Volume 554, July 27 – July 28, 1942

DIARY Book 554 July 27 and 28, 1942 - A - Book Page Airplanes Aircraft despatched, week ending July 21, 1942 - British Air Commission report - 7/27/42 554 138 Shipments to British Forces, week ending July 28, 1942 - Hoflich report 358 American Bankers' Association Treasury prepares congratulatory letter for FDR for 67th annual convention - 7/27/42 70 Appointments and Resignations Dodson, Albert: Cooper (Congressman, Tennessee) asks HMJr to take care of old friend in a modest job - 7/27/42 44 (See also Book 555, page 243 - 7/31/42) - B - Business Conditions Haas memorandum on situation, week ending July 25, 1942 - 7/27/42 101 - C - Canada Forecast of United States dollar position, July 1942 - Plumptre memorandum given to White - 7/27/42 146 Navy promises to inform Treasury of any sizable orders placed in Canada - 7/27/42 156 Cochran, H. Merle White reports no word from Cochran in Latin America - 7/28/42 370 Cooper, Jere (Congressman, Tennessee) See Appointments and Resignations: Dodson, Albert Corn HMJr picks four ears for the White House - Rosenman-HMJr conversation - 7/27/42 21,28 - D - Dodson, Albert See Appointments and Resignations - E - Ecuador See Latin America Engraving and Printing, Bureau of Negro and White Employees: Situation in lunchroom, etc., explained in Reynolds (Senator, North Carolina) correspondence 7/28/42 291 Regraded Unclassified - 7 - Book Page Farben, I. G. See Foreign Funds Control: Sydney Ross Company Financing, Government August program discussed by HMJr, Bell, Haas, and Buffington - 7/28/42. 554 168 a) Victory Fund Committee suggestions 194,288 b) Sproul-HMJr conversation 184 c) Ransom-HMJr conversation 187 War Savings Bonds: Victory Fund Committees: Post Office asked to extend franking privilege to - 7/27/42 79 Payroll Savings Plan: Report of companies where deductions have reached more than 10% - 7/27/42 84 Sales - May, June, July, 1942 - 7/27/42 90 Total daily shipments by denominations, July 1-24, 1942 (last report) - 7/27/42 94 Mrs. FDR and HMJr discuss presentation by movies and radio 7/28/42 259 a) "No more between-the-acts talkers" - 7/29/42: See Book 555, page 8 b) Gamble memorandum after talk with Smith, Cohen, and Robinson: Book 555, page 56 Roanoke, Virginia, meeting on August 23 instead of August 20 discussed by Carter Glass and HMJr - - 7/28/42 264 a) August 23rd not possible: Book 555, page 49 b) August 20th agreed upon: Book 555, page 211 Newsreels acknowledged for King and Queen of England - - 7/28/42 308 New York survey - Gamble report - 7/28/42 310 Payroll Savings Plan - report for June 1942 - 7/28/42 352 Foreign Funds Control Sydney Ross Company: Exports to Latin America - Board of Economic Warfare report . - 7/27/42 119 - G - Germany Changes in war economy - Hoflich memorandum - 7/28/42 362 - L - Latin America Ecuador: White memorandum on report of drop in value of United States currency - 7/28/42 371 Lend-Lease Purchases, week ending July 25, 1942 - 7/28/42 294 Regraded Unclassified - L - - (Continued) Book Page Lend-Lease (in Reverse) HMJr discusses with Acheson - 7/27/42 554 25 British-American exchange of planes: General Meyers-HMJr conversation - 7/27/42 37 Conference; present: HMJr, Meyers, White, and Hicks 7/28/42 217 Conference: present: HMJr, Meyers, Phillips, White, and Hicks - 7/28/42 230 a) Hicks memorandum 244 McCloy-HMJr conversation 7/28/42 276 Phillips note on "Planes diverted off British contracts" - 7/30/42: See Book 555, page 228 Phillips agrees to text - Acheson reports to HMJr - 8/4/42: Book 556, pages 146 and 176 a) Conference; present: HMJr, Bell, White, Paul, and Cairns: Book 556, page 183 b) Meyers (Brigadier General) memorandum on "Airplanes diverted from British contracts" - 8/4/42: Book 556, page 195 Library of Congress Friends of Music give $5000 plus for deposit in Permanent Loan Fund; HMJr OK's - 7/27/12 98 - M - Military Reports British operations - 7/27/42, 7/28/42 167,385 - N - Negroes See Engraving and Printing, Bureau of New York See Financing, Government: War Savings Binds - P - Post Office Department See Financing, Government: War Savings Binds - R - Relief Activities, War See War Relief Activities Revenue Revision Ruml, Beardsley: Disapproves of Treasury "check-off" plan for collecting taxes; proposes "Tay-as-You-Go" plan - 7/27/42 66 a) Paul memorandum and Ruml testimory before Senate Finance Committee 68,69 Withholding Tax: Bureau of Internal Revenue's objections again reiterated by Cann - 7/28/42 285 - R - Book Page Reynolds, Robert R. (Senator, North Carolina) See Engraving and Printing, Bureau of Roanoke, Virginia See Financing, Government: War Savings Bonds Ross Company, Sydney See Foreign Funds Control Ruml, Beardsley See Revenue Revision - - S - - 1 - Sterling Products See Foreign Funds Control: Sydney Ross Company Sydney Ross Company See Foreign Funds Control - V - Victory Fund Committees See Financing, Government - W - War Relief Activities Davies (Joseph E.) report on agencies - 7/27/42 554 115 War Savings Bonds See Financing, Government S 1 U R Y T E L E 1942 JUL 27 AM 8 03 G R NUWE15 29 NT A P ITHACA NY JULY 26 1942 H ENRY MORGENTHAU JR T R SECY OF THE TREASURY E A S ULD APPRECIATE YOUR CALLING ME YOUR CONVENIENCE ABOUT AN U R RICULTURAL MATTER WHICH I WOULD LIKE TO CALL TO ATTENTION Y THE PRESIDENT I BELIEVE IT TO BE EXTREMELY IMPORTANT T lovs SJ H E BABCOCK. w E L E 00AM JULY 27. G $ R A P H Regraded Unclassified 2 July 27, 1942 12:20 p.m. GROUP Present: Mr. Buffington Mr. Gamble Mr. Thompson Mr. Schwarz Mr. Odegard Mr. Paul Mr. Cairns Mr. Haas Mr. Bell Mr. White H.M.JR: I want to ask a couple of questions. Where is Gamble? They gave out an announcement, "Over 1,000,000 persons on the War Department pay- roll have voluntarily set aside part of their pay to purchase War Savings Bonds." Do you think that is true? MR. GAMBLE: A million persons? H.M.JR: One million. MR. GAMBLE: It is possible that is true. H.M.JR: You might check up. From what the Navy says I doubt it - about the Army. MR. BELL: I think that possibly includes the armed forces, not just the civilians. H.M.JR: I would like to know how many civilians there are in the Army. And then, Harry, I see on the ticker here, "An order limiting industrial use of silver in order to 3 - 2 - divert larger quantities of other metals to war uses has been issued by War Production Board with approval from President Roosevelt." Were we at all consulted? MR. WHITE: War Department? H.M.JR: War Production Board. That is what we said we had no objection to - that I had no objection? MR. WHITE: That you had no objection to it. H.M.JR: O.K. I think we will do first this Executive Order, Mr. Paul. If you will sit up here, I can see you better. I can't tell whether you are smiling or frowning at that distance. MR. PAUL: It is enough to make you frown. We had a conference yesterday. Mr. White was there, and Mr. Cairns, and Mr. Bernstein. H.M.JR: Nice way to spend a Sunday. MR. PAUL: Well, I didn't mind it because I had an empty Sunday, but they no doubt suffered. As a result of that, we drew two orders, one covering wages and the other covering agricultural prices, the latter being much the more difficult problem, for reasons I will give in a moment. H.M.JR: Needless to say, this is triple confidential. MR. PAUL: All we can say is our orders are very much better than the order presented by Dave Ginsberg at the conference Saturday morning. H.M.JR: Says you. MR. PAUL: Well, I don't have any doubt of that; I think Dave would-- H.M.JR: Dave plus James Byrnes. Regraded Unclassified 4 - 3 - MR. PAUL: Well, we sent that order to Judge Rosenman yesterday afternoon, but I don't think that that did much good, because I later - I tried to get him on the telephone several times, and I later found that he had registered at the Willard, and I still later found that he wasn't in town yesterday. H.M.JR: He is in town today because he was supposed to have lunch with me, and he said he was very sorry he couldn't but if I would send four ears of corn over to the President for lunch, he would be able to eat two of them. (Laughter) MR. PAUL: That is better information. I had the information he wasn't going to get in until this afternoon. H.M.JR: So I sent four ears of corn from the farm to the President so that Judge Rosenman could have two of them. (Laughter) MR. PAUL: I have copies of these orders here; I don't know whether you want to go into them. The principal problem - the wage situation is much easier for the simple reason that there the question is only one of lack of authority. In connection with the agricultural prices we have a much harder problem because we have a definite edict in the Emergency Price Control Act that no existing law shall be in effect - shall be used. H.M.JR: Supposing I called up the Judge and ask him when he wants to see some of us? MR. PAUL: That would be a good idea. He planned a conference today, he told us Saturday, which would include Oscar Cox and Dave Ginsberg and somebody from Budget. I have to be at the-- H.M.JR: Which route do you take, the 5-B, or the-- Regraded Unclassified 5 - 4 - MR. PAUL: We take route 5-B, primarily, yes, but we have & lot - we also sent the Judge 8. memo containing a number of other alternative routes, some of which we thought should be held in reserve, and there is - Huntington found one statute which may help. It is the military zoning statute, and it wasn't passed until after the other act. This military zoning statute was not passed until March 21, 1942, and it wasn't the existing law at the time of the Emergency Price Control Act. Now, it gives the Presi- dent the right to establish zones, and on the theory that this is a total war you can establish a zone and have price control there - farm price control or wage control - on the theory that if you continue to do something like that your prices would get out of hand and that would hurt the war. But that, we thought, should be something that should be held in reserve. H.M.JR: But that came subsequent to farm prices? MR. PAUL: Yes, it wasn't existing law at the time. H.M.JR: Does that help you in the courts? MR. PAUL: It would certainly be one of our main points if we were briefed on it, but it seems more drastic as a practical, political problem than the other. We thought we ought to go out under 5-B and then perhaps use this argument to convince Senator Barkley, who is against this, saying we could do it by a more drastic means if we wanted but we take this pleasanter route. H.M.JR: Tell him it is a pre-Pearl Harbor matter. MR. PAUL: Now, I was up for a few minutes at the session this morning. Senator George asked me to be 6 - 5 - up at two o'clock. I think he plans to have an execu- tive session. I think he is going to ask us - after determining that you can't get this or that, maybe the State bond exemption or the joint returns or something, he is going to say, "Now, what are your alternative suggestions?" I am going to say, "We are not prepared to submit them today, but if it is clear that you are not going to give us the other, we will submit some further ideas to you in a few days." H.M.JR: This thing that he questioned - that group of economists got something out a week ago from today which I never saw. Who saw that - twenty- seven economists signed something-- MR. WHITE: You mean a booklet on financial policy? H.M.JR: Something criticizing the Treasury. MR. WHITE: Financial policy. Well, if it is what I saw, it is a little booklet which had the effect only of making me thoroughly ashamed of my profession, if that is the same thing he refers to. That is my view of their comment. H.M.JR: Well, they asked me at press a week ago today whether I had seen it. Do you want to dig it up and give it to me later? MR. WHITE: Twenty-seven economists? H.M.JR: Isn't that what they said, Chick? You were there. MR. SCHWARZ: It was about that. It was a round- robin thing. - 6 - MR. WHITE: Excuse me, I am not certain - you would like the pamphlet with the comments? H.M.JR: I would like to see the booklet it- self. MR. WHITE: Yes. MR. PAUL: I think we probably have that. MR. BELL: It was in the paper, I think, Monday. It sort of indicated you had had a conference with them. H.M.JR: What? MR. BELL: It sort of intimated that you had had a conference with them and had turned a deaf ear, or something, but I think the deaf ear came in your press conference of Tuesday - is that your press conference? H.M.JR: The press conference was Monday, but anyway it appeared in some - dig it up, Chick, for heaven's sake, and tell him which one it is. MR. SCHWARZ: We have a copy. H.M.JR: Tell White which one it was that the boys were asking about. If you tell White which it is, he can find out. 8 - 7 - H.M.JR: Norman? MR. THOMPSON: I have nothing. H.M.JR: Mr. Bell? MR. BELL: I have two documents for your signa- ture. One is a letter to the Postmaster General asking for the franking privilege for the Federal Reserve Banks. H.M.JR: For the Federal Reserve Banks? MR. BELL: Yes, for Treasury business. We had it during the last war, but they have never given it to us since. (Letter to the Postmaster General, dated today, signed by the Secretary.) MR. BELL: This is an amendment to an old Public Debt circular which incorporates a recent Act of Congress. (Document entitled "Department Circular No. 660" signed by the Secretary.) H.M.JR: What else? MR. BELL: I don't know whether you are interested in the final results of the Treasury campaign. H.M.JR: Yes, sure. (Chart handed to the Secretary.) About ten, eight. Do you mind if I put on my dark glasses to look at this? (Laughter) I would like to study this. Who is this way out here - Monetary Research. That is rubbing it in - by gawd, that is rubbing it in. They go way out over thirteen percent, you see, on this thing, and here they are inside the Treasury fighting us tooth and nail on the War Bonds. But they just want to demonstrate that they are good sports. MR. BELL: High-salaried people. (Laughter) Regraded Unclassified 9 - 8 - MR. WHITE: I hope it isn't & mistake in the computation. (Laughter) MR. ODEGARD: Mr. Secretary, they have a lot of high-salaried people in Monetary Research. Maybe it ought to be more than thirteen. (Laughter) H.M.JR: I think it is pretty good, knowing how they feel, from the top down, anyway. Incidentally, I think I told you that, along those lines - he asked me not to tell it outside - right after the argument was settled Leon Henderson wrote me a personal note that he was having ten percent taken out of his check each two weeks. He didn't want it publicized, but he just wanted to let me know that the fight was over and that is where he stood, which I thought was very nice. MR. PAUL: He was very appreciative of your proposing the rate tax. I had dinner with him Thurs- day night and he mentioned it. H.M.JR: I have got to see Leon. He needs a friend badly. MR. PAUL: I don't know whether he understands it. He was in a fighting mood the other night; he didn't seem to understand he needed a friend. MR. BELL: He is leaving tonight. (Memorandum concerning resignation of Mr. Mills handed to the Secretary.) H.M.JR: I am seeing him at quarter of three. MR. BELL: I think that is nice. I told him in view of the fact that he didn't want to accept these two or three jobs we had around here possibly it is better for him to go back and get up to date on what has happened in his bank, and then maybe we can call him back later, if that is all right. That is all I have. Regraded Unclassified 10 - 9 - H.M.JR: Harry? MR. WHITE: Mr. McCloy called to say that they have to know, preferably today, whether anything is to be done about taking over more planes from the British, because they are right at the point where a decision has to be made, and pay for them with dollars. You remember the last time we canvassed the situation it was decided not to go ahead with anything more. Now they have some more contracts before them which they want to finish up or salt away, and they have got to have a decision, if possible. I said we would call them back today. H.M.JR: I don't understand that. MR. WHITE: Well, there are still some plane contracts and payments about which they have to know how we want them handled, because once a decision is made not to do any more it will be too late to do anything about it. H.M.JR: I wonder if he couldn't drop over here and talk to me about it. MR. WHITE: That would be General Meyers. H.M.JR: Supposing I call them up on the phone. MR. WHITE: He asked me to get in touch with General Meyers if we have an opinion. H.M.JR: Who, McCloy? MR. WHITE: McCloy. H.M.JR: Supposing I talk to Mr. McCloy. What else, Harry? Regraded Unclassified 11 - 10 - MR. WHITE: Here is a little note which might be of passing interest. The Lord Chancellor of the Exchequer said England is not going to return to the gold standard, and other things of that nature. I don't think it merits any importance. (Paper handed to the Secretary.) H.M.JR: Chick? MR. WHITE: I have one other. The final confer- ence that we had with the Lend-Lease people has indicated that they definitely do not want to lend- lease for coins, and that leaves them willing to lend- lease for war purposes. I suggest a possible step-- H.M.JR: That is like saying a fellow needs a - if he is on a red meat diet, "Wouldn't you like to have some chi cken?" MR. WHITE: Of course that isn't true of England. To England coins are secondary. To Australia coins are primary, and to the South American countries they are primary. I don't think they have very good reasons for not wanting to go along. It simmers down to this, that they feel that the public reaction to such a step would be adverse to them. They are reluctant to do it. H.M.JR: I can't do it now, but let's have another silver session. I have got another idea. See? MR. WHITE: Then we will hold everything up until you have that conference. H.M.JR: I have got another idea. I think we could sit down with Mexico and possibly help Mexi CO make an arrangement with England and Canada, especially if they are going to be held down to thirty-five cents. 12 - 11 - MR. WHITE: Did you want Mexicans in at that session? H.M.JR: No, no, just Mexican Bell and Mexican you and Mexican me, that is all. (Laughter) MR. WHITE: Then we will hold everything up. H.M.JR: Just us three Mexicans. MR. WHITE: Mr. Hays called up - he telephoned, and he for several minutes-- H.M.JR: Can you talk a little louder? MR. WHITE: For several minutes he gave me what must be simply characterized as an awful lot of applesauce - to you and to me. (The Secretary held a telephone conversation with Miss Zinsser, secretary to Mr. McCloy.) H.M.JR: You know who she is? She is Lew Douglas's niece. MR. BELL: - Is she? He is Lew Douglas's brother- in-law. H.M.JR: Well then, what's-his-name is her uncle - McCloy is her uncle. She is working for her uncle. (Discussion off the record) MR. WHITE: Hays said-- H.M.JR: I hope Meyers comes. He is a breath of fresh air. MR. WHITE: Mr. Hays said that he was informed-- Regraded Unclassified 13 - 12 - H.M.JR: Excuse me. I would like you here at three-fifteen, Bell, as well as White. MR. WHITE: He was informed of all the details of the morning meeting which you had had. H.M.JR: Who was? MR. WHITE: Mr. Hays - of all the details. He emphasized that, and he said that he thoroughly approves and he is glad that you are doing it that way, and it is just fine and it is lovely, and he will want to cooperate. H.M.JR: He is smart. O.K.? MR. WHITE: That is all. H.M.JR: Make any offers? MR. WHITE: No. H.M.JR: What? MR. WHITE: No. H.M.JR: Remember, fifty-fifty, Harry. (Laughter) MR. WHITE: It depends on what it is. (Laughter) H.M.JR: Chick? That is right, you are quite right. I might want a hundred percent. (Laughter) MR. WHITE: It may be that kind of an of fer. (Laughter) MR. SCHWARZ: Variety ran, also, an inaccurate story on this Stage Door Canteen, and after talking with Charlie Bell, who said he had an assignment from you, we confirmed the fact that you were making space available in the B elasco. Regraded Unclassified - 13 - 14 H.M.JR: Making space available - my gawd, after they had been turned down one hundred percent by Reynolds, and told by him and the Treasury it couldn't be done, Norman Thompson got the inspiration and decided to do it. Is that right, Norman? MR. THOMPSON: That is right. MR. SCHWARZ: I thought that would backstop Ted's story. H.M.JR: We just turned ourselves inside out on that for - what is his name, this actor? MR. SCHWARZ: Douglas. H.M.JR: Yes, Melvyn Douglas. (The Secretary held a telephone conversation with Judge Rosenman.) H.M.JR: He just got in. He hasn't even opened the envelope yet, Paul. MR. PAUL: If he does call up this afternoon, I will get back from the Finance Committee just as soon as I can; and if I am not back here, or can't get back, Bernstein had better go over. H.M.JR: All right. MR. PAUL: He has been in on it before. H.M.JR: Peter? MR. ODEGARD: Just one or two things. The poll that you asked to have made on the workers' attitude toward the withholding of income at the source-- H.M.JR: Yes, can you talk a little louder? My ears are all stopped up. MR. ODEGARD: We had a session on Friday with Friedman in John Sullivan's office on that, and decided on the ques- tions for a resurvey of employers as to their specific attitude toward the effect this might have upon their 15 - 14 - pay-roll savings operation. We also agreed upon a series of questions that we should put to employees and a preliminary test of that is already in the field, or should be today, through the Bureau of Intelligence of OWI. I thought you might like to know. H.M.JR: Oh, through - will that go through Likert? MR. ODEGARD: Likert sat in - I went over to OWI to go over the questions with him. He sat in on it. H.M.JR: Good. MR. ODEGARD: There is one matter-- H.M.JR: When will we get an answer on that? MR. ODEGARD: Well, we ought to get some prelimi- nary action from the field pretty quickly. H.M.JR: On employees? MR. ODEGARD: On employees, yes. There is a flag- raising ceremony at the Ford plant that I would like to talk with you about. Then there is an editorial in the New Republic for this week that says something that I think is not quite accurate. H.M.JR: You mean on the forced savings? MR. ODEGARD: On forced savings. H.M.JR: No, it is wholly inaccurate. I read it. MR. ODEGARD: It says that the Treasury has been in favor of forced savings, but has been held off it by the President. H.M.JR: The whole article is wrong, and while you are on that, if anybody is interested in the State Department, I highly recommend reading The Nation, July 25, on Mr. Hull. 16 - 15 - MR. SCHWARZ: It called him an anachronism. H.M.JR: The whole State Department. MR. WHITE: Does anybody here listen to Cal Tinney? He broadcasts Monday, Wednesday and Friday. I strongly recommend it. 1 MR. PAUL: What time? H.M.JR: An aunt of mine wrote me she listened to him Friday, a week ago, and couldn't I do something to stop him, but she didn't say what he said. MR. WHITE: I forget what he said. He is very much worth listening to. H.M.JR: Isn't he with the New York Evening Post? MR. SCHWARZ: He used to be. MR. WHITE: Used to be where? MR. SCHWARZ: They tried to make a second Will Rogers out of him, but it didn't work. H.M.JR: Isn't he the fellow that wrote that dirty article about me? MR. SCHWARZ: Yes, sir. H.M.JR: What does he say, Harry? (Laughter) MR. WHITE: I didn't read the article. (Laughter) Between your aunt and the article I sort of stepped into something. He still is very good. I have heard him about three times. The last time he took Secretary Hull's speech and compared it with Secretary Hull's record, and he surely did a beautiful job. H.M.JR: Again, if anybody is at all interested in Secretary Hull's speech and what was back of it, the tip-off was in Arthur Krock's article yesterday. Arthur Krock tipped the thing off yesterday. I mean, to me it Regraded Unclassified 17 - 16 - has been a great mystery, but if you read Arthur Krock yesterday, you will see what is behind it. MR. BELL: Ernest Lindley gave him a good send-off this morning. H.M.JR: Krock tips the hat. I think I am not exaggerating, in the one article - I think Krock said six times in his article, and the article is not very long, "Every single word of Hull's speech was approved by the President." No Utopias about a glass of milk a day, and all the rest of that stuff. Do you want to see me later? MR ODEGARD: Just for a minute, only I would like to have Ted stay, too. H.M.JR: You and Ted. As far as I know nobody else wants to see me after this meeting. George, are you feeling all right? MR. HAAS: I am feeling much better. H.M.JR: You ought to take out cold insurance. You would make money on it. MR. HAAS: The insurance company would certainly be out of luck. H.M.JR: Are you all right? MR. HAAS: I think I will be - as soon as the humidity goes away, I will be all right. H.M.JR: Have you got to wait that long? (Laughter) MR. HAAS: I think SO. H.M.JR: What else, George? MR. HAAS: I have nothing. 18 - 17 - H.M.JR: Huntington? MR. CAIRNS: Elmer Davis is writing a letter to Petrillo because of his order as it affects the Treasury radio program. He wanted the Treasury lawyers to pass on it, but I refused to do it, and said he should get hold of Justice, because Thurman Arnold had announced he is filing suit, and anyway we are not his counsel. So I told him to get in touch with Cox, who knows most about the case. H.M.JR: Who calls us up from there, just as a matter of curiosity? MR. CAIRNS: I got the call from Cailahan. I didn't talk to Davis' office. H.M.JR: In other words, you figure we have enough troubles? MR. CAIRNS: We couldn't approve the letter. We might make suggestions, but we certainly couldn't clear it. H.M.JR: I think you are right. After all, we are not his counsel. Anything else? MR. CAIRNS: That is all I have. H.M.JR: On that same subject, Mrs. Morgenthau said you were most helpful in that Robinson, the composer-- MR. CAIRNS: I am glad it worked out. H.M.JR: She said you were most helpful on that. MR. GAMBLE: The number of radio stations is up to six hundred and twenty-one, now. Mr. Callahan has made a very fine report on some of the outstanding work the early stations are doing. I thought you should have it, so I made it up for you. (Paper handed to the Secretary.) 19 - 18 - H.M.JR: What else, Ted? MR. GAMBLE: Another matter you asked me to take up today was whether or not Wednesday or Friday would be a good day for you to go to New York. H.M.JR: I will talk to you two guys about it. Which, who, and how is it, in Ferdie Kuhn's absence - I know Ferdie Kuhn is supposed to read all the stuff that goes out from War Bonds, literature and so forth. Who does that during his absence? MR. GAMBLE: Odegard. MR. ODEGARD: I have been doing it. H.M.JR: Will you take it over for Ferdie? You don't normally do it, do you? MR. ODEGARD: I usually look over most of it. H.M.JR: Well, when this cartoonist or artist comes down Wednesday or Thursday, whatever his name is-- MR. ODEGARD: Szyk. H.M.JR: The one I had such difficulty in getting - I would like to see him when he first comes down. I would like to tell him why. MR. GAMBLE: That is all. MR. BUFFINGTON: I have asked the District Executive Managers to hold any publicity, the ones with whom I have talked, until you, at some later date - there seems to still be some of it in the paper. I don't know how it originated. H.M.JR: Everybody finished? MR. WHITE: Randolph, are you prepared to suggest to the Secretary the possibility of - the desirability 20 - 19 - of preparing that supplementary tax measure to accompany this order? MR. PAUL: I think that should be pos tponed until after we see what happens in the two o'clock session. The thought Harry has in mind is that we are limiting wages, or proposing to limit wages and agricultural prices. We have also got some mention in here of the wages end of it, the higher salaries, but we can't go any further than that. That is, we can't go into the question of dividends and corporate profits which is the capital end of it, through this instrumentality;we are convinced we have to do it through taxation. Now, the question is whether these executive orders or any publicity in connection with them should contain some reference to the fact that you are proposing to go in with some supplementary tax proposals to tie in with this. I don't think we can decide that. We are undoubt- edly going to have to go in with supplementary tax pro- posals, anyway, after this afternoon's session, and I think it would be much more in the clear when I see what happens up there at two o'clock. MR. SCHWARZ: Could I raise a point, Mr. Secretary? We just about have ready now the annual salaries lists which we are required to give out, seventy-five thousand and over. I would like to time it when it will do us the most good. H.M.JR: Talk it over with Paul. MR. PAUL: I did say to the Judge the other day - he didn't know that this twenty-five thousand limitation of the President's had not been turned down, that it simply hadn't been voted on. He thought it had been turned down. I told him that produced a lot of problems, that particular way of doing it, but that you could do much by way of accomplishing the same general practical result by a heavy rate schedule in the higher brackets. He was quite interested in that. H.M.JR: I will talk with Gamble and Odegard. Regraded Unclassified 21 July 27, 1942. 12:25 p.m. HMJr: Hello. Operator: Judge Rosenman hasn't come in yet. They expect him in about ten or fifteen minutes. HMJr: Well, leave word I'd like to talk to him as soon as he comes in. Operator: All right. 12:38 p.m. HMJr: Sam? Judge Rosenman: Henry! HMJr: I want you to know that I personally went out, with the dew on the ground, at five-thirty this morning, and picked four ears of corn. R: Four? HMJr: Well, I figured three for you and one for the President. R: (Laughs) That's wonderful. HMJr: And it's on the way over. R: And is it raw or cooked? HMJr: No, no, no, Mrs. Nesbitt is going to cook it with her little hands herself. R: I - I - that's good, and I hope you sent a little note over that this 1s from Dutchess County. HMJr: No, I figured that you'd make the speech for me. Regraded Unclassified 22 - 2 - R: I'll make the speech then. HMJr: Are three ears for you enough? I know.... R: Three - three ears for me are enough, one for the President, and that makes four. HMJr: That's right. R: And they were flown down this morning, I take it. HMJr: That's right. R: Okay (laughs). I - - we just landed. HMJr: Oh, you just landed. R: Yeah. HMJr: I see. R: And I hope - I hope he doesn't forget that I'm in on it. HMJr: (Laughs) R: (Laughs) He was met by 80 many people that he's liable to overlook me in the crowd. I'll have to go and stand in the door. HMJr: Well, when are we going to get together on the prices of corn? R: (Laughs) I don't know. Have your boys told you about our talk? HMJr: Yeah, they've sent a lot of new bright ideas over to you. R: Yes, well, I - I see something from the Treasury Department which I haven't opened yet. HMJr: Yeah, and they sent it around to these other lawyers that you had in.... R: Uh huh. HMJr: ....in order to save your time. Regraded Unclassified 23 - 3 - R: All right. Well, I'll - I'll get a hold of them. I'm going to spend this lunch on - the only reason is to work on this subject. HMJr: Yeah, well - after lunch give me a ring, will you? R: Yeah, all right. HMJr: And be sure and tell the President that he only gets one ear. R: Okay, I'll tell him. HMJr: All right. R: (Laughs) All right, thanks. HMJr: I'll hear from you later. R: Yeah. HMJr: Goodbye. R: Thanks, Henry. Regraded Unclassified 24 July 27, 1942. 12:34 p.m. HMJr: .... today or whether he wants to send somebody over. But I'm free at three-fifteen. Miss Zinsser: All right. Now, Mr. Morgenthau, you particularly wanted him? It was.... HMJr: No. Z: General Myers who started agitating about it, and I think he's the one who's been talking with Mr. White. HMJr: He'd be adequate. 2: He would be adequate. (Laughs) HMJr: Yes. Z: See him at three-fifteen.. HMJr: Right. 2: ....if Mr. McCloy thought he knew more about it? HMJr: I'll leave it to Mr. McCloy, and if I don't hear from you I'll expect either or both at three- fifteen. How's that? Z: That's fine. I'll let your office know who - who's coming. HMJr: That will be wonderful. 2: All right. HMJr: Thank you. 2: Goodbye. Regraded UInclassified cc-Dr. White 25 July 27, 1942. 2:37 p.m. HMJr: Hello. Dean Acheson: Hello, Henry. This 18 Dean Acheson. HMJr: How are you? You sound a mile away. A: Well, I - I'm right here. HMJr: Dean, it's been quite awhile since we met in the office on this Lend-Lease in Reverse, and it seems to me that we ought to decide some- thing pretty soon, A: We - we have - are carrying out the decision which you reached in your office. HMJr: Yes. A: We ran into one trouble with the Australians. HMJr: Yeah. A: which I think is now straightened out. HMJr: Yeah. A: The British have accepted the principles which were laid down in that last discussion. HMJr: Yes. A: And we have - we worked all the language and everything out with them. We are now waiting for the Australians, to get a return cable. HMJr: Yeah. A: We've had three exchanges back and forth with Australia. HMJr: Yeah. A: ....and I expect on Wednesday or Thursday to have their final answer, and that they will go along with us. Regraded Unclassified 26 - 2 - HMJr: Now do you know, in the meantime, what the Army and Navy are doing? A: Yes. I was over in McCloy's office on Friday. HMJr: What - what are they doing? A: They are actually operating under this arrange- ment just as though it had been made. HMJr: Yeah. A: They are getting both in North Ireland and in Australia and in New Zealand. HMJr: Yeah. A: ....the materials which there are on the spot, some which the British have imported, and are just giving receipts for those, and the British are - are writing it down in their book and Lend-Lease 18 writing it down in theirs. But no - no money 1s passing and no promise to pay, just the credit. HMJr: How about in England? A: That's the same thing. HMJr: Same thing. A: Yes. HMJr: So it's - - I mean the fact that we've been at it 80 long, we haven't lost any ground. A: Oh, no, we - we're actually operating under the thing now. HMJr: Oh, good, good. A: The only difficulty has been the the Australians. The British have always accepted this. HMJr: Oh. Well, when you do hear, will you let me know? A: Yes, I'll - I'll let you know in any event this week. I'll give you a report on just where we are. HMJr: Will you do that? A: Yes, Henry. i 27 - 3 - HMJr: And on the personal side, sorry we couldn't come out to your farm. A: Well, we will - we will do that again. We'll want.... HMJr: That's fine. AT .... to get you out on the tennis court and see whether you're up to your old form. HMJr: Well, I'm sure I'm not that (laughs), but at least I enjoy whenever I can get on the court. A: All right, well, we'll - we'll try to do it, Henry. HMJr: All right. My regards to your wife. A: Thank you very much. HMJr: Goodbye. A: Goodbye. 28 July 27, 1942. 2:56 p.m. Operator: Go ahead. HMJr: Hello. Judge Rosenman: The corn was a very great social and gastro- nomic success. HMJr: Yeah, I suppose all I could do is to be permitted to smell your breath. That's as close R: (Laughs) Well, the President, of course, butchers his corn by cutting it off the cob. HMJr: that's as near as I can get to the high and mighty. R: Yeah, well, I'll let you - I'll let you touch me. HMJr: Wonderful. R: (Laughs) Ah.... HMJr: Did he enjoy it - did the President enjoy it? R: Yeah, he did. I told him that at five o'clock this morning this was on the.... HMJr: Yes. R: ....on the - vine, I called it. I guess that's wrong.... HMJr: What did he say? R: ....in Dutchess County. (Laughs) HMJr: (Laughs) Stalk. R: Stalk, that's right. I said vine in Dutchess County.... HMJr: Yeah. Regraded Unclassified 29 - 2 - R: ....picked by five-thirty HMJr: Yeah. R: ....and flown here especially. HMJr: Yeah. Was it good? R: Oh, it was very good. HMJr: Good. R: And I'm sorry you only picked four. HMJr: (Laughs) R: (Laughs) I told him - I told him that you said three were for me and one for him. HMJr: Good. R: He said, "Well, Mrs. Nesbitt seems to have divided them more equally." HMJr: I see. R: So I only got two. They were damn good. HMJr: Good. R: Now, Henry, I - - I got some ideas from him as to what he wants done, and I think I'm going to phone Bernstein to come over. I guess I better phone Paul, hadn't I? HMJr: Yeah, Paul's on the Hill, but you could.... R: Well.... HMJr: I can do it for you. Save you time, if you'll tell me what you want. R: Well, I was going to suggest that they come right over. I was going to get Ginsburg over too. HMJr: Do you want them right away? 30 - 3 - R: Yeah. huh? Well, let's - let's make it at three-thirty, HMJr: R: Well, one or the other, you really - I really don't need both. HMJr: Well, it's - I - - he - as a matter of fact, he's on the Hill, you see? R: Yeah. HMJr: I don't think he can come, but I'll - I'll tell him that you're asking for him, how's that? R: Okay. HMJr: What? R: But if he can't come, just send Bernie. That's enough really. HMJr: That's right.... R: Okay. HMJr: ....and.... R: Anything else? HMJr: How did the President feel about it? R: Well, he's got some brand-new ideas, but he - he wants to use this - - he wants to enumerate 5-b in the list of - of weapons that he has. HMJr: Good. R: As a matter of fact, I think it was very ingenious. HMJr: Yeah. Tell me.... R: I think it was damn good, and I - - I went.... HMJr: did - did you go the whole hog on both agri- culture and wages? R: For your information, yes, sir. Regraded Unclassified 31 - 4 - HMJr: Good, good. R: Yes, sir. HMJr: Well.... R: He's got some new ideas of machinery but - - but that's really unimportant. The idea 1s he's really going to work on it. HMJr: Right. All right, Sam, what else? R: That's all right now. HMJr: How long - how long you going to be here? R: Well, I think I'll be here right along now. HMJr: Good. R: Dorothy's coming down tomorrow, I think, and we'll be here except, I guess, for week-ends. HMJr: Well, we'll get together soon. R: All right, Henry. HMJr: If I asked you for supper tonight, you'd think I was trying to influence you on the Executive Order. R: No, you've got no interest in this Executive Order. (Laughs) But I - - but I - - any time you can bring any corn back, no offense. HMJr: (Laughs) All right. R: It's very good. HMJr: All right, Sam. R: We'll get together soon, boy. HMJr: Right. R: All right. You'll tell Bernie or.... HMJr: I'll do it right away. Regraded Unclassified 32 - 5 - R: ....then I won't have to call him. HMJr: Yeah. R: Three-thirty, huh? HMJr: Yeah. R: All right. - HMJr: Yeah. R: Thank you. HMJr: Goodbye. 33 July 28, 1942. MEMORANDUM At the meeting at the White House on July 27, 1942, attended by Judge Rosenman, David Ginsburg, General Counsel for OPA, and myself. Judge Rosenman stated that he had discussed all the matters with the President and that the President had decided to out across section 3 of the Emergency Price Control Act and regulate agricultural prices and that he wanted the following action to be taken on the wage matter: 1. Designate a Wage Stabilization Moderator who would determine all policy questions with respect to wages. The Moderator would have an Advisory Committee consisting of representatives of the various interested agencies who will be satisfactory to the Moderator. 2. The War Labor Board would continue to handle the administrative matters that it is currently handling and will carry out the policy laid down by the Moderator. 3. There is to be set up a national average cost of living index based on absolute necessities of food, clothing and rent and excluding any luxury and anything on the borderline between luxury and necessity. The average is to be fixed as of August 1, 1942. 4. The Moderator is to take the average of wages paid in an industry on a nation-wide basis as of August 1, 1942. Where an employee is getting the average or in excess of this average wage, he will get no increase of wages for the balance of the war. Any employee receiving less than the average wage can by collective bargaining, etc., receive pay to the average paid in the industry. 5. Wages are then fixed until there is a 5 per cent increase in the cost of living index above referred to. It was pointed out to Judge Rosenman that the national average would be wages paid in the south together with wages paid in the north and that there is a considerable disparity in such wage rates, so that workers in the north would be getting little, if any, wage increases. Judge Rosenman said nevertheless the President wanted the average determined on a national basis rather than on a regional basis. It was also pointed out to Judge Rosenman that in many industries such as perhaps steel, there 1s no great disparity between what is paid in one business and in another business and consequently it would mean very little, if any, wage increase. Regraded Unclassified 34 - 2 - Judge Rosenman stated that what the President wanted to do was to greatly curtail any wage increases and that the Treasury formula made it possible to carry out the War Labor Board decisions and perhaps be even more liberal with labor. 6. The President is very anxious to adopt the Treasury's suggestion of including salaries and bonuses under the system of control. The Moderator is also to investigate high bonuses paid on war contracts with a view to reducing the bonuses. In connection with this program, high salaries are to be studied from the point of view of the tax angle and also from the point of view of preventing further increases in salaries. Judge Rosenman was uncertain as to whether anything should be done to cut down existing high salaries. The President wanted the Executive Order to recite specifically all his statutory authority including 5(b). It was anticipated that instead of delegating all of the statutory authority to the Moderator for the purpose of carrying out provisions of the Order, the Moderator would be authorized to use directives to those Government agencies already exercising these statutory powers, telling them to take action under such powers to carry out the program of this Order. 7. Although we asked Judge Rosenman about the matter several times, the President apparently said nothing concerning the problem of wage inequalities. We pointed out that wage inequalities might result in migration of labor from one important industry to another. Miscellaneous. Question was raised as to whether we can tell U.S. Steel that it cannot for tax purposes deduct bonuses paid by it to persons obtaining Government contracts for U. S. Steel. Oscar Cox has prepared a memorandum on the President's powers to deal with wage and agricultural problems and Ginsburg is to furnish a copy of it. 8. Judge Rosenman will want a memorandum outlining the defects in the President's wage proposal. However, he apparently does not want that memorandum just at this time. He stated that after an Order had been drafted, all the interested agencies will be called in together for a conference at the White House and at that time will have an opportunity to express their views. Judge Rosenman left open the question as to whether the labor unions would be consulted. 35 - 3 - Agriculture The President decided that despite the attitude of Judge Byrnes, Senator Barkley, and Leon Henderson, he wanted to out across section 3 of the Emergency Price Control Act, and control agricultural prices. He had in mind having someone like the Wage Moderator fix the policies on agricultural prices but to have OPA administer the prices. Ginsburg said that although in the wage and labor field it was desirable to have a Moderator fix the policies and the existing agencies do the adminis- trative work, this formula would not be sound in the agricultural field, since the Moderator of Agricultural Prices would simply have to duplicate all the work currently being done by the OPA. The President had indicated that one of the senators had written to him and said that although section 3 fixed parity at 110 per cent, the real purpose was to assure farmers 100 per cent of parity. I pointed out that there was something in the legislative history to support this point of view and that the line we might take in the Order was to recognize that we were cutting across the literal words of the statute for the purpose of carrying out the substance of the Order, namely, assure to farmers 100 per cent of parity even if in certain instances it necessitated the paying of certain subsidies. In connection with subsidies, the OPA said they would have to be paid anyway and that the subsidies would not amount to a great deal if through this approach we were able to lop off the extra 10 per cent and only have to assure farmers 100 per cent of parity. The President had in mind also changing the existing formula for determining parity. He wanted conception of parity revised so as to include not only the prices paid by farmers but also the prices paid by other persons. He wanted in effect to put the farmers on the same level with other persons. It was admitted by all that just what the President had in mind was unclear. Furthermore, Ginsburg said that it was very dangerous and undesirable to attempt to revise the conception of parity, since what was likely to result was a revision of the formula to the advantage of the farmer. Ginsburg is to submit a memorandum to Judge Rosenman on this problem of the parity formula showing why we do not want to redefine parity. Ginsburg also made the point that most of the agricultural products had already gone above 110 per cent of parity or were so far below parity because of the great supply such as in the field of wheat and corn that these items presented no problem. He said that there were not more than Regraded Unclassified 36 - 4 - perhaps four items which were important from the point of view of having their prices fixed. These items were butterfat, some vegetables, some fruits, and milk in some areas. Ginsburg felt that fixing the prices on these items was not sufficiently important to justify the President running counter to the OPA statute and Henderson is seeing the President on July 28 to attempt to argue him out of going counter to the agricultural provisions of the OPA Act. Ginsburg said that in the field of poultry and meats, the prices were in excess of 110 per cent of parity. The difficulty that existed was that OPA normally fixed prices at the processor rather than prices on the farm and that as a result of the lend-lease program in which, for example, a huge amount of hogs are being bought for shipment abroad, the prices of hogs on the farm are higher than the price that the processor can charge for pork. Ginsburg is to give Judge Rosenman and me a copy of a memorandum in which he lists the farm items that have not as yet reached 110 per cent of parity. Ginsburg is also to draft a new Order embodying the program discussed at the meeting and is to include in the Order certain of the provisions in the Treasury draft of Order. In this connection, it is to be noted that Ginsburg submitted at the meeting a revised draft of Order in which he had already included some of the provisions of the Treasury Order. Judge Rosenman also indicated that when he discussed the matter with the President, particularly the problem of controlling agricultural prices, he pointed out to the President that instead of fixing prices directly, prices can be controlled through the medium of controlling credit to farmers. Judge Roserman said the President saw the point immediately and agreed. Bernard Bernstein. Regraded Unclassified 37 July 27, 1942. 3:20 p. m. AID TO BRITAIN Present: Mr. Bell Mr. White General Meyers Mr. Hicks H.M.JR: Now, do you want to buy some planes from England and pay them cash? GENERAL MEYERS: No, sir. H.M.JR: You didn't-- GENERAL MEYERS: I wasn't quoted that way, was I, sir? H.M.JR: Well, you said you had to make up your mind. GENERAL MEYERS: That is right. We have to make up our mind. We are taking over, under the recent Arnold-Towers-Portal agreement, certain airplanes that are on British contract. Likewise, we are giving England certain airplanes from America, U.S. contracts, both Air Corps and Lease-Lend. Now, our thought on the matter was that it would be a credit to the Lease-Lend account if those airplanes could be taken over from British contracts. H.M.JR: Talk to me in dollars, can you? GENERAL MEYERS: Roughly, I would say that we are taking over a hundred million dollars worth of airplanes that the British are paying for. H.M.JR: Dollar contracts? 38 - 2 - GENERAL MEYERS: Dollar contracts. H.M.JR: That the British have contracts for here? GENERAL MEYERS: That they have contracts for here, and have substantially already paid for them. In some instances there are still some balances due on those con- tracts. We are giving the British, under that agreement, from American contracts which the United States Govern- ment paid for, roughly, a hundred and fifty million dollars' worth of airplanes, substantially from Lease- Lend appropriations, however. H.M.JR: But giving it? GENERAL MEYERS: But giving it. H.M.JR: A hundred and fifty? GENERAL MEYERS: Yes, sir. H.M.JR: Against a hundred? GENERAL MEYERS: Yes, sir. H.M.JR: Well, what other way-I mean, on the hun- dred and fifty that we are giving them, would the bulk be Lease-Lend? GENERAL MEYERS: Substantially so, yes. MR. BELL: Would they get the dollars for their hundred million - - would the British get the dollars for the hundred million? GENERAL MEYERS: No, no. Our thought was that we would credit the Lease-Lend account with the value of the airplanes that we took over from their contracts. That is the point at issue, of course. MR. WHITE: That is in addition to the seventy million? Regraded Unclassified 39 - 3 - GENERAL MEYERS: Yes, this is entirely apart from that old deal that transpired in December. MR. WHITE: Instead of paying a hundred million, your suggestion is to merely credit them against the Lease-Lend account? GENERAL MEYERS: That is right. MR. BELL: I don't see the advantage in it. MR. WHITE: In one case they will get a hundred million dollars from us and in the other they won't. That is the advantage. GENERAL MEYERS: That is all it is in a nutshell. MR. BELL: Then I don't see the advantage in what he is proposing. MR. WHITE: He is suggesting instead of paying & hundred million dollars, say to them, "We will regard that hundred million dollars' worth of planes which we are taking from you as part of your repayment on Lend- Lease obligations. We will credit you - the stuff we are giving you against Lend-Lease." MR. BELL: Yes, but I don't see that it makes any difference one way or the other as long as there aren't any dollars passing. GENERAL MEYERS: The other way there would be. The other way we would actually refund, give to the British a hundred million dollars in cash. MR. BELL: That was the reason, to get the refund and get the dollars. Wasn't that the purpose? MR. WHITE: That was an additional amount. At the time of the conference they spoke of the three hundred million, roughly-they didn't knowexactly-and then you did give them seventy million. There were a few million more which you were going to give them after you settled what Regraded Unclassified 40 - 4 - the value might be. GENERAL MEYERS: Yes, and then there is an additional twenty-five million or so that they are getting out of the facilities. MR. WHITE: Out of the facilities. Now, here is a hundred million, part of the additional two or three hundred million that we had been talking about, and which we agreed at the time to hold off, and the General is now raising the question: What is the decision? Shall we pay them dollars for this hundred million, or shall we just credit them and they won't get the hundred million? H.M.JR: Well, is this hundred million dollars' worth of planes - has this been under consideration as a part of anything else? GENERAL MEYERS: It is part of an agreement. There was no monetary consideration taken in in the agreement of Arnold, Towers, and Portal, which was approved by the combined Chiefs of Staffs. That is, in other words, it was a distribution of American production of airplanes, and when that consider- ation was given to this distribution, there was no thought . - it made no difference whatsoever in regard to who bought the airplanes. It was American production. H.M.JR: Let me put it another way. This hundred and fifty which we are giving to them, is that something new - was that also part of this three-way agreement? GENERAL MEYERS: It is part of the three-way agree- ment, sir, but it isn't something new, because if this agreement hadn't taken place we would have given them a considerable portion of those airplanes, anyhow, under the Lease-Lend. MR. WHITE: You see, these are - we are going back, now, to the pre-Lend-Lease contracts. H.M.JR: I think, in fairness to the English, I Regraded Unclassified 41 - 5 - ought to give them a chance to tell their side of the story. MR. WHITE: They have, haven't they, Mr. Secretary? H.M.JR: Not to me. When do you have to make up your mind? GENERAL MEYERS: It is very critical right at the moment. I would like to do it by tomorrow. H.M.JR: Do you want to do it tomorrow? We move fast here if we have to. MR. BELL: Are the British expecting dollars for these? MR. WHITE: The British are uncertain. They asked for it. H.M.JR: I just want to be fair. What is the time factor? GENERAL MEYERS: The time factor? H.M.JR: Delivery of the planes? GENERAL MEYERS: Delivery of the airplanes. For example, a company does not want to turn the British airplanes over to us until the British release them, and in some instances the British haven't made final payment, and the company wants to know where they can get their money from, of course. H.M.JR: How can I identify this to Phillips so he will know? GENERAL MEYERS: I should think if you would identi- fy it by reference to the recent Arnold-Portal-Towers agreement which was confirmed by the combined Chiefs of Staffs-- H.M.JR: How recent? GENERAL MEYERS: About three weeks ago. Regraded Unclassified 42 - 6 - H.M.JR: As recent as that? GENERAL MEYERS: Yes, sir. MR. WHITE: Wait a minute. H.M.JR: This doesn't go back to that-- MR. WHITE: It doesn't refer back to that other deal at all. H.M.JR: This is something new which I never heard of. MR. WHITE: These are part of the planes which the British have bought and paid for, and which they hope we will take them out of. H.M.JR: But this is another agreement that the Treasury never heard of. GENERAL MEYERS: I am sure this never came up. MR. WHITE: Doesn't that apply to planes prior to January first? GENERAL MEYERS: That was the - no, that was even prior to the Arnold-Portal agreement. We commandeered, or requisitioned these airplanes between December seventh and January first. That was one thing. That was a clean-cut deal in which we made our decision to reimburse them for those airplanes that we took from their contracts, which was their property, in effect. We made that deci- sion. We made them for them. Now, that was done, except for the final adjustment. H.M.JR: I will tell you what I will do. I think the best thing is this. Have you heard of this agree- ment within the last three weeks? MR. WHITE: No. GENERAL MEYERS: I have a copy if you would like to look at it. 43 - 7 - H.M.JR: Could White look at it, and Bell? GENERAL MEYERS: Yes, sir. H.M.JR: And could you come back at ten o'clock tomorrow morning and we will settle the thing then, and we will have the English here. How is that? GENERAL MEYERS: That will be fine. MR. BELL: I don't see that we are involved, Harry, if it isn't a question of taking these planes and giving these British actual dollars. MR. WHITE: You are involved to the extent that if you do take these planes you give them a hundred million dollars instead of giving them a credit. H.M.JR: Needless to say, the Army doesn't want to pay them the hundred million. GENERAL MEYERS: I am sure that is the War Depart- ment's thought on the matter. I am sure it is Mr.Lovett's and Mr. McCloy's. MR. BELL: No doubt about that. H.M.JR: But I think we have got to be fair. GENERAL MEYERS: I think we should, too. H.M.JR: I think you had better step back a minute with Mr. White and unburden your soul on this agreement which we don't know about, this Arnold-Portal-- GENERAL MEYERS: Towers. H.M.JR: --Towers agreement. Do you mind? If you have got another five or ten minutes-- GENERAL MEYERS: Yes, sir. 44 Mr. Thompson: F. Please speak to the Secretary about this in the morning. appl. 41440 Sen. seey 7/3/ for Thom 45 July 27, 1942 3:38 p.m. HMJr: Hello, hello. Congressman Jere Cooper: Hello, Henry. HMJr: Hello, Jere? C: All right. How are you getting along? HMJr: How's the old campaigner? C: All right, fine. I want to congratulate you on that statement you made over in the Senate Committee. HMJr: Well, I'm glad you liked it. I think it's the only man of the Ways and Means that did. C: Well, I - I thought it was fine. HMJr: Yeah? C: I - in fact, I've been using part of this afternoon calling Secretaries congratulating them. I called Cordell Hull and congratulated him on that big speech he made. HMJr: That's good. C: Henry? HMJr: Yes,.sir. C: You told me any time I really needed help to come to you in person. HMJr: That's right. C: All right. I have an awfully good, old friend. HMJr: Yeah. C: .... that I want a little job for. 46 - 2 - HMJr: Right. C: He's an elderly man, but in splendid health, and he has a Civil Service status as a junior clerk. HMJr: Yeah. C: And I want to get a place for him. HMJr: Is he over eighty? C: No, no, he's not that old. HMJr: (Laughs) C: No, he's younger than Bob Doughton. HMJr: He's younger than Bob Doughton. (Laughs) C: Yeah. HMJr: What's his name? C: Mr. A - - Albert.... HMJr: Yeah. C: ....R.... HMJr: R. C: Dodson - D-o-d-s-o-n. HMJr: Yeah, and where does he live? I know it's Tennessee but what.... C: No, he's here in Washington. HMJr: He's here in Washington. C: Yeah, his address is 7208.... HMJr: 7208.... C: ....Blair.... HMJr: How do you spell that? Regraded 47 - 3 - C: B-1-a-1-r. HMJr: B-l-a-i-r. C: Road. HMJr: Road, yeah. C: Washington, D. C. HMJr: Now where is he working now, Jere? C: Well, he's not working now. HMJr: He's not working. C: No, I tell you what the fact is, Henry, he. HMJr: Can he spell? C: Oh, my, he's - I want to tell you right now in just a word. He - he's one of the most competent, best qualified, and capable men I ever knew. He's a - he was the leading banker in my district for forty years. HMJr: My God. C: That's right - leading banker in my district for forty years and who had a big insurance business. HMJr: Yes. C: Really an outstanding, top-notch man. HMJr: Well, I won't try to kid you because this 1s your serious day. But you'd like me to take care of him? C: That's right. I want a little - oh,a fourteen, fifteen, sixteen hundred job for him. HMJr: Well.... C: Now the situation is this, Henry, he has one - has a daughter whose husband is a commander in the Navy.... Regraded Unclassified 48 - 4 - HMJr: Yeah. C: ....and - the old man's been up here for some time living with them. HMJr: Yeah. C: But he's active and vigorous and energetic, and he wants a little job himserf. HMJr: Yeah, well, Jere, after what you did for us on the tax bill, this would be the - this is cheap. C: Well, fine. HMJr: And I - and I'd do it, if you hadn't done any- thing anyway. C: I know that. HMJr: Yeah. C: You know I don't call on you unless I really.... HMJr: Well, the old friends are the best friends. C: Well, thank you. HMJr: I'll be - I'll - we'll - I don't know how we'll do it, but by hook or crook, we'll do it. C: Well, I'm going to tell him that it'll be done, and he'll hear from you soon. HMJr: You tell him it will be done. I don't know how but I'll do it. C: Ali right, Henry. HMJr: Thank you. C: Thank you 80 much. HMJr: Goodbye. C: Bye-bye. 49 July 27, 1942 3:40 p.m. INFLATION Present: Mr. Bell Mr. White Mr. Haas Mr. Friedman H.M.JR: Now, where were we when we got this interruption? MR. BELL: You started out with the statement that you wanted the three economic groups-- H.M.JR: I want the three economic groups to go to work on this memorandum which Harry White gave me in regard to rationing of money. (Memorandum referred to entitled "A New Program for Inflation Control and Government Borrowing," dated July 20, 1942.) Now, we started on this thing last fall, and we had this man from New Jersey sitting here - you remember Viner - and this thing has been kind of aggravated in my mind by the challenge which Taft made to me that we would have to go to the banks and sell them about twice as many securities as they have now. That is what he said. As a matter of fact, I asked this man Warren here a month ago to make a study of everything that he could to criticize the Treasury financing, remember? MR. HAAS: Yes, he is working on that. H.M.JR: I asked that. Well, this is what I am doing. I can't over-emphasize the fact that I want this within the Treasury, and I don't want to read about it in the Wall Street Journal. But Harry has Regraded Unclassified 50 - 2 - raised the point - he raised it before, before I was interested. At that time I think Henderson said they couldn't do anything for six months, or something or other. I don't know, but, frankly, I want to look at this thing entirely fresh, you see. I don't know where it will lead us, but I am worried about after the first of January where we are going to go. Now, as I said before, the hard thing to explain is that just increasing the bonds held by the banks - that alone doesn't necessarily mean we have inflation, if there are enough other curtailments around, ceilings, and so forth, and so on. But if this war is going to be a long one, and I say we in the Treasury have to figure on a five-year war - that is the only way we can figure the thing - then we have got to do something different than has ever been done before. And quoting Stewart, he told me two months ago, or a month or two ago - he said, "Mr. Morgenthau, you can go for the rest of this calendar year the way you are, but after that you will have to do something else." I don't know whether he told you that or not. MR. BELL: Yes. H.M.JR: Now, maybe this is it; maybe it isn't. I have got a completely open mind. I don't know, but I want you fellows to go full steam ahead. What is England's experience on this question of giving the man the books? He can spend so much on clothing, so much on food. If we did do rationing, what would we do about voluntary bonds, compulsory savings? And then, while this may not fit particularly in this group - you might tell Paul this because I would like Paul to hear the whole story - but what I am going to say now comes to Paul in his capacity in taxes rather than as General Counsel. The thing that I can't get through my head is this. I think that if we were successful in getting deduction at the source through, that the man and woman when they do understand it would say, "Well, the Regraded Unclassified 51 - 3 Treasury put one over on us, the dirty so and so" because they would wake up to the fact that they are paying about a year and a half of taxes in one year. Isn't that right, Friedman? MR. FRIEDMAN: It is about a year and a quarter. H.M.JR: Well, it will look like two years to them. And the thing, again, talking of taxes - the thing that I want to raise - and I raised this with Helvering before and he threw his hands up in holy horror - was instead of doing this tax anticipation business I would like to consider next year - I mean, let's say - well, it is irrespective of this rationing - that we might want to say to the people during '43, "We are going to ask you to pay your '42 taxes each month." See? MR. BELL: Pay your '42 or '43? H.M.JR: '42 taxes in '43, each month, and have that come along. "Now, maybe we can do it by sending you a bill or maybe we can deduct it at the source. You see what I mean? You follow me, Friedman? MR. FRIEDMAN: Yes. H.M.JR: There are two ways to do it and not try over a period of three years to catch up, 80 that you are trying to do the current thing, because I don't think you can - when I raised this question of going to employees, everybody - I mean, they said, "Well, if you did explain it, if they ever did under- stand, they would be against it." I mean that was the general idea, and I don't think you should do something like that - I mean that you are afraid to have the man explain it. But I am raising the point of getting a man to pay in '43 his '42 taxes either by sending him a bill, a notice once a month, or possibly deducting it at the source, you see, and not trying to catch up. Regraded Unclassified 52 - 4 - Now, this whole business, this question of volunteer savings, all rests there. We will let that go for the time being, but the rationing thing I want. Now, I have invited Dr. Viner to come back. I don't know anybody whose criticisms I would rather have on this thing, and also Stewart, to be here on this thing because it goes right down to the guts of the thing, Dan, doesn't it? MR. BELL: It sure does. We ought to review anyway what we have been thinking about. H.M.JR: Then I sent word to what is his name - Warren - fully a month ago. I wanted a criticism of what we have been doing. What is it, about a month ago? MR. HAAS: In the neighborhood of that, three weeks ago. H.M.JR: I haven't got it, but I don't want - personally I doubt very much if we do anything before election. Now, I did mention it to the President in connection with this message, and the President said, "Well, Henry, if I do this thing, frankly, I don't want to bring in any new idea. I don't want to get, you know, off on something else. If So I did sort of plant the seed. I thought he should be thinking about it. Now, I think as long as Harry has done more on the rationing, as far as I know, than anybody else, I will make him chairman of this committee of the three of you, Blough, Friedman, and he. But I would like the thing to go ahead full steam because - and I again emphasize that for the time being it is strictly Treasury family, with the exception of Viner and Stewart. MR. HAAS: Warren. H.M.JR: And Warren. Regraded.Unclassified 53 - 5 - MR. HAAS: He is in. MR. WHITE: Warren? MR. HAAS: Robert Warren. H.M.JR: He is with the Bamberger Institute. Now, do you want to add anything, Dan? MR. BELL: No. You said Harry submitted a memo- randum on it. Is that the memorandum you sent me a copy of? MR. WHITE: Well, yes, but there were a lot of memoranda earlier on this particular point, none on this financing, but on the rationing. Is that what-- MR. BELL: The Secretary said he had a memorandum from you. MR. WHITE: This is the one. H.M.JR: This is the one. In that Harry talked about - he said if you did the rationing, you wouldn't have to do anything else. MR. WHITE: As far as inflation is concerned, but not so far - there were a lot of other things in the memo, as far as that-- H.M.JR: You said you may not be able to do the rationing, and then you would have to do other things. MR. WHITE: I think we understand each other. It didn't have to do - it had to do only with inflation. There were other things that bore on financing which you are not discussing. H.M.JR: No, you distinctly said, Harry, if you could do the rationing, fine, but then if you couldn't do the rationing you had alternatives. Regraded Unclassified 54 - 6 - MR. WHITE: Possibly you didn't read it carefully. MR. BELL: That is the way I understood it. H.M.JR: That is what you said, Harry. Did you' read it? MR. BELL: Yes. H.M.JR: Read it again, Harry. You said, "If you do the rationing, that is O.K.; but if for political or other reasons you can't do the rationing, then here are a lot of other suggestions.' MR. WHITE: "Then here are other suggestions" and then it went on. It was indented a little more and there were other things. H.M.JR: Take another look at it. MR. BELL: He is right. I think he had a program there which scares me a little. MR. WHITE: That is right, but I just wanted to make it clear that this part has to do only with inflation. H.M.JR: Well, the part that I am asking the three of you to do here is to explore this thing, ration- ing, in connection with inflation. MR. WHITE: That is right. I just wanted to make it clear that there were other things in there that didn't relate to inflation. H.M.JR: Anyway, are we clear on that? As I understand it from Harry, and I don t want you people to think anything at all - I mean I am completely of an open mind - if we did this rationing that would take care of the inflation. MR. WHITE: That was our decision; everybody agreed with that. Regraded Unclassified 54 - 6 - MR. WHITE: Possibly you didn't read it carefully. MR. BELL: That is the way I understood it. H.M.JR: That is what you said, Harry. Did you' read it? MR. BELL: Yes. H.M.JR: Read it again, Harry. You said, "If you do the rationing, that is O.K.; but if for political or other reasons you can't do the rationing, then here are a lot of other suggestions." MR. WHITE: "Then here are other suggestions" and then it went on. It was indented a little more and there were other things. H.M.JR: Take another look at it. MR. BELL: He is right. I think he had a program there which scares me a little. MR. WHITE: That is right, but I just wanted to make it clear that this part has to do only with inflation. H.M.JR: Well, the part that I am asking the three of you to do here is to explore this thing, ration- ing, in connection with inflation. MR. WHITE: That is right. I just wanted to make it clear that there were other things in there that didn't relate to inflation. H.M.JR: Anyway, are we clear on that? As I understand it from Harry, and I don t want you people to think anything at all - I mean I am completely of an open mind - if we did this rationing that would take care of the inflation. MR. WHITE: That was our decision; everybody agreed with that. 55 - 7 - MR. HAAS: If it works - I mean, that is the proviso. MR. BELL: Well, it certainly leaves the money some place out there that can't be spent. H.M.JR: Then the question is how are you going to get the money in. MR. BELL: If they put it in the bank, borrow the bank money. MR. WHITE: We don't need to get it so far as inflation, but we might so far as financing is con- cerned. H.M.JR: Well, I agree that if you could take this money and keep it from being spent and it stays there in the people's pockets, then the question of getting it is that much easier; and of course I also agree that the first thing is to try to keep the people from spending it, and the thing that nobody yet has been willing to face is that somebody has got to go before the country and say we have to reduce our standard of living. We have to reduce it. We can't live as well as we have. Isn't that right? MR. FRIEDMAN: It certainly is, absolutely. H.M.JR: Now, somebody has got to go and say, "You can't have - if you are accustomed to two bath- rooms, and twenty electric lights, and two ice boxes," and SO forth and so on, "you have got to get along with one ice box and half as many lights, etcetera, etcetera. After all, it gets down to - and I heard somebody say - well, I was discussing this with some- body and they got out a pencil and paper and figured that we would spend less than we did in '32 on civilian goods. Of course I never said anything. Somebody threw that in my face. MR. HAAS: Pretty close. 56 - 8 - MR. WHITE: We will have to buy as little goods as in the depths of the depression, but they will be higher priced so there will be more money. H.M.JR: But they will have to buy less. Some- body, I don't know-- MR. WHITE: That is the one problem. H.M.JR: Some unkind soul threw that in my face, that we would have to have less civilian goods at the disposal of people than we had in '32. MR. BELL: Less available. MR. HAAS: And a different distribution of goods. H.M.JR: Well now, it gets back to that whole business, and then if we block this thing off, then where do we end up? How much money would there be in the pockets and vaults and safes that I could borrow? Then the question of how we would get it, that is some- thing else again. MR. WHITE: That is a separate question. H.M.JR: That can be put in a separate pocket. MR. BELL: Yes. H.M.JR: Do you agree? MR. HAAS: Yes. MR. WHITE: Yes, sir. MR. FRIEDMAN: Yes, sir. H.M.JR: What I am asking, if you can block off this money so it can't be spent, how I get it in the Treasury is something else again. Is that all right? 57 - 9 - MR. WHITE: Or if you get it in the Treasury - either if or whether. H.M.JR: I will get it in the Treasury, but how I get it in the Treasury is something else. MR. FRIEDMAN: The only relation it has is that the more effectively you can get it in the Treasury the easier it will be to enforce the other controls. That is, if it is left lying around and not gotten into the Treasury directly, there will be more of a tendency for people to break the law with respect to the other money. H.M.JR: In other words, you mean if the liquor is in the safe it is not as hard to say, "I won't drink" as if you have a glass in front of you and you say you won't drink it. You don't have much faith in humanity, do you? MR. FRIEDMAN: Exactly. H.M.JR: Harry, have I stated the thing? MR. WHITE: The immediate task before us, I think, is clear. H.M.JR: Now, George? MR. HAAS: Yes, sir. H.M.JR: Now, I can't overemphasize how anxious I am to have something within a couple of days, even if it is just an outline. MR. WHITE: Yes, we will have something. H.M.JR: An outline. After all, we have been at this since last October or November. MR. WHITE: That is the reason we can have an outline. Regraded Unclassified 58 - 10 - H.M.JR: Do you want to add anything? MR. BELL: No. I think it is fine we are going over it. H.M.JR: Now, when we get this outlined, and, as I say, we will all take a look at it, and we will have meetings here to decide what we are going to do with it. MR. BELL: I think it is time to review the whole past six months to see where we have gone and where we ought to go from here. H.M.JR: That is why I asked-- MR. HAAS: You started this thing a week or two ago when you raised that question on taxing idle balances - I mean, you raised the question again. H.M.JR: It keeps popping up all the time, but I just-- MR. HAAS: I think next fall, beginning then, the real pressure is going to start. It looks like that to me. H.M.JR: Next fall? MR. HAAS: I think so, after the summer lull. H.M.JR: Well, one of the things that bothers me and that I don t know enough about again, is they keep saying, "When the inventories are exhausted, that is the time." MR. HAAS: That is right. H.M.JR: And, of course, this is a good time to start this, now that the President is going to go ahead with some kind of an announcement on prices. Well, that again will temporarily take care of the 59 - 11 - thing, and then we will have to come along, and I think after he does that the people will be shouting all the more, "Why doesn't the Treasury do something?" Well, a couple of days, gents, and then you tell Blough and Paul, and please impress on them two things: One, the need of secrecy, and two, the question of speed. MR. FRIEDMAN: I certainly shall. H.M.JR: I don't want - for everybody I don't want to read about it in the Wall Street Journal. I am looking at the ceiling. O.K. 60 THE WHITE HOUSE WASHINGTON July 27, 1942. MEMORANDUM FOR THE SECRETARY OF THE TREASURY: FOR YOUR INFORMATION. F.D.R. 61 RESOLUTION or THE NATIONAL GRANGE ON ADOPTED AT 75th ANNUAL SESSION AT WORCESTER, MASS., November 13, 1941. INFLATION The right to store up the results of skill and labor in the form of property is fundamental to the preservation of the American may of life. One of the greatest dangers this country faces is from inflation, which, unless controlled, may destroy the foundations of our democracy, There are two methods of control. First 18 the use of economic devices designed to lessen the pressure of surplus income on inadequate supplies. Second is the arbitrary control of prices, labor, rents, commissions, etc. Among the economic devices are: 1. Encouraging savings and building individual reserves, to meet the shock of post-war adjustments. 2. Increase in income taxation, coupled with efficient and economical administration of government, which will serve to retard inflation and prevent the passing of an unnecessary dobt burden to future generations. 3. Encouraging investment (by individuals in preference to banks) in government securities which finance the borrowing from which employment and excess income are derived. 4, Maximum production of all consumer goods, which can bo produced without hampering production of nooded dofense materials. 5. Restricting credit to productive purposes and sound investmente in order to discourage speculation. 6, Voluntary roduction of selling prices, when increased volume results in lower costs and increased profits. This will promote the benefits of A cycle of plenty by reducing living costs, reversing the trond of the ovils leading to inflation, and laying a firm foundation for post-war adjustments. If these measures do not serve to prevent prices advancing unreasonably, it may be necessary to resort to measures of arbitrary price control. In that event, certain definite principles should be borne in mind: First, some advance in price is a natural accompaniment of the great destruc tion of wealth as a result of war, This advance is not inflation, It is an unavoidable cost which all must bear, Any adjustments of prices, wages, rents or commissions which relieve any group of bearing its share of the cost will result in increasing the burden of others, and are unsound, Second, any effort to increase profits because of the increased demand is inflationary. If arbitrary control is necessary, it should be limited to profiteering. Third, if control is necessary, further than well-defined cases of prof- iteering, all should be subject to control, BO that equity among all groups will be assured, The administration of any price control legislation should be vested in a board with a chairman appointed by the President and any authority so granted should be terminated as of a specified date, Regraded Unclassified 62 National Grange Resolution - 2 - Fourth, Congress should not allow the authority to fix prices to be vested in any agency which is not constantly subject to Congressional Control. Congress should require prompt reports on all actions of any price control body and should retain to steelf (1) the right to review and revoke by joint resolution any order issued by such agency, and (2) the right to revoke by joint resolution any powers thus granted to such agency. The unlimited right to control prices is tantamount to the right to legislate. Fifth, Congress should establish standards for the guidance of any price control agency and provide & court of appeals. The purpose should be to attain equitable income and equitable relationships between. groups. No group should receive more or less than an equitable and just share of the national income. In the con- sideration of farm prices, farmers should not ask more nor agree to accept less than actual parity, but it is essential that & just rule be provided for determinig parity. Some flexibility In administration will be necessary to assure actual parity Three facts bearing upon agriculture's place in this problem should be kept in mind: FIRST, Not once in twenty years has agriculture's income reached parity. On the contrary, the farmer's proportionate share of the national income has declined alarmingly, and substantial increase in prices are necessary to bring farm purchasing power back to normal. SECOND, With farmers receiving substantially less than half of the consumer's dollar, there is no justification for passing on to the consumer any increase further than the increase received by the farmer, unless justified by some other valid cause. THIRD, Agriculture, with its 6} million individual producing units, is the least likely of all industries to exact monopolistic prices from consumers, If farmers can get equitable prices for their products, they can and will produce in abundance. If they cannot get adequate prices, exhortation to raise food to win the war and write the peace will not suffice, not because of lack of will to serve, but because of financial inability to carry on. The Grange, therefore: 1. Favors application of economic devices as the best means for holding down inflationary tendencies. 2. Opposes arbitrary price fixing unless necessary. 3. If arbitrary price fixing becomes necessary, demands: (a) that all groups be included to assure equity, (b) that the activities be devoted to preventing profiteering, (c) that standards be provided, as far as possible, to assure equity for all, (d) that Congress retain control. The Grange will oppose arbitrary price fixing if these principles are not complied with, Regraded Unclassified 63 July 27, 1942 4:40 p.m. HMJr: Hello. Operator: Sir Frederick Phillips haen't returned. His assistant, Mr. Bewley, is there. HMJr: Bewley? Operator: Yes. HMJr: I don't understand - all right, I'll put it in. Operator: You want to talk to him? HMJr: I'll talk to Bewley. Operator: All right, I'll get him on. HMJr: Hello. Operator: Mr. Bewley. HMJr: Hello. T. K. Bewley: Hello, Bewley speaking. HMJr:. How are you? B: I'm very well. How are you? HMJr: Pretty well. I've been trying to get hold of Sir Frederick Phillips for over an hour now and.... B: Phillips isn't feeling well. I think he's probably in bed. I'm not sure. HMJr: oh, well, they told me he'd be back in the office in a few minutes when I called up a little after three. B: Oh, really? Well, he hasn't come back yet. He wasn't feeling well this morning. 64 - 2 - HMJr: oh, I'm sorry. B: Could I give him a message or anything? HMJr: Yes - and if he's not going to be able to be here tomorrow - I wish you'd let me know. B: I will. HMJr: Or let my office know. Well.... B: Certainly. HMJr: ....Mr. McCloy put up a proposal to me about - they're thinking of taking over a hundred million dollars of airplanes that the English have on - on order in this country. B: Yeah. HMJr: At the same time, there's a proposal to let you have a different lot of a hundred and fifty million of airplanes. Under the they said that the agreement was signed three weeks ago between Portal and Arnold and our air man in the Navy, I can't remember his name. B: Yeah. HMJr: And - I said before I did anything about it, I wanted to hear the English side of the story. B: Yeah. HMJr: And that's what I wanted to see Sir Frederick about tomorrow morning at ten-fifteen. B: All right. I - - I should think he'd be likely to be available at ten-fifteen. I'll find out how he is, and what ought to be done. HMJr: But if he can't come - maybe you could come. B: Yeah. One of us will come at ten-fifteen anyhow. HMJr: And you might post yourself on it. Regraded Unclassified 65 - 3 - B: Oh, I'll find out what I can. HMJr: It's - it's - you - you got the story. B: Yes - - you're thinking of taking over a hundred million of the airplanes off our contracts and letting us have a different hundred and fifty millions worth. HMJr: That's right. B: Yes. HMJr: The question is how they're going to be paid for. B: Yes, yes. HMJr: And the Army has one idea, and I thought that before I heard - decided it, I'd better hear your side of the story. B: Yeah. Right you are. HMJr: Thank you. B: Thank you. HMJr: I hope Sir Frederick - - is he seriously 111? B: Oh, I don't think 80. He was feeling rather rotten this morning, and he went off. I haven't seen him since. HMJr: Oh. B: But he was only just feeling rather rotten. I don't suppose it's anything very serious. HMJr: I see. All right. B: I'll let him know anyhow. HMJr: Thank you. 66 177 0 MR. PAUL: st now PLEASE SPEAK TO ME ABOUT THIS SOON. ns TH PAY You SECRETARY Paul with 58% WITH m this an WITH RESULT MAGR END Fees; 12:8/3/4 - were TIME, - THAT TAXPAYERS K PUT CO A CURRENT ET & ------------------------- PLANT WHICH COULD, 2N sirect, CORPLETED CORNENTS FOR - YEAR. to PLAN, ME EXPLAINES, a TAXPAYER TOULD WIND TAXES 100 THAT BANK YEAR INSTRAL dy MACH, 712 are BETWAM IV ACCORDANCE WITH W26 1942 INCOME, WHICH WOULD 8316 any X BAACH USED If PHRITTEN 017* as THE 15 Stills THAT 5 TSX TAX CLOCK " MD each 095 X LASS $ REVENUE TO TNR via 22 yes 1> at 4676 ADD TAXES, SENATE soon. BEARDSLEY RUML, CHAIRMAN OF THE FEDERAL RESERVE BANK OF NEW YORK, INOUNCED THE TREASURY'S "СИЕСК-ОFF" PLAN FOR COLLECTING INCOME TAXES T THE SOURCE AND PROPOSED A "PAY-AS-YOU-CO" PLAN WHICH WOULD, IN EFFECT, ELIMIMATE TAX PAYMENTS ON 1942 INCOME. HE CHARGED THAT THE TREASURY'S PLAN WOULD REQUIRE TAXPAYERS IN THE OVEST BRACKETS 70 PAY TO THE COVERNMENT 24 PER CENT or THEIR INCOME IN 1943. THE WITHHOLDING TAX INCORPORATED IN THE HOUSE- PPROVED BILL VOULD RESULT IN "DOUBLE TAXATION," ME TOLD THE OMMITTEE, BECAUSE WAGE EARNERS WOULD NAVE TO PAY TAXES ON 1942 AND 194 INCOME AT THE SAME TIME. RUML PROPOSED THAT TAXPAYERS BE PUT on A CURRENT BASIS BY A. PAY-AS-YOU-GO PLAN® WHICH WOULD, IN EFFECT, COMPLETELY ELIMINATE INCOME TAX PAYMENTS FOR ONE YEAR. UNDER THE PLAN, NE EXPLAINED, A TAXPAYER WOULD START PAYING TAXES ⑉ 1943 INCOME IN THAT SAME YEAR INSTEAD OF WAITING UNTIL MARCH, 944, TO FILE HIS RETURN IN ACCORDANCE WITH PRESENT LAW. THE TAX on 1942 INCOME, WHICH WOULD NORMALLY FALL DUE ON MARCH 5, 1943, WOULD BE "WRITTEN orr" BY THE TREASURY, HE SAID. THAT WOULD ISULT IM "SETTING THE TAX CLOCK AMEAD," HE ADDED, AND OULD MEAN NO LOSS OF REVENUE TO THE GOVERNMENT. 7/27--R1213P Regraded Unclassified 68 MEMORANDUM To: Secretary Morgenthau From: Mr. Paul July 27, 1942 With reference to the Ruml testimony and the particular report which you sent to me, I am attaching it to a copy of the latest revision of the "Pay-As-You-Go Plan" as pre- sented today by Ruml to the Senate Finance Committee. From several questions asked me informally by the Committee, I take it that Ruml aroused some interest KEP Regraded Unclassified 69 Testimony of BEARDSLEY RUML before The the FINANCE COMMITTEE of the SENATE on the Pay-As-You-Go Income Tax Plan July, 1942 Statement of Beardsley Ruml Mr. Chairman, my name is Beardsley Ruml. I am the Treasurer of R. H. Macy & Co., and also Chairman of the Federal Reserve Bank of New York and Advisor of the National Resources Planning Board. The Committee is familiar with the weakness in the American scheme of things which is caused by the universal indebtedness of income taxpay- ers to the federal government. It is my purpose to emphasize the seriousness of this weakness, to point out briefly some of the consequences, and to make a suggestion as to what may be done about it at the present time. I should like, if I may have permission, to submit for incorpora- tion in the record a printed statement which ana- lyzes the problem and the suggested solution in some detail. Every income taxpayer on the first of January of this year was in debt to the federal govern- ment for his income tax on his income for 1941. By the time he paid the first installment on March 15, 1942, he was already in debt for the tax on his income from the first of January, 1942 to the middle of March-so he is always in debt for the tax on about a year's income. This situation is not a new one. The year be- with employers or employees that, in order to fore he was similarly in debt; and 80 also in the save power, everyone ought to go to work at eight year before that, back to the first year after he o'clock in the morning instead of at nine; the had a taxable income. Generally speaking, this same result in power saving was achieved much debt, the income tax on last year's income, was more simply by moving all the clocks forward an paid out of the next year's income, and by and hour, 80 that we actually go to work at eight large it didn't cause any difficulty-rates were o'clock, although we nominally still go at nine. low and most citizens weren't liable for any in- And 80 as a matter of practical fact, most in- come tax anyway. But the days of low rates and come taxpayers are counting on paying their general immunity from income tax have gone, year's debt to the federal government out of in- and what was once a minor defect has become a come they haven't yet received and which will serious and a growing weakness; and an obstacle itself be subject to income tax. to urgently required tax measures. Some day, for each and every taxpayer, that In general, the American taxpayer is count- counted-on-income to pay last year's income tax ing on paying his 1941 tax out of 1942 income. will not materialize. Already today, many an in- Some few, to be sure, being accounting-minded, come taxpayer is in difficulties because of this in- have accrued their income taxes, but these are come tax debt. Who are these taxpayers! First few indeed. For most the desirability of accru- of all, there are the men in the armed forces and ing personal income taxes only became evident those who have gone into government service at after rates became so high that it was impossible lower income. Next, there are those who had been to double up-to accrue the tax on this year's in- successfully employed in non-war industries, who come and to pay the tax on last year's income have seen their income shrink because of priori- during the same year. ties and allocations, and who have not completed Nothing is to be gained by arguing that people their adjustment to war occupation. There are ought to save this year's tax out of this year's in- the thousands and thousands who every year suf- come. The fact exists that they did not do it, and fer reduced income because of accident, sickness, now they cannot do it. We need rather to adopt a old age. For all of these, their income tax debt, plan which automatically shifts taxpayers to a cur- especially now because of the high rates, creates rent basis. It would have done little good to argue an intolerable situation. [2] [8] And for the tens of thousands who are actually tax debt free, there would be no problem of pay- in distress, there are millions who are in danger, in danger of loss of income through being drawn ing two years' taxes in one, and a withholding tax could be imposed forthwith. into military or government service, through war- time industrial displacement, through accident, I believe I have said enough to demonstrate through sickness, through retirement because that the tax debt of income taxpayers is a dan- they can no longer keep up the pace. To be sure, gerous weakness, that it causes widespread hard- the lightning will not strike all in 1942; but it is ship and apprehension, that the danger is an in- creasing one, and that it obstructs desirable tax sure to strike some of us-which, we do not know, measures. I think all will agree that it would be but we are all in danger. highly desirable to get rid of this tax debt and This danger will be increasingly felt by the that it is well worthwhile to attempt to solve this people as income tax rates go higher and as a major problem even at the risk of a few minor friend here and an acquaintance there is en- imperfections. gulfed by his income tax debt. For the welfare The suggestion that I am offering is not being and morale of the country it is a situation which presented as the only or even as the best solu- is not good. We should get our income taxes on tion. It is the best that I and those with whom a current basis and at once. We should get out I have consulted have been able to devise. In of debt to the federal government. any case, it may serve to emphasize the problem There is a compelling reason for doing some- and to be a starting point for others who will thing about it now. Sooner or later we shall be have alternative and better suggestions. demobilizing our war industries, and war time in- The Pay-As-You-Go Income Tax Plan is in- comes will cease. There will be a period of read- tended to apply to individual income, not to cor- justment. Suppose we are still a year behind, porations or to estates. a year in debt on income tax. Can we imagine In order to get individuals free of tax debt to income taxes being paid by the unemployed out of their unemployment compensation the federal government, and to keep them from that time on a current basis, we must solve three Finally, this income tax debt makes difficult or problems. impossible the full use of the withholding tax. 1. How can we get on to a current basis with- If we did not have this debt, if we were currently out paying two years' taxes in one year? [4] [5] Unclassified 2. If we are to file a tax return near the begin- present income tax paying generation, and occurs ning of a year, how can we estimate in advance beneficially for each taxpayer at the time when the amount of the new year's income! his income fails. As for the Treasury, the Treas- 3. What tax rate should be applicable to the ury has never considered taxes receivable as an new year's income? asset, and accordingly they can be written off the Taking up these problems in order, we make balance sheet of the government without the these suggestions: change of a single penny. 1. How can we get on to a current basis with. As to the second problem-if we are to pay out paying two years' taxes in one year! We in any given year a tax based on the income of are now paying a tax in 1942. It is considered that year, how are we to know the amount of the a tax on 1941 income. Suppose we move the tax- income? We make this suggestion. In March clock ahead, suppose we re-define our tax and of each year the taxpayer should declare a tenta- say that the tax we are paying in 1942 represents tive tax for that year-but because he does not a tax on our income for 1942. In 1943 we con- yet know the exact amount of income for the cur- tinue to pay a tax which becomes a tax paid with rent year, the tentative tax should be measured respect to income which will be received in 1943. by the income of the preceding year; that is, a Although the tax on 1941 income drops out of return filed on March 15, 1942 would be a return existence, the Treasury continues to receive its of tentative tax for 1942, based on 1941 income, revenue and the taxpayer continues to pay his rather than a tax for 1941. In the subsequent taxes. The great difference is that the taxpayer year's return, end-of-the-year adjustments would is now on a current basis. He continues to pay be made to correct the tentative tax to the actual his taxes every year on income received in that tax liability. I will try to explain a little later year. But when he dies or ceases to receive in- the way in which these adjustments could be made. come, he does not owe a tax as he does under the The problem of how the taxpayer will know present system. Reduction of tax payment by the what tax rate is applicable can be solved by a taxpayer as a result of setting the tax-clock ahead technical change. Under the present system when occurs only at some future date when and as the the Congress changes the rates of tax this year, taxpayer's income ceases or declines. The reduc- the new rates will be made applicable to 1942 in- tion is therefore spread over the lifetime of the come-but the tax on 1942 income will not be [6] [7] paid until 1943. We suggest that under the Pay- owes him a refund or a credit of the tax on the As-You-Go plan the new rates, for taxpayers sub- $500 differential. The tax on that amount could ject to the plan, be made first applicable to income be credited against the taxpayer's tentative tax received in 1943. In 80 far as the government is liability for 1943. Continuing into 1943-the tax- concerned, this change will make no difference in payer would file a return in March 1943 showing tax collections in 1943; under the present system, tentative tax for 1943 based on his actual 1942 as well as under the proposal, the new rates first income. He would pay in 1943 this tentative tax affect payments of income tax made in 1943. plus any deficiency that was owed for 1942 or minus any credit for an overpayment of his 1942 The way in which the plan would work out in tax. In the same way, in each succeeding year practice is perhaps made clearer by a simple ex- the taxpayer would pay a tentative tax for the ample. Suppose a taxpayer received $5,000 tax- current year plus or minus any differential be- able income in 1941. His return filed on March tween the tentative tax and the actual tax liabil- 15, 1942 showed a tax measured by the 1941 in- ity for the preceding year. come. Under the plan this tax instead of being For taxpayers with stable income the plan his 1941 tax would be his tentative tax on 1942 in- means that they owe no taxes to the govern- come. This tentative tax is paid in 1942. If at ment at the end of the year. For taxpayers with the end of 1942 he finds that his taxable income increasing or decreasing income, there is ordi- in that year was actually $5,000, the same amount narily an adjustment to be made at the end of as in 1941, his full tax has been paid and he owes the year. However, there are some cases where the government nothing. If at the end of 1942 he it would seem to be unnecessary for the taxpayer finds instead that his 1942 income was actually whose income has decreased to pay his tentative $5,500, he owes the government a tax on the addi- tax at the high level of the preceding year and tional $500, but this is certainly better than his then claim a credit for the overpayment. Take, owing the government, as under the present sys- for example, the men who have gone into the tem, a tax on the full $5,500. This deficiency tax armed services. Suppose a particular individual, on the additional $500 would be payable in March who received $7,500 in 1941, and who is now hold- of 1943 at the time his tentative tax for 1943 is ing a commission in the army and receiving $2,000. returned. If at the end of 1942 he finds that his Under the plan as stated he would pay tentative 1942 income was actually $4,500, the government tax for 1942 on the basis of the $7,500; but since [8] [9] his actual income in 1942 is only $2,000, he would sible for a taxpayer to pay his tax on a high in- be entitled to a credit on the overpayment. We come in the year it is received, and the higher in- suggest that in cases such as this, where income come is never reflected in tax receipts until the has decreased and will clearly remain at the following year. Certain taxpayers with fluctu- lower level, the taxpayer should, upon proper cer- ating income might be glad of the opportunity to tification, be required to pay tax only on the lower pay their taxes on the high income currently and income of the current year. In such cases provi- certainly the option to do 80 could never operate sion could now be made for waiving collection of to the disadvantage of the revenues. future installments payable in 1942 to the extent I do not want to take the Committee's time to they exceeded the amended 1942 tax, or for cred- iting the taxpayer with amounts already paid in go into any detailed consideration of the general excess of that figure. We have called this the effects of the plan on taxpayers and on the gov- ernment-these are outlined in the printed state- relief provision, and have suggested that it be ment of the plan. The advantages of the plan to made applicable only to income from personal taxpayers are self-evident. All taxpayers would services. In these cases the lower current income be largely freed of tax debt immediately since could be certified and tax paid only on that the larger part of their tax liabilities would be amount. This would give immediate relief to paid in the years in which the income was received. the taxpayer whose income has decreased, and When a taxpayer died, or ceased to receive in- eliminate the necessity for unnecessary payment come, or came to a period when his income had and crediting. The relief provision could prob- markedly decreased, there would not be the addi- ably not be extended beyond income from personal tional burden of a tax debt based on the full earn- services as the administrative difficulties might ings of a previous year. outweigh the advantages. We do not believe that the adoption of the plan When income has increased in the current year would prejudice the revenues. Every taxpayer over the level of the preceding year, we suggest will continue to pay income tax every year-the that the taxpayer should be given the right to, and only difference is that under the plan he would be encouraged to, make a voluntary declaration of be paying a tax on this year's income rather than the increase and pay tentative tax at the higher on last year's income. The skipping of a year's current level. At the present time it is impos- tax actually occurs only when the taxpayer dies [10] [11] or he ceases to receive income. This resulting loss of revenue is spread over the years as the ers out of tax debt and on to a current taxpaying basis, does, however, also solve the great dif- current generation of taxpayers cease to be tax- ficulty encountered under the present system in payers. This loss of revenue, spread perhaps the imposition of a withholding tax. Under the over a period of fifty years, would be partially present system it is extremely difficult to insti- offset by certain increases in tax collections under tute a withholding tax without some amount of the plan; and in any case could be made up by double taxation during the transition period. slightly higher rates over this long period of time. The difficulty lies in the fact that under the Balancing any possible net loss in revenue to present system taxpayers will be paying in 1943 the government are certain important advan- a full year's tax on 1942 income. If withhold- tages. It is as essential for the government to ing is instituted in 1943 against 1943 income (and collect taxes currently as it is for the taxpayer therefore credited against 1943 tax which is not to pay them currently. The problem of delin- payable until 1944), the taxpayer will have to quencies in tax collections, although it has not pay in 1943 not only the full year's tax on 1942 been serious in past years of higher exemptions income, but also the amounts withheld out of 1943 and lower rates, is certain to become serious in income. Even under the provision in the Bill the future if taxes are not paid on a current as it was passed by the House under which the basis, The entire problem of tax collection in withholding rate in 1943 would be 5 per cent in- general becomes more difficult as we widen the stead of 10 per cent, there would still be a 5 per income tax base. The collection problem has cent additional tax during both of the transition brought to the forefront the desire for some type years 1943 and 1944. With the rate schedule of withholding tax. Yet a withholding tax im- of the House Bill this will mean that the tax- plies current tax collections-it does not fit well payer will be paying in 1943 a rate of 24 per cent into our present tax system. In one sense, as a on the lowest bracket of taxable income. withholding tax becomes more desirable, our Under the Pay-As-You-Go plan the tax paid present tax collecting system becomes more cum- in 1943 would be a current tax on 1943 income; bersome. therefore, amounts withheld against 1943 income The Pay-As-You-Go plan, although it is pri- could be directly credited against the installments marily designed as a method of getting taxpay- of tentative tax on 1943 income. Further, since [12] [13] Regraded Unclassified the amounts withheld in 1943 could be directly dividuals could not have built up their 1941 in- credited against the installments of tentative tax, comes with prevision that this plan would be the withholding rate could be set at the rate suggested or adopted and therefore no deliber- equivalent to the sum of the normal tax rate plus ate manipulation of income for this purpose is the lowest bracket surtax rate-19 per cent, involved. In 80 far as there is inequity in the under the rates of the Bill as it was passed by plan on this account, it resides in being too bene- the House. Under the Treasury's proposal it ficial to some few taxpayers; but since the plan would be impossible to set the withholding rate is beneficial to all and harmful to none, inequity so high since withholding superimposed on the of this kind, though regrettable, is an imperfec- present system necessarily involves to a consid- tion of a minor order as compared with the great erable extent an additional tax burden during the good that will be achieved. transition period. We believe that the problem of tax debt must In our discussions during recent months, we be solved in some manner. As I have pointed have sincerely looked for objections and criti- out, the problem is an intensely personal one af- cisms, and the plan as it now stands has profited fecting every taxpayer. The suggested solution greatly from these conversations. One criticism offered in the Pay-As-You-Go plan gives relief that the plan does not meet should be mentioned to the taxpayer and yet does not embarrass the and answered. revenues. Whether the solution of the problem It has been pointed out that under the Pay- of income tax debt takes the form suggested in As-You-Go plan there will be a certain number the Pay-As-You-Go plan or some other form is of individuals who will benefit unduly because not important; what is important is that the prob- of the fact that for them 1941 happened to be a lem should be solved. year of unusually large income, larger than that of the years that preceded or that followed. Con- sequently, in selecting 1941 as the year to be omitted, they receive unintended benefits. We concede the fact. In answer, we point out that no tax program will cut with the precision of a surgical knife. Furthermore, these few in- [14] [15] Regraded Unclassified 70 JUL 27 1942 MEMORANDUM FOR THE PRESIDENT: In accordance with your request of July 15, I take pleasure in handing you herewith a draft of a letter for your signature to Mr. H. W. Koeneke, President of the American Bankers Association, con- gratulating that Association on the occasion of its sixty-seventh annual convention. (Signed) H. Morgenthau, Jr. Photostatic file to NMC Orig. File to Thompson Delivered by Secret Service agent 7/27/42 4:45 Regraded Unclassified 71 My dear Mr. Koenske: Please extend my hearty congratulations to the members of the American Bankers Association on this their sixty- seventh annual convention. It is appropriate that the manner of your meeting in this year of historic decision should reflect the determination of American bankers to leave nothing undone that can in any way contribute to the object we all have in view-the defeat of our enemies. By holding this "convention in print" instead of assembling together as you have done for more than half a century, you are helping to conserve vital transportation and other facili- ties at a time when they are taxed to the utmost by the demands of war. The bankers of America have & great obligation and a great opportunity to serve our beloved Country in this hour of peril and they have answered the call to service joyfully and with stout hearts. For over a year they have played a distinguished role as volunteers in the promotion and sale of War Savings Bonds. They have met unprecedented demands from industry for the expansion and conversion necessary to win the battle of production. They have been in the fore- front of the fight against inflation not only through the sale of savings bonds to the people but by putting Into effect restrictions on consumer credit and combatting unneo- essary expenditures of all kinds. They have been indispen- sable in the freezing of foreign funds to prevent their use directly or indirectly by the enemy. I montion all this in the past tense not because the job is done but because even now it represents & record of accomplishment of which you all may be justly proud. But no one knows better than American bankers that we have only just begun to fight. American fighting forces are moving into battle on lines that encircle the globe. If we on the home front are to be worthy of them, we must carry on the battle of production, wage war on inflation, combat complacency and fear with the same spirit of courage Regraded Unclassified 72 -2- and sacrifice with which they meet the enemy on land and sea and in the air. We like they can have no other thought than to win the war. All considerations of private interest or personal comfort must give way to a single-minded devotion to that aim. As community leaders, bankers have a unique opportunity to promote that unity and teamwork which is 80 necessary to success. Involved in this conflict are values too precious to be expressed in economic or financial terms. They include all those intangibles which make the name America a synonym for freedom throughout the world. Faith in freedom, in the honor and integrity of the common man, is what sustains us as a Nation. United in this faith we are invincible. with best wishes, and again congratulations, Sincerely yours, Mr. H. W. Koeneke, President, The American Bankers Association, Ponca City, Oklahoma. PHO/mff Regraded Unclassified 73 July 18, 1942. Dear Mr. Koeneke: Secretary Morgenthau has asked me to thank you for your letter of July 10th and for the compliment which you have paid him in asking him to address a message to the bankers of the country through the medium of the magazine "Banking". It will be a pleasure for the Secretary to address the members of the ABA through this "Convention in Print". I wonder if you will let me know the approximate length of the message you wish and also the latest date on which you can receive it for publi- cation in the September issue. Mr. Morgenthau has received word from the White House that the President will be very glad to send the letter which you requested. You will receive this in plenty of time for publication in the September issue. Sincerely, Ferdinand Kuhn, Jr., Assistant to the Secretary. Mr. H. V. Koeneke, President, The American Bankers Association, Ponca City, Oklahoma. FK10g Regraded Unclassified TO: Mr. Kubu 74 I believe he should mal 6 a good statement of The problem just the same as if be were making a speech. DWB 7-18 Office of the Under Secretary o TO: m. D.W. Bell 75 One you think the Secretary should send a really good Statement to the a.B.a. - something more Than quick a bond plug on a thank you note ? I'd be glad to have your ideas on this. 7.k. MR. KUHN 13 76 THE AMERICAN BANKERS ASSOCIATION OFFICE OF THE PRESIDENT THE SECURITY BANK OF PONCA CITY PONCA CITY, OKLAHOMA W. KOENEKE July 10, 1942 PRESIDENT The Honorable Henry Morgenthau Jr. The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: We have often had reason to feel appreciative of your understanding attitude toward banks and the job they are trying to do for the winning of the war. If it were possible to hold our convention this year in the usual way, I should regard it 8.8 e. high honor to have you come and speak to us on the financing problems of the Treasury. Because of the transportation situation and the need for conserving facilities in every way, we are substituting this year 8. "convention in print" through our magazine BANKING. It gives me great pleasure, therefore, to in- vite you to address a letter or message of some kind to the bankers of the country, calling attention to the ways in which they can help the national effort. A word also about the size of the job still to be done might be appropriate. The bankers of the country will appreciate hearing from you, and I shall be deeply grateful. A Sincerely yours, President. THE WHITE HOUSE WASHINGTON July 15, 1942 MEMORANDUM FOR THE SECRETARY OF THE TREASURY: With the return of the accompanying letter from H. W. Koeneke, President, The American Benkers Association, will you be good enough to write for the President's signature an appropriate letter in response to Mr. Koeneke's request. William X.Noued WILLIAM D. HASSETT Regraded Unclassified JUL16192 78 THE AMERICAN BANKERS ASSOCIATION OFFICE OF THE PRESIDENT WHOMA THE SECURITY BANK OF PONCA CITY PONCA CITY. OKLAHOMA H. W. KOENEKE July 10, 1942 PRESIDENT Mr. Franklin D. Roosevelt The President Washington, D. C. My dear Mr. President: We are holding our annual convention in an unusual way this year. It is the first time since the organization was founded sixty-seven years ago that we have missed meeting to- gether. For several months we have been in conference with Mr. Joseph B. Eastman of the Office of Defense Transportation. In line with his suggestions, the American Bankers Association can- celled its annual meeting, which was to be held in Detroit, and we propose to do the next best thing under the circumstances. . Our monthly magazine BANKING goes to all members of the Association, and we want to present in the September issue of this publication some kind of substitute for the discussions that usually take place at our conventions. We desire very earnestly to include a message from our Commander in Chief, I have the honor, on behalf of our member banks, to invite you to be present at this wartime "conference in print." Knowing that you have many things to do, I suggest a message or letter to the banks of the country, perhaps calling attention to the necessity of every individual and every organi- zation putting war needs first and giving a. secondary place to everything else, including the time-honored institution of con- ventioning. I feel that I can assure you, Mr. President, that your words will be read with appreciation by the bankers of the country who are giving their fullest effort to the successful prosecution of the war. Sincerely yours, HWKimfb Regraded Unclassified 79 July27,1942 My dear Mr. Postmaster General, In order to finance the Ear expenditures, it is necessary to borrow enormous sume of money, and in such connection it is desirable to borrow directly from the people of the United States so far as possible, rather than from the banking institutions of the country, which has been the usual practice. with this objective in mind, a War Savings Organisation was specifically charged with promoting the sale of Mar Savings Bonds and Stampe. The organization is & part of the Treasury Service and comprises the Mar Savings Staff, at the Treasury in Washington, and State organisations in the field. As a result of the promotional efforts it was found necessary to complement the Postal Service and Federal Reserve Banks as agen- cies for the sale of War Savings Bonds of Series E. About 25,000 private concerns have qualified as official issuing agents, includ- ing many commercial organisations, offering plans which permit their employees systematically to buy Savings Bonds through deductions from pay. These agents are subject to the direction of the Treasury, through the Federal Reserve Banks as fiscal agents of the United States, for the issuance of the bonds. At the outset of the program the Treasury realised that these agents would be put to considerable expense in acting as issuing agents and it has been gratified by their generous and patriotic response in absorbing these costs. Many of the agents spent and are spending relatively large sums of their own funds not only to perform the duties of an issuing agent but for advertising the program. However, there has always been an undercurrent of die- content among the agents, sometimes expressed openly, because of their being required to assume postage and registration costs for mailings required in connection with their bond activities. Gen- erally, they cannot understand why they should be required to pay & Governmental establishment for mailings effected for the Govern- ment. This was a particularly troublesoms matter for the Treasury. Accordingly, when the pay roll savings plan was sponsored, re- quiring greatly increased mailings of bonds, this Department believed it could no longer request the agents to continue to absorb the costs and agreed to reimburse issuing agents for postage and registry fees involved where personal delivery is impractical. Subsequently, the Regraded Unclassified 80 -2- agents were given reimbursement for postage and fees on returns of stubs and bonds to Federal Reserve Banks on shipments made in accord- ance with your instructions. These reisbursement items have become material charges against the Treasury appropriation. There has been much criticism, too, of the use of the registered mils in the delivery of the bonds, both from the agents because of the work involved and from the public because of the cost. The postal charge for the delivery of a $25 bond, which is the unit for the greater part of the mailings, is 18 cents, which charge is hard to explain to a person receiving his bond from the Government. The Base situation is true regarding mailings by Federal Reserve Banks. Many requests have been received for simplification and saving by use of ordinary mail. I should dislike to effect the change and believe that general satis- faction night be obtained both from the Treasury appropriation and issuing agent and public viewpoints if the franking privilege and free registration were permitted for the mailing of bonds. of course, a statement of the mailings would be rendered your Department for credit purposes. It is believed that a real saving will accrue to agents by eliminating the function of affixing necessary postage or metering mail. This Department, of course, would be glad to consider any simplified plan for mailing and delivery of savings bonds affording the protection of establishing delivery of the bonds to the postal service and receipt by the addressee. Aside from the War Savings program, but as a part of the Treasury's effort to borrow money from non-inflationary sources and at the same time to take advantage of and coordinate the generously offered services of the commercial banking institutions and the investment bankers of the country, I have established Victory Fund Committees under the Presidents of the Federal Recerve Banks. The organisation and its purposes are briefly set forth in my statement of May 14, a. copy of which I as enclos- ing. There is established in each Federal Reserve District, headed by the President of the Federal Reserve Bank, a Victory Fund Committee. Under this Committee, other committees are being formed to cover each Federal Reserve District. The service for the most part is voluntary but a paid organization in each district has been authorized to perform essential organization work. Under the Federal Reserve Banks, in addi- tion to the restricted paid personnel, out-of-pocket expenses, including official postage required for dispatching publicity matter and for rendering reports and generally for establishing and maintaining contacts, are authorised and reimbursed by the Treasury. Accounting for postage is troublesome and vexatious, and again it is difficult to explain to the Victory Fund Consuittes that, although they constitute official agencies of the Treasury, they may not exercise the franking privilege in the conduct of their promotional efforts for the Treasury for the sale of Government securities. In this connection, 1 as enclosing a copy of a letter from Mr. L. R. Rounds, First Vice President of the Federal Meserve Bank of New York which, in measure, presents the situation. I aight add that other Federal Reserve Banks have made personal representa- tions to the BALLO effect. Regraded Unclassified 81 -3- At this point I wish to emphasize that the organization of Victory Fund Committees to promote the direct sale to investors of Government obligations will continue during the War emergency. The ar Savings program and the Victory Fund program are complementary and taken as a whole, in measure, serve the same end as did the Liberty Loan Committee Organization during the last war. It is of the utmost importance to the welfare of the country that promotional efforts of the Victory Fund Committees be facilitated in every possible way. In such connection, I-hope you will find it possible to grant the franking privilege to the Federal Reserve Banks and to the Victory Fund Committees for the dissemination of official publicity matter and generally for the conduct of their efforts to promote the sale of Government securities. The foregoing matters are presented for your consideration and I hope you will find it possible to rule that during the emergency these privileges may be extended in such connection. An early reply would be appreciated. Very truly yours, Secretary of the Treasury The Honorable, The Postmaster General, Washington, D. C. Enclosures 7/13/42 Copy for Secretary's files Regraded Unclassified 82 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service Thursday, May 14, 1942. No. 31-59 5/13/42 Secretary Morgenthau today announced plane for the organiza- tion throughout the country of Victory Fund Committees to be set up in each Federal Reserve district and to be made up of bankers and members of the securities industry to aid the Treasury's financing program. This organization will work chiefly with the larger investors and will in no way duplicate the work of the War Savings Staff. Because the nation's war needs have increased tremendously the money-raising responsibilities of the Treasury, the Secretary of the Treasury has accepted the offer of the banking and securities industry to co-ordinate their efforts in helping to distribute Government securities. The organization announced today, in which committees headed by presidents of the Federal Reserve Banks will be set up in each Federal Reserve district, developed through assistance given the Treasury by the banking and securities industries. The collaboration of these organizations will be formalized with the establishment of the new Victory Fund Committees, tied together nationally by a committee of Federal Reserve bank pre#1- dents, of which the Secretary of the Treasury will be chairman. The Chairman of the Board of Governors of the Federal Reserve System will provide the liaison between the Reserve banks and the Treasury. In some districts executive committees may be set up for operating purposes, and district committees, with approval of the Secretary of the Treasury, may set up regional subcommittees. -000- Regraded Unclassified 83 FEDERAL RESERVE BANK of New York June 5, 1942. Honorable D. 1. Ball Under Secretary of the Treasury Treasury Department hashington, D. C. Jear /r. Bell: Te have recently been giving particular thought to the matter of controlling expenses which will arise incident to the operations of the Vic- tory Fund Committee. One point to which we have been giving thought in this connection is the desirability of using franked envelopes for mailing purposes. AS you know, committees of this kind are likely to do a very large amount of mailing and a good deal of this work may be decentralized with local committees. This imposes considerable difficulty in the control of the use of postage. We believe this burden would be considerably reduced if arrangements could be made so that these committees could use the franked penalty envelopes for this pur- pose. You will doubtless recall during the First World Mar the Liberty Loan Committees and the Federal Reserve Banks as well were permitted to use the Treasury Department frank for all mailing connected with the fiscal agency work, and this continued to the end of 1920 when use of the franking privilege WAS discontinued. Tie are not familiar with the r easons which may have led to this dis- continuance, but since they were not discontinued until long after the end of the war, it occurs to us that the conditions which now exist may again justify the use of this frank in connection with the war effort. There may be reasons why it would not seen advisable to extend this privilege to the Federal Reserve Banks for use in all fiscal agency work, and if so no would not be inclined to press a request for that privilege. We do think, however, that there are such greater reasons arguing for the franking privilege for use in connection with the general publicity effort, advertising, etc. as it will be carried on by the Victory Fund Committees. Also the problem of controlling the use of postage by these committees is much greater than it is in connection with the control of postage actually used by the Reserve Banks. May we ask that you give consideration to the granting of the franking privilege for use either in all matters having to do with fiscal agency operations, or at least for the use of the Victory Fund Committee in its advertising and pro- not onal program. Very truly yours, (Signed) L. R. Rounds First Vice President Regraded Unclassified 84 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE JUL 27 1942 TO Secretary Morgenthau FROM Mr. Hear Subject: Operation of payroll savings plan in companies where deductions have reached 10 percent of payroll. In accordance with your request to Mr. Graves, the State Administrators of the War Savings Staff are reporting to us each week the names of organi- nations which have reached the goal of 10 percent of payroll deducted under the payroll savings plan. These reports cover plants, units, branches, or subdivisions of companies 8.8 each of these reaches the goal of 10 percent of payroll deducted for the purchase of war savings bonds, As of July 25, 1942, 7,343 companies, firms, plants, branches, units or subdivisions were report- ed to have reached the goal of 10 percent of pay- roll, These organizations employed 488,000 persons according to the reports or approximately 2.2 per- cent of the 22 million persons employed in companies that have installed the payroll savings plan. De- tails on the amount deducted in the organizations with more than 1,000 employees which were included in the reports are shown in the table attached. Attachment Regraded Unclassified 85 Firms with 1,000 or More Employees Reported to be deducting 10 Percent or More of Aggregate Payroll Under Payroll Savings Plans (As Reported by the War Savings Staff's State Administrators July 22, 1942) : : Approximate : : : Number : aggregate : Percent of : Average monthly Name of firm and state : of : monthly payroll : aggregate pay : deduction : employees : (in thousands) : deducted = per employee General Electric Co., N. Y 132,340 $ 27,600 10 $ 20.86 Oregon Shipbuilding Co., Ore 30,000 * 10 Westinghouse Elec. and Mfg. Co., Pa 26,000 6,247 11 26.43 Ex-Cell-0 Corp., Mich 6,796 # 11 # McLellan Stores Company, N. Y 6,034 337 10 5.58 Carbide and Carbon Chemical Corp., W. Va 4,500 * 10 * Kaiser Co., Inc., Ore 4,200 * 13 * Árma Corporation, N. Y 3,200 814 12 30.52 Morrells, S. 3,000 406 11 14.88 Barber Colman Co., Ill 2,800 540 10 19.28 Westinghouse Electric and Mfg. Co., Ohio 2,500 601 10 24.03 Dry Dock Association, Pa 2,386 689 12 34.65 Owl Drug Co., Calif 2,383 294 10 12.34 Meier and Frank Co. Inc., Ore 2,284 278 10 12.17 Continental Roll and Steel Foundry Co., Ind 2,195 497 12 27.17 Wilson and Co., Inc., Okla 2,000 450 10 22.50 Hiram Walker and Sons, Ill 1,994 346 10 17.35 Keystone Steel and Wire Co., Ill 1,880 344 10 18.30 Munsingwear, Inc., Minn 1,685 191 10 11.34 Dixie Mercerizing Co., Tenn 1,660 141 10 8.49 Stockham Pipe and Fitting Co., Ala 1,619 223 10 13.77 Oliver Iron and Steel Corp., Pa 1,567 237 10 15.12 National Supply Co., Ohio 1,550 298 10 19.26 Albina Engine and Machine Works, Ore 1,512 * 12 * American Hoist and Derrick Co., Minn 1,450 300 12 24.82 Gibbs Gas Engine Co., Fla 1,400 277 14 27.70 Geo, E. Buckler, Ore 1,400 * 10 R. K. Le Blond Machine Tool Co., Ohio 1,329 324 10 24.38 Chicago Mill and Lumber Co., Ill 1,325 # 10 * E. B. Badger and Sons, Mass 1,308 333 14 35.64 0. D. Purington Co., R. I 1,300 180 13 18.00 I. Miller and Sons, N. Y 1,300 180 13 18.00 Colonial Radio Corp., N. Y 1,279 216 11 18.58 Stinson Aircraft, Mich 1,228 290 10 23.61 N. A. Handley Mfg. Co., Ala 1,225 * 10 # T. Stuart and Son Co., Mass 1,200 297 10 24.75 Bayonne Associates, N. J 1,176 409 10 34.78 Magee Carpet Co., Pa 1,156 165 13 18.55 Magna Copper Co., Ariz 1,128 206 10 18.26 Continental Steel and Foundry Co., Pa 1,000 226 10 22.64 United Aircraft Corp., Hamilton Standard Propellor Div., Conn # 10 # Office of the Secretary of the Treasury, July 25, 1942 Division of Research and Statistics. * Not available. Regraded Unclassified 86 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 27, 1942 TO Secretary Morgenthau FROM Vincent F. Callahan Re: DIRECT SALE OF BONDS BY RADIO STATIONS As of today 621 out of 856 radio stations have agreed to become direct agents of the Treasury Department in the sale of War Savings Bonds. These stations are being qualified daily. Following are early reports from a number of cities: BALTIMORE, MARYLAND WEAL (50,000 watts) starts off campaign with a series of full page advertisements in Baltimore News Post. Proof of first advertisement which runs today is attached. PITTSBURGH, PENNSYLVANIA KDKA (50,000 watts) launches campaign tonight with a half-hour program. Officially inaugurates campaign tomorrow with public celebration on steps of City Hall. Speakers include the Mayor, local War Savings Committee representatives, and others. KIKA directing campaign to listeners outside city, particularly in small communities in Ohio, Pennsylvania, and West Virginia. KDKA is printing special envelope in which Bonds will be sent to purchasers. Regraded Unclassified 87 -20 BUTLER, PENNSYLVANIA WISE (250 watts) started campaign Friday, July 24. Stocked up with $5,000 in Bonds and sold out first day - total sales $6,500. PHILADELPHIA, PENNSYLVANIA WFIL inaugurated announcers' contest with announcers making direct personal appeal to listeners. Announcer selling most Bonds in each week will be given a $25.00 Bond by the station. Station also has built "chuck wagon" manned by volunteer workers who will tour city. CHICAGO, ILLINOIS WBEN devoting one and one-quarter hours daily in the afternoon to sell Bonds. POUGHKEEPSIE, NEW YORK WKIP selling Bonds by series of radio auctions. Feature was so successful that the first Bond supply vas sold out in several days. Have asked Federal Reserve Board for more Bonds. CINCINNATI, OHIO WOPO (250 watts) has made tie-up with RKO theater chain and has enlisted aid of Junior League Girls. Promoting Bonds on all programs. BANGOR, MAINE WOBI offering $5.00 prise to person writing best suggestion as to how station can sell more Bonds. Touring Band Wagon through streets, and have arranged to have Western Union boys deliver Bonds. Regraded UUnclassified 88 NEW YORK, NEW YORK WJZ (50,000 watts) selling Bonds direct over the air and have erected a booth in Radio City with tie-up with American Women's Volunteer Service. This station has hired one person to handle Bond sales. WASHINGTON, D. C. WINX making direct sales in cooperation with Blue Light Taxi Company Drivers of taxicage are delivering Bonds. BUFFALO, new YORK WGR and WKBM insugurated youth movement called "Commando Corps of the Court of Honor". Awards are made during week to local youngsters for their sale of Bonds. $25.00 sale makes boy a Corporal and $50.00 sale a Sergeant. SAN ANTONIO, TEXAS KTSA, in cooperation with local women's club, is setting up lobby in city's leading hotel. Listeners are urged to buy Bonds and Stamps at the hotel booth. DES MOINES, IOWA WHO sent in following message: "Starting July 23 Herb Plambeck, Farm News Editor, and Bob Burlingame, Assistant News Editor in charge of night side, will sell War Bonds. Each has large and loyal following. Will build up competition between them. Announcers will take sides. Urge listeners to support their favorite. Send order at once Plambeck or Burlingame. Orders will be acknolwedged on air." CHICAGO, ILLINOIS WLS (50,000 watts) opening campaign this week with all-night program. Station talent divided into two teams with artists making direct appeal over the air. Prises for team selling most Bonds. Vincent Callahan Regraded Unclassified MONDAY NEWS Reg. No. 42 First Proof DOMINICE Sure, it Makes You Mad! 0 YOU REALIZE that thousands of our good American You can't do it by flag-waving. by slogans, and by cheers. soldiers are behind brbed wire-with Jap sentries march- It takes planes-tanks-guns-bombs-shells-ships And ing up and down outside? these don't grow on trees, You-and you-and you-must buy these things. Not the Do you know that American women and children, too, are Jap way, nor the Nazi way, nor the Fascist way. The in Jap concentration camps? American way - freely and gladly. In War Bonds. And your money will buy the stuff to beat the Axis- How long do you want them there-and what are you to attack them to bomb them, to make them wish they'd willing to do to get them out? never picked a serap with Uncle Sam! Now You Can Buy War Bonds Thru WBAL By Mail By Phone In Person is super any to tuy War Bonds the Just call Lexington 4900, will the WHAT just bring cash - many order to WHAL's WHAL of mail Just sent - merry miles tark mp check operator your name and address, deposint ciudio (Ark floor-Lexingion Building-Lax- . personal together wish and bond WBAL tim of bond you wish and your bond will inglam and Liberty Streets) pour your - and address la WHAL Lexington Building Baltimare, and your bond will to delivered - you Yes can pay for the beef will be instrubed, dared and validated while sent you If registered mail on delivery either in cash en by check pus wait. Listen to the WBAL Honor Bonds 50,000 WATTS Roll Next Monday at BALTIMORE 6.30 P. M. Sends - $51.75 8140 $71.00 You'll hear news of WAL'S War Bond drive, the best #144 ONE OF AMERICA'S in band music. and names of people who have Total GREAT RADIO STATIONS purchased bonds thru WBAL THE STATION MOST PEOPLE LISTEN TO MOST-1090 ON YOUR DIAL Unclassified MONDAY NEWS Reg. Ms. 42 First Prast SOMINICE Sure, it Makes You Mad! 0 YOU REALIZE that thousands of our good American You can't do it by flag-waving. by slogans, and by cheers. soldiers are behind brbed wire-with Jap sentries march- It takes planes-tanks-guns-bombs-shells - ships. And ing up and down outside? these don't grow on trees, Do you know that American women and children, too, are You-and you-and you-must buy these things. Not the Jap way, nor the Nazi way, nor the Fascist way. The in Jap concentration camps? Americon way - freely and gladly. In War Bonds. And your money will buy the stuff to beat the Axis - How long do you want them there-and what are you to attack them to bomb them. to make them wish they'd willing to do to get them out? never picked a scrap with Uncle Sam! Now You Can Buy War Bonds Thru WBAL By Mail By Phone In Person It's - vary to tup War Bonds thru Just call Lesington 1000, tell the WEAT Just loing cash or money order in WHAL's WDAL in mail Just send . - under of a bank - check ingither operator your name and address, studio (Arb floor-Lexington personal with WBAL your - and address to WHAL Lesington tion el bund you wish and your will - ingine and Liberty Streets) end your hand Busiding Bahimare, and your bond will be delivered to price You can pay for the will will to inscribed. deind and validated while énti you les registered mail. en delivery either in cash - by theck. pour wait. Listen to the WBAL Honor Bends FIN 50,000 WATTS Roll Next Monday at BALTIMORE 6.30 P.M. $71.00 You'll hear news of WAL'S War Bond drive, the best in band music, and names of people who have Total ONE Of AMERICA'S GREAT RADIO STATIONS purchased bomile thru WBAL THE STATION MOST PEOPLE LISTEN TO MOST-1090 ON YOUR DIAL Unclassified CONFIDENTIAL 90 UNITED STATES SAVINGS BONDS - SERIES E Comparison of July sales to date with sales during the same number of business days in June and May 1942 (At issue price in thousands of dollars) : July : Cumulative sales by business days Date : daily : : : sales July : June : : : May July as : :percent of June July 1942 1 $ 15,821 $ 15,821 $ 19,834 $ 12,679 79.8% 2 14,880 30,701 27,841 24,263 110.3 3 16,822 47,523 40,811 46,532 116.4 6 29,797 77.320 58,199 55,460 132.9 7 17,724 95,044 82,988 73,824 114.5 8 21,599 116,643 98,197 97,049 118.8 9 22,746 139,390 125,245 114,218 111.3 10 24,772 164,161 134,157 128,670 122.4 11 19,077 183,238 154,242 151,956 118.8 13 26,550 209,787 169,920 161,346 123.5 14 15,744 225,532 186,470 177.133 120.9 15 18,407 243,938 201,700 194,047 120.9 16 17,828 261,766 225,684 208,939 116.0 17 22,345 284,111 233,218 223,242 121.8 18 12,233 296,344 249,033 247,532 119.0 20 31,368 327,712 261,321 257,374 125.4 21 12,239 339,951 280,742 271,079 121.1 22 18,184 358,135 291,729 290,485 122.8 23 18,261 376,396 321,114 309,584 117.2 24 18,588 394,984 331,806 323,705 119.0 25 10,695 405,679 347,673 347,494 116.7 Office of the Secretary of the Treasury, July 27. 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 91 UNITED STATES SAVINGS BONDS - SERIES F AND G COMBINED Comparison of July sales to date with sales during the same number of business days in June and May 1942 (At issue price in thousands of dollars) : July : Cumulative sales by business days Date : daily : : July June : : May July as : sales : 2 : :percent of June July 1942 1 $ 12,597 $ 12,597 $ 9,705 $ 7,302 129.8% 2 9,389 21,986 17,601 15,168 124.9 3 10,455 32,441 26,235 25,516 123.7 6 16,734 49,175 40,009 33,145 122.9 7 13,386 62,561 49,353 48,751 126.8 B 21,852 84,413 55,888 60,817 151.0 9 17,172 101,585 67,414 67,213 150.7 10 22,983 124,568 72,366 72.794 172.1 11 17,050 141,618 82,310 80,845 172.1 13 20,614 162,232 89,852 85,410 180.6 14 14,358 176,590 95,254 94,391 185.4 15 15,400 191,991 101,464 102,106 189.2 16 13,842 205,833 108,715 108,923 189.3 17 15,314 221,147 112,279 114,129 197.0 18 9,696 230,842 119,749 123,534 192.8 20 21,888 252,731 126,048 127,724 200.5 21 9,447 262,178 134,062 138,908 195.6 22 16,327 278,505 137,429 149,502 202.7 23 15,174 293,679 147,698 156,587 198.8 24 14,399 308,077 153.532 161,404 200.7 25 8,816 316,893 162,774 171,335 194.7 ffice of the Secretary of the Treasury, July 27, 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 92 UNITED STATES SAVINGS BONDS - TOTAL Comparison of July sales to date with sales during the same number of business days in June and May 1942 (At issue price in thousands of dollars) : July : Cumulative sales by business days Date : daily : : July June : : May : July as sales : : : :percent of June July 1942 1 $ 28,418 $ 28,418 $ 29,539 $ 19,981 96.2% 2 24,269 52,687 45,442 39,430 115.9 3 27,277 79,964 67,046 72,048 119.3 6 46,531 126,495 98,208 88,605 128.8 7 31,110 157,605 132,341 122,575 119.1 8 43,451 201,056 154,085 157,866 130.5 9 39,918 240,974 192,659 181,431 125.1 10 47,755 288,729 206,523 201,464 139.8 11 36,127 324,856 236,552 232,801 137.3 13 47,164 372,020 259,772 246,756 143.2 14 30,102 402,122 281,724 271,525 142.7 15 33,807 435,929 303,163 296,152 143.8 16 31,670 467,599 334,398 317,861 139.8 17 37,659 505,257 345,497 337.371 146.2 18 21,929 527,186 368,782 371,066 143.0 20 53,257 580,443 387,369 385,098 149.8 21 21,686 602,129 414,804 409,987 145.2 22 34,511 636,640 429,158 439,987 148.3 23 33,434 670,075 468,812 466,171 142.9 24 32,987 703,062 485,338 485,109 144.9 25 19,510 722,572 510,446 518,829 141.6 fice of the Secretary of the Treasury, July 27, 1942. Division of Research and Statistics. purce: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. Regraded Unclassified 93 Sales of United States Savings Bonds From July 1 through July 25, 1942 Compared with Sales Quota for Same Period CONFIDENTIAL (At issue price in millions of dollars) : Series I : Series y and G I Total : Actual Sales : Quota, : Sales : Actual Sales : Quota, : Sales : Actual Sales : Quota, : Sales Date : : July 1 : July 1 : to Date I I July 1 : July 1 : to Date 1 : July 1 : July : to Date : Daily : to : to : as $ of : Daily # to : to : as % of I Daily : to : to : as $ of : : Date : Date I Quota : : Date : Date : Quota : # Date I Date : Quota 1 $ 15.8 $ 15.8 $ 23.6 66.9% $ 12.6 $ 12.6 $ 19.4 64.9 $ 28.4 $ 28.4 $ 43.0 66.0% 2 14.9 30.7 47.9 64.1 9.4 22.0 36.4 60.4 24.3 52.7 84.3 3 16.8 65.1 62.5 47.5 73.0 10.5 32.4 50.6 64.0 27.3 80.0 123.6 64.7 6 29.8 77.3 126.0 61.3 16.7 49.2 82.6 59.6 46.5 126.5 208.6 60.6 7 17.7 95.0 139.3 68.2 13.4 62.6 94.2 66.5 31.1 157.6 233.5 21.6 116.6 67.5 8 162.2 71.9 21.9 84.4 114.5 73.7 43.5 201.1 276.7 9 22.7 139.4 72.7 189.8 73.4 17.2 101.6 129.5 78.5 39.9 241.0 319.3 10 24.8 164.2 216.0 75.5 76.0 23.0 124.6 139.9 89.1 47.8 288.7 355.9 81.1 11 19.1 183.2 236.6 77.4 17.1 141.6 147.7 95.9 36.1 324.9 384.3 84.5 13 26.5 209.8 273.2 76.8 20.6 162.2 160.6 101.0 47.2 372.0 433.8 14 15.7 287.6 85.8 225.5 78.4 14.4 176.6 168.0 105.1 30.1 402.1 455.6 15 18.4 243.9 311.6 88.3 78.3 15.4 192.0 181.8 105.6 33.8 435.9 493.4 88.3 16 17.8 261.8 335.5 78.0 13.8 205.8 193.5 106.4 31.7 467.6 529.0 88.4 17 22.3 284.1 358.7 79.2 15.3 221.1 202.8 109.0 37.7 505.3 561.5 90.0 18 12.2 296.3 377.4 78.5 9.7 230.8 210.5 109.6 21.9 527.2 587.9 89.7 31.4 327.7 411.8 79.6 21.9 252.7 223.9 112.9 53.3 580.4 635.7 21 12.2 425.9 91.3 340.0 79.8 9.4 262.2 231.8 113.1 21.7 602.1 657.7 91.5 22 18.2 358.1 451.1 79.4 16.3 278.5 247.0 112.8 34.5 636.6 698.1 91.2 23 18.3 376.4 477.5 78.8 15.2 293.7 260.1 112.9 33.4 670.1 737.6 24 18.6 90.8 395.0 503.8 78.4 14.4 308.1 270.7 113.8 33.0 703.1 774.5 90.8 25 10.7 405.7 525.0 77.3 8.8 316.9 279.5 113.4 19.5 722.6 804.5 89.8 27 562.7 295.1 28 857.8 577.2 304.3 881.5 29 601.3 322.1 923.4 30 625.8 337.5 31 963.3 650.0 350.0 1,000.0 Office of the Secretary of the Treasury, Division of Research and Statistics. July 27, 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. Note: Quota takes into account both the daily trend during the week and the monthly trend during the month. 94 July 27, 1942 The Secretary today directed that this report be discontinued. Regraded Uncla 95 7/25/42 UNITED STATES SAVINGS BONDS, SERIES X TOTAL DAILY SHIPMENTS BY DENOMINATIONS FROM JULY 1 TO JULY 24, 1942 : : Date of : Denominations - Number of Pieces : Total Shipment : : : : : : Pieces : $25 # $50 : $100 : $500 : $1,000 : by 1 441,453 79,590 78,344 2,256 2,527 604,170 2 515,964 94,404 93,481 3,068 3,510 710,427 3 464,350 80,760 79,220 8,320 3,565 636,215 6 736,205 82,647 89,767 8,475 2,235 919,329 7 678,221 163,951 160,712 24,510 13,894 1,041,288 8 558,650 106,000 115,461 15,039 3,790 798,940 9 440,389 89,212 112,623 7,807 5,816 655,847 10 672,288 117,122 107,512 5,508 5,967 908,397 11 643,310 121,615 135,412 5,062 15,649 921,048 13 654,983 118,591 98,816 6,314 8,528 887,232 14 673,000 109,750 102,000 7.775 10,000 902,525 15 548,501 156,626 152,361 12,270 14,535 884,293 16 384,250 91,600 107,800 13,010 19,955 616,615 17 555,023 138,080 124,232 8,378 10,066 835,779 18 599,366 109,552 98,646 6,052 9.777 823,393 20 ..... 629,367 60,200 98,900 4,150 9,885 802,502 21 603,350 57,130 93,272 11,947 10,035 775.734 22 583,946 82,850 92,000 6,535 9.777 775,108 23 527,745 90,120 114,838 13,001 15,751 761,455 24 450,650 109,600 65,800 11,275 9,300 646,625 tal 11,361,011 2,059,400 2,121,197 180,752 184,562 15,906,922 ly 25, 1942 MRL/kwk may 96 July 27, 1942 Dear Jake: air mail, I an a sending very confidential you herewith, memorandum by (7-20-42) prepared by Harry White. I wish you would read it and carefully consider the contents. I think I remember correctly that you said you would be willing to stay as long as I needed you, 80 I think you had better bring enough collars and shirts to last you a week. Yours sincerely, (Signed) Henry Dr. Jacob Viner, 5554 Kenwood Avenue, Chicago, Illinois. nmc air mail Spec Del. Jakento air part 4.45 by Messenger ch clk Regraded Unclassified 97 July 27, 1942 Dear Walter: I am enclosing herewith a very confidential memorandum from (7-20-42) Harry White, which I shall want to discuss with you Wednesday and Thurs- day when you are here. Yours sincerely, (Signed) Henry Dr. Walter W. Stewart, Gladstone, New Jersey. nmc Jaken 5Pm7-27-42 to the airport by Mass. air mail Spec Del Regraded Unclassified 98 JUL 27 1942 Dear Mr. MacLeish: There is returned herevith your letter of July 16, 1942, recommending acceptance of the offer of The Friends of Music in the Library of Congress to give $5,340.69 to the Library of Congress Trust Fund Board for deposit in the Permanent Loan Fund, upon which Secretary Morgenthau has indicated his agreement with your recommendation. Very truly yours, (Signed) D. W. BELL Under Secretary of the Treasury. Honorable Archibald MacLeish, Librarian of Congress, Library of Congress, Washington, D. c. 00 Inclosure. Miss Chauncey. WTH:mlb 7-25-42 Regraded Unclassified 99 THE LIBRARY OF CONGRESS TRUST FUND BOARD Washington CHAIRMAR The - TREASURY New July 16, 1942 The LIBRARIAN of COMMISS Dear Mr. Secretary: I have the honor to submit to your attention a photo- stat copy of a letter received from Mr. Myron n. Whitney, Pres- ident of the Friends of Music in the Library of Congress, dated June 15, 1942. This letter proposes a gift to the Library of Congress, to be credited to the permanent loan account of the Library of Congress Trust Fund Board, the income therefrom to be applied to the purposes of the Music Division. In accordance with the Act entitled "An Act to create a Library of Congress Trust Fund Board end for other purposes" as amended, this offer is hereby submitted for your approval 68 & member of the Board. I recommend that this offer be accepted. Faithfully yours, Amarla Archibald MacLeish The Librarian of Congress Secretary of the Library of Congress Trust Fund Board Enclosure Jmp. I vote in favor of acceptance I vote against acceptance The Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. Regraded Unclassified RARY OF CONGRESS 100 kp JL1 1942 The Friends of Music in the Library of Congress STARTS OFFICE CHIPP ASST. WASHINGTON, D. C LIBRARIAN Prodent Plate reply to Ms. Myson w. Warner JUL 1 - 942 303 MUNTEY BUILDING, WASHINGTON a C Va Presidents Telephone: Naimal - Ma. CASL box Mas BONEY Wease Bus Min Christmal a Hall, Senday is de Sentary Ms. Exem Mas. NICROLAS LONGWORTS Hom. C value June 15, 1942 Sentary Dr. Luther 3. Evens Mm GRACE DUMBAIL GUIST Transmer Acting Librarian of Congress Ms. CLARENCE A. Asrowall The Library of Congress Ex for Washington, D. C. The Chef of de Music Division Library of Congress Da MAROLD Servaces Dear Dr. Evans, The Friends of Music in the Library of Congress, after much delibera- tion, has decided to suspend its activities and operations for an indefinite period. The times are difficult for a society of its nature, and its out-of-town members at present receive little or no benefit from their membership. The primary purpose of the organisation, of course, is to make possible the acquisition of rarities by the Music Division of the Library of Congress, but this becomes increasingly difficult in the light of present day circumstances. In entering its period of indefinite suspension, the Friends of Music desires to transfer its financial resources, with no obligations outstanding. to the permanent loan fund of the Library of Congress. This gift amounts to $5,340.69 and will be subject to increase by voluktary contributions. From the interest it will bear, it should insure to the Music Division our permanent support and cooperation. The income from the fund may be applied to purchases of rare books, pieces and manu- scripts or may be used to defray any expenses incurred by the Music Division in pro- moting activities congenial to us in the past. It is our hope that our suspension will be of relatively short duration. If so, we can again resume our work for music and our furtherance of in- creasing the Library's musical collections. Meamwhile we trust that the proposal stated in this letter will be satisfactory to you and will keep alive the relation- ship between your institution and our Society. Very sincerely yours, myron w, Myron W. Whitney President, The Friends of Music in the Library of Congress MmW:bd Regraded Unclassified 101 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION CONFIDENTIAL DATE July 27, 1942 TO Secretary Morgenthau FROM Mr. Haas Subject: The Business Situation, Week ending July 25, 1942. Summary (1) Industrial activity in June fell behind earlier Federal Reserve Board estimates but still forged ahead to record levels. The FRB seasonally-adjusted index of industrial production for the month rose to 177 from 174 (revised) in May. Since our entry into the war the index has risen 11 points. (2) Steel shortages are now reported to be holding up truck production and forcing curtailment of electric utility expansion plans, in addition to hampering shipbuilding. In view of the very heavy demand for steel, it now appears likely that the projected 10 percent expansion program for the steel industry will not be curtailed as much as expected a short time ago. An expansion of 9,700,000 tons by June 1943 1s now being recommended by the Steel Branch of the WPB. (3) Contrary to earlier indications, the cost of living rose further after price ceilings were imposed. The BLS cost- of-living index (revised) for June shows a gain of 0.4 percent over the previous month, due to increased food prices. (4) The BLS index of basic commodity prices showed a further moderate decline last week and touched the lowest level since mid-June. However, butter prices moved higher as the Agricultural Marketing Administration raised the support level 3 cents per pound. (5) Factory employment and payrolls continued to expand to new record highs in June, according to confidential BLS indexes. Factory payrolls stood 28 percent above year-earlier levels while employment was 8 percent higher. (6) Construction contract awards in June, as reported by the F. W. Dodge Corporation, jumped 57 percent above the highest previous month on record. All categories except residential construction showed wide gains over year-earlier levels. Regraded Unclassified 102 - 2 - Industrial production index for June revised downward Industrial activity rose to a new high in June, but the level attained was somewhat below earlier estimates of the Federal Reserve Board. The seasonally-adjusted FRB index of industrial production advanced to 177 from 174 (revised) in May. (See Chart 1, upper section.) These figures compare with previously reported estimates of the Federal Reserve Board of 180 for June and 176 for May. In contrast with the new peak of 177 reached in June, the index stood at only 106 in the pre-war month of August 1939. Last November, prior to our entry into the war, the index stood at 166. The 11 point rise in the production index since last November has been due, as might be expected, to expansion in the armament industries. It has been estimated that in June almost 50 percent of industrial output (as measured by the FRB index) was war production, taking into account also the machinery, supplies, etc., necessary to produce the war materials. A year earlier only 20 percent of the index 18 estimated to have been accounted for by wer production. The dominant industries in the further rise in industrial activity last month were machinery and transportation equipment (including shipbuilding and aircraft). (Refer to Chart 1, lower section.) Nondurable goods output on the whole showed little change from the previous month. Soft coal output receded, but still attained high levels, while lake shipments of iron ore continued in very heavy volume. On the other hand, steel production declined somewhat. Steel plant expansion program reconsidered Press reports last week indicated that a shortage of steel 18 slowing up truck output and 18 causing a cut in the expansion program of the electric utility industry, and Chairman Nelson of the WPB was quoted as saying "The lack of steel is BO great that we must shorten our production lines." Against this back- ground, the WPB 1s apparently reconsidering a program for a major expansion in steel capacity. Originally an expansion program designed to step up steel capacity by nearly 10,800,000 tons was approved by SPAB. Early in June it was said that probably only 65 to 70 percent of the program would be carried out, due to a desire to save critical raw materials by cutting down on plant expansion projects. However, during the past week it WB.B disclosed that the Steel Branch of the WPB has now recommended an expansion of over 9,700,000 tons, or only about 10 percent less than the original proposal. If carried out, this would increase the industry's total Regraded Unclassified 103 - 3 - capacity to 98,300,000 tons by June 30, 1943 as compared with 88,600,000 tons at the end of 1941. Among other features the program would require an increase of nearly 11,000,000 tone in p1g iron capacity, involving the construction of 20 new blast furnaces and the restoration or enlargement of 15 others. Steel operations fail to reach capacity Despite the contentions made in the Gano Dunn report last year that a steel operating rate of 102-1/2 percent of capacity could be maintained under emergency conditions, the highest rate attained this year was 99.6 percent of capacity during two weeks in May. During June the average operating rate slumped to 96.4 percent of capacity. While some improvement has been shown recently, the rate scheduled for this week 1s again down to 97.0 percent. (See Chart 2.) However, operating rates are still being calculated on the basis of capacity last December 31, and it is estimated that by the end of June the steel capacity had been increased by about 1,000,000 tons. Thus recent operating rates are even lower than indicated, and eventually will be revised downward to conform to the expansion in capacity since the end of last year. Living costs continue to rise The cost of living, contrary to earlier indications, shows an increase since price ceilings were imposed. The BLS cost-of-living index has been revised back to April, and now shows an increase rather than a decrease. (See Chart 3.) As of June 15, the combined index had increased 0.4 percent above that of a month earlier, due to a continued rise in food prices. The cost of clothing, on the other hand, has declined since April, and the weighted average of rent, fuel, and light has declined also in that period. Housefurnishings and other costs were unchanged in the past month. Basic commodity prices decline Commodity prices declined somewhat last week on reports of the possibility of more aggressive action being taken against inflation. The BLS price index of 28 basic commodities declined for the second successive week, and touched its lowest level since mid-June. (See Chart 4.) The component indexes of controlled and uncontrolled commodities have been revised back to June 26 to transfer the price of gum rosin from the controlled to the uncontrolled group, because of its exemption from OPA control. Regraded Unclassified 104 - 4 The ind X of 9 uncontrolled commodities declined moderately last week, but was still within its range of the last two months. Barley prices were sharply lower, due to an increased Government crop estimate. Rosin prices continued to lose some of the previous sharp gain. Cotton declined for the third successive week. Wheat and corn prices increased somewhat. The price of butter increased to 39$ from 37%, owing to the Department of Agriculture's raising of the support level by 3% a pound. Prices of steers increased to the highest since April 28. Hog prices declined on the Secretary of Agriculture's announcement that Lend-Lease purchase prices would be lowered. The index of 19 controlled commodities was also somewhat lower. Tallow prices declined sharply as a result of a revision in the fats and oil ceiling structure. In the week ended July 18, the BLS all-commodity index declined 0.2 percent, continuing to move within its range of the past four months. At 98.3, the index stands 31.1 percent above the August 1939 pre-war level. Retail price levels maintained by OPA "rollbacks" As rising production costs continue their pressure on prices, various rollback orders are being issued by the OPA to keep retail prices below the ceilings. The net result in most cases is to relieve the pressure on retailers' and distributors' profit margins by reducing the margins at some earlier stage. Among recent measures are the following: (1) Canners' prices for Maine sardines have been reduced 11 percent below March prices in an order designed to eliminate the squeeze on distributors. (2) An extensive revision of the price structure of fats and oils will partly compensate the soap industry for its earlier cancellation of price increases made before the price regulation became effective. The rollback on inedible tallow was planned to restore soap manufacturers' profit margins to normal. (3) Manufacturers' maximum prices for Kraft wrapping paper are to be reduced, and distributors' mark- ups have been lowered from March levels to those prevailing during the first half of 1941. Regraded Unclassified 105 - 5 - (4) Pulpwood prices are to be fixed below current market levels to enable wood pulp producers and paper manufacturers to maintain their established ceiling prices. (5) Maximum prices on rice at the milling level may be reduced 10 percent to allow wholesalers to maintain their ceilings without loss. Price ceilings breached for canned fruits The OPA has announced increases of 15 to 25 percent in canners' ceiling prices on the 1942 fruit pack, effective July 29, to compensate for increases in costs of labor and raw materials. At the same time wholesalers and retailers were promised corresponding price increases. The increases granted are somewhat more than had been implied in the OPA's first announcement several weeks ago. Agriculture moves to remedy meat packers' difficulties As the impact of the Government's meat purchases and meat price control came to a climax last week in vanishing profit margins for packers and shortages of pork and beef in retail markets, the Secretary of Agriculture took cognizance of conditions in the meat markets by announcing a program designed to help alleviate the situation. The three points of the program are as follows: (1) Effective this week, the maximum prices to be paid for most meat products being purchased for Lend-Lease will be revised downward. (2) In connection with Lend-Lease purchases, adjust- ments in price differentials in different areas will be made to bring prices more nearly in line with the actual cost to packers there, and to favor shipments to the East. (3) Small packers squeezed between the higher cost of livestock and the ceiling prices for meat may continue to operate by purchasing and process- ing livestock to be bought by the Department of Agriculture. Press reports indicate that this project will be financed by a subsidy from Lend- Lease funds. 106 - 6 - The Secretary stated that in all probability purchases of meat for Lend-Lease will be reduced somewhat during the next few weeks. The shortage was ascribed by the Secretary to a continuation of the unusually high demand for meat for domestic requirements, for the Army and Navy, and for Lend- Lease during the period when marketings of meat animals are the smallest of the season. He pointed out that later such marketings will increase, especially of hogs, which will ease the situation. The meat shortage 1s reported to be confined to pork and beef. The price ceiling on beef has operated to encourage the shipping of cattle to market without fattening, because packers refuse to pay sufficiently high prices for heavy cattle. Although packers operating under Federal inspection (and therefore eligible to supply Lend-Lease requirements at premium prices) have 80 far been able to operate under the OPA ceiling for Government orders, the margins between the price of live hogs and pork products have declined close to zero. (See Chart 5.) Localities formerly supplied mainly by intra- state packers, however, are now failing to receive their customary share of meat deliveries, because those packers are being forced out of the market by the high prices for live animals. As there 18 a tendency to allocate restricted ship- ments in accordance with past sales distribution, shortages may easily appear in war-production centers where the number and purchasing power of consumers have risen sharply. Government purchases drop 8.8 receipts decline Purchases of pork products by the Department of Agricul- ture were suspended during the week ended July 11, when hog slaughter declined seasonally to a new low for the year, but were resumed in the following week. Chart 6 shows weekly pur- chases of canned, oured and frozen pork by the Department of Agriculture since last December, in comparison with hog prices at Chicago and with slaughter under Federal inspection at 27 markets. Factory employment and payrolls rise to new peaks The expansion in factory employment and payrolls continued last month and reached new record levels, according to pre- liminary and confidential BLS indexes just made available, Regraded Unclassified 107 - 7 - which will be published later in the week. (See Chart 7.) Payrolls continued to rise more rapidly than employment, but the disparity was less marked than in earlier months. During the year ending in June, payrolls rose 28 percent as compared with a gain of only 8 percent in employment. Estimated average weekly earnings of factory workers showed but little further gain in June, but stood 18 percent above year-earlier levels. (Refer to Chart 7.) Further steps in the direction of enlarged factory payrolls occurred last week, as the Bethlehem Steel Corporation and the Weirton Steel Company granted factory workers wage increases of 44 cents per day in line with the recent WLB decision in the "Little Steel" wage case. Construction contract awards at record high Despite the various restrictions on building activity and recent steps toward cutting down plant expansion programs, construction contract awards in June, as reported by the F. W. Dodge Corporation, jumped sharply to a new record high. In fact the monthly total for 37 eastern states, amounting to $1,190,000,000, was 57 percent above the previous record set in August 1941. The gain over the corresponding month in 1941 was 121 percent, with all major classifications except residential construction showing wide gains, as will be seen in the following table: June 1942 June 1941 (Millions of dollars) Residential 186 206 Non-residential 568 200 Public works 203 100 Utilities 233 33 Total 1,190 539 The non-residential total included manufacturing buildings aggregating $272 millions. Contracts for "automobile and air- craft" building construction rose to $90 millions, while chemical construction work jumped to $65 millions. Regraded Unclassified F.R.B. INDEX OF INDUSTRIAL PRODUCTION 1935-39=100, Seasonally Adjusted 1939 1940 1941 1942 1943 PERCENT PERCENT 190 190 180 180 170 170 160 160 150 150 140 140 130 130 120 120 110 110 100 100 90 90 J F M A M J J A $ o N D J F M A M J J A $ o N D J F M A a J J A 5 o N o J F и A M J J A $ o M D J F M 1939 1940 1941 1942 1943 Selected Components May 1942 and June 1942 Compared with Nov. 1941 PERCENT Transportation Equipment 140 Machinery Chemicals 120 Metal Mining COMBINED INDEX Iron and Steel Nonferrous Metals Fuels (crude) 100 Manufactured Foods Lumber, etc. Leather, etc. 80 60 40 20 o Nov. May June 1941 1942 1942 108 Office of the Secretary of the Treasury it 1 - of - and Statistics C-435 Regraded Unclas Chart 1 Chart 2 109 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 C-419 Division of Research and Statistics Regraded Unclassified Chart 3 110 COST OF LIVING AND SELECTED ITEMS June 1939-100 1939 1940 1941 1942 J s o M J N o J F M A M J J A o N D J F M A J J A D PERCENT PERCENT 125 125 120 120 Cost of Living 115 115 110 110 105 105 100 100 140 140 135 135 130 130 Food 125 125 120 120 Clothing 115 115 110 110 105 105 100 100 Household Furnishings Rent, Light, and Miscellaneous and Heat 95 95 J S D M J S o N D J F M A M J J A 5 o N D J F M A M J J A 5 o N D J F M 1939 1940 1941 1942 Souce B.L.S. Office of the Secretary of the Treasury Drive of Reserved and Birthties C-413-A Regraded Unclassified MOVEMENT OF BASIC COMMODITY PRICES 1941 1942 PERCENT PERCENT August 1939-100 190 190 185 185 9 Uncontrolled Commodities 180 180 175 175 170 28 Commodities 170 165 165 160 160 19 Controlled Commodities) 155 155 150 150 145 145 140 140 SEPT. NOV. JAN. MAR. MAY JULY SEPT. NOV 1941 1942 PERCENTAGE CHANGE DEC. 6. 1941 TO JULY 17 AND JULY 24, 1942 PERCENT PERCENT 19 Controlled 9 Uncontrolled Hoge 464% +45 Commodities +45 Commodities +40 +40 +35 +35 Florsed 30.1% +30 +30 +25 +25 +20 Lard /95% +20 Com N.B% Steers ILEX +15 Shellac 13.8% +15 Lood IIIX Butter 120% Cottonwed Oil 78% +10 Print Cloth 7.8% +10 Cotton M Sugar 6.9% Zine 2% Aven Let +5 0% Change +5 Mides. Salk, Tin, Rubber, o Coffee, Copper, o St. Scrap,dom, St Scrap exp. -In Cocoo - 5 - 5 Whent -42% Tolkw -2.81 Wee/ Topo -3.5% Burlep -4.8% -10 - 10 Dec. 6 July 17 July 24 Dec. 6 July 17 July 24 1941 1942 1942 1941 1942 1942 20 Controlled and . Uncontrolled previous to Jose 26 111 Office of the Secretary of the Treasury Regraded.Uncla HOG PRICES, VALUE OF PORK RODUCTS, AND GROSS MARGINS Weekly, July 1941 to date 1941 1942 AUG. OCT. DEC. FEB. APR. JUNE AUG. OCT. DOLLARS DOLLARS PER PER 100 LBS. 100 LBS. 15 15 COMPOSITE WHOLESALE VALUE OF Hoe PRODUCTS 14 14 13 13 12 12 WHOLESALE PRICE OF LIVE Hous** 11 11 10 10 GROSS GROSS MARGIN MARGIN (CENTS) Gross MARGIN (CENTS) 100 100 o 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. 112 ** GOOD CHOICE, 180-200 LBS. Chart 5 SOURCE: U.S.D.A. Office of the Secretary of the Treasury Division of Research - Statestics Regraded Unclass Chart 6 113 HOG PRICES COMPARED WITH HOG SLAUGHTER AND U.S.D.A. PURCHASES 1941 1942 DEC. FEB. APR. JUNE AUG. OCT. DEC. DOLLARS TTT DOLLARS Per 100 Lbs. Per 100 Lbs. 15 15 14 14 13 13 Price of Live Hogs 12 12 11 II 10 10 THOUSANDS MILLIONS OF HOGS OF LBS. (Slaughter) (U.S.D.A. Purchases) 1000 Slaughter 27 Centers 800 160 600 120 400 U.S.D.A. Purchases 80 200 40 0 o DEC. FEB. APR. JUNE AUG. OCT. DEG. 1941 1942 "Chicogo, good to choice, 180-200 pounds Source: Department of Agriculture Office of The Secretary of the Treasury Division of - and P-248 Regraded Unclassified CONFIDENTIA FACTORY EMPLOYMENT, PAYROLLS AND WAGES FIRST 6 MONTHS OF 1939 = 100, UNADJUSTED 1939 1940 1941 PER 1942 PCR CENT CENT 220 220 200 200 180 180 PAYBOLLS 160 160 Est 140 140 EMPLOYMENT 120 120 100 100 AVERAGE WEEKLY EARMINGS OF FACTORY WORKERS 80 J M M J $ N J M M J $ M J M M J $ N J 80 M = J 5 # 1939 1940 1941 1942 SOURCE: B.L.S. 114 Chart 7 Office of the Secretary of the Treasury Division of - and - c - 414 Regraded Unclass 115 FOR THE PRESS IMMEDIATE RELEASE JULY 27, 1942 Joseph E. Davies, Chairman of the President's Committee on War Relief Activities, today submitted to the President a re- port, the text of which follows: "Your Committee on Var Relief Agencies respectfully sub- mits the following report. "In the foreign relief field, a degree of success has been achieved in reducing the number of agencies and coordinating the activities of those remaining. The number of active foreign relief agencies is now approximately 300 as compared with some 700 or more during the peak period in early 1941. While this is a definite improvement, further coordination and consolidation 18 desirable in the public interest. "Funds and contributions in kind raised by agencies regis- tered with the Department of State from the beginning of the var to the end of May 1942 have totalled over $71,000,000. During the same period other foreign relief agencies raisod a total estimated at $25,000,000. It 1a significant that the administrative and other costs of the agencios registered with and subject to supervision by the Department of Stato have averaged only about 10 percent of total receipts while those of other foreign rolief agencies have averaged, on the basis of somowhat incomplete information, 30 percent or moro. It is also significant that administrativo exponses of the latter group have shown an approciable docreaso since the President's Com- mittoe requested periodic reports from them, even though the Committee has beon able to exercise only advisory supervision. The present rate of collections by foreign rolief agencies, other than the Rod Cross, is substantially bolow the poak, with & resulting increaso in the percentage of overhead coste, but this decrease in collections is far more than offset by the increase in domestic relief solicitations. "In the domostic rolief and welfare field, the entry of the United States into the war has quite naturally rosulted in the estab- lishment of a very largo number of now agencies appealing to the public for funds and contributions for the rolief and volfare of our own civilian population and armod forces. As thore 1s at procent no central registration or other regulatory authority, those organiza- tions aro subject to no coordinated supervision or control end even thoir number can only be estimated. "While actuated by the highost humanitarian motives, theso agencies tond to duplicate each other's offorts causing public con- fusion and uncortainty. Unduo competition among themselvos and be- twoon them and the foreign rolief agencies loads to a wasto of financial resources and manpower and thus tendo to hemper the national war effort. There 1e a lack of corrolation botwoen the programs of the private agoncies in both the domostic and foroign rolief fields, and those of the Red Cross and of the sovoral governmontal agencies concerned with various phases of roliof and welfare. "Certain important objectives of the Committee have not BO far boen accomplished, because of lack of authority. There remain, ne indicated above, two important factore affecting national unity of effort 111 these times of emergency--(a) the public 18 subject to solicitation from far too many agencies representing an excessive amount of duplication and (b) the limited amount of leadership that oxiste for charitable, welfare and Government var bond campaigns 18 overly occupied and its effectiveness seriously diminished and dissipated. "The Committoo bolieves that those facts call for a central authority with general jurisdiction and povers to bring about coordina- tion of effort and elimination of duplication and vaste, Pursuant thoreto, the Secretary of State, upon whose recommendation this Com- mittee was originally appointed, has suggested that, as the domestic relief field is nov dominant, it would be in the national interest to consolidate, in such a contral authority, supervision over both domostic and foreign relief agencies, including the administration of Sootion B(b) of the Neutrality Act, 1939, nov vested in the Secretary of State. Regraded Unclassified 116 - 2 - "The Committee recommends, therefore, that adequate powers be delegated to a central authority and suggeste that this might be done by the issuance of an Exocutive Ordor," In accordance with the recommendation of the Committee the President has signed an Erocutive Order, the text of which follows: EXECUTIVE ORDER ESTABLISHING THE PRESIDENT'S WAR RELIEF CONTROL BOARD AND DEFINING ITS FUNCTIONS AND DUTIES By virtue of the authority vested in mo by the Constitution and statutes of the United States, 68 President of the United States of America and Commandor-in-Chiof of tho Army and Navy, because of omergoncios affecting the national sccurity and dofonse, and for the purpose of controlling in the public interest charities for foreign and domestic rolief, rehabilitation, reconstruction, and wel- faro arising from war-croated noeds, it 1a horoby ordered as follows: 1. The President's Committoe on War Rolief Agencies, appointed by no on March 13, 1941, 1a horeby continued and estab- lished as the President's War Rolief Control Board, hereinafter roferred to as the Board. The Chairman of the Board shall be ro- sponsible to the President. 2. The Board 1a horoby authorized and empowered-- (a) to control, in the interest of the furtherence of the var purpose, all solicitations, sales of or of- fore to sell merchandise or services, collections and receipts and distribution or disposition of funds and contributions in kind for the direct or implied purpose of (1) charities for foreign and domestic relief, ro- habilitation, reconstruction and welfare arising from war-created noeds in the Unitod Statos or in foreign countries, (2) refugee relief, (3) the rolief of the civilian population of the United States affected by enemy action, or (4) the roliof and welfare of the armed forces of the United States or of their dopond- ents; Provided, that the powers horoin conforred shall apply only to activities concorned directly with war roliof and wolfare purposes and shall not oxtond to local charitable activities of a normal and usual character nor in any caso to intra-state activities other than those immodiately affecting the war effort; (b) (1) to provide for tho registration or licons- ing of persons or agencios ongagod in such activities and for the renowal or cancellation of such registration or licenses; (2) to regulate and coordinate the times and amounts of fund-raising appeals; (3) to dofino and promulgato othical standards of solicitation and collec- tion of funds and contributions in kind; (4) to require accounts of receipts and exponditures duly and roliably auditod, and such other records and reports no the Board may doom to be in the public interest; (5) to eliminato or morgo such agencies in the interests of officiency and economy; and (6) to tako such stops no may be neces- sary for the protoction of occential local charities; and (c) to prosoribe such rulos and regulations not incon- sistent with law no tho Board my determine to be necessary or desirable to carry out the purposes of this Order. Regraded Unclassified 117 - 3 - 3. The provisions of section 2 of this Order shall not apply to (a) the American National Red Cross or (b) established religious bodies which are not independently carrying out any of the activities specified in section 2 of this Order. 4. Under the authority given ne by Section 13 of the Joint Resolution of Congress approved November 4, 1939 (54 Stat. 8, 11) and Title I of the First War Powers Act, 1941, approved December 13, 19/11 (Public Law No. 354, 77th Congress), and pursuant to the sugges- tion of the Secretary of State, it is ordered that the administration of any and all of the provisions of Section 8 (b) of the said Joint Resolution relating to the solicitation and collection of funds and contributions for relief purposes, heretofore by me vested in the Secre- tary of State, be and it hereby is transferred to the said Board. All rules and regulations and forms which have been issued by the Secretary of State pursuant to the provisions of said Section 8 (b) and which are in effect shall continue in effect until modified, superseded, revoked or repealed by the Board. 5. Any and all matters within the jurisdiction of said Board which may be affected with a question relating to the foreign policy of the Government of the United States in connection with the adminis- tration of the powers vested in the Hoard by this Order shall be deter- mined only after conference with the Secretary of State, to the end that any action with respect to such matters shall be consistent with the foreign policy of the United States. 6. For the purpose of economy in administration, the Board is authorized to utilize the services of available and appropriate por- sonnel of the Department of State and other Government departments and agencies and such other services, equipment, and facilities as may be made available by these departments and agencies. 7. For the purpose of effectively carrying out the provisions of this Order, the Board may require that all war relief and welfare policies plans, programs, procedures and methods of voluntary agencies be coor- dinated and integrated with those of the several Federal departments, establishments and agencies and the American Red Cross; and all these organizations shall furnish from time to time such information as the Board may consider necessary for such purposes. 8. The Board shall from time to time submit to the President such reports and recommendations regarding war charities, relief and welfare in foreign countries and in the United States and the rela- tionship of public and private organizations, resources and programs in those and related fields, as the public interest may require. 9. The members of the Board shall sorve as such without compensa- tion, but shall be entitled to necessary transportation, subsistence, and other expenses incident to the performance of their duties. 10. This Order shall remain in force during the continuance of the present war and for six months after the tormination thereof, un- less revoked by Presidential order. FRANKLIN D. ROOSEVELT THE WHITE HOUSE, July 24, 1942. Regraded Unclassified 118 BOARD OF ECONOMIC WARFARE WASHINGTON, D.C. OFFICE OF THE EXECUTIVE DIRECTOR July 27, 1942 AGENDA FOR THE MEETING OF THE BOARD OF ECONOMIC WARFARE TO BE HELD THURSDAY, JULY 30, AT 10:00 A.M. IN THE OFFICE OF THE VICE PRESIDENT IN THE CAPITOL There is attached a brief report on export licenses issued to the Sydney Ross Company allowing shipments of cer- tain drugs to Latin America. It is requested that each affected agency arrange to have available such additional information as it may have bearing on the general subject of drug exports to Latin America, and particularly exports by the Sydney Ross Company. Attachment Regraded Unclassified SECRET119 July 27, 1942 SYDNEY ROSS COMPANY EXPORTS TO LATIN-AMERICA Exportulicenses for drugs to the Sydney Ross Company have been to assist that company in maintaining its trade war in Latin America against Nazi controlled producers and distributors of pharmaceutical goods, The salient facts in the matter follow: 1. The company's trade war is being waged mainly against the German aspirin and caffeine compound called "Cafiaspirina". Sydney Ross competed against this "commercial swastika" with its own aspirin and caffeine compound called "Mejoral". Apparently its trade war strategy has been expertly conceived and vigorously executed. The June issue of "Fortune" gives the com- pany a big "hand" for its aggressive campaign. The article deplores the Government's lack of initiative in not itself seizing the oppor- tunity to strike vigorously at I. G. Farben through the Sterling con- trolled companies. 2. In May of this year Sydney Ross faced an increasingly crit- ical supply problem, and requested BEW to expedite the licensing of the company's minimum requisites of supply and shipping. Since the Sydney Ross Company had originally been part of the I. G. Farben cartel group, a meeting was promptly called of the interested agencies to review the status of the Sydney Ross Company and to decide what, if any additional aid should be extended, The meeting held on June 5, 1942, was attended by representatives of the Treasury Department, the Department of State, the Coordinator of Inter- American Affairs, and the Alien Property Custodian. As a result of this meeting -- at which the company was given a substantially clean "bill of health" by the Treasury Department* -- a decision was reached to. extend further aid to the company in its trade war, A 500 page investigation report of the Treasury Department com- pleted early in July concluded that in general and subject to investigation of purchasers and personnel abroad the Sterling Products group "has appar- ently made a sincere effort to fill its obligations under the Representa- tions it máde to the Foreign Funds Control Committee on August 15, 1941". Regraded Unclassified - 2 - 3. After this decision, the company's applications for additional export licenses were granted, The chief items involved were the acetyl salicylic acid and caffeine needed by Sydney Ross for "Mejoral", the big competitive item against the similar German compound "Cafiaspirina". The licenses also covered advertising matter, labels and other material neces- sary in the effective sales distribution of "Mejoral". 4. The decision to grant the licenses obviously involved consider- ations of economic warfare as well as those of requirements and supplies. South America is becoming increasingly dependent upon us for drugs. How- ever, the amounts actually licensed were within the quantities indicated for export to the countries in question by the Drug Branch of the War Production Board. .5. In adopting this program of increased assistance at the inter- departmental conference on June 5, it was specifically understood: a. That the Sydney Ross Company would keep the Board fully informed at all timos as to its oporations, activities and affairs; and, b. That similar aid would be made available to any other American companies in good standing, engaged or proposing to engage in similar economic warfare against Axis firms in Latin America. 120 - 3 - ASPIRIN (Tablets and Bulk) Licensos Granted for Export to Latin-America January 1, 1942, to Date Licenses Granted to Liconses Granted Sterling Products to Others and Subsidiaries Pounds Pounds January 2,700 February 39,894 March 147,454 3,500 April 71,336 May 34,282 June 3,556 July 44,137 270,525* TOTALS 343,359 274,025 * 3-6 months' supply The Drug Branch, War Production Board, has indicated that exports should not exced 50,000 pounds a month, and also an additional annual reserve of 200,000 pounds could be made available. - 4 - QUI!!INE SULPHATE - EQUIVALENT Licenses Granted for Export to Latin-America January 1, 1942 to Date Licenses Granted to Licenses Granted Sterling Products to Others and Subsidiaries Ounces Ounces January 42,080 February 101,456 March 167,889 April 75,364 73 May 156,606 1,331 June 44,187 3,695 July 28,850 3,367* TOTALS 616,432 8,466 * 3-6 months' supply The Drug Branch, War Production Board, has requested that individual ship- ments be cleared with it. It is realized, however, that 2 million ounces will be needed in 1942 in Latin America, but local inventories are not accurately known. Since April no quinine has been exported except for antimalarial control unless it was compounded in other medicines and in stock prior to April. This is in strict compliance with War Production Board Order No. M-131. 121 - 5 - CAFFEINE Licenses Granted for Export to Latin-America January 1, 1942, to Date Licenses Granted Licenses Granted to to Others Sterling Products & Subsidiarios Includ- ing Sydney Ross Co. Pounds Pounds January 1,472 February 2,873 March 5,959 April 5,267 750 May 2,190 June 914 July 402 15,750* TOTALS 19,077 16,500 The caffeine content of compounds is not included in the table. Compounds containing 191 lbs. of caffcino were licensed to the Storling Products Company and subsidiaries during the period. The Drug Branch, War Production Board, has indicated that exports should not exceed 10,000 pounds monthly. * 3-6 months' supply. 122 JUL 27 1942 By dear Mr. President: I - enclosing report on our exports to some selected countries for the period ending July 10, 1942. Faithfully, (Signed) H. Morgenthau, Jr. Secretary of the Treasury The President, The White House. Enclosure. VDW Cc Dr White nme Delivery Secret 7/27/42 Service FILE COPY Regraded Unclassified SECRET 123 July 22, 1942 Exports to Russia, Free China, Burma, France and other blocked countries, as reported to the Treasury Department during the ten-day peried ending July 10, 1942. 1. Exports to Russia Exports to Russia as reported during the ten-day period ending July 10, 1942 amounted to about $36,000,000 as compared with ap- proximately $50,000,000 during the previous ten-day period, Among the military equipment exported during the period under review were 60 P-40 pursuit fighters, 39 light bombers, 4 medium bombers and 77 tanks. (See Appendix 0.) 2. Exports to Free China and Burma Exports to Free China as reported during the ten-day period under review amounted to $7,900,000. Military equipment accounted for nearly 85% of the total, (See Appendix Do) Exports to Burma as reported during the period under review amounted to about $45,000. (See Appendix E.) 3. Exports to France Exports to France during the period under review amounted to less than $500. 4. Exports to other blocked countries Exports to other blocked countries are given in Appendix A. Exports to Portugal were most important, amounting to $162,000. ISF/fa 7/23/42 Regraded Unclassified STRICTLY CONFIDENTIAL 124 SUMMARY OF UNITED STATES DOMESTIC EXPORTS to SELECTED COUNTRIES AS REPORTED TO THE TREASURY DEPARTMENT FROM EXPORT DECLARATIONS RECEIVED DURING THE PERIOD INDICATED w July 28, 1941 to July 10, 1942. (In thousands of dollars) July 28 to Period ended Period ended Total June 20 June 30 July 10 Domestic Exports S. S. R. $587,872 $49,919 $35,618 $673,409 ree China 84,500 1,664 7,900 94,064 urus z/ 12,435 5/ 45 12,480 rence 3/ 56 I 5/ 56 pain 2,849 - I 2,849 witserland 10,710 591 93 11,394 weden 17,778 2 82 17,862 ortugal 9,036 165 162 9,363 rench North Africa w 6,283 5/ I 6,283 reasury Department, Division of Monetary Research July 21, 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 Barma, is destined for Free China. Includes both Occupied and Unoccupied France - no breakdown is obtainable from Department of Commerce. Includes Morocco, Algeria, and Tunisia. Less than $500. (W:rl 7/21/42 Regraded Unclassified Total July 1 - July 10 June 21 - June 30 'une 11 - June June 1 - June May 21 - May 31 May - May 11 May - May 1 Apr. 21 - Apr. Apr. 11 - Apr. Apr. 1 - Apr. Mar. 20 - Mar. Mar. 10 - Mar. Mar. 1 - Mar. Feb. 20 - Feb. 28 Feb. 10 - Feb. Feb. 1 - Feb. 10 Jan. 26 - Jan. Jan. 19 - Jam. Jan. 12 - Jam. 17 Jan. 5 - Jan. 10 Dec. 29 Jan. I Dec. 22 - Dec. 27 Dec. 15 - Dec. Dec. 8 - Dec. 13 Dec. 1 - Des. Nov. 24 - Nov. 29 Nov. 17 - Nov. 22 Liov. 10 - Nov. 15 "ov. 3 - Nov. Oct. 27 - Nov. Oct. 20 - Oct. 25 Oct. 13 - Oat. 18 Oct. 6 - Oct. 11 Sept.29 - Oct. 4 Sept.22 - Sept.27 Sept.15 - Sept.20 Sept. 8 - Sept.13 Sept. 2 - Sept. 6 Aug. 25 - Aug. 30 Aug. 18 - Aug. 23 Aug. 11 - Aug. 16 Aug. 4 - Aug. 9 July 28 - Aug. 2 20 10 20 10 30 20 to 31 20 10 20 31 24 3 20 o 0014 V y 5/ n $96,667 7,900 1,664 5,312 3,822 2,281 309 395 Free China Exports s (Thousands of Dollars) July 28, 1941 - July 10, 1942 w Exports from the U. S. to Free China, Burma and 1,15 55.06 Barza 3/ Exports to U.S.S.R. as reported to the Treasury Department APPENDIX B 5 .06 Regraded Unclassified TST"7298 2, 2 4,525 Experts s 125 SECRET 126 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 Hangoom which are presweed to be destined for Free China. 3. It is presumed that a large percentage of experts to Burna 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. Treasury Department, Division of Monetary Research July 22,1942 ISP/efs 7/22/42 Regraded Unclassified SECRET 127 APPENDIX c Principal Exports from U. S. to U. s. s. R. as reported to the Treasury Department during the ten-day period ending July 10, 1942 Value Unit of (Thousands Quantity Quantity of dollars) TOTAL EXPORTS $ 35,657 Principal Items: Aircraft 10,326 Fighter, pursuit (P-40) No. 60 Light bomber (A-20) No. 39 Mediwa bomber (B-25) No. 4 Ammunition 2,675 .30 caliber No. 7,222,829 .32,.38 and .45 caliber No. 1,286,000 .50 ealiber No. 1,528,700 20 m. Oerlikom No. 106,500 37 m. anti-aireraft No. 102,330 75 m. high explosive and armor piercing No. 22,884 81 m. mortar shells No. 21,168 Links and belts for mall arms ammunition No. 1,165,000 Military tanks 2,665 Light tanks No. Medium tanks No. NY Aircraft parts and accessories - # 1,942 Copper wire Lb. 3,853,946 1,218 Submachine guns (.45 cal.) No. 5,700 1,212 Pork and sausage, canned & not canned Lb. 3,027,219 1,156 Tracklaying tracters No. 181 1,126 Iron end steel bars and reds LD. 12,299,030 825 Motor trucks No. 502 762 Combat vehicles 722 Seout ears No. 27 Light armored care No. 80 Ordnance combat vehicles,n.e.s. No. 39 Treasury Department, Division of Monetary Research July 22,1942 ISF/efe 7/22/42 Regraded Unclassified SECRET 128 APPENDIX D Principal Exports from U. S. to Free China as reported to the Treasury Department during the ten-day period ending July 10, 1942 (Thousands of Dollars) TOTAL EXPORTS $ 7,900 Principal Items: Military equipment Other iron and steel manufactures Printed matter Surgical and medical instruments Relief supplies - surgieal and hospital Treasury Department, Division of Monetary Research July 22,1942 ISP/efa 7/22/42 SECRET 129 APPENDIX I Principal Exports from U. s. to Burna as reported to the Treasury Department during the tem-day peried ending July 10, 1942 (Thousands of Dollars) TOTAL EXPORTS $ 45 Principal Item: Steel sheets, black 45 Treasury Department, Division of Monetary Research July 22,1942 ISF/efs 7/22/42 130 JUL 27 1942 My dear Mr. Secretary: I an enclosing copy of report on our exports to some selected countries for the period ending July 10, 1942. Sincerely yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury The Honorable, The Secretary of State, Washington, D. c. Enclosure. cc-Br White cc-Dr White nmc 7/2/42 FILE COPY Regraded Unclassified SECRET 131 July 22, 1942 Exports to Russia, Free China, Burns, France and other blocked countries, as reported to the Treasury Department during the ten-day period ending July 10, 1942. 1. Exports to Russia Exports to Russia as reported during the ten-day period ending July 10, 1942 amounted to about $36,000,000 as compared with ap- proximately $50,000,000 during the previous tem-day period, Military equipment ascounted for more than one-half of the total. (See Appendix c.) 2. Exports to Free China and Burna Exports to Free China as reported during the ten-day period under review amounted to $7,900,000. Military equipment accounted for nearly 85% of the total. (See Appendix D.) Exports to Burna as reported during the period under review smounted to about $45,000. (See Appendix E.) 3. Exports to Pronee Exports to France during the period under review amounted to less than $500. 4. Exports to other blooked countries Exports to other blocked countries are given in Appendix 4. Exports to Portugal were most important, mounting to $162,000. ISF/efs 7/23/42 Regraded STRICTLY CONFIDENTIAL 132 SUMMARY OF UNITED STATES DOMESTIC EXPORTS TO SELECTED COUNTRIES A5 REPORTED TO THE TREASURY DEPARTMENT FROM EXPORT DECLARATIONS RECEIVED DURING THE PERIOD INDICATED w July 28, 1941 to July 10, 1942. (In thousands of dollars) July 28 to Period ended Period ended Total June 20 June 30 July 10 Domestic Exports S. S. R. $587,872 $49,919 835,618 $673,409 res China 84,500 1,664 7,900 94,064 pres al 12,435 5/ 45 12,480 rance 2/ 56 - s/ 56 pain 2,849 - I 2,849 witserland 10,710 591 93 11,394 reden 17,778 2 62 17,662 ortugal 9,036 165 162 9,363 rench North Africa w 6,283 s/ - 6,283 reasury Department, Division of Monetary Research July 21, 1942. Many of the export declarations are received with & lag of several days or more. Therefore this compilation dose 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 persentage of material listed here, consigned to Burna, is destined for Free China. Includes both Occupied and Unoccupied France - no breakdown is obtainable from Department of Commerce. Includes Moroceo, Algeria, and Tunisia. Less than $500. Mirl 7/21/42 Inls June 21 - June 30 May 21 May 31 May 11 - May 1 Jan. July 1 - July 10 June 11 - June June 1 - June Apr. 21 - Apr. Apr. 11 - Apr. Apr. 1 - Apr. Mar. 20 Mar. 10 Mar, 1 Mar, Feb. 20 - Feb. Feb. 10 Feb. 1 - Feb. Jan. 26 Jan. 19 Jan. 12 Dee. 29 Des. 22 Total 5 I . - Dee. 15 - Dec. Dee, OM I . Des. Des. - Des. Nov. 24 . Nov. Nov. 17 - Nov. Nov. 10 - Nov. Nov. 3 - Nov. Oct. 27 - Nov. Det. 20 - Oct. Oct. 13 - Oct. Oct. 6 - Oct. Sept.29 - oct. Sept.22 - Sept. Sept.15 - Sept. Sept. 30pt.23 CON 6 Sept. - Sept. Aug. 25 - Aug. Aug. . Aug. 23 18 - May Leg Mar. Mar. Feb. Jame Jun, Jam. Jan. Jam. Dos. AUg. 11 - Aug. 16 1% Aug. 4 - Aug. July 28 - Aug. 2 20 10 20 10 30 20 to 20 10 25 ST 30 RR EXE $96,667 7,900 1,664 395 Exports = (Thousends of Dollars) July 28, 1941 - July 10, 1942 = 1.3 $11,367.06 0674,151 45 I - 196 1,021 s Experts to U.S.S.R. as reported to the Treasury Department Exports from the U. s. to Free China, Burna and APPREDIX B 55.06 .06 Regraded Unclassified U.S.S.R. 8 Experts 133 SECRET 134 APPENDIX B Page 2 1. These figures are in part taken from copies of shipping manifests. 2. Figures for experts to Free China during these weeks include exports to Remgoon which are presumed to be destined for Free China. 3. It is presumed that a large preentage of experts to Surma 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. Treasury Department, Division of Monetary Research July 22,1942 ISF/efe 7/22/42 Regraded Unclassified SECRET 135 APPENDIX c Principal Exports from U. s. to U.S.S.R. as reported to the Treasury Department during the ten-day period ending July 10, 1942 (Thousends of Dellars) TOTAL EXPORTS - 35,657 Principal Items: Military equipment 20,582 Copper wire 1,218 Pork and sausage, canned and not canned 1,1% Tracklaying tractors 1,126 Iron and steel bars and rods 825 Motor trucks Tallow and lard Relief supplies - surgieal and hospital Brass and blanks, plates and sheets Telephone instruments and parts Refined copper in bars, billets and eathodes Wheat flow Diesel marine engines Relief supplies - elothing Linseed oil Wheels of artificial abrasives 301 Treasury Department, Division of Monetary Research July 22,1942 ISF/efs 7/22/42 Regraded Unclassified SECRET 136 APPENDIX D Principal Experts from U. s. to Free China as reported to the Treasury Department during the ten-day period ending July 20, 1948 (Thousends of Dollars) TOTAL EXPORTS 8 7,900 Principal Items: Military equipment Other irem end steel manufactures Printed matter Surginal and medical instruments Relief supplies - surgical and hospital Treasury Department, Division of Monetary Research July 22, 1942 ISF/efs 7/22/42 Regraded Unclassified SECRET 137 APPENDIX = Principal Exports from U. S. to have as reported to the Treasury Department during the ten-day period ending July 10, 1942 (Thousands of Dellars) TOTAL EXPORTS s 45 Principal Items Steel sheets, black $ Treasury Department, Division of Nonetary Research July 22,1942 ISP/efs 7/22/42 Regraded Unclassified 138 BRITISH AIR COMMISSION 1785 MASSACHUSETTS AVENUE WASHINGTON, D.C. TELEPHONE HOBART 9000 PLEASE QUOTE REFERENCE NO With the compliments of British Air Cemmission who enclose Statement No. 43 - Aircraft Despatched - for week ended July 21, 1942. The Honourable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. July 27, 1942. Regraded Unclassified MOST SECRET 139 STATEMENT NO. 43 AIRCRAFT DESPATCHED FROM THE UNITED STATES WEEK ENDED JULY 21st. 1942 TYPE DESTINATION ASSEMBLY POINT BY SEA BY AIR FLIGHT DEL'D FOR USE IN CAN CONSOLIDATED Liberator II U.K. Canada en route 1 B 24 D U.K. . . # 7 PBY 5 B Middle East Middle East 3 FAIRCHILD PT 26 Cornell Ganada Canada 4 24 R. 9 Middle East Sues 2 LOCKHEED (a) & 28 Hudson VI Middle East Middle East 2 & 28 . . . If # # 2 & 28 #: # U.K. Canada en route 2 (b) A 28 - VIA Middle East Middle East 2 . ⑉ - = If . M: 3 C 60 Lodestar IIA . # - = 1 AuddomoNIs New Zealand Auckland 4 Ventura Canada Canada 1 . U.K. Canada en route 12 . South Africa South Africa 9 # U.K. Canada en route E 1 (c) # South Africa South Africa 7 GLENN MARTIN Baltimore Middle East Port Sudan 2 B 26A Marauder Middle East Middle East 12 NORTH AMERICA B 250 U.K. Canada en route 1 / VULTEE Vengeance India Bombay 6 TOTALS 14 65 5 NOTE (a) Were exported week ended July 7th but were not reported at that time. (b) Were exported week ended July 7th, but were not reported. (c) Were exported week ended July 14th but were not reported. British Air Commission July 25th, 1942. Regraded Unclassified 140 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 27, 1942 TO Secretary Morgenthau FROM Mr. White Subject: Official British Statements on International Financial Organization after the Armistice (Cable from London, July 24, 1942, No. 4124) You may be interested in the debate in the House of Lords on July 22, during which Lord Simon gave the Government's views on the restoration of the gold standard and the re-adoption of other orthodox economic policies. 1. In summing up a long debate, the Lord Chancellor stated: "The whole object of our post-war financial policy must be to do all that is possible to give practical and lasting effect to the admittedly general language of the Atlantic charter I am speaking with the authority of the Treasury when I say that it may well be that in the course of our common discussions we shall find that new and far-reaching international measures are called for. We do not intend to be bound by the orthodoxies of the nineteenth century. we shall, at all times, be ready to join with our allies in "ollowing B. course which may be, as far as past experience LOSS, comparatively uncharted, if it is going to lead us to the reater welfare of all the people whom the Atlantic charter seeks to serve. " 2. The Lord Chancellor quoted frequently from the President's fifth rosort to Congress on Lend-Lease operations, the concluding paragraphs of which develop Article VII of the Master Lend-Lease Agreement as follows: "All the United Nations are seeking maximum conversion to war production, in the light of their special resources. If each country devotes roughly the same fraction of its national production to the war, then the financial burden of war is distributed equally among the United If Nations in accordance with their ability to pay 5. In answer to & direct question from the floor, asking for the prevailing opinion in Treasury and banking circles, Lord Simon said that ne had heard "no whisper and no echo" of any intention to repeat the return to the gold standard after the end of this war. 1.. The pronouncement on the gold standard is similar to pre-war statements. More interesting 1s Lord Simon's emphasis on joint Anglo-American policy statements, which indicates that traditional canons of international finance will not interfere with the British Government's readiness to take cooperative action in order to attain to desired objectives. Regraded Unclassified 141 MEC PLAIN London. Dated July 24, 1942 Rec'd 8:30 p.m. Secretary of State, Washington. 4124, July twenty-fourth. FOR DEPARTMENT AND TREASURY FROM CASADAY In the House of Lords on July 22 (where the debates of late have sttracted more sttention than usual) there W&S a discussion of post-war financial problems. In the Lord Chancellor's winding-up speech, two important declarations were made, be- sides a number of significent references to and quotations from the President's fifth report to Congress on lease-lend operations. The official report of the debate, which covers 40 pages, is being forwarded by air pouch. The following are the more important points from Lord Simon's speech: 1. During the debate, Lord Strabolgi asked the Lord Chancellor to reply to & direct question E.S. to whether there is "eny hankering now in treasury circles - meaning benking, financial and money-lending circles in the city who all work together - for A return to Regraded Unclassified 142 -2- #4124, July twenty-fourth, from London. return to the gold standard after the war". He also urged that the dollar and pound must be linked to- gether and said that the policy must be an informational one and "should be under close study now and the results be made known to the people". He added "I hope this is not being discussed in secret treasury conclave, as Lord Perry suggested, but as openly as possible between the leaders of the great alliance". Lord Simon, in his replying speech said that Lord Strabolgi had, as he was entitled to do, asked him a specific cuestion, which he would answer as well as he could. The Lord Chancellor continued "he asked this question: 16 there any prospect of our returning to the gold standard? Now, I am not a prophet or the son of a prophet, but we have had our experience of returning to the gold standard last time. That experience did not turn out to be a very happy one, and I have heard no whisper and no echo, from these secret conclaves on which the noble Lord looks with some suspicion, of any intention to repeat our former experience in that. matter. I trust that that will be regarded AB a straightforward answer; I can hardly be expected to say more". 2. In the Regraded Unclassified 143 -3- #4124, July twenty-fourth, from London. 2. In the course of the debate, more than one speaker, and in particular Lord Addison who opened the debate, and Lord Strabolgi later, stressed the impor- tance of realizing that there should be no going back to the pre-war financial system. Lord Simon made the following statement regarding this: "The whole object of our post-war financial policy must be to do all that is possible to give practical and lasting effect to the admittedly general language of the Atlantic charter. Lord Strabolgi raised a question, very naturally, as to whether we were after the war simply going to return to the old ways and to employ the old methods and 11mi- tations in economic policy. Let me try to answer that in a sentence or two. I am speaking with the authority of the Treasury when I say that it may well be that in the course of our common discussions we shall find that new and far-reaching international measures are called for. We do not intend to be bound by the orthodoxies of the nineteenth century. We shall, at all times, be ready to join with our allies in following a course which may be, as far 88 past experience goes, compare- tively uncharted if it is going to lead us to the greater welfare of all the people whom the Atlentic charter seeks to serve." 3. In his Regraded Unclassified 144 -4- #4124, July twenty-fourth, from London. 3. In his speech, the Lord Chancellor also laid particular stress on the passage in the President's speech regarding equality of sacrifice 80 far 86 the money cost of the war is concerned, as well 8.6 to erticle VII of the lease-lend agreement, stating with regard to the President's reference to this article that here the President is "making precisely the same effirmation 88 I have ventured to meke on behalf of His Mejesty's Government this afternoon". Besides also referring to recent pronouncements of Mr. Wellace, Hull, Sumner Welles, the Lord Chencellor welcomed in lauditory terms the visit of Mr. Stettinius on behalf of the Government. 4. With regard to the debate in general, it is perhaps notable that, though all the speakers, namely Lord Addison, Stanhope, Percy, Moyne, Bennett end Strebolgi, stated that they spoke with diffidence to E body which includes many distinguished financial ex- perts, none of the "financial experts" contributed to the debate. Notably Lord Keynee, Kindersley end Werdington for example, were absent or silent. Never- theless the fact that such 8 debate was held in the House of Lords et this time is significent. It mpy not be Si coincidence that such en opportunity wes afforded to Regraded Unclassified 145 -5- #4124, July twenty-fourth, from London. afforded to the Government through the Lord Chancellor's speech in reply, to offer an official response to the numerous recent speeches by American statesmen which have received wide publicity here end have prompted at least one journal - viz. THE ECONOMIST on July 18 - to deplore the absence (up to that time) of any official response on this side. In fact, Hercourt Johnston (Perliamentery Secretary of the Board of Trade) end Mr. Eden have since mede speeches which can be regarded F8 additional official expressions on questions of post- wer economic sims. WINANT CSB Regraded Unclassified FORECAST OF CANADA'S UNITED STATES DOLLAR POSITION JULY 1942 146 SECRET TABLE I. Financing Canada's Heads for United States Dollars. n. Camada's Deficiency of United States Dollars on Current Account Transactions with the United States. III. Capital Account Transactions with the United States. IV. Effect of Hyde Park Transactions, Gross. v. United States Dollars obtained from Newfoundland and other Non-Sterling Area Countries. VI. Canada's Liquid Reserves. Note: These estimates embody only such changes in present trends as can be estimated now with reasonable accuracy. It will be noted (Table I, Item 14) that they point to an increase in Canada's stock of United States dollars during the calendar year 1942 and for the first quarter of 1943, But the actual increase is not likely to be nearly as large as the present estimate for the following reasons: 1. The import of United States capital into Canada may cease, The sale of securities in the United States, which has been running at a high level, may dry up for any one of several reasons. This alone would reduce our net credits by the $35 milliom which has been included in Table ПІ, Item 3, as the probable sise of this sale of Canadian securities in the United States should present trends continue, 2. Further shortages of materials would reduce our imports from the United States but they would reduce much more the value of our exports to the United States of both war and non-war products. The probable dimension of the consequent worsening of our position is impossible now to estimate. It might conceivably wipe out such of the rest of the increase in our U.S. dollar belences which 10 estimated in Tuble I. Item 14. 3, There 11 a further minor factor to be considered. These estimates do not include any item estimating the change in our net indebtedness to the United States on current account. When imports have been increasing rapidly, as in the immediate past, there my be a delay in paying for them which results in a current, but purely temporary. addition to our exchange receives, There is some evidence also that purchases of exchange to transfer the earnings on American capital invested is Canada are lagging markedly behind the actual earnings themselves. For both these reasons the immediate future might see the use of American dollars somewher in excess of the estimates here net down, thus further reducing the net acquisition of United States dollars here estimated. Handed by Mr. Plumptre to Mr. White in Mr. White's office, July 27, 1942, at 2:30 P.Y. 147 SECRET TAME I. Financing Casella's Meeds for United States Dollars (Millions of U.S.Dollars) Present Forecast Forecast compiled in March 1948 1941 1948 1941 1942 Calendar Calendar Quarters of 1942 1945 Calendar Calendar Quarters of 1942 Year Year I II III IV I Year Year I II III TV I. Canda's Needs for U.S.Dollars: (a) Excess of current payments over receipts (excluding Hyde Park transactions) 286 543 87 146 136 174 142 286 491 111 146 111 123 Chief items in this excess are (Table II)- Imports for war production and military equipment 2. 292 488 106 119 150 135 130 292 494 112 125 128 129 Other imports 5. 550 556 135 153 158 150 119 550 505 135 135 120 115 Total of all current payment 4. 1,191 1,443 319 380 365 379 335 1,191 1,358 384 364 333 337 Exports 5. 506 539 140 159 131 129 126 506 526 131 128 151 136 Total of all current receipts 6. 905 900 332 234 229 205 193 905 867 215 218 222 214 (b) Bond maturities and other debits on capital account (Table III) 35 # 5 7 8 5 5 33 45 8 6 11 18 (c) Imports of goods Lend-Leased to the U.K.and transferred to Canada under 19 16 Hyde Park agreement 8. 3 69 6 22 22 19 18 = 48 4 9 (d) Total needs for United States dollars (1/7/8) sea 637 98 195 166 198 165 321 584 123 163 141 157 II. Says of meeting these needs: (a) Hyde Park transactions gross 65 398 85 72 107 136 (Table IV) 10. 61 467 61 107 142 157 174 which includes the U.S.dollar content of Hyde Park exports amounting to 11. 3 49 6 18 14 15 15 6 19 5 4 5 5 (b) U.S. dollars obtained from Newfound- land and other non-sterling area 20 10 24 22 8 8 3 5 countries (Net) (Table 1) 12, 24 62 11 18 15 (e) Sales of securities and other credits on capital account (Table III) 13. 94 163? se 58 279 32? 321 94 65 30 17 22 16 (d) Loss (or gain A in stocks of gold and United States dollars H #14 4169 #119 4519 142 99 1 66 9 2 (Table VI) 14. 142 fest AR (o) Total (10/12/15/14) 15. SRL 609 at 165 166 198 165 323 584 123 163 141 157 III, Errors and omissions (9 of. 15) 16. 1 28? 16 12 2 - - 1 This item is introduced in Section I of this Tuble because it 10 included in Section II(s) below and because in the absement of the Ryde Park agreement Casada presumsbly would need United States dollars to cover the importe in this item. # This amount includes $35 million " the estimated net sale of Canadian and U.S. securities is the United States by residents of Canada during the last half of 1948. Should this flow dry up the increase in Camada's U.S. dollar balances for the calendar year 1942 would be less by that amount. 148 SECRET TABLE II. Canada's Deficiency of U.S. Dollars on Current Account Transactions with the United States. (Millions of U.S.Dollars) Present Forecast Forecast compiled in March 1942 1941 1942 1941 1942 Calendar Calendar Quarters of 1942 1943 Calendar Calendar Quarters of 1942 Year Year I II III IV I Year Year I II III IV I. Payments by Canada to U.S. (a) Imports: War production and military equipment (excl .Lease-Lend) 292 488 106 117 130 135 130 292 494 112 125 188 189 Other 550 556 135 153 138 130 119 550 505 135 135 120 115 Total Laports 3. 842 1,044 241 270 268 265 249 842 999 247 260 248 244 (b) Freight reyable in U.S. dollars 86 125 21 34 35 35 as 86 96 20 28 28 20 (c) Tourist & other travel in the U.S 5. 15 15 4. 4 4 3 4 15 15 4 4 4 3 (d) Interest 6. 85 87 19 24 19 25 20 85 85 19 24 18 24 (a) Dividends & profits 7. 118 112 20 38 24 36 22 118 118 23 36 24 35 (f) Miscellaneous 8. 45 60 14 16 15 15 15 45 45 11 12 11 11 Total Payments (3/1/5/6/7/8) 9. 1,191 1,443 319 380 365 379 335 1,191 1,358 324 364 333 337 II. Receipts by Canada from the U.S. (a) Erports of merchandise by Canada (excl.Hyde 1ark) 10. 506 539 140 139 131 129 126 506 526 151 128 131 136 (t, Exports of nowly mined gold 11. 185 148 44 42 35 27 20 185 160 42 43 39 36 (e) Freight receipts in U.S.S 12. 54 64 16 16 16 16 16 54 60 14 15 18 16 (d) Tourist & other travel by the U.S. in Canada 13. 73 42 7 11 17 7 6 73 8 6 10 19 7 (o) Interest, dividends and profits from the U.S 14. 47 50 12 12 15 11 9 47 41 10 12 10 9 (f) Miscellaneous 15. 40 57 13 14 15 15 16 40 40 10 10 10 10 Total Receipts (10/11/18/15/14/15). 16. 905 900 238 234 229 205 193 905 867 213 218 222 214 III. Excers of Payments over Receipts Item 9 minus Item 16 19. ses 543 87 146 136 174 142 286 491 111 146 in 125 / Including net expenditures by the United States Government in northern Canada. 149 SECRET TAHLE III. Capital Account Transestions with the United States. (in millions of U.S. dollars) Item Calendar Years Quarters of 1942 1943 No. 1941 1948 I II III IV I Receipts: Sales of U.S. securities end other U.S. assets held is Canada 1. 40 41 19 8 , , , Sale of Canadian securities and other Canadian assets : 54 122 B 44 20 as as Total capital importe (1/8) 3. 94 165 - 58 27 38 38 Payments: Bend anturities i. as 21 4 6 , 4 4 Other debt repayments 5. 7 4 1 1 1 1 1 Total capital export (4/5) 6. 33 25 5 7 8 5 5 Excess of capital inflow from the U.S. (3-6) 7. 61 138 49 45 19 27 27 TABLE IV. Effect of Hyde Park Transactions, Gross# (in millions of U.S. dollars) Item Calendar Years Quarters of 1942 1945 No, 1941 1948 I II III IV I Total Hyde Park Exports 1. 8 327 15 56 119 141 161 Deduct exports against prepayments 8. - 27 8 5 , 15 16 Add prepayments and capital advances 3, 50 78 44 34 - - - Total current yield of U.S. dollars from Hyde Park exports (1-2/3) 4. 56 378 55 85 110 128 145 Add petroleum products purchased by the United States on account of the United Kingdom for the British Commonwealth Air Training Plan 5. - 20 - - 10 10 11 Add imports of goods Lend-Leased to the United Kingdom and transferred to Canada under the Tyde Park Agreement 6. 3 69 6 as as 19 18 Total contribution of Hyde Park transactions gross 1 (4/5/6) 9. 61 467 61 107 148 157 174 I all the United States dollar content of llyde Park exports 19 included under war importe (Table II Item 1) in the current account, it has not been deducted here from the Hyde Park contribution; hence the use of the term "gross" to describe the total arrived at in this table. The amount of this U.S. content is estimated for Hyde Park exports as follows: 3 47 6 12 14 15 15 The petroleum products purchased by the United States oo behalf of the United Kingdom for the B.C.A.T.P. will also require purchases of crude petroleum by Canada in the United States. The amount likely to be involved cannot be estimated yet. Regraded 150 TABLE V. United States Dollars obtained Outside the United States (Net) (in millions of U.S. dollars) Item Calendar Years Quarters of 1942 1943 No. 1941 1942 I II III IV I Receipts of U.S. dollars from Non-sterling area countries cutside the U.S 1. 88 71 16 21 15 19 11 Payments 1L U.S. dollare to non-sterling areas outside the U.S 2. 79 45 14 13 10 8 8 Receipts from non-sterling areas (Net) (1-2) 3. 9 26 4 8 3 11 3 Receipts from Newfoundland (art) 4. 15 36 7 10 10 9 7 Total receipts from Newfoundland and unn-sterling areas (ast) (2/1) 5. 24 62 11 18 13 20 10 TABLE VI. Crawdn's Liquid Reserves (in millions of U.S.dollars) U.S. $ Total Private Gold / Balances / Official 1 Balances " Total i. Amounts (a) Actual - September 15, 1939 205 56 261 130 391 December 31, 1940 136 194 330 - 330 December 31, 1941 136 52 188 - 188 March 31, 1942 126 104 230 - 230 June 30, 1942 125 119 244 - 244 (b) Estimated- Deptember 30, 1942 260 - 260 December 31, 1942 271 - 271 March 31, 1943 322 # 322 Lemo: II. Changes in amounts from previous period- Estimated get capital import (a) Actual - September 15, 1939 - - - - - Lecember 31, 1940 -59 ,138 A69 -130 -61 December 31, 1941 - -142 -142 - -142 61 Larch 31, 1942 -10 452 /42 - /42 47 June 30, 1942 -1 #15 A14 - A4 45 (b) Estimated . September 3, 1942 #16 - #16 19 December 32, 1942 All - #11 27 March 31, 1943 151 - A51 27 / Total "official" holdings - Foreign Exchange Control Board, Winister of Finance and Bank of Canada. H Total holdings of U.S. dollars by all other residents of Canada, excluding Canadien banks and insurance companies whose holdings of U.S. dollars are required for the purpose of their U.S. business. The totals shown are exclusive of $80 million in misimum working balances. Regraded Unclassified 151 COPY EX-1593 July 23, 1942. 3:10 p.m. Following for Plumptre from Knox, begins: Sales of Canadian bonds with a foreign payment feature accounted for $65 million of the total sales of $67 million of Canadian bonds in the six months ending in June 1942. Sales of Dominion Guaranteed Canadian National Railway issues represent $35 million of this total. Most of these were concentrated in "three way" issues payable in United States or Canadian dollars or sterling. Sales of outstanding Dominion issues of $14 million and of provincial issues of $14 million make up most of the remainder. It appears that there has been a resppraisal of investment opport- unities in Canada by United States investors (primarily institutional investors) since the entry of the United States into the war. No doubt internal conditions in Canada as well as curtailed possibilities for investment in other foreign countries were factors influencing streng- thened markets and higher prices in the United States for high grade Canadian issues payable optionally in U.S. dollars. With markets favorable for trading, Canadian insurance companies and others sold substantial amounts of their holdings of Canadian optional-pay issues in the United States. During the Victory Loan Campaign important blocs of such Canadian issues were sold out of the deposits of U.S. insurance companies with the Receiver General, to be replaced with Victory Bonds. U.S. dollar forecast being sent this afternoon. July 22/42. Ends. rtr, Regraded Unclassified 152 JUL 27 1942 MEMORANDUM FOR THE PRESIDENT: I have gone over Dr. Currie's memorandum on Canadian affairs which you sent to me on July 15. The problems he touched upon are followed closely by the Treasury. I have recently held a meeting in my office of representa- tives of all the agencies concerned with the placing of contracts in Canada -- War, Navy, Reconstruction Finance Corporation, the Maritime Commission, Lend-Lease Administration, War Production Board, the Board of Economic Warfare, State Department, and the Treasury. The discussion at the meeting revealed that this Government, in pursuance of the general policy laid down in the Hyde Park Agreement, has placed an aggregate of over $1 billion of contracts in Canada for munitions, ships, critical and strategic materials. As a consequence, Canada's U. S. dollar position has improved during recent months and Canada may close the current year with an official gold and U. S. dollar reserve roughly equivalent to the amount held in September 1939. Canada entered the war with gold and available U. S. dollar balances aggregating $390 million. Present indica- tions are that Canada will end 1942 with an official gold and U. S. dollar reserve of $350-$500 million -- or $100- $250 million more than on July 1. If the present trend continues, Canada's holdings of U. S. dollars may reach & level which would be difficult to justify under present circumstances. The situation, however, is not yet out of hand. We will continue to watch developments closely and will inform you if the situation seems to call for a modification of the purchasing program being carried under the Hyde Park Declaration. (Signed) H. Morgenthau, Jr. File-nmc HDW: TMK: 7-23-42 Delivered bySecut Service agent 2:45 7/27/42 Regraded Unclassified 153 THE WHITE HOUSE WASHINGTON July 15, 1942. MEMORANDUM FOR THE SECRETARY OF THE TREASURY To read and return for my files. F.D.R. THE WHITE HOUSE WASHINGTON July 1, 1942. MEMORANDUM FOR THE PRESIDENT: Re: Canadian Affairs, I have been spending a good deal of time on Canadian-American relations in the past year and I should like to indicate sorse of the things that have been done and some of the emerging problems. You will recall the Hyle Park Agreement. The flow of orders to Canada following it was petering out by last December when the Joint War Production Committee, U. S. and Canada, which you set up on my recommendation, began to function. It has, in many res- posts, accomplished much more than I had dared hope. Some 500 million of orders have been placed in Canada in the past five months, exclusive of the $175 million ship deal. Much of this represents production that would not otherwise have been undertaken. Hundreds of millions are pending or under negotiation. Considerable progress has been made in integration and in standardization. Work is proceeding on the exchange of information on best production techniques. A very competent Canadian has been added to the Anglo-American Ordnance Technical Committee (I worked this out with General Somervell). A general report on accomplishments will be submitted to you shortly by the Chairman. The problem now looming is the conversion of a shortage of U. S. dollar exchange into a surplus. I have suggested to Secretary Morgenthau that we re-examine the exchange picture. Various possi- bilities suggest themselves: 1. We might slacken off on new orders. 2. We might continue orders provided the Canadians cut down on their production of gold and divert the resources freed to the war. 3. We might do the same with other exports such as newsprint. 4. We might place new orders for ourselves and arrange that certain existing orders to Canada under lend- lease to Britain be shifted directly to Britsin. 5. We should maintain a close watch that the surplus of dollar exchange is not used up through an increase of non-essential imports from us by Canada. Regraded Unclassified for -2- July 1, 1942. President Canadian Affairs I explored the situation informally with Clarence Howe, Maister of Munitions in Canada, over the weekend. I got the inpression that meither be nor the Minister of Finance would object in the slightest to cutting down Canadian gold production. or the various alternatives, this appeals to me most as it sould result in an actual increase in the overall war effort. Lauchlin Currie Regraded Unclassified 156 JUL 27 1942 Dear Jime Thank you for your note of July 21, 1942, enclosing a copy of the memorandum of the same date which you sent to all Bureau Chiefe in the Havy and in which you saked for a report on contracts placed by the Navy in Canada. I appreciate the promptness with which you acted. The requested information should be adequate for Treasury purposes. Sincerely, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. Honorable James Forrestal, Under Secretary of the Havy, Department of the Havy, Washington, D. C. Photostatic file to NMC Orig. File to Thompson TMK:dsl 7-24-42 Regraded Unclassified DEPARTMENT OF THE NAVY OFFICE OF THE UNDER SECRETARY WASHINGTON SO:LLS 21 July 1942 Dear Henry: I have a full account of the meeting in your office this morning, which I very much regret I was unable to attend. I am enclosing a copy of memorandum which I have sent to all the Bureau Chiefs in the Department, and which will enable me to advise you from time to time of any sizeable orders which we may contemplate placing in Canada. Sincerely, Fountal James Forrestal Honorable Henry Morgenthau, Jr. The Secretary of the Treasury Regraded Unclassified (COPY) DEPARTMENT OF THE NAVY OFFICE OF THE UNDER SECRETARY WASHINGTON July 21, 1942 From: The Under Secretary of the Navy To, The Chief of Office of Procurement and Material The Chief of the Bureau of Aeronautics The Chief of the Bureau of Ordnance The Chief of the Bureau of Ships The Chief of the Bureau of Supplies and Accounts The Chief of the Bureau of Yards and Dooks Subject: Canada - Procurement of Materiel from. 1. The Secretary of the Treasury has requested information with respect to all contemplated contracts for purchase of material by the Navy Department in Canada. 2. Information should include (a) name and location of contractor; (b) whether affiliated with a. U. S. company; (o) dollar value of contract; (d) general character of items to be purchased; (e) whether raw or semi-finished materials required will be imported from U.S.; and (f) an opinion from the contracting Bureau or Office as to whether the Canadian facilities used to manufacture such items would otherwise be idle. 3. In order that the present status of contracts may be accurately determined, it is requested that information, with respect to existing contracts, as indicated in paragraph 2, with the exception of 2(f), be furnished VILLABOLT iniaroffice as of 25 July 1942. SAEI ss JUL // Forrestal dozessed so Regraded Unclassified 159 1931 27 1942 Contlomen: Attention: B, b. Senford Reference is made to my letter of February 28, 1936, enclosing & form of letter which I approved and which I authorised mé requested you, as fissal agent of the United States, to write to the Bank if Canada, Ottawa, Onterie, Canada, respecting the purchase of nevly-mined Canadian silver, and also to 4 letters of May 13, 1936, November 5. 1936, Jamary 26, 1938, March 29. 1940 and September 14, 1940, in this commention. It is my understanding that the Bank of Canada has advised you that 11 vishos to remov, for the month of August, 1942, the arrengement pro- vided for by your letter to it of February 29. 1936 as amended and clari- fied " your letters of May 27, 1936. Nevember 10. 1936, January 27. 1938, March 30. 1940 and September 24, 1940. This is to siving you that you are authorised and requested, M fiscal agent of the United States, to rease such arrangement for the meath of August, 1942, all M stated is your letter to the Bank of Canada above nantioned, as amaded sal clarified, except that during August, 1942, you may purchase newly-mined Canadian silver which according to the production date marked on the hare was produced in Canada during July, August or September, 1942, and se to advise the Bank of Camela, and to earry out during make month the trans- actions contemplated by your letters of February 29, 1936, May 27. 1936, November 10, 1936, Jamary n. 1938, March 30, 1940 and September 24, 1940. It is understood that the terms of the Department's letter to you of June 19. 1934, regarding the purchase for the account of the United States of silver, at home or abroad, shall apply to the action taken by you per- cusat to the foregoing. except that the silver purchased parsuant to this authorisation seed not be of the degrees of finances, or earry the marks, required for "good delivery" in the market of the place where the purchase is made or where delivery is to be taken. Very truly yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. Federal Reserve Bank of New York, 33 Liberty Street, New York, Nov York. nmc EH:imc:7/17/42 Regraded Unclassified 160 JUL 27 1942 Contlomen: Attention: 1, L. Sanford Reference is note to my letter of Devember 19, 1941, anclesing a form of letter which I approved and which I authorised and re- quested you, as fiscal ageat of the United States, to write to Baseo do Mexico, 5. A., Mexico City, Mexico, respecting the purchase of nevly-mined Hexican silver. It to my understanding that Bance do Mexico has advised you that 10 wishos to reasy, for the month of August, 1942, the arrange- next provided for by your letter of November 21, 1941, to 18. this is to advise you that you are authorized and requested, as fiscal agent of the United States, be reasov such arrengement for the month of August, 1942, all as stated is your letter to Banco de Mexico above mentioned, except that daring August 1942, you my purchase and mined Mexican silver which according to the production date marked on the hare vas produced is Mexico during July, August or September, 1942, and 90 to advise Banco do Nexico, and to carry out during such south the transactions contemplated by your letter of November 21, 1942. It is understand that the terms of the Department's letter to you of June 19. 1934, regarding the purchase for the assemb of the United States of silver, at home or abroad, shall epply to the nation taken by you parment to the foregoing. except that the silver per- chased purcuant to this authorization need not be of the degrees of finences, or carry the marks, required for "good delivery* is the market of the place where the parchase is made or where delivery is to be taken. Very truly yours, (Signed) H. Morgenthan. Jr. Secretary of the treasury. Federal Receive Bank of New York, 33 Liberty Street, New York, Bev York. 1mc:7/17/42 nmc Regraded Unclassified 161 Y WAR DEPARTMENT WASHINGTON CONFIDENTIAL July 27, 1942 WD 560.81 (7-24-42)WS-AFDAS The Honorable, The Secretary of the Treasury. Dear Xr. Secretary: In regard to your letter of July 24, 1942, I an able to advise you that the Air Force will fly the gold from Nome, Alaske to Denver, Colorado. How- ever, it is believed essential that a representative of the Treasury Department accompany this flight to take charge of the shipment. I will appreciate it if you will advise me EB to the name of this representative. I believe that this representative will then be able to arrange all later details regarding this flight directly with the Air Force authorities. Sincerely yours, /=/ Henry L. Stimson Secretary of War. CONFIDENTIAL Copy:vw:a-12-42 Regraded Unclassified 162 DRAFT OF LETTER TO II WRITTEN BY RUSSIAN AMBASSADOR By dear Mr. Secretary: I have been informed that a shipment of as casse of gold shipped by the deverament of the Union of Seviet Socialist Reyublics has ar- rived at Brooklyn, I. Y. Please arrange with the Federal Reserve Bank of New York to have the gold transported, uninsured, frem Breaklyn to the United States Assey Office in New York where 10 is to be 44- posited for the assount of the Secretary of the Treasury of the United States by erder of the Government of the Union of Seviet Secialist Republics. The gold contained is this shipment 10 to be applied against the amount sold under the agreement of January 3. 1942. Please request the Federal Reserve Bank of New York to commission with the State Bank of the U.S.S.R., Mossev, relative to my expenses which 11 my insur in commention with the transportation of this gold. Sincerely yours, The Eenerable The Secretary of the Treasury, Vachington, D. c. Initialed: FD Approved by 3,3, FD:1ap-7/27/42 Regraded Unclassified C- 0 163 P Y EMBASSY OF THE UNION OF SOVIET SOCIALIST REPUBLICS WASHINGTON, D. C. July 27, 1942 My dear Mr. Secretary: I have been informed that a shipment of 28 cases of gold shipped by the Government of the Union of Soviet Socialist Republics has arrived in Brooklyn, N. Y. Please arrange with the Federal Reserve Bank of New York to have the gold transported, uninsured, from Brooklyn to the United States Assay Office in New York where it is to be deposited for the account of the Secretary of the Treasury of the United States by order of the Government of the Union of Soviet Socialist Republics. The gold contained in this shipment is to be applied against the amount sold under the agreement of January 3, 1942. Please request the Federal Reserve Bank of New York to communicate with the State Bank of the U.S.S.R., Moscow, relative to any expenses which it may incur in con- nection with the transportation of this gold. Sincerely yours, /a/ Maxim Litvinoff The Honorable The Secretary of the Treasury Washington, D. C. Copy:1c:8/10/42 Regraded Unclassified 164 Rose an - n Stabilization Pand July 87. 1948 Federal Reserve Bank of New York, New York, New York. Attention: L. V. Knoke Confirming telephenic conversation, you are authorized and directed, as fiscal agent of the United states, to assept delivery of as cases of gold at the point of arrival, to transport the gold uninsured to the United States Assay Office is New York and to deposit 10 there for account of the Secretary of the freasury of the United States by erder of the deverament of the Union of Seviet Secialist Reychlics. hypropriate instructions will be given w the Treasury to the Accept Office regarding the disposition of the cold. You will be adviced by letter as so reinbursement of your expenses. (SIGNED) D. W. BELL Acting Secretary of the Treasury. aled: FD m n VII UNT FD:vw17-27-43 Regraded Unclassified 165 July 27. 1942 To: 5. s. Department of Commerce, Division of Pereign trade Statistics, Attention: Mr. Simpeen will you kindly include in your Weekly Statement of Gold and silver Emports and Importe for the week ending July 29. 1942 - import late New Yesk of 54,234.119 fine cances of gold valued at $1,895,194.16. This shipment - from Bussia. 10 will not be covered w my other entry papers. (Signed) D. W. BELL D. V. Dell $ I r Secretary der Initialed: FD EMB Regraded Unclassified 166 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 27, 1942 TO Secretary Morgenthau FROM J. W. Pehle You may be interested in the following item broadcast by Tokyo radio and picked up by the Federal Communication Commission's monitoring service. Tokyo radio says today, July 27, is really the first anniversary of the war between the U. S. and Japan. The Japanese arrive at this conclusion by alleging that "it was on this day that Japan was subjected to the freezing order which out off long standing (commercial) ties between the two nations and vas actually driven into a state of war with the U. S. by none other than the crucial declaration of President Roosevelt". JuiPrale Regraded Unclassified 167 COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPTEL No. 257 Information received up to 7 A.M., 27th July, 1942. 1. NAVAL Two AA trawlers were engaged by four of our steam gun boats off NORMANDIE during the night 25th/26th. One trawler was left sinking and one damaged. A French ship, 3,350 tons, suspected of carrying cobalt for the enemy was stopped north of ORAN yesterday and is being escorted into GIBRALTAR. 2. MILITARY EGYPT. 25th. No change. Enemy continuing to dig in. 3. AIR OPERATIONS WESTERN FRONT. 25th/26th. DUISBURG--about 550 tons of H.E. and in cendiaries including fifty-seven 4,000 pound bombs were dropped over the area. A Mosquito operating in the vicinity on the following day reported smoke drifting from DUISBURG and four large fires burning. 26th. In the early morning a Spitfire off LE TOUQUET sighted a 2,000 ton vessel which had been attacked the previous night by Hurricane bombers smoking heavily. It is believed to have sunk later. Three sweeps by Spitfires over THE PAS DE CALA produced a reaction of about 80 enemy aircraft. During these and other operations nine FW 190's were destroyed, 3 probably destroyed and ten damaged. A T-boat was sunk. Three Spitfires are missing. Mosquitos dropped bombs on three places in the RUHR. A merchant vessel attacked by & Sunderland off SAN SEBASTIAN was later seen making for the panish coast at much reduced speed. 26th/27th. 433 aircraft were sent out - HAMBURG 404 including 189 heavy, aerodromes 29. Weather at HAMBURG was perfect being cloudless with bright moon. The objective was easily identified and numerous large fires were caused in the target area. Preliminary reports indicate an outstanding success. 29 bombers are missing, including 12 heavy. 20 Coastal Command aircraft were sent to attack a convoy off the FRISIAN ISLANDS. One 4,000 ton vessel was hit. 27th. In the early morning about 25 enemy aircraft taking advantage of cloud and rain flow overland and dropped some bombs over a wide area. EGYPT. 24th/25th. Our bombers attacked TOBRUK EL DABA landing ground and aerodromes in CRETE. Torpedo aircraft scored one hit on an escorted merchant vessel off BOMBA. MALTA. Between 1240/25th and 1215/26th about 40 enemy bombers and 60 fighters operated. One fighter was destroyed and 3 aircraft were damaged. HOME SECURITY 25th/26th. BILLINGHAM. There will be some loss of production at I.C.I. works. At MIDDLESBOROUGH there was no serious damage to key points but 10 persons were killed. Regraded Unclassified 168 July 28, 1942 9:15 a.m. FINANCING Present: Mr. Bell Mr. Haas Mr. Buffington MR. BELL: We will need two billion two hundred and fifty million dollars of new money in August, and that is based on the assumption that we will get one billion dollars in Savings Bonds, three hundred million in tax notes, and five hundred million, Treasury bills. We recently sent out a telegram to the chairmen of the Victory Fund Committees asking them for their sug- gestions on the August financing, and if they wanted, to give us some ideas on the full three months. I can give you sort of a summary of that if you would like to have it. H.M.JR: Yes, I would. MR. BELL: Two and a half percent, '62-'67, it was suggested by Boston, New York, Philadelphia, Richmond - well, all of them except one - that we reopen that issue, and the estimates ran anywhere from five hundred to seven hundred and fifty million dollars. H.M.JR: That is the so-called tap issue? MR. BELL: That is the so-called registered tap, yes. There were some suggestions that we reopen - that it be made available for estate taxes and that it be made a coupon bond so that it could transfer freely in the markets. They said there was a great deal of sales resistance to the registered security. Now, we have an amendment to the circular drawn which would permit its acceptance or its redemption, rather, in connection with the estate taxes, but George and I both feel that to make it a coupon bond would certainly make it sell Regraded Unclassified 169 - 2 - a good deal higher on the market, and we ought to give consideration to extending the term from '62 - '67 up nearer the '67-'72, wouldn't you say, George - maybe not quite that. But we don't think that ought to be done. H.M.JR: I don't think you want to sell more of the same one-- MR. BELL: You do, you say? H.M.JR: I don't; I think if we make it a coupon that the price will be too high. MR. HAAS: Yes. H.M.JR: Why would a coupon bond sell - you mean, with no limitations? MR. BELL: You would have a limitation that the banks couldn't own it, but how you would police that would be through your supervisory authorities, whereas now we police it through our registered records. MR. HAAS: It would be difficult to tell a bank examiner that a bank couldn't hold United States Govern- ment bonds. MR. BELL: Practically all of them suggested that you do your August financing, that is, your major finan- cing, by a certificate of indebtedness from six months to a year. Two or three of them suggested - one of them suggested three-quarters percent, May 1943; and one, seven-eighths, August '43, but they all practically suggested a certificate. Philadelphia suggests that we increase bills from four hundred million dollars - from three hundred fifty million dollars to four hundred million dollars in August and raise them to five hundred million dollars a week in September. Richmond and St. Louis also made that suggestion. Regraded Unclassified 170 - 3 - Kansas City made a rather novel suggestion, that many of these country banks still don't know how to bid on Treasury bills, and they suggest that each week they remain on sale, Treasury bills, at the highest bid; in other words, sort of a tap Treasury bill, so that the banks can come in and buy at that rate rather than bidding in competition with the larger banks. Philadelphia, Minneapolis, and Dallas suggested the so-called short tap issue. H.M.JR: Now who made this survey? MR. BELL: This is the Victory Fund Committees'. H.M.JR: I see. MR. BELL: St. Louis said there was a divergence of opinion on this tap issue, but it is recommending that, in order to get some of the funds and keep the financing out of the banks. Boston suggested that we have periodic drives on financing rather than an attempt that we have now to sustain steady sales efforts. They thought that we ought to have, say, a big financing program and everybody all out for it and then stop maybe for a month or two. We had two suggestions, one coming from New York and the other from Richmond, that in connection with the refunding early in September of the eight hundred ninety-four million securities matur- ing this fall, we do that with a Treasury note and we raise a half a billion dollars in cash in connection with that refunding, which would make your billion and a half issues about what we are trying to hold to. New York suggests that we give consideration to a four or five billion dollar issue late in September, or early in October, and that an early decision on this should be made in order that proper preparation should be made for it. There were several suggestions that we raise the limit on series À tax notes from twelve hundred to five Regraded Unclassified 171 - 4 - thousand. New York even suggested we might put it at ten thousand, and that the rate on series B be raised from forty-eight hundredths to seventy-two hundredths. Philadelphia and Minneapolis suggest that same thing. There are miscellaneous suggestions, such as New York still thinks that the responsibility for the sale of F and G's ought to be given to the Victory Fund Committee, that all market bond issues under war finan- cing should be at fixed rates rather than giving the Treasury an option. I don't know why. It seems to me to be more important to give an optional date in war financing because of its size than any other plan. Philadelphia says that shortcomings in the organizational set-up are responsible for the lack of greater success in the sale of F and G Savings Bonds. They said also that there is sales resistance in the discount features of series G Bonds. St. Louis thought that the two and a quarter percent bond might be considered. They don't necessar- ily recommend it, but they thought that if the Treasury certificate was not wanted that the two and a quarter percent bond - that is what was wanted before, and there still is a lot of interest in that in the District. Minneapolis suggested, by the way, that we increase the F and G to a two hundred and fifty thou- sand limit instead of a hundred thousand; and we have one man who particularly wanted his views known to you that we should eliminate F and G's altogether, that they were a demand obligation on the Treasury, and the people who invested in those should go to a two and a half long tap. H.M.JR: Who is that? MR. BELL: No particular name; it just said one individual in the group wanted you to particularly know how he felt about it. Regraded Unclassified 172 - 5 - Dallas suggested you might have a seven to ten year bond issue. It would be well received in their District. H.M.JR: You had better give me those. MIL. BELL: Yes, I can give you the letters if you want them. (Paper handed to the Secretary.) H.M.JR: No. MR. BELL: They are quite long. There are one or two yet to hear from. Now, in your - I think maybe we ought to draw up a little agenda for your discussion on-- H.M.JR: This is from the Victory Fund? MR. BELL: Yes. We will have a better analysis of that, Mr. Secretary, when they are all in. That is very brief. H.M.JR: That is all right. MR. BELL: For your three o'clock meeting tomorrow afternoon, I think maybe we ought to draw up a little agenda and try to stick to it. If we don't, We will get all over the lot, and we are getting now so that we can't talk to the Federal on the subject that we don't switch and get back to the tap issue. We sub- mitted to them our tax note. H.M.JR: I was going to ask you that. MR. BELL: Well, they didn't like it. The Board didn't like it particularly, but I think Allan Sproul and Bob Rouse said that they thought it was a good suggestion. MR. HAAS: And Williams, Al Williams. Regraded Unclassified 173 - 6 - MR. BELL: He thought it was a good suggestion. They didn't like it as well as the short tap. H.M.JR: Sure, their copyrighted idea. MR. BELL: I think there was some author's pride in it, but nevertheless they said that they thought it was important that we go ahead on a short tap of some kind, and they would go along with this one that we could get together on. H.M.JR: I think we ought to do it right away. MR. BELL: If we are going to do it, it ought to be announced before the first of August, before anybody begins to invest in that tap, the old tax note, in August. We can get the notes ready, I think, by the fifteenth. I think you ought to do it. H.M.JR: The thirty-first is a Friday. Why couldn't we settle it before Friday? MR. BELL: I think we can. I think maybe you will be able to settle it this week - this week, Friday. H.M.JR: This is only Tuesday. MR. BELL: But, you shouldn't settle it, I don't think, until after the meeting tomorrow. H.M.JR: Pardon? MR. BELL: I don't think you should settle it until after the meeting tomorrow and give them a chance to argue against it. They said that there was no inducement like there was in their tap issue. In other words, they had a beginning three-eighths percent rate and it graduated up, and the longer a man held it, there was inducement to hold on to it. Regraded Unclassified 174 - 7 - Now, I asked Henry to look into the question of leaving the rate on the tax note for the first six months like it is, forty-eight hundredths, increasing it one cent every six months up until nine cents in the last six months, and that would give an average of about three-quarters. 2 MR. HAAS: That makes new series every month. MR. BELL: No, I don't think SO, It is the same thing. We can put a schedule on there. H.M.JR: Supposing there was a new series every month? MR. HAAS: The mechanical - I mean, that is-- MR. BELL: We would have to issue it like Treasury bills. The trouble with tax notes is they are so hard for a collector to handle. The compu- tations on the face of the note have got to be simple; if the collector has ten notes of one denomination - he can't look through each denomination and see the amount. He has to look at one on a certain date and multiply by ten. It has to be simple for him, but I thought tomorrow-- H.M.JR: Well, I personally think we ought to go ahead now with this tax note. That answers that argu- ment about if there are - now long would it be, two years, three years? MR. BELL: We thought that we would make them December thirty-one, 1943 - I mean '45. That is a little over three years. We had it in your memorandum three years, but we thought we would complete the calendar year, go to December thirty-one, '45, instead of August. H.M.JR: But you will have to advance them a cent a month. Regraded Unclassified 175 - 8 - MR. BELL: No. Then on January first of this next year we would have a new series and go to December thirty-first, 1946. Each January we would have a new series, and just extend it out three years from that date. That is what we do now. H.M.JR: Do we? MR. BELL: Yes, we have a new series every January. H.M.JR: It seems to me if you are going to have the sliding scale you ought to have one every three months. MR. HAAS: You like a sliding scale rather than - that seventy-two is sweet. We put it that way. H.M.JR: No, I would like - the thing that Bell has been talking about, the first six months at this same rate, then increase it a cent a month. MR. BELL: I think that would be attractive. Just figuring it out roughly, I think you would get around seventy-five, wouldn't you, three-quarters percent on that basis? MR. HAAS: Off-hand I don't see any objection. H.M.JR: Well, you fellows have got all day today to study it. MR. BELL: Well, I thought tomorrow that you might put down something to talk about - would be first the reopening of the two and a half's, when we ought to do that. H.M.JR: Yes. MR. BELL: It has been suggested that we do that August third. That is Monday. And then the next thing I think you ought to discuss, probably, is this tax note, Regraded Unclassified 176 - 9 - one, raising the limit from twelve hundred on A to some figure - it has been suggested five - one fellow said ten - and then go and change the B to take in both the idle funds and the tax funds. And then I think you ought to consider what you ought to do in the major job. H.M.JR: Well now, just a second, if we reopen the tap issue, how much do you think we would get out of it? MR. BELL: Well, it is estimated anywhere from five to seven fifty. I thought six hundred million. H.M.JR: Let's say six hundred million; and if we did this new tax note, how much would we get? MR. BELL: Gosh, that is hard to say. We are getting now around three hundred or three hundred and fifty million dollars a month, and that might go to seven or eight hundred million. H.M.JR: Let's say six hundred on that. What? MR. BELL: That is a billion two. H.M.JR: Which would leave a billion. MR. BELL: No, because in the two billion two hundred fifty I have considered three hundred million tax notes, so it is really a billion three. H.M.JR: How much do you think we would have to raise outside of that? MR. BELL: I was thinking we ought to raise about a billion and a half - a billion six outside of this new tap issue; and I would be inclined to go ahead and raise the billion six - billion and a half or billion six - and then test the new note. That would cut down on your September financing. Regraded Unclassified 177 - 10 - H.M.JR: If you ask for more than a half and took five percent over, you would get-- MR. BELL: That is all right. H.M.JR: You asked for a billion and a half - five percent is what, seven fifty? MR. BELL: Seventy-five million. H.M.JR: You could run a little-- MR. BELL: We took eighty-eight million on the last certificate. H.M.JR: I mean, don't you think about a billion and a half? MR. BELL: That suits me fine. H.M.JR: Then you could take six or seven percent over. MR. BELL: And we are sure to get some funds here on this new tax. H.M.JR: Then it gets down to how we are going to do the billion and a half. MR. BELL: That is right, and it has been suggested by all of them that you do another certificate; some have suggested nine months, May, at three-quarters, and some have suggested a year at seven-eighths. H.M.JR: You mean another certificate? We have two out now. MR. BELL: Yes, sir, and most all of them would like six billion dollars of certificates outstanding. Eccles would like eight. He would like eight billion dollars in certificates and six billion dollars-- Regraded Unclassified 177 - 10 - H.M.JR: If you ask for more than a half and took five percent over, you would get-- MR. BELL: That is all right. H.M.JR: You asked for a billion and a half - five percent is what, seven fifty? MR. BELL: Seventy-five million. H.M.JR: You could run a little-- MR. BELL: We took eighty-eight million on the last certificate. H.M.JR: I mean, don't you think about a billion and & half? MR. BELL: That suits ne fine. H.M.JR: Then you could take six or seven percent over. MR. BELL: And we are sure to get some funds here on this new tax. H.M.JR: Then it gets down to how we are going to do the billion and a half. MR. BELL: That is right, and it has been suggested by all of them that you do another certificate; some have suggested nine months, May, at three-quarters, and some have suggested a year at seven-eighths. H.M.JR: You mean another certificate? We have two out now. MR. BELL: Yes, sir, and most all of them would like six billion dollars of certificates outstanding. Eccles would like eight. He would like eight billion dollars in certificates and six billion dollars-- Regraded Unclassified 178 - 11 - H.M.JR: What was the last? Excuse me, I didn't mean to interrupt. What did you say? MR. BELL: I say Eccles would like eight billion dollars of certificates, that is, two billion dollars on each of the maturity dates, and he would like six billion dollars of Treasury bills. H.M.JR: He is going up. MR. BELL: He has gone up a little. But most of them suggest that we have eventually six billion dollars of Treasury certificates. H.M.JR: Well, we always figured, didn't we, in August on doing a billion and a half? MR. HAAS: I thought you were figuring on that. H.M.JR: In certificates. MR. BELL: Either in August or September we said we would have another certificate issue. MR. HAAS: November - was it February, May, August - I mean it is even quarters. MR. BELL: Those are maturity dates. We set February first, May first, August first, and November first. H.M.JR: I think, particularly if we are going to do the tap issue, this will be the time to do the certificate. MR. BELL: I think you are right. H.M.JR: That doesn't sound too difficult, does it? MR. HAAS: No. It would be difficult if you tried to do a big job in August, but I guess that is out. Regraded Unclassified 179 - 12 - MR. BELL: I think it is too early to do a big job. Then the next thing I think you ought to discuss at the meeting would be the longer term program as to whether or not we want to do a big job some place along here, say in September, and get their views on that, and get them thinking about it. If we decide that we want to give consideration to - I think we ought to give consideration to whether or not we ought to announce that we are considering it so as to let the market talk-- H.M.JR: You are going to have trouble with me on that with all this other stuff in the wind until we see what the President does on the cost of living and rationing. MR. BELL: He would be pretty well out by that time. Isn't he coming out next week? By the way, is that going to hurt our financing? H.M.JR: Help it. MR. BELL: Ought to help it, ordinarily. H.M.JR: Ought to help it, if he does the-- MR. BELL: The right thing. H.M.JR: If he does what they were talking about up to seven o'clock last night, it would help us. Now, the question is - everybody is going to go at him, and the question is how much he will water it down. But I know that Henderson is going over there today to try to get him to change, but he certainly was tough- minded yesterday. MR. BELL: Who is that - Henderson is going to try to get him to change? H.M.JR: Yes, it is too tough for Henderson; even Henderson couldn't stomach it. Regraded Unclassified 180 - 13 - MR. BELL: I think he has got to get tough. H.M.JR: I think whatever he does would help us, Dan. MR. BELL: Certainly we shouldn't announce that we are considering it until after our books are closed and there is some distribution of the C/I's probably around the tenth or fifteenth of August. H.M.JR: You won't get me to commit myself until I come back. MR. BELL: Not commit, just announce to the market that you are considering it. H.M.JR: You won't get me to do anything on this until I come back from my week's holiday. MR. HAAS: If you discuss it here, the Fed will have it all out anyway. MR. BELL: It was in the paper Sunday. H.M.JR: We will slap them down. We slapped them down before. MR. BELL: Yes, that the Treasury was considering it. I think that came from the Victory "und Committees. I wonder if you want to discuss that in the meeting tomorrow. H.M.JR: No. MR. BELL: They will bring it up. H.M.JR: Let them bring it up. MR. BELL: Allan Sproul will. H.M.JR: That is all right. Doaradod 181 - 14 - MR. BELL: Then you ought to discuss the Treasury bill program as to whether the three fifty is enough. Allan Sproul thought that you ought to go to four hundred million on September ninth. I think that is the maturity date of the three hundred million dollars. That is the beginning of the maturity date. That would be a good time to go to four hundred, he thought, and then you would have in the picture also the reserves. The reserves are down, what is it, two ninety? H.M.JR: Yes, I wish you would certainly put some- thing in on that. MR. HAAS: I think you have to. It has gone down where you have to. MR. BELL: Allan Sproul suggested the other day at the meeting that possibly we ought to lower reserve requirements in New York and Chicago by two percent. That would give about four hundred million, wouldn't it, George? MR. IIAAS: That is right. MR. BELL: And then in September and October do the same thing. H.M.JR: I wish you would put that up to the head of the list because I have got to do something about that and quit fooling about it. MR. HAAS: You have reached the stage where you have to. H.M.JR: They have got to do something. I wish you would put that up as number one. Please put that number one on the agenda. MR. BELL: Well, I-- MR. HAAS: Don't they realize that, Dan? I thought Sproul discussed it. Regraded Unclassified 182 - 15 - MR. BELL: I think Sproul feels that if you are going to do financing from month to month, just like we have been putting out bank issues, that you have got to put out some additional reserves, but he thinks that two percent a month would do it. He thinks that - I believe he thinks that you can go by August and no harm will be done. H.M.JR: What are the reserve requirements in New York? MR. BELL: Twenty-six percent. They want to lower it to twenty eventually. H.M.JR: Why not do it at once? Why this nig- gardly business-- MR. BELL: I think if you do it at once you throw a billion two hundred dollars' worth of money into the market which is going to seek investment and probably rush the price of securities up, which I don't think should be done. You certainly have heard no kick on the reserves. No one is worried about the reserves any more because they have got flexibility. H.M.JR: I am worried; it tightens the money market. MR. BELL: I don't think it is tight. H.M.JR: Why do they want to raise the short- term money rate? MR. BELL: That is for a different reason. I think that also ought to be on the agenda. H.M.JR: Is Sproul ready to go ahead on the two percent? MR. BELL: I think he is. Wouldn't you say - I don't think-- Regraded Unclassified 183 - 16 - MR. HAAS: He will ask - coupled with that, he will ask to raise the three-eighths on bills to a half, which I agree with the Secretary on, no. MR. BELL: I don't think he was free to talk, but he did suggest we do the two percent a month. H.M.JR: I will see how serious he is. They begin doing that when? MR. BELL: In August. MR. HAAS: It ought to be done before this financing. MR. BELL: Announce it about the time-- H.M.JR: They ought to announce it this week. MR. HAAS: They ought to announce it so the banks know where they are at before you offer it, several days before. MR. BELL: I should think if you announced it the first of the week it would be all right. Don't announce it far enough in advance 80 they go into the market and start buying. That is what you don't want them to do. (The Secretary held a telephone conversation with Mr. Allan Sproul as follows:) Regraded Unclassified 184 July 28, 1942. 9:50 a.m. HMJr: Hello. Operator: Mr. Sproul. HMJr: Hello. Allan Sproul: Good morning, Mr. Secretary. HMJr: How are you? S: Fine. HMJr: You going to have lunch with me tomorrow? S: Yes, I just got the message, and I've planned to. HMJr: Good. I was just sitting here with Bell and Haas talking about the financing, and Bell tells me that you have a plan to lower the reserves two percent a month in New York and Chicago till you get them down to twenty? S: I suggested that, yeah. HMJr: Well, are you going to - you're serious about that? S: Well, I'm serious about it, but that's some- thing that's in the Board's hands, not in the Open Market Committee's or the banks, 60 it's that the Board has to act on that. HMJr: Yeah, but as far as you're concerned, you're serious. S: That's right. HMJr: I see. Well, I just wanted to - I just wanted to make sure.... S: Yeah. HMJr: because I think it should be done. Regraded Unclassified 185 - 2 - 8: Well, it's tied up with some other things. It's not a separate thing by itself. HMJr: Yeah. Well, you're - what are you going to try to do, deal with me? S: Well, I'm not - no, I - - I - - my suggestion 1s a - 18 a complete - a complete program, more or less a complete program, not isolated action. I can't deal with you. (Laughs) HMJr: Well, you make a good stab at it. S: (Laughs) Well, I try sometimes. HMJr: (Laughs) All right. Okay. All right. S: All right. HMJr: Thank you. Regraded Unclassified 186 - 17 - (The Secretary held a telephone conversation with Mr. Ransom as follows:) 187 July 28, 1942. 9:53 a.m. HMJr: Hello. Operator: Mr. Ransom. HMJr: Hello. Ronald Ransom: Good morning. HMJr: How are you, Ronald? R: Fine. I hope you're well. HMJr: Are you in your own office? R: I am. HMJr: Good. Ronald, I hope that the Board will entertain a suggestion of lowering the reserves now. As I understand it, Proul - Sproul's made the suggestion two percent a month till you get it down to twenty for New York and Chicago. R: Yes. HMJr: Well, I think to run along with $200 million dollars reserve in New York is just plain dumb - hello? R: Yes, I'm listening to you. HMJr: And I hope I'm not going to have to have a row about it. R: I don't see why you should ever have a row with us or we with you. HMJr: No, and I don't know where you stand, but I know - you told me that you saw no reason to increase the three-eighths rate, and of course this 18 tied up with that. R: Well, may - may I take just a minute of your time? Regraded Unclassified 188 - 2 - HMJr: Sure. R: I was sitting here trying to dictate a memo- randum HMJr: Sure. R: on this general subject. HMJr: Yeah. R: to relieve my own mind. HMJr: Yeah. R: I came out of the last meeting between the Treasury people and ourselves. HMJr: Yeah. R: ....in a most unhappy frame of mind, as did everyone there 80 far as I know HMJr: Yeah. R: and trying to analyze the cause for that, I came to several conclusions, first, that the Board itself should deal much more directly with you HMJr: Yeah. R: that, secondly, that we should try to hold staff discussions to the staff level HMJr: Yeah. R: and I'm not including Dan as staff because he is principal, of course HMJr: Yeah. R: but to try to get our respective staffs to clarify the questions that we are both jointly interested in HMJr: Yeah. Regraded Unclassified 189 - 3 - R: ....and when they come out at a point, then let you and the Board, respectively, reach some understanding as to the staff recommen- dation. It seems to me we - we wholly lack that direct contact with you which I think in this emergency period 1s of the utmost importance. HMJr: Well, let's be frank with each other. Is it my fault? R: No, I don't know that it's anybody's fault, Henry. I think it's - I think we all have failed to quite realize that in this situation it's - 1s of the utmost importance that you and we-you and Dan, I'll say, and the Board-- should have direct contact HMJr: Well R: to discuss these things face-to-face rather than.... HMJr: Yeah. R: in the perplexing, round-about way we have followed. HMJr: I think R: It's not your fault. I HMJr: that all of the initiative of asking the Board to meet with me, I think, comes from me. R: Yes. HMJr: I think every time that we want to get together, it's I'm asking the Board to sit down with me and advise me R: Yes. HMJr: with me R: Yes. Regraded Unclassified 190 - 4 - HMJr: and I'm not conscious of the fact that the Board wants to see me except when I ask for it. R: Well, I - I think there's something in that. HMJr: What? R: I think there's something HMJr: Just stop and think, I mean now.... R: Yes. HMJr: I don't know when the Board's asked to see me. R: Well, perhaps we've been - that's a possibility. HMJr: But I agree with you. I - I think we ought to meet regularly once a week. R: Well, that would be fine. HMJr: Yeah, whether we have a financing or not. Now this week I'm starting a week earlier with you fellows. R: Yes. HMJr: But I'd be delighted to meet once a week. R: Yes. Well, I think that's a grand idea. HMJr: Yeah. R: I really do, because this 18 no time to have any differences. HMJr: But I didn't know that you fellows were upset over there. R: Well, we're not upset. I said I came out of the meeting. HMJr: Yeah. Regraded Unclassified 191 - 5 - R: quite unhappy, not on account of anything that was said or not said, but I thought it was apt to be - it was the - we had reached the point of utter futility. We were not getting anywhere, you see? That's what's worrying me. HMJr: Yeah. Well, of course, I wasn't conscious of that - I mean R: No, I know that's clear out of your HMJr: but I must say, I - as far as my relationship with the Board, I've got a clear conscience. R: Your conscience is pretty clear now, isn't it? HMJr: Yeah, it's - it's - yeah, I - I think BO. R: I think it is. Now HMJr: But anyway R: Let me - let me - let me go just a minute HMJr: Yes. R: further if I may. I suggested that tomorrow after that meeting--in fact, I wasn't on the Executive Committee but I made B. motion and got somebody else to put it, and the Executive Committee to tentatively agree--that we ask Goldenweiser and Williams, John Williams, on our part, to ask Dan to put two fellows from your senior staff, Haas or - anybody that you fellows wanted, and ask those four to sit down and state points of agreement, pointe of doubtful agreement, and points, if any, not in agreement HMJr: Yeah, yeah. R: and that we take a look at it. Well, Dan said that looked to him as if we were moving it only one step further from you, and that it was a pretty good way to go at it, so I said, "All right," when Marriner reported that to me, "let's just have our own staff to pass such a statement and let us take a look at it." Regraded Unclassified 192 - 6 - HMJr: Well, Dan has been bringing to my attention that - I want to - don't want you to think that he hasn' R: Yes. HMJr: .... that there should be closer working - I mean, he has told me that R: Yes. HMJr: ....and that's why we're having these meetings this week. Dan's responsible for that. R: Yes. HMJr: But I'll have to stop now, but I - I'm more than pleased to work - and see you fellows just as often as possible and talk to you as often as possible. R: Well, that's fine. Now.... HMJr: And you think over these reserve requirements, will you? R: Yes, sir, it's tangled up in 80 many other things, I'd like to discuss the whole thing face-to-face with you. HMJr: Well, we'll - we'll do that tomorrow. R: Fine. HMJr: Okay. R: Okay. Regraded Unclassified 193 - 18 - MR. BELL: Of course I didn't say that you shouldn't discuss it; I said you should, but I thought we were moving one point further. (Mr. Buffington entered the conference.) H.M.JR: George, I want to ask you one question. Do you know - could you give me an estimate, if we decide to make this tax anticipation note, your old friend and pal, which you once used to sell - if we made that more available or more popular along the lines we have been talking, not today, but other days, whether your boys - how much they could sell? Have you any way of getting or making an estimate? MR. BUFFINGTON: It would be difficult to make an accurate estimate. I think from what Dan has told me, and I have heard in those Federal Reserve meetings it would be much more flexible, therefore much more salable to corporations where they wouldn't have to accurately estimate their tax requirements but could carry them for other purposes. I will make an effort to make an estimate. I don't know how accurate it will be. H.M.JR: Make an estimate, and then sometime tomorrow morning let me have it, will you? MR. BUFFINGTON: O.K., sir. Regraded Unclassified