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Volume 330, November 7 – November 14, 1940
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Volume 330, November 7 – November 14, 1940
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 330
November 7 - 14, 1940
- A -
Book Page
Argentina
See Latin America
- B -
Business Conditions
Haas memorandum on situation for week ending
November 9, 1940
330
213
- C -
Chile
See Latin America
China
See War Conditions
- D -
Defense, National
Health of United States workers discussed at Cabinet -
11/8/40
138
a) FDR recommends that program be transferred
from Miss Elliot to Federal Security Administrator
- F -
Financing, Government
Increase of debt to $60-65 billion to finance defense,
and participation by all citizens, discussed by HMJr,
Knudsen, Young, Knox, Towers, Cox, Stimson, Palmer,
and Marshall - 11/7/40
53
Finland
See War Conditions
France
See War Conditions
- G -
General Counsel, Office of
Report of projects during October 1940
106
Germany
See War Conditions: Foreign Funds Control
Gold
See War Conditions
Greece
See War Conditions: Foreign Funds Control
- I -
Book Page
Italy
See War Conditions: Foreign Funds Control
- L -
Latin America
Argentina:
Banco Central general manager introduced to HMJr
by Secretary of Treasury - - 11/7/40
330
90
Pinedo plan to stimulate private enterprise,
provide cheap housing, safeguard currency, and
solve surplus commodity problem discussed in
memorandum from American Embassy, Buenos Aires -
11/8/40,
140
Chile: Itemized list of exchange owed to all concerns
in United States - 11/12/40
250
- M -
Mint, Bureau of
Plans for new Mint in Middle West ready for discussion
by HMJr and Graves - 11/7/40
44
Morgenthau, Henry, Jr.
Trip to Jamaica, etc., following election: Itinerary
(San Juan to St. Thomas to Kingston) cabled to
Treasury - - 11/10/40
191
- N -
National Defense
See Defense, National
- P -
Plant Expansion
See War Conditions: Airplanes
- R -
Research and Statistics, Division of
Report on projects during October 1940
297
Revenue Revision
HMJr and Sullivan to put on program making it impossible
for states and municipalities to sell tax-exempts -
11/7/40
29
Excess Profits Tax: HMJr aske that watch be made on
higher prices to offeet excess profite tax 11/13/40.
211
Roumanta
See War Conditions: Foreign Funds Control
Regraded Uclassified
- S -
Book Page
St. Pierre-Miquelon Islands
See War Conditions: Foreign Funds Control
Steel
See War Conditions
- T -
Taxation
See Revenue Revision
- U -
U.S.S.R.
See War Conditions: Foreign Funds Control
United Kingdom
See War Conditions: Military Planning: United Kingdom
- W -
War Conditions
Airplanes:
Plant Expansion: National Defense Advisory Commission's
reluctance to certify to Reconstruction Finance
Corporation necessity of facilities involved
delaying program (Purvis memorandum) - 11/7/40
330
3
Plants: Forrestal report on inspection trip accompanied
by Young - 11/8/40
130
China: Exports through Chungking, September-October 1940 -
11/11/40
201
Closing Agreements: Suspension of Vinson-Trammell Act
suggests discontinuance of reports (Helvering
memorandum) - 11/12/40.
249
Exchange market resume' - 11/7/40, etc
52,161,163
229,254,290
Export Control: Exports of petroleum products, scrap iron,
and scrap steel from United States to Japan, Russia,
Spain and Great Britain as shown by departure permits
granted for week ending November 9, 1940
212
Finland: Debt 89 result of World War reviewed by Procope
and Cochran - 11/7/40
1
a) Further discussion by Procope, Cochran, and Bell
129
b) Jones tells FDR at Cabinet of visit from Procope -
11/8/40,
138
Foreign Funds Control:
Extension to all foreign countries: Letter to FDR
discussed at 9:30 meeting - 11/7/40
35
a) Hull told by HMJr of plan and that copy will
be sent him - 11/7/40.
45,47
b) Cochran memorandum urging consultation between
State and Treasury before plan is submitted
to FDR - 11/7/40
51
c) Discussion by HMJr, Knudsen, Knox, Stimson,
etc. - 11/7/40.
55
Regraded Uclassified
- V - (Continued)
Book
Page
War Conditions (Continued)
Foreign Funds Control (Continued):
Germany: Transactions with Chase National Bank and
National City Bank - 11/8/40, etc.
330
158,231,260
Greece: Transactions with Federal Reserve Bank of
New York - 11/8/40
160
Italy: Transactions with Chase National Bank and
National City Bank - 11/8/40, etc
157,234,258
Roumania: Release of $25,000 for "salaries and
expenses of Romantan Legations and consular
offices" discussed in memorandum from State
Department to Treasury - 11/12/40
243
St. Pierre-Miquelon Islande: Resume'of existing
situation from American Vice Consul - 11/7/40,
86
U.S.S.R.: Transactions with Chase National Bank
11/13/40
256
France: "Text of instruction from German Commissioner
to an English bank in Paris": Report sent by American
Embasay, Vichy, transmitted by State Department -
11/8/40
153
Gold: United Kingdom holdings of gold and exchange:
British Embassy memorandum - 11/14/40,
293
Military Planning:
Report from London transmitted by Lothian - 11/7/40.
118
War Department bulletins:
Some Aspects of Defense in Great Britain -
11/9/40.
164
Morale in French Army - 11/14/40.
279
Purchasing Mission:
Program in its entirety reviewed by HMJr, Knudsen.
Young, Knox, Towers, Cox, Stimson, Palmer, and
Marshall - 11/7/40.
53
Federal Reserve Bank of New York statement showing
dollar disbursements - 11/7/40, 11/14/40
101,294
Vesting Order: Official sales of British-owned
dollar securities - 11/9/40
182
United States dollar expenditure and sterling transfers
to United States (and possessions) during
September, 1940, other than through British
Purchasing Commission: British Embassy memorandum -
11/14/40
292
Stoel: FDR, at Cabinet, worrted over situation: Stettinius,
after months of optimism. reverses his position -
11/8/40
139
United Kingdom:
Holdings of gold and exchange: British Embassy
memorandum - 11/14/40
293
Regraded Uclassified
1
Devember 7. 1942
Valor Secretary Ball
Rr. Cederal
Maister Presepo of Finlend called on as yesterday morning at 10:15. to realnied
as that the principal of the dobt from Pintent to the United States had boen funded at
$8,281,926.17. fines the debt arrangement with the United Mates, Finland had paid
$5,691,291.77. This has, havever, been chiefly applied to interest, than leaving the
mount das the Dail ed States at $8,138,015. It will be recalled that interest charges
prested as a result of the Recver Maraterium. Proceps sentioned that the Finnish
cort agreement had been use of the first consumented with the United States and that
the terms theresf vere 2020 covere than those arrenged with Italy and Balkas countries.
If the arrangment had Yes on & scale similar 16 that with the Balkans, the dobt
would have anounted 10 only around $2,400,000.
The Minister has talked with the Male Department efficials and has had instruc-
tions from his Government. Es any contemplates addressing a letter to Secretary Ball
stating that his Government desires to value adventage of the Vandenberg Recelution,
ad not pay 9a December 15 the installment then ins. Furthernare, he plane to Indi-
ate the interest of the Finnish Deverament is responing the entire debt question.
That 10, the funding dobt, as spart free the credits now being emjoyed from the
Repert-Import Bank. It is my understanding that the Plane have utilized $17,000,000
under the Expert-Import Bank credite and have earmarked another $6,000,000 thereaf,
leaving as undered balance of $7,000,000. It 10 planned, however, to nove forward
with the spending of this balance for much needed vister supplies if shipping
fasilities can be arranged. The Plane have experienced difficulties with both the
British and German efficials in getting certain clearances for imports from the United
States.
The Rimister has several propositions is sind with respect to a BAY dobt afferge-
nont. His preference would be for shat be called a "restitution" of the old debt.
That is, the Treasury Department would refund to Fialmd the anount of $5,891,000
which has sev been received, and would let the 1924 agreement begin to functies M
of 1940 with repayment extended ever thirty years. this would give Finland almost
$6,000,000 in cash foreign exchange which is seriously needed at present.
A second proposition would be the cameellation of the existing Finnish dobt.
That 18. 19 accept the approximately $6,000,000 which has MV been paid the and wipe
out the realnder of the sbligation.
& third proposal would be to consider as capital repayment the $6,000,000 which
have been received as interest. and time reduce the capital obligation " around
$2,200,000. this balance to be paid over shirty years. with a clanse to be written
in the new contract which would free Finlend from any payment within the first five
of the agreement, If Finland night absese this delay.
Regraded Uclassified
2
- 8 -
Minister Proceps sald he thought that the State Department would fatur the
third of the alternatives.
the Maister hoyes to write his letter to Mr. Hall shertly. but was cartons to
have the opinion of the Greasury Department before ⑉ doing. I telephened his back
resterday afternoon to lot his know that I had nentioned this subject to Secretary
who is leaving today for a holiday. and that I had been instructed to
take the matter - with m. Dell. Consequently, m. Presepo acked If he ess ⑉
and ⑉ B. Doll and agrelf ⑉ time 02 Friday noveing.
25ml
HMG:lap-11/7/40
r
the you wine to
3
story
my
11-7-40
-
Financing of new facilities under U.S. and
British complementary programs along the lines of the
policy approved by Secretary Morgenthau in June, and
applied in September to the Continental Motors case,
has been withheld from subsequent British contracts,
primarily due to reluctance on the part of the National
Defense Advisory Commission (N.D.A.C.) to certify to
the R.F.C. that the facilities involved were essential
to the U.S. Even where the War Department has approved
the facilities as essential, such 85 for tank and machine
gun contracts, the N.D.A.C. has withheld its approval.
The result has been to delay placement of British contracts
and, accordingly, production.
Under the conditions laid down by the R.F.C.
In the Continental Motors case, both the Army or the Navy
and the N.D.A.C. must certify to the R.F.C. that additional
facilities are essential for the U.S. Defense Program before
the R.F.C. will finance them.
The reluctance of the N.D.A.C. so to certify is
not fully understood, but may be due to its preference
for a type of financing which draws upon private sources
of capital rather than the R.F.C. It is understood
that the N.D.A.C. 16 prepared to approve financing of new
facilities along the lines informally approved for production
of aircraft engines by Buick, which involves the so-called
Five Year Financing Plan by private funds.
Either type of financing, under the Continental
or Buick plan, is satisfactory to the British.
It is most urgent that British contracts which
will create new facilities for the U.S. Defense be
released at the earliest possible date. It is urged that
some solution to the financing difficulties be reached
promptly. The solution seems to lie in one or both of the
following alternatives:
(a) If R.F.C. financing is to be used, the necessity
of obtaining a proval from the N.D.A.C. should
be eliminated, so that such approval will emanate
from either the Army or Navy alone.
(b) If R.F.C. financing is not to be used, the Buick
plan should be adopted AS it has received the
approval, if not full endorsement, of all parties
concerned.
As R.F.C. financing is probably the only type
open for the contracts presently held up, it is urged
that both solutions (a) and (b) above be accomplished
so that either type may be used where appropriate.
Concurrent with the foregoins, EL procedure should
be adopted which will permit early co-ordination of British
and U.S. programs with a view to providing the necessary
new facilities for the entire programs and authorizing the
financing thereof on approved lines prior to the negotiation
of any new contracts thereunder.
November 7. 1940
Regraded Uclassified
4
STATEMENT
of
FACILITIES GRANTED
by
UNITED KINGDOM
to
UNITED STATES
B.P.C.
Washington, D.C.
October 31, 1940.
Regraded Uclassified
5
2.
I. AERIAL WARFARE
A. AT REQUEST OF UNITED STATES
Rolls-Royce "Merlin Engine" - Latest type sent to
Wright Field with full advice re working,
operations, potentialities, etc.
Rolls-Royce "Griffin Engine" - Latest type supplied
with full advice re working, operations,
potentialities, etc.
Various Types of Captured German Aircraft Engines
Sent to Wright Field for testing operations.
20 n.m. Hispano Equipment - Certain details given.
Further data and reports sent for.
Soulton and Paul and Frazer Nash Turrets - B. and P.
turrets leaving for Wright Field in approximately
14 days time, F.N. turrots to follow.
Confidential Notes on Turret Training and Tracer
as an Aid to Air Fighting - Copies obtained from
U.K. and delivered October 11th.
Stabilisation of Torpedoes in Air - Preliminary
information received Oct. 29th and about to be
delivered. Complete data being prepared.
Chattellerault Belt Feed - All available information
sent to all Departments. Manufacturing drawings
obtained and about to be delivered, One sample
feed in transit.
Anti-Structure trials 303 to 20 nn, Inclusive -
Data obtained from U.K. and delivered Oct, 11th.
Latest type British Banner and Other Towed Targets -
U.K. preparing information.
Information ré Gan Tracor Ammunision - U.K. preparing
information.
Servo Feeds up to and Including 20 mm. Manufacturing
Drawings for Banner and Other Targets and above
Ammunition - U.K. preparing information.
Information Regarding Operational and Technical
Requirements of Future British Aircraft - Delivered
October 28th.
Reports on 40 n. Cannon - Requested October 28th;
Cable sent to U.K.
Fire Control, Range Finders and Directors Employed
with Above - Requested October 28th; cable sent to
U.K.
Data and Lists of British Incendiary Ammunition -
Requested October 28th; cable sent to U.K.
Description of British Practice In Mounting Armour
Plate and Test Reports - Requested October 28th;
cable sent to U.K.
Ballistic Data used for Bean Firing - Requested
October 28th; cable sent to U.K.
Regraded Uclassified
6
2.
I. AERIAL WARFARE (Continued)
B. UNSOLICITED BY UNITED STATES
Power Driven Turrets - Complete information,
production drawings, 2 sample turrets and
mechanic being sent from U.K. to demonstrate.
Ammunition - 10 reports of trials small calibre
ammunition against aircraft. Details incendiary
and special tracer requested from U.K.
Air Engines - Details of experimental work on two
stroke internal combustion engines, internal
combustion turbines, and jet compulsion.
Aerial Navigation - Details of latest developments.
Sample installation German distant reading compass
demonstrated and handed over to U.S.N.
Regraded Uclassified
3.
II. ANTI-AIRCRAFT DEFENCE
A. AT REQUEST OF UNITED STATES
Naval Guns, Ammunition and A.A. Control System
Information given orally. Paper left with
Ordnance,
20 mm, Oerlikon Gun - Demonstration for October
30th.
2 Pounder Mark VI and 0.5 Mark III and Drawings -
Supplied to U.S. Navy in September.
Aircraft Torpedo - Diagramatic sketches supplied.
Working drawings sent for,
B. UNSOLICITED BY UNITED STATES
Full Disclosure Secret Method Including:
Balloon Barrage, Kite Barrage, Rockets P.A.C.
Scheme, Long Aerial Mine, Anti-Barrage Cutters,
Navel Rocket Barrage.
3.7" Gun - Full details including war experience,
data, performance, new power-operated equipment
given to U.S. Gun and crew being sent from U.K.
40 mm. Bofors Gun with Power Control & Kerison
Predictor - Full disclosure of this most important
and secret equipment. Data on performance given
to U.S. Complete equipment and crew with pro-
duction drawings being sent from U.K.
Other A.A. Guns - Full particulars all other types
including 4.5", 3" Naval 4", 4.7" and Pom Pom
with data on war experience.
Rockets - Details secret experiments with A.A.
rockets and film lent. Details recent work on
proximity fuses.
Fire Control - Full disclosure on directors for
A.A. gun fire. Full details of very important
and secret work on Radio Fire Control.
Small Arms - Details war experience with small arms
against aircraft - types of mounting, sights, etc,
Regraded Uclassified
8
III. LAND WARFARE
A. AT REQUEST OF UNITED STATES
Tanks -
Organization of Armoured Division
Organization of Army Tank Bde.
Type of Tanks used by (a) Germany
(b) Russia
(c) Italy
(d) France
Handbook on Power Traverse.
Particulars and Drawings of 2" Smoke Mortar
and mounting.
Particulars of No. 9 and No. 11 Wireless Sets
25-Pounder Gun - Particulars given.
B. UNSOLICITED BY UNITED STATES
Tanks -
Note on the work of the 1st Army Tank Bde. in
France.
Brig. Crocker's notes on A. F. V.'s in France
Notes on the work and organization of the
Hopkinson Mission.
Full particulars of A12 Infantry Tank Mark II.
(Firing trials were carried out against Turret
at Aberdeen)
Particulars of 2-pounder gun and shot.
(Ballistic tests were carried out at Aberdeen)
Particulars of the Besa M. G.
Particulars of all British tanks.
Summary of Technical Report regarding weapons.
War Industry and Transportation Secret Copy No.144,
Chemical Warfare - Full disclosure latest detailed
information. Scientist coming from U.K.
Explosives - Full disclosure all available informa-
tion. Offer of explosives expert to be sent from
U.K.
Ordnance - Details anti-tank guns - new types in
development. Method of direction for guns and
searchlights with operational experience in field.
Regraded Uclassified
9
IV. NAVAL WARFARE
A. AT RENTEST OF UNITED STATES
Purchase 30 Depth and Roll Recorders - Admirality
cabled U.K. for permission.
Torpedo Net Cutters - Verbal description given.
Tornedo Pistols - 3 F. type explained verbally.
New Composition for Detonators - Specification
sent Naval Ordnance.
Composition C.E. Foriprimers - Specification
sent Navel Ordnance.
Gercon Jagnetic Tornedo Pistol - Request
forwarded to Admiralty.
Gorgan Magnetic Mine Parachutes - Request
forwarded to Admiralty.
Br tish Wines & Parachutes - Request Torvariel
to Admiralty.
Durles Warnends - Request forwaried to Adairalty.
Buoyant Cables for L.L. Swaces - Information
(iven verbally.
Effect Exclosion la Sitell Shock on Grace Comess -
Information given verbally.
Rffect Deganesing on Magnable Commases -
Information given verbally.
Ship Electrical Arran.,ewents - Various verbal
requests answered.
Anti-sobuarine Equipment and Information - Suily
heing iealt with.
Jerslin - Magaliy look being assed for.
Later Deck Covering - Request Corversies so Addiralty.
Minin Cable - Specifications provided.
Windless Telegraph Signalling - Information
given and Purther-date sent for.
B. UNSOLICIT D SY UNIT D. STATSS
Anti-subsarine measures - "Astion sevice -
Full disclosure - hendbooks, drowings, U.S.
Naval Officers invited to inspect in detail
and in operation. Special Items leing sent
from U.K. for test by U.S.N.
Debails experimental work debection submarines
by aircraft. Influence fyses for anti-sulmerine
hombs supplied.
Ollin Torgedogs - Details of experimental work
and film lent to U.S.N.
Regraded Uclassified
10
6.
V. GENERAL
A. AT REQUEST OF UNITED STATES
B. UNSOLACITED BY UNITED STATES
Radio Detection - Full disclosure highly secret
and important radio methods for detection of:
Aircraft from ground; aircraft from ships;
aircraft from other aircraft; ships from
coast; also of radio method of gun and search-
light laying and identification friendly air-
craft and ships.
Sample equipment for detection ships from
aircraft has been sent from U.K. Sample gun
and searchlight laying equipment inspected by
U.S. officers at Halifax. Details experimental
work V.H.F. radio supplied. Most recent radio
tubes for very low wave lengths exhibited. Advice
and assistance being given in instituting new
radio research laboratory for V.H.F.
Influence Fuses - Disclosure highly secret experi-
mental work on influence fuses for bombs, rockets
or shells, including that on photo-electric,
acoustic and radio-operated fuses.
Regraded Uclassified
11
MEMORANDUM
BOMB DAMAGE
ARMY SUPPLIES
Current general output loss through:
(a) Damage
(b) Loss of time through warnings
remains at 10% or less. Expected may rise
to 15% during winter.
In the case of particular items the situation
is worse, e.g., small arms ammunition.
ADMIRALTY
Current general output loss estimated at
11%, of which only 1% is due to actual
damage.
AIRCRAFT PRODUCTION
Total loss through:
(a) Damage from concentrated attacks
on factories and
(b) Loss of time
probably at least 20% of final output.
In many cases loss of working time through
air raid warnings is as much as 50%.
Nov. 4/40.
Regraded Uclassified
12
How York
November 1, 1940
Tot
Winistry of Aircraft Production
From: Self
1, Brewster: Firm are two months late on contract
now in starting delivery and will be approximately two
and one-half months behind by end of November. We do
not see much hope of this contract being completed
earlier than the middle of May 1941, which would be two
and one-half months late of completion. Reasons for
delay are given by the fire as delays in design settle-
sent, modifications, etc., but we do not accept this
excuse in full sa firm are 8. work organisation and
undoubtedly have had trouble securing labour and were
late in their shop work although they are doing all
they can now to overtake arrears,
2. Curties Wright: This firm are not late as In
your cable, but are now 39 machines shead of schedule.
3. Glenn Martin: This firm are about six weeks
late now and will be nearly two months late by the end
of November. They expect to overtake some of these
arrears and we think they will probably complete deliver-
les in March instead of February which will be just over
one month late, Firm states reasons for delay was
lateness in receipt of engines, and also lateness in
technical decisions involving changes in shop tools,
neither of which were firm's fault, but in addition we
consider that firm were behind in general shop work.
They anticipate picking up some of these arrears.
4. Grummant Grumman 36A was completed in October
according to promise.
5. Douglas: Douglas are still having cooling and
other technical troubles, and have dropped further behind.
We are following up the position with them and do not
feel safe in saking forecast until those troubles are
cleared. Actually the shop work is reported to be well
ahead and we believe these delays are mainly due to the
troubles referred to and that they will get into good
production an 2000 as they are cleared.
6. Lockheed: Lockheed are approximately one month
late on Hudson deliveries at present time. Some of these
delays were due to technical difficulties outside their
control, but works are also late in addition. We consider
that this position will not worsen, but that the arrear#
will be steadily picked up.
7. North American: North American are about two
weeks behind schedule at present minute and would be
up to programme early in December if engine deliveries
can be secured to meet their accaleration, but it in
probable that engine deliveries may prevent their catching
up fully before January.
8, General: I need not stress the difficulties
here, as in U.K., in maintaining contract schedules
against the host of technical difficulties. In addition
the engine situation is a limiting factor to possible
airframo acceleration, No have every case under close
supervision to achieve best improvement practicable.
Regraded Uclassified
13
November 7, 1940
9:40 a.m.
Arthur
Purvis:
Good morning, Henry.
H.M.Jr:
Hello, Arthur. Two things - I saw Secretary
Knox this morning and he's really quite
upset that he can't get that pom-pom gun.
P:
Well, thank heavens, I've got it on the
water now.
H.M.Jr:
Oh, have you?
P:
Yes.
H.M.Jr:
He said the last he heard it was on a dock
somewhere.
P;
Well, I understood it was on the water. I
think that's right. I'll check immediately,
but they have been very slow about it. That's
all there is to it.
H.M.Jr:
Well, if you don't mind my saying it, I think
it's inexcusable.
P:
Yes. I cabled after our last talk along the
lines that they simply have got to put it on,
that it was causing an extremely bad impression
H.M.Jr:
If you could phone before 11 and let me know.
P:
I will.
H.M.Jr:
So I could tell Knox at 11, it would give our
meeting a good send-off.
P:
I'll call up.
H.M.Jr
Now, the other thing that I'm going to do -
the President has done me the honor of asking
me for lunch today, the first one after
election. And what I'm going to do when I
get over there - I have no idea of how he'll
feel
P:
No, quite.
Regraded Uclassified
14
a ( I
H.M.Jr:
..... that 1f, when we're through luncheon,
whether you could come in and say good-bye
to him.
P:
Yes, if it were only for half a minute, it
would simply - - I'd love to do it.
H.M.Jr:
So would you - BO when I get over there
I'll let the Treasury operator - but from
1 to 2 would you be reachable through my
Treasury switchboard?
P:
At any moment.
H.M.Jr:
Well, if you don't mind - I mean, being on
tap SQ to speak.
P:
I'll have an arrangement with her. I'll
ring her telling her exactly where she can
get me before 1.
H.M.Jr:
Well, no, between 1 and 2.
P:
Yes, but I mean I'll let her know before 1
exactly where she can get me.
H.M.Jr:
Where you will be so that if I call up and
eay, yes, the President says come in at five
minutes of 2 or something like that you can
.....
F:
I'd be there on the dot.
H.M.Jr:
And as I say, I never know, and if it ien't
it's nothing personal.
P:
Oh, no. Well, I'd simply love to do it and
I fully understand if he can't - if it doesn't
happen I shall understand too.
H.M.Jr:
And if it doesn't happen, I'll Bee you at 2
anyway.
P:
Thank you very much.
H.M.Jr:
Right.
P:
Now I'll find out about the pom-com.
Regraded Uclassified
15
- 3 -
H.M.Jr:
And if possible if I could know before
11 .....
P:
Yes.
H.M.Jr:
Thank you.
P:
Good-bye.
Form 9625
16
ASURY DEPARTMENT
U. 8. COAST GUARD
Ed. Sept. 1930
U.S. COAST GUARD
OFFICIAL DISPATCH
NIT HEADQUARTERS
DATE
7 NOVEMBER, 1940
INCOMING HEADING
072219 P QUAH GR 13
ROM
SECTREAS
D (FOR ACTION)
ACKNOWLEDGE
COMDT
PRIORITY
,
ROUTINE
NITE
(FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR OFFICE OF SECRETARY X HAVE MR PHILLIP YOUNG STAND BY FOR
RADIOGRAM
Operator's Record.
Initials of "ACTION" officer.
U.S. GOVERNMENT PRINTING OFFICE 2-15420
di eifie
Philip young
or office of for,
Purvis was to
let me know today
is has left is
if Porn Pm gun
on high seas.
Radio me answer
after if after
contacting Pervis.
sentry Mr
072220 #8
Form 9625
ASURY DEPARTMENT
U.S. Coast GUARD
18
Ed. Sept. 1930
U.S. COAST GUARD
OFFICIAL DISPATCH
NIT HEADQUARTERS
DATE
7 NOVEMBER, 1940
INCOMING HEADING
QUAT 072220
IOM
SECTREAS
(FOR ACTION)
ACKNOWLEDGE
COMDT
PRIORITY
ROUTINE
NITE
(FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR PHILLIP YOUNG X PURVIS WAS TO LET ME KNOW TODAY IF
POM POM GUN IS ON HIGH SEAS X RADIO ME ANSWER AFTER
CONTACTING PURVIS
perator's Record.
Initials of "ACTION" officer.
8.1. GRYERNMENT PRINTING OFFICE 3-15420
Regraded Uclassified
11/7/40
From: Office of Secy
To : Secy
PURVIS ADVISES POM POM GUN ON DOCK AWAITING SHIPMENT BUT TEMPORARILY
DELAYED DUE TO ADVERSE SHIPPING CONDITION S. PURVIS ALSO ADVISES THAT
OPERATIONALY LOSES NOT YET AVAILABLE BUT SLESSER WHO WILL ARRIVE TOMORROW
HAS HOME DATA. SIGNED
PHILIP YOUNG
Form DEN
ASURY DEPARTMENT
U.S. COAST GUARD
20
U.S. COAST GUARD
Bept. 1987
OFFICIAL DISPATCH
transmit
7 NOVEMBER, 1940
DATE
ROM
CODE
COAST GUARD HEADQUARTERS
CIPHER
D (FOR ACTION)
ACKNOWLEDGE
SECTREAS
PRIORITY
NLESS DESIGNATED OTHERWISE TRANSMIT THIS DISPATCH AS NITE.
ROUTINE
D (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
AIL TO
LEPHONE TO
ISSENGER TO
OUTGOING HEADING
TEXT
PURVIS ADVISES POM POM GUN ON DOCK AWATTING SWIPMENT BUT
TENPORARILY DELAYED DUE TO ADVERSE SHIPPING CONDITIONS X
PURVIS ALSO ADVISES THAT OPERATIONAL LOSSES NOT yet
AVAILABLE BUT SLESSER WHO TII ARMIVE TOMORROW HAS SOME
DATA X SIGNED PHILIP YOUNG
PERATOR'S RECORD
OFFICIAL BUSINESS
INITIALS OF "RELEASING" OFFICER.
------------------------- - - 2-18412
Regraded Uclassified
21
Phil Young
If after
reasonable
time after slesser arrival
Stresser, is
not given what
oth he wants
let me know
#12 072320
Fonn ⑉
22
URY DEPARTMENT
8. Court GUARD
Ed. Bept. 1930
U.S. COAST GUARD
OFFICIAL DISPATCH
7 NOVEMBER, 1940
IT HEADQUARTERS
DATE
INCOMING HEADING
072320 QUAH
DM
SECTREAS
FOR ACTION)
ACKNOWLEDGE
PRIORITY
COMDT
ROUTINE
NITE
FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR PHILIP YOUNG X IF AFTER REASONABLE TIME AFTER ARRIVAL
SLESSER IS NOT GIVEN WHAT HE WANTS LET ME KNOW
- Record.
Initials of "ACTION" officer.
E.S. GOVERNMENT PRINTING REPICE
10/7/40
From:
Office of Secretary
To :
Secretary
072337
WILL NURSE SLEFFER X GOOD NIGHT
24
QWAT 072300 QUAN P
Phil Young X
90m Purvis to
contact 11/7/41
it porrow
at
at my request
he is
NMH
Regraded Uclassified
25
Course
I
U.S. COAST GUARD
OFFICIAL DISPATCH
7 NOVEMBER, 1940
T HEADQUARTERS
DATE
INCOMING HEADING
2 QUAT
072500 QUAR
IM
SECTREAS
FOR ACTION)
ACKNOWLEDGE
COMDT
PRIORITY
ROUTINE
NITE
OR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR PHILLIP YOUNG X ASK PURVIS TO CONTACT KNOX TOMORROW AND
INFORM HIM AT MY REQUEST X HE IS FOLLOWING THROUGH ON POM
POM GUN
Insure
Initials of "ACTION" officer.
0.0. - PRINTURE arrea
-
Regraded Uclassified
26
November 7, 1940
Purvis
ARTHUR B. PURVIS, REPRESENTATIVE OF THE BRITISH PURCHASING
COMMISSION, CALLED UPON PRESIDENT ROOSEVELT TO "PAY HIS RESPECTS"
BEFORE LEAVING BY CLIPPER FOR A SHORT VISIT IN ENGLAND.
HE LEFT THE PRESIDENT'S OFFICE WITH SECRETARY MORGENTHAU WHO HAD
LUNCHEON WITH MR. ROOSEVELT. PURVIS SAID THAT ME WOULD RETURN SOON
"UNDOUBTEDLY WITH MORE ORDERS.'
11/7--W222P
Regraded Uclassified
27
Nov ember 7, 1940
9:45 a.m.
GROUP MEETING
Present:
Mr. Hass
Mr. Thompson
Mr. Sullivan
Mr. Young
Mr. Pehle
Mr. Foley
Mr. Gaston
Mr. Cochran
Mr. Graves
Mr. Schwarz
Mr. White
Mr. Wiley
Mrs. Klotz
Well, I asked you All to have lunch with me
today. It is a goodbye luncheon. But the
President has asked me to come over, which
I think 1s very nice, and the lunch 1s here
90 P.B they say, it will be on the house.
Foley:
Don't say that.
H.X.Jr:
It 1s all there, 80 if you people will go
down at one o'clock, it 's All ordered. I
tried to give it back and couldn't. Have
you all met Mr. Viley? Have you, Foley?
Poley:
No, I haven't.
H.M.Jr:
Sullivan, did you meet him?
Sullivan:
Yes, I did meet him.
H.M.Jr:
Do you know Harold Graves?
Wiley:
We met 8 long time ago.
White:
I don't think I have met you.
Regraded Uclassified
28
- 2 -
H.M.Jr:
You remember him from Belgium, Harold?
Graves:
Yes, indeed.
H.M.Jr:
When he was prime minister of Belgium for
United States and gave them the works.
Graves:
Sure.
Gaston:
The meeting of the Advisory Committee to
Colonel Maxwell, the administrator of export
control, was concerned yesterday with an
order regulating the export of steel fabricated
products. That 1s all right. The only other
thing was that he distributed copies of a
summary of the accomplishments of the Export
Control since its creation. If you would like
to take a minute to read it --
H.M.Jr:
I certainly do not.
Gaston:
It is fascinating.
White:
Won't take long to read.
H.M.Jr:
I only read detective stories.
Gaston:
I just wanted to say there 1s a letter here
from him saying that he has submitted that report.
H.M.Jr:
You (Foley) haven't had time?
Foley:
That 1s right.
H.M.Jr:
The same to you?
Sullivan:
I haven't even had breakfast yet.
H.M.Jr:
You have lost weight, too, haven't you?
Sullivan:
Thank you, sir.
H.M.Jr:
Haven't you?
Sullivan:
It 18 the first kind word I have had on my
figure since I came to town.
29
- 3 -
E.M.Jr:
Haven't you?
Sullivan:
I think so.
Gaston:
I remember way back in the campaign that
Mr. Sulliven made some speeches. They were
very good.
H.M.Jr:
Johnny, one of the things that you and I have
got to do when I get back, 2 thing we have
never done before, and I wish you would carry
it, I want to go out end sell the presentation
program to the public. And what we are going
to do now. One of the things I want to do,
I want A number of talks prepared. I want to
go to the people and sell them A program, for
the first thing, of making it impossible for
states and municipalities to sell tax-exemots.
I want to out on a regular campaign, and about
2,000,000,000 worth of securities of totally
tax exempt non-Federal securities are coming
due next year. Mr. Bell is my authority. I
want to really out on a selling job with the
people, explain to them that this money goee
into these tex exempts, it can't be used for
for national defense, et cetera, et cetera,
we don't collect the revenue. I went to put
on a real selling job.
Sullivan:
Are you restricting that to state and
municipals or also Federals.
H.M.Jr:
The whole works. I have always taken the
position - I don't want to have it just the
Federal, but the whole works.
Sullivan:
That 1s right.
H.M.Jr:
But instead of waiting and all this Jockeying
in Congress, I want to put on a real campaign.
Sullivan:
Yes.
R.M.Jr:
So if you would be working on that.
Sulliven:
You went about four speeches?
30
h
H.M.Jr:
Yes, for you and me,
Sulliven:
Right.
H.M.Jr:
And the other thing, I want to get out a weekly
statement showing how much revenue we have
collected, how much goen out to the national
defense, and how we are paying for them weekly
or semi-monthly. I want to educate the people
on how much we Are spending for national defense,
how we are raising the revenue, who is paying for
it, who 1F not paying for it. In other words,
I want to really do an educational job on taxes.
Sulliven:
Yes.
S.K.Jr:
And not use it the way WE have always done it
before, wait until we get un on the Hill. You
have got three weeks while I am gone to bring
it in a simple way to the people, BO they can
understand. So much is being spent. Me have
got to borrow BO much, we have got to go in
debt so much, and we are getting 80 much from
revenue. Give it to the collectors of internal
revenue and 20 forth and 80 on, that they can
use, R thorough salesmanship Job.
Bullivan:
All right.
H.M.Jr:
You will agree with me, do you?
Sullivan:
I do.
BA11:
Yes.
H.M.or:
We have never done that, and I want to do it.
Schwarz:
Now that Dan 18 here you might want to suggest -
at the cress conference you are going to be
asked about the financing program on the bills.
H.K.Jr:
Dan will be here.
Schwarz:
Fine. I thought the story this morning WAS
pretty good. The other thing, I want to call
your attention to Carl Allen's etory on the
Regraded Uclassified
31
- 5 -
export of planes for Britain in the Herald
Tribune.
H.M.Jr:
The campaign 1s over.
Schwarz:
They will ask about it.
H.M.Jr:
I mean, it 1s BO ridiculous to take one month's
export figures and multiply them by 12. The
issue is over.
Schwarz:
That 18 all.
H.M.Jr:
Merle?
Cochren:
You remember that Mr. Cooper brought up that
point About the British purchasing tax.
H.M.Jr:
I don't understand it.
Cochran:
There is an article in the Star of yesterday
about that.
H.M.Jr:
Well, Mr. Sullivan 18 back.
Bell:
It 1s a Customs matter.
H.M.Jr:
Well, Mr. Gaston is back.
Gaston:
We have had A lot of conversations with both
the British and the State Department on that.
We don't seem to have any out on it. The
British wanted us to go to Congress and get
a law under which we could declare that that
purchase tax was not a part of the cost price
of the products but that would simply upset
our whole revenue schedule. It would consitute
a glaring exception to our general revenue
scheme.
Bell:
I think Merle's point of view is that there is
some publicity going on which 1s adverse to the
Treasury And with the campaign it ought to be
offset some way.
Cochran:
I thought it WAB a little unusual that it
32
- 6 -
should appear in the Star. New York commercial
papers mentioned it, but in the Star --
H.K.Jr:
Well, they have got this commission here now.
I will leave it with Gaston, and the other
thing, Purvis last night said he never thought
he would have to come up to the Treasury to
complain about air slowing up shipments to
Europe.
Baston:
It seemed that they cleared with the State
Department that they can strengthen the decks
of Norwegian boats for gun mounts and have the
work done in this country and everybody said
they got it through the State Department. Then
along comes Coast Guard and BAYS no, that is
arming e vessel and you can't do it.
H.M.Jr:
Who was it?
Gaston:
We had an agreement with the State Department
if the State Department hes agreed with the
British that they can strengthen decks for the
particular purpose of a gun mount, then they
haven't told us about it, because we have en
agreement with State and Justice that they
could not do it.
E.M.Jr:
So they sold you down the river.
Caston:
Well, of course, it is diplomacy.
H.M.Jr:
All right, but anyway --
Gaston:
When State Department and Justice tell us we
cen let them do it, we will let them do it.
H.M.Jr:
W111 you call them up?
Gaston:
Yes.
H.M.Jr:
This morning.
Gaston:
Call up --
H.M.Jr:
Anybody. Then tell Purvis or Philip Young
what the answer is.
Regraded Uclassified
33
- 7 -
Gaston:
What we did do with them, where they had
materials manufactured here by Bethlehem
Steel and others, steel stanohions and all
that sort of thing and even the actual
gun mounts themselves, we let them put those
aboard the ship and menifest them as cargo
to the agents of the ship at Halifax and
install them up there.
H.M.Jr:
This is the strengthening of the decks?
Gaston:
We had cases of that kind where the timbers
were shipped to Halifax and they did it up
there.
H.M.Jr:
Will you take care of that?
Gaston:
Yes.
H.M.Jr:
I SAW Sumner Welles this morning and he
reminded me that I would see that this
Argentinian mission was taken care of and
he wanted to know who would see them and I
said inasmuch as Mr. White was going to get
himself well while I was gone, Mr. Bell
would carry it.
Bell:
What will I do with them?
White:
Well, we will have an agenda, detailed.
H.M.Jr:
Will you carry it?
Bell:
I will try it.
H.M.Jr:
Harry will tell you.
Bell:
All right.
White:
I take it that your idea 1s to go into the
matter and continue discussions until you
come back.
Bell:
That 18 what I was afraid of, a whole month.
H.M.Jr:
And while I am gone, make sure that Merle Cochran
34
- 8 -
doesn't give them the Stabilization Fund.
Cochran:
The Argentine --
Bell:
I wish I was 8.8 safe on everything else as
I am on that.
Cochran:
The Argentine Ambassador called awhile ago
and wanted to know if he could see you before
you got away, and I told him no.
H.M.Jr:
Anything else, Merle?
Cochran:
No, sir.
H.M.Jr:
Mr. Wiley, have they got you fixed up with a
room?
Wiley:
Very well, sir.
H.M.Jr:
Is Thompson taking care of you?
Wiley:
Splendidly.
H.M.Jr:
You are down --
Wiley:
Right below.
H.M.Jr:
You are all right?
Wiley:
Fine.
H.M.Jr:
Is there anything you want to ask me before
I leave?
Wiley:
I don't think 80 yet. I am just getting
started.
Pehle:
You asked us to get up this letter to the
President.
H.M.Jr:
Yes. There has been a lot of Fifth Columnists
around here trying to keep me from sending it.
Let me read it out loud. I am having lunch
with him.
Bell:
You are having lunch with a Fifth Columnist,
you say?
35
- 9 -
H.M.Jrs
No, I say there are B. lot of Fifth Columnists
around here who even though they say they are
sick, come around and see me, trying to stop
this letter.
(Mr. White looks behind screen)
White:
I think he has gone, (Laughter)
H.M.Jr:
"My dear Mr. President, during the past two
months the Treasury has been studying and
discussing with the State Department and other
interested agencies the extension to wider areas
of the present system of exchange control, which
has thus far been applied only to invaded countries
of Europe and their nationals and colonies. It
is my recommendation that exchange control be
extended to all foreign countries.
"(1) Exchange control 1s the most effective,
comprehensive and flexible instrumentality for
controlling international transactions of every
kind - trade, capital movements, tourist expendi-
tures, financing of subversive activities, etc.
The control may be exercised in most international
transactions since such transactions usually
involve money payments. The system of licensing
will permit varying forms of treatment for different
countries, for different commodities, or for
different transactions - varying all the way
from complete economic blockade against 8. selected
country to conservation of strategic materials.
Exchange control would be administered in accord
with, and as a supplement to, our national
policies. Licenses can be granted or denied
or otherwise dealt with in accordance with such
governmental policies in & variety of fields.
"It is important to note that by the issuance
from time to time of general licenses which may
be modified or revoked, trade and financial
transactions with certain countries or areas
can go on substantially on the same basis 8.8
though no control applied to that country or
area.
36
- 10 -
"(2) Such control will be of significant help
in dealing with propaganda and subversive activities.
We have had extensive evidence in recent weeks of
the withdrawal by the Axis powers of millions of
dollars in United States currency and the shipment
of such currency to Latin America. At present we
have no effective means of controlling such action
or even of obtaining adequate information as to the
use of such funds.
"(3) Protection and control of the assets in this
country belonging to the invaded countries or their
nationals necessitate general exchange control
because --
(a) very large amounts of such assets in this
country are nominally held in neutral
names, particularly Swiss, and A8 a practi-
cal matter such assets have not been brought
under control, and
(b) large amounts of the assets of the invaded
countries have come under the control of
the aggressore who, either directly or
through neutral countries, may sell such
assets for dollar exchange.
"(4) The existing control has been criticized on
the ground of inconsistency. We control And
restrict relief payments and other remittances to
the invaded countries, but freely allow all re-
mittances and payments to the aggressors. We have
blocked certain of the invaded countries but not
others, such BB China, Poland, Czechoslovakia,
Albania, etc.
"(5) The census of all foreign-owned assets in the
United States by countries and by individuals will
furnish valuable information concerning foreign
participation in American industry and other
problems before us.
"Almost every country in the world has some form
of exchange control. Americane having assets
abroad find their use of such assets greatly limited,
in some cases to the point of virtual confiscation.
37
- 11 -
Exchange control by this Government will put it
in a better position to enforce and protect its
claims and the claims of its citizens against
foreign nations.
"I am satisfied that extension of exchange control
is an important, if not a vital, element of our
defense program, and would be well received in
this country.
"I am sending a copy of this memorandum to
Secretary Hull."
H.M.Jr:
Now, have you seen this letter?
Bell:
No, sir.
H.M.Jr:
Do you want to make any comment?
Bell:
It sounds all right. The comment I would like
to make is, I would like to see it sent to the
Secretary of State instead of the President.
H.M.Jr:
Well, Merle made B. comment, wrote me last night,
in which he said that this committee had been
appointed and we hadn't done anything about it
but it wasn't up to us to call that meeting
together.
Cochran:
But I thought if we had a problem we ought to
get in touch with them before we made a definite
reply to the President.
H.M.Jr:
As 8 matter of protocol, you are right.
Cochran:
Since we have had it up twice in group meetings --
H.M.Jr:
That is the point. We have had it up twice and
nothing happened.
White:
There was something said at that meeting. We
were trying to recollect definitely. It was
to the effect that the matter would be taken
up during the week, and it is now almost a month.
Bell:
Mr. Hull was to get in touch with --
38
- 12 -
H.M.Jr:
Which side are you on today, Harry?
White:
I am on the same side. I think the letter
ought to be sent when you come back. I think
the letter ought to be sent to the President.
H.M.Jr:
What?
White:
I think the letter ought to be sent to the
President when you come back and that will be -
three weeks will have elapsed, and by that time
possibly the State Department may bring it up
again.
c
H.M.Jr:
No, you know damn well they won't.
White:
That is why I think you ought to send it to the
President.
Gaston:
I think the State Department ought to be given
an opportunity to join in this letter to the
President, because if they won't do it, I think
we ought to give them notice that we are going
to send it to the President anyway, and we ought
to Just give them a few minutes today to re-
ciprocate.
White:
There will be numerous objections, and I think
you ought to be here to defend them. That 18
another reason.
H.M.Jr:
Three weeks is too long.
White:
Then you might leave it with some special
committee, either that or send it R week from
now.
H.M.Jr:
In writing my letter to Mr. Hull, I can rewrite
that and simply Bay in view of my leaving on B.
holiday and the seriousness of the situation, I
am leaving with the President A memorandum.
White:
A memorandum instead of a letter.
H.M.Jr:
A memorandum on exchange control. Mr. Bell would
like to discuss this matter with you at your
39
- 13 -
earliest convenience. Do you feel a little
better, Merle?
Cochran:
Some.
H.M.Jr:
All right.
White:
Would a happy compromise be to state just what
you have but add a phrase that, "I would like
to send this to the President unless you have
some objection."
H.M.Jr:
No, I am going to give it to him at lunch,
Harry. Three weeks 18 a lifetime.
White:
Not on this.
H.M.Jr:
Well, this is one of the times that my mind is
made up, one of the few times. I disagree with
you. It will take several weeks to get it through.
I don't want to wait five or six weeks. I will
call up Mr. Hull on the telephone and tell him.
Cochran:
Fine.
H.M.Jr:
I will do it that way. I will call him up on the
phone and ask him if he has any objection to my
leaving this memorandum with the President. How
would that be?
Cochran:
That is all right.
H.M.Jr:
That would take the curse off, wouldn't it?
Cochran:
I think 80, yes.
H.M.Jr:
I will call him up on the telephone. Does that
make everybody happy?
White:
That 18 much better.
H.M.Jr:
What?
White:
Much better.
H.M.Jr:
Dan?
Bell:
A little better. It is getting closer.
40
14
1
H.M.Jr:
All right. Now, how far have we got. Mr. Wiley?
Oh, Pehle, you gave me the letter.
White:
That is to be changed to the form of B. memorandum?
H.M.Jr:
Yes.
White:
Rather than a letter.
H.M.Jr:
Philip?
Young:
Joe Green called me up last night.
H.M.Jr:
What 18 that?
Young:
Joe Green called me up last night. He has just
received the second memorandum I wrote to you
last week, which traveled evidently the same
route, via Stimson and Hull, reporting on my
conversation with him, which probably gave him
good reading and evidently - caused some discussion
between him and Mr. Hull, 80 I told him I was
properly sympathetic and I wouldn't have written
the memorandum that way if I had known it was
going to be distributed.
Caston:
If you had known he W88 listening.
H.M.Jr:
Mr. Wiley, at the staff conference, if you want
to change your mind and go back to the State
Department, if this is too tough company for
you - I don't know whether you are going to be
able to stomach us or not.
Wiley:
I think SO.
H.M.Jr:
What happened was very funny, if it wasn't 80
serious. Mr. Stimson called me up on the wire
and said, as a great student of international
law, me, would I find some way of getting these
planes which are on the way to Siam, which were
now in the Philippines, over to the Chinese, and
I said I would love to, anything to help the
Chinese. So we do it and give them away and
give it to the President at Cabinet and the
President BAYS to Mr. Hull, "If it is legal,
41
- 15 -
I would like to have it done, and Mr. Hull
said, "I will take care of it." Bo I called
him up a couple of days later and he says,
"Why" - he seemed surprised. He had started
the thing. In the meantime, Joe Green calls
up Philip Young end gives him R calling down
for having this bright idea and Young said,
"Well, you might be interested to know whose
idea this 18. It isn't mine, it is Mr. Hull's."
So that left Green breathless. So then we find
out later on that Green, the same day or next
day, tells Young that the Army wanted these
planes and it was all off. I called up
Mr. Stimson and in a sort of serious kidding
manner said to him, "Why put me to work studying
law books all night and then find out that you
don't want the planes?" He really was quite
excited; BO much so, that he asked me to send
Young's memorandum to me, giving me the inside
done about Joe Green, to him, and he was so
excited that he takes it and walks it over to
the State Department himself and lays it on
Mr. Hull's desk, Joe Green saying that the
deal WRB off. Mr. Hull goes through the ceiling
and says, "If it 18, I never heard it. I or dered
it to go through." And Philip Young's memorandum
to me, to Stimson, to Sullivan, finally reached
Joe Green. Have the Chinese got the planes?
Young:
No, the deal 18 still off according to Joe Green.
H.M.Jr:
Joe Green had better be careful,
Young:
He assures me it 1s all settled now.
H.M.Jr:
Anything else?
Young:
No. Anything new on the McReynolds picture?
Bell:
He was to call you (Secretary) by noon today.
H.M.Jr:
Remind Mac, will you?
Sell:
Yes, sure.
H.M.Jr:
He will never bring it over, if you don't.
42
- 16 -
Dell:
He said he would have it to you by twelve
o'clock.
H.M.Jr:
George?
Haas:
I have nothing this morning.
H.M.Jr:
Harry?
White:
I have a few things, but before I say them,
your suggestion with respect to taxes has
brought to B. head something that I have been
feeling and others have been feeling, and we
were talking this morning very briefly, about
the fact that somehow or other it seems to us
the Treasury is doing more than any other
department in general and somehow gets less
defense and the public is less aware of the
issues at stake, etc. I am wondering whether
you wouldn't care to extend tho instructions
to constitute a committee to examine what sort
of a one year program can be laid out. There
are all sorts of possibilities in the way of
articles, speeches by the staff, on the numerous
Aspects which the public ought to be informed
of in order to enable them to get behind the
kind of legislation that we would like to see
in monetary matters and exchange funds and
Coast Guard, Custome, etc. I think there 1e
a b1g field that can be accomplished over a
long period if every evenue 1a taken advantage
of. I don't think definitely it has been. I
don't think the staff has been making either
the talks or the speeches or writing the articles,
etc., that they should be doing, not solely for
the question of getting the public to understand
what the Treasury has been doing, but more
important to get the public behind the kind
of policies which the Treasury stands for; BO
if you would care to consider appointing an
informational committee to outline some plan of
attack for the next year or two, I think something
may well be accomplished.
H.M.Jr:
Well, it will be part of that thing that Bell
does in connection with inflation and that sort
43
- 17 -
of thing. It 1s part of the same thing,
don't you think 80?
Bell:
It all ties in there, all phases of it.
White:
That is right. I noticed that the Council
of Defense has adopted the - has begun the
procedure of getting out a weekly release,
rather lengthy, on the various activities,
etc, not that we want to pattern that, but
they are aware of the need to sell their work.
H.M.Jr:
I think you are right, and I think this meeting
that Bell has once 8. week, that that is the
perfectly proper place to take it up.
White:
I shouldn't think so, but if you think so --
H.M.Jr:
Well, talk it over with Dan.
White:
I mean that that plan was proper.
H.M.Jr:
All right.
White:
You might be interested in knowing that Greece
has about 42 million dollare here. Half of it
is private. An examination of the material
put out by the Department of Agriculture, which
is very excellent, and the material that you
send us, which you get confidentially on the
food situation in continental Europe, indicates
rather clearly that there should not be any
starvation in Europe if the food is properly
distributed, that if there 18 starvation in
Europe it is because of German maneuvering of
the material. The letter which Soong sent you
about this tank agreement which you wanted to
know about, I think you can just overlook it.
It is something that has been known for many
years. He merely wants to call your attention
to the fact that the Japanese have long been
planning this extension of aggression and that
the United States is one of the --
H.M.Jr:
Is it worth reading?
White:
Yes, it 18 worth reading.
44
- 18 -
H.M.Jr:
Give it to McKay, and I will take it along
with me.
White:
That is all.
H.M.Jr:
Harold?
Graves:
Our people who have been studying this mint
proposition, that 18, the proposition to
establish B. mint in the Middlewest, or at
least an additional mint, have just about
finished their job. We now know the type
and size of the institution we would want.
If you have a few minutes today, I can go
over that with you.
H.M.Jr:
Just go ahead and do it.
Graves:
I was going to ask, if it would be satisfactory
to you, we will take it up on that basis with
the Federal Works Agency.
H.M.Jr:
Yes.
Graves:
Of course, I will go over it with Mr. Bell.
H.M.Jr:
Yes, but I don't want to do it. Okay?
Craves:
Yes.
H.M.Jr:
Norman?
Thompson:
I have nothing.
H.M.Jr:
I will see some of you but I may not see the
rest of you. I am sorry I cannot partake of
the lunch with you. It 1e there, 80 I think
I will say goodbye now, formally, and I will
be back if everything is all right, about the
28th of November.
Sullivan:
Bon voyage.
Schwarz:
Happy voyage.
H.M.Jr:
As I told the President about two o'clock in the
morning, we have just begun to fight. Goodbye,
everybody.
45
November 7. 1940
10:25 a.m.
H.M.Jr:
Hello.
Hull's
Secretary:
He's coming right on, sir.
H.M.Jr:
Hello. (Pause).
Cordell
Hull:
Hello, Henry.
H.M.Jr:
Hello, Cordell.
H:
What's going on over there?
H.M.Jr:
Well, two things. First, I'd like to thank
you for lending me John Wiley.
H:
Well, I think John 18 an exceedingly bright
fellow.
H.M.Jr:
Yes, he is and he's going to be very useful
and helpful to me. The other thing is this:
I'm going away after lunch on & holiday
and the President has done me the honor to
have lunch with him.
H:
Yeah.
H.M.Jr:
And I would like to use that opportunity
to leave a memorandum with him on exchange
control which I would send you a copy over -
I was just writing it now. I didn't know
I was going to have lunch with him.
H:
Yeah.
H.M.Jr:
And then Bell will be here to discuss it
with you. Now if you say to me, Henry,
you'd rather discuss it first and send it
over to him later, I'll do anyway you suggest.
H:
No, it's all right to take it right up there
and then we can follow up anytime.
H.M.Jr:
Right. Well, I'm just leaving - normally I
wouldn't do it that way but
Regraded Uclassified
46
- 2 -
H:
Yes, well that's all right.
H.M.Jr:
.....
but I want to make use of the chance
of seeing him, and I'll tell him that I'm
going to have Bell call on you and take it
up with you.
H:
All right, Henry.
H.M.Jr:
Is that all right?
H:
Yes, sir. I hope you have a fairly restful
vacation.
H.M.Jr:
Thank you 80 much.
H:
Yeah.
H.M.Jr:
Good-bye.
47
November 7, 1940
MEMORANDUM FOR THE PRESIDENT:
During the past few months the Treasury has been studying
and discussing with the State Department and other interested
agencies the extension to wider areas of the present system of
exchange control, which has thus far been applied only to invaded
countries of Europe and their nationals and colonies. It is my
recommendation that exchange control be extended to all foreign
countries.
(1) Exchange control is the most effective, comprehensive
and flexible instrumentality for controlling international trans-
actions of every kind - trade, capital movements, tourist expendi-
tures, financing of subversive activities, etc. The control may
be exercised in most international transactions since such
transactions usually involve money payments. The system of
licensing will permit varying forms of treatment for different
countries, for different commodities, or for different transae-
tions - varying all the way from complete sconomic blookade
against & selected country to conservation of strategic materials.
Exchange control would be administered in accord with, and as a
supplement to, our national policies. Licenses can be granted
or denied or otherwise dealt with in accordance with such govern-
mental policies in a variety of fields.
It is important to note that by the issuance from time to
time of general licenses which may be modified or revoked, trade
and financial transactions with certain countries or areas can 80
on substantially on the ILM basis as though no control applied
to that country or area.
(2) Such control will be of significant help in dealing
with propaganda and subversive activities. We have had extensive
evidence in recent weeks of the withdrawal by the Axis powers of
millions of dollars in United States currency and the shipment
of such currency to Latin America. At present we have no effec-
tive means of controlling such action or even of obtaining ade-
quate information as to the use of such funds.
(8) Protection and control of the assets in this country
belonging to the invaded countries or their nationals necessitate
Regraded Uclassified
48
8
general exchange control because --
(a) very large amounts of such assets in this
country are nominally hold in neutral
names, particularly Swiss, and as a practi-
cal matter such assets have not been brought
under control, and
(b) large amounts of the assets of the invaded
countries have come under the control of
the aggressors who, either directly or
through neutral countries, may sell such
assets for dollar exchange.
(4) The existing control has been criticised on the ground
of inconsistency. We control and restrict relief payments and
other remittances to the invaded countries, but freely allow all
remittances and payments to the aggressors. We have blocked 007-
tain of the invaded countries but not others, such as China,
Poland, Csechoslovakia, Albania, ets.
(5) The census of all foreign-owned assets in the United
States by countries and by individuals will furnish valuable
information concerning foreign participation in American industry
and other problems before us.
Almost every country in the world has some form of exchange
control. Americans having assets abroad find their use of such
assets greatly limited, in some cases to the point of virtual
confiscation. Exchange control by this Government will put it in
& better position to enforce and proteet its claims and the claims
of its citizens against foreign nations.
I an satisfied that extension of exchange control is an in-
portant, if not a vital, element of our defense program, and would
be well received in this country.
I an sending a copy of this memorandum to Secretary Hull.
Regraded Uclassified
49
November v, 1940
My dear Cordell:
In view of w going away on a
holiday and the seriousness of the
situation, I as leaving with the
President a memorandum on exchange
control.
Mr. Bell would like to discuss
this matter with you at your earli-
est convenience.
Yours sincerely,
Honorable Cordell Mull,
Secretary of State.
Regraded Uclassified
50
November 9, 1940
My dear Cardell:
In view of going any on &
holiday and the environment of the
situation, I - leaving with the
President a memorandum en exchange
control.
Mr. Doll would like to disease
this matter with you at your carli-
ost convenience.
Yours sincerely,
Nonorable Cordell Mull,
Secretary of State.
51
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 7. 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
I have not initialed the draft letter to the President recommending the extension
of our control to all foreign countries. Taking advantage of your suggestion made at
the Staff Meeting yesterday to the effect that anyone who might not be in agreement
with the letter as drafted by our Group was free to eubmit a minority recommendation,
I beg to submit the following points:
1. Since the matter of extending our control to non-invaded countries is, in
my mind, a matter of major foreign policy, the question should be discussed fully
between the Treasury and State Departments before any recommendation 1s made to the
President. At the meeting held in Secretary Hull's office on October 8 arrangements
were provided for a committee drawn from the two departments which would study this
very question of extending the control. The Treasury has not suggested that such e.
committee meet, and has not asked Mr. Hull to call the committee. In the absence of
such action, it seems improper to me for the Treasury Department to submit directly to
he President a separate recommendation 80 importantly affecting State Department policy.
2. I em not convinced that our Foreign Funds Control as presently constituted is
equipped to check effectively the utilization in this country of funds for subversive
activities, Extending the control to cover all countries of the world might permit our
Control to acquire certain leads, but some other agency would still have to be depended
unon to follow un these leads. The job is one of domestic policing, rather than one of
control of foreign exchange. To reduce the likelihood of foreign governments spending
money for propaganda in this country, I think we should ask the Department of Justice
to draft legislation toward that end, rather than set in motion such & ponderous and
dangerous weapon as that which we are now considering.
16.00/8
Regraded Uclassified
52
we -
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 7, 1940
TO
Secretary Morgenthau
CONFIDENTIAL
FROM Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
L28,000
Purchased from commercial concerns
L12,000
Open market sterling remained at 4.04 until late in the day. It closed at
4.04-1/4. Transactions of the reporting banks were as follows:
Sold to commercial concerns
L12,000
Purchased from commercial concerns
-0-
Continuing its improvement, the Argentine free peso advanced to .2360 at
the close. Last week's closing rate was .2335.
The other currencies closed as follows:
Canadian dollar
13-1/8% discount
Swise franc
.2321-1/2
Swedish krona
.2386
Reichamark
.4005
Lira
.0505
Brazilian milreis (free) .0505
Mexican peso
.2070
Cuban peso
9-1/8% discount
There were no gold transactions consummated by us today.
No new gold engagements were reported.
No gold or silver prices were received from India today. According to one
New York bank, the Bombay bullion market is extremely sensitive to India's political
situation, and even minor developments often result in a suspension of trading.
In London, the prices fixed for spot and forward silver were both 1/16d higher,
at 23-7/16d and 23-3/8d respectively. The dollar equivalents were 42.56# and 42,44#.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 35#.
Ve made three purchases of silver totaling 150,000 ounces under the Silver
irchase Act, all of which consisted of new production from foreign countries,
for forward delivery.
Smx
Regraded Uclassified
53
RE BRITISH PURCHASING PROGRAM
November 7, 1940
11:00 a.m.
Present:
Mr. Knudsen
Mr. Young
Mr. Knox
Admiral Towers
Mr. Cox
Mr. Stimson
Mr. Palmer
Mr. Marshall
Mrs Klotz
H.M.Jr:
Well, I just had a press conference and I
thought I might as well let them know the
worst. They wanted to know about the debt
limit, so I said it would have to go to
somewhere from 60 to 65 billion, and then
they said - I said that was to June 30, '42,
and then I made a remark which they didn't
pick up. I said, "We have just started our
National Defense.
Knox:
That is the down payment.
H.M.Jr:
And instead of the boys coming back and
saying, "What do you mean, just started?
Are you going to ask for more money?" - then
I would have been on the spot. But we have
got to get the debt increased from 15 to 20
billion if I am going to raise the money.
Knox:
Henry, have you seen this last Harper's
Monthly?
H.M.Jr:
No.
Knox:
Do you know a fellow named Guy Grier? I wish
you would get that and read it, the first
article in it, "How Are We Going to Pay For It?"
He has got something, that fellow has.
H.M.Jr:
I will take it with me.
Knudsen:
Aren't you pretty nearly ready to get the
Regraded Uclassified
54
- 2 -
people to put some money in this stuff?
H.M.Jr:
You mean --
Knudsen:
The common people.
H.M.Jr:
We are doing that through our baby bonds,
you know.
Knudsen:
You ought to have a Defense bond.
H.M.Jr:
What I am going to ask Congress for is to
give me more leeway on my baby bonds.
Knudsen:
But you ought to get it hooked up with the
Defense.
H.M.Jr:
I agree with you. Now, there are four billion
there which we are starting to sell bills on
tomorrow.
Knudsen:
The common people don't understand it.
H.M.Jr:
Because they will sell them in lots of
25 million. The banks will buy them up.
But I agree with you that we ought to have
something that a fellow feels, well, if he
buys a hundred dollar certificate or a five
dollar stamp through the Post Office --
Knudsen:
Forty cents.
H.M.Jr:
I agree.
Knox:
Yes.
H.M.Jr:
Something that will have & gun and an air-
plane and a boat on it, stamps, through the
Post Office, like we used to.
Knudsen:
A little sunshine.
55
3
H.M.Jr:
Rising sun. We are asking for permission to
do what we want within the baby bond limits
and then we can do it that way, but my hands
are tied now.
(Stimson, Marshall and Palmer entered the
conference)
Knudsen:
It is good economics.
H.M.Jr:
I would like to talk to you about it more.
Well, gentlemen, I have asked to impose upon
your good nature once more before I go and
the Navy is going to see that I stay away
for at least a couple of weeks.
Knox:
Longer than that; three weeks. (Laughter)
Stimson:
You think the effect of your announcement is
going to be an explosion that will send you
off into some happy country?
H.M.Jr:
I have got one that I am laying at the Presi-
dent's desk at lunch which is an explosion,
but that is something else again. In the
room, I am asking him whether he won't please
approve complete exchange control, because
we cannot be responsible for the monies that
are being spent in this country by Germany
and Italy and the money they are taking out,
down to Brazil particularly, unless we have
complete exchange control so we cover every
transaction. I cannot do it.
Knox:
You are right. They picked up two million
dollars down in Mexico today.
H.M.Jr:
We are picking it up every day. We have got
to have the authority to control both the
currencies in any financial transaction.
56
- 4 -
They know it is coming and they are rushing
this money down to Brazil to get it out of
the country, in currency. You know, we
picked up this Italian, you know.
Knox:
Yes, with two million dollars. What was
that, in currency?
H.M.Jr:
In currency, dollar bills. It was used by --
Stimson:
It was Italian property.
H.M.Jr:
It was this Count. He is from the Embassy
here. He met a fellow down there in Mexico.
Isn't that the story?
Klotz:
Yes.
Knox:
We had to give it back to him, that is the
worst of it.
H.M.Jr:
Well, what I wanted to ask was this, to bring
to your attention. Along the lines that I
was talking last night, there are a number of
planes, bombers, being made in our factories
now where the English are not getting any
part of that production, and in my most humble
manner - very humble --
Stimson:
You have discovered some property that the
British haven't yet got?
H.M.Jr:
And we will take the most difficult one first
and that is Boeing four-engine bombers. After
the first 42 will be delivered, which I under-
stand will be in a couple of months, they are
delivering about 20 a month now, we then
get into a really good bomber --
Knudsen:
Don't we - is that a month?
H.M.Jr:
Brett said they were going to do 21 8. month,
57
- 5 -
B-17's. That is what Brett said. Am I right?
Isn't that what Brett said?
Knudsen:
Yes.
H.M.Jr:
He said they did 17 in October and they will
do 20 this month.
Cox:
That is right, he said they only expected
seven and had gotten 17 and were expecting
20 now.
Knudsen:
I thought 10 would be a fair expectancy.
M.M.Jr:
He said they delivered 17 in October and he
thinks they will do 20 this month.
Knudsen:
That is a bonus.
H.M.Jr:
I know. Whatever it is, after those 42 are
delivered, which I think are called - I don't
know what the initial is, but the next lot,
of which you have 500 on order, are really
good and the thing that I am suggesting is
that every one of these bombers, lock, stock
and barrel, just the way we did the destroyers,
that is, bomb sight, ammunition and bombs,
enough for three months, be sold to the British.
Also some of the Martin B-26's and some of
the North American bombers.
Stimson:
I am only struggling for breath, that is all,
for the moment, but --
S.N.Jr:
Well, General Brett last night --
Stimson:
Owing to the trip which I had to make very
early this morning to the station, and owing
to the departure of Judge Patterson, who I
asked to go to this and to report to me but
who didn't report to me, this is the first
58
- 6 -
announcement. I have only just had your
announcement of this this morning, just
about 20 minutes before I came.
Now, I have got to have some time to think
about it.
H.M.Jr:
Well, I want to lay it in your very generous
lap, generous not in proportions but in what
you have produced. (Laughter)
Stimson:
You see, I can still cross my legs.
Knox:
What bomb sight is in these planes?
H.M.Jr:
Yours.
Knox:
The Norden?
H.M.Jr:
Yes.
Knox:
Then you have got to get a clearance from the
President anyway.
H.M.Jr:
Yes. Well, all I can do is bring it as a
suppliant to your attention, and then if you
decide to recommend it --
Knudsen:
What happens, you let the British give an
order to the airplane company and that takes
priority.
H.M.Jr:
In the Boeing --
Knudsen:
You haven't got anything new?
H.M.Jr:
No, they place an order.
Stimson:
I don't know I haven't any time to discuss
it. I just got General Marshall from another
conference in your (Knox) office.
59
- 7 -
Knox:
It wasn't a conference. I am glad he is out
of there.
Stimson:
At 14 minutes before the hour I was due here,
so he and I have had no conference about this
at all, but I think - what I mean, I can only
give you my general principle. We are getting
along to & situation where we have got to
probably fall back on the power of the Com-
mander-in-Chief to - and not upon, perhaps,
artificial interpretations of statute, and to
do that we have got to put ourselves in a
position where we can advise the Commander-in-
Chief of the military question of whether or
not we can take a certain chance in order to
give the British another chance. That is what
it always comes back to in my mind, whether
the property in question is going to be more
useful to the defense of the United States
across the Atlantic or here, and that is a
military question on which the Chief of Staff,
in military affairs, is the adviser of the
President.
E.M.Jr:
I appreciate that.
Stimson:
Now, I think it is a good deal better to go
through - it is such a big question and it
is becoming so important and the crisis is
coming so near now, comparatively, next
spring, that I believe that we have got to
do it as a broad matter of policy if we do it
at all, rather than a question of statutory
interpretation. In some cases we may be
within the statute and in some cases I think
we may not.
H.M.Jr:
Might I interrupt you there? I was thinking
along these lines. The bombers I am talking
about are ones which will be coming into
production along in November or December or
60
- 8 -
January, somewhere in along there. I mean
somewhere they will come in --
Stimson:
I heard the same thing that Mr. Knudsen said.
I heard, I think late last night or this
morning, that the B-17's had been very much
speeded up.
H.M.Jr:
And I was thinking in this term, that if the
Chief of Staff would say that in his opinion
he would consider it important from a strategic
standpoint to have these bombers in the hands
of the English in January, February, March, so
we can get ready, rather than to do this thing,
I would ask for special authority from Congress.
Tell Congress what we want and ask Congress -
we want to release so many of these bombers
with complete equipment with the bomb sights,
with the machine guns, with the ammunition
and the bombs. Now, here is the bill of goods.
Stimson:
That would be infinitely better than to --
H.M.Jr:
And get it. Now, after all, even Mr. Willkie
in his dying gasp yesterday on the radio said
he wants to help England, so it seems to be
unanimous.
Stimson:
Well, I think it is a much more frank way to
do.
H.M.Jr:
That is the way I would like to see it done.
Stimson:
Than to try to bring it under & statute which
was intended to mean something else.
Knudsen:
While we are doing this, is there any way to
get that engine question settled that we
started to settle on July 23, and it is not
settled yet?
61
- 9 -
N.M.Jr:
Well, Kr. Knudsen, you have the unfortunate
quality of remembering particular dates
which are embarrassing.
Enudsen:
Well, it was & letter day as far as I was
concerned, because we sat down and made a
program.
Stinson:
Which engines were these?
Enudgen:
We were going to pool the engines and every
plane in the United States was going to have
an engine before we shipped any engines out
of here, and it was finally twisted around
that we were going to wait until we found
out how many engines we wanted for British
planes in England, you see, and it is still
sort of vague.
Well, didn't it work out satisfactorily in
connection with the Boeings? I mean, didn't
the Army get the number of --
Coudsen:
Yes, we got them; we went and took them.
T.N.Jr:
Haven't you got a committee on that?
Emisen:
No.
Towers:
Yes, sir. That is pretty well straightened
out, Mr. Knudsen.
N.C.Jr:
I thought it was.
Amidsen:
Well, I had Mead in last night and he said
it isn't straightened out. Ever so often
the rate - the latest one is, they want to
get 1200 engines over in England on specu-
lation.
R.P.Jr:
Do you know anything about that, Phil?
62
- 10 -
Young:
No, I haven't heard anything about that.
Knudsen:
That is the latest one.
Towers:
We have had a committee. I am unfortunately
the chairman of the committee that is - had
a working committee that has been handling
this matter daily as these things came up
and then meeting as frequently as we could.
The full committee passed on the recommenda-
tions of the working committee and put it
into effect.
Knudsen:
I would like to have the understanding that
if we have a plane and there is an engine,
that the engine goes in the plane on this
side.
H.M.Jr:
Well, is that the understanding?
Knudsen:
That is what the papers say.
Young:
Engines are now being exported for British
frames.
Knudsen:
Yes.
H.M.Jr:
But the point - as I get it, what Mr. Knudsen
says --
Knudsen:
I don't care if we have them to spare, but
as long as we have got a plane that hasn't
got an engine, we ought to have the right
to take the engine, whether it is for export
or not.
H.M.Jr:
Isn't that taken up with your committee?
Towers:
Yes, sir. We have been balancing the needs.
H.M.Jr:
Is it working all right?
63
- 11 -
Toners:
I think so. Captain Kraus and Mead were both
members of that committee. Mead has now been
replaced by Meigs. Lombard attends all the
meetings.
Emplaen:
Well, it is fresh in my mind. I worked with
him last night.
Well, would you mind --
No, that is all.
Towers:
I will take it up with Mead and find out just
exactly what is worrying him.
Are you having any trouble with the English?
Towers:
No. of course, there are minor arguments, there
is of lot of give and take, but they are accepting
the decisions. Fairey is a member of the com-
mittee and their Commodore Baker is a member of
it.
3.M.Jr:
Are you a member?
Towng:
Yes.
was it, as stated by Mr. Knudsen, that all our
requirements were to be satisfied first?
Termps:
Not quite. We had no such directive in our
precept. There has been a great deal of swap-
ping of engines, as you know. The British
gave up their rights on these engines and in
turn maybe for planes that have been manu-
factured for the Swedish Government. There
has been - I don't know how many cases before
this committee and if it isn't functioning
properly, certainly your representatives
haven't had anything to say about it.
T.e would like to have this understanding, that
Regraded Uclassified
64
- 12 -
we are perfectly willing to ship engines to
Great Britain if they are surplus, but as
long as we have got a plane here that wants
an engine and we haven't got any engines for
that plane, that engine isn't going to go
abroad.
Towers:
We have no such recommendation as that. The
British bought these engines. They paid for
the expansion of the plant in which they are
being manufactured and they have certain in-
herent rights there.
H.M.Jr:
Well, if he (Towers) is chairman of this com-
mittee, couldn't George Mead see him?
Knudsen:
Yes.
Towers:
George Mead, up until a few days ago, was a
member of the committee. In fact, he is still
officially a member of the committee.
Knox:
Is Meigs taking his place now?
Knudsen:
Yes.
Knox:
Is Mead still here?
Knudsen:
He is going to help me on the bombers.
Knox:
Who, Meigs?
Knudsen:
No, Mead. Meigs is going to take up airplane
production.
H.M.Jr:
Well, would you be willing to volunteer, Harry
Stimson, to take this on inasmuch as it is all
Army stuff?
Stimson:
I would rather not. I have just gotten off
my shoulders the Layton matter.
65
- 13 -
H.M.Jr:
You did a beautiful job. Won't you take
this on?
Stimson:
It really belongs to Patterson.
H.M.Jr:
Well, I meant - would you issue the instructions?
Stimson:
I would be glad to do it except that I am aw-
fully crowded with other work.
H.M.Jr:
I didn't state it correctly. Would you be
willing to say that the Army will carry the
ball up to the point that they will say yes
X
or no on this thing to the President? Would
you designate somebody?
Stimson:
The thing that you are speaking about now?
H.M.Jr:
Yes.
Stimson:
You mean - you have left it --
H.M.Jr:
Yes, I have left that now.
Stimson:
Oh, I beg your pardon. I thought you meant
the thing with Admiral Towers.
H.M.Jr:
No; I have left that and come back to the thing
I asked for a chance to see you people about,
X
this thing, are we going to let some of our --
Stimson:
What is the shape or way in which this thing
has come up? The only thing that I have known
about it, so to speak, my summons and complaint
was a request to ome to this meething, which
I got yesterday. Now, have the British made
a request or --
H.M.Jr:
No.
Stimson:
What - I mean, what is the ball?
66
- 14 -
H.M.Jr:
The ball --
Stimson:
That you ask me to carry.
H.M.Jr:
The ball is this: Do we, in our policy of
more aid to England, want to make it possible
for them to get some of these very new, latest
bombers which are going to be manufactured
between now and the first of July, of which
they have none on order, and give them every
other one of these, with the equipment that
goes with them?
Knudsen:
And that is in addition to the present allot-
ment.
H.M.Jr:
Yes, sir.
Knox:
And the question that makes it different from
the others is that we are going to completely
equip these with bomb sights and guns.
H.M.Jr:
And ammunition and bombs.
Knox:
In other words, we are going to throw the
present statute out of the window and ask
for a new one.
H.M.Jr:
Whatever is necessary.
Knox:
We will have to do it legally.
Stimson:
Are these all supposed to be Army bombers?
H.K.Jr:
They have to be.
Stimson:
The Navy isn't --
Towers:
The Navy has no large land plane bombers.
Knox:
What did you say, Admiral?
67
- 15 -
Towers:
The Navy has no land planes except those that
operate from the carriers and operate - are
operated by the Marines. There is no place
in our picture for these bombers.
Stimson:
The British don't feel that sea planes would
do them any good?
H.M.Jr:
Well, we have done a job on the sea planes.
We are getting from Consolidated - I mean, we
are getting everything that even I was willing
to ask for.
Marshall:
The implication is that you didn't get a good
bid from the Army, is it?
H.M.Jr:
Didn't ask for enough. The Army has been all
right, but we didn't ask for enough.
Knox:
You said in your remarks, Henry, we have got
to decide as a general policy whether the use
of these bombers by the English are more effective
for our defense than if we keep them for our-
selves.
H.M.Jr:
Where they are going to do the most good.
Stimson:
Of course, if it relates only to Army bombers,
it is my baby.
H.M.Jr:
I thought so, but you know that better than
I do. But I don't want to go away this after-
noon without your saying, "Henry, I won't
touch it," or "I will take it on. I will give
it to Bob Patterson, or "I will give it to
General Marshall," or "I will do it myself."
Stimson:
Well, we haven't acted --
H.M.Jr:
No, I have got no complaint.
68
- 16 -
Stimson:
....badly in the past, I think. But this is
a question which is a very serious question,
as you must know.
Knudsen:
Can we do this, Mr. Secretary, can we reduce
our American requirements for a certain period
by one half?
Stimson:
Of this particular kind of claim?
Knudsen:
Yes, four-motored bombers.
Marshall:
Well, the determining factor, it seems to me,
is this: how far dare we go in limiting our-
selves? How far dare we speculate? That is
the whole issue. Then, having arrived at
that, how are we going to put it across, what
is the modus operandi of going through the
transaction? We have just completed one on
the 26th of these big planes.
Knox:
Why do we have to decide this now, Henry?
Stimson:
We don't have to now.
Knox:
He wants to start it now. We can't get any
of these ships to them before next March,
can we?
H.M.Jr:
Oh yes, you can. The stuff all just begins
to come into production in November or Decem-
ber.
Stimson:
You see hitherto, Frank, we have been dealing
in deferment of orders. Now the British need
some more planes and the only big land planes,
of course, are our Army planes, of which we
have some 60 or 70 now.
Knox:
New ones?
Stimson:
No, I mean the ones we had right along, and
then the new ones that are coming in at an
69
- 17 -
accelerated rate.
Knox:
You put a certain point - after they had
42 more new ones, how long will it take to
get those 42 more new ones?
H.M.Jr:
According to General Brett, at the rate they
are going it will take them two to two and a
half months.
Knox:
That would be sometime in January.
Knudsen:
January first.
Il.M.Jr:
And then this North American bomber is coming
off rather soon and so is this Martin B-26.
They are all coming and the - we will say, "Well,
we have started.'
Knudsen:
But the English have got some on order.
H.H.Jr:
But the American one is different.
Knudson:
The B-25, we haven't any of. The B-26, we have
got 300.
H.M.Jr:
But the Army has a lot of bombers coming out
of Martin very soon now, which is a heavier
bomber than the English one. I think I am
right.
Marshall:
It carries 2,000 pounds of bombs.
Knudsen:
We gave the British clearance on 300 B-26's
just the other day.
H.M.Jr:
But that is orders. The stuff I am talking
of --
Knudsen:
You don't need any modus operandi on Martin.
You have got the orders in there.
70
- 18 -
H.M.Jr:
Well, I don't know.
Knox:
How about the guns and equipment?
H.M.Jr:
The other thing you ask, if you gave them
a four-engine bomber tomorrow, how long would
it take them to train a crew so they could
operate one of those things if they had one?
Towers:
It would take only a matter of days if they
used personnel that were experienced in hand-
ling twin-engine bombers.
Knudsen:
If you took them off their own?
Towers:
Yes.
H.M.Jr:
But Frank, if you said today - that is what I
want to do, to get the thing S tarted until
you get - if General Marshall decides that he
can't, well, if he can't, all right. If he
can't, we will forget about it, but if he
can, can he get the legal papers and we will
have to get authority from Congress. How
long does the destroyer thing take, three
months?
Knox:
Yes.
II.M.Jr:
If we did this thing in a month --
Knox:
Part of that delay was due to the English.
H.M.Jr:
If this thing was done in a month, it would
be quick.
Knox:
Well, I think you are asking for a decision
as to general policy that the War Department
would be reluctant, I suspect, to make. They
could only put it up to the President.
H.M.Jr:
And you have got to decide on the Norden bomb
sight.
71
- 19 -
Knox:
I am ready to talk to the President any time.
I know Harry is, too. We have both avoided
discussion of it until now.
Stimson:
The point is, what I think both General Mar-
shall and I tried to present in language just
a moment ago, it is B. question of military
policy of the most difficult kind. It involves
80 much guess work. We have to advise the
President, or he will have to advise the Presi-
dent, so that the President can thereafter act
on it.
Marshall:
Might I ask a question here? It is a continua-
tion of what Colonel Stimson spoke of. We have
just had a discussion of this. I have had an
analysis made. Out of that came the proposal
of this 26 Consolidated four-engine bombers.
That has been adjusted in the last 24 hours
when they got the final decision that the thing
was a go. That was a calculation that was in
relation to the development of our squadrons,
what we didn't have, what We thought we must
have for our own security. Just as that is
finished, this new one comes in. The Secre-
tary was asking, where does this come from,
is this our side or the British --
H.M.Jr:
Me.
Marshall:
Edging in still further?
H.M.Jr:
It is me.
Marshall:
That is what I wanted to get at, because we
have just analyzed this whole thing on how
far we dare go, and just as a settlement is
reached we are out again, so I want to be
pretty certain on how we start the thing.
H.M.Jr:
I am the fellow.
72
- 20 -
Marshall:
I am in agreement we have got to do every-
thing we can to help the British, 80 long
as we don't hurt ourselves.
Knox:
There is another question of whether the
British will be able to hold out without
us. A couple of months and we will be able
to know a lot more about it than we do now,
Marshall:
I didn't quite understand you, Mr. Secretary.
Knox:
I say in the next couple of months we will
have far more information as to whether the
British are going to hold out without us, and
if we are going to get in it has a direct
bearing on this question, doesn't it? You
would rather operate the bombers yourselves
than have the British operate them, wouldn't
you?
Marshall:
Yes, and as Mr. Knox says, the timing comes
into it. We can go right ahead and go through
all our figures and our delivery rates and the
status of our affairs and measure that against
the international possibilities, which is an
estimate, and that has to do with the State
Department, too, and measure the Japanese hazards
and see if we can still do still more than we
have already done and on what terms. I think
the method is almost a secondary consideration.
The first thing is to determine what we might
do. After we get through that, then it is a
question of whether the Commander-in-Chief
orders it and ignores the present legal pre-
scription, or whether you go into Congress as
a state question to take it up there, but I
think that is all secondary to the first
phase of this thing.
Stimson:
It is all interwoven into the general picture
of this situation in which both Great Britain
Regraded Uclassified
73
- 21 -
and ourselves are involved.
Knox:
We can do it if we want to. The only question
is why.
H.M.Jr:
I think it is popular. I am not saying - I
think it is, but I can't decide anything. All
I can do is to bring it to your attention,
mention it at lunch to the President that we
had this meeting and that Mr. Stimson and
General Marshall --
Stimson:
Has the President had it under consideration?
H.M.Jr:
I mentioned it to him on Monday to find out
how - if this was agreeable to him, that I
start this thing, and he said it was agree-
able that I take it up with you people, but
he hasn't committed himself, but having taken
it up, I wanted to know whether it was agree-
able to him that I take it up and he said
yes, by all means. He said - his answer was,
"I think it is about time we got on that
one-and-one basis." But he isn't committed --
Stimson:
He isn't familiar with these --
H.M.Jr:
All he is committed to is, it was all right
with him that I talk to you gentlemen about
it.
Stimson:
And then I mean, in considering the second
question, the question beyond that, the ques-
tion which we have got to guess at, the ques-
tion of how the British are going to use those
bombers and how effectively, there are lots
of considerations in which I think we ought
to have an opportunity in time to have assur-
ances through the State Department which would
satisfy our military men of how they are going
to be used.
74
- 22 -
This is a thing that is brought to my mind
by something I haven't even had a chance to
discuss with General Marshall but which I
have had a chance to discuss with people in
the State Department. It isn't a question
of saying we are safe in doing this or we
are not, on what we know here. It depends
in great part on how the British are going
to use those things and where they are going
to use them and whether or not they use them
in that way, as to whether it will be safe or
not.
H.M.Jr:
Safe?
Stimson:
For us.
H.M.Jr:
There is an English officer coming over here
by the name of Slesser, who is in the opera-
tion end of the Air Ministry. He is one of
the ablest men. I would like, while I am
gone, if Philip Young could bring him to you
(Stimson) and then see that he has an oppor-
tunity to meet --
Stimson:
Slesser?
H.M.Jr:
Yes. He is one of the ablest people they have
got.
Stimson:
He is on his way here?
H.M.Jr:
He got - the ship he was on got as far as
Horta, and they turned around and took him
back to Lisbon. He is one of the ablest men
on the operations end they have. He is an
outstanding officer. If he would have an
opportunity - what he wants to do is see what
is the latest stuff we have got, and I under-
stand he can make a contribution from ex-
perience. They say he is one of the ablest
men.
75
- 26 -
Stimson:
Is he able on the procurement side or the
operations side?
H.M.Jr:
On the operations. If he could be given an
opportunity to --
Stimson:
Well, I agree with you, Mr. Secretary, that
this is a very important matter, one of the
most important that can be brought up, and
as I look at it, I think what we have got to
do is to be sure that we not only have the
sufficient time to do it but we have suffi-
cient - I mean, the thing should be drawn
together. There is a great danger of a de-
cision by the Navy by itself or a decision
by the Army by itself or a decision of the
Treasury by itself or a decision by the
State Department by itself. Now, we may
have to go further than that. As Knox
suggests, we will know a good deal more
about the British in due course, but there
may be other ways of accelerating that knowl-
edge.
Now, all I say is, it is a question which in
my opinion and from my study goes to the very
basic roots of this country's problem, facing
it in a great war.
H.M.Jr:
I realize it is important. I mean, I realize
it is only second in importance to the one that
I have scheduled in December when Sir Frederick
Phillips arrives here with the latest informa-
tion as to their financial position.
Knox:
That will be a headache.
H.M.Jr:
Yes. I thought I would go away on a holiday
before I saw him.
Stimson:
Who is this?
76
- 27 -
H.M.Jr:
Sir Frederick Phillips. He is the present
Under Secretary of the Treasury.
Stimson:
He was here in July.
Knox:
I hope he is more loquacious than he was then.
He can say fewer words than anybody I know.
Knudsen, what is the possibility of stepping
up the speed of production? Are they working
three shifts a day in all these airplane
factories?
Knudsen:
They are working in some of them, but in most
of them they are only working in two shifts
because we haven't got executives enough to
go around.
Knox:
How can we promote higher production, get
pressure on them, out of what we now have in
producing facilities to get more ships?
Knudsen:
The best thing to do is to work them seven
days a week, three shifts.
Knox:
Why don't we go at that?
Knudsen:
We are going at it.
Knox:
Are we?
Knudsen:
Yes.
Knox:
Have we any prospects of success?
Knudsen:
I don't know. We can try.
Stimson:
Is Boeing working on three shifts?
Knudsen:
Boeing is working two ten-hour shifts and
Douglas is working three eight-hour shifts.
77
- 28 -
Stimson:
Is Consolidated going into that?
Towers:
Two ten-hour shifts and --
Knudsen:
We can either let them go --
Towers:
They are working a third shift on engineering.
Knudsen:
We can either let them go two ten-hour shifts
for seven days, or three eight-hour shifts
for seven days. It is a case we ought to get
some more out of them.
Knox:
Yes. I think now that the damn election is
out of the way and political pressure is off,
we ought to do everything we can. I am going
to do it in the Navy Yards. I am going to
get all the possible production I can out of
them every week.
Stimson:
Unfortunately, we haven't got any ship yards
for airplanes.
Knox:
They raise the question now, are we getting
maximum production on what we have.
Knudsen:
They all say as soon as they get executives
they will put three shifts on. You see, now,
you haven't got enough foremen. You have got
the place filled up with men, and if they
haven't any foremen, you just have the men
in there and don't get anything done, so as
fast as we can develop that, that is what we
will have to do, but in the meantime, I thought
I would ask President Roosevelt if there is
any objection to putting it on a seven-day
basis, or at least a six-day basis. It is more
hours and We pay for them, and that is all there
is to that.
Stimson:
Where do you go to get executives?
Regraded Uclassified
78
- 29 -
Xnudsen:
We train them. In other words, we take a
certain key man on a bench and make & fore-
man out of him. It takes a little while to
do it, 30 or 60 days, but you remember how
we have jumped the men in the plant in the
last 60 days.
Stimson:
That means, in other words, each plant or
each contractor will undertake the job of
training his own men?
Knudsen:
He does that, yes. Now, Curtiss at Buffalo
works three shifts.
Knox:
How did they get their executives?
Knuñsen:
They train them. That is what you will have
when you get the other three plants. You
will have a problem there. They are now
training in their own plant people to handle
the second, third and fourth ones.
Stinson:
You are going to be gone --
H.N.Jr:
I hope three weeks.
Stimson:
That takes away my right hand helper in regard
to this job you were talking about because I
want to have some way of getting at people
that I don't have facilities to get at.
H.E.Jr:
You will do pretty well.
Knox:
The President is going away too, isn't he?
He told me he wanted a cruiser.
H.M.Jr:
When did he say that?
Knox:
Before election.
H.M.Jr:
Since Monday?
79
- 30 -
Knox:
No, at the last Cabinet meeting.
H.M.Jr:
I don't think he is going away before the
2lst.
Xnox:
21st of November?
M.M.Jr:
Yes.
Knox:
That might have been what he meant.
Stimson:
When is he going, then, and for how long?
H.M.Jr:
He spoke of only a week or ten days.
Knox:
Is he going down and see that landing opera-
tion?
H.M.Jr:
What he said was, in the room here, he was
going to stay in the Chesapeake Bay, he would
not leave the Chesapeake Bay.
Knox:
Going fishing, is he?
H.M.Jr:
Well, just take the Potomac and go down there
and stay in the Bay. That was Monday after-
noon. He didn't think he would be further
than that. I would like to bet, though, that
if he finds some good fishing somewhere he
may change his mind, but that is what he said
Monday afternoon.
Stinson:
I don't see, then, that there is anything more.
I have got to think up - General Marshall
will have to do it, and then Frank, you and I
have got to take something on this.
Knox:
One thing that I thought of while I was away,
we haven't discussed with Leahy this matter
of bases.
Stimson:
But after all, that is a question of administration.
Regraded Uclassified
80
- 31 -
It wouldn't take as much time, as I see it.
Knox:
Is that all you want of us, Henry?
Stimson:
I was going to say, my chief trouble is to
get some steam under other departments, not
yours (H.M.Jr's).
H.M.Jr:
That is all right.
Stimson:
You haven't got too much steam.
H.M.Jr:
Thank you. (Laughter)
81
November 7. 1940
12:00 noon
H.M.Jr:
Hello.
Operator:
Mr. Henderson.
H.M.Jr:
Hello.
Leon
Henderson:
Yes, Henry.
H.M.Jr:
How are you, Leon?
H:
Pretty good - feeling better all the time.
H.M.Jr:
Atta boy.
H:
Every newspaper I read makes me feel better.
H.M.Jr:
Leon, I don't know whether you've seen what
I said about inflation or not - prices -
but I hope that you'll like it - at the press
conference. Hello?
H:
Yeah.
H.M.Jr:
I mean from our standpoint - what it would do
to the Treasury.
H:
Yeah.
H.M.Jr:
The principal thing that I'm calling you up
about is - Dan told me about his conference
with you on steel. Hello?
H:
Yeah.
H.M.Jr:
And that the boys over there don't seem to
want to do anything. I wondered if it would
be helpful to you if I said something to the
President about steel - or would you rather
have me keep out of it?
H:
Well, we've got two good surveys going on it
we've forced a rechecking of the estimates
and it wouldn't - Dan may have misunderstood
me. I'm not clear from any of the statistics
that have been brought to me that we've got
a basis for making a fight and it has taken
some time to get into line. I've got an
82
- 2 -
instinct and a hunch to go on that we're
going to need more and now I expect it'll
be another week before we've really perfected
the figures.
H.M.Jr:
I see.
H:
If we need any help then, that would be the
time to put it in but now you can't make a
case.
H.M.Jr:
I see. Then that's - that isn't - Dan must
have misunderstood.
H:
They are resisting but they've said that they've
got enough and we can't prove that they haven't
yet, and we've got several good fellows in
there now who are really putting the pressure
on the study and as I say, I'll know - I'm
watching it pretty carefully myself.
H.M.Jr:
O. K. Now the other thing - aluminum -
domestic use.
H:
Yeah.
H.M.Jr:
From what I've seen they certainly ought to
begin to curtail that.
H:
Well, not in terms of the delivery dates on
aluminum.
H.M.Jr:
Well, I forget how much they use, for instance,
for transmission of power. I'm perfectly
amazed. Are you convinced there's enough
aluminum for the planes?
H:
Well, I'm convinced that they have 88 fast
as they are going to need it. On the other
hand, if we get a real big program. - bigger
than what 1s in sight now - we won't have
the water power and therefore we'll probably
have to curb domestically. I've got a man
working on aluminum and magneeium now. I'll
check with him again.
H.M.Jr:
Well, I'm more worried about aluminum than I
am anything else. If you put an order in
Regraded Uclassified
83
3
now, you can't get a delivery under twenty
weeks. Did you know that?
H:
For sheet?
H.M.Jr:
For anything. For instance, the English
place an order for some planes and they
want to place an order for aluminum they
can't - this was a week or ten days ago,
it may be worse now - they won't promise
them a delivery under twenty weeks.
H:
Uh-huh.
H.M.Jr:
Why that's terrible.
H:
Twenty weeks, huh?
H.M.Jr:
Twenty weeks.
H:
Well, then I've - we discussed it the other
day because you can pick up quite a bit Just
H.M.Jr:
Well, there's no argument about the twenty
weeks. Everybody agrees that that 18 80,
and I think that that's about fifteen weeks
too long.
H:
Yeah. Well, it's symptomatic of maybe an
approaching worse condition.
H.M.Jr:
Yes. I wish, Leon - I mean, the steel I don't
know about. I'm convinced that the aluminum
thing 18 right on us.
H:
I'll step my fellows up on it today.
H.M.Jr:
Would you?
H:
Yeah.
H.M.Jr:
Thank you BO much.
H:
All right.
H.M.Jr:
Good-bye.
84
November 7. 1940
2:28 p.m.
H.M.Jr:
to Mr. Hull.
a copy of that memorandum which I sent
Daniel
Bell:
Oh, yeah.
H.M.Jr:
I spoke to Mr. Hull on the phone and he asked me
what he should do about it and I said
just to hold it. See?
B:
Yeah.
H.M.Jr:
And that you'd get hold of - hello?
B:
Yes.
H.M.Jr:
That you'd get after Mr. Hull and see that
the thing went through.
B:
I see.
H.M.Jr:
So the President has read it. He approves
of it but he wants it to come through
Mr. Hull.
B:
Yeah, I see.
H.M.Jr:
See?
B:
All right.
H.M.Jr:
0. K., Dan.
B:
Did you call Henderson?
H.M.Jr:
Yes. Henderson said you got the thing wrong.
He says he thinks there's plenty of steel
and he's having two surveys and no reason
why I should say anything to the President.
So I went after him on aluminum.
B:
I see. What did he say about that?
H.M.Jr:
Well, he wasn't 80 sure on that.
B:
Well - (laughs) - that was just our point
that he seems 80 sure but he didn't convince us.
85
- 2 -
H.M.Jr:
Well, keep after him. That's my answer.
B:
0. K.
H.M.Jr:
Keep after him.
B:
All right. Have a good time.
H.M.Jr:
Thank you.
86
DEPARTMENT OF STATE
Washington
In reply refer to
November 7. 1940.
KA 851A.5151/4
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury, and encloses
herewith a copy of despatch no. 25188, dated October 24,
1940, from the American Vice Consul at St. Pierre-Miquelon.
Enclosure:
From St. Pierre-Miquelon,
October 24, 1940.
eh
COPY
87
COPY
In compliance with Department's memorandum dated
October 1, 1940 transmitting a copy of a letter dated
September 27, 1940 addressed to the Chief, Commercial Office,
Department of State, by Chief, Financial Division, Department
of Commerce.
REQUIRED
STRICTLY CONFIDENTIAL
EXCHANGE SITUATION IN ST. PIERRE-MIQUELON
From
Maurice Pasquet
Vice Consul
St. Pierre-Miquelon.
Date of Completion: October 24, 1940.
Date of Mailing: October 24, 1940.
da
88
- 1
Since the beginning of hostilities the islands of St. Pierre-
Miquelon are entirely dependent on the United States and Canada for
all supplies. Formerly, France was a large supplier but no ships
have arrived from that country since the entry of the steamer Celte
on May 23, 1940.
In August 1940 a credit of approximately United States $80,000.--
vas reported granted to St. Pierre-Miquelon by the United States under
guarantee of theFrench gold in the United States and at the same time
the Canadien government granted a credit of about Canadian $50,000.-
guaranteed by French gold in that country or in the United States.
Both of these credits are now exhausted and from September 27 to
October 15 neither of the two banks operating locally were able to
issue any checks in American or Canadian currency.
The Administrator, Gilbert de Bournat, made a. trip to Canada and
the United States during the early part of October and, upon his return,
both banks resumed the issuance of Canadian currency checks based on a
renewable monthly credit of 40,000 Canadian dollars alledgedly obtained
for an indefinite period. However the Administrator advised me that to
date he had been unable to renew the American credit and consequently
no United States currency checks can be issued to meet payments for
orders already made or for future orders but that he hoped that any day
he would receive advice from the French Embassy at Washington that a
credit has been granted.
The current foreign exchange situation in these islands may be
described as favorable for the purchase ofCanadian goods owing to the
existence of credits but unfavorable for the purchase of American goods
until such time as the credits are renewed. If the United States holds
security for the credits to be advanced it would be advisable to take
immediate steps to renew such credite because certain American goods
would be quickly replaced by Canadian goods and the market therefore
would be lost.
dm
89
CONFIDENTIAL
The Administrator advises me that the needed monthly credits from
the United States would be approximately United States $20,000.- and
in view of the strict control exercised locally over the granting of
import licenses and the issuance of checke by the two local banks (La
Banque des Iles St. Pierre et Miquelon and the Banque Pierre Andrieux)
be VSS at & loss to understand why St. Pierre should be suspected and
placed in the same category as two countries which be heard in Washington
had been guilty of diverting to axis powers some of the credits allotted
to them under a similar arrangement as exists for St. Pierre. Mr. de
Bournat suggests that when the allotment of credits is made to the two
correspondent banks in New York (The Guaranty Trust Company of New York
and the Bank of Nova Scotia) that the Federal Reserve Bank of New York
would be in a position to verify the checks drawn by the two local
banks on their correspondents in New York. A further suggested means
of verification might be to advise, through local importers, American
exporters to attach & copy of their commercial invoices covering ship-
ments to St. Pierre firms to the checks when they present these checks
for collection. This latter procedure might obviate the necessity of
having the local banks here apply for individual check licenses, as
is done at present through their New York correspondents, thus shorten-
ing the unavoidable delay during which American exporters cannot but
feel uncertain regarding the payment of the checks which they present
for collection. Another possible reason for the delay of the reneval
of American credits is that, according to Mrs. de Bournat's statement to
my wife, the French Embassy at Washington insisted that the Administrator
put into force a system of ration food tickets and possibly also monopolize
banking as well as the purchase of merchandise through a government co-
operative. To this proposal be is reported to have replied that they
(French Embassy officials) did not know the St. Pierrais AS he did and
that he would rather resign than attempt to institute and enforce these
restrictions which would certainly leed to public unrest. This situation
would have been particularly difficult to handle at a time when there were
at St. Pierre about 1400 French seamen of the French codfishing fleet most
of whom have since left this port.
851.51
MP/ph.
Original and five copies to Department.
1 true copy of the
signed original
(1) P.H.
90
Ministro de Hacienda de la Nacion
Buenos Aires, November 7th., 1940.
The Honourable Henry Morgenthau,
Secretary of the Treasury,
WASHINGTON, D.C.
My dear Mr. Secretary:
It is a great pleasure for me to
introduce to you, Mr. Raúl Prebisch, General Manager of
the Banco Central de la República Argentina, who is travel
ling to the United States, as the representative of the
Argentine Ministry of Finance, to handle negotiations which
I would have greatly liked to undertake personally had I
not been prevented from doing 80 by certain internal
questions connected with my portfolio which for the moment
demand my personal attention.
I have great confidence in the
possibility of our two countries being able to come to
mutually beneficial agreements, and I hope that the charac-
teristic energy and efficiency of the Administration of
which you, Mr. Secretary, are such an able and distinguished
member will ensure the rapid achievement of such a result.
If these negotiations are brought to a happy conclusion
they will furnish a further proof of the good neighbour
policy, from which this continent expects such great things.
I am firmly convinced that Mr. Prebisch
will prove a worthy and efficient representative of our
Government and that you will find it easy to work with him.
I remain, dear Mr. Secretary,
Yours very truly,
91
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Rio de Janeiro
DATE: November 7, 7 p.m.
NO. : 576
The Bank of Brazil has been informed by the Manager
of Office of the Yokohama Specie Bank in Rio de Janeiro
that the Yokohama Specie Bank would soon take steps to
centralize all of its operations in dollar exchange in the
Americas through the Bank of Brazil. One transaction
amounting to $500,000 has already been carried out in this
manner.
The Bank of Brazil has also been approached by the
Portuguese Government in an effort to enter into an agree-
ment whereby the Bank of Brazil would be the agency which
would carry out the Portugese Government's foreign exchange
operations in the Americas.
BURIETT
RA:JSH
C
0
P
Y
by
92
COPY
COPY:F2:CJL
No. 139
Air Heil
AMERICAN CONSULATE
Kunming (Yunnanfu), Chica, November 7. 1940.
SUBJECT: Railway Conditions in Yunnan Province.
The Honorable
The Secretary of State,
Washington.
I have the honor to refer to my telegrame of September 17, 11 a.m. and
September 19, 4 p.m., to the Embassy, Chungking, in regard to traffic con-
ditions on the Yunnen-Indochina Railway, and to report that the removal of
toils from the southern section of this line has now progressed to a. point
will Above Le-ba-ti, which is a division point 71 kilometers from the bor-
der at Holcow. The schedule calls for the tearing up of between 2 and 3
kiloneters of rails per day, but work has apparently progressed at a slower
rate than this. However, there has been no relasation of efforts in this
direction, and the eventual objective is said to be the destruction of the
line PO for as Mengtez-Pishinchai, 178 kilometers from the border.
The road-bed itself is also being largely destroyed, it is reported.
Several bridges have already been blown up in Yunnen,* and it is likely
that all the more important bridges south of Mengtes (among which are those
costing the greatest effort end engineering skill when the line was construc-
ted) will in time be demolished,
Upon removal the rails are transported immediately to Kunming for use
02 the Tunnan-Autsing section of the Yunnan-Ssechwan Railway, construction
on which is being regidly pushed. Kutsing is an important highway junction
and rail transport to that point will greatly facilitate shipments to the
interior and essist in clearing Kunming of cargo. It is learned from the
engineers in charge of this line (most of them American-trained) that track
is below laid from Kunming northward at the rate of about B. kilometer 8 day.
ore to date has progressed to B. point of about 40 kilometers distant from
Lunning. It 18 stated that the topography of the country on this section
It not BE difficult for building as the remainder of the line to Szechwan,
fewer
",unning's telegram to the Embassy, Chungsing,
Oct. 22, 4
Regraded Uclassified
93
-2-
fever tunnels and briiges being needed. Apparently the road-bed has already
Inrgely been completed. Construction may be expected to slow m. however, on
it progresses from Kunming and the completion of this section by the end of
the present year, as first contemplated, may not be accomplished. The line
is already in local use as B. means of daily evacuation of the population of
and 8 freight service for evacuation of merchandise end personal effects
for e distance of 30 kilometers from the city hes now been instituted.
A prime difficulty encountered in using the iron rails from the Yunnen
Brilway has tean the fact that most of them are curved. Local French Railway
officials observed with wome humor st the time that removal of rails from
their line began th. t this curvature would make the rails useless for the
building of 5. new line. However, the engineers of the Szechwan railway claim
that a special method has been found (by Chinese workmen) for straightening
the rails and that most of them can be used. Material is needed for an rox-
imately 120 of the 150 kilometers of the section being laid, Apparently the
iron sleepers used by the French on the Yunnen Railway are not being trans-
corted to hunding, E6 wooden slee ore are used on the new line, but it is not
clear what disposition is to be made of the old ties.
The Tunnan-Szechwan Railway has a certain amount of rolling-stock in the
province, to lenent which it can use stock of the Yunnan Railway es needed,
the 601688 of the two lines being the same. Coal can be obtained from the
Illang area, particularly at Ko-pao-taun (
) about 60 kilometers below
Lunsing on the Yunnan Railway.
Most of the French nationals employed by the Yunnen Railway in the prov-
ince ere continuing to work with it under the new Chinese control. Night
massenger train service WER inaugurated around the middle of October owing
to the threat of Japanese serial attacks on the line. Passenger service
extende, of course, only to the point where the rails end, the railway's
responsibility for trevel ceasing there. Passengers must then walk to
Hokow-Leokai, arranging for coolie transportation of luggage et schorbitent
raten. Pessengers who made the trip on foot in two days when the gap was
only © kilometers in length reported the journey as burdensome in the
extreme. (The French Ambassador, who recently came to Kunming over the line,
told local railway officials that the old caravan route Mengter-Manhac-Ho.com
VAB proferable for the lower section of the trip.)
Bushing of work on the southern end of the Tunnan-Srechven Railway has
resulted in a diversion of attention from the Yunnan-Surme Railway: indeed,
it is understood that orders have gone out to curtail wor- on the latter
line in favor of the Szechwan route. An American Chinese construction engi-
zeer on the Burna Railway recently informed the Consulete that of the seven
sections of the eastern part of the Burma line (Kunming-ssiangyun), work WAS
being pushed only on the eastern three sections. The Chief Engineer of
the Burna Railway, Tu Chen-yuan, recently received orders to proceed to
Chungking for consultation end possible transfer of employment to the new
Esichang
Regraded Uclassified
94
Heichang highway. According to present plans this road, which will be a cut-
off to the interior of China from the Tali region, would leave the Burma
highway at Hsiskwan, thence to Pingchwan, across the Xin Sha River to
Tungsheng, thence to Heichang (
). Cooperation be-
tween the Ministry of Communications and the Yunnan Provincial High Adminis-
tration is planned for the early competion of this route, which is regarded
as necessary from a strategic viewpoint.
Respectfully yours,
TROY L. PERKINS,
American Consul.
BECOMED DEATILHE
940 DEC 10 VA D
and = OFFICE
JACKHO3T
10 1HE RECEIVE
In quintumlicate to the Department,
original and 2 copies by airmail.
Copy to Embassy, Peiping.
Copy to Embassy, Chungking.
Copy to Consulate General, Shanghai.
877
TLP:Epy
95
ATP
PLAIN
LONDON
Dated November 7, 1940
Rec'd 2:05 P.m.
Secretary of State,
Washington
3668 Seventh.
FOR TREASURY
(1) Both the gilt Edge and ordinary sharts quoted
in the second paragraph of Embassy's 3462 of October 18
continue to rise, Government securities yesterday
standing at 111,4 and ordinary shares at 67.9. Meanwhile
the saving campaign yielded sterling 81.5 million for the
period October 1 to 26 towards a deficit of sterling
206 million, the floating debt being increased by only
sterling 125 million, whereas for September 1 to 30
savings yielded only sterling 60 million and the floating
debt increased by sterling 167 million to meet a deficit
of sterling 224 million. The halt in the increase in
supply expenditure which occurred in October when the
weekly average was sterling 68.4 million as compared with
sterling 65.5 million in September was sharply reversed
in the week ended November 2 when supply expenditure
totalled
96
-2-
3668 November ?, 1840 from London
totalled sterling 89.1 million.
(a) Though conclusions from the index of retail
sales ATE necessarily confused when compared to upsetting
ana seasonal trends, the figure for September indicates
no special increase in the public's purchases and this
trend coupled with improved savings is regarded as
reassuring.
(3) There is, of course, no surprise in the
announcement of financial assistance to Greece to meet
her requirements in the sterling area with the initial
loan of sterling 5 million. It is EXPECTED that purchases
of Greek dried fruits and other produots for immediate
delivery from goods available in Egypt held by the United
Kingdom Commercial Corporation will follow.
The particular concern is with physical delivery of
needed armaments and supplies rather than finance.
(4) Two Treasury orders permit United Kingdom exports
to Canada and Newfoundland to be paid for in sterling from
Canadian authorised accounts (such accounts only to be
opened with Bank of England permission) and payments to
Philippines and certain other territories to bE paid for
in Philippine pesos. The names of the "other territories"
will bE obtained later.
JOHNSON
ALC
Regraded Uclassified
97
RDS
GRAY
LONDON
Dated November 7, 1940
Rec'd 6 p.m.
Secretary of State,
Washington.
3673, November 7, 11 p.m.
CONFIDENTIAL FOR TREASURY.
The British Treasury has communicated the following
to bring up to date the payments agreements position dis-
cussed in Butterworth's 3291, October 2, 6 p.m. and 3340,
October 8:
(1) The agreement with Chile will probably soon bE
signed, although there has been a slight delay for dis-
cussion on some point said not to bE of much importance.
There is still no de jure agreement with Peru.
Negotiations with Bolivia continue. The Bolivians
have agreed to the British Treasury's proposal to set up
special accounts for sterling outside of tin concentrates
sterling.
Cuba is EXPECTED to enter the picture shortly. The
United Kingdom might bE able to buy more sugar there, and
there are insurance interests involved. HOWEVER, as
indicated in 3291, the British Treasury will inform us
before doing anything, in view of American interests.
Bank
98
-2- #3673, November 7, 11 p.m., from London.
Bank of England representative who has been in Chile
is dealing with Colombia and Venezuela. The Vanezuelan
negotiations are being handled partly in London in view
of difficulties Experienced in Venezuela.
There is a small agreement on the way with Paraguay.
This is linked up with the Argentine and would probably
involve payment Paraguay's sterling into Argentine special
accounts.
A multi-lateral arrangement is in contemplation with
the Argentine--long in sterling, and Brazil--short,
although one or the other does not know it yet.
The last annual report of the Argentine Central
Bank contains what is described as a substantially ac-
curate account of the Argentine agreement. There never
has been a text of that agreement, by the way; as it was
fixed by an Exchange of telegrams.
The probable direction--although not yet settled
policy--will bE to Eliminate free sterling from the Ameri-
can continent as a whole.
(2) As far as other parts of the world are concerned:
The British Treasury would not regret the Elimina-
tion of the Swedish agreement, as it has cost too much
gold.
The situation with Japan is unchanged, and the Japs
are
99
-3- #3673, November 7, 11 p.m., from London.
are now looking at a British text.
There were plans for an agreement with Yugoslavia,
which would have been pleasant from the prestige view-
point; but their failure to materialize is stated to
mean little from other points of view.
Hungary's example is taken to show that the actual
terms of agreement do not matter much, and that it is the
use of the special accounts procedure that is important.
The Hungarian Foreign Office, having turned down proposals
for an agreement as not feasible politically, the Central
Bank of Hungary promptly asked for information how to
open special accounts and has done 80,
(3) Referring to exchange rates, the Treasury in-
dicated that--Except in CBSES of countries like Greece,
traditionally tied to sterling--the rates used are based
on the appropriate dollar-sterling cross rates as starting
points. Obviously they do not stop there in all Cases
and in this connection the Treasury noted another and
broad aspect of "probable direction": from 45 different
kinds of pounds in the various special accounts arrange-
ments with countries with or without payments agreements,
they hope Eventually to regstablish the international
nature of sterling. Peculiar as is the process used to
spproach such a result, and although they do not Expect
a
Regraded Uclassified
100
-4- #3673, November 7, ll p.m., from London.
a return of precisely the old status, they nevertheless
regard the present stage as less Schachtian than ap-
peared likely at first.
JOHNSON
NK
101
Noted
FEDERAL RESERVE BANK
F. I, Cochrea
OF NEW YORK
November 7, 1940.
CONFIDENTIAL
Dear Mr. Secretary: Attention: Mr. H. Merle Cochran
Pursuant to Mr. Cochran's request, I enclose
our weekly compilation, showing dollar disbursements
out of the British and French accounts at this bank and
the means by which these expenditures were financed.
Faithfully yours,
L. W. Knoke,
Vice President.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosure
102
ANALYSIS OF BRITISH AND FRENCH ACCOUNTS
Strictly
(In Millions of Dollars)
Week Ended Oct. 30, 1940 Confidential
BANK OF ENGLAND
BANK
OF
FRANCE
CREDITS
DEBITS
CREDITS
DEBITS
Other
Net Incr.
Proceeds
Proceeds of Sales of
(incl.
Cov't
Other
(+) or
of
Gov't
Net Inon
Total
Total
Total
Other
Total
Other
(+) or
SecuritiesRegistered
adjust-
Expend-
Door. (-)
Gold
Expend-
Deor.(-)
PERIOD
Gold (Est.)(a): Sterling(b)
ments)
Itures(s)
In Balance
Sales
itures(d)
in Balance
1939
Aug. 31 - Sept. 27
207.8
185.4
33.6
1
-11.2(e)
94.3
3.6
90.7
+113.5
11.3
I
11.3
19.4
6.0
13.4
- 8.1
Sept.28 Nov. 1
142.0
3,2
52.6
-
06.2(f)
106.7
5.8
100.9
+ 35.5
76.2
35.0
41,2
88,6
1
Nov. 2- 29
57.8
25.0
61.8
105.4
- 12.4
105.8
-
23.0
191.7
8.9
182.8
- 85.9
82.9
55.1
27.8
78.6
1
+ 4.3
Nov. 30 Jan. 3
75.2
50.6
14.2
-
10.4
97.7
8.7
89.0
- 22.5
109.2
93.9
15.3
86.8
28.1
58.7
+ 22.4
1940
Jan. 4 - 31
43.4
20.6
17.8
,
5.0(g)
54.8
16.8
38.0
- 11.4
55.9
50.1
5.8
61.5
31.5
30.0
- 5.6
Feb. 1 - 28
108.3
56.7
17.9
,
33.7
124.2
15.4
106.8
- 15.2
71.5
54.8
16.7
72.7
32.8
39.9
- 1.2
Feb. 29 - Apr. 3
94.0
60.9
21.5
-
11.6(h)
115.5
14.5
101.0
- 21.5
105.0
75,4
29.6
99.6
35.9
63.7
+ 5.4
Ar. 4 - May
1
86.4
46.8
13.4
-
26.2(
113.4
26.1
87.3
- 27.0
78.7
60.7
18.0
84.8
29.4
55.4
- 6.1
May 2- 39
126.2
93.2
7.1
-
25.9
100.9
23.6
77.3
+ 25.3
145.4
126.2
19.2
101.4
57.0
44.4
. 44.0
May 30 - July
3
319.3
301.3
5.1
-
12.9
283.2
145.3
137.9
+ 36.1
345.1(j)
335.6
9.51
156.7(j)
127.3(j)
19.4
+188,4
July 5 - 31
225.0
312.2
2.0
2.8
8.0
249.7
156.7
93.0
- 24.7
5.2
3.0
0.8
7.3
6.3
1.0
- 4.1
Aug. 1 - 28
294.8
267.4
1.0
2.4
24.0[k]
261.1
180.2
80.9
. 33.7
10,9
10.4
0.5
8.9
0.5
8,4
+ 2.0
First year of wor
1,828.2
1,356.1
811.2
5.2
255.7
1,793.2
605.6
1,167.6
+ 35.0
1,095.3
900.2
195.1
866.3
416.6
449.7
+229.0
Aug. 29 - Oct.
es
308.9
271.5
6.0
1.1
30.3(1)
316.8
244.3
72.5
- 7.9
1.3
-
1.3
8.6
4.4
4.2
- 7.3
Oct. 3 30
198.5
160.5
6,0
0.3
31.7(m)
196.7
167,8
28.9
+ 1.8
0.5
-
0.5
0.5
0.3
0.2
-
Oct
- Nov.
27
Nov. 28 Des. 31
ITEEK ENDED:
Oct. 9
59.2
48.9
2.0
0,2
8.1
52.4
44.1
8.3
+ 6.8
0,2
-
0.2
0,2
0.1
0.1
-
16
20.0
9.4
-
-
10.6
45.4
41.3
4.1
-25.4
0.2
-
0.2
0,2
0,1
0.1
-
23
61.3
52.1
2.0
0.1
7.1
58.3
50.9
7.4
+ 3.0
,
-
-
-
-
-
-
30
58.0
50.1
2,0
-
5.9(m)
40.6
31.5
9.1
+17.4
0.1
-
0.1
0.1
0.1
-
-
Average weekly expenditures since outbreak of war:
Transfers from British Purchasing Commission to
France (through June 19)
$19.6 million
Bank of Canada For French account:
England (through June 19)
27.6million
Week ended October 30
$0.1 million
(See fontrotes on reverse side.)
England (since June 19)
60.4 million
Comulation from July 86
79.4 million
(a) Through June 19, these figures represent total sales of American securities in Scoond District reported for account of the United Kingdom.
(Proceeds of those atloo, however, my not have been crodited to the Bank of England's account in all' Jacon.) Beginning with the wook
ended June 26, the figures represent transfero from the Bank of Montroal, New York Agency, which 1a quatocian for requisitional Amorican
securities held in this smintry. The transfers apparantly refloct proceeds nf official security salos, including three handled through
private deals. From June 17 to July 19, transuitions in securities payable in specified monico currensies, including dollars, by Juited
Kingdom residents wore prohibited.
(b) Includes proceeds of unles of "rogistered" sterling in this carket only.
(=) Includes payments for account of British Burchasing Commission, British Air Ministry, British Supply Board, Ministry of Supply Timber Control,
and Ministry of Shipping
(3) Includes payments for assount of Fronth Air and Fronch Purchasing Commission.
(e) Includes adjustment for (a) above.
(f) About $85 million transferred from accounto of British outhorized tanks with Now York
(g) About $11 million transforred from accunts of Dritish cultorized Dani:a with Nov York tanks.
(h) About $9 million transforred from accounts of Pritish authorized banks with New York banks.
(1) About $10 million trunsforred from accounts of British authorized banke with New Thank banks.
(j) Adjusted to eliminate the effort of $20 million paid out on June 26 and returned the following day.
TO THE PARTY
TECHNIC/ AGRISTANT
10 6 W 6 NON MA
TREASURY TRE DEPARTMENT
RECEIVED
(k) About en million transferred frue assognts of British authorized banks with Nove York bunks.
(1) About $2 million transferred from assounts of British authorized banks with New York banks.
(m) About $4 million transferred from accounts of British authorized banks with New York banks.
(n) $1 million transferred from account of Royal Netherlande Government at this bank.
103
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 7. 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
PERSONAL
Following instructions given to me after our Staff Meeting yesterday forenoon,
I telephoned Mr. Pinsent in the British Embassy at 12:45 noon. I told him that
Secretary Morgenthau would be arriving in Kingston on November 13, accompanied by his
aide, Lieutenant-Commander McKay, and would be glad to accept the Governor General's
invitation to spend that night at King's House. Furthermore, Mrs. Morgenthau would
reach Kingston the following day and she and the Secretary would be pleased to spend
the night of November 14 at the Governor General's. After that, however, the
Secretary preferred to start looking around the island and not to have any definite
commitments made as to plans or hotels. He would discuss such plans with the Governor
General upon his arrival in Kingston. I added an expression of the Secretary's
appreciation of the Governor General's invitation. Pinsent promised to have the mes-
sage sent to Kingston at once.
As promised in the above-mentioned conversation yesterday, Mr. Malcolm of the
British Embassy has today sent to me a letter of introduction from the British
Charge d'Affaires here to the Governor General of Jamaica, which I have handed to
Lieutenant-Commander McKay for the Secretary.
70ml
Regraded Uclassified
104
G-2/2657-220
RESTRICTED
M.I.D., W.D.
November ?, 1940.
No. 240.
SITUATION REPORT
12:00 M
This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion of political information and of opinion it 1B classified
as Restricted
I. Western Theater of War.
1. Air Force Operations.
The. German Air Force stepped un the scale of its opera-
tions materially on the 6th. Daylight attacks were widespread over
southern England and over adjacent waters. Southampton was attacked
particularly heavily. Night activity centered over the London area
and over unindentified industrial centers. The intensity of the at-
tacks on London was high.
The Royal Air Force carried out normal night bombard-
ments, attacking primarily oil refineries, factories, and rail
junctions in Germany. Spandau, near Berlin, was raided.
II. Greek Theater of War.
1. Ground Operations.
The Italian communique of November 7 reports that on
the Epirus front their troops have crossed the Kalamas River,
The Greek communique of the same date reports local
Greek withdrawals in Epirus.
The lines on the Florina front appear to be stabilized,
2. Air Force Operations.
The Italian Air Force continued to attack ports and
communications and to support ground troops on the Florina front.
Cessation of attacks on Seloniki suggeste that an adequate air de-
fense has been established in that area.
III. Mediterranean and African Theaters of War.
1. There has been a hot local action at Gallabat, Sudan,
which the British apparently are trying to recepture.
RESTRICTED
Regraded Uclassified
105
RESTRICTED
2. The Italians report air fighting as occurring
incident to the Gallabat operation. The R.A.F. raided Kassala
in the Sudan and Bardia, Gar-el-Grein and Fort Maddalena along
the Mediterranean coast.
RESTRICTED
-2-
106
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE NOV 7 1940
TO
Secretary Morgenthau
FROM Mr. Foley
In accordance with the request contained in Mr. Thompson's memo-
randum of December 26, 1939, there is attached a summary report of studies
or projects carried on in the Office of the General Counsel for the month
of October, 1940.
9.10.7L 7L
Attachment
107
SUMMARY REPORT ON STUDIES OR PROJECTS IN
THE OFFICE OF THE GENERAL COUNSEL -
OCTOBER 1940
The following matters received attention in the Office of the
Chief Counsel for the Bureau of Internal Revenue:
1. Income Tax - Second Revenue Act of 1940. The Second Revenue
Act of 1940 was approved by the President on October 8, 1940.
Regulations under that portion of the Act relating to amortiza-
tion of war facilities were approved by the Secretary on
October 23, 1940, as Treasury Decision 5016. A final draft of
regulations under the "earnings and profits" provisions of the
Act has been prepared and submitted for review. The Division is
now concentrating on the development of further regulations under
the Act, principally those relating to the excess profits tax
provisions and those authorizing the filing of consolidated re-
turns.
2. Income Tax - Non-taxable Reserves for Construction Permitted
Under Amendment to Merchant Marine Act. The amendment to the
Merchant Marine Act permitting B. tax-free accumulation of re-
placement reserves, Public, No. 340, WELB approved by the Presi-
dent on October 10, 1940. The issuance of joint regulations for
the administration of the provisions are provided for in the en-
actment. Consideration is now being given to the development of
appropriate regulations.
108
- 2 -
3. Social Security - Comprehensive Amendment of Reilroad
Unemployment Insurance Act and Railroad Retirement Act of
1937. By virtue of Public, No. 833 (s. 3920), approved by
the President on October 10, 1940, there was effected a com-
prélientive amendment of the Reilroad Unemployment Insurance
on the Rullrood Retirement Act of 1937. Prior to the
This mactment of the measure, there me eliminated from
- MII the provision which would muke decisions of the
Indired Retirement Board binding upon the Treasury Depart-
write
4. Social Security - Extension of Time for Procuring Federal
Creat re Contributions to State Unemployment Funds. by vir-
240 of section 701 of the Becond Rovenue Act of 1940, employers
Iven L. Purther extension of time within which contribu-
in may Do wide mier State unemployment componsation Lons
'dre Dogle of D credit eguinst Federal unemployment
well for 1936, 1937, 1938, and 1939. Consideration 1e being
1ven DO the Mevelopment of appropriate emenlments of Regula-
Tom 90 so =$ to facilitate the administration of this recent
invotment.
y- Incone Tex - Coldiers' and Seilors' Civil Relief Act of
1940. On October 17, 1940, the President approved S. 4270,
Public, No. 361, the Soldiers' end Seilors' Civil Relief Act
of 1940. Section 513 of this Act requires deferment of the
Regraded Uclassified
109
- 3 -
collection of any tax on the income of any person engaged in
the military service of the United States if the ability of
such person to pay the tax is materially impaired by reason
of such service.
6. Income and Other Taxes. - Repeal of Various Provisions of
Prior Acts Proposed by Committee on Revision of Laws. Consid-
eration is being given to the occasion for and the possible
consequences of a repeal of certain statutory provisions pro-
posed by the House Committee on Revision of Laws in H.R. 9773,
H.R. 9882, and H.R. 9947. The suggested repeal is proposed on
the ground that the provisions involved are obsolete. A Trea-
sury report on the bills requested by the Chairman of the Com-
mittee is now being prepared.
7. Income and Other Taxes - Code of Federal Regulations, 1939
Supplement. Galley proof of the 1939 Supplement to the Code of
Federal Regulations has been checked and returned with correc-
tions to the Treasury Archivist.
8. Vinson-Trammell Act - Suspension. There is being developed
a Treasury decision prescribing regulations re the effect of
section 401 of the Second Revenue Act of 1940 suspending the
profit-limiting provisions of the Vinson-Trammell Act.
The handling of the above matters was supervised by G. E. Adams,
Head, Legislation and Regulations Division.
Regraded Uclassified
110
- 4 -
The following work was done under the supervision of Assistant
General Counsel Cairns:
9. Treasury Control Over Credit Unions. This opinion, which
was signed on October 1, 1940, was prepared by Mr. Feidler in
onswer to three questions raised by the Administrative Assis-
tent to the Secretary. The opinion concludes (1) the Treasury
Department has no supervision over Federal Credit Unions; (2)
there are Department regulations which prohibit a superior off1-
cer from borrowing money from one of his subordinates and also
prohibit, under certain circumstances, a subordinate from lend-
ing to a superior; (3) the Treasury Department cannot legally
issue a circular prohibiting employees from executing notes to
Credit Unions or others as co-makers.
10. Reinstatement of Government Employees Who Enter Military
or Navel Service. This opinion, prepared by Mr. Wolf, was signed
on October 1, 1940. It sets forth and summarizes the restoration
provisions of section 3 of the Joint Resolution of August 27,
1940 (Pub. Res. No. 96, 76th Congress) and section 8 of the
Selective Training and Service Act of 1940 (Pub., No. 733, 76th
Congress).
11. Procurement-Submission of Invoices. This opinion, signed
on October 1, 1940, was prepared originally by Mr. Davis of the
Procurement legal section and was revised by Miss Goode. It is
111
- 5 -
in answer to the question whether it is a violation of section
109 of the Criminal Code, which makes it an offense for & Gov-
ernment employee to assist in the prosecution of a claim against
the United States, for field officers of the Procurement Division
to send a form letter to contractors to whom the United States is
indebted, informing them that submission of invoice is necessary
to obtain payment. The opinion concludes that it is not a viola-
tion to send such a letter in the course of their official duties.
However, the opinion suggests that it would be advisable to inform
the Comptroller General that resumption of the practice of sending
out letters is contemplated and suggests a new form.
12. Classification of Members of Processing Tax Board of Review.
This opinion W&S prepared by Mr. Plumb in answer to the question
hother such members are exempt from classification by virtue of
section 917 of Revenue Act of 1936. It was signed on October 15,
1940. The opinion concludes that the salaries of the members of
the Board are not subject to the Classification Act of 1923.
13. British Purchase Tax. Messrs. Dwan and Smith of the Customs
legal staff studied and approved a letter to the Secretary of State
informing him that the proposed purchase tax of the United Kingdom
would form a part of the foreign value of merchandise imported
therefrom under existing tariff laws even though actually remitted
in the case of exported goods. The most recent development on the
matter is & Treasury Decision signed by Acting Secretary Gaston on
Regraded Uclassified
112
- 6 -
October 26, 1940, requiring that invoices covering merchandise
subject to the purchase tax imposed by the British Finance
(No. 2) Act, 1940, shipped to the United States from the United
Kingdom shell set forth certain specific information with re-
Frect to each item of such merchandise, Mr. Dwen participated
in the drafting of the Treasury Decision and in the discussion
of it with 8 representative of the British Embassy.
13. Coffee Agreement. Mr. Dwan, Chief Counsel, Customs, and
the Commissioner of Customs have had several discussions with
representatives of the State Department on the proposed coffee
agreement with certain South American countries for the purpose
of indicating the type of provisions which would be desirable
from the standpoint of customs administration.
14. Currency Conversion. Mr. Everett Smith represented the
Chief Counsel's Office, Customs, in & conference between Trea-
mary representatives (including Messrs. Cairne and Feidler)
and officials of the Federal Reserve Bank of New York concern-
Ink the rete of exchange for Brazilian milreis, Chilean pesos,
and Uruguayen pesos which should be certified for customs use
pursuant to section 522 of the Toriff Act of 1930 (U.S.C. title
31, sec. 372). The purpose of the conference was to reach an
agreement ES to the proper procedure for the Bank and the Trea-
sury. No definitive agreement was reached, but the participants
Regraded Uclassified
113
7
for the Bank, Messrs. Trimble, McKeon and Lang, tended to agree
with the Treasury's view that certifications of official rates
for these currencies should be discontinued.
By virtue of the temporary suspension of legislative action by the
Congress, practically the entire staff of the Legislative Section have
been granted leaves of absence which they had not previously been able
to take, and as a result there has been no material change in the
studies and projects being handled by that section. The following are
exceptions to the above:
15. Proposed Amendments to the Federal Narcotic Laws. These amend-
ments have been returned to the Bureau of the Budget.
16. Litigation - Barlow Award. In the Barlow case (item 23, last
month's report), the Court of Appeals for the District of Columbia
issued an order under date of October 28, 1940, the effect of which
was to require immediate payment to Barlow, the bomb inventor, of
the sum of $296,359.60, representing one half of the amount appro-
priated by Congress to Barlow to reimburse him for using his bomb
patents. The balance of the appropriation is to be held until final
determination of the case on the merits in the District Court, or
until further order of the Court of Appeals. Ellis and Hansen have
worked closely with Justice in the handling of this case.
The following matters were worked on under the direction of Mr.
Bernstein:
114
- 8 -
17. Foreign Funds Control. This office drafted an amendment to
the Executive Order and Regulations extending the provisions
thereof to the property of Rumania and nationals thereof. In con-
nection therewith this office also prepared new general licenses,
instructions and forms.
An extensive amount of work has also been done in the answer-
ing of correspondence relating to the Executive Order end the ex-
minetion of legal questions which are continually crising.
In cooperation with Mr. Cairns' office and the Bureau of Cus-
toms this office participated in discussions concerning methods of
controlling shipments of French paintings which were being shipped
from Lisbon, Portugal on the SS EXCALIBUR and from South America on
the SS DONALD McKAY. Instructions were given to the New York cus-
tous office for the detention of the paintings in question. The
hipying company wus also instructed not to receive bills of lading
07 other evidences of ownership covering the paintings pending the
issuance of A license by this Department authorizing dealings in
such evidences of ownership. The paintings were removed from the
SS EXCALIBUR by the British at Bermuda; the cases of paintings from
the DONALD McKAY are now beld by Customs at Public Stores.
This office also worked on the problem of dealing with the
essets held at the World's Fair by blocked foreign countries and
nationals thereof. Mr. Luxford spent several days in New York going
over this matter with the Customs and Federal Reserve officials.
Regraded Uclassified
115
- 9 -
Appropriate action has been taken to obtain reports of such
assets and as the cases arise, interested parties are being
notified of the necessity of obtaining a license.
The entire staff worked on the foregoing matters.
Mr. Bernstein participated in several conferences with re-
gard to the possible extension of the freezing control, includ-
ing B. conference at the Department of State.
18. Finnish Loan Payment of June 15, 1940. Mr. Bernstein as-
sinted in the preparation of a reply to an inquiry from the
Finnish Legation with respect to the question of whether the
Finnish Government may now exercise its option under the Vanden-
burg resolution and have returned to it the loan payment which
it mude to the Treasury on June 15, 1940.
19. Withdrawal by Italians of Funds in this Country. Mr. Bern-
stein participated in the consideration of various alternative
aethoda of dealing with the problem presented by an alleged with-
drawal in cash of several million dollars of funds by Italians,
and in departmental discussions on the matter.
20. Ruck-A-Chucky Gold. Miss Hodel and Mr. Friedman participated
in discussions with Justice and Interior regarding the sale of
gold recovered on a Government dan project by workers on such pro-
ject. Justice contemplates a suit against the miners and pur-
chasers of such gold.
Regraded Uclassified
116
- 10 -
21. General Mexican Claims Bill. This office cooperated with
Mr. Bernard's office in drafting & proposed veto message to the
above bill which provides for the immediate payment of General
Mexican Claims. The bill is still in conference and when it
leaves conference it is proposed to discuss the veto message
with the Department of State. Mr. Sutton and Mr. Friedman worked
on this.
22. Code of Federal Regulations Material. We reviewed material
to be included in the 1939 Supplement to Title 31 of the Code of
Federal Regulations. The material included silver regulations,
Secret Service regulations and quarterly proclamations of the value
of foreign money. Mr. Groman and Mr. Sutton worked on this.
23. Sabotage Awards. Mr. Bernstein and Miss Hodel attended a con-
ference in the Under Secretary's office to discuss whether or not
the Treasury Department would be in a position to nake payment of
the sabotage awards on October 14, in case the Supreme Court handed
down a decision denying certiorari. Mr. Bernstein and Wiss Hodel
also attended a conference in Assistant Attorney General Shea's
office at which the matter of payment of the awards WELS again dis-
cussed. It was decided that the Treasury should not be ready to
make payment on October 14.
On October 14, the Supreme Court granted certiorari in the
2. & F. case. Copies of a petition to the Secretary of State to
Regraded Uclassified
117
- 11 -
recall his certifications of the sabotage awards were served on the
Secretary of the Treasury. The Department of Justice formally ad-
vised the Treasury not to make payment of the awards pending the out-
come of the present litigation.
23. Katherine Drier Case. In connection with Private Law No. 509
for the Relief of Katherine M. Drier, Mr. Aron, attorney for Mrs.
Drier, submitted a memorandum for supporting & petition for reaudit
and for the payment to Mrs. Drier under this Act. Mr. Bernstein,
Miss Hodel and Mr. O'Daniel talked to Mr. Aron about the matter and
it was decided that the Treasury Department could not agree with
Aron's interpretation of the law. Mrs. Drier subsequently demanded
that the Department pay her forthwith the 25 percent which is being
retained by the Treasury Department pending the determination of
rights of various parties to that share. The Department has ad-
vised Mrs. Drier and Aron that it will continue to hold the afore-
mentioned 25 percent.
24. Purchase of Milreis from Brazil. This office assisted in the
various steps taken in connection with the putting into operation
of the agreement with Brazil to purchase milreis for dollars se-
cured by gold.
Regraded Uclassified
118
BRITISH EMBASSY,
WASHINGTON, D.C.
Personal and Secret
November 7th, 1940.
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a copy
of the latest report received from
London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
havile Butter
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.
119
Telegram despatched from London
dated November 5th, 1940.
Noval.
Four French destroyers passed Gibraltar
eastbound p.m. 4th.
2.
Knemy aircraft bombing Red Sea convoy 0.00
November 4th wse badly damaged by our escorting aircraft
no damage to any ship.
3.
Night of November 3rd/4th, Kiel and Naplee
militory targets bombed.
4.
British submarine put 3 torpedoes into large
inward-bound tanker p.m. November 4th off the mouth of
Loire.
E.
A second Itelian U-boat entered Tangier p.m.
Movember 4th. Fe are pressing for internment after 24
hours stay.
6.
"Windsor Castle" has arrived in harbour.
7.
Military
Greece.
Up to 6 p.m. on November 2nd, 18
was reported from extreme north Greek-Albanian frontier
to e point due east of Leskovik in Albania, Greek forces
had driven the Iteliens back on average distance of 8t
miles. The movement of Creek troops to their concentrat-
ion areas was proceeding without interruption. Enemy
aircraft activity has much increased, and 8 towns,
including Buda (in crete) Corfu and Salonics (twice)
were bombed. Itelian sir reconnsissance was carried
out over main routes and Greek military concentration
areas. Three energy bombers were shot down at Balonica.
8.
Up to 10 a.m. November 3rd.
The night was calm on the Albanion front.
There/
Regraded Uclassified
120
- 9 -
There has been no artillery activity such as to
indicate preparation for 8. general advence. There
is no indication whatever that any German troope or air-
craft are cooperating with Itolian forces on this front.
9.
Royal ir Porce.
Night operations 3rd/4th Six heavy
bombers banbed shipbuilding yard at Kiel, Bombe were
seen to burst in target area but sport from 2 large fires,
no results were observed. All our aircraft returned
safely although one came down into the sea off the cast
coset. Five heavy bombers attacked an oil refinery
at Raples. Observation was extremely difficult but bombe
were seen to hurat between the refinery e rullway
junction close by. All our aircraft returned safely.
10.
Day bombers sent out on November 4th were
obliged to abandon their tasks owing to adverse weather.
11.
Night of 4th/5th.
Most operations were cancelled owing to
bad weather. Heevy bombers, however, attacked 8
"invasion porte" und large fires were started at
Havre. Rurate were also seen on flares at one airport.
All our sircraft returned safely.
12.
Germen Air Porce.
Daylight of November 4th.
Enemy activity was on B small scole and
mainly sonfined to single aircreft operating in coastal
districts but some occasionelly penetrated inland.
Damage in London area was negligible and no incidents of
importance were reported from the reat of the country.
13.
Night of November 4th/5th For the first
four hours of darkness there was considerable enemy
Regraded Jclassified
121
-
activity in London area and Scotland with a lighter
attack on Midlends. About 200 aircraft were plotted
over the country but by 11 p.m. the attack on Scotland
had ceased and thereafter activity over London was much
reduced.
14.
In London area two suburban stations were hit
and main line from London to Dover was temporarily blocked.
One factory manufacturing barrage balloons was damaged.
Some incendiary bombs fell in the grounds of Buokingham
Palace and considerable damage was caused to the Navel
end Military Club. Two wounded. Some bombing and a
few casualties were also reported from various London
arean. No serious damage has been reported from Reotlend.
One motor-car factory at Coventry was hit but production
is not affected. Minor bombing took place at Birmingham,
Liverpool and in south-eastern counties.
16.
Enemy attacks on trade. A lifeboat containing
10 men from a Swedish ship of 1600 tons which sailed
from Rootland on October 13th has arrived in Azores.
16.
Two tugs were sunk by mines in Thuses Retuary
on November 2nd.
Regraded Uclassified
122
Paraphrase of Code Disputch
Received st the War Department
at 20:50, November 7, 1940
CONFIDENTIAL
Landon, filed 17:00, November 7, 1940.
1. The results of the daylight operations of the Bomber
Commind - Reductry, November 6th, were good. It was planned to
dispatch 6 total of 120 benbers that night, 20 against Berlin, 12
against - parts, nine against power plants, 12 against air
fields, eight egainst chandeal plants, 35 against eil plants, 14
against railreads and 10 against munitions plants. During the
night of Nevember 5-6th there - no beabing of Berlin due to very
bed weather conditions. The Italian missions had searly results;
but other operations were successful. Your planes were lost that
night and five erashed - landing. The Coastal Commend was active
against energy shipping and coastal batteries, dispatching 19 convey
escorts, 33 patrol adesions and 51 serties. One enery plane vas
destroyed and one damaged, while M British planes vere lest in
these operations. The Fighter Cemand dispatched 402 planes on
99 patrols.
2. Daylight eparations of the German Air Force - Wednesday,
November 6th, emailsted of one large raid of about 100 planes Also
patrol and recomeiseance ulssions, with & total of about 140
planse pletted. That night Germs planes sparated chiefly over
London and Beutheat England until midnight, after which time
there were seattering reids - the whole country.
3. Several unsursessful checks - British air fields
CONFIDENTIAL
Regraded Uclassified
123
CONFIDENTIAL
ware reported. The major damage in Landen consisted of hits -
a military hospital, a amitions plant and large flate compled
by workson. Three railreads were blocked and a southern sesport
tom suffered considerable civilism damage. Severe civilian damages
to a term in Sectland resulted when it was mahine gurmed and banbed.
4. The determination of the Royal Air Fores to attack long
range objectives in spite of severe weather conditions is expensive
but they intend to emtinue these operations. In the present
situation the use of the Flying Fortresses would be of great
assistance.
LEE
Distribution:
Military Aide to the President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of Var
Chief of Staff - 2 00's
Har Plans Division
Office of Naval Intelligence
CONFIDENTIAL
Regraded Uclassified
123.A
Regraded Uclassified
CONFIDENTE
Paraphrase of Code Radiogram received at the
War Department 8:50 p.m., Nov. 7, 1940
London, Filed 17:00, Nov. 7, 1940
EXTRACT
*
*
#
1. The outstanding feature of the first three months of
intensified aerial operations is the failure of the German Air Force
to concentrate on vital British military and industrial objectives
and wipe them out. I was told by the Deputy Chief of the Air Staff
that there was absolutely no satisfactory explanation of the foregoing
and for & scale of ensay operations ao incommensurate with the great
air force Germany claims to possess.
2. As background material the following are reported:
4. The Russian Ambassador recently stated emphatically
that in his opinion there were but three unconquerable nations in the
world, i.e., the United States, China, and Russia. In spite of this
belief be is convinced in the present situation that the combination
of Aria Powers could not defeat Great Britain and that he has 80 14-
ported to his Government since the first of July.
b. Last night the Minister from Switserland stated that
it was his opinion that the non-Axis countries are rapidly coming to
believe that the tide is DW commencing to turn in the fortunes of
the Aris Powers. There is an increasing general skepticism regarding
the accuracy of the present claims of the Axis and its ultimate more.
CONFIDENTIAL
123-B
CONFIDENTIAL
He believes that the conviction of hopelessness will begin to per-
vade Germany itself unless the position of the Ands Powers has in-
proved by Christmas.
LEE
Copies to: Military Aide to President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff
ONI
WPD
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
124
Paraphrase of Code Radiegram received at the
War Department 1:23 a.m., Nov. 8, 1940
Helgrade, Filed 10:00, November 7, 1940
Yeunger Sorbian officers of General Staff are stumed
at dismissal of vigerous Minister of War Medic. They had 0
pested that he would force the supine government to fight.
Peter Pesie, his susessess, is conservative and physically
insetive. No was fernerly Quartermaster General and was
retired in 1929.
FORTIER
Copies to: Military Aide to President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of Har
Chief of Staff
War Plans Division
ONI
CONFIDENTIAL
CONFIDENTIAL
Paraphrase of Code Cablagram Received at
125
Regraded Uclassified
the War Department on November 8, 1940.
London, Filed November a, 1940 at 12:30.
1. only one plans dispatched by the Bomber Command during
daylight hours of Thursday, November 7th, reached its objective.
One plane vas lost. For that night it was planned to dispatch 4.
total of 111 planes, of which 18 were against targets in Italy.
Due to heavy clouds and extress 101.ng conditions the Bomber Opera-
tions during the might of November 6-7 had an effectiveness of only
about 35%. The operations of the Coastal Command were normal. Two
energy planes were damaged but no British planes were lest. The
Fighter Comand operated 1,251 planes on 208 patrols.
2. The German Air Force Launched a raid of about 90 planes
on shipping in the Themse Estaary. Two attacks were made on the
Portmouth area, the first with about 110 and the second with about
80 planes, The first attack was made an & ten-mile front and its
prompt retreat was covered by about 50 additional fighters. The
usual reconnaissance patrols were made. A total of about 370 Gerner
planes were plotted.
3. The main night attack on London was mare severe than usual.
Bomby dropped all over the town, with a total of 56 plotted. There
were - damages to factory tome in the Midlands and en the South-
east coast of England. Five airdrosss ware attacked. Three planes
were destroyed at 009 field, there wird nine craters in the second
and the third is temporarily out of comission. The others are -
damaged. Major damage was done to one bridge, three fasteries, one
CONFIDENTIAL
CONFIDENTIAL
126
railreed station and - tenal. Other damages was entirely -
military and of small consequence. Total casualties in London the
the night of Nevember 45 was 20 dead and 201 wounded. I consider
18 reserimble how the German planse help missing the image Interves
Power station that is still operating undenaged. the delay action
bomber at Window Castle have been reserved.
40 German air camulties were seven confirmed, five probable
and two damaged. One plane w shot dem in embat at 31,000 feet.
the British lest five planse but all pilets nere seved. In the
Middle But Italian plane leases were four confirmed, - probable
and five damaged. The British last five planse and two pilots in
this theatre.
5. Britdsh Intelligence reports from Grosse state that the
Italian Any is net only being hald but is being driven back at -
points. It is reported that the Italians are shart of rations with
inficates that they expected an easy march through Greese to Salemike.
6. The Mar office is informed that there are mere the ten
divisions in Rumania. This presages the ecoporation of the AND
powers along the Busharest-Salanica line to establish a burrier
against Turidah intervention and to pinsh out the Greak fores.
Another report also believed to be reliable states that the Germans
are constructing two person bridges anress the Dambo River between
Ruanda and Bulgaria, - at Calarust-Stlistrure and the other at
At the latter point a train furry is also being
I
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
127
7. Additional information believed to be reliable intinates
that there has been an increase in the total mumber of Gurman Pensor
divisions to ten and noterised divisions to 20. This makes a total
of 30 fast powerful units which indicates an ultimate operation over
the only suitable terrain, 1.0., in Ressia.
8. British air recommissance in Libya showed a trensh and
pipe line extending ten miles east of Baqbuq. In addition there were
four miles of narrow gauge reilreads extending from Beging to Alamed
Barraqi.
9. There is no indication that the German air and land forces
facing Britsin across the Channel are being decreased.
10. Three British ships, totaling 19,000 tons, were bombed
from the air, two being sunk and one damaged. A convey of 32 vessels
has arrived in Britain.
LEE.
Distribution:
Military Aide to the President
Secretary of Mr
State Department
Secretary of Treasury
Asst. Secretary of -
Chief of Staff
for Plans Division
Office of Neval Intelligence
CONFIDENTIAL
Regraded Uclassified
128
0-2/2657-220
RESTRICTED
M.I.D., W.D.
November 8, 1940.
No. 241
SITUATION REPORT
12:00 M
This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion of political information and of opinion it is classified
as Restricted.
I. Western Thester of War.
1. Air Force Operations.
German operations over England conformed to the ee-
tablished pattern. Portsmouth was attacked heavily during daylight
of the 7th. Last night raids were heavy, and while London received
the brunt of the attacks, there 16 evidence of considerable bombing
in the provinces. The Germans are emphasizing in their communiques
the extent of their aerial attacks on shipping all around the British
Isles,
Last night the R.A.F. was active over Germany claiming
a particularly heavy attack on the Krupp works at Essen. Cologne,
Dusseldorf, the Dortmund-Ems Canal, a submarine base at Lorient,
France, and several airdromes were also bombed.
II. Greek Theater of War.
Italian ground pressure was intensified yesterday but
their activity apparently is still not a maximum effort. The
Italian Air Force continued to attack Greek roads and ports. The
R.A.F. bombed Valona, Albania on the 6th.
III. Mediterranean and African Theaters of War.
1. Capture of Gallabat, Sudan 1e claimed by the British.
Apparently this is an effort to gain access to Ethiopia.
2, The R.A.F. bombed Brindisi on the 6th. The Italians
attacked the Siva casis from the air yesterday.
RESTRICTED
Regraded Uclassified
129
Revember 9. 1990
Dodor Secretary Bell
R. Cachram
AS 10:45 yesterday serving Acting Decretary Dell received Planish Minister Proceps.
Mr. mikimls of the Finnish Legation and Mr. Ceckram of the Treasury were also prosect.
The Mainter presented to Mr. Ball his ideas with respect se the Finatch debt
toward the United States which had been cunnerised is my amorazione of Devember 7 to
R. Bell. Mr. Zell suggested that if Mr. Precope chose to comminate femaliy be
the Department of State the Finnish desire 10 take alvestage of the Fundenberg resolt-
tim with respect to the payment the December 15. 1940, and also to raise - the question
of a readjustment of the funded debt of Fialand to the United States, these use
quartions sheald be taken up is opparate communications.
lb. Ball indicated the readiness of the Treasury to participate is 4M7
time that may be arrenged for, but improvied that the prelimisary decisions should
in taken after consultation between the Ninister, the Department of Mate. and possibly
President. Be felt that 19 would be highly important that the leaders of Congress
A evented out before any propesition w advanced too for with respect to respondar
the Finnish debt question. That 10. an eviryant of unitady approach sight result is
the whole prepesition being chelved, like that of Bangary. 11 was matersteed that
the Minister will keep is touch with the Department of Mobe, therefore, and my also
salt to see the President shertly 68 this subject.
20ml
INC:1ap-11/9/40
Regraded Uclassified
130
November 8, 1940
My dear Mr. Forrestal:
Just before the Secretary left yesterday
afternoon for a vacation, he asked no to return to
you the enclosed nemorandum which you prepared on
the inspection trip to aviation aircraft plants
last month.
Yours sincerely,
(Signed) H. S. Klotz
H. 8. Klots,
Private Secretary.
Honorable James V. Forrestal,
Under Secretary of the Navy,
Navy Department,
Washington, D.C.
Enclosure.
By Measeaser 1 35
Regraded Uclassified
131
November 8, 1940
My dear Mr. Forrestal:
Just before the Secretary left yesterday
afternoon for & vacation, he asked me to return to
you the enclosed memorandum which you prepared on
the inspection trip to aviation aircraft plants
last month.
Yours sincerely,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
Honorable James v. Forrestal,
Under Secretary of the Navy,
Navy Department,
Washington, D.C.
Enclosure.
By Messenges
MEMORANDUM
132
OFFICE OF THE UNDER SECRETARY
Hum:
This is a very
sketchy pulisinary
virew of an tip. P.Y.
will have a much wor
detailed one (see you. Ite
yas wort ret habpul.
GPO 10-10782
Plo. return after reading
133
THE UNDER SECRETARY OF THE NAVY.
WASHINGTON
18 October 1940
MEMORANDUM TO:
SECRETARY KNOX
FROM:
MR. FORRESTAL
Subject: INSPECTION TRIP TO AVIATION AIRCRAFT
PLANTS, OCTOBER 15-18.
1) Those on the trip were, besides myself, Commander Richardson,
U.S.N., Phillip Young of the Treasury, Air Commodore Mansell
(British), Mr. Fairey (British), Commander Gingrich, U.S.N.
At Hartford, General Eccles and Major Meeney and Commander
Kilfer
Zeigler, our inspector. At Brewster were Captain Whiting,
U.S.N. and Captain Capehart, U.S.N. At Grumman, Commander
D. Rittenhouse, U.S.N.
2) Plants Visited.
Pratt & Whitney Engine Plant, Hartford;
Vought, Sikorsky - Bridgeport;
Grumman Manufacturying, Beth Page, Long Island;
Ranger Engine, Farmingdale; and
Brewster Aeronautics Plants at Long Island City
and Newark.
3) Some progress was made in standardization. Further gains can
be made on certain items such as guns, bombs and certain gadget
equipment (pyrotechnics, safety belts, etc.), requiring conferences
with Joint Board,
4) In addition it is obvious there are certain practices developed
in actual combat overseas which we ought to look into at once and
possibly adopt. These include automatic fire extinguishers for
planes that have been shot down (extinguisher works automatically
on landing and has proved effective in saving lives of injured
pilots); balloon barrages for war ships, concentration of fire
(put machine guns closer together in the wings to get greater fire
concentration on fighters).
:-
5) It is also clear that we can make gains in pooling of shop
practices. At Grumman, a very efficient plant with vigorous
direction by the way, there has been developed use of excavated
bays with elevator installation to work on planes doing away
with scaffolding and super-structure occypying & good deal of
space and loss of efficiency. Pratt & Whitney has a "cold" run-
in of motors under external power which saves a good deal of time
in test runs of motors. Either the Industry or the Defense
Commission ought to have someone constantly visiting all plants to
see what particularly efficient practices can be made uniform for
the Industry.
6) Questions that arose in course of trip:
(1) Should we not camouflage our fighting, scouting, and bombing
planes in the plant? This 1s 8. British practice and would
seem to save time at some future date.
(aring)
(2) Why do "spend $90,000,000 at Packard for the development
of an in-line liquid cooled Rolls motor which we are by no
means sure we can produce because it 1s the product of
British shop and tool practice and not ours. In the last
war it took us eighteen months to reproduce anHispano Suiza motor
and then it was really an American motor rebuilt after take
down of the French model,
Pratt & Whitney and Grummen are doing an outstanding job. Ranger, which
is making engines for us 1s slower but coming along well and seemed to
have excellent engineering experimental work in progress. Brewster has
a bad management situation - principal owner of the stock, James Work,
who 12 also President, is both ill and apparently incompetent. I did
not see him because he had just come out of a hospital in Philadelphia
but I telephoned him and told him I wanted him to come to Washington next
week.
Phillip Young is writing a more detailed report which I will send-you in
later.
Regraded Uclassified
135
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
November 8, 1940.
Cabinet Meeting November 8, 1940,
The President asked Secretary Hull 68 to whether the Neutrelity
Proclasationswith respect to Greece should be issued, Re said he had
signed them some time sgo, ready to issue whenever the Secretary
thought it advisable. The Secretary replied that they were still
studying the matter, and this vas not the proper moment to issue these
proclemations. The President then aked regarding the Chinese situs-
tion with respect to the withdrawal of Japanese troops from certain
sress in China; be wented to know whether this had any real signifi-
cence from the Chinese stendpoint. Secretary Bull replied he did
not think it hed any real significance other then that the Japanese
were endeevoring to shorten their lines and consolidate some of their
positions.
The President then said he had had & conference with Rr. Purvis
aná Sear tery Morgenthau and had agreed to give the British fifty
per cent of our armament production including sirplanes wherever the
type of items produced fit in with the British program. It hed :150
been suggested to Purvis end the Secr tary, he said, that in view of
the fact that the British were losing a large number of ships, the
possibility of the United States building the ships and renting them
to Great Britain. I raised e. question of the Neutrality Act 88 to
what flag there ships would fly. The President said this vas e detail
that would have to be worked out; he thought maybe the Attorney General
night be able to solve the problem. Then there was a general discussion
of the unused plant facilities throughout the country. The President
thought there were many small plants that might be out into production
of national defense items. He said that the National Defense Commission
was setting up B committee to make B. detailed study of this matter.
Mr. Bell. I had nothing to present other than the New York Times
index which showed a rise of .4 of 1% over last week on five items,
information regarding the other items not being available before two
o'clock today. The President then said that he understood from Secre-
tary Morgenthau that the Secretary of State hed B. memorandum from the
sury in which it WEB recommended that the funds in this country
belonging to all governments of the world end their nationals be
frozen and asked if anything had been done about the matter. I told
his we hadn't heard anything from the State Department. Secretary
Hull said the matter VES being considered by his people and that he
Regraded Uclassified
136
- 2 -
expected to cell the Treasury within a day or two. The President then
saked about E news item of 8 few days ago in whi h it was stated that
Mexico had examined the baggage of an Italian Consul who wes carrying
approximately one and at half million dollars. I told the President
we had had information from the F.B.I. on this end other metters of
B. similar character and our information WEB that at the same time
$3,800,000 of currency left the country by Mexico end that during the
past two or three weeks approximately $20,000,000 of Italian funds
have gone to South America. Attorney General Jackson said that the
7.3.1. was getting this information but that there was not much they
could do about it other than tip off the Mexican authorities. The
Mexican authorities immediately seized the Italian Consul and found
out he did have the large emount of currency and after examining his
beggage. returned the currency to him and apologized. I told the
President, in connection with the recommendation for freezing funds
In this country, there should also be issued B. proclamation prohibiting
the exportation of currency under the Anti-Hoarding Act.
The President also said that it looks 88 though we were going
to have an increase in the debt limit. I said that the Secretary had
felt it desirable to let the public know that the Treasury would
require en increase in the debt limit of $45,000,000,000 and that the
inflexible provisions of the last act authorizing the issuance of
11 tionel Defense notes should be eliminated. The Secretary had also
stressed et his press conference that the Tressury was going to strongly
recommend in the next nession of Congress legislation which would eliminate
the tax exemption features of all government securities. Both of these
statements seemed to cause substantial increase in prices of Government
securities and stocks. I said, however, I felt that this would not last
more then a day or two and that things would soon settle back to normal
procedure.
Mr. Stimson. Mr. Stimson said he had nothing except he wondered
if something could not be done to get E. certain piece of legislation
pending in Congress passed in which the Ver Department is much interested.
The President seid be thought the Secretary might oall Chairman May of
the Military Affairs Committee and ask him if it could not be expedited.
The President said that he had en idea that he would like to throw
out for discussion. We all knew, he said, that the Fan-American and other
transportation lines were getting virtual monopoly on air traffic over
certain foreign transportation lines. He thought it might be en excellent
thing if the Government would participate in the ownership of these
companies and that they should extend, after the war is over of course,
their facilities to Northern Europe, to the Mediterranean end to the Far
Regraded Uclassified
137
Exat, 5.8 well as to all South American countries. This would give these
companies a monopoly, but to some extent under Government control, but
yet with private management facilities. Secretary Jones said he was
also interested in the matter and would like to look into it and report
to the President.
Mr. Jackson. Mr. Jackson seid he WEB still conferring on the
Censdian border matter but that he was finding some difficulty in working
out la procedure for identifying Americans going back and forth across
the border. He then discussed, in connection with the question that
the President asked Mr. Walker noted below, violations of the Hatch Act
in the last election. He thought that some action should be taken either
to enforce the Hatch Act or to show that it should be drastically amended.
Mr. Walker, The President saked the Post Master General to look
into the matter of scurrilous pamphlets being sent through the mail, He
thought there were a number of them sent through the mail during the
last campaign end he would like to have a report on it. Mr. Walker said
he VES meeting with his postal inspectors tomorrow morning for that very
purpose. Mr. Jeckson confirmed the fact that many pamphlets of a
scurrilous nature were being transported through the mails and Mr. Cermody
commented that there were not only pamphlets, but open mail and post cards.
Mr. Knox. The President said he wanted to telk to Secretary Knox
about the Navy some time very soon. He had information that a foreign
ship recently came out of B. port in Columbia with several German sviators
on board. While the Nevy was supposed to keep track of this vessel, they
completely lost her and just where she is now located no one seems to
know. Secretary Enox said he was quite well aware of this fect and he
had told the Havy people what he thought about it. He then said he had
received a dispatch from one of his men abroad who had raised the question
85 to what could be done about securing bases in Ireland for the operation
of the British fleet and air fields for their airplanes. He said this
dispatch indicated that the British were having a rather difficult time
in stopping the submerine drive coming in from the north and this was
all due to the lack of proper facilities in that area. He wondered if
something could not be done to stir up the American-Irish in behalf of
the British 50 that the Irish Government would cooperate in this con-
nection. He seid he had definite information that DeValera had agreed
with Churchill that the English should have these facilities but that
when he returned home he was, forced, because of the opposition of the
protestant groups, to renounce the plan. The President said that he
would have to be very careful as to what is done in this direction end
suggested that Secretary Knox end Secretary Bull confer on the matter
end see what could be worked out.
Regraded Uclassified
138
Mr. Ickes. Kr. Ickes said he had nothing.
Mr. Wickard. Mr. Wickard said that cotton was still the chief
problem of the Agriculture Department. He said domestic consumption
Is very good end will take about 8 million bales this year and that we
vill ship out about 1-1/2 million bales, but that doesn't take all of
the production. He said that Russia has begun to take cotton end they
purchased about 54,000 bales in October, He raised the question of
policy 58 to whether we ought to sell cotton to Russia at this time in
such quantities which may be going to Germany. The President suggested
that he work up for him a routing chart for cotton showing the verious
countries to which we end other cotton raising countries are now shipping
cotton.
Mr. Jones. Mr. Jones seid that the Finnish Minister had been in
to see him and see whether or not his Government could get any relief
from paying the interest and principal due under the $60,000,000 credit
extended to that country about E year ago, He said there VES no doubt
but what Finland was going to have a hard time this winter, and possibly
we would extend to them some relief. He thought maybe some of the notes
which are coming due this next year could be carried over for another
year or two. I told the President that the Finnish Minister had advised
the Treasury today informally that his government was going to take
advantage of the Vandenberg Resolution by postponing the payments due
on December 15th next and that he also wanted to discuss with this
Government reconsideration of the whole debt matter.
Kr. Jones said that Stewart MacDonald had just about reached his
limit on insured mortgages and he would like to get the President to
sign E letter reising that limit another billion dollars. The Pre-ident
agreed to do this.
Miss Perkins. Secretary Perkins advised that the textile mills
of the country are now operating at capacity. She then discussed at
some length the possibilities of peace between the A.F.of L.and C.I.O.
She thought there was quite an undercurrent of feeling among the labor
unions: that an understanding should be reached very soon and that it
should be accomplished by the two organizations working together rather
than due to any pressure from the President.
Mr. MoNutt. The President told Mr. McNutt that he is having
prepared e letter Miss Eliot of the National Defense Commission
advising her that the matter of the health of the workers of the country
should come under the Federal Security Administrator. He said he thought
Mr. McNutt should set up a committee to E° into this whole matter of
Regraded Uclassified
139
- 5 -
training not only for industry, but training from & health standpoint.
Be thought we might even do something along the petriotic line to change
the attitude of certain elements of our population. There was quite a
!iscussion of this matter between McNutt, Carmody, Miss Perkins, Bob
Jackson, Mr. Ickes and the President.
After B. long discussion the President appointed 8 committee of
Kr. Ickes, Mr. Stimson, Mr. Knox, Mr. Jackson, Mr. Mclhutt, Miss Perkins
end Dr. Dyketra to study this whole matter and make a report to the
President on ways and means of carrying out the program.
suB
One other important matter discussed by the President at the
Cabinet Meeting today which I failed to insert in its proper place
above vas the question of the capacity of the steel industry to meet
the demands of national defense. The President said he had continually
tried to impress upon the National Defense Commission the importance of
this matter. He had always been told up until last week by Kr. Stettinium
that the steel industry is prepared to meet all of the demands, but this
week when he asked again about it, Mr. Stettinius said he had appointed
e. committee to look into the matter and would let the President have a
report within the next few days. The President said he WEB quite certain
that something would have to be done, This is important to the Treasury
in view of our interest in the matter over the past month. We have
insisted that a bottle-neck was developing in this industry and that
it would be B. good investment if we spent fifty to one hundred million
dollars to expand plant facilities, even though we never used them in
the end. We take this position because it will require anywhere from
fourteen to eighteen months to complete these additional plant facilities.
DWB
Regraded Uclassified
'O
o
P
I
140
GRAY
BUENOS AIRES
Dated November 8, 1940
Rec'd 7:40 p.m.
Secretary of State,
Washington.
532. November 8, 6 p.m.
The 50 called Pinedo plan approved by the Argentine cabinet for sub-
mission to Congress, is attracting much attention. It 1a designed to
stimulate private enterprise, provide cheap housing, safeguard the cur-
rency and solve the surplus commodity question. It is understood that the
plan will be administered by a board formed by the President of the
Central Bank and is to remain in operation until at least one and not
more than five years after the war.
Although Argentina has lost 40% of her overssas markets for the
time being, the surplus commodity question is not new and the present
plan merely contemplates at continuation of the method already in use
in avoiding disastrous accumulations of unmarketable agricultural
products by purchasing crops at moderate minimum prices, financing the
operation from exchange control profits. The workmen's housing plan
will involve the expenditure of from 150 to 200,000,000 pesos next year
to provide employment and stimulate local business. Moreover everything
possible will be done to encourage sound domestic industries designed to
increase employment and reduce the volume of necessary importe. The plan
contemplates putting to work B portion of the funds now idle in savings
accounts by a species of forced loan.
Regraded Uclassified
3
141
- 2 -
It is clearly implied from the Minister's report that imports
are to be curtailed. In this connection reference is made to the
Embassy's telegram 493 of October 17. 8 p.m. indicating that imports
are to be divided into three categories.
ARMOUR
EMB
ne
seoven
es OI MA 22 VON 00
0046 MAIL
CSVI303R
11
bfn
- OFFICIAL COMMUNICATIONS TO
142
THE SECRETARY OF STATE
WASHINGTON, a.c.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
EA 840.51 F.C./863
November 8, 1940
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
a copy of a paraphrase of telegram no. 575 dated Novem-
ber 7, 1940 from the American Embassy at Rio de Janeiro
and requests his suggestion as to the reply that may
be made in 80 far as concerns jurisdictions of the
Treasury Department.
Enclosure:
From Rio de Janeiro,
November 7, 1940.
AECEPTION
061 THE
10 THE
000 nos a bh È se
143
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Rio de Janeiro.
DATE: November 7, 1940, 6 p.m.
NO.: 575.
Today the Bank of Brazil was informed by the manager
of the Brazilian subsidiary of the Dutch Phillips Company
that decision has been made by the company to centralize
its business with its United States subsidiary, which
18 the Knickerbocker Carriers, Inc., 24 Stone Street,
New York, N. Y. It is now the desire of the Brazilian
subsidiary's manager to transfer a sum of $350,000 to
granting
the company in New York; however, before issuing author-
ity for this transfer, the Director of Exchange wants
to find out how the New York company 18 regarded by
the Government of the United States.
Your reply should be telegraphed.
BURDETT
EA:MSG
- -
144
EH
PLAIN
40'
Shanghai via N.R.
Dated November 8, 1940
Rec'd 1:20 a.m., 10th
Secretary of State,
Washington.
1219, Eighth.
Weekly Financial.
Shanghai open market foreign exchange rates ruled
quietly steady during week with operators cautious in
commitments. Rates declined slightly early in week because
of ports covering but firmed on receipt results American
election. Rates eased slightly this morning because of
unfavorable local developments and recurrent rumors that
the proposed Central Bank of Nanking regime will shortly
be established which expected be attended by closer regi-
mentation of finance and trade. Interbank spot selling
at noon around six one sixteenths cents and three twenty
nine thirty seconds pence (representing sterling parity of
United States dollars three point seven two five) having
high during week of six three sixteenths and three thirty
one thirty seconds and low of six cents and three seven
eighth pence, November delivery same as spot, December
delivery one thirty second cent and one sixty fourth penny
lower.
Regraded Uclassified
145
-2-
lower. Other quotations this morning: paper gold bars
around yuan five five three naught having high during week
of five five seven five and low of five four naught five,
Wei Wah cash discount rate point six percent, Bank Japan
notes yen one for Chinese yuan one point five three lower
due to new exchange control law enforced November eighth in
Japan completely prohibiting repatriation of yen notes to
Japan except with special permits,
(END OF SECTION ONE)
LOCKHART
EMB
146
EH
PLAIN
Shanghai via N.R.
Dated November 8, 1940
Rec'd 1:20 a.m., 10th.
Secretary of State,
Washington.
1219, Eighth (SECTION TWO).
military scrip now commands various rates in Shanghai
ranging from yen one from Chinese yuan one point five
seven to Chinese yuan one point six seven, central bank
gold unit rates yuan two point seven naught seven or
United States dollars naught point six six one eight seven
five, Shanghai customs gold unit for duty payment purposes
equivalent Huahsing yuan two point seven eight nine or
Chinese yuan four point three seven nine as Hushsing yuan
commands today premium fifty seven percent over Chinese
yuan, Tientsin exchange rates six one sixteenths cents and
three twenty nine thirty seconds pence, Tientsin Shanghai
remittance Tientsin Chinese yuan nine nine noint two five
for Shanghai Chinese yuan one hundred, Tientsin Federal
Reserve Bank yuan eight six point fifty for Chinese yuan
one hundred. Yesterday's closing quotations: Chinese
Government domestic bond prices reached new record high
yesterday
147
-2-
yesterday with some issues approaching pre-hostilities
level consolidation loan averaging six five, Shanghai
general stocks higher average two eight nine point two
seven, Shanghai rubber shares average two nine two point
three five, Hong Kong exchange rates twenty three and three
sixteenths cents and fourteen thirty one thirty seconds
pence.
INFORM COMMERCE.
(END OF MESSAGE)
LOCKHART
EMB
= s
C
0
P
Y
bj
148
CABLE
FROM: Commercial Attache Nicholson
Shanghai, China.
DATE: November 8, 1940
For the Secretary of the Treasury.
Current situation Shanghai for week ending November 2nd.
Exchange market during week was dominated entirely by speculative
activity without material change in rates. Net oversold position
in foreign currencies estimated about U.S. dollars $2,000,000.
Stock exchange showed more confidence and greater activity than
for some weeks past with steady improvement in prices. The
general level of local industrial activity decreased during
October. General index of cost of living of Shanghai workers
October was 524 U.S. compared with 482 in September. Increase
was spread over all commodity groups being heaviest in food
and clothing. September compared with August Number of vessels
entered and cleared all Chinese ports was up 15% tonnage was
down 16%. Compared with September 1939 number entered was up
21% but tonnage was down 17%. These divergent trends in
entrances and tonnage are no doubt due to fact that trade is
passing more into hands of small vessels mostly Japanese engaged
in tramp coastwise and shuttle service. Another part follows.
NICHOLSON
149
CABLE
FROM: Treasury Attache Nicholson
Shanghai, China.
DATE: November 8, 1940
For the Secretary of the Treasury.
Jap shipping is finding less to do in world trade than formerly.
Transpacific lines are mostly engaged in export carriage of Japanese
specialists and out of 5-1/2 million tons of tramp tonnage it is
estimated 400,000 tons are idle in dock from lack of materials and
skilled labor for repairs while another 1-1/2 million tons are
engaged in transportation of supplies to China and in other war
duties and still others are employed in unusual work of carrying
food, etc., to Japan all of this decreasing number available for
general merchant service productive of foreign exchange. It is
estimated that Japanese shipping monopoly on Tangtze vill this year
carry 8 million tons cargo and 1 million passengers and that central
China railway monopoly will carry 8-1/2 million tons freight. Now
being organized a far eastern britle company capitalized at $1,000,000
which is apparently another Japanese monopoly to operate in central
China. Much of merchandise handled by these trade and transport
monopolies evidently does not pass through customs 68 indicated by
fact that for first 7 months of this year Japanese official figures
for trade with central China are 50% larger than nearest comparable
Chinese figures for trade with Japan. The monopoly and permit system
now in effect evidently aims at gradual incorporation of central China
into you block and is achieving more effect as Japanese policy becomes
more unified under new totalitarian regise. Requirement that all
foreign trade with interior be done in military yen has tended to
150
- 2 -
bolster that currency which recently approached Chinese dollars
170 per 100 military yen but is now around 155. There is rumor
that all continental currencies including those of Manchuria
Mongolia and North China may be devalued about 30% in comparison
with Japanese yen. If this done and market value of military yen
were to show further reasonable increase there might be some chance
of bringing market value and official value into correspondence.
The supreme authority on monopoly trade and currency questions in
central China appears to be headquarters of the expeditionary force
of the imperial Japanese army in Nanking.
NICHOLSON
151
JR
PLAIN
London
Dated November 8, 1940
Rec'd 1 p.m.
Secretary of State,
Washington.
3681, sighth.
FOR TREASURY.
OnE. The London financial dailies now assume that
credits for the United Kingdom will follow naturally on the
Election result. The FINANCIAL NEWS prints an article
stating that the Export-Import Bank Act already provides
a loophole "by the modification of the Export-Import Bank's
constitution which would make possible loans to Canada
notwithstanding that Dominion's belligerent status." The
Embassy has not received a copy or official summary of the
act but from reference to an incomplete file of the
Congrassional Record, it appears that the FINANCIAL NEWS
is under SOME misunderstanding which it might bE desirable
to correct, Especially in view of that journal's
connections mentioned in the Embassy's No. 1639 of June 13.
In any case definite information would bE welcome for use
in answering inquiries on this point.
Two.
152
-2- #3681, November 8, from London.
Two. The following clarifies the last sentence of
the first section of No. 3668 of November 7. The halt
TEENT
in the increase in supply expenditure which occurred in
September when the weekly average was stlg 65.5 million
as compared with stlg 67.6 millions in August was reversed
in October when supply Expenditure averaged stlg 68.4
millions weekly, while for the WEEK Ended November 2 the
figure was stlg 89.1 millio n.
Three. The "other territories" to which payments
may bE made in Philippine pesos referred to in the 4th
section of No. 3668 are the United States and possessions
thereof.
Four. Replying to a question in the House of Commons,
Sir Kingsley Wood stated that the average daily cost of
interest on the national debt was stlg 593,311 and stlg
625,816 during the six months Ended August 31, 1939 and
1940 respectively; and the cost of management of the debt
stlg 2,740 and stlg 2.770 for the years 1938-39 and 1939-40
respectively.
JOHNSON
PEG
- OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
153
WASHINGTON, p.e.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
EA 851.5151/2647
November 8, 1940
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
a copy of despatch no, 17 dated October 10, 1940 from
the American Embassy at Vichy, transmitting the text
of an instruction issued to one of the English banks by
its German Commissioner, and a copy of the translation
of the text.
Enclosures:
1. No. 17, October 10,
from Vichy.
2. Translation of en-
closure to despatch.
THE
100
WEST
as E H B VOA 000
EVEN
VOW DIG
If
Regraded Uclassified
COPY
154
EMBASSY OF THE
UNITED STATES OF AMERICA
Vichy, France, October 10, 1940
No. 17
Subject: Text of Instruction of German Commissioner to
An English Bank in Paris.
The Honorable
The Secretary of State
Washington, D. C.
Sir:
I have the honor to refer to my telegram for the
Treasury, no. 581 of September 17, 5 p.m., reporting
the increased control being exercised by the German
Bank Supervision Office over the activities of certain
foreign banks in Paris, and to enclose the text and
translation of an instruction issued to one of the
English banks by its German Commissioner.
The copy of the instruction, which has just been
received by the Vichy Manager of the Guaranty Trust
Company, does not give the name of the bank to which it
was issued. He has been informed by his Paris Bank,
however, that commissioners have been assigned to all of
the English banks, and that at least three or four
German officials have been permanently installed in
the Westminster Bank.
Respectfully yours,
H. FREEMAN MATTHEWS
Chargé d'Affaires ad interim
Enclosures:
1. Text of Instruction
2. Translation of above
WCT/gd
Regraded Uclassified
COPY
155
(Enclosure no, 2 to Despatch no. 17 of Oct. 10, 1940 from
the Embassy at Vichy.)
With reference to the interview which I had with
your directors on September 6, 1940, it is requested
that, until further notice, you observe the following
rules in the management of your business:
(1) Current business of & commercial or administra-
tive nature shall, barring special instructions for par-
tioular cases, be handled by the competent departments
now in operation. My prior approval 18 required for the
execution of measures or decisions relating to transac-
tions of a commercial nature not falling within these
bounds. This 18 particularly true as regards:
a) The acceptance of commercial risks of all types
(credits, guarantee committments, bankers' accept-
ances, discounts for customers) exceeding in value,
in each instance, the sum of 200,000 france.
b) All withdrawals of funds and deposits by indi-
viduals having their residence outside of occupied
French territory or possessing a nationality other
than French,
o) All operations relating to foreign currency
accounts of customers or banks, whether creditor
or debtor, or to securities, whether they belong
to the bank itself or to its customers, payable in
a currency other than French, or which have been
issued by an entity situated outside of France.
d) All operations relating to the bank's own
assets, BO long ae they do not concern the dis-
count or pledging of bonds with the Bank of France
in order to increase cash reserves.
e) All correspondence with the German or French
authorities. I reserve the right to make excep-
tions to this rule as regards matters connected
with the current fiscality of the bank.
f) All correspondence with individuals, commercial
firms, companies or public authorities residing or
having their headquarters outside of Franch terri-
tory occupied by the German troops.
(2) I must be immediately informed of all opera-
tions covered by the existent German and French legis-
lation regarding foreign exchange, in particular those
covered by the second provisional ordonnance on foreign
currencies
Regraded Uclassified
156
-2-
currencies issued by the Head of the Military Adminis-
tration, on August 14, 1940. If the bank should be
called upon to submit & statement on such a subject, it
should first obtain my consent.
Trusting that we shall be able to cooperate fully
and without difficulty in these matters to our mutual
interest,
Very truly yours,
(signature not given)
With reference to my letter of September 9, it 18
requested that you furnish me, at the beginning of each
week, with a brief numerical statement covering the
financial position of your bank and that of your branches.
Outstanding differences in comparison with the previous
week's position must be explained. A report on the 1m-
portant transactions occurring in the week under review
must also be attached to this statement, including those
whose value is less than the maximum limit referred to in
paragraph 1 a).
Commissioner-Administrator
WCT/gd
157
Miss
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 8, 1940
Secretary Morgenthau
TO
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. McKeon of the Federal Reserve Bank of New York gave us the following
information regarding the transfer listed below from the account of the Banca
Commerciale Italiano, New York, maintained with the Chase National Bank.
Date
Amount Debited
Paid To
November 8
$50,000
Cash withdrawal
70.m.2.
158
Mr
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 8, 1940
Secretary Morgenthau
TO
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. McKeon of the Federal Reserve Bank of New York gave us the following
information regarding the transactions listed on the attached statement in
German accounts maintained with the Chase National Bank of New York.
N.M.
Chase No lonal Bank
Amount
Amount
Date Credited Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 8
$58,800
Reichsbank, Berlin
Chase National Bank,
$250,000
Reichsbank, Berlin
Tokohama Specie Bank,
N. Y., by order of
Ltd., N.Y., for account
Banco Aleman Trans-
of Yokohama Specie Bank,
atlantico, Lima
Ltd., Tokio
56,675
Deutsche Gold-
Irving Trust Co., N.Y.,
diskontbank, Berlin
for account of Carl
Marks & Co., Inc.
159
Regraded Ucla
160
Miss
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 8, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. McKeon of the Federal Reserve Bank of New York gave us the following
information regarding the transfer listed below from the Account of the Bank of
Greece, Athens, mintained with the Federal Reserve Bank of New York,
Date
Amount Debited
Paid To
November 8
$2,900,000
Chase National Bank, New
York, for account of
Gosbank, Moscow, in execution
Bank of Greece credit #70065
We understand from Mr. McKeon that Gosbank is the cable address of the
State Bank of the U.S.S.R.
BMP
161
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 8, 1940
TO
Secretary Morgenthau
CONFIDENTIAL
FROM Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£133,000
Purchased from commercial concerns & 30,000
In the open market. sterling vas first quoted at 4.04. Around noontime,
it noved to 4.03-3/4. where it remained throughout the afternoon. Transactions
of the reporting banks were as follows:
Sold to commercial concerns
£4,000
Purchased from commercial concerns £1,000
In the other currencies, there was a further small gain in the Argentine
free peso rate. and a. slight improvement in the Canadian dollar. The closing
uotations were as follows:
Swiss franc
.2321
Canadian dollar
13% discount
Swedish krona
.2386
Reichamark
.4005
Lira
.0505
Argentine peso (free)
.2365
Brazilian milreis (free)
.0505
Mexican peso
.2070
Ouban peso
9% discount
We purchased $446.000 in gold from the earmarked account of the Central
Bank of Chile.
About two weeks ago., the Central Bank of El Salvador wrote the Federal
Reserve Bank of New York that it was applying to the B.I.S. for a dollar credit,
the proceeds of which would be used to repay the three-month loans granted by the
Federal to the Salvadorean bank. (Since the end of August, the Federal has made
seventeen such loans aggregating $797,000. with maturity dates ranging from
December 2. 1940 to January 28, 1941. As collateral, the Federal set aside gold
valued at $890.069 from the Salvadorean bank's earmarked account.) In its letter,
the Central Bank of Il Salvador observed that the B.I.S. vas prepared to make
dollar loans provided the U. S. Treasury licensed the Federal to transfer gold. to
be pledged as collateral, from the Salvadorean earmarked account to that of the
B.I.S. The Federal vas accordingly requested to apply for a license to nake 8.
Regraded Uclassified
162
- 2 -
number of gold transfers to the value of up to $650,000, and today, the Treasury
granted such a. license under the Gold Reserve Act. The Treasury also issued a
license under Executive Order No. 8389 as amended, permitting the withdrewal of
funds from the B.I.S. dollar account at the Federal, and the deposit of gold in
the B.I.S. earmarked account. The Central Bank of n Salvador, incidentally,
stated that it had applied to the B,I.S. for & loan of longer maturity because
it did not expect to acquire enough dollar funds this year to make repayments on
the Federal's loans, and did not wish, under existing conditions, to effect re-
payment by selling its gold.
The State Department forwarded to us a cable stating that Samuel Montagu
& Co., London, shipped $225,000 in gold from England to the Central Hanover Bank
& Trust Co., New York, for sale to the U. S. Assay Office.
A gold price equivalent to $33.79 was received from Bombay, This was 10
lower than the quotation of November 5. Silver was priced at the equivalent of
43.20$, a gain of 1/2# over the November 5 level.
In London, the price fixed for spot silver was 23-5/16d. off 1/8d. The
forward quotation was also 23-5/16d. off 1/16d. The dollar equivalent of both
prices was 42.334.
Handy and Harman's settlement price for foreign silver was unchanged at
34-3/44- The Treasury's purchase price for foreign silver vas also unchanged at
354.
We made four purchases of silver totaling 225,000 ounces under the Silver
Purchase Act, all of which consisted of now production from foreign countries,
for forward delivery.
jud
CONFIDENTIAL
Regraded Uclassified
163
for Nies Chaunces
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 9, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
confidential
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
L22,000
Purchased from commercial concerns
: 1,000
The rate for open market sterling was 4.03-3/4 all morning. There were no
reported transactions in open market sterling.
The other currencies closed as follows:
Canadian dollar
13% discount
Swiss franc
.2321-1/2
Swedish krona
.2387
Reichamark
.4005
Lira
.0505
Argentine peso (free)
.2365
Brazilian milreis (free)
.0505
Mexican peso
.2070
Cuban peso
8-7/8% discount
There were no gold transactions consummated by us today.
The Federal Reserve Bank of New York reported the shipment of $1,406,000 in
gold from Portugal by the Bank of Portugal, to be earmarked for its account at the
Federal.
In Bombay the equivalent of the gold price was $33.81, up 24 from yesterday.
Silver figured out to 43.46#, up 1/4.
B.M.S.
164
CONFIDENTIAL
TENTATIVE LESSONS BULLETIN
MILITARY INTELLIGENCE DIVISION
No. 65
WAR DEPARTMENT
G-2/2657-235
Washington, November 9, 1940.
NOTICE
The information contained in this series of bulletins
will be restricted to items from official sources which are
reasonably confirmed. The lessons necessarily are tentative
and in no sense mature studies.
This document is being given an approved distribution,
and no additional copies are available in the Military Intel-
ligence Division. For provisions governing its reproduction,
see Letter TAG 350.05 (9-19-40) M-B-M.
SOME ASPECTS OF DEFENSE IN GREAT BRITAIN
SOURCE
Section 1 of this bulletin is quoted from a cable dispatched
by an official American observer in London on October 25, 1940. Infor-
mation in Section 2 was furnished by official British sources in late
September, 1940.
CONTENTS
1. THE BRITISH CIVILIAN EFFORT
2. THE BALLOON BARRAGE UNDER
WARTING OPERATIONAL CONDITIONS
CONFIDENTIAL
-1-
165
CONFIDENTIAL
1.
THE BRITISH CIVILIAN EFFORT
"One of the outstanding features of the British war effort
is the extensive diffusion of responsibility for national success.
In addition to members of the armed forces, nearly all British adulta
have assumed or been assigned duties of a direct and distinct nature.
"More than a million men have been conscripted into the
armed forces, while two million have been exempted because of reser-
ved occupations 1. and will continue at these unless inducted into
the armed services at a later date. One million seven hundred thou-
sand men have volunteered for the Home Guard and are performing well
organized day and night duty under arms. Three and a half million
men and women who belong to the Air Raid Precautions organizations
are carrying out in an admirable manner duties that are frequently
dangerous, and at present they are suffering more casualties than
members of the Army.
"Many organizations are filled by voluntary enlistment,
but their full-time workers are uniformed and paid. These include
the Women's Royal Naval Service with the RAVY, the Wonen's Auxiliary
Air Force and the Air Transport Autiliary A. with the Air Force, the
Auxiliary Territorial Service with the Army, and the Auxiliary Fire
Service with the Air Raids Precautions. Members of these organiza-
tions are supplemented by uniformed but unpaid volunteers in the
First Aid Nursing Yeomanry, the Mechanized Transport Corps, the
Women's Voluntary Service, and similar groups which utilize the
enormous patriotism and energy of the women and relieve the men of
many duties.
"Add to these the civil servants, regular members of the
police and fire departments and the industrial workers, who regard
themselves as combatants since they frequently work under bombard-
ment, and it becomes evident that no family and few individuals are
without considerable and immediate responsibility for war efforts.
"There are enormously important by-products of these civil-
ian efforts. They tend to stabilize and steady the social and poli-
tical structure, to reduce useless activity, and to minimize the
irresponsible chatter and epidemic apprehension which can 50 easily
pervade communities or individuals not fully occupied."
2. THE BALLOON BARRAGE UNDER WARTINE OPERATIONAL CONDITIONS
a. Role and General Use of the Barrage
1. Essential jobs in industry. G-2.
2. Composed of wonen pilots for ferrying duty. 0-2.
CONFIDENTIAL
-2-
Regraded Uclassified
166
CONFIDENTIAL
The role of the balloon barrage is to keep enemy bombers
above the height at which they can carry out accurate destructive bomb-
ing and to force them into the sone of sir where fighters and antiair-
craft guns are effective. In clear weather the barrage is flown at
between 4,000 and 5,000 feet, its full operational height, while in
cloudy weather it is flown in the clouds. Its moral effect has proved
to be very great.
In general, the balloon barrage is used over clusters
of vital points, such as docks, harbors, and large cities, where it
serves as an economical and effective means of protection. When vital
points are isolated, however, the barrage is not economical, for as
many as 60 balloons would be necessary to provide adequate defense for
a single precise point such as a power station. For defense of isola-
ted points, light antiaircraft artillery is used.
Fighter aircraft are always available in areas where
balloon barrages are located, for barrages require their protection.
Extra protection is provided by a small proportion of light antiair-
craft within the areas covered by the barrages.
The barrage is also used for protection of convoys.
It prevents low flying attacks and, if kept to about 2,000 feet,
renders it difficult for bombers to malce hits on ships. Care must
be taken, however, to provent balloons projecting above the clouds
and thus giving away the location of convoys.
b.
Damage to Balloons
Recent storms have damaged and brought down a large
number of British balloons, but many of these have been recovered,
repaired, and put back into use,
Other balloons have been lost when they were struck
by lightning with some frequency. If, however, the barrage is
lowered below the cloud base under these circumstances, wastage can
be avoided to a large extent.
It requires six to eight antiaircraft shell fragments
to bring a balloon down, and these fragments take a toll of approxi-
mately 30 balloons each 24 hours in the vicinity of London. Repairs
can be effected quickly, and the damaged balloon is generally in ser-
vice again within four to ten hours.
c.
Layout Plan
The British Air Force use an area layout with a 17%
probability of collision for aircraft flying across the balloon-
CONFIDENTIAL
-3-
Regraded Uclassified
167
CONFIDENTIAL
defended zone. The barrage is strategically innobile-that is, it
defends specific areas and is not moved. Tactically it is mobile
and can be shifted from one location to another when a sudden change
in enemy strategy makes this necessary. The British balloon barrage
is lethal in that the cable used is strong enough to tear the wing
from a plano striking it.
In London and certain other cities, especially those
in which the aircraft industry is centered, the barrage is kept fly-
ing at all times. The average assigned strength of the London barrage
is 360 balloons, but the average number in operation during a normal
24-hour period is 310. About 50 are generally on the repair list.
The strategically immobile barrage can be replaced by
one strategically mobile-that is, a hedge of balloons across a well-
known avenue of attack. The British have tried this, and, as more
balloons become available, they may have more mobile barrages.
CONFIDENTIAL
168
0-2/2657-220
RESTRICTED
M.I.D., W.D.
November 9, 1940.
No. 242
SITUATION REPORT
12:00 M.
This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion of political information and of opinion it is classified
as Restricted.
I. Western Theater of War.
1. Air Force Operations.
German air activity conformed to normal pattern and
intensity. The German official communique again emphasizes the ex-
tent of attacks on shipping and claims night operations against con-
voys.
The R.A.F. operated extensively over Germany. Munich
was bombed, as was the Dornier plant at Friedrichshaven.
II. Greek Theater of War.
The ground situation continues to be one of inconclusive
mountain warfare. The Italian Air Force bombed widely behind the
lines in Greece.
III. Mediterranean and African Theaters of War.
No ground operations reported, but apparently brushes be-
tween patrols in western Egypt are becoming increasingly frequent.
Last night the R.A.F., probably based on Great Britain, delivered a
fairly heavy attack on Turin and its vicinity.
RESTRICTED
Regraded Uclassified
169
Parapherese of Code Rediegram
Received at the Ver Department
at 11:47 holder Nev. % 2040
CONFIDENTIAL
Budspest, filed Nev. n 1940.
Information resel.ved from the British Military Attache
stationed in indicates that the hondquarters of six German
any cargo are being set up at Busharest, Galate, Alex (garbled),
Craisva, Janey and Fleashi. Divisions of the 20st named earge are
at Im, Brance and Flessti.
PARTRIDGE
Distribution:
Military Aide to the President
Secretary of Her
State Department
Secretary of Treasury
Asst. Becretary x 152
Chief of Staff - 2
Var Plans Division
Office of Neval Intelligence
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
170
Paraphrace of Code Cablegram
Received at the Mar Departments
at 6:15 P.M., November 9, 1960.
Lenden, filed 15.55, November D, 1940.
1. Due to the absence of clouds there were no daylight
operations by the Besber Command on Friday, November 8. It was
planned to dispatch a total of 188 planes that night, 47 against
energy lines of communication, 37 against oil targets, 18 against
Italy, 12 against airfields, 6 against aircraft factories and two
against easay parts, The results of the operations during the
previous night were excellent comept for the attacks on Italian
targets. Fifty benefors dropped fifty time of bombs, including
ten 1,000-permders in the attack on the Krupp works. Two planes
crashed on landing. During the night of November 7-8 the Constal
Consent attacked Lorient with seven bembers and planned to No
peat the attack the following might. Its other operations were
routine. One plane erashed on landing. the Fighter Command die-
patched 708 planes - 187 patrols.
2. On November 8 German fighters operating at about 25,000
feet made three raids, of about so, 75, and so planes, respectively,
against the Southeast Censt. There were three attacks of about $5,
80 and 20 planes, respectively, a British shipping along the east
and southeast coasts delivered from about 15,000 feet. On the
CONFIDENTIA
Regraded Uclassified
171
CONFIDENTIAL
assend attack the British shot down 15 dive beneers and - fighter.
German operations that night ware of a reutine nature and on a small
scale until daylight. A total of about 230 German planes vere plotted.
8. Quarters at - British airdrass were damaged and unexploded
bamba stopped operations at a record. Net weather is hundicapping
several fields. A munitions plant in London, a railread, and a -
line suffered major damage. Railread lines in Birnington were
blocked in tax places. Coventry was raided but damages were light.
4. German plane lesses were 19 confirmed, seven probable and
nine damaged. The British lest six planes but three pilets were
saved.
5. The Greek Army is new completely mobilised and its marale
is high. But no far it has been impossible to drew sonslusions as
to the operations taking place.
6. Alexy the Southern Rusandan frontier several battalisms of
German tochnicians have arrived and arrangements have been empleted
for a reyid cressing to the railheads at Vidia, Lam, and Milespel, all
in Pulgaria and for transport to Philippopelis, higaria, and the lesse
Stress River, Greese.
9. There has been 20 major action in Northern Africa but a
further Italian advance is anticipated. the British have identified
about 8,700 tracks which are capable of transporting - native and
- white divisions. In the resepture of Calladat, Angle-Ngyptim
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
172
sulan, - the morning of November 4, the British took 18 Italian
decertors and may Italian prismers.
!
Distribution:
Military Aide to the President
Secretary of Mar
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff
Mar Plans Division
Office of Maval Intelligence
CONFIDENTIAL
173
Puraphrase of Code Disputah
Received at the Tar Department
on November 10, 1940
CONFIDENTIAL
London, filed 12:30, November 10, 1940.
1. There were no successful daylight operations by the
Bomber Commind on Saturday, November 9th. That night this Command
dispatched & total of 108 planes, w against submarine bases, 18
against energy parts, 10 against German industrial plants, 12 against
may airdremes and 25 against targets in Italy. During the proced-
ing night the principal benber attack against comminions -
delivered against the railread yard in Match. A total of 32 planes
dropped 22 tom of bonks, including two of 1,000 permis each, a
this target. The beending - very securate. All other missions,
including these against Italian targets, were satisfastery. During
that night & total of 100 planes were dispatched, of which three
creshed a landing and one was lost. On November 9th the Cental
Command carried out 32 patrol missions, engaged in 32 serties and
esearted 15 conveys, all without lesses. the preceding night
planes from this Commend curried oct & very successful attack .
the reburine base at Lerient, Forty-four 250-lb. benen were
dropped at altitudes warying from 2,000 to 9,000 feet. The Fighter
Commind sperated 320 planes en 122 patrols.
2. The operations of the German Air Few en Nevember 9th
were a & aims seals, with about 120 pilmon platted.
3. Five attache were unde on British airdresse, motly
W machine seas, with negligible damage, Five planse were damaged
at - field but for of the - be fined . within two days.
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
174
The only damage of & major nature cocurred when four high exple-
sive bombe hit a freight depet without damage, One railread line
was blecked. Other damages were quite widely distributed and mainly
to private properties.
4. German plane losses were four confirmed and three
damaged. The Fighter Command had no lesses. In the Eastern
Mediterranean the British lest two planes and the Italians two.
Civilian casualties were 14 killed and 28 seriously wounded.
5. The following is the status of British airdross
damaged from all causes: One field is completely out of service
and another is out temperarily. One airdrome is permanently out
of action for night operations while another is serviceable at
night for takenffs but net for landing. One field has but one
serviceable runway. Another field 10 useful in an emergency if
given warning in advance, as the runsey is being extended.
6. The Fighter Command is increasing its number of
night patrols against German bombers. In my opinion their success
in this field is increasingly premising.
7. I consider that the meet important operation in the
present situation TM the seisure and establishment of a strong
base at Crete free which Italy and the Balkans are very readily
accessible W air. As yet there is no probability that it will be
overrun by the German Army. This unexpected good fortune is almost
the first British break so far in the were The possession of this
base allows the British to carry out effective operations against
CONFIDENTIAL
Regraded Uclassified
175
CONFIDENTIAL
the Italian lines of communication to the Eastern Mediterransm
and to maintain uninterrupted sea and sir pressure on Italy. The
success of this action depends wholly upon prompt action and the
availability of the necessary forces.
LEE
Distributions
Military Aide to the President
Secretary of Wax
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff - 2
War Plans Division
Office of Naval Intelligence
CONFIDENTIAL
176
- THE CORMANDANT, u.s. COAST -
AND REFER TO -
TREASURY department
1799
UNITED STATES COAST GUARD
HEADQUARTERS
WASHINGTON 9 November, 1940.
From:
Spagent, Shanghai, China.
To :
Secretary of the Treasury.
Message from Mr. Nicholson.
Local Chinese bankers through Hsi Teh Mou send heart-
iest congratulations on the re-election of President Roosevelt
and wish your administration contimued prosperity and success for
the next four years. The local American community, Chinese, and
British are highly elated over the results of the election. The
Japanese are very nervous, but continue whistling in the dark.
This office wishes to add our congratulations to those expressed
above and to also express our gratitude to you for the kind con-
sideration and encouragement we have enjoyed at your hands during
the past years and to assure you, God willing, of our humble
efforts to contribute to your success during the next four years
shall not diminish.
Regraded Uclassified
OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, a.e.
177
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
NE 881.515/9
November 9, 1940
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and transmits
a copy of a telegram no. 48, dated November 2, 1940, from
the American Diplomatic Agent and Consul General at
Tangier concerning an order issued by the Spanish military
authorities there with respect to the Spanish peseta.
Enclosure:
From Consul General,
Tangier, November 2, 1940.
so
OFFICE
SECRETARY OF TREASURY
1940 NOV 12 AM & 46
41.07
DOG was 13 LGT 32
are
TREASURY DEPARTMENT
has
Regraded Uclassified
178
AS
GRAY
Tangier
Dated November 2, 1940
Rec'd 8:18 a.m.
Secretary of State,
Washington.
48, November 3, 10 a.m.
Referring to my despatch No.54 of October 11th,
the following is a translation of a notice which was
posted yesterday afternoon:
"I, Don Antonio Yuste Segura, Colonel of Infantry,
Chief of the Column of Occupation of the Zone of
Tangier, order from tomorrow Spanish money shall bE
admitted into circulation as legal ourrency. Declara-
tions of taxable values can always bE written in
Moroccan francs and in Spanish prestas. Tangier,
November lst, 1940. (Signed) Antonio Yusts."
Comments will follow in a day or two.
WHITE
GW
Regraded Uclassified
179
EH
GRAY
(Paris)
Vichy
Dated November 9, 1940
Rec'd 6:20 p.m.
Secretary of State,
Washington.
924, November 9, 1 p.m. (SECTION ONE)
FOR THE TREASURY FROM MATTHEWS.
A series of laws and decrees designed to increase the
credit base and at the same time reduce the circulation of
bank notes by substituting other means of payment for them,
was published in last night's Journal Official. These
measures provide: (1) private payments in amounts in EXCESS
of 3,000 francs for such purchases as wages, salaries,
rents, transportation charges, services, supplies and works
shall hereafter obligatorily bE paid by means of Either (?)
checks or transfers to a bank or postal account;
MATTHEWS
EMB
Regraded Uclassified
180
REB
GRAY
(Paris)
Vichy
Dated November 9, 1940
Rec'd 2:25 a. m. 10th.
Secretary of State,
Washington.
924, November 9, 1 p. m. (SECTION TWO)
(2) payments by the state and other public entities
in amounts in EXCESS of 3,000 francs for such purposes
as those enumerated above shall be paid by transfers to
a postal account or to an account opened at the Treasury
office or a bank; (3) payments by the state and other
public entities in amounts less than 3,000 francs shall bE
paid with postal money orders; (4) all merchants shall
be required to maintain a bank account or a post office
checking account; (5) up to 50 percent of state contracts
for works EXCEEDING 50,000 francs in value and those
for supplies in EXCESS of 200,000 francs may bE paid
with six month Treasury bills.
MATTHEWS
KLP
Regraded Uclassified
181
EH
GRAY
(Paris)
Vichy
Dated November 9, 1940
Rec'd 6:15 pame
Secretary of State,
Washington.
924, November 9, 1 p.m. (SECTION THREE)
The first four of the above provisions represent the
latest and most important of the steps taken by the Govern=
ment to further the Employment of checks and giros, methods
of payment which up to the present time have not been
Extensively used in France because of the average Frenchman's
marked preference for banknotes.
The fact that payment of state contracts may hereafter
bE paid in part with Treasury bills, however, represents
an innovation in French financial practices and one which
seems closely to resemble those utilized in the autarchic
economic systems. HERETOFORE EXCEPT for war time requisi-
tions which were usually paid with one year Treasury bonds
the French Government has customarily Effected settlement
of its contracts with cash.
(END OF MESSAGE)
MATTHEWS
EMB
Regraded Uclassified
182
TREASURY DEPARTMENT
FOR Zijon Canada
INTER OFFICE COMMUNICATION
DATE November 9. 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Official sales of British-owned dollar securities under the vesting order
effective February 19:
No. of Shares
$ Proceeds of
Nominal Value
$ Proceeds of
Sold
Shares Sold
of Bonds Sold
Bonds Sold
October 28
9.760
356,834
Nil
Nil
29
27,140
1,050,417
Nil
Nil
30
19,685
930,502
25,000
9,214
31
36,295
1,505,557
14,000
10,891
November 1
44,619
1,371,866
76,000
52,383
2
200
11,932
3,000
4,224
137,699
5,227,108
118,000
76,712
Sales from
February 22 to
October 26
1,686,695
59,033,831
5,124,000
3,996,896
TOTAL FEBRUARY
22 TO NOVEMBER 2
1,824,394
64,260,939
5,242,000
4,073,608
Mr. Pinsent reported sales of non-vested securities for the week ended
October 26 totaled $500,000.
Simr
Regraded Uclassified
183
Revember 9. 1990
Files
Mr. Gestram
is a conversation w telephone yesterday b. Livery lot as know that he had
to Assistant Secretary of Rate Bevie is regard be Heath's recent ingiry
nate at the instance of Vice President Publ of the Relabateak is regard to more
of pessible freesing of forman besets is the Writed Mates w - Treasury. Barie
stated that if the Treasury Department are not case to draft a reply to Heath's -
mgo, he thought 10 - net insurbect upon the Department of Mate to de 60. I -
tiened this matter at our Foreign Funds Centrol droup meeting yesterday afterason,
196 " was confirmed that the Treasury should net give any reply is the premises.
jul
MM0:1ap-11/9/40
Regraded Uclassified
184
Devember 9. 1940
Files
Mr. Gookren
Mr. Pinsent telephened as from the Brittch yesterday afternoon. Be
stated that Mr. D'Arey Cooper bed talked with the Rate Department is regard to the
incrican Government purchasing certain British materials required for sotablishment
of our bases is Brittch pessessions is this heni ophere, arranged for recently between
the two governments. Mr. Feque of the Department of Diate, as assistant is the
Trade Agreements Section under Assistant Secretary traly. had been holpful with the
British, and had volunteered the private advice that Br. Cooper should @ directly
to Secretarios Enex and Stimpoon ea this matter. the with 414 ast like to take
this stop without first conculting the Treasury.
I talked with Fhil Toung and called Pineent back yothorday overlag. I tald his
that b. Young and I were of the optates that stage the Treasury had been settag
from the beginning as lisison agency between the British and other Departments and
agencies of the United States with respect to perchases w them en this norket of
upplies, the name procedure should be followed w British nissions interested is
selling preducts to the Matted States. This 14m was cutirely agreeable to Mr. Piscent
and 10 was arranged that he or Cooper would call Toung directly with the view to
Making mah arrangments as my 70ml be found appropriate
EMC:1ap-11/9/40
Regraded Uclassified
185
November 9. 1940
Mr. Peble
Mr. Geshram
Mr. Livesey talked with me by telephone yesterday fereases is regard to the
request from the instralians. recently transmitted free the Department of Mate to
the Treasury Department. for treatment of securities otering the Prited States from
Australia. similar to that granted promities soming from the British Isles and
Canada. I had told Livecoy of our (mendary, 19 being not clear in our sinds as to
whether we should spoak of this natter to Mr. Stepford of the British Roberty before
laking & decision. Ve feel that Stepford knows 2020 about the pessible emaggling of
cocurities into the Valted Motor than anyone is the Nactralism Legation.
Should 199 discuss this matter with his or would 11 be wrong for we to take - with
the Britten Relater a matter raised W the Amstralian Logation?
Livesay had diseased this matter with Mr. flowers. is sharge of the Britisk
Lock, and let me know that the Department of State would like to - the not as
generonaly as possible toward the instrulies request. 10 vas Livesey's ouggestion
1 vs sight - fis to grant the Australian request and then let the Brittels
change know of our action. If the Brittsh had any chjostion thereto, they could
threat our the matter with the Anstralian legation.
Then I nentioned this proposal to the Foreign Funds Gentrol group yesterday
afterness. 19 use found to involve difficulties. including that of giving publicity
to & decision which we night embsequently be requested w the British to alter.
Mr. Livesey telephoned as at 10:30 this norning. Be stated that the Anstralian
Legation had asked for as appointment is the State Department at 11:30 this morning
on - financial matter. Is abover 10 his inquiry. I teld his that I was not ever
of any pending question with the Anstralians. other than that of entry of cornities.
I sold Livesey further that our Group had not case to any definite decision on the
instralles courtity matter. Livesey throught 10 would be a good 14am if the Australians
might be permitted to have direct contact with the Treasury. I teld his that if he
desired to suggest this to his visitor this seraing. I would be glad to nation the
necessary introductions over here observer the Anstralian representative eight care
to call.
2ml
RMC:1ap-11/9/40
Regraded Uclassified
186
liver 9. 1940
Mr. Peble
Mr.
48 10:00 yesterday norating Mr. Randelph Dargese telephoned me from the
National City Bank. be said that the bank had os the proceding day filed with the
Federal Reserve Bank of New York application for a Itemse to transfer the dollar
deposit accounts free the Brassels branch of the National City to & Belgian hank.
Durgose stated that he have we vere evere of the National City efforts to liquidate
their affairs is Belgium. They now think that they my be able to vork est as as-
reagement that vill avoid the accessity of their purchasing Belgian france. and
nov the third largest bank in Belgium - interseted is toking over both the assets
and liabilities of the Bruncels bank. This would be dose without yrier repayame of
National City leans. % clear the wg for this treasmation, - disposition mat
be nade of dollars which had been accepted for deposit by the Prescole branch sal EPO
nov hold - deposit with the National City Bank at New Terk to the credit of the
branch.
Is saver to Mr. Bargess' inquiry as to our attitude - this transaction, I told
is that our desision would be greatly facilitated if be would address & letter to
The Preasury giving is detail the facts which he had commission be as ever the sale-
phone. No premised to de this promptly sal also to have Dr. an - does from the
bank to discuss this matter with us - time seal week. I montioned this matter to
the Centrol Group yesterday afterases, Mr. Poble having the application under
reference before bis.
16ml
HMC:lap-11/9/40
Regraded Uclassified
187
EH
GRAY
Bucharest
Dated November 9, 1940
Rec'd 4:45 p.m.
Secretary of State,
Washington.
720, November 9, 1 p.m.
On various occasions since WE blocked Rumanian funds
in the United States high Rumanian officials have requested
the Legation's assistance in securing licenses from the
Treasury. The Legation has invariably replied that it was
not in a position to take the requested action and that the
proper channels of application were: (one) through the
Rumanian Legation in Washington; or (two) through the Chase
Bank or other American corresponding banks of the Rumanian
National Bank.
An official of the Ministry of National Economy recently
called twice at the Legation leaving on each occasion a
memorandum concerning applications made for the release of
dollars to pay Rumanian diplomatic and consular salaries and
Expenses abroad. The first memorandum listed an application
telegraphed to the Rumanian Legation on October 22nd re-
questing monthly authorization for $100,000 for diplomatic
and consular Expenditures; and a telegraphic application
made
188
EH ⑉2⑉ 720, November 9, 1 p.m, from Bucharest.
made by the National Bank on October 23rd to Chase Bank
for $140,000--apparently a reiteration of the October 22nd
request, the additional $40,000 being for Military and
Commercial Attaches. The National Bank states that no
reply has yet been received to these applications.
The second memorandum concerned applications made on
October 16th through the Chase Bank for the payment of
October salaries of the staff of the Rumanian Legation in
Tokyo totaling $3,792.16. The National Bank states that
these applications were definitely refused by the Treasury.
This memorandum also stated that an additional sum of approxi-
mately $2,000 a month was required for general running
Expenses of the Rumanian Legation at Tokyo but that no
application had yet been made pending a favorable reply
to the application for salary payments in Tokyo. REference
was also made to a telegraphic application of October 22nd
for $2,196 to cover the transportation cost of the Rumanian
Commercial Counsellar in NEW York who has been recalled to
Bucharest; no reply has been received to this application.
Both memoranda ended with the request that the Legation
take steps with a view to securing the prompt issuance of
these licenses.
On the occasion of both visits it was made clear to the
Ministry
189
EH -3- 720, November 9, 1 p.m. from Bucharest.
Ministry of National Economy official that the Legation
had bEEn specifically instructed not to act as a channel
of transmission for applications and further that it could
not volunteer recommendations concerning applications which
had already been made through the Rumanian or the Chase
bank. HOWEVER, in view of the fact that these licenses are
apparently needed urgently for the prompt functioning of
the Rumanian foreign SERVICES I venture to bring the fore-
going to the Department's attention for whatever action may
bE deemed advisable.
GUNTHER
EMB
190
U. #.
Ed. Sept. 1930
U.S. COAST GUARD
OFFICIAL DISPATCH
UNIT HEADQUARTERS
DATE
9 NOVEMBER, 1940
INCOMING HEADING
090228 QUAH D GR 15
FROM
SECTREAS
TO (FOR ACTION)
ACKNOWLEDGE
PRIORITY
COMDT
ROUTINE
NITE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR MRS KLOTZ X AFTER RECEIPT OF THIS MESSAGE PLEASE SEND
ALL MAIL DIRECT TO JAMAICA
Operator's Record.
Initials of "ACTION" officer.
U.S. GOVERNMENT PRINTING EFFICE 3-1548
Regraded Uclassified
REASURV DEFARTMENT
REASURE DEPARTMENT REASURV DEPARTMENT
191
gift. Sept. 1900
U.S. COAST GUARD
OFFICIAL DISPATCH
UNIT HEADQUARTERS
DATE
10 NOVEMBER, 1940
INCOMING HEADING
100200 QUAH GR 29
FROM
SECTREAS
TO (FOR ACTION)
ACKNOWLEDGE
COMDT
PRIORITY
ROUTINE
NITE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
DEPARTING SAN JUAN TOMORROW SUNDAY AFTERNOON FOR ST THOMAS VIA
AIR X STOPPING BLUE BEARD HOTEL ST THOMAS X DEPART ST THOMAS
MORNING 13TH AND ARRIVE KINGSTON SAME AFTERNOON X INFORM
NECESSARY PARTIES
Operator's Record.
Initials of "ACTION" officer.
N.N. GOVERNMENT PRINTING affice
15435
Regraded Uclassified
REASURV DEPARTMENT 8.
REASURY DEPARTMENT
192
E4. Bept. 1930
U.S. COAST GUARD
OFFICIAL DISPATCH
UNIT HEADQUARTERS
DATE
10 NOVEMBER, 1940
INCOMING HEADING
101450 QUAH GR 26
FROM
SECTREAS
TO (FOR ACTION)
ACKNOWLEDGE
COMDT
PRIORITY
ROUTINE
NITE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
ASK SECRETARY'S OPERATOR TELEPHONE FOLLOWING TO MRS KLOTZ
AFTER 1200 TODAY SUNDAY QUOTE REQUEST DICK TO START MONDAY
CARRYING OUT MY ORDERS CAREFULLY BEST REGARDS UNQUOTE
Operator's Record.
Initials of "ACTION" officer.
B.S. BUYERRMENT PRINTING SPFICE I-IMM
Regraded Uclassified
193
REASURY DEFARTMENT
Ed. Sept. 1930
U.S. COAST GUARD
OFFICIAL DISPATCH
UNIT HEADQUARTERS
DATE
10 NOVEMBER, 1940
INCOMING HEADING
101453 QUAH GR 24
FROM
SECTREAS
TO (FOR ACTION)
ACKNOWLEDGE
COMDT
PRIORITY
ROUTINE
NITE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR MRS MORGENTHAU X SECRETARY REQUESTS YOU BRING WITH YOU
TWO GOOD DETECTIVE BOOKS AND ONE BOTTLE 250 TABLETS MEADS
BREWERS YEAST TABLETS
Operator's Record.
Initials of "ACTION" officer.
N.S. PRINTING affice
I-001
194
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate, Dakar, Senegal, French West
Africa
DATE: November 10, 1940
NO.: 54
FOR THE TREASURY.
Reliable information has come to me that there is
being sent by airplane to France a shipment of gold
consigned to the Banque de France in the amount of ten
metric tons. The greater part of the remaining gold
(amounting to 1,240 tons) 18 now at Kayes, a town on
the railroad to Bamako, according to the report.
WASSON.
EA:LWW
Regraded Uclassified
REASUAY DEPARTMENT REASURY DEFARTMENT
REASURY DEPARTMENT REASURY DEPARTMENT
N4. Sept. 1990
195
U.S. COAST GUARD
OFFICIAL DISPATCH
UNIT HEADQUARTERS
DATE
11 NOVEMBER, 1940
INCOMING HEADING
110323 QUAH D GR 21
FROM
SECTREAS
TO (FOR ACTION)
ACKNOWLEDGE
COMIT
PRIORITY
ROUTINE
NITE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR MRS MORGENTHAU X SECRETARY REQUESTS YOU BRING WITH YOU
A COPY OF NEW YORK TIMES FOR MONDAY AND TUESDAY
Operature Remord.
Initials of "ACTION" officer.
** COVERNMENT PRINTING EFFICE
Regraded Uclassified
196
U.S. COAST GUARD
Back. -
OFFICIAL DISPATCH
TRANSMIT
DATE
11 NOVEMBER, 1940
FROM
CODE
COAST GUARD HEADQUARTERS
CIPHER
TO (FOR ACTION)
ACKNOWLEDGE
SECTREAS
PRIORITY
UNLESS DESIGNATED OTHERWISE TRANSMIT THIS DISPATCH AS NITE.
ROUTINE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
MAIL TO
TELEPHONE TO
MESSENGER TO
OUTGOING HEADING
TEXT
IS IT VERY WARM DOWN THERE X FEELING FINE AND LEAVING HERE
TUESDAY X LOOKING FORWARD TO JOINING YOU THURSDAY LOVE
ELINOR
OPERATOR'S RECORD
INITIALS OF "RELEASING" OFFICER.
OFFICIAL BUSINESS.
- - - 2-1817
Regraded Uclassified
RABURY DEPARTMENT
RABURY DEPARTMENT
197
Ed. Sept. 1900
U.S. COAST GUARD
OFFICIAL DISPATCH
UNIT HEADQUARTERS
DATE
11 NOVEMBER, 1940
INCOMING HEADING
111540 QUAH GR 22
FROM
SECTREAS
TO (FOR ACTION)
ACKNOWLEDGE
COMDT
PRIORITY
ROUTINE
NITE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR MRS MORGENTHAU X VERY WARM SIMILAR HAWAII X WILL TRY
MY BEST TO ARRANGE HAVE YOU GO DIRECT MONTEGO BAY X LOVE
HENRY
Operator's Record.
Initials of "ACTION" officer.
M.S. GOVERNMENT POINTING effice
I--
Regraded Uclassified
198
11 November, 1940.
SFORET
From:
Secretary of the Treasury.
To I
Mr. Dan Bell.
Docks and yards here cannot get steel deliveries
under ninety days. If price of wool is out of line, suggest
Army and Havy specifications permit up to twenty-five par-
cent foreign wool. Understand Uruguay has a limited supply
of svailable wool. Please investigate both steel deliveries
and do best in price of wool cloth.
Copy to:
Mrs. Klots
Regraded Uclassified
199
MN
GRAY
London
Dated November 11, 1940
Rec'd 4:13 p.m.
Secretary of State
Washington
3694, November 11, 8 p.m.
FOR TREASURY.
(One) The Chilsan payments agreement has now been
signed and Treasury orders Effective today provide that
payments by Chilean residents to United Kingdom residents
must be made in sterling to a Chilsan special account.
Arrangements have been made for payments of certain
types of income in sterling from Chilsan sterling area
accounts with United Kingdom banks registered at the Bank
of England, which Chilsan residents are permitted in certain
circumstances to maintain for meeting personal expenditure.
Exports from the United Kingdom to Ohile must bE paid for
in sterling from a Chilean special account.
Commenting on the agreement the Treasury said that
all arrangements have thus been made for handling a large
amount of sterling, and that all is complete Except that
there 16 no sterling. Another multilateral effort 1s, however,
being
Regraded Uclassified
200
MN -3 - tel # 3694, November 11, 8 p.m. from London
being made to remedy this deficiency, and the Bank of
England representative is endeavoring to induce Peru, Chike,
and Brazil to sell their products to Bolivia for sterling.
(Tho) The text of the payments agreement with Uruguay
dated Suptember 11th has now been received. Does the
Treasury wish the text telegraphed?
(Three) A Bank of England notice to bankers announces
arrangements for individuals resident in Hungary
to open sterling area accounts after prior authorization
by the Bank of England.
JOHNSON
NPL
COPY:FE:OJL
201
EMPASSY OF THE
UNITED STATES OF AMERICA
No. 693.
Chungking, November 11, 1940
Subject: Exports through Chungking during September
and October 1940.
Air mail
The Honorable
The Secretary of State,
Washington, D. C.
Sir:
I have the honor to report that the Bureau for the Inspection
and Testing of Commercial Commodities of the Ministry of Economic
Affairs just released the following figures showing exports from
or through Chungking during September and October 1940.
October Exports
September Exports
Commodity
in 100 pounds
in 100 pounds
Tung oil
9,098.43
5,553.75
White Hog Bristles
30,62
Black Hog Bristles
457.03
935.58
Pig Casings
116.73
Yellow Silk
MF OT
163.30
12.00
Rabbit hide
237 sheets
Since the reoponing of the Burma Road an average of 100 tons of
Szechuan wood-oil have been exported daily from Chungking.
The Szechuen Tung 011 Trading Company, which is the collecting
agent in this province for the Fooshing Trading Corporation of the
Ministry of Finance, announced that over 12,000 tons of wood-oil were
purchased by the company from June, 1940, to October 31, 1940. It is
expected that total purchases will reach 15,000 tons by the end of the
year.
Respectfully yours,
NELSON TRUSLER JOHNSON
Original (by air mail) and
five copies to the Department
Copy to Peiping
Copy to Shanghai
610.22
Copy:bj
Regraded Uclassified
CONFIDENTIAL
202
of Code Cablagues Reselved as the -
Department 20:45, November 11, 1940.
Lendon, filed 20:30, Sevember 11, 1940,
1. The - of the Busher Command for the night of Foresher
10-21th me to disputes a total of 143 planes, w against I eil
targets, 26 against facturian in Beelin, 25 against injustrial plants
in Italy, 18 against German reflreads, 12 against - advirence, 20
against - ports and 20 against special tangabo in Eastern -
Attention to called to the my that Britdah bonking to reaching the
and further with the Langue hours of end the disinishing threet
of investem. from bonbers operated during daylight hours of
10th and 14 buring the proseding night. One beater - 200% ml -
erashed - Insting. the Constal Community curried out its usual program
z I peter # I 8 I I 1 # a I
plane we destroyed in there operations. the Fighter Command disputched
w planes a 207 petrols.
2. - November 10th, was a pleasent day and there - but
⑉ raid of about 40 planse equinst the Feels area, this - probably
ained at the terminess of the Listen Airmys, & total of about 230 planes
I E
20 your British statements - attached. M - field three
Department Spittives - destruyed and five damageds while other air-
dreams were undersaged. There - no caralties. the presence of -
unmpleded - - a mustime plant to - production for -
1 & 1 1 w i I a so I
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
203
due to a broiness missline, & lake reflrent station and a first abd
depos - stouck by 12 high explesive besin, billing the and wanting
14. Three fires - not in London, & city min purpling station w
damaged and other whilities and primite house - Mt. & retirent line
- out at too points, traffic w affected but the damages - mill,
40 There - m plane canalties a ofther side in the
British thestre, h the information the Italian Air Terce
last - plane confirmed, - probable and - damged, The Brittle
had two planes dangel,
50 the total casulties in Lendon during the night of
6-7th - as billed and 297 injured and during the following night n
as MITH $ 1 I 1 a Dates 1 I I
attached. This illustrates the settered nature of - night
The inffirmary of the whole Germa booking progress to indicated w the
fast that the Desiriced district reparts that 3,500 high explesive humber
300 unexploint tabe and five 200d nines have struck 10 since September
E within 1 state I d
6. the Britdsh have - that during the last thirteen
weeks fire has Imached down 357 General planes, - of
& I information s 1 I J I 1 I a a I
and 24 fighters were destroyed.
7. The Garman redder in the Atlantic appoars to have tem
identified - the "yochers battleskip" Address School. Britdsh leases in
the - attack en Nevember 9th is - - dire to an
attack a & - in the These New a limite 7th nk three ships
and damaged - bet 2008 the planes entired and the
CONFIDENTIAL
Regraded Uclassified
204
CONFIDENTIAL
the - day another - we attached to the - wes, sinking -
ship and damaging a second, = this attack to - dive bechare -
destruged and - damaged w the - of excepting
and 15 wase destroyed w Brittlen fighters, as the - w - midmitties
neitish - off the - of Ireland - benhed at damaged. A -
1 I I I at r
a. 00 November m an Italian force was defented at Kassalata
(not located to G-2) 200mg 133 out of - me, n 20:00 homes -
9th, Nalion Unite - envormied - Dystratem (Dysteme => and -
trying to 1 their my outs while others to the area (shout five
wilso within dreak twittery - - - reported to be in full return.
-
Distributions
Hilltary Adde to the President
Secretary
r
MP
I
r
I
CONFIDENTIAL
Regraded Uclassified
205
G-2/2657-220
RESTRICTED
M.I.D., W.D.
November 12, 1940.
No. 243
SITUATION REPORT
12:00 M.
This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion of political information and of opinion it is classified
as Restricted.
I. Western Theater of War.
1. Air Force Operations.
In the period November 9-11, bad weather generally pre-
vailed.
On the 11th heavy German daylight raids with Italian
participation occurred, and on the night of the 10th-11th German
aerial activity over the London area was intense. Otherwise the
scale of operations was relatively light. The Germans continue to
emphasize their attacks on shipping.
The R.A.F. bomber command operated extensively only
on the night of November 10th-11th, when raids were made on a number
of coastal towns and targets in Germany, including Munich.
II. Greek Theater of War.
Ground situation apparently is stabilized along the Kala-
mas River, in the Voissa valley and in the Florina area. Italian re-
inforcements are arriving in Albania. There has been fairly heavy
Italian air activity over Greek rear areas.
III. Mediterranean and African Theaters of War.
Small scale fighting continues around Gallabat. Air
activity apparently has been minor.
RESTRICTED
EASURY DEPARTMENT
206
U. 5.
EL Bept. 1930
U.S. COAST GUARD
OFFICIAL DISPATCH
UNIT HEADQUARTERS
DATE
12 NOVEMBER, 1940
INCOMING HEADING
120001 QUAH D GR 34
FROM
SEC TREAS
TO (FOR ACTION)
ACKNOWLEDGE
COMDT
PRIORITY
ROUTINE
NITE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR MRS KLOTZ X REQUEST VINER AND STEWART COME TO
WASHINGTON FIRST TUESDAY AFTER I RETURN X THEY SHOULD
BE PREPARED TO ADVISE ME WHO THEY CONSIDER OUTSTANDING
PROFESSOR IN PUBLIC FINANCE BEST REGARDS
Operator's Record.
Initials of "ACTION" officer.
9.5. GOVERNMENT PRINTING effice
1-1500
207
REASTRY DEPARTMENT
U.S. COAST GUARD
impt. 1000
OFFICIAL DISPATCH
transmit
12 NOVEMBER, 1940
DATE
FROM
CODE
COAST GUARD HEADQUARTERS
CIPHER
TO (FOR ACTION)
ACKNOWLEDGE
SECTREAS
PRIORITY
UNLESS DESIGNATED OTHERWISE TRANSMIT THIS DISPATCH AS NITE.
ROUTINE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
MAIL TO
TELEPHONE TO
MESSENGER TO
OUTGOING HEADING
TEXT
DICK COMPLETED NUMBER ONE X NUMBER T.VO X THREE HINDIESO MIMBER
YOUR X THREE HUNDRED NUMBER PTVK X ONLY 85 AVAILABLE EFN NOT
ONE HUNDRED X SUFFICIENT AVAILABLE FOR ONLY TWO HUNDRED
NUMBER FOUR X BEST REGARDS HENRIETTA KLOTZ
OPERATOR'S RECORD
INITIALS OF "RELEASING" OFFICER.
OFFICIAL BUSINESS.
# a - - - 2-1611
Regraded Uclassified
208
EASURY DEPARTMENT
EASURY DEPARTMENT EASURY DEFARTMENT
Ed. Sept. 1930
U.S. COAST GUARD
OFFICIAL DISPATCH
UNIT HEADQUARTERS
13 NOVEMBER, 1940
DATE
INCOMING HEADING
QUAT 130132 QUAH GR 21
FROM
SECTREAS
TO (FOR ACTION)
ACKNOWLEDGE
COMDT
PRIORITY
ROUTINE
NITE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR MRS KLOTZ X YOUR SPECIAL CODE MESSAGE RECEIVED X
PLEASE MAIL DETAILS X ENJOYING VIRGIN ISLANDS FEELING
BETTER X BEST REGARDS
Operator's Record.
Initials of "ACTION" officer.
a.s. BOYEARMENT PRINTING OFFICE
2-15420
Regraded Uclassified
209
EASURY DEPARTMENT
EASCRY DEPARTMENT EASTRY DEPARTMENT
u Sept. 1900
U.S. COAST GUARD
OFFICIAL DISPATCH
18 NOVEMBER, 1940
UNIT HEADQUARTERS
DATE
INCOMING HEADING
QUAT 130130 QUAH GR 38
FROM
SECTREAS
TO (FOR ACTION)
ACKNOWLEDGE
COMDT
PRIORITY
ROUTINE
NITE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
FOR PHIL YOUNG X HOW LONG DOES ENGLISHMAN CONTEMPLATE
STAYING IN UNITED STATES X IF I DECIDE TO HAVE HIM
VISIT ME IN JAMAICA THINK IT BEST THAT HE DO so AFTER
HE HAS COMPLETED HIS VISIT IN UNITED STATES
Operator's Record.
Initials of "ACTION" officer.
a.s. GOVERNMENT PRINTING EFFICE
2-15400
Regraded Uclassified
210
HYPTOGRAPHIC MESSAGE
18 November, 1940.
SECRET
From:
Secretary of the Treasury.
To I
Under Secretary Bell.
Please do not make any comitments to change
present set-up of four billion dollar national defense
obligations as I may wish to keep the present set-up.
Copy tos
Mrs. Klots
Any inquiries concerning this message should be telephoned
to Extension 2251. Send replies, if any, in writing to
Room 316 (Code Room), to be forwarded in eryptographic
form.
Regraded Uclassified
Mrs. klotz 211
BLUEBEARD'S CASTLE HOTEL
CHARLOTTE AMALIE
your file
SAINT THOMAS, VIRGIN ISLANDS
Dron
maBell:-
the following is sent by arimal to you
instead of in code at direction of the Secretary.
Please give a copy to Mrs (Daty)
11
Have the Haas and couple of hismen go
intenfield and check production both for
ordinance and for civilian use and see
where bottle necks are developing Work
out a plan with Don Helson that we
get red lights just as soon as any particular
industry either raises its prices too fast or
slows down on its deliveries. Hatch for increase
prices to counter balance excess profitax.
Want a plan in working order by the time
2 get home. check with other agencies to
machinery they mayhar already set up
make sure we are not duplicating any
in the field.
H.M. Jr.
13 Nov 1940
Per D8M Ray
Regraded Uclassified
212
EXPORTS OF PETROLEUM PRODUCTS, SCRAP IRON AND SCRAP STEEL
FROM THE UNITED STATES TO JAPAN, RUSSIA, SPAIN, AND GREAT BRITAIN
AS SHOWN BY DEPARTURE PERMITS GRANTED
Week ended November 9, 1940
:
JAPAN
:
RUSSIA
:
:
:
SPAIN
:
:
GREAT BRITAIN
:
THROLEUM PRODUCTS
Fuel and Gas 011 (including
Diesel 011)
73.037 Bbls.
---
81,100 Bbls.
30,000 Bble.
Crude -
Blended or California
High Octane Crude*
91,953 Bbls.
---
---
38,000 Bbla.
All Other Crude
64,990 Bbls.
--
---
--
Gasoline -
Gasoline A **
---
---
Gasoline B
.
91,267 Bbls.
--
67,000 Bbls.
-
All Other Gasoline
---
---
8,000 Bbls.
---
ricating 011 -
Aviation Lubricating 011 ...
---
---
---
10,496 Bbls.
All Other Lubricating 011
655 Bbls.
---
---
34,030 Bbls.
Tetraethyl Lead ...
---
---
-
---
"Boosters", such as Iso-
Octane, Iso-Hexane, or
Iso-Pentane
---
-
---
---
CRAP IRON AND SCRAP STEEL
Tumber 1 Heavy Melting Scrap
---
---
---
836 Tons
All Other Scrap
---
---
---
3,505 Tons
ffice of the Secretary of the Treasury, Division of Research and Statistics.
November 12, 1940.
ource: Office of Merchant Ship Control, Treasury Department.
Any material from which by commercial distillation there can be separated
more than 3 percent of aviation motor fuel, hydrocarbon or hydrocarbon
mixture - President's regulations of July 26, 1940.
Aviation Gasoline.
is defined in the President's regulations of July 26, 1940.
213
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
CONFIDENTIAL
DATE November 12, 1940
TO
Secretary Morgenthau
FROM
Mr. Hane MA
Subject:
The Business Situation,
Week ending November 9, 1940
Summary
(1) The pre-election lull in the commodity markets has
been followed by a marked expansion of buying activity and
a further rise in basic commodity prices, affecting both in-
dustrial materials and food products. This price upturn,
accompanied by a rise in security prices and a further gain
in our "index of confidence", apparently reflects a general
increase in optimism over the business and price outlook,
with some increase in inflationary sentiment.
(2) Weekly business series continue to indicate & rising
trend of industrial activity. Our new orders index has risen
to a new high level, owing to a marked expansion in textile
orders. Unfilled orders generally have been increasing.
The New York Times index for the week ended November 2 rose
.3 further to 109.7.
(3) The heavy volume of lumber orders for defense con-
struction in recent months, which has caused a sharp rise in
lumber prices and a substantial reduction in available
stocks, has not yet brought any material increase in lumber
production, owing to characteristic slowness in this industry
in getting production under way.
Price rise gains momentum
The general relief from pre-election uncertainties, and
the centering of attention once more on the growing volume
of demand arising from the national defense program, brought
increased buying and rising prices in the commodity markets
last week. While sales in a number of markets had begun to
expand early in the week, the real buying movement was touched
off on Thursday by the announcement of the Treasury's position
favoring a substantial increase in the debt limit. Security
Regraded Uclassified
214
Secretary Morgenthau - 2
prices as well 8.6 commodity prices rose on this announcement,
which contributed further to a growing optimism over the
business and price outlook. Our "index of confidence", de-
rived from a ratio between high grade and second grade bond
prices, has risen slightly further since the election, after
improving gradually over the past several months.
Last week's price movements in the futures markets are
shown in Chart 1 (agricultural products) and Chart 2 (indus-
trial materials). Following B. pre-election lull in the pre-
vious week, sharp gains were recorded last week in the
futures markets for various commodities. A feature of the
market action was its comprehensiveness. Agricultural com-
modities joined in the advance and commodities with previously
divergent price trends and widely different demand-and-supply
situations acted together. Even raw cotton followed the
market pattern, under the influence of heavy buying in the
gray goode market, in spite of an admittedly large current
supply (estimated slightly higher by the Government crop 66-
timate which appeared Friday) and unfavorable export prospects.
Price gains widely distributed
Spot prices also advanced last week, with the index of
raw industrial materials 1.0 point higher and foods 2.1
points higher. (See Chart 3.) The most important advances
for the week were in wheat, flaxseed, and lead, with wheat,
hides, and wool still the highest BB compared with their
August lowe.
The spot price of lead was raised to 5.80 cents last
week in two 0.15-cent advances, reaching the highest price
since September 1937. In spite of the price advance, the
pressure of buying did not slacken, and Mexican lead stored
in bond continued to be drawn on. During the first nine
months of 1940, imports of lead in pigs and bare totalled
131,000 tons, of which 117,000 tone came from Mexico. Net
imports from Mexico and elsewhere in this period amounted
to 26 per cent of domestic deliveries, whereas previously
imports had been relatively small.
Sales of zino advanced again to 19,000 tons in the
week ended November 2, a8 compared with the high figure of
11,000 tons in the previous week. The American Zinc Insti-
tute reports that stocks of zinc at the end of October had
Regraded Uclassified
215
Secretary Morgenthau - 3
declined 8,365 tons to 22,600 tons, the lowest since
December 1926. Shipments declined in October as compared
with September, but since unfilled orders increased to al-
most double the level of shipments, there 18 evidently no
reduction in the pressure of buying. Zinc production in-
creased further in October to a daily average rate of
1,520 tone from 1,771 in September as additional retorts
came into operation.
Commercial loans rising
An expansion of credit has accompanied the steady ad-
vance in prices of raw industrial materials over the past
two months, as indicated by a rising volume of commercial
loans. (See Chart 4.) Loans by New York banks for
"commercial, industrial, and agricultural" purposes, have
increased relatively less than loans of outside banks, the
latter having now reached approximately the peak of 1937.
While the $315,000,000 increase in commercial loans
since the end of August cannot be attributed entirely to
the financing of commodity purchases, there seems little
doubt that e substantial part of the loans have been for
that purpose. Raw materials are being bought in larger
volume for defense orders, for new plant construction, and
for inventories. Purchasing agents report that buyers are
covering their needs for B. longer period into the future,
and the Purchasing Agents Association advises this policy
in view of possible price advances and delivery difficulties.
Record production in numerous industries
In reflection of the expanding rate of operations
still proceeding in numerous industries, business activity
BB measured by the New York Times index during the week
ended November 2 showed a further slight gain to a new
high since August 1937. (See Chart 5, upper section.)
The steel industry continues to be in the vanguard of
the current high level of industrial activity. The indus-
try's operating rate during the past week made a fractional
gain to reach 96.0 per cent of capacity (refer to Chart 5),
turning out the largest weekly tonnage in the history of
the industry. The rate this week 18 scheduled at 96.1 per
cent.
Regraded Uclassified
216
Secretary Morgenthau - 4
Trade sources report that steel buying in the first
week of November showed no slackening from the extremely
active pace set in the previous month. New orders received
by the U. S. Steel Corporation during the week ended
October 31 amounted to 105 per cent of capacity as compared
with 106 per cent in the previous week. During the week
ended November 4 the Corporation produced steel at a rate
fractionally above 100 per cent, thus passing theoretical
capacity for the first time since April 1929.
The extent of the present boom in the steel industry
became more apparent last week when it was revealed that
steel ingot production in October was 5 per cent in excess
of the highest monthly total on record, and no less than
9 per cent in excess of the best month of 1929. Pig iron
production in October also reached & new high record, although
the number of furnaces in blast on November 1 totaled 195,
only 2 more than on October 1. While there are 235 poten-
tially active furnaces, some of these have not been operated
in years, and the Iron Age reports that limited supplies of
coke may prevent much further increase in the number of fur-
naces in blast.
Automobile production and sales high
The automobile industry, which in recent years has been
consuming more steel than any other industry, has shown an
uninterrupted rise in production for the past thirteen weeks.
(Refer to Chart 5.) As a result of a further gain of 3,000
unite during the past week, automobile output reached the
highest figure since the week ended July 3, 1937. Prelimi-
nary data covering last month's operations indicate that
the industry attained the best production and sales levels
for any October on record. However, it must be remembered
that an unusually early start was made in new model produc-
tion this fall, so that too much significance cannot be
attached to this showing. In view of the unusually rapid
rise in volume production of new model cars since the change-
over began last August, a leveling off in production is
probably about to occur. This 16 likely to be followed a
few weeks later by a gradual curtailment of production as
field stocks are built up and poor selling weather arrives.
217
Secretary Morgenthau - 5
Power output at record
In addition to the gains noted in the steel and auto-
mobile industries, further evidence of expanding business
activity is to be found in the rising trend of electric
nower output. Reference to Chart 5 will disclose succes-
sive gains in power output for the past three weeks at the
highest levels on record. The latest figure reported, which
covers the week ended November 2, already stands 4 per cent
above the seasonal peak reached last December. On the
breis of normal sessonal trends further expansion in elec-
tric power output may be expected between now and the
latter part of December.
In view of the record activity in the steel, electric
11/ht and power, end other important coal consuming indue-
tries, it 1s somewhat anomalous at first glance to find B
noticeable dropping off in oituminous coal production in
October, (Refer to Chart 5.) The decline set in 88 8 re-
sult of developmente connected with establishment of mini-
mum prices for bituminous coal effective October 1. Prior
to that date, numerous consumers had been building up
stocks in anticipation of higher prices. As a result,
stocks in the hands of industrial consumers on October 1
were 12,000,000 tono (or 40 per cent) above the same date
in 1939. In addition to the reaction which has occurred
due to the advance building un of stocks, it has been re-
ported that some independent producers of lower grade
TOALS were forced to curtail or suspend operations A6 a
result of the new minimum prices.
Lumber orders far exceed production
Lumber production has not yet responded to the heavy
Volume of defense orders, which in recent months have far
exceeded the production level. (See Chart 6.) The normal
slowness of the industry in expanding production 1s appar-
ently responsible. It will be noted that in previous years
several months have usually elapsed before production has
reflected an increased level of new orders, and comments
from the industry suggest that this behavior is character-
istic. Trade reports eay that sawmills commonly carry
light stocks of menufactured lumber, and that these were
drawn very low when the defense program began placing orders
for large quantities.
Regraded Uclassified
218
Secretary Morgenthau - 6
Judging by evidence from the industry, it 1s probable
that lumber producers have the capacity to increase produc-
tion considerably further. The Lumber Survey Committee of
the Department of Commerce, in its quarterly report dated
August 26, 1940, estimated that the present saw mill capac-
ity 18 adequate to increase the output of softwoods by
40 per cent and of hardwoods by 50 per cent, and that avail-
able timber resources afford no limitation on this estimate.
From the point of view of lumber needs for defense purposes,
the availability of softwoods 18 the more important.
The increase in the price of lumber and other building
materials in 1940, 88 stocks declined, is shown on Chart 7.
The price of lumber as measured by the lumber component of
the BLS price index (1926 = 100) advanced sharply in
September, while building material prices as B. group were
elso somewhat higher. (Refer to Chart 7. upper section.)
Preliminary data for the month of October indicate that
building material prices again rose, largely because of an
increase in lumber prices, which increased 2 per cent in the
week ended October 26 and 1.4 per cent in the week ended
November 2.
From the point of view of cost, it 18 significant that
the Quartermaster Corps has raised its estimate of the cost
of housing a soldier in cantonments to $450, from the $400
figure estimated last spring. Although this estimate in-
cludes all items required for shelter, the increase repre-
sents in considerable degree an advance in the cost of lumber.
Press reports intimate that unless the FHA consents to in-
crease its valuations of residences because of the increased
cost of materials, some prospective purchasers of new homes
may be deterred from buying.
New orders at record high
Our index of new orders reached 8. new high for the week
ended November 2, largely because of a striking increase in
orders for woolens which carried the textile component also
to a new high. (See Chart 8.) The steel component and the
total excluding steel and textiles were little changed from
the previous week's revised figures.
Regraded Uclassified
219
Secretary Morgenthau - 7
Although cotton goods orders were fractionally lower
for the week ended November 2, market news indicates an out-
standing increase last week, which carried the estimated
volume of orders for print cloth and related items to 225
per cent of current production. The already large backlog
of unfilled orders, including both defense and civilian re-
quirements, was thus increased further. Sales in the last
2 hours on Thursday totalled 10 million yards, a figure
which would have been exceeded except that facilities of
even the largest commission houses were unable to keep page.
Sales on Friday totalled 30 million yarda, while prices of
most fabrics rose to the highest level in 12 months. Even
D.B early as last Monday, however, the demand was such that
mille were doing everything they could to discourage long-
term commitments.
Trade sources reported last week that orders for woolens
by civilians are being refused because of the inability of
mills to promise delivery on dates satisfactory to the pur-
chasers. Meanwhile the War Department has announced that
in the future Government contracts will no longer be limited
to domestic wool alone, thus alleviating a serious diffi-
culty which has been frequently mentioned. As a consequence,
the woolen trade expects one of the heaviest import move-
ments on record in the next 6 months.
Weekly business indexes
Largely as & result of a sharp contra-seasonal rise in
electric power output, the New York Times index of business
activity during the week ended November 2 advanced elightly
to a new high for the current rise. Ae B. result the index
stood at 109.7 as compared with 109.4 (revised) in the pre-
vious week.
Other factors contributing to the rise were a contre-
seasonal advance in steel ingot production and a more than
seasonal increase in cotton mill activity. Miscellaneous
freight car loadings showed less than the usual seasonal
decline.
The principal offsetting factor was another sharp de-
oline in the adjusted index of automobile production despite
B further rise in actual output. However, the adjusted
indexes of lumber production and "all other" carloadings
Regraded Uclassified
220
Secretary Morgenthau - 8
also showed rather sizeable downturns as a result of greater
than seasonal decreases in activity.
Barron's index of business activity for the week ended
November 2 lagged behind the Times index slightly and as a
result declined to 118.8 from 118.9 in the previous week.
PRICES or SELECTED ACRICULTURAL COMMODITIES
Weekly Averages (Putures)
Daily Futures
1946
1940
(94)
OCTOBER
NOVEMBER
-
JULY
SEPT.
NOV,
JAN.
-
20
27
10
17
24
M
is
22
CENTS
NE
CENTS
I
18/15
PER
-
FER
-
POUND
POUND
n
Cotton
FOURD
"
10
19
10
10
Cotton
9
9
9
,
a
B
8
a
MAY - AUG., OCT. FUTURE
7
7
CERTS
CENTE
FER
PER
CERTS
BUSINEL
CENTS
PER
PER
thest
BUSHEL
Thest
BUSKEL
110
110
so
so
100
100
8
8
90
90
80
8
R
70
70
70
CERTS
CERTS
PER
PER
POUND
FOURD
50
3
Lard
5.5
5.5
CENTS
CENTS
PER
PER
POLIED
FOURD
Lard
5.0
5.0
7
7
4.5
4.5
&
6
4.0
4.0
5
5
3.5
3.5
+
4
6.5
6.5
Cottoment 011
6.0
L0
-
8
Outtomesed 011
5.5
15
7
7
5.0
3.0
6
6
4.5
4.5
5
5
4.0
4.0
7
7
7.0
7.0
Coffee
Coffee
6.5
6.5
5
6
6.0
6.0
.
5
5
5.5
5.5
4
5.0
5.0
4
4.5
4.5
2.4
2.4
Begar
2.3
2.2
2.2
242
Supur
2.0
2.0
2.0
2.0
1.8
1.8
1.6
1.6
1.8
1.8
1.4
1.4
1.6
1.6
12
1-2
SEPT. - - FUTURE
1.0
1.0
1.4
1.4
-
i
-
JULY
SEPT.
i
JAM.
i
20
27
3
10
17
24
I
.
15
12
a
1940
1941
OCTOBER
INVOICE
I
1940
. DECEMBER FUTURES
MAY FUTURES
SEPT. FUTURES
DEC., FUTUREN
MAY FUTURES
(suma JAB. runes)
- FUTURES
221
Office of the Inventory of the Transy
Chart 1
- - - -
P-190-9
Regraded Uclassi
PRICES OF SELECTED INDUSTRIAL MATERIALS
Daily Patures"
weekly Averages (Putures)
1940
1940
IVA
OCTOBER
NOVEMBER
DECEMBER
JAN.
NAME
MAY
(A)
SEPT.
I
JAB.
-
20
27.
19
17
24
.
15
25
R
CLASS
CENTS
CENTS
CENTS
PER
PL#
FLX
PER
-
Rubber
FOUND
FOUND
Bubber
PAIN
22
u
22
a
20
20
il
20
20
18
10
18.
18
18
WILLIAM
DOLLARS
PER
PLA
POUND
Filled
DOLLARS
DOLLARS
Silk
PER
NO
POUNDI
I
Bilk
3.50
1.50
2.80
2.80
1.00
3,00
2.60
2.00
2.40
2.40
2.50
2.50
2.20
2.20
2.00
1.00
CENTS
CENTS
PER
FLE
CENTS
litdes
CERTS
POUND
Hidee
POUND
PER
PER
14
POUND
FOOD
14
13
13
12
12
10
12
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Chart
190 10
- of - - -
Regraded Uclass
MOVEMENT OF BASIC COMMODITY PRICRS
AUGUST 1939 = 100
Chart 3
1940
1939
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130
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116
116
16 RAM INDUSTRIAL
16 RAW INDUSTRIAL
125
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112
112
120
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PER
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16 RAW INDUSTRIAL MATERIALS
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Miss et the Secretary al the Treasury
P 167 E
- - and
Chart 4
224
COMMERCIAL LOANS AND INDUSTRIAL MATERIALS PRICES
1937
1938
1939
1940
DOLLARS
PER
BILLIONS
CENT
(LOANS)
(PRICES)
5.4
180
5.2
170
5.0
160
4.8
150
r
COMMERCIAL LOANS
WEEKLY REPORTING MEMBER BANKS
4.6
BILLIONS OF DOLLARS
140
4.4
130
4.2
120
4.0
110
16 RAB INDUSTRIAL MATERIALS
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3.8
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3.6
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1937
1930
1939
1940
Office of the Secretary of the Treasury
Division of Research and
c - 283 - A
SELECTED BUSINESS INDICES
BUSINESS ACTIVITY
PER
CENT
Seasonelly Adjusted
Est. Normal 100
120
110
100
29
90
Y38
80
N° y Times
70
JAN
MAR.
MAY
JULY
SEPT.
NOV.
STEEL INGOT PRODUCTION
AUTOMOBILE PRODUCTION
PER
CARE
CENT
Per Cent of Capacity
THOUSANDS
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150
80
125
39
60
100
40
75
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JAN
MAR
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JAN
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ELECTRIC POWER PRODUCTION
BITUMINOUS COAL PRODUCTION
KW. HAS
HORT TONS
BILLIONS
MILLIONS
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225 Chart
Office of the Secretary of the Treasury
of haurch of Statement
Regraded Uclass
Chart
226
LUMBER PRODUCTION AND NEW ORDERS
EST. NORMAL = 100'
1937
1938
1939
1940
JAN.
MAR
MAY
JULY
SEPT
NOV.
JAN.
MAR,
MAY
JULY
SCPT.
NOV.
JAN.
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JULY
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NOV
JAN
MAR,
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P.C.
my
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JULY
NOV,
PEN
CENT
CENT
130
130
Weekly
120
120
110
110
100
100
LUMBER PRODUCTION
LUMBER, New ORDERS
N.Y. TIMES
90
90
BO
BO
70
TO
60
8
50
50
40
40
so
30
20
=
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MAR.
MAY
JULY
SEPT.
NOV.
JAN.
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JULY
SEPT.
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JULY
sept.
NOV.
1937
1938
1939
1940
-
ADJUSTED
- - Che Transury
j I 1
c 363
LUMBER AND BUILDING MATERIAL PRICES AND LUMBER STOCKS
1937
1938
1939
1940
1941
PER
PER
CENT
CONT
Tholecale Priose
1926 = 100, B.L.S.
112
112
1
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1937
1936
1939
1940
1941
BILLIONS
BILL IORS
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BOARD FEET
Lamber Stocks
BOARD FEET
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1939
1940
1941
- of - formal of - Transary
Chart 7
- at - - -
P 203
Regraded Ucla
228
INDICES OF NEW ORDERS
Chart 80
CONFIDENTIAL
Combined Index of New Orders and Selected Components
1938
1939
40
B.
PERCENTAGE]
PERCENTAGE
POINTS
POINTS
160
160
150
150
140
140
130
130
Total (combined index!
1936 . 100
120
120
110
110
100
100
90
90
60
BO
70
70
8
60
Total excluding Steel and Textiles
50
50
40
40
Steel Orders
30
30
20
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1938
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1940
- of The Secretary - the Treasury
1-6-0
I L % [ i
TREASURY DEPARTMENT
229
FOF Miss Chauncey
INTER-OFFICE COMMUNICATION
DATE November 12, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
confidential
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
L95,000
Purchased from commercial concerns
L44,000
The Federal Reserve Bank of New York sold L20,000 in registered sterling
to a non-reporting bank.
Open market sterling remained at 4.03-3/4 until late in the afternoon. It
closed at 4.04. Transactions of the reporting banks were as follows:
Sold to commercial concerns
L27,000
Purchased from commercial concerns
1 5,000
In a very dull market, the Swiss franc eased slightly, closing at .2320.
Saturday's final rate was .2321-1/2.
The Argentine free peso continued to move upward, closing at .2370. A week
ago, that currency was quoted at .2335.
The Cuban peso has shown a. firm tendency of late. As compared with last
week's prevailing discount of 9-1/8%, today's quotation was 8-1/2%.
Closing quotations for the other currencies were as follows:
Canadian dollar
13% discount
Swedish krona
.2386
Reichamark
,4005
Lira
.0505
Brazilian milreis (free)
.0505
Mexican peso
.2070
There were no purchases or sales of gold effected by us today.
Having received the Treasury's authority under both the Gold Reserve Act and
Executive Order No. 8389 as amended, the Federal Reserve Bank of New York effected
the following transfer of gold in its vaults today:
$2,963,000 from B.I.S. account No. 2 to the account of the Central Bank
of the Argentine Republic. Gold in B.I.S. account No. a is
owned by the B.I.S.
230
According to cables received from the B.I.S., the aforementioned transaction
represents part of an arrangement between the National Bank of Hungary and the
Argentine Central Bank, in which the B.I.S. acted as intermediary. Having
decided to keep part of its metallic reserve in Buenos Aires, the Hungarian Bank
asked the B.I.S. to effect this transfer in preference to incurring the delay,
cost and risk of shipping gold to Argentina. The B.I.S. arranged with the Argentine
Central Bank to exchange gold in New York for gold in Buenos Aires: the latter
is being earmarked with the Argentine Central Bank in the name of the B.I.S. and
1a the property of the National Bank of Hungary.
The Federal Reserve Bank of New York reported that the following gold shipments
had been consigned to it;
$50,000,000 from Canada, shipped by the Bank of Canada, to be earmarked for account
of His Britannic Majesty's Government.
17,082,000 from Canada, representing two shipments by the Bank of Canada, for
account of the Government of Canada, for sale to the U.S. Assay Office
at New York.
3,229,000 from Portugal, shipped by the Bank of Portugal for its OWN account,
disposition unknown.
518,000 from England, shipped by the Bank of England, for account of the
National Bank of the Kingdom of Yugoslavia, disposition unknown.
(Similar shipments in the past have been earmarked upon arrival.)
$70,829,000 Total
The report from the Federal Reserve Bank of New York listing deposits for
the account of Asia as reported by the New York agencies of Japanese banks on
November 6, showed that such deposits totaled $98,753,000, an increase of $1,006,000
since the last report as of October 30. Included in this total were $36,249,000
in deposits with the Tokohama Specie Bank, New York, made by its branches in China,
slightly higher than the figure of October 30, and $51,411,000 in deposite made by
Jananese banks in Japan and Manchuria, up $1,530,000. In addition to the last-
mentioned increase, bills held by Yokohama's New York agency for Asiatic account
rose $2,751,000. Against these new dollar liabilities, the New York agency reported
that its loans to Japanese banks in Japan and Manchuria increased by $3,671,000
to $32,433,000 during the week ended November 6.
The gold price received from Bombay today was equivalent to $33.80, off 14
from the quotation of November 9. According to cable advice received from Bombay,
5. fair export demand was in evidence last week, despite a 2% increase in war risk
insurance rates. The Bombay silver price was equivalent to 43.80#, a gain of 3/84
since November 9.
In London, the spot and forward silver prices were both fixed at 3-3/8d. each
showing a gain of 1/16d from last Friday's quotation. The dollar squivalent of
23-3/8d is 42.44#.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 35#.
We made six purchases of silver totaling 390,000 ounces under the Silver Purchase
Act, all of which consisted of new production from foreign countries, for forward
delivery.
CONFIDENTIAL
Regraded Uclassified
231
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 12, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
We received from the Federal Reserve Bank of New York the following informa-
tion regarding the transactions listed on the attached statements in German accounts
naintained at:
Chase' National Bank
National City Bank
Juid
Regraded Uclassified
Chase
nel Bank
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 8
$180,000
A/B Svenska
Chase National Bank
$ 55,700
Deutsche
Irving Trust Co.,
Handelsbanken,
by order of Reiche-
Golddiskontbank,
for account of
Stockholm, for
bank
Berlin
Vongibara
account of
Allgemein Waren
Finanserung,
G.M.B.H., Berlin
Nov. 9
250,000
Reichsbank,
Chase National Bank, N.Y.,
Berlin
for State Bank of U.S.S.R.
250,000
.
Chase National Bank, N.Y.,
for account of Deutsche
Gold Discount Bank, Derlin
250,000
#
Central Hanover Bank and
Trust Co., N.Y., for
account of Bance de Is
Nacion Argentina, Busnos
Aires
36,882.50 Deutsche Gold
Irving Trust Co. for account
Discount Bank,
of Carl Marks & Co., N.Y.
Berlin
50,216.67 Reichsbank,
Corn Products Refining Oo.,
Berlin
17 Battery Place, N.Y., by
order of Konversionkness
fur Deutsche
Auslandeschulden, Berlin
23
Regraded Uclass
National City Bank
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 9 $750,000
Reichsbank, Berlin
National City Bank,
$250,000
Reichsbank, Berlin Yokohama Specie Bank,
N.Y., by order of
Ltd., N.Y., in favor of
Swies National Bank,
Yokohama Specie Bank,
Zurich
Ltd., Tokio, by order
and for account of the
Reichsbank, Berlin
233
Regraded Ucla
234
TREASURY department
FOR Wiss
INTER OFFICE COMMUNICATION
DATE November 12, 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
We received from the Federal Reserve Bank of New York the following informa-
tion regarding the transactions listed on the attached statements in Italian accounts
maintained at:
Chase National Bank
National City Bank
R.M.S.
Chase National Bank
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 9 $50,000
Banca Commerciale
National City Bank,
$59,987.32
Banca Commerciale
Check to order of
Italiana, N.Y.
N.Y., by order of
Italiana, N.Y.
Bankers Trust Co., N.Y.
For account of
Banca de America et
Banca Commerciale
d'Italia, Rome
50,000
Banca de America
Chase National Bank, for
Italiana, Rome
et d'Italia, Rome
account of Banca
Commerciale Italiana, N.Y.,
for account of Banca
Commerciale Italiana, Rome,
78.748
Banca Commerciale
Check to order of Bankers
Italiana, N.Y.
Trust Co:, N.Y.
235
Regraded Ucla
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Oct. 26
$ 75,000
Banca Commerciale Check to order of
Italiana, New York Manufacturers Trust Co.,
N.Y.
Oct. 28
42,200
Banco di Napoli
Check to order of
Trust Co., New
Leopoldo Alerane
York
Glauer
40,240
I
Check to order of
Credit Suisee, N.Y.
Nov. 1
150,000
Banca Commerciale Check to to order of
Italiana, New York National City Bank, N.T.
Nov. 2
40,000
#
.
Nov. 6
25,000
.
Check to order of
Guaranty Trust Co., N.Y.
Nov. 7
50,000
Credito Italiano,
Check to order of
New York
Irving Trust Co., N.Y.
for account of Credito
Italiano, N.Y.
28,200
Credito Italiano,
National City Bank,
Rome
N.Y., for account of
Credito Italiano, N.Y.
236
Regraded Ucla
237
Sevember 12, 1940.
Dear Mr. Sharmad:
Shank you very much for sending -
the twenty copies of the liet of business-
men secretated with the Defense Commission.
I approxiate year prouptness is replying
to w request.
Sincerely years,
(Signed) H. S. Kietz
Private Secretary.
Mr. Sidamy Shervest.
Assistant Secretary.
the Advisory Commission of the
Genneil of National Defense,
Toderal Receive Building.
Washington, D. 6.
Regraded Uclassified
238
Sevenber 12, 1940,
Dear Mr. thereod:
Thank you very much for sending ⑉
the twenty copies of the list of business-
ma associated with the Defense Commission.
I approciate your promptases is replying
to - request.
Sincerely years,
(Signed) H. S. Klotz
1. B. nots,
Private Secretary.
Mr. Sidney thereof.
Ascistant Secretary.
the Advicery Commission of the
Council of National Refense,
Federal Receive Building.
Washington, D. 0.
Regraded Uclassified
239
THE ADVISORY COMMISSION TO THE COUNCIL OF NATIONAL DEFENSE
FEDERAL RESERVE BUILDING
WASHINGTON, D.C.
November 8, 1940
Dear Mrs. Klotz:
Herewith 20 additional copies of the
current list of businessmen associated with the
Defense Commission, in keeping with your request
of November 6th.
Sincerely,
Sidney Swerwood
Assistant Secretary
Mrs. H. S. Klotz
Office of the Secretary
Treasury Department
Regraded Uclassified
240
Revember 18, 1940
Dr. Feis
Mr. Geshram
Vill you kindly cond the following sublegram:
*Amoriean Behavey.
Zendon.
From Treasury.
Vith reference to year #3694, Revember 11, 8 . Not measurelly
to tolegraph test of payments agreement vith Trughay dated September 11. Copice
Y mill will unffice."
Regraded Uclassified
241
FOR
November 12. 1940
Files
Mr. Cookren
then I talked with Mr. Livesey at 9:15 this seraing he teld se that the State
Department had not cont the telegraphic instruction to Martinique for our Vice General
there to report upon 6016, as had been planned last week. The reason for this dest-
sien was that Admiral Groenalado of the Velted States Nevy, who has just returned
from & tear of the Caribbean inspecting nevel bases, had reported that be had die-
encred with the French Commanding Matral at Martinique the question of gold and had
been assured w the latter that there had not been my chipment of French gold out of
"artinique and that se mach gold would be shipped. the State Department was satisfied
with this report and proferred ast to nice any further inquiries through our Fice
Gensal.
20ml
INC:lap-11/12/40
Regraded Uclassified
242
12, 1940
Mr. Peble
Mr. Cookren
Mr. Stepford talked with se at 10:35 this seraing. Se had received & collegram
to the offect that his people in London ware still verried about permitting the French
to make payments ost of dollars is the United States for diplomatis and consuler
expenses in Latin Amries. I told that this desision had only been unde
after smoh disemssion W various branches of our Government and that I die not think
" would be changed unless there might be essie important alteration is the Preech
situation. them he asked whether be could let Me people have that this was really a
diplematic decision in which the Department of State had participated, I teld Ms that
I NY se objection thereto.
Stepford also indicated the unhappiness of Lendon over our exproving 6 trease-
tim involving dollars, wherely furbey use to sell cotten to ni Remais was
to sell oil to Turkey. Again I told Stepford that the application is question had
been suproved only after consultation with the Department of State. I alied that I
M sade available to the Department of State all of the information as this subject
which Stopford had provided to no, ⑉ that the State Department was fully sours of the
views of the British Covernment is the premises. Hopford hoped that us usuld not
take any action en the Iran-Innanian cotten proposition without letting his have as
opportunity to present Brittsh objections. I seld his I thought this case vas still
yeading, but that I would check with Mr. Peble.
Just
HMC:lap-b1/12/40
Regraded Uclassified
COPY
DEPARTMENT OF STATE
243
Washington
In reply refer to
November 12, 1940
Eu 840.51-Frozen Credite/865
My deer Mr. Secretary:
I enclose for your consideration and information a copy of a
note date November 6. 1940 from the Rumanian Charge d'Affaires
with regard to the release of $25,070 for "salaries and expenses
of the various Romanian Legations and congular offices."
The Charge d'Affeires also refers to four previous applications
for license to pay from the account of the National Bank of Rumania
certain sume to the Rumanian Legation in Tokyo and to members of
the Legation's staff, It appears that these applications have been
refused.
In view of the limited amounts involved, I ruggest that favorable
consideration be given to the release of the amounts specified in the
note in nuestion from the Rumanian Legation.
Sincerely yours,
For the Secretary of State:
(Signed) A.A. Berle, Jr.
Adolf A. Berle, Jr.
Assistant Secretary
Inclosure:
From Rumanian Legation,
November 6, 1940.
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
Regraded Uclassified
COPY
244
No. 3793/P-3-11-3a
November 6, 1940.
Sir:
Since the requests I had the honor to present to you in behalf of
my Government, on October 19, 1940, our No. 3631, have not yet been
docided, I have the honor to refer to point (a) thereof, calling
attention to the following:
Pending consideration of the Romanian Government's request to have
the sum of $95,000 monthly freed from the funds the National Bank of
Romania has on deposit with the Chase National Bank of New York, the
latter, through the Federal Reserve Bank, filed with the Treasury
Department on October 29, (No. 15173). an application for a license
to pay from the said account the amount of $25,070.00 for "salaries
and expenses of the various Romanian Legations and consular offices."
As this amount represents urgently needed traveling expenses of
recalled officers of various Romanian Legations and saleries for the
month of October, for which no other means of payment exist, I
have the honor to ask you to be good enough to intercede with the
Treasury Department in order that the said amount may be freed in
the shortest possible time. Considering that the National Bank of
Romanie will draw checks to various Legations and Consulates, up to
the said amount, it will be necessary that the license be irrevocable
for a period of at least sixty days.
Regraded Uclassified
- 2
245
The sum of $25.070 is divided, 08 follows:
of the Romanian Diplomatic Service:
1, Sums representing traveling expenses of transferred members
Legation in Lisbon
$1,500
Legation in Moacow
350
Legation in Mexico
2,000
Legation in Rio de Janeiro
600
Legation in Buenos Aires
2.350
2. Sums representing salaries of members of various Romanian
missions, which heretofore have been paid in dollars:
Legation in Buenos Aires
$1,800
Legation in Moscow
4,900
Legation in Mexico
1,400
Legation in Helsinki
900
Legation in Rio de Janeiro
2,400
Legation in Teheran
800
Legation in Washington
500
Consulate in Montreal
1,300
3. Sums representing partial salaries of members of the
staffs of the following Legations and Consulates:
Legation in Ankara
$ 650
Legation in Athens
750
Legation in Belgrad
1,000
Legation in Lisbon
350
Legation in Madrid
550
Consulate in Ianina (Greece)
150
Consulate, Istanbul (Turkey)
250
Consulate, Piraens, (Greece)
150
Consulate, Salonika (Greece)
150
Consulate, Skoplje (Yugoalavia)
120
Romanian Danube Commission in
Belgrad
150
The salaries above must be paid in dollars because dollars
represent the only means whereby the payees may nake foreign
purchases, which are indispensable to them.
Prior to requesting the sum of $25,070. the Chase National Bank,
on October 18, 24 and 26, filed four applications for license to pay
from the account of the National Bank of Romania the amounts of
$1,738.37. $159.92. $1,894.07. Yens 1.997.09 to the Romanian Legation
Regraded Uclassified
- 3 -
246
in Tokio and to members of the said Legation.
This request having not been approved, the Romanian Legation
asked, on October 31, 1940, (No. 3783), for a reconsideration, explain-
ing that the said sums represent urgently needed salaries and office
expenses for the month of October 1940 of the Romanian Legation and
the Military Attache in Tokio, for which, because of the late date,
no arrangements can be made for payment from other sources.
(See Enclosure).
On November 6, 1940, the Treasury Department replied that "such
applications have received careful consideration and it has been
found that the approval thereof would not be in accordance with the
policy of the Treasury Department in administering Executive Order
No. 8389 of April 10, 1940, as amended."
In view of the urgency of these matters, we now request the kind
intervention of your Department with the Treasury Department in an
endeavor to have these payments approved.
Accept, Sir, the renewed assurances of my highest consideration.
Romanian Charge d'Affaires a.1.
The Honorable Cordell Hull,
Secretary of State.
COPY
247
No. 3783/P-3-II-3a
COPY
The Honorable,
October 31, 1940.
The Secretary of the Treasury,
Washington, D. C.
Attention of Mr. Pehle.
Sir:
The Chase National Bank, through the Federal Reserve Bank, filed
the following applications for license to pay out of the account of
the National Bank of Romania, the sume shown below:
1. No. 14728, dated October 18, 1940, to
Colonel Radulescu Nicolae, Romanian Mili-
tary Attache in Tokyo, $1,738.37;
2. No. 14739, dated October 18, 1940, to
Colonel Radulescu Nicolae, Romanian Mill-
tary Attache in Tokyo,
$159.92;
3. No. 14958, dated October 24, 1940, to
G. Paraschivescu, Romanian Minister, and
R. Flonder, Secretary of Legation, in
Tokyo, $1,894,07;
4. No. 15077, dated October 26, 1940,
Royal Legation of Romania in Tokyo, Yen
1.997.09.
The Chase National Bank informs me that the requested licenses
were not approved and I, therefore, beg to ask you to be good enough
to reconsider this refusal for the following reasons:
The above sums represent immediately needed salaries and office
expenses for the month of October 1940 of our Legation and the Military
Attache in Tokyo. Because of the late date no arrangements can be
made for the payment of these sums from other sources and, therefore,
I would greatly appreciate it if the necessary licenses would be
granted.
Accept. Sir, the renewed assurances of my highest consideration.
Brutus Coste,
Romanian Charge d'Affaires
248
Miss Chauncey says that this should just
he put in the diary without HM Jr seeing
it as it is obvious that the reports should
be discontinued since the V.T. Act has been
suspended.
249
TREASURY DEPARTMENT
WASHINGTON
OFFICE OF
OMMISIONER OF INTERNAL REVENUE
ADDRESS REPLY TO
IMMISSIONER (IF INTERNAL REVENUE
AND HEFER TO
IT:P:CA
November 12, 1940.
CAA
REPORT FOR SECRETARY MORGENTHAU,
In regard to closing agreements under the Vinson-Trammell
Act, there were no developments during the week.
In view of the suspension of the Vinson-Trammell Act and of
the unlikelihood of further transactions in closing agreements,
if you approve it is proposed that this weekly report be dis-
continued.
Commissioner.
Regraded Uclassified
250
Paraphrase of No. 269, November 12, 6 p.m.
from Santiago, Chile
All itemized list of exchange totaling $6,086,178
has now been furnished by the Exchange Control Commission
which it states is owed to seventy-one firms in the United
States for goods sold to companies in Chile. The Commis-
sion reports that the total amount of exchange owed to all
concerns in the United States for merchandise is $8,500,000.
The difference between the two amounts mentioned repre-
sents small accounts owed to about five hundred exporters
in the United States. About thirty important commercial
houses in Chile contributed information for the compila-
tion of the itemized list, the Control Commission having
asked them to report the names of United States exporters
to whom monies wore owed and the amounts of exchange that
had been applied for but not yet granted.
The amount of $2,413,822 declared to be owed to United
States exporters was arrived at by the Exchange Commission
by the subtraction of the total of the itemized list
(that is, $6,086,178) from $8,500,000, which figure
appears to be the total of all dollar exchange for which
applications have been received, but for which exchange
has not been granted, to pay for goods from the United
States. The $8,500,000 should accordingly be considered
as
Regraded Uclassified
2
251
as an all-inclusive figure, in view of the manner in which
the information has been compiled by the Control Commission,
presumably because its records do not permit the prepara-
tion of data showing actual arrears. If assistance were to
be provided in this total amount, it is believed that
exchange cover for all applications pending at this time
for payments for American merchandise could be provided by
the Exchange Control Commission.
In the Chilean market, there is always a "float" of
unmatured and currently maturing bills for imports and
for which exchange has been requested. The figure of
$8,600,000 mentioned by the Exchange Control Commission
includes this float, which is unofficially but reliably
estimated to total from $1,600,000 to $2,000,000.
If this amount is deducted, it appears that from
$6,500,000 to $7,000,000 would be the actual amount of
dollar exchange arrears. The Department and the Export-
Import Bank may wish to consider the granting of exchange
assistance on this basis.
The Exchange Control Commission states that it is
not able to break down the amount of $8,600,000 accord-
ing to (1) goods in the country for which exchange has
been applied for but not yet granted, (2) goods held in
customs for which exchange has been applied for, (3)
goods in transit and/or on order for which exchange has
been
Regraded Uclassified
- 3 -
252
been applied for. After discussing this question with
leading importers, the Commercial Attache believes that
the $8,500,000 may be broken down approximately as
follows, in the numerical order mentioned in the preced-
ing sentence: (1) $5,000,000, (2) $2,500,000, and
(3) $1,000,000.
Of the $5,000,000 for goods already in the country
but not yet paid for, the following accounts for the
major part!
Standard Oil Company of New
Jersey
$620,000
General Motors
$250,000
Anglo-Mexican Petroleum, New York
$400,000
Balfour Guthrie, New York (for
general merchandise)
$150,500
International Standard Electric
Company
$110,000
Ford Motor Company
$383,600
International Harvester Corporation $163,400
Eastman Kodak Company
$108,000
Grace and Company (for general
merchandise)
$700,000
Wessel Duval (for general products) $800,000
Singer Sewing Machine Company
$348,000
Goodyear
$ 56,800
United States Rubber
$ 35,600
Goodrich
253
- 4 -
Goodrich
$ 30,100
Kelly Springfield
$ 37,200
United States Steel
Corporation
$222,400
Bethlehem
$128,000
The last two firms mentioned owe the amounts specified
to banks in Chile which have opened the corresponding
dollar commercial credits in New York on behalf of the
companies. The Embassy's observation of the manner
in which exchange control has functioned in the past
counsels the advisability of including in any arrangement
for exchange relief some provision for preventing the
accumulation of new arrears, such as by limiting the
issuance of import licenses for goods the aggragate value
of which in any three-month period or other convenient
period would not exceed the exchange receipts for the
same period as conservatively estimated. Air mail report
follows.
BOWERS
RA:RFW:GRS
COPY
bts
254
FOX MIDS Charges
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 13. 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
confidential
Registered sterling transactions of the reporting banks were as followe:
Sold to commercial concerns
£57.000
Purchased from commercial concerns £38,000
Open market sterling was quoted at 4.04 throughout the day. Transactions of
the reporting banks were as follows:
Sold to commercial concerns
£9,000
Purchased from commercial concerns €3,000
The Cuban peso continued to improve. Today's discount was 8-1/8%. as against
8-1/2% yesterday.
There was no appreciable movement in the other currencies. The closing
quotations were as follows:
Canadian dollar
13% discount
Swies franc
.2321
Swedish krons
.2386-1/2
Reichsmark
.4005
Lira
.0505
Argentine peso (free)
.2368
Brazilian milreis (free)
.0505
Mexican peso
.2070
We purchased $50,162,000 in gold from the earmarked account of His Britannic
Majesty's Government.
The Federal Reserve Bank of New York released $340,000 in gold from the ear-
marked account of the Bank of Finland. This gold was sold directly to the U. 8.
Assay Office at New York. Since the bare are not in a condition acceptable for
an advance payment, the Assay Office intends to make full payment for the gold
twelve days hence.
The Federal Reserve Bank of New York granted the Central Bank of Il Salvador
three-month loan of $25,000 yesterday, setting aside as collateral $28,712 in
rold from the Salvadorean bank's earmarked account. The total of such loans now
outstanding amounts to $522.000. secured by $918.781 in gold.
There were no new gold engagements reported to us today.
Regraded Uclassified
2
255
The report of November 6, received from the Federal Reserve Bank of New York
civing foreign exchange positions of banks and bankers in its district. revealed
that the total position of all countries was short the equivalent of $12,472,000.
& decrease of $140,000 in the short position. The net changes in the positions
are as followel
Short Position
Short Position
Decrease in
Country
October 30
November 6
Short Position
Ingland
$ 2,552.000
$ 2,153,000
$399.000
Surope
4,252,000
4,234,000
18,000
Canada
52.000
38,000
14,000
Latin America
324.000
369,000
45,000 (Increase)
Jawan
4,338.000
4,471,000
133,000 (Increase)
Other Asia
1,083,000
1,227,000
144.000 (Increase)
All others
11,000
20,000 (Long)
31.000 (Increase in
Long Position)
Total
$12,612,000
$12,472,000
$140,000
*Combined position in registered and open market sterling.
No gold or silver quotations were received from Bombay by the New York banks.
In London, A price of 23-5/16d was fixed for both spot and forward silver, 1/164
over in each case. The dollar equivalent of 23-5/16d is 42.33#.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44-
the Treasury's purchase price for foreign silver wes also unchanged at 35#.
Ve made three purchases of silver totaling 315,841 ounces under the Silver
Purchase Act, all of which consisted of new production from foreign countries. for
forward delivery.
B.M.P.
CONFIDENTIAL
Regraded Uclassified
256
e
TREASURY DEPARTMENT
For
INTER OFFICE COMMUNICATION
DATE November 13, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following transactions in
Russian accounts maintained with the Chase National Bank,
Principal changes in the State Bank of Russia's dollar account during the
period November 7 to November 13, inclusive, were as follows:
Amount
Amount
Date
Credited
Received From
Debited
Paid To
Nov. 7
$ 270,000
Amtorg Trading Corp.
$ 150,000
Chase National Bank,N,Y.
for account of Mosoow
3,000,000
Guaranty Trust Co., N.Y., by
Narodni Bank Ltd.,
order Banque de Greece,
London
Athens, re obligation to pay
for 50,000 tons of wheat for
account of the Greek State,
represents reimbursement
under Guaranty Trust Do.
Letter of Credit
Nov. 8
60,000
Chase National Bank, N.Y.,
1,300,000
Amtorg Trading Corp.
for account of Skandinaviska
Banka, Stockholm
199,618
Commercial Letters of
Credit
250,000
Chase National Bank, N.Y.,
by order Sveriges Rikebank,
Stockholm in favor Rasno
Export order Reservfoerr-
sadana@und, Stockholm
Nov. 9
2,900,000
Federal Reserve Bank of
79,614
II
N.Y. by order of Banque de
Greece, Athens
Nov. 12
250,000
103,123
II
Chase National Bank, N.Y.
by order of Reichsbank,
Berlin
Rov. 13
510,717
Commercial Letters of
197,216
-
Credit
257
-2-
Amount
Amount
Date
Credited
Received From
Debited
Paid To
Nov. 13
$ 221,866
Chase National Bank, N.Y., by
order of Skandinaviska Banker,
Stockholm
176,043
Chase National Bank, N.Y., by
order Stockholms Enskilda Bank
Stockholm account Sojuz
Promexport, Moscow order
A. Johnson & Co.
On November 13 the balances of the State Bank and the Amtorg Trading Corporation
were as follows:
State Bank of the U.S.S.R. Amtorg Trading Corporation
Cash Balance
$15,346,400
$ 1,459,000
Cash commercial Letters of
Credit
13,899,500
2,141,700
Time deposit
10,300
-0-
Total
$29,256,200
$ 3,600,700
Change in total since
November 6
+ $ 6,058,300
- $ 117,600
Jull
258
TREASURY department
INTER OFFICE COMMUNICATION
DATE November 13, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported the transactions, on the
statement attached, in Italian accounts maintained with the Chase National Bank,
Sev York.
16ml
Chase Nation
Bank
no
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 13 $619.737
Credito Italiano,
Credito Italiano,
$ 606,000
Credito Italiano,
Chase National Bank, N.Y.,
N.Y.
N.Y. (Check drawn
N.Y.
for account Banca Commerciale
by Post & Flagg,
Italiana, N.Y.
N.Y., on Bank of
Manhattan Co., N.Y.) 1,023,000
Banca Commerciale
Federal Reserve Bank of N.Y.
Italiana, N.Y.
in favor of Banque Nationale
606,000
Banca Commerciale
Chase National Bank,
du Royaume de Tugoslavie,
Italiana, N.Y.
N.Y., by order of
Belgrade for account of
Credito Italiano,
Hrvatska Banka dd Zagreb, by
N.Y.
order of Istituto Nazionale
per I Cambi con L'Estero,
150,000
If
B.C.I., N.Y.(Check
Rome
of B.C.I., N.Y., on
National City Bank,
N.Y.)
150,000
#
B.C.I., N.Y., (Check
of B.C.I., N.Y., on
Guaranty Trust Co.,
N.Y.)
259
Regraded Uclassi
260
TREASURY DEPARTMENT
-
INTER OFFICE COMMUNICATION
DATE November 13, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported the following transactions in
German accounts maintained with the Chase National Bank and the National City Bank,
Sew York.
Chase National Bank
Date
Amount Debited
Account Debited
Paid To
November 12
$200,000
Reichsbank, Berlin
Chase National Bank, N.Y.,
for account A/B Svenska
Handelsbanken, Stockholm
National City Bank
Date
Amount Debited
Account Debited
Paid To
November 13
$150,000
Reichsbank, Berlin
Tokohama Specie Bank, Ltd.,
N.Y., in favor Yokohama
Specie Bank, Tokio, by
and for account Reichsbank,
Berlin
Jews
Regraded Uclassified
261
JT
GRAY
BUENOS AIRES
Dated November 13, 1940
Reo'd 4:58 p.m.
Secretary of State,
Washington.
539, November 13, 3 p.m.
With reference to the Embassy's telegram 532,
November 8, 6 p.m., concerning the Pinedo report, the
final section published Saturday is of more direct
interest to the United States since it indicates a
radical reduction in the volume of American automotive
products and agricultural machinery that will be admitted.
The figure given, 24,000,000 pesos, is one-third the
estimated total for the present year and is understood
to represent 8. provisional figure to be used as a basie
for the second category of provisional figure to bE used
8.8 a basis for the second oategory of products mentioned
in the last paragraph of the Embassy's telegram 493,
October 17, 8 p.m. whereunder any increase would depend
upon the SUCCESS of the importers affected in stimulating
certain Argentine exports.
The Minister's report divides Argentina's foreign
markets into three categorise: (1) the sterling group
comprising areas governed by compensation agreements
or
Regraded Uclassified
262
-2- No. 539, November 13, 3 p.m., from Buenos Aires
or where payment is made in blocked exchange; (2) countries
of free exchange, chiefly the United States; and (3)
neighboring countries Exercising control of Exchange.
The plan contemplates the liquidation of blooked balances
through the repatriation of government bonds or the
purchase of forsign-owned public utilities and trans-
portation companies. As to the unfavorable balance with
the second group the report states that imports will
have to be restricted and to this end will DE divided
into the three goups referred to in the Embascy's tele-
gram 493 and the ENCLOSURES to despatch No. 1309,
September 27. As to the remaining group, a reduction
is to be effected by dieposing of the exchange available
for this category at auotion. The free market will be
maintained for transactions such B.B remittances of
profits abroad and investments of foreign capital in
Argentina.
ARMOUR
NPL
Regraded Uclassified
(CORFIDENTIAL)
CONFIDENTIAL 263
PARAPHRASE
The following is the substance of a telegram
(no. 1240) dated November 13, 1940, from the American
Consul General at Shanghai:
(A) In local Chinese banking circles considerable
agitation has been caused by (1) the fact that Japanese
brokers have stated to American and other local banks
that plans are being actively pushed for the early
inauguration of the new central bank; end by (2) the
taking over on November 9 by the Nanking authorities of
the Central Bank of China premises in the International
Settlement.
(B) It 1s stated by Chinese bankers having contact
with the new bank's personnel that it is planned that the
Nanking Finance Minister, Chow Fu Hai, will proceed on
November 16 to Japan to make arrangement for final details.
Whether the bank will be named "The Central Reserve Bank
of China" or "The Central Bank of China" apparently has
not been decided,
(c) The intention is to introduce strict trade control
to insure success, according to one Chinese banker with
close contacts in Nanking; and also to Deg the new central
bank currency on 8. "managed" basis at 16 United States
cents; and to announce that, until the ultimate perfection
of trade
Regraded Uclassified
CONFIDENTIAL 264
-2-
of trade control and the consequent disappearence of the
"Fani", the "Fapi" and its related foreign exchange market
are to be allowed to continue, the exchange rate between the
"Fani" and the new currency being determined by the for-
mer's foreign exchange value in United States cents.
(D) It is feared by Chinese benkers that pressure
will be exerted upon them, when the new currency 16
launched, to subscribe to loan issues of the new bank and
to assist in furthering the currency's circulation.
Verious comestive messures for the consideration of the
Chungking authorities are being suggested by the bankers.
They are especially concerned over the rendition to lian-
single jurisdiction of the Cainese courts in t.e French
Concession at Shanemai, and over the cossibility of fur-
ther pressure being used with D. view to similar action in
the International Settlement. Should rendition in the
International Settlement be consumnated the banker's
securities and the chances for future prosperity of
Chinese banks end business enterprises would be undermined.
The American position might also be further seriously
inpaired, since foreign, including American, business and
trade
Regraded Uclassified
265
CONFIDENTIAL
-3-
trade in this region obviously can survice and flourish
only under conditions propitious for the Chinese.
A section of the Japanese Army here is understood
to have opposed establishment of the new bank and issuance
of the new currency, because it wishes to perpetuate its
own military scrip notes and because it depends on the
free and open foreign exchange market for exchange to pur-
chase supplies from abroad. This opposition may have been
overcome, however, and a compromise scheme for early
execution may be in the making, according to the indications.
Regraded Uclassified
266
JR
GRAY
Berlin
Dated November 13, 1940
Rec'd 11:30 a.m.
Secretary of State,
Washington.
4690, November 13, 11 n.m.
For Tradsury from Heath and for Department's
information.
In a speech recently made by the REICH'S Economic
and Financi 1 Commisser for Holland Dr. Fischbock he
denied that it WLS planned to devolue the florin to parity
with the mark, HE regarded the Adjustment of the Dutch
price level to Garmany's as inevitable since Holland
must obtain such C large proportion of her imports from
Germany. although note circulation has increased from
1 to 1.5 billion florins there is no ground for fears of
inflation he asserted since uncontrolled price rises are
prevented and the EXCESS purchasing power 18 made available
to the Government for its expenditures via the banks.
Fischbock denied also that trade between Germany and
Holland was "onesided". Imports from Germany reached 19
million florins in July 29 million in August, and 31 million
in September (as compared with a monthly everage of 25
million in 1938 and 30 million in 1939) and Dutch exports
to
Regraded Uclassified
267
-2- #4690, November 13, 11 came, from Berlin.
to Gensany reached 25 million florins in July 38 million
in ..ugust and 39 million in September (ns compared to a
monthly average of 13 million in 1938 and 11 million in
1939). Hollend's EXCESS of Exports to Germany he said is
thus not very large ha maintained that future negotiations
concerning Economic affairs will be on the basis of equality
that Rolland will not be dictated to and her economic
interests will be given full consideration although
Germany Economic requirements must under all
circumstances be sufeguarded. in increase in the profits
tax but not to the German level was _150 forecast in his
spesch and it WCS indicated that there night also be
other tax increases.
It will be noted that in his account of the
increasing value of German exports to Hollend no mention
is mode of the higher export prices now quoted for
certain German commodities.
MORIS
RR
Regraded Uclassified
268
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, (Paris) Vichy, France
DATE: November 13, 1940, 8 p.m.
NO.: 944
FROM MATTHEWS FOR THE TREASURY DEPARTMENT.
Reference, telegram of November 5, 5 p.m., No. 898
from the Embassy.
Instructions have been given to the banks by the
Finance Minister not to comply with the instructions of
the German authorities that they shall submit etatements
covering the total values of foreign currencies and
foreign securities which they hold in the unoccupied
territory as well as the total values of such currencies
and securities which they hold in this area for the
account of clients who are domiciled in the occupied
area.
A letter was written to the German authorities by
Bouthillier to the effect that he considered in issuing
these instructions they had exceeded their authority.
The German authorities informed him finally that they
could not accept his contention. Consequently the matter
has been referred to Wiesbaden by Bouthillier.
MATTHEWS.
EA:LWW
Regraded Uclassified
269
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, (Faris) Vichy, France
DATE: "ovember 13, 1940, 9 p.m.
NO.: 946
FOR THE TREASURY DEPARTMENT FROM MATTHEWS.
In a talk with Cariguel at Clermont-Ferrand today
he said that the relations between Schaeffer and the Bank
of France continue to be amicable. Cariguel said that
Schaeffer had not made any attempt to influence the Bank's
policies in the unoccupied territory. It has been pointed
out by the bank supervision office that it will be necessary
to institute certain reforme in the French banking system,
especially to reduce the number of banks, but as yet
no steps have been taken to bring about this reduction.
Reference: telegram of August 26, 7 p.m., No. 431 from
the Embassy. It is Cariguel's opinion that there really
he
are too many banks in France, and/agrees with the German
authorities that no bank should be permitted to operate
if its capital is less than 50,000,000 francs.
French banknote circulation figures are usually about
two or three weeks old because of the difficulties and delays
in communication; the total is still around 210,000,000,000
francs according to the latest data available.
Cariguel said that the Germans had been informed by
Bouthillier that it would not be possible for France to
continue payments to cover the costs of the occupation Army
in the amount of 400,000,000 france daily.
END SECTIONS ONE AND TWO.
MATTHEWS.
Regraded Uclassified
270
PARAPHRASE OF SECTIONS THREE AND FOUR OF
TELEGRAM NO. 946 OF NOVEMBER 13, 1940 FROM PARIS (VICHY)
He said that it would be necessary for Germany to scale
the payments down to & reasonable figure, or there would
be serious monetary inflation in France. At Wiesbaden
conversations are now proceeding on this matter.
According to Cariguel, attempte had been made by the
Uermans to invest the idle capital accruing to them from
these payments in the French money market, but the Bank of
France had not permitted them to put into operation such
a scheme.
Cariguel claimed that the French authorities are
becoming concerned about prices in the occupied zone, which
are from 10 to 15 percent higher than those in the unocousied
area. Prices continue to rise despite the strict measures
of control. The upward movement DEFERRED has been encouraged,
he said, vecause the Germans are unwilling to pay more than
the market price for consumers goods provided delivery can
be assured thereby.
One of the main pointe in the recent protest by
Bouthillier to the Germans on submitting bank statements
of foreign securities held in the unoccupied territory,
Cariguel said, was the fact that the Bank of France had no
desire to divulge information to the Germans about the
foreign securities since all those which it holds for its
clients are now physically located in this territory.
(Reference, telegram of November 12, 8 p.m., from
Regraded Uclassified
271
- 2 -
the Embassy, No. 944.)
Several of his colleagues, Cariguel said, were somewhat
concerned lest de Gaulle have turned over to him the balances
of the Bank of France held in the United States.
END OF MESSAGE.
MATTHEWS.
EA:LWW
272
AS
PLAIN
London
Dated November 13, 1940
REo'd 12:22 p.m.
Secretary of State,
Washington.
3718, thirteenth.
FOR TREASURY.
One. Under the headline "United States Blow To
British Trade" the DAILY TELEGRAPH prints an article
from its Washington correspondent complaining that as
Dr. Jekyll the United States Treasury gives EVETY assis-
tanor to the British Purchasing Commission and as Mr. Hyde
88868878 import duty inclusive of purchase tax. The COTTES-
pondent asserts that "it would be the simplest matter in
the world by a MEIE change in administrative ruling to
assume that the British wholesale price on which the Ameri-
can customs duty is based is the prioe at which the goods
are sold by wholesalers". The correspondent goes on to
point out that since the Neutrality Aot prosesitates cash
payments the building up of exports to the United States
18 of prime importance and asserts that "British-held
securities ATE being used up rapidly. If British imports
ATE
273
AS-2- No.3718, thirteenth, from London.
BTE at the same time restricted by Treasury policy a.
critical situation will bE reached far sooner than expected".
Two. The October Clearing Bank returns show a further
increase of stlg 64 million in deposits to stlg 2,611
million, only stlg 6 million being due to transit items.
The increase, the eighth in succession, in investments, of
stlg 25.8 million to stlg 723.9 million is attributed
largely to purchases of 2-1/2-0/0 on tap war bonds rather
than market purchases of gilt-sdged securities. Advances
declined by pounds 3.1 million to pounds 933.7 million,
indicating that the September increase was due to special
causes. The now weekly loans to the Treasury by deposit
receipts are recorded in the returns at pounds 179.5 million
having increased by pounds 88 million on September and being
only partly offect by a drop in bills discounted of pounds
27.9 million to pounde 373.4 million and a drop of pounde 6.5
million to pounds 137 million in call money. Cash, down by
pounds 18.7 million to pounds 269.5 million, gave a ratio
to deposits of 10.13 per cent as compared with 11.1 per cent
for September.
Three. Supply expenditure continues high, standing at
pounds 85.2 million for the WEEK ended November 9 when total
expenditure was pounds 87.4 million and revenue pounds 22.8
million leaving a deficit of pounds 64.6 million for the WEEK.
TFV
JOHNSON
Regraded Uclassified
274
PARAPHRASE
Telegram No. 591 from Rio de Janeiro, November 14.
Today the Banco Allemao Transatlantico posed the
following questions in strict confidence to the Director
of Exchange of the Bank of Brazil:
Remittances of bullion (gold bars) to Brazil from
abroad.
One. Will the Banco do Brazil purchase gold arriving
in Brazil from abroad, against payment in United States
dollars? If in the affirmative, at what rate?
Two. May gold received from abroad by a bank or local
firm be reexported to another country after being in safe
keeping for a certain time in a bank or some other place
for account of the remitting party?
No decision as to the answers has yet been made. The
Director states that in all probability the Bank of Brazil
will buy the gold if additional information is forthcoming
or will accept the gold in payment for Brazilian exports.
The Director is under the impression that the gold which
the Germans wish to sell is French gold held in French Guiana
or other French possessions.
eh
COPY
Regraded Uclassified
CONFIDENTIAL
275
Puraphra.co of Code Cablegram
Asserved At the Your Department
as 8.00 P.M., November 13, 1840.
Lendon, filed 15:45, November 15, 1940.
1. All missions of the Dember Command for the night of
November 11-18 and for the following day were cancelled. For
the night of November 12-18 10 was planned to dispatch 110 beabers
to attack Germa and Fresch targets. The Coastal Command operated
20 patrol nissions, 27 certies and 18 comvey occurts, with -
plane crashing en landing. The activity of the Fighter Commond
was at a sinims during Nevember 12, with 41 patrels engaged in
st certifs.
1. three British airdress were attacked but name were
damget. Newever, six fields are wholly or partially unserviesable
because they are waterlogged. To military targets in London -
tained major damage. A miney station, an air raid shelter in the
working class district, and & moving picture theater were his with
- casmities. During November 10-11 the total civilien earal-
time in Leadon - 04 killed and 273 watel.
8. The only plane less was ⑉ German bender destroyed.
4. the British have MV accounted for a total of # merchant
ships out of the as from the energy that was attacked by the Curren
"pecker's bettleship." A British destroyer has - damaged by a
size, A cervey off the coast of Scotland was banked by Daysem
planes and - ship was lest by fire. Two conveys - bested in
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CONFIDENTIAL
276
the estuary of the Thamas on November 11; with two ships damaged
and one set on fire. A 3,400-tom Norwegian ship was bombed and
sunk on the same day.
6. General Venning, Quartermmster-General of the British
Aray, advised - on Tuesday that the situation would soon become
difficult if the present rate of ship sinkings continues. At
present the British are able to carry on regardless of the long
haul around the Cape of Good Hope. However, it' is reasonable to
expect that the Germans will continue their present efforts against
shipping and, unless enough tonnage can be purchased from the United
States, no way is seen to replace the losses fast enough.
6. Reports of November 10 state that the British have occupied
Gallabat in the Sudan.
7. There now seems to be no question but that the Greeks have
won a decided victory over the Italian Alpini and Bersoglieri.
LEE
Distribution:
Military Aide to the President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff
Mar Plans Division
Office of Naval Intelligence
CONFIDENTIAL
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277
G-2/2657-220
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M.I.D., W.D.
November 13, 1940.
No. 244
SITUATION REPORT
12:00 M.
This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion of political information and of opinion it is classified
as Restricted.
I.
Western Theater of War.
1. Air Force Operations.
During daylight of the 12th there was widespread Gor-
man activity over England by single planes and small formations.
Last night the German air attack on London was officially described
as "heavy" until after midnight, when visibility decreased.
The R.A.F. last night attacked German oil plants at
Gelsenkirchen, Cologne, and Duisburg-Ruhrort, rail centers and fac-
tories in the Ruhr and the submarine base at Lorient. Docks at
Flushing and Dunkirk and some airdromes in occupied territory were
also raided. The British bombing effort against the "Invasion Porta"
is clearly slackening.
II. Greek Theater of War.
No change in the general situation. Greek ground forces
have made local counterattacks at various points along the front.
The Italian Air Force continues to bomb Greek troops at the front
and communication centers in rear areas. Greek or British planes
are conducting similar operations over Albania.
III. Mediterranean and African Theaters of War.
Ground fighting on the Sudan-Ethiopian border is con-
tinuing.
The R.A.F. attacked Italian naval units at Taranto on the
11th and 12th and claims to have sunk or severely damaged several
vessels, one warship. It is believed that the British claims are more nearly
including three battleships. The Italians admit damage to
correct.
Elsewhere in the theaters air operations were minor in char-
acter.
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278
0-2/2657-220
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M.I.D., W.D.
No. 245
November 14, 1940.
SITUATION REPORT
12:00 M.
This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion of political information and of opinion it is classified
as Restricted.
I. Western Theater of War.
1. Air Force Operations.
Bad weather prevailed.
The German Air Force was active over southern England
by day on the 13th but apparently the raids were not heavy. Last
night German air activity over England appeared normal, but was cen-
tered in the provinces. London had an unusually early "all clear".
The German air effort against shipping apparently is increasing.
British night bombing, apparently on a reduced scale,
reached the Berlin area, but was concentrated on Western Germany and
the occupied territory.
II. Greek Theater of War.
No change in the ground situation. Italian air activity
conformed to established pattern. Greek and British planes continued
to attack Albanian ports.
III. Mediterranean and African Theaters of Mar.
Ground fighting apparently was confined to the Gallabat
area, Sudan. This town has changed hands several times. The Ital-
ian Air Force attacked shipping in the eastern Mediterranean. The
British state that Taranto and Bari were bombed.
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279
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TENTATIVE LESSONS BULLETIN
MILITARY INTELLIGENCE DIVISION
No. 66
WAR DEPARTMENT
G-2/2657-235
Washington, November 14, 1940.
NOTICE
The information contained in this series of bulletins
will be restricted to items from official sources which are
reasonably confirmed. The lessons necessarily are tenta-
tive and in no sense mature studies.
This document is being given an approved distribution,
and no additional copies are available in the Willitary
Intelligence Division. For provisions governing its re-
production, see Letter TAG 350.05 (9-19-40) M-P-M.
MORALE IN THE FRENCH ARMY
SOURCE
This bulletin presents B study made in the Morale Division
of the Adjutant General's Office. It is based upon the reports of
American official observers.
CONTENTS
1. ELEMENTS IN THE MORALE POLICY
2, MORALE REPORTS AND CONDITIONS, AUTUMN 1939
3. DISCONTENT AT THE FRONT, WINTER 1940
4. ABSENCE OF MILITARY CONTROL OVER MORALE
5. CIVILIAN INTEREST AND ACTIVITY IN ARMY MORALE
6. AFTER-EFFECTS OF MORALE POLICY
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280
1. ELEMENTS IN THE MORALE PROBLEM
Three important elements entered into the morale problem
of the French Army. They were, (1) the fact that France, morally un-
prepared to fight, was taken into the war by political leaders with-
out the formality of popular of parliamentary sanction; (2) the
feeling among soldiers and their families that men who should have
been in the Army were being allowed to evade military service on
specious pleas of indispensability in non-combatant fields; and
(3) the fact that civilians rather than military men played dominant
roles in the conduct of morale activities within the military es-
tablishment.
2. MORALE REPORTS AND CONDITIONS, AUTUMN 1939
Both officers and men of the French Army have said that they
entered the war without enthusiasm, and that this attitude matched
the lack of enthusiasm among civilians. What little spirit the troops
had at the beginning of the war was weakened by the monotony of hours
in the Maginot Line.
Although reports stated that morale and general discipline
in the French Army were at a high pitch, there were indications to
the contrary as early as November, 1939. Absence without leave was
widely prevalent, although it was virtually unknown in the German
Army, and on Saturdays there were mass departures without authority,
despite increased police details and many arrests. Men generally
returned on Monday mornings and were given ten days extra duty as
penalty for their unauthorized absence,
In addition to asserting that the morale of troops at the
front was magnificent, reports in the autumn of 1939 stated that all
soldiers seemed confident of their ability to meet the Germans. ob-
servers visiting the front during the winter, however, began to question
the validity of these generalities, especially in view of concrete
bits of evidence, such 8.8 absence without leave, drinking, and care-
lessness, which were not in line with the optimistic assertions of
officers.
While the commanding general of the 2nd Army and his officers
spoke of the high morale of both French and Pritish troops, the repeat-
ed emphasis given these assertions inspired in observers et feeling of
doubt, The men themselves presented & sorry spectacle of discomfort
and dejection, and to their material hardships were added the moral
factors of inaction and monotony.
3. DISCONTENT AT THE FRONT. WINTER 1940
As the winter wore on, reports on morale became less ro-
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281
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assuring. On January 31, 1940, the Chef du Cabinet of Mandel,
member of the French Ministry, noted growing discontent among the
mobilized men belonging to labor syndicates. These men were dis-
gusted with the living conditions of their families at home, and
this disgust created & fertile field for the seeds of discontent.
The view that the British were not doing their share in
meeting the German menace was spreading. Reports spoke of the French
feeling that the British were treating the war as a sport, and of
crowds of R. A. F. officers about the hotel bar at Rheima throughout
the late afternoons and evenings. Circulated remarks referred to
France es Britain's catspaw, and British participation on the Western
Front was described 8.8 pitifully inadequate. Apparently the prin-
cipal measures taken by French leaders against the spread of this
feeling fostered by German propaganda, was the showing of American
motion pictures on Britain's war effort.
By March, 1940, the morale at the front had still further
deteriorated. The soldiers grumbled because of long inaction. There
was more and more discontent in camps behind the lines, with the men
demanding to know what the war wes about. Soldiers stated that their
discontent had nothing to do with patriotism, but grew out of the
feeling that something ought to be started. They spoke of the
absence of drill or other activity behind the lines, where life held
"nothing but monotony". Growing discontent over inaction and military
discipline bred an urge to return to normal civilian life.
From the start of the war, men called into the military
services, their relatives, and their friends resented the favoritism
allegedly shown to persons claiming indispensability in their civilian
occupations, French emphasis on behind-the-lines activity was
carried to such a point that specialists were taken out of armored
divisions and assigned. to non-combatant jobs. Combat teams were thus
broken up, and it becane necessary to train replacements on what
proved to be the eve of a decisive battle.
As the war continued, resentment against so-called "special
assignments" to non-combatant jobs gren until political loaders
felt obliged to take action. Special commissions were organized for
the purpose of correcting this condition, and, in order to reassure
men at the front, veterans of the World Mar were included in the
membership of these commissions. Despite all efforts, the evasion of
combat service by political, social, or other influences remained a
standing grievance of the men at the front.
40 ABSENCE OF MILITARY CONTROL OVER MORALE
The outbreak of the war found the French Army without
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machinery for conduct of morale activities under proper military con-
trol. Army units in the field were left more or less to their own
devices, although civilian agencies active in welfare and recreation
work included national organizations such as the Red Cross and local
individuals such as village priests in billeting areas. One observer
notes the search made by B. lieutenant of the 45th Infantry Division
for civilians who might be interested in providing for the men of
his organization recreation and welfare facilities such as motion
picture machines, radios, sporting goods, books, and games.
The morale problem which confronted the French Army and
the methods somewhat haphazerdly adopted for its solution combined
to obscure the principle that morale as a function of command is B.
military function.
In certain exceptional cases, division commanders dominated
morale activities within their jurisdiction, and in these units
excellent results were obtained. Generally, however, morale activities
were carried on from the civilian standpoint of entertainment rather
than from the military standpoint of training. Officers lost contact
with their men, and soldiers became more concerned with their per-
sonal comfort than with their military efficiency as part of B. fighting
team.
A French colonel in a summary called Trop de Croix Rouge,
emphasized the demoralizing and unmilitary morale conditions which
prevailed just before the collapse. Despite this and other examples
of recognition of danger by military leaders, there were plans afoot
to organize a |inistry of Social Service to be charged with welfare
work in the armed services and elsewhere.
5. CIVILIAN INTEREST AND ACTIVITY IN ARMY MORALE
a. Control. As needs became evident, civilians became
active in raising funds and doing welfare work with governmental
sanction. This work was under the general direction of the Minister
of Tar, Veterans, and Pensioners and the President of the National
Office of Mar, Invalids, Veterans, ar Victims, and National Pupils.
Requests for authority to participate in the work were examined by
an interdepartmental committee of Government agencies.
b. Radio. French broadcasting stations were directed to
alter their programs and to provide gay music and light songs for
soldiers in the lines end in the interior.
0, Supplies. The civil population was urged to send
soldiers such articles as books, cigarettes, and blankets. There
was & shortage of blankets because & large number had been sent from
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France to the Spanish Loyalists during the Civil War, and this cir-
cumstance occasioned bitter comment.
d. Foyers. Recognition of the necossity for some form of
amusement for the soldiers resulted in the establishment of Foyers
Militaires or Foyers des Soldats in the regions of the front. Those
Foyers had recreation halls equipped with billiard tables, radios,
phonographs, playing cards, chess tables, and reading and writing
rooms. Wine could be had at the Foyers.
e, Theatricals and Athletics. There were halls for motion
pictures and theatricals, Regiments had theatres at which improvised
plays and sketches, as well as professional performances, were pre-
sented. Group singing was encouraged. In some organizations, em-
phasis was placed on athletics, and teams were developed to compete
with the British.
f. Education. There were, in addition, educational courses,
some for illiterates and others consisting of lectures and conferences
on the war, French history, and the geography of countries in the news
of the day.
Ea "Godmothers". An effort was made to strengthen morale
in the armed services and, at the same time, to identify civilian
communities with men at the front, through formation of a government-
sponsored Ecole Marraine du Combettant, headed up in the Ministry of
National Defense, A similar organization largely under private con-
trol, had existed in 1914-1918. Under this plan, marraines, "god-
mothers", were chosen for men who were at the front and who had no
near relatives interested in their welfare. These men were listed
by organization commanders and "assigned" to various French schools,
which in turn provided "godmothers" from among their pupils. To
strengthen national unity, men were assigned to schools in regions
distant from their home communities.
"Godmothers" were encouraged to correspond with and send
was transferred to a unit in the zone of the interior or until he
gifts to their "godsons". The relationship continued until the soldier
died. The Ecole Marraine received wide attention and became an object
of great interest to politicians.
6. AFTER-EFFECTS OF MORALE POLICY
When disaster overtook the French Army, the country was
quick to place the blame on the shoulders of the Commander-in-Chief. the Army
Those censured who him for furloughing soldeirs who should have been retained
had demanded a generous leave policy for men in
now to build blockhouses and trenches. Those who had clamored for use
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of his name and prestige in sponsoring civilian welfare agencies now
condemmed him for nominally heading societies such as those which
sought "godmothers" for soldiers or supplied radio sets and athletic
equipment.
The soldiers themselves complained that for six crucial
months they had been given little to do by way of preparing themselves
to meet the enemy, and that, instead, they had sat around writing
letters and being entertained in idleness.
As expected, the Army authorities were denounced for
allowing morale work, a military function, to become a civilian
welfare and entertainment activity. These denunciations now form
part of the charges brought against General Gamelin and others formally
accused of responsibility for the downfall of France.
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285
Paraphrase of Code Cablegram Received at the
Your Department at 10:23 A. M., November 14, 1940
London, November 14, 1940.
the outstanding feature of this struggle 80 far is the
insistence of the British upon the highest standard of quality
attainable in every aspect of we making. The result of this
policy or national charasteristic has been meet rigerously demon-
strated in the confliet between mall musbers of British planes
and pilots of high quality and large numbers of Comman airplanes
and pilots, both of a sourshat lower standard. I believe that
this recent dramatic serial struggle between character and -
chinery (using latter term in largest sense) or between quality
and quantity is only one exemple of many.
The - insistance upon quality and thoroughness is
evident in training and equipping the Army and the Havy, as wall
as the Air Raids Presentions service and the unexpected hage
force of the Home Owerds. It is also apparent in the refusal of
the Air Ministry to surrender under pressure to & shorter period
of pilot training and to the use of cheeper, nore easily produced
mashines.
My - convistion is that have the British begin
micing sensessions in this policy they will plase themselves a
a leval with the Commans and will take the first stop toward
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286
defeat since the Owners are greater maters of ass production
than the British and have planned their efferts on the principle
that quantity can and will oversun and chliterate quality.
The reason for this dispatch is that our industrial
production is the feator which will tarn the scale. to are the
greatest masters of IM production existing but the idea is
widespreed that name production implies a considerable lowering
of highest standards) that is, that mass production necessarily
comotes Ford instead of Linseln or Rolls Royee standards. I
believe that the policy which should be adopted at the outset
in the United States is that no matter how large a program we
envisage on land, - or in sir, W must follow the line that
in using our great resources of mass production 10 will use it
to min only the types of articles which in trained hands will
give the maximum performance. This principle should be applied
not only to material but to all other phases of the national
effort, such as the training and discipline of officers and -
of all services. General Pershing adopted this idea for the
Any in the last will when he amounted that in all respects the
standards to be streed at were those of West Point.
the idea of best quality should - be extended to
every phase of war. This argment om be amaricad in four
words, "Quantity Production of Quality".
The imadi.ate objective, of course, is to speed the
supporession of the Avia provers but 18 is very abvious that this
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287
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policy, if made effective throughout United States injustry, would
give Amriem producers greater adventage in world markets after
the war in competition with cheep German, Japanese, Chinese and
Indian products.
ill.
Distributions
Military Aide to the President
Secretary of THE
State Department
Secretary of Treasury
Asst. Secretary of -
Chief of Staff
Mar Plans Division
Office of Naval Intelligence
National Defense Advisory Commission
RESTRICTED
LW 287-A
CONFIDENTIAL
Puraghrase of Code Cablegrom
Received at the Mar Department
at 6:30 P.M., Nevember 14, 1940
London, filed 15:30, November 14, 1960.
1. the weather almost completely noviralized the daylight
operations of the Bomber Command an Mednesday, Sevember 13. It
was planned to disputes a total of 115 benbers that might, u
against Borlin, se against eil targets, 15 against railreads, 22
against targets in Italy, 8 against - parts, nine against
easy airfields and three against novel targets. The bowling
attacks during the night of November 12-13, involving TO carties,
were fairly sussessful. One plane ereshed a landing. the constal
Commend carried out restine operations, dispatching 39 patrol
missions, 62 serties and 20 energy courts. The Fighter Commond
operated 525 planes a 110 daylight patrols en November 18 and
61 planes on 51 patrols that night,
2. During daylight hours of November 18 the German Mr Force
was only reasonably active, operating about 200 planes - resm-
naissance missions and smill raids. Operations that sight were a
as exterency small smle with little penstration inlend and no she
tack reaching as for as Landon.
8. Atringks - five British airdrams were reported both -
of then was effective. New nine fields are alther visally or
partially unserviseable, meetly due to wather conditions. No major
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Regraded Uclassified
CONFIDENTIAL
287-B
damage during the last 24 hears - reported. Civilian casualties
during November 11-12 were (7) killed and three worked.
4. Genean plane losses were three confirmed and eight damaged,
while the British lest 2020.
5. Right ships, with a total tormage of about 50,000, from the
cenvey attacked en November 5 are still missing.
6. The great British success at Taranto with the less of two
planes only justifies in may eyes the British establishment of the
Fleet Air Arm. It is said that Italian naval vessels were attacked
with torpodose dropped from aircraft under moonlight conditions.
7. That the threats of German invasion still exist is shown
by the constant aross-Chammal training and consensus of British
spinion that Germay cannot win the war without a desperate uttempt
to conquer Britain. Therefore the threat of invasion will remin
present all winter.
8. A universal rear of laughter has been caused by the advent
of Italian raiders equipped with helmsts, (as make, Chianti wine,
choose, champagas and baymets, and at the - time flying absolessent
biplanes with wooden wings. This use of Musselini's airms plus the
removed operation by the of their discredited dive beabers
lends color to the belief that the derman-Italism reserves of air
craft are net large. Instrution of expirated Italian airms gives
indications of their low combets value and of their great relief at
being safely out of the fight.
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287C
J
9. General Seanlem has been informed by high officers in
the Mr Ministry that they estimate at this time that the resure
of Corman fighters has been practically wiged out by the casualties
inflicted by the Reyal Air Force during the last three menths. la
this commetion please ... our daily cablegram of September 25.
(This dispatch sets forth the belief that the previously accopted
estimate of the strength of the Germa Air Feree is greatly -
aggerated. - G-2.)
LEE
Distribution'
Military Aide to the Procident
Secretary of war
state Department
Secretary of Treasury
Asst. Secretary of Your
Chief of staff
Mar Plans Division
Office of Naval Intelligence
CONFIDENTIAL
CONFIDENTIAL
288
Parsphrase of Code Radiegram
Received at the Var Department
3:12 a.m., November 14, 1940.
Maxila, November 14:
Seurce, Dritish Consership: Reich 011 Control
Department, according to recent letter from Memberg, vants
more Gepra from Cebu and gives Manshouli as alternative
to Vladivestek as trans-shipping point.
GRUNERT
Distribution:
State Department
Secretary of Treasury
Acct. Secretary of Var
O.N.I.
CONFIDENTIAL
U.S. COAST GUARD
289
TREASURY COAFT GUARD
Sept. 1990
OFFICIAL DISPATCH
transmit
14 NOVEMBER, 1940
DATE
FROM
CODE
COAST GUARD HEADQUARTERS
CIPHER
TO (FOR ACTION)
ACKNOWLEDGE
SECTREAS
PRIORITY
UNLESS DESIGNATED OTHERWISE TRANSMIT THIS DISPATCH AS NITE.
ROUTINE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
MAIL TO
TELEPHONE TO
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OUTGOING HEADING
TEXT
IT IS ARRANGED THAT ENGLISHMAN REFERRED TO AWAIT YOUR RETURN
PHILIP YOUNG
INITIALS OF "RELEASING" OFFICER.
OPERATOR'S RECORD.
OFFICIAL BUSINESS.
" - - - 9-1417
FOI Miss Chaungey
290
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 14, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
confidential
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
1151,000
Purchased from commercial concerns
1 38,000
Of the sterling sold, approximately L125,000 were used to pay for the importation of
rubber, and the remaining L26,000 were applied against various imports.
In the open market, sterling remained at 4.04 throughout the day. Transactions
of the reporting banks were as follows:
Sold to commercial concerns
: 5,000
Purchased from commercial concerns
-0-
The other currencies closed as follows:
Canadian dollar
13% discount
Swise franc
.2320-1/2
Swedish krona
.2386
Reichamark
.4005
Lira
.0505
Argentine peso (free)
.2365
Brarilian milreis (free)
.0505
Mexican peso
.2070
Cuban peso
8-1/8% discount
There were no gold transactions consummeted by us today.
No new gold engagements were reported.
A gold price equivalent to $33.82 WAS received from Bombay today, 2# higher
than the quotation of November 12. Silver in Bombay was unchanged at the equivalent
of 43.80#.
In London, both spot and forward silver were fixed at 23-5/16d, unchanged from
yesterday's level. The dollar equivalent of this price is 42.33#.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 35#.
We made two purchases of silver totaling 125,000 ounces under the Silver Purchase
Act. all of which consisted of new production from foreign countries, for forward
delivery.
pmp.
(Handed by Mr. Pinsent of the British Embassy to Mr. Cochran in the
Treasury at 1:15 p.m., November 14, 1940).
291
MINUTE SHEET
Reference
Mr. Cochran.
Annexed is a statement of British
expenditure in U.S. dollars for the month of
September, other than expenditure through the
British Purchasing Commission. This is an
improvement on the statement of which I showed
you a specimen before. It will be sent in monthly.
I hope rather more promptly in future than this one.
(1) G.H.S.P.
GHSP:MAB
November 11th, 1940.
STRICTLY CONFIDENTIAL
SECRET
292
U.S. DOLLAR EXPENDITURE AND STERLING TRANSFERS TO THE UNITED
STATES OF AMERICA (AND POSSESSIONS) DURING SEPTEMBER, 1940,
OTHERWISE THAN THROUGH THE BRITISH PURCHASING COMMISSION
(INCLUDING FORWARD TRANSACTIONS)
L000's
In
In
Purpose
Dollars
Sterling
Total
(Stg. Equiv.)
Imports into U.K.:
Food, drink, tobacco
972
109
1,081
Raw materials
4,371
128
4,499
Manufactures
2,932
33
2,965
Miscellaneous
13
-
13
8,288
270
8,558
Government Departments
858
-
858
Ships' Disbursements and other
transport charges
182
17
199
Royalties
29
14
43
Agency Services
77
34
111
Purchase and upkeep of property abroad
184
1
185
Miscellaneous Services
104
22
126
Subsistence and travel
117
30
147
Insurance (Premia, Claims, etc.)
121
40
161
Dividends and profits on U.S. investments
Il the United States
608
64
672
uirements of firms operating dollar
accounts
715
-
715
Distribution of Capital under Trusts
-
44
44
Payments on account of rest of Sterling
Area
7,497
256
7.753
Other payments
-
12
12
18,780
804
19,584
+
Including U.S. dollars paid to countries other than the U.S.A. In future such
payments will be eliminated.
*
Surrenders by such firms cannot yet be stated; nor their expenditure out of
dollar receipts other than from the Control.
Bank of England,
17th October, 1940.
STRICTLY CONFIDENTIAL
la
(Handed by Mr. Pinsent of the British Embassy to Mr. Cochran in the Treasury
at 1:15 p.m., November 14, 1940).
C
293
0
P
STRICTLY CONFIDENTIAL
Y
United Kingdom Holdings of Gold and Exchange
With reference to my memorandum
of the 7th October, showing the monthly balance
and loss of gold and exchange, and the resources
utilized each month, the loss of gold and
exchange in October amounted to $116 million,
bringing the balance at the end of that month to
$781 million.
The proceeds of sale of securi-
ties in October were $9 million, and the total
resources utilized were thus $125 million.
(The British Treasury has not
yet given me the analysis of the above figures
into gold, United States dollars and Canadian
dollars).
(1) G.H.S.P.
BRITISH EMBASSY,
7th November 1940.
bfn
294
FEDERAL RESERVE BANK
OF NEW YORK
November 14, 1940.
CONFIDENTIAL
Dear Mr. Secretary: Attention: Mr. H. Merle Cochran
Pursuant to Mr. Cochran's request, I enclose our
compilation for the week ended November 6, 1940, showing
dollar disbursements out of the British and French accounts
at this bank and the means by which these expenditures were
financed.
Faithfully Whiman yours,
L. W. Knoke,
Vice President.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosure
295
ANALYSIS OF BRITISH AND FRENCH ACCOUNTS
Strictly
(In Millione of Dollarel
Week Ended Nov. 6, 1940.
Confidential
BANK
OF
ENGLAND
BANK
OF
FRANCE
CREDITS
DEBITS
CHELITS
EFFITS
Other
Neb [nov.
Proseble
Net Incn
Proceeda 05 Saleo of
intl,
Cov't
Total
Total
Other
(*) OF
nf
Pov't
Total
Other Total
other
(+) or
adjust-
Expend-
(-)
Cold
Expend-
Door.(-)
PERIOD
Cold
(Bst.)(a)
Storling(b)
ments)
ituros(s)
in Balance
Sales
iturez(d)
to Belance
1939
Aug. 31 - Sopt. 27
207.8
185.4
33.6
1
-11.E(e)
94.3
3.6
50.7
+113.5
11.3
I
11.3
19.4
6.0
13.4
- 8.1
Sept.28 - Nov.
1
148.0
3.2
52.6
1.
86.2(m)
106.7
5.8
100.9
F 35.8
76.2
35.0
442
85.6
I
61.8
100.4
- 18,4
Nov. 2 - 29
105.8
57.8
15.0
-
23.0
191.7
8.9
182.8
- 88.9
es.9
85.1
27.6
78.6
1
- 4.3
14.2
10.4
97.7
-
Nov. 30 - Jan.
3
75.2
50.6
I
8.7
09.0
- 22.5
109.2
93.5
19.3
86.8
28.1
587
. 20.4
1940
Jan. 4 - 31
43.4
20.6
17.8
1
5.0(e)
54.8
15.8
36.0
- 11.4
65.9
50.1
5.8
61,0
31.5
30.0
- 0.8
Feb.
1 - 28
108.3
56.7
17.9
124.1
15.4
106.8
- 15.2
71.5
64.8
16.7
71.7
32.8
39.9
- 1.2
,
33.7
Fob.
29
- Apr.
3
94.0
60.9
21.5
1
11.6(h)
115.5
14.5
101.0
- F1.5
105.0
70.4
29.6
99.6
35.9
63.7
- 5.4
pr.
4 - May
I
86.4
46.8
13.4
-
26.2(f)
113.4
26.1
87.3
- 27.0
78.7
00.7
18.0
84.8
19.4
55.4
- 6.1
May
2 - 29
186.2
93.2
7.1
-
25.9
100.9
25.6
77.3
. 25.3
145.4
126.2
19.2
101.4
57.0
44.4
+ 44.0
May
30 - July
3
319.3
301.3
5.1
-
12.9
283.2
145.3
137.9
. 36.1
345.1(j)
335.6
9.5(J)
156.7(j)
127.3(j)
29.4
+189.4
July 5 - 31
225.0
212.0
2.0
S.B
8.0
249.7
156.7
93.0
- 24.7
3.£
5.0
0.2
7.3
5.3
1.0
- 4.1
Aug. 1 - 26
294.8
267.4
1.0
2.4
24.0(k)
261.1
180.2
80.0
# 33.7
10.9
10.4
0.5
8.9
0.5
8.4
- 2.0
First year of wer
1,828.2
1,356.1
211.2
5.2
255.7
1,793.2
605.6
1,187.6
- 35.0
1,095.3
900.2
195.1
866.3
416.6
449.7
$200.0
Aug. 29 - Oct.
to
308.9
271.5
6.0
1.1
30.3(1)
316.8
244,3
72.5
- 7.9
1.3
-
1.3
8.6
4.4
4.2
- 7.5
Dot
3 - 30
198.5
160.5
6.0
0.3
31.7(m)
196.7
167.8
28.9
+ 1,8
0.5
-
0.5
0.5
0.3
0,2
-
Og
31 - Hov.
27
Nov. 28 - Dec. 31
VSEX ENDED:
Oct. 16
20.0
9.4
-
-
10,6
45.4
41.3
4,1
- 25.4
0,2
-
0.2
0.2
0.1
0.1
-
61.3
52.1
2.0
0.1
7.1
58.3
50.9
7.4
+ 3.0
-
-
-
-
-
-
23
-
30
58.0
50.1
2.0
-
5.9
40.6
31.5
9.1
+ 17.4
0.1
-
0.1
0.1
0.1
-
-
Nov. 6
61,2
47.2
6.0
0.1
7.9(n)
55.4
47.7
7.7
+ 5,8
0,2
-
0.2
0.4
0.1
0.3
- 0.2
Average wookly expenditures since outbresk or war:
Transfers from Dritish Purchasing Commission to
France
(through June 19)
$19.6 million
Bank of Canoda for French socount:
Vack ended November 6
5 6.4 million
(See Contrates on reverse wide.)
England (through June 19)
27.6 million
Comulation from July 26
85.7 million
England (since June 19)
60.1 million
(a) Through June 19, these figures represent total sales of American nejurities in Second District reported for account of the United Kingdom.
(Proceeds of those calos, bowever, may not have been crodited to the Bank of England's account in all' cases.) Boginning with the trook
ended June 36, the fimires represent transfers from the Bank of Montreal, New York Agency, which is instodian for requisitioned American
securities held in this country. The transfers apparently refloct proceeds nf official necurity pales, including three handled through
private doaln. From June 17 to July 19, transactions in securities payable In specified foreign currensies, including dollare, by United
Kingdom residento wore prohibited.
(b) Includes proceeds' of salon of "registered" storling in this market only.
(2) Includes payments for account of British Purchasing Commission, Britich Alr Ministry, Britloh Supply Board, Ministry of Supply Timber Control,
and Ministry of Shipping.
(4) Includes payments for assount of Fronch Air Commission and Fronth Purchasing Commission.
(e) Includes adjustment for (a) above.
(f) About $85 million transferred from accounts of British authorized banks with Noss York
(g) About $11 million transferred from comunts of British authorized banka with New York battle,
(h) About 30 million transferred from accounts of British authorized banks with New York bankn.
(1) About $10 million transforred from accounts of Britich authorized banks with New York banks.
(1) Adjusted to eliminate the effoct of $30 million paid out on June 26 and returned the following day.
(k) About as million transferred from assounts of British authorized banks with New York banks.
(1) About $3 million transferred from accounts of British authorized banks with New York banks.
TO THE SUPERARY
(m) About $4 million transferred from accounts of British authorized banks with New York banks.
INVISISSV TECHNICAL
OFFICE OF THE
(n) $2 million transferred from the account of a British authorised bank with a New York bank.
25 21 Wd 91 AON 076
TREASURY DEPARTMENT
RECEIVED
30 Rockefeller Place
296
New York
Dovember 14, 1940.
suill
=. I. Merle Cochren,
Tressury Department,
Washington, D. C.
Jair Kerle:
1.
TETHERLATIS EAST INDIES
You have doubtless read in this morning's newspapers that
the negotistions between the N.E.I. authorities and the oil companies
on the one rand and the Japanese Government and Mitsui on the other,
have now been concluded. I an told that the understanding has been
initialed but no formal contracts have been drawn up as yet. The
errengement is for a period of six months and provides for supplies
of crude oil and products at the rate of 1,800,000 tons per annum,
heretofore the annual amount has been around 500,000 tons so that the
Japanese have obtained a substantial increase although their original
demande were for 3,500,000 tons. No aviation gasoline is included
and payment is to be made in dollars in New York before the vessele
are loaded. In fact the Japanese are to supply their own tonnage.
2. ARGENTINA
With reference to the Argentine, we have just received
advice from our people that they have reached an agreement covering
exchange at the official rate for petroleum imports up to the end of
this year on the basis of 50% in dollars in cash and 50% in 3-year
doller notes of the Argentine Treasury, with interest at 2-1/2% and
30% amortisation at the end of the second year. The aggregate amount
involved for us up to the end of 1940 will be close to $5,000,000.
This takes care of our companies for this year in a reasonably satis-
factory manner and we must now concern ourselves with the arrangaments
which can be made for next year. I presume the authorities in Buenos
Aires will went to await the outcome of the resent discussions in
Washington before they decide what they can do for us in 1941.
3. GREAT BRITAIN
In regard to the recent visit of Sir Andrew Agnew and the the
dearend that we take some sterling in payment of our exports to
United Kingdom, we have heard nothing further about the matter.
HUNGARY
We have had no further word regarding the possible sale of
our properties.
Copy to:
With kind personal regards, believe me,
Mr. D.W.Bell
Faithfully yours.
09py:Jbm
(signed) J. E. Crane
Regraded Uclassified
297
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE November 15, 1940.
TO
Mr. Thompson
FROM Mr. Haar M.
In further response to your request of December 26, 1939,
there is submitted herewith for the Division of Research and
Statistics a memorandum listing, with brief descriptions, the
studies or projects completed or under way, and the names of
persons working on each, for the month of October 1940.
298
DIVISION OF RESEARCH AND STATISTICS
Report of Studies or Projects Completed or Under
Way, and the Names of Persons Working on Each,
for the month of October 1940
For convenience of reference, the studies listed are
grouped under general subject heade.
The names shown for persons working on each project
include only those who participated fairly directly, as
explained in the introductory note to the corresponding
recort submitted on December 28, 1939. No attempt has been
made to cover also persons whose responsibility in each
particular case was mainly in planning, supervising, or con-
sulting.
Financial Analysis
I. Projects or studies completed
1. Reviewsof current developments in the high-grade se-
curities markets were prepared, and memoranda were
transmitted to the Secretary on October 1, 15, and 29. -
Mr. Haas, Mr. Turner, Mr. Purvis
These reviews contained, in addition to analysis of the
current situation, the following special studies:
(1) Decline of mutual savings bank dividend rates
(Review of October 1, page 4). - Mr. Purvis
(2) Canadian war finance (Review of October 15,
page 4). - Mr. Turner
(3) Canadian war effort (Review of October 29,
page 4). - Mr. Purvis
2. Yield rates on United States securities, direct and
guaranteed, on the basis of over-the-counter closing
quotations were calculated daily. These were summarized
each day in a table showing for each 1ssue the closing
price and yield that day, the change in price and yield
from the preceding day, and the price range since date
of issue and also for the years 1939 and 1940 to date.
A chart for each issue was kept up to date showing re-
cent daily price and yield figures together with compara-
tive monthly data since 1933 or since date of issue. -
Mr. Brown, Mr. Moody, Mr. Kroll
299
- 2 -
3. Four proposals of the RFC that the Secretary of the
Treasury request that Corporation to purchase preferred
stock of banks were examined. - Mr. Murphy, Mr. Turner,
Mr. Purvis
4. At the request of the Secretary, arrangements have been
made to seoure periodically from the British Purchasing
Commission certain information regarding purchases in
the United States by the British Empire. - Kr. Haas,
Mr. Lindow, Mr. March
(1) Weekly statements are received covering in dollar
volume the itemized purchases by British Empire
Governments through the Commission, the itemized
purchases made by these Governments with the
knowledge of the Commission but not through its
facilities, and inquiries made by the Commission
or with its knowledge for future purchases.
Similar statements are received showing, by
itemized contracts, the dollar volume of deliv-
eries made with respect to orders placed by Great
Britain through the Commission. The details with
respect to orders and deliveries are classified
by some twenty-five commodity groups designed
especially for the purpose.
These data are reviewed and edited in the Division
each week and reports are then prepared summarizing
total orders by the British Empire, classified by
commodity groups. A separate statement shows the
delivery status of orders placed by Great Britain
through the Commission, classified by the commodity
groups.
During October statements showing weekly orders
placed in the United States were prepared for the
weeks ended September 21 and 2d, and October 5. 12,
and 19; tables showing the delivery status of orders
placed by Great Britain (excluding Dominions) through
the British Purchasing Commission were prepared for
the weeks ended September 7, 14, 21, and 28, and
October 5 and 12. These tables were transmitted 8.0-
cording to instructions by the Secretary.
(2) The Commission also supplies the Division each week
with the data required to prepare stat ements giving
the details concerning the physical volume of air-
plane and airplane engine orders in the United States
by the British Empire. The material for these state-
ments is contained in a group of worksheets prepared
- 3 -
300
by the Commission, but it is necessary for the
Division to consolidate and coordinate the in-
formation contained in the Commission's state-
ments. The finished tables show, by company and
by type of plane or engine, the volume of orders
placed and the volume of deliveries made, by
months beginning with Sentember 1939, and by
weeks for a current period. Other tables show
the number of planes or engines on order and the
scheduled deliveries with respect to those orders.
Similarly, tables on options show the number of
planes or engines under option and the delivery
schedules. Orders for secondhand planes and en-
gines and deliveries thereon, as well as scheduled
deliveries with respect to unfilled orders, are
shown in separate tables. Summary tables show,
in one table each, the most important information
on planes and on engines, respectively. In addi-
tion to summarizing the data in the detailed tables,
the summary tables present information concerning
the number of planes or engines which have actually
been shipped and, in the case of planes, the country
of destination 1s shown.
During October tables giving detals and summaries
regarding purchases of airplanes and airplane
engines were prepared as of September 28, October 5,
12, 19, and 26, and were transmitted according to
instructions by the Secretary.
(3) Reporte are prepared each week showing commitments
by British Empire Governments for capital expendi-
tures in the United States and for extraordinary
charges designed to expedite deliveries from United
States companies. The data for these statements are
provided by the Commission but the tables are actually
prepared in the Division.
During October tables showing capital commitments
as of September 21 and 28, October 5, 12, and 19,
were prepared and were transmitted according to in-
structions by the Secretary.
(4) Monthly statements are also prepared with respect to
certain activities of the Commission. One of these
statements shows estimated British payments to be
made in the United States on balances due as of the
end of the preceding month. This statement shows
the amount of payments made to date, the value of
orders to date, and the residual amounts of balances
301
- 4 -
due, together with the estimated schedule of
future payments. The material for the table
18 obtained from the Commission but the table
18 actually set up in the Division. This table
was not prepared in October in view of the fact
that the payment data were incorporated in a
special analysis summarizing British requirements
as of October 1, 1940 (described below), prepared
by the British Purchasing Commission with the
assistance of the Division.
Another monthly statement shows the physical
volume of iron and steel purchases in the United
States by the British Government and the deliveries
which have been made. This statement 18 brought up
to date each month with new data supplied by the
Commission. A table was prepared showing the status
of iron and steel purchases as of September 30,
1940, and was transmitted on October 11, 1940 ac-
cording to instructions by the Secretary.
(5) Special analyses are also prepared from time to time.
Special statements were prepared during October 8.8
follows:
(a) Tables showing deliveries of airplanes and
airplane engines made to the French Govern-
ment through June 30, 1940 were prepared on
October 10, 1940 and transmitted according
to instructions by the Secretary.
(b) Statements summarizing British requirements
as of October 1, 1940 were prepared for the
Secretary by the British Purchasing Commission,
with the assistance of the Division, on
October 17, 1940. These tables were trans-
mitted to the Commission on October 18, and a
copy was returned to the Secretary by the
Commission the same day.
(c) Statements showing summary of British Govern-
ment orders, deliveries, and additional re-
quirements, as of October 1, were prepared on
October 26, 1940 and transmitted to the
Secretary on October 28, 1940.
302
5- At the request of Mr. Cochran on October 17, A descrip-
tion was prepared of the reports made from data obtained
from the British Purchasing Commission, and vas trans-
mitted to him on October 18. - Mr. Lindow
6. Arrangements have been made to obtain weekly statements
covering the itemized purchases in the United States
through various Dutch purchasing agencies, and the de-
liveries made on these orders. In these reports, all
orders and deliveries are classified in the same twenty-
five commodity groups designed for the purpose of report-
ing British orders in the United States. The first re-
ports, showing unfilled orders of the Dutch Government
purchasing missions as of September 28, 1940, were re-
ceived on October 25. - Mr. Lindow
7. At the request of the Secretary on May 23, arrangements
were made for securing weekly until September 11, and
after that fortnightly, from more than forty airplane
and airplane engine manufacturers data on deliveries,
new orders, unfilled orders, and estimated deliveries
by months on the unfilled orders. Analytical tables
are prepared every other week showing this information
by type of plane or engine and by class of purchaser.
Reports for the fortnights ended September 28, October 12,
and 26, were prepared during October and were transmitted
according to instructions by the Secretary. - Mr. Hass,
Mr. Tickton, Mr. D. J. Leahy
1. At the request of Under Secretary Bell, various memoranda
and charts were prepared for use in the Friday discussion
group, considering matters of general interest in connec-
tion with defense finance. - Mr. Haas, Mr. Murphy, Mr. Daggit
The material presented during the month included the fol-
lowing:
(1) "What Should We Do Now about Inflation", an analysis
which considered the problem as a whole, its mone-
tary, and its physical aspects, the last with special
emphasis on the nossibility of capacity shortages
in steel, zinc, conner, and lead. (Memorandum at
meeting on October 4)- - Mr. Hass, Mr. Murphy,
Mr. Daggit, Mre. May
(2) A chart showing the movements of selected economic
indices in the United States from 1913 to 1922.
inclusive, and annotations to accompany the chart.
(At meeting on October 4). - Mr. Haas, Mr. Murphy,
Mr. Turner
303
- 6 -
(3) Charts showing the movements of commodity prices
and related price factors during the first World
War, with a memorandum giving a chronological
interpretation of commodity price movements from
1913 to 1922, inclusive. (At meeting on October 11). -
Mr. Haas, Mr. Daggit, Mrs. May
(4) A chart showing the movements of interest rates in
the United States during the period 1913 to 1922,
inclusive, and annotations to accompany the chart.
(At meeting on October 11). - Mr. Murphy, Mr. Turner
(5) A study of present action needed to forestall in-
flation, which included an analysis of the current
approach to capacity by major industries represented
in the FRB index of industrial production, new basis,
with 8. parallel statement for steel, cotton textiles,
and zinc in the first World War period; and an inter-
pretation of the present commodity price situation
with special attention to hides, wool, zinc, copper,
and steel. (Memorandum and 8 large charts presented-
at the meeting on October 25). - Mr. Haas, Mr. Daggit,
Mrs. May
(6) A study of selected components of the FRB unadjusted
index of industrial production, new basis, for
September 1940 compared with the peake in 1929 and
in the period 1937 through 1939. (Chart presented
at the meeting on October 25). - Mr. Daggit, Mrs. May
(7) A study was made of the movement of basic commodity
prices, showing components of BLS 28 basic commodities
weekly from September 1939, daily from August 1940
to the present, and the percentage change for in-
dividual commodities from the August 1940 low to the
present. (Chart presented at the meeting on October 25).
Mr. Daggit, Mrs. May
(g) Relationship of commodity prices and the cost of
living, 1935 to date, monthly. ( Chart presented at
the meeting on October 25). - Mr. Daggit, Mrs. May
(9) A study of the "basic price" for copper, estimated
from past relationships of production, deliveries,
and stocks, 1935 to date, monthly. (Chart presented
at meeting on October 25). - Mr. Daggit, Mrs. May
304
- 7 -
(10) A memorandum was prepared in connection with a
request of Under Becretary Bell of June 24, on
the distribution among the various classes of
investors of increases in the direct and
guaranteed public debt since June 30, 1933, and
was transmitted to the Secretary and the Under
Secretary on October 3. - Mr. Murphy, Mr. Turner,
Mr. Purvis
(11) At the request of Under Secretary Bell on
October 4, a memorandum was prepared on the be-
havior of high-grade bond prices during Dast ware,
and was transmitted to him on October 17. - Mr. Haas,
Mr. Murphy
(12) A study was completed of problems encountered and
solutions devised in connection with var borrowing
and was incorporated in a memorandum on borrowing
problems and methods of the United States Treasury
during the World War, which was transmitted to
Under Secretary Bell on October 23. - Mr. Haas,
Mr. Murphy, Mr. Purvis
9. At the request of the Secretary on October 21, a memo-
randum WAB prepared showing defense appropriations made
since January 1, 1940, and was transmitted to him on that
date. - Mr. Tickton
10. At the request of Mr. Blough on October 25, a table was
prepared showing the computed annual interest charge on
the direct and guaranteed debt on February 20, 1933 and
September 30, 1940, classified by type of tax exemption,
and was transmitted to Mr. Blough on the date of his re-
cuest. - Mr. Conrad
11. At the request of Mr. Broughton on September 14, a memo-
randum, with tables and charts, was prepared for Under
Secretary Bell showing proposed schedules of redemption
values of United States savings bonds with various
specified final maturity yields, and analyzing the current
position of savings bonds relative to the yield of market
securities, and was transmitted to the Secretary and the
Under Secretary on October 3. - Mr. Murohy, Mr. Brown,
Miss Eyre
12. At the request of Under Secretary Bell on October 22, a
memorandum was prepared on a procosal for 8 type of
United States savings bond with a current interest
rate, and was transmitted to him on October 25. -
Mr. Murphy, Mr. Purvis
6 -
305
13. At the request of Under Secretary Bell on October 23,
1/4 per cent United States Housing Authority note,
for information on the probable yield of a one-year
Mr. Murphy, Mr. Conrad
figures were given to him orally on that date. - Mr. Haas,
14. At the request of Assistant Secretary Sullivan on
October 25, a table was prepared showing corporate net
profits, after all Federal, State, and local taxes, for
the years 1932 to 1939, inclusive, and was transmitted
to him on that date. - Mr. Tickton
15. In response to a request by Mr. Foley on September 25,
a memorandum was prepared and transmitted to him on
October 17 for use by the Legal Division in preparing
a review of the indebtedness compromise offer of the
Erie Forge and Steel Company. - Mr. Murphy, Mr. Conrad
II. Projects or studies under way
1. Chart comparing yielda on long-term Treasury bonds and
over-the-counter volume depends for completion upon
arrangements to secure the necessary data. - Miss Eyre
2. Study of the relationship between the yields and
maturities of high-grade securities immediately pre-
ceding prior major bear markets in such securities. -
Mr. Turner
3. Comparison of relative amplitude of price fluctuations
of long-term and short-term securities. - Mr. Lindow,
Mr. Conrad
4. Study of the effect of the maturity, call period, coupon,
premium, and size of the issue on the prices and yields
of U. S. securities. - Mr. Conrad
5. Memorandum comparing and contrasting war and depression
deficit-financing. - Mr. Murphy
6. Review of war-financing measures in belligerent countries
in the present war. - Mr. Murphy, Mr. Purvis, Mr. Stringham
7. United States Savings Bonds - An analysis of factors affecting
sales and redemptions of United States savings bonds, as a
guide to future experience. - Mr. Conrad
8. At the request of the Division of Statistical Standards,
Bureau of the Budget, on September 20, 8. review 1s being
made of the "Base Book of Financial Statistics", to be
issued by the Federal banking authorities. - Mr. Murphy
306
- 9 -
9. At the request of Under Secretary Bell on October 9,
a memorandum is being prepared on the increase of
money in circulation in the United States. - Mr. Turner
10. At the request of Under Secretary Bell on October 14,
a memorandum 1s being prepared on a memorandum submitted
by Mr. John Evans, President of the First National Bank
of Denver, Colorado, in reference to United States Govern-
ment bonds now owned by the Federal Reserve System and
its member banks, and suggestions concerning a refunding
and change in form which would sppear to be in interest
of the Treasury Department, the Federal Reserve System,
the member banks, the Federal Deposit Insurance Corpora-
tion, and the public generally whose money is deposited
in member banks. - Mr. Murphy
11. At the request of Under Secretary Bell replies are being
prepared to certain questions asked by the Wagner Committee
preparatory to its investigation of banking and monetary
conditions pursuant to Senate Resolution 125. - Mr. Murphy,
Mr. Turner, Mr. Conrad, Mr. Purvis
12. At the request of Under Secretary Bell on October 11, 8.
memorandum 1s being prepared on suggested changes which
should be made in the laws affecting the public debt in
the event of a revision. - Mr. Murphy
13. A review of a report by the Bureau of Accounts on 3.4269
(to extend the Social Security Act), at the request of
Senator Harrison, Chairman of the Finance Committee, is
being made in response to a request by the Bureau of
Accounts on September 10. - Mr. Murphy, Mr. Reagh,
Mr. Brown
Revenue Estimates
I. Projects or studies completed
1. The regular monthly statement was prepared for the
Bureau of Accounts, showing the latest revised esti-
mates of receipts, by months and by orincipal sources
of revenue, for the period October-June 1941, and was
transmitted on October 4. - Mr. Wilson, Mr. Delcher
2. The regular monthly summary comparison of estimated re-
ceipts and actual receipts in September 1940 on the
daily Treasury statement basis, was prepared. - Mr. Wilson,
Mr. Delcher
307
- 10 -
-
The regular monthly detailed comparison of estimated
and actual receipts in September 1940, and for the
period July-September 1940, based on the collections
classification, V&B prepared. - Mr. Vilson, Mr. Delcher
A preliminary revision of the Budget estimates of re-
ceints for the fiscal years 1941 and 1942 WRS made for
the Director of the Budget in resoonse to nis request
addressed to the Secretary on Sectember 7, and was for-
varded to Under Secretary Bell on October 4, in a
letter prepared for signature of the Secretery. - Ar. Hane,
r. [Donnell, Mr. Damgit, Er. T. F. Leaney, Kr. Vilson,
r. Bronfenbrenner
5+ At the request of the Bureau of Accounts on August 20,
in connection with the 1942 Budget, estimates were made
of (1) tax collections under the Federal Insurance Con-
tributions Act (formerly Title VIII of the Social
Security Act), for the fiscal years 1941 end 1942: (2)
texes to be collected from carriers and their employees,
for the fiecal years 1941 and 1942; and (3) amounts to
be deposited in the Unemployment Trust Fund under the
Social Security and Railroad Unemployment Insurance
note, for the fiscal years 1941 and 1942. The estimates
were incorporated in a memorandum to Kr. Maxwell, which
198 transmitted on October 3.-Mr. Wilson
E.
At the request of Mr. Heffelfinger on October 28, ore-
liminary estimates were prepared of the monthly distribu-
tion of revenue during the fiscal years 1941 and 1942,
end were transmitted on that date. - Mr. Delcher, Are. May
7, Tentative estimates of receipts for the fiscal years 1943
end 1944 were prepared at the request of Under Secretary
Bell and were given him orally on October 14. In connec-
tion with the component miscellaneous internal revenue,
the estimates involved the making of a special study to
determine the influence on Federal revenue collections
of taxes upon consumers in these years. - Mr. Heas,
r. Dangit, Mr. Wilson, Mrs. May
At the request of the Division of Tax Research on
September 20, a review was made of a proposed revision
of gift tax Table 2 for Statistics of Income pursuant to
recommendations made to the General Committee on
Statistics of Income by its subcommittee on estate and
=1ft tax tabulations, and was transmitted to 1 r. Blough
on October 3. - Kr. 0'Donnell
Regraded Uclassified
308
- 11 -
9. Estimates were prepared of the revenue yield of the
Second Revenue Act of 1940, in terms of probable range
based on the upward revision in the forecast of business
levels for the calendar year 1940 and the lower levels
of forecasts used in connection with estimates made
during the Committee hearings on the excess profits tax
bill. The estimates in tabular form were given to
Assistant Secretary Sullivan on October 2. - Mr. Leahey
II. Projects or studies under way
1. Tentative plans for a WPA statistical project in con-
nection with work on the excess-profits tax, as well
as material proposed to be obtained from the Securities
and Exchange Commission, are being reviewed in accord-
ance with requests by the Division of Tax Research on
July 12 and 17. - Mr. T. F. Leahey
2. At the request of the Division of Tax Research on
July 12, an estimate 18 being made of the additional
revenue which would be derived if mutual insurance
companies other than life Insurance companies taxable
under Section 207 of the Internal Revenue Code were
made taxable in the same manner as stock insurance
companies other than life insurance companies taxable
under Section 204, and at the same time the exemption
under Section 101 (11) were restricted to local mutual
companies of the assessment type. - Mr. T. F. Leahey
3. An estimate is being made of miscellaneous internal
revenue except from capital stock, estate, and gift
taxes, in the calendar year 1941, if the taxes in ex-
istence as of July 1, 1928 were in effect. -
Mr. Daggit, Mrs. May, Mr. Chevraux, Mr. Smith
Economic Conditions Related to Fiscal
and Revenue Matters
I. Projects or studies completed
1. Memoranda on the business and price situation were ore-
pared and were transmitted to the Secretary on October 7,
14, 21, and 28. - Mr. Haas, Mr. Daggit, Mrs. May,
Mr. Chevraux, Mr. Smith
309
- 12 - -
These memoranda contained in addition to analysis of
the current situation the following special studies:
(1) The movement of non-ferrous metal prices com-
pared with the movement of the BLS index of all-
commodity prices during the first World War.
(Chart in memorandum of October 7). - Mr. Daggit,
Mrs. May
(2) Relationship of commodity prices and the cost of
living, 1935 to date, monthly. ( Chart in memo-
randum of October 7. Also listed above under
Financial Analysis, section I, as item 8(g)). -
Mr. Daggit, Mrs. May
(3) FHA reports on new homes under construction and
new homes to be built through its facilities,
1939 to date, weekly. (Chart in memorandum of
October 14). - Mr. Daggit, Mrs. May
(4) Production and prices of copper, lead, and zinc,
monthly from 1936 to October 18, 1940. (Chart in
memorandum of October 21). - Mr. Daggit, Mrs. May
(5) A study of the "basic price" for copper, 1935
to date, monthly. (Chart in memorandum of October 21.
Also described above under Financial Analysis,
section I, as item 8(9)). - Mr. Daggit, Mrs. May
(6) Movements of commodity prices and related price
factors with chronological interpretation for
period 1913-1922. (Revised charts and annotations
in memoranda of October 21 and 28. Also described
above under Financial Analysis, section I, as item
8(3)), - Mr. Daggit, Mrs. May
(7) A study of selected components of the FRB unadjusted
index of industrial production, new basis, for
September 1940 compared with the peaks in 1929 and
in the period 1937 through 1939. (Chart in memo-
randum of October 28. Also listed above under
Financial Analysis, section I, as item g(6)). -
Mr. Daggit, Mrs. May
2. Memoranda on employment under the Work Projects Administra-
tion were prepared and were transmitted to the Secretary
on October 1, 8, 14, 23, and 28. - Miss Hagedorn
310
- 13 -
3. At the request of the Secretary, arrangements have been
made with the Bureau of Labor Statistics of the Depart-
ment of Labor for the securing of monthly data on the
number of factory workers employed in 25 of the large
airplane and airplane engine plants. On the basis of
these data, and of a census prepared at the Treasury's
request by the Bureau of Labor Statistics for August
1940, an estimate of employment in the airplane in-
dustry by geographic areas is prepared. A report for
September was transmitted on October 10, according to
instructions by the Secretary. - Mr. Tickton
4. At the request of the Secretary on October 18, three
tables were prepared and were transmitted to him on
that date showing estimated employment and the
percentage change for selected periods for the fol-
lowing industrial groups: total non-agricultural,
total factory, iron and steel, shipbuilding, airplanes,
airplane engines, machine tools, aluminum, and explosives. -
Mr. Daggit, Mrs. May
5. At the request of the Secretary, a table is prepared
each week summarizing exports of petroleum products,
scrap iron, and scrap steel, from the United States
to Japan, the U.S.S.R., Spain, and Great Britain, 8.8
indicated by departure permits reported daily by the
Office of Merchant Ship Movements. The tables were
prepared for the weeks ending October 5, 12, 19, and
26. On October 7, 14, 21, and 28, the original and 13
photostats were transmitted to Assistant Secretary
Gaston. In addition, each week two photostate were
transmitted to Mr. Young, one of which was for
Mr. Purvis. - Mr. Tickton, Miss Kailey, Mr. D. J. Leahy
6. At the request of Mr. Young on October 15, a study was
made to ascertain available export figures on specified
commodities, and was transmitted to him in a memorandum
on October 29. - Mrs. May, Mr. Smith
7. Compilations were made of daily quotations on selected
commodities and daily and weekly figures on selected
business indices, foreign and domestic security trans-
actions, security prices, exchange rates, etc., as
well 8.8 other data for the Secretary's chart book. -
Mrs. May, Mr. Chevraux
8. A memorandum entitled "What Should Be Done now about
Inflation" was prepared, on the basis of the memorandum
listed under Financial Analysis I, 8.6 item 8 (1) above,
and was transmitted to the Secretary and the Under Secretary
on October 16. - Mr. Haas, Ar. Daggit, Mr. Murphy
311
- 14 -
9. A memorandum, with charts, was prepared giving a
chronological interoretation of commodity price
movements from 1913 to 1922, and was transmitted to
the Secretary on October 7. This study was used also
in connection with item 8(2), section I, under
Financial Analysis, and item 1(6) under Economic
Conditions. - Mr. Haas, Mr. Daggit, Mrs. May
10. A study was made of the movement of basic commodity
prices, showing components of BLS 28 basic commodities
weekly from September 1939, daily from August 1940 to
the present, and the percentage change for individual
commodities from the August 1940 low to the present,
and was shown in a chart. The results of this study
were used in connection with the memorandum to the
Secretary shown 88 item 11 below, in the business
memoranda of October 21 and 28, and at the meeting of
the Friday discussion group on October 25. - Mr. Daggit,
Irs. May
II. At the request of the Secretary on October 15, a memo-
randum WRB prepared showing movements of commodity
orices and living costs, and WELB transmitted to him on
October 16. - Xr. Hass, Mr. Deggit, Mrs. May
12. At the recuest of the Secretary compilations were made,
and were transmitted to him on October 21 and 22, in
tables with notations showing business trends since
1929, as follows: FRB index of industrial production
(new); American Iron and Steel Institute steel produc-
tion; Standard Statistics cuarterly earnings of industrial
and utility corporations; BLS factory payrolls; NICB cost
of living index (on 1923 and 1926 bases): Department
of Agriculture farm income (2 series): BLS wholesale
prices of raw materials and finished products; BLS
factory average hourly earnings; F. V. Dodge residential
construction contracts awarded; and FRB production of
non-durable manufactures. Included were the following
business data for more recent years: BLS estimated
emoloyment in September 1940 for selected industries,
showing percent increase since August 193° and August
1939; NICB estimated total employment and unemnloyment
in August 1940; and WPA employment by months, 1938 to
date. - Mr. Haas, Mr. Daggit, Mrs. May, Miss Hagedorn
Regraded Uclassified
312
- 15 -
13. A forecast we.B made of the following basic business
series for the fiscal years 1943 and 1944, for use in
estimating tax revenues: FRB index of industrial
production, new and old bases; BLS index of wholesale
prices; an index of the value of industrial production;
BLS index of factory payrolls; Department of Commerce
series of salaries and wages; Standard Statistics index
of 419 stock prices; and Federal Reserve series on bank
debits outside New York City. - Mr. Haas, Mr. Daggit,
Mrs. May, Mr. Smith
II. Projects or studies under way
1.
Index of unfilled orders.
An attempt is being made to improve our information on
the volume of unfilled orders by working out a composite
index based on data from individual industries. -
Mr. Daggit
2.
Forces determining trends of basic commodity prices.
This project involves a study of (1) the forces de-
termining general commodity prices and (2) the forces
determining the prices of individual commodities.
With respect to (1), general commodity prices, an
analysis is in process of disparities between demand
and production as a basic price factor which, under
excessive war demand, might lead to inflation. For
use in this analysis two indexes of demand are being
constructed: An index of export demand which ex-
presses the exports of manufactured goods in physical
volume, and the index of consumer buying in terms of
physical volume, which 1s part of the project on
measures of consumer buying listed 8.8 item 3 below.
With respect to (2), prices of individual commodities,
shipments of a given commodity, or deliveries to con-
sumers, are taken 8.8 a measure of demand, to be com-
pared with production. Ten basic commodities have been
selected tentatively for study, and this work is in
process. - Mr. Daggit, Mrs. May, Mr. Smith, Miss Hagedorn
313
- 16 -
3. Measures of consumer buying.
A project 18 under way with the object of developing
(1) an index to measure the buying power of consumers
in terms of physical volume of purchases, after cor-
recting for the effect of changes in price on the RD-
parent demand; and (2) an index to measure changes
in total consumer expenditures, in dollar volume.
These two indices will supplement our present "index
of sales", which 1s designed to measure the "offtake"
of manufactured goods into various consumption channels.
Studies on a monthly basis have been nearly completed
on individual components of two physical volume in-
dexes of consumer buying, one corrected for the effect
of price changes, and the other corrected both for the
effect of price changes and for the effect of changes
in national income. The weighting of the individual
components remains to be done. In addition, with
respect to the index of consumer expenditures in dollar
volume, substantial progress has been made in develon-
ing individual series, in determining their suitability
for inclusion and the necessary adjustments. The pur-
pose 1s to cover as large as possible 8 proportion of
the purchases of ultimate consumers. - Mr. Daggit,
Mrs. May, Mr. Smith
4. Trends of individual commodity prices and price factors
during the World War period.
This project is patterned after the general study of
prices and price factors, 1913 to 1922, made in
October 1939, but deals with six individual basic
commodities - wheat, cotton, hoge, steel, copper, and
zino. The project 1s designed to determine the principal
price factors associated with the wartime rise and sub-
sequent collapse of prices of these commodities. -
Mr. Daggit, Mrs. May
5. Index of commodity stocks.
This project 16 designed to develop 8. composite index
of basic commodity stocks as 8. measure of one important
factor in the general price level. Stocks of sixteen
important industrial materials, expressed in terms of
their net effect on prices, are being compiled for this
index. - Mrs. May
314
- 17 -
6. Index of goods inventories.
A better index of inventories of finished goods 18 needed
as an indication of business maladjustments, with a break-
down as between inventories of finished goods held by
manufacturers and those held by others. An attempt to
develop such an index 18 under way. - Mr. Daggit
7. Index of buying on deferred payments.
A study of the volume of installment buying and consumer
credit has nearly been completed. This study is designed
eventually to provide & monthly index of the volume of
buying on deferred payments, which at times 18 an important
business factor. It 1a in abeyance at present, pending
publication of a new study by the Department of Commerce.-
Mrs. May
8. Weekly approximations of the FHB index of industrial
production.
Project was started during March and for completion
awaited the new FRB monthly index which has since been
released. This project 1s designed to develop an in-
dex of industrial production that will indicate week
by week the approximate level of the FRB index. It
will include a larger number of weekly series than are
included in any current business indices, with weight-
ings and seasonal adjustments approximating those in
the FRB index. - Mr. Daggit, Mr. Smith
9. Classifications of specified export data by Commerce
and Treasury Departments.
A new study was made during the month to determine how
to classify export data from the Department of Commerce
to conform as closely as possible to the classification
in the weekly reports summarizing exports of petroleum
products, scrap iron, and scrap steel, from the United
States to Japan, the U.S.S.R., Spain, and Great Britain,
a.s shown by departure permits granted. Monthly statistics
were compiled, on the Commerce classification developed by
this Division, from January 1937 to July 1940. A memo-
randum 18 in preparation showing the Commerce series
chosen, with an explanation of divergences in the Commerce
and Treasury series. - Mr. Daggit, Mrs. May
Regraded Uclassified
315
18 -
10. New orders in the lumber industry.
This project 1s designed to obtain current figures on
a seasonally-adjusted basis for appraising the outlook
for lumber production. Work has been done toward more
accurate determination of seasonal trends, which has
involved obtaining new data for earlier years. - Mr. Daggit,
Mrs. May
Actuarial Problems
I. Projects or studies completed
1. Federal Communications Commission.
A request from the Federal Communications Commission
was received on May 18 to review an actuarial report
of the American Telephone and Telegraph Company re-
garding recent changes which they have made in the
valuation of their pension plan. Members of the
Division's staff served in an advisory capacity.
A final report was submitted to the Commission on
October 18. - Mr. Reagh, Mr. Brown
II. Projects or studies under way
1. Board of Actuaries of the Civil Service Retirement and
Disability Fund.
There 1s pending before the Board of Actuaries the
matter of approving regulations with respect to the
optional benefits payable under the Civil Service
Retirement Act. The Comptroller General has decided
that a cash refund of voluntary contributions would
not be permissible under the Act. On the basis of
this decision and other information the Board of
Actuaries is now deciding whether to approve the
regulations. - Mr. Reagh
2. Board of Actuaries of the Civil Service Retirement
and Disability Fund.
The Board of Actuaries is laying out detailed plans for
tabulating and processing data for use in preparing
the regular five-year valuation of the Civil Service
Retirement Fund for the purpose of determining the 11-
abilities of the Government under the Civil Service Re-
tirement law. Under the law, such a valuation must be
prepared as of July 1, 1940. - Mr. Reagh, Mr. Brown
Regraded Uclassified
316
- 19 -
3. Board of Trustees of the Federal 01d-Age and Survivors
Insurance Trust Fund.
In cooperation with the members of the staff of the
Social Security Board, there is being prepared a draft
for the first annual report of the Board of Trustees. -
Kr. Reagh, Mr. Murphy, Mr. Brown
4. Actuarial valuation of the Foreign Service Retirement
and Disability Fund.
The Foreign Service Retirement law, as approved April 24,
1939, Section 26(m), provides that the "Treasury Depart-
ment shall prepare the estimates of the annual appropria-
tions required to be made to the Foreign Service Retire-
ment end Disability Fund and shall make actuarial valua-
tions at intervals of five years, or oftener if deemed
necessary by the Becretary of the Treasury". An outline
of the data required for making an actuarial valuation
has been submitted to the State Department. A preliminary
estimate of the appropriation required for the fiscal
year 1942 has been prepared, and has been submitted to
the State Department. - Mr. Reagh, Mr. Brown
5. Retirement System for Field Employees of the Farm Credit
Administration.
In response to A request from the Farm Credit Administra-
tion on October 10, assistance is being given in devising
a retirement system covering field employees in that
organization. During the month several conferences were
attended by a member of the staff. - Mr. Reagh
6. Retirement System for Haitian Government Employees.
The State Department has requested assistance in de-
vising 8. retirement system for employees of the Haitian
Fiscal Service. Cooperation will be given the Fiscal
Representative of Haiti in that cost estimates will be
prepared on the basis of data submitted and plans will be
suggested for financing the system. The work 18 temporarily
in abeyance. - Mr. Reagh
7. Report of the Civil Service Assembly of the United States
and Canada on "The Retirement of Government Employees.
A first draft of the chanter on "Financing the Plan" is
in process of preparation. - Mr. Reagh
Regraded Uclassified
317
- 20 -
R. Review of Memorandum on Pension Trust Plan vs. Group
Annuity Plan.
At the request of the Division of Tax Research on
October 29, a review 18 being made of a memorandum
submitted by Mr. B. E. Wyatt, University of Michigan,
entitled "The Inequitable Tax Provisions of the Pension
Trust Plan in Comparison with the Group Annuity Plan. " -
Mr. Reagh, Mr. Brown
Other Projects or Studies
1. Treasury Bulletin.
Data were prepared for the October issue of the Bulletin
on average yields of long-term Treasury bonds and high-
grade corporate bonds. - Miss Eyre
All the material submitted for the October issue was
reviewed and edited. Substantial revision was made in
the following tables: Customs duties and taxes col-
lected, and values of dutiable and taxable imports,
estimated by tariff schedules; Bank holdings of Govern-
ment obligations; Securities held in Treasury trust
funds and by certain governmental corporations;
Statutory debt limitation; Average yields of Treasury
bonds and high-grade corporate bonds; Government corpora-
tions and credit agencies: assets, liabilities, and
proprietary interest of the United States; Silver pro-
duction by leading countries; and Balance sheet of ex-
change stabilization fund.
Additional revisions are being considered for the
November issue. - Mr. Lindow, Miss Eyre
2. Annual Report of the Secretary of the Treasury.
Articles for the text of the Annual Report for the
fiscal year 1940, including the special review are
being prepared on the following subjects: Estimates of
receipts; Public Debt; Obligations guaranteed by the
United States; Absorption of the direct and guaranteed
public debt by classes of holders; Market developments;
Banking developments; Treasury activities under the
provisions of the Social Security Act; Treasury national
defense activities; and the Administrative report for the
Division. - Mr. Haas, Mr. Tickton, Miss Michigan,
Miss Westerman, Mr. Turner, Mr. Bronfenbrenner, Mr. Murphy,
Miss Ziegler, Mr. Reagh, Mr. O'Donnell
Regraded Uclassified
318
- 21 -
Manuscript for the Annual Report, both for the regular
features of the Report and for the special review
articles, 1s being given an editorial review 8.8 re-
ceived. The usual handling of the material is going
forward. - Mr. Tickton, Miss Westerman, Mr. Turner,
Mrs. Wolkind
3. Other material for publication.
(1) Two tables on the distribution of holdings of
direct and guaranteed Government obligations were
brought up to date for Moody's Government Manual,
and were transmitted to the Bureau of Accounts on
October 18. - Mr. Turner
(2) At the request of Assistant Secretary Gaston on
October 18, an article is being prepared on the
operations of the Treasury Department during 1940
to be incorporated in the 1941 Americana Annual. -
-Mr. Tickton
4. Cumulative index of Treasury Publicatione.
Work has been begun on the preparation of a cumulative
subject index of Treasury publications since the establish-
ment of the Department, covering (1) Annual Reports of
the Secretary, (2) other publications issued by the De-
partment, including annual reports of the bureaus and
offices in the Department, and (3) material prepared in
the Treasury Department which was published in Congres-
sional documents, hearings before Committees of Congress,
or the Congressional Record. - Miss Westerman
5. Sources of Statistical material in Annual Report and
Bulletin.
Request was made by Mr. Henrikeen, Bureau of Accounts,
on October 14, for information on the sources of statistical
material in the Annual Report of the Secretary of the
Treasury and in the Bulletin of the Treasury Department.
The material on the Annual Report was transmitted on
October 25, and the information on the Bulletin 18 in
preparation. - Miss Michener, Mr. Lindow, Mr. Tickton,
Miss Westerman
6. Correspondence.
Replies were prepared to letters received on subjects
relating to the work of the Division, and letters drafted
elsewhere and submitted to the Division for that purpose
were reviewed. - Miss Michener, Miss Ziegler, and other
members of the staff in appropriate fielde of work.
Regraded Uclassified
319
- 22 -
During October 307 letters were received in the
Division and 299 were handled as required.
7. Charts.
Charts are prepared and continually brought up to date
for use in memoranda and in chart books on special
subjects, and corresponding photographic, photostatic,
and multilith work is carried on. This is done in the
Graphic Section under the supervision of Mr. Banyas.
A statistical report on the work of the Graphic Section
for the month of October is attached.
320
Work completed in the Graphic Section, Division of
Research and Statistics, during October 1940
Type of work
For Division
For
of R & S
Others
Total
raphic:
New charts:
Total charts completed
34
9
43
Bond book charts completed
63
-
63
Charts brought up to date:
3 bond chart books brought up to date
27 (times)
-
27 (t)
All other charts brought up to,date
682
29
711
Miscellaneous:
Total jobs
19
13
32
hotographic;
Photographs:
Total jobs
46
16
62
Number of-
Negatives
182
38
220
Contact prints
105
76
181
Enlargements
632
49
681
Photostats:
Total jobs
136
4
140
Number of-
Lettersize copies
730
15
745
All other copies
9,190
15
9,205
Multilith:
Total jobs
3
1
4
Number of-
Zinc plates
79
14
83
Miscellaneous:
Total jobs
15
11
26
Divit
1-1-40
Statistical Report on Wrk Completed by the
Graphic Section, Division of Research and Statistics, by months,
beginning July 1940.
#
:
I
#
#
I
1
Type of work
July
Aug.
Sept.
Oct.
lov.
Dec.
Total
#
#
4
$
I
$
I
4. Graphic
In charts completed
45
18
39
43
Charts brought up to date
748
687
716
711
Bond book charts completed
2
-
-
63
Bond books brought up to date
28 (times) 27 (t)
26 (t)
27 (t)
Miscellaneous jobs completed
23
17
36
32
3. Photographic
Photographs1
Total jobs
53
48
66
62
Number of-
Negatives
151
170
158
220
Contact prints
164
158
250
181
Enlargements
177
96
196
681
Photostats:
Total jobs
123
116
149
140
Number of-
Lettersize copies
3,657
342
420
745
All other copies.
8,165
12,467
8,967
9,210
Multilith:
Total jobs
7
5
5
4
Number of-
Zinc plates
91
131
80
83
Miscellaneous:
Total jobs
14
12
27
26
IB:wlt
321
7-31-40
9-3-40
10-1-40
11-1-40