Volume 491, February 1 – February 3, 1942

DIARY Book 491 February 1 - 3, 1942 - à - Book Page Airplanes Shipments to British Forces - Kamarck report - 2/2/42.. 491 232 Aircraft flight delivery, February 2, 1942 - British Air Commission report - 2/3/42 235-A Appointments and Resignations Hardy, Charles 0. (Brookings Institution): Viner suggests for Haas's staff - 2/2/42 60.65 Powel, Earford: Change from Director of Information (Defense Savings Bonds) to Consultant discussed by HMJr, Graves, Kuhn, and Odegard - 2/2/42, 8,9 - B - Bullitt, William C. See Foreign Funds Control: General Aniline and Film Corporation Business Conditions Haan menoranous on mituation. week ending January 31, 1942, 217 C China Loan: Phillips and H/Jr discuss simultaneous releases on terms; Phillipe states British expectation that loan would be repaid promptly; British share to be E30 million - 2/1/42 2,4 a) Copy of British memorandum sent to Hull - 2/2/42 13 b) Discussion by White House group prior to HKJr's appearance on the Hill - 2/2/42 15,39 1) Conversation with Bureau of Budget - 2/2/42,, 27 2) Conversation with Jesse Jones, 30 3) Joint Resolution as okayed by 708 out not used 32 4) FDR's letter to Speaker and Vice Fresident 33,34 5) Stimeon's and Knox's letters to FDP. 36,37 5) Hull's letter to FOR 38 7) Scong-HMJr conversation 40 8) HMJr-Litvinoff conversation 44 9) Hull-HMJr conversation 47 10) HMJr-Early conversation 35 11) Berle-HMJr conversation, 52 12) Rayburn-HMJr conversation 63 13) Joint Resolution (copy) sent to Scong, Litvinoff, and Phillips 74,75.76 14) Copy of FDR's letter to Sperker and Vice President end copies of Stimson's and Knox's letters to FDR sant to Hull - 2/2/42 7d 2) Stimson, Knox, Jones, Smith, Speaker, and Vice President sent copies of correspondence 79,etc. 15) Bloom and HMJr discuss those who are to testify, 92 Regraded Unclassified - 0 - (Continued) Book Page China (Continued) Loan (Continued): Conference of Treasury group and Soong - - 2/2/42 491 95 a) HMJr-Currie conversation 108 b) Bloom-HMJr conversation 113 c) Statement by HMJr on Joint Resolution - draft 1 121 1) Copies sent to Stimson, Jones, Knox, and Hull 135 d) Soong's memorandum on terms and conditions 131 Conference of Treasury group - 2/3/42 270 a) Stettinius-HMJr conversation 289 b) HMJr's testimony - draft 2. 293 c) Meeting with House Committee on Foreign Affairs - resume 302 1) HMJr's reading copy 312 a) Papers which HMJr took with him 322 2) Resolution passed unanimously 367 a) Soong informed 371 3) Breckenridge Long statement 308 d) HMJr's appearance before Senate Committee on Foreign Affairs - 2/5/42: See Book 493, page 273 1) Minutes of meeting: Book 493, page 293 e) FDR's message to Chiang Kai-shek announcing passage of loan - 2/7/42: Book 493, page 278 f) HMJr's appearance before Sub-Committee of House Appropriations February 9, 1942 - resumet Book 494, page 1 1) HMJr's reading copy: Book 494, page 5 Universal Trading Corporation report sent to HMJr by Lochhead - 2/2/42 148 Stabilisation Board: William H, Taylor and Wei Yin Lin "detained by enemy action"; names deleted from those authorized to operate accounts of Board - 2/3/42 408 Coordinator of Information See Treasury Representatives Abroad - D - Dies List of Government Personnel See Un-American Activities Donovan, Colonel William J. (Coordinator of Information) See Treasury Representatives Abroad Douglas, Lewis W. See Financing, Government: Defense Savings Bonds - E - Exchange Market Resumes - 2/2-3/42 245,432 Regraded Unclassified - 7 - Book Page Federal Reserve Act Existing prohibition against direct purchase by Federal Reserve Banks of direct and guaranteed obligations of United States: HMJr informe Committee that he approves removal of restriction - 2/3/42 491 420 a) HMJr's conversation with Spingarn - 2/2/42 151 Federal Reserve System See Financing, Government Financing, Government Eccles' memorandum on future program acknowledged by Treasury - 2/2/42 173 Non-defense Economies: See also Books 458, 473, and 485 Conference - 2/3/42 402-A Conference - 2/6/42: See Book 493, page 98 Conference - 2/10/42: Book 495, page 85 Defense Savings Bonds: "Buy & Bomber" campaign: a) Hearst, William Randolph: Thanked by HMJr for newspaper Aid in sale of bonds to "Buy 8. Bomber" - 2/2/42 203 b) Discussion of "Buy 8. Bomber" campaign at 9:30 meeting - 2/4/42: Book 492, page 5 c) Letters to Washington Post - 2/4/42: Book 492, page 31 1) Meyer-HMJr conversation: Book 492, pages 46, 74, 79, and 304 d) McCloy-HMJr conversation - 2/4/42: Book 492, pages 39 and 43 e) Post explanation - 2/5/42: Book 492, page 264 Postmaster General thanked for assistance - 2/2/42. 206 Douglas, Lewis V.: Thanked by HMJr for assistance - 2/2/42 208 January sales report - 2/2/42 211 Comparative statement of sales during November, December, and January 213 Unfilled orders, January 15 to date - 2/2/42 215 Navy program at which check for $1,700,000 is presented to HMJr - 2/3/42 376,377,380 a) Radio talk by HMJr and Knox - 2/3/42 382 Defense Savings Stamps: Sales at moving picture theatres recommended by HMJr - 2/3/42 387,390 Post Office sales unsatisfactory to HMJr - 2/3/42, 397 a) Graves' report - 2/6/42: Book 493, page 108 b) Mahan's report - 2/6/42: Book 493, page 110 Foreign Funds Control General Aniline and Film Corporation: Bullitt, William C.: Offers assistance to HMJr and Foley - 2/1/42 1 Swope, Gerard: HMJr wants Swope to sit in on conferences; hopes Treasury can work out line of action very soon - memorandum to Foley - 2/3/42 415 France: Payments to diplomatic missions in Far East - State Department agrees to terminating - 2/3/42 416 France See Foreign Funds Control Regraded Unclassified - G - Book Page General Aniline and Film Corporation See Foreign Funds Control Germany "Voice of the Chief" broadcasts summarized by Kamarck - - 2/2/42 491 254 a) Sent to Crown Princess Martha - 2/4/42: See Book 492, page 250 Great Britain Recent financial developments - Hoflich memorandum - 2/2/42 236 - H - Hardy, Charles 0. (Brookings Institution) See Appointments and Resignations Hearst, William Randolph See Financing, Government: Defense Savings Bonds - M - Military Reports Reports from London transmitted by Campbell - 2/2-3/42 246,251,433 "Voice of the Chief" broadcasts (Germany) summarized by Kamarck - 2/2/42 254 - N - Navy Department See Financing, Government: Defense Savings Bonds - P - Powel, Harford See Appointments and Resignations - R - Revenue Revision Disney film: Publicity for - 2/2/42 201,403 Roosevelt (Franklin D.) Library - Hyde Park, New York Second annual report - - 2/2/42 171 - S - Silver Uruguay: Federal Reserve Bank of New York memorandum concerning purchase - - 2/3/42 430 Regraded Unclassified - S - (Continued) Book Page Speeches by HMJr Defense Savings Bonds: Navy program at which check for $1,700,000 1s presented to HMJr - 2/3/42 491 376,377,380 a) Radio talk by HMJr and Knox - 2/3/42 382 Stabilization Agreements Resume' - Dietrich memorandum - 2/2/42 237 Statements by HMJr Aid to China: HMJr's appearance before House Committee on Foreign Affairs Draft 1 of testimony - 2/2/42 121 If 2 If # - 2/3/42 293 Reading copy - 2/3/42 312 a) Papers which HMJr took with him 322 HMJr's appearance before Senate Committee on Foreign Affairs - 2/5/42: See Book 492, page 273 Swope, Gerard See Foreign Funds Control: General Aniline and Film Corporation - T - Treasury Representatives Abroad Portugal, Spain, Switzerland, and Sweden suggested by Donovan - Gaston's memorandum to HMJr - 2/3/42 410 a) Discussion at 9:30 meeting - 2/4/42: Book 492, page 27 - U - - Un-American Activities Foley memorandum concerning Dies' investigation of Government personnel - 2/2/42 161 Universal Trading Corporation See China Uruguay See Silver - V - Viner, Jacob HMJr again advises staff, including White, to utilize services - 2/2/42 72 "Voice of the Chief" See Germany I February 1, 1942 Mr. Foley Copy The Secretary Bill Bullitt had lunch with us on Sunday, and after telling UF of his experiences in the Near East, he got on the question of General Aniline and Dye. He fished around BE to whether I wanted him to stay, and I said that definitely I hoped he would stay and help us to olean it up. He said that Foley had asked him to do the same thing, and he said that he thought the thing ought to be done very rapidly because 0' Connell had told him the case where American Woolene had called up and wanted to place a large order with them, and O'Connell had not been able to give Aniline Dye 8 clean bill of health eo they haven't placed the order. If that went on, why rapidly the company would disintegrate. I told him I thought that nobody should get more than 150,000 salary, and that Hack might be made General Counsel, Bullitt could stay as Chairman of the Board, and then we'd get 8 first-class operating man to operate the company. I thought that these enormous fees that they were paying were e disgrace and that the whole thing would reflect on the President. He agreed on that. I told him that Gerard Swope was advising us 88 to personnel; 60 MB the thing develope, I wieh Foley would keep me posted and also keep Mr. Gerard Swope posted. Regraded Unclassified 2 February 1, 1942 Sunday at five o'clock, Sir Frederick Phillips called at the house at my request. He said he had 13. message for me, and I said, "Go shead end give it to me," which he did, and I would hear from the British Ambassador at Chungking. On reading it, I was glad that again we were sufficiently ahead of the parade and were ready. I gave him a copy of the joint resolution, which he wanted so that he could cable it to London. But I told him that the "whereas" which had to do with the defense of China, etc., he should leave that sentence out because it was changed two or three times. He asked me if B8 soon as I knew it was going to be released, would I let him know through Harry White. I said that when I get ready to leave the Hill, I will phone Harry White so that he could let Sir Frederick Phillips know. Phillips wants to get out a statement simultaneously from London. White ought to let T. V. Soong know at the same time. I discussed with Phillips the fact that it looks as though when the war is over they would sort of cancel the loan. He said, "No," that they would expect to have it repaid promptly. I said that I would try to get something similar in our conditions although we had not discussed conditions with T. V. Soons, but I expected to see him at three o'clock on Monday. Phillips asked me whether it was all right for them to go ahead with their 30 million pounds. I said, "Yes," and that after all that was three timesas much 88 they of- fered the Chinese before. He said he hoped that I didn't mind Lord Helifax's coming to see me with a question as to whom should bring to the President's attention that the British wanted us to pay them cash for the material they bought prior to March 11, 1941. I said that I didn't mind but I was sorry that Churchill hadn't agreed to send it to the President. However, I said that I could understand that and I could also understand that Halifax didn't want to wear out his welcome with the Presi- dent. I said that my shoulders were broad, and I would try to carry it, but that it was much more difficult for me to carry it directly with the President. To prove my point, there is the copy of the memorandum which I sent to the President, and I haven't heard from him yet. I then said Regraded Unclassified 3 - 2 - that I felt sure that if either Churchill or Halifax had sent it it would have carried more weight. However, I said I would do the best I can, and I will try to take it up with Phillips on either Tuesday or Wednesday. Regraded Unclassified MEMORANDUM In view of further representations !rom His Majesty's Ambassador in Chungking, His Majesty's Government feel that it is essential to send en immediate reply to the Generalissimo. It is under- stood th. t the question of assistance to China is under the President's consideration. His Majesty's Government now SUGGERT that in addition to their supplying munitions on & lond-lesse, basis a joint offer should be made of & combined loan of $400 millions, of which, in view of the disparity of financial resources, the british share would be $120 millions or 630 millions. The latter sum would be made vailable immediately but there would be an unpublished understand- ing that it would be drawn upon only as required for expenditure in the sterling area directly requ red for the war; each itom of expenditure being agreed upon between the two governments with the condition that any amount that had not been drawn upon at the conclusion of hosttlities would be repaid. The United States part of the credit would no doubt be mace subject to similar conditions. His Majesty's Government LSK whether the President would agree that we should at once inform the Generalissimo that we have made this proposal to the United tates Government. Washington, D.C., February 1, 1942. Regraded Unclassified 5 February 1, 1942 Mr. Graves, Mr. Kuhn, Kr. Schwarz The Secretary If the figures are in for January, I'd like to have a carefully prepared statement to give out at my four o'clock press conference of the results of January sales of Defense Savings Bonds and Stamps. Done- Per Regraded Unclassified 6 C 0 P Y (CONFIDENTIAL) PARAPHRASE A strictly confidential telegram no. 24 of February 1, 1942 from the American Commissioner to India reads sub- stantially a.c follows: In response to your inquiry of January 30 regarding air passage for Messrs. Lattimore and Fox, you are informed that they departed by Clipper on January 28 from Karachi. Copy:bj:2-3-42 RESTRICTED 0-2/2657-220: No. 618 M.I.D., W.D. 11:00 Avile. February 1, 1942. SITUATION REPORT I. Pacific Theater. Philippines: Several strong enemy thrusts including & night attack were repelled yesterday. Enemy losses were relatively large. Corregidor's big guns suddenly concentrated on an enemy force assembling launches at Ternate, on the south shore of Manila Bay. The surprise was complete, and the Force was destroyed, Hawaii: No further reports of hostile action. Malaya: The press reports that British withdrawal to Singapore Island has been completed. and that British reinforcements have arrived at Singapore. Burma: Dritish are reported to have with- drawn west of the Salween River, evacuating Moulmein. The Japanese carried out 3 air raids against Rangoon on January 31. Only a few planes got through to drop leaflets on the city. Australasia: No 1m- portant change reported. West Coast: No further reports. II. Eastern Theater. Ground: The Russians continue to press the offensive at various points along the front. (No situation map will be issued this date.) Air: The Russians claim to have defeated a division of German parachute troops that were flown into the Leningrad front from Crete. III. Western Theater. Aircraft of the H.A.P. carried out raids against objectives in Occupied France yesterday. IV. Middle Eastern Theater. Ground: Press releases from British and Axis official sources indicate sporadic fighting south and west of Maraua. À sixty-mile advance to the east from Benghazi is claimed by the Axis. Air: Malta is still under serial bombardment and both a/r forces in Libya are active against ground forces, Aircraft of the R.A.F. carried out successful raids against motor transports in the Agadabia region. RESTRICTED Regraded Unclassified 8 February 2, 1942 Harold Graves Secretary Morgenthau Please talk to me as soon as possible about Harford Powel of the Defense Savings Staff. I want to discuss him with you. Gravest Kuhu disinssed with Hajr this maning/13/42. Regraded Unclassified 9 February 2, 1942 9:12 a.m. HMJr: Hello, Peter. Peter Odegard: Hello. HMJr: How are you feeling? 0: Fine, Mr. Secretary. How are you? HMJr: I'm fine. How are you? 01 oh, pretty well, HMJr: How's your cold? 0: Oh, it's much better this morning. HMJr: This may seem like a very unimportant matter, but I was - Graves and Kuhn are sitting here - and I was asking them to change the title of one Harford Powel from Director of In- formation to Consultant, because that's what I think he is, and he's 8. Consultant and he 1e not in charge, and I wondered if you Baw any good reason why we shouldn't. 0: No, I don't see any reason, because Harford hasn't had any administrative direction over Mahan and the others, BO far as I can gather. HMJr: Uh huh. 0: But I had some ideas about that whole thing that I think we probably ought to talk about sometime. HMJr: I see. 0; It seemed to me that the - that Mr. Houghteling status probably ought to be re-defined, too. HMJr: Well, we - he's no longer Assistant to the Secretary. 01 He isn't? Regraded Unclassified 10 - 2 - HMJr: No. That wae done last week. D: Yeah. What is his title now? HMJr: Talks aside) What 1E his title, Harold? His payroll title is "Consultant". O: Yeah. Well, that was what I was going to suggest. HMJr: Well, that's what it ie. o: Yeah. Well, I should think the same relation might be established for Harford. HMJr: Good. Well, the reason I called you about it was because after all, you did bring him in. O: Yeah. HMJr: I mean 0: Well, I'm sure that Harford wouldn't be hurt at all about that. HMJr: He wouldn't? 0: I shouldn't think BO. HMJr: Well, I'm sure that Graves can handle it. But it Just bothers me to have a man of his kind getting the credit in history for director of this organization. 01 Yeah. HMJr: Because he ien't entitled to it. 0: No. Well, we really have no Director of Information excepting Harold Gravee. HMJr: Except Harold Graves? O: Yeah. Regraded Unclassified 11 - 3 - HMJr: Well, I wouldn't call Harold that. I think he's above that. 0: Oh, I wouldn't call him that, but I mean actually. HMJr: Yeah. Well, we should have. 0: Oh. HMJr: And I think that these days we could get one. 0: I think we could, too. HMJr: I think we could get one these days. 0: Yeah. HMJr: What? 0: Yeah. I think certainly that a title of consultant more nearly describes the work that Harford has been doing. HMJr: Well, then it's fairly unanimous. O: Yeah. HMJr: And we'll let it go at that. 0: (Laughs) Well, I - you never tell me how other people think. HMJr: I don't? 0: No. Until after I've told you what I think. HMJr: Well, you don't want me to try to influence you. 0: (Laughs) No. HMJr: What? 0: No. HMJr: If I said to you, "Graves is absolutely opposed to this," then - I don't want to color your 12 - 4 - thinking. Why I'm surprised at you. O: (Laughs) HMJr: As a matter of fact, he agreed and 80 did Kuhn. 0: Oh. HMJr: Before I called you. 0: Yeah. Well, I would think that. HMJr: As I say, I didn't want to do anything. 0: Uh huh. HMJr: Well, thank you. 0: Well, thank you for calling. HMJr: Good-bye. O: Good-bye. 13 February 2, 1942 Dear Cordell: Yesterday, at five o'clock, Sir Frederick Phillips of the British Treasury, called on me and gave me & memorandum, a copy of which you will find enclosed herewith. Yours sincerely, (Signed) I. Margesthaw, Jr. Monorable Cordell hull, Secretary of State. Copy to Secretary Jones. Regraded Unclassified COPY 19 MEMORANDUM In view of further representations from Ris injesty's Ambassador in Chungking, his Majesty's Government feel that it is essential to send an immediate reply to the Generalissimo. It is understood that the question of assistance to China is under the President's consideration. His ajesty's Government now suggest that in addition to their supplying munitions on a lend-lease basis e joint offer should be made of 8. combined loan of $400 millions, of which, in view of the disparity of financial resources, the British share would be$120 millions or 6-30 millions. The latter sum would be made available immediately but there would be an unpublished understanding that it would be drawn upon only as required for expenditure in the sterling area directly required for the war; each item of expenditure being agreed upon between the two governments with the condition that any amount that had not been drawn upon at the conclusion of hostilities would be repaid. The United States part of the credit would no doubt be made subject to similar conditions. his Majesty's Government ask whether the President would agree that we should at once inform the Generalissimo that we have made this proposal to the United States Government. Regraded Unclassified 15 February 2, 1942 9:20 a.m. AID TO CHINA Present: Mr. Bell Mr. Foley Mr. White Mr. Bernstein Mr. Southard Mr. Viner Miss Chauncey H.M.JR: I have got to go on the Hill this morning, to Mr. Wallace's office, on this Chinese loan, and I want Mr. Bell and Mr. White to go with me. I asked for a copy of this resolution. Have you got one? MR. FOLEY: Yes, the one with the greatest possible importance or the way it was-- H.M.JR; No, the way-- MR. FOLEY: That is the way Jones wants it changed. This is the way it was for the President. H.M.JR: No, this way is all right. MR. FOLEY: Then we will substitute these two. H.M.JR: Yes. Have you had these photostated? MR. FOLEY: The letter? H.M.JR: Yes. Regraded Unclassified 16 - 2 - MR. FOLEY: No. MR. WHITE: I am not very presentable, Mr. Secretary. H.M.JR: That is the matter with you. 19. WHITE: I have got a little boil on my nose. MR. HELL: Where were you Saturday night? R.H.JK: Just to bring you people up to date, Mr. V. Soons was at my house at a quarter of seven, and I informed hin what we had done in confidence, and then I sent for Mr. Phillips, Sir Frederick Phillips. le came to the House last night at five. Re had been anxious to see me, and he said he had something for ne very urgent, which is es follows: "In view of the further representation from His Lajesty's Ambassador in Chungking, His Majesty's Government feels it is essential to send an immediate reply to the Generalissmo. It is understood that the question of assistance to China is under the President's consideration. His Majesty's Government now suggests, in addition to their supplying munitions on 8. Lend-Lease basis, a joint offer should be made of a combined loan of four hundred millions, of which, in view of the disparity of the financial resources, the Pritish share would be a hundred and twenty millions, or thirty million pounds. The latter sum would be unde available immediately, but there would be an unpublished understanding that it be drawn upon only ns required for the expenditure in the sterling area directly required for the war. Each item of expenditure being agreed upon hetween the two Governments with the condition that any amount that has not been drawn upon at the conclusion of hostilities would be repaid. "The United States part of the credit would no doubt be made subject to similar conditions. His Vajesty's Government asked whether the President would agree that we should at once inform the Generalissmo that we have made this proposal to the United States Government." Well, I told him We were going up on the Hill. I Regraded Unclassified 17 - 3 - said as soon as I had left the Hill, we would phone Phillips so he could phone London, because they want to get out a statement at the same time we do here, you see. I think at the same time we ought to let Soong know, you see, but the English want to get out 8. statement from London, 80 whatever time - I think we ought to tell them not to release it for three hours up there so as to give them a chance to get through to London, you see. Be- cause they have got a clause in here which is a good one. That is-- MR. WHITE: Give the money back when the war is over, and they have to spend it during the war, and they can't spend it during the war. H.M.JR: I think it is a good clause. MR. WHITE: I don't. I think it is very niggardly. If they are going to make any gesture at all, I think there is no value in that. MR. VINER: In any case, the limitations ought to go into the agreement with the Chinese and the authorization ought to be unlimited. MR. WHITE: That is right. Has your answer already been given to Phillips? H.M.JR: Oh, I told Phillips we would go ahead on our basis according to what he told us originally, and they could go ahead on theirs. MR. WHITE: That was the answer? H.M.JR: That wes the answer. MR. FOLEY: You see, the legislation provides-- H.M.JR: I - - excuse me - I said, "You told us you were going to give ten million pounds, and we could go 18 - 4 - ahead on ours. Well, we have gone ahead. We are going to give them the five hundred million. You can go ahead on yours and give them thirty million if you want to." He said, "Is that all right for us? Do you recognize that we can't give as much as you do?" And I said, "Yes, we recognize it." MR. WHITE: He called up & couple of times, and I kept him informed. I said on Saturday that I thought on Monday there would be some definite progress made, and we would inform him at once, so he has been informed right along as much as we could. H.M.JR: Well, I gave him a copy of the resolution last night, telling him in cabling to leave out that "whereas," what we were doing for - to preserve China, because that was being changed. Now, what I want in the few minutes that are left is - either White or Southard, in case they ask me this morning, "On what basis are you going to make this loan?" have either of you men got any suggestions? MR. WHITE: We have got a draft of a written state- ment. H.M.JR: Well, I can't read that. Supposing they say, "Well, on what basis are you going to lend this money?" MR. WHITE: I should be inclined to stick very closely to the "whereases," which indicate that they have been putting up a splendid fight for four years and there has been a tremendously heavy financial burden and it has the - the impact upon their economy has been naturally progressively severe and until their economic structure now is very weak, and that this loan should go a long way toward helping them to-- H.M.JR: Harry, I haven't got the time for the "whereases." On what basis are we going to lend it? Are we going to buy yuan, or how the hell are we going to do it? I haven't got the basis for the spinach. 19 - 5 - MR. WHITE: I don't know as we have given any thought to it. My own horseback opinion would be that those are the things that would be worked out later. H.M.JR: "Well, now, Mr. Morgenthau, you can't come up here and ask us for five hundred million dollars unless you have got ideas. How are you going to lend it to them?" MR. WHITE: Well, they may want to draw upon some of it in an effort to support their monetary system. H.M.JR: "Well, you have got fifty million dollars in the Stabilization Fund for that." MR. WHITE: Well, that has rather more restricted uses. That applies much more to their exchange opera- tions. This here could be used for strengthening their internal economy. H.M.JR: How? MR. BELL: What committee is this? H.M.JR: This is Wallace, the Speaker, McNary, and Joe Martin. MR. BELL: The Republicans, isn't it? MR. VINER: You might use it as a reserve. MR. BELL: Do you care to come right out and say, "Well, gentlemen, it is nothing but a political loan"? H.M.JR: Well, I am going to say it. MR. BELL: It is the big answer. H.M.JR: I am going to say, "It is a political and military loan.' MR. WHITE: It is a loan being made for political Regraded Unclassified 20 - 6 - and military purposes, but I am wondering as to whether he doesn't have to have some answer to the question of how they possibly can use it. H.M.JR: Have you got it? MR. VINER: Well, they can use it as a reserve held over here against their own bond issues or against their own currency. They can use it in small amounts over a time in gold and silver or gold or silver, or even American money. H.M.JR: How, Jake? MR. VINER: By taking it into China and selling the American currency for the Chinese and mopping up Chinese currency. H.M.JR: Does that mean we are going to buy yuan? MR. VINER: No, no, we wouldn't buy it. They would buy the yuan with your dollars. You see, they would buy the yuan away from the Chinese public with your dollars. H.M.JR: Well, the President said - I haven't got on this thing deeply, and I gather no one else has here either, that against the dollars we loan them we should have yuan, 30 at least we would have something. MR. WHITE: Mr. Secretary, what we have got is & Regraded Unclassified 21 - 7 - promise for dollars. That yuan isn't going to be worth very much, and if we take the yuan we may not have the - we won't have as good a credit as we may have if they owe us dollars. The reason why I would like to see you avoid, in so far as possible, stat- ing anything but that it is a political and economic loan is because we can't do anything-- H.M.JR: Harry, don't argue with me about it. I have got to have something if they press me. MR. VINER: That is a drawing credit here. You will establish 8. drawing credit - the ways in which they can make use of it, they still have to work out with you. H.M.JR: But the only thing we are going to have against it is their I.O.U.? MR. VINER: Not even that, possibly. MR. WHITE: In some cases you may have yuan. In some cases you will have the I.O.U. MR. VINER: And in some cases you will have nothing. MR. WHITE: You may have nothing. It depends on what the terms and conditions are that you haven't worked out yet, because they are in the midst-- MR. VINER: You can tell them up there that you don't like it any better than they do, but we are in 22 - 8 - 8 war, and things have to be done. H.M.JR: Well, the answer is nobody has thought this thing through yet. MR. WHITE: Oh, I wouldn't say that, Mr. Secretary. I have thought it through to the extent where I say nothing can be done economically and financially. H.M.JR: Are you just going to let him call up and say, "I want a hundred million dollars," and have it transferred to the Chase? MR. WHITE: Oh, no, I think we would want to set such conditions as the best we could get under the lend circumstances. MR. VINER: Each time, presumably, he would tell us how he is going to use the next installment, and then we would turn it over to him as & credit with the Federal Reserve Banks, or in some other way. MR. SOUTHARD: You might buy yuan against some of it. MR. VINER: You might. MR. SOUTHARD: In other cases you will take their note. MR. WHITE: They may not call on most of it until after the war, in which case there would be all kinds of conditions you could set on it. MR. FOLEY: The bill, Mr. Secretary, is very flexible, and it states, "at such time or times, and upon such terms or conditions" as you prescribe, and you get the best terms you can. MR. VINER: That is the thing to tell them. MR. FOLEY: You are not going to give it to them all at once, and each time you make an advance to them Regraded Unclassified 23 - 9 - you get the best terms you can in the light of the circumstances. H.M.JR: Well, have we crossed that bridge, we are not going to give it to them all at once? MR. WHITE: No, I don't think we have, but I think in our own minds -- MR. VINER: But you can say you will make the best terms you can. MR. FOLEY: You don't have to give it to them all at once. H.M.JR: After listening to you fellows, I haven't got any help, no help at all. MR. BERNSTEIN: Can I suggest & possible approach, that since this is a military and political loan, it will have its greatest beneficial effect, the fewer conditions that you apply? You know, however, that they probably can't use the whole five hundred million any one time, and you are going to keep watching it to see that they don't go out of bounds. MR. VINER: But don't make any pledges as to how you are going to use it. H.M.JR: That is the point, any pledge I make this morning, I have got to keep. MR. VINER: But don't make any pledges. Say it is 8 political loan, and you musn't have your hands tied. If they ask you to give them a pledge, say you would have to take it up with the President, because it might nullify the whole purpose of the loan. MR. WHITE: You are making it for military and po- litical purposes. H.M.JR: Let's not prolong the agony. You are not ready yet to advise me how the thing should be written out. Regraded Unclassified 24 - 10 - MR. WHITE: Definitely not. H.M.JR: Well, that is -- MR. VINER: You can't, because you have to talk to them and give them the - as little as possible. H.M.JR: Then let's say no one here has gone that far. MR. SOUTHARD: You could make a list of all the possibilities and bases, but they might interpret those as being - you might make 8. list of all the possible technical means by which dollars could be made available, but they might interpret that on the Hill as being your promise of the particular ways in which it would be done. It is yuan and silver and gold. H.M.JR: You fellows had better get busy this morning and work on it. MR. VINER: There is nothing more to be done. H.M.JR: You had better, while I am up on the Hill, get busy and have something for me at three o'clock, when T.V. Soong comes in here. He is coming in at three o'clock. MR. WHITE: We could do that anyway -- MR. VINER: Can't -- MR. WHITE: The thing to do is ask what terms they want. MR. VINER: Mr. Secretary, if we give them 8. range of possibilities, he will pick out the easiest and the best. H.M.JR: I am going to ask him this time. MR. WHITE: They will be stuck worse than we will 85 to what to use the money for. Regraded Unclassified 25 - 11 - H.M.JR: I made the mistake before of making sug- gestions. Now I will let him make one. Listen, there is one thing that is bothering me. I have got all these letters from the President to Wallace and the Speaker, and we have got a resolution, and I haven't sent a damn thing to the Director of the Budget. Don't you think it would be a nice thing to call him up and say I am going up on the Hill 80 he doesn't read about it in the paper? MR. BELL: He ought to know about it. When is it coming out in the press? H.M.JR: Maybe at noon. MR. VINER: One of these letters says you are going to inform the Bureau of the Budget. The letter up to the Hill says that, doesn't it? It says that there wasn't -- H.M.JR: I didn't read it. MR. BELL: I think he ought to be told. This, I take it, is just an informal meeting this morning. H.M.JR: To get a clearance. MR. BELL: With this group. Now, when the bill is introduced, where do you go? Do you have to go to some committee and defend it? H.M.Jk: I think it is Appropriations. MR. BELL: Then it is legislative also. H.M.JR: I don't know. MR. FOLEY: Well, it is legislative, Dan, but the appropriation is made in the legislation, so I should think -- MR..BELL: You have to have 8. rule, then. 26 - 12 - MR. FOLEY: No, it is a special bill, not a general bill. MR. BELL: But you have to have a rule in the House. MR. FOLEY: Well, we can get a rule. H.M.JR: Have you got your overcoat in here, Harry? You had better get it. MR. BELL: Then you would have to have these pur- poses that you are talking about when you go before that committee. I think you have got to give more than just political. H.M.JR: But not necessarily this morning. MR. BELL: Not today, no. (The Secretary held a telephone conversation with Mr. Blandford, of the Bureau of the Budget, as follows:) 27 February 2, 1942 9:38 a.m. HMJr: Hello. John B. Blanford, Jr: Hello, Mr. Secretary. HMJr: How are you? B: Fine, thanks. HMJr: Mr. Blanford, I gather the Director of the Budget ie out. B: Juet for the moment. HMJr: Well, if you could give him this message. B: Yeah. HMJr: Mr. Hull and I brought up at Cabinet the question of & loan to China. B: Yeah. HMJr: Based on military and political necessities. B: Yeah. HMJr: And we recommended five hundred million dollars. B: Yeah. HMJr: And then we met with the President around noon - Mr. Jones and I - because Mr. Hull 1s sick B: Uh huh. HMJr: and the President has signed letters to the Vice-President and to the Speaker recommending this. Hello. B: Yeah. Vice-President and the Spesker. HMJr: Yeah. We're going to - we have letters. Now, we're going up on the Hill this morning to meet Regraded Unclassified 28 - 2 - with the Vice-President and the Speaker, and also the two minority leaders, Mr. Jones and I and the people from my office. B: Yeah. HMJr: And with the hope that they'll release the President's letter, because both Mr. Hull and Mr. Stimson - from political and military angles - are very, very anxious that it get out at once. B: Yeah. That'll require legislation, won't it? HMJr: Yes. B: We've had such a proposal knocking around here in Lend-Lease language, too, Mr. Secretary. HMJr: Yes. Well, the President - I have a signed letter from the President, you see. I'm having it photo- stated. B: Yeah. HMJr: And after we come down from the Hill, Mr. Bell will send you over everything that we've got. B: Fine. HMJr: And I'd appreciate your cooperation, but this has been a sort of a shotgun affair. B: Very good. HMJr: So we haven't had time to do the normal thing. B: All right. HMJr: But it happened over the week-end, and I wish you'd explain it to Mr. Smith. B: I'll do it. HMJr: And when we come down from the Hill, Mr. Bell will give you everything that I've got. B: Good. Thank you. HMJr: Thank you. B: All right, sir. Regraded Unclassified 29 - 13 - H.M.JR: Now, you (Miss Chauncey) write a letter to the Secretary of State. "Dear Cordell: Yesterday at five o'clock Sir Frederick Phillips of the British Embassy called on me and gave me the following" - "gave me a memorandum, a copy of which you will find enclosed herewith." And when I come back, I will sign it. MR. WHITE: Don't you want to tell him what you answered to him? H.M.JR: No, I haven't got time. (The Secretary held a telephone conversation with Mr. Jesse Jones, as follows:) Pe 30 February 2, 1942 9:40 a.m. Jesse Jones: Yes. HMJr: Yes, Jesse. J: Have you got the Hull letter? To the President? HMJr: The Hull letter? J: Yeah. HMJr: Wait a minute. (Talks aside) Have we got the Hull letter? No. We were counting on you for that. J: Well, I was just trying to get it located. I talked to the Secretary last night. He signed it and sent it down to the President, so I got hold of Rudolph trying to get him to find it. HMJr: No, I've got Knox' and Stimson's. J: Okay. HMJr: And the President's. J: Yeah. HMJr: Hull was your baby. J: Yeah. Well, he's signed, but I haven't located the letter yet. HMJr: I see. J: I'll meet you at ten o'clock. HMJr: Attaboy. J: All right. Regraded Unclassified 31 - 14 - H.M.JR: He hasn't got Hull's letter. Hull sent it to the White House, but we did it differently. MR. FOLEY: You don't need Hull's letter this morning, do you? MR. WHITE: Oh, yes. H.M.JR: No, Jones said, and I think he is right, that those letters should be saved for the committee. MR. FOLEY: That is right. H.M.JR: And just the President's letters -- MR. FOLEY: That is enough, and the bill. H.M.JR: And the resolution to be released. MR. WHITE: No, but you intend to show it to them, don't you? MR. FOLEY: When you go before the committee. MR. VINER: You can say that you have the letters. H.M.JR: They sat up all night drafting those letters. Now, where are my - the copies of those things? MR. BELL: Stephens is still out. I take it he is staying down there with them. JOINT RESOLUTION To authorize the President of the United States to render financial aid to China, and for other purposes. "th. WHEREAS China has for more than four years valiantly resisted the forces of Japanese aggression; and WHEREAS financial and economic aid to China will increase her ability to oppose the forces of aggression; and WHEREAS the defense of China is vital to the defense of the United States: Therefore be it Resolved by the Senate and House of Representatives of the United States in Congress assembled, That the Secretary of the Treasury with the approval of the President is hereby authorized, on behalf of the United States, to loan or extend credit or give other financial aid to China in an amount not to exceed in the aggregate $500,000,000 at such time or times and upon such terms and conditions as the Secretary of the Treasury with the approval of the President shall deem in the interest of the United States. Sec. 2. The authority herein granted shall be in addition to any other authority provided by law. Sec. 3. There is hereby appropriated out of any money in the Treasury not otherwise appropriated, such sum or sums not to exceed $500,000,000 as may be necessary to carry out the provisions of this Joint Resolution. Regraded Unclassified 33 THE WHITE HOUSE WASHINGTON January 31, 1942 wy dear Mr. Speaker: Responsible officials both of this Govern- ment and of the Government of China, have brought to my attention the existence of urgent need for the immediate extension to China of economic and financial assistance, going beyond in amount and different in form from such aid 8.8 Congress has already authorized. I believe that such ad- ditional assistance would serve to strengthen China's position as regards both her internal sconomy and her capacity in general to function with great military effectiveness in our common effort. I urge, therefore, the passage by Congress of appropriate legislation to this effect and attach hereto a suggested draft of a joint resolution which would accomplish this purpose. Sincerely yours, final Minawel The Honorable, The Speaker of the House of Representatives. Regraded Unclassified 34 THE WHITE HOUSE WASHINGTON January 31, 1942 My dear Mr. Vice President: Responsible officials both of this Govern- ment and of the Government of China, have brought to my attention the existence of urgent need for the immediate extension to China of economic and financial assistance, going beyond in amount and different in form from such aid as Congress has already authorized. I believe that such ad- ditional assistance would serve to strengthen China's position as regards both her internal economy and her capacity in general to function with great military effectiveness in our common effort. I urge, therefore, the passage by Congress of appropriate legislation to this effect and attach hereto a suggested draft of a joint resolution which would accomplish this purpose. Sincerely yours, Jusesak The Honorable, The Vice President of the United States. Regraded Unclassified JOINT RESOLUTION 35 To authorize the President of the United States to render financial ald to China, and for other urposes. MEREAS China has for more than four years valiantly resisted the forces of Japanese aggression; and WHEREAS financial and economic aid to China will increase her ability to oppose the forces of aggression; and WHEREAS the defense of China is of the greatest possible importance: Therefore be it Resolved by the Senate and House of Representatives of the United States in Congress assembled, That the Secretary of the Treasury with the approval of the President is hereby authorized, on behalf of the United States, to loan or extend credit or give other financial aid to China in an amount not to exceed in the aggregate $500,000,000 at such time or times and upon such terms and conditions as the Secretary of the Treasury with the approval of the President shall deem in the interest of the United States. Sec. 2. The authority herein granted shall be in addition to any other authority provided by law. Sec. 3. There is hereby appropriated out of any money in the Treasury not otherwise appropriated, such sum or sums not to exceed $500,000,000 as may be necessary to carry out the provisions of this Joint Resolution. Regraded Unclassified 36 WAR DEPARTMENT WASHINGTON January 31st, 1942. My dear Mr. President: The confidential information which has been coming to me during the past few weeks indicates that the difficult economic and financial situation within China is impairing her military effort. Our information indicates further that sub- stantial financial aid must be given to China quickly If we are to have assurance that recent and prospective military developments will not too seriously weaken the morale of the Chinese people. Any substantial financial help that can be given to China at this time can not but help strengthen her striking power. I therefore urge for your consideration that the financial assistance which I am informed the Generalissimo is requesting be granted expeditiously. Faithfully, Hurry < Stuson The President, The White House. Regraded Unclassified 37 THE SECRETARY OF THE NAVY WASHINGTON January 31, 1942 My dear Mr. President: I refer to the urgent request which this Government has received from Generalissimo Chiang Kai-shek to help him, by financial assistance, to maintain more effectively the morale of the Chinese people. Recent military developments in the Pacific and difficult economic and financial conditions in China have made necessary remedial action of a substantial character. The military operations which the armies of China under the Generalissimo are carrying on and are planning to carry on are of extreme importance to us. It would be very unfortunate if we were to overlook any possibility of checking the impair- ment of China's morale resulting from the growing internal difficulties in China. I am convinced that the financial assistance which the General- issimo has requested would make an effective con- tribution to the maintenance of China's morale and military strength. I strongly recommend, therefore, that we should grant the Genoralisaimo's request without delay. Faithfully, Jeankstnor The President, The White House. Regraded Unclassified 38 DEPARTMENT OF STATE WASHINGTON January 31, 1942 Dear Mr. President: I refer to Generalissimo Chiang Kai-Shek's request for an immediate credit to China of $500,000,000 to assist him in China's prosecution of the war. China is now in her fifth year of war against aggression and has had to draw very heavily upon her own resources. Certain loans have been made to China through the Federal Loan Agency, mostly in connection with the purchase of strategic materials. These loans have been used to buy supplies in this country, but China now needs cash to be used within, or from within, its own borders, and I strongly recommend that you ask Congress to authorize loans, or credits, or both, to China up to $500,000,000. The brilliant resistance to appression which the Chinese have made and are making, and their contribution to the common cause, deserve the fullest support we can Cive. Sincerely yours, The President, The White House. Correshiel 39 February 2, 1942 10:55 a.m. AID TO CHINA Present: Mr. White Mr. Foley Mr. Bell Miss Chauncey H.M.JR: Sit down, gentlemen. I will call T.V. Soong and the Russian Ambassador. (Miss Chauncey entered the conference.) MR. BELL: How about Phillips? H.M.JR: I called him from the Hill. (The Secretary held 8 telephone conversation with T.V. Soong, as follows:) Regraded Unclassified 40 February 2, 1942 10:48 a.m. HMJr: Hello. Operator: Dr. Soong. HMJr: Hello. T. V. Soong: Hello, Mr. Secretary. HMJr: Hello, Dr. Soong. I thought you'd like to know that at twelve o'clock the Speaker of the House 18 going to release this request from the President to the newspapers for five hundred million dollars. S: Yeah. Good. Good. HMJr: So that's that. 8: Yeah. HMJr: But it will not be released until twelve o'clock. Si Very good. When would you want me to come, three o'clock? HMJr: Three o'clock. S: Very good. HMJr: Thank you, 6: Thank you very much for calling me. HMJr: Thank you. Regraded Unclassified 41 - 2 - H.M.JR: Now, if you (Miss Chauncey) will write a letter to Dr. Soong, and one to the Russian Ambassador, and one to Phillips. It ought to be done fairly promptly in each case. "Gentlemen: I am enclosing herewith for your confidential information a copy of the resolution which will be introduced at twelve o'olock by the Speaker of the House." MR. WHITE: The form may change. They haven't definitely decided on the form. H.M.JR: Well, they have asked for a copy. MR. BELL: "A copy of the resolution covering the loan to China." H.M.JR: How does it read? MISS CHAUNCEY: "I am enclosing herewith for your confidential information 8 copy of a resolution covering a loan to China which will be introduced at twelve o'clock" : MR. FOLEY: "In substantially this form." MISS CHAUNCEY: "Which will be introduced in sub- stantially this form at twelve o'clock today by the Speaker of the House." H.M.JR: "Will be introduced by the Speaker"? MR. FOLEY: No, he will have whoever is chairman of the committee that they select do it. It will probably be introduced by Sol Ploom. H.M.JR: Well, "will be introduced" -- MR. FOLEY: "Laid before the House today by the Speaker in substantially this form." H.V.JR: That is right. How have you got it there? Regraded Unclassified 42 - 3 - MISS CHAUNCEY: "I am enclosing herewith for your confidential information & copy of a resolution which will be laid before the House today in substantially this form" -- MR. FOLEY: "By the Speaker." MR. WHITE: You left out a phrase there. MISS CHAUNCEY: "Covering loan to China"? MR. WHITE: That is right. H.M.JR: Now how have you got it? MISS CHAUNCEY: "I am enclosing herewith foreyour oon- fidential information 8 copy of 8 resolution covering a loan to China, which will be laid before the House today in substantially this form by the Speaker." H.M.JR: O.K., get it under way 50 it will get to them before twelve. MR. FOLEY: "Laid before the House by the Speaker at noon today in substantially this form. H.M.JR: What did you say, Ed? You keep changing it every two minutes. MR. FOLEY: She had the Speaker in the wrong place, Mr. Secretary. H.M.JR: I mean, you fellows - if you are going to get it there at twelve o'clock, you have got to do these things. I mean, I can't work this way. MR. FOLEY: All right. H.M.JR: I mean, if you are going to change it, we might as well not send it. I mean, I am under - I worked right straight through Saturday and Sunday. Regraded Unclassified 43 - 4 - MR. WHITE: Has Hull been notified? (Miss Chauncey left the conference.) H.M.JR: Let the great Jesse do that. I am not going to be worried about it. Would you, Dan? MR. BELL: Well -- MR. WHITE: Not necessarily. It is your ball from now on. MR. BELL: You are sort of carrying the ball. Do you want me to do it? H.M.JR: No, no. You mean Hull? MR. BELL: You are sort of going to carry the ball. Jesse might think he was butting in. MR. WHITE: The way the bill is drafted, it is really your ball. H.M.JR: Well, I can do that. (The Secretary held a telephone conversation with Ambassador Litvinof, as follows:) 43 - 4 - MR. WHITE: Has Hull been notified? (Miss Chauncey left the conference.) H.M.JR: Let the great Jesse do that. I am not going to be worried about it. Would you, Dan? MR. BELL: Well -- MR. WHITE: Not necessarily. It is your ball from now on. MR. BELL: You are sort of carrying the ball. Do you want me to do it? H.M.JR: No, no. You mean Hull? MR. BELL: You are sort of going to carry the ball. Jesse might think he was butting in. MR. WHITE: The way the bill is drafted, it is really your ball. H.M.JR: Well, I can do that. (The Secretary held a telephone conversation with Ambassador Litvinof, as follows:) Regraded Unclassified 44 February 2, 1942 10:58 a.m. HMJr: Hello. Operator: Go ahead. HMJr: Hello. Ambassador Litvinov: Yes. HMJr: Mr. Ambassador. L: How are you, Mr. Secretary. HMJr: That's right. L: Good morning. HMJr: Good morning. L: I thought you'd like to know this in confidence, that at twelve o'clock we're having introduced in the House of Congress, a request for a loan to China for five hundred million dollars. L: I have had no reply to my cable. HMJr: What's that? L: I've had no reply to my cable. HMJr: You have not? L: None as yet HMJr: Well L: It was embarrassing. HMJr: I see. Well, we've decided to go ahead with it. L: Uh huh. HMJr: And I'm sending you by hand a copy of the resolution. L: Yes. Thank you very much, Mr. Secretary. Regraded Unclassified 45 N I I HMJr: But we're not - it'll not be given out to the newspapers until twelve o'clock. L: Uh huh. That's half of what they asked for. HMJr: No, that's all they asked us for. L: Why I thought they asked you for a billion dollars. HMJr: Yes. Half from us, and half from the English. L: Oh, I see. HMJr: The English will make their own announcement from London. L: Uh huh. HMJr: They're going to do something also. L: Uh huh. HMJr: Yes. L: Thank you very much. HMJr: You're welcome. L: I will give you a copy of the reply from my government when I receive it. HMJr: Well, if you get it, I'd like to see it. L: Yes. HMJr: If you get a reply, I'd like to see it. L: All right. HMJr: Thank you. L: Thank you, Mr. Secretary. HMJr: Thank you. Regraded Unclassified 46 - 5 - (Mrs. McHugh entered the conference.) H.M.JR: You (Mrs. McHugh) write a letter to Mr. Hull and Jesse Jones -- (The Secretary held a telephone conversation with Mr. Cordell Hull, as follows:) Regraded Unclassified 47 February 2, 1942 11:00 a.m. HMJr: Hello. Secretary Hull: Hello, Henry. HMJr: Cordell, has Jesse called you to let you know what happened on the Hill? H: No. HMJr: Well, we've just come back, and they received us very well and the Speaker's arranging to have the resolution introduced at noon today. H: Oh, that's fine. HMJr: And he doesn't think he's going to have any trouble. H: He oughtn't to. HMJr: Charlie McNary said he was for it. Joe Martin wasn't there. They had somebody elee..... H: Who? HMJr: A man by the name of Mischner or Mishner. H: Oh, Michener of Michigan. HMJr: And he kept talking all the time about something that Dean Acheson had said about scrap iron, or - I don't know. I couldn't make head or tail out of it. H: Well, he's a little, narrow, city politician, you know. HMJr: Well, he talked that way. H: Yeah. HMJr: But he said he'd go along, but he kept talking were we going to do for China what we've done for Japan. I couldn't make head or tail of it. Regraded Unclassified 48 - 2 - H: Oh, a little cheap political stuff. You see, here's something, Henry, that bears a little fruit. Back all last spring when I was being urged to - over there - to freeze everything in Japan..... HMJr: Yeah. H: she had twice the fighting naval strength in the Pacific that we had under our plan to take half of it out..... HMJr: Yeah. H: ..... to help Britain, and we had information - very reliable - in January - that Hitler would attack Russia in June. HMJr: Yeah. H: And I told the Russians that and got nothing but a cussing out. HMJr: I see. H: And now if we had gone in there with what in those circumstances would have been an aggravated act of war HMJr: Yeah. H: with Japan's finger on the trigger of her navy and Germany ordering her to go forward and all her war leaders urging her to go forward, why we could awful easily have gotten hooked there in her fight..... HMJr: Yeah. H: last spring. HMJr: Yes. H: That would have meant that Hitler wouldn't have even remotely thought about attacking Russia in the summer. 49 - 3 - HMJr: I see. H: Now that was - nobody knows that, but that's a tremendous factor in all those difficult evolutions that we had to - that the President and I had to go through with..... HMJr: I 800. H: in handling that thing. And that 1s why we're BO far above these smarter things, you know, that of course, we can't go out and make it very public yet. HMJr: Yes. H: But I just - in a private meeting, you could let the fellows see the breadth of the matter. HMJr: Well, I think that that's something that you could do much better than I can, because they'll un- doubtedly expect you to testify. H: Yeah. HMJr: You did a swell job on that other - the time we went up on the fifty million dollars for China. H: Well, that's no sign of what a fellow would do later, but HMJr: Well, it'll H: Anyhow, I'm trying to get rid of the grippe and cold and 8. lot of other things at the same time, and as soon as I can function why I'll be delighted to go anywhere. HMJr: Well, I think it would be most important for them to hear from you, because they'll expect it. Are you home now? H: No, I ran down here this morning. HMJr: Well, take care of yourself. The thing is going along... H: But I'm going home this afternoon. - 4 - 50 HMJr: Yeah. Well, take care of yourself. H: Anyhow, I'll keep in touch with you. HMJr: And I'll do the same. H: Yeah. HMJr: Thank you. Regraded Unclassified 51 - 6 - H.M.JR: It is really pitiful. MR. WHITE: I couldn't understand him. H.M.JR. You couldn't hear him? MR. WHITE: I heard him, but I - it didn't make continuity. MR. FOLEY: He was trying to make some justifica- tion for what they had done to Japan, why they sent oil and scrap. H.M.JR: What he was trying to say was that if we had tightened up on Japan, then Germany would never have attacked Russia. MR. FOLEY: That is it. H.M.JR: That is a new one. MR. WHITE: He is still in the same frame of mind, justifying his -- MR. FOLEY: Justifying everything he did. MR. WHITE: The thing that is uppermost -- H.M.JR: When I said scrap iron, he said - at least that is what I gathered. MR. FOLEY: That is right. H.M.JR: That is what he was trying to do. If he had tightened up then Japan would have attacked us and Germany never would have attacked Russia. MR. WHITE: It is a fairy story, to me. H.M.JR: What? MR. WHITE: It sounds like a fairy story to me. 52 - 7 - H.M.JR: It is a new one to me. This is a letter to Mr. Hull, Mr. Stimson, Mr. Knox, and Mr. Jones. In each case, "I am enclosing herewith" - well, to Mr. Hull it will be, "I am enclosing herewith a photostat of Mr. Stimson's and Mr. Knox's letter to the President for your records," you see, and then to Stimson you can give him Hull's and Knox's letter, and to Knox you will give him Stimson's and Hull's letter, and to Jesse Jones, you give all three. MR. BELL: Have they got the President's letter? MR. WHITE: Stimson returned it. We will want to enclose it. I don't think he has a copy. H.M.JR: Then why not give them in each case a copy of the President's letter? What? MR. WHITE: And doesn't the President have to have the original? They are to him. H.M.JR: We will see about the President. We will take care of him later on. We will hang on to those for the time being. And I think I would send a complete set to the Director of the Budget, and also the President's letter to the Vice-President on this Chinese matter, you see. MR. WHITE: Is it necessary to mention in any of the letters the confidential nature of the letters, other than the President's letter? H.M.JR: No. Now, that supplies the Director of the Budget. Anybody else around town? Do you think we ought to send a set over to Steve Early? MR. BELL: Well, I don't know. You are not going to ask him to comment on it for the present? H.M.JR: No. I think maybe we had better not. MR. WHITE: He might release them. Has he got the President's letter and a copy of the resolution, if you expect him to release something? 53 - 8 - H.M.JR: Oh, he isn't going to release anything, Harry. I just wanted to tell him what is going to happen so he doesn't say, "Well, why don't somebody tell me about this?" MR. FOLEY: I think it is enough just to tell him. H.M.JR: Now -- MR. BELL: I think I would say in the letter to the Director of the Budget, "The letter from the Secretaries of War and Navy are of course confidential." MR. WHITE: And State. MR. BELL: Was that true? I didn't see the Sec- retary of State's letter. MR. WHITE: I didn't either, but if it isn't that kind of a letter -- H.M.JR: Why not say to each one in turn, "Of course these letters are confidential?" What harm can it do. MR. BELL: That certainly would be better protection. H.M.JR: Why not say, "I am sending you these for your confidential information"? MR. BELL: Yes, that is right. H.M.JR: I want to get rid of all of this stuff. These are various drafts. Here is one for you, Harry. (The Secretary held 8. telephone conversation with Mr. Stephen Early as follows:) 54 February 2, 1942 11:05 a.m. HMJr: Hello. Operator: Mr. Early has a newspaper man with him, and he'd like to wait until he leaves. HMJr: Well, tell him not too long. Operator: All right. HMJr: Not too long. Operator: All right, I'll tell him. Do 55 February 2, 1942 11:09 a.m. HMJr: Hello. Operator: Mr. Early. HMJr: Hello. Stephen J. Early: Yes, Henry. How are you? HMJr: Fine. How are you? E: All right, sir. HMJr: On the chance that you may not know what I'm going to tell you, I thought I'd better call you up; and if you do know, why just tell me BO. E: Yes. HMJr: Saturday noon the President - Jones and I went over to see the President because Hull was sick. E: Yes, I know of that meeting. HMJr: And the President signed letters to the Vice- President and the Speaker asking for five hundred million dollars for China. E: Uh huh. HMJr: Now, Jesse and I and my boys went up, and we had B. meeting there at which Barkley was present and Charlie McNary E: Uh huh. HMJr: and somebody pinch-hitting for Joe Martin. E: Uh huh. HMJr: A fellow from Michigan, Michener. E: Yes. That's right. HMJr: And they all agreed that they'd go ahead, and Regraded Unclassified 56 - 2 - the Speaker's having it introduced at noon. E: Uh huh. HMJr: And he's going to introduce - release at that time the President's letter, to him. E: Good. HMJr: See? E: Good. HMJr: Now, is that all right? E: Yes, perfect. And thanks a lot for telling me. HMJr: Anything - any loopholes there? E: No, it's quite all right. That's all right. You saved my face by telling me, though. HMJr: Well, you can do that to me. E: Yeah. Well, I will. HMJr: All right. It's easier for you to do it. E: (Laughs) HMJr: Now, one other thing while I have you. The Vice- President showed me the letter from you to Cabinet and heads of departments. E: Yeah. HMJr: ....about..... E: About the speeches. HMJr: Yeah, fine. And somebody up there said, "Well, this doesn't include Marriner Eccles." E: Well, by God, he doesn't make a speech, does he? HMJr: He makes one once a week. E: He does? Regraded Unclassified 57 - 3 - MMJr: Yeah. Some of them are terrible. E: Well, I'll just send him one. HMJr: Would you do that? is Sure. HMJr: It would make my life sweeter. E: Sure. Well, yes, Henry, I'll send him one; because I didn't put him on the list because he heads up a more or less independent shop up there in Federal Reserve. HMJr: Well, his - some of his speeches cut across the President and me more than any others. 3: Well, I'll but him right on. He'll get it today. HMJr: Wonderful. E: Right, sir. HMJr: Thank you. E: Now, Henry. HMJr: Yeah. E: This is a loan, is it? HMJr: Yeah, this is a loan. E: Well. HMJr: And they're going to give it to the press - rather, release it - however they do that on the Hill - at noon. E: Yeah. The Speaker'll handle it. HMJr: Yeah. E: All right. Thank you very much. HMJr: Thank you. E: Good-bye. Regraded Unclassified 58 - 9 - H.M.JR: Now, any suggestions? MR. WHITE: I have one comment. I think this sen- tence is - only the British Government would dare do this. "The United States part of the credit would no doubt be made subject to similar conditions." They are setting conditions for the loan that we are making with- out discussing it with us. If we could only utilize the brass that they have in some of our industry, I think there wouldn't be any shortage. H.M.JR: Anything else? MR. WHITE: No, everything is taken care of. H.M.JR: Ed, any suggestions? MR. FOLEY: No. H.M.JR: Dan? MR. BELL: No, sir. MR. WHITE: With your permission, I will just keep Berle informed. I said I would. H.M.JR: I think that would be good. If you don't mind, I would like to call up Berle and thank him for getting after Jones. MR. WHITE: It would be very nice. I don't know whether he did, but it would be very nice. He would appreciate it, since he is in the doghouse. MR. FOLEY: Is he in the doghouse? MR. WHITE: Well, sort of. H.M.JR: He is, as far 88 Harry is concerned, because I have always treated him beautifully. (Mrs. McHugh left the conference). Regraded Unclassified 59 - 10 - MR. WHITE: Is it your thought - I imagine it is - that you want a prepared statement, as in the past? H.M.JR: That is right. MR. WHITE: Herbert Feis expressed himself - I don't know who he was talking for - he said they very much do not want this matter to come before the Foreign Relations Committee of the Senate. H.M.JR: Well, that is very nice of Herbert Feis. Now, I think that when T. V. Soong comes in this after- noon that we ask him for suggestions. I think that is a good plan. We will say, "Now, Mr. Soong, what ideas have you got?" MR. WHITE: Or what ideas has his Government got, and that will give him a chance to get them, and 80 on. (Miss Chauncey entered the conference.) H.M.JR: That letter to Soong is all right. (Laughter) What are you laughing at? MR. FOLEY: She has got the Speaker in the right place. H.M.JR: They wouldn't know the difference. You had better send these by three different messengers, so that they will get it. MISS CHAUNCEY: All right. H.M.JR: Thank you very much. (Miss Chauncey left the conference). H.M.JR: No, I think that the thing is to ask him - don't you - ask him that - you know-- MR. BELL: If he has some ideas? MR. WHITE: Maybe before the bill passes it might be better to merely tell them to be thinking about it. 60 - 11 - n case the bill does pass we will want to go into the matter very carefully. Otherwise, you are almost committing yourself before it passes. I suppose it will pass, but he might talk in such terms with his own Government as to make them assume it is already passed. H.M.JR: No, I want to say, "How are you going to use this?" and all the rest. MR. BELL: I think he ought to say it before the Secretary appears before the committee, and he hasn't got time, I don't believe, to get word back from China. MR. WHITE: Well, he can submit a tentative memoran- dum. H.M.JR: Did I give each of you a copy of Sir Frederick Phillips'? MR. FOLEY: Yes. H.M.JR: Well now, Dan, the other thing is this. As soon 88 we get out of this for air, then I want to start with you men on the so-called Lend-Lease in reverse, but we will clean this up first, you see. Then we will do Lend-Lease in reverse. MR. BELL: I got your memorandum on that thing. You asked how are we buying sterling. Well, the dollars I am putting over there is buying the ster- ling. That is the way that is working. H.M.JR: Did you get my memorandum that Viner suggested Hardy as an addition to George Haas's staff? MR. BELL: Recently? H.M.JR: Friday or Saturday. Regraded Unclassified 61 - 12 - MR. BELL: I haven't seen it this morning. H.M.JR: Have you got any opinion on Hardy? MR. BELL: No, I haven't at all. H.M.JR: Do you know him? MR. BELL: I don't know him. I met him, but I don't know anything about him. Jake brought him here, you remember, for that banking study, and I haven't very much use for Brookings, but he says he doesn't agree with the Brookings crowd at all. MR. WHITE: He has been there nine years. MR. BELL: He says he doesn't agree with the crowd over there. H.M.JR: What do you think, Harry? MR. WHITE: I think he is a second-rater. I don't know. If George wants him - he is a whole lot better than a lot of other men around town, but I am sure he can also get a better man, and his connections with Brookings, I think, are something to be avoided here. MR. BELL: They never give up their connections. They are always utilizing Brookings as a sort of extra governmental agency to put out things as though they are speaking for the Government. They have a lot of prestige. I think it is unfortunate to have them have & channel there. (The Secretary held a telephone conversation with Mr. Berle as follows:) Regraded Unclassified 62 February 2, 1942 11:19 a.m. HMJr: Hello. Adolf A. Berle: Hello, Mr. Secretary. HMJr: Hello. B: I think we're all set, unless something's happened that I don't know about. HMJr: Well, we just came back down off the H111. I don't know if anybody's told you that. B: No, sir. They haven't. HMJr: Well, Jones and I and my own people were on the Hill. B: Yes. HMJr: And we met with the Vice-President and the Speaker and Charlie McNary and Barkley and somebody substituting for Joe Martin, and it's all right. B: Fine. HMJr: And they're going to introduce it at noon, and I just wanted to thank you, for I gather that you must have gotten after Jesse Jones. B: I did. HMJr: Well, I wanted to thank you for the help on that. B: Not at all, sir. Thank you for your help. I'm very glad. I'm sorry the earlier idea which you worked out didn't worry you. Let me say now I was worried a little fearing that you thought that we'd been unfriendly to the idea. We were skeptical as to whether the Generalissimo would be, but if it worked we were very happy about it. HMJr: Well, it Regraded Unclassified 63 - 2 - B: We rather wondered whether he'd like it, but - in fact, Stanley Hornbeck thought he probably wouldn't, and as you know he didn't; but as far as we're concerned, if it could have been worked out that way, we're all happy. HMJr: Well, two other men liked it enthusiastically by the name of Roosevelt and Churchill; but the Generalissimo didn't, and it's to please him, 80 that's that. B: So that's that. Well, I suppose it is a little bit funny to have a foreign government acting as paymaster for your Army in a foreign currency. I suppose if the situation were reversed we might feel funny about it. However, that's his business and not ours and the political result 1s the main thing. HMJr: Well, anyway they liked it on the Hill, and I just wanted to thank you for what I felt that you had done with Jones. B: Well, we have done that, and I'm infinitely obliged to you for your help in a matter that I think is of great interest to all of us. HMJr: Righto. B: Thank you, sir. HMJr: Good-bye. Regraded Unclassified 64 - 13 - H.M.JR: They told me the same thing about Stanley Hornbeck. You see, the thing that I told Berle, I said, "Now, listen, Berle, no cables go out of the State Depart- ment to prejudice the Chinese against this suggestion." That is what bit him, you see. MR. BELL: None went? H.M.JR: What would you think from that conversa- tion? I would say, "No." MR. BELL: I would think not, because you sent somebody over to look over the cables, didn't you? H.M.JR: No, that was with Harry. I wanted to make sure they didn't send something down on that so- called "Morgenthau dollar." I wanted to make sure there wasn't going to be something going down there which we weren't sure about, because Harry and I were out on the same limb together. MR. WHITE: There was no dollar on that limb. It was only an International Stabilization Fund. H.M.JR: Well, but the stories which came out, the poking of fun; and one fellow, you know, wrote it that Mr. Hull debunked the thing, and there is nobody who can debunk a thing better than Mr. Hull, which made me believe that he had given an off-the-record statement of it, you see, because you (Bell) told me that Hull said he had never heard of it, so I just wanted to know whether, without my knowing it, somebody had sent 8. cable down there to try to torpedo this suggestion, and I wanted to be sure. MR. BELL: They had not? H.M.JR: I will be terribly honest. When Harry was to come back I got a slip back and I never looked at it. I was afraid when he wasn't coming back - wait a minute and let me see. I never looked at the dupli- cates. Rio cables, here they are. Regraded Unclassified 65 - 14 - MR. WHITE: You never saw the cables? H.M.JR: I was worried, you see, and when you came back I quit fussing and I asked for a complete set of cables. I never - but I mean, when I heard you weren't coming back I didn't know what was going on, when we got that cable, and I wanted to see whether there was something going on that I didn't know about. Then when I got word that you were coming back, I never bothered to open them. Well, this has been a little faster than I enjoy it, but I guess it is necessary. MR. WHITE: I suppose you will know sometime today when the Committee is going to appear so that we will know-- MR. FOLEY: I will follow up on that and keep you advised. H.M.JR: If you three gentlemen will come in at three o'clock, and I will tell Viner to come in too. MR. WHITE: Of course, going back to the question of Hardy, if George Haas wants him I think he ought to be able to get anybody he wants. H.M.JR: I talked to everybody except Haas. I sent him the memo. No, I mean I wanted to get everybody's reaction before I talked to him. I think it is impor- tant. I don't know whether George wants him or not. But you people question him? MR. BELL: Viner came to me and said it would be 8 good thing if we got Hardy in on this meeting we are going to have this week to discuss the gap which George is working on, and-- MR. WHITE: There are at least ten men around town that know more than he does. MR. BELL: We have got a committee of about twelve Regraded Unclassified 66 - 15 - or fourteen, and I think that is enough. H.M.JR: Well, let me give you the suggestion so that you know where I was working from. I asked Viner if he could give me the name of somebody who was out- standing in American universities on Government finance, and I wanted a man who would approach him as good as Viner in his field, and the name he came back with was Hardy. MR. WHITE: Well, maybe Jack knows him better than I do. H.M.JR: I just want to give you the history on this thing. Let me finish, just one second. Somebody who would sit back like Viner does in & consultant capacity without any administrative responsibility and only on Government finance, who would be one of the recognized outstanding men in Government finance. A man like Viner that we call in, no administrative responsibilities. I thought we could use a man like that you see. What? MR. WHITE: Well, if you ask a dozen others and if any of them mention Hardy, I will buy you a fall hat. MR. BELL: Just from what I know of him, I don't know very much and I am probably doing him an injustice, I wouldn't choose him. H.M.JR: In fairness to myself, that is what I asked for. MR. BELL: Harry, do you know this fellow at Columbia? Nador? N-a-d-o-r, is it? MR. WHITE: There is a fellow under Mitchell who is very brilliant and able if you can get him. I know I have tried to get him, and he won't come. We couldn't offer him enough. 67 - 16 - MR. BELL: What is his name? MR. WHITE: There are several others with the same name around town. He has always worked under Mitchell, but if you want to get somebody, Wesley Mitchell is of that character. MR. BELL: This fellow Nador - I think it is N-a-d-e-r or something like that. He has got a pretty good repu- tation. H.M.JR: I don't want Wesley Mitchell. MR. WHITE: But this fellow -his field is business cycles. It is just this thing. He has done more writ- ing, but he is an older man and doesn't want to come down. H.M.JR: I don't want that. MR. WHITE: But he has a man under him-- H.M.JR: I don't want him. That isn't what I. want. MR. BELL: This fellow teaches finance at Columbia, and he issues bulletins, and I think sells his services. MR. WHITE: But public finance - oh, yes, I know. You are thinking of a man on international finance. It does begin with an "N." It may be Nader, but I didn't think 80. But this is not the sort of thing the Secretary is talking about, I don't think. This thin that you are talking about, Mr. Secretary, is consump- tion, national income and so on. There are men out- standing in just that field. H.M.JR: No, that is not-- MR. WHITE: Public finance is not that field. H.M.JR: That isn't what I am talking about. Regraded Unclassified 68 - 17 - MR. WHITE: But public finance is taxation and raising bonds. That is why it is called finance. H.M.JR: That isn't what I want. What I want is somebody who will be studying sources from which we can borrow. MR. WHITE: Well, that is income, national income, consumption studies and things of that character which - I will submit to you a list of a half dozen names of the leading men. There aren't many left in the uni- versities on it. H.M.JR: Do you know anybody? MR. BELL: This one man I just happened to think of. H.M.JR: You suggest some. MR. WHITE: I will suggest some. MR. BELL: I am not so sure you haven't got most of them in the Government service. MR. WHITE: With the exception of one or two, I think they are all here. There aren't many good out- standing economists in that field. MR. BELL: And they all differ. They never get together on their subjects. (The Secretary held & telephone conversation with Mr. Rayburn as follows:) Regraded Unclassified 69 February 2, 1942 11:29 a.m. HMJr: Hello. Speaker Rayburn: Henry. 4MJr: Yes, Sam. A: Sol's in the office, and he'll introduce this bill at noon. HMJr: Yes. R: I'll release 8 copy of it, and the President's letter HMJr: Yeah. of and now who do you - he wants a hearing - we want a hearing at ten o'clock in the morning, whatever hearing we're going to have. HMJr: Yeah. R: I guess we'll leave it up to you. Would the Secretary of State want to come? HMJr: Well, I think he should. R1 Well, I'd better call him, then. HMJr: I think - he'e going to tell you he's got a cold and all that, but he's in his office now because I just talked to him, and I think it's very im- portant that he come. R: Well, now, you bring whoever you want to and come up at ten. HMJr: I'd like Stimson to come, too, because Stimson feels very strongly on thie. R: And it'll be an executive session. HMJr: I see. Well, if you could have Hull, would you call Hull and Stimson? Regraded Unclassified 70 - 2 - R: Yeah. HMJr: What? R: Yeah. HMJr: Hull and Stimson, I think, would give you the best - and I'll be there, too. R: All right, Henry. HMJr: At ten o'clock tomorrow. R: At ten o'clock in the morning in Sol's committee room. HMJr: Well, that's moving. R: Fine. Why we're going to try and pass it Wednesday. HMJr: You're going to pass it Wednesday? R: Try to. HMJr: Did you make any changes? R: No. HMJr: No. R: No. I could make it an authorization instead of an appropriation. HMJr: Well, 60 we understand each other - you'll call Hull and Stimson. R: That's right. HMJr: And I'll appear there myself at ten o'clock. R: Fine, Henry. HMJr: Before Sol Bloom in executive session. R: That's right. HMJr: Righto. R: All right. Regraded Unclassified 71 - 18 - H.M.JR: Well, I don't mind being a little crotchety with you fellows, if you don't mind, as long as I get the things done. MR. WHITE: Why shouldn't they get Knox as long as you are getting them all? H.M.JR: I don't know how Knox feels on this thing. MR. FOLEY: He is away, isn't he? H.M.JR: I don't know, but listen - oh, gee, I didn't say Jesse Jones, did I? Stimson feels this thing very stiff. How about Bill Donovan? He has feelings on this thing. MR. FOLEY: Well, he and Hull don't get along very well. H.M.JR: That is right. I think if you have Hull, Stimson, and myself, and Jesse. Now, when can I see this prepared statement, because I haven't got a hell of a lot of time? MR. WHITE: This afternoon. MR. FOLEY: Four o'clock. H.M.JR: I have got press at four. MR. BELL: Four-thirty. MR. FOLEY: After press. MR. WHITE: Three o'clock? MR. FOLEY: T. V. Soong is coming in at three. H.M.JR: Soong won't take more than fifteen minutes. We will do it right after that. MR. WHITE: Soong won't have many ideas, and he Regraded Unclassified 72 - 19 - won't want to give anything definite, so I don't think he will take long. H.M.JR: He never takes long. Supposing we con- tinue right after that. MR. BELL: Can you prepare something in an hour and a half, Harry? I think it won't be very long. H.M.JR: Harry, get Viner to help you. MR. WHITE: Mr. Secretary, anything at all that is ever in Mr. Viner's field, I always ask him to help me. I am always glad of his help. H.M.JR: Well, that hasn't always been 80. MR. WHITE: That has always been true except where we have - questions where I know we are opposed on domestic policy and in which I didn't think it would be & help but & hinderance, as far as I was concerned, but on foreign policy. H.M.JR: Well-- MR. WHITE: Or monetary matters. MR. BELL: It is always better to have Jake in after something is prepared, because he will argue for two hours before he gets started. MR. WHITE: He is helpful, and I am always glad to have him. MR. BELL: It is very helpful to get his criticisms on documents that have been prepared. MR. WHITE: But again, thinking of somebody for Haas' division, you know, Viner is in a little different position than he would be if Haas had somebody in his division. There are men who might come in the same capacity as Viner, but who might or might not come in a-- 73 - 20 - H.M.JR: Well, the man I had in mind would be in the same relation to the rest of us as Viner is. Now, if you ask me who is Viner responsible to, I don't know. He has never raised the question. He is here to help all of us. MR. BELL: Well, he is responsible to you, but we all use him. H.M.JR: Including Harry. MR. WHITE: Very definitely, and I am very glad to. MR. BELL: He really sits in on most of our con- ferences. MR. FOLEY: He has been in on all this China thing. MR. WHITE: Whenever he is in the Treasury he is always in. MR. FOLEY: He was in Harry's office on all of this. H.M.JR: I believe Harry. I don't know why Harry is suddenly sensitive on that one. MR. WHITE: Because three times in the last week, you have reminded me to get him in. I always do. I didn't know whether that was an indication that you think I don't. H.M.JR: Well, sometime when we are alone I will tell you why. MR. WHITE: O.K. I will try to give you some names of those that I hear about and I will ask other men about Hardy. Maybe I have got a peculiar notion about him. H.M.JR: Well, you men needn't wait. I will just tell Harry now and get it off my chest, that is all. 74 February 2, 1942 Dear Dr. Soong: I am enclosing herewith, for your confidential information, copy of 8. reso- lution, covering loan to China, which will be laid before the House today by the Speaker, in substantially this form. Yours sincerely, (Signed) I. Norgesthau. 37, Dr. T. V. Soong, 1601 V Street, Washington, D. C. Regraded Unclassified 75 February 2, 1942 My dear Sir Frederick: I am enclosing herewith, for your confidential information, copy of a. reso- lution, covering loan to China, which will be laid before the House today by the Speaker, in substantially this form. Yours sincerely, (Signed) 1. Morgentbau, Jr. Sir Frederick Phillips, The British Embassy, Washington, D. C. Rm 909, willare Hotel delivered to Regraded Unclassified 76 February 2, 1942 My dear Mr. Ambassador: I am enclosing herewith, for your confidential information, copy of a reso- lution, covering loan to China, which will be laid before the House today by the Speaker, in substantially this form. Yours sincerely, INC Mergenthan, Fi His Excellency, The Ambassador of the Union of Soviet Socialist Republics. JOINT RESOLUTION 77 To authorize the President of the United States to render financial aid to China, and for other urposes. MEREAS China has for more than four years valiantly resisted the forces of Japanese agression; and WILLREAS financial and economic aid to China will increase her ability to oppose the forces of aggression; and WIENDEAS the defense of China it of the greatest possible importance: Therefore be it Resolved by the Senate and House of Representatives of the United States in Congress assembled, That the Secretary of the Treasury with the approval of the President is hereby authorized, on behalf of the United States, to loan or extend credit or give other financial aid to China in an amount not to exceed in the aggregate $500,000,000 at such time or times and upon such terms and conditions as the Secretary of the Treasury with the approval of the President shall deem in the interest of the United States. Sec. 2. The authority herein granted shall be in addition to any other authority provided by law. Sec. 3. There is hereby appropriated out of any money In the Treasury not otherwise appropriated, such sum or sums not to exceed $500,000,000 as may be necessary to carry out the provisions of this Joint Resolution. Regraded Unclassified 78 February 2, 1942 My dear Cordell: For your confidential informa- tion, I an inclosing herewith photo- static copies of the President's let- ters to the Speaker of the House and the Vice President, and Secretary Knox's and Secretary Stimson's letters to the President, in connection with the Chinese loan. Sincerely yours, Many Honorable Cordell Hull, The Secretary of State. Regraded Unclassified 79 February 2, 1942 My dear Henry: For your confidential informa- tion, I an inclosing herewith photo- static copies of the President's let- ters to the Speaker of the House and the Vice President, and Secretary Hull's and Secretary Knox's letters to the President, in connection with the Chinese loan. Sincerely yours, (Signed) Henry Honorable Henry L. Stimson, The Secretary of War. Regraded Unclassified 80 February 2, 1942 My dear Frank: For your confidential informa- tion, I an inclosing herewith photo- static copies of the President's let- ters to the Speaker of the House and the Vice President, and Secretary Hull's and Secretary Stimson's letters to the President, in connection with the Chinese loan. Sincerely yours, (Signed) Henry Honorable Frank Knox, Secretary of the Navy. 81 February 2, 1942 My dear Jesse: For your confidential informa- tion, I am inclosing herewith photo- static copies of the President's let- ters to the Speaker of the House and the Vice President, and letters from Secretaries Hull, Stimson and Knox to the President, in connection with the Chinese loan. Sincerely yours, (Signed) Henry Honorable Jesse Jones, The Secretary of Commerce. 82 February 2, 1942 My dear Harold: For your confidential informa- tion, I am inclosing herewith photo- static copies of the President's 1st- ters to the Speaker of the House and the Vice President, and letters from Secretaries Hull, Stimson and Knox to the President, in connection with the Chinese loan. Sincerely yours, (Mont) 2. Morgenthas, It, Honorable Harold Smith, Director of the Budget. Regraded Unclassified 83 February 2, 1942 (Signed) Henry My dear Mr. Vice President: For your confidential informa- tion, I am inclosing herewith copies of the letters from Secretaries Hull, Stimson and Knox to the President, in connection with the Chinese loan. Sincerely yours, (Signed) Henry The Honorable, The Vice President of the United States. 84 February 2, 1942 (Signed) Hunry My dear Mr. Speaker: For your confidential informa- tion, I am inclosing herewith copies of the letters from Secretaries Hull, Stimson and Knox to the President, in connection with the Chinese loan. Sincerely yours, (Signed) Henry The Honorable, The Speaker of the House of Representatives. THE WHITE HOUSE WASHINGTON January 31, 1942 My dear Mr. Speaker: Responsible officials both of this Govern- ment and of the Government of China, have brought to my attention the existence of urgent need for the immediate extension to China of economic and financial assistance, going beyond in amount and different in form from such aid as Congress has already authorized. I believe that such ad- ditional assistance would serve to strengthen China's position as regards both her internal economy and her capacity in general to function with great military effectiveness in our common effort. I urge, therefore, the passage by Congress of appropriate legislation to this effect and attach hereto a suggested draft of a joint resolution which would accomplish this purpose. Sincerely yours, The Honorable, The Speaker of the House of Representatives. Regraded Unclassified THE WHITE HOUSE WASHINGTON January 31, 1942 My dear Mr. Vice President: Responsible officials both of this Govern- ment and of the Government of China, have brought to my attention the existence of urgent need for the immediate extension to China of economic and financial assistance, going beyond in amount and different in form from such aid as Congress has already authorized. I believe that such ad- ditional assistance would serve to strengthen China's position aa regards both her internal sconomy and her capacity in general to function with great military effectiveness in our common effort. I urge, therefore, the passage by Congress of appropriate legislation to this effect and attach hereto a suggested draft of a joint resolution which would accomplish this purpose. Sincerely yours, The Honorable, The Vice President of the United States. Regraded Unclassified JOINT RESOLUTION To authorize the President of the United States to render financial aid to China, and for other purposes. THEREAS China has for more than four years valiantly tad the forces of Japanese aggression; and WHEREAS financial and economic aid to China will increase birth ability to oppose the forces of aggression; and WHEREAS the defense of China is of the greatest possible importance: Therefore be it Resolved by the Senate and House of Representatives of the United States in Congress assembled, That the Secretary of the Treasury with the approval of the President is hereby authorized, on behalf of the United States, to loan or extend readit or give other financial aid to China in an amount not to erceed in the aggregate $500,000,000 at such time or Clear and upon such terms and conditions as the Secretary of Treasury with the approval of the President shall deem the interest of the United States. Sec. 2. The authority herein granted shall be in Ition to any other authority provided by law. Sec. 3. There is hereby appropriated out of any money the Treasury not otherwise appropriated, such sum or sums to exceed $500,000,000 as may be necessary to carry out provisions of this Joint Resolution. Regraded Unclassified THE SECRETARY OF THE NAVY WASHINGTON January 31, 1942 My dear Mr. President: I refer to the urgent request which this Government has received from Generalissimo Chiang Kai-shek to help him, by financial assistance, to maintain more effectively the morale of the Chinese people. Recent military developments in the Pacific and difficult economic and financial conditions in China have made necessary remedial action of a. substantial character. The military operations which the armies of China under the Generalissimo are carrying on and are planning to carry on are of extreme importance to us. It would be very unfortunate if we were to overlook any possibility of checking the impair- ment of China's morale resulting from the growing internal difficulties in China. I am convinced that the financial assistance which the General- issimo has requested would make an effective con- tribution to the maintenance of China's morale and military strength. I strongly recommend, therefore, that we should grant the Generalissimo's request without delay. Faithfully, Janketnox The President, The White House. Regraded Unclassified WAR DEPARTMENT WASHINGTON January 31st, 1942. Nty dear Mr. President: The confidential information which has been coming to me during the past few weeks indicates that the difficult economic and financial situation within China is impairing her military effort. Our information indicates further that sub- stantial financial aid must be given to China quickly if we are to have assurance that recent and prospective military developments will not too seriously weaken the morale of the Chinese people. Any substantial financial help that can be given to China at this time can not but help strengthen her striking power. I therefore urge for your consideration that the financial assistance which I as informed the Generalissimo is requesting be granted expeditiously. Faithfully, Hurry Struson The President, The White House. Regraded Unclassified DEPARTMENT OF STATE WASHINGTON January 31, 1942 Bear Mr. President: I refer to Generalissimo Chiang Kai-Shek's request for an immediate credit to China of $500,000,000 to assist him in China's prosecution of the war. China is now in her fifth year of war against aggression and has had to draw very heavily upon her own resources. Certain loans have been made to China through the Federal Loan Agency, mostly in connection with the purchase of strategic materials. These loans have been used to buy supplies in this country, but China now needs cash to be used within, or from within, its own borders, and I strongly recommend that you ask Congress to authorize loans, or credits, or both, to China up to $500,000,000. The brilliant resistance to aggression which the Chinese have made and are making, and their contribution to the common cause, deserve the fullest support we can give. Sincerely yours, The President, The White House. Correshiel Regraded Unclassified 91 February 2, 1942 11:35 a.m. HMJr: Sam, in talking, I forgot. Of course, Jesse Jones. Speaker Rayburn: Yes. HMJr: Jeese would like to testify and I'd like to have h1m testify. R: Yeah. All right, fine. HMJr: Thank you. Regraded Unclassified 92 February 2, 1942 1:16 p.m. Dorretor: Go ahead. HMJr: Hello. Cons. Sol Bloom: Hello, Henry. 4MJr: Yes. is Sol speaking. Say, the Speaker spoke to you about who's to come up here tomorrow? (MJr: That's right. 9: Now, who's going to come up? H&Jr: Well, there should be Mr. Hull, and Mr. Stimson a Yes. WJr: Jesse Jones, and myself. B: Fine. All right. At ten o'clock. HMJr: Ten clock. #: Yes. HMJr: Yeah. B: And you haven't spoken to anyone else, then? HMJr: No. B: All right. I'll get them all. So then you'd rather have it at ten for yourself? HMJr: Well, if..... in I'll see what they can do. If you don't hear from me, I'll tell your secretary. If not, if you come up - oh, a few minutes after ten or 80, and then I'll arrange the other accordin ly. Mr. Now, don't let Cordell Hull tell you he's sick, see? Regraded Unclassified 93 - 2 - B: Yes. HMJr: Because he's in his office today. B: Yes. HMJr: And he ought to come up. B: Well, he can be just as sick up here as he can up there, you know. HMJr: That's right. B: (Laughs) All right. I'll get Stimson and Jones, then. HMJr: Right. B: All right, Henry. Regraded Unclassified 94 Following message telephoned to Mr. White by Mr. Pinsent, February 2, 1942, et 2:05 p.m. "llis Majesty's Government are willing to make available under A lend-lease arrangement all munitions and military en inment which it is possible for then to supply. "In addition, His Majesty's Government are informing the Chinese Government of their willingness to lend to China The war purposes an amount un to 450 million, at such time and unon such terms as may be agreed between the two govern- netts." There was an introduction which Mr. Pinsent said he don't take down, regarding desire to cooperate with China. He is not sure it has been released yet, but is being released in London this evening. HDW:ls 2/2/42 efs Regraded Unclassified 95 February 2, 1942 3:05 p.m. AID TO CHINA Present: Mr. Soong Mr. Bell Mr. Foley Mr. White Mr. Southard Mr. Viner Mr. Kuhn H.M.JR: Well, you know what the English have done. They have raised themselves up to fifty million pounds. MR. SOONG: From ten to fifty. MR. PELL: They have added Lend-Lease, too. H.M.JR: Now, what are the figures on Lend-Lease? I haven't had any chance to do my home work. I hope you don't mind if I do it in your presence. How does this figure check with what you have? I have asked Lend-Lease how much the allocations are, and they say six hundred fifteen million, of which about twenty-five million has been shipped. MR. SOONG: 1 think considerably more than twenty- five million. H.M.JR: Have you got the figures? MR. SOONG: I know the six fifteen is right, in addition to more for the third Lend-Lease. Regraded Unclassified 96 - 2 - H.M.JR: Third? MR. SOONG: This is for the first and second. The third is six hundred million. H.M.JR: You mean when the bill passes? MR. SOONG: Yes. H.M.JR: But as of today -- MR. SOONG: The six hundred fifteen is right. H.M.JR: And in the third Lend-Lease there would be how much? MR. SOONG: Between four hundred and six hundred million. H.M.JR: I see. Well now, what I want to ask you, Dr. Soong, is this. I have to go and appear at ten o'clock tomorrow before the Committee on Foreign Affairs in the House, and if they say to me, "Under what terms and conditions are you going to make this loan," what shall I tell them? MR. SOONG: You ask me to begin considering the matter? H.M.JR: That is right. MR. SOONG: Now, in one of the Generalissimo's telegrams he asked that a loan be granted without any conditions as to use, and on terms at least as generous as the Lend-Lease terms. Now, the Lend-Lease terms are specifically contained in that paper (handing docu- ment to the Secretary). H.M.JR: This is the Lend-Lease? MR. SOONG: Yes. H.M.JR: They never got beyond, "which the President deems satisfactory" (returning document to Mr. Soong)? Regraded Unclassified 97 - 3 - MR. SOONG: No, they never got beyond that. Now, in accordance with that, I made some scheme, very preliminary. I did not even refer to the Generalissimo, but I thought it might be a starting point for you to consider. H.M.JR: Thank you. "The terms and conditions upon which China receives this financial aid shall Fe those which the Secretary of the Treasury under the direction of the President deems satisfactory. "After the war the President shall determine the precise terms for settlement of this financial aid. In so doing he will deal with the matter as one of adjustment between the United Nations taking into account the declaration by the United Nations of January 2, 1942, by which each Government pledges itself to employ its full resources, military or economic, against those members of the Tripartite Pact and its adherents with which such government is at war. "China on her part agrees to abide by the terms which the President shall subsequently so determine." Well, let me ask you this, which isn't clear in my mind. The chances of this going through are excellent, you see. My estimate of one or two weeks is still good. Let's say this thing passes and credit is open on the books of the Treasury for five hundred million dollars to the Chinese Government. Do you think you are going to need any of it right away? MR. SOONG: Well, my Government has not told me exactly what they will use it for. H.M.JR: You don't know? MR. SOONG: No, 80 I don't know. H.M.JR: Well, could you cable them for instructions? Regraded Unclassified 98 - 4 - MR. SOONG: How quickly the money would be used? H.M.JR: Well, you see what I would like to be prepared to answer is - what I would like to know is - what you have in mind, you see, to do with this money, because they may ask me tomorrow. If I can't answer, they may say, "Well, we will have to wait." They may ask me in the Senate. They are much more apt to ask me when I appear before the Senate. In fact, this morning when -- MR. BELL: It was the first question they asked you this morning. H.M.JR: That was the first question they asked. "Well, what are they going to use this money for?" Well, I have got to be truthful. I don't know. Well, that doesn't sound very intelligent on my part. "Are they going to use it all right away?" "I don't know." "Are they going to spend it here, or are they going to use it in China?" In other words, I don't know. And this morning I was successful, but now when Congressman Fish goes after me tomorrow, I don't know whether he is a friend of China or whether he isn't, you see, and then when I get up before the Senate, so the quicker you could get something for me the better. MR. SOONG: I an afraid that if I were to ask for this question, probably the reply would also be in rather vague general terms. I imagine the reply would be something like this. "China would need the money to support the currency, to meet current expenditures. That as to the method of using it, it wants to be free to use it in as elastic a way as possible, and probably there will have to be much of it in the way of trial and error, because as you started the New Deal, you did not know exactly how you were going to do it, but there is a broad objective. There are the funds required, and if it is working one way that has proved successful, go on with it, and if not, try another way. Because Regraded Unclassified 99 - 5 - we are meeting with an extraordinary situation. There- fore, extraordinary methods may have to be employed." I suppose that would be the answer that would be given to me. I do not believe that - in fact, I have been asking them for something very concrete. H.M.JR: You have? MR. SOONG: Yes, before, see. That was the gist of their reply. H.M.JR: But now that you know that the loan is within sight, couldn't you ask them again? MR. SOONG: Of course I could ask, see. But I don't know whether they would be in any way more specific than this. H.M.JR: Well -- MR. SOONG: If you want me to, of course I shall be glad to cable immediately. H.M.JR: You see, Mr. Fox isn't here, so I don't know what message he is earrying. At least they could tell me what they have told Fox. Or rather, they could tell you what they have told Fox. MR. SOONG: Oh, yes, surely. H.M.JR: At least they could tell you what they told Fox, so that you could tell me what they have told Fox. MR. SOONG: Yes. H.M.JR: Well, I am not going to press it, but all I am asking you is, give me everything that you can to help me testify, in order to successfully get the loan through. MR. SOONG: That will be tomorrow? Regraded Unclassified 100 - 6 - H.M.JR: I am not worried so much about tomorrow as I am when I go before the Senate. MR. SOONG: Of course what will be presented by my Government to me will be not in a sense & commitment. That is, they don't bind themselves to use 80 many millions for such purpose and 30 many millions for ano- ther purpose, but it is generally to give the - am I not correct? H.M.JR: You are lucky you are not having to deal with Mr. Jones on this. That is only for you. I am not going to - the whole purpose of this thing is to make General Chiang Kai-shek happy. That is the whole purpose of the thing, you see. We want to make him feel happy. Now, I am not going to press the thing to a point where I am going to make him feel unhappy, but everything that he could tell me that he does know that is in his mind would be that much more helpful to me, that is all. MR. SOONG: Yes. H.M.JR: Do you see? MR. SOONG: Yes. H.M.JR: We are doing this as one friendly nation to another, and we want to do it in a nice manner. Now, anything that he has - anything that he told Fox or any- thing that he would like to tell me through you would be that much more helpful. MR. SOONG: I suppose what he told Fox was generally, why in his opinion the arrangement of the payment of the troops would not work satisfactorily. And then I imagine Fox has been discussing with him a number of possible methods by which the money could be usefully expended. I will wire to him. H.M.JR: That would te useful to me. Regraded Unclassified 101 - 7 - MR. SOONG: Yes. H.M.JR: Bell, do you think of anything? MR. BELL: No, but I do think those are important. H.M.JR: What? MR. BELL: I think it is unfortunate you haven't got something tomorrow. H.M.JR: I do too. MR. BELL: That is something you are going to have to answer. H.M.JR: It is going to be very difficult. MR. SOONG: Would it be hard to say, supporting the Chinese currency and - and secondly, as I said, for military expenditures? MR. BELL: I don't think support of the currency is enough, because you have got a Stabilization loan for that. H.M.JR: Yes, they asked me - I mean, how do I explain what - if I say, for the currency and then you have a credit here of fifty million dollars, none of which you have drawn on. MR. SOONG: Yes. H.M.JR: It would be different if that was exhausted. MR. BELL: How about helping to balance your budget? (Laughter). H.M.JR: I know the explanation which you gave me about the Generalissimo wanting this as a reserve the way he has troops, but frankly, I can't make that Regraded Unclassified 102 - 8 - explanation to the Congress, and you understand. MR. SOONG: Yes. H.M.JR: What? MR. SOONG: Yes. H.M.JR: It isn't the kind ofexplanation which I could make. Well, let's hope for the best. We have been very lucky so far. Senator McNary was fine this morning. Senator McNary is all right. But Joe Martin, the minority leader, was not there, and they sent another man there by the name of Michener from Michigan and he seems to have a lot of doubts, but he agreed to go along, 80 it puts a lot on my shoulders, but we will do the best we can, and I hope that - if Mr. Hull and Mr. Stimson go up, I think that is going to help 8. lot. Mr. Hull this morning said he was too sick to go, but I think they will get him to go up there. MR. SOONG: About this British thing, did they say something about Lend-Lease? H.M.JR: Yes, they do say something about Lend- Lease. They are going to make available all the muni- tions and military equipment which you can use. No, "which it is possible for them to supply under Lend- Lease." MR. WHITE: This is in addition? H.M.JR: This is in addition. Well, we can say the same thing. We are saying the same thing. And then in addition, they are proposing to lend you fifty million pounds. They started at ten, and they are up to fifty now. I imagine they will tell you more. They say this is only half of it. The rest is being released from London this evening. MR. SOONG: I am curious to know the terms of that. Regraded Unclassified 103 - 9 - H.M.JR: Yes. MR. SOONG: They haven't told you? H.M.JR: Not as of today. They showed me something yesterday which I would rather they would show you. It may be different today. What they showed me yester- day, I think they may have forgotten about that. MR. BELL: They say their own terms and conditions to be agreed upon. H.M.JR: Yes. At such times and on such terms as may be agreed upon by the two Governments. Do they do that through your Ambassador in London? MR. SOONG: Well, probably they will do it like the last time they signed here. H.M.JR: I see. MR. SOONG: I did not know that the message - the indications from home were that we should discuss it with you people. H.M.JR: Well, I am partly responsible, you see, because -- MR. SOONG: Oh, yes. H.M.JR: I let the English know yesterday what I was going to do, and then they must have got busy and telephoned and they said to tell them as soon as I knew and from last night to tonight the fact that we were going to do something - they decided that they would do more. So I think that the decision was made - they only heard it at five o'clock last night, 80 since five o'clock last night and up until noon today they have decided to do more. MR. SOONG: Probably it was referred to the Prime Minister. Regraded Unclassified 104 - 10 - H.M.JR: I asked them to refer it to the Prime Minister. What I told them yesterday, "Please to send it to Mr. Churchill," and he is very sympathetic himself to China. MR. SOONG: Yes. H.M.JR: So I said - the message I gave them yes- terday was for the Prime Minister. MR. SOONG: Probably that was it. H.M.JR: So it was settled there rather than - it is always good, isn't it? MR. SOONG: Yes, it is most cheerful. H.M.JR: And it is going to be done in a nice friend- ly manner. I mean, that is the whole idea. We want to be helpful at this time. I think this all happened since five o'clock last night. Well, as we go along we will keep you informed. Have any of you gentlemen got any after-thoughts, anybody? MR. WHITE: No. We have cabled Fox to communicate whatever he had, and he has left -- H.M.JR: Where is he? MR. WHITE: Well, we cabled to India, but he has left the place that he was yesterday, and if the present schedule holds out, he should be here before the end of the week, either Thursday or Friday. H.M.JR: This week? MR. WHITE: Yes. But in the meantime -- H.M.JR: This is moving so fast. MR. WHITE: We just received word about an hour ago. MR. SOONG: He has left Karachi? Regraded Unclassified 105 - 11 - (Mr. Soong left the conference.) MR. WHITE: What I think happened on that was that they must have decided that, and they told Phillips to hold it until they heard from you that it was all right up on the Hill. Then when Phillips got word from you of what you had done there and it looked like a fait accompli, they called us back and said they would announce it. I presume that was the sequence of events. We have two things here. We have A draft state- ment. H.M.JR: Where are my dark glasses? (Laughter). MR. WHITE: It isn't final. We also have B state- ment -- H.M.JR: Is somebody doing something? MR. WHITE: God Almighty is doing his best. That is what bothers me. MR. BELL: I am afraid he can't hear you, (Mr. Kuhn entered the conference.) H.M.JR: Ferdie, this is my statement. MR. KUHN: Tomorrow? H.M.JR: I want you to get in on it please. MR. KUHN: Good. H.M.JR: I don't like thing about their crops. "Their lives, their homes, their factories." I don't know what you mean by their crops. MR. WHITE: They have eaten most of their crops. H.M.JR: Well, I don't think it helps any. Who wrote this? Regraded Unclassified 106 - 12 - MR. WHITE: It is composite. Coe and Friedman worked yesterday on 8 preliminary draft and Viner, Southard, and I, and Bernstein rewrote it in the last hour. H.M.JR: It is good. MR. BELL: Yes. This must be misspelled. "In waging this war China has well-nigh performed economic and military" -- MR. SOUTHARD: Miracles. We tried three times to get that word out of the draft. H.M.JR: I would like to work this in. "At the beginning of the war the Chinese" - and had accomplished unifying of their currency. MR. WHITE: That is only a small part of it. H.M.JR: Yes, but you are going to talk about the thing. I mean, I always thought that the fact that they had just accomplished unifying their currency and had one currency was a sort of 8. signal for Japan to attack them. MR. WHITE: And had just completed unifying their currency and banking system. H.M.JR: Something. "Amazingly well." "Exceedingly" isn't strong enough for me. It is at the top of four. It is amazing, what they have done. MR. SOUTHARD: Instead of "remarkably." At the top of five, "extremely honorable in carrying out any - carrying out all obligations which they have assumed." MR. VINER: I wouldn't use the word "honorable." I would use something else. "Punctilious" is a good term. All men are honorable. MR. WHITE: That is true. H.M.JR: And instead of being negative, "took no Regraded Unclassified 107 - 13 - actions prejudicial to American interests," I would put it the other way around, "gave the American interests fair treatment." "The Chinese Government has now urgently" - have you spoken to Lauch Currie recently? Today? MR. WHITE: I spoke to him today to see if he could get this Lend-Lease figure, because we weren't able to get them from Lend-Lease in time. H.M.JR: I thought I would ask him to come over and help us on this. MR. WHITE: It would be very good. H.M.JR: Make it Mr. Jesse Jones. (The Secretary held a telephone conversation with Mr. Lauchlin Currie as follows:) 108 February 2, 1942 3:38 p.m. MJr: Hello. Operator: Mr. Currie. 4MJr: Hello. Lauchlin Hello, Mr. Secretary. Currie: TVr: Lauch? C: Yeah. m'Jr: Well, we've been rether fortunate the last few days. C: Yeah, things have gone amazingly well, I'd say. Unprecedented. (Laughs.) HWr: Well..... C: Itwent through 80 quickly. HVTr: What? C: It's unprecedented for things to go through BO quickly. ="Jr: Yeah. E I should have known you. 4"Jr: Oh, yeah, yeah. Lauch, I'm working out B. statement with the boys here, and I thought if you had time to drop over and go over it - I'm sure you could be helpful. 0: Why, I'd like to, Mr. Secretary, but I - I'm tied un at the moment with a - A general. (Laughs.) "Wr: A general? C: Yeah. (laughs.) MJr: Well, I'm only a private. C: You're only a private? ! (Laughs.) Regraded Unclassified 109 - 2 - HMJr: Well, when will you be - - when will you swallow the general? C: I should think that I would finish up in about an hour. HMJr: Well, if you come over to Harry White's the thing will still be in the - there'll still be room for you to change plenty of words. (Laughs.) HMJr: Don't get indigestion now. C: No. That's not an awfully good showing, I'm afraid, I sent over. Did Harry show you the figures? HMJr: No. You mean the twenty-five million? C: Yeah. HMJr: Yeah. C: But on the other hand, it's as much as we sent the Russians. HMJr: Right. What? C: Yeah. HMJr: It's what did you say? C: It's as much as we sent Russia. HMJr: Yeah. Okay. C: Okay. Thanks. - 14 - 110 H.V.JR: He will be over in about an hour. This first (menty-five million, who made that loan? MR. WHITE: Well -- MR. BELL: It was the Export-Import Bank, wasn't ito VR. WHITE: Tt was the Export-Import Bank purchase, rut they sere to pay it back in tung oil. H.M.JR: I remember it intimately. I just wondered if we were saying too much about Jones. He can repeat It, can't he? Vs. WHITE: You never could tell from this state- ment who made it. H.M.JR: Did you do that on purpose? MR. VINER: No. MR. WHITE: Well, I don't know - that is the loan they have repaid and have the best record on. It is an Export-Import Bank loan. H.M.JR: I just wondered whether, in view of Jones testifying and my testifying, if I did this first, you know how he is. He might say, "well, hell, Morgenthau ala it all," and put on his hat and walk out. If you simply say, "They have always been prompt in their payments, and Mr. Jones can tell you more about the details, and he is here to do so" - and let's leave it at that. He might get sore and put on his hat and walk out. I think I would do it that way, gentlemen. MP.. WHITE: All right. MR. VINER: Is there any chance of showing him this before he has to testify? MR. 3 UTHART: Or even getting in touch with him? Regraded Unclassified 111 - 15 - MR. WHITE: It would be nice to show it to him. H.M.JR: It would be good to show it to - of course the thing to do if ours was finished would be to show it to all three Cabinet members who are going up there. MR. VINER: Well, we could do it by six o'clock, I should say. H.M.JR: Fine. Well now, you say "joint". Didn't the English get in on that? MR. WHITE: Which? H.M.JR: At the bottom of page seven. MR. BELL: Yes. MR. WHITE: Not on the dollars. They had some sterling. H.M.JR: But didn't they put up their stuff also as 8. cushion? MR. BELL: Yes. H.M.JR: Didn't they come before us? MR. WHITE: Not as a cushion for our dollars. Theirs was only sterling. MR. VINER: Still they ought to be mentioned there. MR. BELL: Yes, I think so, too. H.M.JR: Isn't it a joint board, England, China, and ourselves? MR. WHITE: Yes. H.M.JR: I think you ought to talk a little bit about it and bring in England, because they are going to read 112 - 16 - in tomorrow morning's papers, that England is making an offer. MR. WHITE: Well, we can say, "Under that arrange- ment the Chinese Government" -- (The Secretary held a telephone conversation with Congressman Sol Bloom as follows:) 113 February 2, 1942 3:42 D.M. "ello, Congressmen Bloom. Hello. Sol Vello, Henry. loo : You are you? All right. ""Jr: Sol Yeah to I understand that this meeting tomorrow 18 going to be an executive session? Yes, sir! ^bsolutely! Yes, sir, huh? With the - with the understanding in advance that every member present 1s accusinted with the fact that it is an executive session and anything that's cold there 18 absolutely confidential. Good. I VAR just working on my statement. oh, yes, yes, yes, Cood. Now let me ASK you something else, if I may. Ah Did you get the other three cabinet members? Jesse Jones seid he'd be here at ten, and Cordell Full - he said that, of course, it'd depend upon how he felt. Th-huh. He seid he's having his statement prepared, and I told him he could feel just as good or bad UD here AB he could any other place, and I'm waiting to hear from Stimson. yow how about Knox? Why, I think It'd be good ! Regraded Unclassified - 2 - 114 R: Well, I'll try and get him then. I myr: I not a letter from him on it. I think it'd be mood! P: All right, I'll try and get him. "Jr: Yeah, after all he's got as much interest as anybody. =: Yes. Well, I'll try and get him, and T'm waiting to hear from Stimson. He's in the meeting unstairs, but they're going to call me right back. "Jr: Well, Stimson ought to come because he's been very much interested. 7: Yes, well, I'm going to UMJr: And I think your suggestion of Knox would be excellent. P: All right, I'll get Knox right away. "Wr: Thank you. R: All right, Henry. ""Jr: Goodbye. Regraded Unclassified 115 - 17 - H.M.JR: I felt like saying, "Donsld Duck" to you when he said "Yes, sir." I don't know whether he had ssen our picture or not. MR. KUHN: "I will do anything, anything." H.M.JR: "Anything, yes, sir." I think I am up to you now, Ferdie. I think I have seen it nine times. I would bring the English in at the bottom of seven. MR. WHITE: Yes, sir, we will put the English in on the bottom of seven. H.M.JR: I have two criticisms. I think you slur over this Lend-Lease too much. MR. FOLEY: I thought we ought to give those figures because there isn't anybody down there that will be able to give them except you, unless they want to call Stettinius. H.M.JR: I think you slur over that too much, and then at the end, oh boy, oh boy, oh boy, as Donald Duck says. Common ef ort. Noteworthy demonstration not to the people of the world, but the Axis, that United Nations stand together. MR. VINER: You are right, that is right. After all -- H.M.JR: Not the people but - it says notice to the Axis, but we are serving notice on the Axis, and the thing, if you get over to the Japanese on their fifth columnists. I mean, you see their activities and their infiltration of puppet governments and so forth and so on, you see, that the place to look to are the other members of the United Nations, and not to the Axis for financial help. See, boys? That is what we are doing. We are saying to the United Nations that we won't leave B. stone unturned or 8 dollar unavailable to 8 member of the United Nations to see this thing through, and they should look to us and not to the Axis. O.K., Professor Kuhn. Regraded Unclassified - 18 - 116 MR. WHITE: Do you want to mention the British - news that the British are going to give -- H.M.JR: Sure. They are going to ask us that, any- way. MR. VINER: You ought to have the text there in case they ask you. H.M.JR: That is right. How about it, Professor Kuhn? MR. KUHN: I would only make a couple of suggestions. On page two where you talk -- H.M.JR: That isn't enough, a couple of suggestions. MR. KUHN: You talk about the common enemy. Why not make it "our common enemy?" Because I miss in here particularly at the beginning the sense that we and the Chinese are together in the same war. H.M.JR: Yes. MR. KUHN: One place you can get that in is at the top of page two, third line, "the defeat of our common enemy, and then the sixth line, "in the war against our enemy." H.M.JR: what are you doing between now and five o'clock? MR. KUHN: I am free. H.M.JR: Why don't you put an hour on this? MR. KUHN: And also I would suggest at the very beginning where you say, "The effective continuance of the Chinese military effort depënds largely," and so on, "that military effort is of invaluable help to ourselves at this very moment," and something to that effect, I think should be said. 117 - 19 - H.M.JR: That is right. Well, I think you could very well put an hour - when do you go to the MacLeish meeting? MR. KUHN: Five fifteen. H.M.JR: If between now and then - I don't know what else you have got. Is Donald Duck taking care of himself? MR. KUHN: He is, yes, sir. H.M.JR: I think that is an excellent start. I would like another crack at it. I will be down here tomorrow morning at nine, and I could make a few changes if necessary. MR. WHITE: This can be finished before tonight. H.M.JR: I won't get another chance. MR. FOLEY: It won't be necessary to mimeograph this, will it? H.M.JR: No. MR. KUHN: Is it going to be issued publicly? H.M.JR: No. MR. KUHN: Could it be? There is nothing in it which couldn't be. MR. WHITE: We wrote it with that in mind, 80 that in case you wanted it. MR. VINER: Some day of course it will come out. As we polish this up, shall we or may we send copies to the other participants? H.M.JR: I wish you would. 118 - 20 - MR. VINER: And tell them it is 8. tentative draft, subject to further change. H.M.JR: And if they have any suggestions, please call up. MR. KUHN: Wouldn't it be good to get this out publicly at this time? Is there anything in it that is secret or harmful? H.M.JR: Well, I imagine what will happen is that 8 man like Bloom will say to our boys, prepare statements, you see, for him when he goes before the committee -- MR. BELL: When he goes on the floor. H.M.JR: Yes, and he will take the best of Hull, Knox, Stimson, and Jones, and mine and our boys will most likely have to whip it in shape and give him a statement to make. MR. BELL: Or write 8. report for him. MR. VINER: If we were to release this and the others come without prepared statements it would be had. MR. WHITE: After we have told them it was this kind of a meeting it would seem 8 little bit -- H.M.JR: I think it is better to get A statement for the chairman of the committee to get. MR. KUHN: It is 80 good it is a shame to waste it. MR. WHITE: Here is a memo indicating the five or six suggestions of how the money could be used. H.M.JR: All right. And then the other thing, I think Lauch had better go up with us tomorrow and sit there. MR. WHITE: All right. Shall I ask him? Regraded Unclassified 119 - 21 - H.M.JR: I wish you would. Tell him that I suggested it. What else? MR. WHITE: Nothing, unless you want to glance at any of those. H.M.JR: No, thanks. 120 The terms and conditions upon which China receives this financial aid shall be those which the Secretary of the Treasury under the direction of the President deems satisfactory. After the war the President shall determine the precise terms for settlement of this financial aid. In so doing he will deal with the matter as one of adjustment between the United Nations taking into account the declaration by the United Nations of January 2, 1942, by which each Government pledges itself to employ its full resources, military or economic, against those members of the Tripartite Pact and its adherents with which such government is at war. China on her part agrees to abide by the terms which the President shall subsequently so determine. Regraded Unclassified Feb 2ml Draft 121 DRAFT STATEMENT FOR SECRETARY OF THE TREASURY ON THE JOINT RESOLUTION TO AUTHORIZE THE SECRETARY OF THE TREASURY WITH THE APPROVAL OF THE PRESIDENT OF THE UNITED STATES TO RENDER FINANCIAL AID TO CHINA AND FOR OTHER PURPOSES The purpose of my appearance before this committee 1s to recommend favorable consideration of the joint resolution to authorize the extension of financial assist- ance to China up to the amount of $500 million. This proposal 1s a war measure. The effective contin- uance of the Chinese military effort depends largely upon the strength of the economic structure of Free China. The financing of the wer effort is 8. major war task of the Chinese Government and the efficient performance of this task re- quires that the Chinese financial and monetary system should be made as strong 8.3 possible. In the United Nations Declaration to which China and the United States are signatories, each of the United Nations solemnly pledged itself to use its full resources in the Regraded Unclassified 122 - 2 - common war. Our financial resources are not only great, but they can be made immediately to contribute to the defeat of the common enemy. China's financial resources are very limited in relation to the tasks which she has assumed. If any part of our financial resources can be of assistance to China in her war against the enemy, I am sure that our people will want to see these resources put to that use. The Chinese have been fighting against the Japanese for four and one-half years. They have not spared their lives, their homes, their crops, their factories, or their financial resources in this struggle. They have remained free because they were willing to make these sacrifices. The people of China are carrying on unceasing war against the Japanese in front of and behind the Japanese lines. The Chinese Armies are not only holding their lines, but on widely separated fronts they are gathering their men 123 - 3 - and supplies to intensify their offensive. The Chinese people have shown to us and to the whole word that a people who will not be conquered cannot be conquered. In waging this war China has well nigh performed economic and military proteges. At the beginning of the war Chinese people were engaged in creating a modern sconomic and financial system. Great progress had been made but the work was by no means complete. The Japanese occupation stripped the National Government of the sources which had accounted for 80 percent of her revenues. The apparatus of the financial and money markets in the coastal cities has fallen into the hands of the Japanese. The loss of the International Settlement and Hong Kong since December 7 has still further impaired the financial struc- ture of the Free Government of China. Under these circumstances the Chinese Government has. faced a double financial burden. It had not only to expand - 4 - 124 their expenditures, but it also had to create a new finan- cial system of banks in the unoccupied area. It is not easy in peace-time to undertake great financial changes. Considering the terrific obstacles with which the Chinese Government has been and still is faced, it has succeeded remarkably well in continuing its resistance to the enemy. But neither they nor we can ignore the fact that the Chinese financial and monetary system has been severely strained in this undertaking. The budget is desperately unbalances. Prices are rising rapidly and at an acceler- ated rate. The accompanying economic and social conditions are serious threats to the Chinese war effort. It would be unwise for the United States to ignore these weaknesses or to withhold any aid within its power. On several occasions in the past the United States Government has rendered financial assistance to China. In - 5 - 125 general that assistance was designed to finance the import of goods both directly and indirectly by stabilising China's rate of exchange. In these financial arrangements I have found that the Chinese were extremely honorable in carrying out any obligations which they assumed. They lived up to the letter and spirit of every contract, took no actions prejudicial to American interests and under the hardest circumstances maintained the export of vital commodi ties which the United States needed. The Chinese Government has urgently requested that we come to their financial support so as to enable them to more effectively carry on their war effort. We have been constantly informed as to the financial and economic situation within China. It is clear from the information received by our government that the granting of the finan- cial assistance that is now being requested will make a substantial contribution toward strengthening their domestic economy. Regraded Unclassified - 6 - 126 The Chinese Government has informed us that the finan- cial aid which the proposed Joint Resolution would make available could be used by it in a variety of ways to strengthen the financial and economic situation within China. Without attempting at this time to specify the par- ticular, arrangements which would be entered into with China and which would most effectively carry out the common objectives of China and ourselves, we are fully satisfied that arrangements can be worked out which will be of great financial and economic help to the internal economy of China, and will enable China more effectively to carry on its war effort. I think that you will be particularly interested in the splendid record that the Government of China has main- tained in the repayments of the loans we have already made, notwithstanding the extremely difficult circumstances under which she has been operating. The first financial assistance - 7 - 127 of $25 million which was granted to China in 1938, which was to be liquidated by the proceeds of shipment to the United States of tung oil. That shcedule has been more than fulfilled to date. $23 million of the $25 million has been repaid and, as a consequence of that arrangement, we have been assured a stock of tung oil at reasorable prices. As & result of this arrangement, our supply of tung oil, which, as you know, serves many war needs, is the largest in our history. Jesse Jones, no doubt, can describe to you the gratifying way in which China has handled the two loans totalling $45 million which the Export-Import Bank made to China in 1939 and 1940. You will recall that in December 1940 I obtained the approval of the Congressional committees for the máking of a $50 million stabilization arrangement with China. Under that arrangement the Chinese governmental banks put up $20 million and the U. S. Treasury $50 million, the Chinese - 8 - 128 contribution to be a cushion for the U. S. contribution. So far, the Chinese Stabilization Board has not called on the United States for any portion of its Fund and has used its own contribution for the management of its foreign ex- change. I may say here, too, that the joint management of that Fund gives us every hope that future sums made avail- able to them will be used judiciously and effectively. These arrangements are proving in practice to have been well-designed for their specific purposes and to be to the mutual advantage of both countries. They are designed, however, to meet the specific problems involved in the flow of goods to and from China and the attempt to stabilize the foreign exchange value of the yuan. The provision for aid to China under Lend-Lease will take care of supplying China with the necessary imported war materials. The additional assistance now proposed is much more comprehensive in scope 129 - 9 - and is designed especially to make possible a strengthen- ing of the internal economic and financial structure of China. The passage of the Joint Resolution authorizing the President to render financial aid to China, will be an outstanding contribution to the common war effort and a noteworthy demon stration to all the peoples of the world, as well as those of China, that the United States stands ready to support and assist their strivings and struggles for independence with every weapon in its arsenal. I hope that in the light of the foregoing, you will see fit to give this Joint Resolution your prompt and whole- hearted support. Regraded Unclassified 130 Following message telephoned to Mr. White by Mr. Pinsent, February 2, 1942, at 2:05 p.m. "His Majesty's Government are willing to make available under a lend-lease arrangement all munitions and military equipment which it is possible for them to supply. "In addition, His Majesty's Government are informing the Chinese Government of their willingness to lend to China for war purposes an amount up to L50 million, at such time and upon such terms as may be agreed between the two govern- ments." There was an introduction which Mr. Pinsent said he didn't take down, regarding desire to cooperate with China. He is not sure it has been released yet, but is being released in London this evening. 131 Submitted by Soong to Hajr 2/2/92 mating at 3:05 The terms and conditions upon which China receives this financial aid shall be those which the Secretary of the Treasury under the direction of the President deems satisfactory. After the war the President shall determine the precise terms for settlement of this financial aid. In so doing he will deal with the matter as one of adjustment between the United Nations taking into account the declaration by the United Nations of January 2, 1942, by which each Government pledges itself to employ its full resources, military or economic, against those members of the Tripartite Pact and its adherents with which such government is at war. China on her part agrees to abide by the terms which the President shall subsequently so determine. 132 February 2, 1942 3:54 p.m. In the Star tonight, I notice that you say EXJ:-T the meeting between Jones and myself took place on Saturday with the leaders. As a matter of fact it only took place this morning. Treaner 5amy: oh, did it? Correct me, will you? If the boys ask me, is it all right to correct you? XA Oh, certainly. Please correct me. M&Jr! All right, thanks. E! Yeah. Thank you, Henry. WIr: Thank you. Right, sir. I misunderstood it, I guess. HWr: Well..... in It was the other meeting Saturday with the President. MyJr: Yeah, but that was just with the President. Yeah, I know, and I suppose that's what I had in my mind. HMJr: Because some of them might - the leaders might sey, "Well, hell, Jones and Morgenthau just have had a secret meeting." F: Yeah, that's right. Correct me. SHIPS I'11 do that. 51 Thank you, sir. DWr: Thank you. E) Good-bye. Regraded Unclassified 133 FE3 2 weter United Press News Item President Receivelt saked Congress to approve A $500,000,000 loan to China. 444 Chinese Loan Mr. Roosevelt nade the request in & letter to Speaker Rayburn asking that Congress approve the necessary appropriation and suabling legislation for the $500,000,000 loan. White House Secretary Early disclosed that Secretary Morgenthan and Administrator Jones not Saturday with Republican and Democratic Congressional leaders and presented the plan for the loan. From the conference came an agreement by leaders of both parties en the request and Reyburn was 83- peeted to have a resolution introduced in the House immediately, Marly said. 2/2-21130A 3-0 Copy:ve:2-2-42 Regraded Unclassified Notes 134 F, District February 2, 1942. United Press News Item Add China Lean The letter also was sent to Vice President Vallase who said he believed the legislation would be introduced first in the House. Mr. Roosevelt's letter said: "Respensible officials both of this Government and of the Govern- next of China, have brought to NY attention the existence of urgent need for the imediate extension so China of esenomic and financial assistance, going beyond in amount and different in form from such aid M Congress has already authorised. I believe that such addi- tional assistance would serve to strengthen China's position as 10- gards both her internal economy and her capacity in general to fune- tion with great military effectiveness in our common effort. "I urge, therefore, the passage by Congress of appropriate legislation to this effect and attach herete a suggested draft of a joint resolution which will accomplish this purpose." Speaker Rayburn announced that the Chinese sid Resolution would be considered by the House by Wednesday. Chairman Bloom of the Foreign Affairs Committee, introduced the resolution shortly after the House not and pleased to hold hearings temorrov. 2/2--21213P Copy:vwi2-2-48 Regraded Unclassified OFFICE OF 135 THE SECRETARY OF THE TREASURY February 2, 1942 TO: THE SECRETARY OF THE NAVY FROM: THE SECRETARY OF THE TREASURY Appended is 8. copy of the statement I propose to make to the House Committee on Foreign Affairs. I would appreciate any suggestions you may care to make. As you know, the Committee will meet in executive session at 10:00 Tuesday morning. OFFICE OF THE SECRETARY OF THE TREASURY 136 February 2, 1942 TO: THE SECRETARY OF COMMERCE FROM: THE SECRETARY OF THE TREASURY Appended is 8. copy of the statement I propose to make to the House Committee on Foreign Affairs. I would appreciate any suggestions you may care to make. As you know, the Committee will meet in executive session at 10:00 Tuesday morning. Regraded 137 February 2, 1942 TO: SECRETARY STIMSON FROM: SECRETARY MORGENTHAU Appended is a copy of the statement I propose to make to the Louse Committee on Foreign Affairs. I would appreciate receiving any suggestions you may care to make. As you know, the Committee will meet in Executive Session at 10 Tuesday morning. Regraded Unclassified = 138 1 - February 2, 1942 TO: SECRETARY HULL FROM: SECRETARY MORGENTHAU Appended is a copy of the statement I propose to make to the House Committee on Foreign Affairs. I would appreciate receiving any suggestions you may care to make. As you know, the Committee will meet in Executive Session at 10 Tuesday morning. 139 STATEMENT FOR SECRETARY OF THE TREASURY on THE JOINT RESOLUTION TO AUTHORIZE THE SECRETARY OF THE TREASURY WITH THE APPROVAL OF THE PRESIDENT OF THE UNITED STATES TO RENDER FINANCIAL AID TO CHINA AND FOR OTHER PURPOSES The purpose of my appearance before this committee is to recommend favorable consideration of the Joint Resolution to authorize the extension of financial assist- snoe to China up to the amount of 8500 million. This proposal is a war measure. The affective contin- uance of the Chinese military effort -- 60 invaluable in our fight against the Axis powers -- depends largely upon the strength of the economic structure of Free China. The financing of the war effort is & major war task of the Chinese Government and the efficient performance of this task requires that the Chinese financial and monetary system should be made as strong as possible. In the United Nations Declaration to which China and the United States are signatories, sach of the United Nations solemnly pledged itself to use its full resources in the D-2 Regraded Unclassified - 2 - 140 common war. No have large financial resources. China's financial resources are very limited in relation to the tasks which it has undertaken. If any part of our financial resources can be of assistance to China in the war against our common enemy, I am sure that our people will want those resources put to that use. The Chinese have been fighting against the Japanese for four and one-half years. They have not spared their lives, their homes, their farms, their factories, or their financial resources in this struggle. They have remained free because they were willing to make these sacrifices. The people of China are carrying on unceasing war against the Japanese in front of and behind the Japanese lines. The Chinese Armies are not only holding their lines, but on widely separated fronts they are gathering their men and supplies to intensify their offensive. The Chinese people have demonstrated to the whole world that a people who will not be conquered cannot be conquered. D-2 Regraded Unclassified - 3 - 141 In waging this war China has performed economic and military miracles. At the beginning of the war the Chinese people were engaged in creating a modern economic, financial and currency system. The Japanese occupation stripped the National Government of the sources which had accounted for 80 percent of her revenues. To make matters worse the apparatus of the financial and money markets in the coastal cities fell into the hands of the Japanese. since December 7. the fall of Heng Kong and the complete loss of the International Settlement have still further in- paired the financial structure of the Free Government of China. In these circumstances the Chinese Government had to bear a double financial burden. It had not only to expand its expenditures, but it also had to create a new financial and banking system in the unoccupied srea. It is not easy even in pease-time to carry out such changes. Considering DR Regraded Unclassified - 4 - 142 the terrifie obstacles with which the Chinese Government has been and still is confronted, it has succeeded amasingly well in continuing its resistance to the enemy. We must face the fast, however, that the Chinese fin- moial and monetery system has been severely strained in the process. The budget is desperately unbalanced. Prices are rising rapidly and at an accelerated rate. The accom- panying esonomic and social dialocations are serious threats to the Chinese war effort. It would be unwise for the United States to ignore these weaknesses or to withhold any aid within its power. on several occasions in the past the United States Government has rendered financial assistance to China. In general that assistance was designed to finance the import of goods and to help stabilise the exchange position of China's currency. In these financial arrangements China has made payments on schedule and even ahead of schedule. D-2 Regraded Unclassified 143 - 5 - And, under the most difficult circumstances, they have maintained the export to the United States of commodities vital to our war effort. Indeed, the Government of China has carried out to the letter every obligation to us which it has assumed. The Chinese Government has now urgently requested that we come to their financial support 50 as to enable them more effectively to carry on their war effort. We have been constantly informed as to the financial and economic situation within China. That information makes clear that the granting of the financial assistance now being requested would make a substantial contribution toward strengthening = the domestic economy of China. The Chinese Government has informed us that the finan- cial aid which the proposed Joint Resolution would make available could be used by it in & variety of ways to strengthen the financial and economic situation within China. without D-2 Regraded Unclassified 144 - 6 . attempting at this time to specify the particular arrange- ments which would be entered into with China and which would most effectively carry out the comon objectives of China and curselves, we are fully satisfied that arrangements can be worked out which will be of great financial and economic help to the internal economy of China and will enable China more effectively to earry on its war effort. I think that you will be particularly interested in the splendid record that the Government of China has main- tained in the repayments of the loans we have already made, notwithstanding the extremely difficult circumstances under which she has been operating. Mr. Jesse Jones, no doubt, can describe to you the gratifying way in which China has handled the loan which the Export-Import Bank has made to China. You will recall that in December 1940, with the approval of the Congressional committees, I made a $50 million D=2 Regraded Unclassified 145 - 7 - stabilisation arrangement with China. A similar arrange- ment was más to China by the British. Under these arrange- ments, the Chinese governmental banks put up $20 million, the British government put up 65 million, and the U. s. Treasury #50 million, the Chinese contribution to be a eushion for the U. S. contribution. So far, the Chinese Stabilization Board has not called on the United states for any pertion of the United States participation and has used its own share for the mmagement of its foreign exchange. I may say here, too, that the joint management of that Fund gives us every hope that future suas made available to them will be used judiciously and effectively. As you know, this Government is giving very substantial Lend-Lease aid to China. of course, because of the tremsmious transportation difficulties, as well as the many-fold demands on American war production, it will take time before the bulk of this Lend-Lease commitment can be delivered to China. D-2 Regraded Unclassified 146 - 8 - These arrangements are proving in practice to have been well-designed for their specific purposes end to be to the matual advantage of both countries. They are designed, however, to meet the specific problems involved in the flow of goods to and from China, the stabilising of the foreign exchange value of the yuan, and the supplying of war material. The additional assistance now proposed is much more somprehensive in seope and is designed especially to make possible a strengthening of the internal economic and financial structure of China. Purthermore, this financial aid is of a different character from the stabilization loans and Expert-Import Bank loans referred to. The proposed aid contemplated here should be regarded as the financial counterpart of lend-leasing war materials. It is designed to the same end - namely, the successful prosecution of the war, and should be evaluated in the same terms. D-2 Regraded Unclassified 147 . , . The passage of the Joint Resolution authorizing the President to render financial aid to China, will be an out- standing contribution to the common war effort. It will be a demonstration to our friends and a warning to our enemies that the United States stands ready with every weapon in its arsenal to assist all who are joined with us in this fight for freedom. I hope that in the light of the foregoing, you will see fit to give this Joint Resolution your prompt and whole- hearted support. D-2 HDW3 JVs BB:rel 2-2-42 Regraded Unclassified 148 February 2, 1942. Dear Archie: It was very good of you to send me the facts and figures contained in your letter of January 29th, which I read with a great deal of interest. I was also glad to have the word concerning Mr. and Mrs. Chen. Thank you again for your comment on my part is the aid that has been given to China. I shall always be glad to have you keep se informed of your program. Sincerely, (Signed) R. Morgenthau, 898 Mr. Archie Lochhead, President, Universal Trading Corporation, 630 Fifth Avenue, New York, New York. GEF/dbs 149 UNIVERSAL TRADING CORPORATION 530 FIFTH AVENUE NEW TORK. N.Y. January 29th, 1942 Wg dear Mr. Secretary: Since Pearl Harbor you may have wondered from time to time how your train child, Universal Trading Corporation, has been Caring. Accordingly I am writing you this brief report to keep you posted to date. Of the $25,000,000 wood oil credit maturing on December 31, 1943, we have borrowed $22,000,000 and have already repaid $18,500,000. of the $20,000,000 tin credit maturing in installments from two to seven years after each advance we have borrowed $13,000,000, and have already repaid $2,200,000. I have no doubt that the balance of both loans will be paid; and on time - unless shipments of wood oil and tin are temporarily suspended because of war developments. In spite of almost insuperable difficulties, Mr. Chen has managed to keep up exports from China of wood oil And tin. We have just heard from our principals in Rangoon that they have succeeded in loading 2,200 tons of wood oil there. Further shipments will be made whenever space is provided by the United Status Maritime Com- mission, upon which we must depend for ships. While we are naturally proud of this record, we take grester satisfaction from knowing that our efforts have substantial- ly contributed to the national defense program. For the past nine months we have worked closely with the O.P.M. and have acted unof- ficially as their agent in supplying all urgent requirements of wood oil to manufacturers engaged in defense work. In addition, since Pearl Harbor me have furnished the United States Navy 2,100 tons and the Defense Supplies Corporation 5,500 tons for its strategic stock File. After all these defense provisions we still hold 3,000 tons which we are authorized to distribute to the defense trade under in- structions from government authorities. The distribution of our tin shipments is also carried out in close cooperation with the govern- ment authorities. You will be glad to hear that Mr. and Mrs. Chen were just able to get away from Hongkong before its fall, and are now safe in Chungking. The great work for China which you undertook almost single- tranded in 1938, is more deoply appreciated by the Chinese than you Regraded Unclassified 150 - 2 - may realize, and really laid the ground for the close collaboration now being worked out between the two allies. It should be a source of great satisfaction to you as an American that your plans for help- ing China have also been the means of obtaining strategic materials which otherwise would have been lacking for the United States war ef- fort. With kindest personal regards, I remain Yours sincerely, Archie Lochhead The Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. Regraded Unclassified 151 February 2, 1942 11:15 a.m. HMJP: Hello. Stephen Scingorn: Mr. Secretary, 5MJrT Yes. 5: Stephen Spingarn. -Mir: Yes. Br You know I'm handling the Treasury end of the war powers bill on the Hill. EXJe: Yes, 5: I'm at the House Judiciary Committee now, and you know that provision of the bill that removes the restriction on the Federal Reserve Banks of buying direct from the Treasury HNJr: Yeah. 5: The suggestion has been made by the Chairman that he's received advice from certain cuarters that the Treasury 1s against that. I told him that my information has been that while the division is soonsored by the Federal Reserve, the Treasury has no objection, and Oscar Cox had told me that he had cleared it with you. HWr: Not only have we no objection, but I've told the press about a week ago that I WAS for it. 2: That's right. And I told the Committee that I would check with you and get that confirmation. (XJr: Now I told the press that I was for it. 69 Right. Wr: And I - that's over 8 week or ten days ago, (ii Right. Well, I'll report that back to the Committee. Regraded Unclassified 152 - 2 - HMJr: Okay. S: Thank you, sir. 153 February 2, 1942 4:37 p.m. Leon Henderson: Hello. This 18 Leon. HMJr: Hello, Leon. H: Remember the other day you had some information that Archangel was open? MJr: Yes. H: Well, I checked today with Robeson. He eaid our Naval Attache there reported that on Friday it was still frozen, and not only that but one of the two big ice-breakers they had relied on had been bombed. HMJr: Well, I've been kidded before. Evidently they been kidding me again. H: Well, I asked - do you know Robeson at all? HMJr: No. H: Robeson 18 - if you want anything - he's the fellow that handles the emergency shipping. HMJr: Yeah. #: When you want accurate information, I've found this over a period of time, that that fellow 18 a - he's in the Maritime, you know HMJr: Yeah, I know. 41 and he's a swell operator, and he's very clean-cut about what he has to say. HMJr: Good. He said they sent out everything that they could - that was available to take - to Russia last month. HMJr: Yeah. That he had some boate available and nothing Regraded Unclassified 154 - 2 - to go, and he sent coal to South America with them rather than see them sit around. HMJr: Yeah. H: And about seventeen actually landed and about thirty-two went out of here. HMJr: I see. H: And when you want anything - I suggest you take his name down and HMJr: I have. H: And when you get a little thing like that, you might check with him. HMJr: I think it's a good idea. H: Because otherwise they may kid you and HMJr: That's possible. H: that's the last thing in the world that you ought to be done to. HMJr: Righto. H: All right, Henry. HMJr: Thank you. M: Good-bye. Regraded Unclassified TREASURY DEPARTMENT 155 INTER OFFICE COMMUNICATION DATE FEB 2 1942 Secretary Morgenthau TO FROM E.H. Foley, Jr. Re: Luscombe Airplane Corporation Pursuant to your approval, an investigation of the records and personnel of the Luscombe Airplane Corpora- tion at Trenton, New Jersey, was begun on Monday, February 2. The investigating staff is headed by James M. Williamson, Chief of the Alcohol Tax Division of the Office of Chief Counsel of the Bureau of Internal Revenue. In addition to guards and stenographers, Mr. Williamson will be assisted by the following personnel: Lawrence Lesser, attorney George E. McMurray, Jr., attorney Frank H. Coe, investigator from Erwin May's staff Morris F. Kahn, engineer and investigator from the Bureau of Internal Revenue. 9.10.76 OK. m.h. Regraded Unclassified 156 FEB 2 1942 My dear N. Secretary: You will be interested to know that & Treasury Department staff has begun an investigation of the records and personnel of the Luscombe Airplane Corpora- tion, at Trenton, New Jersey. information at present available to the Treasury Deyartment indicates that & substantial part of the stock of the Luscombe Airplane Corporation 1s owned or controlled by a. foreign national, one Leopold £lots. Accordingly, the Corporation is under the freezing control of the Treasury Department. The har Department will be kept advised of the progress and the resulte of this investigation. Tery truly yours, (Signed) 1. Margesthan, 11. Secretary of the Treasury. The Nonorable The Secretary of war. nm. copies tabley by X Highing 6:25 Ws:1hh 1-31-42 Regraded Unclassified 157 FEB 2 1942 By dear Mr. Secretary: You will be interested to know that & Treasury Department staff has begun an investigation of the records and personnel of the Luscombe Airplane Corpora- tion, at Trenton, New Jersey. Information at present available to the Treasury Department indicates that a substantial part of the stock of the Luscombe Airplane Corporation is owned or controlled by a foreign national, one Leopold Klotz. Accordingly, the Corporation is under the freezing control of the Treasury Department. The Navy Department will be kept advised of the progress and the results of this investigation. Very truly yours, (Signed) 1. Horgesthau. 39. Secretary of the Treasury. The Monorable The Secretary of the Savy. n.m.c. capis to Jaley WS:1hh 1-31-42 By Messenger Hiphine 5:25 Regraded Unclassified 158 FEB 2 1942 My dear Mr. Chairman: You will be interested to know that a Treasury Department staff has begun an investigation of the records and personnel of the Luscombe Airplane Cor- poration, at Trenton, New Jersey. Information at present available to the Treasury Department indicates that a substantial part of the stock of the Luscombe Airplane Corporation is owned or controlled by a foreign national, one Leopold Klotz. Accordingly, the Corporation is under the freezing control of the Treasury Department. The Civil Aeronautics Board will be kept advised of the progress and the results of this investigation. Very truly yours, (Signed) 1. Wergenthaw, 300 Secretary of the Treasury. Hon. L. Welch Pogue, n.m.c. Chairman, Civil Aeronautics Board, capiro w Foley Washington, D. C. By Messenger Hopbins 5:25 DJS:EHFJr. :vls - 2/2/42 Regraded Unclassified 159 TREASURY DEPARTMENT Washington FOR FOR IMMEDIATE RELEASE Press Service Monday, February 2, 1942 The Treasury Department announced today that & staff of Treasury representatives under J. M. Williamson, of the Office of the General Counsel of the Treasury Department, has begun an investigation of the records and personnel of the Luscombe Airplane Corporation at Trenton, lieu Jersey. The corporation is under the freezing control of the Treasury Department. (Initialed) B. I. 1., Jr. 0 DJS:BB/ma - 2/2/42 Regraded Unclassified 160 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Press Service Monday, February 2, 1942. No. 30-5 The Treasury Department announced today that a staff of Treasury representatives under J. M. Williamson, of the Office of the General Counsel of the Treasury Department, has begun an investigation of the records and personnel of the Luscombe Airplane Corporation at Trenton, New Jersey. The corporation is under the freezing control of the Treasury Department. -000- Regraded Unclassified 161 Secretary Morgenthau TO: The purpose of the attached mem- orandum is to familiarize you with matter which will probably be ralsed at Cabinet meeting by the Attorney General in the near fu- ture: the proposed creation of & general governmental committee to consider charges of un-American activities against Government em- ployees and make advisory recom- mendations to agency heads involved. The proposal is patterned after the Treasury Un-American Activities Committee set-up. As I have indicated in the at- tached memorandum, it is my recom- mendation that the Treasury support the proposal, which will afford assurances that both Government and employee interests will be consid- ered in the disposition of these cases, and will provide some degree of uniformity in the treatment of atters which are now handled in widely disparate fashion in dif- ferent agencies. MR. FOLEY Uncle 162 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE FEB 2 1942 TO Secretary Morgenthau FROM Mr. Foley At my request, Spingarn recently attended 8. number of interdepartmental conferences on ways and means of handling charges of un-American activities against Fed- erel personnel so as to protect both the interests of the Government and the basic rights of the employee in each case. Participating in these conferences have been chief law officers of various Government agencies including Jim Rowe of Justice, Jerry Reilly of the Labor Board, Warner Gardner, the Solicitor of the Labor Department, Telford Taylor, the General Counsel of the Federal Communications Commission, and others. The matter arose as a result of the list of almost two thousand alleged communists that Representative Dies sent the Attorney General a few months ago. The F.B.I. has been investigating each of these cases, and the question non arises as to what should be the procedures for handling the investigation reports when they are completed. The con- ferees, however, agreed that the problem was larger than Regraded Unclassified 163 - 2 - this, that cases were continually arising in each of the - agencies in which such charges were made against employees. The present methods of handling these cases differ widely. In some agencies persons so charged have been fired out of hand without any notice or hearing. Other agencies have proceeded more judicially in these cases. Spingarn explained the Treasury Un-American Activities Committee set-up, and there was general agreement that this represented an admirable solution of the problem. After considerable discussion, the conferees came to the conclusion that the best thing to do was to establish a general governmental committee to deal with these cases. The committee would be composed of both Government officers and public members: the public members to be retired judges, leading members of the bar, and other persons whose character and fairness would command general respect; the Government members to be officers of similar character who would not be vulnerable to attack on the ground that they were fellow travelers or had radical associations. The committee would be large enough 80 that it could operate by subcommittee and Regraded Unclassified 164 - 3 - in the field. It would consider the investigation reports in the cases referred to it, hold hearings when justified, and report its findings and recommendations to the appro- priate agency head in connection with each case. Such recommendations would be purely advisory, however (and indeed could not be legally otherwise), and the agency head could then retain or fire the employee involved as he saw fit. Because of his experience with the Treasury Un-American Activities Committee, Spingarn was asked to prepare & draft of an Executive Order establishing such committee, and I attach a copy of the Order he prepared. It establishes an "Advisory Committee on Subversive Activities" to be ap- pointed by the President and requires all agencies except Army and Navy to refer to the committee all cases now pend- ing or which may hereafter arise in such agencies in which charges of un-American activities have been made against an officer or an employee. After appropriate consideration in accordance with procedures which it is to establish (which are required by the Order to be so framed as to further the Regraded Unclassified 165 - 4 - best interests of the Government in time of war and adequately to protect the essential rights of accused officers and employees), the committee is to transmit its findings and communications to the appropriate agency head who is not bound by them but can follow them or not as he sees fit. Agency heads, moreover, are expressly authorized to transfer or suspend accused officers or employees at any time before or after their cases may be referred to the committee. For obvious reasons the War and Navy Departments are not required (as are the other agencies) to refer their cases to the committee, but they are authorized to do so if they wish. The proposed Executive Order has now received the approval of all the conferees. The Attorney General is expected to bring the matter up for discussion at Cabinet meeting in the near future. I recommend for your consideration that the Treasury support the proposal. It is true that the Treasury is handling its own cases without the trouble that some of the other agencies are experiencing. Our Un-American Regraded Unclassified 166 - 5 - Activities Committee has received general approbation. (See, for example, Jerry Kluttz's column in the Washington Post of November 26, 1941, which after the statement that "Treasury Secretary Morgenthau is credited with supplying a practical answer to a very delicate problem" briefly describes our set-up). However, I don't think that be- cause we have been able to handle our own cases without too much trouble we should refrain from helping other agencies which have been less fortunate. A general gov- ernmental committee along the lines indicated would pro- vide a very desirable degree of uniformity in the treat- ment of these cases and would give assurance that in the disposal of these cases consideration would be given both to the interests of the Government and those of the employee. 9.10.7h DRAFT OF JANUARY 17, 1942 167 EXECUTIVE ORDER ESTABLISHING AN ADVISORY COMMITTEE TO CONSIDER CHARGES OF SUBVERSIVE ACTIVITIES MADE AGAINST OFFICERS AND EMPLOYEES OF THE UNITED STATES. By virtue of and purusnat to the authority vested in me as President of the United States by the Constitution and statutes of the United States, and in order to provide for more uniform consideration and disposition of charges of subversive activities against officers and employees of the United States with due regard to the best interests of the United States in its war efforts and the essential rights of officers and employees against whom charges are made, it is hereby ordered 85 follows: 1. There in hereby established in the Executive Office of the President an Advisory Committee on Subversive Activities (hereafter referred to as the Committee) to consider charges of subversive and disloyal activities made against officers and employees of the United States. 2. The Committee shall consist of a chairman and S. vice- chairman, to be designated by the President, and such other members representing the Government and the public as the President may from time to time hereafter appoint. 3. It shall be the duty of the Committee, in accordance with such procedures as it may prescribe, to consider any case referred to it (1) by the head of any department, agency or corporation of the United States in the Executive branch of the Government (hereafter Regraded Unclassified 168 referred to as agency head and agency, respectively), based upon charges against a civilian officer or employee of such agency that such officer or employee is disloyal or advocates, or is a member of an organisation that advocates, the overthrow of the Government of the United States by force or violence, or that such officer or employee is otherwise engaged in subversive acti- vities, or (2) any case referred to it by the Attorney General based upon such charges against any civilian officer or employee in any agency. 4a (a) Except as otherwise provided in subparagraph (b) of this paragraph, each agency head is hereby directed to refer to the Committee each case currently pending or which may hereafter come to his attention, in which charges of the character described in paragraph 3 have been made against an officer or employee of his agency, and the Attorney General is hereby directed to refer to the Committee each case currently pending or which may hereafter come to his attention in which such charges have been made against an officer or employee of any agency: Provided, however, That no case shall be referred to the Committee until an investigation of the charges in such case has been made by the appropriate agency or agencies. 1 copy of such investigation report or reports shall be transmitted to the Committee at the same time that the case is referred to it. (b) Nothing in this Order shall apply to officers and enlisted men of the military establishments or to civilian officers and em- ployees of the War Department or the Navy Department (including the Coast Guard) and their field services: Provided, however, That the Secretary of War or the Secretary of the Navy my, in his discretion, Regraded Unclassified 169 refer any case involving a civilian officer or employee of his Department to the Committee in accordance with the provisions of this Order. 5. After appropriate consideration, the Committee shall trans- sit its findings and recommendations to the appropriate agency head, and (if the case was referred to the Committee by the Attorney General) to the Attorney General. The findings and recommendations shall be purely advisory in character and after their consideration the agency head shall take such action, if any, 88 in his judgment the circumstances require. The agency head may, however, transfer or suspend such officer or employee at any time before or after the case is referred to the Committee, if in his judgment such action is necessary to protect the interests of the Government. 6. The Committee shall prescribe its procedures, but they shall be framed so as to further the best interests of the Govern- ment in time of war and adequately to protect the essential rights of officers and employees against whom charges have been made. The Committee may act through subcommittees of one or more members, and may appoint persons not members of the Committee to act as members of field subcommittees outside the District of Columbia, and such persons and field subcommittees shall have all the rights, posers, and privileges of regular members end subcommittees of the Committee. 7. The Committee is hereby empowered to employ such persons as it may deem necessary; to fix the compensation of such persons; to incur all necessary expenses for services and supplies; and to direct such travel of members end employees at public expense as it may deem necessary in the accomplishment of its work, Members of Regraded Unclassified 170 the Committee shall serve without compensation in that capacity, but each of the members of the Committee shall receive payment for his actual end necessary expenses for transportation, and in addi- tion a subsistence allowance of ten dollars per diem while away from his official station in the case of governmental members, or while away from his place of residence in the case of public members, in connection with the work of the Committee. Employees of the Committee shall receive such travel and other allowances as civilian employees of the United States receive generally by law. 8. All of the expenses of the Committee shall be paid on vouchers approved by the Chairman (or other person authorized by the Committee) from allocations to be made to the Committee for that purpose from the Emergency Fund for the President. 9. All executive officers and agencies of the United States are hereby authorized to furnish the Committee such facilities, services, and cooperation as it may from time to time request. 10. The Committee shall make a public report at least semi- annually of its procedures, disbursements, and by general classi- fication, the number and nature of cases referred to and handled by it and the findings and recommendations therein. THE WHITE HOUSE, January # 1942. Regraded Unclassified 179 The National Archibes Welfington, B.C. WILL DONCERNING THE FRANKLIN D. ROO&EVELT LIBRARY AT HYDE PARK, N. 1. Papers recently transferred to the Franklin D. Roosevelt Library by the President include letters, memoirs, and diaries of various officers of the United States Navy, 1775-1898; Mr. Roosevelt's diplomas and certificates of membership in various organizations, 1905-41; copies of letters, reports, and memoranda received by the Office of the Secretary of the Navy from naval units and bureaus, 1913-20; and copies of the official stenographic reports of the President's press conferences, January-June 1941. Material recently acquired relating to the history of Dutchess County, N. Y., includes correspondence and other papers of the DePeyster family, 1697-1865, and diaries, notebooks, and bird-banding records kept by Maunsell S, Crosby of Rhinebeck, N. Y., 1909-31. The Second Annual Report of the Archivist of the United States as to the Franklin D. Roosevelt Library (19 P.), just published, describes the activities of the Library during the fiscal year 1940-21 and includes a descriptive list of material deposited in the Library by the President or acquired by it from other sources to June 30, 1941. Copies of the Report may be obtained from the livision of Information and Publications of The National Archives, asshington, D. C. February 2, 1942 Regraded Unclassified 172 SECOND ANNUAL REPORT OF THE ARCHIVIST OF THE UNITED STATES AS TO THE FRANKLIN D. ROOSEVELT LIBRARY 1940-1941 Regraded Unclassified THE NATIONAL ARCHIVES + SECOND ANNUAL REPORT OF THE ARCHIVIST OF THE UNITED STATES AS TO THE FRANKLIN D. ROOSEVELT LIBRARY HYDE PARK, N.Y. + For the Fiscal Year Ending June 30 1941 THE PRESIDENT'S Room, FRANKIN D. OF SECURITY THE UNITED TENOLINA THE 434 STATE UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON : 1942 THE FRANKLIN D. ROOSEVELT LIBRARY (As of November 15, 1041) Sotox J. Buck-Archivist of the United States. FRED W. Surmas-Director of the Franklin D. Roosevelt Library, LETTER OF TRANSMITTAL THE NATIONAL ARCHIVES, Washington, D. O₂ November 15, 1941. To the Congress of the United States: In compliance with section 208, title II, of the joint resolution, approved July 18, 1939 (53 Stat. 1062-1066), which requires the Archivist of the United States to make to Congress "at the beginning of each regular session, a report of the preceding fiscal year as to the NATIONAL ARCHIVES PUBLICATION No. 10 Franklin D. Roosevelt Library," I have the honor to submit herewith the second annual report on the Franklin D. Roosevelt Library, which covers work performed under the direction of my predecessor, R. D. W. Connor, during the fiscal year ending June 30, 1941. Respectfully, Soton J. BUCK, Archivist of the United States. SECOND ANNUAL REPORT OF THE ARCHIVIST OF THE UNITED STATES AS TO THE FRANKLIN D. ROOSEVELT LIBRARY Four days after the beginning of the fiscal year under review, on July 4, 1940, the building for the Franklin D. Roosevelt Library, then virtually completed, was turned over to the Government of the United States by the Franklin D. Roosevelt Library, Inc., a nonprofit New York corporation that had constructed it from funds privately sub- scribed, and was accepted for the Government by the Archivist of the United States, who is responsible for the administration of the Library. During the year finishing touches were put on the building, equipment was installed, and the grounds were landscaped, all with- out cost to the Government; a small but well-qualified staff was appointed; large quantities of manuscripts, books, and museum objects were received, chiefly from the President; and the work of arranging this material was begun. Sufficient progress in arrangement had been made by the last day of the fiscal year to permit the opening to the public of the exhibition rooms and museum portions of the building, and accordingly, on June 30, the building was formally dedicated by the President. The institution that was thus made available to the American people will serve primarily as a depository for the manuscripts, books, prints, paintings, and other historical material accumulated by Franklin D. Roosevelt. This material includes his public and personal papers covering the years of his services as New York State senator, 1910-13, as Assistant Secretary of the Navy, 1913-20, as Governor of New York, 1929-33, and as President of the United States; political material re- lating especially to the Presidential campaigns of 1920, 1924, 1928, 1932, 1936, and 1940; letters, log books, and other manuscripts relat- ing to American history, especially the history of the American Navy since 1775, and paintings, drawings, prints, and models of many famous American naval vessels; a small but valuable collection of ma- terial relating to the history of the State of New York, and particularly of Dutchess County; and flibrary of some 15,000 books and pamphlets, some of them rare, many of them autographed copies from the authors, and the great bulk of them important works for American history. The Library hopes also to acquire by gift or deposit the papers of other persons and organizations that have been influential during the 1 2 REPORT OF THE ARCHIVIST OF THE UNITED STATES FRANKLIN D, ROOSEVELT LIBRARY 3 period since 1910 and to build up a comprehensive collection of related November 1940, and April 28, 1941, respectively; and Eleanor G, books nind pumplets Thus there will be made available under Fed. Metionagle, formerly cataloger in the library of Tutts College and eral control and for the use of the public an extensive collection of research secretary for the Mount Vernon Ladies Association, was commer material relating to this important epoch in American history. appointed junior arelivist and cataloger on November 12, 1940, This BUILDING AND EQUIPMENT professional staff was supplemented in the course of the year by the appointment of a miseumit side, a secretary to the Director, two clerks, When the U-shaped, Dutch colonial building of stoue, Set far back and a laborer. As the Library is n. field agency of The National Irom the New Albany Post Road on n. 16-acre traet deeded Archive, the staff of the latter institution is used in commetion with without cod to the Government by the President from the Rousevelt oth administrative nutters as equipment, finances, and personnel. Park estate, Was turned over to the Archivist on July 4, it was Time professional work is organized along three distinct lines of fac from ready for final occupaticy. In the months that followed the activity (L5 determined by the three major types of material in the remaining work was done and tenant changes" to increase the useful- printed material, aud museum object-but no the of the building were made, Stacks and shelves for the storage professional worker on the staff will be restricted to any single one of and books were already in place, but 35,000 fiber boxes of the three lines of activity. Each worker will be expected to acquire for the preservation of manuscript vaterial and a machine for the IL general knowledge of all rosterial in the Library, and as the work on playing of sound recordings of specebes and other historical wents the mannecripts progresses he will be assignal a field of specialization, were oldained. Cass, tables, shelves, and similar wi're which will necessitate not only complete familiarity with relevant purfussed or constructed for the misenm objects. Ontside the beritd- portions of the Imldings of the Library but also an acquintance with ings. Une grounds stound the Library were landscaped, a public patting the extente location. and value of related materials, both manuscript space. a ticket booth, and walks were constructed, and fences and signa and printed, that may be in existence elsewhere, He will also be were crected, All this work was done without cost to the Government responsible for all the stéps in the arrangement and description of the by the Franklin D. Roosvelt Library, Inc., working in close coopers- materials in his immediate charge from the time of their receipt to tion with the President, the Archivist, and the members of the Library their tital analysis and description. To familiarize the staff further citizens. staff and using funds donated by more than 28,000 public-spirited with the techniques employed in the Library and the subject matter of its holdings, il series of staff meetings was held during the year 05 pail of an in-service training program. THE STAFF To experyise the completion of the building and the installation of MATERIAL RECEIVED it- equipment and to care for the manuscripts. books, miseum objects, As anon NS the Library building was turned over to the Govern- and offer materials tliat were to come to the Library, the Archivist ment, the President started sending material to it, and throughout processed 500m after the beginning of the year to appoint a staff for I'm year he continued to turn over material to the Library as rapidly the Library, Fred W. Shipman, a member of the National Archites n° il could be absorbed. No material for the collection was pur- sinft since June 1935 and Chief of the Division of State Department Archives sitire March 1936 and previously a research worker for flue chased and only H. small quantity was received through gifts from American Antiquation Society and n. historical expert in the Depart- persons other than the Presilent. In accepting these gifts care was exercised to observe the provision of the law creating the Library ment of State, Wills appoired Director of the Library OR July 16. Esten It, Nixon, also formerly employed N.F. il historical expert in the that limits the material the Library may acquire from other sources by gift, purchase. or loan to "historical books related to and other Department of State in connection with the publication of the Terrie tarlet Papers. Wills appointed associate arehivist at the Librury on historical nuterial contemporary with and related to the historical November I. James L. Whitchead. formerly State Supervisor of material acquired from the donor." that is, from Franklin D. Rouse- the WPA Survey of Federal Arelives in Pennsylvania, and John S. vole, This provision wisoly prolibits the acquisition of items or Curties, formorly urra project supervisor of the Historical Records intrinsically interesting Last onrelated to the purposes to Survey in Now York and instructor in history in several miurteipal which the institution is dedicated. collige in Now York City, were appointed assistant archivista OD Manumeript the fiscal year 1941 approximately 2056 linear feet of mmmuscript material was received, 1,563 feet 4 REPORT OF THE ARCHIVIST OF THE UNITED STATES FRANKLIN D. ROOSEVELT LIBRARY 5 from the President and 493 feet from other sources. The papers Gree(ings and Invitations. 1933-10. 69 feet. Birthday greetings, letters no from the President fall into three groups relating respectively to latter to the Birthday Balls, and enugratulations ou undversaries of the his activities as a leader of the Democratic Party, as Governor of President's elections and inaugurations and other ocrasions. New York State, and as President. Papers in the last group crim. Press runferences of the President- 1933-40. 16 volumes, typed. Carbon copies of official stenographic reports. prise about three quarters of the manuscripts received to date, and Correspondence on the Bonus Bill. 1985. 11 foot. Letters opposing or sup- of them only a few are concerned with the executive and policy. porting the Palman Adjusted Service Certificate Bill. making aspects of the Presidential office. Most of them consist of Belief authorizations. 1935, 1 feet. Copies of letters from the President au- letters to the President offering advice or criticism on national issues thorizing the transfer of relief tunde to specific projecta. or soliciting aid on matters of personal or local character. Correspondence ou the Indiciary Reorganization Bill. 1037. 85 feet. Letters in support of or opposing the Judiciary Reorganization Bill, divided pro and The following are the groups of papers that have been received coa, with copies of the President's replies, from the President: Third (erm currespondence. 1937-40. 37 feet. Letters to the President urging Campaten currespondence. 1931. 10 feet, Relates to Mr. Roosevelt's service or opposing Dis condidacy for a third term. as chairmon of the New York State committee for the nomination of Alfred Currespondence and papers of Louis McHenry Howe. 1918-20, 1980-36, ai feet. This material relates to Howe's term of service as assistant to Assistant EL Smith as Presidential candidate of the Democratic Party. Secretary of the Navy Franklin D. Roosevelt and to his emeretaryship to Compaign correspondence and papers. 1928-30. a feet, Chiefly letters n- Mr. Boowell as Governor of New York and as President. celved by Mr. Rousevelt Las his capacity as compaign matinger for Altrat EL Smith during the Presidential compaign of 1028, The following groups of papers have been received from the Campaign correspondence 1028-33. 163 feet. Letters and telegrame to Mr. persons, organizations, and agencies named at the beginning of the Roomevelt from Democratic Party officiale and workers and from the descriptions: public, with enples of bis replies, Personal correspondence while Governor of New York State, 1939-33, 46 Trell Harry 4 Hopkins. Papers as Works Progress Administrator. 1933-38. 125 Compaign correspondence and papers. 1930-86. 20 fort. Financial records feet of the 1932 Democratie National Campaign Committee: 1036 election compaige Mrs. Franklin D. Roosevelt. Correspondence. 1930-31. 2 feet. literature; and analyses of the political struction in 1936, Democratic National Committee. Patronage correspondence. 1988-40. 5 feet. Addresses as Governor and President. 1930-40, 10 volumes, typed. Cartinn Letters to the committee with reference to positions to the Government. copies of official stenographie reports of the addresses Democratic National Committee, Women's Division. Campaign records, cor- Correspondence, 1982-38, 29 feet. Letters to Mr. Housevelt, for the bost part respondence, and Ilterature. 1954-40. 34 feet. from the general public, relating largely to the for the Presidential National Committee of Independent Foiers. Campaign records and correspond- nomination and election and to the Insuguration. code 1036-40, 27 feet. Addresses as Presidential caudidate and President, 1932-40, 22 Items Drafts Commerce Department. National Recovery Administration documents 1933-96. and final exples of the addresses of July 2, 1032, August 14, 1038, March 4, 230 feet. Copies of the codes formulated by the NRA, of the Executive 1037, and December 29, 1940, with corrections and additions in pencil in Mr. orders of the President placing them in effect, and of histories of the making Roosevelt's hand. of the codes. White House alphabetical file, 1933-30. 1,000 feet. Letters to the President Interior Department, Bituminous Coal Division. Copy of the official record in from the general public, with abstructs of letters forwarded to various Dorket 15, presenting a detailed account of the Division's actions In establish- agencies of the Government and of letters placed in other White House files, Ing minimum prices and marketing rules and regulations. 1980-40. 67 feet. and copies of replies, Printed material.-The Library received 2,469 books and 673 President's personal file relating to gifts. 1933-87. 12 feet. Letters to the President necompanying gifts, with copies of bis replies. pamphlets from the President, including 359 books relating to the Papers relating to trips of the President. 103-38. 14 feet. Correspondence history of the United States Navy, 673 nineteenth century pamphlets and memorands dealing with arrangements, (Hnerarles, speeches, Interviews, and periodicals containing biographies of prominent American naval and administrative matters. men, 94 books on Dutchess County history, and 2,016 books on history, Correspondence relating to raillo aidresses and messages. 1933-30. 17 fret. economics, biography, and current affairs. Many of the President's Letters commenting on the lesure touched upon in the President's speeches, with copies of his replies. books and pamphlets have added interest because they contain com- Papers on national pulities. 1083-39. 0 feet. Letters, reports, and mens- ments and notations in his hand or because they are inscribed copies muta from Democratic Party leaders submitting analyses of the political presented by the authors. In addition, 1,319 books and 10,242 struation throughout the country. pamphlets, for the most part Government publications, were received White House press releases. 1033-39. a feet. Chiefly mimeographed re- from other sources. Thus the Library had acquired by the end of the lesses: with sume hrief releases In typewritten form. and a number of memo randa an the properation of the releases. year 3,788 books and 10,915 pamphlets. 6 REPORT OF THE ARCHIVIST OF THE UNITED STATES FRANKLIN D. HOOSEVELT LIBRARY 7 Museum material.-In his long career the President has collected or has had given to him hundreds of intiseum objects. During the bouis formerly a part of the Rousevelt family library are kept in year the Library received from the President naval prints and pir- special groups, but all other printed material with the exception of tures and ship models, which he had spent many years in collecting: Government publications is being arranged in a single subject classi- rore and beautiful items, such as oriental rugs, Chinese carvings, fication based on that used by the Library of Congress. Printed Li- Seandinavian glassware, and Arabic metal work, which had been brary of Congress cards are used for cataloging whenever feasible, given to him by friends and admirers from all over the world; and but must of the books received from the President require special hundreds of trinkets, souvenirs, relies, and curios, which had been identification and cataloging to indicate such facts as the presence sent to him by men, women, and children from all parts of the United of his autograph, notations in his hand, or signatures by authors on States us evidence of their vsteem and good will, By groups, this presentation copies. The subject entries indicated on the Library of material consisted of 161 nával prints and paintings and other pic- Congress cards are supplemented by additional entries for all topics tures; 113 ship models; 550 coins, medals, medallions, and pieces of of importance within the Library's field of interest. Printed material received from Government agencies is arranged alphabetically by the jewelry; 51 walking sticks; 44 flags and pennants; 27 gavels; 18 names of the agencies, and checking cards have been made for docu- paperweights; 14 vases; and 842 other objects of 11. miscellaneous ments regularly issued. During the year the titles of the 2,469 cluracter. The holdings of the Librury were also enriched by the looks received from the President were alphabetically listed, 302 titles receipt from other sources of 32 pictures and 18 miscrllaneons objects. reataloged, and 1,393 cards were prepared for the public catalog. bringing the total number of museum objects received during the Muscum material-A complete inventory was made of the 1,850 year to 1,850. museum objects received by the Library during the year, and some ARRANGEMENT AND DESCRIPTION OF MATERIAL 500 of these objects were chosen for initial display. The museum ex- hibits will be rotated periodically to permit the display of the ma- Manuscript material.-Most of the papers thus far received have jerial not yet used and of new material that may be received. It is been products of active, well-organized offices and were consequently destrable for exhibite at the Library to be at once nautical, biographi- well arranged in files at the time of the creation of the records. When cul, artistic, and historical, in short, for them to bear the imprint of such files are received, no attempt is made to change their arrange- the President's interests and to be representative of his activities. It ment; only files lacking identity or original arrangement or papers was fortunate, therefore, that the President was able to play 11 large obviously misfiled are arranged in the Library. The papers received part in arranging the initial exhibit, particularly in the Naval Ex- are therefore ordinarily removed from the filing cases, packing boxes, hibition Room. or other original containers, are supplied with new folders if nec- The objects ou display are distributed through several rooms. In essury, and are then placed in fiber boxes each of which holds approxi- the Main Exhibition Room on the first floor a diversified collection of nately Я Unear inches of material, The boxes are given identifying objects is displayed in cases and cabinets, in the Naval Exhibition Inbels and are laid flat on steel shelves, usually in rows two boxes high Room on the same floor numérous ship models are on display, in on each shelf, the Oddities Room on the ground floor over 100 miscellaneous gifts By the end of the year inventories based on careful examination from the general public are placed on open shelves and tables, and in and study of the papers had been made of all papers received from another exhibition room nearby carriages, sleighs, and ice boats of the President with the exception of his correspondence during the the President and his family are placed; and in all these rooms, except period of his governorship, and the following five groups of papers the last, pictures suitable to their surroundings have been hung. In of the President, amounting to 743 linear feet in all, had been labeled accordance with standard museum practice, cards and labels identify- and shelved: Correspondence, 1902-33; White House alphabetical file, ing or explaining the significance of the objects on display are placed 1933-36 tin part); President's personal file relating to gifts, 1933-37: with them. Correspondence on the Bonus Bill, 1935: and Correspondence on the Judiciary Reorganization Bill, 1987. The work of arranging and RELATIONS WITH THE PUBLIC AND WITH OTHER INSTITUTIONS describing the manuscript material had not progressed sufficiently far, however, to permit its tise for research. As might be expected, the Library has attracted the attention of Printed material.-Books and pamphlets relating to the history of the public at large because of its personal relationship to the Presi- the United States Navy and to the history of Dutchess County and dent of the United States. Representatives of newspapers have Visited the Library from time to time and have written articles 8 REPORT OF THE ARCHIVIST OF THE UNITED STATES FRANKLIN D. ROOSEVELT LIBRARY 9 about it, and many newspaper men, as well as newsree) photog- FISCAL AFFAIRS raphers, were present at the dedication of the Library. Even though the Library was not opened to the general public, over 1,000 persons The resolution establishing the Franklin D. Roosevelt Library visited the building during the year. Among the earlier visitors authorizes the Archivist to pay the expenses incurred by him in carry- were persons of national and international importance, as well as ing out his duties with respect to the Library from the appropriations many professionally interested individuals, including librarians from for The National Archives and requires him to submit to Congress the New York State extension service and members of the Society annually a detailed statement of the receipts and expenditures on of American Archivists. Distinguished foreign visitors included account of the Library. The expenses incurred by the Archivist for Crown Princess Martha of Norway, His Excellency the Earl of the Library during the fiscal year 1941 were accordingly paid from Athlone, Governor General of Canada, Her Royal Highness Princesa the appropriations for The National Archives contained in the In- Alice, and W. L. Mackenzie King, the Prime Minister of Canada. dependent Agencies Appropriation Act, 1941, approved April 18, From the interest ovidenced thus far it seems likely that the visitors 1940 (Public, No. 459, 76th Cong.). Expenditures and obligations to the Library will number in the thousands annually. for the Library during the year, insofor as it is possible to segregate The general public will be admitted to the exhibition rooms and mu- them, totaled $23,405, as indicated in the following statement: seum portions of the building beginning with the first day of the new Obligations and expenditures for the flocal year ending June 30, 1941 fiscal year. These portions of the building will be open Tuesdays to Saturdays inclusive from 9:30 0. III, to 5 p. ni., and Sundays and and expenses holidays (including any holiday that falls on Monday) from 11 Personal services $15,016 Supplies and material 1, .019 д. m. to 5 p. m. An admission fee of 25 cents will be charged all Communication service 2, 2N9 visitors except those under 12 years of age, but no fees will be charged Travel expense 1, 784 for the use of books and papers in the Library when they are made Transportation of things 3 available to investigators. The funds so collected are administered Repairs and alterations 70 Special and miscellaneous 80 for the benefit of the Library by the Archivist Under the provi- sinns of the resolution establishing the Library, gifts and bequesta Equipment 2, 527 to it of personal property may be received and administered us trust Total miaries and expenses $22,788 funds by a Board of Trustées composed of the Archivist and the Printing and binding 017 Secretary of the Treasury as es officio menubers and five others ap- $23,405 pointed by the President for life. The President has appointed Basil O'Connor, Frank C. Walker, Harry L. Hopkins, and Samuel E, Funds for the operation of the Franklin D. Roosevelt Library for filled. Morison ns trustees, and one vacancy on the board remains to be the fiscal year 1942 were provided in the appropriations for The National Archives in the Independent Agencies Appropriation Act, Other institutions have been especially helpful in the work of the 1942, approved April 5, 1941 (Public, No. 28, 77th Cong.). Library. The Library of Congress has supplied bibliographies and catalog cards, subject headings lists, classification schedules, and vari- ous other tools used in cataloging and has otherwise been of material aid The Vassar College Library and the Adriance Memorial Li- brary of Poughkeepsie have been extremely helpful in lending books and answering inquiries, Too much cannot be said of the assistance rendered by the Franklin D. Roosevelt Library, Inc., which, ns mentioned earlier in the report, has borne most of the expenses involved in furnishing and equipping the building and in providing the landseaping and other necessary work on the grounds. FRANKLIN D. ROOSEVELT LIBRARY 11 torical material as shall be donated by the donor. The Archivist Roosevelt Library, as D gift from the donor, such collection of his- also acquire for the said Library from other sources, by gift, APPENDIX I material contemporary with and related to the historical material parchase, may or loan, historical books related to and other historical RESOLUTION ESTABLISHING THE FRANKLIN D. ROOSEVELT this section shall be permanently housed in the Franklin D. Roosevelt acquired from the donor. The historical material acquired under LIBRARY, APPROVED JULY 18, 1939 Librury: Provided, That the Archivist may temporarily remove any 153 Stat. 1062-1006] of such material from the said Library when he deems it to be Joint Resolution to provide for the establishment and maintenance of the necessary: And provided further, That the Archivist may dispose l'ranklin D. Roosevelt Library, and for other purposes. of any doplicate printed material in the said Library by sale or ex- change. and, with the approval of the National Archives Council, States of America in Congress assembled, Resolved by the Senate and House of Representatives of the United may dispose of by sale, exchange, or otherwise any material in the said ary which appears to have no permanent value or historical interest. The proceeds of any sale made under this section shall be TITLE 1-DEPINITIONS paid into the special account provided for in subsection (d) of sec- SECTION 1. As used in this joint resolution- tion 905 of this title, to be held, administered, and expended in (a) The term "donor" means Franklin D. Roosevelt, accordance with the provisions of that subsection. Sen. 204. The faith of the United States is pledged that, upon the (b) The term "historical material" includes books, correspondence, construction of the Fronklin D. Roosevelt Library and the nequisi- papers, pamplilets, works of art, models, pictures, photographs, plats, maps, and other similar material. tion from the donor of the collection of historical material in (c) The term "Board" means the Trustees of the Franklin D. accordance with the terms of this title, the United States will pro- Roosevelt Library. vide such funds as may be necessary for the upkeep of the said Library and the administrative expenses and costs of operation TITLE H-FRANKLIN D. BOOSEVELT LIBRARY thereof, including the preservation and care of historical material acquired under this title, so that the said Library shull be at all SEC. 201. The Archivist of the United States is authorized to accept times properly maintained. for and in the name of the United States from the donor, or from Sec. 205. (a) A Board to be known as the Trustees of the Frank- such person or persons as shall be empowered to act for the donor, fin D. Roosevelt Library is hereby established. The Archivist and title to Il tract of land consisting of (LT) area of twelve acres, more or the Secretary of the Treasury shall be ex officio members, and the less, of the Hyde Park estate of the donor and his family, located Archivist shull be chairman of the Board. There shall also be five on the New York-Albany Post Road, in the town of Hyde Park, members of the Board appointed by the President for life, but the Dutchess County, State of New York; such area to be selected and President may remove any such member for cause. Vacancies on carved ont of the said estate by the donor and to be utilized as & the Board shall be filled by the President. Membership on the site for the Franklin D. Roosevelt Library provided for in this title. Board shall not be deemed to be an office within the meaning of the Sec. 202. The Archivist is authorized to permit the Franklin D. Constitution and statutes of the United States. Roosevelt Library, Incorporated, a New York corporation organized (b) No compensation shall be paid to the members of the Board for that purpose, to construct on the area referred to in section 201 of for their services as such members, but they shall be allowed their this title a building. or buildings, to be designated RS the Franklin D. necessary expenses incurred in the discharge of their duties under Roosevelt Library, and to Indecape the grounds within the said area. this title, The certificate of the chairman of the Board shall be Such project shall be curried out in accordance with plaos and specifi- sufficient evidence that the expenses are properly allowable, cations approved by the Archivist, The Federal Works Administra- (e) The Board is hereby authorized to nocept and receive gifts tion is authorized to permit the facilities and personnel of the Public and bequests of personal property and to hold and administer the Building Administration to be utilized in the preparation of plans for same RE trust funds for the benefit of the Franklin D. Roosevelt and in the construction and equipping of the project: Provided, Library. The moneys or securities composing trust funds given or That the Franklin D. Roosevelt Library, Incorporated. shall enter bequeathed to the Board shull be receipted for by the Secretary of into an arrangement satisfactory to the Secretary of the Treasury to the Treasury who shall invest, reinvest, and retain investments as the reimburse the sud Public Building Administration for the costs and Board may from time to time determine: Provided, however, That expenses incurred for such purposes, as determined by the Federal the Board is not authorized to engrage in any business nor to exercise Works Administration. any voting privilege which may be incidental to securities in such SEC, 203. Upon the completion of the project authorized in sec- trust funds, nor shall the Secretary of the Treasury make any in- tion 202 of this title, the Archivist shall accept for the Franklin D. vestments for the account of the Board which could not lawfully be 10 made by 18 trust company in the District of Columbia, except that 12 REPORT OF THE ARCHIVIST OF THE UNITED STATES FRANKLIN D. HOOSEVELT LIBBART 13 he may make any Investment directly authorized by the instrument of gift under which the funds to be invested are derived, and may 8m. 208. The Archivist shull make to the Congress, at the begin- retain any investments accepted by the Board. of each regular aussion, 8 report for the preceding fiscal year (d) The income from any trust funds held by the Board, as and wing the Franklin D. Roosevelt Library. Such report shall include when collected, shall be deposited with the Treasurer of the United - detailed to statement of all accessions, all dispositions of historical States who shall enter it in a special account to the credit of the material, and all receipts and expenditures on account of the said Franklin D. Roosevelt Library and subject to disbursement by the Archivist, except where otherwise restricted by the instrument of Library. Sec. 209. The costs incurred by the Archivist in carrying out the gift, in the purchase of equipment for the Franklin D. Roosevelt duties placed upon him by this title, including the expenses of the Library; in the preparation and publication of guides, inventories, numbers of the Board and the costs of the Board's necessary clerical calendars, and textual reproduction of material in the said Library; assistance, shall be paid out of the appropriations for The National and in the purchase, under section 203 of this title, of historical Archives Establishment as other costs and expenses of The National material for the said Library, The Arobivist may make siles of any Archives Establishment are paid; and such sums as may be necessary publications authorized by this section at a price which will cover for such purposes are hereby authorized to be appropriated. their cost and 10 per centum added, and all moneys received from TITLE III--FRANKLIN D. BOOSEVELT RESIDENCE such sales shall be paid into, administered, and expended as a part of the special account herein provided for, See 301. The head of any executive department, pursuant to agree- (e) Unless otherwise restricted by the instrument of gift, the ment between him and the donor, may accept for and in the name Board, by resolution duly adopted, may authorize the Archivist to of the United States from the donor, or from such person or persons time the principal of any gift or bequest made to it for any of the as shall be empowered to act for the donor, title to any part or parts purposes mentioned in subsection (d) hereof. of the said Hyde Park estate of the donor and his family which shall (1) The Board shall have all the usual powers of a trustee in be donated to the United States for tise in connection with any desig- respect to all funds administered by it, but the members of the Board nated function of the Government administered in such department. shall not be personally liable, except for misfeasance. In the admin. The title to any such property may be accepted under this section istration of such trust funds the actions of the Board, including any notwithstanding that it may be subject to the life estate of the donor payments made or authorized to be made by it from such funds, shall or of any other person or persons now living: Provided, That during not be subject to review or attack except in an action brought in the the continuance of any life estate reserved therein DO expense to the United States District Court for the District of Columbia, which is United States in connection with the ordinary maintenance of the hereby given jurisdiction of such suits, for the purpose of enforcing property so acquired shall be incurred: Provided further, That the the provision of any trust accepted by the Board. neceptance hereunder by the United States of the title to property in Sec. 206. The Commissioner of Public Buildings shall be respon- which any life estate is reserved shall not during the existence of such sible for the care, maintenance, and protection of the buildings and life estate exempt the property, except to the extent provided in section grounds of the Franklin D. Roosevelt Library in the same manner 804 [803] of this title, from taxation by the town of Hyde Park, and to the saine extent BS he is responsible for the National Archives Dateless County, or the State of New York as other real property Building in the District of Columbia. Except as provided in the in the said town, county, or State is taxed under the applicable laws preceding sentence, the immediate custody and control of the Frank- relating to taxation of real property. lin D Roosevelt Library, and such other buildings, grounds, and See. 802. Upon the expiration of all life estates reserved in any equipment as may from time to time become a part thereof, and their property acquired under this title for use in connection with a desig- contents shall be vested in the Archivist of the United States, and nated function of the Government, or, if no life estate is reserved, he is authorized to appoint and prescribe the duties of such officers immediately upon the acceptance of title thereto, the head of the unit employees, including clerical assistance for the Board, as my department administering the said function shall assume jurisdiction be necessary for the execution of the functions vested in him by this title and control over the property so acquired and administer it for the purpose designated, subject to the applicable provisions of law. Sec. 207, The Archivist shall prescribe regulations governing the Sirc. 303, The right is reserved in the Congress to take such action arrangement, custody, protection, and use of the historical material and to make such changes, modifications, alterations, and improve- acquired under this title; and, subject. to such regulations, such ma- ments in connection with and upon any property acquired under this Ivrial shall be available to the public free of charge: Provided, That fith, during or after the expiration of any life estate reserved therein, the Archivist is authorized to charge and collect, under regulations as the Congress shall deem proper and necessary to protect and pre- proseribed by him, a fee not in excess of 25 cents per person for the werve the same: but neither the improvements 50 made nor any in- privilege of visiting and viewing the exhibit rooms or museum portion crease in the value of the property by reason thereof shall be subject of the said Library; and any funds so derived shall be paid by the to taxation during the existence of any life estate reserved in the Anhivist into the special account provided for in subsection (d) of property. setion 200 of this title, to be held, administered, and expended under the provisions of that subsection. Approved. July 18, 1939. FRANKLIN D. ROOSEYELT LIBRABY 15 wondering where else in the world would 12. Chief Executive be am truly cognizant of the need for close relationship between the statesman ao and the historian and make such generous disposition of such priceless material. APPENDIX IT This, too, is an unusual occasion in another sense, because this grand repository Was conceived and came to pass by reason of the CEREMONIES INCIDENT TO THE DEDICATION OF THE FRANKLIN D. generosity of fine Americans, 28,000 in number, from every walk of ROOSEVELT LIBRARY, JUNE 30, 1941 life, representing every State in the Union and the several possessions. To you fine representative Americana who helped BO nobly to make INVOCATION BY THE REVEREND PATRICK J. MEE, RECTOR OF THE CHURCH OF this possible, I say we are sincerely thankful. REGINA COELI, HYDE PARK, N, Y. To you, Mr. President, may I my we are most grateful. 0 Almighty and Eternal God, Father of Mercies, in whom ADDRESS OF R. D. W. CONNOR, ABCHIVIST OF THE UNITED STATES assembled. live, move, and have our being, graciously look down upon as here We In normal times the average person thinks little and cares less about may be truly wise und ever enjoy His consolations. Enlighten our minds with the light of Thy holy spirit NO that me the past; he is quite content to let the dead past bury its dead; for him the living present is sufficient. But when times are out of joint, the fulfillment of Thy commandments. Grant to us that peace which can come into our minds only through when new ideologies appear to challenge traditional ideologies, every champion of either the new or the old looks to the pust for help, and Direct, we pray Thee, all our actions by Thy holy inspirations, and feels himself at liberty to use or abuse the helpless Muse of History further them by Thy continual assistance, 80 that every prayer and 05 suita his purpose, work of ours may begin with Thee, and by Thee be happily ended. We ourselves are living in such a time. Everywhere new and through the merits of Jesus Christ Our Saviour, strange isms are engaged in a life and death struggle with old and Amen. familiar isms, In our own land, according to our American custom, the struggle is being waged within the framework of constitutional REMARKS OF THE HONORABLE BANK C. WALKER, THEASURER OF THE FRANK LIN D. ROOSEVELT LIBRARY, INC., PRESIDING OFFICER AT THE DEDICATION principles and practices. Other lands and other peoples have not OF THE LIBRARY been so fortunate. From Europe, from Africa, from Asia, come reverberations of war and revolution. But whether waged with bal- Mr. President, Ladies and Gentlemen: lots or with bullets, the conflicts everywhere, in one respect at least, We are assembled here today to dedicate the Franklin D. Roosevelt follow the same historic pattern. In the present as in the past, pro- Library, not to any individual, not to any group, but rather we are togonista of the new and defenders of the old are busily thambing the dedicating this splendid historic edifice to the American people, pages of history in search of arguments to support their own partico- Here, in the shadows of the birthplace and home of our President, lar brands of isms. No one who wades patiently through the "publie now stands, fully completed, a fine building of dignity and importance pulse" columns of our daily papers can fail to admire the zeal if not that will serve as the storehouse for the records of a period that has the knowledge of these champions. no paralle] in the history of America and of the world. Within The interests which make such uses of history are ns numerous and these walls shall be found, in the days to come, a collection of rare varied as the interests of humanity itself. Ambition to live in history documents that will well and truly record much of our part in World has always been a powerful influence in the conduct of men. From War I, Here will be found papers that will faithfully tell the inti- earliest times, conquerors and rulers have had the records of their mate story of the ambitions and aspirations, the suffering and sorrows, actions preserved, falsified, or destroyed, as the case might require, and the final triumph of the American people of the New Deal Era- in the hope that history might speak well of them; leaders of lost here, conceivably, may come a collection of documents that may pro- causes have appealed for vindication from the verdict of their con- vide more accurate source material delineating the world's greatest temporaries to the verdict of history: and martyrs of every philos- catastrophe, World War II, than may be found in any one collection ophy have found consolation in handing over their persecutors to of papers of an individual in the world. history's avenging pen. But respect for the judgments of history This unusual occasion is made possible by the fine understanding is not confined to individuals; society itself, in every form, has he presented to the people of America his private records, which tell and appreciation of our President, who did that which is unique when acknowledged its power. The Exchange, the Church, the State, have feared its condemnation and courted its praise. n Hory of n. most interesting and important era in world history. I In a national crisis, men instinctively seek to find in the spirit of the past inspiration to strengthen the morale of the present. Not With the exception of the address by Dr. Connor, the material in this long ago the President appealed to the American people for national appeads 14 la taken from a stenographic report of the ceremonies unity in the present crisis. Only through national unity, be told ns, can We successfully defend our national heritage" and pass it 16 REPORT OF THE ARCHIVIST OF THE UNITED STATES PRANKLIN D. ROOSEVELT LIBRARY 17 on come." "not only But intact, What is but strunger than ever, to all generations of false respect in truth and defend its integrity! The 0102 if we do not its CRD we pass it on intact and stronger than national history? And how our "national heritage" if it is not fille yet to administrations in history. Think, for instance, of the number of Your will be latter documented than any earlier Presidential meile, misleading books about the great Abraham les tin more history be desired a speteious patriotism. and a spurions product Linedia that we might have been spared, had his heirs brought to- to in Il democracy than in an autocracy, gather and a collection of papers as this. But, Mr. President, if TAW when outerials of history are the records of past human am going to keep if Smig Harbor for all your collections and your you from the White House, 1 shall have to warn you to give and to him only the such records have been preserved and made available officies, papers of these "oddities" the "deep six" or they will overflow and Ii toust can have been historian truly reconstruct and interpret the contrete expression in this library which We dedicate today, finds some such thought that inspired the idea that Dur, take np Class "pare needed for documents, I know you are the Nation's No. 1 collector, but collecting can be overdone, even by No. 1. Thoughtful person will seriously question the fact that the No I want to any to the President's neighbors from Dutchess County renomic, and social development of both the domestic and political. IN assendited if you feel an impulse to give the President that old afferirs of the United States during the past two deeades marks foreign hor trunk in the nittie, or horse buggy, don't do it! Not (Tait I um one of those who regard all historical material as his- the that this period will be the subject of intensive study dontited poriod UF a distinctivo uta in our national bistory: now can it this be ing un paper or in ink. Far from it. I should like to sec. for in- Toture historians, politiont wrientists, economists, and sociologiste of the by stude, in this Library and musenm-well, a straw from that Literary Suns Vote. I should like to see some of then Blades of Grass Franklin D. Roosevelt, the historian, was quite as well aware That grow in the Streets of our Cities. 1 should like to see n. the fuel n° Was Franklin D. Ronsevelt, the statesman, when, of Mark nit of that firmous Walk time led ont. from the White House, Incomber 10, 1938, las annomed to the country his plan for on and line now tompily come full circle, back again. establement of Hris library. Mior describing the rich and varied the And when I go below here, Mr. President, down into the hold of N° of a whole atul intact in their original condition. ovailable to stolars noterials (I) his collections, he soid: "It in my desiro that they be kopt the building, I entimat help approving those ice-boats and carriages, eyes if Hwy do take up a lot of space. They are going to be very the future in one definite locality interesting to historians in the future. PPI, thought fireproof that building can be raised for the crection It of is, 11 separate, therefore, made my Mr. President, you and I went to sen first al about the sume time, and in the same waters, along the const of the Bay of Fundy, where so designed that it would hold all of flory is an uwful lot of fog, and I know that learning to suil through this period in our history as might be domited to the collection in to big own collections and also such other source material relating the frigg has been extremely oseful to me, and I shouldn't wonder if il future by other members of the present Administration." This there badn't been sometimes usoful to you, Mr. President. history." colled n. sources nuterial collection relating to a specific period in our would be "wit op for the first time in this country what might be It W/IB down in those regions a summer "yotter" asked il native lobsternan what the lighthouse at "Tit Manan looked like. The lob- sterman said. "Well, sir, I am afraid I don't know, I have been That plan Terre now been carried into effect. and we have met here living down here and lobstering for 50 years, but I ain't seen it yet." today to dedicare the building and its contents to the service of the Now, Mr. President, you know as well as I do that seamen don't like American people, We do this in confident expectation that for sailing through fog. nor do historians, But owing to the wise and governtions to conts, the Franklin D. Roosevelt Library will be the g-nerons provisions that have been made, there will be no Inistorical Merra for rebolars And statesmen who would learn how in the mider frg over the history of your administrations. of IL world conflict between antocracy and democracy a free people REMARKS OF THE PRESIDENT OF THE UNITED STATES provided institutions. these freedom and strengthened their democratic Mr. Wolker, Dr. Connor: It sems to ne that the dedication of a library is in itself on not of REMARKS OF SAMURE E MORISON, PROFESSOR OF HISTORY AT HARVAND faith To bring together the records of the past and to them in UNIVERSITY lauklings where they will be preserved for the lise of meti and women One of my Reverite quotations to annotinée a historical address, in the future, A nation forst believe in three things. when a poet is present-is from Date To must believe in the pust, The (10ml le able to my OF sing Urings, not as they were, but ITA they "It in one thing to write as a poet. another ИН all historian. Ti must believe in the future. It must, above nll, believe in the capacity of its own people sO to modit to Inc. The historian has to write of them, not as they should learn from the past that they can guin in judgement in creating their have leon, Int 01 They were, without adding to them or subtracting own future. (ton) the both in any way," D has been among democracies, I think, through all the recorded Now, Mr. Provident. it will be previble to write the truth, the whole history of the world, that the building of persunent Institutions Instructival Truth, aboid. your ndministrations, on account of this like libraries and museums for the use of all the people has flourished. wonderful collection Host you the bringing regether in this building 18 REPORT OF THE ARCHIVIST OF THE UNITED STATES FRANKLIN D. ROOSEVELT LIDRARY 19 the determination interest rather than people ought to work of out their for best. themselves, and through their own study, And that is especially true in our own land, because We believe that O'Commor very old friend is also the man who And your let from New York; and Frank Walker, carries who in addition mail; and to kind of course, rather than to accept such so-called information Dr. is there? Oh, I asked him but he get Island being Morison, a an old seafaring friend of mine. couldn't now here us today. see, who decide what is best for them. may be handed out to them by certain types of self-constituted leaders D He was cooler than Hyde Park. Another old friend, whom you who else terribly sorry, but he said, quite frankly. that Long have And so it. is in keeping with the well-considered trend of these servi was here many times with me-Harry Hopkins. difficult days that we are distributing our own historical collections so-and so I am asking the first Federal judge to be appointed more widely than ever before throughout the length and breadth of old these-1 won't call them diplomas, but they Jook like diplomas- from friend Eddie Conger of Poughkeepsie, to step forward give And Dutchess County for I don't know how many generations, when I our our land. From the point of view of their sufety-the physical safety of our records-it is, it seems to us in later times, Wiser that these records should not be too greatly concentrated. And from out these new trustees. I am going to ask Federal District Judge the point of view of accessibility of these records, greatly concern Conger to to administer the oath of office. trated in any one place in the United States, modern methods, to [The oath of office was then administered to Basil O'Connor, Samuel which we have become accustomed, now make study and dissemination E. Morison, and Frank C. Walker.] of these records in many places possible for the modern historian, This particular Library is but one of many new libraries, And so, RENEDICTION BY THE REVEREND FRANK R. WILSON. RECTOR. ET. JAMES' because it happens to be a national one, I as President have the privi. CHURCH, HYDE PARK, N. Y. lege of accepting this newest house in which peoples' records an preserved-public papers and collections that refer to our own period of history. And this latest addition to the archives of America is dedicated at name. May He give us light to guide us, courage to support us, and Holy Spirit, rest upon our people and upon all our work done in His May the blessing of God Almighty, the Father, the Son, and the a moment when government of the people by themselves is being love to unite us, now and forevermore. attacked everywhere, Amount It is, therefore, proof-if any proof is needed-that our confidence in the future of democracy has not diminished in this Nation and will not diminish. As all of you know, into this Librury there has gone, and will con- tinue to go, the interest and loving care of a great many people, Most of you who are here today are old friends and neighbors of mine-friends and neighbors throughout the years. And so all of you, my friends and neighbors, are in a sense trustees of this Library through the years to come, We hope that millions of our citizens from every part of the land will be glad that what we do today makes available to future Ameri- cans the story of what We have lived, and what we are living today, and what We will continue to live during the rest of our lives. And so I am grateful to all of you for all that you have done. I think that the cereinonies are now over, except for one very im- portant addition that relates to the future. Under an act of the Con- gress of the United States, there was appointed-authorized to be appointed-a Boned of Trustees, who will be responsible for this Library from midnight tonight, through the years to come. I am glad that you have come today, because, as I suggested at lunch to some of the trustees, this is the last chance you have to see this Library free of charge. At midnight tonight the Government of the United States takes over, and it takes over through this Board of Trustees of which Dr. Connor, the Archivist-the National Archivist of the United States-is to be the Chairman, and on which will serve ex officio our own neighbor from this county, the Secretary of the Treasury of the United States-Henry Morgenthau, Jr. And incidentally, I have appointed a number of very old friends of mine to serve as additional trustees: My old law partner, Basil 173 Dear Marriners I have your letter of January 28, 1942, enclosing a nemorandum which expresses the unanimous view of those present at your meeting on Friday, January 23, on the program of Treasury financing that might be followed during the was period. I appreciate your sending this to no. I have turned it over to the various staff members for study and we will probably want to discuss it with you at some later date. Sincerely, Secretary of the Treasury Honorable Marriner 5. Eccles, Chairman, Board of Governors of the Federal Receive System, Teshington, D. C. DWBtce 2-2-42 Photo junn.me Original File to m.Bell Regraded Unclassified TO: m D. dr. Belk74 Secretary said read and return on Friday, 1/30/42 1 cities Noss musly, s N Xo Morri The From: MR. FITZGERALD TOE mr. morris 175 Secretary said to read this and return it to hive tomorrow, Thursday ft. Stevens called ine to this effect + sent this down 4:40 AWB 1/28/42 National From: MR. FITZGERALD 176 BOARD OF GOVERNORS Di THE FEDERAL RESERVE SYSTEM WASHINGTON JEWIERS 29, Honorable llenry Margenthau, Jr., Secretary of the Treasury, D. C. new to you mov, the members of the Board and of the Poderal Open Market Committee have been giving consideration for EL con/dderable period of time to a program of Trensury fi- nancing that might be followed during the war period. From time to time we have had informal meetings in Washington the last of which was held on Friday, January 23. At that meeting, in addition to members of the Board, there were present Messrs. stoul, Leach, and Williams, Presidents of the Federal Reserve Broker of New York, Richmond, and Philadelphia, respectively, Mesrs. Goldenweiser and Piser of the Board of Governors, and Ressrs. Williams and Rouse of the New York Federal Reserve Bank. As the result of discussions at that meeting, there was prepared the attached memorandum which expresses the unanimous view of those present, and it was understood that I would trans- mit the statement to you for such consideration as you may wish to give to it. If you or the members of your staff wish to dis- cusa the various aspects of the program, we shall be glad to go & the Treasury for that purpose at n time that is convenient to you. During the meeting on Friday Mr. Williams of Phila- delphia presented a memorandum relating to the subject of busi- ness funds for noninflationary war financing and it WAS agreed thirt 5 copy of this memorandum would be sent to you as n supple- ment to that pert of the general memorandum dealing with an Lasue designed to attract temporarily idle business funds. Sincerely, S. weeles, Chairmon. Regraded Unclassified TREASURY FINANCING 177 110 Prosident in nis Budget Message submitted to the Congress on 1 the following statement concerning "Borrowing and the Mensice supply d "Inst year, defense expenditures so stimulated private capital outlays that intonsified use of private funds and private crodit added to the influtionary pressure created by public spending. "Under it full war program, Newever, most of the in- chest in expenditures will replace private capital out- 195° rather than add to them. Allocations and priorities, by shortuges of reterial, are now in operation; 11,07 curtail private outlays for consumers' durable FOODS, private and public construction, expansion and ovun ru- placements in nondufense plunt sná equipment. Those Jr.stic curtailments of nondofense expenditures odd, there- for , to the private funds svailable for noninflationary financing of the Government deficit. "Tile factor will contribute substantially to financing the tremendous war <ffort rithout disruptive price rises ad without necossituting a departure from our low-interust- rate policy." This statement will only Be birne out by the event If, in fact, private funás diverted from their normal uses are lent to the Government luning the your period. It omphasizes the neconsity of tuking further steps DC obtain the maximim amount of borrowed funds from lenders other than cond banks. devising sorrowed Punis from Lendors the Corporcial Danlis (1) The President's Sudget Mossage indicated that expenditures of the Fuderal Government nt during the fieral year 19/2-1913 (beginning July 1, $0.0 write Le approximately 160 billions. (2) Or the basis of the estimates riven in the Zudget Missury, the revenue from proposed They taxes, the Fuder 1 dubt will indreant 570.8 billior on June 30, 1942, to 3110.L billion on Jury 30, 1943, an EMail 12 039.8 billion. (3) Th. : t public borrowing contennlated in the fiscal your mede 033.6 billion. (1.) Making allowance for possible sulve of Defonse Sevings Bonds Bar to present solling program and a not increase over the fiscal year count of tix anticipation notes and depository Londs outstanding, it likely that 20 to "25 billions will him to be obtained by the sale 1 mem securities to banks end to other londors and inv stors. Regraded Unclassified -- 2 178 (5) The grave necessity of the Treasury's taking further steps to obtain the maximum amount of these borrowed funds from lenders and in- vestors other than commercial banks is apparent, if fiscal and monetary policy is to contribute its share to the anti-inflation program. It will require more than additional pressure for the sale of the present series of Defense Savings Bonds, important as that is. (6) The principal sources of funds, other than the banking system and the small income purchasers of the present series of Defense Savings Bonds, are: (a) Insurance companies, other institutional investors of various kinds, public bodies, wealthy individuals, trustees, etc. (b) Corporations and other business concerns which, in the aggregate, may now have or may accumulate large idle balances. These two sources of funds must be tapped by the Government, and preferably should be tapped with obligations which have fil special appeal for tho holders of such funds but which cannot get into the commercial banking system. (7) It is sugrested that an attompt should be mado to roach those funds with two issues, extending the present sorios of Defense Savings Bonds, one of longer term for insurance companies and similar long-torm investors, and one of shortor torm for business concerns (and public bodies) with temporarily idlo funds. The general foatures of such offerings might be as stated below. (The exact ratos and naturities of those issues are, of course, subject to review. We are in agreement that the terms of those offerings should not be inconsistent with existing open-markot rates and maturities having in mind suggested rostrictions upon nogotiability and other differences.): (a) Long-torm issue: Interest rate: 2 1/2%, Maturity: 15 years or thoreabouts, Redemption: At cost value with interost adjustment (as in the case of Sories E, F, and G Savings Bonds) on six months' notice after bond has been held for one yoar, Negotiability: Not negotiable in consideration of redemption foature, Callable: Not callable prior to maturity, Salos Rostriction: For the present, limited sale to any ono purchaser in any one year, upper limit to be not loss than $1,000,000. Regraded Unclassified 179 -- 3 -- (b) Short-term issue: Interest rate: Rate of interest payments Yield 6 months 3/8 0.38 1 year 5/8 0.50 1 1/2 years 7/8 0.62 2 1 1/8 0.75 2 1/2 1 3/8 0.87 3 1 1/2 0.98 3 1/2 1 5/8 1.07 4 1 3/4 1.15 4 1/2 1 7/8 1.23 5 2 1.30 Maturity: 4 or 5 years, preferably 4 years, Redemption: Redeemable -- after held six months, on 60 days' notice at any time, Negotiability: Not negotiable, Callable: Not callable, Sales Restriction: Available in unlimitod amounts, (8) It is also suggested that there be an immediate increase in the supply of Treasury bills to at least $2.6 billion (not including tax period bills), whi ch would contribute not only to the fluidity of the money markot but would also provide an alternative modium for the temporary invostment of idlo public and business balancos. With $2.6 billion of Treasury bills outstanding, thore would still be an adoquate margin of reserve buying power in this markot to take care of emergoncy or temporary financing which it might be desirable or necessary to accomplish with additional of forings of bills. It is also important that consideration regularly be given to issuing additional blocks of Treasury bills to mature in the three or four days following the quarterly tax payment dates. (9) In so far as it is nocessary to use bank credit in financing the Treasury's needs, money should be sought from banks with short-torm opon markut issues, that is, with notos and bonds with maturities not ex- cooding ten years. It may be truo that the breadth of the open markot will be somewhat reduced by the sale of the rostricted issues suggested above. It is more certainly true that to the extent such sales are successful in obtaining for Government uso funds which otherwise would leve lain idlc, the amount of the issues which it will be nocessary to place in the open market will be reduced. On balance, and over a period, it would seem most likely that the successful sale of these rostricted issues would be & factor of strength, not of workness, in the open markot, Regraded Unclassified 180 Pattern of Rates (1) Our experience in the last war, the experience of other countries in this war, and our present capacity for the management of the monetary and credit resources of the country, all indicate that this program should not be cast in the old pattern of rising rates of interest as the war progresses. Price control is required in the field of credit, just as in other fields, when the Government is the principal borrower in the market and the cause of its borrowing is the defense of our national existence. (2) It is, therefore, desirable, and the existing situation in the money market and the Government security market makes it practicable, to dotormino and establish a pattern of rates for United States Government securities which will fix, for the present, the general terms of Treasury financing. (3) It is suggested that the rango of rates establishod by such a pattorn should be, for the present, from 1/4-1/2 to 2 1/2 por cent, for obligations other than Series E Dofense Savings Bonds. The lower limit of the range and the short-torm ratus in general could have somo flexibility without disturbing the maximum or long-term rato. The 2 1/2 per cont long- turn rato approximates closely enough the general pattern of rates which has already been established, and stoers a middlo course between the dangor of B. substantial declino in the priocs of outstanding socurities on the one hand, and the dangor of an unattractive program which will not draw the maximum funds from investors and investing institutions on the other. (4) Within the terms of the genoral financing program we suggest, the ostablishment and maintenance of such a pattern of ratos does not require the excessive volume of excess reserves which has characterized recent years. It does contemplate that should excess reserves shrink to a point which endangers maintenance of the pattern the Reserve System will provide a sufficient volumo of reserves to enable banks to assist the Treasury's financing to whatever extent is necessary. Regraded Unclassified 181 Federal Reserve Bank of Philadelphia, BUSINESS FUNDS FOR NONINFLATIONARY WAR FINANCING MEMORANDUM A Proposed Plan for Utilizing Idle Business Funds by the Treasury The var program now calls for expenditures at the rate of $50-60,000,000.- tod & year. In physical terms this means (1) that about one-half of our industrial state will be engaged directly on the production and transportation of war materials, 1 12} that about one-half of our human resources will be engaged either in the 1241 forces or in the production and transportation of supplies for the armed forces, (inancial terms it means that the Treasury will have to acquire $50-60,000,000,000 IT purchasing power. If inflation is to be minimized, these funds must be obtained ⑉195 89 little resort to bank credit 88 possible. How such can be raised through taxes and borrowed savings? Even if the tax revenue is doubled and borrowed savings exceed one billion dollars a month, there would still be an inflationary gap to bridge. Based upon current estimates of ex- venditures and reasonable possibilities of expanding real income, it would appear that the Treasury may have to resort to bank credit to a considerable extent, as is indicated in the following examples. POSSIBLE METHOD OF MEETING TREASURY REQUIREMENTS - IN BILLIONS 1942-1943 1941-1942 1942-1943 (extrone) Satimated abount procurable from: Caxes $12 $24 $26 Government trust funds 2 5 6 Defense Savings Securities a 12 14 Total availabl $22 $41 $45 Towal. need of the Treasury (war and ordinary) 33 63 62 Remost to bene credit, if not available from other sources. $11 $21 $16 The Assumptions as to the amount that can be secured from taxes and borrowed savings 170 probably over-optimistic, but they suggest the urgency for exploring all possible lources of funds if inflation is to be curbed. Operations have already been undertaken by the Treasury to raise a large Regraded Unclassified (Memorandum 4, Cont.) -2- 182 pertion of the required funds through taxation and through the sale of Defense Bonds to individuals. There exists, however, within business enterprise itself, a. large volume of potentially inflationary funds, particularly if used for nondefense pur- poses. Specifically. the funds consist of business balances available after taxation accruals have been set aside and business operating requirements have been met, No adequate provision has yet been made to use this money in the war effort. Special attention must be given to this potential market for Treasury f1- sancing because (1) the amounts involved may become huge as the year progresses, (2) these funds in large part are not properly subject to taxation, and (3) Treasury ob- ligations now available for the investment of these funds are not particularly suit- able to the needs of the situation. What is required, obviously, is a special con- sideration of the kinds of Federal securities best adapted to meet the needs of busi- sess concerns for the investment of idle business funds and a special organization to promote the sale of these securities to business enterprises. Large business balances will arise during 1942 out of (a) surplus earnings not needed for immediate expansion, (b) liquidation of current assets (accounts re- ceivable and inventories). and (c) depreciation accruals. In view of prospective shortages of materials, it is probable that enterprises not engaged directly on war production will not be in & position to replace current inventories during the coming year or to replace capital equipment for which depreciation is taken. It is impossi- ble to estimate closely the funds that may become available from these two sources but their total may well aggregate as much as $10,000,000,000. Part of the funds BO released will be used to repay indebtedness. The remainder of the funds should be invested in Treasury obligations. Such investment will make them available to finance the war effort without inflationary effects and will leave business enterprise in a strong financial position to re-acquire materials and re-equip plant when the emer- gency is over, The amounts so invested should be as large as possible, because, to minimize inflation, it is essential to postpone as long se possible all deferable business expenditures. January 16, 1942. Regraded Unclassified 183 Federal Reserve Bank of Philadelphia. BUSINESS FUNDS FOR NOWINFLATIONARY WAR FINANCING MEMORANDUM 3 What is the Amount of Business Funds Available for War Financing? The minimum amount of business funds in the United States available for In- restment in Government securities might be placed at $7 billion. Of this total prob- ably over $750 million might be procured in the Third Federal Reserve District. Conservative estimates made informally by the National Bureau of Economic Research at the request of the Federal Reserve Bank of Philadelphia indicate the fol- loving volume of business funds that are now available or will become available dur- ing 1942. Available Sources of funds Total for investment (Dollar figures in billions) in 1942 in Government securities 1. Cash balances $10.0 $1.4 2. Inventory 26,6 2.7 3. Undistributed earnings 2,6 1.1 4. Depreciation accruals 4.3 1.9 TOTAL $7.1 Large concerns (assets over $1 million). $4.6 Small concerns (assets under $1 million) 2.5 These estimates do not include cash that may be derived from collection of receivables, giving an additional sum of $500 million. The break-down by grand totals and by groups shows the following: Manu- Con- Serv- Public (000,000's omitted in figures) factur- Trade struc- Mining ices util. Total ing tion 1. Existing cash balances $5,876 $1,990 3420 $133 $450 $1,170 $10,039 Available - purchase U.S. 380,... 1,370 50 - - ! - 1,420 2, Existing inventories 14,413 10,450 580 80 300 795 26,618 Liquidation in 1942 1,325 2,130 0 0 o o 3,455 Available - purchase U.S. sec. (Net of retirent. of notes pay.) 1,040 1,608 o o o o 2,648 3, Undistributed earnings 1,615 300 93 25 60 505 2,598 Available - purchase U.S. 800,... 750 205 50 o 40 50 1,095 4, Depreciation accruals 1,985 450 180 110 400 1,200 4,325 Available purchase U.S. 600,... 955 285 45 40 300 300 1,925 January 16, 1942. 184 Federal Reserve Bank of Philadelphia. BUSINESS FUNDS FOR NONINFLATIONARY WAR FINANCING MEMORANDUM C What Type of Treasury Security Would be Most Suitable for Sale to Business Concerns? Informal contact with the Presidents and Treasurers of business concerns in Philadelphia indicates! 1. Appreciation of the public need of pressing the sale of Treasury securi- ties to business concerns in order to siphon off cash balances now avail- able or to become available in 1942 through inventory liquidation, col- lection of receivables, accumulated depreciation accruale, etc. 2. Willingness to participate in e program such as has been suggested by the Federal Reserve Bank of Philadelphia. 3. The importance of bringing out B. new type of Treasury security tailor- made to fit the problem of business concerns. This memorandum is specifically directed toward the last problem . the need for A special type of security for this purpose. There is general agreement that Treasury securities now available are not particularly suited to the investment of idle cash balances of corporations. There is also general agreement that the issu- ance of a suitable security would make directly available to the Treasury large amounts of cash that at present are left on deposit and are made available only through recourse to the banks. It is suggested that a special issue of Treasury notes similar to that pro- posed last year by Chairman Eccles would meet the needs outlined. Such notes would be marketed in the manner outlined in Memorandum D. They would have the following characteristics. 1. Maturity - 3 years. or 5 years. 2. The notes could be issued on a besis that each coupon would be for e definite mount rising from my a 1/2 per sent rate for the first coupon to a 1 per comb rate for throe-year naturity and 1-1/2 per cent rate for five-year naturity for the final eoupon. 3, Registered. 4. Non-negotiable, but elegible as collateral at the Reserve Bank. 5, Redeemable by the Treasury on three months' notice after six months from purchase. Interest for the portion of the period during which ascurities are redeemed to be paid at coupon rate for the full period. January 16, 1942. Regraded Unclassified 185 Federal Reserve Bank of Philadelphia. BUSINESS FUNDS FOR NONINFLATIONARY WAR FINANCING MEMORANDUM D How to Sell Treasury Securities to Business Concerns PROPOSED VOLUNTARY ORGANIZATION TO PROMOTE THE SALE OF TREASURY SECURITIES TO BUSINESS CONCERNS IN THE THIRD FEDERAL RESERVE DISTRICT UNITED STATES TREASURY FEDERAL RESERVE SYSTEM THIRD FEDERAL RESERVE DISTRICT BUSINESS VICTORY FUND COMMITTEE Business men Bankers EXECUTIVE COMMITTEE INDUSTRIAL AREA COMMITTEES Wilkes- Wilmington Altoona Allentown, Etc. Barre Members of regional committees should represent such industries as manufacturing, trade, construction, min- ing, public utilities, and services, as local condi- tions warrant. 1. The Federal Reserve Bank of Philadelphia is to set up & well-integrated working organization for the Third Federal Reserve District. It should have an appro- priate title, as explanatory and suggestive as possible. For example, it may be designated as - BUSINESS VICTORY FUND COMMITTEE 2, This organization is to be established by industrial areas, or combination of such areas, having due regard to industrial structure of each area. (a) Business Victory Fund Committee is to be represented by one business san and one banker from each area, and by the Federal Reserve Bank. Regraded Unclassified 186 (Memorandum D, Cont.) & The primary purpose of this Committee is to provide organiza- tional material and to cover all parts of the District and all leading industries therein. (b) This Committee is to appoint an Executive Committee consisting of three business men, three bankers and the President of the Federal Reserve Bank or his alternate. The function of the Executive Committee is to develop the program and to direct the campaign among business concerns. The Reserve Bank is to provide the needed facilities for this purpose. 3. Regional Committees. Under the direction of the Executive Committee, representa- tives on the Business Victory Fund Committee are to organize appropriate local committees within their respective areas. (a) The size of such committees should be large enough, but not too large, to enable its members to canvass industrial establishments within the areas. (b) Committee members should be responsible business executives, as they are to be the effective saleemen of Treasury securities designed for the purpose. (c) The chairmen of such local committees should be members of the general committee and should be responsible to the Executive Committee. 4. The supply of Treasury securities is to be handled by the Reserve Bank, as Fiscal Agent - (a) The Reserve Bank is to issue the security directly upon receipt of applications and payments, or (b) The Reserve Bank may issue the security in due course through the banks authorized for this purpose. 5. The Federal Reserve Bank, as Fiscal Agent, is to be directly responsible for the proper functioning of the organization, assisting the Treasury in every way to assure the success of the campaign. (a) The Treasury is to define general policy and to provide suitable se- curity for sale. (b) The Bank is to advance the necessary expenses, such expenses to be re- inbursed by the Treasury in the usual manner. January 16, 1942 Regraded Unclassified 187 Federal Reserve Bank of Philadelphia. BUSINESS FUNDS FOR NONINFLATIONARY WAR FINANCING MEMORANDUM E Would the Proposal to Sell Special Securities To Business Concerns be Acceptable to Banks? la Withdrawals of deposits by business concerns for purchase of Government securi- ties would not result in hardship to banks. (a) Às the Treasury spends borrowed funds, banke receive new deposits immediately. (b) Large banks in New York City would probably be the heaviest losers of business deposits but they, too, would soon regain the funds through Treasury operations. 2. Deposit withdrawls may lessen the burden on the capital structure of many banks. (a) While this effect may be temporary, it will indicate the fluidity of funds and tend to lessen the pressure for higher capital ratios. (b) This would be desirable because (1) at present It would be difficult to raise capital locally and (2) it wight lessen the concern of super- visory authorities in this respect. 3. As an integral part of the program to curb inflation, the proposed plan would be in the interest of sound banking and credit. (a) Inflation and deflation are injurious to banking: they disrupt values and expose assets to undue risk. (b) À spiral and tailspin of prices impoverish the people, destroy savings, increase cost to the Government and the taxpayer, and undermine the capital and credit structures. (c) The plan provides for noninflati onary borrowing as against inflationary borrowing from commercial banks. 4. Active support of the proposed plan by the bankers will aid in war financing, help in curbing inflation, and assist in safeguarding the credit structure against current and prospective dislocations. (a) Wisdom and self-interest require cooperation, as the war must be won regardless of financial difficulties. (b) Cooperation in the use of funds may forestall the need for further over-all and selective credit controls, including adjustment in re- quired reserves. (c) The effect of the proposal will be to minimize & post-war slump. (d) The support of the plan would result in good public relationship. January 16, 1942. Regraded Unclassified BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE or THE CHAIRMAN , Jenuery LB, 1041 Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Mashington, D. C. Dear Henry: As you know, the members of the Board and of the Federal Open Market Committee have been giving consideration for a considerable period of time to a program of Treasury f1- nancing that might be followed during the war period. From time to time we have had informal meetings in Washington the last of which was held on Friday, January 23. At that meeting, in addition to members of the Board, there were present Messrs. Sproul, Leach, and Williams, Presidents of the Federal Reserve Banks of New York, Richmond, and Philadelphia, respectively, Messrs. Goldenweiser and Piser of the Board of Governors, and Messre. Williams and Rouse of the New York Federal Reserve Bank. As the result of discussions at that meeting, there was prepared the attached memorandum which expresses the unanimous view of those present, and it was understood that I would trans- mit the statement to you for such consideration as you may wish to give to it. If you or the members of your staff wish to dis- cues the various aspects of the program, we shall be glad to go to the Treasury for that purpose at a time that is convenient to you. During the meeting on Friday Mr. Williams of Phila- delphia presented a memorandum relating to the subject of busi- nees funds for noninflationary war financing and it was agreed that . copy of this memorandum would be sent to you as a supple- west to that part of the general memorandum dealing with an Spouse designed to attract temporarily idle business funds. Sincerely, Marrmer M. S. Eccles, Chairman. Regraded Unclassified TREASURY FINANCING The President in his Budget Message submitted to the Congress on January 1 mide the following statement concerning "Borrowing and the Menace of "Last year, defonse expenditures so stimulated private capital outlays that intensified use of private funds and private credit added to the influtionary pressure created by public sponding. "Undor a full war program, howover, most of the in- cruase in expenditures will replace private capital out- lays rathor than add to them, Allocations and priorities, necussitated by shortagos of material, are now in operation; they curtail private outlays for consumers' durable goods, privato and public construction, expansion and oven re- placements in nondefense plant and equipment, These drastic curtailments of nondofense expenditures add, there- fore, to the private funds available for noninflationary financing of the Government deficit, "This factor will contribute substantially to financing the tremondous war effort without disruptivo prico rises and without nccessitating a departure from our low-interest- rate policy." This statement will only be berne out by the event if, in fact, privato funds diverted from their normal usos are lent to the Government during the war period. It emphasizes the necessity of taking further steps to obtain the maximum amount of borrowed funds from lenders other than commorcial banks. Obtaining Borrowed Funds from Londers Other than Commercial Banks (1) The President's Budget Mossage indicated that expenditures of the Foderal Government during the fiscal year 1942-1943 (beginning July 1, 1942) would be approximately $60 billions. (2) On the basis of the catimates givon in the Budgot Message, including the rovenue from proposed now taxes, the Foderal dobt will increaso from $70.6 billior on June 30, 1942, to $110.4 billion on Junc 30, 1943, an incroase of $39.8 billion. (3) The not public borrowing contemplated in the fiscal yoar 1942-1943 totals $33.6 billion. (4) Making allowance for possible salos of Defense Savings Bonds under as present solling program and G nct incruase over the fiscal year La ount of tax anticipation notus and depositary bonds outstanding, it appears Mooly that $20 to 325 billions will have to be obtained by the sale of unt sccurities to banks and to other londors and invustors. Regraded Unclassified -- 2 -- The grave necessity of the Treasury's taking further steps to obtain eximum amount of these borrowed funds from lenders and in- waters than commercial banks is apparent, if fiscal and monetary policy sontribute its share to the anti-inflation program, It will require than additional pressure for the sale of the present series of Defense vings Bands, important as that is. (6) The principal sources of funds, other than the banking system and the small income purchasers of the present series of Defense Savings Bonia, are: (a) Insurance companies, other institutional investors of warious kinds, public bodies, wealthy individuals, trustees, etc. (b) Corporations and other business concerns which, in the aggregate, may now have or my accumulate large idle balances. These two sources of funds must be tapped by the Government, and proferably should be tapped with obligations which have a special appeal for the holders of such funds but which cannot get into the commercial banking system. (7) It is suggested that an attempt should be mado to roach those funds with two issues, extending the present sorios of Defonso Savings Bonds, one of longer torm for insurance companies and similar long-torm investors, and CELO of shorter torm for business concerns (and public bodies) with temporarily idlo funds. The general foatures of such offerings might be as stated below. (The asset ratos and maturitios of those issues arc, of course, subject to review. To are in agreement that the terms of those offerings should not be inconsistent with existing open-markot rates and maturities having in mind suggested restrictions upon nogotiability and other differences.) (a) Long-torm issuo: Interest rato: 2 1/2%, Maturity: 15 years or thoreabouts, Redemption: At cost valuo with interest adjustment (as in the caso of Series E, F, and G Savings Bonds) on six months' notice after bond has boon hold for one year, Negotiability: Not negotiable in consideration of redomption foature, Callable: Not callable prior to maturity, Salos Restriction: For the present, limited sale to any ono purchasor in any one year, upper limit to be not loss than $1,000,000. Regraded Unclassified m : : (b) Short-term issue: Interest rate: Rate of interest payments Yield 6 months 3/8 0.38 1 year 5/8 0.50 1 1/2 years 7/8 0.62 2 1 1/8 0.75 2 1/2 1 3/8 0.87 3 1 1/2 0.98 3 1/2 1 5/8 1.07 1. 1 3/4 1.15 4 1/2 1 7/8 1.23 5 2 1.30 Naturity: 4 or 5 years, preferably 4 years, Redemption: Redeemable -- after held six months, on 60 days' notice at any time, Negotiability: Not negotiable, Callable: Not callable, Sales Restriction: Available in unlimitod amounts. (8) It is also suggested that there be an immediate increase in the supply of Treasury bills to at least $2.6 billion (not including tax period bills), whi would contribute not only to the fluidity of the money markot but would also provide an alternative medium for the temporary investment of idlo public and businoss balances. With $2.6 billion of Treasury bills outstanding, thore would still be an adequate margin of reservo buying power* in this markot to take care of emorgency or temporary financing which it might be dosirable or nocessary to accomplish with additional offorings of bills, It is also important that consideration regularly be given to issuing additional blocks of Treasury bills to mature in the three or four days following the quartorly tax payment dates. (9) In so far LB it is nocessary to use bank credit in financing the Treasury's needs, money should be sought from banks with short-torm opon market issues, that is, with notos and bonds with maturities not EX- coodi ten years. It may bc truc that the breadth of the open markot will be somewhat reduced by the salo of the restricted issues suggested above. It 10 more certainly true that to the extent such sales are successful in obtaining for Government uso funds which otherwise would have lain idlc, the amount of the issues which it will be necessary to place in the open market dill be reduced. On balance, and over a period, it would soon most likely that the successful sale of these restricted issues would be & factor of strungth, not of weakness, in the open markot, Regraded Unclassified 4 Pasteri Our experience in the last war, the experience of other countrie M # war, and our present capacity for the management of the scortary prodit resources of the country, all indicate that this program should st in the old pattern of rising rates of intorest as the Price control is required in the field of credit, just as me Le other when the Government is the principal borrower in the market and the of its borrowing is the defense of our national existence. (2) It is, therefore, desirable, and the existing situation in the or arket and the Government security market makes it practicable, # and establish a pattern of rates for United States Government which will fix, for the present, the general terms of Treasury Dransing. (3) It is suggested that the rango of ratos established by such 3 patients should bo, for the present, from 1/4-1/2 to 2 1/2 por cent, for obligations other than Series E Dofense Savings Bonds, The lower limit of the PARES and the short-torm ratos in general could have somo flexibility without Listurbing the maximum or long-term rato. The 2 1/2 per cont long- total rate approximates closoly enough the general pattern of ratos which her already been established, and stoers a middlo course betwoon the dangor of minutial declino in the prioce of outstanding socurities on the EMP 1404, and the dangor of an unattractive program which will not draw F solum funds from investors and invosting institutions on the other. (4) Within the torms of the genoral financing program we NEW the catablishment and maintenance of such a pattern of ratos dous TMP the excessive volume of excess reserves which has characterized mee It does contemplate that should excess reserves shrink to a FOR endangers maintenance of the pattorn the Reserve System will ficient volumo of roserves to enable banks to assist the Cinadoing to whatever extent is necessary. Regraded Unclassified Federal Reserve Bank of Philaderphia. CONFIDENTIAL BUSINESS FUNDS FOR NONINFLATIONARY WAR FINANCING MEMORANDUM & Plan for Utilizing Idle Business Funds by the Treasury The vir program now calls for expenditures at the rate of $50-60,000,000.- 000 a year. la physical terms this means (1) that about one-half of our industrial plant vill be sagaged directly on the production and transportation of war materials, and (a) that sbout one-half of our human resources will be engaged either in the arsed forces of in the production and transportation of supplies for the armed forces, Is financial terms it means that the Treasury will have to acquire $50-60,000,000,000 of purchasing power. If inflation is to be minimized, these funds must be obtained with as little resort to bank credit as possible. How much can be raised through taxes and borrowed savings? Even if the tax Insurence is doubled and borrowed savings exceed one billion dollars B month, there would still be an inflationary gap to bridge. Based upon current estimatee of ex- penditures and reasonable possibilities of expanding real income, 1t would appear that the Treasury may have to resort to bank credit to a considerable extent, as is indicated in the following examples. POSSIBLE METHOD OF MEETING TREASURY REQUIREMENTS - IN BILLIONS 1942-1943 1941-1942 1942-1943 (extress) Extimated ascreas procurable from: Taxas $12 $24 $26 2 5 6 Government Igust funds 8 12 14 Defense fairingo Securities $22 $41 $46 Total evailable Total Treasury (wor and ordinary) 33 62 62 need M the Enset so sdit, If not available from other nources. $11 $21 $16 The assumption " to the amount that can be secured from taxes and borrowed savings are proteile vr-optimistic, but they suggest the urgency for exploring all possible Rources if inflation is to be curbed. isions have already been undertaken by the Treasury to rateo a. large Regraded Unclassified -2- \ pertice of squšted funds through taxation and through the sale of Defense Bonds there exists, however, within business enterprise itself, A large se ally inflationary funds, particularly if used for nondefense pur- volume of the funds consist of business balances available after taxation power. sccruale 1 H set aside and business operating requirements have been met. No adequate provision has yet been made to use this money in the war effort. spacial attention must be given to this potential market for Treasury f1- assing legility (1) the amounts involved may become huge as the year progresses, (2) these funds is large part are not properly subject to taxation, and (3) Treasury ob- ligations MY available for the investment of these funds are not particularly suit- able to the needs of the situation. What in required, obviously, is a special con- sideration of the kinds of Federal securities best adapted to meet the needs of busi- sees concerns for the investment of idle business funds end a special organization to promote the sale of these securities to business enterprises. large business balances will arise during 1942 out of (a) surplus earnings not needed for immediate expansion, (b) liquidation of current assets (accounts re- coivable and investories), and (c) depreciation accruals. In view of prospective shortages of materials, it is probable that enterprises not angaged directly on war production will not be in a position to replace current inventories during the coming par If La ruplace capital equipment for which depreciation is taken. It is impossi- ble to closely the funds that may become available from these two sources but there total may well aggregate as much as $10,000,000,000, Part of the funds so released an be used to repay indebtedness. The remainder of the funds should be Teasury obligations. Such investment will make them available to finance. Rs without inflationary effects and will leave business enterprise in a strong al position to re-acquire materials and re-equip plant when the emer- The amounts 80 invested should be as large as possible, because, to lation, it is essential to postpene as long as possible all deferable ditures. Regraded Unclassified 195 Federal Reserve Bank of Philadelyhia, BUSINESS FUNDS FOR NONINFLATIONARY VAB FINANCING MEMORANDUM B What is the Amount of Business Funds Available for War Financing? The minimum amount of business funds in the United States available for in- restment in Gevernment securities might be placed at $7 billion. Reserve Of this total prob- ably over #780 million might be procured in the Third Federal District. Conservative estimates made informally by the National Bureau of Economic Besearch at the request of the Federal Reserve Bank of Philadelphia indicate the fol- loving volume of business funds that are now available or will become available dur- 105 1942, Available Sources of funds Total for investment (Dollar figures in billions) in 1942 in Government securities 1. Cash balances $10.0 $1.4 26.6 2.7 2, Inventory 3. Undistributed earnings 2.6 1.1 4. Depreciation accruals 4.3 1.9 TOTAL $7.1 Large concerns (assets over $1 million). $4.6 Small concerns (assets under 21 million) 2.5 These estimates do not include cash that may be derived from collection of receivablem, giving an additional sum of $500 million. The break-down by grand totals and by groups shows the following: Manu- Con- Serv- Public (000,000), smitted in figures) factur- Trade struc- Mining ices util. Total ing tion 1. Tristing ansh balances $5,876 $1,990 $420 $133 $450 $1,170 $10,039 50 - 1,420 - purchase U.S. sec 1,370 - i 2. Idditional Inventories 14,413 10,450 580 80 300 795 26,618 in 1942 1,325 2,130 0 o 0 o 3,455 - purchase U.S. sec. retirent. of notes pay.) 1,608 0 o 0 0 2,648 1,040 I. The 93 25 60 505 2,598 ed earnings 1,615 300 - purchase U.S. sec 750 205 50 0 40 50 1,095 4. Non accruals 1,985 450 180 110 400 1,200 4,325 . purchase U.S. sec.... 955 285 45 40 300 300 1,925 June 1942. Regraded Unclassified Federal Reserve Bank of Philadelphia. BUSINESS FUNDS FOR NONINFLATIONARY WAR FINANCING MEMORANDUM C What Type of Treasury Security Would be Most Suitable for Sale to Business Concerns? Informal contact with the Presidents and Treasurers of business concerns in Philadelphis indicates: 1. Approciation of the public need of pressing the sale of Treasury securi- the to business concerns in order to siphon off cash balances now avail- able or to become available in 1942 through inventory liquidation, col- lection of receivables, accumulated depreciation accruals, etc. 2. Villingness to participate in a program such as has been suggested by the Federal Reserve Bank of Philadelphia. 3. The importance of bringing out a new type of Treasury security tailor- made to fit the problem of business concerns. This memorandum is specifically directed toward the last problem - the need for a special type of security for this purpose. There is general agreement that Treasury securities now available are not particularly suited to the investment of idle cash balances of corporations. There 1e also general agreement that the issu- SECE of - suitable security would make directly available to the Treasury large amounts of cash that at present are left on deposit and are made available only through recourse to the banks. It 1a suggested that a special issue of Treasury notes similar to that pro- posed last year by Chairman Eccles would meet the needs outlined. Such notes would be la the manner outlined in Memorandum D. They would have the following characteriatics. 1. subjecty - 3 years. or 5 years. 1. birted could be issued on 4 basis that each soupon be for a definite mount rising from say a 1/2 per cent for the first equapon 10 a 1 per cent rate for three-year I and 1-1/2 per eent rate for five-year naturity for Itad everyon. alered. ptiable, but elegible 8.6 collateral at the Reserve Bank. ble by the Treasury on three months' notice after six months from no. Interest for the portion of the period during which securities sened to be paid at coupon rate for the full period. 1542. Regraded Unclassified Federal Reserve Bank of Philadelphia. BUSINESS FUNDS FOR NONINFLATIONARY WAR FINANCING MEMORANDUM D How to Sell Treasury Securities to Business Concerns PROPOSED VOLUNTARY ORGANIZATION TO PROMOTE THE SALE OF TREASURY SECURITIES TO BUSINESS CONCERNS IN THE THIRD FEDERAL RESERVE DISTRICT UNITED STATES TREASURY FEDERAL RESERVE SYSTEM THIRD FEDERAL RESERVE DISTRICT BUSINESS VICTORY FUND COMMITTEE Business men Bankers EXECUTIVE COMMITTEE INDUSTRIAL AREA COMMITTEES Altoons Allentown, Etc. Wilkes- Wilmington Barre Members of regional committees should represent such industries as manufacturing, trade, construction, min- ing, public utilities, and services, as local condi- tions warrant. 1. The Feieral Reserve Bank of Philadelphia is to set up & well-integrated working organization for the Third Federal Reserve District. It should have an appro- priete Htle, as explanatory and suggestive as possible. For example, it may be desipated as - - BUSINESS VICTORY FUND COMMITTEE 2. This signization is to be established by industrial areas, or combination of having due regard to industrial structure of each area. inees Victory Fund Committee is to be represented by one business and one banker from each area, and by the Federal Reserve Bank. Regraded Unclassified 3.) -2- (Memoration primary purpose of this Committee is to provide organiza- Jacal material and to cover all parts of the District and all ing industries therein. (w) ittee 1n to appoint an Executive Committee consisting of three men, three bankers and the President of the Federal Reserve - his alternate. The function of the Executive Committee is to develop the program and to direct the campaign among business concerne. The Reserve Bank is to provide the needed facilities for purpose. 3. Redings ittees. Under the direction of the Executive Committee, representa- time - the Business Victory Fund Committee are to organize appropriate local come) within their respective areas. 3 DE sizo of such committees should be large enough, but not too large, 1 ble its members to canvass industrial establishments within the ATEA). (b) ittee members should be responsible business executives, as they sto to be the effective saleamen of Treasury securities designed for as purpose. (e) as chairmen of such local committees should be members of the general ittee and should be responsible to the Executive Committee. 4. The equaly of Treasury securities is to be handled by the Reserve Bank, as Marki Agrot - (a) - laserve Bank is to issue the security directly upon receipt of leations and payments, or (a) s Reserve Bank may issue the security in due course through the banks rised for this purpose. Reserve Bank, as Fiscal Agent, 1 e to be directly responsible for the tioning of the organization, assisting the Treasury in every way to nuccess of the campaign. Treasury is to define general policy and to provide suitable se- Ay for sale. * is to advance the necessary expenses, such expenses to be re- sed by the Treasury in the usual manner. Regraded Unclassified Federal Reserve Bank of Philadelphia. BUSINESS FUNDS FOR NONINFLATIONARY WAR FINANCING MEMORANDUM I Would the Proposal to Sell Special Securities To Business Concerns be Acceptable to Banks? 1+ Withdrawalz of deposits by business concerns for purchase of Government securi- tiee would not result in hardship to banks. (a) As the Treasury spends borrowed funds, banks receive nov deposits imediately. (b) Large banks in New York City would probably be the heaviest losers of business deposits but they, too, would soon regain the funds through Treasury operations. 2. Deposit withdrawls may lessen the burden on the capital structure of many banks, (a) While this effect may be temporary, it will indicate the fluidity of funds and tend to lessen the pressure for higher capital ratios. (b) This would be desirable because (1) at present it would be difficult to raise capital locally and (2) it might leasen the concern of super- visory authorities in this respect. 3. As an integral part of the program to curb inflation, the proposed plan would be in the interest of sound banking and credit. (a) Inflation and deflation are injurious to banking: they disrupt values and expose assets to undue risk. (b) A spiral and tailspin of prices impoveriah the people, destroy savings, increase cost to the Government and the taxpayer, and undermine the capital and credit structures. (c) The plan provides for noninflationary borrowing as against inflationary borrowing from commercial banks. 4. Active support of the proposed plan by the bankers will aid in war financing, help 1b curbing inflation, and assist in safeguarding the credit structure against current and prospective dislocations. Ca) Visdom and self-interest require cooperation, as the war must be won regardless of financial difficulties. (b) Cooperation in the use of funds may forestall the need for further over-all and selective credit controls, including adjustment in re- quired reserves. (es The effect of the proposal will be to minimise a post-war slump. w The support of the plan would result in good public relationship. January le, 1942. Regraded Unclassified 200 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE February 2, 1942 TO Secretary Morgenthau FROM George Buffington You may be interested in the attached one sheet poster being sent to exhibitors by the National Screen Service Corporation. I am also attaching a photostatic copy of the publicity which appeared in the Motion Picture Herald on January 31. GB. Regraded Unclassified 201 MOTION PICTURE HERALD Donald Duck Shows the Nation How Disney Cartoon (**) TREASURY DEPARTMENT istributed Free WASHINGTON or Treasury January 28, 1942 To the Maving Picture Exhibitor Addressed Dear Bir: the Very 8000 you will be offered a new Donald Duok picture in teshnicolor entitled "The New Spirit* which 10 very entertaining. It was made especially for the United States Treasury by Walt Disney as 4 contribution to the nation's war affort. It carries a patriotic ******* to every American, showing through the medium of Donald Duok how each citizen can do his or her bit by paying his income tax promptly. Tble pleture will have widespread publicity, and I believe your patrone will be looking for it engerly. It will be offered to you free and 2 hope that you will aleot to show it. Since its greatest effectiveness will be between now and March 18, 1 further hope that you will show it as soon " you can get it, and then send 1% along without delay so that the next exhibitor say show it promptly. 1 I shall appreciate very much your coopera- Um tion. Sincerely yours, Henry Sprind las Inco granted los 1/2 Services of the Invoice to allowing Ilvm to reproduce the letter, with (ignature, in 493 promote or advertion menti in with deleve (mil drive n° under patriolic chale 1)- me us Department office Bawn juver litributed he in threater to It held It i. (1) dos promot dari el and din othy Margenthan in Washington and Die the tent SOAL ins ИЛ* rengling and delivered la The Disney plant disparched line comming prix neg Income to the Terhnicalia plus in souls Jahr if prote= E (los enterprise would as 18th The plant un migarism based Regraded Unclassified 202 MOTION PICTURE DAILY January 29, 1942 Auks Exhibitors' Aid On Disney Tax Short Supplary of the Treasury Hinry Morgenthau has ad- dressed . letter to all exhibi- (ifs urging them to show the Denoy Bonald Duck cartoun. "The New Xpirit." made for the Treasury Department and the importance of early income tax payments. The subject is heims distrib- ated through the War Activi- time Cummitter- Motion Pie- fare Intents by National with armier 1 reproduction of the letter and a review of the subject an 00 l'ave 1. Uncle Sam Needs Your Help REASURY DEPARTMENT WASHINGTON January 24, 1948 1a the Maving Picture Exhibitor Addressed Dear Bir: Vary soon you will be offered a new Donald Duck picture la teahnicalor entitled "The Sex Spirit" which 18 very entertaining. Is vas made sapecially for the United States Treasury by Walt Disney as . contribution to the nation's war affort. It carries A patrintis 16 every American, showing through the medium of Donald Duck how such citizen can do this of her bit by paying his income tax promptly. This ploture will have widespress publicity. and 1 believe your patrons will be looking for it engerly. IN will be affered to you free and I hope that you will sleet to show it. Since its greatest effectiveness will be between DOV and March 14, I further hope that you will above is as soon " you un get it, and then wend 11 along without dalay so that the next exhibitor say show it promptly. I stall supreciate vary such your enoyers- 1100- Sincerely yours, BUY Above in e facaimile of a leiler addressed by Secretary of the Treasury subject. "The See Spirit." Special permission has been granted exhibitore Morgenthan I'm exhibitors. urying them to show the Dianey income Ins by Morgenthau for reproduction of the letter, with signature, by in the for adcertising purposes. A review of the subject will be found adjuining column at the right. Regraded Unclassified OFFICE OF WILLIAM RANDOLPH HEARST 203 WYNTOON McCLOUD, CALIFORNIA February 2, 1942. Hon. Henry Morgenthau, Jr., THE secretary OF THE TREASURY, Washington, D. C. My dear Mr. Secretary : I appreciate very highly your kind letter of January 30. Every American desires to be of some service in the present situation, and it 18 a great gratifica- tion to know that you feel that our newspapers are making a real contribution. We will continue to do our utmost, stimulated by your generous encouragement, for which we all thank you most sincerely. Very faithfully yours, Regraded Unclassified COPY 204 January 30, 1942 Dear Mr. Hearst: The "Buy a bomber" campaign now being concucted by your newspapers parallels the plan shereby the people of certain cities have provided funds for military equipment by the purchase of befense Bonds and Stamps. The regular purchase of Defense Bonds and Stemps by every American is a program which gives each of us continual opportunities to strike added 5lows for freedom. Your newspapers are making a real contribu- tion to this program. Sincerely, (Signed) Henry Morgenthau, Jr. Mr. William Rendolph Hearst "yntoon LoCloud, California (m. Duffer he dell Regraded Unclassified Ferdinand Kuhn, Jr., Ext. 332 STANDARD FORM NO 14A TREASURY DEPARTMENT 205 APPLYES an DE PRESIDENT WASHING TON MARCH N. IM TELEGRAM CHARGE TREASURY DEPARTMENT. APPROPRIATION FOR Official OFFICIAL BUSINESS-GOVERNMENT RATES (The apprepriation from which payable must Le stated on alove line) - nime - 2-1117 William Randolph Hearst January 9, 1942 San Simeon California Delighted to hear that your newspapers are urging their readers to buy bombers with Defense Savings Stamps stop motorful Every little purchase will help if it is repeated every payday stop Every stamp you can sell will strike 8. blow for freedom Henry Morgenthau, Jr. Secretary of the Treasury and - Regraded Unclassified 206 2 1942 My dear Mr. Postmaster General: Thank you very much for your good letter of January 24. I em deeply grateful for the superb cooperation which you personally and elso your associates are giving us in the Defense Savings Progrem. Our people tell me that they have net several times in the lest few days with Mr. Helmer and Mr. Hargrove of your Department. I understand that these men have been designated to carry on the work 80 ably cerried on by Mr. Imus during the past year. You may be sure that every assistance will be given in the preparation of the Postal Bulletin which you suggest. We know you will feel free to call upon us et eny time that you believe we oan help. Sincerely, 1. 11. The Honorable, The Postmaster General, Washington, D. C. Place jele amc EWS:MTR Sloou Regraded Unclassified INSTRUCE Office of the Postmaster General Mashington, D. G. January 24, 1942. Honorable Henry Morgenthau, Jr. Secretary of the Treasury Fashington, D.C. My dear Mr. Secretary: I have received with your letter of January 7, a copy of your letter of December 29 to the heads of bureaus and divisions of your Department with respect to the purchase of defense savings bonds and stamps by employees of the Department, urging that where possible employees make larger per capita purchases. I have arranged for meetings with postmasters, and thus far have met with postmasters in Boston, New York and Washington, and contemplate several other meetings in the course of the next three weeks. At these conferences, among other things, I have been encouraging the postmasters to devote special emphasis to the participation by employees in the defense bond and stamp program. I have in mind that sometime after this series of confer- ences it might be helpful, at least to the postal service, if I issued a postal bulletin explaining not only the necessity for participation because of the needs of the government, but also calling attention to the fact that the withdrawal of past savings is not as important as the use of current income. In that connection, I would appreciate having some member of your Defense Savings Staff collaborate with Mr. Arthur C. Helmer, of this Department, in the preparation of such & bulletin. I feel confident that as a result of these conferences and such a bulletin, the amount of bonds and stamps purchased regularly by employees of the postal service would be materially increased. Sincerely yours, From Owder FOR IC Postmaster General. Regraded Unclassified 208 February 2, 1942 Dear Low: I am very sorry to have to accept your resignation 8.5 Chairman of the Defense Savings Committee for Greater New York. You have been of immense help to us in setublishing our llen York organization, and I should like you to know how much all of us nt the Treasury approciate what you have done. I an sure that with the foundation that has now been laid, we can expect fine results. Your new work in England will enable you to give still greater service on one of the front lines of the war effort, and I wish you every success in the important work which you are about to undertake. Sincerely, (Signed) Heary non. Lewis W. Douglas, Co-Chairman, New York State Defense Savings Committee, 1270 Sixth Avenue, lien York, 3. Y. ING/mff FR/Nkb 2/2/42 Take to Shompson there file c nime Regraded Unclassified Sames: am by monday TREASURY DEPARTMENT DEFENSE SAVINGS STAFF NEW YORK HEADQUARTERS-1270 SIXTH AVENUE. NEW YORK. N. Y.-CIRCLE 6-3100 ALBANY BUFFALO ROCHESTER STATE BMK - MARTINE TRUST BULDING LINDSLY ALLIANCE BUILDING January 28, 1942 et YORK STATE COMMITTEE 39. HEREAT H. LEMAN HONORY OWN HOURD c. PATTERSOR, a STATE CHAIRMAN las LYTLE HULL en FORD Dear Mr. Secretary: STATE ADMINISTRATOR act a SMITH ASSOCIATE STATE ADMINISTRATOR I suppose it isn't necessary - perhaps LEMIS W. DOUGLAS it isn't even proper - for me to submit in - GREATER HEW TOM writing my resignation as Chairman of the Defense - COURTLANDT D. BARNES Savings Staff for the lower New York area, but M. LETCHWORTH MEMAN, LIPETATE NEW York at any rate I want you to know in black and Md. OSCAR SOLDERT white how grateful I an to you for having let Vice-Charman me help a little in the establishment of the EXECUTIVE COMMITTEE organization. I want you to know, too, that QUY EMERSON CUMMANY I am not without regret in resigning as MTARD POPE Chairman for this area. 4DRY BRUERE FRANK 1. COLUMBUS I hope to see you next week. DANNE c. DONOVAN A ARTHUR GETMAN BALTER 1. GIFFORD DAY H. HEMANN ATHUR H. KUONER Ever faithfully yours, TROMAS 4. LYONS WILLIAM L MYERS W. REVENUE UNIT G. ROUSE - ROSE CUSTAVE STREET, though The Honorable Henry S. Morgenthau, Secretary of the Treasury, Washington, D. C. FORDEFENSE BUY UNITED STATES LIVENGS SONDS - Regraded Unclassified 474 Halvern Drue > Brentwood 210 has Palifornia Angeles 2/2 they dear ever Secretary I want to Thank mumber of the Treasury my off out ment as you want warmly a for Refuse delail I have Band & STaff two you how rhappy ) are & have This the Country in these difficult assure apportune by to serve trues and ) can you that I shall work very trally- hard and culturias - with sincere appreciation of your thoughTfuluess and heat mg and 50 you and Uus Morgrethan - endially your Eleaner Wilson Willieloo Feb 2nd 1942 o