precise -- the oldest of these Bonds
will reach its maturity and be presented to the Treasury of
the United States for redemption.
A birthday is a family affair. And I am especially happy
to be able to celebrate this birthday with members of the
immediate family that made savings bonds the most popular and
most widely held form of investment ever conceived in the United
States. I think you can be very proud of your adopted child.
When the history of this war comes to be written I believe,
indeed, that the savings bond program will have a highly honored
place in it and that the job which you have done so generously
and so effectively will be recorded as one of the major contri-
butions to our victory.
I should like to go back with you for a few minutes to
those early days, a decade ago, when War Bonds were Baby Bonds.
They were conceived then with a very definite purpose in view.
That purpose was, in a phrase, to democratize public finance
in the United States.
We in the Treasury wanted to give every American a direct
personal stake in the maintenance of sound Federal finances.
Every man and woman who owned a Government Bond, we believed,
would serve as a bulwark against the constant threats to
Uncle Sam's pocketbook from pressure blocs and special interest
groups. In short, we wanted the ownership of America to be in
the hands of the American people.
Regraded Unclassified
3
- 2 -
We had made only a start in this direction, you will
remember, when war broke out in Europe and threatened the
security of the United States. But the foundation had been
laid for real popular participation in an American preparedness
program. Savings Bonds became known as Defense Bonds. And,
as you all know, they played an important part in making the
Nation ready for the great crisis which came upon us at the
end of 1941. They served not only as a vital factor in
financing the rearmament of our fighting forces but, what seems
to me even more important, they gave to the average citizen
a sense of the war's meaning and of the urgent nature of the
national danger.
When the enemy struck, the machinery was ready and in
operation for the people's financing of the war. Defense Bonds
became War Bonds and through your efforts they have been put
into the hands of 85,000,000 individual Americans. I congratulate
you on the accomplishment. Think of it! Out of every thirteen
men, women, children and babies in the United States, more than
eight have purchased Bonds of their Government. Today there
are approximately $23,000,000,000 of Series E Bonds -- the
people's Bond -- outstanding all held by individual investors.
This Series E Bond was tailored specifically to meet the
need of the average American citizen able to set aside modest
savings for investment purposes. As all of you know, it is
nonnegotiable and through arrangements which have recently been
insugurated, it is payable on demand 60 days after issue date,
at any bank. Its investment yield if held to maturity, 2.9%,
is the highest obtainable on any United States Government
security.
We designed this security in order to protect the small
investor against any possibility of loss as a result of
fluctuations in market value. Nonnegotiable securities with
guaranteed redemption values are not subject to panicky
liquidation which, experience shows, develops among small holders
of marketable securities in the event of decline in market value.
In short, they are more likely to be retained as investments.
It is worth-while to recall the experience following
World War I when Liberty Bonds plunged down into the eighties,
and frightened buyers, inexperienced as investors, unloaded.
They felt that their trust in their Government had been betrayed.
Later they awoke to find that their loss had been the gain of
the speculators and the wealthy who then owned their Bonds at
prices that brought them truly handsome yields on the safest
securities in the world.
Regraded Unclassified
4
- 3 -
The Series E War Bonds will have an immense value, I believe,
not only for the individual holders, but for the economy of the
country as a whole when the war is ended. They will constitute
an invaluable backlog of purchasing power in the post-war decade.
Only a part, and I believe the smaller part of this purchasing
power will come from cashing the Bonds themselves. The most
importent part will come from the greater spending of current
incomes growing out of the sense of security afforded to
individuals by their War Bond holdings. They will provide,
therefore, a strong bulwark against the sort of deflation which
struck this nation so disastrously in 1920 and 1921.
There is one aspect of the War Bond r. ogram in which I take
particular pride and upon which I want to offer my warm congratu-
lations to you. Throughout, the program has been conducted on
a genuinely voluntary, democratic basis. From the beginning,
we were resolved to avoid certain high-pressure sales tactics
which, unavoidably, attended the fund-raising of World War I.
It was determined that there should be no compulsion, no hysteria,
no slacker lists and no invidious' comparisons between those who
bought Bonds and those who did not. There was to be room in
this program for the individual with special burdens and responsi-
bilities who could contribute only in very small amounts -- and
even for the individual who could not share at all. hink you
know, and the whole Nation knows, how scrupulously this policy
has been observed.
There was a good reason for it. In the early days of 1941,
when I first asked Congress for authorization to borrow from
the general public through a Defense Savings Bond campaign, I
said this: "There exists in the country today an overwhelming
desire on the part of nearly every man, woman and child to make
some direct and tangible contribution to the national defense.
We ought to give them a sense of personal participation beyond
that which comes from doing their daily job faithfully and well.
Every day, letters come to me from people who ask, 'What can I
do to help?' Our plan to offer securities attractive to all
classes of investors is an attempt to answer this question.
I can think of no other single way in which so many people can
become partners of their Government in facing this emergency.
It is the purpose of the Treasury to raise money for national
defense by methods which strengthen the national morale."
The desire of the people "to help, the sense of participation
in the national cause, could never have been realized except
through a voluntary program. You will recall, of course, the
clamor that arose for forced or compulsory savings. There were
Regraded Unclassified
5
4
many who declared that only in this way could the stupendous
sums needed for victory be raised. There were times, indeed,
when those of us who had faith in voluntary methods seemed
lonely voices crying in the wilderness. But there was one
voice that never failed to support us -- the voice of the
President of the United States. He believed always that the
people would respond to any call that was made upon them. He
knew that the enlistment of their support could be best attained
through a voluntary program adapted to the democratic pattern
of American life.
But a voluntary program could succeed, of course, only
through the efforts of volunteer workers. We in the Treasury
could fulfill only the functions of a general staff. The real
battle had to be fought and won in the field -- fought and
won by sustained, unstinting, tireless service. You have given
that service. You have given it with a resourcefulness and
enthusiasm and good cheer that have overridden every difficulty.
You have given it at real sacrifice of time and comfort and
self-interest. I think that the job that you have done is
beyond my praise. I know that the richest reward you can receive
for it is the knowledge that it has been done supremely well,
that it has played an indispensable part in our forward march
to victory. Still, I should like, on behalf of the Treasury
Department to say one simple word to you -- Thanks. I shall
venture nothing more than this. But I know that this one word
is echoed, and will be reechoed, by every one of your fellow-
Americans.
When you enlisted in this program, you enlisted for the
duration. The term of your service has not yet reached its end.
The truth is that the toughest part of your job still lies ahead.
Let us look at the future reslistically. The war news of
late has been extremely good. The enemy in Europe is on the
run. How soon he will collapse, none of us can tell. But even
when that great day comes, there will still be a hard and costly
victory to be won in Asia. Our military and naval authorities
made the grim assertion just recently that it will take us at
le ast a year and a half to defeat Japan after Germany is beaten.
And we shall be able to do it in that time only if we put every
bit of our strength into the effort. The enemy has short,
interior lines of communication, while we must move men and
materials across the vast distances of the Pacific before we
can bring our power to bear. The costs of this kind of warfare
will certainly be very high, higher even than they were in
Europe.
Regraded Unclassified
6
- 5 -
You cannot rest on your laurels. The Sixth War Loan
campaign lies immediately ahead. Its challenge must be confronted
just as resolutely as in the past. And I tell you frankly that
even on the most optimistic assumption there will have to be
a Seventh Loan. Your job is to make the people of America
understand that there can be no let-down on the Home Front now,
that the time has not yet come to relax or celebrate. I know
that America can count upon you to see your job through to
its end.
o00
7
TREASURY DEPARTMENT
Washington
FOR RELEASE, AFTERNOON NEWSPAPERS,
Press Service
Thursday, October 12, 1944.
No. 43-65
(FOR RADIO RELEASE 1:45 P.M., CWT)
(The following address by Secretary Morgenthau
at a War Bond Rally at the Hotel Roosevelt,
New Orleans, is scheduled for delivery at
1:45 P.M., CWT, Thursday, October 12, 1944.)
Wars, now as always, are won on battlefields. But in
modern war, which is total war, the Home Front is intimately
involved. Economic stability at home is one of the absolute
requisites to victory. For without economic stability it is
impossible to maintain the vast and complex flow of supplies
necessary for the men on the fighting lines.
It has been the task of the Treasury Department to finance
the costliest war in history. I should like this afternoon to
review with you in some detail the manner in which this task
has been executed. Our problem has been some thing much more
difficult than the mere raising of vast sums of money. The
nub of the problem has been to raise these sums in such a way
as to strengthen, rather than weaken, the national economy.
Half of the total resources of the United States are now
being devoted to waging war. Since Pearl Harbor, war expendi-
tures have amounted to about $208,000,000,000. During this
same period, non-war expenditures have been kept down to
$16,000,000,000, making a total government outlay for the
course. of the war to date of $224,000,000,000.
Where has this tremendous sum come from? Well,
$87,000,000,000, or 39 percent of the total bill, has come
from revenue.
During the fiscal year just ended, expenditures were
slightly more than $95,000,000,000, and net receipts climbed to
a little over $44,000,000,000, or 46 percent. This means that
there has been an upward trend in our coverage of war costs
through taxation. It is a trend which may be surprising to
some and which certainly should be encouraging to all.
Regraded Unclassified
- 2 -
I'want to put some emphasis on this trend since there have
been charges of late that the Treasury has confused the public
by persistent increases in the tax burden. In the year ended
June 30, 1940, the last fiscal year before the beginning of the
defense program, net Treasury receipts were slightly less than
$5,500,000,000. The $44,000,000,000 total which. as I have
just told you the Government took in during the est year, was
an eightfold increase -- a larger increase than has taken place
in the revenue collection of any other major belligerent of
this war. This is an important thing to remember in inter-
national comparisons because the burden of taxation must be
measured not only by its absolute magnitude but also by its rate
of increase.
Now, I do not think there has been anything CO, fusing about
this. The American people, recognizing the need for greatly
increased Government revenues, have submitted to the highest
taxes in the nation's history with remarkably good grace and
good cheer. A sharp rise in taxes was absolutely necessary for
the maintenance of economic stability,
But even after these record collections there remained the
giant sum of $137,000,000,000, expended during the last three
years, that had to be raised through some other means than taxa-
tion.
This money had to be raised by borrowing. It would have
been relatively easy, of course, to raise it by borrowing from
the banks. But in order to avoid inflation, it was essential
that a major part of the increased debt be borrowed outside of
the banking system -- that is from the general public.
In selecting the Series E Bonds as our primary vehicle for
mass borrowing, we had in mind first of all the protection of
the interests of the small investor. The Treasury Department has
considered itself a trustee for the men and women who purchased
Government Securities primarily to help their country in time of
stress. Such investors place their faith in their Government.
We wanted, therefore, to protect them, through a nonnegotiable
bond, against the kind of liquidation which, experience shows,
develops among small holders of securities in the event of a
decline in market value.
After World War I, Liberty Bonds dropped in value down into
the 80's, and many persons who had bought them during the war
became frightened and sold them. They discovered later that
their loss had been the gain of the speculators and the wealthy
Regraded Unclassified
8
- 3 -
who then owned their bonds and gleàned from them truly handsome
dividends on the safest security in the world. It is not
unnatural that they should have felt that their trust in their
Government had been betrayed.
The Series E Bonds have another virtue which will be of
benefit not only to those who have purchased them but to the
entire national economy. When the war is over they will provide
an invaluable backlog of purchasing power.
I don't think that these bonds are going to be redeemed in
a sudden deluge immediately after V-Day. On the contrary, I feel
confident that most of those who bought them will make every
effort to hold them to maturity. But possession of the bonds
will give to these people a sense of security about the future
which will permit them to spend their current incomes more freely
than would otherwise be possible. We shall find this purchasing
power immensely helpful during the reconversion period. It will
prove, I am certain, a vital asset in warding off the scrt of
deflation which struck this nation so disastrously in 1920 and
1921 when we turned from war to peace production.
Our fiscal policy of siphoning off excess buying power by
taxing and borrowing from the general public has been one of two
buttresses supporting the structure of economic stabilization.
The other buttress, of course, has consisted of direct controls
including rationing, price ceilings, allocations, etc.
During this war the country has devoted twice as large a
proportion of its resources to war purposes as in World War I.
In consequence, inflationary pressures have been very much
greater. The fact is, however, that prices have been held under
much closer control. Based on actual studies of price changes
in World War I as compared with World War II, the savings to the
Government, as a result of more effective control of inflationary
pressures, has already amounted, by June 30 of this year, to
$70,000,000,000.
But the greatest and most important saving has been that
among the people themselves. In the course of this war there
has been comparatively little of the reckless kind of silk shirt
buying that took place as a result of inflated pay envelopes
during World War I. There has been very little recourse to
black markets. Instead, people have used their incomes, in con-
siderable measure, to pay off their debts. Since the beginning
of 1942, for example, farm mortgages have been reduced 15 percent.
Regraded Unclassified
- 4 -
It is fair to say, I think, that the War Bond program, by its
encouragement of thrift, has contributed significantly to this
sensible restraint in the expenditure of surplus income.
Of course, there have been other benefits of economic
stabilization, too. The success of this policy has aided in
preventing the piling up of excessive profits by fortunate busi-
ness concerns, has helped to reduce industrial disputes to a
minimum -- and here I refer you to the factual record rather
than the headlines -- has prevented the impoverishment of recip-
ients of fixed incomes including soldiers' dependents; and prob-
ably most important of all, it has averted what otherwise would
have been almost a certainty, the likelihood of a postwar depres-
sion.
I have discussed the problems of War Finance and economic
stabilization in such detail because I feel that you have been
and must continue to be vital partners in their solution. The
record so far is one of which we can all be proud. It has been good
in its accomplishments, perhaps even better in the fine cooper-
ation which made these accomplishments possible. If this same
tireless, unselfish cooperation is applied to the problems of
the postwar world, we need have no fear of the future.
But the kind of postwar world which we desire must still be
hacked from the enemy on the fields of battle. The time has not
yet come for us to indulge in day dreaming or celebration. I am
not going to offer any predictions about the end of the war in
Europe. I should like to remind you, however, that much more
competent military authorities than I have declared that even
after the European war is won it will take us at least a year
and a half to subdue our enemy in the far East. The war that
faces us there is bound to be a long and tough and costly one --
in certin respects more costly than the war against Germany.
Let me remind you, too, that war expenditures do not stop
abruptly with enemy capitulation. During the first six months
following the Armistice in World War I, expenditures were
slightly greater than during the six months preceding the
Armistice. Completed and partially completed products must be
paid for. Enemy countries must be occupied. Some relief for
Allied Nations will certainly be necessary. The Armed Forces
must be brought home and demobilized and, in the meantime, they
must be paid and clothed and fed. I am sure that no American
will want to fail in these responsibilities. They are costs
that must be met if we are to make our victory complete and real.
Regraded Unclassified
9
- 5 -
And like the costs of the war itself they must be met in such a
way as to preserve and promote the stability of our economy.
The Sixth War Loan campaign, immediately ahead of us, is
one essential step in the performance of this job. Your job is
to overcome any disposition among the American people to relax
before final victory has been achieved.
I know that you will do this job as you have done the job
in the past. The success of the War Bond program up to the pres-
ent time has been your handiwork. It has been brought about
because you tackled it with fervor and resourcefulness and devo-
tion. I know that you have done your job only at real sacrifice
of time and comfort and self-interest. And I know also that the
only reward that you have sought for your services has been the
knowledge that you have played an indispensable part in the
nation's progress to victory. I convey to you the very warm
thanks of the Treasury Department, and I know that the work which
you have done commands the gratitude of all of your fellow
Americans.
-o0o-
Regraded Unclassified
10
TREASURY DEPARTMENT
Washington
FOR RELEASE, AFTERNOON NEWSPAPERS,
Press Service
Saturday, October 14, 1944.
No. 43-75,
(FOR RADIO RELEASE 1:45 P.M., PWT)
(The following address by Secretary Morgenthau
at a War Bond Rally at the Hotel Biltmore,
Los Angeles, is scheduled for delivery at
1:45 P.M., PWT, Saturday, October 14, 1944.)
For the last week I have been addressing a number of
meetings such as this in various parts of the country. During
the course of these talks, I have endeavored to outline briefly
some of the philosophy behind American war finance as we at the
Treasury Department view it.
The democratic manner in which the financing of the war has
been handled, I described last Saturday at Atlantic City. About
85,000,000 individual Americans have bought bonds of their
government. They have bought them not as a result of compulsion
but for purely patriotic reasons and because they are the best
investment in the world.
Thursday, addressing a gathering similar to this at New
Orleans, I emphasized the part which war finance has played in
economic stabilization. The heavy tax burdens which the
American people, generally speaking, have accepted with extra-
ordinarily good grace and the large proportion of the increase
in the public debt which has been absorbed by the men and women
of this country, have played a very important part in holding
inflation in check. The OPA has estimated that if prices
during this war had risen as sharply as in World War I, there
would have been approximately a $70,000,000,000 increase in
government costs -- a $70,000,000,000 additional burden fastened
onto the country.
Today I would like to conclude this resume with a quick
examination of interest rates and a glance at the postwar public
debt problem as I see it.
The great expansion in the Federal debt has been achieved
with virtually stable interest rates--thanks largely to your
efforts. Such change as has occurred has been to slightly lower
levels. This contrasts with World War I when almost each new
Regraded Unclassified
11
- 2 -
series of bonds carried a higher interest rate, so that the cost
trend was almost constantly upward. As a result, the average
interest cost has been only 1-3/4 percent on the wartime increase
in the public debt. This contrasts with 4-1/4 percent for World
War I.
The resulting interest saving approximates $4,000,000,000 a
year -- quite a tidy sum to have saved for the taxpayers of this
nation. Realization of your part in this saving, I believe,
should give you, as it has us at the Treasury, a feeling of real
accomplishment.
Moreover, and this is a point deserving of particular empha-
sis, the interest on all securities sold during the war has been
fully taxable while the issues marketed during World War I were
all either wholly or partially tax-exempt. This has resulted in
a further net saving to the Treasury amounting to several hundred
million dollars a year. Further through removal of tax exemption,
all purchasers of Government securities are taxed their share of
the war cost in proportion to their ability to pay. This is a
point which may not have occurred to you but which should be of
help in the sale of E Bonds.
Incidentally, the Government in eliminating tax exemption
relinquished any "unfair" advantage it might have had over
private borrowers in securing credit. It thereby served to
strengthen the private enterprise system.
President Roosevelt, in his 1945 Budget Message summarized
the situation as follows--
"The primary achievement of our debt policy has been the
maintenance of low and stable rates of interest. Average
interest rates payable on the public debt now are less than
2 percent. Interest received from all new issues is fully
taxable. As a result, the net cost per dollar borrowed
since Pearl Harbor has been about a third the cost of
borrowing in the first World War."
Personally, I do not anticipate a rise in interest rates in
the foreseeable future. Savings are abundant and promise to be
adequate to meet all likely demands. We believe, therefore, that
we shall be able to refund our obligations, as they come due, at
rates comparable to those now prevailing. Thus, the saving to
the Treasury will continue over a long period of years. At the
same time the people to whom you have sold the war bonds will
continue to be satisfied rather than disgruntled customers.
Regraded Unclassified
12
- 3 -
Moreover, quite apart from its value to the Treasury -- and,
hence to the taxpayers -- the continuance of low interest rates,
will provide a stimulus to the national economy in the postwar
period. High interest rates limit enterprise and discourage
employment. Low interest rates stimulate business and make for
expanding employment.
Just as I see no reason for substantially higher interest
rates in the postwar period, I do not see any need for a whole-
sale postwar funding of the public debt into long-term bonds.
In the first place, it would cost the taxpayers more in
interest. Next, it would shift whatever risk there is inherent
in fluctuating interest rates from the Government, which is able
to bear it, to individuals, institutions and corporations. Cer-
tainly the day is past when the United States Government need ask
its citizens or its business enterprises to insure it against
changes in the rate of interest.
Finally, we have endeavored to tailor the debt structure to
the needs of those who lend us the money and of the national
economy.
The small investor who purchases the Series E Savings Bonds
places his faith in his Government. Could we do less than see to
it that the securities offered him were suited to his needs?
The Savings Bonds, while not a war development, having been
first offered ten years ago, have proved an admirable war finance
medium which we expect to carry over into the postwar period. We
hope that many millions of people will continue to hold a finan-
cial stake in their Government.
Industrial corporations, as you know, have principally pur-
chased certificates of indebtedness and Series C Notes. These
constitute a substantial part of their reserves for reconversion
and postwar development. It is clearly advantageous not only to
the corporations but to the whole economy that these reserves be
liquid. The corporations thus know that the money will be
available and without loss whenever they need it. When the
proper time comes they can proceed full speed not only with their
conversion but with any expansion plans they may have.
Finally, there are the Government securities which now con-
stitute a large proportion of the assets of the commercial banks.
Many of you are bankers. You know it has been our policy to
encourage the banks to purchase issues of short maturity. As a
Regraded Unclassified
13
- 4 -
consequence, about half the securities acquired by the commer-
cial banking system since the beginning of the war have been
bills and certificates maturing within one year and practically
all have had a maturity of ten years or under.
The result is that the banking system of the country is in
a position of unparalleled liquidity. This, we believe, affords
assurance against a recurrence of such unsettling deflation as
came in the aftermath of World War I. Further, it places the
banking system in a strong position to meet the shifts in
deposits that many of you anticipate with reconversion and the
new business demands for funds that should accompany the develop-
ment of a healthy, expanding economy.
In a word, the banks' part in war finance, great as it has
been, instead of hamstringing them, has left them in a position
to service enthusiastically a virile private enterprise system.
I might point out that the banks have not only been able
to maintain a strongly liquid position as a result of the manner
in which the nation's war finance has been handled, but also
they have found an opportunity for public service. This has
enhanced the esteem with which they are held in their respective
communities. Moreover, while they have been making this contri-
bution to the war effort they have enjoyed an increase in earn-
ings. Net profits of all member banks of the Federal Reserve
system last year were back"at almost exactly the-all-time high
level of 1929.
I want to thank you who have been the leaders in the war
finance work in these great western states -- thank you upon the
part of the Treasury, whose job it has been to direct the program,
and, more important, thank you on behalf of the United States
of America, which, of course, is the real beneficiary.
I am no prophet as to the duration of the war, but today we
are hopeful that unconditional surrender by Germany may not be far
away. At such time all eyes will turn to the West. The eleven
states represented at this meeting will take on new importance in
the war. The Pacific coast will become the springboard for the
all-out offensive against Japan.
This should prompt you who have the job of raising the neces-
sary money to redouble your efforts.
Our immediate task is to put over the Sixth War Loan, to do
so just as decisively as our fighting men are establishing their
positions in Europe and in the islands of the Pacific,
Regraded Unclassified
14
- 5 -
I know you understand the importance of this absolutely
essential link in the war effort. But you must do more than
understand it, you must make the people understand it, the men
and the women in stores and offices, in factories, on the farms
and in their homes.
These people must understand, as you do, that the time has
not yet come to relax or celebrate, that we must speed weapons and
supplies far across the Pacific to our armed forces who know full
well that a hard fight still lies ahead before they can bring us
victory over the Japanese -- and these weapons and supplies must
be paid for. That is our task -- I know America can count upon
you!
=
oOo
Regraded Unclassified
TO: Mrs. Klatz
15
I asked Mr. Olich to
bring up matter discussed
in last fam faragraphs
on fage 3 at his
conference Tomorrow
with Secretary.
(Note: Checked with DuB
who Mr. said Olrich at on Mr.bell's 10/26, 10/16/44
suggestion he handled this
informally and issued orders that no
contracts will be cancelled for some
little time. Nothing to be in writing)
Office of the Under Secretary
16
Hi
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
October 13, 1944.
CABINET MEETING
The President said he had nothing of interest to say to the
Cabinet and everything seemed to be going very well on all fronts.
Mr. Stettinius reported on Sweden. He said Sweden had now
stopped all aid to the enemy and he thought the War and Navy Depart-
ments ought to be very grateful to the State Department for the action
it had taken. He said this also disposed of the matter of S & K. He
said he had received very favorable publicity on the Dumbarton Oaks
proposal, both from the domestic and foreign viewpoint. The cables
they had gotten in from abroad indicated it was accepted generally
throughout the world except, of course, in the enemy countries. He
thought there was pressure now to set a date for the general meeting.
He had told his press conference that the date depended on the next
meeting between the Big Four. He advised them that the President
would probably be tied up until after the election and the chances
are that the foreign diplomats would not want to go to a meeting
before Christmas. It looked to him, therefore, that the meeting
might not be held until early next year. The President said he had
no word yet about a meeting of the Big Four but might have something
definite on it within the next few days.
I had nothing to report.
Mr. Stimson said he had nothing in particular to report. He
had a number of matters he would like to discuss with the President
after the Cabinet was over - matters which normally would be discussed
between the President and General Marshall. General Marshall was away
so he would like to discuss them.
The President asked him what was being done to further the program
of rehabilitation of returning soldiers. He said that was making progress.
The Army had started out on rather a small scale and it was now developed
to the point where he thought they could handle the situation very well.
Mr. Biddle had nothing, although he asked to see the President
after the Cabinet.
Mr. Walker said they were making progress on the Christmas mail
1though it was going to be quite a job delivering all of the volume
VICTORY
of packages they expect to receive. He said last year they handled
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
17
- 2 -
and mailed 23 million packages to the boys overseas. It is estimated
this year they will handle more than 70 million. They have a temporary
one-story building on Long Island with a floor space of 500,000 square
feet and another at Los Angeles with 350,000 square feet. They are
having some difficulty in keeping employees. Last Sunday more employees
stayed at home than came to work, but they are unloading from seventy
to eighty cars a day in New York alone.
The President brought up at this point the matter of sending
some relief supplies to Italy. He said he would like to suggest that
the first ship load that goes, he would have Governor Poletti meet
the boat at the wharf with Italians crowding around receiving the
supplies and have a moving picture taken of it and sent back to this
country. Of course he had in mind this would be done before election.
Mr. Walker also brought up the question of the returning ballots
of the soldiers. He said unfortunately a few of them had been opened
by mistake by the censor. Mr. Stimson said he had knowledge of two
ballots being opened. Of course a great deal of criticism has been
directed at the censor for this act, but he says the censor has to pass
thousands of pieces of mail a day and in tearing them open and stamping
them they are bound, now and then, to get a ballot. They sent abroad
about four million ballots and if half of them are returned you can
see the volume of mail the censor must watch for.
Mr. Forrestal had nothing, but said he would like to see the
President a few minutes after Cabinet.
Mr. Fortas had nothing.
Mrs. Perkins commented on the prices in Canada and the United
States. She said she thought we had done a better job than Canada
and that the President might very well use the material they had
gotten together in some of his speeches. The President said he would
like to see the statistics on it and asked her also to get up some
data with respect to England.
Mr. Jones had nothing, although he wanted to see the President
a few minutes after Cabinet.
Mr. McNutt had nothing.
Mr. Blandford had nothing.
Captain Krug had nothing.
Mr. Vinson had nothing and wanted to see the President after
the Cabinet.
Mr. Crowley had nothing, and here the President raised the question
of what organization should handle the relief when Russia occupies Poland.
Regraded Unclassified
18
- 3 -
He wondered if UNRRA couldn't handle the whole matter. Crowley said
he thought UNRRA could handle the first phases of direct relief, but
they couldn't furnish any rehabilitation. This again brought up the
question of what the Army was doing in Italy in furnishing relief to
the Italians. Mr. Stimson said he would like for the Army to get
out of that business so long as it was not connected with the battle-
front. I said I thought the purpose to be gained by the approval
by the President of the recent memorandum permitting the use by Italy
of the dollars for our troop pay was to relieve the Army about October
1st of this function. Leo Crowley said that was right, but he wanted
to call sttention to the fact that neither UNRRA nor the Army can
furnish rehabilitation. Mr. Stimson then said he had some doubt as
to the legality of lend-lease being used for rehabilitation purposes
unless it was directly tied in with the battle. He said he had a
great deal to do with getting the original Lend-Lease Act through and
the subsequent appropriations and it was all put on a basis of helping
those people who would help us to fight. He thought if any rehabilitation
was going to be furnished to any great extent we should go back to Congress.
The President said "Yes, that's right," but I was not quite sure whether
or not he fully understood the question.
The President said he had one other thing. There had been brought
to his attention the possibility of some of the contracting officers of
the various departments cancelling contracts which would throw thousands
of people out of work all at once. He said this certainly would be a
bad thing before election and would require a great deal of explanation,
all of which would be very unpleasant. He said that he would like to
issue an executive order to Treasury, War, and Navy requiring that the
Secretaries of those departments pass upon each contract to be cancelled.
I stated that there would be certain implications if the President
issued such an order, and raised the question of whether we should not
take what the President said at the Cabinet meeting as a direction and
let each Secretary issue his own internal orders.
Fred Vinson readily agreed with this. He said it would be bad
for the President to issue such an order at this time, within three
weeks of election. The President said all right, he would like each
Secretary to do that.
I talked with Jim Forrestal before I left the meeting and he
said, he thought we all should do it on an informal basis.
swif
Regraded Unclassified
19
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
October 13, 1944.
MEMORANDUM TO THE SECRETARY:
AA
In compliance with your request for information
with respect to the issuance of GI Bonds, I am told the
Army has received 555,652 allotments of these bonds up
to September 30th, which amount to a little over $4
million. In addition, they report 1,207 bonds sold for
cash overseas and 22,000 bolds sold for cash within the
continental limits of the United States amounting to
another $150,000, a total of less than $5 million for
the two months that GI Bonds have been on sale.
These are not very impressive figures, but then
of course it takes an awfully long time to get reports
from the field offices, and these figures do not repre-
sent the total bonds that have been sold.
DWB
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
20
25
October 13, 1944
Your Excellency:
This is to acknowledge your letter of October 9, 1944
with respect to Dr. Kung's request to have US$20 million
worth of gold transferred. In accordance with this request,
US$20,050,763.98 has been transferred from the credit in the
name of the Government of the Republic of China with the U.S.
Treasury, and 571,428.554 fine tray ounces of gold, valued
at $19,999,999.38 have been earnarked to "The Central Bank
of China as fiscal agent of the Government of the Republic of
China" gold account with the Federal Reserve Bank of New York.
The following table summrises the cost of the gold
purchased:
Cost of 571,428.554 fine ounces of
gold st 835 per ounce
$19,999,999.38
1/4 percent handling charge
50,000.00
Labor, transportation and
insurance costs
764.60
Total cost
$20,050,763.98
Sincerely yours,
(Signed) H. Mergenthau, JI.
Secretary of the Treasury.
Nie Excellency,
The Ambassader of the Republic of China,
Washington, D. C.
SA:ke 10-13-44
Regraded Unclassified
CHINESE EMBASSY
WASHINGTON
October 9, 1944.
My dear Mr. Secretary:
I have the honor to refer to my letter of July 23,
1943 and your reply of July 27, 1943 regarding the trans--
fer of US$200,000,000 (Two hundred million Dollars) for
the purchase of Gold.
I am again instructed by Dr. H. H. Kung to request
your consideration of a transfer of US$20,000,000 (Twenty
million Dollars) worth of Gold from the US$200,000,000
( Two hundred million Dollars) Gold Account with the
United States Treasury to the Central Bank of China Gold
Account with the Federal Reserve Bank of New York for the
purpose of making further shipments of gold to Chungking,
China.
I am, my dear Mr. Secretary,
Very sincerely yours,
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury.
Regraded Unclassified
22
ORIGINAL TEXT OF TELEGRAM SENT
FROM : Secretary of State, Washington
TO
: American Embassy, Quito
DATE : October 13, 1944
NUMBER: 813
SECRET
The following cable has been received from Amembassy Bern:
QUOTE A note with regard to protection of individuals
in Germany claiming Ecuadorán Nationality of Federal
Political Department was forwarded on May 12 by the Ecuadoran
Consulate, we are told by Swiss. Contradictions of such a
nature were contained therein that its meaning was difficult
for the Swiss to interpret. It is said the Consulate was
not able to supply explanatory interpretation of the note
and the Consulate concurred with Swiss that in order to
avert misconstruction, they should ignore note of May 12.
In the meantime, contents of the note were sent by Federal
Political Department to Swiss Legation Berlin for
informational purposes while waiting for clarification.
Ecuadoran Consulate decided to ask Government of Ecuador
for such clarification. UNQUOTE
Please endeavor to ensure that clarifying message is sent
to Ecuadorean consulate in Bern consistent with the humanitarian
ends sought to be achieved, and advise Department and Board of
date and contents of such message.
HULL
23
CABLE TO AMBASSADOR WINANT, LONDON, FOR MANN FROM WAR REFUGEE BOARD
Please advise appropriate trustees to furnish reports through Embassy
to WRB on use of funds sent from United States for rescue projects of
United Czechoslovak Relief, Polish War Relief and French War Relief. Amounts
remitted are $150,000, $250,000 and $75,000 respectively. Licenses call
for regular reports from trustees and National War Fund has been advised that
such reports would be made.
Interested groups here very anxious for information concerning use of
such funds. They also advise that there probably will be available for the
last quarter of 1944 the following additional amounts for operations in enemy
controlled areas: $100,000 for the Czechoslovak program; $150,000 for the
French program; and $150,000 for the Polish program. They request that the
trustees be informed of this and, if they feel the additional funds can be
used by them for operations in enemy controlled areas, they should be re-
quested to submit detailed programs to you for forwarding to the WRB. In-
terested groups here would also appreciate opinion of trustees concerning
the desirability of channelling future operations of these programs through
Switzerland or Sweden rather than London.
The trustees of the three programs should also be advised that if funds
already remitted cannot be profitably used by them, such funds should be
returned to the remitting organizations in the United States.
THIS IS WRB CABLE TO LONDON NO. 13.
10:15 a.m.
October 13, 1944
Miss Chauncey (for the Soc'y) Cohn, DuBois, yours,
Lesser, Mannon, McCormack, 212es
FREST 20/11/24
24
Distribution of true
October 13, 1944
reading only by special
arrangement. (SECRET W)
Midnight
AMEMBASSY,
LONDON
8467
The following for Mann from Pehle is WRb 12.
There is presently being cleared with the British the
proposal of this Government to make payment in full to the
refugees evacuated to the United States and the 550 evacuated
from Italy to Palestine for the Italian lire, AM lire, BMA notes
and U.S. yellow and blue seal dollars turned in by such refu-
gees to ACC upon leaving Italy. JDC is willing to make the
payments in the United States and in Palestine against reim-
bursement in lire by ACC. Since it appears that the refugees
in question turned in their valutz on the assumption that they
would be paid in full and in view of delays already involved
and numerous complaints, we are urging the aforementioned
special treatment for these cases. Please consult with
Aarons with a view to expediting clearance of our proposal
in London.
HULL
(GIM)
WRB :MMV #OMH
10/12/44
25
CABLE TO AMERICAN MISSION, PARIS, FROM WAR REFUGEE BOARD.
Please deliver the following message to Maitre David, 117 Rue
Breteuil, Marseille, from Rabbi Langer, New York:
QUOTE ON BEHALF EDOUARD DE ROTHSCHILD CHAIRMAN OF ARIF
CABLE MOST REQUISITE NECESSITIES NEEDED FOR CHILDREN AND
ADULTS SHALL ENDEAVOR MEET REQUIREMENTS UNQUOTE
=
10:15 a.m.
October 13, 1944
Regraded Unclassified
26
CABLE TO AMERICAN MISSION, PARIS, FROM WAR REFUGEE BOARD.
Please deliver the following message to Grand Rabbin Julien Weil,
44 Rue de la Victoire, Paris, from Rabbi Langer, New York:
QUOTE ON BEHALF EDOUARD DE ROTHSCHILD CHAIRMAN OF ARIF CABLE
MOST REQUISITE NECESSITIES NEEDED FOR CHILDREN AND ADULTS
SHALL ENDEAVOR MEET REQUIREMENTS UNQUOTE
10:15 a.m.
October 13, 1944
Regraded Unclassified
27
CABLE TO AMERICAN MISSION, PARIS, FROM WAR REFUGEE BOARD.
Please deliver the following message to Leon Meiss c/o Temple
Israelite, Quai de Tilsit, Lyon, from Rabbi Langer, New York:
QUOTE ON BEHALF EDOUARD DE ROTHSCHILD CHAIRMAN OF ARIF CABLE
MOST REQUISITE NECESSITIES NEEDED FOR CHILDREN AND ADULTS
SHALL ENDEAVOR MEET REQUIREMENTS UNQUOTE
10:15 a.m.
October 13, 1944
Regraded Unclassified
28
AIRGRAM
SECRET
FROM AMERICAN CONSULATE GENERAL
Jerusalem
Dated October 13, 1944, 5 p.m.
Courier departure: October 14,
1944, 6 a.m.
Rec'd: October 26, 2 p.m.
Secretary of State,
Washington
A-51, October 13, 1944, 5 p.m.
Have received confidential information from competent
Jewish source that Colonial Office has agreed to admit Jewish
immigrants at the rate of 1,500 per month distributed as follows:
Bulgaria and Rumania, 5,000; Italy, 900; Aden, 1,000; France
2,000 children; Belgium 200 mostly children. Turkey, 200 mostly
children; Switzerland 1,000 children.
Previous commitment to admit all escaping to Turkey has
been abrogated and all other commitments, except those for Spain
and Portugal are to be met from above allocation. Monthly rate
of admissions is subject to revision in January. Remainder of
White Paper quota will be reallocated when present allocation
nears completion.
If immigrants are brought in from unincluded countries or
more than indicated from any included country, other will be
decreased correspondingly.
Jewish Agency is pressing for increased monthly rate and
for the eligibility of adults from France and Switzerland,
PINKERTON
Regraded Unclassified
29
BJR - 991
Lisbon
Distribution of true
reading only by special
Dated Catober 13, 1944
arrangement. (SECRET w)
Hee'd 12:20 p.m.
Secretary of State,
Washington.
3136, October 13, Hoon
THIS IS WRB 220 FOR CHARLES JOY THOM ELISABETH
DEXTER UNITARIAN 347.
Ask New York office notify Hoften Family Max
leaving for England inuediately. Address Larek Hotel
Termann 103 Peryo Road, London SE 14. Please continue
payments to wife. Writing explanatory letter.
NORWEB
JMS :WMB
Regraded Unclassified
30
CABLE TO MINISTER HARRISON, BERN, FOR MC CLELLAND, FROM WAR REFUGEE BOARD.
Please deliver the following message to Saly Mayer from M. A.
Leavitt of the American Jewish Joint Distribution Committee:
QUOTE WE AUTHORIZE ADDITIONAL EXPENDITURE BEHALF HUNGARIAN
JEWS BOTH FOR RESCUE ACTIVITIES OR RELIEF IN HUNGARY UP TO
$300,000 ON CONDITION THAT YOU CAN PURCHASE PENGOES IN
SWITZERLAND FROM SOURCES KNOWN TO YOU TO BE RELIABLE AND
so THAT SWISS CURRENCY WILL NOT AID ENEMY OR ENEMY
COLLABORATIONISTS. UPON YOUR REQUEST WE WILL TRANSMIT
THE SUM TO YOU AND WOULD ASK YOU SET THIS UP AS A SEPARATE
ACCOUNT TO BE REPORTED ON SEPARATE AND APART FROM OUR REGULAR
FUNDS AT YOUR DISPOSAL UNQUOTE
THIS IS WRB CABLE TO BERN NO. 214.
10:15 a.m.
October 13, 1944
Regraded Unclassified
31
ORIGINAL TEXT OF TELEGRAM SENT
FROM
:
Secretary of State, Washington
TO
:
American Legation, Bern
DATE
:
October 13, 1944
NUMBER :
3496
CONFIDENTIAL
To Minister Harrison and McClelland.
1. With reference to Department's 3120 of September 9,
3255 of September 21 and earlier communications regarding
admission of Jewish children from Hungary, Paraguayan Minister
of Education by communication of August 30 agreed in principle
to entend to children from Hungary previous Paraguayan consent
to give asylum to a number of refugee children from France to
be determined later, subject to certain economic conditions.
On September 14, Ecuadorean ministry of foreign affairs
informed Amembassy that "it is believed that Ecuador would be
able to receive up to three hundred children provided that
WRB furnished the funds necessary for the case."
By note of August 31, Dominican Foreign Minister informed
Amembassy that since it made "no distinction in the nationality
of the children which it would receive there is no inconvenience
that they should also proceed from Hungary.' This applies to
a previous Dominican agreement to accept between 1000 and
2000 refugee children.
2. Substance of your 6469 of September 29 is being
communicated to Amembassy Quito for appropriate action. In the
meantime, the following Ecuadorean aide-memoire to Amembassy
of August 24 has been received.
QUOTE The Ministry for Foreign Affairs, having been
informed of the persecution which at present is taking
place in Hungary against persons of a certain race, among
whom are many who possess passports issued in the names of
American Republics, has addressed its diplomatic representative
in Switzerland to arrange for the Federal Government as
representative of the interests of Ecuador in Axis nations
or satellites thereof to notify the Government of Hungary
that the Government of Ecuador recognizes the validity of
documents or passports issued in its name and that
accordingly it is expected that the bearers of such papers
will be accorded the rights, privileges and immunities
which Ecuadoran nationals enjoy. Likewise it has been
requested to state that the United States is authorized
to negotiate the exchange of such persons.
The
Regraded Unclassified
32
-2-
The Ecuadoran Ministry for Foreign Affairs, in
replying to the aide memoire of the Embassy of the United
States dated August 19, reiterates its intention of not
declaring invalid passports granted illegally while
they may serve to protect the life and property of their
holders but (reiterates) that these persons are not
thereby authorized to enter Ecuador. UNQUOTE
Pending further action by Ecuador, please try to make
use of above to ensure prompt action by Ecuadoran consulate
and Swiss government in defense of holders of Ecuadorean
documents.
3. With reference to last paragraph of your 6469 of
September 29 it is difficult to perceive why Swiss authorities
should not have treated Ecuadorean request regarding Hungary
as implying a request to represent Ecuador in Hungary to the
extent stated, and have adopted procedure analogous to that
described in your 6219 of September 20. Department's 2490
of July 21 item six applies to this case.
4. By note of August 14 Haitian Foreign Ministry informed
Amembassy that the following note has been sent on August 11
to Haitian legation Bern:
Quote Referring to cablegram of the 31st of July
please ask Federal Government to communicate the following
declaration to the German Government: 'Having learned that
the following persons, namely, Abraham Berger, Eugenia
Berger, Leon Muszynski and Lili Muszynski, holders of
passports delivered in the name of Haiti, have been
removed by the German authorities from the civilian
internment camp at Vittel to an unknown destination, the
Haitian Goyernment protests energetically against the
treatment inflicted upon the above-mentioned persons,
STOP The Haitian Government urgently asks for infor-
mation concerning their address and their health and
expects their immediate transfer to a civilian internment
camp where they would be easily available for exchange
and where, in awaiting this exchange, they will be placed
under the supervision of the Protecting Power and the
International Red Cross. STOP. The Haitian Government
also declares that it will not permit that Germany place
in doubt the validity of any documents delivered in its
name and that it expects that the German Government
will accord the holders of these documents the same
treatment which the German Government expects to obtain
for its nationals in the Western Hemisphere. STOP.
Finally, the Haitian Government reserves the right to
take action against any ill treatment which might be
inflicted upon the above-mentioned persons and upon all
persons who may be in the same position. UNQUOTE.
5. With
Regraded Unclassified
33
-3-
5. with reference to your 5281 of August 14, the following
note from Cuban Ministry of State was received by Amembassy
on September 19:
QUOTE Although the data on Gelernter are not
sufficient to enable a quick search, since it is a
humanitarian matter the Government of Cuba desires to
avail itself of the good offices of the Government of
the United States of America to the end that all possible
protection be given to Gelernter through the means which
the North American Government uses in similar cases.
The Ministry will continue the investigation started in
the Department of Citizenship and Immigration in order
to verify the exactness of the information and the
Embassy will be duly informed. UNQUOTE.
Please take appropriate action.
6. With reference to your 6524 of September 30, please
express to Swiss authorities this Government's appreciation
of their action in conveying to Hungarian officials the message
referred to therein.
THIS IS WRB CABLE TO BERN NO. 213.
HULL
Regraded*Unclassified
34
PARAPHRASE OF TELEGRAM SENT
FROM :
Secretary of State, Washington
TO
:
American Legation, Bern
DATED :
October 13, 1944
NUMBER : 3498
CONFIDENTIAL
Your cable of September 5, 1944, No. 5820, is referred
to herewith.
It is requested that the Foreign Office of Switzerland
be informed that due to extensive mining operations in the
Danube River by Allied forces, the Government of the United
States is not able to grant to group of Hungarian Jews safe
conduct for travel on Danube vessels.
HULL
Regraded Unclassified
35
MB-154
Bern
This telegram must be
paraphrased before being
Dated October 13, 1944
communicated to anyone
other than a Government
Rec'd 4:30 p.m.
agency. (SECRET 0)
Secretary of State,
Washington.
6837, October 13, 5 p.m.
FOR WRB FROM MCCLELLAND
Department's 326, September 22.
Received 85,334.45 Swiss francs net on October
3, through Swiss National Bank from friends of
Luxemburg.
Krier and Clement both left for Luxemburg on
orders of their Government on October 9. They were
very anxious know whether these funds could not now
be spent in Luxemburg. Since possibility use this
money effectively in enemy territory very limited I
therefore recommend license be amended authorize
expenditure equivalent $15,000 in Luxemburg, $5,000
being reserved for expenditure enemy territory (Germany)
pending elaboration acceptable plans.
If permission use funds in Luxemburg fortheeming
Krier and Clement desire know if donors wish favor
special categories beneficiaries.
HARRISON
MEV
Regraded Unclassified
GEP-67
Bern
35
This telegram must be
paraphrased before being
Dated October 13, 1944
communicated to anyone
other than a Government
Rec'd 4:40 p.m.
Agency. (SECRET-O)
Secretary of State,
Washington.
6839, October 13, 7 p.m.
FOR WRB FROM MCCLELLAND
Legation's 6619, October 5.
Detailed letter of October 4 from Kasztner in
Budapest, which arrived by Swiss courier October 7,
given following information situation Jews in
Slovakia.
Night September 28 to 29, SS soldiers and Hlinka
Guards blocked off Jewish quarter of Bratislava (Press-
burg) and conducted a brutal house to house roundup
taking off between three to four thousand. Mrs.
Fleischmann and Dr. Kovacs of Central Jewish
organization were ordered to their office to supply
authorities with necessary information. All other
members Jewish Central including Dr. Oskar Neumann
and Rabbi Weiss-Mandel along with mass Jews arrested
were taken to camp of Sered. This camp, originally
built for one thousand persons, housed five to
seven thousand Jews. Number of Jews thus
concentrated represents about one-third remaining
Jewish population of Slovakia. Other two-thirds
either in Partisam controlled territory or able
remain in hiding. News was received October 2 in
Budapest that first transport of two thousand Jews
had already been deported from Sered.
This action in Bratislava was directed by a
certain "Hauptsturm Fuehrer" Brunner who was sent
there by Eichmann in Budapest on September 26.
Brunner, whose past record of brutality is well known,
has been charged with similar actions against Jews
during recent month (*)sdrancy (Vienna and Poland).
Kasztner had fair hopes that Eichmann could be
influenced to release at least leading members of
Bratislava Jewish Center.
Situation of Budapest Jews very critical. Un-
confirmed
Regraded Unclassified
37
-2- #6839, October 13, 7 p.m., from Bern
confirmed rumors speak of deportation "en masse"
having already begun. Am trying by every available
channel secure reliable information. Wire from Kasztner
dated October 11 does not indicate any such radical
change in status quo.
HARRISON
WTD
(*) apparent omission
Regraded Unclassified
EMBASSY OF THE
38
UNITED STATES OF AMERICA
SECRET
Caracas, October 13, 1944
No. 6583
Subject: Protection of Bearers of Venezuelan Documents
in Territory occupied by Germany.
The Honorable
The Secretary of State,
Washington.
Sir:
With reference to the Department's secret circular
airgram of September 18, 8:15 a.m., entitled "Safe-
guarding of Lives of American Republics Document Holders",
I have the honor to furnish the following information
which has been supplied in strict confidence by the
Ministry for Foreign Affairs in response to representa-
tions made by this Embassy as instructed in the airgram
above-cited:
1. The Ministry stated that it had notified the
Swiss Government through the Venezuelan Charge d'Affaires
at Bern by cable that the Venezuelan Government ratifies
the lists described in the memorandum of this Embassy of
September 23, 1944, in so far as concerns persons named
in Venezuelan documents.
2. The Foreign Office expressed the appreciation
of the Venezuelan Government of the offer of the State
Department with regard to protecting the said persons
and is in agreement with the lists mentioned be delivered
to the Swiss authorities for the consequent purposes.
Respectfully yours,
/s/ Frank P. Corrigan
Frank P. Corrigan
Enclosures:
8
1. Copy of Strictly
Confidential Memorandum
No. 1872, September 23, 1944,
left at Foreign Office.
2. Copy of Strictly Confi-
dential Memornadum from
Foreign Office (No. 2796 of
October 13, 1944).
548
JF:ces
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Akzin, Cohn, Drury,
DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack,
Pehle, Files.
Regraded Unclassified
39
Enclosure No. 1, Despatch No. 6583, October 13, 1944,
from the American Embassy, Caracas.
STRICTLY CONFIDENTIAL
No. 1872
MEMORANDUM
The Embassy of the United States of America has
the honor to refer to the Ministry's esteemed
Memorandum 2121 (Confidential) of August 3, 1944
and to furnish below certain additional information
which has been received from the Department of State
with regard to holders of documents of nationality
of the American Republics in German controlled
territory:
The United States Government, at the suggestion
of the Swiss Government, is endeavoring to compile
lists of such holders for transmission to the German
Government. In this connection the State Department
mentioned that disturbed war communications have inter-
fered with communications between the Governments of
the American Republics and their European Missions,
resulting in incomplete records which make toe compila-
tion of such lists difficult. However, to assist the
Swies in this matter, the Department of State suggested
to the United States Legation at Bern that it endeavor
to obtain, with the aid of local representatives of
organizations that have records on the subject, lists
that are as complete as possible with the view to
transmitting them to the Swies authorities.
In the foregoing connection, the Department of State
suggests that the Governments of the other American
Republics be informed of the urgent desirability of
confirming to the Swies authorities the authenticity
of such lists and the State Department has expressed the
hope that, in view of the humanitarian consideration
involved, the Venezuelan Government, for its part, may
be willing to confirm the authmticity of the list sub-
mitted by the United States Legation at Bern in 80 far
as bearers of Venenuelan documents may be concerned.
The State Department reiterated that the assurances
previously given on behalf of the United States Govern-
ment that the Venezuelan Government will not be expected
to grant physical admission to the persons involved and
that no objection will be raised to an examination by
the Venesuelan Government of the status of such persons
once they are safe from enemy persecution fully apply
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Aksin, Cohn, Drury,
DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack, Pehle,
Files.
Regraded Unclassified
40
Page 2, Enclosure No. 1, Despatch No. 6583, October 13,
1944, from the American Embassy, Caracas.
envisaged. to the persons whose named will be included in the lists
The State Department has also stated that, in the
event of the completion of the list of holders of docu-
ments issued in the name of the VenezuelandGovernment
or of other persons under enemy control to whom it
desires to give protection, the United States Government
will be glad to extend to such persons the benefit of
its activities intended to safeguard their lives and will,
if desired by the Venezuelan Government, gladly transmit
any such list to the 9wiss Government.
Caracas, September 23, 1944.
JF:ces
Regraded Unclassified
NOT TO BE RE-TRANSMITTED
41
COPY NO.
<<
SECRET
OPTEL No. 333
Information received up to 10 a.m., 13th October, 1944.
1. NAVAL
One of our motor gun boats mined and sunk in the Gulf
of Venice on 10th. A minesweeper also damaged by mine same area.
On 10th and 11th U.S. Destroyers shelled bridges on the Franco-
Italian frontier.
On 10th Carrier-borne aircraft attacked harbour instal-
lations Syra and Leros and on 11th sank 3 E-boats and damaged
another, an escert ship and several small craft.
One of H.M. Submarines has sunk a small cargo ship and
four caiques in the Aegean.
On 12th one of H.M. Cruisers bombarded Phleva Island,
S.E. of Piraeus and one of H.M. Aircraft Cruisers bombarded a battery
on the Island of Aegina.
2. MILITARY
WESTERN EUROPE. 2nd British Army has attacked S.E. from
the corridor and occupied Overloon, 14 miles N.E. Helmond. Attack
on Aachen renewed following refusal of German garrison to surrender.
Unofficial reports state Allied troops already fighting in the streets
of the city. Slight advances made East and S.E. of Epinal against
determined resistance.
ITALY. Exploiting their bridgeheads over the Fiumicine
troops of 8th Army made a little further progress towards Cesena.
Our troops have also gained a small area N.E. of Bagno. 5th Army
have moved forward very slightly in three sectors south of Bologna,
north and east of Porretta and north of Borgo.
RUSSIA. Russians report progress to within 5 miles of
Riga on the East. Advances in Memel area, including widening of
frontage on Baltic Coast, arrival at East Prussian border due west
of Kovno, progress up the Carpathians in North Transylvania and
N.W. of Cluj; capture of Oradea and severál railway stations S.W.
and W. of Debrecon; capture of Subotica on Hungarian-Yugoslav
frontier and progress S.E. of Belgrade.
3. AIR OPERATIONS
WESTERN FRONT. 12th. Provisional sorties 4,860 R.A.F.
heavy bombers attacked Wanne Eickel oil plant near Bochum - 563 tons,
and battery at Breskens - 558. U.S. heavy bombers bombed Osna-
bruck railway centre - 618 tons and Bromen aircraft components factory
558. Good results claimed. Military objectives in battle area
attacked by medium and fighter bombers, particularly in Aachen and
Saarburg areas - 637 tons. German casualties 29,4,8 in the air and
8,1,12 on the ground. Ours - 21 missing and 1 crashed.
12th/13th. 70 Mosquitoes despatched: - Hamburg 52 (1
missing); other tasks - 18.
MEDITERRANEAN. 10th/11th, 39 aircraft (2 missing)
dropped 91 tons on Verona railway centre.
11th, 178 escorted heavy bombers (3 missing) dropped
391 tons on industrial targets and communications in Austria, Yugo-
slavia and Northern Italy. 55 Mustangs (3 missing) attacked air-
fields and transport in Austria and Yugoslavia, Enemy casualties
3,0,1 in the air and 24,0,20 on the ground. 765 medium and fighter
bombers and fighters attacked railways etc., in the Italian battle
area,
12th. Preliminary reports state 1130 tons dropped by
658 escorted heavy bombers from Wediterranean on military objectives
around Bologna in support of ground operations. Results good, 9
aircraft missing.
4.
COME
Regraded Unclassified
OFFICE OF
42
THE SECRETARY OF THE TREASURY
October 14, 1944
MEMORANDUM
Mr. Steve Early called today at
1:50 p.m. He said he wanted this office
to know that the President had declined
an invitation to participate in the N. Y.
Herald-Tribune Forum. He said, "Confiden-
tially, I would suggest that any Treasury
people who might be invited to participate
should also decline."
P.B. Mannen
(advised ms. D.W. Bell at 2:20 p. m.)
9:30 meeting
OCT 1944
12:15
-
ROOSEVELT DECLINES INVITATION
43
TO SPEAK AT HERALD TRIBUNE FORUM
WASHN - A P - WHITE HOUSE ANNOUNCED TODAY
THAT PRESIDENT ROOSEVELT HAS DECLINED AN
INVITATION TO SPEAK AT CONCLUDING SESSION
NEXT WEDNESDAY NIGHT OF NEW YORK HERALD
TRIBUNE FORUM
GOV THOMAS E DEWEY HIS REPUBLICAN OPPONENT
WILL SPEAK ON THE FORUM THAT EVENING ON
FOREIGN POLICY HIS TOPIC BEING -THIS MUST BE
THE LAST WAR-
WHITE HOUSE PRESS SECRETARY STEPHEN EARLY
REFERRED REPORTERS TO DEMOCRATIC NATIONAL
CHAIRMAN ROBERT E HANNEGAN IN NEW YORK WHEN
ASKED WHY PRESIDENT TURNED DOWN INVITATION -
PRESIDENT USUALLY HAS ADDRESSED THE FORUM
IN FORMER YEARS
-THE PRESIDENT- EARLY SAID -DECLINED THE
INVITATION BY TELEGRAM LAST NIGHT - HE DIDN-T
SAY WHY TO MY KNOWLEDGE AND IT WAS A VERY
BRIEF TELEGRAM YOU CAN ASK CHAIRMAN
HANNEGAN WHY-
EARLY REPEATED WHAT THE PRESIDENT TOLD RE-
PORTERS YESTERDAY ABOUT FUTURE CAMPAIGN PLANS -
THAT THE PRESIDENT IS TALKING AB OUT OTHER SPEE-
CHES BEYOND THE ONE PLANNED FOR OCTOBER 21 IN
NEW YORK BUT - 95 -- BUT -NOTHING IS READY.
FOR ANNOUNCEMENT
-v-
Regraded Unclassified
44
October 14, 1944
heading copy of Secretary's Los Angeles
speech.
15
Los Angeles Speech
For the last week I have been addressing a
number of meetings such as this in various parts
of the country. During the course of these talks,
I have endeavored to outline briefly some of the
philosophy behind American war finance as we at the
Treasury Department view it.
The democratic manner in which the financing of
the war has been handled, I described last Saturday
at Atlantic City. About 85 million individual
Americans have bought bonds of their Government.
They have bought them not as a result of compulsion
but for purely patriotic reasons and because they
are the best investment in the world.
1612
10L
1506
Regraded Unclassified
-2-
46
Thursday, addressing a gathering similar to
this at New Orleans, I emphasized the part which
war finance has played in economic stabilization.
The heavy tax burdens which the American people,
generally speaking, have accepted with extra-
ordinarily good grace and the large proportion of
the increase in the public debt which has been
absorbed by the men and women of this country,
have played a very important part in holding
inflation in check. The OPA has estimated that
if prices during this war had risen as sharply as
in World War I, there would have been approximately
a 70 billion dollar increase in Government costs --
a 70 billion dollar additional burden fastened onto
the country.
-
1506
104
Regraded Unclassified
-3-
47
Today I would like to conclude this resume
with a quick examination of interest rates and a
glance at the postwar public debt problem as I
see it.
The great expansion in the Federal debt has
been achieved with virtually stable interest rates-
thanks largely to your efforts. Such change as has
occurred has been to slightly lower levels. This
contrasts with World War I when almost each new
series of bonds carried a higher interest rate, so
that the cost trend was almost constantly upward.
As a result, the average interest cost has been
only 1-3/4 percent on the wartime increase in the
public debt. This contrasts with 4-1/4 percent
for World War I.
1402
119
Regraded Unclassified 1283
48
-4-
The resulting interest saving approximates
4 billion dollars a year -- quite a tidy sum to
have saved for the taxpayers of this nation.
Realization of your part in this saving, I believe,
should give you, as it has us at the Treasury, a
feeling of real accomplishment.
Moreover, and this is a point deserving of
particular emphasis, the interest on all securities
sold during the war has been fully taxable while
the issues marketed during World War I were all
1/4
either wholly or partially tax-exempt. This has
resulted in a further net saving to the Treasury
amounting to several hundred million dollars a
year.
1283
105
1178
Regraded Unclassified
49
-5-
Further, through the removal of tax exemption, all
purchasers of Government securities are taxed their
my
share of the war cost in proportion to their ability
to pay. This is a point which may not have occurred
to you but which should be of help in the sale of
E Bonds.
Incidentally, the Government in eliminating
tax exemption relinquished any "unfair" advantage
it might have had over private borrowers in securing
credit. It thereby served to strengthen the private
enterprise system.
President Roosevelt, in his 1945 Budget Message,
summarized the situation as follows:
"The primary achievement of our debt policy
has been the maintenance of low and stable
rates of interest.
1178 /
110
Regraded Unclassified
50
-6-
Average interest rates payable on the public
debt now are less than 2 percent. Interest
received from all new issues is fully taxable.
As a result, the net cost per dollar borrowed
since Pearl Harbor has been about a third the
cost of borrowing in the first World War."
Personally, I do not anticipate a rise in
interest rates in the foreseeable future. Savings
are abundant and promise to be adequate to meet
all likely demands. We believe, therefore, that
we shall be able to refund our obligations, as they
come due, at rates comparable to those now pre-
vailing. Thus, the saving to the Treasury will
continue over a long period of years.
1068
113
Regraded Unclassified
-7-
51
At the same time the people to whom you have sold
the War bonds will continue to be satisfied rather
than disgruntled customers.
Moreover, quite apart from its value to the
Treasury -- and, hence to the taxpayers -- the
continuance of low interest rates, will provide
a stimulus to the national economy in the postwar
period. High interest rates limit enterprise and
discourage employment. Low interest rates stimu-
late business and make for expanding employment.
Just as I see no reason for substantially
higher interest rates in the postwar period, I
do not see any need for a wholesale postwar
funding of the public debt into long-term bonds.
955
107
Regraded Unclassified
-8-
52
In the first place, it would cost the
taxpayers more in interest. Next, it would shift
whatever risk there is inherent in fluctuating
interest rates from the Government, which is
able to bear it, to individuals, institutions
1/2
and corporations. Certainly the day is past
when the United States Government need ask its
citizens or its business enterprises to insure
it against changes in the rate of interest.
Finally, we have endeavored to tailor the
debt structure to the needs of those who lend us
the money and of the national economy.
The small investor who purchases the Series
E savings bonds places his faith in his Government.
848
107
Regraded Unclassified 741
-9-
53
Could we do less than see to it that the securities
offered him were suited to his needs?
The savings bonds, while not a war develop-
ment, having been first offered ten years ago,
have proved an admirable war finance medium which
we expect to carry over into the postwar period.
We hope that many millions of people will continue
to hold a financial stake in their Government.
Industrial corporations, as you know, have
principally purchased certificates of indebtedness
and Series C notes. These constitute a substantial
part of their reserves for reconversion and postwar
development. It is clearly advantageous not only
to the corporations but to the whole economy that
these reserves be liquid.
741
Regraded Unclassified 1147
-10-
54
The corporations thus know that the money will
be available and without loss whenever they need
it. When the proper time comes they can proceed
full speed not only with their conversion but with
any expansion plans they may have.
Finally, there are the Government securities
which now constitute a large proportion of the
assets of the commercial banks. Many of you are
bankers. You know it has been our policy to en-
courage the banks to purchase issues of short
maturity. As a consequence, about half the
securities acquired by the commercial banking
system since the beginning of the war have been
bills and certificates maturing within one year
and practially all have had a maturity of ten
years or under.
627
123
504
Unclassifie
55
-11-
The result is that the banking system of the
country is in a position of unparalleled liquidity.
This, we believe, affords assurance against a re-
currence of such unsettling deflation as came in the
aftermath of World War I. Further, it places the
banking system in a strong position to meet the
shifts in deposits that many of you anticipate with
reconversion and the new business demands for funds
that should accompany the development of a healthy,
expanding economy.
In a word, the banks' part in war finance,
great as it has been, instead of hamstringing them,
3/4
has left them in a position to service enthusi-
astically a virile private enterprise system.
504
110
Regraded Unclassified
56
-12-
I might point out that the banks have not
only been able to maintain a strongly liquid
position as a result of the manner in which the
nation's war finance has been handled, but also
they have found an opportunity for public service.
This has enhanced the esteem with which they are
held in their respective communities. Moreover,
while they have been making this contribution to
the war effort they have enjoyed an increase in
earnings. Net profits of all member banks of
the Federal Reserve System last year were back
at almost exactly the-all-time high level of 1929.
394
101
293
Regraded Unclassified
57
-13-
Pause
I want to thank you who have been the
leaders in the war finance work in these great
western states -- thank you upon the part of the
Treasury, whose job it has been to direct the
program, and, more important, thank you on behalf
of the United States of America, which, of course,
is the real beneficiary.
I am no prophet as to the duration of the war,
but today we are hopeful that unconditional sur-
render by Germany may not be far away. At such
eleven
time all eyes will turn to the West. The seventeen
states represented at this meeting will take on new
importance in the war. The Pacific Coast will
become the springboard for the all-out offensive
against Japan.
293
122
171
58
-14-
This should prompt you who have the job
of raising the necessary money to redouble
your efforts.
Our immediate task is to put over the Sixth
War Loan, to do so just as decisively as our
fighting men are establishing their positions
in Europe and in the islands of the Pacific.
I know you understand the importance of this
absolutely essential link in the war effort. But
you must do more than understand it, you must make
the people understand it, the men and the women in
stores and offices, in factories, on the farms and
in their homes.
171
98
73
Regraded Unclassified
59
-15-
These people must understand, as you do, that
the time has not yet come to relax or celebrate,
that we must speed weapons and supplies far
across the Pacific to our armed forces who know
full well that a hard fight still lies ahead
before they can bring us victory over the
Japanese -- and these weapons and supplies must
be paid for. That 1s our task -- I know America
can count upon you!
73
73
Regraded Unclassified
FOREIGN ECONOMIC ADMINISTRATION
60
WASHINGTON
9:30 meeting
yes
Klan 50
October 14, 1944
Dear Secretary Morgenthau:
If it is satisfactory to you, we would
like to talk to Sam Klaus about signing him up
on the FEA payroll.
Sincerely yours,
Oscar lox
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
gostin see Page 20
att
61
MEMORANDUM FOR THE SECRETARY.
October 14, 1944.
Mail Report
At the end of the third week, the controversy
over the so-called Morgenthau plan for de-industrializ-
ing Germany has very nearly spent itself. This week
there were only 40 communications on the subject, a
number of which merely requested copies of the com-
plete plan or submitted other proposals for postwar
treatment of Germany. The ratio of favorable comment
to unfavorable remained, roughly, 3 to 1.
Other mail was a bit heavier than in previous
weeks, but covered only run-of-the-mill subjects
that offered little of a quotable nature. However,
for the first time, the political campaign was made
an issue in quite a few of the letters. In request-
ing tax refunds, describing conditions that necessi-
tated redemption of bonds, complaining of delays in
handling them, or demanding that the Treasury forward
at once their delayed allotment checks, correspondents
frequently berated the Administration for its ineffi-
ciency and threatened to vote it out of office in
November.
Although the over-the-counter plan has been in
effect more than a week, there has as yet been no
decline in the number of bonds submitted here for
redemption. In fact, the number rose from 50 last
week to 57 this week.
The volume of mail received from the White House
during the month of September was exceptionally small.
Out of a total of 174 pieces, 120 were re-routed to
other offices, and 54 were acknowledged in the
Correspondence Division.
G. E. Forbush
by Kay Peason
Regraded Unclassified
62
Favorable Comments on Postwar Plans for Germany
H. C. Minard, Davenport, Iowa. 4b # These "soft-
hearted, sob-sister" people that want to be-kind to
the Germans, and not be too severe on them in making
the peace, ought to have had the experience the
small nations and Russia have endured. # We can
be assured of a permanent, lasting peace in the world
only when the German and Japanese nations are de-
stroyed as a nation, then the younger generations as
they grow up may be educated away from Prussianism
and militarism. There must not be any "soft-hearted,
sob-sister" peace. Hon. F. D. Roosevelt and Secretary
Morgenthau are the ones to speak for the United
States, and Secretary Hull and Secretary Stimson
should keep silent.
James Gruen, Los Angeles, California. Some call your
postwar Germany plan drastic. Many of us, still taut
over Germany's postwar World plan, call your attitude
reasonable in the extreme. # # * Who are the ones who
so deplore the possibility of Germany being reduced
to a fourth rate power status? Aren't they people
with patent and production partnerships? Aren't they
the ones who say that dividends know no flag? Soldiers
don't deplore your plan; they don't fear German rakes
and hoes and spades and farm wagons and cows. #
Many of us returned from World War I and looked
sorrowfully at our sons and nephews. Failure of the
League of Nations may have been the reason for our
deep anxiety. But, Sir, speaking as a soldier, permit
me to say that our real anxiety was caused by the fact
that the enemy was not utterly and unquestionably
defeated. Our anxiety grew with the years; so did our
sons and nephews; they are now in a war. # # Certain
very articulate intellectuals have a way of beginning
what they say with, "Of course", thus essaying a truism.
Like this: "Of course, no one would want to entirely
63
- 2 -
disarm Germany!" Or, for instance: "Of course,
Germany must be given every consideration. It's the
heart of European industry. Of course, you can't
turn back the clock!" The clock has been turned
back for many a gardener at Sing Sing and San Quentin.
As for Carthage, well, we are not troubled by Carthage
any more.
Paul M. Byk, Arnold Seligmann, Rey & Co., Inc.,
New York City. Your plan for Germany has aroused a
violent reaction throughout the Press. You may be
interested to know that I pleaded for this plan long
ago in a committee meeting where the outlook for the
German industry was discussed. I pointed out to them
the fact that this was the remedy, and the only one,
and that it would not be too hard for the German
people because it was recommended by Mr. Hitler in
his book as the solution for France. You may be in-
terested to know that other people among which I am
share fully your viewpoint in this matter.
Roy S. Stevens, Kansas City, Missouri. The writer
wishes to express appreciation of your plan for post-
war Germany. It seems to me the most practical, reason-
able and humane offered as yet, and it is noticeable
that its critics do not offer anything workable which
would eliminate their objections. # # # Your proposal,
if carried out humanely, would not work any hardship
on Germany which she has not already imposed on the
peoples she conquered, and surely it is more kind
than to permit any arrangement which would leave the
door open for another similar war in the next genera-
tion. More kind not only to this country but to the
German people. If this plan is too extreme, what
were we fighting for? # # #
Charles J. Mitchell, Los Angeles, California. I see
by the latest issue of TIME that your scheme for
abolishing the everlasting war spirit of Germany is
Regraded Unclassified
64
- 3 -
receiving the widest acclaim in England. More
particularly it should receive the highest support
in the United States, as undoubtedly it will when
our millions of service men return. Giving each
German family ten acres of land and compelling them
to stay thereon and improve their homesteads would
be the most wonderful civilizing influence the world
has ever seen, and you are entitled to universal
acclaim. It will leave the Republican Party not a
leg to stand on. It will gain support from every
right-thinking man and woman who goes to the voting
booth. War will be an unknown thing inside of five
years, and the manufacture of destructive instruments
of war will be condemned as roundly as is the manu-
facture and sale of destructive drugs -- the greatest
work of the League of Nations. # #
Lewis C. Greer, Wichita, Kansas. I heartily approve
of your postwar plans for Germany and believe that
you will be able to obtain overwhelming popular sup-
port for your plan if there is any way for you to get
it submitted to popular consideration. Hoping that
you will continue to advocate, very firmly, the
theories you have thus far advanced to the President.
Robert M. Dorris, Benton, Arkansas. # # # Nearly
everyone with whom I have talked are of the same
opinion as yourself, namely, that Germany should be
so crushed and impoverished that the mere mention
of war or the preparation therefor would raise goose
pimples on their spines. # After the last war
Germany was on probation, as it were; on parole, if
you please, and she violated that parole by visiting
upon the helpless peoples of Europe horrors that are
almost inconceivable. # It is true that you can-
not destroy a nation by killing all of its inhabitants,
and no one that I know wishes to even consider such
a brutal thing; nevertheless, it is necessary to
render impotent any maniac who goes about brandish-
ing a dangerous weapon. # # # If Germany is allowed
Regraded Unclassified
65
- 4 -
to retain her heavy industry after this war, the blood
and treasure spent by the fighting men of the Allies
will have been spent in vain. # # # Your proposal to
make of the German people an agrarian people has
more merit than any other proposal I have read. People
who are close to the soil are basically peaceful.
Mrs. Socrates Drew, Birmingham, Alabama. Three cheers
for your insistence on a hard peace, but do please
make it harder! # * # Germany should be divided into
small growing farms and settled by peasants of non-
German countries. If the boundaries of the surround-
ing countries should be extended so as to absorb the
country there would be no Germany to which they might
return. That's the way the English did the Acadians.
I am 82 years old and members of my family have been
in every war from the French and Indian to the present
day. I have three grandsons in the service now and
don't want any more Germans left for my great grand-
sons to fight.
Mrs. Hastings, Terre Haute, Indiana. I wish to congratu-
late you on your comment or suggestion as to means of
preventing another war. There is much truth in the
saying that they who conquer by force only partially
conquer -- we must have some way of making the peace
stick. # # #
Herbert H. Neale, Los Angeles, California. If the
Allies have the moral courage to adopt the plan out-
lined in the enclosed letter to the World Herald of
Omaha, the world will not again have to combat the
Nordic superman ideology. # # # So long as the sadistic
Nazis were victorious the civil population of Germany
remained 99% pro-Nazi; therefore, Germany should pay
full damages, either in labor, money, or territory,
for the crimes for which they are responsible. # # #
For the past 20 years I have cut my living expenses
to less than $30 per month in order to devote a large
Regraded Unclassified
66
- 5 -
share of my time to writing letters, trying (in vain)
to wake up Britain and the United States to the
German-Japanese menace. It is now 57 years since
I became a naturalized citizen of the United States,
and my earnest prayer is to live long enough to see
the Nazis pay the just penalty for their crimes.
Seymour J. Wilner, Quittner, Weis & Wilner, Attorneys
and Counselors at Law, New York City. Doubtlessly
you heard of last night's radio debate on America's
Town Meeting of the Air entitled, "Should the Allies
Change Germany from an Industrial to an Agricultural
Nation?". Apparently, it is not known whether or not
you are the author of this plan, or even whether you
favor it. Along with many other Americans, I hope
you do favor it whether or not you are its author.
In any event, it is quite obvious that the matter has
evoked your interest. I am therefore taking the
liberty of enclosing herewith copies of letters I have
this day sent to Dr. Warren Seavey of the Harvard Law
School and Dean Christian Gauss of Princeton. I am
sending these in the sincere hope that it is quite
unnecessary to furnish you with any additional ammuni-
tion. But the matter is so serious to all of us, and
our children, that we cannot afford to take anything
for granted. We must prevent another war of German
aggression, and we must prevent it now. * # #
A. L. Putnam, Arcata, California. It is the universal
experience of anyone who dares to spring an idea a
little in advance to current thinking on any subject
whatever to have the whole world jump on him with both
feet. You are getting yours now in respect to your
only effective plan for disarming Germany. Since that
plan was published, the Press has been filled with
other plans to set up Germany again as an industrial,
military, and financial swindling power. Forgotten
entirely are the results of that past policy and the
Regraded Unclassified
67
- 6 -
ten billion in hard cash we dropped to them. Am so
disgusted that all interest in the war has been lost
as no matter what our military forces do, we have
suffered complete defeat. Hope you keep up the role
of one-man army as you may then have the satisfaction
years hence of saying -- I told you SO.
J. R. Hunneman, Boston, Massachusetts. (A circular
letter of which the author sent us sample copies.)
May I urge you to do ANYTHING to high pressure
the British into a harsh peace (such as the Morgenthau
plan). The British have no right to desert or stand
in the way of a harsh peace and depend on us to save
them. # % * No public official is doing his duty who
evades this critical menace to our national security.
Jacques Ebstein, Ex-Director de Cordre, Rio de Janeiro.
Warmest congratulations for your Germany postwar plan.
My friend Van Sittart and you are the only two Anglo-
Saxons realizing what the word Germany means.
R. D. Risser, Kilgore, Texas. Please excuse card.
I am for your program -- "Germany would be stripped of
her industries and reduced from a modern industrial
state to a country of small farms". (Colorado Springs
Evening Telegram)
D. C. Abbott, Sarasota, Florida. I hope your idea of
distributing Germany's industrial machinery among sur-
rounding countries will prevail. It is said some
Cabinet members want Germany built up into a good
customer. But what is the good of a customer who is
a liar or a cheat, and who will shoot you as soon as
he is able to get a gun? To build up industrial Germany
is to build up World War III. #
Regraded Unclassified
68
- 7 -
Milton H. Wind, New York City. The controversy among
the administrators of the world to find an adequate
solution to reduce Germany to a nonwarring nation
should be uppermost in our minds. I wish to convey
my suggestion and offer it for what it is worth. The
Allied Nations in the world have suffered tremendous
losses of manpower. If nothing is done about it, it
will take these nations several generations to recover
from the impact. While Germany too has suffered
casualties, they have been justly rewarded for their
destruction. Consequently, I suggest that each of
the Allied Nations determine how many men they have
lost in dead and seriously wounded, and then make
application to have an equal number of German men
transferred to these nations.
Professor F. W. Foerster, New York City. (Telegram)
Society for prevention of World War Three wants to
reply to criticism of your plan published by London
Times and Economist. As this plan seems to be dis-
torted by Press, we take liberty of asking you whether
we are right in supposing that you did not propose
destruction of the whole German industry but only of
the six big industries connected with rearmament.
Arthur W. Gorbutt, Seattle, Washington. # As a
citizen, I am in accord with you re the division of
Germany; more than this, I believe they warrant the
punishment, for both their own good and the best wel-
fare of the whole world, that their government should
be supervised for the next fifty years; that their
able-bodied work in all the lands they have laid waste
until full restoration and restitution, if it takes a
lifetime; that the "slaves" they kidnapped be allowed
the choice of remaining in the lands held in bondage
to become freeholders of the estates of the German
upper class; these former slaves to use the option as
to settling their families upon these lands, they to
become the dominant ruling classes, etc. #
Regraded Unclassified
69
- 8 -
Mrs. Bessie A. House, Huntington Park, California.
I am a voter of this nation, and a middle-aged woman,
in business for myself. I am interested, of course,
in the future welfare of my country. This includes
what is meted out to Germany after the war. I wish
to congratulate you regarding your postwar treatment
of Germany, as I have read where you wanted to convert
Germany from an industrial state into a nation of small
farms. During my life I have always felt that it was
not wise to be sorry for criminals. The law in the
United States deals with them, and that law does not
allow them to keep the loot they have gained in murder
and stealing. If it did, we certainly would have more
murder and more stealing and more crime. Now, when
it comes to dealing with a nation that has murdered
men and women, together with their children, by the
thousands, and have tortured and murdered our own
soldiers when captured, have even killed their own
relatives and friends; that has committed atrocities
past human understanding; now, when it comes to deal-
ing with such a nation, we have men in power who say
Germany should not be deprived of its industries be-
cause they occupy a key place in Europe's economy.
4b # # Why not deal with criminals as criminals, in-
stead of them as necessities. Certainly the world
could get along without Germany or anything that it
stands for.
Justin A. Rollman, Cincinnati, Ohio. Permit me to
comment on your suggestion that Germany be reduced
after the war to an agricultural state. I most cer-
tainly agree with this suggestion and I have personally
advocated same for a long time. I see no other way to
completely put the German people in a position where
they cannot rearm unless they are handled in a manner
which will prevent them from manufacturing anything of
a war nature. All of us who have sons, relatives and
friends in the armed services owe it to these boys and
the future generations to completely and thoroughly
disperse any thought that the German people may have
of war or rearmament in the future.
Regraded Unclassified
70
- 9 -
W. L. Urquhart, W. L. Urquhart's International Purchas-
ing Service, New York City. Having for the past several
years advocated to my business associates and friends
that Germany, or at least the industrial sections of
the Reich, be reduced to a permanent agricultural
economy, I am most interested to learn from this morn-
ing's New York Times that you also advocate such a plan.
Unfortunately, I know of no organization or group of
individuals whom I might approach on the subject to
discuss and possibly help bring about the plan you have
in mind. Can you guide me in this direction? Although
the Times article indicates that foreign traders and
government officials do not support your plan, I am
firmly of the opinion from my own discussions with
foreign traders that in principle, at least, many are
in agreement with my views, which, incidentally, go
much further than the mere destruction or removal from
Germany of their heavy industries, as my theories in-
clude the re-education of German youth and the avoidance
of despair which would result in anarchy among the
German population, should their industries be destroyed,
without an alternative given for livelihood of the
individual German. Trusting I may have an opportunity
of cooperating with you in the promulgation of your
program.
W. M. Elliot, Hotel Astor, New York City. I wish you
to know that the plan credited to you by the newspapers
for turning Germany into a purely agricultural country
has my complete support. In no other way will the
world be safe from German aggression. The complete
reason for this is so simple, so unanswerable, that
I have been surprised to meet no reference to it in
radio and other discussions. It is merely that, in
twenty-five years from now, there will be a completely
new set of personages at the heads of our and the
other governments, to whom war will have become a
memory. # * By that time, who knows what the situation
will be between the Allies? And what set of men --
who never were, themselves, near any fighting, especially
in this country - -- is going to make & point of spying
Regraded Unclassified
71
- 10 -
on Germany when there is their own country to serve?
Business will expand as never in world history, and
German industry will expand with it. Why not, when
they have all the facilities? This is the crux of
the problem: after many years of peace, a new set
of men throughout the world will not feel as we do
now, and differing viewpoints will permit Germany
again to grow strong. This cannot happen if she has
no such factories, and is, instead, doing as 80 many
of her people are doing today in Wisconsin, Pennsylvania,
etc., -- become farmers. Then they could be a bless-
ing, instead of a curse. May your plan succeed!
Regraded Unclassified
72
- 11 -
Unfavorable Comments on Postwar Plan for Germany
Anonymous -- Chicago, Illinois. I thought as a Cabinet
Officer you had more brains than to advise Churchill
and F.D. to crush Germany industrially, nor any other
nation in that direction, as every country needs each
other in order to exist. "I.M." (Sends cartoon
captioned, "The Blunder That Prolonged The War -- Army
Leaflets Urging German Soldiers to Surrender Were Very
Effective Until Washington Politicians Released the
Morgenthau Plan of Punishment for the German People".
Copyrighted by The Chicago Tribune.)
The following is taken from the copy of a letter
addressed to the President by Albert E. Barnett of
Evanston, Illinois: "The proposals of Secretary of
the Treasury Morgenthau for the economic destruction
of Germany, as reported in the daily press of Sept. 24
and further detailed in last week's issue of 'Time'
will not only cost the Allied Nations the lives of a
half million boys but will cost you a decisive number
of votes in the coming election. It was an affront both
to the conscience and to the historical intelligence
of the American people and only a vigorous disavowal
of his views can relieve you of responsibility for them.
Mr. Morgenthau's personal bitterness is entirely under-
standable, but that does not mean it is morally or If
historically justifiable as public policy. # #
Paul Wengel, Michigan Baptist Convention, Adrian,
Michigan. As Americans we have the privilege to appreci-
ate our leadership if that leadership is on a high plain.
Doubtless you will say that is not very often done and
one must confess that public officials do not get as
much commendation as they do criticism. That is true
of every public servant, political, religious or other-
wise. Though, knowing that, I feel strongly urged to
Regraded Unclassified
73
- 12 -
offer my unqualified protest to the kind of postwar
treatment of Germany as anticipated in your publicized
program. There is no room for that kind of policy in
the true American spirit. Hate breeds hate. I am
concerned about our generations of children that are
just born and going to be. They have a right to come
into the kind of a world that has been wisely prepared.
Nothing could be more unwise, unchristian, unscrupulous,
ungodly, as the kind of thing you propose. That kind
of policy is, to say the least, degrading the high
standard of American leadership. ***
Regraded Unclassified
74
- 13 -
General Comments
E. C. Byers, Wm. Penn Senior High School, York,
Pennsylvania. Kindly send me 25 copies of your Atlantic
City address of October 7, if available, for our History
Department.
John Spear, El Segundo, California. I wish to apologize
to you for a letter disrespectfully addressed and
written to you in either the latter part of 1939 or
the fore part of 1940. I felt pretty bitter toward
President Roosevelt and those associated with him,
figuring that they were war mongering English stooges.
It took time to show me how wrong I was, and how fortu-
nate we were in having a strong-minded man like President
Roosevelt at the head of our Government. Let's hope
he continues at the head until this war is over. I hope
this letter finds you in the best of health and you need
not waste valuable time in replying to it.
Theophilus Meshach, New York City. PEACE Enclosed is
the sum of twenty-seven dollars and ten cents. This
being given voluntary by me to the United States
Treasury as a retribution for misdeeds perpetrated years
ago before I learned of Father Divine. About the year
of 1923 I stolen some coal, I saw money dropped from a
man one day and I took it, I have stolen sugar cane and
potatoes, I worked on docks and stolen beans, sugar and
shoes. I have stolen bread, I have jumped fishing boats
in Nassau, Bahamas, and owe for tobacco and matches and
the food I ate before I leave, and now I am making good
with God and man, all credit goes to Father Divine for
he stopped me from doing those things and caused me to
live right, so all the glory and honor goes to Father
Divine. I would appreciate your sending acknowledgment
of the above to Father Divine at 764-772 South Broad
Street, Philadelphia 46, Pennsylvania. Thank you and
Peace.
Regraded Unclassified
75
- 14 -
Favorable Comments on Bonds
Alberta Fly Getchell, Sunnyvale, California. I had
to send you some more bonds. I am sorry that I have
to. It is this way. The bank here in Sunnyvale will
not cash a bond unless the bondholder has an account
with them, so I have to send them to you. This is
why I am cashing bonds. I lost my wife by death in
August. # # # I have heart trouble now so that I can-
not hardly stand to set here and write this. But
I want you to know I was buying bonds right along
until this trouble came on me. As soon as I can go
to work, I will start buying Bonds. Thanking you.
You are doing a good job.
Regraded Unclassified
76
- 15 -
Unfavorable Comments on Bonds
Congressman Luther A. Johnson (Texas) sends the
following letter he has received from Ray Jarvis of
Hubbard, Texas: "Information, please! I should like
to ask you a $64.00 question. Can you tell me what
fertile Washington brain conceived the idea of having
the banks of our nation run ads advising holders of
A, B, C, D, and E Defense Bonds that they stood ready
to provide instant redemption of their bonds?
Immediately following which, there has been an un-
precedented rush to cash them. One moment we hear
a patriot pleading with us to buy these bonds for the
dual purpose of financing the war and of avoiding in-
flation, and a moment later machinery is set up to
encourage their sale. Does this make sense? I don't
believe it would to my son who today is enduring the
rigors of service on the Isle of Morotai."
J. Park Smith, Cashier, The National Bank of Topton,
Topton, Pennsylvania. After hearing of the large
volume of Savings Bonds that have been redeemed in
our county since October 2nd, I have been wondering
whether this condition may be nation-wide. If so,
I should like to ask your consideration of a plan
which is outlined in a. general way in the following
paragraph. ***
0. P. Jordan, Jr., Executive Vice President, The Pulaski
National Bank, Pulaski, Virginia. Please pardon the
presumption of 8. small town banker making a suggestion
to the Secretary of the Treasury, but we have been
somewhat alarmed at the rate Series E Bonds are being
cashed in since banks were permitted to cash same on
October 2nd. The writer is especially concerned since
it has been my duty to sell same as chairman of our
county in all of the War Loan Drives. While I think
Regraded Unclassified
77
- 16 -
it is a splendid thing to make the cash readily avail-
able in cases of real need, would it also not be wise
to go one step further and help the bondholder to hold
his bonds if he wishes to do so? # # #
E. H. Crowson, Trustee of the India Mission Fund, Inc.,
Loughman, Florida. We have had occasion to notice in
the press some discussion of a possible arrangement
whereby U. S. Bonds might be relieved of interest pay-
ments later on. If there is ANY prospect of this, we
would like to know it. We have a Special Fund in this
Company known as The Pension Fund For Foreign Employees,
and this fund has purchased U. S. Securities in full
confidence that interest due would be payable on same
at maturity. This Company has in effect a plan whereby
money loaned from any Special Fund to the Maintenance
Fund for maintenance uses receives quarterly a 5% in-
crement posted to its credit. Thus, as we receive
about 3% or less on Government Securities, our Pension
Fund is in reality the loser by about 2% when we pur-
chase these Government Securities. Yet, in the
stringency of our war needs, we considered it a patri-
otic privilege to purchase these bonds, even at a loss.
However, if resumption without interest is to be the
order of procedure, we want to know it, as we would
wish, in such a case, to liquidate the bonds and clear
them through our General Fund, which will compensate
for the use of such money quarterly at 5%. # # #
Bernard W. Uhlin, Minneapolis, Minnesota. I wish to
thank you for the little note of caution I received on
cashing my last War Bond. However, I do not believe
it will be necessary to continue to add notes of this
nature in the near future, when I shall be compelled
to cash in on the rest of my bonds. You see, my wife
and I have deemed it our patriotic duty to buy bonds,
and as many as we can. We had planned to have them
for our two boys so they could go to school and receive
an education, but there proved to be a joker in the
plan. The high cost of living, taxes, and a limited
salary for the four of us to live on makes it most
difficult to meet B. most unwholesome situation.
Regraded Unclassified
78
- 17 -
Stanley Meyer, System Vice Chairman, The Pullman Car
Employees Association of the Repair Shops, Buffalo,
New York. # # # Where payroll subscriptions are made
towards the purchase of Savings Bonds, the individual's
payroll name appears on the bond purchased, along with
the name of the beneficiary. In many cases we have
men who for years are known to be working under an
assumed name, for obvious reasons. Neither the Treasury
Department of the United States Government nor the
employer questioned the name of the subscriber or pur-
chaser, but rather accepted the payment of (let us say)
John Smith, but when John Smith, who may have a real
name of John Smiczinski, finds it necessary to turn in
a United States Savings Bond for cash with which to pay
a bill that is due, the banks or the Post Office, we
find, will not cash such Savings Bonds, even though the
individual shows his social security card, or his pay
check, unless they have a savings account or are en-
dorsed by someone. It is unfortunate that conditions
such as these exist, but we feel that the Treasury
Department could make provisions to assist such people.
We understand that the United States Treasury Department
is guarding against possible cashing of stolen Savings
Bonds. Nevertheless, when the individual finds it nec-
essary to cash one or more of his Savings Bonds, he
should be permitted to do 80 without embarrassment.
W. B. Rundell, Vice President, Farmers State Bank,
Hillsboro, Wisconsin. Re: Sixth War Loan. On July 12,
1944, in connection with the Fifth War Loan, we entered
the following open market purchase of bonds on books
of this bank: 50M U.S. Treas. 11%, due 3-15-47. Cost
of bonds -- $50,125.00 plus accrued interest to date
of delivery. We are convinced the overnight profit of
$125.00 indicated above was merely a "joy ride" for
somebody. We would be interested in knowing who got
the $125.00 profit. Now we note you are going right
back into the same kind of a setup on the Sixth War
Loan. This small country bank has sold one million
dollars of War Bonds of one issue or another for our
own account. We would be interested in having your
comment in the premises.
Regraded Unclassified
79
- 18 -
Unfavorable Comments on Taxation
Senator Arthur H. Vandenberg, Washington, D. C.
I enclose herewith a self-explanatory letter from
Mr. Adolph Anderson of Montague, Michigan. # #
Even though this "cooperative" may not be entitled
to tax exemption it would appear that its infini-
tesimal small size (owning not more than $7000 of
property) makes it impossible for it to comply with
all the demands for records, etc. It occurs to me
that this is a case in which a Special Agent might
well deal with the matter on the ground and arrive
at 8. reasonable compromise which will not entirely
destroy this tiny unit ( which - despite its size -
is of great importance to this isolated community).
# # #
(The following is taken from the letter addressed to
the Senator by Mr. Anderson.) The Claybanks Cooperative
Creamery Association is a nonprofit oorporation, organized,
operated and controlled by the farmers, and the stock-
holders as such have never been paid a dividend, a fact
to which I can attest, being one of the stockholders
myself. Their plan is to deduct the expenses of
operation and to pay the remainder to the patrons.
The officers and directors are farmers but they do not
give the company their full time -- in fact, give it
only the time required for board meetings and such like.
# # # It has been in operation better than 30 years,
during which time they have changed officers at least
4 times, losing considerable records with each change.
They were careful to pay their bills and to keep their
record clear that way, but the keeping of records over
the years was never given much consideration. Yesterday
their secretary called on us with a large bulky envelope
bearing the return card of the Internal Revenue Collector
on it, enclosing a letter which stated that a Bureau
letter dated September 7, 1944, had informed the Detroit
Collector that the claim of this Creamery for exemption
from Federal Income Tax had been denied, and that they
should immediately file returns starting with the year
1915 through 1943, also they should file Capital Stock
80
- 19 -
Tax returns for 1933 through 1944. They graciously
granted them 30-days from September 23rd in which
to do all this. The present secretary has held office
for a little over 2 years, and has never filed a
return inasmuch as the previous secretaries had been
given to understand that nonprofit corporations of
their character were exempt. This little company has
a. frame plant about 10 miles out in the country, with
a small frame dwelling alongside for the butter maker.
Aside from that, they own a delivery truck. The pos-
sible value of this property would range from $5,000
to $7,000 as a going concern. If closed, the value
would be reduced at least 50%. # # # It appears that
it will be utterly impossible for this Creamery to
comply with the Bureau's request because they do not
have the data, but aside from that, any such request
makes men fighting mad. It is entirely inconsistent
with good policy and breaks down good citizenship.
It is so utterly asinine to bring the matter up now,
after all these years, that it borders on the ludicrous.
If they should have filed, why were they allowed to go
on under a false assumption all these years? # # #
None of their officers or directors are capable of
complying with the request, neither have they the time
as the management and operation of their individual
farms demands their full time. To hire this work
done would run their costs to such an extent they
might as well quit -- in fact, the statement was made
to let "them" have the creamery -- which makes far more
sense than the request made of them. In short, the
farmers are "burned-up" about this and one cannot
censure them. #
Norman Stone, Washington, D. C. I am writing to
earnestly request that the tax taken from my wages
during the year 1943 be returned to me without further
delay. I only worked a relatively few weeks during
the year 1943, and my total earnings were less than
$300.00. But almost $40.00 were taken from this
pitifully meagre sum in taxation. I spent most of
Regraded Unclassified
81
- 20 -
the year in a tuberculosis sanatorium and was not
released until a few days ago. I need my money. There
was a day when rich men were paid six percent interest
on overpaid taxes, but now a poor citizen has his
wretchedly insignificant income taxed unjustifiably
with no recourse in the soulless bureaus and agencies
which run our Government. I am both poor and ill of
health - and I am going to vote for a change in
November. # # #
Lewis S. Vermillion, Wilkinsburg, Pennsylvania. I was
called into the Internal Revenue Office of this city
and told by Cornelius Murphy, and his immediate super-
visor, that if I did not have my 1943 income tax paid
in full by the first of January, or before, amounting
to $359.00, the office would levy on my wages and earn-
ings of my war job at the Westinghouse Electric Company,
East Pittsburgh, Pennsylvania. I asked for time, and
to pay it in quarterly payments over a period of a
year, which has been refused. I have been informed
that this is going to happen to thousands of others
in this part of the country. This amount cannot be
paid in time, between now and the first of the year,
and I want to know whom to write to or contact to
stretch this out over a period of a year. You have
been deducting too much, with this other tax, consider-
ing the cost of living, to make such demands on working
men with families. I would like to hear from you or
someone who can stop this levying a man's income at
its source, and go back to paying it the way it should
be paid.
7 Phoned Paston 10/24/945
gasten look
this 1m2 please
82
CABLE TO AMERICAN EMBASSY, RIO DE JANEIRO, BRAZIL
United Lithuanian Relief Fund of America, Inc. is desirous
of being of assistance to such Lithuanian refugees in Brazil as may
need help. Please advise the Board of the number of such Lithuanians
and the amount per month that you believe would be necessary to sustain
them.
0
0
10:45 a.m.
October 14. 1044
Regraded Unclassified
83
0
MS
This telegram must be
October 14, 1944
paraphrased before being
communicated to anyone
9 p.m.
other than a Government
agency. (RESTRICTED)
AMEMBASSY
RIO DE JANEIRO
3139
The following is from War Refugee Board.
In view of desire of United Lithuanian Relief Fund
of America, Inc. to help such Lithuanian refugees in
Brazil as may need assistance please inform Board of the
number of such Lithuanians and the monthly amount that
you consider needed for their maintenance.
HULL
(GHW)
BA
EE
WRB:MMV:OMH
o
84
CABLE TO AMBASSADOR WINANT, LONDON, FROM WAR REFUGEE BOARD.
Please deliver the following message to Sir Herbert Emerson
from Mr. Paul Baerwald of the American Jewish Joint Distribution
Committee:
QUOTE WE ARE VERY HAPPY THAT COMMITTEE
AND BRITISH AUTHORITIES AGREE TO MODIFY OUR UNDERSTANDING
FULL USE OF YOUR FUNDS BEHALF HUNGARIAN JEWS. WE HAVE
IMMEDIATELY AUTHORIZED SALY MAYER TO TAKE NECESSARY ACTION
AND REQUESTED HIM TO KEEP SEPARATE ACCOUNTING THIS OPERATION.
SCHWARTZ EXPECTS TO COME LONDON AS SOONAS BRITISH VISA RECEIVED.
WILL DISCUSS WITH YOU PROPOSALS FOR LAST QUARTER. WARMEST GREETINGS.
UNQUOTE
THIS IS WRB CABLE TO LONDON NO. 14.
9:00 a.m.
October 14, 1944
RDrury 10/13/44
Regraded Unclassified
85
CABLE TO AMERICAN DELEGATE, ROME, FROM WAR REFUGEE BOARD.
Please deliver the following message to Arthur Greenleigh,
Rome, from M. A. Leavitt of the American Jewish Joint Distribution
Committee:
QUOTE MINISTRY OF PUBLIC HEALTH OF PROVISIONAL FRENCH
GOVERNMENT HAS APPROVED VISA FOR YOU AND SCHWARTZ TO
ENTER FRANCE. YOU MAY WISH NOTIFY COMPETENT AUTHORITIES
OF THIS APPROVAL. WILL KEEP YOU ADVISED OF SCHWARTZ'S
PLANS. UNQUOTE
9 a.m.
October 14, 1944
Regraded.Unclassified
86
CABLE TO NORWEB, LISBON, FROM WAR REFUGEE BOARD.
Please deliver the following message to Robert Pilpel from
M. A. Leavitt of the American Jewish Joint Distribution Committee:
QUOTE ADVISE SALY MAYER WE REMITTED TO HIM $45,000 FOR SHANGHAI
REPRESENTING $10,000 INCREASE FOR MONTH OF SPETEMBER AND $35,000
FOR OCTOBER BUDGET. UNQUOTE
THIS IS WRB CABLE TO LISBON NO. 107.
9:00 a.m.
October 14, 1944
RDrury 10/13/44
Regraded Unclassified
87
CABLE TO MINISTER JOHNSON FOR CLSEN, STOCKHOLM, SWEDEN
United Lithuanian Relief Fund of America, Inc. is desirous of being
of assistance to such Lithuanian refugees in Sweden as may need help. Please
advise the Board of the number of such Lithuanians and the amount per month
that you believe would be necessary to sustain them.
THIS IS WRB STOCKHOLM CABLE NO. 109.
10:45 a.m.
October 14, 1944
Main (Pr
0
88
0
October 14, 1944
RK
Distribution of true
reading only by special
midnight
arrangements. (SECRET W)
AMLEGATION,
STOCKHOLM
2069
The following for Olsen is WRB 109.
United Lithuanian Relief Fund of America, Inc. is
desirous of being of assistance to such Lithuanian refugees
in Sweden as may need help. Please advise the Board of the
number of such Lithuanians and the amount per month that
0
you believe would be necessary to sustain them.
HULL
(GEW)
WRB :MMV :OMH
10/14/44
NOE
EE
FROM: American Legation. Stockhelm
89
TO:
Secretary of State, Washington
DATED: October 14, 1944
HUMBER: 4161
SECHWE
U S URGENT
We repeat below cable No. 1381 which has been sent to Lendon
today.
With reference to Embassy's cable dated October s, Be. 545,
to Legation and Department's message No. 8244 to Hubessy dated
October 7. in connection with feed parcels for Jeve interned in Germany.
According to World Jewish Congress representatives in Sweden, as a rule
Germans do not allew IRC centrol of Jewish concentration camps. However,
they have sent a telegram asking aid in whatever control pessible, to
IRC in Geneva. It is claimed by Jows that parcels sent previously
from Switzerland. Pertugal and close relatives in Susden reached their
destination satisfacterily. Letters from recipients cenfire this.
Swedish TMCA will forward feedstuffs in packages of one to
three kiles via parcelpest. Their representatives in Germany will try
to help in securing infermation that parcels are reaching recipients.
Germane will not be aware of part Congress takes in plan. Confirmation
from addressees by card or letter (which will be made available to
Legation for centrel) will be asked by Swedish TMCA. with possible
exception of camp at Bergenbelsen, it 10 believed recipiente will be
allowed to write confirmation that parcels have been received, in most
cases. The majerity of the recipients will consist of individuals
which the World Jewish Gengress in Switzerland has authorized.
In the event confirmations do net reach Swellen regularly. or
if conditions justify, forwarding of parcels can be stopped at once.
Accerding to reports, feed situation in Jewish concentration
camps, particularly in Bergenbelsen, is desperate.
The above arrangements are satisfactory, Legation is convinced,
(and British Legation agrees). and urgent approval is recommended.
DCR:GPW
JOHNSON
10-17-44
Regraded Unclassified
90
HM-478
Stockholm
Distribution of true
reading only by special
Dated October 14, 1944
arrangement. (SECRET W)
Rec'd. 8:38 p.m.
Secretary of State
Washington
4185, October 14, 9 a.m.
We do not presently have effective channels
for transmitting a message of the character suggested
in WRB'S 10 (Department's 2041, October 11, midnight)
but are making efforts to develop such channels to the
end that this statement may be transmitted at the
earliest possible moment. (THIS IS OUR WRB 91).
You may wish to consider, in view of the urgency
of the matter, the feasibility of making a public state-
ment in the United States along the line of the reference
telegram and similar to the recent public statements
put out in the United States with respect to other pre-
spective acts of liquidation by the Germans of persons
in their concentration camps.
JOHNSON
WJF
WMB
91
0
HM-470
Stockholm
Distribution of true
reading only by special
Dated October 14, 1944
arrangement. (SECRET W)
Rec'd. 7:59 p.m.
Secretary of State
Washington
4186, October 14, 9 p.m.
THIS IS OUR NO. 92 FOR WRB.
Wallenberg is being instructed by the Swedish
FOROFF to obtain any available information regarding
the persons mentioned in last paragraph of WRB cable
No. 94 and to extend all possible assistance to them
as requested in WRB cable 101. FOROFF was not sanguine
that any positive result would follow as the only
Swidish Government representative in Slovakia is an
honorary consul and there are no cipher or pouch
communications with him.
o
Furthermore, Wallenberg is technically able to
conduct operations in Hungary. FOROFF assumed he had
all the funds he could use under present circumstances
but would check this aspect with him.
JOHNSON
EEC
Regraded Unclassified
92
HM-485
Stockholm
Distribution of true
reading only by special
Dated October 14, 1944
arrangement. (SECRET W)
Rec'd. 9:36 p.m.
Secretary of State
Washington
4187, October 14, 10 a.m. (SECTION ONE OF TWO)
Storch has informed us that Kleist (see last
paragraph our 854 WRB) during his recent visit to
Stockholm made the following statements: (1) It is
impossible to buy release of Jews in Germany with money.
(2) His real mission here was to negotiate release of
the 100,000 Estonians on Osel and to arrange for their
entry into Sweden. (3) He was to take up. on his
return to Berlin general subject of release of Jews.
He claims Swedes had put pressure on him to do something
for the Jews and he expected to have some measure of
success in Berlin as he wished to do the Swedes a
favor.
(4) He claimed that in a recent Berlin meeting
on the general subject of treatment of Jews following
points were discussed: & All Jews should be treated
kindly now and endeavor made to prove to the world that
they had never been abused, the idea being that
surviving Jews who would be treated kindly would speak
up for the Germans after the war. B. Remaining Jews
should all be killed. This point was turned down.
C. As the Germans cannot expect the Allies to treat
them any better than they themselves have treated the
Jews or the inhabitants of occupied countries the Germans
must work out some plan other than A or B above, hence
they are now considering the use of Jews as hostages.
He claimed in this connection the Germans have not
killed remaining Lithuanian Jews.
JOHNSON
JMS
WMB
Regraded Unclassified
93
HM-469
Stockholm
Distribution of true
reading only by special
Dated October 14, 1944
arrangement. (SECRET W)
Rec'd. 7:55 p.m.
Secretary of State
Washington
4187, October 14, 10 p.m. (SECTION TWO)
THIS IS WAR REFUGEE BOARD CABLE NO. 90
as was once intended but have taken them to work on East
Prussian fortifications and are reserving them for
possible use as hostages.
Five. Kleist is expected back here any day and
hopes to have concrete plans to present before a
conference consisting of Count Bernardotte, Professor
Ehren Preis, Storch and Austrian representative.
Storch feels Kleist wants to convey impression
at least he tried to do the Jews a favor so he may
gain favor in Allied eyes. Storch wishes Iver Olson
in London to get in touch with Mr. Easterman or some
other official of the World Jewish Congress there as
he feels that organization is not clearly informed of
the negotiations taking place here regarding the Jews.
(END OF MESSAGE.)
JOHNSON
WMB
94
0
CABLE TO MINISTER HARRISON AT BERN FOR MCCLELLAND
United Lithuanian Relief Fund of America, Inc. is desirous
of being of assistance to such Lithuanian refugees in Switzerland
as may need help. Please advise the Board of the number of such
Lithuanians and the amount per month that you believe would be
necessary to sustain them.
THIS IS WRB BERN CABLE NO. 216.
10:45 a.m.
October 14, 1944
2.95
MS
This telegram must be
October 14, 1944
paraphrased before being
communicated to anyone
10 p.m.
other than a Government
agency. (RESTRICTED)
AMLEGATION,
BERN
3512
The cable below for McClelland is WRB 216.
In. view of desire of United Lithuanian Relief Fund of
America, Inc. to help such Lithuanian refugees in Switzer-
land as may need assistance please inform Board of the
number of such Lithuanians and the monthly amount that you
consider needed for their maintenance.
HULL
(GHW)
WRB:MMV:OMH
WE
EE
19/14/44
96
RP-680
Ankara
This telegram must be
paraphrased before being
Dated October 14, 1944
communicated to anyone
other than a Government
Rec'd 2:30 p.m., 16th
agency. (RESTRICTED)
Secretary of State
Washington
1976, October 14, midnight.
FOR WAR REFUGEE BOARD ANKARA'S 164
A report dated September 29 just received in
Ankara indicates that over 5,000 Jews have been
interned in concentration camps at Slovakia under
the worst conditions and that 2,000 persons were
threatened with deportation. Jewish community
representatives in Budapest have been able to
postpone action against the internees but assistance
of the Vatican, the International Red Cross and
our Government is urgently requested to prevent
deportations from Slovakia. According to the report
no word had been received in Bratislava from either
the International Red Cross or the Vatican both of
which had been approached for aid in Switzerland.
The foregoing is for your information and
consideration in relation to steps which you may
already have taken to protect the Jewish people
in Slovakia.
STEINHARDT
MRM
Regraded Unclassified
SECRET
COPY NO 11
97
NOT TO BE RE-TRANSMITTED
OPTEL No. 334
Information received up to 10 A.M. 14th October 1944.
1. NAVAL
On 11th a Tank Landing Craft capsized and sank off I3LE OF
WIGHT and yesterday another was driven ashore by the gales at
PORTLAND and considered total loss. 4 British Destroyer damaged
by mine off RIMINI 12th. No casuàlties. On 6th. A British
Submarine sank a submarine chaser S.W. of SABANG.
2. MILITARY
Western Europe French have advanced and captured several
villages VOSGES Sector. Slow progress by
U.S. troops AACHEN and German counter attacks repulsed. U.K.
troops have advanced about 2,000 yards in their attack OVERLOON
area. Canadians have made slight progress north of ANTWERP and
have reinforced and extended their bridgehead south of SCHELDT.
Italy Heavy fighting but little progress on 8th Army Front.
U.K. troops have crossed RIVER PISCIATELLO and made
advances west, of from 1 to 2 miles,
Russia Russians have captured RIGA. In Northern TRANSYLVANIA
they have taken BISTRITA and have made further progress
S.E. of BELGRADE.
3. AIR OPERATIONS
Western
Front
13th.
A.E.A.F. Bombers dropped total 42 tons
Railway Centres .MERSFOORT and UTRECHT. 963
fighters and fighter bombers 15 missing) attacked gun positions,
railways, strongpoints and transport in HOLLAND and RHINE area
454 transport aircraft carried supplies to the Continent.
13th/14th. Bomber Command sent 57 Mosquitoes to COLOGNE and 4 to
STUTTGART.
Mediterranean. 12th. 160 Mustangs (2 missing) attacked
airfields and communications HUNGARY and AUSTRUA
13 enemy aircraft shot down and 46 destroyed on the ground besides
38 locomotives destroyed and large number railway carriages damaged
919 Tactical aircraft (A missing) successfully attacked many close
support targets Italian Battle Area and destroyed an ammunition trai.
of 30 wagons
German Activity Twelve flying bombs piotted.
Regraded Unclassified
98
WAR REFUGEE BOARD
Executive Office of the President
Washington
RELEASE NO. 15
(The following address by John W. Pehle,
Executive Director of the War Refugee
Board, before a dinner meeting of the
Combined Jewish Appeal, at the Statler
Hotel, Boston, is scheduled for delivery
at 8 P. m., Eastern War Time, Sunday,
October 15, 1944, and is for release
at that time.)
Tonight I want to tell you sométhing about the rescue program which
the War Refugee Board has been carrying on for the past eight months with
the help of the voluntary philanthropic agencies of America, the govern-
ments of the neutral countries, the underground of Europe, and men of
good will everywhere. I cannot blueprint all the details of that program,
but I can give you some examples taken from the files of the War Refugee
Board of the work that has gone ahead. And these illustrations bear
witness to the practical and ingenious humanitarianism of the American
people during the grimmest war in all history.
In Gothenburg, Sweden, 15,000 food parcels from America were recently
unloaded - destined for helpless inmates of internment camps
...
285,000 more parcels are now on their way.
In a Balkan country a humanitarian volunteer arrives equipped with
sufficient status, prestige and funds to aid the victims of enemy
persecution.
His first act is to furnish a shelter for Jewish refugees.
He is currently using private funds that originated in America to provide
food - especially for children.
Of many couriers who have entered the Baltic countries to rescue
refugees, some have been reported missing immediately after their arrival
and others have even lost their lives in the effort.
Over the Pyrenees groups of children tortuously made their escape from
France, prior to its liberation, to Spain, with the blessing of the Maquis,
and with the aid of guides paid by funds from America. A few weeks
later some are on their way to Palestine.
Along the Black Sea doast of Rumania small ships gather groups of
refugees for a hazardous trip to Turkey.
In Turkey, two Americans
persuade local authorities to cut red tape and to permit refugees arriving
on foot and in small boats to cross the country on their way from the
Balkans to Palestine.
Regraded Unclassified
99
- 2 -
In a neutral country a prominent personage writes a personal letter
in longhand for delivery to Horthy, asking that there be a stop to the
deportation and extermination of Jews from Hungary.
: .
As a result of this
and other protests, the British and American governments accepted the
offer of the Hungarian government to release Jews and agreed to care for
those reaching United Nations or neutral territories.
All over Europe listeners to secret radios hear statements of protest
and warning against persecution of Jews issued by President Roosevelt,
Secretary of State Hull, and two Congressional committees of the United
States.
Pamphlets drop over Hungary warning of retribution for her
inhuman conduct.
In Southern Italy an American helps arrange for the escape in fragile
ships of the downtrodden from Yugoslavia across the Adriatic to Italy.
Some of those escaping later appear in African refugee camps and in an
American Refugee Shelter.
In a camp at Casablanca several hundred wondering Sephardics at last
find a temporary haven.
In upper New York State an American soldier visits his parents who,
with almost 1,000 others have been brought to Oswego,
In Lisbon a committee meets to facilitate the departure of refugees
who have come from France.
Some arrive in Palestine.
Some in
Canada.
In London high government officials, American and British, join
officers of an international organization to expedite the rescue of refugees.
In Poland, as in other occupied countries in Europe, underground groups
protect exposed refugees by hiding them, by disguising them, by moving
them from place to place.
These items constitute part of the story of the current war effort.
America has been using every imaginable device to contest the enemy's
barbaric determination to wipe out complete sections of the world's non-
combatant population.
This is not idle rhetoric. There can be no doubt that Hitler and his
partners in barbarism have a deliberate plan to exterminate entire segments
of the population of Europe, including particularly the Jews.
This effort, as we know from the evidence at Lublin and Kharkov and
from much unpublished material, has not been confined to the Jews. In
obvious preparation for another war, the Germans have killed large numbers
of non-Jewish intellectual and cultural leaders of Poland. Huge segments
of the Russian civilian population have been slaughtered. Entire groups
in all the other occupied countries have fallen under the crushing heel
of Hitler and his followers.
Regraded Unclassified
100
- 3 -
And there have been tens of thousands of individuals who have been
selected for death simply because they kept on being themselves - which
meant being an anti-Nazi preacher, a true democrat, a courageous patriot,
an honest journalist, or a humane citizen.
We have been shocked to the extreme by this war of extermination.
The barbarity of the enemy has aroused the conscience of America. It has
mobilized our sympathies, and it has inspired the Government of the
United States to do all that can be done to rescue the intended victims
of enemy slaughter.
Specifically, this revulsion in America has expressed itself in the
creation of the War Refugee Board by President Roosevelt. It has been my
privilege to serve as Executive Director of this Board, the members of
which are Secretary Hull, Secretary Morgenthau, and Secretary Stimson.
In creating the War Refugee Board the President declared: "It is the
policy of this Government to take all measures within its power to rescue
the victims of enemy oppression who are in imminent denger of death and
otherwise to afford such victims all possible relief and assistance con-
sistent with the successful prosecution of the war."
The creation of the Board and the statement of this goal are landmarks
in the humanitarian history of America. The Government of the United
States issued a solemn statement of policy in behalf of refugees, and it
asked three members of the Cabinet to take all feasible steps to implement
that policy.
As a result of my service with the Board, I have come to appreciate
more than ever some typically American qualities in their true magnificence.
I have learned that Americans are capable of heartfelt indignation when
barbarities are committed during the course of a war. And I have learned
that our American way permits indignation to be translated into action ---
in time of war no less than in times of peace.
Without the widespread and insistent public interest in the perilous
condition of European refugees, it would have been most difficult to
establish the Board and to carry on its operations. Many of those who
have been saved from Europe's deathtraps owe their lives to American
sympathy and American effort.
There is evidence that the oppressed and endangered peoples of Europe
are keenly aware of America's interest and America's activities. Ira A.
Hirschmann, War Refugee Board representative in Ankara, has told us of
a recent incident that illustrates this awareness.
Following the recent break in relations between Turkey and Germany,
a number of individual Germans, Austrians and Czechs, known to be anti-
Nazi, found themselves under a threat of expulsion from Turkey because
they were technically Germans in the eyes of the Turkish authorities.
Some approached the War Refugee Board representative for aid. They
Regraded Unclassified
101
- 4 -
received it and I am happy to say that the Turkish Government has dealt
sympathetically with these cases. One of them was a woman who had lived
in Turkey for 12 years and who was accompanied by a one-year old child.
When asked why she had come to the United States officials, she replied:
"Where else should I go? It seemed only natural to come here. Who else
really cares?"
Another typically American institution whose importance has emerged
clearer than ever is the voluntary philanthropic agency. A quick and
effective program of the War Refugee Board was made possible by generous
contributions of suggestions, personnel, and funds by private agencies
that had already existed in the field of international rescue and relief
work.
I want to pay my unqualified respects to these agencies for their
generous support. As matters have developed, the War Refugee Board has
served as a central enabling and expediting body for all agencies -
Jewish and non-Jewish, new and old, reform and orthodox, soft-spoken
and outspoken.
To catalog these agencies would be impossible. But I want to mention
a few. The constituent agencies of the United Jewish Appeal - the United
Palestine Appeal, the National Refugee Service, and particularly the
American Jewish Joint Distribution Committee - have contributed most of
the funds that have carried on rescue and relief programs. Funds, ideas
and unstinted cooperation have also come in varying amounts from other
agencies, such as the World Jewish Congress and HIAS.
It is the purpose of the War Refugee Board to strengthen agencies like
these by giving them the support of a clear-cut statement of sympathetic
policy by this government and by using the diplomatic, licensing and
communication facilities of the government to help them achieve their
welfare ends.
I also want to pay tribute to many non-Jewish groups and individuals
who have shown a true Christian spirit in their quick and friendly reaction
in support of the helpless of Europe. This help has come from both
Protestant and Catholic organizations. The American Friends Service Committee
and the Unitarian Service Committee have made important contributions, as
have other Protestant groups.
The record of the Catholic Church in this regard has been inspiring.
All over Europe, Catholic priests have furnished hiding places and
protection to the persecuted. His Holiness, Pope Pius XII, has interceded
on many occasions in behalf of refugees in danger.
In this country, too, we have received help from Catholic leaders. At
a most critical point in the Hungarian situation, Archbishop Spellman
wrote a truly impressive supplication to the Catholics of that country to
protect and help the Jews. This moving statement was broadcast in
Hungarian, and reprints of it were dropped over Hungary.
Regraded Unclassified
102
- 5 -
Of great assistance, too, was a statement of protest against
Hungarian atrocities prepared by the late Alfred E. Smith in conjunction
with over 100 other non-Jewish leaders.
The net result of all the efforts I have mentioned has been
a significant contribution in the rescue of helpless human beings. It is
difficult to measure the results of the Board's efforts in figures.
Actually thousands of persons were rescued from enemy territory. There is
reason to believe that several hundreds of thousands escaped death in the
occupied countries as the result of the psychological and diplomatic
efforts of the Board.
Thus, in the American tradition, as the result of a partnershi. between
private groups and a government agency, there has been affirmed -- in word
and in action the principle of human fellowship.
In the matter of philanthropic effort, there is danger in confining
ourselves to the recent past or to the present. The instruments of
humanitarianism must be plastic. They must be fashioned for use in the
challenging new days that lie ahead - days of liberation, days of peace,
days of reconstruction.
We know from recent experience in Italy, in France, and in Belgium
that there is a prodigious task ahead in the field of post-liberation
0
relief and rehabilitation. We know, also, that UNRRA and the Intergovern-
mental Committee on Refugees have staked out certain areas of activity,
and are hard at work. But we also know that important functions are even
today being performed by voluntary agencies. And we have reason to
believe that private groups will continue to play an important role. It
is most important that voluntary agencies be supported fully during the
period that lies before us.
This war has brought untold suffering and sorrow to the people of the
world. It has been particularly severe on the Jewish population, which
has been reduced nearly one-third by the* atrocities of Hitler. Jews and
Christians alike have shed dry, bitter tears at the unspeakable atrocities
committed on the body and mind of man. The time for tears is almost over.
The time for constructive action is near. Determined men and women must
soon pick up the pieces of our civilization, reassemble them, and move
forward into a world of peace, where human dignity and the brotherhood
of man may once more prevail.
o0o
Regraded Unclassified
Treasury Department
Division of Monetary Research
103
Date October 16, 19449
To: Secretary Morgenthau
From: Mr. White
Subject: Reports of the American Military
Mission to Yenan.
The actual texts of reports of
the American Military Mission to Yenan
are not available to us. However,
the War and State Departments allowed
Mr. Adler to read these reports and
make copious notes on them. The at-
tached memoranda are based on these
notes.
104
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Oct. 12, 1944
TO
Mr. White
FROM Mr. Adler
Subject: Highlights of American Military Mission reports from
Yenan.
1. The general impression made on the Mission was extremely
favorable, particularly by contrast with Chungking. The typical
comment of American Army men was "a different country, a different
people" and that Yenan was "the most modern place in China".
There was no show and formality, no subservience to leaders, no
bodyguard, no gendarmes and no claptrap. While living is simple,
there are no beggars and no signs of desperate poverty. Morale is
very high, and the Mission reacted most favorably to the fact that
the Communists never explicitly asked for any kind of assistance--
a marked contrast with usual Chinese official behavior.
2. The following are the conclusions of Chungking G-2 on
the first reports from Yenan:
The head of Army Intelligence in Chungking in transmitting
the reports of Colonel Barrett's mission states that the following
conclusions are justified:
(a) For 7 years the Communists have engaged a large propor-
tion of the Japanese forces in China.
(b) For 7 years the Communists have successfully defended
large areas in North China against determined and well organized
large scale Japanese attacks.
(c) Since 1941 they have supplied themselves entirely by
arms and munitions either captured from the Japanese or puppet
troops or produced by their own unaided efforts.
(d) They have effected improvements in the conditions of
the people in large parts of the areas under their control. The
population of the areas under their control is not less than 50
million. (The New York Herald Tribune correspondent gave the
figure of 86 million.)
3. The Communists have successfully resisted the Japanese
for 7 years.
(a) This resistance, conducted with no active support from
Chungking for a period of from 4 to 6 years and of active hostility
Regraded Unclassified
105
- 2 -
from Chungking in the form of a tight economic blockade and
intermittent military attacks and sniping for at least 4 years,
necessarily takes the form primarily of guerilla activities al-
though there have also been may larger scale operations, par-
ticularly against puppet troops. Such resistance is based on
an intimate alliance if not fusion on the political, economic,
military and social level between the Communist troops and the
people.
(b) The Communists have at least 240,000 first line troops
and 130,000 second line troops who are comparatively well-trained,
plus almost 2 million militia who have undergone some form of
guerrilla training, but they are very short on equipment and
munitions. There is barely one rifle per two men even for the
first and second line troops, and men with rifles rarely have
more than 30 cartridges. Most of the weapons in the possession
of the Communists were captured from the Japanese or puppets.
(c) The Communist armies' strong points are their intimate
ties with the people, their high mobility and the centralization
of their command. Their weak points are their lack of equipment,
particularly munitions, commmunications equipment and medicines,
lack of specialized troops, and lack of uniformity. The center
of activity of the largest army is in North China. The New 4th
Army operates in Central China and there are a few thousand
Communist guerrillas as far South as Kwangtung and Hainan.
(d) The extent of Communist military activity is best in-
dicated by the fact that 21 Japanese divisions are engaged
against them and by the following figures for the last year
on which data are available. The 8th Group and New 4th Armies
(1.e. the 470,000 first and second line troops) had 28,000
engagements in which 200,000 Japanese and puppets were killed
[of which about a third were Japs - our Mission believes the
number of Japs killed is somewhat exaggerated/ and 73,000 taken
prisoner, and in which 85,000 rifles and 1,000 machine guns were
captured. Communist losses were 19,000 dead and 27,000 wounded.
The technical operations of the Communists consist of minor en-
gagements, the main purpose of which is also to prevent small
Japanese forces from looting food, larger engagements with puppet
troops and attacks on isolated forts and garrisons held by the
Japanese, defensive operations on a still broader scale chiefly
to protect key centers of food supply, and offensive operations
for, the purpose of expanding guerrilla areas into firmly held base
areas.
4. The Communists are anxious to cooperate with us militarily
in whatever way they can. They are not only ready to supply us
with intelligence on enemy occupied areas and to extend facilities for
air rescue work, for weather reporting, and interrogation of
Japanese prisoners, but also to coordinate their military effort
Regraded Unclassified
106
- 3 -
with an Allied offensive by cutting the Japanese North-South
Railroads and by undertaking to expel the Japanese from
Manchuria if sufficiently strong. They would prefer to take
orders from an Allied High Command in China rather than from the
Kuomintang, which they say is bankrupt and not interested in
fighting the Japanese. They were asked for a statement of their
military needs but were informed that no commitments could be
made by us; at the same time they went out of their way to
avoid asking us specifically for any assistance. The Communists
appear to believe that large land operations in North China and
Manchuria will be necessary for the final defeat of Japan.
While there is nothing specific on this point in the reports
of our Mission or the comments of Headquarters in Chungking, it
would appear that our Mission is well disposed to the idea of
cooperating with the Communists even to the extent of flying in
a minimum of essential supplies such as munitions, bazookas, and
medicine. (I understand that our Army in China has asked the
Generalissimo for his agreement to our sending such supplies to
Yenan but that his agreement was not forthcoming.)
5. The Communist political program is moderate in the sphere
both of domestic and foreign policy. According to the political
expert of the American Military Mission the Chinese Communist
party "has a healthy moderate maturity" and "it is strong and
successful and has such drive behind it and has tied itself so
closely to the people that it will not easily be killed". "Their
interests do not run counter to those of the United States in
the foreseeable future and merit a sympathetic and friendly at-
titude on our part."
Their domestic goal is what they call New Democracy, which
includes defeating the Japanese, the institution and extension
of internal democracy, and raising the standard of living by
solving the agrarian problem and encouraging the growth of pro-
gressive capitalism in China. Mao Tse-tung indicated the
Communists supported proper treatment of capital both Chinese
and foreign after the war and as much free trade as possible.
Concessions have been made to landlords in Communists areas; one
of the objectives of Communist policy in this sphere was to reduce
profits from the investments of capital in land in such a way as
to encourage landlords to invest surplus capital in industrial
projects.
With respect to racial minorities within China the Communists
favor giving them a considerable degree of autonomy within a
United States of China. They wish to apply such a policy to the
Mongols of Outer and Inner Mongolia, the Tibetans and Chinese
Mohamedans of the Northwest.
Regraded Unclassified
107
- 4 -
In the sphere of foreign policy, the Communists favor
China's adherence to the foreign policies already agreed
upon by the United Nations in such documents as the Atlantic
Charter and the Moscow and Teheran Declarations. They believe
it is unrealistic to talk of the ultimate fate of Hong Kong
as long as the Japanese are in China. With respect to the
peace, they say that Japanese internal affairs must be solved
by the Japanese people, although militarism and feudalism
should be wiped out in the period immediately following on
Japanese defeat. Democracy, they add, cannot be instituted in
Japan as long as feudalism survives. They feel that the colonial
countries of the Far East should have self rule. They deny having
received any material support from the Russians. There would
appear to be some division of opinion among them as to whether
the Russians would come into the Far Eastern War or not.
6. Kuomintang--Communist relations. The Communists are
pessimistic about the seriousness of Kuomintang intentions to
bring about a settlement of outstanding Kuomintang--Communist
issues. They claim that the Kuomintang is stalling and is
putting on a show of negotiating for the benefit of public
opinion both at home and abroad. The Kuomintang objective is
to liquidate the Communists in a summary fashion immediately
after the end of the war. /In this connection it is interesting
to note that Mao Tse-tung, the leader of the Chinese Communist
Party, raised the possibility of the opening of an American
consulate in Yenan, stating that the danger of the Kuomintang
attack on the Communists would be greatest at the end of the
war and implying that the presence of an American Government
official in Yenan would prevent such a clash. Mr. Gauss, our
Ambassador in Chungking, feels that the National Government
would never agree to our opening a consulate in Yenan.7 One
Communist leader went so far as to say that if a turn for the
better did not occur before the end of the year the situation
might become hopeless. They recognize that American press
criticism has played a constructive role in preventing the sit-
uation from becoming worse. Chou En-lai asserted that American
Government officials' conversations with high Chinese officials
had been and could be even more effective in this respect. He
mentioned Wallace's visit and alluded to Kung's presence in
America, with reference to which he specifically stated that
Kung was more pliable and amenable than T.V. Soong. Communist
leaders do not expect Chungking to collapse before the end of the
war. The Communists attitude toward the Kuomintang appears on
the whole to be fairly conciliatory. Mao said that if attacked
they would retreat, but when the point to which they could re-
treat no farther was reached they would fight, adding that if
civil war broke out it would be protracted.
Regraded Unclassified
108
- 5 -
While the Communists attitude toward the Kuomintang
is conciliatory, it is also firm. They realize that they are
growing stronger and that the Kuomintang is growing weaker.
At the same time they certainly do not want to provoke hos-
tilities and would like to avert them if at all possible on
terms which would not make them prisoners of the Generalissimo.
It is interesting to note that the Communist military
leaders were sharper and more bitter in their criticisms .of
the Kuomintang than were the Communists civilian leaders.
However, it is the latter who have the last word. While the
former were very cynical in their comments on the Generalissimo
and his immediate entourage (Chou En-lai referred to Shang
Chen, the head of the Chinese Military Mission to the United
States, as "empty headed"; he also poured ridicule on the
Kuomintang plans to de-mobilize, asking when it had ever
mobilized.) The latter go out of their way to recognize the
National Government and the Generalissimo as the head of the
National Government. Mao stated that what they wanted was
recognition of the Border Area governments as lower organs of
the National Government.
7. The economic situation in Communist China is much
better than in Kuomintang China. An effective program for in-
creasing production is being enforced and economic self-sufficiency
has been attained with a consequent raising of living standards.
Labor, including soldiers, students, and members of the Govern-
ment and Party bureaucracy, is efficiently mobilized for
agricultural and industrial production. The cultivation of
cotton and the production of certain essentials such as soap
and matches have been instituted for the first time in many
areas.
The number of cooperatives, including productive and dis-
tributive cooperatives, has increased phenomenally. Private
productive enterprise is encouraged by liberal Government credits.
Owing to their measures for increasing production and their ef-
fective controls, inflation has not had serious effects on either
the functioning of economy or on the living standards of the
people. In fact, living standards have risen in areas which were
previously among some of the poorest and most backward in China.
Diet and health have improved, with wheat replacing millet as the
staple.
Regraded Unclassified
109
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Oct. 12, 1944
TO Mr. White
FROM Mr. Adler
Subject: Summary of Reports of American Military Mission to
Yenan.
(Colonel Barrett is the author of the military reports and
Mr. Service of the political reports. I know them both well.
Colonel Barrett has spent many years in China and was Military
Attache until 1942. He is a sound and level-headed man. Mr.
Service, who was born in China, has the well-earned reputation
of being the best informed American on internal Chinese politics;
he is a member of the Foreign Service and is now attached as a
political adviser to General Stilwell's staff. Both speak and
read Chinese with fluency and facility.)
A. MILITARY REPORTS
I. Conclusions
The head of G-2 in Chungking in transmitting the reports
of Colonel Barrett's Mission states that the following con-
clusions are justified:
(a) For 7 years the Communists have engaged a large pro-
portion of the Japanese forces in China.
(b) For 7 years the Communists have successfully defended
large areas in North China against determined and well organized
large-scale Japanese attacks.
(c) Since 1941 they have supplied themselves entirely by
arms and munitions either captured from the Japanese or puppet
troops or produced by their own unaided efforts.
(d) They have effected improvements in the conditions of
the people in large parts of the areas under their control.
II. The first military report was enthusiastic over the coopera-
tion and sincere friendliness extended to the American Military
Mission by the Yenan military and civilian officials. The
Communists had been informed by General Ho Ying-chin that the
purpose of the American Military Mission was to obtain intelli-
gence on enemy occupied areas and to make arrangements for air
rescue work and were surprised to find that the objectives of
Regraded Unclassified
110
- 2 -
the Mission were much broader and included making arrange-
ments for weather reporting, obtaining reports on Communists
military activities against the Japanese, the possibility of
utilizing air bases in Communist areas, interrogation of
Japanese prisoners, etc. Colonel Barrett added that he also
wished to obtain information on Communist military needs, but
made it clearly understood that he was in no position to make
any commitment as to the possibility of meeting those needs.
The Military Mission was entertained by the Yenan Government
at an official dinner after which there was music and dancing.
Members of the Mission were asked to sing American songs which
were greeted with tumultuous applause.
Mao Tse-tung asked Mr. Service about the possibility of
opening an American Consulate at Yenan, pointing out that the
danger of a Kuomintang attack on the Communists would be
greatest when the war ended, and implied that the presence of
an American Consul in Yenan would prevent a clash. Ambassador
Gauss feels that the National Government would never permit a
Consulate to be opened at Yenan and would not even agree to
the temporary detailing of an Embassy officer at Yenan. How-
ever, Mr. Service expects to stay there for several months and
will be replaced by another Embassy officer.
The Mission was impressed by the initiative and planning
ability of the Communists, who are apparently doing everything
to cooperate with it. They encountered no suspicion or pro-
crastination, such as is too often the case in Chungking.
III. Report of Yeh Chien-ying, Chief of Staff of the 18th Route
Army. This report contains information disclosed to the
American Military Mission but not to the Kuomintang.
Most of the weapons in the possession of the Communists
were captured from the Japanese or from puppets. Much of the
captured material cannot be used. The Communists have no
regular arsenals and are short on munitions. There are 4 Base
Areas in North China, in addition to the Yenan Border Area, in
which the 18th Route or 8th Group Army operates: the
Shansi-Hopei-Chahar, the Shantung, the Shansi-Hopei-Honan
and the Hopei-Shantung-Honan areas. In addition, the New 4th
Army which was officially liquidated by the Central Government
in 1941 but which has actually survived, operates from
North Kiangsu right through central China as far South as
Kiangsi. There are also small numbers of guerrillas in Kwangtung
and Hainan Island. The 8th Group and New 4th Armies
Regraded Unclassified
111
- 3 -
consist of field armies and local forces.
8th Group
New 4th
Total
Men
Rifles
Men
Rifles
Men
Rifles
Field Armies
220,000
136,000
121,000
77,000
341,000
211,000
Local Forces
100,000
50,000
31,000
16,000
131,000
66,000
Total
320,000
184,000
152,000
93,000
472,000
277,000
It will be noted that there is barely one rifle per two
men. Eash man with a rifle is supposed to have 50 cartridges but
often has only 30. Men are instructed not to shoot at a range of
more than 200 yards except if they are particularly good shots,
when they are allowed a range of up to 400 yards.
General Yeh pointed out that the main weaknesses of the
Communists armies were that they had no special troops, that
they were short even on light munitions and that the training
of the officers needed improvement, lack of machine guns and
light artillery, and lack of uniformity. On the other hand he
claimed that its great strength was its high mobility and the
high centralization of the command. Since 1938 when the National
Government gave them 120 light machine guns and 6 anti-tank guns
they had received nothing from Chungking. Some small arms were
made by hand. He went out of his way to emphasize that he was
not asking the American Military Mission for anything.
IV. Further Military reports from Yenan
(a) It is the opinion of the American Military Mission that
the greatest need of the Chinese Communist armies is munitions,
portable weapons such as the bazooka, for example, communications
equipment, and medicines. Such materials would have to be flown
in by air, and would have to consist solely of essential supplies.
The Communists claim that they could win the whole of Shansi with
a little additional equipment and air support. While our Mission
believes that this claim is over-optimistic, it agrees that the
Communist could recapture substantial and significant areas under
such circumstances.
(b) In addition to the members of the 8th Group and New
4th Armies, the Communists have 1,850,000 militia---1.e. pre-
sumably guerrilles. Morale is high. The Japanese are deeply
hated owing to their savage conduct, and discipline is well
maintained. Desertion to the enemy is rare and puppet support
extremely good. The health of the troops was not particularly
good.
Regraded Unclassified
112
- 4 -
(c) The tactical operations of the Communists can be
classified as follows:
(1) Minor engagements in which the purpose is often
to prevent small Japanese forces from looting the food supplies
of the peasantry.
(11) Larger engagements with puppet troops and attacks
on isolated forts and garrisons held by the Japanese.
(111) Defensive operations on a still larger scale
in which again the protection of key centers of food supplies
is an important objective.
(1v) Offensive operations with the purpose of ex-
panding guerrilla areas into base areas, chiefly against puppets.
(a) The Communists are engaging 21 Japanese divisions.
The 18th Group Army in one year had 23 thousand engagements in
which 65 thousand Japanese and 80 thousand puppets were killed,
300 Japanese and 59 thousand puppet prisoners were taken, and
weapons captured tottalled 51 thousand rifles and 626 machine
guns. Their losses were 11 thousand killed and 18 thousand
wounded. In the same year the New 4th Army had over 5 thousand
engagements in which 53 thousand Japanese and puppets were
killed and 14 thousand taken prisoner, and in which 34 thousand
rifles and 376 machine guns were captured. Their losses were
8 thousand dead and 9 thousand wounded. The high proportion of
Communist Army dead to wounded is due to the fact that it is very
difficult to rescue men or to cure them if rescued. It is felt
by our Military Mission that the above figures are somewhat ex-
aggerated with respect to Japanese casualties.
V. Random points from the military reports.
(a) The Japanese have used gas against the Communists
who suffered quite heavy casualties at one stage owing to the
lack of anti-gas equipment.
(b) Even machine gun companies often do not have more
than 4 light and 2 heavy machine guns.
(c) Central government forces, i.e. guerridlas, behind
the Japanese lines total 20 to 30 thousand and play a very small
part in fighting the Japanese. In fact, their main role appears
to be to keep the Communists out and to wait until the end of
the war and be in a position to occupy the big cities around
which they are congregating before the Communists occupy them.
113
- 5 -
(d) The Communists claim that they have documentary
proof of the fact that Central Government agents often give
the Japanese information with respect to location, etc. of
the Communist troops.
B. POLITICAL REPORTS
I. First report after six days in Yenan.
People going to Yenan have heard such favorable reports from
foreigners who have passed through or foreign correspondents that
they are very much on guard against being swept off their feet
or being taken in. Nevertheless, discounting the above, the re-
action of all members of the American Military Mission was
extremely favorable. This reaction was confirmed by the foreign
correspondents then visiting Yenan.
The typical comment of American Army men was "a different
country, a different people". There was no show and formality,
no subservience to leaders, no bodyguards, no gendarmes and no
claptrap, all of which are all too prevalent in Chungking.
There were no beggars and no signs of desperate poverty. Living
is simple and foreigners are entertained unostentatiously. The
women are self-assured and unselfconscious, presumably as a re-
sult of the improvement in their social status. The general
morale was extremely high. Almost everybody takes an interest
in politics, even coolies reading the newspapers.
The atmosphere in Yenan is that of a small town sectnsian
college or of & religious summer conference. Another comment
by Army men was that it was "the most modern place in China".
Mr. Service's conclusion was that the Chinese Communist Party
has a healthy moderate maturity"and that "1t is strong and
successful and has such drive behind it and has tied itself 80
closely with the people that it will not easily be killed".
II. Mr. Service's conversation with Chou En-lai (Chou is the
number two man in the Chinese Communist Party. He is well known
in Chungking foreign circles, where he was the Communist repre-
sentative until the summer of 1943. It is generally believed
that he would be Minister of Foreign Affairs in any Government
in which the Communists are strongly represented.)
According to Chou the Kuomintang will not make reasonable
concessions to the Communists. A compromise is most improbable,
and the Kuomintang has entered the talks with the Communists
for propaganda purposes and in order to create an impression on
114
- 6 -
foreigners, particularly Americans. The Generalissimo and
the Kuomintang no longer have concrete policies, are drifting
and are awaiting favorable developments. The Kuomintang hopes
at the end of the war to liquidate the Communists in summary
fashion. The Communists neither welcome nor fear Kuomintang
plans for attacking them. In the summer of 1943, the
Kuomintang was hesitating between two alternatives, the first
being to attack and the second to delay the attack until a more
favorable opportunity. They were all set for attack when the
Communists found out the Kuomintang plans, and the Kuomintang
accordingly switched to the second alternative.
There is a steady decline in Kuomintang China, but there
will be no sudden collapse. The Japanese do not plan to cap-
ture Chungking because Kuomintang China is dying a slow death,
and if Chungking were attacked the Kuomintang would be driven
toward unity with the Communists.
The Generalissimo is surrounded by second-raters such as
the "empty headed" Shang Chen, the head of the Chinese military
mission to the United States. These people dare not tell him
the truth and are only interested in maintaining their own posi-
tion. Chou poured scorn on the Kuomintang plans to demobilize,
asking when, if ever, they had mobilized. He also ridiculed
Kung's plea to have cotton cloth flown into China saying that
cargo space should be used only for bombs, munitions, gasoline,
etc. and that the production of cotton had fallen off in China
purely as a result of Kuomintang inept food and price control
policy.
He admitted that American interest in Chinese affairs had
been extremely helpful. Outspoken press criticism had been of
some use, but frank talks by high American officials with high
Chinese officials were even more important. He cited Wallace's
and Nelson's and Hurley's trips to China and added that talks on
the right lines with Kung now that he is in the United States
would also be most helpful. In this respect he thought that Kung
was more amenable and pliable than T.V. Soong. Chou thought
there was a tendency to under-estimate the importance of the
Chinese land theater as a result of the remarkable advances of
the American Navy in the Central Pacific. He said 1t would
still be necessary to rout Japanese troops in North China and
Manchuria. He seemed to feel that the Soviet Union would come
into the Far Eastern war but would not commit himself.
III. Kuomintang-Communist Relations.
The Communist military leaders were much more outspoken
and more bitter in their criticisms of the Kuomintang than were
the political civilian leaders who, of course, have the last word.
Regraded Unciassined
115
- 7 -
It is understood that some of the military leaders had been
rebuked for the sharp way in which they had expressed their
criticisms to Americans. The political civilian leaders are
obviously adopting an attitude of self-limitation with respect
to the Kuomintang.
There are two possible explanations of the moderate pro-
gram adopted by the Chinese Communists, not only in their
relations with the Kuomintang but also in their political,
social, and economic program.
(a) Theoretically the Chinese Communists are Marxists
and believe that China is not yet ready for socialism, that
she has to go through a stage of capitalist development before
socialism will even be theoretically attainable. They also
believe that socialism can be achieved in China by peaceful
means as a result of a long and orderly democratic process.
(b) This practical explanation runs in terms of expediency
and might even be called Machiavellian. According to this
explanation the Communists know that they are growing stronger
while the Kuomintang is growing weaker, and that as this process
continues they have everything to gain and nothing to lose by a
policy of conciliation and moderation, as things are moving in
their direction anyhow. Moreover, the policy of moderation wins
them foreign sympathy. It is thus the easiest and most convenient
way of obtaining power. While according to the theoretical ex-
planation they do not desire power for themselves alone for a
long time to come, according to the practical explanation they do
and the policy of moderation is the best means of obtaining it.
Mr. Service definitely favors the theoretical explanation,
but Mr. Drumright of the American Embassy in Chungking favors the
second explanation. It should be noted that Mr. Drumright was
formerly strongly pro-Kuomintang. While his predilection for the
Kuomintang has weakened somewhat, his antipathy to the Communists
has not. This would appear to be the reason for the difference
of opinion within American diplomatic circles in China. Mr.
Service's conclusion with respect to the Chinese Communists is
"their interests do not run counter to those of the United States
in the foreseeable future and merit a sympathetic and friendly
attitude on our part".
IV. Economic Conditions in Communist China. (This report, while
perfunctory, does bring out the most striking features of the
economic situation in Communist China.)
There has been a definite economic improvement in the last
two years due in the first place to the Communist production
Regraded Unclassified
116
- 8 -
campaign and to a succession of excellent crops. In the
Yenan Border Area there has been an improvement in diet, wheat
having been substituted for millet and cotton is being grown
for the first time. Banditry has been eliminated.
There has been a systematic campaign to mobilize every
available hand for production and to eliminate loafing. Members
of the Army must work either on the fields or in producing
cloth or both. Students have to work two hours a day in ad-
dition to their studies. Government and Communist party of-
ficials also work on the cultivation of crops and vegetables
and manufacturing cloth. The system of labor heros has been
introduced to stimulate production. The blacksmiths in Yenan
work day and night. Private productive enterprise is encour-
aged with liberal credits from the government and premiums are
given to merchants engaged in the risky business of moving
goods through the blockade. The number of C.I.C. units has
increased from 30 to 343 in three years. (The number of C.I.C.
units has fallen steadily during the same period in Kuomintang
China.) The total number of Co-ops is 800 and include both
producer and distributor co-ops.
Health has improved and there has been a reduction in mor-
tality particularly from typhus epidemics. Taxes in kind are
down to 12% and lower than elsewhere in China. As a result of
original research in the locality, matches and soap are being
produced for the first time from indigenous materials and are
quite satisfactory and adequate in quality, which is unfortunately
not the case in Kuomintang China. Paper is also being produced
from a local grass.
The official exchange rate was recently reduced from
Border Area $10 to Border Area 8 to CN$1. The black market
rate for Border Area dollars is actually higher, being $6 to 1
but Mao Tse-tung explained to Mr. Service they did not want to
lower the official rate too rapidly, as many peasants holding
CNS would suffer. The inflation does not seem to have had an
important effect on the lives of the ordinary people. Economic
conditions in general are booming, the main difficulty being lack
of technical personnel.
V. Interviews - off the record between foreign journalists
and prominent Communist leaders.
(a) Mao Tse-tung.
The Chinese Communist goal at present is not socialism but
New Democracy in accordance with the Three Peoples' Principles.
They wish to defeat Japan, to institute democracy and to solve
the agrarian policy. Capitalism of a progressive character
Regraded Unclassified
117
- 9 -
can develop in China. While they are controlling rents they
have made rent concessions to the landlords; their objective
in this sphere was not only to protect the tenant but also
to reduce the profits from investment of capital in land' in
such a way as to encourage landlords to invest surplus capital
in industrial projects. They believe in the proper treatment
of capital both Chinese and foreign after the war and as much
free trade as possible. There will be three forms of industrial-
ization in China - State, large scale private, and handicraft.
They hope that their governments will become lower government
organs of the National Government, but they claim equality of
party status with the Kuomintang. Village governments should be
elected by the people and higher governments by direct or in-
direct election.
Their foreign policy was in line with the Atlantic Charter
and the Moscow and Teheran Declarations. The Comintern had no
place in the Far East. They had received no material support
from Russia. If strong enough, they will undertake to expel
the Japanese from Manchuria. After the war there should be a
demobilization of the Kuomintang and Communist armies in the
proportion of 6 Kuomintang soldiers to 1 Communist soldier.
Outer Mongolia is a part of China but should be recognized
as a national entity, and there should be a Mongolian Federation
within a United States of China and similarly with the Tibetans
and the Chinese Mohadadans of the Northwest who constitute dis-
tinct national groups.
Japanese internal affairs must be solved by the Japanese
people though militarism and feudalism should be wiped out.
It is unrealistic to talk of the institution of democracy in
Japan as long as feudalism survives. Colonial countries in
the Far East should have self-rule.
There is no likelihood of a breakdown of the National
Government before the war ends. The Communists will retreat
if attacked by the Kuomintang but when the point is reached when
they can retreat no further they will fight. The Generalissimo
does not want Allied Mediation between the Communist and
Kuomintang or an Allied High Command for China. Civil war would
be protracted. What China needs is internal peace.
(b) Chu Teh (the leader of the 8th Group Army)
The Chinese Communists are willing to cooperate with the
United States and would coordinate their military effort with an
Allied offensive by cutting the Japanese North-South railroads.
Regraded Unclassified
118
- 10 -
They had already rescued eight American airmen who had made
forced landings. If permitted they could penetrate Kiangsi,
Fukien, Hunan, Chekiang, and Kwangsi. They need ammunition
as well as light arms, radio materials, medicines and tech-
nical personnel. The Kuomintang is not much interested in
fighting the Japanese. Two Kuomintang generals had gone over
to the Japanese under orders from Chungking for the purpose of
fighting the Communists and sent their families to Chungking
as guarantee of good behavior. The Kuomintang had hundreds
of thousands of spies who in the occupied areas often cooperated
with the Japanese. The Communists would accept an Allied
Command in China, as the Kuomintang is bankrupt and is pur-
suing the inconsistent dual policy of fighting the Japanese
and the Communists at the same time. While he was not specific,
Chu did not believe the Russians would enter the war in the
Far East as they were exhausted from the war in Europe.
(c) Lin Piao
During the last two or three years the quality of the
Japanese troops in North China has perceptibly deteriorated.
Regraded Unclassified
DEPARTMENT
INCOMING
DIVISION OF
OF
COMMUNICATIONS
TELEGRAM
TE
STATE
AND RECORDS
DCG-.1681
DEP
Chungking
This telegram must bE
119
paraphrased before being Dated October 15, 1944
communicated to anyone
1944-007
other than a Government
REc'd 2:10 p.m.
Agency. (SECRET 0)
FLIASORS
Secretary of State,
Washington.
1681, October 15, 2 p.m. (SECTION ONE)
FOR TREASURY FROM FRIEDMAN.
OnE. Some discussion of gold sale
program took place at PPC meeting but
largely confined to asking for details of
program. Interest shown in Existence of
black market and in difference between black
market and official prices and questions asked
as to why these conditions allowed to continue.
Points made that ordinary merchants found
difficulty in obtaining gold in market and
that sale in form of large bars made it
impossible for ordinary individuals to purchase
at official price. No resolutions passed or
introduced on this matter. Considerable dis-
cussion did take place on desirability of
government commandeering foreign Exchange
resources
Regraded Unclassified
120
-2-71681, October 15, 2 p.m. from Chungking
resources of private citizens and using them
to hElp finance program of improving condition
of soldiers and this still being discussed by
standing committee of PPC. Suggestion made in
PPC that dollars acquired in this manner could
bE converted into gold and sold. (Reurtel 1316,
October 10).
Two. TAKUNG PAO on October 1 carried article
by Prof. Wuchi-Yuan of South-VEst Associated
Universities, Kunming adverasly critical of
gold sale policy. Wuchi-Yuar does not oppose
sale of gold but feels should not bE sold to
"rich class at low prices." Sale gold price
should bE CN dollars 70,000 per ounce. If not
sold at this price should bE conserved for post
war USE. In off record conversation Hu-lin,
manager TAKUNG PAO told mE that paper was in
general agreement with United Sates position.
COMMERCIAL DAILY NEWS on October 6 carried
Editorial opposing sudden increase to dollars
70,000 per ounce but favoring gradual increase:
seriously questioned desirability of gold sale
policy, said justifiable only as last resort
because
Regraded Unclassified
-3-1/1681,October 15, 2 p.m. from Chungking
121
because there will bE more important uses
after the war. Attempting to obtain more
on press criticism and PPC meeting on gold
sale policy.
Three. Widespread opinion that official
gold price is too low: Kwok opposed to raising
gold prices unless hE has on hand stocks adequate
to meet demand for week following change:
EXPECTS increase in price would further stimulate
demand.
GAUSS
JUS
Regraded Unclassified
DEPARTMENT
INCOMING
DIVISION OF
OF
COMMUNICATIONS
STATE
TELEGRAM
AND RECORDS
LSL-711
Chungking
This telegram must bE
paraphrased bufore bEing
Dated October 15, 1944 122
communicated to anyone
other than 3 Government
Rec'd 4:20 p.m., 16th
Agency. (SECRESSO)
DEPARTMENT # STATE
Secretary of State,
CONFIDENTIAL
For security reasons the
text of this message must
DIVISION OF
Washington.
OCT 18 1984
be closely guarded:
1681, October 15, 2 p.m.
Am
Four. Regarding OnE. B. of your telegram word
"forword" garbled. There is no difference between forward
price and spot price. Central Bank requires full payment.
in advance and guarantee delivery on arrival without
specifying time. This practice (A) guarantees speculators
and hoards who are chief purchasers that will get gold
since there is constant fear in market that Government
will CEASE gold sale program and (B) protects purchasers
against rise in price.
Five. There is considerable sprEad between official
and black market prices. Black market rises whenever
Central Bank sells forward because of shortage of stocks
on hand. HOWEVER, as Central Bank has repeatedly met its
commi tments when gold shipments have arrived, during Each
SUCCESSIVE period of black market sales the price has tended
not to rise as much from level which prevails during period
of spot sales, E.g. during first half of September black
market
Regraded Unclassified
123
-2- #1681, October 15, 2 p.m. (SECTION TWO) from Ghungking.
market price reached high of $28. 500 peroz; in second half
of September $25,000; Early October $24,000 and on October 13
$22,600. Speculators take advantage of this difference by
selling own stocks on black market and buying forward from
Central Bank at official prices. Kwok claims that govern-
ment can not Eliminate black market EXCEPT by bEing always
able to sell for immediate delivery. Gold sales October 1
through 13 total 108,007 own, of which 57,600 undelivered
commitments.
Six. Since SEPTEMBER 28 old purchasers required to
purchase "community welfare savings certificates" issued by
four government banks and postal savings bank Equal to 10%
of gold purchases. Certificates mature in three years and
pay 8% interest. Central Bank permitting goldsmiths to
pass on this burden to ultimate purchaser in form of resale
of certificates to customers.
SEVEN. Gold deposit programs aid to bE still unimportani
Purchasers of gold deposits still not required to purchase
certificates; no Effect noted R8 yet on volume of gold
deposit.
(END OF MESSAGE)
GAUSS
JMS
HTM
Regraded Unclassified
124
COPY NO.
11
NOT TO BE TRANSMITTED
SECRET
OPTEL No. 335
Information received up to 10 a.m. 15th Oct. 1944
1.
NAVAL.
Reported Kiel Canal blocked since 8th May by a ship
which was mined and sunk near Western entrance to Canal at
Brunsbuttel. Weather yesterday again interfered with cross-
channel sailings. A Canadian Frigate was torpedoed 14th in
St. Lawrence River while on Anti U-boat patrol. Attempt being
made to beach her. A 12,5000 ton British tanker carrying
petrol and aircraft was in collision yesterday N.W. of Madeira
with a 7,000 ton U,S. ship and is believed total loss. Ships
were in sonvoy bound for Mediterranean from U.S., both abandoned
on fire, five men missing.
2.
MILITARY.
Italy, Little change on right flank in Canadian and
New Zealand sector. Some slow but steady progress further left
Eighth Army front, patrols reached River Savio. No appreciable
change Fifth Army front.
Russia, In Transylvania Russians have gained some
ground N.W. and N. of Cluj. In Yugoslavia they have captured
places 12 miles S. of Belgrade.
3.
AIR,
Western Front 13th. Further reports show 173 A.E.A.F.
Bombers - two missing, dropped 272 tons mainly on railways
Western Germany and 989 fighters - 15 missing, scored 18:1:11
in the air and destroyed 360 vehicles. 14th. 1,002 escorted
bomber command aircraft dropped 4,684 tons on Duisburg through
cloud. Bombing somewhat scattered although some good concentra-
tions achieved, fifteen bombers and one fighter missing. 1,006
escorted U.S. heavy bombers bombed railway centres Western
Germany including Pologne 2,151 tons, Kaiserlautern 295 and
Saarbrucken 215. Pathfinder technique used: 12 bombers, seven
fighters missing. According to preliminary reports 35 escorted
A.E.A.F. Bombers bombed a bridge near Zutphen while 651 fighters
- one missing supported and covered troops in Holland and N.W.
Germany and 532 aireraft carried supplies to the continent.
14th/15th. Bomber command sent out 1,555 aircraft:-
Duisburg 1,008 - seven missing, Brunswick 241 - one missing,
Berlin and three other targets 46 - one masing, bomber support
120 and Diversionary sweep 140 - one missing. Weather over
Duisburg *lear and bombing concentrated.
Mediterraneen 12th/13th. 68 bombers from Mediterranean
dropped 132 tons on Bronzollo Railway Yards S.S.S. Bolzano.
13th. 762 escorted heavy bombers bombed S.E. Germany, Austria
and Hungary dropping total 794 tons on two oil refineries and 752
on six railway centres. 228 medium bombers attacked Military
objectives Bologna area and 818 fighters and fighter bombers
operated over Italian battle area. 13th/14th. 79 bombers dropped
169 tons on a railway centre Hungary. Enemy casualties above
operations:- two destroyed in the air and 24:0:18 on the ground.
Ours 38 heavy bombers, one medium and ten fighters and fighter
bombers.
4.
HOME SECURITY.
14th/15th. Twenty-two flying bombs plotted in two phases,
About 8 p.m. ten plotted and about 2 a.m. 12 plotted,
Regraded Unclassified
TREASURY DEPARTMENT
125
INTER OFFICE COMMUNICATION
DATE Oct. 16, 1944
TO Mrs. Klotz
FROM Mr. Shaeffer C.P.D.
Secretary Morgenthau's Los Angeles speech was not
distributed to Treasury officials until 9:00 Saturday
morning. As the teletyped copy was full of errors it
was stenciled before being shown to anyone. Unfortunately,
D. W. Bell had ignored his copy, placed on his desk at
9:05 o'clock Saturday morning up to the time Mr. Morgenthau
talked with him. It was available to Mr. Bell seven and
one-half hours in advance of delivery.
No effort was made to show it to Mr. Bell earlier
on the assumption that Henry Murphy, who accompanied the
Secretary, was completely authorized to act for the
Under Secretary on fiscal affairs.
Regraded Unclassified
126
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Oct.16,1944
TO
Secretary Morgenthau
FROM Harold Mager the
I have arranged for the production and distribution of
4,500 sets of your three addresses to the Regional Conferences in
Atlantic City, New Orleans and Los Angeles. They are being prepared
in sufficient quantity for distribution to both State and County
War Finance Committees. State and Local Chairmen will be urged to
bring them to the attention of local Financial Editors, and to
give them the widest possible distribution.
A copy of each address, with covering note, will be mailed
to County Chairmen in those states for which we have authorized
mailing lists of County Chairmen.
Bulk shipments of the addresses for remailing to Local
Chairmen will be sent to state headquarters, on the basis of one set
per county, in those states that have not furnished authorized
lists of county chairmen.
Copies of speeches will be shipped to Chicago tomorrow
(Tuesday, October 17) for remailing to the field.
The field is being informed that additional copies may be
requisitioned in the usual manner.
Regraded Unclassified
127
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATEOCT. 16, 1944
TO
Secretary Morgenthau
FROM
Mr. Haas
Subject: The Business Situation,
Week ending October 14, 1944.
Summary
Reconversion: In addition to the adverse psychological
effects of declining income and employment after the de-
feat of Germany, present disparities between labor costs
and civilian-goods price levels may raise serious problems
in the transition to a peacetime economy. The labor cost
per unit of factory output appears to have risen at least
12 percent since 1942, while prices of manufactured
civilian goods have held virtually unchanged. Further
concern over reconversion prospects is suggested by the
possibility of sharper cutbacks in war contracts than
official figures indicate.
Commodity prices: Moderate declines in grain futures
featured an easing tendency in commodity markets last
week. The Dow-Jones futures index declined 0.8 percent,
but the BLS index of 28 basic commodities showed practi-
cally no change.
Crop prospects: As a result of improved growing conditions
last month, 1944 crop production may attain the record
levels of 1942, which would be 23 percent above the pre-
war 1935-39 average. A new record is expected in corn
production.
Wheat exports: The United States, Canada, Australia, and
Argentina have agreed to divide the export market after
the war, with this country being allocated 16 percent of
the total.
Consumer debt: The volume of consumer debt outstanding has
shown relatively little change since August 1943 follow-
ing the long decline of more than 50 percent from the
September 1941 peak. The total remains nearly $5 billions
below the peak reached in 1941.
Regraded Unclassified
128
- 2 -
Difficult transition period
Recent developments suggest that the reconversion problems
after the defeat of Germany may be more difficult than is gener-
ally expected, and may result in serious unemployment. This
situation may arise from a number of possible developments:
(1) from the psychological effect of declines in employment
and incomes on consumer spending; (2) from the prospect of
severe labor difficulties during the reconversion period;
(3) from the possibility that a tight OPA pricing policy on
civilian goods may discourage full production; (4) from the
slow progress apparently being made in getting reconversion
projects under way, and (5) from the possibility that cutbacks
in war contracts may be more severe than official statements
have indicated,
While the chances are perhaps no more than 50-50 that a
serious situation may develop, we believe the possibility is
one that should be kept in mind in looking ahead.
Effect of cutbacks
The 40 percent outback in war contracts after the defeat
of Germany, as envisaged in the latest official statement, will
cause several million workers to lose their present jobs. It
will also cause a substantially greater percentage decline in
incomes than in employment, since the high-wage industries and
high-rate overtime earnings will be most affected. Furthermore,
the displaced workers will doubtless be reemployed in lower-paid
jobs, and the surplus of labor may result in a general abandon-
ment of overtime work and overtime pay on the remaining war
contracts.
Price Administrator Bowles mentioned in a press conference
last week that 4 to 6 million workers may be thrown out of work
in the first months after V-E day, with a resulting drop in
national income. In addition, he estimated that a change from
the 48-hour week to a 40-hour week will mean a loss of $12 to
$15 billions in workers' incomes.
While the war with Japan will require a continued large
Government deficit, which will do much to maintain incomes dur-
ing the reconversion period, the psychological effect of such
a deficit when people are losing their jobs may be quite
different from that during a period of expanding employment.
People may wait until the outlook becomes clearer before spend-
ing freely for any but necessary/items, a condition which
Regraded Unclassifie
129
- 3 -
would not be favorable for a rapid expansion in civilian goods
production. Mr. Bowles said last week that cancellation of war
contracts may reduce Government spending by $30 to $40 billions,
and that deflationary influences are likely to become cumulative
for a time before inflationary factors become operative.
In view of the labor unsettlement which the cutbacks will
cause, and judging from experience after the First World War,
labor difficulties may have an important retarding effect on
employment and national income during the transition period.
Downgrading of jobs, curtailment of overtime pay, and laying-off
of workers will provide numerous grounds for strikes. When
war orders were cancelled after the last war, according to one
author, "overtime work at the factories ceased and the war bonus
system was abandoned. Labor became restless and dissatisfied.
Strikes occurred in almost every line of industry. In Novem-
ber (1919) the great steel strike took place, involving over
365,000 men."
Disparity between labor costs and price level
The recently-announced policy of the OPA to hold prices
of new civilian goods as closely as possible to the 1942 price
level presents a difficult problem, since in the effort to pre-
vent inflation it may unintentionally act as a brake on pro-
duction and employment by narrowing too severely the profit
margins of manufacturers. Actually, the readjustment of dis-
parities to restore a peacetime balance between labor costs and
prices will be one of the most difficult jobs of the reconversion
period.
Labor costs have risen substantially since 1942, while
prices of manufactured goods (excluding war materials) have
held virtually unchanged. A rough measure of present labor
cost per unit of output of all manufactured goods is obtained
by dividing an index of factory payrolls by an index of factory
production. Such an index is shown in Chart 1, in comparison
with the BLS price index of nonagricultural products. The com-
bined index, which averages 12 percent higher in 1944 than in
1942, doubtless understates the rise in labor costs for civilian
goods, since it is affected by increasing production efficiency
in such heavily-weighted war goods as ships, tanks, and planes.
On the other hand, production costs other than for labor have
doubtless shown a smaller rise.
While the disparity indicated in Chart 1 1s being corrected,
conflicts of interest may hinder a rapid reconversion and tend
to increase unemployment. Labor will actively resist any
Regraded Inclassified
130
- 4 -
reduction in pay when the shift is made to civilian goods --
in fact, the unions are now seeking higher wage rates to com-
pensate for prospective reductions in overtime pay. Consumers
may limit their buying if prices are increased during a period
of declining incomes. Industry may restrict production if profit
margins are unsatisfactory, and might actually welcome a period
of severe unemployment to shake down labor costs.
It is difficult to foresee definitely whether, when fac-
tories shift from war contracts to civilian goods, the disparity
will be adjusted by reduced labor costs, by higher prices, or
a combination of both. However, it is possible that the pre-
occupation of the OPA with holding prices down, and consumer
reluctance to pay higher prices while jobs are uncertain, may
result in pressure on wage rates which will tend to prolong the
period of reconversion unemployment.
Bowles sees inflation threat
Mr. Bowles last week expressed his fear that the greatest
inflationary pressure on prices, which may become a serious
threat, will come four to six months after the defeat of Germany.
In an effort to forestall inflation, he intends to set prices
on civilian goods which will yield good profits to business
"on the basis of high volume production.' Some companies have
already indicated, however, that they will be unable to attain
high volume production until many months after V-E day, and
that in the period of initial production their costs may be
very high. Mr. Bowles indicated that the OPA has so far made no
provision for this.
The expectation of Mr. Bowles and others that inflationary
pressure is likely to develop within six months after the end
of the war in Europe may be based in part (and perhaps mis-
takenly) on our experience after the last war. Our present eco-
nomic dislocation, however, involving potential deflationary
forces, is much more severe than at the end of the First World
War, when only about 25 percent of our industrial production
was involved. This would be approximately equivalent to the
situation if the present war had ended three years ago -- in
October 1941. By referring to Chart 1, it will be noted that
the entire indicated disparity between prices and the index of
labor costs has developed since that date.
Regraded Unclassified
131
- 5 -
Extent of outbacks uncertain
While a 40 percent cutback in war contracts remains the
official figure, and is used as the basis for various forecasts
of national income and employment, statements have appeared
recently which suggest that the actual outback may be higher.
This possibility is by no means certain, but should be given
consideration. Chairman Sloan of General Motors, for example,
told the Chamber of Commerce of New York State recently that
he expected production to be cut back 70 percent rather than
40 percent. If the war in Europe were to end now, he expected
that reconversion would require about six months, with & shorter
period expected if the war should continue into next year.
Progress of reconversion program
Although the number of applications to produce civilian
goods under the spot authorization order has increased con-
siderably recently, actual reconversion in progress under the
program is still relatively small. Earlier in the month it
was reported that only about 10 percent of applications were
receiving approval, largely because of the stringent manpower
situation. However, it is reported that WPB and WMC officials
expect approvals to increase sharply before the end of this
month, partly due to anticipated greater leniency of local
WMC representatives.
In addition to efforts to speed up the spot authorization
program, the WPB is reported to be working on other measures
to facilitate the transition to civilian goods production
after the end of the war in Europe. Among others, an order
is to be issued shortly which will provide a modified form of
high priority to manufacturers seeking machine tools for
civilian goods production. While it is uncertain how effec-
tively such action can be carried out, prospective delay in
obtaining machine tools has been one of the major reconversion
problems of numerous manufacturers, especially in the automo-
bile industry.
Another reconversion measure now receiving WPB attention
is that of releasing from war production before Germany falls
some plants now producing bottleneck items, such as bearings
and small electric motors. The prospective lack of such items
has been & serious retarding factor in the resumption of
civilian goods production, and solution of the problem would
132
- 6 -
enhance reconversion prospects. The WPB is also studying
means whereby existing restrictions on construction activity
can be revised to permit more civilian construction without
interfering with the war effort.
Commodity prices show easing tendency
Featured by moderate declines in grain futures, commodity
markets showed an easing tendency last week. The Dow-Jones
futures index declined 0.8 percent, but the BLS spot index of
28 basic commodities was practically unchanged. (See Chart 2.)
The declines in grain futures last week were due in part to the
very favorable official crop report as well as to & belief that
the recent reaction of the markets to the Government's parity
purchase program had been too bullish. Cotton prices were off
slightly.
In the week ended October 7 the BLS general index of whole-
sale prices registered a slight advance for the third consecutive
week. Further advances in prices for grains, cotton, fresh
fruits, eggs, and cotton yarns and higher prices for cereals
and quicksilver largely accounted for the rise in the index.
At 103.9 percent of the 1926 average, the index is now 1.1 per-
cent higher than a year ago and is 38.5 percent above the pre-
war level of August 1939.
Price stability likely to be broken
The high degree of stability which has characterized whole-
sale prices during the past year may not continue after the war
ends in Europe, but the actual trend of prices will depend on
the net effect of conflicting influences. The BLS general in-
dex of wholesale prices has varied less than 2 points since
March 1943. Wholesale prices of farm products have fluctuated
within a rather narrow range since the President issued his
"hold-the-line" order in April 1943, and prices of industrial
products are now only about 3 percent above the level of
May 1942, when the General Maximum Price Regulation went into
effect. (See Chart 3.)
Since the start of the war in 1939, wholesale prices of
farm products have risen 101 percent, while industrial prices
have risen only 23 percent. The very disparity between the
amount of increases in farm prices and in industrial prices
suggests the likelihood of readjustments in the post-war period.
If farm production continues at the present high levels when
demand tapers off, prices of farm products may decline despite
the Government's support program, while prices of manufactured
goods may be raised somewhat by increases in price ceilings.
133
- 7 -
Farm prices are now 113 percent of parity, whereas the
Government is obligated to support agricultural prices at
only 90 percent of parity. Thus prices of many products
could decline substantially before reaching the support level.
Moreover, the prices of many farm products help to determine
the level of parity, hence a decline in farm prices will in
itself lower the parity level. Assuming no changes in prices
of products in the parity index except farm products, farm
prices could conceivably decline as much as 25 percent despite
Government support. If business activity is maintained at
fairly high levels, however, prices of all farm products may
not decline the full extent to the support levels.
For many manufactured products, on the other hand, in-
creased labor and material costs may force upward revisions in
the price ceilings when production is resumed. The OPA
apparently hopes that manufacturers can offset these increased
costs by improved methods of production and by a reduction in
selling and other distribution costs, which seems to us rather
doubtful. In one of its first cases of reconversion pricing,
the OPA announced last week interim prices for pianos at 13 per-
cent above the existing (March 1942) ceiling price. The margins
between the factory costs and the selling prices historically
prevailing for the piano producers, it was indicated, were 80
narrow as to leave little room for absorption of cost increases.
Although the OPA emphasized that the repricing of pianos should
not be taken to set a general pattern for reconversion pricing,
it is likely that similar situations will be encountered for
other products.
1944 crop production may equal record 1942 crop
Crop production this year may equal the record levels of
1942 if weather conditions do not interfere unduly with the
tremendous harvesting job, according to the October 1 crop
report of the Department of Agriculture. At the level now
indicated, crop production would be 23 percent larger than the
pre-war 1935-39 average. Crop prospects improved last month
as a result of more favorable growing conditions, and yields
per acre are now expected to be higher than in any past year
except 1942, on a harvested acreage larger than in any year
since 1932. The corn crop, showing substantial improvement
last month, is now estimated at 3,197 million bushels, which
is slightly more than the previous record crop of 1942.
Regraded Unclassified
134
- 8 -
In view of the high level of crop production this year,
the United States has now passed the time when it will be
threatened with food shortages caused by war needs, Food
Administrator Jones stated last week. Civilian food supplies
during the last 3 months of 1944, according to the Bureau of
Agricultural Economics, will continue to be moderately large
despite present heavy allocations for military and lend-lease
use. An early end of the war in Europe, moreover, would re-
duce military allocations, with a consequent increase in
civilian supplies.
Post-war wheat export market divided
The four great wheat producing countries, Australia,
Canada, Argentina, and the United States, with Great Britain
sitting in for the Empire, have agreed to divide the wheat ex-
port market after the war, Secretary of Agriculture Wickard
stated last week. This country would be allocated 16 percent,
or 72 million bushels, of the estimated annual world exports of
450 million bushels. Allocations can be changed by mutual
agreement, and eventually an agreement on prices is planned.
Average exports of this country in the pre-war years
1935-39 were approximately 63 million bushels, or 8.3 percent,
of the average production of that period. Wheat production,
however, has increased substantially during the war period.
If production in the post-war years should continue at the
high wartime levels, our export allocation would represent
only 7.4 percent of our total crop. Moreover, the wartime
use of tremendous quantities of wheat for grain alcohol and
feed is unlikely to continue. In view of prospective con-
sumption, Secretary Wickard indicated that with crops of
1 billion bushels (the 1942-44 production averaged 975,502,000
bushels) "there will be 200 or 300 million bushels of wheat
carried over.'
WLB refuses to make recommendations in Little Steel wage case
The War Labor Board last week finally took definite action
on the long-pending controversy over the Little Steel wage
formula raised by wage demands of the CIO and AFL. By a vote
of OR to 4 the Board refused to make recommendation one way or
the other with regard to the formula on the grounds that it
"1s not sufficiently informed as to the possible effects of a
modification of the Little Steel formula on the price structure
and on the national economy generally."
Regraded Unclassified
135
- 9 -
In lieu of a specific recommendation in the matter, the
Board will send & report to the President through the Director
of Economic Stabilization, setting forth pertinent data rela-
tive to the relationship between wages and the cost of living,
and an appraisal of inequities resulting from recent trends.
The labor members of the WLB sharply criticized the Board for
its failure to recommend a change in the Little Steel formula,
and indicated that they would make their own recommendations
directly to the President.
Consumer debt restricted despite heavy retail sales
Continuing the gain shown earlier in 1944, the value of
total retail sales in August exceeded year-earlier levels by
8 percent. This compares with a rise of 4 percent in the
retail price index of the Department of Commerce during the
same period. Although nearly all major groups shared in the sales
rise, the widest gains were shown by the apparel and general
merchandise stores, with increases of 18 percent and 14 percent,
respectively. Sales of the "other retail stores" group were
bolstered by a rise in liquor store sales to 50 percent above
the August 1943 level. This sharp gain is attributed largely
to a more abundant liquor supply resulting from the August
"holiday" granted to alcohol producers.
Despite the notable expansion in the aggregate value of
retail trade under wartime conditions, total consumer debt de-
clined steadily for 20 months after our entry into the war.
By August 1943 the total outstanding was less than one-half
the peak figure attained in September 1941. This heavy decline
reflected the stoppage of production of passenger automobiles
and other consumer durable goods as well as the restrictions
on consumer credit imposed by Federal Reserve Board regulations.
(See Chart 4.) Since August 1943 the decline in consumer debt
has levelled off and a slight rise has occurred in recent months,
but the total is still nearly $5 billions below the 1941 peak.
Regraded Unclassified
LABOR COST AND COMMODITY PRICES
1939 = 100
PERCENT
PERCENT
Quarterly
150
150
140
140
130
130
Indicated Labor Cost
Per Unit of Output
120
120
B.L.S. Wholesale Prices
(Excludes Farm Products)
110
110
100
100
90
90
80
80
I 2 3 4 I 2 3 4 I 2 3 4 I 2 3 4 I 2 3 4 I 2 3 4 I 2 3 4
1939
1940
1941
1942
1943
1944
1945
Chart 1
*B.L.S. index of payrolls in manufacturing. divided by FRB. production index
136
Office of the Secretary of the Treasury
P-287
Division of Research and Statistics
Regraded Unclassified
WHOLESALE COMMODITY PRICES
1943
1944
PERCENT
PERCENT
WEEKLY
1926-100
106
106
105
105
104
104
889 Commodities. B.L.S.
103
103
102
102
101
28 Basic Commodities. B.L.S.
101
100
JUNE
AUG.
OCT.
DEC.
FEB.
APR.
JUNE
AUG.
100
OCT.
1943
DEC.
1944
SELECTED BASIC COMMODITIES
Percentage Change December 6, 1941 to Oct 6 and Oct.13, 1944
PERCENT
+100
Rosin 94.1%
+80
Barley 68.2%
Flexseed 67.3%
+60
Corn 56.9%
+40
Hoge 457%
Wheel 414 %
Steers 31.6%
Lord 28.8%
Coftee 246 %
+20
Butter 18.8%
Print Cloth 10.3%
Cottonseed Oil 8.7%
Supar 7/%
o
Weel Tope 3.9%
Hides 0%
Tellow -4./%
-20
Dec.6.
Oct.6.
Oct 13,
137
1941
1944
1944
Office of the Secretary of the Treasury
of learn and States
Regraded Unclassified
Chart
WHOLESALE PRICES
August 1939 - 100
1939
1940
1941
1942
1943
1944
1945
PERCENT
PERCENT
200
200
180
180
Farm Products
160
160
All Commodities
140
140
120
120
Commodities other than
Farm Products and Foods
100
100
80
80
J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N
1939
1940
1941
1942
1943
1944
1945
Office of the Secretary of the Treasury
133
Chart 3
Division of Research and Statistics
P-259-A
Regraded Unclassified
RETAIL SALES AND CONSUMER DEBT
1939
1940
1941
1942
1943
1944
DOLLARS
DOLLARS
Billions
Billions
10
10
9
9
8
8
Consumer Debt
Total Short Term Outstanding
End of Month
7
7
6
6
5
5
4
4
3
Sales, All Retail Stores
3
2
2
I
I
o
O
J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N
1939
1940
1941
1942
1943
1944
189
Chart 4
Office of the Secretary of the Treasury
Division of Research and Statistics
Regraded Urclassified
TREASURY DEPARTMENT
140
INTER OFFICE COMMUNICATION
DATE
Oct. 16, 1944.
get
TO
FROM
Mr. Hass
Secretary All Vorgenthau
Subject:
Digest of Chester Bowles' memorandum on "Pricing
objectives in the reconversion period, sub-
Barth
mitted in response to your request of October 11
This memorandum of the Price Administrator, sent to
all members of OPA advisory committees and recently released
to the press, presents the position of the OPA on repricing
of new civilian goods. This problem will be one of the most
critical in the reconversion period, since ineffective price
allan
control could allow inflation to develop, while too rigid
control might restrict production and employment.
Ins Klay material the first thing minday
Mr. Bowles calls attention to the serious inflationary
rise which developed after price controls were removed fol-
lowing the Armistice in 1918, and the resulting collapse
which caused a drop of 44 percent in payrolls and 66 percent
that
in net farm income. Corporate profits after taxes were
reduced from $6,419 millions in 1919 to a net loss of $55
millions in 1921, and an inventory loss of $11 billions
wiped out practically all of the reserves accumulated from
wartime profits.
see
The situation after V-E day
While potentially inflationary forces will exist in the
billions of wartime savings of individuals and accumulated
reserves of corporations, Mr. Bowles says that deflationary
Please
forces will begin to develop after the war is won in Europe,
and that no one can say now which pressure will be greater.
Uncertainty about prices could lead to a wild speculation,
or to a drying up of purchasing power. For that reason, the
OPA is determined to do everything possible to hold prices
stable.
Among the deflationary factors he cites the unemploy-
ment resulting from closing war plants, and the decline in
earnings of employed workers when the work week is cut back
to 40 hours. A 10 percent cut in hours, "which seems prob-
able soon after V-E day, will cut salaries and wages by
something like 12 billion dollars in & year."
Unclassified
141
- 2 -
He mentions that "fear of prolonged unemployment can
make people hesitant to spend their savings except for
necessities. A man out of work goes slow in building 8. new
home - even though his savings account is still ample.
....
If reconversion is slow, the national income will
be dangerously down while millions of people are waiting to
return to work."
Objectives of OPA pricing policy.
The pricing policy on reconyerted civilian products,
in Mr. Bowles' opinion, must accomplish the following:
(1) Encourage maximum production, (2) be easy to apply,
(3) encourage the continued payment of high wage rates in
order to maintain purchasing power, (4) protect the public
against increases in living costs, (5) avoid contributing to
another collapse in farm prices, and (6) provide for removal
of price controls as rapidly as possible.
General statement of policy.
As a general policy, the present ceilings will be con-
tinued on civilian goods now being produced, subject to ad-
justment in individual hardship cases. Price increases will
continue to be allowed to industries whose profits have
fallen below the 1936-1939 level. On products which have
been off the market during the war, the general objective
will be to set prices at the manufacturer's 1942 level,
absorbing any increases in labor and material costs through
increased plant efficiency and lower selling costs. (Mr. Bowles
is confident that this can be done in most cases). However,
"in those cases where an increase over the 1942 price level is
really needed to bring any product back on the market, an in-
crease will be given. For the smaller firms, provision is
being made for price ceilings to be determined by the 93 OPA
district offices, with a possibility that very small concerns
or those making minor articles may be exempted from price
control.
Personal observations by Mr. Bowles.
In a few concluding remarks on general economic policies,
Mr. Bowles says that as a practical matter we cannot go back to
the production levels of 1940, since, under assumed conditions
in 1946, this would mean that 19 million would be unemployed.
For this reason, industry must abandon previous policies of
high unit profits based on curtailed production, and must seek
larger profits through increased volume and lower unit costs. How-
ever, if major segments of industry attempt to cut prices by
depressing wage rates, we will face the dangers of another
disastrous depression.
Regraded Unclassified
OCT, 1944
OFFICE OF PRICE ADMINISTRATION
WASHINGTON, D. C.
142
MEMORANDUM
To:
All Members of OPA Advisory Committees
From:
Chester Bowles, Administrator
Subject: Our Pricing Objectives in the Reconversion Period
For two and a half difficult years we have
It has been the responsibility of the OPA
been striving to maintain a stable wartime
under the Stabilization Act to administer the
economy. In general our efforts have been
actual pricing of 8,000,000 products and serv-
successful.
ices, and to establish rents for 14,500,000
Since the Spring of 1942, when price control
dwelling units. It has been a staggering task.
first became effective, the Department of Labor
The ground over which we have travelled has
tells us that industrial prices have risen less
been new and unfamiliar. There have been no
than three percent. The cost of living, ex-
sign posts to guide us. Our policies have been
pressed in the individual prices of items pur-
developed laboriously by trial and error. In-
chased by the average middle income family. has,
evitably there have been mistakes, delays and
according to the same authority. risen only
irritations.
about nine percent in this same period.
FOUR REASONS WHY
ALL GROUPS HAVE BENEFITED
There are, I believe, four basic reasons why
But the fact remains that the job so far has
we have been able to establish this record:
been accomplished. Prices and rents have re-
mained relatively stable. Moreover, this sta-
1. The tremendous wartime production of Ameri-
bility has been accomplished without hardship
can farmers and American industry, which,
to any major economic group.
in addition to our huge production ear-
Industry profits in 1943, even after the pay-
marked for war, has provided us with 90
ment of high wartime taxes, actually exceeded
billion dollars worth of consumer goods
net profits after taxes in 1929. They were more
and services in the past year.
than double the netprofitsafter taxes in 1939.
Net farm income after all expenses exceeded
2. The patriotic desire of the American peo-
prewar levels by 170 percent. Industrial wages
ple to save their money instead of spend-
are at an all time peak.
ing it during wartimes.
3. The basic honesty of the American people
V-E DAY WILL BRING NEW PROBLEMS
which has kept the vast majority of them
from patronizing the black market.
The pricing pulicies which we have followed
during the war period have been effective under
4. The government stabilization program au-
wartime conditions. Put today we look forward
thorized by Congress in the Stabilization
to more and more cut backs in war production
Act.
and the increased production of peacetime coods.
EARNINGS OF CORPORATIONS, FARMERS AND LABOR
CORPORATE PROFITS
FARM OPERATORS
WEEKLY EARNINGS
(AFTER TAXES)
(NET INCOME)
(FACTORY WORKERS)
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
DOLLARS
8
8
12
12
48
48
6
6
9
9
36
36
4
4
6
6
24
24
2
2
3
3
12
12
o
o
o
"
o
o
11
o
1929
39
'40
'41
'42
'43
1929
39
'40
'41
'42
'43
1929
'39
'40
'41
'42
'43
Regraded Unclassified
PAGE 2
During the next ninety days we are hopeful
During the first World War, with a minimum of
that the war will be brought to a close in
price control, the cost of living increased by
Europe. During the next 18 months or so we are
62 percent from July 1914 to Armistice Day.
looking forward to victory in the Pacific. As
Both corporation profits, and net farm income rose
our economy partially reconverts to peacetime
to record levels.
requirements we will be called upon to face
Immediately after the Armistice, in November
rapidly changing economic conditions.
and December, war controls were dropped. In
Within three months after Germany is defeated
March 1919 the price level again started upward
it is estimated that plants now producing 40
as a wild scramble for inventories and new goods
percent of our war goods can be freed for the
developed.
manufacture of civilian goods. More than
This pestwar inflationary rise continued at
an increasing pace. By June 1920 living costs
4,000,000 wor workers will be made available
had risen to 108 percent above the 1914 level
for the production of goods for which the
an additional 46 percent increase after Armistice
American people are eagerly waiting.
Day. Wholesale prices, which had risen 102 per-
The Federal Government has made clear that
cent, went on to a peak of 148 percent above
industry will be assisted and encouraged to re-
prewar levels. Fages and payrolls, business
sume the manufactureof civilian goods s rapidly
earnings and farm income - these too continued
as possible. To this end, the War Production
their climb.
Foard has announced that it will lift controls
And then came the collapse. Within 22 months
over most and manufacturing immediately
factory payrolls dropped 44 percent to bring
after V-E Day. The War Manpower Commission has
misery and privation to millions of our workers.
stated all manpower controls will be lifted ex-
Net farm income dropped 66 percent. 436,000
cept in relatively few areas where they are
farmers lost their properties through fore-
essential to continued war production.
closures during the next four years.
The only lasting answer to inflation is full
Corporate profits after taxes dropped from
production of civilian goods with all possible
$6,419,000,000 in 1919 to anet loss of $55,000,000
speed. For this reason we in the OPA welcome
in 1921. Inventory losses, amounting to 11
these developments as q major aid in holding
billions, wiped out practicallyal the reserves
accumulated out of wartime profits.
prices stable.
But even under the most favorable conditions
That's the story of our price levels after
our pricing task will bea ticklish one. A weák
the last war. Everybody had moved up together
and everybody came down together. We went up
price policy during the next few months can set
fast; we came down hard. It's a story that pro-
in motion all the powerful inflationary forces
vides a perfect lesson on how not to handle our
that surround us. A rigid price policy in which
pricing problems during the next few months.
no allowance is made for legitimate increases
It's a story which we must all be determined
in costs could stifle employment and production
shall not be repeated this time.
and head us straight for a major depression.
During the war our efforts have aimed solely
at checking inflation. On V-E Day the picture
will change. When the telegrams go out cenceling
WHAT HAPPENED IN 1919
war orders, the forces of deflation will begin
to develop.
In 1919 we met this sameproblem, on a greatly
From that day on until full production is
reduced scale, and fumbled it badly. While there
achieved and supply and demand come into reason-
are many factors now whichare totally different
able balance, the forces of inflation and defla-
from those we faced after the last World War, it
tion will exist in our economy side by side.
will be wise to examine carefully what happened
Bight now it is impossible for anyone to say
to prices immediately after Armistice Day 1918.
with finality which will be the greater.
PRICES: LAST WAR AND THIS WAR
INDEXES: LAST WAR-1914-100, THIS WAR-1939-100
COST OF LIVING
WHOLESALE PRICES
INDUSTRIAL PRICES
26C
260
240
240
LAST WAR
220
220
LAST WAR
200
200
LAST WAR
180
180
THIS WAR
160
160
THIS WAR
THIS WAR
140
140
120
120
100
100
so
80
1914 1915 1916 1917 1918 1919 1920 1921-1914 1915 1916 1917 1918 1919 1920 1921-1914 1915 1916 1917 1918 1919 1920 1921
1939 1940 1941 1942 1943
1939 1940 1941 1942 1943
1930 1940 1941 1942 1943
143
PAGE 3
THE DANGER OF INFLATION
serve as an anti-depression asset, But fear of
prolonged unemployment can make people hesitant
Let's first take a look at the huge infla-
to spend their savings except for necessities.
tionary pressures all ready to push prices up
A man out of work goes slow in building a new
0
as soon as the war in Europe ends.
home - even though his savings account is still
By the end of 1944, 100 billion dollars of
ample.
wartime savings will be waiting in the hands of
Up to now business and industry have been
people who have been unable to buy many of the
able to absorb the men - more than 1,250,000 of
things they winted most - a new car, an electric
them - who have been mustered out of the armed
refrigerator, a washing machine, a sewingmachine,
forces. However, when our soldiers and scilors
a new stove, new farm machinery, a new house.
start coming home after V-E Day there may be
Obviously, it will be impossible to produce
more men than jobs until industry hits its stride.
all of these articles in sufficient quantities
If reconversion is slow, the national income
immediately. But people don't like to wait.
will be dangerously down while millions of workers
The pressure of buyers with good jobs and a back-
ore waiting to return to work. Slowness in re-
log of wartime savings will be tremendous.
conversion would also mean a let-down in demand
Merchants will be anxious to be among the
for basic raw materials.
first to offer new goods for sale. The retailer
The Government has been spending about 70
who can quickly build a good inventory will be
billion dollars a year for war materials and
in a position to cupture the business.
construction, and that money has provided good
Every manufacturer, too, will want to be among
jobs at high wages, Within three months after
the first to produce these goods. The competi-
the defeat.of Germany it is estimated that this
tion for materials will be considerable. To back
will be cut about 40 billions. To a major extent
up this competitive desire for inventories and
that's money out of our pockets, until we get
row materials are billions of dollars in wartime
civilian production going on a comparable scale.
reserves.
Some of these deflationary threats we cannot
THE DANGER OF DEFLATION
hope to avoid. Some of them are temporary and
the speed or slowness of reconversion will deter-
But, as I have pointed out, inflationary
mine the extent of their influence. Others may
pressures are only one-half the story. Defla-
not materialize, unless businessmen and their
tionary pressures - some of them inescapable,
customers -- frightened of the future -- are
some of them potential, are equally dangerous.
afraid to invest and spend their money.
The closing of plants built only for war pro-
But after V-E Day the threat of deflation
duction (which probably cannot make peacetime
cannot be ignored.
goods) will require an estimated 2 million people
to look for peacetime jobs elsewhere. Millions
of others will face temporary unemployment while
WE MUST RESIST BOTH FORCES
the plants in which they work set up their new
production lines for civilian goods.
Statistics alone cannot measure either of
In all plants changing over to civilian pro-
these dangerous economic forces. Behind them
duction, the return to the 40 hour week will re-
lie the psychological factors of over-optimism
duce the workers' weekly take-home pay. Even a
on the one side or fear on the other. Both of
10 percent cut in hours, which seems probable
these are products of uncertainty.
soon after V-E Day, will cut salaries and wages
Uncertainty about prices is one of the most
by something like 12 billion dollars in a year.
dangerous. It could lead to a wild speculation
Adequate unemployment compensation will, of
or to a drying up of purchasing power. That is
course, help to some degree to hold up purchasing
why we are determined to do all in our power to
power. Our huge backlog of savings will also
hold prices stable during the months ahead,
WHAT HAPPENED WHEN INFLATED PRICES CRASHED 1918
CORPORATION PROFITS
FACTORY PAYROLLS
FARM INCOME
TURNED TO LOSSES
DECLINED SHARPLY
FELL RAPIDLY
ANNUAL TOTAL IN BILLIONS
WEEKLY TOTAL IN MILLIONS
ANNUAL TOTAL IN BILLIONS
7
7
250
250
10
10
6
6
200
200
8
8
5
5
4
4
150
150
6
6
3
3
2
2
100
100
4
4
I
I
50
50
2
2
o
o
-1
T
o
o
0
o
1918
1919
1920
1921
1918
1919
1920
1921
1918
1919
1920
1921
Regraded Unclassified
PAGE 4
Itwill take careful planning and intelligent
home wages of our industrial workers is in-
cocperation on thepart of all of us GS a nation
evitable. If this trend were increased by
Government, industry, labor, farmers - if we are
pricing policies that would result in a general
to guide ourselves successfully through this
lowering of wage rates, we would soon face a
difficult transition period.
serious depression.
4. Our pricing policies must continue to protect
There are many factors which will determine
the public against general increases in the
our success or our failure. The pricing policy
cost of living. Rents. food prices and cloth-
we follow isonly one of them. Our export policy,
ing prices held at no higher than pres-
our tax policies, our disposal of government
ent levels. On consumer goods which have been
owned war plants and surplus war goods will all
out fproduction for some time, price increases
play an important part.
must be given only when absolutely necessary.
and then held to the minimum amounts needed to
But our OPA responsibility is for pricing and
encourage volume production.
for pricing alone. What shall our reconversion
5. Our pricing policy must not contribute to any
price policies be?
repetition of the farm collapse which followed
the inflation in prices after World War I. The
WHAT OUR PRICING POLICY
ability of our farmers to purchase industrial
MUST ACCOMPLISH
products and generally toincrease their stand-
ard of living has been tremendously improved
during the war period.
The pricingpolicy on the reconverted civilian
With sustained high purchasing power our
products which we adopt to meet the difficult
farmers can furnish one of the largest and most
conditions which lie ahead must, in my opinion,
profitable markets for industrial products. In
accomplish the following:
my judgment that market, in the reconversion
1. It must encourage maximum production. It must
period as well as during the postwar period,
not stand in the way of the manufacturer's de-
must be encouraged vigorously and sustained.
sire to produce to the limit of his capacity.
The responsibility for that, of course, lies
This means prices which yield good profits for
in other agencies.
business. large or small, on the basis of high
6. Our OPApricing policy must call for the elimi>
volume production.
nation of price control as rapidly as possible.
2. Our pricing policy must be easy to apply. De-
This means that ceilings should be removed on
cisions must be made rapidly. Manufacturers
each product or in each industry one after on-
have a right to expect from us the quickest pos-
other, when there is no longer any danger of
sible answers on requests for prices on new
inflationary price rises in that particular
items. We must realize, however, that prices
field.
cannot be setwithoutadequate information from
If we decontrol too quickly we will find
the businesses of fected.
ourselves in serious trouble with the possible
3. Our pricing policies in the reconversion period
need for reimposing controls at a later date.
must encourage the continued payment of high
But if we hold controls in effect after they
wage rates. When wages are reduced purchasing
are no longerneeded it will tend to discourage
power begins to dry up. Through the loss of
production and initiative on the part of
overtime and through some unavoidable unemploy-
industry.
ment. as plants are reconverted from wartime
It is obvious that the development of o
production to peace some deflation in the take-
pricing policy to meet all these objectives is
TWIN DANGERS TO OUR NATIONAL ECONOMY IN 1945
THREAT OF INFLATION
THREAT OF DEFLATION
BILLIONS OF DOLLARS
SAVINGS OF INDIVIDUALS
UNSATISFIED DEMAND
AT PRESENT, CIVILIAN SALARIES AND WAGES (OFF THE FARM)
10
BIG, BUT NOW BIGP
ARE RUNNING ABOUT $94 BILLION A YEAR
e
10
EO
30
40
se
so
TO
so
se
:
1941
DURING 1942, 1943, AND 1944 THESE CONSUMERS'
im
QURABLES HAVE RD OUT OF PRODUCTION, EITHER
COMPLETELY OR is PAIOR PART, IF DURING WESE
DURING RECONVERSION, HOURS WILL BE REDUCED AN ESTIMATED
# YEARS THE (94) RATE of PRODUCTION HAD COM-
10 PERCENT. THE EFFECT ON WAGES INCLUDING OVERTIME WILL
81023
TIMED HERE IS THE NUMBER OF THESE 00003 THAT
REDUCE THIS TOTAL BY $12 BILLION
ACCUMULATED FROM PEARL HARBOR THRU 1944
WOULD HAVE BEEN PUT OR THE MARKET FOR AMERICAN
e
CONSUMERS:
⑉
94
(EST.)
DEMAND DEPOSITS
10,980,000 AUTOMOBILES
RECONVERSION WILL ENTAIL A CUT OF 10 PERCENT (5 MILLION)
END of MONTH
10,500,000 REFRIGERATORS
IN EMPLOYMENT. THIS WILL REDUCE SALARIES AND WAGES BY A
INCLUDES ALL DEPOSITS EXCEPT INTERBANK
FURTHER $ 8 BILLION
AND u.s. GOVERNMENT, LESS CASH ITEMS -
PROCESS OF COLLECTION
6,042,000 WASHING MACHINES
e
N
"
$4
HD
=
6,351,000 VACUUM CLEANERS
DEC. 1941
OPERATING MORE SLOWLY, THERE WILL BE A REVERSAL OF THE
16,755,000 ELECTRIC IRONS
no
UPGRADING PROCESS WHICH OCCURRED DURING THE WAR, AND MEN
WILL LEAVE HIGH PAYING WAR JOBS FOR LOWER-PAYING JOBS use
SEE 1944 (EST)
7,923,000 TOASTERS
PEACE-TIME PRODUCTION. THIS WILL REDUCE SALARIES AND WAGES
BY NO LESS THAN $ 10 BILLION.
41,100,000 RADIOS
MONEY IN CIRCULATION
.
82,380,000 CLOCKS AND WATCHES
,
:
74
:
"
END of MONTH
If
10,400,000 FURNAGES AND
ALTOGETHER, WE FACE A CUT OF $30 BILLION me SALARIES
ses 1941
HEATERS
AND WAGES AFTER V-E DAY.
(11)
14,010,000 STOVES AND
MEX. 1944 (EST.)
THIS MEANS SHRINKING MARKETS
RANGES
-A SERIOUS DEFLATIONARY FACTOR
Regraded Unclassified
PAGE 5
a difficult task. But if we are to achieve a
The important point is that these ceiling
144
vigorous, full production economy with a high
prices are already in effect and are working.
standard of living and with full opportunity
They have stood the test of time and, as the
for every group, it must be successfully ac-
record amply demonstrates, they have.permitted
0
pmplished.
full production and record profits. Our hard-
earned experience in setting them has given us
THE SIZE OF THE JOB
the know-how to work out ceilings for the in-
dustries coming back into civilian production.
Let's take a look at the types of companies
and products that have been under price control.
These present price controls present no new
Let's compare them with the others that will
problem. They will be continued in substan-
need to have their ceiling prices reviewed. In
tially their present form. We shall continue
other words, let's take a look at the job ahead
to use the same pricing standards, standards
from the standpoint of administration.
which during the last few months have been
Many companies have continued to make peace-
carefully reviewed and approved by Congress.
time products throughout the war production
In other words, we will expect absorption of
period. Others have continued the production
cost increases on less profitable items, GS
of civilian goods, side by side with wartime
well as on more profitable items, by industries
commodities. Still others have for at least
which manufacture several lines and whose total
two years been wholly converted to the making
profits are satisfactory.
of war materials. Some peacetime products have
We have been adjusting prices in cases of
been entirely off the market since the first
individual hardship ever since ceiling prices
quarter of 1942. During the next few months
were established, and we will. of course, con-
they will become available to the general pub-
tinue to do so.
lic for the first time in more than two years.
Price control now covers all civilian goods
We will also continue to allow price in-
creases to industries whose profits have fallen
and many services. The principal consumer
below the level of the 1936-39 period. But in
items now under price control have an estimated
most of these consumer lines now in production.
1943 retail value of 78 billions of dollars, or
volume should increase as war restrictions are
85 percent of total consumer expenditures in
removed and as raw materials become more
1943. Among the most important of these are
food, clothing. rent, furniture and furnish-
plentiful.
ings, fuels and certain services.
Overtime payments will probably decrease,
The regulations setting up ceiling prices
and more efficient labor will become available.
the fields now covered have been geared to
As a result of these factors, unit production
individual requirements of the businesses
costs should decrease. It is my belief, there-
and industries affected. With few exceptions
fore, that with relatively few exceptions.
they have been fair both to buyers and sellers.
firms which are now manufacturing consumer
They the legal obligation that they must
peacetime products will continue to prosper
be "generally fair and equitable."
under present ceiling prices.
THE SIZE OF OUR RECONVERSION PRICE PROBLEM
PRODUCTS NOW UNDER PRICE CONTROL
VOLUME OF RECONVERSION GOODS
TOTAL CONSUMERS' EXPENDITURES
IN 1943 CAME TO
$92 BILLION
OF THIS, PRICE CONTROL REACHED $78 BILLION
FURTHERMORE, ABOUT 80 PERCENT OF THIS
VOLUM WAS IN 1941 PRODUCED BY A SCORE OF COM-
OR 85 PERCENT
PANIES
MAJOR GROUPS UNDER CONTROL WERE:
TOTAL CONSUMERS' EXPENDITURES
$33 BILLION
PERCENT
FOOD
RECONVERSION
as
50
75
we
CLOTHING
13 BILLION
RENT
7 BILLION
FURNITURE, ETC.
3 BILLION
HOUSEHOLD FUELS
3 BILLION
EO
SERVICES
3 BILLION
25,000 COMPANIES
COMPANIES
TOTAL CONSUMERS' EXPENSITURES
85%
15%
On, ON A PRODUCT BASIS, A DOZEN ITEMS-
PASSENGER CARS, REFRIGERATORS, RADIOS, ETC.-
UNDER PRICE CONTROL
CONSTITUTED 85% OF THE TOTAL
CONTROL OF RECONVERSION PRICES is A
MINOR ITEM IN COMPARISON
TOTAL CONSUMERS' EXPENDITURES
IN 1941, WHEN THESE ITEMS ( CONSUMERS'
PERCENT
METAL-USING DURABLES) WERE LAST IN
ACCOUNTERSION
=
so
79
105
PRODUCTION, THEY AMOUNTED TO 10t BILLION
OR of PERCENT OF CONSUMERS'
EXPENDITURES
TOTAL CONSUMERS' EXPENDITURES
12 MAJOR
ALL THE HUNDREDS OF MINOR ITEMS
CONSUMER
DURABLES
PAGE 6
PRODUCTS WHICH HAVE BEEN
ample, substantial increases in either hourly
OFF THE MARKET
wages or materials prices, or both, have OC-
What industries may need new ceiling prices?
curred. In none of these cases, however, has
As we see it, they will be largely in the metal
it been necessary to allow price increases any-
using industries in the consumer durable goods
where near equivalent to the cost increases
fields - industries which for the most part
In most cases the price increase has be
have been out of civilian production since
only a small fraction of the full equivalent.
early 1942.
Nevertheless, profits have moved up sharply
The retail value of the products made by
so sharply. in fact, as to suggest that the
these industries in 1941 was 6.5 billion dol-
cost increases should often have been entirely
lars. That represents only 8.5 percent of
absorbed without unfairness to the industry.
total consumer expenditures in 1941. Obviously,
In cotton textiles, average hourly earnings
the percentage may differ for 1945, depending
increased 25 percent between December, 1941 and
upon the speed and extent of reconversion, the
May, 1944, while materials prices rose 19 per-
progress of the war in the Pacific, consumer
cent during the same period. To offset these
spending power and many other factors. But it
increases in full, a price rise of 17 percent
gives us on idea of the size of the problem.
would have been necessary. The actual price
Fewer than, a dozen types of goods make up
increases during this period averaged only six
over 85 percent of the value of all items which
percent. Profits of the industry before taxes
many need a reconversion price. These are auto-
nevertheless rose 33.3 percent between 1941 and
mobiles and parts, refrigerators. sewing ma-
1943.
chines, washing machines, vacuum cleaners and
In slaughtering and meat packing, the ex-
other electrical household appliances, radios,
perience has been similar. To reflect fully
phonographs, pianos, heating and cooking equip-
increases in average hourly earnings and mate-
ment, clocks and watches.
rial costs between 1941 and 1943 would have
The hundreds of miscellaneous items in the
required a price increase of 30 percent. The
durable goods field amount to only 15 percent
actual increase (including subsidies as a 10
of the problem. These, like the 85 percent,may
percent price increase) was the equivalent of
or may not need new prices.
only a 16 percent price increase. Cost absorp-
About score of companies manufacture 80 per-
tion here Was therefore about 50 percent. Yet
cent of all the items which will soon be coming
industry profits in 1943 were 68.2 percent
back into production. The remaining 20 percent
above 1941 levels.
are produced by about 25.000 additional firms
In the paper and pulp industry. average
of varying sizes.
hourly earnings have increased 17.7 percent
From our administrative point of view the
since 1941, Material costs have increased
problem is substantial. But it is not as great
percent during the same period. If these in
as generally assumed. It is smaller than others
creases had been fully reflected, prices would
which we have handled successfully in the past.
have had to increase by 14.6 percent. Actually.
WHAT WILL NEW PRODUCTS COST?
paper and pulp price increases during this
period averaged only 4.2 percent while in-
In general. our objective in setting ceiling
dustry profits have continued at the 1941
prices for these new goods will be the manufac-
level.
turer's own 1942 prices. These are the prices
Our experience in these fields and dozens of
he was charging when he converted from civilian
others strongly suggests that in the consumer
to war production. And, with few exceptions,
durable goods industries, where increases in
these are the ceilings in effect today for any
wage rates have been no greater and increases
manufacturer still producing the same or simi-
in materials prices have been substantially
lar goods.
less, production for most companies can be re-
This means that any manufacturer who is
sumed at approximately 1942 prices.
planning to put new civilian goods on the mar-
There are some companies, however, and per-
ket at 1942 prices or less knows now that his
haps a few industries whose costs have risen no
ceiling price will not be lowered. As soon as
far above their 1942 level as to make full ab-
production and manpower controls are released,
sorption impossible. These will need new
he can proceed at once. Reconversion pricing
prices. They will need them quickly. and we
will not be one of his problems,
intend to see that they get them.
In practically all consumer durable goods
industries there have, of course, been increases
HOW NEW PRICES WILL BE SET
in wage rates and some increases in material
prices. But we know from the wartime experi-
It is our hope that ceiling prices for the
ence that increased wage rates and material
major fields combe arrived at through industry-
prices need not be fully reflected in price
wide conferences in Washington. We are now
increases for the finished product.
plenning meetings with members of the automo-
In industries now under price control, such as
bile, electric refrigerator. washing machine,
textiles, meat packing, puper and pulp. for ex-
radio and a few other industries - representi;
PAGE 7
on a dollar volume basis 80 percent of the en-
$100,000; second, by exempting manufacturers of
tire reconversion pricing problem.
minor parts or miscellaneous products.
145
At these meetings we will discuss the volume
We are anxious to do this in order to elimi-
each industry plans to achieve; what they are
nate as rapidly as possible all unnecessary red
going to pay for labor and materials; the sav-
tape and needless regulation. We are investi-
age they expect to make through increased
gating the extent to which this can be done
plant efficiency, and lower sales costs. We
without endangering effective price control in
will also be guided by prices which they feel,
the consumer durable goods field.
on the basis of their own experience. are most
likely to assure the wide-scale consumer buying
WHEN WILL CONTROLS BE LIFTED?
necessary to maintain volume production.
In those cases where an increase over the
We have always looked upon price control as
1942 price level is really needed to bring any
a stop-gop. a stabilizing wartime control to be
product back on the market, an increase will
dropped as soon as production brings supply and
be given. We will make every effort to set
demand reasonably in balance. The lost war,
ceilings at a point that will lead manufac-
withits false economic calm after the Armistice,
turers to expand, not restrict, their produc-
followed by a ruinous inflation and collapse,
tion.
taught us the danger of moving abruptly and
PRICES FOR
thoughtlessly. To maintain controls needlessly
25,000 SMALLER MANUFACTURERS
even for a few extra months would be equally
mistaken.
I am well aware that any delay on our part
The wartime lock of balance between supply
in setting prices would be aneven greater hard-
and demand made price control necessary. When
ship for small manufacturers than for large
supply and demand come back into balance price
ones. We must make sure that any manufacturer
controls will not be needed. As soon as there
who needs anew price can get decision quickly.
is no further danger of price increases in a
In order to do this, we will authorize the 93
particular commodity field there will be no
OPA District Offices, located in all parts of
reason for price ceilings in that field and we
the country, to set the final ceiling prices
will drop them.
for all reconverted products not on the key
The exact timing will vary widely from item
list of 12 major items.
to item. But, working with Industry Advisory
Many firms have already indicated that they
Committees we will watch each field closely. We
plan to sell at their 1942 prices, or even
will heavily on their recommendations as to
lower, as soon as they can get back with civilian
when controls can be safely removed.
production. They will not need to call on our
eld offices at all.
INDUSTRY'S RESPONSIBILITY
Firms whose higher production costs make a
FOR THE FUTURE
price adjustment necessary will be able to pre-
(Some Personal Observations)
sent the facts to the nearest office and re-
In this memorandum I have discussed govern-
ceive a price based on a set of standards ar-
ment wartime controls over prices and rents. I
rived at in Washington. These will be standards
would like to add, however, a fewpersonal thoughts
that can be quickly applied without referring
on the problems which industry will face when all
back to Washington.
government controls have been eliminated.
The exact method by which the prices for
I must emphasize that these ideas represent
the smaller firms will be set and the standards
my personal opinion only. They are based on my
which will be followed are now under discussion
own experience and observations gathered in my
with many of our advisory groups and with our
own business before the war and, more recently,
field officers, on whom much of the administra-
in dealing with policy problems as a wartime
tive burden will fall.
employee of our government.
Barring the sudden end of the war in Europe,
Most of us think of free enterprise as a
the details will be withheld until these dis-
system in which prices are set by competition
cussions are finished.
and the lowof supply and demand. Unfortunately.
A complete plan, including pricing standards
before the wor this concept WGS true only in
for the smaller manufacturers, however, has been
part of our economy.
fully developed. If necessary. we are prepared
In too many industries prices were held up
to announce full details of the pricing pro-
artificially in order to provide higher unit
cedure that each manufacturer (with the excep-
profits. Pecause of this policy, in some indus-
tion of those making the "major items" listed
tries full production and employment were curbed,
above) will follow within 48 hours after V-E Day.
In many cases, business men pursued a policy of
Finally, we are studying the possibility of
high unit profits based on curtailed production,
completely exempting from price control certain
rather than going after the larger to:al profits
manufacturers in the consumer durable goods
that might have come through larger volume at a
field. This might be done in two ways: First,
lower profit per unit.
by exempting all manufacturers doing less than
During the wir have. all had on opportunity
certain annual volume of business say
to learn much about our economic system. Before
PAGE 8
the war few of us visuclized the tremendous pro-
successfully meet this test of the future. But
ductive power of our American economy. The fact
I believe we are all aware, both in government
that this miracle of production has been achieved
and in industry, that in order to reach this goal
during wartime will have a significant influence
we must establish and maintain close cooperation
on our peacetime industrial planning.
among all groups - business, lator, farmers and
It unlikely after the wor that our people.
government.
including our 11,000,000 returning service men,
During thenext five years, of all periods in
will long tolerate any economic system which
our history, we will need economic courage, good
does not provide reasonably full production with
sense and a common understanding of the problems
reasonably full employment at a high standard of
that we face,
wages and form income.
If, during the next few years, major segments
As a practical matter, we cannot go back to
of American industry operate on a high price,
the production levels of 1940. The Department
high unit profit basis, we are going to have
of Commerce recently estimated that if in 1946
production and dangerous unemployment.
we were to go back to 1940 total production at
If major segments of American industry attempt
1940 hours of labor there would be 19 million
to cut prices by depressing wage rates, we will
unemployed. There would be a cut of more than
face the dangers of another disastrous depression.
30 percent from our present level of production.
The basic answer to our economic future, it
Such an economic reversal would mean shrink-
seems to me, lies in the moximum hourly produc-
ing markets and falling prices for farm products
tion on the part of labor: high wage rates, low
as well as the products of our factories. It
unit profitsa the createst possible volume on
would mean that our farmers, our workers, and
the part of industry: the maintenance of high
our returning soldiers would again have to com-
farm income: and the joint realization of all
pete bitterly with each other for their frugal
groups that the prosperity of each depends on
individual shares of economic scarcity. It is
the prosperity of the others.
obviously unthinkable.
During this difficult wor period we have all
If we attain full production and experience a
learned to cooperate and to work together on a
corresponding increase in the national purchas-
constructive give and take bosis. We are winning
ing power, the Department of Commerce says we
the war today because each group our soldiers
would be able to spend 40 percent more for food
and sailors, our industrial workers, our leaders
in terms of a more varied diet, better qualities
of enterprise, our farmers and our government -
and increased services in connection with pro-
have worked as part of a team.
cessing and distributing food products - 45%
We have had our occasional differences of
more for clothing) 5% more for refrigerators and
opinion. But we have never had to argue about
other electrical equipment, 70% more for house-
where we wanted to go or the speed with which
hold furniture, 90% more for new farm machinery
we wished to get there.
and 2% times more for new homes than in 1940.
Our economic future, like the winning of the
be who have been close to American industry
war, rests in our own hands. This challenge is
during the war period believe that industry can
as great as the war itself.
WHICH ROAD WILL WE TRAVEL?
IF WE GO BACK TO 1940 PRODUCTION
IF WE MAINTAIN FULL PRODUCTION
AFTER THE WAR WE CAN SPEND THIS MUCH MORE THAN IN 1940
IN 1940 THERE WERE
9 MILLION UNEMPLOYED.
PERCENTAGE INCREASE IN CONSUMER
EXPENDITURES
FOR THE PAST YEAR, WITH WAR PRODUCTION AT PEAK LEVELS,
UNEMPLOYMENT HAS RUN AT APPROXIMATELY
40%
FOOD
1 MILLION
SINCE 1940, THE GROWTH OF POPULATION HAS ADDED
45%
CLOTHING
2½ MILLION WORKERS.
MEANTIME PRODUCTIVITY OF INDUSTRY HAS GROWN STEADILY.
ELECTRICAL
AFTER THE WAR, UNDER A 1940 WORK WEEK, 1940 PRODUC-
55%
TION CAN BE ATTAINED WITH 6 MILLION FEWER WORKERS.
EQUIPMENT
HOUSEHOLD
INCREASE in
WORKERS DISPLACED BY TBeM-
70%
1946 UNEMPLOYMENT
LABOR FORCE
IMPROVEMENTS, ETC
FURNITURE
AFTER THE WAR, THEREPORE, IF WE WENT BACK TO 1940 PRO-
DUCTION(THE HIGHEST ON RECORD UP TO THEN) WE SHOULD
HAVE, NOT 5 MILLION UNEMPLOYED AS IN 1940, BUT OVER
90%
FARM MACHINERY
19 MILLION UNEMPLOYED
150%
NEW BUILDINGS
- WHENPLOTHEST
IMPORTANT -
workers SISPLACER # TEAM-
LABOR PURCE
IMPROVEMENTS, EN
THIS MEANS HARDSHIP -AND IT MEANS DEPRESSION
THIS MEANS JOBS AND PROSPERITY FOR ALL
U. 5. GOVERNMENT PRINTING OFFICE 1544 0 812067
Regraded Unclassified
146
25
October 10, 1944.
Dear Mr. Bowlows
Your letter of October 6, which trans-
mitted a copy of a memorandum you have cent
to the members of your Advisory Committees,
has reached this office during the
Secretary's absence. I shall be glad to
bring your letter and the enclceure to
Mr. Norgenthau's attention as soon as he
is again at his deek, and I know he will
be most interested in secing the material
you have prepared.
Sincerely yours.
(Signed) H.S. Klots
a
H. s. Klets,
Private Secretary.
Monorable Chester Bowles,
Administrator, Office of Price
Administration,
Washington 25, D. C.
KP/dbs
o
Regraded Unclassified
147
OFFICE OF PRICE ADMINISTRATION
61520
WASHINGTON 25, D. C
FFICE OF THE ADMINISTRATOR
October 6, 1944
Hoes
33
In
The Honorable
Henry Morgenthau, Jr.
Secretary
Department of the Tresaury
Washington, D. C.
Dear Mr. Morgenthau:
I am attaching a copy of a memorandum to
the eight thousand members of our Advisory Committees
on the inflationary and deflationary dangers which
we are likely to face during the coming year, together
with a general outline of the program which we are
developing to meet them.
I will be glad to get any suggestions or
criticisms.
Sincerely,
Chester Bowles
Administrator
Attachment
BUT OCL a VWI 8 22
RECEIVED 06 ABEVENBA
save
OFFICE
Regraded Unclassified
148
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 16, 1944
TO
Secretary Morgenthau
FROM Mr. White
HOW
This is a comparative statement of the earnings and
expenses of the Stabilization Fund for the months of August
and September, 1944.
Earnings
August
September
Interest earned on investments
$
41,169.99
$ 40,010.00
Profits on handling charges on
gold
211,418.54
259,423.63
Handling charges on gold
(Stabilization) - Accrued
12,499.88
---
Profits on other gold and ex-
change transactions
3,000,000.00
1,000,000.00
Miscellaneous profits
12.37
17.25
Total
$3,265,100.78
$1,299,451.68
Expenses
Salaries
$ 31,652.72
$ 27,482.26
Travel
454.78
2,815.07
Subsistence
4,619.25
1,354.50
Telephone & Telegraph
4,255.66
3,542.19
Stationery
84.03
27.35
All other
187,342.64
623.87
Total
$ 228,409.08
$ 35,845.24
Net earnings
$3,036,691.70
$1,263,606.44
This report was completed from figures supplied by
Mr. O'Daniel.
1/ $186,387.83 of this item represents cost of moving gold
from Fort Knox to New York.
Regraded Unclassified
meeting TREASURY DEPARTMENT
149
9\30
INTER OFFICE COMMUNICATION #
Date
OCT 16 1944
TO
Secretary Morgenthau
FROM
Mr. O'Connell
F.E.A. has proposed that the President make a
public statement to the effect that this country will not
recognize the acquisition by neutrals of German-owned
patent and patent rights. The purpose behind the proposal
is to prevent German industrialists from finding safe havens
for their patents.
On October 2, 1944, this Government formally re-
quested neutral countries to take the measures called for
by Resolution VI of the Bretton Woods conference. The next
step, obviously, is to advise neutral countries of the meas-
ures we are prepared to take to enforce our request. It is
my view, however, that our approach in this regard should
be as broad as the requirements of Resolution VI, and that
patents should not be dealt with separately and apart from
other forms of property. To deal with the problem piece-
meal may well lead to confusion, and to complexities of
such a nature as to create unsuspected loop-holes.
In my opinion, therefore, the proposed statement
should not be issued. If you agree, I will call Mr. Cox
and advise him accordingly.
&
Regraded Unclassified
FROM:
MR. 0'CONNELL
150
10/11/44
Mr. DuBois
TO:
This letter has been acknowledged and the
Secretary wants our comments, either by a
letter to Oscar Cox for the signature of the
Secretary or a memo to the Secretary, or both,
by Monday, October 16th.
If possible, I would like to have something
on it Saturday, October 14th.
J.J. you of Connell,
151
FOREIGN ECONOMIC ADMINISTRATION
Office of the General Counsel
OFFICE OF THE ADMINISTRATOR
7 C 8/15 1-5
WASHINGTON 25, D.C.
or - ( (.0
/ 6 X
October 7, 1944
Dear Secretary Morgenthau:
Attached is a rough draft of a
proposed statement which might be used by the
President.
It has been suggested that I get
your comments on it.
Sincerely yours,
Oscar lox
The Honorable Henry Morgenthau, Jr.
Secretary of the Treasury.
Regraded Unclassified
152
Draft - October 6, 1944
In their frantic efforts to try to put German property in safe-
keeping beyond the borders of Germany, Nasi industrialists have been
offering German patents and patent rights for sale in neutral countries.
One purpose of such transactions is to put ownership temporarily in a
neutral name as a cover until the Germans feel it is safe to transfer
the patents back to their own names. Another purpose of the Nasis, in
the cases where the transfers are not used merely as a cover, is to
realise on these assets and aequire useable funds outside of Germany.
No such transfers or licenses will be granted any recognition
by this country. The patents and all rights thereunder will continue
to be regarded by the United States as enemy property subject to seisure.
Neutral purchasers or licensees who participate in such transactions
will be unable to protect their claimed rights by registration in the
United States. They will, moreover, find themselves subjected to
infringement suits if they attempt to market products in this country
based on enemy patents already vested by the United States.
In view of this, 1t is hoped that no neutral individuals or
companies will lend themselves to any of these Wasi schemes to dispose
of or hide German property.
Regraded Unclassified
153
October 11, 1944
Dear
Mr. Cox:
In the absence of the Secre-
tary, I am acknowledging receipt
of your letter of October 7th
with which you enclosed the draft
of a proposed statement for the
President.
As soon as AP. Morgenthau re-
turns, I shall bring your letter
to his attention.
With kind regards,
Yours sincerely,
(Signed) H.S. Klotz
H. S. Klotz,
Private Secretary
Mr. Oscar Cox,
Office of the General Counsel,
Foreign Economic Administration,
Washington 25, D. C.
Regraded Unclassified
154
FOREIGN ECONOMIC ADMINISTRATION
WASHINGTON 25, D.C.
October 13, 1944
Dear Mrs. Klotz:
I appreciate very much your letter of
October 11th about the draft of the proposed patent
statement, telling me that you will bring the letter
to Mr. Morgenthau's attention as soon as he returns.
Sincerely yours,
Occar lot
Mrs. H. S. Klotz
Office of the Secretary
Treasury Department
Washington, D. C.
Regraded Unclassified
Treasury Department
155
Division of Monetary Research
Date Oct. 19, 194419
To:
Mrs. McHugh
This memo is in response to the
Secretary's request of Oct. 4, 1944, as
follows: "Would you please look into the
matter mentioned in the attached article".
The newspaper article is returned herewith.
L. Shanahan
MR. WHITE
Branch 2058 - Room 214-1/2
156
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 16, 1944.
TO
Secretary Morgenthau
FROM
H. D. White HDW
Mr
FOR YOUR INFORMATION
You wanted me to consider the proposals made by Dr.
Antonin Basch in the report published by the Committee on Inter-
national Economic Policy.
Dr. Basch proposes that in order to reach looted prop-
erty, the United Nations declare invalid all property rights
acquired by the Germans or their satellites in the occupied coun-
tries after certain dates, and that all German property rights
outside of Germany be taken into custody to meet all "eventual-
ities. If Dr. Basch warns the United Nations against being misled
by the "legal" methods employed by the Germans in looting the
occupied countries, and "cloaking" by neutrals. He stresses the
importance, however, of putting plants and factories to work at
the earliest possible moment, and proposes that they be operated
under national trusteeships until their ownership is clarified.
Dr. Basch also considers certain problems related to the future
domestic economic policies of the formerly occupied countries.
While Dr. Basch would prefer the creation of an international
agency representing the United Nations to act as trustee for the
victims of German economic penetration, he recognizes that politi-
cally it may be impossible to take that course. He, therefore,
suggests the desirability of an agreement between the United Nations
establishing common international standards of procedure.
Foreign Funds Control and the Legal Division have been
studying this problem and its related aspects for some time and have
special units handling the matter. It ties in closely with the un-
freezing of blocked assets and the measures we will have to take with
respect to looted assets in Germany and in neutral countries. Our
Gold Declaration and Resolution VI of the Bretton Woods Conference
are samples of some measures we have already taken.
We all think that we will have to have some of our men not
only in Germany but in the neutrals devoting their time to locating
German loot and in getting leads to German assets secreted outside
of Germany.
Regraded Unclassified
157
FACTORY TRUSTEES
URGED FOR EUROPE
157
Economist Says Plants Seized
From Nazis Should Be Put
to Use Without Delay
"An agreement among the
United Nations," he says, "and
perhaps incorporated in the peace
treaties will have to be concluded.
Special to THE New York TIMES.
Such an agreement shodid estab-
WASHINGTON, Oct. 1-Propos-
lish common international stand-
als for seizing, naming trustees for
ards and sét up a special interna-
and restoring to operation under
tional tribunal to deal with indi-
their rightful owners all industrial
vidual cases, granting the right of
appeal against the decisions of the
properties plundered by the Nazis
national governments."
are set forth in a pamphlet report
The pamphlet studies in detail
issued today by the Committee on
the German policy of achieving
International Economic Policy.
economic domination throughout
Winthrop W. Aldrich, who as the
occupied and controlled Europe,
which he says was all part of a
committee's chairman released the
blueprint for the new German em-
report, emphasized that the views
pire and provided supremacy for
it expressed were those of the the
the Nazis under the name of a
author, Dr. Antonin Basch, for-
"new economic and political order."
In conclusion, the author de-
merly corporation executive and
clares: "It would be a tragic after-
professor in Czechoslovakia and
math of naziam if the solution of
now a member of the economics
the changes of property caused by
department of Columbia Univer-
the Germans' were to interfere un-
sity. The committee's aim, he
duly with political consolidation
said, is to present for public
and economic reconstruction."
information and consideration
"For all these reasons," he adds,
thoughtful studies of various as-
"the problem of industrial prop-
pects of the international eco-
erty should be considered as one
nomic problem.
of general international import-
Dr. Basch's report, entitled, "In-
ance, and an effective means of
dustrial Property in Europe," says
dealing with it should be adopted
it is probably now too late to or-
by the United Nations."
ganize an international agency to
represent the victims of German
economic penetration, and thinks
that action should be national
rather than international. At the
same time, he thinks the work
should be conducted in accordance
with an agreement among the
United Nations, which would ea-
tablish a common form of pro-
cedure.
"Two particularly important
tasks must be faced," says the re-
port. "One of them, which is often
greatly underrated, is to restore
the rule of law throughout Europe
The other task is to put all the
seized enterprises back to work as
rapidly as possible. Questions of
ownership should npt stand in the
way of starting and continuing op-
erations of factories, mines and
other enterprises."
Dr. Basch opposes having gov-
ernments take over the mines and
principal industries, but favors
trusteeship 80 long as the property
cannot be returned to the rightful
owners.
UK-801
158
UNITED KINGDOM TREASURY DELEGATION
BOX 680
BENJAMIN FRANKLIN STATION
WASHINGTON, D. c.
REFERENCE:
TELEPHONE EXECUTIVE 2020
October 16, 1944.
Dear kg Secretary,
As promised I am sending you a document explain-
ing our case for Lend-Lease in Stage II and giving the relevant
figures. I trust it is the sort of thing you want. It has got
rather long, I fear; certain points also are repeated in dif-
ferent chapters since we thought you might wish to restrict
circulation of different parts of the document to various
individuals.
With this host of figures originating in different
departments, there may well be minor discrepancies, but we have
made every effort to check them and to make sure they are consis-
tent. The munitions figures, of course, derive from Service
demands. If your people wish to discuss them in detail we have
the necessary experts available here to explain them. There are
also representatives of the other departments available should
questions arise on any of the other figures.
I trust you had a pleasant time on the Coast, and
remain, as over
yours very sincerely
The Hon. Henry Morgenthau, Jr.,
Cherwell.
Secretary of the Treasury,
Washington, D.C.
Regraded Unclassified
159
Here
14/11/1
MEMORANDUM ON PALESTINE POLICY
submitted by the
JEWISH AGENCY FOR PALESTINE
to
HIS MAJESTY'S GOVERNMENT
STRICTLY CONFIDENTIAL
The war is approaching its end, and the Jewish problem in its post-war
setting calls for immediate consideration. Of the six million European Jews
outside of USSR and the British Isles, probably not more than ono-and-a-half
million are alive today, and not all yet safe. The Jews in Soviet territory
under German occupation have probably lost another million. Even in this war,
no other people in proportion to their numbers have suffered such lossos,
accompanied by such horrors.
2.
Allied victorios are bringing immediate security to the survivors.
But the root of the tragedy 1s the inherent weakness of the position of the
Jews as a homeless people. As long as that endures, Hitler's solution of the
Jewish problem by extermination will continue to haunt mankind, as a night-
maro to some, as a temptation to others. To offer to the surviving European
Jews, deported and broken, a roturn to the "status quo anto," proppod up by
philanthropic palliatives and paper guarantees, is morally unthinkable. For
the large mass, true rehabilitation can only be achieved by a fresh start in
new surroundings. Moreover, the problem is not merely one of finding homes
for refugees; it is one of finding a country for a people. The solution must
be constructive and permanent. It involves not only the fate of the remnants
of European Jewry; the curse of homelessness must be lifted from the entire
race.
3.
"Some place must be found." Tropical or sub-arctic regions, such as
Guiana, Madagascar, or Alaska --- to mention some recent suggestions - can
hardly be seriously considered. The colonisation attempt made in San Domingo
has proved a fiasco. Even under the more favourable climatic and economic
conditions of Argentina, Southern Russia. and Biro-Bidjan, experience has
shown that where the national idoa and tradition are inoperative, Jowish
settlement cannot develop on a large scale for lack of driving power. An
inspiration of high intensity is needed to transform a people of town-dwellers
into agriculturists, middle-mon into manual workers.
4.
The renaissance of the Jowish nation is bound up with Palostine. The
choice made by dostiny cannot be undone. Palostino is the Jowish people's
birthplace, and it gave birth to no other. It owes its place in history to
the Jews, and to no other people. The Jews as a people, and Palestine as a
country, ceased to be truly creative when the bond botween thom was severed.
But the hope of renewing that bond has kept the Jewish people alive, and
meantime, Palestine remained desolate. The Jews have never ceased to pray
for their return to Palestine. The urge to go back has been continuous, and
in every generation practical efforts were made to return. Zionism is a final
and determined bid for achievement.
Regraded Unclassified
- 2 -
160
5.
The British people have always been conscious of the unique connection of
the Jews with Palestine. From that consciousness the Balfour Declaration was
born. But vision and statesmanship have not been translated into administrative
practice. Jowish endeavour has received scant encouragement. Official policy
has been far more alive to the difficulties of implementing the Mandate than
to its creative aim. Step by step the original conception has been whittled
down until a complete negation of the primary purpose of the Balfour Declaration
and the Mandate was reached in the White Paper of 1939. But Jewish work has
attained a stage of development which precludes Palestine from becoming an Arab
country.
6.
If the war had found two million Jows in Palestine instead of half-a-
million, the task of the Allies in the Middlo East would have been groatly cased,
and the position of the Jewish people would have been totally different. But
even the half-million proved their value, both to their people and to the Allies.
Palestine has received tens of thousands of Jewish refugees, and were it not for
tho paralysing effect of the White Paper policy, the dimensions of rescue would
have been far greater. All resources of Palestinian Jewry, in man-power, pro-
ductive capacity, and scientific knowledge, were harnessed to the war offort.
Palestinian Jewish units served with the British Forces in Palestine, France,
Ethiopia, Eritrea, Egypt, Greece, Crete, Syria, Libya, and Italy. Civilian
volunteers risked and laid down their lives in hazardous para-military opera-
tions under British command. Palestine provided a source of information,
unique in the Middle East, on the industrial, technical and scientific position
in enemy countries. Jewish technicians and artisans were mobilised to perform
urgent war taks in all the neighbouring countries. This war effort would have
been far more fruitful had it not been crampod and thwarted by the present
negative policy.
7.
The Jewish Agency appeals to H. M. Government to inaugurate a new era
for Palestine and the Jewish people by drawing the logical conclusion from the
Balfour Declaration as originally conceived. At this juncture they regard as
imperative a docision designating Palestine as a Jewish Commonwealth - a
country where the Jewish people shall be free to work out its salvation by
large-scale settlement and by the achievement of full nationhood.
8.
The Jewish Agency is fully aware of the difficulty with which this policy
is fraught on account of Arab opposition. But if Arab consent is to be a pre-
condition of any political settlement, hope must be given up of justice to the
Jewish people. The Arabs demand that the Jows should be mado a permanent mi-
nority in an Arab Palestinian State, which should become one in a cluster of
Arab States. The Jews ask that a Jewish State be established with Pal catine
West of the Jordan for its territory, and hope that this State, whilo maintain-
ing friendly relations with all its neighbours, may be organically connected
with the British Commonwealth of Nations. The Arab programme would deny to the
Jews a place among the nations, which they can only obtain through Palestine.
The Jewish programme would have no such effect on the Arabs, who are already
possessed of many States with enormous undoveloped potentialities. A Jewish
minority in an Arab Palostine would be like the Ozochs in Greator Gormany: but
an Arab minority in a Jowish Palostine will not merely have every guarantee
of equality of rights, religious freedom, autonomy in cultural and municipal
affairs, and a full share in the benefits of development; the fact that Pales-
tine is surrounded by Arab countries will add to thoir security. In view of
what Great Britain and her allies have dono, outsido Palostine, sinco 1914, to
promote and protect Arab nationhood and independence, Arab objections to the
Jews being given full national status in their ancient homeland lack moral
Regraded Unclassified
- 3 -
validity. The movement towards Arab unity is an additional reason why Jewish
161
effort in Palestine should once and for all be established on a fim territorial
and political basis.
9.
Some who have come to recogniso that the Jews ought to have their State,
think that this could best be achieved by partitioning Palestine between Jews and
Arabs. The Jewish Agency would view with deep apprehension an attempt to rovive
the partition idon. In 1937, a major consideration was tho impending war. Now
the most must be made of the potentialities of Palestine for immediate large-
scale immigration. Palestine is already a twice-partitioned country. as compared
with what it was at the time of the Balfour Declaration. Its further dismomber-
mont is liable to be fatal to the viability of the Jowish State. A propor land
basis is vital to Jowish development. This entails the promotion of intensive
farming throughout Palestine, and access for Jews to undeveloped areas scattered
all over the country. With the sca in the West, the Jordan and the Power and
Potash concessions in the East, the chief water-resources in the North, and the
main land-reserve in the South, any partition scheme seems bound to disrupt the
country's economic framo, and wrock the chances of large-scale development.
10. In facing Arab opposition, the docisive element is time. Once Palestine
has become a Jewish State, its existence would be accepted as an accomplished
fact, just as the present Jewish population is accepted, though in the past
thore was strong opposition, accompanied by violonce, to the increase of Jows
even up to the present number. The prospect for the future is by no means one
of perpetual strife and unsettled conditions, but of an ultimate equilibrium
and collaboration. It is both the desire and the interest of the Jews to live
in peace with thoir neighbours, and develop closo intercourse with them. Evon
now, Palestine can rondor important services, industrial and sciontific, to
the neighbouring countries, which are taking a keen interest in these results
of Jewish work.
11. The political programme here set forth required, first and foremost, the
quickest possible increase of the Jewish population. Two things are urgent:
to create a Jewish majority in Palestino in ordor to cnsure the offective
functioning of the Jewish State, and to rehabilitate the survivors of the
European tragedy. Most, if not all, of these people, certainly the children
among them, would anyhow be a chargo on public funds for a considerable time
after the cessation of hostilities. Such funds would be much more profitably
spent on their settlement in Palestine. Apart from the survivors in Europe,
the main groups of would-be immigrants are (1) refugees scattored throughout
the world who have not boon absorbed; (11) Jews in those oriental countries
where thoir safety and well-boing are in permanent jeopardy; and (111) Jews
in English-speaking countries, among whom a movement to settle in Palestine
is. spreading.
12. For the proper organisation of this immigration, its control should be
entrusted to the Jowish Agency. Large funds will be required, and on intor-
national loan may be necessary. Detailed plans of absorption are being propared
by the Jewish Agency. comprising reclamation works, irrigation schemes, and
projects of intensive agricultural end industrial development. The return of
the Jews to Palestine has revolutionised their social structure and tho country's
oconomics. Sixty years of trial and error, experiment and achievement, is a
firm basis on which to build the edifice of the future. With modern technique
and adequate powers, what has been achieved so far can be turned into e. lover
for further and greater progress.
13. The present is & unique opportunity for righting a historic wrong. and
solving a burning international problem. Millions of Jews throughout the world
are now pinning their age-long hope on Allied victory. Its fulfillment will
being salvation to the Jewish people, and everlasting credit to Great Britain
nit her Allies.
20/15/04
Regraded Unclassified
162
AIRGRAM
SECRET
FROM : Ciudad Trujillo, D. R.
DATE : October 16, 1944
Rec'd: October 21 6 p.m.
Secretary of State
Washington
A-516 October 17 - 10:30 A.M.
Reference is made to the Department's secret
airgram, September 19, 9:15 a.m. with regard to holders
of Latin American documents in enemy territory.
The Acting Minister for Foreign Affairs has informed
the Embassy that no such documents have been issued by
the Dominican Government and consequently no lists are
available. He stated that the Dominican Government has
not been notified that action along these lines is being
taken by other American Republics nor that the Political
Defense Committee in Montevideo has been notified. In
this respect please see the Embassy's secret airgrams
A-397 of August 19, 10:30 a.m. and A-420, August 26,
10:30 a.m.
NEWBEGIN
848
RN :MC
ac: Miss Chauncey (for the Sec'y) Abrahamson, Akain, Gohn, Drury, DuBois,
Priedman, Gaston, Hodel, Lesser, Marks, Nannon, McCormack, Pehle, Files.
Regraded Unclassified
163
MS-699
London
Distribution of true
reading only by special
Dated October 16, 1944
arrangement. (SECRET W)
Rec'd 3:50 p.m.
Secretary of State,
Washington.
8776, October 16 2 p.m.
FOR DEPARTMENT AND PEHLE WAR REF BD
Re your 8341 of October 10. Delighted to have Mann
appointed as special representative and with the arrange-
ment that Goodhardt be available for special consultation
and advice.
o
WINANT
DU
UInclassified
164
HK=766
Lisbon
Distribution of true
reading only by special
Dated October 16, 1944
arrengement. (SECRET a)
Ree'd 7:08 p.m.
Secretary of State,
Washington.
3156 October 16, 6 P.M.
THIS WRB 222 JDC 91 FOR LEAVITT FROM PILFEL.
Saly reports Bulgarian Jews have same status as
other Bulgarians hence require no special aid at
present.
Saly acknowledges receipt regular grant
October but not inforsed regarding purpose of $180,000.
He is endeavoring arrange for shipments Bergen Beison
and other camps and has bought 5,000 blankets for
former camp. Saly just informed regarding special
camp in Slovabia with 250 United States, Argentine,
Belivian and other American passport and visa holders.
Camp leader is Milton Hear, born, New York, July 16,
1910. Filderman has ssoured 150 loi against credit of
300,000 Seise franss. Saly has authorised Filderman
to repeat transaction.
NORWER
JMB
Regraded Unclas
165
0
BJR - 767
Lisbon
Distribution of true
reading only by special
Dated October 16, 1944
arrangement. (SECRET W)
Rec'd 7:07 p.m.
Secretary of State,
Washington.
3158, October 16, 6 p.m.
THIS WRB 223 JDC 90 FOR LEAVITT FROM PILPEL.
Jefroykin with wife and new born son probably
Toulouse. All well, Have telegraphed Jefroykin's
father Montevideo. Daly has made available additional
forty million French francs for France and is dealing
with joint representatives on interim basis. Saly
informs us that Dr. Joseph Weil and Pierre Bigar left
for Paris. Will report to him.
NORWEB
JMS:EEC
0
Regraded Unclassified
165
CABLE TO MINISTER JOHNSON FOR OLSEN, STOCKHOLM, SWEDEN
Reference your 4008 to Department, Section 2, WRB's 89 of
October 7, 1944.
The Board's concern with the welfare of refugees in neutral
countries arises only when it bears a direct relationship to the re-
ception of additional refugees from enemy controlled areas. Conse-
quently, the Board does not consider that the matter raised in the
telegram under reference is one which is properly to be dealt with
by it. For that reason, the Board has referred the problem in its
entirety to the Department of State.
THIS IS WRB STOCKHOLM CABLE NO. 110.
11:00 a.m.
October 16, 1944
Regraded Unclassified
167
0
DMH-709
Stockholm
Distribution of true
reading only by special
Dated October 16, 1944
arrangement. (SECRET W)
Rec'd 4:20 p.m.
Secretary of State
Washington
4206, October 16, 7 p.m.
Substance of Department's 2041, October 12, midnight
(WRB's 105) has been communicated to Eric von Post, head
of Political Department Swedish Foreign Office) (This is
our 93 for WRB) and he has undertaken to make every effort
to have the message conveyed to the German authorities.
JOHNSON
RB
Regraded Unclassified
168
ORIGINAL TEXT OF TELEGRAM SENT
FROM:
Secretary of State, Washington
TO:
American Legation, Bern
DATE:
October 16, 1944
NUMBER:
3523
SECRET
For McClelland, from War Refugee Board.
Please deliver the following message to Saly Mayer from
M. A. Leavitt of the American Jewish Joint Distribution
Committee:
QUOTE WE AUTHORIZE ADDITIONAL EXPENDITURE BEHALF
HUNGARIAN JEWS BOTH FOR RESCUE ACTIVITIES OR RELIEF
IN HUNGARY UP TO $300,000 ON CONDITION THAT YOU CAN
PURCHASE PENGOES IN SWITZERLAND FROM SOURCES KNOWN
TO YOU TO BE RELIABLE AND so THAT SWISS CURRENCY WILL
NOT AID ENEMY OR ENEMY COLLABORATIONISTS. UPON YOUR
REQUEST WE WILL TRANSMIT THE SUM TO YOU AND WOULD ASK
YOU SET THIS UP AS A SEPARATE ACCOUNT TO BE REPORTED
ON SEPARATE AND APART FROM OUR REGULAR FUNDS AT YOUR
DISPOSAL UNQUOTE
THIS IS WRB CABLE TO BERN NO. 214.
HULL
Regraded Unclassified
169
CABLE TO MINISTER HARRISON AT BERN AND MCCLELLAND FROM WAR REFUGEE BOARD
Reference your 6721 of October 9.
Paragraph 3 of Department's 2490 of July 21 commences as follows:
QUOTE Please endeavor through any unofficial channels
that may be available to you UNQUOTE
The same paragraph closes
QUOTE the consequences for which formed the subject
of President Roosevelt's statement of March 24. UNQUOTE
THIS IS WRB BERN CABLE NO. 218.
3:45 p.m.
October 16, 1944
Regraded Unclassified
170
DMH-676
Ankara
This telegram must be
paraphrased before being
Dated October 16, 1944
communicated to anyone
other than a Government
Rec'd 2:18 p.m.
agency. (RESTRICTED)
Secretary of State
Washington
1977, October 16, midnight.
FROM KATZKY TO PEHLE, WAR REFUGEE BOARD, ANKARA'S 165.
Reports reaching Istanbul describe the dangerous
situation of Jewish people in Hungary and Slovakia and the
the continuing urgent need to evacuate them to safe havens
as rapidly as possible. All avenues of escape, therefore,
should be explored at the earliest possible moment. Recent
authorization of American Mission to proceed to Rumania
may provide occasion (see Department's 810 of September 20,
WRB 112) to request State Department permission for me to
proceed to Bucharest, with secretarial assistance while
there, in order to investigate means of rescue at that
place. Passman of JDC would accompany me. Telegraphic
authorization requested.
STEINHARDT
RB
CC: Miss Chauncey (for the Sec'y) Abrahamson, Akzin, Cohn, Drury, DuBois,
Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack, Pehle, Files.
Regraded Unclassified
171
NOT TO BE RE-TRANSMITTED
SECRETARY SUPOOPY NO, "
OFFICE TREA
SECRET
OPTEL No. 336
1944 OCT 17 AM 10
Information received up to 10 October,
1944.
TREASURY BEPARTMENTH
1. NAVAL
On 12th one of our motor mineweepers was mined and
sunk off Leghorn. On 13th a French destroyer bombarded enemy
positions Bordighera.
2. MILITARY
WESTERN EUROPE. Heavy fighting continues immediately
north of Aachen where U.S. troops are meeting fierce resistance.
Some progress in street fighting in the northeastern outskirts of
the city. U.K. troops have advanc ed 1,000 yards S.E. from Over-
loon and are nearing Venray. Canadians have enlarged their bridge-
head on the south bank of the Scheldt and have linked up with
other Canadians who have crossed the Dutch frontier from Belgium.
RUSSIA. Russians have captured Petsama, have made
further progress west of Riga, have taken Dej N.E. of Cluj and
have captured Krusevac, N.W. of Nis.
3. AIR OPERATIONS
WESTERN FRONT. 14th/15th. 4,382 tons including 499
incendiary on Duisburg and 858 on Brunswick.
15th. 1089 escorted U.S. heavy bombers (21 missing)
bombed Cologne railway centre - 1993 tons, factory 196; Mannheim -
oil 138; Reisholz - oil 143; other targets 134. 687 supporting
aircraft (7 missing) claim 7, 0, 1 in action, also 26 locomotives
and 54 vehicles destroyed.
Sorpe Dam S.E. Dortmund, attacked by 16 Lancasters
escorted by 61 Mustangs. 16 12,000 pound bombs dropped. Some
fell on crest of Dam but no breach seen. No opposition.
778 fighters and fighter bombers supported ground
forces in Holland, Western Germany. One Mosquito sent to Kolberg
airfield destroyed 8 aircraft on the ground. 38 Coastal Command
aircraft sank a 2,000 ton tanker and a coaster off Norway. Two
other coasters set on fire off Heligoland.
15th/16th. 667 bombers including 54 Mosquitoes sent
out:-
Wilhelmshaven
506 (7 missing)
Sea Mining
37 (4 missing)
Bomber support
70
Hamburg
44 Mosquitoes
Much cloud Wilhelmshaven, Attack considered scattered.
MEDITERRANEAN. 14th. 384 escorted U.S. heavy bombers
(23 missing) dropped 707 tons on oil refineries and rail centres
Central Europe. 011 - Blechhammer 217 tons and Odertal 163; rail-
ways - Maribor 131; other targets 196. 54 Mustangs (2 missing)
attacked two airfields in Hungary. 31 aircraft destroyed on the
ground.
4. HOME SECURITY
15th/16th. 22 flying bombs plotted in two phases
at about 10:30 p.m. and 4:45 a.m.
Regraded Unclassified
172
October 17, 1944
9:45 a.m.
GROUP
Present: Mr. D. W. Beil
Mr. Gaston
Mr. White
Mr. O'Connell
Mr. Pehle
Mr. Blough
Mr. C. S. Bell
Mrs. Klotz
H.M.JR: The funniest thing happened in Los Angeles.
It turned out that Murphy's being there was very useful,
because some newspaperman had a question. He was trying
to tie up the relationship between the deficit in '33,
the present deficit, and the national income. I said
to the fellow, "I don't know what you are driving at;
for political purposes it is no good, but Mr. Murphy
will give you the figures, anyway."
Then I said, "If you really want something good, I
don't know the answer, but I will give it to you. What
you want is the net deficit and the national income."
I have never seen those figures before. They are
very good. The net deficit in '33 was a billion and a
half, and the net deficit in '39 was only three billion.
MR. D. W. BELL: I can't remember the figures.
H.M.JR: Those are the figures that Murphy gave.
Then you compare the national income; it was around fifty
or sixty billion at that time.
MR. D. W. BELL: Forty then.
H.M.JR: But they are interesting figures.
Regraded Unclassified
173
- 2 -
MR. D. W. BELL: Percentage-wise.
H.M.JR: I mean from a billion and a half to three
billion. You talk about a three billion deficit today,
and it sounds almost like nothing. And then you show that
the deficit realiy began to grow when we began to spend
for war.
MR. D. W. BELL: Yes, your debt was below fifty bil-
lion dollars when you started on your defense program.
H.M.JR: Somebody gave these fellows some crazy
figures, and, of course, it didn't work out. They didn't
ask for any tax figures, but I missed your (Blough's)
company. I realize you didn't have a chance to talk
taxes to me, but I was 80 rushed on the way back.
MRS. KLOTZ: On the whole trip.
H.M.JR: I didn't get a chance to talk on the whole
trip.
MR. BLOUGH: After all, from here to New Orleans
it was the Los Angeles speech, and there wasn't anything
after New Orleans.
H.M.JR: I slept from here to Atlanta.
MR. BLOUGH: Well, I didn't care to bring that up.
(Laughter)
H.M.JR: And from Atlanta to there we did the speech.
I would like to get a sample of what they sent out
last night. How did they send it out?
Herbert, I didn't have a chance to see an awful lot
of Vanderpoel, but Murphy did, and he thinks he is really
tops. He said he is half way between a very good writer
and a good economist, and he said the way he took that
stuff and the speed with which he turns out his stuff is
perfectly amazing. And I thought that you might, if you
would, sound him out. As I remember, he was willing to
come with us at one time.
Regraded Unclassified
174
- 3 -
MR. GASTON: Yes, he was.
H.M.JR: You might sound him out.
I wish you would, in the first place, write a letter
for my signature teiling him how well the speech was
received.
MR. GASTON: He did the Los Angeles speech?
H.M.JR: He has the same quality of a different type,
but this quality he has is the same as Alan Barth's. You
can talk at him, and then he will take my idea and give
me the result.
The last time I talked three hours to these three
script writers from Washington to Nashville, I gave them
three hours of my time. Then when I got to Los Angeles
in the middle of the night, I found out I had no speech,
and I had to get this Columbia Broadcasting--or somebody
else--to rewrite the thing over night, but this fellow
is good. And I thought you might see whether he would
like to come with us. I don't know whether you have had
a chance or not.
MR. BLOUGH: Yes, I did. And J am very favorably
impressed. He seems to have the right attitude toward
things on the one hand, and he seems to be a very able
fellow.
H.M.JR: And he does not make me nervous, which is
important. But doesn't he turn out his work very fast?
MR. BLOUGH: I am not in a position to judge that
side of it.
H.M.JR: Murphy says it is unbelievable. He said
in an hour he took this thing and just did it, that is all.
He said he is accustomed to working against a deadline.
And I believe he is a thorough New Dealer. He seems to
be.
MR. GASTON: Yes, he is.
Regraded Unclassified
175
- 4 -
MR. BLOUGH: I taiked to him at some length about
points of view, and so forth, and I think he is.
H.M.JR: He is perfectly willing to make the state-
ments about the banks and all the rest of that.
MR. BLOUGH: He believes that, too, I am pretty sure.
MR. D. W. BELL: He certainly came out strongly
against Brooks in Illinois some time ago.
H.M.JR: Did he?
Well, he did something else last week. He says his
editor jumped all over him.
Will you do that, Herbert?
MR. GASTON: Yes, I think there is probably a good
chance of getting him. The only objection I have ever
had about getting Vanderpoel is taking him away from the
Middle West. He is practically the only financial writer
in the country who is constantly writing stuff in our
favor, doing us good.
H.M.JR: Well, I am like Churchill and Eden when they
were discussing this question of Germany and they got a
little excited. Churchill said that between the German
children and the English children, he was for the English
children. I am for Morgenthau against the Middle West.
MR. GASTON: I don't think that is the question. It
is a question of where he can do the most good for you.
I still think the other way, but I will be very glad to
talk to you.
H.M.JR: Thank you, sir.
Incidentally, you look refreshed.
MR. GASTON: I am.
H.M.JR: I am not very cantankerous this morning. I
still haven't gotten enough sleep.
Regraded Unclassified
176
- 5 -
MR. WHITE: As long as you have it your way!
H.M.JR: Well, it is very hard to find somebody who
can write, who has the financial background; it is terribly
important. And listen, Herbert, if he comes, he is here
to work for Morgenthau. He is not to do speeches for
Sullivan and the rest of them, or Bell.
MR. D. W. BELL: Bell has quit making speeches. You
don't have to worry about that.
MRS. KLOTZ: Then you will have to be making a lot of
speeches, or he won't have enough to do.
H.M.JR: I tell you, living through this month of
working these three speeches out and for the first time
putting down in pencil the Treasury's fiscal policy has
been very good for me. If Blough can give me the time, I
would like to do the same thing on taxes.
MR. BLOUGH: My time is very crowded, Mr. Secretary,
and I am very sorry that I haven't been able to give you
the time.
H.M.JR: I don't know whether any of you people have
read those three speeches, but I thought they were pretty
good. Commissioner Allen, formerly of Washington, who is
out there heard me at the press conference. He is doing
advance work for Truman. He was kind enough to say that
he thought that speech and the press conference were the
best for Roosevelt he has heard since the campaign started.
He was very enthusiastic. And he said, "You get radio time
for notning. That is what burns me."
MR. GASTON: How is he betting?
H.M.JR: He has a list of States. He is getting
even money that Roosevelt will carry California by two
hundred thousand. That is one of his bets. But he has
his own list. You know, he makes a living out of this
betting. He is very, very confident. There is no question
out West that Roosevelt will carry the whole Pacific Coast.
Regraded Unclassified
177
- 6 -
MR. GASTON: Well, on the general result he is pretty
confident, is he?
H.M.JR: Oh, yes, he says the betting is three to
one. But, of course, Winchell gave it three and a half
to one Sunday night. But he says the odds everywhere are
three to one. He has no doubts.
Of course, I had dinner, just to gossip a little bit,
at Twentieth Century Fox as the guest of Mr. Skouras.
The interesting thing is, he had his top-flight scenario
writers. He had three of his young stars as table decora-
tions, but they were as mentally stimulating as flowers
usually are.
MR. WHITE: They smelled nice.
H.M.JR: Yes, but I didn't get close enough.
Anyway, they tell me there they raised a million
dollars a month for Republicans, just in the State of
California--for Dewey. So there is plenty of money.
But they are working very hard. They can't get any
publicity out, that is the thing. The papers just won't
carry it for Roosevelt.
MR. WHITE: What kind of an audience was it you spoke
to?
H.M.JR: Ten or eleven States--War Bonds. They have
this thing in this Hotel Biltmore, what they call the Bowl.
They nad about nine hundred people there. But the point is,
that in itself wouldn't be worth while, but they get me a
broadcast for the whole Pacific Coast, I mean, a rebroadcast
at four-thirty. There are five radio stations in New Orleans,
so when I spoke there I had anywhere from fifty thousand to
half a million people listening.
MR. WHITE: Wouldn't it be worth while to duplicate
the speech in the East?
H.M.JR: The trouble is, Ted Gamble can't set me up
that kind of an audience. Alan was very, very anxious that
Regraded Unclassified
178
- 7 -
I go to New England and do the same thing. He thought it
was terribly important. But if Ted manufactured it--you
see, he had the New England people come down to Atlantic
City. If he did the thing, it would be too obvious.
MR. GASTON: Let's see, the drive doesn't start
until after November 7, does it?
H.M.JR: No, but Alan was very anxious that I go to
Boston. But I think a better man than I will go to Boston,
80 I don't think it will be necessary.
Now, I have a lot of stuff here. The trip was very
hard, but I think it was worth while. But it wouldn't
have been worth while if I hadn't had that radio hookup.
General Joseph Stilwell, according to Mr. Stimson,
is very much worried about the speculation in money,
and he happens to have two Treasury people working for
him, Special Agent Dowling, and Special Agent somebody
else.
MRS. KLOTZ: Isn't that in China?
H.M.JR: Yes, but I want the Treasury Department to
cooperate. Wouldn't that go to you, Herbert?
MR. GASTON: Yes, but there is cooperation already
underway. There has been a lot of theft by Army officers
out there, smuggling, and 80 forth. That man Dowling did
the primary investigating in the field, and now it has been
made into a Bureau of Internal Revenue Intelligence investi-
gation from the tax standpoint. There are thirty or forty
of those fellows.
H.M.JR: General Stillwell has ordered Colonel Harry
Cooper--is he a Treasury man?
MR. GASTON: he was formerly supervising agent of
this district. He is in town now, or was a day or two ago.
H.M.JR: Would you prepare the answer to this for me?
Regraded Unclassified
179
- 8 -
MR. GASTON: Yes.
MR. WHITE: Does that smuggling also refer to the
fact that they are getting large sums of currency out
there and then buying it at the official rate, or does
he have reference only to goods?
MR. GASTON: Dowling, this Treasury man who is in the
Provost Marshall's Office, is the man who stirred this up
and got the letter written, but it is both, Harry, it is
money smuggling, and it is smuggling of other goods.
MR. D. W. BELL: Speculation.
MR. GASTON: Gold smuggling and--
MR. WHITE: Such large profits could be made.
H.M.JR: Well, that needs an answer.
MR. GASTON: Right.
H.M.JR: Then this is confidential: Steve Early
telephoned that in as much as the President declined speaking
at the Herald Tribune Forum, he hoped nobody from the Treasury
would speak. Is anybody speaking?
MR. D. W. BELL: No, but I assumed that that would go
to all the other departments; Somervell and Hines are speak-
ing.
H.M.JR: It just says here that any Treasury people
who might be invited to participate would also decline.
MR. D. W. BELL: So far as I know, nobody is on from
the Treasury.
H.M.JR: Then this is Oscar Cox: "If satisfactory to
you, we would like to talk to Sam Klaus about signing him
up for FEA pay roll." Now don't say no.
MR. PEHLE: Me?
Regraded Unclassified
180
- 9 -
H.M.JR: He rose to that one! If you insist, or
you (O'Connell) insist on keeping him--
MR. O'CONNELL: I would be very happy to have Sam
work for FEA. He has really been working for them, and
certainly not working for us, in the past few months, and
I think that would be a very desirable thing.
H.M.JR: You reluctantly--
MR. O'CONNELL: Let's say reluctantly.
H.M.JR: All right. We reluctantly give him up.
But Sam has asked to see me, and I will see him when I
can catch my breath. You just make a note.
Now, has anybody seen Sam?
MR. WHITE: I have seen Sam. He wants to see you,
as far as I know, about Spain. I think you ought to hear
him. He may have something personal in addition, but I
don't think so.
MR. O'CONNELL: About Spain?
MR. WHITE: Yes, the Embassy in Spain.
H.M.JR: This is from Joseph J. O'Connell (refers to
memorandum of October 16), "F.E.A. has proposed that the
President make a public statement to the effect that this
country will not recognize the acquisition by neutrals of
German-owned patent and patent rights. The purpose behind
the proposal is to prevent German industrialists from
finding safe havens for their patents.
"On October 2, 1944, this Government formally re-
quested neutral countries to take the measures called
for by Resolution VI of the Bretton Woods conference. The
next step, obviously, is to advise neutral countries of
the measures we are prepared to take to enforce our request.
It is my view, however, that our approach in this regard
should be as broad as the requirements of Resolution VI,
and that patents should not be dealt with separately and
Regraded Unclassified
181
- 10 -
apart from other forms of property. To deal with the prob-
lem piecemeal may well lead to confusion, and to complexities
of such & nature as to create unsuspected loop-holes.
"In my opinion, therefore, the proposed statement
should not be issued. If you agree, I will call Mr. Cox
and advise him accordingly."
I am reading this to be sure everybody is familiar
and everybody agrees with Mr. O'Connell.
MR. O'CONNELL: I don't know how many have seen it.
Oscar sent you a short note with a two-paragraph
statement which he suggested that the President might
put out with respect to German-owned patents which might
be cloaked by saying it meant other countries, and that
was our reaction.
I have only talked to the people in Foreign Funds
Control who deal with the ABC office all the time and
are familiar with the patent situation.
H.M.JR: You call Oscar and tell him. You might
tell him to be getting a letter, because the man works
for you. But we will release Sammy, do you see?
MR. O'CONNELL: Yes.
MR. WHITE: Instead of telling Cox that, why not
have some of his men meet with Foreign Funds besides
and thresh it out, instead of telling him not to do it.
Maybe he has some good arguments. Let Schmidt and one
of his men thresh it out.
MR. O'CONNELL: That is all right.
Regraded Unclassified
182
- 11 -
I think we could meet your point by saying sub-
stantially what I said in the memorandum, but that if
there are considerations we haven't thought of, there
may be some point in having one of Oscar Cox's men talk
to him.
But there doesn't seem to be a reason why the
President should concentrate on such a narrow field as
the patent situation in Germany.
MR. WHITE: They are familiar with that. I don't
know--if you use the second approach--.
H.M.JR: Well, will you still call him up?
MR. O'CONNELL: Yes.
H.M.JR: Now, Mr. Gaston?
MR. GASTON: I haven't anything.
H.M.JR: Good. Herbert, would you have a look to
see if there are any editorials that have come in?
MR. GASTON: Yes, I have a book of them out there
to look over.
H.M.JR: Would you write a little note for my signa-
ture to this Mr. Fritchey? I forget his first name. He
is the managing editor of the evening paper in New Orleans.
MR. GASTON: Yes.
Regraded Unclassified
1
183
- 12 -
H.M.JR: He saw me off at the airport and in the
great excitement I had to send a message to him that I
couldn't say goodbye to him. He is a great friend of
Henry's. I'll address him by his first name and simply
say I was pleased to see him and I was sorry I had to
rush off the way I did; if he ever comes to Washington,
look us up. He is a very attractive New Dealer. But he
was the man who was responsible for cleaning up the
Louisiana thing on the delegates for Roosevelt. He
took three reporters up there to Baton Rouge and just
sat there until he got the thing through. He was
formerly with the Cleveland Plain Dealer.
Joe?
MR. O'CONNELL: Did you see the memo I sent you
after I talked with Ben Cohen about that matter you
asked John and me to see him about? John wasn't able to
go; he was laid up. But I think the memorandum described
it. There is nothing we need to do. Probably nothing
will happen. If a business man asks us whether leave
with pay is deductible, why the Bureau will tell him yes
and tell him so as a matter of course; but I have indi-
cated to Ben that we didn't want to take the initiative.
We didn't think much purpose would be served by finding
a business man to make the inquiry, but if they do it
S.O it is clear that--
H.M.JR: I have asked you to be here at ten-thirty
when Olrich comes in, and I thought Lynch, too, and
Charles Bell.
MR. O'CONNELL: How about Dan?
H.M.JR: He is always welcome.
MR. D. W. BELL: Okay.
H.M.JR: I gave Dan an engraved invitation when he
became Under Secretary. That is a season pass! At
least, while Roosevelt continues.
D.W.BELL: After that time, I'm on my own.
Regraded Unclassified
184
2
- 13 -
MR. O'CONNELL: I have nothing else.
MR. PEHLE: I spoke in Boston yesterday. We had a
very good meeting. There were twelve hundred at a
dinner meeting; it was very large. Hirschmann is back
and will be around the first part of this week; if you
have a few minutes to talk to him, it would be very
nice.
I haven't anything else.
H.M.JR: Let's see. There is nothing pressing,
is there?
MR. PEHLE: No.
H.M.JR: I have a number of things that are.
MR. PEHLE: I'll tell Fitz. I haven't anything
else this morning.
H.M.JR: Any local political gossip?
MR. PEHLE: No, I came back from the station with
Dave Niles.
H.M.JR: Is he for Roosevelt?
MR. PEHLE: I think SO. He seemed not too dis-
turbed. I think the jitters that have been getting
everybody is probably a healthy thing, because they are
getting out now and really doing some pitching.
I thought the White House analysis of the Dewey
statement and what the facts were was a very devastating
document, and they really got it printed before the
opposition papers. It is very, very strong. Niles said
they are doing a series of those.
H.M.JR: Dewey said in the press conference that
this is the same as the Democratic National Committee
got out. They couldn't get it printed, so they had to
use the White House, which I guess is correct.
Regraded Unclassified
3
185
- 14 -
MR. O'CONNELL: I understand they are awfully short
of money for the campaign on the Democratic side.
Senator O'Mahoney mentioned yesterday that newspapers
were not printing the material that the Democrats have
available, and he mentioned how terribly expensive
broadcasting time was and indicated that the Committee
was pretty well strapped.
I was also told the other day by a fellow working
with Leon Henderson and his group that the main thing
they are trying to do is collect enough money to pay for
broadcasting time for the Government speeches that Henry
Wallace has scheduled; that the National Committee either
hasn't any funds or isn't able to allot any particular
amount of money to the Vice President for his speeches.
I also had an invitation this morning to go to a
luncheon under the auspices of the Democratic National
Committee on Saturday. There was no indication of the
purpose of the meeting, but I assume that they are anxious
to get additional funds to help carry on the campaign.
MR. BLOUGH: Yesterday we had a meeting with some
representatives of small business men - one more of these
tax meetings. We are not learning a great deal any more,
although we pick up a few facts each time. But I think
it is very helpful to have them in. They all seem to
feel both flattered and interested in learning what the
problems are.
We are having a group of professors of Public Finance
in on Saturday to see what their points of view and
feelings are about the matter.
I am scheduled to leave for St. Louis tonight to
give a talk on paper on corporate tax simplification at
the American Institute of Accountants on Thursday, and
will be back here Saturday morning. Perhaps next week
we might have some discussions of taxation.
H.M.JR: Yes.
Harry?
Regraded Unclassified
4
186
- 15 -
DR. WHITE: The Indians, you remember, have asked
for sixty-five million ounces of silver, and you agreed
to give them twenty. Now we are having a little
difficulty.
We have been selling gold to India and getting
rupees at a lower price, and they have stopped doing it
on the grounds that the market isn't favorable even
though the market is fifty-three dollars an ounce.
We also asked whether we couldn't have a man in
India for a while who could watch the gold market and
maybe help us, because they were cutting down on the
sales and they have eliminated them in Egypt. The
British Government said, well, they'd have to consider
it and he'd be wasting his time. I said that we were
paying his salary; why should they worry about his
wasting his time.
Well, they want to talk it over. I'm mentioning it
because I think we can do one of two things: We can
either hold up the silver until they are more cooperative,
or you can just mention it. I don't know which you want
to do.
H.M.JR: I'll hold it up. I won't stand for any
nonsense from that front!
DR. WHITE: All right.
The American Bankers Association talked to Dan
about a month or two ago. Their committee is going to
be here next week, and they are going to spend three
days studying Bretton Woods proposals, and they are
going to confer with us and with other people in town.
H.M.JR: Everything else all right?
Mr. Bell?
MR. D. W. BELL: Here is a letter of introduction
addressed to you by Mrs. Roosevelt, introducing a
Regraded Unclassified
5
187
- 16 -
Mr. Lord, who is supposed to be a warrant officer.
By the way, he has sent a number of these to you,
Jack McCloy, Patterson, and various other people in
town.
What he is trying to do is to get the Army and the
Navy to permit this company's representatives to go into
the various theaters and take a film of the boy who
stands before a camera and writes his name and address
of the people to whom this goes. This is all free to
him.
Then they send it back in the film form just like
they send V-mail, and develop it here and will send
it out to the country. And it carries a bond advertise-
ment on the other side.
The expense of this is paid by a sponsor like Lucky
Strike, or something. It is nothing but a commercial
project all the way through. They came to see me in
your absence.
H.M.JR: If it is a commercial, how do they make
money out of it?
MR. D. W. BELL: The sponsor pays for the advertis-
ing, do you see? Lucky Strike will give them so much
money for this privilege.
H.M.JR: You mean on the back - instead of "Buy a
Bond"
HR. D. W. BELL: No, no, we'll get that. But it
will be right there (demonstrating), "Sponsor for
Lucky Strike" - or Camels, or whatever it is. Just that
little place right there will be the sponsor's name.
MR. BLOUGH: Eighty-five and a half percent excess
profits tax!
MR. D. W. BELL: But I told him that if he got
permission of the military, then we'd give it consider-
ation. It is not our problem until the military makes
Regraded Unclassified
6
183
- 17 -
the decision.
He went out and apparently called up Jack McCloy
and said that the Treasury had this under consideration
and he'd like very much to see him. I told Jack that
the Treasury did not have it under consideration; that
I'd seen this gentleman, and he had a letter addressed
to him by Mrs. Roosevelt; that I thought he would see
him on the strength of the letter and not on the strength
of my having seen him. The decision was up to the
War Department and the Navy.
H.M.JR: What is the man's name?
MR. D. W. BELL: M. R. Lord. He wears the uniform
of the Merchant Marine, and he has sixty-five days leave
coming to him. He is taking leave to try to put across
this project. He was in the Army or the Navy, one or
the other, and discharged for disability. Then he went
in the Merchant Marine. He is now a warrant officer.
I don't know whether you want to keep these or not.
(Hands samples to the Secretary)
H.M.JR: I'll take them.
I am going to send word to Mrs. Roosevelt to kill
this stuff. I think it is a mistake.
MR. D. W. BELL: This concerns a gift of six
thousand dollars to the Library of Congress, which they!d.
like to have you initial. (Refers to letter of October 11
from Mr. MacLeish to the Secretary)
(Secretary initials letter)
We have been working some time with the Bureau of
the Budget and the General Accounting Office to get a
delayed payday program in operation throughout the
Government service. The law requires the people charged
with pay rolls to certify that the people have earned
their money, and heretofore they have certified those
pay rolls four days before payday and then the checks
are delivered the morning of payday. Of course, that
Regraded Unclassified
7
189
- 18 -
certification is not strictly legal. And, furthermore,
it costs a great deal to make the changes on the pay
roll of resignations, leave without pay, and so forth.
And they have been trying throughout the Government
service to get paydays from five days to ten. A great
many of the organizations have already adopted it.
The War and Navy are the two old-line Departments that
have adopted it.
We have drawn up a scheme whereby we would start
ours on the 22nd of November and we would like to announce
it now so that the employees can get their arrangements
ready.
But there is an election next month. I don't know
whether we'd want to go ahead with it or not.
MR. GASTON: What is it? Is it ten days, Dan?
MR. D. W. BELL: Ten days, yes.
MR. GASTON: That means one-third of a month less
money between now and Christmas?
MR. D. W. BELL: No, it is staggered so that we
don't get up to the ten days until March 10.
H.M.JR: I don't know. You raise the election.
Will it make the people favorable or less favorable?
DR. WHITE: Hold pay for ten days!
MR. GASTON: They'd be very angry.
DR. WHITE: They don't catch up with themselves
until they die or quit, do they, Dan?
H.M.JR: Known as the anti-Ruml plan!
MR. D. W. BELL: So far the Departments who have
adopted it have had no unfavorable publicity, and the
employees have not kicked. A lot of the independent
agencies have adopted it.
Regraded Unclassified
190
8
- 19 -
H.M.JR: Dan, I am in favor of doing it simultan-
eously with the Army and Navy.
MR. D. W. BELL: They have done it already.
H.M.JR: Then it is too late!
MR. D. W. BELL: Is that what you meant?
MR. C. S. BELL: It might be better to hold it off
until January. I think that was the original idea.
MR. D. W. BELL: No, the idea was to get back on a
monthly payday before the end of the year, because your
new tax rates go into effect--
H.M.JR: I'd start it on a calendar-year basis.
MR. D. W. BELL: That is what we are trying to do,
and that is the reason for starting now. Now, we can
start on December 8.
H.M.JR: I think your reasons for starting December 8
are wholly convincing.
MR. D. W. BELL: We are trying to work it so the
employee will get a full payday before Christmas, and if
we start on the 8th, I'm afraid we can't work that.
H.M.JR: No announcement this month.
MR. D. W. BELL: We could announce it around the
10th and start, probably, December 8. We ought to give
them about three weeks.
DR. WHITE: Something I forgot to mention. There
was a meeting in McCloy's office last week at which the
Directive which presumably was satisfactory here and
was going to the British for consideration was examined
by the British. The British representatives refused
to consider the matter here. They said that they had
received instructions or were informed that that matter
Regraded Unclassified
9
191
- 20 -
would be taken up in London. They indicated, however,
that they were not favorable to the Directive at all.
They also submitted a handbook of their own for
the period. There were two copies; Army got one copy and
State the other. We did not receive a copy of the
handbook.
H.M.JR: Which handbook?
DR. WHITE: The British draft. So there are two
matters: One, it looks as though the Directive which
State, War, and Treasury had agreed on here for the
interim period will be greatly modified unless you follow--
H.M.JR: Remind me this afternoon and I'll mention
it to Cherwell.
DR. WHITE: Yes. And we also would like to see a
copy of that handbook.
H.M.JR: I'll get Cherwell to get it for me. I
feel he is wholly in our corner on this thing. I mean,
that will be a good way to do.
MR. D. W. BELL: That is all.
MR. C. S. BELL: I have nothing but some Procurement
matters which I can take up after ten-thirty.
H.M.JR: All right. We'll go right into Procurement.
Harry, if you want to arrange a meeting with me on
this talk for tomorrow, I could start at nine-fifteen
tomorrow morning.
DR. WHITE: All right.
Regraded Unclassified
182
October 17, 1944
10:30 a.m.
SURPLUS PROPERTY DISPOSAL
Present: Mr. D. W. Bell
Mr. O'Connell
Mr. Olrich
Mr. Lynch,
Mr. C. S. Bell
Mrs. Klotz
H.M.JR: The floor is yours, so to speak. Nobody
has prepared me other than I was to see Mr. Olrich.
MR. OLRICH: I wanted to talk out with you,
Mr. Secretary, what we started to talk on yesterday
morning, or the other morning when you had to leave
early.
I want to recite that I have again reviewed the
matter with every man in my organization and his status
with the company. I am referring now to the conversation
we have had recently with Mr. Lynch, and that is that
the Department of Justice has given no relief in the
matter of men that are carrying on the burden of Treasury
Procurement, Surplus Property activity.
I spent the last half hour reviewing with the key
men in that organization their status and their future,
and the situation is so serious that if that act goes
through as it is, the day that the men are confirmed as
the heads of the new Surplus Property--two directors--
we'll be without a competent organization to carry on in
Treasury Procurement.
And that goes for the top merchandising men; it goes
for such men as Schlesinger in our Washington regional
office and Bonnett, Sales Manager in San Francisco,
and probably Rader, Sales Manager in our New York office,
and Smith, the Sales Manager in Boston, and the two
Sales Managers in Chicago.
Regraded Unclassified
133
- 2 -
In other words, it would denude us of people to
carry on.
My own situation is such that the OPA has forced
the issue, and they have gone into courts and made us
answer and then given us interrogatories that we had to
answer in which the court, in reviewing their interrog-
atories, indicated that it would give us a six months
period in which to answer the questions that they had
asked us from our books.
When the OPA learned that, they changed their
interrogatory so that we were given ninety days to just
get the information from our books to file an answer,
and then given thirty days to prepare our case. The
case must go to trial early in December. So that means
on December first I must be in Minneapolis to handle
the final matters on this case, because I will be with
one of my associates.
It is estimated the case will last many weeks
because there is much matter to go before it. The interrog-
atories they asked of us formerly were the informal
interrogatories that they sent me, in which I told them
from my knowledge of the business it would take six
months to answer, and they had the inclination that I
was stalling and didn't want to answer them; so they
forced us into court. And when the Federal judge
reviewed their questions, he said it was without question
necessary to take six months to answer, and the attorney
for the OPA admitted that his examination of our record
and our system indicated that the information could not
be answered for a full six months.
Now, with the new set-up--I am going to the next
step--of the Surplus Property Act under the three
administrators, all initiative in disposal of property
is removed from the Director. You follow certain proced-
ures and regulations that they must carry out. There
are certain orders of preferences and priorities, and
we are already beginning to feel the effect of those
preferences and priorities.
Regraded Unclassified
194
- 3 -
As an illustration, when we have had tires declared
to us we have sold those tires back to the original
manufacturers, so that they could distribute them through
their dealers. The City of New York has served notice
on us that under the Act they have a priority for future
tires, as they know tires will be declared in New York.
They have indicated they will do everything they can to
stop us from selling them to manufacturers. They demand
those tires.
The only way we can circumvent such an action is
to make those tires available. I mean, it simply indicates
the first step in the breakdown of the organization that
we have set up.
Now, step by step, that is already evidenced. The
Small War Plants Corporation indicated that they were
dissatisfied with the way we had distributed trucks in
Kentucky, and they demanded the right to buy trucks
from us and distribute them in Kentucky against our dis-
tribution.
H.M.JR: Is that a Government corporation?
MR. OLRICH: Yes, under Maury Maverick. And under
the law they have that right. We faced them down in
that particular issue, and we showed them that every bit
of information they had was misinformation and deliberately
false statements, and of course there are no trucks to
sell in Kentucky.
So they have raised the next step. They have gone
to Alben Barkley, and he is raising cain now because we
haven't enough trucks to supply to the State of Kentucky
and he has demanded that we give them three hundred
trucks. Well, the nearest trucks are in Louisiana. By
the time you transport trucks that distance--
But I mean that is the indication, that under this
law these situations are taking place.
Now it seems to me that somewhere along the line
someone should be appointed to succeed me. I will
continue as adviser to you, if you wish, in this work.
Regraded Unclassified
195
- 4 -
That man should have a knowledge of surplus property
disposal, which means merchandising. In my opinion
he should have the same title as I have, Assistant to
the Secretary. He should have complete charge of that
department. He should have three assistants, a
Director of Procurement, a Director of Surplus Property,
and a newly-created post under this Act which is ex-
tremely important--a Director of the Stockpile of
Critical Materials; because under this Act it is manda-
tory that you supervise a stockpile of critical materials
of over two billion dollars, which you will have to
rotate, store, be responsible for, move it about and
take charge of all of the scrap. That is mandatory.
You may refuse to take Surplus Property, but under
the Act you are the custodian of surplus critical
materials. Those men ought to be men of importance,
and they should report directly to this Assistant to
the Secretary, who has no other responsibility but
Treasury Procurement.
Now, that man should be sought as soon as possible.
We have been looking for him, but ever since the Act
was on the Hill and Congress was indicating the inter-
ference it was going to put in the Act, we have been
unable to recruit a single man from business into our
organization in any way. We were unable to get a drug
man. We had an indication that the head of the Leroy-
Huffman Company, a man who earns a quarter of a million
dollars a year, was willing to come down as a drug man,
but the minute this Act become known-that he couldn't
work here and go into the chemical business and deal in
surplus, if he wished to--why, all negotiations stopped.
Step by step we have had that all along the line.
We have lost men in Boston and we have lost men in
New York. Now, that is the situation. It is critical.
H.M.JR: Now, let me just get some of these dates
straight. You say you have to resign when?
MR. OLRICH: December first.
MR. D. W. BELL: Is that date definite except for
the start of the trial?
Regraded Unclassified
196
-. 5 -
MR. OLRICH: We have less than thirty days in that
time to perfect our case. In other words, I will have
to review this information that they have demanded be
presented and analyzed for submission to the court.
H.M.JR: And that, in your mind, is final?
MR. OLRICH: Yes, sir.
H.M.JR: Now, what is the status? I sent somebody
over to see Jimmy Byrnes, and he was going after the
Attorney General.
MR. LYNCH: Yes, sir. In the meantime We have had
discussions with representatives of the Attorney General.
The matter is not satisfactorily worked out yet with the
Attorney General. We are still in the course of dis-
cussions.
H.M.JR: Who in the Attorney General's office is
looking after it?
MR. LYNCH: Hugh Cox, who is Assistant Solicitor
General, ordinarily handles such matters for the Attorney
General.
One reason for the delay in getting a final con-
clusion, we have been discussing it with an assistant of
his--first with him, and then he referred it to his
assistant. Now, we hope in the matter of a day or two
to have it up with Hugh Cox, himself.
H.M.JR: It is important enough--why don't we get
Biddle?
MR. LYNCH: He ordinarily refers those. I should
think we'd want to save that for the last shot,
Mr. Secretary.
H.M.JR: But you have been going on now for weeks.
MR. LYNCH: Here is what we have done in the mean-
time--
H.M.JR: My guess must be at least three weeks since
Regraded Unclassified
197
- 6 -
I sent you over to see Byrnes.
MR. D. W. BELL: Tom, hasn't Biddle said that you
can look upon the Act going into effect so far as all
these restrictions are concerned, when the Board is
appointed?
MR. LYNCH: That is right. At the outset he
gave us that assurance.
MR. OLRICH: Which has retarded our men from having
stepped out before this. In other words, they said they
would continue to the time the Board was appointed.
H.M.JR: I don't get the point of that.
MR. D. W. BELL: That delays these resignations that
Mr. Olrich has on his desk. Otherwise, these fellows
would have gone the day the bill was signed by the President.
H.M.JR: When does the Board go into effect?
MR. O'CONNELL: When the President appoints the Board.
H.M.JR: That is just stalling.
MR. O'CONNELL: That is right, but at least it
gives us that much time. He wouldn't want to appoint a
Board until the Congress is here to confirm it, and until
the Board has been confirmed the people Mr. Olrich is speak-
ing of will be under no inmediate pressure to resign.
H.M.JR: But I thought we would get an interpretation
from the Attorney General which would make it unnecessary
for them to resign.
MR. LYNCH: We have a draft of the interpretation.
We don't like it. It isn't what we expected and it isn't
satisfactory. Now, we are trying to get it changed.
H.M.JR: Do you want me to get into it at this time?
MR. LYNCH: No, we discussed it, and we'd rather take
the next step first, because we haven't concluded it with
Hugh Cox first. But we hope if that isn't satisfactory that
we may come to you on it.
Regraded Unclassified
188
- 7 -
MR. D. W. BELL: I think Biddle is keeping in touch with
it and he is familiar with it, because I wanted to discuss
this Surplus Property Bill at the last Cabinet meeting. I
wanted to ask the President if anybody was studying it with
a view to getting it changed just as soon as Congress returns.
Biddle said, "No, don't bring it up. Let's let the Depart-
ments get together and see what they want in the way of
changes, and then let's recommend it jointly." I said,
"That is all right with me, if you have it in mind." He
said he definitely had.
MR. OLRICH: But when the employees are gone, they
are gone. Today is the 17th, and the earliest date that
anything could happen is the 14th. But it could happen on
that date or shortly afterwards, which leaves us 25 days
to do all the things we want for a department that has a
hundred million dollars worth of goods on hand, and they
are selling goods at the rate of fifteen million a month.
H.M.JR: But Lynch doesn't want me to get into it yet.
MR. O'CONNELL: One of the reasons this has taken time
is that not only the Treasury, but RFC, the Army, Navy,
Maritime Commission, War Foods have, to a certain extent, the
same problem we have, and we have been dealing with them.
H.M.JR: How about asking Jimmy Byrnes to call the
agencies together?
MR. O'CONNELL: The agencies are coming together, and
we have been working with them at the level just below. Cox
to come to agreement. If we weren't able to solve it there,
then it seems to me we will try to get you and Byrnes to
work on the Attorney General.
H.M.JR: Has anybody any recommendations for me of some-
body to take Mr. Olrich's place - and these assistants?
MR. C. S. BELL: We have a Mr. Seidemann. We would like
to put him in there to study it for two weeks and then go .
on a half-day basis until he has acquainted himself with it.
He has had quite a career in the Government, starting first
with the Director of the Budget. That is his background.
(Hands the Secretary personnel record of Mr. Seidemann)
H.M.JR: There is absolutely nothing in his career which
would fit him for this job.
h-1
199
- 8 -
MR. C. S. BELL: Except, Mr. Secretary, that he
managed the whole Three-A program. The whole job changes,
Mr. Secretary, with this new bill.
H.M.JR: But there is absolutely nothing in here that
fits him for this job.
MR. C. S. BELL: No, sir. As we see the job--and I
think Mr. Olrich will bear me out--after January 1 it
will be very difficult to get merchandising men to come
into the job.
H.M.JR: Well, the way the thing is now, I am going
to ask the President to take it off my hands and move it
out of the Treasury. I don't want it in the Treasury.
I am going to ask him to take it lock, stock, and barrel
out of the Treasury.
MR. C. S. BELL: And consolidate it with other units?
H.M.JR: I don't care.
MR. OLRICH: It should be set up as a unit. RFC and
Surplus Property should be set up as one unit, because at
the present time you are governed by the same set of regu-
lations. The States and everybody has priority. There is
no discretion in the matter. They have access to all of
these things, and 80 to me it seems that there should be
a surplus property unit of its own set up to handle these
various things 80 that one agency would be dealing with
the other agency. It can be set up, but whoever heads it
up should have a merchandising background. He must be
an administrator, but he should know something about mer-
chandising.
H.M.JR: Look, Mr. Olrich seems sympathetic to the
idea, at least to get it out of the Treasury and get it
in one place. How about somebody drafting a letter for
me, you (Olrich), with these people's assistance, saying
why we want to get it out of the Treasury, and, two, here
is the setup for the President, putting it in one place,
instead of having three or four different agencies.
Regraded-Unclassified
2
200
- 9 -
MR. OLRICH: That would be the sensible thing, because
the Treasury loses all discretion in the disposal of stuff.
All the Treasury is is an operating agency handling surplus
under somebody else's discretion.
MR. c. S. BELL: Isn't this true, that all of these
men you speak of, who will be going out unless Section 27
is changed, will go out anyway under the new bill?
MR. OLRICH: Within a year or so. And they pick
successors to come in. Each man has assured me he will
be able when his reasonable time is up to find someone
whom he has trained to carry on.
MR. C. S. BELL: But he wouldn't be able to operate
as he is now operating. He will become a Civil Service
employee. Isn't that true?
MR. OLRICH: A hundred percent.
MR. C. S. BELL: So they wouldn't stay.
H.M.JR: Now, if this is consolidated into one agency,
where would that agency fall?
MR. LYNCH: First, where it could fall, the Board itself
has authority to appoint any agency, disposal agency.
There is no mention in the Act of the Procurement Division
or RFC, so the new Board is not committed to any agency.
It could pick RFC for the whole job. It could give it to
Federal Works Administration, Public Housing Administration,
or anybody else who is looking for work and who might be
able to take over the warehouses as well as the administra-
tive staff. In other words, it is an open book as far as
the Act is concerned.
MR. OLRICH: It could set up its own agency.
MR. LYNCH: It says, "Select one or more agency."
H.M.JR: Joe, do you think it would be a good idea
to have all procurement in one place?
Regraded Unclassified
3
201
- 10 -
MR. O'CONNELL: All disposition, all disposal? I
take it you can't get rid of your stockpiling, because
Procurement has that job, but, of course, they have done
it in a small way--
H.M.JR: But supposing the President picks it up
bodily?
MR. O'CONNELL: He can do that under his War Powers
Act.
H.M.JR: I don't want it now, the way it is. I
don't want anything to do with it. I want to get rid of
it. I said that if I could have this fellow I would run
it. I am not going to look around, have a certified
public accountant. He may be a wonderful fellow down
somewhere for you.
MR. D. W. BELL: Not for me. I know him. I am
sorry.
H.M.JR: I know him; his name rings a bell; he is
from the Red Cross. We had something to do with him in
the Red Cross.
MRS. KLOTZ: Well, the Director of the Budget has
always wanted your Procurement Division; after all, they
don't have merchandising people in there, and they feel
they are equipped to handle it.
MR. LYNCH: I think they would like to sit in a
rarefied atmosphere and dictate policy and leave to somebody
else the whole problem of working it out.
H.M.JR: Look, gentlemen, I don't bluff. If Mr. Olrich
could have stayed with me, fine and dandy. He can't!
All right. Now, I am teiling you people, I want you to
fix up some letters for me. Do you see? In them we will
say that in view of this business, and in view of the
situation, we feel that all of this disposal of surplus
property should be in one agency, that the Board can
decide what agency it will be. We are not making a recom-
mendation as to where it should go. That is up to this
Regraded Unclassified
202
- 11 -
new Board. But let's get it out of the Treasury. And
in the interest of good management and good business,
there should not be three different agencies having
disposal of property.
MR. C. S. BELL: There is a danger that they might
put it all in the Treasury.
H.M.JR: All right, we will cross that bridge. They
won't. I tell you I won't have it. After election there
are certain things I want to get rid of, and certain things
which will come back to me. There is certainly going to be
a New Deal unscrambled both ways as far as I am concerned.
Mr. Roosevelt wants me to stay here. I am not going to be
doing all these unofficial things and having all these
agencies down on me. This is something I want to get rid
of; it doesn't belong here. It has nothing to do with
the stuff I have been talking about, interest rates, re-
funding of public debt, and all the rest; it is just as
far removed as black from white. It doesn't belong here
and this is a good time to fix up some letters.
MR. OLRICH: The reason I say you are right, Mr.
Secretary, is because unless this bill is admitted, it
is going to be the worst headache in Government because
there is no control of it. You do what another agency
tells you to do. You exercise no discretion or judgment.
H.M.JR: Please take time enough with these people
here. Mr. Dan Bell should give it as much time as he can,
because he is very good on this stuff on account of his
experience. in the Bureau of the Budget. But 80 there will
be no misunderstanding, I will hold you responsible, Charles,
that I get the letter, teiling the President of the United
States to go on the assumption, "Look, even if we get a
ruling, these fellows aren't going to stay with me."
MR. C. S. BELL: No, sir.
H.M.JR: And even if they can, you can't get any new
blood, can you?
Regraded Unclassified
5 :
203
- 12 -
MR. OLRICH: No, sir, not very well. People want to
go home.
H.M.JR: And let's put the thing so that it can go
to one agency, that this new Board should have the decision
as to where it should go. I don't think I should tell the
President where this new Board should put it, but at least
I can recommend three agencies to be consolidated into one.
Now, let's say that that is good government. I take
it, it is. Now, what about the buying end of Procurement?
Where can that go?
MR. C. S. BELL: That might remain just where it is.
It is operating a little more smoothly.
MR. OLRICH: They have it running smoothly, but at
the same time, I feel that if that organization continues,
there should be even with its magnitude an assistant to
the Secretary that is actively engaged in doing that.
Your present problem of irregularities in management--and
I don't mean financial irregularities--is due entirely to
the lack of managerial ability and the fact that nobody
traveled the field and put the house in order.
H.M.JR: May I just say something in the confines
of this room? I don't want anything in the Treasury that
isn't straight fiscal, domestic and foreign, after election.
I want to get rid of these things. There are certain
things that I very much want to have cleaned up, as
between ourselves and the other agencies. I think I have
already spoken to you about this.
MR. D. W. BELL: That is right. I am thinking about
it. I haven't done much work yet.
H.M.JR: And this thing of barbed wire, whether it
should have four prongs or three prongs, and the construction
of an oil well refinery for Russia--those things are just
foreign to what I should be doing. And afterelection, I
want to lay those things on Mr. Roosevelt's lap and say,
"These are the things that don't belong to the Treasury,
and here are the things that do." Do you see? And a lot
Regraded Unclassified
6
204
- 13 -
of things should come back here, in my opinion, including
the Budget; it should be put back to its original position
in connection with the Treasury.
MR. D. W. BELL: And in a little stronger position
than it was before.
H.M.JR: And the Bureau of the Budget should be
back in the Treasury. That is where it belongs.
MR. OLRICH: Yes, sir, that is sound organization.
H.M.JR: And this whole business--SEC should bé in
the Treasury.
MR. D. W. BELL: That is a headache though.
H.M.JR: All right, but we swap one for the other.
I would like to put the things which should be in the
Treasury in the Treasury, which are strictly financial.
FDIC should be consolidated with the Comptroiler. I am
just throwing these things out which are logical, and I
don't need any Brookings Institute to tell me what should
be in the Treasury and what shouldn't be in the Treasury.
All of these lending agencies should be supervised by
the Treasury, the way we originally had them; Home Owners
Loan and all of those things should be under one great big
corporation of which I should be chairman of the board.
MR. D. W. BELL: I think you should be back on the
Federal Reserve Board.
H.M.JR: Well, that is the kind of thing I would
like to have. And please don't mention these things
outside, but this kind of thing I want to get out of.
There are a lot of things I want in. There are a lot of
difficulties and headaches, but they should be in the
Treasury, and I am not going to have an Assistant Secretary,
because he won't have the time, and I haven't the time to
worry about them. I meant what I said, if this thing is
busted up, I am going to get rid of it. Frankly, I am not
going to worry about getting any head for it.
Regraded Unclassified
7
205
- 14 -
MR. D. W. BELL: I hate to turn over such a bad organ-
ization to somebody else.
MR. OLRICH: I am afraid you will have that perfected
before you turn it over, because we are cleaning it up
pretty fast. We have two more offices to clean up, and we
are in it, and there was some pretty straight speaking
yesterday in the Boston office. I only have to get a head
for the New York office and I think we will have cleaned
up your offices. That is why I want this man Fox, if I
can get him, to put in as an auditor; then I will have a
job done, and I think you will not be ashamed of the organi-
zation when you turn it over.
MR. C. S. BELL: It is possibly in better shape than
any of the other units.
H.M.JR: Well, anyway, the two Mr. Bells, please get
busy on what I have just been talking about; this Procure-
ment thing is part of the picture. It is the responsibility
of the two Mr. Bells to give me something in writing. I
would like it to look just as though I said to you people,
"Here you are, two experts in the Government, give me a
report that I can send to the President, that if you
start it new"--I mean, if this were '33-- what should
belong in the Treasury." And I want that. I know pretty
much myself. After all, the President took seven different
lending agencies and made the Farm Credit out of it. I
pulled the things all in. But Farm Credit, RFC, and all
of these lending agencies should be supervised by the
people who have to raise the money.
The time will come when I have to face an audience
who will say, "Wait a minute, Mr. Morgenthau, you say
that ninety-five cents out of every dollar goes into the
war, but how much indirect money is there if Dewey were
smart--"of the taxpayers' that goes for this, this, and
this?"
Do you know what John Fahey is doing these days?
MR. D. W. BELL: A little bit; he isn't doing much.
Regraded Unclassified
206
- 15 -
H.M.JR: No, he is sitting up in Boston.
MR. D. W. BELL: But they are doing a very good job
of liquidating the Home Owners Loan.
H.M.JR: But does anybody supervise them?
MR. D. W. BELL: No, they have a board down there to
supervise them. I certainly confer with them on their
financing. We have a pretty good liaison, Mr. Secretary.
H.M.JR: But I am again saying how I feel, and I
want the thing for the day after. election.
MR. D. W. BELL: Of course, it isn't wrong for the
Treasury to have control over expendable property. Most
textbooks on the subject have considered that as cash
and it belongs in the Treasury. That is the way your
British system is set up.
H.M.JR: What are you referring to?
MR. D. W. BELL: I am referring to supplies for the
various departments. That is the British system. They
have control over money that is spent for all the supplies
of the British Government.
H.M.JR: But whenever it got tough, we always would
sign a piece of paper and say to the Department of Agriculture,
"All right, you have kicked 80 much, you go ahead and buy
your own stuff." Somebody else kicks and you say, "All
right;" you don't want a row, 80 you let him buy his own
stuff. That is what has happened. About all we do is
buy pencils and paper and a few odds and ends. We don't
do the buying for Ickes.
MR. D. W. BELL: Yes, we do.
MR. C. S. BELL: We could still maintain financial
control over Procurement,
MR. D. W. BELL: Oh, yes.
Regraded Unclassified
207
- 16 -
MR. O'CONNELL: We have no control over disposition,
anyway, in this legislation.
MR. OLRICH: All you are under this Surplus Property
Act is an operating agency receiving supplies and dis-
tributing those supplies in the manner in which they
indicate to you. You have the right, up to a certain
point, to sell it to the public at certain prices, but it
is removed from you in 80 many different ways that it is
a headache, and we have begun to feel the force of those
already. We have requests for property to be donated,
concessions and preferential treatment.
H.M.JR: I am going to ask you to excuse yourself,
and I am going to ask these other people to stay behind.
I have your viewpoint.
MR. OLRICH: All right, sir.
(Mr. Olrich leaves the conference.)
H.M.JR: Look, what I want to say is this--and it
will shock you people a little bit, see? I am not going
to appoint a lot of people and have an organization. I
am perfectly willing to let this thing, the transitional
period, just be to the point that I have nobody. In that
way, they have to take the thing off my hands.
If, on the other hand, I have what he says here in
the beginning--because he wants to fix the thing up so I
won't hold it--but I wasn't born yesterday. I will have
no successors, and I will have no heads of the thing,
and I am perfectly willing to let the thing disintegrate.
It gets to the point where I can't get anybody. Now, I
have seen it. But I am being very honest. I haven't the
time in the next thirty days to spend on this thing. I
just haven't the time. I didn't have the time this
morning, but everybody is high-pressuring me to see this
man. All right, I have seen him.
MR. D. W. BELL: That is the picture we wanted you
to get.
Regraded Unclassified
208
- 17 -
H.M.JR: What I am saying isn't so shocking, because
you haven't anybody.
MR. C. S. BELL: No, sir, you couldn't get anyone.
H.M.JR: So I am going to be a little bit over-
honest, and I can say, "Wonderful, go on and look for
people." Well, you give me Seidemann. I won't buy
Seidemann.
MR. D. W. BELL: No, I would have to disagree with
Charlie.
H.M.JR: All right, I wouldn't buy Seidemann, either.
I am telling you fellows that we will carry on and let
this thing go and simply say, "Here is the situation;
somebody has to do these things. I have many more things
which are more important." We can argue about keeping
the buying end of Procurement in the Treasury. I mean,
my mind is open on that, but on this Procurement business,
let it go into one place, and let the new Board set this
thing up. After all, we recommended a veto, didn't we?
MR. D. W. BELL: Yes.
H.M.JR: I have been thinking on this thing, even
though I haven't seen Olrich. I have my veto. I am
all right. He can't get the people.
Take it the other way. Charlie, go out and get me
a man. You will get me Seidemann.
MRS. KLOTZ: He says himself he can't get anybody.
MR. C. S. BELL: Not a merchandising man.
H.M.JR: Then I will do it the other way around and
say, "Now, you get me somebody." But I am always honest
with you people.
Regraded Unclassified
209
- 18 -
MR. C. S. BELL: I think everyone is in agreement
that this becomes a Civil Service organization with the
new bill. Isn't that true, Joe?
MR. O'CONNELL: Certainly the control is in the Board,
and it probably would have to be at the level at which
the agencies are operating and with the restrictions that
we have.
H.M.JR: All right. I don't want to be bothered
with it. I am willing, when Mr. Roosevelt is re-elected--
after his re-election, if he wants me to stay--he has
indicated to me that he does twice now-I want to stay
on the basis that I can spend my time on fiscal matters
and I can do a job, and I know that I cannot do this job
for Mr. Roosevelt and my country, unless I have far more
control of the fiscal end of the Government than I have
now. I have to have it. And I cannot raise sixty billion
dollars for twelve months after V-E day, unless I have
far greater control. This isn't a grab of power, but I
have to raise sixty billion dollars twelve months after
V-E day. That is five billion dollars a month that I have
to borrow. In other words, to do that, I have got to be
able to control this situation, which I am not able to
do now, and whoever is here has to be able to control it.
And I have to do it openly. I can't constantly be in
fights with all the other departments who have to do with
lending the money. My God, they make a commitment to lend
two billion dollars for reconstruction in France. Mr.
Hull signs it; Mr. Crowley signs it; and Mr. Harry Hopkins
signs it. The President sends it over to me, and I say,
"Hold it up." He holds it. Supposing he didn't. There
are two billion dollars. Everybody is sore. They feed
the press. They undermine me publicly. But I am doing
what my boss wants, and I will continue to do it as long
as I am here. But I can't do it indefinitely because
they undermine me, or try to. They haven't yet.
Now, if I am going to hold up a two billion dollar
appropriation, I want to say so publicly. I am not going
to do it on this informal basis, and I am trying to drive
it home to you fellows. It is a damn sight more important
than this thing. This is important to him (Olrich), but
it is not important to me.
Regraded Unclassified
210
- 19 -
But what I am talking about is you people here with
me; we can't sweat and fight all the time behind the
scenes. And to do this borrowing program for the eighteen
months--twenty-four months--of the Japanese war is going
to take--the man who sits in this chair has o have complete
financial control of this Government. And I cannot do the
job unless I have it.
And I am telling you fellows for God's sake, get to
work and give me a program that I can lay on Mr. President's
desk and say, "On the basis of this, the Secretary of the
Treasury has to borrow 80 much money." That is the opening
sentence. "And in order to do that and face the public as
your representative, he hast 0 have this authority." Don't
let's kid ourselves. You can't do it. And nobody has
the time and the energy to always do this fighting benind
the scenes. And believe me, if I couldn't tell it to him--
any professor at a university, or a student of finance
knows it. I have kept my mouth shut. Now, 1 want to put
it down. I don't need B. Ruml to tell me what to do, or
somebody else in the National City Bank. I know what I
want. You fellows know what I want. Now, give it to me.
This is just a symptom of the disease (refers to Olrich).
I know I am repeating myself.
Whoever is Secretary of the Treasury for Mr. Roosevelt
and has to face this borrowing and this period of the next
four years will have to have certain definite clean-cut
financial controls in order to do the job. Now, I want
you to put it down on the basis of the borrowing program.
You (Mr. D. W. Bell) and you (Mr. C. S. Bell) and everybody
get in on this thing.
(The Secretary holds a telephone conversation with
Secretary Stimson, as follows:)
Regraded Unclassified
211
October 17, 1944
11:15 a.m.
HMJr:
Hello.
Henry L.
Stimson:
Hello.
HMJr:
Henry talking.
S:
Yes.
HMJr:
How are you?
S:
How are you? I'm -- I'm
....
HMJr:
I'm fine.
S:
I'm very well. I -- I am a member of an
organization which I was put in by the
President ....
HMJr:
Yes.
S:
handling a very secret matter and I have
$12 Million in checks that I, for security,
would like to put in the Federal Reserve Bank
in New York.
HMJr:
Yes.
S:
That can't be done without your consent and
your authorization.
HMJr:
Yes.
S:
Are you willing 'to' give them to me without
asking questions? (Laughs)
HMJr:
Well, now, let me just think a minute. We've
had other things similar to this. Hello?
S:
Yes.
HMJr:
And they've always -- your Department has
always told Mr. Bell and me what it 1s.
S:
Well, this is one that is 80 much more secret
than anything else that I've ever had that I
don't feel able to do that.
Regraded Unclassified
212
- 2 -
HMJr:
Uh huh.
S:
I -- I've had to take the same attitude towards
the head of both Houses of Congress. They've
taken it -- taken my word that it was that.
HMJr:
Well, can I -- it's such an unusual request --
could I turn it over in my mind?
S:
Yes.
HMJr:
I don't understand the process anyway.
S:
No, it's
....
HMJr:
I mean, won't the Federal Reserve know what it
1s?
S:
No.
HMJr:
What?
S:
They'll know the name of the depositor that's
all.
HMJr:
But I mean they won't know where the money goes?
S:
No.
HMJr:
Well, after all, I'm just thinking out loud --
uh -- I won't -- I mean, if the Secretary of the
Treasury can't be trusted, he oughtn't to be
Secretary of the Treasury.
S:
Well, I don't -- uh -- Henry ....
HMJr:
I don't care how secret it 1s.
S:
Well -- well, then I won't do it that way. I
can't do it then.
HMJr:
What?
S:
I'm obliged to follow a rather narrow path.
HMJr:
Well, it -- if it's -- I don't care how secret
it 1s, if the Secretary of the Treasury can't
be told, then he'd better get another Secretary
of the Treasury.
Regraded Unclassified
213
- 3 -
S:
Well, Henry
....
HMJr:
What?
S:
Suppose the Speaker had said that to me.
HMJr:
Yeah, but he
....
S:
Suppose that several other ....
HMJr:
Yeah, but I'm the chief ....
S:
.... high official members ....
HMJr:
Yeah, but I'm the chief fiscal officer of the
Government.
S:
Well, this is -- this 1s not Treasury money.
HMJr:
But you need my permission ....
S:
Under the rules for that particular process
only to put it in a certain bank over there.
HMJr:
Yeah.
S:
I may have to put it in some other depository
if you won't consent to that. I'd prefer to do
it with the Federal Trust.
HMJr:
Well -- but that -- I -- I mean you've put up
something ....
S:
I'm awfully sorry to shock you but it's
....
HMJr:
I mean, he -- that's the way I feel, Harry.
S:
Yes.
HMJr:
And as I say, I don't care -- I'm perfectly
willing -- you could tell it just that way to
the President.
S:
I won't go to him. I won't bother him.
HMJr:
Yeah. I mean, I don't care how secret it is
if I can't be trusted then he ought to get a
new Secretary of the Treasury.
Regraded Unclassified
214
- 4 -
S:
I -- my answer to that is I don't think you
ought to feel that you ought -- that you
ought not to be trusted in a matter like
this.
HMJr:
I don't think you know how much your own
people tell us.
S:
Yes, I do. Oh, well.
HMJr:
Yes.
S:
I can't do it.
HMJr:
Well ....
S:
I -- I ....
HMJr:
Hello. Well, I'll give you an example.
S:
Yes.
HMJr:
When Mark Clark went down in the submarine
there to get the gold
....
S:
Oh, yes, I know.
HMJr:
.... and ....
S:
That was nothing to this.
HMJr:
All right. Well, anyway, you've asked me
a question ....
S:
All right.
HMJr:
....
and I've given you my answer.
S:
All right. Good bye.
HMJr:
Bye.
Regraded Unclassified
215
- 20 -
H.M.JR: It is 80 secret he can't tell me what it is.
MR. D. W. BELL: Well, they don't tell us, of course,
the final details, but they tell us what they want with
this money, whether it should be foreign coins or U.S.
coins or British coins, and what kind of money they want,
and we get it for them. We deliver it to wherever they
want it. We do it every day.
MRS. KLOTZ: But your case is right. If the Secretary
of the Treasury can't be trusted, they should get another
Secretary of the Treasury.
H.M.JR: Somebody wants a deposit in the Federal
Reserve Bank. He says he will do it some other way.
MR. D. W. BELL: The Federal Reserve Bank, I hope,
won't take a deposit without the approval of the Secretary
of the Treasury.
H.M.JR: No, he says he has to get my approval, 80
he says he will do it through a private bank.
MRS. KLOTZ: But it still needs your approval.
H.M.JR: No, he says he doesn't. He said, "Supposing
the Speaker of the House took that attitude?"
I said, "Well, the Speaker of the House isn't a fiscal
agent of the Government."
MR. D. W. BELL: He can't even deposit the money in
the bank without the approval of the Secretary of the
Treasury.
H.M.JR: Henry Stimson! And he won't trust me. To
hell with him. I am sick and tired of it, anyway.
MRS. KLOTZ: Supposing it was the other way around.
H.M.JR: It is in regard to some military thing.
MRS. KLOTZ: Would you get approval?
Regraded Unclassified
216
- 21 -
H.M.JR: Well, he has the answer. I will make you a
bet now we find out what it is.
MR. D. W. BELL: We will know before it is over.
MRS. KLOTZ: You have got to know. I don't understand
how he can work if you don't.
MR. D. W. BELL: We have had dozens of them in the
last two weeks.
Let me say that I agree in general with what you
say about what we should do, and certainly we ought to
get rid of Procurement eventually, but I doubt if we are
doing the President a real service in just saying to him,
"We don't want this."
Now, I think we ought to get together with the other
departments and show the President wherein the bill is
unworkable, and he is going to get into his point for
accepting this bill, so an attempt ought to be made
immediately to amend it 80 it is workable. Then I think
that Olrich's crew that has come in would probably stay
for a year or two even though we had to administer it under
the new Bill. We could get along, and under the new program
you have, you could transfer the whole thing to whatever
the President wants.
MR. O'CONNELL: Even under a better bill a good argu-
ment could be made at some time for having surplus property
disposal all handled by one agency.
MR. D. W. BELL: I am talking about both disposition
and acquisition.
MR. O'CONNELL: I think you have to cut them in two.
The argument for having surplus property disposal in one
agency stems from the legislation. You could do that
without necessarily transferring your procurement function.
You can do the one by merely having the Board decide what
agency will dispose of surplus property.
Regraded Unclassified
217
- 22 -
The other one, the Procurement Division--getting rid
of this stockpiling function requires a different technique.
In the first place, it would require action by the President
in the War Powers Act, which can't be definitive except as
approved by legislation. Thw two things can be kept
separate.
H.M.JR: I am fully in accord with Dan, but that
doesn't say yet that these three procurement agencies
shouldn't be in one place.
MR. D. W. BELL: No, I am saying just write a letter
to the President and say that we don't want it. That is
one thing. But we ought to be helpful.
H.M.JR: You could write him a letter right now,
showing him how the thing could be amended.
MR. D. W. BELL: But I think this meeting ought to
take place right soon. Out of that meeting should come
a joint recommendation.
H.M.JR: Are you in on this?
MR. D. W. BELL: No, but I brought this up with Biddle
and Forrestal, I think it was.
H.M.JR: How are you going to get a meeting?
MR. D. W. BELL: I think Byrnes ought to call it.
H.M.JR: How are you going to do it?
MR. O'CONNELL: We will be ready in a day or two.
MR. D. W. BELL: Biddle wants to get together with the
other departments and see what can be done.
H.M.JR: I don't want to get the President on a hot
spot, but I showed him how I felt when we sent him the veto.
MR. D. W. BELL: But, apparently, he was under pressure.
Regraded Unclassified
218
- 23 -
H.M.JR: He never saw it.
MR. LYNCH: Oh, yes, he did. Ac ouple of phrases
were taken from it in the statement. That is the one
consolation we had, Mr. Secretary.
H.M.JR: All right.
Regraded Unclassified
219
October 17, 1944
11:30 a.m.
Operator:
Go ahead.
HMJr:
Hello. Yes.
Lord
Halifax:
Hello.
HMJr:
Morgenthau.
H:
Good morning. Halifax here.
HMJr:
How are you?
H:
How are you?
HMJr:
Fine.
H:
And all your family, are you all right?
HMJr:
I'm quite all right.
H:
Good. Have a good time?
HMJr:
No, but
....
H:
Useful.
HMJr:
.... useful.
H:
Good. Well done. Look here, I called you
up first of all, I'm awfully pleased and I
hope you are that our two friends are coming
to see you and
HMJr:
Right.
H:
....
that's much better, isn't it?
HMJr:
I think so for the first time.
H:
I think SO. I have been advising them to do
that and I'm very glad they've decided 80.
HMJr:
Yes.
H:
And you've decided 80.
Regraded Unclassified
220
- 2 -
HMJr:
I'll have nobody here but Harry White.
H:
Good. Now, the other thing I wanted to ask
you was: I thought that I would like, if it
was all right by you
....
HMJr:
Yes.
H:
to try and get a few of the people on
all sides who are mixed up with this to come
and just dine quietly one night.- - I might
split them up into two parties possibly --
in a week or ten days' time. And I was
planning a little dinner on the 26th of
October
J
HMJr:
Yes.
H:
....
which is -- which is Thursday.
HMJr:
Yes.
H:
And I wonder whether you could come to that.
HMJr:
Yes, I'd be very glad to.
H:
And I thought I'd have a rather -- a mixed
group. It will be rather -- might be a
lavish party but people go away when they
like.
HMJr:
Yes.
H:
I thought I'd get -- try and get some of
your people and some of ours and mix them
in a bit together.
HMJr:
That would be very nice I think.
H:
It wouldn't do any harm would it?
HMJr:
Oh, I think it would be helpful.
H:
Good. Well, then if you are free, will you
note that?
HMJr:
I -- I have.
Inclassifier
221
- 3 -
H:
I'll send you a formal thing to confirm it.
HMJr:
It's not necessary.
H:
The 26th of October.
HMJr:
Just if you'd give me the time.
H:
Eight.
HMJr:
Eight.
H:
And dress or not, as you like.
HMJr:
What will the others do?
H:
Well, I think some will dress and -- but I
shall tell them all to -- to do as they like.
HMJr:
Right.
H:
Whichever you like. I
....
HMJr:
Well ....
H:
If I've had a beastly day, I sometimes like
having a bath.
HMJr:
I sometimes take two baths a day.
H:
Well ....
HMJr:
I'm very extravagant.
H:
You please yourself about that.
HMJr:
Right.
H:
And anyhow, I'll look forward to seeing you.
HMJr:
Thank you.
H:
Only men.
HMJr:
Right. Now, may I ask you, this Mr. Sinclair
who was here, is he the Mr. Sinclair who is in
charge of production?
H:
Yes. He -- he is Sir Robert.
Regraded Unclassified
222
- 4 -
HMJr:
Sir Robert.
H:
Sir Robert Sinclair.
HMJr:
Yes. But they're not bringing him this
afternoon?
H:
He was here. He won't be with you this
afternoon.
HMJr:
He will be?
H:
He will not.
HMJr:
He will not be?
H:
No. You're only having Keynes and Cherwell.
HMJr:
I see.
H:
Sinclair was over here for sometime doing the
job that Henry Self is doing now.
HMJr:
Yes.
H:
And he, now, has gone back -- Sinclair has --
and is number two to Oliver Littleton.
HMJr:
Oh, he's number two to Oliver Littleton.
H:
He. is the head of his office.
HMJr:
Right.
H:
And when he's not doing that, in peacetime he
manages Willsey's Tobacco -- cigarette making
at Bristol.
HMJr:
I see.
H:
He's a very nice fellow.
HMJr:
Now, you have another Sinclair. Now, he is what?
H:
We had another General Sinclair.
HMJr:
But isn't there a Sinclair in aircraft?
H:
What?
Regraded Unclassified
223
- 5 -
HMJr:
Isn't there another Sinclair that has a very
high position in your Government?
H:
Archie Sinclair.
HMJr:
Yes, well, that's ....
H:
Sir Archibald.
HMJr:
That's -- that's what I thought.
H:
He's M.P., Secretary of State for Air.
HMJr:
That's right.
H:
Leader of the Liberal Party.
HMJr:
I know.
H:
And owns most of Caithness in Scotland.
HMJr:
Well, these are two quite different people.
H:
Yes, quite different -- quite different.
HMJr:
Right.
H:
Yes, you must never mix them up or you won't
please either.
HMJr:
Well, I know Sir Archie but I didn't -- I haven't
met this other gentleman.
H:
But you've met -- you've met Robert Sinclair.
HMJr:
Have I?
H:
Oh, you must have met him when he was here
before. You won't have met him this -- he
came to see Harry White.
HMJr:
I see.
H:
Keynes brought him to see Harry White while you
were away.
HMJr:
Right.
H:
But I think you will have met him. Anyhow, you
won't be meeting him this afternoon.
Regraded Unclassified
224
- 6 -
HMJr:
Right.
H:
But no doubt you will be meeting him and I
would very much like you to have a talk with
him sometime if you could make it.
HMJr:
I can.
H:
Right.
HMJr:
Thank you 80 much.
H:
Well, good bye then. We shall -- I'll mark
you down for the 26th.
HMJr:
If you please.
H:
Good. Good bye.
Regraded Unclassified
225
October 17, 1944
11:57 a.m.
HMJr:
Hello.
General
Watson:
Hello there.
HMJr:
How are you?
W:
Fine.
HMJr:
Well, while you try to take care of me on my
trip out there, you evidently don't have very
much influence over at the War Department.
W:
Why?
HMJr:
Well, I talked to this General or Colonel or
whatever his name is after you did and he said
that he could get me reservations the following
morning out of Dallas. You see?
W:
Yes.
HMJr:
And he put it on such a basis that it made me
feel as though I was asking for something that
I shouldn't so -- and he also told me he'd have
an officer meet me at Dallas. Well, nobody met
me at Dallas. When I saw that he didn't show
very much interest, I just made my own arrange-
ments and went through that night, changing to
three different lines. I went from Eastern to
Braniff to American Air Lines.
W:
Well, didn't he have -- didn't he have the
reservation for you?
HMJr:
oh, he had the reservations the next morning.
W:
Yes.
HMJr:
But I didn't use them. I got my own and went
through the same night. Then I asked him
about how could I get back and could he get
me back and he said he'd have an officer meet
me in Los Angeles. Well, nobody ever met me
in Los Angeles and I made my own arrangements
about getting back. And
Regraded Unclassified
226
- 2 -
W:
Well, I'll tell you the whole trouble was, I
guess, that they didn't ....
HMJr:
Yes.
W:
We didn't just order it out. That's what I did
and then you let them soft-talk you.
HMJr:
That's right.
W:
That's what the whole thing was.
HMJr:
Well, I should have -- yeah, but
....
W:
Well, I'll call them up now and give them hell
about it.
HMJr:
Well, it was -- I mean it -- I -- you put it
right -- I let them soft-talk me.
W:
Yeah.
HMJr:
Because when people tell me -- you know -- and
all this -- they never send a plane out of
Washington and describe how difficult it is
....
W:
Yeah.
HMJr:
Well, that's that, but -- but at least he could
have had an officer show -- make a call in Los
Angeles, which he never did. My God, they've got
plenty of them around there.
W:
Certainly. Well, I'll dig that up. I'm glad you
told me.
HMJr:
Because I only asked, I think, what I -- well, it
was a reasonable request and certainly you were
very kind.
W:
Certainly, you're entitled to it.
HMJr:
And -- that's what you said -- but
....
W:
You are.
HMJr:
But you didn't get an execution from the War
Department.
227
- 3 -
W:
Well, the point 1s I would have if I'd have stuck
to my order.
HMJr:
That's right.
W:
But they -- they kind of soft-talk -- soft-soaped
you there.
HMJr:
Well, no, they ....
W:
I'll jump on them for that.
HMJr:
You might be interested in -- I went out there on
War Bonds
....
W:
Yeah.
HMJr:
....
and this insurance man -- what's his name --
used to be Commissioner here
....
W:
Yeah.
HMJr:
The fellow that bets all the time, you know.
W:
Uh -- uh
....
HMJr:
A great betting fellow.
W:
You mean Allen?
HMJr:
Allen.
W:
George Allen.
HMJr:
Well, he heard my talk and came to my Press
Conference in Los Angeles. Hello? Allen.
W:
Yeah.
HMJr:
And he said that he thought that my talk and my
press was the best he'd heard for Roosevelt since
the election started.
W:
Good.
HMJr:
I thought you might like to know that.
W:
Yes, I am.
Regraded Unclassified
- 4 -
228
HMJr:
And it ....
W:
How did you find everything?
HMJr:
Very good.
W:
Yeah? You don't feel discouraged at all, do you?
HMJr:
Not at. all. The President has the whole West
Coast in his pocket.
W:
Good. That's fine.
HMJr:
And these fellows know and you know Allen's
pretty shrewd.
W:
Yes, he is.
HMJr:
And he's very confident.
W:
Yeah. All right, sir.
HMJr:
But I did want to -- because I -- -- this was official.
It wasn't anything else and
....
W:
Yes.
HMJr:
you described it. He just talked me out
of it.
W:
I know, I'll -- I'll give them hell.
HMJr:
But I wanted you to know what happened.
W:
Well, I'm glad you did. I'll -- I'll take care
of that.
HMJr:
Thank you.
W:
I'm sorry it went that way too.
HMJr:
Well, it worked out -- it so happened that they
did fix the plane -- hello?
W:
Yeah.
HMJr:
And they flew it out that night and it got there
and they were able to bring me back.
Regraded Unclassified
229
- 5 -
W:
Yes.
HMJr:
So it worked out all right.
W:
All right.
HMJr:
The Coast Guard came through.
W:
Yeah.
HMJr:
God bless Coast Guard.
W:
Yeah.
HMJr:
But if I'd have been up against it, I'd still
be in Los Angeles
....
W:
I see.
HMJr:
....
as far as the Army was concerned.
W:
I see. Well, I'm sorry but I -- I'll try to
do what I can.
HMJr:
Well, this -- whoever this fellow is, he's no
Colonel McCarthy, he's no Colonel or Major
Bedell Smith either.
W:
I know. Well, you can't find those fellows
I
often.
HMJr:
Yes.
W:
But I'll -- I'll take care of that.
HMJr:
Okay.
W:
All right.
HMJr:
Thank you.
Regraded Unclassified
230
October 17, 1944
12:52 p.m.
Operator:
Go ahead.
HMJr:
Hello.
James
Barnes:
Mr. Secretary.
HMJr:
Speaking.
B:
Jim Barnes.
HMJr:
Go ahead, please.
B:
What I called you about is the -- the Business
and Professional Club for Mr. Roosevelt is --
the President -- is giving -- sponsoring that
broadcast on the 27th in Philadelphia...
HMJr:
Yes.
B:
.... where he is going to speak.
HMJr:
I don't hear you terribly well.
B:
He's going to speak, as you know, in Philadelphia
on the 27th.
HMJr:
Yes.
B:
Now, in addition to that they're going to have
a lot of dinnersin various spots over the
country and they're either going to precede the
President or follow the President with a state-
wide hook-up....
HMJr:
Yes.
B:
....
of various individuals.
HMJr:
Yeah.
B:
Now, the Committee would like very much to have
you, if you would, speak in New York or Brooklyn,
one or the other of those spots, on the night
of the 27th.
HMJr:
I see.
Regraded Unclassified
231
- 2 -
B:
Now, they don't know yet -- the plans are not
definite enough yet whether you'll speak before
the President or after the President.
HMJr:
Yes.
B:
The chances are it will be before the President.
That will be on a New York hook-up.
HMJr:
Yeah.
B:
The President will be on Nationwide and they're
trying to get -- like some are going to speak
in New Jersey and some in Ohio and some in
Illinois and various other spots at these State
dinners.
HMJr:
Yes.
B:
The various ones speaking that night in addition
to the President.
HMJr:
And what do you -- is it -- do I have my choice
as between New York or Brooklyn?
B:
Well, no, it hasn't been definitely decided.
They're going to have two dinners in New York,
one in New York and one in Brooklyn. In which
would you rather speak?
HMJr:
I see.
B:
I mean they're going to have two dinners up there.
HMJr:
They're going to have two?
B:
Yes, sir.
HMJr:
Well, if I do it, I'd like to do it where I
would do the most good.
B:
Well, I think that would be true, sir. Where do
you think you'd do the most good?
HMJr:
Well, I'll tell you, I'd like to talk it over with --
well, people like the Commissioner of Internal
Revenue ....
B:
Yeah.
Regraded Unclassified
232
- 3 -
HMJr:
Who comes from Brooklyn.
B:
Well, those boys up in New York, at the National
Committee -- they're all working together -- are
working that out. The only thing they asked me
to do this morning was to see if you could be
free that day and could hold yourself open for
that.
HMJr:
Yes, I'll be glad to do it. I'll tell you now
I'll do it.
B:
Fine. I think that's grand.
HMJr:
I ....
B:
I think you'll do a lot of good.
HMJr:
I'll be glad to do it and I -- I don't know --
I'd like to talk to Nunan about it.
B:
All right. You do that, sir.
HMJr:
I'll talk to Nunan and ask him which he thinks.
B:
Fine. And I'll tell New York about it, sir.
HMJr:
Right.
B:
Thank you very much.
HMJr:
Thank you.
B:
Bye.
Regraded Unclassified
233
October 17, 1944
Dear Mr. Ramspeck:
I have received your telegram of Octo-
ber 16th.
You will realize that I cannot give you a
blank check on my time because I do not know
from one day to the next what calls will be
made on me here in Washington. Mr. James
Barnes has just asked me whether I would be
willing to speak on the 27th, and I have
cheerfully given my consent. If, after the
27th, there is some place you would like me
to speak, I should be glad to hear from you,
and we can settle the question at that time.
Sincerely yours,
(Wigned) III. Mergenthat. A
Henry Morgenthau, Jr.
Mr. Robert Ramspeck,
Chairman, Speakers Bureau,
Democratic National Committee,
Hotel Biltmore,
New York, New York.
Regraded Unclassified
234 1298
CLASS OF SERVICE
WESTERN
SYMBOLS
This is a full-rate
DL=Day Letter
Telegram or Cable-
NL-Night Letter
gram unless its de-
red character is In-
UNION
LC=Deferred Cable
Lated by a suitable
symbol above or pre-
NLT=Cable Night Letter
coding the address.
A. N. WILLIAMS
Ship Radiogram
PRESIDENT
The filing time shown in the date line on telegrams and day letters is STANDARD TIME at point of origin, Time of receipt is STANDARD TIME at polat of destination
LDRR108 AK DL PD
WUX NEWYORK NY OCT 16 1944 437P
5326
HON HENRY MORGANTHAU JR
SECY OF TREASURY WASHDC
THE VITAL PART OF THIS CAMPAIGN WILL BEGIN OCTOBER TWENTY THIRD AND
CONTINUE THROUGH NOVEMBER SIXTH. OUR DEMAND FOR SPEAKERS WILL BE
HEAVY. PLEASE WIRE ME STATING WHETHER OR NOT YOU WILL HOLD YOURSELF
READY TO ACCEPT ASSIGNMENTS DURING THAT PERIOD IF WE CALL ON YOU.
YOUR COOPERATION WILL BE APPRECIATED.
ROBERT RAMSPECK, CHAIRMAN SPEAKERS BUREAU
DEMOCRATIC NATL COMM.
THE COMPANY WILL APPRECIATE SUGGESTIONS FROM ITS PATRONS CONCERNING ITS SERVICE
235
October 17, 1944
3:08 p.m.
HMJrt
.... British requirements for the first year of Stage Two.
Robert P.
Patterson:
Yes.
HMJr:
I'll have that over to you within the hour.
P:
Fine.
HMJr:
It's three volumes.
P:
Oh : All right.
HMJr:
And -- ah -- would Thursday morning be rushing you too much
to have the first meeting?
P:
Thursday?
HMJr:
Yes.
P:
Meeting with whom, Henry?
HMJr:
Well, with -- with the English, on this.
P:
Ah -- meeting with your group?
HMJr:
Of the committee. Yes, you see this is the committee which
the President set up, you see?
P:
And you're meeting with the British?
HMJr:
Yes.
P:
And you mean for us to get our comments in by Thursday?
HMJr:
Yes. Well, no, for you to be here, yourself, and be prepared
to discuss it.
Pt
Yes. I think we could.
HMJr:
You think you could.
P:
Does this cover the air as well as the ....
HMJr:
It covers everything as far as I know.
P:
Yep. Yep. Does it cover food and all?
HMJr:
Everything.
Regraded Unclassified
236
- 2 -
P:
Okay.
HMJr:
I'll have -- I'll have a ....
P:
Let me take a look at it and I'll call you back.
HMJr:
I'll send you over, because you'll most likely need -- what
two or three sets?
P:
Two sets will do.
HMJr:
Two sets?
P:
Yep.
HMJr:
Now, I'm counting on you to represent the Army.
P:
All right. I'll do it.
HMJr:
I take it that you'll straighten that out with Stimson
and McCloy.
P:
Yes, sir, that's right.
HMJr:
And put it on your calendar tentatively for nine-fifteen,
Thursday.
P:
Yes, sir, I will, Henry.
HMJr:
And, then if -- after this gets over there, you might give
me a ring.
P:
Yes, sir.
HMJr:
I thank you.
P:
Thank you, Henry.
HMJr:
Good-bye.
P:
Bye.
Regraded Unclassified
237
October 17, 1944
SECRET
Dear Bob:
I am enclosing herewith two copies of
the British requirements for the first year
of Stage II. Please consider this of utmost
secrecy.
Sincerely yours,
(Signed) Henry
The Honorable Robert P. Patterson,
Under Secretary of War,
War Department,
Washington, D.C.
Regraded Unclassified
235
October 17, 1944
3:11 p.m.
HMJr:
How are you?
Edward R.
Stettinius:
Did you have a nice trip?
HMJr:
A very interesting trip.
S:
Well, I - - I -- it must have a thrilling trip, from what the
boys told me.
HMJr:
Well, I don't know whether we're talking about the same
trip.
S:
Well ....
HMJr:
You mean the one to Los Angeles?
S:
Yeah.
HMJr:
What was thrilling about that?
S:
Well, Danny Bell told me the other day everything you were
doing out there.
HMJr:
Oh ! Oh, I just call these trips out -- off the Continent
thrilling.
S:
Oh, yeah. Yeah.
HMJr:
Well, anyway, our British friends have given me now a very
complete volume of their requirements for the first year of
Stage Two.
S:
Right.
HMJr:
I will have over to you within the hour two sets, if you
would like them
....
S:
Fine.
HMJr:
.... and if I'm -- I would like to have a meeting in my
office at nine-fifteen, Thursday morning. I know that rushes
a little bit
....
S:
That's all right.
HMJr:
....
but if -- if you could do that
.....
Regraded Unclassified
239
- 2 -
S:
Nine-fifteen, Thursday, is fine, Henry.
HMJr:
Fine. And would two sets be enough?
S:
Sure. That will be perfect.
HMJr:
Well, if it isn't, I can get you more.
S:
No - no. That'll be enough.
HMJr:
I'll -- I'll get you more.
S:
Good.
HMJr:
And, so far, I have not read in Drew Pearson's column what's
happened and I -- let's hope that we won't. (Laughs)
S:
Well, you won't -- you won't get that leak from here, Henry.
I can promise that.
HMJr:
Right. But, this -- I'm -- the reason I'm -- well, you've
seen the stuff in the papers recently. Hello?
S:
Yeah.
HMJr:
Well, anyway, there will be, within the hour, two sets
coming over, and the English tell me if I want more, I can
get more.
S:
Good.
HMJr:
And I'll look forward to seeing you
....
S:
Now, are you having -- you'll have the British there on ....
HMJr:
The British will be here.
S:
Yes.
HMJr:
Plus Bob Patterson
....
S:
Yes.
HMJr:
....
and plus Crowley.
S:
Right.
HMJr:
I think that's the complete picture.
S:
Now, may I bring Dean with me?
Regraded Unclassified
240
- 3 -
HMJr:
Oh, that would be fine.
S:
I think that would be helpful.
HMJr:
That would be very helpful.
S:
All right, Henry, I'll be there, and Dean and I-- Dean and
I will have the -- will each study the papers before we come.
HMJr:
And if you need more than two sets, you let me know.
S:
All right, old boy. Thank you.
Regraded Unclassified
241
ST CRET
October 17, 1944
Dear Ed:
I am enclosing herewith two copies of the
British requirements for the first year of
Stage II. Please consider this of utmost
secrecy.
Sincerely yours,
(Signed) Henry
The Honorable Edward R. Stettinius,
Under Secretary of State,
State Department,
Washington, D.C.
Regraded Unclassified
242
October 17, 1944
3:14 p.m.
HMJr:
Leo.
Leo T.
Crowley:
Yes.
HMJr:
Good afternoon.
C:
How are you?
HMJr:
Fine. I now have in my hand the British requirements for
the first year of Stage Two.
C:
Yeah.
HMJr:
I will send you over two copies within the hour.
C:
Fine.
HMJr:
Would it be rushing you too much if we would meet Thursday
morning with the British at nine-fifteen and have our first
discussion?
C:
I don't think SO. I think that's all right. That will give
our fellows all this afternoon and tomorrow on it.
HMJr:
Fine. If you want additional copies, I can -- I think I can
get more if you want more than two.
C:
Fine. I think that's enough to have around right now, anyhow.
HMJr:
You think that's enough?
C:
If we need any more, I'll call you.
HMJr:
Will you do that?
C:
You bet.
HMJr:
Now, look
C:
Nine-fifteen, Thursday morning?
HMJr:
Nine-fifteen, Thursday morning.
C:
Fine, Henry.
HMJr:
Thank you 80 much.
243
October 17, 1944
SECRET
Dear Leo:
I am enclosing herewith a copy of the
British requirements for the first year
of Stage II. Please consider this of utmost
secrecy.
Sincerely yours,
(Signed) Henry
The Honorable Leo Crowley,
Administrator,
Foreign Economic Administration,
Washington, D.C.
Regraded Unclassified
244 L
OCT 17 1944
Dear Mr. Crowleys
(Book 779, p.315) P. 315)
I an enclosing herewith for your information &
copy of a letter dated October 5, 1944 which I have
received from the Under Secretary of War. It seems
to me that this letter eliminates any misunderstanding
that may have arisen as to the role of the War Depart-
ment in connection with the work of the Lend-Lease
Committee established at Quebec. Naturally the
Committee will wish to maintain a close and continuous
relationship with the military and naval authorities
in carrying out the task assigned to it.
Very truly yours,
(Signed) H. Mergenthau, Jr.
Secretary of the Treasury.
Mr. Leo T. Crowley, Administrator,
Foreign Economic Administration,
National Press Building,
Room 414,
14th & F Streets, N.W.,
Washington, D.C.
Enclosure
HDW
WE
FILE
COPY
Regraded Unclassified
245
Regraded Unclassified
5 October 1944
Honorable Henry Morgenthau, Jr.,
Secretary of The Treasury,
Washington, D. C.
Dear Henry:
Following the receipt of your letter of October 3, enclosing a copy (Book-
of Cable No. 7899 dated September 22 from the American Embassy in London
p.121)
to the Secretary of State, in reference to a cable WARX 28496 from the
International Division to Army authorities in London, I have looked into
the matter.
The International Division cable was sent in the course of the busi-
ness of coordinated planning of U. S. Production with U. K. and other
British Empire production to meet the military requirements of the two
countries to best advantage following the defeat of Germany.
Supply plans have to be made well in advance of the time the supplies
will be needed, and the War Department would be dilatory if it failed to
anticipate and prepare for prospective developments before they occur. The
cable of the International Division is not & policy making document and of
course it does not, as apprehended by the Embassy in London, contemplate
that the British be urged to produce munitions which can be produced to
better advantage in the United States. It is desired to make sure that
U. 8. requirements which can best be met from British sources are not
neglected in the revision of British production schedules.
The cable was sent before the Committee, was set up at Quebec and be-
fore anything was known of it in the War Department, which had been discus~
sing informally with the British current and stage two requirements and
supply plans for several months.
I believe this clears up the matter of the cable.
I understand that the Committee will develop guiding policies in
respect to Lend-Lease and reciprocal Lend-Lease and will consider the
British requirements to be filled from U. 8, sources during the first year
of the war against Japan alone. Consideration will no doubt be given also
to the U. 8. requirements which should be met from British sources. In
both of these subjects the War Department will desire to be consulted in
respect to the supply of those munitions for which it has primary responsi-
bility for production or for supply. Any other assistance that we can give
to the Committee will also be rendered on call.
Sincerely yours,
(Bigned)
Robert P.
Under Secretary of War.
246
October 17, 1944
Memorandum
TO: Secretary Morgenthau
FROM: Mr. Gaston
Mr. Shaeffer's office has gone through the New
York Times index and has been unable to find any record
of an interview with Mr. Roosevelt on the subject of
his health during 1928 when he was a candidate for
Governor for the first time. They did find, however,
reference to two speeches and extracts from these two
speeches are attached. The first of the two was de-
livered before an audience estimated at "almost five
thousand" at Convention Hall in Rochester on October
22. The second was delivered at Phillipsburg Hall in
Yonkers on November 1 and you will note that the story
estimates the audience as two thousand.
Ernest Lindley told me that he had no recollection
of any interviews given by Mr. Roosevelt on this subject.
On October 2, on his way back from the Convention to
Albany, Governor Smith told reporters that except for
the full use of his legs Mr. Roosevelt was in first
class physical condition. In Ernest's personal file
there were also notes of an interview with F.D.R. on
October 5 in which he said that he was amazed at re-
ports that he was being "sacrificed" by being made a
candidate for Governor and said "I was not dragooned
into becoming a candidate." He did not make any direct
reference to his health, however. This seemed to be in
reply to an editorial in the Herald Tribune which said
it was unfair to Mr. Roosevelt and unfair to the people
of the State that in his physical condition he had been
forced into becoming a candidate for Governor. Governor
Smith in the interview referred to above characterized
as nonsense the story that Mr. Roosevelt was not actually
going to serve as Governor.
wr
Regraded Unclassified
247
New York Times, October 23, 1928.
At Convention Hall, Rochester, New York, October 22,
1928.
"I may be pardoned if I refer to my own intense interest
in the care of crippled children" he (Mr. Roosevelt) said.
"More than 100,000 adults and children in this State
are crippled from infantile paralysis and other diseases
most of them so seriously that they are unable to live normal
or useful lives. From a practical standpoint it is obvious
that if a large proportion of them can be restored to use-
fulness they will in time repay the State for its expenditure.
"Persons readily recognize that I myself furnish a
practically good example of what can be done by the right
kind of care.
"I dislike to use this personal example, but do so
because it fits. Seven years ago I was completely put out
of any sort of useful activity by an attack of infantile
paralysis.
"By personal good fortune I was able to obtain the
best medical care. Today I am on my feet and entirely capable,
at least from the physical point of view, of running any
business, private or that of the State of New York. 11
Regraded Unclassified
248
New York Times, November 2, 1928.
At Phillipsburg Hall, Yonkers, November 1, 1928.
Mr. Roosevelt took occasion to spike the rumor current
in some circles that he would resign on account of his
health if elected.
"As the campaign progresses," Mr. Roosevelt told his
2,000 hearers, "I am getting many letters from Westchester
and Long Island voters asking me seriously about my health,
and particularly asking me to confirm whether or not it is
expected that I would not live after January 1. If I could
keep on campaigning 12 months longer, I'd throw away my
canes. 11
Regraded Unclassifie
249
EXECUTIVE OFFICE OF THE PRESIDENT
WAR REFUGEE BOARD
INTER-OFFICE COMMUNICATION
DATE
October 17, 1944
TO
Secretary Morgenthau
FROM
J. W. Pehle
For your information:
You may not have noticed that Governor
Dewey, in his speech last night, included the "WRB"
in his listing of agencies of the Administration
"now operating wholly or partly all over the world. #
This afternoon Jonathan Daniels called me from the
White House and asked me how many representatives
we had abroad. The score is five professional
people and three secretaries.
Daniels told me that he was getting
material for a reply to Dewey, who had singled out
several agencies which had little or no personnel
abroad.
JMane
Regraded Unclassified
250
25
October 17, 1944.
Dear Mr. Thompson:
Mr. Robert Vanderpoel told me that you
were 80 good as to postpone your vacation two
separate times in order that Mr. Vanderpoel
could be free to help me.
I appreciated this very much and want to
thank you for "standing by" in this way. May
I also say that I hope you will eventually
get the vacation, and that it will be an
enjoyable one.
With thanks again for your courtesy,
Sincerely,
(Signed) M. Morgenthau. JR.
Mr. Hal Thompson,
Assistant Financial Editor,
The Chicago Herald-American,
326 West Madison Street,
Chicago, Illinois.
Regraded Unclassified
TO:
251
Mr. Paul Wooten called Mr. Shaeffer's
office back and said to tell you
that Mr. Fritchie is their
"hated competitor". His full name
is:
Clayton Fritchie
Executive Editor
The Item
New Orleans, Louisiana
(He was not listed in Who's Who)
FROM: MR. GASTON
252
October 17, 1944.
Dear Clayton:
I enjoyed greatly having the chance to see
you again during my visit to New Orleans last
week. I am sorry indeed that the uncertainty
about my means of transportation to Los Angeles
caused me to dash away so unceremoniously and to
miss seeing you again as I had expected.
With cordial regards,
Sincerely,
(Signed) Henry Morgenthau, Jr.
Secretary of the Treasury.
Mr. Clayton Fritchie
Executive Editor, The Item
New Orleans, Louisiana
HEG/mah
mrs
Regraded
253
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Oct. 17, 1944
TO
Secretary Morgenthau
FROM Harold Mager Hen-
You will find attached "Special Memorandum to State Chairmen"
dealing with the mailing of your speeches, and the quantities they
may expect; and "Special Memorandum to State and County War Finance
Chairmen" to be attached to each set of speeches.
To save paper, the speeches have been mimeographed by "backing".
Because the rollers had to be re-inked today, the samples attached
are not too good. I have Mr. Shaeffer's assurance, however, that
the 4,500 sets mailed to Chicago last night are a fine workmanlike
job.
Attachments
Regraded Unclassified
254
VICTORY
BUY
TREASURY DEPARTMENT
WASHINGTON
WAR FINANCE DIVISION
October 17, 1944
SPECIAL MEMORANDUM TO STATE CHAIRMEN:
Mimeographed copies of Secretary Morgenthau's addresses to the Regional
Conferences in Atlantic City, New Orleans and Los Angeles are being prepared
in sufficiont quantity for distribution to both State and County War
Finance Committoes.
A copy of each of these addresses, with covering note, will be mailed
to county chairmen in those statos for which we have authorized mailing lists
of county chairmen.
Bulk shipments of the addresses for remailing to local chairmen will be
sent to state headquarters, on the basis of one set per county, in those
states that have not furnished authorized lists of county chairmen.
We are ordering for shipment to your state within the next three or
four days:
copies of the addresses and covering memorandum to your
state office in bulk.
1 copy of each address, with covering momorandum, to each of the
names on county chairman mailing list #314.
The addresses and covering memorandum are also being mailed to the
addressograph lists (149-2 and 149-3) which usually receive Field Memoranda.
It is desired that these important addresses on War Financing be given
the widest possible distribution. State and local chairmen should bring
them to the attention of local financial editors.
Additional copies may be requisitioned from the Field Director's
office in the usual manner.
R. W. COYNE
Field Director
War Finance Division
Regraded Unclassified
255
BUY
TREASURY DEPARTMENT
WASHINGTON
WAR FINANCE DIVISION
October
1944
SPECIAL MEMORANDUM TO STATE AND COUNTY WAR FINANCE CHAIRMEN:
Attached are copies of three addresses recently delivered by
Secretary Morgenthau on the subject of War Finance. I think you
will find them helpful to your own work with the Treasury program.
The Atlantic City talk deals with the democratic manner in
which the financing of the war has been handled.
The New Orleans talk emphasizes the part which War Finance
has played in economic stabilization.
The Los Angeles talk examines the problem of interest rates
and the post war public debt.
The information contained in these talks is important, and
should be given the widest possible distribution. May I suggest
that you call the addresses to the attention of financial editors
in your locality.
Additional copies of the addresses may be secured from this
office if desired.
R. W. COYNE
Field Director
War Finance Division
Attachments (3)
Regraded Unclassified
256
TREASURY DEPARTMENT
Washington
FOR RELEASE AT 1:30 P.M., E.W.T.
Press Service
Saturday, October 7, 1944.
No. 43-64
(The following address by Secretary Morgenthau
at a War Bond Rally at the Hotel Claridge,
Atlantic City, is scheduled for delivery at
1:30 P.M., EWT, Saturday, October 7, 1944,
and is for release at that time.)
You may not be aware of it but this meeting today is
a kind of birthday celebration -- a very important birthday in
my calendar. Just about ten years ago the first United States
Savings Bonds -- they used to be called Baby Bonds in those
days -- were sold to the American public. And in just a few
months -- next March to be precise -- the oldest of these Bonds
will reach its maturity and be presented to the Treasury of
the United States for redemption.
A birthday is a family affair. And I am especially happy
to be able to celebrate this birthday with members of the
immediate family that made savings bonds the most popular and
most widely held form of investment ever conceived in the United
States. I think you can be very proud of your adopted child.
When the history of this war comes to be written I believe,
indeed, that the savings bond program will have a highly honored
place in it and that the job which you have done so generously
and so effectively will be recorded as one of the ma jor contri-
butions to our victory.
I should like to go back with you for a few minutes to
those early days, a decade ago, when War Bonds were Baby Bonds.
They were conceived then with a very definite purpose in view.
That purpose was, in a phrase, to democratize public finance
in the United States
We in the Treasury wanted to give every American a direct
personal stake in the maintenance of sound Federal finances.
Every man and woman who owned a Government Bond, we believed,
would serve as a bulwark against the constant threats to
Uncle Sam's pocketbook from pressure blocs and special interest
groups. In short, we wanted the ownership of America to be in
the hands of the American people.
Regraded Unclassified
- 2 -
We had made only a start in this direction, you will
remember, when war broke out in Europe and threatened the
security of the United States. But the foundation had been
laid for real popular participation in an American preparedness
program. Savings Bonds became known as Defense Bonds. And,
as you all know, they played an important part in making the
Nation ready for the great crisis which came upon us at the
end of 1941. They served not only as a vital factor in
financing the rearmament of our fighting forces but, what seems
to me even more important, they gave to the average citizen
a sense of the war's meaning and of the urgent nature of the
national danger.
When the enemy struck, the machinery was ready and in
operation for the people's financing of the war. Defense Bonds
became War Bonds and through your efforts they have been put
into the hands of 85,000,000 individual Americans. I congratulate
you on the accomplishment. Think of it! Out of every thirteen
men, women, children and babies in the United States, more than
eight have purchased Bonds of their Government. Today there
are approximately $23,000,000,000 of Series E:Bonds -- the
people's Bond -- outstanding all held by individual investors.
This Series E Bond was tailored specifically to meet the
need of the average American citizen able to set aside modest
savings for investment purposes. As all of you know, it is
nonnegotiable and through arrangements which have recently been
inaugurated, it is payable on demand 60 days after issue date,
at any bank. Its investment yield if held to maturity, 2.9%,
is the highest obtainable on any United States Government
security.
We designed this security in order to protect the small
investor against any possibility of loss as a result of
fluctuations in market value. Nonnegotiable securities with
guaranteed redemption values are not subject to panicky
liquidation which, experience shows, develops among small holders
of marketable securities in the event of decline in market value.
In short, they are more likely to be retained as investments.
It is worth-while to recall the experience following
World War I when Liberty Bonds plunged down into the eighties,
and frightened buyers, inexperienced as investors, unloaded.
They felt that their trust in their Government had been betrayed.
Later they awoke to find that their loss had been the gain of
the speculators and the wealthy who then owned their Bonds at
prices that brought them truly handsome yields on the safest
securities in the world.
Regraded Unclassified
257
- 3 -
The Series E War Bonds will have an immense value, I believe,
not only for the individual holders, but for the economy of the
country as a whole when the war is ended. They will constitute
an invaluable backlog of purchasing power in the post-war decade.
Only a part, and I believe the smaller part of this purchasing
power will come from cashing the Bonds themselves. The most
important part will come from the greater spending of current
incomes growing out of the sense of security afforded to
individuals by their War Bond holdings. They will provide,
therefore, a strong bulwark against the sort of deflation which
struck this nation so disastrously in 1920 and 1921.
There is one aspect of the War Bond Ir ogram in which I take
particular pride and upon which I want to offer my warm congratu-
letions to you. Throughout, the program has been conducted on
a genuinely voluntary, democratic basis, From the beginning,
we were resolved to avoid certain high-pressure sales tactics
which, unavoidably, attended the fund-raising of World War I.
It was determined that there should be no compulsion, no hysteria,
no slacker lists and no invidious' comparisons between those who
bought Bonds and those who did not. There was to be room in
this program for the individual with special burdens and responsi-
bilities who could contribute only in very small amounts -- and
even for the individual who could not share at all. It hink you
know, and the whole Nation knows; how scrupulously this policy
has been observed.
There was good reason for its In the early days of 1941,
when I first asked Congress for authorization to borrow from
the general public. through a Defense Savings Bond campaign, I
said this: "There exists in the country today an overwhelming
desire on the part of nearly every man, woman and child to make
some direct and tangible contribution to the national defense.
Ye ought to give them a sense of personal participation beyond
that which comes from doing their daily job faithfully and well.
Every day, letters come to me from people who ask, 'What can I
do to help?! Our plan to offer securities attractive to all
classes of investors is an attempt to answer this question.
I can think of no other single way in which so many people can
become partners of their Government in facing this emergency.
It is' the purpose of the Treasury to raise money for national
defense by methods which strengthen the national morale."
The desire of the people "to help," the sense of participation
in the national cause, could never have been realized except
through a voluntary program. You will recall, of course, the
clamor that arose for forced or compulsory savings. There were
Regraded Unclassified
- 4 -
many who declared that only in this way could the stupendous
sums needed for victory be raised. There were times, indeed,
when those of us who had faith in voluntary methods seemed
lonely voices crying in the wilderness. But there was one
voice that never failed to support us -- the voice of the
President of the United States. He believed always that the
people would respond to any call that was made upon them. He
knew that the enlistment of their support could be best attained
through a voluntary program adapted to the democratic pattern
of American life.
But a voluntary program could succeed, of course, only
through the efforts of volunteer workers. We in the Treasury
could fulfill only the functions of a general staff. The real
battle had to be fought and won in the field -- fought and
won by sustained, unstinting, tireless service. You have given
that service. You have given it with a resourcefulness and
enthusiasm and good cheer that have overridden every difficulty.
You have given it at real sacrifice of time and comfort and
self-interest. I think that the job that you have done is
beyond my praise. I know that the richest reward you can receive
for it is the knowledge that it has been done supremely well,
that it has played an indispensable part in our forward march
to victory. Still, I should like, on behalf of the Treasury
Department to say one simple word'to you -- Thanks. I shall
venture nothing more than this. But I know that this one word
is echoed, and will be reechoed, by every one of your fellow-
Americans.
When you enlisted in this program, you enlisted for the
duration. The term of your service has not yet reached its end.
The truth is that the toughest part of your job still lies ahead,
Let us look at the future realistically. The war news of
late has been extremely good. The enemy in Europe is on the
run. How soon he will collapse, none of us can tell. But even
when that great day comes, there will still be a hard and costly
victory to be won in Asia. Our military and naval authorities
made the grim assertion just recently that it will take us at
le ast a year and a half to defeat Japan after Germany is beaten.
And we shall be able to do it in that time only if we put every
bit of our strength into the effort. The enemy has short,
interior lines of communication, while we must move men and
materials across the vast distances of the Pacific before we
can bring our power to bear. The costs of this kind of warfare
will certainly be very high, higher even than they were in
Europe.
Regraded Unclassified
258
- 5 -
You cannot rest on your laurels, The Sixth War Loan
campaign lies immediately ahead. Its challenge must be confronted
just as resolutely as in the past. And I tell you frankly that
even on the most optimistic assumption there will have to be
a Seventh Loan. Your job is to make the people of America
understand that there can be no let-down on the Home Front now,
that the time has not yet come to relax or celebrate. I know
that America can count upon you to see your job through to
its end.
000
Regraded Unclassified
259
TREASURY DEPARTMENT
Washington
FOR RELEASE, AFTERNOON NEWSPAPERS,
Press Service
Thursday, October 12, 1944.
No. 43-65
(FOR RADIO RELEASE 1:45 P.M., CWT)
(The following address by Secretary Morgenthau
at a War Bond Rally at the Hotel Roosevelt,
New Orleans, is scheduled for delivery at
1:45 P.M., CWT, Thursday, October 12, 1944.)
Wars, now as always, are won on battlefields. .But in
modern war, which is total war, the Home Front is intimately
involved. Economic stability at home is one of the absolute
requisites to victory. For without economic stability it is
impossible to maintain the vast and complex flow of supplies
necessary for the men on the fighting lines.
It has been the task of the Treasury Department to finance
the costliest war in history. I should like this afternoon to
review with you in some detail the manner in which this task
has been executed. Our problem has been some thing much more
difficult than the mere raising of vast sums of money. The
nub of the problem has been to raise these sums in such a way
as to strengthen, rather than weaken, the national economy.
Half of the total resources of the United States are now
being devoted to waging war. Since Pearl Harbor, war expendi-
tures have amounted to about $208,000,000,000. During this
same period, non-war expenditures have been kept down to
$16,000,000,000, making a total government outlay for the
course of the war to date of $224,000,000,000.
Where has this tremendous sum come from? Well,
$87,000,000,000, or 39 percent of the total bill, has come
from revenue.
During the fiscal year just ended, expenditures were
slightly more than $95,000,000,000, and net receipts climbed to
a little over $44,000,000,000, or 46 percent. This means that
there has been an upward trend in our coverage of war costs
through taxation. It is a trend which may be surprising to
some and which certainly should be encouraging to all.
Regraded Unclassified
- 2 -
I want to put some emphasis on this trend since there have
been charges of late that the Treasury has confused the public
by persistent increases in the tax burden. In the year ended
June 30, 1940, the last fiscal year before the beginning of the
defense program, net Treasury receipts were slightly less than
$5,500,000,000. The $44,000,000,000 total which, as I have
just told you the Government took in during the past year, was
an eightfold increase -- a larger increase than has taken place
in the revenue collection of any other major belligerent of
this war. This is an important thing to remember in inter-
national comparisons because the burden of taxation must be
measured not only by its absolute magnitude but also by its rate
of increase.
Now, I do not think there has been anything confusing about
this. The American people, recognizing the need for greatly
increased Government revenues, have submitted to the highest
taxes in the nation's history with remarkably good grace and
good cheer. A sharp rise in taxes was absolutely necessary for
the maintenance of economic stability.
But even after these record collections there remained the
giant sum of $137,000,000,000, expended during the last three
years, that had to be raised through some other means than taxa-
tion.
This money had to be raised by borrowing. It would have
been relatively easy, of course, to raise it by borrowing from
the banks. But in order to avoid inflation, it was essential
that a major part of the increased debt be borrowed outside of
the banking system -- that is from the general public.
In selecting the Series E Bonds as our primary vehicle for
mass borrowing, we had in mind first of all the protection of
the interests of the small investor. The Treasury Department has
considered itself a trustee for the men and women who purchased
Government Securities primarily to help their country in time of
stress. Such investors place their faith in their Government.
We wanted, therefore, to protect them, through a nonnegotiable
bond, against the kind of liquidation which, experiencé shows,
develops among small holders of securities in the event of a
decline in market value.
After World War I, Liberty Bonds dropped in value down into
the 80's, and many persons who had bought them during the war
became frightened and sold them. They discovered later that
their loss had been the gain of the speculators and the wealthy
Regraded Unclassified
260
will
who then owned their bonds and gleaned from them truly handsome
dividends on the safest security in the world. It is not
unnatural that they should have felt that their trust in their
Government had been betrayed.
The Series E Bonds have another virtue which will be of
benefit not only to those who have purchased them but to the
entire national economy. When the war is over they will provide
an invaluable backlog of purchasing power.
I don't think that these bonds are going to be redeemed in
a sudden deluge immediately after V-Day. On the contrary, I feel
confident that most of those who bought them will make every
effort to hold them to maturity. But possession of the bonds
will give to these people a sense of security about the future
which will permit them to spend their current incomes more freely
than would otherwise be possible. We shall find this purchasing
power immensely helpful during the reconversion period. It will
prove, I am certain, a vital asset in warding off the sort of
deflation which struck this nation so disastrously in 1920 and
1921 when we turned from war to peace production.
Our fiscal policy of siphoning off excess buying power by
taxing and borrowing from the general public has been one of two
buttresses supporting the structure of economic stabilization.
The other buttress, of course, has consisted of direct controls
including rationing, price ceilings, allocations, etc.
During this war the country has devoted twice as large a
proportion of its resources to war purposes as in World War I.
In consequence, inflationary pressures have been very much
greater. The fact is, however, that prices have been held under
much closer control. Based on actual studies of price changes
in World War I as compared with World War II, the savings to the
Government, as a result of more effective control of inflationary
pressures, has already amounted, by June 30 of this year, to
$70,000,000,000.
But the greatest and most important saving has been that
among the people themselves. In the course of this war there
has been comparatively little of the reckless kind of silk shirt
buying that took place as a result of inflated pay envelopes
during World War I. There has been very little recourse to
black markets. Instead, people have used their incomes, in con-
siderable measure, to pay off their debts. Since the beginning
of 1942, for example, farm mortgages have been reduced 15 percent.
Regraded Unclassified
It is fair to say, I think, that the War Bond program, by its
encouragement of thrift, has contributed significantly to this
sensible restraint in the expenditure of surplus income.
Of course, there have been other benefits of economic
stabilization, too. The success of this policy has aided in
preventing the piling up of excessive profits by fortunate busi-
ness concerns, has helped to reduce industrial disputes to a
minimum -- and here I refer you to the factual record rather
than the headlines -- has prevented the impoverishment of recip-
ients of fixed incomes. including soldiers' dependents; and prob-
ably most important of all, it has averted what otherwise would
have been almost a certainty, the likelihood of a postwar depres-
sion.
I have discussed the problems of War Finance and economic
stabilization in such detail because I feel that you have been
and must continue to be vital partners in their solution. The
record so far is one of which we can all be proud. It has been good
in its accomplishments, perhaps even better in the fine cooper-
ation which made these accomplishments possible. If this same
tireless, unselfish cooperation is applied to the problems of
the postwar world, we need have no fear of the future.
But the kind of postwar world which we desire must still be
hacked from the enemy on the fields of battle. The time has not
yet come for us to indulge in day dreaming or celebration. I am
not going to offer any predictions about the end of the war in
Europe. I should like to remind you, however, that much more
competent military authorities than I have declared that even
after the European war is won it will take us at least a year
and a half to subdue our enemy in the far East. The war that
faces us there is bound to be a long and tough and costly one --
in certin respects more costly than the war against Germany.
Let me remind you, too, that war expenditures do not stop
abruptly with enemy capitulation. During the first six months
following the Armistice in World War I, expenditures were
slightly greater than during the six months preceding the
Armistice. Completed and partially completed products must be
paid for, Enemy countries must be occupied. Some relief for
Allied Nations will certainly be necessary.. The Armed Forces
must be brought home and demobilized and, in the meantime, they
must be paid and clothed and fed. I am sure that no American
will want to fail in these responsibilities. They are costs
that must be met if we are to make our victory complete and real.
Regraded Unclassified
261
- 5 -
And like the costs of the war itself they must be met in such a
way as to preserve and promote the stability of our economy.
The Sixth War Loan campaign, immediately ahead of us, is
one essential step in the performance of this job. Your job is
to overcome any disposition among the American people to relax
before final victory has been achieved.
I know that you will do this job as you have done the job
in the past. The success of the War Bond program up to the pres-
ent time has been your handiwork. It has been brought about
because you tackled it with fervor and resourcefulness and devo-
tion. I know that you have done your job only at real sacrifice
of time and comfort and self-interest. And I know also that the
only reward that you have sought for your services has been the
knowledge that you have played an indispensable part in the
nation's progress to victory. I convey to you the very warm
thanks of the Treasury Department, and I know that the work which
you have done commands the gratitude of all of your fellow
Americans.
-oCo-
Regraded Unclassified
262
TREASURY DEPARTMENT
Washington
FOR RELEASE, AFTERNOON NEWSPAPERS,
Press Service
Saturday, October 14, 1944.
No. 43-75
(FOR RADIO RELEASE 1:45 P.M., PWT)
(The following address by Secretary Morgenthau
at a War Bond Rally at the Hotel Biltmore,
Los Angeles, is scheduled for delivery at
1:45 P.M., PWT, Saturday, October 14, 1944.)
For the last week I have been addressing a number of
meetings such as this in various parts of the country. During
the course of these talks, I have endeavored to outline briefly
some of the philosophy behind American war finance as we at the
Treasury Department view it.
The democratic manner in which the financing of the war has
been handled, I described last Saturday at Atlantic City. About
85,000,000 individual Americans have bought bonds of their
government. They have bought them not as a result of compulsion
but for purely patriotic reasons and because they are the best
investment in the world.
Thursday, addressing a gathering similar to this at New
Orleans, I emphasized the part which war finance has played in
economic stabilization. The heavy tax burdens which the
American people, generally speaking, have accepted with extra-
ordinarily good grace and the large proportion of the increase
in the public debt which has been absorbed by the men and women
of this country, have played a very important part in holding
inflation in check. The OPA has estimated that if prices
during this war had risen as sharply as in World War I, there
would have been approximately a $70,000,000,000 increase in
government costs -- a $70,000,000,000 additional burden fastened
onto the country.
Today I would like to conclude this resume with a quick
examination of interest rates and a glance at the postwar public
debt problem as I see it.
The great expansion in the Federal debt has been achieved
with virtually stable interest rates--thanks largely to your
efforts. Such change as has occurred has been to slightly lower
levels. This contrasts with World War I when almost each new
Regraded Unclassified
- 2 -
series of bonds carried a higher interest rate, so that the cost
trend was almost constantly upward. As a result, the average
interest cost has been only 1-3/4 percent on the wartime increase
in the public debt. This contrasts with 4-1/4 percent for World
War I.
The resulting interest saving approximates $4,000,000,000 a
year -- quite a tidy sum to have saved for the taxpayers of this
nation. Realization of your part in this saving, I believe,
should give you, as it has us at the Treasury, a feeling of real
accomplishment.
Moreover, and this is a point deserving of particular empha-
sis, the interest on all securities sold during the war has been
fully taxable while the issues marketed during World War I were
all either wholly or partially tax-exempt. This has resulted in
a further net saving to the Treasury amounting to several hundred
willton dollars'a year. Further through removal of tax exemption,
all purchasers of Government securities are taxed their share of
the war cost in proportion to their ability to pay. This is a
point which may not have occurred to you but which should be of
help in the sale of E Bonds.
Incidentally, the Government in eliminating tax exemption
relinquished any "unfair" advantage it might have had over
private borrowers in securing credit. It thereby served to
strengthen the private enterprise system.
President Roosevelt, in his 1945 Budget Message summarized
the situation as follows--
"The primary achievement of our debt policy has been the
maintenance of low and stable rates of interest. Average
interest rates payable on the public debt now are less than
2 percent. Interest received from all new issues is fully
taxable. As a result, the net cost per dollar borrowed
since Pearl Harbor has been about a third the cost of
borrowing in the first World War."
Personally, I do not anticipate a rise in interest rates in
the foreseeable future. Savings are abundant and promise to be
adequate to meet all likely demands. We believe, therefore, that
we shall be able to refund our obligations, as they come due, at
rates comparable to those now prevailing. Thus, the saving to
the Treasury will continue over a long period of years. At the
same time the people to whom you have sold the war bonds will
continue to be satisfied rather than disgruntled customers.
Regraded Unclassified
263
- 3 -
Moreover, quite apart from its value to the Treasury -- and,
hence to the taxpayers -- the continuance of low interest rates,
will provide a stimulus to the national economy in the postwar
period. High interest rates limit enterprise and discourage
employment. Low interest rates stimulate business and make for
expanding employment.
Just as I see no reason for substantially higher interest
rates in the postwar period, I do not see any need for a whole-
sale postwar funding of the public debt into long-term bonds.
In the first place, it would cost the taxpayers more in
interest. Next, it would shift whatever risk there is inherent
in fluctuating interest rates from the Government, which is able
to bear it, to individuals, institutions and corporations. Cer-
tainly the day is past when the United States Government need ask
its citizens or its business enterprises to insure it against
changes in the rate of interest.
Finally, we have endeavored to tailor the debt structure to
the needs of those who lend us the money and of the national
economy.
The small investor who purchases the Series E Savings Bonds
places his faith in his Government. Could we do less than see to
it that the securities offered him were suited to his needs?
The Savings Bonds, while not a war development, having been
first offered ten years ago, have proved an admirable war finance
medium which we expect to carry over into the postwar period. We
hope that many millions of people will continue to hold a finan-
cial stake in their Government.
Industrial corporations, as you know, have principally pur-
chased certificates of indebtedness and Series C Notes. These
constitute a substantial part of their reserves for reconversion
and postwar development. It is clearly advantageous not only to
the corporations but to the whole economy that these reserves be
liquid. The corporations thus know that the money will be
available and without loss whenever they need it. When the
proper time comes they can proceed full speed not only with their
conversion but with any expansion plans they may have.
Finally, there are the Government securities which now con-
stitute a large proportion of the assets of the commercial banks.
Many of you are bankers. You know it has been our policy to
encourage the banks to purchase issues of short maturity. As a
4
consequence, about half the securities acquired by the commer-
cial banking system since the beginning of the war have been
bills and certificates maturing within one year and practically
all have had a maturity of ten years or under.
The result is that the banking system of the country is in
a position of unparalleled liquidity. This, we believe, affords
assurance against a recurrence of such unsettling deflation as
came in the aftermath of World War I. Further, it places the
banking system in a strong position to meet the shifts in
deposits that many of you anticipate with reconversion and the
new business demands for funds that should accompany the develop-
ment of a healthy, expanding economy.
In a word, the banks' part in war finance, great as it has-
been, instead of hamstringing them, has left them in a position
to service enthusiastically a virile private enterprise system.
I might point out that the banks have not only been able
to maintain a strongly liquid position as a result of the manner
in which the nation's war finance has been handled, but also
they have found an opportunity for public service. This has
enhanced the esteem with which they are held in their respective
communities. Moreover, while they have been making this contri-
bution to the war effort they have enjoyed an increase in earn-
ings. Net profits of all member banks of the Federal Reserve
system last year were back at almost exactly the-all-time high
level of 1929.*
I want to thank you who have been the leaders in the war
finance work in these great western states -- thank you upon the
part of the Treasury, whose job it has been to direct the program,
and, more important, thank you on behalf of the United States
of America, which, of course, is the real beneficiary.
I am no prophet as to the duration of the war, but today we
are hopeful that unconditional surrender by Germany may not be far
away. At such time all eyes will turn to the West. The eleven
states represented at this meeting will take on new importance in
the war. The Pacific coast will become the springboard for the
all-out offensive against Japan.
This should prompt you who have the job of raising the neces-
sary money to redouble your efforts.
Our immediate task is to put over the Sixth War Loan, to do
so just as decisively as our fighting men are establishing their
positions in Europe and in the islands of the Pacific.
Unclassified
264
- 5 -
I know you understand the importance of this absolutely
essential link in the war effort. But you must do more than
understand it, you must make the people understand it, the men
and the women in stores and offices, in factories, on the farms
and in their homes.
These people must understand, as you do, that the time has
not yet come to relax or celebrate, that we must speed weapons and
supplies far across the Pacific to our armed forces who know full
well that a hard fight still lies ahead before they can bring us
victory over the Japanese -- and these weapons and supplies must
be paid for. That is our task -- I know America can count upon
you!
o0o
265
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 17, 1944
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Status of Stabilization and Gold Agreements on
September 30, 1944.
1. Stabilization Agreements in Operation
Amount
Country Dated Expires Commitment Outstanding Collateral
Brazil 1/
7/15/37
7/15/47
$100,000,000
None
None Gold
2. Stabilization Agreement Concluded but not
yet Effective
Mexico
11/1/41
6/30/45
$ 40,000,000
None
None required
Ecuador
3/1/42
6/30/45
5,000,000
None
None required
3. Gold Sale Agreement
Payment due
Country
Dated
Expires
Commitment
Outstanding
within
Cuba
7/6/42
6/30/45
$ 5,000,000
None
120 days from
each sale
4.
British Coin Purchase Agreement
Country
Dated
Expired
Commitment
Purchases
Liberia 3/ 9/26/42
6/30/44
$
2,000,000
$679,313.90
1/ The agreement as amended also provides for sale to Brazil of
up to $300,000,000 in gold, of which $220,986,143 had been
sold.
2/ On October 9, 1944 an agreement, as of June 30, 1944, was
signed by the Secretary of the Treasury and the Ambassador
of Ecuador extending the agreement of March 1, 1942 to
June 30, 1945. The agreement is to come into effect when
Ecuador files appropriate supporting document with the
State Department.
3/
Payment to the amount of $645,308.93 had been received from
the United Kingdom for silver coins shipped from Liberia.
266
OCT 17 1944
My dear Mr. Presidents
In accordance with your request of
Catober 4, 1944, I an enclosing a proposed
reply for your signature to the letter of
Mr. Engelhard dated September 7, 1944.
Mr. Engelhard's letter is returned herewith.
Faithfully yours,
(Signed) H. Mergenthau, Jr.
Secretary of the Treasury.
The President,
The White House.
Enclosures
10/11/44
Regraded Unclassified
267
Dear Mr. Engelhards
This is to acknowledge your letter of September 7a
1944 extending your congratulations for the successful
fight being waight against Hitlerism and expressing your
confidence is the reestablishment of democratic principles
in the world.
I - glad to learn that you have consented case more
to serve as a Presidential Elector and I an grateful for
your good wishes.
Your interest in the stops which are being taken to
build a sound and enduring peace is appreciated. As you
realise such a peace must be based upon a healthy demostic
economy and a high level of international trade. The
Drotton Woods and Dumberten Cake conferences and others
which are to be held may be expected to contributs such
to this goal.
Your suggestions in regard to the desirability of
further changes in the use of gold and silver will be
given thoughtful consideration.
Very truly yours,
m. Charles Engelhard,
30 Church Street,
New York, % New York.
8DStmm
10/11/44
Regraded Unclassified
L
268
THE WASHINGTON WHITE HOUSE q6.0c- z
October 4, 1944.
MEMORANDUM FOR
HON. HENRY MORGENTHAU, JR.
FOR PREPARATION OF REPLY
FOR MY SIGNATURE.
F.D.R.
ORVISIONS
AND è TOO
to activiti
the
CHARLES ENGELHARD
SEP 9 WHERE
30 CHURCH STREET
NEW YORK 7,
RECEIVED 8 32 AM HOUSE "44
September 7, 1944.
My dear Mr. President:
As I had the incomparable privilege to write to
you on many occasions during the last twelve years in commenda-
tion of your manifold political acts, I ask your permission to
write to you to-day as an American citizen of German birth and
descent, to congratulate you on the accomplishment of your vic-
tory over Hitlerism and all that it stood for.
You are reaching the climax of everything you so
valiantly attempted, and your great energy, foresight and endur-
ance are succeeding to re-establish democratic principles for
all the world, on the basis of Christian principles which Hitler
dared to deny.
I believe I speak not only for myself in this re-
spect, but express the thoughts of many millions of loyal Ameri-
can citizens with German blood within their veins.
May God grant you strength to inaugurate a peace
which will be enduring, and the thanks of the world, including
our present enemies will be forever due you.
My co-citizens in New Jersey have insisted that
I become for the third time, one of your Presidential Electors,
and in spite of my years, I feel profoundly honored and enthusi-
astic to serve.
I know now that you will be re-elected, because
there is nobody who could replace you, and I thoroughly believe
in the absolute fairness of the great masses of the American
people.
As far as peace and the economic future of the
world are concerned, under your great leadership, we will find
the solution.
One of your first acts as President of the United
States, was to change the price of gold, and from that moment on,
our economic status improved.
It may be necessary again to attempt such a step,
in conjunction with our Allies, in particular the British Empire,
and it may prove, as heretofore in history, the ONLY solution to
recreate normal conditions for the coming peace.
The war has shown that mere paper promises mean
Regraded Unclassified
CHARLES ENGELHARD
30 CHURCH STREET
NEW YORK
-2-
September 7, 1944.
slavery for the weaker partner, and nothing else.
Everybody agrees that gold and silver are the only safe
basis for international business as a whole.
The Bretton Woods Conference has proven our good inten-
tions to help, and other conferences will follow under your great
leadership.
Before World War I, it was considered safe if any cur-
rency was covered by gold to the extent of 40% of its total value.
To-day the international debts are 80 exorbitant that it
may be considered safe if any currency is covered at least 10% by
gold, with which international balances can be paid at regular in-
tervals on demand.
Such a rule would, to my mind, insure the economic sov-
ereignty of big and small nations alike. At the same time it would
open the way so that silver would find its rightful and logical
place next to gold, on the basis of the present Silver Purchase
Acts which you initiated, Mr. President, to the greatest benefit
of the United States and the rest of the world.
A sound and safe recognition of silver, next to gold,
with essential controls as per our Silver Purchase Acts, may be
necessary to give additional support to the economic wellbeing of
the world, as a basis for credit.
A justified recognition of silver would help China and
India and the rest of the world, and without question or doubt would
EXPEDITE world recovery.
May God grant you strength, Mr. President, to complete
your great work in the coming years, and believe me as ever,
Yours most faithfully,
bharles singethard.
Hon. Franklin D. Roosevelt,
President of the United States,
The White House,
Washington, D.C.
Regraded Unclassified
271
\
Treasury Department
Division of Monetary Research
Date Oct. 17, 19449
To:
Mrs. McHugh
The Secretary may be interested
in seeing this.
H.D.W.
MR. WHITE
Branch 2058 - Room 214-1/2
272
OVERSEAS NEWS AGENCY
101 PARK AVENUE
NEW YORK 17, NEW YORK
STORM OVER GERMAN PROBLEM.
BY HERBERT J. SELIGMANN
WASHINGTON. (ONA) CAN BE SAID ON INFORMED WASHINGTON AUTHORITY
THAT GERMANY NOW IS THE CENTER OF A BITTER STRUGGLE OVER THE KIND OF
WORLD THAT SHALL PREVAIL WHEN THE WAR IS OVER. IN THE COURSE OF THAT
STRUGGLE A DISTORTED VERSION OF ONE OF THE PLANS FOR CONTROLLING GERMANY
WAS PRESENTED TO THE PUBLIC AND LINKED WITH THE NAME OF SECRETARY OF THE
TREASURY HENRY MORGENTHAU.
THIS DISTORTED VERSION WAS CONTAINED IN A "LEAK" TO THE PRESS FOR
THE EXPRESS PURPOSE OF DISCREDITING A PROGRAM WHICH IT WAS FEARED MIGHT
OTHERWISE GAIN ADHERENTS.
I AM IN THE POSITION OF BEING ABLE TO GIVE A MORE ACCURATE NOTION OF
WHAT THE ALTERNATIVES REALLY ARE WITH REGARD TO POSTWAR GERMANY. THEY
ARE SOMEWHAT AS FOLLOWS:
FIRST, THERE ARE THOSE WHO INSIST THAT GERMANY MUST PAY REPARATIONS
FOR WAR DAMAGE, AND THAT IN ORDER TO ENABLE THAT PAYMENT, GERMANY MUST
BE GIVEN HELP IN REBUILDING HER INDUSTRIES. PROPONENTS OF THIS PLAN RELY
ON CONTROL FROM THE OUTSIDE TO PREVENT GERMANY FROM REARMING AS A MILI-
TARY POWER. ALLIED MISSIONS, THEY SAY, SUPERVISING GERMAN INDUSTRIAL
PRODUCTION, WOULD CONSTITUTE THE GUARANTEE AGAINST FUTURE GERMAN PREPA-
RATION FOR MILITARY AGGRESSION.
PROPONENTS OF THIS VIEW WOULD REMOVE GERMANY'S AIRPLANE AND SYNTHET-
IC OIL PLANTS AND CONTROL IMPORTS AND EXPORTS. ONE GROUP IN THIS CAMP
WOULD LIMIT GERMAN REPARATIONS TO A PERIOD OF FIVE YEARS AND HAVE THE
PAYMENTS MADE IN GOODS.
THE SECOND GROUP INSISTS THAT THE PLAN OUTLINED ABOVE WOULD LEAVE
GERMANY ECONOMICALLY AS POWERFUL AS EVER AFTER THE REPARATIONS HAD BEEN
PAID, AND BEHIND THIS POWER WOULD BE GERMANY'S RAGE AT THE HUMILIATION
OF MILITARY DEFEAT. THEY MAINTAIN THAT THE DANGER FROM GERMANY WOULD BE
GREAT NOT AFTER FIVE OR TEN YEARS BUT AFTER 25 YEARS WHEN GERMANY WOULD
HAVE SUBTLY WHITTLED AWAY ALL CONTROLS AND WOULD HAVE WORMED HER WAY
BACK, UNDER COVER OF BEING "PEACE-LOVING," INTO A POSITION OF DANGEROUS
AGGRESSIVE POWER.
MOREOVER, THEY SAY, GERMANY WOULD BE, AS SHE IS NOW, RECEIVING HELP
FROM THE OUTSIDE. THAT HELP WOULD COME PRIMARILY FROM THOSE WHO WOULD
BUILD UP A STRONG GERMANY, IN THE CLIVEDEN SET TRADITION, AS A BULWARK
AND PERHAPS A WEAPON AGAINST SOVIET RUSSIA. HELP WOULD COME ALSO FROM
THE BIG CORPORATIONS WHO FORMED PART OF THE GERMAN CARTEL-OCTOPUS AND
Regraded Unclassified
273
SELIGMANN
PAGE TWO
WHO HAD AND STILL HAVE IMPORTANT INTERESTS IN THE REICH. SUCH HELP
COMES ALSO FROM GERMAN EXILES. WHO REMAIN GERMANS WHATEVER THEIR PLACE OF
REFUGE AND WHATEVER THEIR NEW CITIZENSHIP.
GERMANY, THE PROPONENTS OF THE "REDUCE GERMAN PRODUCTION" PROGRAM
MAINTAIN, WOULD NOT BE so STUPID AS TO PRODUCE ARMAMENTS AT ONCE. THAT
WOULD COME ONLY AFTER AN INTERVAL OF TEN OR FIFTEEN YEARS. BY THAT TIME
FOREIGN CONTROLS WOULD BE RELAXED AND GERMANY COULD PURSUE WHATEVER
POLICY IT WANTED. THIS, SAY THE CRITICS OF THE "REBUILD GERMANY" PROGRAM,
WOULD BE MERELY A REPETITION OF WHAT HAPPENED AFTER THE LAST WAR, ONLY
THIS TIME GERMANY'S MEANS WOULD BE MUCH MORE SUBTLE. GERMANY WOULD CON-
STITUTE ITSELF A CROWBAR TO WIDEN THE CRACKS BETWEEN THE BRITISH, THE
AMERICANS AND THE RUSSIANS.
SAID A SPOKESMAN FOR THIS POINT OF VIEW:
"THE PEOPLE WHO THINK THAT THEY CAN MAINTAIN INTERNAL CONTROLS OVER
GERMANY ARE SIMPLETONS. IT SHOULD BE RECOGNIZED THAT THERE ARE NO EN-
TIRELY GOOD ALTERNATIVES FOR DEALING WITH GERMANY. IT IS A MATTER OF
CHOOSING THE LEAST DANGEROUS AND HARMFUL.
"GERMANY CAN BE KEPT AN INDUSTRIAL COUNTRY BY ENABLING THE MANUFAC-
TURE OF TEXTILES, TOYS, OPTICAL GOODS AND THE LIKE, WHILE DEPRIVING THE
GERMANS OF ALL HEAVY INDUSTRY."
IN SUPPORT OF THIS VIEW THE FOLLOWING PROGRAM IS ADVANCED:
1--INTERNATIONALIZE THE HEAVY INDUSTRY SECTION OF THE RUHR.
2--GIVE THE SAAR REGION WITH ITS COAL TO FRANCE.
3--DIVIDE NORTH GERMANY FROM THE SOUTH AND ABOLISH CUSTOMS BARRIERS
BETWEEN THE SOUTHERN HALF AND AUSTRIA, THEREBY SOLVING THE PROBLEM OF
AUSTRIA'S UNWORKABLE ECONOMY.
4--DISMANTLE GERMANY'S HEAVY INDUSTRIES AND DISTRIBUTE THEM TO THE
NE IGH BOR ING COUNTRIES WHICH HAVE BEEN STRIPPED BY THE GERMANS; RUSSIA,
CZECHOSLOVAKIA, POLAND, FRANCE AND THE LOW COUNTRIES.
THE SPOKESMAN FOR THIS PLAN CONTINUED:
"THE FACT THAT THE MIDDLE WEST OF THE UNITED STATES IS AGRICULTURAL
DOES NOT MEAN THAT IT HAS NO INDUSTRIES. IN THE CASE OF GERMANY, THAT
COUNTRY WAS ALMOST SELF-SUFFICIENT IN THE PRODUCTION OF FOOD BEFORE THE
WAR. IT PRODUCED BETWEEN 95 AND 100 PER CENT OF MANY OF ITS VITAL
GRAINS AND OTHER FOOD RESOURCES. IT PRODUCED BETWEEN 90 AND 95 PER CENT
OF ITS VEGETABLES, BETWEEN BA AND 90 PER CENT OF ITS EGGS AND FRUIT, AND
80 PER CENT OF ITS POULTRY.
Regraded Unclassified
274
PAGE THREE
SEL IGMANN
"IN 1937 GERMANY PRODUCED SEVEN MILLION TONS OF RYE AND IMPORTED
ONLY: 100,000 TONS, AND IT PRODUCED 3t MILLION TONS OF BARLEY. OF POTA-
TOES, GERMANY PRODUCED 55 MILLION TONS, IMPORTING ONLY 100,000 TONS. IN
BEET SUGAR, GERMANY WAS SELF-SUFFICIENT, AS IT WAS IN THE CASE OF TUR-
NIPS, PEAS AND FLAX. IT DID HAVE TO IMPORT ONE-FIFTH OF ITS WHEAT, BUT
GERMANY MIGHT WELL SUBSTITUTE OTHER GRAINS FOR THE WHEAT DEFICIENCY IN
THE POST-WAR YEARS."
THE GERMANS, IN ANY CASE, WILL HAVE TO PULL IN THEIR BELTS AS THEY
DID WHEN ONE-THIRD OF THEIR PRODUC ING CAPACITY WAS DEVOTED TO ARMAMENTS.
THE RUSSIANS, WHO WILL CONTROL GERMANY WELL TO THE WEST OF BERLIN, WILL
IN ANY CASE DISMANTLE AND REMOVE WHATEVER IS MOVABLE. HAVING BEEN STRIP-
PED AND WRECKED BY THE GERMANS, THE RUSSIANS AND POLES WILL NOT ASK
ANYONE'S PERMISSION BEFORE REIMBURSING THEMSELVES WITH WHATEVER GERMAN
EQUIPMENT ESCAPES BOMBING AND OTHER MILITARY WRECKING.
so, IN ANY CASE, GERMANY WILL BE IN DIFFICULTIES. AND NO MATTER
HOW THEIR PROBLEM IS HANDLED THE GERMANS WILL "YELL BLUE MURDER." THOSE
WHO MAINTAIN THAT THE PRIMARY PROBLEM IS TO STAVE OFF FUTURE AGGRESSION,
INSIST THAT:
1--ALL GERMAN ARMAMENT PRODUCTION AND ALL MANUFACTURE TRIBUTARY TO
IT MUST BE STOPPED, ONCE AND FOR ALL.
2--LIGHT INDUSTRIES AND FULL AGRICULTURAL PRODUCTION MUST BE EN-
COURAGED AND THE GERMANS MADE TO LIVE ON WHAT THEY CAN PRODUCE, HELPING
THEM IN THE BEGINNING WITH PROVISION OF NECESSARY FERTILIZERS.
UNDER SUCH A PROGRAM, IT IS MAINTAINED, THEIR STANDARD OF LIVING IN
THREE TO FIVE YEARS CAN BE LIFTED ABOVE THE PREWAR LEVEL IN POLAND. IN
THIS WAY GERMANY CAN BE PREVENTED FROM PREPARING FOR THE NEXT WAR. GER-
MANY CANNOT BE TRUSTED TO STEER FOR PEACE HERSELF. so THE MONSTER'S
FANGS MUST BE PULLED. THE GERMANS WILL YELL AND WHINE IN ANY CASE. so
DISREGARD THE OUTCRY AND GIVE THE CASE THE TREATMENT IT DESERVES FROM
THE POINT OF VIEW OF THE WELFARE AND SAFETY OF THE CIVILIZED WORLD.
COPYRIGHT, 1944, OVERSEAS NEWS AGENCY, INC. - 10/4/44
Regraded Unclassified
275
OFFICE
FORVICTORY
OF
TREASURY DEPARTMENT
BUY
UNITED
STATES
WAR
WASHINGTON 25
BONDS
AND
STAMPS
THE
SECRETARY
October 17, 1944
M MEMORANDUM TO THE SECRETARY
I am enclosing a list of the
special items valued in excess of $50,000
as of October 14, 1944.
E.L.Ohich E.L.
Assistant E. L. to the Olrich Secretary MAWFY
Regraded Unclassified
PROPERTY FO, DISPOSAL
SPECIAL ITEMS, COST TO GOVERNMENT IN EXCESS OF $50,000
AS OF OCTOBER 16, 1944
1. Automotive Products
QUANTITY UNIT COST COST TO GOVT.
AUTOMOTIVE SPARE PARTS, NEW
21 000 000
$ 14 000 000
Large quantities on recent declarations are
bolts, nuts, spark plugs, fuses - called "parts
common" that can be used on any motor vehicle.
Lists totalling 11 million parts worth $2,500,000
have been submitted to Ford and General Motors
for them to analyze and determine parts acceptable.
AUTOMOTIVE PARTS, OBSOLETE, USED
2 000 000
Majority are used, having been taken from used
vehicles and put in stock. There are acres of
used bodies, fenders, cowls, cabs, etc., at Blue
Grass, Ky. and Fort Crook. Spot check inspection
list has gone to Chrysler as a test action on
disposal. Other lists are going to other manu-
facturers.
276
Regraded Unclassified
- 2
:
:
QUANTITY
UNIT COST
COST TO GOVT.
HYDRAULIC FLUID
378 459
$ 1.74
$
658 580
gals.
Needs reprocessing. The manufacturer's
telephone offer of $.50 per gallon for
entire lot has not yet been confirmed.
JACKS, HYDRAULIC
10 741
79.00
848 539
4 wheel, roller type, for garage use. There
are several makes. Two manufacturers have been
requested to submit an offer.
MOTOR ANALYZERS (testers)
1 500
100.00
150 000
Regional Office has been authorized to re-sell
to manufacturer on a 3 months' delivery basis.
2. Textiles and Wearing Apparel
All textiles and clothing in the
hands of disposal agencies have
been temporarily frozen to enable
the Army to make selections for use
in program for occupied countries.
277
Regraded Unclassified
- 3 -
QUANTITY
UNIT COST
COST TO GOVT:
BELT POCKET FOR CARTRIDGE CLIPS
1 OOO 000
$ .10
$ 100 000
Web pocket with fastener. Radio advertiser
is taking quantities under option as requests
from program develop. Price received $0.06.
MAGAZINE BELTS
55 369
2.35
130 325
An apron of web fabric belt pockets to hold
bullet clips. Samples have been sent to all
regions to widen sales effort.
LEGGINGS
213 280
109 833
pr.
World War I stock, good only for salvage.
Now being authorized for sale by Regions.
W.A.C. CAPS
76 712
2.20
168 766
Samples have been given to exporters and
others. This is an item that is hard to
dispose of.
HATS, ARMY SERVICE
45,928
3.00
137 784
The old-style, broad brimmed campaign hat. Of
original amount of 91,000, half have been sold.
Negotiations in process for balance.
278
Regraded Unclassified
- -
QUANTITY
UNIT COST
COST TO GOVT.
HOODS, ANTI-GAS, NEW
97 997
$ 1.00
$ 97.997
New declaration - sample awaited.
COATS, FIREMEN'S SAFETY, NEW
26 526
4.77
126 529
New declaration - sample awaited.
GLOVES, RUBBER, ANTI-GAS
667 000
1.00
667 000
Gauntlet type. An industry meeting was
held to discuss disposal program. Represents
4 years' supply. Present inventories in mfrs.
hands are high. Recommendation was to export or
sell as crude rubber to manufacture critical
items.
APRONS, IMPERMIABLE
79 449
5.00
174 800
Rubber coated apron, with sleeves, designed
like an operating gown. Has very little use,
except to cut up to salvage t he material.
Manufacturers not interested in re-purchase.
Negotiations are underway to sell in open
market.
279
Regraded Unclassified
5 -
QUANTITY UNIT COST COST TO GOVT.
BOOTS, RUBBER & LEATHER, NEW
73 266 $ 1.18
$
86 659
New declaration - samples awaited.
RUCKSACKS, NEW AND USED
5 000
12.66
63 600
Will attempt to sell on open market.
Samples awaited.
MOSQUITO BARS, WITH RODS
110 000
5.90
649 000
Army has withdrawn a substantial quantity.
Sears Roebuck purchased another hundred
thousand.
TARGETS, ANTI-AIRCRAFT
8 861
14.32
126 891
New declaration - sample awaited.
SLIDE FASTENERS
2 009 694
.119
239 797
Inventories will be taken to determine
quantities by manufacturer. They will be
disposed of in same manner as prior lot.
280
Regraded Unclassifie
- 6 -
QUANTITY UNIT COST COST TO GOVT.
3. Machinery
CONSTRUCTION MACHINERY, HEAVY
6 500
$1000.00
$6.500 000
(average)
General inventory of used machinery,
most of it in very poor condition.
Sales are being made regularly but
inventory mounts.
GROUSERS
43 853
3.00
131 559
Non-standard mud cleats for crawler-
type tractors. They are nothing but
sheared pieces of structural angle iron,
worth nothing except for scrap. Adver-
tising folder will be issued.
ICE GROUSERS, NEW
76 726
2.70
207 160
pieces
Ice gripping shoes to be attached to special
rubber tired treads of high speed military
tractors. Each weighs 6 lbs. A tractor needs
296 pieces. There is no known application on
standard machines; no market, except for scrap.
Publicity being released.
TRAILER HITCH, USED
767
80.00
61 360
New declaration -- no action as yet.
281
Regraded Unclassified
- 7 -
QUANTITY UNIT COST COST TO GOVT.
4. Furniture
STOOLS, WOOD, REVOLVING SEAT
14 964 $ 6.30 $ 94 415
Are being offered to the Army and all
Government agencies
BEDS AND COTS, USED
88 789
3.50
310 760
(average)
Includes 41,170 wood, double deck bunks,
12,900 steel, single beds, and 34,719 folding,
wood and canvas cots.
BED PARTS
65 000
Springs, heads, feet, and side rails;
unassembled. Negotiating with bed mfrs. re-
garding repurchase.
PILLOWS, NEW AND USED
899 600
.73
656 708
Some cotton, some feather pillows, mixed
in bales. Moderate sales of new pillows
continue regularly. Used pillows are not
wanted.
MATTRESSES, INNERSPRING, NEW
9 500
6.00
58 000
From O.C.D. stocks. New declaration - plans
282
being formulated.
Regraded Unclassified
- 8 -
QUANTITY UNIT COST COST TO GOVT.
MATTRESSES, NEW AND USED
518 000 $ 5.50 $2 849 000
About 1/3 are new. Substantial sales of
used mattresses, for conversion into paper,
take place regularly.
5. Hardware
HELMETS, SAFETY, O.C.D.
330 000
.89
293 700
Packed 10 to a carton. Will be sold to toy
depts. for the approaching holiday season,
for $.65 each.
MASKS, GAS, USED
47 967
6.28
301 399
O.C.D. stock is being transferred to Chemical
Warfare.
BRUSHES, WINDOW
48 412
1.53
74 069
(average)
Round head, with 8 ft. handle. All will be
sold this week to hardware jobbers. Bids
for entire lot at around $.71 are in hand.
CARTS, FOOD
586
368.00
215 648
Hospital equipment - Inspection report still
awaited. Will be transferred to Veterans' Admn.
283
Regraded Unclassified
- 9 -
1
QUANTITY UNIT COST COST TO GOVT.
HOSE, RUBBER
10 000 $ 33.50 $ 372 446
plus short
Large size, 25 ft. lengths. Approximately
pieces
18,000 lengths that have been used for handling
explosives have been withdrawn. Army will
inspect.
FIRE HOSE, NEW
247 400
109 720
ft.
Some 11 inch, some 21 inch. Army will take
entire lot, if in good condition.
RANGERS, GAS, NEW
1 957
95.00
185 915
141 sold to Govt. agencies. Have several bids
and expect to dispose of 455 more this week.
Awaiting report from Atlanta on remainder.
COVERS AND SEALS, RUBBER
27-3/4
169 245
tons
Includes 3/4 ton seals, which are round rubber
washers about 1 inch in diameter. There are 27
tons of new "covers" which are 2 in. lengths of
black rubber hose -- thin wall, about 1 inch in
diameter. Inspection report awaited.
BOLTS, MISCELLANEOUS
8 500 000
2 500 000
The regional offices have been instructed to con-
28
tact mfrs. and large jobbers. Little interest shown.
Regraded Unclassified
- 10 -
QUANTITY
UNIT COST
COST TO GOVT.
STAPLES, GALVANIZED
18 000
$ 4.52
$ 81 360
kegs
100 lbs. to a keg. Sales are being made in
substantial quantities at price near cost to
Government.
WOOD SCREWS, BRASS, NEW
250 000
.25
62 000
gross
The regional offices have been instructed
to offer these screws to manufacturers and
large jobbers. Little interest shown.
SMOKE GENERATORS
55 000
3.50
192 500
Obsolete smoke pots. Fruit growers have
bought some and an effort is being made to
dispose of this remaining balance at $1.50.
SMOKE GENERATOR PARTS
277 000
Small metal parts (valves, fittings) for Army
mobile smoke generator. The big chain stores
and manufacturers are not interested. A N.Y.
"distributor" is inspecting this material and
has made an informal offer for selected items.
285
Regraded Unclassified
- 11 -
QUANTITY
UNIT COST
COST TO GOVT.
SNOWSHOES, EMERGENCY
18 800
$ 4.25
$ 79,900
pr.
Paratroopers' special type of no value for
sport purposes. Moderate sales at $1.00 each
are being made for childrens' use.
SNOWSHOES, NEW AND USED
41 762
9.00
375 858
14
Regular types. Represents about 6 years total
sales in U.S. Sales are now being made in
small quantity.
SHOTGUNS
1 800
55.00
101 332
Manufacturers are re-purchasing on contract.
EMPLACEMENTS, MACHINE GUN
32
5300.00
169 600
A mount for a machine gun. No utility value
known.
MACHINE GUNS, ELECTRIC
707
279.00
197 253
Practice gun. Specifications have been sub-
mitted to amusement park owners.
286
Regraded Unclassified
- 12 -
QUANTITY
UNIT COST
COST TO GOVT.
SCABBARDS, BOLO
228 000
$ 1.60
$ 364 800
Designed for bolo that is now obsolete. Few
bolos available. This office has developed
1dea to work off this stock to toy manufacturers
who will make toy wooden bolos to go with them.
SPURS, NEW AND USED
300 000
1.30
390 000
pr.
Some small sales have been made at $.50 a
pair. Additional prospects for large quan-
tities are being developed.
LANTERNS, OIL BURNING
34 460
3.00
107 316
Navy will withdraw for transfer to Army.
MARKERS, MINE FIELD
10 000
6.85
68 500
sets
Carrying case with 30 metal flags on pins.
Several orders for small quantities have been
received from state road commissions.
PLATFORM TRUCKS, STEEL, NEW
7 000
75.00
525 000
Steel truckson casters. The truck weighs 800
lbs., and it takes 2 men to push an empty truck.
We have offer of $16.00 for a limited quantity.
About 1500 were sold at $15.00 each.
287
Regraded Unclassified
QUANTITY
UNIT COST
COST TO
/T.
RESPIRATORS, DUST, COMMERCIAL
61 127
$ 1.00
$ 59 293
Made for African combat use - some are suit-
able for industrial use. A manufacturer has
made a repurchase offer of $.70 for those of
his make. Ohter manufacturers' offers awaited.
SIRENS, NEW
28 638
6.00
174 569
Hand warning device in carrying case. We have
offer for entire lot at $1.75 each.
INCINERATORS, NEW
34
9,818.00
333 812
Designed for human excretia but can be used for
burning lower-water content material by re-
modeling at cost of $1000 ea. Manufacturer de-
cided against repurchase. Starting to offer for
sale direct to municipalities.
IMPRINTING MACHINES, NEW
35 600
21.95
781 420
Original manufacturer has been given 10 days to
present repurchase proposal - time will be up
this week.
RAFTS, PNEUMATIC, 5-MAN
1 400
200.00
280 000
About half of original lot has been sold at es-
tablished prices. Sales are slowing down as
vacation season closes.
288
Regraded Unclassified
- 14
QUANTITY
UNIT COST
COST TO GOVT.
6. Medical and Hospital Supplies
DENTAL SUPPLIES
$
$ 100 000
World War I stocks located at Perry Point, Md.
Instructions have been given regional office
for disposition.
SURGICAL INSTRUMENTS
250 000
Stocks at Louisville, Ky. Current inventory
unknown.
STERILIZERS, NEW AND USED
1 381
300.00
495 037
(average)
Considered unsafe for medical department use
by Army. Negotiations with manufacturer in
process. Offer for part of lot received.
BOTTLES, WIDEMOUTH, 250 c.c.
201 307
.45
90 588
Purchase being considered by a large manu-
facturer.
FLASK, WITH CUP
200 000
.33
66 000
Made for soldier to carry liquid medicine in
field - a small canteen. Probably of no
commercial value.
289
Regraded Unclassified
- 15
QUANTITY
UNIT COST
COST TO GOVT.
TEST TUBES, GLASS
4 670 000
$
.03
$ 140 100
Some samples have arrived and disposal plans
are being made.
PETRI DISHES, WITH COVER
230 000
.27
62 100
Laboratory dish for making germ cultures.
Sample awaited. Have been requested a second
time.
DISK, METAL, ABRASIVE, 7/8"
134 OOO
.60
80 400
cards
Dental supply item - packed 12 disks on a card.
Manufacturer is not interested, reporting big
supply on hand from contract termination.
FLOSS, SILK, DENTAL
510 000
173 400
spools
Samples awaited. Have been requested a second
time.
BANDAGES, MUSLIN
134 584
128 034
doz.
Action is being taken to secure a desirable
outlet. Offers will be considered this week.
230
Regraded Unclassified
- 18-
QUANTITY
UNIT COST
COST TO GOVT.
DRESSINGS, FIRST AID PACKAGES
30 000 000
$
$3 582 000
Withdrawals have been made and it is presumed
that this balance represents quantities that
have been purchased from commercial houses, not
Red Cross.
GAUZE, PLAIN, 25 YD. ROLLS
150 000
.75
112 500
New. Region has been instructed to dispose of
this item to Govt. agencies. Also offering to
our own Purchase Group for local Government
office use.
SUTURES, SILK AND CATGUT
13 500 000
2 397 000
tubes
For sewing after surgical operations. Two of
the numerous manufacturers might be interested
in their own product if quantity could be de-
termined. The inspection task is practically
impossible as long as the stock remains in the
custody of the Medical Department.
STRETCHERS, CANVAS AND METAL, NEW
8 400
54 000
New items from O.C.D. stocks. Negotiating with
a large distributor of this equipment.
291
Regraded Unclassifie
- 17
QUANTITY UNIT COST COST TO GOVT.
AZOCHLORAMID IN TRIACETIN
360 000
$ 4.55
$1 638 000
World War I stock. Awaiting action by board
of medical officers.
SODIUM ALURATE
13 500
7.50
101 250
boxes
3½ and 1-3/4 gr. tablets pack in 500 unit
boxes. Special Army package - manufacturer
not interested.
HAEMOTOXYLIN, LIGHT
99 000
1.50
148 500
bottles
10 gram bottle. Awaiting action by board of
medical officers.
DICHLORAMINE T
359 000
1.66
595 940
pints
16-2/3% in Tri. World War I stock. Awaiting
action by board of medical officers.
SULFANILAMIDE
539 000
344 930
packages
5 and 7.5 gr. tablets. 250,000 boxes of 12
tablets, 289,000 bottles of 1,000 tablets.
Obsolete Army item. Awaiting action by board
of medical officers.
292
Regraded Unclassified
- 18
-
QUANTITY
UNIT COST
COST TO GOVT.
BURROWES SOLUTION
18 000
$
$ 144 000
bottles
2.27 gm. tablets - 500 to a bottle. This item
is being offered to the manufacturer today.
PEPTONE, DRIED, U.S.P. BLAG.
96 500
4.00
386 000
pounds
Has been offered to Govt. agencies - not
interested.
PEPTONE PROTEOSE BACT.
35 000
6.20
217 000
pounds
Has been offered to Govt. agencies - not
interested.
PROCAINE HYDROCHLORIDE
163 000
2.75
448 250
pounds
10 units in a box, 150 and 200 MM ampules. Being
offered to other Govt. agencies by our regional
offices (after test).
HYDROGEN PEROXIDE, 8% SOL.
402 000
250 000
pounds
Too strong for beauty parlor use. Stock all re-
ported in leaky bottles. Bottles run from empty
to two-thirds full. Probably worth only salvage
value of the bottles.
293
Regraded Unclassified
- 19
QUANTITY
UNIT COST
COST TO GOVT.
ACETOPHENETIDIN
70 000
$ 1.35
$ 94 500
bottles
5 gr. tablets, packed 1000 in a bottle.
Obsolete item awaiting action by board of
medical officers.
7. General Products
DRUMS, 55 GAL. USED
50 000
2.50
125 000
Sales of moderate quantities are being made
regularly at ceiling price of $1.00
BATTERIES, DRY CELLS AND PACKS
130 000
Overage for Army use. New declarations come in
and sales are reported regularly.
AMMUNITION BOXES, METAL, USED
300 000
1.00
300 000
It is reported that about 2 million boxes are
coming in and we are awaiting further declara-
tions before starting disposal.
CAMERAS, AIRCRAFT
96
307 386
Each camera has great variety of collateral equip-
ment. Obsolete bype. Physical inspection being made.
Informal negotiations with Fairchild Camera Co. in
294
process.
Regraded Unclassified
- 20 -
QUANTITY
UNIT COST
COST TO GOVT.
GENERATING SETS, USED
12
$5,000.00
$ 60 000
25 K.W., gasoline driven. New declaration - no
action as yet.
HORSES
2 200
165.00
333 000
All horses will be sold according to established
program of auctions.
8. Paper and Office Equipment
BOXES, TABLET
320 000
.40
128 000
cartons
500 boxes in a carton. Believed to be
World War I stock. Samples awaited. Have
been requested a second time.
Total
$ 53 796 632
295
Regraded Unclassified
SURPLUS USED TRUCKS REPORT
For 7 Days and Period Ended, October 14, 1944
(Period Began January 1, 1944)
7 Days to Oct. 14, 1944 Period to date
Total Used Trucks Declared
569
41584
Less Declarations Withdrawn
4
1435
Less Loans to Other Federal Agencies
5
150
Less Transfers to Other Federal Agencies
12
21
3021
4606
Net Used Trucks Declared for Sale
548
36978
Less Used Trucks Sold
2116
27704
Balance of Used Trucks on hand
9274
ANALYSIS OF INVENTORY
Inspected and ready for sale
6221
Not inspected
3053
9274
286
Regraded Unclassified
SURPLUS USED PASSENGER CARS REPORT
For 7 Days and Period Ended, October 14, 1944
(Period Began January 1, 1944)
7 Days to October 14
Period to Date
Total Used Passenger Cars Declared
82
5964
Less Declarations withdrawn
0
112
Less Loans to other Federal Agencies
0
19
Less Transfers to other Federal Agencies
4
4
576
707
Net Used Passenger Cars Declared for Sale
78
5257
Less Used Passenger Cars Sold
229
3898
Balance of Used Passenger Cars on hand
1359
ANALYSIS OF INVENTORY
Inspected and ready for sale
921
Not inspected
438
1359
297
Regraded Unclassified
SURPLUS MOTORCYCLES REPORT
For 7 Days and Period Ended, October 14, 1944
(Period Began January 1, 1944)
7 Days to October 14 Period to date
24
14172
Total Motorcycles Declared
Less Declarations Withdrawn
2
35
Less Loans to Other Federal Agencies
0
o
Less Transfers to Other Federal Agencies
0
2
210
245
Net Motorcycles Declared for Sale
22
13933
329
8255
Less Motorcycles Sold
5678
Balance of Motorcycles on hand
ANALYSIS OF INVENTORY
4181
Inspected and ready for sale
1497
Not Inspected
5678
Note: Minus 28 total declared -
Region 8 - erroneously reported 28 declared in report August 26th.
298
Regraded Unclassified
299
CABLE TO AMBASSADOR MACVEAGH, CATRO, EGYPT, FROM WAR REFUGEE BOARD
Please deliver the following message to Leon P. Denenberg from
the International Rescue and Relief Committee:
QUOTE CONGRATULATIONS YOUR GOOD WORK STOP CABLE IMMEDIATELY
WHETHER YOU REQUIRE ASSISTANCE FOR NECESSARY PERMISSIONS TO
ENTER ITALY STOP EAGER TO HAVE YOU SURVEY REFUGEE SITUATION
THERE AND ESTABLISH PERMANENT REPRESENTATIVE IF POSSIBLE UNQUOTE
10
1:00 pemo
October 17, 1944
300
DRAFT OF A CABLE TO LONDON
Please advise Mr. Frantisek Nemec and Mr. Jan Becke, c/o Czechoslovak
Ministry of Foreign Affairs, trustees in London of the American Relief for
Czechoslovakia, Inc., New York, New York, that the Treasury Department has
amended Section 2 of license No. W-2153 described in the Department's tele-
grams Nos. 2158 of March 31, 1944 and 6969 of August 30, 1944, to read as
fellows:
"The total amount of funds paid out or set up in blocked
accounts or otherwise obligated under the terms of this
license shall not exceed the amount of dollars (or the for-
eign currency equivalent thereof) authorized by specific
Treasury licenses to be used under this license."
This amendment is in connection with a specific Treasury license
issued to the American Relief for Czechoslevakia, Inc., to remit to Mr.
Frantisek Nemec and Mr. Jan Becko the sum of $200,000 in addition to the
remittance previously licensed. It has the approval of the Department, the
War Refugee Board and the Treasury.
3:00 p.m.
October 17, 1944
Regraded Unclassified
301
ECM 205
Lisbon
Distribution of true
Dated October 17, 1944
reading only by special
arrangement, (SECRET W)
Rec'd 10:29 p.m.
Secretary of State
Washington
3169, October 17, 7 p.m.
FOR LEAVITT FROM PILPEL
Saly buying cheese, rice, ovaltine, vegetables
and blankets in Switzerland for shipment wherever and
whenever possible. Amount spent 500,000 Swiss francs. He
urges additional purchases there but for that would
need funds additional to your regular remittances.
This is WRB 224 JDC 92 Mayer informed by Filderman
that 5,000,000 Swiss francs if sent immediately or
ten if at all delayed needed for 200,000 Jews liber-
ated from labor camps, returned deportees and refugees
from Hungary. Also urgent necessity of creation 4 re-
training centers. To present 600,000 Swiss francs
used by Filderman to secure 500,000,000 lei. Money
now needed for October, November, and December for
food, clothing and lodging. No confiscated property
has been
302
0
- 2 - #3169, October 17, 7 p.m. from Lisbon
has been returned as yet. Saly has made total credit
of 2,000,000 Swiss francs of which 1,400,000 still
available. Telegraph your decision regarding financ-
ing work immediately. Report dated October 11 received
from Budapest that 5,000 Jews already deported from
Slovakia.
NORWEB
MEV:CSB
0
CC: Miss Chauncey (for the Sec'y) Abrahamson, Aksin, Cohn, Drury, DuBois
Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack, Pehle,
Files.
Regraded Unclassified
303
CABLE TO MINISTER JOHNSON AND OLSEN, STOCKHOLM, SWEDEN
The War Refugee Board requests that you deliver the following message
to Wilhelm Wolbe, 11 Olefsgotten Strasse, Stockholm, Sweden from Rabbi
Kalmanowitz, Vaad Hahatzala Emergency Committee:
QUOTE We are informed that before leaving Kovno, Lithuaniay
Germans took with them five of the greatest rabbis, among whom were
Elchanan Wasserman and Abraham Gredzinski. Please de everything
possible to make contact to save them and try to obtain Swadish pass-
ports for them. Money no object. UNQUOTE
From WRB to Olsen.
Please lend your fullest cooperation in this matter.
3:30 p.m.
October 17, 1944
Regraded Unclassified
304
TK-398
PLAIN
Stockholm via London
Dated October 17, 1944
Rec'd 3:20 p.m. 18th
Secretary of State
Washington
4219, Seventeenth.
Swedish politics today's NYDAG fontpagedly carries
following article under heading "Baltic Fascists in Large
Numbers to Sweden" and subheading "Swedish Authorities
and American Legation as Organizers?" During present
year in neutral Sweden an extensive pro-Fascist and
anti-Soviet Baltic organization has been secretly developed.
Its chief purpose is conspiracy against USSR by organizing
political canyers in collaboration with German and Swedish
Nazis and some simple anti-Communist "democrats" to
conduct hostile propaganda against USSR and organize
emigration from Baltic States to Sweden. Thus far appro-
ximately 30,000 Balts been received Sweden as refugees.
Some are harmless people who have taken opportunity
escape war and eat full meal in Sweden. Puch elements
should enjoy available help and receive work and ob-
viously they can be sent home when peaceful reconstruction
era arrives. They unconstitute essential problem which is
Fascist core of Baltic emigration consisting persons intend-
ing remain Swedish. They will become Baltic irredentists
and center for anti-Soviet politics which will harm and
irritate Swedish policy and interests in east. Everyone
knows how badly Swedish authorities treated anti-Fascist
refugees during early years and it is only recently they
have received better treatment. Situation entirely dif-
ferent regarding Baltic refugees and Swedish authorities
facilitated their journey every possible way. Reliable
information indicates Swedish authorities positively as-
sisted in organization Baltic emigration to Sweden. 6000
to 7000 Estonian Swedes shipped here with German approval.
Estonians and Latvians selected by leaders of organization
in Sweden been brought here according plan. Swedish
General Staff ought explain why special "reception officer"
sent Gothland and what his instructions are regarding
Baltic refugees. Swedish Navy permits itself be photog-
raphed by press connection its strenuous services rendered
Baltic refugee boats. Such boats have come here, unloaded
and received fuel for return journey. It would be proper
for Government
Regraded Unclassified
305
-2- #4219, Seventeenth, from Stockholm
for Government state what is occurred and what's correct
regarding all this. Socialistic Republics, Estonia,
Lithuania following plebiscites been annexed to USSR over 4
years. Swedish Government acknowledged this status de facto
and de jure. How can Swedish Government permit or perhaps
allow Swedish authorities to collaborate with deportation
organized in Sweden of populations from Soviet territories?
Twon't do offer excuse that it's from German-occupied areas
where from refugees been saved because most of them for
over three years adjusted themselves to German occupation
and only just as Germans were driven out felt they ought
flee. Prominentest refugees were well regarded by Germans
wherefore this isn't generally a flight from Germans.
(Following under subheading "American Legation Involved"
is direct quotation): When Estonia was liberated from
Germans and Republic's lawful government returned to Tallinn
a "national" phantom government suddenly arose in Estonia;
that is to say Estonian people have never seen this
"government" but Swedish press obligingly played it up as
a political reality. Since then, however, nothing's been
heard of Government in question but our investigations into
matter led us to American Legation Stockholm (Three preced-
ing words underscored) where an Estonian employer has same
name as one of "Ministers" of phantom government. It's
definitely stated to be a case of one and the same person.
On this score a statement by American Minister Mr. Herschel
Johnson is eminently desirable. It is indeed a question of
relations vis-a-vis United States' great ally. American
Minister ought at same time tell public whether it was with
his knowledge that over 900,000 Swedish kroner (amount
underscored) have been paid by an employee of his Legation
for the organization of Baltic emigration to Sweden. We
must presuppose that the Minister is unaware of matter and
we hope our information will cause him to investigate what
kind of business a number of his employees are conducting.
(Following concluding paragraph is italicized) What has
been said above will suffice for today. We await with
interest what Swedish Government and American Minister have
to say in matter. From Swedish viewpoint it's plain these
machinations must be condemned. We don't have to concern
ourselves with the view that emigration of 30,000 to 40,000
Balts-and Finns-is going to complicate the solution of
postwar employment problems but we can keep exclusively to
question of political consequences which must be involved
when Sweden houses a counter-revolutionary reservoir if we
with to have reason enough for condemning this entire
traffic,
JOHNSON
LMS
Regraded Unclassified
305
CABLE TO MINISTER HARRISON FOR MCCLELLAND, BERN, SWITZERLAND
The War Refugee Board requests that you deliverthe following message
to Isaac Sternbuch, 3 Teufener Strasse, St. Gallen, Switzerland from Rabbi
Kalmanowitz, Vaad Hahatzala Emergency Committee:
QUOTE We are informed that before leaving Kevno, Lithuania,
Germans took with them five of the greatest rabbis, among whom were
Elchanen Wasserman and Abraham Gredzinski. Please do everything pos-
sible to make contact to save them. Money no object. UNQUOTE
3:30 p.m.
October 17, 1944
11
Regraded Unclassified
307
NOT TO BE RE-TRANSMITTED
COPY NO.
11
SECRET
OPTEL No. 338
Information received up to 10 a.m., 17th October,
1944.
1. NAVAL
A thick minefield off Aegina has delayed arrival of
Naval forces at Piraeus. One H.M. Minesweeper and one British
yacht minesweeper sunk in this minefield 15th. One of H.M.
Canadian Frigates sank a U-boat N.W. of the Shetlands yesterday
and took 44 priseners.
2. MILITARY
WESTERN EUROPE. Further limited advances by French
and U.S. in Epinal sector and east of Luneville against determined
resistance. Aachen completely surrounded and street fighting
taking place in the town. Repeated counter attacks by German
infantry and tanks from outside have been driven back with
heavy enemy losses. Canadians have advanced about a mile west-
wards on a six mile front west of the Savejaards Plaat and are
now firmly linked with their bridgehead north of Leopold Canal
in Watervliet area. The original bridgehead about eight miles
further west along the Canal has also been slightly enlarged.
GREECE. Our troops are now established in Athens
area and Kalamaki airfield south of Piraeus has been secured.
RUSSIA. Russians have captured Borsa in the
Eastern Carpathian feothills and in Yugoslavia have taken Nis.
3. AIR OPERATIONS
WESTERN FRONT. 15th/16th. 2,200 tons, mostly H.E.,
on Wilhelmshaven. Most markers accurate and heavy thereon.
Reconnaissance one hour later reported several fires in small
concentration.
16th. Bad weather reduced operations. Fighters
(1 missing) and fighter bembers flew 423 sorties mainly in
support of our troops and transport aircraft flew 107 routine
sorties.
16th/17th. 39 Mosquitoes sent to Cologne, all re-
turned safely.
MEDITERRANEAN. 15th. 302 medium bombers hit 7
road and rail bridges north of the Po; 34 fighters (2 missing)
and 506 fighter bombers attacked rear communications and troops
Bologna area with excellent effect.
4. HOME SECURITY
16th. About 8:30 p.m. 12 flying bombs plotted.
Regraded Unclassified