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Volume 447, October 1 – October 3, 1941
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Volume 447, October 1 – October 3, 1941
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 447
October 1 - 3, 1941
Regraded Unclassified
- -
bank Page
Africa, South, Union of
See War Conditions: South Africa, Union of
Appointments and Resignations
Fox, Roy B, (employee of Customs Agency Service)
Russell, Roswell J. (employee of Alcohol Tax Unit)
Transferred from defense personnel investigative
staff - 10/3/41
447
298
- # -
Flough, Roy
"Indispensable" HMJr says at 9:30 meeting in
connection with Canadian trip - 10/3/41
223
- C -
Chamberlain, Neville
See Revenue Revision
Cnina
See War Conditions
Coest Guard
Japanese fishing boat situation on Facific Coast
and other possibilities of espionage bring
forth proposal to FDR by Navy, State Department,
Federal Bureau of Investigation, Bureau of
Navigation, and Coast Guard - 10/3/41
345
- ? -
Exports
See War Conditions: Calna: Japan; U.S.S.B.
- 7 -
Farben, 1. G.
See WAT Conditions: Foreien Funds Control
Financing, Government
Calendar of direct and guaranteed bonds and notes -
10/1/41
2)
12% Treasury notes maturing December 15, 1941:
Amount owned on August 31, 1941, by twenty-five
largest nolders reporting to Treasury -
10/2/41
181
October Financing: Memoranda by Heas, Hadley,
and Morris - 10/3/41
267,273,276
Defense Savings Bonds:
Sales from May 1, by months, on basis of issue
price - 10/1/41
182
Progress report by Graves - 10/3/41
278
Voluntary payroll allotment olan explained to
Secretary of Labor Ferkins - 10/3/41
293
Regraded Unclassifie
- 1- - (Continued)
Book Page
Fox, Roy B. (employee of Customs Agency Service)
See Appointments and Resignations
- G -
General Aniline and Film Corporation
See War Conditions: Foreign Funds Control
General Dyestuffs Corporation
See War Conditions: Foreign Funds Control
- H -
Hollandsche Bank Unie
See War Conditions: Foreign Funds Control
- I -
India
See War Conditions
- J -
Japan
See War Conditions: Foreign Funds Control; Japan
- L -
Latin America
Mexico:
Status of stabilization and silver negotiations -
White memorandum - 10/3/41
447 355
- M -
Maywood Chemical Company
See War Conditions: Foreign Funds Control
Mexico
See Latin America
- P -
Public Relations, Treasury
See also War Conditions: Foreign Funds Control
Speakers' Bureau: Thompson memorandum concerning -
10/2/41
134
Regraded Unclassified
- R -
Book Page
Revenue Revision
Chamberlain, Neville: Statements dealing with
"taking profit out of war" - 10/2/41
447 175
Russell, Roswell J. (employee of Alcohol Tax Unit)
See Appointments and Resignations
- S -
Socony-Vacuum 011 Company
See War Conditions: Foreign Funds Control
South Africa, Union of
See War Conditions
Speakers' Bureau
See Public Relations, Treasury Department
Stabilization Agreements
Bell resume' of to date - 10/1/41
45
Steel
See War Conditions: South Africa, Union of
- T - -
Taxation
See Revenue Revision
- U -
U.S.S.R.
See War Conditions
United Kingdom
See War Conditions: Military Planning: United
Kingdom
- V -
Vonsiatsky, Anastasi Andre
See War Conditions: Foreign Funds Control
- W -
War Conditions
Airplanes:
Shipments to the British, by air and sea -
Kamarck report - 10/2/41
124
China:
United States trade control measures position
of American business firms in Shanghai
regarding: Report from American Consulate
General, Shanghai - 10/1/41
54
White report on total exports to, for week
ending September 20, 1941 - 10/2/41
190
Regraded Unclassified
- W -
Book Page
War Conditions (Continued)
Exchange market resume - 10/1/41, etc.
447
76,212,380
Foreign Funde Control:
Administration of Executive Order 8389, as amended:
(See also Books 411, 425, 434, and 442)
Meeting - 10/2/41
128
a) Discussion of
1) Socony-Vacuum 011 Company request to
purchase 15% of stock of Maywood
Chemical Company
2) General Dyestuffs Corporation
request to purchase 1,500,000 shares
of stock of General Aniline and
Film Corporation
3) Patents and patent licenses
4) Japan: Proposed methods of payment
for oil which Export Control will
license for shipment
5) Food Shipments: Payment for
discussed
6) Hollandsche Bank Unio - policy to
be followed concerning persons or
firms on Proclaimed List
7) I, G. Farben: Several patents taken
out by Germans assigned to
Meeting - 10/10/41: See Book 450, page 32
a) Discussion of
1) Japanese diplomatic expenses
2) General Dyestuffs Corporation
application
Public Relations program - Foley-Pehle memoranda -
10/3/41
259,261
Vonsiatsky, Anastasi Andre: Accounts to be
blocked - 10/2/41
133
India:
Freezing of Japanese and Chinese assets - copies
of documents in connection with provided by
British Embassy - 10/1/41
65
Japan:
White report on total exports to, for week
ending September 20, 1941 - 10/2/41
190
Lend-Lease:
Aid to Britain: Conference in White's office:
present: White, Bewley, Keyes, Ballantyne,
Chance, Robinson, Coe, Hix, Brown, and
Miss Kistler - 10/2/41
78
a) Agenda for meeting
123
Purchases - weekly report - 10/3/41
327
Military Planning:
Report from London transmitted by Halifax -
10/3/41
378
Purchasing Mission:
Gold and dollar balance report as of
September 26 - 10/3/41
336
Regraded
- W -
Book Page
War Conditions (Continued)
Security Markets (High-Grade):
Current Developments: Haas memorandum -
10/1/41
447
27
South Africa, Union of:
Steel mills needed - White memorandum -
10/3/41
248
(See also Book 448, page 275 - 10/7/41;
Book 453, page 252 - 10/22/41)
U.S.S.R.:
White report on total exports to, for week
ending September 20, 1941 - 10/2/41
190
Agreement between Bank of England and State
Bank of U.S.S.R. - copy sent from American
Embassy, London - 10/3/41
341
United Kingdom:
Agreement between Bank of England and State
Bank of U.S.S.R. - copy sent from American
Embassy, London - 10/3/41
341
White, Harry D.
"Indispensable" HMJr says at 9:30 meeting in
connection with Cuban trip - 10/3/41
223
Regraded Unclassified
October 1, 1941
12:16 R,m.
HMJr:
Hello, John.
John
Boettiger: Yes, sir.
HMJr:
How are you?
B:
Fine.
HMJr:
How's Anna?
3:11
She's fine.
HMJr:
Good. John, the reason I'm calling you 1s
this. I am giving serious consideration of
leaving here on the night of the eighth, on
the invitation of the A. F. of L. to come out
and talk to them about Defense Savings Bonds
and Stamps. Hello.
in
Yes.
HMJr:
And Mr. Green has invited me. Now, I Just
wondered. Is there anything in the Seattle
situation which would - why I shouldn't come
out there?
B:
No, I don't think so. We'd love to have you
come out. There 18 - there was some cuestion
in my mind. I heard about this last night.
HMJr:
Yes,
B:
Graves called Haas and Haas called me.
HMJr:
Yee.
B:
There 18 only this in my mind, that Frances
Perkins is coming out here; and I don't know
what's going to come out of that. She's making
8 speech, and I suppose she'll be courteously
treated and what not. There 18 also - there was
also in my mind the question as to why you
should address the American Federation of Labor,
Regraded Unclassifie
2
- 2 -
but when it was explained that it was on the
Defense Bond drive, why I felt sure that would
be fine.
HMJr:
Well, it's only on that. It's on the payroll
deduction plan.
B:
Yeah. I don't know how well received you would
be on the question of economics or cutting down
expenses and such things like that, but.....
HMJr:
I'm not going to talk.....
B:
on the Defense Bonds business, it would
be excellent.
HMJr:
Only on Defense Bonds.
B:
Yeah.
HMJr:
And labor's stake in this whole World War thing.
B:
Yeah. Well, I think that it would be fine. I
don't know, as I say, what's going to happen
when Frances Perkins comes out here. Also, Haae
reminded me that there's 8. threatened strike of
the welders.
HMJr:
Yeah.
B:
But that wouldn't have any possible effect on
you - I mean, not even remote.
HMJr:
Well, supposing Frances Perkins got a bad
reception? How would it affect me?
B:
Well, in a sort of a way I thought that you
might be - well, if she got a bad reception
it wouldn't be - it wouldn't affect you, no,
but I didn't want to get you in the position
of following her or playing second fiddle or
anything of that sort.
HMJr:
Oh. Well, that doesn't bother - I mean, well
I don't - I'm just coming - why, that wouldn't
bother me.
Regraded Unclassified
3
- 3 -
B:
What kind of a. meeting is this on the eighth?
I haven't even heard of it.
HMJr:
Well, it's - well, for two weeks in your town
they're having their National annual meeting
of the whole A. F. of L.
B:
of course, I know that. They're having 8. couple
of big dinners, you see, and I wondered whether
this was a dinner meeting or
HMJr:
No, no, I wouldn't
B:
a business session or what.
HMJr:
This would be on the morning of the ninth, at
eleven o'clock - a business session.
B:
Oh, I see.
HMJr:
No, not at their dinner. A business session,
and I was going to come out there as a sales-
man.
B:
Yeah. That's a week from tomorrow.
HMJr:
Yeah.
B:
Well, I think it would be swell, Henry. I
would love it, because 1t would give us a chance
to see you besides.
HMJr:
Well, that was part of the temptation.
B:
Yeah.
HMJr:
Now, it'
B:
By all means you should come.
HMJr:
.....it'e a little risky, but
B:
It would help the defense drive here a great
deal, and will be - I'm sure it will be
extremely well received by the community and
it's needed.
Regraded Unclassified
- 4 -
4
HMJr:
Well, it was - my coming was purely to get
the A. F. of L. interested more than they
are - they're all on record and all like
that - in our payroll deduction plan.
B:
Yeah. The President of the Teamsters, Dan
Tobin, gave out an interview here yesterday
saying he wanted to buy two million dollars'
worth of Defense Bonds and you wouldn't allow
him to buy more than fifty thousand.
HMJr:
That's right. That's right.
B:
He said that the law ought to be amended to
permit greater investment.
HMJr:
Well, I'm not interested in the million dollar
subscriptions. I'm interested in the two
dollars a week.
B:
Yeah.
HMJr:
No, Tobin tried to bull it through with me.
He's tried - he's gone over my head to the
President, and we've turned him down. I
turned down Mayor LaGuardia, too.
B:
IE that 80?
HMJr:
You see he wanted to invest twenty million
dollars for the City of New York payroll
deduction plan, but we're not paying two
per cent interest for that. That's what they
want. They want the high interest rate.
B:
I see.
HMJr:
What?
B:
Yeah, I get you.
HMJr:
See? So does Mr. Roosevelt. He'd like 10.
aleo.
B:
Yeah.
Regraded Unclassified
5
- 5 -
HMJr:
He likes high interest rates on his own
money.
B;
Would Elinor come out with you?
HMJr:
No. No, I'd just come alone.
B:
Yeah. I didn't think she could, because I
gather that she's pretty well enveloped now
in the OCD.
HMJr:
But - well then, I think I'll come, John.
I haven't formally accepted. I was waiting
until I had talked to you.
B:
Well, that's fine.
HMJr:
And
B:
How long will you stay?
HMJr:
Well, I thought I'd stay Thursday and Friday
and leave there Friday night. I'd like to
see something of it and I'd like to see some-
thing of you and Anna and I'd like to see
something of Seattle.
B:
Well, you'll stay at our house, won't you?
HMJr:
I hadn't thought of it.
B:
Oh, absolutely. We've got a very nice private
apartment all set here for you.
HMJr:
Wonderful. I'd love to.
B:
Good.
HMJr:
And then if I could see something of Seattle
and hear something for a day or two, it would
be swell.
B:
Well, you'll come then on the - you'll arrive
here - are you coming by plane?
HMJr:
By plane - commercial - United Air Lines.
Regraded Unclassified
- 6 -
6
B:
And you'd arrive here on Thursday morning would you,
or
HMJr:
Thursday morning.
B:
or Wednesday?
HMJr:
Thursday morning and leave there Friday
night.
B:
You might miss connections with the airplanes.
The service has been pretty bad, I understand,
over the mountains.
HMJr:
Well, then I'd have to talk Friday if I missed.
B:
Yeah. I guess that would work out all right.
HMJr:
Yeah.
B:
Well, will you wire us the time of your
arrival 80 that we can meet you there?
HMJr:
Oh, you don't want to do that.
B:
Oh, yes we do.
HMJr:
Well, I'll let you know; but you needn't
bother.
B:
Oh, yes. We'll meet you there and we want
to do that, Henry.
HMJr:
Well, you think it over.
B:
You'll wire us when you arrive, will you?
HMJr:
All right.
B:
When you're on, I mean.
HMJr:
Okay.
B:
I had a long talk yesterday with this agent,
Henry.
HMJr:
Yes.
- 7 -
7
B:
But I'll tell you about that when I see you.
He's going back to report to Irey.
HMJr:
Frank.
B:
Yeah.
HMJr:
Yeah.
B:
I'll tell you about that when we see you.
HMJr:
Okay.
B:
Good-bye, Henry.
HMJr:
Thank you.
B:
Good-bye.
Regraded Unclassified
8
October 1, 1941.
Dear Mr. Green:
It will give me great pleasure to
come to Seattle to speak to the Annual
Convention of the American Federation of
Labor. The most convenient time for me
would be Thursday morning, October 9th.
If you confirm this time, I propose to
leave by plane on Wednesday night and
arrive in Seattle early Thursday morning.
Thank you very much for your WATE
and friendly invitation. I an looking
forward with keen Interest to this oppor-
tunity of meeting the A. y. of L.
Sincerely,
(Signed) a. Morgenthan. are
Mr. william Creen,
Fresident, American Federation of Labor,
A. F. of L. Building,
Washington, D. C.
By Messenger 3:30 Blackarll
Mis 21.m. characty
FK/cgk
Copies to Thampson
10/1/41
Regraded Unclassified
FEDERATION
AMERICAN FEDERATION OF LABOR
OF
Esecutive Countria
WOLLDAM Orders
AMERICAN
Marry
A. F. - L. Bolling, Westlactin, D.G.
LABOR
Tost WILLIAM L.
Revie President, Beart c. -
No., las.
835 a. N. N.. - o,
- Yes Prablest, T. A. lower,
Nets Emino 1. have
- eil Asiair Pain, New York, N. t.
478 of le BM., - D.C.
Thirt Yes MATTHER Was
Testh W.D. MARIA,
FR Are, Xew York, M.
año Venire B/t. Detrit. Mich
Family Visa Prodent, Jume N. Name,
Fun El Issurt,
MBCD
- - Are, Worrened, - - Callf.
aps. en Mar. Caniel Ctr. No.
Twriffs Queste 8.
HERI
Fine Visa a M.
Orgid
Nov.
- St. N. W., Weshington, D. c.
Eum ---- Fina Are New THE N.
I ai § I $
Vice-President EURAPE now
Balwer Cational o.
or - Buffale, N.Y.
- Dams A. Two
a, w. Beams,
Swit = Ind.
Machinista Buildine, - D.C.
STANDE TELEPHONE NATIONAL 1070-1-2-2-4
Pirwerse - c.
CABLE ADDRESS AELLS
Delamars of Birest. test.
Washington, D.C.
September 30, 1941
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
I extend to you a cordial invitation to attend
and address the 6lst Annual Convention of the American
Federation of Labor which will be held in Seattle, Washington,
beginning October 6, 1941. Although the Convention will
remain in session until Thursday, October 16th, - Thursday,
October 9th or Friday, October 10th, would be most acceptable
and satisfactory for you to address our Convention. I hope
one of these days will meet your convenience. I express the
hope that you can arrange to come to Seattle as the guest of
the American Federation of Labor.
I shall be very happy indeed if you respond to
this invitation and I assure you that if you do you will be
accorded a warm and hearty welcome by the officers and delegates
in attendance at the Convention.
W Breen Very sincerely
President,
American Federation of Labor
is
Regraded Unclassified
to
STANDARD FORM No. 14A
TREASURY DEPARTMENT
NOVED BY THE PRESIDENT
WASHINGTON
MARCH 10, 1926
TELEGRAM
CHARGE TREASURY DEPARTMENT, APPROPRIATION FOR
October 1, 1941 (Official)
OFFICIAL BUSINESS-GOVERNMENT RATES
(The appropriation from which payable must be stated on above lime)
e . - - -
2-14/17
MP. N ROFFINSTON
CONTINUPTAL ILLINOIS BANK AUILDING
CHICAGO, ILLINOIS
OULD APPRECIATE IT IF YOU YOULD CCMA TO MY ROOM STRVING R TXL
"INE THIRT THER DAY MARMING PLEASE ASK AT DESK FOR MR. AVE
NORMID
HIGHT MONSEPTHAN JR
Regraded Unclassified
Treasury Department
Division of Monetary Research 11
Date Jet. 2, 19/2 19
To: Secretary Vorgenthau
From: H. D. White
Mr. Wallace had requested
me, after a meeting of the Lconomic
Lefense Board, to comment on some
data Lie hed received from Ir. Bean.
The appended letter was In response
to that request.
Regraded Unclassified
October 1, 1941.
My Dear Mr. Vice President:
I have exa ined the figures with regard to the national income and
consumers' purchasing power given by Mr. Sean in his letter of September 17.
I an in substantial agreement with Mr. Bean on these figures, insofar as
they relate to the past.
I presume that you were especially interested in estimating any in-
creases or decreases in the money and real purchasing power of the various
income groups as well as of the nation as a whole. But apparently Mr. Bean
did not intend to estimate the income available for consumption that would
be in the hands of the public and its various significant sub-groups, as
he makes no deduction for taxes, nor allowance for saving.
In the past few weeks there have been substantial changes in the fac-
tors that will affect the amount of purchasing power that the various
groups have, as well as the amount of goods available for then to buy, The
decided acceleration of our national defense activities since the setting
up of the SPAB, the anticipated greatly increased scope of priorities and
rationing, the greatly increased tax program, the contemplated extended
Social Security program, the increased controls over capital expenditure
and consumer credit, and the expanded program of exports of consumer's'
goods to foreign countries under the Land-Lease - all these introduce 10-
portant modifications into the basic factors which determine the magnitude
of the monetary and real national income.
We are now attempting an evaluation of the effect of these changes
on the national income, the supply of consumer goods, the volume of money
which will be available to the major income groups, etc. I know you are
interested in all these matters and shall therefore send you a copy of
our results na soon as the work has been completed.
Yours respectfully,
H. D. White
Assistant to the Secretary.
The Vice President,
The United States Penate.
HDW:03:d1m
10/1/41.
Regraded Unclassified
13
Change of Atmosphere
"The price control bill." said Mr.
Leon Henderson in a speech on Mon-
Wall Street Journal
day, "is right in not directly control-
ling wages and the bill is right in not
October 1, 1941
directly controlling profits."
And earlier on the same day, Mar-
riner Eccles, chairman of the Federal
Reserve Board, told & Congressional
committee "the fact is that you cannot
leave wages and salaries, which are
the main factors in prices, to rise in-
discriminately and be realistic about
preventing inflation."
Both gentlemen are right.
A statutory wage ceiling would be
impossible of enforcement. If it
could be enforced, it would still be bad
for it would arouse a resentment that
would be fatal to the very thing which
her.to
it sought and that is a maximum of
production at the lowest cost.
Yet wages and salaries are, as Mr.
Ecd
said, "the main factors in prices
and if they are to be allowed to spiral
out of all control, it is quite foolish to
talk about controlling prices.
pertinent parts on page of otheched dispatch
The ay out of the dilemma is
surgested in a dispatch to The Wall
Street Journal of September 29 from
George V. Ormsby, London corre-
ference to English
sp ndent. Mr. Ormsby pointed out
or while the Trades Union Congress
has rejected wage control, that body
Rejection (to date) of legislative
is fully cognizant of the dangers of
inflation and is ready to cooperate
Longe control - a bout which
with the government in combatting it.
The Congress stands against the prin-
I spuke to on Chicago Trip.
sciple of direct limitation of earnings.
Somewhere in our government and
somewhere among the leaders of or-
ganised labor there must be the cour-
age and skill that can bring about a.
similar understanding. To believe
otherwise is to believe that labor
leadership had adopted a policy of
take all you can get now regardless of
orrow and that the government
he courage to bring home the
falls of that attitude.
We need neither n. new law nor
II.H Morris, Ir
new government machinery. We do
need a change of atmosphere.
Oct 6,1941
Regraded Unclassified
14
Extract from The Wall Street Journal, September 29, 1941. which
-- the basis of an editorial in that paper on October 1, 1941.
"Economic Trends in Britain
"By G. V. Ormsby
"Staff Correspondent of The Wall Street Journal
"London (By Air Mail)
"At first sight the rejection of the Trades Union Congress
of the policy of wage control set out in the recently issued
government White Paper on price stabilization is a setback for
the government's drive against inflation. But the Congress did
not oppose a purely negative attitude to the government's plea.
The unions realize the dangers of inflation and provided the
wage fixing system is not interfered with the unions are ready
to support an extension of rationing and control of prices, the
subsidizing of essential commodities and the stimulation of
maximum savings. Sir Walter Citrine, the secretary of the
Congress, who stated the unions case, went further when he ad-
mitted that if private savings were insufficient to bridge the
inflationary gap between revenue and capenditure the unions would
have to face more stringent measures. It is any direct limita-
tion of earnings to which the trade unions object and they made
0. practical proposal that excessive hours of work should be re-
duced. If this were done they maintain that output would not
fall but overtime rates of pay would be considerably reduced.
"On the whole the results of the Congress were negative
mainly because the government has so far never annunciated a
definite comprehensive plan of wartime industrial production.
Regraded Unclassified
15
The Secretary discussed this verbally
with Mr. Eccles.
l
BOARD or GOVERNORS OF THE FEDERAL RESERVE SYSTEM
16
Since this was dictated last night, I
had to DO before the Committee again this
morning. They pressed me specifically on the
AM excess profits matter. As soon as I get
- transcript, I'll send my reply over to you
in case you are interested in seeing it--out
T think it went all right. I said we agreed
on keeping excess profits down and I discussed
the basis of assessing the tax to accomplish
14 end you and I both favored.
ms
Regraded Unclassified
17
BOARD OF GOVERNORS
UNITED ENTER STATE & )
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE or THE CHAIRMAN
Detaber 1, LVI.
Dost Henry:
Just to keep the record stratent, I an enclosing
Proo the incovised orint of the hearines on Nhe nrice con-
trul 31, what I 1144 on too points, namely the excess
reserver 99.18 and the excess profite tax, because the
upase Ave the increasion that T Advanted
further action nn the reserves and that I opposed what you
hed 2014 in regard to BYCASE profits. The fact is that I
- yer, expeful, N the trinscrist shows, to reiterate
this the subject of reserves WALL e rettor of convultation
and that "vertever may Be done in the over-1) credit con-
trol (ield must be done always with an eye to the Treasury's
Trablem its financine, and therefore mist le done in fill
and condete cooporation with the Transury
#
I - not. lisked whether I favored any specific tax
Man, or whether T agreed or not with that you had store'.
In set, TO head off questions SO "ar 28 I could, I simply
referred to what I hat stated previously and testified to
before the Ways and Means Committee when the tax measure
WAS before it.
While I feel that you de not have any mistolen 15-
premions shout it, T vanted to PASS the transcript COMY
NO n matter of record and information.
Honoraide Honey Verginthip, Marrmer Jr.,
Sincerely,
secretary of the "ressury,
D. :.
Regraded Unclassified
Reclar
18
TALL
unfore
Smoke
and
Cummer
It is not possible (1) this country, and
it is not possible in any other country for the Banking authorities
under emergency conditions to not with independener: It line unt
been possible in Britain or Carada or any other country. and i-
not either possible or desirable in my opinion in this country,
that whatever may be done in the over-all credit control Bald 1110ml
be done always with an eye to the Treasury's problem of its finanching.
and therefore must be done in full and complete cooperation with the
Treasury, and in the publie interest,
That does not necessarily mean that 1 may not have certain views
as towlint should be done and the way it should be done, It does
not mean timt 10y views with reference to the place of over-all credit
control may not conform to the views of the others. but 1 nm sure
you will all agree that in times of emergency that the coordination
and cooperation between banking authorities with the Treasury:18
on absolute essential in the public interest, and 10 that end the Secre-
inry of the Treasury and I issued If statement a few days ago which
WOR an effort to point ont the close interest-I mean the common,
interest-tlat We had in the problem and the need of the closest kind
of cooperation, the futility of either of us undertaking A/D*
urately and independently. So far as the Board is concerned, or the
Treasury is concerned, any recommendation that may be made with
reference to this whole field will be doue jointly. after further con-
sultation. That is speaking for the future. That does not mean that
my views as have been expressed and are in the record have neces-
sarily changed.
Now, let me ask you this question, if you care to answer it: Do you
there Congress should consider legislation right now-rld perjuit
Empther increases of reserve requirements. subject to the Imitation that
they shull not be increased to more than dontile the maximum require
nients under the present law?
I think Chut tleat is referred to specifically, that formula, in your
report of about last December.
Mr. ECCLES, Yes. It is rather difficult to avoid a comment dn it
Will you give 108 a comment on that!
under all of the einamstations. A-T stated this morning. any
powers over the reserve situation. over the over-nll credit
presents a matter in which the Treasury, with its larges amount of
financing necessity, is treatendously interested:
Regraded Unclassified
2 -
19
Page 1195
For that increased power, whether the kind is indicated or
in some other form, WATER given to the Board en independe
not that the Board would act without consultation
with the Treasury, but if that power were given, the Government
financing situation could be very greatly affected by any action taken,
and therefore its inflation problem and monetary and fiscal problems
are so interwoven that any recommendation that may be made to this
committee with reference to monetary legislation should be made with
the approval of and in conjunction with the Treasury,
Otherwise I do not believe that effective results could be secured.
Does that answer the question !
Mr. CRAWFORD. I think that that is correct, and I agree with your
ob invations in that respect.
Bile-let. me say it this way: Assuming that Congress will draw the
legislation in such Ta. way that left it entirely to the discretion of the
Board working in conjunction with and coordinating with the Treas-
ury Department. are you in position to recommend to the committee
that it now consider or ennet legislation which would authorize the
Board to, using this same language, increase reserve requirements,
subject to the limitation that they shall not be increased more than
double the maximum requirements under the present law, and let you.
and the Treasury proceed to work out what you want to do after that
type of legislation is enacted?
Would you go so far as to recommend to us that we give you that
authority?
Mr. ECCLER. No: I could not; I would not at this time do that: and
let me just rend what I assume you have heard before, and I think
that this is possibly a full and complete answer to the reasons why
I could not answer your question,
Mr. CRAWPORD. Are you referring to the joint statement?
Mr. ECCLES. Yes.
Mr. CRAWFORD. We have that in the record.
Mr. ECCLES. It is-
Recommendations on the question of what additional powers. If any, over bank
reserves the Bourd should have during the present emergency, and what form
these powers shonld talle, will be trude whenever the Trensury und the Board,
after further consideration. determine (hot such action is accessary to help in
combuting inflationary developments.
So that in the light of that statement, and in the light of the-eon-
ferences and the consultations that the Board and the Treasury laque
been causing on for some months, it would seem
contrary to the understanding RS expressed herein that either VIE.OF
the Board should make any recommendations with reference to this
subject of bank reserves.
Regraded Unclassified
20
- 3
The following in the only discussion of the form of excess profits
Taxes:
Page 1173
The CHAIRMAN. While you are on that, let me ask you, just now
far do you think the Government should go in the recapturing of
excess profits, or profits?
&
Mr. Ecciss. Well, it ought del go a long way. Certainly the taxa-
tionlahould start from the top and come down, sid not We bottom
and go up.
1 have expressed my views with reference to this corporate tax
question before the Ways and Means Committee of the House, I
also have expressed them elsewhere.
Mr. KEAN. May 1 interrupt there? Was that in the hearing on
the bill just passed!
Mr. EOCLES. Yes, sir.
Mr. KEAN. In the Ways and Means Committee?
Mr. ECULES. That is right.
To be more specific, I have greatly favored what is known BY a
floor and a ceiling plan, based upon is base period of earning 1
suggested the 10-percent ceiling plan and IL 5-percent floor plan. In
other words, whatever base period is used, if IS corporation matle
less on its invésted capital than a 5-percent return-and I realize
that there is a queston of definition of invested capital which is im-
portant-that it would not then be permitted to make more than
5 percent before it was subjected to the excess-profits tax. If a cor-
poration had been making more than 10 percent during the base
period it would not be permitted to make more than 10 before it
would be subject to the excess-profits tax.
The excess-profits tax should be greatly increased over what had
prevailed. I feel that possibly with the $5,000 exemption, maybe
less than that, but certainly no more, that the excess-profits rate of
taxation, instead of being what it bad been, I think 20 percent,
should possibly start out at 40 percent, and maybe as high as 50
percent, and when the earnings had reached, say 12 percent, only-
thing above that; or 15, that then the tax should be at Wast 25
percent.
Regraded Unclassified
Calendar of Direct and Guaranteed Bondo and Notes 1
October 1, 1941
(In millions of dollars)
Callable issues
Fixed maturities
First callable
Final saturities
Date
Description
Guaran-
Guaran-
Guaran-
Direct
teed
Direct
teed
Direct
teed
1941-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct,
Nov. 1
RFC 7/8%
300
Nov. 1
USHA 1/4%
112
Nov.15
COO 1%
204
Dec.15
Note 1-1/4%
204
Total
204
616
1942-Jan.15
RFC 7/86
310
Jan.15
FFMC 3% (1942-47)
236
Feb.
Mar. 1
FFMC 2-3/4% (1942-47)
103
Mar.15
Note 1-3/4%
426
Apr.
May
June
July 1
RFC 1%
276
July 1
HOLO 2-1/4% (1942-44)
875
Aug.
Sept.15
Note 2%
342
Oct.15
RFC 7/8%
320(T)
Nov.
Deo.15
Note 1-3/4%
232
Total
1,000
906
1,21%
1943-Jan.
Feb,
Mar.15
Note 3/4%
66(T)
Apr.
May 1
CCC 3/4%
289
June15
Note 1-1/8%
629
June15
Bond 3-3/8% (1943-47)
454
July15
RFC 1-1/8%
324(T)
Aug.
Sept.15
Note 1%
279
Oct.15
Bond 3-1/4% (1943-45)
1,401
Nov.
Dec.15
Note 1-1/8%
421
Total
1,355
13
1,855
1944-Jan.
Feb. 1
USHA 1-3/8%
114
Mar.15
Note 1%
515
Mar.15
FFMC 3-1/4% (1944-64)
95
Apr.15
Bond 3-1/4% (1944-46)
1,519
Apr.15
RFC 1%
571(T)
May 1
HOLO 3% (1944-52)
779
May 15
FFMC 3% (1944-49)
835
June15
Note 3/4%
416
July 1
HOLC 2-1/4% (1942-44)
875
Aug.
Sept.15
Note 1%
283
Sept.15
Note 3/4%
635(T)
Oct.
Nov.
Dec.15
Bond 45 (1944-54)
1,037
Total
1,840
0.65
2,556
1,799
75
Excludes special issues, issues redeemable et option of holder, postal savings
bonde, FHA debentures, and depositary bonds.
Regraded Unclassified
Calendar of Direct and Guaranteed Bonds and Notes
October 1, 1941
no
-
(In millions of dollars)
Callable issues
Fixed maturities
First callable
Final maturities
Date
Description
Guaran-
Guaran-
Guaran-
Direct
Direct
teed
Direct
teed
teed
1945-Jan.
Feb.15
CCC 1-1/8%
412(T)
Mar.15
Note 3/4%
718
Apr.
May
June 1
HOLC 1-1/2% (1945-47)
755
July
Aug.
Sept.15
Bond 2-3/4% (1945-47)
1,214
Oct.15
Bond 3-1/4% (1943-45)
1,401
Nov.
Dec.15
Bond 2-1/2%
541
Dec.15
Note 3/4%
531(T)
Total
1,790
412
1,214
755
1,401
1946-Jan. 1
Conversion 3%
16
Feb.
Mar.15
Bond 3-3/4% (1946-56)
489
Bond 3-1/4% (1944-46)
1,519
Apr.15
May
June15
Bond 3% (1946-48)
1,036
June15
Bond 3-1/8% (1946-49)
819
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
lb
2,344
1,519
1947-Jan. 1
Conversion 3%
13
Jan.15
FFMC 3% (1942-47)
236
Feb.
Mar. 1
FFMC 2-3/4% (1942-47)
103
Apr.
May
June 1
HOLC 1-1/2% (1945-47)
755
June15
Bond 3-3/8% (1943-47)
454
July
Aug.
Sept.15
Bond 2-3/4% (1945-47)
1,214
Oct.15
Bond 4-1/4% (1947-52)
759
Nov.
Dec.15
Bond 2%
701
1,094
Total
714
759
I,662
1948-Jan.
Feb.
Mar,15
Bond 2% (1948-50)
1,115(T)
Mar.15
Bond 2-3/4% (1948-51)
1,223
Apr.
May
June15
Bond 3% (1946-48)
1,036
July
Aug.
Sect.15
Bond 2-1/2%
451
Oct.
Nov.
Dec.15
Bond 2% (1948-50)
571
Total
951
2,909
1,036
Excludes special issues, issues redeemable at option of holder, postal savings
bonds, PHA debentures, and depositary bonds.
Regraded Unclassifie
Caleodar of Direct and Guaranteed Bonde and Notes 1
October 1, 1941
23
(In millions of dollars)
Callable issues
Fixed maturities
First callable
Final saturities
Date
Description
Direct
Guaran-
Direct
Guaran-
Direct
Guaran-
teed
teed
teed
1949-Jan.
Feb.
Mar.
Apr.
May 15
FFMC 3% (1944-49)
835
June15
Bond 3-1/8% (1946-49)
819
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond 3-1/8% (1949-52)
491
Deo.15
Bond 2-1/2% (1949-53)
1,786
Total
2,277
619
835
1950-Jan.
Feb.
Mar.15
Bond 2% (1948-50)
1,115(T)
Apr.
May
June
July
Aug.
Sept.15
Bond 2-1/2% (1950-52)
1,186
Oct.
Nov.
Dec.15
Bond 26 (1948-50)
571
Total
1,125
1,060
1951-Jan.
Feb.
Mar.15
Bond 2-3/49 (1948-51)
1,223
Apr.
May
June15
Bond 2-3/4% (1951-54)
1,627
July
Aug.
Sept.15
Bond 3% (1951-55)
755
Oct.
Nov.
Dec.15
Bond 2-1/4% (1951-53)
1,118
Total
3,500
1,223
1952-Jan.
Feb.
Mar.15
Bond 2-1/2% (1952-54)
1,024(T)
Apr.
May 1
HOLC 3% (1944-52)
779
June
July
Aug.
Sept.15
Bond 2-1/2% (1950-52)
1,136
Oct,15
Bond 4-1/46 (1947-52)
759
Nov.
Dec.15
Bond 3-1/8% (1949-52)
491
Total
1,024
2
779
Excludes special issues, issues redeemable at option of holder, postal savings
bonds, FHA debentures, and depositary bonds.
Regraded Unc assified
Calendar of Direct and Guaranteed Bonde and Notes
October 1, 1941
24
(In millions of dollars)
Callable issues
Fixed maturities
First callable
Final maturities
Date
Description
Guaran-
Direct
teed
Direct
Guaran-
teed
Direct
Guaran-
teed
1953-Jan.
Feb.
Mar.
Apr.
May
June15
Bond 2% (1953-55)
725
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond 2-1/2% (1949-53)
1,786
Dec.15
Bond 2-1/4% (1951-53)
1,118
Total
725
2,904
1954-Jan.
Feb.
Mar.15
Bond 2-1/2% (1952-54)
1,024(T)
Apr.
May
June15
Bond 2-3/4% (1951-54)
1,627
June15
Bond 2-1/4% (1954-56)
681
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond 4% (1944-54)
1,037
Total
681
3,088
1955-Jan.
Feb.
Mar,15
Bond 2-7/8% (1955-60)
2,611
Apr.
May
June15
Bond 2% (1953-55)
725
July
Aug.
Sept.15
Bond 3% (1951-55)
755
Oct,
Nov,
Dec.
Total
8,611
1,480
1956-Jan.
Feb.
Mar,15
Bond 3-3/4% (1946-56)
489
Mar.15
Bond 2-1/2% (1956-58)
1,449(T)
Apr.
May
June15
Bond 2-1/4% (1954-56)
68.
July
Aug.
Sept.15
Bond 2-3/4% (1956-59)
982
Oct,
Nov.
Dec.
Total
8,431
1,170
1
Excludee special issues, insues redeemable at option of holder, postal asvings
bonds, PHA debentures, and depositary bonds.
Regraded Unclassified
Calendar of Direct and Guaranteed Bonds and Notes
October 1, 1941
25
(In millions of dollars)
Callable issues
Fixed maturities
Description
First callable
Final maturities
Date
Direct
Guaran-
Direct
Guaran-
Direct
Guaran-
teed
teed
teed
1957-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
1958-Jan.
Feb.
Mar,15
Bond 2-1/2% (1956-58)
1,449(7)
Apr.
May
June15
Bond 2-3/4/6 (1958-63)
919
July
Aug.
Bept.
Oct.
Nov.
Dec.
Total
919
1,449
1959-Jan.
Feb.
Kar.
Apr.
May
June
July
Aug.
Sept.15
Bond 2-3/4% (1956-59)
982
Oct.
Nov.
Dec.
Total
952
1960-Jan,
Feb.
Mar.15
Bond 2-7/8% (1955-60)
2,611
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond 2-3/46 (1960-65)
1,485
Total
1,485
2,011
Excludes special issues, issues redeemable at option of holder, postal savings
bonds, FHA debentures, and depositary bonds.
Regraded Unclassified
Calendar of Direct and Guaranteed Bonds and Notes 1
October 1, 1941
26
(In millions of dollars)
Callable issues
Fixed maturities
Description
First callable
Date
Final maturities
Direct
Guaran-
Direct
Guaran-
Direct
Guaran-
teed
teed
teed
1961-Jan.
Feb.
Mar.
Apr.
May
June 1
Paname 3%
50
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
50
1962-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov,
Dec,
Total
1963-Jan.
Feb.
Kar.
Apr.
May
June15
Bond 2-3/4% (1958-63)
919
July
Aug.
Sept.
Oct.
Nov.
Deo.
Total
919
1964-Jan.
Feb.
Mar.15
FFMC 3-1/4% (1944-64)
95
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
95
1965-Jan.
Feb.
Mar,
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond 2-3/4% (1960-65)
1,485
Total
1,465
bonds, THA debentures, and depositary bonds.
Excludes special issues, issues redeemable at option of holder, Regraded Unclassified
Prepared by: Mr. Foy
Mr. Murphy
PARTMENT
Mr. HARE
MMUNICATION
27
DATE October 1, 1941
TO
Secretary Morgenthau
FROM
Mr. Hass th
Subject:
Current Developments in the High-grade Security
Markets: Effects of Previous Changes in Reserve
Requirements on Prices and Holdings of United
States Securities
SUMMARY
(1) United States securities roas in price the day follow-
ing the announcement of the increase In reserve require-
ments. During the past two weeks the prices of Treasury
bonds gained about one-quarter of of point, while Treas-
ury notes decreased slightly Chart I).
(2) After remaining constant at 2.64 percent from September
15 to 29, the Treasury average yield of five high-grade
corporate bonds declined one basis point yesterday
(Ohart II). The market for municipal securities reached
a record low yield of 2.00 percent for the week ending
September 27 (Chart III).
(3) The reaction of the market to previous changes in re-
serve requirements has not been uniform (Chart IV).
Some changes have had very little market effect and
others a great deal; while the market movements have
coincided, sometimes with the "announcement" dates of
the changes, sometimes with the "effective" dates, and
sometimes with inspired premonitions that B change was
going to take place. The increases in reserve require-
ments in 1936-37 appear to have caused a protracted
decline in the holdings of Government securities by
New York City banks Chart V).
(4) Over 80 percent of the total privately-held supply of
the three outstanding taxable bonds 18 held by banks
and insurance companies covered by the Treasury Survey
of the Ownership of United States Securities. The
distribution of the outstanding issues indicates that
a new issue of taxable securities due in 1950, or be-
fore, would be absorbed principally by commercial banks,
while an issue due later than 1960 would have to be held
largely by insurance companies and mutual savings banks.
Regraded Unclassified
28
Secretary Morgenthau - 2
I. United States Government Securities
Net price changes of Government securities during the
past two weeks have been mixed (Chart I). Bonds have gained
about one-quarter of e point, short-term notes have remained
unchanged on balance, and long-term notes have declined about
one-tenth of & point. Taxable bonds have manifested greater
strength than comparable tax-exempt bonds, while taxable
notes have been weaker than tax-exempt notes. The market for
Government securities continues to be thin.
Market reaction to the announcement of the increase in
member bank reserve requirements was favorable. Intermediate-
and long-term bonds experienced price increases from 6/32 to
15/32, and short maturities of both direct and guaranteed
securities gained up to 4/32 on the day of the announcement,
Price changes by maturity classes for the eight days
preceding the Federal Reserve announcement and for the seven
days following the announoement, together with the net change
during the two weeks, are presented in the following table:
:
:
Average price change
:
:
September
September
September
=
:
15 - 23
:
23 - 30
15 - 30
(In thirty-seconds)
Notes
1 to 3 years
- 2
+ 2
o
3 to 5 years
- 6
+ 3
- 3
Bonds
5 to 15 years to call
- 4
+11
+ 7
15 years and over to call
+ 2
+11
+13
The average yield of long-term partially tax-exempt
Treasury bonds, moving inversely to prices, has declined four
basis points during the past two weeks - from 1.96 percent
on September 15 to 1.92 percent at last night's close (Chart II).
Regraded Unclassified
29
Secretary Morgenthau ad 3
II. Other Domestic High-Grade Securities
The long anticipated allotment by competitive bidding
of the $90 millions American Telephone and Telegraph Company
2-3/4 percent debentures of 1976 was made Monday to a group
of three insurance companies whose bid of 101. 842 makes this
issue yield 2.66 percent to first date callable at par. This
was about 5/6 of B. point higher than the bid of the syndicate
headed by Morgan, Stanley and Company and more than a point
and a half above the bid of the syndicate headed by Halsey,
Stuart and Company and Mellon Securities Corporation. of
the $90 millions, Metropolitan Life Insurance Company 18
taking $50 millions, Mutual Life Insurance Company $25 mil-
lions, and New York Life Insurance Company $15 millions.
Although the Treasury average yield of five high-grade
corporate bonds had remained absolutely constant since
September 15 at 2.64 percent until yesterday, when it declined
one basis point (Chart II), the volume of new offerings has
increased since the lull during August and the first half of
September. Whereas public offerings for the two weeks ending
September 12 totalled only $10.6 millions, offerings for the
next two weeks ending September 26 amounted to $45.4 millions.
The only corporate securities issued these two weeks, as
during the previous half-month, consisted of railroad issues.
The market for municipal securities has continued firm
and, for the week ending September 27, the Dow-Jones weekly
average yield of high-grade municipal bonds, moving inversely
to prices, achieved a new record low of 2.00 percent (Chart
III). This is one basis point below the previous low of the
weeks of August 2 and 9.
III. Effects of Previous Changes in Reserve
Requirements on Prices and Holdings
of United States Securities
The action of the United States security market in rising
from 1/4 to 1/2 point on the day following the recent announce-
ment of the increase in reserve requirements, makes it interest-
ing to examine the effects of former changes in reserve require-
ments on the prices and holdings of United States securities.
Chart IV compares changes in yields of long-term Treasury
bonds and of 3-5 year Treasury notes respectively with changes
in reserve requirements for the years 1936-38 inclusive. The
Regraded Unclassified
30
Secretary Morgenthau - 4
"announcement" dates of increases in reserve requirements
are represented on the chart by solid red lines, while the
"effective" dates of such increases are represented by dashed
lines. The one decrease in reserve requirements occurring
during the period (the announcement date and the effective
date of which were practically simultaneous) 1e indicated by
a green line.
The chart does not appear to show any uniform correla-
tion of price changes with either the "announcement" or
"effective" dates of past increases in reserve requirements.
The first increase, announced in July 1936 and effective
in August, caused scarcely a ripple in the market.
While the prices of Treasury notes declined sharply from
December 1936 to April 1937, and this decline 18 attributed
generally (and we believe correctly) to the second series of
increases in reserve requirements occurring during the first
half of 1937, its timing correlates only partially with the
announcement date of these increases and not at all with their
effective dates. (The sharp decline in note prices in December
1936, more than a month before the announcement date, is
sometimes associated with B. semi-official "leak" occurring at
that time.)
Long-term bonds, on the other hand, continued strong
until immediately following the first effective date (a full
month after the announcement date) at which time they broke
sharply, thereby disappointing the official expectation of the
Board that the increase would affect short-term rates only.
The decrease in reserve requirements occurring in April
1938, W8.8 more immediate in its effect on prices, both notes
and bonds rising sharply as shown in the chart.
Chart V showing changes in United States security holdings
by weekly reporting member banks against the background of
changes in reserve requirements casts some light on the factors
behind the price fluctuations just discussed.
The most interesting thing shown on this chart 18 the
long decline in the holdings of United States securities by
wookly reporting member banks in New York City from $4.6 bil-
lions on July 1, 1936 to $3.2 billions on September 29, 1937.
Regraded Unclassified
31
Secretary Morgenthau - 5
This decline, it should be noted, began two weeks before the
announcement of the first increase in reserve requirements.
Holdings of United States securities by weekly reporting
member banks outside of New York City, on the other hand, did
not reach their high of $6.5 billions until January 6, 1937
after which they declined to $5.6 billions on June 8, 1938.
These decreases in bank holdings were probably caused prima-
rily by the increases in reserve requirements, and were in
turn primarily responsible for the price movements in these
securities. It should be noted that the decrease in bank
holdings vas particularly sharp in March 1937, the month of
the greatest price decline.
The decrease in reserve requirements in April 1938 was
not immediately effective in stimulating bank holdings, al-
though it was doubtless one of the factors which laid the base
for the increase in such holdings which occurred in subsequent
years.
IV. Distribution of Holdings of
Outstanding Taxable Bonds
It 18 interesting to examine who holds the outstanding
issues of taxable bonds as a clue to who is likely to purchase
new taxable medium- or long-term securities if offered in the
near future.
Eighty-six percent of the entire privately-held supply*
of the 2's of 1948-50 is held by banks and insurance companies
covered by the Treasury Survey of the Ownership of United
States Securities. The corresponding proportions of the 2-1/2's
of 1952-54 and the 2-1/2's of 1956-58 80 held are 77 percent
and 82 percent respectively. If date were available for banks
and insurance companies not covered by the survey, and for
other types of institutional investors, each of these figures
would be increased by, perhaps, as much as 10 percent. It
appears, therefore, that non-institutional absorption of the
new taxable bonds has 80 far been extremely small. This is
Total amount outstanding less amount held by Government
agencies and trust funds, and by Federal Reserve Banke.
Regraded Unclassified
Secretary Morgenthau - 6
32
not surprising, considering the small rate of non-insti-
tutional debt absorption during the entire period since the
Bank Holiday and the much better investment opportunities for
individuals now offered by savings bonds.
Holdings of the new taxable bonds by classes of ineti-
tutions covered by the survey, are as follows:
Holdings of Taxable Bonds by Institutions
Covered by the Treasury Survey
July 31, 1941
(In percent of total privately-held supply)
: Commercial
: Mutual
:
Insurance
::
:
Banks
: Savings
:
Companies
:: Total
:
:
Banks
:
::
2¹₈ 1948-50
54
19
13
86
2-1/2's 1952-54
32
33
12
77
2-1/2's 1956-58
30
25
27
82
Based on the investor preferences shown in the above
table, it would appear that an issue put out at the present
time due in 1950 or before would be absorbed principally by
commercial banks; whereas, an issue due in the 60'm or later
would have to find permanent lodgement largely with insurance
companies and mutual savings banks.
Attachments.
Regraded Unclassified
Chart I
33
CHANGES IN THE PRICES OF U.S. SECURITIES
Pointe Plotted Represent the Difference from December 28, 1040 Price of Each Maturity Class
1941
1942
1941
SEPTEMBER
JAN.
MAR,
MAY
JULY
SEPT.
NOV.
JAN.
OCTOBER
6
13
20
27
4
NOVEMBER
POINTS
10
25
a
parts
15
22
(MCT CHANGE)
TT
POINTS
Saturday Quotations
Daily
(NET CHARSE)
+18
+11
11
-3
+1
:1
12
+2
+1
+ I
11
+ 4
+1
- -
NOTES
# 1
.
3-5 Yes,
NOTES
1-3 Yes.
o
o
e
o
à
Nores
4.
1-3 Yes.
-1
-1
*
+
NOTES
3+5 Yes
:
I
-2
-2
-1
Bowos,
1
OVER 15 Yes.
To CALL
-3
-16
11
Dowps.
-11
5-15 Yas. TO CALL
H
Bonos,
5-15 Yes,
T
TO CALL
-14
H
Bonos,
-2
2
OVER 15 YRS
-5
to CALL
-21
24
7
-2/
H
22
24
-7
-3
3
7
-36
H
H
- H
&
35
-31
7
4
7
4
-10
#
-4
4)
-11
4)
JAR.
MAR.
MAY
JULY
SEPT.
NOV.
JAN,
6
13
20
27
4
"
18
25
1
8
15
22
29
OCTOBER
NOVEMBER
1941
1542
SEPTEMBER
1941
Office all the Secretary of the Treasury
- of - -
r - 153 - L 2
Regraded Unclassified
Chart II 34
AVERAGE YIELDS OF LONG-TERM TREASURY AND CORPORATE BONDS
1940
1941
1941
HB mas APR MAY JUNE JULY AUG SEFT OCT NOV DEC JAN FEB MAN APR MAY JUNE AILY AUG SERT OCT NOV DEC
JULY
AUG
SEPT
JAN
All
-
e
"
"
.
-
1
IT
-
#
4
De
"
é
-
-
"
6
-
#
14
If
"
of
T
:
.
.
is
"
-
.
=
verse Scale
Inverted Scale
inverted Scale
PER CENT
PER CENT
PER CENT
WEEKLY. Saturday Quotations
18
1.8
18
20
2.0
20
Long Term
Treasury
22
2.2
22
Partially tax-exempt
Treasury Bonds
me yours or more to earliest saw date)
24
24
24
26
24
26
28
Corporate
28
28
High-Grade
so
Corporate Bonds
30
30
12
12
32
34
3.4
14
36
3.6
36
FER
PER
PER
CENT
CENT
CENT
100
100
100
Spread between Treasury
and Coporate Bonds
80
80
so
Spread
60
60
60
40
40
40
20
20
20
0
0
o
-
I
=
#
.
.
-
if
=
I
.
-
a
in
.
is
20
ET
* JAN - . FEB - I MAR - - APR 19 MAY " JUNE as I AUG - SEPT - OCT - NOV " DEC - JAN - FEB is MAR - - APR a - MAY 15 H JUNE ⑉ JULY is . AUG 18 - SEPT. il 47 OCT = NOV DEC
AUG
SEPT
JULY
1941
1941
1940
.
Change in composition of long Term Treasury arerage
the the Securitary of - Income
-
Regraded Inclassified
10
Chart III
AVERAGE YIELDS OF LONG-TERM TREASURY AND MUNICIPAL BONDS
Yields Based on Saturday Quotations
1940
1941
JAM
FEB
MAR
APR
MAY
AME
JULY
AUG
SEPT
OCT
NOV
DEC
JAM
FAR
MAR
APR
MAY
June
JULY
AUG
SEPT
OCT
NOV
DEC
or
a
:
17
"
14
"
.
:
is
=
-
BY
=
"
"
if
.
1
as
@
⑉
"
.
a
14
H
-
"
I
"
.
a
is
:
or
in
@
Inverted Scale
inverted Scale
PER CENT
PER CENT
Partially tox-exempt Treasury Bonds"
(if yours If more de springst call date)
16
1 €
20
20
22
22
24
24
2.6
2.6
Dow-Jones Average
Twenty 20-Year Municipal Bands
2.6
2.8
30
10
32
32
PER
PER
CENT
CENT
60
60
Spread between Treasury
and Municipal Bonds
40
40
20
20
o
o
=
:
a
ill
:
11
If
.
e
-
:
18
#
#
H
1
"
.
=
a
.
:
e
or
24
.
de
.
:
-
or
-
a
-
e
If
18
27
-
a
a
"
.
all
1.
=
JAN
TER
MAB
APR
MAI
JUNE
JUO
AUG
SEPT
OCT
NOV
DEC
jas
FEB
MAR
APR
MY
AM
me
AUG
seri
DEF
RETV
DIC
(94)
1940
- in INFORMATION change - response if lang form
the Security of Pa have
e
Regraded Unclas sified
Regraded Unclassified
Chart IV
36
EFFECT OF PAST CHANGES IN RESERVE REQUIREMENTS
ON YIBLDS OF U.8. SECURITIES
1936
1937
1938
PERCENT
M
M
$
N
J
a
M
J
$
N
J
a
2
J.
$
W
PERCENT
(INVERTED)
(INVERTED)
Jan. 30
3315 Increase
.8
Announced
May 1
.8
14%5 Increase
Effective
1.0
1.0
3-5 YEAR NOTES
1.2
Mar. 1
1.2
10% Increase
Offective
April 14
195 Decrease
1.4
Announced
Effective
1.4
April 16
July 14
1.6
50% Increase
Announced
1.6
Aug. 16
50% Increase
2.4
Effective
2.4
Long TERM - TREASURY BONDS
2.6
2.6
2.8
2.8
3.0
J
N
M
J
3.0
$
#
4
if
M
J
$
N
J.
a
M
J
$
M
1936
1937
1938
the el Secretary all the Treasury
Date of - ind how
ELI
Regraded Unclassifie
37
Chart V
EFFECT OF PAST CHANGES IN RESERVE REQUIREMENTS ON HOLDINGS
OF U.B. SECURITIES® BY WEBELY REPORTING MEMBER BANKS
1936
1937
M
M
J
5
#
1936
DOLLARS
J
N
M
J.
$
N
M
M
al
$
M
BILLIONS
DOLLARS
BILLIONS
6.8
6.8
6.4
6.4
OUTSIDE NEW YORK CITY
6.0
Jan. 30
3315 Increase
6.0
Announced
5.6
Mar. 1
lows Increase
5.6
Effective
July 14
5.2
505 Increase
Announced
April 14
15% Decrease
5.2
Ave. 16
Announced
00% Increase
Effective
4.8
Effective
May I
April 16
1455 Increase
4.0
Effective
4.4
4.4
4.0
4.0
NEW YORK CITY
3.6
3.6
3.2
3.2
2.8
J
.
M
J
$
-
J
M
M
di
2.8
$
N
J
as
M
J
1936
$
-
1937
1938
INCLUDES GUARAD ED
P
38
W.T.1117/260/41
BRITISH EMBASSY,
SAFE HAND.
WASHINGTON, D.C.,
October lst, 1941.
Dear Mr. Districh,
I think you would like to see the enclosed
copies of statements made in answer to cuestions in
Parliament on the 9th and 10th September. We have
also sent copies to Mr. Dean Acheson at the State
Department.
Yours sincerely,
/a/ W. Ritchie
Mr. Frank Dietrich,
Room 279, U.S. Treasury Department,
Washington. D.C.
Regraded Unclassified
39
PARLIAMENTARY QUESTION
Anglo-Japanese Trade
30. Lieut.-Colonel Sir Thomas Moore asked the Minister of Meonomic
Verfare whether, in view of public anxiety. be can make any statement
on the trade-barter agreement with Japan: end why it is regarded by
Eie Majesty's Government as necessary?
Mr. Foot: No general barter arrangement, nor anything in-
consistent with the strict enforcement of the freezing Order, has ever
been contemplated. The use of frozen funds for new exports to Japan
is not permitted. If it should be found desirable exceptionally to
license any particular imports from Japan, it would be a matter for
consideration what exports should be allowed against such imports and
how payments should be effected. It is probable that this would best
be done by setting un a separate clearing account, if and when the
need for it should arise. At present, however, no such imports have
been licensed and consecuently no question of payments arises.
Sir T. Moore: As Japan is E partner in the Axis, would not
such R. proposal be almost equivalent to trading with the enemy? Would
it not be unwise for the Government to be a party in any way to B.
transaction with Japan?
Mr. Foot: I think it is clear from the terms of my answer
that no trade is taking place between the two countries at all,
Mr. Noel-Baker: Does that also apply to the Colonial Empire?
Mr. Foot: This question refers only to the United Kingdom.
In these matters the Coloniel Empire generally follows auit. Perhaps
my hon. Friend would put & separate Question down.
10th September, 1941.
Regraded Unclassified
40
PARLIAMENTARY QUESTION
JAPAN
33. Mr. A. Edwards asked the President of the Board
of Trade the Government's policy with regard to trading
with Japan: and to what extent in the last three months
shipments of materials which can be used for munitions
of war have been made to Japan?
Sir A. Duncan: All Japanese assets in the United
Kingdom were frozen by an Order dated 26th July, and
export of all goods from the United Kingdom to the Japanese
Empire vas made subject to licence from 15th August. No
licences have been granted for exports to Japan since the
date of the Freezing Order, and I see no prospect that any
such licences will be granted in the near future. No
materials which, so far as is known. can be used as
munitions of war have been exported from the United Kingdom
to Japan during the last three months.
9th September, 1941.
Copy:wec:10-2-41
Regraded Unclassified
OCT 1 1941
Ey dear Mr. Charge d'Affaires:
I wish to refer to the agreement dated August 15.
1941 relative to the purchase of 301,000 fine troy cunces
of gold by the Secretary of the Treasury from the Govern-
sent of the Union of Seviet Socialist Republies, against
which as advance of $10,000,000 was made on August 16, 1941.
I take pleasure in enclosing for your information
two copies of the assey report of the United States Mint at
San Francisco giving an analysis of the gold which arrived
on the SS MENJENSKI and deposited by your Government on
September 19 for the account of the Secretary of the
Treasury.
You will observe from the enclosed report that
the shipment, after melting and upon assay. vae determined
to contain 161,448.886 fine troy cances of gold and to
have a value of $5,650,711.01. After the deduction of the
amount of $14,288.28, representing the 1/4% handling charge
of $14,126.78 plus the Mine charges of $161.50, the net
value of the gold vas $5,636,422.73. This amount of gold
has been applied by the Treasury against the amount of gold
agreed to be purchased by the Secretary of the Treasury
under the agreement of August 15, 1941.
Sincerely yours.
(Signed) D, W. BELL
Secretary of the Treasury.
Mr. Andrei a. Gremyke,
Charge d'Affaires ad interim,
Union of Soviet Socialist Republics.
Enclosures.
FD:mev 9/30/41
Regraded Unclassified
UNITED STATES MINT
BULLION DEPOSIT - MEMO REPORT
Mint Form 42H
SAN FRANCISCO, CAL
42
Memos Required
Silver Price
SOURCE DATA
abot
4522
Date Sept. 18, 1941
by Depositor
or Class FINE GOLD
Other Data
State RUSSIA
calter EDERAL RESERVE BANK OF BAN FRANCIS00
(
MLT. CHO. ON ToT. WT.
County
OR1 SECRETARI OF THE TREASURY, SPECIAL ACCOUNT
CCT1 FEDERAL RESERVE OF NEW YORK
Mine
Description
Assay
WEIGHTS
ASSAY CERTIFICATE
Refining
PINE o UNCES
OR 1
of Deposit
Number
Before Mell
Alter Melt
FINENESS
chg.-cts.
GOLD
SILVER
Ounces
Dec
Ounces
Dec
Gold
Silver
Base
BOXES
per OZ.
Ouncea
Dec
Ounces
Dec
ARS
/
29
1-4
61.81
7845.75
7535.00
8
(000.1
T534.386
a
e
29
5-8
5158
7000.98
7385.21
999.9
(000.1
7384.471
D
89
9-18
5163
7806.14
7606.21
999.9
(000.1)
7607.449
89
13-16
5154
7785.96
7714.71
099.9
(000.1)
7713.938
29
17-20
5155
7618.99
7570.85
999.9
(000.1)
7570.092
D
29
21-24
5156
7531.10
7678.67
$99.0
(000.m)
7677.134
29
25-28
5157
7578.87
7959.74
999.9
(000.1)
7958.944
29
89-38
5158
7584.47
7790.98
999.9
(000.1)
7790.200
29
33-36
5159
7457.33
7315.01
999.9
(000.1)
7514,278
7613.068
89
37-40
5160
7580.18
7613.83
999.9
(000.1)
29
41-48
5161
3845.45
5688.02
999.9
(000.1)
5687.651
MBLE BY CHECK
NOTE - THIS REPORT IS FOR THE INFORMATION
Total
SEPT AS NOTED
OF THE DEPOSITOR AND IS OF NO OTHER VALUE.
VALUES
C H A R G E S
GOLD
SILVER
Melting
Ralining
Hemdling
Total
et
$
$
5
$
$
$
Bara
$
Cash
Check
NET VALUE
Regraded Unclassified
BULLION DEPOSIT MEMO REPORT
MINI FORM 428
ED STATES
SOURCE DATA
AT SAN FRAN
Memos Required
Suver Price FINE GOLD
CIS00, CAL.
Dale
Sept. 18, 1941
by Depositor
or Class
Per
4522
Other Data
State RUSSIA
FEDERAL RESERVE BANK OF SAN FRANCISCO
JT: FEDERAL REBERVE BANK OF ⑉ YORK
MLT. OHO. ON ToT. WT.
County
we SECRETARY of THE TREASURY, SPECIAL ACCOUNT.
Mine
Assay
WEIGHTS
ASSAY CERTIFICATE
RATES
FINE OUNCES
Description
Number
Before Meit
After Mel:
FINENESS
PAGE I el Deposit
OF CHGS
GOLD
SILVER
Dec
Conces
Due
MII Ref
MARS / BOXES
Oundin
Gold
Silver
Base
Ounces
Doc
Ounces
Date
8
80 1-4
5168
7618.00
7320.76
999.9
000.1)
7580.027
&
50 5-6
5163
7003.62
7600.34
999.8
000.8)
7500.819
OF
30
9-18
5164
7514.79
7673.20
999.9
(000.1)
7672.432
50
18-16
5165
7560.31
7858.80
999.9
(000.1)
7637.526
OF
1936.70
7709.78
999.9
(000.1)
7709.009
8
30
17-20
5166
&
30
21-24
5167
7590.76
7629.38
999.9
(000.1)
7628.617
8
30
25-25
5168
7544.50
7849.69
999.9
000.1)
7848.905
DIE
30
29-38
5169
7418.70
7445.45
099.9
000.1)
7444.906
no
30
53-36
5170
7511.95
7613.52
999.9
(000.1)
7612.756
7596.85
999.9
000.1)
7576.072
RO
30 37-40
5171
7577.44
10
SO
41-45
5178
0547.82
5649.05
999.9
000.1)
0648.465
161,472.30
161,456.57
NOTE: THIS REPORT IS FOR THE INFORMATION
161,445,806
Total
was BY CHECK
0181
D. ns NOTED
OF THE DEPOSITOR AND IS OF NO OTHER VALUE
VALUES
C H A R G E S
GOLD
SILVER
Mell
Retine
Handling
Total
5,650,711.01
$
161.50
5
14186.78
24,888.85
Bare
Cash
Check
NET VALUE
Regraded Unclassified
DEPARTMENT OF STATE
44
CONFIDENTIAL
PARAPHRASE
Telegram no. 1939
Dated:
10/1/41 soss.
From: NOSCOW.
Rao'd: 10/1/41 10:38 s.m.
FROM BARRINAN FOR HOPKINS AND SECRETARY MORGENTHAU,
The information conteined in your 1089 has been per
ceived with thanks.
In the conferences here, no one has ae yet raised
the subject of finance, and I have not raised the sub-
jeet myself, in as such as I have received no instruc-
tions on the matter.
STEINHARDT.
BA/E:DOB:RBJ
10/1/41.
Copies to:
Mr. Hopkins (3)
Secretary Morgenthau (8)
Regraded Unclassified
TREASURY DEPARTMENT
45
INTER-OFFICE COMMUNICATION
DATE October 1, 1941
TO
Secretary Morgenthau
FROM
D.
B#11
1003
STATILIZATION AGREEMENTS
Unine:
On July 14, 1937 the Treasury entered into an agreement with the
Centrel Banc of China to purchase yuan un to a total of $50,000,000 U.S. currency.
The agreement has been renewed each six months end now expires December 31. 1041.
At present we hold 65,000,000 yuan, whose book dollar value 1s $18,112,500. and
regiest which $19,379,015.65 in gold is held at the Federal Reserve Bank of New
Yor: ne collateral. The rate of interest is 1/2% above the current rediscount rate
if the Faieral Reserve Bank of New York.
Sentile
On July 15, 1937, the Treasury entered into an agreement with the
United States of Srazil, which expires on July 15, 1942. We agreed to purchase
-ilrais 47 to s. total value of $60,000,000, with Brazil leaving on deposit in Lew
York gold collateral to guarantee the repurchase of the milreis by Brazil. The rete
of interest is 1/2 of 1;0 above the current rediscount rate of the Federal Reserve
Teric of Yes York. There have been transactions under this arrangement, but at pres-
not we DID bolding no milreis. This agreement also provides for the sale of up to
= amount of $60,000,000 in gold by the United States to be held under earmar :
in our youlte for the account of Bratil. This agreement was modified on September E,
4334 to permit Bratil to ship gold from abroad to be held in this earnerked account.
& to digust 30, 1941, $29,465,770.90 in gold had been sold by us to Prezil ene
(11,932,709.15 had beer shipped by Brazil to New York to be held under earnerk.
Argentina:
On January 1, 1941. the Treasury entered into en agreement with the
Granco Central de la Republica Argentine and the Government of Argestina. Under this
agreement we undertake to purchase Argentine pesos un to the equivalent of 250,000,000
U.S. currency, No collateral is required. The interest rate is fixed et 1-1/2,3.
The agreement comes into operation end effect upon retification and confirmation by
Arryating of the authority under its constitution and leve to enter into this agree-
cent, 110 to the present time the foregoing conditions have not been met and the
Acreement is inoporative. The agreement was drafted to emire on June 30. 1941. AD
catension of the agreement has also been drafted, but canvot be made effective until
Lie agreement itself becomes operative.
On April 1, 1941. the Treasury entered into an agreement with the
Intional Government of the Republic of China and the Central 3ank of Chine. This
calls for the purchase by the Treasury of Chinese yuan My to the equivalent of
(30,000,000 U.S. currency. No collateral is required. The agreement expires June 30,
USA Interest is et the rate of 1-1/2%, China has not yet called for the
200,000,000. The Chinese-American-Britich Stabilization Board in Chine. on which
- he Tynuel Fox is the American representative, did, however, begin to operate in
the of August, The Chinese Government banice have deposited with the Federal
STATE Irax of Yes York their contribution of $20,000.000 to the Joint Statilization
Land, hring the period from August 18, 1941 to close of business on Sentember 27,1941.
Regraded Unclassified
46
- 2
the Chicese Stabilization Board approved application for $6,894,108 and of this
amount made notual payments of $6,545,407.
An agreement with the Government of the Republic of Mexico and the
Bnnco Mexico: de Mexico is practically ready for signature. This involves purchases of
Mexican pesos by the United States up to the equivalent of $40,000,000 U.S. currency.
There is no colleteral. The rate of interest is at 1-1/2%. The repurchase clause
with Mexico gives that country 180 days' notice and then an additional 180 days
within which to repurchase. This is a generous departure from our usual 30 days'
notice. The Department of State expects its related negotiations with Mexico to
be consumnted in time for the signing of the Stabilization agreement before
September 16. The Treasury is also to agree to purchase up to 6,000,000 ounces of
silver monthly from Mexico, under an arrangement similar to that which we have with
Canada.
The Ambassador of Colombia has recently returned from his country
Colombial to which he went a few weeks ago with a draft Stabilisation agreement with the
Stabilization Fund of the Government of Colombia, the Banco de la Republica, Bogota,
Colombia, and the Government of the Republic of Colombia, under which the United
States would buy Colombian pesos up to the equivalent of $3,000.000 U.S. currency.
No colleteral is involved. The interest rate would be 1-1/20, Ne should have fur-
ther discussions with the Colombian Ambassador shortly.
When the Ecuadorian Minister of Finance vielted Washington in August
Housdor: he discussed with the Secretary. and subsequently with the Secretary's assistants,
the question of a Stabilization agreement which might provide as much as $5,000,000
U.S. currency. It is not believed that more than perhaps half of such a sum could
at all be justified. The Department of State has requested that we continue nego-
tistions with the Ecuadorian Ambassador.
Bolivia:
We have promised the State Department that we would consider a
Bolivien request for monetary assistance.
- Icelandt proposition for 8 Stabilization agreement for $2,000,000 with Iceland, In order
On September 30 Mr. Berle of the State Department outlined to Mr. Bell
United States Government for which it will receive dollars. Such commodities
to repay this amount it is anticipated that Iceland will sell ite commodities to would the
then be Lend-Leased to Grest Britain.
Russia: approximately $10,535,000 in gold for delivery within ninety days. On September Kint 19
On August 15 we agreed to purchase from the Government of the U.S.S.R.
the Bussians deposited approximately $5,650,000 in gold with the San Francisco
for the account of the Secretary of the Treasury. The gold was eventuelly sold to
the Treasurer of the United States and payment in dollars received by the Fund. At
the present time the Russians still owe us approximately $4,885,000 in cold-
Regraded Unclassified
17
October 1, 1941
Dr. Fuio
D. V. Ball
will you please seal the fellowing cable to the American Gearal, Sang Keng:
"For Fex from the Treasury.
is order for the treasury to be certain that 11 receives all cables
sent se 11 w yes would you please smiler such cables consentively
prefixing the subser with '2.7.' for identification purposes. bach -
bero should be used fer cables disputabed w you irrespective of whether
the cables are cast through the State Department or the Treasury repre-
contatives at Beag Keng or thanghai. Vould you please initiate this
progress as seen at possible and if convenient allow numbers for the
subjec previously sent W you."
FDilap-10/1/41
Regraded Unclassified
20
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATEOctober 1, 1941
TO
Secretary Morgenthau
FROM e. D. White
Subject: Request from the Secretary for comments on survey
released by "Contemporary China"
Summary of Appended Memorandum
1. "Contemporary China" states that at the current rate of
consumption, Jajan will have ethausted her reserves of oil
and :asoline by the end of March, 1942.
This underestinates Japan's petroleum reserves, Our
earlier studies indicated that they are protably sufficient
Codi about a year, rather than for the six months suggested by
:..e press.
2. "Contenporer, China" concludes that Japan will have used
er stocks of imported iron and scrap before the end of
the current -ear.
Japan may extibust her stocks of Imported iron and steel
betche the end of this year. However, since Japan is reducing
to account of scraj used in the mixture with 912 iron, her total
stock of scra, 1.e., Tomestic as well as imported, may possibly
be suificient for a year. of ...ore importance is her shortage
of iron ore, p1s iron, man_anese QUE and coal.
3. "Contemp rary China" claims that the silk industry will be
at least two-thirds ruined next spring.
This conclusion seems to be based on the pre-1939
importance of orei It markets to Japan's silk industry.
Durin this year considerably more than half of Jagan's
production of silk is for domestic consumption.
4.
"Contemporary China" states that the cotton industry
will be ocerating at 25 percent of normal capacity next spring.
Zhis estimate is probably too low. Our f1 ures seem to
indicate that if Jajan is cut off from all non-yen bloc supplies
of raw cotton, her cotton injustry will probably be operating
at shout 35 percent of normal output in the near future.
Regraded Unclassified
49
Division of Monetary
- 2 -
Research
If, however, Japan is able to continue obtaining supplies
from Latin America, her cotton textile industry will have
sufficient raw cotton to maintain production at more than
50 percent of normal output.
Regraded Unclassified
September 23, 1941
Det TAX Little mite by Ir. Fitzgerald.
Sent
by
Secretary "How accurate is this?"
Exhaustion of Reserves
1. At the current rate of consump-
Lion Japan will have extiausted
her reserves of all and gasoline
JAPAN'S POSITION
by the end of March nest year.
2.
At the current rate of consump-
Uon Japan will have used up her
HELD PRECARIOUS
stocks of imported from and steal
screp before the end of Decem-
ber this year.
The allis industry, the must Im-
Survey Shows That Economic
portant Industry in Japanese do-
mestle economy and foreign
Pressure May Force Tokyo
trade, will be at least two-thirds
ruined nest Spring
to Sue for Tarms
4. The cotton industry, an m-
portant in the export field an
the silk industry, will be operat-
RESERVES BEING USED UP
log at 25 per cent of northal
capacity next Spring.
Estimating the consumption of
Silk and Cotton Industries Are
ml and gasoline by Japan since the
wer with China al 35,000,000 ber-
Facing Ruin-Steel and
rele a year, the survey pointe out
Oil Supplies Needed
that the annual production of this
vital material in Japan was less
than 3,000,000 barrels, with 93 per
cent of the supply coming from the
A preliminary study of the vip-
United States and the Netherlands
tual economic blockade of Japen
Indiea. A comparison of the
by the United States and the Bril-
amount of oil imported by Japan
sall Commonwealth through the
with the rate nt consumption re-
milta In an estimate that the Japa-
stoppage of trade given an Indian-
nese how de not have more than
than that IF this blockade is main-
20,000,000 barrela of oil in reserve.
tained beyond aix months Japan
"Losing Life Blood"
will have "to plead for an economic
truce with America and Britain
"Without the continual supply of
and Base for a military armistice
ett the Japanese war machine can
with China."
not long operate," the survey
The current survey. released to-
states. "At present that war DIA
day by Contemporary China.
chine is virtually suffering from à
soference digest Issued every two
actions continual hemorrhage,
works by the Trans-Pecific News
every day losing = considerable
Service at Rockefeller Center,
amount of life blood. If there la DO
bases its conclusions on analyses
transfusion the machine will blend
of the two most vital was ma-
to death in the course of 200 days.
legiala for Japan, odi and steel, and
In figures on the Iron and atdel
the two most essential pace in-
Industry the survey points out that
distries, silk and cotton.
about no per cent of the scrap used
Ustog figures Misice 1937 on Im-
in steel production has come (rom
parts, exporta and nome produc-
foreign countries, mainly the
time of the war and peace assen-
United States.
Tinla the survey reaches Tour chief
"Since the stocks of imported
inveluations that formshadow BAT
scrap and imported are are repidly
time diatress for Japan.
being exhausted. and if the United
States does not send another pound
of scrap to Japan and British Ma-
leys and the Philippines not an
other pound of are, the Japansas
production of iron and steel in the
coming year will be decreased by
at least one-half." the survey con-
tinues.
The wilk industry is reported to
be racing ruin because of Japanese
dependence upon the export of
about 90 per cent of Japan's silk
to the United States, and the cot-
ton Industry La said to be facing
similar disintegration because no
cotton is produced in Japan and all
raw materials previously have had
to The imported.
Regraded Unclassified
51
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE sptember 26, 1941.
TO
Thite
FROM
Nr. Friedman
wajocts Jamn's petroleum resources and her iron and steel, silk and
Botton industries.
Conclusion:
Ho sharp decline our collapse in Japan's iron and steel, milk and cotton
inmetries, nor exhaustion of her petroleur reserves can be anticipated within
She sert year, unless further restrictive measures are taken by the enti-Axis
countries. Janen's margin of safety has become 60 narrow that 16 would be
difficult for her to take retaliatory measures against further actions. How-
if the 9. 2, and the Alliet countries supply Japan with necessary ran
her pargin of safety will correspondingly widen, strengthening her
position vis-o-vis the anti-Axis countries.
1, Jaman's reserve; of octroleur products are probably sufficient for About
your 82 the present level of consumption. Japan's stocks of petroleum
products, accounting to an estimate made this Division, are probably
doree to 35 rillion barrels than the 20 million barrels estimAlied by Conten-
portry China. Purthermore, while her total consumption is about 35 million
"\EI" year, Japanese vilitory consumption of petroleum, bazed on 1938
entry experates about 12,000,000 barrels annually. Therefore, by further
civilien consumption, the available storks nay not be exhausted
this the year. The Dovernment has alroady announced that the use of
voiline for taxis, buses "nó private care is prohibited unless special
is received and the ratio of slochol being nined with rasoline
7 scientile unline has been increased from 1% to 20% However, the
recessity to carefully nurse her cil supplier will act as a hampering and
factor or Japen's economic and military activities, as lon as the
arrican, Tritish and Dutch Governments do not allow Japan to import any
- products from their respective countries.
2. a ruhriantial decline in Janan be steel production can be anticipaled as
mnit of Casan's shorteco of iron and manganess OTHE end coal. If Japan
lad sufficient supplies of these naterials, her need for iron and steel scrap
be comparatively little since Japon has term reducing the importance
of this iron in the sheel industry by increasing her nin iron repacity and
consumetion "urnaces for the "one heat" process to which dron ore becomes
Regraded Unclassified
52
ping of Voneterm
Research
- 2 -
that In one continuous process. Japan, however, has depended upon non-yen
3/c for more than 50% of her iron and man/janese ores. Furthermore,
15 production is proving insufficient to maintain her entire industrial
addre, a factor 0.9 mecial importance in this connection since the In-
were 1199 of the poor-grade Japanese and anchurien ores would require
cuantities of coal. Therefore, the deplation of her stocks of
serve iron and steel is now a significant factor since the substitute rethode
-160 require reterials in which Japan in Car from self-cufficient, Japan
122 been millidne up her stocks of scrap and probably about 25% of the
2 million tons of scrap imported from the V. s, in 1939 was
Rx: of reserves. These stocks, however, are not sufficient
in eximin the Japanese steel industry at its present level of producing
seem 1 willion tons per year. Even if the available scran can be conserved
"nit more than a year, as is possible, by reducine the percentage of scrap
it noans increasing the amount of pis iron and iron ore used for which
10 even more dependent vpon outside sources than for scrap,
DATO been a number of indications of Japan's shortage of raw
mortale, pich +8 reduction in automotive production, the priority being
-Iven to 1200 cree, pir iron and steel in the allocation of shipping space,
the FORM éron collection compaign begin last spring resulting in the ather-
inr up of railway care, retne, etc., the increasing number of steel articles
which Are no loncer being manufactured, such as razor blades and the Bovern-
mile giving compensation for Insses incurred in importing l'anchurdan pd-
smop.
The iron ore resources of occupied China, l'anchuris and the Japanese
anglire AVE potentially capable of meeting Japan's need, but Janen has been
trattle to fulfill plans made for increasing the output of iron ore, of
course, if Jagan is given access to the resources of the RriMsh and American
Impires, particularly the ritish Empire since it is the chief source of
27 of iron ore, pi iron and mananesse ore, Janan will be able to continue
S at much the present level the iron and steel so necessary for her
ce rachine.
3. The Japance silk industry which employs about 1/3 of Janan's farming
Modling and nore than 320, additional workers in the weavin stares,
facor serious, but not disastrous, dislocation as a result of the stopna/ 5
of Its exports to the U.S. It must he noted that the silk industry is no
langer as conpletely dependent upon foreign markets, mainly the U. S., as
It las heen until recently. As a result of Janan's general shortace of
tentiler, domestic consumption of milk which before the war was less than
12 at production has tended to increase and in 1939, for the first time in
Regraded Unclassified
Division of Monetary
53
Research
the 20th century, domestic silk consumption exceeded silk exports. The
Government, moreover, has been steadily pursuing a policy of reducing silk
production in favor of foodstuffs by uprooting mulberry gardens and supply-
ing less silkworm egga to the farms, while at the same time purchasing silk
to maintain prices. Under a new control scheme adopted this summer before
the freezing of Japanese assets by the 0. S., Japanese silk production was
to be restricted to about 550,000 bales. Since in 1939-40 about 400,000
bales were domestically consumed, and even greater quantities could have
been used in view of Japan's textile shortage, it can be assumed that most
of Japan's current output of silk can be domestically consumed, while the
Government could continue its policy of buying the surplus. There is
Definite evidence that the Japanese are anxious to continue exporting their
silk to the U. S., but the main incentive cones from a desire to obtain
much needed products from the U. S., rather than need to maintain exports
of milk per 58.
44 A sharp curtailment in the Japan cotton textile industry in the near
future is not to be expected unless exports of raw cotton both from Latin
America to Japan and from the U. S. to occupied China cease, Japanese
cotton requirements for 1941-42 are estimated to be about 1-600,000 bales,
of which 600,000 bales are for domestic requirements and 1,000,000 bales
are for textile exports. Latin America provides about 550,000 and China
another 200,000 bales. Moreover, existing Japanese stocks are estimated
at about 350,000 bales. In addition, there is the possibility of securing
large quantities of raw cotton from the U. S. via Shanghai. Assuming that
latin America and China continue to be major direct and indirect sources
of supply, Japan will be able to produce about 70% of her present output
during the next year. However, the Japanese may have no cause to maintain
nanufactures at even this level if she is excluded from her important
markets in the British and Dutch Empires. In addition she has 800,000
bales of stocks of cotton fabrics with which to continue much of her export
trade without using her raw cotton for such purposes. If, however, Japan
is refused access to all non-yen bloo sources of raw cotton, her imports
from China coupled with available stocks will be sufficient only to meet
domostic cotton textile requirements during the next year and this would
mean decreasing the present output of the industry by about 65%. Of course,
if Japanese tertiles are excluded from their non-yen bloc market but Japan
contimues to obtain raw cotton from Latin America and possibly the J. S.,
she will be able to accumulate 2 reserve of raw cotton for future domestic
UER.
Regraded Unclassified
C
0
P
Y
54
No. to Embassy,
China
AMERICAN CONSULATE GENERAL
Shanghai, October 1, 1941.
Position of American Business Community
Subject: in Shanghai Regarding United States Trade
Control Measures.
THE HONORABLE
THE SECRETARY OF STATE,
WASHINGTON.
Sir:
I have the honor to invite the Department's attention
to the fact that the various trade control measures as now
enforced on American trade with Shanghai are arousing much
concern over the ability of American firms operating in this
market to retain their established positions - even on a
limited scale. Local representatives of such firms
express entire sympathy with present American policy
designed to keep essential products from unfriendly con-
sumers, and have indicated their readiness to cooperate
wholeheartedly in accomplishing this purpose. But they
are hopeful that in doing so, they may still be permitted
to obtain sufficient supplies from exportable surpluses
in the United States to serve legitimate local needs and
thus maintain their positions in the China trade.
Regraded Unclassified
55
-2-
It is quite understandable that the "freezing" messures
recently applied to Chinn by the Treasury Department, with
the subsequent restrictive regulations for control of foreign
exchange applied by the Chinese Stabilization Board, added
to the American export license requirements already in effect,
eve caused much confusion among business firms in Shanghai
and aroused sincere misgivings regarding their future operations.
Typifying somewhat the present disturbed feeling of the
American business community in Shanghai is the enclosed
1/
copy of a letter of September 12, 1941, to the American
Chamber of Commerce, Shanghai, from Mr. N. F. Allman, senior
partner in the Shanghai American law firm of Allman, Davies &
Lops. In a memorandum to the Chamber of Commerce commenting
on Kr. Allman's letter, Mr. L. R. Moore, Shanghai representa-
tive of the Dupost Company, expresses a viewpoint widely held
by other American representatives here; a copy of Mr. Moore's
2/
memorandum is also enclosed.
Kr. Allman's aspersions on the administration of the
China Trade Act are not shared by this office. The desires
of Mr. Allman and some of his local clients to obtain regis-
tration under the China Trade Act have at times run counter
to the limitations of that Act. either in spirit or letter;
to some extent tids may have engendered the critical tone
adopted by him in this connection.
Regraded Unclassified
51
-3-
regarding other points raised by L.e. Allman, particularly
in reference to the possibilities of continuing business
operations under present restrictions, it is believed that
his letter reflects the views of EL lar number of American
business representatives here. These representatives whole-
heartedly endorse the American Government's efforts to confine
the distribution of our products exclusively to friendly
channels: but there is considerable enziety that this policy
may be carried to a point where both friend and foe vill be
cut off from sources of supply and that American business
interests developed in Shanghai throu 11 many years accordingly
may be forced to close.
Relative to Mr. Allmen's assertion that local British
firms are receivi. more liceral treatment from their Covern-
:gent control agencies than American firus receive from their
own authorities, the investi tions of this office disclose
little rounds for this belief at the present time: some
instruces undoubtedly have occurred in recent months which
might justify such e view, but scarcely on the broad basis
implied by Mr. Allman.
Since the near-term commercial volicy applied to Shanghai
by the American Government must be contingent on the con-
stently chen,ing political situation in the Far Last, it
seems obvious that no assurances can be given to American
Regraded Unclassified
57
business intereste of this community covering any long-term
period. It is believed, however, that a policy on the part
of our Government that would permit American business interests
in Shanghai to obtain supplies sufficient to meet the more
urgent current needs of their "friendly" clientele might
safely be adopted. Such a policy might safeguard the ex-
tensive stake which American firms have in this market, and
at the same time undoubtedly would be considered by the
American trade interests, and also by the local community, as
a clear indication that their welfare is not being disregarded
by our Government.
Respectfully yours.
Frank P. Lockhart
American Consul General
Enclosures:
1/- Copy of letter from Allman, Davies
& Kops to American Chamber of Com-
merce, dated September 12, 1941.
2/- Copy of comments by Mr. L. 3. Moore
dateu September 17. 1941.
690
HIG N3
Original and five copies to Department.
Copy to Embassy, Chungking.
Copy to Embassy, Peiping.
Copy to Consulate General, Hong Kong.
Copy:1c:11/27/41
Regraded Unclassified
Inclosure DO, I to despatal: Do: 290 of France P. Locklart
58
American Consul Jeneral at Shanghai, dated september 27. 1341,
on the subject: "Position of American Business Community
La Shanghei Regarding U.S. Control !easures.
Jody
ALUMAN, DAVIES sero KOPS
September 12, 1941.
The -merican Chanber of Commerce,
209 Toochow Bond,
Shanghai.
Mentlemen.
1 wonder if the present is not en appropriate time to
consider, or plan for, the future of American trade in China?
Although the British have been engaged in a full-dress
var, British merchants in China have nevertheless gone shead
with the promotion of various companies and with particular
reference to the tertile industry. You have probably noted
the recent large increase in capitalization of the China
Cotton Mills, Ltd. This is just en example of what has been
happening during the past four years in spite of wars here
and in Europe. These companies have been incorporated under
the Bongkong Ordinances and it can be taken for granted that
capital for the most part is from Chinese sources. The
reports mede herein are not in any manner to be considered
as criticism of the British but, on the contrary, as admire-
tion for their foresight and boldness. By incorporating
these companies under the Hongicang Ordinances the British
are placing themselves in a position to control, or st
least to influence, trais whenever trading conditions be-
come possible or ensier. Here whin, they are to be admired
for their foresight.
Às contrasted to this foresight and boliness there
appears to be too much timidity on the part of Americans,
both in official and business circles, in regard to the
Far Snst. Instead of boldly planning expansion there has
been too much of a tendency to retrest. Some of the companies
promoted under the hongkong Ordinances referred to above de-
sired to incorporate unier the China Trade Act. However,
during the past four years comenies attempting to incomorsible
under the China Irvde Act have met with not only an 110->
sympathetic attitude but actual hostility, It is already
Regraded Unclassified
59
-2-
snown to the Chamber that this Act W3B for a long period
completely mabotaged by refusal on the part of the officials
to act on applications for incorporation and matters before
them. The Act itself is B. simple straightforward law and
free of technicalities and red tape. Companies operating
under the law and applicants for incorporation have neverthe-
leas been discouraged by unreasonable interpretation and by
reading into the law technicalities and red tape that do not
exist in the law itself. Consequently, people who usually
incorporate still find it more desirable and simpler to io 30
under the Hongicong Ordinances.
The Chamber itself is being inconsistent in admission
of members. 71th its left hand it admits aliens as repre-
sentatives of American companies, while with its right hand
it excludes firms which it considere not to be pure Aryan
American. The Chamber ought to encourage American firms to
employ Americans, or at least ought to adopt B. policy of re-
ciprocity in this regard. It would be interesting to know
If any single American is a member of any non-American Chamber
of Commerce anywhere in China. It would be impractical to
insist that all employees of American fires in China should
be Americans, but the fact remains that American firms are
far more prone to employ non-Americans than are other nation-
alities.
It is still probably true that trade follows the flag,
and instead of trying to run Americans out of China those who
are here should be encouraged to remain and more brought in,
If at all possible. The evacuation of Americans from dangerous
areas are presumably on two grounds: (1) their safety: and (2)
to save the State Department trouble and work. Hont Americans
are probably willing to take the hazarde of their trade to-
gether with the nezards of the place where this trade is
carried on. As to the validity of the second reason, it spesks
for itself.
Another item that nas some bearing on our foreign trade
is the policy of the American banks. Without meaning any
criticism of the local staffs of any of these banks, the
faot remaine that there is 8 certain amount of resentment In
commercial circles at the somewhat illiberal banking policy
followed by these banks. If we lay e sound foundation for
expansion of trade, as we should do. our banks should be
allowed to operate & little more freely and to have more
identity of interest with the commercial interests in the
fields were they operate. To put the matter bluntly, there
is a feeling that non merican banks will give merchants
better treatment than the American banks will give them,
Regraded Unclassified
60
-3-
In the matter of export permits and restricted commodities,
we get the impression that the British, although engaged in e
full-dress war, are going to greater efforts to supply old
customers than are we. British firms and old customers here
can still get both raw materials and finished products from
Canada and other British possessions, and even from England.
On the other hand, the United States is simply prohibiting the
export of some materials and has made the obtaining of export
licenses respecting certain other commodities so difficult as
to amount to actual embargo. Certainly. all good Americans are
in sympathy with our war efforts, yet this should be tampered
with a sincere effort to maintain our customers and connections
in the interests of our future foreign trade.
We all mov how the Germans have penetraded commercially
into almost every country, and, aside from their political
capers, they will no doubt hold on industrially and com-
mercially in most of these countries. Here in China the
Germans had, and probably still have, a very strong commercial
connection with the Chinese, and even with the Chinese Govern-
ment. Their connections with the Ministry of War were very
closs, and may still be for that matter, while the Japanese are
grabbing off everything in sight by force or by eny other
moans that occur to them. The British Government is cerrying
on an active economic warfare and the commercial information
collected through this phase of the ver 10 likely to be of
more use in Dost war competition than in the natual present
conduct of the war. %e, on the other hand, do not seem to
be meking any special effort to maintain existing trade, let
alone towards developing post war traie.
We have made the Wisat and Cotton Loan, the Stabilization
Loan, and are now advancing funds and/or materials under the
Lease-Lead Bill. Have we any assurance that these somewhat
altruistic enterprises will not benefit the Germans, the Japanese,
the British and everyone else as much or more than our own
nationals? It seems very possible that the Lend-Lease Bill
provides the actual means for Great Britain to carry on her trade.
When ve started in foreign trade seriously about thirty
years 860 the infant mortality in our foreign trade ventures
was very high. Perserverance, however, during those thirty
years has given us & respectable volume of foreign trade and
it is un to merchante and professional men to maintain and
expand same. We can count on no substantial help from
diplomacy, Americans had little to say about the events lasá-
ing un to the first world war. Nevertheless we paid very
Regraded Unclassified
61
largely for that wer. In the intervening 25 years American
diplomacy has occasionally railed at European and For Eastern
diplomecy. For the most part, this American voice has merely
been one in the wilderness. Lack of candor and decency in
European and Far Eastern diplomacy has now led us to the second
world war. No one las to be e financial genius to find out
VL.O is going to pay for this second war. To help America pay
for both of these wars foreign trade will be just as necessary
as domestic trade, and the sooner merchants and professional
men take a stronger stand in keeping commerce from being choked
to death by bureaucracy and red tape, whether domestic or
international, the better.
With the ever increasing official restrictions on trade,
some of which are liatle to become permanent, whether good or
bad, and in view of the plans that a:e being made by other
nationale to expand their trade in China, is it not time that
our Chamber considered the matter and urged the removal
wherever possible of undue restrictions, delaying red tape
agencies, or other hindrances to our trade? Also, to devise
or consider plans for trade expansion rather than acquiesce
in any withdrawals of American business or persons.
Yours very truly,
N. F. Allman
Copy:1c:11/27/41
Regraded Unclassified
Inclosure No. 2 to despatch no. F90 of Frank P. Lockhart,
62
Consul General at Shanghai on "Position of American Business
Community in Shanghai Regarding U.S. Trade Control Measures."
Comments of Mr. L. R. Moore, Shaughai Manager for 3. I. Du
Pont de Nemours de Co., on Mr. Allman's letter of September 12,
1941. to Chamber of Commerce, Shanghai.
Shanghai, September 17, 1941
Mr. Allman's views are important and to a great extent
tae key to the future rests in our continuing to supply China
(including Occupied China) with certain materials and services
between now and the end of World Var No. 2. China 1e now
practically shut off from European sources of supply and Japan
ia too badly off materially to make un the deficit, so if
China is to get a. modicum of the foreign goods which she requires,
it will have to come largely from the United States.
It is my understanding that an important group in the
Chungking Government is onposed to giving any assistance to
Shanghai, on the grounds that this port's activities are of a
parasitical nature. I understand also that our Government de-
sires to restrict supplies to Shanghai very drastically lest a
treasure fall into the hands of a potential enemy should a break
occur in the Pacific. Those are barriers which if closely guarded
will strangle Shanghai quickly, and Shanghai is after all still
the distributing point for the major part of the forei_n gods
which find their May into the interior of China. I am highly
in favor of controlling these operations, to prevent excesse:,
but I see no benefit accruing to anyone by stifling this com-
mercially and industrially important port.
Regraded Unclassified
63
-2-
It is to be expected that people must suffer privations
during time of war, therefore, China cannot expect the free
flow of goods of normal times. The Chinese, particularly in
the occupied areas, have been suffering these privations for
more than four years already. If the Chungking Government and
other Democratic Powers want the support of those millions of
people in the occupied areas, it seens to ne that they would do
well to give them B. little material support. Meglect may be
just the straw that will throw them into the other courp.
On the question of aunger of Shanghai stocks falling into
the Manão of 34 unfriendly power, I think the consequences of
such an event are exaggerated. It is indeed likely to happen,
but if it did, the results as far as the outcome of the present
war would be insignificant. According to Customs statistics,
recorded imports into Shanghai during the year 1940 and Jenuary-
July 1941 were US$186,000,000 and U.S.$120,000,000 respectively.
Included in those figures are textile materials and foodstuffs,
including wines, spirite and tobacco, amounting to US$108,000,000
for the year 1940 and US$78,000,000 for the period January-July
1941; in other words clothing and food. It is reasonable to
believe that there would not be more than the equivalent of one
year's imports in stock at any one time. The United States is
rapidly approaching a var effort of US$40,000,000 per day, and
in the next year or two should be un to B. figure of US$50,000,000
daily. Great Britain's war effort 1s estimated at US $40,000,000
Regraded Unclassified
64
-3-
daily, and is increasing. Modern warfare is basically a material
conflict. Shanghai's entire stores, if requisitioned by an
unfriendly power, would be insignificant 8.8 far as the war is
concerned.
A modicum of supplies will do much toward preventing Shanghai's
decay, will sustain, in a manner, those agencies which have helped
to make it the important business center it is and preserve some
good will and prestige for the future. The risk involved 18
slight compared with risks confronting us elsewhere. I suggest
that we keep the matter before our State Department representatives
regularly.
(sgd.) L. R. Moore
LRM:AK
Copied by:
JCB
Compared with: MAY
Copy:1c:11/27/41
Regraded Unclassified
o
65
D
F
y
W.T.1117/257/41
BRITISH emerassy,
WASHINGTON, D.C.,
SAFE HAND
October let, 1941.
Dear Mr. Dietrich,
I have just received copies of the following
documents in connection with the freezing by India of
Japanese and Chinese assets:-
1. Notification dated 28th July introducing
Rule 920 into the Defence of India Rules.
2. Notification dated 28th July under Rule
92C freezing Japanese assets.
3. Notification dated 30th July under Rule
920 freezing Chinese assets.
4. Circular of Reserve Bank of India dated
26th July relating to Japanese and
Manchurian accounts.
5. Press Communique dated 26th July.
6. Circular of Reserve Bank of India dated
20th July (? 30th) relating to Chinese
accounts.
I think you would like to have the enclosed
copies for your records.
Yours sincerely,
(s) 7. Ritchie
Mr. Frank Dietrich,
Room 279, U.S. Treasury Dept.,
Washington, D.C.
Regraded Unclassified
DEFENCE CO-ORDINATION DEPARTMENT.
66
NOTIFICATION.
Simla, the 28th July, 1941.
No. 958-OR/41. - In exercise of the powers conferred by
section 2 of the Defence of India Act, 1939 (xxxv of 1939). the
Central Government is pleased to direct that the following fur-
ther amendment shall be made in the Defence of India Rules, namely:-
After rule 92B of the said Rules, the following rule shall
be inserted, namely:-
"920. (1) If the Central Government is of opinion that
it 18 necessary or expedient so to do for securing the defence
Power to
of British India or the efficient prosecution of war, the
prohibit
Central Government may give general or special directions
action on
prohibiting, either absolutely or to such extent as may be
certain
specified in the directions, the carrying out of any order
orders 88
given by or on behalf of -
to gold,etc.
(a) any State which may be specified in the
directions, the Sovereign thereof, or any
person resident therein, or
(b) any body corporate which is incorporated
under the laws of that State or is under the
control of that State or the Sovereign thereof
of any person resident therein,
In 80 far 88 the order -
(1) requires the person to whom the order is given
to make any payment or to part with any gold or
accurities, or
(11) requires any change to be made in the persons
to whose credit any um is to stand or to whose
order any gold or securities are to be held.
(2) If any person contravenes any direction given
under this rule, he shall be punishable with imprisonment for B.
term which my extend to five years, or with fine, or with both. a
A. de C. WILLIAMS,
Secretary to the Government
of India.
Regraded Unclassified
FINANCE DEPARTMENT.
67
NOTIFICATION.
Simla, the 28th July, 1941.
No. 0./C.-1859-F./41. - In exercise of the powers conferred
by rule 920 of the Defence of India Rules, the Central Govern-
ment is pleased to prohibit the carrying out, except with
permission granted by or on behalf of the Reserve Bank of India,
of any order given by or on behalf of -
(a) any of the States specified in the Schedule
annexed hereto, the Sovereign thereof, or
any person resident therein, or
(b) any body corporate which is incorporated
under the laws of any of the said States or
which is under the control of any of them or
of any person resident therein,
in BO far as the order -
(1) requires the person to whom the order is
given to make any payment or to part with
any gold or securities, or
(11) requires any change to be made in the persons
to whose credit any sum is to stand or to
whose order any gold or securities are to be
sold.
Schedule.
(1) The Empire of Japan, including Japan proper, Korea,
Formosa, Karafuto, Kwantung leased territory end
Islands in the Pacific under Japanese Mandate.
(2) The Republic of China (Menchuria).
C.E.JONES.
Secretary to the Government
of India.
Regraded Unclassified
68
FINANCE DEPARTMENT.
NOTIFICATION.
Simla, the 30th July, 1941.
No. D./0.1911-F. - In exercise of the powers conferred
by rule 92C of the Defence of India Rules, the Central
Government is pleased to prohibit the carrying out, except
with permission granted by or on behalf of the Reserve Bank of
India, of any order given by or on behalf of -
(a) China or any person resident therein, or
(b) any body corporate which is incorporated
under Chinese laws (including the laws of
any territory forming part of Chine) or
which is under the control of China or any
person resident therein,
in so far as the order -
(1) requires the person to whom the order is
given to make any payment or to pert with
any gold or securities, or
(ii) requires any change to be made in the persons
to whose credit any sum is to stand or to
whose order any gold or securities are to be
held,
except that the following are permitted -
(1) any payment in the sterling area authorised
by the National Government of the Republic
of China or any person duly authorised to act
on its behalf.
(11) Transfers into or out of any Chinese special
accounts which may be set up under the orders
of the Reserve Bank of India.
C.E. JONES
Secretary to the Government of India.
Regraded Unclassified
RESERVE BANK OF INDIA,
Erchange Control Department.
69
Circular No. A.D.57
Bombay, 20th July, 1941.
To
All Scheduled Banks.
Dear Sir,
CHINESE ACCOUNTS.
Banks are advised that the following restrictions have been
imposed by the Reserve Bank of India on Chinese accounts,
(a) accounts of all persons or firms resident in the
Republic of China including the International
Settlement Shanghai or accounts of all firms and
companies incorporated therein or under the
control of residents in these territories and
operating in India are to be blocked,
(b) they may honour obligations under confirmed credits
opened on or before 30th July 1941 on behalf of
persons stated in (a).
(c) they may accept bills or pay cheques drawn by persons
mentioned in (a) and presented by residents in India
or Burma who became holders for value on or before
30th July, 1941.
2. The following accounts are exempted but are released for pay-
ments within the sterling area only:
Central Bank of China.
Bank of China.
Bank of Communications,
Farmers Bank of China,
The National Government of the Republic of China or
any agency thereof.
For the time being the exemption also applies to the accounts
in India of Chinese branches of authorised dealers in foreign exchange.
3.1
Regraded Unclassified
- 2 -
3. Applications for Drivate remittances to China should be
refused. Commercial remittances may be credited in rupees or
sterling to any account exempted as stated in Paragraph 2 or to
a blocked ruper account of a resident in China.
4. The private accounts of Chinese residents in India are
unrestricted,
5. The statement in Para. 2 that the accounts of the banks and
concerns named therein may be released for payments within the
sterling area means that transfers may only be uade from these
accounts to the accounts of residents in the sterling area or to
another of the exempted accounts stated in that peragraph. Amounts
may not be transferred from an exempted Chinese rupee account to any
unexempted Chinese account or to the account of any resident in any
other country outside the sterling area,
Yours faithfully,
(Sga) G. Sulrahmanyam
P. ASSISTANT CONTROLLER,
Copyrbjshr:10-2-41.
Regraded Unclassified
71
PRESS COMMUNIQUE
The Reserve Bank of India has issued instructions to all
banks that accounts of all persons or firms resident in the
Empire of Japan (Japan proper. Korea, Formosa, Karafuto,
Kwantung Leased Territory, islands in the Pacific under
Japanese Mandate) and Republic of China (Manchuria) or the
accounts of all firms and companies incorporated therein or
under the control of residents in these territories and operating
in India shall be blocked. Banks have been informed they may
honour their obligations under confirmed credits opened on or
before the 26th July 1341 on behalf of residents in these
countries and may also accept bills or pay cheques drawn by
such persons provided they are presented by residents in India
who became holders for value on or before the 26th July 1941.
Private remittances to the countries mentioned in the
previous paragraph are no longer permitted and remittances re-
quired for comercial purposes have to be credited to blocked
accounts.
Permission will be given on application, to persons or
firms of Japanese nationality to draw reasonable requirements
from their bank accounts for living expenses or in payment of
wages,
Japanese hanks are permitted to malte payment in respect
of contracts entered into on or before the 26th July 1941 and
also to operate the accounts of customers resident in India and
not of Japanese nationality.
RESERVE BANK OF INDIA,
Central Office,
Bombay, 26th July, 1941.
)
Regraded Unclassified
72
RESERVE BANK OF INDIA
Central Office,
Exchange Control Department,
CIRCULAR NO. A.D.55
Bombay, 26th July, 1941.
To all Scheduled Banks,
Dear Sir.
Japanese and Manchurian Accounts.
Banks are advised that the following restrictions have
been imposed by the Reserve Bank of India on the above accounts.
(a) the accounts of all persons or firms resident in the
Empire of Japan (Japan proper, Korea, Formosa, Karafuto,
Kwantung Leased Territory, islands in the Pacific under Japanese
Mandate) and Republic of China (Manchuria) or the accounts of all
firms and companies incorporated therein or under the control of
residents in these territories and operating in India shall be
blocked.
(b) Banks may honour obligations under confirmed credits
opened on or before the 26th July 1941 on behalf of persons
stated in (a).
(c) they may accept bills or pay cheques and drafts drawn
PY persons mentioned in (a) and presented by residents in India
who became holders for value on or before the 26th July, 1941.
(d) all unconfirmed credits should be cancelled,
2. Applications for private remittances to places named in (a)
above should be refuged and commercial remittances credited to
blocked accounts. All applications to credit blocked accounts will
require the previous approval of the Reserve Bank and the full name
and address of the beneficiary must be given in each case.
3. Permission may be granted to Japanese persons and firms to draw
reasonable requirements for living expenses or payment of wages,
with the prior approval of the Reserve Bank.
14. A copy of B communique issued by the Reserve Bank of India in
the matter is enclosed for your information.
Yours faithfully,
for DEPUTY CONTROLLER.
Regraded Unclassified
73
FOR
October 1. 1941
Files
Mr. Dictrish
Inforence is más to cable Be. 343 dated Reptember 4. 1941. 5 y.m.,
from the American Consulate General is Beng Keng.
to have been advised w the State Department that the first under in
the last line of this cable should read 4780,651. and m 43,780,651.
OFFICE OE THE
12:11 OCL S W 3 51
RH:wec 10-1-41
Regraded Unclassified
74
C
0
P
Y
LEGATION OF SWEDEN
630 Fifth Avenue
New York, N. Y.
October 1, 1941
Mr. L. Werner Knoke
Vice President
Federal Reserve Bank of New York
New York, New York
Dear Mr. Knokes
For your information I beg to quote below a
telegram dated today, received from Sveriges Riksbank:
"RIKSBANKENS BUYING RATE FOR DOLLAR NOTES
TODAY REDUCED FROM 4.15 to 3.90"
This change 1s caused by the present transport
difficulties and the low rates prevailing in Switzerland
for dollar notes.
Very truly yours,
(Signed) F. Magnusson
4.15 # .240963
3.90 - .256410
Buying rate for dollar cable transfers
4.10 . .238663
Copy:alm 10-6-41
Regraded Unclassified
on.
11.00 HENTLAD
25
AO 020.1 (9-19-41)00-P.
Calober 1, 1941.
Designation as Defense Add Director.
Thrus office of the Chief of Maff.
To:
Colomal Nemry 1. Arrand, Central staff Carps.
Colomal Henry 5. Aurund (0-3784), General staff Corpo, -
on duty in the office of the Chief of staff, Naskington, D. C.,
is designated as Defense Add Director.
ky order of the Secretary of Name
..H. Dailey
Adjusant Jeneral.
Distribution:
The Secretary of State.
The Secretary of Treasury.
The Secretary of Navy.
The Under Secretary of War,
The Assistant Secretary of War.
The Chief of Staff.
Mr. Harry L. Hopkins, Lend Lease Administrator,
Mr. Mm. S. Knudsen, Office of Production Management.
The Chairman, British Supply Council in North America.
Budget Officer of the War Department.
Defense Aid Division.
CONFIDENTIAL
Regraded Unclassified
TREASURY DEPARTMENT
76
INTER-OFFICE COMMUNICATION
DATE October 1, 1941.
ro
Secretary Morgenthau
confidential
FROM Mr. Dietrich
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
1 71,000
Purchased from commercial concerne £175,000
of the Intter amount, £125,000 reportedly represents proceeds of machinery exports.
Ogen aarket sterling held steady at 4.03-1/2. The only reported transaction
consisted of £6,000 sold to a commercial concern.
In New York, closing quotations for the foreign currencies listed below were
WE follower
Canadian dollar
11-1/4% discount
Argentine Deso (free)
.2347
Brazilian milreis (free)
.0505
Colombian peso
.5775
Mexican peso
.2070
Uruguayan peso (free)
.4425
Venezuelan bolivar
.2700
Cuban peso
5/16% discount
There were no gold transactions consummated by us today,
The Federal Reserve Benk of New York reported that the 3ank of Canada shipped
$2,432,000 in gold from Canada to the Federal for account of the Government of
Canada, for sale to the liew York Assay Office.
Spot and forward silver were again fixed in London at 23-1/2d and 23-7/16d
respectively. The U.S. aquivalents were 42.67# and 42.55#.
The Treasury's purchase price for foreign silver was unchanged at 35+. Handy
and Harman's settlement price for foreign silver was also unchanged at 34-3/4#.
Ye made two purchases of new production silver amounting to 500,000 ounces under
the Silver Purchase Act, All of this silver came from Peru, and was bought for
forward delivery.
The Federal Esserve Bank's report of September 24, listing deposits of banks in
ABIA with the Sew York agencies of Japanese banks, showed that such deposits totaled
150,583,000, a decline of $373.000 since September 17. Also reported were selected
Itega from the statement of the Yokohama Specie Bank's New York Agency: the only
ppreciable change here was = decline of £563,000 in U.S. Treasury bills and com-
tercial paner which the Agency holds for account of banks in Jepan and Manchuria.
D
Regraded Unclassified
77
RESTRICTED
G-2/2657-220; No. 507 M.I.D., W.D. 11:00 A.M., October 1, 1941
SITUATION REPORT
I. Eastern Theater.
Ground: Strong Russian counterattacks at Leningrad con-
tinue.
Russians continue to hold western portion of
Oesel (Saare) Island and Dago Island.
Russians continuing their strong defense at Mel-
itopol and east of Poltava.
Air: D.N.B. dispatches said that strong formations of Ger-
man fighters and bombers had penetrated the entire Russian front yes-
terday and attacked railway facilities and troop concentrations with
destructive effect.
Moscow claims heavy Rumanian air losses in the Odessa
area.
II. Western Theater.
Air: The British admitted strongest German air attack of
recent days principally centered upon Newcastle.
British action was said to have resulted in large
fires in Stettin and Hamburg. Coastal Command claims attacks on
shipyards and oil depota at Nantes, and St. Nazaire was again bomb-
ed.
III. Middle Eastern Theater.
Ground: Native Ethiopian troops have for some days been
harassing Italian forces in the Gondar area of Ethiopia.
Air: Air attacks on North Africa, Sicily and Sardinia were
announced as renewed. However, no specific objectives were announced.
RESTRICTED
Regraded Unclassified
78
October 2, 1941
11:05 a.m.
LE AIT TO BRITAIN
(Conference held in Mr. White's office)
Present:
Mr. Bewley
Mr. Keyes
Mr. Coe
Mr. Hicks
Mr. Ballantyne
Mr. Chance
Mr. Robinson
Mr. Brown
Miss Kistler
Lite:
We have 8 brief agenda and it shouldn't
take us long to get through with it.
You are getting that duta that the com-
mittee asked for?
steks:
Yes. Mr. Bewley and Mr. Chance will see
me later.
nite:
What has been the progress on the transfer
of plants? You remember the last time Sir
Frederick Phillips said that they would go
ahead with the details on that.
Do you know whether they have made any
progress?
BALAY:
No, what happened was that Phillips was
going to speak to Mr. Jesse Jones about
bringing in some more. It is now eleven
billions, as I understand it, in addi-
tion to the fifty-five or seventy millions
that is alre dy under consideration.
But as I understand, certain arrangements
Regraded Unclassified
79
- 2 -
had been made about the seventy million
dollars.
HobInson:
Well, we have been keeping after these fellows
and we have gotten to the point now where
we have given them the figures on two of the
larger facilities and every time that I get
in touch with them they are working on them.
The Curtiss Tright people came in to see
me 8. couple of weeks ago and had 8 talk
about it. I called again yesterday to
find out what it was, but nothing had been
done. So I think two things ought to be
done. One is that the thing ought to be
speeded up on the things they are actually
doing and the other is, the base ought to be
considerably broadened.
In other words, they are only attempting
to work on two out of eleven different things
at once, and there is no reason that I can
see why they shouldn't working on five or
six of them at once.
ihite:
How much have you got to date actually?
How much cash has actually --
Hobinson:
We have gotten the ten powder facilities in.
Thite:
That is all?
Robinson:
That is all. Well, excuse me. We have been
getting some on machine gun contracts, but
those --
bite:
Let's see, how much WAS that?
entinson:
In facilities those were about twenty-four
million. We haven't gotten it all back yet,
but those I consider finished because it is
just : matter of working out details, and
Regraded Unclassified
80
- 3 -
and that is coming back, and we count it
as having come back.
White:
Have you received - what portion of that
have you received, actually?
Bewley:
I am not sure what figure we have received.
Robinson:
There have been about three or four million
come back. Two of the plants they are doing
piecemeal in that they are passing over
tools as they come in and on one of those
two they turned over the plant as well.
On the other two they are waiting until the
plants are completed and they are going
to do the whole thing at once.
White:
Then they have actually in cash some three
or four million dollars?
Robinson:
Oh, yes, they have actually gotten some in
cash. The things are signed and the proce-
dure is worked out.
White:
And they have got about twenty-eight
million --
Robinson:
That is going along.
White:
In the bag, 80 to speak.
Robinson:
Yes, definitely in the bag. There is no
question. That is why I have never been
thinking about that.
Bewley:
Memphis, how much is that?
Robinson:
Twenty-one million we have already gotten out
of twenty-five. Really, I can say we are
going to get twenty-four.
Regraded Unclassified
81
- 4 -
White:
Well, that is forty-five is certain, of
which you have already received twenty-
two?
Bewley:
About twenty-five.
Robinson:
Now, there are two others.
Bewley:
What about Vultee?
Robinson:
Vultee, the contract with the Army has been
signed and I am advised that we will get more
money, which is about eleven million, within
the next - oh, within three or four weeks.
It just has to go through the mill in the
Army and get the actual paying people to come
through, so there is no reason why we shouldn't
get that. That is eleven.
White:
And you will get that all?
Robinson:
We will get that all, I think. I don't
believe there are any deductions for that.
Remington Rifle and Savage, which aggregate
about fifty or more, look pretty good at
the moment.
The Army has all signed the contracts up.
That I am talking now, not facilities.
I am talking product because Remington is
one of the facilities that the Defense
Plant is proposing to take over, but it
hasn't gotten to it yet.
Savage is one of the ones that are new.
Those I think you will get, maybe not the
full amount, but we will get pretty nearly
the full amount.
Regraded Unclassified
82
- 5 -
In other words, this chart that we had the
other day - this chart that we had the
other day that we presented is substantially
the same in so far as the certain or almost
certain column is concerned.
So far as the probable column which was the
four - the facilities, fifty-five million,
that is just as probable as it was, and no
more probable, and no less probable. It
is just no further along.
White:
Which fifty-five is that?
Robinson:
That is the eleven original companies. It
cost them seventy-nine, estimated recovery
at fifty-five.
White:
And that is still - no progress has been
made on that?
Robinson:
Exactly where it was.
White:
Now, 80 far as that point goes, what do you
suggest might be done to put increased
pressure on that?
Robinson:
I think the only thing that can be done is
to have Mr. Jones advised of it.
White:
To have Mr. Jones --
Robinson:
In his own organization, because that is
where it sits.
White:
It is in his organization?
Robinson:
Yes.
Bewley:
Mr. Jones or the Ordnance?
Regraded Unclassified
83
- 6 -
obinson:
The Ordnance has nothing to do with it.
They have agreed and said "Sure" and they
will give them the take-out letter.
Thitet
Mr. Jones has agreed in principle some time
past. Therefore, it is a question merely
of administering it somewhere down the line.
Is it your feeling, based on your familiarity
with the problem, that there is no reason why
the thing shouldn't move faster?
Lobinson:
I don't see any reason. There are two
problems. One is, they have to check over
the accounts. They have to send their
engineers out, and the second is that
there is a limit to their personnel.
I suppose there is. And the number of things
they can be doing at once. But, at the
same time, no progress that I have been
able to notice - they may have been doing
something - has been made since our last
meeting, which I believe was more than about
a month ago.
hits:
Let's go back further than that. How -
they have had this under review, under
examination --
Robinson:
About six months.
Shiter
For six months. Now, what portion of that
six months, in your recollection, was taken
up with determination and consideration of
the higher policy? It wasn't six months when
they first decided to do it.
Kobinson:
It was about April, wasn't it? It was about
April when Mr. McCloy had the meeting with
Mr. Jones, and at that meeting I believe
Mr. Purvis submitted 8 list of these companies,
About April, approximately.
Regraded Unclassified
84
- 7 -
White:
Well, it is six months since it has been
an administrative matter, and from your
familiarity with it, you see no reason why
it couldn't be done in a shorter time?
Robinson:
Well, you see, if we didn't have a proto-
type, then there might be some objection to it
but Tennessee Powder, and the machine gun
plants are perfect prototypes.
Whiter
Then it is & question of bringing this to
the attention of Mr. Jones.
Robinson:
That is right.
Whites
And we might ask Secretary Morgenthau to
speak to Mr. Jones about it and see what --
Robinson:
As a matter of fact, if I recall correctly
the last time we had it up at the committee
here, that was suggested as the next move.
It was left for Sir Frederick to speak to
the Secretary.
White:
But I thought the Secretary was going to
speak to Secretary Stimson with reference
to that.
Fewley:
I think that is right.
White:
So it is past that stage, and it may be
necessary to call it to the attention of
Mr. Jones, whether by the Secretary or
someone else. And that if and when that
is done there is every reason to expect that
thet fifty million dollars will be avail-
able. There should be no hitches there.
Robinson:
Not that I know of.
White:
So it is merely a question of getting it
down. Well, that takes us through all the
Regraded Unclassified
85
- 8 -
transfer on the old program, and it is
your feeling, Mr. Bewley, or is it your
knowledge, that Sir Frederick felt the -
that in view of the delay on the others
there was no reason - no use in bringing
attention to the other items, thirty-one
million dollars?
Rewley:
I think he felt we might make a little
progress with the fifty-five millions
before pressing the smaller additional cases.
I think that was rather the feeling at
the meeting, that we had better get some prog-
ress on the outstanding ones first.
White:
I thought that you felt that they might go
along all together, but in any case --
Benley:
He may have mentioned it to Mr. Jones,
for all I know, but he didn't tell me.
Chance:
If I may say so, the idea was that Sir
Frederick should discuss it, at least in
principle.
White:
That is right.
Change:
In the hopes that the principle might at
least be agreed and then the details follow
along. That was the point.
Bewley:
I don't know whether he spoke to Mr. Jones
or not.
White:
I see. Well then, in discussing this matter
with the Secretary, if he does see fit to
have someone take it up with Mr. Jones, he
will confine himself to the earlier amounts,
because we are not sure the other amount
has been discussed.
Regraded Unclassified
86
- 9 -
Bewley:
I think that is right.
White:
The supply contract transfer program.
First let me report on the items that the
Secretary was to speak to Secretary Stimson
about.
Bewley:
Yes.
White:
Assistant Secretary McCloy twice has urged
or requested that he be given just a little
more time before the matter be taken up.
Rewley:
This is the hundred millions?
White:
That is the hundred million dollars. And
the last note was only 8. few days ago.
Bewley:
He was still asking for more time?
White:
Just 8 little more time this time. He is
getting to be naturally 8. little more embarras-
sed about asking for it, but I don't know
that the little more time will bring any
results, but what it will do is, it will
hasten the time at which Secretary Morgen-
thau will take it up with Secretary Stimson,
so that in one sense there is no progress
and in another sense, there may be something
going on that we don't know about, but
Assistant Secretary McCloy feels very keenly
on the matter, apparently. Can you throw
some light on that?
Robinson:
My information yesterday was that McCloy
has finally given up and that he is proposing
to write 8 letter --
White:
I see. Indicating that there are no funds
available?
Robinson:
That they can't find the money to do these,
and when he says "these", I think he means
Regraded Unclassified
87
- 10 -
the tank and tank engine items, which are
pre-March 11, the aircraft items which are
pre-March 11, and the approximately thirty
million of tank items since March 11, which
you may recall we thought there were forty
million dollars worth in the Ordnance, but
which has since disappeared.
White:
That totals more than & hundred million,
doesn't it?
Robinson:
Yes, that is the forty - well, tank and tank
engines, forty-four. Well, forty and seventy-
four is about what we had in mind, plus
that great big batch which we have left off
this chart completely now, the hundred and
eighty-odd millions.
In other words, we hoped that these tanks
and tank engines, those two contracts prior
to March 11, which were matching orders,
which were forty-four, we hoped that something
could be developed there, and also hoped
that something could be developed in the
thirty millions of tank contracts to replace
the since March 11.
(Mr. Brown entered the conference).
So that problem seems to be very black.
White:
That relates to the forty-four.
Robinson:
Approximately seventy-four, yes, sir.
White:
Now, there was thirty more than that.
There was about --
Robinson:
Well, there were some more airplane engine
contracts placed since March 11 for about
forty more.
Regraded Unclassified
88
- 11 -
Thite:
Yes, that made it a hundred and ten.
sobinson:
About B hundred and ten.
"hite:
Now, of those there is - the total of those
are up to date out, on the grounds that
there is not the money available?
mhinson:
Well, I believe that is the ground, because
I don't think there has ever been any objec-
tion in principle. I think the difficulty
was that so far as the pre-March 11 group
was concerned, that it was a matter of taking
it out of regular Army Ordnance items. Not
Ordnance, but Ordnance and Air appropriations,
and they said they couldn't find that.
So far as the subsequent March 11 is concerned,
there is nothing left in Lend-Lease.
Wilter
Have you reviewed the situation sufficiently
so that you would venture an opinion as to
whether you think further examination might
reveal items about which there is doubt
as to their availability or not?
Whinson:
Well, I of course only know what I am told
when I talk to the people on this side,
and I was told some weeks ago that the
forty million dollars which Colonel Aurand
was originally said to have earmarked for
these take-overs since the March 11 con-
tracts is no longer available for that
purpose.
Thites
Yes.
Robinson:
And I was told, as I say, yesterday, that
Mr. McCloy is now of the view that it is
not possible to dig up anything out of the
regular Army Ordnance.
Regraded Unclassified
89
- 12 -
White:
Well, that is the situation to date, and
the next thing is, it is to be placed in
the Secretary's hands.
Bewley:
My understanding is then that the Secretary
will take up the matter with Mr. Jones
and when Mr. McCloy says the time is ripe,
he will take up the matter with Mr. Stimson,
is that right?
White:
Whether he will take it up personally
with Mr. Jones and --
Bewley:
Well, the Treasury will take it up with
Mr. Jones' office.
White:
That is right, and make inquiries. I
think that he will take this other matter
up with Mr. Stimson on receipt of the letter.
Brown:
I should rather not go on record about the
letter, because it is just what I was told.
White:
Then that information will be forthcoming
in due time, but apparently the Secretary
will have to take it up.
Now, the Todd ship contracts. I understand,
Mr. Brown, you definitely say they are out.
Brown:
I am afraid so, sir. I spoke to the Maritime
Commission about it, and they felt that they
would not be able to do it on the basis
of leasing the ships with an obligation to
purchase at the end of the lease, because that
really amounts to a time sale, and they didn't
feel that they were either legally authorized
or - to do that, or should do it as 8 matter
of policy.
Regraded Unclassified
90
- 13 -
White:
Well, the legal problem is something that
I imagine is a question of fact. As 8. question
of policy, do you feel that they have got
& sound ground for holding that it would
be unsound policy to make an arrangement of
that character?
Brown:
Yes, I do, because it is a straight financing
proposition. I didn't say this to the Mari-
time Commission until I had heard what their
decision was, but what it would amount to would
be that they would use their appropriation
to take over ships which the British were
already getting under their own contracts,
releasing those dollars to the British and
then sell the ships back to the British
again at the end of the period of time.
So it is a straight financing operation
which is not within the jurisdiction of the
Maritime Commission, and I think their feeling
in that respect is - I mean, if I had been
advising them I would have --
white:
I see, Well, let's approach it this way.
Had these ships been oil burners there would
have been no question about taking them over.
Brown:
No, sir, because it would have been perfectly
justifiable. The Maritime Commission funds
are being used to buy ships which are and
will he in addition to the American Merchant
Marine, of a kind that we use, that fit in
with our program and are consistent, and
then it could have been leased to the Brit-
ish under the express and clear statutory
authority.
White:
And then they would have had these ships.
Frown:
Then we would have had the ships, and had the
kind of ships that were necessary.
Regraded Unclassified
91
- 14 -
White:
Then let's raise this hypothetical question,
because I don't quite see the whole argument
of their position. Let us assume that they
would have no use for oil burners after the
war, as many oil burners as they have got.
On grounds of policy now, not grounds of
law, on grounds of policy do you think that
they ought - they would be wise in taking
8 step which would give them oil burners
which they couldn't use?
rown:
I think that might perhaps be some question,
but I would say it was an infinitely
easier position to defend than the other one.
White:
But at any rate, if they knew definitely
they couldn't useit on the ground of broader
of broader policy and from the point of view -
from the fiscal point of view of making
expenditures on commodities which would be
of no use to them, as against making an
expenditure on a CO modity which would have
B. salable value, it would seem to be some-
thing which they should take into considera-
tion which might affect their decision.
Brown:
Definitely, but I think that their position
with respect to the original proposal, which
was based on the understanding that the ships
were oil burners, was that they were willing
to go along and help out to give this dollar
relief and could do 30 in 8 way which they
could reasonably defend. I don't think they
ever would have initiated the idea in the
first place if they had been left alone.
Mhite:
well, what I am moving toward is this
thought, that it might appear that they
are defending a course of action which
would be more costly to the United States
Regraded Unclassified
92
- 15 -
Government than some other course
of action, provided this assumption
holds, and we will want to examine
that assumption in 8 moment, name-
ly, that they will need all the
oil burners that they are going to
build and have built after the war.
Brown:
They are not defending the course
of action, Mr. White. They are -
because they are not going to
do it and - but they were prepared
to take the risk of defending that
course of action, because they felt
that they could go that far and
not subject themselves to -
not put themselves in an un-
tenable position, but they felt
that to take over ships of the
type that they can't fit into
their program at all, which are al-
ready available to the British
Government, and then to turn them
over to the British Government and
have the British Government agree
to reimburse them - or to buy them
back, was so clearly a function that
should better be performed by some
agency like the RFC, that they didn't
think they could go into that field.
Regraded Unclassified
- 16 -
33
hite:
I am raising this question because
I thought if you were at all impressed
with that line of reasoning you might
want to reopen the case with them, but
I take it that your position --
I would hesitate to because I got turned
down so cold --
mite:
Your position is then that they can
defend their position, that they may or
may not need those oil burners after the
war and nobody can tell.
Prown:
Well, they aren't taking that position
because the facts don't exist.
allo:
But I say, therefore they may or may not
need them and therefore they say we are
getting something which we may need.
Brown:
Sure.
Mite:
Now, when you introduce the question of
them getting something which they know
they can't use, then they are on less
defensible grounds in their argument,
in their legal argument, though from
certainly a broader perspective it seems
far more dubious that they will need all
the oil burning ships they would get.
Heaving
I think they are worried about the question,
"Why did you do this thing at all?"
Site:
I take it that you gave them the answer to
that.
Yes, but they appreciate the force of the
objective we are trying to achieve hore
and I think they wouldn't want to be given
coal burning ships and the proposal that
Regraded Unclassified
94
- 17 -
the British should buy them back again at
the end of the emergency. They would not
want to answer that question.
White:
You feel, then, that their opinion is
sufficiently definite so that it is not
worth while re-opening it?
Brown:
Well, I feel that -- yes, I do. I would
hesitate to re-open it because I don't
think they would like it B. bit.
White:
Do you have any feelings on the matter,
Mr. Bewley?
Dewley:
Well, obviously I am not competent to
answer the point on this specific case.
What we feel is that we need these dollars.
Various ways were suggested and if this
particular way is impossible, it is
impossible, but it makes it much more
difficult for us if each of these ways
falls down in turn, which does seem what
is happening because we are told on the
other case that there aren't any dollars
available to the War Department on the
facilities. I don't say it has fallen
down at all but to say, have I any views,
I have. I would like to get the dollars
somehow or other.
White:
I can appreciate that and I am wholly
in sympathy with you. What I meant was
whether you have any views in the
particular transaction which might
enable us to seek 8. justification for
re-opening the case with them on the
merits of the particular case and not on
the pre-supposition of our entire interest
in the case. I didn't know but what there
might be some angle that had occurred to
you that we might have overlooked.
Regraded Unclassified
- 18 -
95
Bewley:
I find it rather hard to answer in that
particular case. But, as I say, it would
be much easier if some of these things
could go through at least.
White:
Well, I quite agree with you.
Bewley:
It is all of them falling down together which
is so disappointing.
White:
Well, we will have to report to the Secretary
that this is definitely out.
Brown:
I am afraid SO.
White:
Which, as you say, may increase the necessity
for pressure on other things. Were there
any other developments that have occurred
since the last meeting that you would want to
raise?
Bewley:
I don't know - do you think we ought to bring
up --
Robinson:
There is a point not related to that. There
was one other thing which is also on the
negative side. We had an idea that we could
have taken over under the old Lease-Lend a
comparatively large number of machine tool
contracts which had been placed since March 11th.
We thought they were going to be good because
in the categories of the Lease-Lend Approp-
riations Bill the machine tool one didn't
seem to have as heavy a drain on it as the
rest and there seemed to be some money in it.
Well, some of these requisitions have been
put in. I don't think many of them have. But
it has now been discovered that there is
no longer any category of machine tools in
Regraded Unclassified
96
- 19 -
the original Lease-Lend thing 80 I am
afraid that is another thing that is out.
How much did that total?
White:
Robinson:
About two million, as I recall it. There
were a great quantity of little ones
which were all committed for since
March 11th. We figured that the clear
ones where there was no question of
priority was about two millions. It is
not put in the list, but it is one thing
we were hopeful about.
Brown:
It may interest you to know that at the
hearings on the Appropriation Bill which
have recently been concluded, the question
was specifically asked whether any of the
seven billion dollars had been used to
take over British commitments existing
at the time of the original Lend-Lease
Act and also further the statement --
White:
Pardon me, what was that?
Brown:
The question was specifically asked whether
any of the Lend-Lease money had been used
to take over British contracts existing
at the time of the passage of the statute
and also the gentleman stated, "And
further it is not contemplated that any
of this new money will be used to take
over any British contracts, present or
past."
Robinson:
Is that the question?
Brown:
That was the question, and we are at
present working on the answer to that.
White:
The first part of that question was asked
of Mr. Bell, if you remember.
Regraded Unclassified
97
- 20 -
Brown:
Yes.
White:
Mr. Bell did not answer it.
Brown:
No, Mr. Stettinius answered it.
White:
They have submitted a similar question
in writing?
Brown:
No, they just asked later on the same
kind of question with respect to the
new bill.
White:
When you said you were considering the
answer, didn't you give an answer at the
time?
Brown:
Yes, but you are always at liberty to
correct your answers.
Robinson:
Did that first question, Win, apply to
commitments as well as before?
Brown:
No, the second part of the question did.
That is what bothers us. But you see that
that point was still in the minds of the
Congressmen.
Bewley:
But is what you are saying that the
procedure of machine tools particularly,
placing - trying to get it under Lend-
Lease with an interim commitment in order
to be quicker, will not work in the future?
If so, it will be extremely awkward on
machine tools. I don't know that it is 8.
matter --
Brown:
No, I don't think we have committed our-
selves in such & way that it would not be
possible to work it.
(Discussion off the record).
Regraded Unclassified
- 21-
98
It is correct, as far as the seven billion is
Brown:
concerned; we have not used any of the seven
billion to take over the British contract
commitments existing on March 11th. Some
contracts have been taken over which existed
on March 11th but we used a billion three of
the Army's own money, transferred out a billion
three in those cases, and in the cases of
other contracts the only ones that we have
considered have been ones where there have been
uncompleted negotiations at the time of the
passage of the statute, although they may have
ripened into a contract subsequently.
White:
Was there anything else that you had in mind?
Bewley:
Well, Mr. Patterson, as I understand it, argues
that it is illegal to take out any contract.
Brown:
That is Major Patterson, not Judge Patterson.
We have had disagreements with him before.
Bewley:
What is your attitude on that?
Brown:
In our opinion, it is legal for us to use all
the seven billion dollars to take over British
contracts if we want to, legal. But at the
appropriation hearings on the first Appropiation
Act, the Director of the Budget and Mr. Stimson
gave an assurance to the committee that as a
matter of policy it would not be used to take
over --
Bewley:
Pre March 11th?
Brown:
Pre March 11th commitments. Now, as a matter of
policy and to meet that moral assurance, we
have taken the position that if you have a
commitment on March 11th we can't help it but
we see no legal obstacles; there is nothing in
the statute that would prevent us from doing it.
Bewley:
What about these specific cases which Major
Regraded Unclassified
99
- 22 -
Patterson has raised?
Brown
Well, Major Patterson is just wrong.
Bewley:
Well, how is the conflict going to be resolved?
Brown:
Well, that is & matter which is now being taken
up between the higher authorities concerned.
We have a number of cases like that where
people in the legal staffs down the line in
the various departments have raised questions
as to Lend-Leaseability and of course the
responsibility for determining that question
lies with us because we are the agency charged
with administering the funds.
Bewley:
And what you want us to do is just to do
nothing?
Brown:
Just let us know every time you get one of
them and we will take care of it.
Bewley:
I see, and you don't want us to do anything
more? We have told you and that is all there
is to it?
Trown:
That is all you need do. We will take care of
it.
Kades:
Where is Patterson?
"hite:
Is he in the Judge Advocate's office?
Brown:
Yes.
White:
Kades, do you want to say something on the
tax convention?
Cades:
I thought I might bring you up to date on that.
The convention has been agreed upon by Justice,
State and ourselves. Upon the concurrence by
Regraded Unclassified
100
- 23 -
the London authorities it can be submitted
to the Senate for ratification. We are simply
awaiting confirmation from London. Mr. Rose-
borough is in accord with us.
Bewley:
Is it definite that it has to be ratified by
the Senate? At one time the suggestion was
made that it needn't be.
Kades:
That is 8. possibility but - there is a legal
possibility but as a matter of policy it was
decided by the Secretary of State that it
should be submitted to the Senate.
Bewley:
I see.
Kades:
Incidentally, in that connection I don't recall
whether between the time we had our last
discussion of the tax convention and now, the
question arose as to the broadening of the
convention to include Burma and the various
dependencies of the British Empire. I think we
did have it up as well as our own dependencies.
In view of recent developments it has now been
decided that We will limit it to the United
Kingdom and the United States, Alaska and
Hawaii, not including the dependencies or
possessions of either the British or American
Government.
Bewley:
I can only add to that a brief telegram, the
text of which asked London for a very early
reply.
Kndes:
We are also coming in to a position where we
will be submitting 8. Canadian tax convention
soon. That is an additional reason why we
thought this should be submitted, because the
Canadian convention definitely should be and
it would only raise 8 question if we submitted
the one without the other.
Regraded Unclassified
101
- 24 -
White:
You have here an item on disposal of trusts.
Kades:
That was in connection with a letter that Mr.
Bewley wrote you as to the reasons why the
dollars hadn't been utilized through the sale
of trust assets. I think we ought to have
some additional information on that because
on the basis of that le tter alone it seems
to me our position is weak. In the first
place, only one trust is looked at and it all,
of course, turns upon the nature and the
conditions in the trust instrument. Also,
if possible, I think we ought to have the
opinion of counsel on that trust.
Bewley:
English counsel or American counsel?
Kades:
There was an opinion, as I understand it, from
the American counsel to the trustee stating
that the trustee could not invest in British
securities. He must have rested that upon
the terms of the trust instrument. We don't
have either the trust instrument or his opinion.
It may not be necessary to have both, but he
might be wrong and it might be that the terms
of the particular trust on which he was
passing were peculiar and weren't the same as
the terms of the other trust, and I don't Bee
what basis there is for saying that if this
trustee resigns the court wouldn't appoint an
English trust. If the beneficiaries of the
trust asked the court to appoint 8 British
trustee and the British trustee were willing
to submit to the jurisdiction of the court, I
don't see what possible objection there would
be except that the present trustee obviously
doesn't want to surrender 8. very lucrative
trust.
Bewley:
You surely don't want to see the terms - I
don't know how many there are but it must
run into thousands.
Regraded Unclassified
102
- 25 -
Indes:
Well, if - I don't know how large this one
trust is that was --
Bewley:
Well, it was a big one.
Kades:
As I understand it, the Secretary took the
position that if possible he would require that
the direct investments in these trusts be
sold.
Bewley:
Yes.
Kades:
Now, in carrying out that pledge, all that
has happened is that one trust instrument
has been looked at and on the basis of that
one trust instrument it has been determined
that none of the three hundred million dollars
can be realized. Well, that is B. very weak --
Brown:
Hasn't Childs got some thoughts on that
subject, the legal rights and duties involved?
Xades:
I don't know. All I know is what was con-
tained in Mr. Bewley's letter.
Bewley:
I thought it was generally agreed that trusts
set up under American law could only be dealt
with under American law. I thought that was
accepted as a general view.
Mades:
There is nothing - I mean, there is nothing to
indicate that under the particular trust
instruments --
Brown:
Yes, but Chuck, as a matter of principle,
what jurisdiction has the British government
got over an American trustee appointed by an
American court?
Kades:
None, but they have jurisdiction over the
beneficiaries.
Regraded Unclassified
- 26 -
103
Brown:
But the beneficiary can't touch the assets,
probably.
Kades:
But if the beneficiary - but the trustee can.
Brown:
Yes, but they have no jurisdiction over the
trustee.
Bewley:
The trustees are all American.
Kades:
But this trustee puts it upon legal grounds,
as I understand it, and says that he cannot
invest in British securities.
Brown:
I don't see how that is relevant.
Kades:
Well, he indicates that he would if he could.
I mean, I am just purely - I am basing every-
thing I say upon the letter that Mr. Bewley
wrote.
Brown:
Well, I haven't seen the letter.
Bewley:
The point in this case, Mr. Brown, was that
we had gone to one of the largest of the trusts
and in order to try and get dollars, the
suggestion made was that they should sell out
dollar securities and invest in sterling
securities. The result naturally would be
that the English control would get the dollars,
which we could spend over here or what-not,
but we were unable to get it to work. The
trustees refused. But if Mr. Kades would
like to write me a letter saying what further
information you would like, I would be glad
to get it.
Brown:
Are the beneficiaries here in this country?
Bewley:
No, the beneficiaries are in England.
Regraded Unclassified
- 27 -
104
Brown #
I see.
Bewley:
And then they wanted to appoint English
trustees and it turned out that couldn't be
done either. The trustees had to be American.
Kados:
Suppose, for example, the trustee wanted to
borrow on terms of the trust - on the trust
from the RFC, and the beneficiaries acquiesced.
The court would be very reluctant.
Prówn:
But, as I understand it, it was a question of -
but as a matter of legal right, the Government
could not compel the liquidation of these
trusts or their transformance into dollars. I
think that is the - if that be the fact, then
our position, as stated in that memorandum
that Mr. Bell submitted, is a perfectly tenable
one, and regardless of what the amiability of
the particular trustee or beneficiary may be.
I mean, if some of the trustees willingly
give up legal protection that they have, the
British position is SO much the better, but
I don't --
white:
Can the beneficiary request & change in trustees?
Mades:
Sure.
Brown:
I think we can only ask the British Government
to exercise whatever legal rights they have.
White:
Well, could & beneficiary request a change in
trustees --
Brown:
But in ninety-nine cases out of a hundred you
have got infants and possible unborn people
whose interests have to be protected and --
White :
I have reference only to one trust fund which
Regraded Unclassified
105
- 28 -
I think Sir Edward Peacock remarked were
desirous of selling and turning the dollars
over. In other words, here you have a
beneficiary who would wish to see it done
but there stands in the way a certain
trustee. Now, I may not have grasped the
significance of what you are saying.
Brown:
It is very frequently the case, sir, that
all the beneficiaries, all of them who are
alive, want to end the trust or change it,
but the court won't permit them to do so.
White:
The court won't permit them to do 80 on
grounds which it considers --
Brown:
There might be infants or their might be
possible --
White:
But the court could change trustees if the
court saw fit under a given situation, clearly,
couldn't it? If the beneficiary requested 8.
change in trustees and the court felt that
that change was desirable --
Brown:
It could be done.
White:
It could be done and a trustee could be
appointed who would invest in British secur-
ities and --
Brown:
But nobody could be compelled to do that.
Bewley:
But as I understood, the advice which we were
given by this trust, whatever the trustee
wanted to do, the court wouldn't permit him to
invest in British securities. That was the
advice he gave. In certain circumstances the
risk of British securities was such that no
court would permit the investment.
Regraded Unclassified
106
- 29-
White:
Wouldn't regard it as justifiable.
Bewley:
Yes.
Brown:
I think you would find that a very general
holding, don't you?
Kades:
It all depends on the terms of the trust
instrument.
Brown:
Even if we had unlimited authority in the
trust he couldn't sell American Can Company
and invest in a British --
Kades:
In a government bond? In 8. bond of the
government of Great Britain?
Brown:
I think it is doubtful if he could do it at
all.
Kades:
I don't say it is - I didn't say it was
perfectly clear but he could ask the court.
If the court authorized him to, he certainly
would be protected.
Brown:
But isn't the issue whether the British Govern-
ment is in a position to realize on these
securities in the trust? That is the only issue.
Kades:
Well, that is not the issue that was presented
to me. The issue that was presented to me --
Brown:
But that is the issue with which we are faced
in making up this statement of the British
dollar position. Is the British Government
in a position to realize upon these assets?
Regraded Unclassified
107
- 30-
Kades:
Well, the British Government is in a
position to take over the beneficiaries'
interest in a trust.
Brown:
Yes, I suppose BO. I don't know over here
whether they can or not.
Kades:
Well, over there, the beneficiaries are
all in England, as I understand it.
Bewley:
Oh, I think SO.
Brown:
But he could take the income.
Bewley:
We do take the income. Any income there is,
we take the dollars and give the beneficiary
sterling.
Kades:
Any income that gets over there?
Bewley:
Any income that gets over there, yes.
Brown:
In other words, they are already taking
everything they can get.
Kades:
Well, are you - do you think they are
limited to taking the income? Don't you
think they can take the interest itself?
Regraded Unclassified
108
- 31 -
Brown:
I don't think they can force the liquida-
tion of the--
Kades:
But why can't they take the life interest?
Brown:
They could. All that means in terms of
dollars is the income.
Kades:
But the anticipated income as well 8.5 the
income--
Brown:
That is what they are doing.
Kades:
Have you taken the entire life interest? I
didn't understand that.
Brown:
You are taking all the income as it comes
along, aren't you?
Bewley:
Yes.
Kades:
But they haven't anticipated that. Why can't they
take the beneficiaries' life interest itself?
That can be appraised.
Bewley:
But what would be the advantage? I don't
know whether we could or not, but what would
be the advantage anyhow? We couldn't realize
in dollars.
Kades:
Well, now, see there is the difference in the
approach. You say they can't legally require
realization in dollars, and I agree with you;
but, as I understood it, it wasn't 8. question
of what they legally could do. It was &
question of what could be accomplished if the
beneficiaries cooperated. Now, that was the
problem that I was assigned by you (White.)
Now, I agree that there is nothing that the
British Government can't legally require an
American court to change trustees or require
the shifting of the investments in the British
securities. There is no problem there at all.
Regraded Unclassified
109
- 32 -
That is not - the point though, I understood
that what you wanted to accomplish, if possible,
was the realization of the trusts in dollars.
White:
Why don't we leave the question this way. I
think possibly enough has been said to indicate
that the lawyers feel, or at least our lawyers
feel, that they are not justified in making
the definite statement that they can be, and
that is why we have changed it to, they may
not be. The next step would be a further
examination to see whether they would want
to alter that opinion in all cases or in
none of the cases or in some of the cases.
Whether that further investigation is desired
would be & question which I should like to
ask the Secretary. He might feel that even
if--
Brown:
My only point is that I would just like to
suggest that it probably wouldn't be worth
a candle. The trouble that would be involved--
White:
That is pre-judging the case.
Brown:
You are getting 8 lot of legal opinions you
have to pay for and spend dollars for. It
would be a pity.
Kades:
Well, they have already got the opinion, as
I understand.
Brown:
Only in one case.
Kades:
Well, the one opinion that you refer to in the
letter, I don't know--
Bewley:
I would be very glad to leave it. If you
will write to me and ask for any further
information you want, I will see what I can do.
Regraded Unclassified
110
- 33 -
White:
Let's leave it this way. I am not quite
certain as to whether or not there hasn't
been 8. changed status and why we should
be interested in pursuing this any further
is something I want to check with the Secre-
tary. The only thing that we wanted to get
from the lawyers to protect us was to be able
in our statement to say either they are not
or they may not. The Legal Division is not
certain, and therefore they have advised us
to say, "May not."
Now, whether in the light of that the Secre-
tary wants to pursue the investigation any
further is something I would want to check
with him. He may well say, "Well, it is
something that we are not interested in
beyond this point at this time, though we
may have been interested - may be interested
at some time in the future." And if he is
not interested at this time, we will just
drop it. So we will leave it that way.
Therefore, you will not pursue the investi-
gation unless I get a request from the Secre-
tary, but in any case, if we ever decide,
that is, the Treasury, as to whether or not
these are available, we shall also reply
until we have further information that they
may be.
Bewley:
Yes.
White:
Is that--
Bewley:
We may say, "They may not be."
White:
They may be or they may not be. I think that
is what we did say, and we would repeat that.
So as to a bid by the demands of our Legal
Department whom we have asked and who have
given us that answer, we have no other alter-
native. Is that satisfactory?
Regraded Unclassified
111
- 34 -
Kades:
They may not be.
White:
Now you have asked another question here,
Mr. Kades. Do you want to state it yourself?
Kades:
Suppose I state it. I had & call from the
Procurement Division. They said they had
received - Brown may be more familiar with
this than I am in view of the fact that he
has been down at the hearings - that they
had been criticized for purchasing from
companies that were British owned, and then
lend-leasing the articles which were obtained
from those companies to the British. The
questioner apparently thought that the British-
owned companies should be willing to take
sterling and then it wouldn't be necessary
to have those items come under the Lend-Lease
Act. He did askfor a list to be submitted,
which we had submitted of those purchases
which we made from all the British-owned
or controlled companies, and I thought you
ought to know about that. That is simply
informative.
White:
Perhaps I know a little more about it or a
little less, I am not sure. I think it was
I who asked for that list on the basis of the
question which Congressman Scrugham asked. I
thought that it might be possible, in the
light of what Cliff Mack told me at first,
that there might be only one or two on the
list and we might ignore it. He said he
would investigate it, and he thought there
were more. I said, "Well, might you give
me a list on them?" which he did.
Now, since the Congressman hasn't asked us,
to my knowledge - hasn't asked us officially
for that, I think we can ignore it. If I am
mistaken, then we will have to pursue the
question further. If he has asked it, in
Regraded Unclassified
112
- 35 -
any case there is an appropriate economic
answer to that.
Brown:
Oh, sure, Mr. Bell covered that very
thoroughly.
Kades:
I simply wanted you - I didn't know you were
already informed of this. But I got from Man-
ning, the Chief Counsel of Procurement, he
thought that Congressman Scrugham had asked
for the list.
White:
I will recheck on that.
Brown:
I went - unless he asked Mr. Bell, because I
went through Mack's testimony very carefully
without - with that in mind, and there is
no request and no promise for that list.
Kades:
I see.
White:
And there was a request and a promise that
that list would be given to me. The request
came from me based on something that Mack
called me up about, so we will recheck on
that.
Kades:
Well, here is the original of the list, so
I will hand it to you.
White:
We will recheck on it as to whether or not
that list was requested by the Committee
and whether or not an answer is called for.
Kades:
Well, all that Manning knows he got from
Mack, you see. He wasn't there.
White:
If an answer is called for, we will make one
in terms of the list and also in terms of an
explanation.
Brown:
It would only be in connection with Mr. Bell's
Regraded Unclassified
113
- 36 -
testimony because I am sure--
White:
No, there is nothing in Mr. Bell's testimony
that calls for it.
Brown:
And there is nothing in Mr. Mack's.
White:
You are positive? Then the only thing that
remains is for me to check with Mack as to
why he gave me this list, and he will probably
tell me because I asked him.
Dewley:
Do you feel that we ought to try to determine
what steps are necessary?
White:
I don't think it is & matter that rests with
yourselves so much as with the Procurement
Division.
Bewley:
We put in a requisition to you, and you put
it out to the Iowest bidder, I think.
White:
I don't think it rests with yourselves, but
it is a question as to whether or not the
Procurement Division in purchasing goods
from the Dunlop Tire Company should say in -
following the line of thought of the particu-
lar Congressman who asked the question, "Now,
you are a British concern. Hence, there is
no reason why we should pay you in dollars.
We will pay you in sterling. The obvious
answer to that is--
Bewley:
All costs are in dollars.
White:
And that the profits were already accrued.
Brown:
And it happened that the particular company
We discussed had lost money for the last
several years, as Mr. Brown pointed out.
White:
Fortunately we had investigated that.
Regraded Unclassified
114
- 37 -
Kades:
If it is the same company I think you have
in mind, we have had some inquiries about the
purchase of that, the stock of that company,
in the event it is placed by the RFC.
Brown:
That is the same source, I am quite sure.
White:
They are anticipating 8 boom in business for
certain reasons, and their interest was
centered not so much on their past per-
formance as on the value of the concern in
the light of their future performance, but
I don't think we need do anything about
this yet. That takes up the three points
which you had in mind.
Kades:
That is right.
White:
There has been some discussion by the Secre-
tary on the matter of British dollar expendi-
tures here outside the lend-lease. Are there
any figures that you have with any significant
break-downs of the dollar expenditures which
are being made here outside the lend-lease.
Bewley:
What type of expenditures do you mean?
White:
Anything.
Bewley:
Everything?
White:
Outside the lend-lease and outside of the -
you remember that there were a list of items -
there were some expenditures that you were
going to make in dollars provided they were
under a certain amount.
Bewley:
Oh, we give you those regularly.
White:
Now, I am wondering whether there are any
dollar expenditures by - by the British
peoples outside of lend-lease.
Regraded Unclassified
115
- 38 -
Bewley:
Oh yes, I think there are a certain number
of things bought here which are paid for
in dollars which we don't know anything
about.
White:
And there isn't any way that has developed
since we last spoke of it in which you
could obtain that?
Bewley:
I am sorry, I didn't know you asked for it.
White:
We spoke of the desirability of getting it
sometime past, and the answer was that there
was no way of analyzing those.
Bewley:
At that meeting, I wasn't there. I didn't
know that.
White:
There had been no developments to your
knowledge?
Bewley:
I haven't thought about it at all. We ought
to be able to give it to you in bulk.
Whether we can give it to you in break-
downs is another matter. But we ought to
be able to give it to you in bulk.
White:
If we could get--
Bewley:
Of course you get the bulk results.
White:
Yes, we get them - our figures of June on
the exports to the British Empire - we have
just got June. We didn't know about that -
that there were some developments in that
direction which gave the more nearly current
picture of the dollars which you were permit-
ting the individual to expend.
Bewley:
I will look into that. I didn't quite know,
but I will certainly look into that and find
out.
Regraded Unclassified
116
- 39 -
White:
One of the difficulties of our figures on
our exports is that we have them including
all items under Lend-Lease and elsewhere,
past contracts and other matters, and in
order to segregate those into the categories
that we are interested in from the point of
view of value, we find it almost an impossible
task, and the Secretary is of the opinion that
we have them, and he feels that we ought to
be able to get it.
Bewley:
You get all the Supply Council figures, don't
you? You get them regularly.
White:
We get the Supply Council figures, but we
don't get the others except as they appeared
in this recent estimate.
Bewley:
Yes, I see. Well, I will see what I can find
out about that.
White:
And I should like to be able to tell him,
if it were possible, that in the month of
August the U. K. expended outside of the
British Supply Council so many dollars.
Also, if that is a large amount, some break-
down, some rather general break-down. Now,
I don't know what your machinery is there.
Bewley:
It seems as though we could keep track of
these things. I don't know how well we
could give you that.
White:
I should imagine that somebody gets permis-
sion to spend dollars.
Bewley:
Oh, yes, but then you have hundreds and
thousands of E and D1 forms, as they are
called, drifting into the banks of England.
It takes a lot of time.
White:
Well, I don't know, but I am wondering whether
Regraded Unclassified
117
- 40 -
somebody keeps track of the total.
Bewley:
Somebody keeps track of the total, and we
know the total number of dollars lost, of
course.
To give you a picture of our dollar and
gold balances, which does in fact show -
it doesn't show what countries it has been
spent in.
White:
It doesn't show anything in relation to
this. We know the net figure, but it doesn't
enable me to answer the Secretary's question,
"How much is U. K. spending outside of the
British Supply Council?" The answer to that
I don't know, and I haven't the slightest
idea.
Bewley:
I don't either, but I will do my best.
White:
If we can get that, we might avoid further
questioning on his part as to why we can't
get it.
Bewley:
Yes.
White:
Now, there is one other item, possibly, that
we might pass over quickly and that is a report
of the conference of the Dominion representa-
tives on their requisitions. Is there any-
thing that you have made progress on?
Hicks:
I believe Mr. Brown was going to tell us of
that.
Brown:
I beg your pardon?
White:
On the conferences with the Dominion repre-
sentatives?
Brown:
Yes, we have had 8. number of talks with the
Regraded Unclassified
118
- 41 -
Australians and the people from New Zealand
and - I don't think any from South Africa.
We have one man now whose sole responsibility
is to deal with Dominion matters and who is
available for consultation by Dominion
representatives in advance of the filing of
B. requisition 80 that they can know pretty
definitely whether the thing will be eligible
under the Lend-Lease or not. I hope that is
going to be - and we are always formulating -
have unofficially formulated the general set
of principles as to what we feel is broadly
eligible and broadly not eligible for Lend-
Lease, which serves as a working muide which
we hope will be helpful.
Inite:
And that applies to Australia, New Zealand?
rown:
And in South Africa we just haven't had any
talks on that, I don't think, have we?
Sallantyne:
No, you haven't. India has been in, and, as
a matter of fact we have told them of what
you have done. They are immensely pleased to
have someone to whom they can go directly
and get that special help that they are get-
ting from Smith.
Brown:
And then this morning We had a talk on
various steel requisitions dealing with the
Crown Colonies and so forth, and we are try-
ing as much as possible to talk over any
doubtful case beforehand and ret it cleared
so that instead ofhaving a whole requisition
come in with one thing in it that is not quite
right, we can have it all right before it comes
in. It will save a lot of work, I think.
White:
Woll, the only item left then is the requi-
sitions which you have.
Regga:
Yes, I have of report on these. I also have
Regraded Unclassified
119
- 42 -
a. report of dollar commitments. Here are
the dollar commitments since the last meeting.
It is broken down.
White:
Well, you can leave this set here?
Keyes:
Yes.
White:
These are the - are there any items here,
Mr. Brown, that you wanted to raise for dis-
cussion, any doubtful items?
Brown:
No, those have all been cleared with - those
are all sheets we have talked about, Alex,
aren't they?
Keyes:
Yes.
White:
And you are satisfied that there is nothing--
Keyes:
I think Mr. Bewley is satisfied.
Bewley:
Yes, I think SO.
White:
This covers all the time?
Keyes:
The period since the last meeting, that is
right.
White:
Is there anything else that you want to raise?
Bewley:
I would just like to ask Mr. Brown, as I see
him there, whether we can get any position
soon about the tax on copper?
Brown:
Well, I am afraid I am not quite up to date
about that. As I understand it, there are
about three different ways the thing can be
handled, any one of which is a question of
deciding which is the most feasible. You
apparently do not want to pay the money to
get it back by drawback because it would tie
it up three or four months anyway.
Regraded Unclassified
120
- 43 -
Bewley:
That is right. My instructions are that we
want to avoid that if we possibly can.
Brown:
Well, it is something that we feel we can take
care of under Lend-Lease. We don't like to
do it because that means that just that much
money is taken out of the appropriation
which could be used to purchase some other
article, but basicly that choice is yours,
of course. We have one further thing,
we were seeing if we could shift the whole
procurement to the Navy, and hand that
article to the Navy and see if we could get
it under the Navy statute.
White:
How much is involved?
Brown:
Two hundred fifty thousand dollars.
Bewley:
This is copper which we are handing over with-
out payment to be used in Lend-Lease articles
to be eventually handed back to us.
Kades:
We wrote a letter to Justice on that in which
we indicated that it was handled through the
Navy route, that the duty would not be im-
posed.
White:
Well, that is all I have unless someone else
has anything.
Do you have anything, Mr. Brown?
Brown:
I have nothing, sir.
Kades:
I would like to translate that tax conven-
tion into dollars in view of the fact that we
have been talking about dollars that we
weren't getting. That is supposed to mean
thirty million dollars.
White:
In how long a period?
Regraded Unclassified
121
- 44 -
Kistler:
For a year, isn't it?
Kades:
Well, the British estimated that it would cost
thirty million dollars in the event that the
tax convention did not--
Bewley:
That is on the contracts outstanding, I think,
isn't it?
Kades:
Where deliveries have not yet been made.
Bewley:
Yes.
White:
So the longer the tax convention takes, the
smaller the sum?
Bewley:
The smaller the sum, yes.
Kades:
It covers real, personal property, and also
transaction taxes.
White:
How long do you think the convention will take
before it becomes - before it is effective?
Kades:
It is simply a question of the time - it
becomes effective the day after ratifications
are exchanged.
Bewley:
Would ratification take long?
Kades:
I don't know. I shouldn't think it would
take long. It has to go through the Senate,
and I think it has to be ratified on your
side, too.
Bewley:
I don't know.
Kades:
I don't know.
White:
Well, the thirty million is melting away.
Kades:
Yes.
Regraded Unclassified
122
- 45 -
White:
Every month reduces that substantially.
Kades:
But it has melted away so far only about
a million dollars or two million dollars.
White:
All right, gentlemen.
Kades:
I will do my best with the Senate. (Laughter)
Regraded Unclassified
123
Agenda for 11:00 o'clock Meeting
Thursday, October 2, 1941
1. Plant transfer program
(a) Progress on transfer of old program,
(b) Progress on new $31 million program.
2. Supply contract transfer program.
(a) Todd Ship contracts,
(b) Other developments.
3. Report of conferences with Dominion representatives on
their requisitions.
EH:rel
10/2/41
Regraded Unclassified
TREASURY DEPARTMENT
124
INTER OFFICE COMMUNICATION
DATE October 2, 1941
Secretary Morgenthau
TO
J. Ramarek
FROM
Jubject: Airplane Deliveries to the British
Summary
1. The latest statement received reports the shipment
of 11 planes to the British. All of these, except two
Douglas Boston bombers to the Middle East, were destined for
England.
2. Last week the first of the new model of the heavy
four-motor Consolidated Liberator bombers was flown to England.
3. The first Glenn Martin Baltimore medium bomber is
reported as shipped in this latest statement. The Martin 187
Baltimore is a two-motor bomber and B. cousin of the Martin 167
Maryland. It was specifically designed, however, to R. A. F,
requirements and will probably supersede the Maryland.
Regraded Unclassified
125
Division of Monetary
- 2 -
Research
Airplane Shipments to the British
(From February 1 to September 27 by air
January 11 to September 6 by sea)
Table A. - Shipments by Area-
Total
Latest
Reported
Week
To Date
To the United Kingdom
Light and medium bombers
35
915
Heavy bombers
1
44
Naval patrol bombers
0
73
Pursuit
3
67
Total to United Kingdom
39
1,099
To the Middle East
Light and medium bombers
2
202
Pursuit
0
516
Total to Middle East
2
718
To the Far East
Light and medium bombers
0
18
Naval patrol bombers
0
9
Pursuit
o
145
Trainers
0
55
Total to Far East
0
227
Totals
Light and medium bombers
37
1,135
1
44
Heavy bombers
o
82
Naval patrol bombers
Pursuit
3
728
Trainers
o
55
Grand Total
41
2,044
Regraded Unclassified
126
Division of Monetary
- 3 -
Research
Table B. - Shipments by Types
Total
Latest
Reported
Week
To Date
Bell Airacobra
or
58
Boeing B-17
0
21
Brewster Buffalo
0
145
Consolidated Catalina
0
82
Liberator
0
22
Liberator II
1
1
Curtiss Tomahawk
0
516
Douglas Boston I
0
1
Boston II
0
72
Boston III
8
240
Glenn Martin Maryland (Model
167)
0
150
Baltimore (Model
187)
1
1
Grumman Martlet II
0
9
Lockheed Hudson I
0
1
Hudson III
28 *
257
Hudson IV
0
18
0
344
Hudson V
North American Harvard II
0
55
0
51
United Chesapeake
Grand Total-All Types
41
2,044
* One reported overdue at destination. One reported
crashed at Dundalk.
Regraded Unclassified
Division of Monetary
127
- 4 -
Research
Table C.
- Plane Deliveries to the British by Weeks
Light
Naval
Week
and Medium
Heavy
Patrol
Ended
Bombers
Bombers
Bombers
Pursuit
Trainers
Total
Feb.84
22
-
3
-
-
25
Feb.15*
39
-
-
100
-
139
Feb.22#
35
-
-
27
-
62
Mar.1*
7
-
5
25
-
37
Mar.8»
16
-
3
10
-
29
Mar.15*
26
1
-
-
31
Mar.22*
17
-
2
22
-
41
Mar.29*
25
1
3
18
-
46
21
e
Apr.5*
-
7
73
-
101
Apr.12*
21
2
2
27
-
52
Apr.19*
20
3
4
5
-
32
Apr.26*
23
2
3
-
28
56
May 3*
61
1
2
15
27
106
May 10%
36
1
8
10
-
55
May 17*
61
13
7
19
-
100
May 25#
30
10
-
25
-
65
June 1*
28
5
5
21
-
59
June 8#
37
2
e
7
-
-
46
June 15ᵗʰ
26
1
4
20
-
51
June 224
28
-
LL
52
-
84
June 29#
45
-
1
50
-
96
July 6%
19
3
20
-
42
-
July 13*
34
3
48
-
85
-
July 20#
F
-
1
32
-
74
July 27%
45
-
-
24
-
69
Aug.3*
45
-
-
11
-
56
Aug.10#
53
1
15
-
-
69
Aug.17#
49
12
-
61
-
-
Aug.24*
36
1
11
-
48
-
Aug.30%
44
-
-
5
-
49
Sept.6#
29
-
1
4
-
34
Sept.13#
34
-
-
17
-
51
Sept.20s
45
-
-
7
-
52
Sept.27#
37
1
3
1
41
-
1,135
44
82
728
55
2,044
# The date given is for shipments by air. Shipments by water
start three weeks earlier. That is, the statement reporting
the shipment of planes by air for the week ending September 27
would report the shipment of planes by water for the week
ending September 6.
Regraded Unclassified
128
October 2, 1941.
MEMORANDUM FOR THE SECRETARY'S FILES
A meeting relative to the administration of Executive
Order 8389 was held in Mr. Foley's office at 4 P. m. on
October 1, 1941, attended from time to time by the following:
Messrs. Foley (Chairman), Pehle, B. Bernstein, Lawler,
White, Dietrich and Timmons for the Treasury; Messrs. Acheson,
Fisher, Luthringer and Miller for State; Messrs. Shea, Kreeger,
Jurenev and Swidler for Justice; Mr. Knapp for the Board of
Governors of the Federal Reserve System; and Messrs. Knoke and
Kimball of the Federal Reserve Bank of New York.
Mr. Foley read to the meeting & letter received from
Mr. Marshall of the New York State Bankers Association, stating
that the Association was most appreciative of the fact that the
Treasury had sent Messrs. Towson and Murphy to explain freezing
control and Form TFR-300 to the recent meetings of the Association
held throughout New York State. Mr. Foley said that plans were
presently being developed to bring representatives of the other
Federal Reserve Banks to Washington to formulate a program for
similar meetings to be held in other Federal Reserve Districts.
Reference was made to application No. NY 253863 filed
by the Socony-Vacuum Oil Company to purchase 15% of the stook
of the Maywood Chemical Company against payment of part of the
blocked reichmarks balance of Socony-Vacuum's subsidiary in
Germany. Such stock is presently owned by Mrs. Amalia Janner,
a resident of Germany. If the transfer is allowed, Socony-
Vacuum proposes to sell such stock to Emory University and credit
the proceeds of the sale (approximately $300,000) to its German
subsidiary in reduction of debt. This application was previously
denied by this Committee, and the only difference between the
old and the new application is that it is now proposed to place
the proceeds of the sale in 8. blocked account. It is stated,
however, that such blocked account shall at all times be the
property of the Socony-Vacuum Oil Company. In view of all the
facts and circumstances, and the general policy of this
Committee in regard to similar cases, it was unanimously agreed
that the application should be denied.
Regraded Unclassified
129
- 2 -
An application filed by the General Dyestuffs
Corporation to purchase 1,500,000 shares of the stock of
General Aniline & Film Corporation, such stock constituting
control of that Corporation, from the Internationale Gesellschaft
fur Chemische Unternehmungen A. G. was considered at length by
the Committee and was unanimously denied.
Mr. Bernstein reported that Mr. White, the New York
State Superintendent of Banks, will be in Washington tomorrow
morning to discuss with the State and Treasury Departments the
question of the solvency of the Yokohama Specie Bank.
Mr. Bernstein also submitted to the Committee 8.
statement of the policy which has been adopted with respect to
reports of patents and patent licenses on Form TFR-300. A
report of all licenses under American owned patents issued by
the United States is not to be required merely because one of
the licensees is & foreign national. It is sufficient that &
report be required merely of such licensees who are nationals
of 8 foreign country. A report on Form TFR-300 is not to be
required of American owned patents where the sole national
interest arises by virtue of issuance by a foreign country. A
report on Form TFR-300 will not be required with respect to
licenses under American owned patents issued by a foreign country.
However, reports on Form TFR-300 should be made of all contracts
existing between American corporations and foreign nationals by
which any rights would accrue under American owned patents taken
out in foreign countries, and any agreements providing for the
interchange of technical data, know-how, or otherwise.
Mr. Pehle referred to & recent visit from Mr. Nishiyama,
the Japanese Financial Attache, who has proposed two methods of
payment for the oil which Export Control will license for shipment
to Japan. The proposal is that the oil will be purchased either
(a) by shipping gold from Japan to the United States or (b) by
the import into the United States of United States currency from
Japan and/or China. It was agreed by the Committee that it
should be made perfectly clear to the Japanese that the Treasury
stands always ready to buy gold from any source. However, the
Regraded Unclassified
130
- 3 -
question of the disposal of the dollars resulting from such
sale is 8. question which comes within the purview of this
Committee. Mr. Acheson said that Secretary Hull has again
indicated to him that he does not want any clear statement made
on the question of oil exports to Japan, but rather prefers
that & direct answer be delayed as long as possible. In view
of this, Mr. Pehle suggested that Mr. Nishiyama should be told
that the Committee has his last proposal under advisement. The
Committee agreed to this suggestion.
Mr. Pehle informed the Committee that approximately
100 applications are pending before the Foreign Funds Control
to send merchandise to Japan. The largest items involved are
cotton and fur waste. It was agreed by the Committee that
applications to export merchandise to Japan, except petroleum
products, should be denied.
Mr. Bernstein mentioned that & small group in the
Treasury has been working on a memorandum which sets forth ways
in which increased economic pressure can be brought to bear on
Japan if such action seems desirable.
Mr. Pehle raised with the Committee a proposal to
amend General License No. 32 80 as to require that remittances
to all blocked countries be made either by the purchase of the
necessary foreign exchange from a licensed seller or by deposit
of the dollar amount of the remittance in & blocked account.
Remittances to France and French Colonies, Japan, China,
Portugal, Sweden, Switzerland and Spain are presently being
effected in this way. It was pointed out that the present
General License No. 32 allows Germany and Italy to collect
large amounts of free dollars which they can then transfer to
South America or use for undesirable purposes in this country.
Mr. Acheson said that he would like to have a memorandum
explaining the meaning of the proposed change. Mr. Miller is to
prepare such a memorandum.
Mr. Howard Smith, Vice President and Treasurer of the
American Express Company called on Mr. Pehlo today and said that
the American Express Company has & chance to sell its building
Regraded Unclassified
131
- 4 -
in Berlin and receive payment for it out of the blocked account
of the Banque de Paris et des Pays Bas, Brussels. It was
unanimously agreed by the Committee that this application should
be denied.
It was proposed by the Treasury Department that the
present General License No. 42 be modified by issuing & General
License No. 42-A, which will license as generally licensed
nationals all individuals who have been residing in the United
States at all times on or since June 17, 1940, but who have
not come within the provisions of such General License only by
reason of the fact that they were not domiciled here. The
Treasury has ruled that persons on visitors visas cannot be
said to be domiciled in the United States. The banks which
release accounts under General License No. 42-A will be required
to submit reports indicating each account so treated. If it
is found that any undesirable accounts are being released such
accounts can be excluded from the operation of General License
No. 42-A. The Committee agreed that this license should be
issued.
Mr. Acheson reported that it was the view of the State
Department that the pending application to transfer $300,000
to the United Kingdom Continental Corporation in reimbursement
for a shipment of food from Turkey to Greece paid for by such
Corporation should be approved. It was agreed that three other
applications, two involving the transfer of funds to Switzerland
for the purchase of food and medicine for Greece and one involving
a similar shipment to Belgium, should be denied.
Mr. Acheson said that the German, Italian and Japanese
newspaper correspondents in the United States are complaining
that they are not receiving funds. In the case of the Japanese
correspondents, payments to them have been licensed but the funds
for such payments would have to be provided out of the account
of the Yokohama Specie Bank and such payments are not being
permitted pending a study of the solvency of such institution.
This matter will be examined with a view to seeing if funds
can be provided from some other source.
Mr. Acheson read to the Committee B letter from Mr.
Noel Hall of the British Embassy inquiring whether the
Hollandsche Bank Unie has been asked to follow the same policy
Regraded Unclassified
132
- 5 -
as American, British and Canadian banks will follow with regard
to persons or firms on the Proclaimed List and the Statutory
List. The Minister of Economic Warfare in London has also
informed Mr. Hall that they are taking steps to request the
Societe Generale and the Banque Italo-Belge to follow the same
instructions as have been given to American and British banks.
It was agreed that this matter should be brought to the
attention of the Dutch Legation with a request for cooperation.
Mr. Kreeger said in checking through a number of
reports filed under General License No. 72 it had been
found that several patents taken out by Germans had been
assigned to I. G. Farben. Mr. Kreeger inquired if there was
any way in which the issuance of these patents could be delayed.
Mr. Bernstein pointed out that it would be unwise to suspend
the operation of the General License at this time, since no
program for dealing with such patent problems had as yet been
adequately worked out and to suspend the issuance of the
patents might prematurely arouse public opposition from those
who fear regulation of patents. Mr. Bernstein suggested that
the matter be referred to a sub-committee for careful study
and that Messrs. Kreeger and Murphy should discuss the problem
with the Office of the Commissioner of Patents.
Mr. Acheson mentioned the fact that it might be
desirable to exempt foreign service officers from the necessity
of having to report on Form TFR-300. It was agreed that the
Treasury should announce this ruling in a public circular.
Regraded Unclassified
TREASURY DEPARTMENT
133
INTER OFFICE COMMUNICATION
STRICTLY CONFIDENTIAL
DATE October 2, 1941
Secretary Morgenthau
TO
FROM Mr. Klaus
After consulting with FBI, and largely on the basis of the newspaper
article which you gave me, an instruction was issued yesterday, October 1,
by Mr. Foley, blocking the accounts of Anastasi Andre Vonsiatsky and his
wife. This article added to FBI's file, I am informed, enough material con-
cerning Vonsiatsky's purpose to move FBI to present once again to the Depart-
nent of Justice the proposition of taking criminal action against Vonsiatsky.
Samuel (Claus
Kapine informed
Regraded Unclassified
TREASURY DEPARTMENT
134
INTER OFFICE COMMUNICATION
TO Secretary Morgenthau
DATE October M 2, 1941.
FROM Mr. Thompson
In your memorandum of October 1, you ask if we have a Speakers'
Bureau and suggest that we ought to have somebody.
By Treasury Order Number 1 of November 20, 1933, it was ordered
that "all statements to the Press or to the public through interviews,
speeches, or public addresses by any officer or employee of the
Treasury Department shall be submitted before release for approval by
Mr. Herbert E. Gaston, Assistant to the Secretary."
Mr. Gaston saw that there was a rigid compliance with these
requirements. He arranged for memoranda to be sent to him of any
speaking engagements accepted by any official or employee of the
Department, it being indicated in each instance the time and place
of the address and the name of the organization under whose auspices
the address was to be delivered.
When Mr. Gaston became Assistant Secretary, Mr. Duffield was
charged with these responsibilities. Subsequently, it became the
duty of Chick Schwarz. I think that Chick should see that the pre-
scribed procedure is followed, although it might be that you would
want the order amended directing Mr. Kuhn to handle requests for
speakers and matters relating to public addresses, leaving to Chick
the responsibility as to all other public relations matters.
your
Regraded Unclassified
135
ADDRESS OF SECRETARY MORGENTHAU
DELIVERED BEFORE THE CONVENTION OF THE
AMERICAN BANKERS ASSOCIATION
CHICAGO
October 2, 1941
Regraded Unclassified
186
Three weeks ago, in a speech at Boston, I said
that we were in the early stages of a serious price
inflation, and that we must deal with the danger at
once. I said then, and I should like to repeat it
at the very start of this talk today, that 1f we
do not check the spiral of rising prices, and check
it now, the consequences will haunt us and our
children for years to come.
I outlined then a twin program for fighting
inflation, on the one hand by reducing excess
purchasing power in the hands of the public, and on
the other hand by increasing the supply of goods,
like farm products, which do not compete with the
over-riding needs of our national defense effort.
Regraded Unclassified
137
- 2 -
I said then - and I feel very deeply about it -
that it was "sheer folly" for the farmer to seek
higher prices for his crops at this time, for labor
leaders to seek continual new increases in wages, or
for landlords, businessmen, bankers, or any group to
exploit the present emergency for selfish gain. And
I asked for the understanding and support of 130
million Americans in fighting the evil of inflation
by every means in our power.
There is no need to tell this audience of bankers
of the need of common effort, on the part of every
group and every individual in the community, if
inflation is to be averted.
Regraded Unclassified
138
- 3 -
You have shown abundantly in the past year that you
are conscious of your duties and your responsibilities
to the country. You have given magnificent help,
and given it unselfishly and cheerfully, in the
selling of Defense Savings Bonds and Stamps. You
have given further help in the sale of tax anticipation
notes which make it possible for every taxpayer to
meet next year's heavy tax bill more easily. You
have cooperated willingly with the Treasury's control
of foreign funds, even though it interferes with
the free handling of your business affairs and subjects
you to many complicated regulations and questionnaires.
Regraded Unclassified
- 4 -
139
In all these and other ways you have been such
real partners of the government that I am very glad
to be with you this morning, to thank you personally
for all that you have done.
But the most important task of American bankers
lies immediately ahead, and it is a broader and
bigger task than any you have yet been called upon
to perform. That is the task of doing everything
in your power, not only as bankers but as influential
and respected leaders in your communities, to fight
this evil of inflation wherever it rears its head.
Many of you will remember, from your own
experience of twenty-five years ago, that inflation
is just as damaging to bankers as to farmers, wage
earners or businessmen.
140
- 5 -
We now know that the doubling of bank loans
and investments from 1916 to 1920, and the resulting
doubling of deposits in the same five years,
contributed to the great increase in prices which
brought such hardship to American consumers and such
disastrous after-effects to American farmers.
We now know that the inflation of a quarter-century
ago, with all of its injustices and dislocations,
could to some extent have been avoided 1f the
Government of those days had acted more promptly,
if it had taxed more heavily and borrowed more
widely from genuine savings.
Regraded Unclassified
- 6 -
141
When the inevitable collapse came, no fewer
than 2,910 banks with 790 million dollars of deposits
were compelled to suspend operations in the five-year
period from 1921 to 1925. Humpty Dumpty had fallen
from the top of a very high wall, and many years of
effort were needed to pick up the pieces. It is our
job at the Treasury and the Federal Reserve, and
yours as custodians of the people's money, to make
sure that any present-day descendants of Humpty Dumpty
shall not go climbing up that wall of expanded credit
and higher prices again.
That is why my first plea to you as bankers
is that you scrutinize closely your own lists of
applications for loans.
Regraded Unclassified
142
- 7 -
Those lists contain within them much of the ammunition
of inflation. You have in your hands, therefore,
one of the most effective weapons for checking
inflation at its source. You are sure to find, on
looking over your lists, many applications for money
for non-defense projects that would involve competition
for steel or copper or any of the thousand and one
materials now needed so desperately for our defense
effort. If you can postpone all such unnecessary
loans until a later day, without waiting for the
priorities to become broader, you will be doing a
real and lasting service to your country.
Regraded Unclassified
143
- 8 -
I hope that in the not too distant future the
priority system will become so effective that the
supply of practically all raw materials for all
purposes will be under full control in the interests
of national defense. That should mean that materials
which must be used for defense purposes will not go
into any unnecessary civilian projects. But until
that day comes, I hope that you will constitute
yourselves the sentinels of the nation, in your own
bank and your own community, in guarding against any
private encroachment upon the stock of resources needed
for the national effort.
Regraded Unclassified
- 9 -
144
Another essential service which you can perform
is, quite simply, to teach the people of your
communities the facts about inflation and defense
financing. You see in your daily work men and women
from many walks of life. You are in a key position
to advise them, and your advice carries as much
weight as that of a family doctor to his patient or
a lawyer to his client. I know that in these serious
times you will give the right kind of advice, and
that your influence collectively and individually
will be joined with that of your Government in its
efforts to keep the cost of living in check.
There is a real need of convincing the average
citizen, right now, that he will have to accept far
greater taxation.
Regraded Unclassified
- 10 -
145
There is a real need of preparing him to make
greater savings in his daily life to ensure the long-run
survival and improvement of his standard of living.
Above all, there is a real need of explaining to him
that this war cannot be won quickly or cheaply or
easily.
It will require all-out effort on our part to
tip the scales in this war. It will require every
ounce of strength that our giant industrial system
can give. It will demand sweat and sacrifice on
the part of producers, workers, managers and consumers
alike. And it will mean the greatest public
expenditure that has ever been pumped into the
arteries of our economic system.
Regraded Unclassified
- 11 -
146
Defense expenditures have now risen slowly to
more than a billion and a quarter dollars a month.
They will soon be a billion and a half, but even then
they will be utterly inadequate compared to the need.
Perhaps "inadequate" is too mild and charitable
a word. We are trying to make ourselves the arsenal
of democracy by devoting only 20 per cent of our
factory and mining output to defense, only 30 per cent
of our output of durable goods, only 10 per cent of
our output of non-durable goods, and only 16 per cent
of our national income. That, surely, is very far
from total defense or all-out effort.
Regraded Unclassified
- 12 -
147
Nobody can emphasize too often or too strongly
the magnitude of the job which we American people
have set out to do. Let me give you a few simple
illustrations. At present prices the cost of the
total defense program as now planned will be more
than 50 billion dollars. This is 10 billion dollars
more than the original value of all building
construction in the United States since 1927. It
is twice as much as the total investment in American
railways. It is twice as much as the total value of
all passenger automobiles produced in this country
during the past fourteen years.
Regraded Unclassified
- 13 -
148
Yet there is no reason whatever for us to be
discouraged over the mere size of the job ahead.
In spite of a slow start, we are now on the road to
an expansion of production which will confound those
of narrow vision and little faith who cried, "It
can't be done." The capacity of America to produce
over the long pull is almost limitless. We
Americans can do any job that we set ourselves to
do.
It 1s not so much the size of the undertaking
as the limited time at our command which causes
our economic system to heave and strain. To telescope
such a vast construction or production job within,
not twenty years or ten years, but within one, two
or three years, is bound to affect profoundly every
aspect of our economic and social life.
Regraded Unclassified
- 14 -
149
Under the impact of our comparatively modest
defense expenditures up to now, our national income
has increased by fourteen billion dollars in a year,
and we are feeling all the preliminary symptoms of
a serious price inflation. What will the inflationary
forces be six months from now, when we shall be
spending much faster and when the supplies of
materials for civilian use will be smaller than
they are today? Where will prices be then, 1f we do
not act courageously to check them now?
It is imperative that we set aside a great
part of that national income, and especially the
increase in the national income, if we are to put an
effective brake upon inflation.
Regraded Unclassified
- 15 -
150
One indispensable method of paying for defense
without inflation is "all-out" taxation, a method
that has not yet been tried in spite of the good
start that Congress has made in raising $3,500,000,000
in additional revenue. With the help of the new
Revenue Act of 1941, our tax structure will yield
about fourteen billion dollars in revenue, but in
my opinion it still contains many inequalities and
many omissions which will have to be corrected next
year.
The tax bill next year will have to be a
genuinely "all-out" bill, a genuine levy upon all in
accordance with their ability to pay, if it is to
raise the necessary revenue, place the necessary check
upon inflation, and take the profit out of war.
Regraded Unclassified
151
- 16 -
The second indispensable method of drawing off
excess consumer purchases is by borrowing as much as
possible from the genuine savings of individuals
throughout the country. I know I can count on
your wholehearted cooperation whenever we have
to come to your banks for funds. The way to proceed
now, however, is to finance our needs as far as
possible without adding unnecessarily to bank
deposits, to borrow instead from private investors,
large and small, and thus to reduce the inflationary
pressure of our swiftly rising national income.
The Defense Savings Program has now been in
progress for five months. It has yielded us a
billion and a half dollars from two and one-half
million individual investors.
Regraded Unclassified
- 17 -
152
The result so far 18 certainly not below our
expectations, but just as certainly it falls far
short of our needs. It falls short especially in
that it has only begun to reach workers' payrolls.
Every one of the great national labor organizations
has given its endorsement to systematic saving, and
voluntary payroll allotment plans are now in operation
in more than five thousand companies employing
between five and six million workers. Our strongest
efforts must now be made in our great industrial
centers, and must be directed at the good sense and
patriotism of the workers themselves.
Regraded Unclassified
- 18 -
153
I can find no usefulness, for our present
purposes, in the old Liberty Loan method of fixing
money quotas for communities, trades, labor unions,
school classes or individuals in this Defense Savings
Program. I can see no value, either in terms of
economics or of morale, in high-pressuring people
to take money out of bank savings accounts or out
of life insurance. But I do see a great benefit,
financial and moral, in persuading spenders to set
aside, systematically, week after week, a part of
their current income for their own good and their
country's good.
Regraded Unclassified
- 19 -
154
The kind of spending that the Treasury is
most anxious to divert into Defense Savings Bonds
is the spending produced by pay increases and bonuses,
and by increased dividend payments. I should like
to offer as a suggestion, for example, that every
Christmas bonus in the United States be paid in
Defense Savings Bonds or Stamps this year. The banks
of America can start the fashion so that it will
sweep the country. The total amount of such bonuses
may be small, but there could be no finer example
to the public, no more striking reminder of the
spirit of these times, no better safeguard for the
days of economic strain that are sure to follow the
war.
Regraded Unclassified
- 20 -
155
We at the Treasury believe that the voluntary
Defense Savings Program has already awakened a
greater sense of pride in America and a greater
sense of participation in the national effort.
We shall continue along that road of voluntary
cooperation, and I am perfectly confident that we
shall reach vast numbers who are willing and eager
to put their savings to work for their country.
In this effort the Treasury will continue to
depend greatly upon the bankers of America, not
only as its agents in selling Defense Bonds but
also as missionaries in spreading the gospel of
savings in times like these.
Regraded Unclassified
- 21 -
156
There are no commissions for bankers in this
work, and you have asked for none. But in order to
enable you to give wider distribution to Defense
Savings Bonds, I am happy to announce to you this
morning that it will no longer be necessary for you
to put up collateral for the series E bonds which
you keep in stock for customers. I hope that this
will relieve the banks, especially the small banks,
of a real burden, and I hope that you will not
hesitate to tell us at the Treasury of any similar
burdens which you feel may be hampering you in the
sale of these bonds.
Regraded Unclassified
157
- 22 -
Wider savings and greater taxes will not, of
course, be enough in themselves to cope with the
inflation that now confronts us.
You have seen the joint statement issued last
week by the Federal Reserve System and the Treasury,
dealing with the raising of bank reserve requirements
to the limit of the law, and pledging full cooperation
with the Office of Price Administration and the new
Supply and Priorities Allocations Board.
That joint statement was a reminder of the fact
that the Government already has powerful weapons
of control in its hands, and that if it needs more
power it will ask Congress for whatever it needs,
in the fight against rising prices and falling living
standards.
Regraded Unclassified
- 23 -
158
It is now asking for additional power through the
price-control bill, which I hope will be passed by
Congress without delay.
I have already suggested an extension of the
social security program as a possible method of
absorbing several billion dollars of next year's
national income and thus building a further reserve
for the future. I have already suggested, not once
but repeatedly, that the Government cut down
immediately on non-defense expenditure, not only as
sound financial policy but as sound anti-inflationary
practice.
Regraded Unclassified
- 24 -
159
or course, such a combination of emergency
taxes, priorities, savings and price-control will
cause some inconvenience; of course it will cause
some hardship, some sacrifice. We are now engaged
in a world struggle that demands all our energies
and all the qualities that have made America great.
As 2 result of that effort we are compelled to fight
another enemy, the enemy of inflation, on the home
front. How can we hope to win unless we first throw
onto the rubbish heap all ideas of business as usual,
pleasures as usual and comforts as usual? In my
opinion, complacency is our major source of weakness
today in building our defenses, for it saps our will
and clouds our minds, and blinds us to the stupendous
size of the job that confronts us.
Regraded Unclassified
160
- 25 -
We can conquer inflation on the home front if
we act now, just as we can ensure the defeat of foreign
tyranny if we rouse ourselves in time. Most Americans,
I think, are beginning to see that they have a personal
stake in the fight against inflation, just as most of
them began long ago to see their individual stake in
the destruction of the Axis war machine. I am
confident about the outcome on both fronts, because
I have a deep and abiding faith in the common
sense of the American people.
Regraded Unclassified
TREASURY DEPARTMENT
1G1
Washington
(The following address by SECRETARY MORGENTHAU
before the Annual Convention of the American
Bankers Association in Chicago is scheduled to
be delivered at 10:30 a.m., Central Standard
Time, Thursday, October 2, 1941, and is for
release upon delivery at that time.)
Three weeks ago, in a speech at Boston, I said that we
were in the early stages of a serious price inflation, and that
we must deal with the danger at once. I said then, and I should
like to repeat it at the very start of this talk today, that if
we do not check the spiral of rising prices, and check it now,
the consequences will haunt us and our children for years to
come.
I outlined then a twin program for fighting inflation, on
the one hand by reducing excess purchasing power in the hands of
the public, and on the other hand by increasing the supply of
goods, like farm products, which do not compete with the over-
riding needs of our national defense effort,
I said then - and I feel very deeply about it - that it
was "sheer folly" for the farmer to seek higher prices for his
2"-33
Regraded Unclassified
- 2 -
162
crops at this time, for labor leaders to seek continual new
increases in wages, or for landlords, businessmen, bankers,
or any group to exploit the present emergency for selfish
gain. And I asked for the understanding and support of 130
million Americans in fighting the evil of inflation by every
means in our power.
There is no need to tell this audience of bankers of the
need of common effort, on the part of every group and every
individual in the community, if inflation is to be averted.
You have shown abundantly in the past year that you are
conscious of your duties and your responsibilities to the
country. You have given magnificent help, and given it un-
selfishly and cheerfully, in the selling of Defense Savings
Bonds and Stamps. You have given further help in the sale
of tax anticipation notes which make it possible for every
taxpayer to meet next year's heavy tax bill more easily.
You have cooperated willingly with the Treasury's control
of foreign funds, even though it interferes with the free
handling of your business affairs and subjects you to many
complicated regulations and questionnaires.
Regraded Unclassified
- 3 -
163
In all these and other ways you have been such real
partners of the Government that I am very glad to be with you
this morning, to thank you personally for all that you have
done.
But the most important task of American bankers lies
immediately ahead, and it is a broader and bigger task than
any you have yet been called upon to perform. That is the
task of doing everything in your power, not only as bankers
but as influential and respected leaders in your communities,
to fight this evil of inflation wherever it rears its head.
Many of you will remember, from your own experience of
twenty-five years ago, that inflation is just as damaging to
bankers as to farmers, wage earners or businessmen.
We now know that the doubling of bank loans and invest-
ments from 1916 to 1920, and the resulting doubling of
deposits in the same five years, contributed to the great
increase in prices which brought such hardship to American
consumers and such disastrous after-effects to American farmers.
We now know that the inflation of a quarter-century ago,
with all of its injustices and dislocations, could to some
extent have been avoided if the Government of those days had
acted more promptly, if it had taxed more heavily and borrowed
more widely from genuine savings.
Regraded Unclassified
4
164
When the inevitable collapse came, no fewer than 2,910
banks with 790 million dollars of deposits were compelled to
suspend operations in the five-year period from 1921 to 1925.
Humpty Dumpty had fallen from the top of a very high wall,
and many years of effort were needed to pick up the pieces.
It is our job at the Treasury and the Federal Reserve, and
yours as custodians of the people's money, to make sure that
any present-day descendants of Humpty Dumpty shall not go
climbing up that wall of expanded credit and higher prices
again.
That is why my first plea to you as bankers is that you
scrutinize closely your own lists of applications for loans.
Those lists contain within them much of the ammunition of
inflation. You have in your hands, therefore, one of the
most effective weapons for checking inflation at its source.
You are sure to find, on looking over your lists, many ap-
plications for money for non-defense projects that would
involve competition for steel or copper or any of the thou-
sand and one materials now needed so desperately for our
defense effort. If you can postpone all such unnecessary
loans until a later day, without waiting for the priorities
to become broader, you will be doing a real and lasting
service to your country.
Regraded Unclassified
165
- 5 -
I hope that in the not too distant future the priority
system will become so effective that the supply of practi-
cally all raw materials for all purposes will be under full
control in the interests of national defense. That should
mean that materials which must be used for defense purposes
will not go into any unnecessary civilian projects. But until
that day comes, I hope that you will constitute yourselves the
sentinels of the nation, in your own bank and your own com-
munity, in guarding against any private encroachment upon the
stock of resources needed for the national effort.
Another essential service which you can perform is, quite
simply, to teach the people of your communities the facts
about inflation and defense financing. You see in your daily
work men and women from many walks of life. You are in a key
position to advise them, and your advice carries as much
weight as that of a family doctor to his patient or a lawyer
to his client. I know that in these serious times you will
give the right kind of advice, and that your influence col-
lectively and individually will be joined with that of your
Government in its efforts to keep the cost of living in check.
Regraded Unclassified
166
- 6 -
There is a real need of convincing the average citizen,
right now, that he will have to accept far greater taxation.
There is a real need of preparing him to make greater savings
in his daily life to ensure the long-run survival and improve-
ment of his standard of living. Above all, there is a real
need of explaining to him that this war cannot be won quickly
or cheaply or easily.
It will require all-out effort on our part to tip the
scales in this war. It will require every ounce of strength
that our giant industrial system can give. It will demand
sweat and sacrifice on the part of producers, workers, man-
agers and consumers alike. And it will mean the greatest
public expenditure that has ever been pumped into the arteries
of our economic system.
Defense expenditures have now risen slowly to more than
a billion and a quarter dollars a month. They will soon be
a billion and a half, but even then they will be utterly in-
adequate compared to the need. Perhaps "inadequate" is too
mild and charitable a word. We are trying to make ourselves
the arsenal of democracy by devoting only 20 per cent of our
factory and mining output to defense, only 30 per cent of our
Regraded Unclassified
- 7 -
167
output of durable goods, only 10 per cent of our output of
non-durable goods, and only 16 per cent of our national in-
come. That, surely, is very far from total defense or all-
out effort.
Nobody can emphasize too often or too strongly the
magnitude of the job which we American people have set out
to do. Let me give you B. few simple illustrations. At
present prices the cost of the total defense program as now
planned will be more than 50 billion dollars. This is 10
billion dollars more than the original value of all building
construction in the United States since 1927. It is twice as
much as the total investment in American railways. It is
twice as much as the total value of all passenger automobiles
produced in this country during the past fourteen years.
Yet there is no reason whatever for us to be discouraged
over the mere size of the job ahead. In spite of B. slow start,
we are now on the road to an expansion of production which will
confound those of narrow vision and little faith who cried, "It
can't be done." The capacity of America to produce over the
long pull is almost limitless. We Americans can do any job
that we set ourselves to do.
Regraded Unclassified
168
- 8 -
It is not 80 much the size of the undertaking as the
limited time at our command which causes our economic system
to heave and strain. To telescope such & vast construction
or production job within, not twenty years or ten years, but
within one, two or three years, is bound to affect profoundly
every aspect of our economic and social life.
Under the impact of our comparatively modest defense ex-
penditures up to now, our national income has increased by
fourteen billion dollars in a year, and we are feeling all the
preliminary symptoms of a serious price inflation. What will
the inflationary forces be six months from now, when we shall
be spending much faster and when the supplies of materials
for civilian use will be smaller than they are today? Where
will prices be then, if we do not act courageously to check
them now?
It is imperative that we set aside a great part of that
national income, and especially the increase in the national
income, if we are to put an effective brake upon inflation.
One indispensable method of paying for defense without
inflation is "all-out" taxation, a method that has not yet
been tried in spite of the good start that Congress has made
in raising $3,500,000,000 in additional revenue. With the
Regraded Unclassified
- 9 -
169
help of the new Revenue Act of 1941, our tax structure will
yield about fourteen billion dollars in revenue, but in my
opinion it still contains many inequalities and many omis-
sions which will have to be corrected next year.
The tax bill next year will have to be a genuinely
"all-out" bill, a genuine levy upon all in accordance with
their ability to pay, if it is to raise the necessary revenue,
place the necessary check upon inflation, and take the profit
out of war.
The second indispensable method of drawing off excess
consumer purchases is by borrowing as much as possible from
the genuine savings of individuals throughout the country.
I know I can count on your wholehearted cooperation whenever
we have to come to your banks for funds. The way to proceed
now, however, is to finance our needs as far as possible with-
out adding unnecessarily to bank deposits, to borrow instead
from private investors, large and small, and thus to reduce
the inflationary pressure of our swiftly rising national
income.
The Defense Savings Program has now been in progress for
five months. It has yielded us B. billion and a half dollars
from two and one-half million individual investors. The
Regraded Unclassified
170
- 10 -
result so far is certainly not below our expectations, but
just as certainly it falls far short of our needs. It falls
short especially in that it has only begun to reach workers'
payrolls. Every one of the great national labor organizations
has given its endorsement to systematic saving, and voluntary
payroll allotment plans are now in operation in more than five
thousand companies employing between five and six million
workers. Our strongest efforts must now be made in our great
industrial centers, and must be directed at the good sense and
patriotism of the workers themselves.
I can find no usefulness, for our present purposes, in the
old Liberty Loan method of fixing money quotas for communities,
trades, labor unions, school classes or individuals in this
Defense Savings Program. I can see no value, either in terms
of economics or of morale, in high-pressuring people to take
money out of bank savings accounts or out of life insurance.
But I do see a great benefit, financial and moral, in persuad-
ing spenders to set aside, systematically, week after week,
a part of their current income for their own good and their
country's good.
The kind of spending that the Treasury is most anxious to
divert into Defense Savings Bonds is the spending produced by
Regraded Unclassified
- 11 -
171
pay increases and bonuses, and by increased dividend payments.
I should like to offer as a suggestion, for example, that every
Christmas bonus in the United States be paid in Defense Savings
Bonds or Stamps this year. The banks of America can start the
[ashior. 30 that it will sweep the country. The total amount of
such bomises may be small, but there could be no finer example
to the public, no more striking reminder of the spirit of these
times, no better safeguard for the days of economic strain that
are sure to follow the war.
We at the Treasury believe that the voluntary Defense
Suvings Program has already awakened a greater sense of pride
in America and a greater sense of participation in the national
affort. We shall continue along that road of voluntary cooper-
ation, and I am perfectly confident that we shall reach vast
numbers who are willing and eager to put their savings to work
for their country.
In this effort the Treasury will continue to depend greatly
was the bankers of America, not only as its agents in selling
Defense Bonds but also as missionaries in spreading the gospel
of savings in times like these.
There are no commissions for bankers in this work, and
300 have asked for none. But in order to enable you to give
Regraded Unclassified
- 12 -
172
wider distribution to Defense Savings Bonds, I am happy to
announce to you this morning that it will no longer be ne-
cessary for you to put up collateral for the Series E bonds
which you keep in stock for customers. I hope that this will
relieve the banks, especially the small banks, of & real burden,
and I hope that you will not hesitate to tell us at the Treasury
of any similar burdens which you feel may be hampering you in
the sale of these bonds.
Wider savings and greater taxes will not, of course, be
enough in themselves to cope with the inflation that now con-
fronts us.
You have seen the joint statement issued last week by the
Federal Reserve System and the Treasury, dealing with the rais-
ing of bank reserve requirements to the limit of the law, and
pledging full cooperation with the Office of Price Administration
and the new Supply and Priorities Allocations Board.
That joint statement was a reminder of the fact that the
Government already has powerful weapons of control in its hands,
and that if it needs more power it will ask Congress for what-
ever it needs, in the fight against rising prices and falling
living standards. It is now asking for additional power
Regraded Unclassified
- 13 -
173
through the price-control bill, which I hope will be passed
by Congress without delay.
I have already suggested an extension of the social
security program as a possible method of absorbing several
billion dollars of next year's national income and thus build-
ing a further reserve for the future. I have already suggested,
not once but repeatedly, that the Government cut down immedi-
ately on non-defense expenditure, not only as sound financial
policy but as sound anti-inflationary practice.
Of course, such a combination of emergency taxes, priori-
ties, savings and price-control will cause some inconvenience;
of course it will cause some hardship, some sacrifice. We are
now engaged in a world struggle that demands all our energies
and all the qualities that have made America great. As 8. re-
sult of that effort we are compelled to fight another enemy,
the enemy of inflation, on the home front. How can we hope
to win unless we first throw onto the rubbish heap all ideas
of business as usual, pleasures as usual and comforts as
usual? In my opinion, complacency is our major source of
weakness today in building our defenses, for it saps our will
and clouds our minds, and blinds us to the stupendous size of
the job that confronts us.
Regraded Unclassified
- 14 -
174
We can conquer inflation on the home front if we act now,
just as we can ensure the defeat of foreign tyranny if we
rouse ourselves in time. Most Americans, I think, are begin-
ning to see that they have & personal stake in the fight
against inflation, just as most of them began long ago to see
their individual stake in the destruction of the Axis war
machine. I am confident about the outcome on both fronts,
because I have a deep and abiding faith in the common sense
of the American people.
Regraded Unclassified
TREASURY DEPARTMENT
175
INTER OFFICE COMMUNICATION
DATE October 2, 1941
TO
Secretary Morgenthau
FROM
Mr. Kuhn
Here are Neville Chamberlain's statements,
which I mentioned to you the other day, about
taking the profit out of war.
As you requested, I am also attaching a
summary prepared in Mr. Blough's office dealing
with British taxation of profits.
J.K.
Att.
Regraded Unclassified
Neville Chamberlain, speaking in the House of
Commons on April 26, 1939, said:
"I wish to make clear that the time when the country
is engaged in a major war is not the time when individuals
should be increasing their fortunes out of the conditions
which war creates. It is the Government's intention, there-
fore, if such 8. war broke out, that legislation be enacted
which would impose special penalties on profiteering and
provide that any increases in profit or individual wealth
should be appropriately curtailed to benefit the state."
Speaking in the House of Commons on the following day,
April 27, 1939, Mr. Chamberlain said:
"In the last war we had to proceed in our endeavors
to limit profits by trial and error. We learned by experi-
once, and toward the end of the war (the World War) we knew
what was the best of the ways that had been tried, to use
the common phrase, to take the profit out of war. Next time
we shall start where we left off and along with measures
which are designed to check and control the rise of prices
of necessities we intend that B. system shall be introduced
to deal with all profits arising out of war and not merely
profits arising out of armaments."
This pledge by the leader of the Tory party was the
besis of the excess profits taxation introduced immediately
efter the outbreak of the war.
Regraded Unclassified
. 2 -
177
Speaking on January 9th, 1940, at the Lord Mayor's
Luncheon at Mansion House, Mr. Chamberlain said:
"Our system of contracting and cost accounting has gone
& long way to prevent any unreasonable profits being made
out of armaments. If such profits, either reasonable or
unreasonable, should still be made, out of let us say, in-
creased output, well then, there is the excess profits tax
which soon sweeps away a good part of them.
"Barely a year ago, speaking in the House of Commons,
I warned the country that it was the intention of His Majesty's
Government that direct taxes, which were already so heavy as
to constitute conscription of wealth, would be still further
increased. Well, that prediction was fulfilled when my heavy-
handed friend and colleague (the Chancellor of the Exchequer,
Sir John Simon) last September placed his little finger upon
the shoulder of the income-tax payer; and we have been getting
at the income-tax payer in other and more indirect ways."
Winston Churchill explained his personal philosophy about
profits in a speech in the House of Commons on June 1, 1937,
when he strongly opposed the proposed tax on the growth of
profits. He said then that it would be an abandonment of the
capitalist system to "penalize the spirit of individual dering
and initiative" which, he said, the proposed tax would do.
His speech also contained this passage:
"Personally, I do not mind saying that I would have gone
as far after the war (the World War) as B. capital levy. It
seemed to me and I think to others that it would have been
quite fair to say that no one should come out of the war richer
than be went in. I think that that ought to be considered in
case we have another unfortunate experience of that kind."
Regraded Unclassified
178
British National Defense Contribution and
Excess Profits Tax
1, National Defense Contribution
The National Defense Contribution imposed by the Finance Act of
July 30, 1937, as amended by the Finance Acts of July 29, 1938 and
June 27, 1940, is a tax on the total profits, arising in each
chargeable accounting period falling within the five years begin-
2108 on April 1, 1937-March 31, 1942, from all trades and businesses.
When the excess profits tax was first imposed by the Finance
Act (No. 2) of 1939, the National Defense Contribution WAB con-
tinued from April 1, 1939 as an alternative tax to the excess profite
tax.
Rate of tax
The rate of tax is 5 percent in the case of B. company and
4 percent for an individual or partnership.
Exemptione
Trades and businesses whose profits do not exceed 2,000 pounds
are exempted; and those whose profits exceed 2,000 pounds, but are
less than 12,000 pounds, receive a tax base credit equal to one-fifth
of the difference between the amount of the profits and 12,000 pounds.
Relation of national defense contribution to income tax
The national defense contribution is an allowable deduction in
computing the profits of a trade or business for the purposes of the
income tax, but in calculating the profits for the national defense
contribution no deduction is allowed for income tax or national
defense contribution payments.
Relation of excess profits tax to national defense contribution
Under provisions of Section 19 of the Finance Act (No. 2) of
1939, as amended by the Finance Act of 1940, the excess profits tax
and the cational defense contribution are each computed without re-
gard to the other. and the taxpayer is charged whichever tex is the
higher.
Regraded Unclassified
179
- 2
II. Excess Profits Tax
The excess profits tax enacted by the Finance (No. 2) Act of 1939
avalies to all trades end businesses conducted by individuals, partner-
ships and corporations. Professions depending wholly or mainly on
personal qualifications are exempt.
Rate of tax
In the Finance (No. 2) Act of 1939 the rate VAB 60 percent of the
profits in excess of the standard profits arising in any chargeable
accounting period beginning on or after April 1, 1939. The Finance
Act of June 27, 1940 increased the rate to 100 percent with respect
to an excess of profits arising in any chargeable accounting period
beginning on or after April 1, 1940.
Under the Finance Act of 1941, 20 percent of the net amount of
excess profite tax paid by every concern for any years during which
the 100 percent excess profits tax rate is in effect is treated as
e post-war credit. The amount of such credit is to be refunded efter
the War at such time as Parliament may determine.
Basis of tax
In general the tax is based on standard profite determined as
follows:
(a) If the business was commenced before 1935, the taxpayer
may choose 1935 profits, 1936 profits or the average of 1935 and
1937. or 1936 and 1937 profits:
(b) If the business was commenced in 1935, the taxpayer may
choose 1936 profits or the average of 1936 and 1937 profits;
(c) If the business was commenced during the first half of the
calendar year 1936, normal profits are those of the succeeding year.
For business commenced after July 1, 1936, standard profits are:
& percent of invested capital for corporations and 10 percent for
individuals and partnerships.
Profits
Profits are computed in the same manner as those for income tax
purposes.
Regraded Unclassified
180
- 3 -
Exceptional depreciation is however, allowed in CASEE of
plant expansion after the beginning of the year 1937, if the new
facilities will be subject to exceptional depreciation and will
bécome obsolete es & consequence of the present war. Pending
final determination, the Commissioners may allow extraordinary
depreciation in an amount not exceeding 10 percent of the net
cost of the new facilities.
Minimim allowances
Any trade or business, regardless of the date of its beginning
or Its form of business organization, is allowed B. minimum standard
profit of 1,000 pounds in any chargeable accounting period, In the
case of e sole proprietorship, partnership or a director-controlled
corporation, the minimum is raised to such greater sum, ud exceeding
5,000 tounds, as is arrived at by allowing 1,500 pounds for each
"working proprietor." However, when the Commissioners are satisfied
that the 6,000 is inadequate, considering the nature of the business
and the size of its assets, the 1,500 pounds may be increased by as
much NB 1,000 pounds in respect of not more than four working pro-
prietors.
Relation of excess profite tax to income tax
The amount of the excess profits tax payable in any chargeable
accounting period is allowed to be deducted as an expense incurred
in that period for the purposes of the income tax, but no deduction
is allowed for income tex, national defense contribution or excess
profits tax in computing excess profite.
Regraded Unclassified
1-1/4 Percent Treasury Notes Maturing December 15, 1941
Amount Owned on August 31, 1941 by the Twenty-Five
Largest Holders Reporting to the Treasury
(In millions of dollars)
National City Bank, New York
12.6
Metropolitan Life Insurance Co., New York, N.Y.
7.5
First National Bank, New York, N.Y.
6.0
American National Bank, St. Paul, Minn
3.5
Commonwealth Bank, Detroit, Mich,
3.0
Central Trust Co., Cincinnati, Ohio
2.5
American Mutual Liability Ins. Co., Boston, Mass
2.0
Seamen's Bank for Savings, New York, N.Y.
1.9
Bank of California, N.A., San Francisco, Cal
1.6
Emigrent Industrial Savings Bank, New York, N.Y.
1.5
Mutual Life Insurance Co., New York, N.Y.
1.3
Ohio National Bank, Columbus, Ohio
1.1
Central Missouri Trust Co., Jefferson City, Mo
1.0
State Mutual Life Assurance Co., Worcester, Mass
1,0
Worcester County Trust Co., Worcester, Mase
1.0
Miners National Bank, Pottsville, Pa
.9
First National Bank, Chicago, Ill
.9
First Galesburg Nat. Bk. & Tr. Co., Galesburg, Ill
"o2
Lincoln National Bank, Washington, D. C
.7
Bankers Life Insurance Co., Lincoln, Neb
.6
.6
Fulton Trust Co., New York, N.Y.
Strafford Savings Bank, Dover, N.H
.6
.6
Guaranty Trust Co., New York, N.Y.
Maryland Trust Co., Baltimore, Md
:
Industrial Trust Co., Philadelphia, Pa
.5
Total amount owned by 25 largest holders
54.3
161.3
Total crivately held supply
Percent of privately held supply owned by 25
33.7
largest holders
Office of the Secretary of the Treasury,
October 2, 1941
Division of Research and Statistics.
Regraded Unclassified
150
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Sales since May 1, 1941, by Months
On Basis of Issue Price
(In thousands of dollars)
:
:
:
:
:
:
Item
=
May
:
June
:
July
:
August
: September
:
Total
:
:
:
:
:
1
Series I - Post Offices
$ 42,836
$ 40,788
$ 50,558
$ 40,725
$ 38,117
$ 213,025
67,123
358,191
Series 1 - Banks
57.745
61,729
94,717
76.878
Series E - Total
100,581
102,517
145,274
117,603
105,241
571,217
Series ? - Banks
37,817
28,876
27.359
20,318
18,099
132,469
Series G - Banks
211,420
183,134
169,498
127,685
108,987
800,725
Total
$349,813
$314,527
$342,132
$265,606
$232,327
$1,504,411
Office of the Secretary of the Treasury, Division of Research and Statistics.
October 1, 1941.
Source: All figures are deposite with the Treasurer of the United States on account of sales of
United States Savings Bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclassified
183
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Business Day of August, September, and October, 1941
(Angust 1, September 2, October 1)
On Basis of Issue Price
(Amounts in thousands of dollare)
:
I
Amount of Increase
I
Percentage of Increase
Sales
:
:
or Decrease (-)
1
or Decrease (-)
Item
:
:
I
:
October
I
September
:
October
I September
: October
:
September
:
August
:
over
I
over
:
over
:
over
I
:
=
:
September
#
August
:
September
:
August
Series 1. Post Offices
$ 1,450
$ 3,021
$ 1,467
-$1,571
$1,554
- 52.0%
105.9%
Series 1 - Banks
3,029
3,385
3,296
- 356
89
- 10.5
2.7
Series 1. Total
4,479
6,406
4,763
- 1,927
1,643
- 30.1
34.5
Series I - Banks
1,286
1,182
1,163
104
19
8.8
1.6
Series G - Banks
8,271
5,510
7,586
2,761
- 2,076
50.1
- 27.4
Total
$14,036
$13,098
$13,512
$ 938
-$ 414
7.2%
- 3.1%
Office of the Secretary of the Treasury, Division of Research and Statistics.
October 2, 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 newessarily add to totals.
ES'
Regraded Unclassifie
184
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Daily Sales - October 1941
On Basis of Issue Price
(In thousands of dollars)
Post Office
Bank Bond Sales
All Bond Sales
Bond Sales
Date
Series 3
Series E
Series 7
Series G
Total
Series 2
Series ,
Series G
Total
October 1941
1
$ 1,450
$ 3,029
$ 1,286
$ 8,271
$ 12,587
$ 4,479
$ 1,286
$ 8,271
$ 14,036
Office of the Secretary of the Treasury, Division of Research and Statistics.
October 2, 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
TREASURY DEPARTMENT
185
DEFENSE SAVINGS STAFF
October 2, 1941
OFFICE or STATE ADMINISTRATOR
SMOKER, illinois
True Ponorable Henry J. Morgenthau, Jr.,
secretary of the Treasury,
Dephington, D. C.
Geor "r. Secretary:
Messrs. Ned Brown, Phil Clarke end Walter
Cummings know very little of the person we were dis-
However, I was able to contact Mr. R. V.
Vimball, Vice-President of the Continents] Illinois
attonal Bank & Trust Company, who states that he has
our subject since be WHS & baby.
Mr. Kimbell gives him e very fine recommenda-
tion, states that he has en enalytical mind, is tire-
Total in effort, tactful, a born selesmen, and 10 res-
parted by all the people be knows. His home life is
must desirable, and he does not care for society.
He comea of 8 fine family, and one of his
misters married Ben Wham, who 1s receiver for the
Chicago and Eestern Illinois Reilrosd Company. He
also confirms 8 checking I had made through Fill's
Reports, Inc., who states this party has an office
nt 231 South IsSelle Street, where he deels in securi-
clas,
Prior to 1934 he was with Eastman, Dillon
und Co., the Illinois Merchants National Bank, and with
Winthrop, Mitchell Co. from January 1, 1934 to June,
1088.
He ia forty-one years 2 age, married, and
has three children. He owns his own home, built eleven
yours ago, in Berrington, Illinois. Formerly he lived
et 1103 Spruce Street, Evenation, Illinois, which home
198 sold in 1938.
He married 6 Sareh Louise Buffington, daughter
of E. J. Buffington, which of course makes them legal
cousine. The femily disowned the daughter at first,
lest became reconciled, later leaving $2,000,000 to
$3,000,000 to two girls, one of whom now lives in
North Carolina.
Regraded Unclassified
TREASURY DEPARTMENT
186
DEFENSE SAVINGS STAFF
October 2, 1941
TPO OF STATE ADMINISTRATOR
Illinois
The Honorable H. J. Morgenthau, Jr.,
Page 2.
They are apparently in very comfortable
circumstances. While st Wintbrop, Mitchell & Co., be
wes reputed to earn 10,000 to $15,000 B year, but
other sources say his earnings in recent years run from
$40,000 to $50,000 annually.
His commercial record is clear. He 1s B member
of the Union League and Attic Clubs in Chicago.
I believe the foregoing will aid you meterially
to the information you seek, but if I can be of further
wanistence, please advise.
Sincerely,
Norman B. Collins,
State Administrator.
Abe:en
Regraded Unclassified
95 ROUND HILL
18?
NORTHAMPTON
MASSACHUSETTS
October :. 41.
Loar Henry:
Just at Tine to t=11 you that
1 found it unfessible to shorten
ny box Instate
+ n.V° THORE to ... noiney of
to sevings State Il novement
if the - which LASTS
Just over a minut . 11c culto
intrusisstic about tai- solution
0809C1011Y 11 1 coul. THEY the ciano
cert in my niece "nich - snall very
NO: allred (alycnstein "ill
LA 6,10 conductor. It 30 hannens that
the lekenu or the 11th Wetober both
entioren del be In 4/2" York wnich
"11: DA nice for 011 nil us. in - zooking
formare to the reflormance.
LOVE from us both to you both
Regraded Unclassified
TREASURY DEPARTMENT
188
INTER OFFICE COMMUNICATION
DATE October 2, 1941
Secretary Morgenthau
TO
PROM
Mr. Kuhn
The Radio Corporation of America, which makes
Victor records, has sent me the following information
in reply to your inquiry.
The four most popular conductors are:
1. Toscanini
2. Koussevitsky, conductor of the Boston
Symphony
3. Stokowski
4. Eugene Ormandy, the new conductor of the
Philadelphia Orchestra
The twelve most popular compositions, on the basis
of sales of records, are the following in this order:
1. Tschaikovsky, Nuteracker Suite
2. Beethoven, Fifth Symphony
3. Tschaikovsky, Piano Concerto
4. Schubert, Unfinished Symphony
5. Rimski-Korsakov, The Scheherezade Suite
6. Cesar Franck, Symphony in D minor
7. Tschaikovsky, Sixth Symphony (Pathetique)
8. Dvorak, New World Symphony
9. Strauss, Blue Danube Waltz
10. Wagner, Orchestral music from Tristan & Isolde
11. Brahms, Second Hungarian Rhapsody
12. Mozart, Symphony in G minor
This information is confidential, and I assured the
RCA people that we would make no use of it outside of the
Treasury.
Regraded Unclassified
Treasury Department 189
Division of Monetary Research
Date Oct. 3,1941.19
To:
Secretary Morgenthau
You night like to know
that in the week ending Suptember 20,
1941, total exports to Russia amounted
only to about $750,000. it may, of
course, be due to shipping problems.
Hany White - Invant
wel Free France.
stuty to
MR. WHITE
Branch 2058 - Room 2141
Regraded Unclassified
190
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 2, 1941.
Secretary Morgenthau
TO
Mr. White
FROM
Subject:
Exports to Russia, China and Jonan as reported
to the Treasury Department during the week end-
ing September 20, 1941
1.
Exports to Russia
Exports to Russia as reported to the Treasury during the week
mainz September 20, 1941 amounted only to about $750,000 B.S. com-
pared with over $5,000,000 during the previous week. Gagoline was
the only item of any significance. (See Appendix 3.)
2. Exports to China
Exports to Free China as reported to the Treasury during the
week under review amounted to nearly $4,000,000, A considerable
increase 88 compared with the previous week. Exports to Occupied
Ohina amounted to only $156,000, B low for the last two months.
(a) Exports to Free China consisted mainly of trucks.
In addition, significant quantities of aircraft engines
and parts, auto parts, tires and blankets were reported
to have been shipped. (See Appendix C.)
(b) Exports to Occupied China included leather, miscel-
laneous food products, cigarettes, medicinel preparations
end miscelleneous office supplies. (Bee Appendix D.)
3. Exports to Japan
Exports to Japan 88 reported during the week under review
were negligible, consisting only of one shipment of cigarettes
Valued at $114. Of course, Japan may very well be the ultimate
destination of much of the goods excorted to Occupied China.
Regraded Unclassified
Appendix A
191
Exports from the U. S. to China, Japan and U.S.S.R. as reported to the
Treasury Department, July 28, 1941 -- September 20, 1941
(Thousands of dollars) 1/
Exports to China
Exports to
Exports to
Total
To Japanese
To Chinese
Japan
U.S.S.R.
controlled ports
controlled ports
July 28 - Aug. 2
937
542
395
1,657
4,523
Aug. 4
- Aug. 9
2,794
2,794
:
159
551
Aug. 11
- Aug. 16
1,278
969
309
42
986
Aug. 18
- Aug. 23
1,352
1,350
2
6
2,735
Aug. 25 - Aug. 30
736
735
1
:
1,023
Sept. 2 - Sept. 6
897
693
204
--
4,280
Sept. 08. - Sept. 13
2,038
757
2,281
--
5,217
Sept. 15 - Sept. 20
3,978
156
3,822
:
752
Total
14,010
7,996
6,014
1,864
20,067
1/
These figures are in part taken from copies of shipping manifests.
2/ Beginning with this week figures for exports to Free China include exports to
Rangoon which are not reported as being for re-export to Free China but which
are presumed to be because of the consignees.
Treasury Department, Division of Monetary Research
October 1, 1941.
Regraded Unclass
192
Appendix B
Principal Exports from U. S. to U.S.S.R.
as reported to the Treasury Department
during the week ending September 20, 1941
(Thousands of dollars)
Total exports
$ 752
Principal Items
Gasoline
305
Drilling units and
appurtenances
171
Gas oil
93
Rotary drill units and parts
68
Power shovel, spare parts
40
Treasury Department, Division of Monetary Research
193
Appendix C
Principal Exports from U. S. to Free China
as reported to the Treasury Department
during the week ending September 20, 1941
(Thousands of dollars)
Total exports to Free China (including
exports to Burma presumed to be destined
for Free China)
$ 3,822
To Free China
2,707
To Burma
1,115
Principal Items
Gasoline & Diesel Trucks
2,458
Aircraft engines, instruments
and parts
199
Auto parts for assembly and
replacement
192
Auto and truck tires and tubes
162
Cotton and wool blankets
131
Iron & steel sheets, plates,
bars and rods
86
Passenger cars
24
Treasury Department, Division of Monetary Research
Regraded Unclassified
194
Appendix D
Principal Exports from U. S. to Occupied China
as reported to the Treasury Department
during the week ending September 20, 1941
(Thousands of dollars)
Total Exports
$ 156
principal Items
Leather
42
Miscellaneous food products
25
Cigarettes
20
Medicinal preparations
14
Miscellaneous office supplies
8
Treasury Department, Division of Monetary Research
Regraded Unclassified
195
Neted
:
45 Dietricts
TSLEGRAM SENT
GRAY
TRB
October 2, 1941
6 p.m.
AMERICAN CONSUL,
HONG KONG, (CHINA).
312.
FOR FOX FROM SECRETARY OF THE TREASURY.
QUOTE With reference to No. 304 of September
29 please correct paragraph six to read "points
ten to thirteen". END QUOTE.
HULL
(FL).
EA:FL:NCE
Regraded Unclassified
196
PARAPHRASE OF TELEGRAM RECEIVED
FROMS American Embassy, Chungking, China, via N.R.
DATE: October 2, 1941, 2 p.
NO.1 408
19E FOLLOWING It FOR THE SECRETARY OF THE TREASURY FROM
20%
Reference 10 nace to the Department's telegram of
sussiber 29, which was received last night, No. 304.
with regard to the relegation of the Central Bank to
the SARE nosition :@ th 1 of the "cooperating banks and
Live decentrylizati n of the control of remittsnes, 1
strongly novise against such action.
At the very time when the Ministry of Finance and the
Contral Bank are most eager to ovoperate 11th Ameries, 12
in stably inadvisable politically to alienate them.
(=) Yesterday afternoon st e long and cordial conference
-1th the Minister and the Vice Ministers, they volunteered
to turn over to the Board export proceed= and remittances.
The officials mentioned above were merely awaiting my
return to have such n. resolution adopted by the Exch nge
Control Commission. The need for strengthening the Central
Benn is resognized by thes. They Are bout to approach you
in the matter of assigning nn American banking expert to
then.
(b) No real difficulty, in the present stmosphere,
would be experienced in the working out of a entisfactory
Control Commission-Hourd arrangement on the lines
of the
Regraded Unclassified
197
+
of the Mamila plan. Should your 304 be adopted, the
Finence Ministry will not cooperate, and, in order to
push through any modifientions, great pressure vill
undoubtedly be needed.
hile, for obvious reasons, the British do not aind
(1) Ministry and Central Bank, the very real basis of
cooper tion that has slowly been built up with the latter
ould be destroyed by an overt show of distrust of them
on our part. It is sore essential than over to treat the
Agenoies of the Chinese Government with sque delieacy in
view of the fact that (1) 10 to be hold in Hong Kong and
not in Chungling.
2. -1th regard to the Department's points 0-2 and EI
Both are undesirable. Five of the institutions, which are
alrendy on general license 00, have no exchange business;
three probably (and more) of the others have never handled
remittences on any scale. Among the institutions remaining,
name have cooperated poorly and lip service has been (civen
by others. To decentralize remitiances and dve all banks
DOWERS under g 1/ needlessly throwing temptation in the
way of the boak* and of changhai, emeoially 18 the word
he a no facilities in Shaughai and only limited facilities
elsewhere to keep a check satisfactorily on the cooperation
of the banks. In view of its saxiety to play bull, 1 would
much rather soke my enance with the Central Bank - (9)
Imperfect AS it is (1). One of the Central Bank's best
=
Regraded Unclassified
198
+
sen has already been delegated to Manila to work out the
problem of remittances. I - confident that this repre-
sentative will do a good job at Manila.
It 10 suggested that the fellowing be adopted at caset
1. The Department's A-2 is all right.
2. The Department's 4-2 is all right for Shoughai and
possibly for Nong Kong but the central bank for other (1)
areas.
3. The Department's w is splendid, especially the
emphasis to have "the general license by express language
now indicate that the banks must cooperate with the Board"
and with the addition of three or four Chinese commercial
banks, (Yesterday I learned that this is being efficially
recommended by the Ministry of Finance to the Department.)
and the removal of Sassoons, Cook, American Express Company,
and underwriters. At Chungking there is no information
available with regard to the Banque Belge pour l'Etranger.
However, from information gathered in Hong Keng, it comples
quite an unimportant position.
4. The Department's 1-1 is satisfactory.
5. The Department's 0-1 is asseptable. In the Depart-
ment's a-2, it is suggested that a substitution be made
for "the Central Bank of China" for the Department's phrase
"one of the cooperating banks" and that the last parenthetical
sentence be onitted.
6. The
Regraded Unclassified
199
6, The Department's paragraph D is all right as 18
stands,
9. The Department's paragraph I should be smitted
entirely.
In my telegram of September 25, X emphasised speed
in connection with the controlling of imports into Shanghai
but this should not hold matters up.
GANES
exconission apparently
EAIPAK
693,51/7316
100
THE
ТИАТ212ВА JACINHORT
OELICE Ot THE
lavi OCL 3 bw 3 OS
RECEIVED
Regraded Unclassified
200
C
PIAIN
o
P
Shanghai via N. 8.
I
Dated October 2, 1941
Rec'd 12:50 s.m., 3d.
Secretary of State,
Washington.
1403, Second, (SECTION ONE).
Special financial importers who fail to obtain exchange at official
rates from Stabilization Board to cover outstanding or new bille strenu-
ously endeavoring to obtain cover either from unlicensed banks, exporters
(linking transactions), speculators having unliquidated long emhange
position, holders of free United States dollars, or owners of United
States dollars notes. Licensed banks complain about dearth of export
bills and steady depletion their foreign exchange resources due to above
mentioned factors plus further reduction in Shanghai exports. Unlicensed
banks permit customers speculators with outstanding long exchange pos-
itions to switch erchange to importers charging commission of 1/8 cent
United States currency. Black market rates now around 4 1/2 cents in
isolated cases involving free United States dollars some business is
reported at 4 3/16 cents. United States dollar notes now quoted about
4 7/16 cents. Importers recently shipped considerable amount of United
States dollars notes to United States to defray import bills. This de-
pletion of United States dollars note supply in Shanghai and tributary
area expected to continue some time.
LOCKHART
Alc
Regraded Unclassified
201
PLAIN
BS
Shanghai via N. R.
Dated October 3. 1941
Rec'd. 7:45 a,m,
Secretary of State,
Washington.
1403, Third. (SECTION TWO)
View insistent merchant demand premium undoubtedly would be even
greater but hoarders are apprehensive United States may ban repatriation
of currency as British have done, therefore, many are inclined to sell
at prevailing rates. Naturally all black market operations are done
clandestinely with no public evidence of transactions but believe above
reflects true situation. Chinese bankers express opinion that Stabili-
sation Board, in cooperation with American, British authorities can
further close many loopholes, but the fact that considerable portion
of the Shanghai trade is with South sen and Southeastern Asiatic
countries makes control difficult, including fact that Thailand tical
is still B. free country and that the Hong Kong currency control is
partially ineffective because of loopholes in Macon and elsewhere.
Beginning October first Shanghai paper gold bar speculative market
makes another attempt to revive activities. November delivery paper
gold bars were quoted yesterday as high as yuan 7600 based on the
black market Hong Kong dollar exchange rate of 18-3/8 cents Hong Kong
currency as compared with the official rate of 21-1/2 cents. Inform
Commerce and Treasury. Sent Department. Repeated to Changking and
Hong Kong.
(END OF MESSAGE)
LOCKHART
MG
Copy:hr:10-6-41.
Regraded Unclassified
Nated
F. Dietrict
TELEGRAM SENT
TRB
GRAY.
October 2, 1941
5 p.m.
AMERICAN CONSUL,
HONG KONG, (CHINA)
311.
FOR FOX FROM THE TREASURY.
QUOTE In order for the Treasury to be certain
that it receives all cables sent to it by you
would you please number such cables consecutively
prefixing the number with "T.F." for identification
purposes. Such numbers should be used for cables
dispatched by you irrespective of whether the
cables are BENT through the State Department or
the Treasury representatives at Hong Kong or Shanghai,
Would you please initiate this program as soon as
possible and if convenient allow numbers for the
cables previously sent by you. END QUOTE.
HULL
(FL)
EA:FLINCE
Regraded Unclassified
203
DEPARTMENT OF STATE
Washington
In reply refer to
EA 840.51 Frozen
October 2, 1941
Credits/3660
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
B copy of telegram No. 403. dated September 29, 1941,
noon, from the American Legetion. Sofia, Bulgaria. in
regard to the account of the Argentine Charge d'Affaires
in the National City Bank which, apparently, has not
been unblocked.
The Secretary of State would appreciate being
advised as to what reply may be communicated to due
merican Legation at Sofia.
Inclosure:
From Legation, Sofia,
No. 403, September 29,
1941.
eh:copy
10-3-41
Regraded Unclassified
204
des
GRAY
Sofia
Dated September 29, 1941
Rec'd 10:34 a.m.
Secretary of State,
Washington.
403. September 29, noon.
Department's 58, May 9.
Apparently the account of the Argentine Charge
d'Affaires in the National City Bank has not (repeat
not) been unblocked. The bank continues to refuse
to execute payment orders on grounds of blocking regula-
tions. It will be appreciated if the Department will
again intervene energetically.
It may be noted that the Charge has informed the
Legation that he cannot but regard the difficulties
being placed in his wey as unfriendly.
EARLE
ALC
eh:copy
10-3-41
Regraded Unclassified
205
Cable through the State Department to the Icelandic Trade Delegation from
the Iceland Government which was probably sent several days ago.
"Dollar shortage now becoming embarrassing. Telegraph
whether Landsbanki can now draw on amount of $500,000* men-
tioned in your 15."
*Iceland thought Treasury depositing $500,000. Deposit
actually made was only.$300,000.
(Telephoned to Mr. Dietrich by Mr. Cummings in the State
Department on October 2, 1941, at 4:40 p.m.)
B
206
Excerpts
from
Memorandum from Chairman of the Icelandic Delegation
October 2, 1941
"As mentioned in our memorandum of September 9, 1941 the amount
which Iceland is obliged to resell to the British Government, if and
when any surplus dollar currency is available, was, on September 1, 1941,
as follows:
Canadian Dollars
1,525,000
U. S. Dollars
663,000
In addition to these figures, the British Currency Control has sanctioned
to Icelandic importers an amount of dollars, 2,071,000, which, however,
had not been effected on September 1.
"As Icelandic U. S. Dollar holdings have been very scarce and no
Canadian Dollars available, I presume that a substantial part of this
amount has been transferred and provided by the British Government since
September 1 and accordingly comes under the above-mentioned re-payment
clause."
"From information available to the Delegation we estimate the Ice-
landic Government Bond loans in Great Britain now amount to approximately
1,140,000 1 sterling but about 520,000 1 sterling is to be redeemed on
November 1, leaving a balance of 620,000 1ª sterling.
"Other Bond loans guaranteed by the Icelandic Government we estimate at
about 200,000 1 sterling.
ment for exact figures, including information about annual installments and
"These figures are only approximate but we have cabled to our Govern-
interest and hope to be able to submit these figures in a few days."
(Received by phone from Mr. Cumming in the State Dept., Oct. 2/41 - ek)
Regraded Unclassified
207
COPY
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
October 2, 1941
SA/E
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
encloses three copies of a paraphrase of telegram
no. 1739. dated October 1, 1941, noon, from the
American Embassy. Moscow, transmitting a message from
Mr. Harriman for Mr. Hopkins and Secretary Morgenthau.
Enclosure:
From Embassy. Moscow,
No. 1739, October 1.
1941 (3 copies of para-
phrase of telegram)
00PY:lap-10/3/41
Regraded Unclassified
208
DEPARTMENT OF STATE
COPY
CONFIDENTIAL
PARAPHRASE
Telegram no. 1739
Dated: 10/1/41 noon.
From:
Moscow
Rec'd: 10/1/41 10:35 a.m.
FROM HARRIMAN FOR HOPKINS AND SECRETARY MORGENTHAU.
The information contained in your 1089 has been received
with thanksl
In the conferences here, no one has as yet raised the
subject of finance, and I have not raised the subject myself,
in as much as I have received no instructions on the matter.
STEINHARDT.
SA/E:DCB:MBJ
10/1/41.
Copies to:
Mr. Hopkins (3)
Secretary Morgenthau (3)
COPY:lap
C
0
209
P
Y
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
14 840.51 Frozen
October 2, 1941.
Credite/3724
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
two copies of a paraphrase of telegram No. 272, dated
September 30. 1941. 5 p.m., from the American Legation.
La Par, Bolivia, concerning a check or draft in the
amount of $571.89. dated September 26, drawn by the Benco
de Bolivia to the order of the Neuse Hesslein and Company.
This check covers a payment to the Juan Elener and Cia
which is on the Proclaimed List.
The Secretary of State would appreciate being advised
as to what reply may be communicated to the American
Legation at La Paz.
Enclosure:
From Legation, Les Pa:,
No. 272. September 30.
1941. (2 copies of cara-
phrase.)
Regraded Unclassified
210
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, La Pas, Bolivia
DATE: September 30. 1941, 5 p.m.
NO.: 272
Under date of September 26, a check or draft in the
amount of $571.89 was drawn by the Banco de Bolivia to
the order of the Neuss Hesslein and Co. This check or
draft was probably drawn on the Chase National Bank or
the Chemical Bank and Trust Company. The name of Juan
Elener and Cia is on the proclaimed list and this check
or draft (for $571.89) covers a payment to this company.
The Legation urgently suggests that action be taken
to prevent the payment on this transaction. The prevention
of transactions of the banks here on behalf of firms which
are on the Proclaimed List (such as the above) would dis-
courage the local banks from aiding Axis interests to
circumvent the freezing order and would thereby strengthen
the Legation's hand in obtaining the full cooperation of
the banks. See the Legation's telegram, dated September
23, 1941, 4 p.m., No. 263 for Proclaimed List firms.
It is requested that the Legation be informed of
any such action which may be taken in this matter.
JENKINS
EA:PAK
840.51 Frozen Credits/3724
Copy:hr:10-2-41.
Regraded Unclassified
211
TREASURY DEPARTMENT
COPY
Telegraph Office
October 2, 1941
Extra Rush
3:21 p.m.
Mexico City.
Henry Morgenthau, Jr.
Treasury Department
We are very glad to inform you that we hereby authorize
Mr. Antonio Espinosa de los Monteros to sign on behalf of
the Bank of Mexico the Stabilization Agreement involving
the purchase of Mexican pesos by the United States Treasury.
The duly and formally issued powers will be sent forward
as soon as properly executed.
Banco de Mexico
S. A. Eduardo Villasenor
Director General
00PY:lap-10/2/41
Regraded Unclassified
TREASURY DEPARTMENT
212
INTER-OFFICE COMMUNICATION
DATE October 2, 1941
TO Secretary Morgenthau
FROM Mr. Districh
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
L55,000
Purchased from commercial concerns L24,000
Open market sterling remained at 4.03-1/2. The only reported transactions
consisted of L2,000 sold to and L1,000 purchased from commercial concerns.
The Argentine free peso again declined to close at' .2340. Yesterday's
final quotation was .2347.
The Uruguayan free peso, which rose 1/44 to .4425 two days ago, advanced
1/20 today to close at .4475.
In New York, closing quotations for the foreign currencies listed below were
as follows:
Canadian dollar
11-1/8% discount
Brazilian milreis (free)
.0505
Colombian peso
.5775
Mexican peso
.2070
Venezuelan bolivar
.2700
Cuban peso
5/16% discount
There were no purchases or sales of gold effected by us with foreign
countries today.
No new gold engagements were reported.
In London, spot and forward silver were again fixed at 23-1/2d and 23-7/16d.
respectively. The U.S. equivalents were 42.67$ and 42.55#.
and Harman's Treasury's settlement purchase price for foreign silver was also unchanged at 34-3/44.
The price for foreign silver was unchanged at 35#. Handy
under the Silver Purchase Act. All of this silver came from Honduras, and was
We made three purchases of new production silver amounting to 210,000 ounces
bought for forward delivery.
Regraded Unclassified
213
- 2 -
The report of September 24, received from the Federal Reserve Bank of New York,
giving foreign exchange positions of banks and bankers in its district, revealed
that the total position of all countries was short the equivalent of $4,485,000.
an increase of $952,000 in the short position since September 17. Net changes were
as follows:
Short Position
Short Position
Change in
Country
September 17
September 24
Short Position*
England**
$1,342.000 (Long)
$ 272,000 (Long)
+ $1,070,000
2,683,000
2,615,000
-
Europe
68,000
Canada
170,000 (Long)
162,000 (Long)
+
8,000
Latin America
6,000 (Long)
46,000 (Long)
-
40,000
Japan
274,000
310,000
+
36,000
Other Asia
2,196,000
2,093,000
- 103,000
All others
102,000 (Long)
53,000 (Long)
+ 49,000
Total
$3,533,000
$4,485,000
+ $952,000
*Plus sign (+) indicates increase in short position, or decrease in long position.
Hinus sign(-) indicates decrease in short position, or increase in long position.
**Combined position in registered and open market sterling.
CONFIDENTIAL
D
Regraded Unclassified
214
RESTRICTED
G-2/2657-220; No. 508 M.I.D., W.D. 11:00 A.M., October 2, 1941
SITUATION REPORT
I. Eastern Theater.
Ground: Finns report the capture of Petrozavedsk (not ad-
mitted by Russians).
Germans report the arrival of new Russian troops on
the Volkhov River front southeast of Leningrad.
No further information on the Smolensk-Bryansk
front.
The German line has been straightened from Belopo-
Iye to the south through Lebedin.
Germans report that they are advancing slowly to
the south on the isthmus of Perekop. Russian forces (strength un-
known) appear to be operating against the Germans on the isthmis west
of the Crimea.
II. Western Theater.
Air: The R.A.F. offensive was principally directed last
night against the manufacturing center of Stuttgart. Raids covered
western and southwestern Germany, along with Calais, Boulogne and
Ostend.
The Luftwaffe directed its attack against port facill-
ties of Hull and Dover, and also unnamed British air force,
Official German figures reported 683,000 tons of ship-
ping sunk during September, with submarine action accounting for
452,000 tons of this,
III. Middle Eastern Theater,
Ground: In Ethiopia the Italians conducted reconnaissance
within the British lines.
Air: British planes last night raided Tripoli and Benghazi,
while Cyprus was subjected to Axis attack.
RESTRICTED
Regraded Unclassified
215
October 3, 1941
9:30 a.m.
ITTDG
Present:
Mr. Graves
Mr. Blough
Mr. Haas
Mr. Gaston
Mr. Foley
Mr. Morris
Mr. Thompson
Mr. White
Mr. Schwarz
Mr. Kuhn
Mrs. Klotz
Harold, here is something from Floyd Odlum,
complaining about Procurement. Ile says he
wants to see me. Let what's-his-name get me
a memo on it for Monday.
What are you doing here, Roy?
100, h:
I would like to talk to you sometime today about
the proposed tax treaty with Canada.
Say, all of you fellows that think you are going
out of town, I think you had better stay here.
Are you going tonight?
No, I was going Sunday.
I can't talk to you. I just haven't got the time.
I am absolutely booked right through this morning.
Are you (White) going this evening? Then are
you going to Cuba?
Today is Friday. Tonight.
nell, who is going to stay here and tell me
Regraded Unclassified
210
-2-
about Mexico, and the Minister of Finance is
coming here Monday.
He is here now.
But who is going to take care of that?
Anybody you say.
Je:
Well, I just don't - there is nobody here. I
can't handle this stuff all alone, gentlemen.
Well, the Mexican thing is all settled.
I don't know B single thing about it, not a
thing. I don't know anything about this
business. I can't very - I just can't have
you people running all over the country, and
I have got to carry the whole burden myself.
I don't know anything about Mexico and I don't
know anything about Canada. You see what
happens, you gentlemen leave and then I have
got to carry the whole thing. I can't do it.
Well, if you have something else in your mind
about Mexico, you may be right, but if what
you have in mind is Mexico, it will take
five minutes to let you know what is to be
done.
I can't - I don't know the whole Mexican
thing. I an not golus to do this thing until
I know the whole Mexican deal.
Daniel Bell thought that he would be able to
take care of the Social Security work which
I would do, if that met with your approval.
I am not going to do It, that is all. Look,
if you leave town, I am not scing to touch
Social Security.
Regraded Unclassified
217
- 3
Blough:
Then I had better not go.
H.M.Jr:
And I am not going to worry about Mexico.
White:
Mr. Secretary, don't get the notion this
Cuban thing is B. jaunt. The Cuban government
is reorganizing its monetary and banking
system. There is a lot of work there that
needs to be done to initiate the studies.
They have asked the United States to do it.
If the Treasury doesn't do it, I don't see
who can or who will. It is in no sense a
jaunt. It is hard work. It will be about
three or four days down. I will fly back
by the end of the week. It is something I
don't think you can avoid the responsibility
on and though I have been kidding about it,
I don't like the impression that it is a
jaunt.
H.M.Jr:
I sent Roswell Magill down there a couple
of years ago. He did B. good job. Did the
Cubans ever do anything about it?
White:
Well, yes, they have done some things and
they may do more now that this thing which
has been cooking for four years - they were
up here four years ago and I mis-spent
almost B. month with them. They were up
here two years ago and we spent very much
less time with them and the Federal Reserve
Bank spent more. They are now ready to go
through with something, perhaps.
H.M.Jr:
Well, I am doing something which I have never
done before. I am out half the time trying
to talk about inflation and Defense Savings
Bonds and so forth and so on, which is something
entirely - I have never done this before, and
I am going to continue to do it as long as
I get a good reception. With that in mind,
Regraded Unclassified
218
- 4 -
the other people who I have made heads of
bureaus have got to take additional stuff
and carry it. Now, John Sullivan has been
away for over three weeks. All this stuff -
been away for three weeks. I won't
illustrate everybody.
Next Monday, Tuesday and Wednesday I have
got to do just two things. I have got to,
with Kuhn's help, write a speech for the
A.F. of L. and I have got to raise a billion
dollars.
Now, I have got to do that in three days,
and Mr. Wells calls up, will I see this man.
I don't know anything about it. I want to
know about the Mexican thing. No one has
told me a thing.
I want to know the whole deal. I have
refused to see him until Mr. Wells comes
over, and I can't have my key men leaving
town if I am going to leave town. This
is something new. I never used to leave
town.
I have never said a word. If somebody wants
to go this place or that place, I pick up
their responsibilities and carry it. I
am not going to do it any more.
Regraded Unclassified
219
- 5 -
White:
Well, Mr. Secretary, I think this Cuban
thing --
H.M.Jr:
I am not going to do it. I am not going
to carry other people's work, from now on.
White:
This Cuban thing I think is Treasury
responsibility, and if you can arrange,
which I think you could, that if I don't go,
that I can send my assistant, that suits me
perfectly, but as the understanding is now,
if the Treasury wasn't going to go, they were
going to put somebody in the Federal Reserve
Board to take charge, and I think that is
an unfortunate development.
H.V.Jr:
But gentlemen, without illustrating it, when
anybody is gone I have always picked up
their work and I have carried it, and I
have done it. I am not going to do it
any more.
White:
Well, who is responsible for this Mexican
thing?
H.M.Jr:
You have carried it up to date.
White:
I think so, but I didn't know that you
thought 50,
H.M.Jr:
Who else has? You have and I don't know
a thing about it, but I have got to face
this man and he starts this thing and he
starts that. I don't know about the oil
deal that the State Department has made,
and I am not going to make a Stabilization
loan unless I know the whole story. Now,
you have carried it up to this point. You
rushed me into having this fellow come, and
he is here now Monday, and I. should see him
alone when you have got all the details.
Regraded Unclassified
220
- 6 -
White:
Well, I am sure Dan has as many details as
I have, but aside from that --
H.M.Jr:
Dan isn't here and Dan has got to do my
financing.
White:
I certainly am not going to argue myself
into going, but I would like to ask you
to cooperate. We have done quite a little
on this Cuban thing. I do think Treasury
ought to have the responsibility. If you
would call up Welles and ask him to -
to let me send my assistant.
H.M.Jr:
You call him up.
White:
With your authority?
H.M.Jr:
You are Assistant to the Secretary. You
call him up.
White:
With your authority I can call up to send
my assistant down. It will be satisfactory
to me, because he is conversant with our
views and problems, and we can pick it up
at a later date.
H.M.Jr:
That was my understanding originally.
White:
I want the Treasury to continue to have the
responsibility for that investigation.
H.M.Jr:
Harry, I told you when you first talked to
me a bout it --
Whiter
Well, it is 8. question as to who is going
to be responsible, who is going to be in
charge. It is not 8 question as to what men
go down.
H.M.Jr:
You can tell Mr. "Telles I want 8 Treasury man
in charge. Who are you going to send down?
Regraded Unclassified
221
- 7 -
White:
I will send Frank Southard. Now who can
you send to Canada --
Blough:
If you are willing for Eldon King to
represent the Treasury in Canada - I
understand you and Mr. Sullivan preferred
to have someone else there also, but I am
not asking to go to Canada, far from it.
H.M.Jr:
The same thing is true, Roy. I am not going
to be here wi th this thing popping any time.
You have carried the responsibility on Social
Security. Now it should all be dumped on
my shoulders. I an not going to take it.
I mean, I have done John Sullivan's work for
three weeks. I am not going to do it any
more. For three weeks I have done John Sul-
livan's work. I am just not going to do
anybody else's work from now on. I have
covered up for more people here, and I am
not going to do it any more. You fellows
will have to cover up for me. John King
or John Sullivan can go. I am not angry.
It is just a new deal in the Treasury, that
is all. I am sure you all agree. But you
will have to let King go. As far as I am
concerned, John Sullivan can go. I mean -
well, I am not going to say anything more.
I have said enough.
Norman?
Thompson:
I have nothing this morning.
H.M.Jr:
Harold?
Graves:
I have nothing that won't carry over, except
this. Mr. Bruere, who was to come in at
eleven thirty, went down to get his plane
this morning and found that the flights from
New York were cancelled, and he is coming
down by train, to reach here at one. Whether
you can --
Regraded Unclassified
222
- 8 -
H.M.Jr:
Out. That is good. That gives me a little
more time. I can't do it.
Graves:
Mr. John Blair is in town. I suppose you
wouldn't be able to see him.
H.M.Jr:
Who is he?
Graves:
He is our man from Warren, Pennsylvania, that
advises us on direct mail advertising. Mr.
Bob Jackson's friend. You know him too.
H.M.Jr:
Is there any particular reason why I should
see him?
Graves:
No, except that you have expressed before
the desire to have him come in.
H.M.Jr:
Do you want that eleven thirty for him?
Graves:
That would be very nice.
H.M.Jr:
And when they come in, could you have the
stuff? I am very much interested in the
report that they sold ninety thousand
of stuff in connection with my speech. I
don't understand what he means when he keeps
saying commercial lists, they have sold 8
million dollars on commercial lists.
Graves:
That means the corporations to which they
have sent literature about F and G Bonds.
That is what he means.
H.M.Jr:
And bring in his man.
Graves:
I will have Mr. Buckley come too.
H.M.Jr:
Right. I just want to say this. If White
and Blough weren't 80 indispensable to me,
I would say "Go," but the fact that you
Regraded Unclassified
223
- 9 -
people have made yourselves so indispensable,
I can't spare you. I am paying you the
highest kind of a compliment. If I didn't
need you - I am very sincere now. If you
fellows hadn't made yourselves indispensable,
I would say, "God bless you," and "Go."
"Go to wherever you want." But I have given
you responsibility. You do beautiful jobs,
both of you, and I leave it to you up to
the point I have got to sign, and then I am
completely in ignorance, and I have got to
spend two days finding out what you fellows
can tell me in fifteen minutes. If you
weren't so indispensable, I would say, "Go,
and good riddance," but, I am verys incere,
you have made yourselves indispensable. If
I thought you needed the vacation, I would
be the first to ask you to go --
White:
It is nothing in that class at all.
H.M.Jr:
So it isn't that. Harry, look at me. I am
talking to both of you. It is the fact
that both of you are indispensable, and I
want you around me, and I don't want you
away. I may not be doing it in the most
diplomatic manner, but I am not scolding,
I am praising, and I am just annoyed at
the thought of having you out of town. So
long as we understand each other. O.K.
White:
Yes, I was concerned only that the Treasury --
H.M.Jr:
and my only concern is that both of you
have been handling very difficult situations,
and I don't want to take the time to learn
my homework, and I want you both here when
Social Security or anything else comes up.
I am paying you the highest compliment I
can. If I didn't need you, I would let
you go.
Regraded Unclassified
224
- 10 .
White:
Mr. Wallace, at the end of the last meeting
on economic defense, had a little memorandum
from Louis Bean, which contained some esti-
mates of the effect on prices and what not.
He asked me to check on it. I didn't have
8. chance. I left it on my desk. He called
me about it. I sent him a letter saying
that we were studying the effect of the new
taxes and the contemplated Social Security
program, and so forth, on the price level,.
and that I would be glad -to let him have
8 copy of it when it was done. I sent a
copy of the answer to you. While he was
on the phone he said that one thing he was
interested in and wondered whether I would
look into it, was something which he had
spoken about before, but I didn't pay much
attention to, and that was a kind of an
excise tax or a sales tax on certain commodi-
ties whose consumption we wish to restrict,
but the tax to take the form, rather, of
saving.
In other words, & man pays a tax and it repre-
sents a saving stamp or something. He was
rather vague about it, but it was that objec-
tive. I said that we would look into it and
prepare a memorandum on it, and he spoke to
Louis Bean who later spoke to me, to get in
touch with me on it, 80 I am letting you
know that we are working on something like
that. It is a small matter, and I will pre-
sent the memo to you before we give anything
to him.
H.M.Jr:
Now, there is one - is that all?
White:
That is all.
H.M.Jr:
Here comes a thing, confidential, from Harriman
for Hopkins and Secretary Morgenthau.
Regraded Unclassified
225
- 11 -
(Discussion off the record).
White:
Mr. Bewley spoke to me again. He urgently
requested a reply to that memorandum. The
The Russians haven't appeared.
11.M.Jr:
All right?
White:
The Finance Minister, Suarez, wants to discuss,
according to his assistant, freezing funds.
He would like to see Mr. Foley. Would you
prefer that he waited until after he had
seen you?
H.M.Jr:
No, I would let him go ahead. I have given
him three o'clock Monday, but I insisted
that Mr. Welles come over here first to tell
me the whole Mexican deal at eleven, which
I would like you to be here for. So if you
(Foley) would see them.
White:
Well, if you are not going to be here to-
morrow --
H.M.Jr:
I will not be here.
white:
And if you are going to be busy Monday
morning, I think if you set aside ten
minutes today, we can bring you up to date
on the Mexican negotiations, so that when
Mr. Welles comes here you will know what
we have been doing.
H.M.Jr:
You couldn't put it in a memo I could take
up to the farm?
Whiter
Very easily.
H.M.Jr:
Thank you.
White:
That is all.
Regraded Unclassified
- 12 -
226
H.M.Jr:
Chick?
Schwarz:
United Aircraft has notified us that they
are contemplating action against McCall's
Magazine, which last month ran 8 piece by
Pearson and Allen in which they say that
you had to threaten them in order to get
them to license engines so that other Amer-
ican manufacturers could make them, that
they had licensed German manufacturers
over the protest of Cordell Hull. And then
they quoted you as saying, "Since you have
licensed your patents to Germany, you can
license them to the United States Government.
And we are going to re-license them to any
company we think will speed up production,
even if they are competitors of yours."
H.M.Jr:
Well, let Foley handle that whole thing.
de handled it --
Poley:
Truth is the best defense. We said it.
H.M.Jr:
Turn it over to Ed because he handled
the whole thing. God knows what he said
at the time. (Laughter).
Schwarz:
They wanted our colleboration.
H.M.Jr:
Well, I don't know. Ed says we said it.
'oley:
It sounds familiar.
H.M.Jr:
the New York Times ran my speech again?
Schwar-:
They ran a full text of it.
Kuhn:
So did the Wall Street Journal.
Schwarz:
The Wall Street Journal has a very good
editorial.
H.M.Jr:
Well, B.M. Edward wanted me to tell - you
see if I tell the story right. He says,
"You tell that man Ed Foley at least we got
a good New Deal resolution from the Bankers."
Regraded Unclassified
227
- 13 -
I don't think Ed did as well out at Indianapolis.
He said they tried to impeach the President.
Where was Ed Foley when they were trying to
impeach the President?
Teleys
Yes, look. Look at that (handing clippings
to Secretary). (Laughter). W Look at that, "up-
holds the President.
White:
Must be local papers. (Laughter).
I am glad you mentioned it. I would have been
too modest.
H.M.Jrs
This is the Syracuse Sentinel. (Laughter).
shiter
He didn't tell you his pal was editor, did
he?
9.M.Jr:
No wonder, Syracuse Sentinel.
White:
I think it is very interesting, that that
speech was published again, because when I
read it I expressed the opinion that I didn't
think it would be.
M.W.Jrt
You mean Foley's?
differ
No, your speech. Hot because it wasn't B
good speech, tut because it didn't have any
startling news in there. The fact it WAS
printed T think is very significant. It
indicates 8. carry-over of the general interest
and it - it indicates a different level and
I think it is far more significant than had it
been printed because it had some kind of 8 punch
in it like six per cent profits or something.
Manager:
The Wall Street Journal editorial says it
bears repeating. They are glad to repeat it.
I am not asking for compliments, Harry, but
I don't ouite understand you. Oh, I see, you
read the Wall Street Journal where it says it
is worth repeating.
"lites
No, I didn't know it was in there. I was sur-
prised it WHS reprinted.
E.V.J.:
Well, I am too. Why do you suppose they did it?
Regraded Unclassified
228
- 14 -
White:
Well, I say the significance of the reprint-
ing to me is, without having read any of
their comments, is the fact that they are
now interested in your speeches. In other
words, let me put it this way. I think if
the next speech you make is a bum one, it
will still be printed. (Laughter)
Klotz:
That is a wonderful compliment.
H.M.Jr:
Now you see why I want you to stay around
here?
White:
I am just getting even. (Laughter)
Foley:
It is liable to be bum.
H.M.Jr:
Ferdie, I can't use such high-faluting language,
but when the speech was in progress, tell them
what Peter Odegard said about it, which I
think was priceless.
Kuhn:
The first time Peter Odegard saw the draft
of the speech and said, 'Mr. Secretary, I
think this speech is argumentative, hortatory,
petulent, and peevish. (Laughter)
H.M.Jr:
Other ways it was good.
Anything else Chick?
Schwarz:
That is all.
H.M.Jr:
George?
Haas:
I have a few things.
H.M.Jr:
George, I wish - well, you give me the reports
first.
Haas:
Here is the four months' figure.
Regraded Unclassified
- 15 -
200
I see, You got down to seven percent. That
isn't bad. Where are the notes?
lass:
I don't have them.
H.M.Jr:
It is not bad.
Hero:
I haven't done all of that yet.
M.S.Jr:
I have got to do this this morning. I would
like to see - fifteen minutes after this
meeting breaks up, I would like to see you
(Haas) and Hadley and Henry Murphy and Dave
Morris. Fifteen minutes after this meeting
breaks up. And George, if you would have
this in mind when Mr. Chester Barnard comes,
one of the assignments I am going to give
you is to prepare material for me as a member
of this so-called economy committee, you see.
I rave you all that stuff of the American
Farm Bureau Federation.
nees:
Can I tell you in half 8. minute about how
good that is?
How good is it?
itans:
They say in times like these they should
economize. They have made this study which
is very thick to prove that the administration
of all these acts which are spending so much
money should be improved, and if you would
improve them you would save a third on the
administration, which is thirty million dol-
lars. This just doesn't mean anything. They
are just diverting off onto another tangent.
S.M.Jr:
I see.
dans:
Do you want this acknowledged? I would be
inclined, if I were you, to have it acknowledged
by the Administrative Assistant.
Regraded Unclassified
- 16 -
230
H.M.Jr:
No, I acknowledged it when he gave it to me.
Haas:
It doesn't mean anything in terms of economy.
H.M.Jr:
George, I wish you would be thinking about it, and
also Harry would you be thinking about it,
what kind of stuff we should feed to Chester
Barnard. I am going to ask him to be my
alternate on that committee, the so-called
Byrd committee.
Haas:
The resolution to reduce expenditures.
White:
How to reduce expenditures?
H.M.Jr:
Yes.
haas:
I have a couple of minor things. Did you
want to take up the question of these memo-
randa which are out of the ordinary?
H.M.Jr:
Not today. Just hold them.
Haas:
I have got two of them. I think you will
approve them without question.
H.M.Jr:
Will it take long?
Haas:
About & minute.
H.M.Jr:
Go ahead.
Haas:
One was in connection with the Federal Re-
serve and those meetings on excess reserves.
They are continuing the meetings. Bell had
another meeting, and they worked up jointly
with us a series of memoranda and we are
preparing them jointly with Harry's staff on
excess reserves and controlled credit.
H.M.Jr:
That is all right.
Haas:
The other thing is that the Budget Bureau
Regraded Unclassified
231
- 17 -
sent one of their men over after they
received these estimates on '43, and Smith
would like to see what would happen to his
budget in case of a rather severe inflation.
They want us to make a series of estimates,
assuming a thirty percent price increase and
fifty percent and so on.
H.M.Jr:
O.K.
Haas:
That is too much work.
H.M.Jr:
Oh, you want me to say no?
Haas:
Yes, right at that point. So I settled with
him on this basis. We will work out one more
estimate, assuming prices went as they did
during the last World War. They thought that
was swell.
H.M.Jr:
Good.
Morris?
Morris:
Nothing.
H.M.Jr:
Ferdinand? Are you seeing Gardiner Jackson
or have you seen Gardiner Jackson?
Kuhn:
I am going to today.
H.M.Jr:
Will you make my apologies?
Kuhn:
Yes. This is the Neville Chamberlain material
on profits and taking the profit out of war,
and this is the sales of recordsin the order
of popularity that you asked about.
H.M.Jr:
Oh, very interesting. I want to take that
to the farm.
Who is going to be out at Seattle? Is Gardiner
Regraded Unclassified
232
- 18 -
Jackson going to be out there?
Graves:
No, Mr. Hyatt from our staff, our labor man
whom you have met.
H.M.Jr:
And he is leaving today?
Graves:
He has gone, hasn't he Ferdie?
Kuhn:
He went to Denver first to clear up some
matter out there.
H.M.Jr:
But he will be out there?
Graves:
He will be there.
H.M.Jr:
Well, where does Gardiner Jackson get in on
this?
Klotz:
He wanted to come in with it, and Mr. Hyatt
wasn't supposed to leave until tonight.
H.M.Jr:
But he has gone?
Graves:
Yes.
H.M.Jr:
Well, if you (Kuhn) would send for Gardiner
Jackson and tell him I am all tied up today.
If he still wants to see me next week, I would
be glad to see him.
Kuhn:
Mr. Secretary, the National Association of
Insurance Agents is meeting at Kansas City
to talk about payroll allotments. They would
like you to talk from your desk for a few
minutes on October 13, I believe, thirteenth
to seventeenth, and Harold and I both think
that it is something that ought to be done,
even if it is only for five minutes.
H.M.Jr:
Is that where I could make the bum speech?
Regraded Unclassified
- 19 -
233
Kuhn:
Oh, that could be a fine one.
White:
No, you can make the bum speech any time.
(Laughter)
Foley:
Take it easy, Harry.
Mite:
That didn't start out that way.
Foley:
Remember where you are.
1.1.Jr:
I have got the best crowd in Washington.
D.K.
Suhn:
I an asking you now because they would like
to know.
.....Jr:
The answer is yes.
Ruhn:
Fine. That is all.
Blough:
I just want to say on this Canadian business,
I don't want to go to Canada, and I don't -
I think it will be taken care of all right,
so I wouldn't - I will be around.
H.M.Jr:
O.K. It is all right. You and Harry both
can treat each other. It is a privilege to
stay here and work.
lough:
There is something to that, too.
All right. I will have to see Altmeyer Monday,
too, because he has asked. Tell Altmeyer ten-
thirty Monday and tell Fitz, will you? And
you be here, please. Well, let's make it
eleven-thirty. Welles is coming at eleven.
Blough:
No signs of a White House conference yet?
S.V.Jr:
No.
Regraded Unclassified
234
- 20 -
Foley:
Everything lovely?
Here is a report on the trip up State from
John and me.
H.M.Jr:
Oh, yes. I will take that to the farm.
Foley:
And here is a program on public relations of
Foreign Funds Control and a proposed letter
for you to send to all the banks.
H.M.Jr:
Fine. Were you able to get back on Bob
Patterson's plane? I hear you had quite a
time getting on it.
Foley:
No, I didn't come back with Bob Patterson.
I came back with Francis Biddle on the train.
H.M.Jr:
But I mean I hear you tried to get back on
it. Weren't you able to fix it up?
Foley:
No, I didn't have any trouble. Eddiewas
going to go, and Eddie said if I wanted to
come back with them, I could.
H.M.Jr:
That isn't the way I heard the story.
Foley:
What did you hear? I didn't even try. I came
back on the train with Francis Biddle Tuesday
afternoon. I got in Wednesday morning about
ten o'clock.
H.M.Jr:
I heard you were trying to get onto Patterson's
plane. False rumor?
Foley:
Guess it must have been.
H.M.Jr:
Ask your secretary. Anything else?
Foley:
No.
H.M.Jr:
There was no real hostile feeling toward the
Regraded Unclassified
235
- 21 -
President, was there?
Foley:
Oh, I didn't encounter any- at all. When I
made the speech on his defense powers, there
was complete agreement. There were no ques-
tions at all. There were some questions -
at the speech on Foreign Funds control, there
was a much bigger crowd there. There were
about four hundred at that. All the insurance
lawyers - that is the biggest section in the
Bar. I think it is a good thing--
H.M.Jr:
Well, evidently you did very well.
Has Sullivan been?
Foley:
Yes, Sullivan was there. He is mentioned
in the article. That is what I wanted to
show it to you for. (Laughter) It said he
was there.
White:
Also.
H.M.Jr:
Have you shown that to Mrs. Foley?
Foley:
No, not yet. I haven't seen her.
H.M.Jr:
Is that all?
Foley:
Yes.
H.M.Jr:
Herbert?
Gaston:
You raised a question about one of these
candidates for appointment as ensign. The
boy is twenty-three years old. I think both
as to his qualifications and his eligibility
for draft - well, here is a report as to his
qualifications, and they seem pretty good.
He has had a lot of experience with small
boats, and he is a student of the University
of Washington Navigation School, and he is
Regraded Unclassified
236
- 22 -
recommended by 8 Captain in the Navy who is
a professor at the University of Washington.
As to his age, as to being subject to the
draft, the Coast Guard is, by arrangement
with the Selective Service Board and with
the Army and the Navy, soliciting - recruiting
for the Reserve boys who are within the draft
ages and who are in class one, so long as
they have not actually been called for
examination.
Now, all these Reserve officers whom we are
commissioning are going right into active
service. It isn't a case of their taking--
H.M.Jr:
But this man has some technical qualifica-
tions?
Gaston:
Yes, here is the story. It looks pretty
good. They first raised 8. question as to
him, and then they went back and got further
information from Captain Barr at the Uni-
versity of Washington, and it seems to look
all right.
H.M.Jr:
Well, it says here he received what was recom-
mended - and was rejected by Headquarters--
Gaston:
By Headquarters here.
H.M.Jr:
on account of lack of practical experience.
Gaston:
Yes. "Further information submitted by the
commander revealed that he was continuously
studying seamanship and navigation. Captain
Barrrecommended him for the appointment.
Thomas has considerably more practical
experience than was first indicated, and he
has been employed for about five years in
various capacities on power yachts, which
seems to look all right."
Regraded Unclassified
237
- 23 .
H.M.Jr:
That is all right. Send the thing back, and
I will sign it.
Gaston:
All right.
There is another thing about that, and that
is that I didn't know that you had asked that
these be submitted to you. I had been signing
the commissions in the Reserve. The first
time I heard about this arrangement through
Stephens was from Miss Chauncey day-before-
yesterday.
H.M.Jr:
Well, I simply asked that anything put on
my desk, that they be justified, and then I
also told them - I went all through this
thing a month ago.
Thompson:
The only instructions I had were with re-
spect to the regular commissioned personnel.
H.M.Jr:
No, the only thing I was interested in was
for the Reserves. I think I must have taken
it up with Admiral Waesche.
Gaston:
You took it up with Stephens and Stephens
talked to O'Neill, but nobody told me about
it and--
H.M.Jr:
Then I had a review made of all previous
appointments.
Gaston:
Did you?
H.M.Jr:
Oh, yes.
Gaston:
I didn't--
H.M.Jr:
Well, the Coast Guard knows about it. I asked
for a justification of all appointments. I
were no political appointments. I went all
guess Admiral Waesche assured me that there
Regraded Unclassified
238
- 24 -
through that. I don't care - I didn't issue
any orders that I wanted to sign them, but
I did issue instructions to Headquarters that
I didn't want anybody given a commission
unless he had technical qualifications.
That is all.
Gaston:
Yes.
H.M.Jr:
I don't want to be bothered, but be sure
that somebody's Senator or Congressman doesn't
have a boy given a commission for political
reasons, but if the men are qualified, O.K.,
but I want to make very sure that they are
qualified.
Gaston:
Yes. Well, I think that is being pretty
well looked after, but I wanted to let you
know that I have signed upward of & hundred
commissions in the Reserves.
H.M.Jr:
Well, if you are satisfied that none of them
are political, that is all right, but if you
don't mind, I would like to hold you responsible.
Gaston:
Yes, I will watch it very closely.
H.M.Jr:
I mean, I don't want to appoint anybody because
he is somebody's son or somebody's friend or
so forth, because he has got to have the
qualifications.
Gaston:
Yes, sure.
H.M.Jr:
And that is what I explained to somebody, I
can't remember who. Ask Waesche if he doesn't
know about it.
Gaston:
Yes.
H.M.Jr:
All right?
If Kuhn and Graves would stay, please.
Regraded Unclassified
239
October 3, 1941
10:55 a.m.
Daniel
Bell:
Did you have a good trip?
HMJr:
Yes.
B:
Tiresome?
HMJr:
No.
in
Well, fine. Even made the headlines.
H/Jr:
Well, I suppose I would.
B:
Now, I wondered if - as long 86 I'm starting
some discussion up here with these dealers,
if you didn't want to say something about
financing.
HMJP:
Oh.
3:
They've - of course, the first question is
as to how much we're going to raise, and I've
made it quite 8 range. I said, "I don't know
yet." That you heven't considered it and
that.....
9MJr:
Well, what's on your mind?
3:
Well, this 1s the situation. We have 8 billion
three forty going out of September.
HhJr:
What's that?
31
A billion three forty.
HMJr:
Weit B minute. I've got the group outside.
Bill
Yesh.
HMJr:
Just hold on. Go ahead, Dan, and talk. The
men are here.
B:
I say we have - we had - 8 billion three hundred
forty million at the close of September. If
Regraded Unclassified
240
- 2 -
we raise B. billion dollars cash in October,
get two hundred and fifty million of cash
notes - I mean, tax notes - two hundred fifty
million of Savings Bonds, and then raise an
additional six hundred fifty million for RFC
and United States Housing at the end of
October, we would go out of October with about
a billion nine hundred and fifty million.
HMJr:
Now you've got to repeat it again, Dan, please.
B:
If we raise a billion dollare in cash for the
Treasury at this time
HMJr:
Right.
B:
get 8.8 much B.S two hundred and fifty
million dollars in tax notes
HMJr:
Yeah.
B:
two hundred and fifty million on Savings
Bonds
HMJr:
Yeah.
B:
and at the end of the month raise six
hundred and fifty million for RFC and United
States Housing
HMJr:
Yeah.
B:
we would go out of October with a billion
nine hundred and fifty million.
HMJr:
Yes. That's if we raise a billion?
B:
Yee, sir.
HMJr:
Yeah.
B:
Now, we go out of November with no further
financing in November other than Savings Bonds
and Tax Notee
HMJr:
Yeah.
Regraded Unclassified
241
- 3 -
B:
with nine hundred and seven million.
HMJr:
Yeah.
B:
Now, that probably is a. little low.
HMJr:
Yeah.
B:
And maybe we'll be getting towards the quarter
period when they'll - the companies will take
more tax notes
HMJr:
Yeah.
B:
and our balance may be a little above
that.
HMJr:
Yeah.
B:
But, of course, we could have a couple of
Treasury bills if it got low.
HMJr:
Yeah.
B:
So it looks as though with that program, we
ought to have at least a billion dollars at
this time; and I don't know whether you'd
want to go any higher than that or not.
HMJr:
I'm willing to go higher.
B:
Now whether you'd want to put it out as a
range. You'd want to - you're going to have
a new cash offering of as much as a billion
to a billion and a quarter.
HMJr:
That's all right.
B:
Is that all right?
HMJr:
That's all right.
B:
And do you want to say that it's going to be
a long bond?
HMJr:
Well, I
Regraded Unclassified
242
- 4 -
B:
I said you're going to give it consideration.
HMJr:
No, I don't think I'd say that today.
B:
You don't.
HMJr:
No, I can say that Monday afternoon.
B:
Yes, you can say that Monday afternoon.
HMJr:
I'd just give them the amount.
B:
Uh huh.
HMJr:
But I haven't had a chance to discuss it
with my boys.
B:
Well, I - if you can give the range on it
from a billion to a billion and & quarter,
I think that might help.
HMJr:
I'll do that, Dan.
B:
All right.
HMJr:
I'd like to do it all in a bond.
B:
All in a bond?
HMJr:
If possible.
B:
Well, I just talked to Dudley Mills, and he
feels you can do it in a bond; and he had
his trading man with him. They feel that a
billion and a quarter can be done in a straight
bond. They think the insurance companies will
takeit and savings banks will take it.
HMJr:
Yeah.
B:
The banks will take it on the first issue,
but, of course, they'll sell it to the
insurance companies, and they might find
savings banks selling some of their present
longer bond. They don't think it will affect
holdings to the banks and going into the
Regraded Unclassified
243
- 5 -
the market any, although there'll be some
trading.
HMJr:
Well, I Bat next to Randolph yesterday and
I talked 9. little shop and I asked him how
he felt about bonds - all bonds - two and 8
half bonds, and he said, "No trouble what-
soever. They're hungry for 1t."
B:
Uh huh.
HMJr:
Re said, "The banks may buy it and they'll
re-sell it," but he sald, "what harm if they
do re-distribute?"
B:
None.
HMJr:
What?
B:
No harm in that.
HMJr:
No.
3:
Just a little churning, but I think it might
help a little.
HMJr:
Well, I think I'll say a billion to a billion
and a quarter, but I'm a little bit previous.
I haven't had a chance to talk with my own
people or the others.
B:
Well, I think that's right. The only thing,
you could say that we certainly would give
consideration to a long bond.
MMJr:
I don't think I'll say that. I think I'll
just say I'm going to borrow between a billion
and a billion and a cuarter.
And that's in line with your previous polloy -
giving out the amount and then indicate later
what the type 18.
HMJr:
Yes. And shall we make uo our mind earlier
Monday - oh, I think if they have it four
c'olock and they read it Tuesday, that gives
them & day's time to check and
Regraded Unclassified
- 6 -
244
B:
Yeah. Yeah.
HMJr:
What?
B:
You'll say something right away then.
HMJr:
Now?
B:
Yeah.
HMJr:
Oh, you mean not
B:
About the billion and 8 quarter.
HMJr:
.....wait until four o'clock?
B:
Well, I'm talking to the dealers.
HMJr:
Oh.
B:
See? And I'm afraid they're going out, and
I've have quite a range, from seven hundred
million to 8. billion and a quarter.
HMJr:
Oh, you want me to put it out right away?
B:
I'd like to Just let it leak out that you're
thinking of this figure 80 that I won't give
any wrong indication up here.
HMJr:
I - well, I'll - I didn't get that
B:
Don't you think it's better.
HMJr:
I'm all confused. I thought I had press
today. I don't have any press today. I'll
do it at once. I think you're right.
B:
Yeah. Now, the other thing 18, I assume
in view of the time that you don't want to
see any of these boys - the dealers?
HMJr:
I'm just thinking.
B:
You've got eleven o'clock Tuesday.
HMJr:
Well, I tell you what we can do. I could
Regraded Unclassified
245
- 7 -
start in at eight-thirty Tuesday and run
from then until eleven o'olock - every half
hour. I could run in a lot.
B:
Yeah.
HMJr:
You'd better fix it up down there.
B:
Do you want to do that?
HMJr:
Yeah.
B:
You're getting too much in there now, if
you're
HMJr:
No, no. Start - run me from eight-thirty
to ten-thirty. That's, I think, two hours -
I ought to be able to see eight people -
eight groups.
B:
Yeah. Eight-thirty to ten-thirty.
HMJr:
Yeah. Eight-thirty to ten-thirty I could run
in eight groups. It's too many. I wouldn't
bring in more than a half a dozen groups.
B:
Okay. You want to see people different from
whom I'm seeing? Except you might want to
see Discount. I've seen Dudley Mills.
HMJr:
Well, I'd like to see the Discount boys and
also - what's-his-name?
B:
Devine.
HMJr:
Devine.
B:
Well, I'm not seeing Devine.
HMJr:
Well, let me see the Discount boys and
Devine.
B:
And then we'll fix up some others.
HMJr:
Yes, and one life insurance fellow.
Regraded Unclassified
246
- g -
B:
Okay.
HMJr:
What?
B:
Yeah.
HMJr:
You might bring me down Lewis Douglas and
his man.
B:
Lewis Douglas and his man? Bring Lew down?
HMJr:
Bring Lew down.
B:
Lew, I think, would like to talk to you
anyhow, about another matter.
HMJr:
Well, bring Lew down.
B:
Okay.
HMJr:
Tell him I can't talk about fight for freedom
until I've got some money.
B:
Well, Lew wants to talk to you about committee
work.
HMJr:
Yeah.
B:
Up here.
HMJr:
All right.
B:
And I think it might be B good thing for him
to come down.
HMJr:
Okay.
B:
One more.
HMJr:
Yeah.
B:
I've got a meeting tomorrow morning with the
State Department on Iceland.
HMJr:
Yeah.
Regraded Unclassified
247
- 9 -
B:
And they called me this morning and said
that situation - the dollar situation in
Iceland is rather serious.
HMJr:
Yeah.
B:
Would you be willing to go along with a
two million dollar Stabilization loan there?
HMJr:
Sure.
B:
I think it might be a good thing, and I
think we can get it back.
HMJr:
I'd B great deal rather do that than this -
what was it - two million or five million
we gave to Nicaragua.
in
Ecuador?
HMJr:
Ec - no, Nicaragua.
B:
I'd much rather do it here than Ecuador.
HMJri
Don't you remember the Nicaragua one?
B:
No, I didn't hear that one.
HMJr:
Sure. We gave it to the fellow who killed
his uncle in order to become president.
B:
(Laughs) Yeah. Well, I think this is
better than some of them. Well, I'll go
ahead on that basis then - Saturday morning.
HMJr:
That's all right.
B:
All right.
HMJr:
Thank you.
B:
Thank you.
Regraded Unclassified
248
October 3, 1941.
MEMORANDUM FOR THE SECRETARY'S FILES
The Minister of South Africa, R. W. Close, called on Secretary
Morgenthau at 11:30 a.m. today. Mr. White was present.
The Minister stated that his country was urgently in need of
steel milla to produce additional steel in South Africa. The ap-
plications for the material had been forwarded to the United States,
end the Minister was hopeful that Secretary Morgenthau would help
the Union of South Africa obtain the desired material, If such
material could not be appropriately procured under Lend-Lease, his
Government hoped that they would be able to purchase them for cash.
The second item which the Minister stated his Government urgently
needed was some gold-mining machinery.
The Minister stated that apparently little was known in this
country about the large contribution his country was making. Re
stated, for example, that with white population of 2,000,000 they
had fully equipped an army of 100,000 men to fight in the British
forces. Be stated that they needed to increase their gold produc-
tion in order to increase their purchases so they could give the
maximum assistance to the forces fighting Germany.
He left with the Secretary three memoranda, copies of which
are appended, and a budget statement of the Union of South Africa.
The Secretary replied that he would do what he could to help
the Union of South Africa obtain the steel that it needed and that
he uld consider the matter of gold-mining machinery. Secretary
Vorgenthau cautioned the Minister not to expect too much, as the
question of priorities of goods going to South Africa was only
indirectly related to the question of the dollar position to the
Union of South Africa.
H. D. White
Regraded Unclassified
GOLD WINING STEEL PLATES.
ITTON
1200 long tons Mild Steel Plates for South African Gold
Mines.
2.
Under Lend Lease by Regulation 3305/802 of lat August
1941. Control Reference S.A. 67/LL/R 301.
NOTE, Shipment desired October - March at say 2000
tons per month.
3.
Memo at foot of requisition.
"These plates are required for Plant Maintenance
"on the Witwetersrand Gold Mines the continued
"operation of which 1s essential to South Africa's
"economic structure and war effort. The Mine
Workshops are also actively engaged in production of
"bomb casings, etc".
4.
After requisition in - by telephone there was a query
over the telephone as to the part played by the Gold
Mines in South African war effort. 77777
5.
General Smute: Realised the grave danger that if that
view obtains no chance of obtaining material for the
mines 111.
Memo "Belgien Congo".
SOUTH AFRICA'S PART IN WAR.
be regarded as to three spheres -
1.
War Effort in the Field.
2.
War Economy.
3.
Production of War Material.
- 2/ -
Regraded Unclassified
- 2 -
I. IN THE FIELD,
194
had her
In November 100,000 army raised and large part sent
to Abyssinnia. Fully equipped in all branches
6000000 11
Equipment and its maintenance
Entirely Union responsibility
Largely Union manufacture.
Ex nihilo.
in
Allied araies received from Union large supplies
equipment ranging from armoured trucks and vehicles to
shells, amunition and boots (300000 in three months).
We make howitzers.
4.
Mainly work of Mines, Railways, Iscor.
Mines share highly important.
5.
Delhi Conference. Heavy future commitments.
6.
In all these matters Mines played a vital parts
it would be a grave disaster if anything were to happen
to stop production.
7.
Field Marshal Sauts regards BO gravely risk of
jeopardising the supply of material for mines that be twice
or more in September cabled to London to represent to the
British Government that it was fundamental to regard Gold
Mining production as part of the war effort.
8.
Witwatersrand University on Gold Mining Area - dong
before this question had taken present form General Pmuts in
speech to University declared that the Mines wore probably
contributing as much to the South African War Effort as
our own fighting forces in the Field (Soldier Statesman)
Pardonable in view of their record (and his)
to say "And that's that".
Bad shalese Ponies - -3/-
Regraded Unclassified
3 . 1
II. WAR ECONOMY AND GOLD MINES,
1940
0
(Latest figures obtainable here from Year Book
and Budget).
N.B. Our war financing net by Internal Loans and
Taxation - - Direct and Indirect.
1917. Gold Production Figures
Gold Production
12821507 fine os.
Gross Revenue
£107701000 (X51)
Costs approximately 63% 1.e.
£673 million.
Stores
£34 L milliom. 34%
Salaries and Wages
Anno
£33-1/3rd million.
Profite approximately 37% 1.0.
£41 million.
Less 1940 taxation (exact)
....
£10232000
Shareholders (exact)
£30694000
1941 - 42. (Budget Estimates - - page 18).
TOTAL REVENUE
£64347000
1. Direct Taxation
£42884000
(Mines Share)
normal tax:
£15115000
special war levy.
4820000
compare with
£10232500 in 1940
...
Increase in year
£95 million
over
Add.
Dividends in Super tax brackets.
Add.
Sliding leased mines. scale of (contractual). share of profits Be in non some birth 737/34
west
See Budget Figures,
him
- w - & LONE 192
for add
Regraded Unclassified
- 4 -
Indirect Taxation.
Customs and Railways re Mining Stores
(machinery, chemicals, etc. etc.)
even in 1939
-
over £34000000
Employees wages
( 394000 personnel. 1
Natives and European.- (6.7 ratio black to white)
Personal taxation by all.
Income tax by large percentage European.
3. Dependent on Mines,
(1)
Many factors directly dependent on Mines:
Manufacturing supplies (machine parts, steel drills and
explosives, etc.)
(2)
Explosives Manufacturers -
Cape Explosive Works.
One of greatest Pouth of Equator.
Done splendid war work: supplying all Douth African
civil and military needar and sending large supplies to
other W&X centres.
dirma
Intimate connection with and dependence on Mines above.
(3)
S.A.R. & H. Annual Budget (explain),
In importance rivals Union Budget) (National Railways).
Major portion its revenue is from haulage of Mines.
(4)
Agriculture - Farmers rising into hundreds of thousands
depend directly or indirectly on Mines.
Soul
4.
Sterling Support.
guld
(1)
General Douts understand took to make available to the
United Kingdom the equivalent in gold of the value of
goods obtained by us in U.S.A., 1.9. virtually we pay
cash.
(2)
Transfer to J.K. serves to help finance the war for rest
of British Commonwealth.
- 5/ -
Regraded Unclassified
- 5 -
International Aspect.
Could not wish for more convincing statement than
that made by the Secretary himself.
FINAL
Read summaries or paraphrases of General Sauts
Telegrams.
Uctober, 1941.
Regraded Unclassified
MINISTER'S COPY
20171 d/d
PRIME MINISTER TELEGRAM TO HIGH COMMISSIONER LONDON:
1.
Clearly fundamental to regard gold mining production
as part of the war effort of the Union.
mainal
2, Opportunity therefore of getting from U.S.A. the materi
necessary for gold mining should not be put in jeopardy
3.
Gold Mining Production essential -
(a) Because of British Dollar Exchange.
(b) Because the gold mines contribute so very
greatly to the Public Revenue of the Union
as follows:-
(1) Direct Contribution: 1/3 of total
Union Public Revenue.
(11) Indirect Contribution - probably
practically the same share - 1/3.
Regraded Unclassified
GOLD AWD ST
Telegram 1471 1st September, 1941, conveys text telegram
to High Commissioner, London, to inform
Dominion Secretary,
(1) We wish to make use of Lease Lend to maximum extent
for all purchases so far as held applicable.
(2) To the United Kingdom Government we will make available
in gold - the equivalent of Lease Lend use.
(3) Promise from lst September complete control of exports
and imports per Import Permits, also where needed
Essentiality Certificates plus for goods bought in
U.S.A. priority ratings.
(4) Control of
(a) Use and distribution promised -
via National Control Board.
(b) Prices - through Price Controller.
(5) Therefore can assure U.S.A. that Lease Lend conditions
will be fulfilled, vis:
(a) Centralisation of orders by S.A.P.C. in
New York - presented by B.P.C.
(b) Purchases will be those essential to war
effort and community vital needs.
(c) Purchases in U.S.A. by Union private
persons of such commodities will cease.
(a) Undue profit by agents (distributors)
will be stopped.
(a) But Government will be secured re use
and distribution for its purposes.
(+) "Re-Export" of Lease Lend things from
Union will be prohibited - unless arranged
with U.S.A. - e.g. other African British
territories like Rhodesia.
(6) List of articles to be dealt under these was givent with
quota allocated by U.S.A. Shell was theratly recever
passenger motor cars but hope for share for Union in
including commercial motor cars. Difficulty
(7) Supurcom will be advised of priority ratings and
War Transport Ministry in Now York to arrange
import permits - and told to act in collaboration with
necessary sea freight.
Regraded Unclassified
MINISTER'S COPY
TELEGRAM,
EXTERNAL AFFAIRS (7) PRETORIA.
SECRET
SOUTH AFRICAN LEGATION, WASHINGTON, D.A
2nd October, 1941.
Further to a) telegram 171 McCola telegraphed Swingler
2
comprehensive statement of activities Einos Iscor and hailways
act production 64 ¥ caterial for Africa and Middle Last. Such
Sion JR. the print of ,old mines depends entirely on caintenance
and even perisal closing down would gravoly affect output of
Hour. 2013 aines 180 provide principal serket for sany manufacturing
101.0 which wre tweating out clothing footwear And foodstuifs for
sot oKo their existence and maintenance to mining industry and re-
its its employees. Continuity of gold production is ts vital to
Erica's economic existence And therefore to our NET efforts 05
ace of export trade is to United Kingdom. Please read this (cut.)
a conjunction with govolm's telegram to Swingler.
Regraded Unclassified
address mills
22nd September, 1941.
dear Mr. Secretary,
I have the honcur, on instructions of my
Government, to inform you that the South African
Purchasing Commission, 37 Wall Street, New York City,
has submitted, on behalf of the South African Iron and
Steel Industrial Corporation, Limited, of Pretoria,
South Africa, through the British Purchasing Commission,
its formal applications for the procurement of one two
high blooming and slabbing mill and one nlate mill with
all accessories.
The above applications were forwarded to the
Director: Procurement, Government of the United States,
on form 1 of Requisition for Defence Articles (Under
Act March 11, 1941) under British references SO/SA83/LL/E311
and SO/SA84/E348 dated the 22nd August, 1941. The e
applications were accompanied by an explanatory memorandum
showing the urgent necessity for the Union of South
Africa to obtain this equipment at the earliest possible
date. A copy of this memorandum is enclosed herewith for
ease of reference.
My Government has instructed me to support
the above applications and to confirm that these mills
are essential to the Union's war effort bein" developed to
the limit of its resources, particularly for the equipping
and the maintaining of South African and other Forces in the
Middle East and for assisting in the making of our full
contribution to the effort of the Eastern Group,
With the ac nisition of these mills the
available steel output of the Union of South Africa will
Regraded Unclassified
-2-
be increased by an estimated additional two hundred and
fifty thousand tons per annum. This additional steel in the
Union of South Africa will be invaluable in view of the
difficult shipping position and in view of the Union's
geographical position relative to the Middle East operations.
The Union Government would be grateful if the most
favourable consideration could be given to the applications
referred to above and if the United States authorities
would allot so high a priority rating for the material as
would allow of the quickest possible delivery thereof.
Should the United States Government, however,
feel that these mills cannot be procured appropriately under
Lend Lease, the Union Government trusts that the acquisition of
the urgently required equipment against cash would be
authorised.
I am, my dear Mr. Secretary,
Yours very sincerely,
no
ourable the Secretary of State,
Department of State,
WASHINGTON, D.C.
COPY DB
Regraded Unclassified
TREASURY DEPARTMENT
259
INTER OFFICE COMMUNICATION
DATE Oct 3.19 41. oil
TO
secretary Morgenthau
FROM
SSSPS. Foley and Pehle
no:
Foreign Funds Control Public Relations Program
pursuant to instructions, Norman Towson and Joseph Murphy
attended meetings of Groups of the New York State Bankers' Asso-
elation, and discussed the freezing Order. The meetings were
1018 in the following cities on the dates indicated; the approx-
irate attendance at each meeting is also shown:
Sept. 18, 1941
Binghampton, N.Y.
182
F
19
Il
Albany, N.Y.
258
II
22
Il
Buffalo, N.Y.
334
If
23
ff
Rochester, B.Y.
210
11
24
ff
Syracuse, N.Y.
341
is
25
o
West Caldwell, N.J.
350
"
26
11
New York City
1352
in addition to the evening meetings as scheduled, there
were arranged in each of the last five cities, and in Newark,
1 Jersey. informal round table question and answer periods de-
cted entirely to Foreign Funds Control. Each of these meetings
listed about two hours.
The evening meetings were more formal in character, con-
sisting of a presentation of Regulation W (consumer credit) by
P. ounds and Mr. Treiber of the Federal Reserve Bank of New
Tork, with impromptu questions and answers concerning that Regu-
lation. Following an intermission, Executive Order No. 8389, as
mended, was discussed by Towson, and its legal aspects by Murphy.
This n85 followed by a question and answer period devoted to the
.rder.
The presentation of the Order was on the theme that it is
in essential, integral part of national economic defense, that the
banks are in the front line of such defense, and that their coopera-
Uon is needed. The explanation of the legal aspects was in such
torms as to arouse questions and SO to develop 8 broader discussion
C the problems involved in the effective administration of Foreign
74003 Control.
Regraded Unclassified
-2-
260
A summary was kept of the types of questions asked, which
may be used in connection with further public relations programs.
Informal contacts with members of the audiences, and the
comments made by officers of the Bankers' Association, indicate
that the program was well received, the bankers feeling gratified
at the attention paid to them and their problems by the Treasury
Department, and pleased at the willingness of representatives of
the Department to answer their questions and to assist them in the
solution of their problems. In all the cities visited, the party
was entertained at dinner, and in most of them at lunch. The at-
titude of the bank officers who attended was informal and cordial.
Towson and Murphy report having gained the following im-
pressions:
1. A large number of the bankers were obviously ignorant of
the scope of the freezing regulations, and many seemed
to have disregarded them entirely.
2. The relationship between freezing and economic defense
was new to most persons.
3. Many banks had given only slight consideration to the
tests by which to determine whether accounts should be
blocked, and consequently, numerous questions were asked
as to how far they were required to go in effectuating
the program.
4. There was a full, whole-hearted response to the request
for cooperation as soon as it was realized that Foreign
Funds Control is & defense measure of broad scope.
TREASURY DEPARTMENT
261
INTER OFFICE COMMUNICATION
DATE 3.194.
TO
Secretary Morgenthau
FROM
Messrs. Foley and Pehle
Foreign Funds Control Public Relations Program
On the basis of the experience of Norman Towson and Joseph
"urphy, in their speaking tour of Kew York State, the following
Turther program is recommended:
1. An initial address by you over B. nation-wide radio
hook-up, emphasizing the national economic defense
aspects of freezing, and the importance of the
Foreign Funds Control program.
2. Additional radio addresses, from time to time, by
officers of the State, Treasury and Justice Depart-
ments on various aspects of freezing in which the
public should be interested. Round table radio dis-
cussions between government officials and representa-
tives of various groups, such as banks, insurance,
shipping, importing, and other interests, might also
be arranged.
3. Newspaper and magazine articles having general
circulation, as well as appropriate trade papers,
prepared by well-known writers after discussion with
Treasury officers, on various phases of the Control.
4. A conference to be held immediately in Washington,
to be attended by & representative of each Federal
Reserve Bank, at which the public r elations program
of Foreign Funds Control will be worked out in detail.
5. A series of public meetings to be held in each of the
cities where Federal Reserve Banks ano their branches
are located, to be addressed by representatives of
Foreign Funãs Control. These meetings would be
followed by smaller round table discussions with
particular groups affected by the Control.
Regraded Unclassified
262
6. A letter, bearing your signature, to be sent to the
president of each bank in the country, urging the
full cooperation of his bank in the program of the
Control. Thereafter, a semi-monthly letter from
Foreign Funds Control to the officer designated by
each bank to handle freezing matters, discussing
matters of mutual interest, and presenting questions
and answers. A suggested draft is attached. If
this is satisfactory, steps can be taken at once
to have it multilithed and sent out.
7. The assignment to Foreign Funds Control of a full
time competent ublic relations man, with adequate
staff, to coordinate and develop the above program.
Regraded Unclassified
263
THE SECRETARY OF THE TREASURY
WASHINGTON
Dear Sir:
Here in Washington we are anxious to learn more
about the difficulties you are encountering with respect
to freezing control.
It is no easy task to administer freezing control.
I know that it has raised & number of serious problems for
you. I should like to hear from you about these problems
and at the same time receive your views on how we can do B.
better job.
What can we do to make your job easier? Do you have
enough information? If not, what else can we send you?
What kind of problems are causing you difficulty? Are the
Federal Reserve Banks and the Treasury Department giving you
the kind of assistance you need? Do you see loopholes we
are missing? If so, how can we plug them? Are we unneces-
sarily strict in some areas? Where?
You are on the firing line. You know what help you
need better than we do. Please give us your suggestions.
I hope that in this way we can better understand your prob-
lems and improve our effort. Many of the general problems
and questions raised we hope to discuss and distribute in
pamphlet form.
Please let me hear from you very soon.
Sincerely yours,
Secretary of the Treasury
Regraded Unclassified
264
TREASURY DEPARTMENT,
FOR RELEASE, MORNING NEWSPAPERS,
Mashington
Friday, October 3, 1941.
The Secretary of the Treasury, by this public
notice, invites tenders for $100,000,000, or thereabouts, of
01-day Treasury bills, to be issued on a discount basis under
competitive bidding. The bills of this series will be câted
October 8, 1041, and will mature January 7, 1942, when the
face amount will be payable without interest. They will be
issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity
vslue).
Tenders will be received at Federal Reserve Banks
and Branches up to the closing hour, two o'clock P. m.,
Bastern Standard time, Monday, October 6, 1941. Tenders will
not lse received at the Treasury Department, Washington. Each
tender must be for an even multiple of $1,000, and the price
offered must be expressed on the basis of 100, with not more
then three decimals, e. :., 99.925. Fractions may not be
used. It is urged that tenders be made on the printed forms
and forwarded in the special envelopes which will be supplied
by Foderal Reserve Banks or Branches on application therefor.
Tenders will be received without deposit from incor-
porated banks and trust companies and from responsible end
recognized dealers in investment securities. Tenders from
27-84
Regraded Unclassified
265
- 2 -
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 incor-
porated bank or trust company.
Immediately after the closing hour, tenders will be
opened at the Federal Reserve Banks and Branches, following
which public announcement will be made by the Secretary of
the Treasury of the amount and price range of accepted bids.
Those submitting tenders will be advised of the acceptance
or rejection thereof. The Secretary of the Treasury expressly
roserves 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 at the prices offered
must be made or completed at the Federal Reserve Bank in
cash or other immediately available funds on October 8, 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, as such, and loss from
the sale or other disposition of Treasury bills shall not
have any special treatment, as such, under Federal tax Acts
now or hereafter enacted. The bills shall be subject to
estate, inheritance, gift, or other excise taxes, whether
Federal or State, but shall be exempt from all taxation now
Regraded Unclassified
- 3 -
266
or horenfter 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 Treasury bills are originally sold
by the United States shall be considered to be interest. Under
Sections 42 and 117 (a) (1) of the Internal Revenue Code, as
emended by Section 115 of the Revenue Act of 1941, the amount
of discount ct which bills issued hereunder are sold shell not
be considered to accrue until such bills shall be sold, redeemed
or otherwise disposed of, and such bills are excluded from con-
sideration as capital assots. Accordingly, the owner of
Treasury bills (other than lifo insurance companies) issued
hercunder nood include in his income tex return only the differ-
ence between the price paid for such bills, whether on original
issue or on subsequent purchase, and the amount actually re-
ceived oither upon sole or redemption at maturity during the
texable year for which the return is made, as ordinary gain or
loss.
Treasury Department Circular No. 418, as amended,
end this notice, prescribe the terms of the Treasury bills
and govern the conditions of their issue. Copies of the cir-
cular may be obtained from any Federal Reserve Bank or Branch.
-o0o-
Regraded Unclassified
Conies of this memorandum
have been given to
Mr. D. W. Bell and Mr. Morris
Prepared by: Mr. Sandelin
Mr. Foy
Mr. Tickton
Mr. Lindow
Mr. Murphy
Mr. Hans
Regraded Unclassified
2077
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 3,
1941
Secretary Morgenthau
TO
FROM
Mr. Heap UA.
Subject: October Financing
The major technical problem presented by the October
financing is whether it should be concentrated entirely in
a long-term issue or divided between B. medium- and 8. long-
term issue. A minor problem is the proper treatment of the
$204 millions of 1=1/4 percent notes maturing on December 15.
The first and second sections of this memorandum are devoted
to a. consideration of these problems and the third to a dis-
cussion of particular proposed issues. It 1s assumed that
the amount of new money desired to be raised at this time
18 about 81 billion.
I. The Market for a New Medium- or
Long-term Issue
The market for & new medium- or long-term issue 18 over-
whelmingly an institutional one. August 31 figures, just
available, show that about 81 percent of the total privately-
held supply of the three taxable issues put out this spring
is held by banks and insurance companies covered by the
Treasury Survey of the Ownership of Government Becurities.
If the holdings of banks and insurance companies not covered
by the Survey and of other classes of institutions were known,
this figure might be raised by, perhaps, 8.8 much 8.6 10 per-
cent.
Prospects are not good, furthermore, of increasing the
non-institutional absorption of medium- and long-term
marketable securities in the near future. Individuals plus
all institutions other than banks and insurance companies
absorbed less than 2 percent of the net increase in the pri-
vately-held marketable supply of Government debt during the
eight years ended June 30, 1940. Holdings of marketable
securities by individuals alone probably declined during
this period despite an increase of over $18 billions in the
privately-held supply of such securities. Individual pur-
chasers at the present time, moreover, have a much more
Regraded Unclassified
268
Secretary Morgenthau - 2
attractive outlet for funds up to $53,750 & year in savings
bonds ($107,500 for married couples, plus additional amounts
for children). It may be concluded, therefore, that the
market for the new financing must be primarily institutional.
A medium-term issue would be attractive principally to
commercial banks; & long-term issue would have to find per-
manent lodgment principally with insurance companies and
mutual savings banks, although a large part of it might be
placed temporarily, and & smaller part permanently, with
commercial banks. The preferences of these different classes
of institutions, as indicated by their holdings of the three
outstanding taxable issues as of August 31, 1941, are shown
in the following table:
Holdings of Taxable Bonds by Institutions
Covered by the Treasury Survey
August 31, 1941
(In percent of total privately-held supply)
:
:
Mutual :
:
Commercial
Insurance
:
:
Savings
:
:
:
Total
Banks
Companies
:
:
Banks
:
::
2's 1948-50
53
20
13
86
2-1/2's 1952-54
31
33
12
76
2-1/2's 1956-58
27
26
28
81
Total
36
26
19
81
Life insurance companies are currently in a very strong
cash position. Cash holdings of 36 large legal reserve life
insurance companies having 82 percent of total admitted
assets of all legal reserve life insurance companies in the
United States amounted to $1,171 millions on July 31. This
16 about the same as in the preceding five months, but is
Regraded Unclassified
269
Secretary Morgenthau - 3
sharply above the levels prevailing prior to February of
this year, 8.8 18 shown by the attached chart. While it 1a,
of course, unlikely that the major portion of this cash
balance would be used at any one time for the acquisition of
United States securities, it 16, nevertheless, probable that
the life insurance companies would be willing to drav on
their cash balances to the extent of, Bay, $200 to $300 mil-
lions to purchase an issue especially appealing to them.
From the longer-run point of view, however, the amount
of Government securities which life insurance companies may
be expected to purchase from new funds 1a more important
than any single-shot purchase which might be made from ao-
cumulated cash. The average monthly increase in total funde
available for investment of the 36 large companies was only
$115 millions during the year ended July 31, 1941. The
average monthly increase in holdings of United States se-
curities was only #25 millions.
Cash balances of mutual savings banks at $968 millions
on June 30, 1941 were around their all-time high. These
cash holdings which amounted to about 9.1 percent of total
deposits might be drawn down by perhaps $100 to $200 mil-
lions to purchase an issue particularly attractive to the
mutuale.
The long-run absorptive capacity of mutuale 18 not
good, however. During the year ended June 30, 1941, their
total deposits increased only $17 millions. The increase
of $313 millions in their Government holdings during this
period W8.8 made possible, therefore, only by & liquidation
of other loans and investments. During the six months
ended June 30, 1941, mutual savings banks acquired about
$821 millions of new taxable bonds, but financed about
$600 millions of these by the liquidation of other Govern-
ment securities. Since the securities liquidated were
presumptively sold mostly to commercial banks. little was in
gained from the standpoint of restraining the increase
bank deposits by selling the new securities to the mutuals.
insurance appears, companies and mutual savings banks 18 very limited. about
It therefore, that the absorptive capacity of
Commercial banks, on the other hand, will still have
84 billions of excess reserves remaining after giving effect
fore, are still able to absorb about $20 billions in
to the recent increase in reserve requirements and, there- ad-
ditional loans and investments.
Regraded Unclassified
270
Secretary Morgenthau - 4
It follows from the above figures that the only classes
of investors capable of absorbing a large proportion of the
huge deficit financing ahead are individuals and commercial
banks. Individuals cannot be reached effectively by open
market securities, while sales to commercial banks result
in an expansion of deposits. Institutional investore other
than commercial banke do not have the capacity to absorb
any substantial proportion of the deficit except by resell-
ing existing securities to commercial banks -- at procedure
fully 8.8 inflationary as if the securities were sold to com-
mercial banks in the first instance. A greatly increased
sale of savings bonds appears to be the only way by which
B. major proportion of the deficit may be financed otherwise
than through direct or indirect sales of securities to com-
meroial banks.
Under the circumstances, it would seem wise not to
bear too heavily on the long-term market at the present
time. We should suggest, therefore, that the proposed new
money financing be divided about equally between B. medium-
term issue attractive principally to commercial banks end
a long-term lasue attractive primarily to other institu-
tional investors.
II, The 1-1/4's Due December 15, 1941
The refunding of the 1-1/4 percent notes, due December
15, presente no important problem. These are outstending
in the amount of only $204 millions, of which 843 millions
are held by the Federal Reserve Banks. Of the remaining
3161 millions, $88 millione are owned by holders covered
curities -- $64 millions by commercial banks, and 824 mil-
by the Treasury Survey of the Ownership of Government Se-
lions by insurance companies and mutual savings banks
combined. (The relatively large amount of this issue -
$73 millione -- owned by "other holders", as compared with
recent issues, 18 explained by the fact that this issue 18
wholly tax-exempt, and hence attractive to individuals.)
Due to the small amount of the maturing notes, two
no especial problem as there would be no objection to the
option for the notes to exchange into either, would present
separate cash issues offered at the present time, with an
bulk of the notes going into either one or the other of the
new issues. (If the amount of the maturing notes were
larger, it would be desirable, if two new-money issues were
to be offered, that their premiums be approximately equal in
order to prevent the bulk of the exchanges going either one
way or the other.)
Regraded Unclassified
Secretary Morgenthau - 5
271
III. Suggested Issues
An indication of what might be obtained in terms of
interest rates and maturities at the present time 18 given
by the specific issues listed below. The pricing of these
issues 18 preliminary and is based on the supposition that
the financing will be divided approximately equally between
two issues, one in each category. If the entire financing
should be concentrated in one issue, the issue selected
would have to be alightly shorter than indicated in the
table:
: Estimated I
Yield
Probable
:
:
Basis*
Price
:
:
(Percent)
Issues Primarily Attractive to
Commercial Banks
1-1/2 percent bond
1.37
100-25/32
due March 15, 1948
(6 years, 5 months)
2
percent bond
1.85
101-15/32
due September 15, 1952-54
(10 years, 11 months -
12 years, 11 months)
2
percent bond
1.55
101- 6/32
due September 15, 1952-55
(10 years, 11 months -
13 years, 11 months)
Issues Primarily Attractive to
Insurance Companies and Mutual Savings Banks
2-1/4 percent bond
2.13
101-17/32
due September 15, 1956-61
(14 years, 11 months -
19 years, 11 months)
2.43
101-15/32
2-1/2 percent bond
due September 15, 1971-76
(29 years, 11 months -
34 years, 11 months)
Based on closing bid prices October 1, 1941.
Attachment
Regraded Unclassified
assified
LIFE INSURANCE COMPANY AND MUTUAL SAVINGS BANK CASH HOLDINGS
1939
1940
1941
1642
J
2
A
5
o
N
D
+
F
M
A
E
J
7
A
5
o
N
D
al
-
M
A
M
-
J
A
à
o
N
D
J
.
a
.
W
-
DOLLAR
DOLLARS
MILLIONS
MILLIONS
1200
1200
LIFE INSURANCE COMPANIES
1100
1100
MUTUAL SAVINGS BANKS
1000
1000
900
900
BOO
800
700
700
600
600
F
M.
A
M
J
J
A
5
o
N
D
J
,
M
A
M
J.
J
A
5
o
.
D
J
F
M
A
M
J
J
7
A
5
o
6
D
-
1940
1941
1942
1939
. 36 LEGAL RESERVE COMPANIES HAVING B2 PERCENT OF TOTAL ADMITTED ASSETS OF ALL
UNITED STATES LEGAL RESERVE LIFE INSURANCE COMPANIES.
242
" DATA AVAILABLE ONLY ON JUNE 30 AND DECEMBER 31.
Office of the Secretary of the Treasury
B. 235
- - I and tirtifie
TREASURY DEPARTMENT
273
INTER-OFFICE COMMUNICATION
DATE October 3, 1941
TO
Secretary Lorgenthau
FROM na Hadley
PROPOSED TREASURY PINANCING
The present market indicates that it could very easily take $1 billion
in cash and refunding of the 3200 million December note in one long issue,
gowever, it would seem advisable to make a split offering of, say, $700 or
JEOU million in EA long issue and $500 million in a shorter issue so as not
to overload the longer end of the market.
ISSUES:
A long 2-1/2% issue could be offered with the first call date in the
neighoorhood of 27 to 30 years. This is roughly 15 years longer than our
last 2-1/2, offering in May. The best shorter issue that could be offered
AR conjunction with a 2-1/2% bond would appear to De a 2% with 10 or 11 years
LO lirst call date. If such an offering is made, the holders of the December
notes should De given the opportunity to exchange into either issue, although
must of them would probably take the long issue.
ase ISSUE:
for a single bond offering, my preference would be a 2-3/6 issue of
about 20 years to first call date. This would not only represent a saving
in interest over a 2-1/2% out would give us a better basis for determining
reles on future long offerings. At the present time a 2-1/2,2 appears as
it could be placed as early as 1968 out procably AS long as 1972 or
2973 to first call date,
Regraded Unclassified
1.
274
Premiums Based on Offering 2 Bonds
Probable
Coupon
Maturity
Yield
Price
Premium
2%
10-12 yrs.
1,81
101.23
1 pt. 23/32nds
(1951-53)
1.83
101.18
1 pt. 18/32nda
11-13 yrs.
1,88
101.7
1 pt. 7/32nds
(1952-54)
1.90
101.
1 point
2-1/4%
15-17 yrs.
2.10
101.30
1 pt. 30/32nde
(1956-58)
2.12
101.21
1 pt. 21/32nds
16-16 yrs.
2.14
101.16
1 pt. 16/32nds
(1957-59)
2.16
101.7
1 pt. 7/32nds
2-3/6%
20-23 yrs.
2.24
102.5
2 pts. 5/32nds
(1961-64)
2.26
101.27
1 pt. 27/32nds
21-24 yrs.
2,27
101.25
1 pt. 25/32nds
(1962-65)
2.29
101.13
1 pt. 13/32nds
2-1/2%
27-32 yrs.
2.36
102.23
2 pts. 23/32nds
(1968-73)
2.38
102.11
2 pts. 11/32nda
30-35 yrs.
2.41
101.29
1 pt. 29/32nds
(1971-76)
2.43
101.16
1 pt. 16/32nds
Regraded Unclassified
2.
275
Premiums Based on Offering Only 1 Bond
Probable
Coupon
Maturity
Yield
Price
Premium
2-1/46
14-16 yrs.
2.10
101.27
1 pt. 27/32nds
(1955-57)
2.12
101.19
1 pt. 19/32nds
15-17 yrs.
2.14
101.13
1 pt. 13/32nds
(1956-58)
2,16
101.4
1 pt. 4/32nds
2-3/8%
19-22 yrs,
2.26
101.25
1 pt. 25/32nds
(1960-63)
2.28
101.14
1 pt. 14/32nds
20-23 yrs.
2.28
101.17
lpt. 17/32nds
(1961-64)
2.30
101.7
1 pt. 7/32nds
2-1/2%
27-32 yrs.
2.38
102.11
2 pts. 11/32nds
(1968-73)
2.40
101.31
1 pt. 31/32nds
30-35 yrs.
2.42
101.23
1 pt. 23/32nds
(1971-76)
2.44
101.10
1 pt. 10/32nds
Regraded Unclassified
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 3, 1941
TO
Secretary Morgenthau
D. H. Morris, Jr.
FROM
Subject:
Suggestions Concerning October Financing Resulting
from B Meeting of Mesars. Haae, Murphy, Hadley. and
Morrie
Special reference is made to the first paragraph on page
four of Mr. Haas' memorandum dated October 3. Elaborating
somewhat on that paragraph, it is pointed out that the biggest
total dollar field available from individuals is that area
covered primarily by wages, which, in effect, means that this
field can only successfully be tapped through the sevings bond
program and through an extension of social security or some
similar program.
On the background of Mr. Haas' memorandum of October 3,
plus the above comment, it 18 suggested that the October
financing be divided approximately as follows:
A 2-1/2 percent issue, due 1971-76. The amounts to
be provided under this issue are estimated to line
up about as follows:
Announced amount of new money
$750,000,000
75,000,000
10 percent tolerance
Exchange from 1-1/4 percent
150,000,000
12-15-41 issue
Trust fund, preliminary estimate
100,000,000
$1,075,000,000
Total
The balance of the financing to be by B 2 percent issue,
due 1952-55. It 18 estimated this will amount to between five
end six hundred million dollars.
Regraded Unclassified
Secretary Morgenthau - 2
277
A single issue is felt to be inadvisable at this time
for several reasons. First of all, in spite of the fact that
part would be in the nature of refunding operations, never-
theless the total issue would be pretty big, as 1a shown by
the following estimate:
New money as announced
$1,250,000,000
10 percent tolerance
125,000,000
Exchange from 1-1/4 percent
issue 12-15-41
204,000,000
Trust funds, preliminary estimate
100,000,000
Total
$1,679,000,000
If such an issue carried 8. 2-1/2 percent rate and was
placed in a long maturity schedule, such as 1971-76, it would
be exploring new ground in a pretty radical way. Furthermore,
not only if this type of issue were used, but also even if a
2-3/8 of about 1961-66 were put out, it still seems likely at
this time that much of any such finanoing would simply dis-
place shorter issues held by some institutions, and the shorter
issues would be taken up by the commercial banks. Thus very
little would be accomplished in the way of placing these funds
with true savers (for further details, see memorandum from Mr.
Haas). If B. 2-1/4 percent coupon were used, the maturity
would probably have to be brought down somewhere in the 1955-61
group and here we run into some years which are already pratty
well filled up on maturity schedules.
sking
Regraded Unclassified
October 3, 1941.
278
To:
Mr. Harold N. Graves
Subject:
PROGRESS REPORT FROM DEFENSE SAVINGS STAFF
SALE OF BONDS
Sales of Defense Savings Bonds reached $1,504,411,000
as of September 30. Actual cash receipts from the sale of E,
F, and G Bonds from September 1st through September 30th were
$232,327,000, which is a decrease of 12.5 per cent over the
month of August. Sales from August 1st through August 31st
were $265,606,000. Sales from July lst through July 31st
were $342,132,000.
Total sales of all three series of Bonds turned
upward in the week September 15-20, advancing more sharply
in the last week of September. Sales of Series E showed
an upward trend in that week. Sales of Series F and G turned
up in the third week of September, continuing their rise in
the last week. (See graph attached)
"ANY BONDS TODAY?"
The Automatic Phonograph Manufacturers' Association
and representatives of all the major recording companies tele-
graphed Secretary Morgenthau on October 2 pledging support
in helping the Government "publicize, promote and sell Defense
Savings Bonds and Stamps". They are taking steps to have a
recording of "Any Bonds Today" placed in No. 1 position on all
the 300,000 automatic phonographs in the country, to be followed
Regraded Unclassified
- 2 -
279
by other defense bond records as available. K.R.K. Publications
are printing the words of "Any Bonds Today" in their latest
"Broadcast Song Hits", circulation 425,000.
AMERICA PREFERRED
Union meetings are using the film extensively. One
request alone was for 500 showings in Detroit. All the 13,000
schools in Texas will see the picture, and it is being booked
in other States.
TREASURY HOUSES
New York Treasury House closed September 29 with total
stamp sales of $28,034.10; Stamps sold, 65,120; albums started,
7,612. Boston Treasury House in 25 days sold 42,724 Stemps,
et $36,814.60; 4,821 albums were started.
DIRECT MAIL
The mailing to 410,000 corporations, associations,
etc. has brought orders for $1,955,577 in 22 days and orders are
still coming in. Approximately 44 per cent are for
Series F Bonds, the balance for Series G. Total orders 597.
A mailing to customers started the middle of September
and not yet completed shows $508,123 in direct sales from 1020
orders in 12 days. More than 50 per cent of the people ordering
are signing up on the Regular Purchase Plan, underlying purpose
of the mailing. Approximately 56 per cent of the orders are for
Series E Bonds, 34 per cent for G and the balance for F.
Regraded Unclassified
- 3 -
280
FIELD OFFICE
Since September 26 three States, Idaho, Indiana, and
l'ennessee, and the Territory of Haweii have moved from the blue
to the red group; Kentucky has progressed from the white group
to the yellow. (See map attached)
State Administrators received this week Field Bulletin
ED. 7 on the installation and operation of the Payroll Allotment
Flan. A central record file of data covering all employers of
100 or more persons in the United States as of June 30 last is
now being classified, and active promotion concentrated on firms
employing 500 or more persons.
Since September 26 one new Field Representative has
started work in the field, another has completed his course of
Iceining, and three new men reported for training on October 1.
Two others will report on October 6th.
Mr. Johnston spoke on payroll allotment at the convention
of the National Association of Comptrollers, New York; and deliver-
ed three addresses at the convention of the National Association
of Life Underwriters, Cincinnati. Mr. Sparks addressed the 2000
members of the American Bankers Association Convention of Chicago.
RAIGO
Announcements were carried on the Louis-Nova fight broad-
cast coast to coast September 29th. Announcements are being
carried on all World Series broadcasts.
Complete program for "For America We Sing" on Navy Day,
October 27, will be dedicated to the Navy. Hildegarde is to be
the singing star on this date. Song writing contest was launched
Regraded Unclassified
281
on this program September 29.
Incomplete reports show 407 stations used 12,000
Retailers-For-Defense Week announcements; women's program an-
nouncements were used by 878 stations in September. So far six
five-minute interviews sent to all stations in September have been
broadcast 475 times over 118 stations.
Printed football announcements for all stations are
being released weekly to all sponsors of college and professional
football games, as well as to stations carrying football broad-
casts, pre-geme programs and follow-up scores. (See copy of
release attached)
PRESS
Important magazine publishers approached with the sug-
gestion that they incorporate "Buy Defense Bonds" emblems in their
cover designs are indicating interest. Among the organizations
considering this form of cooperation are Crowell, Hearst, McCall's,
Time-Life, and Curtis Publishing Company.
The Philadelphia Evening Bulletin reports that the
second week of their carrier campaign resulted in the actual sale
of 130,000 Defense Savings Stamps, a 30 per cent increase over
the first week of the canvass. The Bulletin has purchased 150,000
Stamps for the third week, and is using space in other newspapers
to advertise its cooperation in the Defense Savings Program. (See
advertisement in the Washington Star attached)
A unit has been set up in the Press Section to supply
the labor press (reader coverage 15,000,000) with news and informa-
Regraded Unclassified
- 5 -
282
tion stimulating labor participation in the Program.
Conspicuous among the newspaper syndicate artists
cooperating in the Program was the widely-syndicated Webster,
with his "Life's Darkest Moments" cartoon published September 30.
(See attached)
Regraded Unclassified
Life's Darkest Moment
:
:
:
BY WEBSTER
FORDEFENSE
BUY
UNITED
STATES
SAVINGS
BONDS
ON SALE ATYOUR POSTOFFICE OR BANK
GUILTY
CON SCIENCE
health
--
Regraded Unclassified
STATUS -
ATE ORGARIZATIONS
1941
Aluexa
/
I
9
RAND 00 NALLY
MONTH RANDYA
MISMESITA
NEW
YORK
SOUTH DAKOTA
WYOMING
I
IOWA
UTAH
NEBRASKA
I
ILLINOIS
ICHIO
NO
-
RENTUCKY
I CAND
GALANORA
LOOSE LEAF OUTLINE MAP
ALABAMA
-
william
LIQUIDIANA
KEY
State and Local Committeen Organized
State Committees Organized
Administratore nni/or Chairmen personted
80
Hayn!!
Not started
Regraded U classified
UNITED STATES
SALES of E,F and G BONDS
SALES of E,F and G BONDS
BY WEEKS
285
BY MONTHS
TO TAL
MILLIONS of BELLARS
350
300
250
MILLIONS OF DOLLARS
11°
200
105
150
100
100
95
so
90
a
may - Saly AME Sept.
85
SERIES G
80
200
75
150
70
jos
65
50
60
+ may June Intry - seys
55
50
TOTAL
SERIES E
45
SERIES G
150
log
No
35
3
e
30
- The July BK seyr.
SERIES
25
SERIES F
2°
So
15
- Agaz Am
10
&
5
SERVES
o
May
May
NW
May
MAY
JUNE
JUNE
June
JUNE
JUNE
JULY
JULY
July
JULY
DUE
Aue
DOG
AVE
Gept.
Sept.
Sept.
Sept
1-3
5-10
12.17
19-24
26-31
2.7
4-14
16-21
23-28
34-
14.M
21-16
"
:
11-16
7-12
AUG
18-23
25.30
1-6
$-13
15.20
22-27
JULY
(200ys)
5
2
Regraded Unclassified
286
U.S. DEFENSE
IS NOW
HOME DELIVERED
Meet on Officiel U.S. Defense Agent.
He's one of thousands in Philadelphia. The
Evening Bulletin newspaper boys have
bunded together voluntarily to help bridge
the gap between those who sell and these
who buy U.S. Defense Stamps,
These youngsters elected to sake en e
Defense job in addition to their regular job.
The idea was not morely to tell about
Defense Stamps-the boys were entrelly
offered e chance to sell them!
This in not the regular job of these young Ameri-
cana Their regular job is the sale and delivery
of The Evening Bulletin to thousands of families.
Storms don't stop them. They take year-round
weather in their stride. The work they de in honest
and earnest. The dollars they make --- theirs to
use or RETA. Delivering newspapers is big busi-
- to these little business man.
* They've Icken en mother Job. en extra job.
They get nothing out of it except the pride and
autisfaction of doing en outstanding work for
National Delense
Phündelphis la teeming with Dalanas activity.
The leading nawspoper in the city offered lines
boys a unique chence to serve their country, There
WIDE no pressure. No command.
* A plan to sell Delense Stomps was worked out
for them by The Evening Bulletin with the Tremory
Department. a - the first such plan to be initl-
cled by any pewspaper in the country, The very
lirst week that The Bulletin newspaper boys went
into action. sales of Delense Stange in Philo-
delphio increased gret one-third. The boys sold
103,000 the first week. 150,000 the second work-
mé they any they've just started
HILADELPHIA- - NEARLY EVERYBODY READS THE BULLETIN
Regraded Unclassif
ootball
Announcement
EASURY DEPARTMENT
DEFENSE SAVINGS STAFF
For Football Broadcasts, Pre-game Programs and Score
Summations During the Second Week End of October.
I-A
Today our country is poised for a touchdown. Ours is a dash
for liberty, for freedom, and for justice. One hundred and thirty
million people are playing the game of National Defense. Every
American can carry the ball over the goal line. Uncle Sam is
depending on every citizen for active support! You must do more
than root on the sidelines. Billions are needed for defense-
billions to keep the wheels of industry humming, billions to stem
the tide of tyranny and dictatorship which is engulfing the world.
Get back of your Government and push it over the goal line. Put
your dollars and dimes to work for the defense of America. Buy
United States Defense Bonds and Stamps now! Buy them as
often as you can! Invest your savings regularly in United States
Defense Bonds and Stamps. Let the roar of the crowd proclaim
liberty and justice throughout all the world!
Regraded Unclassified
288
otball
Announcement
EASURY DEPARTMENT
DEFENSE SAVINGS STAFF
For Football Broadcasts, Pre-game Programs and Score
Summations During the Second Week End of October.
1-B
Score a touchdown for National Defense today! Buy United
States Defense Bonds and Stamps and put your dollars and dimes
to work pushing America over the goal line.
Regraded Unclassified
289
ootball
Announcement
EASURY DEPARTMENT
DEFENSE SAVINGS STAFF
For Football Broadcasts, Pre-game Programs and Score
Summations During the Second Week End of October.
1-C
The signals have been called and America sweeps down the
field to victory. Our opponents are tough, tyrannical. Make
our side the winning side by buying as many United States Defense
Bonds and Stamps as you can afford. There must be no fouls, no
offsides in this great play for National Defense.
290
ootball
Announcement
EASURY DEPARTMENT
DEFENSE SAVINGS STAFF
For Football Broadcasts, Pre-game Programs and Score
Summations During the Second Week End of October.
1-D
The roar of all-out production for National Defense is drowning
out the roar of the football crowds. You, too, can root for your
country's defense by buying United States Defense Bonds and
Stamps often and regularly. Kick off for victory today and every
day this fall.
Regraded Unclassified
291
OCT 3 1941
Dear Mr. Kavanagh:
I was very glad to have your nice note
of September 24. My visit to Detroit was
one of the most enjoyable experiences I have
had during my service at the Treasury, and
for this I an very grateful to yourself and
NP. Isbey.
with many thanks for your good wishes,
I an
Sincerely,
(Digned) 1. Morgenthau. Jr.
Secretary of the Treasury
Honorable Giles Kavanagh,
State Administrator,
Defense Savings Staff,
334 Publ Building,
Detroit, Vichigan.
HNG:fns
To me Shompson
nanme
Regraded Unclassified
292
TREASURY DEPARTMENT
INTERNAL REVENUE SERVICE
The of THE COLLECTOR
DETROIT. MICH
-
September 24, 1941
is ADLYING none TO
GE:KF
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury
Washington, D. C.
Dear Mr. Secretary I
The reaction to your visit here has been no pleasing
to me that I feel I should pass this word on to you.
Quite & number of persons in various walks of life
have informed me that they believe your visit was a fine gesture.
I find that the impression made on Labor has been excellent.
One man said to me "I always thought a Secretary of the Treasury
198 a sort of super bank president. and as far from reach as one
of these fellows, but this Morgenthen is a regular guy, and seems
to be one of us." The concensus, as B. result of reading the
accounts in the daily papers, seems to be that that was the fine
way to get the feel of the people. It is my opinion that you have
contributed tremendously to the morals of the Michigan citizenry
through this venture.
Indeed, if it were not for the inhibitions that I have
felt since Senator Satch provided a modern decalogue, I might
have . suggestion to make with reference to 1944. Anyway, 1 am
quite pleased about the whole thing.
You will be interested to know that since your visit,
I have had an opportunity to discuss the payroll deduction plan
with some officials of the Ford Motor Company, and it looks to =
às If we will be able to put that over at Dearborn in a very short
time.
With good wishes, I an
Gils Sincerely yours, Karaney
GILES KAVANAGH
Collector of Internal Revenue
Regraded Unclassified
OCT 3 1941
Dear Madam Secretary:
In connection with the Treasury's continuing campaign
to sell Defense Savings Bonds and Stamps, we are proposing
a voluntary payroll allotment plan which I believe will
contribute very materially to the success of our efforts
in this vital work. The gist of the plan is that, at the
voluntary request of an employee made in writing to his
employer, the employer will place such amount of the er
ployee's salary for each pay period as the employee may
have designated in a trust account to be accumulated un-
t11 sufficient for the purchase of 1 Defense Savings Bond,
such bond to be purchased In the name of the employee and
ediately turned over to him. The plan provides that
the employee's authorization for the allotment of part of
his salary for this purpose may be withdrawn by him at any
time and that he can then receive whatever accumulations
there may be to his credit. The employer will not receive
any profit, direct or indirect, from the allotment plan.
Since we desire to put the plan into nation-wide
effect and since virtually all large employers now have
Regraded Unclassified
- 2 -
294
Government contrasts, the question has arisen whether the
plan is contrary to any of the statutes requiring the pay-
ment of minimum wages or prohibiting kick-backs. These
statutes are the Fair Labor Standards Act, the Walsh-Healey
Publie Contracts Act, and the Copeland Kick-back Act.
I attach a copy of a letter of August 13, 1941, from
Administrator Walling of the Division of Public Contracts
of your Department and 8 copy of a letter of August 12,
1941, from Administrator Fleming of the Page and Hour Divi-
sion of your Department, indicating that the Treasury's
voluntary payroll allotment plan is not prohibited by the
Walsh-Healey Act and the Fair Labor Standards Act, re-
spectively.
The same considerations are applicable to the Kisk-
baok statute. The Treasury Department is of the considered
opinion that the plan cannot be construed to violate either
the letter or the spirit of this statute. Indeed, it would
seen that the Kiok-back statute is even more clearly in-
applicable to the situation than the Walsh-Healey Act,
which your Department has already ruled does not prohibit
our plan.
In order that any possible doubts of employers may
be dispelled, and the Treasury may effectively proceed
Regraded Unclassified
- 8
295
to put its plan into nation-wide operation, I should greatly
appreciate a letter from you, which could be made public,
indicating that none of the statutes which I have referred
to should be construed to prohibit the operation of the
plan.
The voluntary payroll allotment plan will prove a
very effective means of furthering the sale of Defense
Savings Bonds. I need not tell you how deeply interested
I am in this very important phase of the defense program.
I know that you share my interest, and I wish, therefore,
to express the hope that you will give this matter your
personal attention and that I may hear from you on it
within the next few days.
Sincerely yours,
(Signed) 1. Morgenthun, 32.
Secretary of the Treasury.
The Honorable,
Bleshmell
The Secretary of Labor.
By Messenger 3 3 20
SJS:mfw
10/2/41
M.Mr
Regraded Unclassified
THE
296
U. S. DEPARTMENT OF LABOR
Wage and Hour Division
Washington
Office of the
Administrator
August 12, 1941
Mr. Gale J. Johnston
Field Director
Defense Savings Staff
United States Treasury Department
Washington, D. C.
Dear Mr. Johnstons
In accordance with the telephone conversation between
Mr. Hill of the Solicitor's office of the Department of Labor and
Mr. 0'Malley of the Treasury Department, I am writing you in regard
to the propriety under the Fair Labor Standards Act of making de-
dasaions for defense stamps and bonds.
It is our opinion that where AB employer 1a directed by a
voluntary assignment or order of his employee subject to the act
to pay a sua for the benefit of the employee to a creditor, dones,
or other independent third party, deduction from wages of the actual
sum so paid is not prohibited provided that neither the employer nor
any person acting in his behalf directly or indirectly derives way
benefit or profit from the transaction. In such case payment to the
independent third person for the benefit and credit of the employee
will be considered squivalent for the purpose of the Fair Labor
Standards Act to payment to the employee.
Since deductions for defense stamps or bonde from the wages
of the employee cannot involve any direct or indirect profit to the
employer, we believe that such deductions are proper provided that
the individual employee voluntarily consents to such deductions,
Please do not hesitate to call upon use again if there is
any further information you desire in this matter.
Sincerely yours,
(Signed) Philip B. Flesing
Philip B. Fleming
Administrator
Regraded Unclassified
397
COPI
DEPARTMENT OF LABOR
In reply refer to
DIVISION OF PUBLIC CONTRACTS
rsh/bld
WASHINGTON
August 13, 1941
Mr. Gale 1. Johnston
Field Director
Defense Savings Staff
U. S. Treasury Department
Washington, D. C.
Dear Mr. Johnston:
This will confirm the information given verbally
to a member of your staff by Mr. Esalam of the legal staff
of this office to the effect that section 1(b) of the
Walsh-Healey Public Contracts Act does not prohibit an
employer subject to that Act and & minimum wage determina-
tion under it from paying from amounts due to an employee
sa wages sums for the purchase of Defense Savings Stemps
and bonds, provided that certain conditions are met.
Payments for employees for the purposes stated
are not considered deductions prohibited by the Act,
provided the employee affected authorises, in writing,
his employer to pay for such purchases, and provided
further that the authorization may be withdrawn by the
employee at any time.
Very truly youre,
(Signed) L. Metcalfe Welling
Administrator
Regraded Unclassified
ASSISTANT SECRETARY OF THE TREASURY
October 3, 1941.
Memorandum
TO: Secretary Morgenthau
FROM: Mr. Gaston
We have had to transfer two men out
of our Defense personnel investigative staff
for making statements contrary to Adminis-
tration policy. The first such case was that
of Roswell J. Russell, an employee of the
Alcohol Tax Unit. He was the man who inter-
viewed Henry Paynter, formerly of P.M., who
wrote a personal letter to you about the
matter.
We have just acted this week in the
case of Roy V. Fox of the Customs Agency Ser-
vice, formerly 8. Treasury representative in
Berlin. Both of these men volunteered to
didates under examination statements very
much along the line of the speeches of
Lindbergh, Wheeler and Nye. Fox denied making
the statements, but we find that he made
similar statements in discussions with fellow
investigators and do not believe his denial.
The original report on which we acted in his
case came to me from David Cushman Coyle.
Mr.
Regraded Unclassified
TREASURY DEPARTMENT
299
INTER OFFICE COMMUNICATION
DATE October 3, 1041
TO Ferdinand Kuhn, Jr.
FROM Alan Barth
EDITORIAL OPINION
ON FOREIGN AFFAIRS:
RESPONSE TO THE PRESIDENT
Symbol
Following the lead of the influential metropolitan papers,
the press as 8. whole has now indicated B. preference for repeal,
rather than mere modification, of the Neutrality Law. It seeks
I final and definitive test on the direction:of foreign policy.
"It is the Lease-Lend Act, not the Neutrality Act," says
The St. Louis Post-Dispatch, "that represents today's national
policy. "herever they conflict, it is inevitable that the
Neutrality Act will give way." This observation, from a leading
midwestern newspaper which vehemently opposed enactment of the
Lease-Lend Act, affords B striking example of the reorientation
of editorial thinking which has taken place throughout the country.
The St. Paul Pioneer Press, also formerly isolationist, reasons:
"The Neutrality Act has gone to pieces under the pressure of the
realities of war because it was based on 8 superficial analysis
of America's position in the world. America has not been able to
ignore the war by looking the other way."
Regraded Unclassified
- 2 -
300
Innumerable editorials recite the contention that the
Act has proved to be ineffectual and outmoded. But to many
commentators, the simple erasure of its inhibitions does not
seem to be sufficient; they consider it symbolic, and desire
its complete repeal as & means of restating the American posi-
tion. The Detroit News gives B. representative expression of
this point of view: "It is true no attempt to repeal the
Neutrality Act is apt to succeed without opposition. But the
subject of debate will not be the law's substance, now value-
less. It will be the law as a symbol of American hope regarding
the war. And that, again, is no longer 8. hope of keeping out
but only of keeping as far out as possible, while still winning
the victory which virtually all Americans now accept as neces-
sary to national welfare and safety.'
Authorization to arm merchant ships, even the lifting of
restrictions against the movement of American vessels into
belligerent zones, does not satisfy these critics. Some of
them acknowledge that these things could be done by Executive
order without recourse to Congress. But they are inclined to
view 8.5 thinly legalistic such rulings as that recently ren-
dered by Attorney General Biddle. They want an unqualified
demonstration that the course pursued by the Administration
Regraded Unclassified
& If -
All
in foreign affairs commands the full support of Congress and
the country. Such a demonstration, they believe, will have
& profound moral effect, both at home and abroad.
Trend
A Callup Poll taken last April disclosed that only 30
percent of the people responded affirmatively to the question:
"Do you think American merchant ships with American crews
should be used to carry war materials to Britain?" Sixty-one
percent recorded opposition; nine percent were in the no
opinion column. The results published October 1 in response
to B. similar question revealed 46 percent voting Yes, 40
percent voting No and 14 percent expressing no opinion.
It should be noted that this division of opinion is in
respect to 8 subject which is still in the area of discussion
and on which the President has, as yet, recommended no specific
action. It is to concrete executive action that the public
responds. For example, when Gallup asked recently, "In general,
do you approve or disapprove of having the United States shoot
at German submarines or warships on sight?" 62 percent approved,
29 percent disapproved and ten percent remained undecided.
The bulk of the American public has confidence in President
Roosevelt's leadership. It is prepared to endorse his acts.
Regraded Unclassified
- 4
302
But this does not mean that it will propel him toward
measures which are proposed by subsidiary leaders and
on which he himself remains uncommitted. The determining
factor in the crystallization of public opinion is the
President's own unequivocally expressed attitude and action.
The Gallup Poll figures, taken in conjunction with
these studies of newspaper editorials, show clearly that
popular opinion and editorial opinion alike are moving in
8. swift current toward more forceful American intervention.
Editorial thinking has been somewhat in advance of popular
thinking. But the consistency with which the public, as
reflected in Gallup Polls, has taken up the positions advo-
cated by the press indicates an unmistakable trend. The
inference seems warranted that the people, 88 well as the
newspapers, will overwhelmingly support neutrality repeal --
provided the demand for repeal comes from Mr. Roosevelt.
Comrades
All newspapers available at this date have been unanimous
in decrying the President's reference to Article 124 of the
Soviet Constitution. In current newspaper usage, the term
"Communist" has significance only as an epithet; it is em-
ployed commonly as a synonym for "anti-Christ." As the label
Regraded Unclassified
- 5 -
303
for 8 political and social philosophy, the word has become
virtually devoid of meaning.
Most editorial commentators are quite ready on the simple
basis of expediency to give aid to the Red Army in its resist-
ance to the Nazis. They are convinced that any further jus-
tification of the policy is needless and even injurious. The
general sentiment on this score is pithily stated in a Scripps-
Howard editorial: "Let's not pretend that there is anything
sweet-smelling about the commies. Give them guns, tanks,
planes -- but keep on saying: 'Don't call me brother. The
press resolutely refuses to allow its disillusions about
Russia to be shattered.
Regraded Unclassified
TREASURY DEPARTMENT
304
INTER OFFICE COMMUNICATION
DATE October 3, 1941
TO
Ferdinand Kuhn, Jr.
FROM
Herbert Merillat
PRESS COMMENT ON
PROFITS AND PRICES
Not knowing how seriously to take Secretary Morgenthau's
proposal of a 6 percent profit-limit, editorial writers in one
breath have discounted the possibility of its being enacted and
in the next -- as if to take no chances -- have criticized it
roundly. The only endorsements yet noted have come from the
liberal weeklies -- the New Republic and the Nation. This is
in contrast to the cool attitude of the liberal press to most
of the Secretary's proposals.
The Secretary's proposal before the Rouse Banking Committee
has been variously interpreted as an impulsive remark, as 8. move
to soften up the business community to accept the Treasury's
original excess profits tax, or as a seriously intended legisle-
tive recommendation.
Whatever their speculations on this point, most commentators
have pooh-poohed the idea that the proposal will be seriously
considered by Congress. These gestures of dismissal are belied,
however, by the unusually full reports of criticism of the plan
Regraded Unclassified
- 2 -
305
end the volume of editorial denunciation. For example, the
New York Times has attacked the profit-limit plan not only
once, but three times within 8. week. So has the New York
Journal of Commerce.
From coast to coast, news reports have played up the
criticism by Congressional and Administration leaders. The
Nation suggests that "the ill-concealed anxiety shown by con-
servative papers in denouncing the proposed levy revealed
8. defensive attitude. For though they would be the last to
admit it, Wall Street spokesmen are fully aware that business
got off extraordinarily lightly in the tax bill just passed."
Although the overwhelming majority of press comment has
been bitterly critical of the profit-limit proposal, there have
been some concessions that the plan has merit. Several papers,
including one of the Frank Gannett chain, have remarked that
the proposal is not so drastic as it might appear to be on
first sight. Others, while not endorsing the plan, have taken
the occasion to call for a much more drastic excess profits tax
than that now on the books. Some conservative papers, as well
as the New Republic, have pointed out that 8 6 percent return
on investment is high for many industries.
Regraded Unclassified
- 3 .
306
Adverse criticism has continued along the lines indicated
in last week's report:
(1) The proposed tax cannot properly be called an "excess
profits" tax to take the profit out of war. It would
tax "normal" earnings as well as earnings attributable
to the defense effort.
(2) The tax would destroy the profit motive and end private
enterprise.
(3) The tax would be particularly ruinous to small businesses
which operate on 8 small investment.
(4) It would stimulate, rather than check, inflation because
it would encourage extravagant expenditures by corpo-
rations.
Mid-Western and Southern Comment on Price Control
The Eastern metropolitan papers were at first practically
alone in showing alarm at the prospect of inflation and interest
In en anti-inflation program. There are signs that in recent
weeks the indifference of the press in other parts of the country
has been shaken. Taking heed of the warnings of Secretary
Morgenthau, Mr. Baruch, Mr. Henderson, and Mr. Eccles, the press
in the Middle West and South is paying much more attention to
the danger of inflation. Increasing food prices have served to
point up the threat in a vivid way.
There persists, however, an uneasiness among press commen-
tators in farming regions -- 8. feeling that the farmer must be
Regraded Unclassified
- 4 -
307
on guard against unfair treatment under the price-control
bill. The omission of wage-controls is a sore point. Con-
cerning Secretary Morgenthau's comments on wages before the
Banking Committee, the Council Bluffs (Iowa) Nonpareil said
bitterly: "The prices of farm products are the farmer's wages.
They haven't been very good wages during the last 20 years.
Now, when there is 8. chance for the farmer to get better wages
(prices for his products) Mr. Morgenthau objects. The farmers
can become peasants for all he cares."
Social Security Expansion
Early comment on the President's outline of an expanded
social security program has been similar to that which followed
Secretary Morgenthau's proposal of an increase in social security
taxes. The press opposes the use of the social security system
to finance emergency spending. Increased coverage and contri-
butions, it says, should be considered only from the viewpoint of
desirable improvements in that system. Opposition also is based
on the ground that increased social security taxes would hit
employers as well as employes and would add an intolerable tax
burden to an already heavy one on corporations.
Regraded Unclassified
I.M.
308
GEF has noted at bottom of 1st P&. and
I have copied on my carbon set of this date.
HF 10-11-41
309
MERCRANDUM FOR THE SECRETARY.
Two
October 3, 1941.
One of the heaviest weeks in "comment mail" that we have
ever had followed the Secretary's limitation of profits testimony
end press conference. It was unnecessary to abstract All the
lettere because they fell into certain definite classifications.
However, it was an unusually intelligent group of letters, with
many interesting side-lights on American business, many facts end
figures, 98 well as comments and other material. Acknowledgments
have cleared through Mr. Kuhn's office, and be has been kept in-
inred of the more important come-backe of one sort and another.
Aside from those abstracted here, there have been between 300
and 400 returns on the statement. The proportion is 100 unfeverable
to 29 favorable. The outstanding protest is against the blow to everage
business firma just as they are getting their heede above veter.
There is also a very large proportion of critician of the Administra-
tion's labor policy, of Administration spending, and of the penalties
put upon the small stockholder and "white collar" class of investor.
Travelling far behind the 6% letters are the comments on the
Boston speech. Ae this has been reprinted and circularized, it is
coming in intermingled with Bond letters. On the whole, the comments
on this speech are fevorable in the ratio of about 8 praising it to 3
criticising it. The same complaints, however, appear in thece letters
in regard to Union labor, the need for Government economy, etc.
There has been an increase in the anonymous abusive meil, and
curiously, more of these are coming in signed. also, There are 11
communications abusing the Secretary, anonymous, to & signed;
10 abusing the President to 1 signed; and 5 violently abusive of all
members of the Administration, signed, to 5 anonymous.
No help to Great Britain outnumbers no help to Russia by 8 to 3.
There are only two letters commenting on the Lindbergh statement
pro end 1 anti.
vist
Regraded Unclassified
310
Henry Genther, Jr., (General Merchandise), Farmington, Iown. You no
doubt vill be glad to learn that my customers are turning down high
priced merchandise - they say, keep your goods, no reason for them
being ao high. I was in Keolcuk, Iowa, yesterday and talked with some
of the merchants I know and they told me the name thing was happening
to them -- some of the customers really abused the clerks. This no
doubt will help to hold down inflation.
I never hear a good word
for Lindbergh. Our family now holds some $41,000 In 0. 5. Government
Bonds and we have the utmost faith in our country.
Albert C. Lord, Englewood, N. J. I wish, in all sincerity. that you
would explain how you can expect to maintain your reputation as an
honest man with statements like that when it is obvious that "this
Administration" is not only not doing everything possible to prevent
inflation, but is actively promoting inflation by (1) refusing to make
any substantial cut in expenses, (2) raising food prices and clothinge
costs by its farm legislation, and (3) continuing g. labor policy which
not only is raising costs enormously but it interferring with the effort
the country is making to re-arm itself and to produce goods at top speed
to meet its own, and others, needs.
P. 1. Keck, W. Farmington, Ohio. In my opinion 8 big majority of the
people are back of you in your campaign for the prevent of further in-
flation. Keep up the good work.
Thomas H. Shepard, Boston, Mass. Inflation possibly can be prevented,
although I am not no absolutely sure of that, and should be prevented
if it is possible, without doing a great deal of damage in preventing
it. thing that has got to be strongly handled. We judge you realize this
... If we are going to keep down inflation, Union labor is some-
from your speech. As far as I have seen, the actions of the Government
have done nothing to control all kinde of unreasonable and perhape illegal
strikes, or almost nothing. They have in a few cares seized plants: the
owners of the plant don't know what 1s going to happen to them, and of
course that method alone in simply going to make owners try their level
best to agree with labor and pass on the results to the consumer, whether
it 18 the Government or whoever it in. As your influence is very great,
I hope you will give due consideration to these various points I have
brought up.
Louis G. Loob, Counsellor at Law. Boston, Mass. I have read e. copy of
your address before the Advertising Club of Boston on Sept. 9th. It is
no clear and full of meat to the average nan that I consider it quite a
public service to the nation to have the inflationary threat so clearly
presented. May I thank you as A simple citizen of this country for the
service you have rendered.
Regraded Unclassified
- 2 -
311
Frank Murceyk, Secretary, Polish-American Businessmen's Association,
Chicago, Ill. Your address on inflation recently delivered before
the members of the Advertising Club of Boston vas exceptionally in-
teresting. I have carefully read it and found it to be 80 vitally
important that I translated the complete address into Polish and
published it in a Commercial Column of the Polish Daily Zgoda, thereby
urging the readers to cooperate with the Administration in checking
inflation.
T. T. Thompson, Bode, Iowa. Your pamphlet on inflation impressed on
so much that I would like to have 50 of them to distribute among my
friends. Your idea is right on this question.
Gordon H. J. Clark, Wheaton College, Wheston, Ill. It was with pleasure
that I read your speech of September 9th, received yesterday. It is the
sanest thing I have recently seen from hysterical Washington. Your
advice on cutting down unnecessary Governmental expenditures I heartily
approve. The veto of the highway bill, however, 18 hardly evidence that
economy is really desired.
In so far as you have tried to speak
sound sense, I commend you heartily. But what is the use of buying
Bonds when everything is going to smash anyhow?
J. 2. Krause, President, P. Krauss, Inc., Lafayette, La. (Jewelers)
May I take a few seconds of your time to tell you that I have read the
pamphlet, "A Speech and a Pledge". More timely and understandable
literature has not been gotten up. I certainly hope that this pamphlet
gets into the hands of millions. With sincere best wishes for & continu-
ing of your earnest efforts.
Regraded Unclassified
- a -
312
Joseph 1. Connor, Baltimore, Md. I an of the fifth generation of by
family living in Baltimore, a retired Police Sergeant, age 64. I intend
to keep on buying et least & $50 Bond monthly. Defense Bonds and
Stamps are my first topic of conversation with friends and relatives.
I keep telling them Uncle Sam 18 the safest bank in the world, and that
every family in the land should hold up the President's hands In this
time of stress and emergency by investing in either of them.
Jonn B. Frost, Astoria, L. I., New York. Permit me to add my email voice
to the many who must express their appreciation of the marvelous program
which our Government has presented to its people during this summer. The
fine presentation of American high-lights and stirring musical appeal
certainly brings home the privilege that is ours, In calling ourselves
American.
Charles N. Brings, Whittier, Calif. How can you accept the savings of
hard-vorking and thrifty people who are trying to keep off public relief
(and the children's pennies) in exchange for Defense Stanps and Bonds
when you know that with Mr. Roosevelt's wild squandering and unsound
methods those bonds will hardly be worth the waste paper they are written
on, in buying power at maturity.
L. R. Ford, Mgr. Sargeant, Malo & Co., (Members New York Stock Exchange),
Boulder, Colo. I did "my bit on the first day the Defense Bonds were
offered. Now, if as a member of the committee, comprising fourteen, you
and Mr. Byrd, who seems to be the most interested in reducing non-defense
expenses, will see to it that B. couple of billions are looped off in this
respect, you will have my further thanks end of course the thanks of
millions of others. I have yet to see any reference either by you, by
Mr. Henderson or by anyone elee, prominent or otherwise, in the Adminis
tration, suggesting that a ceiling on wages 18 just as essential as s
ceiling on commodities, because nothing 1a produced in usable shape into
which wages are not injected. Nor have I heard one single expression
against the thousands of strikes that are interferring with defense
projects,
Mrs. Audrey Mitchell Pinkston, Procurement Div., Treasury Dept., Atlanta,
Ga, I have pledged with myself to purchase one $18.75 Bond each month,
end more if possible. I do not need A. REMINDER, just the 15th on the
celendar and my salary check, and the First National Bank very graciously
issues my Bond. So long as my job and health will last, I shall continue
to do my little bit for my country. May I take this opportunity to con-
gratulate you and your staff for the splendid work you are doing.
Regraded Unclassified
313
V. B. Rich, Los Angeles, Calif. I sincerely believe its the duty of
all who are privileged to enjoy the freedom and opportunity given us
all in these United States to stand back of those who have been placed
in their various positions and thus mis their task lighter and the
future more secure.
George LaMotte, Chicago, 111. It has been by extrem pleasure to listen
to the American Defense Program ever since they were originated by you.
They are not only thrilling and patriotic, but do the job they were in-
tended to do. However, in portraying American life, as you do on all
your programs, you have never yet had an original American on one of
your programs. This must be an oversight for there are many fine Indian
business sen, doctors, lawyers, and real artists, and it is merely a
suggestion on 47 part that the American Indians' record in times of our
country's stress, have been, in our time, always for the Government,
without any '152' or question and that representation on your patriotic
programs would be in good grace.
J. 7. Daley, Detroit, Mich., tells of over-purchase of Series I Bonds,
on bank's advice. "By being misinformed in the bank, ve purchased in
excess of our $5,000 maturity value. We have started a long series of
correspondence since July 9th back and forth with your Department, try-
ing to get the problem ironed out. The correspondence is in your De-
partment's file #USR-USSB with a. Mr. N. Wesley, Chief of the Division
of Loans and Currency. I do not know whether this organization is
endeavoring to start & letter writing contest or not, but if they are,
they surely will win for they have more facilities to write letters
than I have. We have $1,050 in excess of the allotment of Series 1.
If some master mind in the Treasury will tell us what to do with this -
either cash it in or transfer it to Beries 7 Bonds, we would appreciate
it. When you have straightened this out for us, ve will be pleased, in
our small vay, to make additional purchases of Series 7 Bonds."
Nora C. O'Connell, Frankfort, Ky. May I thank you for your letter of
Sept. 20th (re bond purchases). My mental response was so instantaneous,
and 60 definitely pleasant, to what I conceived to be your purpose in
writing that I have felt it might be valumble to you to know the reaction
of the John Does of America (as represented by me). There was an immediate
ware gratitude, and a satisfying sense of the worth-whileness of the small
sacrifices I was making to buy monthly & Defense Bond: for, to those of us
in the salary bracket into which I fit, it is necessary to cut out quite
a few things which we felt contributed to our pleasure, but which we nov
find we can get along without quite well.
Thomas Graham, The Bankers Bond Co., Louisville, Ky. I have read with a.
great deal of interest the speech which you sent me on the "Fight Against
Inflation". I have also read your statement in the paper today at the
Price Hearing, with which, in the main, I agree. I have repeatedly written
some of assistante regarding suggestions on the sale of Defense Bonds, with
and Senator your Barkley and some of our other representatives have talked
Regraded Unclassified
5
your assistante for me. 1 believe it is just as important for the
Treasury Department to keep an open mind to suggestions of the citizens
of the country, as it is for the citizens to heed the splendid advice
which you personally have given from time to time for the welfare of the
country AB a whole. I think the Defense Bond situation could be very
materially helped and expedited, and I have tried to get an opportunity
to see you about it, but so far, I have gotten no where with any of your
assistants.
Harry Dorman, Knight Packing Co., Portland, Ore, During the last war 1
served my country in its armed forces. I now have my son In the Army -
1 am A member of the local "Defense Bond" committee, end chairman of A
local draft board. I don't think that my love of country can be
questioned. I pledge you, and I mean it, that if this country needs any-
whing and all I have, down to my last pair of socks, it will be given
fraely and without regret.
I have never before written such a
letter to a public official, but such a proposel as you have advanced
already stopped one very loyal, fine American citizen of my acquain-
tance from investing his life's mayinge in E really constructive anter-
prize where all he expected wer to be able to have the principal when
the boom's end ceme, He does not see how he will have that under your
arogram.
Bay C. Schragger, Lekewood, N. J. Last week my husband took our little
com to the Post Office with $8 in change to buy Defense Stamps. They
refused to accept the money until it was converted at the bank into bills.
We have been buying one bond a month, and it seems to me that any American
comes should be acceptable without any inconvenience to the buyer.
Sing Hood Lissak, N. Y. C. Such a letter, at such R time, is most
gratifying, and only adds to praise 1 have occasion to give to the
Treasury Department frequently, and especially to friends not secing
eye to eye with the Administration! (Tells of income tax case.)
Anrious to be absolutely right in the matter - long before tex time -
: wrote the proper authority in your Dept., and I was amazed et the
courteey shown. Several letters sent me - until the final decision -
to 1st me know 1 was not overlooked. Also soveral times - other than
this, when uncertain about items in my income tax (e very small one 1)
I have gone to your officials and had them mtraightened out so efficiently
and courteously. It elways amazes me and gives be great pleasure.
Ky Income has suddenly been cut, nearly in half. The big taxes you are
puttin on everything I need, and the sum that must be put away for next
Merch's tax, has made me immediately have to drop out all but the aboolute
necessities of living!
Resil N. Bass, N. Y. C. Whenever the question of the investment of Funde
comes up In my relations with clients, or when meting in 8 fiduciary
capacity. I urge and shall continue to urge that such funds be invested
Regraded Unclassified
- 6 -
315
in Savings Bonds. I greatly admire the manner in which you are
Alacing these securities before the public and feel that we are
fortunate in having the fiscal affairs of the Government so simply
and frankly discussed by the Secretary of the Treasury. Such an
approach inspires public confidence and I, for one, think that you
are discharging a. stupendous task in an admirable and efficient
manner.
Dr. Bruce Snow, Manchester, N. H. I know you don't give a damn for
what I think, except that maybe there are millions more Americans
who think as I do. Last month, against my better judgment, I bought some
of your Bonds, and if the money were being used to defeat Hitler, I
intended to buy more. But Hitler and the var are merely window-dressing
for more boon-doggling and bigger wages to labor and more dues for C.I.O.
Unions - and I do not care to contribute to these. ... I should like
to help beat Hitler - but I don't want to contribute to beat Hitler and
have the money used to build up a C.I.O. monopoly. If our Government
will stop being a subsidiary of the C.I.O. and will expect all citizens -
whether business men or C.I.O. - to obey the same laws and keep their
contracts with equal fairness, there will be no doubt of the unity of
this nation. We will contribute to the defeat of Hitler, but not for
double pay for Unions and half pay for investors. There is no sense in
giving money to build ships and then have the Government let the C.I.O.
refuse to sail these ships.
Regraded Unclassified
- 7 -
316
Comments on the Taxation Program
G. S. Stuart, Executive Director, Contractors of America. It has come
to the attention of the members of this Association that the Treasury
Department is sponsoring an increase in the Social Security taxes in
order to restrain civilian spending power to avoid inflation. We
desire to register our protest to any further increase in Social
Security taxes because of the burden such increase would place upon
the members of our industry. Payroll taxes are already very high. the
amount of weekly benefit payment is generous, and the benefit period
18 sufficiently long. An examination of the huge surpluses existing
in the funds from tax collections paid by employers would leave nothing
to be desired in the way of additional funds.
Fred A. Sime (Lawyer), Indianapolis, Ind. At the present time I an
trying to "save against the day" when my income tax report is due, for
it is my intention, if possible, to pay the entire tax for the year
when the report is filed. It would seen to ne this would give the
Government the benefit of the entire amount at the earliest possible
moment.
Regraded Unclassified
- 8
317
R. 1. E. Halsey, New Haven, Conn. While symbolic with your ideas of
heavy texation, I wish to call your attention to the unjust hardship
to your proffered Bill to limit dividends to 6% on invested capital.
There must be thousands of women whose magre living depends upon their
dividends on one or another of our few successful corporations. I know
you do not want to cripple the small investor.
Eben Owens, Yonkers, N. T. (Member A.E.F.) I have always admired your
approach to all fiscal problems, but your latest assertion of a general
6% tax is too broad. Nobody wants to make e nickel out of this war. On
the contrary, would be glad to lose the little I have left to stop it.
But By own business lost money for 5 years. Have just turned the corner
into black this year. You see all cases are different.
J. V. Norman, Jr., Louisville, Ky. I an an intense supporter of the
foreign policy and the defense program of the present Administration.
I agree with you that everyone must pay still higher taxes than those
now in effect, and that all possible measures to prevent inflation must
be taken. But I was shocked beyond expression when you, occupying the
position of Secretary of the Treasury of the U. 3. of America, coolly
proposed that the Government should take all earnings over 6% on invested
capital. This is, of course, a complete change in our philosophy of
taxation, and would completely kill all business incentive for all of
our most successful businesses. The advancement of such & theory by a.
man in your position does more to damage our war effort, to discourage
initiative, and to destroy national unity than all the Nazi sympathisers
could ever do.
J. Tyson Watte, Norristown, Pa. The proposed new law to limit corporate
profite to 6% on invested capital, and advocated by you, concerns se and
thousands of others most vitally. We who are wholly or partially depend-
ent upon income or increment derived from security investments -- with
aggregate incomes under $750.00 or $1,500.00, feel the enactment of this
proposed law would be a most cruel and iniquitous inquisition. In most
cases it would reduce the already shrunken dividend yields to one-half or
less, ... We are sealous (I'm certain of myself) in the support of our
Government, and especially our President, it meeting its hurculean task
of defeating Ritler and all he stands for, by accepting our proportionate
share of a gigantic tax levy - but not even tolerant where our very
existence is needlessly and miserably threatened.
Etta K. Staub, San Francisco, Celif. Why crucify the "little people"?
It is about time this Administration gave them 9. break. It has been
enriching the labor leaders and their communistic followers.
Isadore Stillman, Woodside, L. I., New York. I enthusiastically endorse
your proposal to put & limit to profits, and putting no limit to vages.
Regraded Unclassified
- $
318
Mason B. Starring, Jr., Irvington-on-Hudson, N. Y. I was very interested
Ln reading your statement of yesterday. I agree that we owe e. debt of
gratitude to those who are serving their country. but why should they
only receive a. dollar c. day when the Government itself does everything
In its power to grant absurd and uncalled for wages to the Union labor-
log man who is doing everything in his power to damage the defense 10-
terests of the country and to sabotage our American program. ...
It is quite evident that the Government 11 afraid of the labor vote and
expects those who have built up the industrial production of the country
to make all of the sacrifices. It seems to be at R. time like this,
sacrifices should be borne equally by everyone and that the privileged
voting classes. namely the Union laborer and the farmer, should not be
exempt.
C. L. Batchfield, Toledo, Ohio. You urge 6% limit on firs profits, I
think that 1e the most sensible thing that has come out of Washington
in 8 long time.
B. Bunting, Brooklyn, N. T. The millions of small stockholdere who own
these corporations have invested their life eavings: poor people like ne;
and bad little return these ten years of depression. Nov with realty tax,
indirect tax, sales tax, etc., we are poorer than ever. You want 6% the
top. What about us?
R, R. Munn, Cleveland Heights, Ohio. 1 vant to congratulate you on the
stand you have taken, as reported in today's press, regarding taxing of
corporation profits. The greatest need today 10 morale, & will to
secrifice for defense of this country and democracy throughout the world.
And the greatest impediment to sound morale is the suspicion on the part
of the common people that large profits are being made out of defense
industry. ... You have a responsibility of bistoric importance.
William Stix Wanserman, President, The Investment Corporation of Phila-
delphia. I feel sure that you would not consciously sabotage the national
defense effort and yet in a way your tax proposals are bound to have just
that sort of an effect on national defense. I happen to be a banker and
every day people come in to see me with various projecte that have to do with
national defense. Some of these projects are new inventions that are still
in the development stage, while others are borderline projects that require
additional capital for raw materials, extensions of plant, payrolla, etc.
For example, in one instance we financed a shipbuilding corporation which
is now making merchant ships for the British and tenders for our Navy. In
another instance we helped a small concern get money so it could build an
sssential type of bearing used in shipbuilding. In each instance we went
to the general public for money, Now, of course, people with money are
willing to invest at a low rate when the return is guaranteed or there is a
large measure of safety. Your proposed return of a 6% 10 more than ample
in such instances, but business is a highly hassrdous venture and the
private owner of capital who has any experience in these matters 10 well
Regraded Unclassified
- 10 -
319
avare of these hasards. If you restrict his possible profit to 6%
on his successful ventures, you offer him absolutely no incentive to
go ahead with these now risk projects which are so important in our
scheme of national defense. If one 1a to take the law of averages
into consideration, it is necessary to eara 5 good deal more than 6%
on the successful projects to counterbalance the loss involved on the
unsuccessful ones. ... By putting a. ceiling of 6% OB business profits
you are likely to block the exploitation of very many new inventions.
The whole industrial progress of this country has always been based on
our willingness to further new technique. ... None of us want to ⑉
a new crop of war millionaires but there is 8. far cry between the creation
of 8 string of war millionaires and the permitting of sufficient profits
that will give proper inducemente to prudent capital to go to work. ...
Let se remind you that the President himself recently said that the rights
of free labor are dependent on the rights of free enterprise. In a profit
and loes system, free enterprise depends on profit.
Mrs. John Enderly, Columbus, Ohio. I cannot refrain from expressing my
anxiety over your most recent utterance regarding profits for corporations.
I an 8 widow, dependent upon dividends received from stocks which my
husband left to m. It seems that you would prefer to "Rob Peter to pay
Paul". If our industries are only allowed to make 6. 6% profit, what is
to become of the poor stockholder?
Clarence Poe, President, Progressive Farmer, Raleigh, N. 0. (Telegram)
I earnestly beg you to consider whether your proposal for taxing corpora-
tions would not be seriously unfair to thousands of businesses of which
the Progressive Farmer is only one example. My associates and I who
organised the Progressive Farmer Company thirty years age were poor and
virtually without capital. Hence, year after year we worked, struggled
and sacrificed with subnormally low salaries in order to make profite
enough to build up the business. Our present values represent thirty
years of such subnormal salaries, while vo put extra labor and overtime
hours into the business because ve lacked the capital which rich men's sons
would have had and used. I confidentially appeal to you to prevent such
companies from being discriminated against.
John 1. Baunann, West Englewood, 1. J. If, as you stated before the House
Banking Committee, you consider it only fair that owners of corporations
be allowed only a. 6% return on their invested capital in the interests
of patriotism and sacrifice, (1) why has not the Government stopped spend-
ing the people's money for nonessential, nondefense purposes, and (2) why
does not the Government bear down upon labor and ask them to do their bit
for their country?
Anonymous - Fond Du Lac, Wis. Do you want us to lose our jobs and go on
relief? Capital will never "stick its neck out" if it is limited to 6%
profit, with no guarantee against loss. A man in your position should
know better than to preach such & damn fool doctrine. I have & good job,
an paying for my home, a. good bose, three square meals a day, and I want
my boss to make enough money on his investment 80 he will not get scared
and shut up shop.
Regraded Unclassified
11
320
G. V. Hull, Greenwich, Conn. (Clipping about 0% statement attached.)
The chief trouble with this Administration is that it has sold out 10
labor Unions and is too dama cowardly to put a. ceiling or to attempt
to put a ceiling on wages or farm products, but particularly on Unions,
which are dominated by racketeers for the most part, yet wages and
farm prices will constitute the greatest impetus to inflation of all
other causes combined.
George J. Joly, Jr., Wynnewood, Pa. This would be a bad blow to many
investors who have invested their savings, not so much in the book
value of securities, as in the earning ability thereof. You would take
away from these investors what they had honestly paid for and are entitled
to retain.
David Fox, Huntington, W. Va. (Branchland Pipe & Supply Co.) It may
ECOM presumptuous but I feel that you say want the opinion of business
men and am therefore going to inject mine. I cannot agree with
you that a tax such as you suggest would prevent inflation, but on the
contrary I think it would be one of the greatest contributing factors
toward inflation. If a corporation knows that it will be taxed 100%
above the 6% profit on invested capital, the tendency might be to raise
wages and give bonuses to employees to consume all the excess, and we
would then have one of the greatest "silk shirt" eras we have ever ex-
perienced. I only know what I read in the news dispatches and I feel
that there must be some exceptions in your mind instead of making a
rigid tax of 100% on earning above 6%. I think the country will approve
of a. simple form of tax to take up the wartime profits, but corporations
will have to have some incentive to prevent them from paying out the
profite in the form of wages and bonuses.
Melville Keim, Chicago, Ill. Your recommendation of taxing corporations,
on earning over a certain percentage of their invested capital, would
greatly curtail interest in new enterprises.
Leon L. Rice, Anderson, S. c. (Atterney) I as sure that you would wel-
come any assistance in seeing how your suggestion would work a hardship
on stockholders' income. I have had stock in several textile corpora-
tions for several years, and many of them have not paid 6 dividend to
the common stockbolders in ten years and more. If you limit their earn-
ings to 6%, there will arise the matter of deferred dividends, money
borrowed, etc., and the stockholder will still be the "Forgotten Man".
In fact, it would take several dividends to make up for losses incurred,
and the probability is that the corporations earning 6%, even where they
owed no money, would pass this on to reserve, and pay nothing to the
common stockholdere. Since A reasonable reserve is good business, why not
allow 6% for reserve and not less than e% for dividends. It also seems
that some consideration is due stockholders for past loss of earnings. I
truet that in your fairness to all concerned you will not advocate a.
ceiling over corporate earnings without taking into consideration the
long neglected common stockholders.
Regraded Unclassified
- 12 -
321
Va. 1. Kennagh, Bayside, L. I., New York. Let se honestly commend
you for your Bill to limit corporation profits to 6% during the emergency.
I see no reason why these corporations should not pay for a war which
they are seeking - a var for economic reasons. This again is war for
Power Politics. one which we should not enter at all. The poor man should
not have to pay the greater part of the burden in relation to his income.
Vir N. James, Croton, I. I. Stick by your guns on the 100% tax on all
defense profits above 6%. We are for it Take the profits out of var I
Work for union nov.
Anonymous - Pleasantville, X. I. New Deal Attempts to Rob People of
Initiative ! By advocating 6% earnings. The New Deal and your 1deas aren't
fit to hear about. If you get your way, we will have a. nation without
a spine or reason for working at all. Put them all on relief then.
"Poor Mother of 4 from Harlem" - You are absolutely right when you ask
6% profit limit ceiling on prices. Let those people pay for war who are
making money out of war.
Anonymous - New Tork City. Limiting profite to 6% will help to hold
prices down, but absolutely will not yield as much taxes and positively
will kill small business. Nobody is going to work for nothing. ... You
are simply ruining the chances of the Allies winning, breeding fear and
preventing unity. You should do the very reverse -- namely, offer to
split 50-50 on all earnings over the beet three-year average. Capital
should always be encouraged to take risks if we are to progress, but now
more than ever.
Maria Aaronson, New York City. I notice by to-night's paper that your
experts are drafting a 6% ceiling bill. The first place to start is right
in our Army Camps with the Post Exchange. Our selectees, whose income
is less than $1 per day, are overcharged for everything they buy at the
Post Exchange. ... Even a three-cent stamp costs more at the Post
Exchange -- which 10 against the law. A 5# cake of scap costs 10# or
15#.
Charles B. Bohn, Chairman, Bohn Aluminum & Brass Corp., Detroit, Mich.
If you are trying to reduce production of essential defense needs, I do
not know 6. better way to accomplish it.
Alexander C. Ward, Jr., Riverton, N. J. Industry is doing its best to
cooperate with the Government in this present crisis. It 18 wholly die-
heartening, therefore, to have the head of the Treasury Department so
contemptuously indifferent to the elemente of fair play, as they apply
to the relations between Government and business, as to make the pre-
posterous proposal of a 6% ceiling to corporation profite. If your object
is to further break down the morale of the people by the imposition of
this burden, then your plan is a. successful one. I cannot think that you
are seriously determined to pursue this neasure.
Regraded Unclassified
- 13 -
322
August Brody, N.T.C. I will be frank enough to any that that 6% sug-
gestion really makes Be sick. It reminds De of the early part of 1937
when, evidently for fear of & runaway inflation, a great may restric-
tions were being made and discouraging remarks made, all these while
the patient was still sick, with the natural effect that instead of
the patient recovering, be became more 111. How can you expect anybody
to have any confidence in the Administration when there is no control
of labor or no effort to control it. but that other things are controlled.
Labor is the most expensive item there 1a.
Andrew J. Browne, Saint Alphonsus Church, Chicago, 111. Permit me to
offer my sincere congratulations upon your proposed measure to limit
corporation profits to 6%. To my sind it is not only the only feasible
method of preventing inflation, but also a most necessary cog in our
economic machinery. It will go far to balance the fair distribution of
wealth even in normal times, to say nothing of such times as these, when
our industry is hard pressed to fill all the orders for our national needs
as well as those tending to build up the defense of the so-called Democracies
throughout the world. ... Profite in excess of this figure, (particu-
larly at this time of feverish production) will go far to meet our national
deficit; and at the same time, should greatly relieve the ordinary vage
earner from the, too drastic taxes on incomes, which are now being levied.
Many economists have pointed to the necessity of establishing a. profit rate.
Permit we to congratulate you on being the first man in public office to
suggest such a measure.
Richmond J. Reese, Counsellor at Lav, N.Y.O. It is the privilege, perhaps
the duty, of every voter to express his views regarding policies of his
Government to those members of the official family who are formulating
them.
... Newepapers report you have said that you had in wind (in the
6% statement) no only the raising of revenue but to bring the American
public to the realization of the present emergency. In my humble opinion
the results of such legialation would be directly contrary to this. ...
It would tend to make the rich richer and the great middle class poorer
for the following reasons: where legislation is confiscatory in its effect,
corporations would not have an incentive to make more than 6% profit and
the remainder of their earnings would be expended in raising the salaries
of its executives, for after paying income taxes in the highest brackets,
at least & small part would remain, while the effect on a cerporation would
be to earn not more than 6%. If you had seen the action of the stock
market yesterday when your announcement VAS published over the news ticker,
I believe there is no question but that you would have come to the same
conclusion as has been arrived at by me.
Frank S. Brown, Xansas City, No. In connection with your tax bill, designed
to impoverish the middle class and hasten Jewish Communism, do everything I note to you defend find
...
I
this the country country, too but complacent. we have done enough for England already, and no far as
as
willing
to
Russia is concerned, I will shed BO tears, if she sinks tomorrow.
Regraded Unclassified
-14-
San S. Spalding. N.Y.C. It seems to se that you abandon absolutely sound
logic when you go on to sek for the exemption of wages from Government
control, when everything clse seems to be controlled. The New Deal bee
lost all guts in dealing with labor.
...
The
middle
class
of
the
American people have been terribly hard hit. It seeme to me, at a time
like this, sacrifices should be borne equally by everyone, and that the
privileged voting classes, namely the Union laborer and the farmer,
should not be exempt. This is what I hear in general conversation of
various people on the railroad, steamboat, and with all the people with
whom I come in contact. I vieh we bad a fev more roal, sensible BRD like
Grover Cleveland in Washington.
Drake H. Sparkman, N.Y.C. The proposed 100% taxation on earnings in
excess of 6% will be the death knell to small business. The small company
of which I am the head, with a capitalisation of $25,000, employing some
twenty people, could not exist if its undistributed sarnings of profitable
years were not available to carry over the had end provide funds for rs-
placements which are not otherwise available to . small business.
Carl E. Schiffer, N.T.C. I heartily endoree your 6% profite limitation
proposal. I believe it would be of tremendous help not only financially,
but from the point of view of morale.
Harry Sellars, N.Y.C. The power to tax is the power to destroy. Your new
bill to limit earnings of corporations to 6% is not only cruel but a
sabotage of the savings of the unfortunate owners and holders of these
securities.
Why continue to confiscate the earnings of the thrifty
citizens in order to cover the mistakes of the Administration in their
extravagant non-defensive expenditures)
Dr. Reinbold Nisburhr, Chairman, Union for Democratic Action, N.Y.C.
(Telegram) The Union for Democratic Action fevors speedy enactment into
law of the Treasury proposal to tax excess corporate profits 100% limit
on profits.
S. Gysin, N.T.C. You say that you have every confidence that business
will fully cooperate and be willing to make the sacrifices which are nac-
essary. Are they necessary and equitable when they are so one-sided that
they are going to pauperise innocent citizens who have worked for years to
get some security? Why should B company. making 6% of invested
capital on sales of $100,000 handle an additional $1,000,000 of sales
without an additional cent of profit, but all of the added risk? I an
disregarding the fact that State Corporation taxes would take the remain-
Lne 6% or even more.
I an fully in favor of "pay as you 80°: I think
that we should raise considerably more money through taxation, but you
know as well as I do that your 6% plan and others of the same type and
scale are inequitable, vindictive and unfair; that they hit certain people
from all angles, and that Personal Income Tax (graduated as it has been
for years) is the only system that can be justified.
Isham T. Wilkinson, Konbridge, Va. Statements like those with which you
were accredited yesterday will blast defense coordination faster than the
President can build it. Should Congress accept your proposale se democratic
then millions of farmers and peoples in other vocations will veer to the
Regraded Unclassified
324
- 15 -
thought that Ritler is not wholly wrong. I sincerely hope you will
clarify your position in the light of democratic principles.
A. Ross, Neverking Cleaning Fluid Co., N.Y.C. For many years I V&E
employed in the Publishing business, and managed to save I little and
spend a little. Then, when the Hoever Administration came along, after
14 years of service is one establishment, I found myself without a Job.
With the little I crate salvage, I went into this business, and have
been in It for the pass eight years. The first six years of this business
I utilized all my life's savings; By family of four VAI obliged to live
on $10 to $15 per wook. last year, for the first time, I found ayself
saking a little many. I paid By debts, cleaned up my bills, and I was
in a position so take care of By family in better style. This year,
fortunately, business is even better and we will have a profit. Nov, what
I would 2.1kg to min what will happen next year if this business of
nine does not abov & profit, and ve find that VI cannot get the material
we need to stay in business? My investment amounts to nothing, I cannot
get material, and yet, I must give all my profits to the Government.
"Sixty Dollar a Week Machinist" You should go over to the Mellon Library
and clarify your thinking. Maybe the ghost of old Andy would in part
clear away some of the fog generated by your association with the pro-
fessional pan-handlers, campus pin-beads, and greasy Communists.
Alfred Pincus, 3. T. 0. I have read with much concern your proposal that
all corporations give to the Government all monies earned over 6% of their
capital invested at taxes. The majority of the people realise the
present situation throughout the world, and are praying daily for the de-
foat of Hitler, at are willing to make great sacrifices. In most mann-
feeturing Industries a large percentage of cost is labor. To say that
labor is no commodity in my opinion is incorrect. Unfortunately, most
men holding the most responsible positions in the Government have had no
experience in trying to build up a manufacturing industry. ... I realize
it is difficult to create a tax law that will equalize taxation for all,
but I an certain your proposal is aimed too much at R minority, and seens
to favor a vast majority and has too much of the odor of politics.
Marvin H. Carter, Troy, Ala. What is fixing of farm prices but fixing of
farm labor wages? You wish to fix the vage of a farm worker, the poorest
paid labor by far in this country, and let the industrial worker jack up
have committed a crime as great as any Hitler ever committed and further
the price of everything the farmer buys. If you succeed in this, you will
divide the country and injire morale. Nearly all farmers work their fields
themselves and the price of their product is the seasure of their wages.
Down here they work for 754 to $1.00 per daz. not por hour. Their acreage is
is fixed by lav and is so small that they can hardly make a. living. It but
true the Government pays them a pittance for their acreage reduction,
it is only & pittance. - The farmer never strikes. Farm machinery labor wes and
advanced by labor costs. Tet you are advocating fixing the fare
letting his costs run wild.
Regraded Unclassified
- 16
325
R.F. Wellingheff, Cincinnati, Ohio. Let me tell you that if you sponsor
a reduction of non-defense spending by several billion dollars with the
came vigor and enthusises that you sponsored this 6% income limitation
bill, you will get three cheers and terrific support from the vast
middle-class in America. You know when ve middle-class folk are being
taxed, and taxed, and taxed, it gets a little irritating to read in the
daily papers about the fall schedule of concerts by the W. P. A. Orchestra
and the fall schedule of the art exhibits by the V. P. A. artists. The
realization that our taxes are going out in this manner at a time when we
are confronted with such & Herculean expenditure program just doesn't make
6. fellow feel like standing up and shouting from the house-tops.
H. 1. Shaddick, Detroit, Mich. If, as stated, your 6% tax plan is being
drafted to destroy the complacency of America, it vill be successful. It
will be even more far reaching it will destroy also the morale of America,
the initiative of America, and perhaps America !
O.E.M. Keller, President, The Toledo Small Business Men's Association.
As an Association, and small business men, ve wish to protest against your
suggestion that business profit be limited to 6% on invested capital and
the balance paid for taxes. That would work an untold hardship, particu-
larly upon small business, which is already suffering, and which we are
told vill suffer still more from lack of materials, and in the case of
retail business, lack of goods to soll. ... Some of the things already
being done are driving firms out of business - and this certainly would do
it in B. much larger degree, particularly with the advent of 6 slump and
losses, even though they might be only temporary.
Ashley Miller, N. Y. 0. Please accept the congratulations of three voters
here on your far-seeing and eminently courageous proposal for fixing profits
at 8. rational figure. The nation-wide discussion of your idea will undoubt-
edly indicate whether patriotism or profits dominate the thoughts of our
industrial leaders. Those of us who have sone in the service note and ap-
prove your comparison of them with the young Americans whom ve are asking
to serve their country for & dollar & day.
James 7. Bell, General Mills, Inc., Minnempolis, Minn. No sacrifice is too
great if it is necessary to our defense or for the defeat of those evil
forces that are loosed upon the world today. The proposed limitations upon
earnings fall not upon corporations, per 10, but upon all the people who
own American industries. As individuals we are willing to make sacrifices
in our homes and in our lives, but, by the same token, we have = right to
expect that Government will limit its demands and its expenditures to those
things that are essential to the defense program. effort So of far research there is cannot little be
...
The
evidence capitalised. that The this enterprise latter prevails. may require little capital, bat the profits
would have to be quite large to repay the previous years of expense and
effort. Is there not to be some provision for these small beginnings that
may grow into vast enterprises? Ford started in B woodshed. And there are
many of like nature. Today these industries are the source of great
Government income. ... I an hopeful that you will find some modification
in your thinking and your proposals that will accommodate these still -
discovered and still undeveloped sources of national wealth.
Regraded Unclassified
326
Roy L. Heidelberg, Manager, Hotel Heidelberg, Baton Rouge, La. What are
small corporations going to do who have incurred debte maturing OVER -
period of years? In my case, and I believe the same will apply to
hundreds of other small corporations, this will mean bankruptcy unless
some provision is made for amortising long-time obligations.
Lester I. Brooks, Betty Brooks Co., Huntington Park, Calif. (Manufacturers
of Service Frocks, Gym-Toge & Sportswear) Have noted your suggestion for
the 6% limit on profits during the war emergency. I do not know whether
6% is correct or not, because our system is not only 8 profit system, it
1a a profit and loss system. And some opportunity ought to be accorded
to accumulate profits to take care of losses. But I would rather see a 6%
limit than none at all.
Charles H. Snyder, Abindon, Ill. I can't reconcile your statement of
the confiscation of all earnings of corporations above 6%, and the urge
to purchase more Bonds. Where will the funds come from when we who are
dependent on interest and savings, for our living, and they are dried up
st the source, have enough to live on and purchase Defense Bonds?
T. J. Byerly, President, State Planters Bank, Walnut Cove, N. c.' The
proposition to take all income from corporations after a 6% income is
allowed would break every small country bank in the country.
Julius C. Martin, Merchantville, N. J. A friend came to us asking for E
loan for X very urgent purpose. Be told us even though we would have to
tighten our belts to accommodate him, be thought he should have the loan.
We thought BO too and made a sacrifice in our living standard to provide
him with the funds. Time went on. This time we said, when our friend
needed more money and approached us again, that he had made no change in
his way of life. He had gone on spending in his customary manner for
things we know are not essential, for things we know he could eliminate
or at least reduce to a minimum. Our living costs are going up in leaps
and bounde. This proposition is all one-sided. Why should we make these
sacrifices while he spends AB usual? When our friend wakes up to his
responsibilities, then we shall help him again and gladly.
Mrs. Vernon C. Ward, Sr., Robersonville, N. C. You are probably receiv-
1ng thousands of letters endorsing your advocacy of a fair and just 6%
profit limitation on corporations. Nevertheless, I went to add my
endorsement also.
Carl B. Newlon, Denver, Colorado. Many of us were greatly disturbed by
the remarks of Mr. H. V. Kaltenborn over the radio yesterday. I all sure
a majority of the people of this country who support your view on taxation
are with you and anxious to help promote the legislation you propose.
Frank Conto, Providence, R.I. For the past couple days I have been I know hear-
ing you lambasted for your 6% profit limitation proposal.
that your proposal will cause as much B. furor as Patrick Henry's *Give no
liberty or give me death and I hope that these, my clumsily put together
congratulations for your courage, may help break the storm that will come
your way. May your spirit never flag. I salute you Sir, & brave man-
Regraded Unclassified
noted @ I.B.
327
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE of THE DIRECTOR
WASHINGTON
October 8, 1941
20A.UL TO THE SECRETARY:
Weekly Report - Lease-Lend Purchases
(9/26/41 - 10/3/41)
Requisitions
Istimated Cost
Cleared by O.P.
207, 754, 71.43
waiting clearance by O.P.M
11,780,342.48
TOTAL Pending Requisitions
9
212,604,413.91
Less devisitions for metals and textiles,
AND contracts will De made for term periods
KIC ellocations required from OFF
106,177,052.73
total recding Requisitions for Spot Purchases
111,829,861.18
Purchases to 9/20/41 156,421,569.70
Purchases 5/88 to 10/3/41
9,064,054.36
Total to 10/3/41
&
185,485,624.06
r. Guy Thompson of OPM has been detailed to this office to act
to lisison with the Procurement Division end to serve in an advisory
scity with reference to steel purchases.
Bn
Director of Procurement
Childrent Gliston B. Mack
Regraded Unclassified
UTS)
MAMBER
as
YAOR
COL ODTY
DOTAL ALLE
DA-TPS-1467
SKF Strels, Inc.
U.K.
..i. Carton Chr. Steel 554.30s
+
200,005.25
DA-TP3-1472
Pittsburgh Steel Co.
If
Concrete meinf. wire roûs 6500T.
49,212.80
DA-TPS-1474
Sandvik Steel, Inc.
II
Alloy Steel
62GT.
88,875.08
Bethlehem Steel Export Corp.
11
DA-TPS-1294
Freight
39,710.00
(Adj.Deduct)
DA-TPS-1241
U.S. Steel Export Corp.
If
20,900
641.63
(Aaj. Add)
U.S. Steel Export Cory.
If
DA-TPS-1241
1,386.895
1,203.44
(Adj. Add)
DA-TPS-1491
Inland Steel Co.
If
Slabs and illets
12,400st.
503,762.00
DA-TPS-1294-1 Bethlehem Steel Export Corp. "
Hods, Freight, Billsta
2,100GT.
95,751.00
11
DA-TPS-1452
SKF Steels, Inc.
Hi Carton Chr. Steel
112.GT.
37,504.17
DA-TPS-1494
Lolybdenum Corp. of America
"
Ferro Molybuenum
145,600#
100,190.40
DA-TPS-1104
Sucyrus-Erie 00.
"
Shovela
8
95,409.28
DA-TPS-1415
General l ctric Supply Corp.
If
Mire
30,000#
4,836.00
DA-TPS-388
Lancaster Iron Morks Inc.
"
9,335.40
(Adj. Add)
DA-TP S-389
Lancaster Iron dorks, Inc.
If
9,335.40
(Adj.Aod)
Joseph Dixon Crucible JO.
II
DA-TPS-1351
Gruphite /lake
215#
97.20
D.S. Rubber Export CO.
"
DA-TTS-1259
Tires c Tubes
750
26,260.50
DA-YPS-1414
mestinghouse Plec. end ,fr...
If
voltmeters
8
244.44
328
Cater illar Tractors Co.
If
DA-TPS-1086
spare Parts
1,892.56
Regraded Unclassified
CONTRAC
REQUISI-
NUMBER
CONTRACTOR'S NAME
TIONER
COMMODITY
QUANTITY
TOTAL VALUE
DA-TPS-1065
Chicago Pneumatic Tool Co. U.K.
Runner, Nuts, Drills,
$ 4,408.70
Gappers
E. C. Atkins Co.
If
DA-TPS-1291
Files
5doz.
8.40
If
DA-TPS-1292 Heller Bros. Co.
Files
18doz.
34.56
DA-TPS-1124
International Harvester Exp.Co. If
Tractors
982,215.20
General Electric Co.
If
DA-TPS-1443
Ammeters
4
424.60
DA-TPS-1409
Kieckhefer Container Co.
If
Boxes, Fiber
100M
15,875.00
DA-TPS-1396
Threadwell Tap & Die Co.
"
Stocks Die
985 sets
16,551.70
It
DA-TPS-1383
Diataphone Corp.
Rgdio Recor.Mch.
8
9,610.00
Transcribing Mch.
20
If
DA-TPS-1395
Greenfield Tap & Die Corp.
Plates, Screw
3850Sets
54,338.00
DA-TPS-1109
L.C. Smith & Corona Typewriter If
Mach. Duplicate
5,072.24
DA-TPS-1382 Standard Record Co.
11
Cylinders
3,000
950.00
If
DA-TPS-1289
M. S. Brooks & Sons
Pins Splet
551 Gr.
52.28
John Morrell and Co.
"
DA-TPS-1324
Hog Hair
67,000#
5,360.00
DA-TPS-1336
Great Lakes Carbon Corp.
If
Calcined Petroleum
5000LT
106,400.00
coke
The Cudahy Poehing Co.
"
DA-TPS-1322
Hog Hair
188,100#
14,773.87
If
DA-TPS-1326
The Rath Peehing Co.
Hog Hair
74,813#
6,268.64
"
DA-TPS-1290
Nicholson File Co.
Files
23doz
48.77
329
DA-TPS-1148 James J. Ryan Tool Works
II
Drivers, Screw
1315
95.50
Regraded Unclass
4.
tioner
our
110
Total
ALLB
DA-TIS-1147
Demasites steel PRODUCT our
U.K.
Punnses, .in
$ 2,560.79
DA-TPS-1288
Groust File sorp. of America
"
Viles and
$18.35
DA-TPS-1110
Ditto Inc.
"
Machine Duplicating
16,904.20
DA-TPS-1440
The Fyr. Fyter Co.
11
Fire Extinguisher
1,000
4,220.00
LA-TPS-1315
west Steel Castin Co.
n
Anvils, Blacksmith
72
3,240.00
DA-TPS-1314
Illinois Iron & Bolt Co.
il
Ditto
480
9,000.00
DA-TPS-1441
Buffalo /ire A pliance Corp. 11
Fire Extinguishers
ill Charges
1,000
520.00
DA-TPS-1393
The Pharis Fire & Rutuer Do. If
Fires & Tuoes
400ea.
3,020.00
DA-TPS-1389
Pennsylvania Rubber C..
If
Flaps
1,000
40,130.00
DA-TPS-1386
The Goodyear Tire & Ruober Co. If
Tires, Tubes & Flaps
21
566.16
DA-TPS-1388
+unlop fire & Rubber Corp.
"
Tires Tubes & Flaps
3400
58,140.00
11
U.S. Rubber port 00.
Ditto
1900
108,794.00
DA-TPS-1387
DA-TPS-1392
The ohant Rucber Co.
it
Oitto
1250
26,472.50
DA-TPS-1390
The Vansfield Tire Ruber Co. 11
Ditto
1814
36,543.40
DA-TP3-1391
The Mirestone Tire è Rubber Co. "
Ditto
223,172.50
General Electric Supply corp.
"
DA-TPS-1486
"ire & Caule
51,766.37
if
eyerhaeuser Sale .0.
Douglas Fir
970,000
443,370.00
DA-TPS-1465
330
Regraded Unclassified
CONTRACT
REQUISI-
NUMBER
CONTRACTOR'S RALE
TIONER
CORRODITY
QUANTITY
TOTAL VALUE
DA-TPS-1466
Pacific Coast Spruce Inc.
U.K.
Douglas Fir
750,000
$ 443,370.00
DA-TPS-1468
Pennwell Oil & Belting Co.
If
Belting Leather
2250 FT.
8,183.47
The Eagle Belting & Leather
#
DA-TPS-1433
Belting
2,394.00
The Harshaw Chemical Co.
II
Potassium Hydroxide
42.50
DA-TPS-1150
DA-TPS-1477
General Electric Supply Co.
If
Bushar Chambers
22,000.00
E. F. Houghton & Co.
II
DA-TPS-1352
Case Hardening Comp.
134.55
Brunswick Pulp & Paper Co.
II
DA-TPS-1498
Kraft Pulp
80.00
The Cleveland Trencher Co.
"
Trench Diggling Machines
38,802.00
DA-TPS-1367
DA-TPS-1384
Millbarn Mills, Inc.
11
Mosquito Netting
18,000.00
Anderson -Tuley Co.
If
DA-TPS-1478
Lumber Hardwood
36,034.82
If
DA-TPS-1479
Angelina Hardwood Co.
Lumber Hardwood
2,125.00
Bankston Lumber & Export Co.
If
DA-TPS-1480
Lumber Hardwood
49,014.00
If
DA-TPS-1481
Brooklyn Cooperage Co.
Lumber Hardwood
3,401.00
DA-TPS1482
Eastman Gardiner Hardwood Co. "
Lumber Hardwood
3,755.00
11
DA-TPS-1485 Sears Lumber Co.
Lumber Hardwood
981.00
DA-TPS-1484
Santee River Hardwood Co.
"
Lumber Hardwood
1,200.00
Miller & Co., Inc. of Florida "
Lumber Hardwood
44,520.00
DA-TPS-1483
331
If
DA-TPS-1486
E. H. Shreener Lumber Co.
Lumber Hardwood
4,562.00
Regraded Unclassi
CONTRACT
REQUISI-
NUMBER
CONTRACTOR'S NAME
TIONER
COMMODITY
QUANTITY
TOTAL VALUE
DA-TPS-1488
Discie Lumber Co., Inc.
U.K.
Lumber Hardwood
$ 47,950.00
Allis-Chalmers Mfg. Co.
It
Tractors
17
73,069.81
DA-TPS-1243
Snow Removal Equip. Co.
If
DA-TPS-1293
Snow Plow
1
4,830.00
Suik Mix Concrete Mixer Co.
"
Concrete Mixers
211,371.71
DA-TPS-1307
DA-TPS-1306
Construction Mchy Co.
If
Concrete Mixers
128,694.00
The Jaeger Machine Co.
If
DA-TPS-1308
Concrete Mixers
59,800.00
DA-TPS-1419
Harrisburg Steel Corp.
II
Oxygen Cylinde
10,000
166,300.00
Caterpillar Tractor Co.
If
DA-TPS-1206
Tractor & Spares
5,827.90
DA-TPS-1301
International Harvester Co.
If
Power Units
200
199,070.00
General Elec. Supply Corp.
If
DA-TPS-1536
National Receivers 116
28,797.00
Norma-Hoffman Bearing Co.
#
DA-TPS-1205
Bearings Ball & Roller
92,987.50
General Motors Sales Corp.
"
Bearing Ball & Roller
299,700.00
DA-TPS-1212
DA-TPS-1512
Trojan Rectefrer & Equip. Inc. If
Battery Chorges 50
2,723.86
If
DA-TPS-1475
Defense Supplies Corp.
Douglais Airplane
289,269.67
DA-TPS-1305
S. L. Allen & Co., Inc.
If
Hoes Seeders 1600-600
21,247.23
DA-TPS-1239
Standard Vacuum Oil Co.
China
Aviation Gasoline 1,356,000 Gals.
334,950
332
Regraded Uncla
CONTRACT
REQUISI-
NUMB R
CONTRACTOR'S NAME
TIONER
COMMODITY
QUANTITY
TOTAL VALUE
DA-TPS-1531
Great Lakes Steel Corp.
U.K.
Sheets
237GT.
$ 17,756.86
DA-TPS-1385
U.S. Steel Export Co.
"
Steel
268.80
(Adj. Add.)
If
DA-TPS-1532
Republic Steel Corp.
Tinplate
779,357GT.
93,764.28
DA-TPS-959
General Motors Overseas Corp. If
Freight
900.00
(Adj. Add)
If
DA-TPS-1534
Pittsburgh Steel Co.
Ingots
3900GT.
138,489.00
DA-TPS-1537
Jones and Laughlin Steel Corp."
Tinplates
481GT.
54,010.16
Weirton Steel Co.
If
DA-TPS-1549
Tinplates
1,557.5 GT.
175,004.29
Continental Steel Corp
If
DA-TPS-1552
Barbed Wire
800GT.
73,472.00
DA-TPS-1553
Keystone Steel & Wire Co.
If
.
Barbed Wire
1,400GT.
128,730.00
DA-TPS-1554
McLouth Steel Corp.
If
Hoop Steel
29GT.
2,944.67
Follansbee Steel Corp.
If
DA-TPS-1555
Steel Sheets
22,400
1,388.80
DA-TPS-1559
Pittsburgh Steel Corp.
If
Barbed Wire
1,300GT.
115,897.60
If
DA-TPS-1561
Sharon Steel Corp.
Rolled Strip
441 GT.
97,401.02
Weirton Steel Corp.
"
Sheets
480GT.
DA-TPS-1564
33,331.20
If
DA-TPS-1565
Wisconsin Steel Corp.
Billets
2,500GT.
111,200.00
DA-TPS-1171
Commercial Acetylen Supply Co."
Acetylene Cylinder 750
20,625.00
La Plant Choate Mfg. Co., Inc."
Scraper
36
74,809.44
DA-TPS-1300
333
hashelete Mfg. Corp.
44.50
DA-TPS-1145
(Adj.Add)
Regraded Uncla
CONTRAC
REQUISI-
NUMBER
CONTRACTOR'S NAME
TIONER
COMMODITY
QUANTITY
TOTAL VALUE
DA-TPS-1518
Jones & Laughlin Steel Corp. U.K.
Barbed Wire
1,300GT.
$ 112,840.00
-
DA-TPS-1012
Holo-Krome Screw Corp.
If
6,072.22
(Canc.)
Laclede Steel Co.
If
DA-TPS-1499
Concrete Reinf. Wire rods
69,780.48
1,982,400
DA-TPS-1500
Republic Steel Corp.
If
Sheets
1,070 ,000#
34,186.50
DA-TPS-1503
Midstate Steel & Wire Co.
#
Barbed Wire
300GT.
28,374.00
DA-TPS-1504
Granite City Steel Co.
If
Tinplate
99GT.
12,107.00
DA-TPS-1505
Follansbee Steel Corp.
If
Tinplate
139GT.
16,884.81
DA-TPS-1507
Youngstown Sheet & Tube Co.
If
Tinplate
493GT.
56,868.41
DA-TPS-1508
Youngstorm Sheet & Tube Co.
It
Wire rods, Ingots8,500GT.
324,955.00
DA-TPS-1510
Wheeling Steel Corp.
If
Tinplate
608GT.
73,566.14
DA-TPS-1548
Northwestern Steel & Wire Co."
Barbed Wire
1,000GT.
92,780.00
DA-TPS-1476
General Motors Overseas Operations
Freight
9,025.00
(Adj. Add)
DA-TPS-963
General Morots Overseas Operations
Freight
10,000D.Fgs.
60,400.00
DA-TPS-958
General Morots Overseas Operations
Freight
2,500.00
(Adj.Add.)
If
DA-TPS-1538
Atlantic Steel Co.
Wire Rods
193GT.
11,110.62
If
U. S. Steel Export Co.
Tinplate
4,049.3GT.
479,416.19
DA-TPS-1540
If
Andrews Steel Co.
Slabs
2,000GT.
91,020.00
DA-TPS-1541
334
If
DA-TPS-1523
Wheeling Steel Corp.
Billets
6919GT.
309,355.00
Regraded Unclass
CONTRACT
REQUISI-
NUMBER
CONTRACTOR'S NAME
TIONER
COMMODITY
QUANTITY
TOTAL VALUE
DA-TPS-1446
The Pharis Tire & Rubber Co. China
Tires, Tubes
525
$ 3,905.75
DA-TPS-1445
The Nohawk Rubber Co.
If
Tires, Truck tubes 1,000
7,688.00
The Dayton Rubber Mfg. Co.
If
DA-TPS-1448
Tires Truck Tubes 800
3,096.00
DA-TPS-1447
The Firestone Tire & Rubber Co."
Truck Tires, Truck tubes 6400 29,579.00
American Haer & Felt Co.
If
DA-TPS-1422
Hair Felt
133 1/3 Yds.
50.67
If
DA-TPS-1375 The Washburn Co.
Washes, Lock, Steel
36.28
United-Carr Fastener Corp.
If
DA-TPS-1335
Fasteners
5,375.00
American Felt Co.
If
DA-TPS-1337
Grey Woolen Felt
253.75
DA-TPS-1533
The Kay & Eso Co.
11
Enamel Bl., Green 180Gals.130Gals.491.20
DA-TPS-1265 Heppenstall Co.
U.K.
-13.14
(Adj. Deduct)
DA-TPS-1137
SKF Steels, Inc.
If
3,332.00
(Adj. Add).
Total Purchases 9/26 to 10/3/41
$ 9,064,054.36
335
Regraded Uncla
336
October 3, 1941.
Dear Mr. Bowley:
Many thanks for your letter of October 3rd,
setting forth the figures on gold and dollar
balance at the close of business on September 26th.
Sincerely yours,
(Signed) M. II. Binks
H. D. White,
Director of Monetary Research.
Mr. 1. K. Bewley,
The British Supply Council
in North America,
Willard Hotel,
Washington, D. C.
le
10/3/41
Regraded Unclassified
THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA
337
BOX 680
TELEPHONE: REPUBLIC 7850
BENJAMIN FRANKLIN STATION
WASHINGTON, D. C.
October 3, 1941.
SECRET
Dear Dr. White:
The figures at the close of business on
September 26th are as follows:
Total Gold (including Belgian)
272
Official dollar bulance
37
TOTAL COLD AND DOLLARS
309
Lass Belgian Gold
105
Scattered Gold
21
Reserve against immediate
liobilities
10
CODE aND DOLLARS
173
The increase is accounted for, among
other things, by the receipt of : second instalment
of 225 willion under the recent R.F.C. Loan.
& further instalment of $75 million
was received on the 1st October and should uppear
in future figures.
IMP
Yours
incerely,
T. K. Bewley
Dr. E. D. White
Director of Monetary Research
United States Treasury
Wishington, D. C,
Regraded Unclassified
338
10/6/41
copy furnished to Mr. Welles today when
he called on the Secretary.
Regraded Unclassified
339
October 3, 1941
My dear Mr. President:
I would appreciate receiving in-
structions from you as to how I
should answer the memorandum from
the English which I sent to you on
September 25th, as the British
Financial Attache, Mr. T. K. Bewley,
is urgently requesting a reply to
this memorandum.
Sincerely yours,
(Street) 1. Documber 99.
The President,
The White House.
fent by Secret fermie
man 11:40A.M.M.-19/41-
Regraded Unclassified
340
Treasury Department
Division of Monetary Research
Date 12/4/41
19
To: Miss Chauncey
Mr. White thought you would
probably want this original letter
in your files. Photostats were
sent to Mr. Bell and Mr. Cochran
some time ago.
L. Shanahan
MR. WHITE
Branch 2058 - Room 214
341
London, October 3, 1941.
Dear Mr. Secretary:
Enclosed is a copy of the Agreement between
the Bank of England and the State Bank of the U.S.S.R.,
signed September 4. 1941, implementing the Anglo-
Russian Inter-Bank Agreement of August 16, 1941. As
explained in the Embassy's cable No. 4695 of today's
date, the document should be held strictly confiden-
tial until and unless released by the Bank of England.
Three copies are being forwarded today by air
mail despatch, one of which is to go to Treasury. It
was decided after some consultation here that the text
should go forward by despatch rather than by cable.
I am taking this means of sending you one copy direct.
Sincerely yours,
L. Waseday N. Casaday
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington.
Regraded Unclassified
strictly Confidential
COPY
32
AGREEMENT
BETWEEN THE BANK OF ENGLAND AND THE STATE BANK
OF THE UNION OF 30VIET SOCIALIST REPUBLICS
In order to implement the Agreement of the 16th August
1941 between the Government of the United Kingdom of Great Br1-
tain and Northern Ipeland and the Government of the union of
coviet Socialist Republics concerning unitual deliveries, credit
and methods of payment (hereinafter referred to 68 the Inter-
Governmental Agreement) the Bank of England and the State Bank
of the Union of Soviet Socialist Republics have agreed as fol-
10:01-
ARTICLE 1.
The Bank or nglana shall open in its books B. separate
account in storling in the name of Line State : wnk of the Union of
Coviet Socialist Republics designated ups "no. 1 (count" to which
may be credited:-
(a) Sterling arising ra. deliveries 01 goods by the Govern-
ment of the Union 01 oviet Cocielist Republics on: oviet organi=
sations to the Covernment of und nicou or to any depart-
ment, organisation or persons under the Corms 01 that Inter-
Covernmental Agreement.
(b) Starling arising from the delo to the Back of ingland,
soting as agents for His Rejusty's Treasury, of U.S. dollars or
gold in accordance with the provisions of Apticle 6 (a) of the
Inter-Governmental Agreement and with rticle + of the present
Agreement.
(c) starling artsing from novances made by the Government
of the United Kingdom in accordance with the provisions of Art-
icle G(b) of the Inter-Governmmental Agreement, or under the
Supplamentary Agreement thereto dated 1st September 1941.
(d) sterling arising 150m other sources as may be agreed
from time to time between the Bank of England and the state Bank
of the Union of soviet Socialist Republica with the approval of
their respective Governments.
The No. 1. Account DEC be debited as follows:-
(e) For payments an under the terms of the relevant con-
tracts in respect of the value of goods delivered to the Govern-
ment of the Union of Soviet Socialist Republics and Soviet or-
ganisations under the terms of the Inter-Governmental Agreement,
(f) For repayment of sums due by the Government of the
Union of Soviet Socialist Republics under the 1936 Export Cro-
dita Guarantee Agreement in accordance with the provisions of
Article 5 (b) of the Inter-Governmental Agreement.
(g) For such other sterling payments as may be agreed from
time to time between the Bank of ngland and the State Bank of
the Union of Coviet Socialist Republics with the approval of
their respective governments.
Regraded Unclassified
&
343
ARTICLE II
The Bank of angland shall advise the State Bank of
the Union of Soviet Socialist Republics by cable of amounts
received for the credit of the No. 1 Account.
Payments under the provisions of Article 1 (=), (f)
and (g) of the present Agreement shall be effected by the Bank
of ngland upon receipt of telegraphic instructions from the
State Bank of the Union of Soviet Socialist Republics.
All transactions passing through the No. 1 Account
shall be effected free of commission.
ARTICLE III.
The Bank of England shall open in its books a "state
Bank of the Union of Soviet Socialist Republics Suspense 10-
count" to which shall be credited the sterling proceeds of sales
of platinum to the Government of the United Kingdom and of dol-
lars or gold to the Bank of ingiand, acting as agents for His
Rajesty's Treasury, in anticipation of the Quarterly 8 ettlements.
However, during the period between sottlement dates, balances on
this account shall be at the free disposal of the State Bank of
the Union of Soviet Socialist Republics and in perticular may be
transferred to the ordinary account of the State Bank at the Bank
of England.
ARTICLE IV.
The No. 1 Account shall be balanced on the 31st October
1941 and at the end of every three calendar months thereafter.
Any debit balance thereon which is a multiple of £250.000 shall
be settled in accordance with the provisions of Article 6 of the
Inter-Oovernmental Agreement. For the purpose of implementing
the provisions of Article 6 (a) of the Inter-Governmental Agree-
ment the Bank of !england 1s authorised by the State Bank of the
Union of moviet Socialist Republics to transfer, at the end of
any accounting period, the necessary amounts from the "state Bank
of the Union of soviet Socialist Republics Suspense Account" to
the No. 1 Account. At the same time the Bank of England shall
advise the State Bank of the Union of Soviet Socialist Republics
by cable of the amounts 80 transferred and in the event of the
balance on the "state Bank of the Union of Soviet Socialist Re-
publics Suspense Account" not being sufficient to meet the pay-
ments due, the state Bank shall sell to the Bank of England
U.S. dollars, or gold delivered in such places as shall be agreed
between the two Banks.
Any credit balance remaining on the No. 1 Account at
the end of any accounting period shall be placed in multiples of
£250,000 at the free disposal of the State Bank of the Union of
Soviet Socialist Republics and in particular may be transferred
to the ordinary account of the state Bank at the Bank of England.
ARTICLE V.
with regard to the males of U.S. dollars or gold reforred to
in Article 1 (b) of the present Agreement, the Bank of England will
purchase:-
(a) U.S. dollars at the London middle official rate for U.S.
dollars (at present U.S. dollars 4.03 - :1).
Regraded Unclassified
(3)
15-14
(b) Gold, delivered in North America, at the official
price of gold in New York on the day of salo, in which case
U.S. dollars will be converted into Pounds sterling at the mid-
dle official rate for U.S. dollars in London on the day of male.
Gold, delivered elsewhere, at prices agreed between
the Bank of England and the state Bank of the Union of Soviet
ocialist Republica, but not lower than the official buying
price of the Bank of Ingland (at present 168/- per fine ounce)
or, at the option of the State Bank of the Union of Soviet 30-
cialist Republics, at the official price of gold in New York
003 the day of sale adjusted to allow for the cost of freight and
insurance of gold from the place of delivery to the U.S.A.
ARTICLE VI.
on the termination of the present Agreement, the No. 1
Account shall be balanced at the next following quarterly settle-
ment date, or on such other date as may be agreed between the Bank
of England and the State Bank of the Union of Soviet Socialist
Republics with the approval of their respective Governments, and
settlement shall be effected in accordance with the provisions
of Article 6 of the Inter-Covernmental Agreement and Article 4
of the present Agreement. Any credit balance thereafter remain-
Ing OIL the No. 1 Account or on the "state Bank of the Union of
Soviet Socialist Republics Suspense Account" shall be dealt with
in accordance with the second paragraph of Article 4 of the pre-
sent Agreement.
For the purpose of the final closing of the accounts,
the stipulation regarding settlement in multiples of £250,000
provided for in Article 4 of the present Agreement shall not
apply.
FINAL ARTICLE
This Agreement shell come into force on the date of
signature and shall remain in force until the termination of
the Inter-Governmental Agreement.
Done in duplicate the
day of
ninetean hundred and forty-one, in English and
Russian, both texts having equal forow.
For and on behalf of
For and on behalf of the State
the Bank of England,
Bank of the Union of Soviet
socialist Republics
(Sd.) A.I. Mikoyan.
Regraded Unclassified
MAE
ASSISTANT SECRETARY OF THE TREASURY
October 3, 1941.
Memorandum
TO:
Secretary Morgenthau
FROM: Mr. Gaston
The attached letter to the President
is largely self-explanatory. The matter
arose primarily from our desire to do some-
thing about the Japanese fishing boat situ-
ation on the Pacific Coast, about which there
have been many rumors of espionage, and also
our desire to institute better protection in
such important harbors as New York against
stray craft that might be used for sabotage.
I had a meeting in my office on September 10,
at which the Navy, State Department, F.B.I.
and Bureau of Navigation of Commerce were
represented. At that time I said we would
explore our power to control the situation
through anchorage regulations. Navy was very
trong for our doing it and the others had
no objections. The file contains specific
approval from State, Navy, Commerce and F.B.I.
We have had several meetings internally, with
Coast Guard, Customs and the General Counsel's
office represented, and I think the regula-
tions are now in pretty satisfactory shape.
Although they mean an increased pres-
sure of work on the Coast Guard, I believe
they are necessary and recommend Mrs that you sign
the letter to the President.
Regraded Unclassified
346
OCT 3 1941
My dear Ir. President:
Under the anchorage regulations, approved by you June 17,
1940 and October 29, 1940, - anonded, the departure and movement
of vossels in American waters not required to secure sustoms clearance
are not subject to control by the Government.
Section , of the regulations of June 27, 1940, requires
a departure permit of wasels for which clearance is required. It
10 the view of the Department of the Treasury that the scope of this
section should be broadened to cover vessels stopping at /merican
ports for the purpose only of loading fuel end ship's stores. AB
amendment of section 7 10 accordingly submitted for your approval.
It has come to the attention of the Department of the
Treasury that some vessels not included in either of the above onle-
ories are engaging in activities detrimental to the interests of
national defense. In order to put all end to those activities, this
Department proposes the promulgation of certain added provisions to
the existing regulations. Those added provisions would give to the
Coast Cuard the power to license, specifically or generally, the opera-
tion of not controlled under section 7 and to require documents
Regraded Unclassified
347
of identification to be carried by persons a board all ressols, but
to allow discretion is the captains of the port to waive the 1denti-
fication requirements in appropriate cases. They also will provide
authority to prevent the meering of a vessel, or to compel the shift-
ing of a vesse) if mored, in situations where the involved does,
wharf, pier, or other water front structure 18 found unsafe for such
mooring.
The assignate proposed will provide an efficient -
for checking attempts at sabotage and espionage on the water at as
fixed water front property, where at present other effective means of
enforcement are not available. They also will afford great flexi-
bility in the application of centrols, while at the same time provide
for uniformity of administration where that is appropriate.
The control measures provided by the proposed amendments
to the regulations have been urged by the Nevy Department. The
Secretaries of State, Havy and Commerce, and the Director, Federal
Bureau of Investigation, Department of Justice, also have expressed
their approval of the draft of these proposed
Because of the great public interest involved here during
the present national emergency, I strongly recommend to you the
approval of these amendments to the regulations.
Faithfully yours,
(Signed) 1. Borgesthan, M
Secretary of the Treasury.
Blackwell
The President,
By - 5:30
The White House.
Typed 10-1-81
[
01. Mr. Hompan
Regraded Unclassified
348
TITLE 25 - NAVIDATION AND NAVIGABLE SATERS
CHAPTER I + 00AST GUARD
TO PART 5 - ABCROBADE REGULATIONS
INSULATIONS FOR THE CONTROL OF V:85K18 IN THE
TERRITORIAL NATURO OF m UNITED STATES.
TO COLLEGIORS or curroms, CAPTAINS OF FORTS, AND OTHERS CONCERNED:
Parents to the authority contained is meetion 1, Title II
of the Repiesage Act, approved June 10, 1917, 40 Stat. 280
(U.S.C. 02020 so, me. 192), ml by virtue of a Preslamation
1ssued in the day of June, 1940 (8 Fed. Reg. 2619),
the Regulations relating to the emtrel of reasols is the terri-
terial of the United States (5 Fed. Reg. 2442),
by the Services of the Trunty at approved by the President
a June 17, 1940, are headby sold M follows:
section 4 is to read M follows:
(4) (a) the capinia of the part of other officer designated
by the incretary of the Treasury perment so postion (2) bereef
10 happy exthorised to - to be inspected and courched at
any the any ressel, foreign or demotic, or or person of
yoskage theres, within the territorial non of the United
states, and to - therefree any or all persons not specially
authorized w his to ⑈ or N remain w board thereof.
(b) Every person - hourd any mostl, foreign or damestic,
within the territorial misers of the United States shall earvy
personal identification papers satisfactory to the emploin of
the part consisting of a eath to which 10 affixed the photograph
Regraded Unclassified
349
of the bearer and embaining such identifying date ad MD, sign-
- fingerprint, date and place of birth, actionality, alim
registration univer (in the case of resident alisms), height, wight,
also of hair and ayes, mch ourd to be fursished by the explain
of the part or the identification date shown thereos to be is a
form acceptable to Mo. In 1100 of such card, the explain of the
part my, to his discretion, accept any other antisfactory -
of identification, much w a matimous discharge book, or .
certificate of identification Lamed under authority of section
4951 of the Revised Statetes, as and (5.3.6. title 46, -
(43), # & passport. the captain of the part is further enthorized,
in me discretion, to - any or all percone a beard of us?
nd ressel, or any of all persons 6 board any class of vessols,
from the requirement of personal identification. the my clso,
upon notification to the - agents, motors, of operators
thereof, exclus individual veasols tree a dass of vassels to
which is granted a general exemption from the requirement of
personal Montification. for the purposes of this paragraph, the
commins, with the approval of the Decretary of the treasury,
my deselfy vessels as provided is section c(4). the
of identification are and the agercise of discretion by exptains
of parts with respect to the identification requirements
is this paragraph shall be subject to the supervision of the
Deceptary of the treasury, coting through the Commentati of the
and cases, est the - my, subject to approval by the
decretary of the Treasury, same nd instructions to captains
of the part - be any form acceptary to provide general unifersity.
+
Regraded Unclassified
350
sootion s. to be effective fiften days after the date of
publication in the Federal Register, is unrated to read w follows:
(a) (a) tasept with mayor to the departure of a work
ter with 8 departure pennit 10 required by motion , of these
legulations, w ressel shall depart tre eng part w please in the
United states, # from my part or place subject to the jurie-
diction of the Unived States, for e point estable the territorial
unters of the United States unloss the event, agent, # marker
of such voccel shall first obtain Drem the explain of the port
in when juriodiction the reasel 18 to depart a lieease authorizing
each departure.
(b) Except with respect to the departure of a rease) for
which a departure pennit 10 required by metion , of shall
Regulations, OF for with a departure liemse to required by
paragraph (a) of this motion, ao vossel shall - in wri-
toriel waters of the United States unless the owner, agest, of
meter of make ressol shall first obtain from the captain of the
part is where jurisdiction the reasel is to - & license
authorizing má areaut. The emptain of the part my, is his
discretion, Lease w license covering the requirements of this
peragrajh and paragraph (a) of this section.
(e) my application for license under the provisions
of this costion shall be filed with the suptoin of the pert is
deplicate and shall include - statement by the ourst, agent,
of mater of such - describing the perpose for which the
vessel to to be operated and 100 destination or the 1591 is
which 11 will aperate. If the captain of the part finds that
the granting of a under the circumstances would not be
inimiesl se the interests of national defense and of the safety
Regraded Unclassified
+
351
and protection of vensels or the territorial waters, be shall
approve the application by satersing 11 accerdingly set shall
return to the - agent, or unster oge an thereof do 4
dersod. is application when ao approved shall constitute 4 lie-ase
to 42 - for the paryone and to the destination of is the
are specified in the application. Duck 110.000 shall be carried
8 the reasel for which it Le issued while the rease) is operated,
shall be shibited for imspection upon the request of any efficer
charged with the enforcement of these Regulations, and shall be
valid the reported departures or novements of the subject ressel
for the - purpose and to the - destination or LEON ustil
revent by the issuing officer of until the axpiration of the time
limit. if say, fixed is the license. The captain of the part who
Leased the license, or use captain of the part in whose juriodic-
tiem the vensel my be, my remaire - liernse by notice to the
holder thereof If be shall fine that (2) there has both say viale-
tion of the terms thereof, of (a) any yerron on board of the
mbjoct reason her failed to emply with the identifica registro-
wate of section 4(b) of these Regulations, 62 (3) further emergise
of the 1100000 would be ininical to the interests of national
defense or of the safety at protection of ressols or the terri-
terial waters. the income sad revolution of lieenses by
explains of the part shall be subject to the supervision of the
Secretary of the Tyeasury, acting through the Commendent of the
Coast ours, and the Commendant my, mbjost to approved by the
decretary of the Treasury, 18880 such instructions to the explain
of the part as be may deam to provide general uniformity.
Regraded Unclassified
352
(4) the Commission of the Coast ours, with the approval of
the fearstary of the Treasury, my tome 8 general lie-nse for
of class w classes of wescole for which a departure of -
liesase is required by this matter If he finds that the penting
of ash - general license would net be inimical to the internets
of national defense and of the cafety and protection of voccals
w the insulterial weberal be my exclude individual vegale true
a general license at the time of income or INS
notification to the agents, maters, OF operators thereoft
Provided. That any reased a melated my novertholess be greated
. 1100(ine use the provictions of peragraphs (a). (b) and (+) of
this metion; sad be my permise say license If he finds
that continuence of the lieense in form would be initient to such
interests. for the purposes of this exction, - Comments: with
the approval of the Secretary of the Typesury, my electify wasels
upon my reasonship basis, including, but not limited to, control,
1 8 I Ingula, * s and 1 i
i
Soction , is - so reed all follows:
(9) the ressel shall depart from say part or place is the
United States, of from any port or place subject to the juriodic-
them of the United states, a a varage for with clearance by a
customs officer of - United States 10 required or for which
# such clearanov 10 required - the vessel is compted
from middle eakly by contion 441(4) of the Tariff Act of 1950,
u State vas, at mented (U.S.C., Dap. 1, title 19. cod. 1461(4)).
unless the principal officer in charge of the past of
departure shall have boen authorized by the Secretary of the
Treasury to permit departure.
Regraded Unclassified
+
353
AMERICANT: TO PART , - AUTHORIZE AND NOV/MENTS
07 VISUELS AND THE LADING 450 DISCHARGIBG OF
EXPLOSIVE OR INFLAMMABLE MATERIAL, OR OTHER
ASID CARBO.
Termest to the authority contained is section 1. Title II
of the 108 of June 15, 1917, 40 Stat. aso (U.D.C. title so,
no. 192), at a Preclamation issued June SF, 1940, the Males
will Regulations Governing the Macherage and Novements of Vessels
and the laking and Discharging of Emplosives or Inflamable
Material, w Other Deagerous Cargo, approved Detober 29, 1940
(a 7ed. leg. 4401), 5 horeby escaded by the addition of a sew
personsible to the regulations for machorages in general under
the General Bales and Regulations shick is designated 1 7.8 (b)
(18) (dosignation 10 to ambering as 11 will appear in Code of
Federal Regulations, title 33, shapter 1, part 91 the see
peragraph to addre fellowing paragraph 11 of part I under -
division - of the aferementioned regulations as they appear in
5 Fed. mg. 4401 and paragraph 18 added by the consterst approved
June 19, 1941, 6 red. Reg. svea), and we shall read as follows:
- 7.5 Experal fales and Regulations.
......
(b) -
(10) IDENTIFY the captain of the part finds that the secring
of my vessel to a worf, docts, pier, or other witer frest structure
weld endonger nd mossi, of any other w the herber,
of -cald be inimical to the musitive interests of the United states,
or the national defense, by receive of conditions misting a or
Regraded Unclassified
354
1 I i Ither s I house à
cluding, but not limited so, imadequate guard service, insuffi-
etems lighting, fine beaunts, imdepente fire protection, made
anchinery, internal disturbance, w unsatisfactory operation, the
captain of the part my provent the musing of any vessel to ná
wharf, desit, star, w other water front structure until the mentis-
factory condition or conditions ⑉ frunt age corrected, and he may,
is the case of a like finding after say vessel has been mored,
compel the shifting of much rease). from any such sharf, doek, pier,
or other water front structure.
Sccretary of the Treasury.
the thite Inco,
. 1941.
+
Regraded Unclassified
355
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 3, 1941
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Status of the Mexican stabilization and silver
negotiations
1. Drafts of both a stabilization agreement and A silver
purchase agreement have been approved in general by you
and in detail by Under Secretary Bell and other Treasury
officials. The Mexican negotiator -- Mr. Monteros -- has
informed us that his government has also approved both
drafts.
2. Finance Minister Buarez is now in Washington, prepared to
sign the stabilization agreement on behalf of the Mexican
Government and Mr. Monteros has been authorized to sign
on behalf of the Bank of Mexico. These signatures will
have to be on an ad referendum basis pending legislative
approval in Mexico.
3. Stabilization Agreement
(a) We agree to purchase pesos up to $40 million.
There is no limit to the amount which can be purchased at
any one time up to A total of $40 million.
In this respect it differs from the agreement we
had prepared with Argentina, which provided for monthly
amounts.
Although we agree to purchase up to $40 million,
actually the Bank of Mexico will be able to utilize only
up to $30 million of the sum because their laws require
them to keep 25 percent gold or foreign exchange 88 a.
reserve against the pesos on deposit.
Your obligation to purchase pesos under this agree-
ment will terminate on June 30, 1943 subject to earlier
termination by you on 30 days' notice.
Regraded Unclassified
356
Division of Monetary
- 2 -
Research
(b) The Bank of Mexico must repurchase any pesos
180 days after the receipt of notice from you, repayment
to be effected in six equal instalments during the next
succeeding 180 days.
The pesos we buy will of course be repurchased at
the price we paid for them 50 that there will be no loss
through changes in the exchange rate.
(e) The exchange rate shall be the New York
Telegraphic transfer rate on Mexican pesos and the rate
of interest shall be 1-1/2 percent per ansum on the
daily balances. The interest rate may be reconsidered
at any meeting between the parties concerned, of which
there shall be not less than two per year.
(d) Mexico agrees to make no substantial change in
dollar-peso rate of exchange and to introduce no impor-
tant exchange control measure without providing you with
an opportunity for consultation. Mexico further agrees
to use the dollars as a revolving fund to stabilize the
peso-dollar rate and to exercise due diligence to pro-
vent the permanent exhaustion of the fund and to prevent
such internal currency and credit expansion as would
cause an undue drain on dollars.
4. Bilver purchase agreement. This agreement will be in
the form of & letter to the Bank of Mexico from the
Federal Reserve Bank which you will authorize the Federal
Reserve Bank of New York to send.
(a) The purchase agreement will be on & month-to-
month basis with the price to be quoted on a daily basis
and the total obligation to purchase limited to 6 million
ounces per month.
(b) The Bank of Mexico must ship the silver to a
designated United States mint or assay office at its
risk and payment will be made by the Federal on delivery
of the silver to the mint or assay office.
prior to 1938 except that you are agreeing to purchase 6
This silver agreement is similar to the one in foree
million ounces per month whereas in the earlier agreement
it was 5 million ounoes per month.
There is appended & copy of the Stabilization
arrangement and the Silver Purchase Agreement. I have
marked the most important parts in red crayon.
Regraded Unclassified
STRICTLY CONFIDENTIAL
357
DRAFT 8/25/41
(Liffers from Draft 8/6/41 by minor changes in Sec. 8)
AGREEMENT nade as of the lot day of September, 1941, at the
of Washington, District of Colombia, between the Secretary of the
Treasury of the United States of America (hereinafter called the
Secretary), the Sanco de Mexico (hereinafter called the Bank) and the
Government of the Republic of Mexico (hereinafter called Mexico).
WHEREAS, the monetary and financial cooperation of the United
States of America and the Republic of Mexico and the stabilization of
the United States dollar-Mexican peso rate of exchange are important
factors in promoting trade and in fostering the welfare and friendly re-
lationshine of the two countries;
NOW, THEREFORE, in order to further such objectives and in
consideration of the premises and of the mutual covenants horein contained,
it is agreed as follows:
1. The Secretary, through the Federal Reserve Bank of New York
as Fiscal Agent of the United States (hereinafter in its capacity as
Fiscal Agent of the United States called the Federal) shall, as herein-
after provided, nurchase Mexican nesos from the Tank from time to time as
requested by the Bank, the United States collars prid therefor to be used
exclusively for the purpose of stabilizing the exchange value of the Mican
pézo with respect to the United States dollar. The total amount of nesos
thus purchased by the Secretary, exclusive of accrued interest thereon and
of any 00505 repurchased, shall not at any time exceed in the aggregate
the equivalent of United States $40,000,000 computed at the rate et which
such nesos are nurchased is hereingfter provided. The pesos so purchased
shall be credited to the Federal on the hooks of the Bank in C special
secount to be onened in the name of "Federal Reserve Penk of New York as
Fircal Agent of the United Status". Unon receint by the Zederal Reserve
Regraded Unclassified
358
- 2 -
Bank of New York of advice from the Bank by tested telegram that this
account has been credited with a stated amount of Mexican pesos, the
Federal will in turn, in payment thorefor, credit the Bank in a special
account to be opened by the Federal in the name of "Bonco de Mexico,
Soccial Account", in an amount in United States dollars equivalent, at
the then prevailing buying rate of exchange in New York for telogrenhic
transfers payable in Mexican nesos on Mexico, D. F., to the emount in
Mexican nesos 50 credited to the account in the name of the Federal on
the books of the Bank.
2. The Bank shall credit interest to the special nuso account
in the name of the Federal on the last day of scoh successive month from
and after the date hereof. Such interest shall be computed at the rate of
1-1/2% (one and ono-half mercent)per annum on the daily balance of such
pesos in such special account DS were nurchased by the Secretary under this
Agreement. The matter of the rate at which the Bank shall credit interest
to such special Jeso account may be reconsidered it any meeting provided
for in paragraph 8 of this Agreement.
3. (a) One hundred and eighty days after the receipt of notice
from the Secretary or the Federal contrining such request, the Bank shall
repurchase, or cause to be repurchased (and in the case of accrued interest,
purchase, or cause to be purchased), in six equal instalments at the end
of each thirty-day period during the next succeeding one hundred and eighty
days, in United States dollars (utilizing, if necessary, the gold resources
of the Bank and Mexico), by payments at the Foderal Reserve Bank of Now Yorks
(i) Any or all of the 70305 nurchased by the Secretary
through the Federal at the same rate or rntes of exchange at
which such nesos were purchased; and
Regraded Unclassified
m I I
359
(ii) Any or all of the nosos representing interest
accrued on, and whether or not credited to, the special
neso account on the books of the Pank in the name of the
Federal at the average rate of exchange et which the Desos,
upon which such interest has accrued, were ourchased by the
Secretary through the Federal.
(b) Notwithstanding the foregoing, in the absence of such
E request by the Secretary or the Federal, DES08 in the amount of such
accrued interest shall be nurchased or caused to be purchased by the Bank
by payment in United States dollars at the Federal Reserve Bank of New
York on the last day of unch succossive throw-months' period from and
after the date hereof end upon the termination of this Agreement, at the
rate of exchange described in subdivision (c)(ii) of paragraph 3.
(c) The s forumentioned special DUDO recount, the Desos
crudited thereto (including interest), and all transactions respecting
such account, and the other obligations of the Bank and Mexico under
this Agreement shall, in so for 1.8 the rights, nowers and privileges
of the Secretary or the Federal may thoraby be affected, be exempt
and immune from any taxes, fees, charges, restrictions, and controls
of any nature under the laws of Mexico or any political subdivision
or taxing authority thereof.
4. The Bank may also at thy tim. by making payments at the
Federal Reserve Bank of New York in United States dollars at the rate of
exchange provided in paragraph 3, renurchase the nesos described in norm-
granh 3, with available funds from any source.
5, In the event of any failure to repurchase (or, in the
case of interest, purchase) the 00508 28 provided in 21 regranh 3 or of
any other not, done or onittod, not in recordence with the provisions of
this Agreement, the Bank shall, if and when the Secretary, acting directly
Regraded Unclassified
360
- 4 -
or through the Federal, 50 elects by giving notice to the Bank and/or
Mexico to such effect, become forthwith oblignted to reourchase or cause
to be reourchased, or in the case of interest, purchase or cause to be
nurchased, all of the pesos at a total purchase price in United States
dollars determined E.S. provided in naragraph 3 by payment at the Federal
Reserve Bank of New York and the dollars remaining in the "Banco de Mexico,
Special Account" shall be retrined by the Federal and inplind by the
Secretary or the Foderal as TL noyment on account of such nurchase price.
No failure or delay on the part of the Secretary in exercising any of his
rights, DOWERS, or privileges in whole or in part, under this Agreement
shall constitute to weiver thereof, or of any other rights, nowers or
privileges granted to the Secretary under this Agreement. It is under-
stood that the Federal Reserve Bank of New York will Act only E.5 fiscal
agent of the United States in carrying out this Agreement and in doing
and performing any acts or transactions in connection with this Agreement,
and that it will not incur any liability for my acts done or omitted
pursuant to instructions of the Secretary. The Federal is authorized to
accept and act upon any writing relating to the purchase of nusos under
this Agreement or to the "Banco de Hexico, Special Account" which is
received by the Federal in the name of the Bank and which is believed
by the Federal to be genuine, and upon (ny emblegram, radiogram or tele-
gram relating to the foregoing which is received by the Fedoral in the
name of the Bank and which conforms to existing or futuro prrangements
agreed upon betwoon the Bank and the Federal Reserve Bank of New York,
or to arrangements hereafter agreed unon between the Bank and the Federal
with regard to the authontication of cablegrams, rediograms or telegrams
by the use of test numbers, and all such writings, cablograms, mdio-
grams and telegrame shall be binding upon the Bank and Mexico,
Regraded Unclassified
361
- 5 -
6. Mexico heroby unconditionally guarantees the full per-
formance by the Bank of all the obligations, duties and liabilities
of the Bank under this Agreement and any arrangements made oursuant
thereto,
7. Any notice given by the Secretary or the Federal either
to the Bank or to Mexico shall be deemed and taken as full notice to
both of them, and such notice may be given by the Secretary or the
Federal to the Bank at its head office in Mexico, D. F., or to Mexico
at the office of the !inister of Finance of Mexico et Hexico, D. F., or
to the Mexican Embassy at Washington, D. C. The Bank and Mexico hereby
waive diligence, protest, notico and demand of every kind, excent as
expressly provided for in this Agreement.
8. Mexico, the Bank and the Secretary agree that at periodic
intervals of approximately six months from end after the date of this
Agreement (the precise dates to be agreed unon) there shall be held
a conference to be attended by the representatives of each of such
carties to discuss and consider the United States dollar-Mexican
peso rate of exchange, problems of mutual interest in connection there-
with and all other monetary, financial and oconomic problems of mutual
interest. The Bank und Mexico agree that, without providing the Secretary
with an opportunity for consultation, no substantial change in the United
States dollar-Noxicen peso rate of exchange will be made, and no important
exchange control measures will be introduced. At such consultation due
consideration will be given to till relevant factors, especially to commara-
tive price levols. The Bank and Mexico further agree that the dollars made
available under this Agreement will be used 28 c revolving fund for the
stabilization of the exchange value of the Mexican peso with rospect to the
United States dollar, and that due diligence will be exercised to prevent
the permanent exhaustion of the fund, In particular, the Bank and Mexico
Regraded Unclassified
362
- 6 -
agree to take all reasonable measures to provent unwarranted internal cur-
rency and credit expansion such as would cause an undue drain on the dollars
medo available hereunder.
9. Each of the parties to this Agreement shall take and
cause to be taken all the necessary measures to effectuate the purposes
and intent of this Agreement and to provide each other with such informa-
tion in their possession relative to foreign exchange transactions,
stabilization operations and other matters of mutuol interest as is
relevant to the proper functioning of this Agreement.
10. Any obligation of the Secretary pursuant to this Agree-
ment shall be conditional and dependent unon the prior performance by
the Bank and/or llexico of any obligations to be performed or liabil-
ities to be discharged by then, or either of them, under this Agreement
and any arrangements made pursuant thereto.
11. Any obligation of the Secretary to purchase pesos under
this Agreement shall terminate on June 30, 1943, subject to earlier
termination at any time thirty days after receipt by the Bank of a
written communication or telegram from the Secretary or the Federal to
that effect. The termination of any such obligation of the Secretary
shall not affect any of the rights, nowers or privileges of the Secretary
or of the Federal, or any of the duties, lisbilities or obligations
of the Bank or of Mexico hereunder, all of which shall continue in effect
until the Bank and Mexico shall have fully performed their said duties
and obligations and discharged said limbilities. If an oxtension of the
Agreement is agreed upon, the Agreement shall continue in full force and
effect during the period thus agreed upon. In the event that the Bank and
Mexico wish an extension of this Agreement, they will give the Secretary
Regraded Unclassified
363
- 7 -
notice to that effect in writing or by telegram at least thirty days
prior to the termination of the Agreement.
12. This Agreement shell come into onuration and effect as
between the parties hereto when Mexico shall filo with the State Denart-
ment of the United States appropriate documents satisfactorily ovidencing
the authority of the Bank and Mexico under the constitution, laws, statutes,
decrees and regulations of Mexico, and under the statutes, by-laws, regu-
lations, resolutions and rules of the Bank, to enter into this Agreement,
or satisfactorily evidencing ratification of the action of the Bank and
Mexico in entering into this Agreement. The Bank and Mexico each for
itaelf represents and agrees that upon the delivery of the aforementioned
documents, the execution and delivery of this Agreement shall have in all
respects been duly authorized or retified, and that all acts, conditions
and legal formalities which should have been completed order to this Agree-
mont becoming offective shall have been completed PS required by the
constitution, laws, statutes, decrees and regulations of Mexico, and under
the statutes, by-laws, regulations, resolutions and rules of the Bank, and
in conformity therewith.
IN WITNESS WHEREOF, the parties herete have executed this
Agreement in duplicate.
SECRETARY OF THE TREASURY OF THE UNITED STATES
BANCO DE MEXICO
By
GOVERNMENT OF THE REPUBLIC OF EXICO
By
Regraded Unclassified
STRICTLY CONFIDENTIAL
DRAFT "A" - 8/6/41
364
Banco de Mexico, S.A.,
Mexico City, Mexico.
Dear Sire:
Agreement to Purchase Silver
We refer to the conversations which the Secretary of the
Treasury of the United States has had with Mr. Antonio Espinosa de
los Monteros, representative of the Mexican Ambassador in Washington
during August relative 1941, to the purchase of Mexican silver by
the United States. We beg to advise you that we, as fiscal agent of
the United States, are new authorized by the Secretary of the Treasury
to enter into the following arrangement with your
We, as fiscal agent of the United States, will purchase
from you during the month of hounber , 1941, for delivery on board
American steamer at Vera Crus or for delivery on board train at
Monterrey, up to 6,000,000 ounces of silver newly mined in Mexico in
refined silver bars of the customary size, of the degrees of fineness
and carrying the marks required "for good delivery" in the New York
market, which according to the production dates marked thereon were
produced in Mexico during System or
, 1941
(hereinafter referred to as "silver"), as follows:
Regraded Unclassified
365
- 2 -
(a) We will advise you daily during november, 1941,
by telegram, the price at which W, M fiscal agent of the United States,
will purchase from you en that day such amount of silver as you may
elect, within the feregoing limitations, to sell to us on that day. Such
quotation will be in terms of United States cents per ounce of silver .999
fine delivered on board American steamer at Vera Crus or on board train
at Monterrey, which will be specified.
(b) If on any day during the month of november, 1941, you
elect to sell silver to us at the price specified in our telegram to you
of that day, you shall so advise us by telegram dispatched from Maxico
City net later than 4:00 p.m. your time of the same day, stating the
amount of silver which you have 80 elected to sell to us.
(e) The reseipt by us of any such telegramfrom you shall
conclude & contract between us for the sale by you and purchase by us,
M fiscal agent of the United States, of the amount of silver stated in
such telegram, at the price specified for the day such telegram is dis-
patched.
(a) You shall, at your expense, cause the silver covered
by each such contract to be shipped, consigned to us, to such United States
aint or assay office as W may designate so that it will be delivered
there within 30 days from the date of each such contract.
(e) You shall assume the risk of less of the silver during
transit, 1.0., you agree to hold us haraless from any less of or damage
Regraded Unclassified
-3- -
366
to the silver while it is in transit from the time it is delivered on board
American steamer or on board train, as hereinabove provided, until it reaches
its ultimate destination at a United States wint or assay office, as herein-
above in paragraph (a) provided, and from any costs and expense arising from
any such less or damage,
(f) Payment for the silver purchased by us as aforessid will be
made by a credit to your account on our books at the contract price for each
such purchase, such credit to be made upon the delivery of the silver to the
United States aint or assay office designated by us. A full set of "on beard*
bills of lading or the express company's receipt, showing Federal Reserve Bank
shall
of New York as sensignee and bar lists in duplicate, all in good order, to be
forwarded directly to Federal Reserve Bank of New York. Any reasonable or
necessary expenses incurred by us with respect to such silver will be debited
by us to your account on our books.
If you wish to consider renewing this or entering into a similar
arrangement for the month of December , 1941, and for month-to-month there-
after, will you kindly 80 advise us on or before the fifteenth day of november
1941, and on or before the fifteenth day of each succeeding month, and - will
advise you as soon as possible thereafter whether any such arrangement would
be acceptable.
If you will confirm to us, by letter or tested cable, that the fore-
going is acceptable to you, w shall place the arrungement in operation by
advising you en 7
1941, as contemplated by paragraph "(a)" above,
of the price at which m, as fiscal agent of the United States, will purchase
silver from you and we, as such fiscal agent, will thereafter purchase silver
from you in accordance with the terms and cenditions of this letter.
Regraded Unclassified
C
CONFIDENTIAL
0
P
PARAPHRASE
367
Y
A telegram of October 3. 1941 from the American Consul
at Kunming reads substantially as follows:
According to reports in the press, beginning October 1,
one-fourth of all the commercial trucks will be permitted to
bring in commercial cargo which 1s two months virtual ban
on commercial cargo. In & conversation on October 3 this
was confirmed by General Yu Fei-peng who said that the
measure was a temporary one and that the permanent plan was
to acquire a permit issued by the Ministry of Economic Affairs
for all imports of commercial goods. The Ministry of Economic
Affairs would certify permits to the transport control authori-
ties who then would allot freight space as such became
available for imports of this kind. General Yu Fei-peng
said also that in November or December the rate of arrivals
at Kunming would be increased to twenty thousand tons monthly
from the recent nine thousand tons. General Yu did not make
it clear how this was to be accomplished. General Yu
estimates about three thousand tons recently carried
monthly to Chungking along two (1).
Copy:hr:10-8-41.
Regraded Unclassified
C
368
0
P
Y
Service on Kunming's telegram of October 3. re:
Burma Road.
Insert in line three between "commercial cargo,
which 1s" and "two months" the following: If a relaxation
of".
Insert as last word of message "highways".
SEAKE
1001 OCL 12 EN + 2
RECEIVED
Copy:bj:10-13-41
362
D
0
?
Y
By Safe Hand
British Embress,
Washington, D.C.
ho. Y.T. 1049/104/41
October 3, 1941
Dent AT. Districh,
With reference to my letter V.T. 1049/103/41 of September 29th,
I earn sending you a translation of FL decree regarding the new Argentine
Exchange Regulations in case you have not seen it.
In the course of a. personal letter regarding these re pulations,
our representative in Buenos Aires said that he had received the impression
froz his conversation with the Central Bank on the subject that the Bank
WAS preparing the ground technically for more complete blocking mensures
if circumstances forced the Argentine Government's hand. If later on
the Central Bank should be instructed by the Argentine Government to block
the pesos corresponding to remittances to Axis countries, their machinery
would be et hand in these regulations to secure this end without publicly
pillorying these countries. The present policy of the Acting President
and Cabinet 10 to avoid offending the Axis in any way possible. Thus,
rhould the Argentine Government be forced to make a move, R. veiled UTDM
cedure would appeal to them.
Yours sincerely,
/a/ R. J. Stopford
Mr. Frank Districh,
U.S. Treasury Department,
Stabilization Office, Room 279,
Weshington, D. C.
Copyralm 10-41
Regraded Unclassified
0
C
TRANSLATION
F
1570
Buenos Airos,
Y
Sentember 1, 1941
In accordance with Decree No. 66230, all remittances to countries
-128 which Argentina has compensation or payments agreements (et present:
the British Empire, Qermany, Spain and France) must be effected through the
secounts established in the respective agreements and the movement of funds
or securities outside such accounts may only be effected with the stecial
authorization of the Central Bank.
In order to simplify the rocedure in regard to these latter oner-
atlons, the Centrel Bank hes decided to allow the authorised banks, subject
to the necessary prior examination, to authorize direct the sublications which
may be resented to them in accordance with the provisions of this circular,
in which, in order to avoid confusion, all the preceding regulations applicable
to such operations have been recapitulated.
Operations which may be authorized by the benks themselves:
(1) Transfers of funds through the compensation or payments accounts which
may continue to be effected 89 hitherto under the conditions established
for each country in accordance with the regulations in force.
(2) The receipt of funds (credits or deposits) in the accounts in Argentine
pesos opened in the authorized banks in the nenes of rersons resident in
the countries affected by the sbove-mentioned Decree, always provided
that such receipts relate to direct operations between Argentina end the
countries in which the respective account-holders reside.
(3) Payments of funds (debite or withdrawals) from the accounts referred to
in the previous paragrath when such funds are utilised for:
(a) Remittances effected through the compensation or payments accounts.
(b) Transfers to other accounts in Argentine Tesos opened in the puthor-
ized banks in the names of rersons resident in the sime country in
which the holder of the account from which the transfer is mode resties.
(v) The following expenses, payments or investments 1n the cointry:
Cable and postage expenses, taxes end bank charges end commission
Current expenditure prising from property situated in the country,
belonging to the account-holder, which is administered by the author-
ized bank issuing the permit.
Payments to shipping companies and arencies and scirs' carteing pro-
vided the funds Te required to neet the exyenses of ships in
Argentine ports.
Payments to insurance companies established in the country provided
such reyments relate to the rulfilment of re-insurance contracts.
The purchase of Argentive bonds and securities provided they are
deposited In the name of the 04710 sccount-holders.
Regraded Unclassified
371
-2-
(4) The authorised banks will inform the Central Bank fortnightly in regard
to the permits they have granted showing the amounts of, and reasons for,
the operations covered by paragraphs (2) and (3) above.
Operations in respect of which permits will be required from the
Central Bank
.
(1) All transactions in the accounts referred to in Argentine pesos which
are not expressly dealt with in the preceding paragraphs.
(2) Transfers of funds to the countries referred to which may not be effected
through the compensation or payments accounts nor through the accounts in
Argentine pesos above-referred to.
(3) Withdrawals from the accounts in bonds or securities and accounts in for-
eign currencies opened in the names of persons resident in the countries
above-specified.
(4) Remittances of all classes of bonds or securities to persons domiciled in
such countries.
Changes of address of holders of accounts subject to the provisions
of Decree No. 66230 may only be registered in the respective accounts with the
prior authorisation of the Central Bank.
Copy:bj:alm:hr:10-4-41.
Regraded Unclassified
PARAPHRASE OF TELEGRAM RECEIVED
372
FROM: AMEMBASSY, BOGOTA
TO : Secretary of State, Washington
DATED: October 3, 1941
NO. 1 453
STRICTLY CONFIDENTIAL
The local representative of the Case Company,
Jorge Lambert, claims Case had a special license to ship
to Helda and that there were still to come forward three
pieces of machinery. The case 1s 60 flegrant that it is
hard to believe that licenses would have been given. If
this information is not correct it is recommended that
consideration be given to prosecuting criminally the Case
Company for violating the Freezing Control Order and the
President's Proclemation of July 17. It is also suggested
that licenses be not granted for shipments which are
pending. On the United Fruit Company steamship Abangarez
a shipment of screws valued at $807 from Charles Parker
of New York WAB received by Helda on September 18.
BRADEN
eh:copy
10-6-41
Regraded Unclassified
COPY
373
KD
GRAY
Berlin
Dated October 3, 1941
Rec'd 10:09 a.m.
Secretary of State,
Washington.
3659, October 3, 9 a.m.
In a speech by Reich Economics Minister Funk in Dresden
on September 29 reported in the local press of last night and
this morning he asserted once more that Germany wished to carry
on trade with other nations but required that the entire European
economy be directed exclusively toward the realization of con-
tinental European interests. He stated that the institution of
private property and hence also private forms of enterprise,
private initiative, and the responsibility of business itself
must be recognized but also private risk. If there were no risk
personal ambition would be stifled. Funk stated that there had
been plans before the war for changes in the corporative organi-
zations of business but their realization had been postponed be-
cause of the war.
Funk spoke very strongly against the view that "money is
not important." All money set free by restrictions on consumption
must be used for war financing. The recent measures on the Bourse
were, he said, not aimed against genuine investments, but against
investments in stocks of which only a limited quantity is available
Regraded Unclassified
-2-
374
of temporarily idle funds of war profits not yet "skimed". This
he said leads to a false evaluation of an important part of the
national wealth, confuses the situation as regards yields, and
gives an entirely false picture of the profit possibilities of
the German economy. The Bourse must be kept in a condition in which
it can continue to function since it is very important to war
financing. The recent Bourse measures prove, he said, that no war
profits will be tolorated. He stated that interest rates could
not be decreased further without discouraging savings. Funk said
that demands on business would increase and new difficulties would
arise and be overcome. Germany, he stated, has only one goal and
that is victory which means a happy future for the German people
and a free mighty Greater German Reich.
Press comment on Funk's speech emphasizes particularly the
statements made against under-evaluation of the role of money and
the necessity of making all funds available for war financing. His
statement that war profits will not be tolerated is interpreted to
mean that still other means might be employed to prevent them
either through price or taxation policy.
MORRIS.
NPL
Cogy:bj:10-11-41
Regraded Unclassified
375
22443
C
0
P
Y
KD
GRAY
Rome
Dated October 3. 1941
Rec'd. 10:53 a.m.
Secretary of State,
Washington.
1546, October 3. 1 P. m.
By decree published in the Official Gazette
of October 2 the Minister of War is authorized to
assume obligations for services et cetera "depend-
ing on the state of war" up to an additional amount
of twenty-four billion lire the necessary appropriations
as needed to be inscribed in the budget.
Illustrative of the policy of spreading payments
for important war orders over a period of years the
present authorization is given within the general
provisions of a decree (number 27) of January 13, 1941
which empowers the Minister of War Marine and Aeronautics
to effect payments relating to contracts representing not less than
twenty million lire by issuing annual certificates in series
covering periods not exceeding 10 years.
Recipients requiring cash can finance themselves
within limits to be determined by the Finance Minister
by surrendering
Regraded Unclassified
376
-2- #1546, October 3. 1 p.m. from Rome.
by surrendering the certificates to the "Consortium
for Advances against Industrial Securities."
PHILLIPS.
EDA
VALIDE DANNE
a
LC Copy 10/8/41
Regraded Unclassified
C
0
377
P
Y
FROM:
AMERICAN EMBASSY, ROME
TO :
Secretary of State, Washington.
DATED:
October 3, 1941, 2 p.m.
NO. :
1547
CONFIDENTIAL -- NOT FOR PUBLICATION
Reference is made to my October 3, 1 p.m., no. 1546.
Since this decree was dated August 31, only two months
after the beginning of financial year, this may conceivably
be of report that Government is spending twelve billion lire
monthly as mentioned in my September 29, 11 a.m., no 1504.
PHILLIPS
Copy:bj:10-8-41
Regraded Unclassified
378
BRITISH EMBASSY,
WASHINGTON, D.C.
PERSONAL AND
October 3rd, 1941
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,
Habjax
the Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.
379
TELEGRAM RESEIVED FROM LONDON
LATED OCTORER 1st,1941
14 AL
Thr a motor torpedo boats supported
by motor on beers attacked energy convoy
steaming wastward through otra ts of Lover
night of September 30th-October let, and
ascorting trawler WAS probably sunk. We
suffered no 08814 ties.
RUSPIA.
Russians stubbornly resisting Jerman
thrist from Poltave towards Kharkov and in
elitogo area appear to have hela up German
advance.
ROYAL AIR FOR E.
September 30th-October 1st, over
160 airoraft sent against Hamburg Stettin
Cherbourg and Nantes. One aircraft missing.
Regraded Unclassified
TREASURY DEPARTMENT
380
INTER-OFFICE COMMUNICATION
Miss Cooducty
DATE October 3. 1941
TO
Secretary Morgenthau
STRICTLY CONFIDENTIAL
FROM
Mr. Districh
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
247,000
Purchased from commercial conerns
£ 9,000
Open market sterling was quoted at 4.03-1/2 most of the day, and advanced
to 4.03-3/4 at the close. The only reported transactions consisted of £5,000
purchased from a commercial concern.
The Cuban peso, which has shown a fire tendency for many weeks, improved
to 1/8% discount today, the best rate in several years. New York banks expressed
the opinion that the peso wes strong, and would continue to show strength, as a
result of the improved sugar situation and expanding sugar exports.
In New York, closing quotations for the foreign currencies listed below
were as follows:
Canadian dollar
11-1/8% discount
Argentine peso (free)
.2340
Brazilian milreis (free)
.0505
Colombian peso
-5775
Mexican peso
.2070
Uruguayan peso (free)
-4475
Venezuelan bolivar
.2700
There were no purchases or sales of gold effected by us with foreign
countries today.
No new gold engagements were reported.
In London, spot and forward silver prices remained at 23-1/2d and 23-7/16d.
respectively. The U. S. equivalents were 42.67 and 42.55$.
The Treasury's purchase price for foreign silver was unchanged at 35#.
Handy and Harman's settlement price for foreign oilver was also unchanged at 34-3/44.
Ye made no silver purchases today.
A
Regraded Unclassified
381
RESTRICTED
0-2/2657-220; No. 509 M.I.D., W.D. 11:00 A.V., October 3, 1941
SITUATION REPORT
I. Eastern Theater.
Ground: Russians claim the capture of Stryelna, west of
Leningrad; also making strong attacks southeast of Leningrad, push-
ing the Germans back to the Line Kolpino-Schluesselburg,
There is no further news from the Central Front,
The Germans are apparently feeling their way for-
ward north and south of Kharkov and east of Poltava, reporting the
capture of a town 78 miles south of Kharkov.
Russians are still holding the narrow bridgehead
west of Melitopol and holding the German advance on the Crimean Penin-
sula.
Russians report that Odessa has been reinforced
by a division by sea.
Air: Berlin saya that the German Air Force is playing havoe
with Soviet communications in the south, smashing at vital points far
to the rear of the main battle line.
II. Western Theater.
Air: Nazi war planes last night raided targets on the east
and southeast coasts of Britain, in answer to the recently strengthen-
ed British offensive in this theater. Newcastle was announced as the
chief target.
Action against Brest and St. Nazaire, on the occupied
French coast, featured the British action in last night's operations.
Each side claimed losses of six planes for the other during the day's
operations.
III. Middle Eastern Theater.
Ground: No action of interest reported.
Air: Italian planes attacked British air bases on Cyprus
for the second consecutive day. Other Axis raids were made on Tobruk
and Matruh, while the British again bombed Benghazi.
RESTRICTED
Regraded Unclassified