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Volume 488, January 24 – January 26, 1941
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Volume 488, January 24 – January 26, 1941
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 488
January 24 - 26, 1942
Regraded Unclassified
- - 1 ,
Book Page
Airplance
Aircraft despatched - British Air Commission report -
1/26/42
488
135
Shipments to British Forces - Kamarck report -
1/26/42
137
- = -
Brazil
See Latin America
British Purchasing Mission
Federal Reserve Bank of New York statement showing
dollar disbursements, week ending January 14, 1942..
141
Business Conditions
Hass memorandum on situation, week ending
January 24, 1942
228
- C -
Canada
Dollar exchange problem discussed in letter from
Clark (Deputy Minister of Finance) - 1/24/42
59
Cancellation of $1 billion of Great Britain's
outstanding debt to Canada and continued aid up
to $800 million per year without repayment
obligation announced - 1/26/42
146
a) Prime Minister's speech announcing:
See Book 489, page 208
China
(Frese, Walter F.
(Taylor, William H.
Wives notified of present status - 1/24/42
54
Loan:
Summary of conclusions and considerations - Coe
memorandum - 1/24/42
61
Congressman Somers (New York) resolution setting up
Committee to investigate benefits resulting to
China from extension of United States credit,
etc. : Correspondence between Treasury and Somera -
1/26/42
175
Currency, United States
See United States
- D -
Defense Savings Bonds
See Financing, Government
Regraded Unclassified
- 2 -
Epstein, Henry (Solicitor General of New York)
Book Page
See Revenue Revision
Exchange Market
Resume's - 1/24/42, 1/26/42
488
76,272
- } -
Financing, Government
Defense Savings Bonds:
Field Organization News Letter, No. 36 -
1/24/42
46
Unfilled orders at Federal Reserve Banks and
Post Offices, January 12 to date - 1/24/42
47
Stock of Series E on hand, January 15 to date -
1/24/42
50
Great Lakes Steel Corporation plant, Boorse,
Michigan, presented with Minute Man flag by
HMJr - 1/25/42
91
Organization chart - 1/26/42
213
Morris, Dave H., Jr., authorized to designate
issuing agents - 1/26/42
215
Comparative statement of sales during first 21
business days, November, December, and
January
218
Taxation of Defense Savings Bonds - Vandenberg-
HMJr correspondence: See Book 490, page 77
Foreign Funds Control
Internal Revenue, Bureau of: Availability of
information contained in TFR-300 reports for
enforcement of tax claims - Foley asked for
ruling - 1/24/42.
57
Pilot Reinsurance Company - Foley report -
a
1/26/42
211
Frese, Walter F.
See China
- G -
Great Lakes Steel Corporation
See Financing, Government: Defense Savings Bonds
" Speeches by H/Jr
- I -
Internal Revenue, Bureau of
See Foreign Funds Control
Iraq
Exchange control measures recently adopted by
Government and request of Exchange Control Committee
for list of dollar holdings of residents of Iraq
as reported on Treasury Form TFR-300 - 1/24/42
67
Regraded Unclassified
- L -
Book Page
Latin America
Brazil:
Rio Conference:
See also Book 483
Notes to date - Coe memorandum - 1/24/42
488
56
Stabilization Fund Resolution: Resume' of cables -
1/25/42
242
Minister of Finance Dr. Arthur de Sousa Costa to
visit United States - 1/26/42
266
Lausche, Frank J. (Mayor of Cleveland)
See Revenue Revision
Lend-Lease
Operating report for week ending January 24, 1942
52
British funds (additional): Best method of securing
discussed by HMJr, Halifax, and Phillips - 1/26/42.
132
- M -
Military Reports
Reports from London transmitted by Halifax -
1/24/42, 1/26/42
77,274,277
War Department bulletin:
Japanese warfare - notes on - 1/24/42
80
Coordinator of Information report: Germany - - interview
with former American directors of General Motore
plant at Opel - 1/26/42
280
- N -
National Youth Administration
Equipment on hand: Mrs. FDR suggests "using and not
scrapping" - 1/26/42.
222
- P -
Pilot Reinsurance Company
See Foreign Funds Control
- R -
Revenue Revision
Tax-exempt securities proposal in HMJr's speech before
City Club, Cleveland, Ohio, January 24, 1942:
Rouse tells of misunderstanding in New York City -
1/26/42
147
Henry Epstein-Treasury correspondence
150,151
a) Lehman--HMr conversation - 1/27/42:
See Book 489, page 2
b) Lausche (Mayor of Cleveland) may be asked
to organize support for Treasury proposal -
1/27/42: Book 489, page 22
c) Conference: present: HMJr. Kuhn, Sullivan,
Foley, and Paul - 1/28/42: Book 489, page 272
1) Proposed wire to Epstein: Book 489, page 289
Regraded Unclassified
- R - - (Continued)
Revenue Revision (Continued)
Book Page
Tax-exempt securities proposal in HMJr's speech
before City Club, Cleveland, Ohio, January 24,
1942 (Continued):
Tax-exempt organizations discussed by HMJr, Paul,
Foley, Kades, Graves - 1/28/42: Book 489,
page 291
HMJr's former statement "for the future, I an
opposed to making it retroactive" located by a
newspaper man - 1/29/42: Book 490, page 74
New Hampshire Governor Blood opposes:
Book 490, page 76
Taxation of Defense Savings Bonds: Vandenberg-
HMJr correspondence - 1/29/42: Book 490,
page 77
Letters following speech reviewed by Mrs. Forbush -
1/30/42: Book 490, page 203
Disney film discussed at 9:30 meeting - 1/26/42
488
115,119
a) HMJr congratulates Disney - 1/27/42:
Book 489, page 56
b) HMJr suggests posters from - 1/28/42:
Book 489, page 269
Joint Committee: Cooperation by Treasury until it
becomes apparent there's no chance for agreement
or progress recommended by Sullivan - 1/26/42
117
Ruml plan ("Pay As You Go"): Mrs. HMJr's comment -
1/26/42
162
Roosevelt, Franklin D.
See Speeches by HMJr: President's Birthday Ball
Ruml, Beardsley
See Revenue Revision
- S -
Somers, Andrew L. (Congressman, New York)
See China: Loan
Speeches by HMJr
City Club, Cleveland, Ohio:
Draft
1
Reading copy - 1/24/42
19
a) Comment in City Club publication "The City"..
45
b) Tax-exempt securities proposal and Epstein
opposition: See Revenue Revision
c) HMJr thanked by City Club - 2/3/42:
See Book 491, page 409
Great Lakes Steel Corporation plant, Ecorse, Michigan,
presented with Minute Man flag by HMJr - - 1/25/42
91
President's Birthday Ball:
Kuhn's pencilled notes.
Back of 92
Drafts
181,186
Reading copy
191
a) Committee thanks HMJr: Book 489, page 89
Switzerland
Difficulties of American Legation, Bern, in securing
Swiss france for dollar drafts discussed in letter
from American Legation - 1/24/42
70
- T-
Taxation
Book Page
See Revenue Revision
Taylor. William H.
See China
- U -
Unemployment Relief
Work Projects Administration report - 1/26/42,
United States
488 224
Currency control outside of territory - Coe
memorandum - 1/26/42
239
- W -
Work Projects Administration
See Unemployment Relief
Regraded Unclassified
----
1
January 24, 1942
The Secretary went over this draft with
Mr. Kuhn at the Statler Hotel in Cleveland
at 4 p.m. today.
2
It 1s a good and wholesome experience for any
official from Washington to come here to Detroit
to meet a great audience of automobile workers. We
in Washington are much too accustomed to think that
we sit at the very center of the war effort. For
the past few weeks we have seen our Capital City
become, in a sense, the capital of the world, the
scene of wartime planning on a world-wide scale.
The officials and admirals and generals of many
countries are working together in Washington at this
very moment, planning the military, naval, and
economic strategy that will bring Japan and Germany
to their knees.
Regraded Unclassified
- 2 -
3
Yet all our strategy, no matter how brilliant,
cannot accomplish its decisive purpose until the
materials of victory have rolled from America's
assembly lines. All the individual daring and
bravery of our men in uniform cannot win the war
unless they are backed by the mass production of
the implements of war. The real heart of the war
effort 1s, therefore, not in Washington but right
here in your workshops and factories. The big
push begins here. The great offensive against the
Axis is under way here in your State of Michigan,
next door to you in Ohio and Pennsylvania, and
wherever the skill and energy of working men and
women are producing the weapons of victory.
Regraded Unclassified
4
- 3 -
You in this hall are in the front lines in this
phase of the war, and I am genuinely proud to be
here among you today.
This is not the first time that I have been
privileged to visit the Detroit industrial area
in recent months. Some of you know that I had the
pleasure of attending a meeting of shop stewards
at Pontiac in November. I came back to Washington
from that meeting heartened and invigorated as
seldom before. In that one evening I heard more
sound common sense and more realistic judgments
than I had heard in many meetings, in Washington
or elsewhere.
Regraded Unclassified
5
- 4 -
From that day I have been convinced that American
labor has been ahead of all of us in its willingness
to produce armaments to win the war, whatever the
sacrifices, whatever the consequences.
There is every reason for American labor to be
out in the forefront in 1ts understanding of the
war and in its response to wartime needs. For this
1s a people's war, to an extent never before known
in any of the great struggles of human history.
This war is a people's uprising against tyrants who
are trying to push us back into the Dark Ages. It
is being fought by the people and it can only be
won by the people's efforts, by your efforts.
Upon your skill, your sweat, your willingness to
dedicate yourselves to war production, the ultimate
outcome will very largely depend.
Regraded UInclassified
6
- 5 -
In the second place, this is a war against
the enemies of the free labor movement in this
and every other country. Nobody needs to stand
before any group of labor men and women in this
country to tell it what Fascism means. When
the Blackshirts bullied their way to power in
Italy twenty years ago, when others praised
Mussolini for making the trains run on time,
American labor instantly knew Fascism for what 1t
was. When Hitler crushed the trade unions in
Germany, you of American labor knew at once that
he would crush yours 1f he ever had the chance.
Regraded Unclassified
- 6 -
=
Labor has never been dazzled by the military
accomplishments of the dictators. Labor has never
made the mistake of imagining that theirs was in
any sense a "new order" or that their medieval
tyrannies could supply us with any guideposts to
our own future. Now, at last, the life-and-death
struggle has come, just as the rank and file of
labor foresaw that it would. As Hitler sa1d--
truthfully, for once:--"two worlds are in conflict;
one of them must break asunder." We can tell him
now that it 1s his world, not ours, which will
break and die.
Regraded Unclassified
- 7 -
8
But there is E third and still more compelling
reason why labor has an immeasurable stake in this
war. Labor in this country and elsewhere looks to
a better world, a freer and a more secure future.
Everything that labor has fought for a hundred years
to attain will be lost forever if the dictators
should win. Everything that labor seeks, for its
children and its children's children, 1s bound up
with the success of the free countries in the present
struggle.
I think I can describe those aims in & very
few words by telling you about a great picture in
the Grand Central Station in New York. It 1s a
unique picture because it happens to be the biggest
photo-mural in the world; we of the Treasury put it
there to help the sale of Defense Bonds and Stamps, and we
Regraded Unclassified
9
- 8 -
made it big enough to cover an entire wall of the
Station concourse, so that everybody could Cee it.
But what makes me so proud of it is not its
size, but its message and its spirit. The first
of its three huge photographs shows an American
farmer and his land, and the caption under it
says, "That we may defend the land we love." The
second is a panel of children's faces, with the
caption, "That these may face a future unafraid."
And the last shows a worker looking up at a factory,
and under it is the caption, "That we may build a
better world."
10
- 9 -
Those happen to bè the objectives of the
Defense Savings effort, but they also happen to
he objectives of American labor, and they are the
greatest of the aims for which we are fighting
this war.
It may seem unfeeling of me even to mention
Defense Bonds to an audience in which so many of
you have temporarily lost your Jobs, suddenly and
through no fault of your own, because of the
change-over to war production in the automobile
industry. I know what you in the Detroit area have
been suffering in temporary unemployment, and I
wish as fervently as you do for the day when your
plants will be back in full production again, and
when those of you who are walking the streets will be
back at your benches again.
Regraded Unclassified
11
- 10 -
Certainly I would never ask or expect any of you
who are in trouble to buy Defense Bonds or Stamps.
The country does not ask it or expect it of those
who must wait for weeks and sometimes months to
start work again. We have a slogan at the Treasury:
"Let's make every payday Bond Day." That does not
apply to those who have no payday and no regular
income. The Treasury will never ask anyone to
buy Defense Bonds 1f it means taking food from his
children or clothing and shelter from his family.
The other day a Chicago advertising agency sent
us an elaborate sales promotion plan based, frankly
enough, upon (and these were its words) "the
traditional dread among the American people of being
held up to public ridicule and scorn."
Regraded Unclassified
12
- 11 -
The 1dea of this misguided plan was to label as a
slacker everyone who did not buy a bond. We replied
that we disapproved and did not countenance anything
of the sort. We replied that we did not believe in
the effectiveness of intimidating Americans, and
that if any such tactics were proposed, we would
avoid them like the plague.
But for those who do receive regular pay, those
who have good jobs at good wages, there is a greater
need than ever to "make every payday Bond Day."
You who are working in the Detroit area have just
seen with your own eyes what a great economic
dislocation can bring.
Regraded Unclassified
13
- 12 -
You have seen friends and neighbors hard at work
one day and thrown onto their unemployment insurance
the next, as part of the price of preparing this
country's factories for war. You know that those
who have built up a reserve of savings are better
able to meet an unforeseen shock than those who
have not guarded themselves against 1t. Isn't it
better to be prepared in time? Isn't it better to
safeguard your future by setting aside a part of
your earnings now, every week and every payday?
Your country needs the money, and you need the
security that these double-purpose bonds will
bring.
14
- 13 -
I am often asked three questions about Defense
Bonds which must, I am sure, be in your minds. The
first is, "Can I get my money out if I need 1t?"
The answer 18 yes--any time after sixty days from
the date you bought your bond. The second 1s,
"What happens if I lose my bond?" The answer 18 that
we at the Treasury have a record of every bond and
its owner; we can supply you with another if you
identify yourself, and we will be glad to keep your
bond for you at the Treasury if you wish us to keep
it in the safe for you. The third question is,
"Will I lose money on these bonds the way so many
people lost on the Liberty Bonds?" The answer is
that you can't lose.
15
- 14 -
These bonds, unlike the old Liberty Bonds, are
registered in your name. You cannot trade them on
the market or offer them in payment of a debt.
You will always get back at least one hundred
cents on every dollar, and the longer you hold them,
the more they will grow in value.
Moreover, Defense Bonds not only help to pay for
the guns and tanks and planes that will win the
war, they also pay for labor, your labor. Every
time you buy a $75 bond you pay for the services
of a skilled worker for an entire week; every time
you buy a Bond or even a Defense Stamp you are
enabling the United States Government to pay you
for your work, and you are hastening the day when
Regraded Unclassified
16
- 15 -
our fighting men will be able to carry the war to
Tokyo and Berlin.
About a month ago two of your brothers in the
Dodge local came to see me in Washington, to discuss
ways and means of hastening the conversion of their
plants to war production. We accomplished something,
partly because those two men had the initiative to
come to my office, partly because of the fine
cooperation of Mr. Patterson, the Undersecretary of
War. But what I shall always remember about that
meeting is the spirit that your representatives
showed. I argued then, and I have said it for
months to everyone who would listen, that the only
way to arm this country in time was to order the
17
- 16 -
complete and immediate stoppage of all automobile
production, and the quickest possible conversion
of the plants. Your representatives knew that
that would mean immediate unemployment for great
numbers of men; yet when I asked them how they felt
about it they answered, without a moment's
hesitation, "We can take it; we want it done."
That was just a sample of the spirit we at the
Treasury have found among American labor ever since
we started the Defense Savings program. It is a
sample of the spirit that the whole country has
discovered in the weeks since Pearl Harbor. It 1s
the spirit that is going to win the war.
18
- 17 -
I said in Cleveland yesterday that the pioneers
who settled this Middle Western country did not
let danger or hardship frighten them. They regarded
every danger as a challenge, every hardship as an
adventure. That is the spirit with which you are
meeting this crisis, the greatest that free men
have ever undergone.
You workers of Detroit are in the forefront
of the fight, and you will see it through until
the fight is won.
19
READING COPY
SECRETARY MORGENTHAU'S ADDRESS
Before the Forum of the City Club of Cleveland
Statler Hotel
Cleveland, Ohio,
1 p.m., E.S.T., Saturday,Jan,24,1942
30
I am very happy to be with you in
Cleveland this afternoon, because this great
city, far from any battle line, is one of
the places where the outcome of this war and
the future of this country 1s being decided.
Here in the Cleveland area you have a
great concentration of the forges and the
assembly lines which are America's real front
lines at this moment. Day and night your
industrial wheels are turning, your hammers
pounding, your fires burning, your workers
toiling, to win the war. You in Cleveland are
showing what our free people can do when they
are aroused, and I take my hat off to you.
Regraded Unclassified
- 2 -
-
21
You and all the others of our 130 million
people have begun to speak in the only language
that tyrants understand -- the language of tanks
and planes, guns and ships, and men with the
courage and conviction to carry that message
all the way to Tokyo and Berlin.
Pause
What has happened, I wonder, to those who
used to say that the pioneer spirit was dead?
The pioneers who opened Ohio did not let danger
or hardship daunt them; they regarded every
danger as a challenge, every hardship an
adventure. You in Cleveland have not lost that
spirit. It 1s alive and strong, here in your
State and in every State.
- 3 -
22
Already we have answered the shock
of Pearl Harbor by dedicating ourselves to
the greatest job that ever confronted our
country. We have shown that we can take
marching orders by accepting and applauding
the great task the President set for us the
other day, the task of making such an overwhelming
number of weapons that the Nazis and the
Japanese will be utterly unable to match us.
If any further proof of our determination
were needed, let any of our enemies look at the
magnificent response to the sale of Defense
Bonds and Stamps in the past few weeks. The
total has now passed three billion dollars, and
the response in January has set new records in
every direction.
Regraded Unclassified
- 4 -
23
.
Whatever test may be given to us, we are
going to surmount it. Whatever hardship may
be in store for us, we are ready to take it
and give it back to our enemies a hundredfold
until victory 18 won. That was the pioneer way
in the old Ohio days; that 1s the American way
today. That 1s the way we shall keep faith
with the pioneers and with the promise of a
better world which they foresaw.
We have only just begun to fight; we have
only begun to learn what this war effort will
involve. In the near future, for example, we
shall face a new challenge of a kind which I
think too few of us have planned for or even
considered.
- 5 -
24
That is the challenge of paying for the war.
It will come first on March 16th, when fifteen
million Americans will be called upon to pay
income taxes for the waging and the winning of
this war. It will come later in the payment
of the vastly increased war taxes which we
shall have to impose upon ourselves in the new
financial year. I am confident that we shall
meet those new requirements, and any requirements,
without flinching. We know, as I have said
before, that it's a million times cheaper to
win a war than to lose one.
- 6 -
:
25
This 18 not the time for me to discuss
the new tax program. The President has said
we must have nine billion dollars in new revenue.
We have no more right to fall short of that
goal than we would have to fall short of the
President's announced goal of sixty thousand
planes and forty-five thousand tanks in 1942.
It will produce hardship; of course it
will. Since when have the American people been
daunted by hardship? It is part of our American
tradition to face the facts, however harsh the
facts may be. You know, without my saying 80,
that we cannot divert half of our national
income to war production without "dislocating"
our economy from its customary routine.
- 7 -
26
You know, without my saying so, that we
cannot spend forty billion dollars in this
year 1942 without "disturbing" ordinary business
and ordinary living. You know, too, that we
cannot fight and win a life-and-death struggle,
a war that encircles the whole planet, without
discarding old habits, old fears, old notions
of business-as-usual.
We are, however, entitled to lay down
just this one premise: that whatever hardship
may be in store, we shall face it together;
that it shall be distributed fairly and borne
by all in their fair proportion, in accordance
with their ability to carry it.
- 8 -
27
And that brings me to the chief subject I
should like to discuss this afternoon.
This Administration has tried hard for
years, and with a good deal of success, to
remove tax injustices. Such injustices are of
two kinds: those which permitted some to escape
their fair share of tax payments, and those
which bore down too harshly upon certain taxpayers.
For eight years at the Treasury I have fought
against the remaining vestiges of unfairness
on the statute books, and in almost every one
of those eight years Congress has closed some
loopholes and enacted some remedial provisions.
- 9 -
28
In the Revenue Act of 1937 there was a
whole series of reforms which made it impossible,
among other things, for anyone to escape
taxation by incorporating his yacht or country
estate, or by creating a personal holding company.
These devices have now been outlawed. Since
then the struggle to perfect the statutes has
gone on without stopping.
Pause
Now that we are at war, the fight becomes
more necessary than ever. The President has
spoken again and again of the need of making
our taxes not only effective but equitable as
well. Only the other day, in his Budget message,
he repeated that "a fair distribution of the
war burden is necessary for national unity."
- 10 -
29
War knows no avoidance. As the President
said, "When our enemies challenged our country
to stand up and fight they challenged each and
every one of us." Every one of us has a direct
stake in the outcome of this war, and each of
us must, therefore, pay his fair share of the
cost.
Yet I am sorry to say that the present
tax structure still falls short of the requirements
of equity and the insistent needs of a nation
at war. In spite of all our efforts of recent
years our tax laws are still weakened by
loopholes; it 18 still possible for a few thousand
individuals to escape their fair share of the
burden and to pass their share onto the shoulders
of the rest of us.
- 11 -
30
I asked our Treasury tax experts the other
day to compute the total amount of revenue that
had to be passed onto the shoulders of other
taxpayers because of the existence of loopholes
in the law. The answer was almost a billion
dollars, about one-eighth of the entire receipts
from income tax in the fiscal year that ends in
June. How can the war efforts of our people
reach their peak level until such a situation
has been remedied? Can we be sure of getting
the maximum response from everyone until
everyone feels that the tax laws are as fair
as it is humanly possible to make them?
- 12 -
31
In wartime, when we are drafting young
men to fight and risk their lives for their
country, any special privilege for a few
becomes inexcusable.
So that you may know exactly what I have
in mind, I should like to turn now to four
specific examples of tax loopholes -- and I
could name a great many more than four --
which have been allowed to remain on the statute
books at the expense of the majority of our
taxpayers.
Tax-Exempt Securities
The first is the continued existence of
tax-exempt securities. At present, as you know,
the interest from State and municipal bonds is
exempt from Federal income tax.
Regraded Inclassified
- 13 -
32
This provision gives wealthy taxpayers a
possible refuge, not from some income tax, but
from all income taxes. No matter how much
money may be needed for the war, no matter how
high the tax rates may be for others, a taxpayer
1s not obliged to contribute anything in this
hour of his country's peril, if only he can
afford to lay his hands upon a sufficient
amount of tax-exempt securities.
The Federal Government last year took a
first step toward remedying this situation by
stopping the issuance of tax-exempt Federal
securities.
Regraded Unclassified
- 14 -
33
Now that we are at war, now that the revenue
needs of the Government have soared beyond all
previous conceptions, it 18 high time, in my
opinion, to tax the income of State and municipal
securities -- not only the income from future
issues, but also the income from those issues
now outstanding.
The existence of this loophole costs the
Treasury, at present tax rates, about $200,000,000
a year.
Regraded
- 15 -
34
Community Property
A second source of tax discrimination
exists in the nine States having what is called
the community property system. In a
community-property State the law assumes that
the income of the husband belongs equally to
the husband and wife. Yet since the husband
has full management and control of the whole
income, he 1s, in practical effect, in no
different position from a husband in a
non-community-property State. Both of them
have the management and control of the income
and in both cases the income is devoted to the
family purposes.
- 16 -
35
In a community-property State a husband
who earns a $10,000 salary is allowed to report
only $5,000 of that salary as his income and
his wife may report the other $5,000 as hers.
The two of them together will pay a total tax
of $965. In the thirty-nine other States,
however, the husband who earns a $10,000 salary
must report that salary as his income and must
pay a tax of $1,305 on it. Thus the married
citizens of nine out of forty-eight States are
able to escape their fair share of the load at
the expense of the married citizens in the
rest of the country.
- 17 -
36
The existence of this community-property
tax privilege costs the Treasury, on the basis
of existing rates, about $55,000,000 a year.
Separate Returns for Husband and Wife
The removal of this community-property
privilege alone would.not, however, reach a
still more widespread form of avoidance. I
refer to the method of separating a husband's
and wife's investment income -- as distinguished
from the income they get from salary and wages --
in such a manner that two families having
virtually the same economic position pay vastly
different taxes. Under the present law, if a
husband and wife both have investment income,
each pays a tax on the separate income.
- 18 -
37
Because the income-tax rates are progressive
-- that is, because the higher the income the
greater is the rate of tax -- a family in which
both husband and wife have investment income
pays less tax, in many instances, than a family
having the same amount of income all of which
is received either by the husband or the wife.
Let us take the case of á married taxpayer
in the upper brackets having a $100,000 income
from securities. Under the present law he
would pay a tax of $52,748. But if he gives
half of those securities to his wife, he will
pay a tax of $20,926 and his wife will pay a
tax of the same amount.
- 19 -
38
This couple, at the cost of a moderate gift
tax, has thus secured a perpetual reduction
of $10,896 in its income-tax liability under
present rates. The loophole could be closed
and the unfairness to the great mass of
taxpayers removed by taxing the investment
income of each married couple as a unit.
The use of separate tax returns for the
investment incomes of husband and wife costs
the Treasury, on the basis of present rates, about
$260,000,000 a year, in addition to the revenue
that is lost because of the community-property
tax privilege.
- 20 -
39
Percentage Depletion
The final loophole which I shall mention
this afternoon is one against which the Treasury
has struggled for years without avail. If you
use a machine in your business and that machine
can be expected to last for ten years, you
are permitted to deduct each year for ten years
one-tenth of the cost of that machine. Because
you will probably have to buy a new machine at
the end of ten years, this deduction is a fair
and reasonable method of allowing you to
recover your capital. Needless to say, you are
not permitted to deduct more than the cost of
the machine.
- 21 -
40
But you may be surprised to learn that
this 18 not true of mines and oil wells whose
owners are permitted over the years to deduct
far more than the amount of money which they
have put into the property for the conduct of
their business. The so-called percentage
depletion provision of the income-tax law allows
these companies, not simply to deduct a
percentage of the cost of their wells and mines
each year until the entire cost has been made
good, but to deduct an arbitrary percentage of
their income indefinitely. An oil company
which may long ago have recovered tax free many
times the cost of the wells which it 18 operating
1s still permitted a deduction of 27 1/2 per
cent of the gross income from those very same wells.
- 22 -
41
The allowance of percentage depletion
costs the Treasury, on the basis of existing
rates, at least $80,000,000 a year.
I have pointed out the most glaring
examples of these loopholes, but there are
others, all of them unfair to the many for
the advantage of the few, all of them dangerous
to the unity we need to win this war. Perhaps
the American public has been inclined to shrug
its shoulders at the defects in our tax laws;
yet they are not small matters, either morally
or materially, nor are they matters beyond
the control of the people themselves.
- 23 -
42
It has been difficult until now to
correct our tax laws because taxpayers have
been too few and too indifferent. Until the
great body of American taxpayers becomes
thoroughly aroused to the injustices which
have been left on the statute books year after
year, we cannot expect to correct the laws.
The remedy lies in your hands as taxpayers.
We Americans can be proud of the unity
that has been shown by all sections of our
people since Pearl Harbor. But national unity
1s a precious thing. It will be subjected to
many strains in the months and years of trial
ahead.
- 24 -
43
For this reason, with your help, I am going
to fight for the speedy removal of any defects
in the tax laws which may injure our national
morale.
We need nine billion dollars in additional
revenue; I should like the very first billion
of that amount to be obtained by closing the
remaining loopholes. If this is accomplished
it will be a contribution to the financing of
the war, the morale of our people, and the
victory of our cause.
-000-
1-24-42
44
m enclosing
pies of
Tile about
which appaired
Inc (ty of
k, it
into an
much
11 a weeks 1
Herry
45
THE CITY
Volume XXVII
WEDNESDAY, JANUARY 21, 1942
Number 21
Secretary Morgenthau Speaks to 1,000 Saturday
Civie Meeting Will be Held
at Statler
PHE man who is responsible for pro-
ouring the vast astronomical dollar
figures necessary for this country's de-
tensie and ultimate prosecution of to-
day's Armaggedon will bei in Cleveland
Saturday noon for one of the few public
addresses he has made since be has be-
come a national figure.
He is Henry Morgenthau, Jr., secre-
tary of the treasury - confidant of
President Rooseyelt, dirt farmer and
ene of the hardest working public offi-
cluis this country has ever had.
Naturally the subject of Mr. Morgen-
thau's address will be "Taxes"
More than 1,000 Greater Clevelanders,
representing the cross section of the city,
will fie present at Hotel Statler Satur-
day QUOD to hear the Secretary of the
Treasury. All members of civie organiza-
(inne were invited to attend this city-
Secretary Henry Morgenthan, If
wide meeting by the City Club, original
aponsora of the Morgenthau meeting.
Rather is he regarded as a person who
Mayor Frank J. Lausche will introduce
is an indefatigable worker who is inter-
the speaker and President Albert I. Corn-
ested more in getting things organized
sweet of the City Club will open the
and getting things done, than talking
meeting with brief remarks.
about them.
INDEPATIGABLE WORKER
The job at hand is more important to
Secretary Morgenthau is not known in
him at any given time than anything
Washington as a particularly "colorful"
else.
person whose utterances or actions
He never has been known to seek per-
"make news" in that teeming capital.
(Continued on page 3)
THE CITY CLUB PRESENTS
The Honorable Henry Morgenthau, Jr.
Secretary of the Treasury, who will discuss
Taxation in War Time
Hotel Statler Ball Room
Tickets $1.10
danuary 24, 1942
Luncheon served beginning at 11:45 a.m.
All Reservations should be picked up or paid for by 5:00 p.m. Friday
Regraded Unclassified
THE CITY
THE CITY
1.
THE CITY
said: "Lord. reform Thy world, Impirate
workly our Jane, July - August by
with me."
Secretary Morgenthau, Jr.
it until 1934 - when he became BocTo-
(Continued from page 2)
tary of the treasury.
THE CITY CLUB OF CLEVELAND
712 Venient Avenue
See where Cityzon Art Car
conal glory and his past achievements are
In 1929 be Was named by Gov, Frank-
Telephone, MAin com
terbury Golf Club in going in for some
only results of persistent work It to said
lin D. Roosevelt of New York. chairman
" providers marref, September 20, 1916,
at Cloveland, Ohio, under for en all March 1, 1970.
thing besides golf an usual. Last Sunday
that be memor more than a Little bothered
of the governur's Agricultural Advisory
Pret. a part
Ex-Prex Rumell (P.D. Editorial Writer)
by the attention he gets in Washington.
Commission and in 1931 he Item appoint-
Albert 1. Provider
Welsman spoke to the Sunday dinore &
His rule of action has been to let other
ed. Conservation Commissioner of the
Legal 9. Selectory
James K. Custom, Treasurer
"Financing the War." That's surge &
people have the praise if it will help to
state having jurisdiction over state
11. Secretary
tance from the 19th hule,
get a piece of work done.
lands and formis, state parks, Oah and
DIRECTORS
J. Bahn
David H.
The sen of a rich man, he was never-
game and water power. In this position
from 1. Commit
V. Tissin
Our ex-presidente seem to be the Die
be directed the early stages of the state's
1 1. Curin
Name Laur
thelese brought up to earry his own
Rech
that are being picked for responsible WM
million acre reforestation program.
Best H. Drings
responsibilities, make his own career.
Cid
Lumit H. Ealmer
activities. Ex-Prex Nat (The Now
Upon the Insuguration of President
A.T. F. Harding
Karl o Throyand
Howard goos to Washington in the
STUDIED ARCHITECTURE
Roosevelt he was appointed chairman of
Editorial Committee
Milson Wodder, Chairman
Censorship Office, and Ex-Prex WE
He entered Cornell University to study
the Federal Farm Board and Was com-
Name Krichbaum
(Metropolitan Parks) Stinchoomis have
architecture, but gravitated into the
missioned to reorganize and consolidate
TT Mandell
H. L. Tannembre
our local Civilian Defense, A valute to
study of agriculture. The original Intent
government farm lending agencies. When
Members
1.1- Kenn
both.
en architecture was to prepare him for
the Farm Credit Administration Was
Deat N.
work in downtown New York real estate,
created be was named head of that
Believe It or Not
Cityzen Jon. L. (Internal Revenue)
owned, developed and operated by his
agency.
Last Saturday's Furum with Senator
Heffernan down't like to remind you
father, Henry Morgenthau (the 85-year-
Mr. Morgenthau was elected under-
Robert A. Taft the headliner was sume-
that March 16th in coming, last he will
old former ambassador to Turkey who
secretary of (reasury on November 17,
thing of sa event - and you know why,
tell you that Groucho Marx has 9. book
dues not like to be called Senior).
1933. and due to the illness of the late
The Senator was in good form and the
which may alleviate your suffering, The
In 1913 Morgenthau Jr. bought M tract
Secretary Woodin he Was named acting
wullime also. With Secretary of the
book in called "Many Happy Returns"
of land in Dutchess County, New York,
aperetary. When Mr. Wondin resigned
Treasury, Henry Morgenthau. Jr., foi-
and is described by Grouchn - "The Idem
intent on making farming his life work.
on January 1, 1934, Mr. Morgenthau
lowing this week, We think that Chairman
of Marx."
Although he studied agriculture in col-
www appointed secretary of the treasury.
Wondell Fulsgraf is entitled la take a
lege he did nút become thoroughly sold
AN EARLY KISER
low two bows.
Cityzen M. J. Reigert thinks that -
on " as a career until he spent is summer
reding that the song "I wouldn't be 1
on a Texas ranch. recuperating from an
His life on the farm made him an early
Jap for all the les in China" isn't nice,
illness. Thereafter be toured the country-
riser and today in Washington he gets up
When Chairman Andrew Pangrace ssw
more foolish a the man who at a Friend's
side in - Model T Ford looking for suit-
at 6:30
Citywn George (Harry Payer Holmes
ssime into the dining room last Thursday
house, hissed a Japanese print
able land lo develop.
Because of this habit of early rising he
This farm he bought is today - 1600-
above likes to go to beil early. When be is
moon he knew That sometime there
would have to to a City Club Show.
Great rejoicing in the dining room.
acre money making proposition dealing
at his Duchess County Farm the Secre-
That's the only occasion Genrge gota a
especially at the Sanhedrin Table, last
mainly in fruits (apples, strawberries and
tary is generally in bed by 9:30 p.m.,
Ln validit his latenta - one of our
week. Cityxen l'mnk (Doc) Fugue, one
resplierries) with entite ruising and milk
often at 9.
time acture - and we mean talenta.
of the regulars, returned After a covero
produce a secondary line. There are 100
The 50-year-old Secretary preform the
Illness.
head of Holateins and Jerseya on the
companionship of bis family Do visitors,
farm. 50 of the regular milkers.
is a Voracious reader of newapapers and
Cames a story that when Fix-Prom Paul
Called to the attention of our tire
the New York Times, published by his
(Filitor of the P.D.) Bellamy Was handed
the Maggering "I'addition" in a French
rationer, Cityzen Norman (The Admit-
Two YEARS IN TURKEY
childhood friend, Arthur Hayn Sule-
Before he settled down to forming
berger, is one of his favorite dailles.
Restaurant in an city, he re-
able) Krichbaum is an ad in a San Diego
mathed indio - "The Free French,
newspaper: "Gentlemen would like to
Morgenthau Jr. went with his father to
Rosides newspapers the Secretary in H.
meet attentive young blande with four
Constantinople where he spent two years
hum"
devout reader of detective stories, in in-
good tires"
and was present during the dramatic
tensely interested In the activities of the
shelling of the Durdenelles in World
Secret Service and the different other
Here's one we'll sell cheap to Cityzon
Recalled to our memory by this and
War I. When he came back to this
pulicing departments that come under
Ex-Pres Mercellus (Diviy) DeVaughn,
that:
country he were into flie U. S. Navy,
his department.
Cityzen Howard Thurns of his firm
HELP THE HELPLESS
commissioned " lieutenant. In April,
travels about the country NO much that
1916, be married the former Elinor Fat-
Casual acquaintence do not all know
"Help the Red Cross"- we dol
it could be vaid that The other men in The
that the Secretary have ETY excellent
"Help End Cancer"-me and you.
man.
office have m time to fiddle while Burnx
of humor and loves to kid and pun with
"Send to Britain"-yes, sir, yes!
When the war was over he settled
immediate members of his family.
Time
"Tuberculosis"-well, I guess!
down to his dirt farming, doing all the
"Loal Welfare"- say No-
marketing himself and supervising the
When he was interviewed two weeks
Cityzen R. P. l'hotographe while you
farm. In 1922 be purchased the American
after he took office he had this to say
"Help the Bilnd"- away, check, go!
wait) Hakemson says that the President
"Fight the Nazis"- for (t)
Agriculturial, one of the earliest American
about his department:
quated from & Chinma prayer when he
"Help the Orphans"- here's my bitt
farm paperi and he continued to publish
(Continued nn page 4)
THE CITY
4
Secretary Morgenthau, Jr.
However, his representative in Cleve-
land, the vice consul, added come more
(Continued /nim page $1
explanations to the incident and bis let-
"The Treasury is the point. of all
ter is printed berewith:
points, where the government and the
Dear Mr. Lafferty:
cilizens enme closest together. The
I have received a communication from
Treasury is going to be run in the inter-
the Embassy in which they informed me
est of every citizen and with faimese to
that when the Prime Minister sent his
all.
letter of regrets that he Was unable to
"The principle approach is that all are
accept your kind invitation to speak in
to he treated alike. Selfish wealth has
Cleveland, be did not appreciate the fact
been allowed to evade its obligations to
that the Cleveland City Club was the
the common welfare for the last time.
organization which had sent him the
recording of the song from last year's
"All the skill of its clever lawyers is not
Anvil Revue, "I am an Englishman."
going to do it any good now. The special
privilege class in this country is aholished,
The Prime Minister has asked me to
80 far as the Treasury in concerned."
let you know that he very much appre-
ciated not only your kindness in sending
This was not a political protiounce-
him this record but also the sentiments
ment - but a statement of M man's social
which prompted the including of this
autlook.
song in Mr. Friebolin's Revue. I would
His appearance here is a pleasure to
be grateful if you convey to Mr. Frie-
anticipate.
bolln the thanks of Mr. Winston
Churchill and bis good wishes to you all
for 1942.
With Deep Regret
I also take this opportunity of extend-
it was with regret that the Club an-
ing similar greetings to you personally
nounced about 10 days ago that Win-
and to the Club generally.
ston (V- for Victory) Churchill, pro-
Yours sincerely,
consul extraordinary. could not appear
before the Chy Club. He had other press-
(Signed) E. J. BISIKER,
ing engagements.
British Vier Consul.
COMING!
WILLIAM L. SHIRER
Author of "Berlin Diary"
EDWARD R. MURROW
Chief of C. B.S. European Staff
at the PUBLIC MUSIC HALL
WEDNESDAY, FEBRUARY 1, at 8:30 p.m.
Sponsored by Radio Station WGAR
All Seate Reserved - 50 cents, 81.00, $1.50
Tickets on sale AL Bond Clothes, Wm. Taylor Sons,
Korner & Woods, Public Hall Box Office
Cityzens may obtain from J.J. Lafferty
-
FIELD ORGANIZATION News Letter
E
DEVENSE SAVINGS STAFF
PREASURY DEPARTMENT, WASHINGTON, D. C.
15:48: 24, 1942
NUMBER 36
KEEP EM
FIRING!
DEFENSE SAVINGS BONDS
NAVY DEFENSE SAVINGS CAMPAIGN
OF
WE
One of a series of special posters prepared by the Navy Department
in connection with its Defense Savings Campaign now underway throughout
the entire organisation including shore establishments, naval yards and
other civilian activities.
Regraded Unclassified
,Neper Letter
News Letter
CAROLE LOMBARD HELPS SATIVE STATE LAUNCH WAR-TIME BOND DRIVE
PEPORE MEETING DEATH IN PLANE CRASH
INDIANA'S STATE-VIDE DEFENSE BOND RALLY on January 15 - the first
of its kind in the country - use a great success. And much of the credit
for its success properly belongs to that famous Hollywood star who two
JAPAN
(A/E later tragically net her death, Carole Locbard, who returned to her
native state especially for this event and proved her mettle as 6. *Min-
ute Man® by selling more than $2,000,000 worth of bonds.
THROUGROUT THE APTER-
NOON AND EVENING, at the
State Capitol, in the lobby
of the Claypool Hotel, at
the Governor's Mansion and,
after the big rally in the
evening, at the Indiana
Hoof Ballroom, Miss Lumbard
BW
HE GAVE
nade patriotic appeals,
DEFENSE
EVERYYHING
sold bonds, and rendered
DONDS
yearsan service to the De-
Tense Savings Program.
Four prominent Housiere who participated
in the ceremonies on the laws of the
MORE THAN 6000 attend-
Indiana Capitol, which marked the rateing
nd the state-wide rally at
of the flag which flow from the Capitol
Cadle Tabernacle. Repre-
dome in Washington when war vas declared.
-Hungerford in the Pittsburgh Post-Gazette
sentatives from all of the
From left to right: Governor Schricker,
state's 118 city and county
Carole Lombard, Will H. Haye and Mayor
Defense Savings Committees
Sullivan of Indianapolis.
IN THIS ISSUE
were present and some
cities and counties includ-
NAVY Has Bonu items. Fasse 1
ing Fort Wayne, Miss Lombard's home town, sent large delegations.
CARELE LAMBARD Proves Mettle as Minute Man
Before Untimely Death - Page 3
MUSIC, ENTERTAINMENT AND COLOR vere provided by the Indiana and
VICTORY HOUSE in Los Angoles Scene of Many Special Events - 4 and
Purdue University bands; the Culver Military Academy's drum and bugle
IDARD OF TRADE Bond Drive Goen Over the Top Page 6
corps; military units from Fort Benjamin Harrison: American Legion color
BOMILERS Goal of Baltimore 3tramp Campaign - Page ?
guarde; e. large group of newsboy Defense Stamp anlasmen: and a Segro
cherue directed by Floyd Jones.
PRICE TREND Shows Need for Deferign Savings - Page 8
DONO PUSTARS from Providence, K. 1, and Atlanta, Ga. - Page 8
SPEAKERS included Will H. HAYE, Hocater president of the Motion
ALL BANKS In Three More States Qualify or Insuring Agents - Page 9
Picture Producers and Distributors of America, who played an active part
PUBLIC EMPLOYEES Burdll in Pay Noll Savings Plans - 10 and 11
in Indians's Liberty Loan drives of World Var I, BO head of the State
"LABOR INVESTS FOR VICTORY" Campaign Launched - Page 12
Council of Defense: Governor Henry 7, Schricker: Carole Lombard; Burene
Pulliam. Chairman of Indiana Defense Savings Committee: and Clarence A.
FLAGS AWARDED For High Participation In Pay Roll Savings Plane - Page 23
Jackson, Director of Indiana Defense Council.
FISLD ORGANIZATION NEWO - Pages 14 M 17
THE LADIES - Page 10
Carole Lombard's untimely death as she was returning by plane to
RADIO Programs for Conting Week: "Pay" Roll of Honor" - 19
California came as . geouine loss to the Defense Savings Program. As
PICTURES Page 20
Secretary Morgenthau wired her husband:
*Ve at the Treasury feel that ve have lost 1. real friend
and helper. She died in the service of her country.
- 3
News Letter
News Letter
CALIFORNIA'S *VICTORY ROUSE* HUGE SUCCESS
SOME OF THE SPECIAL EVENTS AT *VICTORY HOUSE
BUY
BUY
ERE!
RUGE SIGNS similar to the DRA
pictured above hang over all of
the entrances to the "Victory
House" which 1s now concluding a
highly successful run of about two
months in Pershing Square in down-
town Los Angeles, California. The
Los Angeles "Victory House, (or
*Defense Rouse" as it von originally
designated) is a contribution to the
Defense Savings Program of the Stand-
Circus clown, alephant, Mahout and
Stamp Albums bring smiles to Hopi
ard 011 Company of Southern Call-
ring master entertain crowd. Note
Indians from Albuquarque, Rew Mexico,
fornia. It will soon be moved to
glass bank in elephant's trunk.
who helped celebrate Santa To Rail-
San Francisco and later to other
rond Day.
towns on the Pacific const.
"VICTORY HOUSE" has been the center of 8. continuous program of ao-
tertainment and special evente publicising the Defense Savings Program.
Some of these events, illustrated in the pictures reproduced here, could
be readily duplicated elsewhere.
Advard 0. Arnold, pres-
Paul Whiteman and Nile
Remember Pearl Harbor!
ident of the Screen
Thor. Grunland, two of
Billy Matthew, wounded
Actors' Guild appeals
the many celebrities
at Pearl Harbor, appears
Representatives of the
What A Thrill] Maureen
Elke' band accompanies
for purchases of De-
appearing at "Victory
with Linda Darnell, 20th
School Retirement Fund
O'Hara, RKO star de-
fense Bonds and Stamps.
House."
Century Fox Movie Star.
with State Administra-
lodge officers to "Vic-
livers a stamp, pur-
tor Howard Mills
tory House" where &
chased by e youthful
(right) deliver check
large block of Bonds 18
patriot and movie fan
for A limit purchase
purchased for the
at "Victory House",
organization.
Many local Defense Savings Committees are now arranging for the
of Defense Bonds.
erection of "Defense" or "Victory" houses of their DVD. The Special
Activities Section of the National Defense Savings Staff ie prepared
to render assistance in connection with these exhibite.
News Letter
News Letter
D, D. BOARD OF TRADE BOND DRIVE GOES OTHER THE TOP
BALTIMORE BUYING BALTINORE-MADE BOMBERS
SALE OF $1,326,000 WORTH of III-
FERSE BONDS in less than three works:
IN A FOUR-VEW CAMPAIGN beginning January 11, Baltimore citizens
This VBE the accomplishment of the 100
under the leadership of the Baltimore Seve Post and Bunday American
zan membership committee of the Washing-
have undertaken to invest anough money in Defense Stamps and Bonds to
ton Board of Trade which between Deces-
purchase many of the famous bombers built in the Baltimore Plant of the
ber 16 and January 6 called on the 4400
Glenn L. Martin Company. Originally, these papers (in COMPON with other
numbers of this organization and earnest.
Hearst papere throughout the country) had planned to solicit donations
ly solicited their Defense Bond purchases.
to a fund for the purchase of bombers but at the suggestion of the Treas-
REMEMBER
try, plane were changed and the campaign directed towards increasing yu-
APPROPRIATE PUBLICITY marked the
chases of Defense Stamps and Bonde.
PEORI THAT MARBOR
leunching of the campaign as the Dicture
at the left indicates. Each of the
THE PLAN OF THE CAMPAIGN follows the "Hagerstown petiern'
sight regular tease, into which the member-
(See Seve Letter for January 3):
ship committee is subdivided, vos given
its proportionate share of the 4400 In-
Manders- Sevepaper carriers, advertising solicitors and other
dividuals and firms which belong 40 the
employees sponsor the sale each Monday for four consecue
Board and confined its efforts to this
live Mondays.
group and such non-members or the Board
Uncle Sam bids Godspeed to
" the sembers of the team had the time
Tuesdays. All women's organisations oponsor the sales on
lbs frontieramen who typified
to see.
competitive basis between various clubs and fraternal
the Defense Bond Drive, it
groups.
the left, Fred A. Saith,
FOR THIS CAMPAIGN, Special Order
president of the D. C., Board
Forms were prepared in co-operation wish
Wednesdays. School children, principale, teachere and parent-
of Trade: at the right,
the D. C. Bankers Association and the
teacher groups take over.
Thornton W. Over, chairman
D. C, Building & Loan League. One of
of the Board of Trade's De-
fense Boad Campaign.
these forms, when properly filled out,
Thursdays. Public atility employees, plants, industries and
constituted E draft on the bank or EAT-
allied commercial companies sponsor the sales.
...
linge éccount of the bond purchaser and
gave All information needed to enable the
Fridays. Merchante set up maler booths in stores, push sale of
issuing agent to lesse Series = Bonds or
stemps und sek customers to take change in stamps.
7 of the Seve Letter for December 20.
to order 7 or G Honds. One of libese order forms vas illustrated on Page
Daturdaye and Sundays, theatree " to 10wn and wind up the vesit
of competition.
THE success OF THE CAMPAIGN
VAI celebrated on January 6 at a
This 10 the pattern to be followed each seek for the four works.
general meeting of the Board which
VRA addressed by Daniel V, Bell,
THE FIRST WEEK was enlivened by the appearance of the screen star,
Under-Secretary of the Treasury:
Dorothy Lamour, who devoted a day to appearances and brief addresses
Marold S. Graves, Assistant to the
fore many groups urging the purchase of Dafense Bonde through participa-
Secretary of the Treasury: R. L.
Llon in pay roll savings plans. Miss Lamour sold stamps and bonds al .
Bust, Jr., Chairman of the Defense
special department store booth, sade . radio broadcast from a. store window,
Savings Committee for the District
addressed the Kivania Club, spoke to workers of the Glenn L. Martin Coe-
of Columbia and others, However,
pany at the trailer village and dormitory just outside the company grounds,
the dinner did not conclude the
and addressed telephone employees at the offices of the Chesapeake and
campaign. The Board of Trade has
Potemac Telephone Company.
not up a special Defense Bond Com-
mittee which will, for the durs-
Chairman Owen makes (L Limit sale.
tien of the var, solicit bond pur-
Edvard Balte orders $50,000 worth
Following Mine Lamour's visit to Baltimore, State Administrator
of Defense Bonde.
Walter S. Ruth reported:
chases from board members,
"Her visit here should help wonderfully in producing . rapid
acceleration of participation in the pay roll savings plan."
- 6 -
News Letter
News Letter
92% OF ALL BANKS NOW QUALIFIED ISSUING AGENTS
140-YEAR PRICE TREND CHOWS NEWD FOR DEFENSE SAVINGS
DELAWARE, IDAHO and COLORADO can claim the honor of being the 607+
WHOLESALE PRICES
eath, eighth and ninth states in which all banks have qualified "
ALL COMMODITIES YEARLY AVERAGE
10g agents for Series 1 Bonde. Delavare has 46 banks, Idaho 50, and
I
1929-100
NO
-
Colorado 145. The first siz states is which banks qualified 100% ware:
and
DISTRICT OF COLUMBIA, NEVADA, OREGON, VIRGINIA, NIV YORK and SOUTH
HN
DAKOTA.
INC
180
In many other states, all but 8. very few banks have qualified, and
HO
in the following, 97% or more are nov Issuing agents: ARKANSAS, GALI-
HEO
(20
FORNIA, MAINE, MICHIGAN, MINNESOTA, MISSISSIPPI, MONTANA, NEW HAMPSHIRE,
STV JERSEY, WORTH DAKOTA. UTAH, WEST VIRGINIA and WYOMING.
or
IDO
so
A. total of 13,627 banks representing 93% of the 14,781 institutions
40
in this category eligible to qualify had done so as of December 31, 1941
18
according to the report compiled by the Treasury's Division of Research
an
and Statistics.
40
to
10
en
MORTGAGES HOME TO BUT BONDS
.
-
INC
iño
430
IMO
HEND
IRIME
-
-
-
e
TM . -
the
FRAD
-
MEDICAL -
WILL -
1030
1940
raso
!
- - - l'ant www.a -
A veek after America's entry into World Var II, a customer of the
Farmers' Bank & Trust Company in Wadesville, Indiana called on Bank
of
(
Cashier L P. Cos and said t
This chart, published in the December issue of the Labor Information
Bulletin of the U. 3. Bureau of Labor Statistics, shows how prices increase
"I want to borrow all the money you will loan no. I
of price inflation during the present war and to make it possible for work-
during wars. The Defense Savings Program in designed to minimize this type
want to purchase Defense Bonds and I want to leave the
bonds as security for this debt."
ors to "store up" current earnings during & period of relatively high and
revert to lower, more normal levels.
rising prices and to carry these earnings forward for spending when prices
Mr. Cox pointed out that Defense Bonds are registered in the name
of the purchaser, cannot be assigned and accordingly, cannot be used
as collateral for a loan.
"Then," said the patriot, "I vant to mortgage ay home
Journal.
for all you will loan 20 and invest 1% all in Defense
Georgia
Bonds. . If Ritler vine, then my home and everything
Bulletin
THIS WAR CANNOT BE WON
REMEMBER
of
BY CONTAGE ALONE!
Bankers
else I have is lost. If we win, my home and family
Providence,
PEARL
Assn.,
will be safe and I know I can pay this debt in small
Rhode
monthly payments."
Island.
Atlanta,
Georgia.
Needless to say, the loan was immediately approved and e sub-
stantial sua advanced on e 35 interest basis.
- From The Western Sun, of Hi. Vernon, Indians.
Replace This Shail
BONDS
MAY DEFENSE BONDS
AD STAMPS
"Buy Defense Bonde as if your very life depended upon it. It does!"
- From one of the series of Defense Bond Messages prepared for Devi-
papers by the Press Section, Defense Savings Staff.
8
9
News Letter
News Letter
FUBLIO EMPLOTEES
PUBLIC EMPLOYERS
Mary Mure State, Dounty and City Dovernmente Announce
Mort Cities Install Pay Rell Savings Plane (Consinued)
Paz Rell Savings Plans
FORTLAND, MAINE. The municipal employees credit union 16 sponsor=
IOWA, MINNESOTA, NEW TORK and UTAH are mang the states which have
1% the pay roll sevings plan recently announced by City Treasurer
recently made pay róll seringe plane available to state government
John n. Gimartin.
employees.
SPBINGFIELD, MASSACHUSETTS, Plant for the pay rell savings program
In MINNESOTA, bond allotments
were developed here in co-dperation with officers of the local Chapter
authorized by state employees will
of State, City and town employees which has undertaken to promote the
be turned over to the State Capi-
plan.
tol Credit Union which will serve
as a custodian of the allotments
FLIST and GRAND HAPIDS, MICHIGAN.
while sure sufficient to purchase
bonds are accusulating.
GREAT FALLS, MONTAWA. City Treasurer Lage Ashten reporte virtually
100% participation in a plan in which the sicisum allotment is $6.25 .
In NEW YORK, Governor Herbert
month.
Lehmann launched the plan by auth-
orizing the State Comptroller,
BAYONNE, PATTERSON, HUDSON COUNTY and the BOARD OF EDUCATION of
Joseph V. O'Leary, to allocate 20%
Jersey City, NEW JERSEY. These are some of the recent additions to she
of his salary for the purchase of
rapidly growing list of Sev Jersey cities and counties which have RD-
bonds.
counced plans. In Newark, Mayor Murphy has announced that allotments of
city employees total $8,695 . month or approximately $7 per participat-
Governor Harold E, Stasses looks
Among the County end City
the employee.
over the supply of allotment auth-
Governments which have recently
y
primation cards which are about to
announced pay roll savings plans
THE NEW YORK CITY BOUSING AUTHORITY and ONEIDA COUNTY, NEW YORK.
be sent to the 6500 employees of
are:
the State of Minnesota, together
WINCHESTER, VIRGINIA. Vinchester's City Manager 5. Lee Grant to-
with a letter from the Governor
BIEMINGHAM, ALABAMA. The
ports that all employees in his office and LE the water, street and
urging @ystematic investment in Do-
Municipal Employees Association
sever departments are participating. The League of Virginia Municipali-
fense Bonds,
and other employee groups have
time through = special Defense Bood Committee headed by City Manager Ceth
undertaken to conduct a bond drive,
Burnlay of Charlottesville 14 arging all city governmente to install (a)
and City Comptroller C₂ 1. in-
roll envings plans.
strong has been authorized by the
City Council to administer - pay roll anvings plan.
This Itst of State and local governmente having pay roll savings
OHICAGO, ILLINOIS, ALL local governments in this 8708 - the City,
plane supplements the list published in the Seve Letter of January 10.
the Board of Education, Park District: Senitary District and Cook County
These two lists provide ample precedente for all state and city govern-
- employing a total of 56,000 have made pay roll sevings plane available,
sents and it is hoped that public employees in countless juriadictions
The Park District reporte 100% participation in Its plan.
will soon be using pay roll savings plans to set an example which vill be
both an inspiration and 5. challenge to other employee groups of all kinds
LOUISVILLE, KENTUCKY. Mayur Vilson V, Wyats announcing the plan
asíd: '&s 6. starter I have instructed Pinance Director Lindeay to de-
duet 10% from ay pay check, Our goal la 100% participation by every
why they cannot institute pay roll savings plans and these authorities
Some governmental juriedictions any feel that there is some reason
officer and employee in the City Eall and of outside agencies supported
can develop "group agent* plans. However, pay roll savings plane will in
by city taxes,"
Wherever possible. Of course e pay roll sevings plan does not eliminate
the long run prove to be more satisfactory and these should be set up
VICKSBUBG, MISSISSIPPI, All of the city's 150 employees have agreed
to participate, that becoming the first group of employees in that city
workers and periodically to follow up this CROYMER to Increase participa-
the need for "key men" to make the initial solicitation of their fellow
to enrell 100% in . pay roll savings plan.
tion as conditions warrant.
10
11
News Letter
News Letter
LAROR AND INDUSTRY
LABOR AND INDUSTRY
A.P. of be Sets One Billion Dollars as 11a 1942 Goal
Righ Enrollment in Paz Roll Savings Plane to Vin Special Flat
Purchase of $1,000,000,000 worth of Defense Bonds by the 5,000,000
individual members of the American Federation of Labor and by Constit-
Plans are DOW being made by the National Defense Savings Staff for
uset member unione was pledged by President William Green in . statement
the distribution of special flage or pennante to companies of more than 600
released to the press on January 19th.
workers in which 90% or more of all employees are participating in . pay
roll savings plan. Full details with reference to bow en employee group
Participation in pay roll savings plane by individual members will
can qualify for and obtain one of these Flage will be forthooming in the
be . major way of realising this objective. "Ve urge every worker," maid
near future.
Mr. Green, "to agree to set naide part of his weekly earnings for the
purchase of Defense Bonde.*
In the meantime, some companies have developed their own Defense
Savings flage to stimulate inter-departaantal competition. In the photo-
The drive to sall Defense Bonde and to secure Defense Bond purchase
graph at the right, a coveted 100%
pledges will be climaxed by "Labor Invests For Victory Vook," scheduled
bander is being awarded to the
for February 23 to March 1. The week will be opened on the avening of
Experimental Department of Vultee
Washington's BirthBay, February 22, with a nation-wide radio broadcast
Aircraft, Inc., the first "100% for
in which Secretary Morgenthau and President Green will appeal jointly for
Defense Savings* department in this
for worker support. During the week, each of the 802 central labor unions
encrmous concern, which in its
in as many cities will hold mass meetings and rallies at which announce-
Downey and San Diego California;
ments will be made of results achieved by each local union in the Defense
Wayne, Michigan and Nashville,
Bond drive, in terms of cash purchases and pledges to purchase. These
Tennessee plants, employs more than
meetings will be patriotic rellise which will serve as an inspiration to
55,000. On January 15, mure than
all of the communities in which they are held and to the nation as a whole.
70% of all company employees were
mess
participating in the Defense Bond
Secretary Morgenthau commended the American Federation of Labor for
purchase plan,
U.S.
setting this patriotic example to the nation.
DEFENSE
BONOS
"Just no hundrede of members of the APL building trades unione
Evansville Honor Holl
callantly fought with the Marines et Guam," the Secretary eald,
"no are millions of union zenbers now joining with other Ameri-
An "Honor Holl* to include all
can citizens and investing in Defense Bonds to the limit of
local industrial firms and business
First 100% Department at Vultee
their financial ability.*
houses in which every employee sub-
Plant receives pennent. Jonne
scribes to purchase bonde through a
Touchstone (left), consulting ex-
pay roll savings plan is to be ---
pert, National Defense Savings Staff,
"Pay Roll Savings* Preferred Tera for Allotment Plane
tablished by the Vanderburgh County
congratulates J. D. Stemple (holding
Defense Savings Staff, Evansville,
banner). of the Experimental Depart=
Attention is called to the fact that "Pay Roll Savings" is the term
Indiana, under the direction of
ment. The others, left to right,
which is to supplant or superseda the term "Pay Holl Allotment." Although
Michael Schaeffer, arecutive chair-
Byron I. Smith, local DSS worker and
publications of the Defense Savings Staff which use the older term will
man and Walter Drier, chairman of
A. E. Balab and V. Gerald Tuttle,
not be recalled, the new tarm will be used in all new material,
the pay roll savings drive, A com-
Vultee executives.
sittee of more than 250 persons
"Pay Roll Savings* le pure readily understood than "Pay Roll Allot-
representing every line of business
sent* and for other reasone too, is believed to be & more satisfactory
In the county 14 now concluding a
vera for Defense Bond purchase plans by which an employee arranges with
comprehensive canvase to sell the pay roll savings plas to employers and
his employer for the accumulation of an agreed-upon portion of his ragu-
employees.
lar pay towards the purchase of Defense Bonds,
One of the first universities to establish . pay roll savings plan
"Pay Boll Sarings* plans 62% to be distinguished from all other
⑉ the Massachusetts Institute of Technology, Cambridge, Massachusette.
systematic serings plane and particularly from those which involve the
There are some 2000 members of the Institute's staff.
purchase of stamps,
- la
- 12
Regraded Unclassified
News Letter
News Letter
FIELD ORGANIZATION 1111
FIELD ORGANIZATION INVE
Sev State Leaders Appointed
Parade Opene County Drive in South Dekota
Governor Keen Johnson of Kentucky, Governor San H. Junes of Louisi-
The Defense Sevings campaign in Pennington County, South Inkota USE
ans and Governor Arthur H. James of Pennaylvania have this month accepted
launched with a large meeting at the city auditorium in Rapid City, The
the Honorary Chairmanship of the State Defense Savings Committees being
sceting vse preceded by a.
formed in their respective states.
parade staged by officers
and mes from nearby Fort
Mende and representative
Ohio State Committee Organises
groups from all of the
city's patriotic and var
Organization of the Ohio State Defense Savings Committee van cob-
service organizations.
plated January 7, at . meeting in Columbus attended by the Honorary Chair-
Governor Harlan J. Bush-
man, Governor John W. Bricker and 85 other members of the state committee.
field, Congressman Francis
Coon, Deputy State Adminis-
State Chairman Roy Moore, State Administrator John McSweeney, and
trator Elser Rustad and
Deputy Administrator and Executive Secretary Harold Bredlow reported on
County Chairman Robert 1,
the very considerable progress made up to that date in organizing the Ohio
Driscoll were among the
Defense Savings campaign and outlined plans for the impediate future.
speakers. In conclusion,
prior to the playing of the
"It was cold outside (16 degrees below
Dr. Peter Odegard, special consultant to Secretary Morgenthau, vas
national anthem, Turner M.
serol), but the rally inside VSI ge bet
present from Washington to deliver a keynote address. Other speakers 10-
Rudesill, past state command-
as they come." - South Dakota State
cluded Theodore Vegner, president of the Canton Federation of Labor and
or of the American Legion,
Administrator Charles A. Christopherson
labor consultant on the Ohio Staff; H. V. Hoover, Canton industrialist;
lei the audience in B pledge
Program. and Mrs. Ray Fair of Akron, originator of Akron's school Defense Savings
which began with William
Tyler Page's famous "Ameri-
can's Creed" and concluded:
Milwaukee Committee Organizes
"And to the end that this creed may become effective in these
present troubled times and that my country and the principles
First meeting of the Defense Sevings Committee for Milwaukes County
for which it stands my be perpetuated, I pledge syself to buy
and City vse held January 16 in the auditorium of the Gas Company. Lead-
National Defense Bonds and Stampe to the best of by ability."
era of the Defense Savings Program
who addressed this meeting are shown
at the left.
Automatic Phonographs Continue to Serve
The six patriotically decorated automatic phonographs which have been
ROTO Cadate Use "Tas Day" Technique
placed at the disposal of the Illinois Defense Savings Staff by the See-
burg Corporation, manufacturers, continue to boost Stamp miss in . grati-
to Sell Defense Stamps.
fying way. Deputy Administrator John Gallaher reports that the machine
et the City Hall sells several thousand dollars' worth of Stamps weekly.
As one of the final features of
the Defense Bond and Stamp week beld
The machines, which are displayed and operated in various public places,
in Sen Antonio, Texas from January
are serviced by women members of the American Legion Auxiliary.
12 to 17 under the sponsorship of
the Junior Chamber of Commerce, all
Among the other cities where these machines either recently or cur-
Speakers at Milwaukee's Organisa-
ROTC cadete from the city's high
rently are promoting bond and stamp sales under the general supervision
tion Meeting. Left to right: State
schools, in their attractive uni-
of state Defense Savings Staffs are Detroit, Michigan: Kaneas City,
Administrator Kuhl: County Chairman
forms, devoted Saturday morning end
Missouri; New York City, Sev York; Rochester, Sev Tork; Clevaland, Ohio:
B. T. Franck; Mayor Zeidler and
afternoon to selling Defense Stamps
Washville, Tennessee; Dallas, Texas: and Milwaukee, Wisconsin.
County Commissioner Timmerman.
throughout the business section of
the city,
11 -
14
News Letter
News Letter
FIBLD ORGANISATION TRVS
FIELD ORDANIZATION FRYE
Help Providence Sooat Sales
Chicago Judges and Lewyers Sall Bonds
- wound truck equipped with huge searchlights formarly used at
Under the leadership of Keyer 9. Veinstein, young and aggressive
Rolly wood wovie premiers recently was enlisted by the Rhode Island De-
Ohicago attorney, judges if the Circuit, Superior and Municipal Courte
fense Sevings Staff to boost boad and stamp males in Providence. When
located in the Cook County Court Honee undertook to CRATERS the Court
the truck vas in Providence, 11
House and the adjoining City Ball in behalf of Defense Bonde. Results
was parked in front of the City Hall
the sale of $414,950 worth of Bonds in three days! The judges know hav
and became the center of # round of
Le got results!
entertainment (by members of the
cast of the Ice Capades) and ed-
with the success of this campaign, é committee of lawyers was form
dreases by such notables as Mayor
nil to casvace the 14 Loop office buildings largely tenanted by members
Dennie J, Roberts, Lieutement
of the legal profession.
Governor Louis W, Cappelli, and
Deputy State Administrator Henry
a. Sullivan. To the crowds which
Speakers Bureau Plans to Beach Byery Club
gathered for these events, news-
paper carrier boys sold stamps. In
The Speakers Bureau of the King County Defense Savings Comilites. in
the evening, the truck's powerful
Seattle, Vashington, has undertaken to secure " spot* for a brief assuage
searchlighte made the " for Vic-
Defense Bonds on every program of every club or organization or gather-
tory* aymbol in the sky, And
on ing which brings together 15 or more persons. One girl 1.0 nov devoting
"Y for Victory* 3A Mhode Island
throughout the day the truck's
her entire time to telephoning club offices and arranging these speaking
sound emplifiers flooded downtown
engagements.
Providence with patriotic airs.
The five Tonatmaters and Toestmistrees' Clube of Seattle have vol-
"March of "Ime" Movie and Other Unusual Features Mark Denver Rally
*)
unteered their services, and on December 30, they held . joint dinner
meeting at which more than 125 of their numbers received instructions
& petriotic rally in behalf of Defense Savings was held in a Denver,
end training to enable them to fulfill speaking aesignments obtained for
Colorado high school auditorium on , recent Sunday efternoon. Music by
then by the Ting County DSS Speakers Bureau.
"Our County at Var"; eye witness accounts of the Pearl Harbor blits; Ad-
two acts of professional vaudeville; A showing of the March of Time film,
the Lowry Field (Army Air Corps training center) orchestra and quartette;
Radio Managers and Biltors Contribute Helpful Ideas
drosses on the pay roll savings plan by representatives of management,
features of this successful gathering.
Early E. W, Duncan, Commanding Officer at Lowry Field, were some of the
labor, and the Defense Savings Staff: and as inspirational appeal by Col.
State Administrator Saul Bane in reply to a letter addressed by his to
Many constructive and helpful ideas were received by Washington's
the editor of each daily and weekly newspaper and the manager of each
radio station in the state. In this letter be thanked them for their CO+
operation and invited their suggestions. Be reports that their comments
Band Compaign Dramatised with Pugilistic Terminology
and suggestions have proved to be of genuine value to his and bis asson
cistes.
has set $1,370,000 " Its initial Defense Bond objective. This Le the
The Duval County Defense Savings Committee in Jacksonville, Florida
bolle approximate cost of the ten fighter planes which are the campaign's sym-
Wilhie Moets with Indianapolis Commities
goals. A series of radio "Bond Battles" are reising part of this
amount. The first of these "battles" raised $235,740, (See News Letter
Members of the Indianapolis Defense Savings Committee, holding one
for January 3.) Newspaper publicity in connection with the second battle
od included photographe of the loser, Elliot Butto, 10 & wheel chair, attend-
from Wendell Ing Wilkie, who responded to an invitation extended by tale-
of their regular Saturday meetings December 27, received 6. surprise visit
by . nurse, making a sistement to the effect that he VAL recovering
graph two weaks previously by general chairman Russell V, McDermott and
rapidly turn from No first bout and would definitely be In shape for the re-
committee member Homer 1. Capabert
down engagement; and photographe of the vinner, Fuller Warren, chopping
huge trees and doing road work in preparation for the second battle.
News Letter
News Letter
TO !BI LADIES
ON !!! AIR
A Voman's Work Is Never Done:
padio Programs for the Coming Week:
In North Carolina, Mrs. John D. Robinson, who is on the State De-
fense Savings Committee as the representative of vomen's organizations,
Monder. January 26. "FOR AMERICA we SING.* Dr, Frank Black's Trchae-
has her hands full of Defense Bond and Stamp business. For not only does
178 and Charus, 9:30-10:00 PM (EST), MBC Blue Network.
Mrs. Robineon serve on this Treasury Committee, but she 10 also In charge
Saturday, January 31. "AMERICA PREFERRED," Alfred Wallenstein's
of Vomon's Activities in the State Council for Defense. In that capacity
she directs 14 State vosen's committees, cas of which is set up to pro-
Orchastra, with Doems Taylor, commentation, 6:00-8:30 PM (EST), Mutual
note the sales of Defance Bonds and Stamps, At the same time, she is
Network.
U. 5. Chairman of Bonds and Stamps for the General Federation of Women's
Clubs. In the latter position she has been responsible for setting in
motion a Defense Savings Program that is currently reaching the majority
of the 17,000 federated clubs. Ber idea has been to appoint a U. S.
Bond and Stamp Chairman in each State, in each of the 500 G. F. V. C.
Harr Badio Programs Sell Bonds
districts, and eventually in each local club, To these chairmen, De-
fesse Savings materials are sent with suggestions 66 to how they might
In Indianapolis, the Railroadmen's Federal Savings & Loan Association,
best be used, Kra. Hobinson VAR in Weshington last week to arrange 6
broadcasting over Radio Station WIRE, has demonstrated affectively the
Defense Savings Program for the G. 7. V. C. Board Meeting to be held here
potentialities of the radio a.e. an aid in the sale of Defense Bunds. This
to January.
Association began, on Monday evening December 8, a series of daily half-
hour broadcasts devoted entirely to promoting bond sales, Listeners vere
invited to telephone in and order either bonds or stamps. The names of
10 Dagrees Below Zero
all purchasers were read over the air, and in the case of bond purchases,
the amount of the purchase wer also given. The first 12 programs result-
Sot even a temperature of 10 degrees below saro could keep 200 lead-
ed. in sales of nearly $90,000 to 387 different persons. In addition, the
are of local women's Defense Savings groups from their first meeting, held
savings and loan association attributes many sales unde at its offices
in Indianapolis. Practically every county
directly to the radio program. The program is now being continued on a
la the State vas represented in this seet-
weekly basis,
106 which was lead by Mrs. Oscar A. Ahlgren,
hand of the Women's Division of the Indi-
In Montana, all major radio stations began on January 11 . sories of
and Defense Savings Staff, Mrs. Ahlgren
Sunday afternoon broadonste to promote the sale of Dafense Bonds. Arrange-
is another active 0, 7. V. c. sember who
mente have been sade by local Defense Savings Committees is co-operation
is giving much of her time to the Defense
with Boy Scoute and Service Clubs to fill immediately all orders for De-
Savings Program, At present, she 1e Freei-
fense Bonde telephoned in to the Radio Studios during the two-hour broad-
dent of the Indians Federation of Vomen's
cast period.
Clubs.
In Detroit, la . special one-hour broadcest on December 30, over
Radio Station VXYL. more than $148,098 worth of Defense Bonds and Stemps
Dances for Defense
were sold.
A Defense Savings Stamp booth was a
feature of the "Honky Tonk dance givez
Radio's "Pay Roll of Honor® Grows Rapidiz
at the National Press Club in Washington,
D. C. by three auxiliary Junior philan-
Radio stations throughout the country are not only bromicasting Dew
thropic groups Junior Hadassah, Junior
fense Bond messages large numbers of radio employees are buying Defense
Council, and the Jevish Consumptives'
Bonde through pay roll savings plans. Already 138 stations have won
Buth Steinar - one of the
Relief Society, Faul Draper, nationally
places on the Radio "Pay Boll of Hooor," published in Radio Daily.
known dancer, and members of & local stage
Defense Stamp mleagirls at
the "Honky Tonk® dance La
Station WELP in Chicago, one of the first to announce achievement of
cast acted as salessen at the Stamp booth.
Washington, D. C.
100% status, reports that its 40 employees have pledged themselves to in-
rest at least $12,000 in Defense Bonds during 1942,
- 16
Regraded Inclassified
News Letter
BOWLERS HIS SPECIALTY
Pat Welsh, Detroit policeman is
shown at the left with the plac-
ard he designed in connection with
his usual patriotic hobby. When
MOF
off duty. Patrolman Welsh goes from
one bowling alley to another selling
proprietors, league secretaries and
individual bowlers on the idea of
buying 8 twenty-five cent Defense
Stamp each time they pay seventy-
five cents for the privilege of
bowling three games.
Get a STRIKE today
for UNCLE SAM with
your SPARE quarters
Buy DEFENSE STAMPS
and roll 300
against the JARST
ANOTHER BILLBOARD BOOSTS BONDS
On SHARE IN AMERICA
OFFICIAL BUSINESS
WASHINGTON, D.C. D. C.
BUY
DEFENSE SAVINGS STAFF
TREASURY DEPARTMENT
EMPHIS
COTTON
CHANGE
Milton X. Revill, Memphis and Shelby
County Chairman, helps post another
one of the Treasury promoted "boy
and dog" bond posters. More than
1000 of these posters sponsored by
hundreds of different local business
institutions may now be seen through-
are
out the country. (The "assistant
bill posters" are Mrs. V. L. McXee,
i POTTAGE PAYMENT or
Jr., and Miss Elisabeth Farnsworth.)
HEAN THE ser SERVICE HISA
- 20 -
47
Unfilled Orders for Savings Bonds at the
Federal Reserve Banks and the Post Office Department
January 12 to date
(In thousands of pieces)
: Unfilled
:
:
Unfilled
New orders
Bonds
Stock of
:
IBM
: orders at
:
:
orders at
bonds
:
received
manufactured
deliveries
: opening of
:
today
:
close of
today
on hand
:
this day
: business
:
:
business
:
Jan.
12
541
859
595
805
236
625
13
805
423
630
598
236
650
14
598
622
670
550
236
685
15
550
660
750
455
231
1,000
16
455
773
775
426
204
750
17
426
672
800
298
204
1,000
18
298
none-no mail
none-closed
298
204
800
19
298
204
800
202
704
825
20
202
204
800
86
1,184
1,000
21
36
411
800
59
1,546
875
22
59
697
800
86
1,676
1,000
23
86
569
800
50
1,871
1,000
Office of the Secretary of the Treasury,
January 24, 1942
Division of Research and Statistics.
#
Bonds in Washington vaults only.
Regraded Unclassifie
48
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Twenty Business Days of January 1942 and December and November 1941
(November 1-26, December 1-23, January 1-23)
On Basis of Issue Price
(Amounts in thousands of dollars)
:
:
:
Sales
:
:
Amount of Increase
:
Percentage of Increase
Item
:
:
:
:
January
:
December
:
January
:
December
January
December
November
:
=
:
:
over
:
over
:
over
:
over
:
1942
:
1941
:
1941
:
December
:
November
:
December
:
November
Series E - Post Offices
$123,773
$ 69,593
$ 33,438
$ 54,180
$ 36,155
77.9%
108.15
Series X - Banks
372,680
140,397
62,919
232,283
77,478
165.4
123.1
Series I - Total
496,452
209,990
96,356
286,462
113,634
136.4
117.9
Series F - Banks
54,804
20,760
16,206
34,044
4,554
164.0
28.1
Series G - Banks
215,671
107,198
91,026
108,473
16,172
101.2
17.8
Total
$766,928
$337,948
$203,589
$428,980
$134,359
126.9%
66.0%
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 24, 1942.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclass
49
UNITED STATES SAVINGS BONDS
CONFIDE
Daily Sales - January, 1942
On Basis of Issue Price
(In thousands of dollars)
Post Office
Bank Bond Sales
All Bond Sales
Date
Bond Sales
Series 3
Series X
Series If
Series G
Total
Series 3
Series 7
Series G
Total
January 1942
1
$ 3,982
$ 10,229
$ 1,964
$ 7,605
$ 19,798
$ 14,211
$ 1,964
$ 7,605
$ 23,780
2
4,802
10,736
2,056
7.779
20.571
15,538
2,056
7.779
25.373
3
4,457
9.557
1,278
5,453
16,289
14,015
1,278
5.453
20,747
5
9.684
26,724
3,240
13,704
43,668
36,408
3,240
13,704
53,352
6
6,711
7,659
1,341
6,778
15,778
14,369
1,341
6,778
22,489
7
6,748
21,267
3,692
18,832
43,790
28,015
3,692
18,832
50.539
8
7.509
21,297
3,821
12,871
37,989
28,806
3,821
12,871
45,498
9
5.746
12,359
1,798
4,765
18,923
18,105
1,798
4,765
24,669
10
4,398
16,031
1,858
6,355
24,244
20,429
1,858
6,355
28,641
12
10,187
37,483
3,830
14,353
55,666
47,670
3,830
14,353
65,853
13
7,902
15,059
2.507
11,944
29,510
22,961
2,507
11,944
37,412
14
4,706
19,939
3,701
14,293
37.933
24,645
3.701
14,293
42,639
15
6,444
16,597
2,243
13,283
32,123
23,041
2,243
13,283
38,567
16
5,721
26,239
4,319
14,078
44,637
31,960
4,319
14,078
50,358
17
4,830
6,933
759
3,008
10,700
11,763
759
3,008
15,530
19
8,835
39,000
3,946
16,599
59.545
47,835
3,946
16,599
68,380
20
5,155
10,549
2,285
10,551
23,385
15,703
2,285
10,551
28,539
21
4,886
19,375
3.538
15,566
38,479
24,261
3,538
15,566
43,365
22
5,161
22,257
3.973
9,850
36,080
27,418
3,973
9,850
41,241
23
5,908
23,392
2,652
8,004
34,048
29,300
2,652
8,004
39,956
Total
$123,773
$372,680
# 54,804
$215,671
$643,155
$496,452
$ 54,804
$215,671
$766,928
Office of the Secretary of the Treasury, Division of Research and Statistics,
January 24, 1942.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds of
sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclassified
50
Stock of Series E Savings Bonds on Hand
January 15, 1942 to date
(In thousands of pieces)
: Stock on hand
:
:
Bonds
Stock on hand
IBM
Sales
:
beginning
:
:
manufactured
close of
deliveries
this day
:
of day
:
:
this day
day
this day
Jan.
15
6,569
320
750
6,999
1,000
16
6,999
445
775
7,329
750
7,329
163
800
7,966
1,000
17
18
7,966
none-closed
none-closed
7,966
800
19
7,966
665
800
8,101
825
20
8,101
218
800
8,683
1,000
21
8,683
337
800
9,146
875
22
9,146
381
800
9,565
1,000
23
9,565
377
800
9,988
1,000
Office of the Secretary of the Treasury,
January 24, 1942
Division of Research and Statistics.
Includes stock in hands of (1) Federal Reserve Banks and branches, (2) Post offices,
(3) Federal Reserve Bank issuing agents, and (4) Treasury vaults in Washington.
Regraded Unclass
61
Unitiled organ for mail - 2 for
- who (in FORE office Repartment
Jenuary 11 20 RASE
(In United of
CONFIDENTIAL
: Unfilled
:
Rev orders
T
Bonds
1 Unfilled
:
stock of
:
IDX
I orders st
1
received
:
manufactured
: orders at
:
bonde
:
: close of
deliveries
: opening of :
T
today
:
on hand*
:
I business
today
: business
this day
I
I
:
:
Jan.
12
541
859
595
605
236
625
13
605
423
630
590
236
650
14
598
622
670
550
236
685
15
550
660
750
455
231
1,000
16
455
773
775
426
204
750
17
426
672
8/10
298
20%
1,000
18
298
sall
none-closed
236
204
800
19
298
20%
400
202
70%
825
E
202
20'
BOO
86
1,10%
1,000
21
86
411.
800
59
1,545
875
22
59
697
200
86
1,676
1,000
23
86
569
500
50
1,871
1,000
Office of the Secretary of the Treasury,
January 24, 1942
Division of Research and statistics.
.
Bonds in Washington vaults only.
Regraded Unclassified
52
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
January 24, 1942
is ORANDIC TO THE SECRETARY
There is submitted herewith the operating re-
port of Lend-Lease purchases for the week ended
January 24, 1942.
The advance requisition was received for
1,058,500 tons of steel for delivery during the
second quarter of 1942.
Arrangements have been made for in-transit
storage, also local storage, for supplies await-
ing shipping instructions from the requisitioning
country. Due to the shortage of vessels, efforts
are being made to provide types of cargo immediatcly
which will permit full utilization of space in the
ships.
your Clinton E. Mack
Director of Procurement
FORDEFENSE
BUY
UNITED
STATES
SAVINGS
BONDS
AND STAMPS
us.
Regraded Unclassified
53
OPERATING REPORT - LEND-LEASE PURCHASES
WEEK ENDED JANUARY 24, 1942
TOTAL ALLOCATIONS
$817,112,879.00
PURCHASES PREVIOUSLY
REPORTED
$409,117,623.49
PURCHASES THIS WEEK
32,746,031.08
TOTAL PURCHASES
$441,863,654.57
REQUISITIONS IN PRO-
CESS OF PURCHASE
33,122,856.00
REQUISITIONS IN PRO-
CESS OF CLEARANCE BY
WAR PRODUCTION BOARD
137,877,507.50 $612,864,018.07
UNOBLIGATED ALLO-
CATIONS
$204,248,860.93
54
VAN 1942
Dear Mrs. Preses
The Treasury Department has been informed by the
State Department that according to information received
from Ambassador Gause at Changicing Americans in Hang Kong
were unharmed and were being housed in the Heng Kong and
Shanghai Bank Building. The Secretary of the Treasury
was assured that the American Consul General in Hong Eeng
would do everything in his power to assist Mr. Fress.
Nagotiations with the Japanese Government through the
intervention of the Swice authorities are proceeding to
secure the exchange of Japanese official personnal in the
United States for American official personnel in Japan
and Japanese occupied territory.
The State Department will make every effort to have
Mr. Frace included in the American party If en exchange
takes place.
Very truly yours,
Acting Secretary of the Treasury.
Item. Walter P. Frees,
Arlington Tillage Apartments,
2508 Columbia Pike,
Arlington, Virginia.
157/eta
1/21/42
Ret. to Rm 214'6
Regraded Unclassified
55
JAN 22 1042 1076
Dear Mrs. Taylors
The Treasury Department has been informed by the
State Department that according to information received
from Anhassedor Games at Chungling Americans in Hong Keng
were whareed and were being housed in the liong Kong and
Shanghei Bank Building. The Secretary of the Treasury
was assured that the American Consul General in Heng Keng
would de everything in his power to assist Mr. Taylor.
Negotiations with the Japanese Government through the
intervention of the Swine authorities are proceeding to
secure the exchange of Japanese official personnel in the
United States for American official personnel in Japan
and Jayanese compled territory.
The State Department will make every effort to have
Mr. Taylor included in the American party if an exchange
takes place.
Very truly yours,
(SIGNED) D. W. BELL
Acting Secretary of the Treasury.
Mrs. William H. Taylor,
Receivelt Hotel,
2101 16th Street, N.W.,
Washington, D. c.
ISP/efs
1/20/42
Ret. to Rm 2141/2
Regraded Unclassified
58
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 24, 1942
TO:
Secretary Morgenthau
FROM
Mr. Doe
subject: Notes on the Rio Conference
1. Yesterday, Jenuary 23, the Conference voted unanimously
to recommend to the governments of the 21 Republice a
rupture of diplomatic relations with the Axis. This
wording was finally accepted by Argentina which had re-
jected the previous wording that the Republics "cannot
continue relations with the Axis".
It WAS reported by radio today that Peru his broken off
relations with the Axis. This leaves seven Republics
still maintaining relations with the Axis: Argentina,
Chile, Uruguay, Brazil, Bolivi- and Ecuador. Of these
all but Argentine and Chile are expected to break off
relations within St few days or weeke -- Uruguay possibly
today.
2. The major economic projects now being considered at the
Donference are the following:
(a) Proposal for 8 Hemispheric Stabilization Fund. It
was reported yesterday that March 15 and Washington
have been named as the time and place for the
Conference of American Finance Ministers to con-
sider the establishment of this Fund.
(b) Severance of commercial and financial relations
with the Ax1s.
(c) Development of transportation and distribution of
strategic and other essential raw materials.
(a) Meintenance of the internal economies of the American
nations under wartime conditions.
(e) Joint maintenance of shipping which would provide
for use of available ships in the inter-American
trade "in the best possible menner".
Regraded Unclassified
57
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
JAN 24 1942
TO
Mr. Foley
FROM Mr. Pehle
The question has been raised by Internal Revenue as to
whether the information contained in TFR-300 Reports can be made
available to it for the enforcement of tax claims.
It 1a my understanding that it is not the practice of the
British Government to use censorship material for non-war purposes
such as tax collecting. However, in the letter signed by Mr. Gaston
on January 19, 1942, to the Director of Censorship, one of the classes
of censorship information in which the Treasury indicated its interest
was as follows:
"Internal Taxation - Any information which would
indicate schemes or efforts to avoid or escape
income, profits or other internal taxes of the
United States, including taxes on alcoholic liquors."
If American censorship material is to be used for tax collecting
purposes, it would be logical to assume that the material from the TFR-300
Reports should also be available for such purposes.
I suggest you raise the matter at a 9:30 meeting and obtain the
Secretary's decision in order that the Foreign Funds Control may be
guided accordingly in its relations with the Bureau of Internal Revenue.
JAN 2 8 1942
Josene
"m2
Regraded Unclassified
Mrs. Klotz:
58
Photostat to Dr. White as per your
instructions.
R. McH
Jan. 27th
A OF SINANCE
OF -
DEPUTT MINISTER
OTTAWA, January 24, 1942.
PRIVATE AND CONFIDENTIAL
Dear Mr. Morgenthaut
I wish to thank you for your letter of
January 14th and to express the appreciation of my Minister
and myself in regard to the efforts which you have made and
are making to solve our U.S. dollar exchange problem in order
that we may be able to make the maximum contribution to the
common war cause.
Since returning from Washington I have
done 5 good deal of work on our estimates and have revised
certain of the items in the light of further information and
consideration. We have not yet completed our investigations
in regard to some of the other items and it will take at
least two or three weeks before these studies can be completed.
I had been considering whether I should wait until all these
investigations were completed and we could give a completely
revised forecast with some degree of assurence. However, in
view of the time fector I have concluded that, on the whole,
it is better for me to send to Mr. White the results of my
present thinking on the subject. I know that he realizes
how difficult it is to make these forecests, based AS they
must be on so many factors of risk and uncertainty, and that
he will accept them for what they are, tentstive estimates
for our own working purposes subject to constant revision
in the light of the developing situation.
Incidentally, the results may be summar-
Ized very briefly as follows:
Totel Gold end U.S.
Gain or Loss in Gold
Dollars at End of
and U.S. Dollars
Period,
(In Millions of
(In Millions of
U.S. Dollaro)
U.S. Dollars)
201
1942 1st quarter
+13
160
2nd
"
-41
69
3rd
"
-91
-49
4th
"
-118
-175
1943 1st
"
-126
(over)
Regraded Unclassified
The less favourable position indicated by the above table
n.s compared with that which I discussed with Mr. White during
the Christmas week 18 due to a number of factors. For instance,
it takes into account an up-to-date revision of our estimated
deliveries of merchant ships, the program for which was delayed
for some months by the difficulty of securing an adequate
tonnage of steel. I have also increased our entimated wer
imports from the United States by an allowance for the price
factor and also by taking into account an additional contract
which I believe we are now placing in the United States for
about $60 million of automotive equipment for war purposes.
Finally, it seemed to me necessary, if we were not to be
unduly optimistic, to take the more extreme of the entimates
of loss in our receipts from United States tourist expenditures
in Canada during the present year. In other words, I have
estimated that these receipts will be approximately cut in
two.
On the other side of the picture, I have
left unchanged the figures of probable deliveries of Hyde
Park sales to the United States, 86 I have not yet been able
to secure from our Supply officials any more up-to-date estimate
than I had in late December. I know, however, that the process
of negotiating new orders is going on fairly steadily between War
Suppli a Limited and your various Service Departments and
no doubt a considerable number of new orders will be given to
us. For instance, I am advised that the order for Canadian
scout cars which was held up for a time by Mr. Phillip Young's
ruling has finally been accepted, Furthermore, I gather from
odd bits of information given to me about new orders under
negotiation that it is not improbable that in the general
desire to secure the most effective pooling of the economic
resources of the two countries to which the two Governments
are now committed, and in the interest of getting the speediest
possible deliveries from whatever source they may be available,
the Military and Supply Agencies of the two Governmente may
reach decisions in regard to the purchase of finished articles
in Canada which may greatly improve the prospects of our
exchange position. I suppose it will be better for all
concerned if purely W&T supply considerations should accomplish
this result automatically without requiring too great Inter-
vention on the part of the Treasury. Before the revised
estimate is presented to Mr. White it will probably be
possible to take into account the -esult of some of these
new favourable developments.
Regraded Unclassified
B0
B.
I appreciate your taking the position
that the exchange problem should not stand in the way of
meximum wer production. I note also your assumption that
the goods in question will be produced and used to the best
advantage, whether the payment is in U.S. dollars or some
other form. In 60 far 88 we are concerned, we will do our
utmost to see that that assumption is sound, although I am
bound to say that new war production projects must be planned
a good many months in advance, and where, 89 is normal in our
0888, such projects involve a substantial United States content,
it is difficult to overlook, and not be anxious about, the
possibility that when the time comes we may not have the
United States dollars with which to purchase that United
States content.
In this connection I know you will be
interested in the statement in Thursday's Speech from the
Throne to the effect that the Canadian Parliament will be
asked "as an integral part of Canada's direct war effort,
to approve a contribution to Britain of vest quantities of
munitions, foodstuffs and supplies." On Monday next the
Prime Minister will make his address in the Debate on the
Speech from the Throne and during the course of this address
will make a detailed ennouncement in regard tothis contribution
and to the whole subject of our financial relations with Grest
Britain. I am making arrangements to see that a copy of at
least this part of Mr. King's address will be handed to you
68 soon as possible after it has been finalized, probably
early Monday evening.
Mr. Ilsley wishes me to express to you
again the Government's appreciation of your sympsthetic
interest in, and your understanding of, our exchange problem
and the renewed expression of your willingness to have us
raise with you at any time questions relating to our U.S.
dollar position. Last year we lost $142 million of U.S.
exchange, not to mention a substantial amount of other U.S.
assets, but had it not been for the Hyde Park Agreement
which you inspired, the situation which we would now be
facing would be far more serious indeed. It is difficult
for me to find words to express my own appreciation.
with kindest regards, I em,
Yours very sincerely,
Non. Henry L. Morgenthau, Jr.,
Secretary of the Treesury,
116
WASHINGTON, D.C.
Regraded Unclassified
Treasury Department
Division of Monetary Research
61
Date January 24, 1942 19
Secretary Morgenthau
To:
Mr. Coe
From:
These few pages regarding the
proposed loan to China might be of
some use to you. A considerably more
extensive analysis is now being prepared
by the Division.
Regraded Unclassified
TREASURY DEPARTMENT
62
INTER OFFICE COMMUNICATION
DATE JAQUARY 24.1942
TO
Secretary Morgenthau
FROM
Mr. Coe
subject: Summary of conclusions and conciCerations on
loan to China.
:- Conclusions
For political and military reasons it is suggested that
the United States should grant Chine & loan of sporoximately
the size requested by the Generulissino -- 500 million dollars.
Probably the best form for the loan would be the extension of
L special Lend-Lesse credit to China, on which they would draw
whenever they could use the dollars.
The Generalissimo's desire that there should be no conditions
to the loan should be met only pertially. The Lend-Lesse credit
would have to be for a number of specified uses. No other condi-
tions would be imposed and the Chinese would have complete freedom
to use the dollars in any or all of the specified ways.
The uses which could probably be agreed upon would be for
the peyment. directly in currency or indirectly through bond issues,
of current military expenditures for goods and services; the pur-
chase, directly or indirectly, of goods and services necessary for
the welfare of the people; the ourchase of necessary imports;
investment in necessary productive enterprises; to guarantee bond
1ssues designed to absorb Chinese currency which would otherwise
circulate, and for the backing of currency. By careful definition
of the uses BO that "unsconomical" uses were ruled out, it would
probably result that these dollars would be drawn down gradually.
2. Political requirements and the size of the loan
The President, the Generalissimo, State Department officials,
- Currie end Mr. Fox have all stressed that the loan to China
1e to be made primarily for political purposes. Under present
conditions, certicularly with the Japanese attempting to induce
China to make peace, it 18 highly important thet all possible
mesures be taken to keep Chine in the mar on the side of the
United Nations. The present military situation 16 such that the
Regraded Unclassified
63
- 2 -
energy with which China continues the war 18 vital to us. The
military assistance we oan give the Chinese may be long delayed.
Therefore, if China holds out for 8 larger loan, it is desirable
on political and military grounds that they receive what they
ask for, or something approximating what they ask for,
3. Economic conditions in China.
China 1e in the middle of a grave inflation. Since 1937,
retail prioes in Chungking have risen 27 fold while during the
same period the volume of currency outstanding has increased 7
fold. Outstanding currency will be doubled again in 1942. The
total volume of goods in Free China is decreasing primarily due
to decrease in imports, and the volume of hoarded goods 18
increasing. These economic conditions are the grestest threat
to the Generalissimo's control.
It. The economic uses to which a dollar loan oan be put
Under present conditions, difficulties of transportation
greatly ourtail the ability of China to import goods. Moreover,
China can obtain under Lend-Lease the goods she needs from the
United States and elsewhere. Therefore a dollar loan 18 not
necessary for imports.
A dollar loan could greatly help China in two ways: (a) to
combat inflation by substituting financial hoarding for commodity
hoarding, and (b) to increase the production of goods and the
amount of welfare services in China. In addition, (c) some
temporary psychological benefit would result from the announce-
ment that China had acquired a large store of foreign exchange to
be used for backing of her currency or other vague purposes.
(a) If 8 dollar loan was used to reduce the hoarding of
commodities in Ohina, it would make more goods available to
the Government and people of China and would decrease or prevent
increases in the outstanding Chinese currency, thus attacking
inflation from both ends. Among the various mechanism for doing
this are: (1) issuance of bonds in exchange for fapi, the bonds
to be payable optionally or mandatorily in dollars, with or
without guarantee of principal and interest by the United States
Government; (2) issuance of bonds as above in exchange for goods
and services; (3) shipment of United States currency to China
and its distribution to Chinese nationals in exchange for goods
and services; and (4) the shipment of gold to China and its
distribution there to Chinese nationals in exchange for goods
and services.
64
- 3 -
There are many possible variants of these proposals, all
of which could be of use in combating inflation. In the sending
of United States currency to China there is the political problem
of the probable opposition of the Chinese Government to anything
that would seem to be depriving Ohina of her own monetary system,
and, economically, the many problems raised by the introduction
of a foreign currency alongside of 8 depreciating domestic
currency. In addition, both in the 08.88 of shipping United States
currency and gold, the problem of safe transportation might be
difficult.
It is not necessary that monthly payments be made to a given
number of Chinese soldiers, in order to achieve the objective of
paying out dollars currently while fighting 1s proceeding.
Provision might be made for meeting a portion of the budget,
either military or total, month by month; or, by agreement, dollar
backed bonds could be issued only to meet ourrent military expend-
itures -- in limited monthly quantities; or, by insistence that
the bonds should be sold to individuals and without corresponding
increases in bank credit, the Chinese would be forced to issue
bonds - and to use up the money -- at a slow rate.
(b) In addition to allowing the Chinese to use the Chinese
currency proceeds from the bond issues or sale of United States
currency for military purposes, it would be desirable to allow
them to use these to finance increases in production and to
improve welfare services. Although the Chinese could do these
things by printing more paper money, these important ways of
United States dollars can be 60 used. Among such projects would
increasing the war effort are more likely to take place if
be financing small industrialists at attractive rates of interest,
financing of industrial cooperatives and land reclamation. Bome
degree of American collaboration would be desirable in the
kind of intervention. The Chinese Stabilization Board might be
financing of such projects and the Chinese might agree to this
linked to the loan in this way.
to be "in back of" the Chinese currency will not decrease directly to
(c) The fact that B. dollar account in New York 18 stated
print expenditures money. But there would be temporarily a psychological
the which the Government has to make or its need
rary effect, effect on price rise. The immediate political effect might
paper with decreased hoarding and speculation, and some tempo-
be substantial.
Regraded Unclassified
65
- 4 -
5. Sources of funds
It is essumed that if the loan 1s anywhere near $500 million
the Stabilization Fund will not be used. The resources of the
Export-Import Bank are currently less than $200 million. Therefore,
the alternative sources of funds would seem to be & Congressional
suthorization for a loan or Lend-Lease. Since Congress is already
in favor of Lend-Lease, it would Beem to be easiest to obtain the
money from this source.
In addition, the use of Lend-Lease would make it possible
to eliminate rate of interest and much of the other financial
perephernelia which 18 inappropriate in wartime.
It would seem feasible to use Lend-Lease funds for the
payment of military expenses in China, for strengthening the
Chinese economic system with a consequent strengthening of the
Chinese war effort, and for preventing the Chinese monetary
system from collapsing.
Regraded Unclassified
ALE
PLAIN
66
Bombay
Dated January 24, 1942
Rec'd 12:18 D.M.
Secretary of 3tate,
Mahington.
49, Twenty-fourth.
3ilver dull and innctive with declining orices
partly due wenkness gold market. 3tocks increased amount-
ins bars 20,000 drily, offtnke 400, spot high seventy-
one rupees six DiES, low sixty-four twelve, close
seventy Eleven. Decision reserve bank to discontinus
3010 of sovertigns regainst gold announced seventeenth
chused sharp price increase due misunderatanding
bozorr operators of implocations this notice. As
govereigns rose in price speculators bought gold heavily
and anot price rose to forty-seven Eleven nt which
level short selling began na operators realized
that since it was no longer possible to buy sovereigns
Against gold, price of latter must decline. Prices
dropned nagisted by heavy arrivals from interior.
local price of gold in future will depend
upon supply and demand of metrl itself undisturbed by
flucturtions in price of govertigns stocks. Totals
75,000 daily arrivels and offtcke 7500 soot "igh forty-
seven Eleven, low forty-six two, close forty-seven.
INFORM TREASURY.
TC
DONOVAN
Regraded Unclassified
67
DEPARTMENT OF STATE
WASHINGTON
In reply refer te
50 8900.5151/12
January 24, 1942
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
copies of telegram No. 18, dated January 23, 1942, from
the American Legation, Baghdad, Iraq, concerning exchange
control measures recently adopted by the Government of
Iraq and the request of the Exchange Control Committee
for 8. list of dollar holdings of residents of Iraq as
reported on Treasury Form TFR-SCO.
The Secretary of State would appreciate the advice
of the Secretary of the Treasury as to the reply to be
made to the telegram under reference.
Enclosure:
From Legation, Baghdad,
No. 18, January 23, 1942.
Regraded Unclassified
ALM
68
This telegram must be
Baghdad
paraphresed before being
communicated to anyone
Dated January 23, 1942
other than a Governmental
agency. (BR)
Rec'd 11:05 a.m.
Secretary of State,
Washington.
18, January 23, 10 a.m.
Iraq Ministry of Finance in exercise of exchange con-
trol has issued notice of January 21 requiring all persons
resident in Iraq to surrender against dinar equivalent any
holdings of United States dollars and Swiss france within
period of 15 days. Holders are required to furnish declaration
and prepare telegraphic instructions to effect delivery,
and such cables will be despatched at expense of Exchange
Control Committee. Licensed dealers in Iraq are Ottoman
Bank, Eastern Bank, and Imperial Bank of Iran, which will
pay dinar equivalent at rate of $4.03 and Swiss france 17.40.
Exchange Control Committee has today made it clear to Legation
that American residents of Iraq possessing dollar holdings
are not (repeat not) affected but was unable for peculiar
local reasons to specify this exception in the notice.
Committee understands from NEW YORK TIMES of August 18
that United States Government initiated complete census of
foreign property held in United States per Treasury form TFR--
300 to be completed September 30. Committee requests that
-2-
69
it be furnished by Treasury through this Legation a list
of dollar holdings of residents of Iraq in order to administer
exchange control here effectively. Legation would appreciate
telegraphic reply whether Treasury can do this.
State the cost of reply.
KNABENSHUE
RR
Copy:bj:1-26-42
C
0
P
70
Y
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
FF 840.51 Frozen Credits/5125
January 24, 1942
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and transmits
herewith a paraphrase of telegram no. 210 of January 21
from Bern, concerning the difficulties with which the
American Legation in Bern is presented in securing
Swiss francs for its dollar drafts.
Enclosure:
From Bern, no. 210,
January 21, 1942.
Copy:bj:1-28-42
C
0
70
P
Y
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
FF 840.51 Frozen Credits/5125
January 24, 1942
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and transmits
herewith a paraphrase of telegram no. 210 of January 21
from Bern, concerning the difficulties with which the
American Legation in Bern is presented in securing
Swiss francs for its dollar drafts.
Enclosure:
From Bern, no. 210,
January 21, 1942.
Copy:bj:1-28-42
Regraded Unclassified
71
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMLEGATION, Bern
TO :
Sceretary of State, Washington
DATED:
January 21, 1942, midnight
NUMBER:
210
Reference is made to Bern's 167.
Swiss banks state they cennot be sure that they will
be able to resell official drafts and Treasury checks, and
as a result there have been serious difficulties in selling
them. These banks now offer to purchase this paper at a
discount only, the repurchase of such paper being refused
by the Swise National Bank.
The previous stable buying rate of 4.285 is now 4.145
without assurance that they will continue to maice pur-
chases or that the rate will not 6° lower. A Legation
representative informally consulted yesterday with the
Director from Born of the National Bank and with the Foreign
Office Economic and Financial Liaison Officer with a view to
obtaining the assurance that at a. stated time sufficient
funds in Swias francs would be rovided for Foreign Service
establishments and their employees in Switzerland. Several
previous conversations have been held on this matter.
In a memorandum of the conference it is stated that
the National Bank and the Foreign Office have not prohibited
the purchase of drafts by commercial banks. It has mercly
Regraded Unclassified
72
&
been pointed out by the National Bank that although there
would be no objection to their purchase of them and their
fixing the exchange rate, the National Bank could not re-
purchase them. If a buyer is found, the Foreign Office
elaims we are free to offer and sell our drafts, and that
its (omission) not required. The fact that the market for
our drafts has almost vanished, the Swiss Government holds
is not its fault. It also does not feel required to make
any suggestions for betterment of our position.
It was readily agreed that since commercial banks may
suddenly find it impossible to continue purchasing our
drafts regardless of the low price, such a position could
not be satisfactory to us. The principal reason why the
banks can continue to buy them at all, it was said, is
because of the possibility of their being resold to
emigrant Jews. Several possible ways out of this situation
were seen by the National Bank Director. One. It was felt
that the assent by other National Bank directors could be
obtained to insure the purchase of dollars offered by us
and Latin American nations if Treasury would agree to
transfer either Swiss blocked dollars or gold to neutral
countries' accounts as had recently been asked and rejected
in the Portuguese case and undecided in the Spanish case.
It was stated the Legation thought that providing
Regraded Unclassified
73
-3-
Swise france for maintaining representation of the United
States in Switzerland should not be included with other
problems in the financial relations between Switzerland
and the United States, which was & separate and distinct
question. It was indicated by the bank conferee that if
the United States Government should buy badly needed com-
modities, preferably metals, for shipment to Switzerland,
aside from these for which navicerts already are obtainable,
there would be a further possibility for furnishing francs.
Since the Bank had offered to pay francs to us for gold
delivered to it in Portugal or Bern, it would very likely
do so, enabling us to pay the Swiss for expenses incurred
in representation of interests.
The representative of the Foreign Office stated that
there could be no agreement by the Swiss Government to
"diplomatic" clearing, and asking us only for such ship-
ment of gold would take care of our eventual debit balance.
The Foreign Office believes that with imposition of
clearing, the United States and Switzerland are well able
to pay their debts, and that such a "diplomatic" clearing,
if established, would soon, to the distinct distaste of the
Swiss, become general for all transactions between Switzer-
land and the United States. It was indicated by the
conferee of the National Bank that there was perhaps a
Regraded Unclassified
74
false impression by our authorities that the bank wishes
to liquidate or diminish its position with the United
States, but if it might render it mobile again by adding
to it and drawing from it for legitimate actions of no
help to enemy countries, the Bank would welcome the oppor-
tunity to hold that position. The Bank would willingly
take a corresponding amount of dollars if Treasury would
approve the three million dollar transfer to the Spanish
blocked accounts.
The local bank verbally informed the Legation on
January 19 that it would purchase our draft for $42,500
on January 31 (operating expenses for February and salaries
for January) although its resale to the National Bank was
uncertain. This verbal assurance has now been conditioned
upon whether or not the National Bank will buy the draft.
Our bank will probably refuse ultimately. Thus a very un-
certain material situation faces the consulates, which in
the meantime has, of necessity, had to cash certain small
drafts on private accounts at the reduced exchange rate.
Following communication from Swiss National Bank received
by Legation since above was drafted: "Swise francs
1,502145.92, which amount we hold at your disposal, has
been transferred to us by the Federal Reserve Bank of
New York through the Banco de Portugal, Lisbon". Apparently
Regraded Unclassified
-5-
75
this is the franc equivalent of $350,000 referred to in
telegram no. 139 of January 17 from the Department. The
Legation requests the Department's permission to use this
Swiss franc account at the National Bank for personnel and
administrative funds, as of January 31, until arrangements
are permanently made, thereby escaping exchange loss which
would result from forced draft sales at a discount, and
in view of the uncertainty of the draft market would assure
available funds.
Copy:bj:1c:1/28/42
Regraded Unclassified
TREASURY DEPARTMENT
76
INTER-OFFICE COMMUNICATION
DATE January 24. 14%
TO Secretary Morgenthau
CONF ENTIAL
FROM X. Dietrich
Segistered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
32,000
Purchased from commercial concerns
£27,000
Upen market sterling was quoted at 4.03-3/4. and there were no reported
transactions.
In See York closing quotations for the foreign currencies listed below
were as follows:
Canadian dollar
11-5/8% discount
Argentine peso (free)
.2360
Brazilian milreis (free)
.0516
Colombian peBo
.5775
Mexican peso
.2065
Uruguayan peso (free)
.5250
Venezuelan bolivar
.2675
Cuban peso
Par
There were no gold transactions consummated by us today.
%0 new gold engagements were reported.
A
Regraded Unclassified
77
BRITISH EMBASSY,
WASHINGTON, D.C.
24th January, 1942.
PERSONAL AND
SECRET
Dear Mr. Secretary,
I enclose herein for your
personal and secret information 8. copy
of the latest report received from
London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
Halifex
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.
Regraded Unclassified
78
Copy No.
(
BRITISH MOST SECRET
(U.S. SECRET)
UFTEL Hea zz
Information received up to 7 a, 23rd January, 1942
1, (NVAL
A twelve thousand ton outward bound tanker was terpedoed on
22nd six hundred miles east of CAPE RACE,
1. MILITARY
LIBYA. 22nd, Three enemy columns, including tanks, made a recon-
natesance in force about fifteen miles deep from their positions around AGHEIIA.
Our forces are withdrawing but maintaining touch and harassing the enemy while
our reserves are moving forward towards the fighting area,
MALAYA. East, Our forces, after successfully ambushing the
enemy, have withdrawn south of the river HERSING, Our artillery are harassing
enemy movements, Centre, No further change. Nest, Heavy fighting continues
and the position in confused, On the 21st eight hundred Australian and four hun-
dred Indian troops who had been out off, rejoined from the BAKRI area, A British
infantry trigade ccunter attacked BUKIT PAYONG to help this movement, By the 22nd
the PUKIT PAYONG area was strongly held by the enemy and remainder of our troops
in this area who were unable to force their way through, are making their way in by
tracks leaving their wheel transport,
BURMA. Beavy fighting continues at KAUKAREIK in the MOULMEIN
area against the enemy in force. The evacuation of our forces from the MERGUI
area 16 proceeding, A number of military personnel from TAVOY have arrived in the
29 area and all the R.A.F. ground party have reached LICULMEIN safely.
RUSSIA. The Russian edvance southwards mest of RZEHV has made
"irther progress. Russian attacks south-east of KHARKOV have gained ground,
dattle change in the CRIMEA but a resumption of the German attack towards KBC
probable,
The ATR OPERATIONS
RESTERN FRONT. 21st/22nd, BREWEN. toos ml 040
Immand five hundred inciridiaries,
ETEN- Ferty-seven tons and the thousand too hundre:
At BREZEN a four thousand pourd toat mrst near the reflaxy just
P.m And another nour the Atlas Shipyards, Goven R.C.A.F. and two R.A.A.F. At:-
look pert, One Canadian Hampden - among those
22nd, & Hudson obtained two like on a one thousand ton merchas
Versel off the FRISIAN ISLANDS,
Regraded Unclassified
79
- 2 -
22nd/23rd. Seventy-two aircraft sent out, 47 of them to LINSTER.
Tuo are missing and one crashed on return.
LIBYA. 21st, Tater logged landing grounds prevented operations
ever the forward area,
MALTA. 22nd, The air attacks took place, at HAL AR activerom:
Hildings and a Hurricane on the ground were damaged. Our fightors probably
destroyed three aircraft and damaged two more, Te lost one Hurricane.
HALAYA. SINGAPORE ISLAND was attacked by about hundred aircraft
on the 21st and by 54 bombers escorted by fighters on 22nd. The aerodromes
were heavily bombed, five of our aircraft being destroyed on the ground and
several others damaged. In air fighting our fighters destroyed nine aircraft,
probably destroyed one and damaged four. Te lost ten fighters but four pilots
little eafe. In addition A/A artillery claim nine aircraft destroyed,
Regraded Unclassified
RESTRICTED
80
RESTRICTED
MILITARY INTELLIGENCE DIVISION
INFORMATION BULLETIN
WAR DEPARTMENT
No. 7
Washington, January 24, 1942
MID 461
NOTICE
The information contained in this series of bulletine will
be restricted to items from official sources which are reason-
ably confirmed.
This document is being given an approved distribution, end
no additional copies are available in the Hilitary Intelligence
Division. For provisions governing its reproduction, see Let-
ter CAG 350.05 (9-19-40) M-B-M.
NOTES ON JAPANESE WARFARE
CONTENTS
Section I
JAPANESE LANDING OPERATIONS
1. GENERAL
2, JAPANESE LANDING OPERATIONS
IN THE PHILIPPINES
Section II OTHER INFORMATION UPON JAPANESE
FORCES
1. TACTICS
2. WEAPONS
ILLUSTRATIONS
(at end of text)
Figure 1.
Plan of Japanese Troouship (Landing
Craft Carrior)
Figure 2,
Type "A" Japanese Landing Boat
Figure 3.
Type "B" Japenese Landing Boat
Figure 4.
Type "C" Jepenese Combination Picket
and Command Boat
Figure 5,
Type "D" Jananese Landing Boet
Figure 6.
Type "E" Jenenese Landing Boat
Figure 7.
Type "p" Jepanese Landing Boat
RESTRICTED
RESTRICTED
Regraded Unclassified
RESTRICTED
81
Section I
JAPANESE LANDING OFERATIONS
1. GENERAL. Landing operations have for some time been part of the
pence-time tactical training of Japanese divisions. During the war with
China, which started in July 1937, ample opportunity has been afforded
various Japanese units to perfect the technique of this operation under
service conditions, so that today it follows n pattern tried and tested
by war,
S. Technique of Effecting a Landing
(1) Preparation. Landing beaches or shores are curefully rec-
onneltered from the air or by means of secret agents or both. Troops
assigned to effect landings are carefully drilled in advance.
(2) Rondezvous Point for Troopships, landing-boat
carriers, and navel-convoys estublish SEVOUS at e designated an-
charage the night before the Innding If el suituble anchorage is not
available, vessels arrive off the designated boach between nidnight and
dawn.
(3) Landing. Landings are untially mede just before dawn on e.
dey when it is high tido just after Dentodo of rain or stormy
weather are chosen when possible in to increase the element of
surprire. l'en are trins "orred from to sports sau landing-oraft carriers
just off the landite beach, The intend force usually comprises infan-
try and some fiold petillery, engineers, and light tasks, nll of which
are enbarked in londing craft. These graft make for the shore at full
nosed, and if oll are in formation, they shut off their engines and drop
stern enchors together when they are is short distance off the beach.
For the remeinder of the distance the boats are essed in until they are
grounded by of the hand brakes on the stem anchor cebles. Bonts
normally ground et |\torvels of about 50 yerés. If the situation de-
mands that boats immediately after trocys have disenbarked, stern
anchors are weighed by hard or power and the boats mr.ke off nt top speed.
Fotrol craft armed with pompons and machine guns give close support to
the landing, and air support and naval support are provided if they are
required. Onco a beachhead is secured, the bulk of the troops landed
proceeds regidly inland.
(4) Forces Used. Practically all Japanese landings in China
have been made with B force of two divisions (40,000 men or less).
These units were embarked with normal equipment, including E-ton tanks,
108-mm. field Nowitzers, and 75-mm. field guns. Serious opposition was
assountered on only one occasion. In this CASP, though hasvy cesualties
vere inflicted by monine-gun fire end by Innd nines, the landing force
rained its bjoctime by nightfull,
PUSTRICTED
- 1 -
Regraded Unclassified
RESTRICTED
ASSTRICTED
82
(5) Air and Noval Cooperation. The Japanese have had complete
convered underwater body rose above the water, 85 wes judged free the
oir and reval supprimely In ml thole lamling operations. Thus son
bow encry in the original chotograph. The draft at Light load appaired
communications have always benn anound and all lendings have had over-
Lg be Lot over 2 foot. The craft was stesend Cross forward under the
wholeing support Invo gen end air. De one occasion Japemers destroy-
county. Tr. the drawing Le al.com a whield for n. mechine gun in the box.
ors nachatou tile londing Corona by pm fire, which tonk the following
format
(r) Type "g" (rigure 7). This type, which in constructed
of stor1 plates, is In two alover an feet overeall and 40 feet.
(=) Preliminary bomberdment of undry positions at a range
of about 1,300 yords.
0. Comments. The following footors were Instrumental in giving
the Japaness the succese that they beve achieved in Inving operations:
(b) "Dwitter" Pize on special grons. This vas achieved
by putting extrome elevation on the ships' Elina and using a reduced
(1) Complete security of see communications:
charge.
(a) Complete naval and Air superiority, thereby leasoning the
b. Types of Sportal Shane and Landing Craft Employed
difficulty of landing transport and artillery during the early shipping
of operation;
(1) Landing Craft Caprier (figues 1). This special-type of
traunpect in similar 5.9 construction to n. wholing depot ship. Landing
(3) Inefficiency of energy observation and security organiza-
craft londed with full complements all non and autorial are olid into
tioner
the --- through dide betchme,
(4) lock of real energy opposities it the bench, enabline trens-
(2) Londing Ceart
ports to be Brought close to shoret
(a) Type "-" (Pigue z). Thin in n Inage open type with
(s) Lack of enery ortillory. making a shallow beachheed cuffle
A invoice on LM bent which Plaça forward on to the sand, canbling
aiout protection for the mein Landings
THE to to micoled off. The and the correcio uro usually pro-
teached by Bullet-preef plating. Iwin knelo provide stability after
(6) Care Veten us the Japanene to achieve surprise by aboosing
grounding. This type or bent is undd by the main landing force.
difficult Landing pices and poor weather conditions.
(E) Type "8" (Pigure 3). This La is amill opun type, hold-
2. JAPACCES LANDING OPERATIONS 171 THE RUMPPIYE
Ing from 60 to 00 used, Its stoud in l'euro B to LC môts. This type
of bont 10 used by the initiel covering party. -han it is fully loaded,
4, live and lie Onimations The typical procedure in Insting op-
Le TIME . Uraft of an Inchuse
protting E' na to are NOT a siles of beach, A line of dectroyors
forms gett DI with a Leavy crolser or buttleship
(a) Type "C" (Piques 4). This 1a nn ermored motor launch
about D ALLED be ná the litria of royers. Thre **** of pressporte
used lostions. "or closs broyset work. and pointenance of commun-
Stx a the and the Ap aircreft carrier
stays the 1wo goodse of transports. Them about DO larges with
e capalty NE 130 with with start for Aurs, each harge huing errond with
(a) Type "0" (figure F). This type in used to supplament
2 or 2. Bml who An di to fire upon the
boot. the irrge open Type "^" dosoribed above, It La word solely as KE foir
beloting Dr. Boy nail also dolivie all'active firo, which
in overaly knewy up to sisout 2,600 foot, observation,
and purmit protection are provided by aircraft corriere and lending
(a) Type "I" (ficure c). This type la rittod with an nie
fields alroady notablished.
stree For use In shaller Water or in creaks, smaller tributaries, and
med-bried mater. Figure e is a draving hade from e photograph of one
b. Tris. The V-front light tenk which is used ter the Japancae
of these mirglene-propeller-driven bhuts, taking of one of two In
Piros armor-pieroing ammunition from .50 coliber machine Mirrot
Broup 5.) of DU laughos herded don 6 river. There boats are approximate* n.
hits from 37-mm, guna are deflected by the sloping front of this tenk.
ly feet If, longth, and not ever to l'eet about. About 18 feet of the
RESTRICTED
RESTRICTED
- 3 -
- 2 -
RESTRICTED
RESTRICTED
83
of the Philippines friendly to the energy have benn used is not
0. Firen Coloro Activities. The complete extent to which residents
superior to those previously observed, according to reports of British
Planing 1n of boate and lights, liarover, anown so mided the Japaneze known.
officers who escaped from the island just before It use captured.
POLIO their Imiting operations.
2. WRAPONS.
Section II
OTHER INFORMATION LTON JAPANESR FORCAS
B.- Machine Guara,
1. TICTICS.
(1) Among the wespons in use by the Jaganese in the Uslayan cas-
paign, the following types of mechine gima are reported: di Thompsone
Carena and found troops 18 being maintained by WOLDS of portnble
0. Alt-Oround Comp {cotions. Close llatson botworn Japanuse air
type subsachine gun: a type "96" light machine (un) and a belt-fed DO-
dium machine gun. The latter, mounted on a whooled carriage pulled by
cheet radios. These radize, equipped with surphones, are carried on
truck, La very similar to the British Vickers gun except that the Jap-
riority, by commiting officers of companies. Air Fornes, with Fir :he
arese meapon has a larger water jacket.
positions and Tomir Information is then relayed to the
observe the positions of the Allied front liner and treep Rupe- dis-
(z) The BBW type "D6" light eachine gun is believed to have
Word the in my instencer, are told When to move form
reveral improvements over the Humbu Light Eachine Gun, Model 1922.
and when to stop,
The principal reasurements and characteristics of the type "05" gun are
65 follows:
t. Infentry. The Japhnese infortry areas with granader and
aquipment natio www.pone, Enera obtained creat mobility Ly leoving telind all outo-
Leight-
19.18 lbs.
not absolutely necessary, Their attacks unually are other at
Length, over-ull-
42 inches.
connolidate Company nomenders nave up their companies by agunds mede
Calibor
6.5 m. (.256 inches.)
the with novance security detechments prior to the attack, and
Rifling
4 groovna, right twist.
limile velocity
2400 feet per sec. (approx.)
halten the Eng leve not taken strong security geasures, either
Jepaces D. loar] Learitty, In may instances during the (hloyan
Cyclle rate of fire
580 rounde per minute (approx)
Dipod mount
= positions.
been column or while poving. the of lights at night While
NUABRA noted by the Deltish. the have capitalized on eveh depense also have weak-
b. &rtillery, It has been found that artillery vehicles in nove-
name nions roads are 119aly to be ambushed. The feeling has from that
using d. l'otor be Transportation, In Inlayn both the ritish and
#elf-propelled howitzers would be the nost practical field artillery
they are tend any woter invicios sporingly. for In the Icw, Improvese terrain
weapon.
and to become conclized on any Food that 1s not hard Easly surfaced,
therefore become besy targets for enomy ottack.
with colditro thair in Minga to travel for a number of days through trained
e. Jungle Revements, The Impanese have equipmed and their
clos. supplies efther in their packs or on reall transport jungle trails vehi-
observed to n in group many. and Dome detachments of motor Japaness oppear
have Γ. Parch Discipline. Cycle troops, of which the
while in movement. Kalaya have II tendency to Sunch "In while transport helted as troops will as
and of the Japanese troops who stormed Here battle Kong word Per
AMOUNT 5. Jonandse Troops At Bang Kong. The taction, nfficiency,
RESTRICTED
RESTRICTED
4
- 5 -
Regraded Inclassified
++ M
9
*PNA
anot
person
number of swasi
16 THAN
?
ARMER
meroe
o
BOATA
of -
6
25'10ml
-
-
9
BRIDGE
LOWER
BUR
4 MOTOR
SAILING
LAUHEN.
SAILING CAUNCHERS
A
LAUNCHING OF MOTOR SAILINE LAUNCH
-------------------------
BEARCHLIGHT
-
FINDING
I
aum
NOTOR SAILING
метдя below
LAUNCHES
SECTION number 4 # LOGAINS comme
LAURNER
3
(IMISINARY)
STADER
main BERRICK
TRUES FUR -
ETC
I i .
матоя LAUMCH
INVORANCE LOWERING 440
PLAN OF
MAIN 00045 (MEN MAY
RAISINE LAUMENING PLATFORM
" QUICKLY DISEMBARKED
V/A BANEPLANKI TO
LAUNCHINE PLATFORM. MAY as
JAPANESE TROOPSHIP
once.)
cowere AY MEANS 04 9AM .
NEW TYPE - NOTED AT CHINWANSTAQ
ABOUT SEPT 25. 1937
B
LENGTH 260' (APPROX)
84
BEAM, UNKNOWN,
DRAFT UNKNOWN.
HOM INTELLIGENCE 05075
Figure 1,
Regraded Unclassified
---- AIRCRAFT -
9
мутда soir
Minu
NUMBER del SMALL
ANTI AIR: AIRCRAFT 6045
0
MAINER - ANTI-AIBLART
9
ARMED
MAIN PERMIER
MOTOR
o
BOATA
9
25.10m
Mores LAUNER
9
SEARCHAIGHT
SEARCHLIGHT
BRIDGE
ANTI-AIRCAAPT BUN
LONDRING
- MOTOR
ANTI- AIRCRAFT aun(4)
SAILING
LAUNCH
TERRER
Minia SANIMME LAMITHER'S
A
LAUNCHING or MOTOR SAILING LAUNCH
rees polier
DIRECTION
BEAREWLASHT
CINDING
POSITION 1
GUN
MOTOR SAILING
MINE
METER SAFLANG
LAUNCHES
5
SECTION THROUGH A-8 - LOOKING FORWARD
(IMAGINARY)
TRUSE FOR -
MAIN DERRIER
ETC
don PLATFORM
*
MOTOR LAURCH
MAIN DOORE (MER MAY
INVERAULIC RAM ? FOR LOWERING AND
as QUICKLY DISEMBARAED
ARIZINE LAUNCHINE PLATFORM
PLAN OF
WA BANSPLANNS TO
LAUNCHINE PLAYFORM. MAY DE
OBCH)
LOWERED BYMEANE de AVERSOL 10 RAM 7
JAPANESE TROOPSHIP
NEW TYPE-NOTED - AT CHINWANGTAD
ABOUT SEPT. 25. 1937
B
LENGTH 260' (APPROX.)
84
BEAM, UNKNOWN,
DRAFT UNKNOWN.
FRIM INTELLIGENCE OFFICER U.S.A.T.C
Mgure 1.
Regraded Unclassified
S5
BOW
PLAN
Ramp
Bow
Water line
BROAD-SIDE
Water line
BOW
TYPE "A" JAPANESE LANDING BOAT.
Approx:-
Overall
50'
(Also some type boat- Overall- 67')
Water line 41'
Beam
13'
Loaded mean droft-3'x3"
Looded least freeboord-3'
Powered with low-speed 2-cylinder gasoline engine.
(A few Diesel engines used) Approx. speed: 10 knots.
Estimated capacity: 110-120 men fully equipped.
Figure 2,
Regraded Unclassified
86
PLAN
BROAD- SIDE
Water line
BOW
TYPE "B" JAPANESE LANDING BOAT.
Overoll- 20' to 40'
Powered with gasoline engine.
Construction similar to o steamer lifeboat.
Only some are equipped with bullet-proof shield in bow.
Some carry o light mochine gun in bow.
Figure 3.
Regraded Unclassified
87
MG or
I pounder
AA MG
MG or
I pounder
-
PLAN
00
BROAD - SIDE
Approx
Overall
40'
Beam
13'
Constructed of steel
plate along fine lines
One boat clocked of
15 Knots
BOW
Type "C" Japanese Combination Picket and Command Boat
Figure 4.
Regraded Unclassified
88
Tow
Line
PLAN
Water
Line
BROAD-SIDE
Water Line
BOW
TYPE "D" JAPANESE LANDING BOAT
Approx:
Overall 30'
Beam
10'
Constructed solely as o tow boat.
Hos 0 wooden hull, similar to standard motor launch.
Figure 5.
Regraded Unclassified
89
PLAN
BROADSIDE
APPROXIMATE SCALE
643210
5
10
15
20 FEET
BOW
TYPE'E' "E" JAPANESE LANDING BOAT
Figure 6.
Regraded Unclassified
90
PLAN
STERN & SIDE
TYPE "F" JAPANESE LANDING BOAT.
Overoll- Approx: 40' (Also o 30' boot, this same type, used)
Beam- 12'
Boat is constructed of steel plates. A metal shield is rigged in bow
for protection. In this shield there is an operture for G machine
gun. 40' boat clocked at 9 knots.
Figure 7.
Regraded Unclassified
Mress by Henry Morgenthad, Jr., Secretary of the Treasury
the Great Lakes Steel Corporation Plant, Ecorse, Michigan
91
unday, January 25, 1942 11:15 a.m. Radio Station WJR
my friends:
The United States of America is at war. Just what does
that mean? It means that every last square inch of it is at
WST. It means that every man, woman, and child in the United
States is at war.
The war is not something that affects only the Philippines,
7000 miles away, and the Atlantic seaboard, where the submarines
of the enemy are taking their toll. It affects us all. It is
the concern of every American, whether he is in Alaska or
residing in the inland security of Illinois or Tennessee.
Scores of those in this gathering have sons in our fighting
forces. You workers are engaged in war production, and all
of our lives are directly affected by the insurmountable fact
of war, which is changing already the course of our day by day
existence, no matter what our circumstances and no matter where
we live.
You workers here at this great plant have demonstrated that
you realize it to be your duty to yourselves and to your country
to enlist your dollars voluntarily, dedicating them to the
winning of the war. After all, these dollars are merely the
symbol of the sweat and effort and determination you expended in
earning them. And when you enlist your dollars you enlist
yourselves. The more dollars you devote to victory, the greater
part you play in achieving the great objective.
Regraded Unclassified
--page two--
92
This proves what can be accomplished by the complete
cooperation of labor and management, working together harmoniously
in 8 common cause. Thirty nationalities are represented here
in this plant, but they are all Americans. The results speak
for themselves.
It is my great pleasure today to bring to you on behalf of
the Treasury Department of your government, this flag, emblematic
of the fact that more than ninety per cent of the 8,100 employees
of this corporation, are payroll savings volunteers. This
afternoon the Chrysler Tank Plant will be awarded B. similar
decoration. It is my hope that every plant and every business
house in the country will earn and proudly display such a flag
in the near future.
The flag will fly over this plant as long as 90 per cent
or more of its workers continue to buy Defense Savings bonds by
means of voluntary payroll savings. I am sure that it will fly
until the victory is ours.
And so, Mr. Fink I present to you, for your employees, this
United States Treasury flag, emblazoned with the figure of the
heroic Minute Man and the thirteen stars which bring to mind the
pioneer states of our republic.
My congratulations and grateful appreciation.
Regraded Unclassified
2
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Regraded Unclass
93
READING COPY
OF SECRETARY MORGENTHAU'S ADDRESS BEFORE THE
DEFENSE RALLY OF THE UNITED AUTOMOBILE WORKERS
STATE FAIR COLISEUM, DETROIT, MICH.
4 pm, Sunday, Jan.25,1942
Regraded Unclassified
94
It is a good and wholesome experience for any
official from Washington to come here to Detroit
to meet a great audience of automobile workers.
We in Washington are much too accustomed to think
that we sit at the very center of the war effort.
For the past few weeks we have seen our Capital City
become; in a sense, the capital of the world, the
scene of wartime planning on & world-wide scale.
The officials and admirals and generals of many
countries are working together in Washington at
this very moment, planning the military, naval,
and economic strategy that will bring Japan and
Cermany to their knees.
Regraded Unclassified
95
- 2 -
no
Yet all our strategy, not matter how brilliant,
n
cannot accomplish its decisive purpose until the
materials of victory have rolled from Americas S
assembly lines. All the individual daring and
bravery of our men in uniform cannot win the war
unless they are backed by the mass production of
the implements of war. The real heart of the war
effort 16, therefore, not in Washington but right
here in your workshops and factories. The big
push begins here. The great offensive against the
Axis 1s under way here in your State of Michigan,
next door to you in Ohio and Pennsylvania, and
wherever the skill and energy or working men and
women are producing the weapons of victory.
Regraded Unclassified
-
96
- 3 -
You in this hall are in the front lines in this
phase of the war, and I am genuinely proud to be
here among you today.
This is not the first time that I have been
privileged to visit the Detroit industrial area
in recent months. Some of you know that I had the
pleasure of attending a meeting of shop stewards
at Pontiac in November. I came back to Washington
from that meeting heartened and invigorated as
seldom before. In that one evening I heard more
sound common sense than I had heard in many meetings,
in Washington or elsewhere.
97
- 4 -
From that day I have been convinced that American
labor has been ahead of all of us in its willingness
to produce armaments to win the war, whatever the
sacrifices, whatever the consequences.
There 18 every reason for the rank and file
of American labor to be out in the forefront in
its understanding of the war and in its response
to wartime needs. In the first place, this is
a people's war, to an extent never before known before
in any of the great struggles of human history.
This war 1s a people's uprising against tyrants
who are trying to push us back into the Dark Ages.
Regraded Unclassified
98
- 5 -
It 18 being fought by the people and it can only
be won by the people's efforts, by your efforts.
Upon your skill, your sweat, your willingness to
dedicate yourselves to war production, the ultimate
outcome will very largely depend.
In the second place, this is a war against the
movement
enemies of the free labor moment in this and every
other country. Nobody needs to stand before any
group of labor men and women in this country to tell
it what Fascism means. When the Blackshirts bullied
their way to power in Italy twenty years ago, when
others praised Mussolini for making the trains run
on time, American labor instantly knew Fascism for
what it was.
Regraded Unclassified
99
- 6 -
When Hitler crushed Germany's trade unions, you
of American labor knew at once that he would
crush yours 1f he ever had the chance.
Labor has never been dazzled by the military
accomplishments of the dictators. Labor has
never made the mistake of imagining that Fascism was
in any sense a "new order" or that its medieval
tyrannies could supply us with any guideposts to
our own future. Now, at last, the life-and-death
struggle has come, just as the rank and file of
labor foresaw that it would. As Hitler said--
truthfully, for once !--"two worlds are in conflict;
one of them must break asunder." We can tell him
now that it 1s his world, not ours, which will
break and die.
Regraded Unclassified
100
- 7 -
But there 1s a third and still more compelling
reason why labor has an immeasurable stake in this
war. Labor in this country and elsewhere looks to
a better world, a freer and a more secure future.
Everything that labor has fought for a hundred
years to attain will be lost forever if the
dictators should win. Everything that labor seeks,
for its children and its children's children, is
bound up with the success of the free countries in
the present struggle.
I think I can describe those aims in a very
few words by telling you about a great picture in
the Grand Central Station in New York.
Regraded Unclassified
101
- 8 -
It 18 a unique picture because it happens to be
the biggest photo-mural in the world; we of the
Treasury put it there to help the sale of Defense
Bonds and Stamps, and we made it big enough to
cover an entire wall of the Station concourse,
80 that everybody could see it.
But what makes me so proud of it is not its
size, but its message and its spirit. The first
of its three huge photographs shows an American
farmer and his land, and the caption under it
says, "That we may defend the land we love." The
second 1s a panel of children's faces, with the
caption, "That these may face a future unafraid."
102
- 9 -
And the last shows a worker looking up at a
factory, and under it is the caption, "That we
may build a better world."
Those happen to be the objectives of the
Defense Savings Bond campaign, but I also know
that they are the objectives of American labor,
and they are the greatest of the aims for which we
are fighting this war.
It may seem unfeeling of me even to mention
Defense Savings Bonds to an audience in which so
many of you have temporarily lost your jobs,
suddenly and through no fault of your own, because
of the change-over to war production in the
automobile industry.
Regraded Unclassified
103
- 10 -
I know what you in the Detroit area have been
suffering in temporary unemployment, and I wish
as fervently as you do for the day when your plants
will be back in full production again, and when
those of you who are walking the streets will be
back at your benches once more. Certainly I would
never ask or expect any of you who are out of a
job to buy Defense Bonds or Stamps. We have a
slogan at the Treasury: "Let's make every payday
Bond Day." That does not apply to those who have
no payday and no regular income. The Treasury will
never ask anyone to buy Defense Bonds if it means
taking food from his children or clothing and
shelter from his family.
Regraded Unclassified
104
- 11 -
The other day a Chicago advertising agency
sent us an elaborate sales promotion plan based,
frankly enough, (and these were its words) upon
"the traditional dread among the American people
of being held up to public ridicule and scorn."
The 1dea of this misguided plan was to label as
a slacker everyone who did not buy a bond. We
replied that we disapproved and did not countenance
anything of the sort. We replied that we did not
believe in the effectiveness of intimidating
Americans, and that if any such tactics were
proposed, we would avoid them like the plague.
Pause But for those who do receive regular pay, those
who have good jobs at good wages, there 18 a greater
need than ever to "make every payday Bond Day."
Regraded Unclassified
105
- 12 -
You who are working in the Detroit area have just
seen with your own eyes what a great economic
dislocation can bring. You have seen friends and
neighbors hard at work one day and thrown onto
their unemployment insurance the next, as part of
the price of preparing this country's factories
for war. You know that those who have built up
a reserve of savings are better able to meet an
unforeseen shock than those who have not guarded
themselves against 1t. Isn't it better to be
prepared- in time?
Regraded Unclassified
106
- 13 -
Isn't it better to safeguard your future by setting
aside a part or your earnings now, every week and
every payday? Your country needs the money, and
you need the security that these double-purpose
bonds will bring.
I am often asked three questions about Defense
Bonds which must, I am sure, be in your minds. The
first 18, "Can I get my money out if I need 1t?"
The answer is yes--any time after sixty days from
the date you bought your bond. The second 1s,
"What happens if I lose my bond?" The answer is that
we at the Treasury have a record of every bond and
its owner; we can supply you with another 1f you
identify yourself, and we will be glad to keep your
bond for you at the Treasury 1f you wish us to keep
it in the safe for you.
Regraded Unclassified
107
- 14 -
The third question 1s, "Will I lose money on these
bonds the way so many people lost on the Liberty
Bonds?" The answer is that you can't lose. These
bonds, unlike the old Liberty Bonds, are registered
in your name. You cannot trade them on the market
or offer them in payment of a debt. You will always
get back from the Government your one hundred cents
on every dollar, and the longer you hold them, the
more they will grow in value.
Moreover, Defense Bonds not only help to pay
for the Euns and tanks and planes that will win the
war; they also pay for labor, your labor.
Regraded Unclassified
108
- 15 -
Every time you buy a $75 bond you pay for the
services of a skilled worker for an entire week;
every time you buy a Bond or even a Defense Stamp
you are enabling the United States Government to
pay you for your work, and you are hastening the
dey when our fighting men will be able to carry
the war to Tokyo and Berlin.
Pause
About a month ago two of your brothers in the
Dodge local, Mr. Rubin and Mr. Swetz, came to see
me in Washington, to discuss ways and means of
hastening the conversion of their plants to war
production. Together we accomplished something,
because those two men had the initiative to come
to my office and also because of the fine cooperation
of Mr. Patterson, the Undersecretary of War, Mr.
Stettinius, the Lend-Lease Administrator, and Mr.
E. T. Reller of the Chrysler Corporation.
Regraded Unclassified
109
- 16 -
But what I shall always remember about that
meeting is the spirit that your representatives
showed. I argued then, and I have said it for
months to everyone who would listen, that the only
way to arm this country in time was to order the
complete and immediate stoppage of all automobile
production, and the quickest possible conversion
of the plants. Your representatives knew that
that would mean immediate unemployment for great
numbers of men; yet when I asked them how they felt
about it, they answered, without a moment's
hesitation, "We can take it; we want it done."
Regraded Unclassified
110
- 17 -
That was just a sample of the spirit I have
found among American labor ever since we at the
Treasury started the Defense Savings program. It
is a sample of the spirit that the whole country
has discovered in the weeks since Pearl Harbor.
It 18 the spirit that is going to win the war.
I said in Cleveland yesterday that the
pioneers who settled this Middle Western country
did not let danger or hardship frighten them.
They regarded every danger as a challenge, every
hardship as an adventure. That is the spirit with
which you are meeting this crisis, the greatest
that free men have ever undergone.
111
- 18 -
You workers of Detroit are in the forefront
of the fight, and I am confident that you will
see it through until the fight 1s won.
-000-
112
RESTRICTED
2657-320:
10.
All
A.I.D.,
V.D.
11:00 A.M., January 25, 1942.
SITUATION REPOICE
I, Pacific Theater.
Phillepines: For several days the enemy bas been building us
ar n. DISTATED Attack on our left. For this effort. fresh hostile
Twode DATA brought in under the protection of naval units. Their air
pepurations were heavy. In addition, night efforts At penstration vere
dila alons the !ubic By coast in AD effort to outflank our artire
The attack VAS launched yesterday. and under its pressure va
forned to (Ire ground with aome loss. At this time, however,
maral right flank forces launched a counterattnck with
revalize success, supported by B. heavy concentration of 155-mm. fire.
infantry found the enemy completely disorpanized in this area,
loving hundreds of dend on the field 118 well na quantities of supplies
and - The situation is nov simbilized, There Se до further
in the Visaynna or in Mindanao. Hawa11: No further reports of
stattle nutivity. The British have had nome success in atabi-
Thing lins from Retu Pahat on the went to Marning on the sent, The
Aparase min stfor Le in the wont, Jump Japanese preparations for
of stack un Pangoon continue, with acuttored fighting in the Moulmein
intriat, The reports that U.S. and British fighter pilote
metroyed 11 nore every planes yesterday. including 7 twic-engined bonbers,
Japanese activity in New Grines and New Britain continues,
foording to perial recomminanance, Weet Const: No further reports.
11, Eaytern Thenter
lighting continues on the eantern front in spite of the cold
life le ao reported change in the mituation. (No situation may will
12 Insued the data)
III. Neatern Thanker.
Bo further reports have been received.
IV. Middle Eautern Theater.
Grounce Axis forces 876 moving large bodies of their troops
from E) Achoila. A strong column 16 moving along the Aggheila-
countal road. Sporadic fighting 1a reported in the
grea.
Nr. Axis Air Porces continue the attempted neutralization of
In Tripolitonis and Cyrenicia, bath air forces continue actions
assost supply routes and duabe.
RESTRICTED
Regraded Unclassified
113
January 26, 1942
9:45 a.m.
GROUP MEETING
Present: Mr. Blough
Mr. Bell
Mr. Southard
Mr. Paul
Mr. Viner
Mr. Morris
Mr. Thompson
Mr. Sullivan
Mr. Schwarz
Mr. Buffington
Mr. Graves
Mr. Gaston
Mr. Kuhn
Mr. Foley
Mr. Haas
Mrs. Klotz
H.M.JR: Herbert, what have you got?
MR. GASTON: I don't believe I have anything.
H.M.JR: Neither have I. Good.
Ed?
MR. FOLEY: I would like a chance to talk to you
sometime this morning about the Alien Property Custodian
stuff, a couple of companies. Leo Crowley had lunch
with the President on Saturday.
Regraded Unclassified
111
- 2 -
H.M.JR: Yes.
MR. FOLKY: And I haven't heard anything. I don't
know what happened.
H.M.JR: I see. Well, I haven't heard anything
either.
MR. FOLEY: Here is a memorandum for the diary.
(Dated January 24, 1942, re Alien Property Custodianship.)
H.M.JR: You tell them outside.
MR. FOLEY: Then I think we ought to zet straight
on the silver legislation, Mr. Secretary, if you have
a few minutes today.
H.M.JR: Well, you tell them outside, but we will
just sit tight and wait until we hear from Leo, that
is all.
MR. FOLEY: All right.
H.M.JR: When he is ready, he will phone me,
What else?
MR. FOLEY: That is all.
MR. SULLIVAN: Chairman Vinson of the House Naval
Affairs Committee called me the morning after the article
appeared in the newspaper last week that you and I were
going to work with him in preparing 8. profit limiting
bill. I had not talked with him before. I didn't know
whether you had or not. He called and wanted us to
help him prepare such a bill.
(Mr. Blough entered the conference.)
H.M.JR: I have not talked to him.
MR. SULLIVAN: And I said we would like to see the
report, and he said he would send one down. It hasn't
Regraded Unclassified
115
- 3 -
yet gotten here, but it is & pretty voluminous affair,
and I think we would have to put our men to work study-
ing the report, but we can get into a great deal of
difficulty between his Committee and House Ways and
Means on that, and I just wanted you to know that we
were trying to steer a course through that.
I understand that the Warner Brothers have a
private studio that they are willing to make available
to us, and I would like to show that tax picture to
House Ways and Means and anybody in the Senate Finance
who wants to see it before it goes out to the public.
(Mrs. Klotz entered the conference.)
H.M.JR: It is all right.
MR. SULLIVAN: There is an article on taxes in
"Click" you might want to see.
H.M.JR: You mean the Disney picture?
MR. SULLIVAN: Yes. I think this article is
pretty good, better than any they have had in the past.
It goes on for four pages. I think it is pretty good.
H.M.JR: All right.
MR. SULLIVAN: I think Chick is responsible for that,
and it is a good job.
MR. SCHWARZ: Thank you.
MR. SULLIVAN: Are we all going to see this Disney
picture?
H.M.JR: I haven't heard. I don't even know whether
it is in town.
MR. SULLIVAN: Yes.
H.M.JR: Is it in town?
Regraded Unclassified
116
- 4 -
MR. BUFFINGTON: The picture. I have three
prints with me. Disney will not be here until the
first of next week.
H.M.JR: How long does it take?
MR. BUFFINGTON: Seven and a half minutes.
H.M.JR: I don't know when the soldiers are in the
studio. Well, sometime during the day.
MR. SULLIVAN: That is fine. The reason I asked
that is that there are five hundred of them already
out, and I think the sooner we can get them going, the
better.
H.M.JR: Well, he (Buffington) is supposed to be
in charge of that.
MR. SULLIVAN: I know that.
H.M.JR: And I suppose that is what he is doing.
MR. BUFFINGTON: What is that, Mr. Secretary?
MRS. KLOTZ: He can't hear you.
H.M.JR: Sullivan says he hopes that these five
hundred pictures will get out, and I said that is what
your job is, 80 when we get to it, you can give us a
report, but you can show them to the committee - well,
you had better - only one person can handle the pub-
licity. I don't know what you have done with the Press
Club. I am not going to worry. The picture is the
property of Buffington.
MR. SULLIVAN: That is right, and the only reason
I made the suggestion is, I know he is reluctant to let
anybody see it until you have.
H.M.JR: Oh! Well, I didn't even know it was in
town.
117
- 5 -
MR. SULLIVAN: All right. That is all.
MR. PAUL: We had a conference Friday with Senator
George and Mr. Doughton and made 8 progress report to
them. They seemed very pleased and as a result of that
they said if it were agreeable to you they would post-
pone anything public for about three weeks and continue
the working along the lines that we have been working
on.
H.M.JR: Well, don't you think that is an awfully
long time?
MR. PAUL: I don't think it is any too much, no.
H.M.JR: You don't?
MR. PAUL: I think it should be stopped if we
should stop havingprogress or something of that sort, but
for the moment I think we might work on that - with
that schedule in mind.
H.M.JR: It seems awfully long to me. What do you
think, John?
MR. SULLIVAN: I think that they are very anxious
that every possible effort be made to get Stam in
accord with the Treasury, and until it becomes apparent
that he isn't going to give in, we will have to cooperate
or we will continue to be accused by Doughton of not
cooperating with the Committee. Randolph is entirely
right. A great deal of progress has been made on many
things. On the big issues, I don't think Stam is ever
going to agree with us. I don't think he is going to
agree with us on excess profits, but I think we jeopardize
our position unless we do play along. Now, I think that
Randolph has it correctly analyzed by saying that until
it becomes apparent that we are not going to make any
progress by cooperating, we should do it, and I likewise
feel that the time that has been spent thus far has not
been wasted and that the time we save on the other
end is much greater than the time that has thus far been
spent in conferences.
118
- 6 -
Stam, you know, fell and sprained his ankle and
was out for about a week, and that held it up. It
hasn't been our end of the show that has held us up
all this time.
H.M.JR: Well. I will leave it with you two men.
That is all I can do.
MR. PAUL: I would like to - I am sure that is
the right decision. I would like to see you about a
couple of matters for & few minutes, but it doesn't
have to be today. Tomorrow would be all right.
H.M.JR: Would you mind telling them outside?
MR. PAUL: All right.
H.M.JR: Please. Anything else?
MR. PAUL: No, that is all.
MR. SULLIVAN: You remember last week you wanted
us to come in again on exempt corporations?
H.M.JR: Yes.
MR. SULLIVAN: And I tried for a couple of days,
and you were busy on your speech. We will be ready to
discuss that with you whenever you say.
H.M.JR: I have got one more speech tonight and
then I am through.
MR. SULLIVAN: I think that whatever we are going
to do on this, Mr. Secretary, we had better do before
we start on the tax bill because then we are not going
to have much chance.
H.M.JR: George, tell us about Hollywood.
MR. BUFFINGTON: Five hundred prints were finished
Saturday night, were shipped out of there. The schedule
Regraded Unclassified
119
- 7 -
originally called for the last five hundred to go out
on the seventh, but they will go out either Thursday
night of this week or Friday night of this week. There
is a complete schedule worked out by the National Soreen
Service who the Program Committee of the War Activities
Committee has permitted to handle all releases. We
will have weekly a list of the theaters where each
print is. They will be shown in many theaters within
five and a half weeks.
The Disney Studio in California and their office
in New York are handling the publicity, coordinating
everything they do with Chick Schwarz. The first release
probably will be Thursday of this week.
H.M.JR: Why coordinating with Chick Schwarz?
MR. BUFFINGTON: Well, I wanted to be sure that
there is nothing that they do in the matters of pub-
licity that might in any way interfere with the policy
of the Treasury.
H.M.JR: Then that has nothing to do with the
distribution of the--
MR. BUFFINGTON: No, no, stories.
H.M.JR: No, stories. They have been telling--
H.M.JR: That is good.
What I would like to know, is the picture any
good?
MR. BUFFINGTON: I think it is fine. Peter Odegard
saw it and Harold Graves saw it Saturday morning when
I got in.
H.M.JR: What do you think about it?
MR. GRAVES: I like it very much.
H.M.JR: Not enthusiastic about it?
120
- 8 -
MR. GRAVES: No, I am. I think it is a fine
picture.
MR. BUFFINGTON: We have been given sixteen thousand
boards by the Outdoor Advertising Association. In my
absence, 8. poster was prepared which we wanted to use.
We were told this morning that we can get the sixteen
thousand posters--
H.M.JR: Now, the last I spoke - Bell called me
up in Florida on that, and I said all of the posters
were to go to Defense Bonds.
MR. BUFFINGTON: These are in addition to the
ones going to Defense Bonds and in no way interferes,
as I understand it, with the boards they have allocated
to the Defense Bonds.
H.M.JR: Bell said Defense Bonds were working with
the National Association and you were working with New
England.
MR. BUFFINGTON: No, the New England man came to
see me as a representative of the Association, and he
was in favor of having the boards used for taxes, and
Mr. Fulton, the president, was in favor of having it
used for Defense Savings and there developed a little
altercation in the organization, and, as a result of
that, Mr. Fulton came back, as I understand it, on
Friday of last week and offered the sixteen thousand
boards for taxes.
H.M.JR: How many does that leave Defense Bonds?
MR. BUFFINGTON: Thirty thousand, I understand.
MR. GRAVES: Well, they are the same boards.
MR. BUFFINGTON: Same boards they had before.
H.M.JR: Well, you yourself told me you couldn't
get the thing out in time, and I O.K.'d the thing once
Regraded Unclassified
121
- 9 -
with you present to let them go for Defense Bonds.
MR. BUFFINGTON: Well--
MR. GRAVES: I think Mr. Buffington and I ought
to get together on that.
H.M.JR: I think you should. I don't think you
should bring it up to me, George. George, you yourself
told me you couldn't get the thing ready in time.
MR. BUFFINGTON: No, I said that the Defense
Savings group told us in Dan Bell's office that it
wasn't possible to get the boards out in time.
H.M.JR: You said you couldn't get the thing out
80 it would do any good, and they were ready to go, and
you agreed to it here in this office with me.
MR. BUFFINGTON: Well, I did at that time, but when
they came back and said that we could have these
sixteen thousand boards, and then--
H.M.JR: Well, is it part of the thirty thousand?
MR. BUFFINGTON: No, it is not. It is in addition
to that.
H.M.JR: Well, you had better talk with Harold
Graves. Will you?
MR. BUFFINGTON: All right, sir.
H.M.JR: You and Harold better get together, and
in this matter, if you don't mind, whatever Harold
decides will be final. And as to that sort of thing,
you will have to clear that with Kuhn and Odegard. You
have got to clear that with Kuhn and Odegard. Now,
what else?
MR. BUFFINGTON: That is all.
H.M.JR: Have any fun out there?
122
- 10 -
MR. BUFFINGTON: Well, I got in at eight-forty,
and I was in the Studio until one 0' 'clock the next
morning, and left Friday afternoon at four forty-five.
Technicolor has done 8. marvelous job. This is
the fastest time they have ever gotten - this is the
biggest single job they have ever handled and the
fastest time they have ever made in printing.
H.M.JR: O.K.
Ferdie?
MR. KUHN: I have nothing except that the tax
song was launched on the air last evening by Eddie
Cantor, and I am told it was very, very good, and
Chick got out a story on the song to the papers, and
the Times printed the full text of the words this
morning.
MR. SCHWARZ: The Herald Tribune and the Times
Herald also carried all of it.
MR. KUHN: It is a question now of plugging.
H.M.JR: Jake?
MR. VINER: There are going to be hearings on 8.
war risk insurance bill. The Treasury ought to have
some interest in that. It ought at least to see that the
bill is read here by somebody. It may be & big proposi-
tion that concerns you very much.
MR. FOLEY: I think Dan has been following it.
MR. VINER: Has he?
H.M.JR: He was to have been here this morning.
He was to have had my estimates on my financing. I wonder
if he is sick.
Who would you suggest to do it?
Regraded Unclassified
123
- 11 -
MR. VINER: I think there ought to be a Treasury
policy on it.
(The Secretary held a telephone conversation with
Mr. Bell).
H.V.JR: Ask Fell who should do it, will you, Jake?
He has been fussing with it.
MR. VINER: It is not 8. minor thing. It may mean -
it may affect very important interests in the Treasury.
I would say that Harry White's section ought to work
on It.
(Mr. Pell entered the conference).
H.M.JR: I hadn't forgotten. I thought you said this
morning you --
MR. BELL: Well, I am not, but I just thought I
would sleep a couple of hours.
H.M.JR: Good for you. I approve. Well, before
you leave, if you would - Viner raises the question
of this war risk insurance, who is going to study it in
the Treasury. Will you give it to somebody?
MR. BELL: Well, I started out to study it, you
recall, and Jesse announced with the approval of the
White House that he had created a corporation, and he
has since gone to Congress and gotten Congressional
authority, and I believe he is increasing his borrowing
capacity to two and a half billion dollars, part of which
is for that.
(Mr. Southard entered the conference).
H.M.JR: Do you think we ought to do anything about
it?
MR. BELL: The only thing I think we can do is to
just watch it and see what kind of a liability he puts
Regraded Unclassified
124
- 12 -
upon the Treasury. Apparently he has got White House
approval.
H.M.JR: Would you have somebody look it over?
MR. BELL: Yes.
H.M.JR: Who will you give it to?
MR. BELL: I don't know. White has done some studying
on it and furnished me several memoranda. It is probably
between White and Haas. We will get together on it.
H.M.JR: Well, leave me a memo on it, will you?
MR. BELL: All right.
MR. VINER: Is it going to be free insurance?
MR. BELL: I think it is all free.
H.M.JR: The President said not.
MR. VINER: Well, the tax people ought to have a
hand in it.
MR. BELL: I have seen nothing on it so far as the
charges are concerned. It is 8. Govermnent matter, and I
understood the corporation would stand the whole bill.
H.M.JR: Well anyway, pin it on somebody.
MR. BELL: All right.
H.M.JR: And at 8. quarter of eleven for that Disney
picture, you are all invited. Anything else, Chick?
Roy? George?
MR. HAAS: Mr. Swope would like to change this daily
table. You are receiving it in this form now, and he
would like to change it this way. This shows the stock on
hand in the Federal Reserve Banks and the Treasury.
Regraded Unclassified
125
- 13 -
H.M.JR: Well, I will take my old one and the one
he gets, both. I like the way I have been getting it.
MR. HAAS: O.K.
H.M.JR: I want to see the day where there are no
unfilled orders.
MR. HAAS: Yes, that is why I wanted to check with
you. Let me do it both ways.
H.M.JR: Let me have both. What does that mean, sales?
MR. HAAS: That means the sales - they sold thirty
million dollars worth with that many pieces in the sales.
We get the figures once a week, so we can give you that
figure.
H.M.JR: I will take it both ways.
MR. HAAS: All right.
H.M.JR: Harold?
MR. GRAVES: Nothing.
H.M.JR: I would like to ask you something personal,
if you would stay behind a minute.
MR. GRAVES: Yes, sir.
MR. SCHWARZ: Mike McDermott called me just before the
meeting. He hadn't been at Mr. Hull's press conference.
He checked. He said he didn't say anything off the
record along that line, but he talked with some of the
boys over there and they said in his manner that some of
them got the impression that he was treating it lightly,
that he said it would have to be studied, and that it
was out of his realm for the time being, it wasn't
an immediate practical matter. He said there might be
some basis, but that that statement was wrong. He
checked it this morning.
H.M.JR: Anything else?
Regraded Unclassified
126
- 14 -
MR. SCHWARZ: You might like to see the supplemental
clippings on Cleveland.
H.M.JR: Thank you. Were there any clippings on
yesterday's speech?
MR. SCHWARZ: Yes, there were some in the group
I sent down earlier.
H.M.JR: Either you (Southard) - I don't know -
with White and Coe away I don't know how to get this
information, but between you and Frank Dietrich, one
or the other, will you get for me from the State Depart-
ment all the exchanges of cables between Rio and the
State Department? I would like it this morning. In
regard to the Stabilization. I want a complete file.
Now, whether Frank Districh gets those or how that is
done, I don't know.
MR. SOUTHARD: It would be a matter of being sure
we have got 8. full set. What we have, we have organized.
H.M.JR: You might even go over there. There
may be some cables - I am suspicious that somebody shot
8. cable down there that we don't know about. I Am
suspicious. I think if you got it you might go over, and
I don't see why you just don't ask them for a set. Just
say that I would like to have 8. set out of Mr. Hull's
office of every cable that went, and was received,
pertaining to Stabilization Fund.
MR. SOUTHARD: All right.
H.M.JR: And then the burden is on them to produce
them all.
MR. SCHWARZ: That is all.
MR. MORRIS: Nothing.
H.M.JR: How is your number of corporations?
MR. MORRIS: The reports are as of each Saturday,
and we don't get them until Tuesday night or they
would be available to you Wednesday morning.
Regraded Unclassified
127
- 15 -
H.M.JR: What was the response to those twelve
telegrams?
MR. MORRIS: I have either nine or ten answers,
of which two were this morning. Most of them are
favorable. One raises a question about lack of bonds
in the Atlanta district that I want to follow up on.
Atlanta sent out a request to corporations to please go
slow, because they were very short of bonds.
H.M.JR: Now, that was the first week there were
twelve and the second week there were about a hundred
came in, weren't there?
MR. MORRIS: There were twelve more, a total of 8.
hundred and eighteen today.
H.M.JR: I would like today a telegram to go out
to the second lot, the hundred and twelve.
MR. MORRIS: I asked for that information as of
the close of last Saturday to be here tomorrow.morning.
H.M.JR: But you only sent it to twelve.
MR. MORRIS: But for the second batch, I will not
have the data until tomorrow morning.
H.M.JR: Oh. Well, then you can send it out tomorrow
night.
MR. MORRIS: And I had hoped - when I get that I would
like to look at it because it may be I can do some on a
sampling basis. I tried to make it somewhat personal
instead of just an impersonal telegram, because I think
the companies feel much better in getting something
that ties in with the facts, rather than just a blanket
one,
H.M.JR: I don't want to be - I want to do it once
more.
MR. MORRIS: Yes, but maybe on a sampling basis.
128
- 16 -
Do you want the whole hundred and twelve, or perhaps --
H.M.JR: No, sampling will be all right.
MR. MORRIS: Sampling basis on that group.
H.M.JR: That will be all right. Anything else?
MR. MORRIS: Nothing.
H.M.JR: Dan, you are just in this morning, aren't
you?
MR. BELL: Yes. I have got a number of things I
would like to talk to you about.
H.M.JR: Well, I was holding up the appointments.
I will see you at eleven so that you can go back home.
Dan is going to stay home the rest of the week, at
my orders.
We will come right upstairs from the movie.
MR. BELL: O.K. I have a number of things I would
like to talk to you about it.
H.M.JR: All right. We will come right upstairs.
MR. PAUL: Can we make those other appointments
now?
H.M.JR: No (laughter). I will tell you, what
I am waiting for, I have got this speech at a quarter of
eleven, which comes next. That is why I am holding
everybody off. I want to do Dan, so he can go home.
MR. PAUL: I thought it was Dan.
H.M.JR: No, when I get this one more speech out -
I have done three in three days, which is two too many.
So we will get this out of the way, and we will get back
Regraded Unclassified
129
- 17 -
to normalcy again, as far as I can make it.
MR. KUHN: Four in three days, Mr. Secretary.
H.M.JR: That is right. One at the Great Lakes
Steel.
MR. THOMPSON: We are planning to substitute the
word "victory" for "defense" in this Minute Man symbol.
MR. GRAVES: That is only on the letterhead, Nor-
man?
MR. THOMPSON: Well, I thought if we do it on the
letterhead, we should do it on checks and other things.
H.M.JR: Who is behind this?
MR. THOMPSON: Harold Graves' organization suggested
it.
MR. GRAVES: Our people have sent out mats to all
newspapers with that change, instead of "For Defense" at
the top, it is "For Victory".
H.M.JR: Do you want to take that up with the
MacLeish Committee? Do you think they would be
interested?
MR. KUHN: They are for it. I have been telling
them that you don't have to change the name of the bonds.
You can change the tone of the copy and do the same
job.
MR. GRAVES: We still continue, as you will note,
further down on the copy, to talk about defense bonds,
but at the top --
MR. MORRIS: Don't you think you are going to have
to change the name of the bonds?
MR. BELL: There should be & word "and" between
bonds and stamps. That came to me Saturday, Mr.
Regraded Unclassified
130
- 18 -
Secretary, and I raised a question about it because you
will recall, I think two or three weeks ago, some such
matter was taken up with the President, and he said,
"No victory on any posters because we haven't had any
victory," and that is the reason I raised the question
about it.
H.M.JR: There is a poster committee too, which the
President has created.
MR. KUHN: I understood that he was simply opposed
to changing the name of the bonds.
MR. GRAVES: That is what I understood too.
MR. KUHN: But in posters and in copy you can always
speak of --
H.M.JR: Where is this poster committee? Lowell Mellett?
MR. KUHN: It has had no meeting yet.
MR. BELL: No, he was opposed to a victory program
going to Congress because he said, "We haven't had any-
thing but losses 80 far, so why emphasize victory?"
H.M.JR: Well, I tell you what you do. To make the
record, you see, I would take it up officially at this
MacLeish Committee this afternoon. Will you?
MR. KUHN: Right.
H.M.JR: And then before it is in effect, I would
like to have you take it up again with me, because I am
not sure myself.
MR. KUHN: They have issued an order, I believe,
that all Government agencies with the word "defense" in
their title should change it to "war." "Economic Warfare
Board," and so on.
131
- 19 -
H.M.JR: Who issued the order?
MR. KUHN: I believe --
H.M.JR: Well, they are in direct contradiction of
what the President said. Anyway, it won't do: any harm
to take it up this afternoon with MacLeish, and then
I may even ask you to clear it with Steve Early. Let's
clear it with MacLeish and Steve Farly. I am not crazy
about it.
MR. BELL: I am not either.
H.M.JR: So even if they say "Yes" I am not sure that
I will. I may say "No". I am not crazy about it.
MR. KUHN: I like it. I think it is perfectly all
right without changing the title of the bonds.
H.M.JR: But that isn't the point. I am not
crazy about it.
MR. KUHN: May I take this?
H.M.JR: Yes. As I say, I would like you to go
through the MacLeish Committee and through - and there
is no use sending it over. You have got to walk it over
to Steve Early, somebody, but I am not - and I am
not sold on it myself. I am not sold on it myself. Is
that all?
182
January 26, 1942
10:30 am
Present:
Lord Halifax, British Ambassador
Sir Frederick Phillips
Mrs. Klotz
The Ambassador: You will remember that you talked to
Phillips about the general financial condition. You suggested
that it would be best for the Prime Minister to take the matter
up with the President.
HM Jr: Oh, no. It was not my suggestion, Phillips
gave the two alternatives: (1) That the Chancellor of the
Exchequer should take the matter up with me; and (2) That
Churchill would take the matter up with the President. After
giving me the two alternatives, I said that I thought it was 50
important that it would be best coming from Churchill to the
President.
The Ambassador: We put that up to London and we received
on enswer that the Prime Minister was so deep in the day-to-dey
jot of the war that they hesitated to ask him to take up the
matter directly with the President, and I think he is reluctant
to do it because he is not conversant to do it. They came back
to the other alternative. They would be quite ready if the Chancel-
lor could send you 8 formal message, and I have such 6 message
and I can show it to you off the record or not.
I have a third alternative plan if the second is not EC-
reptable. I could see the President and put whatever I have to
disadvantages and yet certain advantages. I want your judgment
sar to him myself on instructions from London. I seo certain
83 to these two courses of action.
HM Jr: Let me think out loud. I will be frank just as
I always am. I want to look at it from your standpoint as to
how NE can get the money. If the thing comes from the Chancellor
of the Exchequer to me, and then I have to PO around to the
Various departments and try to get this money, and I am willing
to do It Just as I have in the past
Regraded Unclassified
133
- 2 -
Phillips: Stettinius got orders to put it in his new
Lend-Lease Bill, and in the draft is 8. wide margin to cover
these things. That draft is now going to the Budget.
HM Jr: That's all the more roason why it should be given
to the President. Lend-Lease is under him and 80 is the Budget.
Then when you saw the President, he would send you to the Director
of the Budget. If you didn't mind, you could then suggest that
the President should send it to the Director of the Budget.
This will help so that I would not have to battle with the dif-
ferent departments, which I am willing to do, but I do not want
it to become a personal issue that I am trying to do it.
The Ambassador: The doubt that I have in my mind is
that the President might say and think, "What is this fellow
coming over to see me for? He never talked to me about money
before. He doesn't know anything. I do not know anything. Why
does he waste my time? Why doesn't he talk to Secretary
Morgenthau about it?"
HM Jr: You are right. Your reaction is absolutely right.
If Churchill does not want to do it, let the Chancellor of the
Exchequer send it to me personally, and I will do it the best
I can for you. If, after a time, I fail there is always time
to go to the President.
Phillips: You do not want it put up through Winant?
HM Jr: No. When I get this thing from the Chancellor,
I will send a copy to the President, Hull, Stimson and Knox,
and ask them for their suggestions.
The Ambassador: Would it help or hinder if I said &
word to Harry Hopkins?
HM Jr: It would help. He is in the hospital now.
Phillips: Well, we came here to get Mr. Morgenthau's
decision.
Regraded Unclassified
134
- 3 -
HM Jr: No, this is your decision.
The Ambassador: It is his informal judgment as a friend.
I
Regraded Unclassified
135
BRITISH air COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON, D. C.
TELEPHONE HOBART 9000
ABE QUOTE
REFERENCE NO.
With the compliments of British Air Commission,
who enclose Statement No. 17 - Aircraft Despatched -
for week ended January 20, 1942.
The Hon. Henry Morgenthau, Jr.
Secretary of the Treasury
Washing ton, D. C.
January 20, 1942
Regraded Unclassified
136
STATEMENT NO. 17
AIRCRAFT DESPATCHED FROM THE UNITED STATES
DURING DISK INDED JANUARY 20, 1942
T
DESTIVATION ASSELY POINT
BY SEA
BY AIR
FLIGHT DELIVERED
FOR USE I CANADA
CASSIA
Canada
54
T50
CURTIES
Kittghuk
Middle East Port Sudan
9
Kitazbenk Canada
5
DIGLA
Bostoc III Russia
Bagrah
4
EXP ARTIN
Reltimore
Middle East
Port Sudan
3
LOCKHEED
1
Hußson III U.K.
MOSTH AMERICAN
6
Harvard II Canada
TOTALS
16
1
65
Printing Nr Condission
Johuary 2:, 1942
Regraded Unclassified
TREASURY DEPARTMENT
137
INTER OFFICE COMMUNICATION
DATE January 26,1942
Secretary Morgenthau
TO
Mr. Kamarck
FROM
Subject: Shipment of Planes to British Forces
1. In the week ending January 20, e
total of 52 planes of all types (22 combat
planes, 60 trainers) were shipped to British
forces.
2. The number of planes shipped to the
British since January 1, 1941, has now
passed the 5,000 mark. Light and medium
bombers made up 33 percent of the total
number, trainers, 31 percent, and pursuit
planes 30 percent. The remaining 6 percent
of the total was scattered among naval patrol
bombers, heavy bombers, and army cooperation
planes.
Regraded Unclassified
- 2 -
Table A - Shipments by Area
138
Total shipped Total shipped
Week Ending
in 1942
since
Jan.20,1942
to date
Jan. 1, 1941
to the United Kingdom
Light and medium bombers
1
1
1,125
Heavy bombers
o
0
104
Naval patrol bombers
0
o
102
0
Pureuit
13
324
Army Cooperation
0
1.
35
0
0
24
Trainers
Total to the United Kingdom
1
18
1,714
to the Middle East
Light and medium bombers
3
29
359
Heavy bombers
0
0
5
Pursuit
9
84
932
Army Cooperation
0
0
0
0
8
Trainers
150
Total to the Middle East
12
121
1,446
To the British Pacific Forces
Light and medium bombers
O
0
95
Naval patrol bombers
0
0
27
Pursuit
0
O
168
Trainers
O
0
105
Total to Pacific Forces
0
o
395
To the Forces in Russia
Light and medium bombers
4
4
48
Pursuit
0
0
49
Total to Russian Forces
4
4
97
To the Canadian Forces
Light and medium bombers
0
1
55
Naval patrol bombers
0
7
15
Pureuit
5
5
47
Trainers
60
103
1,277
Total to Canadian Forces
65
116
1,394
Totals
Light and medium bombers
5
35
1,682
Heavy bombers
0
o
109
Savel patrol bombers
0
7
144
Pursuit
14
102
1,520
Army Cooperation
0
4
35
Trainers
60
111
1,556
Total
R2
259
5,046
Regraded Unclassified
- 3 -
139
Table B - Shipments by Types
Total Shipped
Total Shipped
Week Ending
in 1942
since
Jan. 20,1942
to date
Jan.1, 1941
Bell Airacobra
o
o
154
Boeing B-17
o
0
20
Boston III
o
o
39
Brewster Buffalo
0
0
168
Cessna T-50
54
74
622
Consolidated Catalina
o
7
144
L.B.30 (B-24)
0
o
6
Liberator I (B-24A)
o
0
19
Liberator II (B-24B)
o
o
64
Curtise Kittyhawk
14
89
471
Tomahawk
o
o
593
Douglas Boston I
0
0
1
Boston II
o
0
81
Boston III
4
4
443
Fairchild 24 R-9
o
4
26
Glenn Martin Baltimore
3
29
97
Maryland
O
0
150
Grumman Martlet II
0
o
41
Lockheed Hudson I
0
o
1
Hudson III
1
1
352
Hudson IV
0
o
70
Hudson V
0
1
398
North American Harvard II
6
37
934
Mustang
O
13
93
Pitcairn Autogiro
0
o
5
Vought Sikorsky Chesapeake
0
0
50
Vultee Stinson-049
0
0
4
Grand Total - All Types
82
259
5,046
Regraded Unclassified
Table C - Plane Shipments to the British by Weeks
140
Light and
Naval
Army
Week
medium
Heavy
patrol
Coopera-
Ended
bombers
bombers
bombers
Pursuit
tion
Trainers
Total
Weekly average of
shipments in 1941
32
2
3
27
1
28
92
January 6, 1942
24
o
5
30
4
9
72
January 13, 1942
3
0
2
58
o
42
105
January 20, 1942
NO
o
0
14
o
60
82
Total shipments
since January 1,
1941 to date
1,682
109
144
1,520
35
1,556
5,046
Regraded Unclass
For Miss Chauncey
141
THERABURY DEPARTMENT
OFFICE OF THE SECRETARY
January 26, 1942.
CONFIDENTIAL
Received this date from the Federal Reserve
Bank of New York, for the confidential informa-
tien of the Secretary of the Treasury, compilation
for the week ended January 14, 1942, showing dollar
disbursements out of the Dritish Empire and French
accounts at the Federal Reserve Bank of New York,
and the sease by which those expenditures were
financed.
R
dm: 1/26/42
Regraded Unclassified
C
0
For Miss Chauncey
142
?
I
FEDERAL RESERVE BANK
OF NEW YORK
January 22, 1942
CONFIDENTIAL
Dear Mr. Secretary:
Attention: Mr. H. D. White
I an enclosing our compilation for the week ended
January 14. 1942, showing dollar disbursements out of the
British Empire and French accounts at this bank and the
means by which these expenditures were financed.
Faithfully yours,
(Signed) L. W. Knoke
L. W. Knoke,
Vice President.
The Honorable Henry Morgentham, Jr.
Secretary of the Treasury,
Washington, D. C.
Enclosure
Copy: 1/26/42
Regraded Unclassified
Metalls
loss
Diar
Total
Y
for much
I
Two
A/C
Credite
Sales
A/C
Credite
5
A/C
Deliver
of
war
10/29/39 1/28/40)*
323.0
16.6
7'90E
504.7
412.7
20.9
38.7
32.4
+181.7
31.2
3,9
27-3
36.1
30.0
6.1
+ 1.9
Var pariod through
December, 1960
477.2
16.6
460,6
707.4
534.8
20,9
110,7
41,0
+230,2
57.9
14.5
43,4
62.4
90.)
12.3
+ 6.5
Second your of war
(6/29/40-8/27/42)=
660.6
-
460,4
462.0
246,2
3.4
123.9
88.5
+ 1.6
72,2
16,7
55.5
81.2
62.9
18.3
+ 9.0
Ave. 28 - Dot, 1
23,1
.
23.1
52.2
21,2
-
-
31.0
+ 29,1
10,7
0.5
10.2
2,8
2.1
0.7
- 7.9
1941
Oct, 2 Oct, 29
37.4
-
37.4
19.7
11.9
-
-
7.8
- 17.7
B,2
5.5
2,7
8.0
5.9
2.1
+ 0,2
324
9.0
2,6
+ bes
Oct, 30- Dec. 3
52.8
0.1
52,7
32.5
19.3
-
-
13,2
- 20.3
10.3
6.9
11.6
Iss. 31
47.7
-
47.7
22.2
17.3
-
!
4.9
= 25.5
3.9
1.8
2,1
2.8
0.2
2.6
= 1.1
1962
EST ENGED:
Dec. 24
14.7
E
14.7
5.5
4.5
-
-
1.0
- 9.2
0.7
-
0.2
0.1
-
0.1
- 0.6
31
11.3
11.3
7.9
7.4
-
-
0.5
- 3.4
1.8
1.8
-
1.6
-
1.6
- 0.2
-
Jan. 2
7.0
-
7.0
1.4
0.1
-
-
1,3
- 5.6
0.7
и
0.7
0.2
-
0.2
- 0.5
14
9.2
9,2
7.6
5.6
-
-
2.0
- 1.8
2.1
-
2.1
0,6
-
0.60
- 1.5
-
lekly Average of Total Debits Since Outbreak of War
TOTAL January 14, 19/1 $ 7.7
willion
-
For monthly breakdown aso tabulations prior to April 23, 1941.
- For monthly breakdown @@@ tabulations prior to October 8, 1941.
Regraded Unclassified
OF BRITISH AND FREEN ACCOUNTS
(In Millions of Dollare)
Vook Ended January 14. 1942
Streetly
Confidential!
(STRUMENT)
BANK
of
FRANCE
DEBITS
CEEDITS
Net Inc.
DAVIS
(+) or
Gor's
Total
Expendi-
Other
Total
Decurities
Other
Dear, (-)
Total
Expendi-
Driver
PERIOD
Debite
tures(s)
Debita
Credite
Gold
(Official)(b)
Credita(e
in Balance
Debite
tures (d)
Debite
Credition
First year of war
(8/29/39-8/28/40)*
1,793.2
605.6
1,187.61
828.2
1,356.1
52.0
420.1
+ 35.0
866.3(e)
416.6(e)
449.7
1,095,3(e)
900.2
195.1(e)
+229.0
Bar period through
December. 1940
2,792.3
1,425.6
1,356,72,793.1
2,109.5
108.0
575.6
+ 10,8
878.3
421.4
456.9
1,098.4
900,2
198,2
+220,1
Second year of war
(8/29/40-8/27/21)**
2,203.0
1,792.2
410.82.189.8
1,193.7
274.0
722.1
- 13.2
38.9
4.8
34.1
8.8
-
8.8
- 30.1
1941
Aug. 28 - Oct. 1
140.9
105.9
35.0
176.2
20,1
2,0
154,1
* 35.3
0.3
-
0.3
0.5
-
0.5
- 0.2
109.0
77.3
31.7
150.9
0.8
-
150.1
+ 41.9
0.3
-
0.3
a
-
0,3
Oct. 2 - Oct. 29
Oct. 30 - Dec. 3
156.1
111.6
44.5
134.6
-
1.0
133.6
- 21,5
16.1
-
16.1
0.4
-
0.2
- 15.7
Dea. 1. Dac. 31
88.4
60.6
18.8
51.5
-
-
51,5
- 36.9
0.8
-
0.8
0.4
-
C-4
- 0.4
1942
EMINED:
Dec. 24
19.7
14,2
4.5
6.2
e
-
6.8
- 11.9
0,1
-
0,1
0.1
-
0,1
-
31
22,4
4.8
10.0
-
-
18.0
- 4.4
0.5
-
0.5
0.2
-
0.2
0.3
Jan. 7
26.4
17.7
E.2
11.5
=
-
11.5
- 14.9
0.1
-
0,1
0,1
0,1
14
30,2
22.9
2.3
24.8
-
0.5
24.3(f) - 5.4
-
-
.
0,1
-
0.2
+0.1
WHITY Expenditures Since Outbreak of Mar
Transfers From British Purchasing Commission to
(through June 19,1940) $19.6 ALL1100
Bank of Canada for French Account
England (through June 19,1940) 27.6 million
Book ended January 1,, 1942
-
adllion
Reglard (since June 19,1940) 41.3 million
Cumulation from July 6, 1940 $ 162.7
million
otfer monthly breakdown see tabulations prior to October 8, 1941.
ofor monthly breakdown - tabulations prior to April 23, 1941.
(See abtached sheet for other footnotes)
Regraded Unclassified
demission, 1/13/2019 alt Brittsh Supply Board, Ministry of
proosodo
&
early months of the war, although ADVERSION the receipt of the probeeds of this Ack osimes -
to the official celling,
to data supplied by the British Treasury and released by Secretary Morgeatheu, total official and private Brittsh liquidation
of our securities through December, 1940 amounted to 8334 million.
(c) Includes about $85 million received during October, 1939 from the accounts of British authorised banks with New York banks,
presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October, dollar
1939 apparently represent the acquisition of proseeds of exports from the sterling area and other currently accruing
receipts.
(d) Includes payments for account of French Air Commission and French Purchasing Commission.
(e) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day.
(f) Includes $7.5 millions transferred from New York accounts of British Authorized banks and about over 55,000,000 presurably
representing refunds of advances rade to American concerns by the British Purchasing Comission.
Regraded Unclassified
146
Treasury Department
Division of Monetary Research
Date January 26, 1942 13
To:
Secretary Morgenthau
From:
Mr. Southard
Dr. Viner has suggested that
you may be interested to know that
Prime Minister Mackensie King will
announce this afternoon in the
Canadian Parliament that Canada
will cancel $1 billion of Great
Britain's cutstanding debt to Canada
and will continue giving financial
aid to Great Britain -- without any
repayment obligation -- up to
$800 million per year.
Regraded Unclassified
147
January 26, 1942
11:20 a.m.
HMJT:
Hello.
Robert
Rouse:
Good morning, sir,
HWr:
How are you?
R:
First rate. And you?
HXJr:
I'm all right.
R:
You got back from Cleveland.
HWr:
Yes.
R:
Right.
HMJr:
Now, I understand there's a misunderstanding
on my speech in New York?
R:
Well, they are confused. They don't know whether
your remarks were directed entirely at state
and municipal bonds or whether in the background
there might be some way of getting At the partially
tax exempt and the tax exempt Treasury securities.
AMor:
Well, now
R:
Now, they don't stop to think that the question
on state and municipals 1e one of the interpretation
of that income tax amendment, and that in some
opinion that it would only be a matter for legis-
lation and that you have a contract - Treasury
has a contract with its holders in respect to
its own securities
Phini
That's right.
R:
which 1s the attitude that I've been taking
when people have discussed it with me this morning,
HXJr:
That's right. Well, now, 18 there any way - any-
thing that we can do down here? You've got B copy
of my speech?
R:
No, I've sent out to the man who distributes them
Regraded Unclassified
148
- 2 -
here - Mr. Friend - and he hoped that he'd
be able to get us one. So far it hasn't come
in. l've had to rely only on the papers, and
one man whom I know who heard you make the
speech.
HMJr:
Well, now, have you got a - can't they - what
I said on tax exempte is only two hundred words.
They could read it over to somebody over the
phone.
R:
Well, I'd like to have that; and I could have
it dictated to my girl here.
HMJr:
Well, I can tell - what's his name - the bond
man?
R:
Chick Schwarz?
HMJr:
No. What?
R:
Schwarz?
HMJr:
No. Hadley. I'll ring for Hadley, and who
do you want him to read it to?
R:
Well, have him read it to the trading desk,
and they'll have a girl take it down.
HMJr:
Have Hadley read it to the trading deek.
R:
Yeah, and they'll get a girl to transcribe it.
HMJr:
Yeah. It's only very short, and you can - I
recognize the obligation.
(Talks Aside) Hadley, read this part over to
Harris on the phone and tell them to give it
to Mr. Rouse. Do it right away.
R:
But my interpretation 16 satisfactory from
your standpoint, and I can go ahead and talk
that way to these people and have it passed
around.
HMJr:
Give it to Harris, will you? (Talks aside)
You can, I mean, this 1s something that we
Regraded Unclassified
149
- 3 -
feel that there's no contract - no contractual
obligation or moral obligation as to the Federal
Government as to state or municipal bonds which
have been sold.
R;
Yeah.
HMJr:
We do feel that there's a moral obligation
between the Federal Government and Federal
bondholders. Hello.
R:
Yeah.
HMJr:
And I feel that way very strongly, and I have
nothing in mind about taxing the income from
outstanding Federal issues.
R:
The other thing that's bothering the market and
has been for ten days in the same respect is the
question of lowering the normal rate of normal
tax and increasing the surtax as it affects the
partially-exempt Governments.
HMJr:
Well, I haven't even - no one's discussed it
with me. I don't know. So I can't treat that.
I mean, I can't handle it because I have no -
I haven't discussed it with anybody here.
R:
Well, the thing for us to do is to say to the
dealers, and to the bankers with whom we talk,
that your remarks were directed solely at state
and municipal securities and not at Government
securities.
HMJr:
That's right. That's right.
R:
And we'll have the text to work on.
HMJr:
Well, you ought to have it inside of five
minutes.
R:
Fine.
HMJr:
All right.
R:
Right, sir.
HMJr:
Thank you.
1/26/82
150
A
2125 12 1 EXTRA
P
H
NPT NEWYORK NY JAN 26 232P
1942 JAN 26 pm 4 28
100
T
HON HEVEY MONGENTHAU JR
R
E
TECRETARY OF THE TREASURY WASHDC
A
S
(if SERAIN " THE STATES AND MUNICIPALITIES OF THIS NATION,
U
ACTIVE THERUGH THE CONFERENCE ON STATE DEFENSE, I HAVE
R
Y
YOUR PROPOSAL TO TAX OUTSTANDING STATE AND
T
MICIPAL HONDS AS A FLAGRANT BREACH OF THE CONFIDENCE AND
E
coon FAITH HERETOFORE EXPRESSED BY
THE ACTS OF CONGRESS,
G
OF THE SUPREME COURT, STATEMENTS OF THE PRESIDENT
R
A
AND YOUR'ELF AS SECRETARY OF THE TREASURY. IN THE LIGHT OF
P
PART AMERICES, THE PLEDGED WORD OF LOCAL GOVERNMENTS,
H
AND THI APPUIESCENCE OF THE FEDERAL GOVERNMENT, A FEDERAL
T
ATTEMPT ID TAX OUTSTANDING ISSUES IS IN FLAT CONTRADICTION
E
A
IF EVELY PRINCIPLE OF GOVERNMENTAL INTEGRITY FOR WHICH THE
S
U
THE APE FIGHTING TODAY.WILL YOU DISCUSS YOUR
"0 TAX OUTSTANDING BONDS WITH ME OVER A
T
PADIO PROGRAM
E
- TEIN CHAIRMAN CONFERENCE ON STATE
E
G
R
Regraded Unclassified
151
PROPOSED TIRE TO HENRY EPSTEIN
I wish to acknowledge your telegram of January 26th. I am
aware that your objective has always been to prevent Federal
taxation of future issues of state and municipal securities, and
I note that in this telegram you seek further to protect this,
your real interest, by condemning the proposal to tax outstanding
issues of state and municipal securities, I am familiar with the
position you have so long maintained despite the fact that every
Republican and Democretic administration for the past twenty years
has sought to end reciprocal exemptions and despite the farther
fact that within the past year both houses of Congress by over-
whelming majority voted to prohibit exemption of future issues of
Féderal securities. I believe that now when Democracy itself is
being challenged, it is unthinkable that some members of our
democratic society through investment in state and municipal
securities should be allowed to escape their share of the national
burden and transfer it to their less fortunate fellows. Such an
undemocratic privilege was never contemplated by the founders of
America, and the continuance of this especially privileged class
at this time 16 unspeakable. State and minicipal officers, as the
most intimate leaders of the people, are in a position to make a
fine contribution to national morale and national unity by support=
ing this proposal. Many of them are doing 30. I enpreciate that
it requires courage to reverse one's position. I am disappointed
that you lack that courage.
Regraded Unclassified
152
PROPOSED WIRE TO HENRY EPSTEIN
I wish to acknowledge your telegram of January 26th. I an
avare that your objective has always been to prevent Federal
taxation of future issues of state and municipal securities, aret
I note that in this tolegram you seek further to protect this,
your real interest, by condemming the proposal to tax outstanding
issues of state and minicipal securities. I as familiar with the
position you have so long maintained despite the fact that every
Republican and Democratic administration Cor the past twenty years
has sought to end reciprocal exemptions and despite the farther
fact that within the past year both houses of Congress by over-
whelming majority voted to prohibit exemption of future issues of
Federal securities. I believe that now when Denocracy itself is
being challenged, it is unthinkable that BOMO members of our
democratic society through investment in state and municipal
securities should be allowed to escape their share of the national
burden and transfer it to their less fortunate fellows. Such an
undemocratic privilege was never contemplated by the founders of
America, and the continuance of this aspecially privileged class
at this time 18 unspeakable. State and municipal officers, as the
most intimate leaders of the people, are in a position to make -
fine contribution to national morale and national unity by support-
1ng this proposal. Marry of them are doing BO. I appreciate that
it requires courage to reverse one's position. I an disappointed
that you lack that courage.
Regraded Unclassified
HOUSE OF REPRESENTATIVE53
RULES COMMITTEE
Secretary Secretary of the Treasury
Washington, D. C.
A copy of the enclosed evidently
has been sent to every House
Member and Denator.
H. S. Shaw, Clerk
Regraded Unclassified
154
From: AUSTIN J. TOBIN,
FOR RELEASE
111 Eighth Ave.,
New York City.
CONFERENCE ON STATE DEFENSE
III EIGHTH AVENUE
NEW YORK CITY
CONFERENCE COMMITTEE
JOHN J. BENNETT, JR.
LEWIS L. DELAFIELD, JR.
Attorney General, New York
Counsel, Triburough Bridge Authority,
EARL WARREN
New York City Parkway Authority, Jones
Attorney General, California; President,
Beach Parkway Authority
National Association of Attorneys General
JOSEPH X. COSTELLO
General Manager, Delaware River Joint
GREEK L. RICE
Commission
Attorney General, Mississippi
FRANK C. FERGUSON
HARRY McMULLAN
Chairman, The Port of New York Authority
Attorney General, N. Carolina
CHARLES A. BEARDSLEY
THOMAS J. HERBERT
Attorney, Commissioners of the Port of
Attorney General, Ohio
Oakland
DAVID WILENTZ
HENRY F. LONG
Attorney General, New Jersey
Commissioner of Corporations and Tax-
tion of the State of Massachusetts
ABRAM P. STAPLES
A. E. NEALE
Attorney General, Virginia
City Auditor, Springfield, Massachusetts;
EWING T. KERR
Executive Committee, Municipal Finance
Attorney General, Wyoming
Officers Association
JAMES R. LAW
WILLIAM C. WALSH
Mayor, Madison, Wisconsin: Executive
Attorney General, Maryland
Committee, American Municipal Associ-
I. H. VAN WINKLE
ation
Attorney General, Oregon
DANA B. VAN DUSEN
General Counsel, Metropolitan Utilities
SMITH TROY
District, Nebraska
Attorney General, Washington
PAUL V. BETTERS
JAMES R. MORFORD
Executive Secretary, United States Con-
Attorney General, Delaware
ference of Mayors
OFFICERS
Chairman
Vice-Chairman
HENRY EPSTEIN
CHARLES J. McLAUGHLIN
Solicitor General, New York
State Tax Commissioner, Connecticut
Secretary
AUSTIN J. TOBIN
Assistant General Counsel,
The Port of New York Authority
FOR BARDLAT.
STATE DEVICIALS
ATTACK JN GUISTATEM 20/28
Solicitor General Labols Nepuciazion
"Shooking, Loord Ad Discriment"
Regraded Unclassified
153
FOR TMC TOTAL RELEASE
STATE OFFICIALS DENOUNCE MORGENTHAU'S
ATTACK ON OUTSTANDING BO.DS
Solicitor General Epstein Labels Repudiation
"Shocking, Innoral and Dishonest"
Henry Epstein, Solicitor General of the State of New
York and Chairman of the Conference on State Defense, expressed
shooked amazement today at the proposal of Secretary of the Treasury
Morgenthau to levy a federal tax upon the income from outstanding
state and municipal bonds which had been issued under the covenant
that they were tax exempt. The Conference on State Defense, of which
Mr. Epstein is the Chairman, is the organization through which the
states and municipalities have presented their organized opposition
to federal attempts to gain control of local financing.
Treasury Drops liask
Mr. Epstein said, "Secretary of the Treasury Morgenthau
bes finally dropped the mask which has so far concealed the real ob-
jective of the Treasury toward the outstanding sacurities of states
and municipalities. These securities were sold by the states and
oities on the solemn assurances of immunity and the states received
for them a price, of which all local taxpayers in the country have
been the beneficiaries, based upon those honest representations.
"This statement," continued the Solicitor General, "coming
as it does from the first fiscal officer of the United States Gov-
argment, is not only shocking, but it probably will do more to des-
troy the confidence of the people of this country in the promises
not TPO # Faith of their own government then anything that I can
(more)
Regraded Unclassified
156
STATE OFFICIALS DENOUNCE
MORGENTHAU (cont'd.)
2,
recall to this time, Every state, every county, every city, town
and hamlet, in this nation, has outstanding obligations. Every one
of these has been issued with the full recognition of the Treasury
Department and the federal government that they were immune from
federal taxation."
Treasury Assured Investors
"Indeed, as recently as last March 14th the Treasury De-
partment in an official press release assured the holders of state
and municipal obligations that they had no 'reason to fear the impo-
sition of taxes on obligations now outstanding.' This same Treasury
statement also assured the holders of our local bonds that 'Secre-
tary Morgenthau has consistently voiced opposition to proposals
which would subject the interest on outstanding state and municipal
securities to federal taxes.'"
Every spokesman for the Treasury has repeatedly given
these assurances and has indeed expressed their "indignation" at re-
peated warnings by the Conference on State Defense that the taxation
of outstanding municipal bonds was the Treasury's real objective.
"In 1939," said Mr. Epstein, "Undersecretary John W.Hanes,
speaking as the Treasury's representative before the Ways and Means
Committee of the House, said 'that the Treasury did not even suggest
that interest on outstanding issues be taxed.' And the report of
the Special Senate Committee unanimously recognized the 'dire effects
of taxing securities already outstanding.'"
Repudiation Held "Immoral, Dishonest"
Despite these representations of the Treasury Department,
every holder of these securities, every insurance company, every
bank, every pension and retirement system throughout the country is
now faced with this brazen repudiation by the Treasury of the prom-
ises and assurances which have been made by our states and cities
(more)
Regraded Unclassified
157
STATE OFFICIALS DENOUNCE
MORGENTHAU (cont'd.)
3,
in good faith and which have been recognized and honored down to
the present moment by the Federal Government itself. Such a repudi-
ation is immoral, dishonest and is in flat contradiction of every
principle of governmental integrity for which the Democracies are
fighting today. It cannot but tend to destroy the confidence of
every investor in the good faith of our covernment's entire fiscal
policy.
"Further than this," concluded the Chairman of the Confer-
ence on State Defense, "this repudiation may well impose a moral
obligation on every community, state and county in the country to
make good every penny that will have to be paid out in taxes on
these obligations. They sold them at a higher price, which the
public obtained because their local securities were represented as
tax immune. The Secretary of the Treasury in his statement today
has dealt national defense and national morale B. greater blow than
any of the Axis powers, singly or together, have thus far been
able to do."
######
Regraded Unclassified
158
JAN 26 1942
Dear Mr. Stam:
This 18 in reply to your letter of January 16,
1942, respecting the submission to you of material
prepared by the Sureau of Internal Revenue relating
to the improvement of the operation of the income
tax laws, the closing of income tax loopholes, and
the removal of tax inequities.
After careful consideration of the entire
matter, I feel that the method of considering pro-
posals for legislation discussed in my previous
letter is the only practicable one which can be
followed. As I there indicated, 10 have made it
our practice to confer with you for the purpose
of exchanging information and views prior to the
presentation of material to the Committees of
Congress. This practice is being fully followed
in connection with proposals for revenue legis-
lation in the current year.
Regraded Unclassified
159
- 2 -
This method of proceeding has enabled us to
achieve an adecuate interchange of views respecting
revenue legislation. At the name time, 1 believe
that such n course is the only one that is in keep-
ing with the responsibility of the Treasury Depart-
sent in such matters.
Sincerely yours,
(Signed) E. Morgenthau. 38.
Secretary of the Treasury.
Mr. Colin F. Stam,
Chief of Staff,
Joint Committee on Internal
Revenue Taxation,
Washington, D. C.
file to Stampson
By Measurer 7 4:25
Photocas pile n.m.c.
SSS:hdr
1-23-42
Regraded Unclassified
COLIN F. STAM
SOMITE
Claim of STAFF
BALTER F. BA., VICE CHAIRMAN
A.D. CHESTERN
ARET. CHILE - BYAEF
- 4. WALEH,
ALBAN W. MARILEY, ex.
MINUT M. LAPOLLETTE, JR., wis,
- CAPPER, KANN.
SEGRETARY
Congress of the United States
JOINT COMMITTEE ON INTERNAL REVENUE TAXATION
Washington
January 16, 1942.
penorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
whington, D. C.
Dear Mr. Secretary:
Further reference is made to your letter of January 12,
1942, relative to our request, pursuant to section 5011 of the In-
ternal Revenue Code, for suggestions prepared by the Bureau of In-
termal Revenue relating to the improvement of the operation of the
income tax laws, the closing of income tax loopholes and the removal
of tax inequities.
I recall that when the Joint Committee on Internal Revenue
ration was first organized, it was one of my functions, as an employee
the Bureau of Internal Revenue, to collect suggestions from various
sources in the Bureau of Internal Revenue, and even from the field, for
improving the internal revenue laws. These suggestions, when compiled,
sore made available to the Staff of the Joint Committee on Internal
vanue Taxation as well as to the Staff of the Treasury Department.
You
suggestions were studied and joint discussions between the Staff of
-
Joint Committee and the Treasury were had for the purpose of decid-
lag
which suggestions should be presented to the various Congressional
ittees. I believe the record will show that at no time has the
" of this Committee attempted to embarrass the Treasury Department
La conflict with those of the Treasury proper. The submission
representing that the views of the Bureau of Internal Revenue might of
dve information Congress. of a confidential character, which cannot be divulged sta-
data to the As an agency of the Congress, we continually
to the Staff of this Committee does not constitute a submission of
Committees of Congress, except upon specific request, based upon
authority and committee action.
Regraded Unclassified
le Henry Morgenthau, Jr., 2. January 16, 1942:
I hope that you will not let Mr. Sullivan's fear of a
man obstruct or interfere with this well-established practice
has been carried on, except during the last three revenue acts,
continuously since the creation of the Joint Committee on In-
Revenue Taxation. It is, therefore, earnestly requested that
consider the decision made in your letter of January 12, 1942,
but the practice which has worked 30 satisfactorily in the past
be
restored.
Respectfully yours,
Colin F. Stam,
Chief of Staff.
Regraded Unclassified
Ideal Reml
my will, B.r
162
visa to be 100% rs. your
January 26, 1942
of 900
specially the 3.14 874
PROPOSAL FOR INDIVIDUAL INCOME TAX
Pay in 1942, tax on 1942 income, figured on basis of 1941
income, with end of year adjustment. sonitional veyment or refund
18 required by any discrepancy between 1942 income actualized and
1941 income which was basis of calculation.
Waive all individual income tax on 1941 income.
Restore solvency and eliminate fear.
Hake practical the retirement of neoole who should retire or
be retired.
Keice practical the taking of lower compensation this year than
fist, whether for Government service or business cost reduction.
COST TO THE TREASURY
Practically little loss of income in early years, the loss
votile be distributed over the life of the present income tax paying
generation as individuals die or retire. Therefore, little infle-
tenger.
Treasury has never considered taxes receivable B.M. an asset and
therefore their elimination would not remove an asset of record.
POLITICAL CONSIDERATION
Some such step will have to be taken some day 68 the problem
vill become progressively more acute. Might 8.8 well do it now,
Regraded Unclassified
- 2 -
163
Step would have wide support among vocal elements, therefore
original source of suggestion should have careful consideration.
The few large income taxpayers who are already on an accrual
basis will have an unexpected windfall. Steps should be taken in
advance to secure in some cases agreement to the application of this
windfall to private educational and philanthropic purposes. Very
useful since the Federal Government has no way of aiding those insti-
tutions.
This step would assist in obtaining acceptance for new, higher,
and unaccustomed forms of taxation.
164
January 26, 1942
11:55 a.m.
HMJr:
Anybody that you say. You Just
Secretary
Hull:
There's two, Just two. One from the Far East,
and then Dr. Feis.
HMJr:
Well, who should he call up in the first
instance?
H:
It would be all right to call - he can take
hie choice. Whichever - which would you prefer,
Hornbeck or Hamilton?
HMJr:
Anybody. Anybody that you say.
H:
Yeah.
HMJr:
Is - this man'e an economiet.
H:
How's that?
HMJr:
Thie man Southard's an
H:
Yes. That's the reason I want Feis to be
present
HMJr:
Well.....
H:
80 he could help to interpret and 60 on.
HMJr:
Well, you Just tell me who he should call, and
he'll go over and see them.
H:
Tell him to call Feis and Hornbeck.
HMJr:
Feis and Hornbeck.
H:
And if Hornbeck's not in, Hamilton.
HMJr:
I'll do that. And I'll tell him that 8.6 soon a.e
they have something or other, then I'd like to
sit down with you.
H:
Yes. All right.
Regraded Unclassified
165
- 2 -
HMJr:
I'd like to sit down with you then.
H:
All right, Henry.
HMJr:
Thank you.
H:
Good-bye.
166
January 26, 1942
12:00 Noon
HMJr:
Hello.
Operator:
I have Mr. Southard. He's in Mr. Bell's
office.
HMJr:
All right.
Operator:
Go ahead.
HMJr:
Southard.
Mr. Frank
Southard:
Yes, Mr. Secretary.
HMJr:
I just called up the Secretary of State and
I told him Harry White was not here, that I
wanted you to handle the Chinese matter for
me.
S:
I see.
HMJr:
I asked him whom you should contact, and he
said "Dr. Feis and Hornbeck."
S:
I see.
HMJr:
And if Hornbeck 18 not there - oh, what's the
second man's name?
S:
Feis - oh, Hamilton.
HMJr:
Hamilton.
Please drop everything that you're doing and
concentrate on this, because I don't want them
to think that we're dragging our feet.
S:
Yes.
HMJr:
And when you have gotten as far as you can with
Feis and Hornbeck or Hamilton, then I want to
go over and see Mr. Hull about it myself.
S:
During the day.
HMJr:
Not today, no.
Regraded Unclassified
167
- 2 -
S:
All right.
HMJr:
You won't get together with them today, but
I mean, I want you to see them today but you
won't come to any understanding with them.
S:
I see. Do you want me to carry this on until
Kr. Coe's return? That 10, ir.....
HMJr:
Well, I don't know when Coe comes back.
S:
Tomorrow morning, Mr. Secretary.
HMJr:
Well, you've started - you see it through now.
8:
All right.
HMJr:
If you start it, you see it through.
S:
All right.
HMJr:
Now, see it through for me.
S:
Yes, I'll do that.
HMJr:
And then report to me on it in the morning.
S:
All right, I'll do that.
HMJr:
Thank you.
S:
Good-bye.
Regraded Unclassified
168
January 26, 1942
12:02 p.m.
HMJr:
I think it would be good to take Bernstein,
the attorney, with you.
Mr. Frank
Southard:
All right, I'll do that.
HMJr:
Please.
8:
Surely.
169
January 26, 1942
12:04 p.m.
Operator:
Operator.
HMJr:
Foley.
Operator: Right.
HMJr:
Hello.
Operator:
Mr. Foley,
Edward H.
Foley:
Yes, Mr. Secretary.
HMJr:
Ed, I'm sending Southard and Bernstein over
to Bee Feis and - oh, whatever - Hornbeck, on
this Chinese loan business, Bee; and you're
to tell Bernstein to go along with Southard.
F:
oh, my Bernstein; not E. M.?
MMJri
What? Your Bernetein?
F:
It's my Bernstein. Harry's got 8 Bernstein,
too, who works with Southard. I'll have
Bernie go right over.
HMJr:
I mean Bernstein, the attorney.
F:
Right.
HMJr:
Now be sure that I get the right one, though,
won't you?
F:
Okay.
HMJr:
Call up Southard and tell him - save me - call
up Southard and tell him I meant Bernstein,
your Bernstein.
F :
All right.
HMJr:
Will you?
F:
I'll do that.
HMJr:
And Crowley called me Saturday. I've had a
call in, but he's out.
Regraded Unclassified
- 2 -
170
F:
I see.
HMJr:
But now call up Southard and tell him it was
your Bernstein.
F:
All right, I'll tell him.
HMJr:
Thank you.
171
THE WHITE HOUSE
WASHINGTON
January 26, 1942.
MEMORANDUM FOR
H.M.Jr.
I still think that this can be
worked out as soon as Fox gets here. If
they don't want dollar notes, why don't
We buy Chinese yuans and use them for
paying for the equipment of Chinese troops
in China itself. I would be wholly willing
to go up to twenty or twenty-five million
dollars a month on some such basis.
F.D.R.
172
THE SECRETARY OF THE TREASURY
WASHINGTON
January 22, 1942
My dear Mr. President:
I am forwarding the inclosed cor-
respondence from Mr. T. V. Soong. Naturally,
I am disappointed in the contents.
What do you suggest as our next
move?
Sincerely yours,
The President,
The White House.
Copies to:
The Secretary of State
The Secretary of War
The Secretary of the Navy
Regraded Unclassified
173
MINISTER FOR FOREIGN AFFAIRS
REPUBLIC OF CHINA
January 21, 1942
My dear Mr. Secretary,
During your absence from Washington I received
the enclosed message for you from the Generalissimo.
Since Mr. Fox is due to arrive in Washington
shortly, it occurs to me that you may like to have an opportunity
of seeing him and hearing from him of the situation in China
before you renew discussions with me. However I am at your
disposal at any time, should you wish to see me earlier.
Sincerely yours,
T. V. Soong
The Honorable
The Secretary of the Treasury
Washington, D. C.
Regraded Unclassified
CONFIDENTIAL
X - - know
was
I
-
STATES
are
(
E
and
-
1-
DATE
THE
Regraded Unclassified
174
CONFIDENTIAL
The Generalissimo deeply appreciates Secretary Morgenthau's
efforts which have materialized in a proposal that the 0, S. Government
would undertake to pay for the maintenance of part of the Chinese army
in U.S. Dollar notes. After careful consideration, however, he doubts
whether this scheme is practicable. Payment of Chinese soldiers in U. S.
currency would tend to create a cleavage between the army and the general
economic structure in China which may actually hasten the collapse of the
Chinese currency. Before Mr. Fox left Chungking the Ceneralissimo had e
long discussion with him in which he pointed out 8. number of reasons why
he considered the scheme difficult of application and which he asked
Mr. Fox to convey to Secretary Morgenthau.
The Generalissimo urgently requeste that cereful consideration
be given to his original proposal that the United States grant to Chine a
political loan of 500 million U.S. dollars, which would be the only means
to prevent an impending economic collapse. This loan should be regarded
in the light of an advance to an ally fighting against a common enemy,
thus requiring no security or other pre-arranzed terms as to its use and
as regards means of repayment.
Regraded Unclassified
90:
175
1/27/42
Re: E. Res. 388
I spoke to Congressman Somers
about this today at Mr. Foley's
request and told him the
Secretary did not want him to go
ahead at this time. I also told
him that I wanted to see him and
give him the Secretary's reasons.
He told me he was going to New
York and would get in touch with
ne next week.
(initialed) LJB
L. J. BERNARD
Regraded Unclassified
1
6
1/27/42
Re: H. Res. 388
I spoke to Congressman Somera
about this today at Mr. Foley's
request and told him the
Secretary did not want him to go
ahead at this time. I also told
him that I wanted to see ham and
give him the Secretary's reasons.
He told me he was going to New
York and would get in touch with
no next week.
(initialed) LJB
L. J. BERNARD
Regraded Unclassified
177
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
January 26, 1942
to THE SECRETARY:
Here is a letter dated January 22, 1942. from
Congressman Somera addressed to Larry Bernard of the
General Counsel's office, regarding his resolution
which would get up A committee to investigate the
benefits which have resulted to the Government of
China from extensions of credit by this Government,
and the possibility of devising further ways and
means of increasing and stabilizing trade with China.
I believe this is an attempt on the part of
Mr. Somera to keep the Stabilization matters within
his committee; that he hopes to do this through the
means of this sub-committee and the passage of this
resolution in the House.
I wonder if you do not want to call him personally
and ask him not to push this resolution on the ground
that the Treasury just does not have the time to make
the studies that would be required. Furthermore, I
doubt if we can show any benefits to China through the
extension of credits except to enable China to carry
on the war.
Somes wonts then early reply
DWB
To Stephens for Sixy
1-26-42- 2:55 p m.
PORDEFENSE
BUY
STATES
SWINGE
ansag
Regraded Unclassified
COPY
178
HOUSE OF REPRESENTATIVES 1. S.
Committee on Coinage, Weights and Measures
Washington, D. C.
January 22, 1942
Mr. Lawrence J. Bernard,
Treasury Department,
Weshington, D. C.
My dear Mr. Bernard:
Enclosed is the Resolution I referred to yesterday
during our telephone conversation.
I would appreciate it if you could get an informal
opinion of the Department 85 to whether they would approve
of it. Let me say, relative to the stabilization feature,
that the word "investigate" would not imply any distasteful
probing but 1a meant to be nothing more than a right to
review so that we can recommend a policy of stabilization
in the future. Such policy would be necessary if we are
to promote trade between the two countries during the
reconstruction period which must follow the termination
of this war.
With that realization, I am most hopeful that the
Treasury will approve and offer its aid in delving into
this problem.
I would like the privilege of discussing it with
whoever in the Department will pase on its merits.
Sincerely yours,
(s) Andrew L. Somers
Andrew L. Somers.
Regraded Unclassified
179
Tita CONGRESS
1ST SESSION
H. RES. 388
IN THE HOUSE OF REPRESENTATIVES
DECEMBER 12, 1941
Mr. SOMERS of New York submitted the following resolution; which was
referred to the Committee on Rules
RESOLUTION
1
Resolved, That there is hereby created a select committee
2 to be composed of three Members of the Honse of Represent-
3 ntives to be appointed by the Speaker, one of whom he shall
4 designate as chairman. Any vacancy occurring in the mem-
5 bership of the committee shall be filled in the same manner in
6 which the original appointment was made.
7
The committee is authorized and directed to investigate
8
(1) the benefits which have resulted. during the existing
9 national emergency, from extensions of credit made by the
10 Government of the United States, or any agency thereof, for
11 the purpose of aiding in the stabilization of China's currency,
12 (2) the possibility of devising further ways and means of
Regraded Unclassified
2
1 increasing and stabilizing trade with China, and (3) the
2 transportation problems related to the foregoing matters,
3
The committee shall report to the House (or to the Clerk
4 of the House if the House is not in session) as soon as prac-
5 ticable during the present Congress the results of its investi-
6 gation, together with such recommendations as it deems
7 desirable.
8
For the purposes of such investigation the committee is
9 authorized to sit and act during the present Congress at such
10 times and places, whether or not the House is sitting, has re-
11 cessed, or has adjourned, to hold such hearings, to require the
12 attendance of such witnesses and the production of such books,
13 papers, and documents, and to take such testimony, as it
14 deems necessary. Subpenas shall be issued under the signa-
15 ture of the chairman of the committee or any member desig-
16 nated by him, and shall be served by any person designated
17 by such chairman or member. The chairman of the com-
18 mittee or any member thereof may administer naths to
19 witnesses.
Regraded Unclas
180
January 26, 1942
12:56 p.m.
HMJr:
Hello.
Operator:
Mr. Crowley. Go shead.
HMJr:
Hello.
Leo
Crowley:
Hello, how are you? I called you Saturday
afternoon and they said you were out in
Cleveland.
HMJr:
Cleveland and Detroit.
C:
Say, now sometime this afternoon or tomorrow,
if you have a few minutes' time, if you'd give
me a ring I'd like to talk with you. I had a
long, long talk about that thing there
HMJr:
Yes.
C:
and there won't be anything done right
away, but I think I ought to tell you all
about our conversation. I'm sure it will be
interesting to you.
HMJr:
I'd like to hear it.
C:
Well, any time now that you can, today or
tomorrow, why you call me, and I'll come right
over.
HMJr:
Well, why not let's set an appointment for
tomorrow?
C:
Fine.
HMJr:
How'e ten o'clock?
C;
Fine, I'll be there.
HMJr:
Ten o'clock.
C:
Yeah.
HMJr:
Thank you.
C:
Good-bye.
Regraded Unclassified
DRAFT OF SECRETARY MORGENTHAU'S BROADCAST
181
FOR THE INFANTILE PARALYSIS CAMPAIGN,
JANUARY 26, 1942.
Tonight I should like to speak to you for a very
few minutes, not as Secretary of the Treasury, but 8.8
en old friend and neighbor of Franklin Roosevelt. I am
going to speak in A. personal way and with 8. personal
theme, not to praise him, because he needs no praise,
but for e different reason. ) I feel very deeply that
it ill help our country to surmount the dangers and
obstacles of this hour if all of us remember how
Franklin Roosevelt conquered the obstacles that at one
time shadowed his whole life.
(
It is Almost thirty years now since Mrs. Morgenthau
and I first became neighbors of the Roosevelts in the
Budson Valley. It is more than twenty years since the
President was stricken with infantile paralysis. The
Regraded
- 2 -
182
very first year that he went to Warm Springs, we went
with him. It did not take us long to discover that he
had brought B. new spirit to Warm Springs with him. Even
in the very first winter at Warm Springs, we saw that the
patients there had a certain cheerful optimism, a kindly
and helpful relationship toward one another, an attitude
toward life which subsequently came to be known as the
"spirit of Warm Springs." In reality that was the spirit
of Franklin Roosevelt. He blew the breath of life and
courage into that place through the example he set,
through the reserves of courage that he summoned. He
had already made up his mind that he had "nothing to
fear but fear itself."
He never spoke to me then about the disease that
struck him, nor has he spoken about it since. He was
fighting his fight alone. He was determined to show that
D-A
Regraded Unclassified
- 3 -
183
he could take it, with the same gay and grim spirit that
the people of London showed when 8. different kind of
scourge fell upon them.
In later years when Franklin Roosevelt haú re-entered
state politics in New York, we went on a number of campaign
an inspiration 7. all of no
trips together. That, too, was & rewarding experience.
Be was always cheerful when others grumbled, he was always
optimistic when others had their doubts. I remember
cold autumn
particularly one h day when he spoke 14 times from an open
car, on & cold autumn day. This was the stricken man whom
we had accompanied to Warm Springs only a few years before.
He WAS winning his fight. He was waging his war with
wither him.
every ounce of energy end determination that he could summon.
This determination to beat all hardships, to conquer
is being
day by day.
all handicaps, can be created in these United States today.
0-A
Regraded Unclassified
- 4
184
Mr. Bitler, Mr. Mussolini, and Mr. Mikado, I want you
to take B look at the spirit of Warm Springs, for that
is the spirit of America today and it is something which
you can never beat, no matter how long you try.
Many times in those early days at Warm Springs the
road ahead must have seemed dark and painful to Franklin
Roosevelt, yet the word "impossible" had been struck out
of his dictionary. Nothing was impossible to him, and
he proved it.
In the same way the road ahead of our country must
seem dark at times. We as a nation have been struck E
crippling blow while we were not looking. Our whole world
has been stricken with the disease of conquest and tyrenny
which we shall have to stamp out before we can live in
poace and happiness again. But if anyone should ever have
and wess being
0-A
Regraded Unclassified
- 5 -
185
his doubts, if anyone should suppose for one moment that
Nemember think of the that
the job is too big for us, let him look - the example
/ Hunt
nv
of Franklin Roosevelt, who has conquered the powers
and then carry
1
evil singl handed.
D-A
186
1/26
o
As Draft "A" was being discussed and re-
visions made, the pages were given to the
typist to make this Draft "B".
DRAFT OF SECRETARY MORGENTHAU'S BROADCAST
187
FOR THE INFANTILE PARALYSIS CAMPAIGN,
JANUARY 26, 1942.
Tonight I should like to speak to you for " very
few minutes, not as Secretary of the Treasury, but 8.8
sn old friend and neighbor of Franklin Roosevelt. I feel
very deeply that it will help our country to surmount
the dangers and obstacles of this hour if nll of UE
remember how Franklin Roosevelt conquered the obstacles
that at one time shadowed his whole life.
It is more than twenty years since the President
MES stricken with infantile paralysis. The very first
Mrs. Marger and I
year that he went to Warm Springs, we went with him.
It aid not take us long to discover that he had brought
R new spirit to Warm Springs. Even in the very first
inter, we saw that the patients there has 8 certain
cheerful optimism, a kindly and helpful relationship
Regraded Unclassified
- 2 -
188
toward one another, en attitude toward life which
subsequently came to be known 8.5 the "spirit of Warm
Springs."
In reality that was the spirit of Franklin Roosevelt.
Fe blew the breath of life and courage into that place
through the example he set, through the reserves of
coure e that he summoned. He had already made up his
mind that he had "nothing to fear but fear itself."
Re never spoke to me then about the disease that
struck him, nor has he spoken about it since. Re was
fighting his fight alone. He was determined to show
that he could take it, with the same min and 64J spirit that
the people of London showed when R different kind of scourge
fell upon them.
In later years when Franklin Roosevelt had re-entered
state politics in New York, we went on & number of campaign
Regraded Unclassified
- 3 -
189
trips together. Then, too, he was an inspiration to all
of us. When others grumbled, he was always cheerful;
when others had their doubts, he was always optimistic.
I remember particularly one cold autumn day when he spoke
14 times from an open car. This was the stricken man
whom we had accompanied to Warm Springs only a few years
before. He was winning his fight. He was waging his war
the
with every ounce of energy and determination within him.
This determination to beat all hardships, to conquer
all handicaps, is being created in these United States
Now, listen,
day by day. Mr. Hitler, Mr. Mussolini, and Mr. Mikado;
A
I want you to take a look at the spirit of Warm Springs,
for that is the spirit of America today and it is something
which you can never beat, no matter how long you try.
Many times in those early days at Warm Springs the
road ahead must have seemed dark and painful to Franklin
D-B
- 4 -
190
Roosevelt, yet the word "impossible" had been struck out
of his dictionary. Nothing was impossible to him, and
he proved it. He is proving it today and every day.
In the same way the road ahead of our country must
seem dark at times. We as & nation have been struck a
blow while we were not looking. Our whole world has
been stricken with the disease of conquest and tyranny, a disease
which we shall have to stamp out before we can live in
peace and happiness and well-being again. But if anyone
should ever have his doubts, if anyone should suppose
for one moment that the job is too big for us, let him
think of the example of Franklin Roosevelt, and then
carry on.
B
191
Reading Copy of
Secretary Morgenthau's talk on behalf of
"President's Birthday Celebration" under
the auspices of the Infantile Paralysis
Campaign, broadcast at 10:45 p.m., EST.,
January 26, 1942.
Regraded Unclassified
192
Tonight I should like to speak to
you for a very few minutes, not as Secretary
of the Treasury, but as an old friend and
neighbor of Franklin Roosevelt. I feel very
deeply that it will help our country to
surmount the dangers and obstacles of this
hour If all of us remember how Franklin
Roosevelt conquered the obstacles that at one
time shadowed his whole life.
It is more than twenty years since the
President was stricken with infantile paralysis.
Regraded Unclassified
193
- 2 -
The very first year that he went to Warm
Springs, Mrs. Morgenthau and I went with
him. It did not take us long to discover
that he had brought a new spirit to Warm
Springs. Even in the very first winter, we
saw that the patients there had a certain
cheerful optimism, a kindly and helpful
relationship toward one another, an attitude
toward life which subsequently came to be
known as the "spirit of Warm Springs."
In reality that was the spirit of
Franklin Roosevelt. He blew the breath of
life and courage into that place through the
example he set, through the reserves of
courage that he summoned.
Regraded Unclassified
- 3 -
194
He had already made up his mind that he had
"nothing to fear but fear itself."
He never spoke to me then about the
disease that struck him, nor has he spoken
about it since. He was fighting his fight
alone. He was determined to show that he
could take 1t, with the same grim and gay
spirit that the people of London showed when
a different kind of scourge fell upon them.
Pause
In later years when Franklin Roosevelt
had re-entered state politics in New York,
we went on a number of campaign trips together.
Then, too, he was an inspiration to all of us.
Regraded Unclassified
- 4 -
195
When others grumbled, he was always cheerful;
when others had their doubts, he was always
optimistic. I remember particularly one cold
autumn day when he spoke 14 times from an
open car. This was the stricken man whom we
had accompanied to Warm Springs only a few years
before. He was winning his fight. He was
waging his war with every ounce of the energy
and determination within him.
This determination to beat all hardships,
to conquer all handicaps, is being created in
Pause
these United States day. by day. Now, listen,
Mr. Hitler, Mr. Mussolini, and Mr. Mikado!
- 5 -
196
I want you to take a look at the spirit of
Warm Springs, for that is the spirit of
America today and it is something which you
can never beat, no matter how long you try.
Pause Many times in those early days at Warm
Springs the road ahead must have seemed dark
and painful to Franklin Roosevelt, yet the
word "impossible" had been struck out of his
dictionary. Nothing was impossible to him,
and he proved it. He is proving it today and
every day.
- 6 -
197
In the same way the road ahead of our
country must seem dark at times. We as a
nation have been struck a blow while we were
not looking. Our whole world has been
stricken with the disease of conquest and
tyranny, a disease which we shall have to
stamp out before we can live in peace and
happiness and well-being again. But if anyone
should ever have his doubts, if anyone should
suppose for one moment that the job is too
big for us, let him think of the example of
Franklin Roosevelt, and then carry on.
-000-
198
GENERAL COUNSEL
TREASURY DEPARTMENT
E
WASHINGTON
January 26, 1942.
TO:
Secretary Morgenthau
E. H. Foley, Jr.
Treasury representatives, assisted by technical
advisers from the Office of Scientific Research and
Development, have been making a thorough investigation
of Schering Corporation which is a $3,000,000 concern
with 400 employees. Prior to 1937 Schering Corporation
was a directly owned subsidiary of Schering A.G., one
of the largest industrial enterprises in Germany, having
approximately 30,000 employees. The American company
is today controlled by the German concern through
notical Swiss ownership.
Schering Corporation is producing (in most
instances is the sole source) pharmaceutical products
which are indispensable in the treatment of our
voldiers and the general public. The most important
these products is one for the treatment of shock,
shock resulting from severe burns and wounds.
me use of this preparation is reported by Schering
proration to have saved the lives of thousands of
lish soldiers after Dunkirk.
Regraded Unclassified
199
- 2 -
The research work of Schering Corporation is
conducted under the direction of Dr. Schwenk, who
is 8. chemist of outstanding ability. Research is
now under way which gives promise of resulting in
discoveries of even greater importance to our war
program and to our national health than the products
at present being manufactured. The United States
Government has a large group of scientists conduct-
ing research along certain lines parallel to those
being conducted by Dr. Schwenk and his staff. The
successful conclusion of this work will be of the
greatest importance to our air forces 88 it relates
to preparations which increase the endurance of
aviators. The technical advisers made available
by the Office of Scientific Research and Develop-
ment state that the experience and ability of
Dr. Schwenk and the use of the laboratories of
Schering Corporation are vitally needed in this
work.
At the present time the experience of Dr. Schwenk
and of his staff and the facilities of Schering
Regraded Unclassified
200
- 3 -
Corporation are to a marked degree lost to the Government
and to the Nation. The technical advisers state that
the Government does not dare use Dr. Schwenk or the
laboratories of the Corporation because of the German
connections of the Corporation and the affiliations of
certain of its German personnel. In addition, dominating
patents held by the corporation, 80 long as they are in
control of personnel of dubious loyalty, may stand in
the way of essential developments in the medical field.
In fact, the technical advisers even fear for the
actual production of the products now being manufactured
by Schering. It is considered imperative by them that
questionable personnel be removed and a trusted scientist
assigned to work closely with Dr. Schwenk in order to
obtain the value of his essential knowledge needed in
the production of items now produced by Schering.
Until recently, when the Treasury Department took
steps to stop the practice, Schering Corporation and
other subsidiaries of Schering A.G. in South America,
were used as tools to obtain dollar exchange to
facilitate the operations of the Nazi regime. The
Regraded Unclassified
201
- 4 -
purported sale of Schering Corporation in 1937 to
Swiss fronts for the Nazie was arranged in such a
manner as to assure the continuance, until stopped
by the Treasury Department, of the flow of dollar
exchange to the Nazis. In addition, until stopped
by the cooperative action of the Treasury Department
and other government agencies, Schering Corporation
was engaged in steps to assist in holding the pharma-
ceutical market in South America for the German
economy until the war was over, and in supplying
dollar exchange through South America to the Nazis.
During this period certain prominent personnel from
Schering A.G. of Germany came to the United States to
direct the activities of Schering Corporation. That
personnel at present dominates the corporation.
In order to protect the source of supply of the
vital medical products made by Schering Corporation
and to enable the United States Government to utilize
this corporation and its expert personnel for the
development of preparations vital to our war effort,
the Treasury Department proposes that the following
Regraded Unclassified
202
- 5 -
persons be suspended from further activities in
Schering Corporation:
1. Dr. Julius Weltzien - President; salary
approximately $60,000 a year; former
president of Schering A.G. of Germany;
entered the United States in May 1938.
2. Mr. Martin Bernhardt - Head of legal and
comptrolling departments; salary, $9,400
a year; former Vice-Chairman of Schering A.G.
of Germany; entered the United States in
March 1938.
3. Mr. Ernst Hammer - Manager of promotion;
salary approximately $22,000 a year;
formerly in the South American department
of Schering A.G. of Germany; entered the
United States in January 1932.
4. Mr. Hans Erdmann - In charge of engineering
and maintenance departments; salary, $10,000
8. year; formerly designer of chemical equip-
ment for Schering A.G. of Germany; entered
United States in August 1929.
Regraded Unclassified
203
- 6 -
5. Dr. Erich Putter - Director of biological
laboratory; salary, $6,600 8. year; former-
ly director of bacteriological research for
Schering A.G. of Germany; entered United
States in July 1938.
6. Dr. Gerhard A. Fleischer - Research chemist;
salary, $4,300 a year; worked for Schering A.G.
of Germany during vacations and came directly
to United States through Schering A.G. after
graduation in February 1937.
7. Miss Frida Friderici - Secretary to Dr. Schwenk,
Director of Research; born in United States, but
educated in Germany where her family is now
living; reported to be of pro-Nazi tendencies;
has in her custody all confidential scientific
matters of the corporation.
8. Miss Henrietta Lange - Secretary to Dr. Weltzien;
entered United States in 1923.
If this action meets with your approval we will take
the necessary steps to put it into effect.
JAN
Approved: 28 1942
Secretary of the Treasury
Regraded Unclassified
204
P.S.S. NNM. TO B2 STATENDED FROM
SCHERING CORPORATION
Dr. Julius Weltzien.
Dr. Weltzien was born in Germany in 1889. He
sintem that his mother is Jewish. He was graduated
with the degree of Doctor of Laws from the University
* Procers in 1912.
30 began to work with Schering A.C. of Germany
prior to the last war. During the last war he was
E second lieutenant in the German Army. At the con-
of the war he returned to Schering A.C. and
brease vice-President of that concern in 1921. In
100 he became President. About 1937 Schering A.G.
and its parent company, which was engaged in mining
mi Maner enterprises, were merged and Dr. Weltzien
décadé President of the combined concern. He is
reported to have directed the establishment of agencies
of Schering A.G. in practically every country in the
world and is said to be an outstanding authority on
foreign trade.
Dr. Weltzien was a close friend of Strausser who,
prior to 1933, was second in command of the Nazi Party.
In 1883 Strausser broke with Hitler as a result of
Strausser's attempt to form B. government in corroboration
with the trade unions. Dr. Weltzien then gave him a
job with Schering A.C. In 1934 Strausser was arrested,
either in the offices of Schering A.G. or on his way
nome, and was shot in the streets of Berlin. Dr. Weltzien
THE also arrested, but was soon released. He is probably
are of the very few associates of Strausser who is alive
triday.
Dr. Weltzien states that for several years
Schering A.C. had to supply a set quota of foreign
exabange to the German Government. By 1937 the
vurces of its subsidiaries to supply the required
- of foreign exchange were exhausted. Schering
Regraded Unclassified
205
- 2 -
A.G. was then directed by Goering's organization
to sell the American subsidiary, but to arrange
the terms of the sale so that approximately the
same amount OI foreign exchange would be trans-
ferred from the American company to Germany each
year. Dr. Weltzien states that he discussed this
with 8. friend who is an official of Ciba, Basle
(pharmaceutical manufacturers), and the negotiations
were then undertaken with the Swiss Bank and with
Ciba. During the course of the negotiations, the
suggested terms were submitted from time to time
to Goering's department and were changed to meet
that department's approval.
Dr. Weltzien reports that he was asked by
the Swiss Bank to take over the presidency of the
American firm as they wanted someone they knew
to be in charge. He states that he had been con-
sidering leaving Germany for some time because
of conditions there, and therefore he readily
accepted the position. Although it is possible
that Dr. Weltzien may not be 8. Nazi, he obviously
believes sincerely in the supremacy of the German
sconomy, and his loyalty and ties are basically
with Germany-
It is also inconceivable, in light of
Dr. Weltzien's background, that he could have
left Germany with the ease that he did without
having first come to some understanding with the
German Government. Undoubtedly his departure
was consented to with the understanding that he
would ensure that foreign exchange would continue
to be transmitted to Germany and that his skill
and experience would be utilized in maintaining
German markets in case of war. It is to be noted
in this connection that his mother and & brother
and sister are still in Germany.
Regraded Unclassified
206
- 3 -
Martin Bernhardt.
Bernhardt was born in Germany in 1886, and
is at least part Jewish. He studied law at the
University of Breslau, Germany. After he was
discharged from the army in 1917, he went to
work for the parent company of Schering A.G. of
Germany and continued to work for that company
for twenty years. He became Vice-Chairman of
the company and was in charge of personnel.
He arrived in the United States in 1938 at
approximately the same time as Dr. Weltzien. It
is reported by employees of the Schering Corpo-
ration that on his arrival he immediately assumed
a dominating role in Schering operations and be-
came Dr. Weltzien's most trusted associate. It
is reported that this led to conflict with Dr.
Stragnell, who complained of Bernhardt's activities.
Evidently, since that time Bernhardt has operated
in a much quieter manner. Bernhardt is ostensibly
in charge of the legal department, but it is doubt-
ful that his services are of much value due to his
lack of knowledge of law as practiced in the United
States. It is felt that he came to the United
States with the understanding that he would be one
of the forces to continue the policies of Schering
A.G. of Germany in the American concern and that
essentially he is & watch-dog for the German
company.
Ernst Hammer.
Hammer was born in Alsace Lorraine in 1903.
!!e began to work for Schering A.G. in the Latin
American department in 1925, and took an active
part in the establishment of the South American
Regraded Unclassified
207
-
agencies of Schering A.G. In 1929 he was sent
to Chile and in 1930 was transferred to Schering
Corporation in the United States. He spent two
years in the United States studying promotional
work. His salary during this period was paid by
Schering A.G. of Germany. In 1932 he re-entered
the United States on an immigrant's visa and re-
ceived his final papers in 1937.
It is apparent that Mr. Hammer was sent here
by the German company to ensure the continuance
of its policies, and it is believed that his ties
and loyalties are to Schering A.G. of Germany. He
has B. brother, two aunts, and an uncle still in
Germany. It is curious that Schering A.G. should
send 8. man from Germany to conduct its promotional
work, as a man to conduct such activities could
easily have been obtained in the United States.
Hammer attempts to explain this by stating that
he underwent a course of training in the scientific
aspect of Schering's products before going to Chile.
This assertion has little or no value, as the
products now being manufactured and marketed by
Schering A.G. of Germany had not been developed
at that time. In fact, at the time that he came
to the United States, Schering Corporation of the
United States was handling only minor pharma-
ceutical products of a standard variety.
Hans Erdmann.
Erdmann was born in Germany in 1898. He worked
for Schering A.G. of Germany from 1922 until 1929,
designing chemical equipment. He came to this country
in 1929, but did not join the Schering Corporation
until 1934. He received his final citizenship papers
in 1936. He is now in charge of the engineering and
Regraded Unclassified
208
5
maintenance departments of Schering Corporation.
At the present time, Erdmann has a mother and
sister in Germany. He is A close associate of
the Weltzien-Bernhardt clique.
Dr. Erich Putter.
Dr. Putter was born in Germany in 1892 and was
graduated with the degree of M.D. in 1916. During
the last war he was 8 lieutenant in the medical
corps of the German Army-
He was employed by Schering A.G. of Germany
in 1924 as under-director in the bacteriological
field, and was later made director. He states that
fearing trouble because his ancestry is not entire-
1y "Aryan", he asked Dr. Stragnell and Dr. Weltzien
for a job with Schering Corporation of the United
States. He and his family came to this country in
April 1938. His mother and a sister are still living
in Germany.
He is at the present time director of the
biological laboratory of Schering Corporation,
and is conducting research work in the bacterio-
logical field. Dr. Putter is in a position to
ascertain the nature of all developments in the
Schering laboratories. It is felt that because
of his long association with Schering A.G. of
Germany and because of his German background, it
would be exceedingly inadvisable to allow him to
remain with the Schering Corporation if it is to
engage in work of 8 secret and confidential nature.
Dr. Gerhard A. Fleischer.
Dr. Fleischer was born in Germany in 1911 and
received his Ph.D. from a university in Danzig in 1936.
Regraded Unclassified
209
- 6 -
During his summer vacations he worked for
Schering A.G. of Germany doing research work. He
met Dr. Stragnell in 1936 and accepted a position
with Schering Corporation in the United States,
entering this country in February 1937. He has
8. sister in Berlin and a siater in the Dutch East
Indies. His mother is deceased and he does not
know where his father is. He is at the present
time in charge of research work on protein hormones.
The technical advisors made available by the
Office of Scientific Research and Development feel
that due to Dr. Fleischer's German background and
former connection with Schering A.G., work of a
confidential nature could not be turned over to
the laboratories of Schering Corporation until he
is removed.
Miss Frida Friderici.
Miss Friderici was born in 1908 in New York
City. She returned to Germany in 1913 and re-
entered the United States in 1930 on a United
States passport. Her mother, two sisters, and
numerous other relatives are now living in Germany.
Her husband, Arthur Ziehm, was born in Germany, but
is now a citizen of the United States. He was
formerly B. motion picture distributor of domestic
and foreign films. He distributed German films, but
Miss Friderici states he discontinued this distribution
either in 1936 or 1937. He served in the United States
Army during the last war.
Miss Friderici was employed by the Schering
Corporation in May 1938 as secretary to Dr. Schwenk.
In this capacity, she has custody of practically all
Regraded Unclassified
210
. 7 -
confidential scientific matters of the corporation.
Miss Friderici's background is essentially German
ly pro-Nazi in sympathies.
and she is reported by other employees to be strong-
Miss Henrietta Lange.
Miss Lange was born in Germany in 1912. She
came to the United States in 1922. In 1930 she
returned to Germany for a visit and in 1933 she
went to Germany for the purpose of relearning the
German language. She applied for her first papers
in April 1940. She has an uncle and aunt, and
their children, still living in Germany.
Miss Lange is a close associate of one Mahr,
who is a skiing instructor. Mahr is of German
birth, but has been 8 citizen of the United States
for nine years. Several anonymous letters have
been received accusing Miss Lange of Nazi activities.
She states that these letters were probably written
by a former suitor of hers who became extromely
jealous when she shifted her affections to Mahr.
Little reliance is placed on the statements in
the anonymous letters, but it is believed that be-
cause of her German background, her connection with
the German skiing group, and her position as secretary
to Dr. Weltzien, it is essential that her relations
with the corporation be severed.
Regraded Unclassified
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE JAN 26 1942
coversbry Morgenthau
Foley
The Pilot Reinsurance Company, of New York City, was
transized in 1925, with capital provided by two German
:-1.1.m rance companies and one Italian insurance company.
The president and the vice president of the new company
were recently naturalized citizens of German origins. The
president, Mr. Carl Schreiner, W&S also a director of
Munich Reinsurance Company, which furnished over one-half
of the capital for the llew corporation, and ever since
its organization the Pilot Reinsurance Company, under the
comination of Mr. Schreiner, has been operated primarily
in the German interest. The directors of the Munich Re-
Insurance Company were active in the Nazi movement from
its inception. They helped finance the party, and the
chairman of the board, who is also 8. director of Pilot
Reinsurance Company, took a leave of absence from his post
to act as Hitler's Secretary of Commerce from 1933 until
1938. In 1939 and 1940 the shares of Pilot Reinsurance
Company owned by the two German companies were transferred
to various Dutch, Swiss and Swedish holding companies.
Mr. Schreiner, a complete Nazi sympathizer and ardent
supporter of Hitler, has been in Europe since April 1940.
During his absence the company has been operated by the
vice president, Mr. A. F. Sadler, as to whose loyalty there
is very serious question. Apart from the officers, there
are only five employees, all of whom have German back-
grounds.
Pilot Reinsurance Company has assets of about
$3,500,000 and at present has only five reinsurance treaties
outstanding. Since June 14, 1941, it has been operating
under 15 and 30 day licenses. The board of directors re-
guested a long term license and submitted a plan for
Americanization" of the corporation, which in effect would
ave enabled some of the directors to organize a new company
Regraded Unclassified
212
- 2 -
using German capital. With its antecedents and personnel
it seemed desirable to compel Pilot Reinsurance Company
to liquidate.
Mr. Louis Pink, Superintendent of Insurance for the
State of New York, was called upon :- an opinion on the
importance of the company to the market. Mr. Pink in-
formed us that, although there is & general shortage in
reinsurance facilities and this company is a "good little
company" which could be Americanized by putting one of his
men in charge, he felt that whether the company "lives or
dies will not have any substantial effect upon the condi-
tions". After clearing the matter with Dean Acheson,
Assistant Secretary of State, and Mr. Leo T. Crowley, the
decision was reached to grant the Pilot Reinsurance Company
only a liquidating license at the expiration of its current
15-day license. This is perfectly consistent with our
treatment of the one large Italian insurance company and
the two Italian banks. This liquidation will take place
under the supervision of the New York Superintendent.
9.14.76
Approved: JAN 28 1942
Secretary of the Treasury.
Regraded Unclassified
213
TREASURY department
WASHINGTON
January 26, 1942.
MEMORANDUM FOR THE SECRETARY:
In accordance with your request on
Friday, I am handing you the attached
chart showing the organization of the
Defense Savings Staff.
I am not completely satisfied with
this chart, and it will need some revi-
sion. It is however sufficiently accurate
for practical purposes.
My oculist says that the eye is much
better, and he has discharged me except
for an occasional check-up.
GRAVES.
Regraded Unclassified
ORGANIZATION, DEFENSE SAVINGS STAFF
THE SECRETARY OF THE TREASURY
Henry Morgenthau, Jr.
CONSULTANTS
B. M. Edwards
ASSISTANT TO THE SECRETARY
P. H. Odegard
T. R. Gamble
Harold N. Groves
G. F. Milton
DEFENSE SAVINGS STAFF
Executive Director - E.W. Sloan
FIELD DIVISION
EDUCATIONAL AND
LABOR, AGRICULTURE AND
INFORMATION DIVISION
R.W. Sporks
WOMEN'S DIVISION
OTHER ORGANIZATIONS
H.W. H. Powel
O.S. Poland
J.L. Houghteling
PAYROLL ALLOTMENT
RADIO, PRESS & PERIODICALS
R. H. O'Malley
SCHOOLS
LABOR
V.F. Callahan
J. Clarke
G. E. Hyatt
NEWS-LETTER
MOTION PICTURES
R. M. Paige
WOMEN'S ACTIVITIES
AGRICULTURE
H. Dietz
H. Dallas
G. K. Zimmerman
ADMINISTRATION
GENERAL PROMOTION
L. M. Olney
PUBLICATIONS
MISCELLANEOUS
S.D. Mohan
R. Goyne
H.W. Peters
B. Fisher
DIRECT MAIL
NEGRO ACTIVITIES
E.A. Bucklay
STATE
W. Pickens
NOWINISTRATORS
LAYOUT AND DISTRIBUTION
LT -
Regraded Inclassifie
218
January 26, 1942.
Mr. Dave H. Morris, Jr.,
Assistant to the Secretary.
Sir:
Treasury Department Circular No. 657, dated
April 15, 1941, as anended, prescribing regulations
governing agencies for the issue of Defense Savings
Bonds, Series E, provides:
or + "The Secretary of the Treasury
may, at any time, designate issuing
agents other than those herounder
designated, the employment of which
shall be subject to qualification as
herein provided, except as may be
otherwise specifically authorized by
the Secretary." e 9
You are hereby authorized, as Assistant to the
Secretary, in my behalf to designate issuing agents
for the sale of Defense Savings Bonds, Series E,
under the above authority, and to instruct Federal
Reserve Banks and their branches with respect there-
to.
Very truly yours,
(signed) H. Morgenthau, In
Secretary of the Treasury.
crs/m
Regraded Unclassified
TREASURY DEPARTMENT
216
INTER OFFICE COMMUNICATION
DATE January 26, 1942
TO
Secretary Morgenthau
FROM
Dave H Morris, Jr.
Subject:
Digest of eight (8) replies to Night Letters sent
Wednesday, January 21st, to first twelve (12)
qualifying corporate Issuing Agents
Swift & Company:
They have requisitioned $7.78125 bonds, which is
about one week's requirements, An increase is expected and
the plan should work smoothly.
Chicago-Great Western R.R. Company:
Slowness is admitted in the requisitioning of bonds.
They expect to requisition bonds shortly and favor the plan.
Chicego-Indianapolis & Louisville Railway:
The Payroll Allottment Plan has been in effect since
July 15, 1941. About 700 of 2,200 employees are at present
participating. Difficulties are not anticipated.
The Cain-Sloan Company:
They want to cooperate and are qualified as issuing
agent, expecting to fill customers' requests for bonds, Cain-
Sloan planned to pay for bonds and sell them to customers. As
they understand rules, they do not permit this; they have not
requisitioned bonds. They, however, expect to accommodate em-
ployees through purchase from local bank or post office.
You Huston Peanut Company:
They understood from the Federal Reserve of Atlanta
that et shortage of bonds exists and decided to wait for a sub-
stential order to accumulate, before ordering any.
Regraded Unclassified
217
N I I
Chicago & Eastern Illinois Railroad:
They understood from the Federal Reserve of
chicago that C.E. & I. could act as issuing agent if the
number of bonds were sufficient to warrant such designation.
They then advised them that they would act as issuing agent
when the number of bonds exceeded 75 per month. Their last
requisition was several days ago. Twenty-two (22) bonds
were ordered, but an increase is expected. Many employees
buy bonds directly. If desired, they would be glad to start
issuing bonds, regardless of the number and already have cer-
tificate of qualification, etc.
Chicago & North Western Railway Company:
Pleased with being able to issue bonds as soon
8.8 payment is made, they feel that this definitely expedites
she sale of the bonds.
Louis Pizitz Drygoods Company:
One hundred Per Cent (100%) of the employees are
buying bonds, either for cash or through payroll deductions.
Each week, they expect to requisition the number of bonds
paid for by their employees. This eliminates carrying on
hand a number of blank bonds. They would welcome any further
suggestions.
Conclusion:
It does not seem that any follow-up need be made,
except in the case of the Cain-Sloan, Tom Huston Peanut Com-
pany and Chicago & Eastern Illinois Railroad, which I am
following-up.
furth
Regraded Unclassified
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Twenty-one Business Days of January 1942 and December and November 1941
(November 1-27, December 1-24, January 1-24)
On Basis of Issue Price
(Amounts in thousands of dollars)
:
:
2
Sales
Amount of Increase
Percentage of Increase
:
:
:
Item
:
:
:
1
January
:
December
:
January
:
December
January
December
November
:
1
:
:
over
:
over
1
over
I
over
:
1942
:
1941
:
1941
I
December
:
November
:
December
If
November
Series x - Post Offices
$128,428
$ 73,206
$ 35,014
$ 55,222
$ 38,192
75.10%
109.1%
Series 1. Banks
388,500
153,483
65,947
235,017
87,536
153.1
132.7
Series 1- - Total
516,928
226,688
100,961
290,240
125,727
128.0
124.5
Series 1. Banks
57,043
22,389
17,160
34,654
5,229
154.8
30.5
Series G - - Banks
221,015
116,098
96,408
104,917
19,690
90.4
20.4
Total
$794,986
$365,174
$214,529
$429,512
$150,645
117.7%
70.2%
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 26, 1942.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totale.
Regraded Unclassifie
UNITED STATES SAVINGS BONDS
Daily Sales - January, 1942
On Basia of Issue Price
(In thousands of dollars)
Post Office
Bank Bond Sales
All Bond Sales
Date
Bond Sales
Series I
Series Ell
Series I
Series G
Total
Series E
Sories 1
Series G
Total
January 1942
1
$ 3,982
$ 10,229
$ 1,964
$ 7,605
$ 19,798
$ 14,211
$ 1,964
$ 7,605
# 23.780
2
4,802
10,736
2,056
7.779
20,571
15,538
2,056
7.779
25,373
3
4,457
9,557
1,278
5,453
16,289
14,015
1,278
5,453
20,747
5
9,684
26,724
3,240
13,704
43,668
36,408
3,240
13,704
53,352
6
6,711
7,659
1,341
6,778
15.778
14,369
1,311
6,778
22,459
7
6,748
21,267
3,692
18,832
43.790
28,015
3,692
18,832
50,539
8
7,509
21,297
3,821
12,871
37.989
28,506
3,821
12,871
45,498
9
5.746
12,359
1,798
4,765
18,923
18,105
1,798
4,765
24,669
10
4,398
16,031
1,858
6,355
24,244
20,429
1,858
6,355
28,641
12
10,187
37.483
3,830
14,353
55,666
47,670
3,830
14,353
65,853
13
7.902
15,059
2.507
11,944
29,510
22,961
2,507
11,944
37,412
14
4,706
19,939
3.701
14,293
37.933
24.645
3,701
14,293
42,639
15
6,444
16,597
2,243
13,283
32,123
23,041
2,243
13,283
38,567
16
5,721
26,239
4,319
14,078
44,637
31,960
4,319
14,078
50,358
17
4,830
6,933
759
3,008
10,700
11,763
759
3,008
15,530
19
8,835
39,000
3,946
16,599
59.545
47,835
3,946
16,599
68,380
20
5,155
10,549
2,285
10,551
23,385
15,703
2,285
10,551
28,539
21
4,886
19,375
3,538
15,566
38,479
24,261
3,538
15,566
43,365
22
5,161
22,257
3.973
9.850
36,080
27,418
3,973
9,850
41,241
23
5,908
23.392
2,652
5,004
34,048
29,300
2,652
8,004
39,956
24
4.655
15,820
2.239
5.344
23,403
20,476
2,239
5,344
28,058
Total
$128,428
$388,500
$ 57,043
$221,015
$666,558
$516,928
$ 57,043
$221,015
$794,986
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 26, 1942.
Source: All figures are deposite with the Treasurer of the United States on account of proceeds of
sales of United States savings bonds.
Figures have been rounded to nearest thousand and vill not necessarily add to totals.
Regraded Unclassified
220
Unfilled Orders for Sevings Bonds at the
Federal Reserve Banke and the Post Office Department
January 12 to date
(In thousands of nieces)
: Unfilled :
:
:
Unfilled
:
:
New orders
Bonds
orders at
Stock of
IBM
: orders at
:
:
:
:
:
received
manufactured
:
close of
bonde
deliveries
opening of
:
:
:
:
today
on hand
this day
: business
today
:
:
:
business
:
:
Jan.
12
541
859
595
805
236
625
13
305
425
630
598
236
650
14
598
622
670
550
236
685
15
550
660
750
455
231
1,000
16
455
773
775
426
204
750
17
426
672
S00
298
204
1,000
18
298
none-no mail
none-closed
298
204
500
19
298
204
800
202
704
825
20
202
204
800
86
1,184
1,000
21
86
411
800
59
1,546
875
22
59
697
800
86
1,676
1,000
23
86
569
800
50
1,871
1,000
24
50
727
800
28
1,922
1,000
Office of the Secretary of the Treasury,
January 26, 1942
Division of Research and Statistics.
Bonds in Washington vaults only.
Regraded Unclassi
Stock of Series E Savings Bonds on Hand 1/
January 15, 1942 to date
(In thousands of pieces)
: Stock on hand
:
:
Bonds
: Stock 0.1 hand :
IBM
Sales
:
beginning
:
: manufactured :
close of
: deliveries
of day
:
this day
:
:
this day
:
da:
: this day
Jan.
15
6,569
320
750
6,999
1,000
16
6,999
445
775
7,329
750
17
7,329
163
800
7,96
1,000
18
7,966
none-closed
none-closed
7,96
800
19
7,966
665
800
8,101
825
20
8,101
218
800
8,683
1,000
21
8,683
337
800
9,145
875
22
9,146
381
800
9,565
1,000
23
9,565
377
800
9,988
1,000
24
9,988
263
800
10,52;
1,000
Office of the Secretary of the Treasury,
January 26, 1942
Division of Research and Statistics.
1 Includes stock in hands of (1) Federal Reserve Banks and branches, (2) Post Offices,
(3) Federal Reserve Bank issuing agents, and (4) Treasury vaults in W: shirgton.
Regraded Uncl
Fee
THE WHITE HOUSE
WASHINGTON
January 26, 1942.
Dear Henry:
It seems to me this should be
used in training youth for industry and
not scrapped.
Affectionately,
III.
Regraded Unclas
222
276 machine shops with 15,884 youth in training
286 sheet metal shops with 11,333 youth in training
234 welding shops with 7,030 youth in training
27 foundry shops with 705 youth in training
87 forge and blacksmith shops with 828 youth in training
85 radio shops with 2,667 youth in training
36 electrical shops with 884 youth in training
129 automotive maintenance and repair shops with 5,315 youth
in training
12 aviation service shops with 798 youth in training
282 patternmaking, joinery and ship carpentry shons with
10,062 youth in training
61 industrial and heavy-duty sewing shops with 7,095 youth
in training
420,000 NYA trained youth secured employment in industry
during the calendar year 1941.
On defense training projects the average training period is
3 months; on regular projects it is about 5 months. Turnover in
defense training projects is, therefore, about 75,000 every 3
months.
Regraded Unclassified
TREASURY DEPARTMENT
224
INTER OFFICE COMMUNICATION
DATE January 26,1942
TO
Secretary Morgenthau
FROM Mr. Haas MA
Employment under the Work Projects Administration increased
from 1,017,000 to 1,020,000 during the week ended January 13,1942.
Attachments
Regraded Unclassified
225
WORK PROJECTS ADMINISTRATION
Number of Workers Employed - Weekly
United States
Week ending
Number of Workers
1941
(In thousands)
June 4
1,442
June 11
1,423
June 18
1.410
June 25
1,368
July 2
1,172
July 9
1,030
July 16
1,016.
July 23
1,025
July 30
1,036
August 6
1,041
August 13
1,042
August 20
1,043
August 27
1,045
September 3
1,043
September 10
1,037
September 17
1,035
September 24
1,033
October 1
1,032
October 8
1,037
October 15
1,040
October 22
1,044
October 29
1,047
November 5
1,050
November 12
1,056
November 18
1,058
November 25
1,060
December 2
1,063
December 9
1,060
December 16
1,055
December 23
1,046
December 30
1,041
January 6
1,017
January 13
1.020
Source: Work Projects Administration
226
WORK PROJECTS ADMINISTRATION
Number of Workers Employed - Monthly
United States
Number of Workers
1939
(In thousands)
July
2,200
August
1,842
September
1,790
October
1,902
November
2,024
December
2,152
1940
January
2,266
February
2,324
March
2,288
April
2,092
May
1,926
June
1,665
July
1,701
August
1,691
September
1,704
October
1,779
November
1,821
December
1,878
1941
January
1,895
February
1,867
March
1,708
April
1,560
May
1,464
June
1,368
July
1,036
August
1,045
September
1,033
October
1,047
November
1,060
December
1,041
Source: Work Projects Administration
Monthly figures are weekly figures for the latest week of
the month.
They include certified and noncertified workers.
227
WORK PROJECTS ADMINISTRATION
thanber of Workers Employed
United States
Monthly W.P.A. Reployment
weekly N.P.A. Employment
1937
1530
1936
1940
NJ
1940
1941
1942
MAR.
MAY
JULY
SEPT.
NOV.
MAY
JULY
asset
MILLIONS
MILLIONS
N/A
MARA
MILL IDWA
or
OF
or
WORKERS WORKERS
MORREAL
2.7
2,7
W
2.6
1.3
2,6
2.5
2,5
as
2.4
2.8
2.8
Al
2.3
2.2
2.2
At
2,4
2.1
2.1
2.0
2,0
2.0
2.0 1.9
1.9
1.8
1.8
lye
1,6
1.7
1.7
1.0
la
1.5
1.3
14
1,4
1,4
1.)
1.3
di
.8
la
1.2
IN
1.1
A
144
1.0
-
.9
L
o
-8
N
JAN,
MARL
MAY
JULY
SOFTA
NOTE
JAC,
-
MAY
a
JULY
HPI.
NOV.
MARC
(5)7
1938
(539
1940
1940
142
1940
1941
1542
sourcer will PROJECTS ADMINISTRATION
- of - Treasury
TREASURY DEPARTMENT
228
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE January 26,1942
TO
Secretary Morgenthau
FROM
Mr. Haep
duoject: The Business Situation,
Week ending January 24, 1942
Summary
(1) The price control bill as revised in conference still
retains inflationary potentialities. In addition to permitting
prices of most agricultural products and of related manu-
factured goods to rise to cellings above present levels, it
requires the raising of ceiling levels based on parity 88
orices of goods bought by farmers increase. On the other hand,
farm prices will not necessarily reach ceiling levels, since
surply and demand influences will still be effective. The
Department of Agriculture's program for expansion of produc-
tion is likely to be a stabilizing factor.
(2) Basic commodity prices ΓoHe moderately higher last
week, with farm products leading the advance. Cotton advanced
steadily during the week to new 12-year highs. Increased
speculative activity was noticeable, stimulated by the high
minimum ceilings in the price bill on cotton, wheat and corn.
(3) The general price level continues to rise, The BLS
all-commodity index in the week ended January 17 rose 0.6 to
95.6, the highest point since September 1929. Since our
entrance into the war, the index has risen 3.7 percent.
(4) Aa e result of the recent upsurge in consumer buying,
the gain in department store sales over year-earlier levels
widened to 45 percent in the week ended January 17 from 31
percent in the previous week. Stocking uo of woolens, number
goods, sugar, and other types of merchandise expected to be
in short sungly, has strongly contributed to the sales up-
turn.
(5) Freight carloadings have risen substantially since
the first of the year, and have already reached levels not at-
tained last year until early May. In order to speed up
equipment construction, SPAB has approved a program to turn
out 36,000 freight cars in the 3 months ending April 30.
Regraded Unclassified
229
Price control bill raises prices further
Rising prices for farm products in the last few days
are largely attributable to the price control bill. The
bill, as revised in conference, 1s still inflationary in
nature, and 1s BO considered by traders in the commodity
markets. Speculative activity has accordingly increased,
and the volume of futures trading in the cotton and grain
markets last week WB.B the highest since the week immediately
after our entry into the war.
The price bill 1s inflationary in several respects:
(1) It permite prices of agricultural commodities to rise
to ceilings which in most cases are above present market levels.
(2) It forbids ceilings on manufactured goods, made in sub-
stantial part from farm products, below the equivalent cellings
for the latter. This would apparently eliminate the present
ceilings on cotton textiles. (3) It requires a stepping up
of ceiling levels based on parity, as prices increase for
goods bought by farmers. Prices of goods bought will them-
selves inevitably increase as B direct result of the bill,
since 51 percent of the change in parity levels depends
directly on changes in costs of Items produced on the farm
or made from farm products: (a) food, a substantial part
of which is home grown and valued at farm prices, (b) clothing,
in which cotton and wool are predominant, and (c) feed, live-
stock, and seed used in farm production.
A notable instance of the inflationary effect of the
price control bill 18 seen in the case of cotton, a product
entering into a wide variety of industrial and defense uses,
to will as having an important effect on the cost of living.
The inclusion of the price average for the period 1919-1929
as one beiling basis raises the ceiling on cotton to 21,47
centa at the farm (32 percent above the 16.23 cente farm
price in December). The 1919-1929 period includes the peak
of the World War inflation, and in the case of cotton, it
also includes the severe boll weevil years of 1921 to 1924,
when cotton prices rose nearly to World War levels,
The effect of the price bill on living costs --- 8 key
factor in the inflation problem --- may be Judged from the
fact that 44.4 percent of the BLS cost-of-living index is
made up of food and clothing.
Farm prices, of course, will not necessarily reach
ceiling levels. Since supply and demand factors will still
be effective, the Department of Agriculture's program for
expanded production in 1942 is likely to have an important
stabilizing influence. The present program for Government
sales of cotton, whent, and corn will also tend to restrain
price advances.
Regraded Unclassified
- 3 -
230
Price control bill provisions
The conference price bill provides that the Secretary
of Agriculture must approve any action taken with respect
to agricultural commodities, and that no ceiling price may
be established on any farm product below the highest of the
prices determined on the following bases:
(1) our The average market price on October 1 or December 15,
(2) The average price during the period July 1, 1919 to
June 30, 1929.
(3) 110 percent of parity prices as determined by the
Department of Agriculture.
For commodities other than farm products, the standards
for price ceilings are prices prevailing during the period
from October 1 to October 15, 1941.
The following table shows for each of a selected group
of farm products the farm price on December 15, 1941, and
the approximate minimum ceiling price. In the case of beef
cattle, and rice, the farm price on December 15 was already
higher than 110 percent of parity and higher than the 1919-
1929 average.
Approximate
Farm price
minimum
Ceiling as
Commodity
December 15,
ceiling
percent of
1941
price
farm price
Cotton, 1b.
$0.1623
$0.2147
132
Wheat, bu.
1.022
1,400
137
Corn, bu.
.669
1.016
152
Rice, (rough) bu.
1.439
1.439
100
Potatoes, bu.
.827
1.245
151
Apples, bu.
1.09
1.52
139
Hogs, cwt,
10.21
11.44
112
Beef cattle, cwt.
9.38
9.38
100
Price rise further stimulated
Announcements of heavy Government requirements of com-
modities for war uses, together with official statements
predicting further price advances, were additional bullish
influences in the commodity markets last week. As & result,
the BLS index of basic commodity prices advanced to a new
peak for the war period, and the Dow-Jones futures index
reached a new high since the index was first computed in
October 1933.
Regraded Unclassified
231
4
The BLS all-commodity index in the preceding week
(ending January 17) advanced to 95.6, the highest point
since September 1929. The rise was again due to broad
price advances in farm products and foods. (See Chart 1.)
The all-commodity index has risen 3.7 percent since our
entrance into the war, 18.6 percent since a year ago, and
27.5 percent from the pre-war level of August 1939. The
component index for-prices of farm products has risen 11,0
percent since our entrance into the war, 41.2 percent from
the level of a year ago, and 65.2 percent since August 1939.
Basic commodity index at new high
The upward movement in basic commodity prices last
week was confined almost entirely to domestic form
products. (See Chart 2.) New peaks since the August
1940 low were reached by cotton, lard, corn, wheat, and
flaxseed. Slight declines occurred in prices for rosin,
barley, steers, and butter.
Cotton prices advanced steadily last week to new highs
since 1928. Under the operation of the flexible ceiling plan,
prices for print cloth and yarns were raised to higher
levels twice during the week. The rise in prices for
raw cotton was stimulated in part by the large volume of
cotton textile contracts being let by the Government for
war goods. Another strengthening factor was the announce-
ment that the entire quota of 300,000 bales of cotton which
the CCC can sell in any one month we.e taken up shortly
after the recently announced selling program became effective,
while total applications amounted to 1,160,000 bales.
Department store sales gain widens
Although January usually 18 a dull month for retail
trade, consumer buying this year has been stimulated by
the rising price trend and fears of shortages in various
types of merchandise. Merchants report that the latter
factor has been especially prominent in recent buying,
with consumers stocking up on woolen and rubber goods as
well as sugar and other articles which are expected to be
in short supply. According to one source, retailers
claim that the big impetus to the fear buying in recent
months has come from Washington announcements relating to
materials shortages.
Regraded Unclassified
232
The latest upsurge of consumer buying carried department
store sales to 45 percent above year-earlier levels in the
week ended January 17, as compared with a 31 percent gain in
the previous week, (See Chart 3.) The widest advances were
shown by the Philadelphia and Cleveland districts, with in-
creases of 60 percent and 58 percent respectively over the
corresponding period of 1941.
Industrial production index still rising
Industrial production during the first half of January,
AS in the previous month, has shown a less than seasonal de-
cline according to Federal Reserve Board comments. Add1-
tional data relating to industrial production in December
confirm an FRB adjusted index of 168 for that month and an
average of 156 for the full year. The last mentioned figure
compares with an average of only 123 in 1940.
Reference to Chart 4 will disclose that the rise in pro-
Suction last year was led by industries making transportation
equipment (including aircraft and ships) and machinery. The
smallest percentage gains occurred in the output of fuels
and in metal mining.
The hugh expansion in aircraft production and shipbuild-
ing, which highlighted last year's outstanding advance in
the transportation equipment group, will be extended further
during the current year. Thus, despite the very heavy
volume of contracts previously awarded, the Maritime
Commission announced at the beginning of last week that con-
tracts had been negotiated for the construction of 632 ad-
ditional merchant vessels costing $1,100,000,000. Coinci-
dent with the announcement, it was indicated that around
$50,000 workers are expected to be employed in shipyards by
the end of this year. Some appreciation of the magnitude of
this expansion may be gathered from the fact that shipbuild-
ing employment at the beginning of 1939 was less than 100,000.
Steel plate production speeded
Due to the very heavy demand from shipbuilding as well
ALB other industries, further stens have been taken to speed
un the production of steel plates. Thus the OPM recently
requested plate producers to operate on a full 168 hour,
7 day week basis. Moreover, greater use of continuous
strip mills is being sought for making plates, and steps are
being taken to simplify orders.
Regraded Unclassified
233
- 6 -
Lack of steel plates has been an outstanding factor in
the lag in freight car building during the past year. In
order to step up production, SPAB earlier this month approved
a program designed to enable producers to turn out 36,000
freight cars in the three months ending April 30. In doing
BO, SPAB estimated that weekly freight carloadings would
rise to the 1,000,000 car level by May.
Although last fall's peak in carloadingswa only 923,000
cars, the above expectation may not be excessive in view of the
recent loadings trend, (See Chart 5.) Freight carloadings
have risen rapidly since the beginning of the year and by the
week ended January 17 had reached 811,000 cars, a gain of 15
percent over the corresponding week of 1941. Last year carload-
ings did not cross the 800,000 level until May, when the spring
upturn in traffic was well under way. The Association of
American Railroads last week placed an embargo on all traffic
destined for inter-coastal steamship transportation, a move
necessitated by Government action suspending normal inter-
coastal shipping.
Regraded Unclassified
COMMODITY PRICES AND COST OF LIVING
1926-100
PER
CENT
PER
CENT
Monthly
100
100
96
96
92
92
88
88
Cost of Living, N.I.C.B.
84
84
80
80
76
76
889 Commodities, B.L.S.
72
1936
72
1937
1938
1939
1940
1941
1942
PER
PER
CENT
Weekly
CENT
104
104
100
100
96
96
889 Commodities, B.L.S:
92
92
88
88
84
84
80
80
76
76
72
72
68
68
28 Basic Commodities, B.L.S.
64
64
60
60
A
5
o
N
D
J
F
M
A
M
J
J
A
5
o
N
D
J
F
M
A
M
J
J
A
5
o
N
o
1940
1941
1942
234
Office of The Services el - -
- el - - -
Regraded Unclassifie
Chart 1
Chart =
235
MOVEMENT OF BASIC COMMODITY PRICES
AUGUST 1939-100
PER
PER
PER
PER
CENT
Weekly Average
CENT
CENT
Daily
CENT
160
180
180
180
170
170
175
175
160
170
170
160
12 Foodetuffa
150
150
165
12 Foodstuffs
165
140
140
160
160
16 Row Industrial
Moterials
130
155
130
155
16 Row Industrial
120
150
120
150
Materials
110
145
110
145
100
140
100
140
A
5
o
N
D
F
.
is
"
29
*
is
as
17
1
10
17
24
3.
T
1
J
A
5
o
N
D
J
F
M
A
M
J
J
NOV
DEC.
JAN
FEB.
1940
1941
1942
1941
1942
Percentage Change for Individual Commodities. August 1940 Low to January 16. and to January 23, 1942
PER
*Tallow 1774%
PER
16 Raw Industrial Materials
CENT
12 Foodstuffs
CENT
Cottonseed Onl 1598%
-150
+150
Shallac 124/X
Cocoa 125,7%
+125
"Lard 1198X
+125
Rosin 1120%
Borley 1000%
Cotton 1064X
-100
Coffee 98.2%
-100
Print Cloth 1291
Wheat 8622
Burlop 6543
"Mage BORX
pHicles 590%
+75
Flasseed 588%
*75
Wool 50.0%
lead 36.8%
pZine 30.12
+50
Sugar 4332
-50
5/4 2/0%
"Butter 321X
Rubber 169%
Corn 301%
Copper MBC
+25
Stears 250%
-25
Steel Screp dom 87%
*Tin 30%
*Stee/ Scrap up 271
0
Jan 16
Jan 23
o
Aug 1940
Jan
Jan.23
aug 1940
Cow
Low
P-157-5-18
Chart 3
DEPARTMENT STORE SALES
236
1935 - '39 - 100, UNADJUSTED
JAM.
MAR.
MAY
JULY
SEPT.
NOV.
PER
PER
CENT
GENT
Weekly
260
200
240
240
2.0
220
200
200
180
180
160
160
140
140
'41
120
120
'42
100
100
80
80
'40
60
où
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
the 4 le Secretary of the Travely
C 390
Serve of - - Indo
Regraded Unclassified
FEDERAL RESERVE BOARD INDEX OF INDUSTRIAL PRODUCTION
1935-39=100
1939
1940
1941
1942
JFMAM J J A S o N D J F M A M J J A S o N D J F M A M J J A 5 C N D J F M A M J
PERCENT
PERCENT
Seasonally Adjusted
165
165
160
160
155
155
150
150
(45
145
140
140
135
135
130
130
125
125
120
120
115
115
110
110
105
105
100
100
.
95
95
J F M A M J J A S o N D J F M A M J J A S o N D J. F M A M J J A S 0 N D J F M A M J
1939
1940
1941
1942
Selected Components
1940 and 1941 Compared with 1935-39 Average
PER
CENT
Transportation Equipment
225
Machinery
200
from and Stee/
Nonferrous Metals
175
COMBINED INDEX
Stone. Clay and Glass
Textiles
Meto/ Mining
150
Poper, etc.
Chemicals
Lumber, etc.
-Fuels. monufactured
125
Manufactured Foods
Printing and Publishing
Crude Fuels
Leather. etc.
100
75
1935-39
1940
1941
-100
237
Crurt 4
Dies if No Security of the -
C-383-C-2
- é - - -
Regraded Unclass
FREIGHT CAR LOADINGS
CARS
THOUSANDS
Total
900
42
800
41
'40
700
'39
600
500
Am. Ry. Aeen.
400
JAN. MAR. MAY JULY SEPT. NOV.
238
Office of the Secretary of the Tressury
Division of Research and Statistics
C-417
5
Regraded Unclassif
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 26, 1942
TO
Secretary Morgenthau
FROM
Mr. Coe
Eubject: The Control of U. 8. Currency outside of our Territory
1. AF you know, the British Government about & year after war
WAR declared imposed an embargo on the import and export of
pound sterling currency. Since then, pound sterling notes
have exchangel abroad at black market retes involving heavy
discounts (for example at present $2.00 to $3.00 per pound
sterling in the United States). The question of whether
the United States should adopt similar currency control
measures 16 apperently rapidly coming to e head.
2. The Spanish Exchange Institute in December asked whether
we would permit 81 ipment to the United States of American
currency sequired by the Institute. The United States
Ambassador in Madrid argues that it might be better to
sllow this currency - supposedly innocently acquired --
to come to the United States then to risk it falling intr
the hands of the Germans. In late December the Institute
sharply dropped its buying rates for U. S. currency. The
State Department in January informed our Ambessador in
amarid that the question of currency control was heing
discussed with the Treasury and that no arrangement oculi
be made with Spain in the meantime. On January 22 the
Exchange Institute in Spain informed our Ambassador that
purchases of U. 3. currency would be discontinued within
eight days.
Brazilian Exchange authorities have urged the United Stews
to adopt B currency control policy.
3. Monetary Research and Foreign Punis Control are examining
various aspects of the problem of controlling dollar cur-
rency now held outside of the United States, in anticipation
of State Department requests for Treasury opinion on this
matter. Among the elements of the problem may be mentioned
the following:
Regraded Unclassified
240
Division of Monetary
- 2 -
Research
(a) Virtually a complete embargo on the export and import
of our currency would prevent our enemies from getting
the full value of their holdings of dollar currency
when they sell them on neutral markets.
(b) The principal difficulty of such an embargo lies in
Latin America where many countries depend on dollar
currency as an important or even major element in
their monetary circulation, and in all of which the
prestige of the dollar might be seriously affected
if the negotiability of dollar currency 1s impaired.
Also the armed forces frequently need to use sizable
quantities of U. S. currency outside of the United
States.
(c) Actual use of dollar notes as an international cur-
rency would, of course, be impossible if an embargo
is put in force unless some special form of, say,
Pan-American dollar could be devised for circulation
in this hemisphere. The use of the dollar 8.8 an
international money of account and its acceptability
as a foreign exchange instrument should not be
materially affected by a mere embargo on currency.
4. This memorandum is designed merely to bring you up to date
on the status of the problem of currency embargo.
Regraded Unclassified
Treasury Department
241
Division of Monetary Research
Date
3/3/12 19
To:
Miss Chauncey
From: Mrs. Tall
For your files. Mr. White showed it
to the Secretary at 5:15 pem. 1/26/42.
Regraded Unclas
Treasury Department
Division of Monetary Research 242
Date January 26, 1942 19
To:
Secretary Morgenthau
From:
Mr. Southard
Attached 18 & file of incoming
and outgoing cables relating to the
Stabilization Fund Resolution intro-
duced at 310.
The State Department (Mr. Livesey)
assures me that he has made 9. very
cereful search of their cable files
and that there are no cablee other than
these which mention in any way the
Stebilization Fund proposal.
I have summarized these cables in
chronological order for your convenience.
Regraded Unclassified
TREASURY DEPARTMENT
243
INTER-OFFICE COMMUNICATION
DATE Jenuary 26, 1942
TO
Secretary Morgenthau
FROM
Mr. Southard
subject:
Cables and telephone convernations from end to
R1o relating to the Stabilization Fund Resolution
I have been assured by Mr. Livesey in the State Department
that no other cables than those listed below are in State
Department files relating to the Stabilization Fund proposal:
(1) Mr. White to you (No. 9, January 14, 1942).
This cable contained substantially our original draft
of the resolution (including the United Nations aspects) and
asks for your approval and that of Berle, Ecolee and the
President.
(2) Mr. Welles to Messrs. Berle end Livesey.
This cable requests Berle and Livesey to do what they can
to expedite your reply to No. 9 above.
(3) You to Mr. White (No. 9, January 15, 1942).
This 1s your reply to incoming no. 9 above, stating that
you do not want any resolution introduced at R1o because it
will not be possible to have prior conversations with the
United tions.
(4) Mr. Welles to you (No. 19, January 17, 1942).
This cable contains e briefer re-draft of the Stabilization
Fund proposal but etill including reference to the United
Nations. Mr. Welles aske your suproval, erguing that clearance
with the British or other United Nations 18 unnecessary.
(5) You to Mr. Welles (No. 24, January 17, 1942).
You informed Kr. welles that you feel 11 essential to
give Grest Britain and other United Nations B. chance to react
to the proposition and possibly even to consult Congressional
Committees end that therefore there should be no formal
presentation at Rio.
Regraded Unclassified
241
Division of Monetary
- 2 -
Research
(6) You to Mr. White (by phone, January 17, 1942).
I understand that you informed Mr. White that if the
Resolution could be confined solely to the American Republica
you would be willing to see it introduced.
(7) Mr. Welles to you (No. 22, Jenuary 18, 1948).
Mr. Welles forwarded to you the draft revised in
accordance with your instructions BO as to eliminate all
reference to the United Nations but explained that he hoped
that the Conference would include representatives of other
countries since there would be ample time to sound them out
before the Conference meets.
(8) You to Mr. Welles (No. 30, January 19, 1942).
You approved the above draft provided the phrase
"settlement of public and private international debts" is
deleted from among the objectives of the proposed Stabiliza-
tion Fund.
(9) No. 53, January 26, 1942.
This cable lists the resolutions thus far approved at
R10, including No. 5 on the Stabilization Fund. It states
that the resolution as introduced was in "substantially the
same form cleared in Washington". 30 far as I can learn, the
actual final text of the Stabilization Resolution 18 not
available in Washington.
Attachments
Regraded Unclassified
C
o
P
Y
245
TRB
GRAY
Bio de Janeiro
Dated January 14, 1942
Rec'd 10:35 p.m.
Secretary of State,
Washington.
TRIPLE PRIORITY
9, January 14, 9 p.m., (SECTION TVO).
"Resolution on the stabilization fund of the united
end associated nations. Wheress, one. In the attainment
of the economic objectives of the Atlantic Charter the
more effective mobilization of foreign exchange resources
is of indiscutable importance and such mobilization should
be of assistance in the war of freedom and liberation which
the united nations are conducting and for the defense of
other free and sovereign nations associated with them: and
Two. The united nations and other nations associated
with them can cooperate in creating an organization to pro-
mote stability in foreign exchange rates, encourage the
international movement of productive cavital, fecilitate
the reduction of artificial barriers to the free movement
of goods, help correct the maldisrosition of gold, strengthen
monetary eystems end facilitate the settlement of tublic and
crivate international debts:
Regraded Unclassified
246
-2-
The third meeting of consultation of the Ministere
of Foreign Affairs of the American Republics resolves:
One. To recommend that the Governments of the
American Republics participate with the Governments of
the united nations in a special Conference of Ministers
of Finance or their representatives, to be called for the
purpose of considering the establishment of a stabilization
fund of the united and associated nations:
Two. To recommend that participation in the conference
shall be open to all nations that subscribe to the objectives
of the Atlantic Charter;
Three. To recommend that the conference, in considering
the establishment of such a fund, shall formulate the plan
of organisation, powers and resources necessary to the
proper functioning of the fund, shall determine the conditions
requisite to participation in the fund, and shall propose principles
to guide the fund in its operation; Four. To recommend that
among the conditions requisite to participation in the fund
there be included in the deliberations of the conference the
following: cooperation in adopting harmonious policies looking
toward the gradual adoption of free foreign exchanges with
reasonable stability in foreign exchange rates, the removal of
arbitrary and discriminatory restrictions on international trans-
actions, and the maintenance of monetary policies that avoid
serious inflation or deflation."
(END OF MESSAGE).
WELLES
HTM
Copy:bj:1-16-42
Regraded Unclassified
247
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Rio de Janeiro, Brazil
DATE: January 14, 1942, 9 p.m.
NO. : 9, Section One
This message is in strict confidence from Mr. White
for the Secretary of the Treasury.
The wish was expressed by Mr. Welles to present a
resolution, similar to the attached draft, on International
stabilization, if you and anyone else you feel necessary
approve the presentation of the resolution.
It is my suggestion that if you desire the presenta-
tion of the draft at this Conference you have Berle and
perhaps Eccles approve it. Since there is some importance
attached to this matter and the eventual calling of a
conference of associated and united nations is implied,
you may even want the draft or merely the idea approved
by the President before you recommend it to be submitted
here. The statement was made by Mr. Welles that the idea
(was 1)
of & stabilization fund for the period after the was has
in general been approved by the President, but Welles did
not indicate that the specific proposal was known to
the President.
The pertinent rules of the conference require
unfortunately that resolutions must be submitted by
Regraded Unclassified
248
-2-
noon on January 16 (Friday). Since it was first necessary
for me to discuss the idea in general terms with come of the
financial representatives of the other American republice
in order to ascertain the prospects of favourable reception
at the present Conference I have not been able to send you
this message sooner. For rather obvious reasons the general
idea was enthusiastically received by those with whom I have
discussed the matter.
In view of the fact that the resolution only calls for
participation in B. conference which would be called to
consider the establishment of B. fund and in view of the very
general terms in which the resolution is stated, the clear-
ance of the phraseology of the draft should not take very long.
It is of course possible that the President may consider some
other time more appropriate for the initiation of the idea.
That question has been discussed with Mr. Welles and be
decided that it would be all right for the United States
Government to submit it here if you approve the resolution.
It is possible that you will feel that there is not time to
clear the matter in B. way which would be satisfactory to you.
If this is the case it is probably better that some other
time be selected to advance a proposal for the establishment
of a stabilization fund. In the opinion of Mr. Velles the
submission of the resolution here would be very helpful but
postponement is to be preferred to difficulties. A reply before
Friday noon would be appreciated whatever your decision may be.
Copy:bj:1c:1/15/42
WELLES
Regraded Unclassified
A
7. D.
219
PARAPHRASE OF TEINGRAM SENT
TV:
American Delegation, alo de Jansiro, Brazil
DATE: January 15, 1942, 5 p.m.
10,1 9
Reference is made to telegram no. 9 sent by the
Delegation at 9 on the 14th of Jenuary, 1942.
This telegram la transmitting a massage from the Becretary
of the Treasury to A. White.
It is the feeling of the becretary or the Treasury
that the suggestion of c Stabilization Fund of the United
and Associated Nations should be discussed with others
W.O belong to the United Nations W will 88 informally at
Rio before you make 4 formal proposal. No arrangement of
discussions within your deadline can be made here.
Therefore, it is the feeling of the Secretary of the
Treasury that a resolution for to Statilization Fund
should not Du brought up at the Conference In Hie de
Janeiro.
MIL
(PL)
Regraded Unclassified
PARAPHRASE OF TELEGRAY RECEIVED
250
FROM: ANDELGAT, H10 de Janeiro, Brasil,
DATE: January 17, 1942, 10 n.m.
NO.: 19.
SECTION ONE.
The following 10 confidential from Velles for the
seretary of the Treasury.
Reference 10 made to telegram No. 9. 5 p.m., dated
the 15th of January,
I appreciate fully that it 10 difficult to clear the
resolution in a time no brief as van indicated in my
earlier telegram. However, I have succeeded In having
the deadline for the presentation of the resolution
extended to Monday. Personally I de not feel that I
clearance
prior
on this matter with the "ritish or any
other Government 18 necessary. It would be most helpful,
in view of developments at the conference, if the resolu-
tion could be presented by the nited tates and I hope
that you can find it possible to give your approval to it,
Following 10 a redraft of the resolution on singler
linest
"
(ALLER
Regraded Unclassified
251
ALH
Rio dE Janciro
This telegram must bE
paraphrased before bEing
Dated January 17, 1942
communicated to anyone
other than a Governmental
Rec'd 10:15 name
OF Ency (BR)
Storetary of State,
Washington.
TRIPLE PRIORITY
19, January 17, 10 name (SECTION TWO)
Resolution on the stabilization fund of the
united and associated nations.
WHEREAS:
OnE. In the attainment of the Economic objectives
of the Atlantic Charter a more Effective mobilization
of foreign Exchange resources is of indisputable
importance, and would bE of assistance in the struggle
against oppression;
Two. The nations which Are combined in a
common effort to maintain their political and Economic
independence can coopEratE in creating on organization
to promote stability in foreign Exchange rates,
Encourage the international movement of productive
capital, facilitate the reduction of artificial and
discriminatory barriers to the movement of goods,
hElp correct the maldistribution of gold, strengthen
montary systems, and facilitate the settlement of
public and
Regraded Unclassified
252
-2- #19, January 17, 10 c.em. (SECTION TWO) , from Rio
de Janeiro
public and private international debts and the main-
tenance of monetary policies that avoid serious in-
flation or deflation;
Three. Participation by the American Republics
in the common effort more Effectively to mobilize and
USE their fortign Exchange resources would contribute
to the realization of the Economic objectives SET
forth at the first and sEcond meetings of the
Ministers of Fortign Affairs of the American Republics
at Panama and Habana.
WELLES
NPL
Regraded Unclassified
253
KD
Rio de Jansiro
This telegram must be
paraphrased before bring
Dated January 17, 1942
communicated to anyone
other than a Governmental
Rec'd. 10:41 8. n.
agency. (BR)
Secretary of State,
Washington.
TRIPLE PRIORITY.
19, January 17, 10 E, I.le (SECTION THREE)
The Third Meeting of Consultation of the
Ministers of Foreign Affairs of the American
Republics.
RESOLVES:
One. To recommend that the Governments of the
united nations in a special conference of Ministers
of Finance or their representatives to be called for
the purpose of considering the establishment of a
stabilization fund of the united and associated
nations;
Two. To recomend that participation in the
conference shall bE open to all nations that sub-
scribe to the objectives to the Atlantic Charter;
Three. To recommend that the conference in
considering the establishment of such a fund shall
formulate the plan of organization, powers and
resources
254
⑉2⑉ #19, January 17, 10 a.m. (SECTION THREE), from Rio dE
Jantiro.
resources necessary to the proper functioning of the
fund, and shall determine the conditions requisite
to participation in the fund, and shall propost
principles to guide the fund in its operation.
(END OF MESSAGE).
WELLES
NPL
C
0
255
P
Y
PARAPHRASE OF TELEGRAM SENT
TO:
American Delegation, Rio de Janeiro, Brazil
DATE:
January 17, 1942, 10 D.M.
NO. : 24
This is a confidential message from Secretary Morgenthau
for the Under Secretary of State Welles.
Reference is made to telegrem no. 19 sent by the Delegation
at 10 B.M. on the 17th of January, 1942. It is still my feeling
that there should be no formal presentation at Bio of the idea
of 5. stabilization fund. Since your telegram of the 15th of
January, I have been considering the matter end more then ever
before I believe this strongly.
In order to sesure success, it may be desirable to discuss
this question with the appropriate committees in Congress as
well as to give Great Britain and other United Nations 9 chance
to react to the proposition.
HULL
(AAB)
Cory:bj:1-19-42
Regraded Unclassified
256
of TELEGRAX MACRIVED
FROM: ANDELGAT, 110 de Janeiro, Trazil.
DATE: January 18, 1947, 7 D.m.
10.1 2.
EXCTION UNK.
PROM THE UNDERSECNETARY or STATE CO THE OF
THE TREASURY, in reply to the repartment's telegrae no, 84,
Jenuary 17. 10 p.m.
Amended 18 a new draft if the resolution which, 1
believe, any satisfactorily COVER the points mentioned in
your unbles to me regarding the vorcing of the earlier draft.
In this new draft you will note that no reference is
we Go to nations other than the imerican agublics. here
10 nothing in the resolution committing the nited tates to
- newting witch need necessarily include the Finance Vinisters
of nations other than the American Republics although It 1ª
to be haved that, when called, the recting referred to in
the new craft would include representatives of other countries
and sey be 40 interpreted by name, defore the calling of the
conference there will of soures be munle time for rounding
out other overnments and their partics attoc therein assured
beforehand.
I would sppreciate it if you could have your reply not
any possible suggestions regarding further changes telephoned
rather than cabled in view of the fact that Wonday noon R10
time (which 16 tvo hours earlier than inshington time) anuary
19 10 the absolute deadline. Forday morning hite oill stand
by in his room at the Copeesbane valage to receive any
telephone manages from (mokington.
Regraded Unclassified
257
ID
Rio de Jantiro
This telegram must bE
paraphrased before being
Dated January 18, 1942
communicated to anyone
other than a Governmental
Rec'd. 10:50 P. n.
agency. (BR)
Secretary of State,
Washington.
TRIPLE PRIORITY
22, Jonuary 18, 7 P. n. (SECTION TWO)
Resolution on the stabilization fund of the
united and associated nations.
Whereas
One. A more Effective mobilization and
utilization of foreign exchange resources would bE
of assistance in the struggle against aggression
and would contribute to the realization of the
economic objectives SET forth at the first and
second meetings of the Ministers of Foreign Affairs
of the American Republics at Panama and Habana; and
Two, The American Republics which are combined
in a common effort to maintain their political and
economic independence can cooperate in the creation
of an organization to promote stability in foreign
exchange rates, Encourage the international movement
of productive capital, facilitate the reduction of
artificial and discriminatory barriers to the movement
of goods,
Regraded Unclassified
258
-2- #22, January 18,7 p.m. (SECTION TW) from Rio de
Jansiro,
of goods, help correct the maldistribution of gold,
strengthen monetary systems, and facilitate the
settlement of public and private international debbs
and the naintenanos of nonetary policies that
avoid serious inflation and deflation:
RESOLVES
One. To recommend that the Governments of the
American Republics participate in a special conference
of Ministers of Finance or their representatives to
bE called for the purpose of considering the Establish-
ment of an international stabilization fund;
Two. To recommend that the conference in con-
sidering the establishment of such a fund shall
formulate the plan of organization, powers and
resources necessary to the proper functioning of the
fund, and shall determine the conditions requisits
to participation in the fund, and shall propose
principles to guid the fund in its operation.
(END OF MESSAGE)
WELLES
JRL
D
259
T
PARAPHRASE OF TELEGRAM SENT
TO:
American Delegation, 21e de Jametra
DATE: Junuary 19, 1942, 2 p.m.
NO. , 30
This wasege is 10 strict confidence from the Secretary
of the Treasury for the Under Secretary of State.
Reference Le sade to tolegram no. 22, sent by the
Delegation at , 1. or the 18th of January, 1942. The
new resolution with the tee shanges as follows le found
untinfactory, is confirmation of a conversation on the
telerhone with Mr. white:
First. "Resolution on an international stabilization
fund" is the very the title 10 to read.
Tecond. "The settlement of public and private inter-
national debts", a three in section 1v0, should be crossed
out.
It 10 hoped that the resolution will prove to be of
assistance.
The work of the Department of the Treasury makes "
declrable that Mr. white come back to *Ashington as quickly
-- possible and ant go os to Duesos stree, argestine.
MULL
(ARD)
Regraded Unclassified
PARAPHRASE OF TELEGRAM RECEIVED
260
FROM: American Delegation, R10 de Janeiro, Brasil.
DATE: January 85, 1942, 2 p.m.
NO.: 53.
The consultative meeting, in addition to recommending
the DeVerance of diplomatic relations with the Axis powers
and which I have already reported, has already approv 1
A number of resolutions which embody practical and specific
measures. The following resolutions are included:
1. Financial and commercial relations to be severed with
Axis powers, (Terms practically the name as terms drafted
in Washington). Although Argentina made R reservation
applying the measures of control to all non-American terri-
tories and Chile made a reservation of its sovereign rights
they both supported the basie objectives of the resolution
and the substance therein:
2. Strategic material production for supplying the
continent's essential defense needs;
3. Frinciples and practices regarding priorities,
allocations, and price controls entirely consistent with
our own are approved;
4. Maritime and other communications supervision to be improved--
defense requirements emphasized.
5. A resolution concerning stabilization fund which
is in practically the same form cleared in Washington,
5. Resolution supporting Inter-American Development
Commission.
7. Resolution
Regraded Unclassified
-2-
261
7. Resolution which urges the Inter-American
Bank's establishment at an eary date.
8. One resolution of major importance embodying
all points previously agreed to in Washington on the
control of subversive activities and other resolutions
which are similar. (The resolution on subversive activi-
ties 10 entirely satisfactory to Smith of Justice).
91 Japanese agression condemned in resolution and
condemnation extended to the other Axis powers,
The resolution which excludes Axis companies or Axis
citizens from commercial and civil aviation has not been
reported to the full committee, but the subcommittee has
approved it. This applies also to the resolutions on
the reorganization of the Inter-American Neutrality Com-
mittee, post war problems, public health and red cross.
The Telecommunications resolution has been approved in
principle but the full committee has not yet been approved.
At a session of the full committee togight (8 p.m.) it 18
probable that soproval will be given these latter resolutions.
Please note that approval along the lines agreed upon
prior to the delegation's departure have been given to
many of the projects supported by the U.S. and that so
far as the schedule here has permitted the remaining ones
have progressed favorably.
ELLES
Regraded Unclassified
DEPARTMENT OF STATE
262
FINANCIAL DIVISION
January 26, 1942
State Department Telegrams to and from American Delegation
at Rio Touching on Stabilization Fund
Delegation's 9, January 14, 9 v.m. For the Treasury
from White.
Delegation's 10, January 14,
FOR BERIE AND
LIVESEY requesting endeavor to expedite reply from Secretary
of the Treasury to Delegation's 9.
Department's 3, January 15, 5 p.m. From Berle and
Livesey reporting that Secretary of the Treasury is away
but Treasury is endervoring to reach him.
Department's 9, January 15, 5 p.m. For White from
the Treasury.
Delegation's 19, January 17, 10 E.M. From Welles for
the Secretary of the Treasury.
Department's 24, January 17, 10 3.4. For Welles from
Secretary Lorgenthau.
Delegation's 22, January 18, 7 For Secretary
Morgenthau from Welles.
Department's 30, January 19, 2 p.m. For elles from
the Secretary of the Treasury.
Delegation's 53, January 25, 2 p.m.-- E summary of
resolutions already approved including item (five) &
resolution concerning stabilization fund which is in
practically the same form cleared in Washington.
FD:FL:BMcB
H
Regraded Unclassified
263
Notes
F. Dictrich
MEV
Rio de Jantiro
This telegram must bE
paraphrased before being
Dated January 26, 1942
communicated to anyone
other than a Governmental
Rec'd 8:12 a.m.
agency. (BR)
Secretary of State,
Washington.
56, January 26, 10 a.m.
FOR THE SECRETARY OF THE TREASURY FROM WHITE
Plans changed. Leaving Rio Saturday arriving
Washington about Wednesday.
WELLES
WWC
Regraded Unclassified
264
Jamary 26, 1942
Mr. Livery
Mr. Southard
Please send as urgent the following cable from Secretary
Morgenthau to Mr. Harry D. White, in Rio.
"Return to Washington as soon as possible."
7AS/efu
1/26/42
Regraded Unclassified
265
TELEGRAV SENT
HRL
GRAY
January 26, 1942
11 p.m.
ANDELGAT,
RIO DE JANEIRO, (ERAZIL).
URGENT
82
FROM SECRETARY MORGENTHAU TO MR. HARRY D. WHITE.
QUOTE. Return to Washington RS scon PB possible.
END QUOTE.
HULL
(FL)
FD:FL:ME
Regraded Unclassified
266
January se, 1962.
Ky dear Mr. Secretary:
I have year letter of January 23rd, which
tells of the fortheening visit of the Brasilian
Minister of Finance, Dr. Arthur de Began Conta,
to this country. I shall be very glad to ... the
Minister when he reacher here, and to divense
matters of estual interest during the course of
his stay is Vachington.
Sincerely,
(Signed) 1. Mergesthas, Jr.
Nemerable Cordell Ball,
Decretory of State,
Vashington, D. 0.
File nmc
By strugs
lar & 29-W hills yfire
caps of many -
GEF/dbe
Regraded Unclassified
1 OFFICIAL COMMISSIONS -
THE SECRETARY OF STATE
- a c.
267
DEPARTMENT OF STATE
WASHINGTON
January 23. 1942
In reply refer to
RA 033.3211/307
My dear Mr. Secretary:
Ambassador Ceffery at R1o de Janeiro has reported
confidentially that the Brazilian Minister of Finance,
Dr. Arthur de Souze Costa, will probably be coming
to Washington et an early date to discuss matters of
general interest to his Department with the authorities
of this Government.
He will probably bring a letter from President Vargas
to President Roosevelt.
You will, of course, remember him from his visit
to the United States in 1937.
Sincerely yours,
Grieshee
The Honorable
FORDEFENSE
Henry Morgenthau, Jr.,
BUY
Secretary of the Treasury.
UNITED
STATES
SAVINGS
BONDS
Regraded Unclassified
268
BRITISH EMBASST,
SAFE HAND
WASHINGTON, I.C.
R.T. 1031/AA/13/42
26th January, 1942
Dear 2, Dietrich,
With reference to the decree published by the Govern-
ment of Costa Rica under which German, Italian and Japanese
subjects are compelled to file with the Co-Ordination Bureau EN
sworn declaration of all their aggets, earnings, etc., our
Charge d'Affaires in San Jose has been informed by the Minister
of Finance that once the information demanded under this decree
is in his possession, he will be In A better position to appraise
Axis commercial and industrial interesta with a view to tightening
his control over them.
A month prior to the declaration of war by Costa Rice,
enemy firms withdrew 1-1/2 million colones from the local banks
and it is expected that the decree will reveal the whereabouts of
this money. The Minister also stated that in the three local banks
there were deposits on account of askinarks estimated at about one
million colones and that be WRE considering taking appropriate
steps for the acquisition of this sur for the benefit of the State.
Yours sincerely,
(34) 1. V. PALI
L. Prank Dietrich,
U.S. Treasury Department,
Stabilization Office, Room 279,
Toghington, D.C.
EVP:OSE
Copy:ec:1-27-42
Regraded Unclassified
269
(FT HILLS)
Wk
MANILA
This telegram met bE
paraphrased before being
Dated January 26, 1942
communicated to anyone
other than a Governmental
Rec'd 1:13 a.m.
agency. (BR)
Stepetary of State
Washington,
30, January 26, 10 a.m.
For THE TREASURY DEPART .ent.
15
In addition to 10,205,151.13 concelled United
States Treasury chEcks pare and held by the Treasurer
of the Philippine Government mentioned in TAX telegram
DECEMBER 28, I have accepted three boxes said to con-
tain 7000 such checks sent here by
Philippins Treasury without maile subsequent to BK/
departure from Manila. Audit by men under the command
of W. À. Enos, Finance Department,
United States Army nhows that the total is 327,496,596.86.
This auditing has bein approved as satisfactory by
the commonwealth. Lists slowing details regarding each
cheoque will be mailtd as circumstanced permit. I
recommend that total of $37,701,747.09 bE credited
imadiately with subsiquent adjustments 12 nscessary
When the lists use received.
ECR
SAYRE
HT;
Regraded Unclassified
Treasury Department
Division of Monetary Research
270
Date February 3,
142
TO:
Secretary Morgenthau
From: Mr. White
You may be interested in the
attached cable which refers to a loan
of 300,000.000 rubles by the Russian
Government to the Polish Government for
the maintenance of the Polish army in
Russia. It also mentions a similar
agreement with the Czechoslovak Govern-
mant.
MR. WHITE
Branch 2058 - 2141
Regraded Unclassified
C
D
271
P
Y
TRB
GRAY
(Mossow)
Kuibyshev
Dated January 26, 1942
Rec'd 6:19 D.M.
Secretary of State,
Washington.
73, January 26, noon.
Embasey's 8, January 4.
The local press of January 25 revorts the signature
in Kulbyshev on January 22 of en agreement between the
Soviet and Polish Governments in accordance with which
the former extends to the latter 2 further loen of 300
million rubles, to be used for the maintenance on Soviet
territory of the Folish eng.
The press also reports the signing on the same date
of of similar agreement between the Soviet and Crechoslovak
Governments whereby 2 loan, uns ecified as to amount, is
extended by the Soviet Government to the Crechoslovak
Government for the mrintenance in the Soviet Union of
Crechosloval: bricade.
THURSTOX
HEF
Copy:bj:3-2-42
Regraded Unclassified
372
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE Jenuary 26. 1942
1
TO
Secretary Morgenthau
FROM Mr. Dietrich
CONFIDENTIAL
Partstared sterling transactions of the reporting banks were es follows:
Sold to commercial concerns
£103,000
Purchased from commercial concerns R 47,000
Open market sterling remained at 4,03-3/4, and there were no reported trans-
actions.
The Canadian dollar discount widened to 12% by noontime, returning to 11-3/45
during the afternoon. Yesteriay's final quotation was 11-5/85. The Post Office,
which vas a buyer late last week, reportedly appeared in the market this afternoon
and purchased 100,000 Canadian dollars.
The Venezuelan bollver, which has been quoted at .2675 for several days,
advanced to .2700 today.
In New York, closing quotations for the foreign currencies listed below were
ne follows:
Argentine peso (free)
2362
Brazilian milreis (free)
.0516
Colombian peso
-5775
Mexican peso
.2065
Uruguayan Deso (free)
.5250
Cuban Deso
Par
There were no gold transactions consummated by us today.
The State Department forwaried cables to us reporting the following shipment=
of gold:
50,000 from Chile, shipped by the Central Bank of Chile to the Federal Reserve
Bank of New York, disposition unknown
350,000 from England, shipped by the Vestminster Bank, London, to the Chase
National Bank, New York, for sale to the liev York Assay Office
$19,000 Total
In London, spot and forward silver remained at 23-1/2d and 23-9/16d respectively
rouivalent to 42.67# and 42.78$.
Regraded Unclassified
273
-2-
The Treasury's purchase price for foreign silver vas unchanged at 35#. Handy
and Harman's settlement price for foreign silver was also unchanged at 35-1/8#.
We made no purchases of silver today.
confidential
D
Regraded Unclassified
274
BRITISH EMBASSY,
WASHINGTON, D.C.
January 26th, 1942
PERSONAL AND SECRET
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a copy
of the latest report received from
London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
Halifax
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
Regraded Unclassified
Copy No.
BRITISH HOST SECRET
(U.S. SECRET)
OPTEL No. 30
Information received up to 7 a.m., 25th Junuary, 19/2.
1. NAVAL
One of H.M. submarines torpedoed and sank an Itallan salvage vegenl
off TUNISIA.
22nd. Two naval auxiliaries which more attacked by onemy airdreft
off THTH SUMATRA shot dewn a four-engined aircraft,
Between 19th and 24th following ships reported vunk or damaged by
enemy submerines:
A. Off U.S. Atlantic Const and in NENPOUNDLAND area, five ships
totalling about 28,000 tons.
B. Dff BURMA, A anll Panamanian ship and another unknown
vessel,
C. 340 ailes S.S.E. of HALIFAX, one medium sized British ship
D, 300 miles West of CAPE ST. VINCENT, one medium sized Spanish
ship.
2. MILITARY
LIBYA. 22nd and 23rd, The enemy seized the opportunity to pumb
along the AGHETTA to JEDABYA Road, which was lightly held and reached JEDABYA on
the afternoon of the 22nd, and then moyed a column of about 30 tanks and 400 147.
through ANTELAT towards SAUNNU. A second column of about 150 N.T. including AI-
coured vehicles and guns followed up as far ae ANTELAT where it 50028 to have I'm
mained, Air reported several hundred M.T. moving North-East on track JEDABYA to
ANTEIAT on morning 23rd, Our arnoured and other forces were in touch with the
ecomy throughout the 23rd and at least three engagements took place in the ANTELAT-
CAUNNI Area where enemy tanks and artillery wore brought to battle by our columns,
The situation ia still confused and no decisive results have been reported, Large
number of fires seen amongst enemy H.T. on track JEDABYA - ANTELAT,
FAR FAST. No further news of operations in BURAM or MAIAYA, NEW
BRITAIN and NEW IRELAND.
24th, No communiontion with Australian military foroes at RABAUL
and KAVIENG, Three enemy aircraft claimed brought down at each place between 21et
and 22nd,
RUSSD. North-Tiest of RESET the 67 Curther prior
CTARS wortwards,
Regraded Unclassified
376
- 2 -
3, AIR OPERATIONS
TESTERN FRONT. Nothing of interest.
MEDITERRANEAN. 23rd and 23/24. Our bombers including Naval
aircraft attacked at intervals a southbound Italian convoy consisting of four
large merchant vessels escorted by one battleship, three cruisers and sixteen
destroyers which was first sighted 170 miles North=East of MISURATA. Reports
are not yet definite but a merchant vessel of about 20,000 tons was torpedoed
and stopped, a destroyer was torpedoed, & cruiser was hit with bombs and near
misses with bombs were scored on the battleship and two merchant vessels, Two
of our aircraft are missing.
25th, Six Swordfish again attacked this large vessel at 1,30
a.m. and claimed hits with two torpedoes, this confirmed by screening Blenheim,
Later each sighted convoy approaching TRIPOLI (L) but no trace of the large
ship.
HALTA. 23rd/24th and 24th, A total of 82 aircraft attacked.
Two or our Aircraft were destroyed on the ground and seven damaged. HAL FAR
aerodrome was cratered. Our fighters probably destroyed one enemy aircraft
and damaged four,
BURMA. 24th. Seven enemy bombers, escorted by 55 fighters at=
tacked two aerodromes near RANGOON. 17 of our fighters including two Hurricanes
shot down all the bombers and six fighters, probably destroyed two fighters
and damaged nine. All our aircraft returned safely.
HALAYA. 23rd. 30 enemy aircraft attacked SINGAPORE ISLAND.
Three of our sircraft were destroyed on the ground. Hurricanes shot down one
enemy bomber and probably destroyed another.
Regraded Unclassified
277
BRITISH EMBASSY,
WASHINGTON, D.C.
January 26th, 1942.
Personal and Secret.
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a
copy of the latest report received
from London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
Halifax
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
Regraded Unclassified
278
13
MOST SECRET
(U.S. SECRET).
STEL No. 29.
Information received up to 7 A.M. 24th January. 1942.
in
SAVAL.
Aircraft reconnaissance en 23rd showed the TIRPITZ at Trendheim.
à small Norwegian vessel was torpedoed off Christmas Island on the 20th
and has been abandoned. On 21st 6. medium sized Greek vessel was sunt by
nine off Singapore.
2. MILITARY,
Libya.
By the evening of the 22nd enomy columns, estimated total strength
about 8,000 mon and 90 tanks, were advancing North and North East from
Jedabya. Our troops have taken up positions South East, East and North
if the town.
Malaya.
Situation 4.30 P.M. 23rd. Right. No change. Dersing area still
held. Centre. Cur forces were withdrawn South x Labis, where they were
in contact with enemy including tanks, Left. Our forces the MAIS out, off
have not yet. been able to extricate therselves. Pressure in the Fatu Pahat
Area las increased. The Japaneze nuerda livision has been inentified =
the That Front. About 400 Australians and many Initian troors returned from
Poss Torce after very bitter fighting,
Purma,
Démolition of Mergui Aprodrance has been completed and ONE
citimrawal continuos. More army personnel from Tayoy have arráved st Ye.
East if Indrain our forces are withdrawing but are not being pressed.
Russia.
The Dussion converging payment terrarás 1A making progress
both from the North and from the South East.
AIR OFERATIONS,
Destern Frent.
22nd. 1,000 ton enemy shit was Nt bign Hudron.
27rd/23rd. Thinster. 65 the Gove weather conditious. Large fires
- started in the toin and bembs straduled the milling stition. 4 R.A.A.P.
aircraft participated.
Libya,
22nd. A Squadren of Blenheims inflicted leavy damage --- 1,00
scobers, accorted by fighters, destroying 3 enery aircraft and damagine 1.
classly parked U.T. South East. <1 Asheila. Kittyhawks ingreed 3. dive
:- littyharks are missing.
22nd/23rd. bellington dreved over 12 time bonds 60 Triptic (C)
Narber. A naval vessel and ti probable A.&. whit 16th htt.
Xita.
exasing slight damage :- thing in the berter in - Walfar aerodrene. in
2251/23rd and 23rd. à nisl of B3 and aircraft strached
aircraft very warre by the 11/11/25.
Regraded Unclassified
279
- 2 -
Burma.
23rd. Our bombers attacked a concentration of lorries near Mesod.
Enemy aircraft attempting to attack an aerodrome near Rangoon were
intercepted by Tomahawks of the American Volunteer Group and Buffaloes, 9
enemy fighters and 3 bombers were destroyed and 8 further 12 enemy aircraft
were probably destroyed. Several more were damaged. The other bombers
jettisoned their homber. %: lost = Nighters.
Malaya.
Singapore. 21st. Civilian air raid casualties reported 304
killed and 625 hospital cases. 22nd. Kluang aerodrome was raided but no
damage caused.
Pacific Zone.
20th. More than 100 Japanese bombers and fighters attacked
Rabaul (New Britain) 21st. 60 aircraft attacked Kswiong (New Ireland) and 50
attacked Salamoa (New Guinea) and other objectives in that area.
The arrival at Ferrol on 12th of an Ax's ship with a valuable
4. cargo from Japan probably represents a first attempt to tring urgently
needed raw materials from the Far East to Germany.
Regraded Unclassified
TREASURY DEPARTMENT
280
INTER OFFICE COMMUNICATION
DATE January 26,1942
TO
Secretary Morgenthau
Mr. Kemarek
FROM
Subject: Summary: D.C.I. Report, Interview with former
American directors of General Motore' Onel plant
in Germany.
1. Production
The Germans have an acute rubber scarcity. Since 1938,
the army has urged Opel to achieve B. production rate of 100
three-ton trucks per day. The capacity of the plant WAS
large enough, but since it WAS never supplied sufficient
tires and batteries, it could not produce more than around
80 B. day. Lack of natural rubber cannot be completely off-
set by the use of the "Buna" synthetic rubber. Tires mede
from "Buns" require 8 30 percent mixture of natural rubber.
This 18 because "Buna" does not stick to the tire fabric.
Tires are made 80 that 100 percent natural rubber 1g next
to the fabric, whereas the treads are 100 percent "Bune".
German lubricating oils are of good quality for ordi-
nary use. However, they contain A high percentage of tar,
shich gives very unsatisfactory results under extremely low
temperatures. (Probably this 18 one of the German handi-
caps on the Russian front.)
Since August, 1939, no passenger care have been uro-
duced. The passenger car plant was converted into making
parte for bombers. Conversion began in August, 1939 and
THE completed ten months later in June, 19/0-
2. Labor
The Nazl Party has A complete organization for spread-
ing propagands in the plants. The great majority of the
workers show very little enthusissm for Nazi propegande.
Initiative in this type of activity 1° entirely lecking on
the Dart of the workers. The men sho* absolutely no anon-
taneous push to schieve greater production.
Regraded Unclassified
281
- 2 -
In 1939, rather serious labor trouble was experienced
in the German coal mines. It is understood that since
then, the situation in the mines has never been entirely
satisfactory.
3. General
Bootlegging of food exists to some extent. In any
case, the wealthy are able to fill in their diet with
expensive, unrestricted foods, such as game, lobster,
caviar, etc. This 1s not flagrant enough to have evoked
any bad feeling.
The widespread notion that the average German is B
stolid, squareheaded individual with a one-track mind, is
wrong. In reality, he is very impressionable and very
changeable. For this reason, the Nazi propaganda machine
has to work in high gear all the time. The deepest 1m-
pression the Germane have received is that if they lose
the war, they will experience indescribable chaos and
suffering.
Regraded Unclassified
282
COORDINATOR OF INFORMATION
WASHINGTON, D.C.
January 20, 1042
CONF IDENTIAL
COORDINATOR OF INFORMATION
The Monorable
The Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
T am enclosing herewith a memo-
randum, "Interview with Former American
Directors of the Opel werke, Germany",
which I hone may be of service to you.
Sincerely yours,
Bax ta.
James P. Parter, sa
Deputy Coordinator
Enclosure
Regraded Unclassified
283
CONFIDENTIAL
NOTE:
The following facts will facilitate interpretation
of some of the information supplied in Mr. Copelin's memo-
randum of January 9, 1942.
Before the war (BE now), Opel's entire production of
trucks was concentrated at the Brandenburg plant. Opel's
entire output of passenger cars (110,000 units annually) was
produced at the Ruesselsheim plant, where about 17,000
workers were employed on this activity. It 18 these men
that were laid off when passenger car production was stopped
in August, 1939.
The passenger car facilities and workers were subse-
quently converted to the production of the air craft parts
referred to on page 3 of Mr. Copelin's report. In addition,
the plant at R manufactures parts for the trucks made at
B, 86 it did before the war.
Regraded Unclassified
284
CONFIDENTIAL
Jenuary 9, 1942
Coordinator of Information
Washington, D. C.
Subject: Interview with former American Directors if the
Opel Werke, Germany.
Dear Sir:
Reference is had to conversation with Mr. Chandlor
Morse of your Office and to a letter of December 22, 1941 from
Mr. Emile Despres regarding a proposed interview with Messrs.
Osborne and Hoglund of General Motors Corporation.
The undersigned spent 8 number of hours with Mr.
(sborne on January 2, 1942. Mr. Hoglund and Mr. R. K. Evans.
Vice President of General Motors Corporation, another former
General Manager of the Opel Company, were asked from time to
time to check information on which Mr. Osborne was not quite
sure of his memory. The questionnaire attached to Mr. Despres'
letter was used as a guide during the interview in order to
cover as much of the ground, in which you are particularly
interested, BS possible. This report of the interview will
therefore follow very closely the questionnaire,
Production
1. Current passenger car production at the Opel Plant 16
zero. It 18 estimated that approximately BO three-ton Biltz
trucks are being produced daily at the Opel Plant at Branden-
burg near Berlin. Monthly production is estimated at 2,000
units. These are all the military adaption of the standard
Blitz Commercial Truck, approximate specifications being 166"
wheelbase, 4x2 drive. wood cargo body with troop scate, 85
H.P., six cylinder gasoline engine. This truck is the Germen
equivalent of the Ford and Chevrolet 1-1/2 ton truck in the
U.S.A.
The Brandenburg Plant has also been tooled to produce a
four-wheel drive three-ton model for use BE a cross-country
troop and cargo carrier. Production was to start on this Job
in June, 1941. It is believed that possibly 250 per month of
this model are currently being built.
1
Regraded Unclassified
285
CONFIDENTIAL
Interview. Directors Upel Worke
January 9, 1942
The complete manufacture of the above trucks 18 carried out
at Brandenburg except for sheet metal, rear axle gears. and
brake cylinders which are manufactured in the meln Opel Plant
At Rucsselsheim-am-Main.
The above production figures compare with pre-war produc-
tion as follows: Passenger car production 10,000 units per
month equals 110,000 per year, allowing for inventory time.
Truck production, 1,750 per month equale 20,000 per year.
Since the Munich meeting of September, 1938 all Opel truck pro-
duction has been exclusively for the German Army except for
small allotments for export.
All spare parts for Opel passenger cars and Blitz trucks
except ourrent production modele are produced in the Ruessel-
sheim factory. According to latest reports this production 18
being maintained at approximately the pre-war rate which amount-
ed to around 3,000,000 Reichsmarke monthly. This spare parts
production requires the labor of 5,000 workment
In connection with 01 el Blits truck production at Brenden-
burg. 11 is interesting to note that since 1938 the Army procure-
ment services have urged Opel to attain a production rate of 100
3-ton, 4x2 trucks per day. The fectory 18 canable of meeting this
rate but has never been able to obtain sufficient tires and bat-
teries through the allocating authorities to turn out the produc-
tion which the Army desires.
2. The principal non-automotive Items manufactured in the
Opel Plant at Ruesselsheim are the following:
Reduction gears for reducing the propeller speed for the
Mercedes Liquid Cooled Craft Engine. (It 18 understood that the
U. 5. Air Corps 16 familiar with this engine and the reduction
gear box. Semples are available at the Allison Motore Plent.)
A separate plant was established at Ruesselsheim for the produc-
tion of these reduction gears. Production started suproximately
July, 1939. The plant now employes 250 to 300 men per shift.
It 18 understood to be working on two 12-hour shifts. It is
estimated that production 18 250 to 300 sete of gears per month,
department in Detroit, where similar gears are being produced
although in checking this figure with the Cadillec production
for Allison, it would seem that production should be much higher, of
probably 450 sets per month. Mr. Osborne's guess at output to
the Mercedes engine is that they are manufacturing 1,000
1,200 enginee per month.
2 -
Regraded Unclassified
286
CONFIDENTIAL
Interview, Directors Orel Werke
January 9, 1942
In connection with the above activity there 1 € of pose-
ible interest the fact that the German Government asked the Opel
Company to Turnish laboretory froilities for a University Profes-
sor who WAE considered the top gear men in Germany, These facil-
ities were provided but the professor had a skiing accident in
which he badly frectured both lege and WAB inceracitated for over
8 year, EO Mr. O:borne's opinion 18 that little research nae been
carried out.
The production of the sircraft reduction gears wee carried
on concurrently with production of passenger cars end trucks at
the Opel Flents. Coincident with the opening of the campaign in
Poland in August, 1939 passenger car production wae immediately
stopped and 17,000 workers were laid off rending conversion of
the Ruesselsheim Plant for the production of:
B. Wiring hernessee
b. Wing assemblies
C. Tail surfaces
d. Hydraulic landing geare
e. Gasoline tenks
all for the Junkers Model UB8 bombers. All of the 17,000 workers
laid off had been resbsorbed by June, 1940. It is estimated that
100 units per month of the above assemblies were being turned out
at thet time. The Opel Plant also has under consideration B pro-
ject for the manufacture of Ordnance fuees but it 18 not known
whether production has been started.
3. Mr. Osborne wes not prepared to hezard gueeses as to
the output of the above items by other eutomotive plants except
as regards total truck production which will be found in 8 later
paragrerh.
4, Messre. Osborne and Hoglund estimate totel automotive
registrations in Germany 85 of August, 1939 at 2,000,000 passen-
ger cars, Of these a very small number were actually owned by the
Army which in time of war expected to end effectively did requisi-
tion privately owned cars for their use. Of these 2,000,000
passenger cars, it 1e estimated that 45% were in the smallest
class with a cylinder displacement up to one liter. These are
almost completely useless for military purposes. It 18 estimated
that 30% were In the 1,5 liter class of which 1/2 might be con-
sidered of some military vplue. Twenty per cent are believed to
have been in the 2 to 2.5 liter class; in terms of body epace and
performence, theee would sprrosch the American Ford and The Chevrolet.
These were the most popular size with the Germen Army.
remaining 5% are in the over 2.5 liter category end were used
only ae Staff cars for the higher officers, etc.
- 3 -
Regraded Unclassified
287
CONFIDENTIAL
Interview, Directors Orel Werke
January 9, 1942
Messre. Osborne and Hoglund would not hazard a guess 88 to
quantities of light trucks in Germany. Many of these were of the
three-wheel variety and even the four-wheel delivery van typee
were too light in construction to be of any militery value.
They estimate total ownership of trucks three-ton this
German rating corresponde to the American Ford, Chevrolet class)
and over at 300,000 units as of August, 1939. Of these approx-
imately 70,000 were owned by the Army. This figure is based on
Opel Blitz sales to the Germen Army which were approximately 9,000
units per year for the four years preceding hostilities end
represented 50% of Army purchases of trensport vehicles.
Based on Germen industry figures, 3% of truck production was
of the heavy duty type of 5 tone and over. These include the big
diesel tractor-trailer combinations which were a femilier sight
on the German roads and have since been an important link in the
Germen Military supply system. It 18 estimated that there are a
total of 20,000 of these tractor units. These Jobe are capable
of carrying 8 to 10 tons on the tractor chaesis and at the time
tow a load of 10 to 20 tone. The principal manufacturers of these
diesel units were Mercedes, Henschel, M.A.N., and Krupp.
According to Mr. Osborne, the Germen Army also used consider-
able quantities of 6x6 (aix wheel, six wheel drive) heavy artillery
tractors and "half-track" medium artillery tractors. He would not
hazard 8 guess 86 to the quantities of these vehicles in the
German Army. It 16 known, however, that both of these types have
been very unestisfactory in service. As an illustration of this
Mr. Osborne cited the invasion of Austria, where 80 many of these
special V ehicles feiled between the German border end Vienna that
a great mejority of the commercial trucks in Bavarie had to be
requisitioned overnight and were sent into Austria to salvage the
equipment which hed failed. On his way back to Berlin, Hitler
paid a personal visit to the Opel Plant and personslly signed an
order for 2,000 trucks BE a compliment to the Opel Works for the
high performence of the commercial vehicles which had gotten the
Army out of a bad spot.
Messrs. Osborne, Hoglund, and Evans concurred that the max-
1mum output of trucks three ton and up in Germany ie 60,000 to
70,000 units year. Their estimate of peak annual pre-war
car per production 18 243,000 units, This figure 18 based
passenger on Opel's allocated share of total German industry output ae
followe:
Regraded Unclassified
288
CONFIDENTIAL
Interview, Directors Opel Werke
January 9, 1942
Opel production for
German market
80,000
=
40% of total
Total Germen market
200,000
Opel production for
Export
30,000
Il
70% of total
Total Export
43,000
Total German production
243,000
Since returning to the U.S.A., B year ago, the writer hae
heard considerable discussion of the Stenderdization Program
imposed on the German automotive industry by the government.
This program does exist but the results effected up to August,
1939 were far less then is generally believed in this country.
Like all matters affecting the German automotive industry the
Standardization Program wes controlled by General Von Schell of
the Verkersministerium (Transport Ministry) in conjunction with
the Automobilwirtehaftsgrupre (Industry Council) composed of re-
presentatives of the manufacturers. Much valuable work was
accomplished in reducing the variety of componente end accessories;
for instance in 1936 there were 31 types of engine oil pumps used
on German care, whereas in 1939 there were only 5 or 6 standard
types. However, the Germans were still far behind the U. S.
Bureau of Standards and the S.A.E. in this connection.
In BO fer 88 the standardization of vehicle types 18 con-
cerned, the first year in which this was to be effective was 1940
but sctually nothing wes done because of the war and the conver-
sion of automotive plents to strictly militery production.
Although General Von Schell's powers on standardization were
dictatorial, the approsch up to August, 1939 was very gradual
and persuasive rather than by mendatory decree. For instance,
General Von Schell ruled in 1937 that truck users would be
allowed 8 reduction in the annual tax if they purchased vehicles
conforming to certain basic specifications desired by by the
Military Authorities. These specifications concerned loading
height, angles of approach and departure, engine power, etc. In
spite of the competitive advantages of building vehicles to meet
these specifications, Messrs. Osborne end Hoglund point out that
the three-ton Opel Blitz truck WeB the only vehicle built to
take advantage of the reduced user's tex. Normally the annuel
tax on a truck of this size would be 300 Reichsmarke, which W&B
reduced to 170 Reichsmarks.
5. The information regarding airplane production, supplied
- 5 -
Regraded Unclassified
289
CONFIDENTIAL
Interview, Directors Opel Werke
January 9, 1942
by Mr. Osborne, 18 based on 8 confidential statement mede to him
in June, 1940 by Dr. Hans Streck, Legationsret, of the German
Foreign Office whom he believes to be in B. position to have auth-
entic data. Dr. Streck's estimate of production at that time W8B
2,500 to 3,000 units per month of all types. The estimated 9V811-
able planes WBB 50,000 to 70,000 unite, again of all types.
The Opel directors were not normally in a position to have
information on the output of Ordnance items (in Nezi Germany it
WAS more comfortable not to know certain things) but Mr. Osborne
cited several examplee to indicate the plentiful availability of
anti-aircraft guns. One exemple WAE the protection of the Opel
Plant for which he estimates that 300 to 400 gune were placed in
the Ruesselsheim Weisbeden district. The emallest of these were
37 mm's with a certain proportion of larger guns up to 90 mm's.
Mr. Oaborne 18 unfamiliar with the situation regarding eub-
marines. He pointed out that in view of the difficulty of obtain-
ing betteries for military trucks, there must be a very tight
situation on the lead required for submerine batteries.
With regard to petroleum inventory and output, Mr. Osborne
cited 8 figure of 8,000,000 tone 88 being Germany's normal peace-
time consumption. He understande that they planned a war-time
consumption of 18,000,000 tone and that the production of synthetic
petroleum products WBB 12,000,000 tone in 1940. Of course, B.
strict rationing of petroleum products has been in effect in
Germany since before the wer. However, it 1e interesting to note
that according to Mr. Osborne the supply of diesel fuel hAE been
more restricted than the supply of gasoline. It appears that all
crude oils are not equally suitable for the quentitative production
of diesel fuel end that the crude from Russion sources 1a consid-
erably more satisfectory for diesel oil production than Roumanien
crude.
With regard to lubriceting oils the supply of these German FEET to
be sufficient and the quality satisfactory under normal
operating conditions. However, according to Mr. Osborne, these
lubricante contain 8 high percentage of ter which gives very I
unsatisfactory discussed with Mr. Osborne in some detail the apparent winter failure
results under extremely low temperatures.
of German It was distinctly his opinion that this WAS but not almost due
Motor Transport on the Russian front under
conditions. design or construction of the vehicles for extreme
to entirely any fault to the of unsvailability of suitable lubricents
low temperature operation.
6
Regraded Unclassified
290
CONFIDENTIAL
Interview, Directors Onel Werke
January 9, 1942
With regard to synthetic rubber products, Mr. Osborne could
not recall offhand much of the data on this industry. He stated
that shortly before the war he had prepared e complete report on
the subject for General Motors and would attempt to find e copy of
it which he would be happy to submit to Colonel Donovan. Generally
speaking on this subject Mr. Osborne pointed out that the greatest
difficulty in manufecturing tiree from synthetic rubber has been
caused by the fact that eynthetic "Bune" rubber will not stick
to the tire fabric. It 18 therefore necessary to immix approx-
imately 30% natural rubber with the synthetic product. This is
done in such 8 way that the part of the tire tread in contect with
the fabric cesing is 100% natural rubber whereas the outer surface
of the tire 16 100% eynthetic rubber. Apparently there has been
great difficulty in securing the quantity of naturel rubber
required to fully utilize the Germen synthetic rubber capacity.
Mr. Osborne WeB given to understand by representatives of the
Germen tire manufacturers that the "Buna" rubber program was two
years behind schedule in 1940. The two principal producing plants
for "Buna" will be found listed at the end of this report in the
list of critical plants.
Steel ingot production in the Reich 16 estimated by Mr.
Osborne at 18,000,000 tone per year. Steel has been rationed to
the automotive industry in Germany since 1937. The ellocations
for domestic passenger car production were constantly decreased
until they were entirely discontinued in August, 1939. Mr.
Osborne believes that the production of steel in Germany 18
being carried on at full capacity. Prior to the war, Germany
absorbed approximately 30% of the Swedish iron ore output. With
100% of this ore now available to Germany, there is no reason to
believe there mey be 8 shortage of rew materials. As regards
other metals, Mr. Osborne pointed out that suparently there wae
no shortage of aluminum, magnesium, and mangenese. All of these
metals are of course on en allocation basis but, for example,
there hae been no pressure from authorities to substitute other
metals for sluminum pistons in German cars and trucks. On the
contrary, many automotive parts, such a8 wiring harnessee, coile,
etc., which were formerly made of coprer are now being manufsc-
tured of eluminum.
Chromium, nickel, tin, and lead have all been under very
strict allocation for a number of years and are very difficult to
obtain with every effort being made to find substitute material.
It 1E believed that the sup ly of coal from German and occu-
pied French, Belgian, Czechoelovek, and Austrian mines is adequate
although Germany has had to assure the supply of the Scandinavian
countries, Itely, and Switzerland which were formerly supplied
largely from England. There has been, every winter since the war,
- 7 -
Regraded Unclassified
291
CONFIDENTIAL
Interview, Directors Onel Werke
January 9, 1942
an acute shortage of coal for domestic heating but it 1e believed
that this 16 caused by e lack of transportation facilities rether
than by e lack of coal at the mines, In 1939 rether serious
labor trouble wee experienced in the German coal mines end it is
understood that this situation has never been satisfectory since
Labor Supply
1. The complete Opel labor records are evailable in General
Motore New York Offices. Mr. Oeborne has made a note to obtain
complete data on this subject to submit to Colonel Donovan.
Generally speaking, the employment at the Orel Blitz Truck Plant
at Brandenburg increased from 1,500 to 3,000 and at the main Opel
Plant at Rueseelsheim, form 19,000 to 23,000 between 1937 and
1940. The new hende were recruited principally form agriculture
and other trades. High wages in the Orel Plants attracted workere
from other industries end while theoreticslly it is not possible
for 8 German worker to change his Job without permission from the
authorities, Mr. Osborne states that in practice this has never
been closely controlled. However, the lebor rates in the Opel
Plants were relatively so attractive in 1940 that the Government
Labor Officials reclassified many jobs and effected an overall
reduction of earnings in the Plants.
The new workers added to the force at the Orel Plant were
trained by Opel. However, since the war there has been 8 notice-
pble lowering of the quality of the workmen employed. This has
been caused principally by a higher ratio of young and inexper-
ienced workmen and by the necessity of employing poor physical
specimene. Very few women workers were employed in the Opel Plant
on automotive production. Since aircraft material has been in
production, the number of women workers has been increased but
does not amount to a sizeable proportion of the total.
The only foreign workers employed by Opel are A group of
200 to 300 Crecks who were recruited by the Germen Labor Offices
in Czeckoslovakia and placed in the Opel Blitz Truck Plant at
Brandenburg. These men have proved to be satisfactory productive
workers but considerable trouble was experienced because of
friction between these Czecks and the German workers.
Consequently it has been necessary to keep the Czecke all to-
gether in certain departments end it has pleo been found necessary
to erect barracks on the factory grounde to house them.
German labor lew requires that manufacturers train 8 minimum
ratio of apprentices to total employment. The opel Plant at
- B -
Regraded Unclassified
292
CONFIDENTIAL
Interview, Directors Opel Werke
January 9, 1942
Rueseelsheim maintains an apprentice school for 1,200 fourteen
to eighteen year old boye. It has been rlanned to increase this
number to 1,800 but the space 18 not available and this project
has been deferred until after the war. The apprentice training
period leets four yeare during which the suprentices are paid 30
Reichemarks per month. Mr. Osborne stated that Opel always has a
long weiting list of boye who want to get into this school. Most
of those accepted are sons of Opel workmen. Very comrlete facil-
ities are evailable for the treining in R erecial school section
of the plant. Practically every type of productive machine 18
operated in the school and in addition, the arprentices are given
classroom work in euch subjects 86 srithmetic and mechanical
drawing. The apprentices are never used to operate productive
machinery in the plant proper but when added production is requir-
ed in the plant, the apprentice mechine toole are occasionally
up to turn out production iteme,
2. In 80 far BE Mesere. Osborne and Hoglund are sware there
is no systematic plan for shifting men from the plant to the Army
and back. On the contrery, eince the invesion of Poland through
the invesion of France and down to the present, the movement has
been all one way; that is, from the plant to the Army. There
have been a proportion of cases where men were discharged from
the Army and returned to the Plant. In these cases the plant
1s bound to restore the men to the job he occupied when called
to duty. In 8. very few instances, men who had been discharged
have been recelled 8 Becond time to the Army but theee were all
special cases of Army interpreters end other specialized per-
sonnel.
3. The organization of lebor in 8 Germen Plant 1E rather
confusing because of the inter-relationship of Government and
Party. There 18 en official Government labor organization under
& Ministry of Labor which is responsible for the operation of
employment buresus and the edministration of Germen labor lavs.
There 18 also the Nazi Party Labor Organization, the "Arbeitsfront"
to which all employees belong end the primary Job of which 16 the
political education of the German workmen. Very frequently the
Government and Party orgenizatione fuee because the Government
labor official for 8 certain Plant or 8 certain district will
slso be the Party labor representative for the same Plant or
area. In the Opel Plant, the labor organization WP8 88 follows:
The top labor man in the Plant ie the Betreibsfuhrer (Worke
Leader). Normally in e German factory this post 1e occupied by
the head of the company. Since the Opel Company WeB under
American management, it wee necessary to have a Germen occupy be this
job. The Betreibsfuhrer was chosen by the company but had to
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Regraded Unclassified
293
CONFIDENTIAL
Interview, Directors Opel Werke
January 9, 1942
approved by the Nazi Party, specifically by the Gauleiter of the
district. As a rule the Betreibsfuhrer would be 8 Party member
although in the Opel Flent the tressurer of the Company WPB
aprointed to this post and he was not a member of the Nazi Party.
Under the Betreibsfuhrer 16 en elected group of employees
known 86 the "Botroiberot" (Worke Council). In the Opel Plant at
Ruesselsheim, this consisted of ten men. These men are nominated
by the Betreibsfuhrer and elected by the employeee for a period of
one year. No immediate choice of candidates 16 given to the
employees; ten men are nominated and voted on; if one or more of
them do not obtain P given pereentage of the total vote they are
not elected and alternate condidates are nominated.
The Betreibsret 18 presided over by 8 Betreibsobmen who 18
appointed by the Nazi Party. The company hae absolutely nothing
whateoever to say about the choice of this functionary. Under the
Betreiberat the Plant is organized into 'Celle', on 8 more or less
departmental basis. In other words 8 or 10 tool makers in a
separate department would have their own Cell, wheress 200 work-
ers in another depertment would also have one Cell. Each of
these Celle has 8 Cell Obman. If 8 workmen has any complaint, he
goes to hie Cell Obman who takes the matter up with the Depart-
mental Foreman or Supervisor. If they can't settle the matter,
it 16 taken up at the weekly meeting of the Betreiberst (inci-
dentally this meeting is held on company time and the company has
no control of the time spent by Cell Obman on labor problems. In
many instences it 16 necessary to engage an extra productive
worker to teke the place of one who 1e elected to the Betreiberst
or made a Cell Obman.) If the matter can still not be settled
in the Betreiberst, it 18 taken up with the Betreibsfuhrer for
settlement with the General Management of the company. If the
Management does not settle it to the satisfaction of the worker,
the matter 18 referred to the Nazi Kreisleiter (District Labor
Leader), whose decision 1e practically finel although on certain
major issues, appeal could be made to the Gauleiter and eventually
to Party Headquarters in Berlin.
of course in a German plant the types of complaints which
the workers and management have to arbitrate are relatively
restricted, inasmuch 8B no strikes are allowed under any condi-
tions and no discussion of basic wage rates 16 allowed. Incentive the
wages labor may authorities. (Consequently very few questions cennot
be discussed but a ceiling 16 placed on these by be
settled in the plant.) A majority of the labor representatives unable to
state whether plant are any of those in the Opel Plant had formerly
in the Nazi party members. Mr. Osborne was been
Union officials.
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Regraded Unclassified
294
CONFIDENTIAL
Interview, Directors Opel Worke
January 9, 1942
As can be seen from the above, the labor representatives
are usually production workers or occesionally clerical employees
who are chosen by their fellow workers. There are, however, 06r-
tain individuals in the organization who are placed there by the
Party organization whether the menagement likes It or not. These
include the Betreibsobman referred to above and also members of
the Gestapo And S. S. Corps and, if the plent has Any militery
potentialities, 88 WSS the case with the Opel Plant, there 18 also
an eyecutive called the Wehrwirtschsftefuhrer (War Economics
Leader) who is in charge of Flant protection against sebotage,
bombing, etc., end 18 also supposed to keep up to date 8. plen
for most effective use of the clant in war times. This individ-
ual need not keep the plant management up to date on his activi-
ties and reports directly to General Thomas, the head of the War
Economics Ministry (Wehrwirtscheftsministerium) in Berlin.
As stated above, the labor organization in the Opel
Plant had no rower to discuss basic wage rates which are fixed
by the Government Labor Offices. The average basic rete in the
Opel Plant in 1940 was 90 pfennigs per hour. Through incentive
rates applied on productive labor, the average pay of the hourly
wage group of the clent vas raised to 1.21 Reichsmarks per hour.
Prior to August, 1939 basic rates hed been eomewhet higher -- Mr.
Osborne could not oite the exact figure. At that time since Opel
rates were out of line with retes for comparable tradee in the
seme district the Government ordered reductions in both the baeic
rete end the maximum incentive wage. The everage overall reduction
was probably 10% elthough in some cases the reductions emounted
to 88 much 88 50% because of reclassification of certain types
of labor. For example, certain operations performed by women
workere on which the rate had been 1.20 Reichemarks per hour were
reclassified and 8 basic rate of 60 pfennigs per hour WAS
established for these operations.
Mr. Osborne pointed out that in Germany the differen-
tial in wage rates for skilled end unstilled labor 18 consider-
ably less then in this country.
Prior to August, 1939 the Germen hourly wge-earner WPB
required to work 197 houre per month (scrroximetely 45 hours B
week), before receiving any overtime, These 197 hours of work
could be required on any days including Sundays and holidays. At
the beginning of the war in August, 1939, the work hours were
changed to 10 hours per day, six drys per week; in other worde, B.
60 hour week which could also include Sunday and holiday work,
Overtime retee were figured by the company for the 15 hours extra
work per week. This overtime VP8 paid to the Government end not to
the worker. In Auguet, 1940 the work week we again changed to 12
hours X 6 days or 72 hours per week, Out of thie the Government
was raid the overtime for 15 hours end the worker the overtime for
12 hours. The overtime rate 18 1-1/2 times besio rete.
- 11 -
Regraded Unclassified
295
CONFIDENTIAL
Interview, Directors Ope1 Werke
Jonuary 9, 1942
Based on American standards, the clothing of the German
employee 1s very poor and since 1939 has been severely rationed.
Retioning 18 done on a point system under W: ich each person 16
given 100 points for 8 year's clothing néeds. Since one suit
takes 60 points And since the remaining 40 pointe would secure
only approximately one shirt, two or three paire of sooke end
two suits of underwear it would seem obvioue thei :-
below minimum requirements in order to enforce the uses of
previously accumulated surrlies. The retioning system does not
permit the purchase of any shoes -- e erecial permit 1s required
for the purchase of shoes or even for resoling or other repaire.
In Mr. Oeborne's opinion, the clothing rationing causes 88 much
unhappines: 88 any restriction in Germany end 18 particularly
hard on young women who are restricted to 8 very inadequate
sur ly of silk stockings. lingerie, etc. This incidentally 16
confirmed by the writer's own observations. Since 1937 and 1938
a few paire of eilk stockings in the luggage of 8 visitor to
Germany has been an incredible "open sesame" into the homes of
even very wealthy people. After the invesion of the low
countries and France the evidity with which the h1, heet renking
Germen Army Officere and pary leaders cleaned out the shops of
Am: terdem, Bruesele, and Paris bespeake volumee on their
accumulated spretite for decent articles of clothing. These
Germane were obviously flabeergested by the etock which existed
in the occuried countries of articles which to the peorle of
Pese countries seemed matter of course, AE examples; hosiery and
lingerie and anything else made of eilk; all woolen articles;
all articles containing rubber, such 86 women's girdlee, men's
garters and suspenders, and the ordinary simple elastic used
for children's clothing; end of course the sbundent supply
of such things 88 razor bledes, needles, pnd probably most
astonishing of all plenty of soap containing precious fet.
As regards the food supply in Germany, Mesers. Osborne,
Hoglund, end Evans concurred that it is sufficient to maintain
the health and efficiency of the rorulation and the rationing
causes little complaint. The writer believes that one of the
principal reasons for BQ little complaint 18 the effio ient
working of the retion system. In most countries where food
rationing exists there are two great sources of trouble: One,
widespread bootlegging; two, bad (istribution or an inadequate
supply to afford each holder of 8 retion card the quentities to
which he 1e entitled. The second trouble 1e the cause of the
long lines of waiting people at the doors of food stores,
In Germany, bootlegging does exist to some extent end
certainly the wealthy people are able to fill in their diet with
expensive unrestricted food such BE game, lobster, gaviar, etc.
12 1 I
Regraded Unclassified
296
CONFIDENTIAL
Interview, Directors Orel erke
January 9, 1942
But this is not ufficiently videspread to d mage the morale of
the population generally. As fer 86 the working class 18 concern-
ed, they very seldom have any difficulty in obtaining the food
stuffe to which their retioning card entitles them. It 16 con-
sequently rere to EEE a line of people waiting in front of 6
Cerman food store.
The principal food items which P German misses in his diet
are milk, butter, cream, end all fets of which he gets practi-
cally none. The egg ration 18 usually two egge per week, Except
during the local Beasons there are no fresh fruits and practici-
cally speaking, no citrus fruite at any time. The meat ration
has consistently averaged about one bound (500 grame) per week.
This 18 probably 30 to 50 per cent lees than the normal Germen
meat consumption but has not been the cause of any particular
complaint.
Mr. Osborne estimates that 40% of the hourly wage workers
in the Onel Flant (8,000 to 10,000 men) were in the heavy worker
category end were given double retions. As for BE he can recall
there were no heavier retion categories than this in the plant.
While it 1e true that the average Germen accepts strict food
rationing quite complacently in his own country, the Pretites of
the Germans in the occu 1ed territories were "Kolossal". The
writer lived with 8 German NAZ1 Party member in Paris from
September through November, 1940; I obtained my food ration card
through the French authorities And received the regular French
ration (spproximately 25 to 30% less than the basic retion in
Germeny). He obtained his direct from the Germen Authorities
his retions were almost exectly 14 time 86 greet 88 mine.
Obviously the Germen rations to Party vieitore to Paris were
designed to allow them to spread some largess among their
"conquered friends". But there WAS many a Germen stomach ache
caused by tring to make up for years of short retions of mest,
butter, eggs, etc.
5. There WBE not only an attempt to use the Opel Plant
se a political unit but effectively, the plant was 8 political
organization. Ae will have been seen under the earlier remarks
on the labor organization in the Plant, every individual employee
16 under the direct influence of the Nezi Party Labor Organization.
While osteneibly this organization (the Arbeitsfront) 18 engaged
in protecting the welfare of the workers end employees, in actual
practice their primary job 16 the political education of the
German people.
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Regraded Unclassified
297
CONFIDENTIAL
Interview, Directore Onel Werke
Jenuary 9, 1942
On an everage of once each month, e big political relly
would be held in the plant attended by every-member of the
plant rersonnel. In between these big rallies there would be
innumerable small group meetings. There would also be fre-
quent "schools" conducted by Nazi Party Labor Organizers for
Undus
ownervisore.
These
schools
purported
to be of B technical cheracter but sctually a great part of their
tesching we strictly political. Ae an exemple, a number of the
teschers essigned to the Opel Plant made statements deprecating
its American ownership end prophesying somedey the German would
"regain their birthright", In eddition to the schools held in
the plant, picked individuale from among the plant foremen and
superintendents were eent to Nazi Labor Schools outside where
they were deeply inculcated with the Nazi philosophy. The
plants were constently plastered with posters of the worst
possible political tyre. Although thie wee en Americen owned
plant, many of these posters which had to be put up were directly
aimed at American Political figures, such as the President,
various Senators, end others who made statements or speeches
which did not meet with Razi approvel.
The plent had attempted to publish a house organ similar
to the publications of American Companies but this publication
was subjected to the censorship and re-editing of the local Nazi
Party offices and quickly degenerated into B, Party rether than
B plant organ,
Whenever Hitler, Goebbels, or Goering mede A speech of any
importence whatsoever, production was stopped in the Plant end
all members of the plant personnelhad to gather eround the loud
speakers to listen to these speeches. In addition to the above
ectivities there were plant chapters of various party organ-
izations such B6 the "Hitler Jugend" (the Hitler Youth Organ-
ization); the "N.S.K.K." (The National Socialist Drivers Corps).
The Americans at the Opel Plent report that there was very ' 6
little enthusiesm among the great mejority of the plant personnel
for these party activities end initiative in this connection was
entirely lacking on the part of the workers. According to
Messrs. Osborne and Hoglund there Wr9 certainly no spontaneous
push from the men for greater production.
Of course the minor Nazi Officials show some initiative
which they hope will merk them in the eyes of their superiors.
However, moet of this initiative WEB shown in devising ways to
ingratiste themselves with the higher perty officials end was
more frequently deterrent rather than etimulating to production.
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Regraded Unclassified
298
CONFIDENTIAL
Interview, Directors Orel Werke
Jenuary 9, 1942
6. There were no sir reids of any militery importance in
the Ruesselsheim Wiesbeden area up to March, 1941. Consequently
the effects of air reide could not be observed in the Opel Plant
However, Messre. Deborne and Hoglund agree fully with the writer
that the Germane as a whole are considerably more susceptible to
the effects of air raide than other Europeans. Mossra. Cobortie
and Hoglund base their impression on the resotion of the Ruessel-
sheim Opel clerical employees who commute from Frankfurt am Main.
Although this city was not bombed to eny great extent air raid
slarms were feirly frequent and the effect of loss of sleep
seemed to be very marked on the limited number of people observed.
The writer spent several nighte in Antwerp during which the R.A.F.
bombed the Port severely end the effects on the Germene were
noticeably greater than on the Belgiens.
At this point it might be well to record some remarks made
by Messrs. Osborne and Hoglund regarding the Germen temperment.
There seems to be a widespread impression that the average German
18 a stolid, square-headed individual with 8 one-track mind. I
believe that most people who have lived in Germany will agree
that in reality the average German 16 very impressionsble and
very changeable. These changes of viewpoint and sttitude are
SO brusque and contradictory as to frequently estonish foreigners
who have occasion to observe them. Certainly the German can
blow hot end cold, optimistic and pessimistic more frequently
and to a greater degree than any of the Latin or Anglosaxon
peoples of Europe, and this undoubtedly accounts for some of the
necessity for the ultra-intensive proreganda to which the
Germen peorle are constantly subjected. Mr. Osborne feele that
this question of German temperement should be a mejor condder-
ption in directing proragande to the Germen people. He feels
that the one idea which has been moet deeply impressed on them
18 that should they lose this war the consequences will be
indescribable in chaos and suffering. At the proper time,
he feels that use of B propagende theme to dissipate this
fixed idea would be extremely fruitful in elienating consid-
erable numbers of Germans from the wr effort,
7. No remarks
8. While the observations made above are essentially besed
on the Opel Works BE B section of the Germen economy moet remarks
apply generally to all industrial rlante of comrerable eize since
the whole of German industry 18 organized by the seme Nazi eyetem.
16 1 1
Regraded Unclassified
299
CONFIDENTIAL
Interview, Direcote LETTE
Jenu ry 9, 1942
Technolopicel Factors
1. The Opel Works was not confronted with any major
technological problems because of the cercity of certain mater-
1816. Automotive axle geers were changed from chrome nickel
alloy to chrome mangonere allov. The new Fears were found to
be equally setisfectory. As pointed out earlier in this report,
copper electrical windings were replaced by eluminum windings
with no lose of quality.
Cutting toole and bearings were maintained at desired stand-
ards of quelity.
In the case of both passenger cere end trucks, there has
been & constant degeneration of quality since 1937 in the qual-
1ty of trim material. This did not effect the functioning of
the vehicle but particularly in export WP6 the source of much
customer dissatiefsction with Germen vehicles. One thing that
was very noticeable on German vehicles, exported efter the Munich
conference of September, 1938, WBE the very bed inspection. In
other words, the vehicles were full of minor defects in workmen-
ship. Mr. Osborne attributes this to the transfer of the most
cepable workers to military production and to the lose of some
good inspector personnel to the Armed Forces.
2. Opel's experience in technological questions was certianly
tyrical of German automotive industry and in general of German
industry BE 8 whole. Government regueltion of industry is carried
out through 8 eyetem of industry councils (Wirtscheftsgruppe) and
the Cecisione worked out by these councils in conjunction with
the proper Government authorities are mandatory on all members of
the particular industry.
3. Approximately 5 per cent of German trucks were diesel
powered. At peak production this would represent 3,000 to 3,500
trucks rer year. In addition, a great major'ty of Germen power
driven agricultural m/ chines, building machinery and thousands
of mell industrial installations were diesel powered. From en
operating standpoint these diesel enginee were highly success-
ful. However, BE pointed out in the discussion on petroleum
products, the proportion of diesel fuel required in Germeny had
reached 8 point where the most efficient uee could not be made of
available supplies of crude oil. In other words in refining a
ton of orude on the basis of requirements too much diesel of
specific grades was required rnd not enough gasoline. Conse-
quently, according to Messrs. Osborne and Hoglund, there has
been 8 tendency to discourage further diesel production and
- 16 -
Regraded Unclassified
200
CONFIDENTIAL
Interview, Director Opel Werke
January 9, 1942
even some attempt to convert certain classes of existing diesele
to injection type gesoline burning engines. Mr. Osborne was
not able to advise Just how far this program has been pushed
nor has he any information to substantiate reports which indi-
cale
despread
conversion
producer-gas.
4. Technically, gas burning motors have proved relatively
successful ae developed in Europe. In Bo far 88 the writer
knows the beet results obtained to date are approximately 80%
of the engine efficiency of the gesoline operated engine. However,
the system of operating 8 vehicle motor from gas compressed in
tanks has not proven populer because of (a) shortage of equip-
ment and materials for producing the tanks; (b) the bulk and
weight of the tanks on the vehicle; (c) the trensportation and
handling difficulties involved in returning empty tanks to a
properly equipped generating station for refilling with new gas.
The type of gas producing mechaniem known generally in
Europe 6.8 B "Gazogene" which 1s mounted on the vehicle or on B.
small trailer behind the vehicle and generates its own gas by
burning a solid fuel such 86 charcoal, wood, or prepared
bituminous coal, has been slightly more successful. The French
and German Governments have both encouraged experimentation with
this type of equipment. In neither country was there any appre-
ciable production. Mr. Osborne and the writer estimate there
were less than 1,000 gas-fuel operated vehicles in Germany.
General Motors Assembly Plente in Denmark and Sweden have gone
into the production of gas generating equipment for the conver-
sion of both passenger care end trucks. General Motors Oversese
Operations undoubtedly have a number of reports on this subject
which might be of interest to your office. In general it is
the understanding that this gas producing equipment has been more
successful in these two countries then elsewhere because of the
ready evsilability of eurplus wood for fuel. On the other hand,
only the present abnormal economic conditions would justify the
use of this equipment. The cost of the gae generating equipment
for B Chevrolet truck in Sweden, for instance, 16 almos t 86 much
ae the cost of the truck. Subsequently fuel cost 1s relatively
cheap but it 1e understood that the maintenance of the gas-
producing equipment 18 bothersome and costly and 86 previously
stated the performance of the truck 16 reduced by 20 to 30 per
cent.
The above covers the subjects outlined in the questionnaire
which you furnished me. In talking to Mesers. Osborne, Hoglund,
and Evens occssionally some German Industrial Plant would be
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Regraded Unclassified
301
CONFIDENTIAL
Interview, Directors Opel Werke
January 9, 1942
mentioned which they considered especially critical in the
Germany economy, particularly from the standpoint of war produc-
tion. These plants are listed hereunder for whatever interest
they may have:
Plant
City
Remarks
Bergesche Stahl
Remscheid
Manufactures a large per-
Industrie
centage of the precision
steel forginge for the
German Automotive and
aircraft industries.
Bosch
Nuremberg
In BO far as Messrs.
Osborne and Hoglund know,
this plant manufactures
all aviation spark pluge
for Germany
Mahlewerke (Electron-
Bad Connetett
Most important German
metall)
near Stuttgart
manufacturer of aircreft
and automotive pistons
and sircraft radio cases.
The Becker Foundry
Leipzig (West)
Most important manufactur-
er in Germany of eluminum
and magnesium castings
for aircraft.
V.K.F. (Vereinigete-
Schweinfurt
The German subsidiary of
kuggelagerfabriken)
the Swedish Ball Bearing
Trust. Has practically
a monopoly on precision
ball bearings for air-
craft and automotive work
in Germany.
Kruppwerke
Essen
Ordnance
Heinkel Fluegzuegwerke
According to Mr. Osborne
Plant 1
Oranienburg
the largest aircraft
(30 miles out-
factory in Germany. He
side Berlin)
has visited the plant
personally as well 8.6
most of the other aircreft
factories of Germany and
states that this 18 in-
comparably the biggest and
most complete
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CONFIDENTIAL
Interview, Directors Opel Werke
January 9, 1942
Plant
City
Remarks
Plant 2
Rostock
Smaller than the Oranien-
Heat DUE VITAL to
the German Air Force.
Junkers
Dessau
Still one of the most 1m-
portant German Aircraft
factories.
M.A.N.
Augsburg
Practically the sole pro-
ducer of Diesel engines
for submarines.
Tevis G.m.b.H.
Frankfurt am
Former manufacturer of
Main
electrical refrigeratore
and other appliances now
the principal producer of
meny vital aircraft parts.
I.G. Farbenindustrie
Near Frankfurt
(
am Main (suburb)
Germany's two principal
Continental Tire Co.
Hanover
Buna Rubber producing
(plants.
Mesers. Osborne, Hoglund and Evans were of the opinion that each
of the above plants produces such a large proportion of the total
ourput of articles which they manufacture that the destruction
of any one of these plante would be a most serious blow to the
German war machine. If further information along this line 18
desired, Mr. Osborne suggested that Mr. Otto Mueller at present
with Turnstedt Division of the General Motors Corporation at
Trenton, New Jersey, knows more about the distribution of the
manufacture of aircraft and automotive components in Germany
than anyone in this country at the present time. Mr. Mueller 18
& naturalized American of German origin who served 88 an executive
engineer at the Opel Werke for several years prior to August,
1939. His position was such that he had occasion to visit 8
great many German Plants and to be familiar with their productive
capacity, processes, methods, etc.
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303
CONFIDENTIAL
Interview, Directors Opel Werke
January 9, 1942
The uniter will he pleased to discuss any pheses of the
above report or to make any further contacts in this connection
which you may desire.
Attached for your information is a copy of 8 report on the
Utilization of civilian automotive maintenance facilities by
the German Army which may be of some interest.
Youre very truly,
Philip W. Copelin
Incl.
Copy of report
mb
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204
CONFIDENTIAL
January 9, 1942
SUBJECT: Report on Gorman Military Transport
TO:
Colonel Ruesel A, Osmun
Office of The Quartermaster General
1. The Militery Attache Reports which you recently forwarded
to me are returned herewith. There 18 nothing that 1 can add
on the specific subjects of German Army Motor Transport Organiz-
ation described in these reports. There 18, however one import-
ant phase of Germen motor maintenance which 18 not mentioned and
on which the following comments may be of interest.
2. Based on my observations in Germany and later in German
occupied France and Belgium, I believe it can be said that B
basic principle of German military maintenance operation is to
utilize to the greatest possible extent the civilien facilities
which are available. In Germany, prior to the invesion of the
low countries, this WBE manifested BE far as motor transport is
concerned by the extensive use of private garages, service
stations, and factory service departments for the maintenance of
army vehicles. In the occupied territories, the inveding armies
were closely followed by "Kommissers" whose job was to organize
the local automotive industry for the most effective utilization
by the German Army.
3. These Kommissars are civilians attached to the automo-
tive branch of the Ministry of Transport, (Verkehrs Ministerium)
This Ministry is in direct control of the entire German automo-
tive industry including its dealer organizations, independent
garages, etc. The head of the Automotive Industry Branch is
General Von Schell. While the organization is purely civilian,
it is headed, like many other Gov ernment Departments in Germany,
by an Army Officer who maintains his rank in the German Army.
General Von Schell ie to all intente and purposes the dictator of
the automotive industry with full power to decide what modele B
given company may build, what quantities, at what prices they
shall sell them, and any other pertinent question. Although not
directly connected with the Army in any way, a very close lialson
18 maintained between General Von Schell's office and the Army
General Staff regarding the utilization of the automotive
industry in the service of the Army. When the German armies
authority was immediately extended to these territories and his
invaded the low countries and France, General Von Schell's
staff took over the job of organizing the local automotive
plants and other facilities.
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Report on German Military Transport
January 9, 1942
4. It was obvious that 8 thorough Job of intelligence and
minute preparation had been done prior to the invasion. As an
example, the Kommissar appointed by General Von Schell to take
over all General Motore operations in the low countries and in
France USE = former General Motors distributor for Germany who
on one excuse or another had made frequent trips to General
Motors Operations in Belgium and France over a period of years
and was thoroughly familier with their activities and potential-
ities. The Kommissar appointed to organize the Ford operations
in the same countries was the German director of the Ford Plant
in Cologne, Germany.
Another example of pre-war preparation will be of interest;
for several years prior to 1939, the appointment of distributors
and dealers in other countries by German car and truck menufactur-
ere was closely watched by the German Transport Ministry and
Military Authorities. This was particularly true of the
countries adjacent to Germany such ae Hungary, Bulgaria, Yugo-
slavia, and the Scandinavian Countries. Factory managements
were under constant pressure to eliminate Jewish dealers (the only
commercially successful ones in several of these countries), to
appoint firms of marked pro-German sympathies, to extend beyond
all reasonable commercial requirements the service facilities
in the Balkans, etc. Approximately 70% of German automotive
exports were products of the Opel Werke, a General Motore subsi-
diary. The distribution of Opel care and trucks outside of
Germany was entirely controlled by General Motors Overseas Oper-
ations, New York, through their various local assembly plants.
This method of operation was a thorn in the sides of the German
Authorities who were thus unable to exert the same pressure on
the export Opel dealers that they exerted on the dealers for
other German makes. Nevertheless. over B. period of years they
were able to influence the development of the major bases for a
very sound automotive maintenance organization throughout Hungary
and the Balken Countries. Thie organization now undoubtedly is
serving its purpose.
5. The German Kommisser took possession of the General
Motors Plant in Antwerp, Belgium within 48 hours after the occupa-
tion of that city. The plant was not requisitioned but placed
under "protective custody" (Sicherstellung), under the authority
of the German Military decree which authorizes the Commanding
General in any area to appoint 8. Kommissar or "Custodian" of
any business whenever he considers it necessary or desirable in
the interest of the Reich. Once appointed the Kommissar has full
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206
CONFIDENTIAL
Report on German Military Transport
Jenuary 9, 1942
authority to operate the business as he sees fit and ie., to
quote the decree, "responsible only to the authority which
appointed him".
6. Immediately upon occupation of the plant in Antwerp the
Kommisser rehired approximately 800 of the 1,500 local workmen
and employees, proceeded to clean up the plant, which had been
somewhat eabotaged by the retreating Belgions and French, and to
make a complete inventory of the materials on hand. Sales to
oivilians were naturally stopped immediately throughout the
occupied territories. Every automotive dealer was required to
submit an inventory of vehicles and spare parts on hand. With
the complete capitulation of the Belgian Army a few days later
all army automotive equipment end spare parte stores were taken
over A.G prizes of war. The Army Motor Maintenance Corps (H.K.P.)
immediately returned all General Motors spare parts to the
General Motors Plant, placing them under the custody of the
Kommisser while Belgian Army vehicles were sorted out according to
their make and state of repair and arrangements made for their
reconditioning.
7. The method of handling this reconditioning 1e interesting.
Through pre-war intelligence the best equipped garages and
service stations throughout Belgium had been spotted and their
potential capacity estimated. These shops were immediately
occupied by the German Army. The Kommissar then entered the
picture and made the following proposels to the ownere of each of
these shops:
8. A contract could be signed employing the shop
to work exclusively for the German Army
b. The contract would be on a "coet plue" bests --
usually the owner would be required only to submit his
payroll on which he was paid 110%. Any spare parts re-
svailable in the inventory of the shop would be billed
quired would be furnished by the German Army or if
at list price less 25%.
C. If the owner was agreeable he could remain in
Officer would be placed in the shop for lieison between
charge of his business -- a non-commissioned German
the owner of the German Army personnel visiting the
shop on business but otherwise there would be no the cooups-
tion. The owner would be given full charge of
management,
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207
CONFIDENTIAL
Report on German Military Transport
January 9, 1942
a
If the owner of the shop would not accept
this proposition, B Kommissar would be appointed to
run his business and he would be out in the cold.
8. Obviously the owners of most businesses in the occupied
territories accepted The German proposition inasmuch 98 it
afforded them a livelihood for themselves and permitted them to
give work to their employees. In a number of instances the
owners of shope had fled the country in advence of the German
Armies; in these cases either the responsible employee remaining
was placed In charge of the business under the above conditions
or a Kommissar was appointed to run the shop.
9. In talking to the Kommisser of the General Motors
Assembly Plant in Belgium, he mentioned several times the figure
of 85,000 vehicles as the number which the German Army found
as prizes of war or requisitioned from the civilian population
in Belgium and Holland. Between June and Sept ember, 1940 all of
these vehicles in addition to thousands of German vehicles were
run through these shops and put in first-class running order.
Obviously these shops were not 100% efficient. In the first
place the German Army 1e cluttered up with an extremely non-
descript lot of vehicles -- in one big shop in Paris L personally
counted 118 different makes of German Army vehicles in the shop
at the same time. Obviously this diversity of makes and models
created 8 very tough spare parte problem for one thing and
secondly it gave the workers who were unsympathetle to the
Germens 8 good excuse for stalling by saying their tools wouldn't
fit certain cars or that they didn't understand the functioning
of certain makes. However, by enforcing 8 rigid discipline and by
impressing on management and workers alike that the price of
detectable sabotage was being shot against the nearest wall very
excellent results were obtained.
10. It should not be deduced from the above that the German
Army did not come equipped with its own maintenance facilities.
Maintenence comperable to the first and second echelons in the
United States Army vere of course performed in the field and all
indications were that they were very efficiently performed.
However, their organization appeared to be set up on a baels
whereby any vehicle which could not be promptly repaired in the
field would be evacuated to one of the civilien shops mentioned
above where it would be repaired and returned to a divisional or
ermy pool.
Regraded Unclassified
308
CONFIDENTIAL
Report on German Militery Trensport
Jenuary 9, 1942
11. There WP6 surprisingly little pressure for expediting
vehicles through the shops except in the case of heavy duty trucks.
I believe this WFB due to the fect that most civilian vehicles
were prohibited on the road and there wee always P large surplus
of passenger care end light trucks from which vehicles could be
requisitioned when required,
12. Returning to the functions of the Kommisser in
charge of General Motors Operations -- after en inventory had been
accomplished, the Assembly Plant in Belgium was put in operation
to build un approximately 2,100 Chevrolet trucke end some 800
or 900 passenger care for which the materials were on hand.
These were 60ld to the Germen Army. The Plent wee then estab-
lished BE central headquerters for spare parts for American care
in the low countries and as e reconditioning plant for the
British vehicles recuperated at Dunkirk.
13. It was estimated that after "cannibelizing" suffic-
iently to supply parts for demeged vehicles, approximately 16,000
British Militery vehicles were recovered. Since there were no
spare perts evailable on the continent for these British trucks
end since the supply of spare parts for American vehicles wes
obviously limited, it wes decided to establish a parts manu-
fecturing center in the Antwerp General Motors Plant, Since,
like ell assembly plents, this one had very little machine tool
equipment, tools were requisitioned from various factories through-
out Belgium and installed in the plant.
14. As previously stated the same Kommissar who WPS put
in charge of General Motors Operations in Belgium was subsequently
charged with General Motors Operations in France. The pattern of
his activity in that country was very similar except that for
verious ressons of convenience any unassembled material found
in Paris was sent to the bigger plant in Antwerp and the Paris
Plent turned into a repsir shop.
15. The General Motors Kommisear employed e Germen
staff of approximately 25 people in Belgium end Frence, These
were ell civiliane and consisted of spare perte experts, shop
superintendents, end General Administrative Executives, This
personnel was ell picked by the Kommisser from hie own German
organization. This staff end the Kommissar were paid by the
local General Motors Companies in which they worked. As I
stated previously, the Kommissar wee assigned by General
von Schell of the Ministry of Transport in Berlin and his actual
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Report on German Military Transport
January 9, 1942
local appointments were under the authority of the Commending
Generals of the occuried territories. Obviously the liaison
between the Kommisser and the local Milita Authorities was
extremely close and to all arpeerances was very satisfactory.
16. It might US junged from the above that the eyetem of
contractual meintenance was used by the Germen Army only In
occuried territory. This is not the case. It may be of inter-
est to note that the Kommisser in charge of General Motors
orerations in the occupied territory was also contractor in
Germany to the German Air Force for the repair and maintenance
of military plenes. In this connection he had constructed and
orerated two very large rerair shops. According to his state-
ments which were corroborated by Luftwaffe Officers with whom
I spoke, all planes which were damaged beyond quick rerair at
Air Field shops were turned over to this orgenization. They
dismounted the motors and returned these to the motor manufactur-
ers for reconditioning and then completely reconditioned the
fuselage, wings, undercerriages, etc.
SUMMARY:
17. In the third end higher echelone of motor maintenence,
the German Army employe evailable civilian fecilities and person-
nel to the greatest possible extent. This system of contractual
maintenance has given satisfactory results in Germany, in her
satellite states, end even in the occupied territories.
18. I attach hereto P. cory of a further report on German
economic conditions 98 related to the automotive industry pre-
pered for the Coordinator of Information.
Philip h. Copelin
mb
Incle.
Milltery Attache Re: orte
Report to Coordinator of Info.
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310
RESTRICTED
G-2/2557-220; No. 612 M.I.D., W.D. 11:00 A.M., January 26, 1942.
SITUATION REPORT
I.
Pacific Theater.
Philippines The situation in Luzon remains stabilized,
with some activity in the Subic Bay area. On last Wednesday, enemy
aircraft bombed shipping at Cebu, The this attack
were imiced to one small ship. In ilindanao the situation remains
unchanged. Hawaii; No further reports of enemy nctivity. Malaya:
There seems to be no substantial change in the di tuation, The
British line appears to be somewhat stabilized. Burma: No further
reports of importance on land or air activity. Australusia: The
situation in the Australian Mandates is confused, though Japanese
action is believed to be continuing. Apparently the Japanese convoy
in the Macassar Straits is still being subjected to successful at-
tacks by Dutch and American air and naval units. West Coast: No
further reports have been received,
II. Eastern Theater.
Russian pressure continues in the area southwest of Seliger
Lakes. Both sides report hard fighting along the eastern front.
III. Western Theater.
On January 25 the R.A.F. carried out further raids on Brest.
IV. Middle Eastern Theater,
Ground: Fighting continues in the triangle Agedabia-
Antelat-Saunnu, apparently without decisive result.
Air: The R.A.F. attacked an Axis convoy in the Lediter-
ranean with some success. Axis air continued to pound Malta.
RESTRICTED
Regraded Unclassified