Volume 478, December 25 – December 27, 1941

DIARY Book 478 December 25 - 27, 1941 Regraded Unclassified - & - Book Page Airplanes Shipmente - Britien AIP Commission report - 13/26/41 478 102 Appointments and Resignations Swope, Gerard: HMJr asks Swope about assisting in Treasury on Procurement - 12/27/41 173 a) Memorandum on Division of Procurement prepared in preparation for conference with Swope: See Book 480, page 216 white, Harry D.: State-Treasury correspondence on responsibility for foreign relations - 12/26/41 96 Automobile Workers, United See United Automobile Workers a 1 I earth, Alan Mitorial Opinion on Foreign Affairs: The Axpanding Korizon (Churchill's visit) - 12/26/41 89 British Purchasing Mission Federal Reserve Bank of New York statement snowing dollar disbureements, week ending December 17, 1941 252 0 I I Canada Joint Defense Production Committee: Statement of policy for better integration of war production in United States and Canada - 12/27/41 212 Capital Funds Committee Historical resume' - 12/27/41 207 Frank-HMJr conversation - 12/29/41: Book 479, page 75 Conference; present: HMJr, Bell, Foley, HARS, and Morris - 12/29/41: book 479, page 78 Eicher memorandum to FDR and proposed answer: book 479, nage 91;and Book 480, page 93 China International Settlement occupied by Japanese: staff still has access to banks - 12/26/41 110 Yunnan-Surma Highway: vovember report of traffic - 1-7 12/26/41 Chrysler Corporation See United Automobile Workers Churchill, Winston HWr's impression of - 12/26/41 5 Correspondence Mrs. Forbush's resume' - 12/26/41 79 Cube See LAtin America Regraded Unclassified - D - Book Page Defense Savings Bonds See Financing, Government Defense Transportation, Office of Treasury liaison representative: Hayghe, Chief of Traffic Division, Procurement - 12/27/41 478 218 Dodge Automobile Company See United Automobile Workers - E - Exchange Market Resumes - 12/26-27/41 148,332 - 7 - Financing, Government Defense Savings Bonds: Toscanini, Arturo: Additional broadcasts offered - . 12/26/41 37 Field Organization News Letter, No. 32 - 12/27/41 242 Payroll Allotment Plan: All states urged to push - 12/27/41 246 a) Conference on December 29, 1941: See Book 479, page 105 Federal Reserve Banks urged to appoint as many issuing agents as possible - 12/27/41 248 Comparative statement of sales during first 22 business days, October, November, and December, 1941 250 Foreign Funds Control Automatic freezing of assets in any territory overrun by Axis - Executive Order to cover - 12/26/41 115 - J - Japan Ship losses, December 7-26, 1941 114 - L - Latin America Cuba: Freezing Control Measures: Report from American Embassy, Havana - 12/26/41 122 Lend-Lease Report for week ending December 27, 1941 240 . Progress report - 12/26/41 41-A Regraded Unclassified - M - - Book Page Martinique Office of Coordinator of Information report summarized by Kamarck - 12/27/41 478 288 Military Reports Reports from London transmitted by Campbell - 12/26-27/41 149,156,333 War Department bulletin: Employment of German antitank regiment on non-tank missions - 12/26/41 161,165 Martinique: Office of Coordinator of Information report summarized by Kamarck - 12/27/41 288 - P - Philippine Islands Manila Clearing House asks that FDR take immediate action to protect bank reserves: Discussion at 9:30 meeting - 12/26/41 11 a) Conference of Treasury and Interior representatives - 12/26/41 51 Procurement Division See Appointments and Resignations - S - Spain Secret instructions as issued to merchant ships - 12/27/41 313 Swope, Gerard See Appointments and Resignations - T - - Toscanini, Arturo See Financing, Government: Defense Savings Bonds Trucks See United Automobile Workers - U - United Automobile Workers Dodge representatives confer with HMJr on closing of plants - 12/27/41 177 a) Stettinius-HMJr conversation 179,183 b) Conference with Stettinius, Young, Cox, and Rowe 185 c) Knudsen-HMJr conversation 187,202,204 d) Keller-HMJr conversation 193 e) McCloy-HMJr conversation on non-military phase - - 12/27/41 206 Regraded Unclassified - U - (Continued) United Automobile Workers (Continued) Dodge representatives confer with HMJr on closing of plants (Continued): f) HMJr confers in Patterson's office with representative of Quartermaster General Corps - 12/28/41: See Book 479, page 1 g) Conference: present: HMJr, Mack, White, Keller, Hutchinson, Vanderzee, Purdy, Rubin, Stephenson, Aurand, Dow, Lawes, Stettinius, Young, and Swetz - 12/29/41: Book 479, page 5 1) Industrial Mobilization Plan - Revision of 1939: Book 479, page 43 2) Chrysler price quotation and production schedule, Dodge standard 1-. 3/4-, and 1-ton trucks: Book 479, page 44 3) Patterson corrects certain "misstatements of Kelleher": Book 479, page 53 4) Murray-HMJr conversation: Book 479, page 139 5) Keller (Chrysler) gets 73,000 truck order: Book 480, page 63 h) UAW-CIO conversion and reemployment program: Book 480, page 44 1) Conference with Murray, Reuther, Pressman, and White - 12/30/41: Book 480, page 42 1) Resume' of orders for 380,000 trucks by Under Secretary of War Patterson - 1/2/42: Book 481, page 288 J) Stories of orders as appearing in Detroit News and Times - 1/3/42: Book 481, page 394 k) Tolan Committee recommendations - 1/6/42: Book 483, page 292 1) Patterson (Under Secretary of War) report on contracts - 1/12/42: Book 485, page 304 - W - White, Harry D. See Appointments and Resignations 1 Washington, D.C., December 25th, 1941. Dear Mr. Morgenthau, Thank you so much for the beautiful album of records which you have sent me. I cannot imagine how you know my taste in these things. But in fact the records are just what I seek for in life. And here I find it, reaching me from you. May I thank you once more then, and offer you my confident hope and expectation that we may rejoice together in B. new year marked by arduous lebours and crowned by splendid victory. Yours sincerely, Benumm Mr. Henry Morgenthau, 2434 Belmont hoad, Washington, D.C. ] 1 Regraded Unclassified 2 RESTRICTED G-2/2657-220; No. 580 M.I.D.,W.D. 11:00 A.V., December 26, 1941, SITUATION REPORT In Pacific Theater, Philippines: Enemy forces have probably inaded near Batangas, 60 miles south of Manila, The general situation 18 apparently the same, with heavy fighting continuing in all sectors, particularly in the north- west part of Luson, The press reports widespread air raide yesterday. Hawaii: There has been no new enemy activity. Hong Kong: According to the press, Japanese Imperial Headquarters at Tokyo announced today that the British Hong Kong garrison had surrendered and that hostilities coased st 19:30 Boseto Malaya: British defense line along Perak River is now in contact with the enemy. The situation in the east ie obsoure. Walco Island: The Navy announced that Wake probably has fallen, West Coast: Continued hostile submarine activity le reported. II. Eastern Theater- Ground: There is an increase in German resistance to con- tinuing Russian attacks. No importent changes in front. Air: Fighters and bombers operating in central and northern sectors raided troop concentrations, and numerous Russian transport columns cost of Tikhvin were heavily damaged., On the other hand, Russian press announces a. lull in aerial activities due to weather conditions and heavy German aircraft losses, I11, Western Theater. No further reports have been received. IV. Middle East Theater, Ground: British Imperial Forces have captured Bengasi. There is an unconfirmed report that Indian troops have taken Barce. British are nontinuing their attacks on Bardia and other frontier garrisons which are still in Axis hands, Air: British aircraft are operating against the retreating Axis forces in western Cyronaica. COMMO High Command states that German nombers raided Malta yesterday seeking Gorman hite on harbor facilities at Veletta. German air units also attacked British armored corpa in Cyrenaice end British airoraft on the ground. RESTRICTED Regraded Unclassified 3 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Friday, December 26, 1941. The Secretary of the Treasury, by this public notice, invites tenders for $150,000,000, or theresbouts, of 76-day Treasury bills, to be issued on a discount basis under competitive bidding. The bills of this series will be dated December 31, 1841, and will mature March 17, 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 value). Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o'clock P. m., Eastern Standard time, Monday, December 29, 1941. Tenders will not be received at the Treasury Department, Washington. Each tender must be for an even multiple of $1,000, and the price offered must be expressed on the basis of 100, with not more than three decimals, e. B., 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 Federal Reserve Banks or Branches on application therefor. Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. 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 reserves the right to accept 29-26 Regraded Unclassified - 2 - 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 December 31, 1941, provided, however, any qualified depositary will be permitted to make payment by credit for Treasury bills allotted to it for itself and its customers up to any amount for which it shall be qualified in excess of existing deposits when 80 notified by the Federal Reserve Bank of its District. 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 or hereafter 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 amended by Section 115 of the Revenue Act of 1941, the amount of discount at which bills issued hereunder are sold shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are excluded from consideration as capital assets. Accordingly, the owner of Treasury bills (other than life insurance companies) issued hereunder need include in his income tax return only the difference between the price paid for such bills, whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable year for which the return is made, as ordinary gain or loss. Treasury Department Circular No. 418, as amended, and this notice, prescribe the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular may be obtained from any Federal Reserve Bank or Branch. - 800 - 5 December 26, 1941 9:30 a.m. GROUP MEETING Present: Mr. Gaston Mr. Thompson Mr. Blough Mr. Schwarz Mr. Graves Mr. Kuhn Mr. Morris Mr. Haas Mr. White Mr. Bell Mr. Cairns Mr. Paul Mrs. Klotz H.M.JR: Who else gets these reports on the production and delivery of bonds? MR. BELL: I get them. (Mr. Paul entered the conference.) H.M.JR: Sit down, Randolph. Since I have seen this article in Time I am scared of you. I didn't know you were that good. MR. PAUL: That was what frightened me, what they might have said. H.M.JR: I hope everybody had 8 nice day yesterday. I had the pleasure of sitting opposite Mr. Churchill last night and watching him for two hours. Ferdie, I suppose you know, he has & distinct impediment, hasn't he? MR. KUHN: A lisp. H.M.JR: Yes, a distinct impediment, and I have never seen a man - he is almost 8. Sir Frederick Phillips. I mean, he would say practically nothing because he just wasn't Regraded Unclassified 6 - 2 - having a good time. MR. KUHN: No, when he is not having a good time he is disagreeable. When he has got an audience and feels that he can scintillate a little bit he is wonderful. H.M.JR: Well, he wasn't wonderful. He couldn't have been -- MR. KUHN: Were there a lot of people there? H.E.JR: Yes. MR. KUHN: That is probably it. H.M.JR: Another Toscannini. MRS. KLOTZ: Stokowski. H.M.JR: Genevieve Herrick, who sat next to me, said she had never seen a man who has been through what he has been through - he shows none of it in his face. You see him on one side of Mrs. Roosevelt and Beaverbrook on the other, and Beaverbrook's face is a map of his life, but on Churchill's face there is absolutely no -- MR. KUHN: It is very flabby, isn't it? H.M.JR: No, he looked in good condition. He wasn't flabby. Literally in the pink of health. He looked pink. MR. BELL: He has a rather boyish face. H.M.JR: Yes, but no flabbiness on the face. MR. WHITE: That is what liquor does to & man. lie drinks a lot. MR. PAUL: Does he talk like he sounds on the radio? H.M.JR: I haven't heard him. What do you mean? MR. PAUL: Is there that same rather husky quality in Regraded Unclassified 6 - 2 - having a good time. MR. KUHN: No, when he is not having a good time he is disagreeable. When he has got an audience and feels that he can scintillate a little bit he is wonderful. H.M.JR: Well, he wasn't wonderful. He couldn't have been -- MR. KUHN: Were there & lot of people there? H.M.JR: Yes. MR. KUHN: That is probably it. H.M.JR: Another Toscannini. MRS. klotz: Stokowski. H.M.JR: Genevieve Herrick, who sat next to me, said she had never seen a man who has been through what he has been through - he shows none of it in his face. You see him on one side of Mrs. Roosevelt and Beaverbrook on the other, and Beaverbrook's face is a map of his life, but on Churchill's face there is absolutely no -- MR. KUHN: It is very flabby, isn't it? H.M.JR: No, he looked in good condition. He wesn't flabby. Literally in the pink of health. He looked pink. MR. BELL: He has a rather boyish face. H.M.JR: Yes, but no flabbiness on the face. MR. WHITE: That is what liquor does to a man. lie drinks a lot. MR. PAUL: Does he talk like he sounds on the radio? H.M.JR: I haven't heard him. What do you mean? MR. PAUL: Is there that same rather husky quality in Regraded Unclassified ? - 3 his voice that he has on the radio? H.M.JR: No, but I was amazed to hear it - no, it was rather soft, but there was a distinct lisp. I didn't know he had it. MRS. KLOTZ: Does he drink a lot? MR. KUHN: Always. MR. WHITE: Oh yes, he is a heavy drinker, but it will get him in the end if he lives long enough. MR. KUHN: Brandy, isn't it, Harry? (Laughter) MR. HAAS: That is normal English drinking. MR. WHITE: I don't know what he drinks, but it is not Coca Cola. H.M.JR: Is it brandy? MR. KUHN: I think it is brandy. H.M.JR: Well, he didn't drink too much last night. It was very funny. lie asked three times to be excused after dinner so, he says, "I can prepare those impromptu remarks for tomorrow." It was interesting. MR. KUHN: lie sometimes prepares them in front of a mirror, too. H.N.JR: With a lisp he might very well do that. There seemed to be great regret - General Dill has always insisted that everybody who reaches sixty must retire. He reached sixty yesterday and he imposed the same rule on himself. The other thing that surprised me, both the remarks that Dill and Churchill made, they seemed very sensitive about the fact that they haven't had any military successes. I sat next to Churchill. After supper I sat next to him all through the movie, SO I had - and his remarks - for instance, when they showed pictures of Libya, he said, "Oh, thatis Regraded Unclassified 8 4 - good. We have got to show the people that we can win." And Dill is very sensitive about Greece and Crete, that it was a mistake; he didn't think they should have gone in, but they did hold up the Germans and gave the Russians more chance. Beaverbrook, on the other hand, is very cocky. It was embarrassing, what he said to me at the house. He came to see us. Well, I am just quoting him. He said that the President and I were the only friends they had right along. Now when they have plenty of friends they didn't need them. The other thing that Beaverbrook and Churchill said, evidently they repeated the remark I was supposed to have made here, because both of them said, "The one thing that we will never forget, when we didn't have a penny to our name you said, 'the English have got lots of money.' That is a by-word in England. The fact that you said, 'Oh, don't worry about the English; they have got lots of money. And both Beaverbrook and Churchill said both the same thing. They said that is a by-word. Beaverbrook had a funny experience. He went to our old house, although the people out here gave him a new address. He said, "I came to the door and this man opened the door and he seemed to know ne and he greeted me by name and said, 'Won't you come in and sit down?'" And then he said a woman came in and talked, and after fifteen minutes she finally had to catch her breath. "I said, 'well, where is Mr. Morgenthau?' She said, 'Oh, Mr. Morgenthau doesn't live here. (Laughter) And it was Macneil of Barra, and he just was chuckling. Last night he said the same thing. He said, "That is one of the funniest experiences I have had. That woman sure could talk." But imagine bringing a man in and asking him to sit down in your house. MRS. KLOTZ: She would. H.M.JR: He said, "Sometime I will tell you what she said. But Beaverbrook, with tears in his eyes when he came in and when he left, thanked me for what I had done, in no Regraded Unclassified 9 - 5 - uncertain terms. Does he get emotional like that? MR. KUHN: I don't know. H.M.JR: Well, he had tears in his eyes. He really was quite emotional about it. I thought you people might like to know. It is quite interesting. MR. THOMPSON: I have a few personnel cases I would like to go over with you. H.M.JR: I have no appointments. I was going up on the Hill with Harry White this morning, but I got word we are not due up there until 11:30. MR. THOMPSON: All right. H.M.JR: You can stay afterward. Mr. Bell? Bell, did Harry Byrd announce the thing? MR. BELL: No, he didn't. I called him down at his place in Virginia. H.M.JR: Did you speak to him? MR. BELL: I spoke to him about it. He said, "I am sorry, it is out." He put it out before he left. We didn't get it until long after it had been given to the press. H.M.JR: Is it out? MR. BELL: No, the report is out. They put it in the paper this morning. But that part you wanted out isn't out. He said, "I am very sorry and I will do everything to correct it." He said to tell you not to worry, that he would see that something was done on that end. There were two things in there. Another was that they lauded you, and the committee was very grateful for all you had done, and you have to sign the report. I think that is very good. H.M.JR: Is that in? Regraded Unclassified 10 - 6 - MR. BELL: That is in, yes. H.M.JR: Good. I thought you were going to tell me you struck it out. MR. BELL: I was going to strike it out. I didn't think you wanted to put your signature to it, but it is out and I don't think there is anything you can do about it. H.M.JR: If anybody calls any of you up and begins to criticize me on the NYA and CCC, tell them to read my original report and send a copy to them, because there is no difference - what the committee did on NYA and CCC and all those was an original report. As to Agriculture, if anybody asks you, the reason I didn't sign it was that I wouldn't go along with the recommendations. They cut everything that was socially any good and they kept everything that had anything to do with keeping prices up. Isn't that about right? That is the way they divided it up. I feel it is up to the Secretary of Agriculture to decide where he can cut. As to the WPA thing, I don't have to apologize for that. MR. WHITE: They mentioned the Farm Security which, in your speech, is definitely excluded. H.M.JR: Well, what I did, Harry, I said the Secretary of Agriculture should find ways to cut five hundred million out of the billion two. As to those agencies which get their money through borrowing, and that includes Farm Security, doesn't it, Dan-- MR. BELL: Yes. H.M.JR: I said the committee should make further studies. Is that right? MR. BELL: Yes, and your letter will be quoted in full in the report. H.M.JR: It is in the Tribune. - 7 - 11 MR. KUHN: The Tribune has it in full, and also Harold Smith's letter. H.M.JR: I don't think there is anything I have to apologize for. I gather from a little inside dope that some of the NYA people, Aubrey Williams, knew what was coming, and already is on Mrs. Roosevelt's trail. I sent Mrs. Roosevelt a copy of my original report and she read it and acknowledged it, so there is nothing different. If I had. not been up there the entire WPA thing would have been thrown out. Dan? And I recommend everybody read Mr. Friendly's article today on the first page of the Washington Post on the Ministry of Supply. It leaves nothing unsaid. MR. THOMPSON: It is good. MR. BELL: On October 30th the President sent you Harold Smith's memorandum of October 29th entitled, "The Urgency of Anti-Inflationary Measures at this Time." You turned it over to Harry and there was a question as to whether we should answer it. I think it was intended at that time to sort of jar loose from the Treasury the Social Security report. H.M.JR: Yes. What was the date of the President's? MR. BELL: October 30th. H.M.JR: I would forget about it. MR. BELL: That is what I wanted to suggest. I think subsequent events makes it unnecessary to answer that. H.M.JR: I would forget about it. MR. BELL: Here is & cable that just came in. I don't know what it means. I don't know whether Harry knows anything about it. H.M.JR: "Manila clearing house takes it of utmost importance that the President take immediate action in protecting bank reserves." 12 - 8 - MR. WHITE: We haven't had any word, to my knowledge, about that. Is this in answer to your cable you sent Thursday night? MR. BELL: I think this is separate. MR. WHITE: They wouldn't call that bank reserves, Bo it must be separate. We will have to look it up. H.M.JR: Could -- MR. BELL: I take it they may be having some runs on the banks down there. H.M.JR: How about having . if they could get - - how about having - so we do something - let Preston Delano try to get through on the telephone. Don't you think so? MR. BELL: To his bank examiners there? MR. WHITE: We also work there through the Interior Department because they are in charge. H.M.JR: Don't you think to get quick action the thing to do would be to turn this thing over to Preston Delano? MR. BELL: Preston might be able to get through to the bank examiner on foreign funds and he could look into it and see what it is. I have an idea that they want some money to protect themselves against runs. They have no way of getting the securities over here. H.M.JR: May I suggest that immediately this is over you and Harry send for Preston Delano. MR. BELL: Yes, and it might be connected up with the balances we have here and that gold reserve. MR. WHITE: Might be. H.M.JR: Well, I would like to know about it. MR. BELL: All right. It isn't clear. Regraded Unclassified 13 - 9 - H.M.JR: Will you do it just as soon as you leve? MR. BELL: Yes, sir. H.M.JR: Anything else? MR. BELL: That is all. H.M.JR: Harry? MR. WHITE: Arrangements were completed night before last - Dan Bell signed a rather lengthy telegram - giving instructions to the Philippine authorities under which conditions to destroy the currency. That is, they were to destroy it at once but indicating what witnesses, et cetera, would be present. You may want & few minutes before that meeting-- H.M.JR: Do you think I ought to go to that meet- ing? MR. WHITE: Well, they called it very important, but as I look over what they say they are going-- H.M.JR: I have got to go on the Hill anyway. MR. WHITE: You are going to be there an hour later: so I think you might be there. H.M.JR: Want to go up with me? You are my alter- nate, aren't you? MR. WHITE: It isn't necessary, and I don't know what the procedure is. It isn't necessary. H.M.JR: Where is the meeting? MR. WHITE: It has been in the Vice President's office hitherto. I presume it is in the same place. Yes, in his office in the Capitol Building. H.M.JR: Anything else, Harry? 14 - 10 - MR. WHITE: That is all. H.M.JR: Chick? MR. SCHWARZ: I have nothing. H.M.JR: George? George, how are you coming along now with your statistics on payroll deduction? MR. HAAS: We have got all the preliminary work done and set together. We plan to get the reports from those companies which the state administrators had reported to us, but how good the report is depends upon how rapidly they report. Harold would know how fast they will come in. That is the key to the whole thing. MR. GRAVES: I think within a couple of weeks we will have a pretty substantial list of companies that we can begin on and that list will grow every day by the addition of new companies reporting. H.M.JR: Well, Harold, what I would like to have from you, if you could tell somebody, I would like to have it tonight, I would like to have a special report on Defense Savings Bonds, on what they are doing on pay- roll deduction in Washington and in the field, see. How many people - I mean, I would like & fairly detailed report. MR. GRAVES: You mean on what steps are being taken, that is what you mean, not just-- H.M.JR: I am not interested - I mean, what are you doing on payroll deduction? MR. GRAVES: Yes, sir. H.M.JR: Who is in charge, who do you look to in Washington-- 15 - 11 - MR. GRAVES: You are asking me now that question? H.M.JR: No, in the report. In other words, I want to be brought up to date. I take it you have & section on that. MR. GRAVES: Yes, we do. H.M.JR: Who handles the companies and who handles labor? MR. GRAVES: Yes, I will have it. H.M.JR: Roy? MR. BLOUGH: Nothing this morning. H.M.JR: Ferdie? MR. KUHN: Mr. Secretary, beginning next week Archibald MacLeish will be sending out the Allan Barth reports with his card instead of yours if that is all right with you and this week I would like to put 8. little noteto all the people that you have been sending it to that it will come out beginning with the new year from Archibald MacLeish, but they will be the same in every other respect, to the same list and all. H.M.JR: Who will pay Barth? MR. KUHN: Barth is in process of being transferred to their payroll, but they can't get that fixed immediately. H.M.JR: Has he decided to go over there? MR. KUHN: Yes. H.M.JR: Because he hasn't sent that word to me. MR. KUHN: Oh, I see. H.M.JR: He was to let me know before the first of January. 16 - 12 - MR. KUHN: I will see that he does that. H.M.JR: All right. MR. KUHN: But-- H.M.JR: That is all right. MR. KUHN: Will that arrangement be all right with you, a little note to be attached to these reports over my signature or yours, whichever you-- H.M.JR: Yours. MR. KUHN: All right. H.M.JR: Now, I sent you a letter from Walter Toscanini to me which I don't think has been answered. MR. KUHN: Tarleau was investigating that, trying to find out what it was all about. H.M.JR: No, no, where he was talking about ad- ditional concerts. MR. KUHN: No, that I haven't seen. H.M.JR: Oh, yes. MR. KUHN: At the end of it was something about-- H.M.JR: His father would like to give us open dates. MR. KUHN: Oh, I didn't know that. H.M.JR: It came to me, from Walter Toscanini. MRS. KLOTZ: Last week? H.M.JR: Oh, it is at least a week. MR. KUHN: There was one letter about a week ago Regraded Unclassified 17 - 13 - from Walter Toscanini which ended with a lot of business about the Banco di Napoli. H.M.JR: In that thing, though, in that same letter, he says, "My father has the following open dates that he would like to play for you." MR. KUHN: I will look it up. H.M.JR: That is the letter, and he said here on such-and-such a date. And it hasn't been - it ought to be answered. MR. KUHN: I didn't remember that part of the letter. H.M.JR: Well, that is the important part. I asked that the answer be prepared for my signature. MR. KUHN: I will do it this morning. H.M.JR: Harold? I read this joint memorandum that you people wrote on the two and a half percent interest rate, but I only read it after last night. I thought you might like to know that. So that maybe explains why I wasn't - it took SO long to convince me, because I only read your memorandum last night. It was a very good memorandum. Did you have anything, Dave? MR. MORRIS: No, sir. H.M.JR: Herbert? MR. GASTON: I suppose you get a clearance on that organization of unions, the Union for Democratic Action, that meeting, that you have no objection to my making that speech. H.M.JR: No. MR. GASTON: I assume that I will get a clearance Regraded Unclassified 18 - 14 - because it is a delegate meeting of labor unions. H.M.JR: Sure. MR. GRAVES: Are you going to talk about bonds, Herbert? MR. GASTON: They asked for a talk about - I thought I would talk about inflation and production and democratic action and so on. H.M.JR: Randolph? Excuse me, are you through, Herbert? MR. GASTON: Yes, I am through. MR. PAUL: Well, I am getting back to the tax pro- gram now. Dick Gilbert is coming over this morning to present OPA views and so on, and I am seeing him this morning. H.M.JR: Is he - what is his background? MR. WHITE: I can tell you. MR. PAUL: Pardon me, Harry probably can tell you. MR. WHITE: I know him quite well. We were together in his early years at Harvard. He was there for about twelve years, I think, and he - then he worked for me one summer. He went back to Harvard and then came here, I think, with the Department of Commerce for a very brief stay, and then went to Leon Henderson. He is & very competent fellow. MR. PAUL: Was that Harvard or Harvard Business School. MR. WHITE: Harvard, and then he also taught, I think, at Fletcher School, which is attached to Harvard. He is B. good economist. Regraded Unclassified 19 - 15 - H.M.JR: I thought you were going to do some ground work, spade work, with the Bureau of the Budget. MR. PAUL: Well, I had a long conference with them day-before-yesterday, and I am a little bit uncertain as to whether I should contact them until after you have seen Mr. Smith. H.M.JR: You mean Wednesday? MR. BLOUGH: Tuesday. MR. PAUL: Tuesday, yes. Tuesday afternoon I had 8. long conference with three men sent over by Smith, Colm - Jones was the head of the delegation, and Colm and Loeffler. I told them in that conference - I didn't show them anything, but I went right through their budget message and told more or less what we thought about this and that item. MR. BELL: But you did not go over the draft? MR. PAUL: I didn't show them our draft, "of course. I went over their draft. I carefully put away our draft in the desk drawer before they came in the room. H.M.JR: What do you think we ought to do, Dan? MR. BELL: I don't think we need to do anything until we hear from the Budget. MR. PAUL: I have a feeling that you first should have a conference with Mr. Smith before I do anything. H.M.JR: Well, I am just raising it. MR. PAUL: Unless they call me up. Then I suppose I can't refuse to see them. MR. BELL: I would question that unless Smith calls up the Secretary for a conference, because I don't believe he will go over this draft in detail. He will Regraded Unclassified 20 - 16 - turn it over to the people who have seen you. MR. PAUL: They told me they are the three men who worked on it. MR. BELL: They will want a conference with you, and I should think I would let it go on that basis if that is what they ask for. H.M.JR: You would wait until we hear from them? MR. BELL: Yes. I think they will ask for a con- ference with Randolph. MR. PAUL: If they asked for one, I should cer- tainly have one. MR. BELL: Sure. H.M.JR: And pending that, you are going to begin to develop 8. tax program? MR. PAUL: Yes, but I have to hear the ideas of OPA this morning. H.M.JR: All right. MR. PAUL: That was Gilbert's suggestion. He said Leon wanted it done. H.M.JR: Mrs. Klotz, there is somewhere around a letter from the Vice President in which he sent me a copy of a memorandum from Ezekiel. MR. WHITE: I have it, and am drafting an answer to it. H.M.JR: I asked you to answer it for me, and you didn't prepare any answer. MR. WHITE: I think you gave it to me the day before Christmas, and I think the answer is ready. Regraded Unclassified - 17 - 21 H.M.JR: A while before. I think we will have to prepare our own answers now. MR. WHITE: I will look up the date. I may be wrong. H.M.JR: Anyway, I am going up - Mrs. Klots, I want to thank him for that and say in confidence, in strictest confidence, I am enclosing herewith a copy of e draft for the budget message which I have sent the President. MR. WHITE: He has already received one through Milo Perkins. H.M.JR: How could he when we called them all in? MR. BELL: Not the latest one, Harry. MR. WHITE: There are some slight changes but the night before the final draft-- H.M.JR: Beanwas here representing him. MR. WHITE: You remember we were going to get in touch with Milo Perkins? H.M.JR: Yes. MR. WHITE: And sent him a draft that very morning. That was the day before Christmas morning, and I asked Milo Perkins to get in touch with the Vice President because I knew the Vice President would be interested in it and that you wanted the Vice President to see it. H.M.JR: So that went up? MR. WHITE: So far as I know. He said he would take it up at the first moment he saw him. H.M.JR: Is there any other draft went out except that? Regraded Unclassified 22 - 18 - MR. WHITE: That is the only one I sent. H.M.JR: Anybody else sent one out? MR. PAUL: I think he ought to get the latest draft until we change it. H.M.JR: When you go back to your office, send in the Vice President's letter to Mrs. Klotz. MR. WHITE: Yes, there is a draft, I am sure, an answer all right. H.M.JR: Well, whatever you have got, send it in. MR. WHITE: With the date when I received it. H.M.JR: We will have to get better service on that. This is not on you, it is Chauncey. MRS. KLOTZ: I don't know who it is on, but there is something wrong with the system. MR. BELL: The budget message has kind of clogged up things in the last six days. H.M.JR: O.K. 23 THE UNDER SECRETARY or THE TREASURY WASHINGTON December 26, 1941 MEMORANDUM FOR THE FILES Mr. Heffelfinger brought the attached report to my attention on Wednesday, December 24, about noon, pointing out that the last paragraph under Item No. La on page 6, regarding sublicity activities, was still in this draft report in spite of the fact that Senator Byrd had promised the Secretary in B. grevious telephone conversation, which was recorded, that be would eliminate this paragraph from the report. Mr. Heffelfinger also called attention to the paragraph on page 9 in which the Committee expresses its appreciation for the cooperation received from the Secretary of the Treasury. I told Mr. Heffelfinger to get in touch with Senator Byrd's office immediately, asking them to eliminate the publicity DRRA- graph in accordance with Senator Fyrd's promise, and that I thought the other paragraph concerning the Secretary might well come out in view of the fact that the Secretary WBB signing the report, tr. Heffelfinger was unable to get anybody on Senator Byrd's telephone. He reported this to me, immediately after which I got in touch with the Information operator at the Capital and was advised that I could probably get Senator Byrd at Berryville. In calling his home at Berryville early in the afternoon we found that he was out hunting and would not be back until six o'clock. I left a message for him to call me an soon Be he returned. The Senator called me about 6:30 end when I asked him about his promise to eliminate that paragraph, he said he had rotten from Heywood Bell the information that the Treasury did not feel very strongly about this paragraph. (In talking to Mr. Heffelfinger again about the matter, he said he told Heywood Bell that that paragraph need not be discussed by them in going over the report as the Senator had definitely promised that it would be eliminated.) Anyway, the Senator said the report had been released to the press end there was nothing we could do about it at that late hour. He asked me to say to the Secretary that he regretted this very much 95 the Secretary had cooperated 90 completely with him and he would not want to do anything the Secretary did not want done: that it would require legislation to eliminate the bureaus and if such legislation 1s proposed he would FORDEFENSE do everything in his power to sée that the Secretary's position BUY Driver withing Regraded Unclassified 24 - 2 - is made clear; and that further he would do everything to see that the Treasury's publicity activities connected with the Savings Bond program would not be molested. I reported this to the Secretary this morning at his nine-thirty staff meeting. DWB Regraded Unclassified December 24, 1941. 25 teport to: The President of the United States; The Vice President of the United States, President of the Senate; The Speaker of the House of Representatives. In accordance with Title 6 of the Revenue Act of 1941, Public Law No. 250, 77th Congress, a preliminary report herewith is presented by the Joint Committee on Reduction of Non-Easential Federal Expenditures. LEGISLATIVE AUTHORITY This Committee was established pursuant to Title 6 of the Revenue Act of 1941, approved September 20, 1941, which directed it to "make & full and complete study and investigation of all expenditures of the Federal Government, with a view to recommending the elimination or reduction of all such expenditures deemed by the Committee to be non-essential, and to report to the President and to the Congress the results of its study, together with its recommendations, at the earliest practicable date." PROCEDURE The Committee has had the benefit of the testimony of the Secretary of the Treasury, & member of the Committee, the Secretary of Agriculture, and various other officials of the Covernment regarding the possibility of specific savings in existing departments and agencies. It has had before it for study the report of the Director of the Bureau of the Budget, also 8 member of the Committee, submitted in response to the request of August 28, 1941, from the Senate Finance Committee, as well as other data submitted directly to this Committee by the Budget Bureau. The Committee has received also suggestions of economies from civic agencies, taxpayers' clubs, and private citizens. It has collected, in addition, evidence from its own sources and it has devoted con- siderable time to a survey of the problems. This report is made on the basis of all the information thus collected. INITIAL REPORT Directed to report to the President and to the Congress "at the earliost possible date," the Committee considers it highly desirable to present now a preliminary report. The Committee emphasizes that this report is only its first, and that other departments, agencies, funds, programs, and itoms will be examined by the Committee and treated in subsequent reports. Regraded Unclassified 26 - 2 - This 1e only a partial report. While the Committee has worked diligently since its organization, the magnitude of the labor involved as well as the vital legialative matters before Congress in recent weeks have provented due consideration to further reductions and eliminations, which will be reported on later. Subjects considered in this report are limited largely to those established originally as depression measures. The Committee believes that in view of the improved economic situation and the vital new war conditions the agencies of Government and the members of Congress should have at the earliest practicable time the benefit of conclusions thus far reached by the Committee, and any possible economies which now can be effected should not be deferred. Before the war, economy in non-essential spending was important. Now it is vital. There 1a no room for non-essentials in a government stripped for action. Our united purpose is to produce sufficient armament and trained per- sonnel to win this war. Nothing can be permitted to interfere with this objec- tive. The American people are being asked to pay extremely burdensome taxes which will become greater; they are being asked to make great sacrifice and endure hardships. The government should set the example. The United States Treasury is facing the tremendous task of financing the mr. We must decrease its difficulties, not increase them. All non-essential spending must yield to the needs of our defense program. Strenuous efforts are being made to prevent serious price inflation. To continue consumer subsidies created during depression years without urgent necessity will pour fuel on a disastrous inflation fire. The Committee believes substantial reduction in non-essential spending would be of material aid in holding down inflationary price increases. We shall have to draw on all our resources and accumulated wealth, as well as manpower to fight a long war. In addition to equipping our OWN armed forces and establishing at home our own defenses, we have undertaken to furnish mill- tary supplies of every description to all nations fighting the forces of aggression. We must continue this without stint. But it is a colossal obligation. Regraded Unclassified - 3 - 27 FEDERAL DEBT We started this war with & direct Federal indebtedness of about 55 billion dollars. Today the ultimate cost of the war is unpredictable, but to date WS have appropriated and authorized 75 billion dollars for national defense. This is only the beginning. Every dollar now added to the public debt without imperative defense need makes it more difficult for America to meet post-war period problems in both domestic economy and foreign trade. In this titanic world struggle with totalitarian forces, democracies must not only conquer; they must preserve their democratic system, That means the preservation of solvent government. National solvency - - difficult in this emergency and 80 essential to the preservation of the democratic system - is of no necessary concern to totalitarian governments. Necessary expenditure of billions for national defense has changed abruptly the reasons and advisability for continuing certain agencies, services and functions of government. Amounts expended for defense soon will be so large 88 to obviate much of the necessity for spending in relief and other items for which the Committee recommends elimination or reduction. Judged by national income, estimated at 105 billion dollars, 1942 will be the most prosperous year in American history. This may be compared with the national income of approximately 82 billion dollars in 1929. That is one reason to believe that much of the relief expenditure continued from the so-called depression years now can be eliminated. Continuation of public works and some other types of projects during the war emergency would require diversion of vital manpower and materials from defense to non-defense projects. The Federal Government alone must pay the cost of national defense. For years the Federal Government has been carrying a heavy load of state and local responsibilities. The Committee believes that during this emergency the states and localities should reassume, where necessary, responsibilities historically theirs. Regraded Unclassified 28 4 THE FUTURE PROGRAM In general, the Committee will continue its investigation as follows: 1. It will continue its examination of all Federal expenditures to determine where further curtailment or elimination of expenditures can be made, in the light of defense needs, increasing industrial production and employment, and other factore. 2. It will examine further and in detail the activities of the departments and agencies of the Federal Government to determine whether all functions performed by departments and agencies are essential under existing conditions, whether duplications and corresponding functions can be consolidated, and the extent to which contraction can be substituted for expansion. 3. It will scrutinize government-owned corporations to determine whether present loan policies are advisable in view of changed conditions, whether loans are being made efficiently, with proper regard to security, repayment and other terms, and whether salaries and expenses of such corporations are reasonable. 4. It will examine purchasing, classification, salaries, transportation, publicity and other items of expense and practice to determine whether they are being administered in an economical namer. 5. It will review all permanent agencies in an effort to determine the necessity and the efficiency of their administration and the advisability of more effective controls. 6. It will review defense expenditures and make recommendations for the elimination of waste and inefficiency in administration. The Committee's views on these subjects and possibly others will be embodied in subsequent reports. RECOMMENDATIONS 1. NEW ADVENTURES The Committee recommends that no new adventures or commitments in public works or costly government programs be undertaken during the period of the war emergency, except those imperatively necessary to national defense. The Committee cautions against the futility of retronching in existing non- essential spending and subsequently appropriating for programs or projects that could be deferred until after the emergency. Regraded Unclassified - 5 - 29 2. CIVILIAN CONSERVATION CORPS, NATIONAL YOUTH ADMINISTRATION, OFFICE OF EDUCATION, WORK PROJECTS ADMINISTRATION. The Committee recomends that the Civilian Conservation Corps, the National Youth Administration, and the national defense training activities of the Office of Education be abolished, effective as soon as possible and not later than July 1, 1942, and that there be established in some suitable agency facilities for training persons for work in defense occupations; this activity to be limited strictly to national defense work and confined to those fielde and to numbers to be certified by the Secretary of War and the Secretary of the Navy as necessary for that purpose; also that there be merged in this new program any necessary part of defense training now under the Work Projects Administration as shall be certified by the Secretary of War or the Secretary of the Navy as necessary to national defense; and further that all portions of previously appropriated funds for these agencies now hold in reserve by direction of the Bureau of the Budget (totaling 132 million) be covered into the Treasury. 3. WORK PROJECTS ADMINISTRATION. The Committee recomends that there be appropriated to the Work Projects Administration the are of not more than $50,000,000 per month for three months beginning July 1, 1942. Any work now being carried on by the Work Projects Administration for account of national defense after July 1, 1942, should be carried on under the direction of the War and Navy Departments and the amount here recommended for the Work Projects Administration reduced accordingly. The Committee believes that with defense expenditures constantly in- creasing, Work Projects Administration appropriations should be on & quarterly basis beginning July 1, 1942, and that as employment increases the quarterly appropriations should be reduced accordingly. 4. CIVIL DEPARTMENTS. The Committee recommends that every possible retronchment be made in the administrative costs of the Civil Departments and agencies. There has not been sufficient time for the Committee to investigate fully these administrative costs. This will be done as promptly as possible. Regraded Unclassified 30 - 6 - The Budget Bureau report before this Committee estimates that under & plan to reduce Federal non-defense spending 1 1/2 billion dollars, the allotted reduc- tion in regular appropriations to civil departments and agencies would be $100,000,000. This would reduce total appropriations from $830,000,000 for civil departments to $730,000,000. The cost of publicity activities in the civil departments and agencies is estimated by the Bureau of the Budget to be at least $30,000,000, and should be carefully reviewed for reductions and eliminations. 5. AGRICULTURE The Committee at this time considered in detail expenditures by the Depart- ment of Agriculture, among the regular departments, because of the large programs and far-reaching activities *stablished within and transferred to that Department during the depression period. The Committee based its study on material furnished by the Secretary of Agriculture, the Bureau of the Budget and its agricultural examiners, and by Department officials who work with the programs and activities. This study will be continued and as a partial report the Committee now recommends: (a) Elimination of all land purchases by the Department of Agriculture during the period of the emergency. (b) Review of administrative costs of the Department of Agriculture and elimination of all unnecessary overhead, and especially the wages and overhead incident to the employment of nearly 100,000 AAA committeemen. (c) Reduction of $100,000,000 in the appropriation for Exportation and Domestic Consumption of Agricultural Commodities program. (d) That rates and premiums of the Federal Crop Insurance Corporation be made actuarily sound in a manner to carry losson and that the corporation be made self-supporting. (a) Abolition of the Farm Tenant program with an annual administrative cost of $7,122,570 and authorisation to borrow $50,000,000. (f) Abolition of the Parn Security Administration with $70,500,000 in direct appropriation and authority to borrow $120,000,000; its national defense activities, to the extent that they are necessary, to be transferred to some more suitable agency. Regraded Unclassified - 7 31 (g) Deferment of Rural Electrification expansion to the extent that it conflicts with national defense priorities on materials. 6. FEDERAL HIGHWAYS AND PUBLIC WORKS. The Committee recomends that during the emergency one half of the Federal highway appropriations and authorizations be deferred, at a seving of $64,000,000. The Committee believes all appropriations and authorizations for all public works, including Federal dama, flood control, reclamation projects and public buildings not directly essential to national defense should be deferred until after the emergency. Such appropriations and authorizations, including highway funds, total approximately 160 million dollars. These items immediately should be reviewed carefully. 7. RESERVES IMPOUNDED. The Committee recommends that all funds impounded by the Bureau of the Budget from previous appropriations and held in reserve now be covered back into the Treasury. The Committee recommends that legislation be enacted which would authorise the Director of the Budget to net up reserves out of any future appropriation, at such times and in such amounts as the Director may determine. 8. GOVERNMENT CORPORATIONS. The Government, more and more, is relying upon the 30 odd Federal corpora- tione for financing both defense and non-defense operations. Most of the funds thus used, amounting to many billion dollars, are not subject now to the usual budgetary and audit control, nor does Congress have control over disbursement of funds through these corporations, except in blanket authorisations. Receipts derived from collections on loans made by these corporations return to their credit. They are subject only to control by the corporations themselves outside of any Congressional jurisdiction. These corporations already have authorization substantially to obligate the credit of the Government. These obligations constitute an indirect Federal debt to the extent that they are guaranteed by the Federal Government and that they are not met by the institutions themselves, Regraded Unclassified 32 - 8 - The Committee recomends coordination of those corporate activities; legis- lation subjecting the corporations to budgetary and audit control; and that Congress assume tangible and direct control over their funds by moans of its constitutional appropriating machinery. The Committee will deal with the disbursements of government corporations and make more specific recommendations in subsequent reports. TABULAR RECAPITULATION If the specific recommendations by the Committee are adopted, the appro- priations for the next fiscal year will be less than in the current fiscal year by the following amounts: Savings Civilian Conservation Corps (abolished) 8 246,960,000. National Youth Administration (abolished) (non-defense) 91,767,000. Work Projects Administration (present appropriation $875,000,000 annually). Recommendation for quarterly appropriation including defense activities for first three months of next fiscal year of $50,000,000 monthly and further reduction as employment improves due to defense expenditures should save at least for the year 400,000,000. Agriculture: Deferment of land purchases 3,000,000. Savings in overhead expenses of department as indicated 50,000,000. Reduction in appropriation for Exportation and Domestic Consumption of Agricultural Commodities 100,000,000. Farm Tenant program (abolished) (cash) 7,122,000. H H If # (loan authorization cancellation) 50,000,000. Farm Security Administration (abolished) (Cash) 70,500,000. H # # H (loan authori- ration cancellation) 120,000,000. Public Works and Federal Highways: One-half deferment in public roads 64,000,000. Other Public Works: Deferment of Public Buildings for non-defense 43,164,000. Deferment of Department of Interior 26,727,000. Deferment of Rivers and Harbors and Flood Control 27,835,000. CASH SAVINGS 1,131,075,000. CANCELLATION OF LOAN ACTIVITIES 170,000,000. TOTAL 1,301,075,000. Regraded Unclassified 33 - 9 - In addition, 1f funds impounded by the Director of the Budget were covered into the Treasury by legislative action, as this Committee recommends, there would be immodiate savings of $415,890,061. These savings specifically recommended are partial in acope and leave e field of economics in which further substantial reductions will be recommended. In the field for future investigation by this Committee, where no recommends- tions are as yet made, are reductions in administrative costs of civil departments as referred to above and noted by the Director of the Bureau of the Budget in his report to the Senate Finance Committee. The Committee has lacked time for investigation into many other expenditures which are and will be under study. The Committee is deeply grateful, especially for the cooperation of Honorable Henry Worgenthau, the Secretary of the Treasury, and Honorable Harold D, Smith, the Director of the Bureau of the Budget, as members of the Committee, and for the expert information which they have made available to the Committee. The Committee is grateful also for the cooperation of the heads and officials of the various departments in the Committee's deliberations. This preliminary report 1a based upon the great amount of factual informa- tion, testimony, and other documentary evidence which will be incorporated from time to time, in additional forthcoming reports. Harry F. Byrd, Chairman (Member, Senate Finance Committee) Robert L. Doughton, Vice-Chairman (Chairman, House Committee on Ways and Means) Henry Morgenthau (Secretary of the Treasury) (Subject to qualifications as stated in his letter, which is attached.) Carter Glass (Chairman, Senate Committee on Appropriations) Walter F, George (Chairman, Senate Committee on Finance) (See attached comment) Kenneth McKellar (Democratic ranking member, Senate Appropriations Committee) Clifton A. Woodrum (Democratic ranking member, House Appropriations Committee) Thomas H. Cullen (Democratic ranking member, House Ways and Means Committee) Regraded Unclassified - 10 - 34 Allen H. Treadway (Republican ranking member, House Maye and Means Committee) John H. Taber (Republican ranking member, House Committee on Appropriations) Gerald P. Nye (Ranking Republican member, Senate Committee on Appropria- tions, approves Recommendations 1, 2, 3, 4, 6, 7, 8, but makes exception to Recommendation 5.) (See attached comment.) Senator George's comment: "In my opinion the defense activities of the NYA and educational activities relating strictly to defense activities in the Sureau of Education should be con- tinued in the agencies respectively unless a substantial saving could be made by combining the two," Senator Nye's exception: "I take exception respecting recommendation No. 5, relating to reductions in the Department of Agriculture. "While I am confident that large savings can be accomplished in that Department, I am not ready to recommend just where and in what amount the sevings shall be undertaken, without chance for searching study of the subject of effect in each recommended reduction. "We must keep agriculture strong and ready for the adjustment that must follow the war. When we 1st agriculture down during and after the last war, are contributed largely to the economic breakdown which finally encompassed the whole country. We must not repeat that experience," Congreseman Clarence Cannon, Chairman of the House Appropriations Committee participated actively in the preparation of the report, and was unexpectedly called home. The opportunity was not available to present the report to him for signature. The Secretary of the Treasury Washington December 22, 1941 My dear Senator: I am willing to sign the report of the Joint Committee on Reduction of Non-essential Federal Expenditures subject, however, to my disagreement with the recommendations under "Agriculture," I disagree with the recommendations with respect to "Agriculture" and in lieu of the recommendations contained in the Committee's report, I desire to suggest the following: "Then I appeared before the Committee on November 14 I stated that expenditures included in the Budget under the farm program which was initiated in 1933, after the catastrophic fall in prices in 1932, wars designed mainly to meet conditions involving low prices for farm products, surplus production and loss of export markets. Present conditions are radically different from those which the farm program was designed to meet. It is estimated that in 1941 the farmer's Regraded Unclassified share of the national income will be 20 per cent greater than 30 in 1932, notwithstanding a reduction of almost 10 per cent in the proportion of the farm population to the total population of the country, Although governmental aid was necessary in order to bring the farmer's net income from three and one-quarter billion dollars in 1932 up to eight and one-half billion dollars or more in 1941, certainly after having reached this goal there does not appear to be any reason to continue spending at the same rate. The farmer is getting his share of the total expenditures made by the Government, as the increase in his net income indicates. In addition, there are substantial benefits that will accrue to the farmer from the Lend-lesse program. "In view of all these circumstances I feel at this time that we should make drastic cute in our agricultural expendi- tures and I would recommend that the Secretary of Agriculture be required to operate the Agricultural program included in the Budget with an annual appropriation of $500,000,000 less than authorized for the current fiscal year. "With respect to that part of the Agricultural program carried on with funds borrowed from the Reconstruction Finance Corporation, I would want the Committee to make & more thorough investigation of these activities before I make any definite recommendation for reductions in the amounts available for this purpose." "I also raise a question about the recommendation (paragraph 1 of Item No. 7, "Reserves Impounded") to cover into the Treasury all reserves set up by the Bureau of the Budget. Reserves are set. up primarily to meet unforeseen contingencies and to avoid deficiencies. Many times these reserves result in large savings. It seems to DE that if a general recommendation of this kind is adopted it would defeat the very purpose for which reserves are created." Sincerely yours, Henry Morgenthau, Jr. Secretary of the Treasury Honorable Harry F. Byrd, Chairman, Joint Committee on Reduction of Non-essential Federal Expenditures, United States Senate. Executive Office of the President Bureau of the Budget Washington, D. C. December 23, 1941 My dear Senator: While I have cooperated with the Committee by making available the facilition of the Bureau of the Budget, in view of my position as head of Regraded Unclassified 36 - 12 - the Bureau and my official participation in the preparation of the President's forthcoming 1943 Budget to be submitted January 3rd, I obviously cannot join in a report which may contain recommendations at variance therewith. Sincerely yours, Harold D. Smith, Director. Honorable Harry F. Byrd Chairman, Joint Committee on Reduction of Non-essential Federal Expenditures, United States Senate. Regraded Unclassified 37 December 26, 1941 Dear Mr. Toscanini: It is wonderful to know from your letter of December 17 that your father will be glad to conduct additional concerts for the Defense Bond program. I know that such a contribution from him will be of the utmost value, and I feel that his spirit of service is 8. priceless asset to the country. May I suggest that we arrange one concert in January, one in February, and one in March, in accord- ance with the dates mentioned in your letter? If your father is willing, we can then arrange with N. B. C. for definite dates, and I shall let you know as soon 0.8 possible. Regarding the Banco di Napoli, your letter has been brought to the attention of the officials in the Treasury who are handling this case. Thank you again for your generous letter and for all the good will it contained. With these thanks I send my best wishes for the Now Year to you and to your father and mother. Sincerely, (Mest) 1. 10. Mr. Walter Toscanini, c/o RCA Manufacturing Company, Inc. Camden, New Jersey. FK/hkb 12/26/41 nmo Regraded Unclassified 38 Mr. Foley -- Mr. Sherbondy talked to Mr. Rainey, the man who arranges the savings bonds programs in New York, DeVecchi Mr. Rainey said that a woman by the name of Divishi, (or something like that,) who has power of attorney to handle Mr. Toscanini Sr's (the conductor) business told MR. Rainey that Mr. Toscanini Sr. didn't want the Secretary to be bothered with the matter and not to pay any attention to his son's letter. Mr. Rainey was sure it ought to be handled that way in view of this, hence the brief acknowledgment. S & Regraded Unclassified 39 William s. Rainey unde 6-3104 - is thought for pow Derecchi year vus. Cans form Toxanimi Mr. Foley -- 12-20-41 40 The Secretary read this and asked that it be given to Mr. Kuhn. Mr. Kuhn thought it she Q1d go to you since it has to do with foreign funds. Mr. Kuhn suggested that the reply not be legalistic. Miss Chauncey suggested that the reply be cleared with Mr. Kuhn. Bener S 41 RCA RCA MANUFACTURING COMPANY, INC. A RADIO CORPORATION OF AMERICA SUBSIDIARY Camden, New Jersey December 17, 1941 Mr. Henry Morgenthau U. S. Treasury Dept. Washington, D. C. Dear Mr. Morgenthau, I want to apologize for my lateness in thanking you and your wife for your kind invitation to the party, but I was hoping to see you at the accond concert of my father. I want also to tell you thut my father was delighted to conduct those concerts and to have an opportunity to do something for your campaign for National Defense Savings Bonds. AS I told Mr. Riney, my father will be glad, if you believe his contribution will be of some value, to conduct more concerts for your program. He already has some engagements wi th the Philadelphia Orchestra and the New York Philharmonic Orchestra, but he will be free the weeks of January 24 and 31, February 21 and 28, and during all the month of March 1942, as well as the week from March 29 to April 4. It will be a double pleasure for him to meet again his NBC Orchestra and to contribute in some way to the fight for liberty. I gave to Mr. Riney a report concerning the unfortunate situation of the Banco di Napoli, and as I told him before presenting this report to you, we got the best information about the two gentlemen who signed it. Our friend the banker, Mr. Lionello Perere, told us that both Mr. Nardoni and Mr. Montefalconi are persons of great integrity and well known to him as good American citizens and deoply convinced anti-Fascists for many years. We all hope you will be able to find & favorable solution to this matter, which is so important for the welfare of ALL large number of little depositors and small business mom. It is not our habit to importune people and ask favors, but we felt it was our duty in this moment to recall your attention to this matter. With my beat regards, sincerely yours, walter Toscanini GT/mh RCA ALL THE WAY" Regraded Unclassified Mr. Secretary: The book of cartoons and the book of advertising in business publications, referred to in the attached memorandum, are much too bulky to be sent to your house. They will be in your office to- morrow morning for your reference. N.M.Chauncey 41-B December 26, 1941 TO: HAROLD N. GRAVES SUBJECT: PROGRESS REPORT FROM DEFENSE SAVINGS STAFF SALE OF BONDS Actual cash receipts from the sale of E, F and G Bonds for the first twenty business days of December were $337,948,000, an increase of 66 per cent over the same period in November. Actual sales for the corresponding number of days in November were $203,589,000, and for the first twenty business days of October were $201,388,000. SPECIAL REPORTS ON SALE OF BONDS AND STAMPS Sale of Series E Bonds in 88 representative post offices shows 8. continuing increase. Sales for the week of December 8 to 13 jumped 145 per cent over the week of December 1 to 6, and for the week of December 15 to 20 were 211 per cent above December 1 to 6. Stamp sales reported from 85 post offices for the week of December 8 to 13 showed a gain of 91 per cent over December 1 to 6, while the week of December 15 to 20 showed a rise of 355 per cent over sales for the first week of this month. 2/26/41 qwz 12/24 Regraded Unclassified 41-C -2- SPECIAL REPORTS ON SALE OF BONDS AND STAMPS (Continued) Chart showing the upward trend in the sale of Series E Bonds is attached. NEWSPAPER CARRIER REPORT A total of 270,000 newspaper carrier boys of 823 news- papers are now selling Defense Savings Stamps to customers on their routes. So far, more than 5,000,000 stamp albums have been distributed by their Defense Savings Agents. BOWLING TOURNEYS With Defense Savings Bonds as prizes, bowling tournaments are now being conducted by newspapers in seventeen cities, and arrangements are under way to hold similar tournaments in eighteen other communities. The prize money, in Bonds, will run into hundreds of thousands of dollars. Cities where Defense Bond Duck Pin Bowling tourneys are now in progress are Washington, D. C.; Richmond, Virginia; Norfolk, Virginia; Miami, Florida; Atlanta, Georgia; Columbia, Regraded Unclassified 41-D -3- BOWLING TOURNEYS (Continued) South Carolina; Spartanburg, South Carolina; Winston-Salem, North Carolina; Raleigh, North Carolina; Durham, North Carolina; Roanoke, Virginia; Baltimore, Maryland; Hartford, Connecticut; Woonsocket, Pawtucket and Providence, Rhode Island. Arrangements for similar tourneys are now being completed in Lawrence, Lowell, Fall River and Taunton, Massachusetts; Burlington, Vermont; Bristol, Waterbury, New Haven, Bridgeport, New Britain, and Stamford, Connecticut; Martinsburg, West Virginia; Frederick, Meryland; Winchester, Virginia; Lynchburg, Virginia; Charlottesville, Virginia; Greensboro, North Carolina; Asheville, North Carolina; Macon and Columbus, Georgia; and Jacksonville, Florida. Clippings from several of these cities and a copy of "The Duckpin World", bowlers' newspaper, are attached. RADIO A "Radio Minute Man Campaign" - one minute talks over all local stations, on all commercial network programs, and on foreign language, farm and women's broadcasts - is set to begin January 10. The general campaign calls for eight national Regraded Unclassified 41-E -4- RADIO (Continued) leaders to make one minute speeches on nationwide commercials daily. This is to be supplemented by the talks of local celebrities over each of the nation's 862 radio stations. These talks, beginning on January 10, will continue to be broadcast indefinitely. Defense Bond Pay Roll Allotment copy is being carried this week on the coast-to-coast network programs of sixty-two commercial sponsors. Nationally famous dance orchestras, on regularly scheduled late night broadcasts, are dedicating two programs each night to the Defense Savings Program. These broadcasts, heard over the Columbia Broadcasting System, reach a large audience of young Americans. Among band leaders cooperating are Benny Goodman, Guy Lombardo, Vaughn Monroe, and Harry James. Special Christmas Defense Savings copy was broadcast over 182 commercial network programs. SPORTS Joe Williams, Sports Editor of the New York World-Telegram and Scripps-Howard newspapers, has been appointed to head up a sports division of the Defense Savings Staff. Details of this activity will be given in later reports. Regraded Unclassified 41-F -5- PRESS Results from telegrams, telephone calls and personal visits to all editorial cartoonists, comic artists and editorial writers of newspapers and magazines are being received daily. First issue of the Defense Savings Newspaper - a four page, full-size publication with pictures and stories of activities of the staff - 18 in production and will be off the press January 2, 1942. Another packet of "War Needs Money" copy, supplementing the supply sent last week, was mailed to all newspapers - daily, weekly, foreign and labor. A proof of four cartoons being sent to all daily news- papers is attached. Women's Home Companion Magazine is devoting its editorial page in the January issue to the Defense Savings Program. (Advance copy is attached). Editors of the American Home and Mademoiselle magazines have advised the Treasury that they plan use of feature articles in forthcoming issues. Regraded Unclassified -6- LABOR PRESS Replies from labor papers assuring they will run the Pay Roll Allotment advertisement are being received in large numbers. BUSINESS PUBLICATIONS Special "Defense" issues are being published by various business publications. (Sample tear sheets from "Music Trade Review" and "Billboard" are attached.) First meeting of the recently created House Magazine Editors Defense Bond Committee will be held in Washington, D. C. on December 30. The purpose is to develop plans for intensifying promotion of the Defense Savings Plan, with special emphasis on pay roll allotment. The American College of Surgeons advises that after receiving our first house organ release they decided to publish a special "Defense Bulletin". NATION-WIDE DEFENSE DOLL TOUR With Miss Audrey Kargere as lecturer, this tour will open on February 2 at the Jordan Marsh Department Store in Boston, Massachusetts. More than forty leading stores in major cities 41-H -7- NATION-WIDE DEFENSE DOLL TOUR (Continued) already have booked this presentation. The display features doll miniatures of famous people. MOTION PICTURES Arrangements are being completed with Walt Disney to have his company produce twenty-six short subjects with Defense Savings themes. Leon Schlesinger's personal contribution to the campaign, "Bugs" Bunny singing "Any Bonds Today?", is ready for distri- bution. Campaigns, outlined similarly to the successful Buffalo Defense Savings undertaking, have been arranged for Hagerstown, Maryland; Sarasota, Florida; Louisville, Kentucky; Indianapolis, Indiana; Des Moines, Iowa; and Seattle, Washington. "OUR AMERICA" This new publication is now printed and being distributed to 20,000,000 homes. (Copy attached). Regraded Unclassified 41-I -8- MAIL ORDER DIVISION The Mail Order Division reports total sales as of December 24 - $12,748,097. This represents sales results in the following classes: First Industrial Mailing - In 91 days has produced $3,240,638. Second Industrial Mailing - In 34 days has produced $1,609,128. First Customer Mailing - In 81 days has produced $4,148,160. Regular Purchase Distribution - In 39 days has produced $372,153. Acknowledgement Distribution - In 46 days has produced $196,369. Enclosures for Outside Advertisers - In 26 days has produced $22,519. Second Customer Mailing - (894,000 newly available names) - In 14 days of pulling has produced $651,408. First Prospect Mailing - In 27 days has produced $2,095,325. CARTOONS Attached to this report is a large book containing 101 original cartoons prepared especially for the Treasury Depart- ment. 41-J -9- FARM PUBLICATIONS A special campaign to reach farmers has been started. Beginning right after the first of the year, advertisements and special news releases will be sent to 200 farm publications with total circulation in excess of 16,000,000. A meeting of prominent leaders in the ferm publication field is being arranged in Chicago or Washington in January. SPECIAL Walter D. Fuller, President of the Curtis Publishing Company, (Saturday Evening Post, Ladies Home Journal, Country Gentlemen, and Jack and Jill), writes as follows: "It seems desirable that we should talk over the ways in which we might be able to utilize our publications for intensifying the promotion of the Defense Savings Program." A meeting is being arranged. BUSINESS PUBLICATIONS (Addition) To date 592 publications have agreed to run monthly page advertisements on pay roll allotment, beginning in December or January issues. These publications represent a circulation of 5,918,005. Regraded Unclassified 41-11 -10- BUSINESS PUBLICATIONS (Continued) Attached is a large book containing actual full-page ads as run in thirty-five business publications in December. ******* united STATES SAVINGS BONDS Comparative Statement of Salez During First Twenty-one Business Days of December, November and October 1941 (October 1-24, November 1-27, December 1-24) On Basis of Issue Price (Anounts in thousands of dollars) : : Amount of Increase : Percentage of Increase Sales : : or Decrease (-) : or Decrease (-) Item : : : : December : November : December : November : December : November : October : over : over : over : over : ++ : : November : October : November : October Series E - Post Offices $ 73,206 $ 35,014 $ 32,364 $ 38,192 $ 2,150 109.1% 6.5% Series E - Banks 153,483 65,947 63,369 87.536 2.578 132.7 4.1 Series E - Total 226,688 100,961 96,233 125,727 4,728 124.5 4.9 Series 7 - Banks 22.389 17,160 17,571 5,229 - 411 30.5 - 2.3 Series G - Banice 116,098 96,408 95,948 19,690 460 20.4 -5 Total $365,174 $214,529 $203,753 $150,645 $ 4.776 70.2% 2.3% Office of the Secretary of the Treasury, Division of Research and Statistics. December 26, 1941. Source: All figures are deposits with the Treasurer of the United States on Account of proceeda of sales of United States savings bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. Regraded Unclassified 43 CONTRO UNITED STATES SAVINGS BONDS Daily Sales - December 1941 On Basis of Issue Price (In thousands of dollars) Post Office Bond Sales Bank Bond Sales All Bond Sales Date Series 1 Series E Series F Series G Total Series E Series 7 Series G Total December 1941 1 $ 2,976 $ 3,904 $ 1,333 $ 7,220 $ 12,458 $ 6,880 $ 1,333 $ 7,220 $ 15,434 2 1,229 2,592 623 5.750 8,964 3,821 623 5,750 10,193 3 1,510 2,734 870 5,289 8,893 4,244 870 5,289 10,403 is 2,411 4,036 726 7,530 12,292 6,447 726 7,530 14,703 5 2,015 4,805 1,152 12,357 18,314 6,820 1,152 12,357 20,329 6 1,001 2,293 656 2,776 5.725 3,294 656 2.776 6,726 8 3,282 4,764 1,011 3,810 9,585 8,046 1,011 3,810 12,866 9 1,828 3,877 601 4,996 9.475 5,706 601 4,996 11,304 10 1,651 3.566 491 2,612 6,668 5,217 491 2,612 8,320 11 1,909 4,763 719 3.423 8,905 6,672 719 3.423 10,814 12 2,773 5,012 658 3,768 9.437 7,785 658 3,768 12,211 13 2,767 5,030 584 2,120 7.734 7.798 584 2,120 10,501 15 7,185 11,679 1,022 4,462 17,162 18,864 1,022 4,462 24,347 16 2,113 3,956 893 1,901 6,750 6,069 893 1,901 8,863 17 4,164 9.750 1,180 6,327 17,257 13,914 1,180 6,327 21,421 18 5.382 11,630 1,337 6,826 19,793 17,012 1,337 6,826 25,175 19 5.995 10,205 1,172 5,214 16,591 16,201 1,172 5,214 22,586 20 4,091 11,890 1,270 5,921 19,081 15,981 1,270 5,921 23,172 22 10,916 23,269 2,490 8,067 33,826 34,185 2,490 8,067 44,742 23 4,393 10,642 1,972 6,831 19,445 15,035 1,972 6,831 23,838 24 3,613 13,085 1,629 8,900 23,613 16,698 1,629 8,900 27,226 Total $ 73,206 $153,483 $ 22,389 $116,098 $291,969 $226,688 $ 22,389 $116,098 $365,174 Office of the Secretary of the Treasury, Division of Research end Statistics. December 26, 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 end will not necessarily add to totals. Regraded Unclassif 44 December 26, 1941 11:17 a.m. HM Jr: Hello. Harold Ickes: Henry? HM Jr: Yes. I: I understand you have taken into protective custody the Sheherazade - that big French tanker which is down in Mobile being repaired. HM Jr: It's news to me. I: You do that, don't you, when it's done? HM Jr: No, that's Coast Guard and - I: And it's operated by Navy now? HM Jr That's right. Do you want me to find out for you? I: Well, what I - I understand further that they have not taken the French tankers in the North Atlantic service into protective custody, and there is some thought that we are going to continue to supply the North African Colonies - French Colonies. Do you know anything about supplying them with oil? HM Jr: No, but I will ask Herbert Gaston, who watches that for me - I: To let me know. HM Jr: - to let you know promptly. I: I see that you have rebuked the Free French for capturing Miquelon. HM Jr: (laughter) I: Yes. Regraded Unclassified 45 - 2 - HM Jr: I tell you - I went up there over Christmas and directed that personally. I: I - I thought I saw your hand in it. HM Jr: What? I: I thought I saw your hand in it. HM Jr: Now when I go down and take the other one down there off Cuba, would you like to go with me? I: Yes. Well, we're working it out pretty comfortably now - some nice long conversations and we love to talk. HM Jr: Oh, yes. And we still supply them. I: Still supply them. HM Jr: And that group down there - whatever that island is called - they out-Fascist the Fascists down there. I: That's right. HM Jr: Yes. I: Henry, that story that Stone busted in PM about that nice big delivery to Spain apparently raised Hell with the State Department. HM Jr: Oh, did it? I: Well, they shut off for a while. Now I was wondering - can you get me by your grapevine - you can do better than I - whether we are shipping anything more to Spain and the French Colonies in North Africa, and 80 on, and 80 forth? HM Jr: Sure. I: Thanks a lot. HM Jr: What? I: All right. HM Jr: Okay. - 3 - 46 I: Goodbye. HM Jr: Thank you. 47 From Carl B. Spaeth Director, American Hemisphere Division Board of Economic Warfare 48 Minutes of the Meeting of the Board of Economic Warfare December 27, 1941 A meeting of the Board of Economic Warfare was held in the Vice President's office in the Capitol Building at 11:30 Meme on December twenty-sixth, The meeting was attended by the following members of the Board: The Vice President, Chairman of the Board The Secretary of the Treasury The Secretary of War The Attorney General The Secretary of the Navy The Secretary of Agriculture The Secretary of Commerce Honorable Dean Acheson, representing the Secretary of State The Coordinator of Inter-American Affairs In addition the following persons were present: Mr. Milo Perkins, Executive Director of the Board of Economic Warfare Mr. Laurence Duggan, Adviser on Political Relations, Department of State Vr. Emilio G. Collado, Special Assistant to the Under Secretary of State Mr. Leo T. Crowley, Department of Justice Mr. Carl B. Spaeth, Director of the American Hemisphere Division, Board of Economic Warfare The Vice President requested consideration of the resolution, copies of which had been sent to members of the Board, relative to the satisfaction of the essential requirements of the other American Republics. The Secretary of Commerce stated that it should be clear that the resolution does not constitute B. specific commitment, but is merely a statement of policy and principle. The meeting agreed that the resolution does not con- stitute EL promise to deliver any specific quantity of goods. Alter discussion, the resolution was adopted unanimously as follows: Regraded Unclassified 49 - 2 - WHEREAS, the President, in his letter of April 5, 1941, to Mr. Knudsen and Mr. Hillman, declared that, "In the interest of Hemisphere defense, therefore, it now appears desirable to give the vital requirements of these (other American) Republics such priority as may be necessary to maintain their industrial and economic stability, provided that there should be no prejudice to the national defense program of this country." and WHEREAS, the Subcommittee of the Committee on Appropria- tions of the House of Representatives in reporting on its trip to South and Central America in the late summer and early fall of 1941 has declared that, "The committee is definitely of the opinion that South and Central America are not being given the proper priorities consideration that they should be extended in terms of the needs of our national and hemispheric defense The feeling of the committee, therefore, is that an intensive study should be made of the needs of each country for our raw materials and manufactured goods and that we accommodate our meighbors in every way possible up to the point where such accommodation would definitely deprive ourselves of absolutely essential national-defense commodities." and WHEREAS, the Board of Economic Warfare has worked out a procedure in collaboration with the Supply, Priorities and Allocations Board pursuant to which authoritative analyses of minimum essential Latin American requirements have been and are being made in cooperation with all of the interested agencies of this Government, and WHEREAS, the new danger to our sources of supply in the Far East renders it more than ever imperative that the economic stability of the other American Republics be maintained so as to enable them to continue and increase their production of strategic and critical materials, and WHEREAS, nine of the other American Republics have declared war against all of the Axis powers, two have broken off diplomatio relations with all Axis powers, six have stated that they do not regard the United States as a belligerent, three have 3 - 50 officially declared that they will pursue B. policy of solidarity with the United States in accordance with Inter-Americen agreements, and several of them are making available strategic bases for the military defense of the Hemisphere, and WHEREAS, all of the American Republics have adopted some form of economic control in support of liemisphere defense, in- cluding control over the export of strategic materials, freesing of funds of Axis nationals, the seisure and utilization of in- mobilized Axis ships, and the elimination of Axis influence from airlines and other vital communications and industrial systema, and WHEREAS, the economies of the other Republics can in fact be kept stable by providing them with an extremely small part, less than 3%, of our normal productive capacity, and WHEREAS, the economies of the other Republics are ex- tremely sensitive, based frequently upon a single commodity or industry, and lack the capacity for developing substitutes or changing methods of production, and have no defense contracts to absorb the shook of dislocation in industry, it is hereby resolved that 1. It is the policy of the Government of the United States to aid in maintaining the economic stability of the other American Republics by recognizing and providing for their essential civilian needs on the basis of equal and proportionate consideration with our OWn. 2. The requirements of these needs in respect of essential industries and services in the other Republics for repair, maintenance and operation supplies shall be given equal consideration with our own in relation to their comparable importance. 3. The Department of State, through its representative at the Conference of Foreign Ministers to be held in Rio de Janeiro during January, 1942, be, and it hereby is, authorized to announce the forogoing statement of policy on behalf of this Government. Regraded Unclassified 51 December 27, 1941 Memorandum for the Secretary's files There was a meeting in Mr. D. W. Bell's office on December 2E, 1941 attended by Messrs. White, Delano and Bernstein for the Treasury, and Messrs. Burlew, Ely and MacDonald for the Department of Interior, for the purpose of discussing the follow- ing cable which the Navy Department transmitted to the Treasury: "Manila Clearing House considers of utmost importance for public interest that the President take immediate action on question of protection bank reserves." The meaning of the cable was not clear. It was thought that the Manila Clearing House was not familiar with the instructions that we had sent to the High Commissioner earlier this week; and that the cable related to the currency and other reserves held in the Philippines and belonging to the banks. It was decided that the Treasury would draft a cable to Sayre explaining to him that his powers under the Trading with the Enemy Act were sufficient to deal with the bank reserves situation. The Treasury also mentioned that it might be desir- able for the President to give authority to Sayre to deal not only with currency, etc. but with respect to stores of goods such as sugar, and other surplus material that might otherwise fall into the hands of the Japanese. It was agreed that the initiative on this latter matter should be taken by Interior and that if Interior thought it appropriate it should prepare B cable for the President to send to Sayre. The Treasury prepared a memorandum and cable, copies of which are attached and marked No. 1. Both documents were cleared over the telephone with Assistant Secretary of State Acheson and Assistent Secretary of Interior Burlew and were then sent by Mr. Bell to Secretary Morgenthau at the Cabinet meeting. At around 3 o'clock Secretary Morgenthau called Mr. Bell from the White House and said that the matter was discussed with the President and the Cabinet. The Secretary gave Mr. Bell a message, 8. copy of which is attached and marked No. 2. The cable was redrafted in accordance with the request of the President and was delivered to Mr. Ely of Interior at 3:30 p.m. with the request that it be sent out immediately. Copy of this Regraded Unclassified 52 - 2 - cable is attached and marked No. 3. In view of the request of the Navy that the incoming cable from the Manila Clearing House be kept secret, the first paragraph of the outgoing cable was redrafted 80 as to paraphrase the cable from the Manila Clearing House and Mr. Ely stated that this would meet the requirements of the Navy. Mr. Ely also felt that in view of the situation in Manila where code books might have been destroyed or might not be available to Mr. Sayre it would seem preferable to send the cable straight rather than in code. He said that sending the cable in code simply meant that it took the Japanese a little longer to find out the contents and that only in sending the cable in cipher could the Japanese not find out the contents and that to send it in cipher would entail very long delays. Mr. Bernstein told Mr. Ely that in view of what Mr. Ely stated the Treasury would have no objection to the cable being sent straight. Attached and marked No. 4 is the cable 8.8 sent to Mr. Sayre. who 53 No. 1 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 26, 1941 TO Secretary Morgenthau FROM Mr. White swB The attached cable to Sayre in the Philippines makes clear to him that the authority given to him last Wednesday includes specifically power to destroy assets and other reserves held in banks, etc., in the Philippines. The cable is drafted 80 that you are acting simply as the conduit for the President. The Legal Division thinks there is legal authority for the action described in the cable. However, you should recognize that the destruction of such property where adequate records may not be maintained is of such an extraordinary character as possibly to give rise to many claims against the United States, and criticism that the action was arbitrary. Accordingly, it would be most desirable that you clear this matter with the President and the Cabinet, making clear the important policy decision involved. Mr. Burlew of the Interior Department at this noon's meeting seems to think that the fall of Manila is simply a matter of days. It may therefore be desirable to send this cable today if possible. Brerlew and acheson approved cable. Regraded Unclassified 54 DRAFT OF CABLE FROM SECRETARY OF TREASURY TO BE TRANSMITTED TO UNITED STATES HIGH COMMISSIONER TO THE PHILIPPINES - 12/26/41 We have received the following cable from Manila: "MANILA CLEARING HOUSE CONSIDERS OF UTMOST IMPORTANCE FOR PUBLIC INTEREST THAT THE PRESIDENT TAKE IMMEDIATE ACTION ON QUESTION OF PROTECTION BANK RESERVES." Cable No. 725 sent to you on December 24 gives you full and ample authority to take any and all steps you deem appropriate to take over for safekeeping and destruction any reserves or assets in or with banks, brokers, safe deposit companies, insurance companies or elsewhere, including any form of currency, coin, bullion, securities, drafts, checks, negotiable paper, etc. This authority 1a by no means confined to property owned by enemy nationals but extends to such property no matter who 1B the owner. As indicated in Cable No. 725 you do not have to wait for further or specific instructions from Washington. In particular you are fully authorised by the President to take whatever steps you deem necessary to prevent such assets and reserves from falling into the hands of the enemy. This 1s the primary purpose and should be carried out whether or not records are kept. The President will very shortly issue an order freezing assets in the United States belonging to residents and business institutions in those portions of the Philippines that are overrun by the enemy. of important This policy is questions AWB Regraded Unclassified 55 NAVAL MESSAGE NAVY DEPARTMENT Message Phone Extension Number Addressees Precedence From COM 16 SECNAV PPPPPPPP Date 26 DEC 1941 TOR Coderoom GERMAN Decoded by PURDY 261035 CR 0817 MANILA CLEARING HOUSE CONSIDERS OF UTKOST IMPORTANCE FOR PUBLIC INTEREST THAT THE PRESIDENT TAKE IMMEDIATE ACTION ON QUESTION OF PROTECTION BANK RESERVES. (NOTE: REPRODUCTION OF THIS MATERIAL IN ANY FORM NOT AUTHORIZED EXCEPT BY SPECIFIC APPROVAL OF THE SECRETARY OF THE NAVY) SECRET Regraded Unclassified Sent on Dec Let, 1941 56 Proposed Text of Cable to Sayre from Secretary of the Treasury. Re your telegram of December 19, 1941 on enemy property: On December 18, 1941 the President approved the First War Powers Act, 1941 (Public No. 354, 77th Congress). Sections 301 and 302 of Title III of such Aot read as follows: (Here take in text of Sections 301 and 302 of attached Act] You will note that these sections amend section 5(b) of the Trading with the enemy Aot of October 6, 1917, as amended, pursuant to which freesing control has been administered. With the approval of the President, and for the purpose of dealing with the Philippine situation, all of the powers and authority conferred upon the President under the above-quoted provisions of law are hereby delegated to you in 80 far 6.6 the Philippines are concerned. In addition, I am allocating $100,000 from the appropriation entitled "2020120, Salaries and Expenses, Foreign Exchange Control, 1942" to cover your initial expenses in carrying out this program. Please forward to me at once an estimate of the amount of funds (by month) that you feel you will need during the next three months. Regraded Unclassified 57 - 2 - It will of course be necessary for you, in cooperation with the military and Commonwealth Government authorities, to formulate a program for dealing with this emergency situation. We will be gladto cooperate with you and offer advice and suggestions on any points you may care to raise but we do not want you to feel that you must wait for instructions from Washington. You will be advised from time to time 8.8 plans are developed for dealing with enemy property. The powers conferred by the statute are very broad. Congress expects that complete records will be established and maintained with /// respect to property seized or otherwise received in your custody. Please be guided accordingly. You are authorised to take any steps you deem appropriate to make public the authority herein conferred on you. 12/26/41 No. 2 wassage phoned by the Secretary to Mr. bell 58 from the White house during Cocinet meeting. The President says that if they have the time they should destroy securities, money, etc., before competent witnesses, but if they have not got the time, they should either try to move the securities, etc., to the Iale of Corregidor, and if they haven't the time, go ahead and destroy them. The Secretary said that in recommending this he would rather have A lot of law suite than have one dollar fall into the hands of the Japanese. Governor McNutt said that the currency of all United States banks have always been held in the banke at Corregidor. Regraded Unclassified No. 3 59 UALLE SECRETARY 1 TREASURY TO II TRANSMITTED T UNITED STATES HIGH CC ISSI NER TO I PHILIPPINES - 12/26/41 no have received the following cable from anila: "MARILA CLEARING EQUSE CONSIDERS OF UT OST expertance 10.00 PUBLIC INTEREST THAT THE ESIDENT TAKE INTEDIATE ACTION ob QUESTION CI Photection BANK reserves." Cable No. 725 sent to you on December 24 rives you full and D do authority to take any an all stens wou deem appropriate to thke over for safeksopin; an destruction any reserves or assets in or with banks, brokers, safe deposit companies, insurance occranies OI' elsenhere, including any for of currency, coin, Luition, securities, drafts, checks, negotiable paper, etc. This euthority is by no means confined to property owned by enemy nationals lut extends to such property no matter Who is the owner. As indicated in Cable Lo. 725 you AC not ave to wait for further ob specific instructions from washington. In particular you are fully authorized by the President to Labe Whatever steps you deem necessary to prevent such assets and reserves iro falling into the hands of the enemy. The President states that if you have the time you should destroy even assels and reserves competent .itnesses and nake records, or take the property to Corregidor, but that if there is not sui- licient time, you sho 15 nevertheless Lestroy such assets and re- serves, whether or not records are kept. The primary urnose is to ceep the property from falling into the hands of the enemy. Regraded Unclassified - 2 - 60 The President will very shortly issue an order freezing assets in the United States belonging to residents and business institutions in those portions of the Philippines that are overrun by the enemy. No. 4 61 COPY GNITED STATES HIGH COS ISSTONER HANTLA ENITED STATES HAVY VIA CORREGIDOR DECIDER 26, 1941 - NO. 727 Following from Secretary of the Treasury: We have received cable from Manila Clearing House urging President to take immediate action on question of protection Lank reserves. Cable Do. 725 sent to you on December 24 gives you full and amle authority to take any and all steps you deen appropriate to take over for safekeeping and destruction any reserves or assets in or with banks, brokers, safe deposit companies, in- surance companies or elsewhere, including any form of currency, coin, bullion, securities, Grafts, checks, negotiable paper, etc. This authority is by no means confined to property owned by enemy nationals but extends to property no matter who is the owner. As indicated in Cable No. 725 you do not have to wait for further or specific instructions from washington. In particular you are fully authorized by the President to take whatever stens you deem necessary to prevent such assets and reserves irom falling into the hands of the enemy. The President states that if you have the time you should de- stroy such assets and reserves before competent itnesses and make records, or take the property to Corregidor, but that if there is not sufficient time, you should nevertheless destroy Regraded Unclassified 62 - 2 - such assets and reserves, whether or not records are kept. The primary purpose is to keep the property from falling into the hands of the enemy. The President will very shortly issue an order freezing assets in the United States belonging to residents and business institutions in those portions of the Philippines that are over- run by the enemy. 63 Message 572, dated 12-28-41, for Swope, dictated over the telephone to Miss Hilland at 2:50 p.m., 12-29-41, by Mr. Ely of the Interior Department. "I am following the procedure which was outlined in your telegrams Ros. 719, 720 and 727, as follows: "I brought to Corregidor 15 boxes which were packed in the presence of my agent and which the Commonwealth Treasurer certified to contain $2,041,300.00 in United States paper currency are affidavit listing checks on the United States Treasury held by the Commonwealth Treasurer which totaled $10,205,151.15, as well as lesser amounts of United States currency, Treasurer checks, and securities which were the property of private parties. Gold Inllion was accepted ithout liability. "The above was all deposited in the Philippine Treasury reservation at Corregidor in Vault Do. 4." sayre. Regraded Unclassified 64 December 26, 1941 Dear Henry: Thank you for sending me the memorandum by Mr. Ezekiel outlining the conclusions of the group that net on the tax policy and budget mes- sage. On the whole, it seems to me that we here in the Treasury are in general agreement with the appraisal outlined in that memorandum, but I do have some reservations with respect to the merits of the second of the two suggestions for tax policy enumerated in the memorandum. However, we have come to no defi- nite conclusion on that point and It is one of the proposals now receiving cereful study in the Treasury. In strictest confidence, I am inclosing here- with copy of the final draft of the budget message which I have sent the President. Sincerely yours, Honorable Henry A. Wallace, Vice President of the United States. Regraded Unclassified 65DEC 24 1941 4:10 P.M Final Draft FINANCING THE WAR Victory in this war will demand expenditures on a scale for which there is no precedent in our history. Victory will call for sacrifices - real and stern sacrifices - on the part of every American, irrespective of occupation or income. If WO are to furnish the weapons to the men who are doing the fighting, we shall have to exert all our strength, and we shall have to mobilize every possible dollar of our income. The resources we need for victory will be supplied, whether guns or dollars. The task is huge, but it is within our powers. Until this Job is done, we will not talk of burdens - of tax burdens or debt burdens. Instead we will talk of opportunity - the opportunity to have a real part in the fight to preserve our freedom. This is the spirit in which the American people will want to approach the problem of finanoing the war, Regraded Unclassified 66 - 2 - Lot me state briefly the basic objectives which I think should guide us in the formulation of a fiscal program for the war. 1. The revenue of the Government must be greatly increased to meet war expenditures. The maximum possible portion of the war cost must be met from taxation. 2. Inflation must be curbed. 3. The financial cost must be equitably die- tributed. 4. During wartine the Government must absorb all undue profits. 5. More flexibility should be introduced into our fiscal measures during the emergency. 6. Our fiscal policy must be directed toward the achievement of the utmost war production. TAXES 1. The Need for Additional Taxes In the past 18 months this Nation, while building up its defenses, laid the foundation for a mighty structure of arms production. Regraded Unclassified 67 - 3 - In the fiscal year 1941 defense expenditures amounted to #6.3 billion. We expect to spend upon our war efforts #22 billion in the fiscal year 1942 and #50 billion in the fiscal year 1943. In the fiscal year 1941 Federal net receipts were $7.6 billion. If there are no changes in our tax structure, such receipts are expected to be $11.9 billion in the fiscal year 1942 and $16.5 billion in the fiscal year 1943. Thus it is estimated that, if no new taxes are enacted, the net deficit will be $16 billion for the current fiscal year, and $40 billion for the fiscal year 1943. In these estimates allowance is made for only a moderate rise in prices. Any considerable rise in the level of prices would greatly increase the deficit. Such disparity between estimated revenue and estimated expenditure is far too great. We must have additional taxes. 2. The Menace of Inflation Additional taxes are needed to combat inflation. As we approach full utilization of our productive resources any considerable rise in prices would be an unqualified evil. Inflation is a source of grave social 68 - 4 - injustice. It undersines mercle and impedes war neo- duction. The hardships of inflation strike at random without consideration of equity or ability. Once it has acquired momentus, inflation is extremely diffi- cult to control, and it will leave a heritage of post- war difficulties that will haunt us for decades. Every consideration of national welfare calls for its pre- vention. The way to prevent inflation is to provent people from engaging in the futile effort to buy mere goods than can be produced. This requires a comprehensive and integrated prograCe of anti-inflationary measures, in which increased taxes and increased savings are essential parts, Another part of such & program might be expansion of the social security pystem, which at a later date I intend to recommend for other and more basic reasons. Price control, allocations, ration- 1mg, and the regulation of consumer credit are other parts of such as integrated program. All these controls are interrelated. The devices of price control, allocation, and rationing will be more effective if taxes and savings are increased. Similarly, the effectiveness of the fiscal devices in Regraded Unclassified 69 - 5 - preventing inflation will be greater if price control and controls over the quantity of goods available for sale are used. 30 Equitable Distribution of Taxes With far heavier taxes the need for equity in the tax system becomes more urgent. In this war it will be necessary to tax more heavily all sections of the population who are above the subsistence level. All able to do so will have to contribute. But the fact that large additional taxes have to be imposed makes it more imperative than over to follow the principle of taxing according to ability to pay. I have frequently pointed out that there are numerous loopholes in the present tax structure which ought to be closed. Because some taxpayers use these to avoid taxes, other taxpayers must pay more than they should. We can no leager tolerate these loopholes. Our tax laws contain & number of unintentional technical inequities and unfair discriminations. These are always objectionable, but with taxes at necessary wartine lovels, 1t 10 urgent that the Government should, to the greatest extent possible, provide relief from them. Regraded Unclassified 70 - 6 - 4. Prevention of Undue Profits It is not necessary to allow unreasonable profits in order to secure maximum production with economical business management. Under conditions of a wartime economy, the country cannot tolerate undue profits. Wherever these occur, they should be recaptured. 5. Flexibility in the Tax System The rate of war expenditure, the size of the national income, the course of prices, and the extent and effectiveness of allocations and other controls cannot be accurately estimated far in advance. It is therefore impossible to determine now precisely how much additional taxes should be collected during the next 18 months. This is true even though there can be no dispute that the needs will be great. It is, accordingly, important that the Congress realize the unusually tentative character of all estimates here presented, and that it give consideration to the desirability of introducing into its tax legislation provisions which will make possible quick adjustments in the timing of tax rates and collections during a period when rapid changes in the fiscal and economic situation are occurring. Regraded Unclassified 71 - 7 - 6. Relation of Production and Victory In wartine when the life of the Nation is at stake sound fiscal policies are those which will help win the war, Sound war taxation not only must contribute to defraying the cost of weapons, but it should facilitate their production in egery possible way. In a war economy, labor, materials, and facilities must be shifted from the production of civilian articles to the production of weapons and war supplies. Taxes can aid in speeding these shifts by outting non-essential civilian spending. The differing effects of various taxes, not only upon the donand for goods but also upon the production process itself, should be carefully considered when tax legislation is drafted. BORROWING The expenditure program net out in this budget will make necessary not only substantially increased taxes but also greatly increasing berrowings. These berrowings will be facilitated by the voluntary par- chase of defense savings bonds on the part of a multitude of patriotic mon and women who will cheer- fully set aside some of their current income for their country. These borrowings will be facilitated also by Regraded Unclassified 72 - 8 - the circumstances which are necessarily associated with a change from a pegee to a war economy. The achievement of the all-out war production program will require drastic curtailment by allocations and other controls of new investment in non-defense plant and equipment; it will require deferment of re- placements and even maintenance in these lines; it will require still further ourtailment of production and consumption of many consumers goods. These measures will out non-defense expenditures - both public and private - by many billions of dollars. This drastic curtailment of non-defense expenditures will add correspondingly to the private funds available for investment in Government securities. With adequate funds available for investment in Government securities and with the effective operation of a program of allocations and rationing, we can finance our war effort without danger of disruptive inflation and without departing from our low interest rate policy. Regraded Unclassified TO: The Secretary 73 Returned by Stenotype Reporter For - Primer the From: MR. FITZGERALD Regraded Unclassified OFFICE OF THE VICE PRESIDENT 74 WASHINGTON December 19, 1941 The Honorable The Secretary of the Treasury Dear Henry: Enclosed is a memorandum sent me by Esekiel which has in it some suggestions you might want to turn over to your tax people. Sincerely yours, Hawallace H. A. Wallace Enclosure Regraded Unclassified 75 26 December 1941. Lieutenant William E. 3inton, United States Coast Guard, Washington, D. c. Sir: The Secretary of the Treasury, seting for the President, has awarded you the Distinguished Flying Cross, in recognition of your extraordinary schievement and outstanding performance of duty while participating as the pilot of the Coast Guard airplane, V188, in an aerial flight on 3 Ostober, 1941. The Department takes great pleasure in commanding you for this distinguished service. Very truly yours, (Signed) 1. Horgentham, in Secretary of the Treasury. File to Mr. Thompson 7) MC Regraded Unclassified 76 December 26, 1941 Aviation Chief Machinist's Mate Lonaie Bridges United States Coast Guard Washington, D. C. Sir: The Secretary of the Treasury, acting for the President, has awarded you the Distinguished Flying Cross, in recognition of your ashievement and outstanding per- formanee of daty while participating in an serial flight of the Coast Guard Airplane V-188 on Ostober 3, 1941. The Department takes great pleasure is commending you for this distinguished service. Sincerely yours, (Signed) 1. Morgenthau, IN Secretary of the Treasury File to Mr. Thompson nmc Regraded Unclassified 77 December 26, 1941 Aviation Chief Machinist's Mate Edmond T. Preston United States Coast Guard Washington, D. c. Sir: The Secretary of the Treasury, acting for the President, has awarded you the Distinguished Flying Cross, in recognition of your achievement and outstanding per- formance of duty while participating in an serial flight of the Coast Guard Airplane V-168 on October 3, 1941. The Department takes great pleasure in commending you for this distinguished service. Sincerely yours, (Signed) 1. Mergenthan, 11. Secretary of the Treasury Tile to Mir. Thompson nmc n Regraded Unclassified 78 26 December 1941. Radioman 1st Class s. J. Brodnan, United States Coast Guard, Washington, D. C. Sir: The Secretary of the Treasury, acting for the President, has awarded you the Distinguished Flying Cross, in recognition of your achievement and outstanding per- formance of duty while participating in an aerial flight of the Coast Guard Airplane V-188 on Ostober 3, 1941. The Department takes great pleasure in commending you for this distinguished service. Sincerely yours, (Signed) 1. Horgenthan, IN Secretary of the Treasury. File to Mr. Thompson nmc Regraded Unclassified 79 MEMORANDUM FOR THE SECRETARY December 26, 1941. Mail Report The week's mail, considerably lighter because of the holiday, follows the pattern of last week's mail in every particular. There are the same expressions of loyalty, the same generous contributions from children's pennies up to large checks from individuals and organizations, and the same suggestions for selling bonds and raising funds. There are many complaints that bonds are not avail- able: many letters saying that the name should be changed to Offense or Victory Bonds; and a great many letters say- ing that the buyers would rather not have any interest, or suggesting a new type of bond which does not corry interest. As for outright gifts, we have not kept a record of the emount received in the Correspondence Division, inasmuch BS such gifts are going to other offices and our count would not be complete. The largest check SQ far has been over $5,000; the largest personal donation, $1,000. A number of telegrams have come in from banks in regard to the misunderstanding B.S to the Government seizing savings deposits. Almost all of these have asked for 8 reply by telegram, while others have asked for 8 general statement to be issued through the press, particularly over the syndicate wires which carried the original alarm- Inc news item. A few sample quotations from the letters follow: Regraded Unclassified - 1 - 80 Comments on Present Emergency Accompanied by Contributions A. Samuel Biedermann, Atlantic City, N. J. # Enclosed herewith you will please find my check for $25.00. Please send me B. $25.00 Bond, Series E. The balance of $6.25 you will apply to Uncle Sam's war fund to help bring about & victorious conclusion. Dessie P1 Spandler, Prin., Coraopolis, Pennsylvania, Junior High School. The six hundred pupils and teachers of our school have voted to forego the pleasure of our annual Christmas ice cream treat and the exchange of gifts in our classrooms. As 8. result you will find enclosed 8. check for $100 as our gift to our beloved country to be used toward the purchase (the rivets, perhaps) of & bomber. We intend to frame whatever acknowledgment you may send to show that we have had B. share in helping our nation in its time of need. Dr. John K. Ormond, Birmingham, Mich. As a contribution to National Defense I am returning herewith 15 Adjusted Service Bonds, Serial Nos. 27,689,274 - 288. Please cancel these Bonds or record them as contributed to the Treasury. Gilbert M. Tuoni, San Francisco, California. Since May it has been my privilege to buy Defense Saving Bonds. # * I want to say that now it is not myself I have in mind. It is America that occupies my thoughts, even though I am still an alien. Today I have bought the enclosed $50 Defense Saving Bond in your name, so the Country may make the best use of it toward ultimate victory. Regraded Unclassified - 2 - 81 William Henry Kidston, Palm Springs, Calif. I am making B. lot of Christmas gifts so I don't see why I shouldn't make my Unole Sam one. I take great pleasure in sending to you, as his representative, the enclosed check. ($500) I hope it helps give them Hell. Charles L. Gerlack, House of Representatives, Washington, D.C. % 4F % As their contribution to National Defense, the employees of the Perkasie Company donated their entire earnings for one work day. The Company furnished 1 equal sum, the total amounting to $5,212.52, for which check is enclosed, payable to your order. E. C. Berkeley, Supt. of Mines, Van, West Virginia. I am enclosing herewith at check for $2,282 on the Cleveland Trust Company, Cleveland, O., payable to the Treasurer of the U. S. This is & donation for National Defense, made from "fine" money assessed against members of the U. S. Mine Workers of America, Local 633, Van, W. Va., for strik- ing in violation of their contract. This disposition was made by agreement of the Commissioners of the Kanawha Operators Assn., and the Commissioners of the United Mine Workers, District 17, Charleston, W. Va. Alva Squires, West Plains, Mo. As secretary of the West Plains Softball Assn., I have been authorized to send to you, as secretary of the United States Treasury, $50 which we wish to donate in the National Defense cause. Although our treasury boasts 8. balance that is by no means large, nevertheless, we do have this slight surplus which we feel may help in the annihilation of the Axis Powers. It is our understanding that this money is 8. donation -- we do not expect it to be returned to us in the form of Bonds or Stamps. Also it is our sincere hope that it will be put to good use, in any form your Dept. sees fit, in bringing about American safety. Regraded Unclassified - 3 - 82 GENERAL COMMENTS A. J. Calderwood, Traer, Iowa. ### I am B. farmer on 320 acres of land in Tama County, Iowa, in fact, was born on said farm over 60 years ago. My payment this year from AAA is nearly $900 for changing three rows of corn to soybeans. Farmers in general, not connected with the setup, do not want the A.A.A. in any form. The administration is too expensive. In Tama County alone, there are well up to seventy-five persons doing a one-man job. There are & lot of things we need and want more than A.A.A. payments, and one thing in particular is money to enter the offensive in this war. Prices of farm commodities are high enough so that no intelligent farmer needs help. Dr. A. H. Butler, El Paso City-County Hospital, El Paso, Texas. I have instructed the Chief Clerk of the Veterans' Bureau to pay my pension check of $60 a month into the United States Treasury until further notice. Irving Wiesen, Wiesen-Hart Press, Cincinnati, Ohio. Accept with our compliments the enclosed samples of our "Remember Pearl Harbor" designs. (Stamps and Stickers) ONE-HALF OF NET PROCEEDS TO GO TO U. S. 0. Jake Novich, Novich Company (Plate Glass), St. Louis, Mo. *** And in conclusion I wish to say that some of the obscure politicians on the Capitol Hill ought to learn by now to line up 100% behind our beloved Commander and Chief, The President of the United States, who, with the help of God and his guidance, will lead us to complete victory. And if they would hear the voices of the masses of people on the streets as a whole, there would be no Number One or First Committees for the accommodation of our common enemies, and to some degree, the trouble in Pearl Harbor would never occurred. Regraded Unclassified 83 - 4 - Walter S. Smith, Brooklyn, N. Y. On Dec. 10th I received a form letter from the Treasury Dept. requesting I purchase Defense Bonds. On Dec. 10th, using self-addressed folding envelope enclosed in appeal, I mailed to the Secretary of the Treasury a $75 personal check on Brooklyn Trust Co., requesting a $100 Bond be mailed to me. This Dec. 23rd I have not received the Bond nor have I received word from you relative to having received the check. Investigate kindly. On appeal form I requested you send me a subscrip- tion form quarterly. I hereby rescind this order as I can procure far better service from my bank or the Post Office. Bette Davis, Hollywood, Calif. (Telegram) Last May I wired President Roosevelt regarding a plan to raise funds for the U.S.O. Mr. Early replied, referring me to Mr. Dewey. No action has been taken yet. Now I feel since our entrance into the war, every channel for revenue is needed more than ever. My plan is briefly, that actors equity American Federation of Radio Artists and Screen Actors Guild members charge for autographs and photographs. Some workable plan should be devised whereby revenue from sale of these auto- graphs and photographs be donated to the Government for defense. Naturally I would be willing to aid in any way I could in setting up such a procedure. I do feel that if it were a request from the Government, all organizations would cooperate to the fullext extent. Regraded Unclassified - 5 - 84 FAVORABLE Comments on Bonds 0. P. Johnson, Supt., Duplin County Schools, Kenansville, N. C. I am happy to report that each of Duplin County's 9,800 school children and teachers, both white and negro, are proud possessors of 8 Defense Stamp or Bond. We are 100% in this and assure you our full and continued coopera- tion. Doris Andrus, Oklahoma City, Okla. Thank you for reminding me about the Bonds, but Pearl Harbor is the only reminder that should be needed. I lost my job this week, and 8.8 I am the sole support of a seven-year old girl, I can't say that I will be able to buy another Bond for awhile. But rest assured that when I am working again, I will do so, and thank God for the privilege. C. H. Reinhardt, Jr., Treasurer, Weehawken Trust Co., Union City, N. J. We think that you would like to know of an in- cident which happened during the past week. In connection with the sale of Defense Bonds in our bank, we required a sign for the window where the bonds were sold. We called upon Kushner Brothers, 4821 Bergenline Ave., Union City, N.J., who made the sign and refused to accept any payment, saying they wish to make that contribution to the Defense Program. Herman Munves, N. Y.C. I honestly feel it is most un- patriotic on the part of we Americans who are not in active service, to accept any fee, bonus, or interest rate for the mere use of any such idle money we may have. I feel that if you were to call upon the people of this country, that you would be pleasurably surprised to find thousands who would be glad to offer the use of their funds without asking for any interest. Why not issue 8. "Freedom Bond", or 8. "Confidence Bond"? I for one, am quite ready to immediately send you my check for $5,000 and authorize you to apply the interest of $125, which accrues on theIncome Bond, Series F or G, towards the purchase of such essentials that are on the priority list. Regraded Unclassified - 6 - 84 FAVORABLE Comments on Bonds O. P. Johnson, Supt., Duplin County Schools, Kenansville, N. C. I am happy to report that each of Duplin County's 9,800 school children and teachers, both white and negro, are proud possessors of & Defense Stamp or Bond. We are 100% in this and assure you our full and continued coopera- tion. Doris Andrus, Oklahoma City, Okla. Thank you for reminding me about the Bonds, but Pearl Harbor is the only reminder that should be needed. I lost my job this week, and as I am the sole support of 8. seven-year old girl, I can't say that I will be able to buy another Bond for awhile. But rest assured that when I am working again, I will do so, and thank God for the privilege. C. H. Reinhardt, Jr., Treasurer, Weehawken Trust Co., Union City, N. J. We think that you would like to know of an in- cident which happened during the past week. In connection with the sale of Defense Bonds in our bank, we required a. sign for the window where the bonds were sold. We called upon Kushner Brothers, 4821 Bergenline Ave., Union City, N.J., who made the sign and refused to accept any payment, saying they wish to make that contribution to the Defense Program. Herman Munves, N. Y.C. I honestly feel it is most un- patriotic on the part of We Americans who are not in active service, to accept any fee, bonus, or interest rate for the mere use of any such idle money we may have. I feel that if you were to call upon the people of this country, that you would be pleasurably surprised to find thousands who would be glad to offer the use of their funds without asking for any interest. Why not issue 8. "Freedom Bond", or a "Confidence Bond"? I for one, am quite ready to immediately send you my check for $5,000 and authorize you to apply the interest of $125, which accrues on theIncome Bond, Series F or G, towards the purchase of such essentials that are on the priority list. Regraded Unclassified - 6 - 85 UNFAVORABLE Comments on Bonds Mrs. Ruth Holland, Brooklyn, N. Y. After reading your plans for Defense Savings, I thought you might be in- terested to know what little cooperation you are getting from the Postmaster in the Red Hook section of Brooklyn. My small son decided it would be & grand idea to give all his friends Defense Stamps in a Christmas album, 50 he went to the P. 0. to get the stamps and albums. The Postmaster was very irritable and gave him the common Postal Savings card - which is anything but attractive. My son came home very disappointed, 50 I took them back myself and W&B informed by the Postmaster that the P.O. was not interested in Christmas or any other holidays. I was compelled to make & trip downtown to satisfy my son. I have already purchased a Bond for each of my family and was delighted with my son's idea. I really think our Postmaster should be reminded he is still in U.S.A. Nora MacLaren, N.Y.C. Last Sat. I stood before a great mural in the Grand Central Station - there was a sailor, 8 soldier, but the marine was not there. When I returned to town, I telephoned an executive with the New Haven Road and I complained that the marine was absent from the great picture. His answer was, "Don't blame us - blame your Government - they ordered it". James Filbin, Bank Clerk, Los Angeles, Calif. sends B. clipping speaking of Senator Lee's "draft wealth" Bill proposing compulsory loans with property liens, if nec- essary. "The Above is hurting sale of Defense Bonds. It lost me three sales today. Several old people showed much alarm over forced home incumbrance. A public state- ment by you will help our Bond sales." Miss Margaret Phillips, Scranton, Pa. I purchased $350 worth of Defense Bonds, naming 8 members of my family as beneficiaries. This week, each member whom I designated as 8. beneficiary, received from Washington a letter thank- ing them for purchasing the Bonds. They had nothing to do with it, and knew nothing about it. Besides, you addressed them all to me. Wouldn't one letter to the buyer have been sufficient in these days of important curtailment of waste? Regraded Unclassified 86 - 7 - T. L. McCready, N.Y.C. Às matters stand now, the U. S. is obliged to finance the war -- a war which may last for many, many years. We must finance England, Russia, China, Australia, South America, possibly Free France, Dutch East Indies, and the U. S. A. The financial out- lay may conceivably run into trillions. Under these circumstances, I feel that we should be extremely cautious as to what we promise the buyer of our Bonds. I feel that it is dangerous to offer to redeem these Bonds in cash. I feel it is dangerous to make them carry such a high rate of interest. It is dangerous to put any due date on the Bonds whatever, unless we issue the Bonds in Series dated so as to mature at intervals of 25 or 50 years after the termination of the war. I feel that 2% interest is adequate, and I believe that our reliance should be not 80 much on the cupidity of investors as on their patriotic feelings. Harry H. Pond, President, The Plainfield Trust Co., Plain- field, N. J. We have been very active in the sale of Defense Bonds, and have sold, to date, about $1,310,000. This incurs considerable expense, as it requires the at- tention of practically one man, besides stenographic service, etc., etc., as well as B. considerable amount of postage covering the numerous reports to the Federal Reserve Bank of New York. The postage on a single con- signment of reports costs almost up to $1. per piece. We are glad to perform this service and are doing all within our power, through advertising and personal work, to further the sale of Defense Bonds. However, do you not think it would be fair for us, and others, to be supplied with franked envelopes? Mrs. Jean Morrow, Oshkosh, Wis. I received the enclosed letter yesterday, and want to tell you not to write again in any way, because I bought Bonds in secret to my husband. If I receive any more letters concerning them, I will be forced to cash them immediately. I purchased these without being reminded by anyone, and I will get more when I can, but DON'T send any letters to me as I will have to give them up right away. Its "my own" way of saving, and if he knows it, he will want them cashed. Please don't send any more! Regraded Unclassified 87 - 8 - C. W. Browne, Breskin Publishing Corp., N.Y.C. ... My youngster is saving all the money he can to buy Defense Stamps. He will take 8. dollar's worth of dimes or small change into the Post Office at Tuckahoe, N. Y., where the clerk with B. very crabbed disposition will resent taking small change, and order him curtly next time to bring it in in paper money. I understand this clerk has treated other people in the same manner. You can appreciate the situation. Here is 8. boy of 13, bubbling over with patriotic ardor, saving what to him is big money, foregoing the usual expenditures dear to B. boy's heart - then when he goes in to make his purchase, he gets a wet blanket thrown over his high spirits by 8. Government employee who ought to be one of the leaders in the cooperative attitude. An American Citizen - Philadelphia, Pa. # 42 # Employees of the Utility Dress Company, at Juniper and Vine Streets, Philadelphia, Pa., are being threatened at the point of losing their jobs if they do not buy the Bonds from the firm after January 1, 1942. There is a sign, placed near the time clock, that definitely states this fact. * # # All loyal American wish and desire to buy Bonds because they are Americans; they form America; they love America. They do not went to be forced into buying Bonds at the threat of losing their livelihood. * * # Many wanted to buy Bonds today for cash and were refused. They must wait and buy on the plan forced by the employer. A. J. Prieur, Santa Paula, Calif. *** About 4:45 p.m. today I had the pleasure of escorting my two young sons to the local Post Office to exchange their savings and defense stamps for a Defense Bond. The radio has been encouraging this practice among children, and you should be able to appreciate their pleasure in feeling they were DOING THEIR BIT. The reception they received at the Post Office, is something else. # # The oldest boy (11 years) had & pouch containing about $2.75 in change and stamps. This he gave to the postal clerk who emptied the pouch on the counter at his window, and on seeing the change, (pennies, nickels, dimes), indignantly informed the boy he could not take this change - that the change would have to be wrapped. # # # There was no rush at the window, no one was waiting for service. The action of the clerk was Regraded Unclassified - 9 - 88 called to the attention of Mr. McIver, the Postmaste- who did not seem to get the idea or appreciate the Per action to the boys. I took the boys to 6. local store where there was considerable retail business going on, (a different condition than that which existed at the Post Office), and the clerk very courteously counted the change and supplied the stamps. Herbert Lee, Santa Cruz, Calif. I tried hard to listen through the two Sat. night radio concerts put on by the Treasury Dept. to sell defense bonds and stamps! It occurs to me that delightfully soothing as they were to highly cultured lady millionaires, who find themselves paying 50% income taxes, they are hardly the type of program to cause the average American to rush out and buy defense bonds and stamps. Do you think so? # # * Both programs (Toscanini concerts) were throughout, of the same highly artistic musical type. The last selec- tion on Sat., December 13th, for twenty minutes revolved around that plaintive southern melody, "Going Home" -- a faithful darkie on his deathbed, "going home". #.# 4b Is that the kind of music to arouse the average American at such a time as this to buy his country's bonds? " # # Is it not the function of great music to express in great crises the great emotions of common men and women? # I suggest the playing of Elgar's Pomp and Circumstance; Tschaikovsky's March Slav (Particularly now that this Russia is inflicting on the German aggressors of today what she did to Napoleon in 1812); Wagner' S Overture to Tennhauser; and Onward Christian Soldiers, a hymn we used to sing in the San Francisco Presidio as soldiers in 1917. I'd like to see that sort of program tried. Mr. Taylor might begin by saying, "The program tonight is different. It has been suggested by an average American, not 8. musician's musician. We want our listeners to keep tuned to this program and then send postal cards to the Secretary of the Treasury, Washington, D. C., to tell him how they liked it, partic- ularly, did it make you want to go out and buy all the Defense Bonds and Stamps you can afford". Regraded Unclassified TREASURY DEPARTMENT 89 INTER OFFICE COMMUNICATION DATE December 26, 1941 TO Ferdinand Kuhn, Jr. FROM Alan Barth EDITORIAL OPINION ON FOREIGN AFFAIRS: THE EXPANDING HORIZON Alliance Prime Minister Winston Churchill's arrival in Washington gave dramatic emphasis to the budding editorial awareness that we are engaged in a world war. This awareness, although often vigorously expressed, appears to have been until now, on 8. somewhat formal or theoretical level of consciousness. Mr. Churchill's visit translated it into bread-and-butter reality. The Chicago Sun refers to the visit as a token of "the unity of the United States and Great Britain in war, and the larger unity of all the nations united against Axis aggression." For the first time, the press as a whole seems to be saying with real conviction that what happens at Hong Kong or in North Africa or on the Russian front intimately and immediately concerns the United States. The editorial writers are beginning to grasp the tremendous implications of 8 conflict which has the entire planet as its locale. Regraded Unclassified - 2 - 90 This understanding has made them a good deal more receptive to the proposition of a joint allied command. They recognize now that the war will demand strategic choices, that weapons are simply not available for adequate action on all fronts at once. They perceive that the utilization of available strength must be co- ordinated to be effective. Most American commentators, of course, prefer to see the direction of affairs in American hands. They are prone, these days, to recite evidences of British blundering. It seems probable, however, that their awareness of the need for coordination will lead them to endorse a division of authority in separate sectors between the British and ourselves. As far as the Russians and Chinese are concerned, there appears to be no inclination to do more than send them materiel and let them conduct their own operations. Overconfidence Press reaction to the Pacific fighting has described 8. parabola. From a wringing of hands immediately after the attack on Pearl Harbor, sentiment rose sharply to an expectation of easy victory over the Japanese. It was not until the middle of the past week that the newspapers began to realize that further serious reverses were almost certainly in store for the British and American Far Eastern forces. Now, suddenly, the downswing has set in. . 3 - 91 It was not only in respect to the Far East that the press fostered a high degree of optimism. Its news and editorial pages also proclaimed 8 Nazi disaster in Russia, encouraging & popular belief that the war might be won much more easily than at first expected. With very few exceptions, commentators gloated uncrit- ically over the indications of a serious Nazi defeat. The removal of von Brauchitsch, the appeal to the German people for winter clothing, news of which could have come over the airwaves only by special permission of the German copyright owners, were heralded here with small discount. With rumors that the French fleet has been delivered into German hands and with news of large-scale Japanese landings in the Philippines, a wave of apprehension has commenced. Having encouraged the public to anticipate good news, the press is now treating it to dire forebodings. Editorial writers have scarcely started their task of promoting public understanding that allied resources are limited. Currently, they foresee a grave threat to Singapore in the Pacific and 8. probable Nazi grab at the Azores in the Atlantic. A discordant choir of journalistic strategists counsels both the concentration of American materiel for the defense of Britain's Far Eastern stronghold and the seizure of the Azores, Cape Verdes and Martinique. Regraded Unclassified - 4 - 92 Future Winston Churchill's visit has revived editorial thoughts about collective security in the post-war reorganization of the world. Anglo-American collaboration continues to be regarded 88 the essential nucleus for the future maintenance of peace. Expressing the prevailing view -- a view which Mr. Churchill himself has now voiced in ringing terms -- Walter Lippmann declares: "The great mistake of our lives -- from which flow all the awful consequences we now face -- was that having won the other war together with the British, we dissolved the partnership, went our separate ways and even became rivals." But even under the stress of present circumstances, there is still a minority which cautions against the hands-across-the-sea philosophy. The parochial imperialism of those who masked but lately under the misnomer of isolationism is perhaps best illustrated by the Patterson papers -- The New York Daily News and The Washington Times-Herald. Suggesting a merger of Canada with the United States, they reason: "After this war, we are likely to find Russia the most powerful nation in Europe. To the west of us, we may face some powerful Asiatic coalition run either by Japan or by China. In the new world which We all hope for, it will be a fine piece of insurance to have Canada and the United States lined up side by side in a close union for defense of the North American way of life." The depth of our new national unity may be gauged from these contrasting points of view. Regraded Unclassified 93 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 26, 1941 TO Ferdinand Kuhn, Jr. FROM Joseph Melia EDITORIAL OPINION ON DOMESTIC ISSUES: LABOR HOLDS SPOTLIGHT Discussion of the military aspects of the war continues to overshadow domestic issues in the nation's press. Only the so-called "labor problem" is successfully competing for editorial attention with the dramatic war events in the Far East, Russia, and Libya. There is relatively little comment on price control legislation, taxation measures, or non-defense spending; Mr. Hoover's testimony and the Senate Banking Subcommittee's report on price control created only 8 flurry of editorial interest. Nor is much attention being given at this time to the prospect of rationing civilian goods, although the possibility is emphasized by the orders banning the sale of tires and cutting the production of automobiles. Labor: Issue No. 1 Controversies over the rights of labor during the war are still far from being settled. This is evidenced, for one thing, by the mixed reception given the "for the duration" labor-management agree- ment. Another indication is the newspaper denunciation of the West Regraded Unclassified - 2 - 94 Coast welders for "traitorously" striking. Still another is the joyful assertion by editorial writers that the Supreme Court's decision in the Virginia Electric & Power case is & precedent- making free-speech victory for employers. The "no strike or lockout" provision of the labor-management agreement is widely acclaimed. But newspapers are generally skeptical of the two other clauses the one promising peaceful settlement of all disputes, and the other establishing a War Labor Board with power to resolve finally any management-labor disagreement. These last two provisions along with the absence of any clause freezing the status quo of the closed shop are interpreted as meaning that conflicts involving closed or union shop issues or jurisdictional disputes can be mediated and finally arbitrated by the Board. With very few exceptions, the press bitterly assails the giving of any such power to 8. government agency. The President's denunciation of the closed shop during the time of the captive coal mine strike is widely quoted to bolster the argument that new closed or union shop agreements should be outlawed for the duration. Look To The Future Newspapers are anxiously awaiting the appointment by the President of the new Board's personnel and the announcement of its policy. Editorial comment at this time indicates that too many Regraded Unclassified - 3 - 95 New Deal, "pro-labor" appointments will probably be a signal for an instantaneous attack. And if an over-all policy to discourage unions from striving for closed or union shop agreements is not quickly established, the present temper of the press forecasts the probability of an increasingly loud demand for revision of the Wagner Act or for passage of legislation similar to the Smith or Ball Bill. Another factor that may influence the attitude of the press toward legislation restricting labor is the extent of future strikes. War-time emotions and the labor-industry conference have, temporarily at least, allayed labor unrest in the United States. But there is no certainty that the rapidly rising cost of living, increased income taxes, and high industrial profits will not eventually result in an outbreak of strikes. If this should happen or if for any reason labor leaders fail to keep the rank and file in line, the press, as indicated by its reaction to the welders' strike, will very likely increase pressure for passage of stringent legislation restricting labor. Regraded Unclassified - 16 YYS SECRETARY OF STATE 96 - a ac DEPARTMENT OF STATE WASHINGTON In reply refer to December 26. 1941 FD 110.71/59 My dear Mr. Secretary: Your letter of December 15 transmitting & copy of Treasury Department Order No. 43 regarding the responsibility of Mr. Harry D. White in matters with which the Treasury Department has to deal having a bearing on foreign relations is being brought to the attention of the interested offices of the Department. I an sure that they will be glad to cooperate in all appropriate ways with Mr. White. Sincerely yours, The Honorable Henry Morgenthau, Jr., Secretary of the Treasury, PAYLDEFENSE BUY DATED STATES SAVINGE BONDS I Regraded Unclassified 97 December 15, 1941. My dear Mr. Secretary: I enclose a copy of an order which 1 have today insued designating Mr. Harry D. White, an Assistant to the Secretary, to assuse full responsibility in matters with which the Treasury Department has to deal having as hearing on foreign relations. Sincerely, (signed) H. Morgenthau, Jr. Secretary of the Treasury. The Homorable, The Secretary of State, Sent by special messenger 12-15-41 at 9:30 6.0. NNTICLO WNT EHFjr DWB HDW COPY Regraded Unclassified 98 December 15, 1941. TREASURY DEPARTMENT ORDER NO. 43. On and after this date, Mr. Harry D. White, Assistant to the Secretary, will assume full responsi- bility for all matters with which the Treasury Depart- ment has to deal having a bearing on foreign relations. Mr. White will act as liaison between the Treasury Department and the State Department, will serve in the capacity of adviser to the Secretary on all Treasury foreign affairs matters, and will assume responsibility for the management and operation of the Stabilization Fund without change in existing procedures. Mr. White will report directly to the Secretary. H. MORGENTHAU, JR. Secretary of the Treasury. COPY Regraded Unclassified DEPARTMENTAL STOCK FORM 2248 Treasury Department s TELEGRAPH OFFICE 99 DN3 18 GOVT CG FROM CINCAPAC 1941 DEC 26 AM 9 03 ACT SECY OF THE TRSY PLEASE ACCEPT MY SINCERE THANKS FOR YOUR KIND AND ENCOURAGING MESSAGE ADMIRAL NIMITZ 855AM Regraded Unclassified 100 H MORGENTHAU JR PERSONAL DEC 24,1941 ADMIRAL CHESTER W. NIMITZ COMMANDER=IN-CHIEF, PACIFIC FLEET HONOLULU TERRITORY OF HAWAII I AM MORE THAN PLEASED AT THE ADDITIONAL RESPONSIBILITY AND HIGH HONOR WHICH THE PRESIDENT OF THE UNITED STATES HAS GIVEN TO YOU AND I WANT TO WISH YOU ALL POSSIBLE CHRISTMAS JOYS AND A VICTORIOUS NEW YEAR HENRY MORGENTHAU JR Regraded Unclassified 100 H MORGENTHAU JR PERSONAL DEC 24,1941 ADMIRAL CHESTER W. NIMITZ COMMANDER=IN-CHIEF, PACIFIC FLEET HONOLULU TERRITORY OF HAWAII I AM MORE THAN PLEASED AT THE ADDITIONAL RESPONSIBILITY AND HIGH HONOR WHICH THE PRESIDENT OF THE UNITED STATES HAS GIVEN TO YOU AND I WANT TO WISH YOU ALL POSSIBLE CHRISTMAS JOYS AND A VICTORIOUS NEW YEAR HENRY MORGENTHAU JR Regraded Unclassified TREASURY DEPARTMENT 101 INTER OFFICE COMMUNICATION DATE December 26,1941 Secretary Morgenthau TO H. D. White FROM Subject: British financial developmente. The following items, culled from reports received recently from Mr. Casaday, may be of interest to you: 1. Two recent wage increases of importance. 8. $1.00 B week increase to women engineering workers. b. Recommendation by Central Agricultural Wage Board for increase from $9.60 to $11.20 minimum per week for farm workers. 2. Government expenditures are running about 10% higher than the budget estimates, and revenue about 25% higher. The ex- case profits tax especially is yielding far more than had been expected. 3. Savings are on the increase. Weekly "small savings" (corresponding to our defense stemps, baby bonds, postal savings and savinge banks deposits) averaged $44.8 million in October, as compared to $42.8 million in Septem- ber and $38.4 million in August, Concern has been expressed in the British financial press because "small savinge" have not yet resched the $60 million a week figure estimated by the Chancellor of the Exchequer as necessary to fill the inflationary gap". "Large savings" (corresponding to our ordinary government bonde) averaged $126.8 million per week in October, 8.6 compared to $28.8 million in September and $104.4 million in August, 4. Trend of prices: Wholesale Cost of living prices index index August, 1939 100.0 100.0 October, 1940 145.5 123.9 October, 1941 157.5 128.4 During 1941, wholessle prices have risen alowly (from 152.4 in January), and living costs have been largely stabilized by widespread price controls and price subsidies. 5. The note circulation continues to rise. It has been sug- geated that this may be explained in pert by bleckouts end the petrol shortage, which render it difficult for small traders, far- sers, etc. to get to their banks frequently. Regraded Unclassified 102 BRITISH AIR COMMISSION 1785 MASSACHUSETTS AVENUE WASHINGTON, D. C. TELEPHONE HOBART 9000 PLEASE QUOTE REFERENCE NO. With the compliments of British Air Commission who enclose Statement No. 12 - Aircraft Shipped - for the week ended December 23, 1941. The Hon. Henry Morgenthau, Jr. Secretary of the Treasury Mushington, D. C. December 26, 1941 Regraded Unclassified 103 STATEMENT NO. 12 AIRCRAFT DESPATCHED FROM THE U. S. WEEK ENDED DEC. 23/41 DESTINATION ASSEMBLY POINT BY SEA BY AIR FLIGHT DELIVERED YPE FOR USE IN CANADA 1 ------- 8 ESSNA Canada -50 RUMMAN 32 --- - By H. M. S. 1 Vertlett II LOCKHED 8 - Hudson III Melbourne - Australie " 13 - - Budson IV If U. K. 4 --- -- ison III U. K. - -- 10 Hudson III Canada I NORTH AMERICAN -- U. K. 1 - Mustang U. K. - 17 - Harvard II Canada - 54 4 35 TOTAL British sir Commission December 26, 1941 Regraded Unclassified 104 Regraded Unclassified DEC 26 1941 KY dear 12. Ambussador, I vish so refer to the agreement dated Deteber 10. 1941, relative to the purchase of 903,000 fine tray cusess of gold by the Secretary of the Treasury from the Government of the Union of Seviet Secialist Republies. against which - advance of $30,000,000 vse made on October 11, 1941. I take pleasure is enclosing for your information two copies of the easay report of the United States what at Sea Prensives giving as analysis of the gold which arrived en the 85 TRANSBALLY and deposited W your deverment - December 10. 1941. for the account of the Secretary of the fressury. Yes will observe from the enclosed report that the shipment after melting and upon May vas determined to - tais 194,675.341 fine trug - of gold and to have a value of $6,813,636.93. After the deduction of the - of $17,228.89 representing the stat charge of $194.50 plus the 1/45 handling charge of $17,034.09. the not value of the gold - $6,796,408.04. This anomat of gaid has been applied by the treasury against the mount of cold agreed to be parchased by the Secretary of the treasury under the agreement of October 10, 1941. sincerely yours, (Signed) D. T. BELL Acting terretary of the treasury. Els Issellancy suda Livineff. Ambassador of the Union of certer socialist Reyablics. Inclecures. 0 105 e TREASURY DEPARTMENT United states Mist Service in Transises, Calif. December 17. 1941. secretary of the Pressury, Treasury Department, vashington, D.O. Attention - a. Merle Ceckren Dear Sir: I as enclosing copy of - letter which 1 have today handed to the Federal Recerve last with check - also tea copies of Menerandum Form 42-2. Hoping you will find everything in order ml assuring you that I - glad of the opportunity of BOTY- ing you at any time, 1 an, Respectfully, 1ml 7.J. Maggerty Superintendent. Seprive:12-22-41 Regraded Unclassified 106 TREASURY DEPARTMENT office of Imperintendent United States Mast service United states Mint as Francisco, Calif. December 17. 1941 Federal Receive Bank, sea Francisco, California. Gentlement There was on December 10. 1941, delivered to the V.S. Mint. Sea Francisco, 194,708.88 cames of 6014 which arrived in as Transisco on the ss "Transbalt" for the account of the state Bank of the U.S.S.R. Meason. We were instructed by telegram from D. V. Bell, Acting Secretary of the Treasury (copy of which is attached) to instruct the Federal Reserve Bank of san Francisco to transfer by telegram to the Federal Reserve Bank of New Yests, for credit of the Secretary of the Treasy, Special Assount, and to include is the tolegram the number of - Pine Outses 194,675.341 Dollar Value $ 6,813,636.93 Mint Charges $ 194.00 Net Amount $ 6,013,442.13 for which latter amount w are delivering you w check. The amount of me-Courth of ⑉ persont (1/b) handling charge is $17,034.09. Tours very truly, let P. J. Maggerty Superintendent Copy:12/22/41:hmd Regraded Unclassified UNITED STATES MINT BULLION DEPOSIT - MEMO REPORT 107 Mint Form 42R SAN FRANCISCO, CAL posit #060 Date Due 10, 1941 Memos Required Silver Price SOURCE DATA by Depositor 10 or Class abor FAUSELL NESSIVE BANK OF SAN FRANCISCher Data ( 3 sheets) RUSSIA State OL ACOUNT OF FEDERAL RESERVE BANK CP NEW YORK (Supt's Vault) County M - TO THE SECRETARY OF THE TREASURY, SPeCIAL ACCOUNT. Mine Array WEIGHTS ASSAY CERTIFICATE The Description Hefining PINE o U NCES Number Belore Melt After Melt FINENESS of Deposit chg.-cts. GOLD SILVER Name Ounces Dec Ounces Dec Gold Silver Base Los per oz. Ounces Dec Ounces Dac praza 15/36 20 9195 7795.32 7800.86 999.8 - (000.2) 7799.299 11/10 20 96 7709.26 7802,11 999.8 (000.2) 7800.549 12/10/4 20 97 7814.22 7728.24 999.8 (000.2) 7726.694 20 ge 7654.52 7278.96 999.8 (000.2) 7277.504 11/0 20 my 1884.20 3784.54 999.8 (000.2) 3783.783 .0 9200 7498.70 7161.36 999.8 (000.2) 7159,927 t/o -Q OI 7015.54 7641.10 999.9 (000.1) 7640.335 w P: 02 7679.94 7575.52 999.9 (000.1) 7574.762 20 03 7672.31 7609.45 999.9 (000.0 1) 7608.689 8 a 7601.81 7574.32 999,8 (000.2) 7573.305 o 05 7583,10 7198.19 999.8 (000.2) 7196.750 Total Total TABLE BY CHECK NOTE:- THIS REPORT IS FOR THE INFORMATION CEPT AB NOTED OF THE DEPOSITOR AND IS OF NO OTHER VALUE VALUES CHARGES GOLD SILVER Melting Refining Handling Total $ $ $ $ $ $ $ Bars $ Cash Check NET VALUE Regraded Unclassified NITED STATES MINT BULLION DEPOSIT - MEMO REPORT Mint Form 42R SAN FRANCISCO. CAL 108 sir 2060 Dec 10, 1941 Memos Required 10 Silver Price SOURCE DATA Date by Depositor or Class RUSSIA ber FEDERAL RESERVE BANK OF SAN FRANCISether Data (3 sheets) State OR ACCOUNT OF FEDERAL RESERVE BANK OF New YORK County FCA CREDIT TO THE SECRETARY OF THE TREASURY, SPECIAL ACCOUNT Mine Sheet #2) Description Assay WEIGHTS ASSAY CERTIFICATE Refining FINE OUNCES of Deposit Number Before Melt After Melt FINENESS chg.-cts. GOLD SILVER Ounces Dec Ounces Dec Gold Sliver Base per oz. Ounces Dec Ounces Dec Lot Boxes Bars 15 25/28 20 9206 7617.51 8012.10 999.8 (000.2) 8010.497 of 29/32 20 07 7479.40 7912.87 999.8 (000.2) 7911.287 If 33/36 20 08 7513.14 7621.70 999.8 (000.2) 7620.175 a 37/40 20 09 7585.87 8008.62 99,-8 (000.2) 8007.018 IT 41/43 15 9210 5720.78 5552.79 999.9 (000. 1) 5552.234 16 is 1/4 20 11 7502.89 7276.43 999.9 (000.1) 7275.702 e 5/8 20 12 7569.70 7330.58 999.9 (000.0 1) 7329.846 a 9/12 20 13 7739.92 7588.18 999.8 (000.2 2) 7586.662 H 13/16 20 14 7607.30 7610.59 999.8 (000g) 2) 7609.067 . 17/20 20 15 7555.84 7428.67 999.9 (000. 1) 7427.927 21/24 20 16 7647.91 7604.26 999.9 (000.1) 7603.499 NOTE:- THIS REPORT IS FOR THE INFORMATION Total Total ABLE BY CHECK EPT AS NOTED OF THE DEPOSITOR AND IS OF NO OTHER VALUE. VALUES CHARGES GOLD SILVER Melting Refining Handling Total $ $ $ $ 5 5 $ Bara $ Cash Check NET VALUE Regraded Unclassified NITED STATES MINT BULLION DEPOSIT - MEMO REPORT 109 Mint Form 42R SAN FRANCISCO. CAL Memos Required Silver Price SOURCE DATA 8060 Date Dec 10, 1941 by Depositor 10 or Class RUSSIA ber altor FEDERAL RESERVE BANK OF SAN FRANCISCO Data -(3 Sheets) State & ACCOUNT OF FEDERAL RESERVE BANK OF NEW YORK, FOrt County CREDIT TO THE SECRETARY OF THE TREASURY, SPECIAL ACCOUNT Mine No.3 ) Description Assay WEIGHTS ASSAY CERTIFICATE Refining FINE OUNCES Number Before Melt of Deposit After Melt FINENESS chg.-cta. GOLD SILVER Ounces Dec Ounces Dec Gold Silver Base per oz. Ounces Dec Ounces Lot Bara Dec Boxes 16 25/28 20 9217 7647.73 7927.06 999.8 (000.2) 7925.494 A 29/32 20 18 7634.85 7851.62 999.0 (000.2) 7850.049 " 33/36 20 19 7652.99 7917.36 999.9 (000.1) 7916.568 II 37/41 25 9220 9664.17 9908.71 999.9 (000.1) 9907.719 194,708.88 194,706.71 ABLE BY CHECK NOTE:- THIS REPORT IS FOR THE INFORMATION Total Total CEPT AS NOTED OF THE DEPOSITOR AND IS OF NO OTHER VALUE. 194,675.341 VALUES C H A R G E S GOLD SILVER Melting Refining Handling Total $ 6,813,636.93 $ $ 194.86 $ $ $ XXX 17034.09 17,228.8 Bars $ 6,796,408.04 Cash Check NET VALUE Regraded Unclassified 110 Treasury Department Division of Monetary Research Date Dec. 26, 19419 To: Secretary Morgenthau There is an inside note con- taining information about Japanese occupation of the International Settle- ment and their treatment of the banks. The information is not important, but the last sentence in the letter explains why I am sending it to you. H.D.W. MR. WHITE Branch 2058 - Room 2141 - 1980 Poor OFFICE Box 0077 1601 V STREET N. W. WASHINGTON D.C. December 26, 1941 Dest Dr. White: I am in receipt of a telegram from Chungking stating that the following telegraphic news has drifted in concerning the situation In Shanghai: "1. The Japanese army occupied the International Settlement on the eighth. the vaults of the four Government Banks were sealed after examination, The enemy forced the Banks to make and hand over copy of the daily state- ment, lists of depositors of one hundred thousand dollars and over, and also British and American depositors of ten thousand dollars and over, and . table showing the names of the personnel of the Banks and their living quarters. The same treatment was accorded to the Shanghai offices of the Bank of China Nanking and Chekiang branches. The staff still had access to these offices. "2- On the ninth the Shanghai Municipal Council, in accordance with the wishes of the Japanese, announced that the Banke should continue to function. "3. On the tenth the Shanghai Municipal Council announced that all banks should reopon in order to raise funds for the enemy. The Nanking branch Shanghai office was ordered to recpen first because it had large assets available. The Shanghai branch and the Chekiang branch offices were ordered to suspend business temporarily, the former pending 8 complete examination of its accounts and the latter because of its inadequate assets. "6. On the 11th all the Chinese and foreign banks, with the exception of the Central Bank and the Farmers Bunk, reopened and transacted business. The Japanese sent men to supervise the reopening of the Banks and the business was limited to paying current deposits on which a limit of five hundred dollars per person was set. After the business day, the vaults were Agalo sealed by the Japanese." Please keep this absolutely confidential to your'self and the Cocretary because we would like to maintain this channel of information. Yours sincerely, T.V.Soong Harry D. White Presury Department Regraded Unclassified 112 18-26-41 To Bonorable manry Morgenthou From 6. Randolph Burgess You will be interested in the following cable from our people in Shanghai: "Ne have received following cable from Mackay, Shanghai. Quote. Advise Hart bank continues under control of Japanese inspector. Stop. Limited withdrawals for wages salaries personal requirements only business permitted. Stop. Our cash position excellent and can pay off depositors hundred percent. Stop. Request Hart advise all families XMAS greetings all well. Love. Unquote. Regraded Unclassified 113 The Bank National City ESTABLISHED 1018 New York Dec. 26, 1941. OFFICE OF the VICE CHAIRMAN OF THE BOARD Dentr Henry: Cables to-day show that our staff in Shanghai, Singapore, uni Vanila ure ull well and comfortable. We also herr through hio that our three men In Tientsin are living comPortably in bank apartments by courteny of Japanese headquarters. No word from Hongkong since the capture. Sincerely yours, Raudagh Honorable Henry Margenthau, Jr., Secretary of the Treasury, Washington, D. C. WRB.H Regraded Unclassified TREASURY DEPARTMENT 114 INTER OFFICE COMMUNICATION DATEDecember 26,1941 Secretary Morgenthau TO Mr. Kamarok FROM Subject: Japanese Ship Losses Japanese Ships Sunk or Damaged from December 7 to December 26 Sunk Damaged Battleships By U.S. Forces 1 1 Cruisers By U.S. Forces 1 - By Dutch Forces - 2 Total 1 2 Destroyers By U.S. Forces 3 + 1 probable - By Dutch Forces 1 - Total 4 + 1 - probable Submarines By U.S. Forces 4 - Seaplane Tenders By U.S. Forces 1 - probable Minesweepers By U.S. Forces 1 - By ? I Japanese admit - 1 Transports, Supply Ships, and Auxiliaries By U.S. Forces 5 - 1 probable 6 By British Forces 2 2 By Dutch Forces 13 2 Total 20 + 1 10 probable Regraded Unclassified 115 December 26, 1941. MEMORANDUM FOR THE PRESIDENT: Annexed is an Executive Order which amenda the outstanding "freesing control" Axecutive rder so as to apply the same control to Hong Kong property in this country. This order also provides for the automatic freezing of the assets of any other territory in case it should be occupied or overrun by the military, naval or other forces of the Axis - as for example the Philippines. This document has been cleared with the acretary of State and the Attorney General. 15/ D. W. Bell Addition ceretary of the Treasury. Cleared with Secretary Morgenthau over the telephone. (init.) DWB Mind - 12/26/41. Regraded Unclassified 116 EXECUTIVE ORDER NO. AMENDMENT OF EXECUTIVE ORDER NO. 8389 OF APRIL 10, 1940, AS AMENDED By virtue of the authority vested in me by Sections 3(a) and 5(b) of the Trading with the enemy Act of October 6, 1917 (40 Stat. 415), as amended by Title III of the First War Powers Act, 1941 (Public No. 354, 77th Congress), and by virtue of all other authority vested in me, I, FRANKLIN D. ROOSEVELT, PRESIDENT of the UNITED STATES OF AMERICA, do hereby amend Executive Order No. 8389 of April 10, 1940, as amended, in the following respects: (1) By changing the period at the end of subdivision (1) of section 3 of such Order to a semi-colon and adding the following new subdivision thereafter: (m) June 14, 1941-- Hong Kong. (2) By amending paragraph B of section 5 of such Order to read as follows: Regraded Unclassified 117 - 2 - B. The term "United States" means the United States and any place subject to the jurisdiction thereof, and the term "continental United States" means the states of the United States, the District of Columbia, and the Territory of Alaska; provided, however, that for the purposes of this Order the term "United States" shall not be deemed to include any territory included within the term "foreign country" as defined in paragraph D of this section. (3) By substituting the following in lieu of subdivision (iii) of paragraph D of section 5: (iii) Any territory which on or since the effective date of this Order is controlled or occupied by the military, naval or police forces or other authority of such foreign country; (iv) Any person to the extent that such person is, or has been, or to the extent that there is reasonable cause to believe that such person is, or has Regraded Unclassified been, since such effective date, acting 118 or purporting to act directly or indirectly for the benefit or on behalf of any of the foregoing. Hong Kong shall be deemed to be a foreign country within the meaning of this subdivision. Limitime THE WHITE HOUSE, December 26, 1941. own Regraded Unclassified 119 TREASURY DEPARTMENT Office of the Secretary December 26, 1941 PUBLIC CIRCULAR NO. 10 UNDER EXECUTIVE ORDER NO. 8389, AFRIL 10, 1940, AS AMENDED, AND REGULATIONS ISSUED PURSUANT THERETO, RELATING TO TRANSACTIONS IN FOREIGN EXCHANGE, ETC. # 1. General License No. 57 is hereby revoked. 2. The offices within Hong Kong an° occupied China of banks named in Schedule A of Goneral License No. 58, shall, e.e. of the date herecf, cease to be appointed banks, and, as if the date hereof, such offices shall also cease to be generally licensed nationals within the meaning of General Licenses Nos. 59, 60, or 61, and such general licenses are to such extent hereby revoked. 3. General License No. 13 is hereby amended in the following respects: (a) The word "Hong Konz" is Aeleted from sub- division (a) of persgraph (1) thereof; and (b) The words "Hone K-nz" and "Penanz" are deleted from subsivision (b) of paragraph (1) thereof, 4. Subparazrawh (a) of peragraph (3) of General License No. 53 18 hereby amended in the following respects: (1) A semicilan 18 substituted for the period at the end of Item (x) thereof; and (2) The following provise to all of the pro- visions of subparacraph (a) 18 added at the end thereof: Regraded Unclassified 120 TRE.SURY DEFARTMENT Office of the Secretary - 2 - December 26, 1941. GENERAL LICENSE NO. 78 "Provided, however, that the term 'generally UNDER EXECUTIVE ORDER NO. 8382, APRIL Iicensed trade area' shall not include any 10, 1940, AS AMENDED, AND REGULATIONS territory which is controlled T occupied by ISSUED FURSUANT THERETO, RELATING TO the military, navel or police forces or TRANSACTIONS IN FOREIGN EXCHANGE, ETC. other authority I Japan, Germany, or Italy, or allies thereof." A general license 18 hereby grented licensing any transac- tien which is prohibited by the Order solely by reason of the D. W. BELL fact that it involves property in which Eenz Konz. or any Acting Secretary of the Treasury national thereof, has AT any time prior to Decemb r 25, 1941, but not on or since December 25, 19/1. hr² any interest. This zeneral license shall not be defand to authorize any transpotion, if (1) such transpetion 1s by, or cn behelf This public circular affects Parts 130 and 131 and will be included in appendices to these parts. of, or pursuant to the direction -f Home Kond, or any national Sec. 5(b), 40 Stat. 415 and 966; Sec. 2, 48 Stat. 1; 54 Stat. 179; Ex. Order 8389, April 10, 1940, as amended by Ex. Order thrreof, or (11) such transaction involve property in which 8785, June 14, 1941, Ex. Order 8832, July 26, 1941, Ex. Order 8963, December 9, 1941, and Ex. Order 8998, December 26, 1941; Hong Kond, or any national thereof, has et any time on or since July 26, 1941. Regulations, April 10, 1940, 88 amended June 14, 1941, and December 25, 1941, het any Interest. D. W. BELL Acting Secretary of the Transury. *Part 131; - 3/0, 5(b), 40 Stat. 415 ano 966; Sec. 2, 48 Stet. 1; 54 Stot. 179; Ex. Order 8389, April 10, 1940, ER amende? by Ex. Order 8785, June 1, 1961, Ex. Or'er 8832, July 26, 1941, Ex. Order 8963, December 9, 1941, and Ex. Order 8998, December 26 1941; Resulations, April 10, 1940, 68 Amendod June 14, 1941, and July 26, 1941. Regraded Unclassified 121 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Press Service Saturday, December 27, 1941 No. 29-30 The President last night issued an Executive Order freezing Hong Kong assets in the United States. This action was taken as the result of the fall of Hong Kong into Japanese hands. Under the new Executive Order all financial and trade transactions in which Hong Kong interests are involved are brought under the control of the Government and criminal penalties for any violations are imposed, The new Executive Order also provides for the automatic freezing of the assets of any other territory in case it should be occupied or overrun by the military, naval or other forces of the Axis. o0o Regraded Unclassified 122 Y DEPARTMENT OF STATE Washington In realy refer to If $40.51 Prozen Credita/4812 December 26, 1941 The Secretary of State presents Date compliments to the Conorable the Secretary of the Treasury and transmits herewith airmail despatch no. 3148 of December 18, 1941 from the American Subasay at Habana, and its enclosures, D copy of the Embasey's note no. 918 of December 17, 1941 to the Foreign Office, regardin the vemicistration of the freezing control measures under existing war conditions. enclosure: From Habana, no. 3148, December 18, 1941. 00py:hnd:12/30/41 Regraded Unclassified 0 o P+ 123 Y No. 3148 Habana, December 18, 1941 AIR MAIL (Department's circular telegram of December 15, Subject: (1941, 10 p.m., regarding administration of (freezing control measures under eristing war (conditions The Honorable The Secretary of State, Washington, D. 0. Sir: With reference to the Department's circular telegram of December 15. 1941, 10 p.m., requesting the Embassy to call the appropriate Cuban authorities' attention to the administration under existing wer conditions of the freezing control measures which were placed in effect by our Government in June 1941, I have the honor to enclose a copy of the Embassy's note No. 918 of December 17, 1941, to the Foreign Office, summarizing the contents of the Department's telegram under reference and expressing the hope that in the interests of Western Hemispheric defense, similar measures may be adopted without delay by the Cuban Government, With reference to that part of the telegram suggesting that measures be adopted by Cuba to prevent all business, finan- cial or trade transactions with Germany, Italy or Japan, the Department's attontion is invited to the Embassy's air mail despatch No. 3143 of December 18, 1941, enclosing a copy and translation of Cuban Decree No. 3366 of December 15, 1941, which, inter alia, prohibits the exportation of all means of payment to countries at war with Cuba, The Department will recall, moreover, Regraded Unclassified 124 - 2 - that Cuban Decree No. 3343 of December 12, 1941. subjected to the supervision of an Enemy Property Custodian all business. financial and trade transactions in Cube engaged in by alien Anemies and froze all funds in Cuba belonging to such aliena (Please gee despatch No, 3119 of December 16, 1941). A number of Italian, German and Japanese nationals suspected of intuical activities have been taken into custody and the Case Government can, in the Embassy's opinion, be relied upon to take whatever SLEPS way be considered necessary to control any eneay alien activities considered dangerous to the defense of the Western Hemisphere. In fact, Decree No. 3343 ANDERSE in some ways to provide for more dractic action than the measures set forth in the Devirtment's telegram of December 15. In further connection with Decree No. 3343. the Cuban Government has issued two additional decrees, No. 3382 and No. 3384. both of December 16, 1941. and promulgated in Official Gagette No. 719 of December 17, 1941, appointing Ranuel Perez Benitoa, the Subsecretary of National Defense, as Enemy Property Quatodian, and creating the Office of Enemy Property Custodian, to be located in the ..inistry of the Interior. According to Decree No. 3382, Dr. Mariano Domingo Lorales del Castillo, Civil Service Commissioner, has been appointed Assistant Custodian, and his services, n.a well as those of Mr. Perez Benitoa, are to be gratuitous. Respectfully yours, 5. Inclosure: Cooy of noté No. 918 of December 17, 1941 Me No. 651 49%/cd A true copy =6 She rigned original. Copy:hmd:12/30/41 Regraded Unclassified C 0 ? 125 Y Enclosure to despatch No. 3148 of December 18, 1941, from the Embassy at Habana (COPY) URGENT No. 918 Habana, December 17, 1941 Excellency: Pursuant to instructions from my Government, I have the honor to bring to the attention of Your Excellency's Government the following information regarding the administration under existing war conditions of the freesing control measures which were placed in effect by my Government in June 1941, affecting German and Italian activities in the United States. As Your Excellency's Government is aware, the above mentioned freezing control measures place under the control of my Government all financial, business and trade transactions in which Germany or Italy or any blocked national of Germany or Italy has any interest, by prohibiting such transactions unless they are licensed, Among other things, payments, transfers and withdrawals are not allowed from any account in banking institu- tions if Germany or Italy, or any blocked national of Germany or Italy has any interest in such account, except as so authorized.. All business, financial or trade transactions between the United States and Germany and Italy are, of course, prohibited. The application of the above described controls to the personal activities of nationals of Germany or Italy resident in the United States, and to local business conducted by these nationals in which neither Germany or Italy or any national thereof resident in Germany or Italy has any interest, has been based on the determination of which of those nationals are suspected in any way of carrying on activities inimical to the defense of the United States. The selective method outlined above is facilitated by the fact that my Government possesses current information collected by various methods, including information made available under the Alien Registration Act. which malces it practicable to separate immediately those aliens who are suspected of such activities from those who are clearly above any such suspicion and to intern those German and Italian nationals as well as Japanese who activi- ties are deemed to be inimical to the United States. His Excellency Dr. Jose Manuel Cortina, Minister of State, Habana, Cuba. Regraded Unclassified 126 - 2 - Some modification has been made in the treatment of nationals of Japan. As Your Excellency was informed in my note No. 885 of December 9, 1941, my Government, upon the outbreak of the war with Jepan, placed an immediate stoppage on all financial, commercial and trade transactions in which Japan or her nationals had an interest, subject to the issuance of appropriate licenses in the future. Since then, any Japanese nationals in the continental United States not taken into custody may obtain minimum living expenses from bank accounts or salaries and Japanese nationale engaged in agricultural pursuite essential to the economy of the locality in which they are located day, with minor exceptions, engage In all transactions incident to the normal conduct of such business. This particular provision appears to be of especial interest to Your Excellency's Government, in view of the existence of colonies of Japanese agriculturists in the Isle of Pines and elsewhere in Cuba. A stringent control has been exercised over German and Italian banks and over German and Italian business enterprises which are owned or controlled by Germans and Italians not resident within the Western Hemisphere. Since the outbreak of the war, representatives of my Government have taken custody of important German and Italian banking and financial enterprises throughout the United States, and have been instructed, where necessary, to prevent the access of persons to the premises of such enterprises and to prevent the destruction or removal of their books, records or other property. This action has also been taken as to business enterprises which are owned or controlled by Germans and Italiano not resident within the Western Hemisphere. Many of these concerns are denied the right to engage in business at all and will have to be liquidated. Certain others of these businesses which are important to the United States' economy are now permitted to engage in purely domestic business subject to the detailed supervision of representatives of my Government. Of course, no transactions are permitted in which Germany or Italy, or any national thereof not recident in the Western Homisphere has an interest. Steps are taken in all such cases to prevent Germany or Italy or nationals thereof residing outside the Western Hemisphere from exercising any control whatsoever over the affairs of such concerns, and in many cases my Government may take over the interests of such persons in the concerns. All these controls are, of course, in addition to the controls outlined previously in this note, under which German or Italian nationals resident in the United States whose activities are deemed likely to be inimical to the interests of the United States are tuken into custody and deprived of the right to engage in any business whatsoever. Regraded Unclassified 127 3 - In conformity with inter-American declarations of solidarity in the event that the peace, security or territorial integrity of any American Republic is threatened, particularly of Resolution IV adopted by the Second Meeting of Ministers of Foreign Affairs of the American Republics, my Government presumes that Your Excellency's Government will be disposed to adopt appropriate measures to curb German, Italian and Japanese economic and financial activities in the Western Hemisphere. The measures which my Government hopes Your Excellency's Government might find it possible to adopt are measures which will accomplish the following results: 1) Prevent all business, financial or trade trans- actions between Germany, Italy or Japan and Cuba; 2) Prevent all business, financial or trade trans- actions in Cuba which are engaged in for the benefit of, or by persons controlled by, Germany, Italy or Japan or nationals thereof not resident in the Western misphere; 3) Prevent any business, financial or trade trans- actions in Cuba by nationals of Germany, Italy or Japan or their agents which are inimical to the defense of the Western Hemisphere. 4) Subject to supervision, all business, financial and trade transactions in Cuba engaged in by nationals of Germany, Italy or Japan; and 5) Take into custody such nationals of Germany, Italy or Japan who are engaged in activities dangerous to the defense of the Western Hemisphere. My Government hopes that it may be possible for Your Excellency's Government readily to adopt the appropriate controls, inasmuch as the defense of the United States and of each of the other American Republics will, it is felt, be in danger if the adoption of such neasures fails or is delayed. Please accept, Excellency, the renewed assurances of my highest consideration. AFN/cd GEORGE S. MESSERSMITH Copy:hmd:12/30/41 C 0 P 128 Y DEPARTMENT OF STATE WASHINGTON In reply refer to FF 840.51 Frozen Credits/4689 December 26, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits herewith a. copy of airmail despatch no. 2366 from the American Legation at Quito, dated December 11, 1941, con- cerning economic measures taken against the Japanese by the Government of Ecuador. Enclosure: From Quito, no. 2366, December 11, 1941. eh:copy 12-29-41 Regraded Unclassified Quito, December 11, 1941. 129 No. 2366 Subject: Economic Measures against Japanese STRICTLY CONFIDENTIAL The Honorable The Secretary of State, Washington. Sir: I have the honor to report that the en claire portion of the Department's circular of December 8, 6 p.m., after being typed in memorendum form, was handed to the Foreign Minister late December 9, after which my telegram No. 515 of December 9. 6 p.m., vas despatched. As the Foreign Minister vas not entirely clear about the extent to which the banks in Ecuador might go in duplicating the procedure adopted by our Government, the memorandum was gone over point by point with the Minister of Finance during the afternoon of December 10, who felt reasonably sure that Ecuador was following the procedure we have adopted in the United States except as to 1-b. There are very few Japanese in Ecuador, no banks, and only two or three shops, so the Finance Minister thought it unlikely that any Jap would have a safety deposit box except possibly some diplomat or geologist. Mr. Illingworth agreed to take the matter up with the President tomorrow and see if the banks could be canvassed, 80 that they might deny access of any Japanese to & safety deposit box. It was suspected that the Japanese Charge might have a safety box at La Previsora Bank: if BO, this was to fell under the above arrangement. Japanese businesshas been on a declining scale for some time and the Finance Minister doubted, excluding bank deposits, that there was more than $90,000 of Japanese money in Ecuador. Of this, he thought $40,000 might be in cash and the other $50,000 in notes or open accounts not yet due. These obligations grew out of sales made by representatives of Japanese firms. Minister Illingworth did not remember that B. single Japanese acted as a merchandise broker, most of the sales agents being foreigners or Ecuadorens. While I was sitting at his desk the Foreign Minister telephoned to say that the Japanese Charge requested permission to buy a draft for $19,000. The Finance Minister replied that the Charge had called upon him before noon and made the same request, which he had denied, but had referred the Charge to the Foreign Office. Dr. Tobar evidently asked Mr. Illingworth's views, judging from the other end of the conversation which I heard. Illingworth replied that Regraded Unclassified - 2 - 130 he vas against giving the Japs one cent, except for the indispensable require- ments of the Legation. Last month they got $1,000, this month $1,200, but he favored giving them no more than the monthly requirement. 8/158,000 in the Previsora Bank On the 10th we received a telegram from the Consulate at Guayaquil stating that the above amount in sucres vas deposited in La Previsora in Guayaquil to the name of Nippon Yusen Kaisha, Rio de Janeiro. S/188,000 in Banco Discuento (Guayaquil) On the 11th we received from the same source advices that the above deposit was held to the credit of the Yokahama Special Bank. The deposits mentioned above, and others which might exist, fall under the regular Ecuadoran blocking provisions. CONFIDENTIAL: As this despatch is being closed, I learn that Officials of this Government claim not to have legal right to prevent the use of safety deposit boxes, or to block the economic activities within Ecuador of private Japanese firms. I learn from a confidential source that should Ecuedor receive assurances from us covering the protection of the Galapagos Islands from Japanese attack, the country would be willing to break relations with or declare war against Japan, after which the necessary measures would be taken. Respectfully yours, Boas Long American Minister 850 BL:jgm A true copy of the signed orig. ehroopy 12-29-41 Regraded Unclassified è 0 131 P Y DEPARTMENT OF STATE WASHINGTON December 26, 1941 In reply refer to FF 840.51 Frozen Credits/4688 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits herewith a copy of air mail despatch no. 2364 of Decem- ber 11, 1941 from the American Embassy at Lima, sub- mitting a translation of the regulations relating to the embargo of Japanese funds and the movement of merchandise consigned to Japanese firms issued on December 10, 1941 by the Peruvian Government. Enclosure: From Lima, no. 2364, December 11, 1941 Copy:ec:12-31-41 132 EMBASSY OF THE UNITED STATES OF AMERICA Lima, December 11, 1941. No. 2364 Subject: Regulations Governing the Embargo of Japanese Funds in Peru The Honorable The Secretary of State, Washington. Sir: I have the honor to refer to the Embassy's despatch No. 2357 dated December 10, 1941, relating to the embargo of Japanese funds and the movement of merchandise consigned to Japanese firms, and to submit a translation of the regulations pursuant thereto issued on December 10 by the Peruvian government, as follows: Whereas: In compliance with article No. 3 of the supreme decree of December 8 concerning the blocking of bank accounts and securities of Japanese entities and individuals, the local banking institutions have requested explanations from the Superintendency of Banks, which has submitted such questions to the government through the Director General of Finance: It being convenient to dictate general rules of procedure govern- ing the execution of the aforementioned decree: Be it resolved: 1. The banks, the Lima Savings Bank (Caja de Ahorros de Lima) and the Caja de Depositos y Consignaciones are hereby authorized to debit the blocked accounts with all kinds of obligations of Japanese firms at the time of maturity, pro- vided that such obligations were in possession of the banks by reason of advances, discounts or other credit operations before December 8. Regraded Unclassified 133 2. Drafts and other collections on Japanese firms which were hele J the banks, by the Lima Savings Bank (Caja de Ahorros de Lima) and by the Caje de Depositos y Consignaciones be- fore December 8, 1941, any be paid by the banks to the debit of the blocked accounts, provided that such payments are made to non-Japanese firms. 3. In the event that the amount of any such collection belongs to a Japanese firm, the amount of such collection will be credited to the account of the same, and in case no account is carried one will be opened for such purpose. 4. Checks issued by Jayanese firms before December 8, 1941, which may have been delivered in payment to the benks. to the 14mm Sevings Bank (Cajn de Ahorros de Lima), to the Caja de Depositos y Consignaciones, municipalities, custombouses end public offices may be debited to the blocked accounts by the banks, paying the amounts directly to the entities which re- coived the checks In payment, no endorsements being admitted In such cases. N Checks from Jamanese firms delivered to customs brokers before December 8, 1941, are included in the provisions of the pre- ceding article, on condition that the administrators of the respective customhouses certify that the same refer to clear- ances of merchandise effected prior to that date. 5. All checks drawn on blocked accounts prior to December 8, 1941, may be charged to such accounts and the amounts paid to the legitimate holders, provided that the latter prove before the Superintendency of Banks that said checks rertain to commercial transactions effected prior to December 8, 1941, The holders collecting such checke must be persons whose accounts are not included in the provisions of the decree of December 8, 1941. 7. Japanese holders of savings deposit-books my withdraw up to S.-500 monthly, it being understood that this withdrawal may be made only from one bank or from several banks but for the aforementioned total amount each month. 8. In order to fecilitate the operations referred to in the foregoing articles, the banks ney effect such operations con- cerning blocked accounts through the Superintendency of Banks, it being therefore unnecessary that such operations be effected through one single tank. 9. Banks having pending contracts with Jamanese firms stimulating the supply of funds in cash for the operation of agricultural and industrial enterprises are hereby empowered to comply with such contracts, but cash deliveries must be made in sccordance Regraded Unclassified 134 with the requirements of the business which was the subject of the loan. For such purposes, each bank will proceed in agreement with the Agricultural or Industrial Banks, whenever agricultural or industrial transactions are involved. Said banks may adopt such safety measures for collection as may be deemed proper in accordance with their organic laws AS though the contracts were celebrated directly with them. 10. Whenever the contracts referred to in the preceding article involve only the granting of credit and loans, without specific purpose to finance an agricultural or manufacturing business, the contract shall be considered as terminated on December 8, 1941, without any subsequent obligation to grant such advance. 11. All accounts associated or combined with Japanese firms are included under the decree of December 8, 1941, and under the provisions of the present decree. 12. Checks drawn in favor of Japanese firms may be accepted by the banks on which they are drawn for the sole purpose of crediting such checks to the accounts of the Japanese firms which present them for collection, accounts being opened to such firms if none are carried, provided that the checks are drawn against accounts which are not blocked, that they were dated prior to December B, 1941, and that evidence is submitted to the Superintendency of Banks to the effect that they were issued in payment of obligations due before the same date. 13. Drafts on Japanese firms whose accounts are blocked, drawn and accepted before December 8, 1941, to the order of non-Japaness firms may be paid debiting the banking accounts of Japanese drawees, provided that proof is submitted to the Superintendency of Banks that such drafts were issued in connection with transactions celebrated prior to December 8, 1941. 14. Checks drawn against blocked accounts may be paid in cash when- ever the amounts are dedicated to the payment of salaries, wages, government and municipal taxes on a scale equal to that recorded in the preceding month by the payer, which fact will be verified by a member of the Superintendency of Banks at the time of pay- ment of the payrolls. 15. Safety-deposit boxes in the name of Japanese firms, whether or not combined with firms which are not Japanese, may be opened only with the attendance of representatives of the bank and of the Superintendency of Banks for the sole purpose of withdrawing personal documents. No titles to property, securities, cash or any other negotiable paper may be withdrawn. Regraded Unclassified 135 16. All partnerships which according to their by-laws operate under Japanese names or in which the majority of the share- holders or directors are of Japanese nationality, are included in the provisions of the decree of December 8, 1941, con- cerning the blocking of accounts. Register and communicate. Dasso." Respectfully yours, For the Ambassador, Julian Greenup, Commercial Attache. Enclosure - Clippings from local newspapers. 851 HC-me A true copy of the signed original. me Copy : 1-1-42: bj C o P 136 Y DEPARTMENT OF STATE In reply refer to Washington FF 840.51 Frozen Credits/4686 December 26, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits herewith air mail despatch no. 2357 of December 10, 1941 from the American Embassy at Lima, and its enclosure of certain newspaper clippings reproducing two decrees treating with Japanese funds blocked by the Peruvian Government and the control of imports from Japan. Enclosure: From Lima, no. 2357, with enclosure. Copy:hmd:12/30/41 Regraded Unclassified C 0 137 P Y EMBASSY OF THE UNITED STATES OF AMERICA Lima, December 10, 1941. No. 2357 Subject: Japanese Funds Blocked by Peruvian Government Control of Imports from Japan The Honorable The Secretary of State, Washington. Sir: I have the honor to submit the following information supplementing the Embassy's telegram No. 669 dated December 9. 1941, with reference to the blocking of Japanese funds by the Peruvian government and the prohibition on the movement of merchandise of Japanese origin without special license. The Department will be interested in knowing that the Peruvian government acted with considerable rapidity in this case. The American government's wish was made known at about 10 a.m., following which the cabinet officers reviewed the situation, drafted, approved and signed the decrees and had them ready for delivery to the newspapers by 6 p.m. Regraded Unclassified 138 - 2 - The decree of December 8, 1941, which blocked Japanese funds is translated as follows: The funds in bank accounts and securities belonging to Japanese individuals and organisations are declared blocked. The Superintendent of Banks will proceed today to establish a registry of existing accounts in banking institutions of credits, savings and other classes belonging to Japanese throughout the republic. While the registry authorized in the preceding paragraph is being formed, and the regulations appropriate in the prevailing situation are being dictated, the Superintendent of Banks in agreement with the Director General of Finance may authorize the payment of checks or drafts by banks up to a prudent sum indispensable for the payment of vital and urgent necessities duly proved. The prologue of the decree states that the war situation which has arisen in the Pacific may produce grave disturbances in the national economy, which it is the duty of the government to foresee; that the interests of Japanese commerce in the republic may be influenced by causes arising from the war, that there may be repercussions in the commercial, economic and financial life of the country: and that it is necessary to provide regulations in the matter in order to malce it impossible that domestic interests be affected by the situation. Another decree of the same date controlling the movement of merchandise is translated as follows: The customs houses of the republic will not despatch any merchandise of Japanese origin without a special license from the Ministry of Finance, Except by permission from the Ministry of Finance, it is prohibited to export all products imported which may be necessary for domestic in- dustry and commerce, as well as manufactured com- modities which are indispensable in the national economy. This prohibition extends to merchandise in transit deposited in the customs warehouses. The Minister of Finance is authorized to draw up & list of the articles of which the exportation is prohibited by this decree and also to prescribe the measures necessary for accomplishing the same, Regraded Unclassified 139 - 3 - The prologue of the decree states that the war situation in the Pacific may bring as a consequence restrictions in maritime traffic which will reflect on the national economy, depriving commerce and industry of the elements necessary for their existence; and that it is necessary to prepare regulations which anticipate any abnormalty in national economy. Newspaper clippings reproducing the two decrees referred to are attached hereto. Respectfully yours, For the Ambassador Julian Greenup, Commercial Attache. Enclosures: Newspaper clippings reproducing the two decrees referred to. 851 JG:ds A true copy of the signed original. Copy:hmd:12/30/41 C 0 140 P Y DEPARTMENT 07 STATE WASHINGTON December 26, 1941 In reply refer to FF 840.51 Frozen Credite/4675 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmite herewith R. copy of air mail despatch no. 408 of Decem- ber 10, 1941 from the American Embassy at Panama, with its enclosures, clippings from the Estrella de Penama, giving the text of the pertinent decree law prohibiting the transfer of gold and funds belonging to the Japanese Government, banks, companies or individuals, as published in the December 9 issue. Enclosure: From Panama, no. 408, December 10, 1941, with enclosures. Cogy:bj:12-20-41 Regraded Unclassified AIR MAIL 141 Panama, December 10, 1941 AIR MAIL No. 408 SUBJECT: Decree Law Prohibiting Transfer of Gold and Funds Belonging to Japanese Government, Banks, Companies or Individuals. The Honorable The Secretary of State, Washington. Sir: I have the honor to refer to my telegram No. 486 of December 8, 11 a.m. regarding the prohibition by the Panamanian Government of the transfer of gold and funds belonging to the Japanese Govern- ment, banks, companies or individuals, and to enclose clippings of the text of the pertinent decree as published in the December 9 issue of the Estrella de Panama, together with clippings of an English translation. It will be noted that in addition to prohibiting the exportation of gold or other funds or valuables belonging to the Japanese Govern- ment or to Japanese subjects or companies, the decree further authorises the Executive Power to adopt similar measures against any state or states, and citizens or companies thereof, which may constitute a menace to the Republic of Panama or to the neutrality or security of the Panama Canal. Violations of the decree are to be punished by a fine of B/1,000, or arrest for three months. In accordance with Article V of the decree, it went into effect immediately upon publication in the local newspapers; that is to say, on the morning of December 9. Respectfully yours, Edwin C. Wilson Enclosures: HEM/nw Clippings from the Estrella de Copy:bj:12-30-41 Panama of December 9 Regraded Unclassified Enclosure No. / to Drugstch No. 406 dated Dr. from the n° Paulima Japan's Funds HereFrozen By Govt's Decree Unlied States of America line of- ficially Informed the Government of Panama that yesterday military forces of the Imperin] Government Prohibit Exportation Of of Japan aftacked, in en unexpect- ed manner, the military bases of Valuable Held Here By the United States situated at Ha- wall, and the Philippines; Japanese Subjects "3.-That in the General Treaty signed between Panama Funds of the Japanele Govern- and the United States on meal or of Japanese or in- March* 2. 1936 If is established In atitutions in the Republic were its Article X that In the case of e frozen by an executive decree las conflagration ur any threat of es- sued yesterday by the Government greenion "which would endancer of Panama. the security of the Republic of Pa- The decree, signed by President nama or the neutrality or security Ricardo Adulfo de la Guardia and of the Paname Cane!" the two Gov. all of the members of his L'abinet eramente "wilt take such measures as well at by the members of the of prevention and defense as they National Assembly's Advisory Com may condider necessary for the pro- mittle, prohibits the exportation of tection of their common Interests", cold or other valuables belonging Decrees to Japanese and suspends payment "Article 1.-The exportation nf by local Individuals of institutions gold or other funds of valuables be- of eredits due them. longing to The Imperis] Govern- The text of this decree fullows: ment of Japan. to lb subjects of "The President of the Republic loridical persons constituted by by virtue of the extraordinary aux them. in hereby prohibited; tharity armeded him by Law No. Article 2.-The banking Institu- 41 and after consulting the opinion Hons or any other Judicial or na- of the Cabinet Comeil and the Spr- turst persons In whose power there clai Commission elected in should exist funds or credits in ance with the provisions of Ordinal favor of the entitles DT persons 20, Article " of the National C'un- mentioned in the forening article. stitution, and shall retain These funds and ale "Considering Male ferer refergive navment no 1-That the Government AT the and credito For (he purpose here in mentioned. depositions aboll be appointed with the obligation of reporting to the Ministry of Fin- since and Treasury, within a period of Dive days, on the valuables 20- tained or the credite payable. "Article 3.-Any violation of the previsions of this Decree shall be punlibable with . fine of one those- sand Balboas (B.1.000) or arrert for three months, which penalty shall be Imposed by the Alcalde of the respective district, "Article 4.-The Executive Pow- or is hereby authorized to adopt analogous measures against any state or states, subjects or juridical persons formed by them. which may constitute - menace to the Re- public of Panama or against the neutrality or security of the Pan- ama Canel because of they being at war with the Unlied Sistes of America "Article 5-Thle decree goes In. to effect immediately upon publics allon in the Invel newspapers Touct 1A P una M) the oth alay of December of the your 1941". Regraded Unclassified 143 ? Y DEPARTMENT OF STATE WASHINGTON December 26, 1941 In reply refer to yy 840.51 Frozen Credits/4811 The Secretary of State presents his compliments to the Monorable the Secretary of the Treasury and transmite nerevith a copy of airmail despatch no. 425 of December 17. 1941 from the American Embassy at Panama, together with its enclosures of clippings from the Panama America of December 13, 1941, concerning a decree freezing Japanese, derman and Italian funds and creating an Alien Property Custodian.- Enclosure: From Panama, no. 425, December 17, 1941. with enclosures. Copy:1c:12/30/41 Regraded Unclassified 144 Panama, December 17, 1941 455 RAIL To. 425 SUBJECT: Decree Freezing Japanese, German and Italian Funds, and Creating Alien Property Custodian. The Sonorable The Secretary of State, Washington, Sir: I have the honor to refer to my telegram No. 507 of December 14 stating that on December 13 the Penamanian Gov- arnment issued a decree freezing Jamanese, Germen and Italian funds and creating an Alien Property Custodian to administer properties belonging to persons of these nationalities, the Spanish language text of this decree 28 published in the December 13 issue of the Panama America, is enclosed herewith. The substantive part of the decree is ae follows in translation; "Article 1. Regraded Unclassified - 2 - 145 "Article 1. Banking institutions OT any person, natural or juridical, having securities or credits belonging to Jananese, Germans and Itelians or to firms constituted by any of these, or to subjects of any state threatening the security of the Republic or of the Panama Canal, are 1p00 facto constituted depository thereof and will notify immediately the Alien Property Custodian. "Article 2. Banking institutions will not permit the opening of safe deposit boxes held by the above mentioned aliens and will furnish the Custodian with a list of the renters of these boxes. "Article 3. Notaries Public are prohibited from issuing documents or from certifying documents purporting to sell, nortgage, rent, etc., goods belonging to the persons mentioned in this decree, "Article 4. The Public Registrar vill refrain from issuing documents in which the above mentioned aliens mortgage or celebrate westever contract in relation with their registered immovable goods. "Article 5. The Administration of Internal Revenues will adopt 5. similar measure with respect to the transfer of castings, 8.8 will the district mayors with reference to the sale of automobiles. "Article b. The Custodian Mll take possession of all property belonging to Japanese, lermans and Italians na proceed to administer then, deducting expenses. "Article 7. All funds belonging to individuals of the above mentioned nationalities will be deposited in the Danco Ancional in - special account set up for the purpose." The docree was signed by the President of the Regublic end the Minister of Finance and Treasury. otices to report to the Alien Property Custodian in the DOVO sense have already appeared in the press. Jr. Forncio F. ALPARO has been supointed Alien Property Justodian. Dr, Alfaro vra, until e. few months ngo, an alternate Justice of the supreme Court. Respectfully yours, Sawin 0. Wilson Inclosures: Olippings of Penama Ameribe of December 13. 1941 X/W Copy/le+12/30/41 Regraded Unclassifie December 13:1941 ncautan los Bienes del Eje El Gobierno se y Teexportación de oro, valores etc, etc., DECRETA: Articulo- In- Las Institucio- hace cargo de Des banearias o evalquier parto sona. natural n Aurídica que tengs valores o créditos perio- todos ellos aquí nocientes a laponeses. alema- nes " Itallanos o a sociedades constituidas por signature de ellos o a. múbditos de cualquier Estado que amenace To Son bienes de Nazis, ridad de In República n del On- Italianos y Japoneses nat de Panamá, meda de him cho constituide depositaria de El Gobierno Nacional, de a- ellos y dark inmeffiatamente a. cuerdo con las facultades que viso nl Customer de Blenes RX- le confiere la Ley aprobada por transicing la Asamblea Nacional, por me- Articulo 20- Las Institucto- die de In cual se le declara in nos bancarias I/D permitirán guerra at Impetto Japonés dis- In. apertura de las cains de puso hoy ineautar por el perio- denúsito que Vegion los evote do que duren Ins hostilidades sados extranjeros V suministra- rão la Custodio una lista de todos los bienes, propiedar y los arrendatarios de PERF coins baberes de los Japoneses, ale- Atticulo- 30- Queda proble manes e Italtanos que hayan bido a los Notarios N otorra- en la República de Panagia. miento de Escrituras o la Cer- Oportunamente se nombrará la tificación de documentos nur persona que tendrá a au cargo tengan por objeto Vender, hi- In custodia de extor bienes e poteent, arrendar. etc. hienes Inmuebles y en las altas esferas pertenecientes a Ina personas oficiales se dice que este nom- mencionadas en este decento bramiento recaerá en et conoci- Atticulo 40-- El Registro Pi do abogado de esta localidad, bilco se abstendrá de dar not- Dr Horaclo F. Alfaro. so a estrituras en las cuales for A continuación damos el tex- menclonados extranjeros, Elpose to del decreto expedido en in tequen o celebren cualquier con mañana de hoy: train en relactón enn los hip- Presidente de la República, nes Immuebles que tengan Im- Tacuftades Ingales, eritos. CONSIDERANDO: Articulo 50-- Isual medida Que la Asambles Nacional adoptorá la Administración Go expidió ayer in Ley 104 por la neral de Rentas Internes 100- cual declare la existencia de pecta el traspaso de cantima un estado de guerra entre la y for Alcaldes del Distrito en República de Panamá y el Ten- relación con la venta de auto- perio del Japón y se toman 0- móviles. tran medidas 29 relación a in Artículo en El Custodio to conflagración sctual: mará posesion de todal for kije- que ean ley tue sancionada a- nes de los Japoneser, yer mismo y, por consigulente, e italianos y procede. a a ad- está en vigor, por mandato ex- ministratles deduciendo los IN preso del Legislador: tos que ello demande. que entre las autorizaciones Articulo 70- Todos los fon- concedidas al Poder Ejecutivo dos pertenecientes a individual flgura la de adoptar Tespecto de las mencionadas nacional)- a toda persona Juridica o na- dades werdin Depostiative en el tural o e tidad politica las me Banon Nacional en - didas de prevención o repre- perful, que se llevata al alón que se hagan necesarias 10. para la defensa pacional y la Artículo & Corresponde at de los paises altados y prohi- Podet- Elecotico por be el comercio con los súbditos get Ministerio de Haricade del Imperto Japonés y sur 8. et nominamiento ans DEF Blados e Impido la importación sonal submitteen del " et de Administraçores de joi ertablecimentes an ministradores glie debrn tat fianca para au maneto: Cominiquese Publiquese Trada en Patrama a les 11 fine del was de Diclemione de mil novertantés cuarenta non Presidente de to Remitting Ricardo Adolfo de Tx Guardia. El Ministry de H V Town José A. Sona J. Regraded Unclassified copy CONFIDENTIAL 147 PARAPHRASE A telegram of December 26, 1941 from the American Concul at Kunming reads substantially as follows: The lovember figures of the statistical department which has been established by the Kinnan-Burge Highway Doctorion allow net arrivale at Kunsing by way of the Sighway of 17,500 tone (7) 6,019 trucks, The total 19 tosed, it will be noted, upon almost three tons net cargo ez truck arriving in Kunmine. Although conalgnor or carizations as well as transport agencies secregate tonnege in the figures, types of goode are not indicated. Mojor Vilson is of the opinion that 1,570 tone ne shown for private commercial cargo is too low. Of the 14,500 tons given R.S October arrivale by the statistical depart- ment 3,200 were for Government organizations, 10,000 were Lilitary supplies, apparently including gasoline, and fuel for commercial trucks made up the remainder. This total 1e about the sane it to soid AB the total for September but there is an increase of 2,000 tone in military supplies. Copy:ec:1-5-42 Regraded Unclassified TREASURY DEPARTMENT 148 INTER-OFFICE COMMUNICATION Chaunces DATE December 26, 1941 TO Secretary Morgenthau CONFIDENTIAL FROM Mr. Mistrich Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns £184,000 Purchased from commercial concerns £ 6,000 or the former amount, £65,000 were sold to a cable company and £64,000 to an oil company. Open market sterling held steady at 4.03-3/4. There were no reported transactions. The Canadian dollar discount widened to a new low of 14-3/8% by mid-ufter- noon, but later recovered. The final quotation was 13-7/8%. as against 13-3/4% on Wednesday. One New York bank, which has been a steady seller of Canadian dollars during the past week, was believed to have been in the market this morning and early afternoon. That bank has reportedly been executing an American customer's order to convert his Canadian funds into U. S. dollars. In New York, closing quotations for the foreign currencies listed below were as follows: Argentine peso (free) .2355 Brazilian milreis (free) .0516 Colombian peso .5775 Mexican peso .2065 Uruguayan peso (free) .5310 Veneruelan peso (free) .2700 Cuban peso Par We purchased $1,125,000 in gold from the earmarked account of the Bank of Mexico. No new gold engagements were reported. In London, spot and forward silver were unchanged at 23-1/24 and 23-0/16d, respectively. The U. S. equivalents were 42.67# and 42.780. Handy The and Harman's Treasury's settlement purchase price for foreign silver was also unchanged at 35-1/84. price for foreign silver vas unchanged at 35#. We made no purchases of silver today. & Regraded Unclassified