Ask the Scholar
Page 1 of 1
I can add historical knowledge about this page.
Page image
OCR
DIARY
Book 430
August 8 and 9, 1941
Regraded Unclassified
- 0 -
Book Page
China
See War Conditions
- D -
Defense Savings Bonde
See Financing, Government
- 3 -
Economic Defense Board
See War Conditions
- 1 -
Financing, Government
Defense Savings Bonds:
Film release schedule, April 18 through
August 9
430
204
Field Organization News Letter, No, 12 -
8/9/41
207
Tennessee Valley Authority: Financial details
requested in connection with refinancing -
8/8/41
123
- X -
Keynes, John Maynard
See War Conditions: United Kingdom
- L -
Lawrence, David
Resume' of financial position provided by
Comptroller of Currency - 8/8/41
144
Louisiana
See Tax Evasion
- T -
Tax Evasion
Louisiana: Final report showing additional taxes
of $6 million, etc. - 8/8/41
106
Tennessee Valley Authority
See Financing, Government
- U - -
United Kingdom
See War Conditions: Military Planning
Regraded Unclassified
- Y -
Book Page
War Conditions
China:
Currency Stabilization Board: Fox report on
set-up - 8/8/41
430
175,178
Economic and financial report by Fox -
8/8/41
180
Economic Defense Board:
See also Book 421
First meeting to be held August 13; HMJr
and White to attend - 8/8/41
101
Exchange market resume' - 8/8-9/41
193,248
Lend-Lease:
Purchases - weekly report - 8/8/41
125
Military Planning:
Reports from London transmitted by Halifax -
8/8-9/41
194,249
United Kingdom:
Keynes, John Maynard: Farewell letter
acknowledged - 8/8/41
133
Regraded Unclassified
TREASURY DEPARTMENT
FOR RELEASE, MORNING NEWSPAPERS,
Friday, August 8, 1941.
The Secretary of the Treasury, by this public notice, invites
tenders for $100,000,000, or thereabouts, of 91-day Treasury bills,
to be issued on a discount basis under competitive bidding. The bills
of this series will be dated August 13, 1941, and will mature
November 12, 1941, when the face amount will be payable without
interest. They will be issued in bearer form only, and in denomina-
tions of $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and cranches
up to the closing hour, two o'clock p.m., Eastern Standard time,
Monday, August 11, 1941. Tenders will not be received at the
Treasury Department, Washington. Each tender must be for an even
multiple of $1,000, and the price offored must be expressed on the
basis of 100, with not more than three ducimals, C. E., 99.925.
Fractions may not be used. It is urged that tenders be made on the
printed forms and forwarded in the special envolopes which will be
supplied by Federal Reserve Banks or Branches on application therefor.
Tenders will be received without deposit from incorporated
banks and trust companies and from responsible and recognized dealers
in investment securities. Tenders from others must be accompanied
by payment of 10 percent of the face amount of Treasury bills applied
for, unless the tenders are accompanied by an express guaranty of
payment by an incorporated bank or trust company.
26-93
Regraded Unclassified
2
- 2 -
Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announce-
m.nt will be made by the Secretary of the Treasury of the amount end
price rango of accepted bids. Those submitting tenders will be
advised of the acceptance or rejection thereof. The Secretary of
the Treasury expressly reserves the right to accept or reject any or
all tenders, in whole or in part, and his action in any such respect
shall be final. Payment of accepted tenders nt the prices offered
must be mude or comple ted at the Federal Reserve Bank in cash or
other imm.diately available funds on August 13, 1941.
The income derived from Treasury bills, whether interest or gain
from the sale or other disposition of the bills, shall not have any
exemption, 28 such, and loss from the sale or other disposition of
Treasury bills shell not heve any special treatment, 35 such, under
Federal tax Acts now or hereafter unacted. The bills shall be sub-
ject to estate, inheritance, gift, or other excise taxes, whether
Federal or State, but shill be exempt from all taxation now or here-
after imposed on the principal or interest thereof by any State, or
any of the possessions of the United States, or by any local taxing
authority. For purposes of taxation the amount of discount at which
Trensury bills are originally sold by the United States shall be
considered to be interest.
Regraded Unclassified
3
- 3 -
Treasury Department Circular No. 418, as emended, and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank or Branch.
-000-
Regraded Unclassified
August 8, 1941
8:52 a.m.
HMJr:
Hello.
Alfred
Levinger:
Good morning.
HMJr:
Mr. Levinger.
L:
Yes, Mr. Secretary.
HMJr:
Hello. Did you hear me?
L:
Yes, I hear you.
HMJr:
Please don't buy or sell anything for me
today.
L:
Right.
HMJr:
You can reinstate whatever orders you have
tomorrow.
L:
Tomorrow we can reinstate.
HMJr:
Yes. Because I'm testifying today, and I
don't want anything in.
L:
On that preferred stock, it sold yesterday
at an eighth above our limit.
HMJr:
Yes.
L:
Tomorrow would it be all right if necessary
to go one eighth or a quarter above that.....
HMJr:
Oh, sure. I give you a half B. point leeway.
L:
All right.
HMJr:
Half a point leeway. But don't do anything
today.
L:
Thank you very much.
HMJr:
All right.
L:
Good-bye.
Regraded Unclassified
5
August 8, 1941
My dear Mr. President:
I am sending you herewith 8. copy
of a statement which I am about to give
before the Senate Finance Committee.
I hope that you will like the
simplified plan which we have worked out
for people with incomes below $3,000.
This carries out your suggestion in your
letter to Mr. Doughton. I am very en-
thusiastic about it, as I think it will
save millions of people lots of trouble
and worry.
Yours sincerely,
(Signed) Henry
The President,
The White House.
By Messonger Blackerell
10:30am
8/8/41
Enclosed: Copy of Secy's proposed
testimony to be given to-day before
Senate Finance Committee.
Regraded Unclassified
6
August 8, 1941
My dear Mr. President:
I am sending you herewith 8. copy
of a statement which I am about to give
before the Senate Finance Committee.
I hope that you will like the
simplified plan which we have worked out
for people with incomes below $3,000.
This carries out your suggestion in your
letter to Mr. Doughton. I am very en-
thusiastic about it, 88 I think it will
save millions of people lots of trouble
and worry.
Yours sincerely,
(Signed) Henry
The President,
The White House.
By Messenger Blackwell
0.8/5/15
Enclosed: Lopy of Secy's proposed
testimony to be given to-day before
Senate Finance Committee.
Regraded Unclassified
?
August 8, 1941
My dear Mr. President:
I am sending you herewith a copy
of a statement which I am about to give
before the Senate Finance Committee.
I hope that you will like the
simplified plan which we have worked out
for people with incomes below $3,000.
This carries out your suggestion in your
letter to Mr. Doughton. I am very en-
thusiastic about it, as I think it will
save millions of people lots of trouble
and worry.
Yours sincerely,
(Signed) Heary
The President,
The White House.
By Messanger Bladervell
10:30
5/5/41
Enclosed: Lopy of Secy's proposed
testimony to be given to-day before
Senate Finance Committee.
Regraded Unclassified
8
August 8, 1941
Dear Eleanor:
I am inclosing herewith copies
of my letter to the President and the
President's letter to Mr. Doughton.
I an also sending you a copy of
my statement before the Senate Finance
Committee today.
In all three of these copies, I
have underlined in blue pencil what
both the President and I have to say
about joint tax returns. I thought
you would be interested in these in
view of what you said in your column
yesterday.
Affectionately,
(Signed) Henry
Mrs. Franklin D. Roosevelt,
Hyde Park, New York.
Enclosures: 7/31/41 letter from President to
Doughton. Testimony Secy. is to
give before Senate Finance Committee.
Dress from seay 7/31/11
Regraded Unclassified
9
August 8, 1941
Dear Eleanor:
I an inclosing herewith copies
of my letter to the President and the
President's letter to Mr. Doughton.
I an also sending you & copy of
my statement before the Senate Finance
Committee today.
In all three of these copies, I
have underlined in blue pencil what
both the President and I have to say
about joint tax returns. I thought
you would be interested in these in
view of what you said in your column
yesterday.
Affectionately,
(Signed) Heary
Mrs. Franklin D. Roosevelt,
Hyde Park, New York.
Enclosures: 7/31/41 letter from President to
Doughton. Testimony Secy. is to
give before Senate Finance Committee.
Learn feom Legita Ke 9/2/91
Regraded Unclassified
10
August 8, 1941
Reading copy of Secretary's testimony before
the Senate Finance Committee at ten o'clock
A.M., August 8th, 1941.
My purpose in being here today is to
discuss taxation as an essential part of
national defense. Our great problem in
providing for the defense of the nation 1s
fundamentally the problem of production -- of
actually building planes and tanks, ships
and guns with labor, management, machinery
and raw materials. To solve that problem
without impairing our economy or weakening
the structure of democracy, our fiscal policy
must be adapted to the needs of the times.
Regraded Unclassified
- 2 -
12
on April 24 I discussed with the Ways and
Means Committee of the House the need of
producing $3,500,000,000 annually in additional
revenue. The Treasury Department presented
a suggested program for raising that amount
of money. As it passed the House, this bill
will produce approximately $3,200,000,000
annually in additional revenue. In my opinion,
it is very important that the revenue yield
be raised to at least the original $3.5 billion
level. It is also important that the bill
be passed as promptly as possible. Income
taxpayers and excess profits taxpayers should
know as quickly as possible what their taxes
on 1941 income and profits are going to be, since
more than seven months of the year have already elapsed.
Regraded Unclassified
13
- 3 -
The excise taxes and the estate tax cannot be
imposed retroactively and every day's delay
in the passage of this tax bill costs the
Treasury several million dollars in revenue
from those sources.
The rapid developments of the last few
months have made this bill inadequate even
before it 1s passed. Since my statement
before the Ways and Means Committee, many
things have happened. Two and one half months
ago the President proclaimed the existence of
an unlimited national emergency.
Regraded Unclassified
14
- 4 -
He called upon "all loyal citizens to place
the nation's needs first in mind and in action
to the end that we may mobilize and have ready
for instant defensive use all of the physical
power, all of the moral strength and all of
the natural resources of this nation."
Since I appeared before the Ways and Means
Committee, the amount of appropriations,
authorizations and recommendations over and
above the Budget has increased by about
$14,000,000,000, thus completely changing the
fiscal picture and greatly increasing the
need for revenue.
Regraded Unclassified
15
- 5 -
Since I appeared before the Ways and Means
Committee, prices and the cost of living have
increased at an accelerated rate, thereby
accentuating the need for a strong fiscal
program.
In the light of these and other
developments resulting from "all out" defense,
I should like to point out what, in my
opinion, will be necessary in "all out"
taxation to support such a program.
Regraded Unclassified
16
- 6 -
First of all, we shall need more revenue --
much more revenue. The defense program is
an absolute necessity. It must be paid for.
Insofar as possible, it should be paid for
now. Borrowing should be kept to a minimum to
maintain our fiscal strength. The rise in
the Federal debt means merely that the
taxpayer's burden 1s being postponed--that
both principal and interest must be paid
later out of higher taxes collected at a time
when they may be harder to pay and less
willingly paid than now.
Regraded Unclassified
17
- 7 -
Along with increased taxation should go
the maximum reduction in the ordinary non-defense
expenditures of Government. The burden of
paying for defense is so heavy that it should
be relieved at every possible point.
Increased taxation 1s needed also to
maintain economic stability. Rising purchasing
power 1s exerting increasing pressure on the
prices of many kinds of goods, while at the
same time production of these goods is being
increasingly curtailed by the necessity
of diverting our resources to defense uses.
Regraded Unclassified
18
- 8 -
This complication of increased demand and
restricted output 1s causing inflationary price
rises which threaten to increase the cost of
the defense program, unbalance family budgets
and seriously disturb our economic life.
This larger needed revenue should come
from all sources where there 1s ability to
pay -- that's what an "all out" tax program
means. The people of this country have never
been more ready to make sacrifices for the
common good. Our tax program has not kept
pace with the defense program. We are still
thinking too much of helping this group or
that to escape its share of the burden.
Regraded Unclassified
19
- 9 -
We have now come to the point where it is
a matter not merely of fundamental equity,
but of the utmost necessity that all exemptions
from taxation be reduced to the absolute
minimum.
An "all out" tax program for defense
should reach ability to pay at several points
not now fully tapped:
1. In my opinion such a tax program
might well involve a substantial lowering of
personal exemptions and a consequent
broadening of the base of the income tax,
if simultaneously we take immediate steps
to remedy defects in the application of the
principle of ability to pay in other
parts of the tax structure.
Regraded Unclassified
30
- 10 -
Under the bill before you, the base has been
broadened to add about two million new
taxpayers, but even so there will remain
a relatively large proportion of the population
in the lower income groups which will not be
directly affected by the income tax. A
further lowering of the exemptions would
produce some additional revenue and in addition
it would give millions of Americans an
opportunity -- a welcome opportunity -- to
make a direct contribution through taxes to
the defense of their country. It would enable
them to feel that they were participating
personally and directly in the defense program.
Regraded Unclassified
21
11 - I
As the President wrote to Chairman Doughton
on July 31, "Most Americans who are in the
lowest income brackets are willing and proud
to chip in directly even if their individual
contributions are very small in terms of
dollars."
But I believe this Committee will agree
with me that we ought not to accept such
sacrifices, even though willing sacrifices,
from millions of people with low incomes on
whom the burden of other types of taxes falls
most heavily, unless we reach in other places
ability to pay which 1s escaping 1ts fair
share of taxes. Among these are the following:
Regraded Unclassified
22
- 12 -
2. The excess profits tax exempts profits
of even the most prosperous corporation,
except to the extent that such profits are
in excess of its average profits for the years
1936-1939. Surely Congress will not wish
to impose additional taxes on millions more
of our low income group, unless it also imposes
the excess profits tax on the exempt excess
profits of such corporations.
3. Families pay lower Federal income
taxes when both husband and wife receive
income than when the same total amount of income
1s received by only one of them. This 1s 8
discrimination of which many wealthy people
have taken advantage by large gifts of income-
producing property between husband and wife.
Regraded Unclassified
23
- 13 -
Furthermore, in at least eight States of the
Union, Federal income taxes are made substantially
lower than in the remaining States because the
local law permits the splitting of income
between husbands and wives. Here are
discriminations against the rest of the
taxpayers which, I believe your Committee will
agree, must be eliminated 1f we are to extend
the income tax downward to include millions of
persons with low incomes. The discriminations
can be eliminated by requiring husband and
wife to file a single joint return with
appropriate relief granted only where both
husband and wife work outside the home.
Regraded Unclassified
21
- 14 -
4. For years, the concerns engaged in
extracting certain of our natural resources,
notably oil, have been granted far greater
allowances for depletion than can be justified
on any reasonable basis of tax equity. If
the income tax 1s to be extended to lower
incomes, this privilege of tax escape should
simultaneously be removed.
5. A few months ago, the Congress
eliminated the tax-exemption privilege
from new issues of Federal securities. The
purchasers of new State and local
securities still enjoy this exemption.
Regraded Unclassified
25
- 15 -
The exemption was inequitable and expensive
even in more normal times. It cannot be
borne longer in a time like this, and especially
if we are to increase the direct tax burdens
of persons with small incomes.
6. In its suggestions to the Ways and
Means Committee, the Treasury recommended
substantial increases in estate and gift taxes,
and lower exemptions. In part, this
recommendation was followed, but, in my
opinion, the estate and gift taxes should
reach more estates and provide more revenue
if we are going to tax smaller incomes.
Regraded Unclassified
26
- 16 -
Those are some of the things that I mean
when I say that an "all out" tax program for
defense must go far beyond the present bill.
There 1s another condition which I would
attach to lowering the personal exemptions.
I think we ought not to take into the income
tax system millions of new taxpayers with
small incomes without simplifying the way
in which their tax is computed.
Take, for example, a person with a $900
salary. Under the present law, he first
figures out what deductions he has -- taxes
paid, interest paid, contributions and so on.
Regraded Unclassified
27
- 17 -
Then he computes his earned income credit.
Then he subtracts his personal exemptions
from his income after déductions. On the
balance, under rates of the bill before you,
he computes a surtax at 5 percent. Then he
goes back to the income and deducts his
earned income credit. On the balance, he
computes a normal tax at 4 percent. He then
adds the normal tax and the surtax and takes
10 percent of the total for defense tax.
He adds the defense tax to the normal tax
and surtax and finally arrives at his income
tax.
Regraded Unclassified
28
- 18 -
When he started to fill out his return,
he may have been full of pa triotic enthusiasm
to pay his share toward the defense program,
but by the time he has finished his last
computation his cheerfulness may well have
collapsed under the strain. It 1s difficult
enough for persons with substantial incomes
who are used to dealing with financial papers
and who can afford high-priced lawyers and
accountants to make their computations for them.
The person with a small income should not be
put to this annoyance and possible expense.
Regraded Unclassified
29
- 19 -
Furthermore, the checking of these tax
computations by the administrative authorities
takes time. Frequent errors are found which
must be rectified, requiring correspondence
and further annoyance of the taxpayer as
well as expense to the Government. We in the
Treasury do not enjoy pestering the taxpayer
any more than he enjoys being pestered by us.
For taxpayers with relatively large
incomes, refinements in determining income
and computing taxes are troublesome but are
necessary in the interest of equity. For small
taxpayers, however, especially those now taxed
for the first time, these refinements are
cumbersome and confusing without serving
any important purpose.
Regraded Unclassified
30
- 20 -
The income taxes of millions of people can be
determined with acceptable accuracy by less
involved methods.
As the President suggested to Chairman
Doughton, there should be a provision in the
case of the small taxpayer "for a straight,
simple payment of some small contribution to
the national tax income through a simple agency
and on a simple form."
For such taxpayers a plain and easily
understood table could be provided with the aid
of which the small taxpayer could compute his
tax bill in a very few moments. He would be
spared time, trouble and annoyance and the
Government would be spared expense.
Regraded Unclassified
- 21 -
31
To indicate more clearly what I have in
mind, I have had prepared a sample table
showing how this might be worked out in
practice for incomes up to $3,000. This is
only a preliminary table, and improvements
and changes will no doubt be desirable, but
it will illustrate how the proposal can be
applied.
The taxes imposed by the bill before you
are very heavy; the taxes of an all-out program
would be even heavier. I am convinced that
the people are not opposed to heavy taxes, that
in fact they favor heavy taxes because they
know that the alternatives are much more onerous.
Regraded Unclassified
- 22 -
32
At a time when expanding incomes are operating
to force prices upward many kinds of measures
must be employed if prices are to be kept
under control. Without heavy taxation, the
other measures have little chance to succeed.
Rising prices would take much more away
from our people now and in the future than
higher taxes now will take. Under the tax
bill in its present form, a married couple
with no dependents, having a net income of
$5,000 a year, will have its Federal income tax
increased by $198, or 4 percent of its income.
Regraded Unclassified
33
- 23 -
Assuming that two-thirds of the family's income
1s spent on items affected by a changing
cost of living, an increase in the cost of
living of 6 percent would impose as great an
additional burden on this family as would the
proposed income tax. The cost of living
index has increased 51 percent since September,
1940. It 18 clear from this simple illustration
that rising prices tax the family income just
as surely as do income taxes. Although, as
prices rise, the incomes of some families will
increase, many incomes will not increase and
most incomes will not increase as fast or as
much as prices.
Regraded Unclassified
34
- 24 -
If, in an attempt to protect the incomes
of our people, we hold down taxes and as a
result the cost of living rises, we shall have
taxed them just as surely as 1f we had levied
on them directly -- and we shall still have
the inflated costs of defense to pay later
from taxes.
An all-out tax program will build public
morale in an all-out defense program. By
reducing the necessity for borrowing, it will
strengthen confidence in the impregnable
fiscal position of the Government.
Regraded Unclassified
35
- 25 -
By contributing to the control of prices, it
will help prevent the demoralization which
would result from inflation. By distributing
the defense burden fairly, it will help unite
the nation. It will make all the people equal
partners in sharing the cost of the defense
of our country.
-000-
Regraded Unclassified
36
I
I
Page 10.
a further lowering of
exem fitions would
produce # 303.
Page 12
Excess profits tax
# A ame or
as : much more as committee
wish
Page/2,
Joint return
$ 258.00
Page 14
% Oil depletion # 86.00
Page 14 taxents States. cities $ 222.00
eventually when and all autstanding retired
Page 15, Estateand seftace
#: 195.00
Regraded Unclassified
Estimated increase in revenue yield 1/, at estimated
income levels used in estimates of revenue effects of
H.R. 5417, of Treasury proposals before
Senate Finance Committee, August 5, 1941.
I. Excess profits tax
Under the Treasury excess profite tax plan
modified by reversing the precedence of deduction
of the income and excess profits taxes, the same
increase in the excess profits tax as raised by
H.R. 5417 could be secured with a decrease in the
effective rate of excess profits tax to adjusted
excess profits net income of
6.3 percent
I. Lowered exemptions
If the present exemptions of $2,000 and $800
are reduced to $1,500 and $750 respectively, the
estimated net increase in revenue would be
$303.0 millions
III, Landatory joint returns
If mandatory joint returns are required but
referential treatment of earned income 1s
allowed, the net increase in revenue would be
$258.0 millions
IV. Percentage depletion
If the method of computing depletion based
on statutory percentages of gross income 18
abolished, the net increase in revenue would be..
8 86.0 millions
V. Texation of State and local securities
If the interest on all future issues of
State and local securities 18 made subject to
all Federal income taxes, there would be 8. small
and indeterminate increase in revenue commencing
in the second year after the removal of tax
exemption and increasing gradually reaching an
estimated average increase in yield when sub-
stantially all present 1ssues have been refunded
and made taxable, some 50 years hence, amounting
to
$222.0 millions
VI. Estate and gift taxes
If the specific exemption under both the
estate and gift taxes 18 reduced from $40,000
to 825,000 and the insurance exclusion under the
estate tax 18 reduced from $40,000 to $25,000,
The estimated increase in revenue would be:
Under the Treasury rate schedules
$195.3 millions
Under the schedules in H.R. 5417
$ 56.4 millions
As compared to the yield of H.R. 5417 8.8 passed by the
Houne of Representatives August 4, 1941.
Regraded Unclassified
38
FORM 1040 A
UNITED STATES
PREMIUM DEPARTMENT
Names - OPTIONAL INDIVIDUAL INCOME AND DEFENSE TAX RETURN
1941
(Auditer's Stampi
Applicable to salaries, weges, and other
incidental income not in excess of $3,000
Do not write in the spaces
(NOTE. you are engaged in & profession or business (includ-
Serial
No.
inc faming), or are & member of & partnership, or had income
-
or losses from the sale of property, use Form 2040.)
Nil I
To be the - & Callector of Internal Imm le - deld - . lates Bled of IN,
(Cashier's Stamp)
PRINT NAME AND HOME OR RESIDENTIAL ADDRESS PLAINLY BELOW
(Nom) (Use gives - of M and vis, If this is . joint nim)
(Street and mis, of real resule)
(hat allies)
(Compy)
(State)
Cash-Check-M.
QUESTIONS
What is your occupation?
4. Are items of income or deductions of both husband and wille included in
Check whether you are a citizen
or . resident alien
this return?
Did you file a return for any prior year?
If so, what was the latest
5, State name of husband or wife if . separate return VM made, personal crump-
year?
To which Collector's office was it sent?
tion, / any. claimed thereon, and the Collector's office to which it was wat:
Item No.
1. Salaries and other compensation for personal services
$
2. All other income
3.
Total income
$
4.
Tax to be paid (from Schedule A on reverse side)
$
Tyclanation of status with respect to personal exemption and credit for dependents
e Personal
(B) Credit for Depandenta
State
Credit Chimad
Now of Dependent and
Credit Chamal
Unler 18
Over 18
Years Old
Years Old
Ingle, or married and not living
with husband or wife
$
Barried and living with husband
or wife,
Bead of family (explain below)
Reason for support
if over 18 years old
AFFIDAVIT.
1. we swear (or affirm) that this return has been examined by me/ua, and, to the best of my/our knowledge and belief, is . true,
Drrect, and complete return, made in good faith, for the taxable year stated, purmant to the Internal Revenue Code and regulations
burd under authority thereof; and that I/we had no income from sources other than stated hereon.
obseribed and sworn to by
live me this
day of
1941.
(Separe)
Cignatures and tab of der administring
Cigaren)
(If de a 4 - news (wi - les 1 . - le vipsi by bath
- and * le - la - - before . - - by the -
1 4 E ]
the
- M - e bath proposes the - is - be - -
I I I
1
Regraded Unclassified
39
MI
If your total
If your total
If your total
Your tax Is:
Your tax to:
Income to:
income 10:
Your tax to:
Income 10:
To
Single
Married
Single
Married
From
From
From
To
Single
To
Marrie
person*
person*
person"
person"
person"
person
#1
#750
-
-
@1,501
$1,525
$62
#1
$2,251
$2,275
$126
159
751
775
$1
-
1,526
1,550
64
2
2,276
2,300
128
61
776
800
2
-
1,551
1,575
66
3
1,576
68
4
2,301
1,600
2,325
130
63
801
825
3
-
2,326
2,350
132
65
826
850
5
-
1,601
1,625
70
6
2,351
2,375
134
6a
851
875
7
-
1,626
1,650
73
7
2,376
2,400
136
70
876
900
9
-
1,651
1,675
75
5
1,676
1,700
77
10
2,401
2,425
139
72
901
925
11
-
2,426
2,450
141
74
926
950
13
-
1,725
79
12
2,451
2,475
143
76
1,701
951
975
15
-
1,726
1,750
81
14
2,476
2,500
145
78
976
1,000
17
-
1,751
1,775
83
16
1,776
1,800
85
19
2,501
2,525
147
80,
1,001
1,025
19
-
2,526
2,550
149
&
1,026
1,050
22
-
1,801
1,625
88
21
2,551
2,575
151
85
1,051
1,075
24
-
1,626
1,850
90
23
2,576
2,600
153
87
1,076
1,100
26
-
1,851
1,875
92
25
1,101
1,125
28
1,876
1,900
94
27
2,601
2,625
156
89
-
2,626
2,650
158
91
1,126
1,150
30
-
1,151
1,175
32
-
1,901
1,925
96
29
2,651
2,675
160
93
34
1,950
98
31
2,676
2,700
162
95
1,176
1,200
-
1,926
1,951
1,975
100
33
1,201
1,225
36
-
1,976
2,000
102
36
2,701
2,725
164
97
1,250
39
2,726
2,750
166
99
1,226
-
1,251
1,275
41
-
2,001
2,025
105
38
2,751
2,775
169
102
1,276
1,300
43
,
2,026
2,050
107
40
2,776
2,800
172
104
2,051
2,075
109
42
1,301
1,325
45
-
2,076
2,100
111
44
2,801
2,825
174
106
1,326
1,350
47
2,826
2,650
177
108
-
1,351
1,375
49
-
2,101
2,125
113
46
2,851
2,875
180
110
1,376
1,400
51
-
2,126
2,150
115
48
2,876
2,900
183
112
2,151
2,175
117
50
1,401
1,425
53
-
114
2,176
2,200
119
53
2,901
2,925
186
1,426
1,450
56
-
2,926
2,950
189
116
1,451
1,475
58
-
2,201
2,225
122
55
2,951
2,975
192
119
1,476
1,500
60
-
2,226
2,250
124
57
2,976
3,000
195
121
o
For each dependent, subtract @400 from your total income and use the balance to
determine your tax.
Regraded Unclassified
10
TREASURY DEPARTMENT
goo w -
INTER-OFFICE COMMUNICATION
DATE August 8, 1941
TO
Secretary Morgenthau
FROM Xr, Cochran
STRICTLY CONFIDENTIAL
At 18:30 this noon, upon the return of the Secretary from the Capitol, I
summarized to him my attached memorandum of this date to the effect that clearance
had been obtained from the Department of State for the direct exchange of notes
between the Secretary of the Treasury and the Soviet Ambassador on the subject of
Russian cold. I presented to the Secretary a letter which I had drafted for his
signature. making the one slight change indicated in my memorandum. A copy of
the letter is attached 88 a second enclosure. The Secretary signed this, which I
explained was in the exact terms, except for the one amell alteration, of the
draft correspondence which had been submitted to the Secretary by the Department
of State with Mr. Welles' letter of July 16. The Secretary asked that I obtain
the initials of my colleagues, Measrs. Bell, Foley and White, to the carbon of
the letter which he had signed and returned to me. After being received by the
Secretary. I took the signed letter and my menorandum to General Counsel Foley,
who had Mr. Luxford with him. Mr. Foley also had prepared a letter for this situe-
tion. It differed from my draft in that it contained en additional and final DETE-
great with respect to the termination of the agreement. When I explained to
Mr. Foley that my clearance from the State Department was rood only insofer pe the
terms originall drafted in the Department of State were concerned, Kr. Foley telé-
phoned Assistant Secretary of State Acheson and obtained clearance for the final
paragraph.
Mr. Luxford then proceeded to rewrite Kr. Foley's letter, with the new pare-
Deph added. It was understood that be would submit it to Mr. White and that Xr.
7:1ey and I would initial it later.
Upon returning from luncheon, I found that Meanrs. Foley. White and Luxford
last initialed the letter as drafted by me and signed by the Secretary, since
13. White would not initial the letter as drafted by Mr. Foley, containing the
added untegraph. I spoke with Mr. Luxford and asked him to provide me, neverthe-
Lega: with Mr. Foley's dreft, although not initialed.
When the Secretary called me to his office at 3:05, with the Soviet Ambi sador
valting in his outer office, I gave his the two drafts, one bearing All of our ini-
Secretary said that he desired to use the letter containing the added paragraph,
timle. and the other without any initials. I explained the situation. The
Upon leaving the Secretary's office. he received Mr. Ounensity. At 3:15 the
bad inserted the date August 2 in two places, E.B. well at giving his communication
Secretary my telephoned me that he had signed the letter with the added paragraph, end
this date. His messenger brought the letter to me. 1 had explained to the might Secretary
know we the date of the note of the Soviet Ambaeeador. and then date ours accordingly,
that had left the blank spece at the top and in the first line until we
While the Anbassador was still with him, the Secretary had his messenger show ne
Regraded Unclassified
41
- 2 -
the letter which he had signed, with the three dates written in by pen. I have
inserted these dates in the copy of the letter which the Secretary actually signed,
and which is attached as a third enclosure.
Juin
42
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE August 8, 1941
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Assistant Secretary of State Acheson told me at our Foreign Funds Control
meeting yesterday evening that he had not succeeded in bringing up with Under
Secretary Welles at his 2:30 conference yesterday afternoon the question of an
exchange of notes on Russian gold. He hoped, however, to see Mr. Welles at 5:30
yesterday evening, since the Under Secretary WAS leaving Washington last night.
At 10:45 this morning Mr. Acheson called me to let us know that he had die-
cuesed the question with Under Secretary Welles and subsequently with Secretary
Bull, and it was agreed that the State Department should offer no objection to
the direct exchange of notes between the Secretary of the Treasury and the Soviet
Anbassador which Mr. Morgenthau desired. I told Mr. Acheson that I would get
this information directly to Secretary Morgenthau as soon Be he returns from the
Congressional hearing which he is attending this forenoon. Mr. Acheson would be
glad to have Secretary Morgenthau call him if there is any question. Mr. Acheson
will be at the Department of State this forenoon, but is coming to the Treasury
nt 2:45 to attend a meeting in Mr. Foley's office.
Mr. Acheson assumed that the notes would be in the terms submitted to the
Treasury Department with Mr. Welles' letter of July 16. There would presumably
have to be one alteration in Mr. Morgenthau's reply to Mr. Oumaneky, since the
reply drafted in the Department of State was written with the idea that it would
be signed by the Secretary of State, end consecuently refers therein to the
Secretary of the Treasury in the third person. Mr. Acheson was not sure whether
Mr. Morgenthau would desire that his letter refer to the "Government of the United
States" or the "Treasury of the United States".
With the idea in mind that the Secretary's note should commit the "Government",
I have drafted B. now letter to the Soviet Ambassador for the Secretary's signature,
merely changing from the third to first person insofer as the Secretary of the
Treasury 1s concerned.
Jul
Regraded Unclassified
Ky dear Mr. interentor:
the receipt is acknowledged of your poso of August
1941. is which you state that the devermment of the Union of
Sevies Secialist Reyablics would approciate certain ASSUPARATE
free the deversment of the United States relating to the pur-
share of Seviet gold is the United States.
la excemements of Junuary 31 and February 1. 1934,
1, as Secretary of the Treasury, stated that, until further
notice, the United States would buy gold imported from abroad
at the rate of #35 Mr fine trey enror, less the usual sist
charges and less one-fourth of cme percent. all subject to 068-
pliance with the regulations inward under the Gold Reserve Ast
of 1934. Deah gold purchases have been made continuously there-
after and without discrimination.
the foregoing continues to be the policy of the
Deverament of the United States and assurances are given to the
Devernment of the Union of Seviet Socialist Republics that as
prohibitive or restrictive measures will be applied to the 65-
pert or import of Seviet gold or silver which will not be applied
to all other countries.
I M, of Lear Mr. Ownersky,
Tery sincerely yours.
Secretary of the Treasury.
are Emellency
BOT KENT
Constantine A. Ownersity.
inhanceder of Union of Seviet
Sectalist Republics.
Initialed: HMC DWB HDW EHFJr AVL
HMC:lap-E/E/41
Regraded Unclassified
Address 2, 1941
My dear Mr. Ambessador:
The receipt is acknowledged of your note of August 2,
1941, in which you state that the Government of the Union
of Soviet Socialist Republics would appreciate certain
assurances from the Government of the United States
relating to the purchase of Soviet gold in the United
States.
In announcements of January 31 and February 1, 1934,
I, as Secretary of the Treasury, stated that, until further
notice, the United States would buy gold imported from
abroad at the rate of $35 per fine troy ounce, less the
usual mint charges and less one-fourth of one percent, all
subject to compliance with the regulations issued under the
Gold Reserve Act of 1934. Such gold purchases have been
made continuously thereafter and without discrimination.
The foregoing continues to be the policy of the
Government of the United States and assurances are given
to the Government of the Union of Soviet Socialist
Republics that no prohibitive or restrictive measures will
be applied to the export or import of Soviet gold or silver
which will not be applied to all other countries.
The foregoing assurances are understood to be in effect
until August 2. 1942.
I as, my dear Mr. Dumansky.
Very sincerely yours,
(Signed H. Morgenthau, Jr.
Secretary of the Treasury.
His Excellency,
Constantine A. Oumansky,
Ambassador of Union of Soviet
Socialist Republics.
HMC:nrd - 8/8/41.
Regraded Unclassified
45
THE SECRETARY OF THE TREASURY
WASHINGTON
not med
aug. 8.2
1941
My dear Mr. Ambassador:
The receipt is acknowledged of 7931 note of August
1941. in which you state that the Governes of the Union of
Soviet Socialist Republics would approciate ertein assurances
from the Government of the United States Ni iting to the pur-
chose of Soviet gold in the United States.
In announcements of January 31 and February 1, 1934,
I, P.S. Secretary of the Treasury, stated shat, until further
notice, the United States would buy gold imported from abroad
at the rate of $35 per fine troy ounce, less the usual mint
charges and less one-fourth of one percent, all subject to com-
oliance with the regulations issued under the Gold Reserve Act
of 1934. Such gold purchases have been made continuously there-
after and without discrimination.
The foregoing continues to be the policy of the
Government of the United States and assurances are given to the
Government of the Union of Soviet Socialist Republice that no
prohibitive or restrictive measures will be applied to the ex-
port or import of Soviet gold or silver which will not be applied
to all other countries.
I am, my dear Mr. Ounansky,
Very sincerely yours,
Secretary of the Treasury.
Eis Excellency
Constantine A. Oumanaky,
Ambassador of Union of Sioviet
Socialist Republice.
Regraded Unclassified
EMBASSY OF THE
UNION OF SOVIET SOCIALIST REPUBLICS
WASHINGTON, D.C.
August 2, 1941
my dear Mr. Secretary:
For a number of years purchases by the Union of
Soviet Socialist Republics in the United States of
America have greatly exceeded exports from the Soviet
Union to the United States and it is probable that this
condition will continue to exist for some time. In view
of this situation the Government of the Union of Soviet
Socialist Republics may find it desirable to export gold
to the United States of America in an amount sufficient
to enable it to meet obligations which it has already
made or the making of which is under contemplation. It
yould, therefore, appreciate assurances from the Govern-
ment of the United States that the State Bank of the
Union of Soviet Socialist Republics will be permitted
without hindrance to export gold into the United States
for
The Honorable
The Secretary of the Treasury
Regraded Unclassified
- 2 -
for the purpose indicated, that the Treasury of the
United States will purchase such gold, and in parti-
cular that the Government of the United States of
America will not take with respect to the Union of
Soviet Socialist Republics any measures prohibiting
or curtailing exports or imports of gold or silver
which shall not be applied with respect to all other
countries.
I em, my dear Mr. Morgenthau,
Very sincerely yours,
C.
Regraded Unclassified
48
August 8, 1941
2:00 p.m.
PRICE CONTROL
Pronont:
Mr. Daggett
Miss Michener
Mr. Bell
Mr. Gaston
Mr. O'Connell
Mr. Marray
Ir. Foley
Mr. White
All right, let's 70.
Mite:
Mr. Kuhn ourlit to be here, because from now on
he ou ht to fix this up.
........
Let's "° right ahead. Somebody read it.
Lite:
Nant me to read it?
....Jr:
Sure.
Lite:
"I am in full agreement with the objectives
of the Emergency Price Control Bill, and with
the concral methods by which the bill seeks to
attain these objectives."
:
Ickes rants somebody to to at three o'clock
to sit with him on & meetin~ for B. pipeline. Who
world that be?
delay;
Kades.
All right, send him. Does Ickes know Mades?
Sure, he used to he Assistant General Counsel.
Regraded Unclassified
49
- 2 -
S.M.Jr:
that is what I thought.
Shell I ston at every raph or shall we
70 through the whole thing?
The whole thing.
Wite:
" /e have been talking about the problem of pre-
venting inflation for 2 long time, but until
vegently the question has been largely academic.
Now, however, we AZO faced with the urgent,
practical necessity of rappling with it. e
are faced with S situation ripe for the develop-
ment of inflation.
"In many respects the price situation today
closely resembles that of the corresponding
period in 1916, when, as we now know, inflation
WAS actually on the way. We have now, as we had
then, a moderate rise in the cost of living,
& creater rise in the wholesale price index, and
a sharp rise in the prices of basic commodities.
It is the latter rise which constitutes the dan-
ger signal. Basic commodity prices rise first;
the wholesale price index slways lass greatly
behind the index of basic commodities, while
the cost of living does not show anything like
the full effects of inflation until long after
the seeds of inflation have taken root.
"I do not mean to imply that price rises have
already cone so far that there is no stopping;
that it is too late to prevent inflation. But
stron- forces are under way which will end in
inflation unless /e do something about it.
Obviously, the time to do something about in-
flation is before it occurs, not after it has
gathered momentum.
"The forces now in operation makin- for further
price rise 278 both potent and persistent.
Regraded Unclassified
50
- 3 -
"Our defense expenditures are rapidly increasing.
During the fiscal year 1942 they will be two and
a half times as much as in the fincal year 1941,
and even that increase does not take account of
extension of the Defense Program maile after
June 1, and of additional sums needed for Lend-
Lease. It must be remembered that A large
part of the defense expenditure is being financed
through borrowing which, in effect, increases
the total money emand for goods. The net
borrowing for the fiscal year 1942 will be nt least
twice as large as in the previous fiscal year.
"As our defense program Frows we must expect
further upward pressure on prices. The program
provides additional income for large sections of
the public without increasing correspondingly
the supply of consumption goods upon which that
income would ordinarily be spent. It has been
estimated that the money moing to the pockets
of the people of the United States will be
increased by more than $10 billion during this
fiscal year. Naturally they will want to spend
part of that increase on consumption goods. If
the supply of consumption roods available is
not increased proportionately, nothing can
prevent the prices of such coods from rising
unless positive preventive steps are teken.
And unfortunately, the defense pro ram is already
operating to curtail the supply of some consump-
tion goods.
"The inflationary force of defense expenditures
has been supplemented during the past year by
a share expansion of bank credit. At the same
time the shortage of raw materials for civilian
goods, absorption of idle capacity in many
industries, and outting off of normal foreign
sources of supplies, are also operating to make
the price situation worse.
"We are all sufficiently aware of the iestructive
effects of inflation. Unlike the situation in
Regraded Unclassified
51
- 1 -
1916 we are now aware of what is happening in
our price structure. We should profit by this
knowledge and take prompt end effective action
to avert a repetition of the price movements
of 1917 to 1920."
(Mr. Kuhn entered the conference).
"It is admitted by those who have studied the
problem that unwarranted price rises cannot be
prevented through the machinery which now exists.
Experience of the last six months has demonstrated
that voluntary cooperation and moral suasion
though effective in many instances are not ade-
quate to check unwarranted and unreasonable
price rises. This Bill gives authority to the
President to fix price ceilings under conditions
which are designed to protect both the consumer
and the seller.
"I feel strongly that unless we adopt now some
such reasonable and moderate system as this,
we shall be forced later to take more drastic
steps.
"However, I believe the Bill should be changed
in two respects. One of the changes I would
surgest relates to arricultural commodities and
the other to rent. I shall have more to say
on these mutters later.
"Though I strongly urge the passage of this bill,
I should like to emphasize that it constitutes
only one of the several measures that are nec-
easary to provent inflation. If we place exclu-
sive reliance unon measures included in this bill
we are bound to be disappointed. Fixing price
ceilings without appropriate fiscal measures,
and without a readjustment of the fundamental
supply and demand relationships, is certain to
prove inalequate in this country as it has
Regraded Unclassified
52
- 5 -
proved inadequate in every other country that
has tried it. An attempt to legislate prices
is bound to be unsuccessful unless it is accomp-
anied by measures to increase the supply and
reduce the demand for goods.
"The most effective protection against inflation
is to increase the supply of goods that people
want to buy. Not only would such action be most
in accord with our system of free enterprise
and competition, but it also would yield a
higher standard of living. Te must, therefore,
make much greater efforts than we are making to
expand the production of those basic products
which are needed not only to meet military
needs but civilian requirements as well. People
must have as many things available to buy with
their money as it is possible to produce with-
out impeding our lefense program.
Would it be satisfactory to you, Mr. Secretary,
if Mr. Kuhn or somebody else continued reading
this?
M.N.Jr:
Yes.
Kuhn:
I would be -lad to go on.
"Unfortunately, it may be necessary to curtail
production" --
. .Jr:
Ferdie, do you mind coming up closer?
Ruhn:
"Unfortunately, it may be necessary to curtail
the production of certain consumption goods for
a while ecause we do not have the plant capacity
necessary to satisfy both lefense and civilian
needs. We need, for example, more iron and
steel for defense, but we should leave no stone
unturned to increase our capacity for iron and
Regraded Unclassified
53
- 6 -
steel production so that Inter we shall be able
to increase our outrut of electric refrizera-
tors as well as guns. In the meantime, during
this period of necessarily curtailed consumption,
every encouragement should be riven to the pro-
duction of those goods which do not compete
with lefense needs.
"I believe we have failed to push our production
of roods to the full capacity of our enormous
productive resources. I. considerable volume
of unemployment still exists, and there are also
millions who, though not classified as unemployed,
could e added to the working force if the jobs
We 70 essily available. In many plants, there
is unused available capacity, and the sources of
necessary row materials have not been fully
utilized. Greater utilization of these idle
resources would go = long way toward protecting
us arainst inflation.
"Wherever there are any artificial restraints,
whatever their character, which are operating
to provent full utilization of capacity, steps
should he taken to have them removed. There
is less excuse for restrictions on supplies of
commodities now than ever before. Te should
make every attempt to bring in more supplies
from other countries, particularly those sup-
plies in which shortages are already appearing.
Every effort should be made to supplement im-
ports of commodities which are scurce with ilenti-
cal or substitute products in this country.
"Above all, we must make full use of those sup-
plies that are available. We ought not to tolerate
the withholding of surpluses from the market
when prices of such commodities are rising
unduly. In this connection We are fortunate in
having large supplies of various agricultural
commodities which ni at be made available to
Regraded Unclassified
51
- 7 -
the market. The supply of wheat is the largest
on record and supplies of some other farm
products are the largest in many years. For
many commodities the price situation which now
exists provides the opportunity that e have
long awaited for selling Government-held stocks.
These stocks of commodities should be released
for consumption as rapidly as is necessary to
prevent unreasonable price rises. By doin so
we will not only contribute to the stobilization
of comodity prices in veneral but also clear
the Worehouses for future vricultural emergen-
cies,
"The Government now holds 7 million bales of
cotton. Cotton prices have risen from 9-1/2
cents per pound on August 1, 1939, to over 16
cents per pound at the present time. Yet
the Senate has passed a bill prohibiting all
sales of lovernment-held stocks of cotton, the
prohibition to continue until Congress shall
otherwise provide.
"If legislation is enacted freezing the Govern-
ment's supplies of cotton we will have laid
the basis for a speculative price boom. The
univorable crop situation and the restriction
on silk imports favor such a beom in prices.
In view of the donger of inflation and in view
of the importance of cotton in the price strue-
ture, it would seem that the time is most in-
opportune to enact legislation of that character.
"We should give careful thought to stabilizing
the prices of those farm products that enter
directly into the cost of living, since an
unward trend in living costs is a powerful
influence toward increasing ware rates, and
hence toward "eneral price inflation. The
rice of food, which makes un one-third of
the consumer budget, has already risen faster
than during the first two years of World War I.
Regraded Unclassified
55
- 8 -
"There are too many people who are looking at
form prices from a purely short-run viewpoint,
with no apparent recard for the calamitous
after-effects of inflation. Have they forgotten
the experience of 1920, when farm prices
dropped more than fifty per cent in a single
year? I want to see a healthy development of
agricultural prosperity, and with that objec-
tive, I helped to initiate, and have continued
to support, our 8. ricultural program. But no
one with the interest of agriculture sincerely
at heart can ignore the danger signals ahead,
"It would, of course, be ideal if we could ad-
just the inequality between the amount of goods
available to be purchased and the amount of
purchasing power available to buy them entirely
in the manner which I have been discussing -
that is, by increasing the supply of goods.
"Unfortunately, this is impossible of immediate
accomplishment because of the large proportion
of the total output which must go into the
defense effort and thus is not available to
satisfy civilian demand. Therefore, if the bal-
ance between supply and demand for civilian
consumption is to be redressed, it must be done
in part by cutting down demand.
"In seekin a reduction in total expenditure
for civilian purposes, we mi -ht well begin
with the Federal ret. Every effort should
be made for economy in State and local government
expenditures and for a curtailment of borrowing
by State and local governments for non-emergency
purposes.
"Any curtailment in government expenditures
possible is, however, small in comparison to
the contraction of total expenditures which is
desirable.
Regraded Unclassified
56
- 9 -
"The great bulk of the reduction must come from
private, rather than from public, spending.
After all, total non-defense expenditures of
the Federal Government in this year will amount
to less than one-tenth of the amount of total
spending by private persons who had not received
their incomes from the Government. We obviously
must seek most of the necessary reduction in
expenditure in the larger group.
"The most powerful instrument which the Federal
Government has for the reduction of private
expenditures is taxation."
M.M.Jr:
May I interrupt? Somebody make a note, on
Monday I would like to know what, if anything,
the Secretary of the Treasury said in '14, '15,
'16, and '17 on inflation and price rises. I
am curious to know what if anything the Secretary
of the Treasury said then.
Bell:
I think it is pretty well set out in the annual
reports.
H.V.Jr:
Or any of the Assistant Secretaries.
Muhnz
"The most powerful instrument which the Fed-
eral Government has for the reduction of private
expenditures is taxation. This instrument may
also be used selectively to reduce the demand
for scarce commodities and particularly for those
for which there is a special need for the defense
effort. The tax bill which has just passed the
House of Representatives represents a step
forward. Serious consideration ought to
be given, however, to the more vigorous imposition
of selective excises at the present time. And
as I indicated to the Finance Committee of the
Senate last Friday, it will be necessary in
any event that yet heavier general taxation be
imposed next year if we are to maintain success-
fully the balance between supply and demand.
Regraded Unclassified
52
- 10 -
"Government borrowing from current consumer incomes
serves the same purpose in controlling inflation
11 does taxation - that is, it transfers mip-
chasing power from private citizens to the Govern-
ment without increasing its total amount. This
purpose is AC omplished to B. considerable extent
by the sale of ordinary Government obligations
provided that these are purchased by others than
commercial banks. A large proportion of such
obligations sold to non-banking investors is
paid for, however, from idle balances which in
any event would not have been spent during the
current period. Then the proce as of such bor-
rowing are spent by the overnment they, there-
fore, increase the total spending stream and so
fail to contribute to the ecuilibrium which I
have been licoussing.
"The Preasury Department is particularly anxious
to borrow as large A proportion of its total
requirements as possible from current consumer
incomes. In order to do this, we are looking
particularly to the sole of defense savings
bonds and stamps. The le of these securities
has been proceeding nuite satisfactorily and
during the three months of May, June, and July
amounted to slightly over a billion dollars.
Of course, iny" no means all of this came from
consumer incomes. VE are protified, however,
that in each month in increasing proportion of
total sales was made to small subscribers.
We are directing our major effort more to -lac-
Ing these securities where they do the most
cool from an anti-inflationary point of view -
that is, in the hands of purchasers from
current income - than to increasing their total
sales. lle are also, through the issuance of
tax anticipation notes, using the horrowing
power ns g moons of reducing the effective lag
between the nocrual and payment of the income
tax - thus increasin the ffectiveness of that
tax 20 an instrument to combat inflation.
Regraded Unclassified
58
- 11 -
"In addition to these strictly fiscal measures,
other measures for reducing the amount of civil-
ian purchasing power may have to be used."
H.M.Jr:
I am bored. I don't know whether anybody else
is. Go ahead. That is just how I feel. It
has got no sex appeal.
White:
No. Well, I thought that would - this is -
Ferdie hasn't started on this. (Laughter)
H.M.Jr:
Oh, Ferdie furnishes the sex appeal. From
now on - "Sexie Kuhn".
Kuhn:
I don't agree with you. This is --
Bell:
It reads much better than I thought it would,
after going over it yesterday. I didn't think
it was 30 hot, but I think it is pretty good.
I think it is too long and has to be out down
a little, but it is much better than I antici-
pated when we went over it yesterday.
Kuhn:
"In adition to these strictly fiscal measures,
other measures for reducing the amount of civilian
purchasing power may have to be used. Among these
are control over consumer credit, over new
capital issues by corporations, and selective
controls over the extension of bank credit for
specified purposes.
"Each of these types of control would strike
directly at a source of non-defense spending,
and so would relieve the upward pressure on
prices both generally and at points where it is
particularly acute. I should consider them
greatly superior, therefore, to the more general
type of credit control, the immediate effect
of which is merely to raise money rates.
"Under more normal conditions the effect of the
imposition of such general controls is to reduce
Regraded Unclassified
59
- 12 -
borrowing and hence total spending. I cannot
emphasize too strongly, however, that the
total amount of borrowing which will have to
be done by the Federal Government under present
conditions is affected only by the needs of the
defense effort and not by money market conditions.
Under such circumstances, it seems eminently
more sensible for the Government to shut off
competing demands than to endeavor to bid against
them on a price basis for restricted amount of
funds.
"The expansion in the supply of consumption
goods and the restriction in the expenditure
on such goods both serve to prevent inflation
in an over-all manner. That is to say,
they exert pressure to keep down the general
level of prices. But the problem of inflation
cannot be solved by these broad methods of con-
trol alone. Even with expanded output of con-
sumption goods and restricted expenditure on
such goods there will still remain areas in
which the public will want to spend more money
than the supply of goods available in these areas
can absorb without an inflationary rise in prices.
This bill is suited particularly to control
the areas of partial inflation which cannot be
reached by the over-all action of the other
methods of control.
"These three methods of preventing inflation-
expanded production, restricted expenditure,
and price control - supplement each other, each
increasing the effectiveness of the others, and
all together providing an effective program
for dealing with the problem. The three methods
a re equally necessary.
"I should like to point out that the effectiveness
of such a program is enhanced when the three
Regraded Unclassified
60
- 13 -
methods of preventing inflation are not used
at cross purposes. Price control must not limit
the flow of materials available for expended
production. Furthermore, by its very nature,
price control must be flexible to be successful.
For these reasons I believe it would be prefer-
able to omit from the bill the minimum ceiling
for agricultural commodities and the provisions
limiting rent control in defense areas to low-
cost housing. The rigidity in prices imposed
by et prescribed ceiling may make it difficult
to prevent inflation and impossible to prevent
post-war maladjustment of prices and post-war
depression.
"With these modifications, I am whole-heartedly
in favor of the Emergency Price Control Bill.'
H.M.Jr:
Bell?
Bell:
Well, as I said, I think it is a little lon,
but it is much better than - reads much better
than I thought it would. We went over it
yesterday afternoon.
E.V.Jr:
Ed Foley is practically asleep.
Rite:
I don't blame him. (Laughter) It is that kind
of a document. I presume partly because it is
dealing so much with economics --
W.W.Jr:
Put your feet un on the davenport, Ed. (Laughter)
Well, of course it is unfair to show me anything
today, because for four days I have been through
the mill on this other thing, so anything that
you showed me --
White:
Except that I think it is important --
Let me rive you --
Regraded Unclassified
61
- 14 -
White:
To get your reaction on policy.
A.M.Jr:
You will get the reaction. In the first place,
there are no examples. Where is my St. Louis
house, which I asked for?
Dagrett:
We have the figures worked up on that.
M.M.Jr:
I don't know anything that touched labor - it
touches materials, it is touching profits, it
touches everything.
White:
We have each of those, At least we have tot
this to say on wages.
H.K.Jr:
But the St. Louis house thing touches everything.
Are you familiar with it?
Mite:
No.
H.V.Jr:
The St. Louis house gives you the six-room
house breakdown - it is the best job that I
know of. llave you got it?
Degrett:
Yes, sir, we have.
Well, take something like that, which shows
the contractor's profit, increase in wages,
increase in materials, increase in rent, the
whole business. How much is it up now?
Derett:
I don't recall the exact percentage increase,
but it is going up rather sharply in the last two
months.
MONTH:
Yes. Now, what I would like to do is - it is
like an illustration to a story. I would like
to *ive that as an illustration.
White:
Prices rising?
N.M.Jr:
Yes.
Regraded Unclassified
62
- 15 -
White:
Of rise in prices.
H.M.Jr:
I would like to - I would love to have something
on cotton. You see, the thing which the President
has been talking about is this. As I understand
the law, the farmer is to receive at the farm
the average price that he receives at the farm -
it is to be parity. Now, what the President says
is, if that average price at the farm is parity,
then he isn't to get any benefit payments.
I don't even know how it is now, so maybe
I had better not get into that. You might look
it up anyway. They have never told the President
quite the story. He has most likely got it
right. But if the parity price is sixteen and
a half cents, average price that the farmer
receives at the farm, the President takes the
position that he is not entitled to any soil
conservation benefits or any other benefits.
Dargett:
That is correct.
H.M.Jr:
But I don't know whether that is the law. Look
it up.
Daggette
I will do that, sir.
E.W.Jr:
There is a lot of mystery about it. Can't you
do something - I mean, am I wrong that during
'14 to '16 they used to have exhibitions in win-
dows showing the price of shirts and the price
of this and the price of that, and all that kind
of business? You don't know?
Darrett:
I don't.
white:
I think it would be a little topheavy if you
said more about cotton. I think, as it is, you
have made a statement that is stronger than
anybody else would dare make.
Regraded Unclassified
63
- 16 -
H.M.Jr:
If you take that statement of mine about the
house, it pretty near covers everything, doesn't
it?
Daggett:
Yes. It gives the breakdown between different
kinds of materials, different kinds of labor,
and the general overhead expense, contractor's
profits and so forth.
H.M.Jr:
Well, that is one thing. Now, Lubin promised
me faithfully --
White:
lle just sent me five minutes ago --
H.V.Jr:
"aithfully that he would have the story to
show Longress.
White:
Five minutes ago he called up and said he was
sending it, and I don't know what is in here,
other than what he told me. He said he was
sending two things. One was to show that when
the cost of living rises ten per cent and if
the Government wants to let its workers share
only half of that increase, and the Government
will take the other half by increasing mages of
its employees, it will cost the Government B.
hundred and twenty-five million dollars a year.
R.M.Jr:
That isn't what he --
White:
That is one thing. The second thing, he is sup-
posed to give the increased price cost that would
be on goods which the Government is buying for
defense projects.
H.N.Jr:
Well, let me put it my way and if he hasn't
done it we can do it. It must be a matter of
record that - there have been all kinds of
studies made - that during the period '14 to
'20, whatever it was - I know the Navy officers
Regraded Unclassified
64
- 17 -
said they had it for '22 and then adjusted their
salaries accordingly in the Navy. They went
through the thing and then studied how much
WRS the increased cost and then they raised
everybody's salary.
well:
The same thing, but it was really a bonus in '17,
'18, and '19.
II.M.Jr:
That is what he said he was going to do for me.
White:
He has got it here. Higher living costs
means higher Federal salaries and he discusses
what happened in 1918. He has got two pages
that seem to read pretty well.
H.M.Jr:
That was the thing that impressed me. I said,
"Now, Mr. Congressman, let me tell you what hap-
pened in 1918, to you people with fixed salaries,
you and me. This is what happened, and your
dollar instead of buying a hundred cents was
only buying eighty cents' worth," and so forth
and SO on, "and therefore you only got eighty
per cent or whatever it is of your purchasing
power, and then by the time you did pay your
taxes, your dollar was reduced to fifty cents."
o' Connell:
Mr. Secretary, Mr. Henderson mentioned it in
about one sentence relating to the District of
Columbia, because he quoted some statistics
to show that the standard of living, measured
by real wages of the Federal employees in the
District of Columbia went down about twenty per
cent during the world war period.
H.M.Jr:
Well, it won't do any harm to repeat it. Did
the Congressman get an adjustment? Did he
get an adjustment in his salary, does anybody
know?
Bell:
Over there, you mean?
Regraded Unclassified
65
- 18 -
B.M.Jr:
In 1918.
Bell:
Congress in the first period gave a hundred
and twenty dollars to every employee up to a
certain salary, I think. Of course in those
days salaries weren't high. Later they gave
two hundred forty dollars. That lasted until
about '21.
H.W.Jr:
That is the kind of thing.
White:
May I ask this question, Mr. Secretary?
Those illustrations are directed toward
showing the evils of inflation, and there are
a great many - you can make a very dramatic pic-
ture on the evils because those are only two.
There are numerous other aspects of inflation
that are bad.
H.M.Jr:
That is what I am trying to get over to you.
I would like to start out not too long, but I
would like to talk about what the evils of
inflation are.
White:
That is it.
H.M.Jr:
I don't want - I want to tell some stories,
about the house. We have got a four-room
house and my salary - if it was six thousand
dollars, I am supposed to pay a third of my
salary for rent or whatever the rule of thumb
is. In those days I could have got a house for
two thousand dollars and that same house now
costs me three thousand, or half of my salary
would have to go. "Gentlemen, I will distribute
this chart showing you just what has happened."
It is in about 8 year, isn't it?
Daggett:
Yes.
H.M.Jr:
The contractor's profit went up the exact amount
Regraded Unclassified
66
- 19 -
in percentage that the increase in the cost
of labor did. In other words, it may have been
an accident, but he kept raising it just as
the thing went up. What happened to you and
me and the million other Government employees?
I mean, now we are - we at least were fortunate
enough that the Government came along and adjusted
it but how about the other millions of people
that can't be adjusted? There is nothing more
cruel. I want to talk about the cruelty of
inflation. This isn't something we should bandy
around. Just because one small group wents to
be selfish and hold seven million bales of cotton,
there is nothing more selfish or cruel, and I
want to talk about if instead of bringing -
freezing three hundred million bushels of wheat,
we ought to be far-sighted enough to say, "Well
maybe We will bring three hundred million bushels
of wheat down from Canada. The price of bread
has already gone up. The staff of life. You
get the feeds, chicken feed - my God, there are
an awful lot of poultry men. It runs into a
hundred million or more dollars. All through
New England the cost of chicken feed has "one
up fifty per cent. It may not he chicken feed,
but it represents 8 couple of hundred million
dollars. Get those figures. It is un at least
fifty per cent. I want to give - I don't want to
give too many, but I want to give some illustra-
tions about the cruelty of this thing.
It is a boa constrictor. It wraps itself around
and finally it just chokes the person to death.
What between taxes and inflation, the nation is
just squeezed, the life is squeezed out of it,
the vitality. It is a thing which we just can't -
you can't fight it with et pen. You have got
fo fight it with a sword. I mean, it is that
kind of stuff that I want to put in there. I
feel this thing very deeply. I want some good
Regraded Unclassified
67
- 20 -
illustrations. I can only give you - I mean,
a couple, but there must be a lot of them around.
The bread figures and Dr. - the woman nutri-
tionist over there in Agriculture, Stanley, she
is the best person in the country and she is
the least used, Dr. Stanley. She is swell.
And Miss Elliott. Between Miss Elliott and
Dr. Stanley, between those two women, you can
ask them each to give you six cases of what is
happening to the consumer, the woman, in this
country, on inflation. They can each give you
a half dozen illustrations. They are two splendid
women, and nobody is using them. Those two
people. The one on nutrition, and Dr. Elliott
could do it on clothing. I think the thing to
do is to - if I do nothing else but confine my-
self and address myself to the housewife of
America, you see. If I didn't even attempt to
cover anything else but just address myself to
the housewife, the mother. "You have not to
take what is left out of the eekly payroll
of your husband and pay for these things, and
now look what is ha pening to your payroll, what
is going to happen to your children?"
Herbert lloover made his reputation and had his
nicture in every kitchen by addressing himself
to the housewives. That is the way he made his
success.
Kuhn:
You want to make this personalized?
H.M.Jr:
I want to make it personalized. I want to talk
to the housewife, I want to talk to the mother,
and between Dr. Stanley and Miss Elliott you
can get the stuff by Monday. I want to make
it so that the people can understand it. Am
I talking sense, Herbert?
Caston:
Oh, yes, indeed. This economic doctrine can
be gone over pretty - in an exact way. It can
be condensed a great deal.
Regraded Unclassified
68
- 21 -
White:
Oh, yes.
Gaston:
And the methods to - it can be summarized very
concisely and then the methods by which you are
going to attack the problem also in the bill
can be cut down.
H.M.Jr:
But you see, the trouble is - please forget my
sarcastic remarks, my remarks at the beginning,
but this is a wonderful thing, to get up to add-
ress the American Society of Economists, wherever
they meet, if they meet, but the fellow on the
street, the woman, the person who buys the lamb
chops and buys the stockings and the underwear
and pays the rent and insurance - it is the woman
that does that. Let me talk to her.
White:
Well, all your remarks, which I think are - can
be turned out into something that would attract
their attention - we skip all the effects of
inflation under the assumption that it was known
to be bad, and merely directed ourselves against
the - what are you going to do about it? How-
ever, it certainly doesn't have the popular
appeal, and maybe the reverse ought to be true.
Maybe by talking about the effects of inflation,
the bad effects of inflation, the assumption
will be that this bill will correct them.
U.M.Jr:
Harry, I think the thing is this. I don't
think yet the average person understands. Just
the way I look around the room here, there is
only one person here that knew about what
happened to Government employees, and the extra
bonuses. I just don't think, with the exception
of people - when sugar went to five cents they
all rushed out and bought sugar. Now they are
all buying stockings. It is disgusting. I
think you have just got to paint this thing to
the people and say, "If you want to stop this
boa constrictor from choking you to death, you
Regraded Unclassified
69
- 22 -
people have got to get mad and say, We want
seven million bales of cotton released.
We want the wheat released. We don't want
our shirts and our cotton dresses to go up and
our bread, when there is that much goods in
this country and in Canada, lying up there
rotting in the warehouse. We are not going
to stand for it. We are just not going to
stand for it, because of 8. crook like Cotton
Ed Smith and his friend Harris in New York,
the cotton broker, to make all this money.
Mite:
What the Secretary is addressing himself to
is quite different. lle wants to dramatize the
effects of inflation. That can be effectively
done, the consequences of inflation dramatized.
Maybe that is the way it would be most effective,
because if you Tramatize the consequences of
inflation, you are not directing - you are
assuming that this bill is what is necessary in
order to correct it.
Mirray:
Do you assume that?
Mite:
No, I mean the public may.
Kuhn:
No, first of all, Leon Henderson has been up there
dramatizing the consequences of inflation, and
probably Eccles will be doing the same, and when
the Secretary of the Treasury comes up, I believe
that people want this kind of reason, rrave, and
clear, a statement from him. He can make it
personal with little illustrations.
White:
Yes, there can be two or three illustrations.
Kuhn:
But I wouldn't give up the substance of this.
Dell:
I think it is pretty good.
White:
We will cut it down about a third.
Regraded Unclassified
70
- 23 -
Bell:
I was agreeably surprised when you read it over.
Gaston:
I think all you say here can be said in half the
space.
Sell:
Well, that may be.
white:
It is a much more intelligent statement than
any that has been made publicly. I don't mean
any that has been made --
Rulin:
It is better than llenderson could have made
because it is in a different key.
White:
But it certainly doesn't have the dramatic
effect or the appeal that the other approach
would. I think it may be possible to combine
it. I think two or three pages --
Gaston:
Two pages of this --
White:
Of that house, of the Government employees,
and the housewife. You need a paragraph on
the housewife, and one on the Government
employees, and 8. counle on this house and I
think you can make it very dramatic.
Gaston:
And then tighten this up & little bit and sharpen
the language of it.
White:
That is right.
Kubn:
And right at the beginning, unless --
Suite:
Of course he stopped listening after the third
page.
Bell:
I don't think he listened from the beginning.
White:
Well, I think we know what he wants.
Regraded Unclassified
?!
- 24 -
Degrett:
It would also have to be turned into what can
be done about it as he suggested about cotton
and wheat.
White:
Well, I don't think he can spend much more time
with the cotton. He is comin- now -- now, you
can say something about this. You can't use
that phrase, how about the housewife who has
to buy cotton shirts and cotton dungarees for
the family?
Derrett:
In the Walter Winchell style.
Mite:
Yes. You can mix & little of that in there,
but I don't think you can confine it to that
and I don't think he will want to, but if some
of that is in there he will take the rest
of it.
Mulin:
Is it necessary to specify what kinds of civilian
production can be increased without detriment to
the defense industries?
Elte:
You try it. I can't think of anything.
Kuha:
Neither can I. That is why I am asking you.
Rite:
Well, there is nothing in there that you will
find --
lacton:
I think you will have to shorten all that
about that stimulation of production that doesn't
compete, because you take so much time to it.
You arouse curiosity as to what you are retting
at.
2011;
lie would get a lot of questions.
Mite:
You can cut that sentence out but I think we
would all agree that there ought to be an increase
in plant capacity. That is what we need.
Regraded Unclassified
72
- 25 -
Kulin:
That requires steel and --
White:
Well, there has to be curtailment of civilian
consumption, then until that is done, because
unless you do it you are going to be worse and
worse.
Kuhn:
That is one hole I think people would nick in
this right away. They would say, "Well, tell
us what -- "
O'Connell:
You mean, "Tell us what --"
Kuhn:
"What to use up that is not needed for lefense,
or labor that is not needed for defense."
White:
How, wait 8 minute, labor, that is a different
story. There is plenty of labor, plenty of it.
Kuhn:
All right, materials.
Gaston:
Bricks. They don't use bricks for defense.
White:
The answer to that is that you have got to lay
the groundwork for increased plants. Otherwise,
you will be in a worse situation next year, and
in the year following a still worse situation,
SO the thing to do is to pull in your belt
a whole lot the next six months, so at least you
can let it out in the years afterward. If you
spend a hundred million dollars on a plant that
is only going to produce a hundred million dol-
lars of goods over four years, your supplies --
laston:
During the period of consiruction, Harry. It
is certainly inflationary.
White:
Well, I said naturally if you are ving to spend
of hundred million dollars --
Lurray:
My point is that one of the main ways of combating
Regraded Unclassified
73
- 26 -
inflation which is advocated is during the
period that you are constructing it is self
inflationary.
Mitez
Now, look, in every situation of this character
you have got a lot of conflicting objectives
which must be harmonized, and one of those
conflicting objectives is that you want more
consumers goods because you want to keep more
people employed and yet you find that in order
to do that you may- you will have to curtail
consumption. Now, whether that will have a net
inflationary or deflationary effect, you couldn't
say, because it depends on how much you curtail
civilian consumption in order to build the plants
to produce more later.
Mirray:
You could say that during the period of con-
struction if you build plants to produce
consumer goods, it is inflationary, because the
people get wages just as much as they would for
producing the goods, but the goods can be sold
and 80 absorb purchasing power, and the plant
can't. So during the period in which this is
happening it is inflation.
White:
Yes, but how much? You know the old story that -
or rather figure of speech that I like to use,
that when a fat woman goes in bathing in Coney
Island it raises the tide in London, but the
question is if you were a ship captain you wouldn't
condition your ship's comings and coings by a tele-
Tam as to whether there were a fat woman on
Coney Island. Now, I think you will find an
inflationary effect of increasing the plant
capacity while at the same time curtailing plant
consumption is negligible.
Murray:
& ten million dollar increase in plant capacity
is a mighty fat woman.
Regraded Unclassified
74
- 27 -
What I was thinking was this, just to make
something dramatic. Should we let cotton, wheat,
corn - is corn in storage?
Doll:
Yes, lots of it.
E.V.Jr:
Sugar. Anyway --
Mite:
There is plenty of sugar in Cubs and there is
a tariff on sugar.
...M.Jr:
Let these things rot in the storehouses in the
United States or in Canada or in Cuba while
people either go hungry on the one hand, they
still do, or on the other hand they pay a fifty
per cent increase for their food.
Bell:
Or have their diet reduced as a result of increased
prices.
-.11.Jr:
Ri-ht. You talk about morale. The first thing
to do is to feed the people the right thing. I
sat over here with Wickard yesterday, and he is
talking about giving them the right formula to
eat with this Australian after the war is over.
Now, that is the thing - that is the thing I
would like to take. You have got to arouse
somebody over here. Now, if you want to do this
thing, the way to make a start is to get this
bill through. Another thing, and I -ot the tip
out of this - how can you expect me, as Secre-
tary of the Treasury, to to ahead day after day
and ask people to invest in Defense Savings
Bonds when they know and I have got to tell them
that the thing is inflationary. They are not
zoing to continue to buy Defense Savings Bonds
and I will not continue to be able to reduce
bank deposits if they know day after day there
will be inflation. They are Toing to hoard,
but they won't buy my bonds. It is a vicious
circle. Instead of making a pretty speech, how
much I am - I have been lucky. I have sold a
Regraded Unclassified
73
- 20 -
billion dollars in three months, but how do I
know that people are -oin- to continue? They
will elthor put the oney in their sock or they
will buy CO moditier or somethin- else, but
they won't buy more Donie.
wel:
or course if prices 1°0 117) they will have nuch
less money with which to buy Bonis. That is the
3 ron- point.
out the point is they are not win- to buy
n fixed thing if they think there is oin to
be inflation, nn. I might 2,5 well say so and
-et = he "C on them in 0/13C this thin TOGS
sour on ne.
The
is ret letters of that character.
Mid I will say, "1 have suid so on August 12,
that I couldn, sell these bonds if Conrress
isn't "cing to do something about it. My
chould people Buy It," bonds?" That is the on-le
I would like to take.
Tito:
C.K.
Ferdie?
DCn:
I saying to Harry before, that I think the
personal touch can be rut in here without de-
: roying these arguments.
Look, I just tried it for a minute or two on
Irs. Morgenthau and she mys, "Ion are ri "ht."
Now, Leon has done a beautiful job. I want to
-et un and is I don't talk about anything else,
talk to the housewives of America.
win't he do that ulso, IF. Secretary?
Tell, you (0'Connell) int there, I lidn't.
Regraded Unclassified
76
- 20 -
0'Connell:
440 was pretty statistical.
hite:
I am sure we can dramatize effectively --
....Jr:
He didn't do it.
white:
I don't know.
H.W.Jr:
I read the newspaper account. There was nothing
in it. There was nothing there.
O'Connell:
You wouldn't have had you been there. It was
a rood statement, though.
H.W.Jr:
I say it was a good statement, but you have got
to ret somebody aroused. Who is aroused today
about this thing? Nobody. We will et the women
aroused. "We are not moing to stand for this.
Mr. Morgenthau says there is all this cotton
and wheat and corn here. Look at our porkchops.
Look what We pay for porkchops." Find out how
much butter there is in storare.
Drocott:
It is one of the biggest sunnlies they have had
in many years.
A.S.Jr:
About fifty per cent. It is un fifty per cent.
Butter is un fifty per cent. "My should I pay
fifty per cent more? This stuff that is -oing
to England - it is a damn lie. Somebody is
speculating in this thing. He is right. He
tells ne there is SO much butter. There is all
this sugar in Cuba. There is four hundred fifty
millions of bushels of wheat and a new wheat crop
coming on in Canada. Why should my bread go
up? I am not going to stand for it." You will
get somebody mad. I forget, is it twenty mill-
ion pounds of butter in storage? Pork, tell
them, one bushel of corn, ten bushels of corn,
one pound of pork, that in the ratio. And all
this corn in storage. How about it, Dakota?
Regraded Unclassified
- 30 -
Inston:
I think that is rood. I think you have -ot to
iramatize this.
Sure you do.
Maton:
I think two or three pages of that and then
condense the other.
More than that.
Tecton:
But I wouldn't stick to food nlone,
Well, cotton. Herbert, if I - well, let me
try it. If I can just zet over - if I can arouse
the housewives of Am rica to what it means to
them, then Leon's bill will 70 through.
The way it is now, he hasn't got too rood a chance.
Let me just take that an-le and the impact on -
I can't sell my bones and the other things he
said. And don't forget the house. Don't for et
the house. How, you two guys (White and Kuhn)
are working on this thing?
Efter
Well, Ferdie hasn't yet, but he says he has free
time from now on.
The
I am coing to net to it.
Well, Ferdie, if you two men could stay behind
now, I would like to arranze how I can ret you
un to the country so It will be most convenient.
And then I will devote all Monday to this.
Are you physically able to work on this tomorrow?
Eain:
Oh, yes.
How about you, Harry?
-hite:
Oh, yes.
Regraded Unclassified
18
- 31 -
.........
And you cal all "O to bed Tuesday night or
get drunk, I don't care which, or do both.
hite:
It is a joint product, and I think it could
probably it. be improved. We have all had a hand in
Do you want somebody from Hans' office?
lite:
I should think 50,
M.Jr:
Who, Miss Michener? One person.
...ite:
Can't we work down here and then brin- the prod-
uct un to you?
Yes, but I don't want more than three people coming
to the country.
I think the more important thing is those who
work on it.
well, the 38 people here. But how about coming
to the country?
,hite:
Let's continue to work on it and whenever you
are ready to --
But who from Mr. Hans' shop must come up?
Wichener:
Well, do you mean, Mr. Mite, for somebody --
Site:
I don't think it matters with moes up to the
country and ets the ideas, but I do think it
would be helpful if those who have been working
on it could continue to work on it.
X.X.Jr:
Everybody should.
Dell:
You and Ferdie can TO un to the country. That
is all you need, I think, is just everybody
work on it while it is here, and when it cooz
Regraded Unclassified
79
- 32 -
to the country just White and Ferdie can work
on it.
H.M.Jr:
Can everybody do it?
Kuhn:
We have got this afternoon.
White:
And by tomorrow noon we can have another draft,
I think, that is close along the lines that you
wanted. Now, if you want to spend time on it
Sunday, that would give us a little more time.
H.M.Jr:
Well, that was my thought, you see. I can work
on it Sunday night.
White:
And then - now, Henderson is still on the Hill,
so that I think that - I am sure you won't
be called Monday, so we will have all day Mon-
day.
H.M.Jr:
I won't go up Monday.
O'Connell:
No, Tuesday is the day, and you may not even
be reached Tuesday.
H.M.Jr:
Wonderful.
White:
Supposing we have another draft that incorporates
the ideas that you have had and you will go over
that Sunday. You will suggest some more changes.
We will work over that again Monday and sometime
Monday afternoon it will be in shape.
M.M.Jr:
That is all right. But I want everybody that
is here to help, please. I am very, very ser-
ious about this. It can just completely ruin
our whole Defense Savings Bonds program.
Gaston:
I suppose there isn't much danger at this
stage of stirring more inflation, more consumer
Regraded Unclassified
80
- 33 -
demand by talk. It will have some effect, but
it won't have a great deal of effect because
there has been so much inflationary talk already.
Of course everybody gets up before a Congressional
Committee and talks about the danger of infla-
tion, that sets a few more people off and does
start an increased demand and reduced supplies.
White:
Well, let's go at it.
H.M.Jr:
Ferdie and Harry stay behind a minute. You are
absolutely right, Herbert.
Unclassified
1st Draft Aug 8th, 1941 Meeting 2:00 P.M.
81
Preliminary Draft
Statement of the Secretary of the Treasury
Pefore the House Committee on Banking and Currency
I am in full agreement with the objectives of the
Emergency Price Control Bill, and with the general methods
by which the bill seeks to attain these objectives.
We have been talking out the problem of preventing
inflation for a long time, but until recently the question
has been largely academic. Now, however, we are faced with
the urgent, practical necessity of grappling with it. We
are faced with 8 situation ripe for the development of inflation.
In many respects the price situation today closely resembles
that of the corresponding period in 1916, when, as we now know,
inflation was actually on the way, We have now, as we had then,
a moderate rise in the cost of living, a greater rise in the
wholesale price index, and a sharp rise in the prices of basic
commodities. It is the latter rise which constitutes the danger
signal. Pasic commodity prices rise first; the wholesale pri ce
index always lags greatly behind the index of basic commodities,
while the cost of living does not show anything like the full
effects of inflation until long after the seeds of inflation
have taken root.
I do not mean to imply that price rises have already gone
50 far that there is no stopping; that it is too late to prevent
inflation. Rut strong forces are under way which will end in
w
Regraded Unclassified
82
inflation unless we do something about it. Obviously, the
time to do something about inflation is before it occurs,
not after it has gathered momentum.
The forces now in operation making for further price
rise are both potent and persistent.
- 2 -
Our defense expenditures are rapidly increasing. During
the fiscal year 1942 they will he two and 8 half times as much
83 in the fiscal year 1941, and even that increase does not
take account of extension of the Defense Program made after
June 1, and of additional sums needed for Lend-Lease. It
must be remembered that a large part of the defense expenditure
is being financed through borrowing which, in effect, increases
the total money demand for goods. The net borrowing for the
fiscal year 1942 will be at least twice as large as in the
previous fiscal year.
As our defense program grows we must expect further
upward pressure on prices. The program provides additional
income for large sections of the public without increasing
correspondingly the supply of consumption goods upon which
that income would ordinarily be spent. It has been estimated
that the money going to the pockets of the people of the
United States will be increased by more than $10 billion during
Regraded Unclassified
83
this fiscal year. Naturally they will want to spend part
of that increase on consumption goods. If the supply of
consumption goods available is not increased proportionately,
nothing can prevent the prices of such goods from rising
unless positive preventive steps are taken. And, unfortunately,
the defense program is already operating to curtail the supply
of some consumption goods.
The inflationary force of defense expenditures has been
supplemented during the past year by a sharp expansion of
bank credit. At the same time the shortage of raw materials
for civilian goods, absorption of idle capacity in many
industries, and cutting off of normal foreign sources of supplies,
are also operating to make the price situation worse.
We are all sufficiently aware of the destructive effects
of inflation. Unlike the situation in 1916 we are now
- 3 -
aware of what is happening in our price structure. We should
profit by this knowledge and take prompt and effective action
to avert a repetition of the price movements of 1917 to 1920.
It is admitted by those who have studied the problem
that unwarranted price rises cannot be prevented through
the machinery which now exists. Experience of the last six
Regraded Unclassified
84
months has demonstrated that voluntary cooperation and moral
suasion though effective in many instances are not adequate
to check unwarranted and unreasonable price rises. This
Pill gives authority to the President to fix price ceilings
under conditions which are designed to protect both the consumer
and the seller.
I feel strongly that unless we adopt now some such
reasonable and moderate system as this, we shall be forced
later to take more drastic steps.
However, I believe the Bill should be changed in two
respects. One of the changes I would suggest relates to
agricultural commodities and the other to rent. I shall
have more to say on these matters later.
Though T strongly urge the passage of this bill, I
should like to emphasize that it constitutes only one of the
several measures that are necessary to prevent inflation.
If We place exclusive reliance upon measures included in
this bill we are bound to be disappointed. Fixing price
ceilings without appropriate fiscal measures, and without
e readjustment of the fundamental supply and demand re-
lationships, is certain to prove inadequate in this country
R.S it has proved inadequate in every other country that has
tried it. An attempt to legislate prices is bound to be
unsuccessful unless it is accompanied by measures to increase
Regraded Unclassified
85
the supply and reduce the demand for goods.
- 4 -
The most effective protection against inflation is to
increase the supply of goods that people want to buy. Not
only would such action be most in accord with our system
of free enterprise and competition, but it also would yield
8 higher standard of living. We must, therefore, make much
greater efforts than we are making to expand the production
of those basic products which are needed not only to meet
military needs but civilian requirements as well. People
must have as many things available to buy with their money
as it is possible to produce without impeding our defense
program.
/
Unfortunately it may be necessary to curtail the production
of certain consumption goods for 8 while because we do not
have the plant capacity necessary to satisfy both defense
and civilian needs. We need, for example, more iron and
steel for defense, but we should leave no stone unturned to
increase our capacity for iron and steel production so that
later we shall be able to increase our output of electric
refrigerators as well as guns. In the meantime, during this
period of necessarily curtailed consumption, every encourage-
Regraded Unclassified
86
ment should be given to the production of those goods which
do not compete with defense needs.
I believe we have failed to push our production of
-oods to the full capacity of our enormous productive
resources. n considerable volume of unemployment still
crists, and there are also millions who, though not classified
65 unemployed, could be added to the working force if the
jobs were easily available. In many plants, there is unused
available capacity, and the sources of necessary raw materials
have not been fully utilized. Greater utilization of these
1dle resources would go 9 lon- way toward protecting us against
invistion.
"herever there are any artificial restraints, whatever
their character, which are operating to prevent full utilization
of
- 5 -
capacity, steps should be taken to have them removed. There
is less excuse for restrictions on supplies of commodities
now than ever before. We should make every attempt to bring
in more S pplies from other countries, particularly those
supplies in which shortages are already appearing. Every
effort should be made to supplement imports of commodities which
Regraded Unclassified
87
are scarce with identical or substitute products in this
country.
Above all, we must make full use of those supplies that
are available. We ought not to tolerate the withholding of
surpluses from the market when prices of such commodities
are rising unduly. In this connection we are fortunate in
having large supplies of various agricultural commodities
which might be made available to the market. The supply of
wheat is the largest on record and supplies of some other
farm products are the largest in many years. For many
commodities the price situation which now exists provides
the opportunity that we have long awaited for selling
Government-held stocks. These stocks of commodities should
be released for consumption as rapidly as is necessary to
prevent unreasonable price rises. By doing so we will not
only contribute to the stabilization of commodity prices in
general but also clear the warehouses for future agricultural
emergencies.
The Government now holds 7 million bales of cotton.
Cotton prices have risen from 9-1/2 cents per pound on
August 1, 1939, to over 16 cents per pound at the present
time. Yet the Senate has passed a bill prohibiting all sales
of Government-held stocks of cotton, the prohibition to continue
Regraded Unclassified
88
until Congress shall otherwise provide.
If legislation is enacted freezing the Government's
supplies of cotton we will have laid the basis for a
speculative price
- 6 -
boom. The unfavorable crop situation and the restriction
on silk imports favor such A boom in prices. In view of
the danger of inflation and in view of the importance of
cotton in the price structure, it would seem that the time
is most inopportune to enact legislation of that character.
We should give careful thought to stabilizing the prices
of those farm products that enter directly into the cost of
living, since an upward trend in living costs is 8 powerful
Influence toward increasing wage rates, and hence toward
general price inflation. The price of food, which makes
up one-third of the consumer hudget, has already risen
faster than during the first two years of World Har I.
There are too many people who are looking at farm
prices from a purely short-run viewpoint, with no apparent
regard for the calamitous after-effects of inflation. Have
they forgotten the experience of 1920, when farm prices
dropped more than fifty percent in 8. single year? I want
to see a healthy development of agricultural prosperity, and
Regraded Unclassified
89
with that objective T helped to initiate, and have
continued to support, our agricultural program. But no
one with the interest of agriculture sincerely at heart can
irnore the danger signals ahead.
It would, d' course, be ideal if we could adjust the
Inequality between the amount of goods available to be
mirchased and the amount of purchasing power available to
buy them entirely in the manner which I have been discussing
--
that is, by increasing the supply of goods.
Unfortunately, this is impossible of immediate accomplish-
ment because of the large proportion of the total output which
must 70 into the defense effort and thus is not available
to satisfy civilian
- 7 -
demand. Therefore, if the balance between supply and demand
for civilian consumption is to be redressed, it must be done
in part by cutting down demand.
In seeking a reduction in total expenditure for civilian
purposes, We might well begin with the Tederal Funget, Every
effort should be made for economy in State and local govern-
ment expenditures and for A curtailment of borrowing ty State
end local governments for non-emergency purposes.
Regraded Unclassified
90
Any curtailment in government expenditures possible is,
however, small in comparison to the contraction of total expendi-
tures which is desirable.
The great bulk of the reduction must come from private,
rather than from public, spending. After all, total non-
defense expenditures of the Federal Government in this year
will amount to less than one-tenth of the amount of total
spending by private persons who had not received their
incomes from the Government. We obviously must seek most
of the necessary reduction in expenditure in the larger group.
The most powerful instrument which the Federal Govern-
ment has for the reduction of private expenditures is taxation.
/
This instrument may also be used selectively to reduce the
demand for scarce commodities and particularly for those for
which there is a special need for the defense effort. The
tax bill which has just passed the House of Representatives
represents A step forward. Serious consideration ought to
be given, however, to the more vigorous impostion of selective
excises at the present time. And as I indicated to the Finance
Committee of the Senate last Friday, it will be necessary in
any event that yet heavier general taxation be imposed next
year if we are to maintain successfully the balance between
supply and demand.
Regraded Unclassified
9!
- 8 -
Government horrowing from current consumer incomes
serves the same purpose in controlling inflation as does
taxation -- that is, it transfers purchasing power from
private citizens to the Government without increasing its
total amount. This purpose is accomplished to a considerable
extent by the sale of ordinary Government obligations pro-
vided that these are purchased by others than commercial
banks. A large proportion of such obligations sold to non-
banking investors is paid for, however, from idle balances
which in any event would not have been spent during the
current period. When the proceeds of such borrowing are
spent by the Government they, therefore, increase the total
spending stream and so fail to contribute to the equilibrium
which I have been discussing.
The Treasury Department is particularly anxious to
borrow as large B proportion of its total requirements as
possible from current consumer incomes. In order to do this,
we are looking particularly to the sale of defense savings
bonds and stamps. The sale of these securities has been
proc reding ouite satisfactorily and during the three months
of May, June, and July amounted to slightly over a billion
dollars. Of course, by no means all of this came from consumer
Regraded Unclassified
92
incomes. We are gratified, however, that in each month an
increasing proportion of total sales was made to small
subscribers. We are directing our major effort more to
placing these securities where they do the most good from
an anti-inflationary point of view -- that is, in the hands
of purchasers from current income -- than to increasing their
total sales. We are also, through the issuance of tax
anticipation notes, using the borrowing power as e means of
reducing the effective lag hetween the accrual and payment
of the income tax -- thus increasing the effectiveness of that
tax 83 an instrument to combat inflation.
J -
In addition to these strictly fiscal measures, other
measures for reducing the amount of civilian purchasing
power may have to be used.
,
Among these are control over
consumer credit, over new capital issues by corporations,
and selective controls over the extension of hank credit for
opecified purposes.
Each of these types of control would strike directly at
9. source of non-defense spending, and 30 would relieve the
upward pressure on prices oth generally and at points where
it is particularly acute. I should consider them greatly
superior, therefore, to the more general type of credit control,
Regraded Unclassified
93
the immediate effect of which is merely to raise money rates.
Under more normal conditions the effect of the imposition
of such general controls is to reduce borrowing and hence total
spending. I cannot emphasize too strongly, however, that the
total amount of borrowing which will have to be done by the
Federal Government under present conditions is affected only
by the needs of the defense effort and not by money market
conditions. Under such circumstances, it seems eminently more
sensible for the Government to shut off competing demands than
to endeavor to bid against them on 8 price basis for restricted
amount of funds.
The expansion in the supply of consumption goods and the
restriction in the expenditure on such goods both serve to
prevent inflation in an over-all manner. That is to say,
they exert pressure to keep down the general level of prices.
But the problem of inflation cannot be solved by these broad
methods of control alone. Even with expanded output of
consumption goods and restricted expenditure on such goods
there will still
- 10 -
remain areas in which the public will want to spend more
money than the supply of goods available in these areas
Regraded Unclassified
91
can absorb without an inflationary rise in prices. This bill
is suited particularly to control the areas of partial inflation
which cannot be reached by the over-all action of the other
methods of control.
These three methods of preventing inflation -- expanded
production, restricted expenditure, and price control --
supplement each other, each increasing the effectiveness of
the others, and all together providing an effective program
for dealing with the problem. The three methods are equally
necessary.
I should like to point out that the effectiveness of such
a program is enhanced when the three methods of preventing in-
flation are not used at cross purposes. Price control must not
limit the flow of materials available for expanded production.
Furthermore, by its very nature, price control must be flexible
to be successful. For these reasons I believe it would be pre-
ferable to omit from the bill the minimum celling for agricultural
commodities and the provisions limiting rent control in defense
areas to low-cost housing. The rigidity in prices imposed by
a prescribed ceiling may make it difficult to prevent inflation
and impossible to prevent post-war maladjustment of prices and
post-war depression.
With these modifications, T am whole-heartedly in favor
of the Emergency Price Control Pill.
Regraded Unclassified
95
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 8, 1941
TO
Secretary Morgenthau
FROM
Miss Michener
awar
Subject: Changes in parity price basis
This is in response to your request for information on
the changes that have been made during the past 5 years in
the basis for calculating parity prices of farm products.
Few changes have been made in the basis for calculating
parity prices in recent years. Those changes that have been
made are listed below.
(1) In the Agricultural Adjustment Act, approved
May 12, 1933, the base period for all agricultural commodities
except tobacco was declared to be the period August 1909 to
July 1914. The base period for tobacco was declared to be
the period August 1919 to July 1929.
(2) In an Act approved August 1935, taxes on farm real
estate and interest on farm indebtedness were added in cal-
culsting the index of prices of goods bought by farmers,
which 18 used as a factor in determining parity prices. The
effect of this change was to raise parity prices for all
products using the pre-war (1909-14) base.
(3) In an Act approved August 1935, potatoes were changed
to a post-war base.
(4) In an Act approved February 1938, freight rates
were added in the calculation of parity prices for all orod-
ucts using a pre-war base.
(5) In an Act approved November 1940, the base period
for certain types of tobacco (burley and flue-cured) was
changed from August 1919 - July 1929 to August 1934 - July 1939,
Regraded Unclassified
96
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 8, 1941
10
Ferdinand Kuhn, Jr.
FROM
Herbert Merillat
PRESS OPINION ON TAXES:
FIGHTING INFLATION
House action on the tax bill and the consideration of
price-control legislation have focussed attention on the economic
aspects of the defense program. In all sections of the press
there has been 8 growing awareness of the danger of inflation,
with increased attention to means of checking the inflationary
(
spiral.
Price Control
Most of the press has come reluctantly to the conclusion
that 8. price-control law with teeth in it is necessary. The
President's message describing the prospect of inflation was
regarded as clear and convincing. No one, however, is satisfied
with the control system provided by the bill introduced in Con-
gress. The criticism most often made is that the failure to
provide for control of wages and the allowance of large increases
in farm prices makes effective price control under the proposed
act impossible.
Regraded Unclassified
2 1 .
297
Papers in farming regions tend to slide over the treatment
of food prices and emphasize the danger of failing to control
wages. The metropolitan press, however, excoriates the "farm bloo"
for attempting not only to ensure farm prices amounting to 110%
of parity but for scheming to fix minimum prices for farm products.
The financial journals see in the measure 8. plan to control
industrial profits, not to control effectively prices in general.
They assert that increasing labor costs and other costs of produc=
tion, together with maximum prices for finished products, will
result in diminished profits but will do nothing to check infla-
tion.
Taxes and Inflation
It is generally recognized that price control in itself
is not an adequate safeguard against inflation. Taxes which would
reduce mass purchasing power are regarded as an important and more
basic safeguard.
With the increased attention given to inflation has come n
shift in the argument for & broader income tax base. Previously
reduced exemptions have been urged mainly on the grounds that the
mass of the electorate should be made tax-conscious and have a
sense of sharing directly in the defense program. Now the emphasis
is on the usefulness of the income tax in siphoning into the
Treasury dollars which otherwise would compete for consumer goods.
Regraded Unclassified
98
- 3 -
The President's recommendation of lower personal exemptions
and Chairman Doughton's statement that a broader base or general
consumption tax is likely in B. future tax bill have revived edi-
torial hopes that the Senate will reduce exemptions in the current
bill. The prophets think the Senate will likely take this action
to fill the $300 million gap left by the removal of compulsory
joint returns from the House bill. The Doughton forecast of lower
exemptions in the near future has given rise to the question, Why
not broaden the tax base now, rather than after the inflationary
spiral has wound higher?
The House Tax Bill
€
Editorial appraisals of the tax bill as it passed the
House are in general agreement on several points:
1. Personal income tax. The failure to broaden the base is
criticized, as already noted.
2. Corporation taxes. There is little criticism of the
corporate taxes. The House is praised for rejecting the
excess profits plan urged by the President and the Treasury.
The meager mention of corporation taxes in the press indi-
cates satisfaction with that part of the bill and 8. wish
to let sleeping dogs lie.
3. Mandatory joint returns. The press outcry against this
proposal was maintained at 8. high pitch until the House
voted on the bill. Rejection of the proposal was greeted
with satisfaction.
4. Excise taxes. This part of the bill is regarded as a
hodge-podge resulting from political trading. Heavy
excises on articles competing for materials with defense
industries are urged.
Regraded Unclassified
99
- 4 .
Tax Anticipation Notes
The tax anticipation notes received little editorial notice
as they went on sale. Such comment as appeared, however, continued
to be favorable. The chief criticism of the notes -- that tax
revenues will be spent before collected -- has been discounted by
such leading conservative papers as the New York Times and the
Wall Street Journal. While granting that the criticism would be
valid in normal times, these papers hold that in the present
emergency the sale of the notes constitutes a desirable and neces-
sary form of borrowing.
Regraded Unclassified
100
August 8, 1941
2:08 p.m.
Harold
Ickes:
We have the plan now submitted by these oil
companies to build the pipe line, and one of
the important clauses - there's one on amor-
tization.
HMJr:
Yes.
I:
Jesse Jonee is coming in with his lawyer to
discuss the plan generally at three o'olock,
and I was wondering whether you could send
someone over from the Treasury.
HMJr:
Sure. Three o'clock at your office?
I:
Yes.
HMJr:
I'll have someone there.
I:
All right.
HMJr:
Thank you.
Regraded Unclassified
8/11/41
101
ecretary Morgenthau will attend this confer-
ce himself and will take Harry White with
mell. White so informed. Wallace's office
also informed.
102
OFFICE OF THE VICE PRESIDENT
WASHINGTON
August 8, 1941
The Honorable
The Secretary of the Treasury
Dear Mr. Secretary:
The Vice President has asked me to
inform you that he has called the first
meeting of the Economic Defense Board for
Wednesday, August 13 at 9:30 a.m. at this
office, which is room 261 Senate Office
Building.
VP vlauner effr,
Sincerely yours,
Harold Young
Assistant to
The Vice President
Regraded Unclassified
103
August 8, 1941
Dear Bill:
The New York Times, in its September 11, 1940, issue,
prints the following in connection with & statement made by
you In Buffalo:
"He predicted that airplane production, in-
cluding military and large commercial planes in
the United States, would be 3,000 a month by
July, 1941."
I have just received & report from OPM on July air-
plane production. These figures show that the following
planes were produced during July:
Fighting planes
626
Training planes
829
Large commercial planes
18
Total
1,473
These figures fall 80 far short of the estimate which
you made last September that I an really worried. When are
we really going to begin to produce planes so that we will
have & surplus to divide with England, China and Russia rather
than 4 defleit?
Yours sincerely,
(Signed) Henry
r. William 5. Knudsen,
Director General of OPM,
Social Security Building,
Washington, D.C.
Copies to: Secretary of State
Secretary of Var
Secretary of Navy
Sidney Hillman
by M - 2.45pm Sanges
Regraded Unclassified
8/14/41-
104
Hajr saw Helsering and John
today-
105
message telephoned to
Commissioner Hebering
8/12/41- memo came down
from house 8/12/41
Regraded Unclassified
106
TREASURY DEPARTMENT
WASHINGTON
OFFICE OF
August 8, 1941.
COMMISSIONER OF INTERNAL REVENUE
-
-
. REVENUE
TO:
Secretary Morgenthau
FROM:
Mr. Helvering
There is submitted to you herewith a
memorandum which has been handed to me by
Mr. Irey, giving a final report of the ac-
complishments in the investigation of the
so-called Louisiana series of cases.
It 1s interesting to note that in these
cases there have been one hundred and forty-
nine persons convicted; in addition, recom-
mendations for additional taxes have been made,
or will be made in the near future, aggregating
more than $6,000,000.
G.H.H.
Enc.
Imant
Lee Mr. Y Lohu, Pline
11.0 to war to at
think Me an
for luin 142
Regraded Unclassified
102
TREASURY DEPARTMENT
WASHINGTON
OFFICE OF
CHIF, INTELLIGENCE UNIT
August 7. 1941,
BURIAU OF INTERNAL REVENUE
TO:
Mr. Helvering
FROM:
Elmer Irey
I am in receipt of a final general report from
Acting Special Agent in Charge Lohn, covering the
investigation of the lest series of so-called Louisiana
cases, and I am sure that the information below, which
is shown in the report of Mr. Lohn, will be of interest
to you and the Secretary.
These cases grew out of the investigation of the
income tax liability of Dr. Jamés Monroe Smith, who at
the time the investigation was commenced was president
of the Louisiana State University and Agricultural and
Mechanical College. Before the agents had gone very
far into the case, it was disclosed that Dr. Smith was
using funds and securities of the university for his own
use or 8.3 collateral in the purchase of grain futures
to the extent of more than a half million dollars. When
it became apparent to Dr. Smith that his breach of trust
would come to light because of the investigation, he
attempted to secure the endorsement of his grain specu-
lations by the university's board of supervisors. He
approached the then Governor Richard W. Leche with the
proposal that the board ratify his grain speculations
as having been carried on by him on behalf of the uni-
versity. Accordingly, a meeting was held in the
Governor's Mansion on Sunday, June 25, 1939, attended
by Governor Leche, Lieutenant-Governor Earl K. Long,
Dr. Smith, and David Ellison, Attorney General of the
State, Dr. Smith later claimed that at that meeting
he was advised by the others present to leave the
state until the matter of his embezzlement blew over.
Accordingly, he fled to Canada the same night and
Governor Leche resigned the following day, in the
obvious hope of stopping any general investigation.
Meanwhile, the investigation by the special agents
brought to light certain situations which caused the
press to launch 8. political reform campaign, and public
Regraded Unclassified
108
- 2 -
opinion was 30 aroused in the state that all hopes
that former Governor Leche and his followers had of
avoiding an investigation faded. During the ensuing
weeks, the federal grand jury in New Orleans, the
Intelligence Unit, and Post Office inspectors, 08
well as other government agencies, inquired into the
activities of the state's most prominent personages.
These investigations resulted in a total of fifty-two
indictments, involving one hundred forty-nine in-
dividuals and forty-two organizations. All of these
indictments except thirteen related either to income
tax evasions or use of the mails to defraud. In
these latter cases, the Intelligence Unit obtained B
great part of the evidence upon which the mail fraud
indictments were based. Some of the evidence used in
the other thirteen indictments (Connally Act and
Sherman Anti-Trust cases) was also obtained by the
Intelligence Unit in the course of their investiga-
tions of alleged income tax evasions.
To this date, thirty of the indictments have been
closed, resulting in a total of fifty-three years
imprisonment being imposed and fines totaling more
than $60,000 being assessed. Nine of the cases, in-
volving some of the most prominent political figures in
Louisiana, were tried before juries and convictions
obtained, Fifteen of the indictments were terminated
by pleas of guilty, while pleas of nolo contendere were
entered in five cases. In one single case, the defend-
ents were acquitted by a directed verdict. Some of the
defendants were named in more than one indictment, and
the total of one hundred forty-nine persons convicted
refers to individuals regardless of the number of times
they were indicted.
In these investigations, a total of $5,888,393.79
in taxes and penalties has been recommended for assess-
ment, as indicated in the attached Schedule 1.
A great part of the investigation in the remaining
nineteen tax cases has been completed, and it is estimated
that these cases will involve approximately $353,000 in
taxes and penalties. The details of these cases are con-
tained in the attached Schedule 2.
Regraded Unclassified
- 3 -
These investigations were conducted under the
immediate direction of Acting Special Agent in Charge
Frank W. Lohn, who had assigned to him four experienced
special agents assisted by three younger special agents
of his division, who worked in cooperation with two
revenue agents from the New Orleans Division and six
revenue agents assigned from other revenue agents'
divisions. This was a picked group of agents and all
of them performed outstanding services. They are en-
titled to a large share of the credit for the accomplish-
ments achieved. Each of them assumed his full share of
the responsibilities connected with the task and each
faithfully carried out his assignment and consequently
merits special commendation for the work completed by
the group.
While these investigations may properly be con-
cidered as having been completed, there remain to be
investigated the returns of a considerable number of
related taxpayers against whom some information has
been assembled. Schedule 4, attached, shows the names
of these taxpayers, whose returns will either be fully
examined or concerning whom some inquiry will be made
as a result of information pending in our files.
I feel that the accomplishments in these cases
reflect very considerable credit on the Bureau of
Internal Revenue and its field officers, both among
the Internal revenue agents and the special agents
of the Intelligence Unit. Undoubtedly, these inves-
tigations, most particularly in the State of Louisiana,
have had a very wholesome effect and have increased
immeasurably the respect for our investigating officers.
THE
Enes.
Regraded Unclassified
110
SCHEDULE 1
INVESTIGATIONS COMPLETED
AS OF JUNE 30, 1941
Case
Total Taxes
Number
Taxpayer
and Penalties
Criminal Proceedings
Results
SI-6386-E
Henry J. Miller (Enrolled Agent),
Convicted with Newman,
Final report recom-
New Orleans, Louisiana
Harris, and Shushan for
mended that card
using mails to defraud
to practice as
agent before
Treasury Department
be revoked.
SI-14135-F
Win or Lose Corporation
Seymour Meiss, James A.
Seymour Weise pleaded
Noe, and Win or Lose
guilty 11-19-40 at
Corporation indicted
same time he entered
10-3-40 for evasion of
plea in case SI-
income and excess-profite
16425-F. Imposition
taxes of Win or Lose
of sentence suspended;
Corporation; aiding,
defendant placed under
assisting, counseling,
probation five years
and advising in prepara-
beginning after son-
tion of false income
tence of four years
tax returns; and con-
served in SI-16425-F.
spiracy
James A. Noe arrested
10-4-40; trial to
begin August 11, 1941.
SI-15479-F
Hart Enterprise Elec- $ 6,099.38
Not recommended
Supplemental report
trical Company, Inc.
recommended net in-
(Old case)
come be increased
$44,431.85 represent-
ing unreported inter-
est from L.S.U. &
A.&M. College, fiscal
year 6-30-36.
SI-15615-F
J. H. Handley
884.43
Not recommended
Mrs. J. H. Handley
21.20
Not recommended
SI-16072-F
James Monroe Smith
297,891.48
Indicted 8-21-39, yr. 1936 Plended guilty 11-10-39;
sentenced to 30 months.
Regraded Unclassified
SCHEDULE 1 (Continued)
Case
Total Taxes
Number
Texpayer
and Penalties
Criminal Proceedings
Results
SI-16356-F
Felix Maggiore
$
6,624.69
Indicted 9-18-39
Sentenced 11-12-40 to 18
months and fined
$1,000 and to pay all
costs of prosecution on
count 1; imposition of
sentence on count 2
suspended for 5 years.
Thomas J. Campbell
3,885.38
Not recommended
Related to SI-16356-F
Mrs. Thomas J. Campbell
2,433.42
Not recommended
Robert Dalovisio
151.54
Not recommended for eva-
Acquitted 11-15-40; re-
sion; indicted for
lated to SI-16356-F
conspiracy
Jeal Fassio
80.26
Not recommended
Related to SI-16356-F
Frank Neszio
142.80
Not recommended
Related to SI-16356-F
Port Commission Club (Partnership)
Related to SI-16356-F
Frank & Bob Bar & Cafe (Partnership)
Related to SI-16356-F
George W. Woodard
Indicted 9-18-39, for
Related to SI-16356-F
conspiracy to defraud
and SI-16515-F; ac-
quitted 11-15-40 in
both cases.
SI-16366-F
W.T. Burton
978,131.63
Recommended
Mrs. W. T. Burton
719,739.43
Not recommended
Sutton Joint Account
(Partnership)
SI-16367-F
W. T. Burton Co., Inc.
387,862.24
Recommended against 1. T.
Burton, L. Brown, Bruno
R. Schulz, Mrs. A. Burton,
and Herman Mazur for con-
spiracy to defeat and evade
income taxes of W. T. Burton
Company, Inc., fiscal years
ended July 31, 1936, 1937,
and 1938; also against W. T.
Burton for miding and noplet-
inc in the filing of a Tolge
Regraded Unclassified
112
SCHEDULE 1 (Continued)
Case
Total Taxes
Number
Taxpayer
and Penalties
Criminal Proceedings
Results
SI-16368-F
Burton-Sutton Oil Co.,
None
Not recommended
Inc.
SI-16378-F
M. E. Hart
62,019.72
Recommended for 1936
(Jeopardy assessment;
Mrs. M. E. Hart
44,426.17
Not recommended
(M. E. Hart committed
(suicide 9-6-40.
SI-16379-F
National Equipment Co.
39,658.07
Not recommended
SI-16425-F
Seymour Weiss
190,487.45
Indicted 8-7-39 for eva-
Sentenced 11-19-40 to
sion and conspiracy,
four years, sentence
1936
to run concurrently
with a sentence of 2½
years imposed 9-15-39
on mail fraud charge;
sentence suspended five
years on conspiracy
charge.
SI-16444-F
Richard W. Leche
63,870.47
Recommended
Jeopardy assessment
11-5-40; case being
considered by U. S.
Attorney.
Mrs. Elton R. Leche
48,980.56
Not recommended
SI-16477-F
Dr. James A. Shaw (Dec'd) 47,013.41
Not recommended
Suicide 8-20-39.
Mrs. James A. Shaw
226.95
Not recommended
George B. Conover
217.57
Not recommended
Related to SI-16477-F;
Mrs. George B. Conover
173.89
Not recommended
closed on basis of RAR;
taxpayer agreed to
findings
SI-16512-F
Leon C. Neisa
137,316.79
Recommended; indicted
Date for trial not set.
5-13-40 for evasion
Sentenced 10-31-40 to
1936, 1937, and 1938,
serve five years on
and for filing false
mail fraud charge-
claim for refund for
appealed.
Mry. Leon C. Weise
89,655.39
1936
F. Julius Dreyfous
371.18
Not recommended
Related to 81-16512-F
Mrs. F. Julius Dreyfous
371.18
Not recomended
Solis Seiforth
174.44
Not reconmended
Related to 01-16512
676.66
Not
Unclassified
113
SCHEDULE 1 (Contimued)
Case
Total Taxes
Number
Texpayer
and Penalties
Criminal Proceedings
Results
SI-16515-F
H. A. Mitchom
$ 3,723.19
Indicted 9-18-39
Sentenced 11-18-40 to
18 months and fined
$1,000 and to pay
costs of prosecution
on count 1; imposition
of sentence on counts
2, 3, and 4 suspended;
probation five years.
Mrs. H. A. Mitchem
2,297.51
Not recommended
SI-16515-F
C. M. Lewis
1,611.89
Indicted 9-18-39
Received same sentence
as H. A. Mitchem (same
jacket number).
Unjacketed
Freddie Romero
654.40
Not recommended
Mrs. Freddie Romero
654.40
Not recommended
Unjacketed
Sam 11. Smith and Wife
912.02
Not recommended
SI-16525-F
George A. Caldwell
21,770.59
Indicted 1-12-40, years
Pleaded guilty 2-14-40;
1935 to 1938
sentenced to 24 months
Mrs. George A. Caldwell
14,513.71
Not recommended
SI-16584-F
Lee Circle Hotel Company
79,331.32
Not recommended
Transferee assessment
against Roosevelt
Hotel Corporation.
SI-16605-F
Allen Christman
1,018.97
Not recommended
SI-16686-F
Frank Costello
350,053.64
Indicted 10-9-39
Not guilty 5-15-40
SI-16687-F
Philip Kastel
444,130.78
Indicted 10-9-39
Not guilty 5-15-40
SI-16688-F
Dudley Geigerman
None
Indicted 10-9-39
Not guilty 5-15-40
SI-16690-F
James Brocato
None
Indicted 10-9-39
Not guilty 5-15-40
SI-16689-F
Harold Geigerman
None
Indicted 10-9-39
Not guilty 5-15-40
SI-16702-F
Gray D. Morrison
4,425.60
Indicted 6-11-40, year
Pleaded guilty 11-27-40;
1938
sentence suspended
five years; taxes end
penalties paid.
SI-16703-F
The Progress Publish-
2,015.62
Not recommended
ing Company, Inc.
Regraded Unclassified
111
SCHEDULE 1 (Continued)
Case
Total Taxes
Number
Taxpayer
and Penalties
Criminal Proceedings
Results
SI-16721-F
Julius Pace
$
23,383.04
Indicted 2-13-40
Pleaded nolo contendere
on 3 counts and guilty
on 2 counts on 1-11-41;
sentence deferred to
3-3-41, at which time
imposition of sentence
mas suspended until
further orders of the
court, to give defend-
ent time to make ef-
fort to settle civil
liabilities; probation
2 years.
SI-16760-F
Younger Motor Truck
9,379.56
Not recommended
Company, Inc.
SI-16765-F
Pelican Oil & Gasoline
10,960.46
Not recommended
Company, Inc.
SI-16779-F
L. Austin Fontenot
2,245.22
Not recommended
SI-16780-F
D. J. Doucet
None
Not recommended
SI-16782-F
Cecil T. Phillips
5,322.54
Not recommended
Mrs. Cecil T. Phillips
529.91
Not recommended
SI-16933-F
Meyers, Whitty & Hodge
(Partnership)
Not recommended
Involving Joseph C.
Meyers, John F.
Whitty, and J. Floyd
Hodge; no additional
taxes for partners,
ST-16935-P
James Themas
7,653.11
Not recommended for
Case closed without
evasion; recommended
prosecution.
for failure to file
Information returns
Mrs. James Thomas
6,224.79
Not recomended
Unjecketed
Notal
Not recomended
to ST-4(93)-E
Culver! Compony
(Portnorship)
Coverage two
licine
not
required
The
to Regraded Unclassified
115
SCHEDULE 1 (Continued)
Case
Total Taxes
Number
Taxpayer
and Penalties
Criminal Proceedings
Results
SI-16936-F
Louisiana Tractor and
Related to SI-16935-F;
Machinery Company
(Partnership)
Not recommended
$9,747.71 recommended
against partners.
George E. McNutt
$
2,501.15
Not recommended
Partner - SI-16936-F
Mrs. George E. McNutt
2,501.15
Not recommended
M. J. Carbone
3,092.19
Not recommended
Partner - SI-16936-F
Mrs. M. J. (Willard)
Carbone
1,440.05
Not recommended
Mrs. M. J. (Eileen)
Carbone
213.17
Not recommended
SI-16966-F
Louis C. LeSage
369.60
Not recommended for
Indicted with Seymour
evasion of his
Weiss (SI-16425-F) on
income taxes
mail freud charges;
also indicted 8-7-40
for conspiracy in con-
nection with Weiss' in-
come taxes; sentenced to
year and a. day on mail
fraud charges 9-15-39;
imposition of sentence cm
income tax conspiracy
case suspended for five
years 11-19-40.
Unjacketed
Harvey Poltier
13,259.45
Not recommended
Assessment recommended by
revenue agent's report
and agreement signed,
based entirely on in-
formation furnished by
Intelligence Unit.
Unjacketed
Ola Silcott
108.00
Not recommended
Based on income from R. T.
Burton (SI-16366-F)
SI-16990-F
Joseph Pipitone
1,149.16
Not recommended
Related to SI-16721-F
SI-17103-F
Hart. Enterprise Elec-
164,133.23
Recomended against
trical Co., Inc.
M. E. Hart, who
later committed
suicide
Regraded Unclassified
116
SCHEDULE 1 (Continued)
Case
Total Taxes
Number
Taxpayer
end Penalties
Criminal Proceedings
Results
51-171/7-F
William C. Bankin
0
41,549.81
Recommended
Related to SI-16444-F,
SI-1714M-F, and SI-
17511-F; case sub-
mitted to U. S. Attorney,
who does not believe
prosecution advisable.
SI-17143-P
Philip A. Gehlback
26,266.89
Indicted 11-29-40,
Pleaded guilty and sen-
years 1937 and 1938
tenced to OISE year and
one day end pay costs
of prosecution, 12-14-40.
Mrs. Philip A. Gehlbach
815.09
Not recommended
SI-17209-F
Estate of Charles S.
435,722.84
Not recommended
Indirectly related to Ls.
Bentley
"scardals" investige-
tions
SI-17262-F
Summa Caldwell
8,169.98
Not recommended
lirs. Summe Caldwell
8,169.98
Not recommended
SI-17263-F
V. L. Caldwell
15,874.57
Not recommended
Mrs. V. L. Caldwell
15,874.57
Not recommended
SI-17387-F
Hampton Reynolds
965.25
Recommended for con-
spiracy to defraud
the United States;
recommended to recover
$124,247.22 fraudu-
lently obtained from
the United States
Mrs. Elma F. Reynolds
965.25
Not recommended
Joseph A. Creven and wife
9,153.46
(Recommended to recover
(
Louis N. Lang and wife
9,582.78
($91,770.51 fraudulently
(Partners in Craven-
Joseph D. Walker and wife
12,797.65
(obtained from the United
(Lang Company
William Stunley Behrren
15,079.66
(States; and for conspir-
r
(AC) to defraid the U. 5.
SI-17388-E
John 7. Farmer
642,05
Not recommended
Pronecytion not recom-
in Income firer
nape, Inch Regraded Unclassified
117
SCHEDULE 1 (Continued)
Case
Total Taxes
Number
Taxpayer
and Penalties
Criminal Proceedings
Results
3I-17401-F
Mr. and Mrs. J. B.
Miller
$
226.25
Not recommended
SI-17427-F
Joseph E. Loper, Sr.
12,260.89
Recommended
Mrs. Retta Loper
13,404.86
Not recommended
SI-17511-F
Joseph H. Connolly
23,592.98
Recommended
(
Both indicted 4-3-41;
Mary H. Comolly
23,592.98
Recommended
Arraigned 6-25-41 and
pleaded not guilty; re-
(
quested 15 days' time
(
within which to file
( technical pleadings with
( the court, which was
( granted. Bond set at
( $5,000 each.
SI-17575-F
John M. Nunes, et ux.
456.14
Not recommended
SI-17605-F
N. C. McGowen, et al.
397,212.06
Not recommended-
barred by the
statute of
limitations
SI-17662-F
L. G. Boxwell
21,891.16
Not recommended
Mrs. L. G. Boxwell (O.A.)
(9,415.73)
Not recommended
SI-17478-F
Homer W. Smith, et ux.
274.24
Not recommended
SI-17718-F
Arthur A. Steiner
4,230.35
Indicted 4-8-41 for
Arraigned 6-25-41 and
income tax evasion;
pleaded not guilty in
indicted 1-12-40
income tex case; re-
on mail freud charge
quested 15 days' time
Mrs. Arthur A. Steiner
1,417.14
Not recommended
within which to file
technical pleadings,
which was granted.
SI-Special
Robert S. Maestri, et ux. 171,246.59
(
(
William H. Helis
309,461.80
(Not recommended
(Case jacket requested
Canal Oil Company, Inc.
5,763.22
(
(
5-28-41.
Lincoln Oil Company, Inc.
None
(
(
Total
$5,888,393.70
Regraded Unclassified
118
SCHEDULE 2
JACKETED CASES UNDER INVESTIGATION
AS OF JUNE 30, 1941
Estimated
Case
Taxes to be
Number
Taxpayer
Recommended
Remarks
SI-15616-F
Henry A. Reid
SI-15617-F
Walter J. Goos
SI-15618-F
Weston Fanguy
SI-15619-F
Gus Broussard
SI-16572-F
R. Thomas McDermott
Related to Maxwell
Supply Company
SI-16713-F
W. T. Nolin
SI-16759-F
John M. Fush
Former purchasing agent for
dock board and custodian
of "deducts" fund
SI-16983-P
Ulic J. Burke
Related to SI-16721-F
SI-17577-F
Bernard Titche, Jr.
$ 1,000.00
SI-17734-F
Earl K. Long
50,000.00
Investigation suspended
pending completion of
Moran group of cases
8I-17876-F
Bruce Cartwright
Related to SI-17734-F
SI-17898-F
Joe L. Lieber
SI-17900-F
Eather E. Stein
2,000.00
Indicted 1-12-40 on mail
fraud charge
SI-17926-F
Alfred Moran, et ux.
SI-17927-F
Arthur J. Moran, et ux.
SI-17928-F
Harry P. Moran, et us.
SI-17929-F
Thomas J. Moran, et ux.
300,000.00
SI-17930-F
Estate of Mrs. Thomas
J. Moran
SI-17931-F
A. Jay Moran
SI-17932-F
Harry P. Moran, Jr.
Total
$353,000.00
SI-6428-E
Victor Canfield (Eurolled Agent)
Prepared false returns
in W. T. Burton cases
SI-6457-E
Ulan Hill (Enrolled Agent)
Regraded Unclassified
119
SCHEDULE 3
INFORMATION REPORTS SUBMITTED
AS OF JUNE 30, 1941
To Internal Revenue Agent in Charge
Texpayer
Address
Remarks
Albert and Deen
Baton Rouge, La.
Made kickbacks to George Caldwell,
SI-16525-F
American Heating and
Plumbing Company
New Orleans, LA.
Made kickbacks to George Caldwell
Architectural Stone and
Plastering Company
New Orleans, LA.
Made kickbacks to George Caldwell
Leo Cafiero
Donaldsonville, Le.
Supplemental to SI-16935-F; re-
ceived graft from James Thomas
2. J. Colfry
New Orleans, La.
Made kickbacks to George Caldwell
Consolidated Roofing Co.
New Orleans, La.
Made kickbacks to George Caldwell
D. A. Lubricant Company
Indianapolis, Ind.
Paid "commissions" to James Thomas
Gove Davis
Olla, Louisiana
Received graft from James Thomas
DeCeneres Brothers
Shreveport, La.
Received graft from James Thomas
Dixie Coin Machine Company
Saw Orleans, La.
Related to SI-16725-F (Julius Pace)
Jules Fisher
Cabinash, La.
Received graft from Jamos Thomas
Holzer Sheet Metal Works,
Inc.
New Orleans, La.
Made kickbacks to George Caldwell
Henry Lenter Hughes
Natchitoches, LA.
District attorney for Watchitoches
and Red River Parishes
F. J. Hunter
Shreveport, La.
Report regarding graft payments by
Pelican 011 and Casoline Company,
Inc. (SI-16765-F)
Ben King, et. al.
Lake Charles, La.
Clifford A. King
New Orleans, La.
Made kickbacks to George Caldwell
Jóhn D. Klorer, Jr.
New Orleans, Lo.
Received graft from Jemes Thomas
George F. Lee
Alexandria, La,
Received graft from James Thomas
Louisiana Materials Co.
Now Orleans, La.
Paid "commissions" to James Thomas
E. A. McIlhenny
Avery Island, La.
Related to Leche case (SI-16444-F)
Merlwether Gravel Company
Shreveport, La,
Paid "commissions" to James Thomas
The Progress Publishing
Company, Inc.
Harmond, La.
SI-16703-F
F. J. Riley Heating and
Plumbing Company
Monroe, LA.
Made kickbacks to George Caldwell
Rose Gravel Company
Shreveport, La.
Paid "commissions" to James Thomas
Shell Petroleum Company
St. Louis, Mo.
Peid "commissions" to James Thomas
Steel Construction Company
Birmingham, Ala.
Paid "commissions" to James Thomas
Dathorlin and Scranton
New Orleans, Le.
Investigation made to get evidence
in connection with mail fraud
case of Newman, Harris, et al.
1. G. Thomas
New Orleans, La.
Paid "commissions" to James Thomas
Trin City Gravel Company
Monroe, La.
Paid "commissions" to James Thomas
1. E. Woodard
Arcadia, Le,
Received graft from James Thomas
Regraded Unclassified
120
SCHEDULE 3 (Continued)
To Collector of Internal Revenue
Taxpayer
Address
Remarks
Equities, Inc.
New Orleans, La.
Report in regard to social
security taxes
L. E. Frazar
Merryville, La.
Received graft from James
Thomas (SI-16935-F)
Sheriff Druce Reed
Allen Parish, La.
Alleged graft payments by
Stephens-Cowart (a
Stephens-Cowart Partnership
partnership)
(
Oakdale, La.
to Sheriff Druce Reed
John Stabile
New Orleans, La.
Regraded Unclassified
121
SCHEDULE 4
TAXPAYERS WHOSE RETURNS HAVE BEEN CONSIDERED
OR WILL BE THE SUBJECT OF SOME INVESTIGATION
Name
Address
Remarks
Asset, Henry
New Orleans, La.
Captain of New Orleans police-
bribes from law violators
Burnett, Mr. and Mrs. J. M. Baton Rouge, La.
Blanchard, Max A.
New Orleans, La.
Brennan, Goorge
New Orleans, La,
Business manager of associations
of operators of misic boxes and
iron claw machines
Brown, Joe 17.
New Orleans, La.
Gambler-friend of Seymour Weiss
Burke, Edward
New Orleans, LA.
Couvillon, Foster
Baton Rouge, La.
Purchasing agent for Louisiana
Highway Commission
Crule Oil Sales Company
New Orleans, La.
Related to SI-17427-F (Loper)
Delcambre, Isadore
Delcambre, La.
Derbes, Louis J.
Houma, La.
Donner, Charles J. (Dec'd)
New Orleans, La,
Related to Shushan case
Dornier, Joseph B.
Convent, La.
Collector of graft on slot
machines
East Texas Refining Co.
Dallas, Texas
Related to SI-16425-P and SI-16444-F
Mwards Transportation Co.
Houston, Texas
Related to Helis case
Ellison, David M.
Baton Rouge, La.
Formerly attorney general of La.
Evans, if. C.
Baton Rouge, La.
Farley, Elmer
New Orleans, La.
Florist, nursery; monopoly on
state business
Farrell, J. E., et ux.
Fort Worth, Taxas
Related to SI-14135-F (Win or Lose
Corporation)
Feacel, n. C.
West Monroe, La.
011 and gas operator; related to
SI-16444-F
Fisher, Joseph
Lafitte, La.
Fisher, Jules
Cabinash, LA.
Fitere, Charles 8.
New Orleans, La.
Related to Shushan case
3111, Thomas J.
New Orleans, LA.
Nortman, Paul
New Orleans, La.
Alleged racketeering in the
Longshoreman's Union
Johnson, Edward W.
New Orleans, La.
Alleged racketeering in the
Longshoreman's Union
James, William B.
New Orleans, La.
C. P. A. Related to SI-17147-F
and SI-17148-F
Regraded Unclassified
122
SCHEDULE 4 (Continued)
Name
Address
Remarks
Landry, Fernand
Delcambre, La.
Lindsey, Coleman and Cora
Baton Rouge, La.
Long, Mrs. Rose McConnell
Baton Rouge, La.
Widow of late Senator threy P. Long
Gue Mayer Company, Ltd.
New Orleans, La.
Allegedly keeping two sets of
records, with the assistance
of an internal revenue agent,
with intent to evade income taxes
Moran, Alfred and Son
New Orleans, La.
Partnership (See SI-17926-32-F)
Moran, Thomas J. and Sons
New Orleans, La.
Partnership
Moran's Sons, Thomas J.
New Orleans, La.
Naron Supply Company
New Orleans, La.
Partnership (related to Moran group)
O'Hara, Dr. Joseph
New Orleans, La.
Perez, Leander H.
Dalcour, La.
District Attorney, Jefferson Parish
Petroleum Sales Company
New Orleans, La,
Related to SI-17427-F (Loper)
Sehrt, Clem
New Orleans, La.
Superior Oil Company
Houston, Texas
One of Helis interests
United Gas Affiliates
Related to SI-16425-F and SI-16444-F
Wallace, George M.
Baton Rouge, La.
Attorney and legal adviser to
Earl K. Long when Long was
governor of Louisiana
White, A. P.
Arcedia, La.
Wimberly, Lorris M.
Arcadia, La,
State senator; received commissions
from insurance agency handling
state business
Wimberly, Shirley G.
New Orleans, La.
Attorney; law partner of former
Governor Earl X. Long
Regraded Unclassified
123
AUG 8 1961
My dear Mr. Morgan:
In KY letter of Documber 30, 1940, with respect
to the four blocks of Tennessee Valley Authority bonds ag-
cregating $56,500,000, principal assum, I accepted the
four typewritten bends submitted to ovidence the obliga-
tion of the Authority to the Secretary of the Treasury in
that amount, and stated that the interest payable by the
Authority beyend February 15, 1941, would be at the rates
specified in the bonds, valese they were not resold before
August 15, 1941, in which 61.54 consideration would be given
to reducing the interest cost to the Authority for the are
rent interest period below the rates specified in the bonds.
Since the bonds are not to be resold before August
15, 1941, the interest cost to the Authority for the six-
month period ending on that date will be at the rate of 1/2
of 1 persent per amm, the came rate which has obtained
sines the bonds ware eriginally purchased. Accordingly, the
- of $141,250 in funds available for credit in the ascount
of the Treasurer of the United States - August 15, 1941,
should be remitted to the Treasury.
The interest payable by the Authority beyond
August 15, 1941, shile the bonds are still held by the
Treasury, will be at the rate of 1 persont por - until
further notice. It is N7 intention, hosever, to resell
three bonds to the public shartly, possibly part month.
In commection with the affering, it appeare advisable that
certain information regarding the Authority's financial
position and its expectancy with respect to & pregram of
retirement of the bonds as they become mbjest to call for
redemption prior to miurity, should be made public in
order that bidders may nore intelligantly compute the
Regraded Unclassified
124
- 2 -
prices they are willing to pay for the bends of the
four different blocks. I will approxiate 14 if you
will furnish M at your earliest convenience such
date in this respect as you feel should be made -
lie, to the end that the bends my be sold at the
nest favorable prices obtainable. Just prior to the
offering, the Treasury will cotimate the probable
predus to be realized on the bonds and will with-
hold from the public offering an amount of these
bonde approximately equivalent to the estimated fig-
use, the bonds ao withheld to be repurchased by the
Authority. will you please advise me from which
block the Authority desires these bonds withheld.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Henorable Mareourt A. Margan,
Chairman of the Board,
Termassee Valley Authority,
Incerville, Temasses.
ump
8/7/42
Regraded Unclassified
125
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
August 8, 1941
B ORANDUM TO THE SECRETARY:
Weekly Report - Lease-Lend Purchases
(8/1/41 - 8/8/41)
Requisitions
Estimated Cost
Cleared by O.P.I.
$ 187,002,398.74
Awaiting clearance by O.P.
21,538,595.75
Total Pending Requisitions
$ 208,540,994.49
Less Requisitions for metals, where contracts
will be made for term periods and allocations
(
equired from O.P.M.
$
85,122,729.76
Total Pending Requisitions for Spot Purchases
$ 123,418,264.73
Purchases to 8/1/41
$ 87,787,648.25
Purchases 8/1 to 8/8/41
15,921,740.50
Total to 8/8/41
$ 103,709,388.75
Arrangements have been made for the establishment of priority
ratings by OPM prior to purchase negotiations by the Procurement
Division. This will enable prospective bidders to somewhat accurately
determine possible deliveries.
In view of the widening scope of commercial purchases, discussions
have been had with the Division of Defense Aid Reports and OPM
representatives to further clarify policy in handling lend lease
requisitions whereby the Division of Defense Aid Reports will determine
whether requisitions come within the scope of the Lend Lease Act; OPL
will establish availability of materials requisitioned; and the
(
Procurement Division will make purchases.
An
Clifton E. Mack
Attachments-7
Director of Procurement
Regraded Unclassified
CONTRACT
NULLER
CONTRACTOR'S NAME
TICNER
COSO ODITY
QUANTITY
TOTAL VALUE
DA-TFS-710
Nashua ufg. Co. Inc.
China
Blankets
600,000
of
669,000.00
DA-TPS-741
Marshall Field & Co.
12
Blankets
100,000
120,000.00
DA-TPS-675
The American Fork & Hoe Co.
U. E.
Hammers
5,000
6,300.00
DA-TPS-683
Gane's Chemical Works, Inc.
"
Barbitol
16,000#
53,200.00
DA-TPS-750
The Plastergon Wall Board Co.
II
Wallboard
Sq.Ft. 17,126,300
343,382.31
DA-TPS-685
Vlcheck Tool Co.
II
Wrenches
5,000
675.00
DA-TPS-358
Allis-Chalmers Vfg. Co,
H.
Tractors
670,899.23
DA-TPS-243
Chicago Flexible Shaft Co.
If
Clipping Machines
200
4,992.50
DA-TPS-626
Sulphur Export Corp.
"
Discolored Sulphur
126,000 LT 1,953,000.00
DA-TPS-696
Barber-Greene Co.
"
Ditcher & Spares
13,191.41
DA-TPS-654
S K F Industries, Inc.
"
Balls, Steel
7.2 M
1,402.38
DA-TPS-671
Ganes Chemical Works, Inc.
"
Benzocaine
2,000#
6,175.00
DA-TPS-485
The Mohawk Rubber Co.
If
Tires
120
1,054.80
The Falls Rubber Co.
n
DA-TPS-487
Tubes
5,000
17,800.00
The Firestone Tire & Rubber Co.
II
DA-TPS-489
Tires
4,640
99,330.80
DA-TPS-486
Lee Tire & Rubber Co. of N.Y. Inc
=
Cases & Flaps
400
20,100.00
David S. Ingalls
"
DA-TPS-632
Cessna Airplane
32,400.00
126
DA-TPS-631
The Palmer Oil Corp.
"
Cessna Airplane
RegradedUnclassified
CONTRACT
he
Jaul-
to A.E
TIDGER
CO. CULTY
n. TITY
TOTAL VALUE
DA-TPS-284
Atlantic Aviation Sales, Inc.
U.
1.4
lessna Airplane
=
32,500.00
"
DA-TP5-C30
F. E. Evans
Cessne Airplane
32,460.00
E. N. Wiggins Airways Inc.
11
DA-TPS-629
Cessna Airplane
29,725.00
"
DA-TPS-578
Caterpillar Tractor Co.
Tractor, Winch, Trailbuilder
6,972.38
If
DA-TPS-749
The Upson Co.
Wallboard
1,400,000 Sq.Ft.
27,930.00
If
DA-TPS-724
Brown Co.
Easy Bleaching Sulphite 2,000 T
122,000.00
DA-TPS-728
St. Joe Paper Co.
If
Kraft Pulp
15,000 T
862,500.00
"
DA-TPS-705
The Phosphate ining Co.
Phosphate
17,500 T
94,500.00
IT
DA-TPS-725
Rayonier, Inc.
Blesched Sulphite
9,500 ST
688,750.00
If
DA-TPS-709
Coronet Phosphate Co.
Phosphate
39,000 T
217,620.00
II
DA-TPS-727
The Champion Paper & Fibre Co.
Semi-Bleached Sulphite 1,000 ST
72,500.00
"
DA-TPS-684
Gane & Ingram, Inc.
Cincophin
2,000#
7,000.00
Pulp Div. Weyerhaeuser Timber Co.
If
DA-TPS-726
Bleaching Sulphite
1,000 ST
60,500.00
Gane's Chemical Works Inc.
=
DA-TPS-681
Phenobarbitol
20,000#
76,000.00
n
DA-TPS-625
Sulphur Export Corp.
Sulphur
81,000 LT
1,255,500.00
If
DA-TPS-226
Fairbanks, Vorse & Co.
Spare Parts for Agric. &chy.
1,082.77
n
DA-TPS-592
The White Votor Co.
Spare Parts for Trucks
25,626.89
127
"
DA-TPS-677
S. B. Penick 6 Co.
Hydrastis
6,000#
22,650.00
Regraded Unclassified
TO
THE
SECRETARY:
CONTRACT
NUMBER
CONTRACTOR'S AE
TIONER
CO ODITY
QUA TITY
TOTAL VALUE
DA-TPS-579
U. S. Rubber Export Co. Ltd.
U.K.
Tires and Flaps
2
28,934.31
DA-TPS-580
The Lohawk Rubber Co.
17
Tires
50
1,639.00
The Mansfield Tire & Rubber Co.Inc.
"
DA-TPS-581
Tires, Tubes and Flaps
78,449.25
DA-TPS-582
The Firestone Tire & Rubber Co.
=
Tires, Tubes and Flaps
38,379.19
If
DA-TPS-583
The Goodyear Tire & Rubber Co. Inc.
Tubes
273.00
If
Oliver Farm Equipment Co.
-
26.03
DA-TPS-81
(Adj.Ded.)
11
DA-TPS-100
Deere & Co.
.58
(Adj.Ded.)
"
DA-TPS-744
Behr - Manning Corp.
Stones, Oil
11,808
7,380.00
"
The Duff-Norton fg. Co.
Jacks
100
DA-TPS-748
1,260.00
11
DA-TPS-638
Schultz-O'Neill Co.
Pulverizer
3,050.00
International Harvester Export Co.
IT
DA-TPS-356
Tractors
507,989.13
11
DA-TPS-618
Deere & Co.
Potato Diggers
10
13,367.86
inn.
If
DA-TPS-362
/ Moline Power Implement Co.
Tractors
337,170.24
DA-TPS-752
George P. Fuller
Lockheed Airplane
57,500.00
n
DA-TPS-298
Geo. P. Muth Co. Inc.
3,078.60
(Adj.Add.)
128
II
DA-TP5-624
Charles B. Jackson, Jr.
Lockheed Airplane
55,000.00
Regraded Unclassified
CONTRACT
no 131-
NEWSR
COMPRACTOR'S MAME
TIONER
COMMUNITY
PASTITY
TOTAL VALUE
DA-TPS-737
The Superior Cil Co.
U.K.
Lockheed Airplane
75,000.00
DA-IPO-676
Benzol Products Co.
If
Ethyl Cyanoscetate 6,000#
7,500.00
Underwood Elliott Fisher Co.
"
DA-TPS-962
Computing achines
14,580.00
"
DA-TPS-663
Laurens Bros.
Lathes, Turret
2
12,600.00
H
DA-TPS-367
James Fyfe
Manila Fiber
734,050#
22,837.32
If
DA-TPS-368
James Fyfe
Lanila Fiber
96,950#
3,493.81
"
DA-TPS-369
Hanson & Orth
Manila Fiber
657,875#
24,357.82
19
DA-TPS-370
!/ac Leod & Co. Inc.
Manila Fiber
692,500#
21,394.38
H
DA-TPS-401
James Fyfe
Ranila Fiber
277,000
6,618.75
"
DA-TPS-402
James Fyfe
Manila Fiber
27,500#
1,100.00
=
DA-TPS-403
Hanson & Orth
Manila Fiber
277,000#
12,387.19
If
DA-TPS-404
Manson & Orth
Manila Fiber
206,250#
8,868.75
II
DA-TPS-405
MacLeod L Co. Inc
Manila Fiber
206,250#
11,601.56
"
DA-TPS-406 Henry N. Peabody & Co.
anila Fiber
401,650#
16,002.81
=
DA-TPS-436 N.Y. wire Cloth Co.
- 12,375.00
(Adj.Ded.)
"
DA-TPS-128 J. I. Case Co.
285.95
(Adj.Ded.)
129
If
DA-TPS-605 Caterpillar .ractor Co.
Spare Parts for Tractors
46,659.34
Regraded Unclassified
AUGUST
CONTRACT
RSQ ISI-
NUMBER
CONTRACTOR'S NA E
TIONER
CO. ODITY
QUALTITY
TOTAL ALUE
DA-TPS-694 Dalzen Tool & fg. Co.
U.K.
Taps, Hand
$
75,845.00
II
DA-TPS-711 The Torrin ton Co.
Bearings, Needle
10,700
2,741.29
DA-TPS-497 The Proctor & Gamble Distributing Co
=
Glycerine
4,480,000#
607,530.00
"
DA-TPS-674
Bayonier, Inc.
Chemical Wood Pulp
1,000 T
85,000.00
DA-TPS-736 Armour & Co. of Delaware
11
Peptone
20,000#
35,000.00
=
DA-TPS-702 The Wilson Laboratories
Pancreatin
2,000#
7,500.00
"
DA-TPS-670 Mal linckrodt Chemical Wks.
Carbromal
6,000#
30,000.00
12
DA-TPP-682 S.B. Pennick & Co.
Cascara Sagrada
320,000#
48,800.00
DA-TPS-701 R. T. Greer & Co.
"
wild Cherry Bark
30,000#
1,800.00
"
DA-TPS-619 Morey Machinery Co. Inc.
Hand Screw Machines
2
1,700.00
"
DA-TPS-593
Mack Mfg. Co.
Spare Parts for Mack Trucks
29,694.48
if
DA-TPS-693
Hill-Clarke chy. Co.
Lathe, Turret
7,700.00
General Electric Supply Co.
"
DA-TPS-851
Radio Receivers
18,291.55
DA-TPS-488 The Mansfield Tire & Rubber Co.
If
Cases & Flaps, Tires
186,584.00
DA-TPS-747 The Mahoning Valley Steel Co.
"
Steel Sheets
401 GT
29,573.23
DA-TPS-769 Walworth International Co.
"
Pipe Fittings
56,258.62
"
130
DA-TPS-315-1 Sharon Steel Corp.
Carbon Steel
2,732 GT
157,488.96
Regraded Unclassified
MEMORA
1
TO THE SECRETARY:
AU GUST
1941
CONTRACT
REQUISI-
NUMBER
CONTRACTOR'S NAME
TIOMER
Ollobity
QUANTITY
TOTAL VALUE
DA-TPS-785
The Timken Roller Bearing Co.
U.K.
Tubing
11 GT $
3,172.40
DA-TPS-308
(Adj.Add.)
Bethlehem Steel Export Co.
n
55,866.60
"
DA-TPS-761
Granite City Steel Co.
Tinplate
774 GT
96,846.90
II
DA-TPS-756
Bethlehem Steel Export Corp.
Tinplate
6210 GT
725,193.00
a
DA-TPS-793
Lukens Steel Co.
Plates
1484 GT
45,990.19
u
DA-TPS-792
Ellwood Forge Co.
Crank shafts
1000
297,500.00
-
II
DA-TPS-755
Weirton Steel Co.
Tinplate
10,055 GT
1,076,383.91
If
DA-TPS-757
Republic Steel Corp.
Tinplate
7,254 GT
831,289.72
II
DA-TPS-759
Youngstown Sheet & Tube Co.
Tinplate
3,080 GT
362,445.03
DA-TPS-352-1
"
(Adj.Add.)
Andrews Steel Co.
8,606.52
It
DA-TPS-758
Jones & Laughlin Steel Corp.
Tinplate
4340 GT
507,520.54
II
DA-TPS-760
Follansbee Steel Corp.
Tinplate
1510 GT
181,974.55
"
DA-TPS-797
Atlantic Steel Co.
Wire rods
542 GT
31,201.86
if
Lukens Steel Co.
Galv. Plates
DA-TPS-798
260,452#
15,727.98
"
Lukens Steel Co.
Galv. Plates
736,268#
24,218.15
DA-TPS-838
131
=
DA-TPS-754 U. S. Steel Export Co.
Terne Sheets and Tinplate 3617GT
Regraded Unclassified
503, 235.88
MENORAOTM
TO
THE
SECRETARY:
AUGUST 1941
CONTRACT
REQ ISI-
NUMBER
CONTRACTOR'S NAME
TIONER
COLLODITY
QUANTITY
TOTAL VALUE
DA-TPS-843
Wisconsin Steel Co.
U.K.
Rerolling Billets
11,827 GT
$
502,410.96
DA-TPS-309-1
(Adj.Ded.)
Republic Steel Corp.
"
- 125,825.00
DA-TPS-848
American Zinc Co. of Illinois
"
Zinc
1,730,000#
127,328.00
DA-TPS-849
The American Metal Co., Ltd.
If
Zinc
1,650,000#
125,565.00
DA-TP-853
Anaconda Sales Co.
"
Zinc
720,000#
59,400.00
DA-TPS-723
(Adj.Add.) Laclede Steel Co.
"
3,710.96
Purchases 8/1 to 8/8/41
$ 15,923,530.50
Contract DA-TPS-395 was cancelled in its entirety
-
1,790.00
Total Purchases 8/1 to 8/8/41
$ 15,921,740.50
132
Regraded Unclassified
133L
AUG 8 1941
Dear Mr. Keynes:
Thank you for your expressions of approviation
for our work here. Tour - efferts have helped
terminal outsblishing odogsato financial arrengments
the no Bhjasty's We will realise that 16
is to our advantage to argedite is my my 10
- the - in which - - constries are joined.
I shall fullow the progres elecely M its details are
wrind out and its operative results because materable.
Your rough activities of the probable fature
course of British dollar balances and gold holdings IN
of internet. I join you is the hoye that as unferences
contingement will arice and that the funds will pm
adequate to your main.
Please accept the yearself and Mrs. Sayana the
kindert personal regards from Mrs. Marganthen and syself.
Sincerely years,
(Signed) 1. Morgenthaw. se.
Secretary of the treasury
Professer J. E. Laymen,
The British topyly Council in Borth amerios,
Bez 600, Benjamin Franklis Station,
Wankington, D. c.
16- secretary Iffice
26-mm
HDW TILE COPY
Regraded Unclassified
134
THE BRITISH SUPPLY COUNCIL :N NORTH AMERICA
Box 680
TELEPHONE REPUBLIC 7860
BENJAMIN FRANKLIN STATION
WASHINGTON. D. c.
The Vonble Tenry Morgenthau, Jr.
July 28th, 1941
United States Treasury,
michington.
Dear us Secretary,
I sm hoping to catch e clipper from New York early tonorrow
m raleg =nd en very sorry that I shall not have an opportunity to
Like leave of you. There have been long delays in getting 4. draft
from the State Department on the matter I nontioned to you. Your
strics shout this proved quite right! But at last to-day I have got
recething, and the best I can do with it is, I think, to take it
is ok 1th me immediately for discussion at home.
I na very grateful for the good progress which has been made
12/ the essential help which you have given Phillips and myself in
getting Forward. The establishment of the Committee at the Treasury
702 If great idea and has made all the difference. I shall be able to
report to the Chancollor of the Exchecuer that be can now have full
condidence in the adequacy of the financial arrangements which luve
Loan set up. Clearly it will take somo time to work the out in
and it is not yet possible to estim to with any precision the
totil unntitative effect of the virious under discussion.
But we have now = sufficient margin to allow some of the reliefs
(though not the biggest!) to fall through.
Our estimate is that the British dollar balances and the cold
hald by the Bank of England teken together should 10 (ue course attain
the desired level of $m600, not 1:00 must to grovide for contingencies
but inough to afford relief from antiety. P cinnot estimate at
what date this figure will be reached. Much depends or wither old
comittment contracts result in punctual deliveries. Mitherto, as
you know, we have been better off sech month than e expected 13 a
result of serious delays in delivery, and It is porsible that the
above figure might be attained temporarily in the latter part of this
year. If 30, It *111 fall away next spring no - 10 point is 11kely
to to reached, recovering again by the entrein of 1942, after rich
our currently accruing incone (the 016 counituents having been sub-
stantipliy cleared off) should stored our muttelnsRegradedUndlassified
Personal
-2-
foreseen developments.
These figures take account of our normal sources of income en
our known commitments. They make no allowance for unforeseen out-
goings on the one hand or for possible windfalls on the other hand.
I believe that the Chancellor of the Exchequer hopes to receive lot
in the year a special receipt of gold of about $m120 from the South
African Government out of which South African Government debt in
London will be redeemed, the stock being requisitioned from the
British holders and handed to the South African Government for can-
cellation.
Thank you for your kindness and hospitality to my wife and
myself. May we be remembered to your wife? We have stayed in
Washington much longer than we expected. But it has beon 2 valuabe
and interesting, and educative experience. I shall be able to give
our Treasury in Whitehall E much truer picture of what Washington
really like; - and, I should like to add, the full story of what yo
did for us during the critical months at the beginning of this year
without which irreparable dolays might have been suffered by this
year's war effort.
Yours sincerely,
JMKeyns
RECEIVED
Treasury Department
JUL 31 1941
Division of
Monetary Research
Regraded Unclassified
135
AUG 8 1941
is. their any *
I acknowledge with thanks your lotter of
July 31, 1941, commying the Concralissine's -
pression of gratitude for the freesing of Chinsee
assits in the United States.
I - sure that you approviate the desirability
of full cosperation between our Governments in the
uncossaful administration of these freesing orders.
I would appreciate it if you would energy to
Commulissime Chiang Ent-shek the need for alone -
operation in these matters and our sincere desire to
administer the control to the entual benefit of the
people of China and the United States.
Sincerely years,
(Signed) 1. in;
Secretary of the Treasury
Dr. T. V. Soung,
1601 1 Street, 1. 3,
Weekington, D. c.
ac-m.
- 1
8/5/42
HOW
FILE COPY
Regraded Unclassified
136
1850
POST OFFICE Box 6677
1601 V STREET N. W.
WASHINGTON, D. C.
July 31, 1941
My dear Mr. Secretary:
I am in receipt of the following telegram
from the Generalissimo, dated Chungking, July 31st:
"Now that the American Government has acceded to my
request to freeze Chinese assets in the United States,
which will be of great assistance to China, please
convey to the Secretary of the Treasury my grateful
thanks for his strong support.
Chiang Kai-shek"
With kind regards,
Yours sincerely,
the
T. V. Soong
The Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Regraded Unclassified
137
August 8, 1941.
Dear Birgo:
It vas very good of you to write as, speaking
of the comment you have heard in regard to the Bev York
Times editorial. I also appreciate your sending it to
others who might have missed seeing the Times for that
day.
I know you vill be pleased to hear that I have had
a number of letters commenting very favorably upon By
statement in regard to the sale of cotton, and that these
have come from different parte of the country and from
people in widely different walks of life.
I hope that you, Mrs. Kinne and the children are well,
and send ey vars regards to you all.
Sincerely,
(Signed) 1. Horgestime, and
Mr. Birgo V. Kiame,
Better Homes & Cardens,
420 Lexington Avenue,
New York, New York.
GEF/dbs
Regraded Unclassified
BETTER HOMES & GARDENS
138
MEREDITH PUBLISHING COMMANY
DES MOINES, TOWA
vote 120 Lenington Now
August 7, 1941
Mr. Henry Morgenthau, Jr.
Secretary of the Treasury
Treasury Department
Washington, D. C.
Dear Mr. Morgenthau:
More than one person has mentioned to me that splendid
editorial in The New York Times and the approval of it
W&B unanímous.
I am sending a copy of it to our people in Des Moines and
also to Ed Eastman, who doesn't are every issue of The New
York Times. Your many friends in advertising up here are
becoming more proud of you every day and are saying now
they wish there were more men like you in Washington.
Good luck to you and keep up the fight.
Your sincere friend and admirer,
time
Birge #. Kinne
BWK.st
SAN FRANCISED
Los
ORTHOIR
PHILADELPHIA
STLANTN
CHICAGE
Regraded Unclassified
139
TREASURY department
WASHINGTON
August S, 1941
Memorandum for THE SECRETARY:
The following report is made of Stamp sales at
"Treasury House":
July 1-August 6
$26,550.90
August 7
232.50
Total
$26,783.40
GRAVES
Regraded Unclassified
IDENTIAL
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Six Business Days of June, July, and August, 1941
(June 1-7. July 1-8, August 1-7)
(Amounts in thousands of dollars)
:
:
Amount of Increase
: Percentage of Increase
Sales
:
1
or Decresse (-)
:
or Decrease (-)
Item
I
:
:
:
August
:
July
:
August
:
July
I
August
:
July
:
June
:
over
:
over
I
over
:
over
I
:
:
:
July
I
June
:
July
I
June
Series 3 - Post Offices
$11,450
$12,851
$10,608
-$ 1,401
$ 2,243
- 10.9%
21.1%
Series E - Banks
21,194
19,277
14,971
1,917
4,306
9.9
28.8
Series E - Total
32,644
32,128
25,578
516
6,550
1.6
25.6
Series 7 - Banks
6,516
6,751
9.670
-
235
- 2,919
- 3.5
- 30.2
Series G - Banks
47,502
42,439
59,974
5,063
- 17,535
11.9
- 29.2
Total
$86,661
$81,317
$95,222
5.344
$13,905
6.6%
- 14.6%
Office of the Secretary of the Treasury, Division of Research and Statistics.
August 8, 1941.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds of
sales of United States Savings Bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclassified
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Daily Sales - August 1941
On Basis of Issue Price
(In thousands of dollars)
Post Office
Bank Bond Sales
All Bond Sales
Date
Bond Sales
Series E
Series E
Series In
Series G
Total
Series E
Series F
Series G
Total
August 1941
1
$ 1,467
$ 3,296
$ 1,163
$ 7.586
$ 12,045
$ 4,763
$ 1,163
$ 7.586
$ 13,512
2
1,500
3,030
726
6,101
9,857
4,530
726
6,101
11,357
4
3,606
4,376
1,892
10,092
16,361
7,983
1,892
10,092
19,967
5
1,278
2,822
928
7,334
11,084
4,099
928
7,334
12,362
6
1,810
4,195
1,156
10,752
16,103
6,005
1,156
10,752
17,912
7
1,789
3,475
652
5,636
9,763
5,264
652
5,636
11,552
Total
$ 11,450
$ 21,194
$ 6,516
$ 47,502
$ 75,211
$ 32,644
$ 6,516
$ 47,502
$ 86,661
Office of the Secretary of the Treasury, Division of Research and Statistics,
August 8, 1941.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of
United States Savings Bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclassified
Report on Some During May, June, and July, 1941
(All figures in thousands)
Post Office
Item
Bank Sales
All Sales
Sales
Series E
Series E
Series ?
Sories G
Total
Series I
Series Pr
Series G
Total
1. Number of bond units
May
453
430
20
91
541
683
20
91
994
June
492
538
21
96
655
1,030
21
96
1,147
July
632
861
22
93
976
1,493
22
93
1,608
Total
1,577
1,829
63
280
2,172
3,406
63
280
3,749
2. Dollar volume (issue price)
May
$ 42,836
$ 57,745
$ 37,817
$211,420
$306,982
$100,581
$ 37,817
$211,420
$
349,818
June
40,788
61,729
28,876
183,134
273,739
102,517
28,876
183,134
314,527
July
50.558
94,717
27,359
169,498
291,574
145,274
27,359
169,498
342,132
Total
$134,183
$214,190
$ 94,052
$564,053
$872,294
$348,373
$ 94,052
$564,053
$1,006,477
3. Number of purchasers,
excluding second 00-
owners
May
218
207
4
30
241**
425
4
30
459**
June
225
246
5
31
282**
471
5
31
507**
July
275
375
5
30
410**
650
5
30
685**
Total*
718
828
14
91
933**
1,546
14
91
1,651**
Office of the Secretary of the Treasury, Division of Research and Statistics.
August 8, 1941.
Source: All dollar figures are deposite with the Treasurer of the United States on account of proceeds of sales of United States
Savings Bonds. Estimates of the number of unite are pro-rated on the basis of daily reports by the Post Office Department
and the Federal Reserve Banks during May and June. Estimates of the number of purchasers are based on special reports by
the Federal Reserve Banks covering the period May 1 through May 21, and, in respect to Series E, on similar data for
Series AD.
Totals represent the number of different purchasers in the three-month period, allocated to the month of first purchase.
Each series of bonds has been considered separately In estimating number of purchasers; hence totals are overstated in
respect to purchasers of more than one series.
Note: Dollar figures have been rounded to nearest thousand and will not necessarily add to totals,
Regraded Unclassified
143
DEFENSE SAVINGS STAFF
ADVANCE NOTICE RADIO PROGRAMS
FRIDAY - AUGUST 8, 1941
Time:
11:45 - 12:00 P.M.
Program:
Our Gal Sunday
Station:
VJSV and CBS Network
Time:
12:20 - 12:30 P.M.
Program:
Daniel W. Bell, Under Secretary,
Treasury Department Spenks on
Tax Savings Plan
Stetion:
WRC and NBC Red Network
Time:
4:45 - 5:00 P.M.
Program:
Treasury House Quiz
Station:
VRC - Washington, D. C.
Time:
8:00 - 8:30 P.M.
Program:
Great Plays
Station:
WJSV and CBS Network
Time:
8:30 - 8:55 P.M.
Program:
Your Happy Birthday
Station:
SMAL and NBC Blue Network
Time:
9:00 - 9:30 P.M.
Progrem:
Wings of Destiny
Station:
WRC and NBC Red Network
BULOVA TIME SIGNALS PROMOTE DEFENSE BONDS AND STAMPS
REGULARLY NOW AT THE RATE OF 428 AMNOUNCEMENTS DAILY
OVER 134 RADIO STATIONS.
Regraded Unclassified
144
August 8, 1941
TO Mr. D. N. Bell, Under Secretary
From Mr. Delano
In reference to the David Lawrence settle-
enta which we have discussed, I have come to the following
conclusions:
1. The settlement with David Lawrence was made after
careful and thorough consideration of the relevant
facts upon reasonable belief that no alternative
method would have returned a larger sun for the
depositors.
2. Unless there was some fraudulent misrepresentation
or lack of disclosure, which we had no reason to
suspect, the debt was worth no more than the settle-
went price.
3. It is believed that our receiverships fared Letter
than other creditors of the same class.
1. The first step in the settlement, acceptance of a
20-year note (maturing five per cent per annum) for
the principal amount of the debt as it stood in 1939,
after substantial monthly payments for many months,
WAS agreed to by all but one of about thirty other
creditors before being agreed to by our receiverships.
That one creditor later settled on the same basis
as our receiverships. Bankruptcy or refuse in the
Chandler Act was believed to be & probable alterns-
tive to acceptance of the 20-year note.
3. The second step in the settlement, a lump sum payment
of ten per cent or the principal of the 20-year note
(the first five per cent installment having been paid
to our two receiverships and two or three other cred-
itors) was believed to be all the asset was worth and
was more than could be secured from several outside
buyers of such items. Most of the 20-year notes held
by others are in default as to the first installment,
with the second installment coming due August 18, 1941.
Regraded Unclassified
145
- 2 -
Memorandum to Mr. Bell, Under Secretary
Tom Mr. Delano
0. no know of no material facts, which would have
resulted in a greater return to depositors, which
were unknown or left uninvestigated, except that 12
some representations of the debtor were untrue, it
is possible that some hidden assets could have been
incovered. As indicated above, there was no reason
to suspect fraud.
7. Decause many of the preliminary no otiations were
had by the receivers, and others, particularly the
compromise of 1939, were conducted by the Insolvent
Division staff, there is no file in either place. which
reveals all of the investigations that were under-
taken, all of the facts that were known, and all of
the considerations that went into the final approval.
more was more consideration and discussion, and
questioning of the debtor in this case by receivers
and by the administrative staff or the Insolvent
Division than in most of our compromise sottlements.
Nereover, one Judge examined the receivers on the
information which they had assembled and another
Judge called the debtor before him for further lon thy
questioning.
These conclusions are drawn from the facts and
statements contained in the attached detailed memorandum
discussing this matter more fully.
The Chemical Bank and Trust Company of New York
Jity and the Marine Trust Company of Buffalo have assured me
their responsible officers conducted very careful independent
investigations leading to the acceptance of Mr. Lawrence's
20-year notes. They apparently proceeded along the same lines
as our receivers and insolvent staff end arrived at the same
conclusions. As of today they regard the settlement as a
rood one and entirely justified by the facts.
Regraded Unclassified
146
August B, 1941
MMMORANDUM FOR MR.
Subject: Compromise settlements
negotiated by Mr. David
Lawrence with the receivers
of the District National
Bank and the Federal-
American National Bank and
Trust Co., of Washington,
D. C.
In this memorandum I wish to augment with
further facts and additional discussion the information
in my memorandum of July 21, 1941 to Secretary Morgenthau.
It is not my purpose to attempt in this manner a Justi-
fication of the settlements approved by my staff for I
believe the files and the record made abundantly support
the action taken. No file, however, consisting of the
accumulated correspondence and documents can ever set
forth all of the circumstances which influenced the
action taken and it is with the hope that the picture
presented by the files may be better understood that I
now undertake to amplify it in this manner. The pro-
cadure by which banks are liquidated under the Statute,
the limitations under which receivers perform their
tasks and the nature of the supervisory work of this
office should be understood. The .'inancial condition
of the debtor 18 set forth in financial statements but
the files do not contain an extended interpretation of
his condition made in the light of the receivers' problem.
The general objectives of this office in its work of
liquidating banks do not appear, nor do the limitations
of time, law or expense. The business judgment which
had finally to be displayed can only be determined by a
process of deduction from the data contained in the files.
I believe that these imponderables should be given their
due weight.
Regraded Unclassified
147
- 2
The Federal-American National Bank and Trust
Company of Washington, D. C. suspended March 6, 1933,
and WAS placed in conservatorship. It was placed In
charge of Cary A. Hardee, receiver, on October 31, 1933
who served until Lay 16, 1939 when he was succeeded by
the present receiver, Frederick J. Young. The total
claims proved against this trust amount to $8,370,000
and dividends of 75% have heretofore been paid to the
creditors with a final dividend which will approximate
0% to be distributed in the immediate future. The
liquidation of this bank (with the exception of one
piece of real estate) has been completed. All of the
remaining asseta, with that excoption, were sold at
public auction on July 14, 1041 and it is anticipated
that the receivership may be wound up within the noxt
few months.
The District National Bank of Washington, D. C.
auspended March 5, 1933 and, after EL period of conser-
vatorship, was placed in the charge of Norman R. Hamilton
es receiver, who served until July 2, 1936 when he was
succeeded by Justus S. Wardell, the present receiver.
The total claims proven against this receivership amount
to $3,916,000, upon which dividends have been hitherto
paid aggregating 85% while EL final cividend which will
approximate 19, will be available within a few weeks.
In this case also liquidation has been completed except
for the sale of two parcels of real estate and a few
pending items, all other assets having been sold at
public auction July 16, 1941, and it is believed that
the receivership may be wound up within EL few months.
At suspension both of these receiverships held
the obligations of David Lawrence.
That held by the Pederal-American (ational Basic
Trust Company consisted of a note made by the United
States Society, a non-profit corporation which was later
dissolved In 1934, in the sum of $30,000 and endorsed
by David Lawrence. At or about suspension Lawrence de-
posited with the receiver & seven-year term life insurance
pulicy in the sum of $50,000 as a form of collateral.
Mr. Lawrence was the sole responsible person upon the
debt and his liability was duly preserved by having the
note protested at maturity. This note bore Interest at
the rate or 6% from February 14, 1933. No payments were
made upon the note until the month of December, 1936
when the debtor started upon a program or payments of
100 per month. These payments were continued for thirty
months, untile June, 1939, vaon they ceased. These
Regraded Unclassified
148
payments, together with an offset or $278.52, had
reduced the debt to a principal balance of $26,721.48
by June 30, 1939, & total of $3,270.52 having been
paid. No part of the interest was paid.
The debt held by the District Rational Bank
consisted of three notes made by David Lawrence for
money directly borrowed, all dated February 6, 1933 and
bearing 6% interest. These notes aggregated the sum
of $21,332.25 at suspension and at or about susponsion
awrence had deposited a life insurance policy es a
form of collateral, which was exchanged for another
policy in June 1937, also a limited term policy. It
should be remarked that this form of insurance accumulates
no cash surrender value and can only be realized upon
11, the event of the death of the insured during the term.
It has no other value as collateral. At 02" about the
the of suspension the debtor entered apon $ of
payments of ,100 02 month with the "onservator, These
were continued from April, 1933 to June 1934, fourteen
such payments having then been made. At that time the
dyments were increased to ,200 per month and continued
no the rate for five years, until June 1939 when they
ceased. By this means the debtor paid & total of
313,400, which, with an offset, reduced his debt by total
payments of 13,695.62, or from the original amount of
21,332.25 to a balance in June 1939 of 7,636.63.
During the aix years prior to June, 1959
LAWTONCE had reduced his debt to these banks in the total
amount of 16,974.14, although not in the same proportion
to each. The collection effort made upon the assets of
an insolvent national bank is left to trio receiver, #
responsible officer appointed under the Statute to take
charge of the assets. While his accounting, his expenses
and many of his acts are closely and regularly scrutinized
by my office, the general collection erfort must noces-
sarily refiect 113 diligence and initiativo, my office
mothing :19 rosults closely checking upon hia energy
and thoroughness by field examination and in other ways.
An individual asset is brought to the attention of my
staff, in ordinary cases, when it becomes the subject od'
litigation, compromise or sale, or other situation requir-
ing specific authorization.
By the close of March, 1939 Lawrence had become
alarmed about the state of his l'inances. E1s debts,
including those assumed, had increased materially while
Regraded Unclassified
149
his assets were of uncertain nature and his earning
power, while large by ordinary standards, would not
support his obligations. He decided that some form
of settlement mist be made with his creditors to
relieve him from immediate pressure, to preserve his
surning power and to permit him to reduce all his
obligations in an orderly manner. By that time the
Chandler Act had been passed permitting debtors to
make such settlements with all their creditors upon
the approval of the Court of 8. definite plan and with
the consent of a majority of the creditors in number
and amount. This course was open to him, and he con-
sidered availing himself of it, or he might attempt a
similar settlement with his creditors upon a voluntary
basis, saving the expense of B. petition in bankruptcy
and the publicity attendant upon it. He determined to
tast out B. voluntary settlement. To avoid B preference
he ceased his payments to the two receivers in June
1939.
Accordingly he devised e Plan which he presented
to all or his unsecured creditors whereby each should
write all accrued and unpaid interest and should accept
notes due in twenty years without interest, payable at
the rate of 5% of the principal each year.
In due course the Plan was proposed to both
receivers and was favorably received by neither.
Lawrence at that point offered both receivers an
immediate cash settlement of 10% and neither receiver
WAS fevorable. These cash offers were withdrawn in
August, 1939 on the ground that such & payment, which
he could not offer to all his creditors would constitute
a preference and interfere with the ontire project.
On July 5th and 11th, 1939 the two receivers
sub mitted the Plan as proposed, with sworn financial
statement and supi crting date, to my office without
recommendation for Its information and asking advice and
instructions. Receiver Young expressed no opinion upon
the merit of the Plan while Receiver Mardell leaned to
acceptance. During this period Receiver Young obtained
n credit report upon Lawrence end his wife from the
Stone Mercantile Agency. My office asked the receivers
to obtain more information about the liquidating value
of Lawrence's assets; and concerning his income and the
possibility of reaching it by garnishment, The receivers
did obtain additional letters, statements and data from
Regraded Unclassified
150
5
Lawrence. None of this data W&B prepared in the formal
mariner to show en audited condition nor W&S it vouched
for other than by the debtor who, however, furnished his
statement of condition in affidavit form.
The matter stood in this status until September
15, 1939. Each receiver, independently of the other, was
trying to assemble information from which of decision
inight be reached. Neither was fully aware or the repre-
sentations being made to the other nor of the attitude
the other might be taking. Payments had ceased to both
receiverships. Ky office was writing almost identical
letters to both receivers with varying results. Neither
receiver could obtain action until simultaneous action
was possible and the situation wes drifting. Obviously
the case was one requiring EL round table discussion at
Which the same information might be available to all and
All might have an opportunity to question the debtor.
Such a conference was arranged for September 15, 1039
but I cannot say upon whose initiative.
This conference was attended by Lawrence; by
the two receivers, Wardell and Young (the latter accom-
panied by his clerk Lochte); by John Anderson, of the
Seneral Counsel's office; and by L. 2. Reed and R. B.
VoCundless of the Division of Insolvent National Banks
of my office. A full and free discussion appears to
have been had, at which a tentative conclusion was
reached and 8. memorandum of the discussion wes placed
in the file enumerating some of the subjects discussed
and the tentative agreement arrived at. I am informed
that the discussion took the following lines:
1. My office had Leen under the Impression,
from previous letters, that the debtor was actually
invoking the Chandler Aot to enforce a uniform settle-
ment upon all his creditors but it now developed that
he had neither prepared nor filed such & petition. He
had, however, presented his Plan to his creditors and
upon his representations he had, he stated, obtained
consents from "prectically 90% in number" and that the
consents of the two receivers would make the consent
unanimous. (This statement was changed slichtly in a
subsequent affidavit, 28 will be noted hereinafter). He
felt that the situation was thoroughly in hand end that
the consenting creditors could be depended on to aid him
15 resort to the Chandler Act were still necessary. De
stated that it had become apparent to him that the Flan
Regraded Unclassified
151
6 -
could thus be made operative on August 19, 1939, when more
than two-thirde in number and amount of his creditors had
consented, end that he had thereupon advised them that
he had declared the Plan "operative". While this act had
no legal significance it W&B his way of declaring to his
creditors that resort to the Chandler Act would only
serve to make mandatory what the majority had approved.
My staff were, of course, informed concerning the Chandler
Act and the inability of B. single creditor to force liqui-
dation or to enforce B. preferred status and realized that
this course was an active possibility. As 8 matter of fact,
there was some indication that resort to bankruptcy itself
micht be had.
2. The nature end volume of his debts was dis-
cussed at length. The debtor did not then or thereafter
file with either of the receivers B. list of the creditors
to whom he had presented the Plan. A considerable portion
of his debt was held by benks, reference being then made
to the Marine Trust Co. of Buffalo, New York, which held G.
note of $30,000 and E. contingent claim of $75,000. Some
pert of the debt was held by tradesmen and people serving
him in his capacity as writer Who were interested in
preserving his status and earning power in the hope of
future business. The members of my staff and the receivers
apparently satisfied themselves that the debt was genuine,
that he was obtaining the cooperation he claimed and that
he was acting in good feith.
3. He stated that as soon as his creditors had
accepted the new notes under the Plan, he would feel free
to make individual settlements with them, in addition to
the 5% per annum payments, as rapidly as he could raise
funds for that purpose and could make suitable offers, and
that he would try to make cash offers in settlement to
the two receivers before they found it necessary to wind
up their receiverships.
4. When it appeared that an agreement might be
reached the debtor expressed the wish to review the
petitions to the court, seeking the necessary orders, before
actual presentation. This is not an unusual request as
courts occasionally seel: verification of the statements
made therein by direct examination of the debtor. He
appeared interested in the accuracy of the language used and
it was assumed by my staff that he wished to avoid news-
worthy or extreme statements that might reflect unnecessarily
on his credit. (This was arranged and tentative drafts were
later examined by him).
Regraded Unclassified
152
5. The status of the debtor's life insurance
was discussed but he had previously informed Receiver
Wardell that all his insurance had been lodged with creditors
or placed in irrevocable trusts. The two policies held
by the receivers, amounting to $55,000 were term policies
of no cash value. His total insurance was understood to
be very large but he did not file with the receivers then
or afterward any schedule of companies or amounts. To
attempt to disturb the insurance trusts or to reach cash
surrender values over the objection of beneficiaries would
require the identification or the proceeds of the original
loans with premium payments and this could not be done.
6. The financial condition of the debtor wes
discussed with care. He had previously supplied both
receivers with financial statements in affidavit form
showing his condition as of June 30, 1939 together with
statements of the United States News, the Bureau of
Public Affairs, Inc., and the Independent Syndicate, Inc.,
the latter three not being in affidavit form. These three
corporations were of his creation and carried on his busi-
ness lut he claimed to hold no stock in them although he
was president of each. His assets consisted largely of
the obligations of two of them for advances made, while
each of the corporations held assets and had liabilities
arising from transactions and relationships between the
corporations. Complete liquidation of Lawrence's assets
would have required four receiverships end a determination
of his financial worth involved estimates of what these
liquidations might yield. From information supplied by
the debtor, obtained from the statements and elicited at
the conference, the following analysis was believed
dependable.
a. Liabilities ES of June 30, 1939
9,681.77 Unpaid taxes.
$103,815.07 Mortgage debt on home. This
debt, being separately secured, W&S not included in the
debts made subject to the stand-by agreement. The debtor's
general creditors would only be affected (and then adversely)
by a deficiency occurring after foreclosure which, as the
home wes represented as worth less than the debt, was B
possibility. It was disregarded in all computations.
Regraded Unclassified
- 8 -
153
$115,525.86 Contingent liability as
endorser on current obligations of his operating companies.
As he believed these companies would be able to meet these
obligations he did not offer the 20-year Plan to these
creditors. They would ripen into actual liabilities only
when the operating companies had to liquidate or defaulted.
These were taken into account in determining net worth on
a liquidation basis.
$373,000.00 Notes and debts subject to the
settlement. The debtor represented that 90% of these
creditors had consented to his 20-year Plan.
602,022.70 Total liabilities.
b. Assets as of June 30, 1939
596.74 Cash on hand.
133,390.00 The assessed value of the home
shown above in his liabilities as being under mortgage of
103,815.07. The sale value wes considered to be substan-
tially less than this assessed value.
17,650.00 Note made by the Independent
Syndicate, Inc., and endorsed by J. J. Williams, an
officer of that company. The statement of the condition of
the maker company shows no assets from which it could be
paid, while Williams was represented by Lawrence to be
irresponsible. The debt WES stated to have ori insted in
1629 and that no interest had been paid, although by e
recent renewal for five years, it would not fall due until
1942.
$ 53,961.01 Note of the Bureau of National
Affairs, Inc. The balance sheet of this company (as of
December 31, 1938) indicates that this is part or a total
indebtedness of $390,000 which must participate in any re-
covery from its assets. The face amount of these assets is
shown to be $266,788.76, of which $250,000 is the carrying
value of preferred stock of United States News. As shown
below this stock is believed to be worthless. or the balance
of the assets, $20,581.88 is cash, $9,384.77 is accounts
Regraded Unclassified
154
-
receivable, $4,011.55 inventory, $1,595.50 furniture and
fixtures, and $2,615.06 miscellaneous. It was the opinion
of my staff that on this showing the assets might yield &8
much as $30,000 which would be reduced by the costs of
liquidating the company to a maximum of $20,000, or approxi-
mately four cents on the dollar. This asset therefore
might not yield more than $2,160 if the company were to
cease operations and be liquidated.
$248,467.15 Notes of the United States News.
The balance sheet of this company as of December 31, 1938,
shows that this is part of total liabilities of approxi-
mately $340,000. To pay these liabilities the balance sheet
showed assets carried at 147,502.14, of which only $33,520.54
is shown as current assets while the balance is in notes
receivable, inventory, building and equipment. At the con-
ference there was a good deal of discussion upon liquidating
velue of these assets. The debtor WES sure that owing to
their age and special nature they would not yield over
$10,000 while receiver Wardell was quite certain they would
yield B.S. much B.S $100,000. It seemed to my staff that if
liquidated economically and favorably, there might be as
much as $50,000 for the creditors, or fifteen cents on the
dollar. The note in the Lawrence assets might therefore
have a maximum value of $37,500.
454,064.90 Total assets.
The realizable value in the Lawrence assets can
therefore be tabulated as follows:
596.74 Cash
2,160.00 Bureau of National Affairs
37,500.00 United States News
40,256.74
Regraded Unclassified
155
- 10 -
This value must be distributed to $373,000
unsecured liabilities end to $115,525.86 contingont
liabilities (for it contemplates the liquidation of the
maker companies), B. total of 488,525.86 or eight cents on
the dollar, (subject to minor adjustment by way of returns
upon the maker liability) which amount will be still
further reduced by the costs of administering the Lawrence
estate in bankruptcy.
My staff therefore concluded that upon a liqui-
dation basis the notes held by the two receivers were
worth not over eight cents on the dollar, that this
recovery must come through three or four bankruptcy liqui-
dations, which they were in no position to bring about,
with the attendant delay and expense. If any greater
recovery were to be had during the life of the two receiver-
ships, it must come through the earning power and voluntary
payments of Lawrence.
7. The debtor reported his annual earnings to be
around 150,000 to $5,000. Either at this conference or
to the receivers the debtor had informed them that of
this 18,650 would be absorbed in the annual 5% payments
on his deferred debts; taxes amounting to 16,000 and
insurance premiums of $18,000, while the care of an invalid
son cost $5,000 or more a year. This left no provision
for living expenses and business expense. The possibility
of garnishment of some part of this salary had been con-
sidered but abandoned as the debt must first be reduced to
judgment and this would bring on, without doubt, the invoking
02 the Chandler Act, or bankruptcy proceedings.
From this study my staff were setisfied with
regard to certain conclusions:
1. Upon A liquidation basis the notes held by
the two receivers were worth not over oicht cents on the
dollar.
2. That any attempt to force liquidation by
legal remedy would result in a potition under the Chandler
Aot, or bankruptcy.
3. That invoking the Chandler Act might not
affect adversely the debtor's earning Dower, but it night
prevent him from offering E. cash compromise settlsment
afterward.
Regraded Unclassified
156
- 11 -
4. That the best chances of recovery lay in
preserving the earning power and freedom of notion of the
debtor.
5. That his life insurance, although very
large, could not be reached for the benefit or these debts.
6. That during these months of negotiations
nothing had occurred to make any of the numerous persons
concerned suspicious of any misrepresentation or fraud and
the statements of the debtor seemed entirely credible, his
reputation and public standing contributing to this feeling.
7. That from all that could be learned the pre-
visus payments of the debtor to these two receiverships
had been made more regularly and in a larger percentage
than to other creditors of the same class.
8. That the possibility of recovery by bank-
raptey or by liquidating his assets showed so little of
ceal value and was so remote in any practical sense that
the effort involved in an examination of the debtor or in
the verification of all his statements would not affect
the result, particularly 8,8 EL cash settlement was not
being offered.
The choice before the receivers was not one of
legal remedy, which would precipitate the Chandler Act pro-
tection; or one of & cash settlement involving an evaluation
of his assets. The choice was between voluntarily consenting
to the 20-year Plan and of refusing to participate, which
also would precipitate refuge in the Chandler Act in their
opinion. Consent would certainly preserve the debtor's
earning power while refusal night interfere with it. Con-
sent would go as far as could be arranged to ensure some
small annual reduction and would preserve the debtor's
right to make a lump sum settlement later on. It seemed
quite sure that consent would yield more than the estimated
value of 8%, and sooner and at less expense and it was
hoped this recovery might be as much as 15% during the
life of the two receiverships (as subsequently did develop).
It was therefore the consensus 02 the conference
that it would be to the advantage of the depositors of both
receiverships to accept the 20-year deferred notes end my
staff informed both receivers that 11 and when they recom-
mended such a settlement, an approval would be forthcoming.
Regraded Unclassified
- 13
157
Our general objective in liquidating banks 10
to achieve the maximum recovery for the depositors with
the loast undue delay and at EL minimum of expense and to
do so, as far 8.3 practicable without disrupting the business
interests of the community or working an unnecessary hard-
ship on the debtor. We do not resort to legal procedure
unless there 13 & definite object to be gained and we try
to obtain the cooperation of debtors rather than their
hostility. The inmediate steps deemed necessary in any
iven case ere left to the discretion of the receiver al-
though when he needs advice, legal or otherwise, or guidance
he seeks it from my staff who exercise a general super-
vision over the management of his trust. This kind of
conference has been found useful many times in assisting
receivers to come to B. decision as to a course of action.
In this case the long continued voluntary payments prior
to June 30, 1939, amounting to $16,400 are deemed an
evidence of the value of the policy.
Following this conference the two receivers
immediately wrote to my office recommending that they be
authorized to accept the 20-year notes.
Under date of September 16, 1939 Receiver Young
of the Fedoral-American National Bank and Trust Co. wrots,
"In view of the information supplied by Mr. Lawrenoe in
yesterday's conference and based on his insolvent condition
it is recommended that I be permitted to Join other credi-
tors in accepting the twenty-year plan of liquidation as
outlined above."
Under date of September 22, 1939, Receiver
Mardell of the District National Bank wrote in part: "At
this conference e thorough discussion of the assets and
liabilities of the debtor and his present and prospective
earnings was had as well as his offer of settlement which,
11 accepted, will result in this trust receiving E. new
note made by Mr. Lawrence in the principal amount of
$7,636.63, without interest, maturing in annual install-
menta over & period of twenty years, the first of such
installments to be paid one year from the date of said
note. Mr. Lawrence has also advised that with the accept-
ance of this plan of compromise settlement by this trust
he would then be in a position at & later date to offer
e lump sum settlement covering his indebtedness
Considering the circumstances and as it appears from con-
ferences held that the best interest of this trust can be
served by the acceptance of the offer as now tendered by
Mr. Lawrence it is accordingly recommended that I be
authorized to petition the court for an order permitting
its acceptance."
Regraded Unclassified
158
- 13 -
My staff, however, did not immediately approve
the acceptance of these notes. Under date of September
20, 1939 e letter was addressed to Receiver Young asking
him to obtain additional information about the United
States Society, the maker upon the note he held, and
asking that he obtain verification in some manner of
Lawrence's statement that 90% of his creditors had acceded
to the 20-year plan. The receiver advised October 6th
that the corporate existence of the United States Society
had been terminated in 1934 and that Lawrence had assumed
its liabilities.
With this letter of October 6th receiver Young
enclosed an affidavit of Mr. Lawrence in which it was
stated that his plan was submitted to all of his creditors,
thirty-five in number, who held a total of 372,371.07
of unsecured notes against him; that acceptances as of
October 6, 1939 had been received from 32 out of the 35
creditors, with a total holding of substantially in excess
of two-thirds both in number and amount; that two of such
acceptances covering $9,047.96 were oral and were to be
confirmed in writing; and that the only three creditors
that had not then accepted were en estate in New York
holding $5,000 and the two Washington receiverships and
that the former had signified an intention to accept when
the two receiverships consented. As stated above this
statement was in affidavit form.
Under date of October 18, 1939, more than a
month after the conference, my staff authorized both
receivers to petition the court for an appropriate order.
These petitions were prepared in due course and
were submitted to Judge Proctor, and at the same time his
attention was called to the size of the debts and the
identity of the compromising debtor. Before signing the
orders he called before him receiver Young and a represent-
ative from the office of receiver Wardell and in chambers
he examined into such matters DB the value of his home,
the amount of the mortgage, his income, the nature of his
debts and the contents of the financial statements.
The petitions as filed by the two receivers are
identical in form, as both are served by the same firm of
attorneys, and both show to the court that Lawrence has
represented that his 20-year plan has been submitted to
all his creditors and that all have accepted except the
Kew York estate and these two receivers and attention is
Regraded Unclassified
159
14
called to his financial statement, and they conclude
with these words: "Petitioner has made a study of the
assets and liabilities of the debtor and his present and
prospective earnings and her concluded that it is to the
est interests of his trust to accept the sald offer in
compromise".
Both receivers inmediately consummated the
settlements by accepting the new notes as contemplated
and the first phase of this matter WAS closed.
Following the settlement outlined above,
receiver Young of the Federal-American National Bank and
Trust Co. was holding a note in the sum of 26,721.48
payable without interest in twenty annual installments,
dated August 18, 1939. In August 1940 Lawrence made the
'irst payment of 5%, amounting to 1,336.07 reducing the
debt to a balance of 25,395.41.
In the same manner receiver Wardell of the
District National Bank was holding a note in the sum of
7,636.63 payable on the same terms. In August 1940
swrence made the first payment of 5, in the sun of
381.94 reducing the debt to a balance of 7,254.79.
Early in 1941 it became apparent that it would
be possible to so nearly complete the liquidation of the
two receiverships within E. few months as to no longer
justify the expense of E. receivership office and staff.
Both receivers were instructed to contact all remaining
debtors and to inform them that the assets must soon be
disposed of by sale to the highest bidder. Regotiations
were soon started by Lawrence looking toward a lump sum
cash settlement in full compromise of all his liability.
Ris offer to both receivers was payment of 10
of the face amount of the 20-year notes accepted in 1939,
making, with the 5% paid in 1940, a total recovery after
consent to the plan of 15% of the then balance. Protracted
and difficult negotiations followed.
Regraded Unclassified
180
- 15 -
Taking up First the reactions or receiver Young
of the Federal-American National Bank - Trust Co., the
offer was submitted in the receiver's letter of March 1,
1941 with the recommendation that it be rejected. Lawrence
had represented to him that he had been unable to make
any of the first annuel payments of 5,0 except to the two
Washington receiverships and that he was in default on all
of the balance, his default ascregating 16,900.64 and
did not know when they could be made; that he was unable
to make B. better offer and would have to let his note go
to sale, preferring to take nis changes with the purchaser,
rather then increase his offer; and that his financial
condition had not materially changed. Receiver Young
expressed the belief that the Lawrence note would be worth
more in the final sale than 10, and recommended rejection.
My staff, by letter dated March 14, 1941, agreed
with him that the settlement wes not too l'avorable but
having in mind the early closing of the receivership and
the well-known disinclination of asset Luyers to invest
any substantial amount for uncollected assets, and parti-
culerly for E. 20-year note made by a nan of such uncertain
l'inancial condition, we felt that he should reconsider the
offer unless, after calling in several individuals or
firms In the habit of buying paper or this kind, he should
get & better offer.
Receiver Young, by his letter of April 8, 1941,
stated that he had solicited a higher offer from Lawrence
without success and submitted a copy of a letter from
Lawrence saying that he was then in default for over
15,000 of the first 52 payments due in 1940 and that there
would be due $17,000 in August of 1941, and that he had no
.'unds with which to meet either payment. Also that his
offers to these receiverships required that in fairness he
make similar offers to lis other creditors which if accepted,
would require an additional ,17,000, or 49,000 in all for
which he did not possess the resources, and hinting that
Lefore the end of 1941 he might rind it necessary to seek
to new arrangement with his creditors whereby the debt would
Le scaled down. The receiver reported that after l:1a best
efforts to develop en offer for the note he had succeeded
in getting offers of 2,250 and 2,500, neither of which is
as large as the 10 offered by Lawrence.
Receiver Young concludes Ms letter of April Eth,
saying: "I have had several conferences recently with Mr.
David Lawrence.
The results from these conferences
Regraded Unclassified
161
- 16 -
confirmed the fact that he 18 not financially able to 80
any higher than 10%, the amount offered. Considering the
recent investigation that I have made and the lack of
interest shown by prospective buyers and the fact that the
trust is in the process of termination and the sale of
essets scheduled for the near future, I respectfully recom-
mend the acceptance of the offer of 10%.
My staff approved acceptance of the offer by
letter dated April 21, 1941 and authorized him to petition
the court. In due course the petition was presented to
Judge Morris.
Judge Morris declined to sign the order until he
had had an opportunity to interview Mr. Lawrence personally,
which was arranged. In answer to the questions of the
Judge, Mr. Lawrence stated that he had en expensive home
encumbered by a mortgage of $103,000 which he had tried
unsuccessfully to deed to the mortgagee. Also that although
he has an income of $60,000 his taxes amounted to 35% or
more; that he had an invalid son whose care cost $6,000 per
year for whom he is carrying heavy insurance; that his
profession entails certain expenses; that he would like to
withdraw the offer if it seemed unfair to the court.
Judge Morris was still unwilling to sign the order without
B. showing that some others of the Lawrence creditors had
accepted settlements of 15% of the face amounts. There-
after there were placed in the court files letters from
the Chemical Bank and Trust Company of New York, administ-
ering an estate which owned E Lawrence note of $10,000, and
from Chadbourne, Wallace, Parke and Whiteside, attorneys in
Rew York also administering an estate owning B $5,000
Lawrence note, stating that each had settled similer notes
with Lawrence on B. basis of 15% of face.
The settlement WAS consumated on May 23, 1941
by payment to the receiver of the sum of $2,672.15 whore-
upon the receiver cancelled and delivered the note and
returned the term life insurance policy. This payment
reduced the debt to 22,713.26. The total payments after
the bank suspended amounted to $7,286.74, or 24.3% of the
original principal of $30,000 with no expense except the
cost of two court orders.
Turning now to the reaction of receiver Wardell
of the District National Bank, holding an unpaid balance
of 7,254.79.
Regraded Unclassified
162
- 17
Mr. Wardell, by letter dated February 20, 1941
recommended rejection of the offer of 10% saying that he
believed it would bring at least that much in the final
sale of assets then scheduled for the month of June. He
writes: "In July 1939 Mr. Lawrence revealed his income
as being between 50,000 and $55,000 a year. Mr. Lawrence
is one of the leading columnists in the country. In light
of this income and the generous treatment of his indebted-
ness accorded in the compromise of August 1939 I am unwilling
to recommend acceptance of the present offer." He encloses
El copy of B letter from Lawrence to him stating that he
did not pay the 1940 payment of 5% to any other creditors
than the two receiverships and that he would not be able to
meet the 1941 installments.
By letter dated March 8th my staff made the same
suggestions to receiver Wardell that had been made to
receiver Young; that the note 10 non-interest bearing and
considering its term and the financial condition of
Inwrence, it may be unattractive to asset buyers; that the
offer covers all payments that could be defsulted until
August 18, 1943. It was further suggested that he offer
the note for sale in an effort to obtain a price higher
than the Lawrence offer of 10%.
The next lettor from receiver Wardell is dated
April 11, 1941 in which he remains unwilling to recommend
the Lawrence offer of 10%. He had tried to sell the note
and had found one buyer who would pay $1,500 for the note
(approximately double the Lawrence offer) 15 Lawrence
would (quoting) "submit to the physical examination required
in obtaining such life insurance protection. R. Lawrence
has refused to entertain this proposition, stating that
others having insurable interest in him have been unsuccess-
ful along these lines by reason of having obtained the
limit of life insurance." When Wardell attempted to plead
the advisability of this insurance and the ease of compliance,
Lawrence reminded him that he had paid this bank E. larger
proportion of its debt than that of any other creditor. He
closes his letter as follows: "This tender has received
my further careful consideration. If Mr. Lawrence would
agree to the restoration of the amount of $13,380.63 due
when the compromise was effected and not seek additional
concession and then make a tender, I would be disposed to
urge favorable consideration. But a concession has already
been made and in one and B. half year's time he seeks
another revision outting greatly the amount agreed upon
Regraded Unclassified
163
- 10 -
after serious consideration E. year and B. half ago. In
view of the large income of the debtor and substantial
concessions made in the last compromise effected I cannot
conscientiously recommend the acceptance of the present
tender. I should very much prefer to have your specific
instructions in the premises."
This of course placed my staff in something of
A dilemma. The recommendation of receiver Young to
accept 10% on a debt of $25,385.41 was in their hands
waiting action. Receiver Wardell was unable to see his
way clear to accept the same offer on EL debt of $7,254.79.
The same facts were available to both receivers and the
same situation existed. Both receiverships were within a
few weeks of a final sale of assets. There was no good
reason to accept one offer and reject the other. If
either were objectionable, both were and If one were deemed
in the interest of depositors, no good reason existed to
deprive the other body of depositors of the benefit. The
receiver holding almost three-fourths of the debt was on
record favorably to the offer.
The two files were again studied and all the
representations of Lawrence reviewed. Neither receiver,
in almost two years had been able to discover any avidence
of bad faith, misrepresentation or fraud. They advanced
no reason why the written representations of Lawrence
were not credible.
It W8.8 finally determined that the situation was
brought about by El difference of opinion which could not
be explained on the basis of any facts available to my
office and that in its supervisory capacity it was neces-
sary to resolve the difficulty in the most reasonable
manner in the interests of both bodies of depositors.
It WELS accordingly determined to approve the
acceptance of both offers and letters to that effect went
forward to both receivers under date of April 21, 1941.
Receiver Wardell thereupon had counsel prepare
a petition to the court to which was attached as an exhibit
the letter of my staff approving the offer dated April 21st,
reading in part as follows: "While you cannot recommend
acceptance of the offer, your efforts to dispose of this
note to investors have met with no success and
we are of the opinion that the offer should be accepted."
The court, on noting that the receiver did not recommend,
refused to sign the order until the receiver could see his
Regraded Unclassified
- 19 -
164
way clear to do so. When advising receiver Wordell that
the court had taken this attitude upon the petition, his
counsel addressed n letter to him under date of June 30,
1941, reading in part B.O follows:
"To me this David Lawrence matter is strictly
M. business one. As I think I have told you,
when the comparable settlement with the
Federal-American National Bank and Trust
Company was sent to me by Kr. Young, I wrote
a rather strong letter to him objecting to
it. Certainly I am in no respect projudiced
in favor of Devid Lawrence.
"After writing my letter to Mr. Young, however,
he telephoned me and discussed the matter In
some detail and then he and Dr. Wainwright of
this office and yr. Lawrence went down end dis-
cussed the matter with Judge Morris. Judge
Morris had refused to sign an order approving
the settlement with the Pederal-American
National Bunk & Trust Company, but finally did
so after there had been submitted to him letters
showing comparable settlements with two estates
In New York, and also two letters showing that
offers lower in amount than Er. Lawrence's
offer had been made by other investors.
"Therefore, it seems to me clear that this
matter comes down to this - the executors or
two estates in New York, namely, the Che ical
Bank and Trust Company of New York, and
Chadbourne, Wallace, Parke & Whiteside, have
accepted the same settlement from David
Lawrence, and Judge orris has approved E
similar settlement with the Federal-Americen
National Bank and Trust Company. As I under-
stand it, you have sought to get other offers
for the Lawrence notes held by you, but that
the largest offer you have received is less
than the David LEWFORCE offer. Based on these
racts, there appears to be not the slightest
reason for believing that any higher offer
will ever be received.
"Furthermore, while I well not present, I am
told that during the discussion with Judgo
Morris, D. Lawrence stated a few facts which
Regraded Unclassified
165
- 20 -
have some bearing on the situation. In the
first place, he stated that while he lives
in an expensive house, such house has a
mortgage upon it of approximately $105,000.00,
and he has offered to turn the house over to
the mortgage owner, but that such offer has
been rejected; and that while he makes a com-
paratively large gross Income of something
over $75,000.00 a year, his corresponding obli-
gations are also very large. For example, I
understand he told Judge Morris that one of his
sons is in some sort of an institution and that
it costs approximately $6,000.00 a year for
his maintenance and because of this Bon's con-
Cition, he feels it absolutely necessary to
carry a comparatively large amount of insurance
for the future support of such child. or course
his Income tax is nigh and he told Judge Morris
of various other expenses, such as labor costs,
etc.
"In addition, of course, the obligation now being
discussed is in the form of B note for 7,636.63
payable in 20 yearly instalments of $81.64 escir
without interest, one payment having already
been made. X guess would be that few investors
would be interested in buying such an obligation
since the worth of such obligation 13 dependent
entirely upon the future earnings of Kr. Lawrence,
and nia life expectancy. I do not know exnetly
how old he is, but I think ho is about 50 years
old, or siightly over that age.
"The above is not writton to convince you of the
soundness of the present offer. with that I
have nothing to do, my Function being entirely
that of a lawyer in the matter and all the busi-
ness negotiations having been had with you and
the Comptroller's office.
"It does seem to me, however, that this present
offer will have to be submitted to the Court
without reservation, or not submitted at all.
It is too much to expect the Court to approve 0.
compromise not approved by the petitioner.
"Shall I submit the revised petition?"
Regraded Unclassified
166
- 81 -
This letter seemed to contain information that
was new to receiver Werdell notwithstanding the fact
that this settlement had been discussed very thoroughly
time and again and he had had numerous conferences with
the debtor for he addresses & letter to his counsel in
reply to the above, reading as follows:
"I have your letter of even date in respect
to the David Lawrence indebtedness to the
District National Bank.
"You revealed to me in your comminication
some matters with which I was unfamiliar.
For instance, I had no distinct impression
that Mr. Lawrence's home had a mortgage of
approximately $105,000. I certainly had no
impression that he had offered to turn the
house over to the mortgagee, and that such
offer had been rejected. I had no knowledge
whatever of the fact that he has a son in
some sort of an institution and that it costs
approximately $6,000 8. year for his maintenance,
and because of this son's condition, Mr.
Lawrence feels it absolutely necessary to carry
a comparatively large amount of Insurance for
the future support of such child.
"The criticism I have to offer is based prin-
cipally upon the fact that Mr. Lawrence
refused to permit his life to be insured to
the extent of the amount the purchaser was
willing to pay for the note. I could sell
the note for $1,500 1f he would agree to the
issue of such insurance. However, he may
have reasons that are purely personal and
perhaps I am unfair in my deductions.
"In the light of all the circumstances I
think it would be well to submit the revised
petition, as probably no more could be obtained
at the sale and perhaps not as much."
When the petition had been revised to contain the
recommendation to the court that the settlement be approved
and that the order be granted and the revised petition was
presented to the court, it was immediately signed. It may
be profitable at this point to quote the language used by
receiver Wardell in the revised petition to the court which
Regraded Unclassified
- 22 -
167
contains his recommendation that the settlement be
accepted, which 1a as follows:
"In a letter to the Comptroller of the Currency
dated April 11, 1941, petitioner requested in-
structions from the Comptroller of the Currency
stating that petitioner could not conscientously
recommend acceptance of such offer. Since
writing such letter, petitioner has been informed
of the facta stated above, namely, that the
executors or administrators of two estates in
New York had accepted offers from the said
David Lawrence upon the basis of the same
percentage as is involved in the present offer
to petitioner. Furthermore, petitioner has
sought offers for the indebtedness of the said
David Lawrence from several possible purchasers
with the result that one offer was received to
pay 10 of the amount remaining due, or 725.47,
which is less than the amount of $763.66 offered
by the debtor himself. No other offers for such
asset have been received by petitioner. In view
of the fact that petitioner's efforts to dispose
of this asset to investors at an amount in excess
of the debtor's tender have met with no success,
it is apparent that the offer of $763.66 is the
maximum that can be obtained during the remaining
life of this receivership. Under the circumstances,
it is believed to be to the best interest of the
creditors of this receivership to accept the
present offer. The acceptance of said offer has
been approved by the Deputy Comptroller of the
Currency as is shown by a copy of 9. letter dated
April 21, 1941, from him, marked Exhibit B and
attached hereto."
Thereafter Mr. Lawrence completed the sottlement
with Receiver Wardell paying to him the sum of $765.66,
reducing the unpaid balance to $6,491.16.
The total payments upon the debt, which at
suspension stood at the amount of 21,332.25, made during
the life of the receivership, therefore amounted to
14,841.09, or 69.6% of the original debt.
As stated above there has never been presented
to my office any evidence that any pertinent fact was with-
held during the negotiation of these settlements or that
the debtor misrepresented the facts in any way or that
Regraded Unclassified
- 23 -
168
any fraud was committed upon the depositors of these
closed banks. On the other hand there is considerable
evidence to the effect that these two closed banks have
fared much better at the handa of Mr. Lawrence than
others of his creditors in the same class and that those
to whom he has not yet made an offer in settlement will
more likely be asked to still further scale the obligations
down than otherwise. My staff is convinced that the final
settlement whereby the two receiverships received 5% and
10% of the 20-year notes was to the advantage of the
depositors and that it represented a greater recovery
than could have been obtained from the assets of Mr.
Lawrence in any other manner. Particularly is this true
if the extreme remedy of bankruptcy had been attempted
or if the debtor had resorted to that refuge when it 18
quite apparent that the costs and delays of liquidation
by that means would have largely defeated the interests
of these depositors whose receiverships are subject to
early termination, and they would necessarily have lost
the benefit of the debtor's earning power.
It should be added that the first settlement is
based upon representations made to the receivers of these
banks under oath. Should it appear that any fraud or
misrepresentation of B. material nature causing a loss to
these depositors has been perpetrated, the settlements can
be set aside and to this end the courts take an attitude
liberal to the depositors when such a situation is found
to exist.
PrentulWalans
Comptroller of the Currency
Regraded Unclassified
169
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 8, 1941
TO
Ferdinand Kuhn, Jr.
FROM
Alan Barth
EAST AND FAR EAST
Qualms
If newspaper editors know their readers, there is 8. tide
of optimism about the war throughout the land. A good many
editors call it over-confidence -- or wishful thinking. They
feel obliged repeatedly in editorials to caution the public
against raising its hopes too high.
Russia's checking of the German blitzkrieg thus far,
together with Britain's sustained aerial offensive, has clearly
gone a long way toward dissipating the discouragement which
prevailed in the United States not long ago. There is 8. feeling
now that Hitler may be beaten without direct American participa-
tion in the war. Speculative stories about uprisings in con-
quered territory, about waning German morale, appear in the
press with a frequency and prominence which reveal the public's
avidity for reading them. Certainly there is B. terrible letdown
in store for the American people if Russian resistance should
now suddenly crumble.
Regraded Unclassified
170
- 2 -
Extravagant hopes have been consciously fostered by the
isolationists. Their line is that we need no longer worry about
Hitler; Stalin and Churchill will take care of him. This is so
precisely what Americans want to believe that it is perhaps not
entirely without effect. The Gallup Poll published on August 1
indicates, however, that it has not yet diminished popular sup-
port for the aid-to-Britain policy. Seventy-two per cent of the
sample polled held that helping Britain is as important as ever,
despite the Nazi-Soviet conflict; only 20 per cent recorded op-
position.
The editors themselves have been both surprised and pleased
at Russian resistance. Current editorials indicate, however,
that to B. good many of them the surprise is proving rather greater
than the pleasure. A decided majority continue to insist staunchly
that Nazism is the only menace to America. But they fear the
Communists even when bearing gifts.
The New York Times, for example, in its leading editorial
for August 6, argues that although "it is Hitler and not Russia
that constitutes the immediate threat to us
at the same time
it must be clear that our primary interest is not in 'helping
Russia' but in 'stopping Hitler'
Stalin is on our side today.
Where will he be tomorrow?"
Regraded Unclassified
171
- 3 -
There are other signs of editorial distasts for giving
more than formal support to the U. S. S. R. Some commentators
regarded Mr. Hopkins' visit to Moscow and Mr. Welles' pledge of
full economic assistance as laying it on a little thick. There
have been rather frequent expressions of relief over the fact
that we are selling, not giving, arms to associates whom even 80
vigorous an interventionist paper as The Richmond Times Dispatch
refers to as the "Bolshevist brigands in the Kremlin."
What the American press hopes for on the eastern front is
not B. victory, but a stalemate which will bog down the German
armies sufficiently to thwart their aggressive instincts.
Heat on Japan
The press has adopted an extraordinarily bellicose tone
toward Japan. In part, this may stem from a desire to impress the
Japanese with America's readiness to fight. In part, it seems to
be & reaction from our avoidance of war in Europe -- a compensation
for the caution which has characterized our behavior in the West.
It is worth noting that a Gallup Poll shows no comparable bel-
ligerency in the part of the general public. The results of &
survey published August 3 presented 51 per cent in favor of checking
Japan even at the risk of war, 31 per cent opposed, 18 per cent
undecided or with no opinion.
Regraded Unclassified
4
There was nearly unanimous editorial approval for the
freezing of Japanese assets. Many of the commentators assumed
that this meant the application of full economic sanctions. A
considerable number expressed keen disappointment that the Admin-
istration is still "temporizing" with the Japanese. Almost all
Insist that stringent economic measures be taken in response to
any further aggressive moves in the Orient.
The President's explanation of American policy in the Far
East mas accepted as valid and reasonable by the majority of com-
mentators. But they are glad to think that the policy has now
been abandoned. The commonest editorial heading for comments on
the subject was "An End of Appeasement." The moral generally
drawn from the Japanese occupation of Indo-China was that appease-
ment has once more been proved 8. failure -- this time so conclusive-
ly that it must not be resorted to again. The term "appeasement"
now appears to have uglier connotations to American ears than ever
before.
It seems possible that American editorial writers have
indulged in an oversimplification of the Japanese problem. They
are inclined to attribute Japanese expansion to the ambitions of
a handful of "war lords" and to suppose that these ambitions can
be overcome by a sufficient display of force. They take it for
Regraded Unclassified
173
- 5 -
granted that conflict with the United States would be suicide for
Japan; editorial comments are replete with contemptuous phrases
such as "little yellow men." The vulnerability of Japan's cities
to air attack and of the island to blockade are cited frequently.
In short, American newspapers dislike, distrust and disdain the
Japanese.
Notes
The action of France in applying to Japan for protection of
Indo-China produced vigorous resentment over here. The prevailing
sentiment appears to be that an end of appeasement on our part is
in order for Vichy, as well 8.8 for Tokyo.
Secretary Ickes' program for voluntary conservation of gas-
oline has evoked 8. good deal of grumbling -- principally on the
ground that oil continues to be shipped to Japan.
Newspapers took with remarkable calm the sensational rumors
of 8 meeting between President Roosevelt and Prime Minister Churchill.
Some compared it with the Hitler-Mussolini conferences at Brennero,
finding in it & symbol of democratic unity to match the dictators'
partnership.
Regraded Unclassified
Regraded Unclassified
August s, 1941
Files
Mr. Declaram
Mr. Jay Crass telephoned as free Nov York at 2145 p.a. on August 6. Be
asked if I was avere that Foreign has Control had refused his second application
for a license to permit the Standard 011 to sell its Bungarian holdings to German
interests. I told Mr. Crans that I was, of course, ware that the first application
had been refused, and that . second vas to be submitted, envisaging a larger part
of the payment to be made in gold in Portugal and in free carrencies. I vas not
AVERS, however, that this second application had been refused.
In naver to Mr. Crame's unofficial and personal inquiry, I told his that
I was convinced that no license would be given for the transaction under reference,
no miter visit the character of the compensation offered. That 1s, 11 ase not
astter whether the payment be made ia gold, blocked currencies and assurities, or
free currencies. I added that the Treasury would not buy gold abread, and that
the fact that Germay was offering 8 considerable amount of gold is Pertugal sight
arouse the suspicies of Government officials as to the searce of such gold. That
1a, had the Germane looted such gold and now vanted to obtain control of American-
avoid property is the Arts countries using 11 as the medium? Mr. Craza shared w
view that the Foreign Funds Control committee was definitely apposed to a trans-
action of this type, and he contemplated expressing such as opinion to his Beard of
Directors.
At 11:30 this morning Mr. Crame called 24 again on the above matter. No said
that his directors, and partionlarly Mr. Farrish, were not happy over the decision
which had been taken " our Control Board. the first suggestion had been that Mr.
Crams should come to Washington to consult Secretary Morgenthan is the premises.
Mr. Crass had thought this inadvicable and the plan is now for 000 of the Vice Presi-
donts of the Standard 011 Company of Inv Jersey to come to Vashington and sake
representations to Secretary Ball with the view to obtaining the desired license.
August 9. 1941
At 10:30 this morning Mr. Lathringer telephoned - from the Department of
State that & cablegram had been received from the American Minister at Padmport
in regard to the Derman desire to obtain Standard 011 holdings is Mangary. 1 no
gosted that as asknowledgemt w made to the effect that the information was timely.
and that no favorable action had been takes by the Treasury upon this proposal
which had been before it for 0000 time. It vas understood that Mr. Lethringer verie
previde the Treasury with sepies NY of the cablegram.
HMC: dm: 8/9/41
175
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Chungking, China, via N.R.
DATE: August a, 1941, 11 a.m.
NO.: 337
THE FOLLOWING Is STRICTLY CONFIDENTIAL FOR THE SECRETARY
OF THE TREASURY FROM FOX.
Yesterday (7), the fellowing order was received by the
board.
"August 6, 1941. Ministry of Finance. A secret order
to the Currency Stabilisation Beard (7).
"In the setting up of the currency Stabilization Board,
the objective is to conselidate the foreign exchange
value of the fapi (1) maintaining the smooth progress of
China's trade with those mations who are friendly. Because
of the importance of this task and, (*) (?) prepare careful
plans in advance and then faithfully put the plans into
prictice. The principles which are given below are
formulated, therefore, for the guidance of (1) (7) in
the working out of the plans in details
sl. AS the present time, one most important consern
is the maintenance of the sonfidence of the public in fapi.
The stability of the foreign exchange value of fapi and the
question of lowering of prices are both related to (7).
Hense, detailed plans to develop the potentialities of the
stabilization fund should be worked out by (2)3
& The
Regraded Unclassified
176
2. The system of governmental allotment of exchange,
in the past, was not used in the operation of the stabilization
fund. Therefore, the nahager of the fund was unable to
stop both the speculators and the enemy from getting hold
of exchange resources of China and prevent the flight of
sepital. (1) from (T) as before the exchange market vere
often great and (1) (7).
(NOTE: A request has been sent for & repetition of the
above information. As seen as the correction is received
the proper persons will be notified.)
Therefore, at the present attention must be directed
to the objective of stopping the flight of capital as well
as making it impossible for speculators and the enemy to
obtain U.S. exchange resources in order that the stabilization
fund's resources will be effectively used instead of squandered
3. When legitimate businessess - for proper use -
request to purchase foreign exchange, the request should
received eareful sonsideration in order that such denand may
be supplied promptly and legitimate business can ⑈ on without
delay in an efficient manner,
On the basis of the above three principles, the board
should work out detailed consrete These
should them be submitted for authorization to the Ministry.
The doversment hopes that this order will be earried out
and that the Ministry may have a report of the results.
The Ministry of Finance
(s) K'ung Nainag Ead'
Even
Regraded Unclassified
177
Even after the needs of the primoiples are now
furnished to the board and after the freezing, reference
is still made to the prevention of the flight of capital
and the sheeking of speculators' inroads. The latter
subject seems to be the Minister's favored topie.
In the last paragraph, the Board is directed to work
out 8. detailed plan. It is my understanding, however,
that on Monday there will be placed before the Board an
organizational procedure now being formulated in the
Ministry. It cooms that the board 1s merely to be the
Ministry's rubber stamp.
On Saturday, Hall-Patch is coming to Chungking for a
few days. This is upon instruction from the British
Ambassador (three telegrams) and orders from the home
office. Immediately after his arrival the Board will
organise officially.
This is the end of the message.
GAUSS
EATPAK
611 521
Regraded Unclassified
178
CORRECTED COPY
PARAPHHASE OF TELEGRAM RECEIVED
FROM: American Embasuy, Maungking, China, via M.R.
DATE: August s, 1941, 11 a.m.
NO.: S37
THE FOLLOWING IS STRICTLY CONFIDENTIAL FOR THE
SECRETARY OF THE TREASURY FROM FOX,
Testerday 0), the fellowing order VAS received by the
Board,
"August 6, 1941. Ministry of Finance. A secret order
to the Currency Stabilization Board.
"In the setting up of the our:ency stabilization Beard,
the objective is to consolidate the foreign exchange value
of the fapi for the purpose of maintaining the smoth
progress of China's trade with those nations who Are friendly.
Because of the importance of this task, the Board must
prepare sareful plans in advance and then faithfully put
the plans into practice, The principles which are given
below are formulated, therefore, for the guideneeof the
Board in the working out of the plans in detail.
"1" At the present time, one most important consern
is the maintenance of the confidence of the public in fapi.
The stability of the foreign exchange value of fapi and the
question of lewering of prices are both related to this
task. Hence, detailed plans to develop the potentialities
of the stabilization fund should be worked out by the Seard.
$20 the
Regraded Unclassified
179
+
vem
"2. The system of governmental allotment of extrange,
in the past, was not used in the operation of the stabilization
fund. Therefore, the manager of the fund was unable to
sto both the spesulators and the enemy from getting hold
of exchange resources of China and prevent the flight of
capital. Hense, the fluctuations in the exchange market
vere often great, This vas followed by serious consequences."
GAUSS
(NOTE: The above is a correction on Section One of telegram
No. 337.)
EAIPAX
Regraded Unclassified
180
C
0
P
Y
DEPARTMENT OF STATE
Mashington
In reply refer to
EA 893.50/248
August 8, 1941.
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury, and
encloses a copy of strictly confidential despatch dated
July 2, 1941, from the American Consulate General,
Shanghai, China, transmitting memoranda prepared for
the Treasury Department representative, Mr. Manuel Fox.
Enclosure:
from Shanghai, July 2.
Copy:lg 8/8/41
Regraded Unclassified
181
C
0
P
Y
NO.
Embassy, China
NO. 602
THE FOREIGN SERVICE
OF THE
UNITED STATES OF AMERICA
AMERICAN CONSULATE GENERAL
Shanghai, China, July 2, 1941
CONFIDENTIAL
SUBJECT: Transmittal of Memoranda Prepared for Treasury
Department Representative Mr. Manuel Fox
THE HONOURABLE
THE SECRETARY OF STATE
WASHINGTON
SIR:
I have the honor to refer to the Department's instruction of
May 10, 1941, (file no. 893.50/242) conveying the request of the
Treasury Department for data on economic and financial subjects
and to my despatch no. 546 of June 16, 1941, in reply, entitled
"Background Information on Problems of Maintenance of an Exchange
Stabilization Fund in Support of the Chinese Yuan in the Shanghai
1/ & 2/
Foreign Exchange Market", and to forward herewith two memoranda
prepared in this Consulate General by Mr. A. Bland Calder, Assist-
ant Commercial Attache, for and at the request of Mr. Manuel Fox,
Treasury Department representative and member of the new exchange
stabilization committee.
Regraded Unclassified
- 2 -
182
The memoranda, which are self-explanatory, attempt to reply to
two questions put by Mr. Fox, firstly, "That is the Importance and
Advantage of Shanghai to Free China Now?". the treatment giving both
the advantages and disadvantages, as argued both by proponents and
opponents of further stabilization effort at Shanghai, and, "What
would have been the effects in Shanghai in the last twelve months
had the United States frozen China accounts on July 1, 19401"
Further copies of memoranda which are being prepared for Mr. Fox
will follow.
Respectfully yours.
Frank P. Lockhart
American Consul General
Enclosures:
1/ Memorandum answering the question "That is the importance
and advantage of Shanghai to free China now?"
2/ Memorandum answering the question "What would have been the
effects in Shanghai in the last 12 months if the U.S. had
frozen China accounts on July 1, 19407"
851/851.51
ABC:EAR
Original and four copies to Department
Copy to Embassy, Peiping
Copy to Embassy, Chungking
Copy:lg 8/8/41
Regraded Unclassified
183
0
0
P
Y
Enclosure no. 1 to despatch no. 602 . dated July 2, 1941,
from Frank P. Lockhart, American Consul General at Shanghai, China,
on the subject: "Transmittal of Memoranda Prepared for Treasury
Department Representative, Mr. Manuel Fox".
Shanghai, June 26, 1941.
What is the importance and advantage of Shanghai to
free China now?
(The following points give the advantages and
the disadvantages, 1.0, they give the arguments
pro and con as to whether Shanghai's position
should be preserved and whether the yuan should
be supported on the Shanghai foreign exchange
market further.)
The Advantages
1. STRATAGEM.
The continued maintenance of a free exchange market at
Shanghai for Chinese currency represents the choice of
the lesser of two evils. The alternative would encourage
the Japanese to introduce drastic and close financial and
trade control measures at Shanghai similar to those in
force in North China and would throw Shanghai more com-
pletely into the yen bloc. Were the Japanese unable to
secure, through the Shanghai market, needed exchange for
certain of the imports which they find it necessary to
bring in from abroad, and should they be unable to use
Shanghai as a supply base for securing these imported na-
terials, they would be most likely to introduce full f1-
nancial and economic controls in the foreign controlled
areas (International Settlement and French Concession)
and thus it would be difficult or impossible for the
American, British, other foreign and Chinese vested 1n-
terests further to hold their position here. It is some
advantage to Free China to keep this foreign "front" at
Shanghai as a curb to Japanese aims.
Regraded Unclassified
184
2, PREVINTS LOOTING,
Present stocks of goods in Shanghai are encrmous. It is
said that stocks of raw cotton, cotton yarn and cotton
cloth alone are worth yuan 1,250,000,000, or about
US$63,000,000, Stocks of chemicals, dyes, metals, min-
dries, foodstuffs and fuels are also huge, not to mention
the aggregation of capital goods in outablished plant and
the value of real property, much of which would be expro-
priated to Japanese purposes if the Japanese were to move
in. The Settlement and Concession represent by far the
richest compact war prize in prospect for Japan in China.
Japan's healtancy to take it lies in the fear that neither
the United States nor Great Britain would put up with a
complete Japanese encroachment here. So long as a
Chinese-British-American stabilization fund is maintained
here, that fact signifies B determination on the part of
the United States and Great Britain to maintain the sta-
China. tue quo and to contime material and moral support for
3. ENABIES NON Yen BLOC COUNTRIES TO ACQUIRE CENTRAL CHINA EXPORT
GOODS.
Were there no free market, it would not be possible to
sell foreign currencies in the Shanghei market for ac-
quirement by the United States, Great Britain and other
non-yen bloc countries of Central China export goods,
except through Japanese hands. From China's point of
view it is preferable for the non-yen bloc countries
to be able to acquire such goods. Proe China apparently
would prefer that her friends should have these goods
rather than that Japan should have the whole quantity.
4. EXPORTS TO NON YEN BLOC COUNTRIES HELP TO MAINTAIN A SUPPLY CG
FOREIGN EXCHANGE FOR THE SHANGHAI MARKET, to the extent of
US$6 to 10 million monthly, (average for the past year).
5. MORALE.
The continued circulation of the Chinese national currency
at Shanghai and in its occupied hinterland definitely
bolsters the morale and helps to hold the loyalty of the
populace in this region toward the National Government at
Chungking.
6. REHABILITATION will be an easier task for the National Gov-
arnment when it returns to this part of China if its our-
rency system is maintained more or less intact.
7. PRESERVATION OF TREE ECONOMY IN CHINA.
The maintenance of a from economy at Shanghni will have an
important influence in restoring free economy in China sen-
orally after the termination of the present hostilities.
Regraded Unclassified
185
34 SUPPLIES FOR TREE CHINA.
While there 10 nothing like the relatively free movement of
goods from Shanghel to "free China" now which prevailed prior
to June, 1940, it 1a still poesible to ship 6,000 to 10,000
bales of cotton yarn and cotton cloth monthly from Shanghai
by round about routee to Chinese controlled territory. The
value of the movement monthly at present prices is therefore
between US$500,000 and US$800,000. There is thus come -
terial value to "free China" in the form of such supplies.
3. PRESERVES A STANDARD OF VALUE.
The fact that the possibility existe for flight of capital
from "free China" to Shanghai enables the National Government
at Chungling to inflate its currency and still to keep alive
arong the populace in the Chinese controlled interior a pre-
veiling faith in an ultimate value (Shanghai value) of that
currency. Thus the rate of exchange at Shinghai represents
the ultimate value or standard of value of the Chinose our-
rency.
10. PAST STABILIZATION EFFORT 15 NOT LOST if further stabilization
is maintained, Were the Shanghai market now to be abandoned
at a time when the stabilization operations cost 80 little.
the considerable sums spent in stabilization effort in 1937
1938, 1939 and 1940 would be lost except for some economic
gains by acquirement of goods by free China from Shanghai in
those years.
11, JAPANESE ECONOMIC success AT SHANGHAI WOULD PROBABLY RESULT 730M
CESSATION OF MARKET FOR "TAPI" AND WOULD ECLIPSE THES CHINA'S
PRESTIGE DOMESTICALLY AND ABROAD.
THE BRITISH, if there is no exchange market for "fap1", WOULD
TEND, as in North China, to săjust themselves
(though under protest) to the situation created by greater
JAPANESE CONTROLS and would get in line with Japanese schemes.
The pressure of the Shanghai British firms upon London for
support and preservation of their position here is strong and
often colors British policy in Chins. The British because of
their greater concern (militarily) with the European situa-
tion, and because of the huge British investment here are in-
clined toward temporary appeasement of Japan as repeatedly
evidenced. Hence, Japanese complete controls would achieve
considerable success with this British acquiescence, Free
China would naturally not ment to see any greater dagree of
cooperation between the British interests and the Japanese,
as Tree China is trying at least to preserve something of a
semblance of having Britain as an Ally. If the Jaganese were
thus successful in establishing complete control at Shanghei,
it would demonstrate that the Chungline Government 1a no
longer essential to the trade and economy of Saet Central
China, which would affect its political prestige.
Regraded Unclassified
The Dieadvantages
1, POOR STRATAGEL
any observers believe that the war in China will continue
two or more years longer and that Chinese victory in the
of recapturing the occupied areas is uncertain.
Japanese efforts at obtaining greater control over the f1-
nancial and economic life of China (particularly of the oc-
cupied areas) may thus be expected to continue and to In-
crease until complete control 18 achieved despite the avail-
ability of exchange. Faced with the inevitable, contly de-
fenge efforts designed to delay the progress of Japanese
control are therefore unjustifiable. Furthermore, as soon
An a state of war exists between Japan and the Anclo-Saxon
powers, the Japanege will unhesitatingly take over the
whole of Shanghai, Indeed they may take this action as soon
às it becomes impossible to secure commodities from abroad
at Shanghai, Shanghai is already lost, 20 why try to starve
off a fait accompli. These are the observations & defeat-
lets in the outlook for Shanghai.
2. MORATE OF THE PEOPLE IN FREE CHINA IS MORE IMPORTANT THAN THAT OF
THOSE IN OCCUPIED REGIONS.
The fate of the Chinege people in the occupied areas of the
country will be determined only by the outcome of the Sino-
Japanese hostilities. not by the maintenance of stabilized
exchange rates at Shanghai. The loyalty of the people in
North China (loyalty to the Chungking Government). where the
Chinese National currency is almost wiped out, 1s as great
BB the loyalty of the people in the Shanshai region, where
"fapi" is still the dominant currency in use. There 1e 3.
good deal of realism practised by the people both of North
China and East Central China. Their loyalty is somewhat in-
paired by circumstance. The moral and material contribution
by the Chinese people in Sast Central China to Tree China 11
pitifully insignificant, the people in Free China look upon
the relatively better condition of the people in occupied
China with something of envy. Thus the virtual luxury en-
joyed by the people of Shanghai has & demoralizing effect
upon the spirit of the people of Free China,
3. FREE ECONOMY FOR CHINA.
If it prevails after this conflict 10 over. will depend opon
the political complexion of the National Government and upon
its considered policies at that time and not upon the preserva-
tion of a nucleus for free economy at Shanghai in the interim.
Regraded Unclassified
5 -
15
4. GOODS FOR FREE CHINA
There is no guarantee that the Maintenance of a free exchange
market at stabilized levels at Shanghai will assure B con-
tinued supply of Shanghai goods to Free Chinn. The Japanese
blockade has become more and more intensified and of late in
even being applied to a greater degree through the Shanghai
customs in prohibitions against export of various commodities
to the south.
5. FALLACIOUS AIMS ARE SERVED.
The purpose of currency stabilization 1u defeated by making
Shanghai the "safety valve" for currency inflation in Free
China. Furthermore, inflation in Free China should be checked.
The huge concentration of capital at Shanghai make for un-
healthy, inflated values here. The fact that cash can be ex-
changed for foreign currency in the Shanghai market or can be
invested here with possibly more promise than in interior
China attracts capital here from Free China, There is likely
to be very little flow of capital from Shanghai to Free China
80 long as the economy and administration of Free China re-
mains unimproved, and 80 long B6 Shanghai's status appeare
likely to remain reasonably intact.
6. MAINTENANCE OF RATES IS TOO COSTLY - PILES UP CHINA'S FOREIGN III-
DEBTRONESS.
The maintenance of a free exchange market for a national cur-
rency within enemy territory is 8 novel phenomenon in the
world's financial history. Note that Great Britain blocked
its currency immediately after the declaration of war, How
can China afford to waste more funds (thus increasing its for-
sign obligations) in mintaining the value of its currency in
the occupied areas?
(Initialed) A.B.C.
4. Bland Calder
Copied by:
HAW
Compared with: JCB
Copy:Lg 8/9/41
Regraded Unclassified
188
Inclosure no. 2 to despatch no. 602 dated July 2, 1941,
from Frank P. Lockhart, American Conwil General at Shanghai,
China, on the subject: "Transmittal of Memoranda Prepared
for Treasury Department Representative. Mr. Manuel Fox".
MEMORANDUM
Shanghai, June 27, 1941.
What would have been the effects in Shanghai la the last
1940. 12 months If the U.S. had frosen China accounts on July 1,
(Note: The effects as enumerated are naturally
highly suppositional.)
1. Shanghat's foreign trade would have been drastically reduced. The
huge importe of materials to Shanghai for hoarding, representing
a
flight of capital, would not have been possible.
C. The Japanese and their sponsored Nanking regime would probably have
introduced exchange and trade controls at Shanchai and would have
mooner and more rapidly introduced and expanded the circulation of
military yen and of the bogus currency of the lianking regime, and
these currencies would now be dominant in the Settlement and Con-
cossion here as is the case at Tientain.
5. Unless Japan accounts were frozen at the same time in the United
States, the freezing of China credits would have immediately given
Japan export menopoly privileges in this region in trade with the
United States. Japanese firms would have been able to export China
goods to the United States from Scanghal and to acquire the credits
in the names of their Toxyo head offices as Japan credits and could
have used such credits for purchases of strategic materials for
Japan and via Japan for their V.ee in China not only from the United
States but from other countries (the funds of which were not frozen)
using the U.S. Dollar credits.
The repatriation to Shanghai of Chinese capital from the J.S. and
from Hong Kong and from other British territory in Southern Asia,
Lalaya, and Australasia, which occurred after the fall of France,
would not have been realized, as the conditions of partial boom
which have prevailed in Shanghai because of free exchange and free
trading would not have obtained and the situation would thus not
have been inviting for such capital repatriation. It 1 a estimated
that no less than US$50,000,000. WELE repatriated to Shanghai because
of impending or anticipated war time restrictions in British por-
sessions, and because of fears of American freezing of China accounts
or of devaluation of the U.S.
Regraded Unclassified
189
Property values in Shanghai would not have become As inflated as
has been the case as Shanghai holders of U.S. Dollar credits would
not have been able to convert them back to Chinese yuan with which
to purchase property to hold as & hedge against further inflation
(of Chinese currency).
is Ohina would have been able to get the benefits of the repatriation
of the frozen credite after the war and would thus have a nest 066
which could contribute toward rehabilitation, whereas the gradual
dissipation of some portion of these free credite in the past year
will probably necessitate larger American loans to Ohine after the
hostilities than would otherwise have been necessary.
7. Had Shanghai credits been fromen but liberal szchange licensing Is-
cilities been granted to free Chins (for imports and for repatriation
of funds) confidence in the Chinese currency would have been main-
tained.
d, free China, If A free and stabilised exchange market had been main-
tained at, say, Chungking, would thus have obtained some of the ex-
change credits sold by Shanghai hoarders for acquirement of ner-
chandise to store in warehouses awaiting higher prices, or for prop-
erty purchases or for investment in local stocks.
9. The incentive for flight of capital from Free China to Shanghai would
not have obtained, but prices because of inflation in free China might
have been even higher than has been the case, as the Shanghai "outlet"
or "eafety valve" would not have existed.
10. Commodity prices in Shanghai would probably have rigen encrmously,
not because hoarders would have been holding goods to ruch an extent
for war time profits. but because import commodities would have been
very scarce in the market.
11. There would probably have been emeedingly great hardships for the
Shanghai residents and possibly a million or more people would have
had to leave Shanghai for the interior as it would not have been poe-
sible to import the rice from French Indochina (paid for, out of U.S.
Dollar exchange purchased in the Shanghai market) nor the coal from
India, nor cotton from the U.S., India and Brazil. Mills and factories
would have had to close and unemployment would have been a serious prob-
lem, more BO than has been the case.
12. The hure potential or "paper" profits of the Chinese banks in Shanghai
the loaded themselves with U.S. Dollar exchange at 164 would have
vanished,
(Initialed) a 3, C.
4. Bland Calder
Copied by:
SAW
Compared with:JCB
Copy:1g 8/9/41
Regraded Unclassified
190
RS
PLAIN
TOKYO VIA SHANGHAI & N.R.
Dated August B, 1941
Rec'd 10:35 a.m., 10th
Secretary of State,
Washington.
1199, Eighth, 6 p.m.
Today's press reports Finance Ministry announce-
ment made yesterday relaxing restrictions on Nether-
lands and Netherlands Indies under act controlling
transactions nations certain designated countries.
Announcement states in view few restrictions imposed
Economic activities other than monetary transactions
of Japanese residing these countries restrictions
will be relaxed from August 8. Economic activities
to which regulations cease to apply are defined as
follows:
OnE. Acquisition or disposal nonmovable property,
movable property, leaseholds, rights of pledge, rights
of mortgage, industrial propristary rights, other in-
visible propriatary rights, businesses, undertakings,
investments in businesses or undertakings, credits in
foreign currency and credits in Japanese currency.
Two. Deposit of immovable property, Japanese
currency
Regraded Unclassified
191
-2-, No. 1199 from Tokyo, August 8, 1941; 10:35 a.m.,10th
currency and credits in Japanese currency.
Three. Loans of movable property and securities.
SENT Department via Shanghai.
GREW
JRL
Regraded Unclassified
192
paraphrase OF TELEGRAM SENT
TO: American Embassy, Panamá, Panama.
DATE: August s, 1941, 7 p.m.
NO.: 177
Reference is made to the Embasay's telegram of August e,
4. p.m., No. 217.
Information has been requested by the Department from
the American Consulate General in Bareelona and the American
Embasay in Madrid in regard to the circumstances which
surround the sale to the Spanish Government oil monopoly
of the Santa Helena. The Department would appreciate it
if the withholding by the Panamanian Government of the
confirmation of the instruction from Madrid at regards the
cancellation of the Panamanian registry of the Santa Helena
can be made until information requested from the above
sources has been received which indicates definitely that
the transaction is or is not above suspicion. The Embassy
may point out to the Minister of Finance that, in view of
the circumstances surrounding this case, a withholding of
confirmation - for the present - appears to be justifiable.
Because the ennecilationief the Panamanian registry
OL
may not be effected, the Department Milling juggests that the Embassy
continue to regard the plan which was outlined in tele-
gram No. 161, dated July 28, 5 p.m., as the basis for
discussion with the authorities of Panama as regards the
possible requisitioning of this ship by Panama.
HULL
RAIJCO:LM A-A
(#3)
EA:PAX
Regraded Unclassified
153
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE August 8, 1941
TO
Secretary Morgenthau
FROM Mr. Cochran
CONFIDENTIAL
Registered sterling transactions of the reporting banks were ne followe:
Sold to commercial concerns
238,000
Purchased from commercial concerns £54,000
Open market sterling closed at 4.03-3/4. unchanged, and there were no
reported transactions.
In New York, closing quotations for the foreign currencies listed below
were D.B. follows:
Canadian dollar
11 $ discount (off 1/8)
Argentine peso (free)
,2390 (up .0005)
Brazilian milrois (free)
+0505
Uruguayan peso (free)
.4380
Colombian peso
.5800
Mexican peso
.2070
Cuban peso
1-3/16% discount (off 1/8)
Veneruelan peso
.2650
In Shanghai, the yuan lost further ground with the rate off 7/321 at 4-13/164.
Sterling advenced 1-1/4 to 4.01-3/4#.
There were no gold transactions consummated by us today. No new gold engage-
ments were reported.
The London fixing prices for spot and forward silver were unchanged et
23-7/16a. The United States equivalent of this price is 42.55d.
Treasury's purchase price for foreign silver WP.8 unchanged at 350- Handy
and Harnan settlement price for foreign silver was also unchanged at 34-3/4#.
We made three purchases of new production silver from various foreign sources
amounting to 175,000 ounces under the Silver Purchase Act.
Regraded Unclassified
194
BRITISH EMBASSY,
WASHINGTON.
Personal and Secret.
August 8th 1941.
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a
copy of the latest report received
from London on the military situation.
Believe ne,
Dear Mr. Secretary,
Very sincerely yours,
Halifax
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.
Regraded Unclassified
195
TELEGRAM FROM LONDON SATED UGUST 6th 1941.
R&V N.V.L. L. or the five ships torpedoed in convoy
west of Ireland on the 5th one has not been sunk.
2.
on the 5th Noyal Air orce mircraft attacked
convoy off the Book of Holland, two hits scored on
morchent vessel estimated 2,000 tons, believed destroyed.
3.
Juez Conal is open. During sir attacks on Suez
night of 3rd/4th 0,000 tons Britlsh tanker hit, will
probably be beached, 5,000 ton Belgion tanker torgedoed,
not reported sunk. mall Delgian ship torpedood and
sunk.
4.
Aritish submarine night of 27th/18th blew up a
train on B roilway line in cast Sicily (sic).
5.
Royal Air Force. Night of 3rd/4th. Two ships
antimated 8,000 tons were each hit by cllington
sireraft west of quolomis.
6.
on the 4th and 5th. Blenheims claimed to have
sunk BUO tons schooner noar Misurate and 9 mall ships
off Tunis night of 5th/8th.
7.
Night of 5th/6th very strong foree of droreft
sent to Germany. Heavy attacks delivered on Frankfurt,
Maunheim and Carlaruhe. Light attacks on achew and
Boulogne. Heven missing. nerry night activity over the
United Kingdom still very elight.
8.
Military - Russia.
No change except in the Ukreine where the Terman
south cest advance mouth of Byelnyn Toorkov opparently
continues sinst stirf resistence.
Regraded Unclassified
196
RESTRICTED
G-2/2657-220; No. 462 M.I.D., W.D. 12:00 M., August 8, 1941.
SITUATION REPORT
I. Eastern Theater.
Ground: The German High Command reports that its troops
in Estonia, after capturing Rakvere, on the Tallinn-Leningrad rail-
road, have reached the Gulf of Finland.
Southeast of Smolensk, the Desna River east of
Roslavl, has been reached.
In the Ukraine the Germans claim to have captured
30,000 prisoners south of Uman.
In addition, the German High Command reports pri-
vately that an armored group under Colonel General von Kleist is ad-
vancing southeastward through the Ukraine in wedge formation. The
central division of the wedge captured Kirovo on August 4.
German forces advancing to the northeast from Kholm
have reached the foothills of the Valdai Hills.
II. Western Theater.
Air: The Axis claims to have brought down British planes
over the Channel coast during the day.
Normal night raiding over Scotland and northwest
Germany.
III. Mediterranean Theater.
Ground: Nothing to report.
Air: Axis planes made a night attack on Alexandria.
RESTRICTED
Regraded Unclassified
197
RESTRICTED
0-2/2657-220; No. 463 M.I.D., W.D. 12:00 M., August 9, 1941,
SITUATION REPORT
I. Eastern Theater.
Ground: The German High Command reports the capture of
38,000 Russians of a combat group encircled a week ago near Ros-
lavl, 60 miles southeast of Smolensk.
The German High Command, in a special commini-
que, reports the capture of 103,000 men in an area around, south
and southeast of Uman. These prisoners were said to belong to the
Russian Sixth, Twelfth and Eighteenth Armies. The Commanders of
the Russian Sixth and Twelfth Armies were among the prisoners.
German pursuit detachments continue to advance
to the south and southeast, in the areas of Perwomajsk and Kirovo.
II. Western Theater.
Air: Russian and British planes cooperated in night
bombing operations against Germany. The R.A.F. operated against
Kiel while the Russian Air Force reported bombing Berlin.
Light German night operations over the eastern
British coast.
пг. Mediterranean Theater.
Air: British raids on Benghazi and Tripoli.
Ground: Limited patrol activity on Sollum front.
RESTRICTED
Regraded Unclassified
198
RESTRICTED
0-2/2657-220; No. 464 M.I.D., W.D. 12:00 M., August 11, 1941.
SITUATION REPORT
I. Eastern Theater.
Ground: Two distinct Russian combat groups, each of very
considerable strength, continue to offer desperate resistance in
Estonia to the invading Germans. The larger group is in control of
Tallinn and northwestern Estonia. A smaller group is defending it-
self west of Narva and northwest of Lake Peipus. Between these
groups the German Eighteenth Army has driven a wedge beyond Radvere
to the southern shore of the Gulf of Finland. The Russian force at
Tallinn is surrounded; that west of Narva may also be surrounded,
but it is possible that this latter group still has a line of re-
treat open to Leningrad over Narva.
Following the destruction of strong Russian com-
bat groups near Uman, German armored and infantry divisions are
following the defeated Russian army to the south and southeast.
A German armored detachment has reached the west-
ern bank of the Dnepr River opposite Kremenchug. Another German ar-
mored division advancing down the eastern bank of the Bug has reached
the vicinity of Voznesensk, 55 miles northwest of Nikolaev.
Air: German night raids on Moscow took place on the nights
of the 9th and 10th.
II. Western Theater.
Air: D.N.B. reports daylight R.A.F. raids on the French
coast. Normal German night raids on Scotland.
III. Mediterranean Theater,
No important activity.
RESTRICTED
Regraded Unclassified
CONFIDENTIAL
199
Paraphrase of Gode Cablegram
Received at the Var Department
at 17:40. August 8, 1941.
London, filed 18:20, August 8, 1941.
1. British Mr Activity over the Continent,
& Hight of Amount 47. The numbers of tons of high
explosive bombs and maters of insendiary bomba dropped upon the
objectives named were as follow#: Mannhsin, 29 and 3600; Frankfert,
25 and 49001 Calais, 20 and 700; and Karlsruhe, 28 and 2000.
b. Pay of Amount 7. & total of 903 fighters were exployed
as follows: 141 on interception missions, 239 in the protection of
shipping, 45 on special patrols, and 478 on offensive patrols. A
Lysander escorted by Spitfires carried out sea resous patrol daty.
Lille and the airdroms at St. Oner were each attacked by 6 Blenheims.
e. Hight of August 7-8. A total of 208 bombers were sent
out as follows: 46 to the railway center at Home, 106 to the Krayp
works at Beeen, 40 to the Dortment railvay center, 6 to Boulogne, 2
attacking airdromes and to drop leaflets over Paris, and 8 on ass
mining operations. These attacks were reported as being generally
successful.
2. German Air Activity over Britain.
a. Day of Amount e Five long range bembers and 15
resonnaissance aircraft were dispatabed.
b. Ficht of August 6-7. 16 fighters and 20 long range
bombers were used.
6. Pay of % The Germans carried out reconnaissance
CONFIDENTIAL
INFORMATION cut
Regraded Unclassified
CONFIDENTIAL
200
operations off the sentionses coast of Britain and over the North Sea.
4. Ficht of Amount 1-4. A few reide took plass over the
Terkshire coast. Activity against shipping also occurred off the
East Anglican coast.
3. Aircraft Losses Reparted.
a. British lesses. 11 Spitfires, 1 Burricans and 10 pilets
were lost on August 7. During the night of August 7-8, three bembers
were unreported from the raid on Besen.
b. Aria losses. On August 7 these were as follows: 1 No-111,
two Me-109F's and two No-109's shot down, 6 Me-109F's probably destroyed,
and 8 No-109's and 1 Ju-88 damaged.
4. British Mr Activity. Other Theaters,
a. Theater. A convey off Lampedure vas attacked
by Swordfish planes from Malta during the night of August 6-7. These
aircraft dropped 5 terpodess, resulting in the sinking of ohe motor
vessel of 6000 tons. On the day of August 7, the same convey vas
attacked by Blenheim bombers, which obtained hits on a destroyer and
two large motor vessels.
5. Arie Mr Astivity. Other Theaters.
a. Middle Eastern Theater. An oil storage tank was his
during an attack on shipping facilities at Bues during the night of
August 6-7.
LEE
Distributions
State Department
Chief of the Army Air Forces
Assistant Chief of Staff, 0-2
War Plans Division
Office of Naval Intelligence
G.H.Q.
Secretary of Treasury
Assistant Secretary of War for Air
Assistant Chief of Staff, 0-5
Air Corps
CONFIDENTIAL
Regraded Unclassified
201
TREASURY department
WASHINGTON
August 9, 1941
Memorandum for THE SECRETARY:
The following report is made of Stamp sales at
"Treasury House":
July 1-August 7
$26,783.40
August 8
1,328.30
TOTAL
$28,111.70
GRAVES
Regraded Unclassified
UNITED STATES SAVINGS BONDS
CONFIDENTIAL
Comparative Statement of Sales During
First Seven Business Days of June, July, and August, 1941
(June 1-9, July 1-9, August 1-8)
(Amounts in thousands of dollars)
:
:
Amount of Increase
:
Percentage of Increase
:
Sales
:
or Decrease (-)
:
or Decrease (-)
Item
:
=
:
:
August
:
July
:
August
:
July
:
August
:
July
:
June
:
over
:
over
:
over
:
over
I
I
:
I
July
I
June
:
July
2
June
Series I- Post Offices
$13,262
$15,080
$13,732
1,818
$ 1,348
- 12.1%
9.8%
Series I - Banks
24,262
23,324
16,904
938
4,420
4.0
23.4
Series 1- Total
37.525
38,405
32,636
-
880
5,769
- 2.3
17.7
Series 1- Banks
7,515
7,631
12,648
-
116
- 5.017
- 1.5
- 39.7
Series G - Banks
50,864
51,852
74,491
-
988
- 22,639
- 1.9
- 30.4
Total
$95,903
$97,888
$119,775
1,985
-$21,887
- 2.0%
- 18.36
Office of the Secretary of the Treasury, Division of Research and Statistics.
August 9, 1941.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds of
sales of United States Savings Bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
202
Regraded Unclassified
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Daily Sales - August 1941
On Basis of Issue Price
(In thousands of dollars)
Post Office
Date
Bank Bond Sales
All Bond Sales
Bond Sales
Series E
Series E
Series 7
Series G
Total
Series E
Series F
Series G
Total
August 1941
1
$ 1,467
$ 3,296
$ 1,163
$ 7,586
$ 12,045
$ 4,763
$ 1,163
$ 7,586
$ 13,512
2
1,500
3,030
726
6,101
9,857
4,530
726
6,101
11,357
4
3,606
4,376
1,892
10,092
16,361
7,983
1,892
10,092
19,967
5
1,278
2,822
928
7.334
11,084
4,099
928
7.334
12,362
6
1,810
4,195
1,156
10.752
16,103
6,005
1,156
10,752
17,912
7
1,789
3,475
652
5,636
9,763
5,264
652
5,636
11,552
DO
1,812
3,069
999
3,362
7,430
4,881
999
3,362
9,242
Total
$ 13,262
$ 24,262
$ 7,515
$ 50,864
$ 82,641
$ 37,525
$ 7,515
$ 50,864
$ 95,903
Office of the Secretary of the Treasury, Division of Research and Statistics.
August 9, 1941.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of
United States Savings Bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclassified
204
aug.
DEFENSE SAVINGS BONDS & STAMPS
FILM RELEASE SCHEDULE
1941
April 18
Secretary Morgenthau - Bureau of Engraving shot.
All five newsreels.
May 2
President - Secretary Morgenthau. All five newsreels.
Paramount News also carried shots from Meddybemps, Meine.
May 22
Abbott and Costello. All five newsreels.
May 28
Universal and Movietone story of Mrs. Whitehurst, President,
General Federation of Women's Clubs.
May 28
"America Preferred" released nationally.
June 6
"130 Million Americans" on Columbia Pictures "Penny Serenade".
June 6
"Protect Them" on RKO Pictures "Sunny".
June 13
"Watch This Baby Grow" on Paramount Pictures "One Night In
Lisbon".
June 13
"Where To Buy" on Universal Pictures "In The Nevy".
June 13
News of the Day, Movietone and Universal story of Billy Conn
buying Defense Bond.
June 13
Columbia Pictures "She Knew All The Answers" refers to Defense
Bonds.
June 14
"The Army Is Yours" on Warner Bros. "Shining Victory".
June 16
Defense Bond and Stamp shot injected into Agriculture Depart-
ment defonse recl. This is being released on both 35 and 16 mm,
June 18
Jack Benny and Carolyn Lee shot released nationally.
June 20
"All Walks of Life" on 20th Century Fox "Man Hunt".
June 27
"Shoulder To The Wheel", on Loow's Inc. "They Met In Bombay".
June 27
Story of the White Family buying Stemps released nationally in
all five newsreels.
July 11
News of The Day and Fox Movietone carry story of four Hollywood
Starlote completing the sewing of a huge silk banner bearing
slogan "Buy Defense Savings Bonds".
Regraded Unclassified
205
- 2 -
Aug. 9
In Warner Brothers foature picture "Manpower", reference 18
made to Defenso Bonds in the following manner:
Alan Hele: "Now don't you wish you'd saved your dough?"
Ward Bond: "What are you talking about? I just bought
two Defense Bonds."
In Production: Metro-Goldwyn-Meyer Our Geng Comedy "Helping Hands" has
a scone with dialogue of Our Gang Kids buying Stamps at
post office Defense Window.
206
DEFENSE SAVINGS STAFF
ADVANCE NOTICE RADIO PROGRAMS
SATURDAY - AUGUST 9, 1941
Time:
9:30 - 10:00 A.M.
Program:
America, The Free
Station:
WRC and NBC Red Network
Time:
6:30 - 7:00 P.M.
Program:
Wayne King
Station:
WJSV and CBS Network
Time:
7:30 - 8:00 P.M.
Program:
Truth or Consequences
Stetion:
WRC and NBC Red Network
Time:
8:00 - 9:00 P.M.
Program:
National Barn Dance
Station:
VRC and NBC Red Network
BULOVA TIME SIGNALS PROMOTE DEFENSE BONDS AND STAMPS
REGULARLY NOW AT THE RATE OF 428 announcements DAILY
OVER 134 RADIO STATIONS.
Regraded Unclassified
207
FORDEFENSE
BUY
FIELD ORGANIZATION News Letter
UNITED
STATES
SAVINGS
DEFENSE SAVINGS STAFF
BONDS
ADDITIMES
TREASURY DEPARTMENT, WASHINGTON, D. C.
August 9, 1941. NUMBER 12,
THE FIRST BILLION
"Cash deposits at the Treasury from the sale of Defense Savings Bonds
went over a billion dollars as of yesterday, July 31, 1941. This is
great and good news. I congratulate all those whose united coopera-
tion has made it possible. I congratulate especially the multitude
of patriotic Americans who have begun to invest their savings for
their country's freedom.
"The first billion has beon raised in the American way, by cooperation
rather than compulsion. I Am confident that the second billion can
be raised in the same democratic way, yet still more speedily.
"I sum especially glad to see that the sales of the Series E bonds,
the 'people's bonds,' were 37 per cent greater in July than in June,
When it is remembered that nobody may buy more than $5,000 worth of
these bonds in any one year, it secms plain to me that the good habit
of thrift is spreading fast among the American people,
"Systematic savings plans are now in operation in hundreds of factor-
ies and offices from coast to coast, in every case with the willing
approval of the workers themselves. Defense Savings Stamps are now
being sold by more than 30,000 retail stores in addition to 16,000
post offices and 10,000 commercial and savings banks, and savings
and loan associations, and we intend in the next few weeks to double
and redouble the number of these outlets.
"The results 80 far are 8. ringing proof that we Americans can unite
in defense of our liberties. And we have only just begun."
Hon, Henry Morgenthau, Jr.,
Secretary of the Treasury
Regraded Unclassified
208
Portland, Oregon,
August 6, 1941.
TO THE FIELD STAFF:
The response of the public to the Defense Savings
Program will be typical of every fine standard set by
the American nation in its history. Evidence is unmis-
takable that there is genuine understanding of the
national emergency, that the public is uniting behind
the Defense Program as only a loyal and an aroused
citizenship can do.
The above statements are made after visits with
many Defense Savings Committees in every section of
the country. State, county and city groups are demon-
strating their devotion to and belief in the American
way by action. Outstanding citizens by the thousands
are enlisting as volunteers to carry the Defense Savings
message to millions of men, women and children throughout
the land and to provide the most convenient methods to
make the securities available for purchase. The plans
for organization and marketing that are being followed
in the sections visited are sound and truly American.
The public response will be equally fine.
Sincerely yours,
GALE F. JOHNSTON
Field Director, Defense Savings Staff
- = SUVERSMENT PRINTING arrive
Regraded Unclassified
209
IN THIS ISSUE
ALLOTMENT DEVELOPMENTS-
Labor and industrial leaders cooperate - page 6
Manufacturers Association urges prompt action - page 6
Bankers stand by to render assistance - page 6
Picture - Airplane parts makers 100% - page 8
Oil companies installing plans - page 9
Picture - Model allotment card available - page 12
Allotment in the Pacific Northwest - page 14
BANK NEWS--
Bankers assist employers install allotment plans - page 6
Defense Bond Week in Georgia - page 7
Florida banker looks for new ideas - page 7
One bank's program described in dotail - page 7
Pictures - Special bank displays - page 8
Seattle bankers install allotment plans - page 15
COMMITTEES REPORT--
Florida, Maine, New Jersey and New York - page 4
Oklahoma, Texas and Washington - page 5
MISCELLANEOUS-
State Government employees organize savings clubs - page 9
Federal Credit Unions sell Defense Bonds - page 10
Defense Savings statistics - page 15
Life underwriters' Defense Savings committee - page 15
Baseball public address systems mobilized - page 17
Boy Scouts on the job - page 17
Chairmen of State Defense Savings Committees - preu 18
QUOTABLE QUOTES--
James B. Carey, National Secretary, C10 - page 13
Walter D. Fullor, President, National Association
of Manufacturers - page 13
William Green, President, American Federation of Labor . page 13
Albort Hawkes, President, Chamber of Commerce of the United States
and Chairman of the Defense Savings Committoe for New Jersoy -
page 13
Jamos A. Phillips, Chairman, Railway Labor
Executives Association - page 19
Hon. Henry Morgenthau, Jr., Socretary of the Treasury - page 13
RADIO-
Programs for coming week - page 11
Lany fine local programs - page 11
Picture - Boston's Defense Variotios . page 12
3 -
Regraded Unclassified
210
CHAIRMEN APPOINTED IN FOUR ADDITIONAL STATES
FOUR MORE DISTINCUISHED CITIZENS have accepted Secretary Morgenthau's
invitation to serve as the active chairmen of the Defense Savings Committees
being organized in their statos:
IDAHO
WASHINGTON
John A. Schoonover
Joel E. Ferris
President, Ideho First National
Executive Vice President,
Bank, Boise
Seattle-First National Bank
KANSAS
WISCONSIN
William Allen White
Charles E. Broughton
Editor and Publisher,
Editor and Publisher,
The Emporia Gezette
The Sheboygan Press
A LIST OF THE ACTIVE CHAIRMEN in the 22 states where the heads of State
Cofonse Savings Committees have been appointed 1s presented on page 18 of this
Issue of the NEWS LETTER.
THE HONORARY CHAIRMAN of those committees In each Instance is the Governor
of the State or Commonwealth.
NEWS OF STATE AND LOCAL COMMITTEES
FLORIDA-Four counties are now fully orgenized, reports Deputy State Adminis-
trstor Karl Lehmann, end Defense Savings Committees are repidly shaping
up in the other counties, County Commissioners are serving as the
Honorary Chairmen in most casos.
MAINE--Tho State Committee is nearly complete, County Chairmen have been
appointed in five counties.
Feirs held in the State of Maine this
year have booths where people can secure information about Defense Sav-
ings Bonds and purchase Defense Savings Stamps.
NEW JERSEY-Orgenization of local committees in Essex, Fudson and Union coun-
tios is progressing repidly. In this work, Deputy State Administrator
Paul Canada has had the assistance of Alfred J. Speek, Assistant Treasurer
of the Fidality Union Trust Company. Mr. Speak has been loaned by
Porace K. Corbin, Prosident of the Fidelity Union Trust Company and Cheir-
man of Now Jorsey's Banking and Finance sub-committee.
NEW YORK-Commender Henry P. Heimenn of the U. S. Navy has recently been
assigned to the State Dofense Sovings Committee for New York to serve as
executive assistent to Cheirman Richard C. Patterson, Jr. Commender
Heimann was formorly Chairmen of the United States Shipping Board and
is now Executive Manager of the National Association of Credit Men.
-
Regraded Unclassified
211
lews of State and Local Committees (Continued)
KLAHOMA-Direct representatives of the Oklahoma headquarters of the Defense
Savings Staff are being appointed in each of the state's 77 counties by
State Administrator H. C. Jones. These "county administrators" will
help in the selection of the chairmen and members of Defense Savings
Committees for the cities and towns in their counties.
All of the 4,200 lawyers in this state have received material which
they can use in preparing speeches on the Defense Savings Program.
[eading retail stores in the state have been asked by Roy L. Sanford,
President of the Oklahoma Retail Merchants Association and member of the
state committee, to place Defense Savings Stamps on sale in their stores.
Each member of the State Committee has been asked to write a 100 to
150-word statement on "Why
(the individuals and organizations
which he particularly represents) Should Buy Defense Bonds and Stamps."
Oklahoma newspapers are being asked to publish this series one article
at a time.
TEXAS-In Fort Worth, the Tarrant County Medical Society, the Life Underwriters
Association of Fort Worth, and the Tarrant County Bar Association have
appointed "Defense Bond Committees," which are circularizing the members
of these professional groups and urging regular purchase of Defense
Savings Bonds.
In Houston, the Junior Chamber of Commerce has established & Defense
Bond speakers committee, under the chairmanship of Milton Gregory. The
Jaycees will work with the speakers bureau of the Houston Defense Savings
Committee.
WASHINGTON-For purposes of the Defense Savings Program, five areas have been
established in the state and an "area director" appointed in each, Area
directors, who are members of the State Committee, will appoint county
chairmen in their territories.
Norman S. Archibald, who is serving as executive secretary of the
King County Committee, is giving his entire time to the program.
.
Office space for the King County Defense Savings Committee headquarters
has been donated by the United Exchange Building, Seattle; the Washington
Mutual Savings Bank donated office furniture; and several women have
Volunteered to do stenographic and secretarial work. A Speakers
Bureau has been set up by the King County Committee and letters sent to
the heads of all clubs, informing them that speakers are available on
request.
NEWS LETTERS
Texas, Oklahoma, and Florida were the first states to have their own
Defense Savings News Letters. A number of other states are planning to
establish them. (Which makes us recall the remark about the sincerest kind
of flattery.)
- 5
Regraded Unclassified
212
LABOR AND INDUSTRIAL LEADERS
COOPERATE TO INSTALL ALLOTMENT PLANS
EVERY LABOR UNION in New Jersey was invited to send representatives to a
meeting on August 5, called by John J. Toohey, Jr., Commissioner of the State
Department of Labor and member of the Defense Savings Committee for New Jersey.
Samuel L. Rothbard of the New Jersey State Council, C. I. O., cooperated with
Mr. Toohey in calling this meeting and in axplaining the advantages of the
allotment plan to those present.
THE 1,100 LARGEST EMPLOYERS of labor in New Jersey (list secured from the
New Jorsey State Chamber of Commerce through the cooperation of George K. Bilt,
president) have received a special letter from State Administrator John W.
Manning, explaining how they can aid the Defense Savings Program by making it
convenient for their workers to save and invest in Defense Bonds regularly,'
Mr. Manning suggests that companies set up Dofense Savings Committoos
and that the members of these committees personally 000 each employee and ask
him to become a partner of Uncle Sam.
"We want the individual worker," writes Mr. Manning, "to feel that
he has a personal share in the Defense task. From the standpoint of
morale, this is important."
MANUFACTURERS ASSOCIATION
URGES PROMPT ACTION
THE INDIANA MANUFACTURERS ASSOCIATION, which recently invosted = sub-
stantial sum in Defense Savings Bonds, has urged all of its 3200 mambers to
cooperate with the program by making Defense Savings allotment plans evail-
able to their employees.
"The Association has set aside funds for the purchase of Defense
Bonds," writes H. M. Cochrane, secrotary. "It urges the seme coop-
eration from all employers of the state,
If you have received
the letter and forms (for the installation of payroll allotment
plans) from Will H. Smith, State Administrator, Defense Savings
Staff, and have not put the program into effect, won't you do so
at once?"
BANKERS STAND BY
TO RENDER ASSISTANCE
WITHIN THREE DAYS after the Seattle Trust and Savings Bank had offered to
assist employers install Defense Savings allotment plans, 13 employers -
representing 1300 employees - had taken advantage of the offer. This bank
has sent full information about the Defense Savings Program to 1600 employers
in the State of Washington (most of them in Seattle),
Another Seattle
bank which has written to all of its depositors offering to cooperate with
them in setting up allotment systems is the Pacific Nitional, And in Spokano
all employers have received information from The First Federal Savings and
Loan Association about the application of the pay roll allotment plan to
Defense Savings.
VNINTING
-
-
Regraded Unclassified
213
BANKERS STAGE DEFENSE BOND NEEK
"HIGHLY SUCCESSFUL" is the report of State Administrator Marion Allen
on the Georgia Defense Savings Bond Week, July 28-August 2, Public speeches,
parades and patriotic displays lent omphasis to the program, which Vas spon-
mored by the Georgia Bankers Association.
In Atlanta, prominent bankers staffed a booth net up at "Five Points,"
principal intersection in the business area, and sold Stamps and
Bonds to all comers,
In Savannah, army bombers showered Defense Savings leaflots orr the city
each day during Defense Bond Week.
In Macon, Columbus, Augusta and Rome - and In many smaller places -
Wrightsville, for example, the week was celebrated with appropi Late
ceremonies, In this latter town, Mayor W. F. Outlaw proclaimed a
two-hour suspension of business, from 3 to 5 PM, in order that All
could attend the mass meeting at the courthouse,
"I AM LOOKING FOR NEW IDEAS"
EVERY BANKER IN FLORIDA has recently received a letter from is, ",
McSachern, President of the Union Trust Company of 86. Potersburg, Chairmen
of the Public Relations Committee of the Florida Bankers Association and must-
her of the State Defense Savings Committee for Florida, asking for suggestinue
as to now to promoto the sala of Defonse Savings Bondo and Stamps. The Union
Trust Company's program he outlines as follows:
Regular purchase plan installed for All officers and amployees--
practically 100% participation;
Reminder notices included in all bank advertisemento;
Special poster displays prepared for bank windows and lobby;
Special Defense Bond blottors sent to all bunk customers;
Small business firms asked to stock Dofense Savings Stange for
their employees.
"I am looking for new ideas," writes Fr. CoZochern. "Ploces lot au know
what you and your institution are doing along those Tines."
ONE BANK'S PROGRAM DESCRIBED IN USTAIL
THE OUTSTANDING JOB of Defense Savings promotion being dono by the "irst
National Bank and Trust Company of Tulsa (See ITS LITER lo. 8, PACK 19) will
be matched by other banks in Oklahoma.
AN ZIGHT-PAGE BOOKLET explaining and illustrating that bank's program of
newspaper advertising, bank signs, billboards, forms for regular depositor
withdrawal orders, bank blottors, etc., has boon propared and sent by R. Ctis
L'sClintock, President of the First National and Member of the State Dofonae
Savings Committee for Oklahoma, to 416 Oklahoma banks und 465 nowspapers in
the state,
7
Regraded Unclassified
AIRPLANE PARTS MAKERS 100% FOR DEFENSE SAVINGS
214
Workers in a factory producing airplane and auto-
motive machine parts are shown as they enlist in
the defense savings program. These are a few of
the 300 employees of the M-B Manufacturing Co.
of New Haven, Conn. who are now participating in
the defense savings payroll allotment plan.
BANK DISPLAYS BOOST SALES OF DEFENSE SAVINGS BONDS
FORDEFENSE
BUY
UNITED
STATES
UNITED
SAVINGS
STATES
BONDS
SAVINGS
BONDS
Windblown American Flags surround the Minute Man
The biggest watermelons grown in the county
poster in the lobby of the First Trust & Deposit Co. of
call attention to defense savings in the lobby
Syracuse, N.Y.
of the Leesburg, Fla., National Bank,
per
6
Regraded Unclassified
215
STATE GOVERNMENT EMPLOYEES ORGANIZE DIZENSE SAVINGS CLUBS
GOVERNOR LEVERETT SALTONSTALL of Massachusetts, responding to B. suggess=
tion made by State Administrator Daniel J. Doherty, has called upon all state
employees to enlist in the Defense Sevings Program,
"Our blessings can only be preserved by sacrifice," Governor Salton-
stall wrote to Patrick J. Moynihan, Chairman of the State Commission
on Administration and Finance. "Those of us who are carrying on the
work of government have the responsibility of helping our government
protect the security we enjoy. We have also the added responsibility
of leading the way and setting the example for our follow citizens,"
COMMISSIONER MOYNIHAN has trensmitted copies of the Governor's letter to
all heads of state departments and suggested the formation of Defense Savings
Clubs and the establishment of other plano for encouraging aystomatic purposo
of Defonse Bonds and Stamps by state employees,
PLEDGE CARDS used in connection with the Fodoral Employee Purchase
Plan could be used without alteration by state and local governments
which have similar purchase programs under way. These cards are
available from the Defense Savings Staff upon request.
PAY ROLL ALLOTMENT IN NATION'S OIL FIELDS
OIL COMPANIES in Oklahoma and ndjoining states Aro establishing salary
allotment plans modelod after the one installed by the Phillips Petroloum
Company of Bartlosvillo (12,000 employees in 22 states).
K. S. Adams, President of the Company and member of the State Defense
Savings Committee for Oklahoma, has sent copies of his company's plon to
more than 500 oil companies. The accompanying letter to oil company presi-
donts urging them to sot up Defense Savings solary allotment plons, WASE
signed by Mr. Adams and Frank Phillips, Chairman of the Bonrá of Phillips
Petroleum.
PAY ROLL ALLOTMENT FOLDERS AVAILABLE
The four page folder containing the mossage "Billions for Defense" end
information about Serios E Dofense Savings Bonds 18 now ovoilable with the
following paragraph:
"For your convenience, n Pay Roll Allotment Plan
has been edopted by your employer.
"Ask about it."
Those folders may be requisitioned through the officasor the State
Administrators. The folders are 1₫ ntified ns "Pay Roll Allotment
Foldors DSS - 111."
- , -
Regraded Unclassified
216
FEDERAL CREDIT UNIONS SELL DEFENSE BONDS
ifying as issuing agents for Sories E Bonds. These credit unions are most
HUNDREDS OF FEDERAL CREDIT UNIONS in all parts of the country are qual-
frequently composed of the employees of the same business or industrial
establishment and maintain offices in the plants where their members work.
By qualifying as issuing agente, these credit unions make it very convenient
for workers who do not have occasion to go to a bank or post office regularly
to invest in Defense Bonds.
"Credit unions are by thoir very nature particularly well
adapted to reach the broad sections of thrifty people the Treasury
Department hopes will purchase this offering of Bonds," states the
news letter of the Credit Union Section of the Farm Credit Admin-
istration - the agency responsible for the supervision of all
federally chartered credit unions.
"We are very pleased that the Treasury Department has given
Federal credit unions the opportunity of selling these Bonds.
It is a chance for Federal credit unions to render invaluable
public service as well as a gratifying recognition."
RECENT REPORTS indicate that credit unions organized among the employees
of the Yale & Towne Manufacturing Company, Pitney-Bowes Postage Meter Company,
and Colt's Patent Fire Arms Manufacturing Company, all in Connecticut, have
qualified as issuing agents;
The Colt Employees Federal Credit Union, to which a majority of
all Colt employees belong, has made it possible for both members and
non-members to invest in Defonse Bonds through regular salary allot-
ments,
L. B. Kilburn, treasurer of the Yale Lockmakers Federal Credit
Union, states that "everything possible will be done to encourage
credit union members to buy bonds in the interests of national defense."
The establishment of a "Defense Bond League" by the Groton Ship-
builders Federal Credit Union was reported in the NEWS LETTER of
August 2.
Up to July 31, 197 Federal credit unions had qualified as issuing agents
for Series E Bonds.
A Correction
Only individuals may be named either as co-owner or beneficiary in
registering Defense Savings Bonds. Accordingly, the United States cannot be
named as beneficiary as one man was reported to be doing in NEWS LETTER of
July 26, page 14. A bond naming the government or a corporation as beneficiary
will, if issued, be called for reissue when this error cones to the attention
of the officials in charge of its registration.
- 10 -
Regraded Unclassified
217
DEFENSE SAVINGS ON THE AIR
Londing Programs for the Coming Wook
Tuesday, August 12
FOR AMERICA WE SING
7:30-8:00 P.M. (EST)
NBC Blue Network
A musical program foaturing o 44-pioco NBC symphony orchostra and chorus,
conducted by Dr. Frank Black, contributed by the National Broedcasting Company,
GUEST STARS: Gladys Swarthout and Lanny Ross.
.....
Wednesday, August 13
MILLIONS FOR DEFENSE
8:00-9:00 P.M. (EST)
(The Treasury Hour)
CBS Network
GUEST STARS: Al Jolson, Edgnr Bergen and Charlic McCurthy, Jonn Crowford,
Bibu Sayao, with Al Goodman end his band, Barry Wood and Ray Block's choir.
.....
MANY FINE LOCAL PROGRAMS
IN ADDITION to the notwork features listcd above, there ATC soveral
locally-produced and arranged radio shows dovoted entirely to Dufunso Sevinge.
Boston, for examplo, now has two such programs. Ono, "Millions For Dofense,"
has boon on the nir since Juno 15 (NEWS LETTER Number 11, August 2). The
other, "Defense Varieties," WAS first honrd Sunday evening, July 27. over
stotion WAAB, and in the future will bo hourd on Sunday evenings ever station
WMEX. Soo studio picture on the next pago.
"Defonsé Vericties" is written and produced by Edward A. Cronin and
Pat La Selva, two Trensury omployees in the office of Thonns B. Hossett,
Colloctor of Internal Rovenuo for the district of Mossachusetts. A footure
of this show 18 the thomo song "Koop Your Lights Always Burning, America"
written by Mossrs. Cronin and La Selva. The Boston musicions union has Given
local orchostras permission to contributo their musical talant to the program.
*****
IN MINNESOTA the Dofonse Savings Committoes of Minnonpolis and 3t. Paul
sponsored jointly a round tablo discussion participated in by Doputy State
Administrator Lief Gilstad, Minneapolis Chairman Robort 7. Pook, and St. Poul
Chairman Ray Wentz. A special playing of "Any Bonds Today?" opuned and closed
this brondcast.
.....
"IDENTIFY THE MUSICAL SELECTION and win to Defense Sovings Bond!" Every
Thursday night over Station WLBZ, Bangor, the Moino Contral Reilrond sponsors
n program which foctures the'swarding of Defonse Bonds and Stamps. Telephone
numbors aro called nt random, and the porsons answering, asked to identify
musical solections played on the program. If they do so correctly, they ro-
ceive $25 Defense Bonds; otherwiso, $5 in Dofonse Snvings Strampo.
L - IMPORTER
- 11 -
Regraded Unclassified
NEW ENGLAND'S "MILLIONS FOR DEFENSE" RADIO SHOW
218
Station WORL, Boston, has aired New England's own "Millions For Defense" radio show every Sunday
evening since June 15. In the studio picture above, from left. to right: Karl Nazarine, tenor; George Micheals,
WORL announcer; Gordon Wayne, WORL director of the program; Bill Cannady, WORL announcer; Ed
(
Cronin, Deputy Collector of Internal Revenue: Pat La Selva, musical director; and Bert Williams, orchestra
leader.
PAY ROLL ALLOTMENT CARDS AVAILABLE
DEPT. a LOCATION
DEDUCTION
PAY-MOLL PERIOD
far DEDUCTION
ISSUE PRICE
NAME
NETCRENT
IPUB TO
NET CHENT
M
M
PAY-BIAL PERIODS
APPLIED TES
NET CREDIT
PAY-POLL members
UTILID TO
PAY-WIRL
MIRCHASE
INJ OY
PURCHASE
END or
o
o
PUYCHASE
END UF
T
=
.
,
4
.
4
.
or -
MONTH
-
7
-
a
-
.
MONTH
à
OF -
or MOMO
MONTH
T
T
YEAR "
H
YEAR "
"
YEAR 19
à
F
E
PAY ROLL ALLOTMENT AUTHORIZATION FOR PURCHASE OF
A
UNITED STATES SERIES E SAVINGS BONDS
t
-
By
-
Il
-
4.
To
.
D
I hereby authorize you ⑉ dellast Irom m) earnings each
the amount of
"
5
effective with the pay roll resting
Each nime the required
- - -
El
UNHAIRE $
has accumulated III my rest to purchase and deliver to me a United States Series
E Sivings Bond maturity value of 3
Such deduction shall continue each pay period illere-
di
afree until (a) Termination of my employment, (b) Written notice by me of the cancelation of this allot-
(Dinser)
.
ment or (c) Termination of this statement arrangement by you
M
I understand that na interest is to be puid by the company 00
d.
Regulter bonds in the name all and deliver No:
This is a reproduction of the pay roll allotment
Miss
"
Mo.
}
authorization card now available from the de-
Doe - non -
Mr.
fense savings staff in sufficient quantities to
Number -
106 at me)
Address of Co-nwner er beneficiary if different-
Janye-
supply small employers who do not wish to print
BACK
their own allotment authorization forms.
These cards are being distributed through the
various State headquarters of the defense savings staff and an employer who needs a supply should address
his request to the State administrator in his State.
GOVERNMENT PRINTING EFFICE
Regraded Unclassified
219
Excerpts from the
FORUM ON DEFENSE SAVINGS BONDS AND STAMPS
Broadcast July 22, 1941 over stations of the CBS
"The appeal to voluntary action has already brought promising results from
the ranks of organized labor in the early months of this drive. You know of
the Action of many locals in the automobile industry-they voted to have their
employers set aside a percentage out of their pay envelopes each week to go
Loward buying Defense Bonds.
Personally, I hope-and I expect-that this
voluntary weekly savings plan will be adopted by large numbers of locals
throughout the organization of the C. I. 0."
-James B. Carey, National Secretary of
the Congress of Industrial Organizations
"I have great faith in the American people. And I'm sure when they
grasp the soundness of the Defonse Bonde and Stamps idea, they're going to
pitch in and really make a go of it."
Walter D. Fuller, President of the
National Association of Manufacturers
"We workingmen don't expect perfection in our lifetime, but we know what
we've got, and we know it can be improved only in the democratic way. It's
not a choice between a perfect world and an imporfect world.
It's
A
choice
between hope and hopelessness. Our hope lies in America, and we know it.
This why we'll buy Defense Suvings Bonds and Stamps."
-William Green, President of the
American Federation of Labor
"1% here represent five groups that are pledged to protect different
marks of the national interest; and now we're all menaced by a gangster
system which, beyond a shadow of a doubt, will wreck all our interests if it
prevails. Secing that that's so, the first thing, as of July 22, 1941, is
to unite in the effort to secure ourselves from that menace."
-Albort Hawker, President of the
Chambor of Commerce of the United States
and Chairman of the Defense Savings
Committee for New Jersey.
"Americans are st last waking up to the fact that this war is a tragedy
that's really Asppening, a crisis that affects the future of every man, woman
and child. Speaking for the railrond men of this country, I would say that
by will buy Defense Savings Bonds because each bond sold is & blow struck in
the defense of our secred freedom es a nation and the preservation of our
democratic my of life."
James A. Phillips, Chairman of the
Railway Labor Executives Association,
"I cannot tell you how pleased I am to find such a united stand
in this discussion. You have provided A dramatic proof that America
is able to unite in A time of crisis,
I don't think it is exagger-
-tion to say that this discussion, informal though it has been, has
been of historic importance."
-Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury
13 -
Regraded Unclassified
220
PAY ROLL ALLOTMENT POPULAR IN PACIFIC NORTHWEST
LUMBER INDUSTRY--
Lumbermen in the Northwest want to participate in Dofonse Savings
through pay roll allotment plans, according to John Christonson, president
of the Lumber & Savmill Workers Union, who has been active in explaining
the Defense Sevings Program to officers and members of the locals offili-
ated with his organization. J. H. Bloodel, president of the Bloodol-
Donovan Lumber Mills and a member of the Defonse Savings Committee for
Washington, 1a ussisting lumber executives throughout the region with
the various dotails connected with the installation of allotment plans.
METAL INDUSTRY-
Ed Johnson, president of the Metal Trades Union in Washington, 14
an active supporter of the Defense Savings Program and is urging local
unions affiliated with his organization to petition their employers for
installation of pay roll allotment plans.
BAKING-
The Silver Loaf Beking Company was the first company in Spokenu to
report that all of its employees were participating in a Defense Divings
pay roll allotment plan.
BANKING-
Salary allotment plens have been installed by the Seuttle-First
National Bank, Washington Mutual Savings Bank of Senttle, and The Pacific
National Bank of Secttle.
PUBLISHING--
"Somo weeks ago, we put in = voluntary pay allotment plan in The
Oregonian. Tomorrow afternoon, there will be the first meeting of
the employees' committee und I bolieve that before wo are through WB
will have 100% participation. We alrondy have throe departments 100
including the ongraving room," reports Pelmer Hoyt, publisher of the
Portland Oregonian and chairman of the Defense Savings Committoe for
Oregon.
RETAIL TRADE--
The largost dopartment store in Senttle=-Froderick & Nelson--hos
installod n Dofense Savings anlary allotment plan. General Manager
William H. St, Clair has assumed the responsibility of seeing that all
department stores follow his company's example.
AVIATION AND SHIPBUILDING--
Installation of Defense Savings allotment plans by the Booing
Aircraft Company, Sonttle-Theonn Shipbuilding Corporation, and Todd-
Senttle Dry Docks, Inc., WEB announced in the NEWS LETTER of July 19.
- 14
Regraded Unclassified
221
DEFENSE SAVINGS STATISTICS
Bond Sales On Basis of Issue Price
For First Three Months or Program
Type of Bond
Total
May
June
July
Series E
$ 348,373,000
$100,581,000
$102,517,000
$145,274,000
Series F
94,052,000
37,817,000
28,876,000
27,359,000
Series G
564,053,000
211,420,000
183,134,000
169,498,000
TOTAL
$1,006,477,000
349,818,000
$314,527,000
$342,132,000
Source: All figures are deposits with the Treasurer of the United States on
secount of proceeds of sales of United States Savings Bonds, Figures
have been rounded to bearest thousend end will not necesserily ndd to totals.
Note:
Figures previously relessed by the Treasury Department for May and
June were on the basis of telegrophic duily reports from seles
agencies and of course do not conform to cash deposits se shown sbove. Actual
sales by sales agencies for the three months May, June, and July, exceed the
figures given in this table by approximately $50,000,000.
LIFE UNDERWRITERS ESTABLISH COMMITTEE
FOR NATIONAL DEFENSE SAVINGS
"The Life insurance egents of this country hope to be of aid to the
national defense program and to the all-out effort of the American people to
preserve intact the democracy which has reached its greatest beights here in
our time," said Harry T. Wright, president of the National Association of
Life Underwriters, following the first moeting of the Life Underwriters
Committee for National Defenee Savinga. "This new committee, in addition to
developing B special progrom, will seek to coordinate the efforte of all
life insurance agents to aid Notional Defense."
The committee, headed by Mr. Wright of Chicago, includes:
John A. Witherspoon, Noshville
Grent Taggart, Cowley, Wyo.
Welter E. Barton, New York
Judd Benson, Cincinnati
Charles J. Zimmerman, Chicago
L. Mortimer Buckley, Chicago
E. L. Carson, Milwaukee
Kenneth Cassidy, San Francisco
0. Sam Cummings, Dellas
Ralph G. Engelsman, New York
Alvin T. Haley, Greensboro, N.C.
J. Hawley Wilson, Oklohoma City
Warren Woody, Chicago
-
Purchase of Defense Sevings Bonds "to the limit" by the Standard Life
Insurance Company of Indiana was recently festured in Indianapolis newspap- DS.
"It is the purpose of this Company," Harry V. Wade, general manager, WSB
quoted as saying, "to support solidly the United States Government in all its
endeevors and this purchase represents tengible evidence of that purpose."
MM
- 15
Regraded Unclassified
PATRIOTISM DEMONSTRATED
Here is a heartwarming little story that helps to indicate that our
great campaign is 8 truly human affair, after all:
A State Administrator was interviewing a retired railroad worker
with the idea of enrolling him AS County Chairman. The man seem-
ed to be just the one qualified to do the work-fine personality,
plenty of leisure time, excellent contacts, and a genuine spirit
of helpfulness. Yet he seemed reluctant to agree to actual par-
ticipation in a committee. Finally, he confessed that his niece
with whom he lived was counting on him to accompany her on a vaca-
tion in Canada. They had planned their schedule, budgeted strict-
ly to finance the trip on her modeat salary and his pension, and
were looking forward to a grand new experience. His nieco, her-
self wnthusiastic over the Defense Savings Program, sensed his
cagerness to be of real service and tried to persuade him to accept
the chairmanship. Finally he agreed to talk it over with her and
notify the Administrator of his decision. At seven-thirty the nuxt
morning the Administrator learned that the trip had been cancelled,
that the gentleman would represent his county, and that the young
lady was contributing her vacation money toward financing the pro-
gram in that county.
This is but one of many examples of personal sacrifice on the part of
those who are active participants in the Defense Savings Program and who 588
in this Program an opportunity to render patriotic service.
MOVIE SHORT AVAILABLE
The movie short "America Preferred" is now available in 16-millimeter
sound film, This is a ton-minute version of the picture made especially for
the Defense Savings Program and shown widely in commercial theatres. (During
the first three months of the campaign, this feature was shown in 6,813 thee-
tres and it is still being shown.)
Prints of the 16-millimeter film are being sent to all State Administra-
tors and, in addition, 75 copies are being distributed by the U. S. Department
of Agriculture to extension agents and other departmental officials in the
field who have facilities for showing sound movies to farm audiences.
City and county Defense Savings Committees may want to arrango to have
this film shown in their communities under their auspices.
À volunteer soldier purchased the first $1,000 Defense Savings Bond sold
ty, in which Apalachicola is located, has the distinction of having had enough
in Apalachicola, Florida, according to Postmaster Hal Hoffman. Frenklin Coun-
volunteers for the Army, Navy and Marine Corps to more than make up its selec-
tive service quota.
- 16
Regraded Unclassified
BOY SCOUTS ON THE JOB AGAIN
The Boy Scouts of America, who placed un display early in May more than
1,000,000 posters announcing the sale of Defense Savings Bonds and Stamps,
have been given their second assignment by Secretary Morgenthau, They have
been locations. called upon to place 400,000 of the largo Minute Man posters in prominent
In a letter to Chief Scout Executivo James E. West, Secretary Morgenthäu
said;
"Kindly convey to the members of your organization my very
sincere appreciation of this good turn for Uncle Sam.
I am confident that the Boy Socuts will undertake this sur-
vice and that it will be done effectively and with dispatch."
BASEBALL PUBLIC ADDRESS SYSTEMS MOBILIZED
Branch Rickoy, Vice President and General Manager of the St. touls Cardi-
nals and Chairman of the Dofonse Savings Connitteo for Missouri, has arrunged
to have Defense Savings Bond and Stamp announcements made over the public ad-
Tress systems at Sportsman's Park, St, Louis, home of the Cardinals. He also
asked major and minor baseball league officials throughout the country to fol-
low suit and to boost Defense Savings betwoen innings. This is now being done
at practically all baseball parks.
In a recent letter, Mr. Rickey says:
"There should be spot announcements on Defense Savings Bondo
At all the football games.
and when I say all I Issan
high school, college and university gamas as well as profes-
sional games.
This effort will at the same time provide
the franovork for basketball broadcasts.
In other words,
the Defense Savings Bond announcement end advertising can be
worked into the program of all sports all the tine and every-
where."
DEFENSE SAVINGS BONDS WILL DO AS MUCH FOR THIS GENERATION:
War Savings Stamps made possible his college education, 7. D. Robertson
reported at the organization meeting of the Santa Rosa County (Fla.) Defense
Savings Committee. Mr. Robertson's grandfather, a ship builder at liilton,
purchased two $5 War Savings Stamps back in 1918 for each of his grandsons.
With this beginning, Mr. Robertson eventually saved the money which rade it
possible for him to enter the University of Florida. He in new an attorney
in Milton and President of the Junior Chamber of Comerce there.
Desk cards reading "I an buying United States Defense Savings Bond's for
National Safety and Personal Security" are being distributed by the Seattle
Trust and Savings Bank.
Regraded Unclassified
224
"Hata Off" to -
CHAIRMEN OF STATE DEFENSE SAVINGS COMMITTEES
CONNECTICUT
NEW JERSEY
Robert Brewer Newell
Albert W. Hawkes
President, Hartford National Bank
President, Congoleum-Nairn, Ine.,
and Trust Company
Kearny
FLORIDA
NEW YORK
Linton E. Allen
Col. Richard c. Patterson
President, First National Bank,
Chairman of the Board, Radio-Keith,
Orlando
Orpheum Corporation, New York
WAHO
NORTH CAROLINA
John A. Schoonover
Julian Price
President, Idaho First National Bank,
President, Jefferson Standard Life
Boise
Insurance Company, Oreensboro
KANSAS
OHIO
William Allen White
Roy D. Moore
Publisher, The Emporia Gazette
Vice President and General Manager
of Brush-Moore Newspapers, Canton
MAINE
OKLAHOMA
Walter S. Wyman
Lew Wentz
President, New England Public
Independent oil producer, Ponca City
Service Corporation, Augusta
OREGON
MASSACHUSETTS
Palmer Hoyt
Edwin C. Johnson
Publisher, The Portland Oregonian
President, H. À. Johnson
Company, Boston
SOUTH CAROLINA
James H. Hammond
MICHIGAN
Attorney-st-Law, Columbia
Frank N. Isbey
President, Dotroit Fruit Auction
TEXAS
Tom Miller
MINNESOTA
Mayor of the City of Austin
D. J. Arnold
President, Northwestern National
VERMONT
Life Insurance Co., Minnoapolis
Levi P. Smith
President, Burlington Savings Bank
MISSISSIPPI
Alfred H. Stone
WASHINGTON
Joel E. Ferris
Chairman, Mississippi State
Executive Vice President,
Tax Commission, Jackson
Seattle-First National Bank
MISSOURI
WISCONSIN
Branch Rickey
Vice President and General
Charles E. Broughton
Managor, St, Louis Cardinals
Publisher, The Sheboygan Press
MONTANA
As he Hoorr
August 5, 1941.
Cashier, Federal Reserve Bank,
Helona
- 18 -
Regraded Unclassified
225
Appointment made with Oscar Cox
for 9:00 August 12th.
226
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE FOR EMERGENCY MANAGEMENT
WASHINGTON, D.C.
August 9, 1941
Dear Secretary Morgenthau:
I appreciate very much your note of August 7,
1941.
On the Russian situation, I enclose for your
confidential information a cable which Wayne Coy sent
to the President. The President answered this cable
late last night and when you get a chance I would like
to tell you orally what the present situation is.
Wayne Coy has done a good job in blasting out
of OPM and the War Department action on the other items
on the list of Russian needs, such as toluol, aluminum,
etc.
Sincerely yours,
Osoar lot
Hon. Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
Regraded Unclassified
227
C
0
P
I
AUGUST 6, 1941
SECRET
THE PRESIDENT
USS POTOMAC VIA NAVAL COMMUNICATIONS
ARRANGEMENTS NEARLY COMPLETE TO TRANSFER 200 P-40's TO RUSSIA. 140
NOW IN ENGLAND TO BE TRANSFERRED BY WATER 59 NOW IN U. S. TO BE TRANS-
FERRED VIA NORTH ATLANTIC IN ACCORDANCE WITH REQUEST OF OUMANSKY.
OTHER MATERIAL ON IMMEDIATE LIST WILL COMPLETE CARGO FOR FIRST
SAILING 2 SHIPS MAY BE REQUIRED. MARITIME COMMISSION ARRANGING
NECESSARY TRANSPORTATION. BOMBER DELIVERIES TO BE DISCUSSED
THURSDAY WITH ARMY AND BRITISH. THREE QUESTIONS, (1) SINCE ALL OF
THE FIGHTER SHIPS BEING MADE AVAILABLE TO RUSSIA ARE FROM BRITISH
ORDERS CAN I INSIST TO ARMY NECESSITY TO SCHEDULE LATE AUGUST AND
SEPTEMBER DELIVERIES FROM CURRENT U. S. PRODUCTION, I.E., TWO OR
THREE SQUADRONS (28 PLANES TO SQUADRON) PER MONTH FOR NEXT TWO
MONTHS? (2) IF NECESSARY TO GET MORE SPEED ON IMMEDIATE AID CAN
WE SUPPLY PROCUREMENT SERVICES THROUGH THE LEND-LEASE MECHANISM ON
A CASH REIMBURSEMENT BASIS? (3) IN LINE WITH QUESTION ONE, IF ANSWER-
ED AFFIRMATIVELY, DO YOU WISH TO PREPARE BRITISH FOR FURTHER
DELIVERIES IN AUGUST AND SEPTEMBER FROM THEIR ORDERS IN THIS COUNTRY?
IN THE MEANTIME WE WILL PREPARE FOR YOUR DECISION TENTATIVE RECOMMENT
DATIONS ON THE DIVISION OF PRODUCTION BETWEEN U. S. PRITAIN AND RUSSIA
FOR AUGUST AND SEPTEMBER.
WAYNE COY
Regraded Unclassified
CANTIVE URITE
REGULATION OF CONSULT: CLEDIT
CECL FATION or NECESSITY AND URPOSE
HEREAS a Irrgo volume of credit is being devoted to 1-
mancing and refinancing purchases of consumers' goods and services
through extensions of credit that usually are made to individuale
and to a large extent are 20 an instalment payment bosis; and
HER AS the conditions under which such credit is evail-
able have an important influence upon the volume and timing of de-
mand, not only for the particular phone and services marchased on
credit but alto for POOGS and services in marri; and
MURCAS liberal term [AI P.NCH cradit tend to otimulate
Geriand for consumers' durable DOCE the production of which re-
quires and materials, skills, and equipment needed for national defense;
the extension of such credit in excessive volume
tends to generate inflationary developments of increasing consequence
BS the limits of productive capacity are approached in more and apro
fields and to hinder the secumulation of savings available for f1-
nancing the defense program; and
PERKAS the public intorest requires control of the use of
instalment credit for financing and re Amancing purchases of con-
sumers' Curable gooda the production of unick absorbs resources
medec for national defanse, in order (a) to facilitate the trans-
far of productive resources to defense indistries, (b) to assist in
curbing unwarrented price advances sid profiteering which tend to
result when the supply ni Auch Foods is ourtailed without correspond-
in curtailment of demand, (c) to sesist in restraining general In-
intionary tenuencies, to support or supplement texation imposed to
restrain such tendencies, and to promote the Accumulation of sevings
available for financing the defense program, (d) to sid 1.. creating
B. backlog of demand for consumers' durable conds, end (e) to restrain
the development of a consumer debt structure that would repress of-
[ective cemand for TODOD and services in the post-defense period; and
MERCAS in order to prevent evasion or avoidance of this or-
Rer und such regulations 28 may be prescribed to affectivate its our-
posse, MPANF should (100 be evailable for reculating the use of other
instalment credit and other forms of credit usually extended to con-
sumers or on consumers' cursble goods; and
HERKAS it is spiropriate that such credit by controlled
and regulated through en existing governmental agency which has pri-
mary responsibilities with respect to the determination and adminis-
tration of national crudit policies:
NOW, by virtus of the authority Vested in me by
section 5 (b) of the act of Cotober 6, 1917, as amended, and by virtue
of all other authority vegted in mo, and in order, in the national
emergency declared by THE on May 27, 1041, to promote the ational de-
fense and protect the national economy, it is hareby ordered as fol-
lone,
ADMINISTRATION
Snotion 1, (a) In Board of Covernors of the Federal Ru-
surve System (herwinefter called the Board) is her by designated 23
Regraded Unclassified
or the to agency through which transfers of credit between and by
directly out 01, any extension of credit of a type set out in suction or
5(b) of the aforesaid Act) which constitute, or 81150 directly section in-
banking institutions (as defined heroin pursuant to payments
2(a) of this order shall be investigated, regulated And (rohibited.
(b) The Board shell, whenever it dates such action to be
necessary DP appropriate, take any lawiul stups herein Authorized and
poses of this order, and may, in administering this order, utilize
such other luwful stops as are within its power to carry out the pur-
Federal or state, which and evailable and appropriate.
the services of the Federal Reserve Banks and any other agencies,
(c) In order to facilitate the coordination of the Board's
functions under this order with other phases of the pregram for na-
tional defense and for protecting the national economy, there shell
be a committee consisting of the Lamotary of the Treasury, the
Fuderal Loan ,crinistretor, and the Administrator DI the Office of
Price Auministration and Givilian Supply, or such alturnate 28 gen
shall designate, and such other as the President shall fub-
auquently appoint. Tike Board that mLintain licison with the com-
mitter, and in formulating policies with respect to down-payments,
maturities, torms of repayment, and other such stions of general
policy shall consult with the connitton the take into consideration
any suggustions or recommendations It may maxo.
RECULATIONS
Suction 2, (e) Whenever the doord chall dutormine that
ruch action 1a necessary or appropriate for rying out the purposus
of this order, the Board shell proscribe regulations with respect to
transfore and payments which constitute, or arice directly or indi-
rectly out of, any extension of instalment credit for the purpose of
ovrebasing or carrying any insumers' curable good except a residen-
tial building in its attiroty; and the woard may in addition, to the
extent deumed by it to be Costrolle and fossible in order to provent
evesion of such regulations AB may be so preseriboo or in order to
control forms of cridit the use of which might de funt the purposes
of this order and such regulations, provide regulations with re-
spect to trensfers and payments which constitute, or orise directly
or indir.ctly out of, (1) any other extension of instalment cruit,
or (2) any other extension of credit for the "urpose of purchasing
or carrying any consumere' durable good, or (3) any other oxtension
of credit in the form of & loan other than a losh made for bus iniss
purposes to a Business unterprise OF for agricultiral purposes to E
person engaged in griculture. Such regulations may be prescribed
by the Board at such times und with such offective detes AS the
Board sholl decem to BO in Accordance with the purposes of this order.
(b) Such regulations THE from tánd to tim, originally or
by amendment, regulate or prohibit such transfore and reyments or UX+
unpt. them from regulation or prohibition and may classify them EC-
cording to the nature of the trensactions or goods or persons in-
volved or upon such other Deais C5 may receivebly diffurentiat, such
transfers and payments for the purposse of regulations under this
order, and may be mrd. applicable to ONE or more of the classos 30
established; ano, without limitin the generility of the fortgoing,
such regulations may require transactions or pursons or classes
thereof to be registered or licensed; my prescribe appropriate
limitations, turnis, and conditions for such registrations or
licenses; may provide for suspension of any such registration or
license for violation of any provision thereof or of any regula-
sion, rus, or order proseribed harounder, may prescribe 4P-
propriste requirements CS to the Resping of records and as to the
Regraded Unclassified
form, contents, or substentive provisions of contracts, liens, or
any relevant documents; may prohibit volicitations by banking insti-
tutions which would oncourage ovarion or avoidance or the require-
menta of any regulation, licenue, or registration under this order;
and to-- may from time to time cake appropriate provisions with respect
(1) The maximum amount of credit which may be ex-
tended on, or in connection with any purchase of, any
consumers' durable good;
(2) The maximum anturity, minimum periodic payments,
and ensime periods batween payments, which may be Atipue
lated In connection with extensions of credit;
(0) The methods of determining purchase prices or mar-
Xent value. or other bases for computing permissible extensions
of credit or required down-paymento; and
(s) Special or different torns, conditions, or ex-
apptions with respect to or used Roods, minimum
original cash payments, temporary credita which are morely
incidental to cash purchases, payment or deposite usable
to liquidate credito, nnd other adjustmento or special
situations.
(c) On and ufter the effective date of any regulation pro-
scribed by the Board with respect to any oxtension of credit of of
type det out in section 2(a), and notwithetanding the provisions
of any other proclamation, order, regulation, OT liconse under the
aforesaid Act, All transfers and payments which are in violation
of such regulation shull be and hereby are prohibited to the ex-
tent specified in such regulation.
(d) Noither this order nor any regulation issued thereunder
shell affect the right of any person to onforco any contract, ex-
cept that after the effective data of EBY such regulation every
contract which 16 made in connection with any extonsion of credit
and which violetes, OD the performance of which would violate, any
provision of such regulation (other than a provision designated
therein as being for administrative pur oses), and every Item,
piodes, seller's interest in 8 conditional 0010, or other property
interest, subject to the provisions of such contract or created in
connection therevith, shall be ununforcoable by the person who ax-
tends such credit or by any person who acquires any right of such
person in such contruct: provided that such disability chall not
nyply to any person who vatonde such credit, or acquired such
right for value, in good faith and without knowing or having
roason to know the dacts by person of which the naking or DET*
formance of such contract sal 02 would be such o violation.
REPORTS
Sootion 3. Reports concerning the Kinus, acounts, and
charecteristics of any extonsions of credit subject to this order,
concerning transfero and payments which arise out of any such such EX-
tensions of credit, or concerning circumstances related to OX-
tensions of cradit or such transfers or payments or to the regula-
tion thereof, shall be filed on such forms, under oath or otherwise, the
such times and from time to the, and by such persons, as
at Board proscribe by rule, regulation, or order as necessary under or
appropriate may for enabling the Board to perform its functions under
this order. The Board may require any purson to furnish,
oath otherwise, complete information relative to and transac- of
tion within or the scope of this order, including the production in
any books of account, contracts, letters, or other such papers, con-
noction therewith in the custody or control of person.
DEFINITIONS
Suction 4. For the purposes of this order, unloss following the context
otherwise requires, the following torms shall have the
meanings, provided that the Board may in its regulations give such
turms more restrict munnings:
Regraded Unclassified
-
(a) "Porson" has the muaning set forth in Suction a(b) of the
net of October e, 1917, as amended.
(b) "Transfore and payment" moans "tranefore of credit be-
twoen ond parments by or to banking institutions".
(c) "Banking institution" means any person ungaged as princi-
pai, agent, broker, or otherwise, in the business of making or hold-
ing extensions of crodit and includes, without limitation, any bank,
any loan company, and finance company, or any other person origaged
in the business of making or holding extensions of orodit whother
08 a vendor of consumers' durable goods or otherwico.
(c) "Consumers" durable 100d" includes any good, whother BOW
or used, which in durable or soni-durable and is used or usable
for personal, femily or household purposes, and any service con-
pected with the acquisition of any such god or of any interest
therein.
(a) "Exten.ion of ordin" nuarie any loan or any 12-
statment purchase contract, any condi 10nal salus contract, or any
sale or contract or nale under which part DI all of the price is
payable subsequent to the making of such sale or contract; any
rental-purchase contract, or any consract for the billment or Loga-
ing of proporty under which the bailon or lebson either has the
option of becoming the owner thoreof or obligatos himself to pay
as componsation a sum substantially equivalent to or in excess of
the value thereof; any contract croating any 1100 or similar
claim or property to be discharged by the payment of money; any
purchase, discount, or other acquisition of, or any extension of
crodit upon the security of, any obligation or claim arising out
of any of the foregoing; and any transaction or serive of transac-
tions having a similar purpose or offect.
(f) An oxtension of credit is on extension of "instalment
brudit" if the obligor uncortakes to repay the crodit in two or
more scheduled payments or undertakes to nake two or more scheduled
payments or doposite usable to liquidate the credit, or if the UX-
tenagon of credit has a similar purpose or offoct, or if it in for
the purpose of financing a Business unterprino which makes such X-
tendions of credit.
(e) An oxtension of crudit is "for the purpose of purchasing
or carrying any consumers' durable 8000" if It il directly or 15e
directly for the purpose d' financing or refinuncing the purchase
of any consumers' (urable good or 16 directly or indiructly Bu-
curod by and consumere' durable good, or if the oxtension of crudit
has 9. sinilar purgoso OF sffect, or If it is for the purpose of fi-
nanciac 1 business unterprise which make with extensions of credit.
PREMALTIES
Section 5. Whoever willfully violates or mowingly partici-
hereunder, shall be subject to the penalties applicable with respect
pates in the violation of this order or of Any regulation prescribed
to violations of section 5(b) of the sit not of October 6, 1917,
as amendod.
FRANKLIN D. ROOSEVALT
The MOTE HOURS,
August V, 1941.
Regraded Unclassified
232
Inguet 9. 1942
By. Pois
Mr. Cockran
M the argent request of Secretary Margesthan, will you bindly forward w
the earliest possible means the sin attached copies of Secretary Margenthan's tax
statement to Mr. Frank Goo, Special Assistant to the American Ambassador. Lendon.
gm
HMC:lap-8/9/41
Regraded Unclassified
233
C
0
P
I
BRITISH EMBASSY,
SAFE HAND
WASHINGTON, D.C.,
August 9th, 1941.
Dear Mr. Cochran,
I enclose two copies each of the following documents
which I have received from London:-
(a) Extracts from the Times of July 26th and July 29th.
(b) Mr. Eden's statement of July 30th.
(c) Circulars issued by the British Bankers' Association
containing the Treasury regulations of July 26th and
July 28th,
I have also received the following information:-
1. Sterling accounts of the following have been released for
payments within the sterling area:-
(a) Central Bank of China
(b) Bank of China
(c) Bank of Communications
(d) Farmers Bank of China
(e) The National Government of the Republic of China and
any agencies or organs thereof, e.g.
Chinese Embasy
Chinese Government Purchasing Mission
Chinese Government Purchasing Agency
Chinese Government Trading Commission
Societe Generale de Commerce, at
Chinese Embasey. London.
2. British and American Banks who have agencies in the Republic
of China and the International Settlement in Shanghai have
been informed that they may use sterling which is their own
property to finance sterling area/Chiness trade.
Kr. Merle Cochran,
Foreign Funds Control,
U. S. Treasury Department,
Washington, D.C.
WR:TMI
Regraded Unclassified
234
- 2 -
3. The Chungking Government has been asked to cable urgently
a list of banks operating in China whom they will appoint
as banks authorised or licensed to deal in foreign ex-
change.
4. The Chungking Government has been urged to accept the
full responsibility for controlling the rate of exchange
and to issue an official rate for sterling and U.S. dol-
lars in terms of Chinese Yuan. It has been recommended
that this rate should approximate closely to the current
rates of exchange in Shanghai with some small adjustment
to meet the official sterling/U.S. dollar rate of 4.03.
Yours sincerely,
W. Ritchie.
Copy:lg 8/11/41
235
C
0
DEPARTMENT OF STATE
P
WASHINGTON
Y
August 9, 1941.
In reply refer to
EA 893.5151/864
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
two copies of telegram No. 1023, dated August 6, 1941,
from the American Consulate General, Shanghai, China,
in regard to the sharp decline in Shanghai rates.
Enclosure:
From Consulate General,
Shanghai, No. 1023,
August 6, 1941. (2).
Regraded Unclassified
236
DES
PLAIN
SHANGHAI VIA N.R.
Dated August 6, 1941
Rec'd 7:30 p.m. 8th
Secretary of State,
Washington.
1023, Sixth.
Special Financial.
Shanghai rates declined sharply yesterday due to larger merchant
demand including petroleum import cover. Rates opened yesterday morning
at five seven thirty seconds cents and three seven sixty fourths bence
but declined to five cents in afternoon firming before closing to five
one eight cente and three one sixteenth pence. Rates this morning opening
at five one eight cents and three one sixteenth pence, August and September
deliveries same as spot. Other quotations this morning: paper gold bare
higher at six seven seven naught, physical gold bars off approximately ten
troy ounces of nine nine naught fineness reached record high of yuan eight
six hundred, Shanghai free sterling parity nominal at United States dollare
four point naught three. British banks have already received instructions
from London for individual personal requirements up to sterling one hundred
pounds British banks in Shanghai are authorized to buy and sell against
Chinese currency provided the drafts or travellers checke are to be used
in sterling areas. Merchant demands are given full cover but all other
accounts blocked. Central Reserve Bank note nine issue August second announced
at CRB yuan eight one point nine million.
INFORM TREASURY.
Sent to Department, repented to Chungking.
GW
LOCKHART
Copy:bj:8-11-41
Regraded Unclassified
237
PARAPHRADE OF TELEGRAN RECEIVED
FROM: American Consulate General, Sunghal.
DATE: August 9, 1041,
so. I 1005.
During the week exchange rates have declines sharply and
the licensing banks, and other banks, feel that this is too to
the fact that much of the export business is carried on by -
Japanese, and the export bills have not yet began to come to
the licensing banks. They also feel that the freesing order
has eaused this doeline. The existing supply of exchange La
insufficient because licensing has stopped the repatriation of
funds and resittences from abroad. The problem is a critical
one and unless Foundial measures are ndopted 12 is likely that
this adverse treat will continue. If the Treasury Department
wishes closely to follow the extremely complicated situation
at changhai 18 is recommended that consideration be given by
that Department to the plasing here of an expert who can keep
in touch with the situation which is constantly changing. Cer-
tain quarters appear disposed to eriticise the freesing order
and the administration of the order w licensing banks. llowers,
these matters are exprenely controversial and before this come
sulate can draw definite conclusions much slarification
is nosded.
This tolegram Le being to nemitted to the Department and
is being repeated to Chunghing.
s)
LOCKMART
N
Regraded Unclassified
238
PARAPERASE OF TELEGRAM RECEIVED
FROM: American Consulate, Dairen, Manchuria
DATE: August 9, 1941, 4 p.m.
NO.: 13
EXCTION OME.
The local manager of the National City Bank of New York
has supplied, in substance, the following information:
The bank is still, after eleven days, unable to conduct
any operations whatsoever even though the local finance
authorities gave early assurances to the bank that they
would provide modus operandi which would enable it to
resume modified operations. These modified operations
especially include the repayment of deposits of 'non-
spscifisd'-appraved--mationals, the use of clearinghouse
facilities, the collection of outstanding loans, the
payment of salaries and other current operating expenses,
and the making of necessary bookkeeping entries.
However trivial, separate permits for both the bank
and the elient are required for every transaction; and ()
the application for permits has been impossible because
of the irrational application of the regulations, endless
red tape and complisations. The funds of the bank as wall
as of its elients-irrespective of nationality-are -
pletely frozen as A result of such. The bank's former
clients have been refused the privilege of opening assounts
in Japanese banks
A friendly disposition to help has been manifested by
the finance authorities. However, they appear utterly
incapable
Regraded Unclassified
239
+
incapable of applying the regulations in a rational and
workable manner, Instead of improving, the situation
is becoming more chaotie every day. A similar predicement
is being experienced by the Hong Kong Shanghai Bank.
BUTRICK
EA:PAX
840,51 Frozen Credits/2943
15 bn 0.21 21
Regraded Unclassified
PARAPHRASE or TELEGRAM RECEIVED
240
FROM: American Consulate General, Bareelona, Spain.
DATE: August 9, 1941, 10 a.m.
NO.: 87
Reference is made to the Department's telegram
No. 65, 9 p.m., dated August 5, 1941.
New in Madrid, Spain, is oglu, Josif. Investigation
is being más by the American Embassy.
FROST
V282 THE
KAINGE
SENICE Ot THE
20 due bill 15 °F
DEave -
BECEMED
Regraded Unclassified
241
PARAPERASE or TELEGRAM SERT
TO:
American Embasay, Buemos Aires, Argentina
DATE: August s, 1941, , p.m.
NO.: sie
Reference is made to the Embasay's telegram No. 788,
dated July 23, 1941.
THE FOLLOWING IS FOR THE ENRASSY'S IMFORMATION AND IS
TO BE REGARDED AS CONFIDENTIAL,
The Treasury Department resognizes the importance of
the problem. This Department has been informed of the follow-
ing information.
Authorization has been given to the Federal Reserve
Banks to approve applications for licenses for the payment
of drafts which are drawn under letters of credit which are
issued to persons whose names appear on the Preelained List
by demostic banks provided the drafts were negotiated on or
before the twentieth of July and that the license is necessary
only for the Peason that the name of the drawer is one of
these which appear on the Proclaimed List.
In view of the facts which have been revealed is -
meetion with the La Rusen transaction, it is not anticipated
that the Trademen's Bank will have any difficulty in
obtaining the licenses which permit the payment of the drafts
that were negotiated on or before July 20, 1941.
Payment of drafts which are drawn after July 20->
under this letter of credit-vill be subject to the approval
of the Treasury Department after the filing of the specific
licenses applications. Action upon such will be taken in the
Regraded Unclassified
242
+
the light of the considerations that were discussed
in the Embassy's telegram as well as other considerations
of pelicy in regard therete.
MULL
(DA)
KAtHGW:VCL
EA:PAK
TBA
The
Drive in BW V 10
It
243
paraphrase OF TELEGRAM RECEIVED
FROM: American Embassy, Panama, via N.R.
DATE: August 9, 1941, noon
NO.: 281
Reference is made to telegram No. 177, dated August s,
7 p.m., from the Department.
This morning I requested the Minister of Foreign
Relations to withhold the issuance of the confirmation
of the cansellation of Panamanian registry of the Santa
Helena until information from the American Consulate General
in Bareelona and the American Embassy in Madrid has been
reseived. His reply was that he would for 'a few days'
delay action in regard to this matter.
Insterday, I discussed the plan outlined in the
Department's telegram of July 31, 7 p.m., No. 161, with
the Minister of Foreign Relations. These suggestions
are now before the Minister of Finance.
The position of the Minister of Foreign Relations
continues to be the same as that reported on August 3,
10 a.m., telegram No. 212 from the Embassy.
WILSON
NONCE Ot THE
a bill 15.13
KATPAK
819.852/42
Regraded Unclassified
PARAPHRAVE or & TELEGRAM RECEIVED
Regraded 244 Unclassifie
FROM: American Embancy, nio de Janeiro.
DATE: August 0, 1941, 9 D.R.
NO. # 1000.
As I said in the course of our telephone convernations
concerning Japanere dollar funds, after some discussion I
in persuading the Bank of Brasil to reject further
use by the Japamese of dollar credite for the purpose of per -
chasing strategic materials is the American republics.
There is quoted below a translation of the letter which
1n to be delivered on the 11th of August to the Age de
Janes PO branch of the Yakohnan Specie Bank by the Director
of Exchange:
QUOTE Our records indicate that there 10 an account,
in dollars, in the name of your head office, consisting of
dollar deposits effected by that office with our Nev York
bankers.
According to your wishes and the instructions ve have
received from you, transestions on the account have been
affected in dollars which La only the equivalent of a treas-
for of funds within the United states.
Japanese funds in the United States were blocked on
the su of July, and degails have now been received consern-
ing the MARKET in which American legal decisions are being
effected.
Obviewsly, such messures would also affect the treasestions
of
245
of the Bands do Drestl If these operations were carried out
for your account and on your behalf regardless of whether or
not such circumstances VIN mentioned.
Consequently, 11 10 not possible for or to continue to
operate ⑉ Tunde for your secreat because after your account
vas opense the legal status conserning the situation who
changed.
For breatl's exports to Japan, it 1a our invention to
request permission of the American authorities to operato
the resount and we wish that you be reminded that the dade
ean be dose 1a the 1110 of other countries.
Furtherasse, in view of this sircumstance your requests
for letter. of credit which speear In the 11st given here
if a
will be greated only attense limense has bann proviously
formed by appropriate American authorities, or if you should
agree that these bankers which you speciat tn effect liquida-
tions will be told the character and details of the transand-
tiems.
should you be in disagrement as to the need forthe
foregoing procedure 11 10 requested that you great the per-
mission that entern be given for the delivery of the verious
of your dollar necessar to your brench In New York. END OF
QUOTE
The foregoing 10 is confersity with any propossle to the
Director of Exchange. It covers the 30 applications amounting
Regraded Unclassified
246
to $1,400,000 for letters of eredit in dollars covering the
emports from other American countries to Japan of strategic
commodities, as well as transcotions in the future.
The following are the details of letters of credit which
the Specie Bank requested on August , and 01
Selivial In favor of Lucie D. Wishi, i.a Pas Dame
Central de Delivis, $4,638 for one humbred tone of seppor we,
193,948 for cover hundred and seventy tone of antimeny are,
case firs, Banco Minero de holivis.
Chile: In favor of Seciedad Commercial Chilene Oriental
Compenia, Ltd., lantingo, at the Bance de Chiles for 900 tess
of lead are, for 1000 tons lead ore, $53,355; for
1000 teas copper are $25,000; for 16 tean of asbestos, 1,050;
for 00 toms chimehons bask, $28,700. In favor of
Amonica Commercial Hitoubishi, Sames de Chiles for 483,000
pounds greasy veel, $151,500; for 283 tome copper consentrate,
$18,478; for 1,627 tons copper consentrates, $100,755; for
1,000 tone suriate netash $78,840; for 200 tome magagess are,
13,400; for 775 kilograma lead consentrate, 934,4291 for
mercury are, $46,000. Is favor of Gasaitehlt to Boutings,
Banco de Chile: for 2,187 tone of copper commentrates,
$130,200; for 1,300 tone copper ore, $39,000.* In favor of
Muller 1. Jedliki, Banco de chile: for 203 bales of vool,
$33,200 .
Argentina
-(add-) for BOO tomo of week salt, 14,790; $30,324 for
greaty vool.
Regraded Unclassified
247
Argentines Is favor of Notwebichi Argentian Seckeded
Renp. LOS, Buenoe Alron, Bussee Aires Provincia,
for 200 tome of borez, $4,500. In favor of T. Mary Katsu,
Buenes Alree Banaado Provincial for ston, $12,074. In favor
of Number Companie Importasion and Exportacion, Buenes Alsoe
Passode Provinvia: for 20 team glycorine 160,199 and for
22 tens of vasoline, $9,450. In favor of xo Takeushi, Business
Aires Baneode Provincin: for 65,300 hides, $319,563.
CAFFERY
PED
EAINOWIVCL
10
1806
Drl me is VIII 1124
Regraded Unclassified
248
FOR Hiss Chauncey
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE August 9. 1941
TO
Secretary Morgenthau
FROM
Mr. Cochran
confidential
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
& 6,000
Purchased from commercial concerns
£21,000
Open market sterling declined 1/40 to 4.03-1/2, and there were no reported
transactions.
In New York, closing quotations for the foreign currencies listed below
were as follows:
Canadian dollar
11-1/16% discount (off 1/16)
Argentine peso (free)
.2387 (off .0003)
Brazilian milrois (free)
.0505
Uruguayan peso (free)
.4380
Venezuelan boliver
.2675 (up .0025)
Colembian peso
.5800
Cuban peso
1-1/8% discount (up 1/16)
Mexican peso
.2070
In Shanghai, the yuan remained unchanged at 4-13/16#. Sterling vas quoted
at 4.01-3/4, unchanged.
There were no gold transactions consummated by us today.
The Federal Reserve Bank of New York reported tast the following gold ship-
ment had been consigned to it:
$2,923,000 from Canada, to be shipped by the Bank of Canada for account of the
Government of Canada, arriving New York August 12, for sale to the U. S,
Assay Office.
The disposition of the $2,223,000 shipment from Colombia (see report of
August 2) is for cale to the New York Assay Office, for account of the Central Bank
of Colombia.
The Bombay gold price was reported today to be $33.99. off 5# from
August 2. As & result of increasing freight rates, the New York bank now figures
export parity to New York at $33.75 instead of previous calculation of $34.01
(see June 24 report).
RMP.
Regraded Unclassified
249
BRITISH EMBASSY,
WASHINGTON.
August 9th, 1941.
PERSONAL
AND SECRET.
Dear Mr. secretary,
I enclose herein for your
personal and secret information a copy
of the latest report received from London
on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
Halifax
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
250
TELEGRAM FROM LONDON DATED AUGUST 7th 1941
liavel.
HoMe Submarine Cachalot now presumed lost.
&
Netherlands Submarine sank 4000 ton enemy
merchant ship 8.8.7. of Naples on 29th and probably
badly damaged enemy anti-submarine Steamships South of
Sardinia on the 3rd,
3.
Thirty aircraft raided the area night of dth/
5th, main effort being on Ismailia. No damage to service
property.
4.
In heavy weather on the 6th/7th small merchant
ships in convey ran ashore off Happisborough together with
an anti-submarine trawler. Six ships totalling 8757 tons
believed total leases.
5.
Royal Air Force Pello on the 5th B Desufort air-
craft dropped 6 Dombs from 800 feet on 10,000 ton merchant
ship at Nantes. All considered hits ss fires and explosions
observed from the bow to the stern of the ship.
6.
On the 6th 3000 ton erchent ship was torpedoed
by Beaufort off Horway.
7.
In Hord Fjord at 1600/0 esufort Aircraft near
missed a merchant ship estimated at 5000 tons.
8.
On the 8th airciaft Sombed a tanker over Cherbourg.
9.
On the 6th our fighters destroyed four, and
damaged one, enemy mircraft without loss.
10.
Night of 6th/7th medium weight attacks on From kfort
Mannheim, Marlsruhe and Calais. 10 aircraft missing.
11.
Night of 5th/6th five Swordfish bombed submarine
base at Augusta Sicily. Several fires started, big DUE at
submarine jetty.
/ 12. Walts
Regraded Unclassified
251
- 2 -
12.
Malta attacked same night by 10 aircreft.
Slight damage to deckyard no casualties. Hurricanes
shot down three.
13.
Military. Tobruk.
Third. We attacked two posts in Medewar
Selinet. One attack completely successful, 26 of the
enemy K lled. Other attack also successful but fierce
confused fighting developed and enerry counter attack
was successful. lie lost 28 killed, 104 wounded, S
missing. Enemy losses unknown but undoubtedly heavy.
German troops were engaged.
14.
Russia.
German special communiques issued August 6th
considered to give reasonably accurate survey of killed
to date except in regard to Russian losses, of which no
check possible.
Regraded Unclassified
CONFIDENTIAL
252
Purephoness of Code Oaklagrea
Reserved st the Ver Department
as 10:05, August 9, 1941.
Lendon, filed 15:35, August 9, 1941.
1. Brittish Air Activity over the Combinent,
1. Bight of August 7-8. the musbers of toms of high explosive
bonts of members of insmitiaries dropped upon the objectives mard were
M follows: Insure, 108 and 3800, also 320 twenty-five pound incondiaries)
- 45 ml siles, Bortand, 44 and 5600, Boulogue, , and 360.
b. Juz of Anount 8. A total of 431 fighters were disystebed M
follows: 106 a interseption patrols, 263 in the protection of shipping,
32 - special adestons and 10 or offensive patrols. Unfavorable weather
provented the disputek of beabers.
1. Night of Anount B-9. A total of 140 boahers vere dispatched
M follows: of to the ship years at Handwarg, 18 to the Handway railway
smiter, 90 to the trugy ship yards, and 6 on con staing operations. 3rd
vesther prevented observation of the results of the raid on Emberg, The
attack - Ricl we very
2. GARDEN Air Activity one Britain.
4. lev. of Answers 1. 15 recommissame aireraft and 10 long
rep bankers - employed.
m. Elahk of August 7-8. 20 fighters así 30 Long regings beabers
1 E
1. X of 0. Four (ema aircraft appoared over Britain,
⑉ on ench of the following plasse: Instrup, Ball, Mablethorye and Image.
CONFIDENTIAL
were
Regraded Unclassified
253
CONFIDENTIAL
4. Elekt of Anyments 4. Operations THEY a a mail scale ml
smasisted montly of night fighter activity over last Anglis ml Lineolnshire.
3. Aircraft Issue Reported.
1. British loases. During the night of August 8-9, three
beniers failed to return and - erashed at con.
2. Arts Leases. One Mo-110 w shot dom by a Whitley benter
the night of August 7-8. On August s, fighters shot done - Me-210 ml
probably destroyed - Ja-88. Another Je-88 via damget.
4. Ania Air Activity. Other Theaters.
a. Middle Justery Theater. There vere - civilian commities
but as Assign to military or naval fasilities or to shipping M a result
of the German air raid on Daes the night of August 6-7.
IN
Distribution:
State Department
Assisteme Chief of Staff, 0-2
War Plane Division
Office of Noval Intelligence
mill j s
Chief of the Any Air Forces
Secretary of Treasury
Assistent Decretary of Var for Air
Asststent Chief of Staff, 0-3
Air Cargo
+
CONFIDEN MAL
Regraded Unclassified
Page data
- Page
- 1
- Source index
- 0
- Type
- document
- Media ID
- b8e214a4c33e6ffa
- Size
- unknown
Document data
- ID
- 28276766
- Core
- doc
- Type
- document
DTO data
{
"id": "28276766",
"sourceUrl": "https://catalog.archives.gov/id/28276766",
"contentType": "document",
"title": "Volume 430, August 8 – August 9, 1941",
"citationUrl": "https://catalog.archives.gov/id/28276766",
"collections": [
"Henry Morgenthau, Jr. Papers",
"Diaries of Henry Morgenthau, Jr."
],
"iiifBase": "https://s3.amazonaws.com/NARAprodstorage/opastorage/live/66/2767/28276766/content/presidential-libraries/roosevelt/FDR-MORGEN/589213/md0582.pdf",
"thumbnailUrl": "https://s3.amazonaws.com/NARAprodstorage/opastorage/live/66/2767/28276766/content/presidential-libraries/roosevelt/FDR-MORGEN/589213/md0582.pdf",
"largeImageUrl": "https://s3.amazonaws.com/NARAprodstorage/opastorage/live/66/2767/28276766/content/presidential-libraries/roosevelt/FDR-MORGEN/589213/md0582.pdf",
"imageCount": 1,
"hasImages": true,
"source": "import",
"hasTranscription": false
}
Context sent to Scholar
Document identity
{
"localId": "28276766",
"label": "Volume 430, August 8 – August 9, 1941",
"core": "doc",
"dtoType": "document",
"citationUrl": "https://catalog.archives.gov/id/28276766"
}
Document source metadata
{
"id": "28276766",
"sourceUrl": "https://catalog.archives.gov/id/28276766",
"contentType": "document",
"title": "Volume 430, August 8 – August 9, 1941",
"citationUrl": "https://catalog.archives.gov/id/28276766",
"collections": [
"Henry Morgenthau, Jr. Papers",
"Diaries of Henry Morgenthau, Jr."
],
"iiifBase": "https://s3.amazonaws.com/NARAprodstorage/opastorage/live/66/2767/28276766/content/presidential-libraries/roosevelt/FDR-MORGEN/589213/md0582.pdf",
"thumbnailUrl": "https://s3.amazonaws.com/NARAprodstorage/opastorage/live/66/2767/28276766/content/presidential-libraries/roosevelt/FDR-MORGEN/589213/md0582.pdf",
"largeImageUrl": "https://s3.amazonaws.com/NARAprodstorage/opastorage/live/66/2767/28276766/content/presidential-libraries/roosevelt/FDR-MORGEN/589213/md0582.pdf",
"imageCount": 1,
"hasImages": true,
"source": "import",
"hasTranscription": false
}
Document source extras
{
"url": "https://catalog.archives.gov/id/28276766",
"naId": 28276766,
"levelOfDescription": "fileUnit",
"recordType": "description",
"ocrSource": "nara-archive"
}
Page context
{
"seq": 1,
"pageIndex": 0,
"type": "document",
"url": "https://s3.amazonaws.com/NARAprodstorage/opastorage/live/66/2767/28276766/content/presidential-libraries/roosevelt/FDR-MORGEN/589213/md0582.pdf",
"mediaId": "b8e214a4c33e6ffa",
"ocrText": "DIARY\nBook 430\nAugust 8 and 9, 1941\nRegraded Unclassified\n- 0 -\nBook Page\nChina\nSee War Conditions\n- D -\nDefense Savings Bonde\nSee Financing, Government\n- 3 -\nEconomic Defense Board\nSee War Conditions\n- 1 -\nFinancing, Government\nDefense Savings Bonds:\nFilm release schedule, April 18 through\nAugust 9\n430\n204\nField Organization News Letter, No, 12 -\n8/9/41\n207\nTennessee Valley Authority: Financial details\nrequested in connection with refinancing -\n8/8/41\n123\n- X -\nKeynes, John Maynard\nSee War Conditions: United Kingdom\n- L -\nLawrence, David\nResume' of financial position provided by\nComptroller of Currency - 8/8/41\n144\nLouisiana\nSee Tax Evasion\n- T -\nTax Evasion\nLouisiana: Final report showing additional taxes\nof $6 million, etc. - 8/8/41\n106\nTennessee Valley Authority\nSee Financing, Government\n- U - -\nUnited Kingdom\nSee War Conditions: Military Planning\nRegraded Unclassified\n- Y -\nBook Page\nWar Conditions\nChina:\nCurrency Stabilization Board: Fox report on\nset-up - 8/8/41\n430\n175,178\nEconomic and financial report by Fox -\n8/8/41\n180\nEconomic Defense Board:\nSee also Book 421\nFirst meeting to be held August 13; HMJr\nand White to attend - 8/8/41\n101\nExchange market resume' - 8/8-9/41\n193,248\nLend-Lease:\nPurchases - weekly report - 8/8/41\n125\nMilitary Planning:\nReports from London transmitted by Halifax -\n8/8-9/41\n194,249\nUnited Kingdom:\nKeynes, John Maynard: Farewell letter\nacknowledged - 8/8/41\n133\nRegraded Unclassified\nTREASURY DEPARTMENT\nFOR RELEASE, MORNING NEWSPAPERS,\nFriday, August 8, 1941.\nThe Secretary of the Treasury, by this public notice, invites\ntenders for $100,000,000, or thereabouts, of 91-day Treasury bills,\nto be issued on a discount basis under competitive bidding. The bills\nof this series will be dated August 13, 1941, and will mature\nNovember 12, 1941, when the face amount will be payable without\ninterest. They will be issued in bearer form only, and in denomina-\ntions of $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000\n(maturity value).\nTenders will be received at Federal Reserve Banks and cranches\nup to the closing hour, two o'clock p.m., Eastern Standard time,\nMonday, August 11, 1941. Tenders will not be received at the\nTreasury Department, Washington. Each tender must be for an even\nmultiple of $1,000, and the price offored must be expressed on the\nbasis of 100, with not more than three ducimals, C. E., 99.925.\nFractions may not be used. It is urged that tenders be made on the\nprinted forms and forwarded in the special envolopes which will be\nsupplied by Federal Reserve Banks or Branches on application therefor.\nTenders will be received without deposit from incorporated\nbanks and trust companies and from responsible and recognized dealers\nin investment securities. Tenders from others must be accompanied\nby payment of 10 percent of the face amount of Treasury bills applied\nfor, unless the tenders are accompanied by an express guaranty of\npayment by an incorporated bank or trust company.\n26-93\nRegraded Unclassified\n2\n- 2 -\nImmediately after the closing hour, tenders will be opened at the\nFederal Reserve Banks and Branches, following which public announce-\nm.nt will be made by the Secretary of the Treasury of the amount end\nprice rango of accepted bids. Those submitting tenders will be\nadvised of the acceptance or rejection thereof. The Secretary of\nthe Treasury expressly reserves the right to accept or reject any or\nall tenders, in whole or in part, and his action in any such respect\nshall be final. Payment of accepted tenders nt the prices offered\nmust be mude or comple ted at the Federal Reserve Bank in cash or\nother imm.diately available funds on August 13, 1941.\nThe income derived from Treasury bills, whether interest or gain\nfrom the sale or other disposition of the bills, shall not have any\nexemption, 28 such, and loss from the sale or other disposition of\nTreasury bills shell not heve any special treatment, 35 such, under\nFederal tax Acts now or hereafter unacted. The bills shall be sub-\nject to estate, inheritance, gift, or other excise taxes, whether\nFederal or State, but shill be exempt from all taxation now or here-\nafter imposed on the principal or interest thereof by any State, or\nany of the possessions of the United States, or by any local taxing\nauthority. For purposes of taxation the amount of discount at which\nTrensury bills are originally sold by the United States shall be\nconsidered to be interest.\nRegraded Unclassified\n3\n- 3 -\nTreasury Department Circular No. 418, as emended, and this\nnotice prescribe the terms of the Treasury bills and govern the\nconditions of their issue. Copies of the circular may be obtained\nfrom any Federal Reserve Bank or Branch.\n-000-\nRegraded Unclassified\nAugust 8, 1941\n8:52 a.m.\nHMJr:\nHello.\nAlfred\nLevinger:\nGood morning.\nHMJr:\nMr. Levinger.\nL:\nYes, Mr. Secretary.\nHMJr:\nHello. Did you hear me?\nL:\nYes, I hear you.\nHMJr:\nPlease don't buy or sell anything for me\ntoday.\nL:\nRight.\nHMJr:\nYou can reinstate whatever orders you have\ntomorrow.\nL:\nTomorrow we can reinstate.\nHMJr:\nYes. Because I'm testifying today, and I\ndon't want anything in.\nL:\nOn that preferred stock, it sold yesterday\nat an eighth above our limit.\nHMJr:\nYes.\nL:\nTomorrow would it be all right if necessary\nto go one eighth or a quarter above that.....\nHMJr:\nOh, sure. I give you a half B. point leeway.\nL:\nAll right.\nHMJr:\nHalf a point leeway. But don't do anything\ntoday.\nL:\nThank you very much.\nHMJr:\nAll right.\nL:\nGood-bye.\nRegraded Unclassified\n5\nAugust 8, 1941\nMy dear Mr. President:\nI am sending you herewith 8. copy\nof a statement which I am about to give\nbefore the Senate Finance Committee.\nI hope that you will like the\nsimplified plan which we have worked out\nfor people with incomes below $3,000.\nThis carries out your suggestion in your\nletter to Mr. Doughton. I am very en-\nthusiastic about it, as I think it will\nsave millions of people lots of trouble\nand worry.\nYours sincerely,\n(Signed) Henry\nThe President,\nThe White House.\nBy Messonger Blackerell\n10:30am\n8/8/41\nEnclosed: Copy of Secy's proposed\ntestimony to be given to-day before\nSenate Finance Committee.\nRegraded Unclassified\n6\nAugust 8, 1941\nMy dear Mr. President:\nI am sending you herewith 8. copy\nof a statement which I am about to give\nbefore the Senate Finance Committee.\nI hope that you will like the\nsimplified plan which we have worked out\nfor people with incomes below $3,000.\nThis carries out your suggestion in your\nletter to Mr. Doughton. I am very en-\nthusiastic about it, 88 I think it will\nsave millions of people lots of trouble\nand worry.\nYours sincerely,\n(Signed) Henry\nThe President,\nThe White House.\nBy Messenger Blackwell\n0.8/5/15\nEnclosed: Lopy of Secy's proposed\ntestimony to be given to-day before\nSenate Finance Committee.\nRegraded Unclassified\n?\nAugust 8, 1941\nMy dear Mr. President:\nI am sending you herewith a copy\nof a statement which I am about to give\nbefore the Senate Finance Committee.\nI hope that you will like the\nsimplified plan which we have worked out\nfor people with incomes below $3,000.\nThis carries out your suggestion in your\nletter to Mr. Doughton. I am very en-\nthusiastic about it, as I think it will\nsave millions of people lots of trouble\nand worry.\nYours sincerely,\n(Signed) Heary\nThe President,\nThe White House.\nBy Messanger Bladervell\n10:30\n5/5/41\nEnclosed: Lopy of Secy's proposed\ntestimony to be given to-day before\nSenate Finance Committee.\nRegraded Unclassified\n8\nAugust 8, 1941\nDear Eleanor:\nI am inclosing herewith copies\nof my letter to the President and the\nPresident's letter to Mr. Doughton.\nI an also sending you a copy of\nmy statement before the Senate Finance\nCommittee today.\nIn all three of these copies, I\nhave underlined in blue pencil what\nboth the President and I have to say\nabout joint tax returns. I thought\nyou would be interested in these in\nview of what you said in your column\nyesterday.\nAffectionately,\n(Signed) Henry\nMrs. Franklin D. Roosevelt,\nHyde Park, New York.\nEnclosures: 7/31/41 letter from President to\nDoughton. Testimony Secy. is to\ngive before Senate Finance Committee.\nDress from seay 7/31/11\nRegraded Unclassified\n9\nAugust 8, 1941\nDear Eleanor:\nI an inclosing herewith copies\nof my letter to the President and the\nPresident's letter to Mr. Doughton.\nI an also sending you & copy of\nmy statement before the Senate Finance\nCommittee today.\nIn all three of these copies, I\nhave underlined in blue pencil what\nboth the President and I have to say\nabout joint tax returns. I thought\nyou would be interested in these in\nview of what you said in your column\nyesterday.\nAffectionately,\n(Signed) Heary\nMrs. Franklin D. Roosevelt,\nHyde Park, New York.\nEnclosures: 7/31/41 letter from President to\nDoughton. Testimony Secy. is to\ngive before Senate Finance Committee.\nLearn feom Legita Ke 9/2/91\nRegraded Unclassified\n10\nAugust 8, 1941\nReading copy of Secretary's testimony before\nthe Senate Finance Committee at ten o'clock\nA.M., August 8th, 1941.\nMy purpose in being here today is to\ndiscuss taxation as an essential part of\nnational defense. Our great problem in\nproviding for the defense of the nation 1s\nfundamentally the problem of production -- of\nactually building planes and tanks, ships\nand guns with labor, management, machinery\nand raw materials. To solve that problem\nwithout impairing our economy or weakening\nthe structure of democracy, our fiscal policy\nmust be adapted to the needs of the times.\nRegraded Unclassified\n- 2 -\n12\non April 24 I discussed with the Ways and\nMeans Committee of the House the need of\nproducing $3,500,000,000 annually in additional\nrevenue. The Treasury Department presented\na suggested program for raising that amount\nof money. As it passed the House, this bill\nwill produce approximately $3,200,000,000\nannually in additional revenue. In my opinion,\nit is very important that the revenue yield\nbe raised to at least the original $3.5 billion\nlevel. It is also important that the bill\nbe passed as promptly as possible. Income\ntaxpayers and excess profits taxpayers should\nknow as quickly as possible what their taxes\non 1941 income and profits are going to be, since\nmore than seven months of the year have already elapsed.\nRegraded Unclassified\n13\n- 3 -\nThe excise taxes and the estate tax cannot be\nimposed retroactively and every day's delay\nin the passage of this tax bill costs the\nTreasury several million dollars in revenue\nfrom those sources.\nThe rapid developments of the last few\nmonths have made this bill inadequate even\nbefore it 1s passed. Since my statement\nbefore the Ways and Means Committee, many\nthings have happened. Two and one half months\nago the President proclaimed the existence of\nan unlimited national emergency.\nRegraded Unclassified\n14\n- 4 -\nHe called upon \"all loyal citizens to place\nthe nation's needs first in mind and in action\nto the end that we may mobilize and have ready\nfor instant defensive use all of the physical\npower, all of the moral strength and all of\nthe natural resources of this nation.\"\nSince I appeared before the Ways and Means\nCommittee, the amount of appropriations,\nauthorizations and recommendations over and\nabove the Budget has increased by about\n$14,000,000,000, thus completely changing the\nfiscal picture and greatly increasing the\nneed for revenue.\nRegraded Unclassified\n15\n- 5 -\nSince I appeared before the Ways and Means\nCommittee, prices and the cost of living have\nincreased at an accelerated rate, thereby\naccentuating the need for a strong fiscal\nprogram.\nIn the light of these and other\ndevelopments resulting from \"all out\" defense,\nI should like to point out what, in my\nopinion, will be necessary in \"all out\"\ntaxation to support such a program.\nRegraded Unclassified\n16\n- 6 -\nFirst of all, we shall need more revenue --\nmuch more revenue. The defense program is\nan absolute necessity. It must be paid for.\nInsofar as possible, it should be paid for\nnow. Borrowing should be kept to a minimum to\nmaintain our fiscal strength. The rise in\nthe Federal debt means merely that the\ntaxpayer's burden 1s being postponed--that\nboth principal and interest must be paid\nlater out of higher taxes collected at a time\nwhen they may be harder to pay and less\nwillingly paid than now.\nRegraded Unclassified\n17\n- 7 -\nAlong with increased taxation should go\nthe maximum reduction in the ordinary non-defense\nexpenditures of Government. The burden of\npaying for defense is so heavy that it should\nbe relieved at every possible point.\nIncreased taxation 1s needed also to\nmaintain economic stability. Rising purchasing\npower 1s exerting increasing pressure on the\nprices of many kinds of goods, while at the\nsame time production of these goods is being\nincreasingly curtailed by the necessity\nof diverting our resources to defense uses.\nRegraded Unclassified\n18\n- 8 -\nThis complication of increased demand and\nrestricted output 1s causing inflationary price\nrises which threaten to increase the cost of\nthe defense program, unbalance family budgets\nand seriously disturb our economic life.\nThis larger needed revenue should come\nfrom all sources where there 1s ability to\npay -- that's what an \"all out\" tax program\nmeans. The people of this country have never\nbeen more ready to make sacrifices for the\ncommon good. Our tax program has not kept\npace with the defense program. We are still\nthinking too much of helping this group or\nthat to escape its share of the burden.\nRegraded Unclassified\n19\n- 9 -\nWe have now come to the point where it is\na matter not merely of fundamental equity,\nbut of the utmost necessity that all exemptions\nfrom taxation be reduced to the absolute\nminimum.\nAn \"all out\" tax program for defense\nshould reach ability to pay at several points\nnot now fully tapped:\n1. In my opinion such a tax program\nmight well involve a substantial lowering of\npersonal exemptions and a consequent\nbroadening of the base of the income tax,\nif simultaneously we take immediate steps\nto remedy defects in the application of the\nprinciple of ability to pay in other\nparts of the tax structure.\nRegraded Unclassified\n30\n- 10 -\nUnder the bill before you, the base has been\nbroadened to add about two million new\ntaxpayers, but even so there will remain\na relatively large proportion of the population\nin the lower income groups which will not be\ndirectly affected by the income tax. A\nfurther lowering of the exemptions would\nproduce some additional revenue and in addition\nit would give millions of Americans an\nopportunity -- a welcome opportunity -- to\nmake a direct contribution through taxes to\nthe defense of their country. It would enable\nthem to feel that they were participating\npersonally and directly in the defense program.\nRegraded Unclassified\n21\n11 - I\nAs the President wrote to Chairman Doughton\non July 31, \"Most Americans who are in the\nlowest income brackets are willing and proud\nto chip in directly even if their individual\ncontributions are very small in terms of\ndollars.\"\nBut I believe this Committee will agree\nwith me that we ought not to accept such\nsacrifices, even though willing sacrifices,\nfrom millions of people with low incomes on\nwhom the burden of other types of taxes falls\nmost heavily, unless we reach in other places\nability to pay which 1s escaping 1ts fair\nshare of taxes. Among these are the following:\nRegraded Unclassified\n22\n- 12 -\n2. The excess profits tax exempts profits\nof even the most prosperous corporation,\nexcept to the extent that such profits are\nin excess of its average profits for the years\n1936-1939. Surely Congress will not wish\nto impose additional taxes on millions more\nof our low income group, unless it also imposes\nthe excess profits tax on the exempt excess\nprofits of such corporations.\n3. Families pay lower Federal income\ntaxes when both husband and wife receive\nincome than when the same total amount of income\n1s received by only one of them. This 1s 8\ndiscrimination of which many wealthy people\nhave taken advantage by large gifts of income-\nproducing property between husband and wife.\nRegraded Unclassified\n23\n- 13 -\nFurthermore, in at least eight States of the\nUnion, Federal income taxes are made substantially\nlower than in the remaining States because the\nlocal law permits the splitting of income\nbetween husbands and wives. Here are\ndiscriminations against the rest of the\ntaxpayers which, I believe your Committee will\nagree, must be eliminated 1f we are to extend\nthe income tax downward to include millions of\npersons with low incomes. The discriminations\ncan be eliminated by requiring husband and\nwife to file a single joint return with\nappropriate relief granted only where both\nhusband and wife work outside the home.\nRegraded Unclassified\n21\n- 14 -\n4. For years, the concerns engaged in\nextracting certain of our natural resources,\nnotably oil, have been granted far greater\nallowances for depletion than can be justified\non any reasonable basis of tax equity. If\nthe income tax 1s to be extended to lower\nincomes, this privilege of tax escape should\nsimultaneously be removed.\n5. A few months ago, the Congress\neliminated the tax-exemption privilege\nfrom new issues of Federal securities. The\npurchasers of new State and local\nsecurities still enjoy this exemption.\nRegraded Unclassified\n25\n- 15 -\nThe exemption was inequitable and expensive\neven in more normal times. It cannot be\nborne longer in a time like this, and especially\nif we are to increase the direct tax burdens\nof persons with small incomes.\n6. In its suggestions to the Ways and\nMeans Committee, the Treasury recommended\nsubstantial increases in estate and gift taxes,\nand lower exemptions. In part, this\nrecommendation was followed, but, in my\nopinion, the estate and gift taxes should\nreach more estates and provide more revenue\nif we are going to tax smaller incomes.\nRegraded Unclassified\n26\n- 16 -\nThose are some of the things that I mean\nwhen I say that an \"all out\" tax program for\ndefense must go far beyond the present bill.\nThere 1s another condition which I would\nattach to lowering the personal exemptions.\nI think we ought not to take into the income\ntax system millions of new taxpayers with\nsmall incomes without simplifying the way\nin which their tax is computed.\nTake, for example, a person with a $900\nsalary. Under the present law, he first\nfigures out what deductions he has -- taxes\npaid, interest paid, contributions and so on.\nRegraded Unclassified\n27\n- 17 -\nThen he computes his earned income credit.\nThen he subtracts his personal exemptions\nfrom his income after déductions. On the\nbalance, under rates of the bill before you,\nhe computes a surtax at 5 percent. Then he\ngoes back to the income and deducts his\nearned income credit. On the balance, he\ncomputes a normal tax at 4 percent. He then\nadds the normal tax and the surtax and takes\n10 percent of the total for defense tax.\nHe adds the defense tax to the normal tax\nand surtax and finally arrives at his income\ntax.\nRegraded Unclassified\n28\n- 18 -\nWhen he started to fill out his return,\nhe may have been full of pa triotic enthusiasm\nto pay his share toward the defense program,\nbut by the time he has finished his last\ncomputation his cheerfulness may well have\ncollapsed under the strain. It 1s difficult\nenough for persons with substantial incomes\nwho are used to dealing with financial papers\nand who can afford high-priced lawyers and\naccountants to make their computations for them.\nThe person with a small income should not be\nput to this annoyance and possible expense.\nRegraded Unclassified\n29\n- 19 -\nFurthermore, the checking of these tax\ncomputations by the administrative authorities\ntakes time. Frequent errors are found which\nmust be rectified, requiring correspondence\nand further annoyance of the taxpayer as\nwell as expense to the Government. We in the\nTreasury do not enjoy pestering the taxpayer\nany more than he enjoys being pestered by us.\nFor taxpayers with relatively large\nincomes, refinements in determining income\nand computing taxes are troublesome but are\nnecessary in the interest of equity. For small\ntaxpayers, however, especially those now taxed\nfor the first time, these refinements are\ncumbersome and confusing without serving\nany important purpose.\nRegraded Unclassified\n30\n- 20 -\nThe income taxes of millions of people can be\ndetermined with acceptable accuracy by less\ninvolved methods.\nAs the President suggested to Chairman\nDoughton, there should be a provision in the\ncase of the small taxpayer \"for a straight,\nsimple payment of some small contribution to\nthe national tax income through a simple agency\nand on a simple form.\"\nFor such taxpayers a plain and easily\nunderstood table could be provided with the aid\nof which the small taxpayer could compute his\ntax bill in a very few moments. He would be\nspared time, trouble and annoyance and the\nGovernment would be spared expense.\nRegraded Unclassified\n- 21 -\n31\nTo indicate more clearly what I have in\nmind, I have had prepared a sample table\nshowing how this might be worked out in\npractice for incomes up to $3,000. This is\nonly a preliminary table, and improvements\nand changes will no doubt be desirable, but\nit will illustrate how the proposal can be\napplied.\nThe taxes imposed by the bill before you\nare very heavy; the taxes of an all-out program\nwould be even heavier. I am convinced that\nthe people are not opposed to heavy taxes, that\nin fact they favor heavy taxes because they\nknow that the alternatives are much more onerous.\nRegraded Unclassified\n- 22 -\n32\nAt a time when expanding incomes are operating\nto force prices upward many kinds of measures\nmust be employed if prices are to be kept\nunder control. Without heavy taxation, the\nother measures have little chance to succeed.\nRising prices would take much more away\nfrom our people now and in the future than\nhigher taxes now will take. Under the tax\nbill in its present form, a married couple\nwith no dependents, having a net income of\n$5,000 a year, will have its Federal income tax\nincreased by $198, or 4 percent of its income.\nRegraded Unclassified\n33\n- 23 -\nAssuming that two-thirds of the family's income\n1s spent on items affected by a changing\ncost of living, an increase in the cost of\nliving of 6 percent would impose as great an\nadditional burden on this family as would the\nproposed income tax. The cost of living\nindex has increased 51 percent since September,\n1940. It 18 clear from this simple illustration\nthat rising prices tax the family income just\nas surely as do income taxes. Although, as\nprices rise, the incomes of some families will\nincrease, many incomes will not increase and\nmost incomes will not increase as fast or as\nmuch as prices.\nRegraded Unclassified\n34\n- 24 -\nIf, in an attempt to protect the incomes\nof our people, we hold down taxes and as a\nresult the cost of living rises, we shall have\ntaxed them just as surely as 1f we had levied\non them directly -- and we shall still have\nthe inflated costs of defense to pay later\nfrom taxes.\nAn all-out tax program will build public\nmorale in an all-out defense program. By\nreducing the necessity for borrowing, it will\nstrengthen confidence in the impregnable\nfiscal position of the Government.\nRegraded Unclassified\n35\n- 25 -\nBy contributing to the control of prices, it\nwill help prevent the demoralization which\nwould result from inflation. By distributing\nthe defense burden fairly, it will help unite\nthe nation. It will make all the people equal\npartners in sharing the cost of the defense\nof our country.\n-000-\nRegraded Unclassified\n36\nI\nI\nPage 10.\na further lowering of\nexem fitions would\nproduce # 303.\nPage 12\nExcess profits tax\n# A ame or\nas : much more as committee\nwish\nPage/2,\nJoint return\n$ 258.00\nPage 14\n% Oil depletion # 86.00\nPage 14 taxents States. cities $ 222.00\neventually when and all autstanding retired\nPage 15, Estateand seftace\n#: 195.00\nRegraded Unclassified\nEstimated increase in revenue yield 1/, at estimated\nincome levels used in estimates of revenue effects of\nH.R. 5417, of Treasury proposals before\nSenate Finance Committee, August 5, 1941.\nI. Excess profits tax\nUnder the Treasury excess profite tax plan\nmodified by reversing the precedence of deduction\nof the income and excess profits taxes, the same\nincrease in the excess profits tax as raised by\nH.R. 5417 could be secured with a decrease in the\neffective rate of excess profits tax to adjusted\nexcess profits net income of\n6.3 percent\nI. Lowered exemptions\nIf the present exemptions of $2,000 and $800\nare reduced to $1,500 and $750 respectively, the\nestimated net increase in revenue would be\n$303.0 millions\nIII, Landatory joint returns\nIf mandatory joint returns are required but\nreferential treatment of earned income 1s\nallowed, the net increase in revenue would be\n$258.0 millions\nIV. Percentage depletion\nIf the method of computing depletion based\non statutory percentages of gross income 18\nabolished, the net increase in revenue would be..\n8 86.0 millions\nV. Texation of State and local securities\nIf the interest on all future issues of\nState and local securities 18 made subject to\nall Federal income taxes, there would be 8. small\nand indeterminate increase in revenue commencing\nin the second year after the removal of tax\nexemption and increasing gradually reaching an\nestimated average increase in yield when sub-\nstantially all present 1ssues have been refunded\nand made taxable, some 50 years hence, amounting\nto\n$222.0 millions\nVI. Estate and gift taxes\nIf the specific exemption under both the\nestate and gift taxes 18 reduced from $40,000\nto 825,000 and the insurance exclusion under the\nestate tax 18 reduced from $40,000 to $25,000,\nThe estimated increase in revenue would be:\nUnder the Treasury rate schedules\n$195.3 millions\nUnder the schedules in H.R. 5417\n$ 56.4 millions\nAs compared to the yield of H.R. 5417 8.8 passed by the\nHoune of Representatives August 4, 1941.\nRegraded Unclassified\n38\nFORM 1040 A\nUNITED STATES\nPREMIUM DEPARTMENT\nNames - OPTIONAL INDIVIDUAL INCOME AND DEFENSE TAX RETURN\n1941\n(Auditer's Stampi\nApplicable to salaries, weges, and other\nincidental income not in excess of $3,000\nDo not write in the spaces\n(NOTE. you are engaged in & profession or business (includ-\nSerial\nNo.\ninc faming), or are & member of & partnership, or had income\n-\nor losses from the sale of property, use Form 2040.)\nNil I\nTo be the - & Callector of Internal Imm le - deld - . lates Bled of IN,\n(Cashier's Stamp)\nPRINT NAME AND HOME OR RESIDENTIAL ADDRESS PLAINLY BELOW\n(Nom) (Use gives - of M and vis, If this is . joint nim)\n(Street and mis, of real resule)\n(hat allies)\n(Compy)\n(State)\nCash-Check-M.\nQUESTIONS\nWhat is your occupation?\n4. Are items of income or deductions of both husband and wille included in\nCheck whether you are a citizen\nor . resident alien\nthis return?\nDid you file a return for any prior year?\nIf so, what was the latest\n5, State name of husband or wife if . separate return VM made, personal crump-\nyear?\nTo which Collector's office was it sent?\ntion, / any. claimed thereon, and the Collector's office to which it was wat:\nItem No.\n1. Salaries and other compensation for personal services\n$\n2. All other income\n3.\nTotal income\n$\n4.\nTax to be paid (from Schedule A on reverse side)\n$\nTyclanation of status with respect to personal exemption and credit for dependents\ne Personal\n(B) Credit for Depandenta\nState\nCredit Chimad\nNow of Dependent and\nCredit Chamal\nUnler 18\nOver 18\nYears Old\nYears Old\nIngle, or married and not living\nwith husband or wife\n$\nBarried and living with husband\nor wife,\nBead of family (explain below)\nReason for support\nif over 18 years old\nAFFIDAVIT.\n1. we swear (or affirm) that this return has been examined by me/ua, and, to the best of my/our knowledge and belief, is . true,\nDrrect, and complete return, made in good faith, for the taxable year stated, purmant to the Internal Revenue Code and regulations\nburd under authority thereof; and that I/we had no income from sources other than stated hereon.\nobseribed and sworn to by\nlive me this\nday of\n1941.\n(Separe)\nCignatures and tab of der administring\nCigaren)\n(If de a 4 - news (wi - les 1 . - le vipsi by bath\n- and * le - la - - before . - - by the -\n1 4 E ]\nthe\n- M - e bath proposes the - is - be - -\nI I I\n1\nRegraded Unclassified\n39\nMI\nIf your total\nIf your total\nIf your total\nYour tax Is:\nYour tax to:\nIncome to:\nincome 10:\nYour tax to:\nIncome 10:\nTo\nSingle\nMarried\nSingle\nMarried\nFrom\nFrom\nFrom\nTo\nSingle\nTo\nMarrie\nperson*\nperson*\nperson\"\nperson\"\nperson\"\nperson\n#1\n#750\n-\n-\n@1,501\n$1,525\n$62\n#1\n$2,251\n$2,275\n$126\n159\n751\n775\n$1\n-\n1,526\n1,550\n64\n2\n2,276\n2,300\n128\n61\n776\n800\n2\n-\n1,551\n1,575\n66\n3\n1,576\n68\n4\n2,301\n1,600\n2,325\n130\n63\n801\n825\n3\n-\n2,326\n2,350\n132\n65\n826\n850\n5\n-\n1,601\n1,625\n70\n6\n2,351\n2,375\n134\n6a\n851\n875\n7\n-\n1,626\n1,650\n73\n7\n2,376\n2,400\n136\n70\n876\n900\n9\n-\n1,651\n1,675\n75\n5\n1,676\n1,700\n77\n10\n2,401\n2,425\n139\n72\n901\n925\n11\n-\n2,426\n2,450\n141\n74\n926\n950\n13\n-\n1,725\n79\n12\n2,451\n2,475\n143\n76\n1,701\n951\n975\n15\n-\n1,726\n1,750\n81\n14\n2,476\n2,500\n145\n78\n976\n1,000\n17\n-\n1,751\n1,775\n83\n16\n1,776\n1,800\n85\n19\n2,501\n2,525\n147\n80,\n1,001\n1,025\n19\n-\n2,526\n2,550\n149\n&\n1,026\n1,050\n22\n-\n1,801\n1,625\n88\n21\n2,551\n2,575\n151\n85\n1,051\n1,075\n24\n-\n1,626\n1,850\n90\n23\n2,576\n2,600\n153\n87\n1,076\n1,100\n26\n-\n1,851\n1,875\n92\n25\n1,101\n1,125\n28\n1,876\n1,900\n94\n27\n2,601\n2,625\n156\n89\n-\n2,626\n2,650\n158\n91\n1,126\n1,150\n30\n-\n1,151\n1,175\n32\n-\n1,901\n1,925\n96\n29\n2,651\n2,675\n160\n93\n34\n1,950\n98\n31\n2,676\n2,700\n162\n95\n1,176\n1,200\n-\n1,926\n1,951\n1,975\n100\n33\n1,201\n1,225\n36\n-\n1,976\n2,000\n102\n36\n2,701\n2,725\n164\n97\n1,250\n39\n2,726\n2,750\n166\n99\n1,226\n-\n1,251\n1,275\n41\n-\n2,001\n2,025\n105\n38\n2,751\n2,775\n169\n102\n1,276\n1,300\n43\n,\n2,026\n2,050\n107\n40\n2,776\n2,800\n172\n104\n2,051\n2,075\n109\n42\n1,301\n1,325\n45\n-\n2,076\n2,100\n111\n44\n2,801\n2,825\n174\n106\n1,326\n1,350\n47\n2,826\n2,650\n177\n108\n-\n1,351\n1,375\n49\n-\n2,101\n2,125\n113\n46\n2,851\n2,875\n180\n110\n1,376\n1,400\n51\n-\n2,126\n2,150\n115\n48\n2,876\n2,900\n183\n112\n2,151\n2,175\n117\n50\n1,401\n1,425\n53\n-\n114\n2,176\n2,200\n119\n53\n2,901\n2,925\n186\n1,426\n1,450\n56\n-\n2,926\n2,950\n189\n116\n1,451\n1,475\n58\n-\n2,201\n2,225\n122\n55\n2,951\n2,975\n192\n119\n1,476\n1,500\n60\n-\n2,226\n2,250\n124\n57\n2,976\n3,000\n195\n121\no\nFor each dependent, subtract @400 from your total income and use the balance to\ndetermine your tax.\nRegraded Unclassified\n10\nTREASURY DEPARTMENT\ngoo w -\nINTER-OFFICE COMMUNICATION\nDATE August 8, 1941\nTO\nSecretary Morgenthau\nFROM Xr, Cochran\nSTRICTLY CONFIDENTIAL\nAt 18:30 this noon, upon the return of the Secretary from the Capitol, I\nsummarized to him my attached memorandum of this date to the effect that clearance\nhad been obtained from the Department of State for the direct exchange of notes\nbetween the Secretary of the Treasury and the Soviet Ambassador on the subject of\nRussian cold. I presented to the Secretary a letter which I had drafted for his\nsignature. making the one slight change indicated in my memorandum. A copy of\nthe letter is attached 88 a second enclosure. The Secretary signed this, which I\nexplained was in the exact terms, except for the one amell alteration, of the\ndraft correspondence which had been submitted to the Secretary by the Department\nof State with Mr. Welles' letter of July 16. The Secretary asked that I obtain\nthe initials of my colleagues, Measrs. Bell, Foley and White, to the carbon of\nthe letter which he had signed and returned to me. After being received by the\nSecretary. I took the signed letter and my menorandum to General Counsel Foley,\nwho had Mr. Luxford with him. Mr. Foley also had prepared a letter for this situe-\ntion. It differed from my draft in that it contained en additional and final DETE-\ngreat with respect to the termination of the agreement. When I explained to\nMr. Foley that my clearance from the State Department was rood only insofer pe the\nterms originall drafted in the Department of State were concerned, Kr. Foley telé-\nphoned Assistant Secretary of State Acheson and obtained clearance for the final\nparagraph.\nMr. Luxford then proceeded to rewrite Kr. Foley's letter, with the new pare-\nDeph added. It was understood that be would submit it to Mr. White and that Xr.\n7:1ey and I would initial it later.\nUpon returning from luncheon, I found that Meanrs. Foley. White and Luxford\nlast initialed the letter as drafted by me and signed by the Secretary, since\n13. White would not initial the letter as drafted by Mr. Foley, containing the\nadded untegraph. I spoke with Mr. Luxford and asked him to provide me, neverthe-\nLega: with Mr. Foley's dreft, although not initialed.\nWhen the Secretary called me to his office at 3:05, with the Soviet Ambi sador\nvalting in his outer office, I gave his the two drafts, one bearing All of our ini-\nSecretary said that he desired to use the letter containing the added paragraph,\ntimle. and the other without any initials. I explained the situation. The\nUpon leaving the Secretary's office. he received Mr. Ounensity. At 3:15 the\nbad inserted the date August 2 in two places, E.B. well at giving his communication\nSecretary my telephoned me that he had signed the letter with the added paragraph, end\nthis date. His messenger brought the letter to me. 1 had explained to the might Secretary\nknow we the date of the note of the Soviet Ambaeeador. and then date ours accordingly,\nthat had left the blank spece at the top and in the first line until we\nWhile the Anbassador was still with him, the Secretary had his messenger show ne\nRegraded Unclassified\n41\n- 2 -\nthe letter which he had signed, with the three dates written in by pen. I have\ninserted these dates in the copy of the letter which the Secretary actually signed,\nand which is attached as a third enclosure.\nJuin\n42\nTREASURY DEPARTMENT\nINTER-OFFICE COMMUNICATION\nDATE August 8, 1941\nTO\nSecretary Morgenthau\nFROM Mr. Cochran\nSTRICTLY CONFIDENTIAL\nAssistant Secretary of State Acheson told me at our Foreign Funds Control\nmeeting yesterday evening that he had not succeeded in bringing up with Under\nSecretary Welles at his 2:30 conference yesterday afternoon the question of an\nexchange of notes on Russian gold. He hoped, however, to see Mr. Welles at 5:30\nyesterday evening, since the Under Secretary WAS leaving Washington last night.\nAt 10:45 this morning Mr. Acheson called me to let us know that he had die-\ncuesed the question with Under Secretary Welles and subsequently with Secretary\nBull, and it was agreed that the State Department should offer no objection to\nthe direct exchange of notes between the Secretary of the Treasury and the Soviet\nAnbassador which Mr. Morgenthau desired. I told Mr. Acheson that I would get\nthis information directly to Secretary Morgenthau as soon Be he returns from the\nCongressional hearing which he is attending this forenoon. Mr. Acheson would be\nglad to have Secretary Morgenthau call him if there is any question. Mr. Acheson\nwill be at the Department of State this forenoon, but is coming to the Treasury\nnt 2:45 to attend a meeting in Mr. Foley's office.\nMr. Acheson assumed that the notes would be in the terms submitted to the\nTreasury Department with Mr. Welles' letter of July 16. There would presumably\nhave to be one alteration in Mr. Morgenthau's reply to Mr. Oumaneky, since the\nreply drafted in the Department of State was written with the idea that it would\nbe signed by the Secretary of State, end consecuently refers therein to the\nSecretary of the Treasury in the third person. Mr. Acheson was not sure whether\nMr. Morgenthau would desire that his letter refer to the \"Government of the United\nStates\" or the \"Treasury of the United States\".\nWith the idea in mind that the Secretary's note should commit the \"Government\",\nI have drafted B. now letter to the Soviet Ambassador for the Secretary's signature,\nmerely changing from the third to first person insofer as the Secretary of the\nTreasury 1s concerned.\nJul\nRegraded Unclassified\nKy dear Mr. interentor:\nthe receipt is acknowledged of your poso of August\n1941. is which you state that the devermment of the Union of\nSevies Secialist Reyablics would approciate certain ASSUPARATE\nfree the deversment of the United States relating to the pur-\nshare of Seviet gold is the United States.\nla excemements of Junuary 31 and February 1. 1934,\n1, as Secretary of the Treasury, stated that, until further\nnotice, the United States would buy gold imported from abroad\nat the rate of #35 Mr fine trey enror, less the usual sist\ncharges and less one-fourth of cme percent. all subject to 068-\npliance with the regulations inward under the Gold Reserve Ast\nof 1934. Deah gold purchases have been made continuously there-\nafter and without discrimination.\nthe foregoing continues to be the policy of the\nDeverament of the United States and assurances are given to the\nDevernment of the Union of Seviet Socialist Republics that as\nprohibitive or restrictive measures will be applied to the 65-\npert or import of Seviet gold or silver which will not be applied\nto all other countries.\nI M, of Lear Mr. Ownersky,\nTery sincerely yours.\nSecretary of the Treasury.\nare Emellency\nBOT KENT\nConstantine A. Ownersity.\ninhanceder of Union of Seviet\nSectalist Republics.\nInitialed: HMC DWB HDW EHFJr AVL\nHMC:lap-E/E/41\nRegraded Unclassified\nAddress 2, 1941\nMy dear Mr. Ambessador:\nThe receipt is acknowledged of your note of August 2,\n1941, in which you state that the Government of the Union\nof Soviet Socialist Republics would appreciate certain\nassurances from the Government of the United States\nrelating to the purchase of Soviet gold in the United\nStates.\nIn announcements of January 31 and February 1, 1934,\nI, as Secretary of the Treasury, stated that, until further\nnotice, the United States would buy gold imported from\nabroad at the rate of $35 per fine troy ounce, less the\nusual mint charges and less one-fourth of one percent, all\nsubject to compliance with the regulations issued under the\nGold Reserve Act of 1934. Such gold purchases have been\nmade continuously thereafter and without discrimination.\nThe foregoing continues to be the policy of the\nGovernment of the United States and assurances are given\nto the Government of the Union of Soviet Socialist\nRepublics that no prohibitive or restrictive measures will\nbe applied to the export or import of Soviet gold or silver\nwhich will not be applied to all other countries.\nThe foregoing assurances are understood to be in effect\nuntil August 2. 1942.\nI as, my dear Mr. Dumansky.\nVery sincerely yours,\n(Signed H. Morgenthau, Jr.\nSecretary of the Treasury.\nHis Excellency,\nConstantine A. Oumansky,\nAmbassador of Union of Soviet\nSocialist Republics.\nHMC:nrd - 8/8/41.\nRegraded Unclassified\n45\nTHE SECRETARY OF THE TREASURY\nWASHINGTON\nnot med\naug. 8.2\n1941\nMy dear Mr. Ambassador:\nThe receipt is acknowledged of 7931 note of August\n1941. in which you state that the Governes of the Union of\nSoviet Socialist Republics would approciate ertein assurances\nfrom the Government of the United States Ni iting to the pur-\nchose of Soviet gold in the United States.\nIn announcements of January 31 and February 1, 1934,\nI, P.S. Secretary of the Treasury, stated shat, until further\nnotice, the United States would buy gold imported from abroad\nat the rate of $35 per fine troy ounce, less the usual mint\ncharges and less one-fourth of one percent, all subject to com-\noliance with the regulations issued under the Gold Reserve Act\nof 1934. Such gold purchases have been made continuously there-\nafter and without discrimination.\nThe foregoing continues to be the policy of the\nGovernment of the United States and assurances are given to the\nGovernment of the Union of Soviet Socialist Republice that no\nprohibitive or restrictive measures will be applied to the ex-\nport or import of Soviet gold or silver which will not be applied\nto all other countries.\nI am, my dear Mr. Ounansky,\nVery sincerely yours,\nSecretary of the Treasury.\nEis Excellency\nConstantine A. Oumanaky,\nAmbassador of Union of Sioviet\nSocialist Republice.\nRegraded Unclassified\nEMBASSY OF THE\nUNION OF SOVIET SOCIALIST REPUBLICS\nWASHINGTON, D.C.\nAugust 2, 1941\nmy dear Mr. Secretary:\nFor a number of years purchases by the Union of\nSoviet Socialist Republics in the United States of\nAmerica have greatly exceeded exports from the Soviet\nUnion to the United States and it is probable that this\ncondition will continue to exist for some time. In view\nof this situation the Government of the Union of Soviet\nSocialist Republics may find it desirable to export gold\nto the United States of America in an amount sufficient\nto enable it to meet obligations which it has already\nmade or the making of which is under contemplation. It\nyould, therefore, appreciate assurances from the Govern-\nment of the United States that the State Bank of the\nUnion of Soviet Socialist Republics will be permitted\nwithout hindrance to export gold into the United States\nfor\nThe Honorable\nThe Secretary of the Treasury\nRegraded Unclassified\n- 2 -\nfor the purpose indicated, that the Treasury of the\nUnited States will purchase such gold, and in parti-\ncular that the Government of the United States of\nAmerica will not take with respect to the Union of\nSoviet Socialist Republics any measures prohibiting\nor curtailing exports or imports of gold or silver\nwhich shall not be applied with respect to all other\ncountries.\nI em, my dear Mr. Morgenthau,\nVery sincerely yours,\nC.\nRegraded Unclassified\n48\nAugust 8, 1941\n2:00 p.m.\nPRICE CONTROL\nPronont:\nMr. Daggett\nMiss Michener\nMr. Bell\nMr. Gaston\nMr. O'Connell\nMr. Marray\nIr. Foley\nMr. White\nAll right, let's 70.\nMite:\nMr. Kuhn ourlit to be here, because from now on\nhe ou ht to fix this up.\n........\nLet's \"° right ahead. Somebody read it.\nLite:\nNant me to read it?\n....Jr:\nSure.\nLite:\n\"I am in full agreement with the objectives\nof the Emergency Price Control Bill, and with\nthe concral methods by which the bill seeks to\nattain these objectives.\"\n:\nIckes rants somebody to to at three o'clock\nto sit with him on & meetin~ for B. pipeline. Who\nworld that be?\ndelay;\nKades.\nAll right, send him. Does Ickes know Mades?\nSure, he used to he Assistant General Counsel.\nRegraded Unclassified\n49\n- 2 -\nS.M.Jr:\nthat is what I thought.\nShell I ston at every raph or shall we\n70 through the whole thing?\nThe whole thing.\nWite:\n\" /e have been talking about the problem of pre-\nventing inflation for 2 long time, but until\nvegently the question has been largely academic.\nNow, however, we AZO faced with the urgent,\npractical necessity of rappling with it. e\nare faced with S situation ripe for the develop-\nment of inflation.\n\"In many respects the price situation today\nclosely resembles that of the corresponding\nperiod in 1916, when, as we now know, inflation\nWAS actually on the way. We have now, as we had\nthen, a moderate rise in the cost of living,\n& creater rise in the wholesale price index, and\na sharp rise in the prices of basic commodities.\nIt is the latter rise which constitutes the dan-\nger signal. Basic commodity prices rise first;\nthe wholesale price index slways lass greatly\nbehind the index of basic commodities, while\nthe cost of living does not show anything like\nthe full effects of inflation until long after\nthe seeds of inflation have taken root.\n\"I do not mean to imply that price rises have\nalready cone so far that there is no stopping;\nthat it is too late to prevent inflation. But\nstron- forces are under way which will end in\ninflation unless /e do something about it.\nObviously, the time to do something about in-\nflation is before it occurs, not after it has\ngathered momentum.\n\"The forces now in operation makin- for further\nprice rise 278 both potent and persistent.\nRegraded Unclassified\n50\n- 3 -\n\"Our defense expenditures are rapidly increasing.\nDuring the fiscal year 1942 they will be two and\na half times as much as in the fincal year 1941,\nand even that increase does not take account of\nextension of the Defense Program maile after\nJune 1, and of additional sums needed for Lend-\nLease. It must be remembered that A large\npart of the defense expenditure is being financed\nthrough borrowing which, in effect, increases\nthe total money emand for goods. The net\nborrowing for the fiscal year 1942 will be nt least\ntwice as large as in the previous fiscal year.\n\"As our defense program Frows we must expect\nfurther upward pressure on prices. The program\nprovides additional income for large sections of\nthe public without increasing correspondingly\nthe supply of consumption goods upon which that\nincome would ordinarily be spent. It has been\nestimated that the money moing to the pockets\nof the people of the United States will be\nincreased by more than $10 billion during this\nfiscal year. Naturally they will want to spend\npart of that increase on consumption goods. If\nthe supply of consumption roods available is\nnot increased proportionately, nothing can\nprevent the prices of such coods from rising\nunless positive preventive steps are teken.\nAnd unfortunately, the defense pro ram is already\noperating to curtail the supply of some consump-\ntion goods.\n\"The inflationary force of defense expenditures\nhas been supplemented during the past year by\na share expansion of bank credit. At the same\ntime the shortage of raw materials for civilian\ngoods, absorption of idle capacity in many\nindustries, and outting off of normal foreign\nsources of supplies, are also operating to make\nthe price situation worse.\n\"We are all sufficiently aware of the iestructive\neffects of inflation. Unlike the situation in\nRegraded Unclassified\n51\n- 1 -\n1916 we are now aware of what is happening in\nour price structure. We should profit by this\nknowledge and take prompt end effective action\nto avert a repetition of the price movements\nof 1917 to 1920.\"\n(Mr. Kuhn entered the conference).\n\"It is admitted by those who have studied the\nproblem that unwarranted price rises cannot be\nprevented through the machinery which now exists.\nExperience of the last six months has demonstrated\nthat voluntary cooperation and moral suasion\nthough effective in many instances are not ade-\nquate to check unwarranted and unreasonable\nprice rises. This Bill gives authority to the\nPresident to fix price ceilings under conditions\nwhich are designed to protect both the consumer\nand the seller.\n\"I feel strongly that unless we adopt now some\nsuch reasonable and moderate system as this,\nwe shall be forced later to take more drastic\nsteps.\n\"However, I believe the Bill should be changed\nin two respects. One of the changes I would\nsurgest relates to arricultural commodities and\nthe other to rent. I shall have more to say\non these mutters later.\n\"Though I strongly urge the passage of this bill,\nI should like to emphasize that it constitutes\nonly one of the several measures that are nec-\neasary to provent inflation. If we place exclu-\nsive reliance unon measures included in this bill\nwe are bound to be disappointed. Fixing price\nceilings without appropriate fiscal measures,\nand without a readjustment of the fundamental\nsupply and demand relationships, is certain to\nprove inalequate in this country as it has\nRegraded Unclassified\n52\n- 5 -\nproved inadequate in every other country that\nhas tried it. An attempt to legislate prices\nis bound to be unsuccessful unless it is accomp-\nanied by measures to increase the supply and\nreduce the demand for goods.\n\"The most effective protection against inflation\nis to increase the supply of goods that people\nwant to buy. Not only would such action be most\nin accord with our system of free enterprise\nand competition, but it also would yield a\nhigher standard of living. Te must, therefore,\nmake much greater efforts than we are making to\nexpand the production of those basic products\nwhich are needed not only to meet military\nneeds but civilian requirements as well. People\nmust have as many things available to buy with\ntheir money as it is possible to produce with-\nout impeding our lefense program.\nWould it be satisfactory to you, Mr. Secretary,\nif Mr. Kuhn or somebody else continued reading\nthis?\nM.N.Jr:\nYes.\nKuhn:\nI would be -lad to go on.\n\"Unfortunately, it may be necessary to curtail\nproduction\" --\n. .Jr:\nFerdie, do you mind coming up closer?\nRuhn:\n\"Unfortunately, it may be necessary to curtail\nthe production of certain consumption goods for\na while ecause we do not have the plant capacity\nnecessary to satisfy both lefense and civilian\nneeds. We need, for example, more iron and\nsteel for defense, but we should leave no stone\nunturned to increase our capacity for iron and\nRegraded Unclassified\n53\n- 6 -\nsteel production so that Inter we shall be able\nto increase our outrut of electric refrizera-\ntors as well as guns. In the meantime, during\nthis period of necessarily curtailed consumption,\nevery encouragement should be riven to the pro-\nduction of those goods which do not compete\nwith lefense needs.\n\"I believe we have failed to push our production\nof roods to the full capacity of our enormous\nproductive resources. I. considerable volume\nof unemployment still exists, and there are also\nmillions who, though not classified as unemployed,\ncould e added to the working force if the jobs\nWe 70 essily available. In many plants, there\nis unused available capacity, and the sources of\nnecessary row materials have not been fully\nutilized. Greater utilization of these idle\nresources would go = long way toward protecting\nus arainst inflation.\n\"Wherever there are any artificial restraints,\nwhatever their character, which are operating\nto provent full utilization of capacity, steps\nshould he taken to have them removed. There\nis less excuse for restrictions on supplies of\ncommodities now than ever before. Te should\nmake every attempt to bring in more supplies\nfrom other countries, particularly those sup-\nplies in which shortages are already appearing.\nEvery effort should be made to supplement im-\nports of commodities which are scurce with ilenti-\ncal or substitute products in this country.\n\"Above all, we must make full use of those sup-\nplies that are available. We ought not to tolerate\nthe withholding of surpluses from the market\nwhen prices of such commodities are rising\nunduly. In this connection We are fortunate in\nhaving large supplies of various agricultural\ncommodities which ni at be made available to\nRegraded Unclassified\n51\n- 7 -\nthe market. The supply of wheat is the largest\non record and supplies of some other farm\nproducts are the largest in many years. For\nmany commodities the price situation which now\nexists provides the opportunity that e have\nlong awaited for selling Government-held stocks.\nThese stocks of commodities should be released\nfor consumption as rapidly as is necessary to\nprevent unreasonable price rises. By doin so\nwe will not only contribute to the stobilization\nof comodity prices in veneral but also clear\nthe Worehouses for future vricultural emergen-\ncies,\n\"The Government now holds 7 million bales of\ncotton. Cotton prices have risen from 9-1/2\ncents per pound on August 1, 1939, to over 16\ncents per pound at the present time. Yet\nthe Senate has passed a bill prohibiting all\nsales of lovernment-held stocks of cotton, the\nprohibition to continue until Congress shall\notherwise provide.\n\"If legislation is enacted freezing the Govern-\nment's supplies of cotton we will have laid\nthe basis for a speculative price boom. The\nunivorable crop situation and the restriction\non silk imports favor such a beom in prices.\nIn view of the donger of inflation and in view\nof the importance of cotton in the price strue-\nture, it would seem that the time is most in-\nopportune to enact legislation of that character.\n\"We should give careful thought to stabilizing\nthe prices of those farm products that enter\ndirectly into the cost of living, since an\nunward trend in living costs is a powerful\ninfluence toward increasing ware rates, and\nhence toward \"eneral price inflation. The\nrice of food, which makes un one-third of\nthe consumer budget, has already risen faster\nthan during the first two years of World War I.\nRegraded Unclassified\n55\n- 8 -\n\"There are too many people who are looking at\nform prices from a purely short-run viewpoint,\nwith no apparent recard for the calamitous\nafter-effects of inflation. Have they forgotten\nthe experience of 1920, when farm prices\ndropped more than fifty per cent in a single\nyear? I want to see a healthy development of\nagricultural prosperity, and with that objec-\ntive, I helped to initiate, and have continued\nto support, our 8. ricultural program. But no\none with the interest of agriculture sincerely\nat heart can ignore the danger signals ahead,\n\"It would, of course, be ideal if we could ad-\njust the inequality between the amount of goods\navailable to be purchased and the amount of\npurchasing power available to buy them entirely\nin the manner which I have been discussing -\nthat is, by increasing the supply of goods.\n\"Unfortunately, this is impossible of immediate\naccomplishment because of the large proportion\nof the total output which must go into the\ndefense effort and thus is not available to\nsatisfy civilian demand. Therefore, if the bal-\nance between supply and demand for civilian\nconsumption is to be redressed, it must be done\nin part by cutting down demand.\n\"In seekin a reduction in total expenditure\nfor civilian purposes, we mi -ht well begin\nwith the Federal ret. Every effort should\nbe made for economy in State and local government\nexpenditures and for a curtailment of borrowing\nby State and local governments for non-emergency\npurposes.\n\"Any curtailment in government expenditures\npossible is, however, small in comparison to\nthe contraction of total expenditures which is\ndesirable.\nRegraded Unclassified\n56\n- 9 -\n\"The great bulk of the reduction must come from\nprivate, rather than from public, spending.\nAfter all, total non-defense expenditures of\nthe Federal Government in this year will amount\nto less than one-tenth of the amount of total\nspending by private persons who had not received\ntheir incomes from the Government. We obviously\nmust seek most of the necessary reduction in\nexpenditure in the larger group.\n\"The most powerful instrument which the Federal\nGovernment has for the reduction of private\nexpenditures is taxation.\"\nM.M.Jr:\nMay I interrupt? Somebody make a note, on\nMonday I would like to know what, if anything,\nthe Secretary of the Treasury said in '14, '15,\n'16, and '17 on inflation and price rises. I\nam curious to know what if anything the Secretary\nof the Treasury said then.\nBell:\nI think it is pretty well set out in the annual\nreports.\nH.V.Jr:\nOr any of the Assistant Secretaries.\nMuhnz\n\"The most powerful instrument which the Fed-\neral Government has for the reduction of private\nexpenditures is taxation. This instrument may\nalso be used selectively to reduce the demand\nfor scarce commodities and particularly for those\nfor which there is a special need for the defense\neffort. The tax bill which has just passed the\nHouse of Representatives represents a step\nforward. Serious consideration ought to\nbe given, however, to the more vigorous imposition\nof selective excises at the present time. And\nas I indicated to the Finance Committee of the\nSenate last Friday, it will be necessary in\nany event that yet heavier general taxation be\nimposed next year if we are to maintain success-\nfully the balance between supply and demand.\nRegraded Unclassified\n52\n- 10 -\n\"Government borrowing from current consumer incomes\nserves the same purpose in controlling inflation\n11 does taxation - that is, it transfers mip-\nchasing power from private citizens to the Govern-\nment without increasing its total amount. This\npurpose is AC omplished to B. considerable extent\nby the sale of ordinary Government obligations\nprovided that these are purchased by others than\ncommercial banks. A large proportion of such\nobligations sold to non-banking investors is\npaid for, however, from idle balances which in\nany event would not have been spent during the\ncurrent period. Then the proce as of such bor-\nrowing are spent by the overnment they, there-\nfore, increase the total spending stream and so\nfail to contribute to the ecuilibrium which I\nhave been licoussing.\n\"The Preasury Department is particularly anxious\nto borrow as large A proportion of its total\nrequirements as possible from current consumer\nincomes. In order to do this, we are looking\nparticularly to the sole of defense savings\nbonds and stamps. The le of these securities\nhas been proceeding nuite satisfactorily and\nduring the three months of May, June, and July\namounted to slightly over a billion dollars.\nOf course, iny\" no means all of this came from\nconsumer incomes. VE are protified, however,\nthat in each month in increasing proportion of\ntotal sales was made to small subscribers.\nWe are directing our major effort more to -lac-\nIng these securities where they do the most\ncool from an anti-inflationary point of view -\nthat is, in the hands of purchasers from\ncurrent income - than to increasing their total\nsales. lle are also, through the issuance of\ntax anticipation notes, using the horrowing\npower ns g moons of reducing the effective lag\nbetween the nocrual and payment of the income\ntax - thus increasin the ffectiveness of that\ntax 20 an instrument to combat inflation.\nRegraded Unclassified\n58\n- 11 -\n\"In addition to these strictly fiscal measures,\nother measures for reducing the amount of civil-\nian purchasing power may have to be used.\"\nH.M.Jr:\nI am bored. I don't know whether anybody else\nis. Go ahead. That is just how I feel. It\nhas got no sex appeal.\nWhite:\nNo. Well, I thought that would - this is -\nFerdie hasn't started on this. (Laughter)\nH.M.Jr:\nOh, Ferdie furnishes the sex appeal. From\nnow on - \"Sexie Kuhn\".\nKuhn:\nI don't agree with you. This is --\nBell:\nIt reads much better than I thought it would,\nafter going over it yesterday. I didn't think\nit was 30 hot, but I think it is pretty good.\nI think it is too long and has to be out down\na little, but it is much better than I antici-\npated when we went over it yesterday.\nKuhn:\n\"In adition to these strictly fiscal measures,\nother measures for reducing the amount of civilian\npurchasing power may have to be used. Among these\nare control over consumer credit, over new\ncapital issues by corporations, and selective\ncontrols over the extension of bank credit for\nspecified purposes.\n\"Each of these types of control would strike\ndirectly at a source of non-defense spending,\nand so would relieve the upward pressure on\nprices both generally and at points where it is\nparticularly acute. I should consider them\ngreatly superior, therefore, to the more general\ntype of credit control, the immediate effect\nof which is merely to raise money rates.\n\"Under more normal conditions the effect of the\nimposition of such general controls is to reduce\nRegraded Unclassified\n59\n- 12 -\nborrowing and hence total spending. I cannot\nemphasize too strongly, however, that the\ntotal amount of borrowing which will have to\nbe done by the Federal Government under present\nconditions is affected only by the needs of the\ndefense effort and not by money market conditions.\nUnder such circumstances, it seems eminently\nmore sensible for the Government to shut off\ncompeting demands than to endeavor to bid against\nthem on a price basis for restricted amount of\nfunds.\n\"The expansion in the supply of consumption\ngoods and the restriction in the expenditure\non such goods both serve to prevent inflation\nin an over-all manner. That is to say,\nthey exert pressure to keep down the general\nlevel of prices. But the problem of inflation\ncannot be solved by these broad methods of con-\ntrol alone. Even with expanded output of con-\nsumption goods and restricted expenditure on\nsuch goods there will still remain areas in\nwhich the public will want to spend more money\nthan the supply of goods available in these areas\ncan absorb without an inflationary rise in prices.\nThis bill is suited particularly to control\nthe areas of partial inflation which cannot be\nreached by the over-all action of the other\nmethods of control.\n\"These three methods of preventing inflation-\nexpanded production, restricted expenditure,\nand price control - supplement each other, each\nincreasing the effectiveness of the others, and\nall together providing an effective program\nfor dealing with the problem. The three methods\na re equally necessary.\n\"I should like to point out that the effectiveness\nof such a program is enhanced when the three\nRegraded Unclassified\n60\n- 13 -\nmethods of preventing inflation are not used\nat cross purposes. Price control must not limit\nthe flow of materials available for expended\nproduction. Furthermore, by its very nature,\nprice control must be flexible to be successful.\nFor these reasons I believe it would be prefer-\nable to omit from the bill the minimum ceiling\nfor agricultural commodities and the provisions\nlimiting rent control in defense areas to low-\ncost housing. The rigidity in prices imposed\nby et prescribed ceiling may make it difficult\nto prevent inflation and impossible to prevent\npost-war maladjustment of prices and post-war\ndepression.\n\"With these modifications, I am whole-heartedly\nin favor of the Emergency Price Control Bill.'\nH.M.Jr:\nBell?\nBell:\nWell, as I said, I think it is a little lon,\nbut it is much better than - reads much better\nthan I thought it would. We went over it\nyesterday afternoon.\nE.V.Jr:\nEd Foley is practically asleep.\nRite:\nI don't blame him. (Laughter) It is that kind\nof a document. I presume partly because it is\ndealing so much with economics --\nW.W.Jr:\nPut your feet un on the davenport, Ed. (Laughter)\nWell, of course it is unfair to show me anything\ntoday, because for four days I have been through\nthe mill on this other thing, so anything that\nyou showed me --\nWhite:\nExcept that I think it is important --\nLet me rive you --\nRegraded Unclassified\n61\n- 14 -\nWhite:\nTo get your reaction on policy.\nA.M.Jr:\nYou will get the reaction. In the first place,\nthere are no examples. Where is my St. Louis\nhouse, which I asked for?\nDagrett:\nWe have the figures worked up on that.\nM.M.Jr:\nI don't know anything that touched labor - it\ntouches materials, it is touching profits, it\ntouches everything.\nWhite:\nWe have each of those, At least we have tot\nthis to say on wages.\nH.K.Jr:\nBut the St. Louis house thing touches everything.\nAre you familiar with it?\nMite:\nNo.\nH.V.Jr:\nThe St. Louis house gives you the six-room\nhouse breakdown - it is the best job that I\nknow of. llave you got it?\nDegrett:\nYes, sir, we have.\nWell, take something like that, which shows\nthe contractor's profit, increase in wages,\nincrease in materials, increase in rent, the\nwhole business. How much is it up now?\nDerett:\nI don't recall the exact percentage increase,\nbut it is going up rather sharply in the last two\nmonths.\nMONTH:\nYes. Now, what I would like to do is - it is\nlike an illustration to a story. I would like\nto *ive that as an illustration.\nWhite:\nPrices rising?\nN.M.Jr:\nYes.\nRegraded Unclassified\n62\n- 15 -\nWhite:\nOf rise in prices.\nH.M.Jr:\nI would like to - I would love to have something\non cotton. You see, the thing which the President\nhas been talking about is this. As I understand\nthe law, the farmer is to receive at the farm\nthe average price that he receives at the farm -\nit is to be parity. Now, what the President says\nis, if that average price at the farm is parity,\nthen he isn't to get any benefit payments.\nI don't even know how it is now, so maybe\nI had better not get into that. You might look\nit up anyway. They have never told the President\nquite the story. He has most likely got it\nright. But if the parity price is sixteen and\na half cents, average price that the farmer\nreceives at the farm, the President takes the\nposition that he is not entitled to any soil\nconservation benefits or any other benefits.\nDargett:\nThat is correct.\nH.M.Jr:\nBut I don't know whether that is the law. Look\nit up.\nDaggette\nI will do that, sir.\nE.W.Jr:\nThere is a lot of mystery about it. Can't you\ndo something - I mean, am I wrong that during\n'14 to '16 they used to have exhibitions in win-\ndows showing the price of shirts and the price\nof this and the price of that, and all that kind\nof business? You don't know?\nDarrett:\nI don't.\nwhite:\nI think it would be a little topheavy if you\nsaid more about cotton. I think, as it is, you\nhave made a statement that is stronger than\nanybody else would dare make.\nRegraded Unclassified\n63\n- 16 -\nH.M.Jr:\nIf you take that statement of mine about the\nhouse, it pretty near covers everything, doesn't\nit?\nDaggett:\nYes. It gives the breakdown between different\nkinds of materials, different kinds of labor,\nand the general overhead expense, contractor's\nprofits and so forth.\nH.M.Jr:\nWell, that is one thing. Now, Lubin promised\nme faithfully --\nWhite:\nlle just sent me five minutes ago --\nH.V.Jr:\n\"aithfully that he would have the story to\nshow Longress.\nWhite:\nFive minutes ago he called up and said he was\nsending it, and I don't know what is in here,\nother than what he told me. He said he was\nsending two things. One was to show that when\nthe cost of living rises ten per cent and if\nthe Government wants to let its workers share\nonly half of that increase, and the Government\nwill take the other half by increasing mages of\nits employees, it will cost the Government B.\nhundred and twenty-five million dollars a year.\nR.M.Jr:\nThat isn't what he --\nWhite:\nThat is one thing. The second thing, he is sup-\nposed to give the increased price cost that would\nbe on goods which the Government is buying for\ndefense projects.\nH.N.Jr:\nWell, let me put it my way and if he hasn't\ndone it we can do it. It must be a matter of\nrecord that - there have been all kinds of\nstudies made - that during the period '14 to\n'20, whatever it was - I know the Navy officers\nRegraded Unclassified\n64\n- 17 -\nsaid they had it for '22 and then adjusted their\nsalaries accordingly in the Navy. They went\nthrough the thing and then studied how much\nWRS the increased cost and then they raised\neverybody's salary.\nwell:\nThe same thing, but it was really a bonus in '17,\n'18, and '19.\nII.M.Jr:\nThat is what he said he was going to do for me.\nWhite:\nHe has got it here. Higher living costs\nmeans higher Federal salaries and he discusses\nwhat happened in 1918. He has got two pages\nthat seem to read pretty well.\nH.M.Jr:\nThat was the thing that impressed me. I said,\n\"Now, Mr. Congressman, let me tell you what hap-\npened in 1918, to you people with fixed salaries,\nyou and me. This is what happened, and your\ndollar instead of buying a hundred cents was\nonly buying eighty cents' worth,\" and so forth\nand SO on, \"and therefore you only got eighty\nper cent or whatever it is of your purchasing\npower, and then by the time you did pay your\ntaxes, your dollar was reduced to fifty cents.\"\no' Connell:\nMr. Secretary, Mr. Henderson mentioned it in\nabout one sentence relating to the District of\nColumbia, because he quoted some statistics\nto show that the standard of living, measured\nby real wages of the Federal employees in the\nDistrict of Columbia went down about twenty per\ncent during the world war period.\nH.M.Jr:\nWell, it won't do any harm to repeat it. Did\nthe Congressman get an adjustment? Did he\nget an adjustment in his salary, does anybody\nknow?\nBell:\nOver there, you mean?\nRegraded Unclassified\n65\n- 18 -\nB.M.Jr:\nIn 1918.\nBell:\nCongress in the first period gave a hundred\nand twenty dollars to every employee up to a\ncertain salary, I think. Of course in those\ndays salaries weren't high. Later they gave\ntwo hundred forty dollars. That lasted until\nabout '21.\nH.W.Jr:\nThat is the kind of thing.\nWhite:\nMay I ask this question, Mr. Secretary?\nThose illustrations are directed toward\nshowing the evils of inflation, and there are\na great many - you can make a very dramatic pic-\nture on the evils because those are only two.\nThere are numerous other aspects of inflation\nthat are bad.\nH.M.Jr:\nThat is what I am trying to get over to you.\nI would like to start out not too long, but I\nwould like to talk about what the evils of\ninflation are.\nWhite:\nThat is it.\nH.M.Jr:\nI don't want - I want to tell some stories,\nabout the house. We have got a four-room\nhouse and my salary - if it was six thousand\ndollars, I am supposed to pay a third of my\nsalary for rent or whatever the rule of thumb\nis. In those days I could have got a house for\ntwo thousand dollars and that same house now\ncosts me three thousand, or half of my salary\nwould have to go. \"Gentlemen, I will distribute\nthis chart showing you just what has happened.\"\nIt is in about 8 year, isn't it?\nDaggett:\nYes.\nH.M.Jr:\nThe contractor's profit went up the exact amount\nRegraded Unclassified\n66\n- 19 -\nin percentage that the increase in the cost\nof labor did. In other words, it may have been\nan accident, but he kept raising it just as\nthe thing went up. What happened to you and\nme and the million other Government employees?\nI mean, now we are - we at least were fortunate\nenough that the Government came along and adjusted\nit but how about the other millions of people\nthat can't be adjusted? There is nothing more\ncruel. I want to talk about the cruelty of\ninflation. This isn't something we should bandy\naround. Just because one small group wents to\nbe selfish and hold seven million bales of cotton,\nthere is nothing more selfish or cruel, and I\nwant to talk about if instead of bringing -\nfreezing three hundred million bushels of wheat,\nwe ought to be far-sighted enough to say, \"Well\nmaybe We will bring three hundred million bushels\nof wheat down from Canada. The price of bread\nhas already gone up. The staff of life. You\nget the feeds, chicken feed - my God, there are\nan awful lot of poultry men. It runs into a\nhundred million or more dollars. All through\nNew England the cost of chicken feed has \"one\nup fifty per cent. It may not he chicken feed,\nbut it represents 8 couple of hundred million\ndollars. Get those figures. It is un at least\nfifty per cent. I want to give - I don't want to\ngive too many, but I want to give some illustra-\ntions about the cruelty of this thing.\nIt is a boa constrictor. It wraps itself around\nand finally it just chokes the person to death.\nWhat between taxes and inflation, the nation is\njust squeezed, the life is squeezed out of it,\nthe vitality. It is a thing which we just can't -\nyou can't fight it with et pen. You have got\nfo fight it with a sword. I mean, it is that\nkind of stuff that I want to put in there. I\nfeel this thing very deeply. I want some good\nRegraded Unclassified\n67\n- 20 -\nillustrations. I can only give you - I mean,\na couple, but there must be a lot of them around.\nThe bread figures and Dr. - the woman nutri-\ntionist over there in Agriculture, Stanley, she\nis the best person in the country and she is\nthe least used, Dr. Stanley. She is swell.\nAnd Miss Elliott. Between Miss Elliott and\nDr. Stanley, between those two women, you can\nask them each to give you six cases of what is\nhappening to the consumer, the woman, in this\ncountry, on inflation. They can each give you\na half dozen illustrations. They are two splendid\nwomen, and nobody is using them. Those two\npeople. The one on nutrition, and Dr. Elliott\ncould do it on clothing. I think the thing to\ndo is to - if I do nothing else but confine my-\nself and address myself to the housewife of\nAmerica, you see. If I didn't even attempt to\ncover anything else but just address myself to\nthe housewife, the mother. \"You have not to\ntake what is left out of the eekly payroll\nof your husband and pay for these things, and\nnow look what is ha pening to your payroll, what\nis going to happen to your children?\"\nHerbert lloover made his reputation and had his\nnicture in every kitchen by addressing himself\nto the housewives. That is the way he made his\nsuccess.\nKuhn:\nYou want to make this personalized?\nH.M.Jr:\nI want to make it personalized. I want to talk\nto the housewife, I want to talk to the mother,\nand between Dr. Stanley and Miss Elliott you\ncan get the stuff by Monday. I want to make\nit so that the people can understand it. Am\nI talking sense, Herbert?\nCaston:\nOh, yes, indeed. This economic doctrine can\nbe gone over pretty - in an exact way. It can\nbe condensed a great deal.\nRegraded Unclassified\n68\n- 21 -\nWhite:\nOh, yes.\nGaston:\nAnd the methods to - it can be summarized very\nconcisely and then the methods by which you are\ngoing to attack the problem also in the bill\ncan be cut down.\nH.M.Jr:\nBut you see, the trouble is - please forget my\nsarcastic remarks, my remarks at the beginning,\nbut this is a wonderful thing, to get up to add-\nress the American Society of Economists, wherever\nthey meet, if they meet, but the fellow on the\nstreet, the woman, the person who buys the lamb\nchops and buys the stockings and the underwear\nand pays the rent and insurance - it is the woman\nthat does that. Let me talk to her.\nWhite:\nWell, all your remarks, which I think are - can\nbe turned out into something that would attract\ntheir attention - we skip all the effects of\ninflation under the assumption that it was known\nto be bad, and merely directed ourselves against\nthe - what are you going to do about it? How-\never, it certainly doesn't have the popular\nappeal, and maybe the reverse ought to be true.\nMaybe by talking about the effects of inflation,\nthe bad effects of inflation, the assumption\nwill be that this bill will correct them.\nU.M.Jr:\nHarry, I think the thing is this. I don't\nthink yet the average person understands. Just\nthe way I look around the room here, there is\nonly one person here that knew about what\nhappened to Government employees, and the extra\nbonuses. I just don't think, with the exception\nof people - when sugar went to five cents they\nall rushed out and bought sugar. Now they are\nall buying stockings. It is disgusting. I\nthink you have just got to paint this thing to\nthe people and say, \"If you want to stop this\nboa constrictor from choking you to death, you\nRegraded Unclassified\n69\n- 22 -\npeople have got to get mad and say, We want\nseven million bales of cotton released.\nWe want the wheat released. We don't want\nour shirts and our cotton dresses to go up and\nour bread, when there is that much goods in\nthis country and in Canada, lying up there\nrotting in the warehouse. We are not going\nto stand for it. We are just not going to\nstand for it, because of 8. crook like Cotton\nEd Smith and his friend Harris in New York,\nthe cotton broker, to make all this money.\nMite:\nWhat the Secretary is addressing himself to\nis quite different. lle wants to dramatize the\neffects of inflation. That can be effectively\ndone, the consequences of inflation dramatized.\nMaybe that is the way it would be most effective,\nbecause if you Tramatize the consequences of\ninflation, you are not directing - you are\nassuming that this bill is what is necessary in\norder to correct it.\nMirray:\nDo you assume that?\nMite:\nNo, I mean the public may.\nKuhn:\nNo, first of all, Leon Henderson has been up there\ndramatizing the consequences of inflation, and\nprobably Eccles will be doing the same, and when\nthe Secretary of the Treasury comes up, I believe\nthat people want this kind of reason, rrave, and\nclear, a statement from him. He can make it\npersonal with little illustrations.\nWhite:\nYes, there can be two or three illustrations.\nKuhn:\nBut I wouldn't give up the substance of this.\nDell:\nI think it is pretty good.\nWhite:\nWe will cut it down about a third.\nRegraded Unclassified\n70\n- 23 -\nBell:\nI was agreeably surprised when you read it over.\nGaston:\nI think all you say here can be said in half the\nspace.\nSell:\nWell, that may be.\nwhite:\nIt is a much more intelligent statement than\nany that has been made publicly. I don't mean\nany that has been made --\nRulin:\nIt is better than llenderson could have made\nbecause it is in a different key.\nWhite:\nBut it certainly doesn't have the dramatic\neffect or the appeal that the other approach\nwould. I think it may be possible to combine\nit. I think two or three pages --\nGaston:\nTwo pages of this --\nWhite:\nOf that house, of the Government employees,\nand the housewife. You need a paragraph on\nthe housewife, and one on the Government\nemployees, and 8. counle on this house and I\nthink you can make it very dramatic.\nGaston:\nAnd then tighten this up & little bit and sharpen\nthe language of it.\nWhite:\nThat is right.\nKubn:\nAnd right at the beginning, unless --\nSuite:\nOf course he stopped listening after the third\npage.\nBell:\nI don't think he listened from the beginning.\nWhite:\nWell, I think we know what he wants.\nRegraded Unclassified\n?!\n- 24 -\nDegrett:\nIt would also have to be turned into what can\nbe done about it as he suggested about cotton\nand wheat.\nWhite:\nWell, I don't think he can spend much more time\nwith the cotton. He is comin- now -- now, you\ncan say something about this. You can't use\nthat phrase, how about the housewife who has\nto buy cotton shirts and cotton dungarees for\nthe family?\nDerrett:\nIn the Walter Winchell style.\nMite:\nYes. You can mix & little of that in there,\nbut I don't think you can confine it to that\nand I don't think he will want to, but if some\nof that is in there he will take the rest\nof it.\nMulin:\nIs it necessary to specify what kinds of civilian\nproduction can be increased without detriment to\nthe defense industries?\nElte:\nYou try it. I can't think of anything.\nKuha:\nNeither can I. That is why I am asking you.\nRite:\nWell, there is nothing in there that you will\nfind --\nlacton:\nI think you will have to shorten all that\nabout that stimulation of production that doesn't\ncompete, because you take so much time to it.\nYou arouse curiosity as to what you are retting\nat.\n2011;\nlie would get a lot of questions.\nMite:\nYou can cut that sentence out but I think we\nwould all agree that there ought to be an increase\nin plant capacity. That is what we need.\nRegraded Unclassified\n72\n- 25 -\nKulin:\nThat requires steel and --\nWhite:\nWell, there has to be curtailment of civilian\nconsumption, then until that is done, because\nunless you do it you are going to be worse and\nworse.\nKuhn:\nThat is one hole I think people would nick in\nthis right away. They would say, \"Well, tell\nus what -- \"\nO'Connell:\nYou mean, \"Tell us what --\"\nKuhn:\n\"What to use up that is not needed for lefense,\nor labor that is not needed for defense.\"\nWhite:\nHow, wait 8 minute, labor, that is a different\nstory. There is plenty of labor, plenty of it.\nKuhn:\nAll right, materials.\nGaston:\nBricks. They don't use bricks for defense.\nWhite:\nThe answer to that is that you have got to lay\nthe groundwork for increased plants. Otherwise,\nyou will be in a worse situation next year, and\nin the year following a still worse situation,\nSO the thing to do is to pull in your belt\na whole lot the next six months, so at least you\ncan let it out in the years afterward. If you\nspend a hundred million dollars on a plant that\nis only going to produce a hundred million dol-\nlars of goods over four years, your supplies --\nlaston:\nDuring the period of consiruction, Harry. It\nis certainly inflationary.\nWhite:\nWell, I said naturally if you are ving to spend\nof hundred million dollars --\nLurray:\nMy point is that one of the main ways of combating\nRegraded Unclassified\n73\n- 26 -\ninflation which is advocated is during the\nperiod that you are constructing it is self\ninflationary.\nMitez\nNow, look, in every situation of this character\nyou have got a lot of conflicting objectives\nwhich must be harmonized, and one of those\nconflicting objectives is that you want more\nconsumers goods because you want to keep more\npeople employed and yet you find that in order\nto do that you may- you will have to curtail\nconsumption. Now, whether that will have a net\ninflationary or deflationary effect, you couldn't\nsay, because it depends on how much you curtail\ncivilian consumption in order to build the plants\nto produce more later.\nMirray:\nYou could say that during the period of con-\nstruction if you build plants to produce\nconsumer goods, it is inflationary, because the\npeople get wages just as much as they would for\nproducing the goods, but the goods can be sold\nand 80 absorb purchasing power, and the plant\ncan't. So during the period in which this is\nhappening it is inflation.\nWhite:\nYes, but how much? You know the old story that -\nor rather figure of speech that I like to use,\nthat when a fat woman goes in bathing in Coney\nIsland it raises the tide in London, but the\nquestion is if you were a ship captain you wouldn't\ncondition your ship's comings and coings by a tele-\nTam as to whether there were a fat woman on\nConey Island. Now, I think you will find an\ninflationary effect of increasing the plant\ncapacity while at the same time curtailing plant\nconsumption is negligible.\nMurray:\n& ten million dollar increase in plant capacity\nis a mighty fat woman.\nRegraded Unclassified\n74\n- 27 -\nWhat I was thinking was this, just to make\nsomething dramatic. Should we let cotton, wheat,\ncorn - is corn in storage?\nDoll:\nYes, lots of it.\nE.V.Jr:\nSugar. Anyway --\nMite:\nThere is plenty of sugar in Cubs and there is\na tariff on sugar.\n...M.Jr:\nLet these things rot in the storehouses in the\nUnited States or in Canada or in Cuba while\npeople either go hungry on the one hand, they\nstill do, or on the other hand they pay a fifty\nper cent increase for their food.\nBell:\nOr have their diet reduced as a result of increased\nprices.\n-.11.Jr:\nRi-ht. You talk about morale. The first thing\nto do is to feed the people the right thing. I\nsat over here with Wickard yesterday, and he is\ntalking about giving them the right formula to\neat with this Australian after the war is over.\nNow, that is the thing - that is the thing I\nwould like to take. You have got to arouse\nsomebody over here. Now, if you want to do this\nthing, the way to make a start is to get this\nbill through. Another thing, and I -ot the tip\nout of this - how can you expect me, as Secre-\ntary of the Treasury, to to ahead day after day\nand ask people to invest in Defense Savings\nBonds when they know and I have got to tell them\nthat the thing is inflationary. They are not\nzoing to continue to buy Defense Savings Bonds\nand I will not continue to be able to reduce\nbank deposits if they know day after day there\nwill be inflation. They are Toing to hoard,\nbut they won't buy my bonds. It is a vicious\ncircle. Instead of making a pretty speech, how\nmuch I am - I have been lucky. I have sold a\nRegraded Unclassified\n73\n- 20 -\nbillion dollars in three months, but how do I\nknow that people are -oin- to continue? They\nwill elthor put the oney in their sock or they\nwill buy CO moditier or somethin- else, but\nthey won't buy more Donie.\nwel:\nor course if prices 1°0 117) they will have nuch\nless money with which to buy Bonis. That is the\n3 ron- point.\nout the point is they are not win- to buy\nn fixed thing if they think there is oin to\nbe inflation, nn. I might 2,5 well say so and\n-et = he \"C on them in 0/13C this thin TOGS\nsour on ne.\nThe\nis ret letters of that character.\nMid I will say, \"1 have suid so on August 12,\nthat I couldn, sell these bonds if Conrress\nisn't \"cing to do something about it. My\nchould people Buy It,\" bonds?\" That is the on-le\nI would like to take.\nTito:\nC.K.\nFerdie?\nDCn:\nI saying to Harry before, that I think the\npersonal touch can be rut in here without de-\n: roying these arguments.\nLook, I just tried it for a minute or two on\nIrs. Morgenthau and she mys, \"Ion are ri \"ht.\"\nNow, Leon has done a beautiful job. I want to\n-et un and is I don't talk about anything else,\ntalk to the housewives of America.\nwin't he do that ulso, IF. Secretary?\nTell, you (0'Connell) int there, I lidn't.\nRegraded Unclassified\n76\n- 20 -\n0'Connell:\n440 was pretty statistical.\nhite:\nI am sure we can dramatize effectively --\n....Jr:\nHe didn't do it.\nwhite:\nI don't know.\nH.W.Jr:\nI read the newspaper account. There was nothing\nin it. There was nothing there.\nO'Connell:\nYou wouldn't have had you been there. It was\na rood statement, though.\nH.W.Jr:\nI say it was a good statement, but you have got\nto ret somebody aroused. Who is aroused today\nabout this thing? Nobody. We will et the women\naroused. \"We are not moing to stand for this.\nMr. Morgenthau says there is all this cotton\nand wheat and corn here. Look at our porkchops.\nLook what We pay for porkchops.\" Find out how\nmuch butter there is in storare.\nDrocott:\nIt is one of the biggest sunnlies they have had\nin many years.\nA.S.Jr:\nAbout fifty per cent. It is un fifty per cent.\nButter is un fifty per cent. \"My should I pay\nfifty per cent more? This stuff that is -oing\nto England - it is a damn lie. Somebody is\nspeculating in this thing. He is right. He\ntells ne there is SO much butter. There is all\nthis sugar in Cuba. There is four hundred fifty\nmillions of bushels of wheat and a new wheat crop\ncoming on in Canada. Why should my bread go\nup? I am not going to stand for it.\" You will\nget somebody mad. I forget, is it twenty mill-\nion pounds of butter in storage? Pork, tell\nthem, one bushel of corn, ten bushels of corn,\none pound of pork, that in the ratio. And all\nthis corn in storage. How about it, Dakota?\nRegraded Unclassified\n- 30 -\nInston:\nI think that is rood. I think you have -ot to\niramatize this.\nSure you do.\nMaton:\nI think two or three pages of that and then\ncondense the other.\nMore than that.\nTecton:\nBut I wouldn't stick to food nlone,\nWell, cotton. Herbert, if I - well, let me\ntry it. If I can just zet over - if I can arouse\nthe housewives of Am rica to what it means to\nthem, then Leon's bill will 70 through.\nThe way it is now, he hasn't got too rood a chance.\nLet me just take that an-le and the impact on -\nI can't sell my bones and the other things he\nsaid. And don't forget the house. Don't for et\nthe house. How, you two guys (White and Kuhn)\nare working on this thing?\nEfter\nWell, Ferdie hasn't yet, but he says he has free\ntime from now on.\nThe\nI am coing to net to it.\nWell, Ferdie, if you two men could stay behind\nnow, I would like to arranze how I can ret you\nun to the country so It will be most convenient.\nAnd then I will devote all Monday to this.\nAre you physically able to work on this tomorrow?\nEain:\nOh, yes.\nHow about you, Harry?\n-hite:\nOh, yes.\nRegraded Unclassified\n18\n- 31 -\n.........\nAnd you cal all \"O to bed Tuesday night or\nget drunk, I don't care which, or do both.\nhite:\nIt is a joint product, and I think it could\nprobably it. be improved. We have all had a hand in\nDo you want somebody from Hans' office?\nlite:\nI should think 50,\nM.Jr:\nWho, Miss Michener? One person.\n...ite:\nCan't we work down here and then brin- the prod-\nuct un to you?\nYes, but I don't want more than three people coming\nto the country.\nI think the more important thing is those who\nwork on it.\nwell, the 38 people here. But how about coming\nto the country?\n,hite:\nLet's continue to work on it and whenever you\nare ready to --\nBut who from Mr. Hans' shop must come up?\nWichener:\nWell, do you mean, Mr. Mite, for somebody --\nSite:\nI don't think it matters with moes up to the\ncountry and ets the ideas, but I do think it\nwould be helpful if those who have been working\non it could continue to work on it.\nX.X.Jr:\nEverybody should.\nDell:\nYou and Ferdie can TO un to the country. That\nis all you need, I think, is just everybody\nwork on it while it is here, and when it cooz\nRegraded Unclassified\n79\n- 32 -\nto the country just White and Ferdie can work\non it.\nH.M.Jr:\nCan everybody do it?\nKuhn:\nWe have got this afternoon.\nWhite:\nAnd by tomorrow noon we can have another draft,\nI think, that is close along the lines that you\nwanted. Now, if you want to spend time on it\nSunday, that would give us a little more time.\nH.M.Jr:\nWell, that was my thought, you see. I can work\non it Sunday night.\nWhite:\nAnd then - now, Henderson is still on the Hill,\nso that I think that - I am sure you won't\nbe called Monday, so we will have all day Mon-\nday.\nH.M.Jr:\nI won't go up Monday.\nO'Connell:\nNo, Tuesday is the day, and you may not even\nbe reached Tuesday.\nH.M.Jr:\nWonderful.\nWhite:\nSupposing we have another draft that incorporates\nthe ideas that you have had and you will go over\nthat Sunday. You will suggest some more changes.\nWe will work over that again Monday and sometime\nMonday afternoon it will be in shape.\nM.M.Jr:\nThat is all right. But I want everybody that\nis here to help, please. I am very, very ser-\nious about this. It can just completely ruin\nour whole Defense Savings Bonds program.\nGaston:\nI suppose there isn't much danger at this\nstage of stirring more inflation, more consumer\nRegraded Unclassified\n80\n- 33 -\ndemand by talk. It will have some effect, but\nit won't have a great deal of effect because\nthere has been so much inflationary talk already.\nOf course everybody gets up before a Congressional\nCommittee and talks about the danger of infla-\ntion, that sets a few more people off and does\nstart an increased demand and reduced supplies.\nWhite:\nWell, let's go at it.\nH.M.Jr:\nFerdie and Harry stay behind a minute. You are\nabsolutely right, Herbert.\nUnclassified\n1st Draft Aug 8th, 1941 Meeting 2:00 P.M.\n81\nPreliminary Draft\nStatement of the Secretary of the Treasury\nPefore the House Committee on Banking and Currency\nI am in full agreement with the objectives of the\nEmergency Price Control Bill, and with the general methods\nby which the bill seeks to attain these objectives.\nWe have been talking out the problem of preventing\ninflation for a long time, but until recently the question\nhas been largely academic. Now, however, we are faced with\nthe urgent, practical necessity of grappling with it. We\nare faced with 8 situation ripe for the development of inflation.\nIn many respects the price situation today closely resembles\nthat of the corresponding period in 1916, when, as we now know,\ninflation was actually on the way, We have now, as we had then,\na moderate rise in the cost of living, a greater rise in the\nwholesale price index, and a sharp rise in the prices of basic\ncommodities. It is the latter rise which constitutes the danger\nsignal. Pasic commodity prices rise first; the wholesale pri ce\nindex always lags greatly behind the index of basic commodities,\nwhile the cost of living does not show anything like the full\neffects of inflation until long after the seeds of inflation\nhave taken root.\nI do not mean to imply that price rises have already gone\n50 far that there is no stopping; that it is too late to prevent\ninflation. Rut strong forces are under way which will end in\nw\nRegraded Unclassified\n82\ninflation unless we do something about it. Obviously, the\ntime to do something about inflation is before it occurs,\nnot after it has gathered momentum.\nThe forces now in operation making for further price\nrise are both potent and persistent.\n- 2 -\nOur defense expenditures are rapidly increasing. During\nthe fiscal year 1942 they will he two and 8 half times as much\n83 in the fiscal year 1941, and even that increase does not\ntake account of extension of the Defense Program made after\nJune 1, and of additional sums needed for Lend-Lease. It\nmust be remembered that a large part of the defense expenditure\nis being financed through borrowing which, in effect, increases\nthe total money demand for goods. The net borrowing for the\nfiscal year 1942 will be at least twice as large as in the\nprevious fiscal year.\nAs our defense program grows we must expect further\nupward pressure on prices. The program provides additional\nincome for large sections of the public without increasing\ncorrespondingly the supply of consumption goods upon which\nthat income would ordinarily be spent. It has been estimated\nthat the money going to the pockets of the people of the\nUnited States will be increased by more than $10 billion during\nRegraded Unclassified\n83\nthis fiscal year. Naturally they will want to spend part\nof that increase on consumption goods. If the supply of\nconsumption goods available is not increased proportionately,\nnothing can prevent the prices of such goods from rising\nunless positive preventive steps are taken. And, unfortunately,\nthe defense program is already operating to curtail the supply\nof some consumption goods.\nThe inflationary force of defense expenditures has been\nsupplemented during the past year by a sharp expansion of\nbank credit. At the same time the shortage of raw materials\nfor civilian goods, absorption of idle capacity in many\nindustries, and cutting off of normal foreign sources of supplies,\nare also operating to make the price situation worse.\nWe are all sufficiently aware of the destructive effects\nof inflation. Unlike the situation in 1916 we are now\n- 3 -\naware of what is happening in our price structure. We should\nprofit by this knowledge and take prompt and effective action\nto avert a repetition of the price movements of 1917 to 1920.\nIt is admitted by those who have studied the problem\nthat unwarranted price rises cannot be prevented through\nthe machinery which now exists. Experience of the last six\nRegraded Unclassified\n84\nmonths has demonstrated that voluntary cooperation and moral\nsuasion though effective in many instances are not adequate\nto check unwarranted and unreasonable price rises. This\nPill gives authority to the President to fix price ceilings\nunder conditions which are designed to protect both the consumer\nand the seller.\nI feel strongly that unless we adopt now some such\nreasonable and moderate system as this, we shall be forced\nlater to take more drastic steps.\nHowever, I believe the Bill should be changed in two\nrespects. One of the changes I would suggest relates to\nagricultural commodities and the other to rent. I shall\nhave more to say on these matters later.\nThough T strongly urge the passage of this bill, I\nshould like to emphasize that it constitutes only one of the\nseveral measures that are necessary to prevent inflation.\nIf We place exclusive reliance upon measures included in\nthis bill we are bound to be disappointed. Fixing price\nceilings without appropriate fiscal measures, and without\ne readjustment of the fundamental supply and demand re-\nlationships, is certain to prove inadequate in this country\nR.S it has proved inadequate in every other country that has\ntried it. An attempt to legislate prices is bound to be\nunsuccessful unless it is accompanied by measures to increase\nRegraded Unclassified\n85\nthe supply and reduce the demand for goods.\n- 4 -\nThe most effective protection against inflation is to\nincrease the supply of goods that people want to buy. Not\nonly would such action be most in accord with our system\nof free enterprise and competition, but it also would yield\n8 higher standard of living. We must, therefore, make much\ngreater efforts than we are making to expand the production\nof those basic products which are needed not only to meet\nmilitary needs but civilian requirements as well. People\nmust have as many things available to buy with their money\nas it is possible to produce without impeding our defense\nprogram.\n/\nUnfortunately it may be necessary to curtail the production\nof certain consumption goods for 8 while because we do not\nhave the plant capacity necessary to satisfy both defense\nand civilian needs. We need, for example, more iron and\nsteel for defense, but we should leave no stone unturned to\nincrease our capacity for iron and steel production so that\nlater we shall be able to increase our output of electric\nrefrigerators as well as guns. In the meantime, during this\nperiod of necessarily curtailed consumption, every encourage-\nRegraded Unclassified\n86\nment should be given to the production of those goods which\ndo not compete with defense needs.\nI believe we have failed to push our production of\n-oods to the full capacity of our enormous productive\nresources. n considerable volume of unemployment still\ncrists, and there are also millions who, though not classified\n65 unemployed, could be added to the working force if the\njobs were easily available. In many plants, there is unused\navailable capacity, and the sources of necessary raw materials\nhave not been fully utilized. Greater utilization of these\n1dle resources would go 9 lon- way toward protecting us against\ninvistion.\n\"herever there are any artificial restraints, whatever\ntheir character, which are operating to prevent full utilization\nof\n- 5 -\ncapacity, steps should be taken to have them removed. There\nis less excuse for restrictions on supplies of commodities\nnow than ever before. We should make every attempt to bring\nin more S pplies from other countries, particularly those\nsupplies in which shortages are already appearing. Every\neffort should be made to supplement imports of commodities which\nRegraded Unclassified\n87\nare scarce with identical or substitute products in this\ncountry.\nAbove all, we must make full use of those supplies that\nare available. We ought not to tolerate the withholding of\nsurpluses from the market when prices of such commodities\nare rising unduly. In this connection we are fortunate in\nhaving large supplies of various agricultural commodities\nwhich might be made available to the market. The supply of\nwheat is the largest on record and supplies of some other\nfarm products are the largest in many years. For many\ncommodities the price situation which now exists provides\nthe opportunity that we have long awaited for selling\nGovernment-held stocks. These stocks of commodities should\nbe released for consumption as rapidly as is necessary to\nprevent unreasonable price rises. By doing so we will not\nonly contribute to the stabilization of commodity prices in\ngeneral but also clear the warehouses for future agricultural\nemergencies.\nThe Government now holds 7 million bales of cotton.\nCotton prices have risen from 9-1/2 cents per pound on\nAugust 1, 1939, to over 16 cents per pound at the present\ntime. Yet the Senate has passed a bill prohibiting all sales\nof Government-held stocks of cotton, the prohibition to continue\nRegraded Unclassified\n88\nuntil Congress shall otherwise provide.\nIf legislation is enacted freezing the Government's\nsupplies of cotton we will have laid the basis for a\nspeculative price\n- 6 -\nboom. The unfavorable crop situation and the restriction\non silk imports favor such A boom in prices. In view of\nthe danger of inflation and in view of the importance of\ncotton in the price structure, it would seem that the time\nis most inopportune to enact legislation of that character.\nWe should give careful thought to stabilizing the prices\nof those farm products that enter directly into the cost of\nliving, since an upward trend in living costs is 8 powerful\nInfluence toward increasing wage rates, and hence toward\ngeneral price inflation. The price of food, which makes\nup one-third of the consumer hudget, has already risen\nfaster than during the first two years of World Har I.\nThere are too many people who are looking at farm\nprices from a purely short-run viewpoint, with no apparent\nregard for the calamitous after-effects of inflation. Have\nthey forgotten the experience of 1920, when farm prices\ndropped more than fifty percent in 8. single year? I want\nto see a healthy development of agricultural prosperity, and\nRegraded Unclassified\n89\nwith that objective T helped to initiate, and have\ncontinued to support, our agricultural program. But no\none with the interest of agriculture sincerely at heart can\nirnore the danger signals ahead.\nIt would, d' course, be ideal if we could adjust the\nInequality between the amount of goods available to be\nmirchased and the amount of purchasing power available to\nbuy them entirely in the manner which I have been discussing\n--\nthat is, by increasing the supply of goods.\nUnfortunately, this is impossible of immediate accomplish-\nment because of the large proportion of the total output which\nmust 70 into the defense effort and thus is not available\nto satisfy civilian\n- 7 -\ndemand. Therefore, if the balance between supply and demand\nfor civilian consumption is to be redressed, it must be done\nin part by cutting down demand.\nIn seeking a reduction in total expenditure for civilian\npurposes, We might well begin with the Tederal Funget, Every\neffort should be made for economy in State and local govern-\nment expenditures and for A curtailment of borrowing ty State\nend local governments for non-emergency purposes.\nRegraded Unclassified\n90\nAny curtailment in government expenditures possible is,\nhowever, small in comparison to the contraction of total expendi-\ntures which is desirable.\nThe great bulk of the reduction must come from private,\nrather than from public, spending. After all, total non-\ndefense expenditures of the Federal Government in this year\nwill amount to less than one-tenth of the amount of total\nspending by private persons who had not received their\nincomes from the Government. We obviously must seek most\nof the necessary reduction in expenditure in the larger group.\nThe most powerful instrument which the Federal Govern-\nment has for the reduction of private expenditures is taxation.\n/\nThis instrument may also be used selectively to reduce the\ndemand for scarce commodities and particularly for those for\nwhich there is a special need for the defense effort. The\ntax bill which has just passed the House of Representatives\nrepresents A step forward. Serious consideration ought to\nbe given, however, to the more vigorous impostion of selective\nexcises at the present time. And as I indicated to the Finance\nCommittee of the Senate last Friday, it will be necessary in\nany event that yet heavier general taxation be imposed next\nyear if we are to maintain successfully the balance between\nsupply and demand.\nRegraded Unclassified\n9!\n- 8 -\nGovernment horrowing from current consumer incomes\nserves the same purpose in controlling inflation as does\ntaxation -- that is, it transfers purchasing power from\nprivate citizens to the Government without increasing its\ntotal amount. This purpose is accomplished to a considerable\nextent by the sale of ordinary Government obligations pro-\nvided that these are purchased by others than commercial\nbanks. A large proportion of such obligations sold to non-\nbanking investors is paid for, however, from idle balances\nwhich in any event would not have been spent during the\ncurrent period. When the proceeds of such borrowing are\nspent by the Government they, therefore, increase the total\nspending stream and so fail to contribute to the equilibrium\nwhich I have been discussing.\nThe Treasury Department is particularly anxious to\nborrow as large B proportion of its total requirements as\npossible from current consumer incomes. In order to do this,\nwe are looking particularly to the sale of defense savings\nbonds and stamps. The sale of these securities has been\nproc reding ouite satisfactorily and during the three months\nof May, June, and July amounted to slightly over a billion\ndollars. Of course, by no means all of this came from consumer\nRegraded Unclassified\n92\nincomes. We are gratified, however, that in each month an\nincreasing proportion of total sales was made to small\nsubscribers. We are directing our major effort more to\nplacing these securities where they do the most good from\nan anti-inflationary point of view -- that is, in the hands\nof purchasers from current income -- than to increasing their\ntotal sales. We are also, through the issuance of tax\nanticipation notes, using the borrowing power as e means of\nreducing the effective lag hetween the accrual and payment\nof the income tax -- thus increasing the effectiveness of that\ntax 83 an instrument to combat inflation.\nJ -\nIn addition to these strictly fiscal measures, other\nmeasures for reducing the amount of civilian purchasing\npower may have to be used.\n,\nAmong these are control over\nconsumer credit, over new capital issues by corporations,\nand selective controls over the extension of hank credit for\nopecified purposes.\nEach of these types of control would strike directly at\n9. source of non-defense spending, and 30 would relieve the\nupward pressure on prices oth generally and at points where\nit is particularly acute. I should consider them greatly\nsuperior, therefore, to the more general type of credit control,\nRegraded Unclassified\n93\nthe immediate effect of which is merely to raise money rates.\nUnder more normal conditions the effect of the imposition\nof such general controls is to reduce borrowing and hence total\nspending. I cannot emphasize too strongly, however, that the\ntotal amount of borrowing which will have to be done by the\nFederal Government under present conditions is affected only\nby the needs of the defense effort and not by money market\nconditions. Under such circumstances, it seems eminently more\nsensible for the Government to shut off competing demands than\nto endeavor to bid against them on 8 price basis for restricted\namount of funds.\nThe expansion in the supply of consumption goods and the\nrestriction in the expenditure on such goods both serve to\nprevent inflation in an over-all manner. That is to say,\nthey exert pressure to keep down the general level of prices.\nBut the problem of inflation cannot be solved by these broad\nmethods of control alone. Even with expanded output of\nconsumption goods and restricted expenditure on such goods\nthere will still\n- 10 -\nremain areas in which the public will want to spend more\nmoney than the supply of goods available in these areas\nRegraded Unclassified\n91\ncan absorb without an inflationary rise in prices. This bill\nis suited particularly to control the areas of partial inflation\nwhich cannot be reached by the over-all action of the other\nmethods of control.\nThese three methods of preventing inflation -- expanded\nproduction, restricted expenditure, and price control --\nsupplement each other, each increasing the effectiveness of\nthe others, and all together providing an effective program\nfor dealing with the problem. The three methods are equally\nnecessary.\nI should like to point out that the effectiveness of such\na program is enhanced when the three methods of preventing in-\nflation are not used at cross purposes. Price control must not\nlimit the flow of materials available for expanded production.\nFurthermore, by its very nature, price control must be flexible\nto be successful. For these reasons I believe it would be pre-\nferable to omit from the bill the minimum celling for agricultural\ncommodities and the provisions limiting rent control in defense\nareas to low-cost housing. The rigidity in prices imposed by\na prescribed ceiling may make it difficult to prevent inflation\nand impossible to prevent post-war maladjustment of prices and\npost-war depression.\nWith these modifications, T am whole-heartedly in favor\nof the Emergency Price Control Pill.\nRegraded Unclassified\n95\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE August 8, 1941\nTO\nSecretary Morgenthau\nFROM\nMiss Michener\nawar\nSubject: Changes in parity price basis\nThis is in response to your request for information on\nthe changes that have been made during the past 5 years in\nthe basis for calculating parity prices of farm products.\nFew changes have been made in the basis for calculating\nparity prices in recent years. Those changes that have been\nmade are listed below.\n(1) In the Agricultural Adjustment Act, approved\nMay 12, 1933, the base period for all agricultural commodities\nexcept tobacco was declared to be the period August 1909 to\nJuly 1914. The base period for tobacco was declared to be\nthe period August 1919 to July 1929.\n(2) In an Act approved August 1935, taxes on farm real\nestate and interest on farm indebtedness were added in cal-\nculsting the index of prices of goods bought by farmers,\nwhich 18 used as a factor in determining parity prices. The\neffect of this change was to raise parity prices for all\nproducts using the pre-war (1909-14) base.\n(3) In an Act approved August 1935, potatoes were changed\nto a post-war base.\n(4) In an Act approved February 1938, freight rates\nwere added in the calculation of parity prices for all orod-\nucts using a pre-war base.\n(5) In an Act approved November 1940, the base period\nfor certain types of tobacco (burley and flue-cured) was\nchanged from August 1919 - July 1929 to August 1934 - July 1939,\nRegraded Unclassified\n96\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE August 8, 1941\n10\nFerdinand Kuhn, Jr.\nFROM\nHerbert Merillat\nPRESS OPINION ON TAXES:\nFIGHTING INFLATION\nHouse action on the tax bill and the consideration of\nprice-control legislation have focussed attention on the economic\naspects of the defense program. In all sections of the press\nthere has been 8 growing awareness of the danger of inflation,\nwith increased attention to means of checking the inflationary\n(\nspiral.\nPrice Control\nMost of the press has come reluctantly to the conclusion\nthat 8. price-control law with teeth in it is necessary. The\nPresident's message describing the prospect of inflation was\nregarded as clear and convincing. No one, however, is satisfied\nwith the control system provided by the bill introduced in Con-\ngress. The criticism most often made is that the failure to\nprovide for control of wages and the allowance of large increases\nin farm prices makes effective price control under the proposed\nact impossible.\nRegraded Unclassified\n2 1 .\n297\nPapers in farming regions tend to slide over the treatment\nof food prices and emphasize the danger of failing to control\nwages. The metropolitan press, however, excoriates the \"farm bloo\"\nfor attempting not only to ensure farm prices amounting to 110%\nof parity but for scheming to fix minimum prices for farm products.\nThe financial journals see in the measure 8. plan to control\nindustrial profits, not to control effectively prices in general.\nThey assert that increasing labor costs and other costs of produc=\ntion, together with maximum prices for finished products, will\nresult in diminished profits but will do nothing to check infla-\ntion.\nTaxes and Inflation\nIt is generally recognized that price control in itself\nis not an adequate safeguard against inflation. Taxes which would\nreduce mass purchasing power are regarded as an important and more\nbasic safeguard.\nWith the increased attention given to inflation has come n\nshift in the argument for & broader income tax base. Previously\nreduced exemptions have been urged mainly on the grounds that the\nmass of the electorate should be made tax-conscious and have a\nsense of sharing directly in the defense program. Now the emphasis\nis on the usefulness of the income tax in siphoning into the\nTreasury dollars which otherwise would compete for consumer goods.\nRegraded Unclassified\n98\n- 3 -\nThe President's recommendation of lower personal exemptions\nand Chairman Doughton's statement that a broader base or general\nconsumption tax is likely in B. future tax bill have revived edi-\ntorial hopes that the Senate will reduce exemptions in the current\nbill. The prophets think the Senate will likely take this action\nto fill the $300 million gap left by the removal of compulsory\njoint returns from the House bill. The Doughton forecast of lower\nexemptions in the near future has given rise to the question, Why\nnot broaden the tax base now, rather than after the inflationary\nspiral has wound higher?\nThe House Tax Bill\n€\nEditorial appraisals of the tax bill as it passed the\nHouse are in general agreement on several points:\n1. Personal income tax. The failure to broaden the base is\ncriticized, as already noted.\n2. Corporation taxes. There is little criticism of the\ncorporate taxes. The House is praised for rejecting the\nexcess profits plan urged by the President and the Treasury.\nThe meager mention of corporation taxes in the press indi-\ncates satisfaction with that part of the bill and 8. wish\nto let sleeping dogs lie.\n3. Mandatory joint returns. The press outcry against this\nproposal was maintained at 8. high pitch until the House\nvoted on the bill. Rejection of the proposal was greeted\nwith satisfaction.\n4. Excise taxes. This part of the bill is regarded as a\nhodge-podge resulting from political trading. Heavy\nexcises on articles competing for materials with defense\nindustries are urged.\nRegraded Unclassified\n99\n- 4 .\nTax Anticipation Notes\nThe tax anticipation notes received little editorial notice\nas they went on sale. Such comment as appeared, however, continued\nto be favorable. The chief criticism of the notes -- that tax\nrevenues will be spent before collected -- has been discounted by\nsuch leading conservative papers as the New York Times and the\nWall Street Journal. While granting that the criticism would be\nvalid in normal times, these papers hold that in the present\nemergency the sale of the notes constitutes a desirable and neces-\nsary form of borrowing.\nRegraded Unclassified\n100\nAugust 8, 1941\n2:08 p.m.\nHarold\nIckes:\nWe have the plan now submitted by these oil\ncompanies to build the pipe line, and one of\nthe important clauses - there's one on amor-\ntization.\nHMJr:\nYes.\nI:\nJesse Jonee is coming in with his lawyer to\ndiscuss the plan generally at three o'olock,\nand I was wondering whether you could send\nsomeone over from the Treasury.\nHMJr:\nSure. Three o'clock at your office?\nI:\nYes.\nHMJr:\nI'll have someone there.\nI:\nAll right.\nHMJr:\nThank you.\nRegraded Unclassified\n8/11/41\n101\necretary Morgenthau will attend this confer-\nce himself and will take Harry White with\nmell. White so informed. Wallace's office\nalso informed.\n102\nOFFICE OF THE VICE PRESIDENT\nWASHINGTON\nAugust 8, 1941\nThe Honorable\nThe Secretary of the Treasury\nDear Mr. Secretary:\nThe Vice President has asked me to\ninform you that he has called the first\nmeeting of the Economic Defense Board for\nWednesday, August 13 at 9:30 a.m. at this\noffice, which is room 261 Senate Office\nBuilding.\nVP vlauner effr,\nSincerely yours,\nHarold Young\nAssistant to\nThe Vice President\nRegraded Unclassified\n103\nAugust 8, 1941\nDear Bill:\nThe New York Times, in its September 11, 1940, issue,\nprints the following in connection with & statement made by\nyou In Buffalo:\n\"He predicted that airplane production, in-\ncluding military and large commercial planes in\nthe United States, would be 3,000 a month by\nJuly, 1941.\"\nI have just received & report from OPM on July air-\nplane production. These figures show that the following\nplanes were produced during July:\nFighting planes\n626\nTraining planes\n829\nLarge commercial planes\n18\nTotal\n1,473\nThese figures fall 80 far short of the estimate which\nyou made last September that I an really worried. When are\nwe really going to begin to produce planes so that we will\nhave & surplus to divide with England, China and Russia rather\nthan 4 defleit?\nYours sincerely,\n(Signed) Henry\nr. William 5. Knudsen,\nDirector General of OPM,\nSocial Security Building,\nWashington, D.C.\nCopies to: Secretary of State\nSecretary of Var\nSecretary of Navy\nSidney Hillman\nby M - 2.45pm Sanges\nRegraded Unclassified\n8/14/41-\n104\nHajr saw Helsering and John\ntoday-\n105\nmessage telephoned to\nCommissioner Hebering\n8/12/41- memo came down\nfrom house 8/12/41\nRegraded Unclassified\n106\nTREASURY DEPARTMENT\nWASHINGTON\nOFFICE OF\nAugust 8, 1941.\nCOMMISSIONER OF INTERNAL REVENUE\n-\n-\n. REVENUE\nTO:\nSecretary Morgenthau\nFROM:\nMr. Helvering\nThere is submitted to you herewith a\nmemorandum which has been handed to me by\nMr. Irey, giving a final report of the ac-\ncomplishments in the investigation of the\nso-called Louisiana series of cases.\nIt 1s interesting to note that in these\ncases there have been one hundred and forty-\nnine persons convicted; in addition, recom-\nmendations for additional taxes have been made,\nor will be made in the near future, aggregating\nmore than $6,000,000.\nG.H.H.\nEnc.\nImant\nLee Mr. Y Lohu, Pline\n11.0 to war to at\nthink Me an\nfor luin 142\nRegraded Unclassified\n102\nTREASURY DEPARTMENT\nWASHINGTON\nOFFICE OF\nCHIF, INTELLIGENCE UNIT\nAugust 7. 1941,\nBURIAU OF INTERNAL REVENUE\nTO:\nMr. Helvering\nFROM:\nElmer Irey\nI am in receipt of a final general report from\nActing Special Agent in Charge Lohn, covering the\ninvestigation of the lest series of so-called Louisiana\ncases, and I am sure that the information below, which\nis shown in the report of Mr. Lohn, will be of interest\nto you and the Secretary.\nThese cases grew out of the investigation of the\nincome tax liability of Dr. Jamés Monroe Smith, who at\nthe time the investigation was commenced was president\nof the Louisiana State University and Agricultural and\nMechanical College. Before the agents had gone very\nfar into the case, it was disclosed that Dr. Smith was\nusing funds and securities of the university for his own\nuse or 8.3 collateral in the purchase of grain futures\nto the extent of more than a half million dollars. When\nit became apparent to Dr. Smith that his breach of trust\nwould come to light because of the investigation, he\nattempted to secure the endorsement of his grain specu-\nlations by the university's board of supervisors. He\napproached the then Governor Richard W. Leche with the\nproposal that the board ratify his grain speculations\nas having been carried on by him on behalf of the uni-\nversity. Accordingly, a meeting was held in the\nGovernor's Mansion on Sunday, June 25, 1939, attended\nby Governor Leche, Lieutenant-Governor Earl K. Long,\nDr. Smith, and David Ellison, Attorney General of the\nState, Dr. Smith later claimed that at that meeting\nhe was advised by the others present to leave the\nstate until the matter of his embezzlement blew over.\nAccordingly, he fled to Canada the same night and\nGovernor Leche resigned the following day, in the\nobvious hope of stopping any general investigation.\nMeanwhile, the investigation by the special agents\nbrought to light certain situations which caused the\npress to launch 8. political reform campaign, and public\nRegraded Unclassified\n108\n- 2 -\nopinion was 30 aroused in the state that all hopes\nthat former Governor Leche and his followers had of\navoiding an investigation faded. During the ensuing\nweeks, the federal grand jury in New Orleans, the\nIntelligence Unit, and Post Office inspectors, 08\nwell as other government agencies, inquired into the\nactivities of the state's most prominent personages.\nThese investigations resulted in a total of fifty-two\nindictments, involving one hundred forty-nine in-\ndividuals and forty-two organizations. All of these\nindictments except thirteen related either to income\ntax evasions or use of the mails to defraud. In\nthese latter cases, the Intelligence Unit obtained B\ngreat part of the evidence upon which the mail fraud\nindictments were based. Some of the evidence used in\nthe other thirteen indictments (Connally Act and\nSherman Anti-Trust cases) was also obtained by the\nIntelligence Unit in the course of their investiga-\ntions of alleged income tax evasions.\nTo this date, thirty of the indictments have been\nclosed, resulting in a total of fifty-three years\nimprisonment being imposed and fines totaling more\nthan $60,000 being assessed. Nine of the cases, in-\nvolving some of the most prominent political figures in\nLouisiana, were tried before juries and convictions\nobtained, Fifteen of the indictments were terminated\nby pleas of guilty, while pleas of nolo contendere were\nentered in five cases. In one single case, the defend-\nents were acquitted by a directed verdict. Some of the\ndefendants were named in more than one indictment, and\nthe total of one hundred forty-nine persons convicted\nrefers to individuals regardless of the number of times\nthey were indicted.\nIn these investigations, a total of $5,888,393.79\nin taxes and penalties has been recommended for assess-\nment, as indicated in the attached Schedule 1.\nA great part of the investigation in the remaining\nnineteen tax cases has been completed, and it is estimated\nthat these cases will involve approximately $353,000 in\ntaxes and penalties. The details of these cases are con-\ntained in the attached Schedule 2.\nRegraded Unclassified\n- 3 -\nThese investigations were conducted under the\nimmediate direction of Acting Special Agent in Charge\nFrank W. Lohn, who had assigned to him four experienced\nspecial agents assisted by three younger special agents\nof his division, who worked in cooperation with two\nrevenue agents from the New Orleans Division and six\nrevenue agents assigned from other revenue agents'\ndivisions. This was a picked group of agents and all\nof them performed outstanding services. They are en-\ntitled to a large share of the credit for the accomplish-\nments achieved. Each of them assumed his full share of\nthe responsibilities connected with the task and each\nfaithfully carried out his assignment and consequently\nmerits special commendation for the work completed by\nthe group.\nWhile these investigations may properly be con-\ncidered as having been completed, there remain to be\ninvestigated the returns of a considerable number of\nrelated taxpayers against whom some information has\nbeen assembled. Schedule 4, attached, shows the names\nof these taxpayers, whose returns will either be fully\nexamined or concerning whom some inquiry will be made\nas a result of information pending in our files.\nI feel that the accomplishments in these cases\nreflect very considerable credit on the Bureau of\nInternal Revenue and its field officers, both among\nthe Internal revenue agents and the special agents\nof the Intelligence Unit. Undoubtedly, these inves-\ntigations, most particularly in the State of Louisiana,\nhave had a very wholesome effect and have increased\nimmeasurably the respect for our investigating officers.\nTHE\nEnes.\nRegraded Unclassified\n110\nSCHEDULE 1\nINVESTIGATIONS COMPLETED\nAS OF JUNE 30, 1941\nCase\nTotal Taxes\nNumber\nTaxpayer\nand Penalties\nCriminal Proceedings\nResults\nSI-6386-E\nHenry J. Miller (Enrolled Agent),\nConvicted with Newman,\nFinal report recom-\nNew Orleans, Louisiana\nHarris, and Shushan for\nmended that card\nusing mails to defraud\nto practice as\nagent before\nTreasury Department\nbe revoked.\nSI-14135-F\nWin or Lose Corporation\nSeymour Meiss, James A.\nSeymour Weise pleaded\nNoe, and Win or Lose\nguilty 11-19-40 at\nCorporation indicted\nsame time he entered\n10-3-40 for evasion of\nplea in case SI-\nincome and excess-profite\n16425-F. Imposition\ntaxes of Win or Lose\nof sentence suspended;\nCorporation; aiding,\ndefendant placed under\nassisting, counseling,\nprobation five years\nand advising in prepara-\nbeginning after son-\ntion of false income\ntence of four years\ntax returns; and con-\nserved in SI-16425-F.\nspiracy\nJames A. Noe arrested\n10-4-40; trial to\nbegin August 11, 1941.\nSI-15479-F\nHart Enterprise Elec- $ 6,099.38\nNot recommended\nSupplemental report\ntrical Company, Inc.\nrecommended net in-\n(Old case)\ncome be increased\n$44,431.85 represent-\ning unreported inter-\nest from L.S.U. &\nA.&M. College, fiscal\nyear 6-30-36.\nSI-15615-F\nJ. H. Handley\n884.43\nNot recommended\nMrs. J. H. Handley\n21.20\nNot recommended\nSI-16072-F\nJames Monroe Smith\n297,891.48\nIndicted 8-21-39, yr. 1936 Plended guilty 11-10-39;\nsentenced to 30 months.\nRegraded Unclassified\nSCHEDULE 1 (Continued)\nCase\nTotal Taxes\nNumber\nTexpayer\nand Penalties\nCriminal Proceedings\nResults\nSI-16356-F\nFelix Maggiore\n$\n6,624.69\nIndicted 9-18-39\nSentenced 11-12-40 to 18\nmonths and fined\n$1,000 and to pay all\ncosts of prosecution on\ncount 1; imposition of\nsentence on count 2\nsuspended for 5 years.\nThomas J. Campbell\n3,885.38\nNot recommended\nRelated to SI-16356-F\nMrs. Thomas J. Campbell\n2,433.42\nNot recommended\nRobert Dalovisio\n151.54\nNot recommended for eva-\nAcquitted 11-15-40; re-\nsion; indicted for\nlated to SI-16356-F\nconspiracy\nJeal Fassio\n80.26\nNot recommended\nRelated to SI-16356-F\nFrank Neszio\n142.80\nNot recommended\nRelated to SI-16356-F\nPort Commission Club (Partnership)\nRelated to SI-16356-F\nFrank & Bob Bar & Cafe (Partnership)\nRelated to SI-16356-F\nGeorge W. Woodard\nIndicted 9-18-39, for\nRelated to SI-16356-F\nconspiracy to defraud\nand SI-16515-F; ac-\nquitted 11-15-40 in\nboth cases.\nSI-16366-F\nW.T. Burton\n978,131.63\nRecommended\nMrs. W. T. Burton\n719,739.43\nNot recommended\nSutton Joint Account\n(Partnership)\nSI-16367-F\nW. T. Burton Co., Inc.\n387,862.24\nRecommended against 1. T.\nBurton, L. Brown, Bruno\nR. Schulz, Mrs. A. Burton,\nand Herman Mazur for con-\nspiracy to defeat and evade\nincome taxes of W. T. Burton\nCompany, Inc., fiscal years\nended July 31, 1936, 1937,\nand 1938; also against W. T.\nBurton for miding and noplet-\ninc in the filing of a Tolge\nRegraded Unclassified\n112\nSCHEDULE 1 (Continued)\nCase\nTotal Taxes\nNumber\nTaxpayer\nand Penalties\nCriminal Proceedings\nResults\nSI-16368-F\nBurton-Sutton Oil Co.,\nNone\nNot recommended\nInc.\nSI-16378-F\nM. E. Hart\n62,019.72\nRecommended for 1936\n(Jeopardy assessment;\nMrs. M. E. Hart\n44,426.17\nNot recommended\n(M. E. Hart committed\n(suicide 9-6-40.\nSI-16379-F\nNational Equipment Co.\n39,658.07\nNot recommended\nSI-16425-F\nSeymour Weiss\n190,487.45\nIndicted 8-7-39 for eva-\nSentenced 11-19-40 to\nsion and conspiracy,\nfour years, sentence\n1936\nto run concurrently\nwith a sentence of 2½\nyears imposed 9-15-39\non mail fraud charge;\nsentence suspended five\nyears on conspiracy\ncharge.\nSI-16444-F\nRichard W. Leche\n63,870.47\nRecommended\nJeopardy assessment\n11-5-40; case being\nconsidered by U. S.\nAttorney.\nMrs. Elton R. Leche\n48,980.56\nNot recommended\nSI-16477-F\nDr. James A. Shaw (Dec'd) 47,013.41\nNot recommended\nSuicide 8-20-39.\nMrs. James A. Shaw\n226.95\nNot recommended\nGeorge B. Conover\n217.57\nNot recommended\nRelated to SI-16477-F;\nMrs. George B. Conover\n173.89\nNot recommended\nclosed on basis of RAR;\ntaxpayer agreed to\nfindings\nSI-16512-F\nLeon C. Neisa\n137,316.79\nRecommended; indicted\nDate for trial not set.\n5-13-40 for evasion\nSentenced 10-31-40 to\n1936, 1937, and 1938,\nserve five years on\nand for filing false\nmail fraud charge-\nclaim for refund for\nappealed.\nMry. Leon C. Weise\n89,655.39\n1936\nF. Julius Dreyfous\n371.18\nNot recommended\nRelated to 81-16512-F\nMrs. F. Julius Dreyfous\n371.18\nNot recomended\nSolis Seiforth\n174.44\nNot reconmended\nRelated to 01-16512\n676.66\nNot\nUnclassified\n113\nSCHEDULE 1 (Contimued)\nCase\nTotal Taxes\nNumber\nTexpayer\nand Penalties\nCriminal Proceedings\nResults\nSI-16515-F\nH. A. Mitchom\n$ 3,723.19\nIndicted 9-18-39\nSentenced 11-18-40 to\n18 months and fined\n$1,000 and to pay\ncosts of prosecution\non count 1; imposition\nof sentence on counts\n2, 3, and 4 suspended;\nprobation five years.\nMrs. H. A. Mitchem\n2,297.51\nNot recommended\nSI-16515-F\nC. M. Lewis\n1,611.89\nIndicted 9-18-39\nReceived same sentence\nas H. A. Mitchem (same\njacket number).\nUnjacketed\nFreddie Romero\n654.40\nNot recommended\nMrs. Freddie Romero\n654.40\nNot recommended\nUnjacketed\nSam 11. Smith and Wife\n912.02\nNot recommended\nSI-16525-F\nGeorge A. Caldwell\n21,770.59\nIndicted 1-12-40, years\nPleaded guilty 2-14-40;\n1935 to 1938\nsentenced to 24 months\nMrs. George A. Caldwell\n14,513.71\nNot recommended\nSI-16584-F\nLee Circle Hotel Company\n79,331.32\nNot recommended\nTransferee assessment\nagainst Roosevelt\nHotel Corporation.\nSI-16605-F\nAllen Christman\n1,018.97\nNot recommended\nSI-16686-F\nFrank Costello\n350,053.64\nIndicted 10-9-39\nNot guilty 5-15-40\nSI-16687-F\nPhilip Kastel\n444,130.78\nIndicted 10-9-39\nNot guilty 5-15-40\nSI-16688-F\nDudley Geigerman\nNone\nIndicted 10-9-39\nNot guilty 5-15-40\nSI-16690-F\nJames Brocato\nNone\nIndicted 10-9-39\nNot guilty 5-15-40\nSI-16689-F\nHarold Geigerman\nNone\nIndicted 10-9-39\nNot guilty 5-15-40\nSI-16702-F\nGray D. Morrison\n4,425.60\nIndicted 6-11-40, year\nPleaded guilty 11-27-40;\n1938\nsentence suspended\nfive years; taxes end\npenalties paid.\nSI-16703-F\nThe Progress Publish-\n2,015.62\nNot recommended\ning Company, Inc.\nRegraded Unclassified\n111\nSCHEDULE 1 (Continued)\nCase\nTotal Taxes\nNumber\nTaxpayer\nand Penalties\nCriminal Proceedings\nResults\nSI-16721-F\nJulius Pace\n$\n23,383.04\nIndicted 2-13-40\nPleaded nolo contendere\non 3 counts and guilty\non 2 counts on 1-11-41;\nsentence deferred to\n3-3-41, at which time\nimposition of sentence\nmas suspended until\nfurther orders of the\ncourt, to give defend-\nent time to make ef-\nfort to settle civil\nliabilities; probation\n2 years.\nSI-16760-F\nYounger Motor Truck\n9,379.56\nNot recommended\nCompany, Inc.\nSI-16765-F\nPelican Oil & Gasoline\n10,960.46\nNot recommended\nCompany, Inc.\nSI-16779-F\nL. Austin Fontenot\n2,245.22\nNot recommended\nSI-16780-F\nD. J. Doucet\nNone\nNot recommended\nSI-16782-F\nCecil T. Phillips\n5,322.54\nNot recommended\nMrs. Cecil T. Phillips\n529.91\nNot recommended\nSI-16933-F\nMeyers, Whitty & Hodge\n(Partnership)\nNot recommended\nInvolving Joseph C.\nMeyers, John F.\nWhitty, and J. Floyd\nHodge; no additional\ntaxes for partners,\nST-16935-P\nJames Themas\n7,653.11\nNot recommended for\nCase closed without\nevasion; recommended\nprosecution.\nfor failure to file\nInformation returns\nMrs. James Thomas\n6,224.79\nNot recomended\nUnjecketed\nNotal\nNot recomended\nto ST-4(93)-E\nCulver! Compony\n(Portnorship)\nCoverage two\nlicine\nnot\nrequired\nThe\nto Regraded Unclassified\n115\nSCHEDULE 1 (Continued)\nCase\nTotal Taxes\nNumber\nTaxpayer\nand Penalties\nCriminal Proceedings\nResults\nSI-16936-F\nLouisiana Tractor and\nRelated to SI-16935-F;\nMachinery Company\n(Partnership)\nNot recommended\n$9,747.71 recommended\nagainst partners.\nGeorge E. McNutt\n$\n2,501.15\nNot recommended\nPartner - SI-16936-F\nMrs. George E. McNutt\n2,501.15\nNot recommended\nM. J. Carbone\n3,092.19\nNot recommended\nPartner - SI-16936-F\nMrs. M. J. (Willard)\nCarbone\n1,440.05\nNot recommended\nMrs. M. J. (Eileen)\nCarbone\n213.17\nNot recommended\nSI-16966-F\nLouis C. LeSage\n369.60\nNot recommended for\nIndicted with Seymour\nevasion of his\nWeiss (SI-16425-F) on\nincome taxes\nmail freud charges;\nalso indicted 8-7-40\nfor conspiracy in con-\nnection with Weiss' in-\ncome taxes; sentenced to\nyear and a. day on mail\nfraud charges 9-15-39;\nimposition of sentence cm\nincome tax conspiracy\ncase suspended for five\nyears 11-19-40.\nUnjacketed\nHarvey Poltier\n13,259.45\nNot recommended\nAssessment recommended by\nrevenue agent's report\nand agreement signed,\nbased entirely on in-\nformation furnished by\nIntelligence Unit.\nUnjacketed\nOla Silcott\n108.00\nNot recommended\nBased on income from R. T.\nBurton (SI-16366-F)\nSI-16990-F\nJoseph Pipitone\n1,149.16\nNot recommended\nRelated to SI-16721-F\nSI-17103-F\nHart. Enterprise Elec-\n164,133.23\nRecomended against\ntrical Co., Inc.\nM. E. Hart, who\nlater committed\nsuicide\nRegraded Unclassified\n116\nSCHEDULE 1 (Continued)\nCase\nTotal Taxes\nNumber\nTaxpayer\nend Penalties\nCriminal Proceedings\nResults\n51-171/7-F\nWilliam C. Bankin\n0\n41,549.81\nRecommended\nRelated to SI-16444-F,\nSI-1714M-F, and SI-\n17511-F; case sub-\nmitted to U. S. Attorney,\nwho does not believe\nprosecution advisable.\nSI-17143-P\nPhilip A. Gehlback\n26,266.89\nIndicted 11-29-40,\nPleaded guilty and sen-\nyears 1937 and 1938\ntenced to OISE year and\none day end pay costs\nof prosecution, 12-14-40.\nMrs. Philip A. Gehlbach\n815.09\nNot recommended\nSI-17209-F\nEstate of Charles S.\n435,722.84\nNot recommended\nIndirectly related to Ls.\nBentley\n\"scardals\" investige-\ntions\nSI-17262-F\nSumma Caldwell\n8,169.98\nNot recommended\nlirs. Summe Caldwell\n8,169.98\nNot recommended\nSI-17263-F\nV. L. Caldwell\n15,874.57\nNot recommended\nMrs. V. L. Caldwell\n15,874.57\nNot recommended\nSI-17387-F\nHampton Reynolds\n965.25\nRecommended for con-\nspiracy to defraud\nthe United States;\nrecommended to recover\n$124,247.22 fraudu-\nlently obtained from\nthe United States\nMrs. Elma F. Reynolds\n965.25\nNot recommended\nJoseph A. Creven and wife\n9,153.46\n(Recommended to recover\n(\nLouis N. Lang and wife\n9,582.78\n($91,770.51 fraudulently\n(Partners in Craven-\nJoseph D. Walker and wife\n12,797.65\n(obtained from the United\n(Lang Company\nWilliam Stunley Behrren\n15,079.66\n(States; and for conspir-\nr\n(AC) to defraid the U. 5.\nSI-17388-E\nJohn 7. Farmer\n642,05\nNot recommended\nPronecytion not recom-\nin Income firer\nnape, Inch Regraded Unclassified\n117\nSCHEDULE 1 (Continued)\nCase\nTotal Taxes\nNumber\nTaxpayer\nand Penalties\nCriminal Proceedings\nResults\n3I-17401-F\nMr. and Mrs. J. B.\nMiller\n$\n226.25\nNot recommended\nSI-17427-F\nJoseph E. Loper, Sr.\n12,260.89\nRecommended\nMrs. Retta Loper\n13,404.86\nNot recommended\nSI-17511-F\nJoseph H. Connolly\n23,592.98\nRecommended\n(\nBoth indicted 4-3-41;\nMary H. Comolly\n23,592.98\nRecommended\nArraigned 6-25-41 and\npleaded not guilty; re-\n(\nquested 15 days' time\n(\nwithin which to file\n( technical pleadings with\n( the court, which was\n( granted. Bond set at\n( $5,000 each.\nSI-17575-F\nJohn M. Nunes, et ux.\n456.14\nNot recommended\nSI-17605-F\nN. C. McGowen, et al.\n397,212.06\nNot recommended-\nbarred by the\nstatute of\nlimitations\nSI-17662-F\nL. G. Boxwell\n21,891.16\nNot recommended\nMrs. L. G. Boxwell (O.A.)\n(9,415.73)\nNot recommended\nSI-17478-F\nHomer W. Smith, et ux.\n274.24\nNot recommended\nSI-17718-F\nArthur A. Steiner\n4,230.35\nIndicted 4-8-41 for\nArraigned 6-25-41 and\nincome tax evasion;\npleaded not guilty in\nindicted 1-12-40\nincome tex case; re-\non mail freud charge\nquested 15 days' time\nMrs. Arthur A. Steiner\n1,417.14\nNot recommended\nwithin which to file\ntechnical pleadings,\nwhich was granted.\nSI-Special\nRobert S. Maestri, et ux. 171,246.59\n(\n(\nWilliam H. Helis\n309,461.80\n(Not recommended\n(Case jacket requested\nCanal Oil Company, Inc.\n5,763.22\n(\n(\n5-28-41.\nLincoln Oil Company, Inc.\nNone\n(\n(\nTotal\n$5,888,393.70\nRegraded Unclassified\n118\nSCHEDULE 2\nJACKETED CASES UNDER INVESTIGATION\nAS OF JUNE 30, 1941\nEstimated\nCase\nTaxes to be\nNumber\nTaxpayer\nRecommended\nRemarks\nSI-15616-F\nHenry A. Reid\nSI-15617-F\nWalter J. Goos\nSI-15618-F\nWeston Fanguy\nSI-15619-F\nGus Broussard\nSI-16572-F\nR. Thomas McDermott\nRelated to Maxwell\nSupply Company\nSI-16713-F\nW. T. Nolin\nSI-16759-F\nJohn M. Fush\nFormer purchasing agent for\ndock board and custodian\nof \"deducts\" fund\nSI-16983-P\nUlic J. Burke\nRelated to SI-16721-F\nSI-17577-F\nBernard Titche, Jr.\n$ 1,000.00\nSI-17734-F\nEarl K. Long\n50,000.00\nInvestigation suspended\npending completion of\nMoran group of cases\n8I-17876-F\nBruce Cartwright\nRelated to SI-17734-F\nSI-17898-F\nJoe L. Lieber\nSI-17900-F\nEather E. Stein\n2,000.00\nIndicted 1-12-40 on mail\nfraud charge\nSI-17926-F\nAlfred Moran, et ux.\nSI-17927-F\nArthur J. Moran, et ux.\nSI-17928-F\nHarry P. Moran, et us.\nSI-17929-F\nThomas J. Moran, et ux.\n300,000.00\nSI-17930-F\nEstate of Mrs. Thomas\nJ. Moran\nSI-17931-F\nA. Jay Moran\nSI-17932-F\nHarry P. Moran, Jr.\nTotal\n$353,000.00\nSI-6428-E\nVictor Canfield (Eurolled Agent)\nPrepared false returns\nin W. T. Burton cases\nSI-6457-E\nUlan Hill (Enrolled Agent)\nRegraded Unclassified\n119\nSCHEDULE 3\nINFORMATION REPORTS SUBMITTED\nAS OF JUNE 30, 1941\nTo Internal Revenue Agent in Charge\nTexpayer\nAddress\nRemarks\nAlbert and Deen\nBaton Rouge, La.\nMade kickbacks to George Caldwell,\nSI-16525-F\nAmerican Heating and\nPlumbing Company\nNew Orleans, LA.\nMade kickbacks to George Caldwell\nArchitectural Stone and\nPlastering Company\nNew Orleans, LA.\nMade kickbacks to George Caldwell\nLeo Cafiero\nDonaldsonville, Le.\nSupplemental to SI-16935-F; re-\nceived graft from James Thomas\n2. J. Colfry\nNew Orleans, La.\nMade kickbacks to George Caldwell\nConsolidated Roofing Co.\nNew Orleans, La.\nMade kickbacks to George Caldwell\nD. A. Lubricant Company\nIndianapolis, Ind.\nPaid \"commissions\" to James Thomas\nGove Davis\nOlla, Louisiana\nReceived graft from James Thomas\nDeCeneres Brothers\nShreveport, La.\nReceived graft from James Thomas\nDixie Coin Machine Company\nSaw Orleans, La.\nRelated to SI-16725-F (Julius Pace)\nJules Fisher\nCabinash, La.\nReceived graft from Jamos Thomas\nHolzer Sheet Metal Works,\nInc.\nNew Orleans, La.\nMade kickbacks to George Caldwell\nHenry Lenter Hughes\nNatchitoches, LA.\nDistrict attorney for Watchitoches\nand Red River Parishes\nF. J. Hunter\nShreveport, La.\nReport regarding graft payments by\nPelican 011 and Casoline Company,\nInc. (SI-16765-F)\nBen King, et. al.\nLake Charles, La.\nClifford A. King\nNew Orleans, La.\nMade kickbacks to George Caldwell\nJóhn D. Klorer, Jr.\nNew Orleans, Lo.\nReceived graft from Jemes Thomas\nGeorge F. Lee\nAlexandria, La,\nReceived graft from James Thomas\nLouisiana Materials Co.\nNow Orleans, La.\nPaid \"commissions\" to James Thomas\nE. A. McIlhenny\nAvery Island, La.\nRelated to Leche case (SI-16444-F)\nMerlwether Gravel Company\nShreveport, La,\nPaid \"commissions\" to James Thomas\nThe Progress Publishing\nCompany, Inc.\nHarmond, La.\nSI-16703-F\nF. J. Riley Heating and\nPlumbing Company\nMonroe, LA.\nMade kickbacks to George Caldwell\nRose Gravel Company\nShreveport, La.\nPaid \"commissions\" to James Thomas\nShell Petroleum Company\nSt. Louis, Mo.\nPeid \"commissions\" to James Thomas\nSteel Construction Company\nBirmingham, Ala.\nPaid \"commissions\" to James Thomas\nDathorlin and Scranton\nNew Orleans, Le.\nInvestigation made to get evidence\nin connection with mail fraud\ncase of Newman, Harris, et al.\n1. G. Thomas\nNew Orleans, La.\nPaid \"commissions\" to James Thomas\nTrin City Gravel Company\nMonroe, La.\nPaid \"commissions\" to James Thomas\n1. E. Woodard\nArcadia, Le,\nReceived graft from James Thomas\nRegraded Unclassified\n120\nSCHEDULE 3 (Continued)\nTo Collector of Internal Revenue\nTaxpayer\nAddress\nRemarks\nEquities, Inc.\nNew Orleans, La.\nReport in regard to social\nsecurity taxes\nL. E. Frazar\nMerryville, La.\nReceived graft from James\nThomas (SI-16935-F)\nSheriff Druce Reed\nAllen Parish, La.\nAlleged graft payments by\nStephens-Cowart (a\nStephens-Cowart Partnership\npartnership)\n(\nOakdale, La.\nto Sheriff Druce Reed\nJohn Stabile\nNew Orleans, La.\nRegraded Unclassified\n121\nSCHEDULE 4\nTAXPAYERS WHOSE RETURNS HAVE BEEN CONSIDERED\nOR WILL BE THE SUBJECT OF SOME INVESTIGATION\nName\nAddress\nRemarks\nAsset, Henry\nNew Orleans, La.\nCaptain of New Orleans police-\nbribes from law violators\nBurnett, Mr. and Mrs. J. M. Baton Rouge, La.\nBlanchard, Max A.\nNew Orleans, La.\nBrennan, Goorge\nNew Orleans, La,\nBusiness manager of associations\nof operators of misic boxes and\niron claw machines\nBrown, Joe 17.\nNew Orleans, La.\nGambler-friend of Seymour Weiss\nBurke, Edward\nNew Orleans, LA.\nCouvillon, Foster\nBaton Rouge, La.\nPurchasing agent for Louisiana\nHighway Commission\nCrule Oil Sales Company\nNew Orleans, La.\nRelated to SI-17427-F (Loper)\nDelcambre, Isadore\nDelcambre, La.\nDerbes, Louis J.\nHouma, La.\nDonner, Charles J. (Dec'd)\nNew Orleans, La,\nRelated to Shushan case\nDornier, Joseph B.\nConvent, La.\nCollector of graft on slot\nmachines\nEast Texas Refining Co.\nDallas, Texas\nRelated to SI-16425-P and SI-16444-F\nMwards Transportation Co.\nHouston, Texas\nRelated to Helis case\nEllison, David M.\nBaton Rouge, La.\nFormerly attorney general of La.\nEvans, if. C.\nBaton Rouge, La.\nFarley, Elmer\nNew Orleans, La.\nFlorist, nursery; monopoly on\nstate business\nFarrell, J. E., et ux.\nFort Worth, Taxas\nRelated to SI-14135-F (Win or Lose\nCorporation)\nFeacel, n. C.\nWest Monroe, La.\n011 and gas operator; related to\nSI-16444-F\nFisher, Joseph\nLafitte, La.\nFisher, Jules\nCabinash, LA.\nFitere, Charles 8.\nNew Orleans, La.\nRelated to Shushan case\n3111, Thomas J.\nNew Orleans, LA.\nNortman, Paul\nNew Orleans, La.\nAlleged racketeering in the\nLongshoreman's Union\nJohnson, Edward W.\nNew Orleans, La.\nAlleged racketeering in the\nLongshoreman's Union\nJames, William B.\nNew Orleans, La.\nC. P. A. Related to SI-17147-F\nand SI-17148-F\nRegraded Unclassified\n122\nSCHEDULE 4 (Continued)\nName\nAddress\nRemarks\nLandry, Fernand\nDelcambre, La.\nLindsey, Coleman and Cora\nBaton Rouge, La.\nLong, Mrs. Rose McConnell\nBaton Rouge, La.\nWidow of late Senator threy P. Long\nGue Mayer Company, Ltd.\nNew Orleans, La.\nAllegedly keeping two sets of\nrecords, with the assistance\nof an internal revenue agent,\nwith intent to evade income taxes\nMoran, Alfred and Son\nNew Orleans, La.\nPartnership (See SI-17926-32-F)\nMoran, Thomas J. and Sons\nNew Orleans, La.\nPartnership\nMoran's Sons, Thomas J.\nNew Orleans, La.\nNaron Supply Company\nNew Orleans, La.\nPartnership (related to Moran group)\nO'Hara, Dr. Joseph\nNew Orleans, La.\nPerez, Leander H.\nDalcour, La.\nDistrict Attorney, Jefferson Parish\nPetroleum Sales Company\nNew Orleans, La,\nRelated to SI-17427-F (Loper)\nSehrt, Clem\nNew Orleans, La.\nSuperior Oil Company\nHouston, Texas\nOne of Helis interests\nUnited Gas Affiliates\nRelated to SI-16425-F and SI-16444-F\nWallace, George M.\nBaton Rouge, La.\nAttorney and legal adviser to\nEarl K. Long when Long was\ngovernor of Louisiana\nWhite, A. P.\nArcedia, La.\nWimberly, Lorris M.\nArcadia, La,\nState senator; received commissions\nfrom insurance agency handling\nstate business\nWimberly, Shirley G.\nNew Orleans, La.\nAttorney; law partner of former\nGovernor Earl X. Long\nRegraded Unclassified\n123\nAUG 8 1961\nMy dear Mr. Morgan:\nIn KY letter of Documber 30, 1940, with respect\nto the four blocks of Tennessee Valley Authority bonds ag-\ncregating $56,500,000, principal assum, I accepted the\nfour typewritten bends submitted to ovidence the obliga-\ntion of the Authority to the Secretary of the Treasury in\nthat amount, and stated that the interest payable by the\nAuthority beyend February 15, 1941, would be at the rates\nspecified in the bonds, valese they were not resold before\nAugust 15, 1941, in which 61.54 consideration would be given\nto reducing the interest cost to the Authority for the are\nrent interest period below the rates specified in the bonds.\nSince the bonds are not to be resold before August\n15, 1941, the interest cost to the Authority for the six-\nmonth period ending on that date will be at the rate of 1/2\nof 1 persent per amm, the came rate which has obtained\nsines the bonds ware eriginally purchased. Accordingly, the\n- of $141,250 in funds available for credit in the ascount\nof the Treasurer of the United States - August 15, 1941,\nshould be remitted to the Treasury.\nThe interest payable by the Authority beyond\nAugust 15, 1941, shile the bonds are still held by the\nTreasury, will be at the rate of 1 persont por - until\nfurther notice. It is N7 intention, hosever, to resell\nthree bonds to the public shartly, possibly part month.\nIn commection with the affering, it appeare advisable that\ncertain information regarding the Authority's financial\nposition and its expectancy with respect to & pregram of\nretirement of the bonds as they become mbjest to call for\nredemption prior to miurity, should be made public in\norder that bidders may nore intelligantly compute the\nRegraded Unclassified\n124\n- 2 -\nprices they are willing to pay for the bends of the\nfour different blocks. I will approxiate 14 if you\nwill furnish M at your earliest convenience such\ndate in this respect as you feel should be made -\nlie, to the end that the bends my be sold at the\nnest favorable prices obtainable. Just prior to the\noffering, the Treasury will cotimate the probable\npredus to be realized on the bonds and will with-\nhold from the public offering an amount of these\nbonde approximately equivalent to the estimated fig-\nuse, the bonds ao withheld to be repurchased by the\nAuthority. will you please advise me from which\nblock the Authority desires these bonds withheld.\nVery truly yours,\n(Signed) H. Morgenthau, Jr.\nSecretary of the Treasury.\nHenorable Mareourt A. Margan,\nChairman of the Board,\nTermassee Valley Authority,\nIncerville, Temasses.\nump\n8/7/42\nRegraded Unclassified\n125\nTREASURY DEPARTMENT\nPROCUREMENT DIVISION\nOFFICE OF THE DIRECTOR\nWASHINGTON\nAugust 8, 1941\nB ORANDUM TO THE SECRETARY:\nWeekly Report - Lease-Lend Purchases\n(8/1/41 - 8/8/41)\nRequisitions\nEstimated Cost\nCleared by O.P.I.\n$ 187,002,398.74\nAwaiting clearance by O.P.\n21,538,595.75\nTotal Pending Requisitions\n$ 208,540,994.49\nLess Requisitions for metals, where contracts\nwill be made for term periods and allocations\n(\nequired from O.P.M.\n$\n85,122,729.76\nTotal Pending Requisitions for Spot Purchases\n$ 123,418,264.73\nPurchases to 8/1/41\n$ 87,787,648.25\nPurchases 8/1 to 8/8/41\n15,921,740.50\nTotal to 8/8/41\n$ 103,709,388.75\nArrangements have been made for the establishment of priority\nratings by OPM prior to purchase negotiations by the Procurement\nDivision. This will enable prospective bidders to somewhat accurately\ndetermine possible deliveries.\nIn view of the widening scope of commercial purchases, discussions\nhave been had with the Division of Defense Aid Reports and OPM\nrepresentatives to further clarify policy in handling lend lease\nrequisitions whereby the Division of Defense Aid Reports will determine\nwhether requisitions come within the scope of the Lend Lease Act; OPL\nwill establish availability of materials requisitioned; and the\n(\nProcurement Division will make purchases.\nAn\nClifton E. Mack\nAttachments-7\nDirector of Procurement\nRegraded Unclassified\nCONTRACT\nNULLER\nCONTRACTOR'S NAME\nTICNER\nCOSO ODITY\nQUANTITY\nTOTAL VALUE\nDA-TFS-710\nNashua ufg. Co. Inc.\nChina\nBlankets\n600,000\nof\n669,000.00\nDA-TPS-741\nMarshall Field & Co.\n12\nBlankets\n100,000\n120,000.00\nDA-TPS-675\nThe American Fork & Hoe Co.\nU. E.\nHammers\n5,000\n6,300.00\nDA-TPS-683\nGane's Chemical Works, Inc.\n\"\nBarbitol\n16,000#\n53,200.00\nDA-TPS-750\nThe Plastergon Wall Board Co.\nII\nWallboard\nSq.Ft. 17,126,300\n343,382.31\nDA-TPS-685\nVlcheck Tool Co.\nII\nWrenches\n5,000\n675.00\nDA-TPS-358\nAllis-Chalmers Vfg. Co,\nH.\nTractors\n670,899.23\nDA-TPS-243\nChicago Flexible Shaft Co.\nIf\nClipping Machines\n200\n4,992.50\nDA-TPS-626\nSulphur Export Corp.\n\"\nDiscolored Sulphur\n126,000 LT 1,953,000.00\nDA-TPS-696\nBarber-Greene Co.\n\"\nDitcher & Spares\n13,191.41\nDA-TPS-654\nS K F Industries, Inc.\n\"\nBalls, Steel\n7.2 M\n1,402.38\nDA-TPS-671\nGanes Chemical Works, Inc.\n\"\nBenzocaine\n2,000#\n6,175.00\nDA-TPS-485\nThe Mohawk Rubber Co.\nIf\nTires\n120\n1,054.80\nThe Falls Rubber Co.\nn\nDA-TPS-487\nTubes\n5,000\n17,800.00\nThe Firestone Tire & Rubber Co.\nII\nDA-TPS-489\nTires\n4,640\n99,330.80\nDA-TPS-486\nLee Tire & Rubber Co. of N.Y. Inc\n=\nCases & Flaps\n400\n20,100.00\nDavid S. Ingalls\n\"\nDA-TPS-632\nCessna Airplane\n32,400.00\n126\nDA-TPS-631\nThe Palmer Oil Corp.\n\"\nCessna Airplane\nRegradedUnclassified\nCONTRACT\nhe\nJaul-\nto A.E\nTIDGER\nCO. CULTY\nn. TITY\nTOTAL VALUE\nDA-TPS-284\nAtlantic Aviation Sales, Inc.\nU.\n1.4\nlessna Airplane\n=\n32,500.00\n\"\nDA-TP5-C30\nF. E. Evans\nCessne Airplane\n32,460.00\nE. N. Wiggins Airways Inc.\n11\nDA-TPS-629\nCessna Airplane\n29,725.00\n\"\nDA-TPS-578\nCaterpillar Tractor Co.\nTractor, Winch, Trailbuilder\n6,972.38\nIf\nDA-TPS-749\nThe Upson Co.\nWallboard\n1,400,000 Sq.Ft.\n27,930.00\nIf\nDA-TPS-724\nBrown Co.\nEasy Bleaching Sulphite 2,000 T\n122,000.00\nDA-TPS-728\nSt. Joe Paper Co.\nIf\nKraft Pulp\n15,000 T\n862,500.00\n\"\nDA-TPS-705\nThe Phosphate ining Co.\nPhosphate\n17,500 T\n94,500.00\nIT\nDA-TPS-725\nRayonier, Inc.\nBlesched Sulphite\n9,500 ST\n688,750.00\nIf\nDA-TPS-709\nCoronet Phosphate Co.\nPhosphate\n39,000 T\n217,620.00\nII\nDA-TPS-727\nThe Champion Paper & Fibre Co.\nSemi-Bleached Sulphite 1,000 ST\n72,500.00\n\"\nDA-TPS-684\nGane & Ingram, Inc.\nCincophin\n2,000#\n7,000.00\nPulp Div. Weyerhaeuser Timber Co.\nIf\nDA-TPS-726\nBleaching Sulphite\n1,000 ST\n60,500.00\nGane's Chemical Works Inc.\n=\nDA-TPS-681\nPhenobarbitol\n20,000#\n76,000.00\nn\nDA-TPS-625\nSulphur Export Corp.\nSulphur\n81,000 LT\n1,255,500.00\nIf\nDA-TPS-226\nFairbanks, Vorse & Co.\nSpare Parts for Agric. &chy.\n1,082.77\nn\nDA-TPS-592\nThe White Votor Co.\nSpare Parts for Trucks\n25,626.89\n127\n\"\nDA-TPS-677\nS. B. Penick 6 Co.\nHydrastis\n6,000#\n22,650.00\nRegraded Unclassified\nTO\nTHE\nSECRETARY:\nCONTRACT\nNUMBER\nCONTRACTOR'S AE\nTIONER\nCO ODITY\nQUA TITY\nTOTAL VALUE\nDA-TPS-579\nU. S. Rubber Export Co. Ltd.\nU.K.\nTires and Flaps\n2\n28,934.31\nDA-TPS-580\nThe Lohawk Rubber Co.\n17\nTires\n50\n1,639.00\nThe Mansfield Tire & Rubber Co.Inc.\n\"\nDA-TPS-581\nTires, Tubes and Flaps\n78,449.25\nDA-TPS-582\nThe Firestone Tire & Rubber Co.\n=\nTires, Tubes and Flaps\n38,379.19\nIf\nDA-TPS-583\nThe Goodyear Tire & Rubber Co. Inc.\nTubes\n273.00\nIf\nOliver Farm Equipment Co.\n-\n26.03\nDA-TPS-81\n(Adj.Ded.)\n11\nDA-TPS-100\nDeere & Co.\n.58\n(Adj.Ded.)\n\"\nDA-TPS-744\nBehr - Manning Corp.\nStones, Oil\n11,808\n7,380.00\n\"\nThe Duff-Norton fg. Co.\nJacks\n100\nDA-TPS-748\n1,260.00\n11\nDA-TPS-638\nSchultz-O'Neill Co.\nPulverizer\n3,050.00\nInternational Harvester Export Co.\nIT\nDA-TPS-356\nTractors\n507,989.13\n11\nDA-TPS-618\nDeere & Co.\nPotato Diggers\n10\n13,367.86\ninn.\nIf\nDA-TPS-362\n/ Moline Power Implement Co.\nTractors\n337,170.24\nDA-TPS-752\nGeorge P. Fuller\nLockheed Airplane\n57,500.00\nn\nDA-TPS-298\nGeo. P. Muth Co. Inc.\n3,078.60\n(Adj.Add.)\n128\nII\nDA-TP5-624\nCharles B. Jackson, Jr.\nLockheed Airplane\n55,000.00\nRegraded Unclassified\nCONTRACT\nno 131-\nNEWSR\nCOMPRACTOR'S MAME\nTIONER\nCOMMUNITY\nPASTITY\nTOTAL VALUE\nDA-TPS-737\nThe Superior Cil Co.\nU.K.\nLockheed Airplane\n75,000.00\nDA-IPO-676\nBenzol Products Co.\nIf\nEthyl Cyanoscetate 6,000#\n7,500.00\nUnderwood Elliott Fisher Co.\n\"\nDA-TPS-962\nComputing achines\n14,580.00\n\"\nDA-TPS-663\nLaurens Bros.\nLathes, Turret\n2\n12,600.00\nH\nDA-TPS-367\nJames Fyfe\nManila Fiber\n734,050#\n22,837.32\nIf\nDA-TPS-368\nJames Fyfe\nLanila Fiber\n96,950#\n3,493.81\n\"\nDA-TPS-369\nHanson & Orth\nManila Fiber\n657,875#\n24,357.82\n19\nDA-TPS-370\n!/ac Leod & Co. Inc.\nManila Fiber\n692,500#\n21,394.38\nH\nDA-TPS-401\nJames Fyfe\nRanila Fiber\n277,000\n6,618.75\n\"\nDA-TPS-402\nJames Fyfe\nManila Fiber\n27,500#\n1,100.00\n=\nDA-TPS-403\nHanson & Orth\nManila Fiber\n277,000#\n12,387.19\nIf\nDA-TPS-404\nManson & Orth\nManila Fiber\n206,250#\n8,868.75\nII\nDA-TPS-405\nMacLeod L Co. Inc\nManila Fiber\n206,250#\n11,601.56\n\"\nDA-TPS-406 Henry N. Peabody & Co.\nanila Fiber\n401,650#\n16,002.81\n=\nDA-TPS-436 N.Y. wire Cloth Co.\n- 12,375.00\n(Adj.Ded.)\n\"\nDA-TPS-128 J. I. Case Co.\n285.95\n(Adj.Ded.)\n129\nIf\nDA-TPS-605 Caterpillar .ractor Co.\nSpare Parts for Tractors\n46,659.34\nRegraded Unclassified\nAUGUST\nCONTRACT\nRSQ ISI-\nNUMBER\nCONTRACTOR'S NA E\nTIONER\nCO. ODITY\nQUALTITY\nTOTAL ALUE\nDA-TPS-694 Dalzen Tool & fg. Co.\nU.K.\nTaps, Hand\n$\n75,845.00\nII\nDA-TPS-711 The Torrin ton Co.\nBearings, Needle\n10,700\n2,741.29\nDA-TPS-497 The Proctor & Gamble Distributing Co\n=\nGlycerine\n4,480,000#\n607,530.00\n\"\nDA-TPS-674\nBayonier, Inc.\nChemical Wood Pulp\n1,000 T\n85,000.00\nDA-TPS-736 Armour & Co. of Delaware\n11\nPeptone\n20,000#\n35,000.00\n=\nDA-TPS-702 The Wilson Laboratories\nPancreatin\n2,000#\n7,500.00\n\"\nDA-TPS-670 Mal linckrodt Chemical Wks.\nCarbromal\n6,000#\n30,000.00\n12\nDA-TPP-682 S.B. Pennick & Co.\nCascara Sagrada\n320,000#\n48,800.00\nDA-TPS-701 R. T. Greer & Co.\n\"\nwild Cherry Bark\n30,000#\n1,800.00\n\"\nDA-TPS-619 Morey Machinery Co. Inc.\nHand Screw Machines\n2\n1,700.00\n\"\nDA-TPS-593\nMack Mfg. Co.\nSpare Parts for Mack Trucks\n29,694.48\nif\nDA-TPS-693\nHill-Clarke chy. Co.\nLathe, Turret\n7,700.00\nGeneral Electric Supply Co.\n\"\nDA-TPS-851\nRadio Receivers\n18,291.55\nDA-TPS-488 The Mansfield Tire & Rubber Co.\nIf\nCases & Flaps, Tires\n186,584.00\nDA-TPS-747 The Mahoning Valley Steel Co.\n\"\nSteel Sheets\n401 GT\n29,573.23\nDA-TPS-769 Walworth International Co.\n\"\nPipe Fittings\n56,258.62\n\"\n130\nDA-TPS-315-1 Sharon Steel Corp.\nCarbon Steel\n2,732 GT\n157,488.96\nRegraded Unclassified\nMEMORA\n1\nTO THE SECRETARY:\nAU GUST\n1941\nCONTRACT\nREQUISI-\nNUMBER\nCONTRACTOR'S NAME\nTIOMER\nOllobity\nQUANTITY\nTOTAL VALUE\nDA-TPS-785\nThe Timken Roller Bearing Co.\nU.K.\nTubing\n11 GT $\n3,172.40\nDA-TPS-308\n(Adj.Add.)\nBethlehem Steel Export Co.\nn\n55,866.60\n\"\nDA-TPS-761\nGranite City Steel Co.\nTinplate\n774 GT\n96,846.90\nII\nDA-TPS-756\nBethlehem Steel Export Corp.\nTinplate\n6210 GT\n725,193.00\na\nDA-TPS-793\nLukens Steel Co.\nPlates\n1484 GT\n45,990.19\nu\nDA-TPS-792\nEllwood Forge Co.\nCrank shafts\n1000\n297,500.00\n-\nII\nDA-TPS-755\nWeirton Steel Co.\nTinplate\n10,055 GT\n1,076,383.91\nIf\nDA-TPS-757\nRepublic Steel Corp.\nTinplate\n7,254 GT\n831,289.72\nII\nDA-TPS-759\nYoungstown Sheet & Tube Co.\nTinplate\n3,080 GT\n362,445.03\nDA-TPS-352-1\n\"\n(Adj.Add.)\nAndrews Steel Co.\n8,606.52\nIt\nDA-TPS-758\nJones & Laughlin Steel Corp.\nTinplate\n4340 GT\n507,520.54\nII\nDA-TPS-760\nFollansbee Steel Corp.\nTinplate\n1510 GT\n181,974.55\n\"\nDA-TPS-797\nAtlantic Steel Co.\nWire rods\n542 GT\n31,201.86\nif\nLukens Steel Co.\nGalv. Plates\nDA-TPS-798\n260,452#\n15,727.98\n\"\nLukens Steel Co.\nGalv. Plates\n736,268#\n24,218.15\nDA-TPS-838\n131\n=\nDA-TPS-754 U. S. Steel Export Co.\nTerne Sheets and Tinplate 3617GT\nRegraded Unclassified\n503, 235.88\nMENORAOTM\nTO\nTHE\nSECRETARY:\nAUGUST 1941\nCONTRACT\nREQ ISI-\nNUMBER\nCONTRACTOR'S NAME\nTIONER\nCOLLODITY\nQUANTITY\nTOTAL VALUE\nDA-TPS-843\nWisconsin Steel Co.\nU.K.\nRerolling Billets\n11,827 GT\n$\n502,410.96\nDA-TPS-309-1\n(Adj.Ded.)\nRepublic Steel Corp.\n\"\n- 125,825.00\nDA-TPS-848\nAmerican Zinc Co. of Illinois\n\"\nZinc\n1,730,000#\n127,328.00\nDA-TPS-849\nThe American Metal Co., Ltd.\nIf\nZinc\n1,650,000#\n125,565.00\nDA-TP-853\nAnaconda Sales Co.\n\"\nZinc\n720,000#\n59,400.00\nDA-TPS-723\n(Adj.Add.) Laclede Steel Co.\n\"\n3,710.96\nPurchases 8/1 to 8/8/41\n$ 15,923,530.50\nContract DA-TPS-395 was cancelled in its entirety\n-\n1,790.00\nTotal Purchases 8/1 to 8/8/41\n$ 15,921,740.50\n132\nRegraded Unclassified\n133L\nAUG 8 1941\nDear Mr. Keynes:\nThank you for your expressions of approviation\nfor our work here. Tour - efferts have helped\nterminal outsblishing odogsato financial arrengments\nthe no Bhjasty's We will realise that 16\nis to our advantage to argedite is my my 10\n- the - in which - - constries are joined.\nI shall fullow the progres elecely M its details are\nwrind out and its operative results because materable.\nYour rough activities of the probable fature\ncourse of British dollar balances and gold holdings IN\nof internet. I join you is the hoye that as unferences\ncontingement will arice and that the funds will pm\nadequate to your main.\nPlease accept the yearself and Mrs. Sayana the\nkindert personal regards from Mrs. Marganthen and syself.\nSincerely years,\n(Signed) 1. Morgenthaw. se.\nSecretary of the treasury\nProfesser J. E. Laymen,\nThe British topyly Council in Borth amerios,\nBez 600, Benjamin Franklis Station,\nWankington, D. c.\n16- secretary Iffice\n26-mm\nHDW TILE COPY\nRegraded Unclassified\n134\nTHE BRITISH SUPPLY COUNCIL :N NORTH AMERICA\nBox 680\nTELEPHONE REPUBLIC 7860\nBENJAMIN FRANKLIN STATION\nWASHINGTON. D. c.\nThe Vonble Tenry Morgenthau, Jr.\nJuly 28th, 1941\nUnited States Treasury,\nmichington.\nDear us Secretary,\nI sm hoping to catch e clipper from New York early tonorrow\nm raleg =nd en very sorry that I shall not have an opportunity to\nLike leave of you. There have been long delays in getting 4. draft\nfrom the State Department on the matter I nontioned to you. Your\nstrics shout this proved quite right! But at last to-day I have got\nrecething, and the best I can do with it is, I think, to take it\nis ok 1th me immediately for discussion at home.\nI na very grateful for the good progress which has been made\n12/ the essential help which you have given Phillips and myself in\ngetting Forward. The establishment of the Committee at the Treasury\n702 If great idea and has made all the difference. I shall be able to\nreport to the Chancollor of the Exchecuer that be can now have full\ncondidence in the adequacy of the financial arrangements which luve\nLoan set up. Clearly it will take somo time to work the out in\nand it is not yet possible to estim to with any precision the\ntotil unntitative effect of the virious under discussion.\nBut we have now = sufficient margin to allow some of the reliefs\n(though not the biggest!) to fall through.\nOur estimate is that the British dollar balances and the cold\nhald by the Bank of England teken together should 10 (ue course attain\nthe desired level of $m600, not 1:00 must to grovide for contingencies\nbut inough to afford relief from antiety. P cinnot estimate at\nwhat date this figure will be reached. Much depends or wither old\ncomittment contracts result in punctual deliveries. Mitherto, as\nyou know, we have been better off sech month than e expected 13 a\nresult of serious delays in delivery, and It is porsible that the\nabove figure might be attained temporarily in the latter part of this\nyear. If 30, It *111 fall away next spring no - 10 point is 11kely\nto to reached, recovering again by the entrein of 1942, after rich\nour currently accruing incone (the 016 counituents having been sub-\nstantipliy cleared off) should stored our muttelnsRegradedUndlassified\nPersonal\n-2-\nforeseen developments.\nThese figures take account of our normal sources of income en\nour known commitments. They make no allowance for unforeseen out-\ngoings on the one hand or for possible windfalls on the other hand.\nI believe that the Chancellor of the Exchequer hopes to receive lot\nin the year a special receipt of gold of about $m120 from the South\nAfrican Government out of which South African Government debt in\nLondon will be redeemed, the stock being requisitioned from the\nBritish holders and handed to the South African Government for can-\ncellation.\nThank you for your kindness and hospitality to my wife and\nmyself. May we be remembered to your wife? We have stayed in\nWashington much longer than we expected. But it has beon 2 valuabe\nand interesting, and educative experience. I shall be able to give\nour Treasury in Whitehall E much truer picture of what Washington\nreally like; - and, I should like to add, the full story of what yo\ndid for us during the critical months at the beginning of this year\nwithout which irreparable dolays might have been suffered by this\nyear's war effort.\nYours sincerely,\nJMKeyns\nRECEIVED\nTreasury Department\nJUL 31 1941\nDivision of\nMonetary Research\nRegraded Unclassified\n135\nAUG 8 1941\nis. their any *\nI acknowledge with thanks your lotter of\nJuly 31, 1941, commying the Concralissine's -\npression of gratitude for the freesing of Chinsee\nassits in the United States.\nI - sure that you approviate the desirability\nof full cosperation between our Governments in the\nuncossaful administration of these freesing orders.\nI would appreciate it if you would energy to\nCommulissime Chiang Ent-shek the need for alone -\noperation in these matters and our sincere desire to\nadminister the control to the entual benefit of the\npeople of China and the United States.\nSincerely years,\n(Signed) 1. in;\nSecretary of the Treasury\nDr. T. V. Soung,\n1601 1 Street, 1. 3,\nWeekington, D. c.\nac-m.\n- 1\n8/5/42\nHOW\nFILE COPY\nRegraded Unclassified\n136\n1850\nPOST OFFICE Box 6677\n1601 V STREET N. W.\nWASHINGTON, D. C.\nJuly 31, 1941\nMy dear Mr. Secretary:\nI am in receipt of the following telegram\nfrom the Generalissimo, dated Chungking, July 31st:\n\"Now that the American Government has acceded to my\nrequest to freeze Chinese assets in the United States,\nwhich will be of great assistance to China, please\nconvey to the Secretary of the Treasury my grateful\nthanks for his strong support.\nChiang Kai-shek\"\nWith kind regards,\nYours sincerely,\nthe\nT. V. Soong\nThe Honorable Henry Morgenthau, Jr.\nSecretary of the Treasury\nWashington, D. C.\nRegraded Unclassified\n137\nAugust 8, 1941.\nDear Birgo:\nIt vas very good of you to write as, speaking\nof the comment you have heard in regard to the Bev York\nTimes editorial. I also appreciate your sending it to\nothers who might have missed seeing the Times for that\nday.\nI know you vill be pleased to hear that I have had\na number of letters commenting very favorably upon By\nstatement in regard to the sale of cotton, and that these\nhave come from different parte of the country and from\npeople in widely different walks of life.\nI hope that you, Mrs. Kinne and the children are well,\nand send ey vars regards to you all.\nSincerely,\n(Signed) 1. Horgestime, and\nMr. Birgo V. Kiame,\nBetter Homes & Cardens,\n420 Lexington Avenue,\nNew York, New York.\nGEF/dbs\nRegraded Unclassified\nBETTER HOMES & GARDENS\n138\nMEREDITH PUBLISHING COMMANY\nDES MOINES, TOWA\nvote 120 Lenington Now\nAugust 7, 1941\nMr. Henry Morgenthau, Jr.\nSecretary of the Treasury\nTreasury Department\nWashington, D. C.\nDear Mr. Morgenthau:\nMore than one person has mentioned to me that splendid\neditorial in The New York Times and the approval of it\nW&B unanímous.\nI am sending a copy of it to our people in Des Moines and\nalso to Ed Eastman, who doesn't are every issue of The New\nYork Times. Your many friends in advertising up here are\nbecoming more proud of you every day and are saying now\nthey wish there were more men like you in Washington.\nGood luck to you and keep up the fight.\nYour sincere friend and admirer,\ntime\nBirge #. Kinne\nBWK.st\nSAN FRANCISED\nLos\nORTHOIR\nPHILADELPHIA\nSTLANTN\nCHICAGE\nRegraded Unclassified\n139\nTREASURY department\nWASHINGTON\nAugust S, 1941\nMemorandum for THE SECRETARY:\nThe following report is made of Stamp sales at\n\"Treasury House\":\nJuly 1-August 6\n$26,550.90\nAugust 7\n232.50\nTotal\n$26,783.40\nGRAVES\nRegraded Unclassified\nIDENTIAL\nUNITED STATES SAVINGS BONDS\nComparative Statement of Sales During\nFirst Six Business Days of June, July, and August, 1941\n(June 1-7. July 1-8, August 1-7)\n(Amounts in thousands of dollars)\n:\n:\nAmount of Increase\n: Percentage of Increase\nSales\n:\n1\nor Decresse (-)\n:\nor Decrease (-)\nItem\nI\n:\n:\n:\nAugust\n:\nJuly\n:\nAugust\n:\nJuly\nI\nAugust\n:\nJuly\n:\nJune\n:\nover\n:\nover\nI\nover\n:\nover\nI\n:\n:\n:\nJuly\nI\nJune\n:\nJuly\nI\nJune\nSeries 3 - Post Offices\n$11,450\n$12,851\n$10,608\n-$ 1,401\n$ 2,243\n- 10.9%\n21.1%\nSeries E - Banks\n21,194\n19,277\n14,971\n1,917\n4,306\n9.9\n28.8\nSeries E - Total\n32,644\n32,128\n25,578\n516\n6,550\n1.6\n25.6\nSeries 7 - Banks\n6,516\n6,751\n9.670\n-\n235\n- 2,919\n- 3.5\n- 30.2\nSeries G - Banks\n47,502\n42,439\n59,974\n5,063\n- 17,535\n11.9\n- 29.2\nTotal\n$86,661\n$81,317\n$95,222\n5.344\n$13,905\n6.6%\n- 14.6%\nOffice of the Secretary of the Treasury, Division of Research and Statistics.\nAugust 8, 1941.\nSource: All figures are deposits with the Treasurer of the United States on account of proceeds of\nsales of United States Savings Bonds.\nNote: Figures have been rounded to nearest thousand and will not necessarily add to totals.\nRegraded Unclassified\nCONFIDENTIAL\nUNITED STATES SAVINGS BONDS\nDaily Sales - August 1941\nOn Basis of Issue Price\n(In thousands of dollars)\nPost Office\nBank Bond Sales\nAll Bond Sales\nDate\nBond Sales\nSeries E\nSeries E\nSeries In\nSeries G\nTotal\nSeries E\nSeries F\nSeries G\nTotal\nAugust 1941\n1\n$ 1,467\n$ 3,296\n$ 1,163\n$ 7.586\n$ 12,045\n$ 4,763\n$ 1,163\n$ 7.586\n$ 13,512\n2\n1,500\n3,030\n726\n6,101\n9,857\n4,530\n726\n6,101\n11,357\n4\n3,606\n4,376\n1,892\n10,092\n16,361\n7,983\n1,892\n10,092\n19,967\n5\n1,278\n2,822\n928\n7,334\n11,084\n4,099\n928\n7,334\n12,362\n6\n1,810\n4,195\n1,156\n10,752\n16,103\n6,005\n1,156\n10,752\n17,912\n7\n1,789\n3,475\n652\n5,636\n9,763\n5,264\n652\n5,636\n11,552\nTotal\n$ 11,450\n$ 21,194\n$ 6,516\n$ 47,502\n$ 75,211\n$ 32,644\n$ 6,516\n$ 47,502\n$ 86,661\nOffice of the Secretary of the Treasury, Division of Research and Statistics,\nAugust 8, 1941.\nSource: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of\nUnited States Savings Bonds.\nNote: Figures have been rounded to nearest thousand and will not necessarily add to totals.\nRegraded Unclassified\nReport on Some During May, June, and July, 1941\n(All figures in thousands)\nPost Office\nItem\nBank Sales\nAll Sales\nSales\nSeries E\nSeries E\nSeries ?\nSories G\nTotal\nSeries I\nSeries Pr\nSeries G\nTotal\n1. Number of bond units\nMay\n453\n430\n20\n91\n541\n683\n20\n91\n994\nJune\n492\n538\n21\n96\n655\n1,030\n21\n96\n1,147\nJuly\n632\n861\n22\n93\n976\n1,493\n22\n93\n1,608\nTotal\n1,577\n1,829\n63\n280\n2,172\n3,406\n63\n280\n3,749\n2. Dollar volume (issue price)\nMay\n$ 42,836\n$ 57,745\n$ 37,817\n$211,420\n$306,982\n$100,581\n$ 37,817\n$211,420\n$\n349,818\nJune\n40,788\n61,729\n28,876\n183,134\n273,739\n102,517\n28,876\n183,134\n314,527\nJuly\n50.558\n94,717\n27,359\n169,498\n291,574\n145,274\n27,359\n169,498\n342,132\nTotal\n$134,183\n$214,190\n$ 94,052\n$564,053\n$872,294\n$348,373\n$ 94,052\n$564,053\n$1,006,477\n3. Number of purchasers,\nexcluding second 00-\nowners\nMay\n218\n207\n4\n30\n241**\n425\n4\n30\n459**\nJune\n225\n246\n5\n31\n282**\n471\n5\n31\n507**\nJuly\n275\n375\n5\n30\n410**\n650\n5\n30\n685**\nTotal*\n718\n828\n14\n91\n933**\n1,546\n14\n91\n1,651**\nOffice of the Secretary of the Treasury, Division of Research and Statistics.\nAugust 8, 1941.\nSource: All dollar figures are deposite with the Treasurer of the United States on account of proceeds of sales of United States\nSavings Bonds. Estimates of the number of unite are pro-rated on the basis of daily reports by the Post Office Department\nand the Federal Reserve Banks during May and June. Estimates of the number of purchasers are based on special reports by\nthe Federal Reserve Banks covering the period May 1 through May 21, and, in respect to Series E, on similar data for\nSeries AD.\nTotals represent the number of different purchasers in the three-month period, allocated to the month of first purchase.\nEach series of bonds has been considered separately In estimating number of purchasers; hence totals are overstated in\nrespect to purchasers of more than one series.\nNote: Dollar figures have been rounded to nearest thousand and will not necessarily add to totals,\nRegraded Unclassified\n143\nDEFENSE SAVINGS STAFF\nADVANCE NOTICE RADIO PROGRAMS\nFRIDAY - AUGUST 8, 1941\nTime:\n11:45 - 12:00 P.M.\nProgram:\nOur Gal Sunday\nStation:\nVJSV and CBS Network\nTime:\n12:20 - 12:30 P.M.\nProgram:\nDaniel W. Bell, Under Secretary,\nTreasury Department Spenks on\nTax Savings Plan\nStetion:\nWRC and NBC Red Network\nTime:\n4:45 - 5:00 P.M.\nProgram:\nTreasury House Quiz\nStation:\nVRC - Washington, D. C.\nTime:\n8:00 - 8:30 P.M.\nProgram:\nGreat Plays\nStation:\nWJSV and CBS Network\nTime:\n8:30 - 8:55 P.M.\nProgram:\nYour Happy Birthday\nStation:\nSMAL and NBC Blue Network\nTime:\n9:00 - 9:30 P.M.\nProgrem:\nWings of Destiny\nStation:\nWRC and NBC Red Network\nBULOVA TIME SIGNALS PROMOTE DEFENSE BONDS AND STAMPS\nREGULARLY NOW AT THE RATE OF 428 AMNOUNCEMENTS DAILY\nOVER 134 RADIO STATIONS.\nRegraded Unclassified\n144\nAugust 8, 1941\nTO Mr. D. N. Bell, Under Secretary\nFrom Mr. Delano\nIn reference to the David Lawrence settle-\nenta which we have discussed, I have come to the following\nconclusions:\n1. The settlement with David Lawrence was made after\ncareful and thorough consideration of the relevant\nfacts upon reasonable belief that no alternative\nmethod would have returned a larger sun for the\ndepositors.\n2. Unless there was some fraudulent misrepresentation\nor lack of disclosure, which we had no reason to\nsuspect, the debt was worth no more than the settle-\nwent price.\n3. It is believed that our receiverships fared Letter\nthan other creditors of the same class.\n1. The first step in the settlement, acceptance of a\n20-year note (maturing five per cent per annum) for\nthe principal amount of the debt as it stood in 1939,\nafter substantial monthly payments for many months,\nWAS agreed to by all but one of about thirty other\ncreditors before being agreed to by our receiverships.\nThat one creditor later settled on the same basis\nas our receiverships. Bankruptcy or refuse in the\nChandler Act was believed to be & probable alterns-\ntive to acceptance of the 20-year note.\n3. The second step in the settlement, a lump sum payment\nof ten per cent or the principal of the 20-year note\n(the first five per cent installment having been paid\nto our two receiverships and two or three other cred-\nitors) was believed to be all the asset was worth and\nwas more than could be secured from several outside\nbuyers of such items. Most of the 20-year notes held\nby others are in default as to the first installment,\nwith the second installment coming due August 18, 1941.\nRegraded Unclassified\n145\n- 2 -\nMemorandum to Mr. Bell, Under Secretary\nTom Mr. Delano\n0. no know of no material facts, which would have\nresulted in a greater return to depositors, which\nwere unknown or left uninvestigated, except that 12\nsome representations of the debtor were untrue, it\nis possible that some hidden assets could have been\nincovered. As indicated above, there was no reason\nto suspect fraud.\n7. Decause many of the preliminary no otiations were\nhad by the receivers, and others, particularly the\ncompromise of 1939, were conducted by the Insolvent\nDivision staff, there is no file in either place. which\nreveals all of the investigations that were under-\ntaken, all of the facts that were known, and all of\nthe considerations that went into the final approval.\nmore was more consideration and discussion, and\nquestioning of the debtor in this case by receivers\nand by the administrative staff or the Insolvent\nDivision than in most of our compromise sottlements.\nNereover, one Judge examined the receivers on the\ninformation which they had assembled and another\nJudge called the debtor before him for further lon thy\nquestioning.\nThese conclusions are drawn from the facts and\nstatements contained in the attached detailed memorandum\ndiscussing this matter more fully.\nThe Chemical Bank and Trust Company of New York\nJity and the Marine Trust Company of Buffalo have assured me\ntheir responsible officers conducted very careful independent\ninvestigations leading to the acceptance of Mr. Lawrence's\n20-year notes. They apparently proceeded along the same lines\nas our receivers and insolvent staff end arrived at the same\nconclusions. As of today they regard the settlement as a\nrood one and entirely justified by the facts.\nRegraded Unclassified\n146\nAugust B, 1941\nMMMORANDUM FOR MR.\nSubject: Compromise settlements\nnegotiated by Mr. David\nLawrence with the receivers\nof the District National\nBank and the Federal-\nAmerican National Bank and\nTrust Co., of Washington,\nD. C.\nIn this memorandum I wish to augment with\nfurther facts and additional discussion the information\nin my memorandum of July 21, 1941 to Secretary Morgenthau.\nIt is not my purpose to attempt in this manner a Justi-\nfication of the settlements approved by my staff for I\nbelieve the files and the record made abundantly support\nthe action taken. No file, however, consisting of the\naccumulated correspondence and documents can ever set\nforth all of the circumstances which influenced the\naction taken and it is with the hope that the picture\npresented by the files may be better understood that I\nnow undertake to amplify it in this manner. The pro-\ncadure by which banks are liquidated under the Statute,\nthe limitations under which receivers perform their\ntasks and the nature of the supervisory work of this\noffice should be understood. The .'inancial condition\nof the debtor 18 set forth in financial statements but\nthe files do not contain an extended interpretation of\nhis condition made in the light of the receivers' problem.\nThe general objectives of this office in its work of\nliquidating banks do not appear, nor do the limitations\nof time, law or expense. The business judgment which\nhad finally to be displayed can only be determined by a\nprocess of deduction from the data contained in the files.\nI believe that these imponderables should be given their\ndue weight.\nRegraded Unclassified\n147\n- 2\nThe Federal-American National Bank and Trust\nCompany of Washington, D. C. suspended March 6, 1933,\nand WAS placed in conservatorship. It was placed In\ncharge of Cary A. Hardee, receiver, on October 31, 1933\nwho served until Lay 16, 1939 when he was succeeded by\nthe present receiver, Frederick J. Young. The total\nclaims proved against this trust amount to $8,370,000\nand dividends of 75% have heretofore been paid to the\ncreditors with a final dividend which will approximate\n0% to be distributed in the immediate future. The\nliquidation of this bank (with the exception of one\npiece of real estate) has been completed. All of the\nremaining asseta, with that excoption, were sold at\npublic auction on July 14, 1041 and it is anticipated\nthat the receivership may be wound up within the noxt\nfew months.\nThe District National Bank of Washington, D. C.\nauspended March 5, 1933 and, after EL period of conser-\nvatorship, was placed in the charge of Norman R. Hamilton\nes receiver, who served until July 2, 1936 when he was\nsucceeded by Justus S. Wardell, the present receiver.\nThe total claims proven against this receivership amount\nto $3,916,000, upon which dividends have been hitherto\npaid aggregating 85% while EL final cividend which will\napproximate 19, will be available within a few weeks.\nIn this case also liquidation has been completed except\nfor the sale of two parcels of real estate and a few\npending items, all other assets having been sold at\npublic auction July 16, 1941, and it is believed that\nthe receivership may be wound up within EL few months.\nAt suspension both of these receiverships held\nthe obligations of David Lawrence.\nThat held by the Pederal-American (ational Basic\nTrust Company consisted of a note made by the United\nStates Society, a non-profit corporation which was later\ndissolved In 1934, in the sum of $30,000 and endorsed\nby David Lawrence. At or about suspension Lawrence de-\nposited with the receiver & seven-year term life insurance\npulicy in the sum of $50,000 as a form of collateral.\nMr. Lawrence was the sole responsible person upon the\ndebt and his liability was duly preserved by having the\nnote protested at maturity. This note bore Interest at\nthe rate or 6% from February 14, 1933. No payments were\nmade upon the note until the month of December, 1936\nwhen the debtor started upon a program or payments of\n100 per month. These payments were continued for thirty\nmonths, untile June, 1939, vaon they ceased. These\nRegraded Unclassified\n148\npayments, together with an offset or $278.52, had\nreduced the debt to a principal balance of $26,721.48\nby June 30, 1939, & total of $3,270.52 having been\npaid. No part of the interest was paid.\nThe debt held by the District Rational Bank\nconsisted of three notes made by David Lawrence for\nmoney directly borrowed, all dated February 6, 1933 and\nbearing 6% interest. These notes aggregated the sum\nof $21,332.25 at suspension and at or about susponsion\nawrence had deposited a life insurance policy es a\nform of collateral, which was exchanged for another\npolicy in June 1937, also a limited term policy. It\nshould be remarked that this form of insurance accumulates\nno cash surrender value and can only be realized upon\n11, the event of the death of the insured during the term.\nIt has no other value as collateral. At 02\" about the\nthe of suspension the debtor entered apon $ of\npayments of ,100 02 month with the \"onservator, These\nwere continued from April, 1933 to June 1934, fourteen\nsuch payments having then been made. At that time the\ndyments were increased to ,200 per month and continued\nno the rate for five years, until June 1939 when they\nceased. By this means the debtor paid & total of\n313,400, which, with an offset, reduced his debt by total\npayments of 13,695.62, or from the original amount of\n21,332.25 to a balance in June 1939 of 7,636.63.\nDuring the aix years prior to June, 1959\nLAWTONCE had reduced his debt to these banks in the total\namount of 16,974.14, although not in the same proportion\nto each. The collection effort made upon the assets of\nan insolvent national bank is left to trio receiver, #\nresponsible officer appointed under the Statute to take\ncharge of the assets. While his accounting, his expenses\nand many of his acts are closely and regularly scrutinized\nby my office, the general collection erfort must noces-\nsarily refiect 113 diligence and initiativo, my office\nmothing :19 rosults closely checking upon hia energy\nand thoroughness by field examination and in other ways.\nAn individual asset is brought to the attention of my\nstaff, in ordinary cases, when it becomes the subject od'\nlitigation, compromise or sale, or other situation requir-\ning specific authorization.\nBy the close of March, 1939 Lawrence had become\nalarmed about the state of his l'inances. E1s debts,\nincluding those assumed, had increased materially while\nRegraded Unclassified\n149\nhis assets were of uncertain nature and his earning\npower, while large by ordinary standards, would not\nsupport his obligations. He decided that some form\nof settlement mist be made with his creditors to\nrelieve him from immediate pressure, to preserve his\nsurning power and to permit him to reduce all his\nobligations in an orderly manner. By that time the\nChandler Act had been passed permitting debtors to\nmake such settlements with all their creditors upon\nthe approval of the Court of 8. definite plan and with\nthe consent of a majority of the creditors in number\nand amount. This course was open to him, and he con-\nsidered availing himself of it, or he might attempt a\nsimilar settlement with his creditors upon a voluntary\nbasis, saving the expense of B. petition in bankruptcy\nand the publicity attendant upon it. He determined to\ntast out B. voluntary settlement. To avoid B preference\nhe ceased his payments to the two receivers in June\n1939.\nAccordingly he devised e Plan which he presented\nto all or his unsecured creditors whereby each should\nwrite all accrued and unpaid interest and should accept\nnotes due in twenty years without interest, payable at\nthe rate of 5% of the principal each year.\nIn due course the Plan was proposed to both\nreceivers and was favorably received by neither.\nLawrence at that point offered both receivers an\nimmediate cash settlement of 10% and neither receiver\nWAS fevorable. These cash offers were withdrawn in\nAugust, 1939 on the ground that such & payment, which\nhe could not offer to all his creditors would constitute\na preference and interfere with the ontire project.\nOn July 5th and 11th, 1939 the two receivers\nsub mitted the Plan as proposed, with sworn financial\nstatement and supi crting date, to my office without\nrecommendation for Its information and asking advice and\ninstructions. Receiver Young expressed no opinion upon\nthe merit of the Plan while Receiver Mardell leaned to\nacceptance. During this period Receiver Young obtained\nn credit report upon Lawrence end his wife from the\nStone Mercantile Agency. My office asked the receivers\nto obtain more information about the liquidating value\nof Lawrence's assets; and concerning his income and the\npossibility of reaching it by garnishment, The receivers\ndid obtain additional letters, statements and data from\nRegraded Unclassified\n150\n5\nLawrence. None of this data W&B prepared in the formal\nmariner to show en audited condition nor W&S it vouched\nfor other than by the debtor who, however, furnished his\nstatement of condition in affidavit form.\nThe matter stood in this status until September\n15, 1939. Each receiver, independently of the other, was\ntrying to assemble information from which of decision\ninight be reached. Neither was fully aware or the repre-\nsentations being made to the other nor of the attitude\nthe other might be taking. Payments had ceased to both\nreceiverships. Ky office was writing almost identical\nletters to both receivers with varying results. Neither\nreceiver could obtain action until simultaneous action\nwas possible and the situation wes drifting. Obviously\nthe case was one requiring EL round table discussion at\nWhich the same information might be available to all and\nAll might have an opportunity to question the debtor.\nSuch a conference was arranged for September 15, 1039\nbut I cannot say upon whose initiative.\nThis conference was attended by Lawrence; by\nthe two receivers, Wardell and Young (the latter accom-\npanied by his clerk Lochte); by John Anderson, of the\nSeneral Counsel's office; and by L. 2. Reed and R. B.\nVoCundless of the Division of Insolvent National Banks\nof my office. A full and free discussion appears to\nhave been had, at which a tentative conclusion was\nreached and 8. memorandum of the discussion wes placed\nin the file enumerating some of the subjects discussed\nand the tentative agreement arrived at. I am informed\nthat the discussion took the following lines:\n1. My office had Leen under the Impression,\nfrom previous letters, that the debtor was actually\ninvoking the Chandler Aot to enforce a uniform settle-\nment upon all his creditors but it now developed that\nhe had neither prepared nor filed such & petition. He\nhad, however, presented his Plan to his creditors and\nupon his representations he had, he stated, obtained\nconsents from \"prectically 90% in number\" and that the\nconsents of the two receivers would make the consent\nunanimous. (This statement was changed slichtly in a\nsubsequent affidavit, 28 will be noted hereinafter). He\nfelt that the situation was thoroughly in hand end that\nthe consenting creditors could be depended on to aid him\n15 resort to the Chandler Act were still necessary. De\nstated that it had become apparent to him that the Flan\nRegraded Unclassified\n151\n6 -\ncould thus be made operative on August 19, 1939, when more\nthan two-thirde in number and amount of his creditors had\nconsented, end that he had thereupon advised them that\nhe had declared the Plan \"operative\". While this act had\nno legal significance it W&B his way of declaring to his\ncreditors that resort to the Chandler Act would only\nserve to make mandatory what the majority had approved.\nMy staff were, of course, informed concerning the Chandler\nAct and the inability of B. single creditor to force liqui-\ndation or to enforce B. preferred status and realized that\nthis course was an active possibility. As 8 matter of fact,\nthere was some indication that resort to bankruptcy itself\nmicht be had.\n2. The nature end volume of his debts was dis-\ncussed at length. The debtor did not then or thereafter\nfile with either of the receivers B. list of the creditors\nto whom he had presented the Plan. A considerable portion\nof his debt was held by benks, reference being then made\nto the Marine Trust Co. of Buffalo, New York, which held G.\nnote of $30,000 and E. contingent claim of $75,000. Some\npert of the debt was held by tradesmen and people serving\nhim in his capacity as writer Who were interested in\npreserving his status and earning power in the hope of\nfuture business. The members of my staff and the receivers\napparently satisfied themselves that the debt was genuine,\nthat he was obtaining the cooperation he claimed and that\nhe was acting in good feith.\n3. He stated that as soon as his creditors had\naccepted the new notes under the Plan, he would feel free\nto make individual settlements with them, in addition to\nthe 5% per annum payments, as rapidly as he could raise\nfunds for that purpose and could make suitable offers, and\nthat he would try to make cash offers in settlement to\nthe two receivers before they found it necessary to wind\nup their receiverships.\n4. When it appeared that an agreement might be\nreached the debtor expressed the wish to review the\npetitions to the court, seeking the necessary orders, before\nactual presentation. This is not an unusual request as\ncourts occasionally seel: verification of the statements\nmade therein by direct examination of the debtor. He\nappeared interested in the accuracy of the language used and\nit was assumed by my staff that he wished to avoid news-\nworthy or extreme statements that might reflect unnecessarily\non his credit. (This was arranged and tentative drafts were\nlater examined by him).\nRegraded Unclassified\n152\n5. The status of the debtor's life insurance\nwas discussed but he had previously informed Receiver\nWardell that all his insurance had been lodged with creditors\nor placed in irrevocable trusts. The two policies held\nby the receivers, amounting to $55,000 were term policies\nof no cash value. His total insurance was understood to\nbe very large but he did not file with the receivers then\nor afterward any schedule of companies or amounts. To\nattempt to disturb the insurance trusts or to reach cash\nsurrender values over the objection of beneficiaries would\nrequire the identification or the proceeds of the original\nloans with premium payments and this could not be done.\n6. The financial condition of the debtor wes\ndiscussed with care. He had previously supplied both\nreceivers with financial statements in affidavit form\nshowing his condition as of June 30, 1939 together with\nstatements of the United States News, the Bureau of\nPublic Affairs, Inc., and the Independent Syndicate, Inc.,\nthe latter three not being in affidavit form. These three\ncorporations were of his creation and carried on his busi-\nness lut he claimed to hold no stock in them although he\nwas president of each. His assets consisted largely of\nthe obligations of two of them for advances made, while\neach of the corporations held assets and had liabilities\narising from transactions and relationships between the\ncorporations. Complete liquidation of Lawrence's assets\nwould have required four receiverships end a determination\nof his financial worth involved estimates of what these\nliquidations might yield. From information supplied by\nthe debtor, obtained from the statements and elicited at\nthe conference, the following analysis was believed\ndependable.\na. Liabilities ES of June 30, 1939\n9,681.77 Unpaid taxes.\n$103,815.07 Mortgage debt on home. This\ndebt, being separately secured, W&S not included in the\ndebts made subject to the stand-by agreement. The debtor's\ngeneral creditors would only be affected (and then adversely)\nby a deficiency occurring after foreclosure which, as the\nhome wes represented as worth less than the debt, was B\npossibility. It was disregarded in all computations.\nRegraded Unclassified\n- 8 -\n153\n$115,525.86 Contingent liability as\nendorser on current obligations of his operating companies.\nAs he believed these companies would be able to meet these\nobligations he did not offer the 20-year Plan to these\ncreditors. They would ripen into actual liabilities only\nwhen the operating companies had to liquidate or defaulted.\nThese were taken into account in determining net worth on\na liquidation basis.\n$373,000.00 Notes and debts subject to the\nsettlement. The debtor represented that 90% of these\ncreditors had consented to his 20-year Plan.\n602,022.70 Total liabilities.\nb. Assets as of June 30, 1939\n596.74 Cash on hand.\n133,390.00 The assessed value of the home\nshown above in his liabilities as being under mortgage of\n103,815.07. The sale value wes considered to be substan-\ntially less than this assessed value.\n17,650.00 Note made by the Independent\nSyndicate, Inc., and endorsed by J. J. Williams, an\nofficer of that company. The statement of the condition of\nthe maker company shows no assets from which it could be\npaid, while Williams was represented by Lawrence to be\nirresponsible. The debt WES stated to have ori insted in\n1629 and that no interest had been paid, although by e\nrecent renewal for five years, it would not fall due until\n1942.\n$ 53,961.01 Note of the Bureau of National\nAffairs, Inc. The balance sheet of this company (as of\nDecember 31, 1938) indicates that this is part or a total\nindebtedness of $390,000 which must participate in any re-\ncovery from its assets. The face amount of these assets is\nshown to be $266,788.76, of which $250,000 is the carrying\nvalue of preferred stock of United States News. As shown\nbelow this stock is believed to be worthless. or the balance\nof the assets, $20,581.88 is cash, $9,384.77 is accounts\nRegraded Unclassified\n154\n-\nreceivable, $4,011.55 inventory, $1,595.50 furniture and\nfixtures, and $2,615.06 miscellaneous. It was the opinion\nof my staff that on this showing the assets might yield &8\nmuch as $30,000 which would be reduced by the costs of\nliquidating the company to a maximum of $20,000, or approxi-\nmately four cents on the dollar. This asset therefore\nmight not yield more than $2,160 if the company were to\ncease operations and be liquidated.\n$248,467.15 Notes of the United States News.\nThe balance sheet of this company as of December 31, 1938,\nshows that this is part of total liabilities of approxi-\nmately $340,000. To pay these liabilities the balance sheet\nshowed assets carried at 147,502.14, of which only $33,520.54\nis shown as current assets while the balance is in notes\nreceivable, inventory, building and equipment. At the con-\nference there was a good deal of discussion upon liquidating\nvelue of these assets. The debtor WES sure that owing to\ntheir age and special nature they would not yield over\n$10,000 while receiver Wardell was quite certain they would\nyield B.S. much B.S $100,000. It seemed to my staff that if\nliquidated economically and favorably, there might be as\nmuch as $50,000 for the creditors, or fifteen cents on the\ndollar. The note in the Lawrence assets might therefore\nhave a maximum value of $37,500.\n454,064.90 Total assets.\nThe realizable value in the Lawrence assets can\ntherefore be tabulated as follows:\n596.74 Cash\n2,160.00 Bureau of National Affairs\n37,500.00 United States News\n40,256.74\nRegraded Unclassified\n155\n- 10 -\nThis value must be distributed to $373,000\nunsecured liabilities end to $115,525.86 contingont\nliabilities (for it contemplates the liquidation of the\nmaker companies), B. total of 488,525.86 or eight cents on\nthe dollar, (subject to minor adjustment by way of returns\nupon the maker liability) which amount will be still\nfurther reduced by the costs of administering the Lawrence\nestate in bankruptcy.\nMy staff therefore concluded that upon a liqui-\ndation basis the notes held by the two receivers were\nworth not over eight cents on the dollar, that this\nrecovery must come through three or four bankruptcy liqui-\ndations, which they were in no position to bring about,\nwith the attendant delay and expense. If any greater\nrecovery were to be had during the life of the two receiver-\nships, it must come through the earning power and voluntary\npayments of Lawrence.\n7. The debtor reported his annual earnings to be\naround 150,000 to $5,000. Either at this conference or\nto the receivers the debtor had informed them that of\nthis 18,650 would be absorbed in the annual 5% payments\non his deferred debts; taxes amounting to 16,000 and\ninsurance premiums of $18,000, while the care of an invalid\nson cost $5,000 or more a year. This left no provision\nfor living expenses and business expense. The possibility\nof garnishment of some part of this salary had been con-\nsidered but abandoned as the debt must first be reduced to\njudgment and this would bring on, without doubt, the invoking\n02 the Chandler Act, or bankruptcy proceedings.\nFrom this study my staff were setisfied with\nregard to certain conclusions:\n1. Upon A liquidation basis the notes held by\nthe two receivers were worth not over oicht cents on the\ndollar.\n2. That any attempt to force liquidation by\nlegal remedy would result in a potition under the Chandler\nAot, or bankruptcy.\n3. That invoking the Chandler Act might not\naffect adversely the debtor's earning Dower, but it night\nprevent him from offering E. cash compromise settlsment\nafterward.\nRegraded Unclassified\n156\n- 11 -\n4. That the best chances of recovery lay in\npreserving the earning power and freedom of notion of the\ndebtor.\n5. That his life insurance, although very\nlarge, could not be reached for the benefit or these debts.\n6. That during these months of negotiations\nnothing had occurred to make any of the numerous persons\nconcerned suspicious of any misrepresentation or fraud and\nthe statements of the debtor seemed entirely credible, his\nreputation and public standing contributing to this feeling.\n7. That from all that could be learned the pre-\nvisus payments of the debtor to these two receiverships\nhad been made more regularly and in a larger percentage\nthan to other creditors of the same class.\n8. That the possibility of recovery by bank-\nraptey or by liquidating his assets showed so little of\nceal value and was so remote in any practical sense that\nthe effort involved in an examination of the debtor or in\nthe verification of all his statements would not affect\nthe result, particularly 8,8 EL cash settlement was not\nbeing offered.\nThe choice before the receivers was not one of\nlegal remedy, which would precipitate the Chandler Act pro-\ntection; or one of & cash settlement involving an evaluation\nof his assets. The choice was between voluntarily consenting\nto the 20-year Plan and of refusing to participate, which\nalso would precipitate refuge in the Chandler Act in their\nopinion. Consent would certainly preserve the debtor's\nearning power while refusal night interfere with it. Con-\nsent would go as far as could be arranged to ensure some\nsmall annual reduction and would preserve the debtor's\nright to make a lump sum settlement later on. It seemed\nquite sure that consent would yield more than the estimated\nvalue of 8%, and sooner and at less expense and it was\nhoped this recovery might be as much as 15% during the\nlife of the two receiverships (as subsequently did develop).\nIt was therefore the consensus 02 the conference\nthat it would be to the advantage of the depositors of both\nreceiverships to accept the 20-year deferred notes end my\nstaff informed both receivers that 11 and when they recom-\nmended such a settlement, an approval would be forthcoming.\nRegraded Unclassified\n- 13\n157\nOur general objective in liquidating banks 10\nto achieve the maximum recovery for the depositors with\nthe loast undue delay and at EL minimum of expense and to\ndo so, as far 8.3 practicable without disrupting the business\ninterests of the community or working an unnecessary hard-\nship on the debtor. We do not resort to legal procedure\nunless there 13 & definite object to be gained and we try\nto obtain the cooperation of debtors rather than their\nhostility. The inmediate steps deemed necessary in any\niven case ere left to the discretion of the receiver al-\nthough when he needs advice, legal or otherwise, or guidance\nhe seeks it from my staff who exercise a general super-\nvision over the management of his trust. This kind of\nconference has been found useful many times in assisting\nreceivers to come to B. decision as to a course of action.\nIn this case the long continued voluntary payments prior\nto June 30, 1939, amounting to $16,400 are deemed an\nevidence of the value of the policy.\nFollowing this conference the two receivers\nimmediately wrote to my office recommending that they be\nauthorized to accept the 20-year notes.\nUnder date of September 16, 1939 Receiver Young\nof the Fedoral-American National Bank and Trust Co. wrots,\n\"In view of the information supplied by Mr. Lawrenoe in\nyesterday's conference and based on his insolvent condition\nit is recommended that I be permitted to Join other credi-\ntors in accepting the twenty-year plan of liquidation as\noutlined above.\"\nUnder date of September 22, 1939, Receiver\nMardell of the District National Bank wrote in part: \"At\nthis conference e thorough discussion of the assets and\nliabilities of the debtor and his present and prospective\nearnings was had as well as his offer of settlement which,\n11 accepted, will result in this trust receiving E. new\nnote made by Mr. Lawrence in the principal amount of\n$7,636.63, without interest, maturing in annual install-\nmenta over & period of twenty years, the first of such\ninstallments to be paid one year from the date of said\nnote. Mr. Lawrence has also advised that with the accept-\nance of this plan of compromise settlement by this trust\nhe would then be in a position at & later date to offer\ne lump sum settlement covering his indebtedness\nConsidering the circumstances and as it appears from con-\nferences held that the best interest of this trust can be\nserved by the acceptance of the offer as now tendered by\nMr. Lawrence it is accordingly recommended that I be\nauthorized to petition the court for an order permitting\nits acceptance.\"\nRegraded Unclassified\n158\n- 13 -\nMy staff, however, did not immediately approve\nthe acceptance of these notes. Under date of September\n20, 1939 e letter was addressed to Receiver Young asking\nhim to obtain additional information about the United\nStates Society, the maker upon the note he held, and\nasking that he obtain verification in some manner of\nLawrence's statement that 90% of his creditors had acceded\nto the 20-year plan. The receiver advised October 6th\nthat the corporate existence of the United States Society\nhad been terminated in 1934 and that Lawrence had assumed\nits liabilities.\nWith this letter of October 6th receiver Young\nenclosed an affidavit of Mr. Lawrence in which it was\nstated that his plan was submitted to all of his creditors,\nthirty-five in number, who held a total of 372,371.07\nof unsecured notes against him; that acceptances as of\nOctober 6, 1939 had been received from 32 out of the 35\ncreditors, with a total holding of substantially in excess\nof two-thirds both in number and amount; that two of such\nacceptances covering $9,047.96 were oral and were to be\nconfirmed in writing; and that the only three creditors\nthat had not then accepted were en estate in New York\nholding $5,000 and the two Washington receiverships and\nthat the former had signified an intention to accept when\nthe two receiverships consented. As stated above this\nstatement was in affidavit form.\nUnder date of October 18, 1939, more than a\nmonth after the conference, my staff authorized both\nreceivers to petition the court for an appropriate order.\nThese petitions were prepared in due course and\nwere submitted to Judge Proctor, and at the same time his\nattention was called to the size of the debts and the\nidentity of the compromising debtor. Before signing the\norders he called before him receiver Young and a represent-\native from the office of receiver Wardell and in chambers\nhe examined into such matters DB the value of his home,\nthe amount of the mortgage, his income, the nature of his\ndebts and the contents of the financial statements.\nThe petitions as filed by the two receivers are\nidentical in form, as both are served by the same firm of\nattorneys, and both show to the court that Lawrence has\nrepresented that his 20-year plan has been submitted to\nall his creditors and that all have accepted except the\nKew York estate and these two receivers and attention is\nRegraded Unclassified\n159\n14\ncalled to his financial statement, and they conclude\nwith these words: \"Petitioner has made a study of the\nassets and liabilities of the debtor and his present and\nprospective earnings and her concluded that it is to the\nest interests of his trust to accept the sald offer in\ncompromise\".\nBoth receivers inmediately consummated the\nsettlements by accepting the new notes as contemplated\nand the first phase of this matter WAS closed.\nFollowing the settlement outlined above,\nreceiver Young of the Federal-American National Bank and\nTrust Co. was holding a note in the sum of 26,721.48\npayable without interest in twenty annual installments,\ndated August 18, 1939. In August 1940 Lawrence made the\n'irst payment of 5%, amounting to 1,336.07 reducing the\ndebt to a balance of 25,395.41.\nIn the same manner receiver Wardell of the\nDistrict National Bank was holding a note in the sum of\n7,636.63 payable on the same terms. In August 1940\nswrence made the first payment of 5, in the sun of\n381.94 reducing the debt to a balance of 7,254.79.\nEarly in 1941 it became apparent that it would\nbe possible to so nearly complete the liquidation of the\ntwo receiverships within E. few months as to no longer\njustify the expense of E. receivership office and staff.\nBoth receivers were instructed to contact all remaining\ndebtors and to inform them that the assets must soon be\ndisposed of by sale to the highest bidder. Regotiations\nwere soon started by Lawrence looking toward a lump sum\ncash settlement in full compromise of all his liability.\nRis offer to both receivers was payment of 10\nof the face amount of the 20-year notes accepted in 1939,\nmaking, with the 5% paid in 1940, a total recovery after\nconsent to the plan of 15% of the then balance. Protracted\nand difficult negotiations followed.\nRegraded Unclassified\n180\n- 15 -\nTaking up First the reactions or receiver Young\nof the Federal-American National Bank - Trust Co., the\noffer was submitted in the receiver's letter of March 1,\n1941 with the recommendation that it be rejected. Lawrence\nhad represented to him that he had been unable to make\nany of the first annuel payments of 5,0 except to the two\nWashington receiverships and that he was in default on all\nof the balance, his default ascregating 16,900.64 and\ndid not know when they could be made; that he was unable\nto make B. better offer and would have to let his note go\nto sale, preferring to take nis changes with the purchaser,\nrather then increase his offer; and that his financial\ncondition had not materially changed. Receiver Young\nexpressed the belief that the Lawrence note would be worth\nmore in the final sale than 10, and recommended rejection.\nMy staff, by letter dated March 14, 1941, agreed\nwith him that the settlement wes not too l'avorable but\nhaving in mind the early closing of the receivership and\nthe well-known disinclination of asset Luyers to invest\nany substantial amount for uncollected assets, and parti-\nculerly for E. 20-year note made by a nan of such uncertain\nl'inancial condition, we felt that he should reconsider the\noffer unless, after calling in several individuals or\nfirms In the habit of buying paper or this kind, he should\nget & better offer.\nReceiver Young, by his letter of April 8, 1941,\nstated that he had solicited a higher offer from Lawrence\nwithout success and submitted a copy of a letter from\nLawrence saying that he was then in default for over\n15,000 of the first 52 payments due in 1940 and that there\nwould be due $17,000 in August of 1941, and that he had no\n.'unds with which to meet either payment. Also that his\noffers to these receiverships required that in fairness he\nmake similar offers to lis other creditors which if accepted,\nwould require an additional ,17,000, or 49,000 in all for\nwhich he did not possess the resources, and hinting that\nLefore the end of 1941 he might rind it necessary to seek\nto new arrangement with his creditors whereby the debt would\nLe scaled down. The receiver reported that after l:1a best\nefforts to develop en offer for the note he had succeeded\nin getting offers of 2,250 and 2,500, neither of which is\nas large as the 10 offered by Lawrence.\nReceiver Young concludes Ms letter of April Eth,\nsaying: \"I have had several conferences recently with Mr.\nDavid Lawrence.\nThe results from these conferences\nRegraded Unclassified\n161\n- 16 -\nconfirmed the fact that he 18 not financially able to 80\nany higher than 10%, the amount offered. Considering the\nrecent investigation that I have made and the lack of\ninterest shown by prospective buyers and the fact that the\ntrust is in the process of termination and the sale of\nessets scheduled for the near future, I respectfully recom-\nmend the acceptance of the offer of 10%.\nMy staff approved acceptance of the offer by\nletter dated April 21, 1941 and authorized him to petition\nthe court. In due course the petition was presented to\nJudge Morris.\nJudge Morris declined to sign the order until he\nhad had an opportunity to interview Mr. Lawrence personally,\nwhich was arranged. In answer to the questions of the\nJudge, Mr. Lawrence stated that he had en expensive home\nencumbered by a mortgage of $103,000 which he had tried\nunsuccessfully to deed to the mortgagee. Also that although\nhe has an income of $60,000 his taxes amounted to 35% or\nmore; that he had an invalid son whose care cost $6,000 per\nyear for whom he is carrying heavy insurance; that his\nprofession entails certain expenses; that he would like to\nwithdraw the offer if it seemed unfair to the court.\nJudge Morris was still unwilling to sign the order without\nB. showing that some others of the Lawrence creditors had\naccepted settlements of 15% of the face amounts. There-\nafter there were placed in the court files letters from\nthe Chemical Bank and Trust Company of New York, administ-\nering an estate which owned E Lawrence note of $10,000, and\nfrom Chadbourne, Wallace, Parke and Whiteside, attorneys in\nRew York also administering an estate owning B $5,000\nLawrence note, stating that each had settled similer notes\nwith Lawrence on B. basis of 15% of face.\nThe settlement WAS consumated on May 23, 1941\nby payment to the receiver of the sum of $2,672.15 whore-\nupon the receiver cancelled and delivered the note and\nreturned the term life insurance policy. This payment\nreduced the debt to 22,713.26. The total payments after\nthe bank suspended amounted to $7,286.74, or 24.3% of the\noriginal principal of $30,000 with no expense except the\ncost of two court orders.\nTurning now to the reaction of receiver Wardell\nof the District National Bank, holding an unpaid balance\nof 7,254.79.\nRegraded Unclassified\n162\n- 17\nMr. Wardell, by letter dated February 20, 1941\nrecommended rejection of the offer of 10% saying that he\nbelieved it would bring at least that much in the final\nsale of assets then scheduled for the month of June. He\nwrites: \"In July 1939 Mr. Lawrence revealed his income\nas being between 50,000 and $55,000 a year. Mr. Lawrence\nis one of the leading columnists in the country. In light\nof this income and the generous treatment of his indebted-\nness accorded in the compromise of August 1939 I am unwilling\nto recommend acceptance of the present offer.\" He encloses\nEl copy of B letter from Lawrence to him stating that he\ndid not pay the 1940 payment of 5% to any other creditors\nthan the two receiverships and that he would not be able to\nmeet the 1941 installments.\nBy letter dated March 8th my staff made the same\nsuggestions to receiver Wardell that had been made to\nreceiver Young; that the note 10 non-interest bearing and\nconsidering its term and the financial condition of\nInwrence, it may be unattractive to asset buyers; that the\noffer covers all payments that could be defsulted until\nAugust 18, 1943. It was further suggested that he offer\nthe note for sale in an effort to obtain a price higher\nthan the Lawrence offer of 10%.\nThe next lettor from receiver Wardell is dated\nApril 11, 1941 in which he remains unwilling to recommend\nthe Lawrence offer of 10%. He had tried to sell the note\nand had found one buyer who would pay $1,500 for the note\n(approximately double the Lawrence offer) 15 Lawrence\nwould (quoting) \"submit to the physical examination required\nin obtaining such life insurance protection. R. Lawrence\nhas refused to entertain this proposition, stating that\nothers having insurable interest in him have been unsuccess-\nful along these lines by reason of having obtained the\nlimit of life insurance.\" When Wardell attempted to plead\nthe advisability of this insurance and the ease of compliance,\nLawrence reminded him that he had paid this bank E. larger\nproportion of its debt than that of any other creditor. He\ncloses his letter as follows: \"This tender has received\nmy further careful consideration. If Mr. Lawrence would\nagree to the restoration of the amount of $13,380.63 due\nwhen the compromise was effected and not seek additional\nconcession and then make a tender, I would be disposed to\nurge favorable consideration. But a concession has already\nbeen made and in one and B. half year's time he seeks\nanother revision outting greatly the amount agreed upon\nRegraded Unclassified\n163\n- 10 -\nafter serious consideration E. year and B. half ago. In\nview of the large income of the debtor and substantial\nconcessions made in the last compromise effected I cannot\nconscientiously recommend the acceptance of the present\ntender. I should very much prefer to have your specific\ninstructions in the premises.\"\nThis of course placed my staff in something of\nA dilemma. The recommendation of receiver Young to\naccept 10% on a debt of $25,385.41 was in their hands\nwaiting action. Receiver Wardell was unable to see his\nway clear to accept the same offer on EL debt of $7,254.79.\nThe same facts were available to both receivers and the\nsame situation existed. Both receiverships were within a\nfew weeks of a final sale of assets. There was no good\nreason to accept one offer and reject the other. If\neither were objectionable, both were and If one were deemed\nin the interest of depositors, no good reason existed to\ndeprive the other body of depositors of the benefit. The\nreceiver holding almost three-fourths of the debt was on\nrecord favorably to the offer.\nThe two files were again studied and all the\nrepresentations of Lawrence reviewed. Neither receiver,\nin almost two years had been able to discover any avidence\nof bad faith, misrepresentation or fraud. They advanced\nno reason why the written representations of Lawrence\nwere not credible.\nIt W8.8 finally determined that the situation was\nbrought about by El difference of opinion which could not\nbe explained on the basis of any facts available to my\noffice and that in its supervisory capacity it was neces-\nsary to resolve the difficulty in the most reasonable\nmanner in the interests of both bodies of depositors.\nIt WELS accordingly determined to approve the\nacceptance of both offers and letters to that effect went\nforward to both receivers under date of April 21, 1941.\nReceiver Wardell thereupon had counsel prepare\na petition to the court to which was attached as an exhibit\nthe letter of my staff approving the offer dated April 21st,\nreading in part as follows: \"While you cannot recommend\nacceptance of the offer, your efforts to dispose of this\nnote to investors have met with no success and\nwe are of the opinion that the offer should be accepted.\"\nThe court, on noting that the receiver did not recommend,\nrefused to sign the order until the receiver could see his\nRegraded Unclassified\n- 19 -\n164\nway clear to do so. When advising receiver Wordell that\nthe court had taken this attitude upon the petition, his\ncounsel addressed n letter to him under date of June 30,\n1941, reading in part B.O follows:\n\"To me this David Lawrence matter is strictly\nM. business one. As I think I have told you,\nwhen the comparable settlement with the\nFederal-American National Bank and Trust\nCompany was sent to me by Kr. Young, I wrote\na rather strong letter to him objecting to\nit. Certainly I am in no respect projudiced\nin favor of Devid Lawrence.\n\"After writing my letter to Mr. Young, however,\nhe telephoned me and discussed the matter In\nsome detail and then he and Dr. Wainwright of\nthis office and yr. Lawrence went down end dis-\ncussed the matter with Judge Morris. Judge\nMorris had refused to sign an order approving\nthe settlement with the Pederal-American\nNational Bunk & Trust Company, but finally did\nso after there had been submitted to him letters\nshowing comparable settlements with two estates\nIn New York, and also two letters showing that\noffers lower in amount than Er. Lawrence's\noffer had been made by other investors.\n\"Therefore, it seems to me clear that this\nmatter comes down to this - the executors or\ntwo estates in New York, namely, the Che ical\nBank and Trust Company of New York, and\nChadbourne, Wallace, Parke & Whiteside, have\naccepted the same settlement from David\nLawrence, and Judge orris has approved E\nsimilar settlement with the Federal-Americen\nNational Bank and Trust Company. As I under-\nstand it, you have sought to get other offers\nfor the Lawrence notes held by you, but that\nthe largest offer you have received is less\nthan the David LEWFORCE offer. Based on these\nracts, there appears to be not the slightest\nreason for believing that any higher offer\nwill ever be received.\n\"Furthermore, while I well not present, I am\ntold that during the discussion with Judgo\nMorris, D. Lawrence stated a few facts which\nRegraded Unclassified\n165\n- 20 -\nhave some bearing on the situation. In the\nfirst place, he stated that while he lives\nin an expensive house, such house has a\nmortgage upon it of approximately $105,000.00,\nand he has offered to turn the house over to\nthe mortgage owner, but that such offer has\nbeen rejected; and that while he makes a com-\nparatively large gross Income of something\nover $75,000.00 a year, his corresponding obli-\ngations are also very large. For example, I\nunderstand he told Judge Morris that one of his\nsons is in some sort of an institution and that\nit costs approximately $6,000.00 a year for\nhis maintenance and because of this Bon's con-\nCition, he feels it absolutely necessary to\ncarry a comparatively large amount of insurance\nfor the future support of such child. or course\nhis Income tax is nigh and he told Judge Morris\nof various other expenses, such as labor costs,\netc.\n\"In addition, of course, the obligation now being\ndiscussed is in the form of B note for 7,636.63\npayable in 20 yearly instalments of $81.64 escir\nwithout interest, one payment having already\nbeen made. X guess would be that few investors\nwould be interested in buying such an obligation\nsince the worth of such obligation 13 dependent\nentirely upon the future earnings of Kr. Lawrence,\nand nia life expectancy. I do not know exnetly\nhow old he is, but I think ho is about 50 years\nold, or siightly over that age.\n\"The above is not writton to convince you of the\nsoundness of the present offer. with that I\nhave nothing to do, my Function being entirely\nthat of a lawyer in the matter and all the busi-\nness negotiations having been had with you and\nthe Comptroller's office.\n\"It does seem to me, however, that this present\noffer will have to be submitted to the Court\nwithout reservation, or not submitted at all.\nIt is too much to expect the Court to approve 0.\ncompromise not approved by the petitioner.\n\"Shall I submit the revised petition?\"\nRegraded Unclassified\n166\n- 81 -\nThis letter seemed to contain information that\nwas new to receiver Werdell notwithstanding the fact\nthat this settlement had been discussed very thoroughly\ntime and again and he had had numerous conferences with\nthe debtor for he addresses & letter to his counsel in\nreply to the above, reading as follows:\n\"I have your letter of even date in respect\nto the David Lawrence indebtedness to the\nDistrict National Bank.\n\"You revealed to me in your comminication\nsome matters with which I was unfamiliar.\nFor instance, I had no distinct impression\nthat Mr. Lawrence's home had a mortgage of\napproximately $105,000. I certainly had no\nimpression that he had offered to turn the\nhouse over to the mortgagee, and that such\noffer had been rejected. I had no knowledge\nwhatever of the fact that he has a son in\nsome sort of an institution and that it costs\napproximately $6,000 8. year for his maintenance,\nand because of this son's condition, Mr.\nLawrence feels it absolutely necessary to carry\na comparatively large amount of Insurance for\nthe future support of such child.\n\"The criticism I have to offer is based prin-\ncipally upon the fact that Mr. Lawrence\nrefused to permit his life to be insured to\nthe extent of the amount the purchaser was\nwilling to pay for the note. I could sell\nthe note for $1,500 1f he would agree to the\nissue of such insurance. However, he may\nhave reasons that are purely personal and\nperhaps I am unfair in my deductions.\n\"In the light of all the circumstances I\nthink it would be well to submit the revised\npetition, as probably no more could be obtained\nat the sale and perhaps not as much.\"\nWhen the petition had been revised to contain the\nrecommendation to the court that the settlement be approved\nand that the order be granted and the revised petition was\npresented to the court, it was immediately signed. It may\nbe profitable at this point to quote the language used by\nreceiver Wardell in the revised petition to the court which\nRegraded Unclassified\n- 22 -\n167\ncontains his recommendation that the settlement be\naccepted, which 1a as follows:\n\"In a letter to the Comptroller of the Currency\ndated April 11, 1941, petitioner requested in-\nstructions from the Comptroller of the Currency\nstating that petitioner could not conscientously\nrecommend acceptance of such offer. Since\nwriting such letter, petitioner has been informed\nof the facta stated above, namely, that the\nexecutors or administrators of two estates in\nNew York had accepted offers from the said\nDavid Lawrence upon the basis of the same\npercentage as is involved in the present offer\nto petitioner. Furthermore, petitioner has\nsought offers for the indebtedness of the said\nDavid Lawrence from several possible purchasers\nwith the result that one offer was received to\npay 10 of the amount remaining due, or 725.47,\nwhich is less than the amount of $763.66 offered\nby the debtor himself. No other offers for such\nasset have been received by petitioner. In view\nof the fact that petitioner's efforts to dispose\nof this asset to investors at an amount in excess\nof the debtor's tender have met with no success,\nit is apparent that the offer of $763.66 is the\nmaximum that can be obtained during the remaining\nlife of this receivership. Under the circumstances,\nit is believed to be to the best interest of the\ncreditors of this receivership to accept the\npresent offer. The acceptance of said offer has\nbeen approved by the Deputy Comptroller of the\nCurrency as is shown by a copy of 9. letter dated\nApril 21, 1941, from him, marked Exhibit B and\nattached hereto.\"\nThereafter Mr. Lawrence completed the sottlement\nwith Receiver Wardell paying to him the sum of $765.66,\nreducing the unpaid balance to $6,491.16.\nThe total payments upon the debt, which at\nsuspension stood at the amount of 21,332.25, made during\nthe life of the receivership, therefore amounted to\n14,841.09, or 69.6% of the original debt.\nAs stated above there has never been presented\nto my office any evidence that any pertinent fact was with-\nheld during the negotiation of these settlements or that\nthe debtor misrepresented the facts in any way or that\nRegraded Unclassified\n- 23 -\n168\nany fraud was committed upon the depositors of these\nclosed banks. On the other hand there is considerable\nevidence to the effect that these two closed banks have\nfared much better at the handa of Mr. Lawrence than\nothers of his creditors in the same class and that those\nto whom he has not yet made an offer in settlement will\nmore likely be asked to still further scale the obligations\ndown than otherwise. My staff is convinced that the final\nsettlement whereby the two receiverships received 5% and\n10% of the 20-year notes was to the advantage of the\ndepositors and that it represented a greater recovery\nthan could have been obtained from the assets of Mr.\nLawrence in any other manner. Particularly is this true\nif the extreme remedy of bankruptcy had been attempted\nor if the debtor had resorted to that refuge when it 18\nquite apparent that the costs and delays of liquidation\nby that means would have largely defeated the interests\nof these depositors whose receiverships are subject to\nearly termination, and they would necessarily have lost\nthe benefit of the debtor's earning power.\nIt should be added that the first settlement is\nbased upon representations made to the receivers of these\nbanks under oath. Should it appear that any fraud or\nmisrepresentation of B. material nature causing a loss to\nthese depositors has been perpetrated, the settlements can\nbe set aside and to this end the courts take an attitude\nliberal to the depositors when such a situation is found\nto exist.\nPrentulWalans\nComptroller of the Currency\nRegraded Unclassified\n169\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE August 8, 1941\nTO\nFerdinand Kuhn, Jr.\nFROM\nAlan Barth\nEAST AND FAR EAST\nQualms\nIf newspaper editors know their readers, there is 8. tide\nof optimism about the war throughout the land. A good many\neditors call it over-confidence -- or wishful thinking. They\nfeel obliged repeatedly in editorials to caution the public\nagainst raising its hopes too high.\nRussia's checking of the German blitzkrieg thus far,\ntogether with Britain's sustained aerial offensive, has clearly\ngone a long way toward dissipating the discouragement which\nprevailed in the United States not long ago. There is 8. feeling\nnow that Hitler may be beaten without direct American participa-\ntion in the war. Speculative stories about uprisings in con-\nquered territory, about waning German morale, appear in the\npress with a frequency and prominence which reveal the public's\navidity for reading them. Certainly there is B. terrible letdown\nin store for the American people if Russian resistance should\nnow suddenly crumble.\nRegraded Unclassified\n170\n- 2 -\nExtravagant hopes have been consciously fostered by the\nisolationists. Their line is that we need no longer worry about\nHitler; Stalin and Churchill will take care of him. This is so\nprecisely what Americans want to believe that it is perhaps not\nentirely without effect. The Gallup Poll published on August 1\nindicates, however, that it has not yet diminished popular sup-\nport for the aid-to-Britain policy. Seventy-two per cent of the\nsample polled held that helping Britain is as important as ever,\ndespite the Nazi-Soviet conflict; only 20 per cent recorded op-\nposition.\nThe editors themselves have been both surprised and pleased\nat Russian resistance. Current editorials indicate, however,\nthat to B. good many of them the surprise is proving rather greater\nthan the pleasure. A decided majority continue to insist staunchly\nthat Nazism is the only menace to America. But they fear the\nCommunists even when bearing gifts.\nThe New York Times, for example, in its leading editorial\nfor August 6, argues that although \"it is Hitler and not Russia\nthat constitutes the immediate threat to us\nat the same time\nit must be clear that our primary interest is not in 'helping\nRussia' but in 'stopping Hitler'\nStalin is on our side today.\nWhere will he be tomorrow?\"\nRegraded Unclassified\n171\n- 3 -\nThere are other signs of editorial distasts for giving\nmore than formal support to the U. S. S. R. Some commentators\nregarded Mr. Hopkins' visit to Moscow and Mr. Welles' pledge of\nfull economic assistance as laying it on a little thick. There\nhave been rather frequent expressions of relief over the fact\nthat we are selling, not giving, arms to associates whom even 80\nvigorous an interventionist paper as The Richmond Times Dispatch\nrefers to as the \"Bolshevist brigands in the Kremlin.\"\nWhat the American press hopes for on the eastern front is\nnot B. victory, but a stalemate which will bog down the German\narmies sufficiently to thwart their aggressive instincts.\nHeat on Japan\nThe press has adopted an extraordinarily bellicose tone\ntoward Japan. In part, this may stem from a desire to impress the\nJapanese with America's readiness to fight. In part, it seems to\nbe & reaction from our avoidance of war in Europe -- a compensation\nfor the caution which has characterized our behavior in the West.\nIt is worth noting that a Gallup Poll shows no comparable bel-\nligerency in the part of the general public. The results of &\nsurvey published August 3 presented 51 per cent in favor of checking\nJapan even at the risk of war, 31 per cent opposed, 18 per cent\nundecided or with no opinion.\nRegraded Unclassified\n4\nThere was nearly unanimous editorial approval for the\nfreezing of Japanese assets. Many of the commentators assumed\nthat this meant the application of full economic sanctions. A\nconsiderable number expressed keen disappointment that the Admin-\nistration is still \"temporizing\" with the Japanese. Almost all\nInsist that stringent economic measures be taken in response to\nany further aggressive moves in the Orient.\nThe President's explanation of American policy in the Far\nEast mas accepted as valid and reasonable by the majority of com-\nmentators. But they are glad to think that the policy has now\nbeen abandoned. The commonest editorial heading for comments on\nthe subject was \"An End of Appeasement.\" The moral generally\ndrawn from the Japanese occupation of Indo-China was that appease-\nment has once more been proved 8. failure -- this time so conclusive-\nly that it must not be resorted to again. The term \"appeasement\"\nnow appears to have uglier connotations to American ears than ever\nbefore.\nIt seems possible that American editorial writers have\nindulged in an oversimplification of the Japanese problem. They\nare inclined to attribute Japanese expansion to the ambitions of\na handful of \"war lords\" and to suppose that these ambitions can\nbe overcome by a sufficient display of force. They take it for\nRegraded Unclassified\n173\n- 5 -\ngranted that conflict with the United States would be suicide for\nJapan; editorial comments are replete with contemptuous phrases\nsuch as \"little yellow men.\" The vulnerability of Japan's cities\nto air attack and of the island to blockade are cited frequently.\nIn short, American newspapers dislike, distrust and disdain the\nJapanese.\nNotes\nThe action of France in applying to Japan for protection of\nIndo-China produced vigorous resentment over here. The prevailing\nsentiment appears to be that an end of appeasement on our part is\nin order for Vichy, as well 8.8 for Tokyo.\nSecretary Ickes' program for voluntary conservation of gas-\noline has evoked 8. good deal of grumbling -- principally on the\nground that oil continues to be shipped to Japan.\nNewspapers took with remarkable calm the sensational rumors\nof 8 meeting between President Roosevelt and Prime Minister Churchill.\nSome compared it with the Hitler-Mussolini conferences at Brennero,\nfinding in it & symbol of democratic unity to match the dictators'\npartnership.\nRegraded Unclassified\nRegraded Unclassified\nAugust s, 1941\nFiles\nMr. Declaram\nMr. Jay Crass telephoned as free Nov York at 2145 p.a. on August 6. Be\nasked if I was avere that Foreign has Control had refused his second application\nfor a license to permit the Standard 011 to sell its Bungarian holdings to German\ninterests. I told Mr. Crans that I was, of course, ware that the first application\nhad been refused, and that . second vas to be submitted, envisaging a larger part\nof the payment to be made in gold in Portugal and in free carrencies. I vas not\nAVERS, however, that this second application had been refused.\nIn naver to Mr. Crame's unofficial and personal inquiry, I told his that\nI was convinced that no license would be given for the transaction under reference,\nno miter visit the character of the compensation offered. That 1s, 11 ase not\nastter whether the payment be made ia gold, blocked currencies and assurities, or\nfree currencies. I added that the Treasury would not buy gold abread, and that\nthe fact that Germay was offering 8 considerable amount of gold is Pertugal sight\narouse the suspicies of Government officials as to the searce of such gold. That\n1a, had the Germane looted such gold and now vanted to obtain control of American-\navoid property is the Arts countries using 11 as the medium? Mr. Craza shared w\nview that the Foreign Funds Control committee was definitely apposed to a trans-\naction of this type, and he contemplated expressing such as opinion to his Beard of\nDirectors.\nAt 11:30 this morning Mr. Crame called 24 again on the above matter. No said\nthat his directors, and partionlarly Mr. Farrish, were not happy over the decision\nwhich had been taken \" our Control Board. the first suggestion had been that Mr.\nCrams should come to Washington to consult Secretary Morgenthan is the premises.\nMr. Crass had thought this inadvicable and the plan is now for 000 of the Vice Presi-\ndonts of the Standard 011 Company of Inv Jersey to come to Vashington and sake\nrepresentations to Secretary Ball with the view to obtaining the desired license.\nAugust 9. 1941\nAt 10:30 this morning Mr. Lathringer telephoned - from the Department of\nState that & cablegram had been received from the American Minister at Padmport\nin regard to the Derman desire to obtain Standard 011 holdings is Mangary. 1 no\ngosted that as asknowledgemt w made to the effect that the information was timely.\nand that no favorable action had been takes by the Treasury upon this proposal\nwhich had been before it for 0000 time. It vas understood that Mr. Lethringer verie\nprevide the Treasury with sepies NY of the cablegram.\nHMC: dm: 8/9/41\n175\nPARAPHRASE OF TELEGRAM RECEIVED\nFROM: American Embassy, Chungking, China, via N.R.\nDATE: August a, 1941, 11 a.m.\nNO.: 337\nTHE FOLLOWING Is STRICTLY CONFIDENTIAL FOR THE SECRETARY\nOF THE TREASURY FROM FOX.\nYesterday (7), the fellowing order was received by the\nboard.\n\"August 6, 1941. Ministry of Finance. A secret order\nto the Currency Stabilisation Beard (7).\n\"In the setting up of the currency Stabilization Board,\nthe objective is to conselidate the foreign exchange\nvalue of the fapi (1) maintaining the smooth progress of\nChina's trade with those mations who are friendly. Because\nof the importance of this task and, (*) (?) prepare careful\nplans in advance and then faithfully put the plans into\nprictice. The principles which are given below are\nformulated, therefore, for the guidance of (1) (7) in\nthe working out of the plans in details\nsl. AS the present time, one most important consern\nis the maintenance of the sonfidence of the public in fapi.\nThe stability of the foreign exchange value of fapi and the\nquestion of lowering of prices are both related to (7).\nHense, detailed plans to develop the potentialities of the\nstabilization fund should be worked out by (2)3\n& The\nRegraded Unclassified\n176\n2. The system of governmental allotment of exchange,\nin the past, was not used in the operation of the stabilization\nfund. Therefore, the nahager of the fund was unable to\nstop both the speculators and the enemy from getting hold\nof exchange resources of China and prevent the flight of\nsepital. (1) from (T) as before the exchange market vere\noften great and (1) (7).\n(NOTE: A request has been sent for & repetition of the\nabove information. As seen as the correction is received\nthe proper persons will be notified.)\nTherefore, at the present attention must be directed\nto the objective of stopping the flight of capital as well\nas making it impossible for speculators and the enemy to\nobtain U.S. exchange resources in order that the stabilization\nfund's resources will be effectively used instead of squandered\n3. When legitimate businessess - for proper use -\nrequest to purchase foreign exchange, the request should\nreceived eareful sonsideration in order that such denand may\nbe supplied promptly and legitimate business can ⑈ on without\ndelay in an efficient manner,\nOn the basis of the above three principles, the board\nshould work out detailed consrete These\nshould them be submitted for authorization to the Ministry.\nThe doversment hopes that this order will be earried out\nand that the Ministry may have a report of the results.\nThe Ministry of Finance\n(s) K'ung Nainag Ead'\nEven\nRegraded Unclassified\n177\nEven after the needs of the primoiples are now\nfurnished to the board and after the freezing, reference\nis still made to the prevention of the flight of capital\nand the sheeking of speculators' inroads. The latter\nsubject seems to be the Minister's favored topie.\nIn the last paragraph, the Board is directed to work\nout 8. detailed plan. It is my understanding, however,\nthat on Monday there will be placed before the Board an\norganizational procedure now being formulated in the\nMinistry. It cooms that the board 1s merely to be the\nMinistry's rubber stamp.\nOn Saturday, Hall-Patch is coming to Chungking for a\nfew days. This is upon instruction from the British\nAmbassador (three telegrams) and orders from the home\noffice. Immediately after his arrival the Board will\norganise officially.\nThis is the end of the message.\nGAUSS\nEATPAK\n611 521\nRegraded Unclassified\n178\nCORRECTED COPY\nPARAPHHASE OF TELEGRAM RECEIVED\nFROM: American Embasuy, Maungking, China, via M.R.\nDATE: August s, 1941, 11 a.m.\nNO.: S37\nTHE FOLLOWING IS STRICTLY CONFIDENTIAL FOR THE\nSECRETARY OF THE TREASURY FROM FOX,\nTesterday 0), the fellowing order VAS received by the\nBoard,\n\"August 6, 1941. Ministry of Finance. A secret order\nto the Currency Stabilization Board.\n\"In the setting up of the our:ency stabilization Beard,\nthe objective is to consolidate the foreign exchange value\nof the fapi for the purpose of maintaining the smoth\nprogress of China's trade with those nations who Are friendly.\nBecause of the importance of this task, the Board must\nprepare sareful plans in advance and then faithfully put\nthe plans into practice, The principles which are given\nbelow are formulated, therefore, for the guideneeof the\nBoard in the working out of the plans in detail.\n\"1\" At the present time, one most important consern\nis the maintenance of the confidence of the public in fapi.\nThe stability of the foreign exchange value of fapi and the\nquestion of lewering of prices are both related to this\ntask. Hence, detailed plans to develop the potentialities\nof the stabilization fund should be worked out by the Seard.\n$20 the\nRegraded Unclassified\n179\n+\nvem\n\"2. The system of governmental allotment of extrange,\nin the past, was not used in the operation of the stabilization\nfund. Therefore, the manager of the fund was unable to\nsto both the spesulators and the enemy from getting hold\nof exchange resources of China and prevent the flight of\ncapital. Hense, the fluctuations in the exchange market\nvere often great, This vas followed by serious consequences.\"\nGAUSS\n(NOTE: The above is a correction on Section One of telegram\nNo. 337.)\nEAIPAX\nRegraded Unclassified\n180\nC\n0\nP\nY\nDEPARTMENT OF STATE\nMashington\nIn reply refer to\nEA 893.50/248\nAugust 8, 1941.\nThe Secretary of State presents his compliments\nto the Honorable the Secretary of the Treasury, and\nencloses a copy of strictly confidential despatch dated\nJuly 2, 1941, from the American Consulate General,\nShanghai, China, transmitting memoranda prepared for\nthe Treasury Department representative, Mr. Manuel Fox.\nEnclosure:\nfrom Shanghai, July 2.\nCopy:lg 8/8/41\nRegraded Unclassified\n181\nC\n0\nP\nY\nNO.\nEmbassy, China\nNO. 602\nTHE FOREIGN SERVICE\nOF THE\nUNITED STATES OF AMERICA\nAMERICAN CONSULATE GENERAL\nShanghai, China, July 2, 1941\nCONFIDENTIAL\nSUBJECT: Transmittal of Memoranda Prepared for Treasury\nDepartment Representative Mr. Manuel Fox\nTHE HONOURABLE\nTHE SECRETARY OF STATE\nWASHINGTON\nSIR:\nI have the honor to refer to the Department's instruction of\nMay 10, 1941, (file no. 893.50/242) conveying the request of the\nTreasury Department for data on economic and financial subjects\nand to my despatch no. 546 of June 16, 1941, in reply, entitled\n\"Background Information on Problems of Maintenance of an Exchange\nStabilization Fund in Support of the Chinese Yuan in the Shanghai\n1/ & 2/\nForeign Exchange Market\", and to forward herewith two memoranda\nprepared in this Consulate General by Mr. A. Bland Calder, Assist-\nant Commercial Attache, for and at the request of Mr. Manuel Fox,\nTreasury Department representative and member of the new exchange\nstabilization committee.\nRegraded Unclassified\n- 2 -\n182\nThe memoranda, which are self-explanatory, attempt to reply to\ntwo questions put by Mr. Fox, firstly, \"That is the Importance and\nAdvantage of Shanghai to Free China Now?\". the treatment giving both\nthe advantages and disadvantages, as argued both by proponents and\nopponents of further stabilization effort at Shanghai, and, \"What\nwould have been the effects in Shanghai in the last twelve months\nhad the United States frozen China accounts on July 1, 19401\"\nFurther copies of memoranda which are being prepared for Mr. Fox\nwill follow.\nRespectfully yours.\nFrank P. Lockhart\nAmerican Consul General\nEnclosures:\n1/ Memorandum answering the question \"That is the importance\nand advantage of Shanghai to free China now?\"\n2/ Memorandum answering the question \"What would have been the\neffects in Shanghai in the last 12 months if the U.S. had\nfrozen China accounts on July 1, 19407\"\n851/851.51\nABC:EAR\nOriginal and four copies to Department\nCopy to Embassy, Peiping\nCopy to Embassy, Chungking\nCopy:lg 8/8/41\nRegraded Unclassified\n183\n0\n0\nP\nY\nEnclosure no. 1 to despatch no. 602 . dated July 2, 1941,\nfrom Frank P. Lockhart, American Consul General at Shanghai, China,\non the subject: \"Transmittal of Memoranda Prepared for Treasury\nDepartment Representative, Mr. Manuel Fox\".\nShanghai, June 26, 1941.\nWhat is the importance and advantage of Shanghai to\nfree China now?\n(The following points give the advantages and\nthe disadvantages, 1.0, they give the arguments\npro and con as to whether Shanghai's position\nshould be preserved and whether the yuan should\nbe supported on the Shanghai foreign exchange\nmarket further.)\nThe Advantages\n1. STRATAGEM.\nThe continued maintenance of a free exchange market at\nShanghai for Chinese currency represents the choice of\nthe lesser of two evils. The alternative would encourage\nthe Japanese to introduce drastic and close financial and\ntrade control measures at Shanghai similar to those in\nforce in North China and would throw Shanghai more com-\npletely into the yen bloc. Were the Japanese unable to\nsecure, through the Shanghai market, needed exchange for\ncertain of the imports which they find it necessary to\nbring in from abroad, and should they be unable to use\nShanghai as a supply base for securing these imported na-\nterials, they would be most likely to introduce full f1-\nnancial and economic controls in the foreign controlled\nareas (International Settlement and French Concession)\nand thus it would be difficult or impossible for the\nAmerican, British, other foreign and Chinese vested 1n-\nterests further to hold their position here. It is some\nadvantage to Free China to keep this foreign \"front\" at\nShanghai as a curb to Japanese aims.\nRegraded Unclassified\n184\n2, PREVINTS LOOTING,\nPresent stocks of goods in Shanghai are encrmous. It is\nsaid that stocks of raw cotton, cotton yarn and cotton\ncloth alone are worth yuan 1,250,000,000, or about\nUS$63,000,000, Stocks of chemicals, dyes, metals, min-\ndries, foodstuffs and fuels are also huge, not to mention\nthe aggregation of capital goods in outablished plant and\nthe value of real property, much of which would be expro-\npriated to Japanese purposes if the Japanese were to move\nin. The Settlement and Concession represent by far the\nrichest compact war prize in prospect for Japan in China.\nJapan's healtancy to take it lies in the fear that neither\nthe United States nor Great Britain would put up with a\ncomplete Japanese encroachment here. So long as a\nChinese-British-American stabilization fund is maintained\nhere, that fact signifies B determination on the part of\nthe United States and Great Britain to maintain the sta-\nChina. tue quo and to contime material and moral support for\n3. ENABIES NON Yen BLOC COUNTRIES TO ACQUIRE CENTRAL CHINA EXPORT\nGOODS.\nWere there no free market, it would not be possible to\nsell foreign currencies in the Shanghei market for ac-\nquirement by the United States, Great Britain and other\nnon-yen bloc countries of Central China export goods,\nexcept through Japanese hands. From China's point of\nview it is preferable for the non-yen bloc countries\nto be able to acquire such goods. Proe China apparently\nwould prefer that her friends should have these goods\nrather than that Japan should have the whole quantity.\n4. EXPORTS TO NON YEN BLOC COUNTRIES HELP TO MAINTAIN A SUPPLY CG\nFOREIGN EXCHANGE FOR THE SHANGHAI MARKET, to the extent of\nUS$6 to 10 million monthly, (average for the past year).\n5. MORALE.\nThe continued circulation of the Chinese national currency\nat Shanghai and in its occupied hinterland definitely\nbolsters the morale and helps to hold the loyalty of the\npopulace in this region toward the National Government at\nChungking.\n6. REHABILITATION will be an easier task for the National Gov-\narnment when it returns to this part of China if its our-\nrency system is maintained more or less intact.\n7. PRESERVATION OF TREE ECONOMY IN CHINA.\nThe maintenance of a from economy at Shanghni will have an\nimportant influence in restoring free economy in China sen-\norally after the termination of the present hostilities.\nRegraded Unclassified\n185\n34 SUPPLIES FOR TREE CHINA.\nWhile there 10 nothing like the relatively free movement of\ngoods from Shanghel to \"free China\" now which prevailed prior\nto June, 1940, it 1a still poesible to ship 6,000 to 10,000\nbales of cotton yarn and cotton cloth monthly from Shanghai\nby round about routee to Chinese controlled territory. The\nvalue of the movement monthly at present prices is therefore\nbetween US$500,000 and US$800,000. There is thus come -\nterial value to \"free China\" in the form of such supplies.\n3. PRESERVES A STANDARD OF VALUE.\nThe fact that the possibility existe for flight of capital\nfrom \"free China\" to Shanghai enables the National Government\nat Chungling to inflate its currency and still to keep alive\narong the populace in the Chinese controlled interior a pre-\nveiling faith in an ultimate value (Shanghai value) of that\ncurrency. Thus the rate of exchange at Shinghai represents\nthe ultimate value or standard of value of the Chinose our-\nrency.\n10. PAST STABILIZATION EFFORT 15 NOT LOST if further stabilization\nis maintained, Were the Shanghai market now to be abandoned\nat a time when the stabilization operations cost 80 little.\nthe considerable sums spent in stabilization effort in 1937\n1938, 1939 and 1940 would be lost except for some economic\ngains by acquirement of goods by free China from Shanghai in\nthose years.\n11, JAPANESE ECONOMIC success AT SHANGHAI WOULD PROBABLY RESULT 730M\nCESSATION OF MARKET FOR \"TAPI\" AND WOULD ECLIPSE THES CHINA'S\nPRESTIGE DOMESTICALLY AND ABROAD.\nTHE BRITISH, if there is no exchange market for \"fap1\", WOULD\nTEND, as in North China, to săjust themselves\n(though under protest) to the situation created by greater\nJAPANESE CONTROLS and would get in line with Japanese schemes.\nThe pressure of the Shanghai British firms upon London for\nsupport and preservation of their position here is strong and\noften colors British policy in Chins. The British because of\ntheir greater concern (militarily) with the European situa-\ntion, and because of the huge British investment here are in-\nclined toward temporary appeasement of Japan as repeatedly\nevidenced. Hence, Japanese complete controls would achieve\nconsiderable success with this British acquiescence, Free\nChina would naturally not ment to see any greater dagree of\ncooperation between the British interests and the Japanese,\nas Tree China is trying at least to preserve something of a\nsemblance of having Britain as an Ally. If the Jaganese were\nthus successful in establishing complete control at Shanghei,\nit would demonstrate that the Chungline Government 1a no\nlonger essential to the trade and economy of Saet Central\nChina, which would affect its political prestige.\nRegraded Unclassified\nThe Dieadvantages\n1, POOR STRATAGEL\nany observers believe that the war in China will continue\ntwo or more years longer and that Chinese victory in the\nof recapturing the occupied areas is uncertain.\nJapanese efforts at obtaining greater control over the f1-\nnancial and economic life of China (particularly of the oc-\ncupied areas) may thus be expected to continue and to In-\ncrease until complete control 18 achieved despite the avail-\nability of exchange. Faced with the inevitable, contly de-\nfenge efforts designed to delay the progress of Japanese\ncontrol are therefore unjustifiable. Furthermore, as soon\nAn a state of war exists between Japan and the Anclo-Saxon\npowers, the Japanege will unhesitatingly take over the\nwhole of Shanghai, Indeed they may take this action as soon\nàs it becomes impossible to secure commodities from abroad\nat Shanghai, Shanghai is already lost, 20 why try to starve\noff a fait accompli. These are the observations & defeat-\nlets in the outlook for Shanghai.\n2. MORATE OF THE PEOPLE IN FREE CHINA IS MORE IMPORTANT THAN THAT OF\nTHOSE IN OCCUPIED REGIONS.\nThe fate of the Chinege people in the occupied areas of the\ncountry will be determined only by the outcome of the Sino-\nJapanese hostilities. not by the maintenance of stabilized\nexchange rates at Shanghai. The loyalty of the people in\nNorth China (loyalty to the Chungking Government). where the\nChinese National currency is almost wiped out, 1s as great\nBB the loyalty of the people in the Shanshai region, where\n\"fapi\" is still the dominant currency in use. There 1e 3.\ngood deal of realism practised by the people both of North\nChina and East Central China. Their loyalty is somewhat in-\npaired by circumstance. The moral and material contribution\nby the Chinese people in Sast Central China to Tree China 11\npitifully insignificant, the people in Free China look upon\nthe relatively better condition of the people in occupied\nChina with something of envy. Thus the virtual luxury en-\njoyed by the people of Shanghai has & demoralizing effect\nupon the spirit of the people of Free China,\n3. FREE ECONOMY FOR CHINA.\nIf it prevails after this conflict 10 over. will depend opon\nthe political complexion of the National Government and upon\nits considered policies at that time and not upon the preserva-\ntion of a nucleus for free economy at Shanghai in the interim.\nRegraded Unclassified\n5 -\n15\n4. GOODS FOR FREE CHINA\nThere is no guarantee that the Maintenance of a free exchange\nmarket at stabilized levels at Shanghai will assure B con-\ntinued supply of Shanghai goods to Free Chinn. The Japanese\nblockade has become more and more intensified and of late in\neven being applied to a greater degree through the Shanghai\ncustoms in prohibitions against export of various commodities\nto the south.\n5. FALLACIOUS AIMS ARE SERVED.\nThe purpose of currency stabilization 1u defeated by making\nShanghai the \"safety valve\" for currency inflation in Free\nChina. Furthermore, inflation in Free China should be checked.\nThe huge concentration of capital at Shanghai make for un-\nhealthy, inflated values here. The fact that cash can be ex-\nchanged for foreign currency in the Shanghai market or can be\ninvested here with possibly more promise than in interior\nChina attracts capital here from Free China, There is likely\nto be very little flow of capital from Shanghai to Free China\n80 long as the economy and administration of Free China re-\nmains unimproved, and 80 long B6 Shanghai's status appeare\nlikely to remain reasonably intact.\n6. MAINTENANCE OF RATES IS TOO COSTLY - PILES UP CHINA'S FOREIGN III-\nDEBTRONESS.\nThe maintenance of a free exchange market for a national cur-\nrency within enemy territory is 8 novel phenomenon in the\nworld's financial history. Note that Great Britain blocked\nits currency immediately after the declaration of war, How\ncan China afford to waste more funds (thus increasing its for-\nsign obligations) in mintaining the value of its currency in\nthe occupied areas?\n(Initialed) A.B.C.\n4. Bland Calder\nCopied by:\nHAW\nCompared with: JCB\nCopy:Lg 8/9/41\nRegraded Unclassified\n188\nInclosure no. 2 to despatch no. 602 dated July 2, 1941,\nfrom Frank P. Lockhart, American Conwil General at Shanghai,\nChina, on the subject: \"Transmittal of Memoranda Prepared\nfor Treasury Department Representative. Mr. Manuel Fox\".\nMEMORANDUM\nShanghai, June 27, 1941.\nWhat would have been the effects in Shanghai la the last\n1940. 12 months If the U.S. had frosen China accounts on July 1,\n(Note: The effects as enumerated are naturally\nhighly suppositional.)\n1. Shanghat's foreign trade would have been drastically reduced. The\nhuge importe of materials to Shanghai for hoarding, representing\na\nflight of capital, would not have been possible.\nC. The Japanese and their sponsored Nanking regime would probably have\nintroduced exchange and trade controls at Shanchai and would have\nmooner and more rapidly introduced and expanded the circulation of\nmilitary yen and of the bogus currency of the lianking regime, and\nthese currencies would now be dominant in the Settlement and Con-\ncossion here as is the case at Tientain.\n5. Unless Japan accounts were frozen at the same time in the United\nStates, the freezing of China credits would have immediately given\nJapan export menopoly privileges in this region in trade with the\nUnited States. Japanese firms would have been able to export China\ngoods to the United States from Scanghal and to acquire the credits\nin the names of their Toxyo head offices as Japan credits and could\nhave used such credits for purchases of strategic materials for\nJapan and via Japan for their V.ee in China not only from the United\nStates but from other countries (the funds of which were not frozen)\nusing the U.S. Dollar credits.\nThe repatriation to Shanghai of Chinese capital from the J.S. and\nfrom Hong Kong and from other British territory in Southern Asia,\nLalaya, and Australasia, which occurred after the fall of France,\nwould not have been realized, as the conditions of partial boom\nwhich have prevailed in Shanghai because of free exchange and free\ntrading would not have obtained and the situation would thus not\nhave been inviting for such capital repatriation. It 1 a estimated\nthat no less than US$50,000,000. WELE repatriated to Shanghai because\nof impending or anticipated war time restrictions in British por-\nsessions, and because of fears of American freezing of China accounts\nor of devaluation of the U.S.\nRegraded Unclassified\n189\nProperty values in Shanghai would not have become As inflated as\nhas been the case as Shanghai holders of U.S. Dollar credits would\nnot have been able to convert them back to Chinese yuan with which\nto purchase property to hold as & hedge against further inflation\n(of Chinese currency).\nis Ohina would have been able to get the benefits of the repatriation\nof the frozen credite after the war and would thus have a nest 066\nwhich could contribute toward rehabilitation, whereas the gradual\ndissipation of some portion of these free credite in the past year\nwill probably necessitate larger American loans to Ohine after the\nhostilities than would otherwise have been necessary.\n7. Had Shanghai credits been fromen but liberal szchange licensing Is-\ncilities been granted to free Chins (for imports and for repatriation\nof funds) confidence in the Chinese currency would have been main-\ntained.\nd, free China, If A free and stabilised exchange market had been main-\ntained at, say, Chungking, would thus have obtained some of the ex-\nchange credits sold by Shanghai hoarders for acquirement of ner-\nchandise to store in warehouses awaiting higher prices, or for prop-\nerty purchases or for investment in local stocks.\n9. The incentive for flight of capital from Free China to Shanghai would\nnot have obtained, but prices because of inflation in free China might\nhave been even higher than has been the case, as the Shanghai \"outlet\"\nor \"eafety valve\" would not have existed.\n10. Commodity prices in Shanghai would probably have rigen encrmously,\nnot because hoarders would have been holding goods to ruch an extent\nfor war time profits. but because import commodities would have been\nvery scarce in the market.\n11. There would probably have been emeedingly great hardships for the\nShanghai residents and possibly a million or more people would have\nhad to leave Shanghai for the interior as it would not have been poe-\nsible to import the rice from French Indochina (paid for, out of U.S.\nDollar exchange purchased in the Shanghai market) nor the coal from\nIndia, nor cotton from the U.S., India and Brazil. Mills and factories\nwould have had to close and unemployment would have been a serious prob-\nlem, more BO than has been the case.\n12. The hure potential or \"paper\" profits of the Chinese banks in Shanghai\nthe loaded themselves with U.S. Dollar exchange at 164 would have\nvanished,\n(Initialed) a 3, C.\n4. Bland Calder\nCopied by:\nSAW\nCompared with:JCB\nCopy:1g 8/9/41\nRegraded Unclassified\n190\nRS\nPLAIN\nTOKYO VIA SHANGHAI & N.R.\nDated August B, 1941\nRec'd 10:35 a.m., 10th\nSecretary of State,\nWashington.\n1199, Eighth, 6 p.m.\nToday's press reports Finance Ministry announce-\nment made yesterday relaxing restrictions on Nether-\nlands and Netherlands Indies under act controlling\ntransactions nations certain designated countries.\nAnnouncement states in view few restrictions imposed\nEconomic activities other than monetary transactions\nof Japanese residing these countries restrictions\nwill be relaxed from August 8. Economic activities\nto which regulations cease to apply are defined as\nfollows:\nOnE. Acquisition or disposal nonmovable property,\nmovable property, leaseholds, rights of pledge, rights\nof mortgage, industrial propristary rights, other in-\nvisible propriatary rights, businesses, undertakings,\ninvestments in businesses or undertakings, credits in\nforeign currency and credits in Japanese currency.\nTwo. Deposit of immovable property, Japanese\ncurrency\nRegraded Unclassified\n191\n-2-, No. 1199 from Tokyo, August 8, 1941; 10:35 a.m.,10th\ncurrency and credits in Japanese currency.\nThree. Loans of movable property and securities.\nSENT Department via Shanghai.\nGREW\nJRL\nRegraded Unclassified\n192\nparaphrase OF TELEGRAM SENT\nTO: American Embassy, Panamá, Panama.\nDATE: August s, 1941, 7 p.m.\nNO.: 177\nReference is made to the Embasay's telegram of August e,\n4. p.m., No. 217.\nInformation has been requested by the Department from\nthe American Consulate General in Bareelona and the American\nEmbasay in Madrid in regard to the circumstances which\nsurround the sale to the Spanish Government oil monopoly\nof the Santa Helena. The Department would appreciate it\nif the withholding by the Panamanian Government of the\nconfirmation of the instruction from Madrid at regards the\ncancellation of the Panamanian registry of the Santa Helena\ncan be made until information requested from the above\nsources has been received which indicates definitely that\nthe transaction is or is not above suspicion. The Embassy\nmay point out to the Minister of Finance that, in view of\nthe circumstances surrounding this case, a withholding of\nconfirmation - for the present - appears to be justifiable.\nBecause the ennecilationief the Panamanian registry\nOL\nmay not be effected, the Department Milling juggests that the Embassy\ncontinue to regard the plan which was outlined in tele-\ngram No. 161, dated July 28, 5 p.m., as the basis for\ndiscussion with the authorities of Panama as regards the\npossible requisitioning of this ship by Panama.\nHULL\nRAIJCO:LM A-A\n(#3)\nEA:PAX\nRegraded Unclassified\n153\nTREASURY DEPARTMENT\nINTER-OFFICE COMMUNICATION\nDATE August 8, 1941\nTO\nSecretary Morgenthau\nFROM Mr. Cochran\nCONFIDENTIAL\nRegistered sterling transactions of the reporting banks were ne followe:\nSold to commercial concerns\n238,000\nPurchased from commercial concerns £54,000\nOpen market sterling closed at 4.03-3/4. unchanged, and there were no\nreported transactions.\nIn New York, closing quotations for the foreign currencies listed below\nwere D.B. follows:\nCanadian dollar\n11 $ discount (off 1/8)\nArgentine peso (free)\n,2390 (up .0005)\nBrazilian milrois (free)\n+0505\nUruguayan peso (free)\n.4380\nColombian peso\n.5800\nMexican peso\n.2070\nCuban peso\n1-3/16% discount (off 1/8)\nVeneruelan peso\n.2650\nIn Shanghai, the yuan lost further ground with the rate off 7/321 at 4-13/164.\nSterling advenced 1-1/4 to 4.01-3/4#.\nThere were no gold transactions consummated by us today. No new gold engage-\nments were reported.\nThe London fixing prices for spot and forward silver were unchanged et\n23-7/16a. The United States equivalent of this price is 42.55d.\nTreasury's purchase price for foreign silver WP.8 unchanged at 350- Handy\nand Harnan settlement price for foreign silver was also unchanged at 34-3/4#.\nWe made three purchases of new production silver from various foreign sources\namounting to 175,000 ounces under the Silver Purchase Act.\nRegraded Unclassified\n194\nBRITISH EMBASSY,\nWASHINGTON.\nPersonal and Secret.\nAugust 8th 1941.\nDear Mr. Secretary,\nI enclose herein for your\npersonal and secret information a\ncopy of the latest report received\nfrom London on the military situation.\nBelieve ne,\nDear Mr. Secretary,\nVery sincerely yours,\nHalifax\nThe Honourable\nHenry Morgenthau, Jr.,\nUnited States Treasury,\nWashington, D.C.\nRegraded Unclassified\n195\nTELEGRAM FROM LONDON SATED UGUST 6th 1941.\nR&V N.V.L. L. or the five ships torpedoed in convoy\nwest of Ireland on the 5th one has not been sunk.\n2.\non the 5th Noyal Air orce mircraft attacked\nconvoy off the Book of Holland, two hits scored on\nmorchent vessel estimated 2,000 tons, believed destroyed.\n3.\nJuez Conal is open. During sir attacks on Suez\nnight of 3rd/4th 0,000 tons Britlsh tanker hit, will\nprobably be beached, 5,000 ton Belgion tanker torgedoed,\nnot reported sunk. mall Delgian ship torpedood and\nsunk.\n4.\nAritish submarine night of 27th/18th blew up a\ntrain on B roilway line in cast Sicily (sic).\n5.\nRoyal Air Force. Night of 3rd/4th. Two ships\nantimated 8,000 tons were each hit by cllington\nsireraft west of quolomis.\n6.\non the 4th and 5th. Blenheims claimed to have\nsunk BUO tons schooner noar Misurate and 9 mall ships\noff Tunis night of 5th/8th.\n7.\nNight of 5th/6th very strong foree of droreft\nsent to Germany. Heavy attacks delivered on Frankfurt,\nMaunheim and Carlaruhe. Light attacks on achew and\nBoulogne. Heven missing. nerry night activity over the\nUnited Kingdom still very elight.\n8.\nMilitary - Russia.\nNo change except in the Ukreine where the Terman\nsouth cest advance mouth of Byelnyn Toorkov opparently\ncontinues sinst stirf resistence.\nRegraded Unclassified\n196\nRESTRICTED\nG-2/2657-220; No. 462 M.I.D., W.D. 12:00 M., August 8, 1941.\nSITUATION REPORT\nI. Eastern Theater.\nGround: The German High Command reports that its troops\nin Estonia, after capturing Rakvere, on the Tallinn-Leningrad rail-\nroad, have reached the Gulf of Finland.\nSoutheast of Smolensk, the Desna River east of\nRoslavl, has been reached.\nIn the Ukraine the Germans claim to have captured\n30,000 prisoners south of Uman.\nIn addition, the German High Command reports pri-\nvately that an armored group under Colonel General von Kleist is ad-\nvancing southeastward through the Ukraine in wedge formation. The\ncentral division of the wedge captured Kirovo on August 4.\nGerman forces advancing to the northeast from Kholm\nhave reached the foothills of the Valdai Hills.\nII. Western Theater.\nAir: The Axis claims to have brought down British planes\nover the Channel coast during the day.\nNormal night raiding over Scotland and northwest\nGermany.\nIII. Mediterranean Theater.\nGround: Nothing to report.\nAir: Axis planes made a night attack on Alexandria.\nRESTRICTED\nRegraded Unclassified\n197\nRESTRICTED\n0-2/2657-220; No. 463 M.I.D., W.D. 12:00 M., August 9, 1941,\nSITUATION REPORT\nI. Eastern Theater.\nGround: The German High Command reports the capture of\n38,000 Russians of a combat group encircled a week ago near Ros-\nlavl, 60 miles southeast of Smolensk.\nThe German High Command, in a special commini-\nque, reports the capture of 103,000 men in an area around, south\nand southeast of Uman. These prisoners were said to belong to the\nRussian Sixth, Twelfth and Eighteenth Armies. The Commanders of\nthe Russian Sixth and Twelfth Armies were among the prisoners.\nGerman pursuit detachments continue to advance\nto the south and southeast, in the areas of Perwomajsk and Kirovo.\nII. Western Theater.\nAir: Russian and British planes cooperated in night\nbombing operations against Germany. The R.A.F. operated against\nKiel while the Russian Air Force reported bombing Berlin.\nLight German night operations over the eastern\nBritish coast.\nпг. Mediterranean Theater.\nAir: British raids on Benghazi and Tripoli.\nGround: Limited patrol activity on Sollum front.\nRESTRICTED\nRegraded Unclassified\n198\nRESTRICTED\n0-2/2657-220; No. 464 M.I.D., W.D. 12:00 M., August 11, 1941.\nSITUATION REPORT\nI. Eastern Theater.\nGround: Two distinct Russian combat groups, each of very\nconsiderable strength, continue to offer desperate resistance in\nEstonia to the invading Germans. The larger group is in control of\nTallinn and northwestern Estonia. A smaller group is defending it-\nself west of Narva and northwest of Lake Peipus. Between these\ngroups the German Eighteenth Army has driven a wedge beyond Radvere\nto the southern shore of the Gulf of Finland. The Russian force at\nTallinn is surrounded; that west of Narva may also be surrounded,\nbut it is possible that this latter group still has a line of re-\ntreat open to Leningrad over Narva.\nFollowing the destruction of strong Russian com-\nbat groups near Uman, German armored and infantry divisions are\nfollowing the defeated Russian army to the south and southeast.\nA German armored detachment has reached the west-\nern bank of the Dnepr River opposite Kremenchug. Another German ar-\nmored division advancing down the eastern bank of the Bug has reached\nthe vicinity of Voznesensk, 55 miles northwest of Nikolaev.\nAir: German night raids on Moscow took place on the nights\nof the 9th and 10th.\nII. Western Theater.\nAir: D.N.B. reports daylight R.A.F. raids on the French\ncoast. Normal German night raids on Scotland.\nIII. Mediterranean Theater,\nNo important activity.\nRESTRICTED\nRegraded Unclassified\nCONFIDENTIAL\n199\nParaphrase of Gode Cablegram\nReceived at the Var Department\nat 17:40. August 8, 1941.\nLondon, filed 18:20, August 8, 1941.\n1. British Mr Activity over the Continent,\n& Hight of Amount 47. The numbers of tons of high\nexplosive bombs and maters of insendiary bomba dropped upon the\nobjectives named were as follow#: Mannhsin, 29 and 3600; Frankfert,\n25 and 49001 Calais, 20 and 700; and Karlsruhe, 28 and 2000.\nb. Pay of Amount 7. & total of 903 fighters were exployed\nas follows: 141 on interception missions, 239 in the protection of\nshipping, 45 on special patrols, and 478 on offensive patrols. A\nLysander escorted by Spitfires carried out sea resous patrol daty.\nLille and the airdroms at St. Oner were each attacked by 6 Blenheims.\ne. Hight of August 7-8. A total of 208 bombers were sent\nout as follows: 46 to the railway center at Home, 106 to the Krayp\nworks at Beeen, 40 to the Dortment railvay center, 6 to Boulogne, 2\nattacking airdromes and to drop leaflets over Paris, and 8 on ass\nmining operations. These attacks were reported as being generally\nsuccessful.\n2. German Air Activity over Britain.\na. Day of Amount e Five long range bembers and 15\nresonnaissance aircraft were dispatabed.\nb. Ficht of August 6-7. 16 fighters and 20 long range\nbombers were used.\n6. Pay of % The Germans carried out reconnaissance\nCONFIDENTIAL\nINFORMATION cut\nRegraded Unclassified\nCONFIDENTIAL\n200\noperations off the sentionses coast of Britain and over the North Sea.\n4. Ficht of Amount 1-4. A few reide took plass over the\nTerkshire coast. Activity against shipping also occurred off the\nEast Anglican coast.\n3. Aircraft Losses Reparted.\na. British lesses. 11 Spitfires, 1 Burricans and 10 pilets\nwere lost on August 7. During the night of August 7-8, three bembers\nwere unreported from the raid on Besen.\nb. Aria losses. On August 7 these were as follows: 1 No-111,\ntwo Me-109F's and two No-109's shot down, 6 Me-109F's probably destroyed,\nand 8 No-109's and 1 Ju-88 damaged.\n4. British Mr Activity. Other Theaters,\na. Theater. A convey off Lampedure vas attacked\nby Swordfish planes from Malta during the night of August 6-7. These\naircraft dropped 5 terpodess, resulting in the sinking of ohe motor\nvessel of 6000 tons. On the day of August 7, the same convey vas\nattacked by Blenheim bombers, which obtained hits on a destroyer and\ntwo large motor vessels.\n5. Arie Mr Astivity. Other Theaters.\na. Middle Eastern Theater. An oil storage tank was his\nduring an attack on shipping facilities at Bues during the night of\nAugust 6-7.\nLEE\nDistributions\nState Department\nChief of the Army Air Forces\nAssistant Chief of Staff, 0-2\nWar Plans Division\nOffice of Naval Intelligence\nG.H.Q.\nSecretary of Treasury\nAssistant Secretary of War for Air\nAssistant Chief of Staff, 0-5\nAir Corps\nCONFIDENTIAL\nRegraded Unclassified\n201\nTREASURY department\nWASHINGTON\nAugust 9, 1941\nMemorandum for THE SECRETARY:\nThe following report is made of Stamp sales at\n\"Treasury House\":\nJuly 1-August 7\n$26,783.40\nAugust 8\n1,328.30\nTOTAL\n$28,111.70\nGRAVES\nRegraded Unclassified\nUNITED STATES SAVINGS BONDS\nCONFIDENTIAL\nComparative Statement of Sales During\nFirst Seven Business Days of June, July, and August, 1941\n(June 1-9, July 1-9, August 1-8)\n(Amounts in thousands of dollars)\n:\n:\nAmount of Increase\n:\nPercentage of Increase\n:\nSales\n:\nor Decrease (-)\n:\nor Decrease (-)\nItem\n:\n=\n:\n:\nAugust\n:\nJuly\n:\nAugust\n:\nJuly\n:\nAugust\n:\nJuly\n:\nJune\n:\nover\n:\nover\n:\nover\n:\nover\nI\nI\n:\nI\nJuly\nI\nJune\n:\nJuly\n2\nJune\nSeries I- Post Offices\n$13,262\n$15,080\n$13,732\n1,818\n$ 1,348\n- 12.1%\n9.8%\nSeries I - Banks\n24,262\n23,324\n16,904\n938\n4,420\n4.0\n23.4\nSeries 1- Total\n37.525\n38,405\n32,636\n-\n880\n5,769\n- 2.3\n17.7\nSeries 1- Banks\n7,515\n7,631\n12,648\n-\n116\n- 5.017\n- 1.5\n- 39.7\nSeries G - Banks\n50,864\n51,852\n74,491\n-\n988\n- 22,639\n- 1.9\n- 30.4\nTotal\n$95,903\n$97,888\n$119,775\n1,985\n-$21,887\n- 2.0%\n- 18.36\nOffice of the Secretary of the Treasury, Division of Research and Statistics.\nAugust 9, 1941.\nSource: All figures are deposits with the Treasurer of the United States on account of proceeds of\nsales of United States Savings Bonds.\nNote: Figures have been rounded to nearest thousand and will not necessarily add to totals.\n202\nRegraded Unclassified\nCONFIDENTIAL\nUNITED STATES SAVINGS BONDS\nDaily Sales - August 1941\nOn Basis of Issue Price\n(In thousands of dollars)\nPost Office\nDate\nBank Bond Sales\nAll Bond Sales\nBond Sales\nSeries E\nSeries E\nSeries 7\nSeries G\nTotal\nSeries E\nSeries F\nSeries G\nTotal\nAugust 1941\n1\n$ 1,467\n$ 3,296\n$ 1,163\n$ 7,586\n$ 12,045\n$ 4,763\n$ 1,163\n$ 7,586\n$ 13,512\n2\n1,500\n3,030\n726\n6,101\n9,857\n4,530\n726\n6,101\n11,357\n4\n3,606\n4,376\n1,892\n10,092\n16,361\n7,983\n1,892\n10,092\n19,967\n5\n1,278\n2,822\n928\n7.334\n11,084\n4,099\n928\n7.334\n12,362\n6\n1,810\n4,195\n1,156\n10.752\n16,103\n6,005\n1,156\n10,752\n17,912\n7\n1,789\n3,475\n652\n5,636\n9,763\n5,264\n652\n5,636\n11,552\nDO\n1,812\n3,069\n999\n3,362\n7,430\n4,881\n999\n3,362\n9,242\nTotal\n$ 13,262\n$ 24,262\n$ 7,515\n$ 50,864\n$ 82,641\n$ 37,525\n$ 7,515\n$ 50,864\n$ 95,903\nOffice of the Secretary of the Treasury, Division of Research and Statistics.\nAugust 9, 1941.\nSource: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of\nUnited States Savings Bonds.\nNote: Figures have been rounded to nearest thousand and will not necessarily add to totals.\nRegraded Unclassified\n204\naug.\nDEFENSE SAVINGS BONDS & STAMPS\nFILM RELEASE SCHEDULE\n1941\nApril 18\nSecretary Morgenthau - Bureau of Engraving shot.\nAll five newsreels.\nMay 2\nPresident - Secretary Morgenthau. All five newsreels.\nParamount News also carried shots from Meddybemps, Meine.\nMay 22\nAbbott and Costello. All five newsreels.\nMay 28\nUniversal and Movietone story of Mrs. Whitehurst, President,\nGeneral Federation of Women's Clubs.\nMay 28\n\"America Preferred\" released nationally.\nJune 6\n\"130 Million Americans\" on Columbia Pictures \"Penny Serenade\".\nJune 6\n\"Protect Them\" on RKO Pictures \"Sunny\".\nJune 13\n\"Watch This Baby Grow\" on Paramount Pictures \"One Night In\nLisbon\".\nJune 13\n\"Where To Buy\" on Universal Pictures \"In The Nevy\".\nJune 13\nNews of the Day, Movietone and Universal story of Billy Conn\nbuying Defense Bond.\nJune 13\nColumbia Pictures \"She Knew All The Answers\" refers to Defense\nBonds.\nJune 14\n\"The Army Is Yours\" on Warner Bros. \"Shining Victory\".\nJune 16\nDefense Bond and Stamp shot injected into Agriculture Depart-\nment defonse recl. This is being released on both 35 and 16 mm,\nJune 18\nJack Benny and Carolyn Lee shot released nationally.\nJune 20\n\"All Walks of Life\" on 20th Century Fox \"Man Hunt\".\nJune 27\n\"Shoulder To The Wheel\", on Loow's Inc. \"They Met In Bombay\".\nJune 27\nStory of the White Family buying Stemps released nationally in\nall five newsreels.\nJuly 11\nNews of The Day and Fox Movietone carry story of four Hollywood\nStarlote completing the sewing of a huge silk banner bearing\nslogan \"Buy Defense Savings Bonds\".\nRegraded Unclassified\n205\n- 2 -\nAug. 9\nIn Warner Brothers foature picture \"Manpower\", reference 18\nmade to Defenso Bonds in the following manner:\nAlan Hele: \"Now don't you wish you'd saved your dough?\"\nWard Bond: \"What are you talking about? I just bought\ntwo Defense Bonds.\"\nIn Production: Metro-Goldwyn-Meyer Our Geng Comedy \"Helping Hands\" has\na scone with dialogue of Our Gang Kids buying Stamps at\npost office Defense Window.\n206\nDEFENSE SAVINGS STAFF\nADVANCE NOTICE RADIO PROGRAMS\nSATURDAY - AUGUST 9, 1941\nTime:\n9:30 - 10:00 A.M.\nProgram:\nAmerica, The Free\nStation:\nWRC and NBC Red Network\nTime:\n6:30 - 7:00 P.M.\nProgram:\nWayne King\nStation:\nWJSV and CBS Network\nTime:\n7:30 - 8:00 P.M.\nProgram:\nTruth or Consequences\nStetion:\nWRC and NBC Red Network\nTime:\n8:00 - 9:00 P.M.\nProgram:\nNational Barn Dance\nStation:\nVRC and NBC Red Network\nBULOVA TIME SIGNALS PROMOTE DEFENSE BONDS AND STAMPS\nREGULARLY NOW AT THE RATE OF 428 announcements DAILY\nOVER 134 RADIO STATIONS.\nRegraded Unclassified\n207\nFORDEFENSE\nBUY\nFIELD ORGANIZATION News Letter\nUNITED\nSTATES\nSAVINGS\nDEFENSE SAVINGS STAFF\nBONDS\nADDITIMES\nTREASURY DEPARTMENT, WASHINGTON, D. C.\nAugust 9, 1941. NUMBER 12,\nTHE FIRST BILLION\n\"Cash deposits at the Treasury from the sale of Defense Savings Bonds\nwent over a billion dollars as of yesterday, July 31, 1941. This is\ngreat and good news. I congratulate all those whose united coopera-\ntion has made it possible. I congratulate especially the multitude\nof patriotic Americans who have begun to invest their savings for\ntheir country's freedom.\n\"The first billion has beon raised in the American way, by cooperation\nrather than compulsion. I Am confident that the second billion can\nbe raised in the same democratic way, yet still more speedily.\n\"I sum especially glad to see that the sales of the Series E bonds,\nthe 'people's bonds,' were 37 per cent greater in July than in June,\nWhen it is remembered that nobody may buy more than $5,000 worth of\nthese bonds in any one year, it secms plain to me that the good habit\nof thrift is spreading fast among the American people,\n\"Systematic savings plans are now in operation in hundreds of factor-\nies and offices from coast to coast, in every case with the willing\napproval of the workers themselves. Defense Savings Stamps are now\nbeing sold by more than 30,000 retail stores in addition to 16,000\npost offices and 10,000 commercial and savings banks, and savings\nand loan associations, and we intend in the next few weeks to double\nand redouble the number of these outlets.\n\"The results 80 far are 8. ringing proof that we Americans can unite\nin defense of our liberties. And we have only just begun.\"\nHon, Henry Morgenthau, Jr.,\nSecretary of the Treasury\nRegraded Unclassified\n208\nPortland, Oregon,\nAugust 6, 1941.\nTO THE FIELD STAFF:\nThe response of the public to the Defense Savings\nProgram will be typical of every fine standard set by\nthe American nation in its history. Evidence is unmis-\ntakable that there is genuine understanding of the\nnational emergency, that the public is uniting behind\nthe Defense Program as only a loyal and an aroused\ncitizenship can do.\nThe above statements are made after visits with\nmany Defense Savings Committees in every section of\nthe country. State, county and city groups are demon-\nstrating their devotion to and belief in the American\nway by action. Outstanding citizens by the thousands\nare enlisting as volunteers to carry the Defense Savings\nmessage to millions of men, women and children throughout\nthe land and to provide the most convenient methods to\nmake the securities available for purchase. The plans\nfor organization and marketing that are being followed\nin the sections visited are sound and truly American.\nThe public response will be equally fine.\nSincerely yours,\nGALE F. JOHNSTON\nField Director, Defense Savings Staff\n- = SUVERSMENT PRINTING arrive\nRegraded Unclassified\n209\nIN THIS ISSUE\nALLOTMENT DEVELOPMENTS-\nLabor and industrial leaders cooperate - page 6\nManufacturers Association urges prompt action - page 6\nBankers stand by to render assistance - page 6\nPicture - Airplane parts makers 100% - page 8\nOil companies installing plans - page 9\nPicture - Model allotment card available - page 12\nAllotment in the Pacific Northwest - page 14\nBANK NEWS--\nBankers assist employers install allotment plans - page 6\nDefense Bond Week in Georgia - page 7\nFlorida banker looks for new ideas - page 7\nOne bank's program described in dotail - page 7\nPictures - Special bank displays - page 8\nSeattle bankers install allotment plans - page 15\nCOMMITTEES REPORT--\nFlorida, Maine, New Jersey and New York - page 4\nOklahoma, Texas and Washington - page 5\nMISCELLANEOUS-\nState Government employees organize savings clubs - page 9\nFederal Credit Unions sell Defense Bonds - page 10\nDefense Savings statistics - page 15\nLife underwriters' Defense Savings committee - page 15\nBaseball public address systems mobilized - page 17\nBoy Scouts on the job - page 17\nChairmen of State Defense Savings Committees - preu 18\nQUOTABLE QUOTES--\nJames B. Carey, National Secretary, C10 - page 13\nWalter D. Fullor, President, National Association\nof Manufacturers - page 13\nWilliam Green, President, American Federation of Labor . page 13\nAlbort Hawkes, President, Chamber of Commerce of the United States\nand Chairman of the Defense Savings Committoe for New Jersoy -\npage 13\nJamos A. Phillips, Chairman, Railway Labor\nExecutives Association - page 19\nHon. Henry Morgenthau, Jr., Socretary of the Treasury - page 13\nRADIO-\nPrograms for coming week - page 11\nLany fine local programs - page 11\nPicture - Boston's Defense Variotios . page 12\n3 -\nRegraded Unclassified\n210\nCHAIRMEN APPOINTED IN FOUR ADDITIONAL STATES\nFOUR MORE DISTINCUISHED CITIZENS have accepted Secretary Morgenthau's\ninvitation to serve as the active chairmen of the Defense Savings Committees\nbeing organized in their statos:\nIDAHO\nWASHINGTON\nJohn A. Schoonover\nJoel E. Ferris\nPresident, Ideho First National\nExecutive Vice President,\nBank, Boise\nSeattle-First National Bank\nKANSAS\nWISCONSIN\nWilliam Allen White\nCharles E. Broughton\nEditor and Publisher,\nEditor and Publisher,\nThe Emporia Gezette\nThe Sheboygan Press\nA LIST OF THE ACTIVE CHAIRMEN in the 22 states where the heads of State\nCofonse Savings Committees have been appointed 1s presented on page 18 of this\nIssue of the NEWS LETTER.\nTHE HONORARY CHAIRMAN of those committees In each Instance is the Governor\nof the State or Commonwealth.\nNEWS OF STATE AND LOCAL COMMITTEES\nFLORIDA-Four counties are now fully orgenized, reports Deputy State Adminis-\ntrstor Karl Lehmann, end Defense Savings Committees are repidly shaping\nup in the other counties, County Commissioners are serving as the\nHonorary Chairmen in most casos.\nMAINE--Tho State Committee is nearly complete, County Chairmen have been\nappointed in five counties.\nFeirs held in the State of Maine this\nyear have booths where people can secure information about Defense Sav-\nings Bonds and purchase Defense Savings Stamps.\nNEW JERSEY-Orgenization of local committees in Essex, Fudson and Union coun-\ntios is progressing repidly. In this work, Deputy State Administrator\nPaul Canada has had the assistance of Alfred J. Speek, Assistant Treasurer\nof the Fidality Union Trust Company. Mr. Speak has been loaned by\nPorace K. Corbin, Prosident of the Fidelity Union Trust Company and Cheir-\nman of Now Jorsey's Banking and Finance sub-committee.\nNEW YORK-Commender Henry P. Heimenn of the U. S. Navy has recently been\nassigned to the State Dofense Sovings Committee for New York to serve as\nexecutive assistent to Cheirman Richard C. Patterson, Jr. Commender\nHeimann was formorly Chairmen of the United States Shipping Board and\nis now Executive Manager of the National Association of Credit Men.\n-\nRegraded Unclassified\n211\nlews of State and Local Committees (Continued)\nKLAHOMA-Direct representatives of the Oklahoma headquarters of the Defense\nSavings Staff are being appointed in each of the state's 77 counties by\nState Administrator H. C. Jones. These \"county administrators\" will\nhelp in the selection of the chairmen and members of Defense Savings\nCommittees for the cities and towns in their counties.\nAll of the 4,200 lawyers in this state have received material which\nthey can use in preparing speeches on the Defense Savings Program.\n[eading retail stores in the state have been asked by Roy L. Sanford,\nPresident of the Oklahoma Retail Merchants Association and member of the\nstate committee, to place Defense Savings Stamps on sale in their stores.\nEach member of the State Committee has been asked to write a 100 to\n150-word statement on \"Why\n(the individuals and organizations\nwhich he particularly represents) Should Buy Defense Bonds and Stamps.\"\nOklahoma newspapers are being asked to publish this series one article\nat a time.\nTEXAS-In Fort Worth, the Tarrant County Medical Society, the Life Underwriters\nAssociation of Fort Worth, and the Tarrant County Bar Association have\nappointed \"Defense Bond Committees,\" which are circularizing the members\nof these professional groups and urging regular purchase of Defense\nSavings Bonds.\nIn Houston, the Junior Chamber of Commerce has established & Defense\nBond speakers committee, under the chairmanship of Milton Gregory. The\nJaycees will work with the speakers bureau of the Houston Defense Savings\nCommittee.\nWASHINGTON-For purposes of the Defense Savings Program, five areas have been\nestablished in the state and an \"area director\" appointed in each, Area\ndirectors, who are members of the State Committee, will appoint county\nchairmen in their territories.\nNorman S. Archibald, who is serving as executive secretary of the\nKing County Committee, is giving his entire time to the program.\n.\nOffice space for the King County Defense Savings Committee headquarters\nhas been donated by the United Exchange Building, Seattle; the Washington\nMutual Savings Bank donated office furniture; and several women have\nVolunteered to do stenographic and secretarial work. A Speakers\nBureau has been set up by the King County Committee and letters sent to\nthe heads of all clubs, informing them that speakers are available on\nrequest.\nNEWS LETTERS\nTexas, Oklahoma, and Florida were the first states to have their own\nDefense Savings News Letters. A number of other states are planning to\nestablish them. (Which makes us recall the remark about the sincerest kind\nof flattery.)\n- 5\nRegraded Unclassified\n212\nLABOR AND INDUSTRIAL LEADERS\nCOOPERATE TO INSTALL ALLOTMENT PLANS\nEVERY LABOR UNION in New Jersey was invited to send representatives to a\nmeeting on August 5, called by John J. Toohey, Jr., Commissioner of the State\nDepartment of Labor and member of the Defense Savings Committee for New Jersey.\nSamuel L. Rothbard of the New Jersey State Council, C. I. O., cooperated with\nMr. Toohey in calling this meeting and in axplaining the advantages of the\nallotment plan to those present.\nTHE 1,100 LARGEST EMPLOYERS of labor in New Jersey (list secured from the\nNew Jorsey State Chamber of Commerce through the cooperation of George K. Bilt,\npresident) have received a special letter from State Administrator John W.\nManning, explaining how they can aid the Defense Savings Program by making it\nconvenient for their workers to save and invest in Defense Bonds regularly,'\nMr. Manning suggests that companies set up Dofense Savings Committoos\nand that the members of these committees personally 000 each employee and ask\nhim to become a partner of Uncle Sam.\n\"We want the individual worker,\" writes Mr. Manning, \"to feel that\nhe has a personal share in the Defense task. From the standpoint of\nmorale, this is important.\"\nMANUFACTURERS ASSOCIATION\nURGES PROMPT ACTION\nTHE INDIANA MANUFACTURERS ASSOCIATION, which recently invosted = sub-\nstantial sum in Defense Savings Bonds, has urged all of its 3200 mambers to\ncooperate with the program by making Defense Savings allotment plans evail-\nable to their employees.\n\"The Association has set aside funds for the purchase of Defense\nBonds,\" writes H. M. Cochrane, secrotary. \"It urges the seme coop-\neration from all employers of the state,\nIf you have received\nthe letter and forms (for the installation of payroll allotment\nplans) from Will H. Smith, State Administrator, Defense Savings\nStaff, and have not put the program into effect, won't you do so\nat once?\"\nBANKERS STAND BY\nTO RENDER ASSISTANCE\nWITHIN THREE DAYS after the Seattle Trust and Savings Bank had offered to\nassist employers install Defense Savings allotment plans, 13 employers -\nrepresenting 1300 employees - had taken advantage of the offer. This bank\nhas sent full information about the Defense Savings Program to 1600 employers\nin the State of Washington (most of them in Seattle),\nAnother Seattle\nbank which has written to all of its depositors offering to cooperate with\nthem in setting up allotment systems is the Pacific Nitional, And in Spokano\nall employers have received information from The First Federal Savings and\nLoan Association about the application of the pay roll allotment plan to\nDefense Savings.\nVNINTING\n-\n-\nRegraded Unclassified\n213\nBANKERS STAGE DEFENSE BOND NEEK\n\"HIGHLY SUCCESSFUL\" is the report of State Administrator Marion Allen\non the Georgia Defense Savings Bond Week, July 28-August 2, Public speeches,\nparades and patriotic displays lent omphasis to the program, which Vas spon-\nmored by the Georgia Bankers Association.\nIn Atlanta, prominent bankers staffed a booth net up at \"Five Points,\"\nprincipal intersection in the business area, and sold Stamps and\nBonds to all comers,\nIn Savannah, army bombers showered Defense Savings leaflots orr the city\neach day during Defense Bond Week.\nIn Macon, Columbus, Augusta and Rome - and In many smaller places -\nWrightsville, for example, the week was celebrated with appropi Late\nceremonies, In this latter town, Mayor W. F. Outlaw proclaimed a\ntwo-hour suspension of business, from 3 to 5 PM, in order that All\ncould attend the mass meeting at the courthouse,\n\"I AM LOOKING FOR NEW IDEAS\"\nEVERY BANKER IN FLORIDA has recently received a letter from is, \",\nMcSachern, President of the Union Trust Company of 86. Potersburg, Chairmen\nof the Public Relations Committee of the Florida Bankers Association and must-\nher of the State Defense Savings Committee for Florida, asking for suggestinue\nas to now to promoto the sala of Defonse Savings Bondo and Stamps. The Union\nTrust Company's program he outlines as follows:\nRegular purchase plan installed for All officers and amployees--\npractically 100% participation;\nReminder notices included in all bank advertisemento;\nSpecial poster displays prepared for bank windows and lobby;\nSpecial Defense Bond blottors sent to all bunk customers;\nSmall business firms asked to stock Dofense Savings Stange for\ntheir employees.\n\"I am looking for new ideas,\" writes Fr. CoZochern. \"Ploces lot au know\nwhat you and your institution are doing along those Tines.\"\nONE BANK'S PROGRAM DESCRIBED IN USTAIL\nTHE OUTSTANDING JOB of Defense Savings promotion being dono by the \"irst\nNational Bank and Trust Company of Tulsa (See ITS LITER lo. 8, PACK 19) will\nbe matched by other banks in Oklahoma.\nAN ZIGHT-PAGE BOOKLET explaining and illustrating that bank's program of\nnewspaper advertising, bank signs, billboards, forms for regular depositor\nwithdrawal orders, bank blottors, etc., has boon propared and sent by R. Ctis\nL'sClintock, President of the First National and Member of the State Dofonae\nSavings Committee for Oklahoma, to 416 Oklahoma banks und 465 nowspapers in\nthe state,\n7\nRegraded Unclassified\nAIRPLANE PARTS MAKERS 100% FOR DEFENSE SAVINGS\n214\nWorkers in a factory producing airplane and auto-\nmotive machine parts are shown as they enlist in\nthe defense savings program. These are a few of\nthe 300 employees of the M-B Manufacturing Co.\nof New Haven, Conn. who are now participating in\nthe defense savings payroll allotment plan.\nBANK DISPLAYS BOOST SALES OF DEFENSE SAVINGS BONDS\nFORDEFENSE\nBUY\nUNITED\nSTATES\nUNITED\nSAVINGS\nSTATES\nBONDS\nSAVINGS\nBONDS\nWindblown American Flags surround the Minute Man\nThe biggest watermelons grown in the county\nposter in the lobby of the First Trust & Deposit Co. of\ncall attention to defense savings in the lobby\nSyracuse, N.Y.\nof the Leesburg, Fla., National Bank,\nper\n6\nRegraded Unclassified\n215\nSTATE GOVERNMENT EMPLOYEES ORGANIZE DIZENSE SAVINGS CLUBS\nGOVERNOR LEVERETT SALTONSTALL of Massachusetts, responding to B. suggess=\ntion made by State Administrator Daniel J. Doherty, has called upon all state\nemployees to enlist in the Defense Sevings Program,\n\"Our blessings can only be preserved by sacrifice,\" Governor Salton-\nstall wrote to Patrick J. Moynihan, Chairman of the State Commission\non Administration and Finance. \"Those of us who are carrying on the\nwork of government have the responsibility of helping our government\nprotect the security we enjoy. We have also the added responsibility\nof leading the way and setting the example for our follow citizens,\"\nCOMMISSIONER MOYNIHAN has trensmitted copies of the Governor's letter to\nall heads of state departments and suggested the formation of Defense Savings\nClubs and the establishment of other plano for encouraging aystomatic purposo\nof Defonse Bonds and Stamps by state employees,\nPLEDGE CARDS used in connection with the Fodoral Employee Purchase\nPlan could be used without alteration by state and local governments\nwhich have similar purchase programs under way. These cards are\navailable from the Defense Savings Staff upon request.\nPAY ROLL ALLOTMENT IN NATION'S OIL FIELDS\nOIL COMPANIES in Oklahoma and ndjoining states Aro establishing salary\nallotment plans modelod after the one installed by the Phillips Petroloum\nCompany of Bartlosvillo (12,000 employees in 22 states).\nK. S. Adams, President of the Company and member of the State Defense\nSavings Committee for Oklahoma, has sent copies of his company's plon to\nmore than 500 oil companies. The accompanying letter to oil company presi-\ndonts urging them to sot up Defense Savings solary allotment plons, WASE\nsigned by Mr. Adams and Frank Phillips, Chairman of the Bonrá of Phillips\nPetroleum.\nPAY ROLL ALLOTMENT FOLDERS AVAILABLE\nThe four page folder containing the mossage \"Billions for Defense\" end\ninformation about Serios E Dofense Savings Bonds 18 now ovoilable with the\nfollowing paragraph:\n\"For your convenience, n Pay Roll Allotment Plan\nhas been edopted by your employer.\n\"Ask about it.\"\nThose folders may be requisitioned through the officasor the State\nAdministrators. The folders are 1₫ ntified ns \"Pay Roll Allotment\nFoldors DSS - 111.\"\n- , -\nRegraded Unclassified\n216\nFEDERAL CREDIT UNIONS SELL DEFENSE BONDS\nifying as issuing agents for Sories E Bonds. These credit unions are most\nHUNDREDS OF FEDERAL CREDIT UNIONS in all parts of the country are qual-\nfrequently composed of the employees of the same business or industrial\nestablishment and maintain offices in the plants where their members work.\nBy qualifying as issuing agente, these credit unions make it very convenient\nfor workers who do not have occasion to go to a bank or post office regularly\nto invest in Defense Bonds.\n\"Credit unions are by thoir very nature particularly well\nadapted to reach the broad sections of thrifty people the Treasury\nDepartment hopes will purchase this offering of Bonds,\" states the\nnews letter of the Credit Union Section of the Farm Credit Admin-\nistration - the agency responsible for the supervision of all\nfederally chartered credit unions.\n\"We are very pleased that the Treasury Department has given\nFederal credit unions the opportunity of selling these Bonds.\nIt is a chance for Federal credit unions to render invaluable\npublic service as well as a gratifying recognition.\"\nRECENT REPORTS indicate that credit unions organized among the employees\nof the Yale & Towne Manufacturing Company, Pitney-Bowes Postage Meter Company,\nand Colt's Patent Fire Arms Manufacturing Company, all in Connecticut, have\nqualified as issuing agents;\nThe Colt Employees Federal Credit Union, to which a majority of\nall Colt employees belong, has made it possible for both members and\nnon-members to invest in Defonse Bonds through regular salary allot-\nments,\nL. B. Kilburn, treasurer of the Yale Lockmakers Federal Credit\nUnion, states that \"everything possible will be done to encourage\ncredit union members to buy bonds in the interests of national defense.\"\nThe establishment of a \"Defense Bond League\" by the Groton Ship-\nbuilders Federal Credit Union was reported in the NEWS LETTER of\nAugust 2.\nUp to July 31, 197 Federal credit unions had qualified as issuing agents\nfor Series E Bonds.\nA Correction\nOnly individuals may be named either as co-owner or beneficiary in\nregistering Defense Savings Bonds. Accordingly, the United States cannot be\nnamed as beneficiary as one man was reported to be doing in NEWS LETTER of\nJuly 26, page 14. A bond naming the government or a corporation as beneficiary\nwill, if issued, be called for reissue when this error cones to the attention\nof the officials in charge of its registration.\n- 10 -\nRegraded Unclassified\n217\nDEFENSE SAVINGS ON THE AIR\nLonding Programs for the Coming Wook\nTuesday, August 12\nFOR AMERICA WE SING\n7:30-8:00 P.M. (EST)\nNBC Blue Network\nA musical program foaturing o 44-pioco NBC symphony orchostra and chorus,\nconducted by Dr. Frank Black, contributed by the National Broedcasting Company,\nGUEST STARS: Gladys Swarthout and Lanny Ross.\n.....\nWednesday, August 13\nMILLIONS FOR DEFENSE\n8:00-9:00 P.M. (EST)\n(The Treasury Hour)\nCBS Network\nGUEST STARS: Al Jolson, Edgnr Bergen and Charlic McCurthy, Jonn Crowford,\nBibu Sayao, with Al Goodman end his band, Barry Wood and Ray Block's choir.\n.....\nMANY FINE LOCAL PROGRAMS\nIN ADDITION to the notwork features listcd above, there ATC soveral\nlocally-produced and arranged radio shows dovoted entirely to Dufunso Sevinge.\nBoston, for examplo, now has two such programs. Ono, \"Millions For Dofense,\"\nhas boon on the nir since Juno 15 (NEWS LETTER Number 11, August 2). The\nother, \"Defense Varieties,\" WAS first honrd Sunday evening, July 27. over\nstotion WAAB, and in the future will bo hourd on Sunday evenings ever station\nWMEX. Soo studio picture on the next pago.\n\"Defonsé Vericties\" is written and produced by Edward A. Cronin and\nPat La Selva, two Trensury omployees in the office of Thonns B. Hossett,\nColloctor of Internal Rovenuo for the district of Mossachusetts. A footure\nof this show 18 the thomo song \"Koop Your Lights Always Burning, America\"\nwritten by Mossrs. Cronin and La Selva. The Boston musicions union has Given\nlocal orchostras permission to contributo their musical talant to the program.\n*****\nIN MINNESOTA the Dofonse Savings Committoes of Minnonpolis and 3t. Paul\nsponsored jointly a round tablo discussion participated in by Doputy State\nAdministrator Lief Gilstad, Minneapolis Chairman Robort 7. Pook, and St. Poul\nChairman Ray Wentz. A special playing of \"Any Bonds Today?\" opuned and closed\nthis brondcast.\n.....\n\"IDENTIFY THE MUSICAL SELECTION and win to Defense Sovings Bond!\" Every\nThursday night over Station WLBZ, Bangor, the Moino Contral Reilrond sponsors\nn program which foctures the'swarding of Defonse Bonds and Stamps. Telephone\nnumbors aro called nt random, and the porsons answering, asked to identify\nmusical solections played on the program. If they do so correctly, they ro-\nceive $25 Defense Bonds; otherwiso, $5 in Dofonse Snvings Strampo.\nL - IMPORTER\n- 11 -\nRegraded Unclassified\nNEW ENGLAND'S \"MILLIONS FOR DEFENSE\" RADIO SHOW\n218\nStation WORL, Boston, has aired New England's own \"Millions For Defense\" radio show every Sunday\nevening since June 15. In the studio picture above, from left. to right: Karl Nazarine, tenor; George Micheals,\nWORL announcer; Gordon Wayne, WORL director of the program; Bill Cannady, WORL announcer; Ed\n(\nCronin, Deputy Collector of Internal Revenue: Pat La Selva, musical director; and Bert Williams, orchestra\nleader.\nPAY ROLL ALLOTMENT CARDS AVAILABLE\nDEPT. a LOCATION\nDEDUCTION\nPAY-MOLL PERIOD\nfar DEDUCTION\nISSUE PRICE\nNAME\nNETCRENT\nIPUB TO\nNET CHENT\nM\nM\nPAY-BIAL PERIODS\nAPPLIED TES\nNET CREDIT\nPAY-POLL members\nUTILID TO\nPAY-WIRL\nMIRCHASE\nINJ OY\nPURCHASE\nEND or\no\no\nPUYCHASE\nEND UF\nT\n=\n.\n,\n4\n.\n4\n.\nor -\nMONTH\n-\n7\n-\na\n-\n.\nMONTH\nà\nOF -\nor MOMO\nMONTH\nT\nT\nYEAR \"\nH\nYEAR \"\n\"\nYEAR 19\nà\nF\nE\nPAY ROLL ALLOTMENT AUTHORIZATION FOR PURCHASE OF\nA\nUNITED STATES SERIES E SAVINGS BONDS\nt\n-\nBy\n-\nIl\n-\n4.\nTo\n.\nD\nI hereby authorize you ⑉ dellast Irom m) earnings each\nthe amount of\n\"\n5\neffective with the pay roll resting\nEach nime the required\n- - -\nEl\nUNHAIRE $\nhas accumulated III my rest to purchase and deliver to me a United States Series\nE Sivings Bond maturity value of 3\nSuch deduction shall continue each pay period illere-\ndi\nafree until (a) Termination of my employment, (b) Written notice by me of the cancelation of this allot-\n(Dinser)\n.\nment or (c) Termination of this statement arrangement by you\nM\nI understand that na interest is to be puid by the company 00\nd.\nRegulter bonds in the name all and deliver No:\nThis is a reproduction of the pay roll allotment\nMiss\n\"\nMo.\n}\nauthorization card now available from the de-\nDoe - non -\nMr.\nfense savings staff in sufficient quantities to\nNumber -\n106 at me)\nAddress of Co-nwner er beneficiary if different-\nJanye-\nsupply small employers who do not wish to print\nBACK\ntheir own allotment authorization forms.\nThese cards are being distributed through the\nvarious State headquarters of the defense savings staff and an employer who needs a supply should address\nhis request to the State administrator in his State.\nGOVERNMENT PRINTING EFFICE\nRegraded Unclassified\n219\nExcerpts from the\nFORUM ON DEFENSE SAVINGS BONDS AND STAMPS\nBroadcast July 22, 1941 over stations of the CBS\n\"The appeal to voluntary action has already brought promising results from\nthe ranks of organized labor in the early months of this drive. You know of\nthe Action of many locals in the automobile industry-they voted to have their\nemployers set aside a percentage out of their pay envelopes each week to go\nLoward buying Defense Bonds.\nPersonally, I hope-and I expect-that this\nvoluntary weekly savings plan will be adopted by large numbers of locals\nthroughout the organization of the C. I. 0.\"\n-James B. Carey, National Secretary of\nthe Congress of Industrial Organizations\n\"I have great faith in the American people. And I'm sure when they\ngrasp the soundness of the Defonse Bonde and Stamps idea, they're going to\npitch in and really make a go of it.\"\nWalter D. Fuller, President of the\nNational Association of Manufacturers\n\"We workingmen don't expect perfection in our lifetime, but we know what\nwe've got, and we know it can be improved only in the democratic way. It's\nnot a choice between a perfect world and an imporfect world.\nIt's\nA\nchoice\nbetween hope and hopelessness. Our hope lies in America, and we know it.\nThis why we'll buy Defense Suvings Bonds and Stamps.\"\n-William Green, President of the\nAmerican Federation of Labor\n\"1% here represent five groups that are pledged to protect different\nmarks of the national interest; and now we're all menaced by a gangster\nsystem which, beyond a shadow of a doubt, will wreck all our interests if it\nprevails. Secing that that's so, the first thing, as of July 22, 1941, is\nto unite in the effort to secure ourselves from that menace.\"\n-Albort Hawker, President of the\nChambor of Commerce of the United States\nand Chairman of the Defense Savings\nCommittee for New Jersey.\n\"Americans are st last waking up to the fact that this war is a tragedy\nthat's really Asppening, a crisis that affects the future of every man, woman\nand child. Speaking for the railrond men of this country, I would say that\nby will buy Defense Savings Bonds because each bond sold is & blow struck in\nthe defense of our secred freedom es a nation and the preservation of our\ndemocratic my of life.\"\nJames A. Phillips, Chairman of the\nRailway Labor Executives Association,\n\"I cannot tell you how pleased I am to find such a united stand\nin this discussion. You have provided A dramatic proof that America\nis able to unite in A time of crisis,\nI don't think it is exagger-\n-tion to say that this discussion, informal though it has been, has\nbeen of historic importance.\"\n-Hon. Henry Morgenthau, Jr.,\nSecretary of the Treasury\n13 -\nRegraded Unclassified\n220\nPAY ROLL ALLOTMENT POPULAR IN PACIFIC NORTHWEST\nLUMBER INDUSTRY--\nLumbermen in the Northwest want to participate in Dofonse Savings\nthrough pay roll allotment plans, according to John Christonson, president\nof the Lumber & Savmill Workers Union, who has been active in explaining\nthe Defense Sevings Program to officers and members of the locals offili-\nated with his organization. J. H. Bloodel, president of the Bloodol-\nDonovan Lumber Mills and a member of the Defonse Savings Committee for\nWashington, 1a ussisting lumber executives throughout the region with\nthe various dotails connected with the installation of allotment plans.\nMETAL INDUSTRY-\nEd Johnson, president of the Metal Trades Union in Washington, 14\nan active supporter of the Defense Savings Program and is urging local\nunions affiliated with his organization to petition their employers for\ninstallation of pay roll allotment plans.\nBAKING-\nThe Silver Loaf Beking Company was the first company in Spokenu to\nreport that all of its employees were participating in a Defense Divings\npay roll allotment plan.\nBANKING-\nSalary allotment plens have been installed by the Seuttle-First\nNational Bank, Washington Mutual Savings Bank of Senttle, and The Pacific\nNational Bank of Secttle.\nPUBLISHING--\n\"Somo weeks ago, we put in = voluntary pay allotment plan in The\nOregonian. Tomorrow afternoon, there will be the first meeting of\nthe employees' committee und I bolieve that before wo are through WB\nwill have 100% participation. We alrondy have throe departments 100\nincluding the ongraving room,\" reports Pelmer Hoyt, publisher of the\nPortland Oregonian and chairman of the Defense Savings Committoe for\nOregon.\nRETAIL TRADE--\nThe largost dopartment store in Senttle=-Froderick & Nelson--hos\ninstallod n Dofense Savings anlary allotment plan. General Manager\nWilliam H. St, Clair has assumed the responsibility of seeing that all\ndepartment stores follow his company's example.\nAVIATION AND SHIPBUILDING--\nInstallation of Defense Savings allotment plans by the Booing\nAircraft Company, Sonttle-Theonn Shipbuilding Corporation, and Todd-\nSenttle Dry Docks, Inc., WEB announced in the NEWS LETTER of July 19.\n- 14\nRegraded Unclassified\n221\nDEFENSE SAVINGS STATISTICS\nBond Sales On Basis of Issue Price\nFor First Three Months or Program\nType of Bond\nTotal\nMay\nJune\nJuly\nSeries E\n$ 348,373,000\n$100,581,000\n$102,517,000\n$145,274,000\nSeries F\n94,052,000\n37,817,000\n28,876,000\n27,359,000\nSeries G\n564,053,000\n211,420,000\n183,134,000\n169,498,000\nTOTAL\n$1,006,477,000\n349,818,000\n$314,527,000\n$342,132,000\nSource: All figures are deposits with the Treasurer of the United States on\nsecount of proceeds of sales of United States Savings Bonds, Figures\nhave been rounded to bearest thousend end will not necesserily ndd to totals.\nNote:\nFigures previously relessed by the Treasury Department for May and\nJune were on the basis of telegrophic duily reports from seles\nagencies and of course do not conform to cash deposits se shown sbove. Actual\nsales by sales agencies for the three months May, June, and July, exceed the\nfigures given in this table by approximately $50,000,000.\nLIFE UNDERWRITERS ESTABLISH COMMITTEE\nFOR NATIONAL DEFENSE SAVINGS\n\"The Life insurance egents of this country hope to be of aid to the\nnational defense program and to the all-out effort of the American people to\npreserve intact the democracy which has reached its greatest beights here in\nour time,\" said Harry T. Wright, president of the National Association of\nLife Underwriters, following the first moeting of the Life Underwriters\nCommittee for National Defenee Savinga. \"This new committee, in addition to\ndeveloping B special progrom, will seek to coordinate the efforte of all\nlife insurance agents to aid Notional Defense.\"\nThe committee, headed by Mr. Wright of Chicago, includes:\nJohn A. Witherspoon, Noshville\nGrent Taggart, Cowley, Wyo.\nWelter E. Barton, New York\nJudd Benson, Cincinnati\nCharles J. Zimmerman, Chicago\nL. Mortimer Buckley, Chicago\nE. L. Carson, Milwaukee\nKenneth Cassidy, San Francisco\n0. Sam Cummings, Dellas\nRalph G. Engelsman, New York\nAlvin T. Haley, Greensboro, N.C.\nJ. Hawley Wilson, Oklohoma City\nWarren Woody, Chicago\n-\nPurchase of Defense Sevings Bonds \"to the limit\" by the Standard Life\nInsurance Company of Indiana was recently festured in Indianapolis newspap- DS.\n\"It is the purpose of this Company,\" Harry V. Wade, general manager, WSB\nquoted as saying, \"to support solidly the United States Government in all its\nendeevors and this purchase represents tengible evidence of that purpose.\"\nMM\n- 15\nRegraded Unclassified\nPATRIOTISM DEMONSTRATED\nHere is a heartwarming little story that helps to indicate that our\ngreat campaign is 8 truly human affair, after all:\nA State Administrator was interviewing a retired railroad worker\nwith the idea of enrolling him AS County Chairman. The man seem-\ned to be just the one qualified to do the work-fine personality,\nplenty of leisure time, excellent contacts, and a genuine spirit\nof helpfulness. Yet he seemed reluctant to agree to actual par-\nticipation in a committee. Finally, he confessed that his niece\nwith whom he lived was counting on him to accompany her on a vaca-\ntion in Canada. They had planned their schedule, budgeted strict-\nly to finance the trip on her modeat salary and his pension, and\nwere looking forward to a grand new experience. His nieco, her-\nself wnthusiastic over the Defense Savings Program, sensed his\ncagerness to be of real service and tried to persuade him to accept\nthe chairmanship. Finally he agreed to talk it over with her and\nnotify the Administrator of his decision. At seven-thirty the nuxt\nmorning the Administrator learned that the trip had been cancelled,\nthat the gentleman would represent his county, and that the young\nlady was contributing her vacation money toward financing the pro-\ngram in that county.\nThis is but one of many examples of personal sacrifice on the part of\nthose who are active participants in the Defense Savings Program and who 588\nin this Program an opportunity to render patriotic service.\nMOVIE SHORT AVAILABLE\nThe movie short \"America Preferred\" is now available in 16-millimeter\nsound film, This is a ton-minute version of the picture made especially for\nthe Defense Savings Program and shown widely in commercial theatres. (During\nthe first three months of the campaign, this feature was shown in 6,813 thee-\ntres and it is still being shown.)\nPrints of the 16-millimeter film are being sent to all State Administra-\ntors and, in addition, 75 copies are being distributed by the U. S. Department\nof Agriculture to extension agents and other departmental officials in the\nfield who have facilities for showing sound movies to farm audiences.\nCity and county Defense Savings Committees may want to arrango to have\nthis film shown in their communities under their auspices.\nÀ volunteer soldier purchased the first $1,000 Defense Savings Bond sold\nty, in which Apalachicola is located, has the distinction of having had enough\nin Apalachicola, Florida, according to Postmaster Hal Hoffman. Frenklin Coun-\nvolunteers for the Army, Navy and Marine Corps to more than make up its selec-\ntive service quota.\n- 16\nRegraded Unclassified\nBOY SCOUTS ON THE JOB AGAIN\nThe Boy Scouts of America, who placed un display early in May more than\n1,000,000 posters announcing the sale of Defense Savings Bonds and Stamps,\nhave been given their second assignment by Secretary Morgenthau, They have\nbeen locations. called upon to place 400,000 of the largo Minute Man posters in prominent\nIn a letter to Chief Scout Executivo James E. West, Secretary Morgenthäu\nsaid;\n\"Kindly convey to the members of your organization my very\nsincere appreciation of this good turn for Uncle Sam.\nI am confident that the Boy Socuts will undertake this sur-\nvice and that it will be done effectively and with dispatch.\"\nBASEBALL PUBLIC ADDRESS SYSTEMS MOBILIZED\nBranch Rickoy, Vice President and General Manager of the St. touls Cardi-\nnals and Chairman of the Dofonse Savings Connitteo for Missouri, has arrunged\nto have Defense Savings Bond and Stamp announcements made over the public ad-\nTress systems at Sportsman's Park, St, Louis, home of the Cardinals. He also\nasked major and minor baseball league officials throughout the country to fol-\nlow suit and to boost Defense Savings betwoen innings. This is now being done\nat practically all baseball parks.\nIn a recent letter, Mr. Rickey says:\n\"There should be spot announcements on Defense Savings Bondo\nAt all the football games.\nand when I say all I Issan\nhigh school, college and university gamas as well as profes-\nsional games.\nThis effort will at the same time provide\nthe franovork for basketball broadcasts.\nIn other words,\nthe Defense Savings Bond announcement end advertising can be\nworked into the program of all sports all the tine and every-\nwhere.\"\nDEFENSE SAVINGS BONDS WILL DO AS MUCH FOR THIS GENERATION:\nWar Savings Stamps made possible his college education, 7. D. Robertson\nreported at the organization meeting of the Santa Rosa County (Fla.) Defense\nSavings Committee. Mr. Robertson's grandfather, a ship builder at liilton,\npurchased two $5 War Savings Stamps back in 1918 for each of his grandsons.\nWith this beginning, Mr. Robertson eventually saved the money which rade it\npossible for him to enter the University of Florida. He in new an attorney\nin Milton and President of the Junior Chamber of Comerce there.\nDesk cards reading \"I an buying United States Defense Savings Bond's for\nNational Safety and Personal Security\" are being distributed by the Seattle\nTrust and Savings Bank.\nRegraded Unclassified\n224\n\"Hata Off\" to -\nCHAIRMEN OF STATE DEFENSE SAVINGS COMMITTEES\nCONNECTICUT\nNEW JERSEY\nRobert Brewer Newell\nAlbert W. Hawkes\nPresident, Hartford National Bank\nPresident, Congoleum-Nairn, Ine.,\nand Trust Company\nKearny\nFLORIDA\nNEW YORK\nLinton E. Allen\nCol. Richard c. Patterson\nPresident, First National Bank,\nChairman of the Board, Radio-Keith,\nOrlando\nOrpheum Corporation, New York\nWAHO\nNORTH CAROLINA\nJohn A. Schoonover\nJulian Price\nPresident, Idaho First National Bank,\nPresident, Jefferson Standard Life\nBoise\nInsurance Company, Oreensboro\nKANSAS\nOHIO\nWilliam Allen White\nRoy D. Moore\nPublisher, The Emporia Gazette\nVice President and General Manager\nof Brush-Moore Newspapers, Canton\nMAINE\nOKLAHOMA\nWalter S. Wyman\nLew Wentz\nPresident, New England Public\nIndependent oil producer, Ponca City\nService Corporation, Augusta\nOREGON\nMASSACHUSETTS\nPalmer Hoyt\nEdwin C. Johnson\nPublisher, The Portland Oregonian\nPresident, H. À. Johnson\nCompany, Boston\nSOUTH CAROLINA\nJames H. Hammond\nMICHIGAN\nAttorney-st-Law, Columbia\nFrank N. Isbey\nPresident, Dotroit Fruit Auction\nTEXAS\nTom Miller\nMINNESOTA\nMayor of the City of Austin\nD. J. Arnold\nPresident, Northwestern National\nVERMONT\nLife Insurance Co., Minnoapolis\nLevi P. Smith\nPresident, Burlington Savings Bank\nMISSISSIPPI\nAlfred H. Stone\nWASHINGTON\nJoel E. Ferris\nChairman, Mississippi State\nExecutive Vice President,\nTax Commission, Jackson\nSeattle-First National Bank\nMISSOURI\nWISCONSIN\nBranch Rickey\nVice President and General\nCharles E. Broughton\nManagor, St, Louis Cardinals\nPublisher, The Sheboygan Press\nMONTANA\nAs he Hoorr\nAugust 5, 1941.\nCashier, Federal Reserve Bank,\nHelona\n- 18 -\nRegraded Unclassified\n225\nAppointment made with Oscar Cox\nfor 9:00 August 12th.\n226\nEXECUTIVE OFFICE OF THE PRESIDENT\nOFFICE FOR EMERGENCY MANAGEMENT\nWASHINGTON, D.C.\nAugust 9, 1941\nDear Secretary Morgenthau:\nI appreciate very much your note of August 7,\n1941.\nOn the Russian situation, I enclose for your\nconfidential information a cable which Wayne Coy sent\nto the President. The President answered this cable\nlate last night and when you get a chance I would like\nto tell you orally what the present situation is.\nWayne Coy has done a good job in blasting out\nof OPM and the War Department action on the other items\non the list of Russian needs, such as toluol, aluminum,\netc.\nSincerely yours,\nOsoar lot\nHon. Henry Morgenthau\nSecretary of the Treasury\nWashington, D. C.\nRegraded Unclassified\n227\nC\n0\nP\nI\nAUGUST 6, 1941\nSECRET\nTHE PRESIDENT\nUSS POTOMAC VIA NAVAL COMMUNICATIONS\nARRANGEMENTS NEARLY COMPLETE TO TRANSFER 200 P-40's TO RUSSIA. 140\nNOW IN ENGLAND TO BE TRANSFERRED BY WATER 59 NOW IN U. S. TO BE TRANS-\nFERRED VIA NORTH ATLANTIC IN ACCORDANCE WITH REQUEST OF OUMANSKY.\nOTHER MATERIAL ON IMMEDIATE LIST WILL COMPLETE CARGO FOR FIRST\nSAILING 2 SHIPS MAY BE REQUIRED. MARITIME COMMISSION ARRANGING\nNECESSARY TRANSPORTATION. BOMBER DELIVERIES TO BE DISCUSSED\nTHURSDAY WITH ARMY AND BRITISH. THREE QUESTIONS, (1) SINCE ALL OF\nTHE FIGHTER SHIPS BEING MADE AVAILABLE TO RUSSIA ARE FROM BRITISH\nORDERS CAN I INSIST TO ARMY NECESSITY TO SCHEDULE LATE AUGUST AND\nSEPTEMBER DELIVERIES FROM CURRENT U. S. PRODUCTION, I.E., TWO OR\nTHREE SQUADRONS (28 PLANES TO SQUADRON) PER MONTH FOR NEXT TWO\nMONTHS? (2) IF NECESSARY TO GET MORE SPEED ON IMMEDIATE AID CAN\nWE SUPPLY PROCUREMENT SERVICES THROUGH THE LEND-LEASE MECHANISM ON\nA CASH REIMBURSEMENT BASIS? (3) IN LINE WITH QUESTION ONE, IF ANSWER-\nED AFFIRMATIVELY, DO YOU WISH TO PREPARE BRITISH FOR FURTHER\nDELIVERIES IN AUGUST AND SEPTEMBER FROM THEIR ORDERS IN THIS COUNTRY?\nIN THE MEANTIME WE WILL PREPARE FOR YOUR DECISION TENTATIVE RECOMMENT\nDATIONS ON THE DIVISION OF PRODUCTION BETWEEN U. S. PRITAIN AND RUSSIA\nFOR AUGUST AND SEPTEMBER.\nWAYNE COY\nRegraded Unclassified\nCANTIVE URITE\nREGULATION OF CONSULT: CLEDIT\nCECL FATION or NECESSITY AND URPOSE\nHEREAS a Irrgo volume of credit is being devoted to 1-\nmancing and refinancing purchases of consumers' goods and services\nthrough extensions of credit that usually are made to individuale\nand to a large extent are 20 an instalment payment bosis; and\nHER AS the conditions under which such credit is evail-\nable have an important influence upon the volume and timing of de-\nmand, not only for the particular phone and services marchased on\ncredit but alto for POOGS and services in marri; and\nMURCAS liberal term [AI P.NCH cradit tend to otimulate\nGeriand for consumers' durable DOCE the production of which re-\nquires and materials, skills, and equipment needed for national defense;\nthe extension of such credit in excessive volume\ntends to generate inflationary developments of increasing consequence\nBS the limits of productive capacity are approached in more and apro\nfields and to hinder the secumulation of savings available for f1-\nnancing the defense program; and\nPERKAS the public intorest requires control of the use of\ninstalment credit for financing and re Amancing purchases of con-\nsumers' Curable gooda the production of unick absorbs resources\nmedec for national defanse, in order (a) to facilitate the trans-\nfar of productive resources to defense indistries, (b) to assist in\ncurbing unwarrented price advances sid profiteering which tend to\nresult when the supply ni Auch Foods is ourtailed without correspond-\nin curtailment of demand, (c) to sesist in restraining general In-\nintionary tenuencies, to support or supplement texation imposed to\nrestrain such tendencies, and to promote the Accumulation of sevings\navailable for financing the defense program, (d) to sid 1.. creating\nB. backlog of demand for consumers' durable conds, end (e) to restrain\nthe development of a consumer debt structure that would repress of-\n[ective cemand for TODOD and services in the post-defense period; and\nMERCAS in order to prevent evasion or avoidance of this or-\nRer und such regulations 28 may be prescribed to affectivate its our-\nposse, MPANF should (100 be evailable for reculating the use of other\ninstalment credit and other forms of credit usually extended to con-\nsumers or on consumers' cursble goods; and\nHERKAS it is spiropriate that such credit by controlled\nand regulated through en existing governmental agency which has pri-\nmary responsibilities with respect to the determination and adminis-\ntration of national crudit policies:\nNOW, by virtus of the authority Vested in me by\nsection 5 (b) of the act of Cotober 6, 1917, as amended, and by virtue\nof all other authority vegted in mo, and in order, in the national\nemergency declared by THE on May 27, 1041, to promote the ational de-\nfense and protect the national economy, it is hareby ordered as fol-\nlone,\nADMINISTRATION\nSnotion 1, (a) In Board of Covernors of the Federal Ru-\nsurve System (herwinefter called the Board) is her by designated 23\nRegraded Unclassified\nor the to agency through which transfers of credit between and by\ndirectly out 01, any extension of credit of a type set out in suction or\n5(b) of the aforesaid Act) which constitute, or 81150 directly section in-\nbanking institutions (as defined heroin pursuant to payments\n2(a) of this order shall be investigated, regulated And (rohibited.\n(b) The Board shell, whenever it dates such action to be\nnecessary DP appropriate, take any lawiul stups herein Authorized and\nposes of this order, and may, in administering this order, utilize\nsuch other luwful stops as are within its power to carry out the pur-\nFederal or state, which and evailable and appropriate.\nthe services of the Federal Reserve Banks and any other agencies,\n(c) In order to facilitate the coordination of the Board's\nfunctions under this order with other phases of the pregram for na-\ntional defense and for protecting the national economy, there shell\nbe a committee consisting of the Lamotary of the Treasury, the\nFuderal Loan ,crinistretor, and the Administrator DI the Office of\nPrice Auministration and Givilian Supply, or such alturnate 28 gen\nshall designate, and such other as the President shall fub-\nauquently appoint. Tike Board that mLintain licison with the com-\nmitter, and in formulating policies with respect to down-payments,\nmaturities, torms of repayment, and other such stions of general\npolicy shall consult with the connitton the take into consideration\nany suggustions or recommendations It may maxo.\nRECULATIONS\nSuction 2, (e) Whenever the doord chall dutormine that\nruch action 1a necessary or appropriate for rying out the purposus\nof this order, the Board shell proscribe regulations with respect to\ntransfore and payments which constitute, or arice directly or indi-\nrectly out of, any extension of instalment credit for the purpose of\novrebasing or carrying any insumers' curable good except a residen-\ntial building in its attiroty; and the woard may in addition, to the\nextent deumed by it to be Costrolle and fossible in order to provent\nevesion of such regulations AB may be so preseriboo or in order to\ncontrol forms of cridit the use of which might de funt the purposes\nof this order and such regulations, provide regulations with re-\nspect to trensfers and payments which constitute, or orise directly\nor indir.ctly out of, (1) any other extension of instalment cruit,\nor (2) any other extension of credit for the \"urpose of purchasing\nor carrying any consumere' durable good, or (3) any other oxtension\nof credit in the form of & loan other than a losh made for bus iniss\npurposes to a Business unterprise OF for agricultiral purposes to E\nperson engaged in griculture. Such regulations may be prescribed\nby the Board at such times und with such offective detes AS the\nBoard sholl decem to BO in Accordance with the purposes of this order.\n(b) Such regulations THE from tánd to tim, originally or\nby amendment, regulate or prohibit such transfore and reyments or UX+\nunpt. them from regulation or prohibition and may classify them EC-\ncording to the nature of the trensactions or goods or persons in-\nvolved or upon such other Deais C5 may receivebly diffurentiat, such\ntransfers and payments for the purposse of regulations under this\norder, and may be mrd. applicable to ONE or more of the classos 30\nestablished; ano, without limitin the generility of the fortgoing,\nsuch regulations may require transactions or pursons or classes\nthereof to be registered or licensed; my prescribe appropriate\nlimitations, turnis, and conditions for such registrations or\nlicenses; may provide for suspension of any such registration or\nlicense for violation of any provision thereof or of any regula-\nsion, rus, or order proseribed harounder, may prescribe 4P-\npropriste requirements CS to the Resping of records and as to the\nRegraded Unclassified\nform, contents, or substentive provisions of contracts, liens, or\nany relevant documents; may prohibit volicitations by banking insti-\ntutions which would oncourage ovarion or avoidance or the require-\nmenta of any regulation, licenue, or registration under this order;\nand to-- may from time to time cake appropriate provisions with respect\n(1) The maximum amount of credit which may be ex-\ntended on, or in connection with any purchase of, any\nconsumers' durable good;\n(2) The maximum anturity, minimum periodic payments,\nand ensime periods batween payments, which may be Atipue\nlated In connection with extensions of credit;\n(0) The methods of determining purchase prices or mar-\nXent value. or other bases for computing permissible extensions\nof credit or required down-paymento; and\n(s) Special or different torns, conditions, or ex-\napptions with respect to or used Roods, minimum\noriginal cash payments, temporary credita which are morely\nincidental to cash purchases, payment or deposite usable\nto liquidate credito, nnd other adjustmento or special\nsituations.\n(c) On and ufter the effective date of any regulation pro-\nscribed by the Board with respect to any oxtension of credit of of\ntype det out in section 2(a), and notwithetanding the provisions\nof any other proclamation, order, regulation, OT liconse under the\naforesaid Act, All transfers and payments which are in violation\nof such regulation shull be and hereby are prohibited to the ex-\ntent specified in such regulation.\n(d) Noither this order nor any regulation issued thereunder\nshell affect the right of any person to onforco any contract, ex-\ncept that after the effective data of EBY such regulation every\ncontract which 16 made in connection with any extonsion of credit\nand which violetes, OD the performance of which would violate, any\nprovision of such regulation (other than a provision designated\ntherein as being for administrative pur oses), and every Item,\npiodes, seller's interest in 8 conditional 0010, or other property\ninterest, subject to the provisions of such contract or created in\nconnection therevith, shall be ununforcoable by the person who ax-\ntends such credit or by any person who acquires any right of such\nperson in such contruct: provided that such disability chall not\nnyply to any person who vatonde such credit, or acquired such\nright for value, in good faith and without knowing or having\nroason to know the dacts by person of which the naking or DET*\nformance of such contract sal 02 would be such o violation.\nREPORTS\nSootion 3. Reports concerning the Kinus, acounts, and\ncharecteristics of any extonsions of credit subject to this order,\nconcerning transfero and payments which arise out of any such such EX-\ntensions of credit, or concerning circumstances related to OX-\ntensions of cradit or such transfers or payments or to the regula-\ntion thereof, shall be filed on such forms, under oath or otherwise, the\nsuch times and from time to the, and by such persons, as\nat Board proscribe by rule, regulation, or order as necessary under or\nappropriate may for enabling the Board to perform its functions under\nthis order. The Board may require any purson to furnish,\noath otherwise, complete information relative to and transac- of\ntion within or the scope of this order, including the production in\nany books of account, contracts, letters, or other such papers, con-\nnoction therewith in the custody or control of person.\nDEFINITIONS\nSuction 4. For the purposes of this order, unloss following the context\notherwise requires, the following torms shall have the\nmeanings, provided that the Board may in its regulations give such\nturms more restrict munnings:\nRegraded Unclassified\n-\n(a) \"Porson\" has the muaning set forth in Suction a(b) of the\nnet of October e, 1917, as amended.\n(b) \"Transfore and payment\" moans \"tranefore of credit be-\ntwoen ond parments by or to banking institutions\".\n(c) \"Banking institution\" means any person ungaged as princi-\npai, agent, broker, or otherwise, in the business of making or hold-\ning extensions of crodit and includes, without limitation, any bank,\nany loan company, and finance company, or any other person origaged\nin the business of making or holding extensions of orodit whother\n08 a vendor of consumers' durable goods or otherwico.\n(c) \"Consumers\" durable 100d\" includes any good, whother BOW\nor used, which in durable or soni-durable and is used or usable\nfor personal, femily or household purposes, and any service con-\npected with the acquisition of any such god or of any interest\ntherein.\n(a) \"Exten.ion of ordin\" nuarie any loan or any 12-\nstatment purchase contract, any condi 10nal salus contract, or any\nsale or contract or nale under which part DI all of the price is\npayable subsequent to the making of such sale or contract; any\nrental-purchase contract, or any consract for the billment or Loga-\ning of proporty under which the bailon or lebson either has the\noption of becoming the owner thoreof or obligatos himself to pay\nas componsation a sum substantially equivalent to or in excess of\nthe value thereof; any contract croating any 1100 or similar\nclaim or property to be discharged by the payment of money; any\npurchase, discount, or other acquisition of, or any extension of\ncrodit upon the security of, any obligation or claim arising out\nof any of the foregoing; and any transaction or serive of transac-\ntions having a similar purpose or offect.\n(f) An oxtension of credit is on extension of \"instalment\nbrudit\" if the obligor uncortakes to repay the crodit in two or\nmore scheduled payments or undertakes to nake two or more scheduled\npayments or doposite usable to liquidate the credit, or if the UX-\ntenagon of credit has a similar purpose or offoct, or if it in for\nthe purpose of financing a Business unterprino which makes such X-\ntendions of credit.\n(e) An oxtension of crudit is \"for the purpose of purchasing\nor carrying any consumers' durable 8000\" if It il directly or 15e\ndirectly for the purpose d' financing or refinuncing the purchase\nof any consumers' (urable good or 16 directly or indiructly Bu-\ncurod by and consumere' durable good, or if the oxtension of crudit\nhas 9. sinilar purgoso OF sffect, or If it is for the purpose of fi-\nnanciac 1 business unterprise which make with extensions of credit.\nPREMALTIES\nSection 5. Whoever willfully violates or mowingly partici-\nhereunder, shall be subject to the penalties applicable with respect\npates in the violation of this order or of Any regulation prescribed\nto violations of section 5(b) of the sit not of October 6, 1917,\nas amendod.\nFRANKLIN D. ROOSEVALT\nThe MOTE HOURS,\nAugust V, 1941.\nRegraded Unclassified\n232\nInguet 9. 1942\nBy. Pois\nMr. Cockran\nM the argent request of Secretary Margesthan, will you bindly forward w\nthe earliest possible means the sin attached copies of Secretary Margenthan's tax\nstatement to Mr. Frank Goo, Special Assistant to the American Ambassador. Lendon.\ngm\nHMC:lap-8/9/41\nRegraded Unclassified\n233\nC\n0\nP\nI\nBRITISH EMBASSY,\nSAFE HAND\nWASHINGTON, D.C.,\nAugust 9th, 1941.\nDear Mr. Cochran,\nI enclose two copies each of the following documents\nwhich I have received from London:-\n(a) Extracts from the Times of July 26th and July 29th.\n(b) Mr. Eden's statement of July 30th.\n(c) Circulars issued by the British Bankers' Association\ncontaining the Treasury regulations of July 26th and\nJuly 28th,\nI have also received the following information:-\n1. Sterling accounts of the following have been released for\npayments within the sterling area:-\n(a) Central Bank of China\n(b) Bank of China\n(c) Bank of Communications\n(d) Farmers Bank of China\n(e) The National Government of the Republic of China and\nany agencies or organs thereof, e.g.\nChinese Embasy\nChinese Government Purchasing Mission\nChinese Government Purchasing Agency\nChinese Government Trading Commission\nSociete Generale de Commerce, at\nChinese Embasey. London.\n2. British and American Banks who have agencies in the Republic\nof China and the International Settlement in Shanghai have\nbeen informed that they may use sterling which is their own\nproperty to finance sterling area/Chiness trade.\nKr. Merle Cochran,\nForeign Funds Control,\nU. S. Treasury Department,\nWashington, D.C.\nWR:TMI\nRegraded Unclassified\n234\n- 2 -\n3. The Chungking Government has been asked to cable urgently\na list of banks operating in China whom they will appoint\nas banks authorised or licensed to deal in foreign ex-\nchange.\n4. The Chungking Government has been urged to accept the\nfull responsibility for controlling the rate of exchange\nand to issue an official rate for sterling and U.S. dol-\nlars in terms of Chinese Yuan. It has been recommended\nthat this rate should approximate closely to the current\nrates of exchange in Shanghai with some small adjustment\nto meet the official sterling/U.S. dollar rate of 4.03.\nYours sincerely,\nW. Ritchie.\nCopy:lg 8/11/41\n235\nC\n0\nDEPARTMENT OF STATE\nP\nWASHINGTON\nY\nAugust 9, 1941.\nIn reply refer to\nEA 893.5151/864\nThe Secretary of State presents his compliments to\nthe Honorable the Secretary of the Treasury and encloses\ntwo copies of telegram No. 1023, dated August 6, 1941,\nfrom the American Consulate General, Shanghai, China,\nin regard to the sharp decline in Shanghai rates.\nEnclosure:\nFrom Consulate General,\nShanghai, No. 1023,\nAugust 6, 1941. (2).\nRegraded Unclassified\n236\nDES\nPLAIN\nSHANGHAI VIA N.R.\nDated August 6, 1941\nRec'd 7:30 p.m. 8th\nSecretary of State,\nWashington.\n1023, Sixth.\nSpecial Financial.\nShanghai rates declined sharply yesterday due to larger merchant\ndemand including petroleum import cover. Rates opened yesterday morning\nat five seven thirty seconds cents and three seven sixty fourths bence\nbut declined to five cents in afternoon firming before closing to five\none eight cente and three one sixteenth pence. Rates this morning opening\nat five one eight cents and three one sixteenth pence, August and September\ndeliveries same as spot. Other quotations this morning: paper gold bare\nhigher at six seven seven naught, physical gold bars off approximately ten\ntroy ounces of nine nine naught fineness reached record high of yuan eight\nsix hundred, Shanghai free sterling parity nominal at United States dollare\nfour point naught three. British banks have already received instructions\nfrom London for individual personal requirements up to sterling one hundred\npounds British banks in Shanghai are authorized to buy and sell against\nChinese currency provided the drafts or travellers checke are to be used\nin sterling areas. Merchant demands are given full cover but all other\naccounts blocked. Central Reserve Bank note nine issue August second announced\nat CRB yuan eight one point nine million.\nINFORM TREASURY.\nSent to Department, repented to Chungking.\nGW\nLOCKHART\nCopy:bj:8-11-41\nRegraded Unclassified\n237\nPARAPHRADE OF TELEGRAN RECEIVED\nFROM: American Consulate General, Sunghal.\nDATE: August 9, 1041,\nso. I 1005.\nDuring the week exchange rates have declines sharply and\nthe licensing banks, and other banks, feel that this is too to\nthe fact that much of the export business is carried on by -\nJapanese, and the export bills have not yet began to come to\nthe licensing banks. They also feel that the freesing order\nhas eaused this doeline. The existing supply of exchange La\ninsufficient because licensing has stopped the repatriation of\nfunds and resittences from abroad. The problem is a critical\none and unless Foundial measures are ndopted 12 is likely that\nthis adverse treat will continue. If the Treasury Department\nwishes closely to follow the extremely complicated situation\nat changhai 18 is recommended that consideration be given by\nthat Department to the plasing here of an expert who can keep\nin touch with the situation which is constantly changing. Cer-\ntain quarters appear disposed to eriticise the freesing order\nand the administration of the order w licensing banks. llowers,\nthese matters are exprenely controversial and before this come\nsulate can draw definite conclusions much slarification\nis nosded.\nThis tolegram Le being to nemitted to the Department and\nis being repeated to Chunghing.\ns)\nLOCKMART\nN\nRegraded Unclassified\n238\nPARAPERASE OF TELEGRAM RECEIVED\nFROM: American Consulate, Dairen, Manchuria\nDATE: August 9, 1941, 4 p.m.\nNO.: 13\nEXCTION OME.\nThe local manager of the National City Bank of New York\nhas supplied, in substance, the following information:\nThe bank is still, after eleven days, unable to conduct\nany operations whatsoever even though the local finance\nauthorities gave early assurances to the bank that they\nwould provide modus operandi which would enable it to\nresume modified operations. These modified operations\nespecially include the repayment of deposits of 'non-\nspscifisd'-appraved--mationals, the use of clearinghouse\nfacilities, the collection of outstanding loans, the\npayment of salaries and other current operating expenses,\nand the making of necessary bookkeeping entries.\nHowever trivial, separate permits for both the bank\nand the elient are required for every transaction; and ()\nthe application for permits has been impossible because\nof the irrational application of the regulations, endless\nred tape and complisations. The funds of the bank as wall\nas of its elients-irrespective of nationality-are -\npletely frozen as A result of such. The bank's former\nclients have been refused the privilege of opening assounts\nin Japanese banks\nA friendly disposition to help has been manifested by\nthe finance authorities. However, they appear utterly\nincapable\nRegraded Unclassified\n239\n+\nincapable of applying the regulations in a rational and\nworkable manner, Instead of improving, the situation\nis becoming more chaotie every day. A similar predicement\nis being experienced by the Hong Kong Shanghai Bank.\nBUTRICK\nEA:PAX\n840,51 Frozen Credits/2943\n15 bn 0.21 21\nRegraded Unclassified\nPARAPHRASE or TELEGRAM RECEIVED\n240\nFROM: American Consulate General, Bareelona, Spain.\nDATE: August 9, 1941, 10 a.m.\nNO.: 87\nReference is made to the Department's telegram\nNo. 65, 9 p.m., dated August 5, 1941.\nNew in Madrid, Spain, is oglu, Josif. Investigation\nis being más by the American Embassy.\nFROST\nV282 THE\nKAINGE\nSENICE Ot THE\n20 due bill 15 °F\nDEave -\nBECEMED\nRegraded Unclassified\n241\nPARAPERASE or TELEGRAM SERT\nTO:\nAmerican Embasay, Buemos Aires, Argentina\nDATE: August s, 1941, , p.m.\nNO.: sie\nReference is made to the Embasay's telegram No. 788,\ndated July 23, 1941.\nTHE FOLLOWING IS FOR THE ENRASSY'S IMFORMATION AND IS\nTO BE REGARDED AS CONFIDENTIAL,\nThe Treasury Department resognizes the importance of\nthe problem. This Department has been informed of the follow-\ning information.\nAuthorization has been given to the Federal Reserve\nBanks to approve applications for licenses for the payment\nof drafts which are drawn under letters of credit which are\nissued to persons whose names appear on the Preelained List\nby demostic banks provided the drafts were negotiated on or\nbefore the twentieth of July and that the license is necessary\nonly for the Peason that the name of the drawer is one of\nthese which appear on the Proclaimed List.\nIn view of the facts which have been revealed is -\nmeetion with the La Rusen transaction, it is not anticipated\nthat the Trademen's Bank will have any difficulty in\nobtaining the licenses which permit the payment of the drafts\nthat were negotiated on or before July 20, 1941.\nPayment of drafts which are drawn after July 20->\nunder this letter of credit-vill be subject to the approval\nof the Treasury Department after the filing of the specific\nlicenses applications. Action upon such will be taken in the\nRegraded Unclassified\n242\n+\nthe light of the considerations that were discussed\nin the Embassy's telegram as well as other considerations\nof pelicy in regard therete.\nMULL\n(DA)\nKAtHGW:VCL\nEA:PAK\nTBA\nThe\nDrive in BW V 10\nIt\n243\nparaphrase OF TELEGRAM RECEIVED\nFROM: American Embassy, Panama, via N.R.\nDATE: August 9, 1941, noon\nNO.: 281\nReference is made to telegram No. 177, dated August s,\n7 p.m., from the Department.\nThis morning I requested the Minister of Foreign\nRelations to withhold the issuance of the confirmation\nof the cansellation of Panamanian registry of the Santa\nHelena until information from the American Consulate General\nin Bareelona and the American Embassy in Madrid has been\nreseived. His reply was that he would for 'a few days'\ndelay action in regard to this matter.\nInsterday, I discussed the plan outlined in the\nDepartment's telegram of July 31, 7 p.m., No. 161, with\nthe Minister of Foreign Relations. These suggestions\nare now before the Minister of Finance.\nThe position of the Minister of Foreign Relations\ncontinues to be the same as that reported on August 3,\n10 a.m., telegram No. 212 from the Embassy.\nWILSON\nNONCE Ot THE\na bill 15.13\nKATPAK\n819.852/42\nRegraded Unclassified\nPARAPHRAVE or & TELEGRAM RECEIVED\nRegraded 244 Unclassifie\nFROM: American Embancy, nio de Janeiro.\nDATE: August 0, 1941, 9 D.R.\nNO. # 1000.\nAs I said in the course of our telephone convernations\nconcerning Japanere dollar funds, after some discussion I\nin persuading the Bank of Brasil to reject further\nuse by the Japamese of dollar credite for the purpose of per -\nchasing strategic materials is the American republics.\nThere is quoted below a translation of the letter which\n1n to be delivered on the 11th of August to the Age de\nJanes PO branch of the Yakohnan Specie Bank by the Director\nof Exchange:\nQUOTE Our records indicate that there 10 an account,\nin dollars, in the name of your head office, consisting of\ndollar deposits effected by that office with our Nev York\nbankers.\nAccording to your wishes and the instructions ve have\nreceived from you, transestions on the account have been\naffected in dollars which La only the equivalent of a treas-\nfor of funds within the United states.\nJapanese funds in the United States were blocked on\nthe su of July, and degails have now been received consern-\ning the MARKET in which American legal decisions are being\neffected.\nObviewsly, such messures would also affect the treasestions\nof\n245\nof the Bands do Drestl If these operations were carried out\nfor your account and on your behalf regardless of whether or\nnot such circumstances VIN mentioned.\nConsequently, 11 10 not possible for or to continue to\noperate ⑉ Tunde for your secreat because after your account\nvas opense the legal status conserning the situation who\nchanged.\nFor breatl's exports to Japan, it 1a our invention to\nrequest permission of the American authorities to operato\nthe resount and we wish that you be reminded that the dade\nean be dose 1a the 1110 of other countries.\nFurtherasse, in view of this sircumstance your requests\nfor letter. of credit which speear In the 11st given here\nif a\nwill be greated only attense limense has bann proviously\nformed by appropriate American authorities, or if you should\nagree that these bankers which you speciat tn effect liquida-\ntions will be told the character and details of the transand-\ntiems.\nshould you be in disagrement as to the need forthe\nforegoing procedure 11 10 requested that you great the per-\nmission that entern be given for the delivery of the verious\nof your dollar necessar to your brench In New York. END OF\nQUOTE\nThe foregoing 10 is confersity with any propossle to the\nDirector of Exchange. It covers the 30 applications amounting\nRegraded Unclassified\n246\nto $1,400,000 for letters of eredit in dollars covering the\nemports from other American countries to Japan of strategic\ncommodities, as well as transcotions in the future.\nThe following are the details of letters of credit which\nthe Specie Bank requested on August , and 01\nSelivial In favor of Lucie D. Wishi, i.a Pas Dame\nCentral de Delivis, $4,638 for one humbred tone of seppor we,\n193,948 for cover hundred and seventy tone of antimeny are,\ncase firs, Banco Minero de holivis.\nChile: In favor of Seciedad Commercial Chilene Oriental\nCompenia, Ltd., lantingo, at the Bance de Chiles for 900 tess\nof lead are, for 1000 tons lead ore, $53,355; for\n1000 teas copper are $25,000; for 16 tean of asbestos, 1,050;\nfor 00 toms chimehons bask, $28,700. In favor of\nAmonica Commercial Hitoubishi, Sames de Chiles for 483,000\npounds greasy veel, $151,500; for 283 tome copper consentrate,\n$18,478; for 1,627 tons copper consentrates, $100,755; for\n1,000 tone suriate netash $78,840; for 200 tome magagess are,\n13,400; for 775 kilograma lead consentrate, 934,4291 for\nmercury are, $46,000. Is favor of Gasaitehlt to Boutings,\nBanco de Chile: for 2,187 tone of copper commentrates,\n$130,200; for 1,300 tone copper ore, $39,000.* In favor of\nMuller 1. Jedliki, Banco de chile: for 203 bales of vool,\n$33,200 .\nArgentina\n-(add-) for BOO tomo of week salt, 14,790; $30,324 for\ngreaty vool.\nRegraded Unclassified\n247\nArgentines Is favor of Notwebichi Argentian Seckeded\nRenp. LOS, Buenoe Alron, Bussee Aires Provincia,\nfor 200 tome of borez, $4,500. In favor of T. Mary Katsu,\nBuenes Alree Banaado Provincial for ston, $12,074. In favor\nof Number Companie Importasion and Exportacion, Buenes Alsoe\nPassode Provinvia: for 20 team glycorine 160,199 and for\n22 tens of vasoline, $9,450. In favor of xo Takeushi, Business\nAires Baneode Provincin: for 65,300 hides, $319,563.\nCAFFERY\nPED\nEAINOWIVCL\n10\n1806\nDrl me is VIII 1124\nRegraded Unclassified\n248\nFOR Hiss Chauncey\nTREASURY DEPARTMENT\nINTER-OFFICE COMMUNICATION\nDATE August 9. 1941\nTO\nSecretary Morgenthau\nFROM\nMr. Cochran\nconfidential\nRegistered sterling transactions of the reporting banks were as follows:\nSold to commercial concerns\n& 6,000\nPurchased from commercial concerns\n£21,000\nOpen market sterling declined 1/40 to 4.03-1/2, and there were no reported\ntransactions.\nIn New York, closing quotations for the foreign currencies listed below\nwere as follows:\nCanadian dollar\n11-1/16% discount (off 1/16)\nArgentine peso (free)\n.2387 (off .0003)\nBrazilian milrois (free)\n.0505\nUruguayan peso (free)\n.4380\nVenezuelan boliver\n.2675 (up .0025)\nColembian peso\n.5800\nCuban peso\n1-1/8% discount (up 1/16)\nMexican peso\n.2070\nIn Shanghai, the yuan remained unchanged at 4-13/16#. Sterling vas quoted\nat 4.01-3/4, unchanged.\nThere were no gold transactions consummated by us today.\nThe Federal Reserve Bank of New York reported tast the following gold ship-\nment had been consigned to it:\n$2,923,000 from Canada, to be shipped by the Bank of Canada for account of the\nGovernment of Canada, arriving New York August 12, for sale to the U. S,\nAssay Office.\nThe disposition of the $2,223,000 shipment from Colombia (see report of\nAugust 2) is for cale to the New York Assay Office, for account of the Central Bank\nof Colombia.\nThe Bombay gold price was reported today to be $33.99. off 5# from\nAugust 2. As & result of increasing freight rates, the New York bank now figures\nexport parity to New York at $33.75 instead of previous calculation of $34.01\n(see June 24 report).\nRMP.\nRegraded Unclassified\n249\nBRITISH EMBASSY,\nWASHINGTON.\nAugust 9th, 1941.\nPERSONAL\nAND SECRET.\nDear Mr. secretary,\nI enclose herein for your\npersonal and secret information a copy\nof the latest report received from London\non the military situation.\nBelieve me,\nDear Mr. Secretary,\nVery sincerely yours,\nHalifax\nThe Honourable\nHenry Morgenthau, Jr.,\nUnited States Treasury,\nWashington, D. C.\n250\nTELEGRAM FROM LONDON DATED AUGUST 7th 1941\nliavel.\nHoMe Submarine Cachalot now presumed lost.\n&\nNetherlands Submarine sank 4000 ton enemy\nmerchant ship 8.8.7. of Naples on 29th and probably\nbadly damaged enemy anti-submarine Steamships South of\nSardinia on the 3rd,\n3.\nThirty aircraft raided the area night of dth/\n5th, main effort being on Ismailia. No damage to service\nproperty.\n4.\nIn heavy weather on the 6th/7th small merchant\nships in convey ran ashore off Happisborough together with\nan anti-submarine trawler. Six ships totalling 8757 tons\nbelieved total leases.\n5.\nRoyal Air Force Pello on the 5th B Desufort air-\ncraft dropped 6 Dombs from 800 feet on 10,000 ton merchant\nship at Nantes. All considered hits ss fires and explosions\nobserved from the bow to the stern of the ship.\n6.\nOn the 6th 3000 ton erchent ship was torpedoed\nby Beaufort off Horway.\n7.\nIn Hord Fjord at 1600/0 esufort Aircraft near\nmissed a merchant ship estimated at 5000 tons.\n8.\nOn the 8th airciaft Sombed a tanker over Cherbourg.\n9.\nOn the 6th our fighters destroyed four, and\ndamaged one, enemy mircraft without loss.\n10.\nNight of 6th/7th medium weight attacks on From kfort\nMannheim, Marlsruhe and Calais. 10 aircraft missing.\n11.\nNight of 5th/6th five Swordfish bombed submarine\nbase at Augusta Sicily. Several fires started, big DUE at\nsubmarine jetty.\n/ 12. Walts\nRegraded Unclassified\n251\n- 2 -\n12.\nMalta attacked same night by 10 aircreft.\nSlight damage to deckyard no casualties. Hurricanes\nshot down three.\n13.\nMilitary. Tobruk.\nThird. We attacked two posts in Medewar\nSelinet. One attack completely successful, 26 of the\nenemy K lled. Other attack also successful but fierce\nconfused fighting developed and enerry counter attack\nwas successful. lie lost 28 killed, 104 wounded, S\nmissing. Enemy losses unknown but undoubtedly heavy.\nGerman troops were engaged.\n14.\nRussia.\nGerman special communiques issued August 6th\nconsidered to give reasonably accurate survey of killed\nto date except in regard to Russian losses, of which no\ncheck possible.\nRegraded Unclassified\nCONFIDENTIAL\n252\nPurephoness of Code Oaklagrea\nReserved st the Ver Department\nas 10:05, August 9, 1941.\nLendon, filed 15:35, August 9, 1941.\n1. Brittish Air Activity over the Combinent,\n1. Bight of August 7-8. the musbers of toms of high explosive\nbonts of members of insmitiaries dropped upon the objectives mard were\nM follows: Insure, 108 and 3800, also 320 twenty-five pound incondiaries)\n- 45 ml siles, Bortand, 44 and 5600, Boulogue, , and 360.\nb. Juz of Anount 8. A total of 431 fighters were disystebed M\nfollows: 106 a interseption patrols, 263 in the protection of shipping,\n32 - special adestons and 10 or offensive patrols. Unfavorable weather\nprovented the disputek of beabers.\n1. Night of Anount B-9. A total of 140 boahers vere dispatched\nM follows: of to the ship years at Handwarg, 18 to the Handway railway\nsmiter, 90 to the trugy ship yards, and 6 on con staing operations. 3rd\nvesther prevented observation of the results of the raid on Emberg, The\nattack - Ricl we very\n2. GARDEN Air Activity one Britain.\n4. lev. of Answers 1. 15 recommissame aireraft and 10 long\nrep bankers - employed.\nm. Elahk of August 7-8. 20 fighters así 30 Long regings beabers\n1 E\n1. X of 0. Four (ema aircraft appoared over Britain,\n⑉ on ench of the following plasse: Instrup, Ball, Mablethorye and Image.\nCONFIDENTIAL\nwere\nRegraded Unclassified\n253\nCONFIDENTIAL\n4. Elekt of Anyments 4. Operations THEY a a mail scale ml\nsmasisted montly of night fighter activity over last Anglis ml Lineolnshire.\n3. Aircraft Issue Reported.\n1. British loases. During the night of August 8-9, three\nbeniers failed to return and - erashed at con.\n2. Arts Leases. One Mo-110 w shot dom by a Whitley benter\nthe night of August 7-8. On August s, fighters shot done - Me-210 ml\nprobably destroyed - Ja-88. Another Je-88 via damget.\n4. Ania Air Activity. Other Theaters.\na. Middle Justery Theater. There vere - civilian commities\nbut as Assign to military or naval fasilities or to shipping M a result\nof the German air raid on Daes the night of August 6-7.\nIN\nDistribution:\nState Department\nAssisteme Chief of Staff, 0-2\nWar Plane Division\nOffice of Noval Intelligence\nmill j s\nChief of the Any Air Forces\nSecretary of Treasury\nAssistent Decretary of Var for Air\nAsststent Chief of Staff, 0-3\nAir Cargo\n+\nCONFIDEN MAL\nRegraded Unclassified"
}