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Volume 544, June 29 – June 30, 1942
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Volume 544, June 29 – June 30, 1942
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 544
June 29 and 30, 1942
- A -
Book Page
Agriculture
Henderson's letter to Wickard concerning Congressional
proposals preventing sales of basic agricultural
commodities below parity - 6/29/42
544
141
Argentina
See Latin America
- B -
Brazil
See Latin America
Business Conditions
Haas memorandum on situation, week ending June 27,
1942 6/29/42
121
- C - -
China
$48 million credit to Central Bank .of China in 1937:
Use of gold to pay off approximately $20 million still
owing discussed in Kung-Adler cable - 6/30/42
334
a) Treasury answer - 7/13/42: Book 549, page 45
(See also Book 550, page 136 - 7/16/42)
b) White explains to Dr. Kan Lee question of
charges involved - 7/21/42: Book 552, page 39
Colombia
See Latin America
Commodities
See Inflation
Coordinator of Information
See Office of Strategic Services
- E - -
Exports
To Russia, Free China, Burma, and other blocked
countries, during 10-day period ending June 20, 1942 -
6/30/42
322
- } -
Financing, Government
Credit of United States attacked - probably pro-German
propaganda - discussed by 9:30 group - 6/29/42
1
July Financing: Conference; present: HMJr, Bell, Haas,
and Murphy; Eccles and Sproul - 6/30/42.
223
a) Bell agenda
246
b) Summary of discussion between Treasury and
Federal Reserve June 23, 1942
247,249
c) Luncheon held at Federal Reserve Bank of New York -
guest list - 6/30/42
254
Regraded Unclassified
- 1- (Continued)
Book Page
Financing, Government (Continued)
War Savings Bonds:
Taxing idle balances and legislation authorising
Government to seize anything over $1000 in savings
discussed by Treasury group - - 6/29/42
544
14
Retailers (See also Book 541 - National Association
of Manufacturers): Plans for sales by as many as
possible by July 17 discussed by Treasury group -
6/29/42
29
Voluntary feature of British war savings system
criticised in letter from American Consul at
Birmingham to American Consul at London; compulsory
savings in United States advocated - 6/29/42
182
Payroll Savings Plan: Discussion by Treasury group
of progress to date and future plans - 6/30/42
255
Sales 88 of June 30, 1942
297
Foreign Funds Control
Latin America:
Conference of "freezing control authorities" of
American Republics - - Foley's progress report -
6/29/42
143
- I -
Inflation
Henderson's letter to Wickard concerning Congressional
proposals preventing sales of basic agricultural
commodities below parity - 6/29/42
141
Internal Revenue, Bureau of
Budget Bureau communication on priority classification -
6/30/42.
305
Iran
See Silver
- L -
Latin America
See Foreign Funds Control
Inter-American conference on economic and financial
control: Foley memorandum concerning opening of
at Pan-American Union - 6/30/42
313
Argentina: Cochran, Meltzer, and Prebisch discuss
proposal that Central Bank be channel for exportation
of United States currency - 6/30/42
328
Brazil: Currency controls discussed in cable from American
Embassy, Rio - 6/29/42
177
Colombia: Restrictions on import and export of United
States dollar currency explained in cable from Bogota -
6/29/42
179
Lend-Lease
Report, week ending June 27, 1942 - 6/30/42
310
Litton, Richard - Private
Wrote winning verses of Treasury song contest; now American
citizen, with HMJr's help; can enter Officers' Training
School - 6/29/42
111
Regraded Unclassified
- N - -
Book Page
Military Reports
British operations - 6/30/42
544 345,347
- 0 -
Office of Strategic Services
Coordinator of Information Donovan promises HMJr
British reports and analyses - - 6/29/42
120
- R - -
Retailers
See Financing, Government: War Savings Bonds
Revenue Revision
Withholding Tax: Equipment necessary discussed by HMJr
and Nelson - 6/30/42
198
a) Data used in conference between HMJr, Sullivan,
and Helvering - 6/30/42
201
b) Budget Bureau communication on priority
classification of Bureau of Internal Revenue - -
6/30/42
305
Debt Repayment: Proposal for deduction from net income
not to exceed $1000 - 6/30/42
301
- S - -
Silver
Iran: Desire to purchase silver discussed in White
memorandum - 6/29/42
191
- T -
Taxation
See Revenue Revision
- U - -
United Kingdom
See Financing, Government: War Savings Bonds
United States
Credit attacked - probably pro-German propaganda -
discussed by 9:30 group - 6/29/42
1
- W -
War Savings Bonds
See Financing, Government
Regraded Unclassified
1
June 29, 1942
12:35 p.m.
GROUP
Present: Mr. Gaston
Mr. Bell
Mr. Haas
Mr. Odegard
Mr. Schwarz
Mr. Thompson
Mr. Gamble
Mr. Graves
Mr. Sullivan
Mr. Blough
Mr. Kuhn
Mr. White
Mrs. Klotz
MR. GASTON: We have had two instances of people
attacking the credit of the United States, spreading
rumors. One Dan Bell sent in to me where a man circulated
a card saying that the bankers were getting bonds free of
charge and another one sent over by FBI where a doctor has
been telling stories that the bonds are going to be worth
nothing, and various things of that sort. They have all
the aspects of pro-German propaganda, but they are es-
pecially attacking the credit of the United States.
I am having the General Counsel's Office look into
the question of what we can do under the present law. We
may need some additional law. It is very doubtful if
we have the power to do anything about people who spread
stories about the value of U.S. securities and generally
the credit of the United States.
MR. BELL: There is another case, Herbert, a gentleman
who is supposed to be employed by the SEC. What did you
do with that one?
MR. GASTON: That is a third case.
H.M.JR: That was more serious than the others, I think.
Regraded Unclassified
2
- 2 -
MR. ODEGARD: Was that the same case, Dan? I
had & letter from a man named Kennedy, who quoted some-
one whom he said was an employee of the Federal Trade
Commission at Princeton, and I ran that down and I have
had excerpts of the statement made. It was Huston Thompson
who delivered himself of a speech at a reunion meeting
of the class of '97 at Princeton, but I just sent that
in to Miss Chauncey this morning.
MR. BELL: This was a case where a gentleman had
spent an evening with an employee of the SEC, and he said
that this man for two hours talked about nothing except
the unsoundness of the credit of the United States
Government.
MR. WHITE: It would be desirable if it could be
handled under present legislation or if some man
could visit these various individuals - the FBI -
merely to question whether he isn't a fifth columnist,
or something. I think there might be some mistake
to put legislation in.
MR. GASTON: Why FBI?
MR. WHITE: Secret Service, something to scare
them. I think legislation seeking to prevent people
from questioning the credit of the United States might
look as though we are scared, as though we are getting -
they could make much of it, and I don't know whether it
is worth the price we pay for it.
MR. GASTON: We had a law of that kind during the
last war, a law broad enough to determine things of that
sort, but we are doing now just exactly what you say.
H.M.JR: Anyway, you have got it in hand?
MR. GASTON: I think so.
H.M.JR: Gamble?
3
- 3 -
MR. GAMBLE: I have nothing, sir.
H.M.JR: I wish you War Bond fellows would think
of this. What I am proposing to do - this doesn't only
affect you, Dan - I am going to start now, this week,
and try as rapidly as possible to visit each Federal
Reserve district myself. I.am going to ask these
people, in the case of New York, for instance, to
have that bankers' committee come in, you know, for
lunch.
In the morning what I wanted to do - - this would
be Wednesday - I wanted to meet with Madden. I notice
by the paper that you are going to be there Tuesday
night.
MR. GRAVES: No, that is postponed to a week from
Tuesday night.
H.M.JR: Well, you think about this. And I thought
I could get up there about ten o'clock Wednesday morning,
go in and see Madden, sit down with him and go over this
whole drive. You decide who, Harold, you think should
go with me. See?
MR. GRAVES: Yes.
H.M.JR: Will you?
MR. GRAVES: Yes.
H.M.JR: And then - what was that thing I asked you
about? Well, I want to talk with you people about the
retailers. I want to talk to you about the coal-mining
business. Tomorrow will be when we - Tickton isn't here -
tomorrow will be the figures on pay-roll deduction.
Are you people ready this afternoon to tell me about
the retailers?
MR. GRAVES: I think we are.
H.M.JR: Should Dan sit in on it?
MR. GRAVES: By all means.
Regraded Unclassified
4
- 4 -
H.M.JR: Has anybody got a meeting at three
o'clock? Well, I would like you (Bell) here. I
want to put bonds on sale over the counter in the
retail stores and I want you fellows to have a plan
by three o'clock. See? So, who besides yourself?
MR. BELL: I don't need anybody else. I will come.
H.M.JR: Tell Eddie Bartelt to come down here. I
want to thank him anyway. Will he be in on this thing?
MR. BELL: No, Kilby would be the one if anybody
came. It would be Kilby or Broughton.
H.M.JR: Well, bring somebody besides yourself. You
need a little support, but have Eddie here a couple of
minutes before three. I want to thank him for what he
has done.
MR. BELL: We were going to have a letter.
H.M.JR: We will have a letter, and I will sign it
and hand it to him.
MR. BELL: I was talking to Kuhn this morning,
as long as you mentioned it, and we didn't get any
publicity on the Treasury going over the top.
H.M.JR: Give it to me at four o'clock. I will
do the best I can. Somebody give me a statement. I
don't know what is the matter with these War Bond
fellows. They don't have any publicity people. (Laughter)
Anyway, Bell and Graves.
Now, Harold--
MR. GRAVES: Gamble.
H.M.JR: Who else?
MR. GRAVES: Odegard.
H.M.JR: All right, this is on the retail this
afternoon, plus Bell, who will tell us how to do it.
5
- 5 -
Who are you going to bring over from the place where they
are supposed to do the work?
MR. GRAVES: I don't think we will bring anyone.
H.M.JR: How do they know what is going on?
MR. GRAVES: How do they know what is going on?
H.M.JR: Yes. Who tells them?
MR. GRAVES: Well, on this particular - I don't
mind bringing Pulte; would you, Ted?
MR. GAMBLE: Sir?
MR. GRAVES: I wouldn't mind bringing Pulte. He
is in charge of our retail--
H.M.JR: Bring him over. I am anxious to get 8.
chance to get acquainted with these fellows.
MR. GRAVES: Is he here?
MR. GAMBLE: Yes.
H.M.JR: Remember the purpose of the meeting is to
tell me how you are going to do it. (Laughter) I an
in dead earnest, Dan. I don't want any meeting on how
not to do it. (Laughter) We are going to let the retail
stores have the bondsto sell over the counter.
MRS. KLOTZ: I believe you once talked about that.
MR. BELL: Once? Several times.
H.M.JR: All right. Well, anyway, three o'clock
meeting.
MR. SULLIVAN: When do you want the how-do-not
meeting? You telephoned Dan Saturday that you wanted
6
- 6 -
to see the Commissioner and myself.
H.M.JR: Yes, that is on--
MR. SULLIVAN: Monthly payments.
MR. BELL: That is on office equipment.
H.M.JR: Machinery involved, and so forth. When are
you fellows ready?
MR. SULLIVAN: Now, sir. They were all in my.office
when 1 got word about this meeting. I knew you wouldn't
have any time before lunch so I sent them back. The
Commissioner and I are ready to see you any time you
say.
H.M.JR: How much time do you - do you want me,
Harry, this afternoon?
MR. WHITE: I don't think 80. There is just one
question.
H.M.JR: I can slip you in. Sullivan, three-thirty?
MR. SULLIVAN: Yes, sir.
H.M.JR: Is that all right?
MR. BELL: Yes.
H.M.JR: All right, John?
MR. SULLIVAN: The only thing I have is, you sent me
a copy of a photostat of a letter from Sumner Welles
stating that Costa Rica wanted to have one or two Treasury
experts on taxes and general fiscal problems loaned to
them for six months. Now, if we can get the men we will
be very happy to do it. I have talked it over with Harry.
I haven't been able to talk with Randolph about it, as you
suggested, but Harry and I were in accord that wherever
possible give the Central and South American countries
all the aid of that kind.
7
- 7 -
H.M.JR: What kind of a fellow do they want?
MR. SULLIVAN: They want two men on taxes and
general fiscal problems.
H.M.JR: I have got a man.
for
MR. SULLIVAN: Good.
H.M.JR: He works over in the Budget. What is
his name?
MR. BELL: Gearhard Colm.
MR. SULLIVAN: Oh, no, we are saving him for
Baluchistan. (Laughter)
H.M.JR: Don't wait too long.
MR. SULLIVAN: This isn't very far, Costa Rica.
H.M.JR: How about Alexandria? That would be &
good place to send him.
MR. SULLIVAN: If we could get him there in time.
(Laughter)
H.M.JR: Well, anyway, think fast work it out.
What else have you got? I heard Pearson and Allen
last night. He said you are investigating income tax
of the Ku Klux Klan. (Laughter) I am serious.
MRS. KLOTZ: That is what he said.
H.M.JR: Seriously. Would they be among the
returns I am waiting to see?
MR. SULLIVAN: That is hardly a war industry.
H.M.JR: No, no.
MR. SULLIVAN: Oh, you mean - yes.
8
- 8 -
H.M.JR: Are they among the list that the Attorney
General asked for?
MR. SULLIVAN: I don't know. I will check and tell
you at three-thirty.
H.M.JR: Because if they are, the best leaks - good
leaks come out of the Attorney General's office, the
best - the best leaks come from across the street.
(Laughter)
What else?
MR. SULLIVAN: Nothing.
H.M.JR: Harold?
MR. GRAVES: I have nothing except that I would
like to see you after this meeting for about thirty
seconds, if you would let me.
H.M.JR: Sure, because Dan is going to only need a
minute or two.
MR. BELL: A minute or two?
H.M.JR: Well, to say how. I am going to listen.
MR. GRAVES: I meant after this meeting now.
H.M.JR: All right, surely.
Ferdie? Ferdie, I have got to be prepared for
this afternoon. This is a letter signed by W. N.
Thompson:
"My dear Mr. Secretary:
"It is is our understanding that the Navy Department
now has under consideration a commission for Milburn
McCarty, Jr. and that if the commission is granted he
will be assigned to Admiral Conard's Division in the
Office of the Secretary of the Navy."
9
- 9 -
I guess that is incorrect, "Admiral Conard's
Division in the Office of the Secretary."
MR. THOMPSON: Yes, he is.
H.M.JR: "At the request of the Secretary I am
writing to ask if you will have the granting of this
commission indefinitely postponed.
"As you know, with the approval of the President,
we recently inaugurated a greatly intensified campaign
for the voluntary sale of War Savings Bonds and Stamps.
Mr. McCarty, as Chief of the Press Section of the War
Savings Staff, is directing an important part of the
campaign. His leaving at this time would seriously
hinder our War Bond activities.
"Under these circumstances we believe it is necessary
for Mr. McCarty to remain in the service of the Treasury
Department. We hope you will agree to this. We hope, too,
that this action will not reflect in any way upon Mr.
McCarty's record with the Navy Department. He acted in
good faith in applying for a commission. Changed cir-
cumstances, of recent development, are responsible for
our esent request.
"We will appreciate a reply as soon as possible."
Did you get a reply?
MR. THOMPSON: We received a reply.
H.M.JR: This is what I would like to say, but
I can"t say it without - Ferdie, inasmuch as you seem
to be in on this thing--
MR. KUHN: I was only in on it when that woman
reporter from The News came up with this anonymous
document which went to Tydings. I told her the straight
story, which was not as she wrote it. I told her it was
not a draft deferment. I told her it was a request for
10
- 10 -
a postponement of a commission and also told her about
the Treasury's record in these matters. I saw her after
consulting with Norman, who agreed with me that it would be
best to be open and aboveboard with her. Then she went
and twisted almost everything in the case.
H.M.JR: This is what I would like to do. You and
Chick better collaborate on this thing. What I would
like to do is - would be to give out Thompson's letter
this afternoon to the Navy, and the Navy's answer. We
would have to get Knox's permission and then point out
that McCarty's consenting to my asking for a postponement
of his commission left himself open to the draft, and
if he was drafted tomorrow he would go in as a private
and lose this chance for having the commission. So it
is all to his credit. There has been no communication
between the Treasury and the draft board. So he should
get a pat on the back instead of this dirty story. Is
that correct?
MR. THOMPSON: That is correct.
H.M.JR: And I think on behalf of the boy, if he
would let me handle it, I would handle it just that way.
He could have gone and taken this job and gotten his
commission and have a nice safe job. Instead of that,
he continues to work for us and may be drafted any day,
so what is the hullabaloo about?
MR. KUHN: It was a very nasty story, and I knew
it was going to be that kind of a story.
H.M.JR: Well, the woman who started it is 8. clerk
in the War Bond section and she sent me the copy of &
letter which she sent to Tydings, which I turned over to you
and told Graves about. Is that right?
MR. GRAVES: That is right.
11
- 11 -
H.M.JR: And for some reason or other - but since
that case, I mean, our record - the Treasury's record
is clear and the boy's record is clear, and I would like
to say so. I would just like to say it and hit it hard.
But before I can release Knox's letter you would have to
get permission from Knox, and you would also have to get
permission from McCarty, but I would like to handle it.
MR. KUHN: I will do that.
H.M.JR: Has anybody seen this? (Indicating
clipping from The News)
MR. GASTON: I think that is perfect. I think that
is the right way to handle it.
H.M.JR: Does anybody question my way of handling
it?
MR. KUHN: How would you give it out?
H.M.JR: Verbally.
MR. KUHN: At press?
H.M.JR: Yes, at press at four o'clock.
MR. SCHWARZ: Just to make the record straight.
H.M.JR: Yes, to stop it. Anybody any question?
Well, between you and Chick have it ready for me a
little bit before.
12
- 12 -
MR. KUHN: I just have some pictures of your father
and the New York pledge campaign. They sold two billion
dollars in bonds the day the war heroes were in Portland,
and here it shows you the direct tie-up with the bonds in
Salt Lake City. They are still becoming salesmen for the
bonds, and Private Litton, the author of that winning
song, has become an American citizen, thanks to you.
H.M.JR: Oh, did he? Did you let him know?
MR. KUHN: He has already been told by the Adjutant
General.
H.M.JR: That is nice.
MR. KUHN: That is all.
H.M.JR: Mr. Paul?
MR. BLOUGH: Mr. Paul will be here about two twenty-
five. He is on the train. I think he had trouble
getting reservations last night. Things are extremely
tight.
H.M.JR: Mr. Paul was extremely tight? (Laughter)
MR. BLOUGH: Reservations on the train are extremely
tight.
H.M.JR: You know you give me this half information
and I go spill it to. the press, then you have got to come
in the next day and tell me you gave me only half the
story. (Laughter)
MR. BLOUGH: That is right.
H.M.JR: We had a wonderful time, though, Blough and -
what is his name - and Tarleau and I had lunch together
13
- 13 -
and they tell me this story, how the Committee decided
only to have a five-percent deduction, and didn't go on
to explain that the thing was in the process of being
drafted. They only got about half way through and I
don't know, they started to eat or I started to eat -
anyway, it was half a story and I take--
MR. BLOUGH: Not that half, but half.
H.M.JR: Well, that was the impression that I got
anyway. So I go out and start to talk about it and
it seemed the minute I started to talk I was spilling
the beans, 80 we went through it and had a wonderful
time.
MR. BLOUGH: It is going to be all right, I think.
H.M.JR: What?
MR. BLOUGH: I think it is all right.
H.M.JR: I think - well, anyway, anything else?
MR. BLOUGH: Well, I have had mimeographed the action
of the Committee on all the various things that have been
before it, and copies have been sent to each of your
offices. Plenty of copies are available in case you
want them for distribution.
H.M.JR: I particularly would like to know what they
have done on that refund. Will you make a note on that,
the fourteen percent, how they are going to handle that?
I have got a couple of things I would like you to do,
please. Will you write them down?. I want an explanation
of the fourteen percent, because the last I heard they
were going to give it to me.
Now, I would like to know why - we have heard so
much about idle balances - why shouldn't idle balances
be taxed? That is number one.
14
- 14 -
MR. WHITE: We already had a report on that some
time ago. If you would like to bring it up to date we
can get up some kind of a joint--
H.M.JR: I would like to know what they are doing
in England and Canada. Harold, if we taxed idle balances
your troubles would be over.
MR. GRAVES: That is right.
MR. WHITE: It seems to me to be the wrong thing
to do at this time.
H.M.JR: Well, I am just raising the question in the
room here. I would like to know what England and Canada -
and then another thing, also with Harold in mind, I would
like to have, both of these fairly promptly - supposing
we passed a law that if anybody had over a thousand
dollars cash the Government would seize it.
MR. WHITE: It seems to me both of those moves are in
the wrong direction.
H.M.JR: All right, you will get your chance.
MR. HAAS: The idea you have got, Mr. Secretary -
I see that what you are driving at there is a proposal
which borders on some of the rest of this on expenditure
tax.
H.M.JR: Is anybody interested in getting together -
Harry seemed interested, and you, but I got it sort of
from the New York Times editorial. Itdidn't mean to be
helpful, but if there is six billion dollars in hoarded
cash and a man couldn't keep it - he couldn't put it in the
bank, because it would be taxed - by Gawd, he would have
to give it to Harold whether he liked it or not.
15
- 15 -
MR. BELL: An expenditure tax is the same thing.
MR. WHITE: Let's see, you want them to invest in
bonds to prevent inflation, and then take a measure which
probably would do more to stimulate spending than any-
thing else. Things must be getting pretty bad if We want
to resort to those methods to sell bonds; maybe we ought
to reexamine whether we ought to go for compulsory savings.
H.M.JR: Don't you threaten me, Harry.
MR. WHITE: Well, I see it is moving into that danger
zone.
H.M.JR: No, I am looking forward--
MR. HAAS: He is looking for an inducement, that is
what it amounts to, but it can be worked out.
H.M.JR: Why should there be six billion dollars, if
that is the correct figure, of hoarded currency? I am
not thinking - I say, Harold - I mean, why shouldn't they
lend that to the Government?
MR. GASTON: How would you be able to reach the
hoarded currency? It is not in the banks; you can't find
it.
H.M.JR: Well, everything else is going to be seized,
just like the gold certificates, if you announce--
MR. WHITE: There are several ways. I think we can
easily think of enough ways to do that.
H.M.JR: Well, I am throwing it out. It is my week-
end thoughts.
MR. BLOUGH: Why don't the three of us - it relates
to all of our work--
H.M.JR: Sure. If you don't agree with the boss,
don't postpone for three months giving me a report.
16
- 16 -
MR. BLOUGH: Three hours.
MR. WHITE: We will have one for you next week,
won't we? It won't be good. (Laughter)
H.M.JR: All right. I like to, you know, stir
them up a little bit. I don't see why it would be in-
flationary, though, Harry.
MR. WHITE: It wouldn't be if it would go into bonds.
H.M.JR: It wouldn't be?
MR. WHITE: I say if it is compulsory savings it
won't be; but if it is merely anti-hoarding, it might be;
it depends on how it is worked out.
H.M.JR: Well, study it, gentlemen. George, are
you feeling all right?
MR. HAAS: I feel much better, thank you.
H.M.JR: Got anything on your mind?
MR. HAAS: No. I am working with Dan on that year-
end thing.
H.M.JR: Mr. Odegard?
MR. ODEGARD: Our education man declined.
H.M.JR: Oh, that is too bad. Well, there must be
other people in education.
MR. ODEGARD: I have another man in mind.
H.M.JR: Anything else?
MR. ODEGARD: That is all.
H.M.JR: Schwarz?
MR. SCHWARZ: Nothing.
17
- 17 -
MR. WHITE: If Mr. Foley were here he would report
on this. Foley and I went to see Berle yesterday on
the draft of the bill to allocate & hundred million
dollars to be expended by the Secretary of the Treasury
with the approval of the President. The chief change
which is introduced was, "By the Secretary of the Treasury
after consultation with the Secretary of State and with
the approval of the President."
H.M.JR: For what?
MR. WHITE: A hundred million dollars to be spent,
for reasons which shall not be stated - loans to
foreign governments for war purposes. It gives the
President practically a very free hand in utilization
of up to a hundred million dollars. There are several
loans which are in the offing and contemplated. It is
connected with the war effort, with the conduct of the
war. The original proposal came from the State Department.
They sent you a letter.
H.M.JR: Why just such 8. pittance?
MR. WHITE: Up to 8. hundred million because they
are afraid they won't get any more.
H.M.JR: Is it worth the time of the staff to bring
up a hundred million dollars?
MR. WHITE: It is a long way from you. At this
stage the next step is to draft the bill and see some of
the men, the party leaders. They want to know how they
would prefer it best to be handled, whether Mr. Hull and
yourself should go, or whether they would like it handled
some other way. That is the next step which would be done
this week, but get your approval--
H.M.JR: When you want something for China, why not
go ask for China; and if you want something for Russia,
why not go for Russia.
MR. WHITE: These funds are supposed to be the kind
they don't want to tell Congress exactly the use for which
they are being made.
18
- 18 -
H.M.JR: Is this something the President wants?
I will have to know more about it.
MR. WHITE: That is my understanding. I will give
you a few minutes whenever you are ready.
MR. BELL: Can't be done through Lend-Lease?
MR. WHITE: They feel that it cannot be.
H.M.JR: What else, Harry?
MR. WHITE: The British have raised the question of
providing dollars for the Dutch East Indies, and they
claimed that the Dutch East Indies dollars, assets, shall
be different from those of the home government. It is a
matter which I think you ought to make a decision on soon,
and I am raising the question whether you want to see the
British on that issue or whether you would prefer to have
a committee meeting before you make a decision on that matter.
H.M.JR: I am all for a committee meeting when I
don't have to attend.
MR. WHITE: I think this decision - I think you will
have to make it because it involves the rather broad prob-
lem as to whether or not the Dutch assets shall be avail-
able for the conduct of the war.
H.M.JR: Have a committee meeting first.
MR. WHITE: All right.
H.M.JR: That will kill a little time.
MR. WHITE: You might be interested in knowing that
the Export-Import has been asked to and is considering
providing funds for the South American countries to take
over Axis-dominated corporations in South America. They
are going to make loans of that character if it can be
worked out.
H.M.JR: I would like to go on record, for anybody
that is interested, that I entirely disapprove of Government
19
- 19 -
directors of International Tel. and Tel. I think it is
terrible. That is something new. I mean, that is the
way - that, plus two directors on American Bosch. I
mean, that is the way the Nazi party works. They put
their people in. Those are the plums that the political
parties distribute. I think it is terrible.
MR. WHITE: That matter wasn't discussed; I don't
think the situation would have been any different if it
had been discussed.
H.M.JR: What else?
MR. WHITE: I don't know whether Mr. Gaston feels
it is ready to tell you about, that alcohol case, but I
might inform you that we are working on some censorship
material.
MR. GASTON: You didn't get that - we didn't get
that report yet, did we?
MR. WHITE: I thought you ought to let him know
generally what it is. We ought to end up in getting some
evidence, irrefutable evidence, on one of the important
dollar-a-year men, that he has been engaging in practices
which are questionable.
H.M.JR: I would love to have it.
MR. GASTON: I think we can get that report today.
It indicates that they have a contract to sell alcohol at -
what was it, thirty-eight cents, or something like that,
and subsequently withdrew it and entered into a contract
at sixty.
H.M.JR: How did you get in on it, Harry?
MR. WHITE: We started because - oh, it began with
you, you remember, when the Cuban Finance Minister was
here. You made the suggestion of the possibility of pur-
chasing alcohol from them. That resulted in 8. series of
conferences with various officials, which in turn raised
the question as to whether or not that alcohol could
come in without paying certain excise duties and
20
- 20 -
and import duties. The legal division made some findings,
then we had some other meetings, inter-departmental meet-
ings, at which certain decisions were made.
The decision there was a decision made to purchase
alcohol, which was supposed to be kept very confidential.
Then we heard through an intercept of a telephone conver-
sation between somebody here in Washington - we don't
know whom - and somebody in Cuba to immediately buy a
large amount of alcohol from somebody in Mexico. Well,
on the basis of that we thought we might find something
if we dug in because we didn't see why that timing occurred.
That might have been accidental, but it didn't look that
way to us. Mr. Gaston went to work, and with the cooper-
ation of the censorship and the telephone companies, and
everything else, I think they have recently found something
that looks as though there is "gold in them thar hills."
MR. GASTON: There is a letter that has been turned
over to Nelson, and by Nelson to FBI, and FBI is now
working on the case.
H.M.JR: Good.
Anything else, Harry?
MR. WHITE: Mr. Hays was in to see me again. The
status of that is that the British will practically -
will agree to take care of the RKO as soon as they get
a satisfactory letter indicating that it will not con-
stitute a precedent.
MR. SULLIVAN: Wait a minute. We can't do that for
one company and not do it for others.
MR. WHITE: They are two different things.
H.M.JR: The letter from Hays - his letter is to be
from Hays, isn't it?
MR. WHITE: Yes, but I think John thought for a moment
I was talking about the question of the tax of Paramount. This
Regraded Unclassified
21
- 21 -
is not a question of releasing funds, taxes upon which
have already been met and paid, but merely a question of
unfreezing certain assets of the RKO. I don't think it
would affect the tax.
MR. SULLIVAN: There are eight different companies
that are in the same position, Harry, and the allocations,
the amounts that could be drawn, were split up by the
British Government among those eight companies. If any-
thing is going to be done for one, the same thing should
be done for the other seven.
MR. WHITE: I still don't think it touches on the
tax business.
MR. SULLIVAN: I don't think so, either, now, but
I mean--
H.M.JR: You had better talk it over. It is a long
story.
MR. WHITE: I think he will agree with us.
H.M.JR: Am I not correct? As I understand the story -
Hays told a cock-and-bull story - all the companies paid
taxes on the English earnings except 20th Century-Fox.
MR. WHITE: Hays didn't say that their English--
H.M.JR: You told me that.
MR. WHITE: I said that is what we discovered.
H.M.JR: Hays said they hadn't paid.
MR. WHITE: He said if we made that money available
to them, the Treasury would get half back in taxes.
MR. SULLIVAN: We get it anyway.
H.M.JR: The point is, just for my information, that
all the companies paid their taxes on the English earnings
except 20th Century-Fox?
22
- ,22 -
MR. SULLIVAN: That is my recollection.
H.M.JR: Would you mind looking it up, and let me
know?
MR. SULLIVAN: I will.
H.M.JR: Come on, Dan.
MR. BELL: There is a donation made to the White
House for twenty-three hundred by those two companies.
The President knows that president very well, and thought
you ought to sign the letter. (Letter addressed to Mr.
S. R. Fuller, Jr., President, N. A. Rayon Company and
American Bemberg Company signed by the Secretary.)
MR. GASTON: Marvin McIntyre asked that you sign it.
MR. BELL: Will you have an opportunity of reading
that memorandum on the question of whether we issue the
gold notes?
H.M.JR: I will read it, yes.
MR. THOMPSON: The Appropriations Committee has
reported supplemental appropriations for next year. They
have given us exactly what the Budget approved in every
instance, Paul, Expenses of Loans, forty-five million,
Harold's staff--
H.M.JR: Wonderful. Has Harold got his million a
day - million a month?
MR. THOMPSON: Million a month - twelve million.
H.M.JR: Isn't that nice.
MR. BELL: It is in the Committee report.
H.M.JR: Please note, Mr. White, this is a Committee
report: "The Treasury Department is to be commended for
making every possible effort to give the voluntary purchase
23
- 23 -
plan full opportunity for success." Don't go against
the spirit of Congress, please.
MR. WHITE: I haven't;in fact, I have contributed to
the success.
MR. SULLIVAN: That is right.
MR. BELL: A girl that Miss Elliott spoke of is
May Alexander, and she is reporting tomorrow morning.
H.M.JR: That is the girl that used to be over
there?
MR. THOMPSON: That is right, and she will be here
tomorrow morning.
H.M.JR: May Alexander?
MR. THOMPSON: Yes.
H.M.JR: Oh, grand. Were you able to fix up that
nice young boy?
MR. THOMPSON: He went down to the Civil Service
Commission and filed his papers. We expect to hear
today or tomorrow. I don't know whether Kamarck told you
or not, but he got his notice to report for duty on
July 9.
H.M.JR: He did, and I asked him to ask Mr. White
to recommend somebody.
MR. WHITE: I have some suggestions.
H.M.JR: I thank you.
24
The News
JUN 29 1942
Mr. McCarty Says Mr. McCarty Is Important:
Cog in War Bond Drive
Up for Draft Deferment
TREASURY DEPARTMENT
WASHINGTON
BEFENDS SAVINGS STAFF
MILBURN MCCARTY, JR.
Data On
Publicity Experience
1. Treasury Department, Chief, Press Section, Defense Savings Staff
From May, 1941, to date
In this job UcCarty is in direct charge of all newspaper and mga-
sine publicity on the National Bond and Stamp campaign. Under the
supervision of Vincent F. Callahan, Director of Press and Radio, he
formulates policy, creates and passes on ideas, and is the adminis-
trative head of the paid publicity staff in Washington and hundreda
of volunteer publicity workers over the country. He built up the
department himself, and developed the Defense Bond promotion that
has appeared in news stories, editorials, feature stories, cartoons.
columns, pictures, elsewhere in newspapers and magazines.
Outstanding in this over-all operation have been: Consolidation of
the country's carteonists behind the Dond Campaign. Organization of
the comie book field and the movie-fan and adventure nagazine groups
for Defense Savings publicity. Development of "Liberty Limericks,"
"Penny Tise," Defense Bond Quis," and other special features. The
general use of the Minute Man design, emblems, and toxes on news-
paper front pages and magazine covers. He has launched special
publicity activities through the Labor Press, College Press, 70r-
sign Language Press, Religious Press, various other media.
Under his direction also has been the acbilization behind the and
Campaign of the Dation's creative writing talent, and the use of
Bond promotion on book jackets and covers.
2 Steve Hannagan Associates -- 1938-43
Principal work with Hannagan was directing the Coca-Cola secount.
Other accounts handled: Libbey Class Company, Martini & Rossi
Vernouth, Gruen Watches, Sun Valley, the Island of Purto Rico.
Although McCarty does both contacting and writing, his sain work is
formulating Ideas for campaigna, then following up to direct their
execution. His handling of a wide range of products -- everything
from Bonds to a soft drink, from watches to a winter-resort - has
POLICE
taught his to find and conceive every sort of publicity Idua. And
ha's learned that publicity can be obtained on practically anything,
even that old wastebanked in the cornor, if proper ideas can be
developed.
The first page of Mr. McCarty's unusual autobiography.
Draft officials today were trying to decide
whether Milburn McCarty Jr. should fight with
a gun or from a Government draft-deferred desk,
at which, according to a mimeographed descrip-
tion on Treasury Department stationery written
Mr. McCarts
Regraded Unclassified
25
The News
by Mr. McCarty about Mr. McCarty, he is one
of the must important coge in the War Bond
drive.
Furthermore, apparently not even the Treas-
ury or Mr. McCarty himself know a "necessary
man" draft deferment for him is in the balance.
All Ferdinand Kuhn, Secretary Morgenthau's
assistant, knows is that the Navy begged him to
accept a commission in a somewhat different
field than publicity (the supply corps) and that
Secretary of the Treasury Morgenthau wouldn't let the armed
force take him because the bond drive would suffer if he went.
THE NAME IS MoCARTY
The Tydings Benate special committee is known to have Mr. McCarty's case
before it.
Milburn McCarty Jr is just 30, unmarried, and lives at the University Club.
And by his own admission he personally is responsible for the support given
by the nation's cartoonists, writers and publishers to the bond program.
Many newspaper and magazine editors have been publishing bond publicity
because they thought it their patriotic duty. But Mr. McCarty in his mimeo-
graphed three page self-advertisement of his life history and talents speaks of
himself in the third person as the man "In direct charge of all newspaper and
magazine publicity" who "formulates policy, creates and passes on Ideas, and
is the administrative head of the paid publicity staff In Washington and hun-
dreds of volunteer publicity workers all over the country," who "built up the
department himself, and developed the Defense Bond promotion that has ap-
peared in news stories, editorials, feature stories, cartoons, columns, pictures,
elsewhere in newspapers and magazines."
McCARTY IS THE NAME
He adds:
"Outstanding in this over-all operation have been: Consolidation of the
country's cartoonista behind the Bond Campaign. Organizations of the comic
book field and movie fan and adventure magazine groups for Defense Baving
publicity.
The general use of the Minute Man design, emblems and boxes on
newspaper front pages and magazine covers.
Under his direction also has
been the mobilization behind the Bond. Campaign of the nation's ergative
writing talent, and the use of Bond promotion on book Jackets and covers.
"Altho McCarty (McCarty still speaking) does both contracting and writing,
bis main work is formulating ideas for campaigns, then following up to direct
their execution. His handling of a wide range of products-everything from
Bonds to a soft drink, from watches to a winter resort-has taugh him to find
and conceive every sort of publicity Idea. And he'se learned that publicity can
be obtained for practically anything, even that old wastebasket in the corner, if
the proper Ideas can be developed."
DONT FORGET-NAME'S McCARTY
Mr. McCarty worked his way thru college, was graduated seven years ago this
month, and worked himself up the hard way-with no known sponsors except
the late Ben. Joe Robinson, Democratic floor leader from Arkansas, and others
he lists as "Washington references" at the end of his unusual autobiography,
among them Ben. Tom Connally (D.), Texas, and Col. Edwin A. Halsey, Secre-
tary of the Senate. Moreover, he advertises that he in "moderate in his indul-
gences; and likes and works hard at any good job he gets his hands on."
Thus, scarcely in his teens in his native Ban Angelo, Tex, he leaped from
a Benate page's Job at 15 to "assistant" at 15 to Col. Halsey at a Democratic
National Convention; has since thoroly covered three continents developing
"good contacts with local newspaper and radio outlets;" won "several golf,
tennis and squash titles; worked his way thru Dartmouth as manager of a
California Ice cream parlor, New York stevedore, ordinary seaman, Texas oil
driller, newspaper boy, sledge man on a highway gang, store clerk, truck driver,
"etc, etc.," "wrote and edited a syndicated column-It Happens in New York,'
which he says was "carried by more than 200 papera thruout the country," and
to actually report, "at various times," for the Eastland, Texas, Telegram, the
Pt. Worth Star Telegram and Dallas News.
Be found time to be graduated from Dartmouth in 1935 and to the same year
Regraded Unclassified
26
ThenNews
to handle a school-and-college sales promotion Job for the New York Herald
Tribune which "brought the Tribune shead of the New York Times In this field
for the first time in history."
From this Mr. McCarty says Mr. McCarty took a fast run thru the New
Yorker Magazine, the Mutual Broadcasting Bystem. and conceived and launched
the idea to make Douglas Leigh the "Broadway Bign King." (The results speak
for themselves: There are half a dosen sign companies "but he is by far
the best known man inthebusiness," says McCarty). Then be worked for Steve
Hannagan, New York publicity man whose job in to get free publicity for Coca
Cola, Libbey Glass, aMrtini & Roasi, Vermuth, Gruen watches, Bun Valley,
Puerto Rico-and Mr. McCarty "handled" all of these, Mr. McCarty states, and
directed the Coca Cola account.
YOU SPELL IT M-c-C-A-R-T-Y
Mr. Hannagan told The News he wouldn't E° 50 far as to say Mr. McCarty
had charge of the Coca Cola account, but did say that the Government asked
the young man to join its bond staff about-a year ago,
The Treasury, for some unknown reason, refused to verify a report that ne
draws $6500 & year after recently having been raised from $5800, despite that
under the law, Federal salaries are supposed to be public knowledge and the
Government lists a lot of them in a book which it publishes annually.
Also unusual WAS Mr. McCarty's statement to a News reporter: that altho be
is a bachelor and only 30, be didn't know his draft number, his classification,
or even the number of his draft board. He indicated be wasn't Interested in
them.
IT IS MR. McCARTY
Perhaps because Mr. McCarty's self-advertisement was worded similar to &
Job application blography with a list of "Washington references" attached in-
cluding "any of the present or former employers named above," & report had
reached the Tydings Committee that Mr. McCarty was circulating the document
among the employers of the armed forces in the latadable effort to obtain a
commission before he might have to become & draftee. The report continued,
however, that when the commission In the Navy finally was offered him be
didn't want It because he meanwhile had been deferred. This after farewell
parties had been held and his successor introduced, only to be displaced by a
signals-over decision.
Knowing that the report was widely circulated and that the only way to
dispose of It was to ask Mr. McCarty himself, & reporter called on him.
ALL TOGETHER, M-c-C-A-B-T-Y
Was It true that he had been deferred or was going to be? Did he turn down
the commission? What about the report? What about the self-advertisement
with the "Washington references" at the end?
"Draft" laughed Mr. McCarty. "I registered In 1940 in New York, but I
haven't even been in communication with my board. or course no deferment
is involved. I don't even know my board's number. I don't even know what my
classification is. Oh yes, I did have a Navy commission. but Mr. Morgenthau
asked to have it held up on account of my work here. That biography? Oh,
that was just got up for some magazine that wanted to run a story about me,
He did not Indicate why the magazine needed so many copies that it was neces-
sary to mimeograph it.
THAT SPELLS McCARTY
Verification on the military side came from Mr. Kuhn, assistant to Mr.
Morgenthau,
"No draft deferment is Involved." he emphasized. "It is true Mr. McCarty
was going in the Navy. Oh, no, he didn't apply. They wanted to give &
commission because of his valuable work here. But because the bond program la
going Into its biggest phase now and IL would be hard to replace him im-
mediately, Mr. Morgenthau naked that the commission be held up for the time."
The News found Mr. McCarty's draft board to ascertain Mr. McCarty's draft
status from the official record. This is the reply:
"Milburn McCarty Jt., who formerly lived in the 200 number of E 48th-st,
applied for a commission in the Navy on April 30 last, according to a report
he made to Local Board 14 on that date.
"According to the Selective Service headquarters, McCarty's file is now up
before the Occupational Deferment Division, where it is being conaldered.
This consideration usually takes two or three days, and no material is allowed to
be released until the division makes its report."
In his mimedgraphed autobiography Mr. McCarty also took credit for "devel-
opment of 'Liberty Limericks" which are printed by newspapers to /help
sell bonds.
According to & Treasury employe, however, the Government buys these from
Warwick & Legier, a New York advertising firm, at the rate of two & week
and 650 aplece.
Regraded Unclassified
21
27
June 29, 1942.
2:51 p.m.
HMJr:
Hello.
Operator: General Smith.
HMJr:
Hello.
General
Smith:
Hello, Mr. Morgenthau.
HMJr:
How are you?
S:
I'm fine, thank you, sir.
HMJr:
Good. Two things, have you heard anything
about Henry?
S:
No, I have not. I was just about to call up
and try - ask about Henry.
HMJr:
Well, we've talked to him a couple times on
the phone. He's been out at Fort Riley for
three weeks, and they're just going to start
their training beginning with today.
8:
Uh huh.
HMJr:
And he seems to like it fine, and from all I
can tell - he doesn't say much - seems to be
getting along all right.
S:
What I'm interested in knowing is when he
makes his application for officers' candidate
school?
HMJr:
I see. Well, he said that they - - he didn't
know - that there's some talk that in view of
their being there three weeks they might run
them for eight weeks instead of thirteen.
S:
Uh huh.
HMJr:
But - but that's all he knows. They really
haven't started yet. But I gather he's get-
ting along all right.
Dearadod site
28
- 2 -
S:
I'm anxious to get that more or less settled
and arranged before I leave because : - there
won't be anybody to look after it when I'm
gone, you see?
HMJr:
Where you going?
S:
Oh, I'm going across on the other side with
Eisenhower.
HMJr:
Oh, really?
S:
Yes, sir.
HMJr:
I didn't - well, of course I had no way of
knowing it.
(Balance of conversation not recorded.)
Regraded Unclassified
29
June 29, 1942
3:00 p.m.
WAR BONDS
Present: Mr. Bell
Mr. Graves
Mr. Odegard
Mr. Gamble
Mr. Bartelt
Mr. Kilby
Mrs. Klotz
H.M.JR: Now, which one of these many people claim
the responsibility for the retailers?
MR. GRAVES: I was just going to ask where Pulte
is.
MR. GAMBLE: He is not in town.
H.M.JR: Is this your child?
MR. GAMBLE: You mean you are now talking about
July 17th day?
H.M.JR: Yes.
MR. GAMBLE: Yes, sir.
H.M.JR: All right, now I go into a store on the
17th of July in Podunk. Will I be able to buy stamps.
in that store?
MR. GAMBLE: Yes, sir.
H.M.JR: Every store will have stamps?
MR. GAMBLE: Yes, sir.
H.M.JR: They will all be supplied?
Regraded Unclassified
30
- 2 -
MR. GAMBLE: When I say every store, there will be up-
wards of a million stores that will have them, Mr. Secretary.
The communities will expand those. There will be plenty
of outlets for stamps.
H.M.JR: Will there be stock on hand in the post
offices?
MR. GAMBLE: We checked the post offices and they
tell us between sixty and seventy billions worth of
stamps are available now.
H.M.JR: Is anybody particularly going to see that
the stamps are in these particular towns?
MR. GAMBLE: Not only that, but we have made arrange-
ments to keep the post offices in all those towns open until
nine o'clock at night.
H.M.JR: You are satisfied as to the stamps?
MR. GAMBLE: Yes, sir.
H.M.JR: I am going in there and I want to buy an
$18.75 bond, what am I going to do?
MR. GAMBLE: You might have a little difficulty.
H.M.JR: What would happen to me? I have got the
money and I want to buy a bond.
MR. GAMBLE: Well, the way we are set up at the
present time, like here in Washington there are some
four or five of the department stores that have bonds
on sale--
MR. BELL: They are issuing agents.
MR. GAMBLE: Yes, they are issuing agents, and you
can - for example, you can get three-minute delivery
on a bond in the Hecht Company in this town; and that
is true in a great many cities, but it is not universally
true of all retail establishments.
31
- 3 -
H.M.JR: How are we going to do it by the 17th of
July? Is it unfair to ask you? Is it a fiscal matter?
MR. GAMBLE: In a sense, Yes.
H.M.JR: Have you got the stores?
MR. GRAVES: I would like to ask Mr. Gamble this,
if he does know - I am sure I don't know. I know in
Chicago there are, I think, twelve of the large stores
qualified as issuing agents. I was going to ask if
he knows what that situation is generally.
MR. GAMBLE: Total number, I can't answer that Mr.
Graves.
MR. GRAVES: Total number of retail stores that have
now qualified.
MR. GAMBLE: It is hoped the retailers - Mr. Bell
requested the retail people in a letter to the Federal
Reserve banks to survey that picture again to speed up
these qualifications for issuing agencies before the
start of the July "Retailers for Victory Month."
H.M.JR: At the rate they are going they will be
lucky if they get them around Christmas Day.
MR. GAMBLE: I should say a thousand would be the
maximum number.
MR. ODEGARD: The best evidence we could get the
other day, when we were preparing that statement for
Congressman Ludlow, was that there are about twenty-
four hundred and fifty corporations qualified as issuing
agents, and about two hundred and seventy-five others.
That was the latest figure. Now it may be a good deal
more than that.
MR. BELL: How big are these towns that you are going
to carry this on in?
32
- 4 -
MR. GAMBLE: All sizes. The large cities probably
won't come in a hundred percent. It is the kind of an
activity that will go better in smaller communities -
I mean towns, cities of a hundred thousand and under,
but there are some forty odd big cities we know already -
for example, New York City.
MR. BELL: We haven't got so many department stores
that are qualified as issuing agents. We have got a lot
of them over the country - we haven't gotten so many.
We have about fifteen thousand banks; we have sixteen
thousand post offices. Now, in these towns, in many cases,
your banks and your post offices could serve the public;
we might even get some more department stores or other
stores to come in as issuing agents.
MR. GAMBLE: Twelve hundred big stores are members of
the retail dry goods stores.
MR. BELL: Big stores?
MR. GAMBLE: Yes, and there are four thousand so-
called second line - take in the chain organizations,
Penny's, Sears and Roebuck, Montgomery Ward. So I should
say there are about five thousand possibilities of
responsible merchants.
H.M.JR: Well now, there is no use going the regular
way of the regular issuing agent because the Federal
Reserve just won't get around between now and the 17th
of July. Just let's use this figure five thousand, and
what I have in mind - let's take J. C. Penny, for instance,
see, and go to J. C. Penny and say, "You must--" Let's
say they have five hundred stores. "Now, look, we would
like you to give us an estimate on what you think you
will sell on the 17th of July. Gentlemen, this is just
for one day, and we would like to stock you up for one
day with twenty-five dollar bonds, every store, and
you make arrangements with the treasurer to make J.C. Penny
corporation responsible.
MR. BELL: They are already, I think. They are
called issuing agents, so right on that--
Regraded Unclassified
33
- 5 -
H.M.JR: Well, I doubt - are they issuing agents?
MR. GAMBLE: I think they are in this way--
H.M.JR: The first thing we ought to do is take a
list of the five thousand and check off which ones are,
which ones aren't, but let's say your figure was right,
a thousand - I just want to get the idea across - these
four thousand stores - I doubt whether J. C. Penny -
they must have five hundred stores. That leaves, let's
say, four thousand stores - we may be all off in our
figures. What is to keep me, the Secretary of the
Treasury, from saying to Penny and all twelve hundred
first-line stores and all the four thousand or five
thousand second-line stores, "This day we will stock you
up with as many bonds as you say that you think you will
need, and if you run short during the day you can go to
the bank and we will make arrangements with the bank to
advance these to you.
MR. BELL: If they are good-sized towns and if there
is a good-sized bank there, they would have 8 pretty
good stock.
H.M.JR: I mean, I know enough about selling and
I know a man's reaction to the thing, and if you can go
in and you go to a counter and the bonds are there and
you can buy them across the counter, there is all the
difference in the world than going through this rigmarole
of a slip of paper, then running two blocks down. When
you go to buy a pair of shoes, you want a pair of shoes;
you don't want a receipt, go through all of that. I mean,
I have tried so hard to break down these obstacles for
the people that we place in their way.
MR. GRAVES: Mr. Secretary, my own view about this -
I have had no opportunity today to do more than discuss
the thing briefly with Mr. Gamble, Mr. Odegard and Mr.
Bell, but my own view is that what we ought to do
is to try to interest retail stores in becoming permanent
outlets for the sale of bonds on some such scale as
34
- 6 -
indicated by Mr. Gamble, increase that as a permanent
proposition rather than to try to interest them in
doing something specially on that one day, the 17th.
H.M.JR: Well listen, Harold, the only way I can
get you people to do something is to do it this way. I
have talked about retail sales. My original suggestion
was to use Western Union, Postal Telegraph, and every-
thing else - that goes back to a year and a half ago.
I don't make any progress. Now, I am going to do this
thing if I have got to do it myself. See? I am
going to have this thing sold. Now, I am not going
to argue about it. I am going to have these things
on sale in these principal stores. You fellows have
just got to work it out.
MR. GRAVES: Yes, but you are interested, I take
it, in having it all of the time.
H.M.JR: But you tell me - the 17th is passed,
you lose all the benefit, and the way to get the stores
to do it is to show them it can be done.
MR. GRAVES: I think we ought to try to get them to
do it by the 17th as far as we can.
H.M.JR: You won't. I have talked about it for
a year and a half and I have gotten nowhere. Now, it
is the twenty-ninth, and the seventeenth is two weeks
or two and a half weeks off, and I want the stuff on sale.
Now, if you could do it on a permanent basis, swell, but
I don't want to be told it will be the 17th of September
because we have got to wait that long in order to have
it permanent.
MR., GRAVES: You told me yesterday, you remember,
over the phone, that what you wanted was to have this
done in all the cities where we were going to have this
Vineland--
H.M.JR: About three thousand cities.
35
- 7 -
MR. GRAVES: Well, I think the number--
MR. GAMBLE: There may not be that many.
H.M.JR: Well again, twenty-five hundred, two
thousand, whatever it is.
MR. GRAVES: A very large number of cities.
MR. BELL: Pretty large cities, though.
MR. GRAVES: You get down into some very small cities,
and that is the trouble. As I said to you over the phone
yesterday, the difficulty of doing what you said literally,
just that one day, of getting these stores in all the
cities where we are to have this celebration on the 17th,
is one of getting qualified people who can do this job
of registering bonds for that one day's operation.
H.M.JR: All right, is that going to be your stumbling
block?
MR. GRAVES: That is one of several stumbling blocks.
H.M.JR: Well, I got your answer on that. I've got
your answer to that. I will order every collector in
Internal Revenue, every man, every custom's man, every
alcohol tax man, to report at a store with bonds in his
pockets, devote that Saturday to that thing. He will be
there in the store. He will be responsible for the bonds.
We must have ten thousand people.
MR. GRAVES: I wasn't thinking of the responsibility
for the funds or the bonds.
H.M.JR: If you want a Treasury man in each store,
I will give you ten thousand men in these stores for
that date. I will order ten thousand Treasury personnel
to report to the stores on that date.
MR. BELL: The best people to issue bonds are the
people that are now issuing them, which are your banks and
UInclassified
36
- 8 -
your stores that are qualified and post offices that have
had the experience.
H.M.JR: Dan, that is all lovely, but you are not
getting the sales. Now, here is a plan which these
fellows are working out. It is like this New York
thing, I don't want these people to make it as difficult
as possible for them to buy them.
Now, don't all sit there and tell me how it can't
be done. I want somebody to tell me how it can be done.
I mean, you have got your stores. I mean, you have got
your post offices, who take no interest in the thing . -
I mean, they won't push the thing; and you have got your
banks, which are doing fine. Now, we are working out a
way that we have got something new, department stores,
and I want the merchandise there, 80 when the people go--
MR. GRAVES: You want something more than department
stores, if I understood what you said yesterday. You
want it in every community where we have this Vineland
celebration; that gets you down into the smaller
communities where probably there are no department stores.
H.M.JR: But you take me to the place, the community
of ten thousand or over - you take me to the community
of ten thousand or over there won't be less than ten
thousand--
MR. GAMBLE: Oh, yes.
H.M.JR: Well, I am talking - - where there isn't
an Atlantic and Pacific or J.C. Penny.
MR. GRAVES: There will be stores of that kind.
H.M.JR: Well, then, those - that is something else
again.
MR. BARTELT: Mr. Secretary, the county agent knows
who are the issuing agents, doesn't he? Why don't you
place that responsibility on him? Tell him what you
want and let him go and see that the bonds are there.
Regraded Unclassified
37
- 9 -
H.M.JR: You say the county agent, you mean--
MR. BARTELT: I mean the War Savings man, whoever
he is.
MR. BELL: The State administrators.
MR. ODEGARD: Could I ask Mr. Bell how much of a
relaxation would be necessary in the present requirements
concerning fiscal agents to authorize the banks on their
responsibilities to supply retail stores in the community
with enough blank stock SO that they could be issued
right in the store and the store then return the stubs
to the banks?
MR. BELL: You mean without qualifying the store
as an agent?
MR. ODEGARD: Without qualifying the store as such.
MR. BELL: I think we could do that. That has been
done in New York where the manufacturer has gone out
and made sub-agents on its own. But I think we could
work up an arrangement of that kind if the banks would
be willing to do it.
MR. ODEGARD: Wouldn't that just about do what the
Secretary wants done?
MR. BELL: It seems to me those are the people that
we have got to work through. We have got to get the list
of the cities, it seems. to me, first, in which you are
going to hold these celebrations, and then find out from
our list who are the agents in those places. And then I
should think we can wire them or write them direct and
tell them we are going to have this celebration. We ask
them to cooperate, either by making available the bonds
in the stores or any place else that is going to be open
there that day. I think we can get a letter right out.
MR. ODEGARD: I would assume that the banks, the
38
- 10 -
local banks, would know who the responsible merchants
are.
H.M.JR: What I was thinking of, if we have seven
hundred national bank examiners, supposing - they are
my men - I put them out to go to work. There are 8.
thousand ways to do this thing. These people only
think of each State bank superintendent helping, but
I have got seven hundred bank examiners. All they do
is look at books; one day they could help win the war.
MR. BELL: I think we could write to each one of
our agents in those districts and get results.
H.M.JR: What agents?
MR. BELL: We have qualified issuing agents in
each of these towns, I am sure.
MR. GRAVES: He means the banks.
H.M.JR: Have you got a list of the towns?
MR. GAMBLE: We won't have them, Mr. Secretary,
probably, until the first part of next week - all of
the towns.
H.M.JR: They are beginning to drift in?
MR. GAMBLE: Yes.
MR. BELL: Have you got part of them?
MR. GAMBLE: Just a few.
MR. BELL: We could get started.
MR. GAMBLE: The responsibility for this day, Mr.
Secretary, the way it is set up, is on the retailers,
and we are riding herd on them as best we can.
39
- 11 -
H.M.JR: Supposing you told Ben Namm there is
a chance of stocking up each of these stores.
MR. GAMBLE: There isn't any question in my mind.
I am all for it. I think we should qualify - in some
way put bonds in the hands of these fifty-two hundred
merchants.
H.M.JR: After I have been in the Treasury another
fifteen years I may get an idea.
MR. ODEGARD: I just raise the question again as
to whether it is necessary to qualify these stores as
issuing agents.
MR. GRAVES: You mean whether the banks can't
distribute its stock around?
MR. ODEGARD: Yes, and rely upon the bank to be
careful enough in knowing the local situation, knowing
the responsible merchants.
H.M.JR: What about the Comptroller? Is he in?
MR. BELL: He has been sick for ten days.
H.M.JR: "hat about this idea of Peter Odegard's
getting the banks?
MR. GRAVES: It is all right; if this is to be done,
in my opinion that is a practical way. Otherwise you
are up against the job of having each store qualified
individually, Dan, and that is a matter of pre-paying
these bonds or putting up collateral, which they probably
are not in the position to do. But if you can arrange
for the bank to send stock out on consignment, so to
speak, and if the bank would take the responsibility for
it, probably--
H.M.JR: Well, will they do that?
MR. BELL: I think so.
40
- 12 -
MR. GRAVES: In some cases they will and in some
cases they won't, that is about the answer to that question.
MR. BELL: You will get some that won't do it, but
most banks have their contacts with these stores. They
trust them.
MR. GRAVES: In other words, we would have 8. double-
barreled selling job, have to sell the banks and the
stores.
H.M.JR: >end for Stonier of the American Bankers,
get Mr. White, superintendent of the banks in New York,
who is president of the State Superintendents Association,
and tell them what we want, and tell the seven hundred
national bank examiners that they should call, in each
town, on each national bank and tell them what we want.
Gawd, we have got so many people in the Treasury that
aren't working on this thing - well, throw them in.
MR. ODEGARD: You mean throw them in so that they
could train the people to do it?
H.M.JR: No, I was thinking - take a national bank
examiner called in on this thing, "Here is a letter from
Mr. Morgenthau. He would like you on the 17th of July
to start the following stores in this thing." The
national bank examiner walks in; if he doesn't make a
hit we send in an income tax fellow to follow him up.
(Laughter) If he doesn't come, the Secret Service men -
we've got all these people to throw in. I am serious.
MR. ODEGARD: I was thinking of the other problem,
Mr. Secretary. By the 17th, I suppose you cald get
people qualified to make these bonds out in stores, the
actual job of issuing the bonds.
MR. GRAVES: Dan is more familiar with that difficulty
than I am, but I have always assumed that that is one of
the problems, Dan, of having this registration put in the
hands of people who are not--
(The Secretary held an unrecorded telephone conver-
sation with Mr. Folger.)
Regraded Unclassified
41
- 13 -
MR. GRAVES: There is a point, Dan, that I think
is very important, and undoubtedly you think it is
important, being careful enough about this that you can
be sure of the accuracy and correctness of the registration
of your bonds.
H.M.JR: Meaning what?
MR. BELL: You wouldn't want to pick up volunteers,
I think, to handle public debt obligations; you would
have to have somebody that is responsible for the
supply of bonds.
H.M.JR: It would be the cashier in the store,
wouldn't it?
MR. BELL: The treasurer, the comptroller, some-
body like that that is responsible for the supply, and
the proceeds that he takes in, that is just as important.
H.M.JR: If you don't do this it gets down just
to a stamp sale, doesn't it?
MR. GAMBLE: No, it does not, Mr. Secretary. As
they did in Vineland, you know, they arranged for the
banks to stay open, they arranged for a number of the
stores, qualified as issuing agents--
MR. BELL: The post offices.
MR. GAMBLE: A number of their smaller stores were
qualified to sell the bonds - probably it would work
forty percent, but I don't think it is good enough.
MR. GRAVES: I suppose the common operation, Ted,
is for these stores to take money and applications,
these to be forwarded to a bank which would issue the
bond and mail it to the purchaser.
H.M.JR: Harold, has it been thought through?
Have they, the banks, the applications? Have they
42
- 14 -
been printed?
MR. BELL: That is exactly what Vineland did, took
the applications and the banks issued the bonds the
next day.
H.M.JR: I would like to see it.
MR. ODEGARD: Mr. Secretary, the booths in New York
that we visited - that is the way they do it.
MR. GRAVES: You mean you would like to see the
application, the thing you fill out if you go into
8. post office or a bank?
H.M.JR: I would like to see what these retailers
are planning to do on the 17th when the people come in
and want to buy a bond. what are they going to do, take
& pledge?
MR. GAMBLE: They were anxious to learn - as a matter
of fact, it was because of that problem we asked the post
offices to stay open all day, so that they could direct
people to the post offices.
H.M.JR: Well, now, what have we accomplished today?
In the first place you are going to get for me, number
one, a list of the towns as fast as they come in.
MR. GAMBLE: That is correct.
H.M.JR: That is number one. Number two, you are
going to find out what the retailershave in mind as to
how they are going to handle the customers.
MR. GAMBLE: Yes.
H.M.JR: Is that right?
MR. GAMBLE: Yes.
H.M.JR: Number three, I take it Bell here is
going to - as fast as he gets the thing he will take
it up.
43
- 15 -
MR. BELL: We will find out how many agents we have
in that town.
H.M.JR: In the first place, how many, and how many
more you can get through the banks on consignment. Is
that right?
MR. BELL: Yes, sir.
H.M.JR: Any bright ideas, Bddie Bartelt?
MR. BARTELT: 1 should think that in every one of
these towns where there will be this celebration you
would have, possibly, an issuing agent, and I suppose
he could borrow bank personnel different places, to get
help to inscribe these bonds. It seems to me that it is
just a matter of designating somebody and putting the
responsibility on him.
MR. BELL: You mean in the town?
MR. GAMBLE: The issuing agent isn't always some-
body who can do it. You asked this question about Penny.
He might be an issuing agency to sell bonds to his own
employees; that doesn't mean they stock bonds in all
their stores.
MR. BARTELT: But there will be a bank in that town,
possibly, that has an issuing agent. Don't you think you
will be able to borrow his help?
MR. GAMBLE: I don't think that is any problem at
all. The problem is getting the blank bond stock to
the stores.
H.M.JR: Look, Ted, this is what these - I still
think this is something we oughtn't to overlook, that
Mr. Helvering has a little over three thousand income
tax examiners.
MR. GRAVES: Yes. The last I knew it was about
thirty-five hundred, maybe more than that.
44
- 16 -
H.M.JR: Thirty-five hundred.
MR. GRAVES: Internal Revenue Agents.
H.M.JR: They are all trained bookkeepers, aren't
they?
MR. GRAVES: Auditors and tax people.
H.M.JR: Supposing you took those fellows and simply
said, "Now, here are the towns where we would like you to
spend three days, Wednesday, Thursday, and Friday before
the 17th, making sure that these people - If and then be
there Saturday to see that the supply - that the post
office does stay open and that the bank cooperates. Get
four days out of those men, Wednesday, Thursday, and
Friday, three days getting ready, and Saturday, to be
there in that town. Get by this hump, and then continue
to work as hard as we can - get as many issuing agents
in the department stores on a regular basis.
MR. GAMBLE: I wasn't resisting that idea, Mr.
Secretary, I was just trying to maintain 8. point. I
don't think we have solved anything simply because you
say to a bank - you get the bank to say, Yes, I will
let the Smith Brothers Department Store have bonds,
bond stocks." Maybe the Smith Brothers don't want to
walk over to the bank and get this, and be under obliga-
tion to the bank for it.
H.M.JR: But, if you have a Treasury man there--
MR. GAMBLE: Irrespective of that, he may not want
to walk over there and feel that he is placed under
obligation to the bank. Maybe he is trying to negotiate
a loan with the bank.
H.M.JR: I suggest--
MR. GAMBLE: I think so, that the Federal Reserve
or the banks make this service available, not as a
responsibility to the bank, but as a responsibility to
the Federal Reserve and the Treasury.
Regraded Unclassified
45
- 17 -
H.M.JR: That is the long view of it, but you can't
do that between now and the 17th. The Federal Reserve,
the entire Federal Reserve System for the United States -
how many new ones do they do a week, a hundred and fifty,
something like that?
MR. BELL: Something like that.
MR. GAMBLE: I mean just the responsibility - we will
have to go through these same steps. There ought not to
be any relationship between the bank and the merchant.
H.M.JR: I still say I would have a Treasury man in
each town.
MR. GAMBLE: I am not opposing that.
MR. BELL: It seems to me after we get this list of
towns we should find out the agents. We ought to write
to each Federal Reserve Bank and give them the list and
ask them to be sure that there is plenty of stock of
bonds there on the 17th, first. Then we ought to have a
letter going to the agents telling them of the celebration -
they are liable to be swamped for bonds. We have asked
the Federal Reserve to contact - be sure they have plenty
of stock - ask them to cooperate with all of the local
stores; and if necessary, consign to them bonds for sale
in those stores and for them to urge them to accept that
responsibility.
MR. ODEGARD: I would assume, too, that the consignment--
MR. BELL: Ninety percent would do it, I believe.
MR. ODEGARD: The consignment of the bonds to the
stores by the banks would be done on application from
the stores. There would be no effort on the part of the
bank to tell anybody to do this, and that is the job of
the retailers to get these people to cooperate.
H.M.JR: I oughtn't to have to bother with this
stuff at all. I really oughtn't. I mean, this ought
to be thought out by the fiscal agency of the Government,
and I ought not to have it.
Regraded Unclassified
46
- 18 -
MR. BELL: I haven't known anything about it.
H.M.JR: What?
MR. BELL: I don't know anything about this.
H.M.JR: That is Harold Graves' - I mean, I spend
most of my time telling people in Harold Graves' shop
one thing and another. I do, Harold.
MR. BELL: I don't suppose Harold feels he had to
come and tell me what you were doing.
H.M.JR: I am not doing this. I passed this thing
out - how old is this?
MR. GRAVES: A little over a month since you had
Mr. Namm in.
H.M.JR: I got to worrying about it on Sunday,
feeling that the thing wasn't right. I was worried on
Sunday and called up Harold at nine-fifteen Sunday morn-
ing. Now, we spent thirty-five minutes going over stuff.
Now, looking at you (Graves) I oughtn't to have to touch--
MR. GRAVES: Well, I have this--
H.M.JR: That I oughtn't to have to touch.
MR. GRAVES: I have this feeling, that if you want
to get the most good out of this thing on the 17th--
H.M.JR: What the hell am I doing it for? I am
not doing it to amuse myself.
MR. GRAVES: We ought to concentrate on this propo-
sition of having as many stores as possible take checks
and money and formal applications for bonds, which would
be turned over to the bank to be executed. If you do
that, instead of having a maximum of a few thousand
stores that would be in this selling operation on the
17th you could have many stores in every one of these
Regraded Unclassified
47
- 19 -
communities in that operation. Otherwise, in a typical
case I suppose you would be apt to find just one store
in a town on the day of this big celebration where you
could go and pay your money and get delivery of the
bond. But if you push this application proposition, you
could have many stores in any one of these towns where
you could deliver your application with your check or your
money, the bond to be issued subsequently by our issuing
agent in that town.
H.M.JR: Is this the first day you have heard about
this?
MR. BELL: No, I heard about it a couple of days
before, but I haven't been in on it at all.
MR. ODEGARD: The question of issuing agents in
department stores and other retail places came up from
the very first discussion of defense savings a year ago
March or February, and we began with the job of trying
to get a maximum number of post offices qualified and a
maximum number of banks qualified. That job was not an
easy one; it took some months before we even got rid of
the collateral requirement in the banks. It isn't as
though nothing had been done on the job of multiplying
issuing agents.
H.M.JR: Peter--
MR. ODEGARD: We decided not--
H.M.JR: I sat in on that with one person after
another, the last being this man from Oregon downstairs.
I mean, I take each one of these things - the thing that
I am complaining about is I oughtn't to have to touch
this stuff.
MR. ODEGARD: I think that is right, but we had
moved in the direction of the more familiar issuing
agents, trying to get a maximum participation there before
We moved into less responsible agents where the job is a
little more difficult.
Regraded Unclassified
48
- 20 -
MR. GRAVES: Well, the point that I am making is
important, I think, that it would be a mistake to try
now, between now and the 17th, to have a lot of stores
put in the position where they could actually deliver
bonds over the counter. I don't think you will get any-
thing like the coverage that you ought to have.
I would like to see us go ahead, so far as the 17th
is concerned, in trying in every one of these communities
to get many stores interested in the proposition of selling
bonds in the way that they are being sold now, in many,
many places the operation being limited to the customer
giving his application with the money, which is turned
over to the issuing agent who issues the bond and mails
it to the purchaser. That we can do on a big scale,
Gamble, as I see it, between now and the 17th.
To do this other thing, to have stock on hand, I
think would turn out to be & very limited thing, one
place in a town perhaps, which would be very bad.
MR. ODEGARD: I think they are not mutually exclusive,
are they?
MR. GRAVES: No, no, you would go as far as you could
in getting stores qualified, by one formula or another,
to actually issue the bonds; but I wouldn't stop at that.
I don't think you need to stop at that. I think that most
people are satisfied to file their application with their
money and wait two or three days for delivery of their
bonds. That is very successfully done in a great many
places.
H.M.JR: Well, if it is so successful - well, anyway,
I am exhausted. I keep going up against 8. stone wall.
You run it - you do it your own way. I am just exhausted.
Every time I try to bring in some new idea, you just wear
me down. So you do it your own way, just the way you did
in New York City, and so forth and so on. I mean, here
sits Bell - this thing is & month old. It is his respon-
sibility down there - they don't even know anything about
it, and I have got to take all of this time. I mean,
I just cannot - I have got too many other things - I
Regraded Unclassified
49
- 21 -
can't - you fellows always just suck me dry. I pour out
ten different ideas on how to do this thing, but you
are just going to do it the same old way. Well, do it
your way. I mean, you just wear me down, and I can't be
bucking you fellows all the time. I mean you, Graves,
I can't do it all the time. I mean, he is here, he knows
the Treasury organization inside out. I offer you thirty-
five hundred people; I offer you the national bank examiners,
and all of these people, and you are just going to have a
person go in the store and then wait, the way they do at
the factories, five or six weeks until they get their
bond, when you are supposed to sell the bond - no wonder
we don't sell any bonds.
MR. ODEGARD: That wasn't what Mr. Graves was saying -
that we ought to try to get as many people qualified to
issue--
H.M.JR: Oh, Peter, for God's sake, why do we always
have to wait until the gun is at our head, and I have got
to sit here and argue and argue and argue on a plan that
is a month old, with regular Treasury personnel, civil
service, who know this business; and if they were told
today that the thing was conceived, in a month's time
they would have had a chance to work the thing out.
Instead of that, here it is the twenty-ninth of June,
and the regular Treasury organization people don't even
know about it and haven't had a chance - I mean, it is
inexcusable. The day it should have been brought in is
the day we asked the retailers, "We are going to have
the thing - here is Mr. Broughton and Mr. Kilby, please
go ahead and work it out." It is at least a month old.
MR. BELL: I still feel, Harold, we can work out
something along the lines--
H.M.JR: It is the same thing.
MR. GRAVES: I think SO.
H.M.JR: Nothing new, nothing thought out, nothing
in time, always wait until the last minute.
Regraded Unclassified
50
- 22 -
MR. BARTELT: Dan, in a--
H.M.JR: As a result, I am not going to make any
new suggestions, I am going to quit. I am not going to
make any because every time I make a suggestion I have
just got to wear myself out. I mean, I just got to wear
myself out. I mean, hanging on to the telephone, and
this thing, and that thing; and instead of saying, "Fine,
this is a good suggestion, let's consider this thing,
let's consider having a Treasury man in each town, you
say, "No, no, it won't work." Let's consider putting
them on direct from the Treasury on consignment." No
soap, but nobody else has got any suggestions.
MR. BELL: My worry about putting on the Treasury
people at this time is I do think the time is too short.
H.M.JR: That isn't my fault, Dan. That isn't my
fault. Mr. Namm came here - whatever the date was -
he sat in this office, and we went over this whole thing.
I had the man down from Vineland, and I asked Ted Gamble,
"Have you got too much to do? Can you take on anything
new?" I didn't want to give you anything new, and you
said, "Yes, I can take on something new, 80 I gave you
this thing to do. All I can do is to conceive the idea,
but the Secretary of the Treasury - I have got to get to
work on every two-by-four thing - I can't do it, I am
not going to do it.
MR. BELL: I mean as to the Internal Revenue agents,
they won't be much better off than a volunteer coming
in and issuing a bond; they don't know anything about it
at all.
MR. GAMBLE: Mr. Secretary,--
H.M.JR: Why don't you call the whole thing off?
MR. GAMBLE: I am just going to make a point.
MR. ODEGARD: No.
51
- 23 -
MR. GAMBLE: I don't think it is necessary to call
it off.
H.M.JR: Seems much better.
MR. GAMBLE: I think these people are much more
resourceful than you think they are. I am all for
expanding the issuing agencies, but if we weren't able
to do a thing for them - after all, we didn't do any-
thing for them in Vineland, New Jersey.
H.M.JR: No, because you had an exceptionally,
unusually able fellow - "small town boy makes good,"
advertising manager of Macy's, and other things - comes
back in a little town.
MR. GAMBLE: He didn't have as much to do with it
as Mr. Bell had to do with it.
H.M.JR: That isn't what you told me when you brought
him in.
MR. GRAVES: I brought Mr. Namm in here.
H.M.JR: I mean, to see me. Well, whoever it was,
I asked to see the man - I asked somebody - to see the
man who was responsible for Vineland, New Jersey, didn't
I? Then why sit here and tell--
MR. GAMBLE: I said he had nothing more to do with
the issuing of bonds, meaning in Vineland, New Jersey,
or the creation of any plans to issue bonds than Mr.
Bell had, and yet they sold six hundred thousand dollars
worth of bonds in that day. These merchants are going
to do a good job and pattern it all after Vineland, New
Jersey, without any change; but I am for the change.
H.M.JR: If I sat here and always relied on others
I would last as Secretary of the Treasury exactly one
minute. I haven't stayed here for eight years as Secretary
of the Treasury always leaning on somebody else as a crutch
and hoping to God he is going to do my work for me.
Regraded Unclassified
52
- 24 -
I mean, that isn't the way I sell my bonds and it isn't
the way I work. I mean, I am going into this thing on
my regular work; I have got this thing checked and triple
checked and double checked, and I have relied on the
civil service employees to see me through, and up to now
they have. But I can't just sit here and say, "Mr.
Benjamin Namm and the retail stores are going to do my
work for me."
MR. GAMBLE: I wasn't going to do that. How do you
suppose Mr. Bell happened to send this to the Federal
Reserve Banks to go to work on the retailers for July?
Because we wanted to qualify more retailers for July to
speed up this job and to help this job on the 17th. We
have a store right here now in Washington selling and
delivering twenty-two hundred dollars worth of E Bonds
every day - a department store, and we would, I think -
I don't know the answer - I think we can, all fifty-two--
H.M.JR: But the main stores - you are going to
sell less bonds in June than you did in May, and that
is the answer. What I try to do when I get a little
bit of energy stored up is to come down here and give
you fellows some new ideas. Well, I am not going to -
I mean, I have got so much energy to divide, and this
thing has been taking three-quarters of my energy, and
I can't get anywhere.
MR. GAMBLE: I would like to ask a simple question.
Why can't the Federal Reserve, at the request of the
Treasury, issue bonds to these fifty-two hundred impor-
tant stores in this country on consignment?
H.M.JR: But, Ted, why ask me that on the 29th
of June?
MR. GAMBLE: They don't need it before the 17th
of July, Mr. Secretary.
H.M.JR: Oh, you have seen how they work. I don't
know why.
Regraded Unclassified
53
- 25 -
MR. BELL: You can do it by putting out a public
debt obligation in the hands of the people. You haven't
got any good security, but we can take a chance on it.
MR. GAMBLE: Those particular stores, twelve hun-
dred of them--
H.M.JR: What was the suggestion?
MR. GAMBLE: Let the Federal Reserve, as a result
of a request of the Treasury, deliver blank bond stock
to these fifty-two hundred big stores in America, twelve
hundred of them leading department stores.
H.M.JR: That was my suggestion in the first place.
MR. GAMBLE: That is why I said--
H.M.JR: But that is the suggestion in the first
place, that I said this morning - I said to you yester-
day, didn't I--
MR. GRAVES: Yes.
H.M.JR: that I wanted to make it directly from
the Treasury? When I say the Treasury, I mean through
our fiscal agent, who acts for me and is paid by me,
the Federal Reserve, to stock these fellows up the way
you would with any other merchandise.
MR. GAMBLE: These are pretty responsible merchants;
the fifty-two hundred big ones are pretty responsible
people.
MR. BELL: They all belong to this association.
MR. GAMBLE: Yes, sir, twelve hundred of them are
big stores; four thousand of them are smaller organiza-
tions.
MR. BELL: Do we have to contact them to see if
they would accept them?
Unclassified
54
- 26 -
MR. GAMBLE: I think we can get the retailers to
contact them all, Mr. Bell.
MR. ODEGARD: The retailers ought to do that; that
is their job. You can't consign bonds to people who
don't want them and won't handle them.
H.M.JR: The thing that I am talking about here -
I made the suggestion - I can't remember who was in
the room - to Mr. Namm the day he came in here. I said,
"If you do that, the thing would be a great success - If
to consign - do you remember?
MR. GAMBLE: I wasn't here.
H.M.JR: Were you here?
MR. GRAVES: I was here.
H.M.JR: Do you remember?
MR. GRAVES: I don't - I wouldn't necessarily
remember.
H.M.JR: I did make it.
MR. BELL: We can try.
H.M.JR: What are you going to try?
MR.
BELL: ... to put them in the hands of all the
fifty-two hundred.
H.M.JR: From whom to whom?
MR. BELL: Federal Reserve Banks.
H.M.JR: To?
MR. BELL: The stores - big merchants.
H.M.JR: That was my suggestion. I didn't have
the fifty-two hundred, but I had the stores.
55
- 27 -
MR. GAMBLE: You would hit every important section
of the country.
H.M.JR: Then send somebody around, teach them how
to do it.
MR. BELL: There would be a bank in the community,
an agent that could tell them how to do it.
MR. ODEGARD: Do we know how many of these fifty-
two hundred agents are now selling bonds?
MR. GAMBLE: How many now selling?
H.M.JR: He said about a thousand.
MR. GAMBLE: That would be the top, that would be
the outside figure. It may be only three hundred.
H.M.JR: If you are going to do it, you haven't
got a day to lose. You know how long it takes.
MR. BELL: We will get it out tomorrow.
H.M.JR: What do you think, Kilby? You have been
very quiet.
MR. KILBY: I think it can be done, Mr. Secretary.
H.M.JR: What Gamble suggests?
MR. KILBY: I think two things, that in consigning
this stock to the stores we ought to have a pretty good
working arrangement with the Federals, and for the actual
issuance of the bonds I think that - my second point is
that there should be someone to instruct these stores
on exactly the form of registration for the bonds.
H.M.JR: Sure, but that takes time. Now, who are
you going to use?
MR. KILBY: Probably, as Mr. Bell suggests, the local
bank could take care of the stores.
56
- 28 -
MR. GAMBLE: That would be much faster than if we
used Treasury people.
H.M.JR: I should think from the bank standpoint
they would be tickled to death to throw the business
on the stores so they don't have this wealth of detail
on them. The little it takes to instruct - if I were a
bank and could get rid of the thing, knowing what was
coming that day, and you told me that I had to do this
thing, that the Treasury through the Federal Reserve
System is going to assign them, I would say, "My God,
if we don't have to go through that Saturday, thank
heavens.' So that, from the bank standpoint they
ought to be tickled to death to take a little time to
instruct somebody.
MR. BELL: We probably ought to write the banks at
the same time.
H.M.JR: You mean to say I am actually having my
own way?
MR. BELL: You are the senior partner. (Laughter)
H.M.JR: But why do I have to be so exhausted to
get this agreeable?
MR. BELL: Well, I hope there aren't many losses.
I hope there aren't many losses.
H.M.JR: I have still got my grievance, Mr. Graves.
Have you got any come-back?
MR. GRAVES: No.
H.M.JR: You know what my grievance is?
MR. GRAVES: Yes, I think you expressed yourself.
(Laughter)
MR. GAMBLE: May I say a word on that? You dumped
this on my lap about two weeks ago, and I have spent
two weeks trying to get the retailers organized. This
57
- 29 -
is after the decision has been made to hold these, and
our big problem has not been the part that we would nor-
mally have to play in an activity of this kind. Our big
job is to see that they were properly organized to do
the job themselves.
H.M.JR: Now, Ted, you are a very sweet fellow,
and you are trying to - here the thing - granted your
job is to do the retailers, but Harold is feeling fine -
he had a good game of golf yesterday, so it is all right,
but Harold is a civil servant, and he knows the Treasury,
and he knows that an idea man like yourself, salesman
like yourself, salesman like Odegard, and salesman like
myself - we guys have the idea, but that somebody has
got to do the mechanics, and therefore he has got Kilby
here who has nothing to do, between financing, and he
should say to you, "You have only been here a very short
time. Now, before you go any further, be sure that
brother Kilby knows all about it." Is that fair?
MR. GRAVES: That is fair.
H.M.JR: Is that fair?
MR. GRAVES: Yes.
H.M.JR: All right.
MR. ODEGARD: I think it is also fair - no, maybe
I had better not say it.
H.M.JR: Go ahead.
MR. ODEGARD: I was going to say that I think it
is also fair to say that when this proposition came up,
and it is much over a month old, Mr. Secretary - you
brought it up at least a year ago, or more - that when
it was first proposed I remember Mr. Bell and Mr. Kilby
saying, and I was inclined to agree with them, that we
ought not to move ahead in this field in multiplying
issuing agents in retail stores because of not only the
risk involved, but I remember Mr. Bell saying, and I say
58
- 30 -
again I am inclined to agree with him, that there is
something different in issuing a Government security
than selling a pair of socks. There is the integrity
of the instrument itself to consider. That doesn't
mean that we can't multiply issuing agents as fast
as we can find responsible people to do it, and to
do it right, but it does mean that the idea that you
cal sell Government bonds the same way that you sell
cigarettes or something else - I don't think that that
is right.
Now, maybe--
H.M.JR: You don't think we can do it?
MR. ODEGARD: I don't know whether we ought to
do it.
MR. BELL: You mean you shouldn't sell a public
debt obligation like we sell a piece of merchandise?
MR. ODEGARD: There is more responsibility in it
than that.
MR. BELL: Yes, I think we have got to be a little
careful; we have got to protect you, Mr. Secretary, as
the Secretary of the Treasury, in this.
MR. ODEGARD: I think the Public Debt people resisted
it. I just want that in the record.
H.M.JR: Which side are you on?
MR. ODEGARD: I am on your side - on your side.
H.M.JR: You are saying that these people resisted
it?
MR. GRAVES: We all were very slow to accept the
idea--
MR. BELL: I think that is fair. Let me tell you
a little story that happened in the last war.
59
- 31 -
H.M.JR: The fellow issued twice too many instead
of half too many, I know.
MR. BELL: Almost a near scandal.
H.M.JR: But the Government got too much money
instead of too little.
MR. BELL: We got a dollar for every security.
It looked on the record like we had issued a lot of
duplicate bonds.
H.M.JR: Name was Collins, was it?
MR. BELL: No, sir, Brewer. He had a nice time
for a while.
H.M.JR: He had issued twice too many.
MR. BELL: Five years with the investigating com-
mittees of Congress - I don't think you want to be put
in that position.
H.M.JR: But the Government got the money and
didn't lose a cent.
MR. BELL: That is right.
H.M.JR: You told me that one before.
MR. GRAVES: The most dangerous thing to me is
that the poor fellow who buys the bond may be in
trouble unless it is accurately registered and recorded.
H.M.JR: Well, I am willing to sign the piece of
paper to anybody that wants - I will take full respon-
sibility for this myself.
Now that we are through, do you want any more ideas
another time? (Laughter)
MR. GRAVES: Sure, we would love to have them.
60
- 32 -
H.M.JR: I would love to give them to you.
MR. BELL: Love to have them, but won't accept
them all. (Laughter)
H.M.JR: Now, who is going to pick this up?
MR. GRAVES: We will go into a huddle with Dan
right away.
H.M.JR: All right.
61
June 29, 1942.
5:12 p.m.
Randolph
Paul:
Hello.
HMJr:
Hello.
P:
Yeah.
HMJr:
Randolph?
P:
Yeah.
HMJr:
They said you wanted to talk to me.
P:
Well, that was before the press conference.
HMJr:
Oh. Well, I said nothing on taxes.
P:
Yeah. Well, here's what I wanted to talk
to you about, they - I thought it might
come up. We filed a debt memorandum - a
memorandum - an informal memorandum with
the Committee at their request in response
to a lot of - of questions about what we -
what relief we give for debt.
HMJr:
Yeah.
P:
It was just an informal memorandum, and I
agreed with the Committee that it shouldn't
be given to the press.
HMJr:
Yeah.
P:
We did not give it to the press, but the
Wall - but I was advised today that the Wall
Street Journal had a full copy of it.
HMJr:
Yeah.
P:
In fact, a little bit of it appeared in this
morning's paper - discussing the spendings
tax.
HMJr:
Yeah.
Regraded Unclassified
62
- 2 -
P:
So I was talking with Chic Schwarz and he
thought and I thought too that since the
Wall Street Journal had it I didn't think
it was fair not to give it to all the press.
HMJr:
Yeah.
P:
So I called Doughton and Cooper both, and
they agreed with that.
HMJr:
Yeah.
P:
But I was just afraid something would come
up in the conference before you knew about it.
That's the reason I called you and - not get-
ting you I got Chic right outside your door.
HMJr:
Okay. I'll be seeing you in the morning.
P:
Okay. Fine.
HMJr:
Thank you.
Checked
of
-
63
June 29, 1942.
5:29 p.m.
HMJr:
Hello.
Operator:
Mr. McCarty's not in his office. I'm trying to
locate him.
HMJr:
Thank you.
5:30 p.m.
HMJr:
Hello.
Operator:
Mr. McCarty. Go ahead.
HMJr:
Hello, Mr. McCarty.
Milburn
McCarty:
Oh yes, sir, Mr. Secretary.
HMJr:
Well, I've had about a half an hour battle
in your defense.
M:
I know that. I heard about it, sir. And I
certainly appreciate the way you're backing
me on this.
HMJr:
Well
M:
I'm only concerned that you and - bother you
or anyone else over there with it at all.
HMJr:
Well, it's my concern because after all I am
the boss.
M:
Yes, sir.
HMJr:
Let me ask you 8. question or two.
M:
All right.
HMJr:
Have you had any communication with your draft
board?
M:
We sent them, after I talked with Mr. Graves
and after I - I told Mr. Graves I would remain
here rather than to take the Navy commission,
why then Mr. Thompson filled out the draft
deferment blank and sent it to the draft board.
I've heard nothing from them since then at all.
Regraded Unclassified
64
- 2 -
HMJr:
Mr. Thompson sent it in?
M:
Yes, sir. You know, it was one of the
regular blanks which explained that I was
ready to take a Navy commission, that they
wanted me over there, but that in place of
doing that, that you wanted - or that the
Treasury wanted me to remain here, and that -
that's what I wanted to do.
HMJr:
Now will you wait a minute, because
Mr. Thompson's here. Let me ask him a
minute.
M:
All right, sir.
HMJr:
(Talks aside)
Mr. Thompson says he has no recollection of
that.
M:
Oh, well that was the regular blank which
is filled out to send - Mr. Graves took it
in to you, as I remember, and you o.k. 'd it.
I know - Mr. Callahan I think sent it over
to you or sent it over to Mr. Graves along
with the letter which was to go to Secretary
Knox from Mr. Thompson, and they were both,
I believe, signed at the same time and went
on in. Mr. Thompson handled both of them.
HMJr:
What does this blank ask for?
M:
Maybe I have a copy of it here.
HMJr:
Do you think
M:
It asked, as I remember - it filled out what
I was doing, and the fact that I was ready to
go into the Navy but that I was at a job here
which I was familiar with and a job which
involved publicity and advertising experience
which took a certain number of years to ac-
quire and that I'd built up my own department
and that we were moving into an intensified
part of the campaign, and that in place of
going to the Navy you wanted - or the Treasury
wanted me to stay here, and whether that was
supposed to be a deferment or not I forget.
Regraded Unclassified
65
- 3 -
HMJr:
Do you know how long it asked for deferment?
M:
Oh yes, I think six months. Because I think
that is the rule in cases like that. But
Mr. Thompson, I'm sure, would have a record
of it, because he was the one who handled it.
HMJr:
Have you any copy of it?
M:
I believe I do, sir.
HMJr:
How long will it take you to find it?
M:
It will take me about two minutes.
HMJr:
Well, supposing you find it and bring it over
here, will you?
M:
All right, sir, I'll do that and I'll come
right over with it.
HMJr:
Over to my office.
M:
All right, surely. Bye-bye.
Regraded Unclassified
66
June 29, 1942
5:35 p.m.
DEFERMENTS (Milburn McCarty, Jr.)
Present: Mr. Graves
Mr. Kuhn
Mr. Gaston
Mr. Thompson
Mr. McCarty
Mr. Schwarz
Mrs. Klotz
Miss Cullen
Miss Austin
H.M.JR: I was just working on the McCarty case.
MR. GRAVES: Ferdie was just saying--
MR. KUHN:
...
what has happened since I first saw
him.
MR. THOMPSON: My records here, Mr. Secretary,
show that on McCarty. (File handed to the Secretary.)
H.M.JR: This is what he says. I just called
him up. I decided I wouldn't be stupid about this
thing, and I asked him this question - I said, "Have
you had any communication with your draft board?"
He hesitated a minute. He says, "Only this - If he
said, "Mr. Graves asked Mr. Thompson to send in for
a six months' deferment, which you did, and you O.K.'d
it," which, if true, is a pretty kettle of fish.
MR. GRAVES: I think that is right.
MR. GASTON: He said that along with the request
of Knox there went a request to the draft board on the
regular form for six months' deferment.
MR. GRAVES: I think it was the other fellow,
Barrett.
Regraded Unclassified
67
- 2 -
MR. KUHN: Barrett was in on this thing, and
Barrett was classified as 3-A. My understanding was
that you had asked for a postponement of a commission
in the case of McCarty.
MR. GRAVES: Also in the case of Barrett.
MR. KUHN: Barrett later turned out to be not involved
in the draft.
MR. GRAVES: I think that is right. I think we
did ask for a deferment.
MR. GASTON: From the draft?
MR. KUHN: From the Navy.
MR. GASTON: The question is on the draft board.
H.M.JR: The story here - the story that has been
told me and the story I told the press was that we
asked the draft board, knowing the reason - he was such
a wonderful boy that he was willing to give up his
commission--
MR. GRAVES: That would be so even if we asked
for the six months' deferment.
H.M.JR: Yes, but I said I never asked for any
deferment - I. never asked for anybody in 1-A that I
can remember.
MR. KUHN: The only thing I knew about from Norman
and from McCarty was the postponement of the commission.
MR. THOMPSON: That is all my record shows there.
I don't have any record here of any--
H.M.JR: Who does these for you - I mean, what
girl does these for you?
MR. THOMPSON: Miss Cullen.
Regraded Unclassified
68
- 3 -
H.M.JR: Has she gone?
MR. THOMPSON: No. She is my secretary.
H.M.JR: Do you mind if I ask her in?
MR. THOMPSON: No.
MR. KUHN: Norman, wasn't there a letter a long
time ago sent over by Callahan requesting a deferment
for McCarty and Barrett, which was torn up because
the Secretary wouldn't approve it? It was long before
this case came up.
MR. THOMPSON: I don't recall that.
MR. KUHN: I sent it in to you, and you brought
it back.
H.M.JR: Well, let's get - when I ask for a
deferment, isn't there a record?
MR. THOMPSON: Yes, I have a complete record here
by offices. All I have here is this Melcher case that
you rejected the other day, and then the copies in the
Barrett, and in the--
(Miss Cullen entered the conference.)
H.M.JR: Miss Cullen, just sit down a minute.
We are trying to check your memory against the records.
What is your recollection - we are all puzzled here in
regard to Mr. McCarty and his draft, and so forth -
just from memory?
MISS CULLEN: That was the day I was away, and
Miss Austin was the one that handled that.
H.M.JR: Miss Austin? Is she in?
MR. THOMPSON: I had a substitute girl.
Doaradod
69
- 4 -
H.M.JR: Has she left?
MISS CULLEN: No, she is still here.
H.M.JR: Would you send her in?
MISS CULLEN: I was in New York that week end.
H.M.JR: So she handled it?
MISS CULLEN: Yes. There were two cases, McCarty
and the Ross case.
MR. KUHN: Ross Barrett.
MISS CULLEN: Yes, Ross Barrett.
H.M.JR: And she handled those?
MISS CULLEN: Both of those.
H.M.JR: Send her in. Tell her not to be frightened -
I am just trying to get her memory. He says he has a
copy of the request for the deferment. Do you think it
went through?
(Miss Cullen left the conference.)
MR. GRAVES: I think--
MR. THOMPSON: I don't keep copies of those requests.
You see, they are on these forms; and if they go forward
they are executed and sent forward, and then I have them
put on a record like that. That is the form; that is
the one we have for Melcher, which was disapproved. If
I executed that form, then it would be listed there.
H.M.JR: Doesn't the administrative man over in
War Bonds - doesn't he get in on this at all?
MR. GRAVES: He might. Shall I call him and ask
what he knows?
H.M.JR: Do it right from here. Do you mind if I
listen?
Regraded Unclassified
.
70
- 5 -
MR. GRAVES: No.
(Mr. Graves held a telephone conversation with Mr.
Charles Adams, as follows:
Checken
z.g. 71
June 29, 1942.
5:42 p.m.
Operator: Mr. Adams.
Harold
Graves:
Hello, Charlie.
Charles
Adams:
Yes, sir. How are you, sir?
G:
Fine, thank you. How are you?
A:
Very good, thanks.
G:
Charlie, do you remember whether we asked
Mr. McCarty's draft board for a six months'
deferment?
A:
No, sir, we didn't.
G:
We did not? Are you positive, Charlie?
A:
Yes, sir, as far as anything official is
concerned, Mr. Graves, I am absolutely posi-
tive on that unless it happened while I was
away, and I've checked on that and I under-
stand no.
G:
You checked with Mr. McDonald, I assume.
A:
That's right.
G:
Check again with Mr. McDonald and Mr. Sloan.
A:
I will.
G:
....and call me back as quick as you can.
A:
I'll call you back in just a minute.
G:
Thank you, Charlie.
A:
Okay, sir.
G:
Goodbye.
A:
Goodbye.
72
- 6 -
MR. KUHN: I don't think it ever went out.
H.M.JR: This would be a nice kettle of fish.
(Miss Austin entered the conference.)
H.M.JR: Can you remember what happened when Mr.
McCarty's application came in in connection with his
draft? They said you handled it on that day. We are
all kind of confused; did you handle it?
MISS AUSTIN: I know there was a letter prepared
for Mr. Thompson's signature for a Mr. McCarty and
somebody else.
H.M.JR: Ross Barrett?
MISS AUSTIN: That is right, and Mr. Thompson
was in here, I think; he came back and gave me a note
to mark "approved by the Secretary" and to send the
letter.
H.M.JR: Do you recall who the letter was to?
MISS AUSTIN: I think it was to Secretary Knox.
H.M.JR: Right. Now, did we do anything about
the draft board in connection with him?
MISS AUSTIN: We had a form forty-two, or forty-
two-A, I think it was. I know I helped fill that out
for Mr. Thompson's signature, and the back of that, I
believe--
H.M.JR: That went--
MISS AUSTIN: That went - I don't know what happened
there.
MR. THOMPSON: The procedure is, if I execute it,
it goes back to the originating office, which would be
Defense Savings.
73
- 7 -
MR. GASTON: There was such a one in the case of
McCarty, or the case of Barrett?
MISS AUSTIN: It was McCarty, I believe.
MR. THOMPSON: There are so many of these things
floating through.
MISS AUSTIN: I haven't seen the file.
MR. THOMPSON: I couldn't say whether I did or
didn't sign it.
H.M.JR: Look at the file. Wouldn't there be
some record in Mr. Thompson's office?
MISS AUSTIN: This is our file that we keep.
H.M.JR: What happens - supposing you had made
one out, what would be the procedure, Norman?
MR. THOMPSON: It would go to Miss Cullen, and they
make a record here and put it under the particular fellow
concerned.
H.M.JR: Would it go back to War Savings?
MR. GRAVES: You mean, leave no record here?
MR. THOMPSON: No record other than just a type-
written record that I had executed that.
H.M.JR: I mean, would it go back to War Savings?
MR. THOMPSON: It would go back to War Savings.
H.M.JR: And from War Savings where?
MR. THOMPSON: It would go to the individual, Mr.
McCarty, and he would mail it in.
H.M.JR: Wouldn't the chances be that Mr. Adams over
there would have some record?
Regraded Unclassified
74
- 8 -
MR. THOMPSON: Yes, it would go from us to him.
MR. GRAVES: Normally he would, I think. There
is a chance these might have been - I remember it
was a matter of hours almost.
MR. THOMPSON: Remember, you came in with the
papers to me.
MR. GRAVES: Those were the letters to the Secretary
of War and the Secretary of Navy?
MR. THOMPSON: To sign two letters and the form.
I can't swear to it; I may have signed it, or I may
not.
MISS AUSTIN: There was a form in one of those
cases to go in to Mr. Graves' office. I don't know
whether it was McCarty's or Barrett's.
MR. GRAVES: Let me ask my people if they have a
record of it. Do you have the date or approximate
date?
MR. THOMPSON: May 1st.
(Mr. Graves left the conference temporarily.)
(The Secretary held a telephone conversation with
Mr. Charles Adams as follows:)
Chicke
288
75
June 29, 1942.
5:46 p.m.
HMJr:
Hello.
Operator:
Mr. Adams.
HMJr:
Hello.
Charles
Adams:
Mr. Secretary?
HMJr:
Yes.
A:
Mr. Graves asked me to call....
HMJr:
I know, he's just - I'd like to know - but
he just stepped out. What have you found
out?
A:
No, sir, we did not.
HMJr:
Did not?
A:
I've - I've checked with Mr. McDonald in the
personnel division. Mr. Sloan has gone, but
I am positive, Mr. Secretary, that we did
not.
HMJr:
Well now, here's the thing. I don't know if
you know about all this mix-up about this man.
A:
Yes, sir, I do.
HMJr:
Well, he just made a statement to me a few
minutes ago - McCarty - that we did ask for
six months' deferment.
A:
We did?
HMJr:
That's what he claims.
A:
Well, Mr. Secretary, there must be some mistake
on it. I'll certainly check it down further,
but
HMJr:
Well, this - this woman reporter is coming in
at ten-thirty tomorrow morning, and I've told
her that she could face McCarty and me.
A:
Yes, sir.
76
- 2 -
HMJr:
Now McCarty claims we asked for six months'
deferment.
A:
Well, Mr. Secretary, I think there must be
some mistake on that, but of course it would
have come through my office or Mr. Sloan's.
Now he's not here. As I said, I haven't been
able to see him. But there's nothing that
was ever in my file except that letter that
was written to the Secretary of the Navy.
HMJr:
Well, that's the position I took at my press
conference today, and she and I had it hot
and heavy for twenty minutes.
A:
I see.
HMJr:
And I took the position that we didn't ask the
draft board for anything for this boy.
A:
Well, I think you're absolutely right, Mr.
Secretary, and as I said, I will certainly
check this in detail and I will call
Mr. Graves and let him know the first thing
in the morning.
HMJr:
Now just a minute. I want you to tell what
you told me to Mr. Graves. I'll have you
switched.
A:
All right, sir.
HMJr:
But what time does Sloan come down in the
morning?
A:
Well, I thought that what I would do - I don't -
imagine he's on the way home now but I would
call him tonight and check this again with him.
HMJr:
Yeah.
A:
If I don't I'll get him the first thing in the
morning. He comes down early, Mr. Secretary.
HMJr:
Just a moment, please.
A:
All right, sir.
Regraded Unclassified
77
- 3 -
Operator: Operator.
HMJr:
Will you give Mr. Adams to Mr. Graves, who's
in his own office?
Operator: Yes, indeed.
HMJr:
Thank you.
Operator: All right.
78
- 9 -
(Mr. McCarty entered the conference.)
H.M.JR: Now what have you got, McCarty, on this
thing?
MR. McCARTY: I looked this up. I am glad we
have a good filing system over there.
(Mr. McCarty handed copy of draft deferment request
to the Secretary.)
MR. McCARTY: Here it is, sir.
MR. THOMPSON: I remember Harold brought the
papers in to sign.
H.M.JR: We have got it here, Harold.
MR. GRAVES: Have you?
H.M.JR: Yes. Look-- (Examining deferment request)
MR. GRAVES: All of us are on there.
H.M.JR: Yes. Isn't that Norman?
MR. GRAVES: That is Norman.
H.M.JR: And there is me.
MR. GRAVES: There is me.
MR. McCARTY: I particularly read the initials of
yours (The Secretary) because it was the first time I
had ever seen them.
MR. THOMPSON: My office, due to Miss Cullen being
away--
MR. GRAVES: I recollect the discussions that we
had about it, and that was part of our understanding,
that that would be done.
79
- 10 -
MR. McCARTY: Our main concern at the time, I
remember - mine was letting the Navy down. I had
told them I would come, I had put in my papers, and
I had said, "Yes, I am ready to go, and they had to
have a slip which released me from here. I got my
superior, Mr. Callahan, to sign that, and so that was
my concern at the time - what the Navy would think,
would I be completely on the black list, and all, and
this was just a part of it which was routine.
MR. GRAVES: Do you remember whether you brought
that to me personally, or did somebody bring it?
MR. McCARTY: Mr. Callahan might have brought it
to you or even sent it to you, because, remember, in
that office that morning we talked about this, and then
you asked me if I would stay, and I said, "Yes, I will."
You said, "We need to do two things, one with the Navy
and the other is to find out what these blanks are.
Someone had seen them around. Someone got that for me
and gave it to me.
H.M.JR: Can you tell how long we asked for?
MR. THOMPSON: We asked for six months.
MR. GRAVES: Where was this document?
MR. McCARTY: It was in my files. This is a
rough, of course. Now Mr. Callahan may have changed
that, or Mr. Graves might have, I don't know. Mr.
Callahan put it together, though, and we kept a rough
draft of it.
MR. GASTON: The original went to the draft board,
didn't it?
MR. McCARTY: Yes, sir, the original which was--
MR. GASTON: Who sent it, Mr. Adams?
MR. McCARTY: No, it was sent back to me, and I
mailed it.
Regraded Unclassified
80
- 11 -
MR. GASTON: You mailed it yourself?
MR. Mc CARTY: I mailed it myself; it was sent
back to me with the seal on, with the signature and
all.
MR. GASTON: It wouldn't go to Adams in Personnel
in War Savings at all?
MR. McCARTY: No, it was sent to me.
H.M.JR: I don't know how it ever got by me.
This is the only 1-A I have ever done. Do you mind
waiting outside a minute, please?
(Mr. McCarty left the conference.)
H.M.JR: I don't see how it ever got by me.
Somebody must have high-pressured me. I never would
ask for a deferment on this thing.
MR. THOMPSON: It was probably on the basis of
having asked for the postponement of the commission,
that this would go along with that.
MR. GRAVES: The two things hung together. Here
was this boy on the verge of having two things happen
to him. He had a commission almost in his pocket; I
think it was delivered to him, wasn't it, the next day?
He also was within a short time of being reached in the
draft, and he wanted to stay on our work. There would
certainly have been no point in killing that commission
and letting the draft thing go because he would have
been reached within a few days. If one thing was to be
done, they both would have had to be done, in order to--
H.M.JR: Yes, but it is unfortunate. Well now,
Ferdie, you talked to the boy - did he tell you this
had happened?
MR. KUHN: All I had heard was that this was not
a question of draft deferment; it was a question of
81
- 12 -
the deferment of a commission. That was Norman's
understanding, too, wasn't it? You remember I came
in to see you.
MR. THOMPSON: Unfortunately Miss Cullen was
away.
H.M.JR: Yes, but before you saw this reporter,
didn't you interview McCarty?
MR. KUHN: Sure, I talked to him, and he talked
in terms of this commission.
H.M.JR: Did he tell you he had had a deferment?
MR. KUHN: No, or I wouldn't have said that it
was not a draft deferment matter at all.
H.M.JR: I called him up myself and asked him.
I called him up myself.
MR. KUHN: I don't think he was trying to conceal -
we were discussing the Naval commission at that time.
H.M.JR: Yes, but--
MRS. KLOTZ: You didn't have the files.
H.M.JR:
... in preparing this stuff and every-
thing else, you didn't do a very good repertorial job
in interviewing him.
MR. KUHN: Well, I took it from what had been
said to me that this was not a draft deferment matter.
H.M.JR: But where did you get that, Ferdie?
MR. KUHN: I went to Norman about it.
MR. THOMPSON: I talked to McCarty yesterday.
82
- 13 -
MR. KUHN: We looked up the record, what you
had in your files.
MR. THOMPSON: I had a girl from the pool that
day, and it just--
H.M.JR: Well, don't feel sick about it; we are
all human. I mean, don't let it upset you.
MR. THOMPSON: It is the one case that shouldn't
have happened.
H.M.JR: Don't let it upset you; we all make
mistakes, so relax. After all, you have got to make
a mistake, too; otherwise you would be having wings.
MR. THOMPSON: It is the worst case to have it
happen on.
H.M.JR: Don't take it too hard.
What made you come back?
MRS. KLOTZ: Well, I came back - I passed through,
and they said you were still here, so I came in. I
felt something went wrong or you wouldn't be here.
H.M.JR: I just thought - I was going to ask this
boy, because this woman--
MR. THOMPSON: I talked to McCarty yesterday and
asked him what his draft status was. He said he had
an original A-1 and he hadn't heard anything further
from the board.
MR. KUHN: He didn't say anything about it?
MR. THOMPSON: So far as he was concerned, he
was subject to draft. He had no notice from the board;
83
- 14 -
apparently he has had no word from the board that he
has been deferred.
MRS. KLOTZ: Is this an indefinite deferment?
MR. THOMPSON: No, six months.
H.M.JR: To show you - we just spoke to Adams,
who is the administrative man over at War Savings,
and he said that there was no request - there was
none.
MRS. KLOTZ: I don't understand how you O.K.'d
it.
H.M.JR: I don't either; it is the only one that
I have ever done.
MR. GASTON: It didn't go back to the man - it
should have gone to the man in Personnel in Savings.
It went directly to McCarty.
H.M.JR: It is unbelievable.
MR. GASTON: You had better catch up with that
press conference as quick as you can.
MRS. KLOTZ: Ibet-that is April--
H.M.JR: 4/30.
MR. GASTON: I think we had better catch up with
that press conference - the people who were at the
press conference, and tell them that.
84
- 15 -
H.M.JR: Tell Chick Schwarz to come down. I hope
he is still there.
MR. KUHN: When was the letter written to Knox?
MR. GRAVES: About that day that--
H.M.JR: Have you got that letter? It is April 29.
I think in decency to that woman I ought to call
her up myself.
MR. GASTON: Yes, I think SO.
H.M.JR: What is her name?
MR. GASTON: Before she writes anything tonight
for tomorrow, you know.
MR. KUHN: Martha Strayer.
H.M.JR: We are in a nice pickle if we find we
have asked for a deferment on this McCarty.
MR. GASTON: Better catch up with the rest of
them, too, if you can.
H.M.JR: When did you see this woman?
MR. KUHN: Last week, about Thursday.
H.M.JR: I can't understand why somebody didn't
ask the boy himself. I called him up. I said, "Any
communication between you?" He said, "Yes, there was
a deferment."
(The Secretary held a telephone conversation
with Miss Strayer, as follows:)
85
June 29, 1942.
6:00 p.m.
HMJr:
Hello.
Operator:
Miss Strayer.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Miss Strayer.
Martha
Strayer:
Yes, Mr. Secretary.
HMJr:
This is Henry Morgenthau.
S:
Yes.
HMJr:
Miss Strayer, I find that I was misinformed
and, therefore, I've misinformed you. Hello.
S:
Yes.
HMJr:
The Treasury did ask for a six months - I -
we - I can't find out in the records, but at
least we did ask for a deferment for McCarty.
I don't know whether it was three months or
six months. I've been unable to find out.
S:
Uh huh.
HMJr:
But we did ask for a deferment, and I wanted
to tell you that personally.
S:
Uh huh. Well, I appreciate your calling,
Mr. Morgenthau.
HMJr:
And I've just found it out this second.
S:
Uh huh.
HMJr:
....and....
S:
Well, as I told you, Mr. Morgenthau, we have
nothing against Mr. McCarty; we feel very
strongly about the draft; we are - we were
certainly misled, and by Mr. McCarty himself,
as to the situation.
86
- 2 -
HMJr:
Well, I've just begun to go into it myself.
I mean up to the time that I saw you, I - I
did not, and I've been going into it and I
now find that we did ask for it, and as far
as feeling strong about the draft is con-
cerned, I don't think anybody feels any
stronger about it than I do.
S:
Well, so I've heard about you, Mr. Morgenthau.
HMJr:
Pardon?
S:
So I have always heard about you.
HMJr:
And - our records show that in the whole time
since we've had the draft we've had thirteen
cases - fifteen cases. Hello.
S:
Yes.
HMJr:
And how many are there out now? (Talks aside)
Seven of the fifteen are outstanding. Hello.
S:
Yes.
HMJr:
So that's for the whole 80,000 employees.
But none of them have been asked for beyond
six months.
S:
Well, we were told positively that no - there
was no question of deferment involved, and we were
told that - both sources of information - although
it did not - and as I happened to know how the
draft functions, I've followed it right from the
first, I know that when a case comes up for occu-
pational deferment, somebody has requested it and
the - the request has been supported by the
employer because.
HMJr:
Well
S:
if it's otherwise, it's not considered.
HMJr:
Well, the Treasury did ask for it, and as -
the minute I found out I wanted to let you
know myself, but....
S:
Well, of course
HMJr:
You're not
87
- 3 -
S:
Well, of course it doesn't quite overcome
the things you said about our paper at that
press conference.
HMJr:
Pardon?
S:
It does not make up for the things you said
about our paper at that press conference.
HMJr:
That's true. I think I owe you an apology.
Do you want me to write one?
S:
Well, I really do think you owe us an apology,
Mr. Morgenthau. We are not, as I have tried
to make it plain - Mr. McCarty - McCarty means
nothing to us
HMJr:
Yeah.
S:
.... and we - in the one case when we thought
it was supported by facts, we simply abandoned
it and dropped it. But we do feel that this
thing needs some policing. We have felt
right along, and when we hear of a. case which
we think is not justified, we are quite willing
to go to battle on it and we do not
HMJr:
Well, would it
S:
make statements of the kind that Mr. McCarty
laid to us.
HMJr:
Yeah, well would it be agreeable to you if I - -
if I do it at my next press conference?
S:
Yes, it would be very nice if you did it at
the next press conference.
HMJr:
Well, I'll be very glad to do it because I'm
only human and I've got to depend upon other
people, and as soon as I went into it myself
I found that I had been misinformed. But if
you'll come to the next press conference, I
assure you I'll make you a graceful apology.
S:
And that will be when, Mr. Morgenthau?
HMJr:
Thursday morning at ten-thirty.
Regraded Unclassified
88
- 4 -
S:
And in the meanwhile 1s the thing tomorrow
with Mr. McCarty off?
HMJr:
Ah
S:
I assure you that every statement I have made
was made to me.
HMJr:
Yes - I haven't finished going into this, but
I just - just learned it this second 80 I
wanted to call you, and I'm going to tell the
other newspaper men who were here
S:
Uh huh.
HMJr:
Hello.
S:
Yes.
HMJr:
that I was wrong.
S:
Well, I shall certainly appreciate that, Mr.
Secretary.
HMJr:
And I tell you, would you mind doing this, call-
ing up at ten tomorrow morning?
S:
Yes, I'll be glad to.
HMJr:
And I'll let you know whether it's on or off.
S:
Okay.
HMJr:
Thank you.
S:
And thank you.
Regraded Unclassified
89
- 16 -
H.M.JR: You had better get busy and tell them
that I was misinformed, and that we did ask for a -
we might as well go out on the end of & limb and say
six months. We certainly didn't ask for more than
six months.
MR. THOMPSON: You can't ask for more.
MR. SCHWARZ: Do the records show the date? If
it was very recent that might ameliorate the situation.
MR. KUHN: April.
H.M.JR: No, I would say what I said to her, that I
was misinformed, and I find that we did ask for a
deferment at the same time we wrote to Secretary Knox,
and I was misinformed.
MRS. KLOTZ: Why did he turn down the commission?
That is what I don't understand.
H.M.JR: The thing takes on an entirely different
light. ne would only postpone the commission if we
would ask for a deferment, which makes the thing entirely
different, and how I ever happened to fall into this trap
I don't know.
MR. SCHWARZ: If you will excuse me, I think I
ought to catch those boys.
H.M.JR: Go on. But somebody - as I say, I must have
been weak-minded that day, soft-brained.
MRS.KLOTZ: That must have been, Mr. Morgenthau,
in the very beginning.
H.M.JR: No, this is--
MRS. KLOTZ: April.
MR. GASTON: You probably signed that thinking it
was a part of the same thing, that is, completing the
deal with the Navy.
90
- 17 -
H.M.JR: Graves is on here, Norman is on here. Why
we didn't have a meeting - why you (Gaston) weren't
here I don't know. Was there a rush about it or something?
MR. GRAVES: There was.
MR. THOMPSON: Yes, Mr. Graves came in to me with
papers on Barrett's and McCarty's cases.
MR. GRAVES: The boys had their commissions. I
think actually they were delivered to them the next day -
it was that close a thing - from the War and Navy Depart-
ments, that is, Barrett in the War Department and McCarty
in the Navy. They both were to be assigned to work much
less important in those departments than they were doing
here, but of the same kind.
MR. KUHN: War Savings work?
MR. GRAVES: I think so, and it seemed--
H.M.JR: Well, the fact remains that a thirty-year-
old boy, 1-A, shouldn't be here in War Bonds. Now, what
are we going to do about it? He should be in the Army.
I mean, that is the long and the short of it.
MR. GRAVES: He probably ought to be in the Army
with a gun and not with a pen.
H.M.JR: That I can't help, but I would like to write
a letter to the draft board and simply say to Local
Board Number 14, 331 Madison Avenue - I would like to get
a letter off and simply say that inadvertently, or some-
thing or other, this request was made. I would like to
withdraw it.
MR. GRAVES: If we do this, in my opinion we ought
also to go to the Secretary of the Navy.
MR. GASTON: Yes, you would have to do that.
MR. GRAVES: And explain to him just what has happened,
because this boy, I am convinced, has acted in perfectly
good faith throughout, and certainly we did deprive him
Regraded Unclassified
91
- 18 -
of an opportunity to get a commission, that he gave up.
H.M.JR: Well, Harold, in my whole life - on the
draft I have never made a bargain with anybody. Gawd,
I have been through this thing - I don't want to mention
any names - with 8 lot of other people, who have told
me again and again, "If you will ask for a deferment,
I will stay here" - holding a pistol to my head - "And
if you won't I am going to take a commission." I have
said, "Go ahead and take a commission." You have heard
me rant on this thing over and over again.
MR. GRAVES: Well, I agree with that. All I was
saying, to be fair, if we write to the draft board
we ought to go to the Navy Department.
H.M.JR: There is another way to handle it. Let
him go over tomorrow morning and try to get into the
Navy; then I don't have to do anything.
MR. GRAVES: Well, it was we who asked the Navy
to withhold his commission.
H.M.JR: I got that thing - Gawd, look at my -
I haven't had such an argument at my press conference
in my whole history. I was going on the assumption
that - what a grand boy, he should be complimented,
here he was willing to take his chances of being
drafted and voluntarily gave up his commission and he
may be drafted tomorrow, and I said he should be compli-
mented instead of being censured.
MR. GRAVES: I think that is true, except that
he will be drafted four months from now instead of
tomorrow.
H.M.JR: Except that he drove a bargain and I have
refused to bargain with anybody.
MR. GRAVES: No, I don't think he drove a bargain.
H.M.JR: Well, anyway, Harold, this is the only
case of its kind that exists, unless there are some
92
- 19 -
others that I don't know about.
MR. GRAVES: No, the boy didn't drive a bargain.
H.M.JR: Again, Norman, I don't want to be - when
this anonymous letter came in I gave it to you, you
see, and I told Harold about it, and somebody over in
War Bonds knows that this boy has been deferred.
MR. GRAVES: Callahan, probably.
H.M.JR: But I mean this woman who is writing these
anonymous letters to Tydings and me, she knew. But in
getting the thing ready for me a poor job was done.
Norman's secretary wasn't there the day it happened,
you see, SO he has had no record about how I ever signed
that.
MRS. KLOTZ: I remember it sort of vaguely, that
it was one of the first ones that he did.
(The Secretary left the conference temporarily.)
MRS. KLOTZ: Now, I don't know, you look back on your
record and you will find it was in the very, very be-
ginning.
MR. KUHN: Mrs. Klotz, it was done very soon after
the interdepartmental agreement was made, about six
months - before that the Secretary had done none at all.
MRS. KLOTZ: That is right. I remember the name
as being one of the first ones. After that he be-
came more hard-boiled as time went on. We didn't
give any.
MR. KUHN: I didn't remember this as a draft
thing. I thought it was a commission thing.
MRS. KLOTZ: At that time--
MR. KUHN: I didn't remember there was a request to
any draft board.
93
- 20 -
MRS. KLOTZ: Yes, we wouldn't have done it for
a commission at the time.
MR. KUHN: The letter is there asking for a post-
ponement.
MRS. KLOTZ: Yes, to the Secretary of the Navy,
MR. KUHN: I remember that Callahan and all the
rest of us were very anxious to keep McCarty at the
time, but I thought of it as a commission - that the
Navy was about to grab this boy.
MR. GRAVES: Of course that is the way it was,
Ferdie, the draft thing was secondary and in the back-
ground. If we hadn't done anything the boy would now
be in the Navy.
MR. KUHN: McCarty got this notification from his
draft board saying he must be ready at such and such
a time. lie didn't then come around and ask for a defer-
ment. It was the Navy thing that prompted it.
MRS. KLOTZ: He really didn't do anything.
MR. KUHN: No.
H.M.JR: Would this be fair to this boy, because
he has got lousy publicity - could I suggest to him
that tomorrow morning he walk over to the Navy and
try to get his commission and go in?
MR. GASTON: I would give him a letter.
MRS. KLOTZ: Why do you have to do it?
H.M.JR: Well, but then I don't have to write his
draft board or anything else.
MR. GASTON: You would have to withdraw your re-
quest to Knox for his deferment of his accepting a
commission, wouldn't you?
Regraded Unclassified
94
- 21 -
MR. GRAVES: I think that some official in the
Treasury ought to explain to whoever it is or er there
what happened in this case, exactly what has happened,
so that - I mean, because if McCarty goes over there
on his own he may be told, "Apparently something is
wrong about this and we don't want you."
H.M.JR: Well, would you and Norman be willing,
the two of you, to go over?
MR. THOMPSON: I think we ought to see Commander
Hayes over there in Knox's office.
H.M.JR: Norman handled it. If you and Norman will
go over there, provided that he is willing--
MR. GRAVES: Yes, of course.
H.M.JR: Because the thing I am afraid of now is
the Navy won't take him.
MR. GRAVES: So am I. I would hate to have that
happen.
H.M.JR: Well, I think that that is the first thing
to do, if he is willing, but then if that is the case
we don't have to do anything about it.
MR. GRAVES: That is right.
MR. THOMPSON: I think that is the thing to do; we
could see Commander Hayes the first thing in the morning.
H.M.JR: You have got to ask his permission.
MRS. KLOTZ: I don't know what else he would want -
he would be thrilled to death.
H.M.JR: Gosh, this was handled badly.
MR. GRAVES: I can take this up, if you would like
95
- 22 -
me to, with Mr. McCarty.
H.M.JR: No, no, Listen, papa is going to handle
it. It has been messed badly now, and I had better
handle it.
You see, this is what you said, Ferdie.
MR. KUHN: About not being--
H.M.JR: "Verification on the military side came
from Mr. Kuhn, assistant to Mr. Morgenthau.
"No draft deferment is involved,' he emphasized.
'It is true Mr. McCarty was going in the Navy. Oh, no,
he didn't apply. They wanted to give a commission
because of his valuable work here. But because the
bond program is going into its biggest phase now and it
would be hard to replace him immediately, Mr. Morgenthau
asked that the commission be held up for the time.'
"The News found Mr. McCarty's draft board to ascertain
Mr. McCarty's draft status from the official record. This
is the reply:
"Milburn McCarty," and so forth.
"According to the Selective Service headquarters,
mcCarty's file is now up before the Occupational
Deferment Division, where it is being considered. This
consideration usually takes two or three days, and no
material is allowed to be released until the division
makes its report."
I will have him in.
(Discussion off the record)
(Mr. McCarty entered the conference.)
H.M.JR: Sit down, McCarty. I called up this woman
reporter and told her that I had been misinformed and
96
- 23 -
that the Treasury had asked for a deferment for you.
MR. McCARTY: You told her this afternoon?
H.M.JR: I just told her before--
MR. KUHN: We told her before that no question
of draft deferment was involved, that this was a commission
affair, as I told you on the phone.
MR. McCARTY: I didn't know that.
H.M.JR: What didn't you know?
MR. McCARTY: I didn't know what you - I was a little -
when you (Kuhn) talked to me this afternoon and I asked
you what I should say tomorrow morning when we met, and
all, I realized that we weren't quite getting together.
I didn't understand. You said there wouldn't be any
problem, that there wasn't anything in the draft about
it, and I was puzzled about it. You didn't know at all,
sir, that the deferment had been O.K.'d?
H.M.JR: Well, Norman, you talk up.
MR. THOMPSON: No. My records, unfortunately, didn't
show the picture. This thing had gone back to your office
and you got it instead of it being in my files. I keep
all these approvals in my file.
MR. McCARTY: Because I was sure the other day,
when you, Mr. Kuhn - when I talked to you and you had
just seen Mr. Thompson and you said you had all the
papers, you had checked up on it and all, so I thought
you had the whole story then.
H.M.JR: Well, I can't tell the press an untruth.
MR. McCARTY: No, certainly not.
H.M.JR: So, therefore, I called her up and told
97
- 24 -
her that I was in error and that the Treasury had asked
for a deferment. Schwarz went to tell the other people,
because the only paper we have got is the paper which you
have just given me.
MR. McCARTY: That is the only one you have?
MR. THOMPSON: That is the only record.
MR. McCARTY: I thought all of you knew all of the
time that that other had gone through because of course
it came over and was O.K.'d.
H.M.JR: The initials are all on it. We all should
have known it.
MR. McCARTY: And someone gave it back to me and
told me to hold it, 80 I put this in the file with those
other letters, the one that went to the Secretary of
the Navy and the one that came back. When you asked me this
afternoon about this I had it looked up and pulled it out.
H.M.JR: Even Mr. Adams over in War Bonds swore
up and down to me two minutes ago that we had not asked
for 8. deferment - swore up and down.
MR. McCARTY: I thought all of you knew it all the
time.
MR. THOMPSON: It seems to me when those letters
were signed you came back to me with this other paper,
which had been O.K'd, to get this signed, and this was
part of it and I signed it.
MR. GRAVES: I think it was a subsequent transaction.
That is my reaction, Norman, that the two letters weren't
done at one time. The draft deferment was a little later.
H.M.JR: This is my suggestion to you, and you sleep
over it. You see - come in tomorrow morning and talk
with Mr. Graves about it the first thing in the morning.
My suggestion to you, in view of this very unfortunate
98
- 25 -
publicity, for your sake, is that you let Mr. Thompson
and Mr. Graves go over tomorrow morning to the office
of the Secretary of the Navy and suggest that they
swear you in on this commission.
MR. McCARTY: Lay me in on it?
H.M.JR: Swear you in, take you into the Navy.
MR. McCARTY: I don't like to be looking for a
commission - if it comes up after this publicity -
when I finished reading the article today I was 80
mad and I said, "I wish I had taken the commission
before if I am going to have something like this now,"
and I was saying to myself, "Well, if this is going to
happen again, if it will be recurring at all I am going
out and enlist. I don't want a commission. I don't want
to be here where the Treasury has to bother about it
and has to worry about things like this." But I said
then, "I have got to realize I am in the Government
here and I am in a fish bowl and people are going to
be taking cracks at me once in a while, and I ain going
to be tough-skinned about it and just not let it bother
me any more than I can help."
H.M.JR: You see, when I got this anonymous letter
from somebody in War Bonds, a copy of what--
MR. McCARTY: You got one too?
H.M.JR: She sent me a copy of what she sent to
Tydings and I turned it over to Norman Thompson that
day, and I felt right straight along - she sent me what
she sent to Senator Tydings, then this man Riley ran
something about it, and I have felt right straight along
that the situation was that you postponed taking your
commission and was taking your chances with the draft
board. There was no one around here, connected with me,
that knew there had been this deferment until I called you
on the phone a few minutes ago.
MR. McCARTY: I thought every one of you knew it
because that was one of the things that had to be done,
and when you told me, Ferdie, you had just seen
99
- 26 -
Mr. Thompson and gotten all the papers and you had
the information, I thought it was O.K.
Then I knew Mr. Kuhn came to see you. I thought,
"The Secretary is reminded of it 80 they have. all the
papers and know what the situation is." I had no idea
you were going to tell the press there was no defer-
ment.
MR. KUHN: Mac, remember that I also consulted with
you immediately after seeing Martha Strayer the first
time. I told you what I had told her and I also con-
sulted you this morning about what was going to be
said at the press conference, and then again afterwards
I told you what the Secretary had said, and you never told
me that a draft deferment had been requested.
MR. McCARTY: I thought you knew it all the time,
and I realized there were one or two things said - you
said, "You needn't worry about that." Well, I wondered
why because of course my commission was all ready, I
was ready to go over, and it was just - it was telling
the draft board, and that I wasn't going to take it be-
cause the Treasury wanted me to stay here, and I didn't
know that all of you didn't know that.
H.M.JR: You see, Kuhn - in this article she quotes
Kuhn, in which she says that--
MR. KUHN: There was no draft deferment involved.
H.M.JR: Yes.
MR. THOMPSON: That is what I had told you. I
checked my records and had Charlie Adams.over and
went over the Tydings letter with him. He told me
there was no deferment, which confirmed what my records
showed.
MR. McCARTY: It was at the time that the draft
deferment wasn't an important part of it. It was either
the Navy or the Treasury for me.
100
- 27 -
H.M.JR: Did you read this article?
MR. McCARTY: I read it, yes, sir.
H.M.JR: When it said no draft deferment was in-
volved, quoting Kuhn, you see--
MR. McCARTY: She mixed up so many things in it.
She said I was given a going-away party, which was one
thing I was disappointed at, too, because I never got
one. But she twisted my remarks around.
H.M.JR: I can see, knowing that you had the defer-
ment you would have a perfect right to think everybody
knew it.
MR. McCARTY: I mean with O.K.'s, your initials, and
when Mr. Kuhn went in to talk to Mr. Thompson and said,
"I have all your papers." - because the draft deferment
at the time was something that was just a routine; it
was either the Navy or the Treasury for me. I was ready
to go to the Navy and Mr. Graves asked me if, in place
of accepting this commission - I was going to be due
within a week - if I wouldn't, in place of that, take my
chances, because after you - this was only for six
months and I could have gone right into the Navy and it
was a very fine commission and all. He said, "Would you,
in place of that, remain here?" I said, "Yes, sir."
H.M.JR: Well, what has happened is this - we have
the responsibility because these men asked you to stay.
MR. GRAVES: That is right.
H.M.JR: So we all have a responsibility towards
you. Certainly the last thing I want to do is be a part
of any plot or any program which would hurt you, but I
think what you should do is to sleep on the thing, you
see, and then in the morning come in and have a talk
with Mr. Graves and Mr. Thompson and then let them
advise you. If you want to see me, talk to me. In the
meantime I don't see any sense in our seeing this Miss
Strayer.
101
- 28 -
MR. GASTON: There is no point to that conference
now.
H.M.JR: I don't see any point in that but you had
better sleep on the thing, see any friend you have to
talk to about it - but we have a responsibility toward
McCarty.
MR. GRAVES: That is right.
H.M.JR: And we have got to see it through. The
War Bonds people asked him to stay on, and he could
have gone through and taken this commission.
MR. GRAVES: I think that I may have specifically
asked Mr. McCarty myself if he would stay on the con-
ditions that are involved.
H.M.JR: You did what?
MR. GRAVES: I think I may have asked Mr. McCarty
to remain on the conditions of the arrangement that
we actually worked out, requesting six months' deferment
and asking the Navy Department to withhold the commission.
Mr. McCarty then was to take his chances on the draft
at the expiration of that six months. I assumed that it
meant at the end of six months he would be drafted.
I assimed he would be.
H.M.JR: Well, you sleep on it, and you talk with
Mr. Graves, and if you want to see me tomorrow I am
available, if you want to ask my advice.
MR. McCARTY: All right, sir, because the way I
feel right now I wouldn't want to run to the Navy and
look for a commission. I don't like to run from this
publicity either - I mean, people are taking cracks at
people in Washington all the time and it is unfortunate,
and I am unlucky to have gotten this this afternoon.
H.M.JR: Well, you got it in the newspapers, you
see, and I thought - when I saw it I went to bat the way
I haven't any time before - I never had such a row as
102
- 29 -
I had here in the Treasury. You read my press conference
notes. And I kept saying that you should be complimented,
because there had been no deferment, that this story was
untrue, and God knows what else I said.
Now, she demands an apology from me to the newspapers,
which I have got to give her. I have got to apologize
to her publicly - no joy, but that is very unimportant.
¹our life is at stake, and we have got to help you on this
thing. We have got you into this.
MR. McCARTY: Well, it is al 80 important to the
Treasury, too, that I cause as little disruption in
the War Bond effort as possible because things like
these aren't good.
H.M.JR: Well, it is your own life. You sleep
on it and you talk with Graves, and any time tomorrow
you would like to talk to me you let me know. I an
available.
MR. McCARTY: Thank you very much, Mr. Secretary.
103
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Press Service
Monday, June 29, 1942.
No. 32-22
Secretary of the Treasury Morgenthau today announced the
final subscription and allotment figures with respect to the
current offering of 5/8 percent Treasury Certificates of Indebted-
ness of Series A-1943.
Subscriptions and allotments were divided among the several
Federal Reserve Districts and the Treasury as follows:
Federal Reserve
Total Subscrip-
Total Subscrip-
District
tions Received
tions Allotted
Boston
$ 176,940,000
$ 90,177,000
New York
1,456,264,000
731,525,000
Philadelphia
120,489,000
61,832,000
Cleveland
168,022,000
86,448,000
Richmond
82,255,000
43,124,000
Atlanta
111,939,000
57,601,000
Chicago
477,261,000
246,067,000
St. Louis
96,925,000
51,435,000
Minneapolis
49,819,000
27,992,000
Kansas City
81,697,000
43,218,000
Dallas
89,884,000
46,612,000
San Francisco
202,434,000
102,189,000
Treasury
550,000
275,000
TOTAL
$3,114,479,000
$1,588,495,000
-o00-
Regraded Unclassified
The Secretary 104
TREASURY BILLS
July 1
June 24
June 17
June 10
Amount offered
$ 300M
$ 300 M
$ 300 M
$ 300 M
Bids tendered
671
710
801
690
Low rate
o 2
.275%
0
.297%
High rate
.368%
.368
.368%
.372
Average rate
.360
.362
.365
.367
Amount in New York
$ 200M
$ 157 M
$ 151 M
$ 144 M
Amount in Chicago
34
79
23
55
Amount in San Francisco
12
13
16
20
Amount in balance of
country
54
51
110
81
$10,000 bid at 99.975; next low rate 0.277%
2/
$1,000,000 bid at 99.991; next low rate 0.237%
BWB
June 29, 1942
Regraded Unclassified
105
Treasury Department
Office of the Under Secretary
Date: 6/30/42
From: To: The Secretary
oT he information you
asked Mr. Folger to yet
up for you. R take it That
it is not required now.
awns
106
June 29, 1942
No. of
No. of
No. of
District
Headquarters
Examiners
Assistants
Clerks
1
Boston
713
37
13
2
New York
35
77
18
3
Philadelphia
20
47
13
4
Cleveland
16
31
9
5
Richmond
14
22
12
6
Atlanta
12
31
4
7
Chicago
25
66
14
8
St. Louis
13
23
9
9
Minneapolis
11
19
8
10
Kansas City
16
28
10
11
Dallas
13
30
7
12
San Francisco
34
49
12
222
460
129
SUMMARY
National Bank Examiners
222
Assistant National Bank Examiners 460 682
Clerks
129
811
Regraded Unclassified
107
Number of State Bank Examiners in each State as of March, 1942.
*******
Alabama
5
Nebraska
11
Arizona
2
Nevada
1
Arkansas
8
New Hampshire
7
California
13
New Jersey
27
Colorado
5
New Mexico
1
Connecticut
29
New York
155
Delaware
2
North Carolina
8
Florida
8
North Dakota
10
Georgia
6
Ohio
36
Idaho
2
Oklahoma
8
Illinois
26
Oregon
3
Indiana
19
Pennsylvania
63
Iowa
16
Rhode Island
4
Kansas
13
South Carolina
7.
Kentucky
10
South Dakota
4
Louisiana
8
Tennessee
6
Maine
12
Texas
15
Maryland
20
Utah
5
Massachusetts
80
Vermont
3
Michigan
25
Virginia
13
Minnesota
16
Washington
4
Mississippi
7
West Virginia
5
Missouri
14
Wisconsin
18
Montana
3
Wyoming
2
765
108
First Federal Reserve District
Maine, Vermont, New Hampshire,
Boston, Massachusetts
Massachusetts, Connecticut, Rhode Island
Second Federal Reserve District
New York
New York, N. Y.
Third Federal Reserve District
Pennsylvania, New Jersey, Delaware
Philadelphia, Pennsylvania
Fourth Federal Reserve District
Ohio
Cleveland, Ohio
Fifth Federal Reserve District
North Carolina, South Carolina, Maryland,
Richmond, Virginia
Virginia, West Virginia, District of
Columbia
Sixth Federal Reserve District
Georgia, Tennessee, Alabama, Florida,
Atlanta, Georgia
Mississippi, Louisiana
Seventh Federal Reserve District
Illinois, Iowa, Wisconsin, Michigan,
Chicago, Illinois
Indiana
Eighth Federal Reserve District
Missouri, Kentucky, Arkansas
St. Louis, Missouri
Ninth Federal Reserve District
Minnesota, North Dakota, South Dakota,
Minneapolis, Minnesota
Montana
Tenth Federal Reserve District
Kansas, Nebraska, Colorado, Wyoming
Kansas City, Missouri
Eleventh Federal Reserve District
Texas, New Mexico, Oklahoma
Dallas, Texas
Twelfth Federal Reserve District
California, Oregon, Washington, Idaho,
San Francisco, California
Utah, Arizona, Nevada
109
June 29, 1942
I telephoned Harold Graves on Sunday, June 28th, a.m.
Suggested on July 17th that $25.00 bonds actually be on sale
in stores. In the small stores, put in our own Treasury
personnel. Asked for report Monday.
As an afterthought, maybe better send 8. man into the
retail stores.
Regraded Unclassified
110
REPEATING
HARRIET ELLIOTT, NEW CHIEF OF THE WOMEN'S SECTION OF THE
TREASURY'S WAR SAGINGS STAFF, TODAY CALLED ON WOMEN TO HELP WIN THE
WAR AND HOLD DOWN INFLATION BY BUYING WAR SAVINGS STAMPS AND BONDS.
HOUSEWIVES, FACTORY WORKERS AND ALL OTHER WOMEN, SHE SAID, NOT ONLY
CAN AID IN ACHIEVING THESE OBJECTIVES BUT ALSO "CAN COLLECT A NEST EGG
FOR THE POST-WAR PERIOD" BY PURCHASING BONDS AND STAMPS.
BROUGHT BACK TO WASHINGTON THIS WEEK TO HELP SELL THE WAR SECURITIES
TO WOMEN, MISS ELLIOTT TOLD REPORTERS WHO INTERVIEWED HER SHE WAS
"GLAD TO HELP IN WAR SERVICE.' SHE SAID SHE HOPES TO STIMULATE
ACTIVITIES OF THE WOMEN'S DIVISION BECAUSE THE TREASURY DEPARTMENT
"FEELS THAT WOMEN CAN DO A LOT MORE THAN THEY HAVE BEEN GIVEN THE
OPPORTUNITY TO DO.
6/29--R1104A
END REPEAT
Regraded Unclassified
>
111
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 29, 1942
TO
Secretary Morgenthau's files
FROM
Ferdinand Kuhn, Jr.
Private Richard Litton, who wrote the winning
verses of our song contest, is now an American
citizen as 8. result of your intervention. This
clears his way to becoming an officer.
F.K.
112
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 29, 1942
TO
Secretary Morgenthau
FROM
Ferdinand Kuhn, Jr.
I think you will be interested in this telegram
from Palmer Hoyt in Portland, Oregon, regarding the
visit of our war heroes.
"War heroes of greatest help to us here in Bond
drive. We credit their arrival with sale of
$1,905,000 worth of Bonds of all types. Parade
staged here generally conceded to be most
spectacular in history of city drew crowd of
250,000 to 350,000. More than 15,000 people
turned out for night event despite unseasonable
weather believe cumulative value in direct sales
will run into additional millions. Our staff
places highest value on entire enterprise which
was capably handled your end."
Mr. Gilchrest, our Treasury man with the tour, tells
me that Ensign Mason inducted a thousand Navy recruits
at the rally in Portland and arroused terrific enthusiasm.
The attached pages of the Salt Lake Tribune will show
you how the heroes are making themselves Bond salesmen.
A direct selling job is done at all rallies, and in Denver
a corps of girls sold stamps and took applications for
bonds among the audience during the rally.
7.1c.
Regraded Unclassified
Reys
The Weather
Densil Petterborg,
The Salt Lake Tribune
For Beit Lais dity end
us
charge
.
Bank Clerk:
- . at Lake City
- important
"Amrrise planet fight
legres. to
Bummei Help United
-
by beying bonds.
Val. 145, Nu. 71
Salt Lake City, Unit. Wednesday Marning, June 21. 1912
Price Five Cents
Throngs Hail
Doughty Fighting Men Draw Wave on Wave of Applause
Nazis Force
U.S. Raids Leave
War Heroes
Russ Back
In L. Visit
At Kharkov
Axis' Libyan
Parade, Stadium
Reds Stiffen
Stronghold Afire
Crowds Cheer
Sevastopol
is Fighting Men
Defense Lines
Reinforcements Reach British Army
MsM. Labort
Bassies-(Official)
In Egypt as Big American
mind
-
Br Associated From
a.
maring
Bombers Deal Damage to Bengasi
MORDOW June S4
Amarican and Birtlinh est
paund - German offre
I nummer
the
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the
from
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Fresh and continuing were reaching like Britte
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-
Allention
is
Causes
it
-
-
Price Mosister Charchill galied is
pictores
gainway
the
and written of
Bonds, Stamps
bete
that
the
en
the
that
with
AND
United Ristes and Perish esperts
all
if
-
fulling
-
-
their
en missing " unter in um base
-
-
musting
the
united
estimes
in
the
bille
the
-
their
spring
plus if - attrasive artis.
at
dimocratic
liber's
the
bettle
solud
Give is the Arms
drimim
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sum
18
sua
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properations
to
-
Nerm
-
et
7.9
M
Unre
-
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Three
wast
be
pm.
And We'll Win,
lls The tipen Rater
M
pie
all costs. regardism
when In rebirts of comple.
Pay
baief
a
-
his
Losse
and
amtion
-
at
(any: the santie for Egypt propir
Say Fighting Men
Miler
Ins
or
.
and
E
est.
but
2004
1
Brite
declared
Blate
desperate - of the tanks are
may - I -
the
the sentral firestia and ene
par and nes they - in the
-
a
et
the
- - have Insured that Fear
half
and
made
-
in et the Aning tax
heur Intest of
=
- - intential to le Leile
.
if
-
as
hop
tradized in immediate
for Devid Limit
THE M Explain
best
"
-
to
the
pirit:
there
su
e
the
emisma
End Winiertis et Arthie Green-
when
#
-
sitered
Tursday
sipil
st
the
to - is and down the -
Innest if sintace Investon be-
that
Minday
use
listed
soil
heren rally - University if the
Russant
time Ma Britas line in
:
tell
you
station by the the Anerias and
Germas
tenks
-
transplates
Details
frus the General -
the
in
bet
minds
" the of
n Brind fighters comprising the
actif vehicles und - MRI
They the reportion is
inrge
in
Crete,
Insuring
America
is
the
is trest Unes the are,
Family stated.
debails
which
resits
Memor, the Britus prom
is
the
air
who
-
if
war
I
at
In the Natio for Reventapol the
land
and
the
prime
information
return
from
nete that enti-
-
#
the
-
homies
the
tattle
Cri-
bite
States
en
Manual last and air relatione
-
The
and
their
-
attitimed
after
ret
for
I
They
en
-
I
-
then
la
almo-
mente wille arriving is Africa sell
suities
une
have
threw
General
M
e
These
?
will
de pintge to simille -
their
Donald F. of New
- First -
-
alle of Eggt failed - alamy
York
-
this
the
parti
in
the
end
the
other
primissary
statement
she
no
asthering
patrical
etern
is
/
-
Rice
I
end
are
airther
et
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is
Regland
Invergment
en
partiame(-
The
auf
the
pm
have
pin
deputs,
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of Churchel's - parte
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Mach
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and
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New
retter
payment
the
- pulling . - la -
-
billind
the
be
IN
1
I
divn
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Third Blasting
of
what
in the prime
- - of the freet
lie
,
of
the
arrimis
of time was - be -
First-
- the
- Inim the United
-
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come
We Air
It's
-
-
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and
By Britons
.
---
evident
that
the
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Denna Netter
minded
to
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NP
las
(plinted
plane
is
day.
dross stock - Chemkire -
The n A. - is Calm
Themas and elempa .
-
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Fight
1
mid
Wrecks Emden
of
the
was
--
ministre
L
Declared that The Unitud Ristin
duty.
/
"Laimitir" which have
the
Germant
are
instrue
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F
I
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that
fullure
that
will
your
ketp
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blast
Bell take City and Vish turent net Tomalay la
" the University of Date is shows
fame
la
seguio
expline
est
the el Delde
-
and
the
pasce
peace
in
with
--
will
knep
Use
-
est
of
Germany
13 Anterica - Being because with
la the photo: imm. . - of the
injurtments will the judgement at
and the Datan mattie Dest Word
e
N.
Hanting
Antine
Gen-
through adverts which were
By described Prose
georgale the Teld
is en Burday signts PARTY NIF
I
I
said
sew
action
-
Om
the
perside
and
selebration
address
-
the
many!
AM
-
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get
the
many
deeda
If
the
si.
the
-
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Greup CHIP
- the ME - equaly pert et
That
of
The
Werld
ner
1.
A
part
- - of specialers.
D-Tis
at
Runday sipt. liere -
and the equipment
EREF and
Turnis providings pora
- from bright firm
--- beyind contingent deted to
SAM Lake Cty have benime
this war is . -
part
of
was
-
will
partif
way
-
what
-
Names
- - and rellares withings and
Pus
officer
Taylor
in
HAVE,
E
returned
bis
fatilité
at
the
relly.
in
House Approves Vast Bill
OPA Imposes
-
L
-
private
salled
ship piere evented
ingreders - evidenced by agent
.
explaine
- granent cabinet critis -
The
niete
any
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da
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pers.
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TUP
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by
the
F
the
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M
55%
1
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i
came hipe 13 hiravy
a
est
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were
England
Demember
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supper
I
is
will
Labo
City
Ceilings on
PAR name M de offentive M -
em
resulting
of
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parte and
-
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application.
it
:
IN
you
get
For U.S. Armv Equipment
trial
-
By
your
-
-
-
invoice
of
Inc with them the threet at -
Charre
1
Service Prices
I
-
I
his
-
party
Imm
bill-
proting ettain, comunt
U-baste participating in the ettal
END
the
harrity Reties en
Greeted with transforme dere
Name Beseral
WASHINGTON,
Pre
15
Insped
MAINE
Lattle
-
was
-
un
I
There
1
poste sear the Carpties frielder
the and - of restelli furing
Careell warren Mor
MI
WASHINGTONE - -
-
-
-
-
as
I
that
Tuesday se American bembre
the atreet perside and again with
Calpin
-
-
to
nine
Mina
in
all
history
-
export
-
allen
-
---
many
-
Per
juiced the - to the frant vo
at the raily the war-
German
-
-
in
give
the
United
distro
the
and
-
-
18
i
I
5
Hall
-
M
Ener
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Daily
paid - the exte NO-
-
scripted
their
fullows
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There
ato
are
!
Utah
lerve
a
to
Der
-
the
-
-
Telephone
1
Marring
Pul
FY has as
expline and vound again -
the
return
bigs
1a
sad
air
----
-
-
of explaine - -
-
frie
the
depairs nies by 48 Am-
again that "$5 the armed forms
tell
-
-
!
-
-
sur
was
sight
and
-
the
time
prive
The
minetry
MIA
-
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altre
the
fail
EWINE Press with
-
.
equipment
your
was
war
Not
Reserve
the
-
The
seld
-
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the
this
-
forma
-
nise
the
for
bonds and stamps will case -
nei -
The
cale
use
-
for
-
please
-
The
-
-
TMAIL
any
-
For
matter
lies
under
Dub
hand
in
.
the
miled
July
4,
:
-
-
hubresed
Ing
Times
taginet
Insured suits under Treatey the -
all
all
-
ein
the
- - the equipment end
-
in
of
to
1
To
maré
of
Order
Pull
E
valte
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provide
Allim
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in
too
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The
under
of
THE
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his
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last
the
sig-nipe
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TMP
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Amount
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of
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report
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treat lie the Into
staing the steporer in MIT
Willess
Boyd
t
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the
Themas
i
Cattlemen Ask
-
I
the
ADDRES
send
Lake Qty in tesir of - Amer-
(partingsted is mil - Genia
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fine
formed
INIMER
-
--
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ngares - May
large Ferras
less min surgices of the
1
I
-
Deriti EFFERIAM
-
-
-
.
-
United States treatment -
the ser - THE winds the -
passage
Price Relief
-
F
If
der
(WYYE
-
Senate Hastens
There - - Indication when IM
bettie
will
Γ
-
No
the
-
and
the
se
will
get
the
and
the
for
people
-
the
T
for
American
DEP
F
a
Divise
illi
DATE
Nam
as
sach
WASHINGTON,
Just
-
Big Navy Bill
email
-
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divient
J.
the
hape
i
use
in
HOME
-
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part et MM amind foreig greated
to
be
and
The derke al -
moving
the
el
for Divise - 4M
Lieutenst - W.
(whis
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be
MA
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situd
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extres
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this Cridett am the No
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reid
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mit
Harver
Atrives
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the
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The billing Hark. is end
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commended
Bullitt Takes Over Navy Post
-
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nevel
affaire
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the United fiste fivere and the
tenant Grorge a Walsh and b.
Voice Hape
MB
the
vundre
per
the
protest
a à F leaned - Proday night,
surv Prentit Prom.
Juno During Nethin
Surgeant II. CHARGE -
aptimation
-
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"Des
:
dark
=
all
I
à
other
any
the
It A. tender:
I
I
to
-
-
As Special Assistant to Knox
-
-
after
Mr.
left air - mine fires in 203
west
if
below
a
Fax:
end
win
is
HA
Cared Warren nember
1
cus
tim
will - by chief Admini
resume damage to PRIMAY
of the Third American tagic
Bus Chief Asks
bright
Out
Print
-
Have
Ville
of
and es pers the "
are
of
this
E
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py
to
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said
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:
Fram
MAYS
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was
grant Meewell niesender Del
Rested POS Officer 1. F. Tagine
Cut in Travel
is
vistary.)
of
e
I
-
The mary nic
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in
people
-
A francios of the
Representative
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charlage
Service of the Navy Frish
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$
the
visa
the
Albert
Ame-
Engel
is
-
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Limiment Themas William New
(R).
ktintigan,
I
-
-
that
the
il
è
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is
all
Ins call and the Into
-
BAN FRANCISCO June n en
Times
E
William
e.
Instits
-
righting
ima
is
the
too
na Literators, est) last THE
Chief Artificer Herry
I
unal
Burgennt B. M. Huntley Bergeant
W. visa president.
-
new
the
live
Clised
E
for
(Mill
E
9
-
April - - -
- am restination
-
the
accest
-
to
- fin to - -
R. George Harbert, Wing Code
at Partie Bet Line
spest
for
all
puper
-
the
-
inter,
food
end
,
Name
EYES
:
-
essiment
in
the
-
end
other - if the Italian may
mander M. Leuise and Lindrest
Tuesta? assed the poble for
first
130
yesrs
,
its
the
18.
-
1
of
the
may
and
with
-
intle HM -
wight
into
-
-
-
your committee entirely.
Main Fines Wall
M
-
situa
Twetay
-
elles
1, Michael Hall
-
Artion
Bel
to
This twice before wasing any
be
added
Time
...
almost
and
daties
at
Mr
salid
I
-
Denit
Air esta registed India
Heren
-
sitp."
-
enting:
Part
this
derivery
granted
Auto
a
the
for
-
apental
-
!
é
mering 17 adout 11 miss - of
if
The
-
-
"
the
Captato Design
-
initiary
of
the
-
-
from
-
e
pour
tiges
The
of the finance brin, im the main elrength
Claimed States -
No
said
of
LAW
2
-
affice
trans
primply
after
F
-
MATER
tax
the
line
AM
of
lie
-
per
mais.
Have
-
information
any
-
SARE
la
H
-
-
the
-
aggress
"
MM
"M> Bullit, presi repre-
the
-
-
in
the
Ceral
$
atill - M miles
form.
all
:
the
I
be
ampt.
-
relly
b/wdy
the
regulations
and
may
-----
-
commities
M
extative of the persident of the
at
-
is
the
---
Alextines
-
a
Kining patente at - aldes
-
-
-
fords - base - - the
-
seeds
or
-
end
I
-
Maiss
with
the
that
et
-
the
airplane
-
provind the ben services of
that
met
- members a the -
name
-
-
-
*ffice
-
i
Regraded Unclassified
Pert - , William -
-
-
-
peal.
I
-
I
One
Address
-
effective Tomilay
2
-
-
Form
Telnesday Morning
The Salt Cake Tribune
amera Catches Highlights of City's Welcome to Warriors
Kings Denaid F. Mason greets cheering from Major
Ah deskins' "Name Miteer" la parade of Ameri-
- and Briths was berom.
and Brish haroes give - spirit a an to Sall
No, Carrell Warren 4.
Bertert and Miss Losis Taglor, airlines Essines et "hrewe
Lake City. Print TOP, left to right, Ensign Donald F.
Michael Itall, Limitemant George 5. Websh. Limitement
nother" for the group. Underset Thereas William Beyd
Name, Easign Francis Pinter, 2014 Other A.F. Taylor,
Vanderanter dr., Squadros Lester John Dame
was about who picture - taken. The group will leave
Fisht Regist Marwell Airegober the NAME THE
emit, National clief Arthor - Harry Neward, IL Gestge
M.
Carrithare
I I I 1
Community M. Leuden, Sergent 9. N, Muntley. Besond
Any American - to further the was bund drive
The var
made the day any-
thing - dell for the
-
alon at Hotel Ptak,
- raile
Inm admiring Halk
Lake "gost
far
the
Beit-
fighting
in " right,
Mrs. Lorraine
Nitle
Mrs. Gladys
Married
Ogien entivation degal police salag down Main street las parade
ralle for - boad buying - - frunt. This
girls any - for was Nine Serone La Was la Halt Baker, Lake
Bchramm, Mini Virginis Miss Darlene Name
honoring 7- - whose beroism - fighting trais
⑉ - af the parado's highlights,
City No Marjorie parals. Johnson, Mine Pully Jane Mine Beliy
Brading
slockwist,
Miss Marge Nusia, to our erst, Miss Gloris -
wa, and Nine Doruthy Consingham,
HINE
A - army lines Malt take City le par
la - shinting clamples of . Fighting frass army.
116
Morning
The Salt Cake Tribune
Jane 24, 1912
arade Puts
Get First Hand News of Fighting Son
15 War Heroes
Visiting Warriors Accept S.L. Plaudits
unds Into
Get Rousing
Ovation in S.L.
With Cryptic Line of Duty'
ar Coffers
an
at
:
-
1
-
-
the
Parade and Stadion
-
is
end
-
Stizens Flock
Through Acelaim
-
against
the
-
a Booths
Allied Warriors
-
S. I. Beauties Win
Mayie
-
:
E
Sall
-
in
the
Get Stamps
has Page Hast
Hero's Praise
Hetel
Utah
et
is
I
hereby
i
beief
AND
-
took
i
*)
enkance
the
mair
the
western
master
of
the
MIFFES
1
the
U.
after
exteding
the
--
they
-
-
-
No
the
a
IF
the
the
:
-
%
STATE
-
the
and
Labo
City:
halt
2
by
IM
-
i
Segulation
givis.
trade
-
dierae
the
1
I
of
The
5
-
better
the
De
-
affaire
at
Others
-
here
cus
Tracy
-
of
the
:
address,
-
the
1
the
the
Utah
-
of
has
the
-
the
thester
-
the
by
is
siding
the
berries
tour;
the
Major
AN
Mr.
Key
first
problems
of
e
the
and
IL
#.
Prett.
afficer
as
Pert Degin
Walks
Q
time
of
Use
et
Vision
who
could
from
the
"
HISTORY
lale
to
is
e
the
in
-
cay
Only
Use
MAKING
SALE
o
MEXO
a
is
of
of
termes
Salt
air
and
the
-
-
be
provil
is
Carroll
Warres
McColpls,
benefit
o
Men's Quality
pretty
will
mespettion."
Mr.
and
Nrs.
Brig-
nisk
Flight
Chesiry
R.
(No)
Use
ham of Nantaquis, left and right,
Primas
:
of
the
distingsives
the
of
devisred
after
areting
Flight
Limitement
figing
with
up
the
bented
is
WORK
P. Old Timers
Heroes Dodge
Parents of Noted Flier
-
the
7
©
plean evening
Outing
Well-Wishers
Praise Visiting Heroes
his
of
the
wer
SHOES
and
o
-
please
I
the
the
i
and many times wartby of the avatina Did
City:
and
earn.
drive!"
of
and
America
-
-
-
the
war
time
G)
I
-
Mr.
-
Mrs.
Brigin
E
Bantaquir,
sing
the
the
of
-
287
-
of
Fitght
Chring
of
the
First
interpred
throughout
all
&
the
American
Kagin
apared
No
of
williers
AND
e
I
and
Regularly
HEAR
for
Or
is
Visites
paid
:
Ensign
Drisk
$4.35
Lake
grint
la
Must
I
is
Drile
and
senk
á
their
Birtin
Be
1
I
Olarion
lets
DA
The
at
©
and
the
If
I
-
.
the
I
the
Malt
Labre
filer - -
time
HEARING AID
tax
any
Displayed
par
is
Cumil
the
is
of the
OTARION OF SALT LAST
Lingiment
for
111 Mulature
delivered
-
the
bind
x
-
M
et
is
and
-
T
Hair
special
1
et-
fin
stadium
sed
Both
-
The
Salt
Lake
the
o
la
SAI
the
Me
Ulan
-
of
and
paint
E
TM
1
what
bonds
the
y
than
MEET THE PEOPLE
3dr.
air
field
VUL-CORK
edded
to
of
Tranps
NOT
York
i
true
me
D
SAFETY SOLES
o
MUST
Unit
-
*
will
E
-
-
-
the
of
Utal
WHO
Will Not Mar or Scratch Flooral
consent
-
of
the
if
-
-
Creditor
Lagino
and
et
the
Will Not Slip on Oily Surfacest
MISS THE BUS!
BAR
for
-
time
to
the
unt
non
war
R
the
that
the
set.
in
firt,
1
vitie
when
-
MM
I
grester
efforts
-
e
-
-
5
I
for
Me
Mrs
at
Drowning Victim's
1
Auf
at
è
-
Rites Set Today
-
Wyw - Family
MEET
GINEL
e
Where can you buy the best in comfort end wear. as we
of
1
Mrs.
Warriors Urge
3
Le
will
low price? Check Home features then you'll know why thousands
for
THE MEMBERS OF VITAL
-
of men choose Wants work shoes. The uppers are of top grain
5
does
MEET
AUTHORT ARMS, RID
MEET
Bond Buying
will
the
plus
o
Insther. Elk-tanned for plishility, genuine Goodyear
.
à
the
CROSS WORKIES AND
La
Deign
HOM
wells: heavy leatler mantings: girmet tongues all this plus
TMI
DEFUNI
(Evellised
-
ARMY,
-
THE SOLDIERS, MARINES HOME SAMORS OM
EST
IN
GREAT.
9
heavy Val-rerk n/n and heels that will not elip on wes IN oily
-
THE
G
WORLD
AND
"
4d
-
surfaces! No matter what your job, Werds have the work this
-
thei
M
for you! Excellent INC ENTREPR machine thops. etc., because they
-
em
;
NP
3
I
-
and
=
Spur
on take It! Available either shoe or osfort and at these
©
I
1
prices they're . mai bur?
all
e
Regular 53.98
See
Your
time
changes
in
BLUCHER OXFORD
3⁴⁷
of
0
SANTA FE BUS DEPOT
BEI
will
I
BUY WAR SAVINGS STAMPS
ON SALE AT
-
Blaze no Hay Ranch
MONTGOMERY WARD
POLICIES
Causes $300 Loss
THE COLA
BUY
NOW
PAY
MONTHLY
CATILOG ORDER SERVICE
Santa Fe:
BUY
of
DRINK
e
-
-
CANADA BRY
o
B
e
e
,
e
e
TRAILWAYS
QUALITY
First Seuth et Male
Salt
La
Regraded Unclassified
116
impolity Morning
The Sall Cake Tribune
Jane 21, 1912
arade Puts
Get First Hand News of Fighting Son
[15 War Heroes
Visiting Warriors Accept S.L. Plaudits
ands Into
Get Rousing
Ovation in S.L.
With Cryptic Allin Line of Duty'
ar Coffers
champse
45.
-
will
the
emision
El
to
Parade and Stadium
-
the
18
and
5
itizens Flock
Througs Acelaim
asive
:
Qty*
Allied Warriors
Booths
S. L. Beauties Win
7
(Cottinued - Page these)
Hero's Praise
the
Get Stamps
by
MA
et
Ear
brancy
Nervises
to
belot
the
the
1
Kart
-
parado
1
Charles
à
the
have
may.
the
associated
in
et
-
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the
the
de
LAST
(ity,
!
the
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work
page
us
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end
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meria
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David
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i
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o
Mr.
Lakers
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Men's Quality
protip stiff ospetities," Mr. and No. Brig-
NAME
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(fer)
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of
has
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Prierses
at
left
and
right,
Primes
-
registral
of
the
the
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of
-
declared
siler
cometing
Flight
Lieutenant
figing
-
the
from
-
WORK
Old Timers
Heroes Dodge
Parents of Noted Flier
only
en
the
if
paint
o
givent
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Well-Wishers
Praise Visiting Heroes
Eart
of
the
fire
SHOES
for
with
Der
American
ent
-
©
Tough
bring
by
MARIN,
is
war
registeral
"Typostchers all and - Home weike of the evalize the
Lake
Dily:
end
and
of
remired
and
America
are
anounting
I
in
His
tend
&
-
tax
ear
Mr.
and
Mrs.
Brigham
2
permis
the
of
287
Be
of
Pligit
Lestment
Chentry
E.
(Evis)
Externes
of
the
Fire
the
all
of
Apericas
Eagle
spending
the
RAV.
rede
to
and
Q
Regularly
HEAR
Hotel
Utah.
for
the
is
not
of
tel
$4.35
to
"Signe
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Mr.
received
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Ofarion
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-
tell
Cymbra
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the
War
i
the
the
BAR
HEARING AID
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Displayed
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=
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Limited
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As
their
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any
The
then
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1
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o
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in
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And
to
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The
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this
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1941.
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the
©
MEET THE PEOPLE
Mr.
an
Rus
VUL-CORK
War
-
the
the
NOT
Think
time
Nists
carps
©
SAFETY SOLES
area
MUST
-
redu
"
as
previl
mail
frie
the
University
Orah
WHO
De
note
WII Not Mar or Scratch Flooral
of
-
o
-
Monters
et
the
Catador
Legine
WIII Not Slip on Oily Surfaced
MISS THE
BUS!
bene of surilary space
F
way
the
war
the
la
-
of
arail
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a
-
I
sible
in
Ulahas
to
-
=
the
each
e
a
California
is
the
e
and
.
for
[
Bite
Mts.
Drowning Victim's
e
the
Rites Set Today
Wyo, Financial
tar
Robert
©
Where
can
you
MEET
lay
the
best
Gmift
in comfort and wear, et each -
of
Mr.
and
lien
Warriors Urge
et
E
le
low price/ Check the features then you'll know why thousands
THE MEMBIRS OF VITAL
n.
of mes choose Wards work shoes. The uppers are of top grain
-
AUTHIARY ARMS, RED
Bond Buying
be
is
Live
family
piet
5
feether,
Elk-tanned
lit
strength
THE meet MIND - SAMORE OM
MEET
pliability; genuine Goodyear
the
-
-
CROST WORKERS AND
Barger.
welts;
heavy
learter
-
givent
tongue;
all
this
plus
DEFENSE
4mb
la
EST
IN
THE
WORLD
Die
in
o
heavy Vul-cork NAM and heels that will not stip en Wet or oily
DI
-
un
surfacest No matter what your jab. Wards have the work shoe
-
-
-
an
MAVE
Card
plan
by
for you! Excellent he garages, mailine shops because they
-
-
-
-
Spur
@
I
can take It! Available - either also or exford and at these
-
-
-
prices they're . real buy!
as
of
2
-
Regular $3.98
See
Year
changes
BLUCHER OXFORD
of
o
SANTA FE BUS DEPOT
unt
If
-
BUY WAR SAVINGS STAMPS
ON SALE AT
I
Blaze en Hay Banch
of MONTGOMERY WARD
POLICIES
Causes $300 Los
THE COLA
BUY
NOW
PAY
Santa Fe
BUY
DRINK
MONTHLY
CATILOG ORDER SERVICE
supt
=
CANADA BRY
o
e
G
e
©
,
D
TRAILWAYS
QUALITY
First South at Male
Salt
La Regraded Unclassified
CONFIDENTIAL
116
UNITED STATES SAVINGS BONDS - SERIES I AND G COMBINED
Comparison of June sales to date with sales during the
same number of business days in April and May 1942
(At issue price in thousands of dollars)
:
June
1
Cusulative sales by business days
Date
:
daily
:
:
June
:
:
:
May
:
June as
sales
:
:
April
:percent of May
June 1942
1
$ 9,705
$ 9,705
$ 7,302
$ 11,987
132.9%
2
7,895
17,601
15,168
21,677
116.0
3
8,634
26,235
25,516
29,097
102.8
4
13,774
40,009
33,145
35,818
120.7
5
9,344
49,353
48,751
46,174
101.2
6
6,535
55,888
60,817
55,991
91.9
8
11,526
67,414
67,213
63,695
100.3
9
4,952
72,366
72,794
70,364
99.4
10
9.945
82,310
80,845
77,197
101.8
11
7,542
89,852
85,410
80,586
105.2
12
5,402
95,254
94,391
91,623
100.9
13
6,210
101,464
102,106
96,031
99.4
15
7,251
108,715
108,923
102,657
99.8
16
3,564
112,279
114,129
111,829
98.4
17
7,470
119,749
123,534
116,374
96.9
18
6,299
126,048
127,724
120,625
98.7
19
8,014
134,062
138,908
131,852
96.5
20
3,367
137,429
149,502
136,532
91.9
22
10,269
147,698
156,587
145,250
94.3
23
5,834
153,532
161,404
152,983
95.1
24
9,242
162,774
171,335
160,398
95.0
25
7.773
170,547
179,208
166,278
95.2
26
5,863
176,410
189,271
176,561
93.2
27
7,024
183,433
196,192
184,279
93.5
fice of the Secretary of the Treasury,
June 29, 1942.
Division of Research and Statistics.
rurce:
All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of United States savings bonds.
Note:
Figures have been rounded to nearest thousand and will not necessarily
add to totals.
CONFIDENTIAL
117
UNITED STATES SAVINGS BONDS - SERIES I
Comparison of June sales to date with sales during the
same number of business days in April and May 1942
(At issue price in thousands of dollars)
:
June
:
Cumulative sales by business days
Date
:
daily
:
:
:
:
:
:
June
June as
sales
:
May
:
April
!percent of May
June 1942
1
$ 19,834
$ 19,834
$ 12,679
$ 12,993
156.4%
2
8,008
27,841
24,263
24,256
114.7
3
12,970
40,811
46,532
35,050
87.7
4
17,388
58,199
55,460
47,119
104.9
no
24,789
82,988
73,824
65,115
112.4
15,209
98,197
97,049
73.795
101.2
8
27,048
125,245
114,218
85,714
109.7
9
8,912
134,157
128,670
97,925
104.3
10
20,085
154,242
151,956
108,707
101.5
11
15,678
169,920
161,346
116,081
105.3
12
16,550
186,470
177,133
138,272
105.3
13
15,230
201,700
194,047
146,937
103.9
15
23,984
225,684
208,939
154,623
108.0
16
7.535
233,218
223,242
168,103
104.5
17
15,815
249,033
247,532
178,870
100.6
18
12,288
261,321
257.374
189,156
101.5
19
19,421
280,742
271,079
207,742
103.6
20
10,987
291,729
290,485
217,104
100.4
22
29,386
321,114
309,584
229,140
103.7
23
10,692
331,806
323,705
241,644
102.5
24
15,866
347.673
347.494
256,076
100.1
25
14,877
362,550
360,564
267,396
100.6
26
15,956
378,505
375.702
288,434
100.7
27
13,719
392,224
392,627
300,188
99.9
fice of the Secretary of the Treasury,
June 29, 1942.
Division of Research and Statistics.
urce: All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily
add to totals.
CONFIDENTIAL
118
UNITED STATES SAVINGS BONDS - TOTAL
Comparison of June sales to date with sales during the
same number of business days in April and May 1942
(At issue price in thousands of dollars)
:
June
:
Cumulative sales by business days
Date
:
daily
:
:
I
June
:
I
May
June as
:
sales
:
:
April
:percent of May
June 1942
1
$ 29,539
$ 29,539
$ 19,981
$ 24,980
147.8%
2
15,903
45,442
39,430
45,933
115.2
3
21,604
67,046
72,048
64,147
93.1
4
31,162
98,208
88,605
82,937
110.8
5
34,132
132,341
122,575
111,289
108.0
6
21,744
154,085
157,866
129,786
97.6
8
38,574
192,659
181,431
149,409
106.2
9
13,863
206,523
201,464
168,289
102.5
10
30,029
236,552
232,801
185,904
101.6
11
23,220
259.772
246,756
196,667
105.3
12
21,952
281,724
271,525
229,895
103.8
13
21,439
303,163
296,152
242,969
102.4
15
31,235
334,398
317,861
257,280
105.2
16
11,099
345,497
337,371
279,933
102.4
17
23,285
368,782
371,066
295,244
99.4
18
18,587
387,369
385,098
309,780
100.6
19
27,435
414,804
409,987
339.594
101.2
20
14,354
429,158
439,987
353,636
97.5
22
39,655
468,812
466,171
374,391
100.6
23
16,526
485,338
485,109
394,628
100.0
24
25,108
510,446
518,829
416,474
98.4
25
22,650
533.097
539,771
433,674
98.8
26
21,818
554,915
564,973
464,995
98.2
27
20,742
575,657
588,819
484,467
97.8
ffice of the Secretary of the Treasury,
June 29, 1942.
Division of Research and Statistics.
ource: All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of United States savings bonds.
Note:
Figures have been rounded to nearest thousand and will not necessarily
add to totals.
119
Sales of United States Savings Bonds
CONFIDENTIAL
From June 1 through June 27, 1942
Compared with Sales Quota for Same Period
(At issue price in millions of dollars)
Series I
:
:
Series F and G
:
Total
Actual Sales
=
:
Quota,
:
Sales
#
Actual Sales
:
Quota,
I
Sales
#
Actual Sales
I
Quota,
I
Sales
:
#
June 1
:
June 1
:
to Date
I
Date
I
June 1
:
June 1
: to Date
:
:
June 1
:
June 1
:
to Date
:
Daily
I
to
:
to
: as $ of
:
Daily
:
to
:
to
I as $ of
:
Daily
:
to
I
to
: as x of
:
:
Date
:
Date
=
Quota
#
I
Date
:
Date*
: Quota
:
:
Date
:
Date
I
Quota
1
$ 19.8
$ 19.8
$ 21.7
91.2%
$ 9.7
$ 9.7
$ 14.0
69.3%
$ 29.5
$ 29.5
$ 35.7
52.6%
2
8.0
27.8
32.0
86.9
7.9
17.6
23.0
76.5
15.9
45.4
55.0
82.5
3
13.0
40.8
46.4
87.9
8.6
26.2
37.9
69.1
21.6
67.0
84.3
79.5
4
17.4
58.2
63.6
91.5
13.8
40.0
51.0
78.4
31.2
98.2
114.6
85.7
5
24.8
83.0
79.6
104.3
9.3
49.4
61.7
80.1
34.1
132.3
141.3
93.6
6
15.2
98.2
93.7
104.8
6.5
55.9
69.4
80.5
21.7
154.1
163.1
94.5
g
27.0
125.2
120.0
104.3
11.5
67.4
82.2
82.0
38.6
192.7
202.2
95.3
9
8.9
134.2
132,4
101.4
5.0
72.4
89.2
81.2
13.9
206.5
221.6
93.2
10
20.1
154.2
149.6
103.1
9.9
82.3
99.6
82.6
30.0
236.6
249.2
94.9
11
15.7
169.9
170.0
99.9
7.5
89.9
108.4
82.9
23.2
259.8
278.4
93.3
12
16.5
186.5
189.0
98.7
5.4
95.3
115.4
82.6
22.0
281.7
304.4
92.5
13
15.2
201.7
205.6
98.1
6.2
101.5
120.8
84.0
21.4
303.2
326.4
92.9
15
24.0
225.7
236.5
95.4
7.3
108.7
130.9
83.0
31.2
334.4
367.4
91.0
16
7.5
233.2
251.1
92.9
3.6
112.3
137.3
81.8
11.1
345.5
388.4
89.0
17
15.8
249.0
271.3
91.8
7.5
119.7
147.8
81.0
23.3
368.8
419.1
88.0
18
12.3
261.3
295.2
88.5
6.3
126.0
157.0
80.3
18.6
387.4
452.2
5.7
19
19.4
280.7
317.4
88.4
8.0
134.1
164.6
81.5
27.4
414.8
482.0
86.1
20
11.0
291.7
336.9
86.6
3.4
137.4
170.6
80.5
14.4
429.2
507.5
84.6
22
29.4
321.1
373.0
86.1
10.3
147.7
181.9
81.2
39.7
468.8
554.9
84.5
23
10.7
331.8
390.0
85.1
5.8
153.5
189.2
81.1
16.5
485.3
579.2
83.8
24
15.9
347.7
413.5
84.1
9.2
162.8
201.3
80.9
25.1
510.4
614.8
83.0
25
14.9
362.5
441.1
82.2
7.8
170.5
212.0
80.4
22.7
533.1
653.1
81.6
26
16.0
378.5
466.8
81.1
5.9
176.4
221.0
79.8
21.8
554.9
687.8
80.7
27
13.7
392.2
489.2
80.2
7.0
183.4
228.0
80.4
20.7
575.7
717.2
80.3
29
530.6
241.4
772.0
30
550.0
250.0
800.0
Office of the Secretary of the Treasury, Division of Research and Statistics.
June 29, 1942.
Source: Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of
United States savings bonds. Figures have been rounded and will not necessarily add to totals.
Takes into account both the daily trend during the week and the monthly trend during the month.
120
DISTRICT O.E EXATION ENIO
UNITED STATES GOVERNMENT
WASHINGTON, D.C.
OFFICE OF STRATEGIC SERVICES
June 29, 1942
The Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
My dear Henry:
I have just returned and find your letter. I
think you will understand that any way that I can meet
your wishes I will do so. I am quite sure that we will
be able to get to you the British reports and analyses,
as under the direction of the Joint Chiefs of Staff I
have been made Chairman of the Psychological Warfare
Committee and I arranged with Eden that we should have
intimate liaison with the British Political Warfare Com-
mittee.
MA
I hope to see you one of these days soon and check
up with you on the progress of the war.
IDVS
Sincerely,
William J. my Donovan
Director
121
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE June 29, 1942
TO
Secretary Morgenthau
FROM
Subject: Situation,
Mr. The 12 Haas Business
Week ending June 27, 1942.
Summary
(1) The general price level has receded slightly for the
third consecutive week. In the week ended June 20 the BLS
all-commodity index declined 0.3 percent to 98.1, the lowest
point since the week ended April 11, making a total reduction
of 0.7 percent in three weeks. The index, however, still stands
nearly 31 percent above the pre-war level of August 1939.
(2) Due chiefly to a sharp rise in the price of rosin,
the BLS index of 28 basic commodities rose last week for the
third consecutive week. Rosin prices rose 13 percent as the
result of the announcement of & Government purchasing program
to accumulate a stock pile of gum rosin and turpentine.
(3) Department store sales in the first 3 weeks in
June averaged about 4 percent higher than year-earlier levels,
thus indicating an actual decline in unit volume since the
intervening price rise was around 18 percent. Preliminary
reports reveal a continued lull in retail trade during the
past week.
(4) Production of war materials has attained such heavy
volume that the WPB is now more concerned over raw material
supplies than manufacturing facilities. The munitions production
program is reported in the press to be undergoing review, with
a possible view to downward revision where objectives now seem
too high.
(5) A shortage of steel plates continues to be one of
the serious bottlenecks of the war program. Despite the
attainment of a new monthly shipment record of more than 1
million tons in May, the supply is still insufficient. Press
reports last week indicated that West Coast shipbuilders may
have to curtail operations due to a lack of steel plates.
122
- 2 -
Wholesale price level elightly lower
During June, wholesale prices of commodities have continued
to move within the narrow range of their fluctuations in April
and May. In the week ended June 20, the BLS all-commodity index
declined 0.3 percent to 98.1, which was the lowest level since
the week ended April 11. In the past three weeks the index
has decreased 0.7 percent, but it still stands 30.8 percent
above the pre-war level of August 1939.
Chart 1 shows the percentage changes in the major groups
of the all-commodity index from the week ended December 6 to
May 9 (previous to the effective date of the ceiling order)
and to June 20. The sharp rise in wholesale prices which began
after the Pearl Harbor attack was halted after application of
the general maximum price regulation. Since that date the
combined index has declined 0.5 percent, and most of the com-
ponent indexes have remained essentially unchanged or have de-
clined. The index for foods has declined 0.9 percent, although
the index for farm products has increased 0.5 percent. The
index for hides and leather products has declined 1.1 percent.
In the week ended June 20, food prices dropped 1.1 per-
cent, accounting for the entire decline in the combined index.
The other components were relatively steady.
A comparison of wholesale prices of all commodities and
of foods in the present war and in the first World War 18
shown in Chart 2. The distinct levelling out of the general
price index in 1942, as compared with prices in the first half
of 1917, is significant. The wide margin between the present
price rise and the corresponding rise in 1917 16 particularly
noticeable. While food prices in the first quarter of 1942
closely approached their sharp increase of the first World War,
they also have levelled out in recent weeks.
Basic commodity prices rising
The BLS price index of 28 basic commodities last week
increased for the third consecutive week. The rise in this
index was due to B. sharp increase of 13 percent in the price
of rosin, resulting from announcement last week of a Govern-
ment purchasing program to accumulate a stock pile of gum
rosin and turpentine. (See Chart 3.)
The index of 20 controlled commodities rose also for the
third successive week, and again the index of 8 uncontrolled
commodities declined. The changes in the two indexes doubt-
less would have been reversed if rosin had been grouped as
123
- 3 -
an uncontrolled commodity, in accordance with the OPA amend-
ment (effective June 19) exempting gum naval stores from the
general maximum price regulation. However, the ceiling on
wood rosin prices doubtless has some stabilizing influence
on prices of gum rosin.
All of the other controlled commodities were unchanged,
except for a slight decline in the price of cottonseed oil
and a slight rise in the price of wool. The quotations for
wool tops used by the Bureau of Labor Statistics, however,
apparently are not representative of wool prices generally,
which have increased since December 6.
The decline in the index of the uncontrolled commodities
was due to weakness in grains. Prices of wheat, barley, corn,
and flaxseed declined on reports of favorable weather for
harvesting. Hog prices touched the highest level in twenty-
five years. According to press reports, packers were forced
to pay higher prices because marketable receipts were too
light to meet Government buying demand for pork cuts. Prices
of butter and cotton rose slightly.
Record 1942 and 1943 pork supplies assured
An increase of 24 percent in the combined spring and fall
pig crops of 1942 over those of 1941 18 estimated by the
Department of Agriculture. By far the largest on record, the
1942 production may total 105.5 million head as compared with
85 million in 1941. Commenting on the report, Secretary
Wickard warned, however, that this year's record production
will not create supplies for civilian consumption as large as
production figures might indicate, although total meat and
poultry supplies will be sufficient. Earlier he indicated
that he believed rationing of pork could be avoided.
The Government's program for purchases of pork and lard
for lend-lease and military uses calls for a large proportion
of this year's output. In accordance with the announcement
in April, the Government will take a minimum of 40 percent of
pork production and two-thirds of lard production in the
period April through September, from packers operating under
Federal inspection. In the first third of this period the
Government's purchases of lard have reached the goal, but
pork purchases have been lagging. This may be due in part to
the fact that heavy receipts may yet have to come on the
market.
The Department estimates consumer requirements for all
meats to be 20 percent greater than a year earlier, and in-
dicates that this, together with the smaller supplies avail-
able for civilians, will prevent any reduction in hog prices
during the next few months.
4
124
The lack of a ceiling on hog prices, while pork prices are
controlled, 18 resulting in a severe squeeze on packers' mar-
gins, particularly for those not operating under Federal in-
spection and therefore not eligible to sell to the Government
at the higher prices offered for lend-lease purchases. The
declining trend in packers' gross margins in recent weeks is
shown by Department of Agriculture data in Chart 4.
Hog prices, according to the Department of Agriculture
as of June 24, are 50 cents higher than normally would be
expected at the ourrent level of pork and lard prices. The
press, commenting on the sharp upturn in hog prices last
week, expressed the opinion that packers paying such prices
are facing certain losses. In this connection, the chairman
of the newly-formed emergency conference of meat packers
stated that OPA action in placing price ceilings on pork
products, without ceilings on hog prices, is endangering the
existence of the independent meat packing industry. A con-
ference of this group with Assistant Secretary of Agriculture
Hill is scheduled for Wednesday of this week.
Gains in farm income and rural sales narrow moderately
Benefiting from the rise in prices during the past year,
farm income in May continued to run substantially above year-
earlier levels, although the gain was not as great as in the
previous month. Thus, on the basis of preliminary and con-
fidential estimates, cash farm inoome in May was 33 percent
above May 1941, while the corresponding gain in April was
46 percent. (See Chart 5.)
Rural sales of general merchandise in May were 11 per-
cent above year-earlier levels, as compared with 16 percent
in the previous month. (Refer to Chart 5.) Although this
was the narrowest monthly sales gain shown thus far this
year, it was a larger gain than that shown by department
stores in that period. Moreover, sales of Montgomery Ward
and Sears Roebuck in May actually dropped 16 percent and
19 percent, respectively, below the same month in 1941.
Unit volume of department store sales below June 1941
Department store sales during the first 3 weeks in June
showed an average gain of around 4 percent over the corres-
ponding period & year ago, although the sales gain in the
week ended June 20 widened to 9 percent. (See Chart 6.)
However, even this gain was only about one-half as great as
the price rise since June 1941, BO the physical volume of
goods sold has been running behind year-earlier levels.
125
- 5 -
On the basis of preliminary reports from Dun and
Bradstreet, as well as New York City department stores, re-
tail trade last week again fell moderately below the corres-
ponding period of last year in dollar volume, thus indicating
an even more noticeable drop in the quantity of physical units
sold.
Referring to Chart 6, it will be noted that department
store sales are at the beginning of the summer slack period.
The chart indicates that the greatest pressure on prices of
department store items will come during the Christmas buying
season.
Raw materials problems posed by high production rate
With the FRB adjusted index of industrial production ris-
ing to 176 in May, and output of war goods attaining such
high levels that nearly 4,000 planes and over 1,500 tanks
were produced in the month, the supply of raw materials has
become the dominant concern of the WPB. In view of this
situation, munitions production programs are said to be under-
going review, with a possible view to effecting downward re-
visions where objectives have been set too high.
In order to cope with the situation, the WPB 18 expected,
among other steps, to extend scrap collection drives and make
further cuts in civilian consumption of such items 8.8 steel.
In view of the difficulties encountered in meeting the heavy
demand for copper, the WPB 18 even reported to be planning
to melt down name plates, statues, bronze bank doors, etc.,
in an effort to increase the metal supply.
Steel plate shortage still troublesome
A shortage of steel plates has been one of the worst
bottlenecks of the whole war effort, and despite the attain-
ment of new production records, the shortage has not been
overcome. During May, steel plate production rose above
1 million tons for the first time on record. The progress
made in expanding steel plate output since our entry into the
war 18 evidenced by the following monthly shipment figures:
December 1941
654,000 tons
January 1942
755,000 tons
February 1942
759,000 tons
March 1942
879,000 tons
April 1942
896,000 tons
May 1942
1,012,000 tons
126
- 6 -
Some further slight increase in plate production is expected
during June, and by July it is hoped that production will be
approximately 1,100,000 tons.
Shipbuilding affected by plate shortage
Despite the steady increase in plate production, it was
reported in the press during the past week that shipyards on
the West Coast might have to curtail operations due to a
shortage of plates. Deliveries of plates to shipyards for
Maritime Commission orders in May ran above 300,000 tons.
Recently Rear Admiral Vickery of the Maritime Commission
stated that shipbuilders in July would need 425,000 tons of
plates, or about 100,000 tons more than they expect to get.
In spite of difficulties, merchant ship completions
stepped up noticeably in May, according to data summarized by
Standard Statistics, with the total for the month rising to
58 from only 36 in April. As a result, ship completions
for the first 5 months of 1942 rose to 164, as compared with
103 in the entire year 1941. However, in view of the large
number of sinkings since the beginning of the year, a very
critical ocean shipping situation remains to further compli-
cate the problem of procuring the heavy volume of raw materials
needed for the war program.
Railroads unable to get estimated steel requirements
During the past week the President of the Association of
American Railroads reported that the railroads this year will
not be able to obtain more than about two-thirds of their
estimated steel requirements for 1942. In addition to the
limitations imposed by materials shortages, conflicting re-
quirements of the Army and Navy are expected to slow up
deliveries of railroad equipment. On June 1 the railroads
had 950 locomotives on order, but due to Navy requirements
for Diesel engines, material shortages and other factors,
probably not more than 425 will be produced before the end
of the year. Moreover, it was indicated that Army needs for
locomotives in overseas operations and Navy demand for Diesel
engines for small boats might further out into the reduced
figure mentioned.
Despite difficulties in obtaining additional equipment,
and the substantial increase in ton-miles of freight handled,
the freight car surplus of the railroads in mid-June was more
than 5,000 cars above that of last year. Due to increased
efficiency in handling, heavier loading, etc., the railroads
have been handling an increased volume of freight with fewer
127
- 7 -
carloadings. Thus, in the week ended June 20, total freight
carloadings were 41,000 cars, or nearly 5 percent below
year-earlier levels.
Steel operations decline moderately
After rising to 99.6 percent of capacity in the last
week in May, steel operations declined gradually to 98.0 per-
cent of capacity in the last week in June, the lowest since
April. (See Chart 7.) Trade reports are somewhat conflict-
ing as to the reasons for the moderate decline, with shut-
downs for repairs and scrap shortages being variously cited.
During the current week, however, which contains the tradi-
tional Fourth of July holiday, operations are scheduled at
a decline of only 1.5 points to 96.5 percent of capacity.
During May the consumption of both iron ore and steel
scrap reached the highest levels on record. However, steel
ingot output during the month was a trifle under the record
set in March. Concern over the longer outlook for steel
scrap supplies is again being shown by some trade circles.
It is pointed out that large exports of ingots and semi-
finished steel under lend-lease arrangements means that dis-
cards from this material will not be available for the home
scrap supply, thus adding to the pinch expected next winter.
Chart 1
128
WHOLESALE COMMODITY PRICES
Percentage Changes in Major Groups of B.L.S. All Commodity Index
Week Ended Dec. 6, 1941 to Week Ended May 9 and June 20, 1942
PER
CENT
FARM PRODUCTS
14
12
FOODS
10
CHEMICALS, ETC.
8
TEXTILE PRODUCTS
ALL COMMODITIES
6
4
MISC. COMMODITIES
HIDES AND LEATHER
PRODUCTS
HOUSEFURNISHINGS
BUILDING MATERIALS
2
METALS AND METAL
PRODUCTS
0
FUEL AND LIGHTING
-2
DEC.6
MAY 9
JUNE 20
1941
1942
1942
Jffice of the Secretary of the Treasury
P - 245
Division of Research and Statistics
Regraded Unclassified
PRICES, 1939 TO DATE COMPARED WITH 1914 TO 1918
July 1914-100 World War Period; Aug. 1939-100 Present Period
PERCENT
PERCENT
All Commodities
200
200
1918
180
180
1917
160
160
140
140
1916
Feel Ented
- 20
1942
120
First Month
120
of Wor
1915
1940
1941
1939
100
100
1914
80
80
J
M
M
J
5
N
J
M
M
J
$
N
J
M
E
J
S
N
J
M
M
J
5
N
J
M
M
J
$
N
PERCENT
PERCENT
Foods
200
200
1918
180
180
1917
160
160
- Ended
- 20
140
140
1942
1941
First Month
120
120
of Mer
1916
1939
1940
1915
100
100
1914
80
J
M
M
J
$
M
J
M
M
J
$
N
J
M
M
J
s
#
J
M
d
s
80
N.
J
M
M
J
5
#
Chart 2
Source: B.L.S.
129
Office of the Secretary of the Truesary
- of - and Statistics
Regraded Unclassified
MOVEMENT OF BASIC COMMODITY PRICES
1941
1942
PERCENT
PERCENT
August 1939-100
190
190
185
185
8 Uncontrolled Commodities
180
180
175
175
170
28 Commodities
170
165
165
160
160
20 Controlled Commodities
155
155
150
150
145
145
140
140
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOM.
1941
1942
PERCENTAGE CHANGE DEC. 6, 1941 TO JUNE 19 AND JUNE 26,1942
PERCENT
PERCENT
20 Controlled
8 Uncontrolled
+45
Commodities
+45
Commodities
Woge 427%
+40
+40
Flamed sux
+35
+35
+30
+30
+25
+25
+20
+20
Lard A/X
Roain MJ a
+15
Shellee ase x
+15
Com MBX
Lood III
Tollow 7.9 x
+10
Print Cloth 78 X
+10
Cotton 9.01
Cottonwed Oil If I
Borky TO:
Sugar as x
Steers 2/ x
Zine # X
+ 5
+ 5
Butter as
0% Change
Hides,
Tin, Rubber,
o
o
Coffee, Copper,
St.Screp,dom,
St.Screp.esp.
Wheet 44 .
- 5
- 5
Coooo no X
Bunkp-4.a x
Who/ Topo 74%
-
-10
-10
Dec. 6
June 19
June 26
Dec. 6
June 19
June 26
1941
1942
1942
1941
1942
130
Chart 3
1942
Office of the Secretary of the Treasury
- of - and
P-244-1
Regraded Unclassified
HOG PRICES, VALUE OF PORK PRODUCTS, AND GROSS MARGINS
131
Weekly, July 1941 to date
Chart
1941
1942
AUG.
OCT.
DEC.
FEB.
APR.
JUNE
AUG.
OCT.
DOLLARS
DOLLARS
PER
PER
100 LBS.
100 LOS.
15
15
COMPOSITE WHOLESALE
VALUE OF Hog PRODUCTS
14
14
13
13
12
12
WHOLESALE PRICE OF LIVE Hogs**
11
11
10
10
GROSS
GROSS
MARGIN
MARGIN
GROSS MARGIN
(CENTS)
(CENTS)
100
100
0
o
-100
100
AUG.
OCT.
DEC.
FEB.
APR.
JUNE
AUG.
OCT.
DEC.
1941
1942
. WHOLESALE VALUE OF ALL EDIBLE PRODUCTS IN 100 LB. OF LIVE HOGS.
- GOOD CHOICE, 180-200 LBS.
SOURCE: U.S.D.A.
Office of the Secretary of the Treasury
P - 246
Division of Research and
FARM INCOME AND RURAL SALES OF GENERAL MERCHANDISE
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
DOLLARS
DOLLARS
MILLIONS
MILLIONS
Form Income
Incl. Rental and Benefit Payments
1600
1600
1400
1400
1200
1200
1941
1000
1000
1942
1940
800
800
1939
600
600
400
400
200
200
o
o
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT
OCT
NOV.
DEC.
PERCENT
PERCENT
Rural Sales of
General Merchandise"
275
1929-31-100 Usedj.
275
250
250
225
225
200
200
1941
175
175
1942
150
150
1940
125
125
1939
100
100
75
75
an
FEB.
MAR
APR.
MAY
JUNE
JULY
AUG.
SEPT
OCT
NOV.
DEC.
132
$ Chart
of - of deller add general norchandise - - Issue of and -
the of to Suntry of the Truary
- of - at Indo
C-878-C
Regraded Unclassi
Chart 6
DEPARTMENT STORE SALES
1935 - '39 - 100, UNADJUSTED
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
PER
PER
CENT
CENT
Weekly
260
260
240
240
220
220
200
200
180
180
160
160
140
140
120
120
'41
'42
100
100
80
80
'40
60
60
JAN.
MAY
JULY
SEPT.
NOV.
MAR.
Office d the Secretary of the Treasury
C - 390
- of - and I
Chart 7
133
STEEL INGOT PRODUCTION
PER
CENT
Per Cent of Capacity
100
'4/
42
80
40
60
40
Amer. / and S. Inst.
20
JAN. MAR. MAY JULY SEPT. NOV.
Office of the Secretary of the Treasury
Division of Research and Statistics
C- 419
134
June 29, 1942.
Dear Cordell:
Mr. Chester A. Allen has written Be that he is
assisting is settling the estate of the late A. Manuel
Fox, who died, as you doubtless know, in China recently,
while serving as a representative of the Treasury
Department.
Mr. Allen asks that I call your attention to his
request for a number of letters which will aid his in
the collection of the life insurance policies, and in
settling other matters in connection with this estate.
Anything that you can do to assist Mrs. Fox by expediting
letters of certificate, in accordance with Mr. Allen's
request, will be much appreciated by no. The death of
her husband was a real loss, not only to us personally in
the Treasury, but to the cause for which we are all work-
ing, and I feel justified, therefore, in asking your
cooperation in this manner.
Sincerely,
(Signed) Honry
Honorable Cordell Hull,
n.m.c
Secretary of State,
Washington, D. C.
By Messenger 5:40
Gar/dbs
Regraded Unclassified
135
June 29, 1942.
Dear Mr. Allen:
I have your letter of June 25, and the enclosed carbon
of one you have written to the Secretary of State.
I have been glad to write to Mr. Hall today, asking
his prompt cooperation is the request you make of him.
I feel sure that you will hear from his effice very shertly.
and 18 10 a pleasure to do anything I can to expedite the
matter for you and for Mrs. Fex.
Sincerely,
(Signed) 1. Horgenthsw. ml
n.m.c.
Mr. Chester A. Allen,
Vice President, Kings County Trust
Company.
342 Fulton Street,
Brooklyn, New York.
GEF/dbs
Regraded Unclassified
136
Rings County Trust Company
342 Fulton Street
Broohlyn, N.g.
CHESTER A ALLEN
VICE PRESIDENT
June 25, 1942
Hon. Henry Morgenthau, Jr.
Secretary of the Treasury,
Washington, D. C.
Sir:
Enclosed is copy of letter we have
just sent to Secretary of State Hull. Be-
cause of the tremendous pressure under which
the State Department is working now in con-
nection with the so important matters of the
war, I venture to send you this copy of my
letter in the hope that you could find the
time to remind the Secretary of the needs on
behalf of Mrs. Fox. As I write this I
realize that your Department too is more
than busy with the tax bill before the House,
but perhaps you will excuse my importunity
on the ground that it is for one who willingly
gave of his services for his country and most
particularly with the thought in his mind
that he was pleasing you in giving this service.
Very truly yours,
Chestua allen
CAA/GCH
enclosure
137
June 25, 1942
Hon. Cordell Hull,
Secretary of State,
Washington, D. C.
Re: A. Manuel Fox, EEQ., Late American Member =
of Chinese Currency Stabilization Board
Sir:
I an endeavoring to assist 11500 Deral C. Fox,
widow of my good friend, A. Manuel Fox, in the collection
of assets for his estate and some life insurance policies.
It will be of invaluable assistance X ae if I may have
a certificate from the State Department as to the fact
that A. Manuel Fox did die in Chungking, China, just GB
reported in public prints, and the date of his death.
If the State Department will asist drs. Fox in this
manner, will you please address such letter of certificate
to -
Equitable Life Assurance Society,
393 - 7th Avenue, New York City,
New York Life Insurance Company,
51 Madison Avenue, New York City,
Shenandoah Life Insurance Company
Washington, D. C.
Sun Life Insurance Company of Canada
Washington, D. C.
and
To Whom It May Concern.
It would be better for us to have five separate
letters, one addressed to each of the five sub-divisions
above, but if that is not conveniently possible, one
letter addressed to all and with some extra copies may
meet our needs.
Your very prompt help in this matter would be of
real assistance to Mrs. Fox and would be greatly appreciated
by ше.
Very truly yours,
Chester A. Allen
CAA/GCH
Regraded Unclassified
138
June 29, 1942
MEMORANDUM FOR THE SECRETARY
Post-war credit for corporations
The post-war credit plan for corporations
adopted by the Ways and Means Committee, contains
the following specifications:
1. The amount returned be 14 percent of the
adjusted excess-profits net income-the base upon
which the excess-profite tax 18 computed, (Giving
effect to the proposed refund, therefore, the net
excess-profits tax rate will be 80 percent.)
2. The refund be effected by the redemption
of bonds issued to the taxpayer.
3. The bonds be issued within 3 months after
the payment of the related tax, or the final quar-
terly installment thereof, for any taxable year.
4. The bonds mature, subject to prior call,
as follows: One-third at the end of the second
calendar year following the cessation of hostili-
ties; one-third at the end of the third such year;
and one-third at the end of the fourth such year.
5. The bonds shall be callable, upon 3 months'
notice, at any time prior to maturity date.
6. The maturity date of all the bonds be
advertised within 30 days after the cessation of
hostilities, and in such a way that the maturity
date of any bond shall be readily ascertainable.
7. The bonds be issued under the provisions
of the Second Liberty Bond Act, thus payable with-
out the necessity of a special appropriation.
8. The bonds be nonnegotiable and non-interest-
bearing.
Regraded Unclassified
139
- 2 -
9. The bonds be assignable after the end
of the war.
10. The amount of bonds issuable to any
taxpayer in consideration of the tax paid for
any taxable year be adjusted for any overage or
shortage in the aggregate amount issued to such
taxpayer for the prior year or years, any over-
age finally remaining to be adjusted by cancela-
tion or, at the election of the taxpayer, by
purchase at face value,
11. No amount be included in gross income
for any year by reason of the receipt of bonds
or of amounts paid for their redemption.
12. No amount be available, by reason of
the issue of bonds or their redemption, for any
of the following purposes:
(1) The payment of dividends in cash
or stock.
(2) The payment of bonuses or salary
increases to executives.
(3) The increase of cash reserves
unless employed in the business.
(4) The purchase of securities.
13. The amounts refunded to be subject to
B. "capital gains" tax of 15 percent.
RongBlough
Regraded Unclassified
FROM THE DESK OF
140
LEON ENVOURSON. ADMINISTRATOR
OF
-
OF PRICE ADMINISTRATION
ED CIVILIAN SUPPLY
Hon. Henry
Margenther
41
6-29-42
141
The Honorable
The Secretary of Agriculture
Dear Mr. Secretary:
1 - greatly concerned about certain proposals now before the
Congress which would have the effect of preventing sales of the basic
agricultural commodities below parity, and about which 19 talked briefly
yesterday. If certain of these commodities are thereby forced to nove
into the trade at parity levels, it will be impossible to hold the
present ceiling prices on some of the products into which the basic
commodities enter as raw materials, without further and somembat costly
neasures. The situation is particularly serious with respect to wheat
and corn.
The May 15 farm price of wheat was about $1 per bushel, with a
parity price of $1,34 par bushel. If the price of wheat going into
flour were raised to this level, I find it would mean a rise of at least
one-half cent in the bakerIs cost of a loaf of bread. The baking in-
dustry is already under & definite aquesse in selling under its March
ceilings, and this increase in flour costs would necessarily lead either
to a puncturing of the bread ceiling or to subsidies to the flour-ailling
or baking industries. The same general considerations apply to the
breakfast cereals and other products derived from wheat. It is import-
tive, therefore, that wheat for human consumption be available to the
trade at or about present levels and that there be appropriate provision
to this end.
In the case of corn, the maintenance of parity prices would upset
present feed ratios and nake it impossible to hold present ceiling
prices on meats and fluid milk unless the Department is prepared, at
substantial cost, to provide for resale of corn at or below present
prices. I understand, however, that you are insisting on such pro-
visions in the case of corn.
The 100-parcent provision would also appreciably increase the
pressure on the price ceilings of tobacco and peanut products.
Regraded Unclassified
142
if
In view of these considerations and of the President's
clear directive, both to Rf office and to your Department, that
living easte be stabilized at March levels, I cames urge tee
strongly that every effert be made to prevent any further increase
in the costs of these commodities to the food precessing industries.
Sincerely yours,
Leen Handerson
Regraded Unclassified
143
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE
June 29, 1942
TO
Secretary Morgenthau
FROM
E. H. Foley, Jr.
I want to bring you up to date on the progress which we
have been making in connection with the Conference of the
freezing control authorities of the American Republics, the
formal sessions of which begin tomorrow, June 30.
Pursuant to your recommendation, in addition to my desig-
nation as the Delegate of the United States, the Treasury will
also have four advisers, namely, Harry D. White, John Pehle,
Bernard Bernstein and Werner Knoke (of the Federal Reserve
Bank of New York). The three advisers from the State Depart-
ment are Emilio Collado, Donald Hiss and Edward G. Miller, Jr.
There is attached a copy of the agenda for the Conference and
Regulations governing the conduct of the Conference, as well
as a list of the delegates and advisers of the other American
Republics.
A considerable amount of excellent work has been done in
preparation for this Conference through the closest cooperation
among the members of my staff, the staff of Monetary Research
and the Administrative Division of Foreign Funds Control. The
whole group worked as a very effective unit.
Attached are 8. number of resolutions which have been
drafted for submission at the Conference. In general, they are
designed to get the Latin American countries to take appropriate
steps, including enactment of appropriate legislation and adop-
tion of appropriate administrative procedures, so that such
countries will follow in general the strict policies which have
been followed by this Government in the administration of its
wartime financial and property controls. For example, we will
attempt to get these countries to cut off all financial, trade
and commercial relationships with the enemy countries and the
countries dominated by the enemy. We will also attempt to get
the Latin American Republics to take appropriate steps by way
of liquidation, reorganization or vesting so as to wipe out all
Regraded Unclassified
144
- 2 -
Axis influence in business enterprises in the American Republics
which are acting for the benefit of the Axis. Arrangements are
being made to have these resolutions introduced by representa-
tives of the Latin American Republics rather than by representa-
tives of the United States. All of the attached resolutions
have been cleared with the working group at the State Department
and are now being cleared with Welles, Acheson and Duggan.
In addition, we have prepared 8. handbook on the adminis-
tration of the wartime financial and property controls of this
Government, which is being printed in both English and Spanish.
We are also getting up a pamphlet which will contain all of our
public documents, including legislation, orders, regulations,
rulings, licenses, etc., and which will also contain 8. short
summary in English and Spanish of these documents. I will give
you copies of the documents as soon as I receive them from the
printer.
There was a preliminary organization meeting at the Pan-
American building this morning at which time the agenda, previously
drafted by State and Treasury, was agreed to. The closing date
for the conference was set for July 10. The procedure to be
followed by the conference committees was agreed upon. The
delegate from Brazil will be the Vice Chairman of the conference.
The American delegate is automatically Chairman.
We have been working hard in preparation for this confer-
ence and we are very hopeful that our efforts will be reflected
in the accomplishments of the conference.
9.1.7h.
Regraded Unclassified
145
LIST OF PROPOSED RESOLUTIONS
(NUMBERS ARE UNOFFICIAL AND FOR INTEROFFICE USE ONLY)
1. General Resolution.
2. Standard for Selection of Control of Real and Juridical Persons
Within the American Republics.
3. Resolution on Control of Real Persons.
4. Draft of Resolution on Business Enterprises.
5. Standards of Effective Blocking.
6. Financial and Commercial Transactions with Aggressor Nations and
Nations Dominated by Them.
7. Financial and Commercial Transactions with Countries Outside the
Western Hemisphere.
8. Transactions Among the American Republics.
9. Transactions Outside the Western Hemisphere Involving Another American
Republic or the Monetary Unit of Another American Republic.
10. Controls of Currency Movements and Transfers.
11. Control of Security Movements and Transfers.
Regraded Unclassified
146 /
GENERAL RESOLUTION
WHEREAS:
1. The aggressor nations and other nations dominated by them
are engaged in carrying out a program of aggression for the purpose
of dominating and controlling all of the world including the Western
Hemisphere; and
2. The nations of the Western Hemisphere are united against this
program because it threatens their political and economic freedom; and
3. This conference has recommended that the governments of
the
American Republics proceed immediately with measures designed
to implement and to intensify a common program of economic defense;
The Inter-imerican Conference on Systems of Economic and Financial
Control
RECOMMENDS:
1. That the government of each of the American Republics co-
operate freely with all governments of nations of the Western Hemi-
sphere in the formulation of plans and in the actual administration of
the program, feeling free to call upon such other nations for the mutual
exchange of information and consultation.
Regraded Unclassified
147
2
Standard for Selection of Control of Real and Juridical Persons
Within the American Republics.
RESOLUTION
WHEREAS:
(1) The Second Meeting of the Ministers of Foreign Affairs
of the American Republics held at Habana in July, 1940, resolved
that each of the Governments of the American Republics should adopt
within its territory all the necessary measures to control and
suppress activities directed, assisted or abetted by foreign govern-
ments or foreign groups or individuals which tend to subvert their
democratic institutions or to foment disorder in their internal
political life;
(2) The Third Meeting of the Ministers of Foreign Affairs
of the American Republics held at Rio de Janeiro in January, 1942,
confirmed those resolutions adopted at Habana and resolved that the
Governments of the American Republics take the necessary measures to
prevent or punish as crimes acts against the democratic institutions
of the States of the Continent in the same manner as attempts against
the integrity, independence or sovereignity of any one of them;
(3) The Third Meeting of the Ministers of Foreign Affairs
of the American Republics held at Rio de Janeiro in January, 1942,
recommended that the Governments of the American Republics take the
necessary measures to prevent within the American Republics all
commercial and financial transactions inimical to the security of the
Western Hemisphere which are entered into directly or indirectly by,
or for the benefit of, the members of the Tripartite Pact and the
territories dominated by them;
Regraded Unclassified
148
- 2 -
(4) It is recognized that the members of the Tripartite
Pact, more commonly referred to as the Axis, through persons, real
or juridical, resident and situated within the American Republics,
have attempted to effect financial and commercial transactions of a
nature inimical to the security of the Western Hemisphere as a part
of their program to subvert the democratic institutions within the
Western Hemisphere and foment disorder in the internal political life
of the American Republics;
(5) Most of the Governments of the American Republics have
instituted financial and economic control measures for the purpose
of effectuating Resolution V, adopted at the Third Meeting of
Ministers of Foreign Affairs of the American Republics held in Rio
de Janeiro in January, 1942, and of combatting subversive activities
within the Western Hemisphere;
(6) It is recognized that there are residing within the
American Republics persons who are not citizens of the Axis nations
who are engaged in activities, tending to subvert the democratic insti-
tutions within the Western Hemisphere, inimical to the security of the
Republics in which they reside and the Western Hemisphere, and for the
benefit of the Axis;
(7) It is recognized that there are residing in the American
Republics citizens of the Axis nations, who are not engaged in activities
inimical to the security of the Republic in which they reside or the
Western Hemisphere, and whose loyalty to the Government of the American
Republic in which they reside is unquestioned,
Regraded Unclassified
149
- 3 -
The Inter-American Conference on Systems of Economic and Financial
Control
RECOMMENDS:
(1) That the administration of the wartime economic and
financial controls of the Governments of each of the American
Republics should have as one of its objectives the control of all
persons, real or juridical, residing or situated within the American
Republics, regardless of nationality, who by their conduct are known
to be, or to have been, engaging in activities inimical to the
security of the Western Hemisphere and for the benefit of the Axis;
(2) That each of the Governments of the American Republics,
through its wartime economic, financial, and other controls eliminate,
insofar as possible, from the economic, social and political life of
its nation the influence and activities of those persons, real or
juridical, residing or situated within the American Republics, who
are known to be, or to have been, engaging in activities inimical to
the security of the Western Hemisphere and for the benefit of the Axis.
Regraded Unclassified
150
3
RESOLUTION ON CONTROL OF REAL PERSONS
WHEREAS:
1. The Third Meeting of the Ministers of Foreign Affairs of
the American Republics held in Rio de Janeiro in January, 1942,
indicated the desire of the Governments of the American Republics to
take the necessary measures to supervise and control all commercial
and financial transactions in any American Republic, engaged in by
real persons resident within the American Republics, whose activities
are deemed inimical to the security of the Western Hemisphere; and
2. It is the purpose of any financial control laws relating
to real persons resident within the American Republics, whose activi-
ties are deemed inimical to the security of the Hemisphere, to elimin-
ate the activities and influence of such real persons insofar as
possible.
The Inter-American Conference on Systems of Economic and Financial
Control
RECOMMENDS:
1. That the Governments of the American Republics take the
necessary measures, including legislative or executive action, where
necessary, as well as administrative action, to carry out the follow-
ing purposes:
(a) The effective blocking of all the assets, including funds
and accounts of all real persons deemed friendly to, or acting for the
benefit of, the Axis interests and who are actually or potentially
dangerous to the common interests of the American Republics.
151
- 2 -
(b) The objectives of the effective blocking of the assets of
such real persons shall be the following:
(1) Insofar as possible, all cash, securities, or other
assets, as well as all current sources of income derived from
any source including wages, rentals, profits, commissions, and
proceeds from the liquidation of assets, shall be deposited
in a blocked account in the central bank or in an approved bank
and shall not be subject to use except with the permission of
the appropriate governmental authority.
(11) The governmental authorities shall not permit the
release of funds from such blocked accounts except insofar as
such release shall be consistent with the fundamental objective
of eliminating or greatly restricting all phases of influence
and activity of such real persons in the economic, social, and
political life of such American Republic.
(111) Any funds which are released for living expenses of
such real persons shall be curtailed to a minimum and the release
of funds for any other purpose shall only be allowed where it is
clear that the release will not permit such real person to main-
tain his position of influence and to carry on his inimical
activities within the Hemisphere. No blocked funds shall in
any event be used for effecting any foreign exchange or import
or export transaction unless the blocked real person proves to
Regraded Unclassified
152
- 3 -
the satisfaction of the governmental authority that the
transaction will not in any way benefit, directly or indirectly,
Axis interests in the country of origin of the transaction or
in any other country that may be involved in the transaction.
(iv) In the formulation of plans and in the actual
administration of the program each country shall be privileged
to call upon any of the other American Republics for assistance,
information and cooperation which is desired to assure the
success of the program and each country shall cooperate with
the other American Republics upon request and shall, within
the means and resources available, furnish such assistance and
information.
Regraded Unclassified
153
4
DRAFT OF RESOLUTION ON BUSINESS ENTERPRISES
THEREAS:
1. At the Third Meeting of Ministers of Foreign Affairs of the
American Republics held at Rio de Janeiro in January 1942, it was
recommended that the governments of the American republics adopt in-
modiately measures -
#(1) To prevent, within the American Republics, all commercial
and financial transactions inimical to the security of the Western
Hemisphere, which are entered into directly or indirectly, by or
for the benefit of the members of the Tripartite Pact, the terri-
tories dominated by them, as well as the nationals of any of them,
whether real or juridical persons, it being understood that real
persons may be excepted if they are resident within an American
Republic and on condition that they are controlled according to
the following paragraph;
"(ii) To supervise and control all commercial and financial
transactions within the American Republics by nationals of the
states signatory to the Tripartite Pact, or of the territories
dominated by them, who are resident within the American Republics,
and to prevent all transactions of whatsoever nature which are
inimical to the security of the Western Hemisphere.
"Whenever a government of an American Republic considers it desir-
able and in accordance with its national interest and its own
legislation, and especially if any of the aforesaid measures, when
applied to concrete cases, should be prejudicial to its national
economy, the properties, interests, and enterprises of such states
and nationals which exist within its jurisdiction, may be placed in
trust or subjected to permanent administrative intervention for
purposes of control; moreover, such government of an American
Republic may resort to sales to its nationals, provided that the
proceeds thereof be subject to the same control and to similar
regulations as those applicable to the funds of the above-
mentioned aliens."
Regraded Unclassified
154
- 2 -
2. The Axis nations have implanted business enterprises through-
out the Western Hemisphere in anticipation of the present conflict in
the hope that such enterprises would be of use to them in their program
of world conquest;
3. The Axis nations have utilized business enterprises owned or
controlled by their nationals as instruments of policy for military,
economic and political aggression throughout the world;
4. Business enterprises owned or controlled by Axis nationals have
been a source of foreign exchange to finance the purchase of supplies and
materials to support the aggressive acts of these nations;
5. Business enterprises owned or controlled by nationals of the
Axis countries have been a source of funds to finance propaganda,
espionage, sabotage, and other subversive activities directed against
the nations of the Western Hemisphere; and
6. Business enterprises owned or controlled by Axis nationals by
providing seemingly innocent employment have enabled the Axis nations
to place agents in the countries of the Western Hemisphere who have
engaged in subversive activities and have attempted to subvert the
political institutions of the countries of the Western Hemisphere.
The Inter-American Conference on Systems of Economic and Financial
Control
RECOMMENDS:
1. That the governments of the American Republics adopt immediately
measures necessary to implement the following program, which has as its
Regraded Unclassified
155
- 3 -
objective the elimination from the commercial, agricultural, industrial
and financial life of the Western Hemisphere of all influence of the
appressor nations which is inimical to the interests of the nations of
the Western Hemisphere.
(a) All business enterprises owned, controlled or dominated
by persons whose activities are inimical to the security of the
nations of the Western Herrisphere and where such business enter-
prises are not essential to the public health, safety, financial
security or economic progress of the nation, shall forthwith be
liquidated, the assets sold or transferred to persons of unimpeach-
able loyalty to the cause of the democratic nations and the welfare
of the nations of the Western Hemisphere, and the proceeds derived
from such liquidation and sale should be effectively blocked.
(b) All business enterprises owned, controlled or dominated
by persons whose activities are inimical to the security of the
nations of the Western Hemisphere and where such business enter-
prises are essential to the public health, safety, and financial
security or economic progress of the nation should be vested in
the government and operated in its interest, or sold as going
concerns to persons of unimpeachable loyalty to the cause of the
democratic nations and the welfare of the nations of the Western Hemisphere.
Regardless of the method utilized by the Government every such business
Regraded Unclassified
156
- 4 -
enterprise shall be reorganized, so as to eliminate all undesir-
able personnel, practices, contracts and other relationships.
(c) Business enterprises which are owned, controlled, or
dominated by persons not acting in the direct interests of the
Axis governments but whose activities have been of benefit to
Axis interests and injurious to the welfare of the Western Hemi-
sphere shall be reorganized. Undesirable personnel should be
dismissed, and undesirable practices, contracts and other relation-
ships should be terminated, and such firms be permitted to continue
to operate after such reorganization only under adequate and com-
plete safeguards including the use of interventors in appropriate
situations to insure that such objectionable practices and re-
lationships cannot be resumed.
2. That, pending the full implementation of this program and to
forestall possible sabotage, destruction or subversive activity in these
business enterprises, each country take appropriate precautionary measures,
including the use of interventors to scrutinize all transactions;
3. That each country designate or establish an organization charged
with the responsibility of administering the program;
4. In the formulation of plans and in the actual administration
of the program each country shall be privileged to call upon the other
American Republics for assistance, information and cooperation which is
desired to assure the success of the program. Each country shall cooperate
Regraded Unclassified
157
- 5 -
with the other American Republics upon request and shall, within the
means and resources available to it, grant or furnish technical,
financial or other assistance and information.
158
STANDARDS OF EFFECTIVE BLOCKING
WHEREAS:
1. This Conference has recommended that the governments of the
American Republics proceed immediately with measures designed to elimi-
nate the activities and influence of real or juridical persons within
the American Republics whose activities are deemed inimical to the
security of the Western Hemisphere; and
2. One of those measures will be the effective blocking of the
funds, accounts and other assets of individuals and of the net proceeds
arising out of the sale, transfer, or liquidation of undesirable business
enterprises; and
3. It is recognized that to insure the effective blocking of
assets, it is necessary to implement decrees or other laws by the
adoption of stringent and flexible administrative procedure;
The Inter-American Conference on Systems of Economic and Financial
Control
RECOMMENDS:
1. That the governments of the American Republics adopt adminis-
trative procedures for the effective blocking of assets which include
the following:
Regraded Unclassified
159
- 2 -
(a) In so far as possible, all cash, securities, or other
assets, as well as all current sources of income derived from any
source including wages, rentals, profits, commissions, and proceeds
from the liquidation of assets, shall be deposited in a blocked
account in the central bank or in an approved bank and shall not be
subject to use except with the permission of the appropriate govern-
mental authority.
(b) The governmental authority shall not permit the release
of funds from such blocked accounts except in so far as it is
established that such release will not benefit directly or indirectly
any Axis interests in the country of origin of the transaction or in
any other country that may be involved in the transaction; and that
such release shall be consistent with the fundamental objective of
eliminating or greatly restricting all phases of influence or
activity in the economic, social, and political life of the American
Republics of any real or judicial persons whose activities are
inimical to the security of the Hemisphere.
(c) The effective blocking of accounts necessitates not only
the enactment of appropriate decrees or other laws but also the
effective administration of such laws. The governmental authority
charged with the administration of the control measures must have
complete authority to determine that any particular assets are sub-
ject to the blocking provisions of the decrees or other laws; to
Regraded Unclassified
160
- 3 -
prevent the use of any blocked assets for any purpose whatsoever,
and to deny any application for the release of blocked assets
for any purpose whatsoever.
(d) Appropriate penalty measures must be provided which will
be sufficient to deter any violation or attempt at violation of
the control laws by blocked persons, banks holding blocked accounts,
and other interested parties.
Regraded Unclassified
6
161
FINANCIAL AND COMMERCIAL TRANSACTIONS WITH
AGGRESSOR NATIONS AND NATIONS DOMINATED BY THEM
WHEREAS:
1. The nations which have committed acts of aggression against the
American continent are using funds and property within the American
Republics, including funds and property looted from real and juridical
persons within the nations dominated by the aggressor nations, to threaten
the political and economic freedom of the American Republics; and
2. Such aggressor nations have contrived to engage in financial and
commercial transactions directly or indirectly with the American Republics
which have the effect of furthering their aggression, and of imperiling
the security of the Western Hemisphere,
The Inter-American Conference on Systems of Economic and Financial
Control
RECOMMENDS:
l. That the Governments of the American Republics in cutting off
all financial and commercial transactions, pursuant to Resolution V of
the Third Meeting of the Ministers of Foreign Affairs of the American
Republics, held at Rio de Janeiro, with nations which have committed
acts of aggression against the American continent, and nations dominated
by them, each of the American Republics adopt immediately appropriate
measures
(a) To block effectively the funds and property within
the American Republics now held or hereafter acquired by
or for the nations which have committed acts of aggression
Regraded Unclassified
162
- 2 -
against the American continent and the funds and property
now held or hereafter acquired, by or for any real or
juridical person within such nations and nations dominated
by them.
(b) To prevent any real or juridical person within the juris-
diction of such American Republic from engaging in any
financial or commercial transaction which involves the
exportation of any property of any nature whatsoever, the
remittance of any funds, or the transmission of any com-
munication to any person within the aggressor nations or
nations dominated by them, whether such exportation,
remittance, or transmission is
(1) directly to any person within such nations, or
(ii) to any person within any other part of the world
for transmission to or if intended for or destined
to any person within such nations,
except limited payments for living expenses to citizens of
such American Republic residing within the territory of the
aggressor nations or nations dominated by them, and payments
of the expenses of representing the governmental interests of
such American Republics within such territory, including the
care and safeguarding of governmental property; all of which
payments shall be effected by the government of such
Regraded Unclassified
163
- 3 -
American Republic through the Government representing its
interests in such territory.
(c) To prevent any real or juridical person within the juris-
diction of such American Republic from engaging in any
financial or commercial transaction which involves the
importation of any property of any nature whatsoever or
the remittance of any funds, or the receipt of any com-
munication or acting upon any instruction from any person
within the aggressor nations or nations dominated by them,
whether such importation, remittance, communication, or
instruction is
(1) directly from any person within such nations, or
(ii) from any person within any other part of the world
when such importation, remittance, communication, or
instruction originates from any person within such
nations,
except limited payments for living expenses to citizens of
such aggressor nations or nations dominated by them and
payments of the representation expenses of such nations
within such republic; all of which payments shall be
effected by the Government of such nation through the
Government representing its interests in such American
Republic and shall in no case be made except against foreign
Regraded Unclassified
164
- 4 -
exchange remitted from abroad and not out of the blocked
funds and other assets of such nation in the American
Republic.
165
7
FINANCIAL AND COMMERCIAL TRANSACTIONS WITH
COUNTRIES OUTSIDE THE WESTERN HEMISPHERE
WHEREAS:
1. The nations which have committed acts of aggression against the
American continent have cloaked their funds and property in the names of
real and juridical persons in other nations outside the Western Hemisphere,
and have used such funds and property in a manner that threatens the
security of the Western Hemisphere; and
2. The aggressor nations have conspired to carry on commercial and
financial transactions through real and juridical persons in other nations
outside the Western Hemisphere for the purpose of strengthening the
economy of the aggressor nations, and of imperiling the security of the
Western Hemisphere,
The Inter-American Conference on Systems of Economic and Financial
Control
RECOMMENDS:
1. That the Governments of the American Republics, in cutting off
financial and commercial transactions with other nations outside the
Western Hemisphere when such transactions are directly or indirectly of
benefit to nations which have committed acts of aggression against the
American continent, adopt immediately appropriate measures:
(a) To regulate and control the funds and property within the
American Republics now held or hereafter acquired by or
for nations outside the Western Hemisphere or real and
Regraded Unclassified
166
- 2 -
juridical persons within such nations, except nations which
have cut off commercial and financial transactions with the
aggressor nations.
(b) To prevent any real or juridical person within the juris-
diction of such American Republic from engaging in any com-
mercial or financial transaction which involves the exportation
or importation of any property of any nature whatsoever to
nations outside the Western Hemisphere, or the remittance of
funds to or from any person in nations outside the Western
Hemisphere, when such exportation, importation or remittance
is of benefit to the nations which have committed acts of
aggression against the American continent, or to the nations
dominated by them.
(c) To prevent all transactions between the American Republics and
nations outside the Western Hemisphere involving any real or
juridical person within any nation outside the Western
Hemisphere whose activities are deemed inimical to the security
of the Western Hemisphere.
Regraded Unclassified
167
8
TRANSACTIONS AMONG THE AMERICAN REPUBLICS
WHEREAS:
1. The nations which have committed acts of aggression against the
American continent have contrived to continue undercover financial and
commercial transactions among the American Republics which are of benefit
to themselves and through which they encourage subversive activities
within the American Republics, and
2. The American Republics are determined through increased vigilance
and through mutual cooperation to eradicate all commercial and financial
transactions among the American Republics which are of benefit to the
aggressor nations,
The Inter-American Conference on Systems of Economic and Financial
Control
RECOMMENDS:
1. That the Governments of the American Republics in cooperating
with each other to prevent financial and commercial transactions among
the American Republics which are of benefit to any of the nations which
have committed acts of aggression against the American continent or any
real or juridical persons within the American Republics whose activities
are inimical to the defense of the Western Hemisphere, adopt immediately
appropriate measures
(a) To supervise adequately financial and commercial trans-
actions among the American Republics to assure each other
that such transactions are not of benefit to the aggressor
Regraded Unclassified
168
- 2 -
nations or to persons whose activities are inimical to the
defense of the Western Hemisphere.
(b) To consult with each other and freely exchange information
with respect to financial and commercial transactions among
the American Republics, to prevent transactions which are
of benefit to the aggressor nations or the persons whose
activities are inimical to the defense of the Western
Hemisphere.
(c) To safeguard adequately in other ways the commercial and
financial transactions among the American Republics to
prevent transactions which are of benefit to the aggressor
nations or to persons whose activities are inimical to the
defense of the Western Hemisphere.
Regraded Unclassified
169
9
TRANSACTIONS OUTSIDE THE WESTERN HEMISPHERE
INVOLVING ANOTHER AMERICAN REPUBLIC OR THE
MONETARY UNIT OF ANOTHER AMERICAN REPUBLIC.
MEREAS:
1. The nations which have committed acts of aggression against
the American continent have cloaked transactions for their benefit with
and through the American Republics by having them appear to originate
or terminate in other nations outside the Western Hemisphere or in the
American Republics, and have conspired to evade in this manner the con-
trol measures of the American Republics; and
2. The aggressor nations have conspired to utilize the monetary
and banking systems of the American Republics to cloak the financial
transactions designed to further their aggression;
The Inter-American Conference on Systems of Economic and Financial
Control
RECOMMENDS:
1. That the Governments of the American Republics, in cooperating
with each other pursuant to Resolution V of the Third Meeting of the
Ministers of Foreign Affairs of the American Republics, held at Rio de
Janeiro, to prevent the monetary and banking systems of the American
Republics from being used for the benefit of the nations which have com-
mitted acts of aggression against the American continent, adopt immediately
appropriate measures -
Regraded Unclassified
170
- 2 -
(a) To prevent any transactions subject to the jurisdiction
of such American Republic involving a real or juridical person
within any nation outside the Western Hemisphere (except nations
that have cut off commercial and financial transactions with
aggressor nations), and a real or juridical person in another
American Republic, except transactions which have received the
approval of the other American Republic.
(b) To prevent any transactions subject to the jurisdiction
of such American Republic with real or juridical persons within
nations outside the Western Hemisphere (except nations that have
cut off commercial and financial transactions with aggressor
nations) involving the monetary unit of another American Republic,
except transactions which have received the approval of the American
Republic whose monetary unit is involved in the transaction.
Regraded Unclassified
=
171
CONTROLS OF CURRENCY MOVEMENTS AND TRANSFERS
WHEREAS:
1. The nations which have committed acts of aggression against the
American continent have looted United States dollar currency from the
victims of their aggression and are seeking to utilize such looted currency
to strengthen their economy for further aggressions and
2. The aggressor nations have conspired to dispose of looted United
States dollar currency within the American Republics and to use the
proceeds that might be derived therefrom for the destruction of the
political and economic security of the Western Hemisphere, and
3. The United States Government pursuant to Resolution V of the
Third Meeting of the Ministers of Foreign Affairs of the American
Republics, held at Rio de Janeiro, has taken steps to prevent looted
United States dollar currency from being utilized by the aggressor
nations,
The Inter-American Conference on Systems of Economic and Financial
Control
RECOMMENDS:
1. That the Governments of the American Republics in preventing
all transactions in United States dollar currency for the benefit of
the aggressor nations, adopt immediately appropriate measures
(a) To prohibit, in the absence of other arrangements mutually
satisfactory and agreed to between the American Republics
involved, the importation and exportation of United States
Regraded Unclassified
172
- 2 -
dollar currency except importations and exportations by or
through the Central Bank or other officially designated
institution from or to the United States.
(b) To prohibit, in the absence of other arrangements mutually
satisfactory and agreed to between the American Republics
involved, all dealing in and all holding of United States
dollar currency, unless such currency constitutes a neces-
sary part of the circulating medium, and to require that all
such currency, the dealing in and holding of which has been
prohibited, be deposited for collection with the Central Bank
or other officially designated institution of such Republic
for exportation to the United States.
Regraded Unclassified
173 11
CONTROL OF SECURITY MOVEMENTS AND TRANSFERS
WHEREAS:
1. The nations which have committed acts of aggression against the
American continent have looted securities from the victims of their
aggression and have utilized this loot to strengthen their economy for
further aggressions; and
2. The aggressor nations have attempted to dispose of such looted
property within the American Republics and to use the proceeds to finance
subversive activities inimical to the freedom and security of the
Western Hemisphere,
The Inter-American Conference on Systems of Economic and Financial
Control
RECOMMENDS:
1. That the Governments of the American Republics in preventing all
transactions in securities for the benefit of the aggressor nations,
adopt immediately appropriate measures
(a) To regulate the importation into such American Republic
of securities in such manner that any security imported
into such American Republic will be effectively blocked
and such security, or the proceeds thereof, will be
immobilized unless and until it is proved that no aggressor
nation or nation dominated by the aggressor, or person
within any such nation has had an interest in such security
at any time on or since September 1, 1939.
Regraded Unclassified
174
- 2 -
(b) To prohibit any dealing in, or the disposition by sale,
transfer, hypothecation, or otherwise, of any security
within such American Republic if such transaction is
pursuant to any communication or instruction received
directly or indirectly from any person within any
aggressor nation or nation dominated by the aggressor.
(c) To prohibit any dealing in or the disposition by sale,
transfer, hypothecation, or otherwise, of any security
within such American Republic, other than a dealing in
or a disposition which results in the complete blocking
and immobilization of such security or the proceeds
thereof, if any person within any aggressor nation or
nation dominated by the aggressor has an interest in such
security or proceeds, or from which dealing or disposition
any such person will derive any benefit, direct or indirect.
(d) To prohibit the acquisition or dealing in any security of
any interest in any security located outside of such
Republic by any person within such Republic, except under
appropriate controls by such Republic which will guarantee
that no person within an aggressor nation or nation
dominated by the aggressor has an interest in or will
derive any benefit, direct or indirect, therefrom.
Regraded Unclassified
175
o
P
Y
TELEGRAM SENT
AHC
June 29, 1942
This telegram must be
paraphrased before being
9 p.m.
communicated to anyone
other than a Governmental
agency. (BR)
AMEMBASSY,
BUENOS AIRES.
966
Triple Priority
Your 1246, June 25, 8 p.m., your 1266, June 28, 2 p.m., and the
Department's 909, June 17. 7 p.m.
The Department and Treasury do not feel that the proposed currency
controls reported in your 1246 are in accord with those outlined in your
1145, June 15, in which you indicated that the Central Bank was prepared
to call in all (repeat all) holdings of dollar currency.
The Department and Treasury regret that the Central Bank is not
now disposed to follow the procedure outlined in the Department's
telegram under reference. Several of the other American republics
have already instituted controls over dollar currency which approximate
the suggested procedure. It was hoped that Argentina, one of the
countries having a substantial dollar currency market, would do the
same and thus fully implement the currency controls established by this
Government, and Resolution V of the Rio Conference.
In view of the previous proposal by the Central Bank to call in
all holdings, it is difficult to understand why the Central Bank now
considers that it does not have the power so to do. Even if the Central
Bank is correct, it could certainly obtain the necessary power through
effective cooperation by the Argentine Government.
The controls proposed by the Central Bank are believed to be
inadequate, but if the program suggested in the Department's 909 is
impossible, of adoption by Argentina at the present time, the Depart-
ment and Treasury recommend that the following points be brought to the
attention of the Argentine authorities:
Regraded Unclassified
176
-2-
One: A prohibition against dealing in dollar currency
cannot be effectively administered in the absence
of a prohibition against the holding of such currency.
Permitting individuals to continue to hold dollar
currency encourages smuggling, and the existence of a
black market.
Two: The Central Bank should not (repeat not) grant
licenses for the exportation of dollar currency to
any place other than the United States. It is also
felt that export licenses should be granted only in
cases where the currency will be shipped to the United
States by or through authorized banks.
Three: The Central Bank should make it clear to all persons
that export licenses granted by it are no (repeat no)
guarantee whatsoever that the currency will be
released by Treasury upon its importation into the
United States.
Four: Prior to granting export licenses, the Central Bank,
in addition to the information outlined in the
Department's telegram under reference, should obtain
the serial numbers of the dollar currency to which
the export license relates, and should turn over
these serial numbers together with the other information
to the Embassy for forwarding to the Department.
Five: Treasury's attitude toward the holdings of banks and
exchange houses under the control of the Central Bank
as of May 19 was predicated upon the assumption that
the Central Bank would adopt the controls outlined in
your 1145 of June 15, which closely approximated the program
suggested in the Department's telegram under reference.
HULL
(DH)
FF:TTjr:GEP FD EO RA
Copy:1c:7/20/42
Regraded Unclassified
C
0
177
P
Y
TELEGRAM SENT
BAS
A portion of
June 29, 1942
this telegram must be closely
paraphrased before being
8 p.m.
communicated to anyone. (BR & B)
AMEMBASSY
RIO DE JANEIRO
TRIPLE PRIORITY
1718
Your 2220, June 24, 5 p.m., and your 2260, June 27, 3 p.m.
The Brazilian procedure for administering currency controls and the
political considerations involved in securing the adoption of the Treasury
procedure have been explained to the Treasury Department. As a result the
following procedure has been agreed to by Treasury, which the Department and
Treasury hope will be satisfactory:
One. Treasury will accept all dollars already deposited, which have
been or in the future may be converted into milreis, provided the dollars are
accompanied by a certificate from the Embassy or Consulate when shipped to
the United States. It is assumed that Treasury will be requested to accept
such dollars only with respect to those deposits which have been or may be
found to be satisfactory.
(BEGIN CONFIDENTIAL) The deposits by the French and Spanish Embassies
should not (repeat not) be liquidated without prior consultation with the
Department and Treasury and it is assumed that you will follow a similar
procedure with respect to any other unusually large deposits where suspicious
circumstances are involved. (END CONFIDENTIAL)
Two. With respect to deposits objectionable as to person or source and
deposits by European refugees who are friendly but subject to Axis pressure
because of home ties, it is assumed that the depositor will be given the
option of transfer to a special account in the United States or deposit in
a special blocked dollar account in the Bank of Brazil as outlined in your
1975, June 10, 9 p.m. Should such deposits be placed in a blocked dollar
account in the Bank of Brazil, it is understood that you will permit with-
drawals from such accounts only up to the sum of $500, said withdrawals to be
in milreis and to be permitted only in cases where funds are necessary for
subsistence purposes and only after agreement by the depositor to permit the
Bank of Brazil to send the balance to the United States on a collection basis.
Regraded Unclassified
178
- 2 -
Three. With respect to future deposits by such persons as recently
arrived American tourists, Army and Navy personnel, merchant seamen, ferry
command personnel, et cetera, Treasury is prepared to accept reasonable
amounts of dollars converted into milreis with the approval of the Embassy
or the Consulate.
Four. With respect to all other future deposits, it is assumed that
there will be no difficulty in following the Treasury procedure of having
all such deposits forwarded to the United States on a collection basis in
the manner outlined in the Department's 1597, June 10, 9 p.m.
HULL
(DH)
811.51/4327
FF:TT Jr:MKG
FD
EO
RA
Copy:bj:7-3-42
Regraded Unclassified
179
0
0
P
Y
BAS
Bogota
This telegram must be
paraphrased before being
Dated June 29, 1942
communicated to anyone
other than a Governmental
Rec'd 7:20 p.m.
agency. (BR)
Secretary of State,
Washington.
878, June 29, 3 p.m.
Reference is made to the Department's circular telegram dated May
18 and Embassy's telegram 677, May 19.
The Colombian Government under date of June 27 issued a decree pro-
hibiting the import and export of United States dollar currency except
through the Bank of the Republic and making the following regulations
concerning dealings in such currency: all payments and other transactions
within Colombia are prohibited.
Holders must deposit all such currency with the Bank of the Republic
or with one of its agencies within 15 days of the day of the decree. The
Bank of the Republic will send such deposits to the United States for de-
posit or collection all of which will be exchanged into Colombian pesos.
If bills are not accepted by the United States Government they will
be held by the Bank of the Republic until regulatory decrees are issued.
Depositors with the Bank of the Republic must make full declaration
descriptive of the transactions through which such bills were required.
The Bank of the Republic will purchase amounts brought into Colombia
by persons returning from the United States or other American Republics.
These purchases will be made per decrees 386 and 1915 of the year 1936 re-
ferring to tourists.
This decree regulates the operations of all previous provisions, rules
and decrees referring to currency.
LANE
JRL
Copy: VW: 6-30-42
Regraded Unclassified
180
0
P
Y
NMC
Habana
This telegram must be
paraphrased before being
Dated June 29, 1942
communicated to anyone
other than a Governmental
Rec'd 5:49 a.m., 30th.
agency. (BR)
Secretary of State,
Washington.
476, June 29, 9 p.m.
Minister of the Treasury informed me this afternoon
that at forthcoming financial conference in Washington
Cuban delegate will be instructed to propose that
American Governments may take over funds of enemy or
enemy occupied countries (with permission of owners in
latter case) and invest same in government bonds.
BRADEN
RR
Copy:1c:7/1/42
Regraded Unclassified
Treasury Department 181
Division of Monetary Research
Date
July 1
19 42
To:
Secretary Morgenthau
From: Mr. White
I am afraid this may annoy
you, but nonetheless you might be
interested.
H.D.W.
MAK
0
182
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 29, 1942
TO
Mr. White
FROM
Mr. Hoflich
The appended statement is bitterly critical of the voluntary feature
of the British War Savings system, chiefly on the ground that it has
resulted in widespread inequality of sacrifice. The opinion is expressed
that "everybody would have been much happier and victory over despotism
nearer" if the Government had instituted enforced savings at the outset.
The statement, in the form of a letter from the American Consul at
Birmingham to the American Consul at London, is based upon conversations
with a small number of people - "ten or so" acquaintances of the Consul
at Birmingham.
It is charged further that:
1. "In many cases the cost of exerting the pressure
has actually
been much greater than the amount of money such pressure squeezed out."
2. "The worker has come to regard with loathing a type of pressure
which is all too frequently brought to bear upon him" to purchase War
Savings securities.
3. The refusal of many people to save up to their capacity has led
to a large volume of hoarding and black market activities.
4. The reported results of the savings campaign are deceptive in that
a large proportion of the securities purchased do not represent genuine
savings.
The hope is expressed that "the United States will dare demand that
the individual American citizen bear his fair share of the population's
responsibility in the matter of lending his Government the money which
that Government needs for the successful prosecution of the war."
Regraded Unclassified
183
OOPY FOR EXPIRARY
C
0
bd
DEPARTMENT OF STATE
Y
WASHINGTON
June 26, 1942
In reply refer to
FD
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
transmits herewith a copy of a strictly confidential
letter under date of May 27, 1942 from the American
Consul at Birmingham to the American Consul at London
concerning the attempts of the British Government to
induce the population of that country to save and
invest in government obligations.
Enclosure:
Letter dated May 27, 1942,
from Consul at Birmingham
to the Consul at London.
Copy:1c:6/27/42
Regraded Unclassified
184
C
o
P
Y
STRICTLY CONFIDENTIAL
800-JRW:dc
Birmingham 2, May 27, 1942.
Glenn д. Abbey, Esquire,
American Consul,
London, W. 1.
Dear Mr. Abbey:
During the last several days I have got into touch
with ten or so men of my acquaintance with a view to
seeing what they think about the method the British
wartime Government has adopted to encourage people to
lend it their money rather than unnecesserily spend it.
In main upshot, what these men said added up to the
opinion that everybody would have been much happier
and victory over despotism nearer if, at the outset,
that Government had simply required the individual citizen
to save during a given period an amount the size of
which depended upon his income and family responsibilities.
The criticism that the method the British Govern-
ment has adopted has resulted in widespread inequality
of sacrifice was little short of fierce. In any
large body of citizens representing some sort of a
category, among clerical workers, for example, while
some have saved till it hurt, others have grimly resisted
all appeals and have saved nothing. In many cases the
cost of exerting the pressure brought to bear on the
individual to save has actually been much greater than
the amount of money such pressure squeezed out. Among
people of wealth, there have been all too many who have
absolutely refused to save to any degree approaching
capacity, such refusal being motivated by downright
suspicion that & postwar government would devise means
to bilk. An enormous aggregate of money that should
have gone into savings has instead gone into the hands
of traders who possess a cunning knowledge of that trait
in human character which makes people want to exchange
what they fear will later become worthless for something
whose intrinsic value is more or less static - for
example, furniture, diamonds, gold, land.
Price/
Regraded Unclassified
185
- 2 -
Price regulation, rationing, scarcity, and BO
forth, have, without doubt, created huge savable
surpluses. But of these precious little has been
converted into Government securities. The spectacle
of the over-paid war worker throwing his easily
acquired wealth about is merely one evidence of this.
Packed public houses is another. Black market
transactions in cash is yet another. Daily, thousands
of pounds find their way into the hands of vendors whose
most effective sales argument is that sterling as well
as British Government securities will one day be worth
nothing.
The periodically reported results of the saving
campaign are deceptive. The Government well knows
this. But the Government does not care. Indeed, it
looks upon the fact as a necessary evil, a sort of
pious misrepresentation. Out of every ten pounds
sterling reported as saved perhaps as much as five, or
maybe even more, represents what, in effect, is little
different from money taken out of one pocket and put
into the other. Banks, insurance companies, building
societies, and private business organizations have been
willing to accommodate, willing to help boost collections
up nearer the quotas fixed. In consequence, the man in
the street has often been encouraged or shamed into
rising to what he has been hoodwinked into believing is
the average citizen's standard of patriotism or sacrifice
in the matter.
The country swarms with busybodies who spend days
on end extracting small amounts from small citizens when
the time could be much more effectively and profitably
devoted to work at the bench or to operating a machine
tool. The aggregate of energy exerted to maintain the
volume of savings among wage earners is appallingly great.
But what is worse, the worker has come to regard with
loathing & type of pressure which is all too frequently
brought to bear upon him to part with the instalments
he has tongue in cheek promised periodically to pay.
Yet it is now perhaps too late for the British
Government to inaugurate the system it did not have the
courage or foresight to insugurate at any one of the
several junctures at which the people were ready, willing,
even anxious to be told what their plain and individual
duties were with respect to lending the Government money,
with respect to cutting down their power to pay for
nonessential commodities and services.
There/
Regraded Unclassified
186
- 3 -
There has been a great deal of controversy about
ways and means, but, at least among intelligent citizens,
there has seldom been any argument about the principle.
During war, lending the Government money is no lesser
duty than paying taxes, and, capacity to lend or pay
taxes is the obvious measure of what is the twofold duty
in the individual case. After this duty is discharged,
and only after it 1s, has the citizen any scope for
doing that which may fairly be looked upon as being more
than his country can rightly demand of him.
No matter which way or means may be adopted to lay
down what the individual citizen's duty is, there will
always be a section of the population whose members will
be able to and will maintain a standard of life
unbecomingly higher than the standard maintained by the
vast majority of their less fortunate compatriots.
But this is no valid argument against the principle nor
should it have ever been allowed to stand in the way of
reducing the buying power of that majority to B. level
that must have spelt an immediate, lasting, and radical
curtailment of the consumption of nonessential commodities
as well as the use of nonessential services.
There is much in one complaint that thousands upon
thousands of British savers have made against their non_
saving neighbors. The latter are buying property or
refusing to do without nonessentials. In other werds,
they are either translating their money into things
which they will have after the war or are making the
most of the "enjoy life now" doctrine. The former,
however, are doing without nonessentials, are currently
foregoing enjoyments, and are lending the money they
thus save to their Government. If, after the war, the
purchasing power of the money in which the Government
refunds loans is far beneath the purchasing power of the
money lent, the relative positions of these two classes
of citizens will do little more than illustrate about all
there is in the saying that virtue is its own reward.
Any postwar loss resulting from lending the Government
money during the war should be B. burden borne not just
by the patriot but by each and every individual as a
citizen and according to his ability to bear such burden.
The United States has won great admiration in England
for its will to adopt, one by one, not the half but the
whole measure which latter a sense of justice coupled with
courage so unhesitatingly recommends. And a great many
Englishmen/
Regraded Unclassified
187
- 4 -
Englishmen are today watching with friendly interest,
with enlightened hope, to see whether the United States
will dare demand that the individual American citizen
bear his fair share of thepopulation's responsibility
in the matter of lending his Government the money which
that Government needs for the successful prosecution of
the war.
Very truly yours,
James R. Wilkinson
American Consul
A true copy of
the signed orig-
inal.
Copy:1c:6/27/42
Regraded Unclassified
188
C
0
P
Y RS
PLAIN
London
Dated June 29, 1942
Rec'd 1:20 p.m.
Secretary of State
Washington
3608, twenty-ninth
Legation Stockholm still opposes proclaimed listing Rober
Gotthard Wunsche.
Embassy and British will deal with this and other so-called
"political" cases upon completion forthcoming discussions here
of listing policy in Sweden. Results of discussions will be
submitted Department for consideration and with request that
further instructions be sent Legation Stockholm. In meantime
if Department desires telegraph Embassy comment on Stockholm's
1302, May 23, guidance given will be helpful in London discussions.
If Legation Stockholm remains unable concur on "political"
cases on basis new instructions Embassy will of course inform
British of failure of ordination and report cases in full to
Department.
WINANT
WSB
Copy:1c:7/2/42
Regraded Unclassified
189
C
0
P
Y
PMW
London
This telegram must be
paraphrased before being
Dated June 29, 1942
communicated to anyone
other than a Governmental
Rec'd 7:07 p.m.
agency. (BR)
Secretary of State,
Washington.
3621, June 29, 11 p.m.
Embassy assumes omission of Stockholm from Department's
unnumbered undated telegram quoting Proclaimed List
operations circular of June 23, 6 p.m. to Ankara, Bern,
Madrid and Lisbon was intentional, and that missions have
been instructed to air mail copies of reports to Embassy
London.
WINANT
CSB
Copy:1c:6/30/42
Regraded Unclassified
Treasury Department
190
Division of Monetary Research
Date
July 1 1942
To:
Miss Chauncey
From: Mr. White
Please call to the Secretary's
attention.
MA
191
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 29, 1942
TO
Secretary Morgenthau
Mr. White
FROM
Subject:
Desire of Iranian Government
to Purchase Silver
The State Department has cabled a reply to the
American Legation in Iran concerning the inquiry of
the Iranian Government on the availability of silver
that could be purchased by Iran for coinage purposes.
The reply states that the Treasury has informed
the State Department that the Treasury does not at
present have authority to sell Treasury silver.
Because of wartime need for silver the silver market
1s becoming increasingly tight and some difficulty
may be experienced by Iran in acquiring silver in
this country. The Iranian Trade Commissioner in
New York has suggested to his Government the possi-
bility of obtaining silver from India. The Treasury
has informed the State Department that the price of
silver in India is nearly twice as high as in the
United States and that the British Government itself
is seriously short of silver.
Regraded Unclassified
192
COPY FOR SECRETARY
REMIT OF STATE
WASHINGTON
In reply refer to
FD 891.515/81
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and with
reference to the Department's letter of June 12, 1942,
transmitting a copy of telegram 193 under date of June
10 from the American Legation at Tehran concerning the
desire of the Iranian Government to purchase silver
transmits herewith a copy of the Department's reply
thereto, telegram 159 under date of June 19.
Enclosure:
To Legation, Tehran,
no. 159, June 19, 1942.
Copy:imc:6/26/42
Regraded Unclassified
193
C
0
P
TELEGRAM SENT
Y
FMH
June 19, 1942
This telegram must be
paraphrased before being
Noon
communicated to anyone
other than a Governmental
agency. (BR)
AMLEGATION,
TEHRAN, (IRAN).
159
Your 193, June 10, 10 a.m.
1. Last week Saleh* inquired informally of the Department
whether this Government would license the export of silver to
Iran for coinage purposes. After inquiry of the Treasury Depart-
ment and the Board of Economic Warfare (the licensing authority)
Saleh was informally advised that the Department did not contemplate
any difficulty in obtaining export licenses for shipments of silver
to Iran for legitimate coinage purposes. At the same time it was
pointed out that it might be extremely difficult to purchase any
significant amount of silver in the open market and the suggestion
was advanced that Iran might look into the possibility of purchas-
ing silver in India.
2. The Treasury Department does not at present have the
legislative authority to sell the silver which it holds. At the
same time there is a great need for silver for industrial war
purposes for solders, et cetera and in substitution for copper for
electrical
*Head of Iranian Trade & Economic Temmission, located in New York City. FD
Regraded Unclassified
194
- 2 -
electrical purposes and this has made the silver market a very tight
one. The whole silver question is receiving the study of interested
agencies of this Government and it is possible that in the near future
legislation may be suggested to Congress which if it is passed may
effect the release of some of the silver held by the Treasury for war
uses and for essential coinage needs. The Department will advise you
if there is any change in the present situation. In the interim the
Department is reluctant to assist foreign governments in diverting
from the open market silver which is badly needed for the war effort.
Even with the assistance of the Department it is believed that Iran
would find it extremely difficult and slow to acquire silver in the
open market.
3. With respect to the suggestion to Saleh that Iran look into
the possibility of obtaining silver from India the Department has
subsequently been informed by the Treasury that the price of silver
in India is nearly twice as high as the price in the United States
and further that the British Government itself is running seriously
short of silver. In the light of this information there may be
little point in the Government of Iran taking this question up with
the Indian authorities.
HULL
(AAB)
891.515/81
FD:GL:BM
NE
EO
Copy:imc:6/26/42
Regraded Unclassified
195
0
0
P
Y
JG
Mexico City
This telegram must be
paraphrased before being
Dated June 29, 1942
communicated to anyone
other than a Governmental
Rec'd 10:47 p.m.
agency. (BR)
Secretary of State,
Washington.
746, June 29, 6 p.m.
Department's 879, June 20, 9 p.m. regarding
Ulises Miranda British concur in recommendation as
set forth in Embassy's telegram 683, June 12.
MESSERSMITH
EMB
Copy:bj:6-30-42
Regraded Unclassified
C
196
0
P
Y
BANCO CENTRAL DE RESERVA
DE KL SALVADOR
SAN SALVADOR, June 29, 1942
Ref. 9s - 1355
Federal Reserve Bank of New York
New York, N.Y.
Dear Sirs:
For the purpose of strengthening our gold
reserves and maintaining the U.S. Dollar rate of
exchange at the actual level we should be much
obliged to you if you would kindly buy for our account
71 standard gold bare of approximately 400 fine ounces
each.
We wish that the gold be held by you under
earmark for our account. Please obtain the necessary
licenses.
Thanking you in advance for your cooperation
in this matter, we are, Dear Sirs,
Very truly yours,
BANCO CENTRAL DE RESERVA
DE EL SALVADOR
(signed)
President
Secretary
VMV/jfb
Note: This sale of approximately $1,000,000 in gold will be
made on July 6, 1942 - FD
ad
copy:7/6/42:lama
197
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 220
Information received up to 7 A.M., 29th June, 1942.
1. NAVAL
TARANTO. 26th. Photographs show one LITTORIO class battleship
entering the graving dock.
TRONDHEIM. TIRPITZ, HIPPER and 4 destroyers were still present at
noon 27th.
2. MILITARY
EGYPT. 27th. The enemy who had concentrated his forces in a
locality about 20 miles south of MATRUH was engaged throughout the day by all forma
tions of the Eighth Army. Our infantry opposed the enemy's eastward thrust and
attacked his northern flank while our armoured and motorised forces operated fur-
ther west against his southern flank and rear. The battle remains extremely fluid
and details are still lacking. The general trend of movement continues in an east-
erly and southeasterly direction and our forces in the MATRUH area appear to be
withdrawing to a position west of FUKA.
3. AIR OPERATIONS
WESTERN FRONT. 27th/28th. BREMEN. 118 aircraft dropped about 265
tons of bombs, weight of incendiaries being approximately four times that of H.E.
28th. 31 aircraft were despatched - ST. NAZAIRE 14, Intruders 9, shipping 3.
One Stirling is missing. Hurricane bombers off CALAIS hit a 4,000 ton ship which
was last seen listing. They also damaged one E-boat. About 40 enemy aircraft
operated against the west country chiefly WESTON-SUPER-MARE. 2 were destroyed, one
by intruders, and a third damaged.
EGYPT. 26th. Our fighters intercepted 20 escorted dive bombers
near MERSA MATRUH, destroying 6 enemy aircraft and damaging 8. At night bombers
successfully attacked TOBRUK harbour and set on fire a vessel 30 miles to the East.
27th. Intensive operations were continued in support of our land
forces. Beaufighters successfully attacked landing grounds in CYRENAICA and road
traffic between MERSA MATRUH and BARDIA.
4. HOME, SECURITY
WESTON-SUPER-MARE. 29th. At about 2 a.m. incendiaries were dropped
followed shortly by heavy H.E. and machine gun fire. Serious fires reported in the
centre of the town are under control. Casualties are likely to be higher than on
the previous night when killed were 36 as now reported.
Regraded Unclassified
00 - Mr. Sullivan
198
June 30, 1942.
10:23 a.m.
HMJr:
Hello.
Operator:
Mr. Nelson 1s out until about eleven-fifteen.
HMJr:
Eleven-fifteen.
Operator: That's right.
HMJr:
Well, leave word I want to talk to him.
Operator:
All right.
HMJr:
Please.
12:04 p.m.
HMJr:
Hello.
Operator: Mr. Nelson.
HMJr:
Hello.
Donald
Nelson:
Hello.
HMJr:
Henry talking.
N:
Yes, sir. Hello, Henry.
HMJr:
How are you? Don, this is the thing that I
want your advice on. Congress is talking
about a five percent withholding tax. Hello.
N:
Yes.
HMJr:
And we've been talking about it. Now I've
asked Internal Revenue to give me an idea of
what it meant in the way of equipment, you
see?
N:
Yes.
199
- 2 -
HMJr:
And they said if they worked - hello
N:
Yes.
HMJr:
day and night, two shifts, it would mean
twenty-one hundred more typewriters, three
hundred adding Thines, and everything
proportionate, you see?
N:
Yes, about three hundred adding machines.
HMJr:
And sixty-four calculating machines and sixty-
four addressographe, and 80 forth and 80 on,
and that's just for the - and thirteen thousand
more employees, working two shifts. Now they
then made a calculation a.8 to what it would
mean to a company that had one hundred
employees - hello
N:
Yes.
HMJr:
and they - not - and it would take two
weeks' time for a company that had one hundred
employees, and they've got a lot of stuff on
this and there's no use our going ahead with
this unless we know we can both get the man-
power and the - the equipment.
N:
The equipment? What would it mean with equip-
ment with companies? Would it
HMJr:
Well, what I thought I'd like to do 1s, I'd
like Sullivan and Helvering to meet with
somebody in your office
N:
Fine.
HMJr:
and talk the whole thing over.
N:
Fine. I'll be glad to do it.
HMJr:
If - and then if we find that the equipment -
well, let's see, twelve thousand four-drawer
letter cabinets, for instance.
N:
Well, those could be made of wood, Henry.
HMJr:
Yes, but I don't want to get into an impossible
situation - and now's the time to find out.
Regraded Unclassified
200
- 3 -
N:
Well, suppose I have Eddie Locke - I have
Eddie Looke see Danny Bell and we'll let
him straighten it out....
HMJr:
Fine.
N:
....and have Eddie Locke see Helvering.
HMJr:
Well, let's see - let him start with John
Sullivan.
N:
With Johnny Sullivan. Okay.
HMJr:
Will you do that?
N:
I'll do it right away.
HMJr:
And Bell was very pleased. He said Locke was
a very able man.
N:
Oh, he is an able fellow.
HMJr:
Yeah.
N:
Well, we'll do it. I'll have Eddie Locke
see - Eddie - see Johnny Sullivan right away.
HMJr:
You can see that we don't want to (laughs) -
if you were in the Treasury you wouldn't
want to get into a thing like this if we're
not going to be able to go through with it.
N:
No, (laughs) I can see that very definitely,
and I'll get after it right away.
HMJr:
Thank you.
N:
Okay.
Regraded Unclassified
201
June 30, 1942
This material was used at the conference between
corded. on June 30, 1942, at 10:05 a.m. Meeting was not re-
the Secretary, Mr. Sullivan and Commissioner Helvering
202
EFFECT OF THE PROPOSED WITHHOLDING TAX
6/80/02
ON A CORPORATION WITH 100 EMPLOYEES
1. On January 1, 1943, the pay clerk will examine his payroll
and select the names of the employees to whom the rate of pay
is $11.00 or more a week and ask each of them to fill in
Form W-2.
Payroll List for Last Week in December 1942
Social
Hourly
Hours
Total
Employees from
Name
Security
Rate
Worked
Paid
whom Form W-2
Number
will be obtained
Adams, A. B.
3416192
40
40
$16.00
Allen, R. W.
216394
60
20
12.00
Brown, C. R.
618934
58
16
9.28
Botts, J.
792341
100
30
30.00
(Etc., to
100)
2. A. B. Adams, R. W. Allen and J. Botts, will be presented with
exemption Form W-2, which will be prepared in duplicate, showing
1. Name and address of employee
2. Social Security number
3. District in which tax return will be filed
4. Marital status
5. Number of dependents.
3. The payroll clerk will receive the forms as soon as prepared
and from 8 table to be furnished each employer (similar to
Optional Form 1040-A) showing the amount exempt from withholding
for each marital status and dependent and indicate the amount
exempt on the payroll record of each of the employees from whom
exemption forms have been obtained.
Regraded Unclassified
203
- 2 -
For example, A. B. Adams shows that he is married and has 2
children. From the table, the payroll clerk ascertains that his
exemption is $43.00 for one week. R. W. Allen shows that he is
single. From the table, the payroll clerk ascertains the exemption
to be $11.00 for one week. J. Botts shows that he is head of a
family with one dependent. From the table, the payroll clerk
ascertains that his exemption is $26.00 for one week.
The same process is repeated for each of the 100 employees from
whom exemption forms have been obtained.
Once the exemption has been established for an employee, that
same amount is used each week unless the employee has & change in
family status. If a new employee is added, the same procedure
prevails as for the old employees after the first exemption form
is obtained.
4. On the basis of the exemption certificates, the payroll clerk
gives effect to the certificates on the first weekly payroll in
January 1943, as follows:
Social
Hourly
Hours
Gross
Amount
Balance
Rate
With-
Security
Rate
Worked
Earn-
exempt
subject
of
hold-
ame
Number
ings
from
to With-
With-
ing
With-
holding
holding
Tax
holding
ms,A. B.
3416192
40
40
$16.00
$43
None
5%
None
en,R.M.
216394
60
20
12.00
11
$1.00
5%
.05
wn,C.R.
618934
58
16
9.28
-
-
5%
None
ts,J.
792341
100
30
30.00
26
4.00
5%
.20
to 100)
Regraded Unclassified
204
- 3 -
5. At the end of the first quarter, the payroll clerk will add
the gross earnings of each of the 100 employees, the amount subject
to withholding and the tax withheld, and prepare a withholding tax
return, Form W-1, showing for the quarter ended March 31, 1943:
Name and address of company;
Gross wages paid
$29,000
Amount exempt from withholding
22,000
Amount subject to withholding.
7,000
Tax at 5 percent
350
6. Each quarter, the payroll clerk will repeat the above process.
7. At the end of the year, the payroll clerk will ascertain from
the payroll records, the gross earnings for the year of each of
the 100 employees, including all additional employees and those
separated from the company's employ during the year from whom
exemption forms have been obtained, and post to each of such
forms in duplicate the amount of the earnings and the total tax
withheld during the year.
8. After the posting is completed, the original form will be
forwarded to the collector with the last quarterly withholding
tax returns for the year. The duplicate will be signed by rubber
stamp, or other means, and given to each of the employees as &
receipt for the tax deducted from wages during the year.
9. The payroll clerk will be permitted to make adjustments in
tax withheld for the account of any of the employees whose marital
or dependency status changes during the year. The payroll clerk
must be alert to changes in pay which would require the procure-
ment of exemption forms from employees who at the beginning of the
Regraded Unclassified
205
- 4 -
were earning less than $11.00 a week and from whom no exemption
form is required, but who during the course of the year advance
in earnings above this figure, 80 as to procure the necessary
forms when such change takes place. The payroll clerk must be
prepared to check back over the payroll records should discrep-
ancies develop which require correspondence from the collector's
office during the audit of the returns.
10. Based on computations on other lines of work, the time re-
quired by the average payroll clerk using some type of mechanical
device to calculate the tax for each of the 52 payroll periods,
make the necessary postings and complete the forms required for
& corporation averaging 100 employees through out the year, is
estimated at 2 hours for each payroll period, or 104 man-hours
during the course of the year. This is the equivalent of
slightly more than 2 weeks during the year for one employee. In
the event of numerous adjustments requiring rechecking and corres-
pondence because of errors discovered by the collectors' audit,
the time may run much in excess of this total.
Regraded Unclassified
206
OUTLINE OF STEPS REQUIRED UNDER A WITHHOLDING TAX
(Assuming that 5 percent will be withheld
January 1, 1943, to be used as a
credit against 1943 taxes.)
A. What the Employee must do.
1. On January 1, 1943, each employee being paid at the rate
of $11.00 or more a week must advise his employer as to whether
he is married or single and the number of dependents, if any, on
8. form provided for that purpose. (Some 40,700,000 employees
worked in covered employment at some time during 1941 - Social
Security Bulletin - May 1942, page 4.)
2. If any time after January 1, 1943, the employees marital
status changes, another statement on an exemption certificate
must be made by the employee to his employer on a form provided
for this purpose. (One out of every ten employees will be re-
quired to make a new form because of some change affecting his
family status.)
3. If after January 1, 1943, the employee changes employers
he must make another statement and file it with his new employer.
(One out of every five employees will have to make a new form at
least once each year because of change of employment.)
B. What the Employer must do.
1. On January 1, 1943, the employer paying wages of $11.00
a week or more to any employee must make certain that each of
such employees prepares a statement for him showing his marital
Regraded Unclassified
207
- 2 -
status. The same must be done for all new employees hired during
the year and also for all old and new employees if the marital
status of the employee changes during the year.
2. The employer must indicate on his payroll record the
marital status of the employee for use in reading from a tax table
and posting to the payroll the amount of salary exempt from with-
holding.
The actual computation of tax is as follows:
Computation of Tax to be Withheld by Employer
(1) Statement from employee shows that he is a married
person with two children.
(2) Tax table to be furnished employer determines the
amount of the exemption--
Single Person
Married Person
Each
Payroll Period
(Not head of
or Head of
Depen-
family)
Family
dent
Weekly
$ 11.00
$ 26.00
$ 8.50
Biweekly
22.00
52.00
17.00
Semimonthly
23.00
55.00
18.00
Monthly
46.00
110.00
36.00
Quarterly
138.00
330.00
108.00
Semiannually
276.00
660.00
216.00
Annually
552.00
1,320.00
432.00
(3) The payroll period is weekly.
(4) By reference to the table, the employer sees that
the amount exempt from withholding for a married person
paid on 8. weekly basis is $26.00 and for each dependent
$8.50. Multiplying $8.50 by 2 (because there are 2 de-
pendents) and adding the product of $17.00 to $26.00, the
total exemption for the week is $43.00.
Regraded Unclassified
- 3 -
208
(5) The payroll shows that the employee has earned $55.60
for the week. The amount subject to withholding is $55.60
minus the amount exempt from withholding of $43.00, or $12.60.
(6) The rate of withholding is 5 percent. Therefore, the
amount of tax to be withheld this week from this employee
is 5 percent of the amount not exempt from withholding
of $12.60, or 63₫.
(7) The taxpayer will be paid the gross amount he has
earned of $55.60 less 63₫ for a withholding tax and less
other deductions under social security and other purposes.
(8) The same computation must be made for each employee
for each payroll period.
3. On each payroll period the amount exempt from withholding
must be subtracted from the amount of wages paid for each payroll
period and a tax of 5 percent computed on the remainder and deducted
from the employee's pay, as described above. (If the employer has
less than eight employees he must also prepare a receipt for the
wages deducted and give such receipt to the employee each payroll
period.)
4. At the end of each quarter, the employer must add his pay-
roll for all periods during the quarter and make a return to the
collector showing the total wages paid and the total amounts de-
ducted accompanied by a payment of the amounts deducted.
5. At the end of the year, the employer must post, from each
employee's payroll record the total amount of wages paid to such
employee and the amount of tax withheld during the year, to the
statement on the form which the employee furnished at the beginning
Regraded Unclassified
209
- 4 -
of the year showing his marital status. The forms, when posted,
will be forwarded to the collector of internal revenue and & copy
of such for each employee furnished to the employees as receipts,
where the employer has eight or more employees. (For the employers
with a small number of employees, the record work will be done by
hand except for perhaps typing up the forms to be filed with the
collectors. For the employers with a large number of employees,
including the executive departments of the Federal Government, the
record work will be done by punch cards, tabulating machines, and
typewriters.)
C. What the Collector must do.
1. The collector must list for assessment each of the quarterly
returns of tax withheld at source filed by the employer. (12,000,000
tax assessments listed by means of Elliott-Fisher billing machines.)
2. At the close of the year, the collector must add all the
individual statements given by the employees to the employer and to
which the employer has posted the amount withheld to insure that
the amount reported as withheld has been paid to the Government on
the Quarterly returns of the employers. (Adding machines are
essential to this step.)
3. A stockholder which is a corporation must also file a form
with the corporation whose stock is owned to notify that corporation
that no withholding should take place.
Regraded Unclassified
- 5 -
210
E. What the Dividend-paying Corporation must do.
1. Upon receipt, from the exempt individual stockholders,
or from stockholders which are corporations, the information on
the forms filed by these stockholders will be carried forward to
the stock ledger to serve notice to the disbursing agent that no
tax should be withheld from dividends paid to these entities.
2. For all other stockholders, 5 percent must be deducted
from the gross amount of dividends paid and a receipt for such
deductions must be furnished each stockholder on each dividend-
payment date. At the end of each quarter, the corporation must
make 8. return of the tax withheld to the collector showing the
amount of dividends paid and the amount of tax deducted accompanied
by a remittance equal to the total withheld.
3. At the end of the year, the dividend-paying corporation
must post to separate forms, for each stockholder from whom tax
has been withheld, the amount of dividends paid and the amount
of tax withheld, and forward such forms to the collector of
internal revenue.
B. What the bondholder must do.
1. Individuals owning coupon bonds or registered bonds of
private corporations or taxable obligations of the Federal Govern-
ment must prepare an ownership certificate in duplicate at the time
interest on such obligations is collected. This ownership certi-
ficate will indicate whether or not the taxpayer's total income
for the year 1943 is likely to be less than or more than his
Regraded Unclassified
211
- 6 -
exemption. If less than his exemption, the bank receiving the
interest item for collection will make no deduction for tax;
but if more than his exemption, the bank will make a. deduction
of 5 percent from the gross amount of the interest.
2. The banks will transmit the ownership certificate
through the usual banking channels to the obligor.
G. The action taken by the collector in the case of tax with-
held from dividends and interest is substantially the same as
in the case of wages described in C.
H. The above steps embrace the preparation of about 100,000,000
forms annually for employees, stockholders, and bondholders and
the preparation of 12,000,000 withholding tax returns, involving
manual and mechanical processes on the part of the public and
all agencies of the Government exceeding any previous tax under-
taking.
Regraded Unclassified
212
TREASURY department
WASHINGTON
OFFICE OF
COMMISSIONER OF INTERNAL REVENUE
June 29, 1942
ADDRESS REPLY TO
COMMISSIONER OF INTERNAL REVENUE
AND REFER TO
MEMORANDUM for the Secretary:
In re performance of work in collection districts
as result of decision of War Production Board denying
purchase of mechanical equipment and furniture.
The Bureau understands that the War Production Board
in the interest of the war program has frozen practically
all types of mechanical equipment that are required in con-
nection with the assessment and collection of the revenue.
Upon receipt of this highly significant information, considera-
tion has been given to the position in which the Bureau finds
itself as the result of these circumstances.
The accounting operations incident to the receiving and
controlling of many millions of Federal tax returns and many
billions of dollars in revenue involves the use of many kinds
of modern mechanical equipment, such as typewriters, adding
machines, addressograph machines, listing machines, numbering
machines, calculating machines, endorsing machines, bookkeep-
ing machines, folding machines, sealing machines and change-
making machines, etc. The inability to secure any one of
these important items is a matter of concern to the Bureau
of Internal Revenue and the fact that the Bureau will apparently
be unable to secure any of this equipment may present problems
of vital importance to the revenue. This memorandum will not
attempt to analyze the results of our failure to purchase each
type of equipment mentioned. It is believed sufficient to point
out the disastrous results that might be involved in our ina-
bility to obtain only one type of the equipment mentioned, pro-
vided the volume of work expands beyond the capacity of our
present equipment.
For instance, the Elliott Fisher listing machine is one
of the most important items of equipment in use in Collectors'
offices. By means of this machine, many documents are prepared
by the manifolding process, such as the assessment lists, mail-
PORVICTORY
ing address slips for the succeeding year's blank return forms,
BUY
statements of account to be sent to the taxpayers during suc-
US
ceeding quarters, index cards for use of Collectors' offices,
BONDS
STAMPS
index cards for use of the Bureau and information cards for
use of the field divisions in connection with delinquencies.
Regraded Unclassified
213
- 2 -
These Elliott Fisher listing machines are used in
connection with not only income tax returns but employment
tax returns, excise tax returns, special tax returns, etc.
In connection with the income tax work, the listing machine
operations must be performed within limited periods of time.
This is necessary because the returns after being filed must
be listed and the bills prepared in time to be mailed at
least ten days before the next installment of tax is due.
If anyone operation is not completed on time, or if anyone
step in our accounting procedure is omitted, the entire
system then fails. If the taxpayers fail to secure their
statements of account by the time the next installment is
due and send to the Collector their remittances without
identifying documents, the work in Collectors' offices in
controlling the accounts is multiplied many times and is
likely to become entirely unmanageable. This result is
brought about because of the necessity for searching the
records in connection with each remittance to identify the
class of tax and also to locate the serial number of the
account and verify the name of the taxpayer BO that the ac-
count can be located on the assessment records. Furthermore,
if the taxpayers fail to receive the quarterly reminders
that an installment of income tax is due, it is anticipated
that many thousands, or perhaps millions, of them will fail
to make their payments, thereby not only affecting the finan-
cial condition of the Government but requiring correspondence
and demand notices from the Collectors' offices, thus in-
creasing their clerical burden.
On the basis of past experience, it has been demonstrated
that there should be in each Collector's office one Elliott
Fisher listing machine for each 15,000 income tax returns
filed. As a matter of fact during the calendar year 1939,
each Collector's office had a listing machine for each 13,000
returns (approximately). It is true that during the current
year many Collectors' offices have processed more than 15,000
returns per Elliott Fisher listing machine. However, in
order to do that, the offices have required their clerks to
perform many hours of overtime service. Even with the over-
time that has been devoted to their official duties by em-
ployees of Collectors' offices, it has been extremely difficult
to keep the work current and in some instances, the work has
not been kept current.
Regraded Unclassified
214
- 3 -
At the present time there are in the sixty-four col-
lectors' offices 1000 Elliott Fisher listing machines.
Priorities have been obtained for the purchase of an addi-
tional 97 machines, making 8. total of 1097, provided the
freezing order does not prevent delivery of those now on
order. Therefore, assuming that the number of machines
available for work during next year is 1097, and assuming
that each machine will be able to process 15,000 returns
in addition to performing the necessary functions in regard
to other types of Federal tax returns, there are enough
machines available from this assumption to service 16,455,000
income tax returns on the basis of one eight-hour shift per
day. By working two eight-hour shifts per day, theoretically
Collectors' offices should be able with their Elliott Fisher
listing machines to process 32,910,000 income tax returns
annually. While & three shift program has been considered,
it has been discarded as it is not feasible administratively.
If the proposal to lower exemptions to $1200 and $500
for married and single persons, respectively, is enacted into
law, it is estimated there will be filed during 1943 approxi-
mately 35 million individual income tax returns. In addition
to the estimated 35 million individual income tax returns,
there will probably be filed about 1,200,000 income tax re-
turns of other types, such as corporation returns, partner-
ship returns, fiduciaries, etc., making & total of approxi-
mately 36,250,000 income tax returns to be received and con-
trolled in Collectors' offices during the calendar year 1943.
It will be observed that this figure is approximately 3,250,000
more than our present equipment will be able to handle if it
is conceded that a two shift operation would be as efficient
relatively as 8. one shift operation.
It has been proposed that in addition to the approximately
36,250,000 income tax returns mentioned above, there be re-
quired of withholding agents quarterly returns which would be
submitted with the amounts withheld from employees, stockholders
and bondholders. It is estimated there will be about three
million withholding agents. If the withholding plan is enacted
into law, an additional 12,000,000 returns would be received
annually by Collectors, making & total of about 48,250,000
returns. The purpose of the foregoing analysis, stated simply,
is to show that the Bureau of Internal Revenue with its present
Regraded Unclassified
215
- 4 -
equipment will be taxed beyond its capacity in carrying
on the additional burden occasioned by the increase of
8,250,000 in the number of returns filed, without giving
consideration to the further burden entailed by the pro-
posed enactment of the withholding plan. It is plain that
if the withholding tax is to be enacted into law, the Bureau
of Internal Revenue must of necessity have additional mechani-
cal equipment.
At the time I was summoned before the Ways and Means
Committee, I made clear that the withholding tax could only
be administered if adequate personnel and equipment could be
obtained. It was the expression of several members of the
Committee, including its Chairman, that they would not vote
for a withholding tax unless proper personnel and equipment
were furnished the Internal Revenue Bureau. It would seem
to me that the Treasury Department might be subjected to
criticism if the proposed withholding tax were permitted to
go forward to enactment without the difficulties concerning
the obtaining of equipment being brought to the attention
of the appropriate members of Congress.
Guy Commi ssioner Helming
6/30/42 216
MIMIMUM EQUIPMENT NECESSARY TO SUCCESSFULLY
ADMINISTER THE WITHHOLDING PLAN
2100
Typewriters
64
Calculating Machines
300
Adding Machines
64
Addressographs
64
3
All Plates,
Graphotypes
Frames, Cabinets.
64
Sorting Machines
64
Check Endorsers
64
E. F. Bookkeeping Machines
64
E. F. Listing Machines
64
Duplicating Machines
12000
4-Drawer ketter cabinets
3000
3x5 card cabinets
4572
desks
5000
office chairs
Regraded Unclassified
217
TREASURY DEPARTMENT
WASHINGTON
OFFICE OF
COMMISSIONER OF INTERNAL REVENUE
June 29, 1942
ADDRESS REPLY TO
COMMISSIONER of INTERNAL REVENUE
AND REFER TO
MEMORANDUM for the Secretary:
It has been observed in the press that there has been
a recent discussion concerning the desirability of amending
the income tax laws so as to direct taxpayers during the
calendar year 1943 to satisfy their income tax obligations
to the Government on a monthly basis rather than a quarterly
basis. The purpose of the monthly payment plan during the
next calendar year would be to ease any possible hardship
on the individual income taxpayers who will be subject to
the payment of the full amount of the tax on their 1942
incomes and will also be subject to a 5% withholding from
their incomes in connection with their 1943 liabilities
provided legislation now proposed is finally approved by the
Congress. As you will, no doubt, recall the monthly payment
plan has been proposed heretofore and this Bureau has, there-
fore, had occasion to give considerable thought to the matter.
This office, therefore, desires to respectfully submit its
comments in regard to the proposed plan for your consideration
in the event it is contemplated to incorporate the monthly
payment plan in pending legislation.
While this Bureau has not been informed concerning the
details of the monthly payment plan, it is presumed that it
would contemplate granting to each individual taxpayer the
privilege of paying one-twelfth of his 1942 liability each
month during the calendar year 1943. If this supposition
is correct, the taxpayer who files his return in March (and
a great majority of them do) would be required to pay three-
twelfths or one-fourth of his tax at the time of filing the
return. The individual taxpayers, under the present law,
have the privilege of paying their first installment in this
manner. Therefore, with respect to the payment that is re-
quired to be made with the return, no relief whatsoever would
be accorded the individual taxpayer provided he delays filing
his return until March 1. Therefore, the relief granted the
POLYICTORY
taxpayer would be for a period of nine months rather than
twelve months. It is with respect to the monthly payments
BUY
U.S.
following the filing of the return that this Bureau is greatly
BONDS
concerned.
STAMPS
Regraded Unclassified
218
- 2 -
The accounting system which has been in successful
operation in offices of Collectors of Internal Revenue for
several years has been devised 80 as to make it possible to
record millions of transactions with efficiency and accuracy
in the shortest possible period of time with the least possi-
ble expense to the Government. In order to enable Collectors'
offices to make prompt postings of the credits to taxpayers'
accounts, the accounting system contemplates that prior to
each installment date, a statement of income tax due is mailed
to each taxpayer for return to the Collector's office with the
remittance. The statement of account, in addition to other
information, discloses the serial number assigned to the ac-
count. Upon receipt of the millions of periodic income tax
payments with accompanying statements, the Collectors' offices
are enabled to make prompt deposits of the monies in the de-
pository banks and extend the credits to the accounts of the
taxpayers using as posting media the returned statements of
account.
During the calendar year 1941, the sixty-four Collectors
of Internal Revenue had about 2,100,000 installment tax ao-
counts on their records. During the expired portion of the
calendar year 1942, the number of installment accounts has
increased to approximately seven million. There have always
been a limited number of installment taxpayers who failed to
comply with the instructions to return their bills with their
remittances. This was true when the Bureau was required to
deal only with taxpayers of substantial incomes. This situa-
tion, however, has become increasingly acute since the lowered
exemptions have added to the assessment rolls many millions
of taxpayers with smaller incomes whose knowledge of accounting
and bookkeeping methods is meager. As an illustration of the
growing problem confronting Collectors of Internal Revenue,
such a large portion of the approximately seven million install-
ment taxpayers failed to return their statements of account in
connection with the June, 1942, installment that Collectors
were seriously delayed in depositing the tax receipts.
Without the return of the statement of account which has
thereon the serial number of the return, it is necessary for
the Collector's office, before the remittance can be safely
deposited, to search the records for the purpose of identifying
Regraded Unclassified
219
- 3 -
the taxpayer and the class of tax that is represented by
the payment. When this information has been ascertained,
a dummy document or posting medium is prepared for the pur-
pose of placing the item under control. This necessary ac-
counting procedure has the effect of retarding deposits,
especially when the number of remittances without statements
is of great volume. In connection with the June 15 installment,
there were 30,000 unidentified items of this kind in the Chicago
District alone, all of which had to be checked with the records
before deposits could safely be made. The same condition in
proportion to the number of part payments involved occurred
in every collection district. On June 19, which was three
days after the money was received, there was over a half-billion
dollars on hand in Collectors' offices which had not been de-
posited. The fact that 80 many taxpayers failed to return their
statements of account with their remittances was the biggest
contributing factor to this difficulty.
As indicated hereinbefore, Collectors at this time are
dealing with approximately seven million installment taxpayers
and it is not unreasonable to estimate that with the lowered
personal exemption bases and the higher rates contemplated
by the pending revenue bill, the number of installment accounts
will increase to somewhere between twelve and fifteen million.
In view of the increasing difficulties experienced as the re-
sult of the expension of installment accounts from two million
to approximately seven million, some idea can be formulated as
to the further difficulties with which Collectors of Internal
Revenue will be confronted when the number of installment ao-
counts is more than doubled next year. The importance of having
the statement of account issued by the Collector accompany the
remittance in part payment of the account has been discussed
in the preceding paragraph. If from twelve to fifteen million
taxpayers are permitted to pay monthly instead of quarterly, it
would be impossible for Collectors to make the postings of the
previous payments, develop the amounts of the unpaid balances,
and mail the statements of account before the next due date.
This is a procedure that would have to be performed every month
of the year following the filing of the returns, rather than
every quarter as is now the practice and it would appear that
there would be less than two weeks to perform this important
function rather than two and one-half months which is now
available.
Regraded Unclassified
220
- 4 -
You will recall, I am sure, the difficulties the Bureau
had in successfully administering the social security taxes
during the early days of the Act. At the insistence of the
Social Security Board, the regulations were at first written
80 as to require a monthly filing of the returns and a semi-
annually filing of the wage information. At that time we were
dealing with less than two million social security taxpayers.
New assessments were made every month and the Collectors were,
therefore, not required to have statements of account come in
with the remittances 80 as to post to a previously made assess-
ment. Little searching of records was necessary in order to
match remittances with previously established accounts. In
other words, the situation with respect to the social security
taxes was far simpler than the situation which would confront
us in connection with the monthly payment of income taxes, both
in volume and in accounting difficulties.
However, the complexities were 80 great with respect to
the social security taxes that it soon became apparent the
Bureau could not successfully carry on the work on & monthly
basis and it was the recommendation of representatives of the
Treasury Department, who were assigned to make a survey of condi-
tions in the Internal Revenue Service, that the tax could not
be administered on a monthly return basis and 8.9 8. result of
the recommendation of these representatives of the Treasury
Department, the regulations were changed so as to require a
quarterly filing. Your support of this change had the effect
of permitting the administration of the social security taxes
to go forward in an orderly manner and without this change of
procedure, it is safe to say that a most serious condition would
have resulted.
On Tuesday, June 23, a conference was held in the Treasury
Department in connection with the recommendation that had been
made to the Ways and Means Committee for the application of
the proposed 10% withholding as a credit against both the 1942
and 1943 liabilities. After considering a memorandum prepared
by the Internal Revenue Bureau on the subject, I understand
that it was the conclusion of Mr. Randolph Paul and Dr. Roy
Blough that it would be unwise to continue to advocate the
application of the withholding to two different years, giving
as 8. reason for their conclusion that the complications of the
withholding tax were so great that it would be unwise to further
complicate them with the difficulties that would be encountered
Regraded Unclassified
221
- 5 -
by reason of the application of 50% of the amount withheld
to the tax liability of 1942 and 50% to be applied as a credit
against the 1943 liability. It was also pointed out that the
year 1943 would be an experimental year for the withholding
tax and it would be unwise to add to the burdens during this
first experimental year. It is believed that similarly it
would be unwise to complicate the withholding plan during the
first experimental year with the burdens of a monthly payment
procedure.
The proposed withholding tax will be 8. permanent part of
the internal revenue structure. While the percentage of with-
holding for the first year will be on the basis of 5%, the
deductions for subsequent years will be on the basis of 10%.
The administration of the withholding tax will be the most
difficult task with which the Bureau and the taxpaying public
have ever been confronted and it would seem that the complica-
tions which will occur in connection with the withholding tax
should not be aggravated by the heavy burden and confusion
which will exist under a combined withholding and monthly
payment plan.
The purpose to be served by the proposed monthly payment
plan is solely for easing the problem of the taxpayers who
will be required to pay their 1942 taxes during 1943 and also
during 1943 will be subject to the withholding tax. It is
believed that the taxpayers of small amounts form the real
basis for the suggestion of 8. privilege of monthly payments.
It would seem that the reduction of the percentage of with-
holding to% during the first year would be as ample a relief
of this burden as should be considered at this time. Further-
more, the hardship to taxpayers will not recur in years sub-
sequent to 1943 and, therefore, the monthly payment plan should
have no permanent part in the collection machinery. It is
believed, however, that once the monthly payment plan with its
accompanying administrative difficulties is injected into the
tax collection machinery, it will be difficult, if not impossible
to have such a law repealed.
Regraded Unclassified
222
- 6 -
In a report dated April 1, 1942, over the signature of
the Acting Secretary of the Treasury, which report was pre-
pared in connection with Bill H. R. 6342 (77th Congress)
entitled, "A Bill To permit the payment of income taxes in
ten equal installments", the Treasury Department went on
record in recommending to the Chairman of the Ways and Means
Committee of the House of Representatives that before consider-
ing H. R. 6342, it would be better to await the outcome of
the suggested legislation with respect to withholding of the
income tax at the source in the case of wages and other speci-
fied classes of income. In effect, the Department at that time
recognized the complications that would occur under two such
plans and it is believed that the same difficulties should be
recognized at this time in connection with the combined with-
holding tax and the monthly payment plan. This Bureau, there-
fore, trusts that the Treasury will maintain the position which
it has heretofore expressed to the Ways and Means Committee.
Commissioner
Regraded Unclassified
of The to The at
223
June 30, 1942
11:10 a.m.
FINANCING
Present: Mr. Bell
Mr. Eccles
Mr. Haas
Mr. Murphy
Mr. Sproul
Mrs. Klotz
H.M.JR: Mr. Bell, or Mr. Eccles, or Mr. Sproul.
MR. ECCLES: I defer to you, Dan.
MR. BELL: All right, for the moment. I thought
we ought to have a preliminary discussion of the July
financing. Our balance will be down to about seven
hundred million dollars on the fifteenth so we have got
to have our money around the fifteenth, and our estimates
made up ten days ago--
H.M.JR: How much will it be down to?
MR. BELL: About seven hundred million dollars on the
fifteenth.
H.M.JR: Practically broke.
MR. ECCLES: A couple of days' pin money, Dan.
MR. BELL: That isn't very much money these days.
I told you that we would need one billion seven hundred
and fifty million dollars in July and two billion dollars
in August. Since I talked to you we have had a notice from
the Bureau of Internal Revenue that they have postponed
the collection of the capital stock tax to the end of
September, which means that we lose two hundred and
Regraded Unclassified
224
-2 -
thirty million dollars out of our estimates that would
come in in the end of July and the first part of August.
So when we take another look at this before the financing
date it may be two billion instead of one billion seven
hundred and fifty million. But we ought to announce next
week, not later, I should say, than Thursday, and even that
would only give us six days before the fifteenth to get
the bonds out and distribute them, policing and allotments,
and the credits in; and if we could announce on Wednesday
it would be that much better. The question is as to what
we ought to do for that one billion seven hundred and
fifty, whether we ought to have an increase in Treasury
bills that we talked about last week, whether we ought
to have a short bank bond, or a note, or a combination
of those two, or whether this is the time to reopen the
long two and & half's or have another long bond. I think
those are the first questions we ought to discuss for
next week.
MR. ECCLES: Well, last week when we met, it was
about, I think, the fourth time we met for a general
discussion of financing, not with regard to any particular
issue, but with regard to the problem as a whole and
the policy to pursue in laying out the program for at
least 8. short time ahead. I would like to get into a
discussion of that when we finish this other, Dan. I
think that is terribly important because the size of this
financing is so great that it just comes on us here, and
I think that unless we lay some plans a little ways in
the future we can very well make mistakes with reference
to a program.
Speaking of the financing for July, we haven't
discussed that in detail at all any more than we discussed
it in general terms when we met last week. My view would
be this, that - I don't know whether Allan agrees or not -
I think we discussed last week the advisability of announc-
ing the intention of opening the long registered two
and a half again, possibly for August; but inasmuch as
the sixty days is past and they will become a market
issue now, it would be desirable to let the market know
that this issue is going to be opened again, so that it
Regraded Unclassified
225
- 3 -
would likely stay around par, which is the desirable
thing to have. You don't want & lot of speculation in
it, and if it was announced I think it would have to
be announced on the sixth. That is the day when it
becomes a market issue.
H.M.JR: That is a little early.
MR. ECCLES: What is it?
H.M.JR: It is a little early. You mean if we .
are going to reopen it?
MR. ECCLES: Just let them know you expect to re-
open it within the next thirty days.
MR. BELL: It will be traded in on Monday; that is
the first time it can be traded in, and it is a question
of whether it will go up to maybe fifteen or twenty
thirty-seconds, and when you announce a reopening, drop
back to par again.
Now, could you avoid that push-up by announcing
that you intend to reopen it very shortly? That is
the question. That was my number two.
H.M.JR: You mean if we decide to do it?
MR. ECCLES: If you decide to reopen, but you
are likely to reopen it again, aren't you?
(The Secretary left the conference temporarily.)
H.M.JR: Now I am at attention. How much can we
decide today? Have you people made up your mind at all?
MR. ECCLES: I think we have got to discuss, as Dan
says, this immediate financing, but discuss it in the
light of the financing job we have got for the next three
months, which would be much less specific. But the job
that - I would like to see us make this announcement with
Regraded Unclassified
226
- 4 -
reference to the long bonds as soon as they are on the
market, which will be next week.
I think at this time possibly the situation calls
for a two-percent bond, a billion and a half two-percent
bond, which would go, I suppose, largely to the banks,
although there ought to be some substantial market out-
side. I would like to see us increase our bills. We
didn't increase them last week, did we?
MR. BELL: No.
MR. ECCLES: Increase them the fifty million, that
would take care of us for July. I mean, I expect you
want us to talk of the immediate job, Dan.
MR. BELL: That would give us two hundred million,
yes, in bills if we increased to fifty million.
MR. ECCLES: And possibly a billion six, and some
offering on the other, 80 you would get your billion
and three quarters for July.
MR. BELL: That is right. Put it all on a short
bond?
MR. ECCLES: I would. with the volume of financing
that we have got to do I don't like to see us split a
billion and a half issue. It is too small, with the
picture we have got ahead of us.
H.M.JR: I agree with you on that.
MR. SPROUL: I like to look at it in terms of the
whole fiscal year first and then work back to the
quarter and the immediate financing. In the light of
the discussions we have had, the way it looks to me,
over the next fiscal year you have to get about fifty-
four billion. On special issues and War Savings
securities, say you get eighteen billion on that, leav-
ing about thirty-six billion; with an increase in Treasury
227
- 5 -
bill issues that you would be rolling over four hundred
million a week, which would give you over the whole period
additional funds of two and a half billion, something
like that.
An increase in certificate issues so that you would
have four quarterly issues of at least 8. billion. Re-
opening the long-term two and B. half percent issue every
quarter would give you another two and a half billion.
I would add to the short-term open-end issue, which would
be on sale continuously - to put a conservative estimate
on it, that might be another two billion, and that
would leave you with perhaps twenty-four or twenty-
five billion to do in the market. This would be &
question then of how you would offer those securities,
whether two billion every month, or taking into account
your certificate offering and your open-end offering
every quarter, whether you concentrate that market in
two out of every three months, or whether you might not
even do better to concentrate those offerings in larger
issues once every three months with some time for pre-
paration for the drive and some time for the actual
selling operation, with five and six billion dollar
issues rather than two billion dollar issues each month.
That sort of a program would give you this schedule
of financing; bills each week; certificates each quarter;
long-term two and a half's each quarter; short-term
open-end, available continuously; market issues either
every month, two out of every three months, or once
out of every three months.
This would leave, then, the question of credit policy
to fit in with such a program, whether it would be on
the basis of maintaining the existing excess reserves
or in increasing them, or whether it would be on the
basis of our getting a little closer to the market, with
some further decline in excess reserves.
It seems to me we have aiready gotten to the point
where it is more important to the banks now that they
have excess reserves, or reserve funds, rather, available
228
- 6 -
to them, easily, readily, and without loss, than any
given amount of excess reserves. So if we maintain &
bill-buying rate and if we perhaps have a preferential
discount rate on short securities under a year, we
would have created the circumstance in which the banks
would be assured of reserve funds readily and easily
whenever they want them, without the necessity of
maintaining any fixed volume of excess reserves. You
would then have a financing program which over the next
fiscal year would be a workable program for such & sum
as fifty-four billion dollars.
For the immediate financing, fitted into that sort
of a program, in the light of what we have done in the
past few months, I think either a nine - eleven year
issue which would probably take two and a half, or a
somewhat longer bond issue, and a note issue, in which
case I would certainly go for two billion rather than
& billion and a half.
The latter I only suggest because there is still
some feeling it is a bank offering - - if it is a bank
offering that you should take into account the differ-
ing preference of banks. Some are willing to go five,
some ten, eleven or twelve years, which is the only
reason for considering 8. possible split offering for
a larger amount.
But in general terms that is the way I would see
your financing problem for the next fiscal year and the
ways of meeting it.
H.M.JR: Well, it is a very intelligent presentation.
I haven't been entirely satisfied. We only look ahead
about a month at a time, but we have been learning to
walk and so far we haven't stumbled; and as we learned
to walk we made a pattern, left our footprints. But
one thing that I wanted to ask was, to get back to this
question of excess reserves, this legislation hasn't
passed yet, has it?
Regraded Unclassified
229
- 7 -
MR. ECCLES: Passed the Senate and has been reported
out of the Committee of the House. It should be passed
this week, or next week at the latest.
H.M.JR: You handled that very well. Once it is
out, what, if anything, do you propose to do?
MR. ECCLES: Well, as Allan has indicated, we would
want to discuss whether the thing to do was to reduce
the reserves in New York or whether to buy bills. I mean,
it is just a question of what mechanism to use. As long
as you have got a bill-buying program in which the banks
can sell on a minute's notice whatever they want to sell,
it gives the amount of reserves needed at that point
where it is needed.
I don't mean to say by that that you could get down
to the point where the excess reserves - there is some
point, but we haven't reached it yet, as indicated by this
trend of rates. Looking back to last april, for instance -
I was looking at them this morning, and the darned rate
picture is just about the same now as it was in April.
There has been practically no change in the yield on
securities, and that is true in practically every category,
showing that five hundred million or 8 billion difference
in excess reserves, whether in New York or somewhere else,
hasn't made very much difference; and so long as we had
this bill-buying program, that met the situation and took
any pressure whatever off of the market.
H.M.JR: New York has gone down steadily.
MR. ECCLES: Yes.
MR. SPROUL: Down from nine hundred million to five
hundred million, a period of a month and a half, and it
has begun to go down again. The excess reserves in
New York last night got down to three hundred and eighty-
eight million. They are back up a little bit. The banks
indicate they are getting some funds in this morning, but
what happened--
MR. BELL: "hat do they do on Wednesday after they
pay for--
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230
- 8 -
MR. SPROUL: We are putting the funds into the market
through purchase of bills. We will get most of those
dealer bills; the dealers got a hundred and twelve millions.
what happens is the New York banks are now working on a
policy of keeping much more nearly fully invested than they
were before, and with us standing ready to buy bills, or
even to discount, they have little concern about the avail-
ability of reserve funds. If we try to keep piling re-
serves into the New York market, what we would be doing
is they would try to keep those funds invested, we would
keep buying bills or other short securities, and you will
have a circle there.
You don't - with that sort of a policy on the part
of the banks, you don't build up excess reserves. You
keep them coming to you through the open-market end of
it. It is a workable sort of policy, but it doesn't
seem to me it is one that is as effective as having the
reserves somewhat lower and the banks coming to us
through whatever window is available to them without
loss to get additional reserve funds.
MR. ECCLES: The difficulty with the New York banks,
they have indicated they don't intend to keep reserves.
If you give them reserves, they will immediately go out
and use them.
MR. SPROUL: And that would work for New York, but
it will to a certain extent prevent the most effective
use of reserves in the rest of the country where &
substantial volume of excess reserves still exists.
MR. ECCLES: I do think, however, there is some
point where as the reserves go down we will find
it necessary to decrease the reserve requirements.
Just what that is and when it will be here- I think there
231
- 9 -
has been no indication of it yet; you can tell when that
point is developing by the way bills are moving.
You may get to & point where you take most of the
bills. The dealers will be subscribing and we will be
getting the bills; then we have got to decide whether we
want to put reserves in the market by buying a couple of
hundred million bills a week, which of course would
give that to the market, or whether instead of us buying
the bills we want to reduce the reserves so the banks
will buy them.
MR. SPROUL: There again I think you will have to
look ahead and determine, or try to decide on what
basis we would want to ride through this situation as
far as reserve requirements are concerned, looking
ahead to the post-war situation as well as to the war
situation.
It seems to me we very well could and should reduce
reserve requirements to some point below where they
stand now, which is the highest permitted under the law,
but I think that would be--
MR. ECOLES: That is right--
MR. SPROUL: But I think that would be one step
in a program which would be determined upon, and then
you try to ride through on that level of reserve require-
ments and use the open-market window for the rest of
the program, with possibly sporadic - not every bank,
but sporadic bank borrowing from time to time in
specific instances, too.
232
- 10 -
MR. ECCLES: We have talked about providing a
special lending rate on certificates or bills, whereas
the bank - the discount rate of the Reserve Banks is one
percent. Of course it is not effective; no bank is
going to borrow at one on short paper, but we have
talked about loaning to the banks on the basis of he
bill rate so that if you don't want to sell - anybody
in a bank will say, Well, I am going to need money in
ten days here; I don't want to sell my certificates; I
don't want to sell my bills. I will borrow for two or
three days - I won't borrow at one percent." But if we
establish a low rate so as to let them borrow over some
temporary period whi ch they all may have, that would
just be another means of stabilizing the market, keeping
less and less stuff going on he market and keeping the
banks holding what they have got.
MR. BELL: I think that would be a good move.
H.M.JR: What is that?
MR. BELL: Lower that borrowing rate so that banks
could go to the Federal Reserve and borrow not at the
present one percent discount rate but at some rate
commensurate with the short-term securities. They put
up Treasury bills, put up the certificates, on which
they don't lose interest. Now, if they have to borrow
at one percent and the certificate bears five-eighths,
they are losing money on this.
H.M.JR: If the dealers have a hundred and twelve
million in bills, there is no shortage of bills in the
market.
MR. SPROUL: No, the significance of that is, I
think, that the distribution of bills this week was
not so good as it has been, that more came to New York,
and in New York more went to the dealers. Last week
dealers got sixty million, and we had to take six
million of them; this week one hundred and twelve
million, and we may have to take seventy-five, eighty,
or ninety million of them.
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233
- 11 -
H.M.JR: The reason I raise that point is, I don't
see any reason right now to increase the bills beyond
three hundred.
MR. SPROUL: If we increase the bills on a higher
rate, I think we would get better distribution both
outside New York and outside the big banks.
H.M:JR: I am awfully sorry, both my ears are stopped
up. They are both stopped up. I don't hear a thing.
MR. BELL: Your average rate went down a little last
night, thirty-six.
H.M.JR: What was it?
MR. BELL: Thirty-six, two, the week before and
thirty-six, five.
H.M.JR: I am very happy with the thing the way
it is now. I like the peg at the bottom; I like the
two and a half at the top. I am even beginning to
work myself up - Marriner, I might be willing to join
you and say something publicly.
MR. ECCLES: About what?
H.M.JR: About rates. (Laughter.) About rates,
Marriner.
MR. ECCLES: Well,--
H.M.JR: The statement is all written. He wrote
it six months ago.
MR. ECCLES: I haven't said anything on rates for
quite a little while.
H.M.JR: Then this fellow - I didn't hear what he
said, but I like it just the way it is.
MR. ECCLES: Well, I think that you shouldn't get
your mind closed on this short-rate business for this
Regraded Unclassified
234
- 12 -
reason, that I think that supplementing what Allan
said on this program, you have got to think of the
banks in this category and the rest of the financing
in another category. What the banks buy - they buy
from funds that the Fed provides. I mean, that is
the control mechanism. If we want the banks to buy
more, we give them reserves; if we want them to buy
less, we take the reserves away.
H.M.JR: I know.
MR. ECCLES: So it is up to us to determine to
what extent we want the banks to do this financing;
where you give them a lot of excess reserves you
have no determination on that. They can go out in
the market and buy; they can do whatever they want with
the reserves. If you give New York a lot of reserves
and they say, "We are going to use our reserves, If then
they just go out and buy whether you want them to or
not as long as you put them in funds. Therefore, I
think it is necessary to keep reasonably close in the
reserve picture-- I mean, don't have a lot of excess
constantly fluctuating up and down, try to have enough
80 as the Fed won't have to buy too much. But, keep
it in a pretty even groove.
Now, I would like to see us then determine-- do
everything we can to sell securities outside of the banks
to develop every kind of securities that would tend to
get all of the funds outside instead of inflating the
volume of funds, using the banks merely as the last
second line defense, knowing that we can always get
whatever we want there, because the Fed completely
controls that situation. I would like to then figure
on using these banks largely for short-term paper.
It will cost the Treasury less than it would if you
give them long paper; because if you give them a lot of
bonds, you are going to have to be in a position to buy
those bonds at par from them when they want to sell, any-
way, so they are getting a higher rate on really a demand
situation.
Regraded Unclassified
235
- 13 -
Looking at it the way the British have done their
financing, for instance, they keep the banks pretty
largely out of the long stuff. They give them what
is necessary to finance in the short market. They
pay them an arbitrary rate, purely an arbitrary rate.
They say, "We don't want you to have to go out and be
getting into the long market here; we will pay you a
rate for the job that you are doing." So I would
like us to think of it from the financing along a
completely controlled situation, which it is, rather
than the open - what we term a natural market situation.
H.M.JR: I don't go that far in my thinking. I
have always taken the position that I don't think you
can control it, I don't care what you do.
MR. ECCLES: I think--
MR. SPROUL: From here on I think we have control,
no matter which way we can work it.
H.M.JR: We can try it.
MR. ECCLES: You have got it absolutely.
MR. SPROUL: When you talk about high or short
half percent for bills and wider distribution, I
think from the standpoint of the Treasury selling more
securities to the banks at a half and less, securities
to the banks at two or two and an eighth is what it
comes down to.
H.M.JR: Let's call a spade a spade. You are
thinking of some relief for the banks, to give them
more earning power.
MR. SPROUL: I think it comes down to selling
more short securities at a slightly higher rate; and
Regraded Unclassified
236
- 14 -
fewer long securities at two or two and an eighth.
MR. ECCLES: Not an earning point at all - I
am just thinking of having them take more short and
don't force them into long.
H.M.JR: Well, a ninety-day bill is pretty short.
MR. ECCLES: That is right, and certificates
likewise. Our discussion involved two aspects of
the short problem. One was to get the bill market up
to at least four hundred million of bills a week.
That is about a five billion, which certainly isn't
large in relation to the total volume of financing
that we have got. It won't be any larger, if as large
as the two and a half billion of bills that we had in
a much smaller market, and then to get a volume of
certificates up to at least six billion, a billion
and a half each quarter, so that you have got a roll-
over of certificates--
H.M.JR: We have a billion and a quarter now,
haven't we?
MR. ECCLES: Yes, but our recommendation would
be--
H.M.JR: A billion and a half.
MR. ECCLES: ... that we start in September with
a billion and a half at least.
MR. SPROUL: You have two issues of a billion
and a half certificates out now. There would be two
more.
Regraded Unclassified
237
- 15 -
H.M.JR: A billion and a quarter.
MR. BELL: No, a billion and a half.
H.M.JR: There isn't much argument about that,
but can I just talk a minute? Let me just say this,
because you people have been talking amongst yourselves.
I haven't had the benefit, and Dan hasn't told me what-
ever he knows.
MR. BELL: I will have a memorandum.
H.M.JR: Let me just put it this way. What I
would like to do is this, after we have all thought
it over, I would like to go through this July finan-
cing in more or less the regular way, and then - I
don't want today, certainly, to make any decision on
anything - and then I would like to, just as soon as
that is over, sit down - what Sproul said interests me,
this idea of possibly an issue every two months, you
see, instead of doing this thing every single month.
I mean, if you could do the refundings four times a
year and the new money financing six times a year.
MR. SPROUL: Yes.
H.M.JR: Wouldn't that be every two months? Yes,
six times, and then - so that, what I am thinking of
is we wouldn't maybe do anything in August and go to
September. That would be along the lines you are
thinking?
MR. SPROUL: Yes, but that ties in, in my mind,
with increased volume of short stuff certificates.
Regraded Unclassified
238
- 16 -
H.M.JR: That is all right. Then the question
is how much do we need. The other thing I would like
to think about is, having got this legislation through -
this other thing, for instance, about their having to
put up collateral against Government deposits. If we
could get that through that would help the banks,
wouldn't it?
MR. SPROUL: It would help them to the extent of
four or five hundred million. That is, if your balance
with the banks runs about two billion and the reserve
requirement averages about twenty percent, that would
be about four hundred million.
H.M.JR: Is that all?
MR. SPROUL: I don't think it amounts to much.
MR. ECCLES: I don't think it is.
H.M.JR: I didn't know it was as little as that.
MR. SPROUL: I think more important than the
amount is the feeling on the part of the banks when
they go to subscribe to a new issue; that wouldn't
immediately mean an increase in their reserve require-
ments so if they had no excess requirements at the
time they would still subscribe to a new issue because
immediately they wouldn't have to dig around and get
some reserve funds.
MR. BELL: They would wait until it is called.
MR. SPROUL: But the calls are coming so fast they
wouldn't have long to wait, and it does - if you think
about the principle S of reserves it violates the
principles of reserves in there, the reason for it
being without much advantage, it seems to me.
MR. BELL: It means about two hundred million in
New York.
Regraded Unclassified
239
- 17 -
MR. ECCLES: We are not very favorable to changing
it. I would sooner see--
H.M.JR: Not favorable to doing what?
MR. ECCLES: Making this change of taking the
reserve requirements off of the Government deposit.
MR. BELL: You would be in favor of taking off
the FDIC insurance rate?
MR. ECCLES: Yes, I think that is much more
important. I think the FDIC rate against a deposit
is a much more important factor. Now, Leo wouldn't
like that.
MR. BELL: Leo is against that in favor of the
other.
MR. SPROUL: If the banks had to choose they would
choose getting rid of the FDIC assessment rather than
the reserve against Government deposits.
H.M.JR: We will have to go into it one of these
days.
Let me ask you this. Supposing after studying it
I say I don't want to increase the bills - I mean, just
a supposition - I didn't want to do it now, I mean for
another week or two, you see, 80 that we couldn't
figure on getting that additional money, do you think
a billion and three quarters is enough?
MR. BELL: I think it is the minimum.
MR. SPROUL: I think I would go for two billion
under those circumstances.
H.M.JR: That is what I think.
MR. ECCLES: I would think if you are going to
go for two billion at this time, then your suggestion
Regraded Unclassified
240
- 18 -
of a split issue might be considered. If you are
going to go to a two and an eighth, & two and a quarter,
then a note. I was thinking of one issue of a billion
and a half and getting more from the bills than you,
possibly, are thinking of.
H.M.JR: Well, on the supposition, one, no im-
mediate increase in the bills, and, two, there will be
a two billion dollar issue, what do you think?
MR. SPROUL: I think I would go for, say, a two
and an eighth and 8 four-year note, some such division.
MR. ECCLES: Why would you go for the eighth,
Allan?
MR. SPROUL: That is the period where it fits in
best in line with what financing we have done in the
past two or three months in line with maturities.
MR. BELL: It is a little out of that crowded
area.
MR. ECCLES: It is a little easier to price than
getting another two.
MR. SPROUL: It is, and a little wider spread
between the maturities of the note and the bond.
MR. ECCLES: It is going to be increasingly
difficult to price open market bond issues because
you have got to price them at some premium, and then
the question is when the next issue comes up, where
do you put those, the last issue that went out. You
have either got to buy it and hold it at the premium
or it drops down to par, and if you hold it at the
premium you are in effect underwriting the under-
writers. That is what you are doing.
H.M.JR: Well, on the two and a half tap issue,
Dan thought the insurance companies wouldn't be
ready until August. Is that right?
Regraded Unclassified
241
- 19 -
MR. BELL: Yes.
H.M.JR: Do you?
MR. ECCLES: That is our idea. We didn't have
it in mind before August.
MR. SPROUL: But with an announcement that it
is going to be open.
MR. ECCLES: Open in August, but an announcement
in July.
H.M.JR: Make a note of that, Bell.
MR. BELL: I have one suggestion, that it might
be opened the latter part of July, the last week in
July, and allowed to run through in August.
H.M.JR: Did you come down by air or--
MR. SPROUL: I came down by train.
H.M.JR: It is quite a chore, isn't it? What I
was thinking about, Marriner, was I would like to
continue this conversation on Friday.
MR. ECCLES: Yes, that would be fine. I am
planning to go out of town Friday night for the most
of the following week.
MR. BELL: These fellows, neither one of them,
plan to be here for the next financing, I think.
MR. ECCLES: I haven't even been as far as the
outskirts - well, I have been out to the club once or
twice since April.
MR. SPROUL: I said that last week in our dis-
cussions with these fellows, and they sent up a loud
cheer.
Regraded Unclassified
242
- 20 -
H.M.JR: What is that?
MR. SPROUL: When they found we weren't going to
be here they all said, "Swell."
MR. BELL: I think the cheer came from your own
group, that we could do as we pleased then.
H.M.JR: What would be a good time for you,
Marriner, next Friday morning?
MR. ECCLES: Any time Friday.
H.M.JR: Would Sproul come down or not?
MR. SPROUL: I will try to come down - yes, I
certainly will.
H.M.JR: You don't fly down, do you?
MR. SPROUL: If I can get on a plane I do.
H.M.JR: Eleven o'clock is better than nine-
fifteen for you, isn't it?
MR. SPROUL: No. Nine-fifteen is all right with
me.
MR. ECCLES: Not if you come on the plane.
MR. SPROUL: Eleven would be better; that would
give me more leeway.
H.M.JR: Let's say eleven o'clock Friday.
MR. ECCLES: That is fine. Just let me say one
more thing so you can be thinking about it on this
three months' program. Dan has said you need six
billion dollars, we will say, for July, August, and
September. Now, this is my suggestion as to what we
ought to think about as to where to get it, if you
Regraded Unclassified
243
- 21 -
accept the general philosophy which we have discussed
of getting as much outside of the banks as possible.
In that period you get your bills up to four hundred
million; possibly it will be another five weeks before
you could do it, but work right to that end, even if
we had to decrease the reserves in New York and Chicago
to make it effective, or if you had decided to increase
the rate to a half in a month or so from now. But at
least, whether you do that - if you do that, if you make
un your mind you are going to put out five billion, bills,
that would give you at least six hundred million in the
next three months from bill money. Then you put out -
carry out your certificate program. In September you
would put out another billion and a half, so that--
H.M.JR: That is not new money, though - that isn't
new money.
MR. BELL: Yes, November 1 is the first maturity.
MR. ECCLES: Yes, the idea being - you have only got
three billion now; you would get six billion out, a bil-
lion and a half new money in September, and another
billion and a half in November of new money. I am
speaking of the next three months. There is six hundred
bills, a billion and a half certificates, seven hundred
and fifty million on this long registered issue - put
the Victory Fund Committees on that; that is one thing
they could be selling in July and August.
H.M.JR: I thought you didn't want to sell in July.
MR. ECCLES: I mean August and September - seven
hundred million. Now you put out a bond issue now, and
a note issue, if you will, you will get, say, two billion
from that source. We would like you to consider again
this short open-end issue.
H.M.JR: How long is that?
MR. BELL: That is the tap.
244
- 22 -
MR. ECCLES: The two and a half to three year
issue. We discussed it with the boys over there the
other day again, for August and September, giving
this Victory Fund Committee, then, the long open-end -
the short open-end, and giving them a quota of a billion
and a half for July and August. Now, I think they can
sell a billion and a half in July and August. That is
outside of the banks, entirely.
Now, that program then will give you six hundred
of bills, giving up to five billion; approximately a
billion and a half in the certificates, working in the
direction of the six billion certificates, with the
cuarterly turnover; seven hundred and fifty million of
the long bonds again for the trustees and the insurance
companies; the two billion of your market issue in notes
and bonds that we are thinking of for next week; a bil-
lion and a half on the short issue to get at the public
funds and other funds that would be willing to go into
a short issue.
Now, that will give you on that program - it would
all fit into the pattern we have discussed - it would
give you your six billion dollars for July, August,
and September.
H.M.JR: It sounds easy when you say it. (Laughter)
MR. ECCLES: Well, and we would either buy enough
bills to give the market reserves or we would reduce the
reserves in Chicago, or some of both, and we will change
the discount rate, that is, down to whatever the bill
rate is, so as to help in that situation.
H.M.JR: Well, I get the idea. I mean, give me a
memorandum, with Mr. Bell, at ten-thirty Friday so I
can have it half an hour before. At least Dan can tell
me what he had in his mind and not try to slip it to me
as you walk in.
MR. ECCLES: We are awfully anxious to give these
Victory Fund Committees something to do, and we figured
if by the first of August you could get these two open-end
Regraded Unclassified
245
- 23 -
issues again for two months, let them really get out
and make a drive, I think you can get two and a half
million dollars from outside of the banks by those
Committees. At least we could find out whether they
are any good or not. That is what I would like to find
out.
H.M.JR: Me too. Well, I thank you very much.
246
CONFERENCE TO BE HELD ON JUNE 30
WITH REPRESENTATIVES OF THE
FEDERAL RESERVE SYSTEM
I. July financing ($1,750,000,000)
Should we -
(a) Increase Treasury bills
(b) Offer a. short bank bond
(c) Offer a note
(d) Offer a combination of a short
bank bond and a note
(e) Offer a long-term bond or re-open
the 2-1/2's of 1962-67
II. Preliminary statement
(a) Should the Secretary announce on
July 6 (the first trading day of
the 2-1/2's of 1962-67) that that
issue will be re-opened? The
purpose of this would be to keep
the ma rket for this issue around
par and not permit it to advance
to a substantial premium and then
react sharply if the issue is later
re-opened.
(b) Discuss the question of making the
2-1/2's of 1962-67 available at par
at all times for use in connection
with the payment of estate taxes.
June 29, 1942
Ecales give 30,1942
June 29, 1942
247
SUMMARY OF DISCUSSION BETWEEN TREASURY AND FEDERAL
RESERVE REPRESENTATIVES or JUNE 23
AA
CONFIDENTIAL
The following general principles were agreed upon:
1. Every effort should be made to sell as large a part as possible
of the increase in the Government debt to investors other than commercial
banks. To the extent that this policy is made effective, the danger of
inflation will be reduced during both the war and the post-war period.
There is outstanding a large amount of idle funds in the form of deposits
and currency, which it should be possible to reach to a. considerable extent,
The so-called inflationary gap should provide a substantial amount of current
savings for investment in Government securities. Strong efforts should be
made to reach these funds by offering types of securities that will be
attractive to the holders of the funds and by the sales efforts of the
Victory Fund Committees. It should be possible to reduce materially the
amount that it is now estimated will be sold to commercial banks.
2. To the extent that it is necessary to sell securities to com-
mercial banks, the issues should be primarily of short term. If the increaso
in commercial bank holdings is confined to short securities, the banking
position will be sounder and the Federal Reserve will have 6. froor hand in
the post-war poriod in exercising credit restraint, if that should become
desirable. Another advantage is that tho interest cost to the Treasury would
be smaller than on longer socurities. The amount of bills outstanding might
be increased to about 5 billion dollars or 400 million dollars a wook and the
amount of cortificatos to 6 to 8 billion dollars or 1.5 to 2.0 billion in
each quarter.
3. Tho existing pattern of ratos should be maintained, but prices
should be allowed to fluctuate moderatoly and should not be hold rigid.
Considoration might be given at a later time to an incroase in the buying
rato on bills from the present 3/8 of 1 por cont to 1/2 of 1 por cont.
The higher rato would attract funds of commercial banks outsido of the large
citios and of investors other than commorcial banks. The existing 2 1/2
per cont rato on long bonds should be maintained.
4. Excess rosorves will not bo allowed to decline to a point that
would maleu it difficult for the Treasury to do its financing.
In viow of the nood to raiso during the period from July to September
about 6 billion dollars from sources other than savings bonds, tax notos,
and an increase in the wookly bill offering to 350 million dollars the follow-
ing specific financing program was outlined:
1. The weekly bill foring should be increased to 400 million
dollars, which would provide an additional 650 million dollars in the three
months.
2. A cortificate issuo in September would provide an additional
1.5 to 2.0 billion dollars.
Regraded Unclassified
-- 2 --
248
3. An additional open-end issue of registered 2 1/2 por cent bonds
should be announced before the beginning of trading in the present issue,
This offering should be kopt open during July and August and should be mado
redeemable upon domand within porhaps four months after the doath of the
original holder. This issue would provido botween 500 and 750 million
dollars in the two months.
4. A short open-ond nonmarkotable noto issuo should be announced
as soon as practicable. Such an issuo would reach funds that will not be
invosted in marketable securitios, would relate the roturn to the longth
of timo that tho socuritios wore hold, and would avoid some of tho problems
connocted with markotable issues, such 0.8 thoso of secondary distribution
and of maintaining a markot and that of the froquent refunding of short
issuos. If the securitios wore mado assignable as collatoral for borrowing,
fow of than would be rodeemed. It is difficult to ostimato the amount of
funds that would be invested in such an issue, but if offored in August
porhaps 1 to 2 billion dollars could bo raised during the two months.
5. This program would loave about 1.5 billion dollars to be
raised from other sources. In view of the rapid doplotion of the Treasury
balance in the oarly part of July and tho dolay that will be experienced in
gotting funds from the above sourcos, an offoring of about 2 billion dollars
may bo necessary next wook. Since funds of invostors other than commercial
banks would be attracted to the various types of socurities montioned above,
this issue should be dirocted principally to commorcial banks. Although
2 1/4 por cent bonds would fall in a period when maturities of Treasury bonds
are rolatively small, it is an issuo somewhat longer than commorcial banks
want and should have. While a noto of foring would be desirable from the
point of view of solling short sccurities to commercial banks, notes havo
beon recently issued. It would be proforable, theroforo, to offer 2 por
cont bonds at this timo.
Regraded Unclassified
249
TREASURY-FEDERAL RESERVE DISCUSSION, JUNE 23, 1942.
249
Regraded Unclas
The following 10 a general outline of the discussion which took place
at a meeting of representatives of the Treasury and the Executive Committee of the
Federal Open Market Committee on June 23, 1942, at Washington, D. C.
First, consideration was given to the general problem of the amount of
Treasury financing to be done during the next fiscal year, and the proportion of
this financing which might be done outside the banking system. There was general
agreement on the desirability of doing as much as possible of the financing out-
side the banking system, although the representatives of the Treasury attached
less importance to this than did the representatives of the Federal Reserve System.
Similarly, representatives of the Treasury were less sanguinethan were the repre-
sentatives of the Federal Reserve Systemas to the amount of financing which can
be done outside the banking system.
This difference in emphasis and in estimates of possibilities led to a
real difference of opinion as to the appropriate credit policy to be pursued at
this time. The representatives of the Treasury felt that the present financing
program, supported by ample excess reserves in the banks of the country, is working
very smoothly, and they questioned the wisdom of "experimenting" under these cir-
cunstances. The representatives of the Federal Reserve System, on the other hand,
pointed to the very large decline in excess reserves which has already taken place
without interference with Treasury financing and with desirable consequences as
far as the interest rate structure and the country-wide use of funds is concerned;
and they argued that a further decline in excess reserves might be permitted to
take place with beneficial results both now and in the post-mar period. In other
words, they advocated a credit program which would hold to & minimum the creation
of "new money" to finance the government's war expenditures. Whatever differences
there may have been as to the importance of this objective during the war, when
other controls admittedly are more effective, there was little difference as to
its importance in the post-war period.
2.
250
There was then a discussion of the short-term market for government
securities and of interest rates in that area. The success of the Treasury and
the Federal Reserve System, both in increasing the amount of Treasury bills and
certificates of indebtedness outstanding, and in bringing about & wider distribu-
tion of these securities, geographically and as between bank and non-bank investors,
was commented upon. It was the general opinion of the group that the amount of
Treasury bills issued each week should be increased by $50 millions to #350 mil-
lions with the issue of July 1st, and the representatives of the Federal Reserve
System were of the opinion that the amount of the weekly issue of bills could
fairly soon be increased to $400 millions a week. There was also general agree-
ment that the Treasury might contemplate four issues of certificates of indebted-
ness of at least #1# billions each over a period of a year.
The effect of substantially increased offerings of bills and certificates
of indebtedness upon short-term interest rates was discussed. The representatives
of the Federal Reserve System believe that a modest rise in short-term rates of
interest (the Treasury bill rate noving up to, say à of 18) could be expected;
that this would promote a desirable wider distribution of such securities; and
that it would not endanger the maintenance of a saximus rate of interest of 21%
for Treasury borrowing, nor would it be likely to effect any rates, beyond
the 3 or 4 year maturities. It was emphasised also that to give the banks 68
much as possible of these short maturities would reduce the amount of longer term
financing to be done through the banks, and that the net cost to the Treasury,
therefore, would be less than it otherwise would be, even though short-term rates
firmed somewhat. Treasury representatives indicated that they had an open mind
on the general question of a further rise in short-torm rates of interest.
The general opinion was reaffirmed that obligations with naturities up
to about 10 years should be designed for bank investment. The Treasury view 4
peared to be, however, that an obligation: with perhaps & little longer maturity
should now be offered, because of a relative concentration of recent offerings
3.
251
and of maturities in the earlier periods. Some of the representatives of the
Federal Reserve System questioned the need of paying the rate (over 25) neces-
Regraded Unclare
sary on such an offering for funds which would come primarily from banks.
There was general agreement that the advantages of serial issues to be used in
this 1 to 10 year area are outweighed by the disadvantages.
Special types of issues, principally designed to obtain funds from
non-bank investors, were also discussed.
Short-Term Open-Hod Registered Issue. Although there was no agree-
ment to the use of & short-term open-end registered issue, there was general
agreement that the 2gor 3 year issue, now recommended by the Federal Open Market
Committee, would be preferable to the 5 year issue previously recommended. The
representatives of the Federal Reserve System repeated their arguments in faver
of adding this kind of a security to the list, in an attempt to bring into
the Treasury individual, corporate, and public funds which may temporarily be
idle and which cannot or will not run the risk of market fluctuations, and which
must preserve a high degree of liquidity. It was further suggested that with
the formation of the Victory Fund Committees, a selling organisation is at hand
to market this kind of a security, and that while finding out what volume of
funds could thus be tapped, TO could also be maintaining interest and enthusiasm
of the Victory Fund Committees.
Tax Anticipation Notes. There was fairly general agreement that 1%
would be desirable to increase the amount of Series A Tax Anticipation Notes
which can be used by an individual in payment of taxes in any one year to $5,000.
Consideration was given to the desirability of increasing the return
on Series B Tax Anticipation Notes. The present coupon of 48/100 of 15 was fixed
when short-term rates of interest were much lower than they are now, and to bring
these funds more nearly into line with the going rates, a coupon of 60/100 of 15
was suggested.
4.
25%
252
24% Registered Bonds. It was the opinion of the group that the Treasury
should contemplate reoffering, from time to time, 218 registered bonds like the
28% bonds of 1962-67 offered in May 1942, or even that such an issue should be
continuously on offer. It was anticipated that an offering of such a security
would be made either in connection with the July or the August financing, and
one suggestion was that this security be offered in July and the books kept open
through the period of the August financing. It was also suggested that such
bonds be made redeemable, on demand, by the executors of the original holder,
say 4 months after the death of the original holder, so that such bonds may be
readily liquidated to meet estate taxes and other demands for cash funds which
might accompany the death of the holder.
There was general agreement that the present maximum rate for Treasury
and could be maintained, and that the Federal Reserve Byse
tem, by appropriate action, should continue to maintain prices and yields for
shorter maturities consistent with this maximum rate. It was agreed, however,
that this "pattern of rates" does not involve fixed or pegged prices for individ-
ual issues, but means maintenance of prices within a range which say include
prices below par as well as above par.
SUMMARY
The general outlines of the financing program, as further developed in
this discussion, includeds
1. A further increase in the issuance of Treasury bills and
certificates of indebbedness.
2. A possible further modest rise in short-term rates of in-
terest accompanying the increase in the volume of short-
term securities outstanding.
3. Continued use of obligations up to 10 years maturity, or
thereabouts, for offerings designed for bank investment,
relying on periodic and split offerings to provide diversi-
fication of maturities rather than introducing serial issues.
5.
253
4. Special types of issues designed primarily for non-bank
investments
a. A short-term open-end registered issue having a
maturity of 21 or 3 years and redeemable in the
intervening period, was considered.
b. Changes in the terms of tax anticipation notes
were suggested to make them more attractive.
0. Continued use of long-term registered bonds of
the type of the 25% bond of 1962-17.
5. Maintenance of the present ceiling of 21% on ordinary Treas-
ury borrowing and maintenance of a range of rates for
shorter maturities consistent with this calling. This ob-
jective is not inconsistent with some further rise in short-
term rates of interest and with moderate fluctuations of
prices of individual issues of securities either above or
below par.
June 27, 1942.
diarps
LUNGRECE HELD AT THE
FEDERAL RESERVE BANK OF YORK
I 1 I & I
Mr. Allan Sproul
- Hest
Ar. Winthrep N. Aldrich, Chairman, Chase National Bank
Mr. John 1. Bierwirth, President, New York Trust Company
Mr. James G. Blaine, President, Marine Midland Trust Company
Mr. 1. Randolph Burgees, Vise Chairman, National City Bank
Mr. Leon Fraser, President, First National Bank
Mr. & Cheater Geratem, President, Public National Bank and Trust Co.
Mr. 1. Abbot Goodbus, President, Bank of the Manhatten Company
Mr. b. 8. Gray, drog President, Central Hanover Bank and Trust Co.
Mr. Frank K. Monstom, President, Chemical Bank and Trust Company
Mr. Herbert P. Howell, Chairman, Commercial National Bank and Trust Co.
Mr. Edwin G. Morrill, Chairman, Bank of lieu York
Mr. Na. c. Petter, Chairman of insentive Committee, Guaranty Trust Go.
Mr. Gordon s. Rentachler, Chairman, National City Bank
Mr. Dumber a. Sherer, Chairman, Corn Exchange Bank Trust Company
Mr. Bruest G, Jrey Chairman, Trust Completee, Manufacturers Trust Go.
Mr. B. 4. Tempkins, Visa President, Bankers Trust Company
Mr. Harry E. Ward, Chairman, Irving Trust Company
Mr. George Whitmay, President, J.P. Morgan and Good Inc.
Mr. Perry Hall, Executive Manager Victory Fund Committee
255
June 30, 1942
3:05 p.m.
WAR BONDS
Present:
Mr. Graves
Mr. Gamble
Mr. Kuhn
Mr. Haas
Mr. Tickton
Mr. Houghteling
Mr. Odegard
Mr. Sloan
Miss Elliott
Mr. Englesman
Mr. Coyne
H.M.JR: Well, Harold, you had a chance to see
this earlier in the day? (Indicating charts sub-
mitted by Mr. Tickton.)
MR. GRAVES: Yes, sir.
H.M.JR: And I asked you to think about it in
view of the fact that we have always realized, and
still do, that the guts of this whole War Savings
sales campaign is the pay-roll deduction plan. I
asked Mr. Tickton to do a little work.
I had a glance at it, and there seems to be
great difference, not only within industry but be-
tween industries; and the thing I want to discuss
here this afternoon with you, with your people, is
what we could do, having this information in hand,
to bring these industries and their people that work
for them up to the ten percent.
Now, what have you got in mind?
256
- 2 -
MR. GRAVES: Would you like Mr. Englesman to
tell you what we have been doing for the last - when
did we start this, about six or seven weeks ago?
MR. ENGLESMAN: The middle of May.
!
MR. GRAVES: I think that you would be interested
to hear what we have been doing, and Mr. Englesman has
visited, I suspect, all of the important States, and
some perhaps not 80 important, and can tell you what
our people are doing and how they are doing it. He
can perhaps tell you what, in his opinion, has got to
be done yet.
H.M.JR: Before he starts - I am sorry, but you
weren't here when the retailers came in. I have never
seen them so happy. Mr. Bell has assured them that
fifty-two hundred retail stores will have all the bonds
they want on hand on consignment.
MR. GRAVES: Fine. Mr. Gamble told me.
H.M.JR: They were very, very happy. Go ahead.
MR. ENGLESMAN: We have held pay-roll savings
meetings in some twenty States, concentrating mostly
on the twelve States where most of industry is.
Our method has been as follows: We have first
covered the method of approach on the pay-roll savings
plan as outlined in the program which was developed by
the Advertising Council, and our purpose in bringing
this to the attention of these various States was to
see that every firm with over a hundred employees - the
executives of every firm with over a hundred employees
in America be called on within 8. specified length of
time.
Now, when we went to the State after presenting
the material we always tried to estimate the extra
Regraded Unclassified
257
- 3 -
number of volunteers they would need in order to
reach all of these employees, and where they wanted
help we actually helped them get extra volunteers,
and where they didn't we made some suggestions as to
how they may get the volunteers.
Now, we are following that up. We had hoped,
and we believe that most of the firms in America -
the executives of most of the firms in America with
over a hundred employees will have been called on by
the first of July and presented with an outline of
the plan to get ten percent. We are following that
up now and going back to these leading States to see
whether they have done the job.
Generally speaking, we think that July will show
the results of this effort, that we will begin to get
ten percent in a lot more plants than we have in the
past, and everywhere they seem to be confident.
Frankly, I have been out in a number of the places
myself, have gone into some of the plants myself, and
gone out with some of the volunteers and also in-
vestigated the work of a number of the volunteers;
and I think that by and large it has been good. I
do think, however, that if we are going to get ten
percent it will be necessary to go back to a number
of these large plants and get them to put on what you
might call a community chest drive within the plant.
Many of them have installed pay-roll savings and think
that they have done & good job - in their own hearts
and souls they think that they have done everything
possible, but they haven't gone after the ten percent.
In order to do that we will need more volunteers.
It has been our experience that a number of these
volunteers, where you assign four or five leads to
them they don't do any of them well; but if you give
them one or two they will do a job and they will
report back.
258
- 4 -
One other thing that seems to me to be indicated
is this, that wherever we go the administrator and
those who are working with him say, "Now that you have
given us a track to run on let us run on that track.
Let us follow through on this without giving us too
many other things to do in the meantime.'
I think that we could clean this thing up in a
month or a month and a half and be well on the way to
national participation to the extent of ten percent
if we just concentrate on this pay-roll savings drive.
That is the only point.
H.M.JR: Be careful now on giving me dates
because I have got an awful memory, plus the help of
this record. (Laughter)
MR. GRAVES: I should have warned him.
MR. ENGLESMAN: May I revise that then and say
by the end of the summer.
H.M.JR: When does the summer end?
MR. ENGLESMAN: Labor Day.
H.M.JR: What are you going to do by Labor Day?
MR. ENGLESMAN: Well, I think that we will have
the participation over what - above what Mr. Tickton
will tell us after the June report, up to somewhere
between eight and ten percent.
H.M.JR: For the country?
MR. ENGLESMAN: For the concerns with over a
hundred.
H.M.JR: Well, if you are right--
MR. ENGLESMAN: Now I am sticking my neck out,
and I realize that.
Regraded Unclassified
259
- 5 -
MR. GAMBLE: These are firms that have just
wired in that they are over ten percent, Mr. Secretary.
(Paper handed to the Secretary)
H.M.JR: I have just been giving a lecture on
people constantly throwing cold water on me, so I will
not begin throwing cold water on you, but I don't see
how you are going to do it.
MR. GRAVES: I think, Mr. Englesman, that the
Secretary probably will be interested if you will tell
him a little about New York and Ohio and Illinois.
H.M.JR: May I interrupt just a minute? How do
you happen to get these, Ted?
MR. GAMBLE: Those are firms that have wired in,
Mr. Secretary, since we have started this stepped-up
activity in these important States - their drives have
brought that result.
H.M.JR: This is since when?
MR. GAMBLE: Those would all be in the last thirty
days.
MR. GRAVES: That is the result of the telegrams
that you sent out asking these firms to report.
H.M.JR: May I do it a little bit differently and
ask you a couple of questions.
Now, in this thing, for instance, with the help
of Mr. Houghteling, we were supposed to have all the
organizers of the AFL working for us. Now, how close
did you work together?
MR. HOUGHTELING: We haven't worked together at
all.
H.M.JR: You haven't worked together at all? That
is pretty far apart, isn't it? (Laughter)
Regraded Unclassified
260
- 6 -
MR. ENGLESMAN : Mr. Houghteling, I think we have
worked together more than you think. For instance, in
New York last week we went to the head of National -
the biscuit leader, Mr. Glavin, and he went with us,
and I believe we will have the proper result there,
which will be the result of his efforts.
In a number of other places the administrators
have worked directly with labor, at our request, 80
we personally haven't been working together but
actually we have been working with labor in the field
all the way throughout the country.
H.M.JR: That isn't very satisfactory to Mr.
Houghteling if he doesn't know and if - he has got
to see the national leaders and keep after them - I
mean, I have been trying to find out what these AFL
leaders are doing. I know about these twelve meet-
ings which are going to take place, but that wasn't
the purpose - that wasn't really to correlate labor.
We had another purpose in mind on these twelve regional
meetings.
But the purpose of this meeting is I want to say
here and now that the policy of the Treasury is pay-
roll deduction should be number one, and everybody who
is in the Treasury, I want them to direct their atten-
tion towards that because if that can steadily grow
I am more than willing to face anybody in a discussion
8.8 to the volunteer plan. So I wanted to get everybody
together and say that anything else that we are doing
should be secondary to this. I want everybody to get
his back to it.
But if Houghteling - well, you can always talk
for yourself, but I have always got to - and the other
thing I want to say is, because I haven't had a chance
to tell you before, I don't want to go through the
front office. I want to start with the workmen where
they are organized, with their representatives.
Regraded Unclassified
261
- 7 -
MR. ENGLESMAN: In every one of our meetings,
Mr. Secretary, all parts of labor have been repre-
sented, AFL, CIO, in every meeting that we have held
throughout the country.
H.M.JR: You will have to sell that to Lawrence
Houghteling. His eyebrows seem to go up. How about
it?
MR. HOUGHTELING: Well, I have felt that I don't
know about these various plans, that I could be much
more useful if I were kept more closely in touch with
what Mr. Englesman and the rest are doing. I am work-
ing through the local labor unions through all these
organizers, and I am convinced that that is the way
to get ten percent, to get the labor in any organized
plant - to get the union officers talking to their
men.
H.M.JR: I have been through this thing with
General Motors. I don't know what happened; I wrote
that letter - did that do any good?
MR. HOUGHTELING: I know you did. I don't think
we have had an answer from them.
H.M.JR: But, you see, I go on the theory that
this is a long war. We are going to have to live with
labor more and more, not less and less, and let's say
that General Motors does get ten percent, which they
haven't - let's sáy they do have, and then the CIO
labor people are thoroughly dissatisfied, and we want
to go to the next plant, the Ford plant, or somebody
else, and finally they begin to work against us and
kick it out. It doesn't help towards national unity.
I haven't just thought of these things overnight, and
you are comparatively new and I would like you to know
how I feel about it. I go on the theory this is a
five-year war; I hope to God I am wrong. If it was
a five months' war we might get away in General Motors
with a high-pressure executive sales drive and get it
Regraded Unclassified
262
- 8 -
through, and get the men in, and then when we go back
in fifteen months from now have the labor unions say,
"We are not interested; we won't help you." In other
words, I am trying to make long-term friends for these
War Bonds, and I am convinced the way to-do it is to
have the men at the bench satisfied, and the women.
Now, as I say - Sloan, you are supposed to ride
herd on these boys over there.
MR. SLOAN: Mr. Englesman has been away a good
deal, but he has been in several meetings where he
has discussed what he has been doing on his trips,
and so forth. Larry has heard him on a few occasions
when he has been back here. We will ride herd a
little harder to try to get together closer on that.
H.M.JR: You have got to do it. It is always the
same thing, though, whenever I have a meeting in the
office; I always find that the labor people are over-
looked. It happens time and time again, and on a long-
term basis I think it is a mistake and I don't want it
that way.
MR. GRAVES: I was simply going to say with
reference to the job that is being done by the or-
ganizers - at least my understanding of that arrange-
ment was that those men were to go to the union locals
and work with the membership of the union locals.
There was nothing in the plan that would have involved
bringing those people into this pay-roll allotment
approach that Mr. Englesman is responsible for.
MR. HOUGHTELING: No, they are not responsible
for getting the plan established by the various
companies.
MR. GRAVES: That is right. Mr. Houghteling's
approach will result in the unions urging heir
membership to participate on a higher rate, and I
263
- 9 -
think that, generally speaking, with perhaps some
exceptions, this thing has been handled as Mr.
Englesman indicated, with the full collaboration of
organized labor. I can think of two of our biggest
States, for example, where labor is right in the
picture. I have in mind Mr. Wagner in Ohio, who is
in charge of pay-roll allotment in that State and
who comes from organized labor. Mr. Shackelford in
Missouri is another case in point. I think in New
York Mr. McMannus, who is employed in our New York
organization, I understand, is always called in in
any case where organized labor should be consulted
with reference to the installation of the thing.
MR. HOUGHTELING: We have to do that in about
ten more States.
MR. COYNE: In theory, Mr. Graves, every State
is covered through the regionalizing of Larry's men.
We have these regional offices, and they have been
instructed--
MR. GRAVES: That was for & different purpose.
That was to reach th e union locals.
H.M.JR: But, Harold, can't we correlate this
all?
MR. GRAVES: Yes, I think we can. I was not
aware that there was any point here until this
minute.
H.M.JR: Well, the point of the meeting is -
what I am groping for is I want to get everybody
working and thinking together in the Treasury towards
making a success of this ten percent thing, and to do
it - certainly in the Washington office they ought to
be in frequent consultation and then have it spread
out from Washington to the States down the line.
Now, what I want to ask is this. I just want -
I mean, would you, Harold, approve of this? As I
264
- 10 -
say, I am groping - take an industry, aircraft or
shipbuilding, which is among the higher weekly ones,
and say we will put on a drive - just use shipbuilding,
for example - in the shipbuilding industry, wherever
they are, and try to bring the whole industry up to
ten percent as an industry, or would you rather do it
by States?
MR. GRAVES: I would like to talk with Mr. Tickton
aboût that a little bit. I think as to some industries
we ought to do it by industries. You used two illustra-
tions of industries. like that, shipbuilding and air-
craft. I think probably we can make some headway with
them, dealing with them by industries; but some of the
other classifications, they seem very heterogeneous.
After all, there is no--
H.M.JR: Machine tools is a very closely-knit
industry; shipbuilding is, and automobile manufacture.
Now, that is out of the five - I don't know about
engine and turbine manufacture, but I think all of
the top five are very--
MR. GRAVES: Steel probably is another one.
H.M.JR: Yes, but among the top five of the
highest weekly, I think you will find there aren't
too many concerns in each one of those. Is that
right?
MR. TICKTON: That is right. There is a limited
number of firms. You would have to work at a dis-
advantage in trying to work by States on this basis,
Mr. Graves. Most of these are national companies.
MR. GRAVES: I think that is the answer, that
any companies that a re national in scope we might
best approach as an industry.
H.M. JR: What I had in mind, Harold - and the
salesmen in this room can tell me whether it is good
or bad - supposing we could take the top - the engine
265
- 11 -
manufacturing company has the highest weekly rate,
and if we could go out and say that of the engine manu-
facturing companies ninety-five percent of their
employees are members of the plan, and they are taking
over ten percent, then you go to the aircraft and say,
"Aren't you as good as the other fellow? We have got
the other fellow; we have got this industry; now we
want to see if you want to do it." Do it among these
industries.
I don't suppose in the aircraft industry there
could be - what, twenty-five to fifty manufacturers?
MR. TICKTON: About fifty. All of the small
ones are included in fifty.
H.M.JR: I don't know whether I am right, but I
just was wondering.
MR. GRAVES: I think you are certainly right as
to some industries, but I doubt whether--
H.M.JR: I am mentioning the five which are at
the top. What do you think, Mr. Englesman?
MR. ENGLESMAN: I think you are right as long
as they are well defined and they are limited to a
reasonable number. Any under a hundred we could do
it that way, and probably very effectively.
H.M.JR: I am not saying it is the way. What
do you think, Coyne?
MR. COYNE: Well, I think it would be an interest-
ing experiment. I don't think it would be the answer
to our question, but I certainly would not oppose
undertaking it and we might learn something of great
value.
Mr. Gamble had an idea some time ago of making
a series of approaches to big companies by & selected
266
- 12 -
group of men of standing, very carefully picked. Now,
it might be entirely consistent with that idea.
H.M.JR: Well, the engine people, it looks as
though there were twenty-five. Why couldn't you do
this, Harold, why can't you take the people who are
directly responsible to you for this, you see, and
let them talk this thing ov er and take a fresh look
at the thing, with the idea that this takes precedent
over everything else, that is, the ten percent idea?
MR. COYNE: Surely.
H.M.JR: And bring in a plan.
MR. GRAVES: Yes.
MR. HOUGHTELING: I would like to bring out one
or two points. These first five categories are all
pretty solidly unionized and there are comparatively
few unions. For instance, in shipbuilding there is
one, CIO, and the boilermakers and the machinists in
the AFL. From the labor standpoint we can do a lot
through three big organizations.
When we talk about getting volunteers in a
situation like that, the volunteers ought to be
appointed by the labor unions in the unionized plant,
not by management, because that is the way to get
their own people to tell them what to do.
H.M.JR: Most of these people, I think you will
find, have an association - the owners.
MR. GRAVES: The industries are organized in
associations.
H.M.JR: Most of them, and if you had the
secretary - for instance, when I was dealing with
machine tools they had a very good secretary out
at Indianapolis, as I remember - a man like that,
plus a man from the union, and they sat down - "Now,
Regraded Unclassified
267
- 13 -
would be willing to help us put on a thirty-day drive?
We have got a lot to do between now and Labor Day in
this particular industry." Then let them go to it.
Harold, I am groping; I am not laying down any
laws.
MR. GRAVES: I understand. I think that in
certain instances that approach would be very helpful.
Railroads is a good example, Larry. You fellows have
taken hold of railroads, not on a geographical basis
at all but as a special part.
MR. HOUGHTELING: For the most perfect example
of cooperation of management and labor, I got a report
today that ninety-six railroads, including some of the
biggest ones, are over ninety percent. Their participa-
tion is only about five percent so far, but we are
pushing them up.
H.M.JR: Then I was thinking, Miss Elliott, that,
after all, they get this all day long and then they are
going to come home and talk it over with their wives,
and they help them to make up their minds.
MISS ELLIOTT: We were talking about that, the
way we can work the Women's Division into the local
educational program.
H.M.JR: Don't you think, for instance, if they
are going to take an engine plant, that something
should be done with the women in their homes to help
them become receptive?
MISS ELLIOTT: Yes, I do, and as we said this
morning, in any meetings that they plan I think the
women directors and the heads of the local women's
committees should be invited to those meetings and
be a part of that program.
H.M.JR: I think SO.
268
- 14 -
Well, Harold, will you turn this over to whoever
you want?
MR. GRAVES: Yes. Gamble, Coyne and Englesman
and I will have to study this out.
H.M.JR: Will you, and then - Gawd, don't forget
this fellow Houghteling. He is such a modest fellow,
you know. (Laughter) You know, you have got to
come in here with a gun or something. (Laughter)
MR. GRAVES: Of course I always represent Mr.
Houghteling. I don't know that I am a very satisfactory
representative.
H.M.JR: Anyway, don't leave Lawrence Houghteling
out, and as soon as you get something let me know and
I will drop what I am doing; but from now on, if this
thing that you (Englesman) are in charge of gets
pressing, radio, press, everything, if you don't get
what you want, holler, but - I mean, so that we can
get these people up to the ten percent or better.
Eugene, over in your place see that everybody
knows that, will you?
MR. SLOAN: Yes, sir, I won't forget that.
H.M.JR: And tell somebody over there - I listened
to the General Electric program Sunday night; they
have just gone over the ten percent, and they broke
into their program and gave us a wonderful send-off
on the ten percent, what they had done, and everything.
They did a beautiful job on the General Electric
program Sunday night. I don't know whether it was
voluntary or written by somebody in the Treasury,
but it was very well done. This man was speaking,
and in the middle of it this all-girl orchestra said,
"Wait a minute, you have forgotten us; don't forget
us; we have gone eleven percent" or twelve percent.
They broke right in, "Don't forget us." It was very
well done.
269
- 15 -
Ted, this all fits into your regional thing,
doesn't it?
MR. GAMBLE: Yes, very well.
H.M.JR: Peter, got any contributions?
MR. ODEGARD: No.
H.M.JR: Kuhn?
MR. KUHN: No.
H.M.JR: Well, this (indicating papers submitted
by Mr. Tickton) is the bible - or, rather, it is the
measuring stick. Somebody else will have to furnish
the bible. This is the yardstick.
MR. GAMBLE: I don't think you have ever seen
this all at one time, 80 we had it put together for
you so you will know what is going on in the plants
today. (Mr. Gamble submitted a group of charts to
the Secretary.)
H.M.JR: I have never seen any of it. Who did
this?
MR. GAMBLE: This is Advertising Council material.
These are the posters going into the factories. This
is all the material that is being used, pay-roll
envelope stuff, and so forth.
H.M.JR: Now, is there anything in there for the
women? I will bet you there isn't. You (Miss Elliott)
will find that if you and Lawrence Houghteling - if
the two of you pair together maybe you will get heard.
I suggest that you join up. (Laughter)
MISS ELLIOTT: All right.
MR. COYNE: That "I Gave A Man" poster is very
effective.
Regraded Unclassified
270
- 16 -
H.M.JR: I have been wanting to see this. I have
never seen this in finished form.
What have they got for labor?
MR. GAMBLE: Labor is all through here.
MR. ODEGARD: Mr. Secretary, could I make just
one suggestion on that? Running throughout that copy
you will find "Will you give ten percent?" It seems
to me psychologically and every other way bad. We
are not asking anybody to give anything.
H.M.JR: I agree with you. Is it too late to
change it?
MR. GAMBLE: Peter, that was discussed, and the
opinion of the fifteen leading advertising men in the
country was that "Give Three, Get Four" was just the
thing they wanted to use. It isn't running all the
way through, Peter.
MR. KUHN: No, it doesn't.
MR. ODEGARD: I haven't seen that. I just
noticed the ads that were held up.
MR. KUHN: It is in that one poster and in the
booklet, "Give Three, Get Four", which was pretty
effective.
MR. ODEGARD: "Give Three, Get Four" is a different
proposition. If you say "Give Ten Percent" it is a
different thing than "Give Three, Get Four."
MR. KUHN: You won't find that in the rest of
that copy.
H.M.JR: Could I have one other thing, if I was
real good, a set of ads that they ran in New York in
connection with their drive?
271
- 17 -
MR. GAMBLE: Yes.
MR. KUHN: I have one of those which I can send
in to you.
H.M.JR: Could you? When?
MR. KUHN: Right away. I have it in my office.
Do you want it now?
H.M.JR: Yes, right now.
I have nothing else.
MR. GRAVES: There is one thing that is missing
from our discussion here. You asked me a week ago
for a report on pay-roll allotment, and Mr. Tickton
prepared one and I sent it to you. I was wondering
if you had a chance to--
H.M.JR: Yes, I have that very much in mind.
MR. GRAVES: It shows the progress of the various
factories.
H.M.JR: Definitely - I read it twice very
carefully. I read that, but I thought now, with the
position that Congress was taking, whatever you wrote
for Mr.
MR. GRAVES: Ludlow.
H.M.JR: Mr. Ludlow, and I am not conscious just
now of any particular pressure from the White House
on me on this thing. When they see the bond figures
there will be all kinds of questions, and I think this,
Kuhn, that I would like to pin this on you - I don't
know whether Thursday morning they will go after me
on the fact that we won't have sold as many bonds as
we did in May - what the explanation is going to be -
Regraded Unclassified
272
- 18 -
I have got a press conference at ten-thirty, and the
boys are kind of tough on me. But I think the figures
will be out - as I say, the June figures won't look as
good as May, and what have I got to offer them in July.
I would, if I had some pay-roll allotment figures--
MR. GRAVES: I think Mr. Tickton can probably
project these figures to give you some estimates for
June.
H.M.JR: If you will consider that a number one
assignment between now and ten-thirty--
MR. KUHN: You mean to get up something you can
give to the newspapers?
H.M.JR: And come in early so I don't get it at
ten twenty-nine.
MR. KUHN: I think this kind of thing will be
very good because it is concrete and the boys don't
know about this.
H.M.JR: Well, I wish you would talk around,
and if anybody has any ideas they want me to talk
about if they could give them to Kuhn in time enough
so I would have something to offset this bad
publicity--
MR. GRAVES: I think I would like to talk with
Mr. Kuhn about that and give him some suggestions.
I have some in my head.
MR. KUHN: This won't be a surprise to news-
paper readers. It has been prepared for, and you have
prepared the way.
H.M.JR: I know, but I will have to take it just
the same.
Now, in order that you can make good on your
statement here you (Englesman) can see you have got
Regraded Unclassified
273
- 19 -
to stand up and ask for what you want.
Mr. Graves will get these people together, and
then as soon as you are ready - I don't mean today,
but in a couple of days, come back.
MR. GRAVES: Yes, sir, as soon as we can.
H.M.JR: Harold, if I don't see you again, you
are willing to fly? Does Gamble fly?
MR. GRAVES: Yes, he flies more than I do.
H.M.JR: Does Tickton fly?
MR. TICKTON: Sure.
H.M.JR: Then I will be at the Cosmos Club at
eight-fifteen tomorrow morning to pick the three of
you up. We are going up to see Madden.
MR. GRAVES: They are expecting us. I talked
with him.
H.M.JR: Did you do anything?
MR. TICKTON: Yes, sir, I talked with Madden
for about an hour.
H.M.JR: Could you boil it down to three
minutes?
MR. TICKTON: I can. They will have the kind
of follow-up on this person-to-person check that you
are going to have next week, the kind of follow-up
you talked about; but the follow-up that is being
conducted in the usual way is going a lot slower than
Mr. Madden thought it would go. It is going slower
because of the physical impossibility of handling two
million pledges with a lot of volunteer workers and
doing it in a very short period of time.
Regraded Unclassified
274
- 20 -
These bank postal cards will really not get out
into the mails until the fifteenth of July. Not more
than fifteen or twenty thousand pledges have been
delivered to the banks as of yesterday, and they will
deliver them at the rate of ten or fifteen thousand a
day for the next couple of days, twenty-five thousand
afterwards.
The post office designees, if they are followed
up, of course will not be followed up on that basis
until some time the middle of August; and the pay-roll
savings designees will probably also be followed up,
say, in the first part of August, all because of the
physical impossibility of very quickly handling these
two million pledges. That is as of yesterday.
They only had financial statistics on five
hundred thousand of the two million pledges. They
knew there were two million - I am pretty sure there
are, but they got that count by measuring bundles and
not by physically counting them.
H.M.JR: Now, what about this thing of sending
the men - twenty-five men out in the blocks?
MR. TICKTON: Those twenty-five men will be
trained this week, the end of this week, and will do
their canvassing the first part of next week.
H.M.JR: You were going to do it last week,
weren't you? That is what I wanted. We said seventy-
two hours - that is what we first said, you remember,
and then it was going to be this week.
MR. GAMBLE: No, it was to be the date he said,
the same date. He didn't close his drive until
Sunday night.
H.M.JR: But he is going to do the thing - when
are these men going to get out?
275
- 21 -
MR. TICKTON: They will probably get out next
Monday or Tuesday. What he wants to do, Mr. Secretary,
is to physically pick up the books the people sign so
that the canvasser will actually have the book and
come to you and have your stuff; but in order to do
that, first he has to determine what district he is
to canvass and then he has to locate the books; and
all this is in the middle of two million pledges.
H.M.JR: What if I barge in there tomorrow?
MR. TICKTON: Well, I can say this, that they
were very much more follow-up conscious this week
than last as a result of you having become interested.
H.M.JR: Well, we have told them we are coming.
MR. GRAVES: Yes.
MR. KUHN: Patterson gave out a statement to
the press on the follow-up idea.
H.M.JR: I read it this morning. It wasn't very
good.
Well, anyway, we will go up because I have told
the Federal Reserve I will be there tomorrow.
Sloan, I would like to show you where in my room
I would like these posters so that you will see that
they come over.
276
June 30, 1942.
4:36 p.m.
HMJr:
Sumner?
Sumner
Welles:
Hello, Henry.
HMJr:
How are you?
W:
I'm fine, thanks.
HMJr:
Sumner, this is in the nature of a personal
matter.
W:
Yes, indeed.
HMJr:
Judge Irving Lehman has sent me a letter -
on a personal basis, see - whether or not
there's anything that we could do for the
Joint Distribution to help them communicate
through Switzerland with people and these
Jewish refugees in Shanghai. Hello.
W:
Yes.
HMJr:
What I'd like to do would be just to stick
this in an envelope with my card in it, and
send it over to you
W:
Yes.
HMJr:
and then let you decide whether there's
anything that could be done for these poor
people or not, you see.
W:
Do that, Henry, and needless to say there's
nothing that I won't do if there's any possible
way of doing it....
HMJr:
Well....
W:
not only on account of the reason but also
on account of the fact that he's interested
in it. You know the very high regard and
affection I have for him.
HMJr:
Well, I knew you'd feel that way. I know it's
a difficult thing but - all these things are
difficult nowadays.
Regraded Unclassified
277
- 2 -
W:
Send it over to me and I'll do everything on
earth I can.
HMJr:
Thank you so much.
W:
All right, Henry.
HMJr:
Thank you.
W:
Goodbye.
HMJr:
Goodbye.
278
June 30, 1942.
4:39 p.m.
Sam
Rayburn:
Henry.
HMJr:
Hello.
R:
Sam.
HMJr:
Sam?
R:
Yeah.
HMJr:
Henry is my name.
R:
That's correct. That's what I said, Henry.
HMJr:
Yeah.
R:
And you know it. Henry.
HMJr:
Yes.
R:
Two things - there are some people down in
Texas, the Texas Textile Mills, who are
celebrating on July the Fourth - that's
Saturday at noon.
HMJr:
Yeah.
R:
They want me to make a little recording on &
disk....
HMJr:
Yeah.
R:
telling them how grand they are because
there's ninety percent participation in pay-
roll deduction for War Bonds.
HMJr:
Yeah.
R:
They want me to make a little disk here in
the morning 80 they can take it in their
pocket and take it down there and play it
to those employees of the three mills.
HMJr:
Right.
Regraded Unclassified
279
- 2 -
R:
They're wondering if you'd come up here and
sit in with me ten minutes and let's have a
little conversation about those people.
HMJr:
Sure, I'd love to.
R:
Congratulating them, and BO forth.
HMJr:
Sure, I'd love to.
R:
Well, supposing you come here at ten o'clock
in the morning then if you can.
HMJr:
Well, now I won't - I won't be here tomorrow
but I'll be here Thursday. Hello. I'm leaving -
I'll be gone all day tomorrow. I'm out of town.
R:
Well, we'll just have to do 1t - - let me see now.
Yeah, they can leave here on the train Thursday
night and get there - do they (talks aside) Bill,
did they come on an airplane or what?
HMJr:
Yeah, they go by airplane. They could go by air-
plane.
R:
Yes, or they can go by train and make it.
HMJr:
Yes, well, I'll....
R:
All right, then say we'll do it ten o'clock
Thursday morning?
HMJr:
Ten o'clock Thursday morning - well, now you
couldn't make it - I have a regular press at
ten-thirty.
R:
Uh huh.
HMJr:
You couldn't either make it - - would would
eleven be too late?
R:
No.
HMJr:
What?
R:
No.
Regraded Unclassified
280
- 3 -
HMJr:
Or earlier. You don't get up BO early though,
do you?
R:
No.
HMJr:
How about if I get up there about eleven-fifteen?
R:
That'll be fine.
HMJr:
And now would - would you like to have us write
something beforehand?
R:
Well, I thought you and I would just get to-
gether here in the office and talk it over and
just have a little informal conversation.
HMJr:
Fine.
R:
I'll ask you some questions
HMJr:
That's fine.
R:
....and these people have done a grand job, and
80 forth, and they - they'd enjoy it down there.
HMJr:
Well, I'd love to. I'll be at your office sharp
eleven-fifteen Thursday.
R:
All right, Henry.
HMJr:
I'll be there.
R:
Fine.
HMJr:
Is that all you've got on your mind?
R:
That's all. Oh yes - you know this old fellow
Cottrell that's been making out the income tax
for these people up here?
HMJr:
Yeah.
R:
Well, they're after me again to speak to you
about continuing him - it's hell, I know.
HMJr:
It's Cottrell. He's in income tax. You want
him extended.
Regraded Unclassified
281
- 4 -
R:
Yes, he's been making out - he comes up to
the Sergeant at Arms office.
HMJr:
Well, we'll have to do it, I guess.
R:
All right, Henry. The name's Cottrell.
HMJr:
Cottrell. He's income tax. He makes out
Congressmen's income tax.
R:
That's right.
HMJr:
I'll do the best I can.
R:
All right, Henry.
HMJr:
Thank you.
R:
Goodbye.
282
The News
JUN 1942
Says Secretary Morgenthau:
Treasury Did Request
McCarty Deferment
By MARTHA STRAYER
The strange draft case of Milburn McCarty Jr. today
became stranger and stranger, as Treasury Becretary
Henry Morgenthau Jr. revealed that without his knowl-
edge and contrary to Information given him by his asso-
clates, the Treasury had requested occupational deferment
for this young man.
Developments followed thick and fast yesterday, after
The News printed a story quoting from & mimeographed
document which, written by Mr. McCarty about Mr. Mc-
Carty, told how important he is to the War Bond drive,
for which he is press section chief. The story pointed out
discrepancies between his statements and those of his
draft board in New York.
First, Mr. Morgenthau called a press conference to de-
nounce The News for printing the story and calling 10
"unfair to Mr. McCarty and the Treasury, and entirely
uncalled for."
PRAISES McCARTY'S ACTION
He described Mr. McCarty as a young man In I-A who
Mr. McCarty
Mr. Morgenthau
had agreed to postponement of a Navy commission to
for Mr. McCarty's deferment, and added: "I owe The News
stay in the Treasury and take his chances on the draft.
an apology. If agreeable to you, I will make it at my
"Mr. McCarty was sufficiently patriotic to be willing to
next press conference on Thursday."
stay here and take his chances," said the Treasury Secre-
"I am only human," the Secretary continued. "I have
tary. "He was willing to give up an opportunity for a
got to depend upon other people. As soon ILF I went into
commission. Not everybody is like that."
this case myself, I found I had been misinformed."
The Secretary read a letter of April 29. addressed to
CORRESPONDENCE IS READ
Navy Secretary Knox by his own (Mr. Morgenthau's),
administrative assistant, Norman Thompson, asking post-
Correspondence read by Mr. Morgenthau at this special
ponement of à commission applied for by Mr. McCarty:
press conference was as follows:
also Mr. Knox's reply. granting the request.
From Mr. Thompson to Mr. Knox:
I take full responsibility for draft deferments in the
"It is my understanding that the Navy Department now
Treasury," said the Secretary. "I did not ask for Mr.
has under consideration a commission for Milburn Mc-
McCarty's deferment, and If I had been asked to make
Carty Jr., who will be assigned to Admiral Conard's
this request, I wouldn't have done anything about 16."
division. At the request of the Secretary, I will ask that
you have the granting of this commission indefinitely
TOLD OF DISCREPANCIES
postponed. As you know, the President recently inaugu-
A News reporter pointed out discrepancies in Mr. Mc-
rated a greatly intensified campaign for the voluntary
Carty's statements, those of his draft board, and the record
sale of War Savings Stamps and Bonds. His leaving at
of his case as reported by Mr. Morgenthau. Mr. Morgen-
this time would seriously hinder our war-bond activity.
thau said he would investigate these discrepancies,
KNOX TO THOMPSON
Less than two hours later he telephoned The News, said
"Under these circumstances, we believe II Is necessary
he had "just begun to go into the case himself," found
for Mr. McCarty to remain in the service of the Treasury
he had been misinformed and that the Treasury did ask
Regraded Unclassified
283
The News
End to TODO you will agree with as and that this will at
affect Mr. McCarty's record with the Navy Department."
From Mr. Knox to Mr. Thompson: "This will acknowl-
edge your letter of April 29, relative to Milburn McCarty
Jr., who applied for a commission in the U. B. Naval
Reserve. The Indefinite postponement you ask for will be
granted, without in any way prejudicing any application
Mr. McCarty might subject or reflecting upon his record
with the Navy."
Discrepancies pointed out by The News were as follows:
Mr. McCarty said he hadn't heard from his draft board,
couldn's remember its number, and that his case involved
no question of deferment. Mr. Kuhn reiterated that It
involved no deferment, but had to do only with & Navy
commission.
Mr. McCarty's local board (No. 14, New York City) told
The News his case is now before the occupational defer-
ment division there. This meant, according to draft regu-
lations, that some one must have asked for deferment and
that the request must have had support from Mr. Mc-
Carty's employer.
When these discrepancies were pointed out to the
Treasury Secretary, he said he would immediately investi-
gate them. He added:
"All correspondence between the Treasury Department
and any draft board is available to Inspection at all times.
In this case we have not asked for deferment.
GETS FEW REQUESTS
"There have been some few requests for deferment here
and I have rejected & number of cases. I take full respon-
sibility for what has happened between the Treasury and
draft boards. I consider honest enforcement of the draft
more important than any other part of the war effort.
"I shall certainly ask Mr. McCarty to explain these
discrepancies. I happen to feel very strongly on the war.
I am fighting. the war."
Asked by another reporter about deferment of Treasury
General Counsel Edward H. Foley Jr., 10 Thompson Circle
nw. Mr. Morgenthau replied:
"I have not asked for any deferment for Mr. Foley."
"I have heard comment about Mr. Foley's case from
outside sources," said the reporter.
"Anybody that wants to may see the correspondence
between this department and any draft board," Mr. Mom
genthau reiterated.
284
(In connection with deferments which
Bad been approved by an Acting Secretary
during the Secretary's absence from the city
I told Norman Thompson I did not care
where I was, as far as draft deferments
were concerned I was always Secretary of
the Treasury.
norman themborn plass 285
bring this in an of class
DEFERMENTS REQUESTED BY THE TREASURY DEPARTMENT
you
we
For 6 months,
3
For 3 months,
8
For 2 months or less,
4
Total requested by the Treasury Department,
15
Request made by Department of Commerce for 6 months
deferment for employee of the Bureau of Marine
Inspection and Navigation which was transferred to
the Treasury Department by E0-9083 on 3-1-42,
1
Total,
16
Deferments which have expired as of the present date,
5
Number of those deferred who have entered or received
notice of induction into the military service,
2
Employee reclassified by Board after request for defer-
ment was made,
1
Number of employees deferred from military service at the
present time,
8
Total,
16
In addition to the above, requests have been made for the deferment of
14 Secret Service Agents and Police assigned to the White House.
Two of these requests were disapproved by the local boards and two of
the employees enlisted in the Army Air Corps after the requests for
deferment were made.
1
6-30-42
Regraded Unclassified
RECOMMENDATIONS MADE FOR DEFERMENT OF TREASURY EMPLOYEES FROM MILITARY SERVICE
©Name
Title
Office
Deferment
Approved by
Board Action
28
Requested
Hahn,Theodore P. Sr. Clerk
Customs
6 months
Director, Bureau of
Deferred until
Marine Inspection &
8-20-42
Navigation, Dept. of
Commerce (Transferred
to Customs by E0-9083,
effective 3-1-42)
Miller,Charles M. Engineer
Mint
6 months
Secretary Morgenthau
Deferred until
(New Orleans)
on 3-6-42.
9-19-42
Leahey, Thomas F. Sr. Economist
Res. & Stat.
6 months
Secretary Morgenthau
Placed in
on 4-27-42
Class II-A un-
til 11-12-42.
McCarty,Milburn(Jr.) Chief,
War Savings
6 months
Secretary Morgenthau
The Board has
Press Section
Staff
on 5-1-42
not replied to
our request or
advised Mr.
McCarty of his
present classi-
fication.
McEachern,
Engineer,
Int. Rev.
3 months
Secretary Morgenthau
The Board has
Webster C.
Revenue Agent
on 2-4-42.
not replied to
our request.
Perkins, Edwin M. Sr. Atty.
Int. Rev.
3 months
Under Secy. Bell on
Deferred until
6-6-42.
8-9-42
Overby,Wesley C.
Zone Deputy
Int. Rev.
3 months
Secretary Morgenthau
Collector
on 6-26-42.
Gatz, Peter
Zone Deputy
Int. Rev.
3 months
Secretary Morgenthau
Collector
on 6-26-42.
Regraded Uncla
Name
Title
Office
Deferment
Approved by
Board Action
Requested
287
Breithut,
Ec. Analyst
Res.& Stat.
3 months
Secretary Morgenthau on
Deferment granted
Richard C.
2-23-42.
for 2 months.
Entered Army Air
Corps 5-5-42.
Weir,William
Adm. Asst.
Res.& Stat.
3 months
Under Secy. Bell on
Deferred by Board
3-23-42.
for 2 months.
3 months
Second request approved
Reclassified by
by Under Secy. Bell on
Board to III-A.
6-2-42.
Anderson,Carl W. Asso.Ec.An.
Tax Res.
3 months
Secretary Morgenthau on
Mr. Anderson was
3-6-42.
advised that he
would be inducted
around 7-15-42.
Atlas, Martin
Asso. Stat.
Tax Res.
3 months
Secretary Morgenthau on
The Board has not
3-6-42.
replied to our
request or advised
Mr. Atlas of his
present classifi-
cation.
Due, John
Ec. Analyst
Tax Res.
2 months
Secretary Morgenthau on
6-26-42.
Edelman,Albert I. Asso. Atty.
Gen.Counsel
1 or 2
Acting Secy.Foley in the
Deferred until
months
absence of the Secretary.
7-26-42. Will
Letter signed by Mr.
report to Coast
Thompson on 5-20-42 re-
Guard for active
questing the Board to
duty as an ensign
defer induction until
on 7-13-42.
Edelman could return
from the West Coast.
Regraded Unclass
TREASURY EMPLOYEES DEFERRED FROM MILITARY SERVICE AT THE PRESENT TIME (6-30-42)
288
Name
Title
Office
Deferment
Approved by
Board Action
Requested
Hahn, Theodore P.
Sr. Clerk
Customs
6 months
Director, Bureau of Marine
Deferred until
Inspection & Navigation,
8-20-42.
Dept. of Commerce (trans-
ferred to Customs by EO-
9083, effective 3-1-42)
Miller, Charles M.
Engineer
Mint
6 months
Secretary Morgenthau on
Deferred until
(New Orleans)
3-6-42.
9-19-42
Leahey, Thomas F.
Sr. Economist
Res. & Stat.
6 months
Secretary Morgenthau on
Placed in
4-27-42.
Class II-A
until 11-12-42
McCarty, Milburn Jr. Chief, Press
War Savings
6 months
Secretary Morgenthau on
The Board has
Section
Staff
5-1-42.
not replied to
our request
or advised
Mr.McCarty of
his present
classification
Perkins, Edwin M.
Sr. Atty.
Int. Rev.
3 months
Under Secy. Bell on
Deferred until
6-6-42.
8-9-42.
Overby, Wesley C.
Zone Deputy
Int. Rev.
3 months
Secretary Morgenthau on
Collector
6-26-42.
Gatz, Peter
Zone Deputy
Int. Rev.
3 months
Secretary Morgenthau on
Collector
6-26-42.
Due, John
Ec. Analyst
Tax Res.
2 months
Secretary Morgenthau on
6-26-42.
Regraded Unclassifie
REQUESTS FOR DEFERMENTS WHICH WERE DISAPPROVED BY THE SECRETARY
289
Name
Title
Office
Deferment
Disapproved
Requested
Head, James D. Jr. Pr. Atty.
Int. Rev.
6 months
By the Secretary on 11-28-40.
Mouhtouris,
Deputy Collector
Int. Rev.
6 months
Mr. Thompson advised Mr. Helvering
Charles J.
or more
in a memo dated 2-26-41, that the
Department could not ask for a
deferment simply because he might
be called to testify at trials as
he could be released from camp for
that purpose.
Moore, Lawrence C. Attorney
General Counsel
2-11-42 his draft board requested
the Department to advise them
whether or not he was a "necessary
man". On 3-12-42, Mr. Thompson
advised that the Department did
not wish to recommend deferment.
Marcus, Max
Jr. Clerk
Public Debt
4-29-42 his draft board submitted
a Form 42-A to be used by the
Department if it desired to request
his deferment. 5-8-42 Mr. Thompson
advised the board that the Depart-
ment did not wish to recommend
deferment.
Melcher, Daniel
Publications
War Savings Staff
2 months
By the Secretary on 6-26-42.
Consultant
Minaker, Cecil W.
Zone Deputy
Internal Revenue
12 months
By the Secretary on 6-26-42.
Collector
Parks, David A.
Asst. Chief
Procurement
6 months
By the Secretary on 6-26-42.
Traffic & Expediting
Unit, New York Office.
Regraded Unclassifie
290
In addition to deferments under the Selective Service Act,
there were 8 cases of reserve officers where the question arose
as to whether if they gave up their commissions, they would be
given draft deferments. They were told that it was a matter for
their own decision as to whether they resigned or accepted their
commissions and no promises were made that if they resigned their
commissions, deferments would be asked for them. Following is a
list of the employees involved:
*Kamarck, Andrew,
Office of the Secretary.
*Towson, Norman E.,
Foreign Funds
*Kades, Charles L.,
General Counsel
HH##Brown, James Joel,
Internal Revenue
****Allen, Guy F.,
Disbursement
*Orcutt, Ralph G.,
Secret Service
*Hale, Kenneth G.,
Secret Service
Bouck, Robert I.,
Secret Service
* Accepted their commissions.
** Has not been ordered to report for duty.
*** Over age and was advised that he had been relieved
from call to active duty.
**** Resignation as a Reserve Officer was accepted 8-7-41.
6-30-42
Regraded Unclassified
291
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
June 30, 1942
TO
Secretary's files
FROM
Ferdinand Kuhn, Jr.
H
I told Miss Elliott this morning what Mr. Street was
doing about the Presidents' wives, and have asked Mr. Street
to see her when he gets to Washington later in the week.
7.K.
292
June 29, 1942
TO: MR. KUHN
FROM: THE SECRETARY
Please ask Julian Street, Jr., to inform Miss Elliott
what he is doing about the wives of former Presidents of the
United States.
Regraded Unclassified
293
June 30,
1942.
Ted Gamble
Secretary Morgenthau
I am worried about these demonstrations that we
are going to put on in the coal mining towns. Before you
commit the Treasury any further on this, I want to talk
to you and to Mr. Houghteling.
JUL 9 1942
Knox, Frank 294
THE SECRETARY OF THE NAVY
WASHINGTON
June 30, 1942
Dear Henry:
The Navy will be glad to cooperate in the
Treasury Department's plan for placing a small plaque on
ships sponsored and made possible by War Bond purchases.
This complies with your request of June 18th.
It is suggested that the practical arrange-
ments necessary in connection with this project be made
direct with the Bureau of Ships here. That Bureau has
been informed and will be ready to cooperate with your
representatives.
Yours sincerely,
Frank Stor
The Honorable Henry Morgenthau, Jr.,
The Secretary of the Treasury
Washington, D. C.
295
File: Knox, Frank
June 18, 1942
Dear Frank:
It would be most helpful to our War Bond effort,
and I think, to the Navy, if the warships which a
county or city "builds" with its War Bond subscriptions
could bear a small plaque naming that county or city as
its "sponsor".
For example, the District of Columbia has chosen
the "building" of a destroyer as the objective of its
June War Bond drive. The interest and activity of the
people would be stimulated very much if our advertising
and publicity could say that a small plaque or even a
few stenciled or painted words would be placed on an
actual destroyer. Such a plaque might say: "Sponsored
and made possible by the War Bond purchases of the
people of the District of Columbia." The same procedure
might be followed for other types of navel equipment
chosen by other cities or counties.
Would the Navy agree to do this, limiting the Items
to one per county or city per month?
Machinery for handling all phases of the promotion
could be worked out to involve a minimum of effort and
paper work.
Sincerely,
(Signed) Henry
The Honorable,
The Secretary of the Navy.
FE/egk
Regraded Unclassified
296
June 30, 1942
Dear Mr. President:
I am so sorry to hear from Mr. Kuhn
that you are under doctors' orders for a
couple of months. This is just to send you
my best wishes and my hope that you will be
well and strong very soon.
Needless to say, we all appreciate your
willingness to help us with the War Bond
campaign later in the summer. I know that
a speech from you will be of the greatest
possible value whenever you feel able to
make it.
Sincerely,
(Signed) 1. Horgenthan, in
Hon. Manuel L. Queson,
President of the Commonwealth
of the Philippines,
1617 Massachusetts Avenue, N. E.,
Washington, D. C.
FK/cgk
capies
to Mr. Thompson
nmc
Regraded Unclassified
CONFIDENTIAL
297
UNITED STATES SAVINGS BONDS - SERIES I
Comparison of June sales to date with sales during the
same number of business days in April and May 1942
(At issue price in thousands of dollars)
I
June
1
Jumulative sales by business days
Date
#
daily
:
:
June
:
:
May
June as
:
sales
I
:
April
:
:percent of May
June 1942
1
$ 19,834
$ 19,834
$ 12,679
$ 12,993
156.4%
2
8,008
27,841
24,263
24,256
114.7
3
12,970
40,811
46,532
35,050
87.7
4
17,388
58,199
55,460
47,119
104.9
5
24,789
82,988
73,824
65,115
112.4
6
15,209
98,197
97,049
73,795
101.2
8
27,048
125,245
114,218
85,714
109.7
9
8,912
134,157
128,670
97,925
104.3
10
20,085
154,242
151,956
108,707
101.5
11
15,678
169,920
161,346
116,081
105.3
12
16,550
186,470
177,133
138,272
105.3
13
15,230
201,700
194,047
146,937
103.9
15
23,984
225,684
208,939
154,623
108.0
16
7,535
233,218
223,242
168,103
104.5
17
15,815
249,033
247,532
178,870
100.6
18
12,288
261,321
257,374
189,156
101.5
19
19,421
280,742
271,079
207,742
103.6
20
10,987
291,729
290,485
217,104
100.4
22
29,386
321,114
309,584
229,140
103.7
23
10,692
331,806
323,705
241,644
102.5
24
15,866
347,673
347,494
256,076
100.1
25
14,877
362,550
360,564
267,396
100.6
26
15,956
378,505
375,702
288,434
100.7
27
13,719
392,224
392,627
300,188
99.9
29
24,893
417,117
408,409
313,511
102.1
ffice of the Secretary of the Treasury,
June 30, 1942.
Division of Research and Statistics.
ource: All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily
add to totals.
CONFIDENTIAL
298
UNITED STATES SAVINGS BONDS - TOTAL
Comparison of June sales to date with sales during the
same number of business days in April and May 1942
(At issue price in thousands of dollars)
:
June
:
Cumulative sales by business days
Date
:
daily
:
June
:
:
1
May
:
sales
:
April
June as
:
:
:percent of May
June 1942
1
$ 29,539
$ 29,539
$ 19,981
$ 24,980
147.8%
2
15,903
45,442
39,430
45,933
115.2
3
21,604
67,046
72,048
64,147
93.1
4
31,162
98,208
88,605
82,937
110.8
5
34,132
132,341
122,575
111,289
108.0
6
21,744
154,085
157,866
129,786
97.6
8
38,574
192,659
181,431
149,409
106.2
9
13,863
206,523
201,464
168,289
102.5
10
30,029
236,552
232,801
185,904
101.6
11
23,220
259,772
246,756
196,667
105.3
12
21,952
281,724
271,525
229,895
103.8
13
21,439
303,163
296,152
242,969
102.4
15
31,235
334,398
317,861
257,280
105.2
16
11,099
345,497
337.371
279,933
102.4
17
23,285
368,782
371,066
295,244
99.4
18
18,587
387,369
385,098
309,780
100.6
19
27,435
414,804
409,987
339,594
101.2
20
14,354
429,158
439,987
353,636
97.5
22
39,655
468,812
466,171
374,391
100.6
23
16,526
485,338
485,109
394,628
100.0
24
25,108
510,446
518,829
416,474
98.4
25
22,650
533,097
539,771
433,674
98.8
26
21,818
554,915
564,973
464,995
98.2
27
20,742
575,657
588,819
484,467
97.8
29
33,858
609,516
615,283
508,904
99.1
Office of the Secretary of the Treasury,
June 30, 1942.
Division of Research and Statistics.
Source: All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of United States savings bonds.
Note:
Figures have been rounded to nearest thousand and will not necessarily
add to totals.
CONFIDENTIAL
299
UNITED STATES SAVINGS BONDS - SERIES 7 AND G COMBINED
Comparison of June sales to date with sales during the
same number of business days in April and May 1942
(At issue price in thousands of dollars)
:
June
:
Cumulative sales by business days
Date
:
daily
:
:
:
sales
June
:
June as
:
:
:
May
:
April
:percent of May
June 1942
1
$ 9,705
$ 9,705
$ 7,302
$ 11,987
132.9%
2
7,895
17,601
15,168
21,677
116.0
3
8,634
26,235
25,516
29,097
102.8
4
13,774
40,009
33,145
35,818
120.7
5
9,344
49,353
48,751
46,174
101.2
6
6,535
55,888
60,817
55,991
91.9
8
11,526
67,414
67,213
63,695
100.3
9
4,952
72,366
72,794
70,364
99.4
10
9,945
82,310
80,845
77,197
101.8
11
7,542
89,852
85,410
80,586
105.2
12
5,402
95,254
94,391
91,623
100.9
13
6,210
101,464
102,106
96,031
99.4
15
7,251
108,715
108,923
102,657
99.8
16
3,564
112,279
114,129
111,829
98.4
17
7,470
119,749
123,534
116,374
96.9
18
6,299
126,048
127,724
120,625
98.7
19
8,014
134,062
138,908
131,852
96.5
20
3,367
137,429
149,502
136,532
91.9
22
10,269
147,698
156,587
145,250
94.3
23
5,834
153,532
161,404
152,983
95.1
24
9,242
162,774
171,335
160,398
95.0
25
7,773
170,547
179,208
166,278
95.2
26
5,863
176,410
189,271
176,561
93.2
27
7,024
183,433
196,192
184,279
93.5
29
8,965
192,398
206,874
195,393
93.0
fice of the Secretary of the Treasury,
June 30, 1942.
Division of Research and Statistics.
surce: All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily
add to totals.
Sales of United Bonds
CONFIDENTIAL
From June 1 through June 29, 1942
Compared with Sales Quota for Same Period
(At issue price in millions of dollars)
:
Series 1
I
Series I and G
:
Total
:
Actual
Sales
I
Quota,
I Sales
$
Actual Sales
:
Quota,
:
Sales
I
Actual
Sales
I
Quota,
1
Sales
Date :
I
June 1
:
June 1
: to Date
I
2
June 1
I
June 1
: to Date
:
:
June 1
I
June 1
:
to Date
:
Daily
:
to
:
to
: as $ of
:
Daily
I
to
:
to
: as % of
#
Daily
:
to
:
to
: as $ of
:
:
Date
:
Date
:
Quota
:
I
Date
:
Date*
:
Quota
:
:
Date
:
Date
:
Quota
1
$ 19.8
$ 19.8
$ 21.7
91.2%
$ 9.7
$ 9.7
$ 14.0
69.3%
$ 29.5
$ 29.5
$ 35.7
82.6%
2
8.0
27.8
32.0
86.9
7.9
17.6
23.0
76.5
15.9
45.4
55.0
82.5
3
13.0
40.8
46.4
87.9
8.6
26.2
37.9
69.1
21.6
67.0
84.3
79.5
4
17.4
58.2
63.6
91.5
13.8
40.0
51.0
78.4
31.2
98.2
114.6
85.7
5
24.8
83.0
79.6
104.3
9.3
49.4
61.7
80.1
34.1
132.3
141.3
93.6
6
15.2
98.2
93.7
104.8
6.5
55.9
69.4
80.5
21.7
154.1
163.1
94.5
8
27.0
125.2
120.0
104.3
11.5
67.4
82.2
82.0
38.6
192.7
202.2
95.3
9
8.9
134.2
132.4
101.4
5.0
72.4
89.2
81.2
13.9
206.5
221.6
93.2
10
20.1
154.2
149.6
103.1
9.9
82.3
99.6
82.6
30.0
236.6
249.2
94.9
11
15.7
169.9
170.0
99.9
7.5
89.9
108.4
82.9
23.2
259.8
278.4
93.3
12
16.5
186.5
189.0
98.7
5.4
95.3
115.4
82.6
22.0
281.7
304.4
92.5
13
15.2
201.7
205.6
98.1
6.2
101.5
120.8
84.0
21.4
303.2
326.4
92.9
15
24.0
225.7
236.5
95.4
7.3
108.7
130.9
83.0
31.2
334.4
367.4
91.0
16
7.5
233.2
251.1
92.9
3.6
112.3
137.3
81.8
11.1
345.5
388.4
89.0
17
15.8
249.0
271.3
91.8
7.5
119.7
147.8
81.0
23.3
368.8
419.1
88.0
18
12.3
261.3
295.2
88.5
6.3
126.0
157.0
80.3
18.6
387.4
452.2
85.7
19
19.4
280.7
317.4
88.4
8.0
134.1
164.6
81.5
27.4
414.8
482.0
86.1
20
11.0
291.7
336.9
86.6
3.4
137.4
170.6
80.5
14.4
429.2
507.5
84.6
22
29.4
321.1
373.0
86.1
10.3
147.7
181.9
81.2
39.7
468.8
554.9
84.5
23
10.7
331.8
390.0
85.1
5.8
153.5
189.2
81.1
16.5
485.3
579.2
83.8
24
15.9
347.7
413.5
84.1
9.2
162.8
201.3
80.9
25.1
510.4
614.8
83.0
25
14.9
362.5
441.1
82.2
7.8
170.5
212.0
80.4
22.7
533.1
653.1
81.6
26
16.0
378.5
466.8
81.1
5.9
176.4
221.0
79.8
21.8
554.9
687.8
80.7
27
13.7
392.2
489.2
80.2
7.0
183.4
228.0
80.4
20.7
575.7
717.2
80.3
29
24.9
417.1
530.6
78.6
9.0
192.4
241.4
79.7
33.9
609.5
772.0
79.0
30
550.0
250.0
800.0
Office of the Secretary of the Treasury, Division of Research and Statistics.
June 30, 1942.
Source:
Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of
United States savings bonds. Figures have been rounded and will not necessarily add to totals.
Takes into account both the daily trend during the week and the monthly trend during the month.
301
June 30, 1942
MEMORANDUM FOR THE SECRETARY
From: Mr. Blough
Attached is the memorandum on deducting from
net income not to exceed $1,000 for debt repayment.
You were right about not receiving this. I an
very sorry that I failed to check more carefully
as I thought it had been sent at the time it was
completed.
In addition to this memorandum, we are work-
ing over the whole problem again and will prepare
a further memorandum.
Attachment
RB:dad
6/30/42
Regraded Unclassified
302
Proposal to Allow a Personal Income Tax
Deduction for Debt Repayment
Pending income tax increases may impose special
hardship on some individuals obligated to make rola-
tively large repayments on debt incurred prior to the
war emergency. To relieve such individuals, it has
been proposed that repayment of debt contracted prior
to January 1, 1942, be allowed as a deduction in com-
puting taxable income, such deduction not to exceed
$1,000 a year.
Distribution of "Relief"
In occasional instances, at the lowest taxable
income lovols, the tax saving accomplished by this de-
duction would completely offset the increase in tax
liability resulting from the pending 1942 legislation.
In general, however, the resulting tax saving would be
less than the increase in tax liability. This partial
"relief" would be accorded to a group of taxpayers an
bitrarily determined by the chance situation of their
personal finances as of January 1, 1942.
The tax saving afforded by the proposal would be
greater for large incomes than for small because the
tax saving for a dollar of additional deduction would
be determined by the highest rate applicable to the
income of the taxpayer.
Equity
Debt repayment is only one among various forms of
saving. Limitation of the deduction to debt repayment
would discriminate in favor of this one type of saving,
and against such other forms as insurance payments,
savings accounts, and purchase of War Bonds. Adoption
of this proposal would probably stimulate agitation for
the allowance of special deductions for these other forms
of saving and may establish an undesirable precedent.
Effect on prices
The proposed reduction would have an inflationary
effect since the reduction in individuals' tax liability
would increase the amounts available to them for spending.
This inflationary effect would be offset by the extent
Regraded Unclassified
303
- 2 -
to which the special deduction accelerated debt repay-
ment out of current income.
Voluntary debt repayment
Many debt contracts call for specified obligatory
payments, with the option of additional payments at the
discretion of the debtor. The special deduction for
debt repayment would encourage debtors to make voluntary
repayments on their debte out of their liquid assets or
current income. Deduction of such optional debt repay-
ment would be outside the "relief" intent of the proposal.
It would be desirable to limit the deduction to the
obligatory element of debt repayment, but administrative
considerations make this impracticable. Moreover, if the
special deduction remains in effect long enough, the tax
rates do not decrease and the taxpayer's income remains
the same, the advantage obtained by taxpayers in deduct-
ing such voluntary debt repayments would amount only to
the interest on postponed tax payments.
Administrative complexity
Adoption of the proposal would create difficult
administrative problems. In particular, requirements of
listing creditors, attaching debt contracts, and requir-
ing informational returns from creditors, which would
check abuses of the deduction privilege, would add to
the administrative complexity of the income tax.
Revenue loss
Official estimates of the revenue loss that would
result from the proposal are not yet available. Prelia-
inary calculations indicate that the loss, under the
proposed rate schedule, would probably be of a magnitude
between $400,000,000 and $500,000,000 a year.
Possible alternative
Instead of a special allowance for debt repayment
under the regular income tax, consideration sight be
given to a policy of not increasing the income tax rate
beyond the point where ability to repay debt will be
Regraded Unclassified
304
- 3 -
appreciably impaired, and to obtaining additional reve-
nue from individuals through a graduated tax on expendi-
tures. Such a tax would impose no burden on that part
of personal income devoted to debt repayment and other
forms of saving. The practicability of such a tax is
being studied by the staff.
Treasury Department
Division of Tax Research
June 22, 1942
E-R:CLH:WJS:em
6/22/42
Regraded Unclassified
305
MEMORANDUM
To:
Secretary Morgenthau
From: Mr. Paul
June 30, 1942
Attached is the original letter from
Harold Smith, which I mentioned to you at
lunch today. I have a copy of the letter,
80 the attached may be put in your files.
I showed this letter to Chairman Doughton
shortly after I received it.
RSI
306
Regraded Unclassified
EXECUTIVE OFFICE OF THE PRESIDENT
BUREAU OF THE BUDGET
WASHINGTON, D.C.
JUN 8 1942
Mr. Randolph Paul,
Tax Advisor to the Secretary
Treasury Department
Washington, D. C.
Dear Mr. Paul:
It is my understanding that in its consideration of the
problem of collection of income taxes at source, the Ways and
Means Committee has expressed some concern at the priority
classification of the Bureau of Internal Revenue. There is
some feeling on the part of Internal Revenue officials that
this classification wight hamper their efforts in recruiting
and mintaining a staff sufficient to collect taxes in this
manner. Knowing the interest of Chairman Doughton in this
subject, I wish you would assure him that I have no intention
of permitting the priority classification of an agency to
stand in the way of carrying out any major administration policy.
My position, I believe, has been stated to the committee by Mr.
Lawton, my Administrative Assistant.
Since I last talked to you the Bureau has explored the matter
with Commissioner Halvering, and to are taking the necessary steps
to insure that no action of the Budget Bureau will in any way
impede the administration of the tax program.
Very truly yours,
noted Rop
BECRIARD
307
BOARD OF ECONOMIC WARFARE
WASHINGTON, D. C.
ffice of the Executive Director
JUN 30 1942
The Honorable
The Secretary of the Treasury
Dear Mr. Secretary:
Enclosed are the minutes of the meeting of the
Board of Economic Warfare which was held on June 25,
1942. If there are any corrections which you care to
suggest, please let me know.
nilo Sincerely yours, Perkins
Executive Director
Enclosure
MM
20
SECRET
308
Minutes of the Neeting of the Board of Economic Warfare
Held June 25. 1942. at 10:00 A. M.
A meeting of the Board of Economic Warfare was held in the office
of the Vice President in the Capitol Building at 10:00 A.M., June 25, 1942.
The meeting was attended by the following members of the Board:
The Vice President, Chairman of the Board
Mr. Dean Acheson, representing the Secretary of State
Mr. Robert Patterson, representing the Secretary of War
The Attorney General
The Secretary of the Navy
The Secretary of Agriculture
Mr. Wayne Taylor, representing the Secretary of Commerce
Mr. Nelson A.Rockefeller,
Mr. E. R. Stettinius, Jr.
In addition, the following persons were present:
Mr. Emilio Collado, Department of State
Mr. Leslie Wheeler, Department of Agriculture
Dr. Joshua Bernhardt, Department of Agriculture
Mr. Harold H. Neff, War Department
Mr. Wayne Coy, Bureau of the Budget
Mr. William Bullitt, Navy Department
Mr. W. L. Clayton, Department of Commerce
Mr. Warren Pierson, Department of Commerce
Mr. Percy Douglas, Coordinator of Intor-American Affairs
Mr. John McClintock, Coordinator of Inter-American Affairs
Mr. James D. LeCron, Coordinator of Inter-American Affairs
Mr. Stanley Robbins, Coordinator of Inter-American Affairs
Mr. Milo Perkins, Executive Director, Board of Economic Warfare
Mr. E. W. Gaumnitz, Board of Economic Warfare
THE FOOD SUPPLY PROBLEM IN THE OTHER AMERICAN REPUBLICS:
The Vice President opened the meeting, and referring to the food re-
port (copies of which were circulated on June 23) stated that a proposed
resolution on this problem had been prepared. The proposed resolution was
as follows:
"The report on the food supply problem in the other American Repub-
lics propared by the Coordinator of Inter-American Affairs indicates that
the following action should be taken immediately:
(1) Preparation of factual information to reflect the current and
changing food supply situation in the other American Republics under war
138032
2
309
time conditions,
Both Mr. Pattorson and Mr. Stottinius shared some of Mr. Porkins'
(2) Establishment of field parties under the Coordinator's direc-
tion in those countries where required for the purpose of gathoring in-
with present request acomed to go in the direction of addod financial involved,
The presented to the Army but no question of funds had boon quostion
boun as to policy. Mr. Puttorson pointed out that the Caribbean concern had
formation, organizing production and distribution of food supplies in
cooperation with the Governments concerned.
handled of shipping DE betwoon South Anurican Republics could oquitable be
allocation no intontion of repayment. Mr. Rockofeller pointed out that help
Bo it resolved that the Board of Economic Warfare agrees that the
Coordinator of Inter-Amorican Affairs shall establish field parties in
Board, through the Advisory Committoo to the Combined Shipping Adjustment perhaps
such countries as may be mitually agreed upon by the Government of the
difficulty the of confining action through Lond-Lonso, Mr. Acheson stated that
With reforence to the ostablishment of pattern or procedent and the
United Statos and the Governments concerned for the purposes sot forth
above.
Puerto program was intended definitely to be limited to the Virgin Islands,
suggested that the interested agoncies confer further AS to administrativo
Rico, the British and possibly the Dutch Rest Indies, Mr. Stettinius
Be it further resolved that & committoe be establishod in Washington,
called by Mr. Porkins.
problems involved in the Caribboan program. Such 1 conference is to be
by the Coordinator as Chairman, membors of which shall be representatives
of the Department of State, Department of Agriculture and Board of Economic
Warfare for the purpose of reviewing and integrating the food supply program
of the Coordinator's Office in the other American Republics. The Committee
President stated that the resolution would stand with the last sontence
There being agroement on the balance of the resolution, the Vice
will integrato euch food supply programs as may be developed in the American
Republics, with whatever food supply program is executed in the Caribbean
to the Committoe. The resolution, as agreed, road as follows:
nmitted and the addition of A representative of the Department of Commorce
possussions."
Discussion of the feasibility of incruasing production in the various
prepared by the Coordinator of Inter-American Affairs indicates that the
"The roport on the food supply problem in the other American Republics
countries and of the mochanics of operation brought out the importance and
following action should be taken imediately:
difficulty of the task. Attention then centered on the last sentence of the
proposed resolution, Mr. Achoson wishing to be cortain that the effect of
(1) Preparation of factual information to reflect the curront and
the proposed resolution would not bo to hindor or dolay action for the
changing food supply situation in the other American Republics under war
Caribbean area, (the proposed Caribbean program is one under which Lond-
time conditions,
Loano has made available $16,000,000 as 4 revolving fund through Agriculture
for the purpose of procuring, assombling and transporting food stuffs to
(2) Esteblishment of field parties under the Coordinator's direction
dosignated distribution conters in the Caribbenn area, and the storago and
in those countries where required for the purpose of gathering information,
disposition of such supplios. This food supply is for the purpose of serving
Puerto Rico, the Virgin Islands, British West Indios and possibly the Dutch
the Governments onncerned.
organizing production and distribution of food supplies in cooperation with
Most Indies. Supplies for the Virgin Islands and Puerto nico would be on
a cash reimbursement basis and probably thoso for the British West Indies
Be it resolved that the Board of Economic Warfare agrees that the
would be on a lend-loase basis, as woll as possibly those for the Dutch Nost
Coordinator of Inter-American Affairs shall establish field partics in such
Indion.
countrice as may be mitually agrood upon by the Government of the United
States and the Governments concerned for the purposes set forth above.
Mr. Porkins stated that the Caribboun proposal raised sorious policy
questions, thore boing involved; Government to Government action and elimi-
Bo it further rosolved that e committou be establishod in Washington,
nation of private exporting without the necessary administrativo machinery
by the Coordinator as Chairman, nombers of which shall be ropresentativos
having been established; possible extension of Lond-Loase financial aid to
of the Department of State, Department of Agriculture, Department of Commerce,
other islands in the Curibboan; and the probability that such actions would
and Board of Economic Wurfare for the purpose of reviewing and integrating
undoubtedly bring requeste for the extension of assistance to other Latin-
Republics." the food supply program of the Coordinator's Office in the other American
American Republics, He indicated that the min reason for such & program
in the Caribboan THE to socure A preforontial shipping position and noted
that any increaso in shipping to that area moant reduction to other areas,
The Vico President loft the nooting at this point and Mr. Perkins
netod 48 Chairman,
Regraded Unclassified
SAILING VESSELS:
The Progross Report on Woodon Sailing Vessels for Latin American
Trades had been circulated to all members prior to the meoting. The follow-
ing resolution was presented:
"BE IT RESOLVED that the plan for the building of wooden sailing
vessels and the acquisition of existing small vessels to aid in transporting
necessities in the Western Hemisphore, us presented at the meeting of the
Board of Economic Warfare on June 4, 1942, and supplemented by Progress
Report of June 25, 1942, is hereby accepted by the Board of Economic Wurfare
and the Coordinator of Inter-American Affairs is authorized to proceed to
place the plan in operation through the modium of the Inter-American Trans-
portation Corporation, to be financed in such manner as the Coordinator may
determine, and BE IT RESOLVEDFFURTHER that the Coordinator will prosent
periodic reports to the Board of Economic Warfare as to the progress and
development of tho program.
Secretary Knox moved that it be adopted and Secretary Wickard
soconded the motion, Mr. Patterson had some reservation to the resolution,
fooling that the construction of vessels, as outlined, would require U. S.
matorials such as auxiliary engines, which might interfere with production
of military items. Secretary Knox stated that his Department had checked
the matter carefully and W.S satisfied that the program could be handled
advantageously. Aftor further consideration, Mr. Pattorson indicated that
he would withdraw his objection and the resolution was adopted unanimously.
EUROPEAN NEUTRALS:
Mr. Patterson raised the question of the imports from and exports to
the European neutrals and the assistance which those countries were giving
Germany, He was particularly concerned with the situation as it rolated to
Swedon, Switzerland, Portugal, Spain and Turkey. It was decided that a
roport should be prepared for the next mooting of the Board covering this
subject.
SUGAR:
Secretary Wickard stated that data on sugar were available as ro-
quosted at the Juno 4 Board moeting. In general, the Secrotary indicated
that the data showed ample supplios of sugar, with shipping, of course,
the limiting factor. It was decided to postpone discussion of the sugar
situation until the next Board meoting,
The meeting adjourned at 11:15 A. M.
Regraded Unclassified
310
TREASURY department
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
June 30, 1942
MEMORANDUM TO THE SECRETARY:
There is submitted herewith the operating report.of
Lend-Lease purchases for the week ended June 27, 1942.
As a result of numerous conferences with members of
the Central Traffic Committee, ODT, WSA, Office of Lend-
Lease Administration, also the British and Russian repre-
sentatives, we are planning certain changes which will
eliminate & good part of the routine now required to
clear materials for shipment. It is proposed that ef-
fective Monday, July 6, we will request suppliers to for-
ward requests for shipping instructions on Lend-Lease
goods for the British to our New York office, and in-
structions will be requested immediately from the British
as to the port to which the goods should be shipped and
related shipping instructions; then the release will be
obtained from the War Department here through a direct
wire teletype with New York.
Further conferences are to be had with the ODT repre-
sentatives with the thought in mind of obtaining specific
authorization to establish banks of bottom cargo at, or
very near, the ports and to secure block releases which
could be delegated to our New York office to save time.
If ODT will authorize the issuance of block releases,
we will be able to complete the entire transaction at
New York without the necessity for teletyping the War
Department prior to clearance. The processing of ship-
ping instructions for the Russians will be handled from
this office, and they are now listing the items in ware-
houses and in process which they wished shipped during
July.
ROPDEFENSE
CLASS Cliston E. Mack
Director of Procurement
BUY
UNITED
STATES
SAVINGS
BONDS
AND STAMPS
LEND-LEASE
TREASURY DEPARTMENT, PROCUREMENT DIVISION
311
STATEMENT OF ALLOCATIONS, OBLIGATIONS (PURCHASES) AND
DELIVERIES TO FOREIGN GOVERNMENTS AT U. S. PORTS
AS OF JUNE 27, 1942
(In Millions of Dollars)
Administrative
Undistributed &
Total
U. K.
Allocations
Russia
China
Expenses
Miscellaneous
$1695.9
$791.8
$331.2
$ 56.7
$ 1.6
$514.6
(1695.9)
(754.6)
Purchase Authoriza-
(298.0)
( 56.7)
( 1.6)
(585.0)
tions (Requisitions)
$1106.0
$721.2
$331.7
$ 45.8
-
(1042.3)
$ 7.3
(680.4)
(309.4)
( 45.6)
-
Requisitions Cleared
( 6.9)
for Purchase
$1064.7
$710.3
$301.8
$ 45.7
-
(
$ 6.9
999.4)
(668.3)
Obligations (Pur-
(278.9)
( 45.6)
-
( 6.6)
chases)
$1017.7
$699.0
$274.5
$ 39.1
$ 1.4
( 955.7)
$ 3.7
(657.8)
(253.8)
*Deliveries to For-
( 39.1)
( 1.4)
( 3.6)
eign Governments
$ 445.4
$358.0
$ 65.7
$ 20.0
-
at U. S. Ports
( 421.5)
$ 1.7
(337.9)
( 62.5)
( 19.4)
-
( 1.7)
*Deliveries to foreign governments at U. S. Ports do not include the tonnage that is either in
ceived from the foreign governments.
storage, "in-transit" storage, or in the port area for which actual receipts have not been re-
Note: Figures in parentheses are those shown on report of June 20, 1942.
Regraded Unclassified
312
EXPLANATION OF DECREASES
The allocations for the United Kingdom and Russia
increased for the week 37.2 and 33.2 respectively. These
funds were provided from the undistributed and miscella-
neous allocations, which explains the decrease therein of
70.4.
Regraded Unclassified
313
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE June 30, 1942
TO
Secretary Morgenthau
FROM
E. H. Foley, Jr.
The Inter-American Conference on Economic and Financial
Control opened this morning at 11:30 a.m. at the Pan-American
Union. Sumner Welles made the opening address. A copy of
his talk is attached. As you will note, he took a strong line
and his speech was well received.
I was elected Chairman of the Conference and I then de-
livered my prepared talk, copy of which is attached.
After the ratification of the action taken at the pre-
liminary session the day before and the adoption of formal
procedures for conducting the meeting, the first plenary
public session of the Conference concluded around 12:30.
All of the delegates attended Mr. Welles' luncheon at
the Mayflower. Leo Crowley attended the luncheon and despite
the fact that all of us were as attendant as possible, he
showed some signs of irritation. However, he promised to
come to my reception on Thursday afternoon. I talked with
Mr. Welles about the situation and he promised to have 8. talk
with Leo Crowley and explain that the decision to restrict the
United States delegation to State and Treasury people was ab-
solutely necessary so that the Conference might be run in an
orderly manner. I also talked along these lines with Leo and
explained to him that the Consultative Committee, composed of
a representative of A.P.C., B.E.W., Rockefeller Committee and
Export-Import Bank, which had its first meeting in my office
at 9:30 this morning was intended to serve as a means of keep-
ing these agencies informed and getting their help and advice.
The resolutions which will be taken up at the subsequent meet-
ings of the Conference were distributed and another meeting
for the purpose of getting their suggestions and criticisms
was scheduled for Thursday morning at 9:00 o'clock.
This afternoon at 3:00 o'clock, the Peruvian, Mexican and
Brazilian delegation met in my office. We went over the eleven
resolutions and agreed upon their distribution.
314
- 2 -
At the conclusion of our meeting, we had a brief talk with
the delegates in regard to the selection of a Chairman for the
International Committee which meets tomorrow morning at 10:00
o'clock. We tentatively decided that the Nicaraguan Minister,
Senor DeBayle, would be nominated as Chairman of the Inter-
national Committee. We also arranged to have luncheon with the
same people in the Treasury tomorrow noon when we will continue
our discussions of the resolutions.
Enclosures
Regraded Unclassified
315
DEPARTMENT OF STATE
FOR THE PRESS
JUNE 30, 1942
No. 331
CONFIDENTIAL
FUTURE RELEASE
NOTE DATE
CONFIDENTIAL RELEASE FOR PUBLICATION IN THE NEWSPAPERS OF
TUESDAY, JUNE 30, 1942, WHICH DO NOT APPEAR ON
THE STREETS BEFORE 11:30 A.M., E.W.T. NOT TO BE
PREVIOUSLY PUBLISHED, QUOTED FROM OR USED IN ANY
WAY.
ADDRESS OF THE HONORABLE SUMNER WELLES, UNDER
SECRETARY OF STATE, BEFORE THE INTER-AMERICAN
CONFERENCE ON SYSTEMS OF ECONOMIC AND FINANCIAL
CONTROL AT THE PAN AMERICAN UNION ON TUESDAY,
JUNE 30, 1942, AT 11:30 A.M.
Delegates to the Inter-American Conference on Systems of
Economic and Financial Control, Your Excellencies, Ladies
and Gentlemen:
It 1s a source of great pleasure to me to extend to all
of you on behalf of the Inter-American Financial and Economic
Advisory Committee a cordial welcome to this Inter-American
Conference on Systems of Economic and Financial Control.
Once again the twenty-one American republics are meeting
in conference in order still further to fortify their soll-
darity, still further to strengthen their common purpose to
maintain this hemisphere forever free from any encroachment
upon the independence of the peoples of the Americas, and as
a citadel of human liberty.
We are confronting an attack upon the New World which is
being waged by the Axis Powers on every front upon which they
can muster their forces of treachery and of deceit.
For this war 1s not being fought, today, on the military
front alone. We, the free nations of America, are today faced
with the supreme and historic mission of repelling B. total
assault on our freedom and our integrity, an assault that is
being carried on, not only by pirate submarines and military
arms, but also by the colonies of subversive agents on the
sovereign soil of each one of our countries. These human
termites, carrying out the will of their Ax1s masters, have
been gnawing for a long time, not only at the foundations of
our inter-American system, but also at the foundations of the
oconomic structure that maintains us whole. It is for the
purpose of completing and integrating controls that have al-
ready been established to thwart, and to stamp out, their
activities, that this meeting of technical experts from our
twenty-one American republics is convened in Washington today.
Regraded Unclassified
316
-2-
Even by the time that the Ministers of Foreign Affairs
met at Rio de Janeiro to consult on measures for the
common defense of our nations, some neasures had already been
adopted by the American republics to control the exporta-
tion or re-exportation of merchandise, to restrict and
control financial and commercial transactions with the
nations signatory to the Tripartite Pact and the territories
dominated by them, and to curb other alien economic activi-
ties prejudicial to the welfare of the Western Hemisphere.
At that meeting, the representatives of the American
Governments laid down, in Resolution V, an outline of the
general nature and objective of commercial and financial
controls that they were unanimous in believing should be
established in order to defend the hemisphere against the
encroachments of the sinister fifth columns that were
operating in advance of the Axis military forces. At that
time they recommended, for immediate adoption, "any
additional measures necessary to out off for the duration
of the present hemispheric emergency all commercial and
financial intercourse, direct or indirect, between the
Western Hemisphere and the nations signatory to the
Tripartite Pact and the territories dominated by them;"
and also "measures to eliminate all other financial and
commercial activities prejudicial to the welfare and
security of the American Republics "
The Ministers of Foreign Affairs at their meeting in
Rio de Janeiro recognized, however, that in order to make
such controls as they recommended effective against the
Axis fifth column in the Western Hemisphere, it would be
necessary that the financial authorities charged with the
administration of such controls in each of the American
republics should meet together to consult with each
other, in order to exchange information and to pool
their experience, It would be necessary to work out
the details of joint procedures that would altogether
eliminate the financial and commorcial manoeuvres by
which the tools of the German and Italian and Japanese
war-lords, operating in this hemisphere, seek to reduce
our defenses and endeavor to prepare the way for our sub-
jugation. It was with this in view that the Meeting in
Rio de Janeiro recommended the convocation of this present
Inter-American Conference on Systems of Economic and
Financial Control.
The historic task that now confronts the peoples
of America, the task of defending the traditional freedom
of the American continent against attack from abroad, can
not be accomplished by military means alone. We must be
no less resolute in measures to counter the economic
assault than in the measures we are taking to meet the
military threat. The soil of our own continent is one of
the great battlefields of this war, On it we are fighting,
and fighting with increasing success, the enemy who has
insinuated himself in our midst.
Delegates
Regraded Unclassified
317
-3-
Delegates to this conference, the decisions that are
made by you here, at this conference, and the actions of our
governments in carrying out those decisions, are of the ut-
most consequence in assisting in the creation of the assur-
ance that the American continent shall continue to maintain
its liberties and its independence, It is a solemn mission
with which this conference 1s charged. I have faith that
that mission will be fulfilled in a manner worthy of the
spirit that has nurtured and defended the freedom of the
Americas throughout the term of our independent life.
Upon you rests a responsibility to provide implements
for the willing hands that are fighting today the economic
battles to preserve our solidarity. I voice the hope of
millions when I express the firm conviction that in this
critical moment your vision, your leadership, and your high
devotion will not be found wanting.
...
Regraded Unclassified
318
TREASURY DEPARTMENT
Washington
(The following address by Edward H. Foley, Jr., General
Counsel of the Treasury Department and chairman of the
Inter-American Conference on Systems of Economic and
Financial Control is scheduled for delivery before the
Conference at 11:30 A.M., Tuesday, June 30, 1942, and
is for release upon delivery.)
Mr. Chairman, Members of the Inter-American Financial and
Economic Advisory Committee, fellow Delegates and Advisers:
It is with a feeling of genuine appreciation of the high
honor which you have accorded to me that I accept the chairman-
ship of this important Conference. The responsibility imposed
upon each of us by our Governments in this hour of peril 1s very
great indeed. I am confident we shell do everything in our
power to accomplish swiftly and effectively the important
purposes and goals of this meeting.
This is a working conference of experts trained in the
field of economic and financial controls. During the period
we shall be together there will be much to discuss and much
which we will learn from each other. I am sure that these dis-
cussions will result in more effective economic and financial
controls in each of our countries - thereby hastening the
destruction of the forces of aggression.
Resolution V of the meeting of Ministers of Foreign Affairs
held in Rio de Janeiro last January recognized the urgent
necessity for the adoption of measures by the American Republics
to cut off all commercial and financial relations with the Axis
powers and the territories dominated by them. By its terms, the
Resolution called for the immediate elimination of financial and
commercial activities, prejudicial to the welfare and security
of the American Republics, in both the international and the
domestic field. Resolution VI of the Rio Conference provided
for this meeting.
Our common problem is to organize effectively all of our
economic and financial strength to strike our common enemy wherever
we meet him. The strength of the enemy in the past has been the
division and disunity among those nations that should have been
united in all of their efforts against the aggressors. These
aggressors have always sought to deal with their opponents one
by one, alternately reassuring or threatening, and playing on
32-23
Regraded Unclassified
319
- 2 -
their narrow national interests and fears to convince them that
their neighbor's problem is not their own. Many nations that
sought to maintain their independence through the observance of
strict neutrality have seen their countries occupied and
destroyed. No country can any longer have confidence in the
security of a policy of strict neutrality during this war,
The strength of the American Republics is and must continue
to be their singleness of purpose and their unity in action. We
must forge one continuous chain of economic and financial controls
around the Axis and each of the links in this chain must be as
strong 8.5 all the others. This 1s and will continue to be the
answer of the American Republics to our common foes, And in this
unity of action lies the greatest assurance that the political
and economic institutions of the Western Hemisphere, the freedom
and dignity of its way of life, will survive.
It is our task to establish a common program for withholding
our resources from the Ax1s and the areas which it has overrun or
dominates. We must prevent the Axis from acquiring our goods and
services. We must prevent the Axis from carrying on financial
transactions either directly or through the cloaks of neighboring
countries. We cannot hope for full success if such Axis trans-
actions are controlled by one American Republic but not controlled
by another; if fugitive funds can pour from one American Republic
to another where the Axis taint can be cloaked and the funds used
for financial and commercial transactions inimical to the
interests of all the American Republics. If each country imposes
effective controls within its own boundaries over Axis funds and
transactions of benefit to the Axis, the controls of all the
Republics will be strengthened.
We must, in a spirit of cooperation and mutual assistance,
work out measures to destroy Axis financial and commercial
activities carried on' within the borders of the Western Hemis-
phere. Axis-owned or controlled enterprises in the American
Republics must be liquidated or taken over by the American
Republics. We must make sure that those who manage or work in
business enterprises in this hemisphere are loyal to the cause
of the American Republics.
We know that the Ax1s nations have planted and are using
enterprises and persons within our borders to undermine our war
efforts, to limit our production, to subvert our institutions and
peoples, and to carry on & myriad of activities of benefit to our
enemies and of harm to the interests of the American Republics.
This Fifth Column not only seeks constantly to weeken us but also
lies in wait for the day when it might join with kindred forces
from across the seas to conquer and destroy everything that we
hold dear in the Western Hemisphere, If we are to survive, if
we are to bring this war to a swift and successful conclusion,
Regraded Unclassified
320
- 3 -
we must be ruthless in the destruction of this Fifth Column
regardless of whether its members have retained their European
nationality or sought to gain immunity for its nefarious
activities by acquiring the cloak of citizenship of one of the
American Republics.
In destroying these Ax1s enterprises or the interests
which they hold in the business life of our community, we will
need each other's support and cooperation. The technical and
managerial skills and the financial resources of the American
Republics should and will be made available to each other to
facilitate the reorganization of such business enterprises and
to assure their operation by persons of unimpeachable loyalty
and of ability capable of contributing to the development of the
national economy of the American Republics. We must be deter-
mined in our methods and mutually helpful in our procedures if
we are to succeed in destroying the enemy within our midst.
As an integral part of our joint efforts we will, of course,
be developing procedures for the exchange of views and informa-
tion and assistance which will carry over not only during the war
but into the period of reconstruction and development after the
war.
Men who have stood side by side in the struggle to preserve
democracy against the forces of aggression, will stand side by
side to face and solve common problems in the victory and the
reconstruction.
These are the purposes of our meeting. The agenda which
has been adopted for this Conference details the work which we
shall do. All of us here will contribute to the completion of
our tasks. We are resolved on the economic and financial
battlefields to do our part in the winning of the war,
-000-
Regraded Unclassified
Treasury Department
321
Division of Monetary Research
Date
19
To: Secretary Morgenthau
From: Mr. White
Original of this report appended
to prepared letter to President.
SECRET
322
June 30, 1942
Exports to Russia, Free China, Burma and other
blocked countries, as reported to the Treasury
Department during the ten-day period ending
June 20, 1942
1. Exports to Russia
Exports to Russia as reported during the ten-day period
ending June 20, 1942 amounted to about $54,000,000 as compared
with $18,000,000 during the corresponding period in May and
about $67,000,000 during the corresponding period in April.
Among the military equipment exported during the period under
review were 58 one engine pursuit, interceptor and fighter
planes; 24 bombers, and 232 tanks. (See Appendix C.)
2. Exports to Free China and Burna
Exports to Free China as reported during the ten-day
period ending June 20, 1942 amounted to $2,707,000, of which
military equipment accounted for more than ninety-five percent.
(See Appendix D.)
No exports to Burma were reported during the period under
review.
3. Exports to France
No exports to Frame were reported during the period under
review.
4. Exports to other blocked countries
Exports to other blocked countries, which are given in
Appendix A, were negligible during the ten-day period ending
June 20, 1942.
ISF/efs 7/1/42
Regraded Unclassified
STRICTLY CONFIDENTIAL
323
SUMMARY OF UNITED STATES
DOMESTIC EXPORTS TO SELECTED COUNTRIES
AS REPORTED TO THE TREASURY DEPARTMENT
FROM EXPORT DECLARATIONS RECEIVED
DURING THE PERIOD INDICATED 1/
July 28, 1941 to June 20, 1942.
(In thousands of dollars)
July 28
to
Period ended
Period ended
Total
May 31
June 10
June 20
Domestic Exports
5. 8. R.
$521,498
$12,575
$53,799
$587,872
ree China
78,394
3,399
2,707
84,500
Burma 2/
12,201
234
-
12,435
France 3/
56
-
-
56
ain
2,849
5/
-
2,849
witzerland
10,367
343
5/
10,710
Ireden
17,778
5/
-
17,778
"ortugal
9,012
15
9
9,036
[rench North Africa w
6,283
-
-
6,283
Treasury Department, Division of Monetary Research
June 27, 1942.
/ Many of the export declarations are received with a lag of several days or more.
Therefore this compilation does not accurately represent the actual shipment of
a particular period. The longer the period covered, the closer will these figures
come to Department of Commerce revised figures.
From September 11, 1941 to date - it is presumed that a large percentage of
material listed here, consigned to Burma, is destined for Free China.
Includes both Occupied and Unoccupied France - no breakdown is obtainable from
Department of Commerce.
Includes Norocco, Algeria, and Tunisia.
Less than $500.
W:rl 6/27/42
Regraded Unclassified
Des.
Total
June 11 - June 20
June 1 - June 10
May 21 - May 31 bl
May 11 - May 20
May 1 - May 10 I/
Apr. 21 - Apr. 30
Apr. 11 - Apr. 20
Apr. 1 -
Apr. 5
Mar. 20 - Mar. 31 6/
Mar. 10 - Mar. 20
Mar. 1 - Mar. 10
Feb. 20 - Feb. 28 5/
Feb. 10 - Feb. 20
Feb. 1 - Feb. 10 W
Jan. 26 - Jan. 31
Jan. 19 - Jan. 24
Jan. 12 - Jm. 17
Jan. 5 - Jan. 10
Des. 29 - Jan. 3
22 - Dec. 27
Des. 15 - Dec. 20
Doo. 8 - Dec. 13
Dec. 1 - Dec. 6
Nov. 24 - Nov. 29
lov. 17 - Nov. 22
Nov. 10 - Nov. 15
Nov. 3 - Nov. 8
Oct. 27 - Nov. 1
Oct. 20 - Oct. 25
Oct. 13 - Oct. 18
Oct. 6 - Oct. 11
Sept.29 - Oct. 4
Sept.22 - Sept.27
Copt.15 - Sept.20
Sept. - Sept.13
Sept. an -
Sept. 6
Aug. 25 - Aug. 30
Aug. 18 - Aug. 23
Aug. 11 - Aug. 1% 16
Aug. 4 - Aug.
July 28 - Aug. 2
$87,103
LOL°2
3,399
2,533
1,872
296
2,827
5.335
4,836
8,058
2,879
2,921
4,853
4,889
6,938
1,695
91
35
m
2,337
791
3,239
1,228
2,851
1,672
4,772
269
5,312
1,225
110
3,822
2,281
204
309
-
395
Free China
Exports to
(Thousands of Dollars)
July 28, 1942 - June 20, 1942 1
U.S.S.R. as reported to the Treasury Department
Exports from the U. s. to Pree China, Burna md
APPENDIX B
2
1
5
1
2
$11,322
-
234
-
-
-
649
447
23
-
583
1,054
5
923
9
447
1,073
NW
2
196
8
18
64
1,364
1,021
88
342
58
403
35
1,157
789
449
Burna 3
Exports to
Regraded Unclassified
$588,575
53,799
12,764
26,180
18,000
28,652
50,958
906'99
51,698
42,435
28,556
32,509
28,119
26,174
13,315
809'6
3,885
5,874
8,247
3,993
1,829
4,580
12,040
3,609
2,436
3,581
2,677
4,552
4,484
5,623
1,924
6,845
325
2,333
752
5,217
4,280
1,023
2,735
986
+CC
551
4,523
U.S.S.R.
Exports to
324
SECRET
SECRET
325
APPENDIX B
Page 2
1. These figures are in part taken from copies of shipping manifests.
2. Figures for exports to Free China during these weeks include
exports to Rangoon which are presumed to be destined for Free
China.
3. It is presumed that a large percentage of exports to Burma are
destined for Free China.
4. Beginning with February 1 figures will be given for 10-day
period instead of week except where otherwise indicated.
5. 8-day period.
6. 11-day period.
7. Due to changes in reporting procedure by the Department of
Commerce this report is incomplete for the period indicated.
freasury Department, Division of Monetary Research
June 30, 1942
ISF/efs 6/30/42
Regraded Unclassified
SECRET
326
APPENDIX C
Principal Exports from U. S. to U. S. s. R.
as reported to the Treasury Department
during the ten-day period ending
June 20, 1942
Value
Unit of
(Thous ands
Quantity
Quantity
of dollars)
TOTAL EXPORTS
$ 53,799
Principal Items:
Ammunition
11,123
.30 caliber
No.
44,381,500
.32, .38, and .45 caliber
No.
20,000,000
37 mm. armor piercing
No.
142,160
37 um. high explosive
No.
31,940
.50 caliber
No.
4,701,650
75 nm. armor piereing
No.
44,076
75 m. high explosive
No.
73,524
81 mm. mortar shells
No.
42,332
Components for small arms
ammunition
-
-
Military tanks
10,564
Light tanks
No.
141
Medium tanks
No.
91
Aircraft
8,082
Pursuit, interseptor & fighter
(1 engine)
No.
58
Light bombers (2 engines)
No.
17
Medium bombers (2 engines)
No.
7
Gune
2,875
Anti-air creft Oerlikon guns
(20 m.)
No.
52
Sub-machine guns (.45 caliber)
No.
11,700
Linseed oil
Lb.
19,909,065
2,634
Sausage, canned
Lb.
4,922,550
1,848
Gasoline motor trucks
No.
712
1,550
Aircraft parts
-
-
1,452
Copper wire, insulated
Lb.
2,163,246
695
Armor plate
Lb.
3,178,837
668
Internal combustion marine engines
No.
35
627
Auto parts for assembly
-
-
616
Treasury Department, Division of Monetary Research
June 30, 1942
ISF/efe 7/1/42
Regraded Unclassified
SECRET
327
APPENDIX D
Principal Exports from U. S. to Free China
as reported to the Treasury Department
during the ten-day period ending
June 20, 1942
(Thousands of Dollars)
TOTAL EXP ORTS
$ 2,707
Principal Items:
Military equipment
2,656
Other iron and steel manufactures
26
Copper wire, insulated
4
Iron and steel wire, rope and cable
3
Other vegetable fiber manufactures
3
Cleaning and washing compounds
3
Treasury Department, Division of Monetary Research
June 30,1942
ISF/efe 6/30/42
Regraded Unclassified
328
0
P
Y
ELP
Buenos Aires
This telegram must be
paraphrased before being
Dated June 30, 1942
communicated to anyone
other than & Governmental
Rec'd 11 p.m.
agency. (BR)
Secretary of State,
Washington.
RUSH
1281, June 30, 10 p.m.
Department's 966, June 29, 9 p.m.
An officer of the Embassy with Cochran and
Meltzer who-had previously not (repeat not) par-
ticipated in Central Bank currency conversations dis-
cussed with Prebisch at length the various proposals
covered in telegram under reference.
(a) Prebisch strongly objected to proposal
that the Central Bank be the channel for the export-
ation of United States currency on the groundsthat
(1) the bank would be merely an automatic shipping
agent unaware of Treasury Standards (2) the bank
would be embarrassed by the inability to secure
assurance that the currency it exported would be re-
leased.
(b) Prebisch also opposed any requirement that
all holdings of United States currency be deposited
with the Central Bank on the ground that much a
regulation
Regraded Unclassified
329
-2-41281, June 30. 10 p.m. from Buenos Aires.
regulation would be violated by holders of doubtful
notes. Furthermore, such a regulation would require
legislation.
(c) It was explained to Prebisch that the
Treasury must itself determine whether imported
currency would be released after examination thereof.
It was, however, pointed out that the bank's
participation would nevertheless not be futile because
it would contribute to the protection of legitimate
holdings in Argentina, that is the $190,000 "bona fide"
holdings of banks and other authorized institutions
as of May 19 which under Department's 909, June 19,
9 p.m., were assured of "very sympathetic consider-
ation".
(d) With respect to the objection to the
bank's calling in currency it was pointed out: (1)
Such a regulation even though not universally observed
would, in accordance with our policy, depress the
market for tainted currency in the future. (2)
Such & measure would assist bank in enforcing a
prohibition against dealings in currency since such
enforcement would be extremely difficult if holding
of currency were permitted. Notwithstanding these
considerations Prebisch would not agree to the
proposal that the bank act as intermediary or to
the proposal
Regraded Unclassified
330
- 3 -
the proposal that all United States currency be
called in.
(E) The bank is agreeable to the following
arrangement which follows in substance the one set
forth in Embassy's telegram 1246, June 5, 9 p.m.
(1) The bank will block all imports of dollar
currency except limited amounts brought by travelers
from the United States.
(2) All Exports of United States currency
will be prohibited except those destined for the
United States and licensed in accordance with pro-
cedure under item three.
(3) Mechanics for licensing exports to the
United States will be as follows: The Central Bank
will empower certain authorized banks and exchange
institutions to issue licenses end will provide that
only such banks and institutions will be authorized to
ship the licensed currency. Individuals desiring to
have their currency exported will file sworn application
therefor with the authorized interprises. Copies of
such applications will call for such information re-
garding the pedigree of the currency and related
matters as Treasury may recommend.
(4) All dealings in United States currency in
Argentina
Regraded Unclassified
331
- 4 -
Argentina including dealing by individuals will be
permitted.
(5) The bank will invite all holders voluntarily
to apply for export licenses coverning their currency,
particularly if the Treasury indicates that an
expeditious application will prevent a presumption
which might arise from delay that the funds involved
are tainted. (In this connection the following
suggestion is submitted: If the Treasury publicly
indicated that all currency not (repeat not) arriving
in the United States by a fixed dead line would
prima facie be considered tainted, the black market
for currency would be depressed as the dead line
approached; and legitimate holders would prior to
the dead line tend to send their currency to the
United States promptly. Moreover, a public indication
that steps will be taken to prevent the postwar
redemption of the currency would also be helpful.
The forgoing action would achieve many of the benefits
which would be derived from a registration scheme
or the calling in of currencies).
It is believed that the foregoing proposal is
the limit to which the Central Bank will go.
ARMOUR
KLP
Copy:bj:7.1.42
Room 275
332
- Stabilization Fund
FERERAL BANK w YOUR
- TOME YOUR
JUN 30 1942
ATTENTION a. 1. SAMPORD
WIER MITHING 90 CAUSE m. 16 w - 25. 1942 run CINTRAL
BASE w CHINA ⑉ ARE nearst AUTHORISED AM AS FISCAL
AND - the UNITED STATES 90 - - FOLLOWING CASH 90 THE CONTRAL
ME w GUIMA
*wine - TO TOBE GASH no. 16 &
NEER INFORMATION or - ARRANGEMENT servem vs m
surress w SUPPLYING INPUBLIC w GHIMA WITH DOLLAR
SUBMANGS - SIGNATURE or THE TREASURY HAS AUTHORIZED
⑉ AS FIGGAL ACCOUNT w - UNITED SEATES 90 INSIFT
- PARAGRAPH SEX w our LETTER or JULY 14, 1937
MB = BULINEING - 30. 1942' WEREBYER -
vease - resumes APPRAR IN - PARAGRAME AS HOMEFIND
AND INSURED IN LINE 31, 1942'.
same - - TO - MONIFICATION w
-
(Signed) H. Margenthau, Jr.
SUBSIDANT or THE THEASURY
Init:FD:BB:FAS:EDW
Regraded Unclassified
333
C
o
P
OUTGOING CABLEGRAM
Y
June 30, 1942
Central Bank of China
Chungking
No. 21
With reference to your cable number 16 requesting &
further extension of the arrangement between us for purpose of
supplying Republic of China with dollar exchange the Secretary
of the Treasury has authorized us as fiscal agent of the United
States to modify further paragraph 6 of our letter of July 14,
1937, as modified, by deleting "June 30, 1942" wherever such
words and figures appear in such paragraph as modified and
inserting in lieu thereof "December 31, 1942". Please confirm
your agreement to such modification of the arrangement.
FEDERAL RESERVE BANK OF NEW YORK
rs
Copy:emk: 7.2.42
Regraded Unclassified
C
334
0
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embasey, Chungking, China
DATE: June 30, 1942, 1 p.m.
NO.: 779
The following telegram, no. TF 46, is a message from
Mr. Adler for the Secretary of the Treasury.
On June 29 I went to see Dr. Kung at his request.
He told me that he would like to ask your advice on the
following matter.
Between $19,000,000 and $20,000,000 of the credit
of about $48,000,000 received by the Central Bank of
China in 1937 is still owed by the Bank to the United
States Stabilization Fund. In that year gold was purchased
from the Treasury on your advice by Dr. Kung and the
loan was fully secured by this gold. He told me that
several times he has received advice that this gold on
which no interest was being earned should be used to
liquidate entirely this debt on which interest had to
be paid. However, because he appreciated the spirit of
your advice and considered it a symbol of good will
between the Ministry of Finance and the Treasury to have
some earmarked gold belonging to China in the United
States, Dr. Kung was and still is reluctant to part with
all the gold which was purchased on your advice. At
this time, however, it is difficult for the Central Bank
to raise between $19,000,000 and $20,000,000 from other
sources in order to pay off the debt. Of course, the
remaining Chinese gold which is held in the United States
could be used for this purpose, but Dr. Kung would prefer
as an alternative that approximately $19,000,000 from the
$500,000,000 United States loan to China be advanced Bo
that he can clear up this debt. He would like to be
informed of your reaction to thisplan. The transaction
contemplated by Dr. Kung would result in net effect in
paying off the debt to the United States Stabilisation
Fund with the gold China now holds in the United States
and in China acquiring by means of an advance from the
$500,000,000 United States loan an equivalent amount of
gold.
GAUSS
Copy:vw 7-1-42
C
o
335
P
Y
PMW
Fort de France
This telegram must be
paraphrased before being
Dated June 30, 1942
communicated to anyone
other than a Governmental
agency. (BR)
Rec'd 8:13 p.m.
Secretary of State,
Washington.
RUSH
242, June 30, 5 p.m.
I am informed that the French (?)eur general
has applied to the Treasury Department for permission
to transfer $40,700 from French Government Reserve
C account to the bank's A accounts. The amount arises
from inability to use it for purchases of petroleum
products and the High Commissioner requests me to
support the application.
The critical food situation requires that every
available dollar be used and I recommend that applica-
tion be granted.
MALIGE
LMS
Copy:bj:7-2-42
C
o
336
P
Y
RS
PLAIN
London
Dated June 30, 1942
Rec'd 6:10 p.m.
Secretary of State
Washington
3640, thirtieth.
FOR PROCUREMENT DIVISION.
Your 1061, March 12, third sentence, Diamond
Trading Company inquires when payment may be ex-
pected against deliveries completed early in May.
WINANT
MG
Copy:1c:7/2/42
Regraded Unclassified
337
C
0
P
Y
BRITISH EMBASSY,
WASHINGTON, D.C.
June 30th 1942.
With the Compliments of
H. W. AUBURN
Mr. Frank Dietrich,
U.S. Treasury Department,
Stabilization Office, Room 279,
Washington, D.C.
338
C
0
P
Y
June 29th 1942.
W.T. 1124/BA/39/42.
Further to previous memoranda regarding the Reichsbank accounts in
Escudos we have received the following information, which is summarized:-
1.
Reichsbank's Escudo account with Banco Lisboa y Acores:-
Payments in
May 29th to June 13th 1942
Payments out
From Leu & Co. 's Bank Esc. 6,000,000 To Japanese Payees
Esc. 500,000
If
sales of Swiss francs
2,800,000
Esc. 8,800,000
Esc. 500,000
2.
Reichsbank's Escudo account with Banco Espirito Santo:-
From Swiss Bank Corp.
Esc.
400,000
To Minero Silvicola
Esc. 2,400,000
. sales of Swies france 2,800,000 II Miscellaneous Payees
700,000
Esc. 3,200,000
Esc. 3,100,000
Copy: 7/2/42
Regraded Unclassified
339
P
Y
June 30th 1942.
V.T. 1124/BA/40/42.
Further to previous memoranda regarding the Reichsbank accounts
in Escudos we have received the following information, which is summarized:-
1.
Reichsbank's Escudo account with Banco Lisboa y Acores:-
Payments in
June 3rd to 22nd 1942
Payments out
From Leu & Co.'s Bank Esc. 14,500,000 To Banco Pinto J Sotto Mayor Esc.2,000,000
II
Miscellaneous sources
4,700,000
# Miscellaneous payees
2,200,000
Esc. 19,200,000
Esc.4,200,000
2.
Reichsbank's Escudo account with Banco Espirito Santo:-
Payments in
June 3rd to 22nd 1942
Payments out
From
Nil
To Miscellaneous payees
Esc. 700,000
Copy:1c:7/2/42
C
0
340
P
Y
PMW
Montevideo
This telegram must be
Dated June 30, 1942
paraphrased before being
communicated to anyone
Rec'd 10:15 p.m.
other than a Governmental
agency. (BR)
Secretary of State,
Washington.
544, June 30, 7 p.m.
Referring to the Department's circular telegram of June 23,
11 p.m. and the Embassy's telegram number 529 of June 24, noon.
Implementing the decree of July 18 the Bank of the Republic
has issued regulations in which it is made clear that United States
currency is accepted only on a collection basis for remittance
to the United States. All currency the holders of which desire
its immediate or future negotiation must be declared by July 5
failing which the Bank will not undertake its negotiation. The
bank reserves to itself all operations in United States currency.
No rate of exchange has been fixed inasmuch as the bank is
acting simply as & transmitting agent and the costs of transportation
are for the account of the holders. Such currency as may be
approved and released by the United States Treasury will be
converted into pesos at the rate of exchange then obtaining for
dollar drafts.
The bank believes that there has been no important transactions
in United States currency since May 19 because the rate for dollar
bills has been 20% or more below the rate for drafts.
Regraded Unclassified
- 2 -
341
Deposits with the bank to date for remittance to the United
States total only $25,000. All deposits and declarations must be
made this week and a report with comment on large blocks will be
submitted as soon thereafter as possible.
It is understood that the Spanish Legation does not intend
to deposit the $35,000 referred to in the Embassy's despatch no. 1194,
June 24.
CHARGE TREASURY.
DAWSON
chrcopy
7-3-42
Regraded Unclassified:
342
RS
Caraoas
This telegram must bE
paraphrased before being
Dated June 30, 1942
communicated to anyone
other than a Governmental
Rec'd 4:48 a.m., July 1st
agency. (BR)
SECRETARY of State
Washington
503, June 30, 9 pam.
Department's circular June 23, 11 p.m.
Following publication of notice reported in
Embassy's telegram 493, June 27, noon, all trading
in United States dollar currency has censed.
(a) No rates were quoted last Saturday (June
27) previously United States notes were bought at
approximately same rate as checks, that is, 3.30
to 3.32 and sales were at 3.35.
(B) Superintendent of banks reports total
purchases of currency dollars by 6*) and Exchange
houses June 1 to June 20, inclusive, $41,123. This
figure believed very conservative. No trading ob-
serable since June 27.
(c) Unable confirm reliable rumor that one
block of $25,000 in currency seeking buyer now,
seller unknown. An Exchange house reports being
offered $5000 in the United States 500 dollar bills
the past
343
-2- #503, June 30, 9 Pells from Caracas.
the past WEEK, seller unidentified.
CORRIGIN
WSB
(*) apparent omission.
341
ENCLOSURES
COPY No.
(Contification)
(For Ramed Better only)
HC/dem
MILITARY INTELLIGENCE DIVISION W. D. G. S.
MILITARY ATTACHÉ REPORT Great Britain
(Country reported an)
Subject Security Arrangements in Government Departments. I. G. No. 5930
(lirket descriptive
From M. A. London
Report No. 48660 Date
30 June, 1942,
Boarce and degree of reliability:
SUMMARY.-Here enter careful summary of report, containing substance succinetly stated; include
important facts, names, places, dates, etc.
Inclosures:
A - Panel on Security Arrangements in Covernment Departments,
First report (duplicate).
B - Panel on Security Arrangemente in Government Departments,
Second report (duplicate).
The inclosures, prepared by the Inter-Services
Security Board for the Mar Cabinet, set forth the result of an
investigation in the British Governmental Department of the
methods of transporting classified documents and their recom-
mendations as to proper procedure. They contain such material
of interest in connection with any study that might be made in
the Mar Department on this subject.
HOMER CASE,
Colonal, G.S.C.,
2 Incle.
Special Observer.
(a dup. - 1 17/MrCpy; 1 W/MIS Cpr)
Eqs., European Theater of Operations, U.S.Aray, 30 June, 1942.
Noted:
Office of the Military Attache, American Embassy, London, England.
Forwarded:
Distribution by originator ltr Cpy to MIS; Cpy to MIS by next poweh; & Cpya File.
Routing space below for use in M. I. D. The section indicating the distribution will place & check mark th
the lower part of the recipients' box in case one copy only in to go to him, or will indicate the number of copies
in case more than one should be sent. The message center of the Intelligence Branch will draw a circle around
the box of the recipient to which the particular copy is to go.
ORQ
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WPD
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F. B.L.
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CHIEFS or ARMS AND SERVICES
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Counter Intelligence Group of
Englogure beferred copy to BE
RESTRICTED
- 1
(Classification)
WAR DEPARTMENT
Regraded Unclassified
17 (Rev.)
16-94307-3 N.S. MOVERNMENT PRINTING office
345
COPY NO.
13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 221
Information received up to 7 A.M., 30th June, 1942.
1. NAVAL
1 of the Swedish Food Relief Ships from PIRAEUS to HATFA was boabed
and sunk on the 9th southwost of CYPRUS. A 12,500 ton British merchant ship on pas-
sage from AUCKLAND to LIVERPOOL reported torpodoed in North Atlantic early on 29th.
2. MILITARY
EGYPT. By the 28th the Italians had concentrated the bulk of their
forces west and south of MATRUH while advanced German elements ?urther south were
advancing eastwards and had reached a point south of BACOSH. Our forces were oper-
ating on the enemy's right flank delaying him and then withdrawing while on his left
flank our forces held MATRUH During the night 28th/29th it was decided to withdre
from MATRUH along the coast road to FUK About 10 miles west of BAGUSH enery troops
were met. Operations on the 29th centred on giving all possible assistance to the
withdrawal of the MATRUH garrison. No reports of the result of these operations
have yet been received.
RUSSIA. The Germans have passed to the offensive in the KURSK area.
SEVASTOPOL. Enemy attacks continued in the eastern sector or. 26th
and 27th. The Russian line was reported still unbroken between INKERMAN and BALA-
CLAVA on 28th.
3. AIR OPERATIONS
WESTERN FRONT. 29th. 12 Bostons escorted by 22 squalrons of fighters
attacked HAZEBROUCK Rail centre. Our fighters shot down 3 F.W.190's and damaged
four. 5 of them are missing.
29th/30th. 221 aircraft were despatched - AREMEN 251, aerodrones 18,
sen mining 7, leaflets 5. 9 are missing, 1 crashed and 2 came down in the sea. P:45
.ininary reports state that cloudy conditions were found over the objective preventing
sccurate identification but the glow of fires was seen through the clouds. 20 ener,
: ircraft crossed the east coast, 1.JU 88 was damaged.
EGYPT. 27th/28th. Liberators, Wellingtons, Bostons and Blenheims
hombed enemy forward landing grounds, M.T. concentrations and camps between MATRUH
end CAPUZZO. Many fires and explosions among vehicles and also petrol fires were
started. 1 Wellington was lost.
28th. Fighter bombers attacked M.T. and gun positions in the battle
area. 4 fighters missing.
28th/29th. iberators and Wellingtons bombed transport vehicles and
dumps and set alight 2 large dumps near SIDI BARRANI. More mines were laid in
TOBRUK Harbour.
Regraded Unclassified
346
- 2 -
GIBRALTAR. 28th/29th. About 8 enemy aircraft believed Italian,
attacked the harbour area and north front aerodrome. 1 of our aircraft was des-
troyed on the ground and 2 damaged.
4. HOME SECURITY
WESTON-SUPER-MARE. 28th/29th. There were 4 principal fire areas
in the business and shopping centre in two of which buildings were completely burnt
out. About 100 H.E. bombs were dropped. 55 persons reported killed.
PETERBOROUGH. 29th/30th. Some fires were caused of incendiaries.
Regraded Unclassified
347
13
COPY NO.
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 223
EGYPT.
Early on 30th June German forces appeared
to have reached a point 20 miles east of DABA and later in the
day an armoured battle was in progress 20 miles south of this
point. Our mobile forces were operating against the enemy's
southern flank and our main forces were withdrawing to the EL
ALAMEIN psoition. 60 percent of the MATRUH garrison is already
in reserve behind this position.
Regraded Unclassified