Volume 267, May 28 – May 31, 1940

DIARY Book 267 May 28 - 31, 1940 - A - Book Page Agriculture See War Conditions Appointments and Resignations Collins, Harry E. (Captain): HMJr's letter of appreciation at time of resignation - 5/28/40 267 83 - B - - Boats See Mar Conditions: Ships Bolivia See Latin America - C - Carnegie-Illinois Steel Corporation Federal Bureau of Investigation acknowledged - 5/29/40 280 Collins, Harry E. (Captain) See Appointments and Resignations Currie, Lauchlin See har Conditions: Airplanes - D - - De la Grange, Baron "Persona non grata" at White House and Treasury - - 5/29/40 177 Denmark Federal Bureau of Investigation report on Norwegian and Danish commercial shipping acknowledged - 5/29/40 280 Dodge Automobile Company Federal Bureau of Investigation report (attached) acknowledged - 5/29/40 280 - E - Electric Boat Company See War Conditions: Bosts - F - Financing, Government Debt Limit Increase: See Revenue Revision 6/15/40: "Setting for the June Financing": Huns memorandum - 5/29/40 270 Supplement on page 125 of Book 268 Regraded Uclassified - F - - (Continued) Book Page Ford, Edsel See har Conditions: Airplanes France See War Conditions: Airplanes (Engines); France Frank, Jerome Speech "In Time of Mar, Prepare for Peace" discusses financing current armament expenditures - 5/29/40 267 286 Freight Shipments Haas memorandum - 5/29/40 248 - G - Gold See War Conditions; Latin America: Bolivia Great Britain See War Conditions - I - International Nitrogen Corporation - Oalo, Norway See War Conditions: Norway Italy See War Conditions - L - Latin America Stabilization Fund use in giving financial assistance to various countries suggested by Welles 311 a) HMJr's answer - 5/30/40 309, Bolivia: Gold: Various cables concerning gold transferred to Federal Reserve Bank of New York by Chase National Bank, London, in name of Banco Central de Bolivia - 5/31/40 445 a) Bolivian Minister protests to State Department - 6/4/40: See Book 268, page 254 b) Details of similar arrangement with Banco Mercantil in 1934 requested of American Legation, La Paz, by State Department - 6/4/40: See Book 268, page 254-A 1) Resume by American Legation, Le Paz: See Book 269, page 351 Peru: Reserve Bank items as of May 25, 1940 296-A - N - Netherlands See War Conditions Norway Federal Bureau of Investigation report on Norwegion and Danish commercial shipping acknowledged - 5/29/40 280 Regraded Uclassified - 0 - Book Page Odlum, Floyd See War Conditions: Airplanes - P - Peru See Latin America - R - Revenue Revision Conference; present: HMJr, Sullivan, Bell, Helvering, Stam, Senator Harrison, Congressmen Doughton and Cooper - 5/28/40 267 1 a) Committee poll reported by Harrison b) Budget situation and debt limitation discussed c) Harrison's proposals 1) FDR approves d) Increase in Customs opposed by Hull e) Press statement Ways and Means Committee meeting attended by Sullivan, Tarleau, Blough, and O'Donnell - - 5/29/40 170 Senate Committee meeting attended by Blough - 5/29/40 171 Bill as introduced in House of Representatives - 5/30/40 327 HMJr's testimony before House House Committee - 5/31/40 328 a) Draft b) Discussed with Treasury group. 397 - S - - Scandinavia Federal Bureau of Investigation report on Norwegian and Danish commercial shipping acknowledged 5/29/40 280 Ships See War Conditions Stabilization Fund See Latin America Statements by HMJr Before Ways and Means Committee on Revenue Act of 1940 - 5/31/40 328 a) Discussion with Treasury group 397 b) Newsreel statement 403 Sweden See War Conditions: Airplanes - T - Tax Research, Division of Progress report for May 426 Taxation See Revenue Revision - U - Book Page United Kingdom See War Conditions United States Treasury Accounts Office (Newark office) Federal Bureau of Investigation report acknowledged - 5/29/40 267 280 - W - War Conditions Agriculture: Wallace and HMJr discuss extending credit for agricultural products to the Allies - 5/29/40 154 a) Copy of Wallace's memorandum to Jones - 5/29/40 264 Airplanes: HMJr urges Marshell to make present request for $300 million a part of the whole national defense progrem - 5/28/40 9 Expansion program conference; present: Haldr, Foley, Young, Haas, Mead, Brett, Lyons, and Kraus - 5/28/40 21,92 a) Foley explains progress on licensing 1) Foley memorandum and draft of agreement 51 b) Training program and number of planes and engines available discussed by Mead 34 c) Jacobs engine order (2000) placed by Canada discussed 36 d) Navy training program described by Kraus 39 e) Edsel Ford coming for consultation 45,229,453 f) Brett dreads reporting back to Johnson 46 50,000 Plane Program (Mead estimates for) - 5/28/40 103 a) Copy to FDR "who liked it" 102 See also conferences - 5/30/40 331,374 Marshall's supplemental estimates for fiscal year 1941 prepared as result of horseback ride with HMJr - 5/28/40 152 (Actual drafts: pages 108 and 111) a) Woodring's memorandum to FDR omitting fiscal year 1941 estimates and answering memorendum to Woodring asking reason for omission 155,157,232 Manufacturers: List (attached) contacted by telegram; data to be sent to Haas at end of each calendar week - 5/29/40 146 See also list on page 227 "Proposed Army and Navy Load" - 5/29/40 193 Chrysler Corporation: Keller reports on progress of study on airplane engines situation - 5/29/40 206 - n - (Continued) Book Page anr Conditions (Continued) Airplanes (Continued): Expension program conference; present: HMJr, Mead, Young, Vaughan, Foley, Kraus, Kadea, Gordon, and Wilson - 5/30/40 267 321,374 a) Program for United States and Allies discussed simultaneously (new American program, page 390) b) Curties-Tright: Possibility of building a plant somewhere west of Alleghenies which, on the three-shift basis, could produce about a million or 1,200,000 horse-power EL month c) Pratt-whitney "to tie up with some automobile company outside of Detroit area if possible" d) Liquid-cooled engine to be manufactured by Ford, Chrysler, et cetera e) 50,000 plane program discussed (see also page 103) 1) FDR's reaction explained to group 2) Army program doubled and Navy program raised 33-1/3% f) Nelson's place in program discussed 342 g) Plywood engines discussed 342,391 h) Navy Planes: Slowness displeasing to FDR 345 1) License from the company to be issued to United States Government who will re-issue to manufacturer 332,346 Advisory Board (Suggested) - 5/29/40, 217 Engines: France: Gnome Rhone motors as requested by French Air Mission discussed by H Jr and Purvis - 5/28/40 15 a) HaJr wants program presented as El whole Chrysler Corporation: Keller reports on progress of study on airplane engines situation - 5/29/40 206 Machine Tools: Stettinius and Knudsen: Hill- hopes FUR will 486 them to be present st next conference with machine tool representatives and Army and Navy representatives with a view to taking over the machine tool program - 5/30/40 394 "Naval Aircraft and Engine Procurement rogrem, 1941" 221 Odlum, Floyd: Currie (Lauchlin) again asks IMJr to цье Odlum; Halr tells Mead and states he will not have either one interfering in his program; thinks Guy Veughan (President, Curtiss-Wright) Day be concerned in this too - 9/30/40 332 Plant Expension: HaJr feels Allies have paid for their share "and it's now up to us to do our share" - 5/29/40. 212 Sweden: Bullitt's suggestion that planes contracted for by Sweden now be transferred to France discussed by Welles and HAJr - 5/29/40 213 Ward, J. Carlton: Mead suggests asking Sloon for him; Howr points out he will be with the French Government for three months - 5/30/40 380 French Government expresses grateful thanks for Ward mission - 5/31/40 444 Regraded Uclassified - W - (Continued) Book Page not Conditions (Continued) Exchange market resume - 5/28/40, et cetera 267 114,208,450 France: Evacuation plans of American Banks in Paris reported by Bullitt - 5/30/40 316 France to be attacked on June 4th: Bullitt informs H/Jr and esks that all financial and economic nessures to weaken Itely be ready - 5/31/40 421 Gold: Bullitt's request that cruiser Vincennes and two destroyers be sent to Lisbon or Bordesux for transportation of gold discussed by Welles end INWr - 5/29/40 213 a) Conference; present: HWr, Welles, Stark, Marshall, end Young - 5/30/40 366 Italy: Stock prices charts - 5/28/40 137,256,419 France to be attecked on June 4th: Bullitt informs HAJr and aska that all financial and economic measures to weaken Italy be ready - 5/31/40 421 Machine Guns: Monnet asks Purvis concerning possibility of vastly increased production capacity in United States - 5/29/40 168 Netherlands: Royal decree to safeguard property against disposal contrary to interest of owners: Copy to Treasury - 5/28/40 134 Norway: International Nitrogen Corporation - Oslo, Norway: National City Bank, New York, funds: Letter of explanation concerning - 5/31/40 422 Shipping: Situation reviewed in Harris memorandum - 5/31/40 435 Ships: United States assistance asked in Allied needs - 5/28/40 188 Electric Boat Company: Twenty speed boots to be released to Allied Purchasing lission - 5/30/40 374 Strategic Materials: Smokeless Powder: British Purchasing Commission memorandum on "Rifle and Machine Gun N/C Powder Supplies" - 5/29/40 163 Tungsten: Supplies and future purchases discussed by HiWr, Purvis, Bloch-Laine, Ballanytne, White, Young, Matthews, and Mead - 5/29/40 172 White memorandum - 5/29/40 209 Tanks: Monnet asks Purvis concerning possibility of vastly increased production capacity in United States - 5/29/40 168 Regraded Uclassified - W - (Continued) Book Page Har Conditions (Continued) United Kingdom: Possibility of borrowing dollars against American securities held by British authorities raised by Pinsent to Cochran - 5/30/40 267 324 Sterling Exchange: New regulations on instructions: Bank of England discusses with Federal Reserve Bank of New York - 5/31/40 437 Chancellor of Exchequer thanks HMJr for helpful attitude - 5/31/40 440 United States: Informal committee to represent United States Government in contact with foreign governments in all matters relating to purchase of war materials: Director of Procurement, Executive Assistant to Assistant Secretary of War, and Paymaster General of Navy - letter prepared for FDR but not used 207 Ward, J. Carlton See War Conditions: Airplanes MEMORANDUM May 28, 1940. TO: Secretary Morgenthau FROM+ Mr. Sullivan CONFERENCE: Present: Senator Harrison, Congressman Doughton, Congressman Cooper, Under Secretary Bell, Commissioner Helvering, Mr. Stam and Mr. Sullivan. Conference opened with Senator Harrison giving the report of the poll of his Committee as follows: Senators George, Herring, Gerry, will follow the Administration; Senators Barkley and Brown prefer to defer action until next session, although Barkley will follow the Administration; Senator King strong for taxes only; Senator Johnson wants to defer all action until next session, but would favor a sales tax; Senator Byrd will approve increase in the debt limit by $500 million to be used for Defense only] Senators Vanden- berg and Capper in favor of immediate taxes; Senator Walsh absent. There then ensued between Congressman Cooper and Under Secretary Bell a discussion of the Budget situation. Then Senator Harrison stated that he was for an increase in the debt limit of 83 million plus a tax bill that would raise about $600 million B. year to retire the new bonds. Mr. Bell objected to restricting this issue to short-term securities or to Defense, to which Senator Harrison replied that the Senate would in- sist that any increase in the debt limit be related to National Defense. Congressman Doughton reported that he had talked to Congressman Treadway, who last week spoke in favor of continuance of session and en- actment of taxes. It was Congressman Doughton's opinion that the Republicans will object to any particular method of raising the money which no select and that any retroactive tax legislation would meet with formidable objection from both Republican and Democratic members of the House, The Secretary reported that he had talked with the President since our conference yesterday and that the President suggested that we should not increase Customs on goods from those countries with whom we had trade agreements, but that we have a 10% increase on everything else. Senator Harrison then suggested an increase in the debt limit of only $500 million with 9. super tax of 10% on individual and corporate income taxes. Re said that we could then meet again in December to draw up a real tax bill in the light of the then requirements for National Regraded Uclassified - 2 - Defense. Congressman Doughton objected and said the debt limit should be raised $3 billion now. To this Senator Harrison replied that last night he went to Senator Byrd's office to find out just how far he would be willing to go and Senator Byrd told him he would be willing to raise the debt limit $1 million if it were accompanied by DEW taxes. Senator Harrison seemed to think that if the debt limit was raised $500 million we would then have until March 30 to pass 8 new tax bill. Congressman Cooper said that he thought this had all of the disadvantages of more drastic action and none of the advantages and it would be worse than nothing in view of the fact that the Secretary has to do some refinancing in December and that his hands would be tied because he will have such a. narrow margin. In fact some refinancing will have to be done next week. The Secretary spoke of the situation last September when he "waited them out". He has carried two or three times a normal balance in the Treasury. At the rate of interest being paid this calls for about $250 thousand a year, but it it easily worth it as insurance. Congressman Doughton expressed some doubt as to whether or not Wall Street would try to hold up the Treasury in the present situa- tion. No one else present entertained any such doubts. Congressman Doughton then asked what was the least amount the Secretary needed. The Secretary replied 1. $5 to $6 million additional taxes; 2. Recepture of $700 million from various governmental agencies; 3. Increase in the debt limit $1 billion. At this point Commissioner Helvering spoke of the check for $500 received for National Defense purposes from a doctor in Iowa who had been fighting an additional assessment of $12.38. Congressman Doughton re- marked that he was B fine man but that he did not have & vote in Congress. The Secretary then asked Congressman Doughton if he would canvass his own Committee and Doughton replied he would canvass the Democratic members. Congressman Cooper reported that he had checked 2 Republican and 7 Demo- cratic members yesterday and found them to be divided with the majority opposed to a tax bill at the present session: McKeough of Illinois and two others will follow anything the Administration requires; Moloney of Louisiana against & tax bill now; Duncan of Missouri against a tax bill now but will go along; Robertson of Virginia against increase of debt limit but will go along with tax bill as far as Senator Byrd, Congressman Cooper reported that Congressman Sam Rayburn says Congress cannot adjourn on June 15th if there is a tax bill and that he is against a tax bill; Boehne of Indiana in favor of raising the debt limit and enacting new taxes; McCormack, Disney and Buok were not interviewed but presumably will follow the Administration. Regraded Uclassified 3 - 3 - The Secretary observed that in bis opinion an increase in the debt limit was as important for home defense as money was for military defense and repeated his request for Doughton to extend his canvass in his Committee. Senator Harrison suggested that 8. manufacturers sales tax of 2% on everything except food, elothing and medicine would yield $800 million, which together with a 10% super tax on income taxes yielding $210 million would produce B. little more than $1 billion. Congressman Doughton inquired what the President insisted upon and the Secretary replied that the President insists or suggests nothing, - that he had asked the Secretary to get the views and advice of the Congressional leaders. The Secretary then suggested that the debt limit be raised $2 billion and that he be given $600 as additional revenue in the fis- cal year 1941. Senator Harrison suggested that these new taxes should retire bonds issued. He then suggested that we raise the debt limit $3 billion and enact new taxes providing $700 million a year to retire these serial bonds. The Secretary immediately suggested that he call the President and get clearance on this, but Senator Harrison said he would prefer to wait and talk out the details. At this time, Mr. Stam, Chief of Staff of the Joint Committee on Internal Revenue Taxation, was brought into the room and there ensued discussion of the various details. Senator Harrison had the following figures which he proposed (Millions) 10% super tax on personal and corporate income taxes $210 Increase in liquor taxes from $2.25 to $3 per gallon 85 Increase from $5 to $6 per barrel on Beer 58 Increase gasoline from 10 to 2¢ per gallon 199 10% super tax on all other Internal Revenue taxes except Social Security taxes 160 Total $712 The Secretary called the President in regard to the above and got his approval. In regard to the further suggestion of 8 10% tax on Customs, he suggested that the Secretary clear this matter with Secre- tary Hull. In response to the Secretary's inquiry the President suggested that the Secretary give the Preas a statement to the effect that at this session we were going to take care of the necessary Defense expenditures by a percentage tax which would pay as we go. Regraded Uclassified 4 - 4 - The Secretary called Secretary Hull who objected to an increase in Customs and the proposal was immediately dropped. The rest of the conference was devoted to drafting a statement to issue to the Press. TLS statement fr the Press 5 May 28, 1940 Chairman Doughton, Mr. Cooper, Chairman of the Tax Sub-committee of the Ways and Means Committee, Senator Harrison, Chairman of the Senate Finance Committee, have been in conference since 9 o'clook this morning with Sec- retary Morgenthau and with Mr. Bell, Mr. Sullivan and Mr. Helvering of the Treasury and with the Joint Congressional Committee expert, Mr. Stam, and they have agreed to ask Congress at this session to consider legislation to pro- vide funds for the payment of the National Defense program. Chairman Doughton and Senator Harrison stated that they will convene their Committees immediately to formulate a plan. They will propose an increase in the National Debt authorization by $3,000,000,000 to provide for the issuance of National Defense obligations to be sold with maturities not to exceed five years and they will also propose the levy of additional taxes, the details of which are to be worked out by the Committee. These proposed taxes will yield between $600,000,000 and $700,000,000 annually over the five year period which will be sufficient to liquidate the National Defense securities. The Secretary of the Treasury communicated to the President the conclusions reached by the conferees and the President expressed his approval of the program. Regraded Uclassified STRICTLY CONFIDENTIAL 6 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE May 28, 1940 TO Secretary Morgenthau FROM Mr. Cochran At 7 o'clock last night, May 27. Mr. Pinsent, Financial Counselor of the British Embassy, delivered to me a memorandum setting forth the proposition of the British Government with respect to having the accounts of the Bank of England with the Federal Reserve Bank converted into "His Britannic Majesty's Government Account." Since this matter had some days ago been the subject of communications between the Federal Reserve Bank of New York and the Bank of England, I telephoned the text of this memorandum to Mr. Knoke this morning. The Treasury will continue in contact with the Federal Reserve Bank until some agreement is reached in the premises. AMP. 7 May 28, 1940 8:30 a.m. Lessing Rosenwald: Hello. H.M.Jr: Hello, Lessing. R: Yes, sir. H.M.Jr: How are you? R: Fine. H.M.Jr: Lessing, when I spoke yesterday to your people in Chicago, they said they couldn't spare Brooks, he was in the job too recently and they suggested the Executive Vice President, Mr. Don Nelson. What do you think of that? R: Why I think he'd be wonderful. H.M.Jr: Is he wonderful? R: Sure. H.M.Jr: Well, that's what I want to ask you. R: You know him, don't you? H.M.Jr: I'm not sure that I do, Lessing. R: He's a very tall, very heavy set man, he's a man of my age. H.M.Jr: I see. A young fellow, huh. R: And -- yeah. You know, like we are. H.M.Jr: Yeah. R: Yes, he'd be 8 very good man for you. He's done a great deal of work in Washington. He knows everybody there. H.M.Jr: Well, for some reason, I never met him, but would you rate him better than Brooks? R: Well, I -- he's certainly had much more experience. He's been in the merchandise Regraded Uclassified 8 - 2 - field for a long, long time. H.M.Jr: Fine. R : Say, Henry? H.M.Jr: Yes. R: News 16 terrible disturbing this morning. H.M.Jr: Yes, it is. Yes, it 1s. But I just wanted to check with you on a personal basis. R: Oh, well, say, I can't tell you too much about Don Nelson. He and I have been friends for, oh, nearly thirty years. H.M.Jr: Thank you 80 much. R: All right. H.M.Jr: Thank you. Good-bye. 3 May 28, 1940 8:44 a.m. H.M.Jr: Hello. Operator: General Marshall. H.M.Jr: Hello. General Marshall: Good morning, Mr. Secretary. H.M.Jr: How are you, General? M: Fine, thank you. H.M.Jr: General, General Brett and Major Lyons are here with me now. M: Yes, sir. H.M.Jr: And he's just shown me this memorandum M: Yes. H.M.Jr: $300 million additional money for airplanes. I'd like to take the liberty of making this suggestion. M: Yes, sir. H.M.Jr: If you tell me that you need for an aviation program $300 million as a part of the whole national defense program, I'll go along with you, but I don't want to go along just because some factories are on a -- half empty -- in order to fill up some factories. M: In other words, on the principal basis that Brett wanted to get this thing started -- you don't agree on that. H.M.Jr: No. But if you say to me, Morgenthau, we need this as a part of the plan to get the United States Army, on an all around program, ready to defend ourselves or take on whatever comers are necessary, we need $300 million more for aviation, I'll go along. But not just on a basis to fill up some half-empty factories. Regraded Uclassified 10 - 2 - M: All right, sir, I'll -- but tell me -- let me ask this question. What about your business of engines, is that -- 18 this throwing a complication at the moment into that? H.M.Jr: No, it's an assistance. M: It's an assistance. H.M.Jr: It's -- it's M: It's the terms under which the money 1s proposed for that you don't -- you take exception to. H.M.Jr: Yes, the reasons for it. M: I see. H.M.Jr: The reasons for it, because I know how it will hit the President just the way it hits me, M: Well, in the first place H.M.Jr: He won't like it. M: in the first place, this -- part of this thing goes back to our original discussion as to how to increase production to give things to the Allies. We can't say that, of course. H.M.Jr: Yeah. M: That, apparently, was the only suggestion they had to offer as a way of doing it other than taking away the few we had coming to us. Well, of course, I can't state that in a paper. H.M.Jr: No. 1 M: What about that phase of it? H.M.Jr: You and I have had several talks. You kept talking to me to -- a rounded out army. M: Yes. H.M.Jr: Now if you can Justify in your own mind that as -- the problem as you see it that you need 8300 million Uclassified 11 - 3 - for aviation as a part of an all-around program, O. K. But you'd have to sell me and, I think, the President on that basis and not on the basis because we have some factories empty. M: Well, can I go back to that same question I asked you Just ahead of that? The start of the special plane thing came up when the Allies wanted a great many planes and I thought we couldn't give them out of those that we had coming to us. Then the proposition was, how could we get planes for them more quickly. Now, I don't know the technical side. H.M.Jr: Yeah. M: But the proposal was made if we could give the orders carrying them over for a longer period there, they could immediately get into a broader basis of production which would give those planes -- we not taking them at any increased rate -- but they would get the increased rate of planes. Is that -- is there any interest on -- in that phase of the thing at all? H.M.Jr: Ah -- some. M: Just some. H.M.Jr: But it's just as far as I'm concerned, before I could sell it to the President, you'd have to sell me the need as part of your all-around program. M: I see. I see. H.M.Jr: Uh M: In other words, I can't mention that thing- at all. I didn't have it in here anyway. H.M.Jr: I don't think I would, General. I'm thinking of the Hill. M: Yes. Well, I -- this -- what I wanted to get over was my embarrassment -- I haven't got it in there you see, and yet part of the -- part 12 4 of the plot in the generation came out of the desire to do that particular thing. H.M.Jr: Well, let me ask you this question. Will it be difficult to build a case that you need $300 million more for -- for air? M: No, it isn't very difficult at all because we've got to have a great many planes over and above what we have now to get into this thing in a larger way. H.M.Jr: Well, because I got this memorandum from Mr. Woodring to the President as to the need and, incidentally, he left off the planes of the regular appropriation, and I'm going to have the boys give me that. Hello. M: Yes, I'm listening. H.M.Jr: He left out half of it -- I don't know why he did that. Who prepared the memorandum? M: Which date was that? H.M Jr : Well, it's dated May 25th, to the President of the United States, and it just gives the airplanes and engines in this more recent program but in the original program, the rate of the 1941 program -- he's left that out entirely. He's left that out of this memo- randum to the President entirely. M: In the 1941. Now, you're distinguishing between the original 1941 budget thing and the program of the President's message? H.M.Jr: Just let me ask Mr. -- General Brett, he's right here. (Aside to General Brett, "What did Mr. Woodring leave out?" General Brett says, "He left out the entire 1941 appropriation, regular.' He left out the entire 1941 regular appropriation, the planes in that program. M: Well, I'll have to check up on what the papers are, I'm confused. That's a memorandum of May 25th Regraded Uclassified 13 - 5 - H.M.Jr: To the President of the United States carrying out that memorandum that he sent to Mr. Woodring and to you. M: I see. Yes H.M.Jr: on May 24th. M: Yes, sir. H.M.Jr: Then Woodring sends over a memorandum to the President and leaves off the planes which, according to General Brett, were in the regular 1941 appropriation, leaves those off entirely. M: All right, sir. I'll check up on what this 18. H.M.Jr: Now don't get me -- don't misunderstand me. You know the conversation we had on M: Yes. Yes. H.M.Jr: And I'm all for this if you can justify it on the basis that you and I have been talking about. M: Yes, sir. All right. H.M.Jr: Which oughtn't to be very hard. M: No, it isn't at all hard. H.M.Jr: What? M: I don't think it'll be at all hard to do that. H.M.Jr: O. K. M: All right, sir. H.M.Jr: Thank you. 14 May 28, 1940 2:25 p.m. H.M.Jr: Hello, Sumner. I have your letter before me of May 27th, with enclosed from Bullitt, S 894 where he asks for a lot of different kinds of planes. Sumner Welles: Yes. H.M.Jr: Well, you asked for what you can say, but there's just nothing we can do. They've asked me every day themselves. W: Yes. H.M.Jr: And that memorandum which I gave to General Marshall to which I've had no answer yet -- ah -- but there's nothing W: Well, this letter to you was sent before my talk with you on the phone last night H.M.Jr: Well, then that W: So I understand the situation. H.M.Jr: Well, then I won't attempt to answer it in writing. W: No, indeed. H.M.Jr: All right. W: Thank you, Henry. Good-bye. H.M.Jr: Good-bye. Regraded Uclassified 15 May 28, 1940 4:06 p.m. H.M.Jr: Hello. Operator: Purvis. Go ahead. Arthur Purvis: Hello. H.M.Jr: Hello. Arthur Purvis P: Good afternoon, Henry. H.M.Jr: How are you? P: Very well, thank you. H.M.Jr: Look, the Studebaker Company ...... P: What's that? H.M.Jr: ...... the Studebaker Company, Paul G. Hoffman, President, has been hanging around here for two or three days. P: Yes. H.M.Jr: He says that the French want to place an order with him for the Gnome Rhone motor. P: oh, the Gnome Rhone motor. H.M.Jr: the French Air Mission. P: For the H.M.Jr: Yes, 1500 engines with two options for 1500 each. P: 600 engines. H.M.Jr: 1500 -- one thousand, five hundred. P: One thousand, five hundred engines, yes. H.M.Jr: And with two options for another 1500 each. P: Oh, yes. Regraded Uclassified 16 - 2 - H.M.Jr: Now I wish that you'd have somebody in your Mission get word to the Studebaker that until you work it out -- the Allied Mission with the United States Government -- we are Just holding everything until we have a picture of the whole engine program. P: Yes, yes, I'll get that. Now they claim to be negotiating with the French here. I'll get that straight away. H.M.Jr: With the French Air Mission. P: Yes. H.M.Jr: The Gnome Rhone Company of Paris, France, are working with the French Air Mission for to buy 1500 engines of 2300 h.p.. P: 2300? H.M.Jr: Yes. P: Those are big ones. H.M.Jr: Yeah. P: Oh, well. Certainly I'll check that. of course, that's got to be done by the picture as a whole. I'll bring you a note of the -- of the situation on that tomorrow morning. H.M.Jr: Well, what -- I just -- wait -- I just -- 1,650 h.p. engines and subsequently the 2300. P: Oh, yes. H.M.Jr: And I thought I'd phone you tonight and if you could get -- have somebody in your Mission get word to the Studebaker -- ah ...... P: ...... that that 18 held pending the -- ah -- pending getting the whole picture. H.M.Jr: ...... the whole picture. P: Yes. Regraded Uclassified 17 - 3 - H.M.Jr: Because any program for big enginee or small engines, now, has got to be worked out in conjunction with our own program. See? P: Yes. I quite agree. As e matter of fact this again 18 -- it's somewhat of a surprise. It must be in some preliminary stage but even then I have not had it. I'll get hold of Jacquin straight away. Jacquin will be down in Washington anyway, 80 he will be available if you want to ask him any questions. H.M.Jr: Well, this man, Paul G. Hoffman, 18 staying at the Hay-Adams Hotel. P: Very good. H.M.Jr: And he's just driving us nuta, if you know what that 18. P: I do. (Laughs) Yes. H.M.Jr: All right, Arthur. P: All right, I'll do that straight away. H.M.Jr: Take them off until we get the whole thing, and then tomorrow we'll talk also about -- if you want to talk engines first, whichever -- anyway, did you get my message that we'd start at 9:00? P: Yes, I got that message. I'll be there at 9:00. H.M.Jr: We'll start at 9:00 and then, what do you want to do first, engines? P: Well, what I'd like to do with you -- what I'd like to do first 18 to acquaint you with this changed policy -- these cables have come in indicating an entirely changed policy with regard to purchases here. H.M.Jr: All right. P: That seems to me to have & general application that should come first. Regraded Uclassified 18 - 4 - H.M.Jr: All right. P: Then I did very much want to have a word with you also in regard to the possibilities on that re-exportation clause and the tungsten matter. H.M.Jr: Tungsten? P: You remember, we have an open item on tungsten as to whether the purchase could be made. H.M.Jr: Yes, yes. P: And also there was a question about getting & re-exportation embargo clause on the books 80 that something could be done to prevent leakages which apparently are turning up in certain materials H.M.Jr: Right. P: as part of the defense measures. H.M.Jr: Right. Thank you. Thank you. P: Now those would be just the broad subjects I'd rather like to talk with you and then if we could go on to such things -- of course, the question that we talked last week, any unfinished section of that, and then if there were the engine matter, if we could do it all today. H.M.Jr: That's all right. Thank you. P: Will that be all right. H.M Jr: Quite. P: Thank you very much. H.M.Jr: Good night. P: Good night. 13 May 28, 1940 4:10 p.m. H.M Jr: Hello. Operator: Mr. White in Mr. Bell's office. Go ahead. H.M.Jr: Harry. Harry White: Yes, sir. H.M.Jr: Purvis Just called me and the first thing he's going to do tomorrow morning at 9:00 is talk about tungsten. W: Right. H.M.Jr: And so can you have a memorandum and be here yourself a little bit before 9:00 with the memo? W: Right. H.M.Jr: on tungsten, and then he's also going to ask me about whether we've done anything about a re-export clause to control these things, both tin and tungsten W: Yeah. H.M.Jr: and you might ask Foley and find out from the Attorney General, and I'm going to pin this on you and I'd like you here a little bit before 9:00. W: On tungsten and on the re-export of strategic commodities. H.M.Jr: Right. W: Ah -- before -- I think that Danny -- we're doing something here and Mr. Bell will want to get in touch with you before you get home to sign something. Have you got a minute to talk to Danny now? H.M Jr: Ah -- if he'll wait a couple of minutes, and if he'll hold my hand and push it, I'll sign it. Regraded Uclassified 20 - 2 - W: Will you be in there? H.M.Jr: I'm in the office and give me three minutes and I'll ...... W: Well, it won't be ready in three minutes. Are you going to be there a little longer than three minutes? H.M.Jr: I hope not! Yes, I will. W: You will. H.M.Jr: How long will you fellows want. W: (Aside) How many more minutes do we need? Well, an hour. Will we be able to go up to your house and get your signature, because we will have to arrange, possibly, for the President's signature today. H.M.Jr : All right, I can be seen after seven o'clock. W: At your home. H.M.Jr: Between seven and seven-fifteen, at my home. W: I'll pass that on to Mr. Bell. (Aside) And you'll be able to get in touch with -- with the President to get his signature for that day, or date it today. Ah -- ah -- Well, that's what the leaders do. (Laughs) All right, I'll tell him you'll arrange it. H.M.Jr: (Laughs) O. K. Regraded Uclassified 21 RE AIR EXPANSION PROGRAM May 28, 1940. 3:00 p.m. Present: Mr. Foley' Mr. Young General Brett Major Lyons Mr. Haas Mrs. Klotz Mr. Mead Captain Kraus H.M.Jr: I hope I didn't inconvenience you, but from nine until twelve fifteen this morning we did a tax bill. We raised $3,000,000.00 for national defense. Where 1s my engineer? Brett: I think he is on his way up here. H.M.Jr: It is a great life. I had to let everything go from nine until twelve fifteen with Pat Harrison and Bob Doughton, but we got an agreement. We are going to sell $3,000,000.00 worth of national defense bonds and pay for them in five years. Brett: We can use all that right off the bat. H.M.Jr: I have got your memorandum here. (Mr. Mead and Captain Kraus entered the conference) H.M.Jr: How do you do? Mead: I am sorry to tell you the typewriter hasn't quite caught up with us, but we will have it in Just a minute. H.M.Jr: I want to be educated, and Ed, would you bring these gentlemen plus me plus Mrs. Klotz up to date 8.8 to where the lawyers are on this licensing business? Just give us & little lecture. Foley: Well, we have completed the drafts of the agreements for United and for Wright Aeronautical. The agreements have been mimeographed, and they have been approved insofar a.8 Wright Aeronautical 1s concerned. by the company, Wright Aeronautical, by the Regraded Uclassified - 2 - Army, the Navy, Justice and ourselves. Insofar 88 United Corporation 18 concerned, we don't have the approval of the corporation. We have the approval of the others. Now, there are certain essentials that have to be decided upon. We have left the blanks in the agree- ment. We have got to know the model, we have got to know the quantity, we have got to know the licensee, we have got to know the royalty payments, and we have got to have a confirmation of the whole underlying policy, but we have got documents now that we can work from. The lawyers for Wright Aeronautical have been quite cooperative. They have been down here with their engineer, 8. man by the name of Finley, and they have given us a good deal of help. We haven't had the same help from United. We have had to 80 ahead with what we knew from all they wrote to us and write it ourselves without their approval. Mead: Why do you have to have the licensee? Isn't that between the Government and the company? Foley: Well, it 18 subject to the Joint approval of both, the Government and the company. Mead: Because we don't know what company to put in there for awhile. Foley: That 18 right. Those are the details that will have to be determined. Mead: Well, then, they will sign it or agree to it with 8. blank in there. Foley: They will approve it as to form; and then if you decide to use it, we will have to insert all these details. The blanks are there. Mead: Captain Kraus -- Captain Kraus hasn't had a chance to Bee those yet, has he? Foley: He was in on the meetings last night, Kraus: They are OK. Regraded Uclassified 23 - 3 - H.M.Jr: And the lawyers for the Army and Navy and Justice, as I understand, have all sat in on this? Foley: That 18 right. They were over here from half past three until seven o'clock last night. H.M.Jr: That sounds funny. Ed, take a couple of minutes, because I won't have any other chance, and describe to me just what this license does, will you? I don't know whether General Brett knows about this or not, but just -- I mean, now one thing you said -- what was the agreement? Foley: Well, subject to the approval of the Government and by the holder of the patent, another corporation would be licensed to produce the engine as patented and AB now being produced by Wright Aeronautical or by United. The quantity and the type and the materials of the payments, how much per engine you would pay as a royalty and how those payments would be made, are matters that have to be determined. In one instance the provision, insofar as duration 18 concerned, would be for three years. That 1s insofar ae Wright Aeronautical 1s concerned. Insofar as United 18 concerned, they want it for the period of the emergency, BO it would be for three years and the period of the emergency. I don't know whether they will object to that when they get down here. H.M.Jr: Well, golly, Ed, when they get down here I don't want to get into an argument on the license. I want to talk business, 80 couldn't -- you see, here is the thing. Couldn't this all be cleared by them before they see me on Thursday, because this thing -- we will waste all our time talking -- what time Wae Curtise coming in? Mead: Eleven c'clock on Thursday. Foley: Curtiss? Regraded Uclassified 24 4 H.M.Jr: Which 1s the one who wanted to come in earlier? Foley: I thought Vaughan was coming in at three. Mead: No, Wilson. Foley: Well, Vaughan thinks he 18 coming in at three and he would like very much to come in earlier. Mead: I talked to him this morning. Foley: I had lunch with him and Paul Shields and I left him at 2:15 and he said he was coming in at three o'clock; and he said if it could be arranged so that he could come in earlier, he would be very appreciative. Mead: I will fix that, and I wish we could settle just what terms you had in mind. This years business bothers me because I don't quite understand it. You wanted it three years but what? Foley: As I understand it, the Wright Aeronautical want three years. Mead: That 1s, they would just license it for three years? Foley: That 1s right. Kraus: It 18 subject to extension beyond that time. Foley: It 1a subject to extension beyond that time, but we would be in the same position at the end of the three year period that we are in at the present time. Mead: Then what about United? Foley: United wants it for the period of the emergency, but that might not be long enough; and the way we have drafted it here, it 1s a lease for three years and then for 80 much longer as the emergency -- as the duration of the emergency. Regraded Uclassified 25 - 5 - Mead: Why the mystic three? Is that your guesa or somebody's guess as to how long the war will last? Foley: Well -- Mead: That 18, if the three suite you, we can drive the cart in that direction, it seems to me. Foley: Well, Dr. Mead, it isn't a question of suiting me; it 18 you telling me what you want. If three years isn't satisfactory, you tell me and -- I started out by taking five years with the Wright -- Curtiss-Wright people, and they said three and we tentatively agreed upon three. Mead: Well, might we settle that outside and save your time and get something that Kraus and Foley and I can agree to? H.M.Jr: Well, what I would like -- Mead: That is the only question, 1a the period. H.M.Jr: What I would like very much if you could, I am putting Curtiss-Wright down, incidentally, for nine o'clock. Mead: Going to shove it up to nine o'clock? H.M.Jr: Yes. Mead: All right. H.M.Jr: And I can have Pratt & Whitney at two-thirty. Mead: All right. That 18 Thursday? H.M.Jr: Yes, Thursday. Now, if this thing could be 80 -- the way I would like it, if it is possible, that all of this thing would be settled before they come down, because I just want to talk to them in terms of engines. I don't want to talk in terms of contracts. I would like, if it 1s physically possible, to be finished 80 when they come in I can say, "All right, which do you gentlemen want?" "All right, we want the four hundred,' or the six hundred horse power engine, Bee, and Regraded Uclassified - 6 - then we can talk right then and there who to give it to. I would like to do two things on Thursday. I would like to get the thing started and if possible finish it or at least within a reasonable time, which engine we are going to take from them and to whom we are going to give it. That 16 No. 1. No. 2 18, talk to each of them about building another plant somewhere west of the Alleghanies Those are the two things I want to talk about, and which engine we want them to build. Those are the two things I would like to talk to you about. Foley: Somebody has got to talk price, Mr. Secretary. Kraus: There 1e a basic difference in the whole conception of the two licenses. The one is practically an agreement to license any engine at prices to be agreed upon and for a certain stipulated payment. H.M.Jr: That 1s which company? Kraue: That 1e Wright. Pratt & Whitney Company's point of view is almost diametrically opposite that, Mr. Secretary. They offer you a free license for one specific engine, and for the period of the emergency. That 1a really basically -- they offer the most limited license. They offer it without compensation. H.M.Jr: Well, my father brought me up on the theory you never get something for nothing. Kraus: That 18 what 18 happening. You get quite 8 good license from the one for a price, and you get 8. very limited license from the other gratis. It 18 probably worth about that much. H.M.Jr: Well, in this room here, you gentlemen had better make up your minds what you want and then we tell them, see, in a nice way, but tell them. Mead: You will give us a few minutes to do that, won't you? Regraded Uclassified 27 7 H.M.Jr: Well, you had better get them down here tomorrow or something. Mead: Well, I meant we can make up our own minds as to the basis and then we can get them on the telephone and get that settled or else get them down here. H.M.Jr: I have no 1dea -- let's just aay for argument's sake, I don't know whether Curtiss-Wright wante the four or six hundred horse power. It doesn't make any difference, whatever the latest one 1s. I don't know how much they should be paid for the license. Now, instead of paying them per engine, I had an idea that we could say to the gentlemen, "How much did it cost you to develop this engine?", and then give them & lump sum. Do you think that 1s good? Mead: That is the way it can be done. H.M.Jr: I mean a lump sum. "How much did it cost you to develop this engine?" Brett: One of the big points they are going to bring in, what do they lose in future business by turning over the license. H.M.Jr: What do they lose if Germany takes America? Brett: That 1s it. H.M.Jr: Which one of these companies is the most reasonable, Curtise-Wright or Pratt & Whitney? Foley: Curtise-Wright. H.M.Jr: Let's make a deal with Curties-Wright in the morning and get a good deal, and then have Pratt & Whitney in the afternoon. Mead: That is the way the schedule is working. H.M.Jr: Good. Mead: I think in fairness we ought to think of their getting something per unit, because it depends on the number of engines built. Regraded Uclassified 28 - 8 - H.M.Jr: All right. George Mead, I want to be fair and I, talking for the Government, whatever 1s fair -- I don't know whether it 1s $10.00 an engine or whether it should be $100.00 an engine. I have never been in this business, but if you fellows can put your heads together, I would rather err a little bit on the side of being too generous rather than too sharp, 80 we will have their cooperation and they will say, "Well, that is fair," see. I would rather be a little bit on the generous side than to be too sharp. Mead: I think the Army and Navy have already paid the development costs once or twice over, 80 that if we pay them Just per unit we will probably come out all right. H.M.Jr: 8o if you people can do that anytime tomorrow in the forenoon that you want to ask me, I'm available. Mead: All right. H.M.Jr: Now, Ed, can I drop this legal thing from here? Can you carry it on? Foley: Yes. H.M.Jr: Thanks. (Mr. Foley left the conference) H.M.Jr: Now, let me just clean up Haas 8 minute. Haas: Here they are (showing tabulations to Secretary). H.M.Jr: Now, where is Jacobs? Haas: They are listed alphabetically. H.M.Jr: What did they deliver? Haas: Jacobs delivered four. H.M.Jr: Now wait a minute. Now, have you gentlemen decided on which engines the Army and Navy want for trainer planes? Regraded Uclassified 23 - 9 - Brett: We have the -- Mead: I can give you all you have got on that list, General, if you want to check me. Do you want to know which companies? H.M.Jr: Well, anyway you can get it. I want to get some idea. Mead: Well, it is the Wright 975 for the training only. H.M.Jr: Start with the lowest one. Mead: Lowest powered is the Wright 765, but N. A. F. builds them all. Brett: Lycoming, Continental, and Menasco. H.M.Jr: How much? Brett: And Menasco. Those are the three small engines, the two hundred horse power class. H.M.Jr: What is the other? Brett: Continental. Kraus: Mr. Secretary, there 18 a Wright 760 cubic inch engine which 18 built both by Wright and by the Naval Aircraft Factory. H.M.Jr: Now, the Lycoming, how much horse power? Mead: Two hundred. The Continental 1e two hundred. Menasco I am not sure about. Brett: Menasco 1a about 125 to 175 horse power. H.M.Jr: It 1e quite an engine, 1sn't it? Lyons: It 18 used in the Ryan. H.M.Jr: And the Wright? Kraus: The Wright 1s approximately the same power. Brett: We are not using that engine at all, sir. Is the Navy using it? Regraded Uclassified 30 - 10 - Kraus: Seven hundred sixty oubie inch size. H.M.Jr: Are you going to buy them? Kraus: A small number only. We will have to, to meet our program. Before anybody else can get in or they can get out, they can make our engines. H.M.Jr: Now, how many are you going to get? Kraus: Only about 160 enginee from them. It wouldn't even clean up their inventory. H.M.Jr: It wouldn't? Kraus: I don't think 80. H.M.Jr: You mean they have got the stuff in stock? Kraus: They undoubtedly have substantially that much material in stock right now. H.M.Jr: Well, now, George -- Brett: And then we have to have the Ranger engines, too, sir. The Ranger engines go into the Fairchild. Lyona: That 18 175 horse power. Brett: That 1a the small primary training engine. Mead: That 18 the Ranger 6. Lyons: Yes, the 175 horse power at sea level. H.M.Jr: Well, does that mean that the Army 18 going to have in this class, one, two, three, four different types of training planes? Brett: No, we buy planes from Fairchild, we buy planes from Ryan; we buy planes from Stearman, all primary trainers. In order to get the productive capacity that we have to have, we split those orders three ways. Ryan 1s capable of producing 80 many, Stearman 16 capable of producing 80 many, and Fairchild; and in order to also handle the engine production, we have split the engines Regraded Uclassified 31 - 11 - according to those airplanes, so that we could get the engine production for those airplanes. Now, these are all Just the very small primary trainers. H.M.Jr: Is the Army going to standardize any of these things to build any of these companies up? Brett: It 18 going to create a six to eight month's delay on deliveries. They would have to re-tool and re-jig and re-fixture and every- thing to build Fairchilds, Ryan, or it 18 the other way for the other two companies. These companies have all been building primary trainers for years, and they already have orders which they are producing on and therefore in order to meet that 2,200 plane program for training planes, our recommendation 1e that we just increase the order with Ryan, with Fairchild and Stearman; and, of course, they use three different engines, which was all started a year ago in order to build up engine production. H.M.Jr: Which one does Lycoming use? Brett: The Lycoming engine goes into the German airplane. H.M.Jr: And the Menasco? Brett: That goes into the Ryan. The Ranger goes into the Fairchild. H.M.Jr: And the Continental? Brett: The Continental goee into the Stearman. The Stearman handles two engines, Continental and Lycoming. In other words, his aircraft production is greater than the engine production; and he can take up the engine production on those two companies. H.M.Jr: Well, this doesn't mean that any one of these engine companies are going to increase their plant on this order. Brett: Well, partly 80, yes. In other words, we have just placed orders for five hundred additional -- Regraded Uclassified 32 - 12 - a total of five hundred additional Stearmane, Ryans, and Fairchilds. H.M.Jr: When did you do that? Brett: Well, the orders are now being worked up in compliance with that direction from Mr. Johnson which told me to have the contracts ready for him the day the President signed the message. H.M.Jr: Well, I think you will find that before they will do that they will come over here. We will see. Brett: In other words, when we had that 2,200 plane implement that came in on the last President's message, we just simply went to the contractors who had been producing that type of airplane such 8.8 North American, Vultee, Stearman, Fairchild, and Ryan, and immediately started to negotiate with them for further deliveries in order to get as prompt delivery as possible, because they are all in production. H.M.Jr: Well, this isn't going to build up the capacity of anybody 80 we can go to 50,000 planes. We will just place this thing the same way we always have. This isn't going to get us any- where. Brett: Well, it 1s placed in that order, Mr. Secretary, simply because they are planning to open up these training schools, you see, the first of October, the first of September, the first of November, and the first of February in order to get planes at that time in order to open those schools for training pilots. In order to get planes at that time, we just extended the orders which were then in effect. To standardize those planes today would probably mean & six to eight month's delay. H.M.Jr: Where are you going to get the money from to pay these fellows to go to the standardized product? Brett: These planes aren't standardized today. We take that money out of this 2,200 plane Regraded Uclassified 33 - 13 - authorization that 1s now before Congress. H.M.Jr: Nobody 1s standardized, but if we are going to get into real production we have got to begin to standardize now. Brett: If you did that, it would delay the program. To attempt to standardize now and say that you will produce all Stearmans -- H.M.Jr: Have you got the pilots waiting? You are only turning out 220 pilots every -- how many weeks? Lyons: Six weeks. Brett: They are planning to have those pilots available, as far as I know. That 1s out of my bailiwick. They hope to open another school by the first of September. They are recruiting pilots, I understand, right now. They are getting the organization all set. H.M.Jr: I don't see what we are doing -- just the way we -- I don't see but what we are doing just the way we were doing it right along. Brett: On that training phase, you are doing it just as we have always done it. H.M.Jr: The Canadians come along and want two thousand of these Jacobs engines. How much does Jacobs produce in three weeks, I don't know. Haas: They delivered four. H.M.Jr: How many did Lycoming deliver? Haas: Lycoming delivered sixty-three. H.M.Jr: And Menasco? Haas: Menasco -- that 18 a little one. They delivered eleven and they only have fourteen on order. H.M.Jr: Menasco? Haas: Yes. Regraded Uclassified 34 - 14 - Brott: That 1s because the Ryan hasn't been producing some airplanes the last month, I think. H.M.Jr: Continental? Haas: Continental delivered one hundred fifty-three in the first three weeks in May, and they have on order sixteen hundred and eight. H.M.Jr: Sixteen hundred and eight? Haas: Yes, sir, that 1e right. H.M.Jr: George Mead, have you been doing any figuring on these small engines to build up their capacity? Mead: No, all we have done BO far was this Job we did this morning to find out the total number of engines and the training program, and we intend to go from there logically to see where those go and which ones can be consolidated. You see, until we had our fifty thousand figure, we couldn't work anywhere; and you will notice there 18 one difference from what the President spoke of. We have knooked -- forty thousand tactical airplanes. We have got thirty two thousand five hundred, and that 1s because of the relationship and the services between tactical and training and I think probably their judgment in that Case would be better than anyone's, 80 instead of having ten thousand trainers we have seventeen thousand and five. Now, we come out at the fifty thousand airplane total and it seems to me we ought to be in agreement on that top table before we go very far, and then we can go very rapidly to break down the training program and consolidate, if possible, and decide how many enginee for each company. I have taken the overall engine situation and it is in pencil yet, but -- you may not want to come to this this minute, but you can tell what we have when you do want 1t. These are fiscal years, and these are what they think 18 the capacity of those plants. Twenty-four thousand eight hundred engines in 1941, fiscal year. We get thirty-two thousand five hundred in 1942. Sixty-seven thousand in 1943 would give us a total in Regraded Uclassified 25 - 15 - three years of 8. hundred and twenty-seven thousand engines, but the program would take about two years and 8 half. They have got ninety-seven thousand or some such number on hand. H.M.Jr: Is it your thought, or haven't you crossed it, to let this twenty-four hundred trainer thing Just go through the old way. Meed: I will tell you the honest truth, I haven't had time to think about it. Brett: It is about the only way you can do it, Mr. Secretary, if they enticipate meeting their training program. H.M.Jr: Well, some of these things, General, may have to be slowed down if we feel we can get to the objective quicker in the long run. Brett: But from a military standpoint, you won't get to the objective because it takes about two and B. half years to train a pilot. What we are worried about 18 right today -- what the Air Coros 18 worried about 1s that any large expansion program among engines and airplanes that we may get the equipment actually before we get the pilots in large quantities. H.M.Jr: You might get the what? Brett: Equipment before we get the pilots. H.M.Jr: Well, from my standpoint that wouldn't be a worry. Nead: Can't we slow down in our training situation for that very reason and get some consolidation? Brett: of course, I was working under Mr. Johnson's orders on the method in which that was done. H.M.Jr: Right. Brett: I have my improved schedule on the procurement of those twenty-two hundred airplanes, which was set up -- Regraded Uclassified 36 - 16 - H.M.Jr: Under the orders of the President of the United States, he 1sn't going to be able to sign any contract unless the President approves. You saw that, didn't you? Brett: No, sir, I haven't seen anything on that subject, sir. H.M.Jr: The order went to Mr. Woodring and to Chief of Staff, no contracts to be signed for engines and planes or development of such unless it had the approval of the President and coordinated by me. Brett: Well, that is the first intimation I had had of that. H.M.Jr: Well, I thought you knew that. Brett: No, sir. Right in this office you asked Mr. Johnson what he was doing about getting his paper work ready for this, and he said, "Well, I will have the contracts all ready to sign." H.M.Jr: Well, let's just go back for a minute. Let's take this -- stick to this thing a minute. How do you feel, Kraus, about the Canadian Government placing an order for two thousand engines with Jacobs? They will be in here tomorrow morning. Kraus: To begin with, Mr. Secretary, I don't think they can get the engines from Jacobs. H.M.Jr: Well, supposing they want to make a deal to build up the plant and BO forth and 80 on. Kraus: My objection to that would be that 18 a matter of balancing the national interest in the Allied training program against our own and absorption of skilled mechanics and trained workmen on our own program. If it should appear that supporting the Allied training program were worthwhile to us, I wouldn't have any objection to their contracting with Jacobs because 80 far as either the Army or Navy program are concerned, it makes no difference in the Navy program directly. You (Brett) have very few Regraded Uclassified 37 - 17 - Jacobs engines. Brett: We hardly use them at all. Kraus: But it does have an effect upon the absorption of men and materials. Brett: It is going to use up a. lot of machine tools which we will need in any expansion program you plan on. Mead: That 1e what I don't like about it. Brett: I recommended to Mead this morning that until an engine program 18 worked un by Mead to a point where we would know what the United States Government needs, that I wouldn't recommend any further release on any engine in production if they are manufacturing at the rate of four B. week or four a month -- H.M.Jr: How much? Haas: In the last three weeks Jacobs delivered four. Brett: It means that they have got to go into a terrific expansion which naturally uses up machine tools and mechanics. H.M.Jr: Here 1s the Jacobs picture. They got a U. S. Army order for & hundred and twenty- eight, South America, twelve, U. 8. Commercial, forty-two, 8. total of one hundred eighty-two, and from the 24th to the 31st of May they produced thirteen engines. Is that right? Haas: That 1s their estimate. H.M.Jr: You mean they propose to do for June, twenty-nine, July, thirty-five? Brett: If they talk about manufacturing three thousand engines, that means that -- two thousand engines, that means they are going into -- they have got to get machinists and machinery. H.M.Jr: I want to say as of this afternoon I am a little disappointed, but it may be straightened out at the White House tonight or tomorrow, but I feel Just the way you feel. I would like to get this whole engine picture on B table. Now, I want General Marshall to aee it. I want the Regraded Uclassified 38 - 18 - President of the United States to aee it. Brett: Mr. Secretary, now don't misunderstand. We have the whole engine picture pretty well worked out. We have the whole engine picture pretty well worked out except, of course, that engine picture 1s built on something that has no approval from the War Department. It 1e something that we just sat down, because you said to have 50,000 airplanes -- H.M.Jr: Not I, the President. Brett: And as a result of that we sat down this morning and worked out a program which hasn't the approval of the War Department and the War Department doesn't even know anything about it right now. H.M.Jr: That 1e all right. Mead: We have got the 50,000 airplanes on a piece of paper and showing how we get them, which 18 more than we had this morning. Brett: It 18 not based on any program which has been submitted, and it was just pulled right out of the clear air. My neok 18 in an awful noose. H.M.Jr: Well, I will say this much: No one has ever gotten in any trouble working for me since I have been in Washington, and I have been here seven years. It did some fellows some good. You didn't get in any trouble a year ago, did you, Kraus? Kraus: No, sir, I haven't gotten into any this year. H.M.Jr: Did it do you any harm? Kraus: Not a bit. I enjoyed it, as a matter of fact. H.M.Jr: And we skated on some thin 1ce. Well, let's Just put this to one side and come back to it. Do you gentlemen yet know which engine you are going to ask Wright to give the Regraded Uclassified 33 - 19 - license on? Mead: No, because that 1a a study of the training program if these figures are correct, that 18, if you feel that our assumptions here in distribution between Army and Navy and between types are all right. I have no way of knowing. All that we did was to do the best that we knew how. The General gave us his side and Kraus gave us his side, and we compromised to get 50,000 airplanes. H.M.Jr: Let's let that cook for a minute. Let's go to the next thing. Do you gentlemen know -- well, before we leave the train of the picture, Kraus, are you and the Army together -- I mean, are you going to use the same engines for anything? Kraus: We used two of the same engines and the third engine that we used in training, that 18 for primary training, we manufactured essentially ourselves within the Navy Department. We will buy a. few of them at the start of the program. Then we will be all through. H.M.Jr: That 1s the primary. Now what is the next step? Kraus: The next step we have 18 the Wasp engine, the R1340, in training. That 1s 400 and 500 horse power. But we use in 8. tactical plane one engine that 1a identical with what the Army uses in one of their intermediate trainers. That 18 the Pratt & Whitney 985 engine. Lyons: To clarify that picture, you use a. sea level Wasp or 8. 1340. We use a super-charged Wasp, which 18 the same basic engine in an advanced training airplane, also in a two engine training airplane, tentative, and 8.6 well as certain tactical types, such as observation, 80 the 1340 engine which is manufactured by Pratt & Whitney 1s the key engine to both the Army and Navy. H.M.Jr: What 1s that? Lyons: 1340. Regraded Uclassified -40 - 20 - H.M.Jr: How much horse have they got? Lyons: Six hundred for the Army and the Navy, I think, uses sea level engines. H.M.Jr: Is that the same? Lyons: The category 1s six hundred, sir. Kraus: The same thing, except part of the rear end of the crankoase. The character of the engines are identical. H.M.Jr: Now, who makes that? Mead: Pratt & Whitney. H.M.Jr: And have you gentlemen got any idea how many of those you need? Brett: Six hundred h.p. Mead: Yes. Brett: How many do you need, Kraus? I need twelve thousand. H.M.Jr: On the fifty thousand program? Brett: On the fifty thousand program. Mead: You see, the total for training engines 1s about 40,000 engines. It is 39,650 for the two services. H.M.Jr: You need 12,000 on the 50,000 of these? Brett: Yes, sir, on the 50,000 plane program I need 12,000 of the 600 horse power engines. The total cost would be -- Mead: Twelve thousand five hundred of those engines. H.M.Jr: Well, there 18 something. There 18 24,500 in that engine. No, 12,500. Mead: He wants 12,000. No, I only want 500. H.M.Jr: I see. Well, that means a thousand a month, doesn't it? Regraded Uclassified - 21 - Mead: Well, but you don't want to get those all in a year, do you? You won't have anybody to use them. H.M.Jr: Well, would it be -- try to produce, say, 4,000 of these on one ship, 60 that you could go to three ships and produce 12,000. Mead: That could be done, probably. H.M.Jr: Is that the way to figure it? Mead: It 1e all right. I was just thinking of con- tracting them down in a year's time. I see what you are up to. It's all right. H.M.Jr: Is there any other one that your people agree on besides the 600 h.p. Wasp? Kraus: The 985-P and W we use. Brett: Don't we have them all set up for the entire 50,000 plane program? Mead: Oh, yes, but we haven't necessarily any other engines that you both want. Kraus: We have a considerable number of them. Mead: The 985 1s the other engine that there would be any quantity of. Kraus: In the training plane? Mead: Yes. Brett: You maufacture all your primary training engines, don't you? Kraus: No, we can't on this program. We have to go to trade for about two-thirds of them. We take exactly the same engine you take from Lycoming and from Continental. Brett: How many of those do you need? Kraus: Nine hundred and sixty of each. Brett: We need ten thousand of that combined engine. Regraded Uclassified 42 - 22 - H.M.Jr: Well, if those are the kind of figures, I am not going to go any further. If those are the kind of figures, If I can have them Thursday -- Kraus: Consolidated figures by types. H.M.Jr: Yes. Mead: I feel sorry not to give you everything you want at the minute, but as a matter of fact these figures just came over the telephone. H.M.Jr: I understand. I am just having a little bit of & dress rehearsal thirty-six hours ahead, and if I don't have them I could talk to these people -- I don't want -- we are all human and we are all crowding each other. Just let me ask you one other thing which I could have possibly by Thursday, so if I had nothing else I could talk with these gentlemen. Take Pratt & Whitney, for instance. Which 1s their biggest engine that you gentlemen agree on? Mead: Twenty-eight hundred 18 the horse power, if you mean that. H.M.Jr: Is that the biggest engine? Mead: That 18 the biggest engine of Pratt & Whitney. Lyons: Just one second, that 1e the type of power -- Mead: The power 1s 2,000. H.M.Jr: Now, what I am going to ask -- the way I am thinking of this, I am going to talk to Pratt & Whitney -- the President 18 crowding me on this -- setting up another factory in middle West to manufacture this engine, and then I am going to ask how many of those 2,000 horse you want, you Bee. Then I am going to say -- I am going to ask Wright which 18 their biggest engine. Mead: 8350 is the biggest one. H.M.Jr: How much 18 that? Regraded Uclassified 43 - 23 - Mead: About 2,200, I think. Lyons: I think there are two engines there that we have to consider on account of our types of the 2,600. Brett: The 2,600 and the 2,800. Mead: Yes, but he asked for the biggest one, ao here it 1e; and the next biggest one is about 1,700 horse power. H.M.Jr: Don't you want the biggest one? Lyons: No, sir, our main production will be on the 2,600, as we visualize the types. Brett: That 18 a Wright Corporation engine. Mead: And that will be about 1,700 horse power. H.M.Jr: But when you go into these four engines, bombers, and all that, which one do you want, looking ahead for a year? Brett: We could go into something on the order of the Curtise, the Wright Corporation, 2,600 engine, or the Pratt & Whitney 2,800 engine, both of them ranging around 2,000 horse power. H.M.Jr: All right. Then the thought that I have in mind 1s this, you see, and this 18 where I thought I might do a little finagling. What I hope to be able to do, thinking out loud about it, 18 this: When the British come in, which they are doing tomorrow -- they have given up the idea about the Bristol. When they come in tomorrow, I will say, "All right, gentlemen, we are thinking of building -- having Pratt & Whitney and Wright build a plant and each one build one engine, the biggest. Now, if you want to put up half the money, how many enginee do you want?", you see, BO that is what I am thinking about. Now, we will go -- how many engines do they want? "We want 80 many engines. Are you willing to put up half the money or have we got to put up two-thirde or whatever it 18?" Brett: You see, this program of mine alone, the one Regraded Uclassified 44 - 24 - that we have worked up this morning, calls for 25,600 engines of the category of the Pratt & Whitney 2,800 and the Wright Corporation 2,600 engine. Those are the two designations. H.M.Jr: Well, didn't somebody say -- I don't know where I got it from -- that the plant had produced within a certain limit to what the horse power in one plant -- Lyons: That was probably Ward. He has the scale of 400 engine units which he has expanded in the scale of 400 thousand horse power engines. Brett: 400 thousand horse power per unit of plant per month. H.M.Jr: I see where the Pratt & Whitney, with all their publicity this morning, will now be able to produce 1,200,000 horse power. Brett: Well, I was talking to Wright.-- Lyons: That 18 400 thousand horse power. Brett: The Wright man said he expected to be producing 1,200,000 horse power here very quickly. H.M.Jr: This 18 what I am thinking about, is to talk to these people on Thursday and say, "Now look, in this big horse power, this 18 just one engine, 8. plant somewhere west of the Alleghanies. Each of you gentlemen -- # that 1s on a three shift basis or whatever 1a the practical unit, and I take it that with the English in mind, we will be able to say between us we could take the full capacity for another plant. But I want to be sure of the facts, as sure as I can, and if I did nothing else on Thursday but to get each of them started on that, that would be a day's work, plus getting the thing straightened out. Mead: The thing that interested me this morning was that we haven't exceeded the capacity of these plants with those two in mind, particularly, and we don't need to bring anybody else into the picture, you would think from this study, and this is pretty early to say anything. 15 - 25 - Kraus: It leaves out the Allied needs. Mead: It doesn't, in a way, because if the program takes three years, we have got 127,000 engines. In other words, we have got perhaps 30,000 engines available for the Allies, just as we stand, without taking in anybody other than the two plants you propose, one for each of the big companies, and taking in -- that is included. H.M.Jr: You mean that if we did that we would have enough on the big engines? Mead: Yes. H.M.Jr: Now, incidentally, I talked to Edsel Ford this morning. He will be down here Friday at ten o'clock. Mead: That 18 a question I was going to ask you. H.M.Jr: But he has not started anything in his plant. The place where he started to tool up was in France, not in Detroit. Mead: Well, he and Olley, who represents Rolle-Royce, don't agree. H.H.Jr: Well, I am just -- Mead: Olley had the work done 80 he ought to know where it was done. He said it was available to us for use in Detroit. H.M.Jr: Mr. Ford claims it was in the French plant. Kraus: Tools may have been made in this country and gone to the French Ford plant. H.M.Jr: What I told them was to get this Chief Engineer in touch with you if they wanted any infor- mation, and he seemed to know -- I Am surprised how much he knew about this engine picture and then he mentioned some French engine which he understood was very good. Mead: Hispano Suiza? Renault? Regraded Uclassified - 26 - H.M.Jr: No, those aren't it. Mead: Hispano Suiza and Gnome Rhone are the two outstanding ones. H.M.Jr: Gnome Rhone, I guess it was. He started production plane on one of these. He knows all about this thing, and he will be down Friday. Mead: He 18 not very interested in this thing, 1s he? H.M.Jr: He 18 interested. Mead: I am having the Rolls man here in case we want him. H.M.Jr: Well, I don't know whether I have got any- where or whether I have just taken fifteen minutes of your time, but at least you can see the lines I am thinking about. I think maybe by Thursday you will have something for me. Mead: Oh yes. I still think you have got something there. that 18 pretty valuable right on your desk. H.M.Jr: I do. Mead: Even though the General over here 1s afraid we have stepped out, but we couldn't do any- thing else. We can't sit around and wait. Brett: There 1s nobody in the world in the War Department who knows anything about this yet. H.M.Jr: I have seen the President, and they have sent me to fix this program and they want me to help sell it, the big one, the one you called me up about this morning. When I see him, I am going to show him this unless you ask me not to. That gives you time to show it to your superiors, doesn't it? Brett: I have got to go back now, and I have got to go to Mr. Johnson and tell Mr. Johnson Regraded Uclassified 47 - 27 - exactly what I have done, and then I have got to go to General Marshall and tell him exactly what I have done, and all I can say 1s that I had to build a 50,000 plane program. H.M.Jr: And that the President insisted that we do it. Brett: And I took the best possible figures I could and built a 50,000 plane program to show the possible requirements in engines and airplanes. H.M.Jr: And that you were doing this at my request and I -- the President pressed me yesterday for an answer, see. Brett: Then I will probably get kicked out of the office. H.M.Jr: Get kicked out of where? Brett: Oh, I don't know. I am just one of these pick and shovel men, Mr. Secretary, you know. I have got ideas, but I am just a pick and shovel man. H.M.Jr: Well, I repeat once more, I don't know of anybody in Washington that has ever been hurt by working with me, and 8. lot of them got promoted. Brett: Well, the sad part of it 1s that I am tremendously enthusiastic, that 1s where -- the thing that -- Kraus: I don't think we have to apologize for this piece of paper, Mr. Secretary. I think it is the best piece of paper of its kind that has been attained 80 far. Brett: Yes, sir. H.M.Jr: I don't see why you should worry. One second more. Here is Just a couple of little things. Request for the French information on Navy seaplanes -- read this out loud, Phil. I have got a copy. Regraded Uclassified 43 - 28 - Young: "Lieutenant Commander Hamelet at the request of the French Under-Secretary of Air has requested, through the Liaison Committee, specifications for Curtiss XS0-3C seaplane and for the Martin XPBM reconnaissance seaplane. "As Commander Hamelet is returning to France the end of this week, Mr. Ballantyne asked me if the Commander could talk with someone in the Navy Department about these planes, because undoubtedly the technical specifications would not be released. The French would evidently like to place some orders for these planes if they are satisfactory." And I checked with Captain Kraus about it last night, and he suggested that someone from Admiral Powers' office should talk to this fellow. Kraus: I can show him what we have in B. few minutes. H.M.Jr: Can Philip Young make an appointment through you? Kraus: Yes, sir, I can take that letter or Just call up over there and I think we can handle it by telephone. H.M.Jr: Tear off that piece and give it to him and give me back another one. That 1s No. 1. What is the next one, Phil? Young: On engines. H.M.Jr: Anything on engines, or aircraft? Young: The Allison situation. That 18 just with respect to the telephone call. H.M.Jr: What is that, the five engines? Young: Yes. H.M.Jr: That 1s all right. Young: The Pratt & Whitney contracts which were signed by both the British and French on Regraded Uclassified 43 - 29 - May 22, giving the amount, British contract 1s for six hundred R28 engines with a total value of twenty million two hundred seventeen thousand dollars, of which six million four was capital assistance, delivery, January, 1941, completed in November, 1941. French contract covered two hundred thirty R1830 engines. The total value was four million nine, of which one million five was capital assistance. Delivery to start January, 1941. Completed in July, 1941. H.M.Jr: You people have that, don't you? Kraus: Yes. Young: They also ordered twenty-eight hundred sixty Hamilton propellers. No capital assistance to Hamilton. H.M.Jr: What else? Young: That is all on planes. H.M.Jr: Okay. I am very much obliged, gentlemen. Mead: Mr. Secretary, before we go, it strikes me that this paper is a pretty dangerous piece of paper to have get out of our hands. H.M.Jr: Well, I have got one copy. Mead: Because for a stock market to get hold of that or any other people -- H.M.Jr: I tell you what I will do. The next time Jerome Frank calls me up from the SEC and says, "Will you go along and let's close the stock exchange," I will jerk out a release on this. Mead: I have taken a lot of care in our office. The only copies are one for Brett and one for Kraus, and one for me and one for you. Lyons: We will have to reproduce one copy -- Mead: You will be hung once for every copy. 50 - 30 - H.M.Jr: What else? Well, I can't tell you how much I appreciate all your help. I am going to hang with you, if you are going to hang. I haven't hung yet, and I have been here seven years. TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE TO Secretary Morgenthau FROM Mr. Foley In accordance with your instructions, a conference was held at the Treasury Department yesterday afternoon from 3.30 to 7 o'clock for the purpose of considering drafts of agreements which might be submitted to Wright Aeronautical Corporation end United Aircraft Corporation to aid in carrying out the President's national defense rogram. Those who attended were Captain Krause, Lieutenant-Commander Jones (representing Admiral Woodson, Judge Advocate General of the Navyl, Captain Snodgrass and Mr. Koontz (representing General Gullion, Judge Advocate General of the Army), Mesars. Kaplan, Mothershead and Campbell of the Department of Justice and Messrs. Kades and O'Connell of this office. The draft agreements were approved ès to form and context by all present with & few minor amendments. In view of the limitations of time, however, it was understood that no one would be foreclosed from suggesting improvements which might occur to him in the next few days. The purpose of these agreements is to provide a method for incressing productive facilities for aircraft engines desired by the Government. This purpose 1s accomplished In one case by an agreement between the Wright Aeronautical Corporation and a corporation capable of producing aircraft engines, and in the other case by an agreement between United Aircraft Corporation and E. similar corporation. It is contemplated that wright Aeronautical and United Aircraft will each write E. letter to you declaring its in- tention of entering into an agreement with such B. corporation to be selected jointly in one case by Wright and the Government and in the other case by United and the Government. As soon thereafter as (a) the licensees are selected, (b) the licensed engines designated, (c) the terms of payment fixed and (d) the policy underlying the agreements approved, the program will be ready to go ahead. Regraded Uclassified 52 Secretary Morgenthau, 2. Under the agreements the Wright Aeronautical Corporation and the United Aircraft Corporation will grant the respective corporations to be 80 selected non-exclusive licenses to manu- facture and sell engines to the Government. To effectuate these licenses Wright Aeronautical Corporation or United Aircract Corporation will make available to the licensed corporations (a) their patents and patent applications, (b) the information, technical knowledge and experience necessary to manufacture the engines, and (c) methods and processes used in their manufacture, and will also provide the licensees with access to the manufacture of materials and machinery which they buy and to the jige, tools and dies needed. The Wright Agreement provides for three types of payments. The first type is to be made when the licensee receives the design drawings, specifications and information and the manufacturing drawings and production data. The second type is to be made seai- annually and will consist of 8. royalty for each engine with & minimum royalty regardless of the number of engines. The third type 18 to reimburse Wright Aeronautical Corporation for royalties which Wright is required to pay. These will be listed on a Schedule to be attached to the draft agreement and which is being prepared at the present time. The sums to be paid and the con- ditions covering the time and manner of payment have been left in blank. The United Agreement is substantially the same, except that instead of royalties, it provides for reimbursement of salaries paid to employees engaged in assisting the licensee and postage, telegrams, and similar miscellaneous office expenses. The Wright Agreement provides for the termination of the agree- ment in three (3) years, unless extended by mutual agreement. The United Agreement provides for termination at the end of the existing emergency, with a minimum period of three years, but this minimum has not been agreed to by United. Such a. minimum fixed license period was thought advisable by all present at the conference referred to above. Likewise, all present thought that the qualification in the draft letter of United Aircraft that the Government would place contracts with the licensee "only to the extent that the manufacturing capacity of United shall be unable to supply the licensed engines in the quantities required by the Government from time to time" was unacceptable. In this connection it may be pointed out that the draft of Wright Agreement has been tentatively approved by Mesars. Hotchkiss and Finlay of Wright, but the draft of United Agreement has not been approved by United officials. 58 Secretary Morgenthau, 3. Both agreements require that the licensees be furnished design drawings and specifications for manufacturing, assembling, testing and servicing the engines to be covered by the licenses, and detailed drawings and production data regarding the manufacture of component parts. Other provisions require that the licensees be supplied with drawings, specifications and other data relating to improvements in the methods of manufacture and changes in the design of the engine. Under the agreements technical aid and engineering personnel to assist the licensees in the manufacture, assembly, testing and servicing of the engines will be furnished, and aid will be given in developing sources of supply for the licensees. The licensees are authorized under both agreements to have representatives visit the plants of Wright Aeronautical and United Aircraft, es the case may be. The agreements also authorize the sellers of materials applicable to the licensed engine to use the patterns, dies, jiga and fixtures owned or controlled by Wright Aeronautical and United Aircraft, respectively, whenever the fabrication of these materials is desired by the licensees. E.N.Th. Regraded Uclassified 54 Draft of May 28, 1940 AGREEMENT made and entered into as of the day of . 19 by and between WRIGHT AERONAUTICAL CORPORATION, 8. corporation organized and existing under the laws of the State of Now York, with offices at Paterson, New Jersey, United States of America, (hereinafter referred to as "Wright"). party of the first part, and . a corporation organized and existing under the laws of the - (hereinafter referred to as the "Licensee"), party of the second part: In consideration of the mutual covenants and agreements of the partics hereto, each does agree with the other as follows: I. DEFINITIONS: For the purpose of this agreement, the Wright engine is defined AS the current single row radial-air- cooled geared and/or direct drive Model engine such as is now being sold by Wright to the United States of America, designed in the English inch moasurement system, and in accordance with specifica- tions satisfactory to the Government of the United States. Wherever the term "Engine" is and in this agreement, it shall be interpreted to mean the bare engine fully equipped, including magnetos, carburetors and spark plugs or the like, but exclusive of All optional accessories which are not necessary for the ordinary and usual operation of the engino. Engine "Type" shall be understood and defined as referring to the general configuration of the engine without specific reference to size or ordinary details, as for examplo, "Vee" type, single row radial type, double row radial typo, in-line type, air cooled type, water cooled type, etc. The word "Model" shall be understood and defined as referring to an engine of a particular type with a given number of cylinders and B given piston displacement. II. NON-EXCLUSIVE LICENSE: Wright hereby grants to Licensee for the term of this agreement a non-exclusive right and license to name- facture, assemble, use and sell Fright engines and spare parts Regraded Jclassified® therefor to the Government of the United States or any of its departments, 55 including all features applicable to said engine covered by United States letters patent or applications for patents now pending or hereafter ap- plied for which are owned or controlled by Wright. III. DESIGN DRAWINGS AND SPECIFICATIONS: Wright will furnish to the authorized representative or reprosentatives of Licensee at the plant of Wright at Paterson, Now Jersey, United States of America, within two months from the date of execution of this agreement, drawings, speci- fications and information regarding assembling, testing and servicing of the Wright ongine as indicated below: (1) Assembly drawings of the licensed engine and parts therefor. (2) Drawings and/or acceptance specifications for all component parts of the licensed ongine purchased by Wright from third parties in finished form, and acceptance specifications and description of all fin- ished accessories, normally purchased by Wright from third parties for application to the licensed engine. (3) Inspection instructions for finished parts. (4) Assembly instructions, assonbly inspection specifications and engine test specifications. (5) Fuel and oil specifications. (6) Engine operating instructions, overhaul and service canuals, tolerance charts, drawings and specifications for special tools, ac- cessories, etc. used in naintenance and overhaul activities. (7) Installation drawings and data showing general requirements for arrangement of cowlings, fuel and oil supply systoms, air intakes and heaters, ventilation of accessory compartments, ongine mounts. (8) Drawings or specifications of all special tools, jigs. fix- tures, etc. designed by Tright and used in the current assembly and test of the licensed engine. All drawings, specifications and data referred to above shall be copies of current drawings. specifications and instructions and other data Regraded Uclassified 56 when designed or prepared by Wright and employed by Wright in current assembly and overhaul activities. Four copies of the data shall be supplied. Two copies shall be delivered in Van Dyke or carbon back typewritten form, whichever is appropriate to the particular informa- tion supplied, in English test and dimensions as used by Tright, and two copies shall be delivered in blueprint form. Tright further agrees to furnish to the authorized representative or representatives of Licensee at the plant of Wright at Paterson, New Jersey, United States of America, at a compensation to be agreed upon and within one nonth from the date of receipt by Fright from Licenses of an order therefor, additional sets of the drawings and specifica- tions and other data referred to in this Article. Two copies of the drawings, specifications and other data, sinilar to that above referred to, of improvements, modifications and changes in Wright engines, shall, during the poriod hereof, be sup- plied by Wright without additional compensation, it being understood that changes in design and specification shall be delivered within one nonth after three months' periode of accurulation. IV. DETAILED MANUFACTURING DRAWINGS AND PRODUCTION DATA: Wright will furnish to the authorized representative or representatives of Licensee at the plant of Wright at Paterson, New Jersey, United States of America, within three nonths from the date of execution of this agree- nent, detailed drawings, specifications and information regarding the manufacture of component parts, as manufactured by Wright, for the engine, and suitable information for the purchase of parts not BO nanu- factured. Said nanufacturing drawings and information shall be 88 fol- lowe: (1) Detailed drawings of engine parta including tolorance spoci- fications for finished parts. (2) Material specifications including heat treating specifications. Regraded Uclassified " 57 (3) Bills of material, production drawings, process sheets, catorial test specifications. (4) Drawings and specifications of all special tools, jiga, fix- tures, etc. normally designed by Wright and used in the nanufacture, assembly and test of parts in process. (5) Inspection specifications used in nanufacturing, including drawings of inspection, tools, jigs and fixtures normally designed by Tright. All drawings, specifications and data referred to above shall be copies of current 7right drawings, specifications and instructions and other data normally designed or prepared by Fright and employed by Wright in current menufacturing activities. Four copies of the data shall be supplied. Two copies shall be delivered in Van Dyke or carbon back typewritton form, whichever is appropriate to the particular information supplied, in English text and dimensions as used by Wright, and two copies shall be delivered in blueprint form. Wright further agrees to furnish to the authorized representative or representatives of Licensee at the plant of Wright at Paterson, Now Jersey, United States of America. at a compensation to be agreed upon, within one month from the date of the receipt by Wright from Licensee of an order therefor, additional sets of the drawings, specifications and other data referred to in this Article. Two copies of the drawings, specifications and othor data, similar to that above referred to, of improvements in the nothods of manufacture of Wright engines, shall, during the period hereof, be supplied by Wright without additional compensation, it being understood that changes in dosign and specification shall be delivered within one month after three nonths' periods of accumulation. Regraded Uclassified - 5 58 V. SERVICES OF ENGINEERS IN LICENSEE'S FACTORY: During the tern hereof Wright undertakes and agrees to ronder all reasonable manufactur- ing and technical assistance and servicing information and data in con- nection with the manufacture, assembly, testing and servicing of the engine, and to that end, and at the request of Licensee, Wright agrees to furnish Licensee with the services of a reasonable number, not to exceed ( ). of competent and experienced engineers to assist Licensee in the nanufacture, assembly, testing and servicing of Wright engines and/or parts therefor. Licensee agrees to pay to Wright in B. menner to be agreed upon the cost of the services of any such engineer or engineers, together with all reasonable traveling and living expenses from the time he or they leave Paterson, New Jersey, United States of America, until their return there- to, plus per cont ( %) thereof. It is further agreed that all liability for injuries to or death of any or all of such engineers, and for damages of any kind and chargeable against Wright, which may arise from any cause occuring in the course of the employment of such engineers while they are with or employed by Licensee, shall be paid by Licensee. VI. PAYMENTS: Licensee agrees to nake payments to Wright at Paterson, New Jersey, United States of America, as follows: A. Partial Payments: (a) The sun of upon delivery to the authorized representative or representatives of Licensee at the Plant of Wright at Paterson, New Jersey, of the design drawings, specifications and information provided for in Article III hereof. (b) The sum of upon delivery to the authorized representative or representatives of Licensee at the Regraded Uclassified - 6 - 59 plant of Wright at Paterson, Now Jorsoy, of the manu- facturing drawings and production data provided for in Article IV hereof. B. Royalties: (a) Semi-annually during the first year of this agreement, whichever of the following anount is the greater: (1) the sun of or (2) the sun of for each direct drive engine manufactured, assembled or sold by Licensee, and the sun of for each geared engine manufactured, assembled or sold by Licensee. (b) Semi-annually during the remaining years of this agreement, whichever of the following suns is the greater: (1) the sum of or (2) the sun of for each direct drive engine, manufactured, assembled or sold by Licensee, and the sum of for each geared engine manufactured, assembled or sold by Licensee. C. Other Payments: Licensee agrees to reimburse Wright for royalties which Wright is required to pay in the anounts and in the manner shown on Schedule A hereto attached. D. Conditions of Payment: 60 -7- VII. REPRESENTATIVES OF LICENSEE AT WRIGHT PLANT: During the term hereof Licensee may send not more than ( ) technicians or representatives to the plant of Wright at Paterson, New Jersey, United States of America, to observe and study the methods enployed by Wright in the menufacture, assembly and servicing of the engine upon the following conditions: (1) Licensee shall pay all salaries and wages of such technicians or representatives and shall bear all traveling, liv- ing and other expense which may be incurred in this connection; (2) Wright shell not be required to admit such technicians or representatives to portions of their factory where work of a secret or confidential nature is in process or where prohibited from doing so by virtue of re- quirements made by the Government of the United States in connection with contracts for the building and developing of aircraft engines and/or accessories therefor; (3) whenever such technicians or representatives are stationed for instruction purposes, they will be under a responsible and capable leader who will secure conformance to the rules and regulations of Wright; (4) Wright will not be liable for injuries to or death of any or all such representatives while at the plant of Wright, or for injury, danage or loss to their property; and (5) Licensee will indemnify and Lold Wright harnless from any such liability. VIII. RESTRICTION ON PATE TS: It is understood between the parties hereto that no patent will be obtained or applied for by Licensee or by another with its inducement or consent, on Wright engines, or any draw- ings or parts thereof either as existing at present or as they may here- after be improved or developed by Fright without the express written COD- sent of Wright. IX. ASSIGNMENT OR TRANSFER: Licensee shall not assign, transfer or sell, or permit the use of the rights hereby granted, without the written Regraded Uclassified 61 -8- consent of Wright and shall not disclose or suffer to be disclosed to another, (except to the Government of the United States), any informa- tion or any designs, drawings or other data which it receives or 10 entitled to receive hereunder, and will, at its own expense, use every effort and take tho necessary proceedings to protect Wright against such disclosure. X. MAINTEPALCE OF RECORDS: Licensec shall at all times during the continuance of this agreement, keep accurate and separate accounts con- taining full entrios and particulars of sales of all engines and parts provided for hereunder, and of all engines and parts fabricated and/or assembled. Wright shall have access during reasonable business hours, not to exceed two investigations per annum, to the books and records of Licensee that :ertain to the subject matter of this agreement, in order to determine what sums, if any, are due it hereunder. XI. PREVENTION 07 PERFORMANCE 3Y WRIGHT: Wright shall not be deemed to have breached this agreement by reason of its failure to perform any of its obligations hereunder, provided such failure shall be due to strikes, fire, acts of God or a public enemy, riots, incendiaries, inter- ference by civil or military authorities, compliance with orders of the President of the United States or other governmental agencies, delays in transit or delivery on part of transportation companies or any act or failure to act of Licensee or other cause of the same or different nature beyond control or without fault of Pright. XII. CANCELLATION OF AGREEMENT: Wright may revoke or terminate this agreement if Licensee shall fail to nake payment of any sum required under this agreement and shall not remody and make good such failure or failures within thirty (30) days from the date of the mailing to it by Wright of & written notice of such failure. Regraded Uclassified 62 In the event of any such revocation or termination of this agree- gent, Jright shall be entitled to receive any and all moneya due it up to the date of such revocation or termination, and such revocation or tormination shall also be without prejudice to any claim which any party heroto may have against any other for damages in respect to any prior breaches of this agreement. In the ovent that this agreement shall be 80 revoked or 80 termi- nated, Licensee further agrees forthwith to deliver to Wright any and all working drawings, blueprints, specifications or other papers or data, and all copies thereof in its possession or under its control, applicable for use in connection with the manufacture of the licensed engines, and which the Licensee is not obligated to deliver to the Government of the United States or any of its departments. XIII. CONSTRUCTION OF AGREEMENT: This agreement shall be con- strued and the respective rights of the parties hereto upon its expira- tion or cancellation pursuant to its terms, shall be determined under and pursuant to the laws of the State of New York, United States of America. XIV. INFORMATION TO BE SUPPLIED BY LICENSEE: In the event that Licensee shall perfect any improvent, modification or invention which may be used in connection with the nanufacture of the licensed engine and/or parte therefor, it agrees forthwith to communicate the same to Wright, to grant to Wright, its successors and assigns, the right to use and apply the same in the manufacture of the licensed engine and/or parts therefor, whenever the same are or may thereafter be manufactured by Wright, its successors or assigns, and the right to include the same in any engine offered for sale by Jright or its successors or assigns, without charge or account thereof, and to execute any and all necessary instrumento to effectuate this purpose, the cost of such instruments, if any, to be borne by Wright, but there shall be no additional cost to -10- 63 Wright on account of the use of any such improvement, modification or invention, and any of the came may be used by Licensee in connection with products manufactured by it without payment of any kind. XV. NOTICES: Notices required under this agreement shall be sent by registered mail to the respective parties at the following addresses; Wright Aeronautical Corporation Paterson New Jersey U. S. A. (Licensee) XVI. LIMITATIONS: Licensee shall not have power to bind Wright by any guarantee or representation that it may give or in any other respect whatsoever, or to incur any debts or liabilities in the name or on behalf of Wright, and the parties hereto shall not be deemed partners or joint adventurers. XVII. EXPIRATION OF AGREEMENT: Unless sooner terminated pursuant to the provisions of Article XII hereof or extended by mutual agreement, this agreement shall cease and terminate three years from the date first above written and upon the expiration thereof all obligations of Wright and Licensee hereunder shall cease and terminate. The provisions of this Article shall not relieve either party of any obligations existing nur- suant to the terms of this agreement at the expiration late thereof. XVIII. GRANT TC VENDORS: Wri it hereby agrees to grant to vendors of all raw, semi-fabricated, and/or fabricated matorials used or eppli- cablo to the heroin licensed enginos the right to use for B. compensation to be mutually agrood upon, all patterns, dies, jiga, and/or fixtures owned or controlled by Wright which are necossary for the purpose of such fabrication at the plant of the vendor at which such patterns, dios, Jise, und/or fixturos aregenerally located, whenever such fabrications of Regraded Uclassified -11- 64 materials may be desired by the Licensee, trovided the Licensee gives Wright reasonable (30 days where practicable) notice prior to the com- moncement of the fabrication of such material, and provided such use by the Licensee does not conflict with Wright's requirements for materials fabricated by such potterns, dies, jigs, and/or fixtures. It is under- stood and agreed that Tright n/s the undisputed right to change at any time and from time to tima any or all of the above-montioned patterns, dios, jigs, and/or fixtures to provido for normal changes in design and/or manufacturing processes instiguted by fright. XIX. ARBITRATION: Any disputo arising herounder shall be submitted to arbitration at the election of either 27 the parties heroto, upon writton notice given to the other party hereto asking for such arbitra- tion and designating an arbitrator solocted by it. Within two (2) vecks from the giving of such notico, the other party heroto shall soloct an arbitrator and notify the first carty of such election. The two arbi- trators BO solocted shall select a third arbitrator within one month from the giving of the first above mentioned written notice. In case either of the partics fails to spocint ar arbitrator within the time aa act forth above, the other varty shall have the right to appoint the second arbitrator, and in case the two arbitrators first appointed are unable within the time set forth, to 12T00 upon the third arbitrator, the third arbitrator small be chosen by the Arbitration Association of America or its officers or board or connittoe authorized to act for it in such matters. The arbitration shall be conducted in Nov York City under the rules of the Arbitration Association of America. The docision of the arbitrators shull be final and binding OF the parties hereto, IN WITNESS WHEREOF, the parties horeto have caused this acrossement to be signed in thoir respective corporate names by their respective officers thereunto duly authorized, and their corporate seals to be Regraded Uclassified 65 - 12 - hereunto affixed, and to be attested by thoir respective Secretaries or other officers thereunto duly authorized, as of the day and year first above written. WRIGHT AERONAUTICAL CORPORATION ATTEST: By LICENSEE ATTEST: By 66 Draft of May 28, 1940 AGREEMENT this day of - 1940, between UNITED AIRCRAFT CORPORATION, a corporation organized and existing under the laws of the state of Delaware, having its principal place of business in the town of East Hartford, State of Connecticut, (hereinafter referred to as "United"), party of the first part and # a corporation organized and existing under the laws of the state of . (hereinafter referred to as "Licensoe"), party of the second part. In consideration of the payments to be made by Licensee to United in the amounts and manner hereinefter provided, and of the outual pron- ises herein set forth, tho parties hereto hereby agree as follows: Article I. Definitions The following definitions shall apply to the terms employed in this agreement wherever such terms are so employed, respectively. unless a different meaning be clearly indicated by the context: (a) The term "licensed engines" shall nean only single-row, air- cooled, nine cylinder fixed radial, poppet-valve engines of 985 cubic inch displacement, equipped with carburetors for the use of gasoline and with magnetos as an ignition system, as now namifactured by the Pratt & Whitney Aircraft Division of United for the United States and in accordance with specifications satisfactory to the United States under the designation of "Wasp, Junior Series B", and sub-series of such series, without reduction gearing and with such ratings and anounts of single-stage, gear-driven supercharging as are now avail- able for such engines. (b) The term "licensed parts" shall mean any spare or replacement part for licensed ongines. (c) The term "affiliated company" shall Dean (1) any corporation of which a najority of the outstanding share capital shall, from timo to tine, be owned or controlled, directly or indirectly, by United or by a Regraded Uclassified 67 corporation of which B. najority of tho outstanding share capital shall, from tine to time, be owned or controlled, directly or indirectly by United, and shall also mean (2) any corporation of which a najority of the outstanding share capital shall, from time to time, be owned or con- trolled, directly or indirectly, by another corporation which contompor- aneously shall own or control a majority of the outstanding share capital of United, and shall also nean (3) any corporation which, from time to tine, shall own or control, directly or indirectly, a majority of the outstanding share capital of United. (d) The words "United States" shall include the Government of the United States or any of its departments, agencies or instrumentalities. Articlo II. Rights Granted Section 1. United hereby grants to Licensee, upon the terms and conditions and subject to the linitations and right of termination herein set forth, a non-exclusive right or license to namufacture, assemble, use and sell to the United States licensed engines and licensed parts for the term or period beginning AS of the date of this Agreement and continuing for three years and thereafter until Licensee shall have made final delivery to the United States of all licensed engines and licensed parts required to be delivered under all contracts entered into between the United States and the Licensee therefor in carrying out the national defense program in relation to the procurement of aircraft as conten- plated by the nessage of the President of the United States to the Congress on May 16, 1940, (House Document No. 751, 76th Congress, 3d Session) or any extension of such program having continuity therewith. Section 2. The right or license granted by Section 1 hereof includes the right at all times during the term or period of this Agreement to use (but only in connection with the exercise of said right or license) any and all inventions relating to the licensed engines or any part or portion thereof or to any licensed parts which may from time to time be covered by United States letters patent, or applications therefor, owned or controlled by United or any affiliated company. Regraded Uclassified - 3 - 60 Article III. Drawings, Specifications, Manufacturing Equipment, Etc. Section 1. Within ( ) days from the day and year first above writton, United shall deliver to Licensee, f.o.b. East Hartford, Connecticut, two (2) complote eets of Van Dyke prints (capable of re- production), or, if Van Dyke prints are not available, two (2) complete sots of blueprints of all detailed-pert drawings, bills of naterial, specifications and mensurements covering the licensed enginee and licensed parts: two (2) complete sets of oporation sheets for the nanufacture of the licensed engines and licensed parts; and two (2) complete sots of blueprint drawings of changes in the liconsed engines or licensed parts, additional specifications and the like; Provided, that nothing herein shall be construed to obligate United to furnish any details of construc- tion, specifications or manufacturing process of any parts purchased by United for use in liconsed engines and not manufactured by United or an affilinted company or under license granted by United or an affiliated company. Section 2. Whenever requested by Licensee, United shall deliver to it, within ( ) days after such request is made, two (2) complete sets of drawings and specifications of any and all special manufacturing equipment (including patterns, dies, nachines, tools, Jigo. fixtures, Gages and the like) for which drawings or specifications are owned or con- trolled by United on the day and yoar first above written. Article IV. Improvenents Soction 1. Whenever during the term or period of this Agreement, United shall nako any inprovement or change in the design, or construc- tion of licensed engines, United shall give prospt written notice thoreof to Licensee, and, within ( ) days thereafter, shall furnish to Licensee f.o.b. Bast Hartford, Connecticut, full particulars of Regraded Uclassified such improvement, together with drawings and specifications completely 69 disclosing the same. Section 2. Nothing in this article shall be construed to require United to disclose to Licensee any improvement or change in design or construction which when applied to licensed engines creates an engine of B model substantially different from licensed engines. Section 3. The right or license granted by this Agreement shall for all purposes be deemed to extend to and to cover, without any other act by either of the parties hereto, all improvements in the design or construction of licensed engines which, when applied to licensed engines, do not create a model of engine substantially different from licensed engines. Article V. Special Agreements of United Section 1. So far as it reasonably can, United agrees to make available to Licensee at the plant of Licensee such of its engineers, production experts, and technical personnel as may be necessary end which Licensee nay request from time to tine to assist Licensee in the namu- facture of licensed engines, including the production, assembly, testing and servicing thereof upon the condition that the Licensee will pay the salaries and expenses of such engineers, exports, and other technical personnel, including their travelling expenses in each diroction between the plant of United at East Hartford, Connocticut, and the plant or plants of Licenses. Section 2. United agrees to permit Liconsos to cause ( ) engineers and ( ) production exports to visit tho plant of United at East Hartford, Connecticut, for the purpose of observing or studying tho nethods of manufacture and assenbly of licensed engines at all tinos during the term or period of this Agreement: Provided, That (1) such engineers and experts shall not receive any componsation or salary - 5 - 70 from United, (2) nono of the expenses of such engineers and exports shall be upon United and (3) Licensee will save United harmless from any clain or clains on account of the death of or any injury or ac- cident to any such engineer or expert while present at the plant of United. Section 3. United warrants that all drawings, Van Dyko and blue- prints, bills of naterial, specifications and engineering data furnish- ed by it pursuant to the provisions of this Agreement shall accord with its current practico in the United States of America and shall accurately reflect its bost judgment in the prenisos, but no other varranty of any nature shall oxtend thereto or be inplied therefron. Section 4. So far as it reasonably can, United agrees to assist Licensee in developing its sources of naterials ontering into the nanu- facture of licensed engines and in the procurement of such standard manufacturing equipment as may be required by Licensee for use in the nanufacture of licensed engines. Soction 5. United agrees to grant to vendors of all rew, seni- fabricated and fabricated naterials used in or applicable to the name- facture of licensed ongines the right to use all patterns, dies, jigs and fixtures owned or controlled by United or any affiliated company, at the plant of the vendor where the sano are usually located, and which are needed to fabricate such materials whenever Licensee dosires to have such naterials fabricated: Provided, such use by Licensoo does not conflict with the uso by United of such patterns, dios, Jige and fixtures. Article VI. Payments Section 1. Licensee agrees to make payments to United at East Hartford, Connecticut, United States of America, as follows: (1) The sun of upon delivery to the authorized repro- sontative or representatives of Liconsee at the plant of -71 - 6 - United at East Hartford, Connecticut, of the design drawings, bills of material, specifications, measuremente and other information which United agreed to deliver in Article III hereof. (2) The sun of upon dolivery to the authorized representative or representatives of Licenses at the plant of United at East Hartford, Connecticut, of the drawings and specifications which United has agreed to deliver in Article IV hereof. (3) A sun oqual to the salaries paid by United to any and all of its officers and employees for the period or periods in which they nay respectively be occupied in assisting the Licensee, its agents and employees, in the nanufacture of licensed engines hereunder, as provided in section 1 of Article V of this Agreement, whether such timo is spent at Unitod's plant, or in Licensee's plant, or elsewhere. (4) A sum equal to the anounts expended by United for postage, telegrams, telephone calls, express and similar miscellaneous office expenses. (5) A sum equal to royalties which United is required to pay in amounts and in the manner shown on Schedule A hereto attached. Section 2. The reinbursement of United for expenditures included under paragraphs (3). (4) and (5) of Section 1 shall be nade in the fol- lowing manner: Regraded Uclassified - 7 - 72 Article VII. Special Agreements of the Licensee Section 1. Licensee recognizes the validity of any and all United States patents and patont rights now or At any time hereafter owned or controlled by United covering licensed engines or licensed parts, and Licensee shall not at any timo during the continuance of this Agreement dispute, or cause to be disputed, the validity of said patents. Section 2. Licensee shall comply with all of United's reasonable requirements as to marking engines nanufactured, used, sold or otherwise disposed of under the right granted by this Agreement, and among other things shall attach to each licensed engine 60 nanufactured by it such appropriate legend to the effect that such engine was nanufactured under license from United as may be necessary in order to protect the validity of the patents involved. Licensee shall not, however, employ any of United's tradenarks or any colorable imitation thereof on any engines or parts thereof without the prior written consent of United. Section 3. Licensee shall not nake, manufacture, license, sell, lease or otherwise dispose of, during the term of this Agreement or at any time after its termination, any type, nodel or design of aeronautical engine or part thereof enbodying any one or more of the basic principles of design or nanufacture employed in and peculiar to the design or manufacture of licensed engines or licensed parts, other than such engines or parts thereof as may be manufactured either under this Agreement or pursuant to other rights, if any, expressly granted in writing to Licensee by United. Section 4. Whenever Licensee shall nake any changes in the design or construction of licensed ongines or licensed parts, Licensee shall, as soon as practicable thereafter, furnish to United, without cost to it, full particulare of such changes, together with drawings and speci- fications completely disclosing the same, When such disclosure shall Regraded Uclassified 73 - 8 - have been nado all rights in and to such changes shall, subject to the rights granted by this Agreement, but without any other act of oither of the partics horoto, pass to and vost in United to the sano extent for all intents and purposes as if such changes had been nade by United. Neverthcless, if deened necessary by United to protect its interests therein, Licensee shall, upon United's request, nake prompt and due applications for United States patonts covering any such changes and shall diligontly prosocute such applications to a conclusion, and upon the granting of any such patents shall (unless they be granted directly to United or its noninee) duly assign the sene to United or its nominee without requiring the payment of any fee or royalty with respect thereto: Provided, that the cost of obtaining such patents shall be for account of Unitod, Section 5. Licensed shall not at any tino discloso to any person any design data, technical information or other information of any charactor rolating to the design or nanufacture of licensed ongines or parts thereof, whether such information be received from United or any of its officors, agents or enployees or shall be information derived from experience gained by Liconseo in nanufacturing liconsed engines or parts thoroof; and Licensoe shall not at any tine disclose any such information to any person other than officers or departments of the Government acting in discharge of their logal duties. Section 6. Licensee shall furnish United one sot of all drawings nado by Licensec relative to the licensed engines and parts chereof 0.0 and when such drawings are completed. Regraded Uclassified - 9 - 74 VIII. Miscellaneous Provisions Section 1. If at any time the licensee shall be in default in making any payment hereunder at the time and in the manner herein pro- vided therefor, and any such default shall continue for a. period of sixty (60) days after notice thereof shall have been given by United to Licensee in the manner herein provided, then United shall have the right, at its option if it has complied with its obligations under this Agree- ment, to terminate the same by giving notice of such termination to Licensee. Upon the giving of such notice, this Agreement and all rights of Licenseo hereunder shall immediately terminate, excopt as horeincfter provided. Section 2. Upon the tormination of this Agrocment, either at the expiration of the term or poriod of the licenso heroby granted, or upon notice as provided in soction 1 of this Articlo VIII, all rights to manufacture licensed engines, or licensed parts, shall immodiately coase, excopt that Liconsoe may thoreafter ship, soll, or otherwise dispose of to the United States any licensed enginos or licensed parts manufactured or in course of manufacture by it at the date of termination. No such termination shall rolieve United or Licensee of their respective oblign- tions oxisting on the date of such termination. Upon any tormination of this Agreement, Liconsee shall forthwith return to United any and all drawings, blueprints, bills of materials, spocifications, operation sheets, and engineering data thon in its possession with respect to liconsed ongines and liconsed parts: Provided, That Licensee shall have the right to rotain two sets of drawings, one sot for the United States and ono set for overhoul and maintenance purposes. Section 3. In case any dispute, disagroement, or misunderstanding shall arisc botwoen the parties horeto in connection with this Agreement, such dispute, disagroement, or misunderstanding shall be reforred to Regraded Uclassified arbitration in the State of Connecticut, in the following manner: 75- Each party heroto shall promptly appoint one arbitrator, and the two arbitrators so appointed shall promptly appoint a third arbitrator; and the parties heroto agroo to accept, abido by, and carry out any docision arrived at by a majority of the throe arbitrators so appointed. The cost of any such arbitration shall be borne by the rospoctivo partics heroto in such proportions ns a majority of the arbitrators may detormine. Soction 4. Any notico or communication horein provided to be givon by United to Licensoe shall for all purposes be docned to be duly given and received, if sent by registered noil, postage propaid, addrossed to Licensoe at its principal place of business in . Any notice or communication heroin provided to be givon by Licensee to United shall for all purposes be docned to bo duly givon and recoived, if sent by registered mail, postage prepaid, addressed to United at ite principal place of business in East Hartford, Connecticut. Section 5. This Agreement shall bo interproted in accordance with the plain English meaning of its terms, and the construction thoreof shall be governed by the lows of the State of Conneticut. Section 6. All promises and covenants horein contained by or in be- half of either of the parties hereto shall bind and inuro to the bonefit of the respective successors and assigns of such parties: Provided, That the rights of Licenseo horeunder shall not be assignable without the prior written consent of United, except to the United States. IN WITNESS WHEREOF the parties hereto have caused this instrument to be exocuted, in duplicato, by their duly authorized officors or representa- tives, as of the day and year first abovo written. UNITED AIRCRAFT CORPORATION ATTEST: By LICENSEE ATTEST: By Regraded Uclassified 76 May 28, 1940 Dear Admiral Stark: It gives no great pleasure to anclose herewith copies of statements showing airplane orders and deliveries to the British end French Governments from May 16 to May 22, 1940, and charts showing scheduled deliveries through December, 1941. This material was compiled by the Treasury Department on the basis of figures submitted by the Anglo-French Purchasing Board, Sincerely, (Signed) H. Morgenthau, Jr. Admiral Enrold R. Stark, Chief of Naval Operations, Havy Department, Washington, D. c. Ff:bj P4. Regraded Uclassified 77 May 28, 1940 Dear Mairal Stark: It gives me great pleasure to enclose herevith copies of statements showing airplane orders and deliveries to the British and French Governments from May 16 to May 22, 1940, and charts showing scheduled deliveries through December, 1941. This material vas compiled by the Treasury Department on the basis of figures submitted by the Anglo-Prench Purchasing Board. Sincerely, (Sugned) E Morgenthau. Jr. Admiral Hareld R. Stark, Chief of Naval Operations, Havy Department, Vashington, D. o. PY:bj Regraded Uclassified 78 May 28, 1940 Dear Admiral Stark: It gives no great pleasure to enclose herevith copies of statements showing airplane orders and deliveries to the British and French Governments from May 16 to May 22, 1940, and charte showing scheduled deliveries through December, 1941. This material vas compiled by the Treasury Department on the basis of figures submitted by the Anglo-French Purchasing Board. Sincerely, (Sagned) E Morgenthau. Jr. Admiral Harold R. Stark, Chief of Naval Operations, Havy Department, Washington, D. C. Fribj Regraded Uclassified 79 May 26, 1940 Dear General Marshall: It gives me great pleasure to enclose herewith copies of statements showing airplane orders and deliveries to the British and French Governments from May 16 to May 22, 1940, and charts showing scheduled deliveries through December, 1941. This material Vas compiled by the Treasury Department on the basis of figures submitted by the Anglo-French Purchasing Board. Sincerely, (Signed) = - Tr General George 0. Marshall Chief of Staff, Var Department, Vashington, D. c. PY:bj Toy. Regraded Uclassified 80 May 26, 1940 Dear General Marshall: It gives me great pleasure to enclose herewith copies of statements showing airplane orders and deliveries to the British and French Governments from May 16 to May 22, 1940, and charts showing scheduled deliveries through December, 1941. This material Vall compiled by the Treasury Department on the basis of figures submitted by the Anglo-French Purchasing Board. Sincerely, (Signed) H Morewathen. Jr. General George 0. Marshall Chief of Staff, Ver Department, Vashington, D. c. PY:bj Regraded Uclassified 81 May 28, 1940 Dear General Marshall: It gives no great pleasure to enclose herewith copies of statements showing airplane orders and deliveries to the British and French Governments from May 16 to May 22, 1940, and charts showing scheduled doliveries through December, 1941. This material Vall compiled by the Treasury Department on the basis of figures submitted by the Anglo-French Purchasing Board. Sincerely, (Sagned) H. Mergesthau. Jr. General George 0. Marshall Chief of Staff, Var Department, Washington, D. C. Pribj Regraded Uclassified NUMBER OF BLAST FURNACES IN THE US Distribution by Districts 9469 mani - ONE R - - BICH pas 1 - W(D = cimm - in et - 10th TALIF 111 ¥ y NOV 12AMg 1044 = W V < HIM like 1 - 1 H \ UN- Charge If = III V - 11 - - plu COLO 1 : MO - - - OHIO LAND 26 - - VP ve - - AT *** = - CALA TENA 1. - ... TEXAS &F : MA - I LA FLA LEGEND Furnance in blass Furnance relle As of Mai 28. 1940* Furnance blown in this week fosal Furnaces MY Blast - 106 5 Furnance b/own out this was Total Furnaces /dia - 65 Each det represente - furnance Preliminary E-mail give Security des 1V I . - 83 MAY 28 1940 My dear Captain Collins: In accepting your resignation as Director of Procurement at the close of business May 31, 1940, let no express my appreciation of the loyal service which you have rendered during the years in which you have been connected with the Treasury Department. I wish you success in any new field which you say enter. Sincerely, (Signed) H Morgenthan. To Secretary of the Treasury. Captain He 1. Collins, Director of Procurement, Treasury Department. HNG/mff ORIGINAL FORWARDED TO ADDRESSEE FROM OFFICE OF THE SECRETARY Initialed canbon to Ballingen & original on Sallind verignation also to Ballinger 6-0-40 8.5- Regraded Uclassified 84 May 21, 1940 My dear Mr. Secretary: It is respectfully requested that my resignation as Director of Procurement, Treasury Department, be accepted effective as of the close of business May 31, 1940. In submitting this resignation I wish to express my appreciation of the privilege of having been associated with you, which associations have not only been most enjoyable, but likewise, most inspiring and beneficial. I shall always look back on them with the greatest of pleasure. Very respectfully yours, e/ H.E. Callins Honorable Heary Morgenthau, Jr. The Secretary of the Treasury HECiga Regraded Uclassified 85 CONFIDENTIAL May 28, 1940 To: The Secretary From: Mr. Young REPORTING PROCEDURE My attempts to coordinate reports of the Anglo- French Purchasing Board are progressing satisfactorily. Lindow has prepared a tentative form in cooperation with the Purchasing Board on the one hand and with the State, War, and Navy Departments on the other. I have asked representatives of these Departments to meet in my office this morning, not only to settle definitely the informa- tion which they desire, but also the form in which it should be prepared and the frequency of reports. All of these Departments have been not only cooperative but even enthusiastic about this program. LIAISON COMMITTEE In working on the reporting procedure some question as to the usefulness of the Liaison Committee is bound to arise. Under the old system, reports were made directly from the Purchasing Board to this committee, which, in turn, routed the material to, or asked for information from the War and Havy Departments. In addition, the Var Department and the Army and Navy Munitions Board received reports from the State Department, which, in turn, secured the information from the embassies and ultimately the Purchasing the Board. Under the new system, the Office of the Secretary of the Treasury receives reports direct from the Purchasing Board, and matters of importance are generally discussed between the offices of the Secretaries of the Departments concerned rather than through offices down the line which have no direct interest in the situation. 86 - 2 - Thus, the functions of the Liaison Committee have been short-circuited. Either the Treasury should be the contact point with the Purchasing Board and then distri- bute information or forward inquiries to the other Departments interested, namely, State, War, and Navy: or the Liaison Committee should be the contact point with the Purchasing Board and distribute information or for- ward inquiries to these interested Departments, including the Treasury. In any event, if the Liaison Committee is preserved in its present form, the membership should include a representative of the State Department, and in addition those representatives of the War and Navy Departments should be those persons most interested in the Allied purchasing situation rather than the Quartermaster General and the Paymaster General. P4. 87 CONFIDENTIAL May 28, 1940 To: The Secretary From: Mr. Young Requests by French for Information on Navy Seaplanes Lt. Comdr. Hamelet at the request of the French Under Secretary of Air has requested, through the Liaison Committee, specifications for Curties XSO-3C seaplane and for the Martin XPBM Reconnaissance seaplane. As Commander Hamelet is returning to France the end of this week, Mr. Ballantyne asked me if the Commander could talk with someone in the Navy Department about these planes because undoubtedly the technical specifications would not be released. The French would evidently like to place some orders for these planes if they are satis- factory. I am arranging an appointment for Commander Hamelet with a representative of Admiral Towers. ALLOY SHIPMENTS Mr. Ballantyne asked me if the Treasury could give him any information with respect to shipments of molybdenum, nickel, and wolfram on Italian ships. I advised him to take the matter up with the State Department. DUPONT The Purchasing Board contract for the new duPont powder plant will be signed very shortly as the Board is not waiting to secure an answer from us on the matter of the powder machinery now held by the Army, or on the matter of a further release of 125 tons monthly of nitro-cellulose which Hercules is now delivering to the Army. - 2 - 83 ALLISON Mr. Ballantyne called me, and Colonel Jacquin attempted to reach me from New York, with respect to the delivery of the other four Allison engines. I asked him to be patient. A B C LISTS To my knowledge, no reply has yet been made to Mr. Purvis on the A B C lists of requests furnished you May 21st, and which you turned over to General Marshall, PRATT & WHITNEY The contract signed by the British with Pratt & Whitney May 22nd covered 600 R-2800 engines, and the total value amounted to $20,217,000, of which $6,406,000 vas capital assistance. Delivery on the engines will start January, 1941, and be completed November, 1941. The French contract of the same date covered 230 R-1830 engines, and the total value amounted to $4,926,000, of which $1,593,000 represented capital assistance. Delivery of the engines is to start January, 1941, and be completed July, 1941. HAMILTON A contract has been let to Hamilton covering 2860 Hamilton propellers at a total value of $10,450,000 with delivery from January to October, 1941. No capital assis- tance was included. P4. Hnise WAR DEPARTMENT OFFICE OF THE ASSISTANT SECRETARY 89 WASHINGTON, D.C. May 28, 1940 MEMORANDUM FOR THE HONORABLE HENRY MORGENTHAU, Jr: Subject: Conference on Machine Tools. 1. In accordance with your request at the meeting yesterday morning with the representatives of the Machine Tool Industry, I am outlining below the further discussion had with the group in the after- noon. The same members of the machine tool industry as were present in your office, as well as of Army, Navy and Commerce Department, at- tended the afternoon meeting. 2. Much discussion was had regarding the methods by which the machine tool industry could best proceed to meet the requirements shown on the memorandum of the Army and Navy Munitions Board, copies of which you furnished the industry members. The consensus was that the requirements indicated could be met by the industry in a reason- able time without any marked expansion of plant needed, provided the orders are placed promptly, the priorities are indicated and the whole program properly coordinated, with respect not only to Army and Navy, but civilian and foreign requirements. 3. To get this industry at work promptly and effectively, the group probably will recommend to you at the meeting on Monday that a "Machine Tool Committee" be established immediately. This committee should consist of a neutral industrialist as chairman and six or seven members-two to be selected by the machine tool industry, two from Navy, two from Army, and one from Treasury, if desired. On Monday, the mem- bership of such a committee will be recommended to you and a group of names suggested, any one of whom, in the opinion of our temporary com- mittee, would be suitable for chairman. 4. The functions of this committee would be to consider requirements for machine tools from all sources, the available and potential capacity to produce, priorities needed to meet national policies, as well as the equitable and efficient distribution of the load. Because of the close relationship of the machine tool industry Regraded Uclassified - -90 to many others, it appears essential that the chairman of the committee should be a neutral, with authority to make decisions and possessing the confidence of all parties interested in machine tools so that his decisions will be respected and carried out co- operatively. In fact, the method of complete cooperation between government and industry in this case appears the only method, since we are informed that legislative priority to government orders cannot now be obtained as the War and Navy Departments had hoped. H. K. Colonel, Ordnance Dept., Director, Planning Branch. + -91 INSERT TELEPHONE CONVERSATION WITH GENERAL MARSHALL BETWEEN PAGES 6 and 7 RE AIR EXPANSION PROGRAM May 28, 1940 8:30 a.m. Present: Mr. Mead Major Lyons General Brett Captain Kraus Mrs. Klotz H.M.Jr: Major Lyons, I want to continue on this thing on a confidential basis as I have. I got this memorandum from the President last night, see, signed by Mr. Woodring, giving your program. I will read it. I have got from now until nine o'clock, and this is what I want to get from you gentlemen. The three of you read this thing over together. Well, is that your program? Lyonst That is the training program only plus two hundred heavy bombers that are provided for in the supplementary estimates for 1941. H.M.Jr: Yes, but in this bill, when this b111 goes through, 18 that all the monies you get for aircraft? Lyons: In regular 1941, there are additional 166 airplanes, comprising six heavy bombers, 66 -- H.M.Jr: Why isn't that in there? Two hundred bombers? Lyons: This is the regular estimates for 1941, 66 medium bombers, 37 interceptor pursuits, 14 amphibians, 6 cargos, -- M.M.Jr: Why isn't that in there? Lyons: I can't answer that, sir, because that is the first time I have seen this. M.M.Jr: Well, make 1/t No. 1, will you? I want to prepare a memorandum for the President to write to Mr. Woodring and say why hasn't he included the following, which he under- stands are in the regular program. But get that from Major Lyons, see. What is it roughly again? - 2 - 93 Lyons: Six heavy bombers, 66 medium bombers, 37 interceptor pursuits, 14 amphibians, 6 cargo, 37 advanced trainers. (General Brett entered the conference) H.M.Jr: I just got B. memorandum from the President from Mr. Woodring -- Woodring to the President to me, and he has left off in this memorandum half of the stuff as to what your program is. The President asked him to submit everything, and what did he leave off? Lyons: The 1941 regular, 66 heavy bombers -- Brett: There are 66 heavy bombers in that 1941, and there were 200 in the President's emergency. That is the total of 266. Then there were 200 training planes in the President's emergency, and then in addition -- H.M.Jr: Have you seen the program? Brett: No, sir, I have not. H.M.Jr: Take a look at it, because I want to get -- Brett: We made an estimate, sir, that under the present program as established today with this latest emergency program of the President's, that there were a total requirement of 8,000 engines right today. H.M.Jr: Yes, but that comes to the President and it 18 incomplete. (Mrs. Klotz entered the conference) Brett: Now, this is just the addition to the present program, sir. H.M.Jr: What I would like, George, in my hands by five minutes of ten, is what is missing on that, see. Brett: In other words, you want us to take in the entire 1941 program. H.M.Jr: Sure, that is what the President's memorandum said. 94 - 3 - Brett: All right, sir, we can sive you that without any trouble. H.M.Jr: By five minutes of ten I want what is missing. In other words, the President and I want the whole program and they have just given us B. piece. Brett: We can give you that. H.M.Jr: I don't know who did it. Brett: I can give you that in no time. S.M.Jr: But I mean, the President of the United States was just given one piece of it and when I read this thing I said, "My God, he can't go before the Congress and give this 8.9 the whole air program after talking about 50,000 planes, then come up with a measly program like this." It is just a laughing stock. Brett: Mr. Secretary, you are only going to get an additional 166 planes in addition to that program there. H.M.Jr: Whatever it is, I want the President to have the whole program. I em not blaming you. I am going to tell what I am saying to Mr. Woodring. Brett: May I ask one question, sir? H.M.Jr: You can ask two. Brett: I just left Mr. General Marshall, sir, and about a week ago in compliance with that request of yours concerning -- 8. request for the release of certain airplanes to the foreign Purchasing Commission, I prepared B. memorandum to General Marshall at that time in which I suggested that in order to place orders -- in order to put the aircraft industry on its feet and take up all unused space, that there be 8. blank check be written for $300,000,000.00 for procurement of 3,000 airplanes. Those 3,000 airplanes lie within a given program which had been submitted. H.M.Jr: To whom? BS Hrett: Which the Air Corps had submitted to the War Department. Now, this memorandum to General Marshall makes this statement, sir. In addition to asking for 3,000 airplanes, $300,000,000.00, I made the statement that the Government immediately initiate action to accelerate engine deliveries. General Marshall 1a now presenting to the Secretary of War e supplemental estimate for the fiscal year 1941 in which he states these 3,000 additional airplanes, $300,000,000.00, these additional sirplanes are now needed for the purpose of accelerating production and placing the airplane industry on a well rounded production basis as well as to provide airplanes for possible use in operations. The submission of this item implies that the Government will immediately initiate action which will accelerate engine deliveries sufficient for the purpose. Now, General Marshall asked me, sir, if I would get a statement from you 88 to whether that state- ment in any way interferes with what you are trying to do. 11.M.Jr: Say it again. Brett: The request 1s for 3,000 additional airplanes, $300,000,000.00. These airplanes are now needed for the purpose of accelerating production and placing the airplane industry on & well rounded basis, as well as to provide airplanes for possible use in operations. The submission of this item implies that the Government will immediately initiate action which will accelerate engine deliveries sufficient for the purpose. Consultation with airplane manufacturers within the past four days -- airplane manufacturers, that is, only, air frames -- within the past four days points toward the desirability of accelerating the Procurement program to this extent. It will utilize to the maximum the potential capacity of air frame manufacturer in army types. Such orders should result in increased delivery rates within four to six months from date of the order, and will provide the necessary initial steps toward an increase in the quantity strength of the GH2. The reason why I suggested this step to General Marshall is in view of the fact that today we have no program. Regraded Uclassified 96 - 5 - H.M.Jr: Now may I say something? Brett: Over and beyond that which has already been proposed. H.M.Jr: Will you let me advise you? Brett: Yes, sir. H.M.Jr: That is all right from you to Marshall, but for God's sake don't give that to the President. It is OK with me. The finished thing is all right, but don't put it on the basis -- because somebody has unused capacity that therefore we have got to get $300,000,000.00 to fill up a factory. Put it on the basis of the needs of the country. The $300,000,000.00 is all right, I will go along with you and say God bless you, but put it on the basis, this is what we need to have a program, but don't put it on the basis -- it is all right from you to General Marshall, but from General Marshall to the President, put it on the basis of the needs of the country, financial needs. Brett: In other words, you will go along with this request provided the reason for the request is on a different basis than the one proposed? H.M.Jr: Exactly. That is fair enough, isn't it? Brett: That 1s very fair. May I be excused to telephone that message to General Marshall? H.M.Jr: Yes -- one minute, will you, just one second, and give me a couple of minutes? Put it on the basis that General Marshall will say to me, Morgenthau, that he needs -- is General Marshall at his office? Brett: Yes, sir. R.M.Jr: Why don't I call him up? Brett: Yes, sir, that would be by far the best, sir. Then he gets it directly from you. H.M.Jr: Let me call him up. Lid - 6 - 37 Brett: He was waiting for this message, because he had to go somewhere. H.M.Jr: I will give him the message. Brett: There is his statement, sir. H.M.Jr: His statement, or yours? Brett: His statement is right there, sir, and his memorandum to the Secretary of War. That is the item we are talking about. It carries on to the next page. (Telephone conversation with General Marshall follows) H.M.Jr: I am for the program, but I want & better reason than this thing that they keep throwing at me that Boeing is only at 8. third of their capacity. That doesn't appeal to me, but if you say the country needs It, OK, then we will go to town for you. Brett: As I said, Mr. Secretary, I put that in because I couldn't get a program and yet I know that we are going to have to have those airplanes. H.M.Jr: Can't you justify it on & national defense basis? Brett: I can justify it. I have got a program right here that is way out and beyond what I have asked for. H.M.Jr: Well, you won't have any trouble with me. I will back you up. All you have got to do is tell General Marshall the program has what this country needs -- well, you heard what I said, and then he can tell it to me and I will help sell it to the President, pronto, but I can't do it on that basis, and if you don't mind, I am 8. little bit frantic today because I feel that way, but this thing is 80 important and then when I got this memorandum of the few training planes and 200 bombers, I said, "My God, are we going to let the President of the United States down and go before the country with a program like that?" 30 - drott: The 1941 doesn't increase it at all, sir. H.M.Jr: Yes, but the two together make something and then you come along with 300,000,000.00 more. Now, one thing I think you ought to put in that program when you ask for $300,000,000.00, some of that money -- I mean they ought to have leeway in there -- and I think this 18 very important if you are going to ask for B. $300,000,000.00 lump sum -- leeway for plant expansion and tooling. I think it is terribly important. Will you make e note of that? There isn't going to be enough money in the $100,000,000.00. If you ask for $300,000,000.00, leave it that at the direction of the President, certain proportions of this could be used for plant expansion and tooling. They will say we are going in competition with business and all the rest of that stuff, but it can't be helped. Meed: That would be plane expansion, not engine facilities. B.M.Jr: What is the all inclusive word? Aircraft and engines. Both. Now look, gentlemen, you are going to have that back for me at five minutes of ten. Mead: Yes, sir. H.K.Jr: Now, last night Purvis called me up and wanted to place an order for two thousand Jacobs engines, 330 horse, on Canada. I want to know where that fits into your picture, see. Do you know that? Is this news? Brett: We can let you know right off. M.M.Jr: I say is this news? Brett: Yes, sir, that is news. We understood the Canadians were after some Kinner engines. F.M.Jr: It is Jacoba. Brett: The Canadians were after the smaller Jacobs engines. S.V.Jr: The Minister of National Defense was with Purvis yesterday. He called me last night at 8:30 and they want to buy two thousand 330 horse power Jacobs engines because -- incidentally, he said the Bristol deal is off, too. They don't want the Bristol. Now, could you gentlemen -- I am free again at 11:00 -- come back and talk with me again so that we can begin to talk in connection with this trainer thing, what does the Army and Navy want, which engine do they want for the trainer planes? Not now, but at eleven o'clock, 80 we can push this licensing thing and begin to 60 to town on that thing. Mead: We will have that. H.M.Jr: Now in this thing, General Brett, that you hope to get, the ,300,000,000.00, will any of that be for more trainers or not? Brett: No, sir, that will be -- the major part of it -- for tactical purposes only. H.M.Jp: I can do the trainer thing at eleven o'clock, and also talk in terms of how many big engines we want. To give you what I am thinking about, I want to talk to Pratt & Whitney and Wright when they come down here about each of them, either licensing or building another factory in the middle West to build big engines. That is the way my mind is running. What is the biggest engine they make now which is successful? Meed: Pratt & Whitney, 2,000 and 2,800. The Curtiss, about 1,800. H.H.Jr: And I want to say to you at eleven o'clock, now the biggest engine that Pratt & Whitney make and the biggest engine that Curtiss makes, each of them could build another factory as the President mentioned at lunch yesterday, somewhere in the West, just to turn out these big engines and how many would you want. Brett: Well, right today we have B. very small -- we have on our present program right up to date, exclusive about 3,000 airplanes, about 1,500 -- 2,378 of the thousand horse power plants, There is B. total of about 3,000 engines. Now, 1,500 in the 1,500 horse power class. Thet is the reason why I am anxious to get that Regraded Uclassified - 9 - 200 $300,000,000.00, because then I could say how many more engines of the larger classes we needed. H.M.Jr: Now look, can you come back at eleven and let's talk engines. Brett: Yes, sir. H.M.Jr: Let's talk on the two bases, what you have got now, Army and Navy together, present program, and what are the engines you would need if you sot the $300,000,000.00 more, and you (Kraus) have got an authorization to build 10,000 long distance planes, haven't you? Kraus: Yes. H.M.Jr: Don't you think we could do that between eleven and twelve? Kraus: I have the best guess on it from some days ago, and I think we will have & more accurate guess. H.M.Jr: You people will be very much interested in this. The President of the United States says -- I asked him this -- and this is right in the room here, please -- what did he mean by 50,000 planes, see. Mead: I asked you. H.M.Jr: Well, he started to think out loud, and what he said was, "When I say 50,000 planes, I say 10,000 planes for training purposes, and 40,000 planes for fighting purposes." Now, that is the terms he is thinking of, see. Brett: In other words, 80% for combat and -- H.M.Jr: He is thinking in terms of 40,000 planes and the capacity -- now, let's see, how did he put this thing? I think he said for the Army he wouldn't want more than 10,000 -- this 1s what I think it was -- more than 10,000 first line fighting planes. I think that 18 what he said. He said you would want the capacity to replace that every year. 101 - 10 - Brett: General Marshall is right there on any program you want to fill. H.M.Jr: You work with me from eleven to twelve, and I will give you something if you will come back 80 that we can sell this to the President, but if you don't mind, I couldn't sell it on that basis, because I know my President. I know myself. Mead: Does this include the Navy? H.M.Jr: Sure. Mead: And it includes existing airplanes as of -- this is not all brand new ships? H.M.Jr: Yes, sir. Mead: Brand new? H.M.Jr: Brand new ships. I will see you all at eleven and let's go to town between eleven and twelve. I 102 gave Pres. copy of gure meads Break down 50,000 flaves want another copy. Pres, seemed to like it 5-28-40 5/28/00 Estimates for 103 50,000 PLANE PROGRAM DISTRIBUTION Navy Army Totals Trainers 3,500 14,000 17,500 Tactical 10,000 22,500 32,500 13,500 36,500 50,000 AIRPLANES Navy (without engines) Number Total Trainers 3,500 $ 49,000,000 Tactical 10,000 675,000,000 13,500 $ 724,000,000 Army (without engines) Number Total Trainers 14,000 $ 231,500,000 Tactical 22,500 1,417,800,000 36,500 $1,649,300,000 Total 50,000 $2,373,300,000 ENGINES Power Range Navy Army Total Total 1,500 - 2,000 h.p. 11,600 25,600 37,200 $ 651,000,000 1,000 - 1,500 h.p. 4,900 17,100 22,000 264,000,000 200 - 600 h.p. 10,650 29,000 39,650 178,425,000 Total 27,150 71,700 98,850 $1,093,425,000 Regraded Uclassified - 2 - 104 Cost Summary Navy Planes $ 724,000,000 Navy engines 309,725,000 Total Navy requirements $1,033,725,000 Army planes $1,649,300,000 Army engines 783,700,000 Total Army requirements $2,433,000,000 Grand Total $3,466,725,000 May 28, 1940 Ja meat Nationates for 50,000 PLANE FROM have - 3,500 14,000 17,500 Trainers Tastical 10,000 22.22 32,500 13,500 36,500 50,000 37% 63% AUROLANE MILL (withem) englass) Total 3,500 1 49,000,000 Trainers 10,000 675,000,000 Tastical 13,500 $ 724,000,000 ARE (witheat engines) lake Total 14,000 # 231,500,000 Trainers 22,500 1,417,800,000 Tastical 36,500 $1,649,300,000 50,000 $2,373,300,000 Total If mm Total Intel 1,500 - 2,000 m.p. 11,600 25,600 37,200 8 651,000,000 17,100 22,000 264,000,000 1,000 - 1,500 h.p. 4,900 200 600 h.p. 10,650 19,000 are 178,485,000 - Total 27,150 71.700 38,850 $1,093,425,000 1250 5 - can Regraded Uclassified - 2 - 106 Havy planes 6 724,000,000 Berry engines 399,785,099 Total Herry requirements $1,033,725,000 40% - planes $2,649,300,000 Any engines 763,700,000 Total - requirements $2,433,000,000 60% Grand Total $3,466,725,000 and i I Drost ( aee droot dates # # 2 WAR DEPARTMENT OFFICE OF THE CHIEF OF STAFF "meme Prestar Pres war to 5/29) WASHINGTON, D.C. per of 107 May 28, 1940. MEMORANDUM FOR THE SECRETARY OF THE TREASURY: General Watson directed that the attached copy of memorandum for the Secretary of War, dated May 28, 1940, Subject: Supplemental Estimate, F.Y. 1941, be sent to you. I understand that you and General Marshall are to see the President at 11:30 a.m. tomorrow on this subject. By direction of the Chief of Staff: ORLANDO WARD, Lt.Col., General Staff, Secretary, General Staff. Incl. 106 G-4/31190-12 Drugh I YM BCM May 28, 1940. OCU BLM MEMORANDOM FOR THE SECRETARY OF WAR: Subject: Supplemental Estimate, F.Y. 1941. 1. The Var Department recomends that the following supplemental estimates for Fiscal Year 1941 be approved. These items are submitted at this time as a. result of an analysis of information which has ⑉ by way of press reports and official reports of our Military Attaches in Europe. Alse, proliminary reports from our mansuvers, emploted last week, have indicated the desirability of a change in the organisation of certain units of the Protective Wobiliantion Flan, which necessitates an inmediate start toward acquisition of the required critical items of na- terial. 2. Critical Items (less airplanes)s 1. 1690 tanks at $46,000 $77,740,000 1. 200 scout safe at $9,500 1,900,000 2. 527 - 75 - How. mounted on self- prepalled earrier, at $10,000 5,270,000 1. 216 personnel carriers, armored, half- track vehicles, 16-man type st $13,000 2,808,000 1. 528 personnel carriers, armored, half- trask vehicles, 8-zen type at $4,500 2,376,000 Total $90,094,000 Developments is Surope and during our indicate the necessity for Initiating production of this naterial, particularly as to the armor plate required. E. Ordnance: Bombs and amunition for airplane bowbers go LE to increase the amount of benbs and ammunition available, insuranch all recent sperations abroad have shown that the amount of booking to be performed by benbers is greater than has been previous- 1y calculated 26,900,000 - 1 - Regraded Uclassified 105 (storage for these bombe is included in Paragraph 4 below.) &- Critical Items for 8 semi-mobile AA Regi- ments at $3,800,000 each for protection of installation in Lose of the Interior (Not included in Protective Mobilization Plan). $30,400,000 as follows: (1) Ordnanes $22,320,000 (2) Engineer 6,000,000 (3) Signal 2,080,000 Total $30,400,000 AA Ammunition (Grdnanes) for the above 8 somi-mobile W regisents $23,040,000 W follows: 800,000 shell, H.E., for 90 . AA Our. 492,000 shall, S.L., for 31 50 44 Own, The necessity for such units is apparent, but the princi- pal purpose of submitting those items at this time is 16 increase production rutes, b. Ordnanger 72 - 105 MD Hav. at $30,000 8 2,160,000 (120 already provided for. 72 additional, or total of 192, will permit replasement of 155 IS Hows. in , triangular divisions at 16 each and provide 48 for two 105 - How. Regts. in GERQ Arty.) 216,000 shell, H.S., for 105 - How. at $30 .... 6 6,480,000 1. Critical Items of Medical equipment to complete two Mobile Operating Sections and two Rospitalisation Sections, Surgical Hospital (less prine novers); 1 Field lat eratery) and to reduce the shortage in surgical instruments required for the Pre- testime Mobilisation Plan 4 600,000 $ 300,000,000 3. 3000 Additional Airplange It is inperative that we apply the lessons learned from current air warfare to our own air forees with the least practianole delay. This beens at least this mabor of additional airplanes, up-te-date in all respects, expe- cially armament. - 2 - Regraded Uclassified 110 Prevision for this number of combat planes will permit us to initiate, as papidly as industry can accept our orders, the first stage of the increase of the GEQ Air Force to a strength pro- perticnate to the increase in ground troops provided for in the Protestive Mobilisation Plan. 4. Constructions For bomb storage at Ordnance Depets, Posts and Air Bases, Cont. United States, for additional bombs. (See Par. 2 £ above) * 2,900,000 5. Research and Developments The rapid accumulation of information regarding the continuing improvement of all types of equip- ment and the figures from the 1942 budget esti- mates, indicate the advisability of speeding up the Research and Development program as follows: Air Corps $16,500,000 Chamical Warfare Service 440,000 Goast Artillery Corps 139,000 Corps of Engineers 550,000 Medical Department 37,000 Ordnance Department 3,464,000 Quarternaster Corps 130,000 Signal Corps 1,740,000 Secretary of War's Reserve 700,000 23,700,000 6. The grand total of the Supplemental Estimates, F.Y. 1941, requested above, is $506,274,000 (Sgd) Q. C. MARSHALL Chief of Staff. has:PD - 3 . Regraded Uclassified 2nd draft 112 my 29, 1940. MENCELANDUM FOR THE PRESIDENT: Subjects Supplemental Estimate, P.Y. 1941. 1. The Name Department recomends that the following supplemental estimates for Fiscal Year 1941 be approved. These items are submitted at this time BE a result of an analysis of information which has GODS by way of press reports and official reports of our Illitary Attaches in Purope. Also, preliminary reports from our unneuvers, completed last weak, have indicated the desirability of a change in the organism- tion of certain write of the Protective Mobilization Plan, which 100- easitates an immediate start toward acquisition of the required critical items of material. 2. Critical Items (less airplanes); 1. 1690 tanks at $46,000 $ 77,740,000 b. 200 scout carr at $9,500. 1,900,000 2. 527 - 75mm. Howitsers mounted on self- propelled carrier, at $10,000 ...... 5,270,000 so 216 personnel certiers, amored, half- treok vehicles, 16-man type at $13,000. 2,803,000 2 528 personnal carriers, armored, ball- track vahicles, S-man type at $4,500. 2,376,000 Total. 90,094,000 Developmento in Europe and during our manuvers indicate the necessity for initiating produe- tion of this material, particularly as to the armor plate required. & Ordnance: Bombe and amainition for airplane bonbers to as to increase the amount of bombs and amunition available, insuruch as recent operations streed have shown that the amount of bombing to be parformed by bombers is greater than has been previously calcu- lated 26,900,000 Regraded Uclassified 112 Regraded Uclassified (sterage for these bombs Le included in Paragraph 4 below) w Critical Items for # seni-mobile M Regi- mate no $3,800,000 each for protection of installation in Zone of the Interier (Not included in Protective Mobilination Plan). s 30,400,000 as followst (1) Ordnomes $22,320,000 (2) Engineer 6,000,000 (3) Signal 2,000,000 Total $30,400,000 M Ansumition (Ordnance) for the above 8 seni-mobile M regiments 23,040,000 as follows: 800,000 shell, R.E., for 90 - M Cuse 492,000 shall, L.L., for 39 - M Que The necessity for such units 10 apparent, but the primot- yes purpose of submitting these items at this time 10 to increase production rates, w N - 105 - Have of $30,000 $ $ 2,160,000 (120 already provided for. 72 additional, # total of 192, will permit replacement of 155 Mile Hows. is 9 triengular divisions at 16 each and provide 48 for two 105 - Dov. Rogis, in ONLY Arty.). 216,000 chall, 11, for 205 - How. at $30.0 0 6,480,000 & Oritical Items of Medical equipment to complete two Mobile Operating Sections and to Hospitalization Sections, Surgical Respital (Loss prime novere); 1 Field Lab- oratory) and to reduce the shortage is surgical instruments required for the Pro- tective Mobilination Plan $ 600,000 30 2850 Additional Airolates $300,000,000 It is imperative that - apply the lesseas learned from current air warfare to OUR ONE air rerees with the least precticable delay. This means at least this number of additional airplance, up-to-date in all respects, - oially or . . ins Provision for this number of combet plense will permit us to initiate, a rapidly 18 industry can accept our orders, the first stage of the incruase of the GHQ Air Force to a strength proportionate to the increase in ground troops provided for in the Protective Mobilization Plan. 4. Construction: For bomb storage at Ordnance Depots, Poste and Air Baeds, Cont. United States, for additional bombs. (See Par. 2 i above) $2,900,000 5. The rapid accumulation of information regarding the continuing improvement of all types of equip- ment and the figures from the 1942 budget esti- mates, indicate the advisability of speeding up the Research and Development program 6.8 follows: Air Corps $16,500,000 Chemical Warfare Service 440,000 Coast Artillery Corps 139,000 Corps of Engineure 550,000 Medical Department 37,000 Ordnance Department 3,464,000 Quartermater Corps 130,000 Signal Corps 1,740,000 Secretary of Har's Reserve 700,000 23,700,000 6. Production Facilities $200,000,000 This material program must be supported by an expension program of production facilities to fill gaps and inadequacios that will be found in industry as they develop. 7. The grand total of the Supplemental Estimates, 7.1. 1941, requested above, is $706,274,000 Secretary of Far. - , - Regraded Uclassified 114 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE May 28, 1940 TO Secretary Morgenthau FROM Mr. Cochran confidential After an early decline on news of European developments, sterling experienced a recovery due to the appearance of unusually heavy commercial demand. The pound opened at 3.14-1/4. five cents lower than last night's close. In the first hour of trading. it moved off further, touching a low of 3.11-3/4. The improvement which subsequently took place carried the rate to 8. high of 3.18 at the close. A commercial concern was reported to have bought L120,000 for the purpose of paying off a sterling loan. This purchase is included in the commercial buy- ing orders shown below. Sales of spot sterling by the six reporting banks totaled L306,000, from the following sources: By commercial concerns I 89,000 By foreign banks (South America, Europe and Far East) 1217,000 Total 6306,000 Purchases of spot sterling amounted to L677,000, as indicated below: By commercial concerns L597,000 By foreign banks (Far East) 1 80,000 Total 1677,000 The following reporting banks sold cotton bills totaling L21,000 to the British Control on the basis of the official rate of 4,02-1/2: L20,000 by the Irving Trust Company 1,000 by the Bankers Trust Company L21,000 Total Developments in the other currencies were as follows: The French franc moved off to & low of .0176-3/4 in early trading. It subsequently improved to close at .0179-1/2. Although its movement vas similar to that of sterling, the franc depreciated somewhat in terms of the pound. From 176.40 france per pound at the opening. the cross-rate widened to close at 177.15. The Swiss franc vas steady and closed at 2242. The closing discount for the Canadian dollar was 21-1/2%, as against yesterday's final quotation of 20-1/2%. Regraded Uclassified - ? 115 The lira and the reichemark were quoted all day at .0505 and .4000 respectively, unchanged from yesterday's rates. The yuan quotations received from Shanghai were unchanged at 5-1/20 against the dollar and 4-1/8d in terms of the British pound. The Cuban peso experienced its fourth successive day of improvement and reached 8-7/8% discount today, as compared with 10-5/16% discount on May 23. The Mexican peso was unchanged at .1672. We purchased $25,000,000 in gold from the earmarked account of the Bank of England. The Federal Reserve Bank reported that the following shipments of gold were being consigned to it: $12,426,000 from England, shipped by the Bank of England. to be earmarked for its account. 2,244,000 from England, shipped by the Bank of England for account of the Swies National Bank, di sposition unknown. 1,936,000 from Switzerland, shipped by the Swies National Bank, Bern, to be earmarked for account of the B.I.S. 1,790,000 from Canada, shipped by the Bank of Canada, Ottawa, for its account, for sale to the U. S. Assay Office. 1,031,000 from England, shipped by the Bank of England, to be earmarked for account of the Bank of Portugal. $19,427,000 Total The Federal Reserve Bank also reported that the Guaranty Trust Company. London, shipped $23,000 in gold from England to its head office at New York, for sale to the U. S. Assay Office. The dollar equivalent of the Bombay gold price, which yesterday reached a current high of $38.99 after a week-long improvement, today fell back to $37.98. e loss of $1.01. The Bombay spot silver quotation worked out to the equivalent of 45.77#, off 1/84. In London, the prices fixed for spot and forward silver both moved off 5/16a to 22d and 21-1/2d respectively. The U. 8. equivalents, calculated at the open market rate for sterling, were 31.58# and 30.62#. On the basis of the official sterling-dollar rate, the spot price was equivalent to 40.00#. Handy and Harman today raised its settlement price for foreign silver to 35-5/84, an increase of 1/44. The Treasury's purchase price for foreign silver vas unchanged at 35#. It was reported that silver was mold in New York at 35-7/84. There were no purchases of silver made by us today. 10m. CONFIDENTIAL Regraded Uclassified STRICTLY CONFIDENTIAL TREASURY DEPARTMENT 116 INTER-OFFICE COMMUNICATION DATE May 28, 1940 TO Secretary Morgenthau FROM Kr. Cochran Rr. Pinsent, Financial Counselor of the British Embassy, VELS in touch with ne several times yesterday, May 27. in regard to his memorandum of Yes 24, 1940, conveying a message from the Chanceller of the Exchequer to the Secretary of the Treasury. The British Government had cabled and tele- phoned yesterday seeking an early response, in view of the urgency of the situation. I pressed the State Department for a reply with respect to its attitude on the points raised in the memorandum, and talked with Messre. Pasvolaky, Livesey and Stone. It was not possible, however, to obtain an opinion from Secretary Hull until this morning, when I received at 9:45 an oral message from Mr. Livesey setting forth the views of the Department of State. I then drafted a memorandum setting forth this Government's position. After mentioning this to Messrs. Bell and Bernstein, I telephoned Mr. Pinsent et 10:15 a.n. and read to him the attached memorandum, constituting B. reply Ló the message from the Chancellor of the Exchequer. Mr. Pinsent was entirely entisfied with the reply, since he was aware, as were ve, that the British Government has already commenced advising our State Department in sivence of its negotiations for payment agreements with countries of South America, The final paragraph of the memorandum 18 in response to an oral inquiry, which was not incorporated in the note of May 24 from the British Embasay. It will be our duty, once the British take the contemplated steps, to 200 what the Federal Reserve System will be willing to do in regard to quot- 10, only the official rate for sterling. BMS Regraded Uclassified 727 The Secretary of the Treasury thanks the Chancellor of the Exchequer for the message communicated to him through the British Embassy on May 24, 1940. After consultation with the Secretary of State, Mr. Morgenthau assures the Chancellor of the Exchequer that the necessity for the proposed action, as set forth in paragraphs 1 to 7 of the message, is understood. In respect of British relations with third countries we would desire that our interests be carefully taken into account in making payments arrangements with other countries, especially in South America, and that, wherever possible, we would be consulted in advance. The United States Government will take up with the appropriate officials of the Federal Reserve System the request of the Chancellor of the Exchequer that the official rate for sterling be quoted and that no quotation of the free rate be published. The Secretary of the Treasury is naturally interested in seeing that the American market remains open to the sale by the British Government of United States doller securities. 3:00P. Regraded Uclassified 110 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE May 28, 1940 TO Secretary Morgenthau STRICTLY CONFIDENTIAL FROM Mr. Cochran Mr. Felix Somary, the Swinn Banker and Economist who is attending to purchases in the United States for his Government, called on me at 3 o'clock this afternoon. Dr. Somary stated that he had operated on account of the Bank of Switzerland in New York last week supporting the Swies franc. Considerable support was required the two bluest days of the week. He had talked with President Weber of the Swiss National Bank today and the latter had insisted upon Swiee determination to maintain the Swies franc on the gold basis if this 18 at all possible. I reminded Dr. Somary that Switzerland and the United States were now the only two members of the Tripartite holding to their original basis, and that we wished our small friend the very best of luck, Dr, Somary WSS seriously perturbed over the possibility of shipping connections for Switzerland, both with respect to getting supplies in and gold out of the country. Much coal imported from England for Switzerland AS its destination 18 now hopelessly held up in France and Rouen. The Swiss are now buying 200,000 tons of coal in Pennsylvania but are not sure at what port it can be landed. If political and naval conditions make it possible, this coal will 60 to Genos. If not, Bordeaux is the most likely port. Dr. Somary said that he had spoken today with President Weber by tele- phone and that the latter would like to get some more Swise gold out of Switzerland into the United States. The question arose as to whether American ships now scheduled to bring refugees from Europe could carry such gold from a French port. After talking with Mr. Joseph Green in the Depart- ment of State I told Dr. Somary that the ships going to porte in the combat sone, such as Gelway and Bordeaux could take on only passengers, and not accept any cargo such as gold. Dr. Somary asked if we would be good enough later, in the event that Italy goes into the war and Lisbon becomes the only port to which we might send American ships, to endeavor to assist in arrangements for permitting Swins gold to pass in special traine from Switzerland to Liabon for further shipping on the American vessels. I asked that he keep in touch with me if such a contingency should arise. 3018 Regraded Uclassified TREASURY DEPARTMENT 119 INTER-OFFICE COMMUNICATION DATE May 28, 1940 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL Mr. Knoke told me by telephone today that the Credito Italiano had drawn a check on the Chase Bank for $250,000, requesting payment in bank notes. This duplicates the operation reported yesterday with respect to & check drawn on the Guaranty Trust. The National City Bank reports, in turn, that the Credito Italiano has deposited with it $250,000 in $100 bills, with the statement that the original plan had been to ship this currency abroad, but that this had been canceled. Mr. Knoke is checking the numbers of the notes to see whether these were the ones paid out by the Guaranty Trust. '120 May 28, 1940. GROUP MEETING 2:30 p.m. Present: Mr. McReynolds Mr. Haas Mr. Young Mr. Graves Mr. Viner Mr. White Mr. Charlie Bell Mr. Daniel Bell Mr. Foley Mr. Gaston Mr. Sullivan Mr. Schwarz Mr. Cochran Mr. Harris Mrs. Klotz H.M.Jr: Where is Philip Young? Young: Right here. H.M.Jr: Phil, here is this thing from the tool fellow. Is Arthur Purvis coming in at nine tomorrow? Young: I have passed word along. I haven't got a confirmation on it yet. H.M.Jr: That letter that Mr. Welles wrote me and told me B. cable from Bullitt -- I answered on the telephone that no can do, so you forget it. Young: Right. H.M.Jr: Mac, have you got something? Do you want to tell about that? Go ahead. What's his name told me -- "Pa" Watson. He said he would try to work it out with you and the Army without trying to bother the President. McReynolds: That is as far as I could get. I am going back over there and talk to them. I will see what happens. H.M.Jr: That is right. He said he would try to work it out. 121 - 2 - McReynolds: That is all. H.M.Jr: You are going to follow through on it? McReynolds: I am following through on it. R.M.Jr: Have you (Viner) got B. memorandum for me? Viner: I have already talked to Mr. Bell and cleared it all. H.M.Jr: I thought via Professor McReynolds you were clearing out the offices downstairs and putting those fellows upstairs. C. Bell: They are all clear. H.M.Jr: Who is in the offices this morning? C. Bell: No one this morning. There is nobody in that space as yet. McReynolds: He said they were developing quite an organization he thought they would have to use. !I.M.Jr: Does he need an administrative assistant? Who is looking after him? C. Bell: Johnston is looking after Dr. Mead and I am contacting Johnston. McReynolds: They have got 8, clear way to Charlie Bell, and they are getting everything they asked for. H.M.Jr: Fine. He said the Treasury was good; I don't know why. I have got to keep moving. Are you all right, Mac? McReynolds: Yes. H.M.Jr: Downstairs is all right and you are taking care of the engineers? C. Bell: Yes, sir. 122 - 3 - H.M.Jr: Bell? D. Bell: I have a lot of things. H.M.Jr: Then you had better wait. Let me go around the room. D. Bell: All right. H.M.Jr: Incidentally, if they are all going to be downstairs, there is no reason why Mead should be up here and the rest of them down there, but I will leave that up to you. McReynolds: That is what I told Charlie. H.M.Jr: Harold? (Mr. Graves handed to the Secretary Captain Collins' letter of resignation) H.M.Jr: I want to see him before he leaves. Anything else? Graves: Nothing else except that I am expecting to go over there and sit down as soon as he has gone until we make other arrangements. H.M.Jr: Well, who checked up on Donald Nelson for me? Foley: I did. H.M.Jr: What did you get? Foley: Well, I talked to Dunn about him, and Dunn thought that he was pretty good. He had heard nice things about him, and thought it would be a pretty good point, but I tried to get hold of Lubin and I couldn't get Lubin. Lubin would know and Henderson, but I understand Mac was going to talk to Leon. I didn't talk to Leon. McReynolds: I got good reports. I put Irey on the job 80 you would get something that way. Foley: On the other hand, I had lunch with Paul Shields and I asked him if he knew him 123 4 - and he said, "Yes", and I asked him what he thought of him, and he said he would say he was third or fourth class. MAIN Why? Poley: Well, he said that they were considering hiring him two or three years ago and they didn't. He said that that organization -- he had his fingers crossed about it. He thinks it 18 a great big organization, and it has got a lot of momentum and it is awfully hard to get B. line on the people in it. The people down are pretty good, but he doesn't have much respect for the people at the top. (cReynolds: Well, Wayne Taylor brought him in while he was here, He came from Sears Roebuck. He thought he ought to be hired, and I said we couldn't hire him. He wasn't worth it. 1.7.Jr: Who wasn't worth it? Voleynolds: The Sears Roebuck man. H.V.Jr: Sut that wasn't Donald Nelson. McReynolds: Oh, no, but the head of Sears Roebuck, the old gentleman, personally recommended this guy that I ran into and I decided that he wanted to get rid of him. He was worth nothing. We couldn't use him under any circumstances. I immediately asked Irey to make B. check on this boy. From all the people I have asked about him, all of them speak very highly of him, and he is a nice guy, but it is all loose stuff and they don't know. Foley: Shields says he is a little disappointed now. He wanted to be president of the organization, and they didn't make him president. He says he is a fellow who has always polished his own apples, and he has been pretty politic and he is a nice guy but he doesn't know much. lie hasn't got much on the ball. Regraded Uclassified 124 - 5 - H.M.Jr: I talked to B. man who knew him for thirty years, I guess the largest stockholder in Seare Roebuck, and he said we didn't want him. I think this man is the biggest stook- holder in there, and he says he has known him for many years. Viner: Mr. Secretary, why don't you phone to Lessing Rosenwald in Philadelphia. H.M.Jr: That 18 who I am quoting. I spoke to Lessing this morning, and he says he is a marvel. I suppose he 1s the biggest stockholder. That 18 Just who I spoke to. It is wonderful. You and I are clicking today. McReynolds: Well, you have been out walking together. H.M.Jr: Mac sits here when I go out with a spy- glass. Viner: I have seen the Secretary in worse company. H.M.Jr: Harry? White: Pasvolsky held the first meeting pursuant to conversations you had with Secretary Hull some time ago to canvass the situation as to what can be done in the event Germany wins. Merle and I went over there, and there was some preliminary discussion and some preliminary reports, nothing of any conse- quence being decided upon. You asked me to see you about General Motors report on tungsten. Do you want that? H.M.Jr: Hang onto it, Harry, don't put it on my desk. I tell you what I wish you would do. I wish you would get hold of Ed Noble and ask him if the Department of Commerce -- I read their report on tin smelting -- whether they can do something to get a tin smelter this contract. I think they should. I think that 1s very important. White: Now, with respect to that tungsten, the Bureau of Mines does collect information but it 18 confidential information which - 6 - they give only to the Army and Navy, unless you want to -- if you want us to get it, I daresay we can. H.M.Jr: George 18 pretty good at it. Hass: Sure you can get it, Harry. H.M.Jr: George has Just gone through & mervelous experience with the Army and Navy. White: You would like us to get it? H.M.Jr: Yes. The only thing I would do, I would check now the strategic materials and sort of ask Hopkins if he 16 doing this, find out what they are doing, on tungsten. Will you find out what they are doing on tungaten? White: If you would like me to do something to keep track of it. H.M.Jr: Well, they have got strategic materials, 80 to speak, now, and I just wondered if they are going to carry the ball. Talk to them and find out what they are doing. If they are Just going to buy it, God bless them. What are they going to do, see? Will you, Harry? Maybe Jones 1e going to handle it. Find out. White: I take it that Procurement 18 going to handle some of it, but I will get whatever they know about it. H.M.Jr: Well, you are sitting next to the new Acting Director for Procurement as of June let. Did you know that? White: I know it now. H.M.Jr: Well, the two of you get together and find out. I mean Mr. Graves and Mr. White and Mr. White and Mr. Graves. Don't go all around Washington looking for the Director of Procurement. Regraded Uclassified 126 - 7 - White: I recognize the half-brother. H.M.Jr: Good luck, Mac. (McReynolds left the conference) H.M.Jr: Basil? Harris: The steamer "Washington" which came in this morning from Italy is going to sail Thursday afternoon for Bordeaux. From Bordeaux she is going to Lisbon and then depending on the situation in the Mediterranean, she will determine whether she will then go on to Naples and take the balance out of Naples, but that ought to clean up the balance of everybody that is left there. H.M.Jr: You know, you brought up yesterday this question of your personnel in Europe. Now, what have you decided to do about these people in England and France and Germany? Harris: Well, I haven't done anything on it. I didn't know, to tell you the truth, who it came under. When you said it was a matter for the Ambassador there, then I appreciated I hadn't thought of that. H.M.Jr: Well, they are our people; they are Treasury people. If they are not doing anything over there, bring them back. Harris: They are not doing anything. They can't do anything there now, but I am not sure that it would be a wise thing for them to leave before the consular agents do. H.M.Jr: Will you go over today and see the chief of Western Europe, Mr. -- and talk to him about it? Harris: Yes. H.M.Jr: Will you do that today, because I don't want it on my conscience that these people are hurt. Please. Harris: Yes, sir. Uclassified 127 - 8 - H.M.Jr: Anything else? Harris: No. H.M.Jr: Harry, were you through? Did I pass you? White: Yes. H.M.Jr: George? Haas: I have nothing. Young: The original of the cable on machine tools from Mr. Kennedy was brought over to me this morning by Mr. Lind of the Department of Commerce. The embargo idea after last Sunday night -- H.M.Jr: Where did they get that from? Young: From Mr. Kennedy to the Secretary of State. H.M.Jr: Where did the English get the idea? Young: I have no idea, and I checked up with the Purchasing Board man, Baker, in New York, who from now on is going to handle all machine tool orders for the Allies in this country, and he says there is no rhyme or reason for it at all. H.M.Jr: It may have been due to this meeting we had here. Gaston: We sent out a telegram to collectors of customs, that is, Mr. Harris did, asking them to report any machine tools offered for shipment, and at the request of Navy Intelligence we want to be informed on any machine tools that are going out, and they have got new legislation, you know, which would empower the President to stop the export. H.M.Jr: Through the Navy? Gaston: Yes. 128 - 9 - H.M.Jr: What is the answer on that thing? Gaston: The answer is yes if -- I wouldn't want you to get gummed up with Harrison and Doughton and the people on the Hill. Otherwise, I would say yes. Schwarz: Is that an inquiry? H.M.Jr: Yes. I am afraid of it. Schwarz: I think it would be better if people on the Hill started it. They are asking for you. H.M.Jr: Let's leave it this way, If they take -- Caston: I don't believe there 18 enough value for you to fuss with it. Schwarz: It will take an hour of your time. H.K.Jr: This (indicating elbow) says "no". Is everybody happy? Schwarz: Fine. They have responded well. H.M.Jr: We broke all records this morning. We did a tax bill in three and & half hours. It has never been done before. Sullivan says, "What is there to & tax bill? You sit down at twelve o'clock at night, and there is nothing to 1t." Sullivan: I thought there was & little more to be done on that bill. I didn't know the President had signed it already. H.M.Jr: Boy, believe me, you had better get an electric pad and plug it in up on the Hill and put it right in your clothes. Sullivan: We will have that ready for you tonight, sir. I think it will be hot enough without any pads. This isn't bad. B.M.Jr: Yes, but the heat may not be in the right place. Sullivan: Well, it is still subject to laws of refraction, isn't it? Regraded Uclassified 129 - 10 - H.M.Jr: That Harry? 1s fair. Can you improve on that, White: I don't even understand it, I am sorry. H.M.Jr: All right, Jake? Merle? Cochran: Matthews will be down in the morning. I phoned his home awhile ago and told his wife about the change in the sailing of the "Washington". He 1s going on it, you see. H.M.Jr: When 1s he going? Cochran: I would make it Thursday noon instead of Saturday noon. H.M.Jr: You had better speak to Mac when you go out. What I am going to try to do, I am not going to advertise it, what I am going to try to do beginning with tomorrow is to stay home on Wednesday afternoons. I can't keep up the pace. Anybody else, if they can get off on Wednesday afternoon, good luck to them. If I should change my mind, I'll let you know. D. Bell: How about Thursday? H.M.Jr: Thursday for you. Gaston: I think Dan was asking whether Thursday of this week was a holiday. D. Bell: That is right. H.M.Jr: It is for everybody except me. I am doing the engines on Thursday, which means Foley. However, how far did we get? Cochran: I have Just finished. Sullivan: Will I have a chance to see you before I go up to see Senator Harrison and Mr. Doughton later in the afternoon? H.M.Jr: Are you going up today? Regraded Uclassified - 11 - 130 Sullivan: Yes, sir. H.M.Jr: I don't know. Tell Mao to see. I am pretty well shot. Bullivan: All right, sir. I can tell you very briefly now. Among the general group of miscellaneous taxes which are to be subjected to 10%, there are a number that are plain nuisances that don't run into any money, and I think we would save ourselves & lot of grief if we would merely eliminate them, and we have enough of a margin, I think, to do it. H.M.Jr: Here is the President's rule of thumb. If a 10% won't produced over R million dollars, I wouldn't fool with it. Sullivan: There are a couple that produced three that are going to cause a lot of trouble. H.M.Jr: Ten years ago Dr. Viner used to claim he was a tax expert. Now he is here, and I have talked to him, so maybe he will remember some of it. White: Are you giving serious consideration to the Bell Soft Drink Tax? Sullivan: Yes, I am, but Congress isn't. D. Bell: They couldn't drink it. Foley: They couldn't swallow it. H.M.Jr: All right, John, use your head on that. Sullivan: All right, sir. H.M.Jr: You won't have any trouble with me. Sullivan: All right. H.M.Jr: Eddie? Foley: Dunn said that Sidney Hillman was a great friend of Nelson's, and he heard the nice things that he knew about Nelson from Sidney Hillman. He only met him and he 331 - 12 - didn't know anything about him, but Sidney Hillman thought very well of him. On the licensing agreement, we have got it cleared with Army and Navy and the represen- tative of Justice. You asked -- H.M.Jr: At three o'clock we are going into engines, and you and Phil will fit in here. Also George. This means someone is going to be here -- I want to get ready for this meeting on Thursday, see. Foley: All right. Now, Vaughan said that on Thursday if you could make it earlier than three o'clock it would be more convenient, but if it wasn't possible, he would be here at three o'clock. H.M.Jr: Well, would you mind saying that when Mead comes in, because he has made the appointment and I will change both of them. Foley: He said if it could be in the morning, some- thing like that, it would be better. H.M.Jr: Well, I have got Pratt & Whitney in the morning, you see, but I will fix it. I can't do them in the morning. Foley: Yes. H.M.Jr: But if you mention it when we come in -- Foley: On the "Washington" that docked this morning, we have got the Post Office and Customs to look at all the mail and the parcel post for securities that may have come out of Belgium and Holland. You see, she sailed on the 19th and the Germans went into those two countries on the tenth, 80 they would have had a chance to get the stuff down to Genoa and get it on that boat. Now, there will have to be a regulation under the freezing order to the effect that importation of those securities 1B a dealing in the securities within the meaning of the pro- hibition and we will have that ready. The Post Office 18 helping. They have got 900 sacks of mail that they are looking at and Regraded Uclassified 132 - 13 - the Customs people have the parcel post that they open anyway for duty of all goods. Basil has & telegram going to all the collectors. H.M.Jr: All right. Herbert? D. Bell Ed got me out of bed this morning at one o'clock. Foley: I do to you what they do to me. They got me out of bed. D. Bell: He thought we ought to delay this ship at quarantine, but I didn't think we ought to take that drastic action. I only had one eye open. Foley: She was then going to dook at seven, and we wouldn't have had a chance to get word out. H.M.Jr: Somebody must have wound up this Treasury organization some time or other to make it go. I don't know who did it. White: It must have been Hitler. H.M.Jr: No, it was Hitler that discovered Brazil. Foley: That 1s all. Gaston: I sent a telegram to Judge Walter Doyle this morning about your friend, Madam Chang, alias something else. H.M.Jr: This boy was going to handle Mrs. Boong and her two children. Gaston: Not only that, but we gave her diplomatic courtesies without examination of her baggage. We held our meeting with Biddle yesterday, and I don't think everybody he had in mind came out in the open, but it appeared to me that they wanted to absorb Customs Patrol into Immigration, which we are disposed to resist as unwise. Regraded Uclassified 133 - 14 - In regard to the sailing of the "Washington", Mr. Lawrence of the U. 8. Lines has suggested that he would like to have a Coast Guard officer, a petty officer who is skilled in radio, aboard as sort of an observer on the dispatches that go out on this voyage inasmuch as they had some difficulty with a great many telegrams which were offered on the "Washington" last trip which might cause trouble. I don't think it would do any harm and it might do some good to have a man on board as a sort of adviser and consultant to the captain. H.M.Jr: Whatever you say, Herbert, I accept. Whatever you say goes. Gaston: That 1s all I have. H.M.Jr: All right. 134 DEPARTMENT OF STATE Washington In reply refer to RA 856.5151/81 May 28, 1940 My dear Mr. Secretary: I enclose a copy of a note (No. 3394) dated May 26, 1940, from the Netherlands Minister at Washington, which quotes the text of a telegram received by the latter from the Netherlands Minister of Foreign Affairs report- ing the publication of & Royal Decree relating to certain properties of individuals and companies resident in the Kingdom of the Netherlands. This communication of the Netherlands Minister is transmitted to you pursuant to the request made therein for such action as you deem appropriate. Sincerely yours, (Signed) A. A. Berle, Jr. Adolf A. Berle, Jr. Assistant Secretary Enclosure: Note from Netherlands Minister, May 26, 1940. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. (Copy) Regraded Uclassified COPT CTAL NETHERLANDS LEGATIC Washington, May 26, 1940. No. 3394 Sir: I have the honour to inform Your Excellency that I an in receipt of a telegram from the Netherlands Minister of Foreign Affairs at present in London, worded as follows: "ROYAL DECREE HAS BEEN PUBLISHED 24TH MAY 1940 TO SAFEGUARD PROPERTY 07 NETRERLANDS individuals AND COMPANIES AGAINST DISPOSAL CONTRARY TO THEIR INTEREST OR THOSE OF THE COUNTRY, STATING THAT CLAIMS OF WHATEVER DESCRIPTION OR LEGAL 70R1. INCLUDING GOLD DEPOSITS, SHARES, SECURITIES, RIGHTS UNDER CREDIT ARRANGEMENTS, 20. BELONG- ING TO INDIVIDUALS AND COMPANIES RESIDENT IN THE KINGDOM OF THE NETHERLANDS AND THAT CAN BE FLEDGED, SOLD OR DISPOSED CF IN WHATEVER FORM OUTSIDE THE EUROPEAN PART OF THE XINGDOM, BECOME AS FROM 24TH MAY THE PROPERTY OF THE STATE BY THE ROYAL NETHERLANDS GOVERNMENT TEMPORARILY RESIDENT IN LONDON, TO BE ADMINISTERED IN THE INTEREST 03 THE ORIGINAL OWNER IN so PAR AS THESE INDIVIDUALS OR COMPANIES WERE on THE 15TH OF MAY NOT RESIDENT CUTSIDE THE NOV OCCUPIED PART OF THE KINGDOM STOP PROPRIETARY INTERESTS TO BE RESTCRED AFTER THE WAR STOP THE DECREE IS APPLICABLE TO THE NETHER LANDS INDIES, SURINAME AND CURACAO STCP COMPLETE TEXT WILL 3E FORWARDED BY TELEGRAM TOMORROW STOP PLEASE INFORM GOVERN- HENT, CENTRAL BANK, BANKERS ASSOCIATION AND STOCK EXCHANGE COMMITTEE, AND WHOMSOEVER. YOU MIGHT THINK DESTRABLE." I should feel greatly obliged If you would be good enough to have the above communicated to the sppropriate United States authorities. Please accept, Sir, the renewed assurances of ay highest con- siteration. À. LOUDOS The Ecnorable The Secretary of State, Washington, D. C. Regraded Uclassified 136 RDS GRAY Milan Dated May 28, 1940 Rec'd 2:20 p.m. Secretary of State, Washington. 45, May 28, 5 p.m. Today's market Index 223.83. Volume 100,875. (The?) Of speculative buying in active market Enabled many shares to recover recent losses. SHOLES ALC Regraded Uclassified 137 5/78 ITALIAN STOCK PRICES (Milan) Daily* Weekly 1940 1940 APRIL MAY JUNE JAN. FEB. MAR. APR. MAY JUNE JULY 6 13 20 27 4 11 18 25 I 8 15 22 PER PER PER PER CENT CENT CENT CENT SATURDAY FIGURES 270 270 300 300 260 260 280 280 250 250 240 240 260 260 230 230 240 240 220 220 210 210 220 220 200 200 200 200 190 190 180 180 180 180 SHARES SHARES THOUSANDS THOUSANDS 200 Volume 200 160 160 100 100 140 140 0 0 JAN. FEB. 6 MAR. 13 20 27 4 11 18 25 1 8 15 22 APR. MAY JUNE JULY APRIL MAY JUNE 1940 1940 SATURDAY FIGURES PRIOR TO MAY 20. Office of the Secretary of the Treasury FO - 141-2 Division of Research and Statistics 138 EG GRAY Berlin Dated May 28, 1940 Rec'd 2:30 p.m. Secretary of State, Washington. V549, May 28, 4 p.m. My No. 1443, May 21, 2 p.m. FOR TREASURY FROM HEATH. The DEUTSCHERREICHSANZEIGER of May 27 announces the stablishment of Reichs kredit kulien in Luxemburg, Amsterdam, The Hague and Rotterdam HEATH ALC Regraded Uclassified 139 RDS PLAIN London Dated May 28, 1940 REc'd 1:55 p.m. Secretary of State, Washington. 1413, May 28. FOR TREASURY FROM butterlorth. Given the Effects of controls, patriotism and paralyzing inertia the action of the London security markets bore no relation to the reality of England's situation. All securities declined but British Govern- ment securities, for instance, closed only slightly off on the day though substantial amounts could not bE dealt in at all. War movements-not financial developments- now occupy and dominate the mind and feelings of the city. KENNEDY ALC Regraded Uclassified 140 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, Paris, France DATE: May 28, 1940, 7 p.m. NO.: 926 FOR THE TREASURY. This morning Rueff came to see the Counselor of the Embassy. Reference, telegram of May 25, No. 882 from the Embassy: Rueff said that he had not gone to London, that instead a Bank of England representative came to Paris to discuss the proposed financial "plan"; he did not give any details about the project, but said that the British Embassy in Washington had been given instructions to submit the plan to you, and until your reaction had been ascertained nothing would be done about it. END SECTION ONE. BULLITT. EA:LWW 141 JT GRAY PARIS Dated Hay 28, 1940 Rec'd 4:03 Pelile Secretary of State, Washington. 926, May 28, 7 pame (SECTION TVO) Rueff reiterated his contention that there was no valid reason for the franc quotation on the NEW York free market to be so far below the official rate and added that it would bE to the interest of the United States for the franc to bE quoted on NEW York at the official rate. A member of my staff saw Young at the British Embassy this afternoon. EE said that "The French placed too much importance on the free market quotation for the franc" and repeated Simons remarks to the Effect that the British authorities were not perturbed over the free sterling rate. HE admitted, however, that the French position was "somewhat different since France's foreign trade was largely invoiced in foreign currencies. Young said that there was nothing in the "Simon-Reynaud agree- ment" of December 6 which provided that the free rate for the pound and the franc should fluctuate together. (END SECTION TWO) BULLITT NPL Regraded Uclassified 142 JE GRAY Paris Dated May 28, 1940 REC'd 3:32 gem. Secretary of State, Washington. 925, may 28, 7 parte (SECTION THREE) A stries of decrees and arretes published in today's Journal Official change the exchange control regulations so C.S to prevent non-residents from selling in France to residents of the country "Franch stocks and bonds, Covern- ment securities or other ngoticble securities of = fixed maturity. In the past the france crising from sales of this type could DE paid into "forsign accounts in france" and thus night subsequently DE sold on the free market. The change "ould, therefors, appear to be designed to close one of the cources of the supply for the francs offered for sale abroad. The Bourse declined as C. result of the capitulation of the King of Belgiun. LOCSES in renteo ranged from one franc to 1.50 franco with the Emerytion of the 1925 and 1937 Exchange guarantee incues which lost 2.35 and 4 francs, respectively. French industricls declined by from 4 to 10%. Suez lost 250 points. (END HESSAGE) BULLITT HPD Regraded Uclassified : 143 May 28, 1940 My dear Mr. Hoover: This will acknowledge receipt of your give to mr. Daston Dartong/19/4c letter of May 23rd referring to an expected remittance to the German Consul in New York City from Italy and your letter of May 27th relative to Walter P. Routher. I appreciate having the information contained in those communications. Yours sincerely. (Signed) E. Morgesthau, Jr. Mr. J. Edgar Hoover, Director, Federal Bureau of Investigation, United States Department of Justice, Washington, D. c. 144 May 28, 1940 My dear Mr. Roovert This will acknowledge receipt of your letter of May 23rd referring to an expected remittance to the German Consul in New York City from Italy and your letter of May 27th relative to Valter P. Bouther. I appreciate having the information contained is these communications. Yours sincerely, ,signed) a. storgenthen, Jr. Mr. J. Edgar Hoover, Director, Federal Bureau of Investigation, United States Department of Justice, Fashington, D. c. 145 May 28, 1940 By dear Mr. Hoovert This will acknowledge receipt of your letter of May 23rd referring to an expected remittance to the German Consul in New York City from Italy and your letter of May 27th relative to Walter P. Reuther. I appreciate having the information contained in these communications. Yours sincerely, (Segned) B Morgenthau, Jr. Mr. J. Rigar Hoover, Director, Federal Bureau of Investigation, United States Department of Justice, Washington, D. c. Regraded STANDARD FORM NO. 14 APPROVED BY THE PRESIDENT FROM Treasury Department 146 WIRCH 10. 1826 BUREAU TELEGRAM CHG. APPROPRIATION destinges OFFICIAL BUSINESS-GOVERNMENT RATES Treasury Department, 1940 A - - 12-1728 May 29, 1940 (Same tolegram to names listed 65 attached shoot) THANK YOU FOR SUBMITTING THE DATA REQUESTED IN NY TELEGRAM OF MAY 24, OF AIRPLANE ONLY RECEIVED AND DELIVERING MADE SERVICE MAY 1 AND MAY 23. I SAVE ASKED SHORE 6. HALS, DIRECTOR OF RESEARCH AND STATISTICS FOR THE TREASURY DEPARTMENT, TO ABRADGE TO ORTAIN 7004 TOU seca vieures AS ARE NEGESSARY TO BRING THE DATA NOV on as UP 90 DATE AT THE - or RACE CALEBRAR VIII. - WILL IIIII TOU & COPY OF TES RELATING TO YOUR COMPANY, PLEASE CORRECT THIS SCHEDULE verm AND DATA SIMILAR TO THAT REQUESTED IN MY TELEBRAN or MAY 24, FOR THE VERIOD SAY 24 90 June 1, INCLUSIVE, AND REPUBN THE INFORMATION TO n. HALLS, ATEMATL SPECIAL DELIVERY, 80 THAT If WILL ARRIVE II NASHINGTON on monday, JUNE 3. EXERY MORGENTHAU, n., SECURRANT or THE TREASURY. GOR Regraded Uclassified Aircraft Regraded Uclassified Provides, 1 si failer é lt. L. a. Gramas, President, Beesh Aircraft Corp., Droma Aircraft Ingineering Corp., Viebita, Kannan. Delhpage, long Island, 1. T. Mr. Lawrence D. Bell, President, Mr. 6. V. Carr. Production Centrol - Dell Aircraft Corp., Lockhood Aircraft Corp., 2050 Xlessed Avenue, Durbank, California. Duffale, New York. Mr. J. 1. Kindelberger. President, Mr. W. 1. Tarnell, Assistant Treasurer, North American Aviation, Inc., Bellance Aircraft Corp., Inglawood, California. liev Castle. Delevare. Mr. V, Vallace Kellett, President, Mr. P. 4. Johnson, Procident, Republic Aviation Corp., Beeing Aircraft Co.. Parmingiale, long Island, 5. 1. Desrgetown Station, Seattle, Washington. Mr. Mari D. Proddem, Vice President, Rynn Adronautical Corp., Hr. John R. Numt, treasurer, Lindbergh Field, Provater Aeronantical Corp., San Diego, California. Broveter Building, long Island City, N. Y. Mr. 0, Barron, Asst. Secretary & Treasurer, Steurner Aircraft, Mr. V, M. Shanshan, Treasurer, Division of Boeing Airplane Co., Consolidated Aircraft Corp., Vichita, Kensas. Lindbergh Field, Ban Dies. Cultfornia. Mr. he v. Vian, Vice President, Spartes Aircraft Co., Mr. Burdette S. Vright, Vice President, Box 2649, Ourtiss Aeroplems Division, Pulse, Okla. Curtise-Wright Corp.. Duffale, N.T. Mr. N. A. Mara, General Sales Manager, Stinson Aircraft Division, Mr. Carl A, Cover, Vice President, Aviation Manufacturing Corp., Douglas Aircraft Co., Ime., Nashville, Temosses. 3000 Deasa Park Realovard, Santa Mantes, California. Rr. c. J. McCarkhy, Vought-Sikorsky, Fairchild Ingine & Airplane Corp.. Division United Aircraft Corp., Regurstovn, M. Bridgepert, Com. Mr. Frank 4a Omahl, Procident, Mr. Drans 1. Vallace, President, Fleetwings, Inc., Ossama Aircraft Oo., Bristel, Pennsylvania Vichita, Kansas. Mr. Glann L. Martia, President, Glam L. Markin Do., Baltimers, Maryland. - 2 . 148 I n. : É Perterfield Aircraft Corp., 2009 1. 14th Street, Kansas City. Me. Mr. v. c. Scherlemer, Viso President, Vultee Aircraft, Inc.. Downey, California. Mr. Lee a. Smith, Asst. Sales Manager, Vaco Aircraft Oo., Trey, Olde. STANDARD FORM NO. 14 APPROVED ST THE PRESIDENT FROM freasury Department MARCH 10. 1525 BUREAU TELEGRAM CHG. APPROPRIATION Contingent Expenses, OFFICIAL BUSINESS-GOVERNMENT RATES Treasury Department, 1940. IFITE May 29, 1940. Mr. M, 3. Martin, Rearwin Aircraft and Engines, Inc., Pairfax Airport, Kannes 0187, Kensas. THANK TOU FOR SUBMITTING THE DATA REQUESTED IN MY ESTABRAN or MAY 24, ON AIRPLANE AND AIRPLANE ENGINE ORDERS RECEIVED AND DELIVERING MATE BETWEEN VAY 1 AND MAY 23. I HAVE ASKED GEORGEN 0. HAAS, DIRECTOR or RESSARCH AND STATISTICS FOR THE TREASURY IMPARTMENT, TO ARRAMES to OBTAIN FROM YOU SUCH FIGURES AS ARE NECESSARY TO BRING THE DATA NOW OF RAND UP to DATE as THE END OF BACH CALENDAR BEEK, KB WILL SEND YOU COPIES OF THE SCHEDULES RELATING to YOUR COMPANY. PLEASE CORRECT THIS SCHNDULES WHERE NECESSARY, ADD DATA SIMILAR TO THAT REQUESTED IN MT TELEGRAM OF MAT 24, FOR THE PERIOD MAY 24 to JUNE 1, INCLUSIVE, AND RETURN THE INFORMATION 90 VR. HAAR, AIRMAIL SPECIAL DELIVERY, so THAT IT WILL ANRIVE IN WASHINGTON ON MONDAY, JUSE 3. HASRY MONGENTHAU, JR., SECTIVEARY OF THE TREASURY, YOH Regraded Uclassified STANDARD FORM NO. 14 UNIVER MY: THE PRESIDENT THOM trumpy Department MAREN 10. THIS BUNEAU TELEGRAM CHE APPROPRIATION Combingued home. OFFICIAL BUSINESS-GOVERNMENT RATES Treasury Dept., 1940. May 29. 1940. (send telegren to - listed a attached shoet) THANK YOU FOR SUBMITTING YES DATA REQUESTED IN MY TELEGRAM or MAT 24. OF AIRPLANE ENGINE ORDERS RECEIVED AND DELIVERIES MADE BETWEEN MAT 1 AND MAY 23. I have ASKED 0. HAAS, DIRECTOR OF RESEARCH AND STATISTICS FOR THE TREASURY DEPARTMENT, TO ALBANGE TO OBTAIN FROM YOU SUCH FIGURES AS ARE MACISSARY TO BRING THE DATA NOW ON HAND UP TO DATE AS THE END OF BACH CALIMDAR VIIX. HR WILL SEND YOU A GOPY OF THE SCHEDULE RELATING TO YOUR COMPANY. PLEASE CORRECT THIS SCHEDULE MEMBERS ERCESSARY, AND DATA SIMILAR TO THAT REQUESTED IN KY TELEGRAM OF MAT 24. FOR THE PREJED MAY 2b to JUNE 1, INCLUSIVE, AND RETURN THE INFORMATION TO XR. HAAS, AIRMAIL SPECIAL DELIVERY, so THAT IT WILL ARRIVE IN MASHINGTON ON MONDAY, JULY 3. HIMAY MONDENTHAU. JR., SECRETARY or THE THEASURY. Regraded Uclassified 151 Inclue Manufacturery Mr. 0. 1. President, Allison Pagineering Oo., Division of General Notors Corp., Indianspolis, Indians. Mr. A. V. wild, Manager, Aircraft Division, Continental Notors Corp., Musicagon, Kichigan. Mr. J. Story Smith. President, Jacobs Aircraft Engine Co., Pottatown, Pennsylvania. Mr. 1. 3. Palmer, Sales Manager, Lyceming Division, Aviation Manufacturing Corp., Williamsport, Pennsylvania. Rr. A. 1. Shelton, President, Wensess Namufasturing Co., 6917 Arems, Los Angeles, California. Mr. I. M. Horner, Acting General Hanager, Pratt & Whitaay Aircraft, Division United Aircraft Corp., Tast Hartford, Com. Mr. Demoan 3. Cex, Tice President, Ranger Engineering Corp., Farminglale, Long Island, N. T. Mr. 7. N. Lease, Manager of Contract and Order Division, Wright Aeronantical Corp., Paterson, New Jersey. Mr. Villiem 0. Verner, President, Varnet Aircraft Corp., 20263 Knover Avenue, Detroit, Hichigan. Mr. larl Herring, General Manager, Kinner Notors, Im., 635 V. Colorado Blvd., Glandale, Calif. Regraded Uclassified 152 (Dictated May 29,1940) While I was horseback riding on Sunday with General Marshall, I said to him, "I am going to give you a little tip. If there 1s anything that you need additional for the Army, for Heaven's sake get it in in the next 30 days." I said, "Don't you need more planes?" and he said well he would look up and study the picture, as a result of which he has evolved this program 5-28-40 (marked #1) which I am going to give my entire support to. But if it had not been for my horseback ride and my talk with the General, there would have been no program of this kind. In connection with General Marshall's program, referred to above, which involves an additional $500,000,000 (revised again to $700,000,000) the President said he was 5-29/40 sorry about this. He also said, "Why didn't they tell me about it in the first place?" 153 May 29, 1940 10:10 an Present: Mr. McReynolds Mrs. Klotz Mr. McReynolde: That's the memorandum you wanted the President to sign. Incidentally, I talked to a couple of General Motors vice presidents when they were here last night of what we could do with their organization and I asked them about Nelson and they said they considered him the best man in Sears-Roebuck. Everybody in the commercial game considered that he was better than General Wood. HM,Jr: I talked to Leon Henderson and he said he's absolutely tops. Mr. McReynolds: The whole story 1s there now. The double program is listed on there. It's combined. I put them in separately. HM,Jr: I see. This 1s different. Mr. McReynolds: Yes, that' 8- the difference. HM,Jr: Mac, my boys are all worried. They think Knudsen 1s going to have charge of planes. Where does that leave me? Mr. McReynolds: Knudeen will not be down tomorrow. HM,Jr: What I answered was we would decide what the Army and Navy would buy and then it's up to Knudsen to manufacture them. Mr. McReynolds: It's up to him to see the machine works. He's the production man. He does not interfere with-your jurisdiction at all. He's purely the production man. HM,Jr: That's what I thought. ∞ Regraded Uclassified 154 May 29, 1940 Wallace wanted to know whether I would go along with him on extending credit for agricultural products to the Allies and I told him that I could not; that I be- lieved in upholding the Johnson Act, but if he wanted to go ahead and do it, leave me out of it and I would not put any barriers in his way. Then he told me that he was using stamp plan money to give the Red Cross food to send across to France. He said that Milo Perkins was opposed to it. I said I admired his courage. I said, "How much?". He said, $Two or three million dollars." I said the thing to do was to go up to Congress and ask for $250,000,000 to feed the starving people and I think you could get it. He said he did not think we could now, but he could in ten days. 000-000 55 war DEPARTMENT WASHINGTON thy 25, 1940. MEMORANDUM FOR THE PRESIDENT: Subject: Program of Requirements in Aircraft for Procurement under New Legislation. In compliance with your memorandum on the above subject, the program of requirements in aircraft by types to be procured as a result of the new legislation in listed below. It will be noted that the total mimber contemplated for specific and immediate procurement aggregates 1,900 aircraft, as compared to 2,400 proposed in the defense of this legislation. This action is believed advisable due to the variations in price factors. The options for additional procurement as indicated below will provide for the required flexibility, and it is Den lieved that through the application of these options as prices permit 2,400 airplanes will be ultimately procured. Options to provide Number Type 0. meximum of 500 Primary Training Airplanes 800 500 Basic Training Airplanes 800 600 Advanced Training Airplanes 1,000 (Single Engine) 100 Advanced Training Airplanes None (Two Engine) 200 Heavy Bombers None 1,900 Contracts have been prepared to cover the above requirements in order that procurement measures may be immediately initiated upon the availability of appropriations. As directed in your letter, all contracts and developments will be cleared through the Secretary of the Treasury to you as Commander- in-Chief, Am HARRY I. WOODRING, Secretary of War, Regraded Uclassified 156 THE WHITE HOUSE WASHINGTON May 27, 1940 MEMORANDUM FOR THE SECRETARY OF THE TREASURY FOR YOUR INFORMATION. F.D.R. 157 THE WHITE HOUSE WASHINGTON May 29, 1940. MEMORANDUM FOR THE SECRETARY OF WAR: I am in receipt of your memorandum of the 25th covering additional aircraft as follows: Number Type Options to provide a maximum of 500 Primary Training Airplanes 800 500 Basic Training Airplanes 800 600 Advanced Training Airplanes 1,000 (single engine) 100 Advanced Training Airplanes None (two engine) 200 Heavy Bombers None 1,900 This apparently does not include the War Department's estimates for the fiscal year 1941 now awaiting action by Congress which includes the following: Heavy bombardment 6 Medium bombardment 66 Amphibian - two engine 14 Pursuit interceptor 37 Transport - two engine 6 Advanced training 37 Total 166 Will you kindly advise me regarding this omission as I wish to include it with the program set forth in your memorandum. It is also my desire, pursuant to my memorandum to you 158 - 2 - of the 24th, that full opportunity be given the Secretary of the Treasury to participate in all negotiations looking to the initiation of contracts for aircraft. only copy 153 URGENT ALLIED REQUIREMENTS Since filing our memorandum of May 20th ne have received specific urgent cable requests for the following: a. 500,000 Enfield rifles with 500,000,000 rounds of ammunition. b. 25,000 Thompson -45 submachine guns with 100,000,000 rounds of ammunition. C. 20,000 revolvers with 5,000,000 rounds of aumunition. These three items are earnestly required to meet parachute attacks expected in the early future. d. An urgent request has aiso been cabled for as many 75 mm guns as can possibly be spared with all ammunition available. BECEIVED DATE 02 will "per to Internal - in w el las not la will gen marshall Cidn stark 5/30/40 May 29, 1940. Regraded Uclassified 150 1 man 791961 MEMORANDUM CONCERNING AMOUNTS OF T N T & NITROCELLULOSE MADE FOR U. B. GOVERNMENT, WHICH THE FRENCH GOVERNMENT WOULD LIKE TO OBTAIN IN EXCHANGE FOR DELIVERIES FROM PLANTS BEING ERECTED FOR THE FRENCH GOVERNMENT ACCOUNT IN THE UNITED STATES 1. TNT We would like to obtain, in June and July, about 2,000,000 lbs. of THT. a) DuPont is making American T N T for the U. 8. Govern- ment, we would like to have the maximum amount from this released to us from duPont's production. b) Atlas has 5,000,000 lbs. on order for the U. 8. Army, we propose that this be released to the French Government to to later replaced by 5,000,000 lbs. to be reconditioned from old T N T 2. NITROCELLULOSE The Hercules Powder Company are making for the U. 8. Army approximately 250,000 lbs. per month of nitro- cullulose which the French Government would like to have made available to them until the end of 1940; this would be replaced by deliveries to be made to the U. S. Army from the large nitrocellulose powder plant which is to be erected near Memphis, Tenn., and is to start producing Dec. 1, 1940. copunits m Welles am mushall Darbery adm stark 5/30/40 Regraded Uclassified CESSION OF TNT TO THE FRENCH GOVERNMENT BY THE AMERICAN GOVERNMENT I. This memorandum completes that which was given May 29th to Mr. Young by Messrs. Barbiére and Cholet in Mr. Ballantyne's presence. The French Government would like to receive, in June and July, the maximum amount of TNT which the American Govern- ment could cede to it from the contracts which the United arNavy States Army has with various American manufacturers at this time. The minimim quantity asked for is Two Willion Pounds (1,000 short tons) for deliveries in June and July 1940. The French Government will be in B. position to replace the TNT which would be released to it by the American Govern- ment in June and July as follows:- August 75 short tons September 150 If " October 225 # If November 275 If " December 275 n " II. The French Government is asking from the American Government the release in 1940, from July to December, of the 125 tons monthly of nitrocellulose which Hercules Powder Company has to deliver to the Picatinny Arsenal as per contract with the United States Army. This nitrocellulose would be returned to the American Government in 1941 as per the minimum following:- January 200 short tons February 250 11 " March 300 " " Regraded Uclassified m young los 162 Memorandum concerning the cession by United States Army Ordnance Depots, Arsenals or plants of equipment for the manufacture of Nitrocellulose for smokeless powder The Anglo-French Purchasing Board is closing with DuPont an agreement for the erection of a Nitrocellulose smokeless powder plant at Memphis Tenn. to produce 24,000 tons of smokeless powder per year. The date at which this plant will start production depends upon deliveries of equipment; therefore if some equipment available in United States ordnance plants, depots or arsenals can be released with the understanding that it would be replaced from deliveries of new equipment now ordered from manufacturers, the date of commencement of production could be materially advanced. This would automatically also advance the replacement date of Nitrocellulose powder for which we have asked the release in the attached memorandum. Copies to m Weller Narbing gen marshall adm. stark May 29, 1940. 5/30/40. 15 BROAD STREET. NEW YORK TELEPHONE HAROVER 2.2460 BRITISH PURCHASING COMMISSION RIFLE AND MACHINE GUN N/C POWDER SUPPLIES Owing to heavy demands on powder for small arms ammunition, there is an extremely urgent need of supplies of rifle type N/C powder to fill a gap in production avail- able for the Allies during the months of August and September, 1940. The existence of this gap will mean that the Allies will be short of 600 tons of rifle powder of a type which may be defined approximately as one-half large bore machine gun powder (.50 caliber type) and one-half small bore rifle powder, such as is used in the British .303" cartridge. This .303" British powder is very similar to the standard American powder for similar calibers. The only possibility of filling the gap seems to be to obtain a release of capacity from the du Pont and Hercules companies now allocated to the U. S. Government, It Ls understood that such a capacity might amount to 225,000 lbs. per month from du Pont and 100,000 to 150,000 lbs. per month from Hercules. If this could be made available to the Allies during the months of June, July and August, there would thus be added to the Allied resources over 1 million lbs. of powder, which would very nearly meet the shortage. The new plant of the Hercules Company at Kenvil is expected to come into production at the end of August, and it is contemplated that this capacity may be still further enlarged so that it would be possible to repay to the U. S. Government any powder released to the Allies under the present request. This repayment could begin, it is expected, in the early months of 1941. Regraded Uclassified 164 MEMORANDUM Naval Priorities In cable of May 17th of which a copy has already been handed you, a request was made that United States assistance be given in securing 48 destroyers, of which 16 might have good anti-aircraft armament, and 32 would preferably be of the flush deck type. All to be complete with torpedoes; spare torpedoes; reserve equipment, and large quantities of ammunition especially anti-aircraft ammunition. A further cable has just been received ur- gently requesting motor torpedo boats. It is under- stood 23 are being built to power boat design, deliv- eries starting in July and being completed by end December 1940. It is asked that as many as possible of these boats, fully equipped, be turned over to the British Admiralty. copus to m willes gen marshall adm plank New York, 5/30/40 May 28, 1940. Regraded Uclassified Purns game Hase 5/29/40 May 28th ,1940 165 MEMORANDUM I. 1) The recent trend of the war in Europe has made it necessary for the Allies to launch immediately a large programme for the supply of armament from the United States. It is proposed that this programme should be a joint Anglo-French programme to be developed on the same lines as the current Aircraft programme. 2) The extent of the programme visualized is such that it will certainly involve a large extension of the existing manufacturing ca- pacity for the production of armament in the States. Having regard to the importance of eliminating all delays, the Allied Governments recognise that a considerable capital contribution may be necessary if their requirements are to be met. 3) The importanceof the time factor, as mentioned above, is such that the Allied Governments would be glad if the U. S. Administration could be moved to give permission for the use of American designs in all cases in which supplies to these designs would be forthcoming at an earlier date than the production to Allied designs; on the evidence available to the Board, this seems to be the case for the H tanks, the 37 mm and 90 mm anti-aircraft guns and the ammunition for these guns. 4) Since the Allied Governments are prepared to proceed immediately with the letting of contracts, it is felt that the steps they take, will, Regraded Uclassified 2. 186 by promoting the early development of armament production in the States, prove of considerable value to the U. S. Government in their rearmament programs. It is accordingly suggested that the U. S. Government might be propared to regard the two programmes as complementary and to afford a considerable measure of priority to the Allies. Moreover, since it would be the intention at e later stage to manufacture to Allied designs, the U. S. Government would benefit both by theknowledge of those designs and by the experience of contractors. 5) The Board feels that in the circumstances, the U. S. Administration will have no objection to their immediate approach to contractors and will be prepared to release to selected contractors the designs referred to in paragraph 3) above. II. The full scope of the programme is not yet finalised. But the following list is submitted in order that the U. S. Administration may have a general idea of the lines on which it 1s being drawn up: 1) American types for delivery starting within 8. few months: medium size, a) Tanks di /1000 to 1500. b) 37 - anti-aircraft guns: 1000 at least. c) 37 - anti-tank guns: 500 to 1000. d) 90 INTA anti-aircraft guns: 300 to 500. e) 3 inch anti-aircraft guns: 1000. Items b,c,d and e are subject to satisfactory supply of ammunition from U. S. sources. 2) Allied types for deliveries starting as soon as possible but not later than April 1941. 3. 167 a) Heavy tanks: 1000 at least: one French and one British type are envisaged. b) 3.7 anti-aircraft guns (British design): 400, by extension of the capacity of Midvale Steel Co. c) Small arm filled ammunition: 800 million a year d) Aircraft Bombs of various sizes: 180.000 long tons per year. JGP/hg D. London, May 24, 1940 186 R. New York,May 25, 1940 To Purvis From Monnet The two Prime Ministers have decided in principle that it is essential to try without delay to make arrangements such as have already been made in the case of aeroplanes to create in the U. S. a vastly increased production capacity for those types of munitions and armaments which are most essential. They have requested me to co-operate with the British and French Ministers of Armaments and the Anglo-French Executive Com- mittee for Armaments in drawing up a joint pro- gramme for the armaments and munitions in question. It seems clear that among the main items which will figure in this joint programme will be - Anti-aircraft guns Anti-tank guns Bofors guns (together with ammunition in each case) S.A.A. and Tanks European models of guns and tanks would be prefer- able but we realize that we may have to be content with American models. We cannot give any details regarding types, numbers, etc. until we have com- pleted the study which is being pushed ahead here. Meanwhile as our decisions must primarily be de- termined by the possibilities of American industry it would be of great assistance to us ?making? this study if you could give us in broad outline your opinion on the following points: (1) do there exist in the U. S. at present factories producing any or all of the items named in the preceding paragraph and if so are they capable of expansion sufficient to ensure production in really large quantities? (11) in cases where such factories do not exist 1a there any other branch of U.S. industry capable of prompt adaptation for our purpose? (111) within what period after the placing of orders might we expect deliveries (a) to start, and (b) to reach really large proportions in respect of each item? Regraded Uclassified 105 -2- Please investigate these points with your own experts (who on the French side are about to be supplemented by a mission due to arrive in New York in a few days) and let us have your views as soon as possible. You are also authorized to discuss the matter in confidence with Mr. Morgenthau with a view to obtaining his and the President's guidance. Our study here will be completed in the light of your reply and the resulting joint pro- gramme after approval by the two Governments will be communicated to you so that you can at once seek the assistance of the President and Mr. Mor- genthau and consider with them how far it can be dove-tailed into likely programme on the lines of the discussion reported in your telegram No.126. In addition to acting in accordance with Paragraphs 2 and 3 of this telegram please telegraph immediately (a) whether there 19 an American model of a heavy tank, and if 50 what are its characteristics, and (b) what are the characteristics of the latest American models of anti- aircraft and anti-tank guns, Regraded Uclassified MEMORANDUM May 29, 1940. TO: Secretary Morgenthau FROM: Mr. Sullivan This morning in company with l'essrs. Tarleau, Blough and O'Donnell, I went to the Ways and Means Committee meeting at 10:00 o'clock. We carried with us mimeographed copies of the new bill to increase the debt limit and provide for additional taxes. In the work on this bill yesterday afternoon and last night we had the cooperation of Mr. Beaman, House Legislative Counsel, Mr. O'Brien, Assistant House Legislative Counsel, and Mr. Stam of the Joint Tax Committee. Vr. Beaman was obliged to leave at 4:30 and we under- stood, according to my conversation with Senator Harrison, Congress- men Doughton and Cooper yesterday afternoon at 5:30, that when we produced our bill they would ask Mr. Beaman to finish inspecting it and they might be able to introduce it before the close of the session today. At the conference yesterday afternoon they also requested that I be prepared to discuss the bill informally this morning. As soon as the committee meeting was opened this morning the Republican members started raising questions about the absence of stenographers and the question as to whether or not this was a public or executive session. To stop such objections the Chairman asked us to withdraw to the adjoining room for the time being. Tie withdrew and for about an hour and three-quarters the committee expressed itself on a variety of problems. From what we could hear of the frequently heated discussion came the impression that the Republican members are anxious to keep Congress in session and hope to seize upon protracted public hearings on this bill as an excuse for continuing the session. There was a fairly insistent demand from the Republican members that the draft of the bill be circulated and public hearings unrestricted as to length started next Monday. Eventually the com- mittee agreed that they would enact new taxes providing for $6 to $7 hundred million additional revenue, and that they would consider the entire program; that public hearings start with the testimony of Secretary Morgenthau Friday morning, May 31st, at 10:00 o'clock; and that after the Secretary's testimony they would then go into executive session and determine whether the hearings should be limited. (Copies of the bill were not distributed). 171 - 2 - When the meeting was concluded, 11. Tarleau and his assistants joined Vesars. Beanan and O'Erien to help them in their review of our draft. It is understood that their com- pleted work will be introduced in the House tomorrow by Congressman Doughton. I immediately went to the office of Senator Harrison. lie had called a meeting of his committee also for 10:00 o'clock this morning and had asked that we send someone to attend it. 'r. Hlough attended and my information on the meeting of the Senate Committee comes largely from Hlough, who reports that there was a great difference of opinion in that committee as to whether there should be a tax bill, whether the debt limit should be increased, and the type of tax bill that should be enacted if the committee decided on additional legislation at this session. I saw Senator Harrison, who said he would like to have you there tomorrow morning at an executive session to give them some of the background on the necessity of raising the debt lirit. I explained to him that you wouldnot be avail- able tomorrow and that the following morning you were to testify before the Ways and l'eans Committee. He then asked me to arrange to have Ir. Bell there and I have done SO. Mr. Bell discussed with Dr. Viner this noon your state- ment before the Ways and l'eans Committee Friday and that state- ment is now being drafted. Dr. Viner has to leave for Chicago this afternoon and I have arranged to read it to him over the telephone tomorrow, if you deem this advisable. JLS Regraded Uclassified 172 May 29, 1940 9:00 a.m. Present: Mr. Purvis Mr. Bloch-Laine Mr. Ballantyne Dr. White (For beginning of the meeting) Mr. Young Mr. Matthews Mrs. Klotz Dr. Mead (For latter part of meeting) HM,Jr: Have you met Mr. Matthews? He's Secretary of the Embassy in Paris. He's sailing back tomorrow. I thought if he could get the feel of the thing to tell Ambassador Bullitt. Mr. Purvis: I'm sorry he's going back go soon. HM.Jr: I am under terrific pressure, gentlemen, and I'm going to stop at ten minutes to ten, BO if you will watch the clock and, as I say, after that if you want to talk to Mr. Katthews he's available. Mr. Purvis: Good. Very good. HM,Jr: I thought we could do the strategic thing first and I could exouse Dr. White. Mr. Purvis: Yes. HM,Jr: Shall I tell you what our situation is first because I think it answers everything we have. Go ahead, Harry. Dr. White: We have adequate funde already allocated to acquire half the Chinese production for the next couple of years so that if that 18 decided upon the funds are there end if we do acquire that amount we will have An adequate source for an emergency need. Mr. Purvis: Quite. 173 - 2 - Dr. White: Then we also consider that we produce increasing amounts of tungsten. Mr. Purvis: True. Dr. White: And there might even be a -- with the reserve stock and with what more we can produce here. Mr. Purvis: Does that mean you cannot continue buying from South America? Dr. White: No longer necessary to buy from South America. We have been buying from China, a very little from South America, but mostly from China. Mr. Purvis: I see. HM,Jr: The point is you wanted to know how we could buy up the 10,000 tons surplus and we are prepared to buy the whole business if necessary. Dr. White: In one year and nothing in the second. Mr. Purvis: One year is a lifetime at the moment. That 18 a fairly satisfactory answer. Might I tell them on the other side that is your position? Dr. White: That we are ready to buy half their production, half their total of all that they have left that is not allocated. HM,Jr: And then report this back to whoever has charge of this so they won't sell me down the river. Mr. Purvis: Shall I invite their suggestions? HM,Jr: Yes. Mr. Purvis: And then let them tell you what they are. HM,Jr: But, Harry, tie up that money and let them know that we have said we are ready to buy the 10,000 tons from China as our part of the show. Dr. White: 0. K. 174 - 3 - HM,Jr: They only asked us to buy half of it. Mr. Purvis: Then the other question was on the possibility of getting some embargo that would control these re-exports. Dr. White: The thing that would strike most quickly at that, skipping the powers that we already have, 1e a bill whi ch has been introduced already before the House, and passed before the House yesterday and 1s now introduced in the Senate. It will take care of most com- modities but not all and therefore we got in touch with the State Department last night to see whether they could not make some slight changes in the bill which 18 now before the Senate which would give all the power necessary to take care of the re-export of any strategic materials. I think they will be acceptable and they will accept such changes and we will know & little later in the day. Mr. Purvis: That's very satisfactory. HM,Jr: Excellent. Harry, I told Leon if he wanted to work with you it was entirely satisfactory. Thanks, Harry, it was a very nice job. Mr. Purvis: Very nice. (Dr. White left the meeting.) Mr. Purvis: The next 18 as to whether you have any more news together in regard to General Marshall HM,Jr: General Marshall 1s testifying this morning and he's coming down immediately after coming off the Hill to see me and I will ask him. He 1s expected to come here about ten minutes past eleven. It's about guns, etc. for the Allies and if I have an answer -- but there has been all the pressure possible and all the sympathy but we have to find a way frankly to get around the law. Mr. Purvis: Yes. What 1s really the essence of the difficulty. 175 4 HM Jr: It's against the law and he has to find a. way and in order to slow myself down I am going to tell you a story about General Marshall when he was in charge of the American soldiers at Tientsin. To show you, he wanted to get instructors to teach his soldiers Chinese and he had no money, and although it took a minimum of money they had no money. Sothe most valuable thing he had in the compound to sell was manure from the stables. So he advertised it for sale, but said you have to supply services, contractors, to get this manure and "services" were teachers to teach soldiers Chinese, and on that basis he got the teachers. Mr. Purvis: You are very reassuring. HM, Jr: Now, I told him if he could get instructors for the soldiers, he could find some way around. I said, "Use the manure deal." He's that kind of fellow. Mr. Purvis! It's in the best hands then. If a way can be found to do it, there 18 some hope of doing it? HM, Jr: If there 1s an illegal way we will do it. It's absolutely against our Neutrality Act to sell these gune to belligerents and he's been fussing with it ever since last Saturday. It's a question of can we do it illegally. We can't get it through Congress. Mr. Purvis: Yes. Yes. We have had, in the last few weeks, many intermediaries offering to sell ua things out of the stock. We have stead- fastly come to you. HM,Jr: It's in the hands of the Chief of Staff. Mr. Purvis: It can't be gotten out of any of these backstairs way. HM,Jr; It would be a grave error when it's in the hands of the General Staff. It's in the hands of Sumner Welles, Chief of Staff, and myself. Either we can or can- not and the disposition 18 to do it. Mr. Purvis: I hate to trouble you again. I have two men around us on priority. Shall I hand them to Mr. Young? 176 - 5 - Hm,Jr: I think it would be better. Is it airplanes? Mr. Purvis: One 1s motor torpedo boats which may be asking for priority on motor torpedo boats which will be delivered from July to December this year, an order which you have. X The other is -- I really almost hesitate to say this -- there 18 June, July, August in which nitro- cellulose powder, we are again up against it and again there is a request. We have a new factory coming into production at the end of August. We would like to borrow for those three months and repay immediately after. HM,Jr: The destroyer thing 1s out. Mr. Purvis: Out? Is it? I thought 80, but the second thing looked like it might be possible. HM,Jr: The destroyer thing is out because some- body went to the President on that. n Mr. Purvis: But on the last thing we thought there might be a possibility. It's priority. If it would be desirable I will change that memorandum including only the last one. HM.Jr: (To Lieut. McKay.) This is extra confi- dential. I want three photostats. I want to take one over to the White House at eleven-thirty. Mr. Purvis: The other thing I wanted to mention to you was to find out where, what, so I could tell the Minister of Supplies in Canada how he stood on that. HM,Jr: Engines? Mr. Purvis: But we will leave that to a little later. HM.Jr: Leave that because I want to have Dr. Mead come in. Mr. Purvis: Then there was a cable came in on Saturday indicating an entire change in the purchasing methods in regard to supplies and I thought I would like to leave, on the confidential record, a copy of it as it means program buying with authority to buy. 177 - 6 - HM,Jr: May I take a minute to read this? Mr. Purvis: Yes, please do. HM,Jr: Incidentally, don't bring down Baron de In Grange, please. Nobody. Mr. Broch-Laine: I can tell you I will not be reguonsible for his coming. he's HX,Jr: He's coming and/persona non grata, And we will not receive him. Mr. Bloch-Laine: Would you like me to say 80? HM,Jr: Please. Please say he's persone non grate at the White House and the Treasury and you will save e lot of time and trouble if he is not brought down. Neither the President nor I will receive him. Doesn't hurt your feelings, does it? Mr. Bloch-Laine: No, it would take a lot to hurt my feelings just now. HM,Jr: I an very 61nd to see this, because if you people in this program will 50 and take American tanks and American guns, et cetern, et cetera, we can work out ways. Now you take the business over at the Curties plant in Buffalo, that left-hand drive and right-hand. I mean, everything 18 different and it slows them up and If from nov on you people will take the United States Army modele Mr. Purvis: Yes. HM.Jr: the chances of working you in on pro- duction side by side are one hundred percent better. Mr. Purvis: May I ask one question? If then may I take it that where we place substantial orders the release will be there on the American models? HM,Jr: I can't guarantee it, but I an quite sure. For instance, if you will say we want -- whatever your tank is -- can we have it? I think the chances are eight out of ten the answer will be yes, but if you say, "Well, we want to do If 178 - 7 - Mr. Purvis: Such and such a tank. HM,Jr: a different tank and upset out whole program. Now, in the first place it takes other kind of tools and everything else. We will be delighted to have those officers and technical people come over and say, "Wait a minute. We have just learned through this fight we are going through that you are weak here or there, and then sit down and argue with our people, but let's turn out, if it's a 30-ton tractor, one 30-ton tractor. Now, it's not one for you or one for us. That's what I wanted to get to you on that. Mr. Purvis: It's common sense. HM,Jr: And we want some of your technical advice to bring us up to date. Mr. Purvis: I think that's a very sensible way to try to work 1t. Is the appointment of this Committee something that will affect us? HM Jr: No, the President has said three times you will still work with us and I will, of course, get Mr. Stettinius and Mr. Knudsen to help me, but you still, unless the President changed as of last night, he still has asked me to continue. Mr. Purvis: I was just wondering whether they were under your wing and you would push us along to talk to them 80 as to try to work in HM.Jr: You are perfectly free to talk with them, but the first member has already called up to see if he can come to see me to get my help. I think it will be the other way around, but you are free Mr. Purvis: just to talk to them, but keep the channels straight as before. HM.Jr: I think you will find you will get further in the long run, but as far as the President is concerned he wants me to handle foreign orders and machine tools that way, as of last night. After all, I helped to make 179 - 8 - up this Committee in three sessions we had with him and four out of the seven were my suggestions. Mr. Purvis: Yes. Quite. HM, Jr: I will let you know when you should go some- where else, because I am too much interested in your success to let my personality interfere. Mr. Purvis: We should be very regretful if that should happen. HM,Jr: The thing 18 too critical. Mr. Purvis: Thanks. It is very oritical. Another cable which came in, indirectly, which I was shown, would indicate that that central cable which I handed you a copy of has the very broadest and best kind of background in its fulfillment from the British end, which has relieved me, I think things are looking much more satisfactory and we should be able to get our setup in better condition. Buying will be program buying, similar to airplanes, and we did get airplane orders, placed as fast as the manufacturer could take them, as soon 8.8 the engine was out of the way. Mr. Bloch-Laine: If you want to get quick action on those things, now that we have the blessing of Mr. Morgenthau, don't you think we ought to see the manufac- turers just as soon as we can? Mr. Purvis: oh, yes! I take it we can have full parleys with the manufacturers to find out their full capacity. HM,Jr: Oh, Yes 1. Go ahead 1 Definitely 1 Mr. Bloch-Laine: They might say they cannot dis- cuss anything, but are agreeable to our discussing models, or their old models, but I suppose that way it could be given to them quickly. Mr. Purvis: You see, we have more technical people on this side already. The Frency mission arrived Monday who could probably talk with great advantage. 160 - 9 - Mr. Bloch-Laine: Including a man who was at the head of HM,Jr: But here is the thing. We are all, every- body, has got more to do than he can attend to. You have to say to me, "Mr. Morgenthau, this 18 what we want to buy. We want to buy so many of this kind of tanks, so many different models, BO many trucks, and we want to buy American models." When you give me your list I will be able to say to the Army and Navy, "I want a release on that." Mr. Bloch-Laine: But, you see, the difficulty is to us that none of us, including our experts, reallyknow what the American model 18. HM,Jr: We have to know first what you want. Mr. Purvis: We have been asked to put them in the very largest terms. The experts have put down a pre- liminary program of what that means. HM,Jr: Just as soon as you have a list as to quantity Mr. Purvis: I can file a preliminary memorandum of what we are prepared to purchase in the next three months. I will give it to Mr. Young. Quite a different program from anything we have contemplated. As a matter of fact, If you are going to see the President, you might want it before. I think it's important enough for that. HM,Jr: Shall we do engines now? Mr. Purvis: Yes. HM,Jr: I want you to meet Dr. Mead. (HM, Jr phones for Dr. Mead to come into the meeting) Mr. Purvis: Have we anybody on the airplane staff that you (Bloch-Laine) want to bring in? Mr. Bloch-Laine: Jacquin is here and he has two men with him. Mr. Detroyat is ace flyer. I think he got fined for flying under the Niagara Bridge. He has been 181 - 10 - busy for the last six months and he might be able to tell you airplane things. HM,Jr: I have the Airplane Board under Mead. Let Jacquin meet him and I'll explain to you in a minute what we are trying to do on airplanes. They should meet Mead. He's the person they should meet. Mr. Bloch-Laine: Jacquin 1s around. He was here this morning. Mr. Purvis: If there 1s any further guidance on the table -- I think we have your general picture up to this minute, but if other points occur to you HM,Jr: It would make all the difference in the world if you people would take United States Army models. We invite technical assistance and criticism. Mr. Purvis: Yes. It seems the obvious thing. Mr. Bloch-Laine: When you talk about A program, we can make one. We can't expect one from the other side. They are very busy and they don't know exactly what America can give them. I think the program -- we can make it go in view of the possibilities of this country. HM,Jr: But put it on a piece of paper so I can see it. Mr. Purvis: I will give you a preliminary memo on it before I leave. (At this point Dr. Mead came in.) HM,Jr: George, just eit down a minute. This 18 what we are trying to do. On engines I am, with Mr. Mead's assistance, for the moment we have, after all, this program of the President's -- the 50,000 planes -- and we are try- ing to work out the details. We are trying to have our own Army and Navy be patient with us for a few days. Mr. Purvis: Yes. 132 - 11 - HM,Jr: I mentioned yesterday to Mr. Mead and the Army and Navy officials this order of 2,000 engines for Canada and we looked up -- you check my memory -- on Jacobe and I think the last month we produced four engines in the first three weeks of May. How they are going to produce 2,000 engines I don't know, and if it is going to mean complete retooling of their plant there is A limited number of tools to go around. What I would like to do -- we get it this way -- General Motors comes in and say they have a request for a $50,000,000 plant from you to go ahead on the Bristol engine. I said, "Wait." In the meantime you say, "No." Mr. Mead has been heckled by the President of Studebaker who says he has an order to go ahead with 1500 Gnome and Rhone engines. Mr. Bioch-Laine: That's right. I told you about it the last time. HM,Jr: If you did, it went in one ear and out the other. And then, following this thing which we have just been talking about, the most important thing is the big engines and both Wright and Pratt Whitney are going to be in here tomorrow, one in the morning and one in the after- noon, devoting the whole day to it, and we are thinking in terms of roughly getting then to duplicate their capacity on the big engines, biggest engines which they each have which is proven. We don't want to & beyond the proven stage. Dr. Mead: It's the 2800 Pratt Whitney and the 2000 Wright. HM,Jr: With these people we don't know quite yet what technic we will use, whether the Government will build the plant, whether they will build the plant, or get an automobile manufacturer, but the present plan is to get somewhere west of the Alleghanies to duplicate Pratt Whitney and Curtiss Wright. When we do that each of the new plants will turn out only one model, one engine, and we won't put that model into production unless we are 100 per cent sure of it, but we are going to duplicate each of those and then B 6 we 8 along and I would like to say to you gentlemen, "All right, now we're going to do this. How much of this do you want?" Regraded Uclassified 183 - 12 - Mr. Purvis: That would be splendid. HM.Jr: How much do you want? And everything you do on engines now if you would direct somebody from the Allied Purchasing Mission directly to work with Dr. George Mead 80 we can coordinate this thing because we can't let you, frankly, place an order for 2000 Jacobs right now. In the first place you wouldn't get them and on what basis? They turn out two engines in three weeks. Mr. Purvis: Deliveries were relatively small this year. I think they will go 200 or 250 this year. HM.Jr: If you will place yourselves in his hands; he has the whole picture and I'm definitely sure that you will get better results than by shopping yourself. Now, 80 much for these air-cooled engines. Now, Mr. Ford 1s coming in here Friday. And for the moment everything 1s stopped out at Allison pending A test. You might just as well know it, but we feel General Motors ought to be able to correct the thing, but we are running additional tests on that engine, both at Dayton and their own shop, under direction of Dr. Mead. And the Rolls-Royce engine BO far has showed up pretty well. Dr. Mead: We are not running the Rolls. This 1s the Allison. HM,Jr: But the Rolls you feel is pretty good. Dr. Mead: Well, I certainly do, knowing Mr. Haas very well for a long time. HM,Jr: So again the question comes up, would the Allies care to Join us in production of their Model 10 or Model 20 Rolls Royce engine 80 that we can be concentrating our efforts. Mr. Purvis: Yes. HM,Jr: And you RO along with us and instead of having these things scattered -- and as I say we have limited tools, limited mechanics, limited brains, and we want to focus this thing into a channel 80 -- 184 - 13 - you may say we don't want any of that Curties engine and give you military reasons why not, and your Military Mission should see Dr. Mead and tell him what they know. They have military men here. Mr. Bloch-Laine: Jacquin is here and two other men. HM.Jr: So very quickly we can say, "All right, gentlemen, we are going to go ahead with two more plants for the b1g engines. We will or will not go ahead with the Rolls-Royce engine." Mr. Purvis: Quite. HM,Jr: We were not interested in the Bristol. Dr. Mead: That's right, simply because we have comparable engines here. Mr. Purvis: I 880. Dr. Mead: It's 8. good engine, but with Wright and Pratt Whitney it seems to be no need to do that. Mr. Purvis: Quite. Quite. You are just duplicating. Dr. Mead: Just trying to speed our own production. I know Feddon also. I think he's a good fellow. HM,Jr: So on emall enginee we are thinking along the same lines, but we hope to get our own Army and Navy to say that in certain classes of horsepower we are going to concentrate on production in those classes and what we will try to do 1s put your production in line with ours if you will go along. I said if they will go along with our American types, giving us the benefit of their military information, 80 we can bring ourselves up to date, I think we can work out 8 program. Mr. Purvis: Then the problem -- I was thinking now of Canada's position. They have this Empire training pro- gram for pilots which is another bottleneck and they are up against the fact that England has suddenly had to withdraw her trainers from deliveries. The question now 18, on trainers, whether anything can be done along the lines they said. Can I discuss it with Dr. Mead? 183 - 14 - HM,Jr: He's down in room 296 and if you will 6° down and discuss it with him Mr. Purvis: Several things, Dr. Mead. HM,Jr: If you talk airplanes and airplane engines with him. Mr. Purvis: Good. Yes. HM,Jr: And tell him what the French have in mind on your engine, you see? Is there one of these French engines over here? Mr. Bloch-Laine: I don't know. I suppose 80. Studebaker has asked for the license because they want to make airplane engines and probably can't get Pratt Whitney or Wright to do it. So they know that the engine works and they are ready to make it. I think it 18 the way those things happen. It's people who want to make airplane engines that haven't got the rights. Mr. Purvis: Or the technical background. Mr. Bloch-Laine: So they get it from the people who make it. Mr. Purvis: We will put into Dr. Mead 's hands all the records we have and we'll keep him advised of changes a.e they transpire. HM,Jr: On engines and planes. Mr. Bloch*Laine: After all, when we tried to bring up that big program there was a question that perhaps General Motors could make Pratt Whitney and Wright and it came to nowhere, because I don't think Pratt Whitney or Wright were willing to hand it down BO they made another one. HM.Jr: We have this thing under control. I think we are approaching it on a commonsense basis, andin the not too distant future we are going to move, and when we move it will be helpful to you and to us to know how much of this do you want, gentlemen. 186 - 15 - Mr. Purvis: You will get much further that way and I think we can give you all our various angles from the verious countries. HK,Jr: Now Mr. Purvis: Then after you have seen General Marshall we might possibly have other word as to whether there is anything? And I see now only one other thing. I will get you the memorandum giving preliminary ideas on the program and the kind of orders we are prepared to place in the next three months. HM,Jr: Mr. Matthews can sit with you wherever you go while you're in the Treasury and anything you want to get back to Anbassador Bullitt, here's your chance. Mr. Purvis: Thank you. I feel I've missed one thing on craft pulp and embargo. Could I have a word with Dr. White? Is there an embargo put on aircraft spruce? Can I just tell him what the problem 1s? HM,Jr: HM, Let Philip Young go along with you. Mr. Purvis: They wired in yesterday from Vancouver and they are worried whether there will be some embargo. HM,Jr: I think it would be better to have you do it with Young. I don't think White 1s the fellow. I think it's the Department of Interior. I think it's Mr. Ickes. Mr. Purvis: I see. Thank you. 00 0 00 0 00 o 00 him they A⁻ 137 crig 5/30 BROAD STREET, NEW YORK MANDYER BRITISH PURCHASING COMMISSION RIFLE AND MACHINE GUN N/C POWDER SUPPLIES Owing to heavy demands on powder for small arms munition, there is an extremely urgent need of supplies of rifle type N/C powder to fill a gap in production avail- able for the Allies during the months of August and September, 1940. The existence of this gap will mean that the Allies will be short of 600 tons of rifle powder of a type which may be defined approximately as one-half large bore machine gun powder (.50 caliber type) and one-half small bore rifle powder, such as is used in the British .303" cartridge. This .303" British powder is very similar to the standard American powder for similar calibers. The only possibility of filling the gap seems to be to obtain a release of capacity from the du Pont and Hercules companies now allocated to the U. S. Government. It is understood that such a capacity might amount to 225,000 lbs. per month from du Pont and 100,000 to 150,000 lbs. per month from Hercules. If this could be made available to the Allies during the months of June, July and August, there would thus be added to the Allied resources over 1 million lbs. of powder, which would very nearly meet the shortage. The new plant of the Hercules Company at Kenvil is expected to come into production at the end of August, and it is contemplated that this capacity may be still further enlarged so that it would be possible to repay to the U. S. Government any powder released to the Allies under the present request. This repayment could begin, it is expected, in the early months of 1941. Regraded Uclassified MEMORANDUM Naval Priorities In cable of Lay 17th of which a copy has already been handed you, a requ st was made that United States assistance be given in sccuring 48 destroyers, of which 16 might have good anti-aircraft armament, and 32 would preferably be of the flush deck type. All to be complete with torgedoes; spare tor, edoes; reserve equipment, and large quantities of ammunition especially anti-aircraft ammunition. A further cable has just been received ur- gently requesting motor torpedo boats. It is under- stood 23 are being built to power boat design, deliv- eries starting in July and being completed by end December 1940. It is asked that as many as possible of these boats, fully equipped, be turned over to the British Admiralty. New York, May 28, 1940. Regraded Uclassified May 28th ,1940 MEMORANDUM 1) The recent trend of the war in Europe has made it necessary for the Allies to launch immediately a large programme for the supply of areament from the United States. It is proposed that this programs should be a joint Anglo-French programme to be developed on the same lines as the current Aircraft programs. 2) The extent of the programme visualized is such that it will certainly involve a large extension of the existing manufacturing ca- pacity for the production of armament in the States. Having regard to the importance of eliminating all delays, the Allied Governments recognise that & considerable capital contribution may be necessary If their requirements are to be met. 3) The importanceof the time factor, as mentioned above, is such that the Allied Governments would be glad if the U. S. Administration could be saved to give permission for the use of American designs in all cases in which supplies to these designs would be forthcoming at an earlier date than the production to Allied designs; on the evidence available to the Board, this seems to be the case for the H tanks, the 37 mm and 90 - anti-aircraft guns and the amminition for these guns. 4) Since the Allied Governments are prepared to proceed immediately with the letting of contracts, it is felt that the steps they take, will, Regraded Uclassified promoting the early development of armanent production in the States, prove of considerable value to the U. S. Government in their rearmament programme. It is accordingly suggested that the U. S. Government micht be prepared to regard the two programmes as complementary and to afford a considerable measure of priority to the Allies. Moreover, since it would be the intention at a later stage to manufacture to Allied designs, the U. S. Government would benefit both by theknowledge of those designs and by the experience of contractors. 5) The Board feels that in the circumstances, the U. S. Administration will have no objection to their immediate approach to contractors and will be prepared to release to selected contractors the designs referred to in paragraph 3) above. II. The full scope of the programme is not yet finalised. But the following list is submitted in order that the U. S. Administration may have & general idea of the lines on which it is being drawn up: 1) American types for delivery starting within a few months: medium size a) Tanks to /1000 to 1500. b) 37 an anti-aircraft guns: 1000 at least. c) 37 am anti-tank Funs: 500 to 1000. d) 90 - anti-aircraft guns: 300 to 500. e) 3 inch anti-aircraft gunst 1000. Items b,c,d and e are subject to satisfactory supply of ammunition from U. 8. sources. 2) Allied types for deliveries starting as soon 0.5 possible but not later than April 1941. 3. e) Heavy tanks: 1000 at least: one French and one British type are envisaged. b) 3.7 anti-aircraft guns (British design): 400, by extension of the capacity of Midvale Steel Co. o) Small arm filled ammunition: 800 million a year d) Aircraft Bombs of various sizes: 180.000 long tons per year. Regraded Uclassified PROPOSED ARMY AND NAVY LOAD Manufacturer Service Type Model 1941 1942 1943 1944 Total Beech Aircraft Corp. Wichita, Kansas Navy Transport, 2-Eng. JRB 1 1 Navy Transport, 1-Eng. BG 3 7 12 20 42 Army Transport, 2-Eng. 0-45 137 137 136 410 Total 4 144 148 156 453 Bell Aircraft Corp. Buffalo, New York Army Pursuit, Inter- ceptor, 1-Eng. P-39 400 400 400 1200 Boeing Aircraft Co. Seattle, Wash. Army Bomber, Heavy, 4-Eng. B-17 (150) 201 201 201 603 Brewster Aero. Corp. Brooklyn, N.Y. 3 Navy Boout Bomber, Newark, N.J. 1-Eng. XSB2A 115 476 729 400 1720 Consolidated Aircraft Corp. Ban Diego, California Navy Patrol Bomber 2-Engine VPB 89 205 404 250 948 Army Bomber, Heavy 4-Engine B-24 *(50) 50 50 50 150 6 On current contract - not included in totals. Curtiss Airplane Division Navy Scout Observa- Buffalo, New York tion, 1-Eng. X603C 360 300 434 250 1344 Army Pursuit Inter- ceptor, 1-Eng. P-40 1088 1088 1087 3263 Army Observation C.D. 1-Engine 0-52 188 188 188 564 Total 360 1576 1710 1525 5171 Sheet 1 of 5 193 Regraded-Uclas Manufacturer Service Type TepoK 1941 1942 1943 1944 Total Curtise (St. Louis) Army Transport, 2-Eng. CW-20 -- 200 200 200 600 Army Trainer, Advanced 1-Engine CW-22 50 100 124 100 374 Total 50 300 324 300 974 Douglass Aircraft Corp. Banta Monica, Calif.) Navy Scout Bomber El Sigundo, Calif. 1-Engine SBD-2 174 - : : 174 Navy Transport, 2-Eng. RD-3(DC-5) 6 5 6 13 30 Army Bomber, Light 2-Engine A-20 669 669 669 2007 Army Transport, 2-Eng. C-39 400 400 400 1200 Total 180 1074 1075 1082 3411 Grumman Aircraft Corp. Beth Page, L.I., N.Y. Navy Fighter,1-Engine F4F3 162 271 470 500 1403 Navy Fighter,2-Engine F5F 54 271 470 500 1295 Navy Transport,2-Engine JRF 10 18 37 30 95 Navy Transport,1-Eng. J2F4 - 95 96 70 261 Army Pursuit, 2-Eng. P-50 90 90 90 270 Total 326 745 1183 1190 3344 Lockheed Aero.Corp. Army Pursuit,Fighter Burbank, Calif. 2-Engine P-38 300 300 300 900 Glenn L. Martin Co. Baltimore, Md. Navy Patrol Bomber VPB 90 205 404 250 949 Army Bember, Medium 2-Engine B-26 630 630 630 1890 Total 90 835 1034 880 2839 Sheet 2 of 5 194 Regraded Uclassi (Continue Manufacturer Service Type Model 1941 1942 1943 1944 Total Naval Aircraft Factory Philadelphia, Pa. Navy Primary Trainer N3N-3 500 173 315 1215 2203 North American Aviation Navy Trainer, Advanced Inglewood, Calif. 1-Eng. SNJ-2 200 25 72 100 397 Army Bomber, Medium 2-Eng. B-25 1229 1229 1228 3686 Trainer, Advanced 1-Eng. 300 300 300 900 Total 500 1554 1601 1328 4983 Republic Airplane Co. Farmingdale, L.I., N.Y. Army Pursuit, Intercep- tor, 1-Eng. P-44 600 600 600 1800 Ryan Aeronautical Corp. San Diego, Calif. Navy Trainer, Primary 1-Eng. 200 -- -- -- 200 Army Trainer, Primary 1-Eng. PT-20 253 253 252 : 758 Total 453 253 252 958 Stearman Airplane Div. (Boeing) Wichita, Kansas Navy Trainer, Primary 500 500 Army Trainer, Primary 1-Eng. PT 18 500 500 500 - 1500 Total 1000 500 500 - 2000 Spartan Aircraft Corp., Tulea, Okla. Navy Trainer, Primary 1-Engine 200 200 Army Trainer, Primary 100 100 100 - 300 Total 300 100 100 500 Sheet 3 of 5 195 Regraded Uclassifie PROPOSED ARMY AND NAVY LOAD (Continued) Manufacturer Service Type Model 1941 1942 1943 1944 Total Vought-Sikorsky Stratford, Conn. Navy Observation Scout 1-Eng. vos 276 300 434 250 1260 Navy Torpedo,1-Eng. XTBU-1 108 165 95 100 468 Army Reconnaissance Amphibian, 2-Eng. 38 38 37 113 Total 384 503 567 387 1841 Vultee Div. Aviation Mfg. Corp. Downey, Calif. Army Trainer, Basic, 1-Eng. BT-13 300 500 500 200 1500 Sheet 4 of 5 196 PROPOSED TRMY LOAD (Miscellaneous) Manufacturer Service Type Model 1941 1942 1943 1944 Total Aircraft Research Corp. Army Trainer, Basic Bendix, N.J. 1-Eng. XBT-11 31 131 131 100 393 Barkley-Grow Army Trainer, Advanced Detroit, Mich. 2-Eng. T&P-1 50 100 100 50 300 Bellanca New Castle, Del. Army Observation, Short Range, 1-Eng. Y0-50 -- I -- - - Fairchild Hagenstown, Md. Army Trainer, Primary 1-Eng. PT-19 300 300 300 I 900 Fleetwings, Inc. Bristol, Pa. Army Trainer, Basic 1-Eng. XBT-12 100 300 300 200 900 St. Louis Aircraft St. Louis, Mo. Army Trainer, Primary 1-Eng. PT-15 250 250 250 : 750 Stinsen Army Trainer, Advanced Nashville, Tenn. 2-Engine 200 500 500 300 1500 Waoo Troy, Ohio Army Trainer, Primary 1-Engine PT-14 150 150 150 - 450 Sheet 5 of 5 Regraded Uclassifie May 30, 1940 198 ARMY AIRPLANE REQUIREMENTS 1941 1942 1943 1944 TOTAL Bonbardment, Heavy, 4-Engine Boeing B-17 201 201 201 603 Consolidated B-24 50 50 50 150 753 Homberdment, Medium 2-Engine Martin B-26 630 630 630 1890 North American B-25 1229 1229 1228 3686 5576 Bomberdment, Light 2-Engine Douglas A-20 669 669 669 2007 Pursuit, Fighter 2-Engine Lockheed P-38 300 300 300 900 Grumman P-50 90 90 90 270 1170 Pursuit, Interceptor 1-Engine Bell P-39 400 400 400 1200 Curtiss P-40 1088 1088 1087 3263 Republic P-44 600 600 600 1800 6263 Reconneissence Amphibian 2-Engine Vought-Sikorsky JRF 38 38 37 113 Transport 2-Engine Douglas 0-39 400 400 400 1200 Curtiss(St.Louis)CW-20 200 200 200 600 Beech 0-45 137 137 136 410 2210 Observation O&D 1-Engine Curtiss (Buffalo)0-52 188 188 188 564 Treiner Advanced 2-Engine Stinson 200 500 500 300 1500 Barkley-Grow. 50 100 100 50 300 1800 Treiner-Advanced 1-Engine Curtiss( St. Louis) CW-2@ 50 100 124 100 374 North American AT-6 300 300 300 I 900 1274 Regraded Uclassified May 30, 1940 - 2 - 199 1941 1942 1943 1944 TOTAL Trainer-Basic 1-Engine Vultee 300 500 500 200 1500 Fleetwing 100 300 300 200 900 Air Research 31 131 131 100 393 2793 Trainer-Primary 1-Engine Fairchild 300 300 300 1 900 Ryan 253 253 252 -- 758 Spartan 100 100 100 - 300 Stearman 500 500 500 -- 1500 St. Louis 250 250 250 -- 750 Waoo 150 150 150 - 450 4658 WRIGHT Number Engine Airplane Type Engines Type Bacing B-17 4 1800 North American B-25 2 2600 Douglas A-20 2 2600 Grumman P-50 2 1820 Douglas C-39 2 1820 Curtise (st.L.) 0W-20 2 2600 Stinson 2 eng. trainer 2 975 Curties (st.L.) OW-22 1 975 P.&W. Consolidated B-24 4 1830 Martin B-26 2 2800 Republic P-44 1 2800 Vought JEF 2 1830 Beech 0-45 2 985 Curties 0-52 1 1340 Barkley-Graw 2 eng. trainer 2 985 North American AT-6 1 1340 Vultee BT-13 1 985 Fleetwing XBT-12 1 985 Air Research XBT-11 1 985 ALLISON Lockheed P-38 2 1710 Bell P-39 1 1710 Curties P-40 1 1710 CONTINENTAL Spartan trainer 1 670 Stearman PT-17 1 670 MENASCO Ryan PT-20 1 L-365 LYCOMING Stearman PT-13 1 680 St. Louis PT-15 1 680 RANGER Fairchild PT-19 1 1-440 JACOBS Stearman FT-18 1 755 Waco PT-14 1 755 Regraded Uclassified 201 ARMY AIRPLANE ENGINE REQUIREMENTS (Allowance made for 50% spare engines) 1941 1942 1943 1944 Total Wright 2600 6,294 6,294 6,291 18,879 1820 2,676 2,676 2,676 8,028 975 675 1,650 1,686 1,050 5,061 P. & W. 2800 2,790 2,790 2,790 8,370 1830 414 414 411 1,239 1340 450 450 450 - 1,350 985 646 1,957 2,107 1,458 6,168 Allison 1710 3,132 3,132 3,132 9,396 Continental 670 900 900 900 - 2,700 Lycoming 680 375 375 375 - 1,125 Jacobs 755 225 225 225 - 675 Menasco L-365 379 379 378 1,136 Ranger L-440 450 450 450 1,350 May 30, 1940 202 ASSIGNMENT OF TYPES (to Manufacturers) Bomber, heavy, 4 engines - Boeing, Consolidated II medium, 2 engines - Martin, North American If light, 2 engines - Douglas Pursuit, fighter, 2 engines - Lockheed, Grumman Pureuit, interceptor, 1 engine - Bell, Curtiss (Buffalo), Republic Reconnaisance, Amphib.,2 engines - Vought-Sikorsky Transport, 2 engines - Curtiss St.Louis), Beech, Douglas Observation, C&D, 1 engine - Curtise (Buffalo) Observation, S.R., 1 engine - Stinson, Bellanca Trainer, advanced, 2 engines - Stinson, Barkley-Grow If 11 1 engine - Curties St.Louis), North American If basic, 1 engine - Vultee, Fleetwings, Air Research Corp. M primary, 1 engine - Stearman, Fairchild, Ryan, Waco, Spartan, St. Louis (to Types) Model Designation Type Commercial Navy Army Aircraft Research Corp. Trainer, basic, 1 engine XBT-11 Barkley-Grow Trainer, advanced, 2 engines T8P-1 Beech Transport, 2 engines GB-1 0-45 JRB-1 Bell Pursuit, interceptor, 1 engine FL P-39 Bellanca Observation, S.R., 1 engine YB-50 Boeing Bombardment, Heavy, 4 engines B-17 Brewster Pursuit, interceptor, 1 engine F2A-2 Burnelli Subcontractor or licensee Cessna # # If Consolidated Patrol Boat PB2Y Bombardment, Heavy, 4 engines B-24 Curtiss(Buffalo) Scout observation SB2C 8030 Pursuit, interceptor, 1 engine P-40 Curtiss(St. Louis) Transport CW-20 Trainer, advanced, 1 engine CW-22 Douglas - Santa Monica Transport 0-39 Bombardment, Light, 2 engines A-20 - El Segundo Scout Bomber, 1 engine SBD-2 Transport DC-5 R3D-1 Engineering Research Corp. Observation, S.R., 1 engine X Fairchild Trainer, primary PT-19 Fleetwings Trainer, basic XBT-12 Grumman Torpedo, 1 engine XTBF-1 Transport, amphib., 2 engines JRF # # 1 engine J2F-1 Pursuit fighter, 1 engine F4F-3 # If 2 engines F5F XP-50 Kellett Subcontractor or licensee Lookheed Pursuit, fighter, 2 engines P-38 Martin Patrol boats PPM/PB2M Bombardment, medium, 2 engines B-26 Meroury Subcontractor or licensee Naval Aircraft Factory Trainer, primary N3N 203 Regraded Uclas Model Designation Type Commercial Navy Army North American Trainer, Advanced, 1 engine SNJ-2 BT-14 Bombardment, Medium, 2 engines B-25 Pitcairn Subcontractor or licensee Republic Pursuit, interceptor, 1 engine P-44 Ryan Trainer, primary, 1 engine (Trainer) PT-20 Spartan Trainer, primary, 1 engine X (Trainer) St. Louis Trainer, primary, 1 engine PT-15 Stearman Trainer, primary, 1 engine (Trainer) PT-13,17,18 Stinson Trainer, advanced, 2 engines X Observation, S.R., 1 engine 0-49 Vega Subcontractor or licensee Vultee Trainer, advanced, 1 engine BT-13 Vought Sikorsky Reconnaisance, amphib., 2 engines JRS-1 Torpedo, bomber, 1 engine XTBU-1 Observation, scout, 1 engine 082U Pursuit, fighter, 1 engine XF4U Waco Trainer, primary, 1 engine PT-14 Arrow - Indeterminate. Culver - If Piper I # Porterfield - # Taylorcraft - II $02 Regraded MAY 30, 1940 ARMY AIRPLANE REQUIREMENTS This Estimate is Not Based Upon An Approved Program Airplanes Airplanes Total Airplanes Airplanes to be Required as Required Airplenes to be on purchased on Basic Equip- for Train- Required hand from 50,000 Airplane ment by Tac- ing and Adm. By previous Program tical Org. in Tac. Org, Type procurements as of 6/30/44 Tactical (169 & 200) Bomb. H. 4-Engine 1122 o 1122 369 753 Bomb. M. 2-Engine 4432 1868 6300 724 5576 Bomb. L. 2-Engine 1700 720 2420 413 2007 Purs. F. 2-Engine 878 372 1250 81 1169 Pure. I. 1-Engine 5110 2140 7250 987 6263 Rec.Auph.2-Engine 96 58 154 41 113 474 Trans. 2-Engine 1614 1150 2290 80 2210 Obs. C&D 1-Engine 874 366 1240 676 564 Obs. S.R.1-Engine : -- -- - I Total 15,826 6,674 22,500 3519 18,655 Training Train.Adv.2-Engine 1800 - 1800 I 1800 Train.Adv.1-Engine 2200 - 2200 (326 and 600) 1274 926 Train.B. 1-Engine 4000 : 4000 (707 and 500) 2793 1207 Train.P. 1-Engine 6000 : 6000 (842 and 500 4658 1342 14,000 14,000 3475 10,525 22,500 3519 18,655 Army Program 50,500 9994 29,180 205 Regraded Uclas CHRYSLER CORPORATION Detroit Michigan SELLEN May 29, 1940. The Honorable Henry Morgenthau, Jr., The Secretary of the Treasury, Washington, D. C. My deer Mr. Secretary: Acknowledging your letter of May 27th, may I first mention that in my letter to you of May 23rd I didn't tell you that I had seen Mr. Purvis in New York, but as he told me he was planning to see you in Washington the next day, I saked him to tell you of our conversation. Since writing you last we have continued our study of the air- plane engine situation; in fact, we already have on paper 8 good deal of prelimin- any design work on an engine such as we understood would meet the Wright Field onzineers' desires. May I comment further on the Continental engine situation? If I am correctly informed, the Continental people are currently engaged in developing and designing such en engine and hope to have a sample engine rendy to submit for test in about seven months. We are not attempting to intrude in any wey upon their activity in this direction. The situation as we see it is this: the Wright Field engineers have a wealth of experience, background and data on airplane engine fundamentals which we are at présent lacking; we have facilities for designing, drafting, ex- verimental building and testing which we believe, sympathetically integrated with their experience, could rapidly design the kind of engine desired. Furthermore, we have a background of manufacturing experience which we believe could rapidly translate any design arrived at into actual production. I realize the pressure you must be under these days, and I marvel st your finding the time and energy to deal with all these questions. If you feel It would be wise to pursue the discussion of this matter further with the War Department or any of the other departments of the Government to which you refer, we would sppreciate your suggestion. Meanwhile, we are carrying on the preliminary excloration work in which we are now engaged without raising the question of com- mitments on the part of the Government, which, after all, can be dealt with when our problems become Es little more clearly defined. May I again assure you of the willingness of this Corporation to take a part in the defense program that will be at once a credit to ourselves and e real service to the Government? Yours sincerely, KTK.LS K. KELLER Regraded Uclassified 207 NOTE: This was prepared for the President but he did not accept it. He used instead the ltr dated 6/4 addressed to the Secy of War. not 6\x. no 2/27/40 208 THE WHITE HOUSE WASHINGTON May 29, 1940 My dear Mr. Secretary: I have created an informal committee to represent the American Government in its contacts with the interested foreign governments in all matters relating to the purchase of war materials in the United States, consisting of the following: (a) The Director of Procurement, Treasury Department; (b) The Executive Assistant to the Assistant Secretary of War; (c) The Paymaster General of the Navy. This committee will serve as the exclusive liaison with reference to procurement matters between this Government and the interested foreign governments. It will hold sessions at least once weekly, and at such more frequent intervals as may be necessary. At these sessions, it will receive an accredited representative of the embassy of any interested foreign government for the purpose of giving consideration to the requirements of such government for supplies, equipment, and materials, in relation to: (a) availability of the desired articles, (b) priorities, and (c) prices. The committee will submit a complete report of its proceedings, acts and recom- mendations to the President through the Secretary of the Treasury. The Secretary of State has informed the British and French Ambassadors of this arrangement. Will you please inform the Director of Procurement of his designation as a member of this committee and ask him to serve as its chairmen. Sincerely, The Honorable, The Secretary of the Treasury. 209 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE May 29, 1940 TO Secretary Morgen thau FROM Mr. White Subject: Tungsten 1, Uses Tungsten is included in the United States Army listing of strategic raw materials. Its chief use 1s in the manufacture of steel, especially in high speed tool steels. It 1s also used in manufacturing steel alloys fabricated into armor-piercing bullet cores, and in producing "stellite", a hard alloy which 18 pro- cessed into surgical instruments. Tungsten 1e important as the filament material in electric light and radio bulbs. It 1s possible to substitute molybdenum for tungsten in certain hard steels. The War Department has reported that it 18 also possible to use carbon steel in place of tungsten steel In the manufacture of armor-piercing bullet cores. Tungaten is virtually indispensable in the production of electric light and radio bulbs, but the amount used in each bulb ie BO small that the total quantity consumed is relatively small. Commodity specialists variously estimate that metallic alloys consume between 80 and 90 percent of the total emount of tungsten used, Moreover, in an emergency, carbon filaments could be used in producing electric light bulbs. 2. Production The total world production of tungsten concentrates amounts to approximately 40,000 tone annually. China 1s the world's largest producer of tungsten, accounting for about one-third of the world output. Until 1939, Burma wes the second largest pro- ducer. It 1s believed, however, that the United States was the second largest producer last year, turning out about 4,000 tons. (Most computations are in terms of metal; one ton of concentrates 1E roughly equivalent to one thousand pounds of metal.) 3. The United States can probably be self-sufficient provided that domestic tungsten producers are given greater incentive. The United States has become increasingly self-sufficient in tungsten. Domestic production rose from 40 percent of con- sumption in 1936 to 73 percent in 1939. Last year approximately 5.6 million pounds of metal were consumed in the United States, of which 1.5 million pounds were imported. Imports came prin- cipally from China and British Malaya. Regraded Uclassified 210 Division of Monetary - 2 - Research The War Department estimated in 1938 that the United States requirements -- both civilian and military -- for tungsten in & "major emergency" would be about 6 million pounds of metal a year. These estimates allowed for partial substitution (molyb- denum in some tool steels, but not carbon in lamp filaments nor carbon steel in armor-piercing bullet cores). According to our information, the United States producers were operating far below their capacity in 1939, when they pro- duced over 4 million pounds. It 1s known that several important mines were not operated in the first 9 months of 1939. In addition, new and improved refining plants have been completed only in recent months. In view of these facts, the United States may be able to supply almost all of its own tungsten requirements, if greater incentive were given to domestic producers. 4. Available stocks of tungsten probably exceed six months' requirements. Stocks in bonded warehouses on December 31, 1939, were equivalent to 1.7 million pounds of metal (mostly in the form of ore). The government in recent months has purchased concentrates equivalent to about 1.1 million pounds of metal for use by the Army and Navy. Only about .8 million pounds of this quantity 1s for the National Stock Pile. The Army estimated that the Army and Navy alone would require 2 million pounds for 12 months of 8. major emergency. $12 million of the anticipated $35 million appropriation for the acquisition of strategic commodities 1s reported to be tentatively set aside for the purchase of tungsten. This sua 18 probably adequate to purchase enough tungsten to meet the Army estimates of requirements for a two year emergency period. In addition to these stocks there are probably several months' industrial supply in the hands of private corporations. 5. There are over 45 tungsten producing companies in the United States, but the output appears to be dominated by one company. The Nevada-Massachusette Corporation produces between 30 and 45 percent of the domestic output, and appears to dominate the industry. 211 Division of Mone tary - 3 - Research Other large companies in the field include the Molybdenum Corporation of America, the U. 8. Vanadium Corporation, the Larson Mill (Subsidiary of Continental Mining Company), the Tungsten Metal Corporation, and the Ima Mines Company. The General Electric Company owns the Germania Mines (Fruitland, Washington) and can probably produce sufficient tungsten for the General Electric needs. In addition, there are about 25 small independent producers in Nevada, and approximately 13 in California, as well as several in Idaho, Washington, and Colorado. 212 May 29, 1940 10 a.m. In this discussion this morning with Purvis I had two things in mind. When I talked to General Marshall last Sunday I told him that from now on I would try to get the Allies to order American models -- tanks, guns, etc. -- so that if the time should come that we had to take over the pro- duction ourselves for whatever reason, they would be American Army models and not French or English. Purvis played right into my hands this morning when he said they might be willing to take American models if they could get them faster and get a release rather than trying to order either English or French models. Second. If we go into the building of new air- plane factories, I think a perfectly legitimate way of helping out the Allies would be from now on not to make them pay for plant expansion, because up to now they have paid for 100% of the plant expansion in the airplane in- dustry and it seems to me it's up to us now to do our share. 000-000 Regraded Uclassified 213 May 29, 1940 10:59 a.m. H.M.Jr: How are you? Sumner Welles: Oh, I'm struggling. I wanted to ask you two questions. H.M.Jr: Please, Sumner. W: There's a telegram just come in from Bullitt to the President, referring to the President's decision yesterday 8.6 announced, to send the Cruiser Vincennes and two destroyers to Lisbon. H.M.Jr: Yes. W: He now asks whether the President will agree to let the Vincennes go to Bordeaux. As you may remember in the telegram that he sent yesterday or the day before, he suggested that it might go ostensibly to take refugees but really in order to take gold. H.M.Jr: Yes. W: And he says the early arrival of a cruiser at Bordeaux 18 essential for the reasons that -- for the reason that interests Henry Morgenthau. Now before sending this over to the President, I wanted to get your judgment as to whether you wanted that done or not. H.M.Jr: Well, you know -- ah -- Mr. Hull called me Sunday noon -- Sunday noon -- and asked me about this gold business, and I drew to his attention the fact that we had sent three different cruisers over there for gold. W: Yes. H.M.Jr: And he said, well, they were not at war, and I said that 18 true. Now, in that case we bought the gold. Now, what we could do 18, if it would help you cross this bridge, we could pay for the gold as it was put on the cruiser. W: I see. 214 - 2 - H.M.Jr: If that would help any. W: I see. H.M.Jr: See what I mean? W: Yeah. Yeah. H.M.Jr: I mean, if they ship the stuff, we'd take title when it got on board the cruiser. W: I see. H.M.Jr: Now, that might help a little bit. W: All right. That answers that question. H.M.Jr: But, if something like that could be worked out, I'd be heartily in favor. And the other time I think we limited it to $25 million, but there's no reason why a cruiser shouldn't take $100 million. W: A $100 million. H.M.Jr: It could just as well take a $100 million. W: Yeah. All right. H.M.Jr: They could take a $100 million on board and it's just as safe as $25. W: Yeah. H.M.Jr: What? W: Right. H.M.Jr: But we'd take title to it as they came on board BO that ...... W: That would avoid that question. H.M.Jr: It makes it look a little bit -- it isn't as though we were transporting French gold, we'd be transferring American property. W: Exactly. 215 - 3 - H.M.Jr: You get the idea? W: Yeah, perfectly. H.M.Jr: It'd be American property. W: Yeah. H.M.Jr: Does that help? W: Yeah, that would clear that up entirely, yes. H.M.Jr: All right. W: Now the second question. H.M.Jr: Please. W: Bullitt's suggestions that we insist that planes that are being manufactured for the Soviet Government and for the Swedish Govern- ment be transferred to the Allies. Is there any way in your judgment which that could be done? H.M.Jr: Well, there are no Soviet planes being manufactured here. There 18 one order here for Sweden, something around 150 planes, roughly. How are you going to take them away from Sweden? W: That's what I wanted to ask you. H.M.Jr: It's impossible. W: There's no power as I see vested in this Government to ex-appropriate property being paid for by another sovereign government. H.M.Jr: Well, I mean, look, we take 150 planes away from a neutral to give to a belligerent. W: Exactly. H.M.Jr: What? W: Exactly. 216 - 4 - H.M.Jr: That doesn't look very good. W: Well, I sometimes get a little bit confused, in the first place the flood of suggestions that comes from him 18 something fantastic. H.M.Jr: Well, any time, day or night, call me on the plane thing. I have that at my finger tips. W: I know you have. Well, in other words, there's nothing that we can do along that line. H.M.Jr: No, there's not. W: All right, Henry. H.M.Jr: Thank you. W: Thank you. 217 SUGGESTED ADVISORY BOARD Carl Breer V. P. in charge Engineering Chrysler Dr. Vannevar Bush President Carnegie Institution of Washington Chairman of NACA Dr. Karl T. Compton President M.I.T. R. V. Davis President Aluminum Company Dr. V. F. Durand Consulting Engineer R. 1. Flanders President Jones & Lampson Edsel Ford President Ford Motor Car Co. Dr. J. C. Hunsaker Aeronautical expert Charles Kettering Vice President General Motors W. B. Mayo Former Chief Engineer of Ford Dr. Robert Millikan President California Inst. of Technology Harry G. Stoddard President Wyman-Gordon Company Gerard Swope Former Chairman of Board, General Electric Willis Whitney Director of Research, General Electric Steel May 29. 1940 OPERATIONS 218 Mark- He Edison askid Loser to have for him - for the President) our plane and procurement rngine plan to went Hur year it is - lwill give mr Edison copy - monday NRS #. 1. GOVERNMENT PRINTING OFFICE Timess 219 THE WHITE HOUSE WASHINGTON May 29, 1940. MEMORANDUM FOR THE SECRETARY OF THE TREASURY FOR YOUR INFORMATION F. D. R. photostat Dr mead 5/31/40 9am. 220 A reply address not the signer of chie letter but Bureeu of Aeronautics, Nevy Department, Washington, D.C. NAVY DEPARTMENT Refer to No. nar-PL-4-VGM BUREAU OF AERONAUTICS WASHINGTON 25 May 1940 MEMORANDUM for Admiral Stark. The information you requested regarding program requirements in aircraft and engines by types is forwarded herewith in tabulated form. Statomer 221 NAVAL AIRCRAFT AND ENGINE PROCUREMENT PROGRAM 1941 A. - AIRCRAFT TYPE 1941 Normal 1941 Training Total Cash Contract Observation Scouting 188 107 304 539 Scout Bombing 189 18 58 269 Fighting 81 42 109 232 Patrol Bombing 26 40 105 169 Torpedo Bombing 27 - 63 90 Utility 11 2 4 17 Utility Transport 6 2 2 10 Small Transport - 1 2 3 Large Transport 3 1 S 7 Training Primary - 525 944 1470 Training Advanced - 69 125 194 TOTAL 2995 Regraded Uclassified 222 25 May 1940 B. ENGINES QUANTITY AND TYPES OF ENGINES REQUIRED FOR 1941 NAVAL AIRCRAFT PROGRAM ITEM TYPE 1941 Normal 1941 Training Quantity Required Cash Contract (Equiv. Engines) AIRPLANE TYPE 4-770-6 (Pouger) 1 R 985-50 (P&N) 205 171 486 862 VOS 2 R-2600-8 (Wright) 303 29 92 424 VSB 3 R-1830-76 (P&W) 152 78 - 230 VF 4 R-1820-40 (Wright) - I 174 174 VF 5 R-1820-42 (Wright) --- - 174 174 VF 6 R-2600-6 (Wright) 83 128 330 541 VPB 7 R-2600-10 (Wright) 22 - 50 72 VTB 8 R-2800-6 (P&W) 22 - 50 72 VTB 9 R-1820-30 (Wright) 18 3 7 28 VJ 10 R-985-48 (P&W) 18 9 10 37 VG & VJR (small) 11 R-1820-44 (Wright) 11 3 11 25 VR 12 R-760-8 (NAF) - 154 278 432 VN (primary) 13 R-670-4 (Continental) - 343 617 960 VN (primary) 14 R-680-8 (Lycoming) - 343 617 960 VN (primary) 15 R-1340-24 (P&W) - 112 200 312 VN (advanced) TOTAL 5303 TREASURY DEPARTMENT 223 Office of the Secretary Technical Assistant to the Secretary Date May 29, 1940 TO: SECRETARY MORGENTHAU Room The two attached paraphrases were re- ceived simultaneously, one from Mr. Welles and the other from Mr. Stone in the Secretary's Office. They concern the same message. AMB Merie Cochran E From: MR. COCHRAN AA 224 OFFICE OF THE UNDERSECRETARY DEPARTMENT OF STATE WASHINGTON May 29, 1940 Personal and Strictly Confidential Dear Henry: I am enclosing R paraphrase of a con- fidential telegram received from Bullitt this morning. Believe me Yours very sincerely, Enclosure: From Paris, May 29, 1940 The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. Regraded Uclassified 225 PARAPHRASE OF TELEGRAM FROM AMERICAN EMBASSY, PARIS May 29, 1940 This morning I received Louis Renault together with the general manager of the Renault works in Paris, Rene de Peyrecave, who told me they intend to leave on Saturday on the Clipper from Lisbon, arriving next Monday morning in Washington. They will get in touch with the Secretary of the Treasury 88 soon as they arrive in Washington in accordance with your suggestion. If it is possible I think arrangements should be made for the President and Renault to shake hands. Regi ded Uclassified 226 PARAPHRASE OF TELEGRAM RECEIVED Paris May 29, 1940 Rec'd 9:55 a.m. Secretary of State, Washington. 933, May 29. STRICTLY CONFIDENTIAL AND PERSONAL FOR SECRETARY MORGENTHAU AND THE SECRETARY OF STATE. The Paris Renault works general manager, Rene de Peyre- cave, this morning accompanied Louis Renault on a call on me. It is planned that they will arrive in your city on the morning of next Monday, taking the clipper from Lisbon on Saturday. As suggested in your telegram No. 488, as soon as they get to Washington, they will communicate with Secretary Morgenthau. I think that the President should shake hands with Renault. BULLITT 5/29/40 9/40 Aircraft Manufacturers 227 Mr. George 0. Moseley, President, Barkley-Grow Aircraft Corp., 13210 French Road, Mr. Frank de Genahl, President, Detroit, Michigan. Fleetwings, Inc., Bristol, Pennsylvania. Mr. Walter H. Beach, President, Beech Aircraft Corp., Mr. L. R. Gruman, President, wichita, Kansas. Gruman Aircraft Engineering Corp., Bethpage, Long Island, New York. Mr. Lawrence D. Bell, President, Bell Aircraft Corp., Mr. J. C. Parker, President, 2050 Elmwood Avenue, Howard Aircraft Corp., Buffalo, New York. 5301 Nest 65th Street, Chicago, Illinois. Mr. G. K. Bellance, President, Bellance Aircraft Corp., Mr. Howard R. Hughes, President, New Castle, Delaware. Rughes Aircraft Co., Union Air Terminal, Burbank, California. Mr. P. 0. Johnson, President, Boeing Aircraft Co., Mr. Robert E. Gross, President, Georgetown Station, Lockheed Aircraft Corp., Seattle, Mashington. Burbank, California. Mr. James Work, President, Brewster Aeronautical Corp., Mr. Glenn L. Martin, President, Brewster Building, Glenn L. Martin Co., Long Island City, liew York. Baltimore, Maryland. Mr. V. J. Burnelli, President, Mr. J. H. Kindalberger, President, Burnelli Aircraft Corp., North American Aviation, Inc., Keyport, New Jersey. Inglewood, California. Mr. R. H. Flest, President, Mr. 1. Wallace Kellett, President, Consolidated Aircraft Corp., Republic Aviation Corp., Lindbergh Field, Farmingdale, Long Island, New York. San Diego, California. Mr. T. Clauds Ryan, President, Mr. 0. W. Vaughan, President, Ryan Aeronautic Corp., Curtise-Wright Corp., Lindbergh Field, 30 Rockefeller Plasa, San Mego, California. New York City. Kr. J. B. Schaefer, Vice President, Mr. Donald N. Douglas, President, Stearman Aircraft, Douglas Aircraft Co., Inc., Division of Boeing Airplane Co., 3000 Ocean Park Boulevard, Wichita, Kensas. Senta Monica, California. Mr. 1. A. Mara, Vice President, Mr. Sharman Fairchild, President, Stinson Aircraft Division, Fairchild Engine & Airplane Corp., Aviation Nanufacturing Corp., RCA Building, Nashville, Tennessee. New York City. 223 - 2 - Mr. A. I. Lodwick, Mr. Richard N. Millar, President, Aviation Manufacturing Corp., Vultee Aircraft, Inc., 420 Lexington Avenue, Downey, California. New York City, Mr. R. W. Clark, Vice President, Mr. C. J. Brukner, President, Vought-Sikorsky, Waco Aircraft Co., Division United Aircraft Corp., Troy, Ohio. Bridgeport, Conn. St. Louis Aircraft Corporation, Mr. R. A. Rearwin, President, St. Louis, Missouri. Rearwin Aircraft and Engines, Inc., Fairfax Airport, Mr. lisc Short, President, Kansas City, Kansas. Vega Airplane Oo., Burbank, California. Mr. V. 0. Skelly, President, Spartan Aircraft,Co., Mr. Duane L. Wallace, President, Box 2649, Cesana Aircraft Co., Tulsa, Okla. Wichita, Kansas. Mr. 3. E. Porterfield, Jr., President, Porterfield Aircraft Corp., 1720 Wabash Avenue, Kansas City, Missouri. Treasury Department 229 TELEGRAPH OFFICE 37w 1940 MAY 29 PM 7 03 R188BU TWS PAID 3 FD DEARBORN MICHIGAN MAY 29 40 641 P M HON HENRY MORGENTHAU JR WASHN D C WILL ARRIVE WASHINGTON ON B AND o 820 AM EASTERN STANDARD TIME FRIDAY 31ST AND WILL BE AT YOUR OFFICE 845 AM EASTERN STANDARD TIME EDSEL FORD 7 P M Regraded Uclassified TANDARD FORM No. 14A TREASURY DEPARTMENT APPROVED BY THE PRESIDENT MARCH 10. 1526 WASHINGTON TELEGRAM CHARGE TREASURY DEPARTMENT. APPROPRIATION FOR OFFICIAL BUSINESS-GOVERNMENT RATES Official (The appropriation frum which payable must be stated on above line) . INTERESENT - - $-14117 Mr. Edsel Ford, Ford Motor Company, May 29, 1940. Detroit, Michigan. I HAVE TO TESTIFY ON HILL TEN O'CLOCK FRIDAY STOP WOULD APPRECIATE YOUR BEING AT MY OFFICE AT EIGHT FORTY FIVE a.m. EASTERN STANDARD TIME FRIDAY PLEASE ACKNOWLEDGE Henry Morgenthau, Jr. € 4:27 made 3/29 Regraded Uclassified 231 TANDARD FORM No. 14A TREASURY DEPARTMENT APPROVED BY THE PRESIDENT MARCH 10, 1925 WASHINGTON TELEGRAM CHARGE TREASURY DEPARTMENT. APPROPRIATION FOR OFFICIAL BUSINESS-GOVERNMENT RATES Official (The appropriation from which payable must be stated on above line) - a INTEREST - - 5-14117 Mr. Edsel Ford, Ford Motor Company, May 29, 1940. Detroit, Michigan. I HAVE TO TESTIFY ON HILL TEN O'CLOCK FRIDAY STOP WOULD APPRECIATE YOUR BEING AT MY OFFICE AT EIGHT FORTY FIVE a.m. EASTERN STANDARD TIME FRIDAY PLEASE ACKNOWLEDGE Henry Morgenthau, Jr. Regraded Uclassified May 29, 1940. KIMORAND OM FOR TEL SECRETARY OF VALID I as in receipt of your memorander of the 28th covering additional aireraft as fellows: Facher Type Options to provide & miss of BOO Primary Training Airplanes 000 800 Basic Training Airplanes 800 600 Advanced Training Airplanes 1,000 (single engine) 100 Advanced Training Airplance Nose (two engine) 200 Heavy Dombers None 1,900 This apparantly does not include the war Department's estimates for the fiscal year 1961 now awaiting action by Congress shich includes the following: Beavy bentardment 6 Medium bombardment 66 Asphibian - two engine 14 Pursult intercepter " Transport - two engine 6 Advanced issining 37 Total 166 will pin kindly advise - regarding this emission as I wish to include it with the program set forth is your It is also 4 desire. persuant to my be you Regraded Uclassified 233 - 2 - of the 24th. that full opportunity be given the Secretary of the Treasury to participate is all negotiations looking to the initiation of contracts for aircraft.