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329
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 12, 1941
TO
Secretary Morgenthan
FROM Mr. Cochran
confidential
Registered sterling transactions of the reporting banks were as follower
Sold to commercial concerns
£48,000
Purchased from commercial concerns
£12,000
Open market sterling held steady at 4.03-1/2. Transactions of the reporting
banks were as follows:
Sold to commercial concerns
E 5,000
Purchased from commercial concerns
&
The Argentine free peso had an easier tendency today. It closed at .2296,
as compared with yesterday's final rate of .2303.
In New York, the closing rates for the foreign currencies listed below were
11 follows:
Canadian dollar
15-1/16% discount
Swies franc (commercial)
.2322-1/2
Swedish kross
.2384-1/2
Reichemark
.4005
Lira
.0505
Brasilian milreis (free)
.0505
Mexican peso
.2066
Cuban peco
6-1/2% discount
We sold $998,000 in gold to the Central Bank of the Uruguayan Republic,
which was added to its sarmarked account.
No new gold engagements were reported.
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 U. 3. equivalents were 42.56# and
42.444.
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 three purchases of silver totaling 150,000 ounces under the Silver
Purchase Act, all of which consisted of now production from foreign countries, for
"orward delivery.
Regraded Uclassified
330
-2-
the Federal Reserve Bank's report of March 5. listing deposits of banks in
Asia with the New York agencies of Japanese banks, showed that such deposits totaled
$101,960,000. an increase of $458,000 since February 26. Also reported were the
Tokohama Specie Bank Agency's dollar liabilities to and dollar claims on Japanese
banks in Asia, which stood as follows on March 5:
Change from
March 5
February 26
Liabilities:
Deposits for Japan and Manchuria
$56,812,000
+ $440,000
Deposits for China
35,855,000
+ 267,000
.
: U.S. Treas. Bills, comm. paper, etc....
23,655,000
- 75,000
Claims
: Loans
$60,753.000
+$6,206,000
#
: Other - mainly Jap. import bills
9,991,000
+ 346,000
Nost of the $6,206,000 additional funds received from Agency loans (made primarily
to Japanese banks in Japan and Manchuria) were used for Japanese commitments in this
country, it was reported.
pms.
CONFIDENTIAL
331
BRITISH EMBASSY,
WASHINGTON, D.C.
Personal and
March 10th, 1941.
Secret
Dear Mr. Secretary,
I enclose herein for your
personnal and secret information copies
of the latest reports received from
London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely your,
Harifax
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
Telegram from London dated March Btb, 1941, 332
1.
Reval. horwegies loaded tanker (3000
tone) was Bank off the set coast yesterday and a
Dritish ship (6,400 tone) outward bound in convey,
with general cargo, was torpodned in the North
Western approaches early Harch 7the
2.
Hilitary. British Somaliland. Perfer 210
miles morth of Megadishu OD Harer road has been
occupied and Belet Uen serodrome 1s fit for use;
the roads and bridges are intact, water plentiful
and large quantities of petrol and oil have been
esptured. Patrols have been sent forward to
Oddur and Dolo (North West of Lugh Perrendi). Among
material ceptured at and on the way to Mogadiscio
are 348,000 gellone of R/T petrol and 0,000 gollone
of evietion petrol.
3.
Bulgaria. German reconnaissance detachments
reached the vicinity of the Speek frontier OD March
3rd and by March 5th the main concentrations were
developing in Sliveno Yambol area, where heavy tanks
are reported and 10 the Strome Valley near Gorna
Djumeya and Petrich. Estimated that B divisions of
Germen troops are in Bulgerian territory.
:
Bulgarian divisiomeppear to be disposed as
follows: Yugoslev frontier 1 motorised, 2 infestry,
2 FOSOFVO infentry forming ...... Turkish frontier, 2
motorised, 7 infantry, Macedonian frontier 4 lofestry,
Southern Dobrudje 1 infentry. Bolhoris general heade
quarters to reported et Store lagora.
5. R.A.V./
Regraded Uclassified
333
a I I
5.
R.A.P. Earch 6th 1 medium bomber attacked
railway targets at Obent.
Sight of March 6th/7tb. Operations can-
celled.
Be
G.A.F. Night of Merch 6th/7th. 40 air-
craft were operating over this country but only 5
came inland, the reminder were mine-laying.
7. Melts. Melta was attacked March 5th as
reported yesterday by about 100 aircraft including
60 bombers. Damage was slight at one aerodrome
but at Hal For barracks and bangers considerably
damaged; 4 aircraft were destroyed on the ground
and all remaining aircraft on the serodrome were
rendered temporarily unserviceable. 11 of our
fighters intercepted and shot down 7 enemy circraft
probably so eighth and damaged four more. Anti-
aircraft destroyed a further nine and damaged four.
One of our fighters 10 missing.
0.
Aircraft ensualties to operations ver end
from British Islos,
German destroyed one, damaged once British
nil.
:
Home Security. March 7the Two R.A.F. aero-
dromes were attacked by
........)
some damage to
buildings but no serious casualtion.
Regraded Uclassified
Telegrom received from London dated arch 0, 1941.
1.
Noval. In the Sues Canal divers have
located mines which were counter-mined, Believed
3 mines remain to be dealtwith, expected Canal will
be open March 7th. Twenty-three mines were exe
ploded at verious home porte on March 7th.
2.
One enemy aircraft loid mines off llayers
Pelle of Earch 7th. L.L. sweepers detonated these
the same efternoon. Between 14.30 and 16.30 hours
March 7th six aircraft laid mines in the Humber
outrance, fifteen were seen to drop.
3.
on March 7th convoye were attacked by De
boat in the Seatern approsches and off the Rest
Coast by aircraft, and during the night of March
7th-Sth by E-boats. of the nine ships torpedoed
or damaged by aircraft four sinking or suck. One
sircraft shot down one damaged.
4.
On March 7th off the Book of Holland a 2500
ton merchant vessel we bombed and left sinking by
coastal aircraft.
5.
Ethiopia. In Cojjem area patriot operations
continue against retreating garrison of Burye. 300
prisoners and four guas have been emptured and 80
seroplane shot down. 1,700 desertors have surren-
dered.
6.
Kenya Colony. Heavy rain has fallen on
Sthiopien border end may roads ere under water.
7.
R.A.F. March 7th. During the day aircroft
from the Coastal Command bombed SD aerodrome in
Tolland hitting hangers also navel dockyard at
Renhelder and left 9 2,500 ton merchant vessel in 9
sink Regraded Uclassified
335
- 2 -
sinking condition off the Dutch Coast.
8.
Night of March 7th-Werch 8th. Operations
cancelled.
:
German Air Force, March 7th about fifty
enemy aircraft were operating overland in wide
localities and forty more were working off East
coast. One enemy circraft was destroyed by enti-
aircraft shore battery and one by a Sevd trawler,
a third hit the mot of a ship and crashed.
10. light March 7-March 8th. Activity
negligible.
11. Belts. Night of Narch 6th/March 7:h.
Twelve enemy sircraft made individual attacks on
various objectives without causing serious damage
OF casualties.
12. March 7the Four bombers escorted by 10 MR
109's damaged a Sunderland by machine-gun fire, shot
down a Glen Martin and also one Hurricase out of
seven which intercepted. Pilot saved. Two enemy
circraft were probably destroyed by enti-sireroft
fire.
13,
Aircraft casualties to operations over and
from Aritish Isles. German, three destroyed.
Britleh nile
14. Home Security "arch 7th. A bell-bearing
factory was hit and seriously damged. hirty-six
persons wro killed and forty-seven seriously injured:
production has heen stogied probably for DOV M days.
1
Regraded Uclassified
336
8
15. Six Royal AIr Foree stations, a balloon
barrage centre and an Infentry training centre were
attacked.
Little damage and few casualties.
CONFIDENTIAL
337
Purephrase of Code Indiagram
Beceived at the Mar Department
at 10:06, March 20, 1941.
London, filed 15:00, March 20, 1941.
1. On Sunday, March 9, adverse wather enused the cancellation of
all flights of British planse. During the proceding night occupied cirfields
in northern Frease were benbed w British Bristel Bloubeins bat there were
as planse of the Benber Command over the Constrant because of the bad weather.
2. Buring the might of March 9-10 German raide - carried out over
the Midlends, Pertomonth, Liverpool Bay ml Suffelk. 2a addition, there was
a Large smle atteck on Inim. the extent of the damage 40mg has not boon
determined. During the proceding day - aircraft patrols were mintained
over the Bover Straits and only eight them planse penstrated boyand the
coast line of England. British fighter please www is the air during this
day and the following night but were unsble w intercept my of the attachers.
Buring the night of March 6-9 tea Games planse planted nines along the
British east. A total of 190 other - planon - pletted am each-
east Britain, Portemouth, Horfelk ml Suffelk. Buring the - night Lendon
was attached W 60 - Gorman planse. Private property in Landon auttered
havey and the vaterfrust area was damged - a - Backington
Palace gremis a Ledge - a - basto fall a - restures) in
which s6 individuals was billed and - then 80 wro injured. British
antiniveraft fire brought term three of the - planse and damaged two
others. Buring daylight hears of March 7 a British Informary tradaing emior,
& ballom barrage center and six Mayal Air Terse stations www banked w
Greena planse. A mall number of casmalties and - - resulted.
CONFIDENTIAL
Regraded Uclassified
338
CONFIDENTIAL
Daring the - day 36 Inberers vere billed and n - injured suriously
during a - attack an a British ball bearing manifacturing plack.
Production at this plant will have to be surpended for a portod of - week.
3. British air activities in Middle Instem themboro - as
follows: the Albasian city of Toyaleni we bended w British planse baned
in in the Eritreen theater the area was attashed w
Salan-based British benbern; in the Likynn thester British benters attacked
the Tripeli burber and dropped bonks on the sirfield at - (Treet Banson).
It is I that planse of the - Air Perso - based at this latter
place which is about 25 miles valid of Sixte.
4. - air activities in the middle Bast consisted of a raid
w five planse against Malta. British installations suffered as - and
- of the Gurman planse - abot dom.
5. the Baes Genal will probably be respons& to traffic w Harsh 11.
British divers have send all of the state planted is the (naml w -
planes and only three - are to be exploied before the emal 10 completely
cleared.
6. A call has hours mis w the Ministry of Labor for 100,000 -
to volunteer for service in munition ml w infestry factories. These
volunteers will be used primarily is filling artillery shalls.
7. During the day and might of March 1 a British merchant -
make up of sine ressels - benied or torpoñood. in the Horth Sen. - of
the were benched and three others mis. During the only meating
hears of March s a - education attached a British - -
4 of 54 vessels 180 miles week of Cape Bimes, a the West - of Africa.
Five of the - teste vere look.
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
339
8. Zate in the afternoon of March s cirplense from British sevel
write located the two Cumman 26,000-tem bettlechips, - use -
half-way between the Cape Verio Islands and the - Islands.
I
Distribution:
Secretary of Ver
State Department
Secretary of Treasury
Asst. Secretary of Ver
thief of Staff
Mar Plane Division
Office of Navel Intelligence
Air Corps
0-3
+
CONFIDENTIAL
Regraded Uclassified
340
RESTRICTED
G-2/2657-220
M.I.D., W.D.
No, 335
March 10, 1941
12:00 M.
SITUATION REPORT
I. Western Theater of War.
Air: German. During daylight of the 8th and 9th there
were normal operations against shipping at sea and scattering attacks
over Great Britain. During the night of the 8th-9th a strong attack
was launched against the London area. This was apparently the
heaviest German night raid of 1941. Last night the attack was re-
newed in less force and Portsmouth also was systematically bombed.
British. Apparently no night operations. On the
9th fairly heavy daylight attacks were made over northern France.
II. Balkan Theater of War-
Ground: Bulgaria. No change.
Albania. The Greeks report their offensive
continues and new positions in the Tepelini sector were occupied
despite strong Italian counter-attacks. The Italians admit Greek
attacks in the sector of the Eleventh Army (southwest sector) but
claim they were repulsed by counter-attacks.
Air: Albania. Considerable air activity on both sides
in close support of the ground operations.
III. Mediterranean and African Theaters of War.
Ground: Italian Somaliland. British troops have
occupied Gabredarre which is about 165 miles by road northwest
Ferfer which was captured March 5, 1941.
Libya. The Italians report another attack on
Giarabub Oasis by the British has been repulsed.
Eritrea. A successful counter-attack is claimed
by the Italians in the Cheren sector.
Air: Axis. Pressure maintained in Libya. Malta was
bombed again on the 9th.
British. No reports of activity.
Note: This military situation report is issued by the Military 1n- In-
General Staff. In view of the occasional as
telligence clusion of Division, political information and of opinion it is classified
Restricted.
RESTRICTED
Regraded Uclassified
341
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 11, 1941.
TO
Secretary Morgenthau
FROM
Mr. Hear AMA
In accordance with your request of March 10, we are
preparing a written analysis of the Gano Dunn report on steel
capacity, which we expect to complete and submit to you on
Thursday afternoon of this week. We disagree with the con-
clusions of Mr. Dunn's report and it has taken a little time
to assemble and organize our refutation.
342
See entry of 6/5/41 which states that
a copy of the President's memo of 3/10/41
was given to Mr. Hopkins by HM,Jr.
343
This is referred to in H Jr's report
e luncheon meeting with the President on
5/10 which is filed in President's folder.
344
Hmr.
Bremse of The general
financial picture Oher your
harry up
(a) RFC taking uses %
British payments made
for plants
(6) Was Dept. taking me,
of material payments
made by the British
1.b
at Runch march 10th 1941.
345
MAR 11 1941
Dear Josse:
For your information I all transmitting here-
with photostat copy of a memorandum which the President
gave no yesterday at lunch, concerning the British
financial picture. As I as nov giving careful considers-
ties to the British financial requirements for each month
from sev until the end of this calendar year, I would
appreciate 10 if you vill furnish Under Secretary Doll,
at the carliest possible mement, the amount of funds that
the Reconstruction Finance Corporation esa make available
each month during this period for payments on account of
plant facilities which 10 may take ever from the British.
Sincerely yours,
Homesable Jesse 1. James,
Administrator,
Replied to by m
Federal Lean Agency,
Jones 3/19/41
Vashington, D. 0.
DEBIELS
March 11, 1941
Imp
Regraded Uclassified
STRICTLY CONFIDENTIAL
346
MAR 1 1 1941
My dear Mr. Secretary:
For your information I an transmitting here-
with photostat copy of a semorandum which the President
gave - yesterday at lunch, concerning the British
financial picture. 4a I as nov giving careful consider-
ation to the British financial requirements for each
month from nov until the end of this calendar year, I
would appreciate 10 if you will furnish Under Secretary
Bell, at the earliest possible moment, the amount of funds
that the Mar Department can make available each month
during this period for payments on account of contracts
which 10 my take over from the British.
Sincerely yours,
(Signed) E Marganthau, Jr.
Secretary of the Treasury
The Honorable,
Replud to by
The Secretary of War.
may. me cloy
DVBINLE
3/17/41
March 11, 1941
web
Copy to them Edelin
By Memeenger 230
Regraded Uclassified
347
TREASURY DEPARTMENT
For Miss Chancey
INTER OFFICE COMMUNICATION
DATE March 11, 1941
TO
Secretary Morgenthau
FROM Mr. Cochran
Mr. Ganson Purcell telephoned me from the Securities and Exchange Commission
at 12:35 yesterday noon. He told me that Chairman Frank had discussed with the
other Commissioners the question of giving publicity to the meeting which was
taking place at the Securities and Exchange Commission yesterday afternoon with
representatives from the investment associations in New York to study a plan for
liquidating British investments in this country. It had been the opinion of the
Commissioners that no publicity should be given to this meeting, considering the
exploratory character thereof. Chairman Frank desired this information to reach
Secretary Morgenthau before the latter's press conference. I gave the Secretary the
substance of this message at 3 o'clock yesterday afternoon.
J.M.P.
Regraded Uclassified
348
March 11, 1941
Some time during the night I woke up and got the idea
that if we were going to refund the $500,000,000 June notes,
we also ought to, at the same time, raise five or six hundred
million cash, and make an issue of sufficient size and do it
all at one time.
Strangely enough, I still remembered it when I woke up
this morning, and I sent for Bell and gave him this idea, and
asked him to speak to the people in New York and find out
whether they have finished digesting the last issue.
349
March 11, 1941
10:20 a.m.
RE AID TO BRITAIN
Present:
Mr. Foley
Mr. Bell
Mr. Cochran
Mr. Bernstein
Mr. White
Mr. Acheson
Foley:
They wanted the same control you had over the
four million eight hundred eighty million.
Bell:
They will get around now to blaming me.
Foley:
No, but you remember.
Bell:
Sure. Well, that is the Budget's job. I am
smypathetic. It is absolutely budgetary con-
trol. (Laughter)
Foley:
Sure, there he comes.
H.M.Jr:
All right. Now, Merle, will you state the case
again, please?
Cochran:
On Saturday morning we considered the memorandum
which had been submitted by Mr. Pinsent on
March 7. It was decided that we needed more
data with respect to the paragraph headed
"Final Result" on page four of this memorandum.
This paragraph reads as follows:
Regraded Uclassified
350
- 2 -
"To cover our shortage up to August 1941 and
to provide a cash balance on lines proposed
in assumption six, we need assistance before
the end of August to the extent of three
hundred sixty-five millions on the basis of
the first alternative and one hundred eighty-
five millions on the basis of the second
alternative, subject to the fundamental
point raised on assumption three. It is
hoped that such assistance can be provided
in the form of the taking over after the
passage of the bill of our existing con-
tracts by the United States Government to
the extent necessary to cover the above
amounts. The taking over of capital assets by
the RFC will, of course, provide part of this
assistance. For the rest, it should not be
difficult to select suitable contracts up to
the amount required. Speed of action is
very desirable as deliveries are constantly
reducing the outstanding value of existing
contracts. Even after August, our deficit
will still rise for & time. This should be
automatically taken care of, since many of
the contracts to be taken over are bound to
have payments due after August as well as
before, of which we shall be relieved. The
months to August are the most difficult ones.
The deficit of the early months will in part.
be currently met from gold borrowed by the U.
K. Government; but, as this is only a tempo-
rary expedient and leaves a responsibility to
repay in gold, no account has been taken of
it in the calculations above."
H.M.Jr:
Let me approach this thing in my own peculiar
manner. As of January 1, their outstanding
contracts were approximately a billion four?
Bell:
That is given in Table 1.
Regraded Uclassified
351
- 3 -
H.M.Jr:
Just for my purposes, you see.
Bell:
A billion three thirty.
H.M.Jr:
All right, & billion three thirty. Now, this
is the eleventh of March. We can use February
28.
Bell:
Yes.
H.M.Jr:
Now, from January 1 to February 28, I want two
figures, I want, one, how many contracts have
they paid for, you see. You can get that from -
how much have they paid for during the month
of January. That subtracted from a billion
three thirty would give us the figure on March
1. Has anybody got the figure?
Bell:
The billion three thirty, Mr. Secretary, is a
February 28 figure.
H.M.Jr:
No, I want the January 1 figure.
White:
I haven't got the payments on those earlier
contracts, but we have got the payments which
are due on the first of each month.
H.M.Jr:
Just let me put it this way. Let's say it is
a billion four. This is the way I want to
approach this thing. A billion four, January
1. Then so many contracts, so much - - they took
delivery of so much stuff during January. Let's
just say for argument's sake they took care of
three hundred million, which left them on the
first of March outstanding one billion one of
the contracts which were in existence prior to
January 1, not the ones that they have written
since. Now, of that three hundred million
dollars that they have paid for during the
month of January, where did that money come
from? In other words, how much of it came
352
- 4 -
from the sale of securities to the stock
exchange, how much of it from gold, how
did they pay for it? In other words, what
I am groping for is this: I had mentally
earmarked & billion four hundred million as
of January 1 when I testified, you see. Now,
I have said toward that there is nine hundred
million of direct investments, there is six
hundred million listed securities, and there
is four hundred million dollars annual output
of gold from South Africa, or a total of nine
and six are fifteen and four are 8. billion
nine. Now, what I want to know is, of this
three hundred million how much of it came from
those three sources. Now, is that assumption
correct, Dan?
Bell:
Your figures are about correct. It is a bil-
lion eleven, as I understood it, instead of
a billion nine.
H.M.Jr:
But my assumptions. So then we carry this
thing along and I will tell you why I ex-
plained it. Is there any other place that
they can get this - have it pledged to me
and I in turn to Congress - the billion four
hundred million contracts outstanding and then
that their listed securities, their direct in-
vestments and their gold or anything else that
we counted in should go toward payment. Now,
for argument's sake they paid three hundred
million dollars out. Now, where the hell did
it come from?
Cochran:
Well, they had gold which was sold on January
2 of a hundred and seventy-six million; Jan-
uary 30, twenty-six million; and on February -
twenty-six million. That wouldn't count.
You have a hundred million of gold there, a
hundred ten of their securities and then some
taken from the balances which they had on hand
Regraded Uclassified
353
- 5 -
the first of January.
H.M.Jr:
Well, do you see what I want, Harry?
White:
I see what you want, yes. I am not sure that
that--
H.M.Jr:
You mean where it is going to?
White:
No, those first three questions are fine.
You want to know, A, they owed you a certain
amount on commitments on January 1. How
much did they pay on those commitments? You
knew their assets. Where did that money
come from? Presumably it came from those
assets. If it did, then their present
assets ought to be just the difference be-
tween the two as compared to their January
1 assets.
H.M.Jr:
Then on the first of March - - I mean, I don't
know just how we will handle it. I am groping.
I don't know just how we will handle the con-
tracts they have signed since then, you see.
I don't know what I am going to do with them.
Let me just think out loud a minute. Now,
they come in and say, between now and the
first of August they need three hundred sixty
million dollars. Is that what you have got?
Cochran:
That is, if they pay Canada gold.
H.M.Jr:
Well, they are going to pay that to us.
Cochran:
Then it is only a hundred and eighty-five.
H.M.Jr:
All right. They need a hundred and eighty-
five million dollars. Now, I say before I am
interested, see, "Gentlemen, I want to know
where are you getting the cash to pay your
bills today. In other words, are you taking
Regraded Uclassified
354
- 6 -
some of the fat off the bone that we said we
didn't want? Where is it coming from? You
say you need a hundred and eighty million
dollars. If Now, let me just give you this
picture. Then they take on more contracts.
I mean, it is like & going concern. They
have got so much to pay out and they have
80 much of their assets. Which of their
assets did they use and what is their position
as of March 1?
Cochran:
They have given us that.
White:
They have given us that.
H.M.Jr:
What?
Cochran:
They have given you a statement of their credit
position and debt position for the month of
March to show how much they expect to use in
gold, how much they expect to get from market-
able securities.
H.M.Jr:
This is for March?
Cochran:
Yes, sir.
H.M.Jr:
But I - - I will come to that in a minute, but
I want to know what happened in January. How
did they finance themselves in January? Now,
they ought to know now. I mean, I want - what
did they do in January? Through the Federal
Reserve we can quickly check up what did they
pay out.
Cochran:
That is just what I was reading.
H.M.Jr:
Do you know how much they paid out in January?
Cochran:
Yes.
Regraded Uclassified
355
- 7 -
H.M.Jr:
You told me how much gold. How much did they
pay out in January?
Cochran:
It isn't broken down by months here.
H.M.Jr:
Well, it should be.
Cochran:
Well, this comes in weekly, but I can figure
it out.
H.M.Jr:
Well, give it to me rough. Can you give it
to me roughly? Take your time.
Cochran:
January 2 to 29, total debits were a hundred
and ninety-seven million, four, paid out of
the account with the Federal.
H.M.Jr:
Well, that is roughly two hundred million
dollars.
Cochran:
And that was raised by gold, one hundred mil-
lion, securities about seventy-five, and the
rest came out of the balance.
H.M.Jr:
Well, did it? Then they only ate into their
balance by twenty-five million.
Cochran:
I mean, I can make it accurate but that is
roughly.
H.M.Jr:
Well, I want it accurately now. What did they
forecast for March?
Cochran:
For March they count their official dollar
balances as eighty-two as of March 1.
H.M.Jr:
Read it, I will listen to it.
Cochran:
The official dollar balances as of March 1,
eighty-two million dollars. Gold as of March
1, one hundred two million.
Regraded Uclassified
356
- 8 -
H.M.Jr:
That is & hundred and eighty-four.
Cochran:
Newly mined African gold to come in during the
month, forty million.
H.M.Jr:
That is two hundred twenty.
Cochran:
Sales of marketable securities and direct
investments, seventy-five.
H.M.Jr:
Well, that is two ninety-five.
Cochran:
Two ninety-nine. That is forty in marketable
securities and they just guess thirty-five for
direct investments. That is the first time
they have carried any item there. So that is
two ninety-nine and ten under debits is an
expenditure by British Purchasing Commission,
two hundred fifteen million dollars. Now,
the breakdown on contracts placed by March
1, one hundred seventy-five million; B, con-
tracts to be placed in March, forty million;
and second entry, balance of all other gold
and dollar items, twenty-four million. Esti-
mated balance at March 31, sixty million.
H.M.Jr:
Let me just see if I have got it. Roughly,
they figure that expenditures for March will
be three hundred million? Two hundred mil-
lion?
Cochran:
Two hundred forty.
H.M.Jr:
Their total expenditures.
Cochran:
Two hundred forty.
H.M.Jr:
Two hundred forty and they figure they can
pick up how much money?
Cochran:
Well, they would have a balance left of sixty
357
- 9 -
million.
H.M.Jr:
And they started the month with eighty-two?
Cochran:
Eighty-two.
H.M.Jr:
Well, I think we ought to take 8. careful
look at what happened in January. What?
White:
We ought to be able to go over the figures
and see how close we can come to what you
want. I didn't know the figures were avail-
able that would give us that monthly payment,
but are those later figures than what we got
last week?
Cochran:
What do you mean?
White:
Those that you are reading from.
Cochran:
These aren't complete because it is just what
is paid out of the Federal, you see.
White:
Well, if you give us both a chance at that,
we can come--
H.M.Jr:
I am going to give you a chance and I will
tell you why I am in no hurry. In the first
place, they have got plenty of money for this
month and in the second place, very much in
this room, I can't overemphasize the confi-
dential nature of it, I saw Lord Halifax
last night after I got the President's approval
and I said if by the end of this week they
didn't show concrete evidence that they wanted
to sell some of their factories, I suggested
that they put somebody else in charge of these
sales. Well, he was very much disturbed and
Sir Edward Peacock is a great friend of the
head of the Bank of England and the thing
which always riles me in these times, he has
Regraded Uclassified
358
- 10 -
got strong political backing, you see, so it
would be a great to-do, to use his language,
to sack Sir Edward Peacock. So he said he
thought he would have after dinner - I don't
know whether he said Purvis and Phillips or
Purvis and Pinsent. So I said, "Well, you
know, Mr. Ambassador, through Merle Cochran
and Phillips and Pinsent I am sure you heard
last week how I was distrubed about this, 80
this doesn't come like a bolt out of the blue,"
and I said, "I cannot go on the Hill and try
to explain on this appropriation bill why
the English Government has not been able to
sell one of its many hundreds of factories
in this country. I can't explain it! So
he tried every way possible to make be back
down. "Do you think it is wise to tell this
to Purvis and the others?" I said, "I cer-
tainly do." I didn't give one single inch.
Now, we will continue our studies, but until
this English industrial crowd permits its
government to sell some of these factories,
I am not interested in their financial pic-
ture end I am not going to do a damn thing
about it. Now, as I told Halifax last night,
I said, "I don't have to tell you that I am
friendly to the English cause. I even demon-
strated it in the past," and he said that -
could he come and see me at the house if he
had something to say, and I said, "Yes." And
I want you to know, Merle, because you are
my mouthpiece on this thing, as far as I am
concerned you can listen, see, but until
these fellows come in and demonstrate con-
clusively to me that they are going to sell
some factories, I am not going to see them any
more. I am not going to see Phillips or any-
body. I am not available and I just want you
to know that, because I am not going to go up
on the Hill and the first thing - "Well, Mr.
359
-
12
Morgenthau, give us the report on what has
happened, and the first thing they are going
to ask is, "How many properties have they
sold, and I say, "Zero. "Well, why?" I
can't give any answer. I told Halifax last
night - it was all very quiet but he used all
his English tradition to getme to swerve.
Make a partial sale - not a partial sale, I
mean a sale with partial payment. I said,
"There are lots of things that you can do."
I read last night what they sent over to
Hopkins on this Lend-Lease to hurry the thing
up. We signed a contract to lend-lease them
some cutters and then we decide afterward
what the price is in order not to hold them
up. That is our attitude. But I want a
complete - I mean, it is one thing for
Cochran when he gets his orders - whether he
believes in them or not, he carries them out.
He demonstrated that. As my representative
with these people, I want you (Cochran) to
know until they move, anything further on
their financial problem just doesn't interest
me, and I want you please to take that front
because I have cleared it with the President,
and you are representing the President and me
on this, you understand, Merle.
Cochran:
This is new as of today, because Saturday we
asked them for this and last night Phillips
was in talking to me about this.
H.M.Jr:
No, you can see them. You listen. No, this
is the follow-up of my time when I asked you
to send for Phillips. How long ago was that?
Cochran:
That was Friday evening.
H.M.Jr:
Not last Friday?
Cochran:
Last Friday, yes.
Regraded Uclassified
360
- 13 -
H.M.Jr:
Oh, no, it must have been Friday a week ago
that you put the heat on.
Cochran:
Yes, I guess that was Friday the week before.
H.M.Jr:
It is Friday a week ago. Do you want to check
me?
Cochran:
I will have to on that.
H.M.Jr:
Do you mind, right now? I would like to know.
Cochran:
They asked - that was when I had Playfair.
H.M.Jr:
Just take a minute. I will wait until you
come in. I told the Ambassador it was my
impression that 10 days had passed.
Cochran:
I will get it.
Bernstein:
Is this it?
Cochran:
Yes, this was on February 28.
H.M.Jr:
I was right. Well, that is all right. It was
over a week. Well, now we go ahead and get
this stuff. Now, let me just get on this
contract business S0 we understand that. The
President - have you people seen this note
that the President gave me to show the Army
and--
Cochran:
You read that little short memorandum yester-
day.
H.M.Jr:
Well, we will put all the pressure on them,
and I don't know whether you have those figures
and the money that they get from there, I am
more than willing that they segregate that to
be used for - if they want to earmark it for
strictly English standard stuff, you see.
Regraded Uclassified
361
Foley:
Well, suppose they want to use it to meet
outstanding commitments?
H.M.Jr:
They can.
Foley:
Use it for any purpose they want?
H.M.Jr:
Any purpose that they want to, but that is why
I want to study the January thing to find out
exactly where they got the money from, you
see, and more details of where it went to. I
mean by classifications. I mean, how much
of it went for food, how much of it went for
armament, how much of it went for dividends.
I don't know what, you see.
Cochran:
Do you want February, too?
H.M.Jr:
I think I would like to start with January.
Of course, this is March.
White:
January and February.
H.M.Jr:
I am talking two months. Yes, I am confused.
Yes, January and February. By classifications,
I would like to get more familiar with how
they spend it and raising it is the easy part.
Yes, January and February. But, Dan--
Bell:
You just want a total? When you say classi-
fications, you don't mean classify expendi-
tures?
H.M.Jr:
Well, I was thinking - yes. No, I will tell
you what I meant. In one classification, let's
say munitions, and in another classification
maybe food. Another classification may be
paying dividends. I don't know what.
White:
Shouldn't one of the classifications be what
they paid on their past commitments?
Regraded Uclassified
362
-18- -
H.M.Jr:
Yes.
White:
That should be one classification.
H.M.Jr:
I would like to play with this thing, you see,
and get so we know really more about it. We
have it, but we have never examined their
checks that they paid through the Federal
Reserve in New York.
Bell:
I take it, one item might very well be net
on balance of payments.
White:
I think if we could just put the questions
that we would like to ask, what they paid on
past commitments, what they paid on other
expenditures that weren't listed in the past
commitments, and let them fill in the figures,
rather than if we examine their - unless they
have given recently data to Merle which would
answer that, the data which we have up to now
would not enable us to answer that.
H.M.Jr:
Well, keep after it.
Cochran:
Well, I have passed on everything I have here
to Harry.
White:
Then W6 haven't got the data.
H.M.Jr:
Well, you see what I mean.
White:
I know.
H.M.Jr:
After all, if we are going to finance these
people, I want to know how much goes to food,
how much goes to non-essentials.
White:
I am wondering whether in order to enable you
to know exactly each month what is happening,
Regraded Uclassified
363
15
- 16 -
if you want that continued--
H.M.Jr:
Yes, I do.
White:
Whether we couldn't set up a statement - we
will leave everything but the figures to be
filled in, which they can fill in each month.
You go over the statement to see that it
contains everything that you want in the form
in which you want it, and then each month they
will fill in such figures as they have, and
we will fill in such figures as we have and
make it a current thing instead of having to
come back and - we get the stuff in B. differ-
ent form each time and it is impossible to
compare their figures.
H.M.Jr:
You see, what I am thinking of, I am taking
plenty of time. I have been operating dif-
ferently. Yesterday, you know, we gave
plenty of time to this thing. This morning
I have got nothing but this, you see, this
morning. I am practicing on you people, so
you can practice on me. Up to this point,
the President and I are together. He knows
what we are doing. When they really run out
of money I just don't know what we are going
to do, but when we do, then all of this stuff
that we are talking about now, why they run
out of it, and what they have spent, it all
helps, doesn't it? Now, of course what they
are going to try to do is to put everything,
including the kitchen stove, under the Lend-
Lease and we have to be prepared to say yes
or no, and it comes back always to two things,
their question of their securities and the
question of their direct investments and how
much of that have they used up since the first
of January. I ought to know so that the
President - "Well, now, look, Henry, they say
you are being awfully tough on them, and I
Regraded Uclassified
364
just want to be sure that you are right.
Now, can we take over some of these contracts,
or can't we?" Which leads me to the thing -
I mean, do you people know today how much
the RFC has taken over and how much--
Bell:
There is a memorandum here that they haven't
taken over any, but there are only a couple
of them that are even close.
Cochran:
Even then they couldn't make the funds avail-
able until the latter half of the year, isn't
that right?
Bell:
Yes.
H.M.Jr:
Do you have that picture?
Bell:
No, I haven't a very good picture on it. There
is 8. memo here that isn't very good.
H.M.Jr:
From whom? Can't we go the other way around?
Ask Jones and the Army for a memorandum? We
will use the President's thing as a - you see?
I will dictate a letter to the Secretary of
War and Jones, with your help, you see, using
the thing - saying, Would you please inform
me how much money can we expect the English
to get from your taking over their contracts?"
you see. "We are making our estimates from
now until September, and we would like to
know during this period of the hundred and
thirty-four million, how much can you do,"
and the Army, "How much can you do?"
White:
And approximately when it will be available.
H.M.Jr:
And approximately when it will be available.
Cochran:
That will leave out that one thirty-four. We
365
-
can't identify that unless Ed can tell us
just what it is.
Foley:
I have got a breakdown of it.
Bell:
You can identify a hundred and five million
here, but there is a difference between a
hundred and five and & hundred and sixty-
seven million; and, I take it, they have taken
these contracts of a million over in one case
and ten million over--
H.M.Jr:
Are you handling that or are these fellows?
Bell:
Well, we have all got it.
H.M.Jr:
Who can write a letter for me to sign to War
and Commerce?
Bell:
We can, together. We can have it for you be-
fore noon.
H.M.Jr:
All right. When I see Jesse I can hand it to
him at lunch. Then one can go over to--
Bell:
Yes, we will take care of it.
H.M.Jr:
Don't you think that is the way to do it? And
ask them what they want, you see. Well, this
is a perfect thing from the President. Simply
say, "I have got to know, gentlemen, Mr. War
and Mr. Commerce, how much money are you going
to make available to the English and how soon.
I think we are beginning to tie the thing in
you see.
Bell:
I wonder if it would help you if you had eacy
month a statement from the British just like
our own giving cash position, giving the back
figures--
366
- 19.
(Miss Chauncey entered the conference.)
H.M.Jr:
Two photostats of what the President gave me
at lunchfor the Army and Navy. Mr. Bell
needs them. He is going to prepare a letter
for me to sign. Please.
Chauncey:
All right, sir.
(Miss Chauncey left the conference.)
White:
I think in the coming months you are going to
be so concerned with problems of how much
they are using that I think that something -
not half but a good deal of your problem is
in knowing what the situation is, not in
making the decision but in knowing the facts.
H.M.Jr:
Well, what we want is, first an analysis of
what they have done through January and Feb-
ruary and then a forecast like Bell makes
through all the departments. I mean, our
cash needs when we have a financing. Isn't
that right, Dan?
Bell:
I think that would give a pretty good pic-
ture.
White:
Then each month or every two weeks there ought
to be a statement which will be of a character
such as will be most helpful to you, and it
ought to be the same statement, and it ought
to be comprehensive. I think if we spend a
little time drafting that up ahead of time,
and then they can adjust their bookkeeping
to meet that need if necessary.
H.M.Jr:
And you make up the forms. But what about the
past stuff? The past stuff will have to con-
from with the form. Will you take that?
Uclassified
367
-
-
Bell:
Yes. We will bring it from January 1. We
don't need to go back of that, do we?
White:
No, but it will be a current form which -
each month you will get a similar statement.
H.M.Jr:
Well, I think each week, Dan.
Bell:
That is & little difficult to change state-
ments in the future on each week. You can
get the actual figures up to date.
H.M.Jr:
I think once a month is all right.
Bell:
I think so, too.
Cochran:
Because we know their gold and security po-
sition daily.
H.M.Jr:
This is a good meeting. Don't you think so,
Ed? I mean, we are getting somewhere. What?
Foley:
Sure.
H.M.Jr:
And then all of this - having this, putting
it back, shows them how seriously we are tak-
ing the thing, and then as I say, I can go
over and explain - now, I am just thinking
of this. In order that I don't get the ground
cut out from under me by the State Department,
what would you think if I ask Dean Acheson if
he could just drop over here for five minutes
so I could tell him exactly what our position
is?
Bell:
I don't get why they--
H.M.Jr:
Why? So that when Halifax goes to complain
to Mr. Hull about how ruthless I am, they
will have the whole picture, and they will
appreciate it, they won't give him any sympathy.
368
- er -
This is important, high policy, and Hull
ought to know about it, and I am going to
try to work through Acheson.
Bell:
Well, he ought to know about it, then, don't
you think?
H.M.Jr:
Don't you think so?
Foley:
I don't know how much good it will do.
White:
I am wondering whether you might not tell
Hull directly.
H.M.Jr:
Oh--
Foley:
Well, he could do both, Harry. I think if
he is going to tell Hull directly he might
better tell Acheson first and then tell Hull.
Cochran:
What is the alternative to Peacock, sending
out some new man from London?
H.M.Jr:
I didn't make any suggestions.
Cochran:
It is a rather long process, we found out.
H.M.Jr:
I think I did drop a hint that they might
let Gifford take it over.
Cochran:
Because he is working in there now.
H.M.Jr:
I did, I am quite sure. "Gifford has done
well. Why not let him take this thing?"
Cochran:
Peacock should - now, I am not defending him,
because I am not happy over his record any
more than you are. He ought to know something
about the security market here that Gifford
doesn't. He was head of the Dominion Securi-
ties up in Canada for years, you see.
Regraded Uclassified
369
22
-
H.M.Jr:
How long ago?
Cochran:
Well, that was some time back, before he went
to London, but there he was head of Baring
Brothers and has been in the Bank of Eng-
land.
H.M.Jr:
I said this. I said, "Peacock is inheriting
the fact that the British Government didn't
do anything with this beginning with last
June. I said, "He is inheriting all of this,
which is unfair to him, but the fact remains.
that somebody has to crack this thing."
Cochran:
But with the pressure you have on Purvis and
you have on Phillips now on holding this up,
I think you may get some action. That is my
guess.
H.M.Jr:
Holding what up?
Cochran:
I mean holding up any conversations with them
on this matter of contracts, which concerns
Phillips very much. I mean, he was in to see
me last night?
Cochran:
Well, he asked about the gold first, and I
said, "Well, we have made commitments up on
the Hill that the gold from South Africa and
Australia will be sold to us," and he says,
"Well, we have just got to build up some sort
of reserve in so that we can take care of
immediate needs--" he said, with the war
centering for the moment down in the Near
East, they ought to have gold available in
South Africa to send up to Egypt and around
those parts. He said they don't want dollar
balances, they want gold there, and he said,
"If they give us every bit from South Africa,"
he said, we just haven't got it. We would
like to build up a little reserve." He said,
370
22
- 28 -
"We are going to be embarrassed now because
I don't think we are getting the full pro-
duction from the Bank of South Africa. I
told him that Playfair had intimated that
production had fallen off. He said, "I
don't think it is that, I think South Africa
isn't getting it."
H.M.Jr:
Merle, it is your job to repeat this to me,
see? Now, you have done it. I am not im-
pressed with what Phillips is saying. It is
your job to repeat to me what he says.
Cochran:
That is right, because I can add to it. They
are getting certain gold from Belgian Congo
and Rhodesia and 80 on.
H.M.Jr:
I am just not impressed. Merle, I, personally,
want a demonstration that the Bank of England
and what they stand for, see, really want to
sell these assets in this country. They have
got to make me believe, see, and pick up
today's Washington Herald and see the thing
at the beginning - the story in the Washing-
ton Herald about how the American taxpayer
is going to have to pay through the nose in
order to give England this stuff. The campaign
is started. It is in the Washington Herald,
the tip-off. And I forecast this thing
several weeks ago, that that was what would
happen. Now, before I take the gaff, publicly
and privately, for these people, I want them
to prove t hat they want to win this war and
that they are willing to do everything possi-
ble to make & billion dollars worth of assets -
turn them into cash, and give up the control
of the American thread business in this country,
which they control, and the viscose, which
they control, before we in turn turn over
seven billion dollars to them. Now, I am not
convinced. I am asking at this moment seven
371
- 34 -
for one, and I don't know whether the Bank
of England and that gang is running the
British Government or whether Churchill is.
I don't know. I told Berle last night - I
didn't tell him much, but I told him a
little of this. I didn't tell him about my
conversation with Halifax. I said, "There
is nobody in this town that has done more
for the English than I have, and Berle says,
"You are absolutely right." I need faith.
Talk about Halifax being religious and all
of that, I need faith, I need confidence.
I think we are on the right track now, Dan,
if you could get this thing up. I talked
this way in this room, but what is going to
happen when somebody from the Treasury goes
up on the Hill?
Bell:
Is there some indication--
H.M.Jr:
Do you think I am overemphasizing this, Dan?
Bell:
No, I don't think you are overemphasizing the
importance of it. I am a little bit worried
about his successor and the delay.
Foley:
Dan--
White:
That is the way to handle it.
Foley:
Dan, if it isn't done, it is my judgment the
first time you go before the committee and
you tell the committee that not one damn cent
has been realized from the sale of these assets,
that the committee is going to force our hand
and turn the whole works over to the RFC, lock,
stock, and barrel, and that is what the Brit-
ish are up against, so you are being a friend
to the British when you are telling them that
they have got to show some results and giving
them another opportunity on their own to do
Regraded Uclassified
372
- 25 -
it, because it is the last call.
Bell:
Well, do you help the situation by forcing the
man in there now out when it may take months
to replace him, weeks anyway?
Foley:
But what other way, Dan, have you got of mak-
ing them realize the significance of the situa-
tion?
Cochran:
If we hold up on this contract business as the
Secretary said, that is the thing that is
worrying Phillips most; and I am convinced that
Phillips has the idea of selling these and
Purvis has the idea.
H.M.Jr:
True.
Cochran:
And I think that we can bring pressure on them
to get that improved just as when you got Gif-
ford here he admitted that he had instructions
from the Treasury not to go ahead. You got
that rectified. If you can get Gifford work-
ing in there with Peacock--
H.M.Jr:
May I interrupt you? It wasn't until I got
Gifford and Phillips sitting next to each other
that I smoked out the fact that the Treasury
had not given them the instructions, see.
Cochran:
That is right.
H.M.Jr:
Well, the same condition, Merle, may be true
here. Maybe Sir Edward Peacock hasn't got the
instructions.
Cochran:
But my point is--
H.M.Jr:
Maybe he hasn't got it. The two fellows sat
there and I took my hat off to Gifford when
he turned to this fellow and he said, "You
373
as
-
never told me to sell more than two to three
million a week."
Cochran:
You remember we were pretty well fed up with
Gifford, we hoped we would get someone in
his place, and now he has turned out to be
a good man when he has the proper instruc-
tions.
H.M.Jr:
Instead of putting the pressure on Peacock,
who is 69 years old and who has an expression-
less face, I am putting the pressure on the
representative of His Majesty, the King, who
can take it. I am putting it - I asked you
10 days ago to do it on his two representa-
tives and I got nowhere. I waited 10 days,
and then I put it on the representative of
the King instead of putting it on Peacock.
Bell:
I am not so sure that that isn't where the
fault lies. It may not be Peacock. It may
be just the other end, just like Gifford.
Foley:
There is only one way to find out.
Bell:
I agree to that, and I think the Secretary is
right in putting the pressure on the Ambassador
rather than Peacock.
H.M.Jr:
Just the way they sat here and kept telling
us that they couldn't do it, they go back and -
Merle, remind me. Then we developed that he
never got the instructions. Now, how do I
know that poor Peacock has got the instruc-
tions to sell? Maybe his instructions are to
stall. I don't know.
Bell:
Well, the instructions were given out and were
rather vague, you remember. He said he came
over to look into the situation, not to dis-
pose of them.
370
White:
Well, the Secretary cannot impute the good
faith of the British Government and the only
position he can take is that his man is
apparently not carrying out your instruc-
tions competently, and therefore he wants
another man. That serves a dual purpose,
it appears to me. In the first place, as he
says, it smokes out the real orders; and, in
the second place, I think, some publicity,
both for the British public and to the Ameri-
can public, is called for at this point;
and, if the Secretary can take the position
in the future, if necessary, that he demanded
the recall of this man because he didn't show
action, he is in a much better position if no
action is taken. If action is taken, then
the man can stay here.
Bernstein:
Well, if this man is as important as the
Ambassador says he is and--
Foley:
The pressure is on the Ambassador.
Bernstein:
They are not going to fire him.
Cochran:
They are not going to make a whipping boy out
of Peacock.
H.M.Jr:
He is the second man in the Bank of England?
Cochran:
There is no ranking there. He is the man
closest to the Governor. He is & senior. He
hasn't any position other than--
H.M.Jr:
If he is as close as that to Montague Norman,
then this fellow Peacock is never going to
make a sale unless we build 8. bonfire under
him and put & couple of sticks of dynamite in
it, but I don't have any confidence in Montague
Norman wanting to give up anything and really
win this war. He typifies everything to me
that is the worst in England.
Regraded Uclassified
375
Cochran:
- Did Walter Stewart speak to you the other day,
Mr. Secretary, about the idea of having these
people? competitors in steel and 80 on approach these
(Mr. Acheson entered the conference.)
H.M.Jr:
Dean, I want to tell you something that is
important to us and I want Mr. Hull to know
about it, but I would like it guarded as much
as possible. Yesterday at lunch I had &
chance to sketch to the President of the United
States just what we were doing here in - in
relation to the English financing, I mean how
all of the English money is deposited with the
Federal Reserve of New York as our fiscal
agent and we know how much money they have put
in and how much they have spent each week and
how we have Phillips here representing the
Treasury and how we are in constant touch with
them and get the amount of their sales each
day of their securities and now Sir Edward
Peacock is here supposedly to sell their
direct investments, 80 the thing all flows
here.
Now, the Army is supposed to be in & process
of taking over English contracts where they
have made down payments, you see, and the RFC
is supposedly in the process of taking over
their contracts where they have created plants.
As far as we can find out, the RFC hasn't con-
summated a single contract and if the Army
has done anything, they have done five million
dollars worth of it. We are trying to find
out how much it all amounted to. The reason
for this coming to a head is that Phillips,
Sir Frederick Phillips came in last week and
sat down and said, "What are you going to do
about our financial situation?" and I said
"What do you mean?" We have been trying to
get a lot of information. Now, the situation
376
on the first of January, roughly, was that
they had commitments for about a billion
four hundred million dollars of contracts
in this country, and we are going to analyze
just how much of those were for munitions
and how much for other things than muni-
tions, also how did they raise the money.
We think we know, but we want more informa-
tion. Then Bell is going to prepare for
them a sheet just like We have as to the
future needs, how much they are going to
spend and how they are going to raise it,
going through to their war year, which is
September 1. Now, in my testimony on the
Mill I pointed out as of January 1 they had
outstanding about E. billion four. To pay
for this, they had somewhere around nine
hundred million dollars worth of direct
investments end six hundred million dollars
worth of securities. We have been unable,
or they have been unable, they claim, to
sell a single factory in this country,
although we have been after them since lest
June. Friday a week ago I had Cochran send
for Phillips and Finsent, the financial
attache, and tell them that I was very much
disturbed about this, it was most embarrass-
ing, I might be asked any time on the Hill
why they don't do it and 50 forth and 80 on,
and that they just hed to get busy and make
good on this thing and never mind all the
reasons why. They just had to produce and
show that they were willing to sell some of
these investments. Well, yesterday I asked -
told the President if he approved that I would
like to tell Halifax that unless by the end
of this week they demonstrated they were go-
ing to sell some of their direct investments,
they had better recall Sir Edward Peacock, who
was in charge of these sales, and I got the
President's approval to do it, and I told
Regraded Uclassified
377
,
-
Halifax last night and he was very much
disturbed and told me what great political
backing Peacock has. It always irritates
me when they talk about political backing
but ask how they are going to win the war.
Why am I 80 exercized? Well, somebody in
the Treasury, when this appropriation goes
up on the Hill, has to review the English
financial situation before the Congress of
the United States is going to vote "X"
billions of dollars under the Lend-Lease
Bill and particularly since the plan now is
to put it all in one bill, and I pointed out
this morning the campaign is open in the
Washington Herald for all the increased
taxes we are going to have to pay for what
we are going to give to England. The posi-
tion which I am taking is that until I get
an answer from Halifax - I want to point out
this. Several months ago I kept saying,
"Why don't you sell more securities?" and
they said they couldn't. They were selling
from one to three million dollars. I got
Gifford and Phillips sitting next to each
other, and when I kept saying to Gifford,
"I know you can sell more, that the American
market will absorb it," he finally turned to
Phillips with a flushed face - but he says,
"My instructions from the British Treasury
are not to sell any more," and then Phillips
got flushed, as a result of which beginning
with the next week they sold ten million
dóllars a week and I think every week after
that they have done 50.
Cochran:
They have kept it up.
H.M.Jr:
They have averaged ten million a week. Now,
I don't know that Peacock has the instructions,
really, to sell these businesses or not and
until they do it, there is no reason, no
378
matter how much Purvis, whom I have the
greatest confidence in, tells me that they
are his instructions - but he doesn't know
any more than - until I made it so unpleasant
for Gifford that in anger he turned on
Phillips and says, "Well, I haven't got the
instructions from the British Treasury."
Now, what I am preparing to do is to sit
tight here and do nothing after my notice
to Halifax with the British on their finan-
cial situation until they make some move.
Now, they are all right for the rest of the
month. They admit they are all right, you
see. They have got enough money. They are
all right. So they are not going to default
on any contracts. Nothing scandalous is go-
ing to happen. But somebody from the Treasury
is going to have to go up within three or
four days on the Hill and one of the first
things they are going to ask is, "Well, what
about their financial condition?" Now, the
financial crowd in New York has been per-
fectly swell, because Peacock has treated
them absolutely shamefully. Reputable
people have gone in and said, "We would like
to have & chance to figure on such and such
a thing, If and he treats them like dogs. I
get this from the SEC all the time. Differ-
ent people call them up, and he either can't
see them or won't see them, people that have
got the cash and want to buy these different
businesses, and I just wanted to get the
picture. We have it from the British. The
Army is supposed to buy - pick up the con-
tracts where they have made down payments
and the RFC is in the process of picking up
any plants that they own in this country,
but pending hearing from these people, in
order that I keep faith with Congress and
they keep faith with me, they have got to
keep my morale up and say that they mean to
379
36
- 22 -
do what they say, never mind the difficul-
ties. The President - I have his complete
backing. Now, why do I send for you? In
case they go to do the baby act over there
and complain about me, I would like to feel
that the State Department will say, "Well,
this is a Treasury matter, it is a hundred
percent finance, and either hands off or
if you - I mean, I am not asking you. If
Mr. Hull or whoever sees the English would
say, "Well, we think until you have complied
with what the Treasury is asking, that the
position that they take of going on a sit-
down strike is right," but the least I would
like to have is hands-off, you see, because
I am sure that Halifax is going to run to the
State Department and try to get sympathetic
hearing for this - whatever kind of treatment
he calls it, I am giving it. Now, you can
ask me questions because I am full of this
and you are not, but I wanted you to get it.
Acheson:
The Army is to pick up the contracts on which
they have already made down payments?
Foley:
British supply contracts.
Acheson:
And the RFC is to take over the financing of
their plant buildings?
Foley:
Well, they own certain plants all over the
country, powder plants and ordnance plants
and airplane plants, title to which is in
corporations wholly owned by the British
Government.
Acheson:
And the RFC is going to buy those from them?
Foley:
Yes.
380
32
-
Acheson:
Well now, what are the proceeds of these
for? sales of private businesses going to be used
H.M.Jr:
Their own British standards, that was the
understanding I had with Purvis. To be used
for things of British specifications.
White:
He said - he wanted to know what the proceeds
of the sale of the private businesses would
be for.
H.M.Jr:
Let me go back first. The money that they
get, I will come to that. The money that they
get from the RFC and the Army would be, so to
speak, free money that they could use for
anything that they wished to. The thing that
Peacock gets is pledged by me to the Congress
against a billion four of contracts that they
had outstanding on the first of January.
Acheson:
I see. The actual financing of the billion
four is - so far as the American suppliers
are concerned, is supposed to be taken care
of, 1, by the Army, and 2, by what Jesse
Jones produces, is that right?
H.M.Jr:
The billion four outstanding on the first of
January, as I testified, would be taken care
of, 1, by the six hundred million dollars
worth of U.S. listed securities; 2, the nine
hundred million of direct investments; and
3, the four hundred million dollars output
of the South African gold mines.
Acheson:
Well, now, where do the Army and Jesse come
in on this picture?
H.M.Jr:
The Army and Jesse come into the picture that
they are in the process of picking up the
factories that they have invested in, the
381
33
- 34 -
advance payments in the case of the Army
that they have made on contracts.
Foley:
That doesn't amount to so much.
H.M.Jr:
No, but anyway - and that money, my under-
standing with Purvis was that they could feel
free to use that for anything they wished to.
Acheson:
On new orders?
H.M.Jr:
Anything.
Foley:
Under the Lease-Lend Bill, stuff that we
couldn't use.
H.M.Jr:
Anything that these - it was free for them
to use any way that they wished to. It wasn't
obligated.
Acheson:
I see. That is a backflow to them?
H.M.Jr:
Yes.
Acheson:
And when the Army reimburses them for down
payment that they have made, is the Army going
on with further payments or are the further
payments part of the one billion four?
Foley:
The Army will assume those contracts.
Acheson:
But the one billion four are some wholly
different contracts?
Foley:
Yes, they would be different contracts.
H.M.Jr:
No, they are part of the same thing. They
overlap.
White:
There are a few of those contracts which
382
- -35 -
apparently the Army will be able to take
over, but it will not amount to a great deal.
H.M.Jr:
Fifty million dollars.
Bell:
Won't it be largely these new contracts that
have been entered into since January l?
H.M.Jr:
Now, since January 1 the thing that we have
tried to keep very, very secret here, because
I have risked my neck, I told Congress that
for all ostensible purposes all buying had
stopped. Instead of that, I let them average
thirty-five million dollars a week new pur-
chases and if I ever had been called up on
the Hill I just never could have explained
it.
Acheson:
I think I have it clear.
H.M.Jr:
Do you want to go over it again?
Acheson:
The only thing I am not quite clear about is
the Army and the RFC.
Foley:
Maybe we can give him the amounts.
H.M.Jr:
Give him everything.
Acheson:
I see that the British have commitments of
& billion four.
H.M.Jr:
As of the first of January.
Acheson:
Which they have got to take care of by the
sale of their six hundred million dollars of
direct investments, the nine hundred million
or privately owned plants and things of that
sort in this country, and four hundred million
dollars of African gold. Now, the six
hundred million is going ahead all right.
383
35
- 36 -
The four hundred is presumably all right.
But they are getting nowhere on the nine
hundred.
H.M.Jr:
That is right.
Acheson:
And then I understand what you said about
Peacock and that situation and what you would
like the State Department to do. The thing
that I am not quite clear about is where the
RFC and the Army come in or whether it is
important that they come in at all.
H.M.Jr:
It is only important in this way. When we
were worried about the money, everybody got
their heads together and there were to kinds
of contracts. There was one where, for in-
stance, they made a twenty-five percent down
payment and McCloy, in order to try to help
this thing out, said, "Well now, we will
pick up those, you see.
Acheson:
That is, that our Army would take over those
contracts?
H.M.Jr:
Assume them. The only one they have done is
Kelsey Wheel.
Acheson:
That takes it right out of the billion four?
H.M.Jr:
Yes.
Foley:
If it was part of the billion four. Those
contracts might be the ones that were entered
into subsequent to January 1 in some instances.
Acheson:
I see.
H.M.Jr:
Now, the Army couldn't assume plants, so they
went to the RFC and they said, "Jones, will
you buy the powder plants that the English
384
- 87 -
have built in this country?" and supposedly
they amount to a hundred and thirty-four
million dollars. If the information is cor-
rect, to date, although he has been on it
for weeks and weeks, he has been unable to
consummate a single British contract.
Acheson:
That they could apply to the billion four?
H.M.Jr:
Yes, or to anything else that they needed.
But you can see what an impossible position -
I told this to Halifax - I would be in to go
up on the Hill and they say, "Well, all right,
now, Mr. Morgenthau, how about these English
factories? What has happened to them?"
"Well, I am terribly sorry, but the English
just haven't sold any. Now, there is no
danger in this thing, because they are all
right, certainly for another month and maybe
another couple of months, but certainly we
can see daylight and they admit they are for
the rest of this month, so by sitting still
and saying I won't do anything until they move
on the direct investments, I am no endangering
anything, you see, other than our relations
with them, but I thought it was important
enough that you ought to know about it and
Hull ought to know about it, so whoever re-
ceives Halifax, if he brings it up, you would
be posted, but it isn't the kind of thing that
I would want to pick up in the papers and
read, you know.
Acheson:
Yes.
B.M.Jr:
I needn't point that out.
Acheson:
No, I can understand that. And the British
did come down and start talking with you
about this and then you discovered that they
are not moving forward on the nine hundred
Regraded Uclassified
385
37
- 36 -
million?
H.M.Jr:
Oh, yes.
Acheson:
And so in talking with the President you said
what you wanted to say to Halifax, which was
that if they don't make some headway by the
end of the week they would have to recall
Peacock?
H.M.Jr:
That is right. And mind you, Friday a week
ago, Cochran told the English financial
representative how upset I was about it and
so they have had ten days' notice and they
just had to do something. He told them this
Friday a week ago. And since Friday a week
ago to yesterday, nothing happened. Now,
there is one other thing. In the course of
my putting this pressure on them, they came
through with this letter which - who helped
us on that?
Cochran:
Livesey.
H.M.Jr:
Which they said this pressure goes back to
about a month ago. It is about a month, isn't
it, roughly? And I have been putting this
pressure on them steadily so they came back
and said, "Well, that is all right. We will
assign all of these properties to the Presi-
dent of the United States." Of course, I
said the President didn't want to take this
responsibility and I advised him not to. But
we left the whole matter in suspense. We
didn't turn it down and we didn't say yes.
I want you to know that they have tried every
way possible - I told Peacock it is very nice
of him to give this to the President of the
United States, but we have got to look to them
to do this. We don't want the President of
the United States to sell English holdings in
386
38
- DS. -
this country. But the matter is so that we
could always say, "All right, now we will
take it over. You make out a deed to us and
we will take over all of these properties."
Acheson:
I think I have got it straight, and I will go
right over now and see Mr. Hull.
H.M.Jr:
If you want anything - Merle sees the finan-
cial people, Merle Cochran, so if you want to
refresh yourself, I think if you want to call
him to come over and see you, he will be glad
to do it.
Acheson:
All right, fine.
H.M.Jr:
Merle Cochran.
Acheson:
Yes.
H.M.Jr:
Because he is on the State Department payroll
on a lease-loan to us and we are very glad
to have him, 80 if you want something or Mr.
Hull wanted to get it word of mouth what did
I say to Pinsent or Phillips, Cochran has all
of that.
Acheson:
I will speak to Mr. Hull right away and then
if you want to say anything further, we will
call Merle.
H.M.Jr:
All right, fine. I appreciate your coming
over. But this is the kind of thing that
you can be useful on.
(Mr. Acheson left the conference.)
Bell:
Give the Secretary of War and Jesse Jones a
copy of this?
387
39
- 10 -
H.M.Jr:
Yes. Well now, doesn't that finish that
chapter? I think it is good to tell Dean.
You know, he has come over here and he wants
to help. Don't you think so?
Bell:
Dean is all right.
H.M.Jr:
Well, is there anything more on this?
Cochran:
There is just that one point, you asked for a
letter on the gold. You remember, the British
had raised the question of their negotiations
with Canada? They had two points in there.
One covered the lease-lend part, as far as
parts and materials; and the other on the gold.
H.M.Jr:
Well, I want them to - excuse me, was it a
letter to us about the gold?
White:
It was a memorandum.
Cochran:
It was & memorandum.
Bell:
You had asked for a reply, which Merle was
preparing to go back.
H.M.Jr:
Where is that?
Cochran:
Have you one?
White:
We have three replies, one of which Bernie and
I recommend. I haven't seen his, although we
primarily recommend no written reply. Bernie
and I definitely feel there should be no
written reply, but we have written replies
prepared.
H.M.Jr:
If I could go along with that and delegate
Merle Cochran, the next time they come in,
to simply say, "Gentlemen, we want the gold
to come here rather than to Canada."
388
- 41 -
White:
I am wondering whether you would want to
put it that way or maybe you would want to
put it that you don't feel it appropriate
for you to comment on what they do with
their funds, indebtedness to foreign coun-
tries. All our concern is that they make
their commitments here, because I am wonder-
ing whether they wouldn't use that informa-
tion in Canada and make it a little diffi-
cult for us. Put it the other way around,
Merle. If you take a note, simply say that
we have been counting on it and all they have
got to do is read the Secretary's testimony.
Cochran:
I didn't get to talk with Harry and Bernie
because they were working on it last night
when Phillips was with me, so I have just
drafted & note in which I quoted your testi-
mony up on the Hill.
H.M.Jr:
May I see it?
"Dear Sir Frederick:
"By memorandum dated March 5, 1941, you raised
two questions. The first was an inquiry as to
whether I would see any objection to Great
Britain paying Canada in gold to the extent
that you may have gold available for that pur-
pose in the future. You explained that this
would not cover more than a fraction of the
adverse balance with Canada, and that gold
so utilized would reach United States eventu-
ally in payment of Canada's adverse balance
with the United States.
"It will be recalled that in the data prepared
with your assistance and submitted to Congress
by me, we estimated for the current calendar
year Australian gold exports to the United
States at $75 millions and South African
389
41
- 42 -
exports of gold at $480 millions. (see
page 11 of Part 1 of "Hearings before the
Committee on Foreign Relations, United
States Senate, on S. 275.")
"May I also invite your attention in this
connection to the following extract from
my testimony before the Committee on
Foreign Affairs, House of Representatives,
as reported on pages 64 and 65 of the volume
of Lend-Lease Bill Hearings."
I think this, unless there is some good reason,
Merle, that you think otherwise, I would show
them this part of my testimony, you see. I
mean, just lift my testimony out of this
letter. I wouldn't send them the letter.
And simply say, "This is what Mr. Morgenthau
says and he hasn't changed his mind any since
he has testified." What do you think about
that?
Bell:
That is all right. Is it in there that this
data that the Secretary gave to the committee
is with the approval of the British Govern-
ment?
Cochran:
I said prepared with their assistance.
H.M.Jr:
And you could add on there, "approved."
White:
Well, they gave it to us.
Bernstein:
Well, there is a point in the testimony where
you make it perfectly explicit that you were
submitting the information with the approval
of the British Government.
H.M.Jr:
Let's just rehearse. Let me say it and you
people disagree, if you wish to. I would send
Regraded Uclassified
390
42
- A3 -
-
for these people and say, "We have considered
this and I would like to show you a copy of
Mr. Morgenthau's testimony and the position
he took in regard to the disposition of the
Australian and South African gold and his
position hasn't changed any. Is that enough?
Cochran:
I prefer it that way.
H.M.Jr:
You prefer it that way?
Cochran:
Yes.
H.M.Jr:
Ed?
Foley:
Yes.
H.M.Jr:
Bernie?
Bernstein:
Quite all right.
H.M.Jr:
Harry?
White:
All right.
H.M.Jr:
It is unanimous.
Cochran:
Just that last paragraph. You know they raised
in a memo two questions and I say, "As to your
second question with respect to the applica-
tion of the Lend-Lease Bill to American parts
and materials entering into Canadian-manufac-
tured munitions for Great Britain, I beg to
inform you that this question is having the
attention of the Treasury during its study of
the general problem of operating under the
Lend-Lease plan."
H.M.Jr:
I don't think I would say that.
Cochran:
I mean, they have raised that question.
391
- 44 -
White:
I would just ignore that part of it.
H.M.Jr:
I would just answer him on the gold.
White:
There is just one question, in order not to
make it possible for Canada to misunderstand
or to raise any difficulties, if they do ask,
"Well then, is it that the Secretary wants
us to pay the gold to him?" I am wondering
whether a statement to the effect that the
question as to how the British Treasury shall
meet its commitments to other countries is not
a matter on which the Secretary feels he can
appropriately express an opinion might not be
made? Then they wouldn't be able to go to
Canada and say--
H.M.Jr:
If you fellows could only see each other be-
fore you see me, you see. I don't know why
it can't be done.
White:
Well, we were all tied up until the last minute.
H.M.Jr:
Well, just at this time - I am tired now and -
I don't want to go any further just now. Show
them that testimony.
Cochran:
All right, and I will tell them the considera-
tion of anything else is deferred.
H.M.Jr:
But please, gentlemen, before you come in
here, try to see each other and show each other
your memoranda.
White:
It was just impossible. He (Cochran) was with
Bell this morning and we were waiting in his
office.
H.M.Jr:
He was what?
Cochran:
I was with Dan trying to get the corrections on
Regraded Uclassified
392
- 45 -
this thing. We were going over this because
there were errors in it which--
White:
There was a desire to get together.
H.M.Jr:
There was a desire?
Cochran:
Oh, yes, I should say SO. But last night I
was seeing Phillips when they were working.
H.M.Jr:
Just so that the intentions are good.
Cochran:
The very best.
White:
Then Merle Cochran will not tell them that you
want all the gold to come here, rather than to
Canada?
H.M.Jr:
What he is going to say is, there is my testi-
mony in which I say that the gold should come
here. I mean, "Mr. Morgenthau's position is
as he testified." Isn't that what you under-
stand?
Cochran:
Yes.
H.M.Jr:
Does anybody object to him saying this is my
testimony and my position is just what it was
then? Now, from that they could only draw one
conclusion, that we wanted it to come here.
White:
But they won't be able to tell the Canadian
Government that you want all their surplus dol-
lars to go to you and not to the Canadian
Government, and that is the only thing I
wanted to avoid.
H.M.Jr:
They will put me in the wrong light whatever
way you do it.
Cochran:
You would rather have it in writing, Harry?
Regraded Uclassified
393
45
- 46- -
White:
No, I think you should tell' it to them orally.
394
Dear Sir Frederick:
By memorandum dated March 5, 1941, you raised two
questions. The first was an inquiry as to whether I
would see any objection to Great Britain paying Canada
in gold to the extent that you may have gold available
for that purpose in_ the future. You explained that
this would not cover more than a fraction of the adverse
balance with Canada, and that gold so utilized would
reach United States eventually in payment of Canada's
adverse balance with the United States.
It will be recalled that in the data prepared with
your assistance and submitted to Congress by me we
estimated for the current calendar year Australian gold
exports to the United States at $75 millions and South
African exports of gold at $480 millions. (See page 11
of Part 1 of "Hearings before the Committee on Foreign
Relations, United States Senate, on S. 275.")
May I also invite your attention in this connection
to the following extract from my testimony before the
Committee on Foreign Affairs, House of Representatives,
as reported on pages 64 and 65 of the volume of Lend-
Lease Bill Hearings:
Sir Frederick Phillips, K.C.M.C.,
Under Secretary of the British Treasury,
Washington, D.C.
395
- 2 -
"Mr. Tinkham. Every year Great Britain is receiving gold
from South Africa where it is mined to an extent of $700,000,000
to $750,000,000. What reason is there, that you know of, why
that gold in due course and under proper arrangements should
not be transferred to us? I mean, of course, as security and
collateral for what we may advance it which may be an unlimited
amount.
"Mr. Morgenthau. Mr. Tinkham, under that section B(3) it
says South African exports of gold, $480,000,000, which they
advise me is the amount which would flow to the United Kingdom.
There is $480,000,000. We have also listed in Australian gold
$75,000,000.
"Mr. Tinkham. We will not dispute about the amount. I have
seen seven hundred to seven hundred fifty million dollars
repeatedly stated as the amount of gold produced in the Rand
in English publications, which I could submit to you. If they
are submitting a larger amount and we have notices of approxi-
mately the amount of $450,000,000 or $750,000,000, or as I
suggested, $700,000,000, why should not they transfer it to
us as collateral against such loans as we are making so the
American taxpayer does not have to meet their bills as is pro-
posed in this legislation?
"Mr. Morgenthau. You and I think alike on this point. I
believe that any amount of South African gold that the United
Kingdom receives during this year they should use to pay for
merchandise which they buy in this country.
"Mr. Tinkham. Now, have they been doing that, do you know?
"Mr. Morgenthau. They have been paying their bills.
"Mr. Tinkham. But you do not know whether they have used
that or whether they are segregating that, cacheing it, as it
were, in London?
"Mr. Morgenthau. No.
"Mr. Tinkham. Or even selling it to us, of course, at a
very heavy profit at the present prices you are paying for gold?
"Mr. Morgenthau. That is something else again. They have
been selling us most of their South African gold and they
propose to sell us all the South African gold that they produce.
396
- 3 -
"Mr. Tinkham. Sell us! Yes; but do you not think that where
we are to let them have an unlimited credit it should be given
us as security and as collateral annually?
"Mr. Morgenthau. I do not think you really mean that.
"Mr. Tinkham. What did you say?
"Mr. Morgenthau. I do not think you really mean that.
"Mr. Tinkham. Certainly, I do, Mr. Morgenthau; I am always
very serious.
"Mr. Morgenthau. These figures which I presented here today
include, I believe, all of the gold that will be mined in South
Africa and Australia within this coming year and they need all
of that gold and all of the securities of their citizens and
they need all of the investments they have in this country to
raise sufficient dollars to pay for the orders already placed
here."
The foregoing paragraphs indicate the commitments which I have
given Congress insofar as current production of South African
and Australian gold is concerned.
As to your second question, with respect to the application
of the Lend-Lease Bill to American parts and materials entering
into Cnadian-manufactured munitions for Great Britain, I beg
to inform you that this question is having the attention of the
Treasury during its study of the general problem of operating
under the Lend-Lease plan.
Sincerely yours,
Secretary of the Treasury.
397
TREASURY DEPARTMENT
mot
INTER OFFICE COMMUNICATION
DATE March 11, 1941
Secretary Morgenthau
TO
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
In accordance with the decision reached at this morning's group meeting on the
British financial position, Under Secretary Bell, with a suggestion now and then on
By part. drew up a list of forms which we contemplated submitting to the British
Treasury representatives here with the view to obtaining from them regular and uniform
monthly reports upon their financial position, both with respect to current assets and
commitments and prospective receipts and disbursements.
At 3:15 I telephoned Sir Frederick Phillips that we had this plan under vay and
hoped that he would let his assistants meet with us this afternoon to see whether our
forms were workable from the British standpoint, and to suggest any amendments.
Phillips agreed with this and had Messrs. Playfair and Allen of his staff meet with
Messrs. Bell, White and myself at 4:15 this afternoon. The forms which had been pre-
pared in Mr. Bell's office were studied and some alight amendments thereto made. The
British representatives took the forms away, with the understanding that they would
study them and report back to us any new suggestions that might require consideration
Before the system is set into operation.
HMR
Regraded Uclassified
398
March 11, 1941
3:00 p.m.
RE TAX PROGRAM
Present:
Mr. Gaston
Mr. Foley
Mr. Bell
Mr. Sullivan
Mr. Blough
Mr. Tarleau
H.M.Jr:
Well, I see Tarleau and Blough. It smells
like taxes.
Sullivan:
Did you see the headlines in the afternoon
paper?
H.M.Jr:
No.
Sullivan:
Seven billion for the Lend-Lease.
Gaston:
Gone up?
Sullivan:
Woodrum made the announcement coming out of the
White House this morning. He said everybody
in the conference except one was agreeable.
Taber was there, and he spoke of his having been
a severe administration critic, the inference
being that he was the one who had protested.
H.M.Jr:
Well, what do you Coast Guard fellows want
today?
Sullivan:
Well, we have a variety of schedules here,
Regraded Uclassified
399
- 2 -
starting in with invested taxes that would
yield a billion six --
H.M.Jr:
Excuse me. Coast Guard is life-saving, isn't
it? Take it all back.
Sullivan:
Another schedule of two billion one, 8. third
of two billion and a half, a fourth of three
and a half and a fifth at just about four
billion.
H.M.Jr:
Well, this is the Roosevelt-Bernie Baruch
plan, you see. The President doesn't know
whether these figures are correct, but he
thought invested business on the present
schedule would give us two billion more
taxes. Yes? No?
Sullivan:
Well, there is an estimate in your report that
an increase from - in national income from 90
to 100 million would give an increase in revenue
of two billion two.
H.M.Jr:
My report?
Sullivan:
Yes, sir.
H.M.Jr:
Well, do you expect it to be a hundred on the
average in the next fiscal year? It is 78.now.
Sullivan:
I think they are planning about 84.
Foley:
When?
Bell:
1941.
Foley:
June 30, '41?
Bell:
Calendar year, which affects your 1942 reve-
nues, materially.
Sullivan:
That is right.
400
- 3 -
Bell:
1942 calendar year hasn't been estimated,
but it is assumed that on the present upper
95. trend, it will go to 90 or better, possibly
H.M.Jr:
Calendar year, how much?
Bell:
Eighty-five, I think. It is close to 80 now.
H.M.Jr:
Seventy-eight was the last I heard.
Foley:
Well, that is a jump of five since when?
Bell:
Since last January.
Foley:
Since January 1, '41?
Bell:
'Forty.
Foley:
Oh, you mean in fourteen months?
Bell:
No, the estimate in January, '41, was 79 and
a half, and the estimate in January, 1940, was
74.
H.M.Jr:
What we are talking about, isn't it, is how
much business for the calendar year - let's
see, six months of '41, isn't it?
Sullivan:
Yes.
H.M.Jr;
And twelve months in '42?
Sullivan:
You mean on these taxes?
H.M.Jr:
Yes.
Sullivan:
Yes, except on the income taxes. They won't
come in - there will be six months of fiscal
'42.
Regraded Uclassified
401
- 4 -
H.M.Jr:
Well, have you struck a kind of an average
for the year that we are talking a bout?
Sullivan:
You mean --
H.M.Jr:
In the calendar '40 year - how much will
business be in the '42 calendar?
Bell:
Forty-two or '41?
H.M.Jr:
Forty-two.
Bell:
In the '41 calendar year, I think our estimates
were based on 85.
H.M.Jr:
Yes, that is what you said, 84?
Bell:
I don't know. We have no estimates for '42,
but there has been talk that it might go up
to 90 or 95. I don't know whether the capacity
is there or not.
H.M.Jr:
Let's just say we strike an average of 90.
How much revenue will that produce on the
present bill?
Sullivan:
It would be well toward two billion dollars.
H.M.Jr:
Then his figure of around two was right. You
get two more. What he spoke about is two more
and a billion and a half new taxes. Now, how
much would that give us in revenue, gents?
Sullivan:
Well --
Bell:
About 12.
Sullivan:
Not quite that.
Bell:
Well, 11.7.
Regraded Uclassified
402
- 5 -
Blough:
You mean gross, or after Social Security
is pulled out?
Bell:
Net. Eight, two plus three, five would be
eleven, seven. Just a little under twelve
billion. That is net.
H.M.Jr:
Twelve billion and how much are we going to
spend?
Sullivan:
Eighteen.
Bell:
That is about right, 18 or 17.
H.M.Jr:
Well, that is two-thirds.
Blough:
That was before Lease-Lend.
H.M.Jr:
Well, I know, but it is two-thirds. That would
be perfect.
Bell:
And if your capacity increases and your national
income increases, your revenue will again go up
to take care of the increased expenditures on
the Lend-Lease Bill in 1943, if necessary.
Sullivan:
I think the country --
Tarleau:
That is good.
Sullivan:
will take something more than that. I
think you can take a lot more than that with-
out in any way interfering with your borrow-
ing plan.
Bell:
God, he is driving us!
H.M.Jr:
Well, what figure are you shooting for?
Sullivan:
I have got them all the way up to four.
Regraded Uclassified
403
- 6 -
H.M.Jr:
Do it the way friend Willkie does, throw &
dart, and pick one.
Sullivan:
We think we could take four without throwing
in a monkey wrench.
H.M.Jr:
You mean four on top of the two?
Sullivan:
The two isn't anything that anybody is giving
us. That is something we are giving them.
H.M.Jr:
That is a volunteer offering.
Sullivan:
No, I mean because business is better, they are
earning that much more. That isn't an increase
in taxes.
Gaston:
I think John is right.
Sullivan:
I don't think we ought to talk at all about any
additional yield because of improvement of busi-
ness conditions.
H.M.Jr:
All right, we will just gracefully accept two
billion more --
Sullivan:
When, as, and if we get it.
H.M.Jr:
And you want how many more taxes on top of that?
Sullivan:
I am willing to go the whole way, sir, and I
think they will take it.
H.M.Jr:
I wondered why you invited Herbert.
Gaston:
I didn't know until now. I didn't know until
now.
H.M.Jr:
You know what we call it up in Duchess County?
It is 8. horse shedding. S-h-e-d, for some of
you boys who haven't lived in the country.
Regraded Uclassified
404
- 7 -
Bell:
What is wrong with taking that much?
Foley:
It all depends on how you do it.
Bell:
We will take it out of the lower brackets.
(Laughter.)
Foley:
We are against that, aren't we, Dan?
Bell:
Yes, we certainly are. We have got to do
something about the ones we have got on the
books now.
Gaston:
It is a long time before we can foresee any
reduction in Federal expenditures, a long time.
If the war is suddenly over, we are going to
have domestic expenditures on a much higher
scale than we have ever had before.
H.M.Jr:
You are one of these spending boys, are you?
Gaston:
No, I am one of these --
Bell:
Realistic.
Gaston:
Yes, one of these "balance the budget" fellows.
(Laughter.)
I am quite serious about it. I think we have
got to get down to business.
H.M.Jr:
Well, what would four billion do to whom and
where and how?
Foley:
Yes, with which and to whom?
(Laughter.)
H.M.Jr:
I may like it, you know. Cheer up, Herbert.
Regraded Uclassified
405
- 8 -
You might just as well smile while we are
all operated on.
Gaston:
I hardly can.
Sullivan:
Of that four, half would come from income
taxes, 353 million from estate and gift
taxes, 645 from corporation taxes, 350 from
liquor, 200 from tobacco, 200 from increased
taxes on automobiles and gasoline, 132 and
a half million on the "Bell" tax --
Bell:
Is that all? A nickel 8. bottle?
H.M.Jr:
We just fixed Pepsi-Cola up. Are you going
to take it away from them?
Bell:
It did all right last year. It earned $24 a
share.
Sullivan:
John Burns is counsel for them, and he says
their only worry is that the water rates will
go up in New York City. That is, it is a very
important item in the cost. I had the mis-
cellaneous tax outfit working on your (Bell's)
tax, and of course, we have to tax the drinks
that are sold at the soda fountains, the
flavoring and the --
Bell:
Sure.
Sullivan:
And the water, carbonated water, and in order
to equalize the tax with the tax on bottled
goods, we have to tax the goods three times as
much as it sells for.
H.M.Jr:
O.K.
Sullivan:
Now, I have receipts for all of you of all of
these different schedules.
Regraded Uclassified
406
- 9 -
R.M.Jr:
All right.
I don't like Herbert when he is so serious
about this thing. This is a plan to raise
additional --
Bell:
Have you got anything here to raise income,
salaries or anything?
Gaston:
That is what we are trying to raise, salaries.
Bell:
Or reduce our installment payments.
M.M.Jr:
I told you the joke about the President,
didn't I? I think it is the best joke I have
heard yet. You can't repeat it. He says,
"Now, Henry, when you get down to line 31 on
the income tax, it says - say your net income
is about $5000. Then what I want you to do is -"
I can't remember whether I did - but he says,
"In line 32, we just add two per cent to he
tax.' So I said, "Mr. President, have you made
out your income tax yet?"
He said, "No." And I said, "Well, when you
get to line 32, you will find it is 10 per cent."
He said, "Well, I haven't got down that far yet."
Don't you love it? He had discovered something
new.
Sullivan:
Baruch may want to do that same thing over again,
and that doesn't solve any problems at all.
H.M.Jp:
That is what he wants. He wants line 32, you
see --
Sullivan:
Baruch has been giving Harrison 8 awful lot of
stuff, and Harrison called me yesterday after-
noon and wanted to know if I wanted to see him
Regraded Uclassified
407
- 10 -
on anything right away because he was leaving
Wednesday for four or five weeks in Arkansas,
and he sounded as though he was not at all well.
H.M.Jr:
Well, here is the thing that amused me. Bell
and Jesse Jones and I had lunch together today,
and I said, "How about the Baruch plan?"
Jones said he spent the last two weeks here,
not lobbying, just visiting.
I said, "Have you heard about the Baruch plan?"
He said, "Sure, it is all right for Bernie,
he has only got tax-exempts. He likes to write
the ticket. He has only got tax-exempts."
I don't see anything in here on apples.
Sullivan:
No, we are saving that until after the war.
H.M.Jr:
You fellows are certainly full of pep and
vinegar, aren't you?
(The Secretary held a telephone conversation
with Mr. Harold Smith.)
Regraded Uclassified
408
- 11 -
H.M.Jr:
What you heard, gentlemen, is in the room,
if you please. I was putting on a show for
the benefit of Smith and not for you.
Sullivan:
Purvis was called down to the Embassy last
night about 11:00 o'clock.
H.M.Jr:-
Was he?
Sullivan:
We were having dinner at Forrestal's, and I
drove him down, I thought it must be important,
or they wouldn t have called at that hour.
H.M.Jr:
He was sent for?
Sullivan:
Yes, he was.
H.M.Jr:
I happen to know what it was. It was as a
result of a conversation that I had that they
sent for him. He didn't know what it was, I
know he didn't.
Sullivan:
Well, he wouldn't have told me anyway if he did.
H.M.Jr:
He didn't know what it was, but that is amusing,
isn't it?
Sullivan:
We had a little game of poker in which he won
most of the money, and Knudsen says, "This is
Lease-Lend poker.
H.M.Jr:
Is Purvis a good poker player?
Sullivan:
He said he hadn't played. I hadn't played for
fifteen years, and I was the only one who won
any money, so I couldn't say.
H.M.Jr:
You and Knudsen and Forrestal, and who else?
Sullivan:
And Ralph Budd and Admiral Towers. Ingersoll
was there and Blandy, the Speaker, and Vinson,
Regraded Uclassified
409
- 12 -
the Chairman of Naval Affairs. Dean Acheson
was there.
H.M.Jr:
Was it fun?
Sullivan:
It was all right.
H.M.Jr:
Well now, look, I don't see why I should waste
your time. This is all very clear, and I am
going to take this home tonight and study it.
Tomorrow is Wednesday, isn't it?
Sullivan:
That is right.
H.M.Jr:
And --
Sullivan:
The last ones, 5A and 5B are just alternative
choices.
H.M.Jr:
I will take this home and study it.
Sullivan:
We have felt that this Excess Profits Tax is
pretty unsatisfactory, and we are not hopeful
of working out a fair and equitable tax at all.
I think we can get the Undistributed Profits
Tax back up there on a tray, and I think we can
get as much money as we are going to get out of
Excess Profits and not nearly half the expense
or half the grief, or half the casualties to
concerns we shouldn't want to penalize.
H.M.Jr:
I am going to continue this discussion at 10:15
tomorrow morning.
Sullivan:
Yes, sir.
H.M.Jr:
You gentlemen are all invited. I would like to
study this.
Bell:
You probably won't be able to sleep.
Regraded Uclassified
410
- 13 -
Tarleau:
That is what I did. I didn't sleep. Now I
feel a little better. When you assimilate
it, you feel a little better. I feel much more
cheerful today than at the first look at it.
Sullivan:
It only hurts for a little while. You will
notice that there aren't any sales taxes.
H.M.Jr:
We gave - we had lunch with Jones. I said,
"Well, Bell and I figured that before this show
was through, we would have to spend 50 billion
dollars for armament." Jones jumped back. That
is what we figured.
Gaston:
I should say that the British will need pretty
desperately around 12 billions, at a rate of 8.
billion a month, as fast as we can get to it.
Regraded Uclassified
411
1
2
992.3
3
1,140.7
4
1,700.0
11111
5
2,020.0
6
203.0
7
322.0
Regraded Uclassified
412
Fine to raise et edditional $1,650 million of MIN w
fourse
individual 1800mg tests
. 904.0
Increase earber return by adopting (2/7/2) attached rate scholule
letate ADÁ an will
103.0
(1) Increase the estate tes rates by admiting the strached
rute scheduler and (2) increase the ein tax rates to
three-guarkers the rates to (1/22/41) the attached subside
Corporation twing
575.0
(1) Issues profits taxi Increase rutes and review base
300.0
(2) Normal taxt Increase mas on all corporations 15
75.0
(Not an official
sen crining
132.5
Incose a 122 on bettled soft drinks at the rate of 1 cent
per bettle with equivalent taxes on unbottled drinks and
formain syrupe
(1/31/42)
Check tax
56.0
the 2-cent sheck tax which vos imposed by the
Sevenue net of 1932
(1/22/41)
Admissions tax
55.0
Reduce the complion under the adminisms tax from
20 cente to 9 combe
(1/22/41)
Automebiles
40.0
Impace 15 additional 2 persent tax on the Item
covered in See. 3403(b) of the 1. 8. s.
(1/2/41)
Liques
192.2
Distilled spirite: Additional 81 per galles
135.0
7ermated milt liquers: Additional #1 per barrel
55.0
vines, cordials and liquears: Insurance of 16 2/3%
2.2
near stock taxes (first year only)
Metilled spirits, $1 per calles
(29.0)
Ferusated mit liquers, $1 per barrol
( 3.0)
(11/29/40)
1,657.7
1/ limites for individual Issue taxes are on basis of salendar year 1941
levels of Income all other estimates are at becluse levels actimbed
for the fiscal year 1942. the date when the estimate - min to given
in paranthesis after each -
37159a
Regraded Uclassified
Plan to relse MR. additional $2,150 addition of mass 3/
foures
I -
I
(In
income -
a 992.3
Increase warter rates by adopting attached rate schedule,
without defense tax
(2/11/41)
latate and an taxes
103.0
(1) Increase the estate tax return w addipting the
rube scheduler and (2) increase the an las rules so
three-quarters the rutes in (1/22/41) the attached schedule
correration texas
575.0
(1) Excess profits taxes Increase rates and revise Inco
500.0
(2) Normal taxt Increase rate on all corporations 25
79.0
(Not as official cettinte)
Saft drinks
132.5
Imposs a tax on bottled soft details as the rate of
1 cost per bottle with equivalent two on unbettled
drinks and fountain cyrups
(2/31/41)
Chedr tax
56.0
the 2-seals chedr tax which vas Impost w the
Revenue les of 1932
(1/22/41)
Admissions 192
55.0
Reduce the exception under the advissions tax from
30 comic to 9 combe
(1/22/41)
10.0
Automobiles
Imposs - additional 2 percent tax on the Issue
covered in section 3403(b) of the 1. R. c.
(1/2/41)
192.2
liques
Distilled spirite: Additional #1 per gallen
135.0
Termented malt liqueres Additional $1 per berrel
53.0
Vines, cerdials and liqueres: Increase of 16 2/35
2.2
Tlear stock - (first year only)
(29.0)
Distilled spirite, 61 per calles
Permited malt liquore, 81 por barrel
(3.0)
(11/29/40)
2,146.0
V Extimates for individual income was are on basis of colonder your 19d
levels of income all other octivates are at lovels astimated
for the fiscal year 1942. The date when the astimate wis máil to given
in parenthesis after each -
Hire
3/12/19
Regraded Uclassified
PLan to raise a additional $2,600 million of w
-
$2,120.7
1 after w adverting ettached she
instating defense team
(2/11/42)
196 -
m.e
for changes (1) Incluse ememption from $40,000 to
$25,000 (2) adopt the abtached estate ten Pute schoduley
(3) reduce emelusion from $40,000 to $25,000
no les charges (1) the excuption from $40,600
to $25,000; (2) Increase the ein - name to -
fourthe the in the proposed (1/27/41) estate tax eshotule
commission -
575-0
(1) facture profite taxt Insurance rubee and revice Insue
500.0
(2) Normal taxt Insurance rube - all 15
75.0
(Nos M official estimate)
MA
132.5
Incose à Vax an bettled oft drinks at the rute of
1 and per bettle with equivalent teams an whettled
trising and fountain eyrope
(1/31/41)
Park M
96.0
the 2-ml check the which - Expend w the
Income 10% of 2952
(1/22/41)
W
35.0
Redome the emergen under the addressions too from
20 cambe to 9 embs
(1/22/01)
who
Impose as additional 2 persons tex on the Items
required in esotion 3403(b) of the I. 2. c.
(1/2/42)
198.2
Disailled spirites Additional 61 per gallen
135.0
Purchased mall liquires Additional 63 per -
93.0
Vines, and 15quirments Insurance of 16 2/36
2.2
FLOOR stock - (ftret year enty)
Distilled spirite, 61 per milm
(29.0)
Termined malt liquire, 01 per barral
3.0)
(11/29/40
Item
70.0
of cigare, tobacco and smith Dealso rates
2,982.4
(Not in official catimate)
V Revientee for individual Income - are 8 basis of minder your 1901 Lovels of
of
Best- The all date other which estimates the assissio are of - bestages is lovels given applicated permissions the the first
3/22/18
Regraded Uclassified
Plan to nis n additional $3,600 aillies of - w
415
I
Michael Lease compliens to $500 the stagle potion and $1,000
insure
$1,700.0
for a nurried persons and Increase Wis - by
adopting attached mis asholule, without defense the
(Date a efficial
-
58.0
tex
(1) Retmon specific emergéion from
140,000 to 225,000 (2) adopt the attached - vate
(3) reduce insurance anstruction from $40,000 to
$25,000
an w changes
(1) the specific exemption from $40,000 to $25,000
(2) increase the are tar makes to the mail
is the propered estate tax edents
(1/27/41)
-
573.0
profite tax: Insurence Febes and revise base
500.0
(2) formal texas Insurence rule a all experiations 15
75.0
(Not a efficial extimate)
350.0
Motilled spirits: Additional $2 per callen
malt liquires Additional #2 your burrel
Vince, certicle, and liquires 33 1/35 insurance
(Not - official exhámate)
I
200.0
Digurations Additional 75 ombe you 2,000
130.
Mainfasture of edgars, tabacco and units
Isside rates
70.
(Not - efficial astimate)
team, including guapline
800.0
Items covered is Som. 3403(b) end y403(a) of
Codes Deahle reter
á
Geopline taxes Increase 1/2 cost per salles
120.
(Not - official estimate)
a drinks
132.5
Typece a be es bettled soft drinks of the rute
of 1 - per bittle with equivalent - -
mistled drinks and formish
(1/31/4)
to
56.0
- the 2-mmil check ton with - invoiced w
the - in of 1932
(1/22/41)
be
53.0
the complies unless the abtained tax from
20 - to 9 mate
3,509.5
(1/22/20)
Stinates for Issue taxes are - hands of 1 191 Levels of
- all other entimates are at Instruct Lovels critinated for the Road your 15th
1 1 & provided 2 5 I 2 1 de the a
Life
1/12/92
Regraded Uclassified
Plan to mine - additional a Williem of - 1/
216
I
I THE -
will
team
$2,000.0
60 6500 the stagle persons and $1,000
too a narvice yearson and insurer - más to
adming attached vote with defenses to
(Ret - efficial
353.0
(1) specific complies from $40,000 to $25,000
(2) Adopt the attached estate tax vale athedule,
with defense tax
(3) - insurance enslusion from $40,000 to $25,000
(1) the specific emplishen from $40,000 to $25,000
(2) Increase the an too reles to the subse
is the propert estate tue with defirmen 9am
(Thes at official contrato)
MM
635.0
(1) profise taxi Insurance rules and series base
500.0
(2) Form) tast Increase mis M all corporations 15
75.0
(3) Capital stock last fames rate to 01.90,
including information for
60.0
(Not M efficial assignée)
Most
350.0
Mattiled spirites Additional $2 per palles
malt ligers Additional # per burrel
Visas, certicle, mé liquires 33 2/32 improve
(Not on official outimate)
been
200.0
Additional 75 embe per 1,000
130
- of dan, totume and units
Drable rules
(Not a afficial estimate)
TO
instating positive
200.0
I'm arread is less. yes(b) and yhoy(e) of
Code: Deable rules
so
Coceline taxt Insurence 1/2 out per gallen
120
(200 a official astimate)
132.5
Imposs & to e bettled coft drinks at the não of
1 - per bettle with equivalent - on unhobiled
drinks and eyesys
(1/32/49)
she
- the 8-seal check tax which - Impossible by the
- of 1932
(1/22/41)
35.0
the examption valor the to them 20
-
- be , -
(1/22/42)
3,999.5
letimites for individual Endome - are - mm of your 1991
Levels of Income; all other estimates are at Instruct 100030 estimated to
the flease year 1942. the date - the nations - más to given in
parenthesis after and -
1/22/13
Regraded Uclassified
Plan to reles - attivienal A William of - w
417
-
-
$2,000.0 w
Least complete to 1800 the stagle your and $3,000
for a morted person and terresse our - w
attended rube substale, with éther tax
(Thes an afficial estimate)
-
353.0
(1) Income specific exception from $40,000 to $35,000
(2) Mopt the attenhed estate tax take askedule,
with defense tax
(3) Income Insurance comination from $40,000 to $25,000
11) Yednes the specifie emerghten from $40,000 to $25,000
(2) Increase the an tax values to three-Courths the nim
in the propesed cotato tax schedule, with deferme to
(Nos is official estimate)
Commission -
Gus.0
(1) Capital stock - Insurance sube to $1.50,
including issuess tax
60.0
(2) Terml taxi Insurance rute %
360.0
(3) Undistributed profite taxes Tenant the 1936 Law
225.0 &
(Not - afficial estimate)
Host
350.0
Motilled spirites Additional R per allm
Femaled mill liquires Additional 42 per burrel
Visa, certials, and liquires 33 2/35 Insurence
(Yes an official catimate)
M
!
200.0
Cigarettes: Additional 75 certe - 1,000
130
- of cigars, tobacco and saff:
Dealth miss
(Not as efficial catizate)
TO
Anterabile tesps, instating quality
200.0
Items covered is mee. 303(b) and 3403(e) of
lew Intite Pates
so
Gasoline taxt 1/2 - pay failen
120
(Not M efficial catimate)
left drinks
138.5
Seport a M on bottled ecft drive at the n/o of
2 - per bottle with equivalent Issues is whethin
with and fundain agrego (2/31/12)
36.0
- the 3-ecut check tax which me Impossed w the
- wh of 2932
(1/22/42)
Malasters top
55.0
Todato the constion under the addissions tax from
DD only to , cashs
(1/22/41)
3,991.9
2/ Primates for individual 1 - are an basic of year 1941 levels of
the indivent offert of the undictributed prodite tall to - Late 1
- 1942, the date who the estimate me más is gives is permitheris d'w to -
all other cotinates we all business Legala cottinued w the flood each year
24158
the attates for the individual I -
3/12/21
Regraded Uclassified
418
1
Individual arter rate schodule
6504 million. vith defense tax
(setimated calendar 1941 Issue levels)
Suries not Income $
I
(1a themseds
I
Indest rate
I
Total earlas
of dollars)
I
(Pereant)
I
comminative
$ o -
2
4
.
80
2 -
h
6
200
4 -
6
8
360
6 -
8
10
560
E -
10
12
800
10 -
12
14
1,080
12 -
14
16
1,400
14 -
16
15
2,760
16 -
18
20
2,160
18 -
20
22
2,600
20 -
22
z
3,080
22 -
26
27
4,160
x -
32
30
5.960
32 -
38
33
7.940
38 -
s
36
10,100
date .
50
40
12,500
50 -
60
16.900
60 -
TO
47
21,600
TO -
80
50
26,600
80 -
90
53
31,900
90 .
100
%
37.500
100 -
150
58
66,500
150 -
200
60
96,500
200 -
250
6a
127,500
250 -
300
64
199,500
300 -
400
66
225,500
400 -
500
293,500
500 -
750
TO
468,500
750 - 1,000
72
245,500
1,000 - 2,000
73
1,378,500
2,000 - 5,000
ya
3,994,500
Over 5,000
75
-
Title
3/12/41
Regraded Uclassified
419
1
Comparison of surber rate under present law and progoaal
not
-
leaders rate
-
total verious
Lacous
4
I
letter
(1000)
NEW
-
I
0 -
2
-
4
-
8
SO
2 -
4
-
6
-
200
is -
6
4
a
$
so
360
6
8
6
20
200
360
I
-
10
#
12
360
800
10
-
12
20
24
560
1,080
12
-
2k
12
16
800
1,400
14
-
16
15
15
1,100
1,760
16
-
18
18
20
1,460
2,160
15
-
20
21
22
1,880
2.600
20
.
22
24
2,360
3.000
22
#
x
27
3,440
4,160
26
-
32
30
30
5,240
5,960
32
-
38
33
7.280
7.940
38
-
54
36
9.300
10,100
-
90
40
11.780
12,500
50
-
&
16,100
16,900
8
-
TO
20,880
21,600
70
-
8
50
50
25,800
26,600
80
-
90
R
53
31,100
31,900
90
-
100
56
36,780
37.500
200
-
150
58
58
69.780
66,500
150
-
200
$
95.780
96,500
200
-
250
62
126,700
127,500
250
-
300
158,700
159.500
300
-
400
224,780
225,500
400
500
192,780
293,500
500
750
467.780
468,500
750 - 1,000
047.780
648,500
1,000 - 2,000
1,377.780
1,378,500
2,000 - 5,000
3,597.780
3,998,900
Over 5,000
-
.
T:1bfa
3/12/41
Regraded Uclassified
120
1
Camparises present and prepaned individual Income taxes
on not Incomes of colected sises w
married person - as dependents
E 1
I
members of tax /
I
Fates
I SERVICE
before personal
-
Present
1
1
Present
I
avenythem 2/
I
Proposal
I
I
Proposal
I
law
I
Law
Amount
Percent
-
$
2,500
$
11
$
33
.4%
1.3%
$ 22
200.05
3,000
31
75
1.0
2.5
lake
141.9
4,000
R
158
1.8
4.0
as
125.7
5,000
110
264
2.2
5.3
154
140.0
6,000
150
370
2.5
6.2
220
146.7
5,000
327
625
4.0
7.5
306
97.2
10,000
528
924
5.3
9.2
396
75.0
12,500
058
1,364
6.9
10.9
506
39.0
15,000
1,258
1,874
8.4
12.5
616
49.0
20,000
2.336
3,106
11.7
15.5
no
33.0
25,000
3.643
4,635
15.4
18.5
792
20.6
50,000
14,128
14,920
28.3
29.8
792
5.6
75,000
27,768
28,560
37.0
36.1
792
2.9
100,000
43.476
44,268
43.5
40.3
792
1.8
500,000
330.156
330,504
66.0
66.2
648
.2
1,000,000
717.584
718.232
71.8
71.8
6kg
.1
5,000,000
3,916,545
3.917.196
78.3
78.3
648
Under the proposal the attached vertax rate schedule is mistituted for present
vehedule.
cursed Income assumed,
Includes 10% defense tax.
Loss than .05 percent.
has
1/12/41
Regraded Uclassified
421
a
Individual oursex rate schedule
6 998.3 ailliem, without defense wa
$1,075.9 million, with defense tax
(Extinated calender 1641 issume levels)
Bartax net income I
Brachet rate
I
(ia thousands
a
I
Total curtax
of dollars)
I
(peresat)
I
cumulative
6 0 -
4
4
4
240
4 -
6
4
400
6 -
8
18
640
a -
10
15
240
10 -
12
ao
1,540
12 -
24
as
1,840
14 -
18
so
8,440
15 -
18
86
8,140
10 -
to
$
5,940
20 -
22
45
4,840
st -
25
50
6,340
26 -
80
&
9,090
30 -
50
00
21,000
00 -
100
an
51,590
100 -
150
62
62,500
160 - 200
48
114,000
200 -
850
66
146,090
R50 - 500
"
179,090
$00 - 400
64
247,090
400 - 500
TO
$17,000
500 - 1,000
78
677,090
1,000 - 2,000
78
1,407,000
2,000 - 5,000
74
3,687,000
Over 5,000
75
-
That
5/11/41
Regraded Uclassified
122
1
Comparison of earter ashedules
under present law and proposed Schedule a
Sustem
direcked rates (Peranch): Total mides selative
net income
I Present
-
Propess)
.
Present
I
($000)
I
law
I
I
law
Propessi
8
0
-
R
-
6
-
180
2 -
6
-
6
-
640
4
6
$
B
40
400
6 -
6
6
18
BOD
640
a -
10
8
25
380
040
10 -
12
10
NO
500
1,360
12
-
14
12
is
000
1,040
14
-
10
15
so
1,100
2,440
16
-
10
28
as
1,460
5,140
16
-
to
a1
$
1,060
8,040
to
-
It
24
45
2,350
4,840
at
-
RS
BY
so
5,170
0,540
25
-
20
27
E
$,440
6,890
26
-
so
20
46
4,840
9,000
so
-
SR
DO
w
8,240
10,200
82
-
38
IS
90
7,220
15,000
se
-
44
N
60
9,380
17,480
44
-
so
8
40
11,780
$1,000
50
-
60
44
B
18,180
27,190
60
-
70
47
61
20,850
$3,890
70
-
80
S
25,880
59,350
00
-
90
#
$1,100
45,480
90
-
100
as
56,780
61,500
200
-
180
se
65,750
62,590
160
-
200
60
85,700
114,090
200
aso
64
106,760
146,000
250
300
44
150,700
170,000
500
-
400
£24,760
247,000
400
800
TO
$17,060
500
750
TO
457,750
49Y,090
750 - 1,000
72
18
647,780
877,080
1,000 - 2,000
78
15
1,577,760
1,407,080
2,000 - 6,000
N
%
8,567,780
5,627,050
Over 6,000
75
76
-
-
Times
5/11/41
Regraded Uclassified
$
Comparism of present and propesed individual income taxes on net incoues of solected alsoe
Married person - no dependents
Bet income I
Amount of tex
I
Effective retails
I
increase in tax
before
I
I
Proposal
:
2
Process)
I
August
:
Percent
personal
a Present
:
Without
E
With
Presentr@ithout: with
1
Framel
4
Properal
examption
#
law
:
defense
A
defense
:
law réafense defense rithout de-sWith $ without deeWith w
<
I
I
tax
:
las
t
:
tax
:
tax
(fense tax
tom
"
D
2,500
4
11
2
40
44
04%
1.6%
1.85
&
29
&
18
263.65
300.05
3,000
31
88
S
1.0
2.9
3.2
57
is
185.9
212.0
4,000
70
184
202
1.8
4.6
5.1
114
112
162.9
108.6
5,000
110
280
308
2.2
5.6
6.2
170
198
164.6
180.0
6,000
150
376
434
2.5
6.8
6.9
228
264
150.7
176.0
8,000
517
606
669
4.0
7.6
8.4
201
352
91.8
111.0
10,000
528
920
1,012
5.8
9.2
10.1
302
484
74.2
91.7
12,500
858
1,410
1,551
6.9
11.5
12.4
552
695
64.8
BO.B
16,000
1,250
2,054
2,259
8.4
13.7
15.1
796
1,001
63.3
79.6
50,000
2,550
3,804
4,194
11.7
19.0
20.9
1,468
1,840
62.8
79.1
25,000
3,845
6,206
5,824
15.4
24.8
27.3
2,561
2,981
61.4
77.6
50,000
14,128
21,754
23,925
20.2
48.5
47.9
7,625
9,801
54.0
69.4
75,000
27,766
37,984
41,585
37.0
50.6
55.6
10,218
18,218
36.8
60.1
100,000
45,476
54,234
$8,811
45.5
54.2
68.8
10,758
15,385
26.7
35.3
500,000
350,158
335,554
351,299
66.0
67.1
70-4
5,390
21,563
1.6
6.0
1,000,000
717,504
715,514
745,963
71.8
72.8
N.A
- 2,070
26,379
. I - 3
8.7
$,000,000
$,916,548
5,825,474
8,962,927
78.5
76.5
78.0
-91,074
26,579
-2,3
.7
Vader the proposal, the attached surtax rate schedule b is substituted for the present socidule.
fazion earned incous assumed.
15-or
8/12/41
Regraded Uclassified
424
,
Individual arter take stabile
million vitiment defines -
million with information
(Noblusbed calenter 1541 Insues Sevele)
I
I
(is thresands of
6
note
8
Total current
dellers)
I
8 e
.
Total
3/12/41
Regraded Uclassified
3/12/41
Thided
- - o
(RESTED
(to thousands of
5
Proposal
$
I personal I I
#
Regraded Uclassified
I
#
3
425
-
14/57/8
Txided
A
5,000,000
<<<<<<<<<<<<<<<<<
500,000
050°00'
000°62
50,000
000°52
000°02
000°ST
12,500
10,000
5,000
000°9
IIII let
I Nutro I 1
6
personal 1 E E I the metiodal E and 5 the for a
"I
-
-
3,999.399
#################
19.4
your Femiel If 8
#################
K I winsted street $ I of
#################
present I Organization Lanes Sales I Individual of
-
-
I
$
.........................
.
-
Regraded Uclassified
5
981
127
-
Individual rate schedule V
$1,150.7 million, without defense tax
$1,261.3 million, wish deforme tax
(Zotimmied colender 1941 income levels)
furtes not income I
rate
.
(in thousands
I
Total surtes
(Pareent)
#
of dollars)
I
cumbisive
#
# 0 -
2
10
8
200
2 -
b
12
Who
is -
6
14
720
6 -
to
16
1,040
8 -
10
is
1,400
10 -
12
20
1,800
12 -
14
22
2,240
24 .
16
24
2.720
16 .
16
26
3,240
18 .
20
26
3,000
20 .
22
30
6,400
22 .
26
33
5.720
26 -
X
36
7.850
32
-
38
R
10,220
y
-
at
E
12,740
$
.
50
5
15,440
50 -
B
by
20,340
to -
70
52
25,540
70 -
80
55
31,040
80
-
90
50
36,840
90 -
100
61
42.940
100 -
130
62
73,940
150 .
200
63
105,440
200 -
250
a
137,440
250
-
300
"
170,440
you
-
400
6s
238,440
400 - 500
70
308,440
500 . 1,000
TO
668,440
1,000 - 2,000
13
1,398,440
2,000 - 5,000
3,618,440
DAY 000% #
75
-
1/ Combined with reduced promptions of 0500 for a single person
and $1,000 for a married person, 11 10 unefficially estimated
that this schodule, without the defense laz, would yield
approximately $1,700 million.
3/12/41
Regraded Uclassified
428
Compartees of prosent and propered individual taxes
on not incomes of solected since 2/
Warried person - se dependents
Net incone I
Amount of
I
Iffective
I Increase fa tax
before
I
las 3/
I
rates
I
water proposal
personal
I
Present
I
exemption 2/1
law
Proposal
I
Presents
E
Proposal
*
: law
Amount
Percent
4
I
-
$
1,500
$
-
8
TO
.
4.75
I
TO
2,000
-
145
-
1.3
105
2,500
11
220
.4%
8.8
209
1,900.05
3,000
32
295
1.0
9.6
254
$51.6
4,000
70
466
1.8
11.7
396
565.7
5,000
110
638
2.2
12.8
500
460.0
6,000
150
832
2.5
13.9
682
454.7
8,000
317
1,241
4.0
15.5
924
291.5
10,000
528
1,694
5.3
16.9
1,166
220.8
12,500
838
2,321
6.9
18.6
1,463
170.5
15,000
1,258
3,018
s.4
20.1
1,760
139.9
20,000
8,336
4,646
11.7
23.2
2,310
98.9
25,000
3,843
6,560
15.4
26.2
2,717
70.7
50,000
14,128
18,583
28.3
37.2
4,455
11.3
75,000
27.768
33,708
37.0
44.9
5,940
21.4
100,000
43,476
50,857
43.5
50.9
7.381
17.0
500,000
330,156
344,880
66.0
69.0
14.724
4.5
1,000,000
717.584
736,042
71.8
73.7
19,278
2.7
5,000,000
3,916,548
3,093,000
78.3
78.7
19,296
-5
w Under the proposal personal examptions are reduced from 1000 to 1900
for . single person and from $2,000 to $1,000 for a married person.
and the attached VEPSAX rate schedule A is abstituted for present
schedule.
3/ Marima earned issue assumed.
y Includes 10 persent defense tax.
T210b
1/12/41
Regraded Uclassified
129
Compartees of arw
valor present law and proyeard Schodule A
Suries
I
Branket rates (Percent)
I
1010 earles regulative
art iscome
:
Present
I
I
law
I
Properal
Present
I
($000)
I
I
law
I
Proposal
:
0 -
2
-
105
$
-
$
200
2 -
be
-
12
-
We
à -
b
is
14
80
720
6 -
#
6
16
200
1,040
I -
10
I
if
360
1,400
10 -
12
10
20
560
1,800
12 -
14
12
22
$00
2,200
14 -
16
15
x
1,100
2.720
16 -
18
18
26
1,460
3,190
18 -
20
n
as
1,880
3,000
20 -
22
%
30
2,360
4,400
22 -
25
27
33
3,170
5,390
25 -
26
27
3,440
5.720
26 -
30
30
4,640
7,160
30
-
32
yo
5,240
7.880
32
-
36
33
39
7,280
10,220
38 -
as
B
9,380
12,740
E
-
50
40
45
11,750
15.440
50
-
$
n
16,180
20,340
8
-
70
47
52
20,680
25,540
70 -
so
of
55
25,680
31,040
80 -
90
53
31,180
36,840
90 - 100
56
36,780
42,340
100 - 150
58
65,700
73.940
150 - 200
8
95,780
105,440
20 - 250
62
126,780
137,440
250 - 300
196,780
170,440
300 - 400
"
224,780
232,440
400 . 500
"
292,780
308,440
500 - 750
TO
$67,750
408,440
750 - 1,000
72
647,700
668,440
1,000 - 2,000
1,377,780
1,398,440
2,000 - 5,000
3,997.700
3,618,440
-
Over - 5,000
75
-
T:10b
3/12/41
Regraded Uclassified
430
14/27/8
Thish
3/ Without 10 personal defense lax.
2/ lariam careed Issue assumed,
5,080,000
1,000,000
000°006
000'00T
75,000
80,000
25,000
20,000
15,000
12,500
10,000
5,000
6,000
5,000
4,000
3,000
2,500
2,000
1,500
1
If I
w
-
-
$1,000 too a carried person, and the attached curter rate scholule "A" to mbstituted for present schetule.
V Valor the proposal personal examptions are reduced free $800 to $500 for a single person and tree $2,000 to
727.50
330,156
27,768
14,128
3,003
2.336
1,25%
.
-
$9
528
317
150
110
20
X
IT
I
-
3,017.60
Annual of tax
119°10'
46,234
30,044
160°92
5,964
4,224
2.7%
2,110
1,500
1,125
95%
500
E
192
COR
132
s
Present Proposal Present law $ Properal $
-
78.3
71.6
0'99
43.5
37.0
28.3
15.4
11.7
us
6.9
1-3
0°N
2.3
2.2
1.8
1.0
ser
I
I
76.4
70.8
65.5
2"94
6'04
33.8
23.9
21.1
18.3
6*9t
15.4
I'M
12.6
9"IT
9'OT
Effective peties
4.9
4.0
99
4.55
1
1 departants Burried If I
X I last of I 8 of rejected elses
Despertion product properd 1 of intiridual
$
W*26-
-9,660
-2,512
2.750
2,676
2.766
2,121
1,658
SOU'T
1,252
1,012
all
909
air
350
237
189
132
-
under proposal
Increase or decrease is laz
-2.5
E
800
59
10.4
19.6
55.2
80.8
118.1
145.9
191.7
253.8
404.0
427.3
505.7
700.5
12'01'1
Purcest
Regraded Uclassified
Individual surtex rate achedule
METER not income I
1
Bracket rute
(in thousands
5
Total surtex
(pereent)
-
of dollars)
4
cumulative
&
o -
2
11
220
2 -
4
14
500
a -
6
16
BEO
6 -
6
19
1,200
B -
10
K1
1,820
10 -
22
22
2,080
12 -
14
25
2,580
14 -
16
27
3,120
16 -
10
29
5,700
16 -
20
31
4,820
20 -
22
33
4,980
22 -
26
36
6,420
26 -
32
39
8,760
82 -
88
of
11,280
88 -
44
45
13,980
44 -
50
40
16,880
50 -
60
51
21,960
60 -
70
54
27,360
70 -
80
69
53,060
80 -
90
69
$8,960
90 -
100
61
45,060
100 - 160
62
76,060
150 - 200
68
107,560
200 -
250
44
189,580
250 - 500
66
172,580
500 - 400
68
240,600
400 - 500
70
510,580
600 - 1,000
78
670,580
1,000 - 2,000
75
1,400,560
2,000 - 5,000
74
$,080,540
76
-
Over 6,000
Treasury Department, division fax Neaworch
March 11, 1941
Regraded Uclassified
132
y
Desparison of Pate schedules under ,Pread Law and proposal
Surtax not .
rate
1
Total vartex
income
1
(norgest)
I
publicative
(1009)
I law 1
I
-
I
5 0 -
2
-
11
-
1
220
2 -
4
-
14
-
500
4 -
6
les
16
I
80
520
É -
8
6
19
200
1,200
E -
10
8
21
360
1,620
LC -
12
10
23
560
2,080
12 -
14
L2
25
800
2,500
14 -
16
15
27
1.100
3.120
16 -
15
18
29
1,460
3,700
LE -
20
21
31
1,40
4,320
20 -
22
24
33
2.350
4,900
22 -
26
27
36
3,440
5,420
26 -
32
30
59
5.240
8,760
32 -
38
33
6
7.200
11,260
3€ -
i
36
lang
9.340
13.950
hb -
50
M)
is
11,740
16,860
X
-
00
91
16,180
21.960
60 -
70
47
54
20,880
27.360
70 -
80
50
57
25,880
33.060
& -
90
53
29
31,180
38.960
90 +
100
56
61
36,780
45.060
100 - 150
58
62
65.700
76,060
150 - 200
60
63
95.780
107.560
200 -
250
62
64
126,780
139,560
230 -
300
A
66
158,780
172.560
300 -
400
66
68
224,780
240,560
400 - 500
68
70
292,780
310,560
500 -
750
2
72
467.780
490.560
750 - 1,000
72
72
647.780
670,560
1,000 - 2.000
73
T3
1,377.780
1,400,560
2.000 - 5,000
74
74
3,597.780
3,620,560
Over - 5,000
75
75
-
-
TIME
1/12/01
Regraded Uclassified
433
Compartaen of present and proposed individual Lncome taxes
on not incomes of solected elses
Married person - no dependente
list income
I
Amount of tax V
Effective rates
Increase in LESS
before
*
under proposal
personal
a
Provent
I I Properal
iPresent:
exemption 2/1
I 10v
Amount
Persont
10m
I
I
4 1,500
-
$
76
-
8.25 $
76
-
2,000
-
ase
-
7.8
150
-
2,500
$
11
257
AX
9.5
226
2054.85
8,000
81
517
1.0
10.8
286
902.6
4,000
70
520
1.0
12.8
440
623.6
5,000
110
704
1.2
14.1
594
540.0
6,000
180
380
2.5
16.5
170
515.8
6,000
517
1,184
4.0
17.8
1,087
336.8
10,000
ass
1,905
1.5
19.0
1,875
200.4
12,600
856
2,615
6.9
20.9
1,758
204.5
15,000
1,858
1,192
0.4
12.6
2,154
100.0
20,000
2,254
5,188
11.7
25.9
2,649
182.0
15,000
3,845
7,254
15.4
29.1
5,422
10.0
50,000
14,126
20,112
29.5
40.2
6,984
42.4
75,000
27,769
55,750
57.0
47.7
6,050
10.0
100,000
43,476
60,100
45.5
63.2
9,725
12.3
500,000
330,150
548,708
66.0
09.4
10,082
5.0
1,000,000
717,584
726,770
71.8
78.9
21,100
3.0
6,000,000
5,920,540
3,037,758
76.3
70.0
21,204
3
Treasury Department, Division of Tax lissourch
V
Under the proposal personal exemptions are reduced from $800 to 1500
for a single person and from 12,000 to $1,000 for a married person,
and the attached ourles rate schedule is substituted for procest
sobstule.
Mazina earned Leases 1
Includes 10 peremat dafence Mr.
JC-PIF
8/12/41
Regraded Uclassified
434
8
Datate and ein fax Tate Tabofule
nos million combined effect, without tax, country gift -
ratee are equal to three-quarters of catate the nine
(estinated fineal 1948 bustasse Levels)
Net estate after
I
specific exemption
#
Brasket rate
I
Comulative to
1
(perount)
1
ou higher
(10 themende)
1
6 0 -
B.
$
#
200
5 -
10
e
400
10 -
20
9
1,200
20 -
se
10
1,500
DO -
$
13
4,080
40 -
so
18
5,850
60 -
w
an
7,550
60 -
100
35
17,100
100 -
280
25
54,650
aso -
800
189,180
860 -
980
194,850
YOU - 1,000
272,300
1,000 - 1,200
384,050
1,250 - 1,800
462,150
1,800 - 2,000
689,180
2,000 - 2,500
B
687,180
2,000 - 8,000
44
1,057,150
8,000 - 3,500
-
1,899,180
3,500 - 4,000
so
1,048,150
4,000 - 5,000
as
2,072,199
5,000 - 6,000
@@
2,682,150
6,000 - 7,000
no
5,283,150
7,000 - 0,000
a
2,083,180
8,000 - 9,000
as
4,462,190
9,000 - 10,000
85
5,113,180
18,000 - 20,000
or
11,613,180
30,000 - 80,000
82,522,180
one
8
-
80,000
3/12/41
Regraded Uclassified
135
6
Troposed estate tax rates sie Substals I comparated
vita yourself coints fax rates
301 solute ofter Transport min
Present rates 1
specific cresptical
Brasket rate
I Curristive
1
I Commissive
(In
I
192 in Mahors
rate
of dellared
(pareant)
must
(persent)
Has as higher
I
o -
9
$
$
100
a
$
100
5 -
20
4
400
3
-
10 -
20
9
1,200
4
600
20 -
20
12
2,50
6
1,200
80 -
$
10
4,000
0
3,000
40 -
60
18
5,000
20
3,000
80 -
60
n
7,150
12
4,200
60 -
100
R
17,100
10 - 14
9,000
100 -
200
m
54,000
17 - 20
00,000
200 - 200
F
132,180
20 - =
89,000
900 -
TOO
20
104,000
25 - 25
151,000
TBO - 1,000
at
372,180
25 - 20
229,680
1,000 - 1,290
IS
204,800
22
300,000
1,200 - 1,800
so
442,150
a
383,600
1,500 - 2,000
=
852,150
55
557,600
2,000 - 2,800
41
897,150
a
767,600
3,500 - 3,000
$
1,097,190
41
982,600
3,000 - 3,800
n
1,293,180
44
1,172,600
3,800 - 4,000
no
1,542,180
47
1,407,000
4,000 - 5,000
E
2,072,150
60 - -
1,929,680
8,000 - 6,000
$
2,682,150
as
2,483,600
6,000 - 7,000
B
8,223,190
50
8,072,600
7,000 - 8,000
61
3,838,190
a
5,663,600
8,000 - 9,000
68
4,463,180
-
4,312,600
9,000 - 10,000
#
6,112,150
#
4,962,600
10,000 - 10,000
#
11,813,160
of
11,652,500
20,000 - 80,000
#
82,512,150
8
22,363,600
Over 80,000
a
-
a
-
2/ Reducive of temparary defence M.
100%
3/12/41
Regraded Uclassified
136
6
Superism of proposed estate the - shobile 1 with
present cotate - M not was (tefore
of solected sises w
3rd estator of fax
-
1
in for
before I
1
1
I
I
exemption
I
Present
1
Proposal
#
Present
I
Preparal
-
2/
t
law
I Schedule Is
lw
I
I
#
Schedule It
Persons
I
(000)
I
$
so
$
300 8
405
0.45
1.06
$
-
123.06
60
660
1,480
1.1
3.8
-
185.0
so
2,300
4,485
2.8
5.6
2,285
102.8
100
4,620
6,763
4.6
8.9
4,125
no.s
200
21,780
$5,365
10.9
17.7
13,285
62.4
400
64,400
$2,755
10.1
23.2
30,326
43.9
000
113,740
168,805
19.0
m.e
19,765
38.0
1,000
233,100
205,725
25.3
29.6
53,625
SS.1
2,000
597,960
678,648
20.9
m.s
60,000
15.8
4,000
1,527,690
1,674,363
30.8
41.9
140,000
0.6
6,000
2,708,220
2,870,725
45.1
47.8
104,505
6.1
10,000
5,430,250
6,594,785
64.8
56.0
164,505
8.0
20,000
13,799,380
12,963,000
64.0
64.0
104,805
1.3
40,000
27,778,500
26,142,000
00.0
70.3
164,500
s
$0,000
43,288,080
45,422,000
93.1
72.4
164,305
A
100,000
74,068,080
74,252,045
74.1
N.S
164,806
.2
Treasury Department, Division of fax Basearch
2/ Their the proposal the attached rate schotule Le substituted for the
present schedule.
2/ m specific exemption of $40,000 alloved use procent law to retained
under the proposal.
a/ Includes 10 percent defense bes.
year 1
5/13/41
Regraded Uclassified
437
7
Satate and an the mis eshable
03m million assistant effect vitiest defunce -
$258 million from estate too and 033 stillen free
an too severing an tax rates ARE equal to
three quarters of estate to rates, the specific
exemption water both taxes 1a reinsed from $40,000
to 125,000 and that the Insurance anclusion valor
the estste tos is reduced from $40,000 to $25,000
(istimated fiscal 19kg bealance levels)
Net estate after
I
I
specific complien
I
Inder sole
1
Completive
(ta
I
(Perema)
:
to - Agen
of dollars)
1
1
-
$
0 -
5
20
$
200
5 e
10
8
600
10 -
20
18
1,800
20 -
30
16
3,400
30 -
to
20
5,400
40 -
60
5
10,000
60 -
so
x
15,800
90 -
100
29
21,000
100 -
150
&
37,000
150 -
200
39
54,500
200 -
290
X
73,500
290 -
300
s
94,000
you -
500
$
182,000
900 9 1,000
MP
417,000
1,000 - 2,000
by
907,000
2,000 - 3,000
52
1,417,000
3,000 - 4,000
53
1,947,000
4,000 - 5,000
59
2,497,000
5,000 - 6,000
57
3,067,000
6,000 . 7,000
59
3,657,000
7,00 - 6,000
61
4,267,000
8,000 - 9,000
63
4,697,000
9,000 - 10,000
63
5,947,000
10,000 - 20,000
67
12,847,000
20,000 - 50,000
69
32,947,000
70
-
Over - 30,000
Thised
3/12/41
Regraded Uclassified
438
1
estate too min under II compared
with present counts tax min
Net estate ofter mines 1/ taketale u
Present rubes 7
specific exemptions
Dysckets
Completive
.
Imdest rate
Completive
(In thousands
1
(pareat)
-
we n higher
I
(mereat)
-
we - Higher
of dellars)
I
1
1
I
1
0 -
5
4
I
6
200
2
I
100
5 -
10
e
600
2
200
10 -
20
12
1,800
1
600
20 -
s
26
3,400
6
1,200
so -
5
20
5,400
8
2,000
to -
$
83
10,000
10 - 12
4,200
60 -
00
n
15,200
12 . 14
6,800
80 -
100
n
21,000
9.600
100 -
190
37,000
18,300
150 e
200
35
54,500
26,600
200 -
250
73,500
36,600
250 -
300
in
94,000
46,600
300 -
500
182,000
83,600
500 - 1,000
se
417,000
1,000 - 2,000
s
2,000 - 3,000
5
1,417,000
BERRER 20 -
23 -
507,000
x .
X - SERVER
222,600
957,600
992,600
3,000 - 4,000
53
1,947,000
* of
1,407,600
4,000 - 5,000
99
2,497,000
, - 53
1,982,600
5,000 - 6,000
50
3,067,000
2,458,600
6,000 - 7,000
"
3,657,000
3,072,600
7,000 - 6,000
61
4,267,000
3,682,600
5,000 - 9,000
63
4,897,000
24 17 17 20 20 61 w 63 70 % 59 07 69
4,312,600
9,000 - 10,000
s
5,547,000
4,962,600
10,000 - 20,000
67
12,247,000
11,668,600
20,000 - 30,000
32,947,000
32,362,600
.
Over 50,000
-
2/ Reglacive of temperary information tax
valided
3/12/41
Regraded Uclassified
439
7
Comparison of proposal estate tax under Schobule II 4th
present cetate tos on not estates (before -
of selected store 2/
Set estates
Amount of text V
1
Effective mts
a
Improve is for
before #
I
I
$
1
I
exemption
I
Present
I Prepased I
Present
I Prepared
8
1
-
Percent
2/
-
Law
t Schedule III
law
III
,
(000)
1
I
.
2
1
1
90
$
220 $
660
and
1.3%
$
to
200.0
S
660
1,980
1.1
303
1,300
200.0
80
2,200
5,940
2.8
7.6
3.740
170.0
100
4,680
11,000
4.6
11.0
6,380
136.1
200
21,750
44,550
10.9
22,3
22.770
204.5
400
64,460
132,440
16.2
33.2
67.990
105.5
500
123,740
231,220
19.0
38.5
117,400
203.3
1,000
232,100
438,020
23.2
43.8
205,980
55.7
2,000
597,960
976,140
29.9
48.8
376,200
63.2
4,000
1,527,660
2,118,300
ye,2
53.0
530,700
38,7
6,000
2,706,220
3,348,620
55.1
53.8
642,400
23.7
10,000
5,430,260
6,073,200
963
60.7
642,540
11.5
100,000
74,065,060
74,710,900
The
74.1
62,00
.9
1/ Under the proposal the attached rate schedule is addititated for the
present schodule.
2/ The specifie examption of $40,000 allowed wher present law 10 retained
under the proposal.
3/ Includes 10 percent defense the
Tatited
3/12/41
Regraded Uclassified
440
March 11, 1941
3:17 p.m.
H.M.Jr;
Hello, Harold.
Harold
Smith:
Yeah.
H.M.Jr:
How are you feeling today?
S:
Well, I don't know how I feel. I know
we've got a job of putting all this stuff
together. I just thought I'd give you a
ring - you're probably away shead of me, but
I just wanted
H.M.Jr:
No, I'm about a couple of blocks behind you
today. No one tells me anything.
S:
Is that BO?
H.M.Jr:
I wasn't at the meeting this morning. Were
you?
8:
Yeah. I was late - I was up on the Hill
and they gave me & ring to come down to the
White House. I didn't know what it was about
until I got there and I found about fifteen
Senators and Congressmen in.
H.M.Jr:
I wasn't there BO you're ahead of me. I don't
know what
S:
Now, here, he talked to you the other day, I
understand, about the total amount, and he
talked to me, and he talked to these people in
terms of $7 billion straight cash appropriation.
Now, I didn't know what he was going to say
aside from that; he was sort of letting the
Congressional people take the lead on it;
and they agreed that there eughtn't to be any
contract authorization in it and it would be
be better if it were a straight out-and-out
appropriation. But the President said - the
thing that disturbed me was that he had been
canvassing the situation around and that he
was going to put it all in and instead of
taking a couple of bites at the cherry,
he was going to take one bite.
Regraded Uclassified
441
- 2 -
H.M.Jr:
Yeah.
S:
Well, now, what I'm afraid of 18 here 18 the British
request for about nine billion and they are being
carried down by the Army and Navy to fit into the
productive situation as best they can but this is
really for 142.
H.M.Jr:
Yeah.
is
S:
And it/not the whole bite ae I 800 it. Do you think
it is?
H.M.Jr:
Well, I don't know. I'm out in the cold till - I
really don't know.
S:
Well, you know more about it than I do. I mean I
Just saw the nine billion dollar figure I think
yesterday for the first time. Hello -
H.M.Jr:
Hello.
8:
And there was another sheet, you know, that went well
way beyond that - that I think you gave me.
H.M.Jr:
Well, that's - from that which is about a week or ten
days old, Harold, I haven't seen a thing and the
President hasn't told me a thing and I don't know as
much about it as the cop on the corner.
8:
Well - -
H.M.Jr:
The President said he wanted me at the meeting this
morning and then I didn't get any word 80 I didn't
call up or anything.
8:
I didn't know about the meeting except I saw something
in the paper and I was down before the Civil Service
Commission in the House and I got a call from the
White House to come down and I didn't know what the
hell it was either. The story - then they got mixed
up on the one billion three versus the total of seven
billion - whether the one three was to be reimbursed
by the seven or not. They finally decided that it was
to be reimbursed by the seven billion dollar amount
which set us scurrying around then to change the whole
set up. I sent somebody down to see Burns to see if
we can get that appropriation language changed to fit
that picture.
Regraded Uclassified
442
- 3 -
H.M.Jr:
Well, you had better know about it because I hear
you're going up to testify on the bill.
B:
Where did you hear that?
H.M.Jr:
Oh, a little birdie.
8:
Ah - (laughs). Listen, I hear you are too.
H.M.Jr:
Oh no. I don't know anything about it.
B:
I don't know why the Director of the Budget should
testify on this.
H.M.Jr:
Well, he's doing it - it's the President's bill.
It's written the way you and he want it.
8:
Well -
H.M.Jr:
And I - they just dropped me at the first way station.
I made all my offers about wanting to cooperate -
what things are there - but I'm in no position to
testify about anything.
S:
I don't think I an either because all the information
we've got here is in the last 24 hours and very much
second hand because this 16 the first time I've had
anything to do with it - with this set up.
H.M.Jr:
Well, the last time I think was Saturday a week ago,
and I sent you what I had. I haven't had anything
on it since then.
3:
No, no.
H.M.Jr:
I don't know how the seven billion 1s arrived at
or anything.
S:
Well - the Army and Navy apparently have processed
those military sections of the British requests and
have said that, "Well, they can only end with Knudsen."
Now that's what they brought to us last night and have
said, "Well, this 16 all we can put in to our produc-
tive machinery and probably more".
H.M.Jr:
Yeah.
S:
And the boss says, "You got to squeeze the whole thing
down to seven billion". Well that meane paring off
of several of these items. What would you think -
what would you think about, after we get this thing
tentatively set up, of talking to Purvis about it?
Do you think that would be appropriate? You've got
Regraded Uclassified
443
4
the background on that, maybe I ought to bring the
thing over to both of you.
H.M.Jr:
Well, I don't know what Hopkins is doing.
S:
Well, I don't know either. I mean only once has he
contacted me.
H.M.Jr:
Well, was he at the meeting this morning?
S:
No, no. And I just heard this afternoon that they're
worrying over in Agriculture about what can be trans-
ferred under the one billion three and somebody told
me that the - well, Wickard said he understood the
President was going to make an announcement tonight
of what could be transferred. Well, I've never heard
anything about that. I don't know whether - just
what their problem is - whether it's a legal problem
or what it 1s.
H.M.Jr:
Well, as far as I know, Hopkins is supposed to be
contacting Purvis. You see I'm not doing it anymore.
8:
I see.
H.M.Jr:
And I've asked to be relieved of that but I'd 800
him occasionally. Hello.
8:
Yeah.
H.M.Jr:
But I know that Hopkins sees him and Hopkins has said
that he expects to contact the British Purchasing
Mission. And - well, I'm very serious, Harold, as
far as I'm concerned I'm in no position to testify
about anything because I don't know this stuff and
you can't - I'm not going to go up and display my
ignorance publicly.
S:
Well, I can't learn about it in 24 hours either.
All I'm trying to do 18 to get an estimate together
here for the boss which he says he wants to sign at by
when he signs the bill and there are
least, tomorrow apparently, two dozen people involved in the
thing.
H.M.Jr:
Well, if you're trying to find out if I'm in on it,
I'm not.
S:
(Laughs)
H.M.Jr:
So you can just - there's just 23 people.
S:
(Laughs) All right.
444
- 5 -
H.M.Jr:
And if I've got anything I'll give you a ring but
the last I know is when I sent that sheet over to
you.
8:
Yeah.
H.M.Jr:
And with that exception and the time we were in
Hull's Office when you were there I know less than
nothing.
S:
Apparently, this sheet that we got there is not the
one that they're working from.
H.M.Jr:
Well -
S:
Well, I just thought I'd give you a ring. I told you -
H.M.Jr:
Well, I appreciate it. I appreciate it.
S:
I know the boss mentioned the seven million. I suggested
that he be sure and talk to you about that.
H.M.Jr:
Well, he told me it was seven billion. He told me the
seven billion and that's all. He said, "That's the
figure."
S:
Yeah.
H.M.Jr:
But, if I knew anything and if I had anything I'd give
it to you but I'm only repeating. I know less than
nothing.
S:
Well, then I'd better check with Hopkins on whether
it's appropriate to raise some questions with Purvis.
I suppose that we ought not to process entirely in
& vacuum. I don't know what all the implications of
it are.
H.M.Jr:
Well, I think if you want to Bee Purvis, I think you
better talk to Hopkins.
8:
Yeah. All right, sir, thank you.
H.M.Jr:
Thank you for calling.
8:
You bet. Bye.
445
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
Mar
DATE March 11, 1941
Secretary Morgenthan
TO
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
At 3 o'clock this afternoon the Secretary called me to his office and asked that
Mr. White, who ⑈1 with the Secretary, explain to me the result of the several neet-
ingo which had been held at the Securities and Exchange Commission with the view to
evalving suggestions to expedite the liquidation of British investments in this coun-
try.
Mr. White told me that the basic 1dea which had been discussed at the S. E. c.
had been that of organizing a private corporation which would float & bond issue, pre-
sumbly at a low rate of interest, to obtain funds which could be utilized in taking
over the complete holdings of British vested securities. This plan was not considered
feasible insofar as direct investments are concerned. The plan would be for this
corporation to advance payment to the extent of 65 to 70 percent of the market value
of the securities taken over. The percentage would be less if the securities were
found to be below the average in marketability. It would be necessary that the British
!isclose to this group their complete holdings, and the group would only consider the
proposition as a whole.
The group would proceed with the sale of securities and remit the balance of the
proceeds obtained therefor, deducting only necessary expenses. If there should be any
question of a difference between the group and the British Government as to the sale
price, this should be settled by an arbiter.
It VAS explained that the S. E. c. had studied this plan. and had then invited to
Washington yesterday afternoon Messrs. For and Connely (*) representing investment
associations in New York. The two representatives from New York had not insisted that
they be drawn into any private corporation which might be set up. They were svailable,
however, for consultation if the British may desire to look into the plan or desire
recommendations as to possible concerns and individuals to constitute the suggested
group.
After receiving this explanation from Mr. White, I telephoned Mr. Gifford. I
learned from his New York office that he was in Washington, and I reached him at the
offices of the British Purchasing Commission at 3:15. He let no know that he had
come to Washington this noon and added, confidentially for our ears, that he was here
with Sir Edward Peacock. I told him that Mr. White had attended meetings at the S.E.C.
and that the Secretary had authorised me to acquaint Mr. Gifford with the results
thereof. I thereupon repeated Mr. White's recital to me. I added the word. of explans-
the disposal of marketable securities. The plan which has been under study vas origi-
tion that the Secretary desired in ne my to criticize Mr. Gifford's operations in
sally conselved of possible assistance in liquidating direct investments. It had to
now been considered as difficult of application to this field, but readily adaptable
the markotable security field. I renewed the explanation made previously that the
* President Emett P. Connely of the Investment Bankers Association of America.
Regraded Uclassified
446
- 2 -
Treasury naturally desires to look into every possible means for assisting in the
orderly liquidation of British assets, and that I was confident Hr. Gifford shared
our interest toward this md. Mr. Gifford thanked us for bringing the foregoing
information to his attention. He stated that the proposal was beyond any instructions
which he has. He is, however, taking note of our report and will think it over. He
would require completely new instructions before he could accept such a proposal,
which would completely rearrange the plan for disposing of marketable securities in
this country. His first reaction was that he would not feel justified in submitting
such a plan to London with recommendations unless the Treasury urged it. I told him
that the Secretary desired to bring to his attention the results of the study which
had been made, but to leave action to Hr. Gifford's judgment.
16.m.s.
447
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 11, 1941
Secretary Morgenthan
TO
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Acting upon the Secretary's instructions, I saked Sir Frederick Phillips to
come to ay office at 3:30 this afternoon. I recalled to Sir Frederick that when be
had visited me yesterday evening he had emphasized his interest in learning the extent
to which existing British contracts could be taken over under the Lend-Lease plan.
Furthermore, I recalled our conversation on gold.
I let Sir Frederick know that the Secretary had held a group meeting this fore-
zoon at which the British position had been studied. The Secretary had saked me to
give an oral reply to Sir Frederick's memorandum of March 5 in which inquiry vas made
if to whether the Secretary would see any objection to Great Britain paying Canada in
gold to the extent that it may have gold available for that purpose in the future.
I permitted Phillips to note on page 11 of Part I of "Hearings before the Committee on
Foreign Relations, United States Senate, on S. 275". the estimates which the
Secretary had submitted to Congress (based upon figures supplied by the British
Preasury) for the current calender year Australian and South African gold exports. I
also invited his attention to the testimony which the Secretary gave before the
Committee on Foreign Affairs, House of Representatives, as reported on pages 64 and 65
of the volume of Lend-Lease Bill Hearings. I told Phillips that the Secretary's
attitude toward South African and Australian gold remained the same as presented in
this testimony. Phillips took note of the two references to the published testimony
described above.
Phillips reminded no that the British had hoped to use certain of their gold in
meeting payments due Canada, Re asked if he was free nov to tell the Canadians that
the Treasury insisted upon all South African and Australian gold being sold for its
benefit. He asked further if ve had been in touch with Mr. Clark on this subject. I
told Phillips that we had had no conversation with the Canadian Deputy Minister of
Finance since he left here a few days ago. There was no reason, however, why Phillips
should not continue his discussions with Mr. Clark, bearing in mind the testimony which
the Secretary has given.
I told Phillips that a group of us had net with the Secretary on Saturday, Monday
and Tuesday to study an operating plan for the Lend-Lease Bill, and that in these
sestings the British position had been given particular attention. I let Phillips
know that after receiving the British memorandum of yesterday which gave details as
to outstanding contracts and negotiations with the R. F. 0. and the Army and Havy on
possible taking over of some of these engagements, we had written both the R. P. C.
and the War Department requesting date from their side as to prospects for consumna-
positively no use of our attempting to discuss the question of contracts further at
ties of their negotiations with the British is the premises. I added that there is
present. I showed Phillips the ticker tape which reported the passing of the Bill and
announced that the President anticipated asking for a $7,000,000,000 appropriation
Regraded Uclassified
447
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 11. 1941
Secretary Morgenthan
TO
Mr.
Cochran
FROM
STRICTLY CONFIDENTIAL
Acting upon the Secretary's instructions, I asked Sir Frederick Phillips to
come to my office at 3:30 this afternoon. I recalled to Sir Frederick that when he
had visited me yesterday evening he had emphasized his interest in learning the extent
to which existing British contracts could be taken over under the Lend-Lease plan.
Purthermore, I recalled our conversation on gold.
I let Sir Frederick know that the Secretary had held a group meeting this fore-
soon at which the British position had been studied. The Secretary had asked me to
give an oral reply to Sir Frederick's memorandum of March 5 in which inquiry vale made
M to whether the Secretary would ⑉ any objection to Great Britain paying Cenada in
gold to the extent that it may have gold available for that purpose in the future.
I cermitted Phillips to note on page 11 of Part I of "Hearings before the Committee on
Foreign Relations, United States Senate, on S. 275". the estimates which the
Secretary had submitted to Congress (based upon figures sumplied by the British
Preasury) for the current calendar year Australian and South African gold exports. I
also invited his attention to the testimony which the Secretary gave before the
Committee on Foreign Affairs, House of Representatives, as reported on pages 64 and 65
of the volume of Lend-Lease Bill Hearings. I told Phillips that the Secretary's
attitude toward South African and Australian gold remained the same as presented in
this testimony. Phillips took note of the two references to the published testimony
described above.
Phillips reminded me that the British had hoped to use certain of their gold in
seeting payments due Cenada. He asked if he was free nov to tell the Canadians that
the Treasury insisted upon all South African and Australian gold being sold for its
benefit. Re asked further if we had been in touch with Mr. Clark on this subject. I
told Phillips that we had had no conversation with the Canadien Deputy Minister of
Pinance since he left here a few days ago, There was no reason, however, vity Phillips
should not continue his discussions with Mr. Clark, bearing in mind the testimony which
the Secretary has given.
I told Phillips that a. group of us had not with the Secretary on Saturday. Monday
and Tuesday to study an operating plan for the Land-Lease Bill, and that in these
seetings the British position had been given particular attention. I let Phillips
know that after receiving the British memorandum of yesterday which gave details as
to outstanding contracts and negotiations with the R. F. C. and the Army and Navy on
possible taking over of some of these engagements. we had written both the R. P. C.
and the War Department requesting data from their side as to prospects for consumer-
tion of their negotiations with the British in the premises. I added that there 10
positively no use of our attempting to discuss the question of contracts further at
present. I showed Phillips the ticker tape which reported the passing of the 3111 and
announced that the President anticipated asking for a $7,000,000,000 appropriation
Regraded Uclassified
448
- 2 -
to complement the Act. I told him that Treasury representatives would have to appear
before Congress to support the appropriation measure, I stressed the embarrassment
which such representatives, and particularly the Secretary. would experience if
obliged to report to Congress that there had not yet been accomplished any progress in
liquidating British direct investments. I made the point that our progress depends
importantly upon smething being accomplished along this line immediately. Phillips
volunteered that Gifford and Peacock were in town for consultation.
I should add that when we were discussing gold, I let Phillips know that I had
reported to the Secretary the information which Phillips had given me last evening,
namely. that it appeared that gold production in South Africa was not falling off,
but that recently the Bank of South Africa evidently had not turned over all current
production to the British authorities. Phillips had also made the point that the
British required a certain stock of gold in South Africa, because of the necessity of
having some of this metal available for hurried despatch to Egypt or other centers in
the Near Eastern war area. In our talk today, Phillips minimized the amount of gold
that could be counted upon to come from Belgian Congo, Rhodesia and other scattered
areas of production.
Hump.
Regraded Uclassified
449
March 11, 1941
4:30 p.m.
Present:
Mr. Gaston
Mrs. Klotz
HM Jr: Herbert, please sit down. I thought that
you could listen while I dictate this.
Harry Hopkins called me about 4:15 and said the
President was going to take some action this afternoon under
the Lend-Lease Bill. He had spoken to the President about the
Coast Guard cutters and asked for permission to speak to me.
He asked me whether I knew what the President had in mind and
if the President had discussed it with me. I said, "No,"
and then I told him that he ought to know better than I what
the President has in mind. So he said that he didn't.
I told Hopkins that if he asked me what I thought
would be most useful to the British this Spring, it is the ten
cutters that I wrote about in my first letter. Then I said that
we could get them ready in two or three weeks if the English
would tell us what kind of armaments they needed and if the Navy
would equip them promptly. Hopkins asked me if we didn't usually
get cooperation from the Navy, and I said, "No, not as far as
the Coast Guard is concerned.
Then Hopkins asked me some more questions, and I
said I never felt that I knew less than what I did right now
about what was going on. He said that nothing was going on
at this time. I then said that the President told me yesterday
he was going to hold a meeting this morning and wanted me to come,
but I never got word as to when it was going to be held. He
said that he wasn't at the meeting either so he did not know
what went on.
Hopkins told me then that Young was with him and
had some message from the English saying how they wanted these
ships equipped, but it was news to me.
Regraded Uclassified
450
- 2 -
Gaston: Waesche told me that the Navy had received
word from the English that they would be very glad to have the
cutters. That's all the message I got.
HM Jr: Did you tell that to Phil?
Gaston: No, I haven't seen Phil since I heard that.
I haven't had a chance to tell him.
HM Jr: I don't know whether you agreed with me on
that.
Gaston: That would be very useful - yes. If we
are going to do anything, that's the thing to do.
HM Jr: Well, I'm glad to hear you say that.
Gaston: Yes, that's the thing to do.
Just when you called me, I was talking to Oscar Cox,
who was asking me a lot of questions. He said that Harry Hopkins
had been asked to do something about it for the President. He
didn't say that you had talked to Hopkins. Evidently Harry Hopkins
wants to get some information, and he's trying to have Cox get it
for him.
HM Jr: Where was Cox when he called you?
Gaston: Why I think he was in his office. I was
talking to him when they said you wanted me so I excused myself
and hung up.
(At this point, HM Jr told the operator that
she should find out whether Oscar Cox and
Philip Young had returned to the Treasury.)
Gaston: I really don't know. He may not have been
in his office.
HM Jr: How long ago was this, Herbert?
Regraded Uclassified
451
- 3 -
and came right in here.
Gaston: Just before I walked in here. I hung up
HM Jr: Well, my call was about 10 minutes ago,
so he must have asked Oscar to get the information on it.
(Operator reported that neither Oscar Cox
nor Philip Young had returned to their
offices.)
HM Jr: Well, they haven't come back yet. I think
that I will walk around the block and by that time they probably
will be here.
I
452
The British Supply Council in North America
March 11, 1941
Philip Young, Esq.
President's Liaison Committee,
Treasury Department,
Vashington, D. C.
Dear Mr. Young,
The British Naval Attache has just received a reply
to a cable to the British Admiralty with regard to the
ten coast guard cutters which we hope will be released
to us by the U. 8. Treasury.
The Admiralty advise as follows:
1. That an offer of ten cutters would be cordially
welcomed,
2. That the vessels would be acceptable in present
condition with low angle areament only, high
angle armament to be fitted in the United Kingdom.
3. Ammunition for 5" guns would be required from
United States, both outfit and reserve, including
practice.
4. That the never type having a speed of 20 knots
would be of considerably greater value than the
older type which has a speed of 16-1/2 knots.
As the Havy Department has been pressing for this infor-
mation, the British Naval Attache, through whom it vas obtained,
has given it to them direct.
Yours very truly.
(Sgd.) 0. 2. Ballantyne
C
0
?
Y
Regraded Uclassified
453
MAR 11 1941
By less Mr. President:
I should like to being to your attention the steely
increase is prices of imported materials that has been
under my for a moth 07 mrs. the matract, as compared
with the rather fist treat of domestic modify prices,
to shows on the attached chart made from priors of the
12 imported materials and 17 demostic enterials is the 3
Beream of Labor Statistics daily price fales of X basic
considities. the price inter of imported asterials has
guinet 10 per cent since the est of Jenuary, as conpared
with a 2 per and average gain is prices of demosite
materials.
Vidlo the increased prices are attributed in the
proce to the tight - shipping situation, a insurence
of eae-third in prices of - and shalles vitida tim
weeks weld also suggest that speculative buying his
been a factor. I mie that the name of truling in
- futures increased sharyly last wesk. Increasing
operalative activity to my - of consulties would
test to affect other all would eld to the dif-
flosity of helding a general price visa in check.
Patthfully yours,
(Signed) H. Morganihau, Jr.
the Provident,
the White lieus.
Copy to mr. Thompson
By 3 n
also 3/10/41 FILE COPY
Regraded Uclassified
454
MOVEMENT OF BASIC COMMODITY PRICES
Domestic and Imported*
AUGUST 1939-100
PER
PER
PER
Weekly Average
PER
CENT
CENT
CENT
Daily
CENT
135
135
132
132
130
130
128
128
// Imported
125
125
Commodities
// Imported
124
Commodities
124
120
120
120
120
115
115
/7 Domestic
Commodities
116
17 Domestic
110
110
Commodities
116
105
105
112
112
100
100
108
m
J F M A M J J A $ o N D J F M A M J
4
II
is
25
,
8
is
22
I
a
15
22
29
5
12
108
19
26
1940
1941
JAN.
FEB.
MAR.
APR.
1941
Percentage Change for Individual Commodities, Jan.31,1941 to March 7,1941
PER
PER
Cocoo 15.6%
CENT
17 Domestic Commodities
CENT
II Imported Commodities
+30
+30
Shellac 30.3%
+25
+25
+20
+20
+15
Burlap 16.2%
Lard 11.7%
+15
Print Cloth 9.8%
Cottonweed Oil 6.5%
+10
Leod 4.5%
Rozin 3.0%
+10
Rubber 8.8%
Steel Scrap,dem. 26%
Sugar 8.5%
Carn 23%
Coffee 6.2%
+5
Cotton 2.0%
Wheat 14%
+5
Sile 5/%
Tallon 0%
9ba/ 24%
Steel Scrap,axp. ON
Tin 22%
0
Autter 0%
Copper 0%
o
Flasseed ox
Zine OX
Nides -/.9%
Hage -2.5%
-5
Banley -19%
Steere -EX
-5
Jan.31
Mar.7
Jan 31
Mar.7
B.L.S. Indexes
Office of the Secretary of the Treasury
- of - - -
P-199-7
Seventy-seventh Congress of the United States of America:
455
fit the first besion
Regraded Uclassif
Bup and held at the City d Washington - Friday, the third
day of Junuary, one thousand nine hundred and forty-one
PUBLIC LAW
[CHARTER
AN ACT
Further to promote the defense of the United States, and for other
purposes.
-
MAR 11 1941
Be it enacted by the Senate and House of Representatives of
THE
the United States of America in Congress assembled, That this Act
may be cited as "An Act to Promote the Defense of the United
States".
Sac. 2. As used in this Act-
(a) The term "defense article" means-
(1) Any weapon, munition, aircraft, vessel, or boat;
(2) Any machinery, facility, tool, material, or supply neces-
H. R. 1776
sary for the manufacture, production, processing, repair, servic-
ing, or operation of any article described in this subsection;
(3) Any component material or part of or equipment for any
article described in this subsection;
(4) Any agricultural, industrial or other commodity or article
for defense.
Such term "defense article" includes any article described in this
subsection: Manufactured or procured pursuant to section 3, or to
which the United States or any foreign government has or hereafter
acquires title, possession, or control.
(b) The term "defense information" means any plan, specification,
design, prototype, or information pertaining to any defense article.
Sec. 3. (a) Notwithstanding the provisions of any other law, the
President may, from time to time, when be deems it in the interest
of national defense, authorize the Secretary of War, the Secretary
of the Navy, or the head of any other department or agency of the
Government-
(1) To manufacture in arsenals, factories, and shipyards
under their jurisdiction, or otherwise procure, to the extent to
which funds are made available therefor, or contracts are author-
ised from time to time by the Congress, or both, any defense
article for the government of any country whose defense the
President deems vital to the defense of the United States.
(2) To all, transfer title to, exchange, lease, lend, or otherwise
dispose of, to any such government any defense article, but no
defense article not manufactured or procured under paragraph
456
H. R. 1776-2
Regraded Uc
(1) shall in any way be disposed of under this paragraph, except
after consultation with the Chief of Staf of the Army or the
Chief of Naval Operations of the Navy, or both. The value of
defense articles disposed of in any way under authority of this
paragraph, and procured from funds heretofore appropriated,
shall not exceed $1,300,000,000. The value of such defense articles
shall be determined by the head of the department or agency con-
cerned or such other department, agency or officer as shall be
designated in the manner provided in the rules and regulations
issued hereunder. Defense articles procured from funds hereafter
appropriated to any department or agency of the Government,
other than from funds authorized to be appropriated under this
Act, shall not be disposed of in any way under authority of this
paragraph except to the extent hereafter authorized by the Con-
gress in the Acts appropriating such funds or otherwise.
(8) To test, inspect, prove, repair, ontfit, recondition, or other-
wise to place in good working order, to the extent to which funds
are made available therefor, or contracts are authorized from time
to time by the Congress, or both, any defense article for any such
government, or to procure any or all such services by private
contract.
(4). To communicate to any such government any defense infor-
mation, pertaining to any defense article furnished to such govern-
ment under paragraph (2) of this subsection.
(5) To release for export any defense article disposed of in
any way under this subsection to any such government.
(b) The terms and conditions upon which any such foreign govern-
ment receives any aid authorized under subsection (a) shall be those
which the President deems satisfactory, and the benefit to the United
States may be payment or repayment in kind or property, or any other
direct or indirect benefit which the President deems satisfactory.
(c) After June 30, 1943, or after the passage of a concurrent
resolution by the two Houses before June 30, 1943, which declares
that the powers conferred by or pursuant to subsection (a) are no
longer necessary to promote the defense of the United States, neither
the President nor the head of any department or agency shall exer-
ciso any of the powers conferred by or pursuant to subsection (a)
except that until July 1, 1946, any of such powers may be exercised
to the extent necessary to carry out & contract or agreement with such
a foreign government made before July 1, 1943, or before the passage
of such concurrent resolution, whichever is the earlier.
457
H. R. 1776-3
(d) Nothing in this Act shall be construed to authorize or to
permit the authorization of convoying vessels by naval vessels of the
United States.
(e) Nothing in this Act shall be construed to authorize or to permit
the authorization of the entry of any American veasel into a combat
area in violation of section a of the Neutrality Act of 1939.
Sec. 4. All contracts or agreements made for the disposition of
any defense article or defense information pursuant to section 3 shall
contain a clause by which the foreign government undertakes that
it will not, without the consent of the President, transfer title to
or possession of such defense article or defense information by gift,
sale, or otherwise, or permit its use by anyone not an officer, employee,
or agent of such foreign government.
Sec. 5. (a) The Secretary of War, the Secretary of the Navy, or
the head of any other department or agency of the Government
involved shall, when any such defense article or defense information
is exported, immediately inform the department or agency designated
by the President to administer section 6 of the Act of July 2, 1940
(54 Stat. 714). of the quantities, character, value, terms of disposi-
tion, and destination of the article and information so exported.
(b) The President from time to time, but not less frequently than
once every ninety days, shall transmit to the Congress a report of
operations under this Act except such information as he deems
incompatible with the public interest to disclose. Reports provided
for under this subsection shall be transmitted to the Secretary of
the Senate or the Clerk of the House of Representatives, as the case
may be, if the Senate or the House of Representatives, as the case
may be, is not in session.
Sec. 6. (a) There is hereby authorized to be appropriated from
time to time, out of any money in the Treasury not otherwise
appropriated. such amounts as may be necessary to carry out the
provisions and accomplish the purposes of this Act.
(b) All money and all property which is converted into money
received under section 3 from any government shall, with the approval
of the Director of the Budget, revert to the respective appropriation
or appropriations out of which funds were expended with respect to
the defense article or defense information for which such consideration
is received, and shall be available for expenditure for the purpose for
which such expended funds were appropriated by law, during the
fiscal year in which such funds are received and the ensuing fiscal
year; but in no event shall any funds so received be available for
expenditure after June 30, 1946.
Regraded Uclassified
458
H. R. 1776-4
Sac. 7. The Secretary of War, the Secretary of the Navy, and the
head of the department or agency shall in all contracts or agreements
for the disposition of any defense article or defense information fully
protect the rights of all citizens of the United States who have patent
rights in and to any such article or information which is hereby
authorized to be disposed of and the payments collected for royalties
on such patents shall be paid to the owners and holders of such patents.
Sec. 8. The Secretaries of War and of the Navy are hereby
authorized to purchase or otherwise acquire arms, ammunition, and
implements of war produced within the jurisdiction of any country
to which section 3 is applicable, whenever the President deems such
purchase or acquisition to be necessary in the interests of the defense
of the United States.
Sec. 9. The President may, from time to time, promulgate such
rules and regulations as may be necessary and proper to carry out any
of the provisions of this Act; and he may exercise any power or
authority conferred on him by this Act through such department,
agency, or officer as he shall direct.
Sac. 10. Nothing in this Act shall be construed to change existing
law relating to the use of the land and naval forces of the United
States, except insofar as such use relates to the manufacture, procure-
ment, and repair of defense articles, the communication of informa-
tion and other noncombatant purposes enumerated in this Act.
Smo. 11. If any provision of this Act or the application of such
provision to any circumstance shall be held invalid, the validity of
the remainder of the Act and the applicability of such provision to
other circumstances shall not be ascected thereby.
Speaker of the House Representatives.
Henry a Wallace
Vice President of the United States and
President of the Senate.
Fine Preserely
March 1941
459
[PUBLIC LAW 11-77m Congress]
[CHAPTER 11-1st SESSION]
[H. R. 1776)
AN ACT
Further to promote the defense of the United States, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That this Act
may be cited as "An Act to Promote the Defense of the United
States".
Sec. 2. As used in this Act-
(a) The term "defense article" means-
(1) Any weapon, munition, aircraft, vessel, or boat;
(2) Any machinery, facility, tool, material, or supply neces-
sary for the manufacture, production, processing, repair, servic-
ing, or operation of any article described in this subsection;
(3) Any component material or part of or equipment for any
article described in this subsection;
(4) Any agricultural, industrial or other commodity or article
for defense.
Such term "defense article" includes any article described in this
subsection: Manufactured or procured pursuant to section 3, or to
which the United States or any foreign government has or hereafter
acquires title, possession, or control.
(b) The term "defense information" means any plan, specification,
design, prototype, or information pertaining to any defense article.
Sec. 3. (a) Notwithstanding the provisions of any other law, the
President may, from time to time, when he deems it in the interest
of national defense, authorize the Secretary of War, the Secretary
of the Navy, or the head of any other department or agency of the
Government-
(1) To manufacture in arsenals, factories, and shipyards
under their jurisdiction, or otherwise procure, to the extent to
which funds are made available therefor, or contracts are author-
ized from time to time by the Congress, or both, any defense
article for the government of any country whose defense the
President deems vital to the defense of the United States.
(2) To sell, transfer title to, exchange, lease, lend, or otherwise
dispose of, to any such government any defense article, but no
defense article not manufactured or procured under paragraph
(1) shall in any way be disposed of under this paragraph, except
after consultation with the Chief of Staff of the Army or the
Chief of Naval Operations of the Navy, or both. The value of
defense articles disposed of in any way under authority of this
paragraph, and procured from funds heretofore appropriated,
shall not exceed $1,800,000,000. The value of such defense articles
2
(Ive Laws
(Pr. Life 11.1
8
shall certied be determined by the head of the department or Agency
OF such other department, agency or officer as shall (in
by the President to administer section 6 of the Act of July 2, 1940
issued designated in the matther provided in the rither and regulations be
(54 Stat. 714), of the quantities, character, value, terms of disposi-
other appropriated than to any department or agency of the Government,
hereunder. Defense articles procured from funds horestter
tion, and destination of the article and information so exported.
(b) The President from time to time, but not less frequently than
from funds authorized to be appropriated under this
once every ninety days, shall transmit to the Congress H report of
Act, shall not be disposed of in any way under authority of the
operations under this Act except such information me he deema
patagraph except to the extent herenfter authorized by the Con-
incompatible with the public interest to disclose, Reports provided
gress in the Acts appropriating such funds or otherwise,
for under this subsection shall be transmitted to the Secretary of
(3) To test, inspect, prove, repair, outfit, recondition, or other
the Senate or the Clerk of the House of Representatives, as the case
wise to place in good working order, to the extent to which funds
may be, if the Senate or the House of Representatives, as the case
are made available therefor, or contracts are authorized from time
may be, is not in session.
to time by the Congress, or both, any defense article for any such
Sec. 6. (a) There is hereby authorized to be appropriated from
contract. government, or to procure any or all such services by private
time to time, out of any money in the Treasury not otherwise
appropriated, such amounts as may be Decessary to earry out the
(4) To communicate to any such government any defense infor-
provisions and accomplish the purposes of this Act.
mation, pertaining to any defense article furnished to such givern-
(b) All money and all property which is converted into money
ment under paragraph (2) of this subsection,
received under section a from any government shall, with the approval
(5) To release for export any defense article disposed of in
of the Director of the Budget, revert 10 the respective appropriation
any way under this subsection to any such government,
or appropriations out of which funds were expended with respect to
(b) The terms and conditions upon which any such foreign govern-
the defense article or defense information for which such consideration
ruent receives any aid authorized under subsection (a) shall be those
is received, and shall be available for expenditure for the purpose for
which the President deems satisfactory, and the benefit to the United
which such expended funds were appropriated by law, during the
States may be payment or repayment in kind or property, or any other
fiscal year in which such funds are received and the ensuing fiscal
direct or indirect benefit which the President deems satisfactory.
year: but in no event shall any funds so received be available for
(c) After June 30, 1943, or after the passage of a concurrent
expenditure after June 30, 1946.
resolution by the two Houses before June 30, 1943, which declares
SEC. 7. The Secretary of War, the Secretary of the Navy, and the
that the powers conferred by or pursuant to subsection (a) are THE
bead of the department or agency shall in all contracts or agreements
longer necessary to promote the defense of the United States, neither
for the disposition of any defense article or defense information fully
the President nor the head of any department or agency shall exer-
protect the rights of all citizens of the United States who have patent
time any of the powers conferred by or pursuant to subsection (a):
rights in and to any anch article or information which is hereby
except that until July 1, 1946, any of such powers may be exercised
authorized to be disposed of and the payments collected for royalties
to the extent necessary to carry out a contract or agreement with such
on such patents shall be paid to the owners and holders of such patents,
a foreign government made before July 1, 1943, or before the passage
Sm. 8. The Secretaries of War and of the Navy are hereby
of such concurrent resolution, whichever is the carlier.
authorized to purchase or otherwise acquire arms, ammunition, and
(d) Nothing in this Act shall be construed to authorize or to
implements of war produced within the jurisdiction of any country
permit the authorization of convoying vessels by naval ressels of the
to which section 3 is applicable, whenever the President deems such
United States.
purchase or acquisition to be necessary in the interests of the defense
(e) Nothing in this Act shall be construed to authorize or to permit
of the United States.
the authorization of the entry of any American vessel into 11. combat
Sec. 9. The President may, from time to time, promulgate such
area in violation of section 3 of the Neutrality Act of 1939.
rules and regulations as may be necessary and proper to carry ont any
Sec. 4. All contracts or agreements made for the disposition of
of the provisions of this Act; and he may exercise any power or
any defense article or defense information pursoant to section 3 shall
authority conferred on him by this Act through such department,
contain a clause by which the foreign government undertakes that
agency, or officer ns he shall direct.
it. will not, without the consent of the President, transfer title to
Sec. 10. Nothing in this Act shall be construed to change existing
or possession of such defense article or defense information by gift,
law relating to the use of the land and naval forces of the United
sale, or otherwise, or permit its use by anyone not an officer, employee.
States, except insofar as such use relates lo the manufacture, procure-
or agent of such foreign government.
ment, and repair of defense articles, the communication of informa-
Sec. 5. (a) The Secretary of War, the Secretary of the Navy, or
tion and other noncombatant purposes enumerated in this Act.
the head of any other department or agency of the Government
Sto. 11. If any provision of this Act or the application of such
involved shall, when any such defense article or defense information
provision to any circumstance shall be held invalid, the validity of
is exported, immediately inform the department or agency designated
the remainder of the Act and the applicability of such provision to
other circumstances shall not be affected thereby.
Approved, March 11, 1941.
Jclassified
MARCH 11, 1941
460
THE HOUSE APPROVED SENATE AMENDMENTS TO THE BRITISH AID BILL BY A
VOTE OF 317 TO 71 AND SENT THE BILL TO THE PRESIDENT. ONE MEMBER
VOTED PRESENT.
SPEAKER SAN RAYBURN SIGNED THE BILL IMMEDIATELY.
3/11--RS44P
FLASH
PRESIDENT SIGNS BRITIS H AID BILL
3/11--M0351P
PRESIDENT ROOSEVELT TODAY SIGNED THE LEND-LEASE BILL AND PREPARED
TO ASK CONGRESS TO APPROPRIATE $7,000,000,000 TO CARRY OUT ITS
PROVISIONS FOR GIVING MATERIAL WAR AID TO BRITAIN AND OTHER NATIONS
FIGHTING AGAINST THE AXIS,
3/11--W0353P
461
March 11, 1941
Dear Senator George:
Now that the Lend-Lease Bill is out of the may,
I should like to send you my sincere thanks for all
that you aid to ensure its passage.
Looking back over the debate, I cannot help feel-
ing that it was a good thing for our country that you
were Chairman of the Foreign Relations Committee at this
particular time. It is to your great credit that serious
mistakes were avoided and that, from first to last, the
debate was kept on a high democratic level.
It was & long, hard fight, and you gave it every
ounce of your skill and energy, but I believe that the
results will more than justify your efforts.
Please let me thank you also, on personal grounds,
for the unfailing courtesy you showed me during the hear-
ings and on all other occasions when we discussed this
Bill together.
Sincerely yours,
(Signed) E Mergenthau. ST.
Honorable Walter F. George,
United States Senate.
FK:nme
m
Measureer
405
+
Regraded Uclassified
462
March 11, 1941
Dear Senator George:
I should like to send you my sincere thanks for all
Now that the Lend-Lease Bill is out of the my,
that you did to ensure its passage.
Looking back over the debate, I cannot help feel-
ing that it was a good thing for our country that you
wore Chairman of the Foreign Relations Committee at this
particular time. It is to your great credit that serious
mistakes were avoided and that, from first to last, the
debate was kept on a high democratic level.
It was a long, hard fight, and you gave it every
ounce of your skill and energy, but I believe that the
results will more than justify your efforts.
Please let me thank you also, on personal grounds,
for the unfailing courtesy you showed me during the hear-
ings and on all other occasions when we discussed this
Bill together.
Sincerely yours,
(Signed) a Mergenthati, VI,
Honorable Walter F. George,
United States Senate.
FK:mme
By
Regraded Uclassified
463
March 11, 1941
Dear Senator George:
I should like to send you my sincere thanks for all
Now that the Lend-Lease Bill is out of the may,
that you did to ensure its passage.
Looking back over the debate, I cannot help feel-
ing that it was a good thing for our country that you
were Chairman of the Foreign Relations Committee at this
particular time. It is to your great credit that serious
mistakes were avoided and that, from first to last, the
debate was kept on a high democratic level,
It was a long, hard fight, and you gave it every
ounce of your skill and energy, but I believe that the
results will more than justify your efforts.
Please let me thank you also, on personal grounds,
for the unfailing courtesy you showed me during the hear-
ings and on all other occasions when we discussed this
Bill together.
Sincerely yours,
(Signed) I Marganthau, Jr.
Honorable Walter F. George,
United States Senate.
FK:nmc
By
Messonger
Regraded Uclassified
464
March 11, 1941
Dear Alben:
Now that the long debate is over,
I think that sincere thanks are due to
the pilot who brought the Lend-Lease Bill
safely into port.
You steered a straight course and
you did a perfectly grand job.
Sincerely yours,
/s/ Henry
Honorable Alben W. Barkley,
United States Senate.
7K:nnc
in
By Measenger 4
Regraded Uclassified
465
March 11, 1941
Dear Alben:
Now that the long debate is over,
I think that sincere thanks are due to
the pilot who brought the Lend-Lease Bill
safely into port.
You steered a straight course and
you did a perfectly grand job.
Sincerely yours,
/s/ Henry
Honorable Alben W. Barkley,
United States Senate.
7 K: -
By Measenser
Regraded Uclassified
466
March 11, 1941
Dear Alben:
Now that the long debate is over,
I think that sincere thanks are due to
the pilot who brought the Lend-Lease Bill
safely into port.
You steered a straight course and
you did & perfectly grand job.
Sincerely yours,
(sgd) Henry
Honorable Alben W. Barkley,
United States Senate.
tkime.
By
Regraded Uclassified
467
March 11, 1941.
My dear Mr. Purvis:
The President has today authorized the Secre-
taries of War and Navy, pursuant to the Act of March 11,
1941, to dispose of the defense articles, set forth in
the annexed schedules, to His Majesty's Government in
the United Kingdom.
The President has also requested the Secretaries
of War and Navy to communicate directly with you to
arrange for the time, method, and other details of the
disposition.
Very sincerely yours,
Harry L. Hopkins (sgd.)
HARRY L. HOPKINS
Honorable Arthur Purvis,
British Purchasing Commission,
Washington, D. C.
Regraded Uclassified
468
DEFENSE ARTICLES AUTHORIZED FOR TRANSFER
BY THE SECRETARY OF WAR TO THE
UNITED KINGDOM
2322 Ground Signal Projectors
150 M 1916 - 75mm Gun, Hi speed American type
300 Field Howitzers - 155mm (not Hi speed)
435 Field Howitzers, 8" (no ammunition available)
500 Caissons, 75mm Howitzers
200 Limbers, 75mm Howitzers
116,100 Signal Cartridges
100,000 H. E. Shells, 75mm Normal Charge, Gun
60,000 H. E. Shells, 155mm Howitzers
15,000 W.P. Shells, 155mm Howitzers
60,000 Reduced Propelling Charges for 155mm Howitzers
15,000 Normal Propelling Charges for 155mm Howitzers
40 Tractors, Medium (track laying)
150 Scout Cars, M3A1 (less armament)
200 Scout Cars, Old Models
MARCH 11, 1941
Regraded Uclassified
469
DEFENSE ARTICLES AUTHORIZED FOR TRANSFER
BY THE SECRETARY OF THE NAVY TO THE
UNITED KINGDOM
ORDNANCE
150 4"/50 L.A. Equipment - U. S. Type
300 3"/50 L.A. Equipment - U. S. Type
8000 4"/50 L.A. Projectiles
8000 4"/50 Complete Rounds - U. S. Type
18000 3"/50 Cal. Ammunition - U. S. Type, L.A.
1200 3"/23 Cal. Ammunition - U. S. Type
3000 Propelling Charges for "I" Guns - U. S. Type
SHIPS
28 Motor Torpedo Boats
March 11, 1941
Regraded Uclassified
470
DEFENSE ARTICLES AUTHORIZED FOR TRANSFER
BY THE SECRETARY OF WAR TO THE
ROYAL GREEK GOVERNMENT
50 M 1916 - 75mm Gun, Hi speed American type
150,000 H.E.Shells, 75mm Reduced Charge, Gun
30,000 H.E.Shells, 155mm Howitzers
30,000 Normal Propelling Charges for 155mm Howitzers
March 11, 1941
Regraded Uclassified
471
March 11, 1941.
My dear Mr. Secretary:
Consultation having been had with the Chief
of Staff of the Army, I find that:
(1) The defense of the United Kingdom is
vital to the defense of the United States;
(2) Sections 4 and 7 of the Act of March 11,
1941 have been complied with by the necessary agree-
ment on the part of His Majesty's Government in the
United Kingdom;
(3) It would be in the interests of our
national defense to transfer the defense articles
set forth in the annexed schedule.
I therefore authorize you immediately to
make the transfer to His Majesty's Government in the
United Kingdom of the defense articles set forth in
the annexed schedule.
I would appreciate it if you would arrange
with the Chairman of the British Supply Council in
North America for the time, method, and other details
of the disposition.
Very sincerely yours,
Franklin D. Roosevelt (sgd.)
The Honorable
The Secretary of War
Regraded Uclassified
472
DEFENSE ARTICLES AUTHORIZED FOR TRANSFER
BY THE SECRETARY OF WAR TO THE
UNITED KINGDOM
2322 Ground Signal Projectors
150 M 1916 - 75mm Gun, Hi speed American type
300 Field Howitzers - 155mm (not Hi speed)
435 Field Howitzers, 8" (no ammunition available)
500 Caissons, 75mm Howitzers
200 Limbers, 75mm Howitzers
116,100 Signal Cartridges
100,000 H. E. Shells, 75mm Normal Charge, Gun
60,000 H. E. Shells, 155mm Howitzers
15,000 W.P. Shells, 155mm Howitzers
60,000 Reduced Propelling Charges for 155mm Howitzers
15,000 Normal Propelling Charges for 155mm Howitzers
40 Tractors, Medium (track laying)
150 Scout Cars, M3A1 (less armament)
200 Scout Cars, Old Models
MARCH 11, 1941
Regraded Uclassified
473
March 11, 1941.
My dear Mr. Secretary:
Consultation having been had with the Chief of
Naval Operations of the Navy, I find that:
(1) The defense of the the United Kingdom is vital
to the defense of the United States;
(2) Sections 4 and 7 of the Act of March 11, 1941
have been complied with by the necessary agreement on the
part of His Majesty's Government in the United Kingdom;
(3) It would be in the interests of our national
defense to transfer the defense articles set forth in the
annexed schedule.
I therefore authorize you immediately to make the
transfer to His Majesty's Government in the United Kingdom
of the defense articles set forth in the annexed schedule.
I would appreciate it if you would arrange with the
Chairman of the British Supply Council in North America for
the time, method, and other details of the disposition.
Very sincerely yours,
(Signed) Franklin D. Roosevelt
The Honorable
The Secretary of the Navy.
Regraded Uclassified
474
DEFENSE ARTICLES AUTHORIZED FOR TRANSFER
BY THE SECRETARY OF THE NAVY TO THE
UNITED KINGDOM
ORDNANCE
150 4"/50 L.A. Equipment - U. S. Type
300 3"/50 L.A. Equipment - U. S. Type
8000 4"/50 L.A. Projectiles
8000 4"/50 Complete Rounds - U. S. Type
18000 3"/50 Cal. Ammunition - U. S. Type, L.A.
1200 3"/23 Cal. Ammunition - U. S. Type
3000 Propelling Charges for "I" Guns - U. S. Type
SHIPS
28 Motor Torpedo Boats
March 11, 1941
Regraded Uclassified
475
March 11, 1941.
My dear Mr. Secretary:
Consultation having been had with the Chief of
Staff of the Army, I find that:
(1) The defense of the Royal Greek Government
is vital to the defense of the United States;
(2) Sections 4 and 7 of the Act of March 11,
1941 have been complied with by the necessary agreement
on the part of the Royal Greek Government;
(3) It would be in the interests of our national
defense to transfer the defense articles set forth in the
annexed schedule.
I therefore authorize you immediately to make the
transfer to the Royal Greek Government of the defense
articles set forth in the annexed schedule.
I would appreciate it if you would arrange with the
Minister of Greece for the time, method, and other details
of the disposition.
Very sincerely yours,
(Signed) Franklin D. Roosevelt
The Honorable
The Secretary of War.
Regraded Uclassified
476
DEFENSE ARTICLES AUTHORIZED FOR TRANSFER
BY THE SECRETARY OF WAR TO THE
ROYAL GREEK GOVERNMENT
50 M 1916 - 75mm Gun, Hi speed American type
150,000 H.E.Shells, 75mm Reduced Charge, Gun
30,000 H.E.Shells, 155mm Howitzers
30,000 Normal Propelling Charges for 155mm Howitzers
March 11, 1941
Regraded Uclassified
THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA
TELEPHONE: REPUBLIC 7860
Box 680
BENJAMIN FRANKLIN STATION
WASHINGTON D C
March 11, 1941
My dear Mr. President:
We represent on behalf of His Vajesty's Government
in the United Kingdom, pursuant to Sections 4 and 7 of the
Act of March 11, 1941, that:
1) Every contract or agreement for the
disposition of any defense article or wefense
information, pursuant to Section 3 of the Act
of March 11, 1941, to His Majesty's Government
in the United Kingdom shall be decised to include
a clause that His Majesty's Government will not,
without your consent, or the consent of someone
designated by you for that purpose, under the
Act, transfer title to or possession of such
defense article or defense information by fift,
sale, or otherwise, or permit its 12SE by anyone
not an officer, employee or agent of His Majesty!s
Government; and
2) If, as a result of the transfer to 11s
Majesty's Government of any défense articles or-
defense information, it is necessary, ursuant
to Section 7 of the Act of March 11, 1941, fully
to protect the rights of any citizen of the
United States, who has patent rights in 5% to
any such defense article or information, flis
(ajesty's Government will do so, vhen so re unsted
by you or your designee for that purpose.
Very truly yours,
The President of the United States
White House
Director General of the
British Purchasing Commission
Approved: arthur RD
anset
Director General of the
British AIr Commission
Chairman of the British
Supply Council in North America
Regraded Uclassified
ROYAL GREEK LEGATION
WASHINGTON
March 11, 1941.
My dear Mr. President:
I represent on behalf of the Royal
Greek Government, pursuant to Sections 4 and 7 of the Act
of March 11, 1941, that:
1)
Every contract or agreement for the
disposition of any defense article or defense
information, pursuant to Section 3 of the Act
of March 11, 1941, to the Royal Greek Government
shall be deemed to include a clause that the
Royal Greek Government will not, without your
consant, or the consent of someone designated
by you for that purpose, under the Act, transfer
title to or possession of such defense article
or defense information by gift, sale, or other-
wise, or permit its use by anyone not an officer,
employee or agent of the Royal Greek Government;
and
2) If, as a result of the transfer to the
Royal Greek Government of any defense articles or
defense information, it is necessary, pursuant to
Section 7 of the Act of March 11, 1941, fully to
protect the rights of any citizen of the United
States, who has patent rights in and to any such
defense article or information, the Royal Greek
Government will do so, when so requested by you
or your designee for that purpose.
Very truly yours,
C. Dismentopoulos,
Minister of Greece.
The President of the United States,
White House.
Regraded Uclassified
I, Viscount Halifax, His Britannic
Majesty's Ambassador to the United States of
America, hereby certify that the Director
General of the British Purchasing Commission,
the Director General of the British Air Commission,
and the Chairman of the British Supply Council
in North America have the power necessary to
make the commitments required of His Majesty's
Government in the United Kingdom by Sections 4
and 7 of the Act of March 11th, 1941 88 set
forth in the annexed letter dated March 11th,
1941, signed by these officers of the British
Government.
Done at Washington this 11th day of March,
1941.
Halifax
Regraded Uclassified
PAT HARRISON, MISS., CHAIRMAN
480
BILTER F. GEORGE, GA
ROBERT M. LAFELLETTE, Ja., wis,
- 1. WALEN, MASS.
ARTHUR CAPPER, KAMS,
- w. BARKLEY, KY.
ARTHUR H. VANDENBERG, MICH,
# CORRIALLY, TEX,
JAMES de DAVIE, PR.
LAB w. BAILEY, N. c.
HENRY CANGT LOOSE, - MASE,
WHETT CHAMP CLARK, MO.
JOHN A. DANAHER, CONN
- FLOOD gran, VA.
ROBERT 4. TAPT, GHIO
United States Senate
PETER 4. CERRY, n. L
- F. CUPPLY, PA.
COMMITTEE ON FINANCE
PRENTIES M. MOWN, MICH.
are L MERRING, IOWA,
- c. colo.
- L RADCLIFFE, MD.
FELTON M. JOHNSTON, CLERR
March 11, 1941.
Dear Henry:
It was good of you to write me as you
did on the anniversary of my thirty years legis-
lative service. One of the finest things about
this job is the splendid associations I have on-
joyed, and I am sure I need not tell you how
much I appreciate your friendship and association.
With best wishes always, I am
Cardama Sincerely yours,
Honorable Henry Morgenthau,
Secretary of the Treasury,
Washington, D. 0.
INERAL OFFICES
c. WASHINGTON ST.
-
CHICAGO ILL.
WURREY BUILDING
WARNINGTON, D.C.
481
TELEPHONE NATIONAL 3342
WASHINGTON, D.C.
March 11, 1941
MEMORANDUM TO: SECRETARY MORGANTHAU
The statement presented to you by Senator Bankhead concerning
S.935 mentions the "parity price loan" feature of his plan but does not
go into any explanation of this feature of this bill. Most of the mamo-
randum deals with the problem of adjusting the supply of cotton to meet
current demands.
Briefly, Senator Bankhead's bill proposes:
1. A system of commodity loans at 100 per cent of parity for cotton,
wheat, tobacco and rice conditioned on marketing quotas being in effect to
control supplies. An 85 per cent loan rate on corn is provided because
the representatives of the corn producers do not want a. loan higher than
85 per cent of parity.
The American Farm Bureau Federation is recommending a loan rate of
85 per cent instead of 100 per cent for all five commodities. (See
attached statement presented by President O'Neal to the Senate Committee
on Agriculture for summary of Farm Bureau plan).
The commodity loan plan has this great advantage,-that it gives
the farmers parity or very close to parity in the markst-place. If a
100 per cent loan is made available, no appropriations are needed for
parity payments; if an 85 per cent loan is made available, appropriations
for parity payments would be needed to meet the 15 per cent deficiency.
But careful estimates indicate that under this plan farmers could receive
100 per cent of parity with about the same appropriations as are now
being made.
Under the Bankheed proposal of 100 per cent loans, as already
pointed out, there would be no parity payments to farmers, as the farmers
would get parity prices in the market-place for their entire crop. The
buyers of cotton, for example, would either have to pay the farmers
parity price or the farmers could put the cotton under the loan. In
order to prevent cotton from piling up in the loan, this plan proposes
first to maintain our fair share of the world market for cotton by
selling cotton for export at the world price and reimbursing the Commodity
Credit Corporation for any losses incurred by reason of such sales. BIM
port payments to exporters could be made if necessary to prevent cotton
from going into the loan. In addition, the Bankhead bill proposes to
bring about an adjustment of production of cotton down to approximately
Regraded Uclassified
482
10,000,000 bales in 1941, which is the estimated amount needed for domestic
consumption and exports.
2. A provision for payments to cotton farmers to reduce their production
below their current allotments for the purpose of adjusting the supply of
cotton to current requirements for comestic consumption and exports.
In his memorandum Senator Bankhead suggested two methods of securing
a voluntary reduction in production of 2 to 2 / million bales below the
allotments for 1941, which have already been announced and which total about
12 million bales. One of these methods consists of a payment in kind at the
rate of one-half bale for each bale taken out of production; the other
method proposes a payment in cash at the rate of so much per pound to take
cotton out of production, utilizing the $85,000,000 appropriated for parity
payments for the purpose of making these payments for extra reduction in
production.
The Farm Bureau has recommended a payment in kind at the rate of
one-half bale for each bale taken out of production below the present
allotment.
arregg R. Ogg
Director of Research
Regraded Uclassified
Sun Bankhiel's glass
march 7/41
S. 935 S.
For the purpose of indicating the objective of this bill
and its probable effect, I beg to present the following as it
applies to cotton:
Using round figures, the government owns 6,200,000 bales.
It holds under loan 4,900,000 bales. There are two primary
objectives involved; first is better income to farmers and second
is better protection to the United States Treasury.
Distribution. Domestic consumption next year may amount
to 9,000,000 bales. The export market is practically eliminated.
From August 1 last until March 1 last, only 504,000 bales were
exported in the channels of trade. There were total exports of
approximately 700,000 bales but the balance of the cotton was
exported under the rubber exchange with Great Britain. Assuming
the same exports next year and a slight increase in domestic
consumption, there will be a distribution of approximately 9,500,000
bales.
The cotton allotment, assuming normal weather, will produce
12,000,000 bales. To the cotton now under the government loan
there will be added from next year's crop about 2,500,000 bales,
thus increasing the government owned and loan cotton to 13,500,000
bales. It is evident that something must be done about the con-
tinued surplus production. The bill, while accepting the announced
Regraded Uclassified
484
-2-
allotments for this year of 12,000,000 bales, provides two methods
of securing voluntary reduction in production of from 2,000,000 to
2,500,000 bales, as follows:
1. To pay in kind with Commodity Credit cotton one-half
bale for each bale taken out of production up to a certain limit.
2. Use the parity payment appropriation of about
$86,000,000 allotted to cotton farmers to pay so much & pound
to take cotton out of production.
If the parity price loan plan is put into operation, the
appropriations for parity payments will not be required for that
purpose and can be used to protect the price of cotton and the
Treasury by adjusting the supply to a quantity that must be bought
by domestic consumers plus a nominal amount to be exported.
The cotton under loan covers loans for the crop years
'38-'39 and '40-'41. The bill provides that farmers who dispose
of their equity in cotton loans after the day the bill was intro-
duced cannot participate in the parity price loan. That is intended
to enable the government to retire that cotton from the market
and take it out of competition with this year's crop. The bill
further provides that the farmers shall be paid the value of their
equity in cotton the day the bill was introduced. There is no
equity in the '38 loan because the loan price and the carrying
charges exceed the present market value. There is a small equity
Regraded Uclassified
485
-3-
of from two to four dollars a bale on the '40 crop. The equity
for that cotton can be paid with from five to seven or eight
million dollars. With the loan cotton taken over by the government,
as it must ultimately be done, and with the crop reduced to
9,500,000 to 10,000,000 bales, there will be practically no cotton
going into the loan. Such amount as goes in must be taken out
by the consumers before a new crop comes to market. This plan
will increase the present totally inadequate income of cotton
producers and will stop increasing the government stocks and may
later be adjusted so as to gradually eliminate the government
stocks.
- TO: miss Chamsey 486
is mentioned the
O' heal letter to
him - he he a lanced
at it - said
he wouldn't need
it
Z
From: LIEUT. STEPHENS
48
AMERICAN FARM BUREAU FEDERATION
487
Munsey Building
Washington, D. C.
March 11, 1941
Honorable Franklin D. Roosevelt
President of the United States
The White House
Washington, D. C.
My dear Mr. President:
We are all greatly distressed that Chester Davis
is leaving the Federal Reserve Board. He has certainly been our
good friend there.
May I respectfully present for your consideration
to fill his place the followings
If you want someone from the midwest, I would
suggest the name of Earl C. Smith, President, Illinois Agricultural
Association and Vice President, American Farm Bureau Federation;
if you want someone from the northeast, I would suggest W. I.
Myers, Professor of Economics, Cornell University and former
Governor, Farm Credit Administration; or if you want someone from
Arkansas Farm Bureau Federation. I believe any of these man could
the south, I would suggest the name of R. E. Short, President,
ably fill this position and would have the confidence of our
farmers.
Farmers feel very strongly that agriculture
should be represented on this important Board.
Hoping these suggestions will have your earnest
consideration and with warm personal regards, I an
Sincerely yours,
154032
EAO'Nes
E A EA e MA SI ЯАМ IAQI
ТИЗМТЯАЛЗО TRU2A38T
Edw. A. O'Neal - President
YRUZA
Regraded Uclassified
488
TREASURY department
pry
ip
INTER OFFICE COMMUNICATION
DATE March 11, 1941
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Official sales of British-owned dollar securities under the vesting order
effective February 19, 1940:
No. of Shares
$ Proceeds of
Nominal Value
$ Proceeds of
Sold
Shares Sold
of Bonds Sold
Bonds Sold
March 3
19,080
1,442,474
81,000
60,348
4
218,632
11,408,484
160,000
125,498
2
24,449
793,163
31,000
31,950
126,017
3,581,120
291,000
296,108
7
36,912
1,433,373
117,000
120,123
8
3,026
255,955
159,400
174,748
428,116
18,914,569
839,400
808,775
March 3
lift to Treasury
4
7
428,120
18,914,576
Sales from
2/22/40 to
3/1/41
5,595,088-1/2
172,222,599
19,483,700
18,664,818
TOTAL 2/22/40
TO 3/8/41
6,023,208-1/2
191,137,175
20,323,100
19,473,593
Miss Poate reported sales of non-vested securities for the week ended
March 1 totaled $300,000.
75ml
De
489
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 11, 1941
TO
Secretary Morgenthau
FROM Mr. Cochram
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£56,000
Purchased from commercial concerns £22,000
The Federal Reserve Bank of New York sold £15,000 in registered sterling to
the American Express Co., and purchased £2,000 from Thos. Cook & Son.
Open market sterling remained at 4.03-1/2, and there were no reported trans-
actions.
In New York, the closing rates for the foreign currencies listed below were
as follows:
Canadian dollar
15% discount
Swies franc (commercial)
.2322-1/2
Swedish krona
.2384-1/2
Reichsmark
.4005
Lira
.0505
Argentine peso (free)
.2303
Brazilian milreis (free)
.0505
Mexican peso
.2066
Cuban peso
6-5/8% discount
In Shanghai, the yuan in terms of our currency remained at 5-1/24. and
sterling advanced 20 to 3.91.
There were no gold transactions consummated by us today.
The Federal Reserve Bank of New York reported that the Central Bank of the
Colombian Republic shipped $2,921,000 in gold from Colombia to the Federal for its
own account, disposition unknown.
The prices fixed in London for spot and forward silver were unchanged at
23-3/8d and 23-5/16d, respectively. The U.S. equivalents were 42.444 and 42.334.
34-3/44. The Treasury's purchase price for foreign silver VAS also unchanged at 350-
Handy and Harman's settlement price for foreign silver vas unchanged at
Regraded Uclassified
490
- 2 -
Ve made six purchases of silver totaling 500,000 ounces under the Silver
Purchase Act, all of which consisted of new production from foreign countries,
for forward delivery.
The report of March 5 received from the Federal Reserve Bank of New York
giving foreign exchange positions of banks and bankers in its district, revealed
that the total position of all countries was short the equivalent of $7,286,000,a
decrease of $322,000 in the short position. Net changes were as follows:
Short Position
Short Position
February 26
Change in
Country
March 5
Short Position*
England**
$ 263,000
$ 515,000
+ $252,000
Europe
3,292,000
3,207,000
- 85,000
Canada
109,000 (Long)
173,000 (Long)
- 64,000
Latin America
211,000
126,000
- 85,000
Japan
2,559,000
2,316,000
- 243,000
Other Asia
1,352,000
1,329,000
- 23,000
All others
40,000
34,000 (Long)
- 74,000
Total
$7,608,000
$7,286,000
- $322,000
Plus sign (+) indicates increase in short position, or decrease in long position.
Minus sign(-) indicates decrease in short position, or increase in long position.
" Combined position in registered and open market sterling.
N.M.R.
confidential
491
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE March 11, 1941
TO
FROM
Mr. Secretary Haas SOA.
Morgenthau
Subject: Markets Current Developments in the High-grade Security
SUMMARY
(1) Treasury securities have regained since February 15
about one-third of the price declines suffered be-
tween December 30, 1940 and February 15 (Charts I
and II).
(2) The increased issue of Treasury bills on March 5 was
absorbed entirely by weekly reporting banks in the
Chicago and St. Louis Federal Reserve districts.
Bills are now in demand in these districts for the
purpose of avoiding local property taxes.
(3) High-grade corporate and municipal bonds have gained
in price only moderately as compared with Treasury
bonds during the past two weeks (Charts II and III).
(4) Estimates of the yield differential between fully
taxable and partially tax-exempt Treasury bonds vary
from as low as 17 to as high as 57 basis points, de-
pending upon the assumptions made with respect to
the correct pricing of the new 2 percent Treasury
bond (Chart IV).
(5) The price of the new 2 percent bond offered on
February 25 declined from an opening bid around
101-20/32 to & low of 100-21/32 at the close that
books closed the following day. As the result
day, but recovered somewhat, on balance, before of the
the offering of & new note with the bond, the worth refund= at
least below that of the note, rights would have bond been
ing 100-16/32, and if the price of the bond
was never in danger. The new note was had
converted fell below the note, and when the books closed,
fallen into the new note. As it was, the
never it was substantially above it (Chart V).
Regraded Uclassified
492
Secretary Morgenthau - 2
I. Price and Yield Movements of
Government Securities
Prices of long-term Treasury bonds have enjoyed a net
increase of over 2 points since February 15, when they
reached a low for the year. Intermediate bonds have gained
about 1 point during this time, while Treasury notes have
gained, on the average, between 1/4 and 1/2 of a point
(Chart I). This rise represents an average recovery of
about one-third of the net decline from December 30, 1940
through February 15. Long bonds have shown the greatest
strength, recovering about 54 percent of their losses be-
tween December 30 and February 15. The market for Govern-
ment securities continues to be very thin, and hence sub-
ject to rather considerable price fluctuations. Price
changes since December 30, 1940 are shown in the following
table:
:
Average price change
:
: Dec. 30, 1940-:Feb. 15, 1941-
:Feb. 15, 1941 :Mar. 10, 1941
(Decimals are thirty-seconds)
Notes
1 to 3 years
- .25
+.09
3 to 5 years
-1.00
+.11
Bonds
5 to 15 years to call
-3.11
+1.02
15 years and over to call
-4.09
+2.10
The average yield of long-term Treasury bonds, moving
inversely to prices, which increased by 29 basis points from
balance, by 15 basis points since February 15 (Chart II).
December 30, 1940 through February 15, has decreased, on
Regraded Uclassified
493
Secretary Morgenthau - 3
II. Absorption of New Treasury Bills
The issue of Treasury bills on March 5 amounted
about $200 millions -- an increase of $100 millions over to
previous weeks. This entire increase and $20 millions
more was absorbed by weekly reporting member banks in the
Chicago and St. Louis Federal Reserve districts. Treas-
ury bills are in demand in these districts at the present
Illinois and Missouri.
time for the purpose of avoiding local property taxes in
The March 5 issue of bills was also the first issue
of taxable bille. The increased size of the issue and the
special demand mentioned above, however, tend to obscure
the effect of the tax feature upon the rates of discount
at which they were awarded. The average rate on the last
issue of tax-exempt bills -- dated February 26 - was
0.043 percent, &s compared with & rate of 0.086 percent
on the first issue of taxable bills.
III. High-grade Corporate and Municipal Bonds
Unlike prices of long-term Treasury bonds which have
risen markedly since February 15, prices of high-grade
corporate bonds have fluctuated within a fairly narrow
range and have improved very slightly (Chart II). High-
grade municipal bonds have gained moderately in the last
two weeks (Chart III).
New bond offerings to the public in the New York mar-
ket were $22.8 millions last week 88 compared with $9.8
millions the week before. The largest of last week's of-
ferings -- $16.0 millions of Public Service Company of
Oklahoma 30-year, 3-1/4 percent bonde (priced to yield
3.07 percent ) -- 1s reported to be moving slowly. The
principal demand is said to come from medium- and small-
size insurance companies.
The RFC took the entire $136 millions State of Arkansas
refunding bonds on February 27 at 8. price to yield about
3.2 percent. A nation-wide banking group which had been
prepared to bid for about two-thirds of the issue on about
& 3-1/2 percent coupon basis withdrew at the last moment.
Regraded Uclassified
103
Ameretary Morgenthau - 4
IV. Pricing and the Value of
Tax Exemption
1948-50 1s still far from complete, and the market for
Secondary distribution of the new 2 percent bonds of
Government securities 8.0 a whole remains thin 8.8 it has been
since the first of the year. It is thus difficult to draw
any valid conclusions as to the yield differential being
established in the market between fully taxable and partially
tax-exempt Treasury bonds. Chart IV compares the yield of
the new bonds with the yields of outstanding Treasury bonds.
Two curves are shown for the outstanding issues: an opti-
mistic one based on low coupon bonds with 2-year call periods,
such as was used by Mr. Piser of the Board of Governors in
pricing the new issue, and a very conservative one based on
the bonds in this area with the highest yields, irrespective
of coupon or call period, such 8.8 was used by the Division of
Research and Statistics in pricing the issue. Inasmuch as
the opinion is widely expressed in the market that the new
bond should be regarded as a 1950 maturity (on the ground
that partially tax-exempt bonds will be called before matu-
rity, but that taxable bonds will be allowed to run their
full term) yields both to earliest call date and to final
maturity are shown for the new 2's.
On the basis of yields to earliest call date the spread
between the new bonds and partially tax-exempt bonds of com-
parable term 18 about 57 basis points when the optimistic
curve 1s used, and about 38 basis points measured from the
conservative curve. On the assumption that the new bond
should be figured to maturity (other issues continuing to
be computed to call) the corresponding spreads are 35 and
17 basis points, respectively.
The spread which may be attributed to the taxability
of the new bond thus varies from as low 88 17 to as high 88
57 basis points, depending upon various assumptions which
may be made - all with some authority - with respect to
the proper pricing of the new bond BB a partially tax exempt
security.
It should be noted, however, that the supposed necessity
for pricing the new issue to maturity rather than to call
1a itself attributed to the tax factor, and thus creates
a sort of "quasi-tax-differential" consisting of pricing
the new issue 6.8 8 9-year rather than as 8 7-year security.
Regraded Uclassified
495
Secretary Morgenthau - 5
When these differentials are expressed as equivalents
of a tax on the coupon they vary from a low of 8 percent
(or only one-third of the corporation tax) to a high of
28 percent (or more than the whole amount of the corporation
tax) as shown in the following table:
Probable redemption date
Curve used in pricing
assumed for new bonds
Optimistic
Conservative
(Percent of coupon)
1948 (Call)
28
19
1950 (Maturity)
17
8
The truth doubtless lies somewhere within these extremes,
but the wide range makes it very difficult to say exactly how
much allowance the market is now making for the taxability of
the new bond,
V. Refunding of the March Maturities
The pricing of the new securities to be offered in ex-
change for the maturing 1-1/2 percent note of March 1941, and
the 3-3/8 percent bond called for redemption at the same time,
presented a special problem because of the difficulty in
estimating the allowance to be made for the taxability of the
new issues. The problem was met by your offering an inter-
mediate-term bond, and - as a "backstop" to insure the success
of the refunding - a 2-year note.
Opening bids on Tuesday, February 25, were about about 101-20/32
for the 2 percent, 7-9 year Treasury bond, and the
100-11/32 new for the new 3/4 percent 2 year note. From the price open-
ing price rose. At the close on Tuesday the prices On
the of the bond declined steadily, while of the
of the note the new note were the same (Chart V). the
new Wednesday bond and the new securities gained, on balance, bond
Regraded Uclassified
496
Secretary Morgenthau - 6
the day its price fell back again to that of the note.
showing the greater strength, although at one point during
As a result of the offering of a note together with the
bond, the refunding was at no time in danger. After the
first two hours of trading, as the chart suggests, the note
was always worth a minimum price of about 100-16/32. If
the price of the bond had fallen below this price, rights
would have been converted into the note rather than the
bond. As it happened the price of the bond twice rico-
cheted upward from the price of the note, but never fell
below it (Chart V).
Attachments
497
Chart I
CHANGES IN THE PRIORS OF U.S. SHOURITING
Potata Plotted Represent the Difference from Besember so, 1943 Price of Bach Materity Class
1941
JAR.
MAIL
1942
1941
MY
JULY
SEPT.
NOV,
FEBRUARY
POINTS
JAM.
BASCH
TTT
e
APRIL
IS
22
POINTS
e
15
22
29
5
12
(NST CHANGE)
=
26
(ART DIANG)
POINTS
Naturday Ometations
Daily
(ACT DIANE)
:
+1
+3
+3
+1
+1
+2
+2
=
..
0
0
*1
+1
1
+
NOTES
NOTES
+3 Yes.
1-3 Yes.
o
+
+
o
+
T
-1
-1
-1
of
Norts
NOTEST
3-5 Yes,
3-5 Yes,
-16
11-
-2
4
-12
-If
&
&
-11
-If
&
Bonos,
&
1
5-15 Yes
TO CALL
T
-2%
é
Boups,
Bonds,
5-15 Yes, TO CALL
&
OVER 15 Yes.
4
4
TO CALL
&
-26
428
9
-6
+3
-3
*
-36
14
-7
&
$
-
9
-34
-Id
Boxos,
OVER 15 Yes. TO CALL
1
T
9
&
7
7
7
&
-10
-10
₺
±
-11
-11
&
-5
JAB.
MAR.
MAY
JULY
101.
NOV.
JM.
a
15
22
1
a
15
22
29
5
12
19
26
1941
1942
FEBRUARY
MARCH
APRIL
1941
Office of the Secretary of the Trumery
F - 153 - C
- of - - -
498
Chart II
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S. TREASURY
AND AVERAGE OF HIGH GRADE CORPORATE BONDS
1940
JAN
FIR
MAR
APR.
MAY
ANE
JAY
AUG.
SEPT
OCT.
HGV.
1941
DEC
1940
-
a
JAN.
,
is
FEB.
MAR
AML
1941
a
If
-
=
"
BI
-
-
MAY
4
-
-
JUNE
-
=
ANY
AUG
SEPT.
.
El
OCT
18
NOV.
DEC.
DEC
JAN
invert Sugle
⑉
-
-
FEB.
e
#
N.
RE
9
M
1
is
-
as
.
=
"
,
Γ.
-
PER CENT
inversed Scale
Invers Scale
PER CENT
PER CENT
WEEKLY. Saturday Quotations
DA
LY
LE
1.5
La
20
2.0
20
.
Long Term
Treasury
2.2
.
2.2
Lt
Long Term Treasury
as years or more to earliest on del
2.4
24
24
26
26
24
Corporate
28
28
28
Corporate
10
3.0
80
32
3.2
12
14
3.4
14
36
36
3.6
PER
PER
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DEC
JAN
FEB
MAR
1940
1941
1940
1941
. Change in composition of Long Term Treasury average
X el the Sentary di the Tradery
of
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM US TREASURY
AND Dow-JONES AVERAGE OF MUNICIPAL BONDS
Yields Based on Saturday Quotations
1940
1941
JAN
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1940
499
"Areat è - indicares change - comportion of Larg form Treasury average
the of the Secretary of the Treasury
F-124-5
- of - - -
Regraded Uclassi
Chart IV
500
COMPARISON 07 YIELD OF NEW 25 TREASURY BOND WITH
YIELDS OF PARTIALLY TAX-EXEMPT TREASURY BONDS
Based on Closing Bid Prices, March 10, 1941
1948
1949
PERCENT
1950
PERCENT
NEW BOND
YIELD TO NATURITY
1.9
1.9
Now BOND
YIELD TO CALL
1.8
1.8
CONSERVATIVE CURVE
1.7
1.7
1.6
1.6
1.5
1.5
1.4
1.4
OPTIMISTIC CURVE
1.3
1.3
1.2
1.2
1.1
1.1
1.0
1.0
1948
1949
1950
Office of the Secretary of the Treasury
F - 203
Division of - and -
Chart
BID PRICES OF NEW TREASURY SECURITIES
Hourly, February 25 and 26, 1941
DOLLARS
DOLLARS
1014
1014
1011
1011
2% BONDS, MARCH 15, 1948-'50
1011
101
101
101
100
100)
to NOTES, MARCH 15, 1943
100}
100}
100
100
100
100
10
11
12
1
2
3
4
10
11
12
1
2
3
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FEBRUARY 25
FEBRUARY 26
TIME
501
Office of the Secretary of the Trusury
of - and /
F - 202
Regraded Uclas
502
Treasury Department
Division of Monetary Research
Date
March 11
1941
To:
Secretary Morgenthau
From:
Mr. White
Subject:
Financing of Argentine food
shipments to Spain
Cable advice from Buenos Aires indicates
that the Spanish interest in the Argentine
Electricity Company will be used as the
security for the Argentine credit to Spain
to finance "immediate shipments" of meat
and wheat to & value of 35 to 40 million
pesos (about $10 million).
This is the first case which has come
to our attention of Argentine acquisition
(probably only as collateral) of foreign-
owned enterprises. Possibly these securities
can be resold in the Argentine capital
market to acquire pesos to pay Argentine
grain and meat producers. But apparently
they are to be used only as collateral.
MR. WHITE
Branch 2058 - Room 208
503
KH
PLAIN
Calcutta
Dated March 11, 1941
Rec'd 9:11 p.m.
Secretary of State,
Washington.
Eleventh.
Government notification March tenth requires British subjects
holding twenty-four American securities surrender them within one
month at fixed prices. Preferred stocks American power light fives
electric bond share fives common stocks Telandtel Anaconda Bethlehem
Chrysler electric bond share General Motors National City Bank Republic
Socony National Power Light United States Steel Government bonds eleven
issues.
GROTH
NPL
Copy:alm
504
Peiping via N. R.
JR
Dated March 11, 1941
Rec'd 1:02 p.m.
Secretary of State,
Washington.
80, March 11, 2 p.m.
As of March 1 the Federal Reserve Bank is reported
to have refused to issue export permits covering articles
made in whole or in part of silver, brass or other metals,
including cloissonne, and costume jewelry.
An official of the bank has stated informally that
although no such restriction has been promulgated the
matter is presently under consideration. The customs
authorities state they have no instructions in the
premises but refuse clearance without & permit from the
bank.
This restriction if universally applied will in
effect eliminate the only remaining major export from this
area.
Sent to the Department, repeated to Chungking,
Tientsin and Shanghai. By air mail to Tokyo.
SMITH
GV
eh:copy
505
(CONFIDENTIAL)
PARAPHRASE
A confidential telegram dated March 11, 1941 from Consul
Brady at Rangoon reads substantially as follows:
Reliable figures show that during the two months from
December 30, 1940 to February 28, 1940 there were shipped into
China by the Southwest Transportation Company supplies of all
kinds for the Chinese Government to the amount of 22,026 long
tons. It is reported that there was reopened to traffic on
March 3 the new bridge across the Mekong River which in
December was badly damaged by bombing. For weeks a pontoon
ferry has been used to handle traffic across the Mekong River
and there is now being built & pontoon bridge. The old Mekong
River suspension bridge is still in a wrecked condition.
mg
COPY
506
RESTRICTED
0-2/2657-220
M.I.D., W.D.
No. 336
March 11, 1941
12:00 M.
SITUATION REPORT
I. Western Theater of War.
Air: German. Daylight activity on the 10th was limited
to attacks on shipping. Last night a heavy attack was made on
Portsmouth.
British. On the night of the 10th-11th Cologne was
heavily attacked. Invasion ports, including Brest, Cherbourg and
Boulogne, were also raided.
II. Balkan Theater of War.
Ground: Bulgaria. No change.
Albania. The Italians report patrol action by
the ninth army and artillery and local infantry action by the eleventh
army in the Tepelini sector. The Greeks report they have repulsed
strong Italian attacks along a widened front in the central sector
(Tepeleni-Klisura). It would appear that the Italians are preparing
for a general offensive.
Air: Normal close support operations in Albania.
III. Mediterranean and African Theaters of War.
Ground: Abyssinia (Ethiopia). British forces have captured
Dambacha and are threatening Debra Marcos 32 miles to the southeast
on the road to Addis Ababa.
Libya. Minor operations incident to the siege
of Giarabub.
Sea: The British report an Italian cruiser has been tor-
pedoed and almost certainly sunk.
Air: German. Harrassing attacks in the Bengazi area.
British. A rather strong attack was made on Harrar,
Ethiopia.
Note: This military situation report is issued by the Military In-
telligence Division, General Staff. In view of the occasional in-
clusion of political information and of opinion it is classified as
Restricted.
RESTRICTED
507
CONFIDENTIAL
Persphrase of Code Rediagram
Received at the War Department
at 10:38. March 11, 1941.
London. filed March 11, 1941.
1. On Menday. March 10, British fighter planes flying at 30,000 feet
carried out three offensive everys over the French coast between Calsie
and Beulagne but encountered m German planes. During the preceding night
no British planes vers over the Continent.
2. During the night of March 10-11 targets on Liverpeel Boy and the
Betuary of the Threes were the objectives of secondary Gernea raids. The
principal raid was a fairly severe German attack corried out against Porte-
mouth. the extent of the damage done has not been determined. No British
planes were lest. German looses were one plane which greshed. During
deylight hours of March 10, 41 German please were on reconnaissance missions
over the English Channel and the North Sea. Twenty-nine Germen please were
platted ever Great Britein. One Germen plans was shot down and no British
planes were lest. There was me damage to military installations. During
the night of March 9-10 Reyal Nevy desk facilities and Army berreaks in
the Portemonth agen suffered - damage. During the - night 120 German
please took part in the attack en Leader. The Manston sirfield is southern
Britein vis attended by 18 Garmen Messerechnidt dive beabers without ump
in the early daylight hours of March 9.
3. Reyal Mr Torce operations in Middle Enstern theaters were as
fellows: GOTER Italian please were shot down and 10 is probable that two
ES
others vere destroyed by British fighter planos over Keleyre (this my be
CONFIDENTIAL
Regraded Uclassified
508
CONFIDENTIAL
Kersive which is the Creak seee for the island of Certa - 0-3)1 - Italian
motor transport consentration and Italian forces in the visialty of
Topoleni, Albenis. vere attacked w British please; Dritish bonbers mussi-
fully cerried out a severe attack on the herber of the Albentes city of
Durease: is the Britreen theater two Itelian please vere destroyed and the
highway between Amere and Keren vis bombed: in the Libyen thester the
sirfield at Trast (Tast Kessen) sad the city of Tripeli were attenked w
British bombers.
4. Axis sir operations is the Middle Estera theaters ware as fellows:
at Melta 18 derman planes attempted to carry out a raid but the British
shot down one of the Gerara planes, demaged two others end drove off the
rest; in Libya Germen bombers attacked the city of Agedabye without damage.
5. During the night of March 9-10 a British enrge beet in the Straite
of Dever use sunk by Corner bombs. During the preceding day Germen benbers
attecked two British norcheat convoys along the cost const of England but
coused no damage.
6. During the night of Merch 7-8 Germen sirplance attacked and council
minor damage to the 1,370-ten British destroyer IMPERIAL is the Nediterraness
near Malte.
SCANLON
Distribution:
Secretary of Yes
State Department
Secretary of Treasury
Asst. Secretary of Var
Chief of Staff
Ver Please Division
Office of Nevel Intelligence
Mr Corps
0-8
CONFIDENTIAL
CONFIDENTIAL
509
Paraphrase of Code Radiogram
Received at the War Department
at 9147, March 11, 1941.
Rome, filed March 11, 1941.
The Italian Army now has the following divisions in Albania:
16 line infantry divisions, 5 Alpine Divisions, 2 armored divisions,
1 motorised division. In addition to these there are the corps and
any troops for 6 corps and 2 armies. These figures include ass Colore
groupment. At present the total strength of the any in effectives my
be placed at 420,000. It is believed that an offensive is imponding.
There is a report that Geleso has been given the command, but as yet
there is no sufficient confirmation.
FISKE
Distribution:
Secretary of War
State Department
Secretary of Treasury
War Plans Division
Office of Naval Intelligence
CONFIDENTIAL
ere
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"ocrText": "329\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE March 12, 1941\nTO\nSecretary Morgenthan\nFROM Mr. Cochran\nconfidential\nRegistered sterling transactions of the reporting banks were as follower\nSold to commercial concerns\n£48,000\nPurchased from commercial concerns\n£12,000\nOpen market sterling held steady at 4.03-1/2. Transactions of the reporting\nbanks were as follows:\nSold to commercial concerns\nE 5,000\nPurchased from commercial concerns\n&\nThe Argentine free peso had an easier tendency today. It closed at .2296,\nas compared with yesterday's final rate of .2303.\nIn New York, the closing rates for the foreign currencies listed below were\n11 follows:\nCanadian dollar\n15-1/16% discount\nSwies franc (commercial)\n.2322-1/2\nSwedish kross\n.2384-1/2\nReichemark\n.4005\nLira\n.0505\nBrasilian milreis (free)\n.0505\nMexican peso\n.2066\nCuban peco\n6-1/2% discount\nWe sold $998,000 in gold to the Central Bank of the Uruguayan Republic,\nwhich was added to its sarmarked account.\nNo new gold engagements were reported.\nIn London, the prices fixed for spot and forward silver were both 1/16d\nhigher, at 23-7/16d and 23-3/8d respectively. The U. 3. equivalents were 42.56# and\n42.444.\nHandy and Harman's settlement price for foreign silver was unchanged at\n34-3/44. The Treasury's purchase price for foreign silver was also unchanged at 35#.\nWe made three purchases of silver totaling 150,000 ounces under the Silver\nPurchase Act, all of which consisted of now production from foreign countries, for\n\"orward delivery.\nRegraded Uclassified\n330\n-2-\nthe Federal Reserve Bank's report of March 5. listing deposits of banks in\nAsia with the New York agencies of Japanese banks, showed that such deposits totaled\n$101,960,000. an increase of $458,000 since February 26. Also reported were the\nTokohama Specie Bank Agency's dollar liabilities to and dollar claims on Japanese\nbanks in Asia, which stood as follows on March 5:\nChange from\nMarch 5\nFebruary 26\nLiabilities:\nDeposits for Japan and Manchuria\n$56,812,000\n+ $440,000\nDeposits for China\n35,855,000\n+ 267,000\n.\n: U.S. Treas. Bills, comm. paper, etc....\n23,655,000\n- 75,000\nClaims\n: Loans\n$60,753.000\n+$6,206,000\n#\n: Other - mainly Jap. import bills\n9,991,000\n+ 346,000\nNost of the $6,206,000 additional funds received from Agency loans (made primarily\nto Japanese banks in Japan and Manchuria) were used for Japanese commitments in this\ncountry, it was reported.\npms.\nCONFIDENTIAL\n331\nBRITISH EMBASSY,\nWASHINGTON, D.C.\nPersonal and\nMarch 10th, 1941.\nSecret\nDear Mr. Secretary,\nI enclose herein for your\npersonnal and secret information copies\nof the latest reports received from\nLondon on the military situation.\nBelieve me,\nDear Mr. Secretary,\nVery sincerely your,\nHarifax\nThe Honourable\nHenry Morgenthau, Jr.,\nUnited States Treasury,\nWashington, D. C.\nTelegram from London dated March Btb, 1941, 332\n1.\nReval. horwegies loaded tanker (3000\ntone) was Bank off the set coast yesterday and a\nDritish ship (6,400 tone) outward bound in convey,\nwith general cargo, was torpodned in the North\nWestern approaches early Harch 7the\n2.\nHilitary. British Somaliland. Perfer 210\nmiles morth of Megadishu OD Harer road has been\noccupied and Belet Uen serodrome 1s fit for use;\nthe roads and bridges are intact, water plentiful\nand large quantities of petrol and oil have been\nesptured. Patrols have been sent forward to\nOddur and Dolo (North West of Lugh Perrendi). Among\nmaterial ceptured at and on the way to Mogadiscio\nare 348,000 gellone of R/T petrol and 0,000 gollone\nof evietion petrol.\n3.\nBulgaria. German reconnaissance detachments\nreached the vicinity of the Speek frontier OD March\n3rd and by March 5th the main concentrations were\ndeveloping in Sliveno Yambol area, where heavy tanks\nare reported and 10 the Strome Valley near Gorna\nDjumeya and Petrich. Estimated that B divisions of\nGermen troops are in Bulgerian territory.\n:\nBulgarian divisiomeppear to be disposed as\nfollows: Yugoslev frontier 1 motorised, 2 infestry,\n2 FOSOFVO infentry forming ...... Turkish frontier, 2\nmotorised, 7 infantry, Macedonian frontier 4 lofestry,\nSouthern Dobrudje 1 infentry. Bolhoris general heade\nquarters to reported et Store lagora.\n5. R.A.V./\nRegraded Uclassified\n333\na I I\n5.\nR.A.P. Earch 6th 1 medium bomber attacked\nrailway targets at Obent.\nSight of March 6th/7tb. Operations can-\ncelled.\nBe\nG.A.F. Night of Merch 6th/7th. 40 air-\ncraft were operating over this country but only 5\ncame inland, the reminder were mine-laying.\n7. Melts. Melta was attacked March 5th as\nreported yesterday by about 100 aircraft including\n60 bombers. Damage was slight at one aerodrome\nbut at Hal For barracks and bangers considerably\ndamaged; 4 aircraft were destroyed on the ground\nand all remaining aircraft on the serodrome were\nrendered temporarily unserviceable. 11 of our\nfighters intercepted and shot down 7 enemy circraft\nprobably so eighth and damaged four more. Anti-\naircraft destroyed a further nine and damaged four.\nOne of our fighters 10 missing.\n0.\nAircraft ensualties to operations ver end\nfrom British Islos,\nGerman destroyed one, damaged once British\nnil.\n:\nHome Security. March 7the Two R.A.F. aero-\ndromes were attacked by\n........)\nsome damage to\nbuildings but no serious casualtion.\nRegraded Uclassified\nTelegrom received from London dated arch 0, 1941.\n1.\nNoval. In the Sues Canal divers have\nlocated mines which were counter-mined, Believed\n3 mines remain to be dealtwith, expected Canal will\nbe open March 7th. Twenty-three mines were exe\nploded at verious home porte on March 7th.\n2.\nOne enemy aircraft loid mines off llayers\nPelle of Earch 7th. L.L. sweepers detonated these\nthe same efternoon. Between 14.30 and 16.30 hours\nMarch 7th six aircraft laid mines in the Humber\noutrance, fifteen were seen to drop.\n3.\non March 7th convoye were attacked by De\nboat in the Seatern approsches and off the Rest\nCoast by aircraft, and during the night of March\n7th-Sth by E-boats. of the nine ships torpedoed\nor damaged by aircraft four sinking or suck. One\nsircraft shot down one damaged.\n4.\nOn March 7th off the Book of Holland a 2500\nton merchant vessel we bombed and left sinking by\ncoastal aircraft.\n5.\nEthiopia. In Cojjem area patriot operations\ncontinue against retreating garrison of Burye. 300\nprisoners and four guas have been emptured and 80\nseroplane shot down. 1,700 desertors have surren-\ndered.\n6.\nKenya Colony. Heavy rain has fallen on\nSthiopien border end may roads ere under water.\n7.\nR.A.F. March 7th. During the day aircroft\nfrom the Coastal Command bombed SD aerodrome in\nTolland hitting hangers also navel dockyard at\nRenhelder and left 9 2,500 ton merchant vessel in 9\nsink Regraded Uclassified\n335\n- 2 -\nsinking condition off the Dutch Coast.\n8.\nNight of March 7th-Werch 8th. Operations\ncancelled.\n:\nGerman Air Force, March 7th about fifty\nenemy aircraft were operating overland in wide\nlocalities and forty more were working off East\ncoast. One enemy circraft was destroyed by enti-\naircraft shore battery and one by a Sevd trawler,\na third hit the mot of a ship and crashed.\n10. light March 7-March 8th. Activity\nnegligible.\n11. Belts. Night of Narch 6th/March 7:h.\nTwelve enemy sircraft made individual attacks on\nvarious objectives without causing serious damage\nOF casualties.\n12. March 7the Four bombers escorted by 10 MR\n109's damaged a Sunderland by machine-gun fire, shot\ndown a Glen Martin and also one Hurricase out of\nseven which intercepted. Pilot saved. Two enemy\ncircraft were probably destroyed by enti-sireroft\nfire.\n13,\nAircraft casualties to operations over and\nfrom Aritish Isles. German, three destroyed.\nBritleh nile\n14. Home Security \"arch 7th. A bell-bearing\nfactory was hit and seriously damged. hirty-six\npersons wro killed and forty-seven seriously injured:\nproduction has heen stogied probably for DOV M days.\n1\nRegraded Uclassified\n336\n8\n15. Six Royal AIr Foree stations, a balloon\nbarrage centre and an Infentry training centre were\nattacked.\nLittle damage and few casualties.\nCONFIDENTIAL\n337\nPurephrase of Code Indiagram\nBeceived at the Mar Department\nat 10:06, March 20, 1941.\nLondon, filed 15:00, March 20, 1941.\n1. On Sunday, March 9, adverse wather enused the cancellation of\nall flights of British planse. During the proceding night occupied cirfields\nin northern Frease were benbed w British Bristel Bloubeins bat there were\nas planse of the Benber Command over the Constrant because of the bad weather.\n2. Buring the might of March 9-10 German raide - carried out over\nthe Midlends, Pertomonth, Liverpool Bay ml Suffelk. 2a addition, there was\na Large smle atteck on Inim. the extent of the damage 40mg has not boon\ndetermined. During the proceding day - aircraft patrols were mintained\nover the Bover Straits and only eight them planse penstrated boyand the\ncoast line of England. British fighter please www is the air during this\nday and the following night but were unsble w intercept my of the attachers.\nBuring the night of March 6-9 tea Games planse planted nines along the\nBritish east. A total of 190 other - planon - pletted am each-\neast Britain, Portemouth, Horfelk ml Suffelk. Buring the - night Lendon\nwas attached W 60 - Gorman planse. Private property in Landon auttered\nhavey and the vaterfrust area was damged - a - Backington\nPalace gremis a Ledge - a - basto fall a - restures) in\nwhich s6 individuals was billed and - then 80 wro injured. British\nantiniveraft fire brought term three of the - planse and damaged two\nothers. Buring daylight hears of March 7 a British Informary tradaing emior,\n& ballom barrage center and six Mayal Air Terse stations www banked w\nGreena planse. A mall number of casmalties and - - resulted.\nCONFIDENTIAL\nRegraded Uclassified\n338\nCONFIDENTIAL\nDaring the - day 36 Inberers vere billed and n - injured suriously\nduring a - attack an a British ball bearing manifacturing plack.\nProduction at this plant will have to be surpended for a portod of - week.\n3. British air activities in Middle Instem themboro - as\nfollows: the Albasian city of Toyaleni we bended w British planse baned\nin in the Eritreen theater the area was attashed w\nSalan-based British benbern; in the Likynn thester British benters attacked\nthe Tripeli burber and dropped bonks on the sirfield at - (Treet Banson).\nIt is I that planse of the - Air Perso - based at this latter\nplace which is about 25 miles valid of Sixte.\n4. - air activities in the middle Bast consisted of a raid\nw five planse against Malta. British installations suffered as - and\n- of the Gurman planse - abot dom.\n5. the Baes Genal will probably be respons& to traffic w Harsh 11.\nBritish divers have send all of the state planted is the (naml w -\nplanes and only three - are to be exploied before the emal 10 completely\ncleared.\n6. A call has hours mis w the Ministry of Labor for 100,000 -\nto volunteer for service in munition ml w infestry factories. These\nvolunteers will be used primarily is filling artillery shalls.\n7. During the day and might of March 1 a British merchant -\nmake up of sine ressels - benied or torpoñood. in the Horth Sen. - of\nthe were benched and three others mis. During the only meating\nhears of March s a - education attached a British - -\n4 of 54 vessels 180 miles week of Cape Bimes, a the West - of Africa.\nFive of the - teste vere look.\nCONFIDENTIAL\nRegraded Uclassified\nCONFIDENTIAL\n339\n8. Zate in the afternoon of March s cirplense from British sevel\nwrite located the two Cumman 26,000-tem bettlechips, - use -\nhalf-way between the Cape Verio Islands and the - Islands.\nI\nDistribution:\nSecretary of Ver\nState Department\nSecretary of Treasury\nAsst. Secretary of Ver\nthief of Staff\nMar Plane Division\nOffice of Navel Intelligence\nAir Corps\n0-3\n+\nCONFIDENTIAL\nRegraded Uclassified\n340\nRESTRICTED\nG-2/2657-220\nM.I.D., W.D.\nNo, 335\nMarch 10, 1941\n12:00 M.\nSITUATION REPORT\nI. Western Theater of War.\nAir: German. During daylight of the 8th and 9th there\nwere normal operations against shipping at sea and scattering attacks\nover Great Britain. During the night of the 8th-9th a strong attack\nwas launched against the London area. This was apparently the\nheaviest German night raid of 1941. Last night the attack was re-\nnewed in less force and Portsmouth also was systematically bombed.\nBritish. Apparently no night operations. On the\n9th fairly heavy daylight attacks were made over northern France.\nII. Balkan Theater of War-\nGround: Bulgaria. No change.\nAlbania. The Greeks report their offensive\ncontinues and new positions in the Tepelini sector were occupied\ndespite strong Italian counter-attacks. The Italians admit Greek\nattacks in the sector of the Eleventh Army (southwest sector) but\nclaim they were repulsed by counter-attacks.\nAir: Albania. Considerable air activity on both sides\nin close support of the ground operations.\nIII. Mediterranean and African Theaters of War.\nGround: Italian Somaliland. British troops have\noccupied Gabredarre which is about 165 miles by road northwest\nFerfer which was captured March 5, 1941.\nLibya. The Italians report another attack on\nGiarabub Oasis by the British has been repulsed.\nEritrea. A successful counter-attack is claimed\nby the Italians in the Cheren sector.\nAir: Axis. Pressure maintained in Libya. Malta was\nbombed again on the 9th.\nBritish. No reports of activity.\nNote: This military situation report is issued by the Military 1n- In-\nGeneral Staff. In view of the occasional as\ntelligence clusion of Division, political information and of opinion it is classified\nRestricted.\nRESTRICTED\nRegraded Uclassified\n341\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE March 11, 1941.\nTO\nSecretary Morgenthau\nFROM\nMr. Hear AMA\nIn accordance with your request of March 10, we are\npreparing a written analysis of the Gano Dunn report on steel\ncapacity, which we expect to complete and submit to you on\nThursday afternoon of this week. We disagree with the con-\nclusions of Mr. Dunn's report and it has taken a little time\nto assemble and organize our refutation.\n342\nSee entry of 6/5/41 which states that\na copy of the President's memo of 3/10/41\nwas given to Mr. Hopkins by HM,Jr.\n343\nThis is referred to in H Jr's report\ne luncheon meeting with the President on\n5/10 which is filed in President's folder.\n344\nHmr.\nBremse of The general\nfinancial picture Oher your\nharry up\n(a) RFC taking uses %\nBritish payments made\nfor plants\n(6) Was Dept. taking me,\nof material payments\nmade by the British\n1.b\nat Runch march 10th 1941.\n345\nMAR 11 1941\nDear Josse:\nFor your information I all transmitting here-\nwith photostat copy of a memorandum which the President\ngave no yesterday at lunch, concerning the British\nfinancial picture. As I as nov giving careful considers-\nties to the British financial requirements for each month\nfrom sev until the end of this calendar year, I would\nappreciate 10 if you vill furnish Under Secretary Doll,\nat the carliest possible mement, the amount of funds that\nthe Reconstruction Finance Corporation esa make available\neach month during this period for payments on account of\nplant facilities which 10 may take ever from the British.\nSincerely yours,\nHomesable Jesse 1. James,\nAdministrator,\nReplied to by m\nFederal Lean Agency,\nJones 3/19/41\nVashington, D. 0.\nDEBIELS\nMarch 11, 1941\nImp\nRegraded Uclassified\nSTRICTLY CONFIDENTIAL\n346\nMAR 1 1 1941\nMy dear Mr. Secretary:\nFor your information I an transmitting here-\nwith photostat copy of a semorandum which the President\ngave - yesterday at lunch, concerning the British\nfinancial picture. 4a I as nov giving careful consider-\nation to the British financial requirements for each\nmonth from nov until the end of this calendar year, I\nwould appreciate 10 if you will furnish Under Secretary\nBell, at the earliest possible moment, the amount of funds\nthat the Mar Department can make available each month\nduring this period for payments on account of contracts\nwhich 10 my take over from the British.\nSincerely yours,\n(Signed) E Marganthau, Jr.\nSecretary of the Treasury\nThe Honorable,\nReplud to by\nThe Secretary of War.\nmay. me cloy\nDVBINLE\n3/17/41\nMarch 11, 1941\nweb\nCopy to them Edelin\nBy Memeenger 230\nRegraded Uclassified\n347\nTREASURY DEPARTMENT\nFor Miss Chancey\nINTER OFFICE COMMUNICATION\nDATE March 11, 1941\nTO\nSecretary Morgenthau\nFROM Mr. Cochran\nMr. Ganson Purcell telephoned me from the Securities and Exchange Commission\nat 12:35 yesterday noon. He told me that Chairman Frank had discussed with the\nother Commissioners the question of giving publicity to the meeting which was\ntaking place at the Securities and Exchange Commission yesterday afternoon with\nrepresentatives from the investment associations in New York to study a plan for\nliquidating British investments in this country. It had been the opinion of the\nCommissioners that no publicity should be given to this meeting, considering the\nexploratory character thereof. Chairman Frank desired this information to reach\nSecretary Morgenthau before the latter's press conference. I gave the Secretary the\nsubstance of this message at 3 o'clock yesterday afternoon.\nJ.M.P.\nRegraded Uclassified\n348\nMarch 11, 1941\nSome time during the night I woke up and got the idea\nthat if we were going to refund the $500,000,000 June notes,\nwe also ought to, at the same time, raise five or six hundred\nmillion cash, and make an issue of sufficient size and do it\nall at one time.\nStrangely enough, I still remembered it when I woke up\nthis morning, and I sent for Bell and gave him this idea, and\nasked him to speak to the people in New York and find out\nwhether they have finished digesting the last issue.\n349\nMarch 11, 1941\n10:20 a.m.\nRE AID TO BRITAIN\nPresent:\nMr. Foley\nMr. Bell\nMr. Cochran\nMr. Bernstein\nMr. White\nMr. Acheson\nFoley:\nThey wanted the same control you had over the\nfour million eight hundred eighty million.\nBell:\nThey will get around now to blaming me.\nFoley:\nNo, but you remember.\nBell:\nSure. Well, that is the Budget's job. I am\nsmypathetic. It is absolutely budgetary con-\ntrol. (Laughter)\nFoley:\nSure, there he comes.\nH.M.Jr:\nAll right. Now, Merle, will you state the case\nagain, please?\nCochran:\nOn Saturday morning we considered the memorandum\nwhich had been submitted by Mr. Pinsent on\nMarch 7. It was decided that we needed more\ndata with respect to the paragraph headed\n\"Final Result\" on page four of this memorandum.\nThis paragraph reads as follows:\nRegraded Uclassified\n350\n- 2 -\n\"To cover our shortage up to August 1941 and\nto provide a cash balance on lines proposed\nin assumption six, we need assistance before\nthe end of August to the extent of three\nhundred sixty-five millions on the basis of\nthe first alternative and one hundred eighty-\nfive millions on the basis of the second\nalternative, subject to the fundamental\npoint raised on assumption three. It is\nhoped that such assistance can be provided\nin the form of the taking over after the\npassage of the bill of our existing con-\ntracts by the United States Government to\nthe extent necessary to cover the above\namounts. The taking over of capital assets by\nthe RFC will, of course, provide part of this\nassistance. For the rest, it should not be\ndifficult to select suitable contracts up to\nthe amount required. Speed of action is\nvery desirable as deliveries are constantly\nreducing the outstanding value of existing\ncontracts. Even after August, our deficit\nwill still rise for & time. This should be\nautomatically taken care of, since many of\nthe contracts to be taken over are bound to\nhave payments due after August as well as\nbefore, of which we shall be relieved. The\nmonths to August are the most difficult ones.\nThe deficit of the early months will in part.\nbe currently met from gold borrowed by the U.\nK. Government; but, as this is only a tempo-\nrary expedient and leaves a responsibility to\nrepay in gold, no account has been taken of\nit in the calculations above.\"\nH.M.Jr:\nLet me approach this thing in my own peculiar\nmanner. As of January 1, their outstanding\ncontracts were approximately a billion four?\nBell:\nThat is given in Table 1.\nRegraded Uclassified\n351\n- 3 -\nH.M.Jr:\nJust for my purposes, you see.\nBell:\nA billion three thirty.\nH.M.Jr:\nAll right, & billion three thirty. Now, this\nis the eleventh of March. We can use February\n28.\nBell:\nYes.\nH.M.Jr:\nNow, from January 1 to February 28, I want two\nfigures, I want, one, how many contracts have\nthey paid for, you see. You can get that from -\nhow much have they paid for during the month\nof January. That subtracted from a billion\nthree thirty would give us the figure on March\n1. Has anybody got the figure?\nBell:\nThe billion three thirty, Mr. Secretary, is a\nFebruary 28 figure.\nH.M.Jr:\nNo, I want the January 1 figure.\nWhite:\nI haven't got the payments on those earlier\ncontracts, but we have got the payments which\nare due on the first of each month.\nH.M.Jr:\nJust let me put it this way. Let's say it is\na billion four. This is the way I want to\napproach this thing. A billion four, January\n1. Then so many contracts, so much - - they took\ndelivery of so much stuff during January. Let's\njust say for argument's sake they took care of\nthree hundred million, which left them on the\nfirst of March outstanding one billion one of\nthe contracts which were in existence prior to\nJanuary 1, not the ones that they have written\nsince. Now, of that three hundred million\ndollars that they have paid for during the\nmonth of January, where did that money come\nfrom? In other words, how much of it came\n352\n- 4 -\nfrom the sale of securities to the stock\nexchange, how much of it from gold, how\ndid they pay for it? In other words, what\nI am groping for is this: I had mentally\nearmarked & billion four hundred million as\nof January 1 when I testified, you see. Now,\nI have said toward that there is nine hundred\nmillion of direct investments, there is six\nhundred million listed securities, and there\nis four hundred million dollars annual output\nof gold from South Africa, or a total of nine\nand six are fifteen and four are 8. billion\nnine. Now, what I want to know is, of this\nthree hundred million how much of it came from\nthose three sources. Now, is that assumption\ncorrect, Dan?\nBell:\nYour figures are about correct. It is a bil-\nlion eleven, as I understood it, instead of\na billion nine.\nH.M.Jr:\nBut my assumptions. So then we carry this\nthing along and I will tell you why I ex-\nplained it. Is there any other place that\nthey can get this - have it pledged to me\nand I in turn to Congress - the billion four\nhundred million contracts outstanding and then\nthat their listed securities, their direct in-\nvestments and their gold or anything else that\nwe counted in should go toward payment. Now,\nfor argument's sake they paid three hundred\nmillion dollars out. Now, where the hell did\nit come from?\nCochran:\nWell, they had gold which was sold on January\n2 of a hundred and seventy-six million; Jan-\nuary 30, twenty-six million; and on February -\ntwenty-six million. That wouldn't count.\nYou have a hundred million of gold there, a\nhundred ten of their securities and then some\ntaken from the balances which they had on hand\nRegraded Uclassified\n353\n- 5 -\nthe first of January.\nH.M.Jr:\nWell, do you see what I want, Harry?\nWhite:\nI see what you want, yes. I am not sure that\nthat--\nH.M.Jr:\nYou mean where it is going to?\nWhite:\nNo, those first three questions are fine.\nYou want to know, A, they owed you a certain\namount on commitments on January 1. How\nmuch did they pay on those commitments? You\nknew their assets. Where did that money\ncome from? Presumably it came from those\nassets. If it did, then their present\nassets ought to be just the difference be-\ntween the two as compared to their January\n1 assets.\nH.M.Jr:\nThen on the first of March - - I mean, I don't\nknow just how we will handle it. I am groping.\nI don't know just how we will handle the con-\ntracts they have signed since then, you see.\nI don't know what I am going to do with them.\nLet me just think out loud a minute. Now,\nthey come in and say, between now and the\nfirst of August they need three hundred sixty\nmillion dollars. Is that what you have got?\nCochran:\nThat is, if they pay Canada gold.\nH.M.Jr:\nWell, they are going to pay that to us.\nCochran:\nThen it is only a hundred and eighty-five.\nH.M.Jr:\nAll right. They need a hundred and eighty-\nfive million dollars. Now, I say before I am\ninterested, see, \"Gentlemen, I want to know\nwhere are you getting the cash to pay your\nbills today. In other words, are you taking\nRegraded Uclassified\n354\n- 6 -\nsome of the fat off the bone that we said we\ndidn't want? Where is it coming from? You\nsay you need a hundred and eighty million\ndollars. If Now, let me just give you this\npicture. Then they take on more contracts.\nI mean, it is like & going concern. They\nhave got so much to pay out and they have\n80 much of their assets. Which of their\nassets did they use and what is their position\nas of March 1?\nCochran:\nThey have given us that.\nWhite:\nThey have given us that.\nH.M.Jr:\nWhat?\nCochran:\nThey have given you a statement of their credit\nposition and debt position for the month of\nMarch to show how much they expect to use in\ngold, how much they expect to get from market-\nable securities.\nH.M.Jr:\nThis is for March?\nCochran:\nYes, sir.\nH.M.Jr:\nBut I - - I will come to that in a minute, but\nI want to know what happened in January. How\ndid they finance themselves in January? Now,\nthey ought to know now. I mean, I want - what\ndid they do in January? Through the Federal\nReserve we can quickly check up what did they\npay out.\nCochran:\nThat is just what I was reading.\nH.M.Jr:\nDo you know how much they paid out in January?\nCochran:\nYes.\nRegraded Uclassified\n355\n- 7 -\nH.M.Jr:\nYou told me how much gold. How much did they\npay out in January?\nCochran:\nIt isn't broken down by months here.\nH.M.Jr:\nWell, it should be.\nCochran:\nWell, this comes in weekly, but I can figure\nit out.\nH.M.Jr:\nWell, give it to me rough. Can you give it\nto me roughly? Take your time.\nCochran:\nJanuary 2 to 29, total debits were a hundred\nand ninety-seven million, four, paid out of\nthe account with the Federal.\nH.M.Jr:\nWell, that is roughly two hundred million\ndollars.\nCochran:\nAnd that was raised by gold, one hundred mil-\nlion, securities about seventy-five, and the\nrest came out of the balance.\nH.M.Jr:\nWell, did it? Then they only ate into their\nbalance by twenty-five million.\nCochran:\nI mean, I can make it accurate but that is\nroughly.\nH.M.Jr:\nWell, I want it accurately now. What did they\nforecast for March?\nCochran:\nFor March they count their official dollar\nbalances as eighty-two as of March 1.\nH.M.Jr:\nRead it, I will listen to it.\nCochran:\nThe official dollar balances as of March 1,\neighty-two million dollars. Gold as of March\n1, one hundred two million.\nRegraded Uclassified\n356\n- 8 -\nH.M.Jr:\nThat is & hundred and eighty-four.\nCochran:\nNewly mined African gold to come in during the\nmonth, forty million.\nH.M.Jr:\nThat is two hundred twenty.\nCochran:\nSales of marketable securities and direct\ninvestments, seventy-five.\nH.M.Jr:\nWell, that is two ninety-five.\nCochran:\nTwo ninety-nine. That is forty in marketable\nsecurities and they just guess thirty-five for\ndirect investments. That is the first time\nthey have carried any item there. So that is\ntwo ninety-nine and ten under debits is an\nexpenditure by British Purchasing Commission,\ntwo hundred fifteen million dollars. Now,\nthe breakdown on contracts placed by March\n1, one hundred seventy-five million; B, con-\ntracts to be placed in March, forty million;\nand second entry, balance of all other gold\nand dollar items, twenty-four million. Esti-\nmated balance at March 31, sixty million.\nH.M.Jr:\nLet me just see if I have got it. Roughly,\nthey figure that expenditures for March will\nbe three hundred million? Two hundred mil-\nlion?\nCochran:\nTwo hundred forty.\nH.M.Jr:\nTheir total expenditures.\nCochran:\nTwo hundred forty.\nH.M.Jr:\nTwo hundred forty and they figure they can\npick up how much money?\nCochran:\nWell, they would have a balance left of sixty\n357\n- 9 -\nmillion.\nH.M.Jr:\nAnd they started the month with eighty-two?\nCochran:\nEighty-two.\nH.M.Jr:\nWell, I think we ought to take 8. careful\nlook at what happened in January. What?\nWhite:\nWe ought to be able to go over the figures\nand see how close we can come to what you\nwant. I didn't know the figures were avail-\nable that would give us that monthly payment,\nbut are those later figures than what we got\nlast week?\nCochran:\nWhat do you mean?\nWhite:\nThose that you are reading from.\nCochran:\nThese aren't complete because it is just what\nis paid out of the Federal, you see.\nWhite:\nWell, if you give us both a chance at that,\nwe can come--\nH.M.Jr:\nI am going to give you a chance and I will\ntell you why I am in no hurry. In the first\nplace, they have got plenty of money for this\nmonth and in the second place, very much in\nthis room, I can't overemphasize the confi-\ndential nature of it, I saw Lord Halifax\nlast night after I got the President's approval\nand I said if by the end of this week they\ndidn't show concrete evidence that they wanted\nto sell some of their factories, I suggested\nthat they put somebody else in charge of these\nsales. Well, he was very much disturbed and\nSir Edward Peacock is a great friend of the\nhead of the Bank of England and the thing\nwhich always riles me in these times, he has\nRegraded Uclassified\n358\n- 10 -\ngot strong political backing, you see, so it\nwould be a great to-do, to use his language,\nto sack Sir Edward Peacock. So he said he\nthought he would have after dinner - I don't\nknow whether he said Purvis and Phillips or\nPurvis and Pinsent. So I said, \"Well, you\nknow, Mr. Ambassador, through Merle Cochran\nand Phillips and Pinsent I am sure you heard\nlast week how I was distrubed about this, 80\nthis doesn't come like a bolt out of the blue,\"\nand I said, \"I cannot go on the Hill and try\nto explain on this appropriation bill why\nthe English Government has not been able to\nsell one of its many hundreds of factories\nin this country. I can't explain it! So\nhe tried every way possible to make be back\ndown. \"Do you think it is wise to tell this\nto Purvis and the others?\" I said, \"I cer-\ntainly do.\" I didn't give one single inch.\nNow, we will continue our studies, but until\nthis English industrial crowd permits its\ngovernment to sell some of these factories,\nI am not interested in their financial pic-\nture end I am not going to do a damn thing\nabout it. Now, as I told Halifax last night,\nI said, \"I don't have to tell you that I am\nfriendly to the English cause. I even demon-\nstrated it in the past,\" and he said that -\ncould he come and see me at the house if he\nhad something to say, and I said, \"Yes.\" And\nI want you to know, Merle, because you are\nmy mouthpiece on this thing, as far as I am\nconcerned you can listen, see, but until\nthese fellows come in and demonstrate con-\nclusively to me that they are going to sell\nsome factories, I am not going to see them any\nmore. I am not going to see Phillips or any-\nbody. I am not available and I just want you\nto know that, because I am not going to go up\non the Hill and the first thing - \"Well, Mr.\n359\n-\n12\nMorgenthau, give us the report on what has\nhappened, and the first thing they are going\nto ask is, \"How many properties have they\nsold, and I say, \"Zero. \"Well, why?\" I\ncan't give any answer. I told Halifax last\nnight - it was all very quiet but he used all\nhis English tradition to getme to swerve.\nMake a partial sale - not a partial sale, I\nmean a sale with partial payment. I said,\n\"There are lots of things that you can do.\"\nI read last night what they sent over to\nHopkins on this Lend-Lease to hurry the thing\nup. We signed a contract to lend-lease them\nsome cutters and then we decide afterward\nwhat the price is in order not to hold them\nup. That is our attitude. But I want a\ncomplete - I mean, it is one thing for\nCochran when he gets his orders - whether he\nbelieves in them or not, he carries them out.\nHe demonstrated that. As my representative\nwith these people, I want you (Cochran) to\nknow until they move, anything further on\ntheir financial problem just doesn't interest\nme, and I want you please to take that front\nbecause I have cleared it with the President,\nand you are representing the President and me\non this, you understand, Merle.\nCochran:\nThis is new as of today, because Saturday we\nasked them for this and last night Phillips\nwas in talking to me about this.\nH.M.Jr:\nNo, you can see them. You listen. No, this\nis the follow-up of my time when I asked you\nto send for Phillips. How long ago was that?\nCochran:\nThat was Friday evening.\nH.M.Jr:\nNot last Friday?\nCochran:\nLast Friday, yes.\nRegraded Uclassified\n360\n- 13 -\nH.M.Jr:\nOh, no, it must have been Friday a week ago\nthat you put the heat on.\nCochran:\nYes, I guess that was Friday the week before.\nH.M.Jr:\nIt is Friday a week ago. Do you want to check\nme?\nCochran:\nI will have to on that.\nH.M.Jr:\nDo you mind, right now? I would like to know.\nCochran:\nThey asked - that was when I had Playfair.\nH.M.Jr:\nJust take a minute. I will wait until you\ncome in. I told the Ambassador it was my\nimpression that 10 days had passed.\nCochran:\nI will get it.\nBernstein:\nIs this it?\nCochran:\nYes, this was on February 28.\nH.M.Jr:\nI was right. Well, that is all right. It was\nover a week. Well, now we go ahead and get\nthis stuff. Now, let me just get on this\ncontract business S0 we understand that. The\nPresident - have you people seen this note\nthat the President gave me to show the Army\nand--\nCochran:\nYou read that little short memorandum yester-\nday.\nH.M.Jr:\nWell, we will put all the pressure on them,\nand I don't know whether you have those figures\nand the money that they get from there, I am\nmore than willing that they segregate that to\nbe used for - if they want to earmark it for\nstrictly English standard stuff, you see.\nRegraded Uclassified\n361\nFoley:\nWell, suppose they want to use it to meet\noutstanding commitments?\nH.M.Jr:\nThey can.\nFoley:\nUse it for any purpose they want?\nH.M.Jr:\nAny purpose that they want to, but that is why\nI want to study the January thing to find out\nexactly where they got the money from, you\nsee, and more details of where it went to. I\nmean by classifications. I mean, how much\nof it went for food, how much of it went for\narmament, how much of it went for dividends.\nI don't know what, you see.\nCochran:\nDo you want February, too?\nH.M.Jr:\nI think I would like to start with January.\nOf course, this is March.\nWhite:\nJanuary and February.\nH.M.Jr:\nI am talking two months. Yes, I am confused.\nYes, January and February. By classifications,\nI would like to get more familiar with how\nthey spend it and raising it is the easy part.\nYes, January and February. But, Dan--\nBell:\nYou just want a total? When you say classi-\nfications, you don't mean classify expendi-\ntures?\nH.M.Jr:\nWell, I was thinking - yes. No, I will tell\nyou what I meant. In one classification, let's\nsay munitions, and in another classification\nmaybe food. Another classification may be\npaying dividends. I don't know what.\nWhite:\nShouldn't one of the classifications be what\nthey paid on their past commitments?\nRegraded Uclassified\n362\n-18- -\nH.M.Jr:\nYes.\nWhite:\nThat should be one classification.\nH.M.Jr:\nI would like to play with this thing, you see,\nand get so we know really more about it. We\nhave it, but we have never examined their\nchecks that they paid through the Federal\nReserve in New York.\nBell:\nI take it, one item might very well be net\non balance of payments.\nWhite:\nI think if we could just put the questions\nthat we would like to ask, what they paid on\npast commitments, what they paid on other\nexpenditures that weren't listed in the past\ncommitments, and let them fill in the figures,\nrather than if we examine their - unless they\nhave given recently data to Merle which would\nanswer that, the data which we have up to now\nwould not enable us to answer that.\nH.M.Jr:\nWell, keep after it.\nCochran:\nWell, I have passed on everything I have here\nto Harry.\nWhite:\nThen W6 haven't got the data.\nH.M.Jr:\nWell, you see what I mean.\nWhite:\nI know.\nH.M.Jr:\nAfter all, if we are going to finance these\npeople, I want to know how much goes to food,\nhow much goes to non-essentials.\nWhite:\nI am wondering whether in order to enable you\nto know exactly each month what is happening,\nRegraded Uclassified\n363\n15\n- 16 -\nif you want that continued--\nH.M.Jr:\nYes, I do.\nWhite:\nWhether we couldn't set up a statement - we\nwill leave everything but the figures to be\nfilled in, which they can fill in each month.\nYou go over the statement to see that it\ncontains everything that you want in the form\nin which you want it, and then each month they\nwill fill in such figures as they have, and\nwe will fill in such figures as we have and\nmake it a current thing instead of having to\ncome back and - we get the stuff in B. differ-\nent form each time and it is impossible to\ncompare their figures.\nH.M.Jr:\nYou see, what I am thinking of, I am taking\nplenty of time. I have been operating dif-\nferently. Yesterday, you know, we gave\nplenty of time to this thing. This morning\nI have got nothing but this, you see, this\nmorning. I am practicing on you people, so\nyou can practice on me. Up to this point,\nthe President and I are together. He knows\nwhat we are doing. When they really run out\nof money I just don't know what we are going\nto do, but when we do, then all of this stuff\nthat we are talking about now, why they run\nout of it, and what they have spent, it all\nhelps, doesn't it? Now, of course what they\nare going to try to do is to put everything,\nincluding the kitchen stove, under the Lend-\nLease and we have to be prepared to say yes\nor no, and it comes back always to two things,\ntheir question of their securities and the\nquestion of their direct investments and how\nmuch of that have they used up since the first\nof January. I ought to know so that the\nPresident - \"Well, now, look, Henry, they say\nyou are being awfully tough on them, and I\nRegraded Uclassified\n364\njust want to be sure that you are right.\nNow, can we take over some of these contracts,\nor can't we?\" Which leads me to the thing -\nI mean, do you people know today how much\nthe RFC has taken over and how much--\nBell:\nThere is a memorandum here that they haven't\ntaken over any, but there are only a couple\nof them that are even close.\nCochran:\nEven then they couldn't make the funds avail-\nable until the latter half of the year, isn't\nthat right?\nBell:\nYes.\nH.M.Jr:\nDo you have that picture?\nBell:\nNo, I haven't a very good picture on it. There\nis 8. memo here that isn't very good.\nH.M.Jr:\nFrom whom? Can't we go the other way around?\nAsk Jones and the Army for a memorandum? We\nwill use the President's thing as a - you see?\nI will dictate a letter to the Secretary of\nWar and Jones, with your help, you see, using\nthe thing - saying, Would you please inform\nme how much money can we expect the English\nto get from your taking over their contracts?\"\nyou see. \"We are making our estimates from\nnow until September, and we would like to\nknow during this period of the hundred and\nthirty-four million, how much can you do,\"\nand the Army, \"How much can you do?\"\nWhite:\nAnd approximately when it will be available.\nH.M.Jr:\nAnd approximately when it will be available.\nCochran:\nThat will leave out that one thirty-four. We\n365\n-\ncan't identify that unless Ed can tell us\njust what it is.\nFoley:\nI have got a breakdown of it.\nBell:\nYou can identify a hundred and five million\nhere, but there is a difference between a\nhundred and five and & hundred and sixty-\nseven million; and, I take it, they have taken\nthese contracts of a million over in one case\nand ten million over--\nH.M.Jr:\nAre you handling that or are these fellows?\nBell:\nWell, we have all got it.\nH.M.Jr:\nWho can write a letter for me to sign to War\nand Commerce?\nBell:\nWe can, together. We can have it for you be-\nfore noon.\nH.M.Jr:\nAll right. When I see Jesse I can hand it to\nhim at lunch. Then one can go over to--\nBell:\nYes, we will take care of it.\nH.M.Jr:\nDon't you think that is the way to do it? And\nask them what they want, you see. Well, this\nis a perfect thing from the President. Simply\nsay, \"I have got to know, gentlemen, Mr. War\nand Mr. Commerce, how much money are you going\nto make available to the English and how soon.\nI think we are beginning to tie the thing in\nyou see.\nBell:\nI wonder if it would help you if you had eacy\nmonth a statement from the British just like\nour own giving cash position, giving the back\nfigures--\n366\n- 19.\n(Miss Chauncey entered the conference.)\nH.M.Jr:\nTwo photostats of what the President gave me\nat lunchfor the Army and Navy. Mr. Bell\nneeds them. He is going to prepare a letter\nfor me to sign. Please.\nChauncey:\nAll right, sir.\n(Miss Chauncey left the conference.)\nWhite:\nI think in the coming months you are going to\nbe so concerned with problems of how much\nthey are using that I think that something -\nnot half but a good deal of your problem is\nin knowing what the situation is, not in\nmaking the decision but in knowing the facts.\nH.M.Jr:\nWell, what we want is, first an analysis of\nwhat they have done through January and Feb-\nruary and then a forecast like Bell makes\nthrough all the departments. I mean, our\ncash needs when we have a financing. Isn't\nthat right, Dan?\nBell:\nI think that would give a pretty good pic-\nture.\nWhite:\nThen each month or every two weeks there ought\nto be a statement which will be of a character\nsuch as will be most helpful to you, and it\nought to be the same statement, and it ought\nto be comprehensive. I think if we spend a\nlittle time drafting that up ahead of time,\nand then they can adjust their bookkeeping\nto meet that need if necessary.\nH.M.Jr:\nAnd you make up the forms. But what about the\npast stuff? The past stuff will have to con-\nfrom with the form. Will you take that?\nUclassified\n367\n-\n-\nBell:\nYes. We will bring it from January 1. We\ndon't need to go back of that, do we?\nWhite:\nNo, but it will be a current form which -\neach month you will get a similar statement.\nH.M.Jr:\nWell, I think each week, Dan.\nBell:\nThat is & little difficult to change state-\nments in the future on each week. You can\nget the actual figures up to date.\nH.M.Jr:\nI think once a month is all right.\nBell:\nI think so, too.\nCochran:\nBecause we know their gold and security po-\nsition daily.\nH.M.Jr:\nThis is a good meeting. Don't you think so,\nEd? I mean, we are getting somewhere. What?\nFoley:\nSure.\nH.M.Jr:\nAnd then all of this - having this, putting\nit back, shows them how seriously we are tak-\ning the thing, and then as I say, I can go\nover and explain - now, I am just thinking\nof this. In order that I don't get the ground\ncut out from under me by the State Department,\nwhat would you think if I ask Dean Acheson if\nhe could just drop over here for five minutes\nso I could tell him exactly what our position\nis?\nBell:\nI don't get why they--\nH.M.Jr:\nWhy? So that when Halifax goes to complain\nto Mr. Hull about how ruthless I am, they\nwill have the whole picture, and they will\nappreciate it, they won't give him any sympathy.\n368\n- er -\nThis is important, high policy, and Hull\nought to know about it, and I am going to\ntry to work through Acheson.\nBell:\nWell, he ought to know about it, then, don't\nyou think?\nH.M.Jr:\nDon't you think so?\nFoley:\nI don't know how much good it will do.\nWhite:\nI am wondering whether you might not tell\nHull directly.\nH.M.Jr:\nOh--\nFoley:\nWell, he could do both, Harry. I think if\nhe is going to tell Hull directly he might\nbetter tell Acheson first and then tell Hull.\nCochran:\nWhat is the alternative to Peacock, sending\nout some new man from London?\nH.M.Jr:\nI didn't make any suggestions.\nCochran:\nIt is a rather long process, we found out.\nH.M.Jr:\nI think I did drop a hint that they might\nlet Gifford take it over.\nCochran:\nBecause he is working in there now.\nH.M.Jr:\nI did, I am quite sure. \"Gifford has done\nwell. Why not let him take this thing?\"\nCochran:\nPeacock should - now, I am not defending him,\nbecause I am not happy over his record any\nmore than you are. He ought to know something\nabout the security market here that Gifford\ndoesn't. He was head of the Dominion Securi-\nties up in Canada for years, you see.\nRegraded Uclassified\n369\n22\n-\nH.M.Jr:\nHow long ago?\nCochran:\nWell, that was some time back, before he went\nto London, but there he was head of Baring\nBrothers and has been in the Bank of Eng-\nland.\nH.M.Jr:\nI said this. I said, \"Peacock is inheriting\nthe fact that the British Government didn't\ndo anything with this beginning with last\nJune. I said, \"He is inheriting all of this,\nwhich is unfair to him, but the fact remains.\nthat somebody has to crack this thing.\"\nCochran:\nBut with the pressure you have on Purvis and\nyou have on Phillips now on holding this up,\nI think you may get some action. That is my\nguess.\nH.M.Jr:\nHolding what up?\nCochran:\nI mean holding up any conversations with them\non this matter of contracts, which concerns\nPhillips very much. I mean, he was in to see\nme last night?\nCochran:\nWell, he asked about the gold first, and I\nsaid, \"Well, we have made commitments up on\nthe Hill that the gold from South Africa and\nAustralia will be sold to us,\" and he says,\n\"Well, we have just got to build up some sort\nof reserve in so that we can take care of\nimmediate needs--\" he said, with the war\ncentering for the moment down in the Near\nEast, they ought to have gold available in\nSouth Africa to send up to Egypt and around\nthose parts. He said they don't want dollar\nbalances, they want gold there, and he said,\n\"If they give us every bit from South Africa,\"\nhe said, we just haven't got it. We would\nlike to build up a little reserve.\" He said,\n370\n22\n- 28 -\n\"We are going to be embarrassed now because\nI don't think we are getting the full pro-\nduction from the Bank of South Africa. I\ntold him that Playfair had intimated that\nproduction had fallen off. He said, \"I\ndon't think it is that, I think South Africa\nisn't getting it.\"\nH.M.Jr:\nMerle, it is your job to repeat this to me,\nsee? Now, you have done it. I am not im-\npressed with what Phillips is saying. It is\nyour job to repeat to me what he says.\nCochran:\nThat is right, because I can add to it. They\nare getting certain gold from Belgian Congo\nand Rhodesia and 80 on.\nH.M.Jr:\nI am just not impressed. Merle, I, personally,\nwant a demonstration that the Bank of England\nand what they stand for, see, really want to\nsell these assets in this country. They have\ngot to make me believe, see, and pick up\ntoday's Washington Herald and see the thing\nat the beginning - the story in the Washing-\nton Herald about how the American taxpayer\nis going to have to pay through the nose in\norder to give England this stuff. The campaign\nis started. It is in the Washington Herald,\nthe tip-off. And I forecast this thing\nseveral weeks ago, that that was what would\nhappen. Now, before I take the gaff, publicly\nand privately, for these people, I want them\nto prove t hat they want to win this war and\nthat they are willing to do everything possi-\nble to make & billion dollars worth of assets -\nturn them into cash, and give up the control\nof the American thread business in this country,\nwhich they control, and the viscose, which\nthey control, before we in turn turn over\nseven billion dollars to them. Now, I am not\nconvinced. I am asking at this moment seven\n371\n- 34 -\nfor one, and I don't know whether the Bank\nof England and that gang is running the\nBritish Government or whether Churchill is.\nI don't know. I told Berle last night - I\ndidn't tell him much, but I told him a\nlittle of this. I didn't tell him about my\nconversation with Halifax. I said, \"There\nis nobody in this town that has done more\nfor the English than I have, and Berle says,\n\"You are absolutely right.\" I need faith.\nTalk about Halifax being religious and all\nof that, I need faith, I need confidence.\nI think we are on the right track now, Dan,\nif you could get this thing up. I talked\nthis way in this room, but what is going to\nhappen when somebody from the Treasury goes\nup on the Hill?\nBell:\nIs there some indication--\nH.M.Jr:\nDo you think I am overemphasizing this, Dan?\nBell:\nNo, I don't think you are overemphasizing the\nimportance of it. I am a little bit worried\nabout his successor and the delay.\nFoley:\nDan--\nWhite:\nThat is the way to handle it.\nFoley:\nDan, if it isn't done, it is my judgment the\nfirst time you go before the committee and\nyou tell the committee that not one damn cent\nhas been realized from the sale of these assets,\nthat the committee is going to force our hand\nand turn the whole works over to the RFC, lock,\nstock, and barrel, and that is what the Brit-\nish are up against, so you are being a friend\nto the British when you are telling them that\nthey have got to show some results and giving\nthem another opportunity on their own to do\nRegraded Uclassified\n372\n- 25 -\nit, because it is the last call.\nBell:\nWell, do you help the situation by forcing the\nman in there now out when it may take months\nto replace him, weeks anyway?\nFoley:\nBut what other way, Dan, have you got of mak-\ning them realize the significance of the situa-\ntion?\nCochran:\nIf we hold up on this contract business as the\nSecretary said, that is the thing that is\nworrying Phillips most; and I am convinced that\nPhillips has the idea of selling these and\nPurvis has the idea.\nH.M.Jr:\nTrue.\nCochran:\nAnd I think that we can bring pressure on them\nto get that improved just as when you got Gif-\nford here he admitted that he had instructions\nfrom the Treasury not to go ahead. You got\nthat rectified. If you can get Gifford work-\ning in there with Peacock--\nH.M.Jr:\nMay I interrupt you? It wasn't until I got\nGifford and Phillips sitting next to each other\nthat I smoked out the fact that the Treasury\nhad not given them the instructions, see.\nCochran:\nThat is right.\nH.M.Jr:\nWell, the same condition, Merle, may be true\nhere. Maybe Sir Edward Peacock hasn't got the\ninstructions.\nCochran:\nBut my point is--\nH.M.Jr:\nMaybe he hasn't got it. The two fellows sat\nthere and I took my hat off to Gifford when\nhe turned to this fellow and he said, \"You\n373\nas\n-\nnever told me to sell more than two to three\nmillion a week.\"\nCochran:\nYou remember we were pretty well fed up with\nGifford, we hoped we would get someone in\nhis place, and now he has turned out to be\na good man when he has the proper instruc-\ntions.\nH.M.Jr:\nInstead of putting the pressure on Peacock,\nwho is 69 years old and who has an expression-\nless face, I am putting the pressure on the\nrepresentative of His Majesty, the King, who\ncan take it. I am putting it - I asked you\n10 days ago to do it on his two representa-\ntives and I got nowhere. I waited 10 days,\nand then I put it on the representative of\nthe King instead of putting it on Peacock.\nBell:\nI am not so sure that that isn't where the\nfault lies. It may not be Peacock. It may\nbe just the other end, just like Gifford.\nFoley:\nThere is only one way to find out.\nBell:\nI agree to that, and I think the Secretary is\nright in putting the pressure on the Ambassador\nrather than Peacock.\nH.M.Jr:\nJust the way they sat here and kept telling\nus that they couldn't do it, they go back and -\nMerle, remind me. Then we developed that he\nnever got the instructions. Now, how do I\nknow that poor Peacock has got the instruc-\ntions to sell? Maybe his instructions are to\nstall. I don't know.\nBell:\nWell, the instructions were given out and were\nrather vague, you remember. He said he came\nover to look into the situation, not to dis-\npose of them.\n370\nWhite:\nWell, the Secretary cannot impute the good\nfaith of the British Government and the only\nposition he can take is that his man is\napparently not carrying out your instruc-\ntions competently, and therefore he wants\nanother man. That serves a dual purpose,\nit appears to me. In the first place, as he\nsays, it smokes out the real orders; and, in\nthe second place, I think, some publicity,\nboth for the British public and to the Ameri-\ncan public, is called for at this point;\nand, if the Secretary can take the position\nin the future, if necessary, that he demanded\nthe recall of this man because he didn't show\naction, he is in a much better position if no\naction is taken. If action is taken, then\nthe man can stay here.\nBernstein:\nWell, if this man is as important as the\nAmbassador says he is and--\nFoley:\nThe pressure is on the Ambassador.\nBernstein:\nThey are not going to fire him.\nCochran:\nThey are not going to make a whipping boy out\nof Peacock.\nH.M.Jr:\nHe is the second man in the Bank of England?\nCochran:\nThere is no ranking there. He is the man\nclosest to the Governor. He is & senior. He\nhasn't any position other than--\nH.M.Jr:\nIf he is as close as that to Montague Norman,\nthen this fellow Peacock is never going to\nmake a sale unless we build 8. bonfire under\nhim and put & couple of sticks of dynamite in\nit, but I don't have any confidence in Montague\nNorman wanting to give up anything and really\nwin this war. He typifies everything to me\nthat is the worst in England.\nRegraded Uclassified\n375\nCochran:\n- Did Walter Stewart speak to you the other day,\nMr. Secretary, about the idea of having these\npeople? competitors in steel and 80 on approach these\n(Mr. Acheson entered the conference.)\nH.M.Jr:\nDean, I want to tell you something that is\nimportant to us and I want Mr. Hull to know\nabout it, but I would like it guarded as much\nas possible. Yesterday at lunch I had &\nchance to sketch to the President of the United\nStates just what we were doing here in - in\nrelation to the English financing, I mean how\nall of the English money is deposited with the\nFederal Reserve of New York as our fiscal\nagent and we know how much money they have put\nin and how much they have spent each week and\nhow we have Phillips here representing the\nTreasury and how we are in constant touch with\nthem and get the amount of their sales each\nday of their securities and now Sir Edward\nPeacock is here supposedly to sell their\ndirect investments, 80 the thing all flows\nhere.\nNow, the Army is supposed to be in & process\nof taking over English contracts where they\nhave made down payments, you see, and the RFC\nis supposedly in the process of taking over\ntheir contracts where they have created plants.\nAs far as we can find out, the RFC hasn't con-\nsummated a single contract and if the Army\nhas done anything, they have done five million\ndollars worth of it. We are trying to find\nout how much it all amounted to. The reason\nfor this coming to a head is that Phillips,\nSir Frederick Phillips came in last week and\nsat down and said, \"What are you going to do\nabout our financial situation?\" and I said\n\"What do you mean?\" We have been trying to\nget a lot of information. Now, the situation\n376\non the first of January, roughly, was that\nthey had commitments for about a billion\nfour hundred million dollars of contracts\nin this country, and we are going to analyze\njust how much of those were for munitions\nand how much for other things than muni-\ntions, also how did they raise the money.\nWe think we know, but we want more informa-\ntion. Then Bell is going to prepare for\nthem a sheet just like We have as to the\nfuture needs, how much they are going to\nspend and how they are going to raise it,\ngoing through to their war year, which is\nSeptember 1. Now, in my testimony on the\nMill I pointed out as of January 1 they had\noutstanding about E. billion four. To pay\nfor this, they had somewhere around nine\nhundred million dollars worth of direct\ninvestments end six hundred million dollars\nworth of securities. We have been unable,\nor they have been unable, they claim, to\nsell a single factory in this country,\nalthough we have been after them since lest\nJune. Friday a week ago I had Cochran send\nfor Phillips and Finsent, the financial\nattache, and tell them that I was very much\ndisturbed about this, it was most embarrass-\ning, I might be asked any time on the Hill\nwhy they don't do it and 50 forth and 80 on,\nand that they just hed to get busy and make\ngood on this thing and never mind all the\nreasons why. They just had to produce and\nshow that they were willing to sell some of\nthese investments. Well, yesterday I asked -\ntold the President if he approved that I would\nlike to tell Halifax that unless by the end\nof this week they demonstrated they were go-\ning to sell some of their direct investments,\nthey had better recall Sir Edward Peacock, who\nwas in charge of these sales, and I got the\nPresident's approval to do it, and I told\nRegraded Uclassified\n377\n,\n-\nHalifax last night and he was very much\ndisturbed and told me what great political\nbacking Peacock has. It always irritates\nme when they talk about political backing\nbut ask how they are going to win the war.\nWhy am I 80 exercized? Well, somebody in\nthe Treasury, when this appropriation goes\nup on the Hill, has to review the English\nfinancial situation before the Congress of\nthe United States is going to vote \"X\"\nbillions of dollars under the Lend-Lease\nBill and particularly since the plan now is\nto put it all in one bill, and I pointed out\nthis morning the campaign is open in the\nWashington Herald for all the increased\ntaxes we are going to have to pay for what\nwe are going to give to England. The posi-\ntion which I am taking is that until I get\nan answer from Halifax - I want to point out\nthis. Several months ago I kept saying,\n\"Why don't you sell more securities?\" and\nthey said they couldn't. They were selling\nfrom one to three million dollars. I got\nGifford and Phillips sitting next to each\nother, and when I kept saying to Gifford,\n\"I know you can sell more, that the American\nmarket will absorb it,\" he finally turned to\nPhillips with a flushed face - but he says,\n\"My instructions from the British Treasury\nare not to sell any more,\" and then Phillips\ngot flushed, as a result of which beginning\nwith the next week they sold ten million\ndóllars a week and I think every week after\nthat they have done 50.\nCochran:\nThey have kept it up.\nH.M.Jr:\nThey have averaged ten million a week. Now,\nI don't know that Peacock has the instructions,\nreally, to sell these businesses or not and\nuntil they do it, there is no reason, no\n378\nmatter how much Purvis, whom I have the\ngreatest confidence in, tells me that they\nare his instructions - but he doesn't know\nany more than - until I made it so unpleasant\nfor Gifford that in anger he turned on\nPhillips and says, \"Well, I haven't got the\ninstructions from the British Treasury.\"\nNow, what I am preparing to do is to sit\ntight here and do nothing after my notice\nto Halifax with the British on their finan-\ncial situation until they make some move.\nNow, they are all right for the rest of the\nmonth. They admit they are all right, you\nsee. They have got enough money. They are\nall right. So they are not going to default\non any contracts. Nothing scandalous is go-\ning to happen. But somebody from the Treasury\nis going to have to go up within three or\nfour days on the Hill and one of the first\nthings they are going to ask is, \"Well, what\nabout their financial condition?\" Now, the\nfinancial crowd in New York has been per-\nfectly swell, because Peacock has treated\nthem absolutely shamefully. Reputable\npeople have gone in and said, \"We would like\nto have & chance to figure on such and such\na thing, If and he treats them like dogs. I\nget this from the SEC all the time. Differ-\nent people call them up, and he either can't\nsee them or won't see them, people that have\ngot the cash and want to buy these different\nbusinesses, and I just wanted to get the\npicture. We have it from the British. The\nArmy is supposed to buy - pick up the con-\ntracts where they have made down payments\nand the RFC is in the process of picking up\nany plants that they own in this country,\nbut pending hearing from these people, in\norder that I keep faith with Congress and\nthey keep faith with me, they have got to\nkeep my morale up and say that they mean to\n379\n36\n- 22 -\ndo what they say, never mind the difficul-\nties. The President - I have his complete\nbacking. Now, why do I send for you? In\ncase they go to do the baby act over there\nand complain about me, I would like to feel\nthat the State Department will say, \"Well,\nthis is a Treasury matter, it is a hundred\npercent finance, and either hands off or\nif you - I mean, I am not asking you. If\nMr. Hull or whoever sees the English would\nsay, \"Well, we think until you have complied\nwith what the Treasury is asking, that the\nposition that they take of going on a sit-\ndown strike is right,\" but the least I would\nlike to have is hands-off, you see, because\nI am sure that Halifax is going to run to the\nState Department and try to get sympathetic\nhearing for this - whatever kind of treatment\nhe calls it, I am giving it. Now, you can\nask me questions because I am full of this\nand you are not, but I wanted you to get it.\nAcheson:\nThe Army is to pick up the contracts on which\nthey have already made down payments?\nFoley:\nBritish supply contracts.\nAcheson:\nAnd the RFC is to take over the financing of\ntheir plant buildings?\nFoley:\nWell, they own certain plants all over the\ncountry, powder plants and ordnance plants\nand airplane plants, title to which is in\ncorporations wholly owned by the British\nGovernment.\nAcheson:\nAnd the RFC is going to buy those from them?\nFoley:\nYes.\n380\n32\n-\nAcheson:\nWell now, what are the proceeds of these\nfor? sales of private businesses going to be used\nH.M.Jr:\nTheir own British standards, that was the\nunderstanding I had with Purvis. To be used\nfor things of British specifications.\nWhite:\nHe said - he wanted to know what the proceeds\nof the sale of the private businesses would\nbe for.\nH.M.Jr:\nLet me go back first. The money that they\nget, I will come to that. The money that they\nget from the RFC and the Army would be, so to\nspeak, free money that they could use for\nanything that they wished to. The thing that\nPeacock gets is pledged by me to the Congress\nagainst a billion four of contracts that they\nhad outstanding on the first of January.\nAcheson:\nI see. The actual financing of the billion\nfour is - so far as the American suppliers\nare concerned, is supposed to be taken care\nof, 1, by the Army, and 2, by what Jesse\nJones produces, is that right?\nH.M.Jr:\nThe billion four outstanding on the first of\nJanuary, as I testified, would be taken care\nof, 1, by the six hundred million dollars\nworth of U.S. listed securities; 2, the nine\nhundred million of direct investments; and\n3, the four hundred million dollars output\nof the South African gold mines.\nAcheson:\nWell, now, where do the Army and Jesse come\nin on this picture?\nH.M.Jr:\nThe Army and Jesse come into the picture that\nthey are in the process of picking up the\nfactories that they have invested in, the\n381\n33\n- 34 -\nadvance payments in the case of the Army\nthat they have made on contracts.\nFoley:\nThat doesn't amount to so much.\nH.M.Jr:\nNo, but anyway - and that money, my under-\nstanding with Purvis was that they could feel\nfree to use that for anything they wished to.\nAcheson:\nOn new orders?\nH.M.Jr:\nAnything.\nFoley:\nUnder the Lease-Lend Bill, stuff that we\ncouldn't use.\nH.M.Jr:\nAnything that these - it was free for them\nto use any way that they wished to. It wasn't\nobligated.\nAcheson:\nI see. That is a backflow to them?\nH.M.Jr:\nYes.\nAcheson:\nAnd when the Army reimburses them for down\npayment that they have made, is the Army going\non with further payments or are the further\npayments part of the one billion four?\nFoley:\nThe Army will assume those contracts.\nAcheson:\nBut the one billion four are some wholly\ndifferent contracts?\nFoley:\nYes, they would be different contracts.\nH.M.Jr:\nNo, they are part of the same thing. They\noverlap.\nWhite:\nThere are a few of those contracts which\n382\n- -35 -\napparently the Army will be able to take\nover, but it will not amount to a great deal.\nH.M.Jr:\nFifty million dollars.\nBell:\nWon't it be largely these new contracts that\nhave been entered into since January l?\nH.M.Jr:\nNow, since January 1 the thing that we have\ntried to keep very, very secret here, because\nI have risked my neck, I told Congress that\nfor all ostensible purposes all buying had\nstopped. Instead of that, I let them average\nthirty-five million dollars a week new pur-\nchases and if I ever had been called up on\nthe Hill I just never could have explained\nit.\nAcheson:\nI think I have it clear.\nH.M.Jr:\nDo you want to go over it again?\nAcheson:\nThe only thing I am not quite clear about is\nthe Army and the RFC.\nFoley:\nMaybe we can give him the amounts.\nH.M.Jr:\nGive him everything.\nAcheson:\nI see that the British have commitments of\n& billion four.\nH.M.Jr:\nAs of the first of January.\nAcheson:\nWhich they have got to take care of by the\nsale of their six hundred million dollars of\ndirect investments, the nine hundred million\nor privately owned plants and things of that\nsort in this country, and four hundred million\ndollars of African gold. Now, the six\nhundred million is going ahead all right.\n383\n35\n- 36 -\nThe four hundred is presumably all right.\nBut they are getting nowhere on the nine\nhundred.\nH.M.Jr:\nThat is right.\nAcheson:\nAnd then I understand what you said about\nPeacock and that situation and what you would\nlike the State Department to do. The thing\nthat I am not quite clear about is where the\nRFC and the Army come in or whether it is\nimportant that they come in at all.\nH.M.Jr:\nIt is only important in this way. When we\nwere worried about the money, everybody got\ntheir heads together and there were to kinds\nof contracts. There was one where, for in-\nstance, they made a twenty-five percent down\npayment and McCloy, in order to try to help\nthis thing out, said, \"Well now, we will\npick up those, you see.\nAcheson:\nThat is, that our Army would take over those\ncontracts?\nH.M.Jr:\nAssume them. The only one they have done is\nKelsey Wheel.\nAcheson:\nThat takes it right out of the billion four?\nH.M.Jr:\nYes.\nFoley:\nIf it was part of the billion four. Those\ncontracts might be the ones that were entered\ninto subsequent to January 1 in some instances.\nAcheson:\nI see.\nH.M.Jr:\nNow, the Army couldn't assume plants, so they\nwent to the RFC and they said, \"Jones, will\nyou buy the powder plants that the English\n384\n- 87 -\nhave built in this country?\" and supposedly\nthey amount to a hundred and thirty-four\nmillion dollars. If the information is cor-\nrect, to date, although he has been on it\nfor weeks and weeks, he has been unable to\nconsummate a single British contract.\nAcheson:\nThat they could apply to the billion four?\nH.M.Jr:\nYes, or to anything else that they needed.\nBut you can see what an impossible position -\nI told this to Halifax - I would be in to go\nup on the Hill and they say, \"Well, all right,\nnow, Mr. Morgenthau, how about these English\nfactories? What has happened to them?\"\n\"Well, I am terribly sorry, but the English\njust haven't sold any. Now, there is no\ndanger in this thing, because they are all\nright, certainly for another month and maybe\nanother couple of months, but certainly we\ncan see daylight and they admit they are for\nthe rest of this month, so by sitting still\nand saying I won't do anything until they move\non the direct investments, I am no endangering\nanything, you see, other than our relations\nwith them, but I thought it was important\nenough that you ought to know about it and\nHull ought to know about it, so whoever re-\nceives Halifax, if he brings it up, you would\nbe posted, but it isn't the kind of thing that\nI would want to pick up in the papers and\nread, you know.\nAcheson:\nYes.\nB.M.Jr:\nI needn't point that out.\nAcheson:\nNo, I can understand that. And the British\ndid come down and start talking with you\nabout this and then you discovered that they\nare not moving forward on the nine hundred\nRegraded Uclassified\n385\n37\n- 36 -\nmillion?\nH.M.Jr:\nOh, yes.\nAcheson:\nAnd so in talking with the President you said\nwhat you wanted to say to Halifax, which was\nthat if they don't make some headway by the\nend of the week they would have to recall\nPeacock?\nH.M.Jr:\nThat is right. And mind you, Friday a week\nago, Cochran told the English financial\nrepresentative how upset I was about it and\nso they have had ten days' notice and they\njust had to do something. He told them this\nFriday a week ago. And since Friday a week\nago to yesterday, nothing happened. Now,\nthere is one other thing. In the course of\nmy putting this pressure on them, they came\nthrough with this letter which - who helped\nus on that?\nCochran:\nLivesey.\nH.M.Jr:\nWhich they said this pressure goes back to\nabout a month ago. It is about a month, isn't\nit, roughly? And I have been putting this\npressure on them steadily so they came back\nand said, \"Well, that is all right. We will\nassign all of these properties to the Presi-\ndent of the United States.\" Of course, I\nsaid the President didn't want to take this\nresponsibility and I advised him not to. But\nwe left the whole matter in suspense. We\ndidn't turn it down and we didn't say yes.\nI want you to know that they have tried every\nway possible - I told Peacock it is very nice\nof him to give this to the President of the\nUnited States, but we have got to look to them\nto do this. We don't want the President of\nthe United States to sell English holdings in\n386\n38\n- DS. -\nthis country. But the matter is so that we\ncould always say, \"All right, now we will\ntake it over. You make out a deed to us and\nwe will take over all of these properties.\"\nAcheson:\nI think I have got it straight, and I will go\nright over now and see Mr. Hull.\nH.M.Jr:\nIf you want anything - Merle sees the finan-\ncial people, Merle Cochran, so if you want to\nrefresh yourself, I think if you want to call\nhim to come over and see you, he will be glad\nto do it.\nAcheson:\nAll right, fine.\nH.M.Jr:\nMerle Cochran.\nAcheson:\nYes.\nH.M.Jr:\nBecause he is on the State Department payroll\non a lease-loan to us and we are very glad\nto have him, 80 if you want something or Mr.\nHull wanted to get it word of mouth what did\nI say to Pinsent or Phillips, Cochran has all\nof that.\nAcheson:\nI will speak to Mr. Hull right away and then\nif you want to say anything further, we will\ncall Merle.\nH.M.Jr:\nAll right, fine. I appreciate your coming\nover. But this is the kind of thing that\nyou can be useful on.\n(Mr. Acheson left the conference.)\nBell:\nGive the Secretary of War and Jesse Jones a\ncopy of this?\n387\n39\n- 10 -\nH.M.Jr:\nYes. Well now, doesn't that finish that\nchapter? I think it is good to tell Dean.\nYou know, he has come over here and he wants\nto help. Don't you think so?\nBell:\nDean is all right.\nH.M.Jr:\nWell, is there anything more on this?\nCochran:\nThere is just that one point, you asked for a\nletter on the gold. You remember, the British\nhad raised the question of their negotiations\nwith Canada? They had two points in there.\nOne covered the lease-lend part, as far as\nparts and materials; and the other on the gold.\nH.M.Jr:\nWell, I want them to - excuse me, was it a\nletter to us about the gold?\nWhite:\nIt was a memorandum.\nCochran:\nIt was & memorandum.\nBell:\nYou had asked for a reply, which Merle was\npreparing to go back.\nH.M.Jr:\nWhere is that?\nCochran:\nHave you one?\nWhite:\nWe have three replies, one of which Bernie and\nI recommend. I haven't seen his, although we\nprimarily recommend no written reply. Bernie\nand I definitely feel there should be no\nwritten reply, but we have written replies\nprepared.\nH.M.Jr:\nIf I could go along with that and delegate\nMerle Cochran, the next time they come in,\nto simply say, \"Gentlemen, we want the gold\nto come here rather than to Canada.\"\n388\n- 41 -\nWhite:\nI am wondering whether you would want to\nput it that way or maybe you would want to\nput it that you don't feel it appropriate\nfor you to comment on what they do with\ntheir funds, indebtedness to foreign coun-\ntries. All our concern is that they make\ntheir commitments here, because I am wonder-\ning whether they wouldn't use that informa-\ntion in Canada and make it a little diffi-\ncult for us. Put it the other way around,\nMerle. If you take a note, simply say that\nwe have been counting on it and all they have\ngot to do is read the Secretary's testimony.\nCochran:\nI didn't get to talk with Harry and Bernie\nbecause they were working on it last night\nwhen Phillips was with me, so I have just\ndrafted & note in which I quoted your testi-\nmony up on the Hill.\nH.M.Jr:\nMay I see it?\n\"Dear Sir Frederick:\n\"By memorandum dated March 5, 1941, you raised\ntwo questions. The first was an inquiry as to\nwhether I would see any objection to Great\nBritain paying Canada in gold to the extent\nthat you may have gold available for that pur-\npose in the future. You explained that this\nwould not cover more than a fraction of the\nadverse balance with Canada, and that gold\nso utilized would reach United States eventu-\nally in payment of Canada's adverse balance\nwith the United States.\n\"It will be recalled that in the data prepared\nwith your assistance and submitted to Congress\nby me, we estimated for the current calendar\nyear Australian gold exports to the United\nStates at $75 millions and South African\n389\n41\n- 42 -\nexports of gold at $480 millions. (see\npage 11 of Part 1 of \"Hearings before the\nCommittee on Foreign Relations, United\nStates Senate, on S. 275.\")\n\"May I also invite your attention in this\nconnection to the following extract from\nmy testimony before the Committee on\nForeign Affairs, House of Representatives,\nas reported on pages 64 and 65 of the volume\nof Lend-Lease Bill Hearings.\"\nI think this, unless there is some good reason,\nMerle, that you think otherwise, I would show\nthem this part of my testimony, you see. I\nmean, just lift my testimony out of this\nletter. I wouldn't send them the letter.\nAnd simply say, \"This is what Mr. Morgenthau\nsays and he hasn't changed his mind any since\nhe has testified.\" What do you think about\nthat?\nBell:\nThat is all right. Is it in there that this\ndata that the Secretary gave to the committee\nis with the approval of the British Govern-\nment?\nCochran:\nI said prepared with their assistance.\nH.M.Jr:\nAnd you could add on there, \"approved.\"\nWhite:\nWell, they gave it to us.\nBernstein:\nWell, there is a point in the testimony where\nyou make it perfectly explicit that you were\nsubmitting the information with the approval\nof the British Government.\nH.M.Jr:\nLet's just rehearse. Let me say it and you\npeople disagree, if you wish to. I would send\nRegraded Uclassified\n390\n42\n- A3 -\n-\nfor these people and say, \"We have considered\nthis and I would like to show you a copy of\nMr. Morgenthau's testimony and the position\nhe took in regard to the disposition of the\nAustralian and South African gold and his\nposition hasn't changed any. Is that enough?\nCochran:\nI prefer it that way.\nH.M.Jr:\nYou prefer it that way?\nCochran:\nYes.\nH.M.Jr:\nEd?\nFoley:\nYes.\nH.M.Jr:\nBernie?\nBernstein:\nQuite all right.\nH.M.Jr:\nHarry?\nWhite:\nAll right.\nH.M.Jr:\nIt is unanimous.\nCochran:\nJust that last paragraph. You know they raised\nin a memo two questions and I say, \"As to your\nsecond question with respect to the applica-\ntion of the Lend-Lease Bill to American parts\nand materials entering into Canadian-manufac-\ntured munitions for Great Britain, I beg to\ninform you that this question is having the\nattention of the Treasury during its study of\nthe general problem of operating under the\nLend-Lease plan.\"\nH.M.Jr:\nI don't think I would say that.\nCochran:\nI mean, they have raised that question.\n391\n- 44 -\nWhite:\nI would just ignore that part of it.\nH.M.Jr:\nI would just answer him on the gold.\nWhite:\nThere is just one question, in order not to\nmake it possible for Canada to misunderstand\nor to raise any difficulties, if they do ask,\n\"Well then, is it that the Secretary wants\nus to pay the gold to him?\" I am wondering\nwhether a statement to the effect that the\nquestion as to how the British Treasury shall\nmeet its commitments to other countries is not\na matter on which the Secretary feels he can\nappropriately express an opinion might not be\nmade? Then they wouldn't be able to go to\nCanada and say--\nH.M.Jr:\nIf you fellows could only see each other be-\nfore you see me, you see. I don't know why\nit can't be done.\nWhite:\nWell, we were all tied up until the last minute.\nH.M.Jr:\nWell, just at this time - I am tired now and -\nI don't want to go any further just now. Show\nthem that testimony.\nCochran:\nAll right, and I will tell them the considera-\ntion of anything else is deferred.\nH.M.Jr:\nBut please, gentlemen, before you come in\nhere, try to see each other and show each other\nyour memoranda.\nWhite:\nIt was just impossible. He (Cochran) was with\nBell this morning and we were waiting in his\noffice.\nH.M.Jr:\nHe was what?\nCochran:\nI was with Dan trying to get the corrections on\nRegraded Uclassified\n392\n- 45 -\nthis thing. We were going over this because\nthere were errors in it which--\nWhite:\nThere was a desire to get together.\nH.M.Jr:\nThere was a desire?\nCochran:\nOh, yes, I should say SO. But last night I\nwas seeing Phillips when they were working.\nH.M.Jr:\nJust so that the intentions are good.\nCochran:\nThe very best.\nWhite:\nThen Merle Cochran will not tell them that you\nwant all the gold to come here, rather than to\nCanada?\nH.M.Jr:\nWhat he is going to say is, there is my testi-\nmony in which I say that the gold should come\nhere. I mean, \"Mr. Morgenthau's position is\nas he testified.\" Isn't that what you under-\nstand?\nCochran:\nYes.\nH.M.Jr:\nDoes anybody object to him saying this is my\ntestimony and my position is just what it was\nthen? Now, from that they could only draw one\nconclusion, that we wanted it to come here.\nWhite:\nBut they won't be able to tell the Canadian\nGovernment that you want all their surplus dol-\nlars to go to you and not to the Canadian\nGovernment, and that is the only thing I\nwanted to avoid.\nH.M.Jr:\nThey will put me in the wrong light whatever\nway you do it.\nCochran:\nYou would rather have it in writing, Harry?\nRegraded Uclassified\n393\n45\n- 46- -\nWhite:\nNo, I think you should tell' it to them orally.\n394\nDear Sir Frederick:\nBy memorandum dated March 5, 1941, you raised two\nquestions. The first was an inquiry as to whether I\nwould see any objection to Great Britain paying Canada\nin gold to the extent that you may have gold available\nfor that purpose in_ the future. You explained that\nthis would not cover more than a fraction of the adverse\nbalance with Canada, and that gold so utilized would\nreach United States eventually in payment of Canada's\nadverse balance with the United States.\nIt will be recalled that in the data prepared with\nyour assistance and submitted to Congress by me we\nestimated for the current calendar year Australian gold\nexports to the United States at $75 millions and South\nAfrican exports of gold at $480 millions. (See page 11\nof Part 1 of \"Hearings before the Committee on Foreign\nRelations, United States Senate, on S. 275.\")\nMay I also invite your attention in this connection\nto the following extract from my testimony before the\nCommittee on Foreign Affairs, House of Representatives,\nas reported on pages 64 and 65 of the volume of Lend-\nLease Bill Hearings:\nSir Frederick Phillips, K.C.M.C.,\nUnder Secretary of the British Treasury,\nWashington, D.C.\n395\n- 2 -\n\"Mr. Tinkham. Every year Great Britain is receiving gold\nfrom South Africa where it is mined to an extent of $700,000,000\nto $750,000,000. What reason is there, that you know of, why\nthat gold in due course and under proper arrangements should\nnot be transferred to us? I mean, of course, as security and\ncollateral for what we may advance it which may be an unlimited\namount.\n\"Mr. Morgenthau. Mr. Tinkham, under that section B(3) it\nsays South African exports of gold, $480,000,000, which they\nadvise me is the amount which would flow to the United Kingdom.\nThere is $480,000,000. We have also listed in Australian gold\n$75,000,000.\n\"Mr. Tinkham. We will not dispute about the amount. I have\nseen seven hundred to seven hundred fifty million dollars\nrepeatedly stated as the amount of gold produced in the Rand\nin English publications, which I could submit to you. If they\nare submitting a larger amount and we have notices of approxi-\nmately the amount of $450,000,000 or $750,000,000, or as I\nsuggested, $700,000,000, why should not they transfer it to\nus as collateral against such loans as we are making so the\nAmerican taxpayer does not have to meet their bills as is pro-\nposed in this legislation?\n\"Mr. Morgenthau. You and I think alike on this point. I\nbelieve that any amount of South African gold that the United\nKingdom receives during this year they should use to pay for\nmerchandise which they buy in this country.\n\"Mr. Tinkham. Now, have they been doing that, do you know?\n\"Mr. Morgenthau. They have been paying their bills.\n\"Mr. Tinkham. But you do not know whether they have used\nthat or whether they are segregating that, cacheing it, as it\nwere, in London?\n\"Mr. Morgenthau. No.\n\"Mr. Tinkham. Or even selling it to us, of course, at a\nvery heavy profit at the present prices you are paying for gold?\n\"Mr. Morgenthau. That is something else again. They have\nbeen selling us most of their South African gold and they\npropose to sell us all the South African gold that they produce.\n396\n- 3 -\n\"Mr. Tinkham. Sell us! Yes; but do you not think that where\nwe are to let them have an unlimited credit it should be given\nus as security and as collateral annually?\n\"Mr. Morgenthau. I do not think you really mean that.\n\"Mr. Tinkham. What did you say?\n\"Mr. Morgenthau. I do not think you really mean that.\n\"Mr. Tinkham. Certainly, I do, Mr. Morgenthau; I am always\nvery serious.\n\"Mr. Morgenthau. These figures which I presented here today\ninclude, I believe, all of the gold that will be mined in South\nAfrica and Australia within this coming year and they need all\nof that gold and all of the securities of their citizens and\nthey need all of the investments they have in this country to\nraise sufficient dollars to pay for the orders already placed\nhere.\"\nThe foregoing paragraphs indicate the commitments which I have\ngiven Congress insofar as current production of South African\nand Australian gold is concerned.\nAs to your second question, with respect to the application\nof the Lend-Lease Bill to American parts and materials entering\ninto Cnadian-manufactured munitions for Great Britain, I beg\nto inform you that this question is having the attention of the\nTreasury during its study of the general problem of operating\nunder the Lend-Lease plan.\nSincerely yours,\nSecretary of the Treasury.\n397\nTREASURY DEPARTMENT\nmot\nINTER OFFICE COMMUNICATION\nDATE March 11, 1941\nSecretary Morgenthau\nTO\nFROM Mr. Cochran\nSTRICTLY CONFIDENTIAL\nIn accordance with the decision reached at this morning's group meeting on the\nBritish financial position, Under Secretary Bell, with a suggestion now and then on\nBy part. drew up a list of forms which we contemplated submitting to the British\nTreasury representatives here with the view to obtaining from them regular and uniform\nmonthly reports upon their financial position, both with respect to current assets and\ncommitments and prospective receipts and disbursements.\nAt 3:15 I telephoned Sir Frederick Phillips that we had this plan under vay and\nhoped that he would let his assistants meet with us this afternoon to see whether our\nforms were workable from the British standpoint, and to suggest any amendments.\nPhillips agreed with this and had Messrs. Playfair and Allen of his staff meet with\nMessrs. Bell, White and myself at 4:15 this afternoon. The forms which had been pre-\npared in Mr. Bell's office were studied and some alight amendments thereto made. The\nBritish representatives took the forms away, with the understanding that they would\nstudy them and report back to us any new suggestions that might require consideration\nBefore the system is set into operation.\nHMR\nRegraded Uclassified\n398\nMarch 11, 1941\n3:00 p.m.\nRE TAX PROGRAM\nPresent:\nMr. Gaston\nMr. Foley\nMr. Bell\nMr. Sullivan\nMr. Blough\nMr. Tarleau\nH.M.Jr:\nWell, I see Tarleau and Blough. It smells\nlike taxes.\nSullivan:\nDid you see the headlines in the afternoon\npaper?\nH.M.Jr:\nNo.\nSullivan:\nSeven billion for the Lend-Lease.\nGaston:\nGone up?\nSullivan:\nWoodrum made the announcement coming out of the\nWhite House this morning. He said everybody\nin the conference except one was agreeable.\nTaber was there, and he spoke of his having been\na severe administration critic, the inference\nbeing that he was the one who had protested.\nH.M.Jr:\nWell, what do you Coast Guard fellows want\ntoday?\nSullivan:\nWell, we have a variety of schedules here,\nRegraded Uclassified\n399\n- 2 -\nstarting in with invested taxes that would\nyield a billion six --\nH.M.Jr:\nExcuse me. Coast Guard is life-saving, isn't\nit? Take it all back.\nSullivan:\nAnother schedule of two billion one, 8. third\nof two billion and a half, a fourth of three\nand a half and a fifth at just about four\nbillion.\nH.M.Jr:\nWell, this is the Roosevelt-Bernie Baruch\nplan, you see. The President doesn't know\nwhether these figures are correct, but he\nthought invested business on the present\nschedule would give us two billion more\ntaxes. Yes? No?\nSullivan:\nWell, there is an estimate in your report that\nan increase from - in national income from 90\nto 100 million would give an increase in revenue\nof two billion two.\nH.M.Jr:\nMy report?\nSullivan:\nYes, sir.\nH.M.Jr:\nWell, do you expect it to be a hundred on the\naverage in the next fiscal year? It is 78.now.\nSullivan:\nI think they are planning about 84.\nFoley:\nWhen?\nBell:\n1941.\nFoley:\nJune 30, '41?\nBell:\nCalendar year, which affects your 1942 reve-\nnues, materially.\nSullivan:\nThat is right.\n400\n- 3 -\nBell:\n1942 calendar year hasn't been estimated,\nbut it is assumed that on the present upper\n95. trend, it will go to 90 or better, possibly\nH.M.Jr:\nCalendar year, how much?\nBell:\nEighty-five, I think. It is close to 80 now.\nH.M.Jr:\nSeventy-eight was the last I heard.\nFoley:\nWell, that is a jump of five since when?\nBell:\nSince last January.\nFoley:\nSince January 1, '41?\nBell:\n'Forty.\nFoley:\nOh, you mean in fourteen months?\nBell:\nNo, the estimate in January, '41, was 79 and\na half, and the estimate in January, 1940, was\n74.\nH.M.Jr:\nWhat we are talking about, isn't it, is how\nmuch business for the calendar year - let's\nsee, six months of '41, isn't it?\nSullivan:\nYes.\nH.M.Jr;\nAnd twelve months in '42?\nSullivan:\nYou mean on these taxes?\nH.M.Jr:\nYes.\nSullivan:\nYes, except on the income taxes. They won't\ncome in - there will be six months of fiscal\n'42.\nRegraded Uclassified\n401\n- 4 -\nH.M.Jr:\nWell, have you struck a kind of an average\nfor the year that we are talking a bout?\nSullivan:\nYou mean --\nH.M.Jr:\nIn the calendar '40 year - how much will\nbusiness be in the '42 calendar?\nBell:\nForty-two or '41?\nH.M.Jr:\nForty-two.\nBell:\nIn the '41 calendar year, I think our estimates\nwere based on 85.\nH.M.Jr:\nYes, that is what you said, 84?\nBell:\nI don't know. We have no estimates for '42,\nbut there has been talk that it might go up\nto 90 or 95. I don't know whether the capacity\nis there or not.\nH.M.Jr:\nLet's just say we strike an average of 90.\nHow much revenue will that produce on the\npresent bill?\nSullivan:\nIt would be well toward two billion dollars.\nH.M.Jr:\nThen his figure of around two was right. You\nget two more. What he spoke about is two more\nand a billion and a half new taxes. Now, how\nmuch would that give us in revenue, gents?\nSullivan:\nWell --\nBell:\nAbout 12.\nSullivan:\nNot quite that.\nBell:\nWell, 11.7.\nRegraded Uclassified\n402\n- 5 -\nBlough:\nYou mean gross, or after Social Security\nis pulled out?\nBell:\nNet. Eight, two plus three, five would be\neleven, seven. Just a little under twelve\nbillion. That is net.\nH.M.Jr:\nTwelve billion and how much are we going to\nspend?\nSullivan:\nEighteen.\nBell:\nThat is about right, 18 or 17.\nH.M.Jr:\nWell, that is two-thirds.\nBlough:\nThat was before Lease-Lend.\nH.M.Jr:\nWell, I know, but it is two-thirds. That would\nbe perfect.\nBell:\nAnd if your capacity increases and your national\nincome increases, your revenue will again go up\nto take care of the increased expenditures on\nthe Lend-Lease Bill in 1943, if necessary.\nSullivan:\nI think the country --\nTarleau:\nThat is good.\nSullivan:\nwill take something more than that. I\nthink you can take a lot more than that with-\nout in any way interfering with your borrow-\ning plan.\nBell:\nGod, he is driving us!\nH.M.Jr:\nWell, what figure are you shooting for?\nSullivan:\nI have got them all the way up to four.\nRegraded Uclassified\n403\n- 6 -\nH.M.Jr:\nDo it the way friend Willkie does, throw &\ndart, and pick one.\nSullivan:\nWe think we could take four without throwing\nin a monkey wrench.\nH.M.Jr:\nYou mean four on top of the two?\nSullivan:\nThe two isn't anything that anybody is giving\nus. That is something we are giving them.\nH.M.Jr:\nThat is a volunteer offering.\nSullivan:\nNo, I mean because business is better, they are\nearning that much more. That isn't an increase\nin taxes.\nGaston:\nI think John is right.\nSullivan:\nI don't think we ought to talk at all about any\nadditional yield because of improvement of busi-\nness conditions.\nH.M.Jr:\nAll right, we will just gracefully accept two\nbillion more --\nSullivan:\nWhen, as, and if we get it.\nH.M.Jr:\nAnd you want how many more taxes on top of that?\nSullivan:\nI am willing to go the whole way, sir, and I\nthink they will take it.\nH.M.Jr:\nI wondered why you invited Herbert.\nGaston:\nI didn't know until now. I didn't know until\nnow.\nH.M.Jr:\nYou know what we call it up in Duchess County?\nIt is 8. horse shedding. S-h-e-d, for some of\nyou boys who haven't lived in the country.\nRegraded Uclassified\n404\n- 7 -\nBell:\nWhat is wrong with taking that much?\nFoley:\nIt all depends on how you do it.\nBell:\nWe will take it out of the lower brackets.\n(Laughter.)\nFoley:\nWe are against that, aren't we, Dan?\nBell:\nYes, we certainly are. We have got to do\nsomething about the ones we have got on the\nbooks now.\nGaston:\nIt is a long time before we can foresee any\nreduction in Federal expenditures, a long time.\nIf the war is suddenly over, we are going to\nhave domestic expenditures on a much higher\nscale than we have ever had before.\nH.M.Jr:\nYou are one of these spending boys, are you?\nGaston:\nNo, I am one of these --\nBell:\nRealistic.\nGaston:\nYes, one of these \"balance the budget\" fellows.\n(Laughter.)\nI am quite serious about it. I think we have\ngot to get down to business.\nH.M.Jr:\nWell, what would four billion do to whom and\nwhere and how?\nFoley:\nYes, with which and to whom?\n(Laughter.)\nH.M.Jr:\nI may like it, you know. Cheer up, Herbert.\nRegraded Uclassified\n405\n- 8 -\nYou might just as well smile while we are\nall operated on.\nGaston:\nI hardly can.\nSullivan:\nOf that four, half would come from income\ntaxes, 353 million from estate and gift\ntaxes, 645 from corporation taxes, 350 from\nliquor, 200 from tobacco, 200 from increased\ntaxes on automobiles and gasoline, 132 and\na half million on the \"Bell\" tax --\nBell:\nIs that all? A nickel 8. bottle?\nH.M.Jr:\nWe just fixed Pepsi-Cola up. Are you going\nto take it away from them?\nBell:\nIt did all right last year. It earned $24 a\nshare.\nSullivan:\nJohn Burns is counsel for them, and he says\ntheir only worry is that the water rates will\ngo up in New York City. That is, it is a very\nimportant item in the cost. I had the mis-\ncellaneous tax outfit working on your (Bell's)\ntax, and of course, we have to tax the drinks\nthat are sold at the soda fountains, the\nflavoring and the --\nBell:\nSure.\nSullivan:\nAnd the water, carbonated water, and in order\nto equalize the tax with the tax on bottled\ngoods, we have to tax the goods three times as\nmuch as it sells for.\nH.M.Jr:\nO.K.\nSullivan:\nNow, I have receipts for all of you of all of\nthese different schedules.\nRegraded Uclassified\n406\n- 9 -\nR.M.Jr:\nAll right.\nI don't like Herbert when he is so serious\nabout this thing. This is a plan to raise\nadditional --\nBell:\nHave you got anything here to raise income,\nsalaries or anything?\nGaston:\nThat is what we are trying to raise, salaries.\nBell:\nOr reduce our installment payments.\nM.M.Jr:\nI told you the joke about the President,\ndidn't I? I think it is the best joke I have\nheard yet. You can't repeat it. He says,\n\"Now, Henry, when you get down to line 31 on\nthe income tax, it says - say your net income\nis about $5000. Then what I want you to do is -\"\nI can't remember whether I did - but he says,\n\"In line 32, we just add two per cent to he\ntax.' So I said, \"Mr. President, have you made\nout your income tax yet?\"\nHe said, \"No.\" And I said, \"Well, when you\nget to line 32, you will find it is 10 per cent.\"\nHe said, \"Well, I haven't got down that far yet.\"\nDon't you love it? He had discovered something\nnew.\nSullivan:\nBaruch may want to do that same thing over again,\nand that doesn't solve any problems at all.\nH.M.Jp:\nThat is what he wants. He wants line 32, you\nsee --\nSullivan:\nBaruch has been giving Harrison 8 awful lot of\nstuff, and Harrison called me yesterday after-\nnoon and wanted to know if I wanted to see him\nRegraded Uclassified\n407\n- 10 -\non anything right away because he was leaving\nWednesday for four or five weeks in Arkansas,\nand he sounded as though he was not at all well.\nH.M.Jr:\nWell, here is the thing that amused me. Bell\nand Jesse Jones and I had lunch together today,\nand I said, \"How about the Baruch plan?\"\nJones said he spent the last two weeks here,\nnot lobbying, just visiting.\nI said, \"Have you heard about the Baruch plan?\"\nHe said, \"Sure, it is all right for Bernie,\nhe has only got tax-exempts. He likes to write\nthe ticket. He has only got tax-exempts.\"\nI don't see anything in here on apples.\nSullivan:\nNo, we are saving that until after the war.\nH.M.Jr:\nYou fellows are certainly full of pep and\nvinegar, aren't you?\n(The Secretary held a telephone conversation\nwith Mr. Harold Smith.)\nRegraded Uclassified\n408\n- 11 -\nH.M.Jr:\nWhat you heard, gentlemen, is in the room,\nif you please. I was putting on a show for\nthe benefit of Smith and not for you.\nSullivan:\nPurvis was called down to the Embassy last\nnight about 11:00 o'clock.\nH.M.Jr:-\nWas he?\nSullivan:\nWe were having dinner at Forrestal's, and I\ndrove him down, I thought it must be important,\nor they wouldn t have called at that hour.\nH.M.Jr:\nHe was sent for?\nSullivan:\nYes, he was.\nH.M.Jr:\nI happen to know what it was. It was as a\nresult of a conversation that I had that they\nsent for him. He didn't know what it was, I\nknow he didn't.\nSullivan:\nWell, he wouldn't have told me anyway if he did.\nH.M.Jr:\nHe didn't know what it was, but that is amusing,\nisn't it?\nSullivan:\nWe had a little game of poker in which he won\nmost of the money, and Knudsen says, \"This is\nLease-Lend poker.\nH.M.Jr:\nIs Purvis a good poker player?\nSullivan:\nHe said he hadn't played. I hadn't played for\nfifteen years, and I was the only one who won\nany money, so I couldn't say.\nH.M.Jr:\nYou and Knudsen and Forrestal, and who else?\nSullivan:\nAnd Ralph Budd and Admiral Towers. Ingersoll\nwas there and Blandy, the Speaker, and Vinson,\nRegraded Uclassified\n409\n- 12 -\nthe Chairman of Naval Affairs. Dean Acheson\nwas there.\nH.M.Jr:\nWas it fun?\nSullivan:\nIt was all right.\nH.M.Jr:\nWell now, look, I don't see why I should waste\nyour time. This is all very clear, and I am\ngoing to take this home tonight and study it.\nTomorrow is Wednesday, isn't it?\nSullivan:\nThat is right.\nH.M.Jr:\nAnd --\nSullivan:\nThe last ones, 5A and 5B are just alternative\nchoices.\nH.M.Jr:\nI will take this home and study it.\nSullivan:\nWe have felt that this Excess Profits Tax is\npretty unsatisfactory, and we are not hopeful\nof working out a fair and equitable tax at all.\nI think we can get the Undistributed Profits\nTax back up there on a tray, and I think we can\nget as much money as we are going to get out of\nExcess Profits and not nearly half the expense\nor half the grief, or half the casualties to\nconcerns we shouldn't want to penalize.\nH.M.Jr:\nI am going to continue this discussion at 10:15\ntomorrow morning.\nSullivan:\nYes, sir.\nH.M.Jr:\nYou gentlemen are all invited. I would like to\nstudy this.\nBell:\nYou probably won't be able to sleep.\nRegraded Uclassified\n410\n- 13 -\nTarleau:\nThat is what I did. I didn't sleep. Now I\nfeel a little better. When you assimilate\nit, you feel a little better. I feel much more\ncheerful today than at the first look at it.\nSullivan:\nIt only hurts for a little while. You will\nnotice that there aren't any sales taxes.\nH.M.Jr:\nWe gave - we had lunch with Jones. I said,\n\"Well, Bell and I figured that before this show\nwas through, we would have to spend 50 billion\ndollars for armament.\" Jones jumped back. That\nis what we figured.\nGaston:\nI should say that the British will need pretty\ndesperately around 12 billions, at a rate of 8.\nbillion a month, as fast as we can get to it.\nRegraded Uclassified\n411\n1\n2\n992.3\n3\n1,140.7\n4\n1,700.0\n11111\n5\n2,020.0\n6\n203.0\n7\n322.0\nRegraded Uclassified\n412\nFine to raise et edditional $1,650 million of MIN w\nfourse\nindividual 1800mg tests\n. 904.0\nIncrease earber return by adopting (2/7/2) attached rate scholule\nletate ADÁ an will\n103.0\n(1) Increase the estate tes rates by admiting the strached\nrute scheduler and (2) increase the ein tax rates to\nthree-guarkers the rates to (1/22/41) the attached subside\nCorporation twing\n575.0\n(1) Issues profits taxi Increase rutes and review base\n300.0\n(2) Normal taxt Increase mas on all corporations 15\n75.0\n(Not an official\nsen crining\n132.5\nIncose a 122 on bettled soft drinks at the rate of 1 cent\nper bettle with equivalent taxes on unbottled drinks and\nformain syrupe\n(1/31/42)\nCheck tax\n56.0\nthe 2-cent sheck tax which vos imposed by the\nSevenue net of 1932\n(1/22/41)\nAdmissions tax\n55.0\nReduce the complion under the adminisms tax from\n20 cente to 9 combe\n(1/22/41)\nAutomebiles\n40.0\nImpace 15 additional 2 persent tax on the Item\ncovered in See. 3403(b) of the 1. 8. s.\n(1/2/41)\nLiques\n192.2\nDistilled spirite: Additional 81 per galles\n135.0\n7ermated milt liquers: Additional #1 per barrel\n55.0\nvines, cordials and liquears: Insurance of 16 2/3%\n2.2\nnear stock taxes (first year only)\nMetilled spirits, $1 per calles\n(29.0)\nFerusated mit liquers, $1 per barrol\n( 3.0)\n(11/29/40)\n1,657.7\n1/ limites for individual Issue taxes are on basis of salendar year 1941\nlevels of Income all other estimates are at becluse levels actimbed\nfor the fiscal year 1942. the date when the estimate - min to given\nin paranthesis after each -\n37159a\nRegraded Uclassified\nPlan to relse MR. additional $2,150 addition of mass 3/\nfoures\nI -\nI\n(In\nincome -\na 992.3\nIncrease warter rates by adopting attached rate schedule,\nwithout defense tax\n(2/11/41)\nlatate and an taxes\n103.0\n(1) Increase the estate tax return w addipting the\nrube scheduler and (2) increase the an las rules so\nthree-quarters the rutes in (1/22/41) the attached schedule\ncorreration texas\n575.0\n(1) Excess profits taxes Increase rates and revise Inco\n500.0\n(2) Normal taxt Increase rate on all corporations 25\n79.0\n(Not as official cettinte)\nSaft drinks\n132.5\nImposs a tax on bottled soft details as the rate of\n1 cost per bottle with equivalent two on unbettled\ndrinks and fountain cyrups\n(2/31/41)\nChedr tax\n56.0\nthe 2-seals chedr tax which vas Impost w the\nRevenue les of 1932\n(1/22/41)\nAdmissions 192\n55.0\nReduce the exception under the advissions tax from\n30 comic to 9 combe\n(1/22/41)\n10.0\nAutomobiles\nImposs - additional 2 percent tax on the Issue\ncovered in section 3403(b) of the 1. R. c.\n(1/2/41)\n192.2\nliques\nDistilled spirite: Additional #1 per gallen\n135.0\nTermented malt liqueres Additional $1 per berrel\n53.0\nVines, cerdials and liqueres: Increase of 16 2/35\n2.2\nTlear stock - (first year only)\n(29.0)\nDistilled spirite, 61 per calles\nPermited malt liquore, 81 por barrel\n(3.0)\n(11/29/40)\n2,146.0\nV Extimates for individual income was are on basis of colonder your 19d\nlevels of income all other octivates are at lovels astimated\nfor the fiscal year 1942. The date when the astimate wis máil to given\nin parenthesis after each -\nHire\n3/12/19\nRegraded Uclassified\nPLan to raise a additional $2,600 million of w\n-\n$2,120.7\n1 after w adverting ettached she\ninstating defense team\n(2/11/42)\n196 -\nm.e\nfor changes (1) Incluse ememption from $40,000 to\n$25,000 (2) adopt the abtached estate ten Pute schoduley\n(3) reduce emelusion from $40,000 to $25,000\nno les charges (1) the excuption from $40,600\nto $25,000; (2) Increase the ein - name to -\nfourthe the in the proposed (1/27/41) estate tax eshotule\ncommission -\n575-0\n(1) facture profite taxt Insurance rubee and revice Insue\n500.0\n(2) Normal taxt Insurance rube - all 15\n75.0\n(Nos M official estimate)\nMA\n132.5\nIncose à Vax an bettled oft drinks at the rute of\n1 and per bettle with equivalent teams an whettled\ntrising and fountain eyrope\n(1/31/41)\nPark M\n96.0\nthe 2-ml check the which - Expend w the\nIncome 10% of 2952\n(1/22/41)\nW\n35.0\nRedome the emergen under the addressions too from\n20 cambe to 9 embs\n(1/22/01)\nwho\nImpose as additional 2 persons tex on the Items\nrequired in esotion 3403(b) of the I. 2. c.\n(1/2/42)\n198.2\nDisailled spirites Additional 61 per gallen\n135.0\nPurchased mall liquires Additional 63 per -\n93.0\nVines, and 15quirments Insurance of 16 2/36\n2.2\nFLOOR stock - (ftret year enty)\nDistilled spirite, 61 per milm\n(29.0)\nTermined malt liquire, 01 per barral\n3.0)\n(11/29/40\nItem\n70.0\nof cigare, tobacco and smith Dealso rates\n2,982.4\n(Not in official catimate)\nV Revientee for individual Income - are 8 basis of minder your 1901 Lovels of\nof\nBest- The all date other which estimates the assissio are of - bestages is lovels given applicated permissions the the first\n3/22/18\nRegraded Uclassified\nPlan to nis n additional $3,600 aillies of - w\n415\nI\nMichael Lease compliens to $500 the stagle potion and $1,000\ninsure\n$1,700.0\nfor a nurried persons and Increase Wis - by\nadopting attached mis asholule, without defense the\n(Date a efficial\n-\n58.0\ntex\n(1) Retmon specific emergéion from\n140,000 to 225,000 (2) adopt the attached - vate\n(3) reduce insurance anstruction from $40,000 to\n$25,000\nan w changes\n(1) the specific exemption from $40,000 to $25,000\n(2) increase the are tar makes to the mail\nis the propered estate tax edents\n(1/27/41)\n-\n573.0\nprofite tax: Insurence Febes and revise base\n500.0\n(2) formal texas Insurence rule a all experiations 15\n75.0\n(Not a efficial extimate)\n350.0\nMotilled spirits: Additional $2 per callen\nmalt liquires Additional #2 your burrel\nVince, certicle, and liquires 33 1/35 insurance\n(Not - official exhámate)\nI\n200.0\nDigurations Additional 75 ombe you 2,000\n130.\nMainfasture of edgars, tabacco and units\nIsside rates\n70.\n(Not - efficial astimate)\nteam, including guapline\n800.0\nItems covered is Som. 3403(b) end y403(a) of\nCodes Deahle reter\ná\nGeopline taxes Increase 1/2 cost per salles\n120.\n(Not - official estimate)\na drinks\n132.5\nTypece a be es bettled soft drinks of the rute\nof 1 - per bittle with equivalent - -\nmistled drinks and formish\n(1/31/4)\nto\n56.0\n- the 2-mmil check ton with - invoiced w\nthe - in of 1932\n(1/22/41)\nbe\n53.0\nthe complies unless the abtained tax from\n20 - to 9 mate\n3,509.5\n(1/22/20)\nStinates for Issue taxes are - hands of 1 191 Levels of\n- all other entimates are at Instruct Lovels critinated for the Road your 15th\n1 1 & provided 2 5 I 2 1 de the a\nLife\n1/12/92\nRegraded Uclassified\nPlan to mine - additional a Williem of - 1/\n216\nI\nI THE -\nwill\nteam\n$2,000.0\n60 6500 the stagle persons and $1,000\ntoo a narvice yearson and insurer - más to\nadming attached vote with defenses to\n(Ret - efficial\n353.0\n(1) specific complies from $40,000 to $25,000\n(2) Adopt the attached estate tax vale athedule,\nwith defense tax\n(3) - insurance enslusion from $40,000 to $25,000\n(1) the specific emplishen from $40,000 to $25,000\n(2) Increase the an too reles to the subse\nis the propert estate tue with defirmen 9am\n(Thes at official contrato)\nMM\n635.0\n(1) profise taxi Insurance rules and series base\n500.0\n(2) Form) tast Increase mis M all corporations 15\n75.0\n(3) Capital stock last fames rate to 01.90,\nincluding information for\n60.0\n(Not M efficial assignée)\nMost\n350.0\nMattiled spirites Additional $2 per palles\nmalt ligers Additional # per burrel\nVisas, certicle, mé liquires 33 2/32 improve\n(Not on official outimate)\nbeen\n200.0\nAdditional 75 embe per 1,000\n130\n- of dan, totume and units\nDrable rules\n(Not a afficial estimate)\nTO\ninstating positive\n200.0\nI'm arread is less. yes(b) and yhoy(e) of\nCode: Deable rules\nso\nCoceline taxt Insurence 1/2 out per gallen\n120\n(200 a official astimate)\n132.5\nImposs & to e bettled coft drinks at the não of\n1 - per bettle with equivalent - on unhobiled\ndrinks and eyesys\n(1/32/49)\nshe\n- the 8-seal check tax which - Impossible by the\n- of 1932\n(1/22/41)\n35.0\nthe examption valor the to them 20\n-\n- be , -\n(1/22/42)\n3,999.5\nletimites for individual Endome - are - mm of your 1991\nLevels of Income; all other estimates are at Instruct 100030 estimated to\nthe flease year 1942. the date - the nations - más to given in\nparenthesis after and -\n1/22/13\nRegraded Uclassified\nPlan to reles - attivienal A William of - w\n417\n-\n-\n$2,000.0 w\nLeast complete to 1800 the stagle your and $3,000\nfor a morted person and terresse our - w\nattended rube substale, with éther tax\n(Thes an afficial estimate)\n-\n353.0\n(1) Income specific exception from $40,000 to $35,000\n(2) Mopt the attenhed estate tax take askedule,\nwith defense tax\n(3) Income Insurance comination from $40,000 to $25,000\n11) Yednes the specifie emerghten from $40,000 to $25,000\n(2) Increase the an tax values to three-Courths the nim\nin the propesed cotato tax schedule, with deferme to\n(Nos is official estimate)\nCommission -\nGus.0\n(1) Capital stock - Insurance sube to $1.50,\nincluding issuess tax\n60.0\n(2) Terml taxi Insurance rute %\n360.0\n(3) Undistributed profite taxes Tenant the 1936 Law\n225.0 &\n(Not - afficial estimate)\nHost\n350.0\nMotilled spirites Additional R per allm\nFemaled mill liquires Additional 42 per burrel\nVisa, certials, and liquires 33 2/35 Insurence\n(Yes an official catimate)\nM\n!\n200.0\nCigarettes: Additional 75 certe - 1,000\n130\n- of cigars, tobacco and saff:\nDealth miss\n(Not as efficial catizate)\nTO\nAnterabile tesps, instating quality\n200.0\nItems covered is mee. 303(b) and 3403(e) of\nlew Intite Pates\nso\nGasoline taxt 1/2 - pay failen\n120\n(Not M efficial catimate)\nleft drinks\n138.5\nSeport a M on bottled ecft drive at the n/o of\n2 - per bottle with equivalent Issues is whethin\nwith and fundain agrego (2/31/12)\n36.0\n- the 3-ecut check tax which me Impossed w the\n- wh of 2932\n(1/22/42)\nMalasters top\n55.0\nTodato the constion under the addissions tax from\nDD only to , cashs\n(1/22/41)\n3,991.9\n2/ Primates for individual 1 - are an basic of year 1941 levels of\nthe indivent offert of the undictributed prodite tall to - Late 1\n- 1942, the date who the estimate me más is gives is permitheris d'w to -\nall other cotinates we all business Legala cottinued w the flood each year\n24158\nthe attates for the individual I -\n3/12/21\nRegraded Uclassified\n418\n1\nIndividual arter rate schodule\n6504 million. vith defense tax\n(setimated calendar 1941 Issue levels)\nSuries not Income $\nI\n(1a themseds\nI\nIndest rate\nI\nTotal earlas\nof dollars)\nI\n(Pereant)\nI\ncomminative\n$ o -\n2\n4\n.\n80\n2 -\nh\n6\n200\n4 -\n6\n8\n360\n6 -\n8\n10\n560\nE -\n10\n12\n800\n10 -\n12\n14\n1,080\n12 -\n14\n16\n1,400\n14 -\n16\n15\n2,760\n16 -\n18\n20\n2,160\n18 -\n20\n22\n2,600\n20 -\n22\nz\n3,080\n22 -\n26\n27\n4,160\nx -\n32\n30\n5.960\n32 -\n38\n33\n7.940\n38 -\ns\n36\n10,100\ndate .\n50\n40\n12,500\n50 -\n60\n16.900\n60 -\nTO\n47\n21,600\nTO -\n80\n50\n26,600\n80 -\n90\n53\n31,900\n90 .\n100\n%\n37.500\n100 -\n150\n58\n66,500\n150 -\n200\n60\n96,500\n200 -\n250\n6a\n127,500\n250 -\n300\n64\n199,500\n300 -\n400\n66\n225,500\n400 -\n500\n293,500\n500 -\n750\nTO\n468,500\n750 - 1,000\n72\n245,500\n1,000 - 2,000\n73\n1,378,500\n2,000 - 5,000\nya\n3,994,500\nOver 5,000\n75\n-\nTitle\n3/12/41\nRegraded Uclassified\n419\n1\nComparison of surber rate under present law and progoaal\nnot\n-\nleaders rate\n-\ntotal verious\nLacous\n4\nI\nletter\n(1000)\nNEW\n-\nI\n0 -\n2\n-\n4\n-\n8\nSO\n2 -\n4\n-\n6\n-\n200\nis -\n6\n4\na\n$\nso\n360\n6\n8\n6\n20\n200\n360\nI\n-\n10\n#\n12\n360\n800\n10\n-\n12\n20\n24\n560\n1,080\n12\n-\n2k\n12\n16\n800\n1,400\n14\n-\n16\n15\n15\n1,100\n1,760\n16\n-\n18\n18\n20\n1,460\n2,160\n15\n-\n20\n21\n22\n1,880\n2.600\n20\n.\n22\n24\n2,360\n3.000\n22\n#\nx\n27\n3,440\n4,160\n26\n-\n32\n30\n30\n5,240\n5,960\n32\n-\n38\n33\n7.280\n7.940\n38\n-\n54\n36\n9.300\n10,100\n-\n90\n40\n11.780\n12,500\n50\n-\n&\n16,100\n16,900\n8\n-\nTO\n20,880\n21,600\n70\n-\n8\n50\n50\n25,800\n26,600\n80\n-\n90\nR\n53\n31,100\n31,900\n90\n-\n100\n56\n36,780\n37.500\n200\n-\n150\n58\n58\n69.780\n66,500\n150\n-\n200\n$\n95.780\n96,500\n200\n-\n250\n62\n126,700\n127,500\n250\n-\n300\n158,700\n159.500\n300\n-\n400\n224,780\n225,500\n400\n500\n192,780\n293,500\n500\n750\n467.780\n468,500\n750 - 1,000\n047.780\n648,500\n1,000 - 2,000\n1,377.780\n1,378,500\n2,000 - 5,000\n3,597.780\n3,998,900\nOver 5,000\n-\n.\nT:1bfa\n3/12/41\nRegraded Uclassified\n120\n1\nCamparises present and prepaned individual Income taxes\non not Incomes of colected sises w\nmarried person - as dependents\nE 1\nI\nmembers of tax /\nI\nFates\nI SERVICE\nbefore personal\n-\nPresent\n1\n1\nPresent\nI\navenythem 2/\nI\nProposal\nI\nI\nProposal\nI\nlaw\nI\nLaw\nAmount\nPercent\n-\n$\n2,500\n$\n11\n$\n33\n.4%\n1.3%\n$ 22\n200.05\n3,000\n31\n75\n1.0\n2.5\nlake\n141.9\n4,000\nR\n158\n1.8\n4.0\nas\n125.7\n5,000\n110\n264\n2.2\n5.3\n154\n140.0\n6,000\n150\n370\n2.5\n6.2\n220\n146.7\n5,000\n327\n625\n4.0\n7.5\n306\n97.2\n10,000\n528\n924\n5.3\n9.2\n396\n75.0\n12,500\n058\n1,364\n6.9\n10.9\n506\n39.0\n15,000\n1,258\n1,874\n8.4\n12.5\n616\n49.0\n20,000\n2.336\n3,106\n11.7\n15.5\nno\n33.0\n25,000\n3.643\n4,635\n15.4\n18.5\n792\n20.6\n50,000\n14,128\n14,920\n28.3\n29.8\n792\n5.6\n75,000\n27,768\n28,560\n37.0\n36.1\n792\n2.9\n100,000\n43.476\n44,268\n43.5\n40.3\n792\n1.8\n500,000\n330.156\n330,504\n66.0\n66.2\n648\n.2\n1,000,000\n717.584\n718.232\n71.8\n71.8\n6kg\n.1\n5,000,000\n3,916,545\n3.917.196\n78.3\n78.3\n648\nUnder the proposal the attached vertax rate schedule is mistituted for present\nvehedule.\ncursed Income assumed,\nIncludes 10% defense tax.\nLoss than .05 percent.\nhas\n1/12/41\nRegraded Uclassified\n421\na\nIndividual oursex rate schedule\n6 998.3 ailliem, without defense wa\n$1,075.9 million, with defense tax\n(Extinated calender 1641 issume levels)\nBartax net income I\nBrachet rate\nI\n(ia thousands\na\nI\nTotal curtax\nof dollars)\nI\n(peresat)\nI\ncumulative\n6 0 -\n4\n4\n4\n240\n4 -\n6\n4\n400\n6 -\n8\n18\n640\na -\n10\n15\n240\n10 -\n12\nao\n1,540\n12 -\n24\nas\n1,840\n14 -\n18\nso\n8,440\n15 -\n18\n86\n8,140\n10 -\nto\n$\n5,940\n20 -\n22\n45\n4,840\nst -\n25\n50\n6,340\n26 -\n80\n&\n9,090\n30 -\n50\n00\n21,000\n00 -\n100\nan\n51,590\n100 -\n150\n62\n62,500\n160 - 200\n48\n114,000\n200 -\n850\n66\n146,090\nR50 - 500\n\"\n179,090\n$00 - 400\n64\n247,090\n400 - 500\nTO\n$17,000\n500 - 1,000\n78\n677,090\n1,000 - 2,000\n78\n1,407,000\n2,000 - 5,000\n74\n3,687,000\nOver 5,000\n75\n-\nThat\n5/11/41\nRegraded Uclassified\n122\n1\nComparison of earter ashedules\nunder present law and proposed Schedule a\nSustem\ndirecked rates (Peranch): Total mides selative\nnet income\nI Present\n-\nPropess)\n.\nPresent\nI\n($000)\nI\nlaw\nI\nI\nlaw\nPropessi\n8\n0\n-\nR\n-\n6\n-\n180\n2 -\n6\n-\n6\n-\n640\n4\n6\n$\nB\n40\n400\n6 -\n6\n6\n18\nBOD\n640\na -\n10\n8\n25\n380\n040\n10 -\n12\n10\nNO\n500\n1,360\n12\n-\n14\n12\nis\n000\n1,040\n14\n-\n10\n15\nso\n1,100\n2,440\n16\n-\n10\n28\nas\n1,460\n5,140\n16\n-\nto\na1\n$\n1,060\n8,040\nto\n-\nIt\n24\n45\n2,350\n4,840\nat\n-\nRS\nBY\nso\n5,170\n0,540\n25\n-\n20\n27\nE\n$,440\n6,890\n26\n-\nso\n20\n46\n4,840\n9,000\nso\n-\nSR\nDO\nw\n8,240\n10,200\n82\n-\n38\nIS\n90\n7,220\n15,000\nse\n-\n44\nN\n60\n9,380\n17,480\n44\n-\nso\n8\n40\n11,780\n$1,000\n50\n-\n60\n44\nB\n18,180\n27,190\n60\n-\n70\n47\n61\n20,850\n$3,890\n70\n-\n80\nS\n25,880\n59,350\n00\n-\n90\n#\n$1,100\n45,480\n90\n-\n100\nas\n56,780\n61,500\n200\n-\n180\nse\n65,750\n62,590\n160\n-\n200\n60\n85,700\n114,090\n200\naso\n64\n106,760\n146,000\n250\n300\n44\n150,700\n170,000\n500\n-\n400\n£24,760\n247,000\n400\n800\nTO\n$17,060\n500\n750\nTO\n457,750\n49Y,090\n750 - 1,000\n72\n18\n647,780\n877,080\n1,000 - 2,000\n78\n15\n1,577,760\n1,407,080\n2,000 - 6,000\nN\n%\n8,567,780\n5,627,050\nOver 6,000\n75\n76\n-\n-\nTimes\n5/11/41\nRegraded Uclassified\n$\nComparism of present and propesed individual income taxes on net incoues of solected alsoe\nMarried person - no dependents\nBet income I\nAmount of tex\nI\nEffective retails\nI\nincrease in tax\nbefore\nI\nI\nProposal\n:\n2\nProcess)\nI\nAugust\n:\nPercent\npersonal\na Present\n:\nWithout\nE\nWith\nPresentr@ithout: with\n1\nFramel\n4\nProperal\nexamption\n#\nlaw\n:\ndefense\nA\ndefense\n:\nlaw réafense defense rithout de-sWith $ without deeWith w\n<\nI\nI\ntax\n:\nlas\nt\n:\ntax\n:\ntax\n(fense tax\ntom\n\"\nD\n2,500\n4\n11\n2\n40\n44\n04%\n1.6%\n1.85\n&\n29\n&\n18\n263.65\n300.05\n3,000\n31\n88\nS\n1.0\n2.9\n3.2\n57\nis\n185.9\n212.0\n4,000\n70\n184\n202\n1.8\n4.6\n5.1\n114\n112\n162.9\n108.6\n5,000\n110\n280\n308\n2.2\n5.6\n6.2\n170\n198\n164.6\n180.0\n6,000\n150\n376\n434\n2.5\n6.8\n6.9\n228\n264\n150.7\n176.0\n8,000\n517\n606\n669\n4.0\n7.6\n8.4\n201\n352\n91.8\n111.0\n10,000\n528\n920\n1,012\n5.8\n9.2\n10.1\n302\n484\n74.2\n91.7\n12,500\n858\n1,410\n1,551\n6.9\n11.5\n12.4\n552\n695\n64.8\nBO.B\n16,000\n1,250\n2,054\n2,259\n8.4\n13.7\n15.1\n796\n1,001\n63.3\n79.6\n50,000\n2,550\n3,804\n4,194\n11.7\n19.0\n20.9\n1,468\n1,840\n62.8\n79.1\n25,000\n3,845\n6,206\n5,824\n15.4\n24.8\n27.3\n2,561\n2,981\n61.4\n77.6\n50,000\n14,128\n21,754\n23,925\n20.2\n48.5\n47.9\n7,625\n9,801\n54.0\n69.4\n75,000\n27,766\n37,984\n41,585\n37.0\n50.6\n55.6\n10,218\n18,218\n36.8\n60.1\n100,000\n45,476\n54,234\n$8,811\n45.5\n54.2\n68.8\n10,758\n15,385\n26.7\n35.3\n500,000\n350,158\n335,554\n351,299\n66.0\n67.1\n70-4\n5,390\n21,563\n1.6\n6.0\n1,000,000\n717,504\n715,514\n745,963\n71.8\n72.8\nN.A\n- 2,070\n26,379\n. I - 3\n8.7\n$,000,000\n$,916,548\n5,825,474\n8,962,927\n78.5\n76.5\n78.0\n-91,074\n26,579\n-2,3\n.7\nVader the proposal, the attached surtax rate schedule b is substituted for the present socidule.\nfazion earned incous assumed.\n15-or\n8/12/41\nRegraded Uclassified\n424\n,\nIndividual arter take stabile\nmillion vitiment defines -\nmillion with information\n(Noblusbed calenter 1541 Insues Sevele)\nI\nI\n(is thresands of\n6\nnote\n8\nTotal current\ndellers)\nI\n8 e\n.\nTotal\n3/12/41\nRegraded Uclassified\n3/12/41\nThided\n- - o\n(RESTED\n(to thousands of\n5\nProposal\n$\nI personal I I\n#\nRegraded Uclassified\nI\n#\n3\n425\n-\n14/57/8\nTxided\nA\n5,000,000\n<<<<<<<<<<<<<<<<<\n500,000\n050°00'\n000°62\n50,000\n000°52\n000°02\n000°ST\n12,500\n10,000\n5,000\n000°9\nIIII let\nI Nutro I 1\n6\npersonal 1 E E I the metiodal E and 5 the for a\n\"I\n-\n-\n3,999.399\n#################\n19.4\nyour Femiel If 8\n#################\nK I winsted street $ I of\n#################\npresent I Organization Lanes Sales I Individual of\n-\n-\nI\n$\n.........................\n.\n-\nRegraded Uclassified\n5\n981\n127\n-\nIndividual rate schedule V\n$1,150.7 million, without defense tax\n$1,261.3 million, wish deforme tax\n(Zotimmied colender 1941 income levels)\nfurtes not income I\nrate\n.\n(in thousands\nI\nTotal surtes\n(Pareent)\n#\nof dollars)\nI\ncumbisive\n#\n# 0 -\n2\n10\n8\n200\n2 -\nb\n12\nWho\nis -\n6\n14\n720\n6 -\nto\n16\n1,040\n8 -\n10\nis\n1,400\n10 -\n12\n20\n1,800\n12 -\n14\n22\n2,240\n24 .\n16\n24\n2.720\n16 .\n16\n26\n3,240\n18 .\n20\n26\n3,000\n20 .\n22\n30\n6,400\n22 .\n26\n33\n5.720\n26 -\nX\n36\n7.850\n32\n-\n38\nR\n10,220\ny\n-\nat\nE\n12,740\n$\n.\n50\n5\n15,440\n50 -\nB\nby\n20,340\nto -\n70\n52\n25,540\n70 -\n80\n55\n31,040\n80\n-\n90\n50\n36,840\n90 -\n100\n61\n42.940\n100 -\n130\n62\n73,940\n150 .\n200\n63\n105,440\n200 -\n250\na\n137,440\n250\n-\n300\n\"\n170,440\nyou\n-\n400\n6s\n238,440\n400 - 500\n70\n308,440\n500 . 1,000\nTO\n668,440\n1,000 - 2,000\n13\n1,398,440\n2,000 - 5,000\n3,618,440\nDAY 000% #\n75\n-\n1/ Combined with reduced promptions of 0500 for a single person\nand $1,000 for a married person, 11 10 unefficially estimated\nthat this schodule, without the defense laz, would yield\napproximately $1,700 million.\n3/12/41\nRegraded Uclassified\n428\nCompartees of prosent and propered individual taxes\non not incomes of solected since 2/\nWarried person - se dependents\nNet incone I\nAmount of\nI\nIffective\nI Increase fa tax\nbefore\nI\nlas 3/\nI\nrates\nI\nwater proposal\npersonal\nI\nPresent\nI\nexemption 2/1\nlaw\nProposal\nI\nPresents\nE\nProposal\n*\n: law\nAmount\nPercent\n4\nI\n-\n$\n1,500\n$\n-\n8\nTO\n.\n4.75\nI\nTO\n2,000\n-\n145\n-\n1.3\n105\n2,500\n11\n220\n.4%\n8.8\n209\n1,900.05\n3,000\n32\n295\n1.0\n9.6\n254\n$51.6\n4,000\n70\n466\n1.8\n11.7\n396\n565.7\n5,000\n110\n638\n2.2\n12.8\n500\n460.0\n6,000\n150\n832\n2.5\n13.9\n682\n454.7\n8,000\n317\n1,241\n4.0\n15.5\n924\n291.5\n10,000\n528\n1,694\n5.3\n16.9\n1,166\n220.8\n12,500\n838\n2,321\n6.9\n18.6\n1,463\n170.5\n15,000\n1,258\n3,018\ns.4\n20.1\n1,760\n139.9\n20,000\n8,336\n4,646\n11.7\n23.2\n2,310\n98.9\n25,000\n3,843\n6,560\n15.4\n26.2\n2,717\n70.7\n50,000\n14,128\n18,583\n28.3\n37.2\n4,455\n11.3\n75,000\n27.768\n33,708\n37.0\n44.9\n5,940\n21.4\n100,000\n43,476\n50,857\n43.5\n50.9\n7.381\n17.0\n500,000\n330,156\n344,880\n66.0\n69.0\n14.724\n4.5\n1,000,000\n717.584\n736,042\n71.8\n73.7\n19,278\n2.7\n5,000,000\n3,916,548\n3,093,000\n78.3\n78.7\n19,296\n-5\nw Under the proposal personal examptions are reduced from 1000 to 1900\nfor . single person and from $2,000 to $1,000 for a married person.\nand the attached VEPSAX rate schedule A is abstituted for present\nschedule.\n3/ Marima earned issue assumed.\ny Includes 10 persent defense tax.\nT210b\n1/12/41\nRegraded Uclassified\n129\nCompartees of arw\nvalor present law and proyeard Schodule A\nSuries\nI\nBranket rates (Percent)\nI\n1010 earles regulative\nart iscome\n:\nPresent\nI\nI\nlaw\nI\nProperal\nPresent\nI\n($000)\nI\nI\nlaw\nI\nProposal\n:\n0 -\n2\n-\n105\n$\n-\n$\n200\n2 -\nbe\n-\n12\n-\nWe\nà -\nb\nis\n14\n80\n720\n6 -\n#\n6\n16\n200\n1,040\nI -\n10\nI\nif\n360\n1,400\n10 -\n12\n10\n20\n560\n1,800\n12 -\n14\n12\n22\n$00\n2,200\n14 -\n16\n15\nx\n1,100\n2.720\n16 -\n18\n18\n26\n1,460\n3,190\n18 -\n20\nn\nas\n1,880\n3,000\n20 -\n22\n%\n30\n2,360\n4,400\n22 -\n25\n27\n33\n3,170\n5,390\n25 -\n26\n27\n3,440\n5.720\n26 -\n30\n30\n4,640\n7,160\n30\n-\n32\nyo\n5,240\n7.880\n32\n-\n36\n33\n39\n7,280\n10,220\n38 -\nas\nB\n9,380\n12,740\nE\n-\n50\n40\n45\n11,750\n15.440\n50\n-\n$\nn\n16,180\n20,340\n8\n-\n70\n47\n52\n20,680\n25,540\n70 -\nso\nof\n55\n25,680\n31,040\n80 -\n90\n53\n31,180\n36,840\n90 - 100\n56\n36,780\n42,340\n100 - 150\n58\n65,700\n73.940\n150 - 200\n8\n95,780\n105,440\n20 - 250\n62\n126,780\n137,440\n250 - 300\n196,780\n170,440\n300 - 400\n\"\n224,780\n232,440\n400 . 500\n\"\n292,780\n308,440\n500 - 750\nTO\n$67,750\n408,440\n750 - 1,000\n72\n647,700\n668,440\n1,000 - 2,000\n1,377,780\n1,398,440\n2,000 - 5,000\n3,997.700\n3,618,440\n-\nOver - 5,000\n75\n-\nT:10b\n3/12/41\nRegraded Uclassified\n430\n14/27/8\nThish\n3/ Without 10 personal defense lax.\n2/ lariam careed Issue assumed,\n5,080,000\n1,000,000\n000°006\n000'00T\n75,000\n80,000\n25,000\n20,000\n15,000\n12,500\n10,000\n5,000\n6,000\n5,000\n4,000\n3,000\n2,500\n2,000\n1,500\n1\nIf I\nw\n-\n-\n$1,000 too a carried person, and the attached curter rate scholule \"A\" to mbstituted for present schetule.\nV Valor the proposal personal examptions are reduced free $800 to $500 for a single person and tree $2,000 to\n727.50\n330,156\n27,768\n14,128\n3,003\n2.336\n1,25%\n.\n-\n$9\n528\n317\n150\n110\n20\nX\nIT\nI\n-\n3,017.60\nAnnual of tax\n119°10'\n46,234\n30,044\n160°92\n5,964\n4,224\n2.7%\n2,110\n1,500\n1,125\n95%\n500\nE\n192\nCOR\n132\ns\nPresent Proposal Present law $ Properal $\n-\n78.3\n71.6\n0'99\n43.5\n37.0\n28.3\n15.4\n11.7\nus\n6.9\n1-3\n0°N\n2.3\n2.2\n1.8\n1.0\nser\nI\nI\n76.4\n70.8\n65.5\n2\"94\n6'04\n33.8\n23.9\n21.1\n18.3\n6*9t\n15.4\nI'M\n12.6\n9\"IT\n9'OT\nEffective peties\n4.9\n4.0\n99\n4.55\n1\n1 departants Burried If I\nX I last of I 8 of rejected elses\nDespertion product properd 1 of intiridual\n$\nW*26-\n-9,660\n-2,512\n2.750\n2,676\n2.766\n2,121\n1,658\nSOU'T\n1,252\n1,012\nall\n909\nair\n350\n237\n189\n132\n-\nunder proposal\nIncrease or decrease is laz\n-2.5\nE\n800\n59\n10.4\n19.6\n55.2\n80.8\n118.1\n145.9\n191.7\n253.8\n404.0\n427.3\n505.7\n700.5\n12'01'1\nPurcest\nRegraded Uclassified\nIndividual surtex rate achedule\nMETER not income I\n1\nBracket rute\n(in thousands\n5\nTotal surtex\n(pereent)\n-\nof dollars)\n4\ncumulative\n&\no -\n2\n11\n220\n2 -\n4\n14\n500\na -\n6\n16\nBEO\n6 -\n6\n19\n1,200\nB -\n10\nK1\n1,820\n10 -\n22\n22\n2,080\n12 -\n14\n25\n2,580\n14 -\n16\n27\n3,120\n16 -\n10\n29\n5,700\n16 -\n20\n31\n4,820\n20 -\n22\n33\n4,980\n22 -\n26\n36\n6,420\n26 -\n32\n39\n8,760\n82 -\n88\nof\n11,280\n88 -\n44\n45\n13,980\n44 -\n50\n40\n16,880\n50 -\n60\n51\n21,960\n60 -\n70\n54\n27,360\n70 -\n80\n69\n53,060\n80 -\n90\n69\n$8,960\n90 -\n100\n61\n45,060\n100 - 160\n62\n76,060\n150 - 200\n68\n107,560\n200 -\n250\n44\n189,580\n250 - 500\n66\n172,580\n500 - 400\n68\n240,600\n400 - 500\n70\n510,580\n600 - 1,000\n78\n670,580\n1,000 - 2,000\n75\n1,400,560\n2,000 - 5,000\n74\n$,080,540\n76\n-\nOver 6,000\nTreasury Department, division fax Neaworch\nMarch 11, 1941\nRegraded Uclassified\n132\ny\nDesparison of Pate schedules under ,Pread Law and proposal\nSurtax not .\nrate\n1\nTotal vartex\nincome\n1\n(norgest)\nI\npublicative\n(1009)\nI law 1\nI\n-\nI\n5 0 -\n2\n-\n11\n-\n1\n220\n2 -\n4\n-\n14\n-\n500\n4 -\n6\nles\n16\nI\n80\n520\nÉ -\n8\n6\n19\n200\n1,200\nE -\n10\n8\n21\n360\n1,620\nLC -\n12\n10\n23\n560\n2,080\n12 -\n14\nL2\n25\n800\n2,500\n14 -\n16\n15\n27\n1.100\n3.120\n16 -\n15\n18\n29\n1,460\n3,700\nLE -\n20\n21\n31\n1,40\n4,320\n20 -\n22\n24\n33\n2.350\n4,900\n22 -\n26\n27\n36\n3,440\n5,420\n26 -\n32\n30\n59\n5.240\n8,760\n32 -\n38\n33\n6\n7.200\n11,260\n3€ -\ni\n36\nlang\n9.340\n13.950\nhb -\n50\nM)\nis\n11,740\n16,860\nX\n-\n00\n91\n16,180\n21.960\n60 -\n70\n47\n54\n20,880\n27.360\n70 -\n80\n50\n57\n25,880\n33.060\n& -\n90\n53\n29\n31,180\n38.960\n90 +\n100\n56\n61\n36,780\n45.060\n100 - 150\n58\n62\n65.700\n76,060\n150 - 200\n60\n63\n95.780\n107.560\n200 -\n250\n62\n64\n126,780\n139,560\n230 -\n300\nA\n66\n158,780\n172.560\n300 -\n400\n66\n68\n224,780\n240,560\n400 - 500\n68\n70\n292,780\n310,560\n500 -\n750\n2\n72\n467.780\n490.560\n750 - 1,000\n72\n72\n647.780\n670,560\n1,000 - 2.000\n73\nT3\n1,377.780\n1,400,560\n2.000 - 5,000\n74\n74\n3,597.780\n3,620,560\nOver - 5,000\n75\n75\n-\n-\nTIME\n1/12/01\nRegraded Uclassified\n433\nCompartaen of present and proposed individual Lncome taxes\non not incomes of solected elses\nMarried person - no dependente\nlist income\nI\nAmount of tax V\nEffective rates\nIncrease in LESS\nbefore\n*\nunder proposal\npersonal\na\nProvent\nI I Properal\niPresent:\nexemption 2/1\nI 10v\nAmount\nPersont\n10m\nI\nI\n4 1,500\n-\n$\n76\n-\n8.25 $\n76\n-\n2,000\n-\nase\n-\n7.8\n150\n-\n2,500\n$\n11\n257\nAX\n9.5\n226\n2054.85\n8,000\n81\n517\n1.0\n10.8\n286\n902.6\n4,000\n70\n520\n1.0\n12.8\n440\n623.6\n5,000\n110\n704\n1.2\n14.1\n594\n540.0\n6,000\n180\n380\n2.5\n16.5\n170\n515.8\n6,000\n517\n1,184\n4.0\n17.8\n1,087\n336.8\n10,000\nass\n1,905\n1.5\n19.0\n1,875\n200.4\n12,600\n856\n2,615\n6.9\n20.9\n1,758\n204.5\n15,000\n1,858\n1,192\n0.4\n12.6\n2,154\n100.0\n20,000\n2,254\n5,188\n11.7\n25.9\n2,649\n182.0\n15,000\n3,845\n7,254\n15.4\n29.1\n5,422\n10.0\n50,000\n14,126\n20,112\n29.5\n40.2\n6,984\n42.4\n75,000\n27,769\n55,750\n57.0\n47.7\n6,050\n10.0\n100,000\n43,476\n60,100\n45.5\n63.2\n9,725\n12.3\n500,000\n330,150\n548,708\n66.0\n09.4\n10,082\n5.0\n1,000,000\n717,584\n726,770\n71.8\n78.9\n21,100\n3.0\n6,000,000\n5,920,540\n3,037,758\n76.3\n70.0\n21,204\n3\nTreasury Department, Division of Tax lissourch\nV\nUnder the proposal personal exemptions are reduced from $800 to 1500\nfor a single person and from 12,000 to $1,000 for a married person,\nand the attached ourles rate schedule is substituted for procest\nsobstule.\nMazina earned Leases 1\nIncludes 10 peremat dafence Mr.\nJC-PIF\n8/12/41\nRegraded Uclassified\n434\n8\nDatate and ein fax Tate Tabofule\nnos million combined effect, without tax, country gift -\nratee are equal to three-quarters of catate the nine\n(estinated fineal 1948 bustasse Levels)\nNet estate after\nI\nspecific exemption\n#\nBrasket rate\nI\nComulative to\n1\n(perount)\n1\nou higher\n(10 themende)\n1\n6 0 -\nB.\n$\n#\n200\n5 -\n10\ne\n400\n10 -\n20\n9\n1,200\n20 -\nse\n10\n1,500\nDO -\n$\n13\n4,080\n40 -\nso\n18\n5,850\n60 -\nw\nan\n7,550\n60 -\n100\n35\n17,100\n100 -\n280\n25\n54,650\naso -\n800\n189,180\n860 -\n980\n194,850\nYOU - 1,000\n272,300\n1,000 - 1,200\n384,050\n1,250 - 1,800\n462,150\n1,800 - 2,000\n689,180\n2,000 - 2,500\nB\n687,180\n2,000 - 8,000\n44\n1,057,150\n8,000 - 3,500\n-\n1,899,180\n3,500 - 4,000\nso\n1,048,150\n4,000 - 5,000\nas\n2,072,199\n5,000 - 6,000\n@@\n2,682,150\n6,000 - 7,000\nno\n5,283,150\n7,000 - 0,000\na\n2,083,180\n8,000 - 9,000\nas\n4,462,190\n9,000 - 10,000\n85\n5,113,180\n18,000 - 20,000\nor\n11,613,180\n30,000 - 80,000\n82,522,180\none\n8\n-\n80,000\n3/12/41\nRegraded Uclassified\n135\n6\nTroposed estate tax rates sie Substals I comparated\nvita yourself coints fax rates\n301 solute ofter Transport min\nPresent rates 1\nspecific cresptical\nBrasket rate\nI Curristive\n1\nI Commissive\n(In\nI\n192 in Mahors\nrate\nof dellared\n(pareant)\nmust\n(persent)\nHas as higher\nI\no -\n9\n$\n$\n100\na\n$\n100\n5 -\n20\n4\n400\n3\n-\n10 -\n20\n9\n1,200\n4\n600\n20 -\n20\n12\n2,50\n6\n1,200\n80 -\n$\n10\n4,000\n0\n3,000\n40 -\n60\n18\n5,000\n20\n3,000\n80 -\n60\nn\n7,150\n12\n4,200\n60 -\n100\nR\n17,100\n10 - 14\n9,000\n100 -\n200\nm\n54,000\n17 - 20\n00,000\n200 - 200\nF\n132,180\n20 - =\n89,000\n900 -\nTOO\n20\n104,000\n25 - 25\n151,000\nTBO - 1,000\nat\n372,180\n25 - 20\n229,680\n1,000 - 1,290\nIS\n204,800\n22\n300,000\n1,200 - 1,800\nso\n442,150\na\n383,600\n1,500 - 2,000\n=\n852,150\n55\n557,600\n2,000 - 2,800\n41\n897,150\na\n767,600\n3,500 - 3,000\n$\n1,097,190\n41\n982,600\n3,000 - 3,800\nn\n1,293,180\n44\n1,172,600\n3,800 - 4,000\nno\n1,542,180\n47\n1,407,000\n4,000 - 5,000\nE\n2,072,150\n60 - -\n1,929,680\n8,000 - 6,000\n$\n2,682,150\nas\n2,483,600\n6,000 - 7,000\nB\n8,223,190\n50\n8,072,600\n7,000 - 8,000\n61\n3,838,190\na\n5,663,600\n8,000 - 9,000\n68\n4,463,180\n-\n4,312,600\n9,000 - 10,000\n#\n6,112,150\n#\n4,962,600\n10,000 - 10,000\n#\n11,813,160\nof\n11,652,500\n20,000 - 80,000\n#\n82,512,150\n8\n22,363,600\nOver 80,000\na\n-\na\n-\n2/ Reducive of temparary defence M.\n100%\n3/12/41\nRegraded Uclassified\n136\n6\nSuperism of proposed estate the - shobile 1 with\npresent cotate - M not was (tefore\nof solected sises w\n3rd estator of fax\n-\n1\nin for\nbefore I\n1\n1\nI\nI\nexemption\nI\nPresent\n1\nProposal\n#\nPresent\nI\nPreparal\n-\n2/\nt\nlaw\nI Schedule Is\nlw\nI\nI\n#\nSchedule It\nPersons\nI\n(000)\nI\n$\nso\n$\n300 8\n405\n0.45\n1.06\n$\n-\n123.06\n60\n660\n1,480\n1.1\n3.8\n-\n185.0\nso\n2,300\n4,485\n2.8\n5.6\n2,285\n102.8\n100\n4,620\n6,763\n4.6\n8.9\n4,125\nno.s\n200\n21,780\n$5,365\n10.9\n17.7\n13,285\n62.4\n400\n64,400\n$2,755\n10.1\n23.2\n30,326\n43.9\n000\n113,740\n168,805\n19.0\nm.e\n19,765\n38.0\n1,000\n233,100\n205,725\n25.3\n29.6\n53,625\nSS.1\n2,000\n597,960\n678,648\n20.9\nm.s\n60,000\n15.8\n4,000\n1,527,690\n1,674,363\n30.8\n41.9\n140,000\n0.6\n6,000\n2,708,220\n2,870,725\n45.1\n47.8\n104,505\n6.1\n10,000\n5,430,250\n6,594,785\n64.8\n56.0\n164,505\n8.0\n20,000\n13,799,380\n12,963,000\n64.0\n64.0\n104,805\n1.3\n40,000\n27,778,500\n26,142,000\n00.0\n70.3\n164,500\ns\n$0,000\n43,288,080\n45,422,000\n93.1\n72.4\n164,305\nA\n100,000\n74,068,080\n74,252,045\n74.1\nN.S\n164,806\n.2\nTreasury Department, Division of fax Basearch\n2/ Their the proposal the attached rate schotule Le substituted for the\npresent schedule.\n2/ m specific exemption of $40,000 alloved use procent law to retained\nunder the proposal.\na/ Includes 10 percent defense bes.\nyear 1\n5/13/41\nRegraded Uclassified\n437\n7\nSatate and an the mis eshable\n03m million assistant effect vitiest defunce -\n$258 million from estate too and 033 stillen free\nan too severing an tax rates ARE equal to\nthree quarters of estate to rates, the specific\nexemption water both taxes 1a reinsed from $40,000\nto 125,000 and that the Insurance anclusion valor\nthe estste tos is reduced from $40,000 to $25,000\n(istimated fiscal 19kg bealance levels)\nNet estate after\nI\nI\nspecific complien\nI\nInder sole\n1\nCompletive\n(ta\nI\n(Perema)\n:\nto - Agen\nof dollars)\n1\n1\n-\n$\n0 -\n5\n20\n$\n200\n5 e\n10\n8\n600\n10 -\n20\n18\n1,800\n20 -\n30\n16\n3,400\n30 -\nto\n20\n5,400\n40 -\n60\n5\n10,000\n60 -\nso\nx\n15,800\n90 -\n100\n29\n21,000\n100 -\n150\n&\n37,000\n150 -\n200\n39\n54,500\n200 -\n290\nX\n73,500\n290 -\n300\ns\n94,000\nyou -\n500\n$\n182,000\n900 9 1,000\nMP\n417,000\n1,000 - 2,000\nby\n907,000\n2,000 - 3,000\n52\n1,417,000\n3,000 - 4,000\n53\n1,947,000\n4,000 - 5,000\n59\n2,497,000\n5,000 - 6,000\n57\n3,067,000\n6,000 . 7,000\n59\n3,657,000\n7,00 - 6,000\n61\n4,267,000\n8,000 - 9,000\n63\n4,697,000\n9,000 - 10,000\n63\n5,947,000\n10,000 - 20,000\n67\n12,847,000\n20,000 - 50,000\n69\n32,947,000\n70\n-\nOver - 30,000\nThised\n3/12/41\nRegraded Uclassified\n438\n1\nestate too min under II compared\nwith present counts tax min\nNet estate ofter mines 1/ taketale u\nPresent rubes 7\nspecific exemptions\nDysckets\nCompletive\n.\nImdest rate\nCompletive\n(In thousands\n1\n(pareat)\n-\nwe n higher\nI\n(mereat)\n-\nwe - Higher\nof dellars)\nI\n1\n1\nI\n1\n0 -\n5\n4\nI\n6\n200\n2\nI\n100\n5 -\n10\ne\n600\n2\n200\n10 -\n20\n12\n1,800\n1\n600\n20 -\ns\n26\n3,400\n6\n1,200\nso -\n5\n20\n5,400\n8\n2,000\nto -\n$\n83\n10,000\n10 - 12\n4,200\n60 -\n00\nn\n15,200\n12 . 14\n6,800\n80 -\n100\nn\n21,000\n9.600\n100 -\n190\n37,000\n18,300\n150 e\n200\n35\n54,500\n26,600\n200 -\n250\n73,500\n36,600\n250 -\n300\nin\n94,000\n46,600\n300 -\n500\n182,000\n83,600\n500 - 1,000\nse\n417,000\n1,000 - 2,000\ns\n2,000 - 3,000\n5\n1,417,000\nBERRER 20 -\n23 -\n507,000\nx .\nX - SERVER\n222,600\n957,600\n992,600\n3,000 - 4,000\n53\n1,947,000\n* of\n1,407,600\n4,000 - 5,000\n99\n2,497,000\n, - 53\n1,982,600\n5,000 - 6,000\n50\n3,067,000\n2,458,600\n6,000 - 7,000\n\"\n3,657,000\n3,072,600\n7,000 - 6,000\n61\n4,267,000\n3,682,600\n5,000 - 9,000\n63\n4,897,000\n24 17 17 20 20 61 w 63 70 % 59 07 69\n4,312,600\n9,000 - 10,000\ns\n5,547,000\n4,962,600\n10,000 - 20,000\n67\n12,247,000\n11,668,600\n20,000 - 30,000\n32,947,000\n32,362,600\n.\nOver 50,000\n-\n2/ Reglacive of temperary information tax\nvalided\n3/12/41\nRegraded Uclassified\n439\n7\nComparison of proposal estate tax under Schobule II 4th\npresent cetate tos on not estates (before -\nof selected store 2/\nSet estates\nAmount of text V\n1\nEffective mts\na\nImprove is for\nbefore #\nI\nI\n$\n1\nI\nexemption\nI\nPresent\nI Prepased I\nPresent\nI Prepared\n8\n1\n-\nPercent\n2/\n-\nLaw\nt Schedule III\nlaw\nIII\n,\n(000)\n1\nI\n.\n2\n1\n1\n90\n$\n220 $\n660\nand\n1.3%\n$\nto\n200.0\nS\n660\n1,980\n1.1\n303\n1,300\n200.0\n80\n2,200\n5,940\n2.8\n7.6\n3.740\n170.0\n100\n4,680\n11,000\n4.6\n11.0\n6,380\n136.1\n200\n21,750\n44,550\n10.9\n22,3\n22.770\n204.5\n400\n64,460\n132,440\n16.2\n33.2\n67.990\n105.5\n500\n123,740\n231,220\n19.0\n38.5\n117,400\n203.3\n1,000\n232,100\n438,020\n23.2\n43.8\n205,980\n55.7\n2,000\n597,960\n976,140\n29.9\n48.8\n376,200\n63.2\n4,000\n1,527,660\n2,118,300\nye,2\n53.0\n530,700\n38,7\n6,000\n2,706,220\n3,348,620\n55.1\n53.8\n642,400\n23.7\n10,000\n5,430,260\n6,073,200\n963\n60.7\n642,540\n11.5\n100,000\n74,065,060\n74,710,900\nThe\n74.1\n62,00\n.9\n1/ Under the proposal the attached rate schedule is addititated for the\npresent schodule.\n2/ The specifie examption of $40,000 allowed wher present law 10 retained\nunder the proposal.\n3/ Includes 10 percent defense the\nTatited\n3/12/41\nRegraded Uclassified\n440\nMarch 11, 1941\n3:17 p.m.\nH.M.Jr;\nHello, Harold.\nHarold\nSmith:\nYeah.\nH.M.Jr:\nHow are you feeling today?\nS:\nWell, I don't know how I feel. I know\nwe've got a job of putting all this stuff\ntogether. I just thought I'd give you a\nring - you're probably away shead of me, but\nI just wanted\nH.M.Jr:\nNo, I'm about a couple of blocks behind you\ntoday. No one tells me anything.\nS:\nIs that BO?\nH.M.Jr:\nI wasn't at the meeting this morning. Were\nyou?\n8:\nYeah. I was late - I was up on the Hill\nand they gave me & ring to come down to the\nWhite House. I didn't know what it was about\nuntil I got there and I found about fifteen\nSenators and Congressmen in.\nH.M.Jr:\nI wasn't there BO you're ahead of me. I don't\nknow what\nS:\nNow, here, he talked to you the other day, I\nunderstand, about the total amount, and he\ntalked to me, and he talked to these people in\nterms of $7 billion straight cash appropriation.\nNow, I didn't know what he was going to say\naside from that; he was sort of letting the\nCongressional people take the lead on it;\nand they agreed that there eughtn't to be any\ncontract authorization in it and it would be\nbe better if it were a straight out-and-out\nappropriation. But the President said - the\nthing that disturbed me was that he had been\ncanvassing the situation around and that he\nwas going to put it all in and instead of\ntaking a couple of bites at the cherry,\nhe was going to take one bite.\nRegraded Uclassified\n441\n- 2 -\nH.M.Jr:\nYeah.\nS:\nWell, now, what I'm afraid of 18 here 18 the British\nrequest for about nine billion and they are being\ncarried down by the Army and Navy to fit into the\nproductive situation as best they can but this is\nreally for 142.\nH.M.Jr:\nYeah.\nis\nS:\nAnd it/not the whole bite ae I 800 it. Do you think\nit is?\nH.M.Jr:\nWell, I don't know. I'm out in the cold till - I\nreally don't know.\nS:\nWell, you know more about it than I do. I mean I\nJust saw the nine billion dollar figure I think\nyesterday for the first time. Hello -\nH.M.Jr:\nHello.\n8:\nAnd there was another sheet, you know, that went well\nway beyond that - that I think you gave me.\nH.M.Jr:\nWell, that's - from that which is about a week or ten\ndays old, Harold, I haven't seen a thing and the\nPresident hasn't told me a thing and I don't know as\nmuch about it as the cop on the corner.\n8:\nWell - -\nH.M.Jr:\nThe President said he wanted me at the meeting this\nmorning and then I didn't get any word 80 I didn't\ncall up or anything.\n8:\nI didn't know about the meeting except I saw something\nin the paper and I was down before the Civil Service\nCommission in the House and I got a call from the\nWhite House to come down and I didn't know what the\nhell it was either. The story - then they got mixed\nup on the one billion three versus the total of seven\nbillion - whether the one three was to be reimbursed\nby the seven or not. They finally decided that it was\nto be reimbursed by the seven billion dollar amount\nwhich set us scurrying around then to change the whole\nset up. I sent somebody down to see Burns to see if\nwe can get that appropriation language changed to fit\nthat picture.\nRegraded Uclassified\n442\n- 3 -\nH.M.Jr:\nWell, you had better know about it because I hear\nyou're going up to testify on the bill.\nB:\nWhere did you hear that?\nH.M.Jr:\nOh, a little birdie.\n8:\nAh - (laughs). Listen, I hear you are too.\nH.M.Jr:\nOh no. I don't know anything about it.\nB:\nI don't know why the Director of the Budget should\ntestify on this.\nH.M.Jr:\nWell, he's doing it - it's the President's bill.\nIt's written the way you and he want it.\n8:\nWell -\nH.M.Jr:\nAnd I - they just dropped me at the first way station.\nI made all my offers about wanting to cooperate -\nwhat things are there - but I'm in no position to\ntestify about anything.\nS:\nI don't think I an either because all the information\nwe've got here is in the last 24 hours and very much\nsecond hand because this 16 the first time I've had\nanything to do with it - with this set up.\nH.M.Jr:\nWell, the last time I think was Saturday a week ago,\nand I sent you what I had. I haven't had anything\non it since then.\n3:\nNo, no.\nH.M.Jr:\nI don't know how the seven billion 1s arrived at\nor anything.\nS:\nWell - the Army and Navy apparently have processed\nthose military sections of the British requests and\nhave said that, \"Well, they can only end with Knudsen.\"\nNow that's what they brought to us last night and have\nsaid, \"Well, this 16 all we can put in to our produc-\ntive machinery and probably more\".\nH.M.Jr:\nYeah.\nS:\nAnd the boss says, \"You got to squeeze the whole thing\ndown to seven billion\". Well that meane paring off\nof several of these items. What would you think -\nwhat would you think about, after we get this thing\ntentatively set up, of talking to Purvis about it?\nDo you think that would be appropriate? You've got\nRegraded Uclassified\n443\n4\nthe background on that, maybe I ought to bring the\nthing over to both of you.\nH.M.Jr:\nWell, I don't know what Hopkins is doing.\nS:\nWell, I don't know either. I mean only once has he\ncontacted me.\nH.M.Jr:\nWell, was he at the meeting this morning?\nS:\nNo, no. And I just heard this afternoon that they're\nworrying over in Agriculture about what can be trans-\nferred under the one billion three and somebody told\nme that the - well, Wickard said he understood the\nPresident was going to make an announcement tonight\nof what could be transferred. Well, I've never heard\nanything about that. I don't know whether - just\nwhat their problem is - whether it's a legal problem\nor what it 1s.\nH.M.Jr:\nWell, as far as I know, Hopkins is supposed to be\ncontacting Purvis. You see I'm not doing it anymore.\n8:\nI see.\nH.M.Jr:\nAnd I've asked to be relieved of that but I'd 800\nhim occasionally. Hello.\n8:\nYeah.\nH.M.Jr:\nBut I know that Hopkins sees him and Hopkins has said\nthat he expects to contact the British Purchasing\nMission. And - well, I'm very serious, Harold, as\nfar as I'm concerned I'm in no position to testify\nabout anything because I don't know this stuff and\nyou can't - I'm not going to go up and display my\nignorance publicly.\nS:\nWell, I can't learn about it in 24 hours either.\nAll I'm trying to do 18 to get an estimate together\nhere for the boss which he says he wants to sign at by\nwhen he signs the bill and there are\nleast, tomorrow apparently, two dozen people involved in the\nthing.\nH.M.Jr:\nWell, if you're trying to find out if I'm in on it,\nI'm not.\nS:\n(Laughs)\nH.M.Jr:\nSo you can just - there's just 23 people.\nS:\n(Laughs) All right.\n444\n- 5 -\nH.M.Jr:\nAnd if I've got anything I'll give you a ring but\nthe last I know is when I sent that sheet over to\nyou.\n8:\nYeah.\nH.M.Jr:\nAnd with that exception and the time we were in\nHull's Office when you were there I know less than\nnothing.\nS:\nApparently, this sheet that we got there is not the\none that they're working from.\nH.M.Jr:\nWell -\nS:\nWell, I just thought I'd give you a ring. I told you -\nH.M.Jr:\nWell, I appreciate it. I appreciate it.\nS:\nI know the boss mentioned the seven million. I suggested\nthat he be sure and talk to you about that.\nH.M.Jr:\nWell, he told me it was seven billion. He told me the\nseven billion and that's all. He said, \"That's the\nfigure.\"\nS:\nYeah.\nH.M.Jr:\nBut, if I knew anything and if I had anything I'd give\nit to you but I'm only repeating. I know less than\nnothing.\nS:\nWell, then I'd better check with Hopkins on whether\nit's appropriate to raise some questions with Purvis.\nI suppose that we ought not to process entirely in\n& vacuum. I don't know what all the implications of\nit are.\nH.M.Jr:\nWell, I think if you want to Bee Purvis, I think you\nbetter talk to Hopkins.\n8:\nYeah. All right, sir, thank you.\nH.M.Jr:\nThank you for calling.\n8:\nYou bet. Bye.\n445\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nMar\nDATE March 11, 1941\nSecretary Morgenthan\nTO\nFROM\nMr. Cochran\nSTRICTLY CONFIDENTIAL\nAt 3 o'clock this afternoon the Secretary called me to his office and asked that\nMr. White, who ⑈1 with the Secretary, explain to me the result of the several neet-\ningo which had been held at the Securities and Exchange Commission with the view to\nevalving suggestions to expedite the liquidation of British investments in this coun-\ntry.\nMr. White told me that the basic 1dea which had been discussed at the S. E. c.\nhad been that of organizing a private corporation which would float & bond issue, pre-\nsumbly at a low rate of interest, to obtain funds which could be utilized in taking\nover the complete holdings of British vested securities. This plan was not considered\nfeasible insofar as direct investments are concerned. The plan would be for this\ncorporation to advance payment to the extent of 65 to 70 percent of the market value\nof the securities taken over. The percentage would be less if the securities were\nfound to be below the average in marketability. It would be necessary that the British\n!isclose to this group their complete holdings, and the group would only consider the\nproposition as a whole.\nThe group would proceed with the sale of securities and remit the balance of the\nproceeds obtained therefor, deducting only necessary expenses. If there should be any\nquestion of a difference between the group and the British Government as to the sale\nprice, this should be settled by an arbiter.\nIt VAS explained that the S. E. c. had studied this plan. and had then invited to\nWashington yesterday afternoon Messrs. For and Connely (*) representing investment\nassociations in New York. The two representatives from New York had not insisted that\nthey be drawn into any private corporation which might be set up. They were svailable,\nhowever, for consultation if the British may desire to look into the plan or desire\nrecommendations as to possible concerns and individuals to constitute the suggested\ngroup.\nAfter receiving this explanation from Mr. White, I telephoned Mr. Gifford. I\nlearned from his New York office that he was in Washington, and I reached him at the\noffices of the British Purchasing Commission at 3:15. He let no know that he had\ncome to Washington this noon and added, confidentially for our ears, that he was here\nwith Sir Edward Peacock. I told him that Mr. White had attended meetings at the S.E.C.\nand that the Secretary had authorised me to acquaint Mr. Gifford with the results\nthereof. I thereupon repeated Mr. White's recital to me. I added the word. of explans-\nthe disposal of marketable securities. The plan which has been under study vas origi-\ntion that the Secretary desired in ne my to criticize Mr. Gifford's operations in\nsally conselved of possible assistance in liquidating direct investments. It had to\nnow been considered as difficult of application to this field, but readily adaptable\nthe markotable security field. I renewed the explanation made previously that the\n* President Emett P. Connely of the Investment Bankers Association of America.\nRegraded Uclassified\n446\n- 2 -\nTreasury naturally desires to look into every possible means for assisting in the\norderly liquidation of British assets, and that I was confident Hr. Gifford shared\nour interest toward this md. Mr. Gifford thanked us for bringing the foregoing\ninformation to his attention. He stated that the proposal was beyond any instructions\nwhich he has. He is, however, taking note of our report and will think it over. He\nwould require completely new instructions before he could accept such a proposal,\nwhich would completely rearrange the plan for disposing of marketable securities in\nthis country. His first reaction was that he would not feel justified in submitting\nsuch a plan to London with recommendations unless the Treasury urged it. I told him\nthat the Secretary desired to bring to his attention the results of the study which\nhad been made, but to leave action to Hr. Gifford's judgment.\n16.m.s.\n447\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE March 11, 1941\nSecretary Morgenthan\nTO\nFROM Mr. Cochran\nSTRICTLY CONFIDENTIAL\nActing upon the Secretary's instructions, I saked Sir Frederick Phillips to\ncome to ay office at 3:30 this afternoon. I recalled to Sir Frederick that when be\nhad visited me yesterday evening he had emphasized his interest in learning the extent\nto which existing British contracts could be taken over under the Lend-Lease plan.\nFurthermore, I recalled our conversation on gold.\nI let Sir Frederick know that the Secretary had held a group meeting this fore-\nzoon at which the British position had been studied. The Secretary had saked me to\ngive an oral reply to Sir Frederick's memorandum of March 5 in which inquiry vas made\nif to whether the Secretary would see any objection to Great Britain paying Canada in\ngold to the extent that it may have gold available for that purpose in the future.\nI permitted Phillips to note on page 11 of Part I of \"Hearings before the Committee on\nForeign Relations, United States Senate, on S. 275\". the estimates which the\nSecretary had submitted to Congress (based upon figures supplied by the British\nPreasury) for the current calender year Australian and South African gold exports. I\nalso invited his attention to the testimony which the Secretary gave before the\nCommittee on Foreign Affairs, House of Representatives, as reported on pages 64 and 65\nof the volume of Lend-Lease Bill Hearings. I told Phillips that the Secretary's\nattitude toward South African and Australian gold remained the same as presented in\nthis testimony. Phillips took note of the two references to the published testimony\ndescribed above.\nPhillips reminded no that the British had hoped to use certain of their gold in\nmeeting payments due Canada, Re asked if he was free nov to tell the Canadians that\nthe Treasury insisted upon all South African and Australian gold being sold for its\nbenefit. He asked further if ve had been in touch with Mr. Clark on this subject. I\ntold Phillips that we had had no conversation with the Canadian Deputy Minister of\nFinance since he left here a few days ago. There was no reason, however, why Phillips\nshould not continue his discussions with Mr. Clark, bearing in mind the testimony which\nthe Secretary has given.\nI told Phillips that a group of us had net with the Secretary on Saturday, Monday\nand Tuesday to study an operating plan for the Lend-Lease Bill, and that in these\nsestings the British position had been given particular attention. I let Phillips\nknow that after receiving the British memorandum of yesterday which gave details as\nto outstanding contracts and negotiations with the R. F. 0. and the Army and Havy on\npossible taking over of some of these engagements, we had written both the R. P. C.\nand the War Department requesting date from their side as to prospects for consumna-\npositively no use of our attempting to discuss the question of contracts further at\nties of their negotiations with the British is the premises. I added that there is\npresent. I showed Phillips the ticker tape which reported the passing of the Bill and\nannounced that the President anticipated asking for a $7,000,000,000 appropriation\nRegraded Uclassified\n447\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE March 11. 1941\nSecretary Morgenthan\nTO\nMr.\nCochran\nFROM\nSTRICTLY CONFIDENTIAL\nActing upon the Secretary's instructions, I asked Sir Frederick Phillips to\ncome to my office at 3:30 this afternoon. I recalled to Sir Frederick that when he\nhad visited me yesterday evening he had emphasized his interest in learning the extent\nto which existing British contracts could be taken over under the Lend-Lease plan.\nPurthermore, I recalled our conversation on gold.\nI let Sir Frederick know that the Secretary had held a group meeting this fore-\nsoon at which the British position had been studied. The Secretary had asked me to\ngive an oral reply to Sir Frederick's memorandum of March 5 in which inquiry vale made\nM to whether the Secretary would ⑉ any objection to Great Britain paying Cenada in\ngold to the extent that it may have gold available for that purpose in the future.\nI cermitted Phillips to note on page 11 of Part I of \"Hearings before the Committee on\nForeign Relations, United States Senate, on S. 275\". the estimates which the\nSecretary had submitted to Congress (based upon figures sumplied by the British\nPreasury) for the current calendar year Australian and South African gold exports. I\nalso invited his attention to the testimony which the Secretary gave before the\nCommittee on Foreign Affairs, House of Representatives, as reported on pages 64 and 65\nof the volume of Lend-Lease Bill Hearings. I told Phillips that the Secretary's\nattitude toward South African and Australian gold remained the same as presented in\nthis testimony. Phillips took note of the two references to the published testimony\ndescribed above.\nPhillips reminded me that the British had hoped to use certain of their gold in\nseeting payments due Cenada. He asked if he was free nov to tell the Canadians that\nthe Treasury insisted upon all South African and Australian gold being sold for its\nbenefit. Re asked further if we had been in touch with Mr. Clark on this subject. I\ntold Phillips that we had had no conversation with the Canadien Deputy Minister of\nPinance since he left here a few days ago, There was no reason, however, vity Phillips\nshould not continue his discussions with Mr. Clark, bearing in mind the testimony which\nthe Secretary has given.\nI told Phillips that a. group of us had not with the Secretary on Saturday. Monday\nand Tuesday to study an operating plan for the Land-Lease Bill, and that in these\nseetings the British position had been given particular attention. I let Phillips\nknow that after receiving the British memorandum of yesterday which gave details as\nto outstanding contracts and negotiations with the R. F. C. and the Army and Navy on\npossible taking over of some of these engagements. we had written both the R. P. C.\nand the War Department requesting data from their side as to prospects for consumer-\ntion of their negotiations with the British in the premises. I added that there 10\npositively no use of our attempting to discuss the question of contracts further at\npresent. I showed Phillips the ticker tape which reported the passing of the 3111 and\nannounced that the President anticipated asking for a $7,000,000,000 appropriation\nRegraded Uclassified\n448\n- 2 -\nto complement the Act. I told him that Treasury representatives would have to appear\nbefore Congress to support the appropriation measure, I stressed the embarrassment\nwhich such representatives, and particularly the Secretary. would experience if\nobliged to report to Congress that there had not yet been accomplished any progress in\nliquidating British direct investments. I made the point that our progress depends\nimportantly upon smething being accomplished along this line immediately. Phillips\nvolunteered that Gifford and Peacock were in town for consultation.\nI should add that when we were discussing gold, I let Phillips know that I had\nreported to the Secretary the information which Phillips had given me last evening,\nnamely. that it appeared that gold production in South Africa was not falling off,\nbut that recently the Bank of South Africa evidently had not turned over all current\nproduction to the British authorities. Phillips had also made the point that the\nBritish required a certain stock of gold in South Africa, because of the necessity of\nhaving some of this metal available for hurried despatch to Egypt or other centers in\nthe Near Eastern war area. In our talk today, Phillips minimized the amount of gold\nthat could be counted upon to come from Belgian Congo, Rhodesia and other scattered\nareas of production.\nHump.\nRegraded Uclassified\n449\nMarch 11, 1941\n4:30 p.m.\nPresent:\nMr. Gaston\nMrs. Klotz\nHM Jr: Herbert, please sit down. I thought that\nyou could listen while I dictate this.\nHarry Hopkins called me about 4:15 and said the\nPresident was going to take some action this afternoon under\nthe Lend-Lease Bill. He had spoken to the President about the\nCoast Guard cutters and asked for permission to speak to me.\nHe asked me whether I knew what the President had in mind and\nif the President had discussed it with me. I said, \"No,\"\nand then I told him that he ought to know better than I what\nthe President has in mind. So he said that he didn't.\nI told Hopkins that if he asked me what I thought\nwould be most useful to the British this Spring, it is the ten\ncutters that I wrote about in my first letter. Then I said that\nwe could get them ready in two or three weeks if the English\nwould tell us what kind of armaments they needed and if the Navy\nwould equip them promptly. Hopkins asked me if we didn't usually\nget cooperation from the Navy, and I said, \"No, not as far as\nthe Coast Guard is concerned.\nThen Hopkins asked me some more questions, and I\nsaid I never felt that I knew less than what I did right now\nabout what was going on. He said that nothing was going on\nat this time. I then said that the President told me yesterday\nhe was going to hold a meeting this morning and wanted me to come,\nbut I never got word as to when it was going to be held. He\nsaid that he wasn't at the meeting either so he did not know\nwhat went on.\nHopkins told me then that Young was with him and\nhad some message from the English saying how they wanted these\nships equipped, but it was news to me.\nRegraded Uclassified\n450\n- 2 -\nGaston: Waesche told me that the Navy had received\nword from the English that they would be very glad to have the\ncutters. That's all the message I got.\nHM Jr: Did you tell that to Phil?\nGaston: No, I haven't seen Phil since I heard that.\nI haven't had a chance to tell him.\nHM Jr: I don't know whether you agreed with me on\nthat.\nGaston: That would be very useful - yes. If we\nare going to do anything, that's the thing to do.\nHM Jr: Well, I'm glad to hear you say that.\nGaston: Yes, that's the thing to do.\nJust when you called me, I was talking to Oscar Cox,\nwho was asking me a lot of questions. He said that Harry Hopkins\nhad been asked to do something about it for the President. He\ndidn't say that you had talked to Hopkins. Evidently Harry Hopkins\nwants to get some information, and he's trying to have Cox get it\nfor him.\nHM Jr: Where was Cox when he called you?\nGaston: Why I think he was in his office. I was\ntalking to him when they said you wanted me so I excused myself\nand hung up.\n(At this point, HM Jr told the operator that\nshe should find out whether Oscar Cox and\nPhilip Young had returned to the Treasury.)\nGaston: I really don't know. He may not have been\nin his office.\nHM Jr: How long ago was this, Herbert?\nRegraded Uclassified\n451\n- 3 -\nand came right in here.\nGaston: Just before I walked in here. I hung up\nHM Jr: Well, my call was about 10 minutes ago,\nso he must have asked Oscar to get the information on it.\n(Operator reported that neither Oscar Cox\nnor Philip Young had returned to their\noffices.)\nHM Jr: Well, they haven't come back yet. I think\nthat I will walk around the block and by that time they probably\nwill be here.\nI\n452\nThe British Supply Council in North America\nMarch 11, 1941\nPhilip Young, Esq.\nPresident's Liaison Committee,\nTreasury Department,\nVashington, D. C.\nDear Mr. Young,\nThe British Naval Attache has just received a reply\nto a cable to the British Admiralty with regard to the\nten coast guard cutters which we hope will be released\nto us by the U. 8. Treasury.\nThe Admiralty advise as follows:\n1. That an offer of ten cutters would be cordially\nwelcomed,\n2. That the vessels would be acceptable in present\ncondition with low angle areament only, high\nangle armament to be fitted in the United Kingdom.\n3. Ammunition for 5\" guns would be required from\nUnited States, both outfit and reserve, including\npractice.\n4. That the never type having a speed of 20 knots\nwould be of considerably greater value than the\nolder type which has a speed of 16-1/2 knots.\nAs the Havy Department has been pressing for this infor-\nmation, the British Naval Attache, through whom it vas obtained,\nhas given it to them direct.\nYours very truly.\n(Sgd.) 0. 2. Ballantyne\nC\n0\n?\nY\nRegraded Uclassified\n453\nMAR 11 1941\nBy less Mr. President:\nI should like to being to your attention the steely\nincrease is prices of imported materials that has been\nunder my for a moth 07 mrs. the matract, as compared\nwith the rather fist treat of domestic modify prices,\nto shows on the attached chart made from priors of the\n12 imported materials and 17 demostic enterials is the 3\nBeream of Labor Statistics daily price fales of X basic\nconsidities. the price inter of imported asterials has\nguinet 10 per cent since the est of Jenuary, as conpared\nwith a 2 per and average gain is prices of demosite\nmaterials.\nVidlo the increased prices are attributed in the\nproce to the tight - shipping situation, a insurence\nof eae-third in prices of - and shalles vitida tim\nweeks weld also suggest that speculative buying his\nbeen a factor. I mie that the name of truling in\n- futures increased sharyly last wesk. Increasing\noperalative activity to my - of consulties would\ntest to affect other all would eld to the dif-\nflosity of helding a general price visa in check.\nPatthfully yours,\n(Signed) H. Morganihau, Jr.\nthe Provident,\nthe White lieus.\nCopy to mr. Thompson\nBy 3 n\nalso 3/10/41 FILE COPY\nRegraded Uclassified\n454\nMOVEMENT OF BASIC COMMODITY PRICES\nDomestic and Imported*\nAUGUST 1939-100\nPER\nPER\nPER\nWeekly Average\nPER\nCENT\nCENT\nCENT\nDaily\nCENT\n135\n135\n132\n132\n130\n130\n128\n128\n// Imported\n125\n125\nCommodities\n// Imported\n124\nCommodities\n124\n120\n120\n120\n120\n115\n115\n/7 Domestic\nCommodities\n116\n17 Domestic\n110\n110\nCommodities\n116\n105\n105\n112\n112\n100\n100\n108\nm\nJ F M A M J J A $ o N D J F M A M J\n4\nII\nis\n25\n,\n8\nis\n22\nI\na\n15\n22\n29\n5\n12\n108\n19\n26\n1940\n1941\nJAN.\nFEB.\nMAR.\nAPR.\n1941\nPercentage Change for Individual Commodities, Jan.31,1941 to March 7,1941\nPER\nPER\nCocoo 15.6%\nCENT\n17 Domestic Commodities\nCENT\nII Imported Commodities\n+30\n+30\nShellac 30.3%\n+25\n+25\n+20\n+20\n+15\nBurlap 16.2%\nLard 11.7%\n+15\nPrint Cloth 9.8%\nCottonweed Oil 6.5%\n+10\nLeod 4.5%\nRozin 3.0%\n+10\nRubber 8.8%\nSteel Scrap,dem. 26%\nSugar 8.5%\nCarn 23%\nCoffee 6.2%\n+5\nCotton 2.0%\nWheat 14%\n+5\nSile 5/%\nTallon 0%\n9ba/ 24%\nSteel Scrap,axp. ON\nTin 22%\n0\nAutter 0%\nCopper 0%\no\nFlasseed ox\nZine OX\nNides -/.9%\nHage -2.5%\n-5\nBanley -19%\nSteere -EX\n-5\nJan.31\nMar.7\nJan 31\nMar.7\nB.L.S. Indexes\nOffice of the Secretary of the Treasury\n- of - - -\nP-199-7\nSeventy-seventh Congress of the United States of America:\n455\nfit the first besion\nRegraded Uclassif\nBup and held at the City d Washington - Friday, the third\nday of Junuary, one thousand nine hundred and forty-one\nPUBLIC LAW\n[CHARTER\nAN ACT\nFurther to promote the defense of the United States, and for other\npurposes.\n-\nMAR 11 1941\nBe it enacted by the Senate and House of Representatives of\nTHE\nthe United States of America in Congress assembled, That this Act\nmay be cited as \"An Act to Promote the Defense of the United\nStates\".\nSac. 2. As used in this Act-\n(a) The term \"defense article\" means-\n(1) Any weapon, munition, aircraft, vessel, or boat;\n(2) Any machinery, facility, tool, material, or supply neces-\nH. R. 1776\nsary for the manufacture, production, processing, repair, servic-\ning, or operation of any article described in this subsection;\n(3) Any component material or part of or equipment for any\narticle described in this subsection;\n(4) Any agricultural, industrial or other commodity or article\nfor defense.\nSuch term \"defense article\" includes any article described in this\nsubsection: Manufactured or procured pursuant to section 3, or to\nwhich the United States or any foreign government has or hereafter\nacquires title, possession, or control.\n(b) The term \"defense information\" means any plan, specification,\ndesign, prototype, or information pertaining to any defense article.\nSec. 3. (a) Notwithstanding the provisions of any other law, the\nPresident may, from time to time, when be deems it in the interest\nof national defense, authorize the Secretary of War, the Secretary\nof the Navy, or the head of any other department or agency of the\nGovernment-\n(1) To manufacture in arsenals, factories, and shipyards\nunder their jurisdiction, or otherwise procure, to the extent to\nwhich funds are made available therefor, or contracts are author-\nised from time to time by the Congress, or both, any defense\narticle for the government of any country whose defense the\nPresident deems vital to the defense of the United States.\n(2) To all, transfer title to, exchange, lease, lend, or otherwise\ndispose of, to any such government any defense article, but no\ndefense article not manufactured or procured under paragraph\n456\nH. R. 1776-2\nRegraded Uc\n(1) shall in any way be disposed of under this paragraph, except\nafter consultation with the Chief of Staf of the Army or the\nChief of Naval Operations of the Navy, or both. The value of\ndefense articles disposed of in any way under authority of this\nparagraph, and procured from funds heretofore appropriated,\nshall not exceed $1,300,000,000. The value of such defense articles\nshall be determined by the head of the department or agency con-\ncerned or such other department, agency or officer as shall be\ndesignated in the manner provided in the rules and regulations\nissued hereunder. Defense articles procured from funds hereafter\nappropriated to any department or agency of the Government,\nother than from funds authorized to be appropriated under this\nAct, shall not be disposed of in any way under authority of this\nparagraph except to the extent hereafter authorized by the Con-\ngress in the Acts appropriating such funds or otherwise.\n(8) To test, inspect, prove, repair, ontfit, recondition, or other-\nwise to place in good working order, to the extent to which funds\nare made available therefor, or contracts are authorized from time\nto time by the Congress, or both, any defense article for any such\ngovernment, or to procure any or all such services by private\ncontract.\n(4). To communicate to any such government any defense infor-\nmation, pertaining to any defense article furnished to such govern-\nment under paragraph (2) of this subsection.\n(5) To release for export any defense article disposed of in\nany way under this subsection to any such government.\n(b) The terms and conditions upon which any such foreign govern-\nment receives any aid authorized under subsection (a) shall be those\nwhich the President deems satisfactory, and the benefit to the United\nStates may be payment or repayment in kind or property, or any other\ndirect or indirect benefit which the President deems satisfactory.\n(c) After June 30, 1943, or after the passage of a concurrent\nresolution by the two Houses before June 30, 1943, which declares\nthat the powers conferred by or pursuant to subsection (a) are no\nlonger necessary to promote the defense of the United States, neither\nthe President nor the head of any department or agency shall exer-\nciso any of the powers conferred by or pursuant to subsection (a)\nexcept that until July 1, 1946, any of such powers may be exercised\nto the extent necessary to carry out & contract or agreement with such\na foreign government made before July 1, 1943, or before the passage\nof such concurrent resolution, whichever is the earlier.\n457\nH. R. 1776-3\n(d) Nothing in this Act shall be construed to authorize or to\npermit the authorization of convoying vessels by naval vessels of the\nUnited States.\n(e) Nothing in this Act shall be construed to authorize or to permit\nthe authorization of the entry of any American veasel into a combat\narea in violation of section a of the Neutrality Act of 1939.\nSec. 4. All contracts or agreements made for the disposition of\nany defense article or defense information pursuant to section 3 shall\ncontain a clause by which the foreign government undertakes that\nit will not, without the consent of the President, transfer title to\nor possession of such defense article or defense information by gift,\nsale, or otherwise, or permit its use by anyone not an officer, employee,\nor agent of such foreign government.\nSec. 5. (a) The Secretary of War, the Secretary of the Navy, or\nthe head of any other department or agency of the Government\ninvolved shall, when any such defense article or defense information\nis exported, immediately inform the department or agency designated\nby the President to administer section 6 of the Act of July 2, 1940\n(54 Stat. 714). of the quantities, character, value, terms of disposi-\ntion, and destination of the article and information so exported.\n(b) The President from time to time, but not less frequently than\nonce every ninety days, shall transmit to the Congress a report of\noperations under this Act except such information as he deems\nincompatible with the public interest to disclose. Reports provided\nfor under this subsection shall be transmitted to the Secretary of\nthe Senate or the Clerk of the House of Representatives, as the case\nmay be, if the Senate or the House of Representatives, as the case\nmay be, is not in session.\nSec. 6. (a) There is hereby authorized to be appropriated from\ntime to time, out of any money in the Treasury not otherwise\nappropriated. such amounts as may be necessary to carry out the\nprovisions and accomplish the purposes of this Act.\n(b) All money and all property which is converted into money\nreceived under section 3 from any government shall, with the approval\nof the Director of the Budget, revert to the respective appropriation\nor appropriations out of which funds were expended with respect to\nthe defense article or defense information for which such consideration\nis received, and shall be available for expenditure for the purpose for\nwhich such expended funds were appropriated by law, during the\nfiscal year in which such funds are received and the ensuing fiscal\nyear; but in no event shall any funds so received be available for\nexpenditure after June 30, 1946.\nRegraded Uclassified\n458\nH. R. 1776-4\nSac. 7. The Secretary of War, the Secretary of the Navy, and the\nhead of the department or agency shall in all contracts or agreements\nfor the disposition of any defense article or defense information fully\nprotect the rights of all citizens of the United States who have patent\nrights in and to any such article or information which is hereby\nauthorized to be disposed of and the payments collected for royalties\non such patents shall be paid to the owners and holders of such patents.\nSec. 8. The Secretaries of War and of the Navy are hereby\nauthorized to purchase or otherwise acquire arms, ammunition, and\nimplements of war produced within the jurisdiction of any country\nto which section 3 is applicable, whenever the President deems such\npurchase or acquisition to be necessary in the interests of the defense\nof the United States.\nSec. 9. The President may, from time to time, promulgate such\nrules and regulations as may be necessary and proper to carry out any\nof the provisions of this Act; and he may exercise any power or\nauthority conferred on him by this Act through such department,\nagency, or officer as he shall direct.\nSac. 10. Nothing in this Act shall be construed to change existing\nlaw relating to the use of the land and naval forces of the United\nStates, except insofar as such use relates to the manufacture, procure-\nment, and repair of defense articles, the communication of informa-\ntion and other noncombatant purposes enumerated in this Act.\nSmo. 11. If any provision of this Act or the application of such\nprovision to any circumstance shall be held invalid, the validity of\nthe remainder of the Act and the applicability of such provision to\nother circumstances shall not be ascected thereby.\nSpeaker of the House Representatives.\nHenry a Wallace\nVice President of the United States and\nPresident of the Senate.\nFine Preserely\nMarch 1941\n459\n[PUBLIC LAW 11-77m Congress]\n[CHAPTER 11-1st SESSION]\n[H. R. 1776)\nAN ACT\nFurther to promote the defense of the United States, and for other purposes.\nBe it enacted by the Senate and House of Representatives of\nthe United States of America in Congress assembled, That this Act\nmay be cited as \"An Act to Promote the Defense of the United\nStates\".\nSec. 2. As used in this Act-\n(a) The term \"defense article\" means-\n(1) Any weapon, munition, aircraft, vessel, or boat;\n(2) Any machinery, facility, tool, material, or supply neces-\nsary for the manufacture, production, processing, repair, servic-\ning, or operation of any article described in this subsection;\n(3) Any component material or part of or equipment for any\narticle described in this subsection;\n(4) Any agricultural, industrial or other commodity or article\nfor defense.\nSuch term \"defense article\" includes any article described in this\nsubsection: Manufactured or procured pursuant to section 3, or to\nwhich the United States or any foreign government has or hereafter\nacquires title, possession, or control.\n(b) The term \"defense information\" means any plan, specification,\ndesign, prototype, or information pertaining to any defense article.\nSec. 3. (a) Notwithstanding the provisions of any other law, the\nPresident may, from time to time, when he deems it in the interest\nof national defense, authorize the Secretary of War, the Secretary\nof the Navy, or the head of any other department or agency of the\nGovernment-\n(1) To manufacture in arsenals, factories, and shipyards\nunder their jurisdiction, or otherwise procure, to the extent to\nwhich funds are made available therefor, or contracts are author-\nized from time to time by the Congress, or both, any defense\narticle for the government of any country whose defense the\nPresident deems vital to the defense of the United States.\n(2) To sell, transfer title to, exchange, lease, lend, or otherwise\ndispose of, to any such government any defense article, but no\ndefense article not manufactured or procured under paragraph\n(1) shall in any way be disposed of under this paragraph, except\nafter consultation with the Chief of Staff of the Army or the\nChief of Naval Operations of the Navy, or both. The value of\ndefense articles disposed of in any way under authority of this\nparagraph, and procured from funds heretofore appropriated,\nshall not exceed $1,800,000,000. The value of such defense articles\n2\n(Ive Laws\n(Pr. Life 11.1\n8\nshall certied be determined by the head of the department or Agency\nOF such other department, agency or officer as shall (in\nby the President to administer section 6 of the Act of July 2, 1940\nissued designated in the matther provided in the rither and regulations be\n(54 Stat. 714), of the quantities, character, value, terms of disposi-\nother appropriated than to any department or agency of the Government,\nhereunder. Defense articles procured from funds horestter\ntion, and destination of the article and information so exported.\n(b) The President from time to time, but not less frequently than\nfrom funds authorized to be appropriated under this\nonce every ninety days, shall transmit to the Congress H report of\nAct, shall not be disposed of in any way under authority of the\noperations under this Act except such information me he deema\npatagraph except to the extent herenfter authorized by the Con-\nincompatible with the public interest to disclose, Reports provided\ngress in the Acts appropriating such funds or otherwise,\nfor under this subsection shall be transmitted to the Secretary of\n(3) To test, inspect, prove, repair, outfit, recondition, or other\nthe Senate or the Clerk of the House of Representatives, as the case\nwise to place in good working order, to the extent to which funds\nmay be, if the Senate or the House of Representatives, as the case\nare made available therefor, or contracts are authorized from time\nmay be, is not in session.\nto time by the Congress, or both, any defense article for any such\nSec. 6. (a) There is hereby authorized to be appropriated from\ncontract. government, or to procure any or all such services by private\ntime to time, out of any money in the Treasury not otherwise\nappropriated, such amounts as may be Decessary to earry out the\n(4) To communicate to any such government any defense infor-\nprovisions and accomplish the purposes of this Act.\nmation, pertaining to any defense article furnished to such givern-\n(b) All money and all property which is converted into money\nment under paragraph (2) of this subsection,\nreceived under section a from any government shall, with the approval\n(5) To release for export any defense article disposed of in\nof the Director of the Budget, revert 10 the respective appropriation\nany way under this subsection to any such government,\nor appropriations out of which funds were expended with respect to\n(b) The terms and conditions upon which any such foreign govern-\nthe defense article or defense information for which such consideration\nruent receives any aid authorized under subsection (a) shall be those\nis received, and shall be available for expenditure for the purpose for\nwhich the President deems satisfactory, and the benefit to the United\nwhich such expended funds were appropriated by law, during the\nStates may be payment or repayment in kind or property, or any other\nfiscal year in which such funds are received and the ensuing fiscal\ndirect or indirect benefit which the President deems satisfactory.\nyear: but in no event shall any funds so received be available for\n(c) After June 30, 1943, or after the passage of a concurrent\nexpenditure after June 30, 1946.\nresolution by the two Houses before June 30, 1943, which declares\nSEC. 7. The Secretary of War, the Secretary of the Navy, and the\nthat the powers conferred by or pursuant to subsection (a) are THE\nbead of the department or agency shall in all contracts or agreements\nlonger necessary to promote the defense of the United States, neither\nfor the disposition of any defense article or defense information fully\nthe President nor the head of any department or agency shall exer-\nprotect the rights of all citizens of the United States who have patent\ntime any of the powers conferred by or pursuant to subsection (a):\nrights in and to any anch article or information which is hereby\nexcept that until July 1, 1946, any of such powers may be exercised\nauthorized to be disposed of and the payments collected for royalties\nto the extent necessary to carry out a contract or agreement with such\non such patents shall be paid to the owners and holders of such patents,\na foreign government made before July 1, 1943, or before the passage\nSm. 8. The Secretaries of War and of the Navy are hereby\nof such concurrent resolution, whichever is the carlier.\nauthorized to purchase or otherwise acquire arms, ammunition, and\n(d) Nothing in this Act shall be construed to authorize or to\nimplements of war produced within the jurisdiction of any country\npermit the authorization of convoying vessels by naval ressels of the\nto which section 3 is applicable, whenever the President deems such\nUnited States.\npurchase or acquisition to be necessary in the interests of the defense\n(e) Nothing in this Act shall be construed to authorize or to permit\nof the United States.\nthe authorization of the entry of any American vessel into 11. combat\nSec. 9. The President may, from time to time, promulgate such\narea in violation of section 3 of the Neutrality Act of 1939.\nrules and regulations as may be necessary and proper to carry ont any\nSec. 4. All contracts or agreements made for the disposition of\nof the provisions of this Act; and he may exercise any power or\nany defense article or defense information pursoant to section 3 shall\nauthority conferred on him by this Act through such department,\ncontain a clause by which the foreign government undertakes that\nagency, or officer ns he shall direct.\nit. will not, without the consent of the President, transfer title to\nSec. 10. Nothing in this Act shall be construed to change existing\nor possession of such defense article or defense information by gift,\nlaw relating to the use of the land and naval forces of the United\nsale, or otherwise, or permit its use by anyone not an officer, employee.\nStates, except insofar as such use relates lo the manufacture, procure-\nor agent of such foreign government.\nment, and repair of defense articles, the communication of informa-\nSec. 5. (a) The Secretary of War, the Secretary of the Navy, or\ntion and other noncombatant purposes enumerated in this Act.\nthe head of any other department or agency of the Government\nSto. 11. If any provision of this Act or the application of such\ninvolved shall, when any such defense article or defense information\nprovision to any circumstance shall be held invalid, the validity of\nis exported, immediately inform the department or agency designated\nthe remainder of the Act and the applicability of such provision to\nother circumstances shall not be affected thereby.\nApproved, March 11, 1941.\nJclassified\nMARCH 11, 1941\n460\nTHE HOUSE APPROVED SENATE AMENDMENTS TO THE BRITISH AID BILL BY A\nVOTE OF 317 TO 71 AND SENT THE BILL TO THE PRESIDENT. ONE MEMBER\nVOTED PRESENT.\nSPEAKER SAN RAYBURN SIGNED THE BILL IMMEDIATELY.\n3/11--RS44P\nFLASH\nPRESIDENT SIGNS BRITIS H AID BILL\n3/11--M0351P\nPRESIDENT ROOSEVELT TODAY SIGNED THE LEND-LEASE BILL AND PREPARED\nTO ASK CONGRESS TO APPROPRIATE $7,000,000,000 TO CARRY OUT ITS\nPROVISIONS FOR GIVING MATERIAL WAR AID TO BRITAIN AND OTHER NATIONS\nFIGHTING AGAINST THE AXIS,\n3/11--W0353P\n461\nMarch 11, 1941\nDear Senator George:\nNow that the Lend-Lease Bill is out of the may,\nI should like to send you my sincere thanks for all\nthat you aid to ensure its passage.\nLooking back over the debate, I cannot help feel-\ning that it was a good thing for our country that you\nwere Chairman of the Foreign Relations Committee at this\nparticular time. It is to your great credit that serious\nmistakes were avoided and that, from first to last, the\ndebate was kept on a high democratic level.\nIt was & long, hard fight, and you gave it every\nounce of your skill and energy, but I believe that the\nresults will more than justify your efforts.\nPlease let me thank you also, on personal grounds,\nfor the unfailing courtesy you showed me during the hear-\nings and on all other occasions when we discussed this\nBill together.\nSincerely yours,\n(Signed) E Mergenthau. ST.\nHonorable Walter F. George,\nUnited States Senate.\nFK:nme\nm\nMeasureer\n405\n+\nRegraded Uclassified\n462\nMarch 11, 1941\nDear Senator George:\nI should like to send you my sincere thanks for all\nNow that the Lend-Lease Bill is out of the my,\nthat you did to ensure its passage.\nLooking back over the debate, I cannot help feel-\ning that it was a good thing for our country that you\nwore Chairman of the Foreign Relations Committee at this\nparticular time. It is to your great credit that serious\nmistakes were avoided and that, from first to last, the\ndebate was kept on a high democratic level.\nIt was a long, hard fight, and you gave it every\nounce of your skill and energy, but I believe that the\nresults will more than justify your efforts.\nPlease let me thank you also, on personal grounds,\nfor the unfailing courtesy you showed me during the hear-\nings and on all other occasions when we discussed this\nBill together.\nSincerely yours,\n(Signed) a Mergenthati, VI,\nHonorable Walter F. George,\nUnited States Senate.\nFK:mme\nBy\nRegraded Uclassified\n463\nMarch 11, 1941\nDear Senator George:\nI should like to send you my sincere thanks for all\nNow that the Lend-Lease Bill is out of the may,\nthat you did to ensure its passage.\nLooking back over the debate, I cannot help feel-\ning that it was a good thing for our country that you\nwere Chairman of the Foreign Relations Committee at this\nparticular time. It is to your great credit that serious\nmistakes were avoided and that, from first to last, the\ndebate was kept on a high democratic level,\nIt was a long, hard fight, and you gave it every\nounce of your skill and energy, but I believe that the\nresults will more than justify your efforts.\nPlease let me thank you also, on personal grounds,\nfor the unfailing courtesy you showed me during the hear-\nings and on all other occasions when we discussed this\nBill together.\nSincerely yours,\n(Signed) I Marganthau, Jr.\nHonorable Walter F. George,\nUnited States Senate.\nFK:nmc\nBy\nMessonger\nRegraded Uclassified\n464\nMarch 11, 1941\nDear Alben:\nNow that the long debate is over,\nI think that sincere thanks are due to\nthe pilot who brought the Lend-Lease Bill\nsafely into port.\nYou steered a straight course and\nyou did a perfectly grand job.\nSincerely yours,\n/s/ Henry\nHonorable Alben W. Barkley,\nUnited States Senate.\n7K:nnc\nin\nBy Measenger 4\nRegraded Uclassified\n465\nMarch 11, 1941\nDear Alben:\nNow that the long debate is over,\nI think that sincere thanks are due to\nthe pilot who brought the Lend-Lease Bill\nsafely into port.\nYou steered a straight course and\nyou did a perfectly grand job.\nSincerely yours,\n/s/ Henry\nHonorable Alben W. Barkley,\nUnited States Senate.\n7 K: -\nBy Measenser\nRegraded Uclassified\n466\nMarch 11, 1941\nDear Alben:\nNow that the long debate is over,\nI think that sincere thanks are due to\nthe pilot who brought the Lend-Lease Bill\nsafely into port.\nYou steered a straight course and\nyou did & perfectly grand job.\nSincerely yours,\n(sgd) Henry\nHonorable Alben W. Barkley,\nUnited States Senate.\ntkime.\nBy\nRegraded Uclassified\n467\nMarch 11, 1941.\nMy dear Mr. Purvis:\nThe President has today authorized the Secre-\ntaries of War and Navy, pursuant to the Act of March 11,\n1941, to dispose of the defense articles, set forth in\nthe annexed schedules, to His Majesty's Government in\nthe United Kingdom.\nThe President has also requested the Secretaries\nof War and Navy to communicate directly with you to\narrange for the time, method, and other details of the\ndisposition.\nVery sincerely yours,\nHarry L. Hopkins (sgd.)\nHARRY L. HOPKINS\nHonorable Arthur Purvis,\nBritish Purchasing Commission,\nWashington, D. C.\nRegraded Uclassified\n468\nDEFENSE ARTICLES AUTHORIZED FOR TRANSFER\nBY THE SECRETARY OF WAR TO THE\nUNITED KINGDOM\n2322 Ground Signal Projectors\n150 M 1916 - 75mm Gun, Hi speed American type\n300 Field Howitzers - 155mm (not Hi speed)\n435 Field Howitzers, 8\" (no ammunition available)\n500 Caissons, 75mm Howitzers\n200 Limbers, 75mm Howitzers\n116,100 Signal Cartridges\n100,000 H. E. Shells, 75mm Normal Charge, Gun\n60,000 H. E. Shells, 155mm Howitzers\n15,000 W.P. Shells, 155mm Howitzers\n60,000 Reduced Propelling Charges for 155mm Howitzers\n15,000 Normal Propelling Charges for 155mm Howitzers\n40 Tractors, Medium (track laying)\n150 Scout Cars, M3A1 (less armament)\n200 Scout Cars, Old Models\nMARCH 11, 1941\nRegraded Uclassified\n469\nDEFENSE ARTICLES AUTHORIZED FOR TRANSFER\nBY THE SECRETARY OF THE NAVY TO THE\nUNITED KINGDOM\nORDNANCE\n150 4\"/50 L.A. Equipment - U. S. Type\n300 3\"/50 L.A. Equipment - U. S. Type\n8000 4\"/50 L.A. Projectiles\n8000 4\"/50 Complete Rounds - U. S. Type\n18000 3\"/50 Cal. Ammunition - U. S. Type, L.A.\n1200 3\"/23 Cal. Ammunition - U. S. Type\n3000 Propelling Charges for \"I\" Guns - U. S. Type\nSHIPS\n28 Motor Torpedo Boats\nMarch 11, 1941\nRegraded Uclassified\n470\nDEFENSE ARTICLES AUTHORIZED FOR TRANSFER\nBY THE SECRETARY OF WAR TO THE\nROYAL GREEK GOVERNMENT\n50 M 1916 - 75mm Gun, Hi speed American type\n150,000 H.E.Shells, 75mm Reduced Charge, Gun\n30,000 H.E.Shells, 155mm Howitzers\n30,000 Normal Propelling Charges for 155mm Howitzers\nMarch 11, 1941\nRegraded Uclassified\n471\nMarch 11, 1941.\nMy dear Mr. Secretary:\nConsultation having been had with the Chief\nof Staff of the Army, I find that:\n(1) The defense of the United Kingdom is\nvital to the defense of the United States;\n(2) Sections 4 and 7 of the Act of March 11,\n1941 have been complied with by the necessary agree-\nment on the part of His Majesty's Government in the\nUnited Kingdom;\n(3) It would be in the interests of our\nnational defense to transfer the defense articles\nset forth in the annexed schedule.\nI therefore authorize you immediately to\nmake the transfer to His Majesty's Government in the\nUnited Kingdom of the defense articles set forth in\nthe annexed schedule.\nI would appreciate it if you would arrange\nwith the Chairman of the British Supply Council in\nNorth America for the time, method, and other details\nof the disposition.\nVery sincerely yours,\nFranklin D. Roosevelt (sgd.)\nThe Honorable\nThe Secretary of War\nRegraded Uclassified\n472\nDEFENSE ARTICLES AUTHORIZED FOR TRANSFER\nBY THE SECRETARY OF WAR TO THE\nUNITED KINGDOM\n2322 Ground Signal Projectors\n150 M 1916 - 75mm Gun, Hi speed American type\n300 Field Howitzers - 155mm (not Hi speed)\n435 Field Howitzers, 8\" (no ammunition available)\n500 Caissons, 75mm Howitzers\n200 Limbers, 75mm Howitzers\n116,100 Signal Cartridges\n100,000 H. E. Shells, 75mm Normal Charge, Gun\n60,000 H. E. Shells, 155mm Howitzers\n15,000 W.P. Shells, 155mm Howitzers\n60,000 Reduced Propelling Charges for 155mm Howitzers\n15,000 Normal Propelling Charges for 155mm Howitzers\n40 Tractors, Medium (track laying)\n150 Scout Cars, M3A1 (less armament)\n200 Scout Cars, Old Models\nMARCH 11, 1941\nRegraded Uclassified\n473\nMarch 11, 1941.\nMy dear Mr. Secretary:\nConsultation having been had with the Chief of\nNaval Operations of the Navy, I find that:\n(1) The defense of the the United Kingdom is vital\nto the defense of the United States;\n(2) Sections 4 and 7 of the Act of March 11, 1941\nhave been complied with by the necessary agreement on the\npart of His Majesty's Government in the United Kingdom;\n(3) It would be in the interests of our national\ndefense to transfer the defense articles set forth in the\nannexed schedule.\nI therefore authorize you immediately to make the\ntransfer to His Majesty's Government in the United Kingdom\nof the defense articles set forth in the annexed schedule.\nI would appreciate it if you would arrange with the\nChairman of the British Supply Council in North America for\nthe time, method, and other details of the disposition.\nVery sincerely yours,\n(Signed) Franklin D. Roosevelt\nThe Honorable\nThe Secretary of the Navy.\nRegraded Uclassified\n474\nDEFENSE ARTICLES AUTHORIZED FOR TRANSFER\nBY THE SECRETARY OF THE NAVY TO THE\nUNITED KINGDOM\nORDNANCE\n150 4\"/50 L.A. Equipment - U. S. Type\n300 3\"/50 L.A. Equipment - U. S. Type\n8000 4\"/50 L.A. Projectiles\n8000 4\"/50 Complete Rounds - U. S. Type\n18000 3\"/50 Cal. Ammunition - U. S. Type, L.A.\n1200 3\"/23 Cal. Ammunition - U. S. Type\n3000 Propelling Charges for \"I\" Guns - U. S. Type\nSHIPS\n28 Motor Torpedo Boats\nMarch 11, 1941\nRegraded Uclassified\n475\nMarch 11, 1941.\nMy dear Mr. Secretary:\nConsultation having been had with the Chief of\nStaff of the Army, I find that:\n(1) The defense of the Royal Greek Government\nis vital to the defense of the United States;\n(2) Sections 4 and 7 of the Act of March 11,\n1941 have been complied with by the necessary agreement\non the part of the Royal Greek Government;\n(3) It would be in the interests of our national\ndefense to transfer the defense articles set forth in the\nannexed schedule.\nI therefore authorize you immediately to make the\ntransfer to the Royal Greek Government of the defense\narticles set forth in the annexed schedule.\nI would appreciate it if you would arrange with the\nMinister of Greece for the time, method, and other details\nof the disposition.\nVery sincerely yours,\n(Signed) Franklin D. Roosevelt\nThe Honorable\nThe Secretary of War.\nRegraded Uclassified\n476\nDEFENSE ARTICLES AUTHORIZED FOR TRANSFER\nBY THE SECRETARY OF WAR TO THE\nROYAL GREEK GOVERNMENT\n50 M 1916 - 75mm Gun, Hi speed American type\n150,000 H.E.Shells, 75mm Reduced Charge, Gun\n30,000 H.E.Shells, 155mm Howitzers\n30,000 Normal Propelling Charges for 155mm Howitzers\nMarch 11, 1941\nRegraded Uclassified\nTHE BRITISH SUPPLY COUNCIL IN NORTH AMERICA\nTELEPHONE: REPUBLIC 7860\nBox 680\nBENJAMIN FRANKLIN STATION\nWASHINGTON D C\nMarch 11, 1941\nMy dear Mr. President:\nWe represent on behalf of His Vajesty's Government\nin the United Kingdom, pursuant to Sections 4 and 7 of the\nAct of March 11, 1941, that:\n1) Every contract or agreement for the\ndisposition of any defense article or wefense\ninformation, pursuant to Section 3 of the Act\nof March 11, 1941, to His Majesty's Government\nin the United Kingdom shall be decised to include\na clause that His Majesty's Government will not,\nwithout your consent, or the consent of someone\ndesignated by you for that purpose, under the\nAct, transfer title to or possession of such\ndefense article or defense information by fift,\nsale, or otherwise, or permit its 12SE by anyone\nnot an officer, employee or agent of His Majesty!s\nGovernment; and\n2) If, as a result of the transfer to 11s\nMajesty's Government of any défense articles or-\ndefense information, it is necessary, ursuant\nto Section 7 of the Act of March 11, 1941, fully\nto protect the rights of any citizen of the\nUnited States, who has patent rights in 5% to\nany such defense article or information, flis\n(ajesty's Government will do so, vhen so re unsted\nby you or your designee for that purpose.\nVery truly yours,\nThe President of the United States\nWhite House\nDirector General of the\nBritish Purchasing Commission\nApproved: arthur RD\nanset\nDirector General of the\nBritish AIr Commission\nChairman of the British\nSupply Council in North America\nRegraded Uclassified\nROYAL GREEK LEGATION\nWASHINGTON\nMarch 11, 1941.\nMy dear Mr. President:\nI represent on behalf of the Royal\nGreek Government, pursuant to Sections 4 and 7 of the Act\nof March 11, 1941, that:\n1)\nEvery contract or agreement for the\ndisposition of any defense article or defense\ninformation, pursuant to Section 3 of the Act\nof March 11, 1941, to the Royal Greek Government\nshall be deemed to include a clause that the\nRoyal Greek Government will not, without your\nconsant, or the consent of someone designated\nby you for that purpose, under the Act, transfer\ntitle to or possession of such defense article\nor defense information by gift, sale, or other-\nwise, or permit its use by anyone not an officer,\nemployee or agent of the Royal Greek Government;\nand\n2) If, as a result of the transfer to the\nRoyal Greek Government of any defense articles or\ndefense information, it is necessary, pursuant to\nSection 7 of the Act of March 11, 1941, fully to\nprotect the rights of any citizen of the United\nStates, who has patent rights in and to any such\ndefense article or information, the Royal Greek\nGovernment will do so, when so requested by you\nor your designee for that purpose.\nVery truly yours,\nC. Dismentopoulos,\nMinister of Greece.\nThe President of the United States,\nWhite House.\nRegraded Uclassified\nI, Viscount Halifax, His Britannic\nMajesty's Ambassador to the United States of\nAmerica, hereby certify that the Director\nGeneral of the British Purchasing Commission,\nthe Director General of the British Air Commission,\nand the Chairman of the British Supply Council\nin North America have the power necessary to\nmake the commitments required of His Majesty's\nGovernment in the United Kingdom by Sections 4\nand 7 of the Act of March 11th, 1941 88 set\nforth in the annexed letter dated March 11th,\n1941, signed by these officers of the British\nGovernment.\nDone at Washington this 11th day of March,\n1941.\nHalifax\nRegraded Uclassified\nPAT HARRISON, MISS., CHAIRMAN\n480\nBILTER F. GEORGE, GA\nROBERT M. LAFELLETTE, Ja., wis,\n- 1. WALEN, MASS.\nARTHUR CAPPER, KAMS,\n- w. BARKLEY, KY.\nARTHUR H. VANDENBERG, MICH,\n# CORRIALLY, TEX,\nJAMES de DAVIE, PR.\nLAB w. BAILEY, N. c.\nHENRY CANGT LOOSE, - MASE,\nWHETT CHAMP CLARK, MO.\nJOHN A. DANAHER, CONN\n- FLOOD gran, VA.\nROBERT 4. TAPT, GHIO\nUnited States Senate\nPETER 4. CERRY, n. L\n- F. CUPPLY, PA.\nCOMMITTEE ON FINANCE\nPRENTIES M. MOWN, MICH.\nare L MERRING, IOWA,\n- c. colo.\n- L RADCLIFFE, MD.\nFELTON M. JOHNSTON, CLERR\nMarch 11, 1941.\nDear Henry:\nIt was good of you to write me as you\ndid on the anniversary of my thirty years legis-\nlative service. One of the finest things about\nthis job is the splendid associations I have on-\njoyed, and I am sure I need not tell you how\nmuch I appreciate your friendship and association.\nWith best wishes always, I am\nCardama Sincerely yours,\nHonorable Henry Morgenthau,\nSecretary of the Treasury,\nWashington, D. 0.\nINERAL OFFICES\nc. WASHINGTON ST.\n-\nCHICAGO ILL.\nWURREY BUILDING\nWARNINGTON, D.C.\n481\nTELEPHONE NATIONAL 3342\nWASHINGTON, D.C.\nMarch 11, 1941\nMEMORANDUM TO: SECRETARY MORGANTHAU\nThe statement presented to you by Senator Bankhead concerning\nS.935 mentions the \"parity price loan\" feature of his plan but does not\ngo into any explanation of this feature of this bill. Most of the mamo-\nrandum deals with the problem of adjusting the supply of cotton to meet\ncurrent demands.\nBriefly, Senator Bankhead's bill proposes:\n1. A system of commodity loans at 100 per cent of parity for cotton,\nwheat, tobacco and rice conditioned on marketing quotas being in effect to\ncontrol supplies. An 85 per cent loan rate on corn is provided because\nthe representatives of the corn producers do not want a. loan higher than\n85 per cent of parity.\nThe American Farm Bureau Federation is recommending a loan rate of\n85 per cent instead of 100 per cent for all five commodities. (See\nattached statement presented by President O'Neal to the Senate Committee\non Agriculture for summary of Farm Bureau plan).\nThe commodity loan plan has this great advantage,-that it gives\nthe farmers parity or very close to parity in the markst-place. If a\n100 per cent loan is made available, no appropriations are needed for\nparity payments; if an 85 per cent loan is made available, appropriations\nfor parity payments would be needed to meet the 15 per cent deficiency.\nBut careful estimates indicate that under this plan farmers could receive\n100 per cent of parity with about the same appropriations as are now\nbeing made.\nUnder the Bankheed proposal of 100 per cent loans, as already\npointed out, there would be no parity payments to farmers, as the farmers\nwould get parity prices in the market-place for their entire crop. The\nbuyers of cotton, for example, would either have to pay the farmers\nparity price or the farmers could put the cotton under the loan. In\norder to prevent cotton from piling up in the loan, this plan proposes\nfirst to maintain our fair share of the world market for cotton by\nselling cotton for export at the world price and reimbursing the Commodity\nCredit Corporation for any losses incurred by reason of such sales. BIM\nport payments to exporters could be made if necessary to prevent cotton\nfrom going into the loan. In addition, the Bankhead bill proposes to\nbring about an adjustment of production of cotton down to approximately\nRegraded Uclassified\n482\n10,000,000 bales in 1941, which is the estimated amount needed for domestic\nconsumption and exports.\n2. A provision for payments to cotton farmers to reduce their production\nbelow their current allotments for the purpose of adjusting the supply of\ncotton to current requirements for comestic consumption and exports.\nIn his memorandum Senator Bankhead suggested two methods of securing\na voluntary reduction in production of 2 to 2 / million bales below the\nallotments for 1941, which have already been announced and which total about\n12 million bales. One of these methods consists of a payment in kind at the\nrate of one-half bale for each bale taken out of production; the other\nmethod proposes a payment in cash at the rate of so much per pound to take\ncotton out of production, utilizing the $85,000,000 appropriated for parity\npayments for the purpose of making these payments for extra reduction in\nproduction.\nThe Farm Bureau has recommended a payment in kind at the rate of\none-half bale for each bale taken out of production below the present\nallotment.\narregg R. Ogg\nDirector of Research\nRegraded Uclassified\nSun Bankhiel's glass\nmarch 7/41\nS. 935 S.\nFor the purpose of indicating the objective of this bill\nand its probable effect, I beg to present the following as it\napplies to cotton:\nUsing round figures, the government owns 6,200,000 bales.\nIt holds under loan 4,900,000 bales. There are two primary\nobjectives involved; first is better income to farmers and second\nis better protection to the United States Treasury.\nDistribution. Domestic consumption next year may amount\nto 9,000,000 bales. The export market is practically eliminated.\nFrom August 1 last until March 1 last, only 504,000 bales were\nexported in the channels of trade. There were total exports of\napproximately 700,000 bales but the balance of the cotton was\nexported under the rubber exchange with Great Britain. Assuming\nthe same exports next year and a slight increase in domestic\nconsumption, there will be a distribution of approximately 9,500,000\nbales.\nThe cotton allotment, assuming normal weather, will produce\n12,000,000 bales. To the cotton now under the government loan\nthere will be added from next year's crop about 2,500,000 bales,\nthus increasing the government owned and loan cotton to 13,500,000\nbales. It is evident that something must be done about the con-\ntinued surplus production. The bill, while accepting the announced\nRegraded Uclassified\n484\n-2-\nallotments for this year of 12,000,000 bales, provides two methods\nof securing voluntary reduction in production of from 2,000,000 to\n2,500,000 bales, as follows:\n1. To pay in kind with Commodity Credit cotton one-half\nbale for each bale taken out of production up to a certain limit.\n2. Use the parity payment appropriation of about\n$86,000,000 allotted to cotton farmers to pay so much & pound\nto take cotton out of production.\nIf the parity price loan plan is put into operation, the\nappropriations for parity payments will not be required for that\npurpose and can be used to protect the price of cotton and the\nTreasury by adjusting the supply to a quantity that must be bought\nby domestic consumers plus a nominal amount to be exported.\nThe cotton under loan covers loans for the crop years\n'38-'39 and '40-'41. The bill provides that farmers who dispose\nof their equity in cotton loans after the day the bill was intro-\nduced cannot participate in the parity price loan. That is intended\nto enable the government to retire that cotton from the market\nand take it out of competition with this year's crop. The bill\nfurther provides that the farmers shall be paid the value of their\nequity in cotton the day the bill was introduced. There is no\nequity in the '38 loan because the loan price and the carrying\ncharges exceed the present market value. There is a small equity\nRegraded Uclassified\n485\n-3-\nof from two to four dollars a bale on the '40 crop. The equity\nfor that cotton can be paid with from five to seven or eight\nmillion dollars. With the loan cotton taken over by the government,\nas it must ultimately be done, and with the crop reduced to\n9,500,000 to 10,000,000 bales, there will be practically no cotton\ngoing into the loan. Such amount as goes in must be taken out\nby the consumers before a new crop comes to market. This plan\nwill increase the present totally inadequate income of cotton\nproducers and will stop increasing the government stocks and may\nlater be adjusted so as to gradually eliminate the government\nstocks.\n- TO: miss Chamsey 486\nis mentioned the\nO' heal letter to\nhim - he he a lanced\nat it - said\nhe wouldn't need\nit\nZ\nFrom: LIEUT. STEPHENS\n48\nAMERICAN FARM BUREAU FEDERATION\n487\nMunsey Building\nWashington, D. C.\nMarch 11, 1941\nHonorable Franklin D. Roosevelt\nPresident of the United States\nThe White House\nWashington, D. C.\nMy dear Mr. President:\nWe are all greatly distressed that Chester Davis\nis leaving the Federal Reserve Board. He has certainly been our\ngood friend there.\nMay I respectfully present for your consideration\nto fill his place the followings\nIf you want someone from the midwest, I would\nsuggest the name of Earl C. Smith, President, Illinois Agricultural\nAssociation and Vice President, American Farm Bureau Federation;\nif you want someone from the northeast, I would suggest W. I.\nMyers, Professor of Economics, Cornell University and former\nGovernor, Farm Credit Administration; or if you want someone from\nArkansas Farm Bureau Federation. I believe any of these man could\nthe south, I would suggest the name of R. E. Short, President,\nably fill this position and would have the confidence of our\nfarmers.\nFarmers feel very strongly that agriculture\nshould be represented on this important Board.\nHoping these suggestions will have your earnest\nconsideration and with warm personal regards, I an\nSincerely yours,\n154032\nEAO'Nes\nE A EA e MA SI ЯАМ IAQI\nТИЗМТЯАЛЗО TRU2A38T\nEdw. A. O'Neal - President\nYRUZA\nRegraded Uclassified\n488\nTREASURY department\npry\nip\nINTER OFFICE COMMUNICATION\nDATE March 11, 1941\nTO\nSecretary Morgenthau\nFROM\nMr. Cochran\nSTRICTLY CONFIDENTIAL\nOfficial sales of British-owned dollar securities under the vesting order\neffective February 19, 1940:\nNo. of Shares\n$ Proceeds of\nNominal Value\n$ Proceeds of\nSold\nShares Sold\nof Bonds Sold\nBonds Sold\nMarch 3\n19,080\n1,442,474\n81,000\n60,348\n4\n218,632\n11,408,484\n160,000\n125,498\n2\n24,449\n793,163\n31,000\n31,950\n126,017\n3,581,120\n291,000\n296,108\n7\n36,912\n1,433,373\n117,000\n120,123\n8\n3,026\n255,955\n159,400\n174,748\n428,116\n18,914,569\n839,400\n808,775\nMarch 3\nlift to Treasury\n4\n7\n428,120\n18,914,576\nSales from\n2/22/40 to\n3/1/41\n5,595,088-1/2\n172,222,599\n19,483,700\n18,664,818\nTOTAL 2/22/40\nTO 3/8/41\n6,023,208-1/2\n191,137,175\n20,323,100\n19,473,593\nMiss Poate reported sales of non-vested securities for the week ended\nMarch 1 totaled $300,000.\n75ml\nDe\n489\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE March 11, 1941\nTO\nSecretary Morgenthau\nFROM Mr. Cochram\nCONFIDENTIAL\nRegistered sterling transactions of the reporting banks were as follows:\nSold to commercial concerns\n£56,000\nPurchased from commercial concerns £22,000\nThe Federal Reserve Bank of New York sold £15,000 in registered sterling to\nthe American Express Co., and purchased £2,000 from Thos. Cook & Son.\nOpen market sterling remained at 4.03-1/2, and there were no reported trans-\nactions.\nIn New York, the closing rates for the foreign currencies listed below were\nas follows:\nCanadian dollar\n15% discount\nSwies franc (commercial)\n.2322-1/2\nSwedish krona\n.2384-1/2\nReichsmark\n.4005\nLira\n.0505\nArgentine peso (free)\n.2303\nBrazilian milreis (free)\n.0505\nMexican peso\n.2066\nCuban peso\n6-5/8% discount\nIn Shanghai, the yuan in terms of our currency remained at 5-1/24. and\nsterling advanced 20 to 3.91.\nThere were no gold transactions consummated by us today.\nThe Federal Reserve Bank of New York reported that the Central Bank of the\nColombian Republic shipped $2,921,000 in gold from Colombia to the Federal for its\nown account, disposition unknown.\nThe prices fixed in London for spot and forward silver were unchanged at\n23-3/8d and 23-5/16d, respectively. The U.S. equivalents were 42.444 and 42.334.\n34-3/44. The Treasury's purchase price for foreign silver VAS also unchanged at 350-\nHandy and Harman's settlement price for foreign silver vas unchanged at\nRegraded Uclassified\n490\n- 2 -\nVe made six purchases of silver totaling 500,000 ounces under the Silver\nPurchase Act, all of which consisted of new production from foreign countries,\nfor forward delivery.\nThe report of March 5 received from the Federal Reserve Bank of New York\ngiving foreign exchange positions of banks and bankers in its district, revealed\nthat the total position of all countries was short the equivalent of $7,286,000,a\ndecrease of $322,000 in the short position. Net changes were as follows:\nShort Position\nShort Position\nFebruary 26\nChange in\nCountry\nMarch 5\nShort Position*\nEngland**\n$ 263,000\n$ 515,000\n+ $252,000\nEurope\n3,292,000\n3,207,000\n- 85,000\nCanada\n109,000 (Long)\n173,000 (Long)\n- 64,000\nLatin America\n211,000\n126,000\n- 85,000\nJapan\n2,559,000\n2,316,000\n- 243,000\nOther Asia\n1,352,000\n1,329,000\n- 23,000\nAll others\n40,000\n34,000 (Long)\n- 74,000\nTotal\n$7,608,000\n$7,286,000\n- $322,000\nPlus sign (+) indicates increase in short position, or decrease in long position.\nMinus sign(-) indicates decrease in short position, or increase in long position.\n\" Combined position in registered and open market sterling.\nN.M.R.\nconfidential\n491\nTREASURY DEPARTMENT\nINTER-OFFICE COMMUNICATION\nDATE March 11, 1941\nTO\nFROM\nMr. Secretary Haas SOA.\nMorgenthau\nSubject: Markets Current Developments in the High-grade Security\nSUMMARY\n(1) Treasury securities have regained since February 15\nabout one-third of the price declines suffered be-\ntween December 30, 1940 and February 15 (Charts I\nand II).\n(2) The increased issue of Treasury bills on March 5 was\nabsorbed entirely by weekly reporting banks in the\nChicago and St. Louis Federal Reserve districts.\nBills are now in demand in these districts for the\npurpose of avoiding local property taxes.\n(3) High-grade corporate and municipal bonds have gained\nin price only moderately as compared with Treasury\nbonds during the past two weeks (Charts II and III).\n(4) Estimates of the yield differential between fully\ntaxable and partially tax-exempt Treasury bonds vary\nfrom as low as 17 to as high as 57 basis points, de-\npending upon the assumptions made with respect to\nthe correct pricing of the new 2 percent Treasury\nbond (Chart IV).\n(5) The price of the new 2 percent bond offered on\nFebruary 25 declined from an opening bid around\n101-20/32 to & low of 100-21/32 at the close that\nbooks closed the following day. As the result\nday, but recovered somewhat, on balance, before of the\nthe offering of & new note with the bond, the worth refund= at\nleast below that of the note, rights would have bond been\ning 100-16/32, and if the price of the bond\nwas never in danger. The new note was had\nconverted fell below the note, and when the books closed,\nfallen into the new note. As it was, the\nnever it was substantially above it (Chart V).\nRegraded Uclassified\n492\nSecretary Morgenthau - 2\nI. Price and Yield Movements of\nGovernment Securities\nPrices of long-term Treasury bonds have enjoyed a net\nincrease of over 2 points since February 15, when they\nreached a low for the year. Intermediate bonds have gained\nabout 1 point during this time, while Treasury notes have\ngained, on the average, between 1/4 and 1/2 of a point\n(Chart I). This rise represents an average recovery of\nabout one-third of the net decline from December 30, 1940\nthrough February 15. Long bonds have shown the greatest\nstrength, recovering about 54 percent of their losses be-\ntween December 30 and February 15. The market for Govern-\nment securities continues to be very thin, and hence sub-\nject to rather considerable price fluctuations. Price\nchanges since December 30, 1940 are shown in the following\ntable:\n:\nAverage price change\n:\n: Dec. 30, 1940-:Feb. 15, 1941-\n:Feb. 15, 1941 :Mar. 10, 1941\n(Decimals are thirty-seconds)\nNotes\n1 to 3 years\n- .25\n+.09\n3 to 5 years\n-1.00\n+.11\nBonds\n5 to 15 years to call\n-3.11\n+1.02\n15 years and over to call\n-4.09\n+2.10\nThe average yield of long-term Treasury bonds, moving\ninversely to prices, which increased by 29 basis points from\nbalance, by 15 basis points since February 15 (Chart II).\nDecember 30, 1940 through February 15, has decreased, on\nRegraded Uclassified\n493\nSecretary Morgenthau - 3\nII. Absorption of New Treasury Bills\nThe issue of Treasury bills on March 5 amounted\nabout $200 millions -- an increase of $100 millions over to\nprevious weeks. This entire increase and $20 millions\nmore was absorbed by weekly reporting member banks in the\nChicago and St. Louis Federal Reserve districts. Treas-\nury bills are in demand in these districts at the present\nIllinois and Missouri.\ntime for the purpose of avoiding local property taxes in\nThe March 5 issue of bills was also the first issue\nof taxable bille. The increased size of the issue and the\nspecial demand mentioned above, however, tend to obscure\nthe effect of the tax feature upon the rates of discount\nat which they were awarded. The average rate on the last\nissue of tax-exempt bills -- dated February 26 - was\n0.043 percent, &s compared with & rate of 0.086 percent\non the first issue of taxable bills.\nIII. High-grade Corporate and Municipal Bonds\nUnlike prices of long-term Treasury bonds which have\nrisen markedly since February 15, prices of high-grade\ncorporate bonds have fluctuated within a fairly narrow\nrange and have improved very slightly (Chart II). High-\ngrade municipal bonds have gained moderately in the last\ntwo weeks (Chart III).\nNew bond offerings to the public in the New York mar-\nket were $22.8 millions last week 88 compared with $9.8\nmillions the week before. The largest of last week's of-\nferings -- $16.0 millions of Public Service Company of\nOklahoma 30-year, 3-1/4 percent bonde (priced to yield\n3.07 percent ) -- 1s reported to be moving slowly. The\nprincipal demand is said to come from medium- and small-\nsize insurance companies.\nThe RFC took the entire $136 millions State of Arkansas\nrefunding bonds on February 27 at 8. price to yield about\n3.2 percent. A nation-wide banking group which had been\nprepared to bid for about two-thirds of the issue on about\n& 3-1/2 percent coupon basis withdrew at the last moment.\nRegraded Uclassified\n103\nAmeretary Morgenthau - 4\nIV. Pricing and the Value of\nTax Exemption\n1948-50 1s still far from complete, and the market for\nSecondary distribution of the new 2 percent bonds of\nGovernment securities 8.0 a whole remains thin 8.8 it has been\nsince the first of the year. It is thus difficult to draw\nany valid conclusions as to the yield differential being\nestablished in the market between fully taxable and partially\ntax-exempt Treasury bonds. Chart IV compares the yield of\nthe new bonds with the yields of outstanding Treasury bonds.\nTwo curves are shown for the outstanding issues: an opti-\nmistic one based on low coupon bonds with 2-year call periods,\nsuch as was used by Mr. Piser of the Board of Governors in\npricing the new issue, and a very conservative one based on\nthe bonds in this area with the highest yields, irrespective\nof coupon or call period, such 8.8 was used by the Division of\nResearch and Statistics in pricing the issue. Inasmuch as\nthe opinion is widely expressed in the market that the new\nbond should be regarded as a 1950 maturity (on the ground\nthat partially tax-exempt bonds will be called before matu-\nrity, but that taxable bonds will be allowed to run their\nfull term) yields both to earliest call date and to final\nmaturity are shown for the new 2's.\nOn the basis of yields to earliest call date the spread\nbetween the new bonds and partially tax-exempt bonds of com-\nparable term 18 about 57 basis points when the optimistic\ncurve 1s used, and about 38 basis points measured from the\nconservative curve. On the assumption that the new bond\nshould be figured to maturity (other issues continuing to\nbe computed to call) the corresponding spreads are 35 and\n17 basis points, respectively.\nThe spread which may be attributed to the taxability\nof the new bond thus varies from as low 88 17 to as high 88\n57 basis points, depending upon various assumptions which\nmay be made - all with some authority - with respect to\nthe proper pricing of the new bond BB a partially tax exempt\nsecurity.\nIt should be noted, however, that the supposed necessity\nfor pricing the new issue to maturity rather than to call\n1a itself attributed to the tax factor, and thus creates\na sort of \"quasi-tax-differential\" consisting of pricing\nthe new issue 6.8 8 9-year rather than as 8 7-year security.\nRegraded Uclassified\n495\nSecretary Morgenthau - 5\nWhen these differentials are expressed as equivalents\nof a tax on the coupon they vary from a low of 8 percent\n(or only one-third of the corporation tax) to a high of\n28 percent (or more than the whole amount of the corporation\ntax) as shown in the following table:\nProbable redemption date\nCurve used in pricing\nassumed for new bonds\nOptimistic\nConservative\n(Percent of coupon)\n1948 (Call)\n28\n19\n1950 (Maturity)\n17\n8\nThe truth doubtless lies somewhere within these extremes,\nbut the wide range makes it very difficult to say exactly how\nmuch allowance the market is now making for the taxability of\nthe new bond,\nV. Refunding of the March Maturities\nThe pricing of the new securities to be offered in ex-\nchange for the maturing 1-1/2 percent note of March 1941, and\nthe 3-3/8 percent bond called for redemption at the same time,\npresented a special problem because of the difficulty in\nestimating the allowance to be made for the taxability of the\nnew issues. The problem was met by your offering an inter-\nmediate-term bond, and - as a \"backstop\" to insure the success\nof the refunding - a 2-year note.\nOpening bids on Tuesday, February 25, were about about 101-20/32\nfor the 2 percent, 7-9 year Treasury bond, and the\n100-11/32 new for the new 3/4 percent 2 year note. From the price open-\ning price rose. At the close on Tuesday the prices On\nthe of the bond declined steadily, while of the\nof the note the new note were the same (Chart V). the\nnew Wednesday bond and the new securities gained, on balance, bond\nRegraded Uclassified\n496\nSecretary Morgenthau - 6\nthe day its price fell back again to that of the note.\nshowing the greater strength, although at one point during\nAs a result of the offering of a note together with the\nbond, the refunding was at no time in danger. After the\nfirst two hours of trading, as the chart suggests, the note\nwas always worth a minimum price of about 100-16/32. If\nthe price of the bond had fallen below this price, rights\nwould have been converted into the note rather than the\nbond. As it happened the price of the bond twice rico-\ncheted upward from the price of the note, but never fell\nbelow it (Chart V).\nAttachments\n497\nChart I\nCHANGES IN THE PRIORS OF U.S. SHOURITING\nPotata Plotted Represent the Difference from Besember so, 1943 Price of Bach Materity Class\n1941\nJAR.\nMAIL\n1942\n1941\nMY\nJULY\nSEPT.\nNOV,\nFEBRUARY\nPOINTS\nJAM.\nBASCH\nTTT\ne\nAPRIL\nIS\n22\nPOINTS\ne\n15\n22\n29\n5\n12\n(NST CHANGE)\n=\n26\n(ART DIANG)\nPOINTS\nNaturday Ometations\nDaily\n(ACT DIANE)\n:\n+1\n+3\n+3\n+1\n+1\n+2\n+2\n=\n..\n0\n0\n*1\n+1\n1\n+\nNOTES\nNOTES\n+3 Yes.\n1-3 Yes.\no\n+\n+\no\n+\nT\n-1\n-1\n-1\nof\nNorts\nNOTEST\n3-5 Yes,\n3-5 Yes,\n-16\n11-\n-2\n4\n-12\n-If\n&\n&\n-11\n-If\n&\nBonos,\n&\n1\n5-15 Yes\nTO CALL\nT\n-2%\né\nBoups,\nBonds,\n5-15 Yes, TO CALL\n&\nOVER 15 Yes.\n4\n4\nTO CALL\n&\n-26\n428\n9\n-6\n+3\n-3\n*\n-36\n14\n-7\n&\n$\n-\n9\n-34\n-Id\nBoxos,\nOVER 15 Yes. TO CALL\n1\nT\n9\n&\n7\n7\n7\n&\n-10\n-10\n₺\n±\n-11\n-11\n&\n-5\nJAB.\nMAR.\nMAY\nJULY\n101.\nNOV.\nJM.\na\n15\n22\n1\na\n15\n22\n29\n5\n12\n19\n26\n1941\n1942\nFEBRUARY\nMARCH\nAPRIL\n1941\nOffice of the Secretary of the Trumery\nF - 153 - C\n- of - - -\n498\nChart II\nCOMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S. TREASURY\nAND AVERAGE OF HIGH GRADE CORPORATE BONDS\n1940\nJAN\nFIR\nMAR\nAPR.\nMAY\nANE\nJAY\nAUG.\nSEPT\nOCT.\nHGV.\n1941\nDEC\n1940\n-\na\nJAN.\n,\nis\nFEB.\nMAR\nAML\n1941\na\nIf\n-\n=\n\"\nBI\n-\n-\nMAY\n4\n-\n-\nJUNE\n-\n=\nANY\nAUG\nSEPT.\n.\nEl\nOCT\n18\nNOV.\nDEC.\nDEC\nJAN\ninvert Sugle\n⑉\n-\n-\nFEB.\ne\n#\nN.\nRE\n9\nM\n1\nis\n-\nas\n.\n=\n\"\n,\nΓ.\n-\nPER CENT\ninversed Scale\nInvers Scale\nPER CENT\nPER CENT\nWEEKLY. Saturday Quotations\nDA\nLY\nLE\n1.5\nLa\n20\n2.0\n20\n.\nLong Term\nTreasury\n2.2\n.\n2.2\nLt\nLong Term Treasury\nas years or more to earliest on del\n2.4\n24\n24\n26\n26\n24\nCorporate\n28\n28\n28\nCorporate\n10\n3.0\n80\n32\n3.2\n12\n14\n3.4\n14\n36\n36\n3.6\nPER\nPER\nPER\nCENT\nCENT\nCENT\n1.00\n100\n100\nSpread Between Long Term\nTreasury and Corporate\n80\n.80\n80\n60\n60\n60\nSpread\n40\n40\n40\n20\n20\n20\no\no\no\n.\n-\n-\nas\nas\n4\n=\n=\n-\n#\n#\n=\n-\n#\na\n.\nJAN. - FEB. If MAR - - APR. is - MAY 19 ARE JULY - AUG. \" - SEPT. - - OCT. - NOV = DSC. JAM FEB. MAR - # APR. # . MAY - = JURE H . JULY - AUG. - - SEPT. 16 of OCT. # # NOV. - DEC\nDEC\nJAN\nFEB\nMAR\n1940\n1941\n1940\n1941\n. Change in composition of Long Term Treasury average\nX el the Sentary di the Tradery\nof\nCOMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM US TREASURY\nAND Dow-JONES AVERAGE OF MUNICIPAL BONDS\nYields Based on Saturday Quotations\n1940\n1941\nJAN\nFES.\nMAR.\nAPR\nMAY\nJUNE\nJULY\nAUG\nSEPT\nOCT\nNOV\nDEC\nJAM\nFEB\nMAR.\nAPR.\nMAY\nJUNE\nJULY\nAUG\nSEPT\nOCT\nNOV\nDEC\n-\n17\n.\n.\nse\na\n=\n#\n\"\nR\n10\n.\nor\n-\nM\n\"\n,\n-\n,\n\"\n,\nDI\n4\nis\n.\n1\n|\nis\n\"\n18\nse\nis\n14\n7\nBY\n.\n=\nI\n=\nao\n13\n17\n#\n29\n.\nes\nInverted Scale\nInverted Scale\nPER CENT\nPER CENT\n1.8\nLong Term Treasury\" (12 years ar more to serviced call date)\n18\n2.0\n2.0\n2.2\nt.z\n2.4\n2.4\n2.6\n2.6\nTwenty 20-Year Municipal Bonds\n1.5\n2.8\n3.0\n3.0\n3.2\n3.2\nPER\nPER\nCENT\nCENT\n60\n60\nDifferential\n40\n40\n20\n.20\no\no\n0\n14\n=\n18\nB\n-\n28\n11\n.\n-\n15\n43\n\"\n18\n-\n2\n1\nT\nIII\n.\n#\nI\n#\n⑉\ne\nIF\n.\nIf\n8.\n=\n#\n1\n.\nas\n-\ne\nN\n$0\n13\n17\n#\n\"\n.\n==\n.\n19\n-\n-\nDEC\nJAM.\nFES\nMAR\nAPR\nMAY\nAM\nJULY\nAUG\nNOT\nOCT\nNOV\nDEC\nJAIL\nFEB\nMAR\nAPIL\nMAY\nJUNE\nJULY\nAUG.\nSEPT.\nOCT:\nNOV\n1941\n1940\n499\n\"Areat è - indicares change - comportion of Larg form Treasury average\nthe of the Secretary of the Treasury\nF-124-5\n- of - - -\nRegraded Uclassi\nChart IV\n500\nCOMPARISON 07 YIELD OF NEW 25 TREASURY BOND WITH\nYIELDS OF PARTIALLY TAX-EXEMPT TREASURY BONDS\nBased on Closing Bid Prices, March 10, 1941\n1948\n1949\nPERCENT\n1950\nPERCENT\nNEW BOND\nYIELD TO NATURITY\n1.9\n1.9\nNow BOND\nYIELD TO CALL\n1.8\n1.8\nCONSERVATIVE CURVE\n1.7\n1.7\n1.6\n1.6\n1.5\n1.5\n1.4\n1.4\nOPTIMISTIC CURVE\n1.3\n1.3\n1.2\n1.2\n1.1\n1.1\n1.0\n1.0\n1948\n1949\n1950\nOffice of the Secretary of the Treasury\nF - 203\nDivision of - and -\nChart\nBID PRICES OF NEW TREASURY SECURITIES\nHourly, February 25 and 26, 1941\nDOLLARS\nDOLLARS\n1014\n1014\n1011\n1011\n2% BONDS, MARCH 15, 1948-'50\n1011\n101\n101\n101\n100\n100)\nto NOTES, MARCH 15, 1943\n100}\n100}\n100\n100\n100\n100\n10\n11\n12\n1\n2\n3\n4\n10\n11\n12\n1\n2\n3\n4\nFEBRUARY 25\nFEBRUARY 26\nTIME\n501\nOffice of the Secretary of the Trusury\nof - and /\nF - 202\nRegraded Uclas\n502\nTreasury Department\nDivision of Monetary Research\nDate\nMarch 11\n1941\nTo:\nSecretary Morgenthau\nFrom:\nMr. White\nSubject:\nFinancing of Argentine food\nshipments to Spain\nCable advice from Buenos Aires indicates\nthat the Spanish interest in the Argentine\nElectricity Company will be used as the\nsecurity for the Argentine credit to Spain\nto finance \"immediate shipments\" of meat\nand wheat to & value of 35 to 40 million\npesos (about $10 million).\nThis is the first case which has come\nto our attention of Argentine acquisition\n(probably only as collateral) of foreign-\nowned enterprises. Possibly these securities\ncan be resold in the Argentine capital\nmarket to acquire pesos to pay Argentine\ngrain and meat producers. But apparently\nthey are to be used only as collateral.\nMR. WHITE\nBranch 2058 - Room 208\n503\nKH\nPLAIN\nCalcutta\nDated March 11, 1941\nRec'd 9:11 p.m.\nSecretary of State,\nWashington.\nEleventh.\nGovernment notification March tenth requires British subjects\nholding twenty-four American securities surrender them within one\nmonth at fixed prices. Preferred stocks American power light fives\nelectric bond share fives common stocks Telandtel Anaconda Bethlehem\nChrysler electric bond share General Motors National City Bank Republic\nSocony National Power Light United States Steel Government bonds eleven\nissues.\nGROTH\nNPL\nCopy:alm\n504\nPeiping via N. R.\nJR\nDated March 11, 1941\nRec'd 1:02 p.m.\nSecretary of State,\nWashington.\n80, March 11, 2 p.m.\nAs of March 1 the Federal Reserve Bank is reported\nto have refused to issue export permits covering articles\nmade in whole or in part of silver, brass or other metals,\nincluding cloissonne, and costume jewelry.\nAn official of the bank has stated informally that\nalthough no such restriction has been promulgated the\nmatter is presently under consideration. The customs\nauthorities state they have no instructions in the\npremises but refuse clearance without & permit from the\nbank.\nThis restriction if universally applied will in\neffect eliminate the only remaining major export from this\narea.\nSent to the Department, repeated to Chungking,\nTientsin and Shanghai. By air mail to Tokyo.\nSMITH\nGV\neh:copy\n505\n(CONFIDENTIAL)\nPARAPHRASE\nA confidential telegram dated March 11, 1941 from Consul\nBrady at Rangoon reads substantially as follows:\nReliable figures show that during the two months from\nDecember 30, 1940 to February 28, 1940 there were shipped into\nChina by the Southwest Transportation Company supplies of all\nkinds for the Chinese Government to the amount of 22,026 long\ntons. It is reported that there was reopened to traffic on\nMarch 3 the new bridge across the Mekong River which in\nDecember was badly damaged by bombing. For weeks a pontoon\nferry has been used to handle traffic across the Mekong River\nand there is now being built & pontoon bridge. The old Mekong\nRiver suspension bridge is still in a wrecked condition.\nmg\nCOPY\n506\nRESTRICTED\n0-2/2657-220\nM.I.D., W.D.\nNo. 336\nMarch 11, 1941\n12:00 M.\nSITUATION REPORT\nI. Western Theater of War.\nAir: German. Daylight activity on the 10th was limited\nto attacks on shipping. Last night a heavy attack was made on\nPortsmouth.\nBritish. On the night of the 10th-11th Cologne was\nheavily attacked. Invasion ports, including Brest, Cherbourg and\nBoulogne, were also raided.\nII. Balkan Theater of War.\nGround: Bulgaria. No change.\nAlbania. The Italians report patrol action by\nthe ninth army and artillery and local infantry action by the eleventh\narmy in the Tepelini sector. The Greeks report they have repulsed\nstrong Italian attacks along a widened front in the central sector\n(Tepeleni-Klisura). It would appear that the Italians are preparing\nfor a general offensive.\nAir: Normal close support operations in Albania.\nIII. Mediterranean and African Theaters of War.\nGround: Abyssinia (Ethiopia). British forces have captured\nDambacha and are threatening Debra Marcos 32 miles to the southeast\non the road to Addis Ababa.\nLibya. Minor operations incident to the siege\nof Giarabub.\nSea: The British report an Italian cruiser has been tor-\npedoed and almost certainly sunk.\nAir: German. Harrassing attacks in the Bengazi area.\nBritish. A rather strong attack was made on Harrar,\nEthiopia.\nNote: This military situation report is issued by the Military In-\ntelligence Division, General Staff. In view of the occasional in-\nclusion of political information and of opinion it is classified as\nRestricted.\nRESTRICTED\n507\nCONFIDENTIAL\nPersphrase of Code Rediagram\nReceived at the War Department\nat 10:38. March 11, 1941.\nLondon. filed March 11, 1941.\n1. On Menday. March 10, British fighter planes flying at 30,000 feet\ncarried out three offensive everys over the French coast between Calsie\nand Beulagne but encountered m German planes. During the preceding night\nno British planes vers over the Continent.\n2. During the night of March 10-11 targets on Liverpeel Boy and the\nBetuary of the Threes were the objectives of secondary Gernea raids. The\nprincipal raid was a fairly severe German attack corried out against Porte-\nmouth. the extent of the damage done has not been determined. No British\nplanes were lest. German looses were one plane which greshed. During\ndeylight hours of March 10, 41 German please were on reconnaissance missions\nover the English Channel and the North Sea. Twenty-nine Germen please were\nplatted ever Great Britein. One Germen plans was shot down and no British\nplanes were lest. There was me damage to military installations. During\nthe night of March 9-10 Reyal Nevy desk facilities and Army berreaks in\nthe Portemonth agen suffered - damage. During the - night 120 German\nplease took part in the attack en Leader. The Manston sirfield is southern\nBritein vis attended by 18 Garmen Messerechnidt dive beabers without ump\nin the early daylight hours of March 9.\n3. Reyal Mr Torce operations in Middle Enstern theaters were as\nfellows: GOTER Italian please were shot down and 10 is probable that two\nES\nothers vere destroyed by British fighter planos over Keleyre (this my be\nCONFIDENTIAL\nRegraded Uclassified\n508\nCONFIDENTIAL\nKersive which is the Creak seee for the island of Certa - 0-3)1 - Italian\nmotor transport consentration and Italian forces in the visialty of\nTopoleni, Albenis. vere attacked w British please; Dritish bonbers mussi-\nfully cerried out a severe attack on the herber of the Albentes city of\nDurease: is the Britreen theater two Itelian please vere destroyed and the\nhighway between Amere and Keren vis bombed: in the Libyen thester the\nsirfield at Trast (Tast Kessen) sad the city of Tripeli were attenked w\nBritish bombers.\n4. Axis sir operations is the Middle Estera theaters ware as fellows:\nat Melta 18 derman planes attempted to carry out a raid but the British\nshot down one of the Gerara planes, demaged two others end drove off the\nrest; in Libya Germen bombers attacked the city of Agedabye without damage.\n5. During the night of March 9-10 a British enrge beet in the Straite\nof Dever use sunk by Corner bombs. During the preceding day Germen benbers\nattecked two British norcheat convoys along the cost const of England but\ncoused no damage.\n6. During the night of Merch 7-8 Germen sirplance attacked and council\nminor damage to the 1,370-ten British destroyer IMPERIAL is the Nediterraness\nnear Malte.\nSCANLON\nDistribution:\nSecretary of Yes\nState Department\nSecretary of Treasury\nAsst. Secretary of Var\nChief of Staff\nVer Please Division\nOffice of Nevel Intelligence\nMr Corps\n0-8\nCONFIDENTIAL\nCONFIDENTIAL\n509\nParaphrase of Code Radiogram\nReceived at the War Department\nat 9147, March 11, 1941.\nRome, filed March 11, 1941.\nThe Italian Army now has the following divisions in Albania:\n16 line infantry divisions, 5 Alpine Divisions, 2 armored divisions,\n1 motorised division. In addition to these there are the corps and\nany troops for 6 corps and 2 armies. These figures include ass Colore\ngroupment. At present the total strength of the any in effectives my\nbe placed at 420,000. It is believed that an offensive is imponding.\nThere is a report that Geleso has been given the command, but as yet\nthere is no sufficient confirmation.\nFISKE\nDistribution:\nSecretary of War\nState Department\nSecretary of Treasury\nWar Plans Division\nOffice of Naval Intelligence\nCONFIDENTIAL\nere"
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