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Volume 803, December 15 – December 18, 1944
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Volume 803, December 15 – December 18, 1944
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 803
December 15-18, 1944
Regraded Unclassified
- A -
Book Page
Alk, Isadore G.
See Appointments and Resignations
Appointments and Resignations
Alk, Isadore G.: Appointed Chief Counsel of Foreign
Funds Control - 12/16/44
803
153
Surplus Property, Disposal of
Rosenthal, Morris:
Lewisohn (Sam)-HMJr conversation concerning -
12/15/44
11
Riegelman (Charles)-HMJr conversation; Rosenthal
present - 12/15/44
34,229
HMJr-Rosenthal conversation - 12/19/44:
See Book 804, page 3
Strasser (Arthur L.)-HMJr conversation - 12/19/44:
Book 804, page 6
Correspondence - exchange of - 12/21/44: Book 804,
page 183
Australia
See Lend-Lease: United Kingdom - Phase 2 (British Dominions)
- B - -
British Dominions
See Lend-Lease: United Kingdom - Phase 2
Business Conditions
Haas memorandum on situation, week ending December 16, 1944 -
12/18/44
269
Byers, Cary
See Post-War Planning: Germany
- È -
Elkus, Abram I.
See Post-War Planning: Germany
- I -
Financing, Government
Non-essential Expenditures, Committee on Reduction of:
Additional report and Treasury comment thereon -
12/15/44
67
War Savings Bonds: 6th War Loan Drive
Amount by which quota will be exceeded discussed by HMJr
and Gamble - 12/15/44
17
Secretary's Office - percentage of quotas reviewed -
12/15/44
56
a) HMJr-Bartelt conversation - 12/16/44
130
Regraded Unclassified
- G -
Book Page
Germany
See Post-War Planning
Glasser, Harold
See Italy
- H -
Harper's Magazine
See Post-War Planning: Germany
- I -
India
See Lend-Lease: United Kingdom - - Phase 2 (British Dominions)
Italy
Glasser, Harold: HMJr wants report on last trip before he
OK's another one - 12/18/44
803
209,218
a) Glasser report as of December 19, 1944
234,236
- L -
Lend-Lease
United Kingdom
Phase 2: British Dominions
Reciprocal aid for U.S. armed forces from Australia,
New Zealand, and India discussed in Treasury-State-
Foreign Economic Administration correspondence -
12/16/44
117
a) Copy of Acheson (State Department) letter
dated November 25, 1944, and copies of letters
from India Supply Mission, New Zealand Legation,
and Australian Government
118
b) Crowley's agreement - 12/29/44: See Book 805,
page 199
Gold and dollar holdings as of October 31, 1944 -
12/18/44
313
- N -
Nation. The
See Taxation
New Zealand
See Lend-Lease: United Kingdom - Phase 2 (British Dominions)
Non-essential Expenditures, Committee on Reduction of
See Financing, Government
Regraded Unclassifie
- P -
Book Page
Packard Motor Car Company
See United Kingdom
Post-War Planning
Germany
War Department to keep HMJr informed - - 12/16/44
803
125
Byers, Cary: Disquieting article in Harper's Magazine
for December sent to HMJr by Abram I. Blkus -
12/16/44
161
a) Reply to Elkus - - 12/22/44: See Book 804, page 309
State Department report on FDR's plans to date -
12/18/44
314
State Department memorandum giving resume of developments
in planning for occupation - 12/18/44
316
a) List of approved directives transmitted to
American representative on European Advisory
Commission
318
1) FDR: "Come back industrially to meet their
own needs but not to do any exporting" -
HMJr disturbed; discusses with Stettinius -
12/19/44: Book 804, page 10
State Department: Luxford and DuBois report after
looking over directives - 12/20/44: Book 804. page 96
a) Reconsideration of entire situation, now that
new group heads State, suggested by Luxford
b) Revised directive discussed: Book 804, page 98
Surplus Property, Disposal of: See Appointments and
Resignations (Rosenthal, Morris)
Public Relations, Division of
HMJr asks Administrative Assistant through whom Shaeffer,
etc., report - 12/18/44
249
- R -
Rosenthal, Morris
See Appointments and Resignations: Surplus Property, Disposal of
- S -
Secretary, Office of
See Financing, Government: War Savings Bonds
(6th War Loan Drive)
State Department
For Treasury-State relations see Treasury Department
See also Post-War Planning: Germany
Sullivan, John L.
Basil O'Connor-HMJr conversation concerning possible trip into
Poland for Red Cross - 12/18/44
262
Surplus Property, Disposal of
See Appointments and Resignations: Rosenthal, Morris
Switzerland
See War Refugee Board
Regraded Unclassified
- T -
Book Page
Taxation
Cost of collection - Bell memorandum - 12/15/44
803
66
Nation. The (See also Book 795): Further discussion by
0' O'Connell at 9:30 meeting - 12/18/44
213
a) Miss Kirchwey-HMJr conversation - 12/18/44
223
Treasury Department
Treasury-State Relations: Stettinius to send State
Department man "to brief" HMJr on international
situation once a week - 12/15/44
25
- U - -
United Kingdom
See also Lend-Lease
Packard plant sold; to whom should money be turned over?:
Discussion by HMJr and White - 12/16/44
111
- V -
Veterans Administration
Rehabilitation of Disabled Veterans: Treasury committee
to cooperate - discussion at 9:30 meeting - 12/18/44...
204
- V -
War Department
See Post-War Planning: Germany
War Refugee Board
Switzerland: "Spectacular achievements" reported by
Board representative - 12/16/44
175
War Savings Bonds
See Financing, Government
Regraded Unclassified
1
December 15, 1944
9:26 a.m.
HMJr:
Hello.
Operator:
Colonel McCarthy.
HMJr:
Hello.
Colonel
McCarthy:
Good morning, Mr. Secretary.
HMJr:
How are you?
M:
Fine, sir.
HMJr:
Colonel, I'm giving a little talk Saturday night at
8:15 on the radio.
M:
Yes, sir.
HMJr:
It's the end of the War Bond Drive.
M:
Yes, sir.
HMJr:
But I'm sort of directing the talk to the man overseas
with the idea of telling them that we at home -- that all
this talk that we're not -- you know -- on the home front
doing anything; that we have as evidence of the fact that
we're going over the top on the Sixth War Loan.
M:
Yes, sir.
HMJr:
Now, I'd like to send it over to you, see?
M:
Yes, sir.
HMJr:
And if you like it or if you have any suggestions or
criticism, I went them.
M:
Yes, sir.
HMJr:
And in the second place, if the Army likes it; if they
think that it would be good for the men overseas to know
about this, what can you do to merchandise it?
M:
I see.
HMJr:
See?
M:
Yes, sir. Let me -- let me take a look at it first.
Regraded Unclassified
2
- 2 -
HMJr:
Yes.
M:
If I get some idea about length and content and so on, I will
probably get a much better idea then about merchandising.
HMJr:
Right. Well, it will be a couple of hours before I get it
over there.
M:
Fine, sir.
HMJr:
But ....
M:
If-whoever brings it over, Mr. Secretary, will deliver it to
me personally, I'll address myself to it right away.
HMJr:
Of course, we wanted to get it out this afternoon for release
for Sunday morning, you see?
M:
I understand, sir.
HMJr:
So -- but I mean as far as the papers at home are concerned,
but I just don't know what the Army could do if it liked
something like this to get it to the men. I don't know what
the facilities are.
M:
Well, I think we have ways of doing that all right, but I --
as I say, I could speak better about it after I've read it.
HMJr:
That's fair.
M:
If I may, I'll read it and call you right back.
HMJr:
You look at the package and you see if you like it.
V:
Fine, Mr. Secretary.
HMJr:
Thank you.
M:
Thank you, sir.
Regraded Unclassified
3
December 15, 1944,
9:46 a.m.
HMJr:
Hello.
Harry
Hopkins:
Hello, Henry.
HMJr:
Speaking.
H:
Two things.
HMJr:
Right.
H:
Have you ever seen that dollar bill that the Germans or
the Vichy-ites got out with your name on it?
HMJr:
Oh, yeah.
H:
You've got that one?
HMJr:
Yep.
H:
I was going to send it over as a souvenir if you don't have
it.
HMJr:
No, I not only
....
H:
I think you should be greatly complimented. God damn, they
never did that good for me.
HMJr:
(Laughs) You mean the one that splits open in the middle?
H:
Yeah.
HMJr:
Yeah.
H:
And the second thing: I was talking to Warm Springs yesterday.
HMJr:
Yeah.
H:
And he got to talking about this Social Security tax business.
HMJr:
Oh, yes.
H:
And I asked him what he was going to do with it.
HMJr:
Yeah.
H:
He said, "I think I'm going to veto it."
HMJr:
Yeah.
Regraded Unclassified
4
- 2 -
H:
"I'm going to decide in the morning."
HMJr:
Yeah.
H:
I haven't been in on it. I don't know what you think
about it. He sounded a little "wishy-washy" about it.
I think he began to talk to me about his previous state-
ments on the same subjects.
HMJr:
Yeah,
H:
And I gathered he was thinking of keeping his own record
clear
HMJr:
Well, what we ....
H:
....
rather than the merits of it.
HMJr:
Well, as I -- no -- Fred Vinson and the Treasury recommended
that he sign it.
H:
Yeah.
HMJr:
Hello?
H:
Yeah.
HMJr:
And Labor and McNutt recommended that he veto it, and we
suggested that in signing it he say that they really have
a fresh look at the whole thing.
H:
Yeah.
HMJr:
The trouble of his veto is that both the House and the
Senate passed it by more than two-thirds.
H:
Well, he knows they're going to pass it over his veto.
HMJr:
But we felt that if he would say that we really have to
have & real fresh look at this whole thing.
H:
Well, it does need that, doesn't it?
HMJr:
Very, very much.
H:
Yeah.
HMJr:
And that right now overriding a Presidential veto at this
time, well, I think on the home front it would be bad.
Regraded Unclassified
5
- 3 -
H:
Yeah. Well, my guess is, Henry, that he's going to veto it.
HMJr:
Well ....
H:
Unless you get really interested in it.
HMJr:
No, I'm not going
....
H:
You've already told him what you think.
HMJr:
Yes, we sent it down with the Bureau of the Budget. It all
went down in one package.
H:
Yeah.
HMJr:
Because the Hill are very anxious - all they want to know
is just what they're going to do because if there's going
to be a pocket veto, they're going to stay here, you see.
E:
Yeah. Oh, I don't think he'd do that, would he?
HMJr:
Well, I don't know.
H:
That's pretty tough on Congress.
HMJr:
Yeah, but they're not going to let him get away with it and
I've told him that.
H:
Yeah.
HMJr:
So they'll just sit here.
H:
Yeah. Yeah.
HMJr:
And all they're asking is just to tell him what they're going
to do.
H:
Yeah.
HMJr:
And I -- I can't get excited about it.
H:
Yeah.
HMJr:
Don't you think right now an overriding veto is
....
H:
Yeah, I do.
HMJr:
Particularly . I don't think our side presented a very good
case.
Regraded Unclassified
6
- 4 -
H:
No. No.
HMJr:
What?
H:
Yeah. I think the political effect of overriding the President
is bad for him in the world picture right now. The world
won't understand it, you know.
HMJr:
No, I -- I
....
H:
Because they'll just say Congress is giving the President a
beating.
HMJr:
It would be -- you know how we feel here - without knowing
all the inside facts, if Churchill or
....
H:
That's right.
HMJr:
....
got defeated on any of those things that he's fooling
around with. What?
H:
Yeah.
HMJr:
We'd say, "Well, he's slipping".
H:
Yeah. What do the -- what do the Senate Leaders want him to do?
HMJr:
I've only heard from Rayburn and Bob Doughton. I haven't heard
from the Senate side.
H:
They'd like to have him sign it?
HMJr:
No, Rayburn said he doesn't care just as long as they know
what he's going to do.
H:
Yeah.
HMJr:
He said, if he -- he wasn't there -- if he'd have been there,
he'd have voted against it.
H:
Yeah.
HMJr:
But he says that they tell him they've got the votes and
....
H:
Yeah.
HMJr:
.... they'll just override it.
H:
All right, Henry.
Regraded
Unclassifie
7
- 5 -
HMJr:
But the point is, you know, if they went home then he could
have a pocket veto.
H:
Yeah.
HMJr:
And they're not going to let him get away with it.
H:
Yeah.
HMJr:
See?
H:
All right, old boy.
HMJr:
Are we apart?
H:
No. No. I'd just like to think a while about the political
effect on Roosevelt
HMJr:
Well, I
....
H:
.... in the world scene and the domestic -- particularly the
world scene.
HMJr:
I think it would be very bad, Harry, and we did not do a
good job up there.
H:
Yeah. Yeah. All right, old boy. Bye.
Regraded Unclassified
8
CONFIDENTIAL
December 15, 1944
Dear Harry:
Regarding the Social Security Bill
now before the President, there is attached
hereto a copy of my letter to the Budget,
recommending that the President approve
the bill and issue a statement. A copy
of the proposed statement is also attached.
Sincerely yours,
(Signed) Henry
Honorable Harry Hopkins
The White House
DWB:NLE
Regraded Unclassified
9
CONFIDENTIA'
December 12, 1944
Sir:
Your office has requested the views of this
Department on enrolled enactment of H.R. 5564, "To
fix the rate of tax under the Federal Insurance
Contributions Act on employer and employees for the
calendar year 1945."
It is recommended that the enrolled enactment
be approved by the President. It is further recom-
mended that a statement be issued by the President
to accompany his approval of the measure. A sug-
gested draft of statement for that purpose is en-
closed.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
The Director,
Bureau of the Budget.
10
CONFIDENTIAL
I have today signed H. R. 5564, a bill "To fix the rate of tax
under the Federal Insurance Contributions Act on employer and employees
for the calender year 1945."
This bill provides for continuing for 1945 the present contribution
rate of 1 percent on employers and employees under the old-age and
survivors' insurance system, instead of permitting the scheduled increase
to 2 percent to become effective January 1, 1945.
In my opinion the scheduled increases should have been permitted
to go into effect. I defer to the opinion of the Congress only as a
temporary disposition of the matter pending a thorough study both of
contributions and of benefits under the Act.
The contributions now being paid by employer and employee are
not sufficient to finance the benefits provided. Successive postpone-
ments have increased the deficit and appear to make inevitable sub-
stantial future contributions from the General Fund.
The provisions of this bill are concerned solely with the rate
of contributions and in no way modify the benefits provided by
present law. I have consistently urged a substantial broadening of
the social security program to the Congress, and have been pleased
to note that in the Congressional debates on this bill the necessity
for such action was generally recognised.
The consideration of the benefits to be provided under a revised
and expanded social security program, as well as the apparent necessity
for future General Fund contributions, requires a thorough review of
the methods of financing. In view of the prospect of early considera-
tion of these matters I do not at this time prese further for an increase
in the present rate of contributions.
11
December 15, 1944
10:45 a.m.
HMJr:
Yes.
Operator:
Go ahead.
HMJr:
Yes.
Operator:
Are you ready?
Sam
Lewisohn's
Operator:
Yes.
Operator:
The Secretary is on the wire.
Other
Operator:
Okay, he's waiting.
Operator:
Hello, Mr. Morgenthau.
HMJr:
Hello.
Sam
Lewisohn: Hello, Henry.
HMJr:
Yes, Sam.
L:
I made inquiries about that man and they say
he's tops.
HMJr:
They say he's what?
L:
Tops.
HMJr:
Tops.
L:
He's -- he's -- you know, he was the head of
that Stein, Hall & Company.
HMJr:
Well, I -- I don't know what Stein, Hall 18.
L:
What?
HMJr:
I don't know the company.
L:
Well, it's -- it's a very -- a very big export
and import company.
HMJr:
Yes.
Regraded Unclassified
- 2 -
12
L:
It represents the -- a very big Dutch concern
called the Hollanders of (Name of place inaudible)
and Amsterdam, and they handled sisal and
tapioca and tea.
HMJr:
I see.
L:
And they've done a great business in -- in --
in those commodities.
HMJr:
Yeah.
L:
The fellow is, they say, a very brilliant
man in his line.
HMJr:
Yeah.
L:
And he was loaned by them to go down to Washing-
ton, as you know.
HMJr:
Yeah.
L:
And he's a very able -- they say -- this is what
I get -- a competent and reliable fellow. There's
no question about his integrity. It's tops.
HMJr:
Good.
L:
His business judgment is good.
HMJr:
Good.
L:
And I understand -- they think he gets along very
well with people. They say so.
HMJr:
They do?
L:
Hello?
HMJr:
Yes.
L:
But they seem to think he's a very brilliant
fellow.
HMJr:
Well, that sounds very good, doesn't 1t?
L:
Yeah. He's back with Stein, Hall now you know.
HMJr:
Yeah.
Regraded Unclassified
13
- 3 -
L:
He was -- he said he was loaned to Economic
Warfare and then he came back to Stein, Hall.
HMJr:
Yeah.
L:
And they say he's a very able business man.
HMJr:
Good.
L:
One of the best -- six best men in the country,
they said, in respect to foreign trade.
HMJr:
Good.
L:
So that's that.
HMJr:
But ....
L:
Now, Henry.
HMJr:
Yeah.
L:
When it comes -- I find -- I've just got the
information -- we looked into La Hoya on the
coast and that won't do because it's too cold
in March.
HMJr:
Oh.
L:
So what we'll have to do is -- if you find that
Ellie wants to go ahead with it, is to see what
we -- whether we can get accommodations down at
Tucson.
HMJr:
I see.
L:
At the Arizona Inn.
HMJr:
Oh, I wouldn't want to go there, Sam.
L:
You would not?
HMJr:
No, that's right in the town.
L:
That's right in the town. Now, what you want to
do is to see if we can get some place on some
ranch, I suppose.
Regraded Unclassified
14
- 4 -
HMJr:
Well look, Sam, I really haven't had time and
I told Elinor of your talk. Let me talk a little
bit to her and see what she'd like.
L:
That's what I want you to do.
HMJr:
And then -- it's on account of her legs -- it's
a question of whether she's going to be able to
ride horseback.
L:
Yeah.
HMJr:
And if she can't ride, there's no use going to a
ranch.
L:
No, that's it.
HMJr:
See.
L:
That's the trouble.
HMJr:
Well, what I think you should do 1s that you and
Margaret ought to make your own reservations and
then -- so that you'll have something. You see?
L:
Yeah.
HMJr:
Not just wait for us, but -- so that -- but in
the meantime -- of course, the kind of place I'd
like to take Elinor -- I don't know if this would
interest you, but I think it would interest her.
And that is: I'd like to go to Cuba.
L:
You'd like to go to Cuba?
HMJr:
Yeah.
L:
Well, I'll tell you, the only trouble is we're
going out to Arizona.
HMJr:
Oh. Oh.
L:
And we're going -- I'm going out to the mines
there.
HMJr:
Oh, that's right.
L:
And I have to go -- I was going to get there
about the -- about the fifth of March.
Regraded Unclassified
- 5 -
15
HMJr:
I see.
L:
I was going to leave here on the second of
March and get there the fifth and then I was
going to be through there about the sixth or
the ninth or tenth.
HMJr:
I see. So you want to be in that vicinity?
L:
I think it's best.
HMJr:
Yes.
L:
Because otherwise the distances are enormous.
HMJr:
Yeah.
L:
Shall I look around anyhow?
HMJr:
Would you do that?
L:
And see what there is around there?
HMJr:
Right.
L:
I'll do that anyhow. It's worthwhile looking
around.
HMJr:
Right.
L:
Of course, the climate there is actually very
good.
HMJr:
Yeah. Yeah.
L:
And that's that.
HMJr:
Yeah.
L:
All right. And on that fellow, I think -- of
course, I can look further into him, but of
course, I thought you'd
....
HMJr:
No, that ....
L:
.... like to know right away.
HMJr:
That's right.
Regraded Unclassifie
- 6 -
16
L:
I'm leaving tomorrow for to go to Vassar to
graduate Betty, you see?
HMJr:
Oh, good.
L:
Betty is graduating tomorrow.
HMJr:
Good.
L:
That's the reason I called you up today.
HMJr:
Good.
L:
And I could make further inquiries but they
seem to be pretty -- from people I have
confidence in.
HMJr:
Right.
L:
So that's that.
HMJr:
Ever so much obliged.
L:
Not at all and I'll go ahead with looking
around about the other thing. And you let
me know how Ellie is later on, will you?
HMJr:
I'll let you know just as soon
....
L:
Okay.
HMJr:
Thank you. Bye.
Regraded Unclassified
December 15, 1944 17
11:16 a.m.
HMJr:
Lindow and Tickton
....
Ted
Gamble:
Yes.
HMJr:
do not want me to say that we've made the
$5 Billion individual quota.
G:
Yeah.
HMJr:
They think it's going to kill us. They are
willing for me to say that we've -- we will go
over the top by at least $5 Billion.
G:
Well, Mr. Secretary, I -- I don't agree with
them.
HMJr:
Well, they say that they've got to get the stuff
in and they're very much afraid everybody is
going to lay down on the job.
G:
Well, if everybody in the country quit, we'd
still get $5 Billion.
HMJr:
You're not afraid?
G:
Not in the slightest.
HMJr:
You're not?
G:
And you'll see -- and as a matter of fact, I'm
sure if you ask them specifically that question,
if they have any doubts if -- as to whether we're
going over $5 Billion or not
HMJr:
No, they have no doubts.
G:
they'll tell you that we will go over. And
I think that the line is that the Secretary of
the Treasury says that War Loan is over the top --
and I think that's one of the news punches to the
speech.
HMJr:
Well, how about my saying we're going to have at
least $19 Billion?
G:
I think that would be wonderful. Now -- but I
do frankly think that that's -- I think you can
say that we'll go over -- that -- that it would
appear at this date as though $19 Billion is the
amount -- that we would exceed $19 Billion.
Regraded Unclassified
18
- 2 -
HMJr:
They say that they will see it -- that they --
they can see it easily by Saturday.
G:
That's right. That's right. We can tell by
Saturday night.
HMJr:
Yeah.
G:
And it looks to me like we're in danger of
having over eighteen Saturday night.
HMJr:
All right. But you're not worried about it?
G:
I am not worried about it, Mr. Secretary, and
I think that's the whole punch to it.
HMJr:
Okay.
G:
All right, sir.
Regraded Unclassified
19
December 15, 1944
2:03 p.m.
Ted
Gamble:
....
the speech.
HMJr:
Yeah.
G:
And we'd recommend against any changes.
HMJr:
I see.
G:
I'll tell you, for two reasons: 1. The Lord &
Taylor operation. We don't think you ought to
mention any names, either theirs or Rich's.
HMJr:
Well, Gaston agrees with you on that.
G:
And -- and I think that if you make a direct
appeal to merchants to do something more, it
cheapens a little bit the tone of the speech.
I think it's a very high tone and you do that
by inference when you say that this work is
going to be kept up during the holiday season.
HMJr:
Yeah.
G:
And I think it's much better the way it is.
HMJr:
Well, I won't fight.
G:
And our people liked it.
HMJr:
Yeah.
G:
Very much.
HMJr:
They did?
G:
Yes, sir.
HMJr:
They did?
G:
Yes, sir.
HMJr:
The only thing -- just a minute. (Talks aside)
Bell questions that eighteen cents.
G:
Well, we got the eighteen cents from the George
Haas Department.
HMJr:
From George Haas.
Regraded Unclassified
20
- 2 -
G:
And I talked to Dan. He always questions
any figure that doesn't take in the printing
of the bonds
....
HMJr:
Yeah.
G:
....
but this is a legitimate sales cost, in
my opinion. And I think it's a good story.
HMJr:
Did they like it?
G:
They liked it immensely.
HMJr:
Yes.
G:
And I read it to them. I didn't read it as
well as I think you'll read it but I thought
it was good.
HMJr:
All right. Now, I'm -- I've sent it over to
the War Department. I had Forrestal for lunch.
He's going to send it out to the Fleet.
G:
Wonderful.
HMJr:
So I'm taking care of the Army and the Navy.
G:
Wonderful.
HMJr:
And Shaeffer and Little are here. Shaeffer is
going to see that -- I gather it's cleared with
O.W.I.
G:
That is right.
HMJr:
But I'm telling Little that I'm looking to him
on the over-all responsibility on the publicity.
G:
That is right.
HMJr:
Since it's War Bonds.
G:
That's right. It's the way it ought to be.
HMJr:
See?
G:
Yes.
HMJr:
Shaeffer gave me a look but I looked him back.
21
- 3 -
G:
(Laughs) Well, I think that's right because
it is War Bonds and we can still use the Sixth
War Loan organization to get it over.
HMJr:
They've got a -- you're not on the loud speaker
but they re all laughing.
G:
(Laughs) Okay.
HMJr:
All right.
G:
All right, sir.
HMJr:
Good bye.
G:
Good bye.
UUnclassified
22
December 15, 1944
2:13 p.m.
Eugene
Duffield:
How are you, sir?
HMJr:
Fine. Gene....
D:
Yes.
HMJr:
....
I had lunch with Forrestal and I told him
about a radio broadcast I'm doing on the end of
the War Bond Drive Saturday night.
D:
Yeah.
HMJr:
And how would he like to send it out to the
Fleet?
D:
Uh huh.
HMJr:
And he said if it's a tough speech, he would.
D:
Good.
HMJr:
So I'm sending it over to him, attention of
you.
D:
All right, fine.
HMJr:
We're releasing it for Sunday morning newspapers.
D:
Good.
HMJr:
And if you like it
....
D:
We'll certainly send it all over.
HMJr:
And as a matter of interest, after you're through
if you'll tell me what you did with it, I'd appre-
ciate it.
D:
You bet, we'll do that.
HMJr:
We'll get you -- I'll just send it over with my
card attached and you'll know what it's for.
D:
You bet I will.
HMJr:
But the idea is to get it to the Fleet because
I'm doing what I never did before. You see,
normally we don't know for two weeks what we
get in.
Regraded Unclassified
23
- 2 -
D:
Yes.
HMJr:
And I'm going to say that the thing has gone over
the top and expect to get over $19 Billion.
D:
Fine! Good!
HMJr:
And that's over $5 Billion indifidual. Well,
I'm just going to stick my neck out.
D:
Good. Fine.
HMJr:
And -- so that it has that news value.
D:
Yeah, you bet.
HMJr:
I think that the men would like to know.
D:
You bet they will.
HMJr:
Inasmuch as they've got -- own a lot of bonds
themselves.
D:
You bet, sir.
HMJr:
I'll leave it with you.
D:
Yes, sir, you send it to me and with your card
on it and we'll take care of it.
HMJr:
How's business?
D:
Well, I'm in the middle of an annual report and
that's never any fun. (Laughs)
HMJr:
All right.
D:
Okay, sir.
HMJr:
Good bye.
D:
Good bye.
24
December 15, 1944
2:56 p.m.
E. R.
Stettinius: Hello, Henry.
HMJr:
Yeah.
S:
Ed.
HMJr:
How are you?
S:
Good. How are you?
HMJr:
Did you say, "dead"?
S:
I said, "Ed". I'm good.
HMJr:
Oh, you're good?
S:
Yes, sir.
HMJr:
Yeah.
S:
I just want to make my peace with you for not
getting to this important business we had between
us this week.
HMJr:
Well, that's all right.
S:
If there's anything -- there's nothing that won't
hold until we see each other Monday, is there?
HMJr:
No. The only -- I wrote you a little note.
S:
Yeah.
HMJr:
And I was a little worried about all this stuff
in the paper about Allied authorities doing this
and that.
S:
Well, I'm -- I'm getting that whole story together
and going to bring it with me Monday so you can go
over the whole thing from soup to nuts.
HMJr:
And -- well, that will be fine -- the other thing,
when you come over, you might have in mind the
possibility of some person who could come over
maybe once or twice a week and sort of bring me
up to date on what's happening in the world.
S:
Political stuff?
Regraded Unclassifie
25
- 2 -
HMJr:
That's the idea. We -- I used to have a State
Department man here, Merle Cochran.
S:
Yeah.
HMJr:
And he used -- he was loaned to me by Mr. Hull.
S:
Yeah.
HMJr:
And he used to -- this was some time ago -- he'd
go over and Mr. Hull would let him read the cables
in the outer office, and then he'd come back and
tell me. Well, I haven't got any such person, but
....
S:
Well ....
HMJr:
.... somebody..
S:
I'll make an arrangement to have somebody come to
you ....
HMJr:
Maybe once a week.
S:
....
about once a week and brief you on the whole
international situation.
HMJr:
That's what I'd like.
S:
All right, old fellow.
HMJr:
Once a week would be plenty.
S:
All right, sir. I think I have the man in mind
already that -- who is going to be my liaison
officer with the White House.
HMJr:
I see.
S:
He'll know everything there is to know, both what
goes on there and here.
HMJr:
Well, Jim was over here for lunch today.
S:
Forrestal?
HMJr:
Yeah. And he was saying he thought that you and
Stimson and he and I ought to get together once a
week.
Regraded Unclassifie
- 3 -
26
S:
Good plan.
HMJr:
And on a basis where we could really just take
our hair down and talk over our mutual problems.
S:
Right, Henry.
HMJr:
So -- anyway, what I've got will keep until Monday.
S:
Right, sir.
HMJr:
Thank you for calling.
S:
Righto.
HMJr:
Thank you.
Regraded Unclassified
27
December 15, 1944
3:30 p.m.
AUTHORIZATION OF GENERAL COUNSEL TO SIGN OFFICIAL MAIL
Present: Mr. O'Connell
Mr. McDonald
H.M.JR: Now, this is how to sign?
MR. O'CONNELL: The main thing I wanted to talk about
is a decision which must be made as an inevitable result of
my being put in general charge of the Bureau. There is a
deuce of a lot of mail, and it would be my view that the
logical way to handle it would be for me to sign such things
as are required by law to be signed in the name of the
Secretary as Acting Secretary, and everything else I would
sign as General Counsel.
H.M.JR: Who else signs as Acting Secretary?
MR. O'CONNELL: Herb Gaston and Dan Bell and John
Sullivan. They are the only ones, plus the General Counsel,
who have legal authority to sign as Secretary, and you
remember last June when I was appointed General Counsel you
told me that you didn't want me to act as Acting Secretary
on Foreign Funds, and I drafted an order changing the
Executive Order.
H.M.JR: Executive Order or Treasury order?
MR. O'CONNELL: Executive Order. There was an Executive
Order that was issued in 1941 which authorized the Under
Secretary, Assistant Secretary, and General Counsel by the
President.
H.M.JR: By the President?
MR. O'CONNELL: Yes.
H.M.JR: That is the thing I wanted to get. This is
authorizing him to sign as Acting Secretary. That is the
Regraded Unclassified
28
- 2 -
thing that was never quite clear in my mind, and that is what
I want to clear up.
Randolph Paul used to take the position that as Acting
Secretary he could sign for Foreign Funds, whether I liked
it or not, and that is something I never could understand.
MR. O'CONNELL: That is a novel idea to me. I didn't
know that.
H.M.JR: He claimed that as Acting Secretary that was
his sole authority and he could sign anything he wanted, and
he only reported to me as a matter of courtesy.
MR. O'CONNELL: That may be, but that is certainly not
the position any of your other people take.
H.M.JR: But he did. He had this authority which flowed
directly to him. Now, that is what I wanted to get straight.
That is why I have been holding this up.
MR. O'CONNELL: There was another order, mind you,
authorizing the General Counsel--first Ed Foley, and then
Mr. Paul--to act as Secretary in connection with Foreign
Funds matters.
H.M.JR: An Executive Order?
MR. O'CONNELL: No, your order. It never seemed to
me that was any different, in effect. It seemed to me it
merely was a delegation of authority from you in the same
way this is a delegation of authority from both you and the
President. And no one who acts as Acting Secretary, it
seems to me, can act independently of you; they act as your
delegate.
H.M.JR: That is the thing Paul once or twice raised.
I never understood it.
MR. O'CONNELL: I don't understand it, either; it doesn't
make sense to me.
MR. McDONALD: The theory is that in the absence of the
Secretary, these other Assistant Secretaries and the
Regraded Unclassified
29
- 3 -
Under Secretary would sign as Acting Secretary. That has
never been followed.
MR. O'CONNELL: No, that has never been followed. The
whole order is based on the theory that in the absence or
sickness of the Secretary certain persons may be named by the
President to act for you.
H.M.JR: Now, let's get this straight.
MR. O'CONNELL: The sole purpose and advantage of this
whole thing is one of your convenience. The only person,
that is, as I understand it, who ever has been, in fact,
the Acting Secretary is Dan Bell when you are not here.
There is a tremendous volume of routine material which has to
be signed by someone in your name, that is, as an Acting
Secretary, and the practice from time immemorial has been--
H.M. JR: Listen, you don't have to--if this is understood,
it is all right with me. I would like to have you have the
right to be Acting Secretary just as long as you don't feel
that by giving you that you have some independent power,
independent of me, which Paul seemed to think he possessed.
In other words, if you are Acting Secretary and sign Internal
Revenue mail, it is still subject to my review.
MR. O'CONNELL: There is no doubt about that in my mind.
H.M.JR: Well, I want to emphasize that. I haven't
had time. There is no question in my mind, but there was
something in Paul's mind. He felt that as Acting Secretary
his Funds. authority flowed from the President to him and to Foreign
MR. O'CONNELL: That certainly is not SO.
MR. McDONALD: Mr. O'Connell has t old me that he has
the opposite view.
MR. O'CONNELL: I prefer to sign as General Counsel.
H.M.JR: Let's stop the argument.
Regraded Unclassified
30
- 4 -
The other thing is this thing which you didn't look up,
this case in connection with Casey. There was something
where the Commissioner--I delegated him something in '40
or '41.
MR. O'CONNELL: That is right, in 1941. I don't have the
order with me. There is an order which you signed which
stated the Commissioner is the one to decide what will be
done with respect to a case which may involve fraud. Now,
the practice has been quite different. And the Casey case
is the only case I know of in recent years, certainly in the
last--
H.M.JR: May I again interrupt you? I would like to
tranfer that power to you.
MR. O'CONNELL: Yes.
H.M.JR: I want to revoke that with the Commissioner
and delegate that to you.
MR. O'CONNELL: I am & little at fault on that. The
reason we haven't really dug up the material and gotten
ourselves on entirely good grounds is, you remember, you
told Charlie Oliphant and me to do something about that,
and Charlie has been in the hospital ever since. I can,
but I have been a little backward about doing anything about
it.
H.M.JR: I didn't know how inter-related those two things
were.
MR. O'CONNELL: As a matter of fact it will probably
be very difficult to do.
H.M.JR: You are not prepared to talk? I am fighting
time, excuse me for interrupting you so much. Study it.
If we are going to move, we ought to move on both of those
fronts at the same time.
MR. O'CONNELL: They can be kept separate.
H.M.JR: That is quite agreeable. Are you, &S of today,
Acting Secretary when it is necessary to sign?
31
- 5 -
MR. O'CONNELL: Yes, I have been signing things as
Acting Secretary.
MR. McDONALD: That is the principal thing we
wanted to clear up.
H.M.JR: I didn't know whether we were going to take
this away from the Commissioner or do them simultaneously.
That was what was in the back of my mind all the time.
MR. O'CONNELL: This can be kept very separate. We can
take the first step now.
H.M.JR: I am happy as long as I know this is something
I have delegated to you to expedite things and it doesn't
give you the right to decide a case in Internal Revenue
without my being consulted if and when necessary. Is that
clear?
MR. O'CONNELL: That is right, sure.
Regraded Unclassified
32
December 15, 1944
3:40 p.m.
HMJr:
Hello.
Clifton
Fadiman:
Hello, Mr. Morgenthau.
HMJr:
Speaking.
F:
Mr. Fadiman.
HMJr:
Right.
F:
I've been in touch with Rex
....
HMJr:
Right.
F:
....
and it's a little hard to arrange it for
Tuesday. It's practically impossible for him.
HMJr:
Oh.
F:
We can take off Thursday if you can get us back --
if you can get me back in time for about six
o'clock in the evening. Would Thursday be any
good?
HMJr:
Oh, yes. What would you do -- come down on the
midnight?
F:
Well, no, I thought the best -- if you could get
us -- do you think you could get us plane priorities
coming and going?
HMJr:
I -- I think so but
....
F:
Maybe the best thing would be to come down on
the midnight. I can do that.
HMJr:
I think the best thing would be to come down on
the midnight and then
....
F:
And then take a train back.
HMJr:
Well, and then -- do you have a broadcast
Thursday night?
F:
No -- no, but I've got an appointment which I
must keep.
Regraded Unclassified
33
- 2 -
HMJr:
Well
F:
If we went there -- if you saw us in the morning --
Thursday morning, we could take any train.
HMJr:
Well, I -- I can see you at nine-thirty Thursday
morning.
F:
Nine-thirty Thursday morning I think is okay.
HMJr:
See?
F:
And then we -- that would give us plenty of time
to get back.
HMJr:
And then -- now, what I will do if you don't mind --
I'll switch you over to Mr. FitzGerald -- See? --
in my office.
F:
All right.
HMJr:
And you tell him what you want and he'll help you
get the lowers or whatever you want to come down.
F:
Well, I -- suppose I bother him only if we have
to. We can probably get them. I've got to check
with Rex anyway, on whether he's able to make it.
HMJr:
Well, anyway, it's on the same extension. If you
drop him a -- send him a telegram, I'll tell'him.
If you have any trouble, give him as much time as
you can. to get the accommodations coming down and
going back.
F:
I'll phone FitzGerald this afternoon if I need
his help.
HMJr:
Right.
F:
Okay.
HMJr:
I'll look forward to seeing you at nine-thirty
on the morning of the twenty-first.
F:
That's correct, sir.
HMJr:
Thank you so much.
F:
Good bye.
December 15, 1944
34
4:01 p.m.
Charles
Riegelman: Hello.
HMJr:
Charlie?
R:
Yeah.
HMJr:
Henry, Jr.
R:
Oh, hello, Henry; how are you?
HMJr:
Fine.
R:
What can I do for you?
HMJr:
That's the right question. I have Mr. Rosenthal
here in the office now, of Stein, Hall & Company.
R:
Yeah.
HMJr:
Your partner, Mr. Strasser, I think is chairman
of the Board.
R:
That's right.
HMJr:
And I don't know Mr. Strasser. I know you
slightly.
R:
Yeah.
HMJr:
And I want to get Mr. Rosenthal to come down
here to head up Surplus Property for us.
R:
Uh huh.
HMJr:
And I thought you might, if you would, talk to
Mr. Strasser and see what we can do to borrow
him.
R:
How long will he be needed, Henry?
HMJr:
Oh, I'd say for a minimum of one year.
R:
Uh huh. Well, of course, they just got him back
and just reorganized on the basis of his coming
back.
HMJr:
I know.
Regraded Unclassified
- 2 -
35
R:
And he probably told you that Mr. Hall died.
HMJr:
Yeah.
R:
So that he's more needed than ever.
HMJr:
Yeah.
R:
Does he want to come?
HMJr:
Well, I can ask him. Just a minute? (Talks
aside) He says the answer is, "Yes".
R:
The answer is "Yes".
HMJr:
Emphatically. Emphatically.
R:
I'll get on the job and locate Stratford this
afternoon or tonight and I'll ask him to put
all the pressure I can on it.
HMJr:
Well, I could ask no more of you.
R:
I beg your pardon?
HMJr:
I could ask no more.
R:
And I think that he ought to be patriotic enough
to do it. It means more work for him probably
but if the situation is such that they could
get along as long as they did without him, I
should think that they ought to be able to do it
again for a year.
HMJr:
Well, we like Mr. Rosenthal very, very much.
R:
Oh, he's a very able fellow.
HMJr:
And ....
R:
Everybody recognizes that.
HMJr:
to get the right man for this Surplus
Property is very difficult.
R:
Is this to be -- this is not one of the Commissioners
is it?
HMJr:
No, Surplus Property in the Treasury.
Regraded Unclassified
- 3 -
36
R:
In the Treasury?
HMJr:
We have all consumer goods.
R:
All consumer goods, yeah.
HMJr:
It's an enormous job.
R:
Uh huh. And that has nothing to do with the
other Commissions?
HMJr:
No, the -- we would -- the Treasury Procurement
operates under the guidance of this Board.
R:
Yeah.
HMJr:
We'd be the operating agency.
R:
You'll be the operating agency.
HMJr:
On the consumer goods.
R:
Yeah.
HMJr:
I mean, we don't have factories and we don't have
boats else. and ships but We have practically everything
R:
I see. Yes, sir.
HMJr:
See?
R:
Yes, sir. Well, I'll be glad to do everything I
can and do you want me to call you Monday?
HMJr:
If you would.
R:
I will.
HMJr:
On District 2-6-2-6.
R:
District ....
HMJr:
2-6-2-6.
R:
2-6-2-6.
HMJr:
You can reverse the charges.
Regraded Unclassifie
- 4 -
37
R:
All right. I'll be glad to. I'll let you know
one way or the other if I can get him to try that --
but I'll call you in any event.
HMJr:
I thank you.
R:
Bye. How's Ellie?
HMJr:
Elinor 1s fairly well. She had an operation ten
days ago.
R:
Is that so? That's too bad. Did you get a house?
HMJr:
No. Well, now, wait a minute. I'm in the process
of drawing a lease.
R:
Oh, you are.
HMJr:
Yeah, but I haven't signed it.
R:
I see.
HMJr:
Yeah.
R:
Well, I certainly hope to see you. We saw your
dad a little while ago. He's doing pretty well,
I think.
HMJr:
Yes, he 1s, Charlie.
R:
He's a wonderful fellow.
HMJr:
I hope to see you.
R:
All right. I do too. Well, I'll be running into
you. And I'll call you Monday in any event.
HMJr:
Thank you.
R:
So long.
Regraded Unclassified
Draft II.
Closing Address - 6th War Loan
Hords 38
Secretary Morgenthau
12/15/44
We have come to the close of another war bond drive the
sixth special campaign for funds since we entered the war, the
third in the course of this year. I want to report this evening
on the results of this drive. The report should be made, it seems
to me, directly to the men for whose use this money has been
raised - the men who are carrying the tough and ugly brunt of the
battle for our freedom.
We set a goal in this Sixth War Loan drive of 14 billion
dollars. It was a high goal. It had to be. Well, that goal has
been met. In fact, it has been surpassed. But we had another
objective even more important than the over-all total of the
drive - to raise five billion dollars through the purchase of
bonds by individuals. I am thrilled to be able to report to you
this evening that this objective also has been fully achieved.
I derived a good deal of amusement from a Berlin radio
broadcast recorded here on December 5th. This is what it said:
"Radio New York reports that during the first half of the period
allotted to the Sixth American War Loan Drive, only one-fourteenth
of the amount to be subscribed has been collected. One billion
dollars has been subscribed during the first two weeks of the
four-week drive which was to bring in at least 14 billion dollars.
All right, Herr Himmler, the other thirteen-fourteenths is now on
its way and will be delivered to you in due course.
Regraded Unclassified
39
- 2 -
The final tally on the Sixth War Loan cannot be completed until
the end of this month. This is because millions of workers who
authorized their employers to deduct money for bonds out of their
pay envelopes will not complete their payments until the last
pay day in December and because it takes time to inscribe and
report to the Treasury the bonds purchased in the thousands of
sales outlets in rural communities and distant places.
Among the distant places where bonds were sold in great
numbers are the bases and battle lines of our armed forces overseas.
Yes, our men in uniform are bond buyers, too. During the past
twelve months they have bought just about one billion dollars worth
of war bonds. Shortly before the Sixth War Loan drive began -
to give you just one illustration of their spirit - the men of
the Eighth Air Force in England organized a war bond drive
of their own. Their slogan was, "Have you signed the book?" Every
one who bought a bond signed a book which was sent to General
Arnold as testimony to their support of the Treasury. Nearly
every member of the Eighth Air Force signed.
But tonight I want to tell these men in uniform something
about the spirit in which this bond drive at home was carried
Regraded Unclassified
40
- 3 -
through to its successful conclusion by the men and women in
the mines and shops and mills and offices and farmhouses of
America. I want them to know how well the home front has
lived up to its responsibilities.
More than 50 per cent of all E bonds - the bond which most
individual investors buy - are sold to men and women at their
places of employment. In these places more than 20 million
workers who buy bonds regularly month in and month out were
harnessed into the Sixth War loan campaign for the purchase of
extra bonds. Drives were organized in more than 150,000 separate
plants. And all over the country labor unions and employers worked
together as a team to reach, and exceed, the quotas in their
particular establishments.
Let me give you a few specific illustrations of the way in
which people worked together to go over the top in this campaign.
A shipyard with about 5000 employees put on a drive in cooperation
with the union leaders in the shipbuilding industry. It took them
exactly 33 minutes to contact and canvass every worker in the yard.
Before the first day of the drive was over, that shipbuilding
plant had subscribed over a million dollars.
Regraded Unclassified
41
- 4 -
They were even more efficient in one of the big airplane
factories in Los Angeles. There an army jeep ran up and down
the assembly line with trained bond sales girls actually taking
bond orders and issuing bonds with almost no interruption whatever
of working time.
Or consider the little town of Stratford, Connecticut, with
a population of 22,500, where eleven firms employ 14,000 of these
people. The employees of these eleven firms raised 1,300,000 dollars -
more than 150,000 dollars above their quota. Here's another case.
In Philadelphia there is a little company making ice cream. It
employs 400 men and women, and the Treasury gave it a quota of
30,000 dollars. Every person in that plant subscribed to the
Sixth War Loan - for a total of 205,000 dollars.
It wasn't altogether easy for the civilian public to reach the
high goal we set in this Sixth War Loan. As I have already noted,
this was the third special appeal this year. And it came, of
course, on top of the regular bond buying done in accordance with
pay roll deduction and monthly purchase plans. Virtually every
person in the United States had to share in the program in order to
raise the five billion dollars worth of individual subscriptions.
The record, I think, is the best testimony that Americans at home
could offer as to the devotion and spirit with which they are backing
up the men on the battle fronts.
Regraded Unclassified
42
- 5 -
It is testimony also to a magnificent unity and cooperation
at home. The tremendous job of selling war bonds was performed
almost entirely by a great army of volunteer workers in every
part of the country. They made it their business to talk personally
with nearly every citizen, either at his home or at his place of
work. They collected funds, issued bonds and did the hard work
of accounting. That work is still going on and will have to be
continued faithfully throughout this month in order to get all
the reports of bond purchases filed with the Treasury by December 3lst.
I think it is a fact worth noting that the cost to the
Federal Government for every thousand dollars raised in the war
bond program amounts to exactly 18 cents. This is because the
sales force is composed almost entirely of volunteers and because
the tremendous promotion effort carried on in connection with the
bond program was contributed freely by advertisers and advertising
agencies, by newspapers and radio stations, by theaters, stores,
banks, clubs, labor unions, chambers of commerce, and all the
various civic associations that made up the vast mosaic of bond
activity. They have given more than money to this drive. They
have given imagination and energy and devotion. One of New York's
Fifth Avenue department stores, for example, for an entire day at
Inclassifie
43
- 6 -
the height of the Christmas shopping season offered for sale only
one kind of merchandise - war bonds. Theaters and moving picture
houses have given innumerable special performances to help the
sale of war bonds; stage and screen stars have generously devoted
time and talent to the program. The broadcasting network over
which I am speaking tonight has turned over its facilities con-
tinuously for the past 13 hours exclusively to the war bond
campaign. These are but samples of the varied ways in which
Americans of every trade and profession have pitched in and teamed
together on the home front.
There has been some stupid and dangerous talk of late that
civilians over here are defaulting on their obligations to their
fighting men. This Sixth War Loan is a concrete refutation of
such nonsense.
The whole drive has been a magnificent demonstration of
home-front solidarity - of real determination on the part of
American civilians to carry out in full measure their responsibilities
in the war effort. It should carry to the men overseas a ringing
declaration of unlimited confidence and unstinted support.
It happened that this drive coincided with the launching of
the war's greatest offensive in Europe and with the beginning
44
- 7 -
of a major effort to liberate the Philippine Islands from
Japanese conquest. The buying of war bonds was one direct way
in which we could share in these great engagements. We at
home know well that hard and bitter battles lie ahead. For us,
there will be other war loan drives after this one. We shall see
them through.
And just as the fighting forces, day after day, must continue
their relentless pressure on the enemy, we at home need to stick
steadfastly at our production jobs and to meet each month our
regular bond buying obligations. This Christmas shopping
season affords a particularly significant opportunity for
Americans here to join hands directly with the men overseas.
There may not be much Christmas celebration for them this year.
But we can help them celebrate by buying war bonds in their names.
No other gift within our choice, whether to those we love in
distant places or to one another here, can convey so much assurance
of our faith in them and in the cause to which they are giving
such high devotion.
We at home understand that this war is not yet won - that it
will not be won until unconditional surrender has been wrested
from desperate and stubborn enemies. We shall not fail or falter
Regraded Unclassified
45
- 8 -
until that time has come. There need be no doubt on this score
among the men in combat. The Sixth War Loan has carried to them
an expression of the way we think and feel. I believe it will
hearten and inspirit them. I believe it will tell them, better
than any words we could employ, that we recognize the magnitude
and splendor of the task they are performing. I believe it will
renew their certainty that all that we possess is pledged to
meet their needs.
Regraded Unclassified
46
Draft from which reading copy
was made.
Draft II Persult 94 words.
Closing Address - 6th War Loan
Secretary Morgenthau
Tright J report 2 you- one the close 8 the Sidth 12/15/44- Was doann drive
We have come to the elose of another war bond drive. the
the third special doing this year.
sixth special compaign for funds since we entered the war, the
third in the course of this year. I want to report this evening
on the results of this drive. The report should be made, it seems
to mey directly to the men for whose use this money has been
Mm
raised the men who are carrying the tough and ugly brunt of the
they
6,
battle for our freedom,
Darel
vor the
We set a goal in-this Sixth War Loan davise of 14 billion
4
dollars. It was a high goal. It had to be. Well, that goal has
when the tables are all
been met. In fact 44 has been surpassed. But we had another
-
objective even more important than the over-all total of the
drive - to raise five billion dollars through the purchase of
bonds by individuals. I am thrilled to be able to report to you
on the basis of returns aluady in, is seems clean that this objective
this evening that this objective also has been fully achieved.
also will be filly achieved.
I derived a goód deal of amusement from a Berlin radio
broadcast recorded here on December 5th. This is what it said:
"Radio New York reports that during the first half of the period
allotted to the Sixth American War Loan Drive, only one-fourteenth
of the amount to be subscribed has been collected. One billion
dollars has been subscribed during the first two weeks of the
four-week drive which was to bring in at least 14 billion dollars."
All right, Herr Himmler, the other thirteen-fourteentha is now on
its way and will be delivered to you in due course.
Regraded Unclassified
Closing Address - 6th War Loan
1316 words 48
Secretary Morgenthau
We have come to the close of another war bond drive - the
sixth special campaign for funds since we entered the war, the
third in the course of this year. I want to report tonight on
the results of this drive. But the report should be made, it
seems to me, directly to the men for whose use this money has
been raised - the men who are carrying the tough and ugly brunt
of the battle for our freedom.
We at home are in the position of trustees. We have & two-
fold responsibility. One part of this responsibility is to see
to it that the fighting men get everything they need in the way
of weapons and equipment and supplies. The other part is to see
Anserk A
to it that the economy of this country is kept on an even keel
so that this will remain a land of opportunity for them when they
return.
Now the only way this second responsibility can be met is by
financing a large part of our tremendous production job out of
current income. To some extent, this has been done, as you know,
through heavy taxation. And in part it has been done by appealing
to the American people to refrain from buying things they want but
do not actually need - and to lend the money they might have spent
to their Government instead.
Regraded Unclassified
49
- 2 -
The final tally on the Sixth War Loan cannot be completed until
the end of this month. This is because millions of workers who
authorized their employers to deduct money for bonds out of their
pay envelopes will not complete their payments until the last
pay day in December and because it takes time to inscribe and
report to the Treasury the bonds purchased in the thousands of
sales outlets in rural communities and distant places.
Among the distant places where bonds were sold in great
numbers are the bases and battle lines of our armed forces overseas.
Yes, our men in uniform are bond buyers, too. During the past
twelve months they have bought just about one billion dollars worth
of war bonds. Shortly before the Sixth War Loan drive began -
to give you just one illustration of their spirit - the men of
the Eighth Air Force in England organized a war bond drive
of their own. Their slogan was, "Have you signed the book?" Every
one who bought a bond signed a book which was sent to General
Arnold as testimony to their support of the Treasury. Nearly
every member of the Eighth Air Force signed.
These men uniform willwant To burw
But tonight 1 want to tell these mersoán uniform something
about the spirit in which this bond drive at home was carried
50
- 3 -
through to its successful conclusion by the men and women in
the mines and shops and mills and offices and farmhouses of
America. I wonk them to know how well the home front is living
They are intelled
lived up to its responsibilities.
More than 50 per cent of all E bonds - the bond which most
individual investors buy - are sold to men and women at their
places of employment. In these places more than 20 million
workers who buy bonds regularly month in and month out joined were
harnessed into the Sixth War loan campaign for the purchase of
extra bonds. Drives were organized in more than 150,000 separate
plants. And all over the country labor unions and employers worked
together as a team to reach, and exceed, the quotas in their
particular establishments.
Let me give you a few specific illustrations of the way in
which people worked together to go over the top in this campaign.
A shipyard with about 5000 employees put on a drive in cooperation
with the union leaders in the shipbuilding industry. It took them
exactly 33 minutes to contact and canvass every worker in the yard.
Before the first day of the drive was over, that shipbuilding
plant had subscribed over a million dollars.
Regraded Unclassified
51
- 4 -
They were even more efficient in one of the big airplane
factories in Los Angeles. There an army jeep ran up and down
the assembly line with trained bond sales girls actually taking
bond orders and issuing bonds with almost no interruption whatever
of working time.
Or consider the little town of Stratford, Connecticut, with
a population of 22,500, where eleven firms employ 14,000 of these
people. The employees of these eleven firms raised 1,300,000 dollars -
more than 150,000 dollars above their quota. Here's another case.
In Philadelphia there is a little company making ice cream. It
employs 400 men and women, and the Treasury gave it a quota of
30,000 dollars. Every person in that plant subscribed to the
Sixth War Loan - for a total of 205,000 dollars.
It wasn't altogether easy for the civilian public to reach the
high goal we set in this Sixth War Loan. As I have already noted,
this was the third special appeal this year. And it came, of
course, on top of the regular bond buying done in accordance with
pay roll deduction and monthly purchase plans. Virtually every
with income
person in the United States had to share in the program in order to
raise the five billion dollars worth of individual subscriptions.
The record, I think, is the best testimony that Americans at home
could offer as to the devotion and spirit with which they are backing
up the men on the battle fronts.
Regraded Unclassified
52
- 5 -
It is testimony also to a magnificent unity and cooperation
at home. The tremendous job of selling war bonds was performed
almost entirely by a great army of volunteer workers in every
part of the country. They made it their business to talk personally
with nearly every citizen, either at his home or at his place of
work. They collected funds, issued bonds and did the hard work
of accounting. That work is still going on and will have to be
continued faithfully throughout this month in order to get all
the reports of bond purchases filed with the Treasury by December 3lst.
I think it is a fact worth noting that the cost to the
Federal Government for every thousand dollars raised in the war
bond program amounts to exactly 18 cents. This is because the
sales force is composed almost entirely of volunteers and because
the tremendous promotion effort carried on in connection with the
bond program was contributed freely by advertisers and advertising
agencies, by newspapers and radio stations, by theaters, stores,
banks, clubs, labor unions, chambers of commerce, and all the
make
various civic associations that made up the vast mosaic of bond
activity. They have given more than money to this drive. they
have given imagination and energy and devotion. One of New York's
Fifth Avenue department stores, for example, for an entire day at
Regraded Unclassified
53
- 6 -
the height of the Christmas -hopping season offered for sale only
one merchandise - war bonds. Theaters and moving picture
Another kind of great storian attanta did the same thing fortune days minning
houses have given innumerable special performances to help the
sale of war bonds; stage and screen stars have generously devoted
time and talent to the program. The broadcasting network over
which I am speaking tonight has turned over its facilities con-
tinuously for the past 13 hours exclusively to the war bond
campaign. These are but samples of the varied ways in which
Americans of every trade and profession have pitched in and teamed
together on the home front.
There has been some stupid and dangerous talk of late that
civilians over here are defaulting on their obligations to their
añower to
fighting men. This Sixth War Loan is a concrete refutation of
such nonsense.
The whole drive has been a magnificent demonstration of
home-front solidarity - of real determination on the part of
American civilians to carry out in full measure their responsibilities
in the war effort. It should carry to the men overseas a ringing
declaration of unlimited confidence and unstinted support.
It happened that this drive coincided with the launching of
the war's greatest offensive in Europe and with the beginning
Unclassified
54
- 7 -
of a major effort to liberate the Philippine Islands from
Japanese conquest. The buying of war bonds was one direct way
in which we could share in these great engagements. We at
home know well that hard and bitter battles lie ahead. For us,
there will be other war loan drives after this one. We shall see
them through.
And just as the fighting forces, day after day, must continue
their relentless pressure on the enemy, we at home need to stick
steadfastly at our production jobs and to meet each month our
regular bond buying obligations. This Christmas shopping
season affords a particularly significant opportunity for
Americans here to join hands directly with the men overseas.
There may not be much Christmas celebration for them this year.
But we can help them celebrate by buying war bonds in their names.
No other gift within our choice, whether to those we love in
distant places or to one another here, can convey 80 much assurance
of our faith in them and in the cause to which they are giving
such high devotion.
We at home understand that this war is not yet won - that it
will not be won until unconditional surrender has been wrested
from desperate and stubborn enemies. We shall not fail or falter
Regraded Unclassified
55
- 8 -
until that time has come. There need be no doubt on this score
among the men in combat. The Sixth War Loan has carried to them
an expression of the way we think and feel. I believe it will
hearten and inspirit them. I believe it will tell them, better
than any words we could employ, that we recognize the magnitude
and splendor of the task they are performing. I believe it will
renew their certainty that all that we possess is pledged to
meet their needs.
Regraded Unclassified
56
VICTORY
INTERDEPARTMENTAL WAR SAVINGS BOND COMMITTEE
BUY
WAR
WASHINGTON
SONOS
STANDS
FICE OF CHAIRMAN
EASURY DEPARTMENT
December 15, 1944
TO THE SECRETARY:
Re: Sixth War Loan - Office of Secretary
Please speck
of the Treasury
This is in response to your request, received through
Mr. Fitzgerald, for a report on the participation by employees
of the Office of the Secretary in the Sixth War Loan.
The chart which you saw downstairs at the entrance shows
that the Secretary's Office had reached 90.04 percent of its
quota as of Saturday, December 9. The chart is revised only
once a week on the basis of weekly reports as of the close of
business on Saturday. The present percentage of quota for the
Secretary's Office is 95.9 percent, the details of which are
set forth below:
I. Secretary's Office
Number of Percent of
Unit
Employees
Quota
Committee on Practice
4
121.55
Assistant Secretary Gaston
7
204.74
Under Secretary and Fiscal
Assistant
21
109.61
Secretary's immediate office
13
80.14
to me
Administrative Assistant
26
129.51
Tax Legislative Counsel
21
98.81
Chief Coordinator, Treasury
Enforcement Agencies
21
78.64
Secretary's Correspondence
Division
22
68.56
Interdepartmental War
Savings Bond Committee
57
108.27
Public Relations
15
64.85
Surveys and Planning
13
61.03
White House (details)
23
76.58
Messengers
Secretary's
5
34.79
Fiscal Assistant
5
53.85
Under Secretary
3
35.67
Administrative Assistant
4
61.44
Total
256
95.98
57
- 2 -
One of the factors adversely affecting the percentage of
the Secretary's Office is that there were several separations
since the quota was established.
II. Over the Top
The following bureaus of the Treasury Department had ex-
ceeded their quotas on December 9, as indicated below:
Office
Percent of Quota
War Finance
163.73
Monetary Research
137.36
Public Debt
131.98
Secret Service
126.50
Bureau of Accounts
114.88
General Counsel
112.43
Research and Statistics
110.22
Foreign Funds Control
110.50
Bureau of Narcotics
107.10
Procurement Division
104.59
Comptroller of the Currency
104.12
The following bureaus and offices had not reached their
quotas on the basis of reports received up to the closing of
business on December 9, but it is to be borne in mind that these
figures will be substantially increased before the close of busi-
ness on December 31, after reports from all field offices have
been received:
III. Will Reach Quotas
Office
Percent of Quota
Customs
93.80
Chief Clerk
89.77
Treasurer, U. S.
87.67
Mint
83.76
Personnel
83.11
Internal Revenue
80.52
Tax Research
75.16
I am reasonably certain that all of the above mentioned bureaus
will reach their quotas.
IV. Doubtful
The only bureaus and offices in the doubtful column are the
following, although these percentages will be improved:
Regraded Unclassified
58
- 3 -
Office
Percent of Quota
Engraving and Printing
77.25
Superintendent of Treasury Buildings
84.92
V. Treasury as a Whole
The percentage for the Treasury Department, as a whole, on
December 9, was 91.45 percent. I am certain that the Department
will reach its quota of $6,622,880 when all field reports are in.
VI. All Departments - Nation-wide
I am also confident that the civilian employees of the Federal
Government, as a whole, will reach their Sixth War Loan Quota of
$200,000,000.
VII. Federal Employees in District
of Columbia
In the District of Columbia, I think the civilian Federal
employees will buy at least $3 million more than their $15 million
Series E quota.
E. F. Bartelt,
Chairman
House
59
MEMORANDUM FOR THE SECRETARY
December 15, 1944
Mail Report
The usual pre-Christmas lull settled over this week's
mail, which was lighter than it has been for some time.
Correspondence came from those who had particular prob-
lems to solve rather than from those who had opinions to
set forth; thus there was little material suitable for
abstracting.
As usual, bond matters overshadowed all other subjects.
Now that the Sixth Drive is ending, several writers,
anticipating the Seventh, suggested that hereafter Drives
be named rather than numbered. With Christmas gifts in
mind, a few persons again asked for smaller bonds similar
to the G. I. issue, and the scarcity of safety deposit
boxes prompted several to request additional and improved
safekeeping facilities.
The recent flare-up about rumors against E Bonds
subsided somewhat, and there was little opposition to the
over-the-counter plan for cashing them. Fourteen bonds,
several bearing Kentucky postmarks, were submitted for
redemption. Complaints about delays in handling bonds
dropped off also, with only 11 from families of Service
men.
In the tax mail there was little of consequence,
with 20 requests for overdue refunds. Along with quite
a few miscellaneous communications were 7 rather generous
contributions. Mr. Melchor Leon sent in his monthly
donation; one writer enclosed a new hundred-dollar bill;
and another his personal check for $1,000.
Regraded Unclassified
60
General Comments
Wolfram Hill, St. Paul, Minnesota. After giving your
plan of coaxing Germany into an agricultural country
further consideration, I am almost convinced that in
spite of opposition, it holds out the best prospects
of peace at least for the present generation. I am
ready to discuss, debate, or lecture on this plan and
in defense of its adoption. I feel it is the kindest
proposal to a confirmed outlaw nation. If there is
any concerted drive by any prominent organization in
support of your plan, would you kindly advise me 80
I may offer my assistance.
Samuel Mayer, Montevideo, Uruguay. I refer to my letters
of September 12 and October 17, to which I received no
answer till now. # # I improve the opportunity to beg
you very earnestly to resolve my demand and answer me
whether I may dispose freely every month of a part of
my blocked accounts for private needs. Since your letter
of January 25, I heard nothing from your Department,
although I wrote several times upon this matter. From
all my letters, you saw that I followed exactly the
instructions contained in your letter of January 25. If,
however, you want more information or proofs, I am at
your entire disposal to give them to you. # #
Dwight L. Bolinger, University of Southern California,
Los Angeles, California. Can you assure me that no
part of the government taxes that I may pay now, or in
the future, will be used to pay for lend-lease tanks
or other war material to be used by the British in killing
anti-fascists in Greece or elsewhere?
Melchor Leon, Mexico City, Mexico. I take the pleasure
to inclose herewith New York draft in the amount of
$245.40, equivalent of $1,190.18 Mexican pesos (at the
rate of exchange of $4.85 pesos for $1.00), to which
Regraded Unclassified
61
- 2 -
amounted the 25% of all purchases made by American
citizens in this store, during the month of November,
1944, that is donated to the U. S. Government for
"National Defense."
R. Moulton Pettey, National Director, National U. S.
Constitution Association, New York, New York, adds
the following postscript to 8. letter concerning
surplus property: "Your plan, recently published
anent just what to do with (and to) Germany appears
to meet with unqualified approval of everyone with
whom I have discussed the subject. We must not let
them get away this time to start another rampage of
murder, rape and arson in about ten years or less!
Will it be 'a Just Peace or Just a Peace'?!"
Philip B. Fisher, Philadelphia, Pennsylvania. I ex-
pected to participate in the Sixth War Loan to the
extent of purchasing a thousand dollar bond. However,
I am, I think, fully aware of the evil which might
result from too large a national debt. Feeling the
way I do, I have concluded that I would like to have
the privilege of contributing the thousand dollars in
a way that will not cause a corresponding increase in
the national debt. I, therefore, send you the enclosed
check as a donation to the United States Government.
62
- 3 -
Favorable Comments on Bonds
Major Edward Bowes, New York, New York. On November 30th,
I presented my Chrysler radio program at the Pacific
Theatre, Navy Pier, Chicago, Illinois, in conjunction
with the 6th War Loan. I wish to express my thanks for
the opportunity I have had of participating in the most
extraordinarily fine effort of its kind ever to be held!
Your Regional Administrative Officer requested me to pay
the bills - and said that the Treasury Department would
send a refund of the hotel and railroad charges incurred
by my staff on the trip to Chicago. I feel I would like
to assume the cost myself, as my contribution towards 80
worthy a cause, so, if such refunding checks have already
been sent, I shall return them to your Department. ###
With deepest admiration -
Walter R. Sanders, Louisville, Kentucky. (Encloses slip
urging buyer not to cash bonds). The attached persuaded
the writer to make his well worn, but still warm, over-
coat last one more season.
Regraded Unclassified
63
- 4 -
Unfavorable Comments on Bonds
Mrs. Ollie C. Hodges, Asheville, North Carolina. Several
times in the past you have written me about bond pur-
chases, and my husband and I have bought one each month
since Pearl Harbor. # # When our son started training
in the Armed Forces, he signed up for one each month to
be deducted from his pay. When he finished training and
started overseas, he signed up for a hundred dollar one
each month to be deducted from his pay beginning July 1.
I received one for July and one for August, then they
stopped. I waited until sometime in November. I wrote
the Bond Department about it, and they said the War
Department had notified them not to mail any more until
the Commanding Officer sent in the checked list each
month. And if they were not received in 90 days, to
notify my son to get in touch with his Commanding Officer
and find out why they did not send in the list. My son
is a pilot and a very busy person, and it takes a month
usually for me to get an air mail letter from him, and
the same perhaps for him to receive one from me. I don't
want to bother him with such stuff for he really has
enough to worry him now. You have always been kind
and I wanted to tell you about this, 80 you would know
why he quit buying. When he was in the States, I could
reach him by phone in a short while, but communications
are difficult now. It seemed strange they passed such an
order. Our fighting men are too busy to be bothered
contacting and checking all the time. After all, they do
deduct the money. He's due one for September, October,
November, and December.
J. T. Liddle, Elizabeth, New Jersey. I am deeply concerned
about the type of thinking which is being expressed pub-
licly by men in regards to the safety of bonds. Mr. Rickenbacher's
speech in New York as reported in the "Times" Tuesday,
December 5, 1944, coming during the Sixth War Loan Drive,
is especially disturbing. My wife and I have put almost
every asset we have in U.S. Bonds - $5,000 in Series E
and $10,000 in 64-69's. We do have faith in the Government's
integrity and are doing everything we can to further the
sale of U.S. Bonds.
Regraded Unclassified
64
- 5 -
Mrs. A. Korten, Long Island, New York. I would like
to know if you could give me any information regarding
war bonds taken out by my son while in N. Africa.
These were a bond a month taken out in July, 1943,
naming me as co-owner. These bonds were to be sent
to me every month. There are 18 bonds coming to me,
and I haven't received any. It seems to me as though
something crooked is going on, as I have tried to
trace these bonds for more than a year. I have written
to the War Department in Washington about them. I also
inquired of the War Bond Department in Chicago, with
no success. My son has also tried to trace them, with
no success. I receive quarterly bonds from my son, but
not the monthly bond. Could you perhaps tell me where
else I could write to. Anything you could do for me
regarding these bonds will be greatly appreciated.
Mrs. Sol P. Schwartz, Louisville, Kentucky. * # We
are in the drug business, and naturally our help is in
the Army, but I have given up teaching, etc., to help
my husband in his place of business. Every day when
he goes to the bank to make his deposits, the line gets
longer. Those people are not making deposits or buying
bonds, but are cashing in their bonds for cash. The
tellers were unable to take care of their regular cus-
tomers, so now they have a special window and a teller
for that purpose. I have been hearing quite a
few people say they buy what bonds they have to buy,
but as soon as they are negotiable, they cash them for
this reason. After the war there will be a change in
administration, and the face value of the bonds will be
changed and not be worth what they have printed upon
each bond.
Regraded Unclassified
65
- 6 -
Unfavorable Comments on Taxation
C. B. Smith, The Clyde Press, Pine Bluff, Arkansas.
There is a tax refund of $139.26 due the Clyde Press,
C. B. Smith owner, for 1943 taxes, and it seems to
me that more than ample time has passed in which this
refund should have been made. If the taxpayer is five
minutes late in the payment, he is penalized, yet
when there is something due him he can wait month after
month and still get nothing. Every man employed in
my plant has been taken from me, leaving me destitute
of help. In addition I am a cripple and need the
amount due me. Will you kindly see that it is forwarded
now?
Ellis M. Rohlf, New York, New York. I am in desperate
need of the refund on the 1943 withholding tax due me.
I have been ill and not able to work seven months in
this year. I need the refund money to pay taxes on my
home or lose it.
Elmer Hugchins, Wichita, Kansas. I hope you don't think
I am rude or hasty. But pardon me, sir, you are a family
man I am sure, and I hope you will get just what I am
wanting to say. I am buying a home and have four de-
pendents. I filed my income tax the 25th of last February,
1943. I have a refund of $136.07 due me. I am getting
a salary of $34.00 a week and on account of the high cost
of living and $18.50 a month payment on my home, I don't
have money to pay my home expense. Will you kindly, sir,
if not asking too much, see that my refund be mailed as
soon as possible?
Regraded Unclassifie
1
I
66
Cost of collecting internal
revenue taxes
32 & a $ 100
3.20 a $ 1000.
lowest in history.
12-15-44
from m. A.Bell D.
67
DEC 15 1944
My dear Mr. Chairmant
Receipt is acknowledged of your letter of December 2,
1944. enclosing copy of a proposed additional report of the
Joint Committee on Reduction of Nonessential Federal Expendi-
tures entitled "Unexpended Balances", and requesting my
comments and suggestions.
On December 14th, Mr. Borda informally indicated certain
changes on pages 7 and 9 of the draft submitted with your
letter of December 2, 1944. I have no objection to the pro-
posed report as amended to incorporate these changes.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
Honorable Harry F. Byrd
Chairman, Committee on Reduction of
Nonessential Federal Expenditures
Congress of the United States
Washington, D. C.
WTH:mlb:ec 12/14/44
Regraded
Unclassifie
68
THE SECRETARY OF THE TREASURY
WASHINGTON
My dear Mr. Chairman:
Receipt is acknowledged of your letter of December 2, 1944,
enclosing copy of a proposed additional report of the Joint Com-
mittee on Reduction of Nonessential Federal Expenditures entitled
"Unexpended Balances", and requesting my comments and suggestions.
I have no objection to the proposed report although there are
two mattere that I believe should have your further consideration.
It seems to me the Joint Committee should avoid any criticism
either directly or by implication, of the appropriations committees
of the Congress. The general tenor of the first paragraph on page
7 of the proposed report is one of criticism of the appropriations
committees. A similar statement is contained in one of the earlier
hate
drafts of the report and in my letter of March 22, 1944 in con-
nection with such draft I stated that as Secretary of the Treasury
I would not want to join in any direct or implied criticisme of
the appropriations committees. In this connection I made the
following comment:
we in He
discuss
"The nature and size of our far-flung war activities
make it imperative that the armed forces be given ample
with 12 it be
appropriations with which to plan their programs. The
War and Navy Departments must formulate long-range plans
see that chase
for the complete mobilization of our combat forces and
for the provision and equipment of our Army and Navy,
held adved horrier because god
and before they can make contracts or incur obligations
under our laws, Congress must first make the necessary
appropriations for such purposes. The size of our
being charged 14 am
armed forces and the extent of our perticipation in
the war require that huge appropriations be placed
under their control. The appropriations committees
of the Congress have recognized this situation and
have granted to the services appropriations of sums
on
that are needed for a successful prosecution of the war.
There may be cases where subsequent events show that too
the Boda n jogs chold urt the
many funds have been granted for particular purposes,
but on the whole I believe the committees have performed
& wonderful job in support of our armed forces. These
matters are under constant scrutiny by the Budge Bureau
and the committees from time to time and adjustments in
dirft
appropriations are made as the situations warrant.
It
seems to me that this is as it should be."
FORVICTORY
BUY
UNITED
On secender 14th her Barda informally indicated
STATES
WAR
BONDS
AND
STAMPS
certain changer on foger 7ama 9 of the droft submitted
with your letter of security v, G44, I love
no
objection to the froposed report as amended to incorporate
Regraded Unclassified
69
- 2 -
Under the caption "Fiscal Revision Needed" on page 9 of the
proposed report the following statement is made:
"It is believed that complete information should
be presented to Congress on unliquidated obligations
with respect to specific appropriations and a complete
and comprehensive accountability be rendered to the
Bureau of the Budget along with the estimated budgets
supporting proposed appropriations."
It is my experience that the Bureau of the Budget and the Congress
call for and receive complete information concerning unliquidated obli-
gations and all other matters affecting appropriations. The Bureau of
the Budget receives monthly reports containing complete data with
respect to appropriations and such reports are supplemented from time
to time by detailed memoranda whenever such information is necessary
for budget purposes. The appropriations committees likewise can
obtain whatever information they deem necessary with respect to
existing or proposed appropriations.
Very truly yours,
Secretary of the Treasury
Honorable Harry F. Byrd
Chairman, Committee on Reduction of
Nonessential Federal Expenditures
Congress of the United States
Washington, D. C.
Mr. Beel
Fred howton said
the Budget Bureau freed
objections along the lines
of on proposed regly. Shields
also tota howton those
Cong. Cannon had also
registered objections
affaication bons
of there objections joges 7+9
were changed as indicated
on the droft
urs
12/14
MR. HEFFELFINGER
RAMBY nace FYRD. SENATOR FROM VIRGINIA, CHAIRMAN
ROBERT L DOVERTOR, REPRESENTATIVE FROM - CABOLINA, VICE OMBIRAR
SENATE
I b
F. comer. SERATOR FROM GEORGIA
ALLEN T. TREADWAY. REPRESENTATIVE FROM MARACHWEETTS
a. EXPILLETTE a SENATOR FROM VISCONSIN
an COOPER, REPRESENTATIVE room
GLASS. SENATOR FROM VIRGINIA
CLARENCE CARINON, REPRESENTATIVE FROM MISSOURI
MORELLAR, SERATOR FROM
CUPTON A. WORDEN, REPRESENTATIVE FROM -
SEALS P. BTL SENATOR FROM NORTH SANDTA
- TANDL REPRESENTATIVE FROM new TOME
Congress of the United States
HIGHEY INDIVIDUAL N. DECRETARY or THE TREASURY
JOINT COMMITTEE ON REDUCTION OF NONESSENTIAL
MANDLO a. ENITIL DIRECTOR or THE - or THE REDUCT
FEDERAL EXPENDITURES
JUSEPS L SOBIA, CLESS
CREATED PURBIANT TO sec. BL OF THE REVENUE ACT or 1841
December 2, 1944
r
Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
My dear Mr. Secretary:
At the last meeting of our committee,
prior to the adjournment of Congress, a report
on unexpended balances was tentatively agreed
upon.
Since then, the report, a copy of which
is enclosed, has been carefully checked with
the Treasury Department, and there is no dispute
as to the amount of the unexpended balances
contained in the report.
I would be glad if you would go over this
report and let me have your opinion regarding it
at the earliest possible time.
With best wishes, I am
Cordially yours,
Hany Chairman 7. Ryra
enclosure
Regraded Unclassified
72
78TH CONGRESS)
2d Session
1
SENATE
{
REDUCTION OF NONESSENTIAL FEDERAL
EXPENDITURES
ADDITIONAL REPORT
OF THE
JOINT COMMITTEE ON REDUCTION
OF NONESSENTIAL FEDERAL EXPENDITURES
CONGRESS OF THE UNITED STATES
PURSUANT TO
SECTION 601 OF THE REVENUE ACT OF 1941
UNEXPENDED BALANCES
SEPTEMBER 21 (legislative day, SEPTEMBER 1), 1944.-Referred to the
Committee on Appropriations and ordered to be printed
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1944
Regraded Unclassified
CONGRESS OF THE UNITED STATES
JOINT COMMITTEE ON REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES
CREATED PURSUANT TO SECTION 601 OF THE REVENUE ACT OF 1941
HARRY FLOOD BYRD, Senator from Virginia, Chairman
ROBERT L. DOUGHTON, Representative from North Carolina, Vice Chairman
SENATE
HOUSE OF REPRESENTATIVES
WALTER F. GEORGE, Senstor from Georgia.
ALLEN T. TREADWAY, Representative from
ROBERT M. LA FOLLETTE, JR., Senator from
Massachusetts.
Wisconsin.
JERE COOPER, Representative from Tennessee.
CARTER GLASS, Senator from Virginia.
CLARENCE CANNON, Representative from
KENNETH McKELLAR, Senstor from Tennes-
Missouri.
see.
CLIFTON A. WOODRUM, Representative from
GERALD P. NYE, Senator from North Dakota.
Virginia,
JOHN TABER, Representative from New York.
HENRY MORGENTHAU, JR., Secretary of the Treasury
HAROLD D. SMITH, Director of the Bureau of the Budget
JOSEPH L. BORDA, Clerk
II
LETTER OF TRANSMITTAL
CONGRESS OF THE UNITED STATES,
JOINT COMMITTEE ON REDUCTION OF
NONESSENTIAL FEDERAL EXPENDITURES,
September 21 (legislative day, September 1), 1944.
The VICE PRESIDENT,
United States Senate, Washington, D.C.
SIR: In accordance with title 6 of the Revenue Act of 1941, Public
Law No. 250, Seventy-seventh Congress, as chairman of the Joint
Committee on Reduction of Nonessential Federal Expenditures; it
gives me pleasure to present to you an additional report of this
committee, which I ask that you lay before the Senate of the United
States, with a view to its being printed as a Senate document.
Respectfully submitted.
HARRY F. BYRD, Chairman.
III
REDUCTION OF NONESSENTIAL FEDERAL
EXPENDITURES
REPORT ON UNEXPENDED BALANCES OF APPROPRIATIONS AND
CONTRACT AUTHORIZATIONS
Pursuant to title 6 of the Revenue Act of 1941 (Public Law 250,
77th Cong.), approved September 20, 1941, the Joint Committee on
Reduction of Nonessential Federal Expenditures was established in
order to-
make 8 full and complete study and investigation of all expenditures of the Federal
Government, with a view to recommending the elimination or reduction of all
such expenditures deemed by the Committee to be nonessential, and to report to
the President and to the Congress the results of its study, together with its
recommendation
The committee, after extensive study and review, herewith presents
a report on unexpended balances of appropriations and contract
authorizations under general and special accounts. These figures are
based upon reports submitted by the various agencies of the Govern-
ment to the Bureau of Accounts of the Treasury Department pur-
suant to Executive Order No. 8512, dated August 13, 1940.
AVAILABILITY OF FUNDS FOR FISCAL YEAR 1945 (:THE YEAR ENDING
JUNE 30, 1945)
Of immediate interest is the availability of funds to begin the fiscal
year 1945. This availability is of two kinds, that which is available
for obligation and that which is available for expenditure. The
following figures are expressed in rounded millions.
Available for obligation:
Unobligated balances brought forward July 1, 1944
$49,576,000,000
New appropriated funds, July 1, 1944
60,581,000,000
New contract authorizations, July 1, 1944
11,079,000,000
Deduct appropriations, cancelations, and adjustments to
contract authorizations, July 1, 1944
17,188,000,000
Total available for obligation July 1, 1944
104,048,000,000
Less obligations incurred to Sept. 30, 1944:
July 1944
$5,973,000,000
August 1944
5,745,000,000
September 1944
7,021,000,000
18,739,000,000
Balance available for obligation Oct. 1, 1944
$ 85,309,000,000
See footnotes at end of table.
1
on hores of your reed of that at
Regraded Unclassifie
2
REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES
Available for expenditure:
Available for obligation, as detailed in previous section
$104, 048, 000, 000
Not available for obligation, unobligated balances brought
forward July 1, 1944
1 4, 969, 000, 000
Unliquidated obligations, balances brought forward July
1, 1944
81, 596, 000, 000
Deduct unappropriated contract authorizations July 1,
1944
I 16, 108, 000, 000
Total available for expenditure July 1, 1944
174, 505, 000, 000
Less disbursements made to Sept. 30, 1944:
July 1944
$7. 149. 000, 000
August 1944
8, 113, 000, 000
September 1944
8, 010, 000, 000
23, 272, 000, 000
Balance available for expenditure Oct. 1, 1944
1 151, 233, 000, 000
, Credit.
1 Does not include deficiency and supplemental appropriations which will be made during the fiscal
year 1945 and which will Increase considerably the balances remaining at the close of the fiscal year.
I Available for expenditure only. to the extent necessary to adjust obligations previously Incurred.
Under the heading of "Available for obligation" we have unobligated
balances of the prior vear appropriations and contract authorizations
which were continued available for the fiscal year 1945 and brought
forward in the combined amount of $49,576 millions; new appropriated
funds, which for the fiscal year 1945 amount to $60,581 millions;
new contract authorizations amounting to $11,079 millions; appropria-
tions made to provide funds to liquidate obligations incurred under
contract authorizations (included in new appropriated funds above),
together with cancelations and adjustments to contract authoriza-
tions amounting to $17,188 millions and which have the effect of
decreasing the amount available for obligation during the fiscal year;
making a total available for obligation in the fiscal year 1945, as of
July 1, 1944, of $104,048 millions. Of this amount $18,739 millions
has been obligated to September 30, 1944, leaving $85,309 millions
available for obligation during the remainder of fiscal vear 1945.
To arrive at funds available for expenditure in the fiscal year 1945,
there must be added to funds available for obligation, as detailed
above, the unobligated balances of appropriations which have expired;
as, although these funds mav not be obligated. they may be expended
in case of adjustments in obligations incurred before the expiration of
the appropriations. The amount of these funds available for expendi-
ture in the fiscal vear 1945 is $4,969 millions. but ordinarily only a
small part of such funds are absorbed in making necessary adjust-
ments. There must also be added the amount of unliquidated obliga-
tions, which represents the amount of obligations that have been
previously incurred but not paid. This amount brought forward to
the fiscal vear 1945 amounts to $81,596 millions. There must also be
deducted the amount of outstanding unappropriated contract author-
izations, as no funds have vet been annronriated therefor. This
amount for the fiscal year 1945 is $16,108 millions. We now arrive
at the total funds available for expenditure in the fiscal year 1945, as
of July 1, 1944, amounting to $174,505 millions. Of this amount
$23,272 millions has been disbursed to September 30, 1944, leaving
$151,233 millions available for expenditure during the remainder of
fiscal year 1945.
Regraded Unclass
REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES
3
EXPLANATION OF UNEXPENDED BALANCES AND CONTRACT
AUTHORIZATIONS
In order to avoid confusion with respect to the terms employed in
this report, there is set forth below a brief explanation of the terms
"unobligated balances," "contract authorizations," "unliquidated
obligations," and "unexpended balances."
Every appropriation made by the Congress is recorded in a separate
account on the books of the Treasury Department. Most appro-
priations are made on an annual basis, that is, they may be obligated
(the action of reserving funds for contracts awarded, orders placed,
salaries or other liabilities incurred) only during the fiscal year for
which the appropriation is made. The funds not thus obligated are
reflected as "unobligated balances" and are divided into "available for
obligation" (for balances which are reappropriated or extended) and
"not available for obligation" (for balances which are not reappro-
printed or extended). Although unobligated balances not reappro-
priated or extended may not be obligated after the close of the fiscal
year for which the appropriations were made, these funds remain on the
books of the Treasury Department for 2 additional years for expendi-
ture only in case of adjustments in obligations previously incurred.
No-year or continuing appropriations follow the same procedure,
except the "unobligated balances" continue available for obligation
from year to year until entirely obligated or until the attainment of
the purpose or object of the appropriation, after which the balances
are carried to the surplus fund.
Contract authorizations are statutory authorizations under which
contracts or other obligations may be entered into prior to appro-
priations granted for the payment of such obligations. Contract
authorizations in respect to obligations are the same as appropria-
tions-contracts may be awarded, purchase orders issued, or projects
put in work-but no expenditure may be made without an ensuing
appropriation. Contract authorizations are usually made for long-
term projects and require financing in the future; they may be financed
in one appropriation or in installments.
The amount of obligations incurred against appropriations and con-
tract authorizations minus the amount of money disbursed to liquidate
those obligations is reflected as "unliquidated obligations." At the
close of the fiscal year this figure of "unliquidated obligations" is
supposed to reflect the amount of money yet to be disbursed, either
already appropriated or yet to be appropriated, to liquidate obliga-
tions incurred under appropriations and contract authorizations.
To the extent money has been appropriated, therefore, this balance
of unliquidated obligations" is available on the books of the Treasury
Department for two additional years after the expiration of the
appropriations, solely for the payment of bills properly incurred before
the appropriations had expired for obligation by limitation of law.
The "unexpended balances" of appropriations and contract author-
izations represent the amount of appropriations or other funds not yet
expended, together with contract authorizations for which appropria-
tions have not been made. Thus, the amount of "unobligated bal-
ances" plus the amount of "unliquidated obligations" is reflected as
"unexpended balances" and represents the amount of appropriations
and contract authorizations not yet disbursed. Part of this unex-
pended balance may never be disbursed, that is, as explained above,
Pearadad Inclass
4
REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES
the amount of unobligated balances of those appropriations which
have expired by limitation of law before the entire amount of the
appropriation was obligated; the amount of obligations incurred
against contract authorizations which may be canceled or reduced;
and the amount of unliquidated obligations which may expire by
limitation of law before disbursements are made.
APPROPRIATIONS, CONTRACT AUTHORIZATIONS, EXPENDITURES AND
BALANCES FOR THE FISCAL YEARS ENDED JUNE 30, 1941, 1942, 1943,
AND 1944
The following table presents the funds available for obligation, the
funds available for expenditure and the expenditures for each of the
fiscal years together with the resulting balances at the close of the fiscal
year and the adjustments to those balances to begin the new fiscal year.
TABLE I.-Appropriations, contract authorizations, expenditures, and balances for
the fiscal years ended June 30, 1941, 1942, 1948, 1944
(NOTE-This table comprises "general and special" appropriation accounts and related contract authort-
sations; it does not include trust funds, amounts payable from postal revenues, funds of Government
corporations, the sinking fund, certified claims, judgments, and private acts. Working fund advances
are treated as being fully expended]
[In millions of dollars)
Line No.
Fiscal year ending June 30-
Item
1941
1942
1943
1944
1945
1
Available for obligation:
2
Unobligated balance from prior year
4,718
9,880
49,506
29,048
40,576
+2
3
Appropriations
24,831
117,641
94,343
93,270
60,581
4
Appropriation transfers net
565
2,441
777
5
New Contract Authorizations
14,903
15,855
16,485
11,360
11,070
6
Decreases in unsppropristed contract authorizations
-1,863
-10,201
-22,083
-4,636
-17,188
7
Amount available for obligation
42,589
133,650
140,692
129,828
104,048
+2
8.
Add appropriations not available for obligation
18
42
75
9
Deduct:
Transfers from expired to unexpired accounts net
-574
-2,42
-786
Transfers to surplus during the year
-11
-48
-77
Not available for obligation:
10
Brought forward from prior year
102
364
2,060
1,024
4,909
-7/
II
Unliguidated obligations:
12
Brought forward from prior year
3,29
22,681
60,818
100,525
81,596
13
Total appropriations, contract authorizations
balances
45,960
156,128
210,722
230,589
190,613
14
Deduct unappropriated contract authorizations
15,518
21,082
15,484
22,217
16,108
15
Total appropriated funds available for expendi-
ture
30,442
135,046
195,238
208,372
174,505
16
Deduct expenditures
12,818
34,017
79,863
94,162
17
Unexpended balances of appropriations
17,624
101.029
115,375
114,210
18
Analysis of unexpended balances:
19
Unobligated balances of appropriations and con-
tract authorizations:
20
Available for obligation at June 30
10,350
51,648
30,306
52,302
21
Less amount becoming unavallable after June
30
479
2.142
1,258
2816
22
Net amount available carried forward
0,880
49,506
29,048
49,576
23
Not available for obligation at June 30
102
645
28
2.409
24
Add amount becoming unavallable after June
30 (line 21)
479
142
1,258
2,816
25
Total amount unavailable
NBI
2,787
1,285
5,225
26
Less amount reverting to surplus
217
127
262
256
27
Net amount unavailable carried forward
364
2,660
1,024
4,960
28
Unliquidated obligations:
29
Available for expenditure at June 30
22,681
69,818
100,525
81,627
30
Less amount reverting to surplus
30
31
Net unliquidated obligations carried forward
22,681
09,818
100,525
81,596
32
Total unexpended balances and contract
authorizations
32,925
121,984
130,507
136,141
33
Deduct unappropriated contract authorizations
15,818
21,082
15,484
22.217
34
Unexpended balances of appropriations car-
ried forward (lines 22, 27. 31, less line 14)
17,407
100,902
115,113
113,924
Bource: These figures are based upon reports of agencies except those for 1941, 1942, and 1943 which are
partly estimated and subject to revision.
REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES
5
EXPLANATION OF TABLE I
The fiscal or operating year of the Federal Government begins on
July 1 and ends on June 30 of the next calendar year; appropriations
made by the Congress for operation of the Federal Government are
made on a fiscal year rather than a calendar year basis.
Funds available for obligation in a fiscal year are composed of
unobligated balances from prior years reappropriated or extended
and continued available for obligation, brought forward July 1 (line
2); new appropriated funds (line 3); appropriation transfers net (line
4) which represents transfers by congressional action between expired
and unexpired appropriations during the fiscal year, transfers to or
from trust funds and other accounts, and transfers to surplus fund of
balances of no-year appropriations when the purpose for which the
funds were appropriated has been fulfilled; new contract authoriza-
tions (line 5); and decreases in unappropriated contract authoriza-
tions (line 6). This item represents the amount of appropriations
that have been made by the Congress during the fiscal year to provide
funds for liquidation of obligations previously incurred under con-
tract authorizations, which funds are included in the "new appro-
priated funds," and also cancelations and adjustments of contract
authorizations during the fiscal year.
Some deficiency appropriations are made to provide funds to
liquidate obligations incurred in prior years and therefore are avail-
able for expenditure in the current fiscal year but not for obligation.
These appropriations are included in line 8. Transfers between expired
and unexpired appropriations, the contra entry of which is included
in line 4 above is reflected in line 9 as well as transfers to surplus fund
of expired amounts occurring during the fiscal year.
Funds not available for obligation (line 10) represent the un-
obligated balances of prior years which expired and were not reap-
propriated and which have not reverted to the surplus fund. Un-
liquidated obligations (lines 11 and 12) represent the amount of
obligations previously incurred which have not been paid as of the
close of the prior fiscal year and funds for the payment thereof have
not reverted to the surplus fund. The sum of these amounts repre-
sents the total available for the fiscal year for obligation and/or
expenditure (line 13). Contract authorizations can be obligated but
not expended.
To arrive at the funds available for expenditure during the fiscal
year (line 15) it is necessary to deduct the unappropriated contract
authorizations (line 14) as no funds have been provided therefor.
The amount of unappropriated contract authorizations at the close
of the prior fiscal year (lines 14 and 33) plus the amount of new
contract authorizations during the fiscal year (line 5) minus the
amount of appropriations for contract authorizations and cancel-
ations and adjustments to contract authorizations (line 6) equals the
amount of outstanding unappropriated contract authorizations at the
close of the fiscal year (lines 14 and 33).
Expenditures (line 16) represent the amount of appropriations
disbursed during the fiscal year to liquidate current and prior year
obligations. Subtracting expenditures (line 16) from the total avail-
able for expenditure during the fiscal year (line 15) we arrive at the
total unexpended balance of appropriations at the close of the fiscal
year (line 17).
Regraded Unclassifie
6
REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES
Unexpended balances at the close of the fiscal year must be adjusted
to begin the new fiscal year to provide for unobligated balances of
?
appropriations which have expired (not reappropriated) and to provide
for transfer to the surplus fund for balances which have remained on
the books of the Treasury Department 2 full years after expiration
of the appropriations. The balance of the amount available for obli-
gation during the fiscal year which was not obligated during the fiscal
year is shown at the close of the fiscal year as available for obligation
(line 20) but must be reduced to begin the new fiscal year by the un-
obligated balance remaining in appropriations that expired by limita-
tion of law (not reappropriated) (line 21) to arrive at the unobligated
balances continued available for the new fiscal year (lines 22 and 2).
In addition to the unobligated balances continued available for the
new fiscal year, certain unobligated balances whose availability for
obligation has expired by limitation of law constitute part of the
unexpended balance and are carried forward into the succeeding
fiscal year. These balances, while not available for obligation, are
[required by law to be]carried on the books for 2 years beyond their
availability for obligation and are then required by law to be returned
to the surplus fund. Lines 23 to 27 show the component elements
of these funds at the close of each fiscal year, the net amount (line 27)
being carried forward as an unexpended balance in the succeeding
year (on line 10). These funds are made up of the book balances on
June 30 of amounts not available for obligation (line 23), plus the
unobligated balances of appropriations expiring for obligation at
midnight, June 30 (line 24), minus amounts reverting to the surplus
fund after midnight June 30 (line 26). Thus, if Congress does not
reappropriate balances expiring for obligation at the end of a given
year, the amounts previously carried as unavailable are increased by
new amounts expiring; and this total would continue to build up if
it were not for the fact that certain appropriations making up the
total have remained on the books 2 full years after their availability
there,
for obligation and must be reverted to the surplus fund.
Unliquidated obligations at the close of the fiscal year (line 29) repre-
sent the total amount of obligations incurred which have not been paid
but must be adjusted to begin the new fiscal year in order to reflect any
amounts reverting to the surplus fund (line 30). Obligations that were
incurred during the life of an appropriation and which were not liqui-
dated within 2 full years after expiration of the appropriation must be
canceled and the funds appropriated therefor revert to the surplus
fund. If these obligations that were not liquidated within the 2 full
years after expiration of the appropriation are subsequently proven
justifiable they can be paid only through submission of a claim to the
General Accounting Office and a deficiency appropriation by Congress
to provide funds for their payment. The adjusted unliquidated obli-
gations (line 31) is the amount brought forward to the next fiscal year
(line 12) to be included in unexpended balances.
The total adjusted unexpended balances of appropriations and con-
tract authorizations to begin the new fiscal year (line 32) is reduced by
the amount of unappropriated contract authorizations at the close of
the year (line 33) to arrive at the total unexpended balances of appro-
priations for the new fiscal year (line 34), which differs from the total
unexpended balance of appropriations at close of the fiscal year (line
17) by the sum of the amounts reverted to the surplus fund (lines 26
and 30).
Regraded Un
REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES
7
UNEXPENDED BALANCES, FISCAL YEAR 1944
In the fiscal year 1941 and running through 1944, appropriations
exceeded expenditures to such an extent that there has resulted large
and apparently disproportionate "unexpended balances." Of course,
it is not possible to maintain a balance between the two-plans, con-
tracts, and purchases must be made well in advance of expenditures-
but large continuing excesses invite unjustifiable extravagance and
waste. An analysis of unexpended balances at the end of fiscal years
1941, 1942, 1943, and 1944 is shown in table I above.
The fiscal year 1944, which covers the period July 1, 1943, through
June 30, 1944, is taken to present a current picture with respect to
unexpended balances. This information is presented in the following
tables compiled from information furnished by the Bureau of Accounts
of the Treasury Department and relates only to general and special
but
accounts. The tables are based on reports submitted by agencies
pursuant to Budget-Treasury Regulation No. 1, issued under Execu-
tive Order 8512.
-
TABLE 2.-Available funds, obligations, and expenditures for the fiscal year
tolower
enge
ended June 30, 1944
[Figures are stated in millions of dollars and due to rounding off may not add to total]
are
Obligations
Expenditures
Department or establishment
Available
Available
dongerous.
for
Obligated
for
Expended
obligation
expenditure
War Department
75,007
41,072
128,890
49,423
Navy Department
32,020
20,750
47,184
26,463
War Shipping Administration
3,764
2,695
5,199
2,071
U. 8. Maritime Commission
1434
703
5,509
3,995
All other departments
15,949
9,557
18,799
9,601
Interest on the public debt
2,653
2,653
2,785
2,609
Total
* 129,828
$77,436
+208,372
$ 94,162
I Does not include 5,700 million dollars additional contract authority under the Independent Offloes
Appropriation Act, 1945 (Public Law 358) approved June 27, 1944.
3 Line 7, table I.
I The amounts of contracts awarded, orders placed, and all other transactions which have the effect of
legally reserving appropriations so as to require expenditures or reserving contract authorizations so as to
require appropriations.
4. Line 15, table I.
I Line 16, table I.
TABLE 3.-Analysis of unexpended balances of appropriations and contract author-
izations, as of June 30, 1944.
[Figures are stated in millions of dollars and due to rounding off may not-add to totals]
Unexpend-
Unappro-
Analysis of unexpended balances
ed bal-
priated
Total un-
Department or establishment
ances of
contract
expended
appropria-
authori-
balances
Unliqui-
Available
rations
dated ob-
in fiscal
Not
tions
ligations
year 1944
available
+2
War Department
79,473
79,473
45,536
33,935
2
Navy Department
20,721
19,319
40,040
26,963
11,264
1,813
War Shipping Administration
3,128
3,128
2,058
1,069
1
U. 8. Maritime Commission
1,514
1,942
3,456
3,725
1259
All other departments
9,198
956
10,154
3,169
6,392
593
Interest on the public debt
176
176
176
Total
¹14,210
122,217
136,427
'81,627
$52,392
12,409
I Line 17, table 1.
1 Line 14, table 1.
I Line 14, plus line 17, table 1.
+2-
4 Line 29, table 1.
8 Credit. Does not Include 5,700 million dollars additional contract authority under the Independent
Offices Appropriation Act, 1945 (Public Law 358), approved June 27, 1944.
. Line 20, table 1.
T Line 23, table 1.
8
REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES
Table 2 shows as funds available for obligation during the fiscal
year 1944 a total of $129,828 millions, against which obligations were
incurred to an amount of $77,436 millions.
Table 3 is an analysis of the unexpended balances at June 30, 1944,
showing $136,437 millions unexpended, of which unliquidated obli-
gations are $81,627 millions and unobligated balances are $54,801
millions. Included in the unliquidated obligations are unappro-
priated contract authorizations to an amount of $22,217 millions.
It will be noted that the bulk of the moneys made available for the
fiscal year ended June 30, 1944, were appropriations granted the War
Department and Navy Department.
The War Department had a total amount of $75,007 millions avail-
able for obligation during the fiscal year 1944. Against this avail-
ability, obligations in the amount of $41,072 millions were incurred
leaving $33,935 millions unobligated. For fiscal year 1945 Congress
appropriated $15,445 millions and in addition reappropriated un-
obligated balances in an amount of $33,873 millions-making B. total
of $49,318 millions available for obligation during the fiscal year 1945,
without considering deficiency and supplemental appropriations which
will be made during the fiscal year. Against this availability $8,266
millions has been obligated to September 30, 1944.
The Navy Department had funds totaling $32,020 millions avail-
able for obligation during fiscal year 1944. Of this sum, $20,756
millions were obligated-leaving $11,264 millions unobligated. For
fiscal year 1945 Congress made $26,489 millions available by appro-
priation and in addition approved contract authorizations in the
amount of $5,075 millions. Decreases in unappropriated contract
authorizations, due to appropriations, adjustments and cancelations,
amounted to $10,446 millions. An unobligated balance of $8,925.0
millions was made available in continuing appropriations or by exten-
sion of 1944 appropriations into 1945-making $30,043 millions avail-
able for obligation in fiscal year 1945, without considering deficiency
and supplemental appropriations which will be made during the fiscal
year. Against this availability $5,340 millions has been obligated to
September 30, 1944.
Of the $136,427 millions shown on table 3 as the unexpended balance
for fiscal year 1944, $81,627 millions is reserved to settle unliquidated
obligations. Of this amount reserved for unliquidated obligations,
$72,499 millions represents the War and Navy outstanding obligations.
In making the foregoing statements, it is taken for granted that the
obligations of $77,436 millions are maximum. There is available bil-
lions of dollars of war matériels, including equipment, planes, muni-
tions, and supplies, which will therefore cut down production require-
ments. Additionally, there is $81,627 millions of unliquidated obliga-
tions covering various sorts of matériel.
THE FISCAL SITUATION
The Bureau of the Budget in the Review of the 1945 Budget,
released August 1, 1944, stated the public debt at June 30, 1944, was
$201,003 millions, and estimated the public debt at June 30, 1945, as
$251,286 millions. The public debt on November 29, 1944, as re-
flected on the Treasury Daily Statement, was $214,077,915 thousands.
Regraded Unclassified
REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES
9
This is a tremendous sum and carries an annual charge for interest,
at present low rates, approaching $5 billions. The measure of the
public debt may be more fully realized in the fact that it will mean &
per capita debt equivalent to $1,800 for every man, woman, and child
in the United States-or to state it in terms of labor force, it will mean
a per capita debt equivalent to approximately $4,200 for each employ-
able person.
The committee has been studying unexpended balances of appro-
priations and contract authorizations for more than a year and, while
it advocates the expenditure of every dollar necessary for the success-
ful prosecution of the war, it believes that great economies could be
effected and recommends en continuous thorough serutiny of appro-
priation requests and greater economy in governmental operations.
The post-war budget should be balanced-revenues should equal
or exceed possible expenditures on a peacetime taxing program-a
taxing program favorable to the maintenance of high levels in business
activity and full employment.
FISCAL REVISION NEEDED
The present system of authorizing continuing or no-year appropria-
tions, continuing availability of balances of current year appropriations
in subsequent years and beginning appropriations for a subsequent
year in the current fiscal year does not afford the Congress OF the
the Budget an opportunity to consider each year the spend-
ing program as a whole.
It is believed that complete information should be presented to
Congress on unliquidated obligations with respect to specific appro-
priations and complete and comprehensive accountability be ren-
dered to the Bureau of the Budget along with the estimated budgets
supporting proposed appropriations.
RECOMMENDATION
The committee recommends that-
1. Within 6 months after the conclusion of the European and
Japanese wars, either or both, the Congress consider unexpended
balances then current and provide legislation to lapse or cancel out all
unobligated balances.
Regraded Unclassifie
73
DEC 15 1944
Dear Lord Keynes:
Your kind letter of November 30 was awaiting me when I
returned from my recent tour in connection with the Sixth
War Loan. I, too, an sorry we did not have the opportunity
for a final word together but it is gratifying to know that
you feel our recent discussions ended happily both in the
substance of what we were able to achieve and in the presen-
tation of these achievements to our respective countrymen.
I share your feeling that our efforts have been fruit-
ful, and I attribute much of our success to your own unfail-
ing patience and wisdom in a situation where the scope and
complexity of our task, coupled with the pressure of a Mght
time schedule, might well have produced friction and deadlock.
I trust that your mission in Canada was also success-
ful and that you and Lady Keynes have had a pleasant voyage
home. You have earned the right to relax a little after
your possible. recent arduous labors and I hope that you may find this
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
The Right Honorable Lord Keynes, C.B.,
H. M. Treasury,
Great George Street,
London, S.W. 1.
LWC:rl 12/14/44
Ret to Rau. 3203
Regraded Unclassified
74
OFFICE OF THE HIGH COMMISSIONER
4.
FOR THE UNITED KINGDOM,
Earnscliffe,
OTTAWA.
30th November 1944.
Dear Mr.Secretary,
As my plane for Canada left early on Tuesday
morning I had no chance of saying a word to you how very
happily I felt our discussions together had ended with the
acceptance of the proposed announcement on your side about
what had been happening. This couldn't have been better
expressed. You were, of course, quite right in feeling
that there had to be a communication on your side at least
as early as anything from us. Apart from that, we feel
that this announcement rounds things off splendidly, and
will serve to give my countrymen that feeling of sustained
comfort which those of us got who were actually engaged in
the negotiations.
I am afraid that the political crisis here
will prevent us from reaching any final conclusion in the
time at our disposal. But we shall, I think, be able to
reach complete agreement on the factual side, and on the
principles involved, and I have the best hopes that here
also
Regraded Unclassified
75
OFFICE OF THE HIGH COMMISSIONER
FOR THE UNITED KINGDOM,
Earnscliffe,
OTTAWA.
- 2 -
also it will turn out pretty well in the final conclusion.
Ever sincerely yours,
keyns
The Hon. Henry M_rgenthau, Jr.
Regraded Unclassifie
76
DEC 15 1944
Dear Judge Patterson:
Enclosed is a memorandum received from the Brittish giving
details on claims they have made for payments said to be due
them on account of the transfer to the United States in 1941 and
1942 of certain British contracts with, respectively, the Savage
Arms Corporation, Termessee Powder Company and Lima Locomotive
Works.
According to an informal discussion of these claims on
December 7 between Mr. Casaday of our Department and Lt. Col.
Carow of your Ordnance Division, the position seens to be as
follows:
1. Savage Arms Corporation ($684,000). This payment, held
up at the specific request of the Comptroller General on the
grounds that it would be tantamount to an advance of funds pro-
hibited by the Johnson Act, can now be made under authority of a
letter dated November 11, 1944 from the Comptroller General to
the Secretary of war, which states that, at the request of the
Har Department, the earlier decision by the Comptroller General
has been reconsidered and that credit on the appropriate vouchers
will now be allowed.
2. Termessee Powder Company ($292,000). Payment of this
claim, held up voluntarily by the War Department, pending clari-
fleation of the Comptroller General's carlier disallowance of the
Savage and other payments, can now presumably be made in view of
the reverual of that decision as set forth in the Comptroller
General's letter referred to above. le understand that now facts
in this particular case may require Mar Department negotiation
with the Pritish for certain minor adjustments in the amount claimed
but that, in principle, there is now no obstacle in the way of firal
settlement.
3. Lima Locomotive Works (8100.000 and $237,000). The war
Department officials with whom we discussed this case could dis-
cover from the terms of the contract and other available data, no
reason why the British claim of $100,000 said to be owing on the
delivery of one complete set of spare parts should not be paid as
soon as delivery of the s pares is epaplete. It is not entirely
Ret Par 3
77
- 2 -
clear, however, whether complete delivery has, in fact, been made.
There appears to be no reference in the contract to the additional
spare parts claimed to have been delivered and Lt. Col. Carow said
that the detailed records necessary to make an accurate appraisal
of this claim for a further $237,000 are to be found only in the
Office of the Chief of Ordnance, Detroit. Because of the uncertainty
that appears to surround this entire transaction, I should appreciate
it if you would cause an investigation to be made with a view to
appraising the total claim in this case of $337,000.
Now that the main negotiations with the British have been con-
cluded, we are anxious to reach a settlement on the for remaining
questions as promptly as possible. I shall be grateful for your
continued cooperation in helping to clear up the above claims
arising out of War Department transactions.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Honorable Robert Patterson,
Under Secretary of war,
Pentagon Building,
Arlington, Virginia.
Enclosure
LWC:rl 12/8/44
Regraded Unclassified
75
Memorandum on Certain Outstanding Claims Presented to the
U.S. Treasury by the British Following Discussions
Between Mr. White and Lord Keynes of November 27th, 1944.
There are four claims which are presently held up on
financial or Treasury grounds only and we have not been able
to make any progress with them for a considerable time, In
accordance with the understanding reached in the meeting at the
U.S. Treasury on November 27th we shall be glad if they could
now be considered with a view to a decision being obtained.
Savage Arms - Contract No. A-3883. In 1941 the U.S. Treasury
arranged for the take-over
of this contract which covered the production of 333,000
British Lee Enfield rifles. The take-over was to be effected
by the War Department placing a new contract for these rifles
covering the entire production thereof and therefore assuming
the entire cost of such production from the outset. Under these
arrangements the British were to be reimbursed through Savage
for the sum of $1,359,000 representing the production expenditure
incurred out of British funds from the beginning of production
until the time production costs were met direct by the War
Department. of this amount $675,000 was recovered, leaving a
balance of $684,000 which the War Department is willing to
refund but payment has not been effected owing, it is understood,
to the action of the U.S. Comptroller-General. It is requested
that this transaction should now be completed as originally
arranged and that the sum of $684,000 be paid by the War
Department.
Tennessee Powder Company - Contract No. A-502 - The production of
powder at the
Memphis Plant of the Tennessee Powder Company, now the Chicksaw
Ordnance Works of the War Department, was completed under the
British contract with DuPonts as of January 31st, 1942. After
that date such production was covered by a War Department
contract and the inventories of various materials and supplies
belonging to us and on hand at that date were taken over by
the War Department. The whole transaction is complete with the
exception of the carrying out of a letter signed by Brigadier-
General R.E. Hardy of the Office of the Chief of Ordnance
dated November 14th, 1942. This provided that the War
Department would assume the liability for certain pay accrued
prior to January 31st, 1942 and, in return, we would not claim
for certain items of the inventory taken over by the War
Department. These items of inventory were so transferred but
the War Department have not assumed the liability for the pay
and in consequence the sum in question amounting to $292,000
has not been reimbursed to us by DuPonts. The U.S. War
Department whilst not disputing the amount of the claim have
suggested that it be satisfied by a reverse Lend-Lease credit,
We are unable to accept this proposal.
Lima Locomotive Works Inc. - Contract No. A-1962 - This was another
production
contract for which the U.S. Government assumed liability in 1942.
It will be remembered that the take-over of British liabilities
was affected by a sale contract No. 555 (U.S. contract W-Ord-694).
A question has arisen as to payment for spare parts supplied
by the British to Lima. Under sale contract No. 555 we are to be
paid $200,000. We have received an advance of 50% and a sum of
$100,000 is outstanding. The sum of $200,000 represents one
complete set and in fact the British supplied much more than
one complete set. The total cost of spare parts 50 delivered
out of British purchased material amounted to $437,000. It
is claimed therefore that an additional $237,000 is outstanding.
In this case the War Department itself has not agreed to the
additional $237,000.
Write Jand antonolic Carter
H.C. Chiffork Detist
Ord Dept.
Dehoid Mid
Regraded Unclassified
79
Packard Motor Company - Contract No. A-787 - In the course of
the sale of certain
capital facilities owned by the British, Packards undertook to
purchase buildings to a total of $200,000. These buildings
originally cost a much larger sum. U.S. Treasury has, however,
objected to any payment being made to the British for this
asset and has claimed that we should be satisfied with a
reverse Lend-Lease credit. We do not accept this and support
the contention with the argument that buildings, the property
of the U.S. Government in foreign countries, would not be
disposed of OR the basis of a simple Lend-Lease credit to U.S.
Government. Packards have agreed to pay $200,000 and matter
is held up solely on account of U.S. Treasury attitude.
Total of the above four claims is $1,513,000.
Washington, D.C.
November 28th, 1944,
- 4 -
Regraded Unclassified
FOREIGN ECONOMIC ADMINISTRATION
80
WASHINGTON 25, D.C.
December 15, 1944
Dear Mr. Secretary:
Thank you for your kind note about my work as
secretary of your Committee on Lend-Lease and Mutual
Aid Between the United States and the United Kingdom.
It was a pleasure to be able to help you and your
Committee.
You will be cheered to learn that the programs
which were worked out are proving firm and are already
governing many operational changes. We are all indebted
to you for the leadership you gave in formulating these
programs and in seeing that many difficult policies were
decided.
Sincerely yours,
Frak Cor
Assistant Administrator
The Honorable
The Secretary of the Treasury
Washington, D. C.
Regraded Unclassified
81
DEPARTMENT
INCOMING
DIVISION OF
OF
COMMUNICATIONS
TELEGRAM
STATE
AND RECORDS
DEPARTMENT OF STATE
DIVISION "F
1944 DEC 15 PM 4 58
M
BEU-462
PLAIN
Chungking via Havy
Dated DECEMBER 15, 1944
Rec'd 2:20 c.m.
Secretary of State
Washington
2021, Fifteenth
FOR SECRETARY OF TREASURY FROM HURLEY
"Thanks for your kind congratulatory message. Will
cooperate with Adler in EVEry way".
HURLEY
RR
Regraded Unclassified
82
December 15, 1944
Signed letter delivered by Mr. White to
Dr. Chi Chao-ting, for transmittal to
Dr. Kung.
THE SECRETARY OF THE TREASURY
WASHINGTON
November 25, 1944
Dear Dr. Kung:
I am informing the War Department that we have success-
fully terminated the negotiations with respect to U. S.
Army yuan obligations in China. The terms of the settle-
ment of these negotiations as agreed upon at our conference
this morning are as follows:
1. The War Department shall transfer to the account of
the National Government of China or the account of
such agency of the National Government of China as
the National Government of China designates a sum
of One Hundred and Eighty-five million U. S. dollars
(US$185 million), in addition to the Twenty-five
million U. S. dollars (US$25 million) already trans-
ferred, making a total of Two Hundred and Ten million
U. S. dollars (US$210 million), in settlement of all
U. S. Army obligations incurred up to September 30,
1944.
2. This settlement does not include the yuan expended by
the Government of the Republic of China for board and
lodging of American armed forces in China. This sum
will be credited to the National Government of China
as reciprocal aid under Article VI of the Mutual Aid
Agreement of June 2, 1942 at the request of the
National Government of China.
3. As stated in paragraph 1 above, this settlement
liquidates all our obligations for U. S. Army expendi-
tures in China up to September 30, 1944 (with the
exception of paragraph 2 above) with the understanding
that as the appended minutes of conversations at
Bretton Woods on July 16, 1944 and in Washington on
November 25, 1944 indicate this settlement is without
ICTORY
BUY
UNITED
STATES
BONDS
STAMPS
Regraded Unclassified
- 2 -
prejudice to the Chinese contention that the cost of
the Chengtu airfields is not included in the amounts
referred to in paragraph 1 but should be treated as
an item of reciprocal aid under Article VI of the
Mutual Aid Agreement of June 2, 1942.
I wish to take this opportunity to say how much I
appreciate the cooperative attitude you have invariably
displayed in your dealings with the U. S. Treasury and
the contribution you have thereby made to the further
cementing of the friendly relations between our two
countries.
Sincerely yours,
Secretary of the Treasury.
Dr. H. H. Kung,
Minister of Finance,
National Government of China,
washington, D. C.
Regraded Unclassified
Excerpt From Minute of Conversation at Bretton Woods on July 16, 1944:
"General Clay: Well, Doctor, going back to what we have been
discussing, and this view which you have just stated, if we paid
you a gross of one hundred and twenty-five million now - a lump
sum of a hundred million with twenty-five million having been
paid - that would leave remaining the food and lodging and the four
billion dollars would be presented by you as a claim under Reverse
Lend-Lease. It would have no effect on the twenty million dollars
for the next three months, which would be paid in cash, and for
which you would provide us with the yuan that we need and would
not prejudice that arrangement in any way; that we would pay you
the lump sum of a hundred million dollars immediately, and in any
Reverse lend-lease agreement to be effected, you could, in addition
to the food and lodging which you would put forward as a claim,
include also this four billion dollars.
"Dr. Kung: I wish I could do it, you know.
"H.M.Jr.: Excuse me. May I add one thing that we talked about,
that in admitting this Chengtu four billion dollars, the claim, we
in no way prejudice or go back on the cable of the President, which
we interpret was all inclusive. I would like to make that clear.
I mean, we claim that this telegram of the President's meant
twenty-five million a month, and included the construction of
everything.
Now, what we are saying in view of what you have said - but not
in any way going back on that - we still hold to this cable. But
if you wish to put that claim under Reverse Lend-Lease for four
billion dollars, we would raise no objection. Do you mind my
making that suggestion?
"General Clay: That is right, sir. And we would do it in
the interest of harmonious relations and appreciation of the 00-
operation which you have given to us.
Regraded Unclassified
Excerpt from Minute of Conversation in
Secretary Morgenthau's office, Treasury Department
November 25, 1944
Secretary Morgenthau: Now let me see if I understand it
correctly. You will accept how many U.S. dollars for how
many months in payment, 80 we get that clear?
Dr. Kung: To the end of September, October first, 185
million.
Secretary Morgenthau: That you will take $185 million
until October first. And that is in full payment with the
understanding with respect to the claim. Is that right?
Dr. Kung: Yes.
Mr. Chi: In addition to that the claim for the Chengtu
air fields can be put in.
Mr. White: I want to make certain, Mr. Secretary, that
you and Dr. Kung are in agreement. I presume that you are
both using the word claim in the sense which we use it in
the United States, namely, that the Chinese Government could
advance the cost of the Chengtu air fields as 8. claim in
mutual aid on the basis that such cost had not been included
in the figures submitted to us by the Army. Whether that
claim will be recognized or not is a matter to be determined
by subsequent examination of the data. In other words, the
word "claim" does not mean a charge but rather the right to
claim that a charge should be made for credit to reciprocal
aid.
Secretary Morgenthau: To go a step further so that
there can be no misunderstanding - when we pay over this
$185 million we will state that that is in full payment
for all obligations incurred by the United States Army
from the first of March to the first of October.
Mr. Pei: I beg your pardon, Mr. Secretary. With the
understanding that the Chinese Government will put in a
claim.
Secretary Morgenthau: May put in a claim
That
if subsequently additional information comes to light,
furnished either by our Army or the Chinese Government, the
Chinese Government may submit a claim as reciprocal aid.
Treasury Department
87
Division of Monetary Research
Date Dec. 29
19
To:
Secretary Morgenthau
The development briefly described
in this letter is a significant one.
H.D.W.
MR. WHITE
Branch 2058 - Room 214-1/2
88
POBVICTORY
TREASURY DEPARTMENT
BUY
STATES
WAR
WASHINGTON 25
BONDS
STANDS
PARIS, 15 December 1944
AIR MAIL
AIR POUCH
No. 36
Dear Mr. White:
Yesterday the Consultative Assembly passed a draft
Ordinance submitted by the Ministry of Labor providing for
establishment of "Comites d'Entreprises". This project
has been the subject of considerable discussion in
political circles and is considered to be an important
measure of economic reform.
The Comité d'Entreprises is really a development
of the Vichy-inspired committees which were installed in
the larger French enterprises and of Comités de Liberation
which arose within the Resistance movement and which have
been since the Liberation an important agency of the workers
for attempting to influence the conduct of industry. As
outlined in the present draft Ordinance the Comités d'Entreprises
will be composed of the head of the enterprise, and delegates
elected by majority vote by the employees whose names appear on
lists submitted by the appropriate trade union organizations.
It is stated that an agreement has been reached between the
two big Unions, CGT and CFTC (Catholic Union) providing for
proportional representation of the members of these two
organizations on the lists of eligible voters.
For less than 50 workers there will be two delegates
so elected, for enterprises employing from 50 to 100 persons,
three delegates, and up to 8 delegates for larger enterprises
according to the size thereof. Comités must be constituted
for all establishments having more than 50 employees, and may be
constituted for smaller establishments upon a decision to
that effect by an appropriate Ministry of the Government.
The Assembly was advised that 52 per cent of all workers
would benefit from the application of the law to establishments
employing more than 50 workers.
Regraded Unclassified
89
Mr. White,
2,
15 December 1944
The functions of the Committees are not very clearly
defined, but it is stated that they will have power to
decide on all questions of a "social" nature and
consultative power for questions concerning conditions
of labor and production. They will also be expected to
initiate proposals for bettering working conditions, etc.
Three important powers which the Committees will have are
those of having two members sit in a consultative capacity
with the Conseil d'Administration of corporations, of re-
ceiving copies of financial statements submitted to the
stockholders and of having such statements verified by a
public accountant.
This project will not become law, of course, unless
passed by the Council of Ministers. If it does become
law it will introduce a major structural change in French
industry, and it will be of interest to watch the manner in
which French industry reacts.
Very truly yours,
Michael L. Hoffman
U. S. Treasury Representative
Mr. Harry D. White,
Assistant to the Secretary
Treasury Department
Washington, D. C.
Regraded Unclassified
90
Treasury Department
Division of Monetary Research
Date December 29 1944
To: Secretary Morgenthau
I think you will be interested in
this comment on attitude toward British
policy in Greece.
H.D.W.
MR. WHITE
Branch 2058 - Room 214-1/2
91
VICTORY
BUY
TREASURY DEPARTMENT
WASHINGTON 25
AIR MAIL
PARIS, 15 December 1944
AIR POUCH
M
NO. 40
Dear Mr. White:
The Greek crisis has given rise to a lively discussion
in the Paris press. During the first few days of the
fighting between the British and Greek forces the press
merely reported the stories of the fighting. It was evident
from the tone of the reports, however, that sympathy was with
the Greeks. Within the last day or two the press has
contained numerous editorial comments on British policy which
more or less openly attack Churchill's action in this case.
Comment of this sort appeared in the press only after the
statement of Secretary Stettinius made it obvious that the
American Government was not in sympathy with the British action
in Greece. It is my impression that the French are deeply
disturbed by the implications of the British policy in Greece.
While strongly disapproving this policy there is an evident
desire to avoid any open friction with the British. Con-
sequently a good deal of comment stresses the existence of a
difference between the policy of the British Government and the
desires of the British people with respect to the matter.
Nevertheless the French do not like the implications of the
British action.
I enclose several clippings containing French opinion on
the Greek situation. The editorial from L'Aube, which is the
paper of Foreign Minister Bidault, is the nearest thing to
French official opinion which has been expressed.
Very truly yours,
Michael Hoffman
U, S. Treasury Representative
Mr. Harry D. White
Assistant to the Secretary
Treasury Department
Washington, D. C.
Enclosures.
Regraded Unclassified
LA TRAGÉDIE GRECQUE
(SUITE DE LA PREMIERE PAGE)
92.
Un journal qui n'est ni commu- sation de résistance grecque, a pu dé
niste, ni même socialiste, mais 'tout
clencher, en pleine occupation, des me.
simplement libéral, le « News
nifestations de 300.000 personnes, Ex
Chronicle », écrivait, le 8 décembre:
dehors d'Athènes, la quest-totalité du
pays est gouvernée par les comités de
Une personnalité très éminente nous
l'E.A.M., clus selon une procédure dé
a dit récemment : . En tant qu'Anglais,
mocratique.
je me sens aussi humilié maintenant
qu'après Munich, . Ces propos expri-
Ce n'est pas nous qui parlons
ment un sentiment courant en Angle-
C'est le « News Chronicle 2. C'os
terre parmi les citoyens de toutes les
l'Angleterre libérale. Nous dirion
classes. Nous recevons des lettres véhé-
volontiers c'est la conscience an
mentes, signées par les parents et les
glaise dont la vigilance est à a
femmes des soldats qui combattent en
fois un modèle pour les nations e
Grèce, et qui s'indignent à la penale
que les leurs vont peut-étre mourir en
une garantie pour les peuples.
combattant non pas l'ennemi, mais un
M. 8.
pays allié et amt,
Car The vous y trompez pas, c'est le
peuple gree que nos soldats sont en
train de combattre et non pas time poi-
gnée d'insurgés. La sol-disant opposi-
tion qui est actuellement attaquée par
nos Spitfires représente en réalité une
très grande partie de la communauté
greeque. Parmi ses chefs, figurent einq
généraux, des libéraux bien connus,
deux professeurs fameuz et deux
évéques. L'E.A.M. dont le but est de 11-
bérer la Grèce d'une tyrannie vieille de
hult ans, compte 1.500.000 membres. Ce
parti, qui englobe la plus vaste organi-
La tragédie grecque 93
et le peuple anglais
par Maurice SCHUMANN
S
N ministre britannique, M. Mac Millan, qui soutint
toujours la cause des peuples, en particulier celle
du peuple français pendant les mois troubles qui
suivirent la première délivrance de l'Afrique du Nord, et
l'un des plus chics parmi les plus vaillants soldats de le
vieille Angleterre, le maréchal Alexander, viennent de ton-
cher Le Pirée. Nous ne doutons pas, nous ne voulons pas
douter, que le but de leur voyage soit de rendre les armes
britanniques à la tâche pour laquelle, il y a plus de cinq
ans, la Grande-Bretagne et nous-mêmes avons précisément
pris les armes : restituer la nation grecque dans son indé-
pendance, et le peuple gree dans sa souveraineté.
Il n'est que temps, en effet, de mettre un terme an
scandale qui, s'il se perpétuait, aurait pour résultat de pri-
ver la championne des nations du crédit moral dont elle
aura besoin pour tenir, dans les conseils de la paix, le rang
qu'elle a noblement mérité. Et dont, au surplus, elle ne
saurait déchoir sans rompre, du détriment de tous et de la
France en particulier, l'équilibre des vainqueurs.
Nous ne nous excusons pas d'intervenir ici dans une-
querelle qui intéresse non seulement deux de nos alliés,
mais encore l'enjeu spirituel de la Grande Alliance. Quand
des troubles mineurs et parfois impurs éclatèrent au Liban,
la presse anglaise jugea bon d'en connaitre. Elle fit bien,
quant au fond sinon toujours quant à la forme, car la fran-
chise est la loi des vraies amitiés; et rien, au surplus, de ce
qui menace de dissondre le eiment moral de to coalition
n'est étranger à aucun des coalisés. Mais notre dessein n'est
pas à proprement parler de mettre en cause la politique
d'un gouvernement allié. Il est, bien plutôt, de faire écho
a la voix du peuple britannique telle que la presse d'outre-
Manche l'exprime avec sa liberté contumière, rehaussée par
une vigueur singulière.
(LIRE LA SUITE EN DEUXIEME PAGE, PREMIERE COLONNE.)
Regraded Unclassified
Contradictions
britannigues
From
Types par Jean-Jacques Mayoux
EU de temps avant le débar-
être et sans doute plus morale,
P
quement libératror, Chur-
en ce qu'elle s'obatine à soutenir
chill faisait aux Commo-
ce qui fai paralt juste et bon. Elle
ries un de ses tours d'hori-
croit soutenir la Grèce en décem-
zon familiers. Sur un point, son
hre 1944 comme elle la soutenzit
discours était totalement instten-
en mai 1941, à son prople dêtri-
du et fit un effet extraindinaire.
ment et pour le principe. Quel
Il s'agissait d'un éloge quasi-
principe Celai de l'ordre et de
ment chaleureux de la neutralité
la lef; le principe qui lui est
espagnole et des services qu'elle
depuis si leaglemps SR. propre
avait rendus à la cause alliée. Il
raison d'éire. L'avis de la mejo-
rendait hummage au général
rité, librement esprimé, défisit la
Franco de sa bienveillance et R°
ligne que la nation dolt suivre.
prochait à la presse britannique
Cela vaul, que cette nation s'ap-
son défaut de tact reliété par
pelle Belgique, Groce ou Grande-
maintes caricatures grossières du
Bretagne. Mais, direct-on, et l'Es-
Caudillo. La réaction à cette par-
pagne 7. lei intervient un carieux
tie du discours fut vive. Le len-
sophisme, que Chutchill avait
demain, la presse était pleine de
soutenu dans le discours précité.
caricatures diversement expressi-
L'Espagne est neutre. II ne nous
ves de Franco, Pune d'elles mon-
appartient pas de nous mêler des
trant un Churchill en blouse,
affaires intérieures d'un pays
aritivé d'un pinceau, et s'atfairant
neutre. Notre responsabilité ne
à blanchir le dictateur paré de ses
s'étend qu'à nos alliés, Chez
laideurs habituelles.
ceux-ci done, maintenons la led,
On ne rencontrait pas un jour-
la règle du jeu démocratique.
maliste britannique sans le trou-
Comme dit la Brabançonne € Le
ver prét à discuter le problème
roi, la loi, is liberté. >
des intentions de Churchill et les
(LARK LA SLITE EN PACK)
explications les plus diverses
étalent données. Je n'en retiens
qu'une : € A la veille du débar-
quement, Churchill, disait celai-
la, tient à rassurer de manière
94
trappante - j'allais écrire fla-
Franc-Tireur
grante - l'opinion conservatrice
d'Europe et à faire ressortir que
lés armées, alliées n'allaient pas
envahir le continent pour lai ap-
porter la révolution. , Il se serait
Contradictions britanniques
donc agi d'une opération politi-
que mais soutenue par l'incli-
isume BE LA PREVIDER PACK)
veru patribliere pupulaire est just loss
nation personnelle.
L
A Ini est use notice
les les natived FAME les confondre
Mrs Kooseveit, Interrogée sur
conservation La lei est ce -
le discours de Churchill, disait
les hommes d'hier ant décidé pour
crâment € M. Charchill pense
N
OS ABA brittengues est, par pre
les hummer d'aujourd'hui, or que les
comme cela depuis soixante ans
dence, manqué de signer- Pour
homes d'aujourd'hui décident pour les
et n'a pas l'intention de chan-
hommes de demain. La les, fét-elle BON-
noss, que notre sympathie frates-
ger. > Le propos de Mrs Roose-
selle pour le prople gree ou le people
ple comme elle Test justribent en An-
velt était la première indication
gleterze, fút-elle três novatrice, est are
belge or nota divigas pas de people brie
visible du changement d'orienta-
il n'a per partage notre less
immobilisation IASI laquelle l'ailleurs la
tion de la politique américaine.
civilaation en socrait se concevoir. Elle
rible expérience. Il n'est par passé dans la
A peine installé au département
est dans la marche des hommes ven Is-
flamme, mais a est loss plus prés que les
d'Etat, M. Stettinius en a tout ré-
paroles eu in actions de ses
venir, le temps où le pied ar poor à levre.
cemment donné une seconde en
se Cindiquent de s'engager arec now dass
Le malegizada est grave. peut-être
blâmant assez brutalement l'ad-
les voire de l'avenir. C'est autre devoir,
inextricable, Ea join 1940, as moment
ministration britannique d'avoir
à nous Français, de rester locides dans
di la France s'effondrait, où la
empéché, par son veto, le comte
Grande-Birtsge à use latte
notze persion méase et de implia bdile-
Sforza de devenir ministre des
ment rathe l'Eirope service et alle
qu'elle pagesit peut-itre same repoir, le
Affaires étrangères dans le cabi-
New Statesman écrivait, dam un No.
grande allies d'Occident notte rôle d'is-
net italien. Le Manchester Guar-
tiest d'intaition vésitable, qu'il y avail
dian évoquait à ce propos avec
Jean-Jacques MAYOUM
en espoir, c'était de faire de la guarre
quelque amertume le passé du
une guerre populaire, socialiste, révolu-
€ State Department », soutenant
nonsaire. C'était bine celá C'est cette
Darlan, soutenant Girand, soute-
gurrre-là qui se pointit, cm ce BOW
nant Badoglio, s'opposant au gé-
néral de Gaulle.
€ Les Américains, disait notre
confrère britannique, ont la mé-
moire délicieusement courte. >
C'est évidemment vrai.
AIS toute la politique re-
M
pose sur la brièveté de la
mémoire des hommes. Peu
importe ce qu'on se rap-
pelle soi-même. Il suffit de cal-
culer ce que les autres auront
oublié. L'histoire est écrite par les
Forces, par un système toujours
mouvant de forces, et malheur à
qui méconnalt les forces réelies,
c'est-à-dire celles derrier les-
quelles se cache l'Esprit, as mo-
ment même où l'Esprit, pour
triompher, se matérialise et s'ar-
me - fât-ce de mitraillettes.
Méconnaissez ces forces et vous
avez la guerre d'Indépendance
américaine, et vous avez les ré-
volutions françaises ou, à vrai
dire, toutes les révolutions.
Ainsi le « State Department ,
fait preuve en faisant pean neuve
d'une trés grande et sans doife
fructueuse sagesse. La position
de la Grande-Bretagne, ou plu-
Mr de son gouvernement, devenue
al fauste et si périlleuse, est pent-
Regraded Unclassified
96
DEC 15 1944
Excellencys
We have just dispatched a cable to our Ambassador in
Moscow requesting him to inform the Soviet Government that
an Allied Military postage stamp has been printed in the
United States for use in the U. S. and U. K. sones of occu-
pation and that supplies of these stamps have already been
shipped to the Duropean Theatre. The Soviet Government will
also be informed that this Government considers it desirable
for similar stamps to be used throughout the occupied Certan
areas and the Soviet Government is asked whether it would be
agreeable to have these stamps used in the area under their
control, and if the Soviet Government so wishes we are pre-
pared to supply the plates BO that the stamps may be printed
in the Soviet Union, or to supply as large & quantity of the
stamps as the Soviet Government may desire from our own
printing.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
His Excellency,
The Ambassador of the Union of
Soviet Socialist Republics,
Washington, De C.
HGsDrl -12/14/44
Regraded Unclassified
97
CABLE TO AMPOLAD, CASERTA, FOR KIRK FROM WAR REFUGEE BOARD
In view of current situation Board does not plan to send
Ackermann back to Italy. It would be appreciated therefore if
you would arrange to send his files to the United States by
pouch and his baggage in most expeditious fashion. Your
assistance and that of your staff to the Board and Ackermann
is greatly appreciated. We are sure if any matters of interest
to the Board arise in future that we can count upon your
cooperation.
10:30 a.m.
December 15, 1944
Regraded Unclassified
98
PARAPHRASE OF TELEGRAM SENT
FROM:
Secretary of State, Washington
TO:
AMERICAN POLITICAL ADVISOR, CASERTA
DATED:
December 15, 1944
NUMBER:
475
SECRET
In view of current situation Board does not
plan to send Ackermann back to Italy. It would be appreciated
therefore if you would arrange to send his files to the United
States by pouch and his baggage in most expeditious fashion.
Your assistance and that of your staff to the Board and
Ackermann is greatly appreciated. We are sure if any matters
of interest to the Foard arise in future that we can count
upon your cooperation.
STETTINIUS
WRB:MMV:KG
12-19-44
Regraded Unclassified
99
DCG-948
This telegram must be
Madrid
paraphrased before being
communicated to anyone
Dated December 18, 1944
other than a Government
Agency. (RESTRICTED)
Rec'd 10 p.m. 16th
Secretary of State,
Washington.
4047, December 15, 9 p.m.
Spanish Charge d'Affaires laft Budapest December
en route to Spain via Switzerland. There is now
no Spanish diplomatic representative in Hungary,
protection of Spanish interests there having been
turned over informally to Swedish Legation.
It is suggested that this information be conveyed
to War Refugee Board.
HAYES
HTM
100
CABLE TO MINISTER JOHNSON, STOCKHOLM, SWEDEN
Reference your 5043 of December 9.
We appreciate weight of Swedish arguments reported therein and
would be inclined to accept them. But before doing so, we suggest that
you drawthe attention of Foreign Office to the fact that, after having
informed German Government in August that Sweden is willing to allow entry
of persons with American immigration visas, there would appear to be a
basis for Sweden to follow this up by informing the Germans of the names
of the people concerned. Viewed in this light, our suggestion does not
(repeat not) involve any new step.
The problem mainly involves Jews and other Nazi victims in Ger-
many and German-occupied territories other than Hungary. In view of de-
velopments in Hungary, we agree that transmission of names of Jews still
there would be of no (repeat no) likely benefit, but since many such Jews
have been deported to other Axis areas, the transmission of their names
may still be beneficial.
Board is inclined to share your doubts as to the effectiveness
of the suggested procedure, but feels that no (repeat no) possibility of
saving lives should be overlooked.
THIS IS WRB STOCKHOLM CABLE NO. 270.
3:30 p.m.
December 15, 1944
Regraded Unclassified
101
REP-659
Distribution of true
Stockholm
reading only by special
arrangement. (SECRET W)
Dated December 15, 1944
Ref'd 9:48 p.m.
Secretary of State
Washington
5136, December 15, 8 p.m.
Fritz Hollander of Swedish Section sends following
message to Kubowitzld of World Jewish Congress. This
is our Number 113 for WRB.
"Incomprehensible no reply received to our cable
of October 30 (No 97 WRB Legation's 4419, 7 p.m.) Require
confirmation your paying for food parcels. Advisable
in sending future names to include date and place of
birth for those at Bergen Behson.
JOHNSON
EMB
Regraded Unclassifier
102
CABLE TO AMERICAN LEGATION, BERN, FOR MC CLELLAND, FROM WAR REFUGEE BOARD.
Please deliver following message to Isaac Sternbuch, St. Gall,
from Rabbis Aron Kotler and Abrahame Kalmanowitz of the Vaad Hahatzala
Emergency Committee:
QUOTE ALL MONIES FOR RABBI SZMULEWICZ SHANGHAI MUST BE
SENT IMMEDIATELY ACCORDING TO OUR DISTRIBUTION SCHEME SINCE
MONEY ONLY FROM EACH JESHIVOTH SEPARATE VAAD HAHAPZALA AND
INDIVIDUALS. YOU MUST FOLLOW OUR INSTRUCTIONS EXPLICITLY.
WILL CONSIDER NEW GROUPS IN FURTHER TRANSFERS. UNQUOTE
THIS IS WRB BERN CABLE NO. 327.
10:30 a.m.
December 15, 1944
Regraded Unclassified
103
EK-480
Bern
Distribution of true
reading only by special
Dated December 15, 1944
arrangement. (SECRET w)
Rec'd 11:35 a.m.
Secretary of State,
Washington.
8139, December 15, 9 a.m.
FOR WRB FROM MCCLELLAND
I am in contact with both Posner and Muller
(Department's 4137, December 7, WRB's 308 and 4169 December 11)
and an endeavoring obtain from them and through other
competent sources all available information concerning
persons still in Bergenbelsen claiming American or
Latin American nationality.
Am also attempting compile more general nominative
list of internees remaining in this camp 80 that WRB
parcels may be sent them.
I will also contact Hungarian group which recently
arrived in Switzerland from Bergenbelsen in further
effort secure above mentioned information but doubt these
persons have much precise data since I understand this
Rungarian group was fairly well segregated from other
internees in Bergenbelsen.
HUDDLE
RR
Regraded Unclassified
104
ALH-692
Distribution of
Bern
true reading only by
special arrangement.
Dated December 15, 1944
(SECRET W)
Rec'd 11:59 p.m.
Secretary of State
Washington
8147, December 15, 3 p.m.
FOR WRB FROM MCCLELLAND AND FOR UNION ORTHODOX
RABBIS EMERGENCY COMMITTEE FROM STERNBUCH
Rabbi of Sotmar states thatttwo or three months
ago at least 4000 men and girls from 15 to 50 years
arrived in Bergenbelsen from Auschwits. He presumes
they were gradually sent to various German works
camps.
Hungarian group at Bergenbelsen was completely
segregated and all personal contact with deportees
from Auschwite was impossible. According to a
written statement all extermination in Auschwits
was stopped a few months ago. Women from Auschwitz
think that children and elderly people were sent to
other camps. We are continuing our rescue efforts
in this direction.
The passports which we once sent to Lithuania
did not arrive. lie have nade various attempts to
locate 16000 persons deported from Lithuania but
unfortunately without success. We imagine the
young people were brought to work camps in Germany.
Short time ago we received a post card from a camp
near Munich written by a young man deported from
Kaunas. We have spared no expense to locate this
camp and hope shortly to receive additional informa-
tion.
Only a few of larger camps in German controlled
territory are known; the many other camps are not
accessible since German authorities in spite of re-
peated intercession refuse intercross all informa-
tion and right to visit. Itusy promised to try to
go to Auschwite
Regraded Unclassified
105
-2- #8147, December 15, 3 p.m. from Bern
go to Auschwite and other camps to locate deportees
from Lithuania and Vittel.
Relief shipments from Switzerland to Shanghai
are not possible. lie have appealed to Japanese Red
Crows.
Kindly wire whether you have received our fol-
lowing direct (clear) telegrams: October 31, Novem-
ber 5, 13, 14, 15, 23 and December 6. We are begin-
ning to send you written communications of less
pressing nature via courier. 8305.
HUDDLE
WSB
Regraded Unclassified
106
NOT TO BE RE-TRANSMITTED
COPY NO.
SECRET
OPTEL No. 405
Information received up to 10 a.m., 15th December, 1944.
1. NAVAL
Yesterday aircraft from two of H.M. Escort Carriers
laid mines off Norwegian coast. 3 attacks by JU 88 torpedo
bombers repulsed. 1 was shot down.
ADRIATIC. 14th. One of H.M. Destroyers sunk by
mine S.W. of Pola.
DODECANESE. 11th, One of H.M. Destroyers engaged
3 landing craft attempting to land enemy troops on Symi. 1 was
sunk.
2. MILITARY
WESTERN FRONT. In Northern Alsace 7th U.S. Army
made substantial gains in forest area N.E. Haguenau and took
several villages. Further west some smaller gains and N.W.
Bitche U.S. forces penetrated Maginot Line one point. The last
fort held by the enemy in Metz area has been captured. In Saar
Valley 3rd U.S. Army had heavy fighting in Sarreguemines area,
also in Saarlouis sector where Dillingen bridgehead subjected
to considerable artillery fire and U.S. forces compelled to
make slight withdrawal. On 1st U.S. Army front gains made
astride Monschau, both S.E. and N.E. of town where U.S. forces
captured Simmerath end Rollesbroich, West of Duren U.S.
forces advanced 1 to 2 miles and cleared several villages.
ITALY. In area north of Bagnacavallo fierce fighting
continues. Germans bitterly contesting all efforts by Canadians
to enlarge their bridgehead over Canal.
GREECE. 13th. ELAS continued to press towards
centre of Athens. They used more mines and explosives and road
to Piraeus though open was under small arms fire. Elsewhere in
Greece, no material change.
BURMA. Our troops have entered Schwegyian 7 miles
south Kalewa.
3. AIR
WESTERN FRONT. 14th. .34 medium bombers dropped 46
tons on defended area west of Karlsruhe and 717 fighter bombers
and fighters (3 missing) operated over battle area. Enemy
casualties 7, 2, 6.
14th/15th. 39 aircraft laid 202 sea mines in Katte-
gat. All returned safely.
MEDITERRANEAN. 13th. 299 fighter bombers and
fighters attacked communications, etc., Northern Italy.
4, HOME SECURITY
To 7 d.m. 15th. 1 rocket about dusk. 3 rockets
during night.
Regraded Unclassified
107
December 16, 1944
9:03 a.m.
HMJr:
Hello.
Colonel
McCarthy:
Hello, Mr. Secretary.
HMJr:
Good morning.
M:
I enjoyed your talk very much, sir.
HMJr:
Did you? Well, we've changed it a little bit.
We've condensed it.
M:
I see.
HMJr:
Is it too late to send you over the
....
M:
No, sir, it is not. I could stop that. I sent
it forward but -- during the night -- it was
quite late when I left.
HMJr:
Yes.
M:
And I'm sure that it won't have cleared the
record room, or if it has and gotten out to the
Stars and Stripes people, they won't have trans-
mitted it yet, I'm certain.
HMJr:
Now, the other thing I want, because I didn't want
them to publish it before Sunday.
M:
All right, sir. Fine.
HMJr:
Well, do they have a publication there?
M:
Well, you see this is the overseas version.
HMJr:
Oh. Well, if it's gone, I'd let it -- no, I'll
tell you what I've put in -- I've out in a coupl
of different figures which are much better.
M:
I see.
HMJr:
Do you think it would be hard to stop it?
M:
No, sir, it won't be hard at all, because as I say,
I put it in my "out" basket late yesterday
HMJr:
Oh.
Regraded Unclassified
2 I I
108
M:
....
or last night. And I'm sure it will not
have been transmitted. I can stop it right away.
HMJr:
And that's to overseas?
M:
Right, sir.
HMJr:
Well, listen, we've cut it down to fourteen
hundred words, which would make it better for
them anyway.
M:
Fine, Mr. Secretary. I figured that for domestic
consumption, it would go to the press
....
HMJr:
That's right.
M:
....
and the Service papers make a great effort
not to duplicate the daily press, so I thought
we would depend on press coverage here but give
it to Stars and Stripes which 18 our largest
circulation publication overseas.
HMJr:
I understand the boys really get that.
M:
Oh, they do. It's the best -- it's the best --
it's the best newspaper we've got anywhere.
HMJr:
Now, 1s that published in London or Paris?
M:
It's published both in London and Paris, in the
Middle East, in the China-Burma-India Theatre --
it's world-wide.
HMJr:
And does that come under General Osborne?
M:
Yes, sir, it does.
HMJr:
I was Just curious.
M:
It does. And every Theatre has its own -- its
own version of Stars and Stripes. They use a
certain amount of stuff that they get from
Washington, you see? And then they fill in with
their own local news in the Theatre.
HMJr:
Now, I've got one other request. I wonder if --
I used to do this at kind of odd times. They
used to send over a man who would brief me on
Regraded Unclassified
100
M 1 ,
HMJr:
Cont'd.
air and I haven't had that for months.
M:
Yes, sir.
HMJr:
But I wondered if some fairly high up officer
under General Bissell couldn't come maybe once
a week and just tell me what's going on and
interpret the war news for me.
M:
Absolutely, Mr. Secretary. I'll call General
Bissell's office on that and have him to desig-
nate somebody and call you and let you know who
he is.
HMJr:
Would you do it? If it's just once a week. I
don't know -- don't want to know where they're
going to attack, you know, but you read so much
in the paper which doesn't make sense.
M:
Correct, sir.
HMJr:
And if once a week I could be briefed by somebody
that, you know -- could go out and say, "Well,
now this thing we're moving with the 9th Army and
the purpose of that is BO and 80." You know --
could give me some idea -- or the Germans have
got some Panzer Divisions and they may move in
here -- that kind of stuff.
M:
I understand perfectly, sir, and General Bissell
will give you a call.
HMJr:
I thank you.
M:
Thank you, sir. And I'll await your new version,
Mr. Secretary, before I do anything.
HMJr:
What's that?
M:
I say, I'll await the new version of your talk
before
HMJr:
It ought -- it will be there not later than --
before ten o'clock.
M:
Fine, sir. And I'll stop the other
....
HMJr:
And I'm sorry that -- but we did change it during
the day.
110
- 4 -
M:
It's perfectly all right, sir.
HMJr:
Thank you.
M:
Good bye.
Regraded Unclassified
111
December 16, 1944
9:35 a.m.
BRITISH REPAYMENT CLAIMS
Present: Mr. White
Mrs. Klotz
H.M.JR: The floor is yours. Don't mop it up.
MR. WHITE: All right. This is the problem: The
Packard plant has already been sold for two hundred thousand
dollars, though it cost five million. It has been sold by
the British. It is one of the plants they bought here.
The question is, who should get the two hundred thousand
dollars, the Army or the British. The British claim they
should get it; they bought the plants.
H.M.JR: If you wouldn't mind, like my children, if
you would take your hand out of your mouth I could under-
stand better.
MR. WHITE: As long as you didn't say thumb!
Prior to our entry into the war, the British purchased
some plants, including the Packard plants. They paid five
million. It is now worth two hundred thousand dollars.
They have sold it, and the cash is being held in escrow. It
is a question of whether the British will get it or the
Army.
We took the position very early that that matter should
not be settled. The Army at the time thought they ought to
get the proceeds of the plants that are sold because they said,
"They should turn the plants over to us"--to the Army--"on
Lend-Lease in reverse. " The British didn't see why they
should. In the meantime, there was a buyer. The Army approved
the sale, but the decision as to where the funds should go
was not made, and the sale was made a long time ago--two
hundred thousand dollars. And in my mind, in the light of
all the discussions and things that have been done, I should
Regraded Unclassified
112
- 2 -
think there would be very little question that it should go
to the British.
H.M.JR: The British invested five million dollars?
MR. WHITE: Yes.
The Army said that at first they thought there were
about ten or twenty million dollars of this kind of thing.
That is why they were interested in the type of case,
because they thought the decision to be made on this would
dictate the decision to be made later.
H.M.JR: Is this money that they paid--this must have
been pre-Pearl Harbor?
MR. WHITE: Yes.
H.M.JR: And pre-Lend-Lease? Sure, it must have been.
Lend-Lease started in March 1942.
MR. WHITE: Yes, it must have been. They ran out of
money. You went up in the fall of 1941.
H.M.JR: The answer to that is, let the British have
it.
MR. WHITE: All right, now the next item is six--
H.M.JR: I mean, how could I do these things? Seriously,
you send a memorandum with a yellow tab and I am supposed
to sit here and do it all by myself.
MR. WHITE: No, I thought you would read it and call me.
H.M.JR: This is the way we are doing it, anyway.
MR. WHITE: We need decisions on items.
You remember the question was definitely decided that
take-out on the planes was out, but there were two other
transactions--three others--which were, it seems, closely
similar, though not identical. FEA was willing to make
Regraded Unclassified
113
- 3 -
the payment on two of these three which are closely similar,
but it seems to us that in talking it over we would be
quite vulnerable if we paid these after turning the others
down, because they are almost identical, and this is what
they are. There are certain planes which U.K. had paid
dollars for, taken by the Army and diverted to Russia as
part of our Lend-Lease. That is, we took them away from
U.K. because we needed them. They amounted to twelve and
a half million dollars. The British say those planes were
never replaced. The Army says, "Well, we replaced others
and better ones." That seems to me to be identical with the
other planes, with the exception that we used the other
planes we took away from them.
H.M.JR: They paid what?
MR. WHITE: Twelve and & half million dollars.
H.M.JR: No, I don't think it is necessarily--
MR. WHITE: You think since they went to Russia as
against our using them would be sufficient difference.
H.M.JR: Is this something that FEA would be willing
to do?
MR. WHITE: Not that one, they are in doubt. They
were Wright engines purchased by U.K. for dollars and also
diverted to Russia for four millions. I think they are
willing to do that; and there was powder, two point two
million dollars, which U.K. paid for and which was shipped
to Russia for U. S. account. Those three are closely
similar.
H.M.JR: No, those are different. I would be willing
to go along on the three.
MR. WHITE: You would? Then we will raise that with
the Army.
H.M.JR: I am willing to go along. That is clean-cut.
I don't think we would be criticized. They paid money for it.
We took it away from them and gave it to the Russians. They
paid their own cash?
Regraded Unclassified
114
- 4 -
MR. WHITE: They did, yes.
H.M.JR: I would be willing to throw my weight on that
to the British.
MR. WHITE: Then we will raise it with Mr. Lovett and
Ordnance. They claim that they gave them other planes and
didn't see why they had to pay, but we will re-examine this
issue. Those are the two.
H.M.JR: All right.
You know, this fellow Johannes Steel was in yesterday.
He gave me three examples of where the English have been
rebuffed severely in this country the last couple of
months. One he claims was on oil, two, on the planes.
The only thing that they have gotten at all which has saved
Churchill's face at home is this Lend-Lease on the Second
Phase. It is the only thing he has gotten.
MR. WHITE: Well, he would need less to save his face.
Those two letters-Ithought we agreed you were going to sign.
H.M.JR: What are they?
MR. WHITE: To Crowley on the position of Dean Acheson--
State Department--with respect to the take-out of planes.
(The Secretary signs letters addressed to Secretary of State
Patterson, and Mr. Crowley, attached.)
MR. WHITE: Did you notice the new development which is
beginning to take shape? It is rather interesting because it
is the contrary of Baruch's apparent moves. This is a
recent development. I think it springs from the trouble in
Greece, in which the people who were formerly isolationists
and formerly anti-British--Chicago Tribune and those--are
turning 8. complete somersault, and they are now taking the
position that if we are to save Europe from Bolshevism, and
so forth, we must support and strengthen England.
H.M.JR: The Chicago Tribune?
Regraded Unclassified
115
- 5 -
MR. WHITE: I understand the Chicago Tribune is
going to turn; the Daily Mirror already has, and there are
some other indications along the line.
H.M.JR: That is not what Baruch is doing.
MR. WHITE: I say this is the opposite of Baruch's
position. I say that is why it is particularly interesting.
H.M.JR: I would like you to bring it to my attention
as you a ctually see it.
MR. WHITE: Yes, I will get the tidbits and give them to
you.
H.M.JR: The other thing which Steel says is interesting
is that he thinks Baruch and Clayton are playing the same
game on England. He thinks SO. He says he thinks that
Baruch and Clayton are together on this thing.
MR. WHITE: Maybe it would be because Clayton is
pretty close to Baruch.
H.M.JR: Baruch sent me another thing yesterday which
I sent you.
MR. WHITE: I didn't know. Did you find out whether
that was the same? I sent it to Gaston. I guess maybe
he hasn't analyzed it yet. I think that statement of the
President's, if it is Baruch' and I think it is--but if
Secret Service tells you the documents are the same, I think
that has to be answered with care. The care requires not
the position to take, but how to present it to the President
so he will read it, because I think that will provide another
opportunity.
Assuming this is Baruch, what he says in that will
provide another opportunity for presenting further a position
on Germany.
H.M.JR: Hopkins is far more worried as stuff comes
out. He says here they are going to meet shortly and, "Just
where does the President stand on Germany?"
He said, "Why do you assume he has changed his position?"
Regraded Unclassified
116
DEC 16 1944
My dear Mr. Secretary:
Mr. Acheson sent a letter to me on November 25
in which he recommended that the assurances from
Australia, New zealand and the Government of India
regarding reciprocal aid for our armed forces should
be accepted and, accordingly, that the Committee
should resommend the elimination of paragraph 10 of
the Joint Report on Army Ground Items and paragraph 11
of the Joint Report on Mr Items. Although I under-
stand that Mr. Acheson has informed you of his recom-
mendation, I an enclosing herewith copies of his letter
and of the signed memoranda submitted by the representa-
tives of the Dominion and Indian Governments.
Your opinion or comments on Mr. Acheson's recom-
mendation will be appreciated. For my part I an in-
clined to accept it. If you and Mr. Crowley agree I
will inform Under Secretary Patterson that this is the
recommendation of the American Committee.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
The Honorable,
The Secretary of State.
Enclosures
Ret. to Ren, 3203
LNC:rl 12/14/44
Regraded Unclassified
117
1
DEC 16 1944
Dear Mr. crowleys
Mr. Acheson sent a letter to no on November 25 in
which he recommended that the assurances from Australia,
New Zealand and the Government of India regarding No-
ciprocal aid for our armed forces should be accepted
and, accordingly, that the Committee should recommend
the elimination of paragraph 10 of the Joint Report on
Army Ground Items and paragraph 11 of the Joint Report
on Air Items. Although I understand that Mr. Acheson
has informed you of his recommendation, I an enclosing
herewith copies of his letter and of the signed memoranda
submitted by the representatives of the Dominion and
Indian Governments.
Your opinion or comments on Mr. Acheson's recom-
mendation will be appreciated. For my part I am in-
clined to accept it. If you and Mr. Stettinius agree
I will inform Under Secretary Patterson that this is
the recommendation of the American Committee.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Mr. Leo T. Crowley, Administrator,
Foreign Economic Administration,
Room 414,
National Press Building,
14th & F Streets, N.W.,
Washington, D.C.
Enclosures
LMC:rl 12/14/44
Ret to Run 3203
118
November 25, 1944.
My dear Mr. Secretary:
In accordance with your request at the combined
meeting with the British group on lend-lease matters of
November 22, 1944, there took place in my office the
name afternoon a meeting to resolve the problem of
reciprocal land-lease aid to our armed forces from the
British Dominions. There were present at the meeting,
among others, Lord Keynes and Mr. Brand representing the
United Kingdom, Senator Keane and Messre. Moore and Dunk
representing Australia, U.S. Reid of New Zealand, Mr.
Symen representing the Government of India, L. Game
Styer and representatives of the State and Treasury
Departments and the Foreign Administration.
Senator Keane and the other Australian representa-
tives presented forcefully their position as already set
forth in their memoranduss of November 20 which has been
circulated in minsograph form. Mr. Hold of New Healand
expressed himself as concurring fully with the position
taken by kis Australian colleagues and indicating that
within the limits of the supply possibilities of New
/ealand his Covernment would certainly make available
materials to our armed forces as in the past with no
serious problem of geographical destination. Mr. Symon
read instructions from the Government of India indicating
its intention to continue reciprocal lend-lease aid to
the utmost, limited only by the very pressing supply and
transport problem which now exists in India.
General Styer expressed himself as very pleased with
the actual performance under reciprosal lend-lease,
especially in the case of Australia to which the meeting
was primarily devoted, but stated that an the scene of
The Honorable
Henry liorgenthau, jrog
Secretary of the Treasury,
Washington, D.C.
COPY
Regraded Unclassified
119
- 2 -
operations noves our of the South and Southmest Facifie
areas the Army was desirous of obtaining assurances that
the reverse lend-lease aid would continue. The Army
therefore continued to press for a new understanding on
this point in writing.
Subsequent discussions brought out that the Australian
position as indicated in the document referred to above
would in fact solve at least 99 per cant if not 100 per
cent of the problem and at my request the representatives
of Australia, New Zealand, and the Government of India
agreed to furnish signed memoranda reiterating their post-
tiens (copies of these memorands are attached). In view
of these entirely satisfactory assurances from Australia,
New Zealand, and the Government of India I indicated that
I would recommend to your Connittee their acceptance, and
the elimination as a condition to lend-lease aid of para-
graph 10 of the Joint Report on Army dround Items and the
parallel paragraph 11 of the Joint Report on Air Items.
Sincerely yours,
/0/ DEAM ACHESON
Dean Acheson
Assistant Secretary
Enclosures:
idmoranda from representatives
of Australia, New Zealand, and
Government of India.
Regraded Unclassified
120
COPY
INDIA SUPPLY MISSION
635 F Street, No No
WASHINGTON, D.C.
24th November 1944.
TELEPHONE - EX 5484
Bear Mr. Acheson,
In accordance with the request which you made during
the discussion in your room on 22nd November, I write to
confirm that the Government of India will continue to
furnish Reciprocal Aid during Stage II on the same tasis
as hitherts. It will be appreciated, however, that the
actual extent of such aid will depend a a number of
factors including the availability of supplies and the
strength of the military forces located in or near India.
I should also like to emphasise the view of the
Government of India that India's real resources (labour,
food, transportation, coal, ruw materials, etc.) are
already over-mortgaged and that in consequence deliveries
against existing supply programses are already bohind.
The quantus of Reciprecal Aid which can be made
available hereafter must necessarily be conditioned by
these factors. Nevertheless, as stated above, within the
limits of India's resources the Government of India will con-
time to furnish the requirements of the United States under
Reciprocal Aid on the basis already in force and subject to
sinilar conditions as to availability of supply and transport.
Yours sincerely,
AGB SYMON
Mr. Dean Acheson,
Department of State,
Washington, D.C.
Regraded Unclassified
121
COPY
TOP SHCET
NNW EXALAND LEGATION
WASHINGTON 8, D.C.
24th October, 1944.
Dear us. Acheson,
Confirming the discussions on Reciprosal Add in
Encl.
Stage II in your office this week, I enclose a note
setting out NOW Realand's attitude on this subject.
Yours sincerely,
JOHN S. REID
First Secretary
Dean Acheson, Esq.,
Assistant Secretary of state,
NASHINGTON. D.C.
Regraded Uncla
122
TOP SECRET
RECIPROCAL AID - NEW ZEALAND
In terms of a note of 3rd September, 1942, and an
exchange of letters of 15th December, 1943, the dovement
of New realand undertook to provide supplice to the Armed
Forces of the United States in the South Pacific area
by way of reciprocal Aid. Provision was made in these
documents for special conditions to apply to supplies made
available for areas outside the South Pacific, but no such
conditions have in fact been imposed, and though in the past
Now Healand supplies have generally been confined to the
South Pacific area, in actual practice substactial quantities
of foodstuffs and other supplies have been provided for
other area. So long as Now Zealand continues to be the
most practical source of supply for foodstufes and other
appropriate commodities, the Now gealand Government will
continue to further the COMMON war effort, by accepting
requisitions for supplies for United States forees in any
part of the Facific or in adjacent areas involved in the may
against Japan.
18 will be understood that the ability of New Healand
to meet such requisitions is dependent upon its capacity to
do Bo and in particular upon (a) its obligations and
responsibility in other areas; for example, the provision
of foodstuffs for the United Kingdom, and (b) upon the coll-
tinued svailability of Land-Loase supplies from the United
States to an extent essential to the maintenance of From
dustion without madue straining of the Deminion's resources.
Regraded Unclassified
123
NOTE ON AUSTRALIAN ENCIPROCAL AND
1. The U.S. Authorities have requested that Australia should
undertake to supply goods and services as reciprocal aid without
geographical limitation.
2. The present position is that the Meciprocal A1d Agreement
of 3rd September, 1942 between the Australian and United States
Governments provides that Australia will furnish assistance,
on reciprosal aid terms, to the U.S. forces in Australia OF
its torritories. Notwithstanding the terms of this Agreement, the
Australian Government have not, in practice, confined their
reciprocal aid within this geographical limits they have from
time to time furnished considerable reciprocal aid to U.S.
forces outside Australian territory, particularly to those in
the South Pacific and latterly in Hollandia.
3. Australia is providing, as reciprocal aid to the U.S.
forces, goods and services to the value of about 20% of
her current way expenditure, with heavy consequential sacrifices
to the population. These burdens, additional to those imposed
by Australia's own war effort, have been spontaneously and
willingly accepted, and the U.S. Theatre Commander in the
area has expressed himself as being well satisfied with the
seale of the resiprocal aid.
4. The Australian Government do not feel able to agree that
the terms of their existing reciprocal aid undertakings to the
U.S. Government should be revised in such a menner as to impose
no limitation upon the amount or upon the area of such aid.
They are, however, prepared, within the terms of their
reciprecal aid undertakings, to continue to supply to the U.S.
Regraded Unclassified
124
- 2 -
forces as reciprosal aid, within locally accepted programmes,
the categories of goods and services which they now furnish.
They would also agree that, where for strategic reasons 18 is
necessary to transfer to other theatres supplies which have
already been provided to the local U.S. Command, no objection
should be raised to the transfer.
5. In addition, the Australian Government are willing,
as at present, to examine my further requests, including
those for additional areas, which say be made by the U.S.
authorities, having full regard to the availability of supplies
and to their resp neibilities in other directions. They suggest
that requests for the provision of supplies, on reciprocal aid
terms, for areas outside their existing undertakings, should
continue to be reforred to then for consideration. They do not,
however, think 18 appropriate that the U.K. Government should
be called upon to undertake responsibility for the provision
of reciprosal aid throughout the British Commonwealth. They
accordingly propose, with the concurrence of the U.K. represents-
tives in Washington, that in cares where the Australian Government
feel unable to meet such requests, the question of the financial
responsibility be jointly discussed butween the Australian,
the U.S. and the U.K. authorities.
6. If se.proposale are acceptable to the U.S. authorities,
it is suggested that the detailed arrangements should be
settled by joint discussions between representatives of the
Governments concerned.
Washington, D.C.
20th November, 1944.
125
)
December 16, 1944
9:49 a.m.
HMJr:
Hello.
Operator:
Mr. McCloy.
HMJr:
Hello.
John J.
McCloy:
Hello.
HMJr:
How are you?
M:
Fine. How are you?
HMJr:
Well.
M:
Haven't heard from you for a long time.
HMJr:
No.
M:
Been away, haven't you?
HMJr:
I've been back for a week.
M:
Have you?
HMJr:
But the telephone is still installed.
M:
You have a very retiring disposition.
HMJr:
That's right.
M:
Yeah.
HMJr:
Look, you people must get regular reports from
G-5 who are in Germany -- what's going on
....
M:
Yes. Yes.
HMJr:
Could I see those?
M:
Sure. Sure.
HMJr:
As they come in?
M:
Sure.
HMJr:
I'd like very much to.
Regraded Unclassified
126
- 2 -
M:
What you ought to do to get a general background,
you ought to talk to John Boettiger -- Boettiger.
HMJr:
Well, I'm seeing him at lunch tomorrow. Would
you mind telling him that he can talk to me?
M:
Sure, I will. I'll tell him -- I'll tell him to
go the limit. The -- he's just back.
HMJr:
Yeah.
M:
And he's -- he's got the best -- well, the
latest story as to what's going on there. I
haven't had a chance to talk to him myself yet.
HMJr:
Well ....
M:
I Just asked him how things are going and he seemed
to be pretty well satisfied.
HMJr:
Well, will you tell him that he can talk?
M:
I will.
HMJr:
And then I'll get the stuff from him.
M:
Right.
HMJr:
That will be wonderful. And -- but the other --
there must be regular reports coming in.
M:
We get -- we get reports by cable.
HMJr:
Yes. As I understand this -- whatever they call
it -- interim report or whatever the thing we all
agreed on over here
M:
Yes.
HMJr:
has never been accepted by the English.
M:
Well, that 1sn't quite right.
HMJr:
Isn't it?
M:
No, that's not right.
HMJr:
Has it been a ccepted?
Regraded Unclassifie
127
- 3 -
M:
It has not been accepted by the English, no.
HMJr:
That's what I said.
M:
No, it has not been.
HMJr:
I said it -- that's what -- you misunderstood
me.
M:
Oh, I thought you said it had been.
HMJr:
No, I sald it has never been.
M:
Oh, no, that's right. It has never been.
HMJr:
No.
M:
And it's now -- it is now being put up to them
in a -- in a -- both at the Combined level and
at the E.A.C.
HMJr:
I see.
M:
But they will -- we'll probably have & little
difficulty with it.
HMJr:
And the English on their own handbook -- what's
happened on that?
M:
On the English own handbook?
HMJr:
Their own Army handbook. You know the one that
you and I -- we gave -- you -- I gave a report on
it, with your approval, to Lord Cherwell.
M:
Oh, that. Well, that's all been revamped.
HMJr:
It has.
M:
Yes, that's all been -- that's all over the dam.
HMJr:
Finished?
M:
Finished, done, and out in its new form.
HMJr:
Could I see a copy?
M:
Yeah, you can get that, and you've seen -- I suppose
you've seen also our handbooks.
Regraded Unclassified
128
- 4 -
HMJr:
No.
M:
Well, you've seen the picture, haven't you?
HMJr:
Picture?
M:
Yes, you saw the movie.
HMJr:
Oh, you mean about fraternization?
M:
That's right.
HMJr:
Oh, yes. I liked it and I told you.
M:
Yeah.
HMJr:
But I haven't seen anything else on it.
M:
Well, there's the handbook which was sort of a
script from which that thing was made.
HMJr:
Oh, yes, you did -- you did show me that.
M:
That's what I thought.
HMJr:
Yeah, I did and 1t was very good.
M:
Okay.
HMJr:
Well, you tell John Boettiger, will you, that
when he sees me he can talk?
M:
Right. I will.
HMJr:
And then the other, as the stuff comes in from
now on?
M:
Right. Right.
HMJr:
I'm very much obliged.
M:
Now on the -- on the ten, sixty-seven, which is
the interim thing which you were talking about
HMJr:
Yeah.
M:
....
we've got to put that into a -- a new form
for the E.A.C.
HMJr:
Yeah.
Regraded Unclassified
129
- 5 -
M:
Because as we drew it, We drew it as a directive
HMJr:
Yeah.
M:
....
to General Eisenhower.
HMJr:
Yeah.
M:
And it mentions Combined Chiefs of Staff. This
would be on a tripartite basis.
HMJr:
Yeah.
M:
It requires some modification in form.
HMJr:
Yeah.
M:
I've just about completed that modification with
the State Department and I want to take it up
with White so that he sees it in the form which
will go to the E.A.C.
HMJr:
Good.
M:
And I think I'll be -- within twenty-four or forty-
eight hours, I'll be talking to him about that.
HMJr:
I thank you.
M:
Okay.
HMJr:
Thank you.
Regraded Unclassified
130
December 16, 1944
12:19 p.m.
HMJr:
See if -- give me Eddie Bartelt if he's in.
Operator:
Right.
HMJr:
Hello.
Operator:
Mr. Bartelt.
HMJr:
Yes.
Operator:
Go ahead.
HMJr:
Eddie?
E. F.
Bartelt:
Good morning, sir.
HMJr:
Good morning. I went out through the Fifteenth
Street entrance yesterday and it looks as though
the Office of the Secretary of the Treasury
wasn't doing 80 well on War Bonds.
B:
I sent you a report yesterday, Mr. Secretary.
That board 1s changed once a week as of Saturday.
HMJr:
Yes.
B:
The Secretary's office is now up to about 96%.
HMJr:
That's more like it.
B:
Yes, sir. And I might say that the Treasury
Department as a whole is going over the top very
well and that is also true of the federal employees
generally.
HMJr:
But we're up to 96%?
B:
You're up to 96% now.
HMJr:
I didn't get your report.
B:
Yes, sir, I sent that yesterday.
HMJr:
You sent one yesterday?
B:
About -- yeah, about noon or a little after
through Mr. FitzGerald, and I
Regraded Unclassif
131
- 2 -
HMJr:
I'll ask -- I never got it.
B:
All right, sir.
HMJr:
But we're up to ninety-six?
B:
You're up to ninety-six now and I think you'll
go over all right.
HMJr:
Thank you.
Regraded Unclassified
132
December 16, 1944
12:21 p.m.
HMJr:
Hello.
Colonel
McCarthy:
Mr. Secretary.
HMJr:
Speaking.
M:
I thought you'd like to know that the speech
goes out for release in Stars and Stripes on
Monday which is the first edition We have after
you make the speech.
HMJr:
Fine.
M:
So it will hit our papers all over the world
on Monday.
HMJr:
Fine.
M:
The Army papers. Now, we are also beaming it
from our short -- Army short-wave stations
which are very powerful affairs, destined to
cover practically the whole world.
HMJr:
Yeah.
M:
It's being rebroadcast in its entirety from both
New York and San Francisco.
HMJr:
Oh, really?
M:
Our two big stations.
HMJr:
Now, would you mind taking a minute to explain
something to me?
M:
If I can, sir.
HMJr:
I know you can. Now, you say you're doing that --
now, where do you end and where does O.W.I start
on a thing like that?
M:
Oh, O.W.I. doesn't have anything to do with
what we publish to troops.
HMJr:
Now, that I know, but on the radio -- now, you say
you're doing it from New York and San Francisco --
you have -- the Army has stations?
Regraded Unclassified
133
- 2 -
M:
Yes, sir, the Army has its own tremendous
short-wave stations at those two places.
HMJr:
And then ....
M:
The New York one, of course, to cover the
Atlantic side and the other to cover the Pacific.
HMJr:
And that's something quite independent from
O.W.I?
M:
Yes, sir. Now, of course, We wouldn't beam
a speech that hadn't been approved by O.W.I.
HMJr:
oh, I know. Now, don't get nervous.
M:
(Laughs) No, sir.
HMJr:
I know you have your troubles with them and I
have mine just the same.
M:
Right, sir.
HMJr:
No, but I was just curious. I -- I didn't know
that you had two radio stations.
M:
Yes, sir, We do.
HMJr:
Yeah.
M:
They are very powerful stations and they're
designed especially for the type of receiver
that is official with us in the field.
HMJr:
Yeah.
M:
So that we reach the maximum number of
....
HMJr:
I -- I'm delighted to know it because I have the
same troubles that you do over there and I know
something about the troubles that you have.
M:
We have great tribulations.
HMJr:
Well, I do too and that's why I sent this thing
to you and that's why I sent it direct to Mr.
Forrestal.
M:
Yes, sir.
Regraded Unclassified
- 3 -
134
HMJr:
And because once they approve the speech, which
they have -- O.W.I. has approved it.
M:
Yes, sir.
HMJr:
But if I wait for them to do something and have
a conference over there, it will be next year.
M:
Yes, sir.
HMJr:
I mean, BO to make you feel better because I know.
M:
Well, our dissemination of this sort of thing all
comes under General Osborne as I mentioned before.
HMJr:
I see.
M:
He is generally responsible for troop newspapers
and for orientation and we might say propaganda
material which we get out to troops. Propaganda
is an invidious word. I don't like it. But I
mean informational material.
HMJr:
Now, what you do is you'll pick up my -- you'll
have -- what do you do -- you'll pick it up or
you'll have the radio station make a record?
M:
Well, we can either make it ourselves or have
the radio station make 1t. I don't know what
they're going to do.
HMJr:
But that -- it's being done?
M:
It's being recorded, of course, and the records
will be immediately delivered to us.
HMJr:
Yes.
M:
For rebroadcast over our own personal short-wave
stations.
HMJr:
Wonderful.
M:
And that's the best coverage we have. The troops
can always get into those stations.
HMJr:
Wonderful.
M:
And they're listened to constantly overseas.
Regraded Unclassified
135
- 4 -
HMJr:
Now, one other thing: did -- you got the
revised version of it?
M:
That -- that's the version which we will use,
yes, sir.
HMJr:
Now, the other thing: do you think beginning
with Monday's edition of Stars and Stripes, I
could receive it regularly? The overseas edition.
M:
Yes, sir. As you know, they are very old.
HMJr:
I don't care.
M:
They come from every theatre in the world.
HMJr:
Well, I Just want one. Give me just one -- give
me the European.
M:
All right, sir. Well, now about the speech.
There is this difficulty. It's not quite fair
to look at one because we don't know how the
different ones will play it. For example, the
European Theatre might use it in full.
HMJr:
Yeah.
M:
Another theatre might, because of pressing
matters of the day, find it necessary to --
to excerpt it. So one wouldn't give you a
very fair picture. Let me make -- attempt to
make a collection
HMJr:
Fine.
M:
of all the Theatre issues for you of that
day.
HMJr:
Wonderful. But could I receive regularly -- I
don't care -- from one Theatre, the copies right
along?
M:
Right, sir. We'll do that.
HMJr:
You -- whichever you think would be the most
interesting Theatre.
M:
Right, sir. Well, I think the European would be
the best.
Regraded Unclassified
- 5 -
136
HMJr:
Fine.
M:
For the moment anyway.
HMJr:
Fine.
M:
All right, sir. I'll get right to work on it,
Mr. Secretary.
HMJr:
Thank you 80 much.
M:
Bye.
Regraded Unclassified
137
December 16, 1944
12:26 p.m.
Morris
Ernst:
Hello, Henry.
HMJr:
Hello, Morris.
E:
Fine. Did you have a good time?
HMJr:
Had a very fine rest and
E:
Swell.
HMJr:
feel much better.
E:
Well, I'm going to be down on Thursday and
Friday.
HMJr:
Just a moment, please. Thursday and Friday
E:
The only date I've got definite is with Joe Walsh
for lunch on Thursday.
HMJr:
Well, now one second.
E:
And after that, any time you want, and I'll get
the other guy.
HMJr:
Thursday and Friday -- would you prefer
E:
It doesn't make any difference.
HMJr:
Well, I'll tell you on account of the other man,
I'll give you your choice of either Thursday
afternoon or Friday morning.
E:
All right, Friday morning at what time?
HMJr:
Well, let's say -- and you could let me know
Monday if either Friday morning, say, at nine-
thirty, or Thursday at three.
E:
Thursday at three. I'll let you know on Monday.
HMJr:
Will you do that?
E:
Right.
HMJr:
Thank you 80 much.
Regraded Unclassified
138
- 2 -
E:
If I can't reach him by Monday, I'll let you
know.
HMJr:
That's all right.
E:
All right. Fine, Henry.
HMJr:
Bye.
Regraded Unclassified
139
12/16/44
Reading copy of Secy's broadcast, from his
desk in Washington, closing the Sixth War
Loan Drive.
140
Tonight I report to you on the close of the Sixth
War Loan drive - the third special drive this year.
We at home are in the position of trustees. We
have a two-fold responsibility. One part of this
responsibility is to see to it that the fighting men
get everything they need in the way of weapons and
equipment and supplies. The other part is to see to it
that the economy of this country is kept on an even
keel so that this will remain a land of opportunity
for them, when they return.
We set a goal for the Sixth War Loan of 14 billion
dollars.
1
It was a high goal.
1
It had to be.
that
goal has been met In fact, when the tallies are all
in, I think they will exceed 19 billions dollars.
1437
139
Regraded Inclassified
141
- 2 -
But we had another objective, even more important than
the over-all total of the drive - to raise five billion
dollars through the purchase of bonds, by, individuals.
1
I
am thrilled to be able to report to you this evening
that, on the basis of returns already in, it seems clear
that this objective also will be fully achieved.
Pause
I derived a good deal of amusement from a Berlin
radio broadcast recorded here on December 5th. This 1s
what it said: "Radio New York reports that during the
first half of the period allotted to the Sixth American
War Loan Drive, only one-fourteenth of the amount to
be subscribed has been collected. One billion dollars
has been subscribed during the first two weeks of the
four-week drive which was to bring in at least 14 billion
dollars."
1298
139
Regraded 1159 Inclassified
142
- 3 -
All right, Herr Himmler, the other thirteen-fourteenths
is now on its way, and will be delivered to you in due
course.
The final tally on the Sixth War Loan cannot be
completed until the end of this month. This, 18 because
millions of workers, who authorized their employers to
deduct money for bonds out of their pay envelopes, will
not complete their payments until the last pay day in
December, and because it takes time to inscribe and
report to the Treasury, the bonds purchased in the thousands
of sales outlets in rural communities and distant places. 1/4
Among the distant places where bonds were sold
in great numbers, are the bases and battle lines of
our armed forces overseas. Yes, our men in uniform
are bond buyers, too.
1,159
129
Regraded Unclassified
143
- 4 -
During the past twelve months they have bought just
about one billion dollars worth of war bonds.
These men in uniform will want to know, something
about the spirit in which this bond drive at home was
carried through to its successful conclusion, by the men
and women in the mines and shops and mills and offices
and farmhouses of America. They are entitled to know
how well the home front 1s living up to its responsibilities.
More than 50 per cent of all E bonds - the bond
which most individual investors buy - are sold to men
and women at their places of employment.
1,030
104
Regraded Unclassified 926
144
- 5 -
In these places more than 23 million workers who buy
bonds regularly, month in and month out, joined the
Sixth War Loan campaign for the purchase of extra bonds.
Drives were organized in more than 150,000 separate
plants. And all over the country, labor unions and
employers worked together as a team to reach, and exceed,
the quotas in their particular establishments.
It wasn't altogether easy for the civilian public
to reach the high goal we set in this Sixth War Loan.
As I have already noted, this was the third special appeal
this year. And it came, of course, on top of the regular
bond buying. done in accordance with pay roll deduction,
and monthly purchase plans.
926
Regraded Unclassified 805
145
- 6 -
Virtually every person with income in the United States
had to share in the program in order to raise the five
billion dollars worth of individual subscriptions.
The record, I think, is the best testimony that Americans
at home could offer as to the devotion and spirit, with
which they are backing up the men on the battle fronts. 1/2
It is testimony also to a magnificent unity and
cooperation at home. The tremendous job of selling War Bonds
was performed, almost entirely by a great army of volunteer
workers in every part of the country. They made it their
business to talk personally, with nearly every citizen,
either at his home or at his place of work. They
collected funds, issued bonds and did the hard work
of accounting.
805
Regraded Uncle 129 ssified
- 7 -
146
That work 1s still going on, and will have to be
continued faithfully throughout this month, in order
to get all the reports of bond purchases filed with
the Treasury by December 31st.
I think it is a fact worth noting, that the promotion
cost to the Federal Government for every thousand dollars
raised in the war bond program, amounts to only 18 cents!
This 1s because the sales force, 1s composed almost
entirely of volunteers, and because the tremendous
promotion effort carried on in connection with the
bond program was contributed freely by advertisers and
MAGAZINES
advertising agencies, by newspapers and radio stations,
by theaters, stores, banks, clubs, labor unions, chambers
of commerce, and all the various civic associations that
make up the vast mosaic of bond activity.
676
127
Regraded Unclassified
- 8 -
147
They have given more than money to this drive.
They have given imagination and energy > and devotion.
One of New York's Fifth Avenue department stores, for
example, for an entire day at the height of the Christmas
shopping season, offered for sale only one kind of
merchandise - war bonds. Another great store , in Atlanta.
,
did the same thing for two days running. Theaters, and
moving picture houses have given innumerable special
performances, to help the sale of war bonds; stage and
screen stars have generously devoted time and talent
to the program. The broadcasting network over which
I am speaking tonight, has turned over its facilities
continuously ) for the past 13 hours, exclusively, to the
war bond campaign.
549
Regraded classified
148
- 9 -
These ) are but samples of the varied ways in which
Americans of every trade and profession have pitched in
and teamed together on the home front.
Pause
There has been some stupid and dangerous talk of
late that civilians, over here ) are defaulting on their
obligations to their fighting men. This Sixth War Loan
is a concrete answer to such nonsense. 3/4
The whole drive has been a magnificent demonstration
of home-front solidarity - of real determination, on the
part of American civilians, to carry out in full measure
their responsibilities in the war effort. It should carry
to the men overseas a ringing declaration of unlimited
confidence and unstinted support.
431
108
Regraded assified
149
- 10 -
Paun
It happened that this drive coincided with the
launching of the war's greatest offensive in Europe,
and with the beginning of a major effort to liberate
the Philippine Islands from Japanese conquest. The
buying of war bonds was one direct way, in which we
could share in these great engagements. We at home
know well that hard and bitter battles lie ahead.
For us, there will be other war loan drives after this
one
We shall see them through.
And just as the fighting forces, day after day,
must continue their relentless pressure on the enemy, we
at home, need to stick steadfastly at our production
jobs, and to meet each month our regular, bond buying
obligations.
323
117
Regraded nclassified
150
- 11 -
This Christmas shopping season affords a particularly
significent opportunity for Americans here to join hands
directly with the men overseas. There may not be much
Christmas celebration for them ) this year. But we can
help them celebrate, by buying war bonds in their names.
No other gift within our choice, whether to those we
love in distant places or to one another here, can
-
convey so much assurance of our faith in them and in
the cause to which they are giving such high devotion.
Pause
We at home understand that this war 1s not yet
1
won - that it will not be won, until unconditional
surrender has been wrested from desperate and stubborn
enemies.
206
Regraded Un classified
151
- 12 -
We shall not fail or falter I until that time has come.
There need be no doubt on this score among the men
in combat. The Sixth War Loan has carried to them
an expression of the way we think and feel. I believe
encourage
it will hearten and inspirit them. I believe ) it will
tell them, better than any words we could employ, that
we recognize the magnitude and splendor of the task they
are performing. I believe it will renew their
certainty that all that we possess is pledged to meet
their needs!
93
93
Regraded Unclassified
152
December 16, 1944
Mr. Isadore G. Alk,
Office of the General Counsel.
Sir:
You are hereby promoted and appointed to the position
of Chief Counsel of Foreign Funds Control, P&S-8, with
compensation at the rate of eight thousand dollars per
annum, payable from the appropriation "Salaries and
Expenses, Foreign Funds Control, 1945," effective
December 16, 1944.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
an
Regraded Unclassified
153
DEC 16 1944
Dear Dr. Soong:
I was glad to receive the message which you
sent to me with Mr. Friedman, my former representa-
tive in Chungking. I am, of course, pleased to
learn that you are so hopeful that the situation
in China is changing for the better.
I would like to take this occasion to congratulate
you on your new post. I know that you will use your
influence in the Chinese Government to bring about
and solidify the unity of the Chinese people in the
war against Japan and that you will do all possible
to further the cause of Sino-American friendship.
Thank you for your kind interest in my family.
Mrs. Morgenthau and myself are quite well. I de hope
that you are enjoying the best of health. I an look-
ing forward to seeing you during your contemplated
short visit to the United States and do hope that by
that time China will have happily passed through the
grave crisis with which she is now confronted.
With best wishes for the New Year.
Sincerely yours,
(Signed) Henry Morgenthau, Jr.
Secretary of the Treasury.
Dr. T. V. Seong,
Minister of Foreign Affairs,
Chungking, China.
ISF/efs 12/16/44
Regraded Unclassified
154
white
MINISTER FOR FOREIGN AFFAIRS
REPUBLIC OF CHINA
1th have 1844
Dear M. Mayantha,
I Lake the apportunity & Nr. Fried marm's
return t send 2a a personal word. The last
twelve months both Chin t for myself. Not personality the least
have been a for F Considerable
difficulties the frustrations for has been the during
of forme was invitably become China 9 Now has
cause the of k. Commander her, whose his post the real
representative in removed of do ml wish to cash man slightest a
the time of your country - - the
he in his Qualities as a fighting The was against
aspersion desire to help him alleroad has
his persine but his temperant and his time impossible
Jahan, been such than in was for a lap
for the t fet along with him. Es a realth
relations have soured all around.
Regraded Unclassifie
I like the new m an, because attengh most
determined, he is tactful & unders tading. decided
all t that from now on is will mean I want a In is
them for because for are the me time.
I feel the better in every may, friend, who
know has this and his nick for us Monganther every
stretched intos tent In a am No. " to lean
have hear very is con hlately well, her for a health. while I
My infe Rind to her. I flow lay
we hall Mrs been Manganther concerned are form
also hade hope that small for continue to have ford new your
sons.
miss my american friends freaty 6th L
States. hope before with kind ryand type d than
lary to make a short issit Mr. Marpan
Very Smoons
T. V. Jary
Regraded Unclassifie
Treasury Department
Division of Monetary Research
155
Date December 16, 1944 19
TO:
Secretary Morgenthau
Attached hereto is suggested reply to message
to you from General Chou En-lai, one of the three
principal Chinese Communist leaders. I have some
doubt as to whether it would be appropriate to send
a written reply to his message and suggest that Adler
ask General Hurley in Chungking whether or not he
feels it would help him to have this letter sent to
General Chou En-lai and to act on the basis of
Hurley's recommendation.
H.D.W.
MR. WHITE
Branch 2058 - Room 214-1/2
156
File to The Hugh 12/16/44
Mr adler is to deliver
in person
157
DEC 16 1944
Dear General Chou:
This is to thank you for the kind invitation
to send my personal representative in Chungking
to visit Yenan.
I appreciate your willingness to invite
responsible American officials to investigate
for themselves conditions in the border regions,
I need not say that the utter defeat of
Japan is in the interests of all the United
Nations as well as my own country and that it
is a cause to which my Department and myself are
constantly striving to make the greatest possible
contribution.
With best wishes for the New Year.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
General Chou En-lai,
Yenan, China.
ISF/efs 12/15/44
Q165323
Regraded Unclassified
158
DEC 16 1944
My dear Mr. Minister:
This is to extend my congratulations
to you on your appointment to the position
of Minister of Finance. I an sure that
your Ministry and my Department will con-
tinue to have the cordial relations which
have always existed in the past.
with best wishes for the New Year.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Honorable 0. K. Yui,
Minister of Finance,
Chungking, China.
ISF/efs 12/14/44
Regraded Unclassified
159
DEC 16 1944
Dear General Wedemeyer:
Allow me to take this opportunity to extend my
congratulations to you on your appointment to the post
of Commanding General of the China Theater. It is
well appreciated what a difficult and important assign-
ment you have been given at this critical time.
As you know, we have concluded our negotiations
with Dr. Kung with respect to U. S. Army yuah obli-
gations in China. In addition to agreeing to the
payment of $210 million in settlement of all U. S.
Army obligations incurred up to September 3, 1944,
it was agreed to have quarterly adjustments and
settlements with regard to yuan obligations of the
U. S. Army incurred after September 30, 1944. I
have instructed Mr. Adler to give you all the details
of the negetiations in which you might be interested.
I have also instructed Mr. Adler to make himself
completely available to you in connection with the
problem of payment for our expenditures in China and
with regard to any other financial matter of consern
to you.
with best wishes for the New Year.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Genoral George C. Wedemeyer,
Commanding General,
China Theater,
U. S. Army Headquarters,
Chungking, China.
ISF/efs 12/14/44
Regraded Unclassified
160
DEC 16 1944
Regraded Unclassified
My dear General Hurley:
I was very much interested in the message from you
which Mr. Friedman, my former representative in Chungking,
brought back with him. I was very glad to receive your
views on the current situation in China and to hear that
you were hopeful that some workable solution will soon be
found to the grave problems which confront China.
I need not say what a feather it would be in your
cap if you were instrumental in bringing about political
unity in China which would be the basis for the more effec-
tive participation of China in our conson war effort. I
do hope that you suceed.
The Treasury, of course, will do all possible to sup-
port and implement the policy which you are endeavoring to
carry out. I have so instructed Mr. Adler. Incidentally,
he will be able to give you all the details of the finan-
cial negetiations with Dr. Kung in which I an sure you will
be interested.
I have also instructed Mr. Adler that, if at any time
he feels it necessary to return to Washington for consul-
tation, he may do so without awaiting instructions from
m. I would appreciate very much if such occasion arises
that the Embassy do all possible to expedite his departure.
Mr. Adler may also have to go to India from time to time
to discuss financial matters with the Government of India
authorities at New Delhi.
with best wishes for the New Year.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Sedretary of the Treasury.
General Patrick Hurley,
Ambassador to China,
American Embassy,
Chungking, China.
ISF/efs 12/15/44
ABRAM 1. ELKUS
40 WALL STREET
NEW YORK CITY
December 16, 1944
Personal and Private
Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D.C.
Dear Henry:
I congratulate you on your success in raising such
an enormous sum of money to be covered by the Sixth War Loan.
It was a real achievement to raise such a large
amount in so short a time with the war going on for three years
or more.
I read an article in December Harper's entitled "The
Future Strength of Germany" by Cary Byers and at the beginning
of the article appears:
(Cary Byers is the pen name of a Washington
official who conceals his identity lest his
personal ideas be taken to be those of his
department)
I suppose you can easily find out who he is.
Reading that article makes me believe much more than
I had hitherto that your plan to make Germany largely a farming
country is sound. It depends on who the writer is. He writes
like a German expressing his views.
I call your attention especially to Par. V, Page 56,
of the article, part of which I quote:
"Cutting German power down to manageable size
will be, in spite of two wars, an undertaking
unpopular in many quarters. The German public
can be expected to resist and oppose such a
program. Acquiescence in it would undermine
the popular support of any German government"
It sounds like a German and appears to be boastful, but the end
of the article appears to be the gist of the whole thing, and it
reads as follows:
Regraded Unclassified
-2-
"Germany will keep trying, however, just
as long as the gap remains between her
underlying power and her political posi-
tion. The stakes are high and the risks
will not be too great as long as Germany
retains, as she did in 1918, the ability
to try again"
His conceit is overwhelming.
With kindest regards and best wishes of the
Season to Mrs. Morgenthau and yourself, I remain
'Cordially yours,
scramstering
Regraded Unclassified
ADVANCE
PROOF!
Attached is an advance proof of an article which will be published
in the
issue of
DEC
HARPER'S MAGAZINE
]
We send this, believing that the contents of this particular article are
of especial interest to you.
DEC 2 1944
Publication date:
Please withhold any public quote or comment until that date.
Cary Byers is the pen name of a Washington offi-
cial who conceals his identity lest his personal
ideas be taken to be those of his department.
THE FUTURE STRENGTH OF GERMANY
CARY BYERS
T
THIS peace can be lost, as the last one
reduce Germany's relative strength. This
was, by failure to understand the
can best be accomplished by building up,
real nature of Germany's strength.
at Germany's expense, in other European
Those elements of German power which
countries heavy industrial capacity such
will remain after unconditional surrender
as steel, chemicals, electric power and
are sufficient to continue Germany's
equipment, and transportation.
power superiority over her neighbors.
The well-spring of German aggression will
not be found in any peculiar German
T
HE fate of any world organization to
maintain peace depends on co-opera-
psychological or political characteristics.
tion among the United States, Russia,
National aggression in Germany, as in
and Great Britain. Obviously Germany
other nations, is nearly always an effort to
cannot hope to attain sufficient power to
make explicit in political institutions a rel-
overcome a coalition of these three na-
ative power superiority already in existence.
tions. The real test is whether Germany,
Germany after defeat will present such
after enforcement of the peace terms, will
an abject picture that it will be easy to
retain sufficient strength to disrupt the
underestimate the power that remains and
coalition. After unconditional surrender,
the obstacles that lie in the path of further
Germany will still be among the five
reducing that power. Plans for stripping
strongest world powers. Occupation, de-
Germany of all industry and returning her
mobilization, and disarmament will not
to a peasant status are dangerous because
automatically set in motion a long-range
they cannot be carried out. Among the
deterioration of Germany's national assets.
effects of such a program would be the
Unconditional surrender merely presents
starvation of at least half the German
the opportunity for a redistribution of the
population and the ruin of Europe, of
elements of national power in Europe.
which Germany is the economic hub.
If such a redistribution is not achieved we
On the other hand, it is equally dangerous
may look forward to these alternatives:
to assume that Germany's threat to world
either an independent Germany will again
peace is ended merely by the destruction
predominate in Europe west of Russia, or
of the Nazi party or by the creation of a
Russia will feel forced to step in and con-
world organization to enforce the peace.
trol Germany. Either eventuality would
It is the purpose of this article to suggest
destroy the coalition of the United States,
that in addition to the elimination of the
Russia, and Britain, and probably would
Nazi party and the creation of a world
be considered a threat to the safety of the
peace organization, it will be necessary to
United States.
Regraded Unclassif
Page 165
taken ant -not - gart of
this article
OD 67.1945
THE FUTURE STRENGTH OF GERMANY
49
Why and how Germany disturbs the
For if Germany, although disarmed, is
peace of the world is usually discussed in
still potentially the foremost nation of
political and psychological terms such
Europe it may have a strong enough bar-
as "Kaiserism," "militarism," "Prussian-
gaining position to achieve rearmament.
ism," "Nazism," "fanaticism," "inferi-
That was how Germany rose between
ority complex," "guilt complex," and
1918 and 1939. Such an explanation
"paranoia." These colorful diagnoses ig-
fits the facts much more closely than those
nore a more fundamental cause of dis-
which attribute the rebirth of German
order: Germany's war potential is much
power to British stupidity, or French
greater than that of any other European
corruption, or Russian duplicity, or Amer-
country west of Russia and of any prac-
ican indifference. Whether, in political
ticable combination of European coun-
terms, the Versailles Treaty was too soft
tries including Great Britain but excluding
or too harsh, it was clear even in the early
Russia. Even a European coalition in-
nineteen-twenties that the treaty had left
cluding Russia, Great Britain, and France
essentially unimpaired the main base of
will not clearly exceed Germany in
German strength.
strength.
This persisting, underlying German
In order clearly to surpass Germany in
power was recognized both by Germans
strength a coalition must contain the
and by the rest of the world. The smaller
United States. But the military pressure
nations of Europe recognized it when they
which this country exerts on Europe is
began to break away from the system of
very uneven because it requires an all-out
alliances which France attempted to con-
American effort to place major forces on
struct. The French and the Russians
the Continent. In September, 1944, Gen-
recognized it in 1933 when they dared not
eral Marshall announced that the United
intervene, without the support of Britain
States had sixty divisions "in combat"
and the United States, to halt an an-
after nearly three years. Germany once
nounced German resurgence. Russia and
maintained five times that number "in
France at that time had the first and sec-
combat" on the Eastern Front alone.
ond armies of the world and German re-
American power is crushing when fully
armament was only slightly advanced.
applied but it is not readily maneuverable
Even so the latent German strength that
over a long peace period. It does not
lay beneath the small German army was
lend itself to quick shifts and limited ap-
enough to deter Russian-French action.
plication. It cannot be exerted at its full
The British likewise recognized Germany's
force without strong allies on the Conti-
pre-eminent strength in Europe in the
nent as well as in Britain. These charac-
nineteen-twenties when they looked to a
teristics of American influence in Europe
disarmed Germany rather than to an
create a special United States interest in a
armed France as the main Continental
relatively stable Continent in which we
buckler against Russia. And Germany's
will not be required intermittently to
power was recognized in the United
bring major military forces to bear.
States, too, in the nineteen-twenties by a
loan policy which considered Germany a
N
EITHER the United States nor Britain
better risk than other European countries.
nor Russia nor France will have
anything to gain in the foreseeable future
II
by disrupting the European peace. Ger-
many will. German policy is certain to
be directed toward domination of her
WHAT is the basis of the German
which existed before the last
weaker neighbors if Germany retains her
German rearmament and which, unless
present relative strength as compared
we deliberately and systematically destroy
with them. The interest of the United
it, will exist again after the coming Ger-
States therefore calls for a reduction in
man disarmament?
German strength that cuts deeper than
The elements that make up continuing
demobilization, disarmament, and super-
German strength may be summarized as
ficial economic penalties.
follows:
Regraded Unclassif
50
HARPER'S MAGAZINE
1. The heavy industry of Germany
the Nazi party, and by the party's sharp
towers above the heavy industries of other
ideological departures from traditional
European countries west of Russia. It is
"Prussianism." Differences of regional
twice as large as that of Great Britain and
background and culture within Germany
larger than that of Russia. German
today are probably not much more im-
heavy industry is supported by the best
portant than they are in the United States.
transportation system in Europe, a level of
Proposals to dismember Germany into
scientific training and industrial technol-
three or more states are politically feasible
ogy easily the first in Europe, and the
in the sense that the victor nations have
largest pool of skilled labor in Europe.
the power to set up such states and, so long
2. The German language group is
as the victors can maintain direct pressure,
twice as large as any other in Europe, ex-
to prevent their polítical reunion. The
cept the Russian. The overwhelming
moment, however, that such enforcement
majority of the people in this language
should cease or falter the German states
group feel a high degree of national and
would be capable of coalescing almost
"racial" solidarity. Most of the fissures
overnight. What we seek are changes to
which formerly divided it on regional lines
be made during the period of occupation
have closed rapidly in recent years.
which Germany cannot quickly erase
3. Germany's geographical position is
when the direct pressure ends,
highly advantageous for both commercial
Germany's geographical advantages can
and military purposes.
be diminished but will not be harmed es-
4. The German military tradition is
sentially by boundary changes. Germany
unexcelled in Europe. After surrender
lies in the center of the northern, more
there will be about five million veterans of
militarily important part of Europe.
the German army, who will be able for a
An alliance of any majority of Germany's
time to carry on this tradition even though
immediate neighbors is hampered because
military organization and military exer-
main communication lines between them
cises should be forbidden by the peace
run through Germany.
terms.
The assets of military tradition and ad-
5. German administrative and organi-
ministrative skill cannot, short of mass exe-
zational skills are unequaled in Conti-
cutions, be affected within this generation.
nental Europe.
None of these factors is affected by un-
T
HAT leaves the relative strength of
conditional surrender and none of them
German industry as the factor most
can be eliminated directly and immedi-
susceptible to reduction by the peace
ately by the terms of peace.
terms and policies of the United Nations.
Lack of understanding of the paramount
T
HE relative size of the German lan-
importance of German industrial pre-
guage group can scarcely be reduced
dominance in Europe is a serious handicap
within a generation by any action the
to any action along this line. Equally
United Nations will take.
serious is the fact that policies designed to
It is suggested that political dismember-
end the pre-eminence of German indus-
ment will offset Germany's numerical
try run counter to other policies and
superiority, but this seems to be debatable.
tendencies in the United Nations.
Germany has been welded together by the
Because many students of the European
victories and disasters of two great wars.
economy place undue emphasis on raw
It is worth noting that separatist tenden-
materials, comparisons of German eco-
cies within Germany between 1918 and
nomic war potential with that of other
1933 were less strong than many observers
nations are often misleading. Germany's
had expected. The popular picture of
position in essential raw materials, except
Bavarians and Saxons herded or tricked
coal, is rather weak. But this weakness
into war by Prussian masters is belied by
has been much less important in World
the war morale record of non-Prussian
War II than in World War I. The differ-
German soldiers and civilians, by the
ence is accounted for partly by stockpiles,
conspicuously non-Prussian leadership of
partly by the greater area of Europe con-
Regraded Unclassified
THE FUTURE STRENGTH OF GERMANY
51
trolled by Germany in World War II,
A country can use for war what remains
and partly by a planned German effort
after the essential needs of its essential
toward autarchy, especially in foodstuffs.
inhabitants and of its productive plant are
All of these factors together, however, are
satisfied. These needs differ very sharply
not as significant as the role of science in
from country to country. The Russians
compensating Germany's raw material
obviously have succeeded in using for
weaknesses. Chemistry, "the science of
direct war purposes an unprecedented
substitutes," is still advancing at a pace
proportion of their total production. In
that gives us every reason to believe that
the immediate future, however, any fur-
flaws in national strength based on lack of
ther large-scale advance in the U.S.S.R.'s
raw materials will continue to decline in
heavy industrial capacity will require a
importance. The one kind of object a
large investment of steel and other prod-
contemporary soldier doesn't use is a "raw
ucts in replacement or new plant con-
material." His weapons, his clothes,
struction, especially in transportation.
even his food are processed. Obviously,
The position of the British Empire vis-à-
war industry today still needs a tremen-
vis Germany shows why it is necessary to
dous range of raw materials, but process-
deal in terms of net productive capacity
ing capacity is a better measure of a na-
available for war. Britain draws upon the
tion's ability to support war.
resources of her Empire, but in payment
for those resources the products of British
T
HE two most convenient indices of
industry are spread thin. The Empire
industrial capacity are steel and elec-
adds an additional 3 million tons of steel ca-
tric power. Germany has a steel ingot
pacity to the United Kingdom's 13 mil-
capacity of 25 million tons a year; the
lion. These 16 million tons must serve
U.S.S.R. has 20 million; Great Britain,
the economies of countries and colonies
13 million; and France, 10 million.
containing 500 million people. The per
Postwar Germany will probably have nine
capita requirements of the Empire for
immediate neighbors, Denmark, Holland,
heavy industrial products do not, of course,
Belgium, Luxembourg, France, Switzer-
equal Germany's per capita requirements;
land, Austria, Czechoslovakia, and Po-
yet out of the British Empire's 16 million
land. Germany's steel capacity exceeds
tons of annual steel capacity must come
the total capacity of these nine. In in-
the shipping to maintain the essential
stalled electric power, Germany's capacity
trade of the Empire, and the steel needed
is double that of Britain and much larger
for the ports and railways not only of the
than that of France. It is only slightly
United Kingdom but also of the Domin-
less than the total capacity of Germany's
ions, the colonies, and India. The British
nine future neighbors.
Empire must use a larger proportion than
Nor do even these rough comparisons
Germany of the basic industrial products
as a measure of Germany's industrial
available in order to maintain the basic
strength tell the whole story. There are
economy itself. With what remains of the
other facts to be borne in mind. For in-
Empire's 16 million tons of steel a year
stance, the French steel position is not, for
Britain must maintain the navy that holds
war purposes, as good as it looks because
the Empire together. Britain's steel is
almost half of French capacity is basic
distributed over the seven seas and over
Bessemer, which is not armament steel.
the maintenance and defense of a land
The heavy industries of Germany's other
area 75 times as large as Germany. Thus
eight neighbors are not severally large
a much higher proportion of Germany's
enough to form the bases of complete war
industrial product than Britain's is avail-
industries. Since they are not integrated
able for war in Europe. Expressed in
with each other, their actual total of in-
terms of annual steel capacity available
dustrial strength is much less than the
for war in Europe, the industrial poten-
sum of the parts.
tials of the British Empire and Germany
When we examine the net production
are related more nearly as 8 to 25 than as
available for war in various nations, Ger-
16 to 25.
many's position appears even stronger.
Sixty years ago the British Empire had
Regraded Unclas
52
HARPER'S MAGAZINE
nearly half the industrial war potential of
been as great as extremist airpower en-
the world. Today it has less than 10 per
thusiasts had hoped. Much of it has been
cent. That is a rapid decline-and it took
concentrated on plants making aircraft
place in the face of increased British com-
and other finished weapons. Although
mitments outside Europe. Slowly rising
there is no doubt that very extensive dam-
power and rapidly rising nationalism
age has been done to such plants, the rate
among the peoples of Asia are almost cer-
of recuperation seems to have been amaz-
tain to tie down a greater and greater part
ingly rapid. In the post-hostilities period
of Britain's decreased strength.
recuperation from war damage to plants
France will come out of this war much
making finished products might be at least
less strong than in 1918. Her empire
as rapid as under the strained conditions
will have a hard task to restore the prestige
of all-out war. In addition to the bomb-
lost through defeat, occupation, and sub-
ing of plants making finished products,
sequent confusion. During the four years
there has been serious damage to some
of German occupation the French indus-
German basic industries, including steel.
trial plant has undoubtedly suffered heav-
The rate of recovery in such industries
ily. Although it is probable that not
will be much slower. At the end of the
many plants were actually moved to Ger-
war German (and Russian) actual steel
many, there is no chance that the Germans
capacity will be less than the figures given
kept the French production plant up to
above. It is almost certain, however,
date. Such modernization and expansion
that Germany's losses through war dam-
as the Germans undertook was in Germany
age will be less than Germany's losses
and Austria rather than in France, the
under the Versailles Treaty, which gave to
Low Countries, or the Balkans. More-
France areas containing a third of Ger-
over France, which entered the last period
many's steel industry and neutralized the
of peace with the world's largest army,
Saar for fifteen years.
will enter this one almost as disarmed as
Germany quickly made up its industrial
Germany.
losses of the last peace by rationalizing
The decline of Britain and France in
remaining German industry, and a similar
the European power equation weighs
and perhaps greater opportunity awaits
heavily against certain inferences concern-
Germany in the coming peace period.
ing Germany which have been drawn
German production methods before 1941
from the rise of Russia. The U.S.S.R.'s
were inefficient by American standards.
industrial capacity and military power
Under stress of an acute manpower short-
have risen so rapidly that many people
age Germany seems to have learned de-
believe Germany's relative power after
skilling of industrial processes and other
this war will be much less than in 1918.
mass production techniques without which
But in fact, from Germany's viewpoint the
she could not have maintained her produc-
rise of Russia is balanced largely by the
tion through 1943 in spite of bombing and
decline in the power of Britain and France.
the repeated comb-out of skilled workers
The combined superiority of Britain,
from her factories. Such a change in
France, Russia, and their reliable Euro-
German production methods might go a
pean allies over Germany will not be
long way toward compensating for all the
much, if at all, greater than it was in the
physical damage wrought by bombing.
early years of the last armistice.
In any case, the fate of German industry
will be decided by the peace, not by the
T
HERE Is in some quarters a tendency
war.
to assume that bombing and other
war damage will have destroyed such a
III
large proportion of German industry that
Germany will no longer be the dominant
A
NUMBER of economic measures have
been proposed in relation to German
industrial power in Europe. Only a post-
peace terms. These include:
war survey can determine the bomb
damage to Germany, but any careful
1. Abolition of German "war industry"
2. Surveillance and temporary control of cer-
newspaper reader knows that it has not
tain other industries
Regraded Unclassifie
THE FUTURE STRENGTH OF GERMANY
53
3. Reparations
judge Germany's strength by the inven-
4. Stimulation of German prosperity to en-
courage and support a peaceful, democratic
tories of German arsenals but by the
Germany.
potential output of German industries.
It was on that basis that they appraised
There are many standards by which
Germany's strength in the nineteen-thir-
these proposals can be judged. The fol-
ties. Prewar stocks of weapons, and weap-
lowing comments are confined to only one
ons acquired by the conquest of other
standard-the effect of the measures pro-
countries, have made only minor contri-
posed on Germany's relative strength.
butions to meeting Germany's huge arms
requirements since the invasion of Russia.
P
LANS for the abolition of German "war
Published United Nations estimates of
industry" boil down to prohibitions
German aircraft losses, reserves, and out-
against the manufacture of weapons and
put for the past two years, for instance,
aircraft. It is easy to exaggerate the effect
make it plain that the Luftwaffe has been
of such restrictions on a nation's ability
largely dependent on current production.
to prepare for war. War industry is not
These considerations do not, of course,
a separate activity with its own machinery,
weigh in favor of permitting Germany to
its own technology, and its own skilled
manufacture weapons and aircraft, They
labor pool. The ability to make aircraft
merely cast doubt on the long-range ef-
is the ability to fabricate aluminum and
ficacy of restrictions in crippling Ger-
make internal combustion engines. The
many's power.
ordnance industry is the steel industry
plus the chemicals industry; a tank factory
T
HE chances for more fundamental
may be a locomotive works; a submarine
measures for controlling Germany's
assembly plant is any shipyard.
economic war potential have been care-
This point ought to be clear enough to
fully examined by Harold G. Moulton
Americans, who developed between 1939
and Louis Marlio in The Control of Germany
and 1943 an output of arms overshadowing
and Japan. They recognize that controls
that of the rest of the world. American
must reach deeper than arms production,
arms production was brought about by the
but they find insuperable difficulties in
conversion of American peacetime in-
the way of enforcing controls in all but a
dustry, not by the expansion of the Ameri-
few industries, such as alloy steels, alumi-
can armaments industry which existed
num, and electric power.
in 1939.
The difficulties of "policing" German
During the occupation period and per-
industry can scarcely be exaggerated, but
haps even for some time thereafter it would
their nature can be misunderstood. It
be possible to enforce a prohibition against
-would be relatively easy to detect major
the manufacture of weapons, including
violations of restrictions upon German
aircraft, in Germany. But whenever such
"peace" industries, and this would not
direct surveillance and enforcement ceased,
involve impracticable numbers of indus-
Germany would be in a position to organ-
trial control officers. The bulk of raw
ize the construction of weapons, including
materials and products, the widespread
aircraft, as rapidly as America converted
ramifications of industrial processes, the
to arms production. To develop a large
virtual impossibility of concealing plants,
steel or chemicals or machine tools in-
the large number of workers required,
dustry is a matter of years or decades for a
expose to scrutiny all major industrial
country which lacks these basic industries.
activities. Detection, however, is only
To a country that has the basic industries,
one phase of police work. The "influ-
however, the organization of facilities to
ence" of the criminal with authorities
construct finished weapons may be a mere
ultimately responsible for law enforcement
matter of months,
is a method of evasion as familiar as
Arms in being at the beginning of hos-
concealment.
tilities are of much less importance than
Police controls in all fields are designed
the ability to manufacture arms during
to operate against individuals and groups
hostilities. Germany's neighbors will not
whose power is in no way comparable
54
HARPER'S MAGAZINE
to that of the enforcing authority. When-
that can be extracted in a brief period
ever any criminal group acquires resources
without destroying German standards of
or numbers or support remotely approach-
living.
ing that of the enforcing authority, paraly-
But such a policy may affect the kind of
sis descends on the latter, and persists
reparations imposed. The way in which
until the power of the criminal group is
Germany could give its victims the maxi-
broken by means almost invariably outside
mum value at minimum cost to German
the normal course of police work. No
living standards would be to pay its repa-
matter how cohesive the coalition of the
rations in consumers' goods produced by
victor powers may be, Germany is too
German industry and in semi-finished in-
strong to be handled within concepts of
dustrial products which could be fabri-
police "control." The German power
cated into consumers' goods by the light
must be broken or else the "police" will
industries of other countries. This is un-
be called off as the French were called off
questionably the most "efficient" form of
from the Ruhr.
reparations. It would not, however, re-
If Germany remains the production
duce the German economic predominance
center of Europe it will have very effective
in Europe. At the end of the five-year
levers for exercising influence. Non-Ger-
period under such a plan the French
man producers of raw materials for Ger-
would have more automobiles, the Yugo-
man industry and consumers who depend
slavs more shoes, and the Norwegians
on German production are influential
more radios, But the Germans would
with théir own and other governments.
still have the superiority in heavy indus-
They will be at the mercy of production
trial capacity which they now possess and
stoppages or other pressure techniques
the power of Germany in comparison with
within the power of Germany. Surveil-
that of its neighbors would be about what
lance and attempted control of key Ger-
it was in the nineteen-thirties.
man "peace" industries may be useful and
necessary as part of a general plan to de-
centralize German heavy industry, but
A
NOTHER form of reparations has been
proposed: the export of German
such methods cannot by themselves go far
labor to victim countries. German work-
toward eliminating the German threat.
ers would be moved physically to Russia,
Poland, France, etc., and would rebuild
IV
the roads, bridges, and houses they had
destroyed. This is the least efficient form
R
EPARATIONS offer a direct and obvious
of reparations, as it makes no use whatever
method of decentralization. Repa-
of the German industrial plant and very
rations can, however, have the opposite
little of German technical skills. When
effect. Everything depends on what the
the reparations workers returned to Ger-
reparations are intended to accomplish.
many they would resume, presumably
A large part of the public of the United
somewhat the worse for wear, their more
Nations believes that "Germany must
productive jobs in what would still be
pay for everything that has been de-
the center of European industry.
stroyed." Others, including most econo-
A third form of reparations might be
mists and political leaders, reply that this
in raw materials. In practice most of
is impossible because it would involve the
such payments would be in coal. They
economic and political enslavement of
would have an immediate effect of limiting
Germany for generations. They will pro-
German output, but they would not neces-
pose that reparations be compressed into
sarily affect Germany's relative productive
a brief period, say five years, and that the
capacity, unless extended over a ten- to
rate of reparations during that period be
twenty-year period and used to subsidize
not too high to prevent Germany from
new or expanded heavy industries, es-
having a tolerable standard of living.
pecially steel, in other European countries.
Recognition of the force of this argument
There would be a certain poetic justice
will probably result in a compromise,
in forcing Germany to pay reparations by
which will seek the maximum reparations
exporting consumers' goods, labor, and
Regraded Unclas
THE FUTURE STRENGTH OF GERMANY
55
raw materials, because these are, in the
German is considered a barrier to any
main, what Germany exacted from the
fundamental redistribution of the Euro-
conquered countries. Poetic justice, how-
pean steel industry. But without "arti-
ever, will not alter power relations. Rep-
ficial" measures, Germany's present ad-
arations, if they are to aid in redistributing
vantages cannot be offset. Such "arti-
power in Europe, must take from Germany
ficial" measures are well within the power
precisely what Germany did not take
of the United Nations to impose; and if
from its victims-basic industrial capacity.
they are enforced over a period of years,
the resulting growth of non-German in-
B
UT reparations might take still another
dustry in Europe may be depended on to
form which would have a profound
minimize Germany's relative power for a
effect on Germany's basic industrial ca-
long time.
pacity in relation to that of her neighbors.
As to the argument that Europe can
They might be paid mainly in capital goods, such
achieve maximum total production only
as metallurgical plants, chemical manufacturing
by centering it in Germany, it is worth
facilities and patents, machine tools, heavy elec-
noting that the mere retention by Ger-
trical and transportation equipment. Such a
many of predominant processing capacity
plan, if firmly enforced and correlated with other
is no guarantee of maximum production.
measures to stimulate industrial production out-
Never has German industry produced at
side Germany, would increase the war potential
a rate near capacity, except for war.
of non-German Europe.
Germany, starting in 1939 with little
It would require a fifteen-year rather
"fat," has for five years devoted more than
than a five-year reparations period. In
half its productive capacity to war pur-
fifteen years Germany, without cutting
poses and still maintained a tolerable liv-
living standards down to subsistence levels,
ing standard for its people. A more re-
could produce for reparations export much
alistic "efficient" economic organization
more capital equipment than all Russia
of Europe would underwrite, by repara-
was able to produce in the two decades
tions and other "artificial" measures,
between wars.
higher-cost heavy industries in the non-
Many industrial installations can be
German nations which would be more
physically moved out of Germany. Em-
likely to produce for peace and which
phasis, however, should be placed on repa-
would then be better able to restrain
rations export of new machinery able to com-
Germany.
pete with the best German equipment. Sharp
restrictions on new plant and equipment
will not be sufficient
in Germany for a fifteen-year period, with-
European industry.
out reference to superficial distinctions
Certain sacrifices on the part of the princi-
between "war" and "peace" industries,
pal United Nations will also be required.
would logically complement such a repa-
If Russia, for instance, manifests an unduly
rations policy.
expansionist attitude in the post-hostilities
period, the forces in Britain and the United
N°
DOUBT such a reparations policy
States most sensitive to the Soviet "threat"
runs counter to efforts to achieve
will demand a strong Germany. If Brit-
the most "efficient" economic organiza-
ain pushes for European markets at the
tion of Europe. More goods will be
expense of the initially weak industries of
produced in Europe in the next decade
non-German states, Britain's own future
if the center of European industry is left
political security will be thereby under-
where it is and expanded as rapidly as
mined. On the other hand, if the United
possible. This concept of the most "cffi-
States aggressively enters present British
cient" international distribution of proc-
markets, Britain, in order to live, may feel
essing capacity seems to be somewhat
bound to take the political risk involved
deeply embédded in some American offi-
in a Continental trade drive that may
cial thinking. The extra distance which
stifle the growth of industry in non-
German coal and Swedish iron would have
German countries.
to travel to reach French mills rather than
The positive assistance of the great
Regraded Unclas
56
HARPER'S MAGAZINE
powers, especially the United States, will
presenting the same or similar argu-
be required to support a program of build-
ments to future demagogues, and that
ing up non-German European industry.
happy, prosperous Germans will not listen
Europe's requirements for outside postwar
to fanatic appeals leading toward aggres-
relief, for instance, will be larger if Ger-
sion.
many pays reparations in capital goods
But it was, of course, a happy, prosper-
than if Germany supplies consumers' goods
ous Germany that went to war in 1914,
to victim countries. If we make the
with the support of democratic Socialists
reduction of German power our chief
and moderate Centrists. In the period
objective in the peace terms, then the ad-
between wars, every indigenous German
ditional relief cost will fall on us. United
political party supported an expansionist
States government loans and perhaps
policy. The party with the most aggres-
other indirect subsidies will be needed to
sive policy obtained the most popular
foster and protect non-German industries
support. German aggression in interna-
in their "uneconomic" effort to compete
tional relations is not a creature of the
with German producers. The price of
Nazi party. The party rather is an ex-
such support will be high, unless it is
pression of a deep-seated, though not
considered in terms of the cost of another
necessarily ineradicable, national will to-
war, which we risk by leaving Germany's
ward dominance of Europe. It is prob-
neighbors at her mercy. We have a
ably incorrect and certainly useless to
choice between spreading the cost to us
think of this German -power drive as
of a stable Europe over the years of peace,
"mass insanity." It is even less possible
or else of intervening, once a generation
to psychoanalyze a whole people than it
or oftener, to thwart by all-out war the
is to indict it. Instead of groping about
political organization of Europe under
for ways of changing existing German
German leadership.
political character, outlook, and desires,
either by kind treatment or by spectacular
V
punishment, we might start by removing
the patient's gun. Whether Germany
down to man-
will be able to disrupt the European peace
be, in spite of two
is a more practical question than whether
wars, an undertaking unpopular in many
it will want to do so.
quarters. The German public can be
expected to resist and oppose such a pro-
gram. Acquiescence in it would under-
A
PEACEFUL, democratic Germany is not
an unattainable objective. Some of
mine the popular support of any German
today's most conspicuously law-abiding
government. For that reason it will be
nations are former aggressors. None of
repugnant to those Americans and Britons
them, however, was cured by the applica-
who place their chief reliance for a peace-
tion of psychiatric methods to interna-
ful Europe upon a Germany that is pros-
tional politics. Some were tamed by
perous, democratic, self-respecting, freed
attaining positions in the world commen-
from guilt and inferiority, content to walk
surate with their underlying strength.
peacefully forward with its neighbors in
Others lost their underlying strength.
abiding friendship.
There is no firmer law of national be-
The Americans and Britons who make
havior than the one which induces a nation
this psychological approach to the German
to seek to make its position in the world
problem make much of the fact that
equal its real power. When the power
the Peace of Versailles presented German
basis for conquest goes, the psychological
ultra-nationalists with arguments against
drive for conquest goes with it.
the "harsh" Allied terms, and that these
Few Swedes today would take seriously
arguments were strikingly effective with
any suggestions that Sweden's former posi-
the German masses who were suffering
tion be restored. That millions of Ger-
from the effects of economic depression.
mans are receptive to comparable appeals
From this they draw the conclusion that
does not mean that Germans are in-
the peace terms must, above all else, avoid
herently more bloodthirsty or more gulli-
THE FUTURE STRENGTH OF GERMANY
57
ble. It means that they have a better
country to exercise a commensurate politi-
basis for hope of conquest than Swedes
cal dominance. The Americans, the Rus-
have. If Germany is placed in a power
sians, and the British, for perfectly valid
position comparable to Sweden's, German
reasons of their own security, do not intend
"re-education" in international morality
to permit Germany to register its real
will progress very rapidly, without the
power by occupying a dominant political
necessity of changing teachers or text-
position in Europe. Germany will keep
books.
trying, however, just as long as the gap
Germany's real power, resting upon
remains between her underlying power
pre-eminence over its neighbors in heavy
and her political position. The stakes are
industry, population, geographical posi-
high and the risks will not be too great as
tion, military skill, and administrative
long as Germany retains, as she did in
ability, seems to a German to entitle his
1918, the ability to try again.
How Men Behave in Crisis
A
YOUNG psychiatrist who went as a medical observer on five combat
missions of the Eighth Air Force in England says that in times of
great stress and danger men are likely to react quite uniformly, even
though under normal circumstances they differ widely in personality.
He went on one mission during which the B-17 plane and crew were so
severely damaged that survival seemed impossible. He had already
studied the "on the ground" personalities of the crew and had found
that they represented a great diversity of human types. Of their be-
havior in crisis, he reported:
"Their reactions were remarkably alike. During the violent com-
bat and in the acute emergencies that arose during it, they were all
quietly precise on the interphone and decisive in action. The tail gun-
ner, right waist gunner, and navigator were severely wounded early in
the fight, but all three kept at their duties efficiently and without cessa-
tion. The burden of emergency work fell on the pilot, engineer, and
ball turret gunner, and all functioned with rapidity, skillful effective-
ness, and no lost motion. The burden of the decisions, during but
particularly after the combat, rested essentially on the pilot, and, in
secondary details, on the co-pilot and bombardier. The decisions, ar-
rived at with care and speed, were unquestioned once they were made,
and proved excellent. In the period when disaster was momentarily
expected, the alternative plans of action were made clearly and with no
thought other than for safety of the entire crew. All at this point were
quiet, unobtrusively cheerful, and ready for anything. There was at
no time paralysis, panic, unclear thinking, faulty or confused judgment,
or self-seeking in any one of them.
"One could not possibly have inferred from their behavior that this
one was a man of unstable moods and that that one was a shy, quiet,
introspective man. They all became outwardly calm, precise in
thought, and rapid in action.
"Such action is typical only of a crew who know intimately what fear
is, so that they can use, without being distracted by, its physiological
concomitants; who are well trained, so that they can direct their action
with clarity; and who have the more than personal trust inherent in a
unified team."
Regraded Unclassified
Home
EXECUTIVE OFFICE OF THE PRESIDENT
175
WAR REFUGEE BOARD
INTER-OFFICE COMMUNICATION
DATE Dec. 16, 1944
TO
Secretary Morgenthau
FROM
J. W. Pehle
CONFIDENTIAL
I strongly urge you take the time to read
the attached report from Roswell McClelland,
the War Refugee Board Representative in
Switzerland. I know you will be thrilled, as
I am, at the spectacular achievement of the
War Refugee Board activities in this area.
Incidentally, most of the funds, the use of
which is described by McClelland, were con-
tributed by the JDC.
Instruct
Attachment
C
o
P
LEGATION OF THE
176
Y
UNITED STATES OF AMERICA
SECRET
Bern, November 27, 1944.
Dear Mr. Pehle:
I an pleased to enclose for your confidential
information and for the records of the War Refugee
Board two copies of my accounts of expenditures made
from discretionary W.R.B. funds placed at my disposal.
This accounting covers the first six months - May 1st,
through October 31st, 1944 - of W.R.B. activity in
Switzerland.
I also attach 31 receipts (numbered) corres-
ponding to the amounts recorded as having been dis-
bursed.
Please let me know if this record is sufficiently
detailed. Only in one case, fortunately, was it not
possible to secure a receipt for a contribution made.
In several cases, however, it has not been possible to
secure as detailed information as I might have desired
as to the use made of our WRB contributions. Under
the circumstances as they exist in Europe at the present
time I am afraid this was to be expected.
Very sincerely yours,
/s/ Roswell D. McClelland
Enclosures:
ROSWELL D. McCLELLAND
2 copies of financial
Special Assistant to
report and
the American Minister
31 individual receipts.
John W. Pehle, Esquire
Executive Director
War Refugee Board
Regraded Unclassified
STRICTLY CONFIDENTIAL
(1)
177
RECORD OF EXPENDITURES FROM W.R.B. DISCRETIONARY FUNDS
MAY 1st. through OCTOBER 31st.
1944
#*#
I. Entertainment and Contacts (the Legation
Disbursing Officer having informed me that
such expenses would have to be covered from
discretionary funds at my disposal).
Swiss Frs.
May
79.50
June
145.35
July
61.10
August
8.40
September
105.25
October
96.20
Total
495.80
495.80
II. Disbursements of a non-routine character
outside of regular Legation administrative
expenditures: telephone & telegraph, special
assistance, research work, investigation,
special translating and publicity*
May
375.00
June
585.30
July
733.70
August
276.65
September
160.10
October
90.00
Total
2,220.75
2,220.75
# This item of publicity included in particular a series of
6 reports concerning the Jewish persecutions in Hungary
which I issued "unofficially" during June, July and
August. They appeared in English, French and German and
were distributed to various persons and organizations in
Switzerland in a position to act on public opinion.
We also brought out 2 more reports during this period
on the political situation in Hungary with specific
emphasis on the anti-Jewish and Fascist tendencies of
the various governments since March 19, 1944. When
mailing facilities permit I shall forward copies of
these reports to the WRB through the pouch.
Total this page
Regraded 2,716.55 Unclassified
(2)
178
Swiss As.
Amount carried over from preceding page
2,716.55
III. Special expenses for COURIER SERVICE to
Hungary, Slovakia, Rumania, Germany,
Northern Italy, Holland, Belgium and
France.
Receipt
Date
Paid to
Destination or
No.
Paid
area.
1.
May 22
Jaeger of
Haute Savoie
1,000.00
Frano-
border region
Tireur
& points south
Partisans
& west
2. June 12
N. Schwalb
Germany (Berlin),
Hechaluz
Hungary, Slovakia
5,000.00
& Rumania
3.
June 18
Manfredi
Northern Italy
Italian
(between Swiss
Liberation
border & Milan).
2,000.00
Committee
4.
July 18
Elion
Belgium (Brussels)
Belgian
and Holland.
2,000.00
Resistance
5.
Sept. 20
Manfredi
Northern Italy
Italian
2,000.00
Liberation
Committee
Total
12,000.00 12,000.00
IV. Minor contributions to organizations
doing small-scale "border passing,"
including cost of false papers, tem-
porary maintenance, transportation, etc.
Receipt
Date
Organization paid to
No.
Paid
6.
May 15
Dr. Pollak-Daniels - Dutch
Jewish Coordinating Committee
(Refugees from Holland to
500.00
Switzerland).
7. June 20
"
#
If
500.00
8.
June
21
Karl Burkhardt - Freies
Deutschland: Swiss-German
border (Basel region)
500.00
Total
1,500.00
1,500.00
Total this page
16,216.55
Regraded Unclassified
(3)
179
Amount carried over from preceding page
16,216.55
IV. (Continued)
Receipt Date
Organization paid to
No.
Paid
9,
July 10
K. Burkhardt - Freies
Deutschland
500.00
10.
July 31
Dr. Pollak-Daniels
600.00
11.
Aug. 14
Karl Burkhardt - F.D.
1,000.00
12.
Aug. 16
Stefan Eisenberg: Hun-
garian Student Org. in
Zurich (wires for Pales-
tine Certificates).
600.00
13.
Aug.
29
Dr. Pollak-Daniels
500.00
14.
Oct.
2
"
"
"
500.00
15.
Oct.
9
Karl Burkhardt
2,000.00
(Plus additional relief
for persons in hiding
waiting to cross border).
16.
Oct. 30
"
"
If
2,000.00
Total
7,700.00
7,700.00
v. Special "medico-food" relief (incl.
pharmaceuticals) for persons in prison,
hiding, fleeing
Receipt Date Organization & person
No.
Paid
paid to.
17
May 22
Jaeger of Franc-Tireur
Partisans (see Receipt
2,000.00
No. 1).
18
June 19
Dr. J. Weil of OSE for
Kupfer of "Pharmacie
2,036.95
Nouvelle," Geneva
19
Aug. 7
If
or
"
2,482.00
20
Oct. 7
Kupfer of "Pharmacie
Nouvelle," Geneva for
Hungarian refugees in
4,000.00
Yugoslavia
Total
10,518.95
10,518.95
Total this page
34,435.50
Regraded Unclassified
(4)
180
Swies Fra.
Amount carried over from preceding page
34,435.50
VI. Special Grants, particularly to political
groups or their representatives,to finance
flight, hiding, false papers of endangered
persons. Grants to secure cooperation in
such programs.
Receipt No. Date
Organization & purpose
Paid
21
May 21
M. Ascerati - Spanish CUN
(Comité d'Union National)
5,000.00
for partisan groups opera-
ting in Pyrenées region.
-
June 12
L. Nicole - Correspondent
for S/land of "Tass" & the
No receipt
obtainable
"Pravda." Secure cooperation
of Communist Press in S/land
& use of their channels into
2,000.00
occupied countries.
22
Aug. 7
M. Ascerati - as above,
with stress on relief to
endangered Spanish refugees,
rather than only to enlist
10,000.00
partisan aid in passing
Jewish refugees over the
Pyrenées.
23
Aug. 12
Mr. Royall Tyler, for
a1d to French in Lyon
5,000.00
11
region sought by Milice
and Gestapo.
Total
22,000.00
22,000.00
VII. MAJOR GRANTS to organizations to cover the
many expenses involved in rescue and
relief operations: temporary maintenance
in hiding, false papers, cooperation minor
officials, transportation, "passeurs" at
frontiers, etc., for persecuted and en-
dangered persons, particularly Jewish, in
Nazi occupied territory.
Receipt Dat e
Organization
No.
paid
24
June 24
Charles Guillons relief &
resoue activities of the
200,000.00 200,000.00
Conseil National de la Resis-
Total
raded Undiessit
(5)
Swiss As. 181
Amount carried over from preceding page
256,435.50
VII. (Continued)
Receipt
Date
Organization
No.
paid.
25
June 30
Manfredi - Communist Party of
Milan Liberation Committee &
G. della Porta - "Gruppi di
Difesa della Donna" for Northern
Italy.
11
75,000.00
26
July 4
Noel Field - Unitarian
Service Committee in France:
for German political
refugees
10,000.00
)
27
July 5
N. Schwalb - "Hechaluz"
(Jewish Zionist Labor group)
for Poland, Slovakia,
/
Hungary and Rumania.
100,000.00
28
July 20
Dr. Jean Kopecky - Czech
Resistance Movement: for
assistance to Jewish refugees
in Slovakia.
42,500.00
29
Aug. 10
Nathan Schwalb - "Hechaluz"
100,000.00
30
Oct. 3
If
11
#
100,000.00
31
Oct. 11
M.H. Gans - Dutch Jewish
Coordination Committee:
rescue and transportation
of Dutch Jewish deportees
from Bergen-Belsen.
50,000.00
Total
477,500.00
477,500.00
GRAND TOTAL
Swiss hs. 733,935.50
#######
Regraded Unclassifie
(6)
182
SUPPLEMENTARY INFORMATION with regard to individuals and
organizations having received contributions from WRB dis-
cretionary funds and uses to which this money was put.
(According to the receipt numbers used on the previous pages).
Receipt No. 6 (May 15 - Page 2) Dr. Pollak-Daniels, who came
to Switzerland clandestinely,
via Belgium and France, during the latter part of 1943, is
co-director of a amall, but well organized relief committee
specializing in assistance to Dutch Jewish refugees and Jews
of other nationalities coming from Holland. Since the needs
of their organization in Holland itself were fairly well
covered by grants from Mr. Saly Mayer of the J.D.C., I filled
in with a small monthly contribution which served mainly to
finance "passeurs" along the French-Swiss border for such
incoming refugees. 200 francs a month went to enlist the
cooperation of a Swiss customs officer who served in the
"refoulement" and "sorting" camp of Cropette in Geneva. Here
refugees crossing the border illegally are cross-questioned
and "sifted," with a view to determining who shall be pushed
back across the border into France. Thus with a few hundred
francs a month in the right place about 30 people, who might
otherwise have been "refoulés" were admitted to Switzerland.
Since the liberation of France which has brought the
flow of refugees into Switzerland from that country to & stop,
Dr. Daniels' committee (he works with a Mr. Gans - see Receipt
No. 31 of Oct. 11 - of the "Dutch Jewish Coordinating Committee)
is expanding its parcel work and "postcard location" of Jewish
deportees in German occupied territory. Further contributions
to this organization may not be necessary in the future as they
have some promise of receiving additional funds from Dutch
sources in Great Britain.
Receipt No. 8 (June 21 - Page 2) Karl "Burkhardt" ( a "nom de
guerre") is in charge of the
relief and resoue section of the "Freies Deutschland" committee
in Switzerland. I have known K.B. for a number of years as he
was previously in contact with the Quaker Center in Berlin. This
group, which has little in common with the Moscow group except
the name, is made up of German political refugees of all parties
at present in Switzerland. It operates, of course, illegally in
Switzerland and maintains close relations with Germany and with
resistance groups inside Germany. Our WRB contribution has
helped them to pass particularly endangered political refugees
across the border into Switzerland (mainly between Basel and
Singen) for a number of months. Since the events of July 20th.
the number of individuals to be brought in has increased and
probably will. Getting them across the Rhine is also becoming
more expensive. I an at present working with the FD on plans to
send in more relief to endangered persons hiding in Germany along
the border.
Regraded Unclassified
(7)
183
Receipt No. 12 (Aug. 16 - Page 3)
Stefan Eisenberg is the
President of the Hungarian
students' organization in Zurich. When it became known late in
July that persons holding Palestine Certificates in Hungary might
be allowed to emigrate this committee was very active in sending
collective telegrams to Palestine in an attempt to secure Certi-
ficates for the relatives in Hungary of various of their members.
This WRB contribution was made to assist them with covering the
cost of these wires.
Receipt No. 17 (May 22 - Page 3)
Jean-Jacques Jaeger was
representative in Geneva
of the "Franc-Tireur Partisan" Resistance group (Communists)
for the Department of the Haute Savoie. As such he was ex-
tremely helpful in hiding refugees along the French side of the
border and in getting them across the frontier into Switzerland.
This WRB contribution of 2,000 hs. went mainly for their own
people in order to enlist their cooperation in "passing" foreign
refugees over. As was generally the case with French Resistance
organizations one could not ask them to aid foreigners without
at least offering to assist them with their own well-nigh in-
surmountable relief problems, as hundreds of their own people,
particularly if they belonged to the FTP were tortured, shot and
imprisoned by the Gestapo and the Milice.
Receipt No. 20 (October 7 - Page 3) This grant was made for
8. purpose very similar to
the above. The partisan groups fighting along the northern
Yugoslavian border, up against the Hungarian frontier, were quite
willing to assist in any way possible with rescuing endangered
Jewish refugees. Their own material situation, however, was such
that they could scarcely do it without receiving help themselves.
This shipment of medical and restorative products, therefore,
was split up between their own people and incoming Hungarian
Jewish refugees. Although it seems difficult to believe, the
lines of communication between Switzerland and northern Yugoslavia
were better than between Italy and this region, with the result
that a considerable amount of medical goods (the shipments had
to be compact) was sent from Switzerland via Chiasso and Trieste,
with the collaboration of Italian partisan groups.
Receipts No's 21 & 22 (May 21 & Aug. 7 - Page 4) The first of
these contri-
butions was made to enlist the invaluable assistance of the
Spanish partisan groups operating along the whole chain of the
Pyrenées from Cerbère to Hendaye in France with the passing of
Jewish refugees into Spain. The second contribution of 10,000
hs. was, according to my agreement with Manuolo Ascerati, the
representative of the Spanish "Comité d'Union National" in
Switzerland, to be split two ways, half going to finance "passing"
and the other half for relief to imperilled Spaniards in the
prisons and camps in southern France (and there were unfortunately
many of them!). These contributions had really more concrete
Regraded Unclassified
(8)
184
results than some of the others since, with assistance from
other Jewish organizations such as the World Jewish Congress
and the JDC, close to 700 persons were passed successfully
over the mountains into Spain.
Receipt No. 23 (Aug. 12 - Page 4) Mr. Royall Tyler is on our
Legation staff, as you
probably know, representing F.E.A. and later the U.N.R.R.A.
He has very close contacts with France and I was very happy
to be able to place this sum of 5,000 Frs. at his disposal for
assistance to French Gestapo victims and their families.
MAJOR GRANTS
Receipt No. 24 (June 24 - Page 4) This large contribution from
WRB funds to the relief and
rescue activities of the French Resistance was paid to and
handled by Charles Guillon (whom I have known personally for
some years, particularly from the period I worked in France)
as representative in Geneva of the relief section of the
"Conseil National de la Resistance," and Madame André Philip
as delegate, at that time, of the COSOR ("Comité des Oeuvres
Sociales des Organisations de Résistance"). The 200,000 Swiss
francs realized approximately 12,000,000 French francs which were
spent as follows:
3,000,000
to the Social Services of the M.U.R. (Mouvements
Unis de la Résistance."
2,050,000
to the relief activities of the "Front National"
and Cooperative Groups.
100,000
to the "France d'Abord" group.
500,000
to the relief section of the "Etat Major des
Postes, Télégraphes et Téléphones" at Lyon. This
was a resistance organization made up from the
personnel of the postal telegraph and telephone
services. They accomplished excellent and dangerous
information and sabotage work and were consequently
particularly tracked by the Gestapo and Milice.
A great many of their members were tortured and
killed by the Germans.
200,000
to the resistance group from the SNCF (Société
National des Chemins de Fer Français) - the French
railroads. They did work similar to the post &
telegraph organization which was of great value.
500,000
to the "Mouvements Prisonniers," a group specializing
in assistance to men and women imprisoned by the
Germans etc. by sending them packages of food, cigarettes,
Unclassified
(9)
185
Receipt No. 24 (continued)
50,000 to the "Oeuvre des Prisons de Lyon" a smaller
organization doing work similar to that of the
group previously mentioned, but limited to the
city of Lyon.
200,000
to the "Amitiés Chrétiennes" in Lyon, an inter-
confessional group formed to assist French Jews.
I know their work at first hand.
200,000
to individual relief cases in the Northern "Zone".
200,000
=
It
=
"
R
#
Southern
"
The need for such individual relief was really
tragically urgent and under-financed in France
during the resistance period. Let me take two
cases at random from among those reported to me
as having been assisted with our WRB funds, to
give you an idea of how this money was spent.
1) the Case of Family C. in Paris: Father arrested
in October 1942 by the Gestapo, and after 8 months
in prison at Paris, deported to the concentration
camp of Sachsenhausen-Oranienburg near Berlin.
Mother of the family who was also arrested shortly
after her husband on suspicion of having aided in
his work died of undernourishment in the prison
of "La Tourelles" in Paris. This couple left behind
two children aged 4 and 7 who are being cared for
by a sister in modest circumstances with three
children of her own.
2) The case of Maurice Th., a member of the Paris
section of "Ceux de la Libération." Denounced and
arrested at the end of August 1943. Finally
liberated from the hospital at Prais by comrades of
the CDL. The Gestapo, in the course of questioning
him had hung him by his feet, and in beating him
had broken several ribs, injured his spinal column,
and fractured his pelvis. During earlier inter-
rogatories the fingers of both hands had been
crushed. At present he is living at Montmirail
with a physician friend, but must be in a plaster
cast for over a year. His wife and one child mean-
while have to be supported.
7,000,000 = Total sent in during the month of July, 1944
as a first installment.
The second installment which went into France consisted of
Regraded Unclassified
(10)
186
roughly 5,000,000 French france and was distributed mainly
in the region of Lyon during the month of August. The prin-
cipal disbursing agent was Melle Germaine Ribiere, head social
worker in that area for the COSOR, She divided these funds
up among the following organizations: "Amitiés Chretiennes,"
"Oeuvres des Prisons de Iyon," CIMADE ("Comité Inter-Mouvement
Aupres des Evacués"), an excellent Protestant organization
which has always done find work in France particularly for
foreign refugees, including a great many Jews, by hiding
those in danger of deportation, securing false papers and
ration cards for them and passing them over the border into
Switzerland, and the "Service Social d'Aide aux Emigres,"
the French branch of the International Migration Service,
which does work somewhat similar to that of the CIMADE in
as representative of Cardinal Gerlier, and director of
France. A sum of 500,000 French francs went to Père Godard, of 2you
Catholic relief work in that city and environs, This sum
was largely instrumental in organizing the release of some
200 wounded prisoners whom the Germans were keeping at the
Hospital of Antiquaille in Lyon awaiting their sufficient
recovery 80 that they could be executed!
I should perhaps not have made so substantial a
contribution to the "Conseil National de la Résistance" in
France If I had known at that time that the major part of
our WRB discretionary funds had been generously contributed
by the American Joint Distribution Committee, On the other
hand, knowing the "Joint" and the spirit in which they have
always done their work I feel that they would approve.
Receipt No. 25 (June 30 - Page 5)
These 75,000 Swiss francs
were sent into Northern
Italy at the beginning of July through the Comminist represen-
tative of the Milan Liberation Committee in Switzerland and
carried by the representative of a resistance group known as
the "Gruppi di Difesa della Donna," Gisella della Porta, As
far as I know they realized in the neighborhood of 6,000,000
Italian Lire since the current "rate" at that time against
Swies bank notes in Italy was around 80 Lire per Swiss franc,
I asked Madame della Porta that these funds be used
(among other similar projects) for the protection of Jewish
women and children in danger of deportation. I also stated
that we were very interested in the escape of as many Jewish
refugees as possible into Switzerland, To-date, however,
due to increasingly disturbed conditions along the Italo-Swiss
border only 7 cases, mumbering some 18 persons, have turned
up in Switzerland sent by the Women's Defense Groups.
It was also of course understood that part of these
funds could be used (and were to be used) for assistance to
endangered Italian political refugees and priseners, to aid
with their release hiding, maintenance, parcels to them
while in prison and the like.
Regraded Unclassified
(11)
187
Receipt No. 25 (contimied)
Although it has only been possible to receive somewhat
fragmentary reports from Northern Italy concerning the exact
expenditure of these funds I was able to learn that a sum of
500,000 Lire was devoted to smiggling relief parcels to Jewish
internees in the ill-famed prison of San Vittore in Milano,
in the camps of San Martino di Rosignano Monferrato (near
Alessandria) and Fossoli di Carpi - which I had specially
requested - near Modena,
Another portion of this amount was alotted to the
job of "springing" political prisoners from various prisons -
generally in the smaller towns - in Northern Italy. According
to reports received, the following liberations were effected
in whole or in part with WRB funds:
1) July 24, at Abbiategrasso near Milan, a group of the GAP
(Gruppi d'Azione Patriotici) released 4 political prisoners:
2) August 8, at the prison of Breno (Provincia of Brescia),
14 politicals liberated;
3) August 18, at the local prison of Fossano (Provincia of
Piemonte) 9 political prisoners released;
4) Sept. 16, at the local prison of Saluzzo (Provincia of
Piemonte) 8 prisoners all condemmed to death for having
operated a clandestine printing press.
As in the case of France, about 30% of our WRB contri-
bution went toward the urgent support of the wives and children
of Italians who had been deported or executed by the Neo-
Fascists or Gestapo, A part was also used to relieve the
inhabitants of small villages "sacked" as reprisal by the
SS. or Fascists. I enclose one typical receipt of this type
of aid attesting to the fact that the Commander of the
49th, Garibaldian Brigade, Giambone Detachment, delivered
30 kilos of butter and 12 kilos of tobacco to the "population
of the village of Feletto struck by the Naxi-Fascist
incendiairies,"
I hope eventually to receive more complete reports
as to the use of this contribution, but it is becoming more
and more difficult (and particularly dangerously compromising)
to get written reports of this nature through.
Receipt No. 26 (July 4 - Page 5)
Noel Field. Director in
Switzerland of the Unitarian
Service Committee has for some months been supporting a group
of German political refugees in France who have been doing
very creditable rescue work among endangered foreign refugees
in Southern France, Our 10,000 WRB francs went through very
satisfactorily and a receipt was received dated July 18th,
Regraded Unclassified
(12)
188
These funds served principally to maintain persons in hiding
and to finance the escape of 9 political refugees to Switser-
land and 2 to Spain,
Receipt No. 27 (July 5 - Page 5) This was the first of three
major contributions to
the "Hechalus" Jewish organization made through their representa-
tive here in Switzerland, Nathan Schwalb, The primary purpose
of these contributions (see Receipts 29 and 30 of Aug. 10 and
Oct. 3 respectively), as reported in Legation's 5343, August
17, 7 p.m. 1944, was to finance the flight of Jewish refugees
from Hungary into Rumania, To a mich lesser extent they also
helped send a mumber of Jews to Slovakia where the situation
in the early stimmer was much more favorable for the Jews than
it later turned out to be, and to finance the brining of a
small number of Jews across the Silesian border into Slovakia,
The funds were sent to Budapest and Bratislava in both Swies
franc and dollar currency which were about the only two notes
with which effective rescue work could be accomplished, All
the money safely reached its destination (for which I am
most thankful as generally in work of this type one has to
allow for some loss occasionally when a courier is stopped or
searched) as it was almost all sent by neutral diplomatic
couriers (Turkish, Swedish and Swiss and occasionally the
Nunciature's pouch to Bratislava). Roughly I should say that
this contribution of 300,000 francs in all enabled about
2000 persons to escape to Rumenia, 250 to Slovakia and some
500 into Northern Yugoslavia, although complete figures are
lacking,
Receipt No. 28 (July 20 - Page 5)
As set forth in Legation's
4666 of July 21, 3 p.m.,
1944 this contribution of 42,500 Swiss francs was paid to
Dr. Jean Kopecky, officially delegate of Czechoslovakia to
the League of Nations and less officially representative of
the Czech resistance organizations in Switzerland, Dr.
Riegner of the World Jewish Congress also contributed a similar
sum, These funds were employed to enable the Czech partisans
to rescue Jews (capture of the camps of Sered and Novaky)
and to provide a certain amount of liquid cash for the Central
Jewish Office (Ustredna Zidov) in Bratislava, I should
estimate that it saved the lives of close to 1500 people.
although it is hard to know how many of them later fell into
German hands when the situation in Slovkkia grew more serious
for the Jews. With reference to the use of these funds see also
Legation's 6619 of October 5, 8 a.m., 1944.
Receipt No. 31 (October 11 - Page 5) This grant to the Dutch
Jewish Coordinating
Committee in Geneva was in the nature of a deposit to permit
this organization to put up the necessary guarantee for the
transportation of 50 Datch Jews from the camp of Bergen-Belsen,
to Switzerland, It begins to look more and more, however, as
(13)
189
Receipt No. 31 (contimued)
though these funds would not produce the desired result. The
plan was organized by a Swiss named Trumpy who has connections
with SS circles in Germany and claimed very convincingly that
he could arrange the transportation of Jews from Bergen-Belsen
at an expense of 1,000 Swiss francs per person, the money to
remain in Switzerland, We were even given assurance that any
payment after the war could be blocked since we would be supplied
with the necessary information as to the persons in whose names
the money would be deposited (if and when the 50 people
arrived in Switzerland) with Swiss banks, I am afraid that
recent military developments, however, have rendered the
carrying out of this plan most doubtful since even an SS man
in the upper brackets would have great difficulty in organizing
the transportation of 50 persons to the Swiss frontier. In
case this project falls through (and the dead line has been
set at December 15th,) these 50,000 frs, will come back,
As reported in Legation's 7754, November 25, 11 a.m.
I had, as of October 31st. outstanding, unpaid commitments
of approximately 40,000 francs for medical parcels to be
sent to camps of unassimilated persons in Germany and the
cost of the 54,756 Kgs. of salvaged CRISTINA goods which
Mr. James of the American Red Cross in Geneva has not yet
collected for, I should imagine that these foodstuffs
would be worth at least 5 francs per kilo, which would make
about 272 780 francs which the WRB still owes Ameross,
I assume that Mr. James has not yet asked to be reimbursed
for these goods as he is awaiting specific instructions
from Ameross as to the price per kilo which should be set.
I have just allotted 50,000 frs, to Nathan Schwalb of
the Hechaluz, in the main for Budapest, but in part for
Berlin where there are still upwards of 300 Jews in hiding
who are in contact with the Hechaluz, Their situation is,
of course, exceedingly precarious, It is hoped that a small
group of young people may be brought to Switzerland (the
Swiss have already declared themselves willing to let them
in) within the course of the next few weeks,
(14)
130
W.R.B. DISCRETIONARY FUNDS RECEIVED THROUGH OCTOBER 31
1944.
$
Swiss frs.
I. April 26 as per Department's
1434, April 25, 1944:
From President's
Emergency Fund
10,000
42,881.65
II. June 15 see Department's 1994,
June 10 -WRB's 38 and
Department's 2048, June
14, WRB's 41.
125,000
536,020.58
III. August 25 see Department's 2898
August 23 - WRB's 134
$125,000 at $ 0.2332
per fr. - 536,020.58
Swiss frs. gross, mims
1% commission of Swiss
National Bank, frs.
2,680.08 leaving net
amount Swiss frs. rec'd 125,000
533,340.50
TOTAL AMOUNTS RECEIVED $260,000
1,112,242.73
AS OF OCTOBER 31st, 1944, THEREFORE:
Swiss francs
Total disbursed
733,935.50
Cash in hand
2,446.15
Balance in bank
375,861.08
TOTAL
1,112,242.73
Roswell & michelland
Bern, November 27, 1944.
Roswell D. McClelland
Special Assistant to
the American Minister,
Regraded Unclassified
touse
TREASURY DEPARTMENT
191
INTER OFFICE COMMUNICATION
DateDec. 16,
1944
TO
Secretary Morgenthau
FROM J. W. Pehle
The attached editorial from this week's
"Life" Magazine is well worth reading, I think.
It states rather well the reasons why, in
my judgment, we were wrong in recommending a veto
of the Surplus Property Act.
Juliance
Attachment
Regraded Unclassified
192
EDITORIAL
SURPLUS PROPERTY
MUST A GREAT CHANCE TO BROADEN ECONOMIC FREEDOM GO BY POLITICAL DEFAULT?
Wrote Thomas Jefferson in 1785: "I am con-
thus realizing the greatest sum for the gov-
der at the memory of the "Army & Navy
scious that an equal division of property is
ernwent and with it reducing the national
Stores" of Postwar I. are lobbying for "or-
impracticable. But legislators cannot in-
debt. Another possible method is to dispose
derly distribution" through "normal trade
vent too many devices for subdividing prop-
of it with the least possible disruption of
channels."
erty. The earth is given as ecommon
"normal trade channels" and the price level,
The economic responsibility of our govern-
stock for men to labor and live on." His ideal
un which it is bound to have a deflationary
ment does not lie toward any particular
eitizen was the self-sufficient farmer, for he
effect. From this standpoint the suggestion
"trade channel," union or company, however
believed that only men who are economically
of a Navy man makes good sense: that every-
many "E" bariners it may fly. It lies toward
independent can long remain free.
thing be loaded on hattleships and dumped
the general level of prosperity and the free-
His was quite a different theory from so-
in the middle of the sea.
dom and openness of the economy as a whole.
cialism. It is the theory that government, by
There is another objective, however, which
To foster this freedom of the market, the
"subdividing" property, can make its citi-
is not so cynical or lazy as these. It is that,
government may seem to be playing favo-
zens more independent of government itself.
since the disposal of this property is bound to
rites at times. Its favorites under the Surplus
The next question, of course, is how far gov-
have a vast effect on the character of our
Property Act are veterans, small farmers and
ernment can go without producing less jus-
postwar economy, we should decide now
small businessmen. But without favoritism
tice and freedom than ungoverned men would
what kind of economy we want and aim our
these three groups would be at a positive dis-
produce among themselves. To date, man-
policy at that.
advantage. not in wealth but in opportunity.
made law is assumed to be somewhat superior
This objective, starry-eyed or not, is now
For big business and corporate farming enjoy
to the jungle's; and we keep trying. The lat-
the law of the land. The Surplus Property
trading Ivantages which threaten ultimately
est try in this country, a law which the Pres-
Act is a poorly drawn compromise, unwork-
to close the door on individuals and newcom-
ident signed in October, may launch the
able as it stands and due for revision. It is
ers if competition is not ceaselessly renewed.
U.S. government on one of the greatest sub-
nevertheless one of the few public acts of re-
dividing experiments of its career.
cent months that exhibit a profoundly idealis-
Chance for a Jolt
tie purpose. Its chief aims are these: to re-
Another Louisiana Purchase?
establish free independent enterprise, to
Every generation or so our nation has been
strengthen the competitive position of the
jolted into a great commercial expansion by
The law is the Surplus Property Act of
new and small businessman and the family
some government-assisted project: North-
1944. It governs the disposal of all the things
farmer; and to put government property to
west Territory development, railroad grants,
the government bought or built to fight the
widespread, nonmonopolistic use. It is a bill
homestead laws, road building and the like.
war with and doesn't want to keep. In land,
in the Jeffersonian tradition, an attempt to
The disposal of our new war-built wealth
acquired for camps, etc., the government will
redistribute property in a way to make men
could be another such jolt. Let "realists"
sell something like 12,000,000 acres. In in-
free.
predict that ten years hence the beneficiaries
dustrial plant capacity, the government owns
of a new distribution, the favored veterans
around one-third as much as all American
Efficiency Is Not Everything
and tenants, will be broke and landless once
corporations. Perhaps Secretary Ickes did
more. Many of them will, no doubt. They
not exaggerate too much when he said that
When he saw the bill Will Clayton, who
will nevertheless have had their moment of
the consequences of how we dispose of this
had been handling surplus property under
equal opportunity, which is all democracy
wealth may make the consequences of the
executive order, resigned his job in disgust.
promises and all Americans have ever asked.
Louisiana Purchase look "insignificant." The
It was the disgust of a capable, efficiency-
But to give them even that much, those
Louisiana Purchase (530,000,000 acres) about
minded administrator. For example, in selling
in charge of demobilization must rise to the
doubled America's area in 1803.
farmland the government (according to the
challenge. If the Surplus Property Act were
Surplus, or waste, is in the nature of war.
law) must offer it first to the former owner or
rewritten by Jefferson himself, it would still
It is already piling up: planes and plants,
heirs, then to any tenant farmers he may
require great courage and imagination to car-
mattresses and monkey wrenches, trucks and
have had, then to any farm-minded veterans
ry it out. Its administrators must not only be
timberland, pressure cookers and police dogs.
who may want it, then to other candidates
in sympathy with its aims but must be men
Everything you can think of, and in quanti-
for subsistence farming.
of enough political adroitness and guts to rest
ties you can't imagine. The RFC is building a
Mr. Clayton wanted to put the land on the
sist enormous pressure.
chain of warehouses just to display the stuff.
market fast, via RFC and the professional
Last weekthe President made his choice
There will be no single dam break, no one
real-estate brokers. But the senators had a
of men for the Surplus Property Board. They
hig auction day: the sales have already start-
different idea. They were more impressed by
are Guy Gillette of Iowa, the lame-duck Sen-
ed and will go on for years. In October alone
the testimony of Norman Littell, the recently
ator: Robert Hurley, a former governor of
four government agencies sold $26,700,000
fired Assistant Attorney General, who con-
Connecticut and Colonel E. H. Heller, a
worth, including two locomotives and 6,500,-
vinced them that under Clayton's methods
California financier and active Democrat.
000 slide fasteners. The total amount ulti-
the land would wind up in the hands of big
Honest men, no doubt. But as the Washing-
niately to be sold is variously valued at from
corporate farmers. Said Senator Chandler, in
ton Post remarked. the President seems to
15 to 103 billion dollars. It can't be appraised
the nearest imitation of Jefferson he is ever
have confused the problem of surplus prop-
in advance even approximately, for its vol-
likely to achieve: "It is better security for
crty with the problem of surplus politicians.
ume would break any market it was dumped
the country to have our people on their own
One looks is vain for the stature which the
on: in fact it can be measured only against
farms."
noble aims and practical pitfalls of this job
the postwar economy as a whole.
The law also tries to help the little business-
demand.
So what method, what objectives should
man. Maury Maverick's Smaller War Plants
Reconversion problems are not popular
we adopt for the disposal of this war-built
Corp. is authorized to intervene whenever it
when the war news is bad. That does not
wealth? Mr. Ickes, as usual, is preoccupied
sees a chance to put industrial property into
make them unimportant. Our surplus-prop-
with the problem of "checkmating scoun-
new and independent hands. This is ineffi-
erty problem contains the chance of a. life-
drels"-i.e, preventing speculation and in-
cient. But efficiency is perhaps not the sole
time for a rebirth of economic freedom in
side track meets. One very simple method
motive of all the enemies of the law. Estab-
America. If we let it go by default the spirit
would be to sell it to the highest bidders,
lished retailers, for example, who still shud-
of
193
EK
Distribution of true
December 16, 1944
reading only by special
arrangement. (SECRET W)
Midnight
AMLEGATION
STOCKHOLM
2537
The following cable is WRB 270.
Reference your 5043 of December 9.
We appreciate weight of Swedish arguments reported there-
in and would be inclined to accept them. But before doing so,
we suggest that you draw the attention of Foreign Office to
the fact that, after having informed German Government in
Sugust that Sweden is willing to allow entry of persons with
American immigration visas, there would appear to be a basis
for Sweden to follow this up by informing the Germans of the
names of the people concerned. Viewed in this light, our sug-
gestion does not (repeat not) involve any new step.
The problem mainly involves Jens and other Nasi victims
in Germany and Gernan-occupied territories other than Hungary.
In view of developments in Hungary, we agree that transmission
of names of Jews still there would be of no (repeat no) likely
benefit, but since many such Jews have been deported to other
Axis areas, the transmission of their names may still be
beneficial.
Board is inclined to share your doubts as to the effective-
ness of the suggested procedure, but feels that no (repeat no)
possibility of saving lives should be overlooked.
STETTINIUS
(GHW)
WRB:10/V:HG
MOE
SWP
12/15/44
Regraded Unclassified
194
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Embassy, Bern
TO:
Secretary of State, Washington
DATED:
December 16, 1944
NUMBER:
8169
CONFIDENTIAL
McClelland sends the following for WRB's attention.
Reference is made herewith to Legation's cable of December 9, no.
8044 and Department8s cable of November 18, no. 3927 WRB's 280.
I have received the following answer from ICRC with respect to
forwarding WRB parcels to camps and localities listed in last paragraph
of your 3927: the committee will try to send collective test shipments
to the following places all located within radius of from 120 to 245
kilometers of the eastern fighting front; Auschwitz, Kattowitz, Krakau,
Oppeln, Myslowice, Piotrkow, Wieliczka, Tacgenstochau, and Trzebinia.
However, in trying to forward parcels to these places it is stated by
ICRC that they must be released from previous engagements accepted con-
cerning control of safe arrival and distribution of parcels as they have
not the slightest hope of securing permission for their delegates to
visit these camps.
Our attention is called by ICRC to the fact that remaining camps
and places mentioned are all either in territory which the Russians have
already occupied or in battle zone and thus unfortunately inaccessible
to relief shipments.
Should it be possible for the Board to obtain authorization to for-
ward such test shipments to Poland I feel it is well worth trying in
attempt to get some relief through to many thousands living under frightful
conditions in these camps.
With relation to 224,328 parcels en route to Gothenburg I have
tentatively agreed with ICRC that 39324 k parcels shall be sent to
Jewish deportees balance of 185,004 primarily to non-Jewish detainees
(although including an unknown number of Jews in the national groups)
in main German concentration camps listed previously (see Department's
cable of November 25, no. 4001, WRB's 291). Second balance of 60,672
parcels to be shipped this month will be reserved for both categories.
Expression of Board's feeling concerning this distribution plan
would be welcomed by me.
HUDDLE
DCR:VAG 12/18/44
Regraded Unclassified
195
BAS-961
Bern
Distribution of true
reading only by special
Dated December 16, 1944
arrangement. (SECRET W)
Rec'd 11:17 p.m.
Secretary of State,
Washington.
8176, December 16, 4 p.m.
FOR WRB FROM MCCLELLAND.
Department's 3926, November 18 WRB'S 283 and
Legation's 7715 November 24.
On December 13 I paid to Decaritat Belgian Charge
d'Affaires at Bern sum of 384005.10 Swiss francs
equivalent to $90,000 minus customary Swiss banking charges
of one half percent on franc amount which grossed
385934.82.
Ministry of Interior at Brussels had wired Decaritat
authorizing him accept these funds stating they were in
contact with Major and would make available to him
equivalent of this amount in Belgium.
This exhausts all Belgian war relief funds I have
been holding.
HUDDLE
JMS
Regraded Unclassified
196
CORRECTED COPTY
ALH-1085
Distribution of
Bern
true reading only by
special arrangement.
Dated December 16, 1944
(SECRET m)
Rec'd 4:52 p.m., 17th
Secretary of State
Washington
8177, December 16, 5 p.m. (SECTION ONE)
Department's 3844, November 11 (WRB 269)
All liste mentioned have been received and trans-
mitted to Swiss with exception number 222 which not yet
received. However, list bearing number 220 received but
not mentioned by WRB.
Swiss note dated December 7 referring to contents
second paragraph Department's 2605 July 28 and third
group of mentioned Department's telegram under
reference states that Swiss Legation Berlin has requested
that following be brought to Legation's attention before
Swiss representative notifies list to German Government:
Judging from experience Swiss Legation considers
that representations which it would make to German
authorities in this connection would contribute nothing
to assure effective protection to persons covered by
Department's 2605 so long as they can not participate in
American-German exchanges. It would appear preferable to
refrain for the present from notifying to German Foreign
Office these lists of non-exchangeable persons to whom
the American Government is prepared to extend its hospi-
tality because communication these lists could mly create
confusion prejudicial to smooth conduct of negotiations
for forthcoming American-German exchange. Inquiry is
made whether, not withstanding foregoing, communication of
liststto German Government is desired.
In another note also dated December 7 Swiss refer
to contents first sentence numbered part three of Depart-
ment's 2918, August 24 and to first and second groups of
lists
Regraded Unclassified
197
-2- #8177, December 16, 5 p.m., from Bern
lists mentioned Department's 3844, November 11 and trans-
mit following observations of Swiss Legation Berlin:
American Legation by note dated November 21 (which
transmitted contents Department's airgram A-540 on
November 9) gave notification that Department had estab-
lished a seventh category of persons entitled to partici-
pate in American-German exchanges that is, category G
which includes wives and children of alien residents of
United States 02" of other American Republics.
HUDDLE
JT
Regraded Unclassified
188
JM-1099
Bern
Distribution of true
reading only by special
Dated December 16, 1944
arrangement. (SECRET W)
Rec'd 7:05 p.m., 17th.
Secretary of State
Washington
8177, December 16, 5 p.m. (SECTION TWO)
(?) (?) (?) persons resident in United States in a single
category such as category and accordingly eliminate dis-
tinction established by Department's 2918.
Owing foregoing Foreign Office inquires whether per-
sons referred to in said telegram could be assimilated to
category G. If this not possible it desires know whether
Swiss Legation Berlin may be authorized defer transmission
lists to Germans until negotiations for forthcoming ex-
change are completed.
Question of authorizing Swiss entry visas individual-
ly or collectively is still under consideration by federal
police. In preliminary discussion chief of police ex-
pressed grave doubt as to protective value of authorizing
Swiss visas to large number of persons whose present where-
abouts is completely unknown and whose last addresses are
several years old. His experience with German police led
him to believe that they would take very little action on
basis of lists in question and in view of Jewish race of
persons concerned disclaim any knowledge as to their
whereabouts.
In view of Swiss Legation's observations it appears
to Legation that classification of persons as exchange-
able would afford a better possibility of according pro-
tection than authorization of Swiss entry visas.
Legation wishes also confirm receipt WRB lists Nos.
265, 269 and 274 which already forwarded to Swies. Lists
Nos. 276, 277, 27(?) 302, 303, 305, 306 and two lists both
bearing No. 307 have been received and their transmission
to Foreign Office will be withheld pending Department's
observations to comments given above. (END MESSAGE)
WSB
HUDDLE
Large portion at beginning undescipherable and serviced. Regraded Unclassified
199
CORRECTED COPY
MAN-1099
Bern
Distribution of true
reading only by special
Dated December 16, 1944
arrangement. (SECRET W)
Rec'd 9:08 p.m., 19th
Secretary of State,
Washington.
8177, December 16, 5 p.m. (SECTION TWO)
Swiss Legation believes that simultaneous
notification to German Government on the one
hand of names of relatively numerous aliens who
could enter United States under conditions set
forth Department's 2918, August 24 and on the other
hand of those persons defined in category C with
a view to exchange would in no wise promote the
protection of first group while it might disturb
preparations for forth coming exchange in which
second group is includable. Experience reliably
shows that German authorities give no considera-
tion to request made for protection of number
new changeable persons. It would, therefore, be
desirable to include all close relatives in Ger-
many of persons resident in United States in a
single category such as category and accordingly
eliminate distinction established by Department's
2918.
Owing foregoing Foreign Office inquires
whether persons referred to in said telegram could
be assimilated to category G. If this not possible
it desires know whether Swiss Legation Berlin may
be authorized defer transmission lists to Germans
until negotiations for forthcoming exchange are
dompleted.
Question of authorizing Swiss entry visas
individually or collectively is still under con-
sideration by federal police. In preliminary
discussion chief of police expressed grave doubt
as to protective value of authorizing Swiss visas
to large number of persons whose present where-
abouts is completely unknown and whose last ad-
dresses are several years old. His experience
with
Regraded Unclassified
200
-2- #8177, December 16, 5 p.m. (SECTION TWO) from Bern
with German police led him to believe that they
would take very little action on basis of lists
in question and in view of Jewish race of persons
concerned disclaim any knowledge as to their
whereabouts.
In view of Swiss Legation's observations it
appears to Legation that classification of persons
as exchangeable would afford a better possibility
of according protection than authorization of
Swiss entry visas.
Legation wishes also confirm receipt WRB
lists Nos. 265, 269 and 274 which already forwarded
to Swiss. Lists Nos. 276, 277, 278, 289, 296,
297, 302, 303, 305, 306 and two lists both bearing
No. 307 have been received and their transmission
to Foreign Office will be withheld pending Depart-
ment's observations to comments given above.
(END MESSAGE)
HUDDLE
WMB
ssified
201
NOT TO BE RE-TRANSMITTED
COPY NO.
SECRET
OPTEL No. 406
Information received up to 10 a.m. 16th Dec: 1944.
1. NAVAL
During passage of convoy from North Russia, 2 JU88 shot down
in torpedo bomber attack and a reconnaissence aircraft destroyed:
4 prisoners taken: 1 Wildcat lost. As result of attacks on U-boats
by aircraft and escorts, 1 U-boat claimed sunk, 3 possibly sunk
and others possibly damaged.
2. MILITARY
Western Front. North of Colmar Germen counter attacks initially
gained about 1 mile at 1 point, but were then held. In Northern
Alsace, 7th U.S. Army has made general advance and crossed German
frontier between Leuterbourg and Wissembourg, fighting taking place
in former. Very slight gains by U.S. 3rd Army N.E. Sarreguemines,
On lst U.S. Army front gains of about 800 yards S.E. and N.E.
Monschaus in latter area fighting taking place in Kesternich.
S.W, Duren advances up to 2+ miles made towards Roer. Further
North, line of river reached between a point 1 mile N.W. of Duren
and Julich, except for 2 German strongpoints still holding out.
Italy. Canadians have enlarged their bridgehead over
Naviglio Canal North of Bagnacavallo against lessening resistance:
U.K. and Polish troops have resumed offensive from their bridge-
head over Lamone S.W. Faenza and have made progress against very
heavy opposition including many tanks. Many prisoners taken in
hand to hand fighting.
Greece. 14th. Athens and Piraeus. Slight ELAS activity
Pirceus, otherwise much quieter.
Eastern Front. Further Russian progress reported North and
N.W. Miskolc and North of Budapest.
Burma. In Arakan, forward elements of a West African Division
have entered Buthidaung and a village 2 miles to the S.W. on the
coast, our troops have advanced about 4 miles South of Alethangyaw.
3. AIR
Western Front. 15th - 13 Lancasters of Bomber Command dropped
70 tons of 12,000-lb. bombs on E-boat pens Ijmuiden: bombing through
cloud, but reported concentrated. 645 escorted U.S. heavy bombers
attacked railway centres Hanover 840 tons and Cassel 832 both on
Pathfinder technique, 4 bombers, 3 fighters missing, but 1 bomber
crew safe.
Medium bombers attacked railway bridges Northern Holland and
enemy positions Dunkirk. 325 bombers - 1 missing dropped 409 tons
on en oil storage depot and defended areas, while 1,166 fighters
end fighter bombers - 5 missing gave ground support and dropped 312
tons on rail and road communications, etc.
15th/16th - 500 R.A.F. aircraft despatched: - Ludwigshafen 334 -
1 missing, 1 crashed in U.K. Mosquitoes to Hanover 62, Osnabruck 11
and Duisburg 31 sea mining 23: bomber support 67.
(1)
Regraded Unclassified
202
(2)
Mediterranean - 14th - 679 aircraft attacked communications
Northern Itely, cutting railways in 40 places and destroying or
damaging 14 bridges. 25 aircraft attacked targets Athens area.
Regraded Unclassified
203
NOT TO BE RE-TRANSMITTED
COPY NO. 4
SECRET
OPTEL No. 407
Information received up to 10.a.m. 17th Dec. 1944,
1. NAVAL
,One of H.M. Submarines in Malecca Strait recently sank two
Consters and a Landing Craft end probably torpedoed two Coasters
in an escorted convoy.
2. MILITARY
Western Front U.S. Troops have mado slight gains across and
towards Germen frontier between Kerlsruhe and Bitche. In the Sear
stiff fighting continues especially in the Saarlouis bridgehead
where German artillery fire perticularly heavy. In Aix soctor
mopping up continues in the area S.W. Duren while to N.W. the two
remaining German pockets West of Roor between Duron Julich have
been eliminated.
Italy Opposition to Canadians in Begnocavallo area severe and
little progress made. Further South Germans appear to have with-
drawn and elements of Now Zealand Division have crossed Lamone
South of Faenza and are established in its outskirts astride
Highway 9- NW. Faenza advance has continued against light
opposition end forward troops now reached River Senio where it
crosses Highway 9 and again a mile South of Castel Bolognese, On
left of Eighth Army Polish Corps have launched an attack across
the River Sintria; a general advance of over a mile has been made
along the Corps front. On Fifth Army front Tossignano, South of
the Imola-Firenzuola Road has been lost,
Greece 16th, Work of clearing Piroous area continued
successfully. 15th, Only slight activity in Athens. Bad weather
slowed up disembarkation reinforcements and supplies.
Burma Chinese troops have captured Bhamo,
3. AIR
Western Front 15th/16th. 1546 tons dropped Ludwigshafen.
16th. 108 escorted Lancasters - one missing dropped 474 tons
through cloud on Siegen Railway centre; bombing concentrated;
104 escorted U.S. Heevy Bombers - three missing dropped 201 tons
Stuttgart Reilway centre and 90 Bietigheim: results unobserved.
665 Fighters and Fighter Bombers - three missing operated over
Central and Southern battle areas and escorted the Lancasters
attacking Sigen. German casualties 8:0:4. & 4,000 ton ship
aground in Sogne Fjord, S.W. Norway was twice attacked by Coastal
Command Mosquitos - two missing and left on fire.
Meditorrenean 16th. 413 escorted U.S. Heavy Bombers - three
missing attacked by pathfinder technique reilway centres Austria
and Bavaria; Linz 375 tons, Innsbruck 100, Amstetten 96, Rosenheim
100 and Salzburg 39. Results unobserved. 1008 Fighters and
Fighter .688g Bombers - six missing operated successfully over battle
Regraded Unclassified
204
December 18, 1944
10:00 a.m.
GROUP
Present: Mr. D. W. Bell
Mr. Blough
Mr. McDonald
Mr. 0' Connell
Mr. Haas
Mr. Pehle
Mr. Luxford
Mr. DuBois
Mr. Bernstein
Mrs. Klotz
H.M.JR: Dan?
MR. BELL: We have a letter from General Hines and the
Veterans' Administration calling our attention to an act of
Congress and some regulations of the Civil Service Commission
about training disabled veterans. I think that is going to
be quite a project, and while we probably ought to designate
Charlie Bell to represent the Department, I am not & sure
there shouldn't be a committee within the Department to con-
sider it, because it involves Internal Revenue, Customs,
the Bureau of Engraving and Printing, and all the rest of the
large agencies. You give these boys a training course, and
if that training course is approved by the Civil Service
Commission, they automatically get a Civil Service status
or can be appointed to 8 civil service job.
H.M.JR: I would like to have that committee meet in
the first instance in my office. I would like to get it off
to a good start. I am interested in it myself.
MR. BELL: Would you designate in the first instance
Charlie to represent the Department before the Veterans'
Administration?
H.M.JR: Yes, that is all right, but a committee within
the Department--
Regraded Unclassified
205
- 2 -
MR. BELL: Then I think we might have a representative
from the various services and meet in your office some time
after Charlie gets back.
H.M.JR: Mrs. Roosevelt hasn't yet written it in her
column, but she is seeing Jimmy Byrnes today, and General
Hines. But this question of getting an artificial limb--
I think it is Hungers who make the best artificial limbs,
and they bid on this thing. I don't know whether we are in
it or not. The officers can get the good limbs, and the
enlisted men can't. Then when it comes to being repaired,
there is all kinds of business--well, she is looking into
it. She said that in order to get results she is going to
put it in her column. You can't get this repaired, and one
agency and another--it is terrible.
(The Secretary holds e telephone conversation with Mr.
Stettinius.)
Unclassifie
206
December 18, 1944
10:06 a.m.
HMJr:
Hello.
E. R.
Stettinius:
Henry.
HWr:
Talking.
S:
How are you this morning?
HMJr:
Okay. You sound ominous.
S:
Ominous?
HMJr:
Yeah.
S:
Well, I'm ominous about Roland and I'm ominous about
my confirmations on the Hill and I have been at it since
seven o'clock this morning and in dutch with a train
coming up from the South and I just think for me to
come over there today for a leisurely luncheon would be
very unsatisfactory to you.
HMJr:
Oh.
S:
Now, do you want me to slip over -- because I'll just be
interrupted on the telephone every minute -- do you want
me to slip over some time during the day for a short one
or let it go until we can have a leisurely
HMJr:
Well, I do want to see you, Ed. I want to get started
with you.
S:
Well, now do you
....
HMJr:
Be frank, is there somebody else you want to -- are you
going to eat somewhere else?
S:
No, no, I'm not going to eat at all, Henry. I'm going to
be up on the Hill with Connally.
HMJr:
Oh.
S:
That's what I -- what I have to do.
HMJr:
Oh.
S:
No, and if it were humanly possible, I'd be there. I mean,
I'm embarrassed as hell to cancel another one, you see,
because we broke one last week.
Regraded Unclassified
207
- 2 -
HMJr:
Yeah.
S:
And would you like -- I'm anxious -- just as anxious to
get started as you are. I've got three or four big things
to discuss with you. The question is to -- what you'd like --
me to come in -- over to you today for a short visit or wait
until we can really have a leisurely visit later on.
HMJr:
Well, you've got your own troubles. I'll adjust myself to
you. What would you like to do?
S:
Well, I
....
HMJr:
I don't happen to have very many troubles right now.
S:
Right today. I'm desperately anxious for a visit. I think
that it would be a mistake to try to rush it today.
HMJr:
Yeah.
S:
Leave it in my hands and see if I can't call you tomorrow or
Wednesday at the latest.
HMJr:
Yes.
S:
When I can come over and we can have a go-around.
HMJr:
Yeah. Unfortunately I'm tied up both Tuesday and Wednesday
for lunch.
S:
Well, we don't have -- it doesn't have to be at lunch. We
can do it
....
HMJr:
If you could only let me know a little bit in advance so that
....
S:
Yeah. Well, we can have our lunch some other time.
HMJr:
Yeah.
S:
But leave it in my hands, Henry.
HMJr:
I'll leave it in your hands because you
....
S:
I'll get in touch with you just the minute I can possibly do
it.
HMJr:
Fair enough.
S:
All right, old boy.
HMJr:
Thank you.
Regraded Unclassified
2.9-
208
H.M.JR: Stettinius says he has been up since seven.
Cross him off for lunch. We are in good shape!
MR. BELL: We don't have to get up until seven-fifteen.
H.M.JR: I don't know where we were, but I was trying
to think fast. He said he wanted to leave. Well, anyway,
he will come when he feels like it.
MR. BELL: I am finished.
MR. McDONALD: I haven't anything.
H.M.JR: You didn't even start.
MRS. KLOTZ: He cleared everything Saturday.
They want to clear Mr. Glasser's going to Italy, see?
MR. McDONALD: Yes.
MRS. KLOTZ: I have the papers in my office.
Regraded Unclassifie
209
- 3 -
MR. McDONALD: I understand that had been cleared earlier,
but--
MR. BERNSTEIN: He has to leave very shortly.
H.M.JR: It is just a formality, getting my approval.
MR. BELL: Well, they could do that after he leaves!
H.M.JR: Had you spoken to me before?
MR. McDONALD: No, sir. I understand--
H.M:JR: What is he going to Italy for?
MR. BERNSTEIN: There is going to be a conference there
on what to do about Italian inflation and other financial
questions.
MRS. KLOTZ: I think it was Doctor White who brought it
to your attention.
11.M.JR: He isn't here, so I can say I never heard of
it before.
MR. McDONAID: I am fairly sure Mr. Bell had not cleared
it before he left.
H.M.JR: Who is going to attend the conference?
MR. BERNSTEIN: I suppose there will be Army people, and
the British, too.
H.M.JR: Who invites us?
MR. BERNSTEIN: I am not quite sure who invites us,
probably the Army people. There was scheduled a discussion
in Washington with Army and British people, too, before
this discussion in Italy. I don't know whether it has come
off yet.
H.M.JR: You tell Harold Glasser that before he goes on
this one I would like to see the report on the last one. He
Regraded Unclassified
210
- 4 -
never finished it. At least, I never got it. Ask him where
the report is on his last trip to Italy. I asked three times
for that report, and he has always been too busy doing some-
thing else. Maybe that is unfair--
MR. BERNSTEIN: He is quite busy.
H.M.JR: What the hell is the use of sending him when
I never get a report out of him?
MR. BERNSTEIN: I don't have anything, Mr. Secretary.
H.M.JR: Step out and see whether Glasser ever made a
report on his last trip to Italy and whether I ever was given
it. I think that was last March.
MR. BERNSTEIN: Yes, sir.
(Mr. Bernstein leaves the office temporarily.)
MR. BLOUGH: The Joint Committee didn't get to meet
again last week, and it appears now they will probably let
any further meeting go over until after the first of the year,
which meant they had about an hour, and the military expendi-
tures were read to them, but that is as far 88 they got on
those two little pamphlets I showed you last week. I gathered
they are in no great hurry. I understand that both George
and Doughton have indicated that they were glad that the
President signed the Social Security freeze and that they
did intend to hold extensive hearings on Social Security.
H.M.JR: Doughton called me up during the middle of the
week. I don't think I told you. He wanted to find out what
the President wanted to do. I told him I was honored. Then
he said he hadn't seen me - but that was my fault. Then he
went on to say how pleased he was with the work you have been
doing.
MR. BLOUGH: Thank you.
H.M.JR: You're welcome! Anything else?
MR. BLOUGH: I'll tell you about it some other time. You
remember the day you and I went down there and he said he had
Regraded Unclassified
211
- 5 -
changed his mind about me - so apparently he thought I was
the arch villain.
H.M.JR: Now he thinks it's Bell?
MR. BLOUGH: Now there is none.
MR. O'CONNELL: They'll find one. Give me a little time!
H.M.JR: Have you thrown your crutches away?
MR. HAAS: Just temporarily.
Did you see Saturday's figures on the Drive?
H.M.JR: They told me about it last night - eighteen
something.
MR. HAAS: Nearly eighteen and 8. half billions.
H.M.JR: Yes - so much so that I thought I'd make my
speech twenty, but I let it stay where it was. Bell called
me up and said, "Why don't you make it twenty?"
MR. BELL: You know me!
MR. HAAS: We'll probably make twenty.
H.M.JR: I got those figures that you were kind enough
to get for me on the shipment of apples.
MR. HAAS: Will they work all right?
H.M.JR: Why doesn't the Department of Agriculture
furnish apple-growers stuff like that?
MR. HAAS: I don't know.
H.M.JR: A Market Division - My God, what do they get
out?
MR. HAAS: I don't know. For instance, here is what
they have on it. You have to have it by varieties, by size
and grade, and by price. That is real information.
Regraded Unclassified
212
- 6 -
H.M.JR: You didn't include prices.
MR. HAAS: No, I didn't know whether you wanted it.
You want the size and grade, too?
H.M.JR: Yes. But why don't they furnish that to the
public? Will you find out?
MR. HAAS: Yes. I don't know what is the matter.
H.M.JR: The agricultural situation - they still haven't
got out of this idea, they produce more, but when it comes to
spending any money and how to distribute it or market it, they
don't know.
MR. HAAS: They have a regular Market News Service, and
you would think they would put that out. I'll look it up.
MR. LUXFORD: The Italian Mission is coming in this
morning at ten thirty to have presumably their last informal
discussion with us. We haven't had any meetings for the last
couple or three weeks. We told them we were going to examine
their request for specific data, and we'll discuss that with
them this morning and get any final views they have and then
set the stage for your making some final discussion with them.
But I think that Harry will probably want to discuss that with
you before we make any final arrangements.
The other thing - I think a number of us will probably
want to talk to you about that Executive Order on Foreign
Economic Policy Board at some point before there is another
discussion with Stettinius.
H.M.JR: You mean the one I am to take up with
Stettinius? Why not let's do that immediately after this
meeting?
MR. LUXFORD: Whatever is convenient to Mr. Bell.
H.M.JR: Mr. Bell isn't busy!
MR. BELL: Sure, any time, twelve to twelve!
H.M.JR: All right, we'll do it right after this.
Joe?
Regraded Unclassified
213
- 7 -
MR. DuBOIS: I have nothing.
MR. PEHLE: I have nothing, this morning.
MR. O'CONNELL: I would like to talk for a moment about
the Nation Associates, on which we had a town meeting in
my office last week. As a result of the meeting, the score
in voting was four to four of those present, but with
Lux having a proxy for John Pehle, that made the vote stand
five to four.
H.M.JR: Was it a written or a telephone proxy?
MR. O'CONNELL: It was oral. It was given before the
meeting, so he had the advantage of not having had the
benefit of the discussion!
H.M.JR: Very good, Joe, very good. He voted without
the benefit of the discussion?
MR. PEHLE: He had my proxy to express a certain point
of view, which I am sure he did.
MR. O'CONNELL: In all fairness to John, I would say
the meeting changed no points of view at all. So, being one
of the four I have prepared a memorandum which is, in a sense,
the Minority Report!
H.M.JR: What about Glasser?
MR. BERNSTEIN: Mr. White's office does not have a final
report on Glasser's study of the inflation problem in Italy.
Mr. Glasser's office thinks there has been a preliminary
report, but no final one yet.
H.M.JR: He is outside. Will you step outside, because
I asked for that. I have this unfortunate memory. I asked
for that either two or three times. I was tremendously
interested; I wanted to get in on the situation. I said I
would give it to the President. I never got a report. Now,
what's the use of sending 8. man to a country? If I am
wrong, you talk back.
MR. BERNSTEIN: No, sir, I think it is very well that you
are interested.
Regraded Unclassified
214
- 8 -
H.M.JR: I was interested. It was then before every-
body knew about this business, and I never got a report.
Now, what is the use of sending them back over there again,
if, as Secretary of the Treasury, I don t get the benefit?
You go on and have a little talk with him. If I am unfair,
you tell ne.
MR. O'CONNELL: In all seriousness, we do have to come
to a conclusion, and the people in the Bureau and Mr. Blough
and Mr. Wales and his office, and I believe Oliphant's--
though it is & close case--you would be better advised to
affirm the Commissioner's ruling that the Nation Associates
are not exempt, at the same time telling the Bureau that
you want from them a re-examination of the comparable cases
and report within the period of time which I have stated to
be three months at the outside, showing what they propose to
do to correct the existing situation which is admittedly
composed of a number of rulings or which includes a number
of rulings which are out of harmony with it. That is the
best judgment I can get on it.
H.M.JR: Well, I can also say, as long as you are being
humorous, that their arguments didn't make any dent on you,
either.
MR. O'CONNELL: That is right. I meant to include my-
self in that group. The people who have opposed this view
have stated their views in great detail, and I must say that
they have 8 very good argument. At the same time, the situa-
tion is complex. I think that we cannot avoid--or I cannot--
thinking that to grant the Nation a tax exemption is to con-
tinue too far along the road that we have already gone too
far on, and I would like to retrace our steps. The only way
I can see is to tell the Nation no, and look back at the
other rulings to get a more consistent pattern.
H.M.JR: That wouldn't mean that in three months we might
not reconsider the case again.
MR. O'CONNELL: That is right. What I have said to the
Commissioner is, "You go ahead and tell the Nation again
that they are not exempt. You re-examine the cases in the
educational field that are at all comparable to the Nation,
Regraded Unclassifie
215
- 9 -
and give me a report in three months telling me what you
have found and what you propose to do." I have included a
couple of the specific suggestions which I understood you
had made, one about not giving them an exemption until they
had been in operation a certain length of time.
H.M.JR: I didn't say that.
MR. O'CONNELL: I think you did suggest that there should
be 8 periodic re-examination. That is in that memorandum
as one of the specific suggestions that you wanted consideration
given to and included in the report that I have asked for in
three months. In any event, that is the best view that the
people that agree with me could come to.
H.M.JR: Could one of the four and a half votes take
five minutes to state it?
Do you nominate yourself?
MR. LUXFORD: Yes, sir. Neither Mr. Gaston nor Harry
White is here, and I feel they think vigorously with the
four and a half that you should not take any action on the
Nation at this point which would deprive them of the
privileges which you are giving to Brookings Institute,
for instance. The issue comes down to this, at least in my
mind--I can't speak for more than that. This is not & true
legal question. There is no question but what legally you
could rule either way. The question then comes down to one
of policy and one of administrative practice. It seems to
us on that score you have really two or three alternatives,
one is to apply a very strict construction which would mean
you would cut down a great deal on the number that now have
the privilege, but applying it on that basis means that you
are going to run into some extremely difficult problems as
to what is propaganda and what is educational. As far as I
am concerned, the Brookings Institute is one of the best
examples.
If you read what they hold themselves out to be, one, an
influencer of public opinion, and, two, to train people, it is
perfectly obvious that that is propaganda in a broad sense
Regraded Unclassified
216
- 10 -
and it isn't propaganda in a narrow sense, in exactly the
same way the Nation falls into that category, just happens
to reflect 8 different point of view from Brookings.
Now, if the minority of four were to say that today
they are prepared to also knock Brookings off and re-examine
the whole situation, then I would say fine, but so long as
they are going to an ad hoc basis, say, we are not going to
give it to the Nation, but we are prepared to let continue
a whole pattern which includes 8 great number of institutions,
not unlike Brookings and not unlike the Nation, when I think
it is bad, and I call your attention to the fact that you are
going to be in trouble if you try to deprive Brookings of
their status.
It seems to me that tnat is clear, that he forces of
conservatism are going to scream at you if you try to deprive
them of that position.
On the other hand, giving it to them--I think the
forces of liberalism have a justifiable complaint if you
do not accord it to them, and I would suggest that there
is no reason here why you have to have a narrow construction.
Congress decided that they wanted to foster educational
facilities, and I should think that would include liberal
education as well as conservative education.
Regraded Unclassified
W1
217
- 11 -
H.M.JR: You are talking about people screaming and
yelling -- How would the conservatives react if I give the
exemption to the Nation?
MR. LUXFORD: It does not seem to me that is a test.
H.M.JR: Now wait a minute. Let's just say for argu-
ment we give it and it becomes public property like every-
thing else in this town, and either Joe or Roy Blough or
myself is called up before the Joint Committee and asked
for an explanation. Roy, what would you say? I don't
know where you stand.
MR. BLOUGH: I would ask to be excused in that case,
because I don't think Congress ever had the foggiest, dreami-
est notion of allowing this type of exemption to this
type of institution. Education, I think, very clearly meant
to them institutions of learning. Now it may be necessary
with the passage of time and the changes in methods of do-
ing things to expand it somewhat beyond institutions of
learning, but when you have gotten completely away from the
institutions of learning idea and have gotten to 8. magazine
of general circulation which is being sold on the market,
I think you are very far away from the purpose that Congress
had in mind, and it would be extremely difficult to defend.
Moreover, you would then be up against the problem of what
about Social Justice, what about Gannett's League for
Constitutional Government, what about a great many other
very reactionary institutions which would like to have this
exemption to which you would almost be forced to extend it.
But I am against it primarily on the ground that I don't
think it was the sort of thing that Congress had in mind
when it made the exemption.
H.M.JR: I have this as a suggestion. Let me read
this memo to myself. Why don't you do it this way, see-
ing that this is a ruling by Solomon? Instead of turning
the Nation down, leave it in suspense and ask the Commission-
er to restudy this whole thing and give me an answer by the
1st of February. Thirty days is ample time. Let's not
turn the Nation down, but just leave it in suspense. By
the 1st of February I want a reexamination of the whole
thing, because once having turned them down that in itself
is precedence.
MR. O'CONNELL: We have already turned them down once.
Regraded Unclassified
w2
218
- 12 -
H.M.JR: But you are having me turn them down over
my signature. Leave the thing in suspense, because I
think for instance what Roy said, just the way I said
to the publishers of the Nation, There are other things
besides yourself, like America First which are conelated
and are very, very important." Miss Kirchwey's answer
was, "Well, I consider that more important than our own
case.'
And I am inclined to agree with Roy, that this
exemption -- you can't distinguish, I can't pick the
Nation and give them exemption and at the same time turn
down Social Justice or the Silver Shirt Magazine or any
one of a dozen.
MRS. KLOTZ: Mr. Morgenthau, did they give it to
the Free World?
MR. O'CONNELL: They did. That is what we are going
to look at.
H.M.JR: That was wrong. Two wrongs don't make a
right.
MR. LUXFORD: Be sure you have Free World knocked
out, some of the other liberal magazines knocked out, and
you will end with having Brookings and the forces of --
H.M.JR: They are not a publication.
MR. LUXFORD: Mr. Secretary, you should read the Format
on their books. They say they have two purposes.
H.M.JR: All right. Well, I don't know how long ago
Free World got --
MR. O'CONNELL: Very recently -- I think it was in
July.
H.M.JR: That does not make it right. The fact
that somebody over there put it over on the Bureau does
not make it right, and I don't want to over my signature
confirm this, do you see? I want this kind of thing
that these gentlemen are mentioning, particularly Brookings--
look up some others you see who are doing propaganda under
tax-exempt privilege.
Regraded Unclassified
w3
219
- 13 -
MR. PEHLE: Would that study show those who are
getting the exemption and those who weren't, because I
think that would throw a lot of light on the question
for everybody?
H.M.JR: And you have forty days in which to do
it.
MR. O'CONNELL: I don't think that is nearly enough,
sir.
H.M.JR: Let's have an interim report, then.
MR. O'CONNELL: There are literally thousands of
tax-exempt institutions and other thousands of rulings.
H.M.JR: Brookings is only one. Take ten other
cases like Brookings. Take the Steuben Society, for
instance. I don't know how many more. Take them on
both sides -- but I think we ought to divide them into
publications and foundations.
MR. LUXFORD: Why? Can't a foundation carry on propa-
ganda?
MR. DuBOIS: The statute says specifically --
H.M.JR: Anyway, I am not over my signature going
to confirm this at this stage, but from what Roy said I
lean that way. Now I understand what these men are
talking about, that it looks right now as though we would
be stepping on the publications that we want to encourage
and encourage the publications we want to step on, but
as Secretary of the Treasury I can't pick and choose my
publications.
MR. PEHLE: That is what you will do once you start.
MR. O'CONNELL: That is what you are necessarily
going to do.
MR. LUXFORD: That is what we are urging you to do.
We are urging you not to pick and choose --
Regraded Unclassified
w4
220
- 14 -
H.M.JR: I am not going to sign this letter, but I
am going to ask for a report -- get a hundred cases of all
kinds, Joe. You don't have to examine two thousand.
MR. O'CONNELL: You have to take a look at the two
thousand in order to get a line on the typical cases, I am
afraid.
H.M.JR: All right, Joe, get somebody over there and
let these people who are interested be in touch as the
thing goes along, so they can make suggestions and
criticisms.
MR. O'CONNELL: Yes. What do we tell the Nation?
H.M.JR: You call up Miss Kirchwey and tell her I
find it is a very difficult thing, that the Bureau again
has recommended that I reject it, but I have not wanted to
do it; that I have asked for additional information which
I will receive on the 1st of February, and that shortly
after that I will invite her to come down and will let her
see what we have; that I will invite her to come down and
see me again with her attorney, and she and her attorney
can go over the material.
MR. O'CONNELL: I would like to have another month,
sir. Norman Cann, who is the man responsible for this
operation, is on the West Coast. He won't be back until
the 6th of January.
H.M.JR: All right, but you call up Miss Kirchwey --
I'll do it myself. (The Secretary places call for
Miss Kirchwey)
MR. LUXFORD: Would it be difficult to get just the
names of these? I would like to know the names.
MR. O'CONNELL: I have the list in my office. That
is what concerns me about the time element.
H.M.JR: You are sympathetic with what we are try-
ing to do?
MR. O'CONNELL: Sure.
H.M.JR: It is just a question of your having the
Regraded Unclassified
w5
221
- 15 -
legal responsibility. Now, my assistants have & wonderful
time. All they have to be is responsible to me, and that
is nothing! They are free lancers.
MR. PEHLE: Shoot!
MR. O'CONNELL: This question of tax exemption under
101 is a much more difficult question than is ordinarily
perceived by people who don't have to deal with it and work
with it all the time, and it is more difficult to say,
"Let's make everything consistent" than to do it.
H.M.JR: I want some kind of report on the 1st of
February.
MR. LUXFORD: Let us have an opportunity to write out
a report too if we don't agree.
H.M.JR: Let them see the report while it is being done.
Whoever is doing it, let them have a crack at it.
MR. BLOUGH: I would like to add my voice to Joe's to
this extent, that you not promise Miss Kirchwey an answer
right after February 1, because you may need a little more
time.
H.M.JR: All right, I'll tell her. I'll tell her to
come down and we will give her something on the 1st of
February. My God, the world moves! She had a smart
attorney. They made some good suggestions.
MR. O'CONNELL: Yes, he is pretty good, but I would
like to emphasize again that the question of tax exemption
under 101 is one which has not been and should be constantly
reexamined by the Congress and maybe next year it will be --
my guess is for 8 reason that has nothing to do with the
Nation. You remember the letter I wrote to Senator Vandenberg
for your signature yesterday about the Petrillo Union. That
is an exemption problem under 101.
H.M.JR: My complaint is not primarily about the
Nation, because I have talked about this for a great
many years, about this thing which should be reviewed and
the fact that the person gets something doesn't give him
a license for the rest of his existence. This thing
Regraded Unclassified
222
- 16 -
should be constantly reexamined and I don't think the
will to do that is over there. In other words, I don't
think they are worrying too much about Social Justice
and Brookings Institution and that kind of thing.
(The Secretary holds a telephone conversation with
Miss Kirchwey.)
Regraded Unclassified
223
December 18, 1944
10:36 a.m.
Operator:
Miss Kirchwey.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Hello.
Freda
Kirchwey:
Hello.
HMJr:
Henry Morgenthau talking.
K:
Oh, good morning, Mr. Morgenthau.
HMJr:
How are you?
K:
All right.
HMJr:
Miss Kirchwey, I just want to tell you we're
having a "helluva" time over trying to decide
the status of your publication. Now the Bureau
has come back again and recommended that we turn
you down again, which I'm not going to do. Hello?
K:
Yes, I'm listening
HMJr:
But
K:
very carefully.
HMJr:
But we are going to study very hard some of the
other kind of institutions which have this
....
K:
Yes.
HMJr:
exemption, which we don't like.
K:
Yes, I see.
HMJr:
But -- and which are dangerous. Now, I've asked
for -- they've asked for three months, and I've
told them I want an interim report by the first
of February.
K:
I see.
HMJr:
On all of these things.
Regraded Unclassified
- 2 -
224
K:
Yes, I see.
HMJr:
I don't want to name them but
....
K:
No, no, I know from our last talk.
HMJr:
That's right. And right after the first of
February I'm going to invite you and your attorney
to come down and I'll show you how far along we've
gotten.
K:
All right. Good enough. I appreciate that.
HMJr:
But that leaves it still an open question, but
our problem isn't 80 much your publication as it
is these other institutions which are doing things
which you and I don't like.
K:
I know that.
HMJr:
That's what bothers me.
K:
Yeah. Well, I -- I'm very much interested in that.
I don't suppose there is anything we could do in
the way of sending any additional information,
because it isn't particularly -- doesn't particu-
larly bear on us, does it?
HMJr:
No, it -- it would be more on the other kind of
people.
K:
Yeah.
HMJr:
But they asked for three months, but I'm giving
them one month.
K:
(Laughs)
HMJr:
And after that whatever I've got, in confidence
I'll let you look at.
K:
All right. Thank you so much, sir, and thank you
for calling me.
HMJr:
Not at all. Bye.
Regraded Unclassified
-
16.a
225
0. K.?
H.M.JR: It is all right. Listen, there are SO few
instruments for liberality left in this world and so much
has happened which is depressing in the last few weeks
that when you have a few little spring flowers like the
Nation and the weather is damned cold and getting colder
all the time, I am going to nurture them. Now that is
the situation.
My God, things are discouraging all over the world.
You'd think we were sitting at a peace conference now.
Every cartel has got in on this thing. I just don't let
myself think about it. I mean, my boys -- Are they there
to put the King of Greece back and King Peter and all
these other forces of reaction? I mean, is that what all
of our relatives and brothers have fought for, to do this
thing? A person gets so bitter, and here is something,
struggling along like the Nation, and I am willing to
stretch a point, Joe.
MR. O'CONNELL: You don't have to stretch a very big
point as far as, either the Bureau or I are concerned
legally. I was rather thinking of it as a thing that
would cause you more trouble than would do you good.
The Bureau would not object strenuously at all if you
were to tell me this morning that we would like to exempt
the Nation -- you'd never hear any more from me.
H.M.JR: No, I am very sincere. I don't want to
exempt that Nation today, but I am a damned sight more
interested in some of the exemptions that some. of these
other institutions have got. Exempting the Nation
Regraded Unclassified
47
226
-17 -
would only put me in a false light, because they would
say I was prejudiced; but I want to see some of these
other publications which can only exist because they
have exemption. Now you are in there and I have put
you in there because I know in the first place you
think right yourself and you will do what I want as long
as you think it is right. What I am much more interested
in is, Why can't we make some progress against these in-
stitutions who only flourish because they have exemption.
These rich people give five thousand dollar checks --
they'd think twice before they gave these things to these
institutions if. they could not deduct it from their income
tax. Now this is a serious piece of business and I
want the best talent we have got on it. I don't know who
is over in the Bureau, but there must be -- get some fresh
minds on the thing. Is Oliphant well?
MR. O'CONNELL: No. He won't be back until after
the first of the year.
H.M.JR: Well, the fight will still be there. Have
I made myself clear? Does anybody want to add to what I
have said? Have I covered the field?
MR. BERNSTEIN: Mr. Glasser said he will have a
final report at six o'clock tomorrow evening.
H.M.JR: Listen, I am in a good humor this morning,
but let this be a lesson. Find out how many other people
have been abroad and have not made report -- How many other
people have gone abroad and have not made reports?
MR. KLOTZ:
Joe's ears are burning!
H.M.JR: Well, I wasn't thinking of Joe, but this is
a very good example.
MR. BERNSTEIN: You are not counting all the reports,
Mr. Secretary --
H.M.JR: I am speaking of White's division. You do a
little checking up on this business.
(To
Mr.
McDonald)
Here is Friedman just back from China. What is he going to
Regraded Unclassified
W8
227
-18 - -
do now? Take it for this calendar year; just look up
how many people went abroad for anybody. That would in-
clude Joe -- and have they made a report if they were
called for a report. I am going to sign this and give
it to you, but you wait until we get the report.
(Secretary hands travel authorization letter on Mr. Glasser
to Mr. McDonald.)
MR. McDONALD: That will not require your signature,
Mr. Secretary.
H.M.JR: Is that fair?
MR. BERNSTEIN: Yes, sir. You will have these reports
tomorrow.
MR. BLOUGH: Six o'clock!
H.M.JR: You check up on the rest of the people, be-
cause it is silly sending these people across and then --
I wanted that for the President last March. It might have
done some good. That was long before all these people
went overseas, all the fussing, everything else.
You started to say something, Roy.
MR. BLOUGH: No, I just withdraw.
MR. BELL: I have just had a report on the market,
Mr. Secretary. The new twosand a half are quoted at four
and five thirty-secondspremium and the market is very in-
active. The new two's are reported at nine to ten
thirty-seconds premium and the market is very active in
bank buying.
H.M.JR: Above par?
MR. BELL: Yes. The one and a quarter per centsare
seven to eight thirty-seconds premium and the market is
very inactive. The new certificates are selling on the
basis of eighty-three to eighty-two hundredths. That is
a premium of about two thirty-seconds. The market is
very inactive. Mr. Rouse wants to know if I want to sell
some new two's at the nine or ten thirty-seconds premium.
I think it might be a good thing to sell a few of them.
Regraded Unclassified
w9
228
- 19 -
I took some in on the trust fund purposely to do this
if the market got too active on that side, but I won't
be in a hurry on that.
H.M.JR: Let them have a little taste -- talk to
me again about it.
MR. BELL: But I did take a hundred million two's.
(The secretary holds a telephone conversation with
Mr. Charles Riegelman.)
Regraded Unclassified.
229
December 18, 1944
10:45 a.m.
HMJr:
Hello.
Charles
Riegelman:
Hello, Henry.
HMJr:
Hello, Charlie.
R:
Hello. I didn't do much of a job for you.
HMJr:
You didn't?
R:
No, I got my friend here pretty much upset and
annoyed at me -- at my persistence.
HMJr:
Oh.
R:
He says the situation is that they bought out
the president of the -- the company bought out
the president's stock, who died, you know.
HMJr:
Yeah.
R:
And it was all done on the basis of the fact
that Mr. Rosenthal would remain and reorganize
the company.
HMJr:
Oh.
R:
And that the -- his family has $2 Million for
which he is responsible in the thing, and he
just can't let him go. Now
....
HMJr:
Who has $2 Million -- Rosenthal?
R:
No, the -- the Strasser family.
HMJr:
Oh.
R:
And they're relying a good deal on Rosenthal
to -- to manage and run the company and
reorganize it.
HMJr:
Yes.
R:
And that, therefore, he can't possibly give his
consent.
HMJr:
Yes.
Regraded Unclassified
230
- 2 -
R:
Now, it occurred to me -- I don't think - -- I don't
know that it will do a darn bit of good. But he
could turn you down much less easily than he turned
me down.
HMJr:
Yeah.
R:
And I was going to suggest that if it's worth your
while -- if you care enough about it -- to ask
Rosenthal and him to come down and talk to you.
HMJr:
Rosenthal and Strasser?
R:
Yeah. You know Rosenthal may be telling you he
wants to come when actually he may not. I don't
know.
HMJr:
I don't think that -- well, if he's that kind of
a man, I wouldn't want him.
R:
Well, I say -- well, he has certain obligations
here, you know.
HMJr:
Yeah.
R:
He apparently gave them the commitment that he
would stay.
HMJr:
Well, I'll talk it over with Pehle and I'm ever
so much obliged.
R:
Now, Henry, while I have you on the wire, could
I speak to you a moment about another matter.
HMJr:
Yeah.
R:
Lawrence Langner wrote a letter to you about
getting a ruling and a closing agreement for
the Theatre Guild.
HMJr:
Who?
R:
Lawrence Langner.
HMJr:
Oh, yes.
R:
I'm the attorney for the Guild -- have been for
twenty-five years.
HMJr:
Yeah.
Regraded Unclassified
- 3 -
231
R:
As the result of that request that he made
from your office, Mr. Cann, the Deputy Commis-
sioner, arranged a very immediate conference
which we had in Washington in early November.
HMJr:
Yeah.
R:
And we've had no word since. And Lawrence had
me on the wire yesterday and I wondered whether
you would be willing to put through an inquiry
just to find out what happened to it.
HMJr:
Sure. I'll ask the General Counsel O'Connell
to look into it and let you know what's happened.
R:
All right. I'd -- I'd appreciate that very much.
HMJr:
Okay.
R:
And if you want to do the other thing, please
don't mention that I suggested it, will you?
HMJr:
Right.
R:
Because I -- he'd be sore as hell at me. I
almost had a blow-up with him.
HMJr:
I'm sorry.
R:
That's all right. I believe it's worthwhile
and I -- I just don't agree with him, that's all.
HMJr:
Okay.
R:
All right, sir.
HMJr:
Thank you.
R:
Good bye.
Regraded Unclassified
- 19-a -
232
H.M.JR: He has got a Theatre Guild case pending
since last November.
MR. O'CONNELL: Tax exemption?
H.M.JR: Yes.
MRS. KLOTZ: He wrote you about it and we turned it
over to you. (Indicates Mr. O'Connell)
:
H.M.JR: Well, it most likely went to John Sullivan.
If anybody wants tickets for Oklahoma, here is a chance to
get them.
MRS. KLOTZ: It is on Oklahoma.
H.M.JR: They want to take a troupeout, start another
Oklahoma Company, but they want to know where they stand.
MRS. KLOTZ: What he wanted was the ruling expedited.
MR. PEHLE: I think they are educational!
H.M.JR: Especially the song, "I Gan't Say No."
Anyway, it is somewhere around.
MRS. KLOTZ: I turned it over to John Sullivan. Oh,
no, Mr. Gaston made that appointment with Mr. Cann.
H.M.JR: He says it is with Norman Cann.
MRS. KLOTZ: I was away, that is right. Mr. Gaston
Regraded Unclassified
w10
233
- 20 -
made the appointment with Cann and all he wanted was the
thing expedited. He did not ask for anything special.
H.M.JR: All he wants to know now is where it
stands.
MRS. KLOTZ: That has been going on now for a
long time.
H.M.JR: He said the last they heard was the 1st of
November.
MR. O'CONNELL: When I find out, do you want me to
call him?
H.M.JR: Yes.
MR. O'CONNELL: Again, it is not a question of whether
we give them the exemption or not --
H.M.JR: This is different. Here is a taxpayer who
just wants to know what has happened -- Why can't they
hear from the Bureau. This is quite different.
MR. O'CONNELL: I suspect the Nation case itself has
probably slowed up the issuance of rulingsin the field of
1016, because it did bring them up short and they did
realize, I think --
H.M.JR: 0. K., that is good. Now I have nine minutes
left to do this thing connected with Stettinius.
Regraded Unclassified
234
TREASURY DEPARTMENT
Country
INTER OFFICE COMMUNICATION
DATE Dec.18,1944
TO
Secretary Morgenthau
FROM
Mr. Glasser Hg
Subject: Developments concerning Italy since June 1944.
1. In July 1944, the bread ration for southern
Italy was increased to 300 grams per person.
However, in the areas liberated after the first of
June, the bread ration has continued, up to the present,
to be only 200 grams per day. Recently, the President
issued direct instructions that the bread ration for
all of liberated Italy be increased to 300 grams, "ir-
respective of the consequences. " The conviction that
300 grams of bread per day is the minimum ration per-
missible is now widespread, even to the British. In a
document prepared by Harold MacMillan, dated December 13,
the 300 gram bread ration is called "the linchpin of the
entire plan" for the reorganization of Allied-Italian re-
lations.
The 300 gram bread ration has become a slogan and
the emphasis placed upon this slogan is attributable in
no small part to the position taken by the U. S. Treasury
in Washington and in Italy, directly and indirectly, in
discussions on this question.
2. The Treasury Department initiated, drafted and
pushed through a program for giving to Italy the dollar
equivalent of troop pay expenditures in Italy. This
single act, which is purely Treasury in origin and de-
velopment, and solely to the credit of the Secretary of
the Treasury, is the most important step which the U.S.
Government has been able to achieve in its Italian rela-
tions. Both the U.S. and U.K. Governments have given
the Italians a large number of words since June 1944,
but this is the only case where the U.S. Government
gave them something solid and meaningful.
Regraded Unclassified
235
- 2 -
The importance of this step to Italy cannot be
over-estimated, and the Italian public greeted the
President's announcement of October 10 as the most
encouraging and the most important step in Italian
life since the fall of Mussolini.
3. The British have now (December 13) taken the
first step towards giving the Italian Government some
authority in Italy. They have now also agreed to
widen the scope of the supply program in Italy to en-
able a minimum amount of supplies, other than food
and medicines, to be imported. The British propose,
of course, that the increased import program to Italy
be the financial responsibility of the United States.
As yet, the supplies have not gone forward; it
is still in the discussion stage.
4. The British have been considering the anti-
inflation program for Italy during the past five months,
even though a British Treasury representative participa-
ted in, and approved, the program last June. The Brit-
ish gave their comments to the Combined Chiefs of Staff
only as recently as November 27. However, the Allied
Control Commission has been discussing the program tho-
roughly with the Italian Government during this period
of British consideration with some minor action having
been achieved.
5. Except for the above steps, our relations with
Italy do not differ from that of last June.
TREASURY DEPARTMENT
236
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
FROM Mr. Glasser H.S
Subject: Re ort on Assignment to Italy: -- April and
May 1944.
I.
MY instructions were to assist the Allied Control
Commission, at its request, in the study of inflation
in Italy and in the preparation or a program designed
to control inflation.
These instructions were carried out and the mis-
sion was completed by June 2. A program for the control
of inflation was prepared by the special committee of
the Allied Control Commission, of which 1 was a member,
approved by Allied Force Headquarters, and was submitted
to the Combined Chiefs of Staff for concurrence.
Il.
Summary View or the Inflationary Movements
in June 1944
1. The situation in Italy can De summarily des-
cribed as bein serious with many dangers apparent,
out Dy no means hopeless or beyond the possibility
or stabilization within the coming months.
2. The inflation is apparent in Italy in the
uncontrolled and black markets and in the trade in
Regraded Unclassifi
237
00 I I
the supplies stolen from the military forces. Bread
obtained on the black market cost 60 cents (U.S.) per
pound. A truck tire, $400 (U.S.), a gallon of gaso-
line $3 (U.B.).
on the other hand, there are stable elements in
the price system which serve to contrast and emphasize
the inflationary elements. For instance, the price
of bread obtained on the legal ration is less than 2
cents (U.S.) per pound. Other commodities included
in the ration (when obtainable) are equally low in
price. The general wage level is only 60 percent
higher than it had been for years before our entry
into Italy. There is no apparent fear of the future
value of the currency. A substantial portion of the
new currency being issued is returned to the banks in
the form or bank deposits.
3. The most dangerous element in the economic
situation in Italy today is the small amount of food
and necessary consumers' goods which pass through the
legal and controlled markets. The present bread ration
of 200 grams per day gives to the Italian people a
food ration of only 850 calories. This 18 inadequate
to sustain life, even in a country such as southern
Italy which has always had a low standard of living
by European standards. The people whose income is
derived from controlled wakes do not obtain enough
food at ration prices. They must go to the uncon-
trolled or black markets to supplement their legal
rations and the simple fact is that they do not have
enough income to compete in the black markets.
This is the great unstable element in the present
balance between inflation and stability. if the bread
ration were increased to 300 grams per day and thus
raise the content of the ration to 1150 to 1300 calo-
ries per day, the pressure on black markets would be
relieved to such an extent that the danger or an ac-
cumulating inflation would, in my opinion, be greatly
alleviated.
238
3
4. The second most dangerous aspect of the
current situation is the failure of the military
authorities to provide even a minimum of transport
for civilian requirements. The army has requisi-
tioned the bulk of usable Italian trucks and auto-
mobiles. Even more important, they have requisi-
tioned the hundreds of small and large boats which
the Italians used for fishing and for coastwise
shipping and thus have taken away the principal
means of civilian transport and an important source
of food. Furthermore, the military has taken over
factories and industrial establishments which could
now be starting the process of rehabilitation.
The military situation may require the army to
impose these sacrifices on the Italian economy and
the Italian people. However, it 1s a very serious
burden and may result in an unjustified decree of
economic chaos in Italy.
5. The supply program now carried out oy the
military is directed only towards supplying the mini-
mum amount of food and medical supplies to avoid
"disease and unrest". There is practically no pro-
vision being made for those supplies which are necess-
ary to maintain Italian production of the basic com-
modities for living. The reason for this inadequate
program is, of course, dominated by the shipping
shortages, the supply shortages and the fact that the
Italians have no foreign exchange assets with which
to make purchases in the United States.
6. The spending by Allied troops in Italy is a
factor towards inflation, but is not as important
as the budgetary deficit of the Italian Government it-
self, nor is it as important as the transport and in-
dustrial facilities taken over by the Allied armies
Regraded Unclassified
239
4 I .
for use in the war effort. The U. S. Army personnel
are spending only about 16 percent of their pay in
Italy and those expenditures hardly touch the central
supplies available for the Italian civilians. The
French and British forces, of course, live off the
country to a much greater extent than does the U. S.
Army, and the effect of their operations are, there-
fore, more serious.
7. There are optimistic factors which can be
relied upon to carry Italy through the stormy period
ahead, although the strength of these factors is
rapidly being dissipated by the absence of a real pro-
gram for economic stabilization in Italy. These fac-
tors are:
(a) The 80 percent reduction in the exchange
rate for the Italian lire has proved to
be a boon to Italy rather than a handi-
cap which critics decry. There is no fear
in Italy of depreciation in the exchange
value of the lire. Rather, the Italians
still look forward to the possibility of
appreciation. Therefore, there is no
apparent escape from currency in Italy.
(There is, of course, a desire to hoard
United States dollars and the black market
rate for dollars of 250 lire per dollar
is a reflection of that hoarding, plus
the fact that there are few U.S. dollars
available for purchase.)
(b) The present foreign exchange rate for the
lire provides a cushion which will permit
substantial increases in legal prices and
wages without threatening the future
ability of Italy to resume exports and re-
establish its financial independence.
(c) The Allied Control Commission and the Ital-
1an Government have succeeded in keeping
the wage level relatively stable. In view
Regraded Unclassified
240
- 5 -
of the small quantity of food and the
absence of clothing in legal and rationed
channels, this is really a great achieve-
ment. It reflects the inexhaustible pat-
ience of the suffering Italian people. It
reflects, I believe, the willingness of
the Italian people to suffer sacrifices
in order to achieve the liberation of the
rest of Italy and in the hope of becoming
an independent and democratic nation.
(d) The prospect of an exceptionally good har-
vest this year, although military operations
may destroy a portion of the crop. The har-
vest be ins in June in southern Italy and
reports indicate that the crop of cereals
may be 20 percent higher than that of the
previous year.
(e) The program for collecting the wheat pro-
duction is being conducted in a democratic
ME nner based on patriotic motives. This is
something new for Italy and is in the nature
of an experiment along democratic lines. It
is my belief that this program will be much
more successful than were the previous fas-
cist programs or forced collections.
Unfortunately, however, the Italian Gov-
ernment has insisted on paying a high price
for wheat, almost three times as much as the
price for the previous crop. The Allied Con-
trol Commission, particularly the financial
sub-commission, strongly advised the Italian
Government to adopt a lower price, but they
refused to ao this.
Regraded Unclassified
241
- 6 -
(I) There is hope that the liberation of
northern Italy will come quickly and
that the liberation might come without
too much destruction to Italian indus-
try. AE long as this possibility exists,
the Italian people will hope that their
economy can be stabilized by their own
efforts.
(g) The Italian people still have faith
that the United States in particular
and the United Nations in general will
not permit their country to "go down
the drain.'
III.
what can De done now?
1. The first and indispensable step which must
be taken is to provide the Italian people with a daily
ration or at least 1150 to 1300 calories per day.
This step is the sine qua non of any economic
program for Italy. Not to take this step is condemn-
in. Italy to economic chaos and to a cruelty wholly
inconsistent with the philosophy of the United Nations.
It is unjust as well as unwise, while we are fighting
a desperate war, to give such treatment to potential
allies. The Italians are pleading with the Allies for
the opportunity to participate to an ever greater de-
gree in the war against the Nazis and it is the Allies
themselves who prevent the Italians from making a
larger contribution. The Italian people look to the
United States in particular for recognition of their
democratic aspirations and look to us to help them to
achieve democracy. Starving the Italian people will
not encourage them to look to us for guidance, but they
will look elsewhere, particularly to the East.
Regraded Unclassified
242
- 7 -
The objection to increasing the bread ration
to 300 grams comes from the Army supply people who
feel that the wheat and the shipping to carry the
wheat are not available for Italy in view of mili-
tary shortages. It is my view, after studying the
situation in Italy, that the increase in ration may
require an increase in imported wheat, out this in-
crease will not be more than 10 to 20 percent of the
present imports. The reason for this is that an in-
crease in the bread ration will force the prices in
the black markets downward and thus make it less pro-
fitable for farmers to sell on the black market. A
small decline in the black market price will increase
the legal collections. Furthermore, the frauds now
being perpetrated in the black market for bread would
decrease as soon as the people were able to get a
set standard of food consumption in the legal markets.
The experts on the Allied Control Commission are,
in general, in agreement with this analysis. The
supply people in Washington, however, are not.
2. The wage level in Italy should be maintained
at present levels, but with the necessary proviso that
the quantity of food obtained in the legal ration
should be increased and a program developed for the
legal distribution of other necessary commodities
such as shoes and clothing.
3. The Allied armies should be pressed to in-
crease its contribution to civilian transport, to the
rehabilitation of public utilities, particularly
electric power, and to give some necessary industrial
supplies for Italian agriculture. However, the re-
quirements of the military campaign in Italy have
the highest priority and the Italians recognize and
sympathize with this priority, even more than we do.
Regraded Unclassifie
243
- 8 -
4. Preparation should be made for a currency
conversion program combined with a heavy anti-infla-
tionary tax. Unfortunately, such a program must
await the liberation of the whole of Italy. An in-
flationary tax program, if combined with provisions
for a confiscatory rate against fortunes made under
"fascist privilege", from collaboration with the Ger-
mans, and from black market activities, should sub-
stantially reduce the volume of purchasing power and
eliminate the explosive inflationary pressures under-
lying the Italian economy.
5. A program should be instituted for the re-
funding or the Italian Government's internal debt
at much lower rates of interest, for the elimination
of interest on deposits and the lowering of the
general interest rate structure. At the present time,
the payments made for interest are an important source
of inflation in the country. on the other hand, there
is no economic justification for high interest rates
since Italy 1s completely-devoid of investment oppor-
tunities. This program should be combined, of course,
with an extension of the existing programs designed
to curb speculation.
6. The Italian Government should attempt to
administer a flexible price policy on imports and
local production. This policy should be designed to
permit the maximum distribution of consumers' goods
on a just basis, combined with a policy of maximizing
government revenues from the distribution of luxury
or semi-luxury commodities.
7. It is my opinion that the Allied Control
Commission is not capable of operating the Italian
economy in a manner which can successfully avoid in-
flation. Perhaps the Italians can't either, out an
Italian Government which has the confidence and sup-
port of the bulk of the Italian people is the only
type of government which can be capable of managing
Regraded Unclassified
244
- 9 -
internal economic affairs as to attain and maintain
financial and economic stability. Therefore, it is
necessary that the Allied Control Commission transfer
to the Italian Government greater responsibility and
authority for the management of Italian economic and
financial processes.
The anti-inflationary program which the Allied
Control Commission has just completed should be given
to the Italian Government in an advisory capacity.
The Italian Government should be given the responsi-
bility and the authority to carry it out.
Regraded Unclassified
245
December 18, 1944
10:50 a.m.
FOREIGN FINANCIAL POLICY BOARD
Present: Mr. D. W. Bell
Mr. O'Connell
Mr. Pehle
Mr. Luxford
Mr. DuBois
Mrs. Klotz
H.M.JR: Go ahead.
MR. LUXFORD: Do you want to mention the only point
I think there is any disagreement at all on?
MR. BELL: Go ahead.
MR. LUXFORD: It is the question of whether or not it
is tactically wise at this point to try to suggest to
Stettinius that we organize this kind of committee in London,
Paris, and Italy at this point. We feel it will be difficult
enough to win our battle on getting the committee set up here.
If we can win that battle--if we can demonstrate that will
work-then go into--
H.M.JR: Stop arguing, it is enough.
MR. BELL: Otherwise the order is O.K., I think. You
remember you mentioned to me that ought to be considered.
We have considered it, and we all agree that nothing should
be done.
H.M.JR: We just tell the patient we want to operate on
one thing; they when we get him open, we take out everything.
MR. LUXFORD: I will send you a copy of the order and
memorandum?
H.M.JR: No, just give me the part I want to give to
Stettinius. He will be in some time tomorrow. Just give me
the one part, that is all.
Regraded Unclassified
246
- 2 -
MR. BELL: Well, attached to the memo is the form of
executive order which carries out the memo.
H.M.JR: Who has that?
MR. LUXFORD: I will send it in to you right away.
H.M.JR: To Mrs. Klotz.
Regraded Unclassif
247
December 18, 1944
11:32 a.m.
Operator:
General Greenbaum.
HMJr:
Hello.
General
Greenbaum:
Hello.
HMJr:
Eddie.
G:
Yes, Henry.
HMJr:
How are you?
G:
Fine.
HMJr:
I understand you're going to see this Captain
Bersinger.
G:
I've seen him, yeah.
HMJr:
Oh, you have seen?
G:
Yeah.
HMJr:
Well, then what I was going to say was too late.
G:
However, I understand he's still around, same status --
but I understand that's without a job.
HMJr:
Well, the only thing was I kind of promised
him as a reward for what he did, that he could
go home for Christmas. That was the thing.
G:
He's going to go.
HMJr:
That's all.
G:
Yeah, we wouldn't interfere with that for a
million dollars. He hasn't been home for five
Christmases.
HMJr:
That's right. That was what I was calling
about.
G:
Well, you're swell to mention it.
HMJr:
Well ....
Regraded Unclassified
- 2 -
248
G:
Well, he will get home.
HMJr:
Do you think you can use him?
G:
We got -- as far as he's concerned it just clicks
a thousand percent, the impression he makes. It's
a question here as to whether we want to enlarge
on that type of work.
HMJr:
I see.
G:
I personally am all for it. I think he's a
natural.
HMJr:
Yeah, I -- well, as a speaker he just goes over
wonderfully. And the boy's got a head.
G:
Yeah.
HMJr:
And I would like -- because I think, as Ted
Gamble explained, occasionally be able to use
him myself.
G:
Oh, yes, that could be arranged easily. Ted
told me about him. He certainly makes a wonderful
impression.
HMJr:
Okay.
G:
Okay. Thanks a lot.
Regraded Unclassified
249
December 18, 1944
11:38 a.m.
Paul
McDonald:
Yes, Mr. Secretary.
HMJr:
Listen -- uh -- that inquiry I made about who
1s Shaeffer and his group responsible to
M:
As of November 30, 143, when Fred Smith was
here, he reported to him, sir.
HMJr:
Yes.
M:
And since then there has been no formal order
to have him report to anyone other than yourself,
but as a matter of practice, I would assume that
he's been clearing some matters with Mr. Gaston.
HMJr:
Yeah, well, I -- but here I get out an order -- I
think it is something in writing, isn't it, making
him responsible to Smith?
M:
Yes, sir.
HMJr:
Then Smith leaves and your office doesn't pick
up the loose ends. Now, here's a loose end.
Shaeffer isn't responsible to anybody.
M:
It was my understanding that Mr. Bell had felt
that there might be a replacement fairly shortly
for Mr. Smith.
HMJr:
Yeah, but when there are these gaps and loose
ends, the office -- the Administrative Assistant
should bring it to my attention.
M:
Yes, sir.
HMJr:
See? I just -- I started to dig on it this
morning -- here's a fellow who isn't responsible
to anybody, actually.
M:
Yes, sir.
HMJr:
I asked Gaston and Gaston said, "No, he will
he said, "He drops down once in a while." The point
1s -- send me in through Mrs. Mannen a copy of the
order which I signed when Smith came in. See?
Now, when Smith resigned, the Administrative Assistant
ought to pick up and say, "Look, Mr. Morgenthau, here's
different things Smith did and you haven't assigned
them to anybody."
Regraded Unclassified
250
- 2 -
M:
Yes, sir.
HMJr:
And you might bring that to Charlie Bell's
attention in case this happens in the future.
M:
Yes, sir, I'll be very glad to.
HMJr:
I'm tough this morning.
M:
All right, sir. (Laughs)
.
HMJr:
All right.
M:
Thank you.
C
Regraded Unclassified
251
December 18, 1944
11:42 a.m.
HMJr:
Good morning. I was talking to Mr. Gaston about
Little.
Robert
Coyne:
Right.
HMJr:
And he doesn't feel that -- while he thinks Little
1s excellent for War Bonds -- that he is what I
want.
C:
Right.
HMJr:
So, there was no -- I don't know whether you've
said anything to Little or not.
C:
Ted, just in a preliminary way
....
HMJr:
Well, I think that Little is fine and when I
go out on the road to speak or do anything, I
went him to handle the advance work for me as
advance man. I'm delighted -- I wish you'd make
that -- to him, you see?
C:
Right.
HMJr:
But when it comes to doing this intricate job
over here of a thousand and 'one inquiries on
the Treasury
C:
Right.
HMJr:
....
we just have to start from the ground up.
C:
I see. Well, I think that's a good conclusion,
sir.
HMJr:
But I'm sure that will be pleasing to you because
what's-his-name didn't
....
C:
Right.
HMJr:
Gamble didn't want me to
....
C:
Right.
HMJr:
But leave it in a way that I'm more than pleased
with what he's done for me.
C:
You bet.
Regraded Unclassified
- 2 -
252
HMJr:
And you might put it this way, that I don't
want to interfere with the War Bond set-up.
C:
Okay.
HMJr:
How's that?
C:
That's fine. How did you like your press?
HMJr:
Very well, what I've seen of it -- tops.
C:
I thought it was extremely good.
HMJr:
And I'm -- I'm waiting for the Atlanta papers.
C:
Well, they should be here today, certainly,
because they left Atlanta airmail yesterday.
HMJr:
Send them over, will you, please?
C:
You betcha.
HMJr:
I'm delighted with everything.
C
C:
I'm glad to hear it.
HMJr:
Thank you.
C:
Righto.
Regraded Unclassified
253
upproved
12/18/20
S. George Little, on leave of absence as President, General
Features Corporation, New York City, has been serving as Special
Consultant on newspaper operations for the War Finance Division of
the Treasury Department since January 1944.
Mr. Little has been activily associated with the newspaper
business for more than 20 years and has a wide acquaintance among
publishers, advertising managers and editors alike.
Before organizing General Features Corporation (together with
some former business associates) in 1942, he was for more than 10
years Executive Vice President of Home Economic Service Corporation,
which syndicate served newspapers with news, editorial and adver-
tising features throughout the Nation.
He began his newspaper career in Oklahoma where he was Ad-
vertising Manager of the Ada (Okla.) Daily and Sunday News, at
the age of 18. He attended East Central State College of Okla-
homa and took two years
post-graduate work in journalism at
the Columbia University, New York City.
and
He was later associated with the Daily Oklahoman/Times, in
Oklahoma City, and helped organize their financial news and ad-
vertising setup. He then went to North Carolina where he was
Advertising Manager of the Asheville Citizen for three years
before entering the syndicate business.
He was recently elected, (for the fifth consecutive year)
Secretary of the Sales Executive Club of New York, which organ-
ization new has & membership of 1500 corporation business and
sales executives.
Mr. Little was born in Marshville, North Carolina in 1903
and graduated from highschool there before entering college in
Oklahoma.
Regraded Unclassified
254
December 18, 1944
12:09 p.m.
Operator:
Go ahead.
Colonel
McCarthy:
Hello, Mr. Secretary.
HMJr:
I just want to tell you how pleased I was with
this Colonel Exton that you sent over.
M:
He's a fine boy.
HMJr:
Yeah. And I don't know what they -- General
Bissell is sending over a Colonel Black tomorrow.
We'll see how good he 18.
M:
You'll fine him fine, Mr. Secretary. He was
our former Military Attache to Germany.
HMJr:
Who, Black?
M:
Black was.
HMJr:
Oh.
M:
He was there at a time when -- when the Nazis
were reaching their full strength and just
before they attacked.
HMJr:
Oh.
M:
I believe he was also there at the time of the
invasion of Poland. I'm not certain of that.
HMJr:
Oh.
M:
And I think he stayed there almost to the
bitter end -- almost until we went in.
HMJr:
Was he there with Truman Smith?
M:
He was there -- I think -- I think he relieved
Truman Smith.
HMJr:
I see.
M:
At any rate, he -- he has a very excellent
insight into the psychology of the German
people -- was used by us on psychological
warfare for quite a long time.
HMJr:
Yes.
Regraded Unclassified
255
- 2 -
M:
And has a long record of good service in G-2
here.
HMJr:
Well, I just wanted to tell you I was very much
pleased with what you did this morning.
M:
Well, thank you, sir. I'm awfully glad that
Exton did a good job. He's about my age and
I've known him always.
HMJr:
He's your what?
M:
He's about my age.
HMJr:
Yeah.
M:
And I have known him always. I thought you'd
like him.
HMJr:
I did.
M:
Good bye, Mr. Secretary.
HMJr:
Thank you.
M:
Good bye.
Regraded Unclassified
256
December 18, 1944
2:13 p.m.
Mac
Asbill:
Mr. Secretary, this 1s Mac Asbill of Cummings &
Stanley. I'm associated with Truitt. He's out
of town.
HMJr:
Oh, yes. Well, here's the thing I'm calling
about: he's been cabling B111 Bullitt about
his house for me, and I wonder -- I've talked
to Max Truitt about it just a week ago, and he
sent another cable to Bullitt. And I wondered
if there's anything in the office
....
A:
You want to know whether there's an answer to
the second cable?
HMJr:
That's right.
A:
I can find out and call you back.
HMJr:
Will you do that?
A:
I'll be glad to.
HMJr:
I thank you.
A:
Thank you.
257
December 18, 1944
3:00 p.m.
COMPLETION OF ARMY NEGOTIATIONS WI TH CHINA
Present: Mr. Friedman
Mr. Adler
MR. FRIEDMAN: You wanted the tables to General Hurley
and a letter to Mr. Stimson.
H.M.JR: Has this been approved by State?
MR. FRIEDMAN: Yes, John Carter Vincent's initials
are "on it.
H.M.JR: What did he say when you sent it to him?
MR. FRIEDMAN: He did not say we had already informed
them. I think the omission was significant.
MR. ADLER: They are very backward that way. They don't
keep the field sufficiently informed. They complain all the
time that they don't know what is going on in Washington.
(The Secretary signs attached letters to Secretary
Stimson and Mr. Collado.)
H.M.JR: That is all right. Do they charge us with that?
MR. ADLER: Yes. That goes on Stabilization.
H.M.JR: General Richards? How about that?
MR. FRIEDMAN: He was the only one. Judge Patterson
didn't really help out. He just signed the agreement.
H.M.JR: No, the man who helped the most was Clay.
MR. FRIEDMAN: After July? In the last phase of the
negotiations?
H.M.JR: I have never met General Richards.
Regraded Unclassified
258
- 2 -
MR. ADLER: We were in telephone communications with
Clay until the last stages. In the last stages something
very peculiar happened in the War Department. The War
Department's responsibility was transferred to the Fiscal
Office of the General Staff, of which General Richards is
the Director. It was taken completely out of Somervell's
and Clay's bailiwick, and I was told that Clay's connection
with it was personal, due to the fact that he visited Chungking
in October 1943.
MR. FRIEDMAN: Of course, we could add both, General Clay
and Richards.
H.M.JR: And Somervell. I would just change this and
send it in this front way, and I will get it. Say General
Somervell, General Clay, and General Richards.
MR. FRIEDMAN: Yes. It was transferred to General
Richards. Who is he?
MR. ADLER: He is the head of the Fiscal Office of the
Chief of Staff.
MR. FRIEDMAN: He is called the Budget Director of the
U. S. Army, I believe.
H.M.JR: As a matter of fact, another General was in
that, General Carter.
MR. ADLER: He is the Fiscal Director.
H.M.JR: There were three Generals who helped on it,
Generals Clay, Somervell, and Carter, and I would put last
General Richards. I have never even met the man.
MR. ADLER: Clay's contribution to the appended minutes
is--you will have to save him from that statement.
H.M.JR: Am I taking for granted that he wants me to
continue?
MR. ADLER: I think it should be taken for granted. The
Army takes it for granted.
Regraded Unclassified
259
- 3 -
H.M.JR: All right, just cross that out. All right,
what else?
MR. FRIEDMAN: That is all.
MR. ADLER: And I am taking the record of the agreement
and everything else with me.
H.M.JR: All right. Is everything else all right?
MR. ADLER: Yes.
MR. FRIEDMAN: He is leaving tonight.
H.M.JR: Oh, well, good luck! Keep us informed, a nd
don't forget that I like the gossip.
Regraded Unclassified
260
My dear Mr. Secretary:
I know that you will be pleased to learn that we
have successfully terminated the rather difficult and
arduous negotiations with Dr. Kung with respect to U.S.
Army yuan obligations in China. In this connection,
I would like to tell you that General Richards was most
helpful to me and I am sure that he and Judge Patterson
kept you fully informed on the progress of the nego-
tiations.
In our settlement with Dr. Kung we agreed to the
payment of $210 million in settlement of all U.S. Army
obligations incurred up to September 30, 1944. The also
agreed to have quarterly adjustments and settlements
with regard to yuan obligations of the U. S. Army incur-
red after September 30, 1944. I am not taking the
necessary steps to obtain the information needed for
the renewal of the negotiations in the near future for
settlement of obligations incurred during the next
quarter of 1944.
Sincerely yours,
Secretary of the Treasury.
The Honorable
The Secretary of War
ISF/efs 12/18/44
Ret Ret.to 5 3 5323
261
Regraded Unclassified
To: Mr. Collade
From: Mr. White
will you please send the following cable to the American Fabasay,
Chungking, Chinas
FOR GENERAL HURLEY FROM THE SECRETARY OF THE TREASURY:
The negotiations with respect to U. 5. Army yuan obligations in Chim
have been successfully terminated on the following terms:
1. The War Department shall transfer to the account of the National
Government of China or the account of such agency of the National
Government of China as the National Government of China designates
& our of One Hundred and Eighty-five million U. S. dollars (US8185
million), in addition to the Twenty-five million U. S. dollars
(US$25 million) already transferred, making a total of 2no Hundred
and Ten million U. S. dollars (US$210 million), in settlement of
all U. S. Arzy obligations insurred up to September 30, 1944.
2. This settlement does not include the yuan expended by the
Government of the Republic of China for board and lodging of
American armed forces in China. This STAR will be credited to the
National Government of China as reciprecal aid under Article VI
of the Mutual Aid Agreement of June 2, 1942 at the request of the
National Covernment of China.
3. As stated in paragraph 1 above, this settlement liquidates all
our obligations for U.S. Army expenditures in China up to Suptember 30,
1944 (with the exception of paragraph 2 above) with the understanding
that this settlement is without prejudice to the Chinese contention
that the cost of the Changtu sirfields is not included in the amounts
referred to in paragraph 1 but should be treated as an item of
reciprosal aid under Article VI of the Mutual Aid Agreement of
June 2, 1942.
In addition to the above 18 was agreed to have quarterly adjustments
and settlements will regard to year obligations of the U.S. Army insured
after September 30, 1944. Mr. Adler, who has already departed for China,
will give you nore of the details of the agreement and the negotiations.
He is also earrying for you a net of the documents relating to the financial
negotistions.
Please repeat the above to General Wedemayer.
ISF/efs 12/18/44
262
December 18, 1944
3:25 p.m.
HMJr:
Hello.
Basil
O'Connor:
Henry, this is Basil.
HMJr:
Good afternoon.
0:
John L. Sullivan -- 1s he persona grata?
HMJr:
Oh, yes.
0:
Okay.
HMJr:
Is that all you want to know?
0:
That's all. He resigned without my permission.
He's a great friend of mine, you know. I've
known the boy for years.
HMJr:
Well, now, come clean. What are you -- what are
you cooking him for?
0:
Probably three months into Poland.
HMJr:
Oh.
0:
That's for your own ears. You're the first one
to know it. He doesn't know it even.
HMJr:
He doesn't? No, he
0:
But I don't have any secrets when I'm asking
another fellow to help me out.
HMJr:
No, he's a fine fellow and
....
0:
Well, that's -- everything was all pleasant and
all that?
HMJr:
Very much BO.
O:
Okay, boy. Don't say anything about it though
because I haven't even spoken to him.
HMJr:
No.
0:
But I want to -- I need to send -- I've got two
men that are going into Poland, off-the-record,
and I want to send another fellow in at the head
of the Commission that has some standing. You see?
Regraded Unclassified
263
- 2.-
HMJr:
Yeah. No, John's a fine fellow.
0:
And he's young and all that.
HMJr:
Yeah.
0:
Okay.
HMJr:
I thank you.
0:
How are you, Henry, all right?
HMJr:
I'm fine.
0:
Good. Thanks a lot.
HMJr:
Hello?
0:
Yeah.
HMJr:
I feel I've got a wonderful job when I compare
what Stettinius has got.
0:
Are you telling me? (Laughs) Hello?
HMJr:
Yes.
0:
You said 80.
HMJr:
My Lord!
0:
And -- of course, I was amazed. I can see
though -- I mean, I want to be fair -- I can
see a theory. I sat next to a lady the other
day and she seemed to think that there was
considerable in the opposition, but it amazed
me because I've -- in fact, I thought the
appointments were all so good that I was amazed
at the ruction they stirred up. However, I can
see where some people think there's too much on
one side of the track.
HMJr:
Right.
O:
But, my God, I mean, it almost seems that if
these days we don't have much time for that kind
of thing, doesn't it?
HMJr:
Well, it's a long story.
Regraded Unclassified
264
- 3 -
O:
Let it be a lesson to you.
HMJr:
Okay.
0:
(Laughs)
HMJr:
Good bye.
Regraded Unclassified
265
December 18, 1944
4:17 p.m.
HMJr:
Hello.
State Dept.
Operator:
Secretary Morgenthau.
Secretary
Stettinius: Henry.
HMJr:
Yes.
S:
If agreeable to you, I'd like to come on over
now a little while because I want to have a
visit and tomorrow looks like it's going to
be just as uncertain as today was at lunch.
How long are you going to be there?
HMJr:
Well, I was hoping to get away by five.
S:
Well, could I -- are you going to have any time
between now and five?
HMJr:
Sure, I'll make time.
S:
Well, I'll be there in fifteen minutes.
HMJr:
Very fine.
S:
Okay.
HMJr:
Be fine.
S:
All right, old boy.
Regraded Unclassified
- the right. the typewriter, derk tab, - - pessit Palet or - writing - - - for photographing
FROM
10. Sgt John Smith
Charles Smith
955 Engr Co (Tope)
414- Seventh St
A.P.O. 708 a/o P.M.
San Francisco Calif
Santa Monica Calif.
[CINSORS STAMP)
SEE INSTRUCTION NO. 2
(Sender's complete oddress above)
Christmas Bond Certificate
$0.00
ATTED STATEN NAVINGS HOND.
THE and STATES 00
360.00
&
ISSUE DATE
JOHN 12M
414 EVENT ??.
MONTON, 0:117.
ocr
10
1944
WAR SAVINGS
BOND SERIES
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Greetings : To you Son:-
mother and 9 are very glad to add this
bond to your collection We all wish
you could be with no this Christmas and
we know you will he next year. Love
HAVE from YOU FALLED all IN COMPLETED of us
Dad.
REPLY BY
HAVE YOU FILLED IN COMPLETE
ADDRESS AT TOPY
V MAIL
ADDRESS AT TOP?
test
Print the complete address in plain block letters In the panel below, and your return address in the space
provided. Use typewriter, dark Ink, or pencil. Write plainly. Very' small writing is not sultable.
267
From
To
(Sender's name)
(Sender's address)
(Date)
(CENSOR'S STAMP)
Christmas Bond Certificate
UNITED STATES SAVINGS BOND
UNKRED STATES
F.
TEN YEARS FROM THE ISSUE DATE HEREOF WILL PAY
To
ISSUE DATE
WHICH IS THE FIRST DAY or
YEAR)
ISSUING ACCATS
DATING State
THIS BOND . ISSUES UNDER Auty
WAR SAVINGS
AS AMERICA, AND is
THE RECORD LIBERTY some ADT,
commons STATES on THE
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BACK HEREOF, m MILL BE VAN
INLIVERED BY AM AUTHORIZED
INSCRIBED AND DATED, AND
BOND SERIES
RECEIPT or PATIENT THEREPOR,
TREASURY DEPARTMENT
WASHINGTON
Margerth
(A REAL bond inscribed as above is waiting for YOU)
as
Greetings
**
V MAIL
H
470
268
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WU 22 68
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NEWYORK NY DEC 18 1944 1213P
1944 DEC 18 PM 12 39
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HONORABLE HENRY MORGENTHAU JR
SECY OF THE TREASURY
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AM DUE FOR CONFERENCE WITH MR STRASSER THIS AFTERNOON STOP
MEANWHILE COMMITTEE OF BUSINESS MEN OF WHICH I SPOKE HAVE
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APPOINTMENT WITH VICE PRESIDENT FOR ELEVN THURSDAY MORNING
P
AND WOULD LIKE VERY MUCH TO SEE YOU SOMETIME THURSDAY AFTER-
H
NOON AT YOUR CONVENIENCE TO DISCUSS PROPOSED NEW PROGRESSIVE
ORGANIZATION OF BUSINESS MEN STOP REEASEXXEX& PLEASE TELEGRAPH
ME AT TWO EIGHTY FIVE MADISON AVENUE IF YOU CAN ARRANGE TO SEE
A
S
US
U
R
MORRIS S ROSENTHAL.
Y
T
E
L
E
Regraded Unclassified
269
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATEDEC. 18, 1944
TO
FROM
Mr. Haas
Secretary and Morgenthau
Subject:
The Business Situation,
Week ending December 16, 1944.
Summary
Stock market: Stock prices rose to new highs for the year
last week in very active trading. Heavy buying of rail-
road stocks continued to feature trading, with the Dow-
Jones average of railroad stocks showing a rise of
10 percent since the beginning of the month. Stock
transactions on the New York Exchange on Friday rose
above the 2 million share level for the first time
since July.
Industrial production: Civilian production has been
virtually frozen at current levels as a result of recent
WPB instructions in an effort to alleviate manpower
shortages and speed up war production. The output of
critical munitions items in November rose 11 percent
above October levels, but was still 4 percent behind
schedule. Plans are being prepared to expand facilities
for the production of heavy tires in order to meet in-
creased military demands.
Commodity prices: Commodity prices moved irregularly last
week, with the Dow-Jones futures index off 0.5 percent
and the BLS spot index of 28 basic commodities declining
0.2 percent. Steer prices weakened sharply on the
threat of a shutdown of retail meat dealers in the
New York area. In the week ended December 9 the BLS
general index of wholesale prices was unchanged at
the peak levels of the previous week.
Worsted freeze: The production of worsted wool tops and
yarns will be restricted entirely to rated orders during
the first part of 1945 in order to meet the sharply 1n-
creased military demands. While this action will tend to
further tighten the civilian apparel situation, no
imminent shortage of civilian clothing is expected since
present stocks are believed to be sufficient for the
next several months.
Retail trade: Following a greater than seasonal rise in
November, department store sales in the week ended
December 9 rose 22 percent above year-earlier levels. The
dollar volume of sales during the week was the largest
ever attained in a weekly period.
Regraded Unclassified
270
- 2 -
Stock prices rise in active trading
The recent shift in public opinion toward expectations
of a longer war has tempered the concern over reconversion
difficulties and cutbacks which beset stock traders during
the fall months. Following up the previous week's sharp
rise in stock prices, the market again moved higher last
week under the continued leadership of railroad stocks.
The volume of trading on the New York Exchange consistently
ran above one million shares daily, and on Friday rose
above the 2 million share level for the first time since
July. Moreover, the volume of bond trading on the Exchange
on Friday reached the highest level since last February.
The current rise in stock prices has occurred in
the face of generally cautious advices of investment
advisory services and considerable bearishness in trading
circles. This bearishness is reflected in a rise in the
short interest on the New York Exchange last month of
63,000 shares to a total of 1,436,000, the highest figure
since June 1933. On the other hand, according to brokerage
comment, the usual year-end selling for tax purposes has
been relatively small.
Prior to the recent upsurge in stock prices, second-
grade railroad bonds had risen steadily since mid-September,
thus providing a strong background for the recent sharp
advance in railroad stock prices. Despite the sharp
improvement in railroad finances during the war, investors
and traders until recently have shown a marked reluctance
to bid up railroad stock prices, presumably in the belief
that an early end of the war in Europe was in sight. Now
that public sentiment has veered heavily toward prospects
of a longer war, fears of an early drop in railroad traffic
have waned, and the Dow-Jones railroad stock average has
risen 10 percent since the beginning of the month. (See
Chart 1.) During the same period the Dow-Jones industrial
average advanced 4 percent, and both averages have attained
new highs for the year. Meanwhile industrial stock prices
in London thus far in December have moved in a narrow range
slightly above the November levels. (See Chart 2.)
Civilian production frozen
In an effort to alleviate the manpower shortage in
war plants and speed up the output of critical munitions
items, the WPB recently issued instructions virtually
freezing civilian production at current levels. Although
some exceptions may be made for essential civilian
Regraded Unclassified
271
- 3 -
requirements on the request of the Office of Civilian
Requirements or in connection with the spot authorization
program, further expansion in civilian goods production
appears to be ruled out indefinitely. Apparently it is
hoped that this move, in conjunction with recent
instructions to draft boards to increase the drafting
of older men who are not doing their part in the war
effort, will halt the drift of workers away from war
plants.
Critical munitions output improved
The recent intensified drive for increased munitions
output appears to be making headway, on the basis of
results announced last week by the Chief of Operations
of the WPB. Output of critical munitions items in
November is reported to have risen 11 percent above
October levels, although production was still 4 per-
cent behind schedule. The widest gains were shown in
the output of B-29 Superfortresses and heavy artillery
ammunition, which were up 30 percent and 23 percent,
respectively. Despite the progress achieved, the WPB
official warned that programs are increasing at such a
rate that utilization of every possible resource in
manpower, machinery and facilities will be necessary.
The output of large truck and bus tires in November
rose 5 percent above schedule, but tire production 1s
described as the most critical of the entire war program.
Further substantial increases in heavy tire output will
have to be achieved to meet military requirements, and
plans are now being prepared for the construction of
new facilities for the purpose. In addition, existing
facilities of the industry are to be rounded out and
expanded. As a result of the critical shortage of truck
tires one company has announced that it is instituting
a 7-day week operating schedule at once.
Commodity prices irregular
Commodity prices moved irregularly last week under
diverse influences. The Dow-Jones futures index was off
0.5 percent and the BLS spot index of 28 basic commodities
declined 0.2 percent. The most important factor in the
decline of the latter index was a 6.2 percent drop in
steer prices, reflecting nervousness over the threatened
shutdown of retail meat dealers in New York. (See Chart 3.)
Regraded Unclassified
272
4
Corn prices declined noticeably on increased marketings,
and cottonseed oil dipped below ceiling levels.
On the other hand, hog prices moved irregularly
higher last week. In connection with hog prices, the
OPA revised upward the ceiling prices on the heavier
weight barrow and gilt hogs in a move to encourage
feeding to heavier weights, now that grain supplies are
again adequate. The continued substantial movement of
cotton into Government hands under the loan and parity
purchase programs had & firming effect on cotton prices.
While cash wheat prices rose slightly as the OPA announced
an increase of 4 cents per bushel in wheat ceilings, the
distant futures declined noticeably on rumors that the
Secretary of Agriculture would propose to Congress a
two-price plan for wheat. Due to the prospective freeze
on worsted tops and yarn production, trading in wool top
futures through the May 1945 delivery was temporarily
suspended last week by the Wool Associates of the New York
Cotton Exchange.
With wholesale commodity prices showing very little
movement in the week ended December 9, the BLS general
index of wholesale prices remained unchanged at the peak
levels of the preceding week. The index now stands at
104.2 percent of the 1926 average, which is 1.3 percent
higher than & year ago and 1s 38.9 percent above the pre-
war August 1939 average.
Secretary Wickard outlines possible
post-war wheat programs
Rumors that the Department of Agriculture would
propose to Congress a two-price system for wheat apparently
arose from a speech Secretary Wickard made in St. Paul last
week in which he outlined various possible post-war programs
to meet the problem of wheat surpluses. The following
alternatives were presented: (1) Production might be held
down to domestic needs for flour and other food products,
plus seed and some for local farm feeding, and the Govern-
ment would maintain parity prices for all the wheat sold.
(2) Exports might continue to be subsidized under the
present export subsidy program, subsidies would be paid
for some non-food uses in the domestic market, and
allotments and quotas would be used to head off large
surpluses. (3) A fairly large acreage might be maintained,
with prices probably below parity, but income payments
would be made to growers. (4) Farmers might be guaranteed
parity prices for an ámount of wheat equal to domestic
consumption for food, but farmers would have to accept
lower prices for wheat produced in excess of this amount.
Regraded Unclassifie
273
- 5 -
WPB to restrict worsted tops and yarn
to rated orders
Strenuous measures are being taken to meet the sharply
increased military demands for woolen and worsted goods in
the next six months. Last week the WPB indicated that the
production of worsted tops would be restricted entirely to
rated orders during the first four months of 1945, and the
production of worsted yarns restricted to rated orders in
the first five months of 1945. Cloth quotas will be
allocated to the various woolen mills but no directives
will be issued unless production lags. The Army in the
meantime has lowered its specifications on the grade
of wool which may be used on uniform serge production,
and has given the manufacturers wider latitude in the
use of foreign wools, although domestic wools are still
preferred.
Army requirements for worsted fabrics for the first
half of 1945 are stated at approximately 45 million yards.
This 1s about double the requirements for the previous
six months and amounts to around one-fourth of the total
worsted production. Requirements for woolens were not
revealed, but they are known to include 9 million yards
of overcoat material and large numbers of blankets.
While the stepping up of the demands for the military
forces will further tighten the civilian apparel situation,
the WPB expects no shortage of civilian clothing unless the
Army fails to cut back its requirements in the latter part
of 1945. Until this recent demand by the Army, military
requirements had been declining, with the result that
inventories of civilian goods are ample for the next
several months.
Meat tie-up in New York threatened
Retail meat dealers in the New York area voted last
week to close from Christmas day "until Office of Price
Administration regulations are adjusted." The dealers
claim that the present "indirect" ceilings on live cattle
have tended to divert beef to black markets and have made
it impossible for them to operate legally at a profit.
Under current regulations slaughterers may pay more
than the indicated ceiling prices, but if the prices paid
during a month average higher than these ceilings,
deductions will be made from the subsidy the Government
pays them. While prices of lower grade cattle have been
274
- 6 -
lower this year than last, prices of prime fed steers
have risen to new war-time highs. Last month at Chicago
the top price of cattle grading AA reached $18.50 per
hundredweight as compared with the announced ceiling of
$16. Since the OPA meat ceilings are based on the
announced ceiling prices on live cattle, the slaughterer
apparently must take a loss on above-ceiling purchases
unless he sells in the black market.
As a result of the threatened shutdown of retail
meat markets in the New York area, Price Administrator
Bowles is reported to have submitted to Stabilization
Director Vinson a proposal for flat ceiling prices on
live cattle. While the OPA has considered imposing
direct ceilings in the past, the WFA appears to have
been opposed to such a move, partly on the grounds that
such ceilings would be difficult to administer and enforce.
Hog prices lower
Hog prices have declined noticeably below ceiling
levels during the past six weeks as marketings have
increased seasonally. (See Chart 4, upper section.)
This decline, however, has been more moderate than that
of a year ago, with the price of good to choice 180-200
pound hogs at Chicago averaging $13.82 per hundredweight
in the week ended December 9 as compared with $13.13 a
year earlier. Hog marketings this season are running
substantially below last year's levels, reflecting a
spring p1g crop which was 24 percent smaller than the
1943 crop. Despite the lower hog slaughtering, Government
purchases during the past six weeks have been almost as
large as the relatively large purchases at this time last
year. (See Chart 4, lower section.)
Due largely to the decrease in hog production, the
total meat supply in 1945 may fall about 8 percent below
that of this year. Sheep and lamb slaughter, as well
as hog slaughter, will be appreciably lower next year
but cattle slaughter may be somewhat higher. The WFA has
indicated that rationing or other restrictions on civilian
consumption of better grade meats may be necessary through-
out 1945 and possibly into 1946, even if the war in Europe
were to end in the next few months. The per capita meat
supply for civilians next year, according to WFA estimates,
will amount to about 123 pounds if the European war
continues through 1945 and to about 132 pounds if Germany
should be defeated within the next few months. This year
the per capita consumption 1s estimated at 143 pounds. Meat
prices, it is believed, are likely to hold close to ceiling
levels next year.
Regraded Unclassifie
275
- 7 -
Department store sales at record levels
Despite the unusually early start in Christmas shopping
this year, department store sales continued to score wide
sales gains in early December, thus virtually assuring the
largest Christmas trade (dollar basis) on record. Since
an unusually heavy volume of sales in October was followed
by a greater than seasonal rise in November, which carried
the FRB adjusted sales index up to a record high of 206,
some retailers expected a relative tapering off in sales
volume in December. However, the sales gain over year-
earlier levels in the week ended December 9 actually widened
to 22 percent from 13 percent in the previous week. (See
Chart 5.) Moreover, sales were 9 percent above the highest
sales volume ever previously attained in a weekly period.
Retail sales last week, according to preliminary
sales reports, continued to run well above year-earlier
levels, with Dun and Bradstreet reporting nation-wide
gains of from 10 to 14 percent. With stocks of merchandise
in many lines already short before the latest buying
upsurge, stocks are expected to be seriously depleted at
the end of the holiday season. Moreover, in view of the
current emphasis on war production and the prospects of
further tightening in civilian textile supplies,
replenishing of stocks undoubtedly will be unusually
difficult.
Regraded Unclassified
Chart 1
276
STOCK PRICES, DOW-JONES AVERAGES
Daily
1944
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
4.
"
18
25
g.
9
16
23
30
6
is
20
27
3
8
17
24
I
e
is
22
=
5
12
e
26
3
IO
17
2
DOLLARS
DOLLARS
155
155
30 Industrial Stocks
150
150
145
145
140
140
135
135
130
130
125
46
20 Railroads
44
44
42
42
40
40
38
38
36
36
28
28
15 Utilities
26
26
24
24
22
22
20
20
SHARES
Volume of Trading
SHARES
Millions
Millions
2
2
I
I
o
o
4
II
e
25
2
9
16
23
30
6
is
20
27
3
IO
17
24
-
e
15
22
29
5
12
ID
26
3
IO
17
24
JUNE
JULY
AUG.
SEPT
OCT
NOV.
DEC.
1944
Office of The Secretary - the Treasury
- - Resert -
P-144-L-2
Regraded Unclassified
INDUSTRIAL STOCK PRICES IN U.S. AND U.K.
August 1936 = 100
1942
1943
1944
PERCENT
PERCENT
Weekly (Average of Daily)
120
120
115
115
110
110
105
105
100
100
95
95
U.K. 56 Industrial
90
Stocks
90
85
85
80
80
75
U.S. 30 Industrial
75
Stocks (Dow-Jones)
70
70
65
65
60
60
OCT
DEC.
FEB.
APR.
JUNE
AUG.
OCT
DEC.
FEB.
APR.
JUNE
AUG.
OCT.
DEC.
1942
1943
1944
Chart 2
277
Office of the Secretary of the Treasury
Division of Research and Statustics
FO-156-CI
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
28 Basic Commodities. B.L.S.
101
101
100
100
JUNE
AUG
OCT.
DEC.
FEB.
APR.
JUNE
AUG.
OCT.
DEC
1943
1944
SELECTED BASIC COMMODITIES
Percentage Change April 9, 1943 to Dec. 8 and Dec. 15, 1944
PERCENT
+80
278
Rosia 66.0%
+60
+40
Barkey 31.1%
theat R5%
Card 9.7%
+20
Burlep 73%
5 I Topez
Priel Claim 23%
Cotton 2.5%
Oil 11%
Sugar 03%
o
Im -02%
Stoors.6.2%
Nogs -8.4%
Better -10.9%
-
20
Dec. a.
Des. IS,
Apr. 9,
1944
1944
1943 (Hold the Line Order)
Office al the Secretary of the Insury
P-ÈSE-A
I el Enant and -
Regraded.Undassifie
HOG PRICES COMPARED WITH HOG SLAUGHTER
AND U.S.D.A. PURCHASES
1942
1943
1944
SEPT
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR
MAY
JULY
SEPT.
NOV.
DOLL ARS
DOLLARS
Per 100 Lbs.
Per 100 Lbs.
16
16
14
14
Price of Live Hogs*
12
12
10
10
THOUSANDS
MILLIONS
OF HOGS
OF LBS.
(Slaughter)
(U.S.D.A.
Purchases)
1400
1200
Slaughter
240
27 Centers
1000
200
800
160
600
120
400
U.S.D.A. Purchases
80
200
40
O
0
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
1942
1943
1944
* Chicago good to choice, 180-200 pounds
132 Centers beginning week ended April a
Source: Department of Agriculture
Office of the Secretary of the Treasury
279
Chart 4
Draision - and Statistics
P-248-B
Regraded Unclassified
Char t 5
280
DEPARTMENT STORE SALES
1935-39 . 100, Unadjusted
PERCENT
PERCENT
320
320
Weekly
300
300
280
280
260
260
240
240
220
220
1944
200
200
1943
180
180
160
160
140
140
120
120
1942
100
100
80
80
JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC.
Office of the Secretary of the Treasury
C-390-C-I
Division of Research and Statistics
Regraded Unclassified
281
M
December 18, 1944
MEMORANDUM FOR THE SECRETARY
From: Mr. Blough
(Important for your information; no present
action required)
The British members of the Board of Inland
Revenue, who were here negotiating a treaty to
eliminate double taxation, have returned to
London. Complete agreement was reached on all
points but one, concerning the proposed 15 per-
cent United States withholding rate on dividends
going from the United States to Great Britain.
The Chancellor of the Exchequer may commun-
icate with you concerning the point at issue.
If so, I would like an opportunity to discuss
the matter with you before any action is taken.
RoyBlough
Regraded Unclassifie
282
DEC 18 1944
Dear Eleanor:
Thank you for sending me Mr. Booth B. Goodman's
Summary of a Plan to Ration Post-War Opportunity.
The proposal has been studied by the members of the
Treasury staff working on post-war problems. They tell
me that the proposed plan is not a realistic suggestion.
You may be interested in the attached memorandum which
briefly discusses Mr. Goodman's plan.
Affectionately,
(Signed) Henry
Mrs. Franklin D. Roosevelt,
The White House.
Enclosure.
JRS1ko:jm 12/9/44
Inclassifie
283
Comment on a Plan to Ration Post-War Opportunity
1. Mr. Goodman's memorandum discusses the important
problem of currency stabilization in relation to the
necessity of maintaining a high volume of consumer spending
in the post-war period. The solution he proposes is in
general of a familier type.
2. He recommends that prices be stabilised by making
them depend upon labor costs. The prices of each commodity
would be determined by the quantity of labor needed for its
manufacture. Wage rates would be set by a government
mission which would take into consideration the cost of the
necessities of life. The prices of these necessities would
also be governmentally controlled, and adjustments would be
made from time to time to take account of necessary changes.
Mr. Goodman also notes the serious danger of unemployment
some years after the war and recomends sharing or "rationing"
the total volume of employment among the laboring population.
3. Mr. Goodman's suggestion is unrealistic for he has
underestimated the complexity of our economic system. Deter-
mining prices on the basis of only the labor costs involved
would mean that no differential allowance 18 made for the
capital, land, and business management that 80 into produc-
tion. Purthermore, for the government to centrol prices and
wages as Mr. Goodman suggests would mean that we should have
to institute an economy completely controlled by the state.
Such a system would be a reversal of the present free enter-
prise economy.
It should also be emphasized that If we achieve sconomic
prosperity after the war, there will be no need to ration jobs
in the way this memorandum proposes. Our task is not to divide
an inadequate number of jobs among those who want work. Our
task is to are that there are jobs for all. The acceptance of
such & "share-ths-werk-program" would be an admission of defeat.
It would mean that we believe we cannot live up to President
Roosevelt's promise of 60 million jobs in the post-war period.
Regraded Unclassified
284
iv,
C
/
THE WHITE HOUSE
WASHINGTON
2re,
11-30-14
M
Referred to Hon. Henry Morgenthau, Jr.
by Mrs. Roosevelt
0
DEC USE
DELICE
SUMMARY OF PLAN
To Ration
POST-WAR OPPORTUNITY
By Booth B. Goodman
of the San Francisco bar
The habit of overlooking the obvious is universal.
Even in attempted solution of basic and fundamental problems,
we are inclined to indulge in complex and involved thinking.
We also have a natural antipathy toward change, and therefore,
seek to obtain the answer to a new problem without changing
or altering any established custom or belief.
We realize that general employment is essential to
a continued peace-time economy. We know that such employment
is possible only through the maintenance of purchasing power
distributed among all. It is obvious that the latter condition
can exist only when there is full employment, or when available
employment is equitably distributed and shared by all.
This economic ideal cannot be super-imposed upon
the present out-moded standard of money value, because the
purchasing power of money must be stabilized as an indispensable
part of any plan for continuous full employment. Gold is not
only unevenly distributed and insufficient in quantity, but
it is a fluctuating medium of exchange which can be cornered
in the world market. The same would be true of silver, or
any other metal.
Money value must be based upon a universal and ever
-1-
Regraded ed
available commodity which cannot be controlled by minority
groups, either national or international. The only such com-
modity 18 common labor, and the following plan is offered as
a solution of our postwar problem.
On a national scale, competent boards, operating
upon the general plan of civil service commissions would, under
appropriate legislation, determine a suitable wage for common
labor. Such wage would be the number of dollars necessary to
provide the reasonably industrious laborer with the necessaries
of life commensurate to the American Standard of living.
This dollar valuation would require study and the
consideration of the necessity of maintaining a high national
income in postwar years. This high income must be preserved
1f we hope to pay our national debt by taxation.
Let us assume that the value of common labor is set
at eight dollars per day. This would form the basis for the
fixing of wage scales for the various skilled types of labor
and each would be set, after careful study, at such rate higher
than common labor as might appear to be warranted from a con-
sideration of the training and skill essential to the competent
performance of the particular craft. In addition to journeyman
ratings there would be special ratings for the semi-skilled
and for the highly specialized workers.
Under this plan and as part of it, we would continue
to exercise reasonable control over the selling price of neces-
saries of life. This control should not be absolute, but within
-2-
Regrad
reasonable limits. Any appreciable increase in the cost of
living would be offset by a blanket adjustment of wage scales.
In this manner a balance in values would be maintained, giving
stability to the economic structure which is now impossible.
There is, of course, a limit to consumption of con-
sumer goods, a peak of production where the saturation point is
reached and partial unemployment would result. To meet this
condition we should invoke the principle of rationing the op-
portunity to work. We have learned in time of war that rationing
is cooperation in action, therefore, the available work should
be equitably distributed by jurisdiction over the length of the
work day. We undoubtedly are approaching 8. time when a six-
hour day will replace the eight-hour day, just as the eighto
hour day replaced the longer day.
If this program is supplemented by adequate old age
and disability security laws, a new era of social cooperation
will be born. It will be observed that this plan does not pre-
vent any person from advancing in any industry, trade or pro-
fession. The dollar value will no longer fluctuate within our
borders to the extent that it has in the past, and gold could
still function as a basis of exchange in foreign commerce.
-3-
Treasury Department
Division of Monetary Research
288
Date December 18, 1944
19
TO:
Mrs. McHugh
For your information: On December 15th Mr. White
returned this memo to the Secretary stating there was
some unfinished business he would like to discuss. The
Secretary sent word for Mr. White to request an appoint-
ment and he saw the Secretary about it at 9:30
Saturday morning.
Status of attachments referred to:
1 - Appended
2 - Letter to Secy. of State, signed by Secretary
Morgenthau, dated Dec. 16, 1944.
3 - Letter to Mr. Crowley, signed by the Secretary
Morgenthau, dated Dec. 16, 1944.
4 - Appended (suggested draft, still pending)
5 - Letter to Mr. Frank Lee, signed by Mr. White,
dated Dec. 15, 1944 - copy attached.
6 - Appended
7 - Letter to Judge Patterson, War Dept., signed by
Secretary Morgenthau, dated Dec. 15, 1944.
8 - Letter to Mr. Frank Lee, signed by Mr. White,
dated Dec. 15, 1944, - copy attached.
L. Shanahan
MR. WHITE
Branch 2058 - Room 214-1/2
Treasury Department
Division of Monetary Research
289
Dec. 15, 1944
Date
19
To:
Mrs. McHugh
I have already spoken to the
Secretary about these letters to be
signed by him.
H.D.W.
MR. WHITE
Branch 2058 - Room 214-1/2
Treasury Department
Division of Monetary Research
290
Date December 15, 1944
19
To:
Secretary Morgenthau
Appended is a memorandum of the unfinished
business remaining from the recent Lend-Lease dis-
cussions with the British. I took up with you orally
Items 1, 2, and 3, but we need your decision on Items
4 (on page 3) and 6 (on page 5).
H.D.W.
L.l.v
MR. WHITE
Branch 2058 - Room 214-1/2
Regraded Unclassified
291
December 8, 1944
To:
Secretary Morgenthau
From:
.r. White
Subject: Unfinished Business Remaining fro the Recent
Lend-Losse Discussions with the British
I. Items Requiring Treasury Action or Decision.
1. Reciprocal Aic to U.S. Forces from Australia,
Lealand and India.
8.
r. Acreson's reco mendations on this question,
made in a letter to you on November 25 pursuant
to your request of Rovember 2, are:
(1) That te American Committes accept as
satisfactory the written statements sub-
mitted by te representatives of Australia,
New Zealand ano the Government of India,
outlining the principles under which their
respective Governments will undertake to
continue to furnish reciprocal aid to the
V.S. Forces in Stage II.
(8) That the clauses presently found in the
Joint Reports on the U.K. Ground Army and
Air Frograms whic CO dition Lend-Lease
aid to te ritis on the acceptance by
the U.X. of responsibility for reciprocal
aid throughout the Empire, be eliminated.
(Attachment (1)
.r. Aceson's letter and the accompanying
documents are attached.
b. You will note that Seneral Styer, who represented
the ar Department at the meeting convened by
r. Ackeso, did not agree that the statements
of the Dominion and Government of India re-
presentatives constituted "entirely satisfactory
assurances" and that he continued to press for
more Dositive commitments. Tresumably this is
still the ar Department's position.
(Attachments
C.
Attached for your signature are suggested letters
NOS. 2 and 3)
to Mr. Stettinius and Mr. Crowley transmitting
for their consideration copies of r. Acheson's
recommendations and of the signed statements
submitted by the Dominion and Indian represen-
tatives.
Regraded Unclassified
292
Division of Monetary
Research
- 2 -
(Attachment (4)
d. If the Committee agrees to concur in the
recommendations, Jr. Patterson ano the British
should be SO informed. Attached for your
signature is the draft of a letter to Mr.
Patterson which might be used in case the
reco mendations are accepted without change.
The British could De informed by a note from
Frank Coe to Frank Lee.
2. Lend-Lease to Australia and New Zealand of Aircraft
and Components not Included in U.K. Vunitions Pro-
grams (6260 million).
8. All munitions requirements for the Dominions and
India have been included in the U.K. munitions
programs with the exception of certain air-
craft and components for Australia (200 million)
and new Zealand (860 million which are actually
for the use of the U.S. Command in the area.
The Fr Deyartment is responsible for specifying
the items needed. NO provision covering these
requirements is included in any of the recently
approved programs.
b. Lord Reynes stated in 8. letter to Mr. White on
November 4 that the ar Department, in view
of the many uncertainties that would be involved,
prefers not to attempt any detailed estimates
of its Ste e II requirements in these items at
the resent time unless you or the Committee
specifically request it to do SO. I see no
advanta e in making such a request especially
since Lord Reynes' letter indicates that the
Dominions are under no anxiety about T eir
needs being met.
C. Copies of Lore Keynes' letter were sent to the
ar Department. Col. brownell of r. Lovett's
office has told us verbally he thinks the letter
states the Ter Department's attitude fairly and
should not require any official reply or comment
from the Mar Department at this time. Re
approved of our suggestion that in acknowledging
Lord Reynes' letter we state merely that we have
made copies available to the ar Department and
that we will transmit to the British group any
comments the har Department may have to offer.
Tis AS been done and should close the matter
(Attachment #5)
for the present. Copy of the letter of ack-
nowledgment is attached.
Regraded Unclassifie
293
Division of Monetary
Research
- 3 -
3. Take-Outs of Capital Facilities - 38 million.
a. The British claim that this sum remains to be
paid on certain take-over transactions originally
involving $50 million which were agreed upon in
1942 (see last section of tabulation in
Secretary's letter to Sir Frederick Phillips
September 28, 1942). British claim that this
group of facilities valued at 350 million was
duly transferred but that only $12 million WHS
paid, leaving 38 million owing in accordance
with the 1942 understanding. In the recent
discussions we have admitted the justice of
this claim in principle, subject to question
of valuation.
b. We are taking these transactions up with
officials of the Reconstruction Finance
Corporation and Defense Plant Corporation
with a view to verifying the statement that
payment W.S.S never completed and ascertaining
whether the valuation claimed by the British
is appropriate.
ka Proceeds of Sale of Capital Facilities to Packard
($200,000).
8. Dritis re ort that plant facilities erected
by them at a cost of $4.8 million end operated
by Packard for the war Department have been sold
to Packard for $200,000.
b. The sale was made with the knowledge and con-
sent of both the Treasury and War Departments
in September of this year but at Treasury
request the proceeds were held in suspense.
C. It is for Treasury to decide whether these
proceeds should go to the British or to the
U.S. Government as reciprocal aid.
5. Claims on Certain Contracts Taken Over in 1941
and 1942 but not fully paid for ($1,313,000).
a. Savage Arms ($684,000). Payment of this sum,
representing approximately 50% of the value
of the contract taken over, was, along with
& number of others, held up at the specific
request of the Comptroller General on grounds
Regraded Unclassified
294
Division of Monetary
Research
- 4 -
it NEB tantamount to an advance of funds to
the British forbidden by the Johnson Act.
her Department officials state that Comp-
troller General in recent letter to Secretary
of Tar has rescinded this decision (see copy
(Attachment (6)
attac ed) and that British may expect early
payment by Har Department of this outstanding
sum.
D.
Tennessee rowder Company ($292,000). The
Tar De artment itself withheld this payment
because some aspects of the case were similar
to the Sava e case held up by the Comptroller
General. Reversal of Comptroller General's
decision as above now clears this case and
rr : artment will approach the British with
offer of payment. .ar Department officials
claim that General aray's letter of November 14,
1342 referred to by the British rested on in-
complete survey of facts ano some minor acjust-
ments in amount claimed by the British may be
requested but in principle the claim is allowed.
C. Lina Locomotive Works ($100,000 and (237,000).
for Department officials say they can see no
reason way the 100,000 representing 50% of
tue value of one set of spare parts cannot be
paid 85 soon as actual delivery of the spares
is complete ES this is in accordance with the
terms of the contract -- 50 paid in advance
and 50% upon delivery of the 2008. These
officials, however, know nothing about the
British claim for an acditional 237,000 for
extra sets of spare parts said to have been
delivered 113 no provision for this appears
in the contract. They suggest We rite the
Var Department asking that the Britis claim
be investigated.
(Attachment (7)
d.
Attached for your signature is 8. suggested
letter to Ar. Patterson on the Lima Locomotive
claim and ti, suggested letter from me to Frank
tackment (8)
Lee to inform the British of the status of all
three of the above claims.
Regraded Unclassified
295
Division of Monetary
Research
- 5 -
6. Diversions to Russia ($18.7 million).
a.
Dostons to U.S.S.R. for which N.K. paid
dollars; in their view have not been re-
placed by s.s. - 812.5 million.
b.
right engines purchased by U.K. for dollars,
and diverted to U.S.S.R. to fill U. S. com-
mitment - 34.0 million.
C. Powder for which U.K. paia dollars, shipped
to D.S.S.R. for U.S. account - 32.2 million.
The last two claims above, totalling 36.2 million
were tentatively a proved by the Foreign Economic
Adrinistration out the Foreign Economic Adminis-
tration failed to approve the 12.5 million claimed
for Le diversion of Bostons. I see no reason why
all three claims should not be treated alike.
There is now some feeling, however, that all three
of these claims are, by implication, ruled out
on the same _rounds that !r. Lovett used in re-
fusing to accept t.e claim of 8250 million for
aircraft taken over by the T.S. If you think it
advisable we will take to these claims with the
war sourtment in an effort to obtain a definite
decision.
7. Machine Tools ($26 million to 642 million). There
are two claims here, one for the present capital
value ($8 million at Cleyton formula rates) of
machire tools which it is pro osed we purchase
from the British, one the other for & sum of
from 418 million to 36 million (depending on
rate allowed) for rental on the past use of
W.M.-owned machine tools regardless of ultimate
disposition.
The British have still not furnished the details
on these claims promised at the meetin November 27.
Mr. Goschen informed us a day or two ago that de-
tails on the oß million claim would be furnished
by December 9 but that it would be very difficult
to assemble in memorandum form all the relevant
data on the rental claim. They will attempt this,
however, and enson will come over this week or
early next week to discuss it with us in detail.
A decision cannot be given until more information
is available.
Regraded Unclassifie
296
Attachment #1
297
Regraded
November 25, 1944.
My dear Mr. Secretary:
In accordance with your request at the combined
meeting with the British group on lend-lease matters of
November 22, 1944, there took place in my office the
same afternoon a meeting to resolve the problem of
reciprocal lend-lease aid to our armed forces from the
British Dominions. There were present at the meeting,
among others, Lord Keynes and Mr. Brand representing the
United Kingdom, Senator Keane and Messrs. Moore and Dunk
representing Australia, Mr. Reid of New Zealand, Mr.
Symon representing the Government of India, Lt. Gen.
Styer and representatives of the State and Treasury
Departments and the Foreign Economic Administration.
Senator Keane and the other Australian representa-
tives presented forcefully their position as already set
forth in their memorandum of November 20 which has been
circulated in mimeographr-form. Mr. Reid of New Zealand
expressed himself as concurring fully with the position
taken by his Australian colleagues and indicating that
within the limits of the supply possibilities of New
Zealand his Government would certainly make available
materials to our armed forces as in the past with no
serious problem of geographical destination. Mr. Symon.
read instructions from the Government of India indicating
its intention to continue reciprocal lend-lease aid to
the utmost, limited only by the very pressing supply and
transport problem which now exists in India.
General Styer expressed himself as very pleased with
the actual performance under reciprocal lend-lease,
especially in the case of Australia to which the meeting
was primarily devoted, but stated that as the scene of
operations
The Honorable
Hensy Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D.C.
COPI
298
- 2 -
Regraded Unclassified
operations moves out of the South and Southwest Pacific
areas the Army was desirous of obtaining assurances that
the reverse lend-lease aid would continue. The Army
therefore continued to press for a new understanding on
this point in writing.
Subsequent discussions brought out that the Australian
position as indicated in the document referred to above
would in fact solve at least 99 per cent if not 100 per
cent of the problem and at my request the representatives
of Australia, New Zealand, and the Government of India
agreed to furnish signed memoranda reiterating their posi-
tions (copies of these memoranda are attached). In view
of these entirely satisfactory assurances from Australia,
New Zealand, and the Government of India I indicated that
I would recommend to your Committee their acceptance, and
the elimination as a condition to lend-lease aid of para-
graph 10 of the Joint Report on Army Ground Items and the
parallel paragraph 11 of the Joint Report on Air Items.
Sincerely yours
DEAN ACHESON
Dean Acheson
Assistant Secretary
Enclosures;
Mamoranda from representatives
of Australia, New Zealand, and
Government of India.
FMA :EGC sdb
11/23/44
299
INDIA SUPPLY MISSION
635 F STREET, N.W.
WASHINGTON, D. C.
24th November 1944.
TELEPHONE - EX 5484
Dear Mr. Acheson,
In accordance with the request which you made during
the discussion in your room on 22nd November, I write to
confirm that the Government of India will continue to
furnish Reciprocal Aid during Stage II on the same basis
as hitherto. It will be appreciated, however, that the
actual extent of such aid will depend on a number of
factors including the availability of supplies and the
strength of the military forces located in or near India.
I should also like to emphasise the view of the
Government of India that India's real resources (labour,
food, transportation, coal, raw materials, etc.) are
already over-mortgaged and that in consequence deliveries
against existing supply programmes are already behind.
The quantum of Reciprocal Aid which can be made
available hereafter must necessarily be conditioned by
these factors. Nevertheless, as stated above, within the
limits of India's resources the Government of India will con-
tinue to furnish the requirements of the United States under
Reciprocal Aid on the basis already in force and subject to
similar conditions as to availability of supply and transport.
Yours sincerely,
ACB SYMON
Mr. Dean Acheson,
Department of State,
Washington, D.C.
ACBS/df
Regraded Unclassified
300
TOP SECRET
NEW ZEALAND LEGATION
WASHINGTON 8, D. C.
24th October, 1944.
Dear Mr. Acheson,
Confirming the discussions on Reciprocal Aid in
Encl.
Stage II in your office this week, I enclose a note
setting out New Zealand's attitude on this subject.
Yours sincerely,
JOHN S. REID
First Secretary
Dean Acheson, Esq.,
Assistant Secretary of State,
WASHINGTON, D.C.
Regraded Unclassified
301
TOP SECRET
RECIPROCAL AID - NEW ZEALAND
In terms of a note of 3rd September, 1942, and an
exchange of letters of 15th December, 1943, the Government
of New Zealand undertook to provide supplies to the Armed
Forces of the United States in the South Pacific area
by way of Reciprocal Aid. Provision was made in these
documents for special conditions to apply to supplies made
available for areas outside the South Pacific, but no such
conditions have in fact been imposed, and though in the past
New Zealand supplies have generally been confined to the
South Pacific area, in actual practice substantial quantities
of foodstuffs and other supplies have been provided for
other areas. So long as New Zealand continues to be the
mos t practical source of supply for foodstuffs and other
appropriate commodities, the New Zealand Government will
continue to further the common war effort, by accepting
requisitions for supplies for United States forces in any
part of the Pacific or in adjacent areas involved in the war
against Japan.
It will be understood that the ability of New Zealand
to meet such requisitions is dependent upon its capacity to
do 80 and in particular upon (a) its obligations and
responsibilities in other areas; for example, the provision
of foodstuffs for the United Kingdom, and (b) upon the con-
tinued availability of Lend-Lease supplies from the United
States to an extent essential to the maintenance of pro-
duction without undue straining of the Dominion's resources.
Regraded Unclassified
302
NOTE ON AUSTRALIAN RECIPROCAL AID
1. The U.S. Authorities have requested that Australia should
undertake to supply goods and services as reciprocal aid without
geographical limitation.
2. The present position is that the Reciprocal Aid Agreement
of 3rd September, 1942 between the Australian and United States
Governments provides that Australia will furnish assistance,
on reciprocal aid terms, to the U.S. forces in Australia or
its territories. Notwithstanding the terms of this Agreement, the
Australian Government have not, in practice, confined their
reciprocal aid within this geographical limit: they have from
time to time furnished considerable reciprocal aid to U.S.
forces outside Australian territory, particularly to those in
the South Pacific and latterly in Hollandia.
3. Australia is providing, as reciprocal aid to the U.S.
forces, goods and services to the value of about 20% of
her current war expenditure, with heavingonsequential sacrifices
to the population. These burdens, additional to those imposed
by Australia's own war effort, have been spontansously and
willingly accepted, and the U.S. Theatre Commander in the
area has expressed himself as being well satisfied with the
scale of the reciprocal aid.
4. The Australian Government do not feel able to agree that
the terms of their existing reciprocal aid undertakings to the
U.S. Government should be revised in such & manner as to impose
no limitation upon the amount or upon the area of such aid.
They are, however, prepared, within the terms of their
Regraded Unclassified
303
- 2 -
reciprocal aid undertakings, to continue to supply to the U.S.
Regraded
forces as reciprocal aid, within locally accepted programmes,
the categories of goods and services which they now furnish.
They would also agree that, where for strategic reasons it is
necessary to transfer to other theatres supplies which have
already been provided to the local U.S. Command, no objection
should be raised to the transfer.
5. In addition, the Australian Government are willing,
as at present, to examine any further requests, including
those for additional areas, which may be made by the U.S.
authorities, having full regard to the availability of supplies
and to their responsibilities in other directions. They suggest
that requests for the provision of supplies, on reciprocal aid
terms, for areas outside their existing undertakings, should
continue to be referred to them for consideration. They do not,
however, think it appropriate that the U.K. Government should
be called upon to undertake responsibility for the provision
of reciprocal aid throughout the British Commonwealth. They
accordingly propose, with the concurrence of the U.S. representa-
tives in Washington, that in cases where the Australian Government
feel unable to meet such requests, the question of the financial
responsibility be jointly discussed between the Australian,
the U.S. and the U.K. authorities.
6. If these proposals are acceptable to the U.S. authorities,
it is suggested that the detailed arrangements should be
settled by joint discussions between representatives of the
Governments concerned.
Washington, D.C. , 20th November, 1944.
304
Attachment #4
305
This suggested letter to be used when and
if we have favorable reply from other
members of the Committee.
DRAFT
Honorable Robert Patterson
Under Secretary of War
U. S. War Department
Washington, D. C.
Dear Mr. Patterson:
There is enclosed a copy of the recommendation
concerning reciprocal aid for our armed forces, which
was made by Dean Acheson to the American Committee. We
understand that the recommendation emerged from a number
of inter-departmental conferences on this matter and a
good many discussions with the British, the representa-
tives of the Dominions and the Government of India.
The Committee has accepted this recommendation
as representing the best solution of the problem which
can be achieved at this time.
Sincerely yours,
Secretary of the Treasury.
Enclosure
Regraded Unclassified
306
Attachment 5
00
5.
307
DEC 15 1944
Dear Mr. Les:
In Lord Keynes' absence I am writing you in acknow-
ledgment of his letter to no of November 24 concerning
the fact that no approved program has been drawn up for
the lend-lease to Australia and New Zealand of aircraft
and components required for the use of the U.S. Command
in that theater.
I note Lord Keynes' statement that the U.S. War
Department prefers, in view of the many uncertainties
that would be involved, not to attempt any detailed
estimates of its Stage II requirements in these items
at present and proposes to take no further action in
the matter at this time unless Secretary Morgenthau
advises that it would be desirable to do 80. I note
also that the Demision representatives express no
anxiety about their needs not being met and are
apparently content, therefore, with the decision which
Lord Keynes reports, the Mar Department to have taken.
Copies of Lord Keynes' letter have been made avail-
able to the War Department and I shall forward to you
any comments that Department may have to offer on the
points Lord Keynes has raised.
Very truly yours,
(Signed) H. D. White
H. D. White,
Assistant to the Secretary.
Mr. Frank Lee,
United Kingdom Treasury Delegation,
Box 680,
Benjamin Franklin Station,
Washington, D.C.
LWC:rl 12/7/44
Regraded Unclassified
308
Attachment #6
309
COMPTROLLER GENERAL OF THE UNITED STATES
WASHINGTON 25
November 11, 1944
B-23634
The Honorable,
The Secretary of War.
My dear Mr. Secretary:
There has been considered your letter of August 11, 1944,
requesting review of the exceptions taken by this office in the
audit of payments made on vouchers Nos. 832, DA-6435, and DA-9595,
June, November and December, 1942, respectively, accounts if I. S.
Werman, covering reimbursement to the Savage Arms Corporation for
raw materials, materials in hands of subcontractors, and finished
parts, used in connection with the performance of cost-plus-a-fixed-
fee contract No. DA-W-478-OFD-70, dated October 14, 1941.
In view of the factual background of the matter as reported in
your letter, I have today issued instructions for the allowance of
credit on the vouchers involved.
Respectfully,
/s/ Lindsay C. Warren
Comptroller General
of the United States.
COPY
Regraded Unclassified
310
Attachment 8
311
DEC 15 1944
Dear Mr. Lee:
This is in reply to your note, which I received on
December 1, giving further details on certain of the miner
claims which were included in the items in Chapter III of the
U.K. case and requesting our early consideration and con-
clusions.
To have been discussing the first three of these claims
with the Har Department and have made some progress toward
settlement as follows:
1. Savare Areas ($684,000). Mar Department officials in-
form us that in response to a Mar Department request the U.S.
Comptroller General has reconsidered his earlier action in with-
holding approval of this and certain similar payments and has in-
formed the Secretary of Mar in a letter dated November 11, 1944
that such payments may now be made. Accordingly, we are told,
your people way expect to hear from the Har Department at an
early date concerning final settlement of this outstanding claim.
2. Tennessee Powder Company ($292,000). Although not
specifically disallowed by the Comptroller General, payment of
this claim is said to have been hold up voluntarily by the War
Department pending clarification of the Comptroller General's
disallowance of the Savage payment. Now that the latter has
been cleared as noted above, War Department offisials state
steps will now be taken to settle the Tennessee claim. They
add, however, that General Hardy's letter of November 14, 1942
to which you refer, rested upon an incomplete survey of the
facts and that, accordingly, the Mar Department say seek to
negotiate with your people for certain minor adjustments in the
amount claimed.
3. Lima Locomotive Works (8337.000). Our discussions of
this claim with the Har Department have thus far been incon-
clusive because certaingrecords pertaining to the case are not
available in Washington. Tentatively, lar Department officials
feel there should be little difficulty concerning the $100,000
claimed to be due on the one complete set of spares, as set
forth in your note, but are uncertain as to the additional claim
for $237,000. He have asked the Mar Department to make an in-
ceived. vestigation and we shall inform you as soon as a reply is 10-
Regraded Unclassified
312
- 2 -
40 Packard Motor Company ($200,000). No expect to reach a
decision on this request soon and I shall inform you in a separate
note as soun as this has been done.
Other items W discussed at the meeting in my office on
November 27 are still under consideration. I shall let you have
our decisions concerning them as promptly as possible.
Very truly yours,
(Signed) H. D. White
H. D. White,
Assistant to the Secretary.
Mr. Frank Lee,
United Kingdom Treasury Delegation,
Box 680,
Benjamin Franklin Station,
Washington, D.C.
LEC:rl 12/8/44
Regraded Unclassified
K-001
UNITED KINGDOM TREASURY DELEGATION
BOX 680
BENJAMIN FRANKLIN STATION
WASHINGTON, D.C.
EFERENCE
TELEPHONE EXECUTIVE SOED
18th December, 1944
Dear Dr. White,
I am writing to send you the figures for our gold and
dollar holdings in million dollars at 31st October, 1944 which
were as follows:
Gold
1719
Less Gold Liabilities
331
Net Gold
1388
Official Dollar Balances
509
Less Dollar Liabilities
153
Net Dollars
356
Net Gold & Dollars
1744
The above net figure, taken in isolation, appears to
indicate a stronger position than was anticipated when the U.K.
case was communicated to you in the course of the present nego-
tiations. But it should be explained that the main reason why
the figure is as high as 1744 is that certain substantial liab-
ilities-such as the payments due for current tobacco purchases,
certain U.S. dollar payments to be made to Canada and the con-
version of surplus Australian notes held by the U.S. forces--
which were expected to be met in the period up to the end of
October were in fact still outstanding at the end of that month.
Yours sincerely,
R. H. Brand.
Dr. H.D. White,
Ass't to the Secretary,
U. S. Treasury,
Washington, D. C.
DFMcC/acs
Regraded Unclassified
314
TOP SECRET
DEPARTMENT OF STATE
WASHINGTON
December 18, 1944
MEETING WITH SECRETARY MORGENTHAU
1. Treatment of Germany.
The President has given his approval to
certain phases of the program for the post-war
treatment of Germany, such as the demilitariza-
tion of Germany and the dissolution of the Nazi
Party.
In addition, the President has before him
a memorandum on the economic treatment of
Germany. He has informed the Department that
he favors restitution of looted property, that
he believes German industry should be permitted
to provide for German needs but not to produce
goods for export, and that he opposes reparations.
State, War, and Navy have recently been work-
ing on a revised edition of JCS 1067 for presenta-
tion to the EAC, which will be shown to Secretary
Morgenthau before transmittal to London.
Certain directives have been forwarded to
the EAC for discussion.
Memorandum attached.
2.
Regraded Unclassified
315
TOP SECRET
-2-
2. Financial Policy Board.
The Department of State proposes the estab-
lishment of the following committees:
(a) Cabinet Committee - a Committee
composed of the Secretary of the Treasury,
the Chairman of the Board of Governors of
the Federal Reserve System, and the Chairman
of the Export-Import Bank of Washington,
under the chairmanship of the Secretary of
State.
(b) Working Committee - a working-level
committee under the chairmanship of the
Treasury Department representative, and with
representatives of State, RFC, FEA, and the
Export-Import Bank. In addition there might
be observers from other interested agencies.
(c) Participation of other agencies -
Provision should be made for the participation
of interested agencies on both committees.
(d) Functions - The foreign financial
policy board would be established by executive
order and would formulate recommendations
regarding the International Monetary Fund
and the International Bank for Reconstruc-
tion and Development, as well as on general
foreign financial policy.
Memorandum attached.
Regraded Unclassified
316
Attachment
No. 1
TOP SECRET
DEPARTMENT OF STATE
WASHINGTON
December 16, 1944
MEMORANDUM
Subject: Developments in Planning for the
Occupation of Germany.
On October 1, 1944 Secretary Hull gave the President
a memorandum respecting American policy for the post-war
treatment of Germany. This memorandum summarized the
status of the negotiations in the European Advisory Com-
mission and listed the important problems for which high
policy decisions must be worked out by the three gov-
ernments. These problems include: Demilitarization of
Germany; dissolution of the Nazi Party in all its ramifi-
cations; controls over communications, press, propaganda
and education; and, primary and continuing economic
objectives which are to render Germany incapable of waging
war and to eliminate permanently German economic domina-
tion of Europe. A recommendation was also included that
no decision should be taken on the possible partition of
Germany at this time.
The President replied to this memorandum under date
of October 20, 1944 in which he agreed with many of the
points mentioned and requested further discussion with the
State Department on others. The State Department has con-
sequently submitted several additional memoranda to the
President, particularly with reference to our economic
objectives. The President has subsequently informed the
State Department that he is in favor of restitution of
looted property of all kinds and that Germany should be
allowed to "come back industrially to meet her own needs
but not to do any exporting for some time until We know
better how things are going to work out". The President
also expressed himself as being opposed to reparations.
Regraded Unclassified
317
-2-
In the meantime, the State, War and Navy Departments
have prepared a revised edition of JCS 1067 for presenta-
tion to the European Advisory Commission. Ambassador
Winant will be instructed to seek agreement on this direc-
tive as a general policy guide for the military government
during the initial phase of occupation subsequent to
German surrender or defeat. Mr. McCloy of the War Depart-
ment intends to show this revised directive to the
Secretary of the Treasury before it is transmitted to
London. In the meantime, a number of directives on partic-
ular subjects, approved by the State, War and Navy Depart-
ments and by the Joint Chiefs of Staff, have been trans-
mitted to London and submitted to the EAC for discussion
there. A list of these approved directives is attached
hereto.
Regraded Unclassified
318
LIST OF APPROVED DIRECTIVES TRANSMITTED
TO THE AMERICAN REPRESENTATIVE ON THE
EUROPEAN ADVISORY COMMISSION.
1. Control of merchant shipping subsequent to surrender.
2. Securing and examining information in archives.
3. Control and disposal of nationals, armed forces and
property of enemy countries other than Germany.
4. Administration of Justice.
5. Religious affairs.
6. Disposition and control of German police.
7. Primary disarmament of German armed forces subsequent to
surrender.
8. Control of public information in Germany.
9. Control of inland transport.
10. Elimination and prohibition of military training in Germany.
11. Control of post, telegraph and telephone service in Germany.
12. Censorship of civilian communications in Germany.
13. Disposition of German or German-controlled aircraft,
aeronautical equipment and facilities.
14. Disposition of German and German-controlled naval craft,
equipment and facilities.
15. Control of works of art and monuments in Germany.
16. Disposal of German armed forces.
17. U.S. directive of proclamations and general orders for
Germany.
319
Attachment
No. 2
SECRET
DEPARTMENT OF STATE
WASHINGTON
MEMORANDUM FOR CONVERSATION WITH
THE SECRETARY OF THE TREASURY
1. Essential documents relating to interdepart-
mental organization to deal with foreign financial
policy are the President's memorandum of August 21,
1944 to the Secretary of State, the Secretary's reply
of September 26 which was approved by the President,
the proposal of the ECEFP secretariat for a financial
section of the ECEFP (all contained in ECEFP D-83/44,
November 29, 1944), and the "Preliminary Draft for
Discussion of U.S. Technical Committee" of legislation
to put the Bretton Woods proposals into effect, circu-
lated by the Treasury on December 6.
2. The Department would propose the following
organization to deal with the various policies, pro-
grams, and operations in this field:
A. A foreign financial policy board consist-
ing of the Secretary of State, chairman, the
Secretary of the Treasury, the Chairman of the
Board of Governors of the Federal Reserve System,
and the Chairman of the Board of Trustees of the
Export-Import Bank of Washington.
B. A working committee under the chairman-
ship of the Treasury representative and consti-
tuting a financial section of the ECEFP, much as
proposed in D-83/44 of November 29, 1944.
C. A
Inclassifie
320
SECRET
-2-
C. A joint State-Treasury secretariat, in
close touch with the ECEFP secretariat.
D. Provision for calling in representatives
of other interested agencies at either the Cabinet
or working committee level. Thus the R.F.C. would
be brought in if a problem of R.F.C. foreign
financing such as the proposed $300,000,000 credit
to the Netherlands arose. Or the SEC would be
consulted with respect to foreign bond flotations
in this market, and market operations of the Inter-
national Bank for Reconstruction and Development.
E. Provision for liaison between the finan-
cial organization--both the Cabinet and working
committees--and the general section of the ECEFP
should be as described in D-83/44.
F. The functions of the foreign financial
policy board would include the formulation of
recommendations to the responsible agencies con-
cerned and, in appropriate cases, to the President,
regarding:
(i) Policies for guiding the foreign finan-
cial operations of the United States Government
agencies.
(ii) General directives for the guidance
of American representatives on international
financial agencies such as the International
Monetary Fund and the International Bank for
Reconstruction and Development or any interim
financial groups or consortia in which this
Government may participate pending establish-
ment of the Fund and Bank.
(iii) Coordination of the foreign finan-
cial activities of government agencies relating
to monetary stabilization, foreign funds
control,
321
SECRET
-4-
to in Section 7 of the Treasury's "Preliminary
Draft".
H. The Foreign financial policy board should
not attempt to pass on individual financial trans-
actions of national or international agencies ex-
cept in so far as it may be necessary to do so to
carry out the policy functions indicated in (F) and
(G). Such transactions would continue to be carried
out by the responsible agencies.
3. The Department would recommend that such organi-
zation with the general functions listed in 2(F) be estab-
lished at once by executive order and that the proposed
legislation relating to the Bretton Woods proposals formal-
ize the organization and confer upon it the additional
specific functions listed in 2(g).
4. In connection with the above recommendations,
the Department emphasizes that foreign financial policy
is an integral part of foreign economic policy and that
the Bretton Woods agreements, especially that for the
Fund, are in large measure commercial policy undertakings,
as the Treasury has so forcefully brought out in its pub-
lic presentation of the matter. The Department recognizes
the importance of the relationship of foreign financial
operations to the domestic credit situation (a problem of
special significance in connection with borrowings by the
Fund and Bank in this market) and believes that the com-
position of the proposed board is nicely balanced in this
respect. Moreover, it has suggested that the approval of
the United States required for certain acts or the Fund
and Bank be by the proposed board with the approval of the
President which would give any agency an opportunity to
present fully any domestic considerations which might re-
late to action which the board might propose to take on a
foreign economic policy basis.
Regraded Unclassified
372
SECRET
-3-
control, lend-lease, financial problems in
military and liberated areas, procurement
contract settlements, and extension of credits,
including those arising in connection with the
disposal of surplus war property.
(iv) Coordination of United States for-
eign financial activities with those of inter-
national financial organizations in which the
Government participates and also with domestic
fiscal policy.
(v) Policies in respect of private invest-
ment abroad.
(vi) Financial aspects of foreign economic
policy referred to it by the General Section of
the ECEFP.
G. With respect to the International Monetary
Fund and the International Bank for Reconstruction
and Development the foreign financial policy board
would:
(i) Make recommendations to the President
regarding the appointment, reappointment, and
removal of United States governors, executive
directors, and their alternates.
(ii) Lay down general policies for the
guidance of the governors, executive directors,
and their alternates.
(iii) Receive regular and full reports
from the governors, executive directors, and
their alternates and make a continuous review
of their activities.
(iv) Give, with the approval of the Presi-
dent, the approval of the United States referred
to
Regraded Unclassifie
323
SECRET
December 18, 1944
No. 988
The Honorable
Robert McGregor Scotten,
American Ambassador,
Quito.
Sir:
Reference is made to the Embassy's despatch no. 2323 of November 7,
1944 transmitting the text of a communication addressed to you by the Ecua-
doran Ministry for Foreign Affairs regarding certain difficulties encoun-
tered by the Ecuadoran Government in its efforts to extend protection to
certain persons in German-held territory who are in possession of documen-
tation reflecting & right of protection by the Ecuadoran Government.
The Department and the Mar Refugee Board have noted with some concern
that the Ecuadoran and Swiss Governments have 50 far been unable to find
a satisfactory formula whereby to extend adequate protection to the persons
referred to. It is hoped that efforts to this end will continue until a
successful outcome is assured. for your confidential information there is
attached & copy of a secret telegram to the American Legation at Bern in
which the Ear Refugee Board requested its representative at that post to
discuss the problem with the appropriate Swiss officials.
It appears that the Ecuadoran Government has not taken into account
the danger to which undoubted Ecuadoran nationals are exposed if the
German authorities are given any grounds for believing that the Ecuadoran
Government will not resist German efforts to determine for German purposes
which passports issued in the name of the Ecuadoran and other foreign
governments are to be accorded recognition. Of interest in this connection,
there is attached for the information of the Lubassy a copy of instruction
no. 3506 August 30, 1944 to the Embasay at Lima, the substance of which
may be conveyed to the Ecuadoran authorities. Since the date of this
instruction the Department has learned of additional cases in which the
German Government in its mistaken effort to distinguish between bearers of
United States passports has apparently done away with undoubted United
States nationals.
It is the feeling of the Department and of the War Refugee Board that
at & time when the lives of undoubted Leuadoran nationals and of other human
beings who may happen to be in possession of Ecuadoran passports are greatly
in danger, an unyielding interpretation of the strictest meaning of legal
terms may not be what the Ecuadoran Government after due consideration will
wish to establish as its policy. In these circumstances and in this
light the Ecuadoran authorities should be urged to consider the possibility
of instructing the Protecting Power to renew the validity of all passports
issued in the name of Leuador which are held in enemy territory by pros-
pective victims of enemy persecution and to accord all such individuals
protection.
Regraded Unclassified
324
- 2 -
Furthermore, when bearers of Ecuadoran passports are released
by the Allied forces, it is the War Refugee Board's opinion which
the Department shares that the individuals concerned should be
carefully examined by an appropriate delegate of the Ecuadoran
Government and that the act of invalidation of passports found to be
illegally held should be accomplished with the least possible
publicity and at the latest date possible in order that no such action
may jeopardize the safety of holders of similar documentation
who remain under enemy control. In this connection there is
attached for the Embassy's information and for communication
of the substance thereof to the appropriate Ecuadoran authorities
a copy of telegram no. 10936 from the American Embassy at London
of December 9, 1944.
Very truly yours,
For the Secretary of State:
/s/ DEAN ACHESON
Enclosures:
1. To American Legation, Bern
December 9, 1944.
2. To American Embassy, Lima,
August 30, 1944
3. From American Embassy, London,
December 9, 1944.
Regraded Unclassified
325
DMH-1207
Vatican City
This telegram must be
paraphrased before being
Dated December 18, 1944
communicated to anyone
other than a Government
Rec'd 2:18 p.m.
agency. (RESTRICTED)
Secretary of State
Washington
408, December 18, 4 p.m.
My 393, December 1 regarding deportation of Jews
from Slovakia.
Vatican under date of December 16 transmits report on
subject dated December 5 from Slovak Government of which
following is substance:
The German military authorities began deporting from
Slovekia in October 1944 the Jews who had been assembled by
the Slovakian authorities in labor camps in Slovakia. In ad-
dition they deported Jews with American passports who had been
residing in the Marianka Castle near Bratislava. When the Slavic
Government protested against these measures, the Germans replied
that the Jews in Slovakia, after having obtained arms from the
partisans, attacked German soldiers with these arms and since
Slovakia is becoming the battlefield (according to the Germans)
a group of persons who would take up arms again to fight against
the Germans when 8. favorable occasion arises cannot be allowed
to remain on this territory. As for the Jews with American
passports, the German authorities have indicated that all these
Jews will be exchanged against Germans. Until the arrival of the
Germans from the United States, the Jews are being detained on
German territory where naturally they will be treated in & proper
(convenable) manner. The report from the Slovak Government ends
with the statement that at the time of writing, the representative
of the International Red Cross committee is in Bratislava and can
see for himself what the situation is.
TAYLOR
LMS
Regraded Unclassified
326
DSH-1289
Lisbon
Distribution of true
reading only by special
Dated December 18, 1944
arrangement. (SECRET-W)
Red'd 6:17 p.m.
Secretary of State,
Washington.
4236, December 18, 5 p.m.
WRB 277, JDC 139 FOR AZAVITT FROM PILPEL
Schwartz asks for million monthly Switzerland
instead of remittance 750. Further in reference
our 138.
Please nake addition of 200 monthly for
unliberated Poland.
NORWEB
JT
Regraded Unclassified
327
TR-1320
Stockhelm
Distribution of true
reading only by special
Dated December 18, 1944
arrangement. (SECRET-W)
Rec'd 7:46 p.m.
Secretary of State
Washington
5167, December 18, 5 p.m. (SECTION ONE OF TWO)
114 FOR WRB
Summary of Trammael - Evenson repert for the month of November on
Norwegian operations fellows:
Expenditures for the month were approximately 292,000 Swedish kroner
for clothing. fectwear, food, licensing of packages and refugee transpor-
tation, and 133,000 Norwegian kroner. 559 licensed packages with about
6,625 kg of food, 750 kg of clothes and 250 kg of footwear were sent.
Also 22,000 kg of various foodstuffs and a number of other commedities
were sent in a (UNDERSCORE) different way (END OF UNDERSCORING). The
Nervegian krener were sent for various purposes and to different districts
in Norway. Necessary equipment of clothes, bedclethes, food, money
et cetera have been placed at dispesal of crews on beats as previously.
JOHNSON
JT
Regraded Unclassified
328
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Legation, Steckholm
TO:
Secretary of State, Washington
DATED:
December 18, 1944
NUMBER:
5167
CONFIDENTIAL
Refugees numbering about 800 have arrived over the routes which
the Committee maintains. Money has been placed at the dispesal of
refugee relief in the northern districts since the situation in the
northern part of Nerway has become so acute.
Since the Committee has received no new contributions during
November and all available funds have been contracted for, it is felt by
the Committee that if it could be sure of a certain amount each month
activities could be expanded since distress among families of prisomers,
refugees and these ferced to evacuate is on the increase. The Committee
desires to have-these views communicated to the American Relief for
Nerway, Inc., and they ferward at the same time their heartiest thanks
for the confidence and great economic support which has 80 far been
given.
We are sending by pouch a full report regarding this.
JOHNSON
DCR:IDB:MLM
12-20-44
Regraded Unclassified
NOT TO BE RE-TRANSMITTED
329
COPY NO.
4
SECRET
OPTEL No. 408
Information received up to 10 a.m., 18th December, 1944,
1. NAVAL
GREECE. On 15th and 16th one of H.M. Destroyers and a mine-
sweeper supported the evacuation of British troops from Krioneri,
Gulf of Patras. One of H.M. Canadian Frigates and Corvettes yester-
day claim a hit in an attack on a U-boat off Cork Harbour,
2, MILITARY
WESTERN FRONT. No appreciable change in Colmar Pocket. U.S.
Seventh Army has crossed German frontier in a number of places in the
general area Lauterbourg and Wissembourg as has also U.S. Third Army
east of Sarreguemines. Germans have heavily counter attacked U.S.
First Army along whole front from Trier to as far north as Linnich,
main weight appears directed eastwards on Malmedy area. Enemy
troops had penetrated to within 3 miles of that town by 4 p.m. 17th.
ITALY. Indian and New Zealand troops have cleared the area
south of Highway 9 and east of River Senio and contact with enemy
established along railway which runs parallel to and north of Highway
between Faenza and the Senio. Faenza itself not yet clear of enemy.
GREECE. Since defeat of large scale ELAS attacks in centre
of Athens on 13th and 14th activity there has been on reduced scale.
troops aided by reinforcements from Italy have made progress in
tearing Piraeus and on 16th liquidated an important ELAS strongpoint
werlooking Phaleron Bay. ELAS now control majority of rest of
preece where state of acute tension and unrest prevails.
BURMA. Our forces have occupied Pinlebu, 14th Army troops
advancing from Chindwin have linked up with our forces operating
from the north along the Myitkyina/Mandalay railway in area Od Katha.
3
AIR
WESTERN FRONT. 16th/17th. About 92 enemy aircraft dropped
parachute troops behind the Allied lines in Forest area Northeast
Salmedy. Unconfirmed reports state 23 aircraft destroyed by A.A. and
di probably destroyed.
17th. 251 fighters and fighter bombers (3 missing) scored
11,0,3 over northern battle area. 1117 U.S. aircraft over Central
Battle area met about 235 German aircraft of which 96 claimed des--
troyed, 9 probably and 46 damaged. Over 250 railway rolling stock,
100 motor transport and 30 armoured vehicles reported destroyed or
(emaged. 31 U.S. aircraft not returned but 5 believed landed in
Allied territory. 500 aircraft (3 missing) operated successfully
over southern sector.
17th/18th. Bomber Command sent out 1306 aircraft: Duisburg -
523, Ulm - 330, Munich - 289, other tasks - 164. Ten missing. From
incomplete reports: Munich - clear weather, good concentration; Ulm:
some cloud, good sky marking and attack appeared satisfactory; Duis-
ourg: no reports yet available.
MEDITERRANEAN. 16th. 549 escorted U.S. heavy bombers (13
Missing) attacked Brux oil plant - 603 tons, Pilsenskoda works - 164
and Innsbruck railway centre - 208. Results unobserved. 157 bombers
and fighters attacked concentrations motor transport along roads N.E.
Podgorica with good results. 646 fighters and fighter bombers (1
Masing) operated over battle areas.
4.
HOME SECURITY
To 7 a.m. 18th, Late afternoon 17th 1 rocket. During night
tckets, Between 4 a.m. and 6 a.m. about 60 flying bombs plotted.
Regraded Unclassified