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Volume 567, September 5 – September 9, 1942
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Volume 567, September 5 – September 9, 1942
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 567
September 5 - 9, 1942
- A -
Book Page
Airplanes
Aircraft despatched, week ending August 25, 1942 -
British Air Commission report - - 9/5/42
567
25
- B -
Beer
See Latin America: Mexico
Board of Economic Warfare
Minutes of meeting - 9/5/42
12
a) Relief and Rehabilitation Administration
draft discussed
Business Conditions
Haas memorandum on situation, week ending
September 5, 1942 - 9/8/42
216
- C -
China
Central Bank charter: Adler's description of draft
.
of new charter - 9/5/42
29,30,31
Customs, Bureau of
Teletypewriter service outlined - 9/8/42
213
- F -
Federal Reserve System
City Reserve Requirements:
Further reduction of 2% discussed with HMJr and
Bell 9/9/42
256
a) Sproul-HMJr correspondence.
260
b) Ransom thanks HMJr for supporting his
point
263
Chicago and New York - Ransom asks whether 14th
or 19th is best date: See Book 568, pages 100 and 102
Financing, Government
Conference; present: HMJr, Bell, Buffington, Haas,
and Murphy - 9/8/42
72,133
a) Haas suggestion: May 1 certificate at rate
of 65 and 11% note to run until March 1945
b) Sproul-HMJr conversation
86
c) Young-HMJr
.
.
93,134
d) Rouse-HMJr #
#
113
e) Ransom-HMJr #
.
117
f) Chester Davis-HMJr
#
142
Currency
See Occupied Territories
Regraded Unclassified
- 1- (Continued)
Book Page
Financing, Government (Continued)
Conference; present: Treasury group, Executive
Committee of Open Market Committee, Ransom, Sproul,
and Baker - 9/8/42
567
148
a) Dual-purpose note discussed by Sproul
159
b) Discussion by Treasury group after Federal
Reserve leaves
167
1) Interest estimates worked out
178
c) Baker memorandum on possible new issues dated
September 15, 1942
179
d) Haas memorandum on possible new issues
181
e) Calendar of direct and guaranteed bonds, notes,
and certificates
182
War Savings Bonds:
Radio Station sales - 9/5/42
6
Sales, May 1942-August 1942 - Haas tables and
charts
191
Payroll Savings Plan - progress of: December 1941--
August 1942
196
Winchester, Virginia, program discussed by HMJr and
Robertson - 9/9/42
238,250
a) Robertson--Randolph Paul correspondence -
9/18/42: See Book 570, page 167
Finley, David E.
See National Gallery of Art: Widener Collection
Foreign Funds Control
Census of American-owned property in foreign countries
discussed by 9:30 group - 9/8/42
66
- I -
Inflation
FDR's message to Congress - 9/7/42
46
Address by FDR - 9/7/42
54
- L -
Latin America
Mexico:
Trade Agreement: Beer - proposed reduction in import
duty - 9/5/42
14
Lend-Lease
Report for week ending September 5, 1942 - 9/8/42
230
United Kingdom:
Federal Reserve Bank of New York statement showing
dollar disbursements, week ending August 26, 1942 -
9/5/42
20
Gold and dollar assets - 9/9/42
331
Reciprocal Aid: Bookkeeping procedure discussed in
State-Treasury correspondence - 9/9/42
321
a) Lend-Lease--Treasury correspondence 9/11/42:
Book 568, page 185
Regraded Unclassified
- M -
Book Page
Mager, Harold
"Who's Who" by Kuhn - 9/9/42
567
271
Mexico
See Latin America
Military Reports
British operations - 9/5/42, etc
32,34,60,
233,332
Japanese and United States Naval Vessels Sunk and
Damaged - Hoflich report - 9/8/42
235
Bombing Raids over Western Europe during August 1942 -
Hoflich report - 9/9/42
333
a) Beginning of United States raids with
Flying Fortresses
Morgenthau, Henry, Jr.
Trip to England: Postponement discussed by HMJr and
General Marshall - 9/5/42
237-A
- N -
National Gallery of Art
Widener Collection: Finley thanks Treasury for assistance
in acquiring collection - 9/8/42
209
- 0 -
Occupied Territories
Currency discussion of HMJr, Phillips, and Carter
reported to Bell and White - 9/9/42
243-A
- P -
Post-War Planning
Relief and Rehabilitation Administration discussed at
Board of Economic Warfare meeting - 9/5/42
12
- R - -
Radio Stations
See Financing, Government: War Savings Bonds
Relief and Rehabilitation Administration
See Post-War Planning
Research and Statistics, Division of
Report for April 1942 - 9/5/42
272
Revenue Revision
Treasury attitude on (1) reduction of exemption to
$1000 if not associated with spendings plan, and (2)
sales tax discussed at 9:30 meeting - 9/8/42
63
Spendings Tax (See also Book 566): Rejected by Senate
Committee - 9/8/42
127
a) George plan described by Paul
128
b) Resume of Committee action - 9/9/42
249
c) Luncheon meeting with Senators George, Barkley,
and Brown; Congressman Doughton: Gaston, Paul,
and Blough - 9/9/42
244
d) Newcomer memorandum on possible publicity:
Blough memorandum 9710/42: See Book 568, page 29
Book 568, page 30
Regraded Unclassified
- R - (Continued)
Book Page
Revenue Revision (Continued)
FDR's brief mention of tax situation discussed by
HMJr and Walter Stewart - 9/8/42
567 205-A
- S -
Stewart, Walter
See Revenue Revision
- T -
Taxation
See Revenue Revision
Teletypewriter Service
See Customs, Bureau of
- U - -
United Kingdom
See Lend-Lease
- V -
War Savings Bonds
See Financing, Government
Widener Collection
See National Gallery of Art
Winchester, Virginia
See Financing, Government: War Savings Bonds
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Press Service
Saturday, September 5, 1942.
No. 38-13
Secretary Morgenthau today made the following statement:
In the coming week the Treasury is going to have to borrow
another $3,000,000,000 to help pay for the war. This is to be
done by public offering of interest-bearing bonds for subscrip-
tion through the Federal Reserve Banks. I have no doubt that
institutional investors, commercial banks and other large pur-
chasers will respond in the fine way in which they have re-
sponded to all offerings of Government securities since the
war began.
Yet too much reliance on this conventional kind of borrow-
ing has its dangers, and I feel that the American people should
become more aware of its dangers. Specifically, we. cannot hope
to finance this war in an orderly manner and without a further
serious rise in the cost of living unless our regular borrowing
is supplemented by bold and resolute action in many directions,
among them in the fields of taxes and savings.
My problem is not simply one of getting more money. It is
a problem of enlisting the taxes and the savings of all the
American people themselves. It is a problem of attacking un-
necessary spending, which is now reaching boom proportions and
which is threatening to drive the cost of living to heights
which will affect every American home.
We have been at war for almost a year, yet we AS a people
are still spending for things we want and can get at a rate far
higher than a war economy can afford. This cannot go on. Our
war on the home front cannot be won unless this evil of un-
necessary spending is checked and brought under control. We
must realize that we are fighting a war for our very survival
as a nation and that we cannot expect comforts as usual or
spending as usual.
In every community in the land young men are going out to
battle fronts all over the world to fight for us. It seems a
small thing to do for them that we should give up temporarily
some of the comforts we possess, the comforts that they are
denied.
2
- 2 -
The spending that is going on today is a national danger
and its continuance will have disastrous results for every
American. We must attack unnecessary spending with stern
remedies, through the fiscal field as well as through other
devices, and there is no more time for delay.
With the double purpose of bringing billions of dollars
into the Treasury and of discouraging unnecessary spending,
the Treasury submitted to the Senate Finance Committee last
Thursday a new form of tax to be known as the spendings tax.
It is aimed at everything above what we need and what we save.
It is a tax in two parts -- the first a flat levy of ten per-
cent on spendings of everyone above a bare subsistence income,
and the second a graduated tax on higher spendings which be-
comes frankly a penalty tax on those who spend thousands of
dollars unnecessarily in these times when spending actually
impedes the war effort. The first part, the flat 10 percent,
will be regarded as a debt to the taxpayer and will be repaid
in full after the war.
From the first part, the refundable ten percent, some
$4,500,000,000 will flow into the Treasury; from the second,
about $1,200,000,000, in revenue would be yielded each year.
But this does not tell the whole story, for there is no way
of estimating the amount of saving which will be encouraged
by such a tax. It is the first tax measure I have seen which
actually gives an incentive to thrift, to the purchase of War
Bonds and the repayment of debt, to the payment of life in-
surance premiums and many other forms of true savings. All
such expenditures will be deductible. The more you save, the
smaller the tax you have to pay.
This is the principle of the spendings tax. To me it is
as simple as grade school arithmetic. Yet I hear it described
as "complicated" simply because there are many technical de-
tails in its structure. In its actual impact on the taxpayer,
it will be severe, because severe measures are needed, but it
will require no elaborate bookkeeping or computation. For the
great majority of our taxpayers it will mean the filling out
of one very simple form to be attached to the regular income
tax form -- and this, I may point out, has already been vastly
simplified for them.
Regraded Unclassified
3
- 3 -
Every new tax seems "complicated" when it first appears.
The income tax which we now take for granted, was regarded
as complicated, unworkable and unsound when it was introduced
a quarter of a century ago. Surely those who complain that
the tax is "complicated" mean rather that it is new and un-
familiar. Its principle is simple, its logic is unassailable,
and its operations can be handled through the normal income
tax machinery.
The problem of financing the war without inflation is
too grave and too pressing to let any major tax proposal be
disregarded without the most serious thought and study.
Accordingly, I regard it as a slur upon the Senate Finance
Committee to suggest that the Committee is about to reject
the spendings tax after only perfunctory consideration.
Such a suggestion is not true. The Senate Finance Committee
is as much aware of the gravity of this hour as we at the
Treasury or anyone in 8. position of authority, and its mem-
bers realize as I do, the need for additional fiscal measures
to prevent unbearable increases in the cost of living.
Senator George, the distinguished Chairman of the Committee,
has discussed it in detail with me, and I know that he and
his fellow members will consider it with all the earnestness
and seriousness which a proposal of this magnitude deserves.
Moreover, I have been concerned at the disposition in
some quarters to couple this spendings tax with a sales
tax -- as if a sales tax were any answer to our problem.
A retail sales tax of five percent on all goods not now sub-
ject to heavy Federal excise taxes would, according to our
estimates, raise only $1,635,000,000 even if it included
sales of food, medicines, clothing and fuel. More than that,
it would fail to tax many kinds of services, it would be
grossly unfair in falling upon those with only $5 or $10 a
week of earnings, it would play havoc with price ceilings,
and it would have an utterly inadequate effect in discourag-
ing consumer spending.
The spendings tax, on the other hand, will bring four
times as much money into the Treasury in a single year. It
will tax all spendings, whether goods or services, above
necessities and above savings. It will not affect price
Regraded Unclassified
- 4 -
ctilings in any way. It will, I am convinced, exert such a
restraining effect upon unnecessary spending that it will make
thrift not only wise but fashionable. I know of no more effec-
tive way of insuring that the people tighten their belts in war-
time and put their savings away until the war is over.
For these reasons it is my firm belief that, no matter what
purely revenue devices Congress may adopt, we shall still face
the necessity of enacting real and basic controls of spending
along the lines I have suggested.
-o0o-
Regraded Unclassified
5
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
September 5, 1942
To
Secretary Morgenthau
FROM Harold N. Graves
Attached is a report from Mr. Callahan covering bond
sales by radio stations.
6
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE September 4, 1942
TO
Mr. Graves
FROM
Mr. Callahan
x2
Secretary Morgenthau asked me yesterday about
the progress of our radio station Bond Sale Campaign.
Herewith is a preliminary report up to and including
today: 52 stations report a sale through August 31) of
$1,004,899. Reports are coming in daily and there are
nearly 700 more stations to be heard from.
Attached are clippings from NEWSWEEK and TIME
which I am sure you will be interested in reading.
NEWSWEEK
RADIO
Bond Marathon
It WAS like election night. All last 9at-
urday night, Blue network stations across
the country peppered their listeners with
figures, but the figures covered War Bonds,
instead of votes. When the marathon
broadcast had ended-it lasted seven
hours-the Blue chain had chalked up a
total of $10,475,000, the biggest day's sale
of War Bonds ever made on the radio.
It was the first time that an entire
network-197 stations-had gone on the
air to sell bonds directly to listeners. The
show got under way at 9 p.m. EWT, with
a two-hour "I Pledge America" program
starring Orson Welles as master of cere-
monies. A fifteen-minute break followed
for local appeals, and then the coast-to-
coast broadcast continued with nineteen
big-name bands, Throughout the night
minute men and others appealed for or-
ders by phone, mail, or wire (Western
Union handled them free). From over-
seas points, American doughboys cut in
with pleas.
aus the radio industry sprang the first
scale plug of its own bond drive,
begun July 28. Described by the Preasury
as "the first instance that & single indus-
try as a whole has gone all the way out-
side of its direct field of action on the
War Bond campaign," the project was
made possible when the stations were
directly licensed to sell bonds. To date,
more than 750 of the nation's 880 stations
have been made issuing agents, and most
under activity has been anlong them issully.
For aside from sales appeals incorporated
in sponsored programs, no well as the
Treasury's own shows, the other big webs
-NBC, CBS, and Mutual-have not yet
on their own initiative staged programs
along the lines of the Blue network-wide
project.
Although only five weeks old, the drive
has already evolved some distinctive sales
stunts. Thus Arthur Godfrey, chatterer for
WJSV in Washington, has his own 10
per cent club, making roll calls of bond
buyers. WMCA in New York rings &
cash register on the air every time a
listener calls up to make a purchase.
KMBC in Kansas City has a caravan of
station artists on the road plugging bond
sales.
Red Barber, baseball announcer, got
$100,000 in pledges from eighteen states
broadcast of a Dodger-Giant game
Other WHN, using autographed baseballs
and players' pictures as incentives. Mar-
tin Block sold $8,000 worth in a day on
his WNEW Make Believe Ballroom show.
Five San Francisco stations took in more
than 8280,000 in & day-long Victory Day
auction of bonds. And WJZ, Blue's key
outlet in New York, which cruised Broad-
way with a "bond buggy." collected
$3,427,000 in seventeen days.
TIME
8
experimental basis from a booth at the
Nat
Lawn Tennis championships at
For Hills in September 1939. Engineers
installed the listening equipment there
because reception was good, and when Ted
Husing was not giving a hushed account
of the tournament, monitors used the
direct wire to relay short-wave news from
Europe back to Manhattan headquarters.
CBS has been eavesdropping on the Axis
-and on more friendly stations-ever
since.
Under monolingual Director Gerber
now work eleven listening linguists, each
of whom knows at least three languages.
For 19-hours a day the squad listens to
both Axis and United Nations broadcasts.
Each day the monitors compile a 20,000-
word digest of news and propaganda slants,
another 30,000 words of direct transcrip-
tions. Carbons are turned over to the
OWI, important stories are relayed to
press associations by teletype, but the
main purpose of the listening post is to
aid CBS in its fight against Goebbels.
Miss Liberty, Saleswoman
Hollywood, which has sold glamor to
the nation, and radio, which has sold it
practically everything, are out to prove
that they can sell the U.S. a billion
dollars' worth of war bonds this month.
Last week a sales crew of cinema ladies
(af
onald Colman), leaving Los Angeles
for tour of 300 cities, were photographed
in a fetching frieze against a background
of soldiers. Last week, too, seven comedi-
ans, six vocalists, four actors and 21 bands
took part in one of the most successful
broadcasts ever made.
I Pledge America, a six-hour, 45-minute
show, was the longest in the Blue Net-
work's history. The broadcast started at
9 p.m. Saturday and continued until 4 a.m.
Sunday with only one 15-minute interrup-
tion (at II, to let Ford's Earl Godwin
repeat Watch, the World Go By for West-
em listeners).
At 9 o'clock the Statue of Liberty
stepped off her pedestal and went to Man-
hattan's RCA building with Orson Welles.
There, for two hours, she listened to Ed-
ward G. Robinson, Jane Cowl, Bob Burns,
Jack Pearl, Red Skelton, Fanny Brice,
Amos 'n' Andy and other comedians and
actors snarl at the Axis, repeat the tales
of U.S. heroes, past & present. Some
heroes spoke for themselves, by short
wave, from England, Hawaii, the Canal
Zone.
Often the listeners were asked to show
pretty Miss Liberty they appreciated her
by sending collect telegrams to their near-
est Blue station ordering war bonds. The
whimsey was profitable. By II, when
the Statue returned to her island, Blue
ht
eceived orders for more than four
million dollars in war bonds. When the
program swung to dance music and picked
up name bands, the orders kept pouring
in. Blue's volunteer tabulators were nearly
swamped, but at 4 a.m. could proudly
announce the total: $10,359,368. Wires
were still coming in, a heavy mail-order
business was expected. Blue officials, who
would soon receive the bill for all tele-
grams, were far from blue.
September
9
Mrs. Klotz:
(For Secretary Morgenthau)
Walter Lippmann's home
advises that he has gone to
England and will be away until
about the 20th of this month.
Wr
FROM: MR. GASTON
Treasury Department
10
TELEGRAPH OFFICE
VIA WESTERN UNION
1942 SEP 5 AM 9 08
M326N FR 18 NT COLLECT GOVT
TDWD BEACON NY SEP 4 1942
HERBERT GASTON
DLR 5TH 9 AM OFFICE OF SECY OF TREASURY WASH DC
PLEASE TRY SEE WALTER LEPMAN AND EXPLAIN TO HIM OUR
NEW TAX PROPOSAL COPY TO MRS KLOTZ
MENRY MORGENTHAU JR
900 AM.
Regraded Unclassified
11
BOARD OF ECONOMIC WARFARE
ECONOMIC DEFENSE BOARD
WASHINGTON, D.C.
OFFICE OF THE EXECUTIVE DIRECTOR
White
SEP 5 1942
The Honorable
The Secretary of Treasury
Dear Mr. Secretary:
The minutes covering the meeting of the Board of
Economic Warfare, which was held on Tuesday, August 18,
are enclosed. If there are any corrections which you care
to suggest, please let me know.
Sincerely yours,
Mil Perkins
Executive Director
Enclosure
12
SECRET
Minutes of the Meeting of the Board of Economic Warfare
Held August 18, 1942 at 10:00 A. M.
A meeting of the Board of Economic Warfare was held in the
Vige President's office in the Capitol Building at 10:00 A. M. on
August 18, 1942.
Those present:
Mr. Dean Acheson, representing the Secretary of State
Mr.Charlos Fahy, representing the Attorney General
The Scorotary of the Navy
Mr. Paul Apploby, representing the Socretary of Agriculture
Tho Socretary of Commorce
Mr. Nolson Rockfellor, Coordinator Intor-Amorican Affairs
Mr. William Batt, roprosonting Chairman, War Production Board
Mr. E. R. Stottinius, Jr., Lond Loaso Administration
In addition, the following porsons wore prosont:
Mr. Wayne Taylor, Department of Commorco,
Mr., W. L. Clayton, Dopartmont of Commorco
Mr. Wayno Coy, Bureau of the Budgot
Mr. Loslio Whoolor, Dopartment of Agriculturo
Mr. Robort Patterson, War Dopartment
Mr. Harold H. Noff, War Department
Mr. Winfiold Rioflor, Board of Economic Warfaro
Mr. Wm. T. Stono, Board of Economic Warfaro
Mr. T. C. Achilles, Dopartment of State
Mr. John Lockwood, Offico of Intor-Amorican Affairs
Mr. Adlai Stovonson, Navy Dopartment
Mr. Milo Porkins, Board of Economic Warfare
Mr. E. W. Gaumnitz, Board of Economic Warfare
Mr. Porkins, acting as Chairman of the moeting until the
arrival of tho Vico Prosidont, roforrod to tho plan for a united
nations' roliof and rohabilitation organization outlined in the draft,
"Roliof and Rohabilitation Administration", draft No. 2, datod
August 13, 1942, copios of which had boon circulated. Mr. Porkins
statod that tho draft had boon propored as a rosult of a sorios of
discussions hold by an ini ormal committoe for submission to the Prosi-
dont, and if approved by him for submission to othor governmonts. It
is important that mombors of the Board should be in agreement as to
the program and also that the judgmont of tho Board should be secured
as to the timo of roloase or publication.
Mr. Acheson roviowed tho background of the dovolopment of tho
plan, stating that the Prosidont had requested tho formulation of a
plan which might be available when nocessary. Tho quostion of timo of
public roloaso or issuance was of course in tho hands of tho President.
Regraded Unclassified
SECKEL
- 2 -
In reviewing the background, Mr. Achoson stated that the
British had formed an inter-allied reliof committeo honded by
Sir Frederick Loith-Ross in the fall of 1941, partly bocauso prossed
by exilod governments and partly to givo considoration to a program
which might be plaood in offect upon rooccupation. Some criticism
having devoloped because the British Government WQB too largely tho
controlling factor, it was thought that a committee more international
in character should be formod to deal with the problem. The State
Department in May, 1942 requested that Sir Fredorick Leith-Ross como
to the United States for consultation.
In reviewing tho plan as drafted, Mr. Achoson notod that in
addition to laying tho basis for an international organization to
capo with tomporary relief problems in rogained areas, the plan pro-
vidod an agoncy to serve as a focal point for centrulising the consider-
ation of any plans which might be developed and for rocommonding action
programs with rogard to rehabilitation. He stated also that a program
such as outlined might reduco tho tondoncy of cortain governments,
principally the French and Dutch, and to a losser extent the Norwogians,
to acquiro and stockpile products for lator uso.
Mr. Achoson stated that if the program mot with general approval,
the procodure would be to discuss it with the Russian, Chineso, and
British Governments and after cloarance with thom to disouss it with a
second group, probably the Dutoh, oto. Later a goneral conference would
be callod.
Thoro was considerable discussion of reprosontation and pro-
ceduro, with discussion contering mainly on whother the Director
General assumed rolief rosponsibility immediatoly upon rooccupation of
any aroa (Articlo IV) and tho quostion of timo at which tho genoral
program should be made public.
It was agrood that Articlo IV should be olarified, BO thore
would be no question as to the relationship of responsibility of the
armed, forcos and the Diroctor Genoral following rooccupation. Undor
Secretary Pattorson insisted that tho probloms of roliof, including
civilian roliof, during hostilities and while they wore still
threatonod, would have to be handlod by tho Military Commander probably
with a staff for that purposo. Ho indicated that a Military Commandor
could not wait to consult with tho Diroctor General. This was gonorally
agrood to and tho Vioo Prosidont askod Mr. Acheson to chango tho draft
accordingly. On tho question of time it was agrood that in view of the
longth of timo that would be consumod in nogotiating with other nations,
no final action would be possible immedintoly. It was the concensus
that nogotiations should procoed, but that no public announcoment should
be mado at this time.
Regraded Unclassified
13
- 3 -
Leukago of Information
Mr. Porkins stated that information of value to the onomy
was being made available through roinsuranco documents which are
going to foreign countries, the documents including data bearing on
location and movement of goods. Mr. Porkins indicated that similar
documents had beon a source of information with reference to enomy
factorios in Board of Economic Warfare intelligenco work. In various
discussions overyono acquainted with the problem WUS agreed that action
should bd takon to stop the transmission of such information, but it
was not cloar what agency or agoncios should assume tho administra-
tive responsibility.
Mr. Fahy stated that he had boon acting as chairman of tho
committeo to oonsidor tho extont of tho problem and possible mothods
of coping with it. Ho stated that in tho committoo mootings, it had
boon gonorally agrood that it was tho typo of job which might bo
handlod by the Board of Economic Warfaro. However, within the last
few days, the Offico of tho Consor had indicated that possibly it was
in a position to handlo the problem.
1
Several phasos of tho problom woro discussed briofly by various
members of the Boards the possibility that it would be nocossary to
ostablish a roinsurance corporation under R. F. C., for oxamplo, which
might provide facilitios in caso transmission of information to foroign
nations should be stoppod; tho possibility that arrangoments might bo
mado by such companies as Lloyds to ostablish offices in the Unitod
Statos 80 that it would not be necossary to send information out of tho
United Statos. It was finally docidod that further conferences should
be hold under Mr. Fahy's diroction bofore final notion was rocommended.
The mooting adjourned at 11:20 A. M.
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Sept. 5, 1942.
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Proposed Reduction in Import Duty on Beer.
1. The Trade Agreements Committee has approved granting
B. maximum reduction in the import duty on ale, porter, stout
and beer in the proposed trade agreement with Mexico. This duty
was $1 per gallon under the Tariff Act of 1930, was reduced to
50 cente à gallon in 1935 by Presidential Proclamation under sec-
tion 330 of the Pariff Act, and would be reduced to 25 cents a
gallon under too proposed action.
2. IT:0 1048 of customs revenue under the proposed reduction
of duty will be a maximum of 3250,000 a year, on the basis of
1940 and 1941 Imports. Actually, the loss will be even less be-
cause (a) previously large imports from the British Isles will
be curtailed and imports from Japan have ceased, ao in effect the
duty 15 expected to stimulate larger imports from Mexico, with the
duty cut will only apply to imports from Mexico, and (b) a lower
result that une provenus might even be highor than if no cut were
made.
The revenue from imported malt liquors is negligible
compared 10 internal revenue taxation of domestic malt liquors,
which yielded 5300 million in revenue during the fiscal year 1942.
advantages n: " lower import tuty in this CASE overbalance the
3. (In the banks of eneral economic considerations, the
loss of cultoms revenue. Too question of protection for private
manufacturers is la matter on which other agencies have primary
responsibility.
on the Trado Agreements Committee will not object to the proposed
4. If you approve, therefore, the Treasury representative
reduction in Chile dity.
Regraded Unclassified
SECRET
15
September 5, 1942
Exports to Russia, Free China and selected blecked
countries as reported to the Treasury Department
during the ton-day period ending
August 20, 1942
1. Exports to Russia
Exports to Russia, as reported during the ten-day
period ending August 20, 1942, amounted to $23,325,000,
as compared with $33,940,000 and $53,799,000 during the
same perieds in July and June, 1942, respectively. Among
the military equipment exported during the period under
review were 18 light bembers, 36 fighter planes and 27
tanks. (See Appendix C.)
2. Exports to Free China
Exports to Free Chima, as reported during the period
under review, amounted to $192,000, as compared with
$590,000 and $2,707,000 during July and June, 1942,
respectively. Military equipment accounted for about
19% of the total. (See Appendix m)
3. Exports to selected blocked countries
Exports to selected blooked countries are given in
Appendix A. Most important were exports to Sweden and
Switzerland amounting to $324,000 and $167,000, respectively.
ISF/efs
9/5/52 HPW
Regraded Unclassified
STRICTLY CONFIDENTIAL
16
SUMMARY OF UNITED STATES DOMESTIC EXPORTS TO SELECTED
COUNTRIES AS REPORTED TO THE TREASURY DEPARTMENT
FROM EXPORT DECLARATIONS RECEIVED DURING
THE PERIOD INDICATED
(In thousands of dollars)
Total
Total
10-Day
10-Day
Domestic Exports
Domestic Exports
Period ended
Feriod ended
August 1, 1942 to
July 28, 1941
Aug. 20, 1942
Aug. 10. 1942
August 20, 1942
July 31, 1962
5.5.R.
$23,325
$14,970
$38,295
$742,941
China
192
208
400
97,720
in
48
30
78
2,858
tserland
167
357
524
11,537
den
324
260
584
18,056
tugal
5
1
6
9,743
nch North Africa 21
1,773
29
1,802
6,305
asury Department, Division of Monetary Research
September 2, 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 shi,ment of a
particular period.
Includes Morocco, Algeria, and Tunisia.
JMW:rl 9/2/42
Regraded Unclassified
SECRET
17
APPENDIX B
Exports from the U. S. to Free China and U.S.S.R.
as reported to the Treasury Department
July 28, 1941 - August 20, 1942 w
(In Thousands of Dellars)
Exports to
Exports to
Free Chine
U.S.S.R.
July 28, 1941 - Jan. 24, 1942
$ 32,758
$ 98,902
- Jan. 11
6,938
Feb. - Feb.
4,889
- Feb.
4,853
- Feb.
2,921
Jan. Feb. Aug. Aug. July
- Mar.
10 10 11 11 11 11 20 26 11 20 Total 21 a 21 n 1 1 1 1 1 1 1
-
Mar.
-
Har.
-
-
Apr.
3/ w y 5/ y
2,879
8,058
$
-
Apr.
4,836
Apr.
5,335
2,821
-
May
296
-
May
1,872
-
2,533
-
3,399
-
2,707
-
June
1,664
- July
7,900
- July
590
- July
y
3,066
- Aug.
208
- Aug. 20
192
23,325
$ 100,723
$ 782,056
1. These figures are in part taken from copies of shipping
manifests.
2. Beginning with February 1 figures are given for 10-day
period instead of week except where otherwise indicated.
3. 8-day period.
4. 11-day period.
5. 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 September 4,1942
ISF/efe 9/4/42
Regraded Unclassified
SECRET
18
APPENDIX 0
Principal Exports from U. s. to U. s. s. R.
as reported to the Treasury Department
during the ton-day period ending
August 20, 1942
Value
Unit of
(Thousands
Quantity Quantity of Dollars)
TOTAL EXPORTS
$ 23,325
Principal Items:
Aircraft
5,150
Light bombers (2 eng. 4-20)
No.
18
Fighters (P-39)
No.
n
Fighters (P-40)
No.
15
Aircraft accessories, including
engine parts
I
-
2,449
Ammunition
2,261
.30 eal.
No.
10,000,000
.32, .38 and .45 eal.
No.
3,000,000
.50 eal.
No.
2,628,000
37
armor piereing
No.
8,860
75 m. arner pieroing and high
explosive
No.
25,497
Anti-aireraft armer piereing
No.
21,840
20
i
tracers (aireraft)
No.
15,885
20
m. high explosive (Oerlikon)
No.
45,000
Military tanks - medium (N-3)
No.
27
2,160
Military tank parts a accessories
-
-
1,242
Pork and savenge
Lb.
2,703,969
1,005
Iron and Steel plates, sheets
and strip
M.Lb.
7,698
860
Meter trucks
No.
457
678
Steel bars and rods
M.L.D.
7,257
547
Treasury Department, Division of Monetary Research September 4,1942
ISF/efe 9/4/42
Regraded Unclassified
SECRET
19
APPENDIX D
Principal Exports from U. 5. to Free Chima
as reported to the Treasury Department
during the ten-day peried ending
August 20, 1942
(Thousands of Dellars)
TOTAL EXPORTS
. 192
Principal Items:
Military equipment
152
Relief supplies - drugs and biologies
15
Aluminum plates, sheets, bare and rode
10
Scientifie instruments
6
Relief supplies - surgical and hospital
4
Treasury Department, Division of Monetary Research September 3,1942
157/efs 9/4/42
Regraded Unclassified
20
TREASURY DEPARTMENT
OFFICE OF THE SECURTARY
For Miss Chauncey
September 5. 1942
COMPIDENTIAL
Received this date from the Federal Reserve
Bank of New York, for the confidential informa-
tion of the Secretary of the Treasury, compila-
tion of the week ended August 26, 1942, showing
dollar disbursements out of the British Repire
and French accounts as the Federal Reserve Bank
of New York and the means by which these expendi-
tures were financed.
A
lap-9/5/42
C
21
o
P
Y
FEDERAL RESERVE BANK
OF NEW YORK
September 3, 1942
CONFIDENTIAL
Dear Mr. Secretary:
Attention: Mr. H. D. White
I an enclosing our compilation for the week
ended August 26, 1942, showing dollar disbursements
out of the British Empire and French accounts at this
bank and the means by which these expenditures were
financed.
Faithfully yours,
151 L. W. Knoke
L. W. Knoke,
Vice President.
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosure
Copy:vw:9-4-42
Regraded Unclassified
ANALYSIS OF BRITISH AND FRENCH ACCOUNTS
(In Millions of Dollars)
Strictly
Week Ended August 26, 1942
Confidential
BANK OF ENGLAND (BRITISH GOVERNMENT)
BANK
OF
FRANCE
DEBITS
CREDITS
DEBITS
CREDITS
Gov't
Proceeds of
Net Incr.
Sales of
Total
Expendi- Other
(+) or
Gov't
Proceeds
Net Incr.
Total
Securities
Other
Decr.(-) (-)
Total
Expendi-
Other
(+) or
Total
of Gold
PERIOD
Debits
tures(a)
Debits
Other
Credits
Gold
(Official) (b)
Credita(e)
Decr. (-)
in Balance
Debits
tures (d)
Debits Credits
Sales
Credits
in Balance
First year of war
(8/29/39-8/28/40) *
1,793.2
605.6
1,187.6
1,828,2
1,356.1
52.0
420.1
+ 35.0
866.3(e)
416.6(e)
449.7
1,095.3(e)
900.2
195.1(e)
+229.0
War period through
December 1940
2,792.3
1,425.6
1,356.7
2,793.1
2,109.5
106.0
575.6
+ 10.8
878.3
421.4
456.9
1,098.4
900.2
198.2
+220,1
Second year of war
(8/29/40-8/27/61)
2,203.0
1,792.2
410.8
2,189.8
1,193.7
274.0
722.1
-13.2
38.9
4.8
34.1
8.8
-
8.8
- 30.1
1941
Aug. 28- Oct. 1
140.9
105.9
35.0
176,2
20.1
2.0
154.1
+ 35.3
0.3
-
0.3
0.5
-
0,5
+ 0,2
Oct. 2 - Oct. 29
109.0
77.3
31.7
150.9
0.8
-
150.1
+ 41.9
0.3
-
0.3
0.3
-
Oct. 30 - Dec. 3
0,3
-
156,1
111,6
44,5
134.6
#
1,0
133.6
-21,5
16.1
-
16,1
0.4
1
Dec, 6- Dec. 31
88.4
69.6
18,8
0.4
-15.7 -
51.5
-
-
51.5
- 36.9
0,8
-
0.8
0.4
-
1942
0.4
- 0.6
Jan. 1- Jan- 28
102,3
73,2
29,1
69.3
-
0.5
68.8
- 33.0
0,2
-
0,2
0.4
-
0,4
+ 0,2
Jene 29- Feb. 25
87.2
63.8
23,4
57.2
-
1.0
56.2
- 30,0
-
-
-
Feb. 26 - Apr. 1
0.3
-
121.4
0.3
86.4
35.0
- 0.3
171.4
-
-
171.4
+ 50.0
0,1
-
Apr. 2- -FF. 29
0,1
6.1
04.2
33.9
70.6
0,4
-
-
0.5
70.1
- 27.5
0.2
0.6
+ 0.3
-
0.2
0.4
.
0.4
. 0.2
Apr. 30 - June 3
204.0
81.4
22.6
165.7
-
-
165.7
+ 61.7
#
-
-
C.3
-
0.3
0.3
June 6- july :
09.0
72.6
173
13.6
-
-
113.6
+ 23.7
-
-
-
C.3
-
0,3
. 0,3
July 2- July 29
66.1
45.9
20,2
84.6
-
-
84.4
+ 18.3
0.1
-
0.1
0.3
-
0.3
+ 0.2
WEEK ENDED:
Aug. 5
19.6
16.7
2.9.
23.3
0.3
-
22.4
+ 3.7
-
I
-
0.1
-
0.1
+ 0.1
12
15.7
12.2
3.5
9.6
-
-
9.6
- 6.1
0.2
-
0,2
0.1
I
0.1
0.1
19
13.0
10.8
2,2
20.5
-
-
26.5
+ 13.5
0.1
-
2.1
-
-
-
- 0.1
26
10.2
7.1
3.1
13.5
-
-
13.6(f)
+ 3.4
-
-
-
0.1
-
0.1
- 0.1
Average Weekly Expenditures Since Outbreak of War
Transfers from British Purchasing Commission to
France (through June 19, 1940) $19.6 million
Bank of Canada for French Account
England (through June 19, 1940) 27.6 million
Week ended August 26, 1942
$
-
million
England (since June 19, 1940) 35.6 million
Cumulation from July 6, 1940 $
162.7
million
*For monthly breakdown see tabulations prior to April 23, 1941.
**For monthly breakdown see tabulations prior to October 8, 1941.
(See attached sheet for other footnotes)
Regraded Unclassified
(a) Includes payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of
Supply Timber Control, and Ministry of Shipping,
(b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the
proceeds of official British sales of American securities, including those effected through direct negotiation. In addition
to the official selling, substantial liquidation of securities for private British account occurred, particularly during the
early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According
to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British riquidation
of our securities through December, 1940 amounted to $334 million.
(c) Includes about 885 million received during October, 1939 from the accounts of British authorised banks with Sew York banks,
presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October,
1939 apparently represent the acquisition of proceeds of exports from the sterling area and other currently accruing dollar
receipts.
(d) Includes payments for account of French Air Commission and French Purchasing Commission,
(e) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day.
(f) Includes: 3.3 million deposited Los British Ministry of Supply Mission
2.0
H
for credit of U. 5. Any
2,1
transferred from Commonwealth Bank of Australia account here,
Regraded Unclassified
ANALYSIS OF CANADIAN AND AUSTRALIAN ACCOUNTS
Strictly
(In Millions of Dollars)
Week Ended AVENUE 26, 1942 Confidential
BANK
OF
CANADA (and Canadian Government)
DEBITS
CREDITS
COMMONWEALTH DEBITS BANK OF AUSTRALIA (and Australian Government)
CREDITS
Transfers
Transfers from Official
Transfers
to
Proceeds
British A/C
Net Incr.
to
Proceeds
Net Incr.
Official
of
(+) or
Official
of
Total
British
Other
Total
Gold
For Own
For French
(+) or
Other
Decr. (-)
Total
British
Other
Total
Gold
Credits
Sales
A/C
Other
PERIOD
Debite
A/C
Debita
A/C
Decr. (-)
Credite
in Balance
Debite
A/C
Debita
Credite
Sales
Credits
in Balance
First year of war
(8/29/39-8/28/40)*
323.0
16.6
306.4
504.7
412.7
20,9
38.7
32.4
+181.7
31.2
3.9
27.3
36.1
30.0
6.1
- 4.9
War period through
December, 1940
477.2
16.6
460.6
707.4
534,8
20.9
110.7
41,0
4230.2
57.9
14,5
43.4-
62.4
50.1
12.3
. 4.5
Second year of war
(8/29/60-8/27/42)**
460.4
-
460.4
462.0
246.2
3.4
123,9
88,5
+ 1,6
72.2
16.7
55.5
81.2
62.9
18.3
Ave. 28 Oct. 1
23.1
23.1
52.2
21.2
. 9.0
-
-
-
31.0
+ 29.1
10.7
0.5
10.2
2.8
2.1
0.7
- 7.9
1941
Oct, 2 - Oct. 29
37.4
-
37.4
1947
11.9
-
.
7,8
- 17.7
8,2
5.5
2.7
8.0
5.9
2.1
. 0.2
Oct. 30 - Dec. 3
52.8
0.1
52.7
32.5
19.3
-
#
13.2
- 20.3
10.3
6.9
3.6
11,6
9,0
47.7
22.2
17.3
2,6
-
47.7
1
4.9
- 25.5
- 1,3
Dec. 4- Doc. 31
-
39
1,8
2,1
2,8
0,2
2.6
- 1.1
1942
Jan. 1- Jan. 28
39.5
-
39.5
33.0
27.0
-
-
6.0
- 6.5
4.5
,
4.5
10,8
-
10,8
- 6.3
Jan. 29 - Feb. 25
34.1
-
34.1
35.7
12,4
-
-
23,3
+ 1.6
8.4
5.3
3.1
1,6
-
1,6
Feb. 26 - Apr. 1
46.5
-
46.5
99.3
20.5
7.7
- 6.8
-
71.1
+ 52.8
7.8
1.1
6.5
3.6
#
35.9
14.2
3.6
344
21.7
- 1,5
- 4.2
API. 2- ADC. 29
31.4
-
-
-
10.9
e.o
2.9
16.8
-
Apr. 30.m June 3
54.2
-
51.2
47.9
15.7
16.8
-
E
32.2
- 6.3
13.2
- 5.9
9.5
3.7
14.6
-
-4.6
- 1.4
June 6- July 1
47.2
-
472
72.9
14.7
-
-
58,2
- 25.7
2,5
0.5
2,0
3.0
-
3.0
- 0.5
July - 2 July 29
40.8
-
40.8
31.2
9.0
-
-
28.7
- 3.1
19.1
15.2
4.1
19.5
-
19.5
+ 0.6
AKEX ENDED:
Aug. 5
4.0
0.2
3.8
15.1
3.1
-
-
12.0
+ 11.1
2,5
1.0
1.5
0.4
-
0.4
- 2.1
12
7.4
-
2.4
11.6
7.3
-
.
4.3
+ 4.2
0.8
I
0.8
0.7
-
0.7
- 2.1
19
9.4
-
9.6
17.5
3.3
-
-
14.2
+ 8.1
-
-
-
3.2
-
3,2
- 3,2
26
17.8(a)
-
17.8(a)
3.41
1)0.1
-
-
3.3(m)
- 14.4
2.1
2.1
-
10
-
1.0
- 1.1
Weekly Average of Total Debite Since Outbreak of Mar
Through August 26, 1942
$
8,1
million
* For monthly breakdown see tabulationsprior to April 23, 1941.
H For monthly breakdown see tabulationsprior to October 8, 1941.
(a) Does not reflect Treasury bill transactions,
(b) Includes 53.2 million of proceed< of U. S. Government checkr posited as Supplie- Ltd.
Regraded Unclassified
25
BRITISH AIR COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON, D.C.
-
TELEPHONE HOBART 9000
EASE QUOTE
FERENCE NO.
With the compliments of British Air Commission
who enclose Statement No. 48 - Aircraft Despatched
- for week ended August 25th, 1942.
The Honourable Henry Morgenthau, Jr.
Secretary of the Treasury
BOND
WASHINGTON, D. C.
September 5, 1942.
26
MOST SECRET
STATEMENT NO. 48
AIRCRAFT DESPATCHED FROM THE UNITED STATES
WEEK ENDED AUGUST 25th, 1942
ASSEMBLY
FLIGHT DELIVERED
TYPE
DESTINATION
POINT
BY SEA
BY AIR
FOR USE IN CANADA
Consolidated
PBY - 5B
United Kingdom United Kingdom
11
Fairchild
Cornell PT 26
9
Burtiss
ittyhawks
Middle East
Port Sudan
20
ockheed
28 Hudson VI A Middle East
Middle East
1
entura
South Africa
South Africa
4
lenn Martin
26A Marauder
Middle East
Middle East
4
Grumman
Martlet IV
United Kingdom
United Kingdom
6
Northrop
Vengeance
India
Bombay
16
North American
Harvard
India
Bombay
13
#
Middle East
Port Sudan
4
TOTALS -
59
20
9
NOTE:-
Statement No. 47 should be amended to show 14 Northrop Vengeance despatched to
India not U.K., making a total of 40 Northrop Vengeance to India for week ended
August 18th, 1942
BRITISH AIR COMMISSION
August 29, 1942.
Regraded Unclassified
27
BRITISH AIR COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON, D. C.
TELEPHONE HOBART 9000
LEASE QUOTE
FERENCE NO.
With the compliments of British Air Commission
who enclose Statement No. 49 - Aircraft Despatched
- for week ended September 1st, 1942.
The Honourable Henry Morgenthau, Jr.
Secretary of the Treasury
WASHINGTON, D. C.
September 5, 1942.
28
MOST SECRET
STATEMENT NO. 49
AIRCRAFT DESPATCHED FROM THE UNITED STATES
WEEK ENDED SEPTEMBER 1ST, 1942
E
DESTINATION
ASSEMBLY
BY BY FLIGHT DEL'D
POINT
SEA AIR FOR USE IN CAN
STER
uda
United Kingdom
United Kingdom 1
OLIDATED
5B
U.K.
Canada en route
8
ISS
yhawk
M.E.
Suez
16
If
If
Alexandria
30
+) ILD
all P.T. 26
Can.
Can.
10
9
U.K.
U.K.
12
If
M.E.
Suez
5
CKHEED
B Hudson VI A
M.E.
M.E.
1
tura
South Africa
South Africa
1
U.K.
Canada en route
4
IN MARTIN
6A Marauder
M.E.
M.E.
5
timore III
M.E.
Suez
4
man
rtlet IV
U.K.
U.K.
34
TH AMERICAN
vard II
New Zealand
New Zealand
12
=
M.E.
Alexandria
6
tang
U.K.
U.K.
1
CHROW
geance
India
Bombay
17
TALS
138
19
10
tish Air Commission
ptember 5th, 1942.
Regraded Unclassified
C
29
o
P
Y
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Chungking, China
DATE: September 5, 1942, 2 p.m.
NO. 3 1009, Section One
This is a message for the Secretary of the Treasury
from Mr. Adler, and is TF56.
1. I am confidentially informed that a committee in
the Ministry of Finance appointed to draft central bank
charter is adopting a draft which has a general trend to
strengthen the control of the government over the central
bank's position and over banking policy. It is reported
that bankers are (?) draft of reforms reported in TF44 of
June 6 and TF 48 of July 6 which went into effect July 1,
1942 and which made the central bank the sole bank of
issue and the sole fiscal agent of the government.
GAUSS
Cepy:bj:9/8/42
Regraded Unclassified
30
PARAPHRASE OF TELEGRAM RECEIVED
Regraded Unclass
FROM: American Embassy, Chungking, China,
DATE: September 5, 1942, 2 p.m.
NO. $ 1009, Section Two
The Central Bank would also be required by the draft
to fix the discount rate and the reserve rate of commercial
banks; branches of Central Bank in previncial centers acting
in a consultation with specially appointed (7) advisery com-
mittees will be allowed to fix higher discount rates, the
Chungking rate being the minimum rate. It appears that this
recommendation would be the only concession to those who prepose
adeption of a decentralized system aleng the lines of our own
Federal Reserve System.
The Government would own all the capital of the Central
Bank and would appoint (?) two deputy governors, the nine
directors. (All banks and individuals could buy shares under
the 1935 Charter but none actually did). For final approval
the draft after submittal to Ministry of Finance must go to
Legislative Yuan.
GAUSS
Cepy:bj:9/8/42
The
C
0
31
P
Y
PARAPHRASE OF THERGRAM RECEIVED
FROM:
American Embasay, Chungking, China
DATE:
September 5, 1942, 3 p.m.
NO. # 1012
This is & message for the Secretary of the Treasury
from Mr. Adler.
This is telegram no. TF57 and refers to paragraph
ene of telegram no. TF55 dated August 24, 1942.
The Board's proposal that the two million pounds,
approximately, which have accrued to the Government of
China as a result of purchases of sterling (?) currencies
from Chinese refugees be turned over to the Board has
been agreed to by Dr. Kung.
FW
GAUSS
Regraded Unclassified
32
COPY NO 13
BRITISH MOST SECRET,
U.S. SECRET,
OPTEL 307.
Information received up to 7 a.m. 5th
September, 1942.
(1)
The operation against the Channel Islands
Lighthouse reported on the 3rd was carried out by 2 Officers
and 10 men of the Special Service Brigade. Complete
surprise was effected and the 7 prisoners taken were
German naval personnel.
2. NAVAL.
An enemy convoy of 3 ships escorted by
destroyers bound for North africa was attacked by
Liberators on the 3rd when south of Crete; results were
not observed, but one ship was torpedoed by H.M. Submarine,
During the night torpedo aircraft sank one ship and the
following morning B. ship was seen to be on fire.
3. MILITARY.
Egypt. 3rd. The main enemy concentration
moved gradually west in the southern sector, enemy patrols
were active and artillery exchanges took place.
3/4. United Kingdom and New Zealand troops made a slight
advance in the southern sector. 4th. 2 enemy counter
attacks were repulsed by the llew Zealand division and our
forces continued to attack the enemy, who was still with-
drawing.
Russia. The Germans have gained further ground in
their attack towards Stalingrad from the south west. In
Caucasia, however, they have made little fresh progress
either in their advance towards Crozni or in the area of
the river Terek. The enemy has reached to within 25 kilo-
metres northwest of Novorossisk, which is under artillery
fire from the north-east,
-1-
Regraded Unclassified
33
4. AIR OPERATIONS.
Western Front. 3/4th. There was thick cloud
over Emden. 15 tons of H.E. were dropped on the estimated
position of the town. 4th. 3 single Mosquitos bombed
Munster, the railway station near Colo ne and Krupps Essen.
4/5th. 251 aircraft were sent to Bremen and 3 to lay
mines. 11 are missing and one is down in the sea,
Egypt. 2nd/3rd. Our bombers continuously
attacked enemy concentrations in the Central Sector,
claiming a large number of direct hits. U.S. medium bombers
attacked landing grounds near El Daba and Liberators bombed
Tobruk Harbour. 3rd. Our light bombers flew 202 sorties
and Fighters 574. Enemy concentrations were again heavily
attacked, the accuracy of bombing being confirmed by the
enemy's attempts to disperse on the arrival of our bombers.
5 tanks and one armoured car were destroyed by Hurricanes,
Our Fighters destroyed 3 enemy aircraft, probably destroyed
10 and damaged 8 for the loss of 12 of our own.
5. HOME SECURITY.
4th, 19 persons were killed and 28 seriously
wounded by bombs dropped at dusk in the Torquay-Paignton
area.
34
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL NO. 308
Information received up to 7 a.m., 6th September, 1942.
1. NAVAL
ATTACKS ON SHIPPING. From 2nd to 4th September (inclusive) 6 ships
were reported torpedoed. 2 British ships sunk off coast of PORTUGAL and 1 British
ship in Canadian waters on 3rd September, a U.S. ship and a Norwegian tanker sunk
northeast of TRINIDAD on 30th August, and & British ship torpedoed in GULF OF GUINEA
on 2nd September. A Dutch ship was reported overdue and & U.S. ship, previously
reported overdue, has arrived.
2. MILITARY
EGYPT. 5th. The enemy continues his withdrawal in the Southern
sector. His forces are being harassed day and night by our artillery and armoured
formations and by the R.A.F. We have advanced approximately 7 miles towards QARET
EL HEMEIMAT and have destroyed a large quantity of armoured vehicles and M.T. which
is still being counted. In the Northern sector our patrols were active, an attempt
by a small party of enemy to land from boats behind our lines and sabotage the rail-
way was frustrated. All were captured.
RUSSIA. In Eastern Caucasia German forces advancing along the
Northern bank of the River TEREK have effected a crossing to the South with the
evident intention of wheeling southeastwards towards the GROZNI oil field some 50
miles away. In Western Caucasia, the Germans have made little fresh progress in
their attack towards NOVOROSSISK from the North but are approaching the town from
the Northwest.
3. AIR OPERATIONS
WESTERN FRONT. 4th/5th. Bremen and Focke Wulfe Works. 209 air-
craft, including 133 heavy, dropped 478 tons of H.E. and incendiaries, including one
8,000 lb., 49 4,000 lb. and 105 1,900 lb. H.E. bombs. Visibility was good with no
cloud and only slight haze but in the later stages of the attack, smoke obscured the
objective. Fires appeared large and well concentrated. Late arrivals reported the
town well alight. Photographs taken the following morning show heavy damage with
fires still burning in various parts of the town and smoke rising to 20,000 feet.
Regraded Unclassified
35
- 2 -
5th. 37 U.S. Fortresses dropped about 70 tons of bombs on ROUEN
railway centre, where engine sheds, rolling stock, permanent way and probably a
railway bridge were hit. 12 Bostons bombed HAVRE. Allied fighters provided
escort and cover and destroyed 2 enemy fighters. 6 of ours are missing. Spitfires
shot down one enemy aircraft off SOUTHEND. 5th/6th. Nothing of importance.
EGYPT. 3rd/4th. TOBRUK was bombed and objectives in the Southern
sector were attacked. About 92 sorties, including naval aircraft, were involved.
4th. 90 bomber and 270 fighter sorties were flown over the battle area. Four
soparate good attacks were made on enemy forces in the Southern sector, 2 of them
in support of our troops resisting counter attacks, 2 enemy aircraft were des-
troyed. We lost one Hurricane. 12 enemy aircraft dropped bombs near AMIRIYA on
the 4th and at night 10 operated over our landing grounds in the ALEXANDRIA area,
3 of them were destroyed.
MEDITERRANEAN. 4th/5th. 2 naval aircraft attacked an enemy
6,000 ton ship previously damaged by our aircraft and beached and escorted by a
destroyer. Each aircraft scored a hit, one with torpedo on the ship and the other
with bomb on the destroyer's stern.
Regraded Unclassified
36
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Sept.6,1942
TO
Mr. Gaston
FROM Mr. Friedman
Re: Consumer Spending
In dollar terms, consumer spending in the second quarter
of calendar 1942 was at near-peak levels. According to the Department of
Commerce, total consumer expenditures on goods and services was are at an annual
rate of $79 billion, a level exceeded only in the first quarter when consumer
expenditures
during the second
spending
reached the record high of $81 billion. These Expenditures
quarter 2 19420
were at an annual rate more than $3 billion higher than in calendar 1941,
itself a record year.
Even these figures understate the seriousness of the spend-
ings problem. The sharp curtailment in the production of durable goods,
particularly automobiles, that has occurred since the middle of 1941 has
removed important categories of consumer goods entirely from the market.
The sharp rises in spending occurred despite & drop in the sales of con-
first
sumer durable goods from an annual rate of $11 billion in the second quarter
of 1941 to $6} billion in the second quarter of 1942.
Sales of non-durable goods and services have risen from
an annual rate of less than $62 billion in the first quarter of 1941 to
a) most $73 billion in the second quarter of 1942. Expenditures for non-
durable goods and services in the second quarter of 1942 were at an annual
rate more than $7 billion higher than in calendar 1941.
Regraded Unclassified
37
-2-
These rapid rises in the dollar volume of sales in large
part reflect price increases resulting from the combination of a strong
demand by consumers and a limited supply of goods. But even in physical
terms, the volume of consumption is extremely high. Aside from durable
goods, the supply of which has been halved, the volume of goods and ser-
vices is as high as it has ever been in the history of this country, hav-
ing remained stable, or even risen slightly, during 1941 and the first
half of 1942.
Unless strong measures are taken to stem consumer spending,
the prospect is that consumers will try to spend even larger amounts dur-
ing the coming year. Even if wages and farm prices are kept at their
present levels, consumer incomes are bound to increase as R. result of in-
by consumers
creased employment, lamger hours, and up-grading. Moreover, savings,
cannot be expected to continue at their present abnormal levels. During
the second quarter of 1942, individual savings were at the amazing rate
of $24 billion per year. - about $5 billion higher than the highest pre-
vious, recorded level. The figures of the Securities and Exchange Commission
reveal that much of this saving WELS in extremely liguid form. Almost
one-third of All individual saving took the form of increases in currency
and bank deposits. Savings of this type are probably transitory, having
been accumulated by individuals who have not yet ad justed their standard
of living to their larger incomes. The combination of increasing incomes,
on the one hand, and reduced savings, on the other, inevitably spells an
attempted spendings boom of unprecedented magnitude, unless strong stops
are taken immediately to channel off purchasing power and to induce savings.
Regraded Unclassified
-3-
The increased volume of purchasing power coming on the market
will be faced with a sharply reduced supply of goods and services. The
increasing use of our resources for war purposes will necessarily leave
less to satisfy consumer demands. Even if war expenditures do not exceed
the budget estimates, the volume of goods and services available to consumers
in terms of present prices will decline from $79 billion in the second quarter
of calendar 1942 to less than $67 billion in the second quarter of calendar
1943. It is already clear that the budget estimates will be exceeded, and
that, as a consequence, even less will be available for civilians.
Regraded Unclassified
TABLE X 1
38
Actual consumer expenditures: seasonally adjusted annual rates
Year and
Current Prices
First quarter, 1941, prices
quarter
Total
Consumer expenditures on
Consumer expenditures on
consumer
Durable
Non-durable
non-durable goods and
expenditures
goods
goods and
services
services
(billions
of
dollars)
lendar 1941
Quarter I
72.8
10.9
61.9
61.9
# II
75.6
11.1
64.5
63.1
# III
78.1
10.4
67.7
64.2
M IV
76.6
8.8
67.8
62.2
lendar 1942
Quarter I
80.6
7.3
73.3
65.4
II
78.8
6.5
72.3
63.0
Survey of Current Business, August, 1942, P. 14.
Figures in current prices deflated by Bureau of Labor Statistics
cost of limits index number.
TABIA 2
Prospective supply of consumer goods at August, 1942, prices:
seasonally adjusted annual rates
Year and quarter
Total supply of
consumer goods
(billions of
dollars)
Calendar 1942
Quarter III
73.0
.
IV
69.0
Calendar 1943
Quarter I
68.5
- II
66.5
1/
Estimates by Oscar Gass.
39
September 7, 1942
Herbert Gaston came to our house in Washington tonight
with a letter which I was to send to George. I read it and
didn't like it - I mean I liked the letter but I didn't like
the 1dea of sending it, particularly in view of the fact that
the President omitted saying anything about the spendings tax.
Gaston told me he thought George had had a meeting Sunday
afternoon with the Democratic members of his Committee. So
I went upstairs and got George on the phone, and he said, "Yes."
I asked him if he had anything he wanted to say, and he said,
"Yes." He said that he had gotten all the Democratic members
of his Committee together with the exceptions of Senator Walsh
and Senator Barkley, and none of them favor the principle of
the spendings tax, and that the various members had various
ideas. He said that they had taken great offense at what the
President had said about their being slow on the tax bill,
and that they would go ahead now and finish voting on the tax
bill within the next couple of days, and get it into the hands
of the drafting experts. He said also that they had been
influenced by the fact that they had talked with Doughton and
several other members of the Ways and Means Committee who said
they couldn't dream of considering the spendings tax without
having hearings. (We all made a great mistake by not talking
with Doughton and Jere Cooper. It was an oversight but a
stupid one.)
I went downstairs and reported the conversation to Gaston,
and said, "There 18 no use sending any letter now," and
Herbert Gaston agreed with me.
Regraded Unclassified
9-7-42
ASSISTANT SECRETARY OF THE TREASURY
WASHINGTON
To H. M. Jr.:
Here is a rough draft of a letter. Griswold has
worked with me on revising it. I think it might help.
I want to suggest to Randolph that he asked George
to call in some people from other Departments and
agencies before the Committee votes. I think we
might get Henderson, Lubin and Loch Currie to help us
and at least stall a decision to let the leaven work.
The Times-Herald today indicates LaFollette is swinging
to our side.
Mrs.
on the Blue network Twday. Chic
P.S.- Randaph had 15-minate
ananged it.
41
The Honorable Walter F. George,
Chairman Commitee on Finance
United States Senate
My dear Senator George:
Supplementing the brief statement I made when I appeared
before the Fiance Committtee on Thurday of last week and the
later statements of Mr. Paul and his associates on the subject
of the spendings tax proposed by the Treasury Department, I desire
to express again to you and through you to the members of the
Committee my very great concern with respect to the consumer
spending and its effect on the cost of living and the problem
of financing the war.
So great is my concern over this problem that I felt
compelled to issue & statement 66 the public on Saturday, a copy
of which I an attaching to this letter.
You will recall that in addressing the Committee last
Thursday I said:
"Revenue is not the sole purpose nor even the primary
purpose of these proposals. Their main purposs is to restrict
consumer spending so that, as far as possible through fiscal
means, we may avoid the perils of inflation in the huge financing
program we have ahead of us."
In my statement on Saturday I said that the Nation as a
whole is now spending at a rate far greater than a war economy
Regraded Unclassified
41
The Honorable Walter F. George,
Chairman Committe on Finance
United States Senate
My dear Senator George:
Supplementing the brief statement I made when I appeared
before the Fiance Committtee on Thurday of last week and the
later statements of Mr. Paul and his associates on the subject
of the spendings tax proposed by the Treasury Department, I desire
to express again to you and through you to the members of the
Committee my very great concern with respect to the consumer
spending and its effect on the cost of living and the problem
of financing the war.
So great is my concern over this problem that I felt
compelled to issue a statement 66 the public on Saturday, a copy
of which I an attaching to this letter.
You will recall that in addressing the Committee last
Thursday I said:
"Revenue is not the sole purpose nor even the primary
purpose of these proposals. Their main purpost is to restrict
consumer spending so that, as far as possible through fiscal
means, we may avoid the perils of inflation in the huge financing
program we have ahead of us."
In my statement on Saturday I said that the Nation as a
whole is now spending at a rate far greater than 8. war economy
Regraded Unclassified
(2)
42
can afford. In his message to the Congress yesterday the
President made plain in these words the urgency of finding a
solution to this problem:
"But even if the process of stabilization of all prices
and all wages at present levels were to be brought about,
therecwould still rremain the great upward pressure on the
cost of living created by the vast amount of purchasing
power which has been earned in all sections of the country.
The National income has been increasing since January 1,
1941, at the average rate of 2% a month. This purchasing
power now exceeds by an estimated twenty billions the
amount of goods which will be available for purchase by
civilians this year. The result obviously is that people
compete more and more for the available supply of goods;
and the pressure of this great demand compared with the
small supply--which will become smaller and smaller--
continually threatens to disrupt our whole price structure."
The facts of the rate at which consumer spending is now actually
going on abundantly support the President's statement and his appeal
for action. Department of Commerce figures show that expenditures
in April, May and June of this year were at an annual rate three
billions higher than in the calendar year 1941, which was itself a
record high expenditure year. But this comparison includes consumer
durable goods such as automobiles and mechanical appliances which
are not now available. Comparison of purchases of non-durable
goods and services shows that they have risen from an annual rate
of less than 62 billions in the first quarter of 1941 to almost
73 billions in the second quarter of 1942. Expenditures for these
available consumer goods in the second quarter of this year were
at a rate 7 billions higher than for the record year 1941.
(3)
43
The supply of goods simply will not be available for
us to continue expenditures at this rate. It is estimated that
there will be a drop of not less than 12 billiohs on an annual
basis in the supply of goods available in the second quarter of
1943 as compared to the same quarter in 1942.
We have to choose whether the asjustment between an in-
creasing demand and a shortening supply is to be made by the
painful, unequal and costly method of inflation-- with all then
injustice and unrest, the hardships upon the poor and those
this
with small fixed incomes-which method will ,entail, or is to
be made through the adoption of adequate methods, including
fiscal methods, to acheive a less expensive and less perilous
solution.
It is to accomplish this result that we have proposed
the spendings tax. That tax combines the merits of an increase
in the income tax with those of a sales tax, without the
demerits of either. It strikes squarely at the major source
of economic pressure. It takes money directly out of the
spending stream, and it gives our citizens an inducement not
to spend so that much more of the spending pressure will be
held back. I have heard of no other proposal which deals 80
straightforwardly and so effectively with the problem which
confronts us. The extreme gravity of the situation requires
44
(4)
the fullest consideration of a fiscal program which will
provide a frontal attack against the enemy of inflation.
It is a problem that we cannot evade. It cannot be met
by any easy or half-way measures.
Sincerely,
45
AM ERICAN WASHINGTON STATE
THE DIRECTOR GENERAL
PAN AMERICAN UNION
WASHINGTON, D.C.
September 7, 1942
My dear Mr. Secretary:
Permit me to congratulate you on the
admirable statement on taxation which I am certain
will contribute much to the enlightenment of public
opinion.
I beg to remain, my dear Mr. Secretary,
Very sincerely yours,
Mome
L. S. Rowe
Director General
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington.
46
HOLD FOR RELEASE
HOLD FOR RELEASE
HOLD FOR RELEASE
September 7, 1942.
CONFIDENTIAL: To be hold in STRICT CONFIDENCE end no
portion, synopsis or intimation to be published or
given out until the READING of the President's Message
has begun in the Sunate or the House of Representatives.
Extreme care must therefore be exercised to avoid pre-
mature publication.
STEPHEN EARLY
Secretary to the President
TO THE CONGRESS OF THE UNITED STATES:
Four months ago, on April 27, 1942, I laid before the Congress
B seven-point national economic policy designed to stabilize the
domestic economy of the United States for the period of the war.
The objective of th t program was to prevent any substantial further
rise in the cost of living.
It is not necessary for me to enumerato again the disastrous
results of a runaway cost of living -- disastrous to all of us,
farmers, laborers, businessmen -- the nation itself. When the
cost of living spirals upward, everybody becomes poorer, because
the money he has and the money be earns buys so much less. At
the same time the cost of the war, paid ultimately from taxes of
the people, is needlessly increased by many billions of dollars.
The national debt, at the end of the war, would become unnecessarily
greater. Indeed, the prevention of a spiraling domestic economy
is a vital part of the winning of the war itself.
I reiterate the seven-point program which I presented
April 27, 1942:
1. To keep the cost of living from spiraling upward, we
must tax heavily, and in that process keep personal
and corporate profits at & reasonable rate, the word
"reasonable" being defined at a low level.
2. To keep the cost of living from spiraling upward, we
must fix coilings on the prices which consumers,
retailers, wholesalers and manufacturers pay for the
things they buy; and ceilings on rents for dwellings
in all areas affected by war iniustries.
3. To keep the cost of living from spiraling upward, we
must stabilize the remuneration received by individuals
for their work.
4. To keep the cost of living from spiraling upward, we
must stabilize the prices received by growers for the
products of their lands.
5. To keep the cost of living from spiraling upward, we
must encourage all citizens to contribute to the cost
of winning this war by purchasing War Bonds with thoir
ournings instead of using those eurnings to buy articles
which are not essential.
Regraded Unclassified
17
- 2 -
6. To keep the cost of living from spiraling upward, we
must ration all essential commodities of which there
is a scarcity, 80 that they may be distributed fairly
among consumers and not merely in accordance with
financial ability to pay high prices for them.
7. To keep the cost of living from spiraling upward, we
must discourage credit and installment buying, and
encourage the paying off of debts, mortgages, and
other obligations; for this promotes savings, retards
excessive buying and adds to the amount available to
the creditors for the purchase of Viar Bonds,
In my message of four months ago, I pointed out that in
order to succeed in our objective of stabilization it was
necessary to move on all seven fronts at the same time;but
that two of them called for legislation by the Congress
before action could be taken. It was obvious then, and it is
obvious now, that unless those two are realized, the
whole objective must fail. These are points numbered one and
four: - namely, an adequate tax program, and a law permitting
the fixing of price ceilings on farm products at parity prices.
I regret to have to call to your attention the fact that
neither of these two essential pieces of legislation has as yet
been enacted into law. That delay has now reached the point of
danger to our whole economy.
However, we are carrying out, by executive action, the other
parts of the seven-point program which did not require Congressional
action.
Price ceilings have been fixed on practically all commodities
(other than certain exempted agricultural products), and on rents
in war production areas of the United States.
This process of keeping prices and rents at reasonable levels
constitutes one of the most far-reaching economic steps that this
nation has ever taken in time of peace or war.
Our experience during the last four months has proved that
general control of prices is possible - but only if that control
is all inclusive. If, however, the costs of production, including
labor, are left free to rise indiscriminately, or if other major
elemonts in the costs of living are left unregulated, price
control becomes impossible. If markets are flooded with purchasing
power in excess of available goods, without taking adequate
measures to siphon off the excess purchasing power, price control
becomes likewise impossible.
Our entire offort to hold the cost of living at its present
level is now being sepped and undermined by further increaso
farm prices and in wages, and by an ever-continuing pressure on
prices rosulting from the rising purchasing power of our people.
Annual wage and salary disbursements have increased from
43.7 billion dollars in 1939 to an estimated 75 billion dollars
in 1942. This represents an increase of 71%. To obtain a full
appreciation of what that increase means, we should remember
that 75 billion dollars is more than our total national incomo was
during any single year in the 1950's. Due to constantly increasing
employment, overtime, and wage rato increases, the annual wage
and salary bill for the entire country has been rising by more
than a billion dollars a month.
It is impossible for the cost of living to be stabilized
while farm prices continue to rise. You cannot expect the
laborer to maintain a fixed wage level if everything he wears and
eats begins to go up drastically in price. On the other hand, it
1a impossible to keep any prices stable - form prices or other
prices if wage rates, one of the most important elements in the
cost of production, continue to increase.
Regraded Unclassified
48
- 5 -
But even if the process of stabilization of all prices and
wages at present levels were to be brought about, there would still
remain the great upward pressure on the cost of living created by
the vast amount of purchasing power which has been earned in all
sections of the country. The national income has been increasing
since January 1, 1941, at the average rate of 2% each month.
This purchasing power now exceeds by an estimated twenty billions
the amount of goods which will be available for purchase by civilians
this year. The result obviously is that people compete more and
more for the available supply of goods; and the pressure of this
great demand compared with the small supply -- which will become
smaller and snaller - continually threatens to disrupt our whole
price structure.
A recent study by the Bureau of Lator Statistics has
shown very strikingly how much the incomes of the average of families
have gone up during the first quarter of 1942. If we assume that
the income for the first quarter of 1942 is a fair basis for
estimating what the family income will be for the entire year, the
results of the study show that whereas less than one-fourth of all
families in the United States received as mich as $2,500 in 1941,
more than one-third will have $2,500 or more in 1942. This shows
how much the purchasing power of the average American family has
gone up as a result of war production and how essential it is to
control that purchasing power by taxation and by investment in war
bonds.
We also know that as the war goes on there will not be
an adequate supply of all civilian goods; that only through strict
rationing, wherever necessary, will these goods be equitably dis-
tributed. We are determined that no group shall suffer a shrinkage
of its normal quota of basic necessitius because some richer group
can buy all the available supply at high prices.
In normal peace times the ordinary procusses of collective
bargaining are sufficient in themselves. But in war times and
particularly in times of greatly increasing prices, the Government
itsulf nos & very vital interest in seeing to it that wages are
kept in balance with the rest of the economy. It is still the
policy of the Federal Government to encourage free collective
bargaining between employers and workers; and that policy will
continue. Owing to the fact that costs of production are now,
in so many cases, being passed on to the government, and that 50
large a percentage of profits would be taken away by taxation,
collective burgaining between employers and employees has changed
a great deal from what it was in peace times. In times of danger
to our economy the government itself must step into the situation
to see to it that the processes of collective bargaining and arbitra-
tion and conciliation are not permitted to break up the balances
between the different economic factors in our system.
War calls for sucrifice. Har askes sacrifice a privilege.
That sacrifice will have to be expressed In terms of a lack of
many of the things to which we all have become accustomed.
Workers, farmers, white collar puople and businessmen must
expect that. No one can expect that, during the war, he will always
be able to buy what he can buy today.
If We an to keep wages effectually stabilized, it
becomes imperative, in fairness to the worker, to keep equally
stable the cost of food and clothing and shelter and other articles
used by workers.
Prices and runts should not be allowed to advance
so drustically whead of wage rates that the real wages of workers
as of today -- their ability to buy food and clothing and medical
care -- will be out down. For if the cost of living gous up as
fast is It is threatening to do in the immediate future, it will
be unjust, in fact impossible, to deny workers rises in wages
which would must at least if part of that increase.
Regraded Unclassified
49
The cost of all food used by wage carners -- controlled
and uncontrolled -- has been going up at the rate of 12% per
month since the price ceilings were set in May, 1942. If this
rise should be permitted to continue, the increased cost of food
to wage earners next May would be moro than 15% over the lovel
which existed when the coilings were set,
This would be equal to imposing a 15% sales tax on all
food purchased by wage earners. Obviously no one would consider
imposing such & tax.
This drastic increase has been oncsed, and will be
caused, chiefly by the fact that a number of food commodities are
exempt under existing law.
In the CASO of these exampt commodities the increases
are even nore startling. The cost of such food used by wage
carners has been rising at an average of 3.5 por month since May 1,
1942.
Prices received by farmers have risen 85% since the
outbreak of the war in September, 1939, and these prices are con-
tinuing to risc. Cash farm income, including government payments,
has increased from 8.7 billion dollars in 1939 to substantially
more than 15 billion dollars in 1942. This is an increase of about
75%.
The movement of uncontrolled food prices since May 18, 1942,
the date when price regulation became effective, has been 80 drastic
as to constitute an imediate threat to the whole price structure,
to the entire cost of living, and to any attempt to stabilize wages.
Within two months after the date that price regulation became
effective, the prices of controlled foods actually fell 7/10 of 1%.
But uncontrolled foods advanced 7.3% during the same period, and are
still going up.
To give some specific examples: From May to August of this
year round steak and pork chops, which are controlled, showed a
slight docline; but during the same period lamb, which was uncon-
trolled up to July, advanced more than 10%, and chickens have
advanced more than 16%.
To take another example: Lard, which is a controlled product,
dropped noarly 5%; whereas butter, which is uncontrolled, went up
more than 6% or twice the normal seasonal rate. Oranges have gone
up more than 25%, although the normal seasonal increase is only
about 6 or 7%
Uncontrolled agricultural commodities include some of
the most important of the foods and include the grain foods
necessary for livestock. When you consider that in this category
are whoat, corn, oats, barley, ryo, dry boans, cotton, sweet potatoes,
apples, shoep, butter fat, wholesale milk, chickens, eggs and oranges,
you can realize how important these products are to the pocketbook
of the housewife.
The greatest danger is in dairy products, which are,
as you know, most important items in the American diet. Butter,
cheese or evaporated milk are exempt under the Price Control Act.
The prices for these have been going up so fast that they constitute
a serious threat to An adequnte supply of fluid milk. Unless we
are able to get control of butter, cheese and other dairy products
in the very near future, the price of milk in large cities is
certain to go up.
Regraded Unclassified
- 5 -
If wages should be stabilized and farm prices be per-
50
mitted to rise at any rate like the present rate, workers will
have to bear the major part of the increase. This we cannot
ask. The Congress must realize that unless the existing
control over farm prices is strengthened, we must abandon our
efforts to stabilize wages and salaries and the cost of living.
If that occurs, workers and formers alike will not only suffer
a reduction in real income, but will bring upon themselves and
the Nation the unparalleled disaster of unchecked inflation.
The reason why price ceilings have not already been imposed
on all food products is, no you know, that paragraph 3 of the
Emergency Price Control Act prohibits such ceilings until farm
prices as a whole have gone up beyond pority prices -- far beyond -- as
high es an average of 16% beyond.
Although that restriction upon establishing ceilings
for farm products usually is referred to as the 110% of parity
limitation, it in much worse than that, The statute provides
other limitations which are more drastic. Ceilings cannot
be imposed, under the statute, on any product at e level
below the market price on October 1, 1941, or December 15,
1941, or the average price for the period July 1, 1919 to
June 30, 1929, or below 110% of current parity, whichever
of those four levols is highost, As a result, the lowest
average level for all farm commodities at which ceilings may
by imposed is not 110%, but 116% of parity -- somo of the
commodities going almost as high as 150% of parity.
Even more important is the psychological effect of such
unfair privilege. It provides fuel for fires of resentment
against farmers as a favored class. After all, parity 18,
by its very definition, a fair relationship botween the prices
of the things farmers soll and the things they buy. Calculations
of parity must include all costs of production including the
cost of labor, As a result parity pricos may shift every time wago
rates shift. Insisting that the coilings on no farm commodity
shall evor be lower than 110% of parity is asking for more
than e fair price relationship wit other rices.
In fact, the limitations on agricultural coilings are
now being cited by other grours as a reason for resisting
economic controls that are needed in their own fields. The
limitations will be a rellying point for such opposition as
long es they are in offect.
As I urged in my message of April 27, 1942, "the original
and excellent objective of obtaining parity for the farmors of
the United States should be restored".
Our policy with respect to farm products should be guided
by three principles: First, to hold the line against inflationary
price increases. Second, to get the required production of
necessary farm products. Third, to maintain the principle of
parity for agriculture.
Agricultural ceilings should be permitted at either parity
or at the price levels which prevailed at some recont date, whichever
in higher. In most cases the formula would prescrve the general
structure of wholessle and rotail price controls, and would also
call out the volume of production needed. Also, it would preserve
the parity principle.
In regard to increasing the total of our food production,
one of the worrios that a farmer has today is the shortage of labor
for cultivating and harvesting crops. The time is soon coming when
in many parts of the country we shall have to use seasonally the
help of women and grown young poople. I fool certain the
nation will cooperate wholeheartedly.
It not only would be unfair to labor to stabilize wages
and do nothing about the coat of food; it would he equally unfair
to the farmer. For we must all remember that the farmer's wife buys
many articles of food at the store for the use of her own family, and
high prices hurt her pockotbook as much no that of the city housewife.
What is needed, therefore, is an over-all stabilization of
prices, salaries, wages and profite, That is necessary to the
continued production of planes and tanks and ships Regraded Unclassified
51
- 6 -
present constantly increasing rate,
We cannot hold the actual cost of food and clothing
down to approximately the present level beyond October first,
But no one can give any assurances that the cost of living
can be hold down after that date.
Therefore, I ask the Congress to pass legislation under
which the President would be specifically authorized to
stabilize the cost of living, including the price of all
farm commodities. The purpose should be to hold farm
prices at parity, or at levels of a recent date, whichever is
higher.
I ask the Congress to tako this action by the first of
October. Inaction on your part by that date will leave no
with an inescapable responsibility to the people of this
country to see to it that the wer effort is no longer imperiled
by threat of economic chaos.
In the event that the Congress should fail to act, and
act adequately, I shall accept the responsibility, and I will
act.
At the same time that farm prices are stabilized, wages
can and will be stabilized also. This I will do.
The President has the powers, under the Constitution and
under Congressional Acts, to take measures necessary to avort
B. disaster which would interfere with the winning of the war.
I have given the most thoughtful consideration to meeting
this issue without further reference to the Congress. I have
determined, however, on this vital matter to consult with the
Congress.
There may be those who will say that, if the situation
is as grave as I have stated it to be, I should use my powers
and act now. I can only say that I have approached this
problem from every angle, and that I have decided that
the course of conduct which I am following in this case is
consistent with my senso of responsibility as President in
time of war, and with my doop and unalterable devotion to the
processes of democracy.
The responsibilities of the President in war time to
protect the Nation are very gravo. This total war, with
our fighting fronts all over the world, makes the use of
executive power far more essential than in any previous war.
If wo wore invadod, the poople of this country would
expect the President to use any and all means to repol the
invader.
The Revolution and The War Betwoon The States were
fought on our own soil but today this war will be won or
lost on other continents and remoto seas.
I cannot tell what powers may have to be exercised in
order to win this war.
The American people can be suro that I will use my powers
with a full sense of my responsibility to the Constitution
and to my country. The Amorican people can also bo suro that
I shall not hesitato to uso every power vested in mo to
accomplish the dofoat of our onemios in any part of the world
where our own safety demands such defect.
Whon the war is won, the powers under which I act
automatically revert to the people - to whom they belong.
Regraded Unclassified
52
- 2
In March and April, 1933, this nation faced a threaten-
ing domestic situation calling for the most drastic measures,
The Congress, alive to the needs of that day, formulated and
enacted whatever was required to do the job before it - without
long debate, without party politics and without heed to the
pressures of any special group looking for advantages for itself.
I need not argue the point that the situation facing
the nation today is infinitely more critical than it was ton
years ago, We are fighting a war of survival, Nothing can
yield to the over-all necessity of winning this war, and the
winning of the war will be imperilled by a runaway domestic economy.
As a part of our general program on farm prices, I
recommend that Congress in due time give consideration to the
advisability of legislation which would place a floor under
prices of farm products, in order to maintain stability in the
farm market for & reasonable future time. In other words, we
should find a practicable method which will not only enable us
to place a reasonable ceiling or maximum price upon farm products
but which will enable us also to guarantee to the farmer that
he would receive a fair minimum price for his product for one
year, or even two years or whatever period is necessary after
the end of the war, Every farmer remembers what happened to
his prices after the last war. No can, I am sure, if we act
promptly and wisely, stabilize the farmers' economy so that the
post-war disaster of 1920 will not overtake him again.
The farmer, instead of looking forward to a new collapso
in farm prices at the end of the war, should be able to look
forward with assurance to receiving a fair minimum price for
one or two years after the war, Such a national policy could be
established by legislation.
In computing parity, WU should continue to use the com-
putations of the Bureau of Agbicultural Economies made under
the law as it stands today. And in determining whether a
commodity has reached parity, wu should include all the bene-
fits received by the farmer from his government under the AAA
program, allocable to the particular commodity. For it is
unfair to give a Parmer a parity price, and, in addition, to
pay him bunefits which will give him far more than parity.
I have confidence that the American farmer who has been
doing so much in the battle of production of food will do as
much in this struggle against economic forces which make for
the disaster of inflation; for nobody knows butter than the
farmer what happens when inflationary, wartine booms are
permitted to become post-war panics.
With respect to point seven of the program of April 27,
1942, we have made certain credit rulings designed to curtail
unnecessary buying; and whatover else has to be done along
these lines will be done.
With respect to point six, rationing is now in effect
on somo commodities, and, when necessary, will be extended to
others.
But with respect to point one - a fair tax program -
that still waits upon the Congress to act.
One of the most powerful weapons in our fight to
stabilize living costs is taxation. It is a powerful weapon
because it relucus the competition for consumers' goods -
especially scarce foods.
Regraded Unclassified
53
- 8 -
The cooperation and self-restraint of the whole nation
will be required to stabilize the cost of living. The
stabilization of the cost of living cannot be maintained
without heavy taxes on everyone except persons with very low
incomes. With such increases in the tax load, unfair tax
distribution becomes less and less tolerable. We can rightfully
expect the fullest cooperation and self-restraint only if
the tax burden is being fairly levied in accordance with
ability to pay.
This means that we must eliminate the tax exemption of
interest on State and local securities, and other special
privileges or loopholes in our tax law.
It means that in the higher income brackets, the tax
rate should be such as to give the practical equivalent
of a top limit on an individual's net income after taxes,
approximating $25,000. It means that we must recapture
through taxation all wartime profits that are not necessary to
maintain efficient all-out war production. Such provisions will
give assurance that the sacrifices required by war are being
equitably shared.
Next to military and naval victory, a victory along
this economic front is of paramount importance. Without it our
war production program will be hindered. Without it we would be
allowing our young men, now risking their lives in the air, on
land, and on the sea, to return to an economic mess of our own
making.
The least that we at home can do for them is to
see that our production increases every day so as to give
them the weapons of war with which to fight, and to make sure
that our economy at home continues to be one to which they
can return with confidence and security.
FRANKLIN D. ROOSEVELT
THE WHITE HOUSE,
September 7, 1942.
54
FILE COPY
HOLD FOR RELEASE
HOLD FOR RELEASE
HOLD FOR RELEASE
September 7, 1942
CAUTION: The following address of the President MUST BE
HELD IN CONFIDENCE until released.
NOTE:
Release to editions of all newspapers appearing
on the streets NOT EARLIER THAN 9:30 O'CLOCK, P.M., EWT., Monday,
September 7, 1942. The same release also applies to radio announcers
and news commentators.
CARE MUST BE EXERCISED TU PREVENT PRELATURE PUBLICATION.
STEPHEN EARLY
Secretary to the President
I wish that all the American people could read all
the citations for various medals recommended for our soldiers,
sailors and marines. I am picking out one of these citations
which tells of the accomplishments of Lieutenant John James Powers,
United States Navy, during three days of the battles with Japanese
forces in the Coral Sea.
During the first two days, Lieutenant Powers, flying
a dive-bomber in the face of blasting enemy anti-aircraft fire,
demolished one large enemy gunboat, put another gunboat out of
commission, severely damaged an aircraft tender and a twenty
thousand ton transport, and scored a direct hit on an aircraft
carrier which burst into flames and sank soon after.
The official citation describes the morning of the
third day of battle. As the pilots of his squadron left the
ready room to man their planes, Lieutenant Powers said to them,
"Remember, the folks back home are counting on us. I am going to
get a hit if I have to lay it on their flight deck".
He led his section down to the target from an altitude
of 18,000 feet, through a wall of bursting anti-aircraft
shells and swarms of enemy planes. He dived almost to the
very deck of the enemy carrier, and did not release his bomb
until he was sure of a direct hit. He was last seen attempt-
ing recovery from his dive at the extremely low altitudo of two
hundred feet, amid a terrific barrage of shell and bomb
fragments, smoke, flame and debris from the stricken vessel.
His own plane was destroyed by the explosion of his own
bomb, But he had made good his promise to "lay it on the
flight dock".
I have received a recommendation from the Secretary of
the Navy that Licutonant Jamos Powers, of New York City, missing
in action, be awarded the Medal of Honor. I hereby and now make
this award.
You and I are "the folks back home" for whose pro-
tection Lieutenant Powers fought and repeatedly risked his
life. He said that we counted on him and his men, We did not
count in vain. But have not those mon a right to be counting
on us? How are we playing our part "back home" in winning
this war?
Regraded Unclassified
55
S
- 2 -
The answer is that we are not doing enough.
Today I sent a message to the Congress, pointing out
the overwhelming urgency of the serious domestic economic
crisis with which we are threatened. Some call it "inflation",
which is a vague sort of term, and others call it a "rise
in the cost of living", which is much more easily understood
by most families.
That phrase, "the cost of living", means essentially
what a dollar can buy.
From January 1, 1941 to May of this year, the cost
of living went up about 15%. At that point we undertook
to freeze the cost of living. But we could not do a complete
Job of it, because the Congressional authority at the time
exempted a large part of farm products used for food and for
making clothing; though several weeks before, I had asked the Con-
gress for legislation to stabilize all farm prices.
At that time I had told the Congress that there were
seven elements in our national economy, all of which had to
be controlled; and that if any one essential element remained
exempt, the cost of living could not be held down.
On only two of these points -- both of them vital
however -- did I call for Congressional action. These were,
first, taxation; and, second, the stabilization of all farm
prices at parity.
"Parity" is a standard for the maintenance of good
farm prices. It was established as our national policy in
1933. It means that the farmer and the city worker are on
the same relative ratio with each other in purchasing
power as they were during a period some thirty years ago -
at a time when the farmer had a satisfactory purchasing
power. 100% parity, therefore, has been accepted by
farmers as the fair standard for their prices.
Last January, however, the Congress passed a law
forbidding ceilings on farm prices below 110% of parity
on some commodities. On other commodities the ceiling
was even higher, so that the average possible ceiling is
now about 116% of parity for agricultural products as a
whole.
This act of favoritism for one particular group in
the community increased the cost of food to everybody -
not only to the workers in the city or in the munitions
plants, and their families, but also to the families of the
farmers themselves.
Since last May, ceilings have been set on hearly all
commodities, rents and services, except the exempted farm
products. Installment buying has been effectively controlled.
Wages in certain key industries have been stabilized
on the basis of the present cost of living.
It is obvious, however, that if the cost of food
continues to go up, as it is doing at present, the wage
earner, particularly in the lower brackets, will have a
right to an increase in his wages. That would be essential
justice and & practical necessity.
Regraded Unclassified
56
- 3 -
a
Our experience with the control of other prices
during the past few months has brought out one important
fact - the rising cost of living can be controlled, providing
all elements making up the cost of living are controlled at
the same time. We know that parity prices for farm products
not now controlled will not put up the cost of living more
than a very small amount; but that if we must go up to an
average of 116% of parity for food and other farm products -
which is necessary at present under the Emergency Price Control
Act before we can control all farm prices - the cost of living
will get well out of hand. We are face to face with this danger
today. Let us meet it and remove it.
I realize that it may seem out of proportion to you to
be worrying about these economic problems at a time like this
when we are all deeply concerned about the news from far
distant fields of battle. But I give you the solemn assurance
that failure to solve this problem here at home - and to
solve it now will make more difficult the winning of this war.
If the vicious spiral of inflation ever gets under way,
the whole economic system will stagger. Prices and wages
will go up so rapidly that the entire production program will
be endangered. The cost of the war, paid by taxpayers, will
jump beyond all present calculations. It will mean an un-
controllable rise in prices and in wages which can result in
raising the over-all cost of living as high as another 20%.
That would mean that the purchasing power of every dollar you
have in your pay envelope, or in the bank, or included in your
insurance policy or your pension would be reduced to about
eighty cents. I need not tell you that this would have a
demoralizing effect on our people, soldiers and civilians alike.
Over-all stabilization of prices, salaries, wages and
profits is necessary to the continued increasing production of
planes and tanks and ships and guns.
In my message today I have told the Congress that this
must be done quickly. If we wait for two or three or four or
six months it may well be too late.
I have told the Congress that the Administration can
not hold the actual cost of food and clothing down to the
present level beyond October first.
Therefore, I have asked the Congress to pass legis-
lation under which the President would be specifically
authorized to stabilize the cost of living, including the price
of all farm commodities. The purpose should be to hold farm
prices at parity, or at levels of a recent date, whichever is
higher. The purposo should also be to keep wages at a point
stabilized with today's cost of living. Both must be regulated
at the same time; and neither can or should be regulated without
the other,
At the same time that farm prices are stabilized, I
will stabilize wages.
This is plain justice and plain common sense,
I have asked the Congress to take this action by the
first of October. We must now act with the despatch which the
storn necessities of war require.
I have told the Congress that inaction on their part
by that date will leave me with an inescapable responsibility
to the people of this country to see to it that the war effort
is no longer imperiled by the threat of economic chaos,
As I said in my message to the Congress:
In the event that the Congress should fail to act,
and act adequately, I small accept the responsibility, and I
will act.
Regraded Unclassified
57
- 4 -
8
The President has the powers, under the Constitution
and under Congressional Acts, to take measures necessary to avert
a disaster which would interfere with the winning of the war.
I have given the most thoughtful consideration to
meeting this issue without further reference to the Congress.
I have determined, however, on this vital matter to consult
with the Congress.
There may be those who will say that, if the situation
is as grave as I have stated it to be, I should use my powers
and act now. I can only say that I have approached this problem
from every angle, and that I have decided that the course of
conduct which I am following in this case is consistent with
my sense of responsibility as President in time of war, and
with my deep and unalterable devotion to the processes of
democracy.
The responsibilities of the President in war time
to protect the Nation are very grave. This total war, with
our fighting fronts all over the world, makes the use of
executive power far more essential than in any previous war.
If we were invaded, the people of this country
would expect the President to use any and all means to repel
the invader.
The Revolution and the War between the States were
fought on our own soil but to-day this war will be won or
lost on other continents and remote seas. I cannot tell
what powers may have to be exercised in order to win this
war.
The American people can be sure that I will use my
powers with a full sense of responsibility to the Constitution
and to my country. The American people can also be sure that
I shall not hesitate to use every power vested in ne to accom-
plish the defeat of our enemies in any part of the world
where our own safety demands such defeat.
When the war is won, the powers under which I act
will automatically revert to the people - to whom they belong.
I think I know the American farmers. I know that
they are as wholehearted in their patriotism as any other group.
They have suffered from the constant fluctuations of farm
prices - occasionally too high, more often too low. Nobody
knows better than farmers the disastrous effects of war time
inflationary booms and post-war deflationary panics.
I have today suggested that the Congress make our
agricultural economy more stable. I have recommended that in
addition to putting ceilings on all farm products now, we also
place a definite floor under those prices for a period beginning
now, continuing through the war, and for as long as necessary
after the war. In this way we will be able to avoid the
collapse of farm prices which happened after the last war. The
farmors must be assured of a fair minimum price during the
re-adjustment poriod which will follow the excessive world
food demands: which now prevail.
We must have somo floor under farm prices, as we
have under wages, if we are to avoid the dangers of a post-war
inflation on the one hand, or the catastrophe of a crash in
farm prices and wages, on tha other.
Regraded Unclassified
58
-5-
Today I have also advised the Congress of the
importance of speeding up the passage of the tax bill. The
Federal Treasury in losing millions of dollars a day be-
cause the bill has not yet been passed. Taxation is the only
practical way of preventing the incomes and profits of in-
dividuals and corporations from getting too high.
I have told the Congress once more that all net
individual incomes, after payment of all taxes, should be
limited effectively by further taxation to a maximum net in-
come of $25,000 a year. And it is equally important that
corporate profits should not exceed B. reasonable amount in any
case.
The nation must have more money to run the War,
People must stop spending for luxuries. Our country needs 6
far greater share of our incomes.
For this 10 a global war and it will cost this
nation nearly one hundred billion dollars in 1943.
In that global war there are now four main areas of
combat; and I should like to speak briefly of them, not in
the order of importance, for all of them are vital and all of
them inter-related.
(1) The Russian front. Here the Germans are still unable
to gain the smashing victory which, almost a year ago, Hitler
announced he had already achieved. Germany has been able to
capture important Russian territory. Nevertheless, Hitler has
been unable to destroy a single Russian Army; and this, you
may be sure, has been, and still is, his main objective.
Millions of Gorman troops seem doomod to spend another cruel
and bitter winter on the Russian front. The Russians are
killing more Nazis, and destroying more airplanes and tanks
than are being smashed on any other front. They are fighting
not only bravely but brilliantly. In spite of any setbacks
Russia, will hold out, and with the help of her Allies will
ultimately drive every Nazi from her soil.
(2) The Pacific Ocuan Area. This area must be grouped
together as a whole - every part of it, land and soa. We
have stopped one major Japanese offensive; and have inflicted
heavy losses on their fleet. But they still possess great
strength; they seck to keep the initiative; and they will un-
doubtcdly strike hard again. We must not over-rate the 1m-
portance of our successes in the Solomon Islands, though we
may be proud of the skill with which these local operations
were conducted. At the same timo, we need not under-rate the
significance of our victory at Midway. There WG stopped the
major Japanese offensivo.
(5) In the Meditorrancan and the Middle East area the
British, together with the South Africans, Australians, New
Zealendors, Indian troops and others of the United Nations,
including ourselves, are fighting a desperate battle with the
Germans and Itelians. The Axis powers are fighting to gain
control of that area, dominate the Mediterms nn and Indian
Ocean, and gain contact with the Japanese Navy. The bettle is
now joined. To are well sware of our dangor, but WL are hope-
ful of the outcome.
(4) The European area. Here the aim is an offensive
against Germany. There are at least a dozen different points
at which attacks cen be launched. You, of courso, do not ex-
pect me to give details of future plans, but you can rest as-
sured that preparations are boing made hero and in Britain to-
ward this purpose. The power of Germany must be broken on the
battlefields of Europe.
Regraded Unclassified
- 6 -
59
Various people urge that we concentrate our forces
on one or another of these four areas, although no
one suggests that any one of the four areas should be abandoned.
Certainly, it could not be seriously urged that we abandon aid
to Russia, or surrender all of the Pacific to Japan, or the
Mediterranean and Middle East to Germany, or give up an
offensive against Germany. The American people may be sure
that we shall neglect none of the four great theatres of war.
Certain vital military decisions have been made. In
due time you will know what these decisions are - and so will
our enemies. I can say now that all of these decisions are
directed toward taking the offensive.
Today, exactly nine months after Pearl Harbor, we have sent
overseas three times more men than we transported to France in
the first nine months of the first World War. We have done this
in spite of greater danger and fewer ships. And every week
sees a gain in the actual number of American men and weapons
in the fighting areas. These reinforcements in men and munitions
will continue to go forward.
This war will finally be won by the coordination of all
the armies, navies and air forces of the United Nations operating
in unison against our enemies.
This will require vast assemblies of weapons and men
at all the vital points of attack. We and our allies have
worked for years to achieve superiority in weapons. The have
no doubts about the superiority of our men. We glory in the
individual exploits of our soldiers, our sailors, our marines,
our merchant seamen. Lieutenant John James Powers was
one of these - and there are thousands of others in the
forces of the United Nations.
Several thousand Americans have met death in battle.
Other thousands will lose their lives. But many millions
stand ready to step into their places - to engage in a
struggle to the very death. For they know that the enemy
is determined to destroy us, our homes and our institutions -
that in this war it is kill or be killed.
Battles are not won by soldiers or sailors who think
first of their own personal safety. And wars are not won
by people who are concerned primarily with their own
comfort, their own convenience, their own pocket-books.
We Americans of today bear the gravest of responsi-
bilities. All of the United Nations share them,
All of us here at home are being tested for our fortitude,
for our selfless devotion to our country and our cause.
This is the toughest war of all time. We need not leave
it to historians of the future to answer the question whether
we are tough enough to meet this unprecedented challenge.
We can give that answer now. The answer is "yes".
60
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 309
Information received up to 7 A.M., 7th September, 1942.
1. NAVAL
Two Ruesian gunboats, converted 350 ton steamers, were blown up by
their crews on the 2nd since they were unable to break out of the SEA OF AZOV.
2. MILITARY
EGYPT. 5th. Our mobile columns from the East and South continued
to harass the retiring enemy throughout the day. The bulk of his forces in the
Southern sector have withdrawn West of the minefields and now appear to be on the
general line DEIR EL MUNASSIB - QARET EL HEMEIMAT.
3. AIR OPERATIONS
WESTERN FRONT. 6th. 41 U.S. Fortresses droppèd about 64 tons of H.Br
on the Potes airframe factory at MEAULT. Two of them are missing. They destroyed
five enemy fighters, probably destroyed 13, and damaged 25. Photographs confirm
numerous hits on the target. A further 13 U.S. Fortresses and 12 U.S. Bostons
attacked aerodromes at ABBEVILLE and ST. OMER and 11 Bostons attacked a merchant
vessel at BOULOGNE. Allied fighters provided escort and cover and probably dos-
troyed 2 F.W. 190's and damaged 5 for the loss of 3 Spitfires, 1 Mosquito sent to
FRANKFURT is missing. Typhoons shot down 2 Me, 210's (new type fighter-bember) over
YORKSHIRE.
6th/7th. 207 aircraft were sent to DUISBURG. 9 were son mining and
5 dropped leaflets. B are missing and 1 crashed. Proliminary reports indicate no
cloud at DUISBURG but ground hase. The attack is considered moderately successful.
17 Hudsone including 9 R.C.A.F. of which one 10 missing and 5 Naval Swordfish were
sent to attack a merchant vessel In BOULOGNE Harbour and shipping off the FRISIAN
ISLANDS.
EGYPT. 4th/5th. Our aircraft bombed M.T. in the Southern Sector.
5th. Escorted light bombers scored several hito on M.T. passing
through a minofield. Five fighters were lost during the day but three pilots are
safe.
4. HOME SECURITY
6th/7th. Scattered bombing occurred on TEESIDE. Damage to olectri-
city mains at MIDDLESBOROUGH caused a partial and temporary stoppage of industry.
Regraded Unclassified
61
September 8, 1942
9:35 a.m.
GROUP
Present: Mr. Bell
Mr. Gaston
Mr. Buffington
Mr. Paul
Mr. Blough
Mr. Schwarz
Mr. Thompson
Mr. Haas
Mr. Graves
Mr. White
Mr. Kuhn
Mr. Gamble
Mrs. Klotz
H.M.JR: I am sorry I didn't hear you on the
radio, but nobody notified me. I thought you were
going to telegraph me.
MR. PAUL: Well, maybe I should have, but I was--
H.M.JR: Remember, that was the last--
MR. PAUL: I was struggling with a rewrite all
the morning, and it was being changed on me until
five minutes before. I didn't have time to do a thing.
I forgot.
H.M.JR: Remember?
MR. PAUL: I think I did say I was going to
telegraph.
H.M.JR: I would like to have listened.
62
- 2 -
MR. PAUL: It was in the process - you see, I
had to cut it from thirty to fifteen minutes, which
was some job.
MR. SCHWARZ: We will have a record in a day or
so if you would like it.
H.M.JR: What time do you go on the Hill?
MR. PAUL: Ten o'clock.
H.M.JR: Paul, just to bring you up to date, I
called up George last night and asked him how things
were going. He said that he had met with all the
Democratic members except Barkley and Walsh, and
nobody in the group was in favor of the principles
of this tax recommendation which we have just made.
He said he had a plan of his own. He said he didn't
know how good it was, but it was a gross tax exempting
people, I think he said, of six hundred twelve dollars
or less. I don't know how he arrived at the six hundred
twelve.
Then he said that they consulted with Doughton
and some other people of Ways and Means, and they
wouldn't hear of it unless they had a public hearing,
and I said that was the last straw because all of us
made a mistake here in the room that we never spoke
to Doughton and Cooper. It was a grave error on our
part that we didn't, but nobody--
MR. PAUL: George said he was going to talk it
over with him.
H.M.JR: We should have. Everybody overlooked
that, and it is unfortunate. Didn't I suggest, Herbert,
Doughton and Cooper tomorrow at this luncheon. didn't I?
MR. GASTON: Yes, you did.
H.M.JR: If they are coming, would you, between you
and Stephens, pass it along?
Regraded Unclassified
63
- 3 -
MR. GASTON: They haven't been invited yet so
I will speak to Stephens this morning about inviting
them.
H.M.JR: Who is to be invited?
MR. GASTON: Those that have been invited are
George, Barkley, and Prentiss Brown.
H.M.JR: Well, I would add Doughton and Cooper--
MR. PAUL: All right.
H.M.JR: ... because what is going to happen is
they are going to vote us down today. He said that
they want to vote the whole bill out the next two or
three days and get into the drafting stage. That is what
he said. So we might just as well have Doughton and
Cooper here and say - well, I think by tomorrow they
will have voted us down - say, "Well, here we are.
Now, my attitude is, and I would like everybody
else to take the same attitude, instead of having sort
of a hang-dog attitude, tail between the legs - the
way I feel is this, I am delighted that we had the
courage and the foresight to make this recommendation.
The only thing I would have regretted is that before
the bill went to the drafting stage we hadn't made a
suggestion like this. So, as far as I am concerned I
have not only no regrets, but I am very happy that we
made it, and I don't want anybody around to take the
attitude that we have been licked or anything else.
It is the public who will get the licking.
MR. PAUL: That is right.
H.M.JR: And so my head is up.
MR. PAUL: There are two questions that are apt
to arise. One is, what is your attitude toward the
reduction of the exemptions to a thousand, where the
reduction is not associated with the spendings plan?
The other is, what is your attitude toward & pure and
unadulterated sales tax without being hooked--
Regraded Unclassified
64
- 4 -
H.M.JR: Well, Randolph, I can't answer that.
I have never yet seen the recommendations that you
made on the sales tax. Nobody has given them to me,
and I haven't seen them. I can't - it is like we
started last Monday to do these things and I said I
couldn't do them that fast, and nobody has given me &
copy of what you read from before the Committee when
you appeared. I mean, I haven't gotten a thing. I
don't know the arguments for and against it. Certainly
somebody in the big staff you have got could have given
me a copy to read over the week end.
MR. PAUL: The arguments for and against it are
all set forth in that statement of mine given the same
day as yours.
'H.M.JR: Yes, but I didn't see it before, and I
haven't seen it since.
MR. PAUL: I am sorry.
H.M.JR: So I mean, I don't know whether the
arguments were good or bad, because certainly you
couldn't gather it from the paper.
MR. PAUL: No, the papers played it down.
H.M.JR: Well, anyway, if Roy, when you leave the
room will you please go out and get me the thing-
will you?
MR. PAUL: I will send it right in from my room.
H.M.JR: I can't give you the answer on the
other thing.
MR. PAUL: I think the answer is pretty clear.
H.M.JR: What is your answer?
MR. PAUL: My answer is that we are not for a
sales tax if it is not associated with some kind of
Regraded Unclassified
65
- 5 -
progressive spendings tax or something that takes
the curse off putting that additional burden on the
lower income groups without putting it anywhere else.
And on the reduction of the exemptions, I think we
should take the view that we are not for it un-
associated with our spendings tax program because
those two things, if you take those things or either
of them, you select certain aspects of our program
that are opposed by our only friendsin the world,
the labor groups; and if you don't put in anything
else, it bears down on the other group.
H.M.JR: I would go along with you on that if
you are cornered.
MR. PAUL: I am not going to bring it up, naturally,
but--
H.M.JR: I can go along with you on that. What
else?
MR. PAUL: Those are the two points.
H.M.JR: All right. Well, let me know during the
day what happens, will you?
MR. PAUL: Yes, I will call you at noon. Can I
call you when I get through with the morning session?
H.M.JR: Yes. What?
MR. BLOUGH: I just said I had nothing on my mind.
H.M.JR: Lucky man. (Laughter)
MR. PAUL: Here is a speech by Vandenberg. (Speech
handed to the Secretary.)
(Mr. Paul and Mr. Blough left the conference.)
H.M.JR: Herbert?
Regraded Unclassified
66
- 6 -
MR. GASTON: No, I haven't anything.
MR. KUHN: I haven't anything.
H.M.JR: Buffington?
MR. BUFFINGTON: No, sir.
MR. GAMBLE: I have nothing, sir.
MR. HAAS: I have nothing this morning.
MR. SCHWARZ: Nothing.
H.M.JR: White?
MR. WHITE: You remember several weeks ago - a
month ago - I spoke about the preparation of an order
to take a census of foreign property owned by Americans,
the American-owned property in foreign countries.
H.M.JR: That goes back months, doesn't it?
MR. WHITE: It originally goes back many months.
At the time I spoke to you about it, I said the order
would be ready within a month or six weeks, but the
lawyers insisted that there was a difference between
this census and the one we took for this country in
that this was not going to be a Presidential order,
but just a Treasury regulation. Therefore, they
wanted the documents all ready before you issued the
regulation, rather than issuing the document subsequent
to the order. They have been working on it busily.
They are now ready. The next step is to clear this
with other agencies, which will probably take a week,
or possibly two. There are a number of agencies who
are intimately interested in the detail. We can go
ahead with that if you say it is all right, unless
you first want to speak to the President.
Regraded Unclassified
67
- 7 -
H.M.JR: No. He is not interested.
MR. WHITE: Then we will go ahead with it.
H.M.JR: Sure.
MR. WHITE: And when the other agencies will have
made such detail changes as they suggest, it will then
be ready for regulation, and it will go into effect.
Frederick Phillips just called Mr. Fitzgerald
after he had heard that the appointment you gave him
was for Thursday, and said he would like it this after-
noon, if possible.
H.M.JR: It is impossible. I am doing the financing
for two days. For two days, I am doing the financing.
MR. WHITE: I have here a letter from Puleston
giving you some figures on trade between South America
and Sweden. (Letter dated July 31, 1942, addressed to
the Secretary.) You asked me to speak to you about it.
This is part of the larger problem. We are preparing
a report on all the trade to neutrals, which you might
want to present before the Board of Economic Warfare.
It will be ready, probably, this week.
I asked Mr. Cairns, pursuant to a discussion we had
a couple of weeks ago, to look over the powers of the
WPB, and he prepared a memorandum which he gave me and
I will pass on to you. It is a prelimi ary one which
indicates that they have all the legal power one can
possibly think of. As Cairns put it, one would have to
think a long time before he could think of a power
which they do not legally have, although they are buried
in & number of orders which, in turn, refer to other
laws, and 80 on. So it really would be a long task.
He is writing a memo which will be ready for you.
Some time before you see Mr. Phillips, inasmuch as
I gather he is going to see you about this memo of
Keynes, I think that you ought to spend fifteen minutes
or so going over that document with me.
That is all I have.
Regraded Unclassified
68
- 8 -
H.M.JR: O.K. What else? Tell Stephens I would
like to see you before I see Phillips.
Harold, you may have thought of this, or some of
your associates may have, but I think, if you haven't
done it - you know I suggested when the women were
here that you explain this thing, the change in my
position, what it meant, and 80 forth. You didn't
want to do that.
MR. GRAVES: At that time.
H.M.JR: Yes. Now, I think not only for them, but
for your whole war bond group, a careful explanation
should go out over my signature to them, just where I
stand, and what this means, and then what changes, if
any, it would mean in the organization, and where they
should direct their fire power.
MR. GRAVES: Well, I think we have pretty well
taken care of that. You remember you asked me to send
a copy of your statement, by wire, to each administrator,
and that was done. We asked, when we did that, to have
their comment by mail, and we are just getting those in.
They are all very friendly to your statement, and all
are saying that this means simply that they have got
more work to do. In that telegram, also, we told our
administrators that we were planning, as soon as things
got clarified a little bit more, to have a meeting of
all of our administrators and chairmen, and I think
that would be the better time to go into this thing
further with them.
H.M.JR: I would like, sometime this week, if you
will give me what you and Odegard and Gamble and Kuhn
think about the thing - I would like to see it this
week, on how you are going to reorient yourselves.
MR. GRAVES: Of course, as matters stand, I doubt
that there is any occasion for us to make any change at
all. I think we ought to go right ahead on our pay-
roll allotment.
Regraded Unclassified
69
- 9 -
H.M.JR: Yes, but let's be a little bit fore-
handed. You do not know what the Committee may slip
you this week.
MR. GRAVES: That is right. I think it would be
well for us to wait until things have clarified a
little more before we say anything to our people about
any change in program.
H.M.JR: They are not particularly disturbed in
the field?
MR. GRAVES: The men who have replied - I think
I have about ten answers - have all considered it as
good - as a thing that calls the attention of the
people to the need for something more drastic; and
they all say that they are going right ahead without
any abatement in their efforts. I think we ought not
to change any part of our program until something has
happened more definitely.
H.M.JR: O.K.
MR. GRAVES: That seemed to be the attitude of
those who have responded to our telegram.
H.M.JR: Anything else?
MR. GRAVES: That is all.
MR. WHITE: By the way, Mr. Secretary, I would
like to comment - I thought that statement that was
issued by you on Sunday was an excellent one. I
would like to compliment whoever prepared it. I
heard several favorable comments aboutit.
H.M.JR: I agree with you. I had nothing to do
with it. Those two gentlemen there, between them--
(Kuhn and Gaston)
MR. WHITE: I was glad to see you fight back.
Regraded Unclassified
70
- 10 -
MR. KUHN: Mr. Secretary, the radio boys are making
little announcements with the direct quotations from
the President's speeches and from that statement, bear-
ing on the subject of spending, and they are sending
them over this afternoon. If they are good they will
be put on the Washington stations this evening.
H.M.JR: Who is doing that?
MR. KUHN: Callahan and his boys.
MR. GASTON: There is another phase of that being
worked on.
H.M.JR: Taking it for granted that that is what
the President meant?
MR. KUHN: No, I simply thought, first of all,
this reference to spending at the end of his speech,
the reference to war bonds in the Congressional message,
the reference to what we, on the home front, are not
doing, and your references to spending.
H.M.JR: I don't know whether you want to do it,
or whether you should do it, or I should do it, or
Gaston, but the New York Times editorial today abso-
lutely misrepresented the facts. Right at the end of
their editorial they said that neither the President
nor the Treasury has made any recommendations which
will lower the standard of living in this country -
flat. Did you read it?
MR. KUHN: Yes.
H.M.JR: I wish - I don't think we ought to let
them get away with 8. statement like that. On the one
hand, they don't like my statement for many reasons,
but then they come out with an absolutely - they say
that neither the President nor I - nor the Treasury -
has made any recommendations which will lower the
standard of living. It is a falsification.
71
- 11 -
MR. KUHN: There are several like that.
H.M.JR: But in this thing - I don't know, talk
about it with Herbert. I am perfectly willing to write
8. letter to Merz.
MR. GASTON: Or Sulzberger.
H.M.JR: He is in England. He is not here. But
it just isn't true. Talk about it.
Bell?
MR. BELL: Nothing.
MR. THOMPSON: On the subject of taxes, I wonder
if there is & possibility of another Donald Duck
next March. If so, perhaps Mr. Paul ought to get
authority before this pending tax bill--
H.M.JR: I think we will just brush off Donald
Duck and change the figures and use the same thing
over again. That is what we will do.
Dan, I will be ready for you and Haas and
Buffington and Henry Murphy at ten o'clock.
I would like to see Graves and Gaston a minute.
72
September 8, 1942
10:10 a.m.
FINANCING
Present: Mr. Bell
Mr. Buffington
Mr. Haas
Mr. Murphy
H.M.JR: George, after having a week end to think,
what do you think?
MR. HAAS: I think it is one of these things
where you have to tie them down rather specifically
that they would take care of the short-term market.
They make it, and they can take care of it if they want
to. If they can't give that assurance, this would ruin
it, I think - even the Szymczak rate.
H.M.JR: Wait a minute, George, we are talking
about the wrong thing. Let's let this tax note thing
go. Let's talk about the financing.
MR. HAAS: On the financing--
H.M.JR: Let's do the financing first.
MR. HAAS: On the financing I would make the
certificates at about sixty-five - the certificates at
sixty-five into May 1.
H.M.JR: I am not concentrating. What did you say?
MR. HAAS: The certificate, May 1, at a rate of
sixty-five, and one and a quarter percent note to run
to about March, '45. I think that is about two years
and six months.
H.M.JR: Have you got & sheet to show me?
Regraded Unclassified
73
- 2 -
(Mr. Haas handed chart to the Secretary.)
H.M.JR: What is there around May l? Let's look
at that first. When do you want to run the other
note?
MR. HAAS: Down to March.
MR. BELL: There is a CCC on May 1 of two hundred
eighty-nine million.
H.M.JR: Of what?
MR. BELL: May 1, of two hundred eighty-nine
million.
H.M.JR: That is peanuts these days. Where would
this go?
MR. HAAS: March '45. You will probably pull
those up prior to that time.
H.M.JR: I don't want to make it April.
MR. HAAS: April would be pretty thin, wouldn't
it?
MR. MURPHY: April in '45?
in
MR. HAAS: Yes.
MR. MURPHY: I don't think one month would make
much difference there. It is pretty thin already.
There is only a premium of maybe three thirty-seconds,
but I don't think one month would make you or break
you there. We have hitherto priced them, that is, had
the maturities - distant maturities on tax dates, with
the feeling that it would be better to only have to
do a financing every three months at that time rather
than perpetuate monthly financing throughout the whole
post-war period.
Regraded Unclassified
74
- 3 -
H.M.JR: You are an optimist.
MR. MURPHY: The President said last night that
he thought 1943 was the victory year.
H.M.JR: Did he say that? I did not hear him say
that. He didn't say that.
MR. MURPHY: He didn't say it last night, you are
right, but I read it - it attributed it to the Presi-
dent - I guess it was in a letter I was reading yester-
day. I misspoke myself. I am optimistic though, Mr.
Secretary.
H.M.JR: Are you? What do you base your optimism
on?
MR. MURPHY: I base my optimism on the slowness
but the massiveness of the roundabout method of pro-
duction, the fact that we are putting five billion
dollars in the end of the horn now, which only has the
effectiveness of perhaps a half a billion dollars now.
We have 80 much in the early stages of production that
will come through; it cannot be hurried a great deal,
but it will come through with a massiveness that I
don't think anything the enemy has can meet when it
gets there - '43, I think it was.
It was very unfortunate that I said the President
said it. I think I was reading yesterday, perhaps, a
Kiplinger letter, in which it said that the President
had never been taken in on the '42 business, that he
had always maintained that '43 was the victory year.
That may or may not be. I would be surprised if the
war went beyond '44, but I am not a military expert.
In any event, I think '45 is the post-war period, Mr.
Secretary.
H.M.JR: What would you rather have, tax dates?
MR. BELL: Yes, as long as we can maintain it.
I don't know whether we can maintain it throughout
this period, but I would like to see it tax dates.
Regraded Unclassified
75
- 4 -
H.M.JR: Let's see what some of these people -
MR. BELL: Of course, if we can get on a pay-as-
you-go basis, you-- (Laughter)
H.M.JR: If you get it on what kind of a basis?
MR. BELL: Current pay-as-you-go, month to month
basis on your taxes.
H.M.JR: What have you been reading?
MR. BELL: Again there is some optimism, I suppose.
H.M.JR: Have you been reading Whaley-Eaton?
(Laughter)
MR. BELL: No, I have been reading Randolph Paul.
H.M.JR: Now, Mills said three years, one and
three-eighths. You didn't say how much this--
MR. HAAS: One and a quarter on this, two years
and six months.
H.M.JR: Now, let me see, Chris Devine said one
and five-eighths, due March '47.
MR. HAAS: He is out farther, yes. I quizzed him
on that, you know, about the strength of that market
out there.
MR. BELL: That is the vacant date, too.
H.M.JR: Now, Gill, the Bank of Manhattan said
either December '44, or March 1945, one and a quarter.
MR. HAAS: That checks--
H.M.JR: You think he is a good man, don't you?
MR. HAAS: He sounded good.
Regraded Unclassified
76
- 5 -
H.M.JR: He agreed with you? (Laughter)
MR. HAAS: It would have been better if he had
left the December off and put it March.
MR. BELL: It is the first time he has been down
for about three years.
H.M.JR: Levy says December 15,'44, one and an eighth.
MR. HAAS: He is cutting it.
H.M.JR: And Aldrich and his crowd said one and
three-quarters, September '47.
MR. BELL: What would it be, September '46, George?
Is it a vacant date there?
H.M.JR: September?
MR. BELL: Forty-six, four years.
MR. MURPHY: It is awfully thin at one and an eighth,
and awfully fat at one and a quarter.
MR. BELL: Oh, no. You are supposing '45 is one
and a quarter - one year longer.
MR. MURPHY: Pardon me, yes, I am on the wrong one.
MR. BELL: Either one and a half or one and three-
eighths. Dudley Mills said three years; that would be
September '45, one and three-eighths.
MR. HAAS: Rather than the long note market, it is
safer to take a short bond - that is what Devine finally
said. That is all we can get there.
H.M.JR: Dan, 80 that you get my thinking straight,
and I have got lots of time, nothing but time to think,
I hope - I have nothing until three o'clock when the
Regraded Unclassified
77
- 6 -
Federal Reserve comes in. I have shoved this tax
note aside for the minute. I think we ought to settle
this thing first.
MR. BELL: I do, too.
H.M.JR: And also that you get my thinking - I
haven't been impressed at all by what the Fed crowd
wants to do - a great big seven or eight billion
dollar money raising campaign in October and, you
know, whoop-it-up stuff. I don't, and I had Ned
Brown in for lunch and talked to him about it. He
agreed with me that supposing you do it, it is
successful, and everybody sort of sits back and says,
"We have got nothing to do now that we have done that" -
sit back, skip a month, and come back again. He thinks
we have to do it every month.
MR. BELL: He does?
H.M.JR: Yes, he thinks that we have got to get
better organized, go more into every community, and I
don't know but that eventually we may have to merge the
victory fund and the war bonds. I don't know whether
we can have two committees going into each community.
I have just been thinking about it.
But what I am getting at now - I don't know whether
you fellows agree with me - I would like to give you
all I have in my mind. I do want to give the Victory
Fund Committee something to sell this month if possible.
Now, the suggestion was made that on the certificate we
give full allotment to any non-banking subscriber and
give the Victory Fund Committee maybe a week to go out
and do that job. I mean, I am just throwing these
things out. The other suggestion made was that if we
are going to have - I meant a note - if we are going to
have a certificate and a note, don't have them both
come due on the same day. That is what the Chase said.
MR. BELL: I like that. I would like to have the
certificate payable on the twenty-first and the note
on the twenty-fifth.
Regraded Unclassified
78
- 7 -
H.M.JR: Something like that. I also was think-
ing that we might start the four hundred million bills
next Monday.
MR. BELL: A week from this Wednesday--
H.M.JR: I mean next Monday . - they bid on Monday,
don't they?
MR. BELL: That is right.
H.M.JR: Let me just ask the Victory Fund - VFC -
most everybody I talked to said they didn't think there
was any harm in giving the fellows a week, but they
didn't think they would sell anything to amount to
anything on a three-year note.
MR. BUFFINGTON: I don't agree with that. I think
that it would not do any harm, but I think that they
have evidenced that they have ability to contact a lot
of corporations and a lot of funds which normally would
not buy a bond like the tap two and a half and weren't
particularly interested in certificates. I think they
might help considerably on a note. How much they will
sell, I don't know, but I think decidedly they will do
more than not harming it. I think they will do some
good on it.
MR. BELL: I doubt if corporations are much inter-
ested in a three-year note.
MR. BUFFINGTON: Well, dan, put it this wey, there
are a lot of them that have said that they are not
interested in certificates, and we know that the tap
two and a half is not the proper one for them to buy.
I think there is that three-year money around. I may
be misjudging it.
(The Secretary held a telephone conversation with
Mr. Gaston.)
MR. BELL: What percentage of the last certificate
issue went outside the banking system, George, do you
remember?
79
- 8 -
MR. MURPHY: We haven't a tabulation of the last
one yet. Federal Reserve District No. 1 is out. We
have wired them and asked them to hurry on it. Before
it was sixty-five percent to banks and thirty-five
outside.
H.M.JR: How much to banks?
MR. MURPHY: About sixty-five, I believe, to
banks.
MR. BELL: I thought it was better than that.
MR. BUFFINGTON: It was forty percent on the one-
half certificate in April and not quite as much on the
five-eighths; and as I remember, we wired the Victory
Fund Committee on the five-eighths that we wouldn't
expect them to do any work on that. I do not think
they did anything on the five-eighths.
MR. MURPHY: I have the figures on those two,
and I can have an eleven-bank tabulation within a
very short time on it.
H.M.JR: Well, Dan, having thrown this all at
you - I mean, let's just put the Victory Fund aside
for one minute - what do you think?
MR. BELL: Well, I like the certificate on the
basis of sixty-five. I think that is about right for
May 1, for half of it.
H.M.JR: The certificate - what do you like?
MR. BELL: Point sixty-five for May 1. On the
note I was a little dubious, but I think probably
that is the best thing to do. I certainly don't
think you ought to hit that short-bond market again.
I think maybe the June, or March, whatever you sug-
gested, 1945, is about as good a place as we can get.
But I have some doubts about keeping it open so long,
although I don't know as there is much harm in it.
Regraded Unclassified
80
- 9 -
I do question giving - or adopting the innovations
that were suggested, but allowing the - what was that -
the banks to--
MR. HAAS: One of them was to have the banks cut
off the first two days. The Secretary does not like
that. He wants to--
MR. BELL: That was in one memorandum I read - I
had some question about that. That is out?
H.M.JR: This is the only innovation, and the Fed
is going to have a check-up on this.
MR. BELL: I would leave the certificate open two
days. I have some doubts as to whether you ought to
leave the note open longer than two days.
H.M.JR: Well, the certificate would be decimal
sixty-five, due May 1?
MR. BELL: Yes, sir.
MR. HAAS: March.
H.M.JR: And the note would be one and a quarter
due March 15, 1945.
MR. HAAS: That is cutting it thin, mainly to help
to tend to cut down any free riding that might be
there in case you left it open a week.
MR. MURPHY: It has got to be cut thin if you allow
full allotment to non-banking investors. If it isn't
cut thin, you are up against the dilemma of either having
delayed delivery, which I think will cut it, or else
having free riding.
H.M.JR: Delayed delivery?
MR. HAAS: Yes, you remember the bankers advisory
group advised you to have sixty days delayed delivery,
which it seems to me would make the sales job pretty
tough. The only other alternative is to cut it thin.
81
- 10 -
MR. BELL: We have been outting them thin anyhow.
I think we have got to keep that up.
MR. MURPHY: Then they cut a slice off themselves,
and we are through with it.
H.M.JR: The certificate would be payable when,
Dan?
MR. BELL: The 21st, I think it is, Monday - yes
the 21st, and I would make it - that is right after
the tax payments, and then the note on the 25th.
H.M.JR: September 21 - payable September 21.
What do you think, Mr. man?
MR. BUFFINGTON: If you are going to leave the
notes open only two days, I don't think the Victory
Fund will do much on it. I think you have got to give
them time to go out and actually contact people. I
think the note that you have suggested is all right,
and I think they will do a fair job on it. I would
like - I don't know why you think corporations wouldn't
be interested in that kind of paper.
MR. BELL: I think, generally speaking, corporations
are interested in something they can get their money out
of pretty quickly, and I think they are interested in
the certificate. I think they will be interested in
this tax note that we contemplate putting out, something
that they can get their money out of within six months.
But I don't think corporations want to go in for three-
year money, generally speaking. I may be wrong on it,
I don't know.
MR. HAAS: There is 8. fellow out in Chicago, Mr.
Secretary, that Ned Brown frequently mentioned, who is
supposed to be one of the best bond men, 8. fellow
named Charlie Stuart.
MR. BUFFINGTON: Harry Stuart.
82
- 11 -
MR. HAAS: He should know this sort of question,
shouldn't he?
MR. BUFFINGTON: Yes, of Halsey, Stuart & Company.
He would be an excellent man to get a broad check on
the whole middle western, Mississippi Valley market.
He would be the best man.
H.M.JR: Is he on your committee?
MR. BUFFINGTON: Yes, sir, Victory Fund.
H.M.JR: What is he, the head of it?
MR. BUFFINGTON: No, he is a member of the district
committee in Chicago.
H.M.JR: Is he very able?
MR. BUFFINGTON: Very. I think he is one of
the best distributors in the country. You have mentioned
him before. I think he has been in to see you; he is
an older man, sixty-five.
H.M.JR: I don't think 80.
MR. HAAS: I think he was over at Farm Credit a
long time ago.
H.M.JR: Who mentioned him?
MR. HAAS: Ned Brown says he is one of the out-
standing. - and his firm has done an outstanding job.
They have had that bad name, and evidently have come
out in good shape.
MR. BUFFINGTON: Insull. We have tried to get
him to come more out in front, but he was indicted in
connection with the Insull fiasco, and I am sure - I
mean, they never have gotten anything on him. That is,
he is a thoroughly reliable person, but some things that
some of his salesmen did were not what they might have
83
- 12 -
been, but I think he is one of the ablest national
distributors, particularly outside of New York, there
is in the country.
H.M.JR: You could call him up on the phone and
ask him.
MR. BUFFINGTON : All right, sir.
H.M.JR: You can call him up and ask him what
they think.
MR. BELL: Supposing we left the note open until
Tuesday?
MR. BUFFINGTON: I think that would be fine, open-
ing it Thursday morning and leaving it open until
Tuesday. I think that would help. That gives them &
little chance to get out some letters and then to
follow up with personal solicitation.
H.M.JR: I would do this, I would get out a notice
Monday night, giving them forty-eight hours' notice,
and close it Wednesday.
MR. BUFFINGTON: That is even better, that forty-
eight-hour notice. They would like to have that
amount of time.
MR. BELL: That gives them a week.
H.M.JR: That gives them a week, yes. What do
you think of that?
MR. BELL: That is all right.
H.M.JR: I tell you, there is another thing on
this thing which I think is important. We ought to
have a financial publicity man here.
MR. BUFFINGTON: We have been using Prenosil, as
you know, for that.
H.M.JR: He is not good enough.
Regraded Unclassified
84
- 13 -
MR. BUFFINGTON: No, Prenosil is not widely enough
known for that. We ought to have an outstanding finan-
cial publicity man.
H.M. JR: In the whole country there must be some-
body.
MR. BELL: That kind is hard to get.
H.M.JR: What I was getting at is just now I think
it is good publicity for the public, to come out with
an announcement that we are leaving this open for a
week for the Victory Fund Committee to go and sell to
non-banking institutions.
MR. BUFFINGTON: That will really put the boys on
notice that they are supposed to go to work.
H.M.JR: Show we are doing everything we can under
the present laws and limitations to get non-banking
money. Now, we can't do any more than that. This
issue we are doing isn't particularly designed for
non-banking, but we are doing everything we can.
MR. BUFFINGTON: Mr. Secretary, that thought of
this publicity - as I said, I think it is the most need-
-ed thing the Victory Fund - it would be the most
helpful thing they could have.
H.M.JR:E They need somebody around who thinks in
those terms.
MR. BELL: Will Sproul be here today?
H.M.JR: No.
MR. BELL: Just the Board members today?
H.M.JR: Yes. It is really childish. Ransom
called me up and said he wasn't a member of this, and
would I make it plain that he was sitting here at
my invitation, although he is acting chairman while
85
- 14 -
Eccles is gone; Sproul is acting chairman of the Open
Market Committee. I felt like saying, is this a war
or isn't it a war. I had to call up Sproul and Williams
on the telephone in Philadelphia and pat them on the
back 80 they wouldn't get mad at Ransom.
MR. BUFFINGTON: Dan, in thinking of this salability
of this note, aren't you thinking pretty much of the
New York reaction, the New York market? I would expect
that this kind of note would go much better outside of
New York than it would in New York.
MR. BELL: You mean corporations?
MR. BUFFINGTON: Yes.
H.M.JR: He would be a good man. I think I will
call him up - Young in Chicago - and ask him what he
thinks of this plan, leaving it open.
MR. BELL: What man, Stuart?
MR. BUFFINGTON: Young of Fed. He wouldn't have as
good a slant on distribution.
(The Secretary held a telephone conversation with
Mr. Rouse, as follows:)
86
September 8, 1942
10:41 a.m.
HMJr:
Hello.
Operator:
Mr. Sproul wasn't there today. I have Mr. Rouse.
HMJr:
All right.
Operator:
Go ahead.
HMJr:
Hello.
Robert
Rouse:
Good morning, sir.
HMJr:
How are you?
R:
Fine, and you?
HMJr:
I'm okay. Where's Allan?
R:
He's on his way down there.
HMJr:
Down where?
R:
To Washington.
HMJr:
Oh. I see.
R:
For your meeting this afternoon.
HMJr:
Oh, for heaven's sake. Okay.
R:
Good.
HMJr:
Now, what I want to ask you is - have you had a
chance to talk to any of these fellows this
morning?
R:
Yes. I've talked to - we've talked to Levy, Mills
and - and Devine.
HMJr:
Yeah. Yeah, well -
R:
And they none of them have seemed to change their
ideas. Both - Levy is - still sees no sense in
leaving the books open. Devine and Mills don't
see any harm in it. They don't think it will
accomplish much.
HMJr:
Yeah.
Regraded Unclassified
87
- 2 -
R:
And their recommendations are unchanged.
HMJr:
Well, what are your recommendations this nice
bright Tuesday morning with not sun in the sky?
R:
Ah - have you got a dull day down there too?
HMJr:
Yeahl
R:
It's just as dark as it can be here.
HMJr:
Yeah.
R:
Miller and I have just been going over it again,
and both - found that both of us have changed
our ideas somewhat over the week-end.
HMJr:
I see.
R:
I haven't discussed it with Allan, but we're
turning more and more to a one and five-eighths
of June, '47.
HMJr:
You are?
R:
Yeah. Our - as - the way we were leaning on
Saturday was for June, '45, one and a quarter.
HMJr:
Yeah. Now, we just caught up with you on that
one.
R:
(Laughs) But, in thinking it over and over the
week-end, it seemed to both of us that we might
get a wider distribution with the banks throughout
the country with the one and five-eighths. We
wouldn't give ground and we wouldn't interfere
with a - with a modified tax note.
HMJr:
I see. Well, that's all true. Mr. Bell 18 here
full of beams and sunshine.
R:
Well, that's good.
HMJr:
He's looking fine.
R:
Doesn't he look well?
HMJr:
Yeah.
R:
I was - I'm thinking it did him a lot of good.
88
- 3 -
HMJr:
Right. He said (aside - what did you say, Bell?)
How's the market in that area?
R:
The market 18 - hasn't been too good.
HMJr:
That's what you've been telling us.
R:
That's right.
HMJr:
See, we believe you.
R:
Well, I think you're right in that.
HMJr:
Yeah.
R:
When I got back and talked to the banks on Friday
here - all - practically all our large banks,
that is - Chase, Guaranty, Bankers, Central
Hanover - they all recommended a three to five-year
note. That is - one and - one and five-eighths or
one and three quarters.
HMJr:
Well -
R:
I'm somewhat influenced by that.
HMJr:
Well, let me ask you this - we're here - will you
go along on a - on the certificate, suppose like
.65, May 1?
R:
Well, we're all set on that. We think there's
no question about it.
HMJr:
You're set on that?
R:
Yes, sir.
HMJr:
Well, all right. I'm going to do a little check-
ing. What - what you're now leaning towards 18 -
what are you leaning towards now? So I can get
this straight.
R:
I'm beginning to lean to a one and five-eighths
of June, '47.
HMJr:
One and five-eighthe of June, '47.
R:
I'd like to know what your people think of it
after looking it over.
HMJr:
Okay.
Regraded Unclassified
89
- 4 -
R:
And, we'll look it over some more, and I'll
talk with Allan. He'll call me I think, as
soon as he gets there.
HMJr:
All right. Be calling you back.
R:
Fine.
HMJr:
Thank you.
90
- 15 -
H.M.JR: I will call Young and Davis. That will
give us the Middle West.
MR. BELL: That is enough.
H.M.JR: What I am going to tell them to do is
to look around and call me back at quarter of three.
MR. HAAS: This one and five-eighths is really
good.
(Ticker release brought in to the Secretary.)
H.M.JR: The Senate Finance Committee voted by
a vote of twelve to zero rejection in total of the
Treasury's proposal for combined spendings tax and
compulsory savings.
MR. HAAS: Bad for you, bad for them, and bad
for the country.
MR. MURPHY: At least George admits it is not
complicated.
MR. BELL: Who admits it?
MR. MURPHY: George.
H.M.JR: What a slap-down.
MR. HAAS: That is all right; your record is good.
H.M.JR: My record is all right; they will come
around to it. After all, how many years has it taken
to make Keynes a baron? (Laughter)
MR. BUFFINGTON: A lord.
H.M.JR: He is & lord.
MR. BELL: Is that an accomplishment? (Laughter)
91
- 16 -
H.M.JR: They made him a lord for something.
MR. BELL: Is that a promotion or a shelving?
H.M.JR: I don't know. Do you know why they
gave him that?
MR. BELL: No, I don't know.
H.M.JR: It didn't take them long either.
Let me catch my breath.
MR. HAAS: This one and five-eighths is really--
MR. MURPHY: Sproul told us last week if we put
out a one and three-quarter bond we would hit the bulls
eye - the weakest place in the market. Now he is taking
a bead on the bulls eye himself. (Laughter)
MR. HAAS: I think I know what is in their mental
process, how they arrived at that. If you are going to
put out the tax notes, that is their baby, and they don't
want anything to absorb any part of that market. In
order to keep it there they will go out into the weak
part of the market.
(Mrs. Klotz entered the conference temporarily.)
H.M.JR: It is wonderful to get such support from
the Senate. (Ticker release handed to Mrs. Klotz.)
I didn't ask them - I requested them. (Laughter)
MRS. KLOTZ: That is terrible.
Why are you laughing?
H.M.JR: I am not going to cry. I told them it
took ten years for Keynes to be made a lordship, and
in ten years they will recognize I was right.
MRS. KLOTZ: They always do - you don't have to
wait ten years for them to recognize that you are right.
Regraded Unclassified
92
- 17 -
That is terrible. I see you needed a little
nourishment. (Laughter)
H.M.JR: That was before. I knew something had
been sunk. I thought it was a Japanese cruiser, but
instead it was me. It is wonderful to be right and
unpopular.
MRS. KLOTZ: I can't laugh about it; I don't know
how you can.
H.M.JR: Henry Murphy was very amusing, as he
usually is. This is what they are laughing at. I
will have to get him to repeat it. Last week the
Federal Reserve - what about a long note?
MR. MURPHY: If we put out a short note we hit
the bulls eye at the weakest point.
H.M.JR: What did you say Sproul did?
MR. MURPHY: He is recommending that today; he
is drawing the bead on the bulls eye himself. (Laughter)
H.M.JR: That is what he said.
MRS. KLOTZ: No wonder the President didn't come
out for it. He must have been tipped off. Well, thanks
for the good news. (Mrs. Klotz left the conference.)
(The Secretary held a telephone conversation with
Mr. Young of Chicago as follows:)
Regraded Unclassified
93
September 8, 1942
10:50 a.m.
HMJr:
Hello.
Operator:
President Young of Chicago.
HMJr:
Right. Hello.
C.S.
Young:
Yes, sir. Young speaking.
HMJr:
How are you?
Y:
All right, Mr. Secretary. Just fine.
HMJr:
Look - can you hear me?
Y:
Yes, sir. I can hear you very well.
HMJr:
All right. Now, this is the way our financing
looks right now. Hello?
Y:
Yes.
HMJr:
A certificate due May let of next year with a -
to pay .65.
Y:
.651
HMJr:
Yes.
Y:
Good.
HMJr:
Hello?
Y:
Good.
HMJr:
But we're going to copy the way New York City
sells it, you see?
Y:
Oh, yes.
HMJr:
Now, there are two kind of notes. The Fed. in
New York - Sproul had gotten me around to a
one and a quarter due March 15th, '45.
Y:
March 15, '45'
HMJr:
But now, Rouse - they told us last week that
was the weakest spot in the market.
Y:
Uh - huh.
Regraded Unclassified
94
- 2 -
HMJr:
No, wait - no - no that - that was what they
wanted last week. Hello? Hello?
Y:
Yes.
HMJr:
I misspoke myself. They wanted March 15, '45.
Y:
Yes, at one and a quarter.
HMJr:
Now over - what?
Y:
At one and a quarter.
HMJr:
Yeah. Now over the week-end they come and say
we want one and five-eighths, June, '47. Hello?
Y:
Yes.
HMJr:
Which last week they said was the weakest spot
in the market.
Y:
Oh, yes.
HMJr:
Now, whatever we do on a certificate and a
note, the certificate we wouldn't ask to have
the people pay it until September 21.
Y:
September 21?
HMJr:
And the note payable September 25th.
Y:
Uh huh.
HMJr:
You see - sorta to not have all the money to come
out at one time.
Y:
Sure.
HMJr:
Now, on the note, this is what we're thinking of.
In order to give the Victory Fund Committee
something to do, give them a week to go out and
sell this note to non-banking people, see?
Y:
Yes.
HMJr:
And any non-banker who wants to subscribe to
this would get full allotments.
Y:
Full allotments?
HMJr:
Yeah.
Regraded Unclassified
95
- 3 -
Y:
Uh - huh.
HMJr:
Now, what I'd like you to do is to sound out
some of the people on what I've told you, you
see?
Y:
Yes.
HMJr:
And get their reaction. Whether they'd like a
one and a quarter note or one and five-eighths,
because 80 far I'm only hearing from New York.
I want to know what the Middle West - because
that's where the money 1s.
Y:
All right. Well, I can - I can let you know
this afternoon, or -
HMJr:
I'd like you to call me at quarter of three,
Washington time.
Y:
All right.
HMJr:
Supposing you put in: a - I'll handle it, because -
I'll - I'll put in an appointment call for you at
quarter of three.
Y:
Well, all right, that is Washington time.
HMJr:
Yes. I have ten minutes of eleven now.
Y:
Yes, all right.
HMJr:
What have you got?
Y:
Well, see here, it - it would be ten minutes of
ten.
HMJr:
Well, I'll call you at quarter of three my time.
Y:'
And, I think - I don't know, but I - I imagine,
Mr. Secretary, that the one and five-eighths would -
would probably be the answer that I will get from
most of the people.
HMJr:
Well, find out, and ask them what would they think -
ask some of your Victory Fund people who are in
the distributing business, if they had a week to
go out and sell this to non-bankers and give them
full allotments, do they think that - how much
could they do?
Regraded Unclassified
- 4 -
96
Y:
Yes, all right.
HMJr:
And, could you talk to somebody maybe in Detroit?
Y:
Well, I'll take Detroit and Milwaukee and Indiana-
polis and Des Moines.
HMJr:
Wonderful.
Y:
And, then I'll - I'll have the - in fact the
Victory Fund - I got four or five of the best -
the active salesmen will be in here in a few
minutes and I'll - I'll sound them out too.
HMJr:
Good, and I'll call you back at quarter of three,
Washington time.
Y:
All right.
HMJr:
Thank you.
Y:
All right, Mr. Secretary.
HMJr:
Thank you.
Y:
All right.
97
- 18 -
H.M.JR: Now, you see, he takes that area and
Chester Davis can take four or five states.
MR. BUFFINGTON: That is a good way.
H.M.JR: Then after we have done that, let's talk
about the tax note.
Have we a teletype to Chicago?
MR. BELL: The Board has.
(Discussion off the record.)
MR. BUFFINGTON: They have suggested a publicity
man from Chicago, but he is not 8. newspaper man.
H.M.JR: He doesn't have to be.
MR. BUFFINGTON: They have suggested an excellent
man. I have asked them to hold it up a little bit.
H.M.JR: Who is that?
MR. BUFFINGTON: I can't recall his name. I have a
memorandum on it in my office. He is a very good man
for that purpose.
H.M.JR: Well, some place there is some fellow.
I don't think he should necessarily be a newspaper man.
MR. BUFFINGTON: Neither do I.
MR. BELL: Did you say Morgan had one?
H.M.JR: For years he was famous. Everybody knew
him. He not only did this stuff, but - I mean, anything
that had to do with--
MR. BUFFINGTON: ...public relations.
H.M.JR: He was well known. He died.
(The Secretary held a telephone conversation with
Mr. Chester Davis, as follows:)
98
September 8, 1942
10:58 a.m.
HMJr:
Hello.
Operator:
Chester Davis.
HMJr:
Hello.
Chester
Davis:
Hello.
HMJr:
Chester?
D:
Hello, Henry. How are you?
HMr:
Fine. How are you?
D:
Good.
HMJr:
Chester, I wanted to let you know where we
stood on our financing, as of this morning.
D:
Good.
HMJr:
Have you got a pencil?
D:
Yes.
HMJr:
What the boys have been thinking of is &
certificate due May lst....
D:
Yes.
HMJr:
.....
with & - a coupon on it of .65.
D:
Yes.
HMJr:
Which would be - the subscribers would pay for
it on September 21st.
D:
Yes.
HMJr:
Now, the note - last week they were telling us
one and a quarter due March 15th, 1945, payable
September 25th.
D:
That's one and one quarter?
HMJr:
Yeah.
D:
Yes.
Regraded Unclassified
99
- 2 -
HMJr:
Now, to my surprise, Rouse in New York comes
through this morning with a new suggestion,
that instead of the March 15th, '45 note, to
consider a one and five-eighths, due in June,
'47.
D:
Uh - huh.
HMJr:
Hello?
D:
Yes. June, '47.
HMJr:
Yeah. Now, what I want to know is, what - if
you could in the next three or four hours make
some checks as to what - the states that you
cover ....
D:
Yes.
HMJr:
.... what they - which one they would prefer,
if they prefer either of these, or if they have
any counter suggestions.
D:
All right - as - on the notes alone?
HMJr:
No - well, I think you might ask them about the
certificates too.
D:
All right.
HMJr:
Now, you - you get the certificate would be
payable September 21st
....
D:
That's right.
HMJr:
....
and the note September 25th.
D:
September 25th on the note?
HMJr:
Yeah. Now, we've got an idea that on the note,
we'd leave it open for a week to any non-banking
subscriber
....
D:
Yes.
HMJr:
.... and give the Victory Fund Committee a chance
to go to work on that
....
D:
Yes.
Regraded Unclassified
100
- 3 -
.... and any non-banking subscriber, we'd
give them an allotment in full.
D:
Yes.
HMJr:
See?
D:
Yes.
HMJr:
Now, I'd like you to try that out.
D:
All right.
HMJr:
Now, how many states do you cover, Chester?
D:
We have one full state, parts of six others.
HMJr:
Well, do as much as you can and I'm going to
call you back at ten minutes of three, Washing-
ton time.
D:
All right.
HMJr:
Do as much as you can.
D:
All right. We'll get busy right away.
HMJr:
Now one other thing which I don't need this
morning but you might think about. I'd like to
get a really first-class publicity man to
help this Victory Fund Committee.
D:
You mean from Washington?
HMJr:
No, anywhere I was thinking was there anybody
in the D'Arcy Agency or anybody like that.
D:
Do you - within our district or down there?
HMJr:
I want - if there's anybody in your district
who could come to Washington.
D:
That's right. You want him in Washington.
HMJr:
See? I mean - if there's any really outstanding man
who knows the financial game and could help the
Victory Fund Committee with publicity.
D:
I'm not sure that D'Arcy's got the man. He's
on our own committee and I haven't been able to
get very much out of him, to tell you the truth.
Regraded Unclassified
- 4 -
101
HMJr:
Well...
D.
But I'll check that too, and do the very best
I can.
HMJr:
Well, I mean, this, I don't expect this morning
you know.
D.
Yes.
HMJr:
But, I mean ...
D.
If we have such a man in here, I'll certainly
get you the information.
HMJr:
And I'll be back at ten minutes of three
Washington Time.
D.
Ten minutes to two here. All right.
HMJr:
Yeah.
D.
I'll be ready.
HMJr:
Thank you.
D.
Thank you.
102
- 19 -
H.M.JR: I think that covers ten states, and it is
the heart - did I state it correctly?
MR. BELL: Yes, sir.
H.M.JR: Now let's talk about - give me five
minutes, will you?
(A short recess was taken at this time)
H.M.JR: Now let's talk about this tax note. How
would you like to have it, Mr. Bell?
MR. BELL: I don't know yet. At first when we
talked about the thing I was in favor of a graduated
rate, making a dual purpose note out of it, but over the
week end I have sort of come back to the old flat six
cents a month, point seventy-two percent, and making
it 8. tax noteonly--
H.M.JR: How would that work?
MR. BELL:
but as George and Henry point out,
we still have the Federal on our neck for a short tap,
and by making this a dual note we get rid of that
proposition with the Federal. How would that work -
that would work just like the present note, which is
on a point forty-eight basis, and would raise it to a
seventy-two basis, six cents a month instead of four
cents a month. But I don't think we ought to go to
the one point fourteen of the Federal. I think that
is too high. I think it will influence the short
rates - it will have a tendency to. I don't think
we ought to go that high.
Before I left we talked about a four, five, six,
seven, eight, nine, which was about eighty-four. I
thought that was about the point where we ought to
stop, but since then George has raised it up to five,
six, which gives you about point ninety.
De
103
- 20 -
H.M.JR: And then the so-called Szymozak thing?
MR. BELL: Szymczak has one that comes out one
point zero four. That isn't a lot different, right
in between the Treasury proposal and the Federal
Reserve. I think the ninety is high enough. That
is the way I feel.
H.M.JR: What did you say?
MR. BELL: I think the ninety is high enough.
H.M.JR: You haven't a curve showing how that
thing works?
MR. MURPHY: Yes. (Chart handed to the Secretary.)
The top curve in black pencil represents the market.
The market curve shows the amount you get if you buy
an open-market obligation, having made up your mind in
advance the time that you want to hold it. That is the
solid pencil curve.
Just to see what that would mean if it were
followed religiously in terms of a tax note, we priced
a tax note of our own along this curve. This note
would offer its purchasers everything that the market
does, and & lot more, too; that is, they could get
out at the end of six months, and yet if they chose to
stay for three years they could have six months' money
at that rate. Just to give you an idea of how high it
is necessary to go to get that effect, notice the rates,
four, eight, eleven, twelve, thirteen, fifteen cents a
month in successive periods. We priced that to give us
a market note.
H.M.JR: Have you had this right along?
MR. MURPHY: We had this last week. Next we
plotted the Board's proposal, which is the green one.
That is the one that goes five, nine, ten, eleven,
eleven, eleven. You notice it is ahead of the market
here (indicating); but in the last year of its run it
falls behind the market. The market note is, as I
Regraded Unclassified
104
- 21 -
recall, one point twenty-eight, and this one is one
point fourteen, 80 even the official Board proposal
does fall behind the full market. It doesn't quite
meet the bogey of letting a person who intends to stay
for three years get the full three-year rate, even
though he can get out at any time.
Now, the Szymczak proposal, five, eight, nine,
ten, ten, ten, is the yellow curve.
The five, six, seven, eight, nine, ten, which is
our proposal, is this (indicating). We are way below
the market as it is here computed, but we are way above
the real alternative which a person would have. At the
end of a half year he would get sixty hundredths of one
percent on our proposal. Now you are contemplating
putting out a sixty-five hundredths percent certificate
for about seven and a half months. So you see, if he
stayed in & half year he would be substantially better
off than in the market. After that he would have
thirty-day money; he could get out at any time on
thirty days' notice. The rate on thirty-day money is
point three seventy-five, and yet instead of getting
that he would get successively higher rates, which
get up to one point twenty during the last six months,
and he would average point ninety for holding the
instrument the whole time. So you have an instrument
which, while it falls short by quite a margin of giving
the rate on three-year money for the whole period,
nevertheless gives a rate very much in excess of the
rate which can be had on any instrument that allows
its holder to get out with equal facility. It also
gives the holder a very substantial vested interest
when he has held it a while.
H.M.JR: Is that a fai way to figure it?
MR. MURPHY: I think that it is.
H.M.JR:- Do you figure any bond which has a year
or two years before it comes due - do you figure it
that way?
MR. MURPHY: If it were an open-market security,
of course, as it came to within one or two years of
UInclassified
105
- 22 -
falling due, it would be priced by the market as a
one or two-year security. All of them are 80 priced.
MR. BELL: This is on the order of a savings bond,
but it is not above the market.
MR. MURPHY: As the savings bonds were originally
priced they would be priced on this top curve, because
in pricing those back 8. year and a half ago we actually
gave them the one-year rate if they were held one
year, and the two-year rate for two years. It was an
exceedingly good proposition; the purchasers did not
have to decide in advance how long they wished to stay
in, but however long they stayed, we gave them at
least the rate for that time. This pricing does not
give that full advantage.
Since the F and G savings bonds were priced, market
short-term rates have gone up a great deal. Now you
have to hold an F or G about seven years in order to
get a rate as good as the mar ket. After that the rate
gets very much better. When you first put them out
the rates were better all along, but the market has
moved up. It has moved that way, and, since we have
no intention of changing the F and G bonds, as far as
I know, it provides us a standard of comparison. It
is int eresting to compare the F and G savings bonds
with this five, six, seven, eight, nine, ten proposi-
tion. For about the first two and a half years a
holder would do better with the tax note than with
the savings bonds.
H.M.JR: With this tax note (Indicating)?
MR. MURPHY: Yes, sir. Of course the E bond is
much better.
H.M.JR: Let me study this. Does this, the five,
six, seven, eight, nine, ten - has that been sent out
to be tested?
MR. MURPHY: No, Mr. Secretary.
MR. BELL: To be what?
H.M.JR: Did we send it out to the Fed to be tested?
Regraded Unclassified
106
- 23 -
MR. HAAS: Just the flat rate, the seventy-two,
was sent out. They thought that was all right.
MR. MURPHY: The only one we sent out was the
flat seventy-two.
H.M.JR: He gives a pretty good line of reasoning
there, doesn't he?
MR. BELL: Yes, sir.
MR. HAAS: Rouse agrees with that a hundred per-
cent.
H.M.JR: Which?
MR. HAAS: The line of reasoning that Henry just
gave you.
H.M.JR: What about Piser?
MR. MURPHY: Piser goes along with the Board a
hundred percent, although I imagine he got a copy of
their telegram. (Laughter)
H.M.JR: Tell that to Bell later on - what I did.
We sent out a request to the twelve bank presidents,
what we were going to do, and foolishly, I guess, we
sent a copy over to Ronald Ransom. So he quickly sent
them a telegram. Two. of them made up their minds before
they heard from the Board. Then when they heard from
the Board they changed.
MR. BELL: Yes, I saw that.
H.M.JR: Supposing I made this change and the thing
did not go well, you have no way - because this thing -
I would be counting heavily on the Victory Fund on this
five to ten. You have no way of testing that with your
own boys, have you?
MR. BUFFINGTON: Yes, sir, we can.
107
- 24 -
H.M.JR: I don't think you ought to test that with -
a little bit depends on if this thing went to June '47,
and this thing wouldn't compete with that.
MR. BUFFINGTON: That is right. A short note will
compete with these tax notes.
H.M.JR: I think we ought to wait until we see what
we do on the '47.
MR. BUFFINGTON: Dan, we agreed that that original
rate was fine just as a tax note. It just depends on
what kind of sal es you are going to try to hit, whether
you want to try to get into that short tax area or not.
MR. BELL: You mean the graduated rate we had
before?
MR. BUFFINGTON: When we first talked, we agreed
we didn't need anything over seventy-two to make it the
right, attractive type of tax notes. (Ticker releases
handed to the Secretary.)
H.M.JR: Do you realize that cotton is eighteen
and a third cents.
MR. BELL: What is parity, nineteen?
H.M.JR: Where the President, I think, with all
due respect, was inconsistent- I mean, he knows we
have to get the people to spend less, but he wants to
freeze everything at the present level.
MR. BELL: They ought to go back about four months.
MR. HAAS: Last month all farm prices averaged a
hundred and seven, wasn't it?
H.M.JR: That is the last I saw. Commodities
are up almost a half a point this morning, commodity
futures.
MR. BELL: I don't believe that this could be &
failure. I should think it would be at least - certainly
108
- 25 -
better than what your tax note has been. I wouldn't
say that has been a failure, by any means.
MR. BUFFINGTON: That is right.
H.M.JR: I think this, gentlemen, after what
Murphy told me - have you tried to explain that to the
Board?
MR. MURPHY: Yes, Mr. Secretary.
H.M.JR: Have you shown them this chart?
MR. MURPHY: Yes, I have. Their point is, that
in order to do it really well they have to offer a
person who contemplates staying in, say, three years,
a rate which is approximately one to three year money.
It is a rather fundamental divergence.
H.M.JR: Say that again.
MR. MURPHY: They have to offer a person who
contemplates staying in for three years & rate approxi-
mately equivalent to what they can get on three-year
money. Then his right of withdrawal is something extra.
They say that you are not going to be able to get this
money that people think they won't need for three years
unless you offer them a rate which is attractive, not
only for six-months' money, or one month, but attractive
for three-year money, and then give them the extra as a
bonus, the exit visa.
H.M.JR: The what?
MR. MURPHY: The right to get out.
MR. HAAS: It would seem to me, Mr. Secretary,
that you might make it either just a pure bona fide
tax note at seventy-two and leave out the dual; but
if you are going to put the dual in you don't gain
very much if they don't accept it enthusiastically.
In other words, it is their proposition anyway, rather
than yours, and you give them & real alibi.
Regraded Unclassified
109
- 26 -
H.M.JR: Well, George, on that basis I would have
listened to them on the bills going from three-eighths
to a half, and the bills are being accepted more and
more.
MR. HAAS: No.
H.M.JR: Sure. The way I think we in the Treasury
have got to watch after all the Fed is much closer to
the banks than we are, and the pressure will always be
on us to pay more.
MR. HAAS: They are not letting the banks buy this,
they want to make good themselves.
H.M.JR: The banks can't buy this?
MR. HAAS: No.
MR. BELL: Banks can't buy except for taxes.
H.M.JR: Well, but they can buy them for taxes.
MR. MURPHY: They are going to lose. The banks
have relatively little to gain in buying for taxes and
are worried lest their customers buy them and draw out
deposits from banks. So the pressure from banks has
been to pay a lower - Burgess said last week it was
just unfair to pay more to these people than to the
tanks. It was a matter of, just, as he expressed it--
MR. HAAS: The motivating force - the real force is
it is their pride. They have announced it; it has been
all around. When something comes out, they want the
price 80 rich it is bound to go without any salesmanship.
MR. BELL: The bankers were against this.
MR. HAAS: Brown was worried about the seventy-two.
MR. MURPHY: But they can take it. They wanted
just the seventy-two and the straight tax note as
opposed to the dual-purpose concept, and opposed to
the short tap as a whole.
110
- 27 -
MR. BELL: Viner was opposed to it originally, too.
I don't know if he has come around to it.
MR. HAAS: He is in the same position.
MR. BELL: Viner thought the tax note had won &
place in our financing and it should be kept as a tax
note and shouldn't be mixed with the financing. He
says everybody now is familiar with the tax note, they
know what it is, and if you make it a financing note,
you only change the name and everybody is mixed up again.
He thinks we have done a swell job with the tax note and
ought to keep it.
MR. HAAS: You can put up an argument that this is
a tax note and forget about the dual. If a corporation
wants to pay cash, they can do it, because of these
changes.
H.M.JR: How are you going to answer their ques-
tion? There is a lot of money in this field. Could
you get out something special that was only for non-
banking people, and don't let the banks subscribe to
it at all?
MR. BUFFINGTON: Then you get back to the short
tap and all - Ned Brown and commercial banks are just
as opposed to the short tap.
H.M.JR: All right, supposing we get out a short
tap. You haven't got the seventy-two?
MR. MURPHY: No, I can draw it in easily. It is
just a straight line, of course.
MR. HAAS: The short tap may be a flop. This thing -
you are sure it won't be a flop. I mean, this will go.
MR. BELL: At two or two fifty a month.
MR. BUFFINGTON: Cheaper than a short tap will go,
a cheaper rate.
H.M.JR: Which would you prefer to sell?
Unclassified
111
- 28 -
MR. BUFFINGTON: The Szymczak rate.
H.M.JR:- I don't mean that.
MR. BUFFINGTON: I would prefer, from a selling
point of view,--
H.M.JR: Excuse me - you have got three things.
We could increase the present rates on the tax notes
from forty-eight to seventy-two, or we can have a
combined tax note and cash-in features, the thing we
are talking about here, or third, a short tap.
MR. BUFFINGTON: I would prefer the dual purpose,
because if you hit on something like the Szymczak rates
it isn't an expensive method of financing and then you
get the same benefits out of the publicity you are using
on tax notes and don't have to go out and educate the
public on 8. second security.
MR. BELL: Again that seventy-two is thirty-day
money after the six months - what do you think of
compromising at the Szymczak rate, one point zero four?
H.M.JR: The only compromise we have made is that -
put the last three months, put it up to - he only goes
to ten, doesn't he?
MR. MURPHY: Yes, five, eight, nine, ten, ten, ten.
MR. HAAS: He gets up to ten faster, that is all.
H.M.JR: I was thinking a little bit different.
I was thinking of five, six, seven, eight, nine, eleven,
jump to eleven, change ours from ten to eleven.
MR. MURPHY: That will make very little difference
in the over-all yield.
H.M.JR: Cost?
MR. MURPHY: Cost, yes.
H.M.JR: Just the last six months pay eleven in-
stead of ten.
Regraded Unclassified
112
- 29 -
MR. MURPHY: You only raise it ninety to ninety-
one, I think. No, it would go to ninety-two.
H.M.JR: Five, six, seven, eight, nine, eleven.
MR. MURPHY: Raise--
H.M.JR: I mean, that would certainly give them
the incentive to hold, wouldn't it?
MR. MURPHY: Not a great deal, Mr. Secretary.
That is, it means they are getting twelve hundred more
in the last six months.
H.M.JR: If they don't hold it, it doesn't cost
us anything; and if they do, if they sit down and
figure, "I don't want to lose that last six months."
MR. MURPHY: If the people actually go out early,
the end rate doesn't cost you anything.
MR. HAAS: Of course, they argue that they have two
points in their curve, one is, raising up very rapidly
at the beginning in order to get them in at the start,
and then hold them. That is why they flatten - that is
their philosophy they outlined to us.
MR. HAAS: Mr. Secretary, Rouse said to take this -
he doesn't like this; he is just like you. He would
compromise by taking that eight and ma king it seven,
that is, Szymczak's with that modification.
(The Secretary held a telephone conversation with
Mr. Rouse as follows:)
113
September 8, 1942
11:46 a.m.
HMJr:
Hello.
Operator:
Mr. Rouse.
HMJr:
Hello. Bob?
Robert
Rouse :
Yes sir.
HMJr:
Uh, what have you got that's new?
R:
Nothing.
HMJr:
Well, the sun's coming out here anyway.
R:
(Laughs) Well that's good.
HMJr:
Nothing new.
R:
Nothing new here at all. There's no change in
the market, nothing much going on, and no new
comments.
HMJr:
Well I got a, well I won't even call it a
suggestion, a thought...
R:
Yeah.
HMJr:
...on this tax note, see?
R:
Yeah.
HMJr:
I, I want to get my name on one, but I am not
ready to put in on. I mean the Treasury
was 5, 6, 7, 8, 9, 10. Hello
R:
Yeah.
HMJr:
I'm suggesting to make that 10, 11 - the last
six months.
R:
Huh?
HMJr:
Hello.
R:
No. This is a fight I've kept out of.
HMJr:
Well, get in on it.
114
-2-
R:
(Laughs.)
HMJr:
Get in on it.
R:
All right.
HMJr:
I've been thinking... that...
R:
But, you go along with this 5, 6, 7, 8, 9, 10
except that you jump from 9 to 11.
HMJr:
That's right.
R:
Yeah.
HMJr:
Well, I'm not saying that I'm doing it, I'm just
raising the...
R:
You want a, uh-huh.
HMJr:
Why aren't you in on the fight?
R:
Well, I haven't been in exactly full accord, except
with the 1dea.
HMJr:
Well, I mean, don't you believe in doing this,
having a dual purpose?
R:
Yeah, I, I gave Dan and George support when they
first proposed it.
HMJr:
Yeah.
R:
But I'm not 80 keen on the higher rate at the end.
HMJr:
Well, what, what would you do if you could write the
ticket?
R:
I think I'd do something akin to the Szymczak label...
HMr:
I see.
R:
...which, when it... would work about 5, 7, 9; 5, 7,
9, 10.
HMJr:
I see.
R:
It's a little different than his, but 5, 7, 9, 10.
Doaradod
-3-
115
HMJr:
I see.
R:
Then you've got, I'm going on the theory that you've
got 30-day money.
HMJr:
Yeah.
R:
Uh, and you have an average rate of a little less
than one per cent...
HMJr:
I see.
R:
...and I can't 600 why, in the first place,
one couldn't sell it.
HMJr:
Yeah.
R:
I think it should be easy to sell, and I think
after a man owns it there's certainly no incentive
to turn it in until maturity, because his alterna-
tive is either to take three months' money at three-
eighths, or invest it in business where he may make
5, 6 per cent.
HMJr:
Yeah.
R:
That's my whole reasoning in the matter, and I
haven't seen any need of these bonuses at the end.
HMJr:
I $00. You'd go 5, 7, 9, 10, 10, 10.
R:
Yes sir.
HMJr:
O. K.
R:
Right.
HMJr:
Thank you.
116
- 30 -
MR. BELL: That seems high.
H.M.JR: While you fellows are figuring, I will
get hold of Ransom.
MR. BUFFINGTON: That is an awful little difference.
He is talking around one and your Szymczak plan is one
point zero four.
H.M.JR: He wants to keep it just under one.
MR. BELL: Bob Rouse hasn't been in on the dis-
cussions very much on this tax note recommended by the
Federal because he has not been in sympathy with the
higher rate, 80 he has kept out of it pretty well.
(The Secretary held 8. telephone conversation with
Mr. Ransom, as follows:)
117
September 8, 1942.
11:51 a. n.
Ronald
Ransom:
Hello.
HMJr:
Ronald.
R:
Yes.
HMJr:
Good morning.
R:
Good morning.
HMJr:
Now, we here have been working on this financing
this morning.
R:
Yes.
HMJr:
And, there doesn't seem to be, or putting it -
there seems to be fairly complete agreement on
the Certificate at .65, due May lst.
R:
Point what?
HMJr:
65.
R:
Yes.
HMJr:
Payable...
R:
Yes.
HMJr:
Payable September 21st.
R:
Yes.
HMJr:
Now, we were just about coming around to 1-1/4%
note, due March 15th...
R:
Yeah.
HMJr:
...when to our amazement, Bob Rouse is now talking
about a 1-5/8's, June #47.
R:
1-5/8's?
HMJr:
Yeah.
R:
Due what,
HMJr:
Hello.
R:
...due when?
- 2 -
118
HMJr:
June 147.
R:
June #47.
HMJr:
Yeah.
R:
Well, I think perhaps, just very confidentially
between you and me, your perplexity would be
added to by the fact that there doesn't seem to
be much agreement over on our side of the fence.
HMJr:
I see. Well, we're seeing each other at...
R:
Well, now may I say this to you. I think it is
tremendously important to maintain the integrity
of the Group with which you have been negotiating,
which is the Executive Committee of the Federal
Market Committee, and all of them are in - will
be in town available and will meet with you, but
at this time that does not include me...
HMJr:
Yeah.
R:
...and with your agreement which I hope I may
have...
HMJr:
Yeah.
R:
...I had rather just let that Group meet with you...
HMJr:
I see.
R:
...and then when I see you again explain some of
the current difficulties from this end if you
don't mind.
HMJr:
Well, I don't know, but it seems to me with Ecoles
away and you Acting Chairman, you ought to sit in.
R:
The difficulty is this, that I do not have a vote
on the Executive Committee. Frankly, this is an
awkward set-up just at this time, because ordinarily
I'm Eccles' alternate on that Committee.
HMJr:
Well, now listen, Ronald, God Damn it, we're at
war...
R:
Yeah.
HMJr:
...and if I want Ronald Ransom to come over to my
office at three o'clook to advise me, I think he
ought to come.
119
-3-
R:
I'll do anything you ask me to, and you know it.
HMJr:
And to - and to hell with stiquette. That's the
way I feel.
R:
(Laughs.)
HMJr:
I mean, you can't win a war that way.
R:
All right, I'll...
HMJr:
Now I want you over here a+ three o'clock, and if
anybody doesn't like it you tell them to talk to
me about it.
R:
All right. I'm coming at your request, but will
you please get the views of the Executive Committee
first and then give me a chance.
HMJr:
I'll do it that way, but this - we are at war and
I can't be bothered if some fuddy-duddy over there
doesn't - is more interested in etiquette.
R:
It isn't 80 much that, but some day when you have
more time, and you and I are not at war, I'll ex-
plain it to you.
HMJr:
Well...
R:
You'll agree with me.
HMJr:
All right. But anyway...
R:
But I'll come if you ask me.
HMJr:
I'm asking you.
R:
Fine. I'll be there at three o'cloak.
HMJr:
0. K.
R:
All right.
120
- 31 -
(The Secretary held a telephone conversation with
Mr. Schwarz.)
H.M.JR: Rouse said his was under one.
MR. BELL: Henry figured it one point zero two.
H.M.JR: You have got five, seven - you want to
get it just under one percent?
MR. BELL: Yes.
H.M.JR: What is the matter with this?
MR. MURPHY: It looks all right to me.
H.M.JR: Can you give me a little chart? Put
this in red ink or something heavier.
MR. MURPHY: It is a little hard to put in, but I
can give you the points, sketch it in.
H.M.JR: Why doesn't that sound pretty good?
You wouldn't announce this until - depending upon--
MR. BELL: No, I wouldn't announce this until
after this financing. He doesn't believe - and I
don't believe I would ask the Victory Fund Committee
about it, because the minute you start discussing this
outside, nobody is going to subscribe to tax notes.
MR. BUFFINGTON: There is not much doing anyway
the next ten days.
MR. HAAS: You won't sell any of these notes,
either, if they know about it.
H.M.JR: Would you or wouldn't you announce that
that banker group was down last week to see me - advise
me?
MR. BELL: Yes, I would. I read your conference
on that, and I would. I don't see any objection to
it at all. I think it is a good thing.
121
- 32 -
H.M.JR: All right. Who can give him a list of
the people who were here?
MR. BELL: I can give him a list.
H.M.JR: Did you read the Kent article?
MR. BELL: Yes.
MR. MURPHY: Thank God I didn't confuse that with a
speech by the President. (Laughter)
MR. HAAS: It hasn't yet reached the stage where
they will submerge private interests for the war. That
is just an evidence of it, that Kent business.
(Mr. Schwarz entered the conference.)
MR. BELL: There is the list. (List handed to Mr.
Schwarz.) Then there is also Viner and Stewart.
H.M.JR: I would have to get their permission.
It wouldn't look too much as though we were trying to
answer Kent, the fact that they were here last week?
Chick, they are the people who were here to advise
with me last week on this financing. Tom Smith is
from the Boatmans' National Bank of St. Louis, and
Spencer is from the First National of Boston. What day
were they here?
MR. BELL: They were here Wednesday or Thursday.
MR. HAAS: Wednesday.
H.M.JR: I would say they were here the middle of
last week.
MR. BELL: Either that, or say last week on this
financing.
H.M.JR: Last week on this financing - I want to
give you Stewart and Viner in a minute - I have got a
call in. You might as well tell them - you haven't
told them about your coming yet?
122
- 33 -
MR. SCHWARZ: Yes, they will be down there in a
minute.
H.M.JR: Where?
MR. SCHWARZ: In the press room.
H.M.JR: We met twice, didn't we, last week with
the Open Market Committee?
MR. BUFFINGTON: Yes.
H.M.JR: Why not say we met once with the Open
Market Committee and once with the Federal Reserve
Board? That is truthful - once with the Federal Reserve
Board and once with the Open Market Committee. The
other time they weren't here. It was the Federal
Reserve Board I met with Friday, once with the Federal
Reserve Board and once with the Executive Committee.
MR. SCHWARZ: This will be the second meeting with
the Executive Committee?
H.M.JR: It was once. Friday afternoon - they
didn't want to call that an Executive Committee meeting.
MR. SCHWARZ: Third meeting with Federal Reserve
officials?
H.M.JR: No, you had better say that I met once
with the Board and this will be the second meeting with
the Executive Committee.
MR. BELL: This is the third meeting with the
Executive Committee, Mr. Secretary. You met, I think,
in the day, at eleven, on September 1, and then at
eight-thirty you had Sproul and Ransom and the others.
H.M.JR: Well, this is really then the fourth
time.
MR. BELL: The third meeting with the Executive
Committee and you had one meeting with the Board.
123
- 34 -
H.M.JR: Third meeting with the Executive Committee
and once with the Board.
MR. BELL: And one meeting with the bankers.
H.M.JR: Do you think they will like this, and it is
not too much an answer to Mr. Kent?
MR. SCHWARZ: They will like it.
H.M.JR: But it was last week. It isn't as though
I suddenly got Johnny Hanes to come down.
MR. SCHWARZ: Some place I read that this is one
war they can't say J. P. Morgan started.
H.M.JR: George Harrison told me last week what
New York wanted was some big figure down here in the
Treasury. Of course they have wanted that ever since
I came here or before.
MR. BELL: Some big figure?
H.M.JR: Financial figure, like George Harrison.
(Laughter)
MR. HAAS: Of course, the biggest ones in 1929 are
not there any more, for obvious reasons.
H.M.JR: I should like them - like Charley Mitchell.
MR. SCHWARZ: Whitney.
(Chart handed to the Secretary by Mr. Murphy.)
H.M.JR: That wouldn't be too bad.
MR. MURPHY: It looks very reasonable.
H.M.JR: Let those names go and I will see. They
are having trouble getting Stewart. Do you think Viner
would have any objection? I never asked.
124
- 35 -
MR. BELL: Haven't the boys known that Viner and
Stewart have been here?
MR. SCHWARZ: They have been seen here.
H.M.JR: I think we had better ask those two. Let
that go for a while. I think we will stop here and
we will continue at quarter of three.
125
September 8, 1942
10:28 a.m.
HMJr:
Hello.
Herbert
Gaston:
Hello.
Operator:
Mr. Gaston.
HMJr:
Hello. Hello.
G:
Yes.
HMJr:
Herbert, I wish you'd talk to me about - sometime
today - of amongst the financial advertising men
who helped us originally on the War Bonds, who -
who was the best - the one from St. Louis, or the
one from New York. I remember they both had some
bright young fellows, you see?
G:
Yes.
HMJr:
And I - I mean a possibility of getting - was there
any one that stood out?
G:
Nobody that stood out. No.
HMJr:
They didn't?
G:
No. Probably the best of the lot was this fellow,
Clevenger, and we had him in here working on tax
things, and he didn't pan out very well. He's now
gone to the - to the Federal Communications Com-
mission.
HMJr:
Yeah.
G:
The very bright fellow was the salesman that I don't
recall his name, that represented D'Arcy of St. Louis.
He - he might be - he might be some good.
HMJr:
A salesman?
G:
Well - he's the fellow that represented them down
before us. He was essentially an advertising
salesman. He was not & copy man.
HMJr:
No. Well, think about it.
G:
I could - I could ask Jim Bryan, but I don't -
I don't myself know anybody that's - that was
Regraded Unclassified
126
- 2 -
hot on either of the organizations.
HMJr:
Well, talk to me about it some time today.
G:
I will. Yes.
127
September 8, 1942
12:58 p.m.
H&Jr:
Hello.
Operator:
Mr. Paul. He's with Mr. Blough.
HMJr:
All right.
Operator:
Go ahead.
HMJr:
Hello.
Randolph
Paul:
Yes. I wanted to report to you about this morning.
HMJr:
Where are you fellows?
P:
Well, they're all working - we're all getting a
statement up for two o'clock down in Roy's shop.
HMJr:
I mean, are you in the Treasury?
P:
Oh, yes. I can come up and see you if you like.
HMJr:
Well, we'll talk on the phone.
P:
All right.
HMJr:
Go ahead.
P:
They turned down the - they turned down the
spendings tax.
HMJr:
I saw. We didn't even have a vote.
P:
No. Well, of course, there were only eleven votes.
Some of them didn't vote but La Follette made a
motion for a modified spendings tax....
HMJr:
Yes.
P:
.... which got a few votes. So, really we didn't -
we did have some, and the people that might have
voted for us weren't there. Now, they then picked
up a discussion, started out a little bit on the
sales tax, but that didn't get very far because
George came in then with his plan - made Walsh
chairman and came in with his plan.
HMJr:
Yeah.
128
- 2 -
P:
This plan is a gross income tax which has an
exemption of $624.00. It hits down - it's on
gross income - five per cent. It has a sort of
an elusory post-war rebate up to a certain
amount which can be taken immediately by applying
it against debt payments, insurance premiums, and
WAr Bonds. Actually there won't be any appreciable
War Bond element in it, because it is only five
per cent and most people won't have enough debt
payments and insurance premium payments to absorb
it. There was a good deal of discussion of that
and the sales tax some of the sales tax boys
were a little bit frustrated. They asked - we
made a few technical comments on it, preliminary
to this thing we're taking up at two o'clock.
Now - the only - the only policy position we took
was this morning that, in response to a question,
I said that the plan had some technical defects,
some of which could be eliminated. I wanted 'til
two to make any decision on it, but then they
pressed me for an answer on whether I thought it
was better than - better than sales tax, and I said
I thought it was. Now, our feeling about it is
this - (aside: let me have that sheet there, will
you?) aside from technical points which I won't
bother you with
HMJr:
Yes.
P:
... we - we have here an equivalent which we
think we ought to state. That is, they've asked
us for our opinion now, and we say we would perfer
something first, and then if that isn't done..
HMJr:
What do you mean 'prefer something first'?
P:
Well, I'll - we wouldn't - rather than this gross
income tax we can't honestly say we prefer that,
except as against the sales tax
HMJr:
Yeah.
e:
...
and I think we ought to say what we think
ought to be done.
HMJr:
Yeah, otherwise you're getting us caught in the
same trap as last week.
P:
Well, yeah, except that I can't help it if the
newspapers completely misrepresent the facts.
We weren't really in that trap, but anyway, that's
129
- 3 -
history - last week is history. We're not
making a suggestion here, we're telling what
would give the equivalent and taking the equiva-
lent with the spendings tax out, it seems to us,
it would be better than the proposed tax to lower
the married exemption to a thousand and credit for
dependents to $250. Then for 1942 income tax rates,
reduce the income - those rates by ten points and
increase the '43 and subsequent years' rates by
five points and start withholding at the source
January 1st, 1943 at fifteen per cent. Now, that's
a much cleaner picture, and it's on the net-income
basis - it's - it ties in with our present tax
structure - it doesn't go down 80 low.
HMJr:
Now, I can't follow you. You fellows shoot these
things at me 80 fast - it's impossible -
2:
Well, you see, this plan goes down - this plan
goes down and taxes people - this gross plan of
George's goes down and puts a tax on, for instance,
married couples
HMJr:
Yeah.
P:
... who are making, say $650.00.
HMJr:
Oh.
P:
Well below a thousand.
HMJr:
Well, that's crazy.
P:
And - well, it's crazy, but it's - it's better than
a sales tax - it gives some exemptions, but I prefer
to stand clean on the picture. It seems to me we
ought to stand clean on the picture that - that we
oughtn't to go below the thousand dollars..
HMJr:
Yeah.
P:
.... and the way to do this - to get a practical
equivalent of what they're trying to do in terms
of revenue - is to - is to put the rate for '42
down, but put the withholding well up for '43.
HMJr:
Put the '42 rates down, but -
P:
Yeah, yeah. Well, reduce the '42 rates ten points
and put the '43 rates up five points.
130
- 4 -
HMJr:
I don't know what you mean "ten points" and
"five points".
P:
The percentage points. For instance, put the
twelve per cent up to - put the twenty-two per
cent rate down to twelve for '42's liability -
HMJr:
Withholding, you mean?
P:
No, that's - that's your 1942 tax, and then
raise your withholding -
HMJr:
I don't understand what you mean.
P:
Well, your - you have a certain type of liability
for '42....
HMJr:
Yeah.
P:
.... under the House Bill. Now, just reduce
those rates for '42.
HMJr:
Why reduce them?
P:
Because, you have to get people - you can't have
withholding at a high rate for '43 and the high
rate for 42 liabilities.
HMJr:
I see.
P:
We're trying to get over that hump, you see?
Same old hump.
HMJr:
Yeah.
P:
And you get about two billion eight hundred
million additional revenue.
HMJr:
By doing -
P:
By reducing the liabilities for '42 income tax...
HMJr:
Yeah.
P:
....
but at the same time increasing the percent-
age liability for '43 by five points and coupling
that with a fifteen per cent withholding.
HMJr:
Fifteen per cent withholding, when?
P:
Beginning January 1st, '43.
131
- 5 -
HMJr:
And is that redeemable. - refundable?
P:
No - I - I neglected to tell you this, that
as far as the refundable part is concerned, they
don't want to deal with any refundable tax now -
they want - they're - they're thinking strongly
of appointing a committee to go into that whole
subject of compulsory saving, or whatever you want
to call it, and report back January lst. They -
they're not prepared to take any action on that.
You see they voted - even voted - they voted
La Follette down. He was for our plan with a
smaller - with certain slight modifications, end
they voted that down largely because it had the
refundable tax in it.
HMJr:
Well, I - I - I'm just dizzy. I - I can't - I
can't - (aside: Is Mr. Bell around? Tell him to
come in) I can't -
P:
Do you want me to come up there?
H&Jr:
No, I can't do it anyway. I can't - you fellows
think about these things for days and then, after
all, these are plans which will affect every man,
woman, and child, and then you give me a new
plan literally every day.
P:
Well, you've got to meet each situation as you
come to it
....
HMJr:
Well, no - we never - we never were in it that way
before. We don't - it's impossible, I mean to
give the Committee a new tax plan well thought
out between morning and lunch time.
P:
Well, we've been thinking we've been - this is
an alternative, based on certain conditions that
arose this morning.
HMJr:
Well, it's - it's
....
P:
It's not a
....
HMJr:
Well, I - I just - I can't - I don't know whether
it's good, bad, or indifferent.
P:
Well, then all right. Then I won't put it up.
HMJr:
Well, I mean, how - how can anybody that - I mean
132
- 6 -
give me a plan like this absolutely cold,
and then for me to say, it'll do the trick -
it's entirely - you want to lower the exemp-
tions, bring up the withholding to fifteen
per cent - I can't - I can't follow you,
Randolph.
P:
Well -
HWr:
As I said the other day...
P:
If you don't want me to, I won't put anything up.
HAJr:
I'd have to be a flea to jump from one plan to
another.
P:
Well, they voted down our plan now, and they -
HMJr:
I know, I can read the ticker just as well as
you can.
P:
Well, then, what do you want me to do? I - I ...
we get faced all the time up there with these
facts.
HMJr:
Well, it's very simple what to do. Tell them,
God damn it, we gave them a good plan and they
don't like it, let them write the tax bill.
Why would you give them a plan one in the
morning and one in the afternoon?
P:
Well, all right, I'll do it that way if you want to.
HMJr:
Well, I mean, supposing you and Roy come up. I -
I can't - I wish you'd both come up a minute and
bring ...
P:
All right, we'll do that.
133
September 8, 1942
2:40 p.m.
FINANCING
Present: Mr. Bell
Mr. Buffington
Mr. Haas
Mr. Murphy
Mrs. Klotz
(The Secretary held a telephone conversation
with Mr. C.S. Young, as follows:)
134
September 8, 1942.
2:44 p.m.
HMJr:
Hello.
Operator:
President Young in Chicago.
HMJr:
Well, tell Mr. Bell and the other Group to come in.
Operator:
Right.
HMJr:
Bell and Haás and that Group.
Operator:
Right.
Operator:
Go ahead.
HMJr:
Hello.
C:S. Young Hello, Mr. Secretary.
HMJr:
How are you?
Y:
Oh, this is Young, Chicago.
HMJr:
Yes.
Y:
I made a pretty good check of Detroit, Milwaukee,
Indianapolis, Des Moines and Chicago.
HMJr:
Yes.
Y:
And the consensus of opinion amongst all the Banks,
with the exception of three...
HMJr:
Yes.
Y:
...that the one-and-five-eighthe '47 would be more de-
sirable and would probably, would go over much better.
HMJr:
I see.
Y:
Now the three banks that thought the one-and-a-quarter
were the Northern Trust Company, the CityNational Bank
of Chicago...
HMJr:
Wait a minute, wait
Y:
...and the Manufacturers National of Detroit.
HMJr:
Wait, you're going too fast. Which three prefer the...
135
- 2 -
Y:
One and a quarter were the Northern Trust
Company of Chicago.
HMJr:
Wait a minute, Northern of Chicago.
Y:
And the City National Bank and Trust Company
of Chicago.
HMJr:
City National of Chicago, yeah.
Y:
And the Manufacturers National of Detroit.
HMJr:
Well now, are any of those big banks?
Y:
Yeah, they're all large banke.
HMJr:
I see.
Y:
Northern's about four hundred million, and the
City's about two twenty, and the Manufacturer's
about three hundred and thirty million.
HMJr:
They all preferred the one and a quarter?
Y:
One and a quarter, because their whole. - the
whole portfolio was all short, you know, and they
lean that way all the time.
HMJr:
Do they lean that way anyway?
Y:
Yes. And 80 they would always, those three banks,
would always take the shorter maturity regardless.
HMJr:
I see. Regardless?
Y:
Yes, but they did say that they, of course, they
would subscribe for the one and five-eighths.
HMJr:
Yes.
Y:
Now, all the other large banks, they all thought
that one and five-eighths would be better.
HMJr:
Uh - - huh.
Y:
And they also, it was the consensus of opinion
that maybe this - these two issues - neither
one of them would appeal to the outsider very
much.
136
- 3 -
HMJr:
They would not.
Y:
And, as I said, very few indicated there would
be very much of a demand from the outside
investors.
HMJr:
I see.
Y:
And - but they thought that the certificates
though at sixty-five, why, there should be a
lot of those sold to non-banking investors.
HMJr:
To be - to non-what?
Y:
To non-banking investors.
HMJr:
The certificate at sixty-five?
Y:
Yes. I was surprised at that, but that was what
I received from - oh - eight of them.
HMJr:
They think a lot of them would go to non-bankers?
Y:
Yes, at sixty-five hundred.
HMJr:
Is that right?
Y:
That appealed to them very much, that 1s,
appealed to the banks.
HMJr:
Is that right?
Y:
And, of course, the war-loan accounts are low
now and the banks are very eager to subscribe
to the limit.
HMJr:
Uh - huh.
Y:
And with - judging from what I - from the con-
versation today and last week, why I believe
that as far as this district is concerned, it
would be better to more or less treat this is as
abank issue and have it the regular forty-eight
hours instead of the week.
HMJr:
I see.
Y:
And -
HMJr:
Well, can -
137
- 4 -
Y:
And all - I talked to the Indiana National and
the Iowa Des Moines, the largest banks in each
state, and the First Wisconsin in Milwaukee,
the First National in Chicago and the Conti-
nental and all the, and the other smaller banks,
and the consensus of opinion, outside of the three
I mentioned is the one and five-eighths was the
one that would go over.
HMJr:
Well, now, can you see any harm if we'd leave
open the note - uh - for a week.
Y:
Well, the only danger is that they . - uh - they're
afraid it might hurt the market, because they
wouldn't know where they were going on that.
HMJr:
Uh - huh.
Y:
That, that would be the only thing, and we ....
HMJr:
Uh - huh.
Y:
....
and, of course, if we had something for the
Victory Fund Committee that would be, they could
use all the time.
HMJr:
Yeah.
Y:
Well, for example, something like your tax -
your tax note revision, why ....
HMJr:
Uh - huh.
Y:
....
I think that they'd have plenty to do.
HMJr:
You mean ....
Y:
I don't believe that they could sell very many
in a week to non-banking investors.
HMJr:
Uh - huh.
Y:
And there's four or five of them that indicated
that they might sell the 1-1/48 to non-banking
investors better than the 1-5/8s.
HMJr:
Really.
Y:
Yes. And there were a few companies they knew
of that had some funds - a million or 80 - lying
idle and probably would rather have the '45 than
the "47.
138
- 5 -
HMJr:
Uh - huh.
Y:
That is, the non-banking proposition would
probably appeal to - the 1-1/4s would appeal
more than the 1-5/8s.
HMJr:
Well, after you've heard it all, Mr. Young,
what would you advise me?
Y:
Well, I believe that I would just treat it as
a bank issue this time and keep it open the two
days, and I believe you'll have your three
billion without any trouble.
HMJr:
Well, which would you do on the note?
Y:
Well, I'd have the 1-5/8s.
HMJr:
Uh - huh.
Y:
Because in checking with the smaller banks,
from five to ten million, the last two weeks,
I've found out that they are looking to rates
rather than to maturity.
HMJr:
Yes.
Y:
Maybe that's wrong, but they're doing that.
HMJr:
Uh - huh.
Y:
And the 1-5/8s, anything over 1-1/2 would
appeal to the banks outside Chicago.
HMJr:
I see.
Y:
Buta 1-1/4 wouldn't appeal to them very much.
HMJr:
Uh - huh.
Y:
They're looking to yields, rather than to
maturity ....
HMJr:
Uh - huh.
Y:
.... and their loans are going down and they are
looking for yields now - they're worrying about
their profits.
HMJr:
Uh - huh. Okay.
139
- 6 -
Y:
All right.
HMJr:
Thank you.
Y:
Yes, sir. All right.
1
140
- 2 -
H.M.JR: He said that he contacted a lot of
banks and they all wanted the one and five-eighths,
with the exception of the Northern of Chicago, the
City National of Chicago, and the Manufacturers of
Detroit. They wanted one and a quarter. The rest
concurred.
MR. BELL: I am surprised at the Northern Trust.
MR. BUFFINGTON: So am I.
MR. BELL: They are a short bank; they would
like that one and five-eighths coupon, I should
think.
H.M.JR: They didn't.
MR. BELL: I did not get what he said about the
market - that the shorter note would affect the market.
H.M.JR: No, leaving it open.
MR. BELL: That is right.
MR. BUFFINGTON: I was unable to reach Harry Stuart.
He is out of town and could not be reached until tomorrow.
MR. BELL: Bob Rouse says the New York banks want
this one and five-eighths, although Repp says that he
thinks we will get more subscriptions to the one and a
quarter.
H.M.JR: Say that again.
MR. BELL: The New York banks want one and five-
eighths.
H.M.JR: Because I like '47. I would like to get
it out then. What month would that be?
MR. BELL: June, he said.
Regraded Unclassified
141
- 3 -
MR. HAAS: That is pretty rich, we figured.
MR. BELL: I told Bob that I thought June was
rich. He said he thought it would sell around ten or
eleven on the chart, but he did not think there would
be any premium at all.
MR. HAAS: No, you cannot put on a premium these
days.
MR. MURPHY: However, it would be a ten or eleven
on the chart.
(The Secretary held a telephone conversation with
Mr. Chester C. Davis, as follows:)
142
September 8, 1942
2:52 p.m.
HWr:
Hello.
Operator:
Chester Davis.
HWr:
Thank you.
Operator:
Go ahead.
HMJr:
Hello.
Chester
Davis:
Hello, Henry.
HMJr:
How are you, Chester?
D:
All right.
HMJr:
What do they think out there?
D:
The banks in the cities that we talked to, and
that's all the cities of any consequence in the
district, believe that the one and a quarter
shorter note would be preferred here.
HMr:
I see.
D:
Now out in the - out in the country banks, and
that probably wouldn't be more than one fifth
I would say of our - of our bank market
HMJr:
Your bank what?
D:
They probably - the country banks probably would
go for the yield - the one and five-eighths
HMJr:
Yeah.
D:
... but the more important bank market - I'm
talking now banks first, would prefer the shorter
note.
HMJr:
Yes.
D:
And that's fairly unanimous, I understand.
HMJr:
I see.
D:
Now, as far as corporations are concerned, there
- 2 -
143
isn't any great deal of - of preference that
we've been able to uncover as between the short
and the long. That is, the long wouldn't be
particularly more attractive as to yield to
off-set the longer market risk
HMJr:
I see.
D:
....
and there's no reason for going to the
longer note as far as the corporations are con-
cerned.
HMJr:
I see.
D:
The certificate, of course, needs no comment.
I think it will go all right - go fine.
HMJr:
Yeah.
D:
Now, there's one thought I want to give. I don't
think looking at it just from the standpoint of
this district
HMr:
Yeah.
D:
.... that there'll be any advantage in holding
open for the corporate or non-banking investors
for the week.
HMJr:
I see.
D:
And particularly, Henry, if it's held open with
the idea that we're going to thru the efforts of
the Victory Fund Committee accomplish any - any
great deal of big and new investments in this
issue.
HMJr:
Yes.
D:
We could get - we're well organized and we could
get to all of the corporate and individual inves-
tors who might be reached in a shorter period.
Say, if it were held open until - as a compromise -
to Saturday for both bank and non-bank, and we
could get over everybody in the district and I'm
not sure but what we could do it if it was held
open just for two days.
HMJr:
Well, have you talked to any of your people on
your Victory Fund?
144
- 3 -
D:
Yes. Yes, we've talked to all of the regional -
representatives of all the main regional committees
that have any prospects at all, outside of banks
in their districts.
HMJr:
And they don't - warm up to it?
D:
No, they - they could go to town probably on
your tax note with its redeemable features and
we hope that something of that sort comes through.
HMJr:
Yeah.
D:
And it - it isn't a case of not warming up particu-
larly, but over most of these - the individuals
could be handled better by the F's and G's and
the corporations, those that we could reach, we
can reach inside of the two-day period anyway
HWr:
Yeah.
D:
....
or two and a half.
HMJr:
I see. Well, anyway that's what you think and
...
D:
And that's what you want.
HMJr:
....
and that's what I want.
D:
That's right.
HMJr:
OKay. Thank - thank-you.
D:
Anything else?
HMJr:
Not today.
D:
How are the tax notes coming?
HMJr:
Very good, oh, you mean as to getting ready?
D:
Are you getting ready?
HMJr:
Yeah, but we didn't think we'd do anything on them,
until this financing was over.
D:
Yeah.
HMJr:
We don't want to mix them up.
145
- 4 -
D:
No, that's right. Well, we hope to give you
something good to work good on them, Henry.
HMJr:
Well, we'll be ready just as soon as this
financing is over.
D:
All right. Now is the amount of this - I
don't know whether you're - you've given us
any indication how big this is going to be -
these notes and
.......
HMJr:
A billion and a half of each.
D:
That's what we thought.
HMJr:
Yeah.
D:
All right.
HMJr:
Thank you.
D:
Thank you, very much.
146
- 4 -
H.M.JR: They do not think very much - they think
about as much of your Victory Fund Committee as my
tax plans. (Laughter)
MR. BUFFINGTON: St. Louis is one of the poorest
markets in the country for that kind of paper.
H.M.JR: How about Chicago?
MR. BUFFINGTON: Chicago, I should think, would
be much better.
H.M.JR: They did not seem to be very hot for it.
MR. BUFFINGTON: I am afraid they are both trying
to let nothing interfere with the tax note sales later
on.
H.M.JR: I still think my spendings tax plan is good,
and I still think it is good to keep something open
for a week to let these boys go to work on. If you
do not keep chewing on fairly hard food, your teeth
fall out - if you do not chew on something hard. We
have got to give these fellows something besides pap.
MR. BUFFINGTON: I am surprised that he says the
one and five-eighths in Chicago would go better for
corporations, if I understood him correctly.
H.M.JR: No, no, he did not say that. He said
that the corporations like the short stuff - that the
interest rate did not make any difference, and that
the corporations would take the shorter stuff.
MR. HAAS: Mr. Secretary, on the increase in bills,
since April 30, only ten percent have gone outside the
banks.
MR. BELL: Only ten percent?
MR, HAAS: Yes.
H.M.JR: The increase--
147
- 5 -
MR. HAAS: The increase since April 30.
H.M.JR: Have gone to non-banking?
MR. HAAS: Ten percent to non-banking investors;
twenty-seven percent, New York City; thirteen percent,
Chicago, making a total of forty; and fifty percent
to banks outside New York and Chicago, adding up to
ninety. The balance has gone to outside the banking
system - - one percent Mutual Savings; insurance companies,
one percent; and all others eight percent.
H.M.JR: What do you deduce from that?
MR. HAAS: I thought you were under the feeling
that mor e went out.
MR. BELL: Well, more of the outstanding.
MR. HAAS: That is right.
MR. BELL: You take the total outstanding and
you get a higher percentage.
MR. HAAS: That is right. And on the certificate,
Dan, you asked - or the Secretary - - on the last one,
seventy-five percent of the last one to commercial
banks.
MR. MURPHY: That is subscriptions. That is the
August subscriptions.
148
September 8, 1942
3:00 p.m.
FINANCING
Present: Mr. Bell
Mr. Buffington
Mr. Haas
Mr. Murphy
Mr. Baker
Mr. Sproul
Mr. Alfred Williams
Mr. Ransom
Mr. Piser
Mr. McKee
Mr. Thomas
Mr. Szymczak
Mr. Draper,
H.M.JR: A little birdie told me you were all
separated as to ideas. (Laughter)
MR. RANSOM: Complete unanimity.
H.M.JR: This would be & good time for me to ask
the Federal Reserve Banks for their advice. (Laughter)
MR. RANSOM: Just give us a little advance notice,
will you?
H.M.JR: I tried to put one over on you fellows
today. I called up Young and Davis and asked them
to call me back at quarter of three today, which they
did.
Who is the spokesman for this group?
MR. RANSOM: Mr. Sproul.
MR. SPROUL: What do you want to know, Mr. Secretary?
(Laughter)
149
- 2 -
H.M.JR: What I would like to know is, how can I
raise three billion dollars, starting Thursday, most
effectively and economically?
MR. SPROUL: We have considered it since we last
met with you, and considered it again from noon on,
today, and we are, I think, wholly in accord with the
idea of a certificate of indebtedness issue for 8.
billion and a half dollars, which would mature May 1
and bear a rate of six five. We think you could
appropriately go to the decimal system of quoting such
short-term securities as the certificates, and that
it gives a little more leeway and a little finer touch
in gauging your market.
On the other billion and a half of the financing,
we considered two possible items, the one and a quarter
percent obligation, which falls about two and a half
years or two and three-quarters years, which we recom-
mended the other day; and we also considered & longer
note - a four and a half or five-year note, which pre-
sumably would carry a one and five-eighths percent
coupon. Our judgment still is that the one and a
quarter percent note would be the better obligation
for this offering - - that it would be less of a conflict
in the possible October financing in the bond area, and
it would avoid the market area which has been the
weakest in recent weeks, that is, the long note market
and the short bond market.
We understand that there is a considerable group
of the larger banks, both New York City and Chicago,
which have a preference for the longer note. We doubt
if that preference extends outside the principal
money centers. We think that they are either interested
in something short, or else in getting an even higher
coupon than one and five-eighths; that they would wait
for your October financing, So that we come back to the
one and one-quarter percent note for a billion and &
half, to go with your certificate of indebtedness for
a billion and a half.
(Mr. Draper entered the conference.)
Regraded Unclassified
150
- 3 -
MR. SPROUL: On the various points in connection
with the financing, we considered again the question
of possibly leaving the books open for a longer
period and enabling others than banks to subscribe
in full and having the banks underwrite the remainder.
We do not think that this issue, which is aimed more
largely at the banks than at any others, lends itself
particularly to that sort of offering, and we think
it would be better to preserve that sort of an innova-
tion for the larger financing of October, when you
would have a piece of merchandise which could be sold
effectively within the longer period that the books
were open.
We considered the question of possible split pay-
ments for these two issues, and think that would be
desirable. It would enable you to take the money more
nearly when you need it, and with less disturbance to
the money market, 80 that you could call for payments,
say, on the certificates one day, and payment on the
notes four or five days later.
We continue to be in accord and wholly in agree-
ment with the idea of increasing your bill issue to
four hundred million with the next issue to be announced
Friday, and to be dated the 16th.
I think, in general, that sums up our ideas on
the September financing.
H.M.JR: Well, of course last week you people were
all off the '47. You said that was the weakest point.
MR. SPROUL: We were, and we still are. We still
think it would be preferable to go for the one and one-
quarter percent note, which we think would do best at
two and a half years, but could be done at two years
and nine months.
MR. BELL: Did I understand you to say you were
against leaving the books open for the note?
Regraded Unclassified
151
- 4 -
MR. SPROUL: Yes, we do not think that this
issue lends itself to that sort of treatment; that
it is an innovation which could be much better put in
when you have an issue which we could expect to get
substantial results from having the books left open
anda sales campaign.
MR. BELL: You do not think the Victory Fund
Committee could sell many of these outside the bank-
ing system?
MR. SPROUL: No.
H.M.JR: On the one and a quarter, what are you
recommending?
MR. SPROUL: We say it would do best on two years
and six months, that is, to March of '45, but you
could do it for two years and nine months - to June
of '45, which has a slight advantage of not being -
of being the nearest to an open date that you have in
that area.
H.M.JR: Is there enough margin to go to June, '45?
MR. SPROUL: It would be pretty close to the line.
It would be about par to par two on the figures, I
think, if we went to June of '45.
MR. BELL: There is a bond in June of '45 that is
callable.
MR. HAAS: We were figuring just at par even, at
two.
MR. SPROUL: It is about on the par line for June.
We think it would do better in March, certainly.
H.M.JR: Are these your figures or Baker's?
MR. HAAS: Those are ours. Baker's were about the
same thing.
152
- 5 -
H.M.JR: Have you got some figures?
MR. BAKER: Yes, sir, I have. I am a little more
optimistic, but not an awful lot. (Chart handed to
the Secretary by Mr. Baker.)
H.M.JR: I talked to Chicago and St. Louis, and
I did not get the same thing from both places. Hap
Young said that about two-thirds of the banks he spoke
to wanted the one and five-eighths.
MR. SPROUL: I think you will get the same reaction
from the New York City banks, that more of them would
want the one and five-eighths than would want the one
and one-quarter.
H.M.JR: Because if we are going to announce
this new tax note - we have got & Bell schedule, now -
we will do this just as soon as this thing is over.
We could start the Victory Fund on that next Monday.
MR. BELL: You mean if you did not keep the books
open?
H.M.JR: Yes, if we did not keep the books open.
MR. SPROUL: There again, if you kept the books
open, or tried to tackle the non-banking market with
this note offering, which I do not think it is possible
to do very effectively, you would then run into a com-
petition with your intensive effort on the modified
tax note, which they really could go to town on, I
think.
MR. BUFFINGTON : I agree that offering this one
and a quarter and emphasizing the market outside the
banks, would affect the offering of the tax notes.
I am a little more optimistic about the interest of
corporations on the one and a quarter than anyone I
have heard here indicate.
H.M.JR: Wouldn't corporations also be interested
in this new tax note?
Regraded Unclassified
153
- 6 -
MR. BUFFINGTON: Yes, they would.
H.M.JR: That would be open continuously.
MR. BUFFINGTON: If you are going to only leave
this open for & day, then I doubt the effectiveness
of the Victory Fund Committee.
H.M.JR: I would not ask them to do anything.
I would much rather get them all set to start next
Monday on the tax note.
MR. BUFFINGTON: They will do a better job on
the tax notes than on the one and & quarter.
H.M.JR: That would be something for them to
sell steadily.
MR. BUFFINGTON: Right.
H.M.JR: Who else? Let's start with Szymczak.
What do you think?
MR. SZYMCZAK: Allan has told the story one hun-
dred percent.
H.M.JR: McKee?
MR. McKEE: That is all right.
H.M.JR: They have got you down, have they?
(Laughter)
MR. McKEE: I am waiting until you pull out these
Bell schedules on me. That is what I am waiting for.
(Laughter)
MR. RANSOM: Save him the strain. (Laughter)
H.M.JR: Draper?
MR. DRAPER: I am holding my fire.
154
- 7 -
H.M.JR: Nobody is interested. I am talking about
the three billion dollars.
MR. DRAPER: Oh, well, I think what Allan said
is correct as far as I am concerned.
H.M.JR: How about Philadelphia?
MR. WILLIAMS: I think if you asked the Victory
Fund Committee to get in on this note, you would have
three jobs for them in four or five weeks which would
be a rather heavy task - rather continuous.
MR. BUFFINGTON: They seem to be wanting a big task. -
different from what they have been talking about in the
past.
MR. WILLIAMS: Not all of them. There is something
to be said for intermittent effort, there, rather than
a steady job.
H.M.JR: How does the Federal Reserve Board feel?
MR. RANSOM: Fine. I think this is really an
excellent program for September. It is all right.
I cannot find any fault with it at all.
H.M.JR: This is where we were this morning until
I talked to Bob Rouse and he started - beginning to
hear that people wanted the '47.
MR. SPROUL: I talked with him at noon. He said
that was the report of the bigger banks in the market
and he thought it ought to be seriously considered
in the light of their opinion. And I, having seriously
considered it, still do not think they are right.
(Laughter)
MR. McKEE: How much of this issue are they going
to buy, anyway? You are talking about a billion and
a half dollars - you are talking about New York, how
much are they going to take?
155
- 8 -
MR. BELL: Not very much.
H.M.JR: But Chicago, Young said one and five-
eighths. Now, the only banks that he talked to that
did not want one and five-eighths- the three banks
that did not were the Northern Trust of Chicago,
the City National of Chicago, and the Manufacturers of
Detroit. They wanted one and 8. quarter, and all the
others wanted one and five-eighths.
MR. McKEE: For two years and six months?
MR. SPROUL: That does not mean they will not
take some one and a quarters, because they will.
They will take one and a quarters, too, perhaps not 80
many as they would take of one and five-eighths. On
the other hand, I think the banks outside of New York
and Chicago would take a short obligation, one and a
quarter, or they will wait for the two's, or whatever
they are going to get in October.
MR. BELL: Wouldn't the country banks take the
one and five-eighths?
MR. SPROUL: I think they will be pretty much
waiting for what they will get in October, which
they think will be & better coupon.
MR. McKEE: The country banks aren't much note-
minded, Dan.
MR. BELL: How about the preferred allotment?
That is, wouldn't you consider that in subscriptions
outside the bank?
MR. SPROUL; We considered that along with hold-
ing the books open. There again, we think this
financing, which is aimed so largely at the banks,
could better be done in the ordinary way, without any
special innovations, continuing the twenty-five thou-
sand full allotment, and that would take care of it.
You could use these innovations to better advantage
on your big October issue in the bond area.
156
- 9 -
H.M.JR: How about raising the amount of twenty-
five thousand?
MR. SZYMCZAK: Raising it beyond twenty-five?
H.M.JR: Yes.
MR. SZYMCZAK: To any particular figure - - fifty
thousand?
H.M.JR: Fifty thousand, say.
MR. SZYMCZAK: Personally, I would have no objec-
tion.
H.M.JR: Do many take the twenty-five?
MR. BELL: We had sixty-nine million, I think, on
the last one. The big one was the bond - - a hundred
and ninety-six million dollars.
MR. McKEE: Don't you think that would be a good
thing to preserve for a big issue? Any chance of
changing - wouldn't it be better to do it in the pro-
posed issue of October, instead of this one?
MR. BELL: I think the twenty-five thousand limit
pretty well takes care of the banks that we intended
it for. We intended it for the small country banks.
You wouldn't want to go beyond that.
MR. McKEE: Wouldn't the twenty-five thousand
limit apply to both certificates and notes in these
two issues?
MR. BELL: Yes.
MR. McKEE: In other words, then, the limit is
fifty thousand, almost.
MR. BELL: For the aggregate, yes.
157
- 10 -
H.M.JR: What you all really want to know is -
you are all interested in these tax anticipation
notes.
MR. McKEE: That is right.
MR. SPROUL: We are interested in the September
financing, but we have & continuing and abiding
interest in the tax anticipation notes. (Laughter)
H.M.JR: Now, what is the latest schedule? The
Bell?
MR. SZYMCZAK: Has Bell got some rates?
MR. BELL: Just for want of a better title--
MR. HAAS: And he hopes it rings. (Laughter)
MR. McKEE: What are your rates, Mr. Bell?
MR. MURPHY: The rates in the Bell schedule are
five, seven, eight, nine, ten, ten, which in decimals
are sixty, eighty-four, ninety-six, one point zero
eight, one point twenty, one point twenty. It averages
ninety-eight for the period. That compares with one
point fourteen in the Board's original proposal; one
point zero four in the Szymczak proposal; and ninety
for the five, six, seven, eight, nine, ten.
MR. McKEE: The Murphy schedule. (Laughter)
MR. BELL: I believe that Bob Rouse changed one
figure in that schedule and it came out exactly at
one.
MR. McKEE: I think your last - when you come out
at one, I think you jump your ninety-six sooner. I
think you go from five to eight.
MR. BELL: Yes, five, eight, nine, ten, ten, ten,
I think he said. I do not see any sense in going over
one. It would be all right with me.
157
- 10 -
H.M.JR: What you all really want to know is -
you are all interested in these tax anticipation
notes.
MR. McKEE: That is right.
MR. SPROUL: We are interested in the September
financing, but we have a continuing and abiding
interest in the tax anticipation notes. (Laughter)
H.M.JR: Now, what is the latest schedule? The
Bell?
MR. SZYMCZAK: Has Bell got some rates?
MR. BELL: Just for want of a better title--
MR. HAAS: And he hopes it rings. (Laughter)
MR. McKEE: What are your rates, Mr. Bell?
MR. MURPHY: The rates in the Bell schedule are
five, seven, eight, nine, ten, ten, which in decimals
are sixty, eighty-four, ninety-six, one point zero
eight, one point twenty, one point twenty. It averages
ninety-eight for the period. That compares with one
point fourteen in the Board's original proposal; one
point zero four in the Szymczak proposal; and ninety
for the five, six, seven, eight, nine, ten.
MR. McKEE: The Murphy schedule. (Laughter)
MR. BELL: I believe that Bob Rouse changed one
figure in that schedule and it came out exactly at
one.
MR. McKEE: I think your last - when you come out
at one, I think you jump your ninety-six sooner. I
think you go from five to eight.
MR. BELL: Yes, five, eight, nine, ten, ten, ten,
I think he said. I do not see any sense in going over
one. It would be all right with me.
Regraded Unclassified
158
- 11 -
MR. McKEE: You don't, Dan?
MR. BELL: I think it would be better if we had
& bargain, ninety-eight cents. (Laughter)
MR. McKEE: Don't you think you are going to have
some bargains later on?
MR. BELL: Probably.
H.M.JR: Look where Ruml got with his plan - Macy's.
MR. McKE E: In the dog house. (Laughter)
H.M.JR: I don't know - he gets lots of publicity.
I forgot that he is your president.
MR. SPROUL: He is chairman of the Board.
H.M.JR: What I ought to do is sit down and write
the Board a letter and say I would like to know
whether this is the Board's opinion. (Laughter)
MR. SPROUL: What their opinion is of the Ruml
plan?
MR. SZYMCZAK: You mean the New York Board?
H.M.JR: Does Mr. Ruml speak for the Federal Re-
serve Bank of New York?
MR. SPROUL: No, he does not on tax matters, but
I think you will find the board of directors of the
New York Bank were unanimously in favor of his proposal.
(Laughter)
H.M.JR: I am thinking of going up tomorrow. I am
going to raise Ruml - skip two years - and see if I
can't get popular. (Laughter)
MR. SPROUL: We considered again the tax savings
note, Mr. Secretary.
159
- 12 -
H.M.JR: Here comes another one, now-- (Laughter)
MR. SPROUL: And we again feel that if you want
to make this a dual-purpose note, you ought to give
the kind of rates which would bring people in at the
beginning, and that, think, requires rates approximat-
ing market rates for the first year or year and abalf,
and then you should have rates which have considerable
attraction to hold them in to the maturity. The kind
of funds you are going. after, idle funds, which the
holder does not know how long he will have no need for,
are funds which need to be brought in by an issue which
is approximately the equivalent of a market issue, and
which has a sugar coating at the end which will hold
him in for as long as possible. The schedule of rates
which we originally suggested would do that, we think,
and enable us to make a very substantial sale of these
obligations.
In our discussions with your staff there was a
question about what the effect of those - whether we
weren't making it too sweet, and what the effect of
those rates would be on existing short-term rates.
We were not so much concerned as they were. We did
not think that those rates would have an upsetting
influence on your short-term rates, because of two or
three saving features: the fact that banks
could not use them for cash conversion privileges;
the fact that there is still, whether it is rational
or not, same considerable desire for fully marketable
obligations; and the fact that we have established
and are supporting a rate structure in that market which
would prevent any serious disturbance to the market.
We do not say we know just the best schedule of
rates to do this job, but we do believe that the
sucdess of the job, as far as a big selling campaign,
and a big sale outside the banking systèm is concerned,
would be jeopardized by rates lower than the second
schedule, which some of our members suggested, which
gave an average of one hundred and four for the whole
period, which approximated market rates during the
first year and which then, while going below market
rates, carried the bait for continued withholding,
which the demand feature provides.
Regraded Unclassified
160
- 13 -
H.M.JR: Now, who else of our guests wants to
speak on this?
MR. RANSOM: I am still very much in favor of the
original schedule which comes out at the one point
fourteen figure, I think very largely for the reasons
that Allan has stated. I think, if we are going to
do this job, making this tax note a dual-purpose note
and trying to get it out of the strict limitations
of a tax note, that the rates had better be adequate
to do the job. I certainly could not undertake to
tell you exactly what schedule would do it, but one
point fourteen was thought out rather carefully, and
after much discussion, it seemed to us, collectively,
that that would produce the result. I still very
strongly favor the one point fourteen rate.
H.M.JR: Williams?
MR. WILLIAMS: I think the schedule has to be
related to the volume. I hesitate to go along on the
original estimate, which was somewhere between a
half a billion and a billion, unless we maintain
the original. With the Szymozak rate, I think we
could do the job - how much, I would hesitate to
say.
I think, when you get down to Mr. Murphy's sche-
dule it is not going to yield much beyond that that
would be forthcoming for tax purposes. I think we
would have a difficult time merchandising it. It
would be pioneering in a new field, and I think there
is something to be said for an attractive rate. So,
personally, I would not want to go below that so-called
compromise schedule", which is one point zero four.
MR. BELL: You do think a pretty good job could
be done at the one point zero four?
MR. WILLIAMS: I think 80. I think if we got to
work immediately on that - certainly I think your
decision to cast the die immediately is a good one, be-
cause I think we are losing time. I think if we got into
it next Monday and worked vigorously, I think we could
do an acceptable job.
161
- 14 -
H.M.JR: Draper?
MR. DRAPER: I am in favor of the one fourteen,
Mr. Secretary, because I think that that would really
do the job in a way that we all would feel was effec-
tive. Anything less than that, it seems to me, would
be taken out in a lowered amount of sales. It all de-
pends on how much we need the money. It seems to me
we need the money.
H.M.JR: McKee?
MR. McKEE: Well, I will repeat what I said here
before, that I think when you go to Murphy's rates
you eliminate the dual possibilities of this note.
If that is what you contemplate, then I would much
rather see you go back to a two-year note, point
seven two, and have a tax note, leaving that field
clear for other short-time paper.
MR. SZYMCZAK: I much prefer the first suggested
schedule of rates, that is, the average of one fourteen;
as a second choice, the modified rate which averages
one point zero four, relating it to volume and tendency
to hold.
H.M.JR: Piser?
MR. PISER: My preference would be for the one
fourteen, but I think, with the one point zero four,
you could still sell a substantial volume. I do not
think it is possible to determine these rates very
exactly. It is sort of a guess, at best, but I
think either the one fourteen or the one point zero
four, would bring in a substantial volume of funds.
MR. SPROUL: There has been reference to the
Murphy rates, which I think, at the present sitting,
are the low of the field. The schedule Mr. Bell
suggested, which comes out either ninety-eight or
one - we are getting pretty close together there, and
certainly it seems to me to accomplish the dual purpose
of both the tax note and to sop up idle funds.
162
- 15 -
We ought to weight it on the side of making it
an attractive obligation, and to hold back from one
point zero four to give one, does not seem to me to
meet the situation as a dual-purpose attempt.
H.M.JR: There is very little difference between
what Bell is suggesting and what Szymczak is suggest-
ing.
MR. BELL: I was just attempting to get under
the one, I will admit. (Laughter)
H.M.JR: There is very little difference.
MR. SPROUL: We think there is just enough differ-
ence to be - and I say again, you cannot be dogmatic
about these things - we think there is enough difference
to be the difference between doing a big job, a rela-
tively big job, on sales to others than banks, and just
having another tax note with some added features, which
would go about as they have been going.
H.M.JR: You mean that as to what Bell has suggested
and Szymczak - you mean there is a difference between
success and failure?
MR. SPROUL: Not between success and failure, but
we have already come back from one fourteen to one
point zero four when we talk in the terms of the
Szymczak obligation, which is the measure of our re-
treat from what we think would do the best job possible.
So we are getting onto ground where we think we are
getting out of the dual-purpose note and into the
purely tax note, with some added features, when we
get down that far. And we do not believe that a note
with those rates and that average of rate for three
years is going to be upsetting to your short-term
market, which is the chief concern, as I understand
it, that some of your people have had.
MR. THOMAS: I think I agree with the position
that has been stated. I do not think there is such
a thing as failure on this, anyhow. Any of the rates
would bring in a lot of money. It is just a question
163
- 16 -
of how much you want to get in from this type of thing
without upsetting the short-term market. In these
ranges, any of the suggestions would fit into that
picture. Therefore, the higher you go within that
range the more of a success it will be.
MR. BELL: Do you think the corporations are 80
much interested in rate, or are they more interested
in liquidity?
MR. THOMAS: I think they have some ideas as to
what rate - there is a marginal point there. They
have an idea as to what rate they are interested in -
below that they will just pay out.
MR. BELL: I think they are interested in that
thirty-day demand money.
MR. McKEE: No doubt your banker friends have
told you this, Mr. Secretary, but they did tell it to
us, that they expect hesitation on the part of some
national treasurers of buying this because of the
notice feature to get their money, and that therefore,
they would prefer, whether or not rate-minded, to get
market paper in order not to have to serve notice to
withdraw their funds. That has been presented by, I
think, Ned Brown, and others. That would be a selling
point against this tax note.
MR. BELL: That will compete with the certificate.
MR. SZYMCZAK: Yes, to an extent, but the competi-
tion will not be quite 80 strong if you get it up
closer to one fourteen. The one fourteen, of course,
they will be much more likely to hold.
MR. BELL: They would be foolish to buy the certi-
ficate at one fourteen if--
MR. WILLIAMS: In our district not many of them
are buying it, so it is not a case of keeping them
out of the one, but rather inducing them to come into
the other. I would agree with you that liquidity
would come first with the people we have talked to.
164
- 17 -
MR. DRAPER: I think, also, that a corporation
would be much more interested in this because they
could see the direct relationship to their plan and
paying the taxes, whereas, if they buy a certificate
it becomes an operation which is more in the line of
banking rather than corporation practice. (The Secre-
tary and Mr. Sproul conferred together.)
H.M.JR: There is nothing confidential, but I
just find it difficult to talk to 80 many people at
one time. What I have asked is this, we have gone
as far as I can without consulting with my own people,
which I would like to do, and I will try to make up
my mind this afternoon.
As to the other financing, in which you people
evidently are not interested, unless something changes -
I am seeing the President in the morning, and I think
it will be the way we talked about - the sixty-five and
the May, '45. It sounds all right.
MR. BELL: March, '45.
H.M.JR: Yes, and I think as long as we can get
together - as long as so many people think there is
8. disadvantage to leave it open, I think we will settle
it tonight, this tax anticipation, then get the stuff
out and get the Victory Fund Committee started on the
new tax anticipation notes on Monday. We are very close
together. It is just a question of - I would like to talk-
MR. SZYMCZAK: Mr. Secretary, you still have - of
course, you can work that out wi th your staff - you still
have the question of whether this will be effective as of
September 1 or 15, or October 1?
MR. BELL: We can do that. We will have to let
the people who have bought them since then exchange
them.
MR. SZYMCZAK: They have bought quite a bit.
MR. BELL: Twenty-seven million.
Regraded Unclassified
165
- 18 -
MR. SZYMCZAK: For this month, which is quite
a bit.
MR. BELL: Twenty-seven million nine-hundred
thousand.
MR. McKEE: One thing I would like to say is that
I would like to see - you gentlemen that are close to
these Victory Fund Committees would know better than
I - I would like to see that they have, before they
start, the goods to sell - that they are available to
them and supplied.
H.M.JR: You mean the pieces of paper? You mean -
well, if we made up our minds tonight--
MR. BELL: They won't be available. It would
take about ten days. It would be about a week from--
H.M.JR: Heffelfinger said & day or two.
MR. BELL: No, the circular and everything - they
would be delayed delivery.
MR. McKEE: What do you think of that? Do you
think that these boys can sell delayed deliveries?
MR. SPROUL: Yes.
MR. BUFFINGTON: The most important thing is
getting the right kind of circular in the hands of
each executive manager.
MR. BELL: That can go out Saturday.
MR. SPROUL: And the right kind of obligation.
(Laughter)
H.M.JR: I have never seen 80 much interest!
(Laughter)
MR. SZYMCZAK: We are all taxpayers.
Regraded Unclassified
166
- 19 -
H.M.JR: I know you all are, but this is - why
are you all so interested? I mean--
MR. RANSOM: Speaking for myself, I would rather
like to see this a great success, and I think it can
be.
MR. DRAPER: That is my feeling, Mr. Secretary.
MR. RANSOM: I think it is very important that
it should be & success. I think it gives you something
that you can lean on for many long months, and perhaps
years, if you establish this. As to the rate interfer-
ing with your short-term rate, I assure you, as far as
I am concerned, that was no part of my thinking in
recommending the rate I did. If I thought it was
going to affect it I might have a different view,
but I haven't been able to think that.
MR. SPROUL: I think I speak for all of us, that
we are not trying to slide in an increase in short-
term rates under cover of this tax note. There is
none of that in it at all.
H.M.JR: It only would rebound on you.
MR. SPROUL: That is all, because we are working
with you on the present schedule, unless it is changed,
so it will just come back on us.
M
H.M.JR: Well, I have got what you have in mind,
and I will give very serious consideration to it, and
I want it a success.
MR. McKEE: And you want to make it a two-purpose
piece of paper, don't you?
H.M.JR: Definitely, and I want your enthusiasm,
too. So between now and the time the sun goes down,
we will decide. Place your bets outside. (Laughter)
167
September 8, 1942
3:45 p.m.
FINANCING
Present: Mr. Bell
Mr. Buffington
Mr. Haas
Mr. Murphy
Mr. Baker
H.M.JR: Sit down and we will settle this. What
he is saying here is that they would like the Szymozak
proposal. See?
MR. BELL: They would?
H.M.JR: They would settle for that.
MR. BELL: They don't like it but would settle
for it?
H.M.JR: No. He said they would take it.
MR. BUFFINGTON: I think they would settle for
it.
MR. BELL: I would take it.
MR. BUFFINGTON: So would I.
H.M.JR: The only difference is this, that theirs
is five, eight, nine, ten, ten, ten; and what we had,
so-called Bell's, was five, seven, eight, nine, ten,
eleven.
MR. MURPHY: The eleven is the Morgenthau
variation to the Bell proposal.
MR. BELL: That is one percent. I don't think
there is enough difference to quarrel about.
168
- 2 -
H.M.JR: Would you start at the five? Everybody
agrees on the five; everybody starts at five. Now,
what do you do at the end of one year? They go to
eight.
MR. HAAS: That is ninety-six.
MR. MURPHY: Those are six months' graduations,
Mr. Secretary.
H.M.JR: They are all the same?
MR. MURPHY: Yes.
H.M.JR: They go to eight, then they go to nine,
as against our eight; and then they run to ten.
MR. BELL: That is the Szymczak rate?
H.M.JR: Yes. They said they would take it.
MR. BELL: I think that will be an inducement,
and they will hold it after they get it. I think I
would accept it. It doesn't cost us much money.
H.M.JR: I would like to make the last six
months eleven.
MR. HAAS: That wouldn't cost you much, and it
would make them happy, too.
H.M.JR: I would like to go five, eight, nine,
ten, ten, eleven.
MR. BELL: That would raise Szymczak to about
one point zero six. That would make them still
happier.
MR. MURPHY: I would like to make the general
remark that all these rates we have been speaking of,
both the Reserve Board and ourselves, are simple
169
- 3 -
arithmetical averages; and when the circular is
computed the final figure will probably be about
one basis lower as a result of it being compounded.
MR. BELL: You mean instead of one point zero
six it will be one point zero five, or something
like that?
MR. MURPHY: Yes.
MR. BAKER: I think there is a lot to be said
for putting the last period a little bit higher than
the others. I like the psychology of it. It would
keep them from turning it in unless they actually buy
them for tax purposes only.
H.M.JR: Of course the Federal Reserve had
eleven cents the last three years. They lay con-
siderable stress on that eight, do they?
MR. HAAS: Yes. They have argued with us about
that.
H.M.JR: Of course it makes, really, 80 little
difference. It is a question of enthusiasm.
MR. BUFFINGTON: You do get more sales enthusiasm
for that little bit more you give them.
MR. BELL: You get support from the Federal.
That is five, eight, nine--
H.M.JR: Wait a minute, go five, eight, nine,
and then ten - how much more expense if we made the
last two things eleven?
MR. BELL: That would be one point zero eight,
wouldn't it, Henry?
MR. MURPHY: Each time you raise one it increases
it point zero two. If you make the last two, elevens
that would make it one zero eight.
Regraded Unclassified
170
- 4 -
MR. BELL: And it would come out compounded
about one point zero seven.
MR. HAAS: Then you have a schedule between
Szymczak.
H.M.JR: I am going to say now, five, eight,
nine, and then make he last eleven. Let's just
talk about the two year and the two and a half year--
MR. MURPHY: You will have two tens then?
H.M.JR: Yes.
MR. MURPHY: That would be one point zero six,
probably compounded down to one point zero five, or
possibly one point zero four.
MR. BELL: Two elevens?
MR. MURPHY: No, one eleven. The Szymczak is
one point zero four; raising the last ten to eleven;
one point zero six; if you raise the last two tens
you get one point zero eight.
H.M.JR: I am going on the theory if you want
to hold those fellows - I don't know, to make it
interesting for them--
MR. BELL: I think that would make them very
happy about it. It wouldn't cost you very much money.
H.M.JR: It wouldn't cost me very much.
MR. HAAS: In fact, if you give them the Szymczak
it will make them feel good.
H.M.JR: I am just thinking - I want them to go
to town.
MR. BELL: They will be more enthusiastic on
the one point zero eight. We are getting closer to
their one point fourteen baby.
--
171
- 5 -
H.M.JR: What do you think? It is now five,
eight, nine, ten, and the third year is eleven. It
is just a question of what to make the two and a
half. It makes & difference of five hundred million
dollars.
MR. BELL: You mean total subscriptions it might
make that difference?
H.M.JR:. Yes.
MR. BELL: Who said that?
H.M.JR: From five hundred to a billion dollars -
it might make a difference how we price this thing.
MR. BUFFINGTON: Mr. Secretary, as I remember
their statement this will increase it from five hundred
to a billion.
MR. BELL: Well, then, I would give them the
benefit of the doubt. I would make the last two
elevens.
H.M.JR: This is the way I feel. The way I feel
right now is that I would like the thing to be success-
ful, you see, and if the Fed - they had five, originally,
then to nine, and this goes to eight. The third year
was ten, and this is to nine; the second year they had
eleven, and this is to ten. Then it is under all the
way down the line.
MR. BELL: Except the last two.
MR. MURPHY: It is one cent under during the three after
the five.
MR. BUFFINGTON: But the two last elevens are
the things they have been laying a lot of importance
on as the thing that would hold them into the third
year period.
Regraded Unclassified
172
- 6 -
MR. BAKER: How about making the last two elevens
& ten and & twelve? It still leaves you with the same
rate, doesn't it?
MR. MURPHY: Yes.
H.M.JR: Would it?
MR. HAAS: Yes.
MR. BELL: Do what?
MR. BAKER: Instead of having two elevens for the
last two years, make it another ten and a twelve.
H.M.JR: You mean make it ten, twelve, twelve?
MR. BAKER: Ten, ten, twelve. That really gives
them an extra piece of icing if they wait. It still
leaves you with the same cost as two elevens.
MR. HAAS: One thing to be said against that,
Sproul has definitely committed himself about taking
care of the short-term rates, but that last six months
is higher than anything he has suggested.
H.M.JR: No, it is the same as the original
Federal Reserve suggestion.
MR. MURPHY: He means Baker's proposal is higher.
H.M.JR: That is right. They had three elevens,
though. This certainly would give them on the end
there, a two and a half in the third year, an induce-
ment to stick, wouldn't it?
MR. BELL: If there is anything to that.
H.M.JR: And under the present money market, too.
MR. BAKER: It is well under.
173
- 7 -
H.M.JR: How much notice do they have to give to
cash them in?
MR. MURPHY: Thirty days.
MR. BELL: And they do not get any interest until
after six months?
MR. MURPHY: If they redeem it after six months
they get interest for the six months; but if they
redeem it within the first six months they get no
interest.
H.M.JR: And a lot will do that, too.
MR. MURPHY: Any of these will only provide an
inducement to hold if your only alternative is to put
the cash in the bank or into Governments. If you are
contemplating taking the money out to put into business,
no rate would provide any substantial inducement to hold.
H.M.JR: How do you feel, Victory Fund?
MR. BUFFINGTON: I think, going back, that the
original seventy-two hundredths as just a tax note
will sell considerably better than you could sell at
forty-eight hundredths. When you make it a dual-
purpose note and give these men a little enthusiasm
because they have a more flexible security to sell.
In the case of the tax note as it stands now the
average corporation wants to buy just up to their
tax requirements. This makes it & little more
flexible, and I think the men will go at it with a
great deal more enthusiasm and do a good job if you
are somewhere on the Szymczak plan.
H.M.JR: You are inclined to two elevens at
the end?
MR. BELL: Yes.
174
- 8 -
H.M.JR: Let's make it five, eight, nine, ten,
eleven, eleven.
MR. BELL: Yes.
H.M.JR: Will you tell them, Dan?
MR. BELL: Yes. I will go right to work on it.
H.M.JR: Did Sproul go back to the Fed or did
he go to the train?
MR. BELL: You probably could catch him at the
plane.
H.M.JR: Five, eight, nine, ten, eleven, eleven.
MR. BELL: I think they will be very pleased.
H.M.JR: That will surprise them. Now, they
will be ready for Monday.
MR. BUFFINGTON: Can we tie some good publicity
into this regular announcement to get these boys off
to & good start?
H.M.JR: Let's see what you can do, but you can't
have any publicity until Monday morning. If you tell
anybody this, it will kill our regular financing. So
don't tell anybody downstairs. Don't tell anybody in
your shop about this. This is on this floor. Don't
-
tell them anything downstairs at all.
MR. BUFFINGTON: O.K.
H.M.JR: You can start working on your publicity
on Saturday.
MR. BELL: We really ought to put it out
Saturday, hadn't we?
175
- 9 -
H.M.JR: For Monday morning, yes. But I don't
want any leaks. I don't want any leaks. He can
write this stuff at home in longhand, or something
like that, and then give it to the newspapermen
Saturday for Monday morning release.
MR. BUFFINGTON: That means we won't have any
circular other than the official circular available
by Monday?
MR. BELL: Yes. If we are telling the Federal
now, that is a little dangerous.
H.M.JR: All right, tell them I won't make up
my mind until Saturday. Does that show lack of
confidence?
MR. BELL: I think you could tell Allan and
Ronald and tell them that you don't want any
publicity.
H.M.JR: Oh, they talk like a bunch of--
MR. BELL: Why don't we wait until Friday night,
then, to tell them?
MR. HAAS: I don't quite see the big danger.
I don't want to see it leak out, but I don't see
the danger. The other thing is almost entirely a
banking job. The banks can't buy this.
MR. BAKER: There is no point in taking the
risk.
H.M.JR: There are too damned many leaks all
the time - leaks, leaks, leaks.
MR. BELL: George doesn't see any hurt if there
is a leak.
H.M.JR: I don't like leaks. There were leaks
all last week on my tax stuff. All week long there
were leaks. And Allan, if I tell him he then feels
he has got to tell the others.
Regraded Unclassified
176
- 10 -
MR. BELL: Probably.
MR. HAAS: There is no harm in holding up your
decision.
MR. BELL: Why don't we just hold it until
Friday night after we have closed the books on the
other?
H.M.JR: That will be Saturday morning.
MR. BELL: No, you will announce--
H.M.JR: But if you announce it Friday, people
don't put their stuff they have got until twelve
o'clock Friday night--
MR. BELL: They will have it in the mail by
closing time.
H.M.JR: What is the harm in telling them
Saturday morning?
MR. BELL: None. They will be very pleased to
get it. They canwait that long.
H.M.JR: I mean there seems to be so much
anxiety and interest in this thing. I don't think
they can keep their mouths shut.
MR. BELL: Let's wait until Saturday.
H.M.JR: I mean they will tell this fellow -
who is it who writes this bond letter?
MR. BELL: Goldsmith.
H.M.JR: He will know it - he will know it
within the hour. I am surprised that he hasn't
known of it before this.
Regraded Unclassified
177
- 11 -
You don't think their feelings willbe hurt?
MR. BELL: No, I don't think 80.
MR. BAKER: They will be so glad to see the
rate that they won't worry about it.
H.M.JR: I will let it go until Saturday
morning. There are too many leaks.
MR. BUFFINGTON: You know there has been a
good deal of discussion at the Fed and here about
the whole tax note thing.
H.M.JR: If everybody keeps their mouths shut
between now and Saturday morning--
MR. BELL: I am surprised it hasn't been out
before because your telegram suggested the change
in the tax notes.
MR. HAAS: The Secretary cautioned them very
strongly in that wire.
MR. BUFFINGTON: It is your decision that the
Victory Fund will do nothing on the certificates
and the notes?
H.M.JR: I think we have got to trust Sproul.
I think we had better trust Sproul. We can't have
him as your fiscal agent and not trust him. You
got what I said we would do - what was it?
MR. BELL: Five, eight, nine, ten, eleven,
eleven. That is one point zero eight.
(The Secretary attempted to reach Mr. Sproul
on the telephone but was unable to.)
H.M.JR: Let me sleep on this, as to how we
are going to tell them. We will tell nobody tonight.
178
Chica (fift 8,1942
certificate 65
due may 1st
payable Sept 21st
note /4
due marchs 1945
City
hayable
15/8 June 47
1
Chicago - young
chester Haves
(larger)
shorter
14 matter Chicago
Godfily not of chicago
mant - Detroit
178
5
St. A Louis
chester Davis
8 Banks (larger)
prefer shorter
fort. Country BKs
want 15/8,
mile may
10 10 9 $ 00
burda
7
11 10 11/0 1,0
.90 1,04
11 9 " 10 50 bbao
179
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
September 8, 1942
FROM Davis L. Baker, Jr.
Possible New Issues, dated September 15, 1942
Certificate of Indebtedness
Approx.
Due
Market
Coupon
Term
Date
Yield
Price
Premium
3/4%
7 1/2 mos,
5/1/43
0.65
$1,000,620
$620/1/11
Treasury Notes
1 1/4%
2 yrs. 3 mos. 12/15/44
1.10
100
11/32
11/32
1.14
100
8/32
8/32
2 yrs. 6 mos. 3/15/45
1.14
100
9/32
9/32
1.18
100
6/32
6/32
2 yrs. 9 mos. 6/15/45
1.18
100
6/32
6/32
1.22
100
3/32
3/32
1 1/2%
3 yrs. 9 mos.
6/15/46
1.38
100
14/32
14/32
1.42
100 9/32
9/32
4 yrs.
9/15/46
1.42
100
10/32
10/32
1.46
100 5/32
5/32
1 5/8%
4 yrs. 6 mos.
3/15/47
1.53
100
14/32
14/32
1.57
100
8/32
8/32
4 yrs. 9 mos. 6/15/47
1.57
100
8/32
8/32
1.61
100
2/32
2/32
1 3/4%
4 yrs. 9 mos.
6/15/47
1.57
100 26/32
26/32
1.61
100 20/32
20/32
5 yrs.
9/15/47
1.61
100 21/32
21/32
1.65
100 15/32
15/32
180
Treasury Bonds
1 3/4%
5 yrs.
9/15/47-49
1.70
100 8/32
8/32
1.72
100 5/32
5/32
2%
(Chart reading indicates that a 2% bond could not be placed
farther out than 12/15/49, coincident with the outstanding 2's
of 12/15/49-51 now quoted 100 5/32 bid. A reopening of this
issue would undoubtedly result in a decline to par for all
three 2% bonds of 49-51)
2 1/4%
12 yrs.
9/15/54-56
2.20
100 17/32
17/32
13 yrs.
9/15/55-57
2.22
100 11/32
11/32
-2-
181
Possible New Treasury Issues
(Based on Closing Bid Prices, September 5, 1942)
: Estimated :
:
Yield
: Probable
:
Basis
:
Price
:
:
(Percent)
Certificates
.65 percent
.65
100.000
due May 1, 1943
(7-1/2 months)
70 percent
.65
100.031
due May 1, 1943
(7-1/2 months)
Notes
1-1/4 percent
1.16
100-6/32
due December 15, 1944
(2 years - 3 months)
1-1/4 percent
1.21
100-3/32
due March 15, 1945
(2 years - 6 months)
1-1/4 percent
1.25
100
due June 15, 1945
(2 years - 9 months)
1-5/8 percent
1.55
100-11/32
due June 15, 1947
(4 years - 9 months)
1-5/8 percent
1.59
100-5/32
due September 15, 1947
(5 years)
Bonds
1-3/4 percent
1.70
100-8/32
due September 15, 1947-49
(5 years - 7 months)
Treasury Department,
September 8, 1942.
Division of Research and Statistics.
Regraded Unclassified
Mistaas gair this thaps
on Tuesday Sign
Regraded Unclassified
183
Calendar of Direct and Guaranteed Bonds, Notes and Certificates V
August 15, 1942
(In millions of dollars)
Fixed maturities
Callable issues 2/
Description
First callable
Date
Final maturities
Direct
Guaran-
teed
Direct
Guaran-
teed
Direct
Guaran-
teed
1942-Jan.
Feb.
Mar.
Apr.
May
June
July
July
Aug.
Sept.15
Note 2%
342
Oct.15
RFC 7/8%
320(T)
Nov. 1
Certificates 1/2%
1,507(T)
Dec.15
Note 1-3/4%
232
Total
2,081
320
1943-Jan.
Feb. 1
Certificates 5/8%
1,585(T)
Mar.15
Note 3/4%
166(f)
Apr.
May 1
000 3/4%
289
June15
Note 1-1/84
629
June15
Bond 3-3/86 (1943-47)
454
July15
RFC 1-1/86
324(T)
Aug. i
Certificates 7/8%
1,609(T)
Sept.15
Note 1%
279
Oct.15
Bond 3-1/4% (1943-45)
1,401
Nov.
Dec.15
Note 1-1/8%
421
Total
4,592
613
1,855
1944-Jan.
Feb. 1
USHA 1-3/8%
114
Mar.15
Note 1%
515
Mar.15
FINC 3-1/4% (1944-64)
95
Apr.15
Bond 3-1/46 (1944-46)
1,519
Apr.15
RFC 15
571(T)
May 1
HOLO 3% (1944-52)
779
May 15
FFMC % (1944-49)
835
June15
Note 3/4%
416
July
Aug.
Sept.15
Note 1%
283
Sept.15
Note 3/4%
635(T)
Oct.
Nov.
Dec.15
Bond 4% (1944-54)
1,037
Total
1,849
685
2,556
1,709
1945-Jan.
Feb.15
000 1-1/8%
412(T)
Mar.15
Note 3/4%
718
Apr.
May
June 1
HOLO 1-1/2% (1945-47)
755
July
Aug.
Sept.15
Bond 2-3/46 (1945-47)
1,214
Oct.15
Bond 3-1/4% (1943-45)
1,401
Nov.
Dec.15
Bond 2-1/2%
541
Dec.15
Note 3/4%
531(T)
Total
1,790
412
1,214
755
1,401
2
Taxable issue,
bonds, FEA debentures, and issues for which an exchange offer has been made and
Excludes special issues, issues redeemable at option of holder, Postal Savings
3/
Gallable issues with respect to which a definite notice of call has been made
accepted by the bulk of the holders.
are listed as fixed matorities.
Regraded Unclassified
184
Calendar of Direct and Guaranteed Bonde, Notes and Certificates
August 15, 1942
(In millions of dollars)
Fixed maturities
Callable issues 2/
Description
First callable
Date
Final maturities
Direct
Guaran-
Direct
Guaran-
teed
Direct
Guaran-
teed
teed
1946-Jan. 1
Conversion 3%
16
Feb.
Mar.15
Note 1%
503(T)
Mar.15
Bond 3-3/44 (1946-56)
489
Apr.15
Bond 3-1/4% (1944-46)
1,519
May
June15
Bond 3% (1946-48)
1,036
June15
Bond 3-1/8% (1946-49)
819
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Note 1-1/2%
1,118(T)
Total
1,637
2,344
1,519
1947-Jan. 1
Conversion 3%
13
Feb.
Mar.
Apr.
May
June 1
HOLO 1-1/2% (1945-47)
755
June15
Bond 3-3/8% (1943-47)
454
July
Aug.
Sept.15
Bond 2-3/4% (1945-47)
1,214
Oct.15
Bond 4-1/4% (1947-52)
759
Nov.
Dec.15
Bond 2%
701
Total
714
759
1,668
755
1948-Jan.
Feb.
Mar.15
Bond 2% (1948-50)
1,115(T)
Mar.15
Bond 2-3/46 (1948-51)
1,223
Apr.
May
June15
Bond 3% (1946-48)
1,036
July
Aug.
Sept.15
Bond 2-1/2%
451
Oct.
Nov.
Dec.15
Bond 2% (1948-50)
571
Total
451
2,909
1,036
1949-Jan.
Feb.
Mar.
Apr.
May 15
FFMC 3% (1944 49)
835
June15
Bond 3-1/8% (1946-49)
819
June15
Bond 2% (1949-51)
1,014(T)
July
Aug.
Sept.15
Bond 2% (1949-51)
1,292(T)
Oct,
Nov.
Dec.15
Bond 26 (1949-51)
2,098(T)
Dec.15
Bona 3-1/8% (1949-52)
_491
Dec.15
Bond 2-1/2% (1949-53)
1,786
Total
6,681
819
835
2 Taxable issue.
bonds, TEA debentures, and issues for which an exchange offer has been made and
Excludes special issues, issues redeemable at option of holder, Postal Savings
Callable issues with respect to which a definite notice of call has been made
accepted by the bulk of the holders.
are listed 4a fixed maturities.
Regraded Unclassified
185
Calendar of Direct and Guaranteed Bonds, Notes and Certificates 1/
August 15, 1942
(In millions of dollars)
Fixed maturities
Callable issues
Date
Description
First callable
Final maturities
Direct
Guaran-
teed
Direct
Guaran-
teed
Direct
Guaran-
teed
1950-Jan.
Feb.
Mar:15
Bond 2% (1948-50)
1,115(T)
Apr.
May
June
July
Aug.
Sept.15
Bond 2-1/2% (1950-52)
1,186
Oct.
Nov.
Dec.15
Bond 2% (1948-50)
571
Total
1,186
1,686
1951-Jan.
Feb.
Mar.15
Bond 2-3/4% (1948-51)
1,223
Apr.
May
June15
Bond 2% (1949-51)
1,014(T)
June15
Bond 2-3/4% (1951-54)
1,627
July
Aug.
Sept.15
Bond 24 (1949-51)
1,292(T)
Sept.15
Bond 3% (1951-55)
755
Oct.
Nov.
Dec.15
Bond 24 (1949-51)
2,098(T)
Dec.15
Bond 2-1/4% (1951-53)
1,118
Dec.15
Bond 2% (1951-55)
510(T)
Total
4,010
5,627
1952-Jan.
Feb.
Mar.15
Bond 2-1/2% (1952-54)
1,024(T)
Apr.
May 1
HOLC 3% (1944-52)
779
June15
Bond 2-1/4% (1952-55)
1,501(T)
July
Aug.
Sept.15
Bond 2-1/2% (1950-52)
1,186
Oct.15
Bond 4-1/4% (1947-52)
759
Nov.
Dec.15
Bond 3-1/8% (1949-52)
491
Total
2,525
2,436
779
1953-Jan,
Feb.
Mar.
Apr.
May
June15
Bond 2% (1953-55)
725
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond 2-1/2% (1949-53)
1,786
Dec.15
Bond 2-1/4% (1951-53)
1,118
Total
725
2,904
T
Taxable issue.
Excludes special issues, issues redeemable at option of holder, Postal Savings
bonds, FHA debentures, and issues for which an exchange offer has been made and
accepted by the bulk of the holders.
Callable issues with respect to which & definite notice of call has been made
are listed are fixed maturities.
Regraded Unclassified
186
Calendar of Direct and Guaranteed Bonds, Notes and Certificates 1/
August 15, 1942
(In millions of dollars)
Fixed maturities
Callable issues 2/
Description
First callable
Date
Final maturities
Direct
Guaran-
Direct
Guaran-
teed
Direct
Guaran-
teed
teed
1954-Jan.
Feb.
Mar.15
Bond 2-1/2% (1952-54)
1,024(T)
Apr.
May
June15
Bond 2-3/44 (1951-54)
1,627
June15
Bond 2-1/46 (1954-56)
681
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond less (1944-54)
1,037
Total
681
3,688
1955-Jan.
Feb.
Mar.15
Bond 2-7/8% (1955-60)
2,611
Apr.
May
June15
Bond 2-1/46 (1952-55)
1,501(T)
June15
Bond 2% (1953-55)
725
July
Aug.
Sept.15
Bond 3% (1951-55)
755
Oct.
Nov.
Dec.15
Bond 2% (1951-55)
510(T)
Total
2,611
3,491
1956-Jan.
Feb.
Mar.15
Bond 3-3/44 (1946-56)
489
Mar.15
Bond 2-1/2% (1956-58)
1,449(T)
Apr.
May
June15
Bond 2-1/4% (1954-56)
681
July
Aug.
Sept.15
Bond 2-3/4% (1956-59)
982
Oct.
Nov.
Deo.
Total
2,431
1,170
1957-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
T Taxable issue,
Excludes special issues, issues redeemable at option of holder, Postal Savings
bonds, PHA debentures, and issues for which an exchange offer has been made and
2/ Callable issues with respect to which a definite notice of call has been made
accepted by the bulk of the holders.
are listed as fixed maturities.
Regraded Unclassified
187
Calendar of Direct and Guaranteed Bonda, Notes and Certificates 1/
August 15, 1942
(In millions of dollars)
Fixed maturities
Callable issues 2/
Date
Description
First callable
Final maturities
Direct
Guaran-
teed
Direct
Guaran-
teed
Direct
Guaran-
teed
1958-Jan.
Feb.
Mar.15
Bond 2-1/2% (1956-58)
1,449(T)
Apr.
May
June15
Bond 2-3/4% (1958-63)
919
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
919
1,449
1959-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.15
Bond 2-3/4% (1956-59)
982
Oct.
Nov.
Dec.
Total
982
1960-Jan.
Feb.
Mar.15
Bond 2-7/8% (1955-60)
2,611
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond 2-3/4% (1960-65)
1,485
Total
1,485
2,611
1961-Jan.
Feb.
Mar.
Apr.
May
June 1
Panama 3%
50
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
50
T
Taxable issue.
Excludes special issues, issues redeemable at option of holder, Postal Savings
bonds, FHA debentures, and issues for which an exchange offer has been made and
Callable issues with respect to which a definite notice of call has been made
accepted by the bulk of the holders.
are listed as fixed maturities.
Regraded Unclassifie
188
Calendar of Direct and Guaranteed Bonds, Notes and Certificates 1/
August 15, 1942
(In millions of dollars)
Fixed maturities
Callable issues 2/
Date
Description
First callable
Final maturities
Direct
Guaran-
teed
Direct
Guaran-
teed
Direct
Guaran-
teed
1962-Jan.
Feb.
Mar.
Apr.
May
June15
Bond 2-1/2% (1962-67)
2,118(T)
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
2,118
1963-Jan.
Feb.
Mar.
Apr.
May
June15
Bond 2-3/4% (1958-63)
.919
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
919
1964-Jan.
Feb.
Mar.15
FFMC 3-1/4% (1944-64)
95
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
95
1965-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond 2-3/44 (1960-65)
1,485
1,485
Total
T
Taxable issue.
Excludes special issues, issues redeemable at option of holder, Postal Savings
bonds, FHA debentures, and issues for which an exchange offer has been made and
Callable issues with respect to which a definite notice of call has been made
accepted by the bulk of the holders.
are listed as fixed maturities.
Regraded Unclass
189
Calendar of Direct and Guaranteed Bonds, Notes and Certificates 1/
August 15, 1942
(In millions of dollars)
Callable issues 2/
Fixed maturities
First callable
Final maturities
Date
Description
Guaran-
Guaran-
Guaran-
Direct
teed
Direct
teed
Direct
teed
1966-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
1967-Jan.
Feb.
Mar.
Apr.
May
June15
Bond 2-1/2% (1962-67)
2,118(T)
July
Aug.
Sept.15
Bond 2-1/2% (1967-72)
2,716(T)
Oct.
Nov.
Dec.
2,716
2,118
Total
#
2,716(T)
1972-Sept.15
Bond 2-1/2% (1967-72)
1/ T Taxable issue. issues, issues redeemable at option of holder, Postal Savings made
Excludes bonds, FHA special debentures, and issues for which an exchange offer has been and
2/ accepted Callable by issues with respect to which a definite notice of call has been made
the bulk of the holders.
are listed as fixed maturities.
Unclassified
190
VIA FEDERAL RESERVE TELETYPE -- URGENT. SEPT. 8, 1942
Mr. C. S. Young,
President, Federal Reserve Bank,
Chicago, Illinois.
WOULD YOU MAKE INQUIRIES AROUND YOUR DISTRICT AS TO WHETHER THERE
IS ANY OUTSTANDING MAN WHO COULD HELP THE TREASURY and PARTICULARLY
THE VICTORY FUND COMMITTEE WITH PUBLICITY. PLEASE ADVISE ME.
HESRY MORGENTHAU JR.
191
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE SEP 8 1942
TO
FROM
Mr. M Haas
Secretary Morgenthau
The attached tables and charts bring
up to date information prepared last month
on the sale of savings bonds and the
operation of the payroll savings plan.
Large colored copies of the charts have
been hung in the Chart Room.
Attachments
Regraded Unclassified
192
Sales of United States Savings Bonds
Monthly, May 1941 to August 1942
(In millions of dollars)
:
:
:
Month
:
Series
:
Series
:
E
Total
:
F&G
1941
May
100.6
249.2
349.8
June
102.5
212.0
314.5
July
145.3
196.9
342.1
August
117.6
148.0
265.6
September
105.2
127.1
232.3
October
122.9
147.9
270.7
November
109.5
124.0
233.5
December
341.1
187.5
528.6
1942
January
667.4
393.2
1,060.6
February
398.0
305.2
703.2
March
337.6
220.3
557.9
April
326.7
203.8
530.5
May
421.8
212.6
634.4
June
433.2
200.7
633.9
July
508.1
392.7
900.9
August
454.0
243.3
697.3
Office of the Secretary of the Treasury,
Division of Research and Statistics. September 3, 1942.
Note: Figures are rounded to the nearest million and will
not necessarily add to totals.
SALES OF UNITED STATES SAVINGS BONDS
Monthly. May 1941 to Aug. 1942
DOLLARS
DOLLARS
Millions
Millions
1000
1000
Series Fand G
All Series
Series E
800
800
600
600
400
400
200
200
o
o
MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT.
1941
1942
193
Office of the Secretary of the Transary
- of - - -
B-329
Regraded Unclass
194
Number of Series E Savings Bonds of Each Denomination
Sold Monthly, May 1941 to August 1942
Denomination
:
$25
:
:
$50
:
$100
:
:
$500
---
$1,000
(Estimated number of units - in thousands)
1941
May
336
162
259
54
65
June
431
192
293
55
60
July
530
239
388
81
88
August
553
238
355
64
65
September
595
246
351
59
59
October
700
267
379
64
62
November
725
262
360
57
53
December
2,661
1,062
1,284
216
181
1942
January
3,846
1,469
1,802
370
355
February
2,807
880
1,152
183
167
March
3,529
901
1,056
151
122
April
4,055
946
1,074
145
116
May
5,618
1,258
1,357
172
130
June*
6,808
1,350
1,347
153
111
July
8,268
1,599
1,552
188
142
August*
8,528
1,540
1,359
146
103
Office of the Secretary of the Treasury,
September 3, 1942.
Division of Research and Statistics.
#
Preliminary.
Regraded Unclassified
NUMBER OF SERIES E BONDS
OF EACH DENOMINATION SOLD MONTHLY
May 1941 to Aug. 1942
$25 DENOMINATION
$50 DENOMINATION
$500 DENOMINATION
Mil.
Mil.
Thous.
400
8
1.2
300
7
.8
200
100
6
.4
0
M J S N J M M J S
5
0
1941
1942
SrWWrNSOW
1941
1942
4
$1.000 DENOMINATION
$100 DENOMINATION
Thous.
3
Mil.
400
1.5
300
2
1.0
200
I
.5
100
0
0
0
M J S N J M M J S
M J S N J M M J S
MJSNJMMJS
1941
1942
1941
1942
1941
1942
the of the Secretary of the Transary
B-331
195
- - - - -
Regraded Uncla
Progress of Payroll Savings Plans for War Savings Bonds
Estimated; Monthly, December 1941 to August 1942
:
1941
:
:
:
1942
:
:
Dec. : Jan. Feb. : Mar. Apr. May June : July : Aug.
Number of firms participating:
(Numbers are units)
1. Firms with 5,000 or more
workers
100
355
448
467
470
475
477
481
484
2. Firms with 500-4,999 workers.
430
1,622
2,780
3,674
4,573
4,768
4,956
5,099
5,266
3. Firms with 100-499 workers...
3,495
7,059
11,172
13,770
16,216
18,169
19,718
21,038
22,375
4. Firms with under 100 workers.
5,914
8,477
20,080
32,209
50,427
67,006
82,948
95,275
108,767
Total number of firms 1/...
9,939
17,513
34,480
50,120
71,686
90,418
108,099
121,893
136,892
Number of workers in firms
participating:
1. Firms with 5,000 or more
(Numbers are millions)
workers
1.6
5.8
7.3
7.6
7.7
7.8
7.8
7.8
7.9
2. Firms with 500-4,999 workers.
.6
2.2
3.8
5.0
6.4
6.5
6.7
6.8
7.0
3. Firms with 100-499 workers
.8
1.7
2.6
3.2
3.8
4.3
4.6
4.9
5.2
4. Firms with under 100 workers.
.2
.2
.5
.8
1.3
1.9
2.2
2.5
2.7
Total number of workers 1/..
3.2
9.9
14.2
16.7
19.2
20.5
21.3
22.0
22.8
Office of the Secretary of the Treasury,
September 3, 1942.
Division of Research and Statistics.
Excludes Federal, State and local Governmental organizations and their employees.
Note: Figures in millions are rounded to the nearest million and will not necessarily
add to the totals.
Regraded Unclassified
197
PROGRESS OF PAYROLL SAVINGS PLANS
FOR WAR SAVINGS BONDS
Estimated: Monthly. Dec. 1941 to Aug. 1942
NUMBER OF FIRMS
NUMBER OF WORKERS
Total
Mil.
Total
8
400
6
Participating
In Participating Firms
4
200
5.000 or more Workers
2
Firms, 5,000 or more Workers
o
0
DJFMAMJJASO
DJFMAMJJASO
Thous.
Mil.
Total
Total
8
6
Participating
6
4
4
In Participating Firms
2
2
500-4,999 Workers
Firms, 500-4.999 Workers
0
o
DJFMAMJJASO
DJFMAMJJASO
Thous.
Mil.
Firms, 100-499 Workers
Total
8
Total
20
Participating
6
4
10
2
100-499 Workers
In Participating Firms
0
0
DJFMAMJJASO
D J F M A M J J A S o
Thous.
Mil.
Firms, Under
-
Under 100 Workers
120
6
100 Workers
Total
80
Participating
4
In Participating
40
2
Firms
0
0
DJFMAMJJASO
D J F M A M J J A S O
1941
1942
1941
1942
- - the of the Transary
B-332
- - - -
Extent of Participation in Payroll Savings Plans for War Savings Bonds
Estimated; Monthly, December 1941 - August 1942
:
1941
:
1942
:
Dec.
Jan.
Feb.
Mar.
:
:
:
Apr.
:
May
June
July
Aug.
(Numbers are units)
I. Number of firms with
plans 1/
9,939
17,513
34,480
50,120
71,686
90,418
108,099
121,893
136,892
II. Workers in firms and
Government agencies
with plans:
(Numbers are millions)
a. Firms
3.2
9.9
14.2
16.7
19.2
20.5
21.3
22.0
22.8
b. Government agencies.
-
.6
.9
1.4
1.5
1.5
1.5
2.5
2.8
c. Total
3.2
10.5
15.1
18.0
20.7
22.0
22.8
24.6
25.6
III. Workers actually partici-
pating in payroll sav-
ings plans:
(Numbers are millions)
a. In participating firms
0.7
3.7
7.2
9.0
10.9
13.2
15.0
16.5
16.7
b. In participating
Government agencies
-
.1
.4
.6
.7
.7
1.0
1.5
1.8
C. Total
0.7
3.8
7.6
9.6
11.6
13.9
16.0
18.0
18.5
Office of the Secretary of the Treasury,
September 5, 1942.
Division of Research and Statistics.
Excludes Government agencies.
Note: Figures in millions are rounded to the nearest million and will not necessarily
add to the totals.
19
Regraded Unclassif
199
EXTENT OF PARTICIPATION IN PAYROLL
SAVINGS PLANS FOR WAR SAVINGS BONDS
Estimated; Monthly, Dec. 1941 to Aug. 1942
1942
FIRMS
Thousands
FIRMS
125
Firms with Plans
Thousands
125
100
100
75
75
50
50
25
25
0
DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT.
0
WORKERS
WORKERS
Millions
Workers in Firms and
Millions
30
Government Agencies with Plans
30
In Participating
Government Agencies
www
20
<<<<<
www
20
In Participating
Firms
10
10
0
0
DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT.
WORKERS
WORKERS
Millions
Millions
20
Workers Actually Participating
20
In Participating
16
16
Government Agencies
ANN
12
12
In Participating
.....
Firms
......
8
8
4
4
0
0
DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT.
1941
1942
Office . - Secretary of the Insury
B-333
- # - - -
Regraded Unclassified
200
Estimated Deductions From Payrolls For Purchase
of War Savings Bonds, Monthly
December 1941 - August 1942
:
Aggregate
:
Deduction as a
:
amount deducted
:
percentage of
:
(In millions
:
pay of workers
:
of dollars)
:
actually par-
:
:
ticipating
1941
December
$ 5
4.1%
1942
January
28
4.5
February
58
4.8
March
78
4.9
April
96
4.9
May
126
5.3
June
153
5.8
July
200 r/
6.3
August*
225
7.2
Office of the Secretary of the Treasury, September 3, 1942.
Division of Research and Statistics.
4 Preliminary.
r/ Revised.
201
ESTIMATED DEDUCTIONS FROM PAYROLLS
FOR PURCHASE OF WAR SAVINGS BONDS
Monthly. December 1941 to Aug. 1942
1942
DOLLARS
DOLLARS
Millions
Aggregate Amount Deducted
Millions
200
200
150
150
100
100
50
50
0
0
DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT OCT.
PERCENT
PERCENT
Deduction as a Percentage of Pay
7
of Workers Actually Participating
7
6
6
5
5
4
4
3
3
2
2
I
I
0
0
DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT OCT.
1941
1942
the of the Secretary of the Transpy
B-330
1 ] - 1 I
CONFIDENTIAL
202
UNITED STATES SAVINGS BONDS - TOTAL
Comparison of September sales to date with sales during the
same number of business days in August and July 1942
(At issue price in thousands of dollars)
:
September :
Cumulative sales by business days
Date
:
daily
:
:
:
:
:
:
September
August
September as
sales
:
:
July
:percent of August
September 1942
1
$ 19,162
$ 19,162
$ 26,267
$ 28,418
73.0%
2
24,558
43,720
65,032
52,687
67.2
3
27,702
71,422
92,055
79,964
77.6
4
28,482
99,904
117,890
126,495
84.7
5
29,880
129,784
158,341
157,605
82.0
ffice of the Secretary of the Treasury,
September 8, 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
203
UNITED STATES SAVINGS BONDS - SERIES I
Comparison of September sales to date with sales during the
same number of business days in August and July 1942
(At issue price in thousands of dollars)
:
September :
Cumulative sales by business days
Date
:
daily
:
:
:
:
:
:
September
August
September as
sales
:
:
July
:percent of August
September 1942
1
$ 11,634
$ 11,634
$ 14,044
$ 15,821
82.8%
2
14,748
26,381
36,222
30,701
72.8
3
18,305
44,687
50,797
47,523
88.0
4
17,804
62,491
63,785
77,320
98.0
5
19,166
81,657
86,789
95,044
94.1
Office of the Secretary of the Treasury,
September 8, 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
204
UNITED STATES SAVINGS BONDS - SERIES y AND G COMBINED
Comparison of September sales to date with sales during the
same number of business days in August and July 1942
(At issue price in thousands of dollars)
:
September
:
Cumulative sales by business days
Date
:
daily
:
:
:
:
:
sales
:
September
:
August
:
July
September as
:percent of August
September 1942
1
$ 7,528
$ 7,528
$ 12,222
$ 12,597
61.6%
2
9,811
17,339
28,810
21,986
60.2
3
9.397
26,735
41,258
32,441
64.8
4
10,678
37,414
54,105
49,175
69.2
5
10,713
48,127
71,552
62,561
67.3
Office of the Secretary of the Treasury,
September 8, 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 will not necessarily
add to totals.
205
Sales of United States savings bonds
CONFIDENTIAL
September 1 through September 5. 1942
Compared with sales quota for same period
(At issue price in millions of dollars)
Series 1
I
Series I and G
:
I
Total
Actual
sales
:
Quota,
:
Sales
I
Actual
sales
:
:
Quota,
: Sales
I
Actual sales
I
Quota,
1
Sales
: Sept. 1
#
Sept. 1
I
to date
:
I Sept. 1
:
Sept. 1
: to date
#
: Sept. 1
1
to
: as $ of
Sept. 1
I
to date
to
1
:
Daily
:
to
I
:
Daily
:
to
: as $ of
I
Daily
:
to
I
to
# as x of
:
date
:
date
$
quota
$
$
date
2
date
:
quota
#
I
date
2
date
I
quote
$ 11.6
$ 11.6
$ 14.9
77.9%
1
$ 7.5
$ 7.5
$ 6.9
108.7%
$ 19.2
$ 19.2
$ 21.8
88.1%
14.7
26.4
34.5
76.5
9.8
17.3
16.6
2
104.2
24.6
43.7
51.1
85.5
3
18.3
44.7
55.5
80.5
9.4
26.7
26.4
101.1
27.7
71.4
81.9
87.2
17.8
62.5
81.0
77.2
10.7
37.4
35.6
105.1
28.5
99.9
116.6
85.7
5
19.2
81.7
98.3
83.1
10.7
48.1
42.2
114.0
29.9
129.8
140.5
92.4
8
143.3
58.1
201.4
9
168.8
67.8
236.6
10
193.4
76.7
270.1
11
220.6
84.4
305.0
12
239.2
90.1
329.3
14
272.7
99.7
372.4
15
288.2
105.0
393.2
16
307.6
112.1
419.7
17
327.2
119.2
446.4
18
350.1
125.7
475.8
19
365.4
130.5
495.9
1
399.6
141.0
540.6
22
415.7
147.0
562.7
23
436.2
155.2
591.4
24
457.1
163.4
620.5
25
481.4
171.0
652.4
26
497.4
176.6
674.0
28
532.7
188.7
721.4
29
549.2
195.5
744.7
30
570.0
205.0
775.0
ffice of the Secretary of the Treasury, Division of Research and Statistics.
September 5, 1942
ource: 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.
205-A
September 8, 1942
4:14 p.m.
Walter
Stewart:
Hello, Henry.
HM Jr:
How are you?
S:
Very good.
HM Jr:
Walter, how did you like what the President said
last night?
S:
I thought it was pretty good.
HM Jr:
You thought it was pretty good?
S:
I thought it was 8. little brief on taxation -
I could have stood a little more on that.
HM Jr:
You and me both.
S:
It sounded to me as though something that had been
omitted was now being included. That was my only
explanation for it.
HM Jr:
Yeah.
S:
It was a bit of a brush-off on that.
HM Jr:
(laughs) It's an understatement but that, of course,
is what we felt. Now what happened this morning
here was that the committee voted down 12 to 0
my spending tax, and voted through about 12 to 6
George's tax on 8. 5% gross income tax.
S:
5% gross income?
HM Jr:
Yeah. Which is 8. big help on keeping down inflation.
S:
Yeah. Well, that's a disappointment, Henry.
I'm sorry. I think you made 8. real effort on that.
Of course, it was licked, but you made a real try
on that.
205B
- 2 -
HM Jr:
Well, the way I feel - I am delighted that I had a
plan, and as good a plan as that.
S:
Yes, you're right.
HM Jr:
I only would be downhearted today if they put some-
thing through the committee and I hadn't made a -
what I think 8. constructive suggestion. That's the
way I feel.
S:
You're right.
HM Jr:
And as to being late, the criticism is just, but
we just couldn't get around to it - - I mean in the
sense that what was the right way to move.
S:
You're quite right. You haven't been dilatory;
it has been busy times.
HM Jr:
Well, it has been very difficult to make up one's
mind.
S:
That's right.
HM Jr:
I mean I feel that I am in the same boat as the
President, and it has taken him up to October 1st
or rather September 7th to decide what he is going
to do on farm prices and labor.
S:
Yes.
HM Jr:
What?
S:
That's right. You had your mind made up on that
some time ago.
HM Jr:
Yeah. I made a speech in Boston last September.
S:
That's right - a year ago.
HM Jr:
Yes, I made my speech then.
S:
That's right.
Regraded Unclassified
205c
- 3 -
HM Jr:
I have no regrets on this.
S:
No, I haven't either. I haven't. I thought the
statement - your statement - I got copies of that -
your statement and the one that went with it from
Paul are both good documents.
HM Jr:
Did you see the one in the Sunday paper?
S:-
I did, yes, and I liked that, too. I wondered who
did night work on that one.
HM Jr:
Well, that was Gaston and Kuhn.
S:
It was a good job.
HM Jr:
I thought so.
S:
I thought it was a very good job, 80 I think it has
been handled with dignity and with great force.
HM Jr:
In view of what the President was going to do - hello?
S:
Yes.
HM Jr:
I mean from now until the 1st of October they have
got to write that legislation
S:
Right.
HM Jr:
do you think anybody ought to make any trips?
S:
Well, I was wondering about that. It would seem to
me to fall right in between a decision and no
decision.
HM Jr:
Yeah.
S:
I mean if it were the sort of thing where you could
say it had been dealt with, some one could feel free
to go, but it is neither dealt with nor not dealt
with, which is an awful twilight zone.
205D
- 4 -
HM Jr:
Yeah.
S:
I'm no real judge of that, but it may be even
more difficult after the 1st of October.
HM Jr:
You're 80 cheerful.
S:
I feel very cheerful. I am a little inclined
to say that if you feel that you want to be there
before sometime in November - the thing to do
is to get away promptly.
HM Jr:
Yeah.
S:
That would be my inclination, Henry. Of course,
I have not been very keen about this you know.
HM Jr:
Yeah.
S:
I think it is in a very uncertain position - - this
whole thing now.
HM Jr:
Yeah. Well, that's that.
S:
All right.
HM Jr:
Okay.
S:
Henry, you're not going to need me this week, are you?
HM Jr:
No.
S:
Right. Goodbye.
HM Jr:
Thank you.
S:
It was nice of you to call. Bye-bye.
HM Jr:
Thank you.
September 8, 1942. 206
4:45 P. a.
Robert
Patterson:
Bob.
HMJr:
Did your family get home without being too cold?
P.
Yes. (Laughs.)
HMJr:
What? The little one was all right?
P:
Sure.
HMJr:
She's oute.
P:
Sat on my lap.
HMJr:
Well, that kept her warm. Bob, we enjoyed having you.
P:
Well, I enjoyed being there a great deal.
HMJr:
The President of the United States called me up about
lunchtime yesterday. Uh, I'm only repeating what
he said - I don't know why he does it through me -
but he said that he'd heard that there were two
buildings on the New Hackensack new Airport that
were going to be torn down, and that would I please
tell the Army that he'd like very much if they could
leave them standing. One was the Woronock Inn...
P:
The What?
HMJr:
Woronock. W-o-r-o-n-o-ok
P:
Yeah.
HMJr:
He says it's the oldest Inn in Dutchess County.
Then he said there was another half-timber, half-
stone house - he couldn't say just what - but that he
understood it was going to be torn down, uh, for the
historic value.
P:
Yeah.
HMJr:
And he wondered if both of them couldn't be left
standing, and the Army use them for headquarters or
something.
P:
I'll find out.
HMJr:
I don't know, and I don't know why he did it through
me, but...
P:
That's all right.
HMJr:
...but I...
207
- 2 -
P:
You - you use it.
HMJr:
Pardon?
P:
You use it. You - you know most about it.
HMJr:
No. I - yeah, but this is something historical
that the President is interested in, and ...
P:
Yeah.
HMJr:
It's - it's of no interest to me - the buildings.
P:
Is the Inn the place that you go past as you
drive out of the place?
HMJr:
Yeah, that's the Inn. Yeah. It's - it was a
nice, you know, two-story porch on it.
P:
I'll - I'll look into it right away.
HMJr:
And if you didn't mind letting me know I could
pass the word back to him.
P:
Yes, sir.
HMJr:
Sorry to bother you.
P:
Not a bit.
HMJr:
Thank you.
P:
That's all right. I'll get it clean.
HMJr:
Thank you.
P:
Thank you, Henry.
208
THE SECRETARY OF THE NAVY
WASHINGTON
September 8, 1942
Dear Henry:
Thank you for your note of the third enclosing your
statement to the Senate Finance Committee. It is splendid
and I sincerely hope that it brings the desired results.
Sincerely yours,
Frankshoon
Honorable Henry Morgenthau
Secretary of the Treasury
Washington, D. c.
INS 23 a W
SEP 4
NATIONAL GALLERY OF ART
SMITHSONIAN INSTITUTION
WASHINGTON, D.C.
September 2nd, 1342.
My dear Mr. Secretary:
I am deeply grateful to you for all that you did
in making it possible for the National Gallery to ac-
cept the gift of t:0 Midener Collection.
It is very important for the Callery to acquire
these works of art, and we all fuel it is largely due
to you and your staff at the Treasury that many of the
difficulties were overcome in connection with the ac-
ceptance of the Collection. Mr. Cairns was both re-
sourceful and untiring in his efforts, as were also
Mr. Kuhn, Mr. Shea, and .r. Gilmore. I saw Kr. Widener
yesterday and he is most appreciative of what you have
done. Again with many thanks, I am
Sincerely yours,
Jand E finles.
Director.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Regraded Unclassified
211
September s, 1942
Dear General Allen:
Thank you very much for sending me
the pictures that were taken while I was
st Fort Benning. I shall treasure them
as reminders of a most impressive and
inspiring day.
I shall not need additional copies
of any of these, but I notice that you did
not include any photographs of the parachute
training. If it is not too much trouble,
would you mind sending no a few of these
as well?
With kind regards to you and Mrs. Allen,
Sincerely,
(Signed) H. Morgenthau, Jr.
Brigadier General Leven C. Allen,
Commandant, Infantry School,
Fort Benning, Georgia.
Pictures turned over to
Mr. Kuhn 9/11/42 for album he is
making of tour, also CC of letter.
File in Diary
FK/ogk
Regraded Unclassified
212SEPS
HEADQ ARTERS
THE INFANTRY SCHOOL
FORT BENNING GEORGIA
August 31, 1942
Mr. Henry Morganthau, Jr.
Secretary of the Treasury
Treasury Building
Washington, D. C.
Dear Mr. Secretary:
Here is a set of pictures taken while you were
here at Fort Benning. I have thought you might like
a set for your own use. If there are any of which
you would like additional copies won't you let us
know?
INF. FOLLOWING SCH. Levenb Sincerely, LEVEN Brigadier C. ALLEN General allen
Commandant, Infantry School
RECORDED
2.0
September 8, 1942 213
TREASURY DEPARTMENT - TELETYPEWRITER SERVICE
BUREAU OF CUSTOMS
Customs Agency Service
Baltimore, Md
BA 64
Houston, Texas
Ho 33
Los Angeles, Calif
LA 439
New Orleans, La
NO 498
New York, N. Y
NY 1-1540
Norfolk, Ta
NF 79
Portland, Ore
PD 297
San Francisco, Calif
SF 284
San Pedro, Calif
SPD 7477
St. Paul, Minn
STP 299
Seattle, Wash
SE 146
Washington, D. C
WA 381
Customs Patrol
Bottineau, N. D
BOTTINEAU, N D 16
Il Paso, Texas
I P 18
Havre, Mont
HAVRE MONT 15
Laredo, Texas
LAREDO TEX 66
Nogales, Ariz
NOGALES ARIZ 45
San Ysidro, Calif
SAN YSIDRO CAL 372
Collectors of Customs
Boston, Mass
BS 132
Galveston, Texas
GALV 51
Los Angeles, Calif
LA 538
Miami, Fla. (Deputy)
MM 87
New Orleans, La
NO 378
New York, N. Y
NY 1-2482
Philadelphia, Pa
PH 732
Portland, Maine
PO 367
Port Arthur, Texas
PORT ARTHUR TEX 183
San Pedro, Calif
S PD 7474
Savannah, Ga
SV 44
Tampa, Fla
TP 25
CHIEF CLERK, OFFICE OF
Washington, D. C
WA 168
*P. L. 950, between Treasury and Army Message
Center (2 stations)
Regraded Unclassified
214
FOREIGN FUNDS CONTROL
New York, N. Y
NY 1-1882
Washington, D. C
VA 162
*P.L. 1321, between Treasury and Washington
Building (2 stations)
BUREAU OF NARCOTICS
Chicago, Ill
CG 820
Houston, Tex
HO 38
New York, N. Y
NY 1-2398
Washington, D. C
WA 192
PROCUREMENT - LEND LEASE
Allentown, Pa
AN 14
Atlanta, Ga
AT 97
Boston, Mass
BS 220
Chicago, Ill
CG-1484
Cleveland, o
CV 324
Detroit, Mich
DE 997
Louisville, Ky
LS 579
New Orleans, La
NO 160
New York, N. Y
NY 1-1885
New York, N. Y
NY 1-1460
Philadelphia, Pa
PH 739
Pittsburgh, Pa
PG 98
San Francisco, Cal
SF 236
Seattle, Wash
SE 103
Washington, D. C
WA 30
Washington, D. C
WA 31
Washington, D. C
WA 32
Washington, D. C
WA 33
Washington, D. C
WA 137
*P.L. 2484, between Procurement Division
Building and War Department (2 stations)
SECRET SERVICE
Atlanta, Ga
AT 164
Boston, Mass
BS 378
Chicago, Ill
CG 803
Cleveland, o
CV 582
Dallas, Tex
DL 583
Detroit, Mich
DE 430
Kansas City, Mo
KC 88
Los Angeles, Cal
LA 321
New York, N. Y
NY 1-2139
Philadelphia, Pa
PH 202
San Francisco, Cal
SF 434
Seattle, Wash
SE 271
Washington, D. C
WA 194
Washington, D. 0
WA 195
215
SECRETARY, OFFICE OF THE
Chief Coordinator, Treasury Law Enforcement Agencies
Washington, D. C
WA 542
TREASURER, OFFICE OF THE
*P.L. 2572, between Treasury and Liberty
Loan Building (2 stations)
WAR SAVINGS STAFF
Boston, Mass
BS 576
Chicago, Ill
CG 198
Cleveland, 0
CV 28
Detroit, Mich
DE 792
Jefferson City, Mo
JFSCY 370
Los Angeles, Cal
LA 484
New York, N. Y
NY 1-2269
Newark, N. J
NK 482
Philadelphia, Pa
PH 120
San Francisco, Cal
SF 595
Washington, D. C
WA 229
Washington, D. C
WA 230
Washington, D. C
WA 211
Total number of Teletypewriter Machines
92
Private Line teletypewriters are direct from one station to another. All
other teletypewriters listed herein are TWX lines which go through an
operator at the Chesapeake and Potomac Telephone Company.
216
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE September 8, 1942
TO
Secretary Korgenthau
FROM
Mr. Hase
Subject:
The Business Situation,
Week ending September 5, 1942
Summary
(1) National income payments in July rose to a new peak
at an annual rate of $113.7 billions as compared with
$112.1 billions in the previous month and only $75.8 billions
in July 1940 when the defense program was in its initial
stages. Income payments continued to rise more rapidly than
living costs in July, and as a result the estimated purchasing
power of national income payments also reached a new peak.
(2) Further gains in salaries and wages in July were ac-
companied by a rise in seasonally-adjusted retail sales for
the first time since last January. Salaries and wages in July
were 26 percent above year-earlier levels while retail sales
were 3 percent lower, due in part to heavy declines in sales
of automotive dealers, filling stations and other lines suf-
fering from wartime restrictions and shortages.
(3) Department store sales during the last week in
August rose to the highest point since early last June. However,
sales were still 14 percent below the corresponding week last
year, when sales were benefitting from heavy advance buying
and the earlier Labor Day holiday. The FRB adjusted index of
department store sales in August advanced to 128 as compared
with 121 in July and 104 in June.
(4) The BLS price index of 28 basic commodities last week
moved up moderately to the highest point since mid-July, due
largely to advances in a number of uncontrolled commodities,
particularly wheat, barley and rosin. A restraining influence
was provided by a decline in livestock prices, due in part to
an expansion in market receipts of hogs.
(5) Employment in nonagricultural establishments rose to
previous month and nearly 6,500,000 above the levels of July 1940.
& new peak of 37,100,000 in July. This was 435,000 above the
With employment still rising, and the armed services making heavy
are increasing. At the same time a few centers, particularly
inroads on manpower, threats to production due to labor shortages
New York City, have a substantial number of unemployed workers.
Regraded Unclassified
217
- 2 -
National income payments at new high
National income payments in July (seasonally-adjusted)
reached a new high annual rate of $113.7 billions, as compared
with $112.1 billions in the previous month. (See Chart 1.)
In sharp contrast with this new record figure, the annual rate
in July 1940, when the defense program was in its initial
stages, was only $75.8 billions.
Actual payments in July were slightly below the previous
month, due to a decrease in interest and dividends. The
decrease, however, was less than customary, resulting in the
above-mentioned rise in the adjusted annual rate. Further
expansion of salary and wage payments occurred in manufacturing,
construction, and government service, 8.8 war expenditures
continued to mount.
Income payments continued to rise more rapidly than
living costs in July, and as a consequence the purchasing
power of national income payments moved up to a new peak.
Reference to Chart 1 will disclose that after flattening out
in the early part of the year, the purchasing power of national
income payments moved noticeably higher in June and July.
This has doubtless been an important factor in the recent up-
turn in retail sales.
Retail trade improved
Seasonally-adjusted retail sales turned upward in July
for the first time since last January, as salaries and wages,
the dominant factor in national income payments, reached new
peak levels. (See Chart 2.) Normally retail sales show a
noticeable seasonal drop from June to July, but this year the
decrease was limited to only 1 percent. In consequence, the
Department of Commerce seasonally-adjusted index of retail
sales rose 6 percent during the latter month. On an adjusted
basis, all store groups showed gains over June, with apparel
stores making the widest advance and automotive stores the
smallest.
Despite this improvement, total retail sales in July were
still 3 percent below year-earlier levels, largely due to the
sharp drop in sales of automotive stores. Filling stations,
household furnishings stores, and dealers in hardware and
building materials also reported declines. Sales of these
four groups of stores, all suffering to a greater or less
degree from restriction programs and goods shortages, were
37 percent below July 1941 levels. The remaining store groups,
relatively unaffected by shortages, showed an aggregate sales
gain of 18 percent over July 1941.
Regraded Unclassified
218
- 3 -
However, even this more favorable sales showing fell
behind the corresponding gain in salaries and wages, which
amounted to 26 percent. Thus, it will be seen that the
relative lag in retail sales in the last year cannot be fully
ascribed to goods shortages.
Sales estimates for year 1942 compared with 1941
Table I shows recent Department of Commerce estimates of
retail sales by types of stores for the year 1941, and projected
estimates for 1942, with individual percentage changes. It will
be noted that sales by drinking places heads the list, with an
increase of 22 percent, with sales by jewelry stores and various
types of food stores not far behind. At the bottom of the list,
of course, are sales by retailers in the automobile and other
durable goods industries.
Commenting on the current retail sales outlook, the
Department of Commerce says:
"At the present time, consumers are saving at an unprec-
edented rate. But many if not most of them are still comfortably
situated with respect to supplies of the goods that would
cause the greatest wrench to dispense with. Their own stocks
are undoubtedly large and BO are those of retailers. This
situation will before long become much less favorable as the
output of many consumer. goods shrinks and as stocks of their
own and those in retailers' hands are steadily exhausted. When
the time comes for consumers to get along without items of food
or clothing or other articles that have been woven into daily
long-standing habits of consumption, then will come the real
test. Consumers will at that time either forego established
consumption patterns and increase the proportion of their
incomes to be saved, or they will sacrifice savings and spend
freely in a vain attempt to maintain their consumption habits
in spite of the disruption of war. In this event, the pressure
on price ceilings will be great."
August department store sales rose more than seasonally
Department store sales have been rising steadily during
the past month and the gain over July levels has been more than
seasonal. As a result, the FRB adjusted index of department
store sales moved up to 128 in August from 121 in July and
104 in June. In the week ended August 29, department store
sales were at the highest level since early last June. However,
even this strong showing was 14 percent below the corresponding
period last year, when sales were benefitting from heavy advance
buying and the earlier Labor Day holiday. (See Chart 3.)
Regraded Unclassified
219
- 4 -
Reduction in consumer debt
One of the several factors tending to restrain retail
sales in recent months despite the rising tide of national
income has been the application of funds to the liquidation
of consumer debt. Thus a recent confidential report of the
Federal Reserve Board estimated that consumer debt showed an
average decline of about $400 millions per month in May, June
and July. Debt repayment in those months was accelerated by
the heavy reduction in charge accounts brought about by
Amendment 4 to Regulation W. During the same period, however,
installment cash loans were declining by more than $50 millions
per month as compared with declines of about $35 millions in
April and $25 millions in March. Retail installment paper for
the past few months has been declining at a monthly rate of
about 10 percent of the volume of paper outstanding.
Due to the heavy reduction in consumer debt already
effected and the dwindling of installment sales, it 18 expected
by the Board that the decline in consumer debt during the
remainder of the year will probably run about $200 to $250 millions
per month as compared with the previously-cited average of
400 millions in recent months.
Uncontrolled basic commodity prices near peak
Basic commodity prices not subject to control continued
to rise last week, carrying the BLS index of 9 uncontrolled
commodities nearly to its May high. The rise was responsible
for an advance in the index of 28 basic commodities. (See Chart 4.)
Among the commodities not subject to control, wheat
prices advanced to their highest levels since early May. The
advance was attributed to mill buying on the strength of improved
flour demand and a forecast by the Commodity Credit Corporation
that 400 million bushels (about 40 percent) of this year's
crop would go into the loan.
Barley prices were up 7 cents during the week. Corn prices
were up moderately, but flaxseed receded somewhat. Butter
prices again touched their highest levels of the season. Cotton
prices were dampened by private crop estimates substantially
above the Government's forecast as of August 1. Prices for
rosin increased 5.7 percent as the trade has been forced to
purchase gum rosin (not under a price ceiling) because of re-
duced stocks of wood rosin.
Livestock declined noticeably. Hog prices receded
under of prices expansion of market receipts indicative of
en early pressure beginning an of the autumn hog movement, presumably
Regraded Unclassified
220
- 5 -
stimulated by prospects of livestock ceilings and of lower
prices later when the record supplies are marketed. In
addition, hog receipts showed the heaviest average weights
on record, & development contrary to expectations.
General commodity prices hold level trend
The BLS all-commodity index in the week ended August 29
W&S unchanged for the third successive week at its maximum
since 1926. At 98.9 it stands 31.9 percent above the pre-
war level of August 1939. The levelling out of the general
price level since last March 1s in sharp contrast to the
steep rise in the corresponding months of the first World War.
(See Chart 5, upper section.) In comparison with the above-
mentioned gain of 31.9 percent since August 1939, the general
price index in the comparable period of the first World War
rose more than 80 percent.
The index of food prices (lower section of Chart 5) also
has flattened out since last March, but in August made a
noticeable upturn.
Cotton crop estimate sharply increased
The cotton crop prospect improved nearly 1,000,000 bales
during August, according to the September 1 estimate released
this morning by the Department of Agriculture. The crop 1s
now placed at 14,028,000 bales as compared with an estimate of
13,085,000 bales last month. The estimated average yield of
289.3 pounds per acre establishes a new high record.
Meat rationing proposed; packers sued
for ceiling evasion
As the meat shortage became increasingly widespread last
week, direct consumer rationing by the beginning of 1943 W&B
recommended to the WPB by its Food Requirements Committee.
The announcement of the recommendation forecast & rationing
allowance of 2% pounds of meat a week. This allowance of
130 pounds on an annual basis compares with actual consumption
of 142 pounds per capita in 1941, and an average consumption of
131 pounds in the 1931-1940 period. The allowance of 2% pounds
D. week was contrasted by the Committee with the British allowance
of slightly more than one pound; the German allowance of 12% ounces;
the Dutch, 9 ounces; the Belgian, 5 ounces; and the Italian,
32 to 43 ounces a week.
operation through a WPB conservation order allocating packers'
In about two weeks, indirect rationing will come into
supplies to civilians through regional sales quotas. Civilians
are to be asked in the meantime to conserve beef, veal, pork,
lamb, and mutton by use of various food substitutes. Restaurants
Regraded Unclassified
221
- 6 -
in New York and Washington, for example, already are
cooperating by adopting meat-saving measures.
More than 100 packers, including the "b1g four", were
included in injunction actions begun and in temporary re-
straining orders sought by the OPA on September 3 for eva-
sion of price ceilings on beef and veal. The cases involved
upgrading, "plain overcharging", and issuance of incorrect
invoices or failure to issue invoices 8.8 provided by OPA
regulations. Practically the entire wholesale meat industry
will be licensed by an OPA order making the license a require-
ment for selling any meat or meat product subject to price
regulations.
Ceilings on a specified dollars-and-cents basis for
dressed pork will be established by zones within ten days
according to the OPA. This system will be substituted for
ceilings supposed to represent individual sellers' list
prices, which the OPA reports "represented hopes rather than
actual prices during the base period". This action is similar
to that taken by the Canadian Wartime Prices and Trade Board
for wholesale prices of beef, after price and supply difficulties
had occurred under general price control.
Nonagricultural employment at new high
With the armed services slated to make further heavy
inroads on the country's manpower, the threat of labor
shortages in key industries 1s already becoming of increasing
concern. As a result of a substantial contraseasonal increase
in factory employment during July, and gains in all other
major groups except trade, employment in nonagricultural
establishments in July rose to the highest level on record.
The total of 37,100,000 reported by the Department of Labor was
435,000 above the previous month, and nearly 6,500,000 above
the level of July 1940.
In the face of the increasing demand for workers, some
key war industries have been losing men to the armed services
at a rapid rate. Thus, following recent announcements of
broadened draft requirements, 5 major airplane plants in
southern California are reported to have lost men to the armed
forces at a rate of 7,000 per month. The present labor
problem is further complicated by the fact that the labor
su ply 16 unevenly distributed. While some areas are
experiencing acute labor shortages, the Wall Street Journal
reports that New York City has 400,000 unemployed. About half
of this number are said to constitute normal unemployment
arising from seasonal and other factors.
222
- 7 -
Scrap shortage again to the fore
Despite all that has been said about the steel scrap
shortage, further evidence of grave concern over the outlook
has developed in steel trade circles. During the past week
the chairman of the American Industries Salvage Committee
asserted that there was only 2 weeks' supply of steel scrap
in the hands of steel mills. In recognition of the gravity
of the situation, leading Government officials have appealed
to newspaper publishers to spur the public to a reinvigorated
scrap salvage campaign.
Due in part to the lack of scrap the steel industry was
able to operate at only 94.5 percent of capacity in July.
Some improvement, however, has occurred in operations during
the past month. (See Chart 6.) During the current week,
affected somewhat by the holiday, the rate is scheduled to
decline 1.2 points to 96.4 percent of capacity,
While the immediate steel scrap situation 1s causing
concern, the outlook for the coming winter months, when
collections will be hampered by weather conditions, is even
more menacing. During the last World War, steel ingot
production dropped severely in January and February 1918, with
output in the former month falling 33 percent below the
previous fall peak. The principal difficulty on that occasion,
however, appears to have been a transportation tie-up, a
repetition of which does not seem likely in view of the
showing made thus far by the railroads.
Regraded Unclassified
NATIONAL INCOME AND ITS EQUIVALENT PURCHASING POWER
1939
1940
1941
-1942
DOLLARS
DOLLARS
Billions
Billions
Monthly
115
115
110
110
105
105
100
National Income
100
95
95
90
90
85
85
Purchasing Power of
National Income ¹ *
80
80
75
75
70
70
A $ o N D J F M A M J J A S o N D J F M A M J J A S o N D J F M A M J J A SOND
1939
1940
1941
1942
223
Chart 1
* Based on cost of living index of B.L.S. Aug. 1939:100
Office of the Secretary of the Treasury
Division of Research and Statisties
C-415-A
Regraded Unclas
RETAIL SALES COMPARED TH SALARIES AND WAGES
Adjusted for Seasonal
1938
1939
1940
1941
1942
1943
DOLLARS
PER
Billions
CENT
6.0
168
5.6
156
5.2
144
Solaries and Wages
1935-39-100, Dept. of Comm.
4.8
132
4.4
120
4.0
108
Retail Sales
(Billions of Dollars)
Actual +
3.6
96
Projection¹
3.2
84
2.8
1938
1939
1940
72
1941
1942
1943
. Department of Commerce refer relaif salse adjusted for
224
+ Besed or average relationship to soluries and - 1935 through 1940.
Chart 2
Office of the Secretary of the Treasury
Dividen of Research and Statestics
C-421
Regraded Unclas
225
Table 1
Sales of retail stores, by kinds of business
(Billions of dollars)
Percent-
Kind of business
1941 1942 est.
age
change
Drinking places
1.8
2.2
+22
Jewelry
.5
.6
+20
Eating places
2.5
3.0
+20
Unclassified food stores
3.0
3.5
+17
Grocery and combination
9.4
11.0
+17
Shoes
.8
.9
+13
General stores with food
.8
.9
+13
Dry goods and general merchandise
"O2"
.9
+13
Men's and boys' clothing
1.0
1.1
+10
Hay, grain, feed, and farmer's supplies
1.0
1.1
+10
Family clothing and women's wear
2.3
2.5
+ 9
Drugs
1.9
2.0
+5
Department
5.0
5.2
+ 4
Hardware
"o2
.8
0
Miscellaneous (including secondhand)
2.0
2.0
0
Furniture and housefurnishings
1.7
1.7
0
Variety
1.2
1.2
0
Fuel, ice, and fuel oil
1.2
1.1
-8 -
Lumber and building materials
2.0
1.8
-10
Auto accessories
.7
.6
-14
Filling stations
3.5
2.9
-17
Farm implements
.6
.5
-17
Heating, plumbing, paint, and electrical
.4
.3
-25
Household appliances and radios
.7
.5
-29
New and used car dealers
7.5
1.8
-76
All retail stores
53.9
51.2
- 5
Source: U. S. Department of Commerce.
Regraded Unclassified
Chart 3
226
DEPARTMENT STORE SALES
1935 - '39 - 100, UNADJUSTED
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
PER
PER
CENT
CENT
Weekly
260
260
240
240
220
220
200
200
180
180
160
160
140
140
120
120
17.
'42
100
100
80
80
'40
60
60
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
Office of the Secretary of the Treasury
I 1 1 1 I
C - 390
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 Commoditiest
155
155
150
150
145
145
140
140
SEPT.
NOV
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
1941
1942
PERCENTAGE CHANGE DEC. 6, 1941 TO AUG. 28 AND SEPT. 4. 1942
PERCENT
PERCENT
19 Controlled
9 Uncontrolled
+45
Commodities
+45
Commodities
Hoge -
+40
+40
+35
+35
Flatered 2175
+30
+30
+25
+25
-
Butter 218%
+20
Lord zeax
+20
Steers ALBX
+15
Shellee an
+15
Carn NEWS
Lead ILIX
Barry 110%
Print Cloth 7.8%
+10
Sugar 6.9%
+10
Rean 1951
Cottonesed a 40%
Cotton 7.31
Zine ...
+5
0,3 Change
+ 5
Mides. Sall.
Tin, Pubber,
Wheet in
o
Coffee. Copper,
o
St. Scrap.dom,
St Screp.exp
- 5
Cocoo #X
. 5
Regraded Unclassified
Tollow 4/3
Burlep-48x
Tape-4.7%
-10
.
10
Dec 6
Ang. 28
Sept. 4
Dec. 6
App. 20
Sept. 4
1941
1942
1942
1941
1942
1942
e 20 Controlled and . Uncontrolled provious to June 26
227
Office of the Secretary of the Treasury
P-244-9
- of - and -
Chart 4
PRICES, 1939 TO DATE COMPARED WITH 1914 TO 1918
July 1914-100 World Wor Period; Aug. 1939-100 Present Period
PERCENT
PERCENT
All Commodities
200
200
1918
180
180
1917
160
160
140
140
1916
Wast Ended
First Month
1942
Any. "
120
of War
120
1915
1940
1941
1939
100
1914
100
80
J
M
M
J
5
N
J
M
M
J
S
N
J
M
M
J
80
S
N
J
M
M
J
$
N
J
M
M
J
5
N
PERCENT
PERCENT
Foods
200
200
1918
180
180
1917
160
160
West Ended
Aug. 29
140
140
1942
1941
First Month
120
of War
120
1916
1939
1940
100
1915
100
1914
80
J
M
M
J
$
N
J
M
M
J
S
N
J
M
E
J
5
H
J
M
M
J
$
N
J
M
M
80
J
5
N
Seirce: B.L.S.
Office of the Secretary of the Trunsery
228
- of bank et Date
222-A
Regraded Unclassified
Chart 5
Chart 6
229
STEEL INGOT PRODUCTION
PER
CENT
Per Cent of Capacity
'41
100
42
90
40
80
70
Amer / and.,G.,Inst
60
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
Office of the Secretary of the Treasury
Division of Research and Stabistics
C-419
230
TREASURY department
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
September 8, 1942
MEMORANDUM TO THE SECRETARY:
There is submitted herewith the operating
report of Lend-Lease purchases for the week ended
September 5, 1942.
A review is being made of stocks in ware-
houses purchased for foreign governments under the
Lend-Lease program in order that consideration may
be given to making those materials available to
domestic needs or for Lend-Lease purposes which
call for prompt shipping.
Director of Procurement
geter Clifton' Mary
PORVICTORY
BUY
THITED
STATES
TONDS
$
LEND-LEASE
-TREASURY DEPARTMENT, PROCUREMENT DIVISION
231
STATEMENT OF ALLOCATIONS, OBLIGATIONS (PURCHASES) AND
DELIVERIES TO FOREIGN GOVERNMENTS AT U. S. PORTS
AS OF SEPTEMBER 5, 1942
(In Millions of Dollars)
Administrative Undistributed &
Total
U. K.
Russia
China
Expenses
Miscellaneous
Allocations
$2100.2
$1081.6
$550.1
$56.6
$3.7
$408.2
(2100.0)
(1074.7)
(517.6)
(56.4)
(3.7)
(447.6)
Purchase Authoriza-
tions (Requisitions)
$1502.8
$ 943.2
$503.8
$40.5
-
$15.3
(1488.5)
( 937.2)
(495.5)
(40.6)
-
( 15.2)
Requisitions Cleared
for Purchase
$1463.0
$ 927.9
$481.2
$40.4
-
$ 13.5
(1441.7)
( 918.3)
(469.2)
(40.5)
-
( 13.7)
Obligations (Pur-
chases)
$1347.6
$ 894.0
$402.1
$40.4
$2.1
$ 9.0
(1329.5)
( 885.9)
(391.9)
(40.4)
(2.0)
( 9.3)
*Deliveries to Foreign
Governments at U. S.
$ 560.6
$ 446.7
$ 91.1
$20.1
-
$ 2.7
Ports
( 554.7)
( 442.3)
( 89.6)
(20.1)
-
( 2.7)
# Deliveries to foreign governments at U. S. Ports do not include the tonnage that is either in
storage, "in-transit" storage, or in the port area for which actual receipts have not been
received from the foreign governments.
Note: Figures in parentheses are those shown on report of August 29, 1942.
graded Uncla
232
EXPLANATION OF DECREASES
The reduction of $100,000 in Purchase
Authorizations and in Requisitions Cleared
for Purchase, for China, was effected by an
adjustment of the estimated value of requi-
sitions for that country.
Regraded Unclassified
233
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 310
Information received up to 7 A.M., 8th September, 1942.
1. NAVAL
On the evening of the 7th a whale oil factory ship believed to be
S.S. SOLGLIMT, 12,250 tons (ex-Norwegian) was sighted off JERSEY. Motor torpedo
boats and motor gun boats were sent to attack but no reports have yet been received,
aircraft have also been sent out,
2. MILITARY
EGYPT. 6th. The enemy still seemed to be withdrawing in the
morning, by last night the bulk of his forces had retired to the positions held prior
to the battle. A triangular area 6 miles by 12 East of the mine fields is still in
his hands. Our light columns have been attacking this area from 3 sides and en-
countering considerable opposition.
RUSSIA. Continued Russian attacks in the Northern and Central
sectors have made no headway. The Germans have made little fresh progress in their
attack on STALINGRAD but are approaching ASTRAKHAN from the Southwest as well as from
the Northwest. The German bridgehead over the TEREK near MOZDOK has been extended
Southwards but German detachments trying to infiltrate through the Western Caucasian
Mountains are still being held. The German claim to have captured NOVOROSSISK though
not confirmed is probably true.
3. AIR OPERATIONS
WESTERN FRONT. 6th/7th. A total of 423 tons of bombs were dropped
at DUISBURG, the attack was somewhat scattered but large fires were reported in the
middle of the town and in the area of the docks. Intense A.A. and searchlight con-
centrations were met over the objective.
7th. 29 U.S. Fortresses were sent to attack the shipyards at
ROTTERDAM. Enemy fighter opposition was met and only 7 aircraft bombed the target.
12 enemy aircraft are claimed as destroyed, ten probably destroyed and 12 damaged.
Fighter escort and a diversionary sweep was provided by 14 squadrons of Spitfires
which probably destroyed 3 F.W. 190's. 2 Spitfires are missing, 1 pilot safe. Other
fighters probably destroyed one enemy bomber and damaged two. 5 single Mosquitos
bombed towns in GERMANY.
Regraded Unclassified
234
- 2 -
7th/8th. 43 aircraft were sent seamining. One Wellington is
missing, also one Boston from Intruder operations. 25 enemy aircraft crossed the
coasts of ESSEX and SUFFOLK and made a scattered attack, one was shot down and
another damaged.
EGYPT. 5th/6th. TOBRUK and HERAKLION aerodrome and harbour were
successfully attacked, 3 bombers are missing.
6th. Our fighters escorted bomber attacks on enemy M.T. and tanks
and intercepted enemy bombing attacks. 5 enemy aircraft were shot down, 2 probably
destroyed and 2 damaged. 12 of our fighters are missing, 5 pilots safe.
MEDITERRANEAN. 6th. 9 Beauforts and 11 Beaufighters attacked
a Southbound convoy of 4 vessels, escorted by 11 destroyers and 12 aircraft. One
ship was hit with torpedo and another probably hit. The convoy was raked with
cannon and machine gun fire. 2 enemy aircraft were shot down, another was
probably destroyed and 6 damaged, 4 of our aircraft are missing.
RUSSIA. 5th. The German Air Force estimated at approximately
1,000 aircraft, attacked Russian forces protecting STALINGRAD. In the MOSCOW
sector attacks were made on Russian aerodromes.
Regraded Unclassified
235
TREASURY department
INTER OFFICE COMMUNICATION
DATE Sept. 8, 1942
TO
Secretary Morgenthau
FROM
Mr. Hoflich
Subject: Japanese and United States Naval Vessels Sunk and
Damaged.
The attached tables show Japanese and
United States naval vessels sunk and damaged
since the beginning of the war on December 7,
1941, so far as these have been reported in
U.S. Naval communiques.
- 2 -
236
Table I.
Japanese Naval Vessels Sunk and Damaged
December 7,1941-September 5, 1942
as reported in United States Naval Communiques
Combatant Ships
: Aleutians
: Solomons
:
All Areas
=
:Probably:
=
:Probably: Dam-:
:Probably: Dam-
:Sunk: Sunk :Damaged:Sunk: Sunk :aged :Sunk: Sunk :aged
Attleships
--
--
--
--
--
1
--
--
5
preraft carriers
--
:
--
--
--
2
6
1
4
1#
--
5
--
--
2##
11
3
19**
Estroyers
6
1
2
1
1
3
24
8
la
Thmarines
--
--
--
--
--
--
6
--
Manders
--
--
--
--
--
--
--
1
3
whers
--
--
1
--
--
4
11
2
19
Total
7
1
8
1
1
12**
58
15
63**
Non-combatant Ships
Street tankers
--
--
--
--
--
--
10
--
2
Transports
1
--
4
1
--
--
25
5
12
and supply
1
--
2
--
--
--
41
3
8
1
--
--
1
--
--
8
2
4
Total
3
--
6
2
--
--
84
10
26
TOTAL-ALL TYPES
10
1
14
3
1
12**
142
25
89**
Possibly destroyer.
One possibly a destroyer; also several additional cruisers damaged.
Regraded Unclassified
237
- 3 -
Table II.
United States Naval Vessels Sunk and Damaged
December 7, 1941 - September 5, 1942
as reported in United States Naval Communiques.
Probably
Sunk
Sunk
Damaged
Battleships
1
--
1
Aircraft carriers
1
--
1
Cruisers
1
:
2
Destroyers
10
1
6
Submarines
2
1
--
Tenders
--
1
1
Fleet tankers
3
--
--
Transports
1
--
1
Miscellaneous
12
6
--
Total reported
31
9
12
Regraded Unclassified
237
- 3 -
Table II.
United States Naval Vessels Sunk and Damaged
December 7, 1941 - September 5, 1942
as reported in United States Naval Communiques.
Probably
Sunk
Sunk
Damaged
Battleships
1
--
1
Aircraft carriers
1
--
1
Cruisers
1
--
2
Destroyers
10
1
6
Submarines
2
1
--
Tenders
--
1
1
Fleet tankers
3
--
--
Transports
1
--
1
Miscellaneous
12
6
--
Total reported
31
9
12
Regraded Unclassified
237-A
September 9, 1942
10:38 a.m.
Gen. George
Marshall:
Good morning, Mr. Secretary.
HMJr:
How are you, General?
M:
Fine, thank you.
HMJr:
General, I'll only take a minute of your time.
I went to see the President today, and I said
in view of the mix-up on our tax bill, and also
that his message takes action from Banking and
Currency, I'd feel happy if I'd stay here now.
M:
Yes.
HMJr:
And he agreed.
M:
Well, then you want me to cancel that reservation?
HMJr:
Yeah, and I was going to postpone it for a month.
M:
All right. Well, I ....
HMJr:
And may I just take a minute to say that - that
all of your people have been most considerate.
I've never seen such care and thought as they've
put into this thing.
M:
Well, thank you for coming.
HMJr:
And - as I say, it was my own - members of my
family they couldn't look after me or people
around me here in the Treasury who usually look
after me, they couldn't have been kinder.
M:
Well, thank you very much for telling me that. I -
I'm ....
HMJr:
And - I mean, and 80 I'd like to postpone it for a
month.
M:
All right.
HMJr:
Thank you.
237-B
September 9, 1942
The following cable will be sent to Ambassador
Winant today by the State Department:
"Party referred to in Mr. Welles' letter
is postponing his trip for a month."
M
Regraded Unclassified
238
September 9, 1942
11:21 a.m.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Hello.
Cong. Willis
Robertson:
Mr. Secretary.
HMJr:
In person.
R:
This is Willis Robertson.
HMJr:
How are you?
R:
Your letter to the Wayne Manufacturing Company
pleased them very much.
HMJr:
Good.
R:
I read it to the - the - they had about four
thousand present...
HMJr:
Yeah.
R:
....
and I read it, and then we had a radio
hook-up and everybody through the Valley heard
it.
HMJr:
Wonderful.
R:
And, my wife was at home and she heard the broadcast
and she said she thought that was the best part of
my speech. That I put more emphasis on that than
anything I had in it, and
....
HMJr:
Well
R:
....
it really pleased them.
HMJr:
Well, if your wife said so, I believe you.
R:
(Laughs) As a matter of fact, they have sub-
scribed twelve and a half per cent ....
HMJr:
Yeah.
R:
of the current payroll.
239
- 2 -
HMJr:
Is that right?
R:
Yes, sir.
HMJr:
Well, Virginians have always been a - my second
favorite state.
R:
(Laughs) Well, I remember you came down to
Lexington, you know
....
HMJr:
Yeah.
R:
.... in 1931, and then we met again when Governor
Roosevelt spoke at the McIntyre Amphi - Open
Theatre over there at Charlottesville, you know?
HMJr:
Sho. We conservation commissioners have to stick
together.
R:
Absolutely.
HMJr:
Is that right?
R:
Yes, sir. Now, on this income tax, my personal
preference - I don't think that five per cent's
too heavy, but I'd rather it would be a part of
the income tax, rather than what they call the -
super five per cent gross income, and give some -
I wouldn't give a nickel of that back.
HMJr:
Well, that again is my second choice - is to have
an income tax, but that isn't going to discourage
people from spending.
R:
No, no, I know we - we've got to reach everybody
in this effort.
HMJr:
Yeah, but you got - you got to make it an induce-
ment to save and a penalty to spend.
R:
Yeah.
HMJr:
And just increasing the income tax ien't going to
do it, in my humble opinion.
R:
No, I don't think 80 either.
HMJr:
See?
R:
Now, we're putting the pressure on the bonds, and ....
Regraded Unclassified
240
- 3 -
HMJr:
Yeah. Well, that all helps, and that's ....
R:
I'm going to send you a copy of the Waynesboro
paper that carried the Governor's address, and
HMJr:
Good.
R:
.... my remarks over there.
HMJr:
But we've still got that twenty-billion dollar
gap, you know, kinda rattling around in its bones.
R:
I - I've - I've been saying that its thirty
billion.
HMJr:
Well, I ....
R:
Roy Blough testified, I think, before the Senate
Committee, I thought in one paper ....
HMJr:
Yeah.
R:
.... that by next spring ....
HMJr:
Yeah.
R:
....
it would be at the rate of thirty billion.
HMJr:
Well, I'll split the difference with you.
R:
(Laughs)
HMJr:
But it's still there, it's got ....
R:
No, I'm up against a little problem to meet my
engagement to speak with Greer Garson in Winchester
tonight.
HMJr:
Yeah.
R:
We've got this soldiers' vote business.
HMJr:
Yeah.
R:
I - - I can't possibly hope to get away by one
o'clock, that's when the bus is supposed to leave
that will get me there in time.
HMJr:
Well ....
R:
The other bus doesn't get to Winchester until 7:35,
Regraded Unclassified
241
- 4 -
and is frequently late.
HMJr:
Yeah.
R:
The dinner starts at 7:30, and they're going to
have one or two five-minute speeches at the dinner.
At 8:30 they expect to have fifteen hundred or two
school. thousand people in the big auditorium of the Hanley
HMJr:
Yeah.
R:
I was wondering if you had somebody who could speak
about five minutes at the dinner and take me to
Winchester so that we both can get there on time,
and then he could come back to Washington tonight -
it's only seventy miles. I haven't got a car here.
The only way I can get there, they said they - nobody
there could come down for me and if my bus is late,
1 just couldn't make the appointment.
HMJr:
Well, now let me just - what is - what is your
problem, Congressman?
R:
My problem is to get from here to Winchester in
time for a 7:30 dinner with Greer Garson, and
....
HMJr:
Yeah. What time
....
R:
....
a five hundred thousand dollar bond program.
HMJr:
What time would you want - would you be ready to
leave?
R:
I would be ready to leave at 4:30 or 5:00.
HMJr:
Yeah.
R:
In a private car we could leave at five o'clock
and get there. See we wouldn't have to make any
stops. I would prefer to leave at 4:30.
HMJr:
Yeah.
R:
And I'd like for whoever goes with me to personally
represent you and say that he came from you ....
HMJr:
Yeah.
R:
to thank them for what they've already done
and tell them that the most that they can de isn't
Regraded Unclassified
242
- 5 -
too much.
HMJr:
Well, now just - will you hold the wire one
minute? (Talks aside)
R:
Yes, sir.
HMJr:
Well, Congressman, I'll look around and if there's
anyway of our doing it, we'll call you back within
the next half hour.
R:
All right, sir.
HMJr:
But, since all these regulations have gone in,
we've never done anything like that. I'd love to
do it for you, but I'll - I'll look around and
see.
R:
Well, it - you see the - to - to keep within your
regulations, I'd want the man to go - - to go to
make a speech for you....
HMJr:
I see.
R:
.... at the banquet.
HMJr:
I see.
R:
Now, they want me to speak at the banquet and speak
again at the Rally.
HMJr:
oh, yes.
R:
That's too much, and it would be more effective
if they can have a message, and that gete in the
paper too, don't you see?
HMJr:
I see.
R:
And, when you call me, I can catch the three
o'clock edition of the Winchester paper and have
this man's name in there - that you have taken
notice of this meeting and are sending a speaker
to this banquet.
HMJr:
I see. Well ....
R:
And incidentally, you get me there.
HMJr:
I - - I .... If - if there's any way that we can
243
- 6 -
work it out, we'll let you know between now and
twelve o'clock.
R:
Thank you, very much, sir.
HMJr:
I'll try my best.
R:
All right, sir. Appreciate it. Good-bye.
Z43A A
September 9, 1942
Present: Mr. Bell
Mr. White
HM Jr: Sir Frederick Phillips called on me to talk
about the currency which British and U.S. Armies are going to
use. He wanted to know what kind we were going to use. I
told him. Then he said, "I had a call from General Carter,
and the question is coming up of what kind of an exchange
rate there should be." So I told Sir Frederick quite frankly
of our meeting here last Friday just for his guidance and
cautioned him to keep it confidential. It told him that if
the Army wanted me to do anything further about it they would
have to ask me. So he said, "Well, supposing we go into
France - what is the exchange rate going to be?" Then he
went on to say, "The Free French may say we pay-too much or
we pay too little, and the whole question of post-war is
involved in this. I told him, "Well, the Army is going to
run this and you will have to ask them." I told him that
I would appreciate his keeping me informed and he said he
would. I asked him how it was going to be in England and
he said, "Well, the Army doesn't want to run it there."
Bell: General Carter came to see me this afternoon
on the same subject, and he said, first, they would have to
have more than the $20,000,000 in currency, and that General
Eisenhower had telegraphed for $12,000,000 more to be shipped
at once for his use, and the British wanted 8. million of our
currency. I asked him if the million was to be on Lend-Lease
and he said, "No, it probably will be a credit."
Then he told me that he had the whole problem of
occupation in his lap, and he wanted the Treasury's help on
it. I told the General of the Secretary's conference last
Friday which Under Secretary Patterson attended, and at which
time the Secretary told Patterson that he would take no further
initiative in this matter unless asked to do 80 by Patterson.
243B
- 2 -
After some further discussion of the whole problem we agreed
that General Carter should go back and talk to Patterson about
the matter, and if he wanted the Treasury in on it that he should
call the Secretary.
Carter said that the Board of Economic Warfare had
been pushing this matter for the past few days, and he had
scheduled & conference with them tomorrow. He said that he
would advise me as to that conference and also on his talk
with Patterson.
Carter also said that Phillips had called him and
asked him to come to see him on this matter, and he said he had
seen Phillips yesterday and discussed the matter. However,
there apparently wasn't much discussion of the problem between
him and Phillips except in a very general way.
HM Jr: He did see Phillips? Phillips let me under-
stand that he hadn't seen Carter yet.
Bell: Yes, he saw him yesterday. He had already
seen him when I talked to Carter today.
HM Jr: Did General Carter give Mr. Bell any idea
as to what country they were going to use this currency in?
Bell: No, he said that this might be used in France
and it might be used in places like Northern Africa. He did
say that the problem was urgent and that the time limit, in his
opinion, was less than two weeks. Carter told me that General
Eisenhower has been pressing them for an answer. It's apparent
that they're not together in the War Department.
White: They don't ever get together.
Bell: Carter didn't know about the conference which
you (HM Jr) had here last Friday. He did know about the confer-
ence which was held in Hull's office. He said, "I am afraid
that Patterson feels that this initial step of printing this
currency solves the problem for the moment, but, in our opinion,
it is just the beginning." He also knows about the school down
Regraded Unclassified
243C
- 3 -
at Charlottesville, and he has talked to the officers in charge
down there. He is quite satisfied that they are not in any
way qualified to pass on the details of this whole problem.
He says that it has to be worked out here in Washington amongst
the departments concerned in broad general principles.
HM Jr: I really don't see where Milo Perkins has a
thing to do with it.
White: I can tell you how they got into it. Somebody
over there got the idea that it would be an excellent thing for
the Board if they got. in on this school and sent lecturers, etc.,
down there, and they also interpreted it as economic warfare.
Somebody got busy and got in touch with the authorities there,
and I think convinced them it would be excellent for the Board
to collaborate with them and prepare papers, etc., on operations
in the field of occupation, and since then they have been pretty
close.
I think what Dan says seems to check a little more
closely with the word I got from Bewley which I passed on to you.
In this letter, Bewley said that the matter was urgent. - I mean
that the British thought the matter was urgent.
Bell: Carter thinks the British ought to be brought
in on it pretty soon. I think what he would like is for the
Treasury to take the initiative, and call a conference on it.
HM Jr: Did the girl give you Friday's meeting?
Bell: Yes, I read the minutes of that meeting on
Friday.
HM Jr: Well, that didn't leave any doubts in your
mind as to where I stood, did it?
Bell: No, and Carter agreed that he should go to see
Patterson, and then if Patterson wants you to go ahead he will
call you.
HM Jr: Well, let it go.
There are two things I don't understand. One is how
Mr. Stimson can take off the whole month of September after
Regraded Unclassified
243D
- 4 -
having had two weeks off in August, and the other is how Eccles
can be away for two months.
White: Also how Patterson thinks it isn't urgent and
his own General Staff thinks it is.
HM Jr: Well, Patterson says that you can lock it up
for a couple of months.
Bell: I think $12,000,000 will be leaving the shores
within 12 hours in planes.
White: There's another thing. We brought up at the
meeting the question of coins. That is very important.
Bell: They raised that, too. We are providing some
coins along with this shipment.
HM Jr: How much?
Bell: I don't know exactly - something like two or three
million, but I would have to check that.
#######
Regraded Unclassified
244
September 9, 1942
MEMORANDUM FOR THE SECRETARY
From:
Mr. Blough
Subject: Luncheon conference on the Tax Bill and
1942. compulsory savings, Wednesday, September 9,
Secretary Morgenthau held a luncheon conference
Wednesday, September 9, from 1:00 to 2:20 p.m. Present,
in addition to the Secretary, were Senators George,
Barkley and Brown, Chairman Doughton, and Messrs. Gaston,
Paul and Blough.
Senator Barkley arrived a little late and the
previous discussion was summarized for him.
Secretary Morgenthau said that there were some
things he wanted to talk over with them that he would
not say to the full Committee. He said he could see his
way clear to financing the war through 1942 but that he
was worried about 1943. He said he had talked with the
President this morning and had told the President that
he thought his message to Congress was a good message
and dealt with the problem of the increasing gap between
consumer purchasing power and available goods, but that
he had not dealt with the gap which would remain despite
such action. He said he told the President that there
was nothing in the message which helped the Treasury with
the Tax Bill, He said the President had told him he was
right, that he had not met the problem of the existing
gap, and that he felt the Treasury's plan was too new
and unknown to the people. The Secretary then explained
how the proposed spendings tax would operate, not only
to withdraw purchasing power but to serve as an induce-
ment to reduced spending.
The Secretary said that his decision to ask for &
plan calling for the return of the tax after the war was
made only after a very great deal of thought and con-
sultation. He said he felt the voluntary plan was a
Regraded Unclassified
245
- 2 -
democratic way and that he had hoped that it would be
sufficient, but that the revenue had not come in with
sufficient rapidity to meet the growing needs.
The Secretary said that the Senate Finance Committee
had turned down the Treasury's plan, that theTreasury
had received no votes for its plan, and that accordingly
he wanted to talk about what should be done next.
Senator George indicated that the fact that there
had been no votes for the Treasury plan did not mean
that none of the senators favored that plan. Only twelve
senators voted for the motion to turn down the plan in
principle. He said that he felt the plan needed very
careful thought because it would largely destroy the
luxury spending of people in the United States and that
would have very serious repercussions on the economy.
Secretary Morgenthau indicated that he understood that
such would be the result but he thought that just as in
England, Bo here, the people engaged in producing these
luxuries should be in war work. Senator George agreed
but said he thought it would be better for them to be
taken for war work by the Government than to have their
business destroyed through some over-all plan such as
the Treasury had recommended.
As to the compulsory saving, Senator George indi-
cated that he favored it and that he thought something
might be put in this bill. He asked Chairman Doughton
whether, if the Senate did put the plan in the bill, the
House conferees would view it favorably.
Chairman Doughton, while indicating that the House
conferees would of course view seriously anything sent
over by the Senate Finance Committee and the Senate,
expressed the view that on a matter of this importance
the Ways and Means Committee would, following its usual
practice, feel that public hearings should be held.
Senator Barkley discussed the fact that the public had
discussed before both the Ways and Means and the Senate
Committees the problem of compulsory savings and indi-
cated that perhaps the House would consider this suffi-
cient hearing. Chairman Doughton made no commitment on
this point but still seemed to retain the idea that 8.
matter of this importance should be subject to public
hearings.
Regraded Unclassified
246
- 3 -
Chairman Doughton also indicated that he did not
believe in levying taxes and then paying them back,
that this increased the financing problem of the
Treasury after the war. Senator George, Senator Barkley
and Mr. Gaston, and also to a lesser extent, Senator
Brown and Mr. Paul, indicated that the compulsory saving
would be in lieu of other loans. The Secretary indicated
that he felt that there would have to be compulsory
saving, that voluntary lending would not be sufficient.
Senator Barkley indicated that much of the borrowing of
the Treasury would probably have to be of a semi-forced
character in the case of banks and other financial
institutions and that the compulsory savings for indi-
viduals would, in his opinion, be no more forced and no
more undesirable than such borrowing from banks and
financial institutions.
Chairman Doughton said that he did not understand
about the inflationary gap and its effect on prices
since the price control law was supposed to take care
of the price problem. Mr. Paul, Mr. Gaston and others
explained how the pressure of purchasing power threatened
to blow up the price ceilings if it were not reduced by
some method of preventing people from spending their
money.
The Secretary asked whether it would not be possible
to have a small joint Committee set up to consider the
inflationary gap problem along with compulsory savings.
Senator George stated that the Senate Finance Committee
had this morning passed a motion calling for the setting
up of a joint Senate and House Committee, with the
Secretary of the Treasury as a member. This Committee
would have the responsibility of studying compulsory
savings plans and reporting January 11, 1943. Secretary
Morgenthau expressed his pleasure that such a Committee
was in prospect but indicated that he would like to have
it report by December 1, 1942. Senator George indicated
that however late the tax bill might be passed, he thought
the Committee would have time to study the matter and
report by December 1. Chairman Doughton indicated his
approval of the Committee. In response to a question of
the Secretary, Senator George and Mr. Paul indicated that
in their opinion the wording of the motion passed by the
Senate would be broad enough to cover other aspects of
the inflationary gap problem in addition to compulsory
savings. Senator George indicated that the motion could
be changed if the Treasury desired revision and the
Secretary asked to see a copy of the motion.
247
- 4 -
Senator Barkley indicated that in his opinion the
tax bill should not be delayed until after election,
that this would be interpreted by commentators and
others as a sign of weakness on the part of Congress.
Senator George said he did not mean to indicate that
the bill would be delayed until after election but
that he felt that if the Senate desired to put a
compulsory saving provision in the bill to take to
conference, there would be considerable time to study
the matter before the conferees finished their work.
Mr. Doughton indicated some irritation, although
he did not frame it as a criticism, that the Treasury
had not dealt with Mr. Stam in working out its spendings
tax proposal. Mr. Paul indicated that as soon as copies
of the preliminary plan were ready, they had been sub-
mitted to Mr. Stam with the approval of Senator George.
Chairman Doughton made a closing statement in which
he took a somewhat more conciliatory attitude but did
not indicate any basic change in his views on the
subject.
RB
248
September 9, 1942
Shown to President this a.m. and report is in the
President's folder.
Regraded Unclassified
249
September 9. 1948
- FOR the SEGRETARY
Premi Mr. Paul
Subject: Action of the Senate Finance Committee ⑉
Puesday, September s, 1942.
1. Conster Byrd's motion to reject
the entire proposul for a spendings tax was
shopted by 6 vote of . e. A few of the senstore
present refreised tree voting. Benater La Follotte's
notion to adopt the Treasury spendings tax without
levering exemptions below the Senate Committee lovels
of 1500, 01,200, and 0300, was rejected.
a. donster Densher's notion for a 10 par-
cest retail to be used for the purchase of non-
negotiable use bonds was rejected. Senator Cuffey's
notion to adopt a retail sales tax at s $ persent rate
without exemptions for feed was rejected by a vote of
13 - 6. in agentment by Beneter taft that feet be orsept
from the miss tax máð been proviously rejected by a the
vote of 9 - 9.
3. "Vistory" a metion of
Senator Goorge, 13 e 6, 8 futobouy"
tax of 5 persont - all gross incomes is excess of 0624
(without my defections ordinarily allowed under the
issues non). the 9as 10 to be collected at were.
& post-war credit of papt of the tax would be provided,
against which a tax credit would be allowed currently for
payments of life incurance, cobro, and purchase of war
beads within limits. this would have the effect of
reducing the $ porsent 9as to a not of 8-1/8 90 3-3/4
Mr. the estimated that the tex would produce
3.6 t billion green and 48.5 billion not after allowing
for the refundable post-war credit.
AO the beginning of the afterness seceion the Treasury,
at the requist of the Chairesa, commented briefly ea the
victery the be the offect that (2) the exemptions were
below the statum subsistenes lovel for families, (2) it
vould be proference to integrate the proposed victory tos
on a not basis with the income tax instead of adding a nov
defective and would redult in at least tea million refunds
gross income saw and (3) that the post-ver credit who
each year.
Before the WAST was instructed Be
bring in on seveing various alternative not basis with mothods the
of
calve tax tax coons to have been
ea
a
finally rejected Food the the question today will be whether to
increase sates upon not income on a low exemption basic or
- - so donster George's gross income tax.
RB:dad
9/9/42
Regraded Unclassified
250
September 9, 1942
3:48 p.m.
Operator:
Congressman Robertson.
HMJr:
Hello. Hello.
Cong. Willis
Robertson:
Yes, Mr. Secretary.
HMJr:
I understand that there is a misunderstanding
about your request to me about sending you down
there. I - I thought that I'd said that if you
didn't hear from me in a half hour, it would mean
I couldn't do it.
R:
Well, I didn't understand it. I thought - I
thought that you said, "You'll hear from me in
a half an hour ....
HMJr:
Well ....
R:
.... if I can't do it".
HMJr:
I - I checked - well, it's very possible that I
was wrong and possibly you could misunderstand
me. In any case, I wanted to offer you my
apology.
R:
Well, that was all right, sir.
HMJr:
But I looked around, and - and we couldn't find
anybody to speak at this short notice. It's for
today, isn't it?
R:
For today, yes.
HMJr:
Yeah. And we - I just had nobody I could send
down.
R:
Yes.
HMJr:
And I wanted to let you know how sorry I was.
R:
Well, I appreciate your calling me, because ....
HMJr:
Because, it's - it's ....
R:
I just called you on an off chance. I knew
that there would be - and they can't prepare
speeches in two or three minutes.
Regraded Unclassified
251
- 2 -
HMJr:
No. Well, there was nobody that I could send.
We don't have a speakers' bureau here ....
R:
Yeah.
HMJr:
.... and we - we rely on each State Administrator
to take care of those matters.
R:
Yes.
HMJr:
And if there's anybody - I - - he could have had
my own car, if that had helped any.
R:
Well, I wouldn't want that.
HMJr:
But, as - we just didn't have the - anything, and
I wanted you to know, because after all, we've
been friends for years, and you'd be the last
person I'd want to slight.
R:
Well, I appreciate that. Well, we'll try to sell
the bonds for you.
HMJr:
Well, I - - I hope you understand.
R:
Oh, yes, and I'll get there. I'll be a little
late. I can get this five o'clook bus. I'll be -
I'll be about a half an hour late, but I can get
there before the dinner's over, and time enough
for the big Rally that starts at 8:30.
HMJr:
Well, I - you - you're a good sport, and I
appreciate it.
R:
(Laughs) Well, thank you, sir.
HMJr:
All right. Good-bye.
R:
Thank you.
252
September 9, 1942
4:00 p.m.
HMJr:
Hello.
Norman
Thompson:
Yes, sir.
HMJr:
Norman, will you get in touch with the Cadillac
Company ....
T:
Yes, sir.
HMJr:
.... and tell them that we appreciate very wery
much their having rented this car to us
....
T:
Yes, sir.
HMJr:
....
but on account of trying to save gas and
tires, we now would like to return it to them.
T:
All right, I'll do that. I was sorry that
there's no legal way to work that.
HMJr:
That's all right. You return it and then the -
the license plate on that could be put on the
Buick.
T:
I see.
HMJr:
See?
T:
I'll do that, yes sir.
HMJr:
Right.
T:
All right, sir.
HMJr:
Thank you.
253
September 9, 1942
4:17 p.m.
HMJr:
Harold.
Harold
Graves:
Yes, sir.
HMJr:
I wonder if you've got a fellow with a little
extra pep and energy who could take this poster
"Let's All Fight" ....
G:
Yes.
HMJr:
.... and I'd like to put it up over the door of
the executive office to the White House to begin
with, see?
G:
Yes.
HMJr:
Just the way it is over mine, and you'd have to
get Forster's permission.
G:
Yeah.
HMJr:
And then put it over all the doors and all - over -
in the entrances to all the buildings here in
Washington.
G:
You mean all the public buildings.
HMJr:
All the public buildings.
G:
Well, we can at least try.
HMJr:
Try it. Starting with Forster. Tell him we'd
like it to set an example. If we can do it over
his, we can do it over anyone's.
G:
We'll try it. I suspect ....
HMJr:
Hello.
G:
Hello.
HMJr:
And then I'd like to have it - we've had this
"bomber" one on the mail trucks now for about
a month.
G:
Yes.
HMJr:
I'd like this one to go on the mail trucks.
254
- 2 -
G:
I'm not sure where we are with respect to size
on this
....
HMJr:
It looks like the right size to me.
G:
Well, I'll - I'll certainly look into that.
HMJr:
Would you and give me a little written report?
G:
Yes, I will. Yes, sir.
HMJr:
How are you coming on the other proposal?
G:
Well, we have sent out we are sending out wires
to all of our issuing agents today and to all the
Fed's, and I have spent a good deal of time looking
into the War Department and Navy Department situa-
tion, and also the Treasury.
HMJr:
Yeah.
G:
I checked with Mrs. Forbush as you suggested
about complaints, and you'd be surprised at the
very small number of complaints that have actually
come in here about this matter. It's not ....
HMJr:
Couldn't she dig up a hundred?
G:
No - no. She couldn't dig up twenty.
HMJr:
(Laughs)
G:
And ....
HMJr:
Well, anyway, I'll - I'll write you eighty.
G:
(Laughs) Yeah. All right. Well, we're working
on that, and we'll ....
HMJr:
Okay. I'm - I'm just as serious as I was this
morning.
G:
Yes. Well, I know, and we'll be ready to talk.
to you Friday about it.
HMJr:
Okay.
G:
Yes, sir.
HMJr:
Good-bye.
255
September 9, 1942
4:30 p.m.
HMJr:
Hello.
Operator;
Mr. Mack.
HMJr:
Hello.
Clifton
Mack:
Hello.
HMJr:
Cliff.
M:
Yes, sir.
HMJr:
In your letter to me on those hundred trucks
that you wanted seized and were scheduled
originally for Manila ....
M:
Yes, sir.
HMJr:
You failed to say for whom they are.
M:
They are for the British Purchasing Commission -
New Zealand.
HMJr:
New Zealand. That's all I wanted to know.
M:
Yes, sir.
HMJr:
Okay.
M:
Yes, sir.
256
September 9, 1942
4:56 p.m.
HMJr:
Hello.
Operator:
All right?
HMJr:
Go ahead.
Operator:
Go ahead.
HMJr:
Hello.
Ronald
Ransom:
Henry, Ronald Ransom.
HMJr:
How are you?
R:
Fine. How are you?
HMJr:
Alive - kicking.
R:
That's good.
HMJr:
Yeah.
R:
We are discussing this afternoon the general
idea of the further reduction of two per cent in
the central reserve - city reserve requirements.
HMJr:
Yeah.
R:
The question of "timing" ....
HMJr:
Yeah.
R:
I can put you on the loud-speaker if you don't
object. The Board members are here in the
Conference Room.
HMJr:
Anybody besides the Board members?
R:
Nobody except our economists, Mr. Goldenweiser
and Mr. Thomas, and Mr. Smeed, who handles the
bank examinations. Is that satisfactory?
HMJr:
Yeah. What's the janitor doing?
R:
The janitor's off on a vacation. It's his
annual-leave period.
HMJr:
(Laughs) I see.
257
- 2 -
R:
It takes us almost as many people for us to
reach a decision as it does for you.
HMJr:
I see.
R:
Can I put you on ,
HMJr:
That's known as "touche".
R:
That's touche. All right.
HMJr:
All right.
R:
Just one second.
HMJr:
All right.
R:
The question 1s one of timing as to whether it
should be done effective or not tomorrow morning
which is the time your own financing is to be
announced, or whether it should be deferred until -
oh say - ten days or 80 later, or effective per-
haps on the 14th which would hit your - your bill
announcement, you see. Now apparently the reserve
position in New York would indicate that we would
have to do a considerable amount in the open
market between now and the 21st, and perhaps let
you sell us some special certificates also in the
meantime, or do something on this reserve situation.
In other words, we do one or the other the first
part of the month and perhaps we do the other the
latter part of the month, 80 that it gets around
to a question of your own feeling.
HMJr:
What would you do if you didn't do it tomorrow?
R:
Well, if we didn't do it tomorrow, that is
announce it tomorrow, we could announce it on the
14th, effective, say - on some later date next
week - 17th or 18th - - that 18 only a suggestion.
HMJr:
Well, Bell 1s sitting here, and he liked what
you say
....
R:
Yeah.
HMJr:
....
and I'm supposed - - I don't, and I tell
you why.
R:
All right.
258
- 3 -
HMJr:
I think it's a sign of weakness to announce it
on the day of the financing.
R:
Yeah.
HMJr:
I mean it looks as though we were kind of scared.
R:
Yeah. That's a possibility. We'd be - discuss
that too, as a real - a real possibility.
HMJr:
Well, my ourb-stone opinion, Ronald is - I'd
rather see you do it on the 14th.
R:
That is announce it on the 14th, effective later
that week.
HMJr:
Yeah, that's all right. Just I - I wouldn't
want to 800 it announced tomorrow. I think it's
too close. It's during the financing, and it
looks as though we were worried.
R:
Yean, and there's one other thing to be considered
if we were worried as a result of the financing
which we don't anticipate we will be, if we then
announce it on the 14th, it would be admitting a
failure, 80 in the meantime, we - we'll have to do
whatever's necessary to keep the Thursday-Friday
period, and Saturday period, from giving anybody
any trouble.
HMJr:
Well, don't - I don't mean to be rude, but with
all respects aboard, I think you kind of should
have thought of that a little earlier.
R:
Well, we have thought of it anyhow.
HMJr:
Yeah.
R:
We didn't just ....
HMJr:
I mean, it's a little bit late. It's five o'clock
at night, and to think about the job that I would
expect you people to do Thursday and Friday, if
necessary.
R:
Yes. Well, we will.
HMJr:
I mean - I - I - - I'm not - I'm just - I'm being
very frank, as usual, but my own - my own hunch 18 -
I - I wouldn't - just hold the wire one second,
will you? Would you mind holding the wire one
minute?
259
- 4 -
R:
Okay.
HMJr:
(Talks aside)
Helle.
R:
Yes.
HMJr:
I - I - my own hunch is, and I've got to go on
that, my instinct tells me that I - I think it
would morning. be a mistake to announce it tomorrow
R:
Yes. You'd ....
HMJr:
I ....
R:
.... you'd prefer it definitely the 14th?
HMJr:
Yes, sir.
R:
Okay.
HMJr:
And - I'm looking to you to do the good job
that you always do.
R:
Thanks. Okay.
HMJr:
Thank you.
260
September 9, 1942
5:05 p.m.
Allan
Sproul:
Hello. Sproul.
HMJr:
Hello.
S:
What did you say?
HMJr:
How are you?
S:
All right.
HMJr:
I've just done something that if you think I've
made a mistake, I can still turn a somersault
....
S:
(Laughs)
HMJr:
....
but - the Federal Reserve Board, through
Ronald Ransom, just called me up, and they're
all in session, and they wanted to know if I
thought it would be all right to announce
tomorrow morning that they were going to reduce
reserve requirements by two per cent ....
8:
Yeah.
HMJr:
.... and I told them I thought it was a great
mistake on the morning of the financing.
S:
Yeah.
HMJr:
And that it was a sign of weakness.
S:
I wouldn't turn a somersault on that.
HMJr:
You wouldn't?
S:
No, I think they ought to announce it the 14th,
after this financing 18 out of the way, but
before the payment date.
HMJr:
That's what I told them - the 14th.
8:
I think that's when they ought to do it.
HMJr:
I told them the 14th.
S:
Well, I think that you should stay right where
you are then.
HMJr:
Well, I felt kind of annoyed, in a mild way, that
261
- 2 -
at five o'clook at night on the eve of
financing, they're getting cold feet that they
may have to do a Job tomorrow.
8:
Well, I don't think that that's necessary to
insure the success of this financing, and 80
I think that they'd better announce it after
the financing, but before the payment date.
HMJr:
Have you any have you - how are - what's
the temperature of your feet?
S:
My feet are warm.
HMJr:
Good. How's your heart?
S:
My heart 1s steady and strong.
HMJr:
Good. Now I'm going to give you some news
that you're going to like, and I haven't told
this yet to the Board, because when I talked to
them, they had everybody but the janitor in there.
S:
(Laughs)
HMJr:
But this is for you only, and I'd - I'd like
you to keep it a secret until Saturday.
8:
All right. It's - that's done.
HMJr:
And I'll tell Ransom tomorrow.
8:
Yeah.
HMJr:
This 18 what the bills are going. - this new tax
bill 18 going to be. You got a pencil?
S:
Yeah.
HMJr:
Five - eight - nine - ten - eleven - eleven.
8:
What does that ....
HMJr:
108.
S:
That sounds good to me.
HMJr:
You like that?
8:
Yes, I do.
262
- 3 -
HMJr:
Good.
8:
I think that's fine.
HMJr:
Well, I just - - it - that's between what Szymozak
wanted and the original request from the Board.
S:
I think that's fine.
HMJr:
Well, I thought if we were going to do it, it
might as well make it taste good.
S:
That's the way I look at it. So long as you
can do it without dynamiting your other market,
and I think that we can take care of that.
HMJr:
Well, it's five - eight - nine - ten - eleven -
eleven.
8:
That sounds fine to me. I'll - I'll sleep
better tonight.
HMJr:
Well, I - I want you to sleep better, and
especially in view of the fact that the Federal
Reserve Board seems to have cold feet.
S:
Well, I -
HMJr:
If there wasn't a shortage of rubber, I'd send
them over a hot water bag.
S:
(Laughs) Well, send them a hot brick.
HMJr:
Well, it might - it might burn them - they
might burn themselves.
S:
(Laughs)
HMJr:
All right.
S:
Thank you.
HMJr:
Good-bye.
8:
'Bye.
263
September 9, 1942
5:08 p.m.
Ronald
Ransom:
Hello.
HMJr:
Yeah.
Operator:
Go ahead.
R:
Hello.
HMJr:
Hello, Ronald.
R:
I just want to - nobody's on the line - I'm
in my own office, just you and me, and I just
want to thank you for saving my life, which you
did. I'm just exactly one hundred per cent in
agreement with you.
HMJr:
Wonderful.
R:
It took exactly what you said to get the result
I wanted, 80 I would be very remise if I didn't
express appreciation.
HMJr:
Well, now - well, that's very nice of you. I
was - I was going to say, "I'd be damned", but
I didn't. But ....
R:
No, this mechanism of government is hard to
operate as you well know, and it ....
HMJr:
You seem to be having troubles over there.
R:
Oh, God! My
....
HMJr:
What?
R:
This 18 always a bad month for me, but this
particular matter I - we will now approach upon
a different, and I think much saner angle. And
unquestionably, your - I had already said exactly
what you said, 80 we were just exactly one hundred
per cent in accord.
HMJr:
Well, I'm glad. I called up Sproul, and I said
if I'm wrong, I can still turn a somersault
....
R:
Yeah.
HMJr:
and he said, "Don't you turn any somersaults".
Regraded Unclassified
264
- 2 -
R:
Yeah. We - we had - I had talked to Sproul at
length, and Sproul and you and I had said the
same thing exactly, but
....
HMJr:
Well, who over there needs a hot water bottle?
I'd like to send them one - to warm up his feet.
R:
(Laughs) Well, the trouble with it 1s that you
can't tell whether they need a hot water bottle
or an ice pack.
HMJr:
I see.
R:
Yeah. That's the real difficulty, but neverthe-
less, the mechanism front moves along, I think
that's all right, and we will - - I - I think the
14th 18 - I want to talk to Allan again at
length before the final decision on that is
reached, but that looks all right.
HMJr:
Well, that's what he wanted - was the 14th.
R:
Yes, and in the meantime, why whatever's
necessary will have to be done.
HMJr:
Yes.
R:
All right, next ....
HMJr:
Now wait a minute wait a minute. This 18 for
you and the Board members only - in secrecy
until Saturday.
R:
Yes.
HMJr:
This 18 what we are going to do on these tax
notes.
R:
Yes.
HMJr:
Got a pencil?
R:
Yeah.
HMJr:
But for you and the Board members only.
R:
Yes.
HMJr:
Five - eight - - nine - ten - eleven - eleven.
Regraded Unclassified
265
- 3 -
R:
That looks pretty good.
HMJr:
108.
R:
Five - eight - nine - ten - eleven - eleven.
HMJr:
Yeah.
R:
108.
HMJr:
Yeah.
R:
Thanks.
HMJr:
Thank you.
R:
Okay.
266
September 9, 1942
5:11 p.m.
HMJr:
Helle. Yeah. Go on.
Operater:
Ge ahead.
Cong.
Cooper:
Helle.
HMJr:
Jerry.
C:
oh, Henry, how are you?
HMJr:
Where were you, we had...
C:
Well, I just want to tell you how much I appreciate
your invitation, and I was just so serry I couldn't
get dewn there, but I get tied up on this Bill up
here. We had three rell calls.
HMJr:
Well, we had mint juleps and everything.
C:
Oh my, I knew you'd de it up right...
HMJr:
Yeah.
C:
...and I'm just serry as I could be, Henry, but
I just couldn't help it. There were three roll
calls, and I just felt like I had to be here to
vote on that.
HMJr:
Well new, if you...
C:
I asked Bob to tell you about it...
HMJr:
He did.
C:
...and I was just 80 sorry.
HMJr:
I'd like to take a minute and a half and tell you
what I had on my mind.
C:
All right. I'll be delighted, or come by to see you,
anyway you want at any time.
HMJr:
Well, you get up a little late in the morning, don't
you?
C:
Oh well, I usually get up about seven o'clock.
267
- 2 -
HMJr:
The hell you do. Don't you kid me, Mister.
C:
Yeah, seven, sometimes ....
HMJr:
Yeah, I once called you at eight, and you -
well, anyway.
C:
Oh, yes, well ....
HMJr:
You tell your constituency that.
C:
Well, all right.
HMJr:
Uh - is ten o'clock too late for you in the
morning?
C:
No. That would be fine.
HMJr:
What?
C:
That'll be fine.
HMJr:
Do you want to drop by tomorrow morning?
C:
Ten o'clock?
HMJr:
Yeah.
C:
Yeah, I'll be glad to, Henry.
HMJr:
Okay.
C:
All right.
HMJr:
And I'll always tell your constituency that you
get up at 6:30.
C:
Oh, I know you'll clarify me.
HMJr:
Okay.
C:
All right. (Laughs) Thank you. I'll be over
at ten in the morning.
HMJr:
Thank you.
C:
Thank you. Good-bye.
268
September 9, 1942
5:29 p. m.
HMJr:
that we're going to be out of nickels inside
of a week.
Ferdinand
Kuhn:
Yeah.
HMJr:
No pennies. I wish you'd be thinking of it and
give me a little memo, something to - a little
radio campaign that we could hook on to the War
Bonds stuff.
K:
Well, we've got the stuff all written, but it was
turned down.
HMJr:
Well, this is just for nickels and pennies.
K:
Well, you remember this was a campaign to get the
nickels and pennies out of the jars...
HMJr:
Yeah.
K:
...out of the big kitty banks, and 80 on
HMJr:
You got it?
K:
Yeah.
HMJr:
Well dust it off, and show it to me tomorrow.
K:
You bet. All right, I'll do that.
HMJr:
All right.
K:
I'm sorry I can't come tonight.
HMJr:
Well, we'll have you some other time.
K:
I appreciate the invitation.
HMJr:
0. K.
K:
O. K.
September 9, 1942
269
Mrs. Klotz phoned Miss Thompson today and
old her that there was nothing the
becretary could do about this. The clipping
book was returned to Miss Thompson by
a Secret Service Agent today.
Regraded Unclassified
270
THE WHITE HOUSE
WASHINGTON
September 8, 1942
Dear Henry:
Captain James Gorman and two members
of the show came to see me about this show.
They tell me that the Army Artillery Chief
18 willing to let them accept offers for
production in different places, but the
Major General who might soon be on the
march, 1s opposed.
They now have an offer for Broadway.
They have sold a great many bonds through
the show thus far, and feel they are good
enough to sell many more. They have worked
hard and if they could get a request from
you, if you think they are worth while, that
they be allowed to accept the offer for
Broadway, as well as in other places, they
think they can turn in a good many bond
sales.
I am only sending this over to you
because they asked me to do 80. This 18
their only scrap book, and I have promised
to return it to them by registered mail.
Affectionately,
There Roseach
270
THE WHITE HOUSE
WASHINGTON
September 8, 1942
Dear Henry:
Captain James Gorman and two members
of the show came to see me about this show.
They tell me that the Army Artillery Chief
16 willing to let them accept offers for
production in different places, but the
Major General who might soon be on the
march, is opposed.
They now have an offer for Broadway.
They have sold a great many bonds through
the show thus far, and feel they are good
enough to sell many more. They have worked
hard and if they could get a request from
you, if you think they are worth while, that
they be allowed to accept the offer for
Broadway, as well 8.8 in other places, they
think they can turn in a good many bond
sales.
I Am only sending this over to you
because they asked me to do 80. This 18
their only scrap book, and I have promised
to return it to them by registered mail.
Affectionately,
There Roseacta
270-A
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Sept. 9, 1942
TO
THE SECRETARY
FROM TED R. GAMBLE
Re: MOTION PICTURE INDUSTRY SEPTEMBER DRIVE
War Activities Committee reports sales for the first
few days of $51,395,250. A substantial part of this figure
represents the industry's purchase of F and G Securities.
For example, Paramount Pictures, Inc., partner associates,
and their subsidiaries, report purchase of $26,014,838
included in the above figure.
In addition, you have received telegrams from 1500
individual theatres reporting sales totalling $11,011,353.
This latter figure is not included in the $51,395,250.
There is no question but what this drive has been
effectively extended down to every community in America, and
I am convinced personally that the sales of yesterday and
today directly reflect the efforts put forth by all branches
of the industry.
CONFIDENTIAL
270-B
UNITED STATES SAVINGS BONDS - SERIES X
Comparison of September sales to date with sales during the
same number of business days in August and July 1942
(At issue price in thousands of dollars)
:
September
I
Cumulative salesby business days
Date
:
daily
I
:
I
September
August
July
: September as
:
sales
#
1
:
:percent of Augusta
September 1942
1
$ 11,634
$ 11,634
$ 14,044
$ 15,821
82.8%
2
14,748
26,381
36,222
30,701
72.8
3
18,305
44,687
50,797
47,523
88.0
4
17,804
62,491
63,785
77,320
98.0
5
19,166
81,657
86,789
95,044
94.1
8
49,400
131,057
111,748
116,643
117.3
Office of the Secretary of the Treasury,
September 9. 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.
Regraded Unclassified
CONFIDENTIAL
270-C
UNITED STATES SAVINGS BONDS - SERIES 7 AND G COMBINED
Comparison of September sales to date with sales during the
same number of business days in August and July 1942
(At issue price in thousands of dollars)
: September :
Oumulative sales by business days
Date
:
daily
:
September
:
August
I
July
I September as
:
sales
:
:
:
:percent of August
ptember 1942
1
$ 7,528
$ 7,528
$ 12,222
$ 12,597
61.6%
2
9,811
17,339
28,810
21,986
60.2
3
9.397
26,735
41,258
32,441
64.8
4
10,678
37,414
54,105
49,175
69.2
5
10,713
48,127
71,552
62,561
67.3
8
18,550
66,678
84,777
84,413
78.7
fice of the Secretary of the Treasury,
September 9, 1942.
Division of Research and Statistics.
urce: All figures are deposits with the Treasurer of the United States on
account of proceeds of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily
add to totals.
M
Regraded Unclassified
CONFIDENTIAL
270 - D
UNITED STATES SAVINGS BONDS - TOTAL
Comparison of September sales to date with sales during the
same number of business days in August and July 1942
(At issue price in thousands of dollars)
: September
:
Cusulative sales by business days
Date
:
daily
=
I
:
sales
September
:
August
July
September as
:
:
:
:
:percent of August
sptember 1942
1
$ 19,162
$ 19,162
$ 26,267
$ 28,418
73.0%
2
24,558
43,720
65,032
52,687
67.2
3
27,702
71,422
92,055
79,964
77.6
4
28,482
99,904
117,890
126,495
84.7
5
29,880
129,784
158,341
157,605
82.0
8
67,950
197,734
196,524
201,056
100.6
fice of the Secretary of the Treasury,
September 9, 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.
Sales of United States savings bo270-E
CONFIDENTIAL
September 1 through September 8,1942
Compared with sales quota for same period
(At issue price in millions of dollars)
Series I
:
Series 7 and G
2
Total
:
Actual sales
:
Quota,
:
Sales
:
Actual sales
:
Quota,
I
Sales
:
Actual sales
1
Quota,
I
Sales
:
: Sept.
1
:
Sept. 1
:
to date
I
I Sept. 1
:
Sept. 1
:
to date
:
: Sept.
1
:
Sept. 1
:
to date
to :
: Daily
:
to
:
to
: as x of
:
Daily
:
to
:
to
#
as $ of
1
Daily
:
to
:
to
:
as x of
:
date
:
date
:
quota
:
:
date
:
date
:
quota
:
:
date
:
date
:
quota
:
1
$ 11.6
$ 11.6
$ 14.9
77.95
$ 7.5
$ 7.5
$ 6.9
108.7%
$ 19.2
$ 19.2
$ 21.8
88.1%
14.7
26.4
34.5
76.5
9.8
17.3
16.6
104.2
24.6
2
43.7
51.1
85.5
3
18.3
44.7
55.5
80.5
9.4
26.7
26.4
101.1
27.7
71.4
81.9
87.2
17.8
62.5
81.0
77.2
10.7
37.4
35.6
105.1
28.5
99.9
116.6
85.7
19.2
81.7
98.3
83.1
10.7
48.1
42,2
5
114.0
29.9
129.8
140.5
92.4
8
49.4
131.1
143.3
91.5
18.6
66.7
58.1
114.8
67.9
197.7
201.4
98.2
9
168.8
67.8
236.6
10
193.4
76.7
270.1
11
220.6
84.4
305.0
12
239.2
90.1
329.3
24
272.7
99.7
372.4
15
288.2
105.0
393.2
16
307.6
112.1
419.7
17
327.2
119.2
446.4
18
350.1
125.7
475.8
19
365.4
130.5
495.9
n
399.6
141.0
540.6
22
415.7
147.0
562.7
23
436.2
155.2
591.4
24
457.1
163.4
620.5
25
481.4
171.0
652.4
26
497.4
176.6
674.0
28
532.7
188.7
721.4
29
549.2
195.5
744.7
30
570.0
205.0
775.0
fice of the Secretary of the Treasury, Division of Research and Statistics.
September 9, 1942.
rece: 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.
271
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
September 9, 1942
TO
Secretary Morgenthau
FROM
Ferdinand Kuhn, Jr.
You asked yesterday about Harold Mager, who wrote
the article on inflation in the current issue of The
Nation.
Mr. Mager is a free-lance lawyer and writer who
has recently turned his attention to economics. He has
contributed very occasionally to "World Unity" and to
the Journal of Abnormal Psychology. His two articles
for the Nation have needed severe editing, but the
editors of the Nation say that Mr. Mager is open to
suggestion and is very easy to deal with.
He did research work at one time for the Laura Spelman
Fund and for the New York State Board of Housing, according
to The Nation's own note about him, but his work for these
agencies could not have been outstanding, as neither of
the agencies remembers him.
If you would like to see him, I can invite him
here for Friday or early next week.
J.K.
W. W- W. us, W- W- W-W-W- W. W. w-w-w-
w-w-w-w-w-w-W-W-W-W-W-W-W W-
TREASURY DEPARTMENT
272
INTER OFFICE COMMUNICATION
DATE September 9. 1942
TO
Mr. Thompson
FROM Mr. A
In further response to your request of December 26, 1939,
there is submitted herewith for the Division of Research and
Statistics a memorandum listing, with brief descriptions, the
studies or projects completed or under way, and the names of
persons working on each, for the month of April 1942.
DESTRUNESS
DO SEP w VA ID 54
-
-
CELICE
273
DIVISION OF RESEARCH AND STATISTICS
Report of Studies or Projects Completed or Under
Way, and the Names of Persons Working on Each,
for the month of April 1942
For convenience of reference, the studies listed are
grouped under general subject heads.
The names shown for persons working on each project
include only those who participated fairly directly, as ex-
plairied in the introductory note to the corresponding report
submitted on December 28, 1939. No attempt has been made
to cover also persons whose responsibility in each particular
case was mainly in planning, supervising, or consulting.
Financial Analysis
I. Projects or studies completed
1. Two reviews of current developments in the high-grade
securities markets were prepared, and memoranda were
transmitted to the Secretary on April 2 and 17. Copies
were given to Under Secretary Bell. - Mr. Haas, Mr. Murphy,
Mr. Foy, Mr. Robbins, Mr. Rosen, Mrs. Miller, Miss Parker
The reviews contained, in addition to analysis of the
current situation, the following special studies:
(a) Changes in bank holdings of United States securities;
portfolio changes of the Guaranty Trust Company of
New York. (April 2). - Mr. Foy, Mr. Robbins
(b) Comparison of yields of high-grade bonds during
World Wars I and II. (April 2). - Miss Parker
(c) Carrying values of United States Government bonds
held by banks. (April 17). - Mr. Robbins
(d) Corporate and municipal bond flotations. (April 17). -
Mrs. Miller
2. A memorandum was prepared, and was transmitted to the
Secretary on April 22, on May cash market financing. -
Mr. Haas, Mr. Murphy, Mr. Sandelin, Mr. Robbins, Mrs. Miller
3. Weekly memoranda were prepared commenting on changes in
the yields of Treasury bonds and notes since March 19.
Two memoranda, each with a table and chart, were prepared,
273
DIVISION OF RESEARCH AND STATISTICS
Report of Studies or Projects Completed or Under
Way, and the Names of Persons Working on Each,
for the month of April 1942
For convenience of reference, the studies listed are
grouped under general subject heads.
The names shown for persons working on each project
include only those who participated fairly directly, as ex-
plained in the introductory note to the corresponding report
submitted on December 28, 1939. No attempt has been made
to cover also persons whose responsibility in each particular
case was mainly in planning, supervising, or consulting.
Financial Analysis
I. Projects or studies completed
1. Two reviews of current developments in the high-grade
securities markets were prepared, and memoranda were
transmitted to the Secretary on April 2 and 17. Copies
were given to Under Secretary Bell. - Mr. Haas, Mr. Murphy,
Mr. Foy, Mr. Robbins, Mr. Rosen, Mrs. Miller, Miss Parker
The reviews contained, in addition to analysis of the
current situation, the following special studies:
(a) Changes in bank holdings of United States securities;
portfolio changes of the Guaranty Trust Company of
New York. (April 2). - Mr. Foy, Mr. Robbins
(b) Comparison of yields of high-grade bonds during
World Wars I and II. (April 2). - Miss Parker
(c) Carrying values of United States Government bonds
held by banks. (April 17). - Mr. Robbins
(d) Corporate and municipal bond flotations. (April 172. -
Mrs. Miller
2. A memorandum was prepared, and was transmitted to the
Secretary on April 22, on May cash market financing. -
Mr. Haas, Mr. Murphy, Mr. Sandelin, Mr. Robbins, Mrs. Miller
3. Weekly memoranda were prepared commenting on changes in
the yields of Treasury bonds and notes since March 19.
Two memoranda, each with a table and chart, were prepared,
Regraded Unclassified
274
- 2 -
and were transmitted to the Secretary on April 16 and
24. - Mr. Haas, Mr. Murphy, Mr. Brown, Mr. Sandelin,
Mr. Conrad, Mr. Kroll
4. A maturity calendar was prepared as of April 1, for
each issue of direct and guaranteed bonds and notes
of the United States. - Miss Lagos
5. Yields on public marketable securities issued by the
United States Government and by Federal agencies were
computed daily on the basis of over-the-counter closing
quotations. A daily table and a weekly table with
comparative data for earlier periods were. prepared
summarizing this information. A chart for each issue
was kept up to date showing daily price and yield
figures together with comparative monthly data since
1935, since the date of issue, or since the date first
traded. In addition, yields were computed daily on
five high-grade corporate securities, three municipal
securities, and two British Government issues. -
Mr. Moody, Miss McCoy, Mr. Kroll
6. In response to the request by the Secretary on January 21,
1941, that measures be taken to obtain information to
assist in carrying through the defense financing pro-
gram, arrangements were made to obtain the necessary
detailed statistics on the holdings of each issue of
the public debt and of guaranteed securities by the
various classes of holders. - Mr. Haas, Mr. Tickton,
Mrs. Barnes, Mr. D. J. Leahy, Mr. Robbins,
Miss Westerman, Mrs. Cambron, Mrs. Merkin, Mise Wood
(a) Supervisionwas given in the preparation by the
Statistical Unit of the Division of Loans and
Currency of 100 tables, showing the information
as of March 31, received from 7,000 banks and in-
surance companies. The tables were completed on
April 30, and were transmitted according to in-
struction by the Secretary.
(b) Tabulations were prepared, and were transmitted on
April 9, to the Federal Reserve Banks of New York
and Philadelphia, showing holdings of each issue of
Government security in their respective districts,
as of February 28.
275
- 3 -
(c) A tabulation was prepared, and was transmitted
on April 9, to the Board of Governors of the
Federal Reserve System showing, by classes of
banks and by issues, the amount of Government
securities owned on February 28, by the banks
covered in the survey.
(d) A summary was prepared on April 6 of the data
as of February 28, consisting of brief explana-
tory text and six tables for publication in the
Bulletin of the Treasury Department for April.
(e) A memorandum and tables were prepared, and were
completed on April 3, comparing subscriptions to
the 21 percent Treasury bonds of 1952-55, with
subscriptions to several earlier issues; and
comparing allotments to the 21 percent Treasury
bonds of 1952-55, with their ownership on
February 28.
(f) A memorandum and tables were prepared, and were
completed on April 9, comparing book and par values
of United States Government obligations held by
member banks of the Federal Reserve System as of
December 31, 1941.
(g) Monthly tables and charts were prepared, and were
completed on April 10, showing as of February 28,
changes since June 30, 1941, in holdings of Govern-
ment securities for the major classes of investors
by type of security.
(h) An analysis was prepared on April 23, showing the
absorption of the public marketable debt in March.
(1) A memorandum is being prepared, showing the cover-
age of various classes of investors in Government
securities included in the survey.
(j) New letters were sent out to the banks and insur-
ance companies on April 28, requesting comparable
data as of April 30.
7. At the request of the Secretary on May 12, 1941, arrange-
ments were made to prepare current statistical reports
on the sales of United States savings bonds, series E,
F, and G, and Postal savings stamps, on the basis of
reports by the Treasurer of the United States,
the Federal Reserve Banks, and the Post Office
276
- 4 -
Department. The reports prepared during April were
transmitted according to instructions by the Secretary. -
Mr. Haas, Mr. Tickton, Mr. Brown, Mr. D. J. Leahy,
Mr. Kroll, Mrs. Grossman, Miss Schmidt, Miss Wood
(a) Daily tables were prepared, showing the dollar
volume, of savings bonds sold in April, by
series, with cumulative totals.
(b) Daily tables were prepared, containing & compara-
tive statement of sales of bonds, by series, in
February, March, and April, with cumulative totals.
The dollar volume was shown, with the absolute and
percentage changes in the two latest months from
the respective preceding months.
(c) A table was prepared on April 1, showing sales of
savings bonds, by series, in dollar volume, in
each month from May 1941 through March.
(d) Supervision was given in the preparation by the
Statistical Unit of the Division of Loans and
Currency of monthly tables, completed on April 30,
showing sales of savings bonds, series E, for the
month of March, in dollar volume, by Federal Reserve
districts, States, cities, and counties, classified
by sales agent and denomination.
(e) A table was prepared on April 6, showing sales of
savings bonds, series E, in dollar volume, by
States, from May 1941 through February.
(f) Supervision was given the Statistical Unit of the
Division of Loans and Currency in the preparation
of a table completed on April 7, showing per capita
sales of savings bonds, series E, from May 1941
through February, by States.
(g) A table was prepared on April 9, showing sales of
savings bonds, series E, by States, as a percentage
of total sales in the eight-month period, May
through December, and in January and February, as a
percentage of total sales in the eight-month period.
Regraded Unclassified
277
- 5 -
(h) Supervision was given the Statistical Unit of the
Division of Loans and Currency in the preparation
of a table completed on April 18, showing total
sales in dollar volume of savings stamps, by
States, from May 1941 through March.
(1) A table was prepared on April 20, showing estimated
total value of savings stamps, and the number of
units sold, by denomination, in each month from
May 1941 through March.
8. In further response to the request of Mr. Graves on
February 10, for the tabulation of pledges for the
purchase of savings bonds, series E, and savings stamps,
in Oregon, supervision 1s being given in the tabulation
by the Statistical Unit of the Division of Loans and
Currency now in progress. - Mr. Reagh, Mr. Kroll
9. In further response to the request of the Secretary on
December 28, a table was prepared on April 2, showing
daily changes in stock of series E savings bonds on hand
with weekly tables appended, showing number of pieces of
series E savings bonds sold by weeks through April 1.
The table was transmitted to the Secretary. Copies were
given to Under Secretary Bell, Mr. Graves, and Mr.Broughton.
The table was discontinued thereafter by instruction of
the Secretary. - Mr. Tickton, Mr. Kelenson
10. In further response to the request of the Secretary on
December 31, weekly memoranda and tables were prepared
from data wired by the Federal Reserve Banks, showing
the number of agents qualified to issue series E,
savings bonds, by type of agent and Federal Reserve
district, for April 4, 11, 18, and 25, and for earlier
comparative dates. The reports were prepared, and were
transmitted to the Secretary on April 8, 16, 22, and 28,
respectively. Copies were given to Under Secretary Bell
and Mr. Graves. - Mr. Tickton, Mr. Kelenson
11. At the request of Mr. Graves on April 1, quotas were
worked out for each county in the country separately
for savings bonds, series E, and combined for series F
and G. The tabulations of these quotas were mailed by
the War Savings Staff to State Administrators on April 15
for their information and comment. On April 20 and 21,
tabulations again were made, showing county quotas for
May 1942 of all series combined, with a total for the
country. Quotas for June are now being prepared. -
Mr. Reagh, Mr. Brown, Mr. Kroll, Mrs. Grossman
Regraded Unclassified
278
- 6 -
12. In response to the request of the Secretary on
December 15, arrangements have been made to obtain
monthly reports from corporations on the progress of
the payroll savings plan for savings bonds, series E.
The information received 18 edited and prepared as a
basis for the analyses listed below. - Mr. Haas,
Mr. Tickton, Mr. Keats, Mr. Kelenson, Miss Westerman
(a) Supervision was given the Statistical Unit of
the Division of Loans and Currency in preparing
the basic information for March 31, received in
April from approximately 22,000 corporations. -
Mr. Tickton, Mrs. Barnes, Mrs. Cambron, Mrs. Merkin
(b) A memorandum and two tables were prepared from re-
ports received in response to our letter of March 28,
from 10,000 companies participating in the payroll
savings plan during February. The first table
showed the companies classified by size group, by
degree of employee participation, and payrolls.
The second table showed detailed data for each of
the 40 largest companies. The report was prepared,
and was transmitted to the Secretary on April 2.
A copy was given to Mr. Graves. - Mr. Tickton,
Mr. Kelenson, Mrs. Cambron
(c) Supervision was given the Statistical Unit of the
Division of Loans and Currency in the preparation
of a tabulation covering the same kind of informa-
tion as that in the first table in (b) for 11, 464
companies participating in the plan during March.
The tabulation was transmitted to the Secretary
and to Mr. Graves on April 24. - Mr. Tickton,
Mr. Kelenson, Mrs. Cambron
(d) Weekly tables were prepared, showing the number of
organizations with payroll savings plans, Govern-
ment and private, classified by size, type, and State,
together with the number of employees eligible to
participate. Tables were prepared as of March 28,
April 4, 11, and 18, and were transmitted on April 3,
10, 17, and 24, respectively, according to instructions
by the Secretary. - Mr. Tickton, Mr. Keats
Regraded Unclassified
279
- 7 -
13. At the request of the Secretary on April 15, two tables
were prepared, showing as of March 31, the operation
of payroll savings plans, classified by the number of
employees and the degree of employee participation
(1) in firms having 5,000 employees or more; and
(2) in firms with war supply contracts of two million
dollars or more. The tables were transmitted to the
Secretary on April 16. - Mr. Tickton, Mrs. Barnes,
Mr. Keats, Mr. Kelenson, Mr. D. J. Leahy, Mr. Goldberg,
Mr. Parsons, Miss Schmidt
14. At the request of the Secretary on April 21, & table in
three parts was prepared, showing as of March 31, corpora-
tions participating in the payroll savings plan, and
having 5,000 employees or more, with the number of
employees in each, classified by size of company, by
Federal Reserve districts, and States. The table was
transmitted to the Secretary on April 22, and copies
were given to Under Secretary Bell, Mr. Graves, and the
War Savings Staff. The third part of the table was
transmitted to Mr. Mills on April 23, with copies for
each Federal Reserve Bank. - Mr. Tickton, Mra. Barnes,
Mr. Keats, Mr. Kelenson, Mr. D. J. Leahy, Miss Westerman,
Mrs. Cambron, Mr. Parsons, Miss Schmidt
15. At the request of the Secretary on April 24, a table
similar to that described in item 14 is being prepared. for
companies having 500 to 5,000 employees. - Mr. Tickton
16. At the request of Mr. Graves on April 13, photostats
of lists submitted by the War Savings Staff's State
Administrators, showing names of firms in the various
Federal Reserve districts installing payroll savings
plans, were transmitted to the respective Federal
Reserve districts on April 17, under cover of a letter
signed by Under Secretary Bell. - Mr. Tickton, Mr. Keats
17. At the request of Mr. Houghteling on April 21, copies
of the forms returned by railroad companies participating
in payroll savings plans were transmitted to Mr. Houghteling
on April 23. - Mr. Tickton, Mrs. Barnes, Mr. Kelenson
18. At the request of Under Secretary Bell on April 9, the
Division was represented in conferences on April 29 and
30 regarding the Treasury Department payroll allotment
campaign for the purchase of savings bonds. Quotas were
worked out for the various salary groups. - Mr. Reagh,
Mr. Kroll, Miss McCoy
Regraded Unclassified
280
- 8 -
19. At the request of the Secretary on April 24, 1942,
a memorandum was prepared, and was transmitted to him
on April 28, concerning a survey to secure information
on the time it took a selected group to obtain delivery
of savings bonds purchased by mail or under the payroll
savings plan. This memorandum suggested that the in-
formation be obtained through the Federal Reserve Banks.
A draft of a letter requesting the Federal Reserve Banks
to secure this information was prepared April 29, and
18 awaiting approval by Under Secretary Bell. - Mr. Tickton
20. At the request of the Secretary on April 27, arrangements
are being made to prepare a room for the Secretary's use
containing charts showing the progress of the savings
bond campaign. There will be about 600 charts showing
daily, weekly, and monthly data on the operation of the
payroll savings plan in firms throughout the country.
The first of these charts will be ready in May. -
Mr. Tickton
21. In further response to the request of the Secretary
on July 28, 1941, tables were prepared, summarizing
sales from August 1941 through March, of Treasury
notes, Tax Series A and Tax Series B, by series, type
of purchaser, and denomination. The tables were trans-
mitted to the Secretary on April 15. Copies were given
to Under Secretary Bell, Mr. Buffington, and Mr. Kilby. -
Mr. Tickton, Mr. Kelenson
22. Further progress was made in the study requested by the
Secretary on December 6 of the sources of funds for
Government borrowing. The reports and tables prepared
during April were transmitted in accordance with in-
structions by the Secretary. - Mr. Haas, Mr. Murphy,
Mr. Daggit, Mr. Lindow, Mr. Breithut, Mr. Weintraub,
Mr. Mayo
(a) A revision was completed on April 14, of the basic,
analytical table on the gross national product,
showing the disequilibrium implicit in the estimated
flow of goods and services, and the estimated applica-
tion of income to various uses, for the fiscal year
1943. - Mr. Lindow, Mr. Breithut, Mr. Mayo
(b) Further revision was made of the table showing esti-
mated sources of funds to finance the budgetary
deficit for the fiscal year 1943, and was completed
on April 3. - Mr. Murphy, Mr. Lindow
281
- 9 -
(o) An appendix to the table listed under (b) was
completed on April 3, containing a detailed
analysis of personal savings, business savings,
and other corporate savings and accumulations
for the fiscal year 1943. - Mr. Murphy, Mr. Lindow
(d) A memorandum and three tables were prepared on
April 10, on the revision of the series from 1929
through 1941 on revenue and expenditures of State
and local governments, with estimates for the fiscal
year 1943, on the basis of Department of Commerce
refinements. - Mr. Mayo
(e) A chart is being developed to present the disequi-
librium analysis. - Mr. Lindow, Mr. Breithut, Mr.Mayo
I
(f) A memorandum was prepared on April 10, concerning
estimates of personal saving for use in the revision
of the disequilibrium table dated April 14.-
Mr. Breithut, Mr. Mayo
(g) A memorandum was prepared on April 6, concerning the
method of estimating business saving for the fiscal
year 1943, as used in the disequilibrium table dated
April 14. - Mr. Breithut, Mr. Mayo
(h) A memorandum was prepared on April 20, for use in
connection with the disequilibrium table concerning
the estimated financial operations of Government
corporations in the fiscal year 1943. - Mr. Mayo
(1) A memorandum was prepared on April 24, developing
estimates of gross national product for the calendar
year 1943. - Mr. Mayo
(J) A table was prepared, showing the valuation of 1tems
necessary in deriving income payment figures from
national income figures for the calendar years 1940
and 1941, and the fiscal year 1943. - Mr. Breithut,
Mr. Mayo
(k) Further study was made of the curtailment in output
of consumers' goods. - Mr. Weintraub
(1) Data are being compiled for measuring monthly changes
in consumers' cash surpluses, for use in estimating
the "inflationary gap". - Mr. Daggit
282
- 10 -
(m) Further progress was made on the survey by the
Bureau of Labor Statistics and the Bureau of
Home Economics on consumer spending and saving.
A meeting was attended on April 24 to discuss
problems involved. - Mr. Daggit
(n) At the request of Assistant Secretary Gaston on
April 21, a memorandum was prepared on the
prospective reduction in the standard of living.
Two accompanying tables were prepared, one showing
the per capita average supply of consumers' goods
and services for the calendar years 1932 through
1941, and the aggregate volume necessary in the
fiscal year 1943 to provide the same per capita
supply of consumers' goods and services; the
other showing the BLS cost-of-living index with
component changes since June 1939. The memorandum
was transmitted to Assistant Secretary Gaston on
April 24. - Mr. Daggit, Mr. Lindow, Mr. Breithut,
Mr. Mayo
(o) Minutes on the conference with Mr. Hansen of the
National Resources Planning Board on March 11
were prepared, and were completed on April 11. -
Mr. Breithut
23. At the request of Under Secretary Bell, agenda, memoranda,
and minutes were prepared in connection with the Treasury-
Federal Reserve meetings held for the purpose of discussing
financing policy. - Mr. Haas, Mr. Murphy, Mr. Lindow,
Mr. Foy, Mrs. Miller
(a) At the request of the Secretary on March 16, a
study was completed on the advisability of issuing
certificates of indebtedness. - Mr. Murphy,
Mr. Lindow
(b) At the request of Mr. Broughton on March 6, a
memorandum was prepared on the "Circular for
Proposed Non-negotiable Short-term Securities",
with a table attached, entitled "United States
Business Savings Notes". The memorandum was
transmitted to Mr. Broughton on April 24. -Mr. Foy
283
- 11 -
(c) At the request of Under Secretary Bell on March 11,
a memorandum was prepared on the reaction of the
Board of Governors and Federal Reserve Banks to
two proposed tap issues, with a summary table
analyzing the replies from the Chairman of the
Board of Governors and the Presidents of four
Federal Reserve Banks. The memorandum was trans-
mitted to the Under Secretary on April 14. -
Mr. Murphy, Mrs. Miller
(d) A memorandum with table on the estimated volume
of excess reserves on April 15, assuming that
New York and Chicago were reclassified as reserve
cities, was completed on April 25. - Mrs. Miller
(e) A memoranduswas prepared, and was transmitted to
the Secretary on April 27, on the member bank
reserve position and the coming financing. -
Mr. Murphy
(f) At the request of the Secretary on April 29,
8. memorandum was prepared on the financing program
agreed upon at the Federal Reserve Board on the
afternoon of April 28, with suggested modifications
for use at the meeting in the Secretary's office on
the same date. - Mr. Murphy
(g) In further response to the request of Under Secretary
Bell on February 20, a study 18 being made of a
special security for short-term funds. - Mr. Murphy,
Mr. Lindow, Mr. Foy
(h) In further response to the request of Under Secretary
Bell on February 20, a study 1s being made of a
special security for long-term funds. - Mr. Murphy
Mr. Lindow, Mr. Foy
(1) At the request of Mr. Broughton on April 30, a
review is being made of the revised, proposed
circular for short-term non-market securities. -
Mr. Murphy, Mr. Foy
(j) A table is being prepared to show estimated excess
reserves as of December 31, 1941, if Chicago and
New York City were reclassified as reserve cities,
and if all other reserve cities, except the 12 reserve
bank cities, were reclassified as country bank cities -
Mr. Murphy, Mr. Foy, Mrs. Miller
Regraded Unclassified
284
- 12 -
(k) Minutes were prepared with respect to the meeting
with representatives of the Federal Reserve System
held on April 28, and & draft was prepared sum-
marizing the program agreed upon. - Mr. Lindow
(1) Minutes are being prepared of three meetings held
on April 29, with the Advisory Committee of Bankers. -
Mr. Murphy
24. Three proposals of the RFC that the Secretary request
that corporation to purchase stock in a bank were ex-
amined. - Mr. Murphy, Mr. Sandelin, Mr. Rosen,
Miss Parker, Mrs. Miller
25. In further pursuance to the request of the Secretary on
July 8, 1941, a table was prepared, and was transmitted
to him on April 20, showing airplane deliveries from
October 1941 through March 1942. - Mr. Tickton
26. At the request of the Secretary on November 3, arrange-
ments have been made to obtain certain information on
the progress of the programs under Lend-Lease, the
Maritime Commission, and the Army Air Corps. - Mr. Haas,
Mr. Lindow, Mr. Wagner
(a) A chart 18 being prepared to show appropriations,
allocations, obligations, and disbursements, for
Lend-Lease purchases, through March 31.
(b) A chart 1s being prepared to show appropriations,
contracts awarded, and disbursements of the Maritime
Commission through March 31.
(c) A chart is being prepared to show appropriations,
contracts awarded, and disbursements, under the
Army Air Corps, through March 31.
27. Four conferences in the Secretary's and the Under
Secretary's offices were attended on April 1 (two meetings),
April 4, and 15, for the purpose of discussing financing
problems. - Mr. Lindow
28. A memorandum was prepared to Under Secretary Bell, and
was forwarded to him on April 20, transmitting letters
addressed to the three Federal supervisory agencies of
banks, requesting that data be furnished on the par value
of United States securities. - Mr. Murphy, Mr. Tickton,
Mr. Robbins
285
- 13 -
29. At the request of Mr. Buffington on April 6, a memorandum
with a table was prepared on a survey of probable new
security offerings, and was transmitted to him on April 7. -
Mr. Foy, Mr. Rosen
30. At the request of Mr. Buffington on April 6, a memorandum
with a table was prepared on prospective new capital issues,
and was transmitted to him on April 28. - Mr. Foy, Mrs. Miller,
Miss Parker
31. At the request of Mr. Kilby on April 13, three tables were
prepared, showing an analysis of subscriptions to recent
issues of Government securities on a basis as comparable
as possible with that which he used for the new certificates.
The tables were transmitted to Mr. Kilby on the same date. -
Mr. Murphy, Mrs. Miller, Miss Lagos
32. At the request of Under Secretary Bell on April 6, an
alternative reply was prepared, for his signature, to a
letter from Mr. A. B. Wilkinson, Knoxville, Tennessee,
with respect to deposits in the Civil Service Retirement
Fund as against purchases of war bonds by Civil Service
employees. The letter was mailed on April 9. - Mr. Murphy
33. At the request of Under Secretary Bell on April 13, a
memorandum was prepared on & proposal to issue a special
series of savings bonds to religious, educational, charit-
able organizations, and unions. The memorandum was trans-
mitted to Under Secretary Bell on April 17. - Mr. Sandelin
34. At the request of Under Secretary Bell on April 17, a
reply was prepared for signature of the President to a
letter from Vice President Wallace with respect to
compulsory savings as against voluntary savings. The
letter was transmitted to the President on April 21. -
Mr. Murphy
35. At the request of Mr. Broughton on March 19, & letter
was prepared to Mr. C. Raymond Allen, concerning Treasury
policy on withdrawal of savings deposits for investment
in Defense savings bonds. The letter was signed by
Under Secretary Bell on April 11. - Mr. Murphy, Mr. Rosen
36. At the request of Under Secretary Bell on April 17, á
reply was prepared, for signature of the Secretary, to
a letter from Senator Vandenberg, with respect to
voluntary purchases of War savings bonds. A memorandum
to the Under Secretary was prepared also, and was trans-
mitted to him on April 20. The letter to the Senator
was mailed on April 21. - Mr. Murphy
286
- 14 -
37. At the request of Under Secretary Bell on April 22,
a revision was made of a reply prepared by Mr. Cunningham
to a letter from Senator Brooks, with respect to the
use of War savings bonds 8.8 prizes. The letter to
the Senator was transmitted to the Under Secretary on
April 24. - Mr. Murphy
38. In response to various verbal requests from members
of the War Savings Staff, information was furnished
by telephone, concerning consumer income, expendi-
tures, etc. A table was prepared, and was forwarded
on April 21, showing estimated income payments in
the fiscal year 1942, employment in February 1942,
and Federal expenditures, taxes, and borrowing in
the fiscal years 1942 and 1943. In addition, a
19-page manuscript containing questions and answers
on the savings bond campaign was edited and revised.
This information was given for use in preparing
material for release by the War Savings Staff. -
Mr. Lindow, Mr. Breithut, Mr. Mayo, Mr. Wagner
39. At the request of Mr. Kuhn on April 9, a review
was made of an address for delivery by Mr. Oscar R.
Kreutz of the Federal Savings and Loan Insurance
Corporation in Atlanta on holdings and building
savings volume during the war period. The ad-
dress was discussed with Mr. Kuhn on April 9. -
Mr. Murphy
40. At the request of Under Secretary Bell on April 13,
a memorandum was prepared on recent developments
in consumer credit, and was transmitted to him on
April 13. - Mr. Murphy
41. At the request of the Secretary on April 14,
a memorandum was prepared on consumer credit,
together with a table and a chart showing the changes
and the amount outstanding from December 1940 to date.
The report was transmitted to the Secretary on April 14,
and a copy was given to Mr. Buffington. - Mr. Murphy,
Miss Lagos
287
- 15 -
42. At the request of Under Secretary Bell on April 25,
a study was made of the third tentative draft of
Regulation W, Amendment No. 4, to be effective May 1,
submitted by Mr. Chester Morrill, Secretary, Board of
Governors of the Federal Reserve System. A letter
was prepared to Mr. Morrill for signature of the
Secretary. The letter was mailed on April 28. -
Mr. Murphy
43. Charts were prepared, and were transmitted to the
Secretary on April 3, showing the effect of rationing
on personal saving. - Mr. Murphy, Mr. Lindow
44. A conference was attended in Mr. White's office on
April 7, on the problems of preventing inflation by
use of consumer expenditure rationing and forced
saving. - Mr. Lindow
45. At the request of Under Secretary Bell on April 14,
comments were prepared on a memorandum addressed to
him by Mr. A. L. Mills, Jr., with respect to the
deposit of legal bank reserves with the Treasury.
The memorandum was discussed with the Under Secretary
on April 23. - Mr. Murphy
46. A memorandum was prepared on interest rates and price
freezing, and was transmitted to the Secretary on
April 23. - Mr. Murphy
47. A memorandum was prepared on April 7; reviewing the
report of the Secretary of Commerce to the President,
dated March 21, 1942, covering war and defense activities
of the RFC and its subsidiaries through March 7, 1942. -
Mr. Wagner
48. At the request of Under Secretary Bell on April 1, &
memorandum was prepared on the proposal of Governor
Black of the Farm Credit Administration to impose a
special income tax upon profits derived from the sale
of agricultural and forest land. The memorandum was
transmitted to the Under Secretary on April 17. -
Mr. Murphy, Mr. Weintraub
49. At the request of Under Secretary Bell on April 7, a
reply was prepared for signature of the Secretary to the
letter from the Director of the Bureau of the Budget
with respect to increased postal rates on third class
and air mail. The letter was transmitted to the
Director of the Bureau of the Budget on April 10. -
Mr. Murphy
288
- 16 -
50. At the request of Under Secretary Bell on April 10,
a study was made of a plan submitted by the Curtis
Publishing Company for organizing American business
in cooperation with the Government to help stabilize
present and post-war conditions. A memorandum en-
titled "The Gallager Plan for Sale of 'Merchandise
Bonds'" was transmitted to the Under Secretary on
April 24. - Miss Parker
51. At the request of the Division of Tax Research on
April 1, a letter was prepared for signature of Mr. Paul,
to Mr. Carl H. Chatters, in regard to his estimates of
the ownership of State and local government securities
by individuals, and the bases used in their derivation.
The letter was mailed on April 7. In response to a
reply from Mr. Chatters on April 19, a letter was pre-
pared, and was transmitted to Mr. Paul on April 29 for
his signature, addressed to Mr. Chatters, describing
in detail the method used in making the Treasury
estimates of the ownership of State and local govern-
ment securities. - Mr. Murphy, Mr. Lindow, Mr. Conrad
52. A memorandum was prepared, and was transmitted to
Mr. Blough on April 8, on Treasury estimates of the
ownership of State and local government securities
outstanding. - Mr. Lindow
53. At the request of Mr. Heffelfinger on April 9, a letter
was prepared for signature of the Secretary to Senator
Tydings, giving the amount of United States and State
and local government securities held by the various
types of banks and by insurance companies. The letter
was transmitted to the Senator on April 10. - Mr. Conrad
54. Analysis of Mr. Viner's proposal for a new system of
allotting Treasury bills has been abandoned since the
reason for such analysis has been eliminated by the
institution of a posted bill rate. - Mr. Murphy
55. At the request of Under Secretary Bell on March 21
and 30, an analysis was made of a memorandum by Dr. Burgess
entitled "Treasury War Borrowing and the Banks", and a
reply to Dr. Burgess W&B prepared commenting on the
memorandum. The reply was transmitted to the Under
Secretary on April 7. - Mr. Murphy
56. At the request of Mr. Upham on March 30, a memorandum was
prepared and was transmitted to him on April 1, on interest-
bearing United States securities subject to surtax and the
amount held by banks. - Mr. Conrad
Regraded Unclassified
289
- 17 -
57. The analysis of a proposed industrial loan corporation
bill of 1942, requested by Mr.Morris on December 16,
has been superseded by Executive Order 9112, March 26,
authorizing all banks to finance contracts to facilitate
the prosecution of the war. - Mr. Foy
58. At the request of Mr. Buffington on April 15, a table
was prepared, showing a comparison of inventories and
bank loans of 25 large corporations. The table was
transmitted to Mr. Buffington on April 16. - Miss Parker
59. At the request of Mr. Buffington on April 21, data were
obtained on the J. I. Case Threshing Machine Company,
and were transmitted to him on that date. - Mrs. Miller
60. At the request of Under Secretary Bell on April 17,
a letter was prepared, for signature of the Secretary,
to Mrs. Roosevelt, transmitting an analysis of the
tax proposals of Dr. Joseph E. Goodbar, submitted by
Mr. George A. Miller. The letter was transmitted to
the Under Secretary on April 20. - Mr. Murphy, Mr. Rosen
61. At the request of Under Secretary Bell on April 6, a
review was made of a draft of an article for his signature
for distribution to Latin American newspapers. The article
was discussed with the Under Secretary on April 15. -
Mr. Murphy
62. At the request of Under Secretary Bell on April 15, drafts
of letters were prepared, commenting on proposed amendments
to the National Housing Act. Drafts of these letters,
addressed to the Bureau of the Budget and to the Senate
Committee on Banking and Currency, were forwarded to the
Legal Division on April 17. - Mr. Lindow, Mr. Wagner
63. At the request of Mr. Tietjens on March 26, a report
was reviewed on 8. 2146, a bill to amend the Home Owners
Loan Act of 1933, as amended, and on S. 2147, a bill to
amend Title IV of the National Housing Act, as amended,
and S. 2148, a bill to amend the Federal Home Loan Bank
Act, as amended.A revised proposed report was prepared,
addressed to Senator Wagner, Chairman of the Committee
on Banking and Currency, for signature of the Secretary,
and a memorandum was prepared to Mr. Tietjens, explain-
ing the changes. Both were transmitted to Mr. Tietjens
on April 7. - Mr. Murphy, Mr. Sandelin
Regraded Unclassified
290
- 18 -
64. At the request of Mr. Tietjens on April 25, a review
was made of a proposed report on S. 2325, a bill to reduce
interest rates on mortgage loans made by Federal land
banks and by the land bank commissioner on loans by the
RFC for drainage and similar districts. The report was
transmitted to Mr. Tietjens on April 27.- Mr. Murphy
II. Projects or studies under way
1.
A study 18 being made of the relative interest costs
of short- and long-term borrowing. - Mr. Foy, Mr. Barnett,
Mr. Rosen
2. A study 18 being made of the effect of the maturity,
call period, coupon, premium, and size of issue on the
prices and yields of United States securities. - Mr. Conrad
3.
A memorandum is being prepared on & negotiable security
for continuous sale. - Mr. Murphy
4. A study is being made of developments in the reserve
position of the banks. - Mrs. Miller
5.
Historical tables are being prepared which will present
various data on new Treasury notes and bonds and on
guaranteed new issues. Three tables have been completed.
Others are in process. - Mr. Conrad, Mr. Rosen
6.
A revision 1s being made as of June 30, 1941, of the
estimates of the ultimate increase in interest costs
which would result from removal of the tax-exemption
privilege from all public securities. - Mr. Murphy,
Mr. Lindow, Mr. Conrad
7.
A study is being made of war-financing measures of
belligerent nations in the present war. - Mr. Sandelin
8.
A study 18 being made of the market action of the
various maturity classes of Government securities
in relation to the type of holder. - Mr. Conrad
9.
At the request of Mr. Surrey on January 1, a study 18
being made of the amortization of bond premium and
discount. - Mr. Murphy
291
- 19 -
10. A memorandum is being prepared on the desirability
of conducting the war finance as it was in the last
World War, by war loan drives. - Mr. Foy
11. At the request of Assistant Secretary Gaston on
January 20, a review 18 being made of "A Memorandum
on Financing the War", by Mr. Robert L. Owen. - Mr. Foy
12. A study is being made of the post-war effects of a
large volume of demand debt. - Mr. Murphy, Mr. Lindow,
Mr. Foy
13. A study is being made of the sources of funds
available for borrowing by the British Government
comparable to the study in progress for this country,
as described in Financial Analysis, I, item 22. -
Mr. Weintraub
14. At the request of Under Secretary Bell on March 30,
a study is being made of replies to the circular
letter of March 20 from the Secretary to 7,500
owners of Series F and G savings bonds - Mr. Murphy
15. At the request of the Division of Tax Research on
March 30, cooperation is being given in preparing
a report on tax-exempt securities. The following
items were prepared during the month. - Mr. Murphy,
Mr. Lindow, Mr. Conred
(a) A review was made of estimates of tax
differentials on various classes of
securities - Mr. Lindow, Mr. Conrad
(b) A memorandum was transmitted to Mr. Blough
on April 2, containing a proposed appendix
to the report, entitled "Estimate of the
market value of the tax-exemption privilege
of long-term high-grade State and local
securities as of March 1, 1942". A revision
of the proposed appendix as of April 1, 1942,
was transmitted to Mr. Blough on the same
date. - Mr. Murphy, Mr. Lindow, Mr. Conrad
292
- 20 -
(o) A memorandum was transmitted to Mr. Blough on
April 10, containing B. proposed appendix to the
report entitled "Treasury estimates of the owner-
ship of State and local government securities
outstanding". - Mr. Lindow, Mr. Conrad
16. At the request of Mr. George F. Milton, Consultant,
Defense Savings Staff, on March 23, a complete file
of tables 18 being prepared giving the history of
sales of Defense savings bonds. - Mr. Reagh
17. At the request of Mr. Buffington on April 11, a
memorandum 18 being prepared, analyzing reports re-
ceived concerning subscriptions to the issue of
t percent certificates of indebtedness. - Mr. Murphy,
Mr. Tickton, Mr. Robbins, Miss Westerman
18. At the request of Mr. Buffington on April 10, a memo-
randum is being prepared onsnew capital issues used
to refund bank loans. - Mr. Murphy, Mr. Foy
19. A memorandum is being prepared on the relationship
of selective control of bank credit and of new
capital issues. - Mr. Murphy
20. At the request of Mr. Bartelt on April 10, comménts
are being prepared on a memorandum prepared by Mr.
Loafman in accordance with the request of Under
Secretary Bell, that consideration be given to the
change of the basis of public debt statements appearing
in the Secretary's Annual Report from the so-called
revised or actual basis to the so-called unrevised
Daily Treasury Statement basis. - Mr. Murphy, Mr. Lindow,
Mr. Tickton
21. At the request of Under Secretary Bell on April 21,
a study 18 being made of currency in circulation. -
Mr. Weintraub
22. At the request of Mr. Buffington on April 15, a memorandum
1s being prepared on the implications for Treasury finano-
ing of the enforcement by the Securities and Exchange Com-
mission of the Public Utility Act of 1935. - Mr. Murphy,
Mr. Rosen
23. At the request of Mr. Bloan on April 18, a memorandum
is being prepared on the effect of sales of War savings
bonds on living costs of families with specified incomes. -
Mr. Lindow, Mr. Wagner
293
- 21 -
24. At the request of Under Secretary Bell on May 31, 1940,
replies are being prepared to certain questions asked
by the Wagner Committee preparatory to its investiga-
tion of banking and monetary conditions pursuant to
Senate Resolution 125, 76th Congress, 3rd Session. -
Mr. Haas, Mr. Murphy, Mr. Foy
25. At the request of Under Secretary Bell on June 16, 1941,
cooperation was given in preparing replies to the list
of questions accompanying a letter from Senator Tydings
of May 5. The information is for use by the Senate
Committee created to find ways and means of automatically
balancing the Federal Budget in times of peace. A pro-
posed reply was sent to the Under Secretary on June 18,
1941. - Mr. Murphy, Mr. Foy
26. At the request of the Office of the General Counsel on
April 11, a memorandum is being prepared on H.R. 6886,
a bill to provide for tolls with respect to the use for
commercial navigation, of the improved inland waterways
of the United States, for the purpose of reimbursing
the United States for expenditures made in improving
such waterways. - Mr. Murphy, Mr. Foy, Mr. Lindow
27. At the request of Under Secretary Bell on April 20,
a review was made, and a revision 18 being prepared
of Mr. White's draft of a reply to Representative
Patman, with respect to H.R. 6391, a bill to provide
for issuance of non-negotiable United States bonds
to Federal Reserve Banks and terminating the authority
of the Treasury to issue other interest-bearing obliga-
tions of the United States to commercial banks, and-for
other purposes. - Mr. Murphy
Revenue Estimates
I. Projects or studies completed
1.
The regular monthly statement was prepared, showing
the latest revised estimates of receipts, by months
and by principal sources of revenue, for the period
April-June 1942, and fiscal 1943. The statement
was transmitted to the Bureau of Accounts. - Mr. Delcher
2.
The regular monthly summary comparison was prepared,
showing estimated receipts and actual receipts in
March 1942 on the daily Treasury statement basis.-
Mr. Delcher
294
- 22 -
3. The regular monthly detailed comparison was prepared,
showing estimated and actual receipts in March 1942,
based on the collections classification. - Mr. Delcher
4. A revision of the budget estimates of receipts for the
fiscal years 1942 and 1943 was prepared, and was trans-
mitted to the Director of the Bureau of the Budget on April 21-
Mr. O'Donnell, Mr. Daggit, Mr. Leahey, Mr. Kelly,
Mr. Smith, Mr. Jorgensen, Mr. Lusk, Mr. Colclough,
Mr. Chevraux, Mr. Saunders, Miss Smith
5. A forecast of the monthly distribution of receipts
in the fiscal years 1942 and 1943 was prepared on the
basis of the revised budget estimates. - Mr. O'Donnell,
Mr. Daggit, Mr. Delcher, Miss Spiegel, Mr. Colclough,
Miss Smith
6. In connection with the proposed revision of the revenue
laws in 1942, a number of revenue estimates, listed be-
low, were prepared at the request of Senator George,
Assistant Secretary Sullivan, Mr. Paul, Mr. Tarleau,
and the Division of Tax Research. - Mr. O'Donnell,
Mr. Leahey, Mr. Kelly, Mr. Smith, Mr. Jorgensen,
Mr. Delcher
(a) A detailed estimate was prepared, and was trans-
mitted in a memorandum to Mr. Blough on April 30,
of the revenue yield of a net value-added tax,
assuming six different taxpayers' bases, on two
tax credit assumptions.
(b) Estimates were completed, and were transmitted in
a memorandum to Mr. Blough on April 15, of the
yield from estate and gift taxes on the basis of
four changes, and their combined effect.
(c) A table was completed, and was transmitted in a
memorandum to Mr. Blough on April 16, showing
for each tax under miscellaneous revenue the
present expected revenue and the expected in-
crease under the rates proposed by the Treasury.
(a) An estimate was completed, and was transmitted in
a memorandum to Mr. Blough on April 9, of the in-
crease in revenue from a 100 percent tax on net
incomes in excess of $5,000.
Regraded Unclassified
295
- 23 -
(e) Estimates were completed, and were transmitted
in a memorandum to Mr. Blough on April 13, of
the additional revenue resulting from reduction
of personal exemptions and credit for dependents
under the present and proposed laws, with analysis
of six aspects of its effects.
(f) Estimates were completed, and were transmitted
in a memorandum to Mr. Blough on April 16, on
the bases of the present law and proposed rates,
for mandatory joint returns, on several separate
assumptions.
(g) A table was prepared, and was transmitted in a
memorandum to Mr. Blough on April 16, giving the
tax base used for estimates of individual and
corporate income and excess-profits taxes.
(h) In connection with the Boland Bill (H.R. 6358)
and the Treasury proposals for taxing capital
gains and losses, estimates were prepared, and
were transmitted in a memorandum to Mr. Blough
on April 15, of the revenue yield, on six dif-
ferent assumptions.
(1) Estimates were prepared, and were transmitted in
a memorandum to Mr. Blough on April 6, of the
effect of proposals to eliminate percentage deple-
tion and the option to charge as an expense in-
tangible development costs, and the combined effects
of both.
(j) A revision was prepared, and was transmitted to
Mr. Blough in a memorandum on April 9, of the
estimates from the individual income tax sub-
mitted to Mr. Blough on March 2. The revision
allowed for the interacting effect of the entire
Treasury program, on five different assumptions.
(k) Estimates were prepared, and were transmitted in
a memorandum to Mr. Blough on April 13, of the
net income of all net income corporations, with
specified component detail.
(1) An estimate was prepared, and was transmitted in
a memorandum to Mr. Tarleau on April 13, of the
flat percentage rate on long-distance telephone
calls necessary to yield the revenue which would
be raised under the bracket rates proposed by the
Treasury on March 3.
Regraded Unclassified
296
- 24 -
(m) Estimates were prepared, and were submitted in a
memorandum to Mr. Blough on April 14, of the increase in
income taxes if interest on outstanding issues of
State and local government securities be made subject
to all Federal income taxes, on three different assump-
tions.
(n) Estimates were prepared, and were transmitted in a
letter to Mr. Stam on April 15, of the increase in
revenue over the estimated yield under the present
law for each of four income tax schedules, on two
assumptions.
(o) An estimate was prepared, and was transmitted in a
memorandum to Mr. Blough on April 15, of the dis-
tribution of the number of taxable returns based
on the calendar year 1941 income.
(p) Estimates were prepared, and were transmitted in a
memorandum to Mr. Blough on April 15, of the yield
of a compulsory savings plan of 5 percent of gross
income.
(q) Two tables were prepared, and were transmitted under
cover of a memorandum to Mr. Blough on April 16,
showing the estimated increase in revenue from the
proposed tax program and the estimated full-year
effect of indicated excises at forecast fiscal year
1943 levels of business.
(r) Estimates were prepared, and were transmitted in a
memorandum to Mr. Blough on April 16, of the combined
effect of specified reductions of personal exemptions
and of substitution of a new surtax rate schedule.
(s) A table was prepared, and was transmitted in a memorandum
to Mr. Paul on April 17, showing the latest estimates
of net income taxes, and dividends of corporations
with positive net income, 1936 through 1942.
(t) A table was prepared, and was transmitted in a
memorandum to Mr. Blough on April 17, showing the
estimated receipts in the fiscal year 1943, assum-
1ng enaotment of the Treasury's proposals, effective
July 1, 1942.
Regraded Unclassified
297
- 25 -
(u) Two tables were prepared, and were transmitted
under cover of a memorandum to Mr. Paul on April 21,
showing estimated revenue for the fiscal year 1943,
assuming enactment effective July 1, 1942, of the
Treasury program and the estimated increase due to
changes incorporated in the Treasury program.
(v) An estimate was prepared, and was transmitted in
a memorandum to Mr. Blough on April 22, of the
effect of limiting the special credit for earned
income, in connection with mandatory joint returns,
to $50 instead of $100.
(w) An estimate was prepared, and was transmitted in
a memorandum to Mr. Blough on April 22, of the
effects of specified reductions of personal ex-
emptions and dependent credits respectively, on
the basis of the Treasury's proposed surtax schedule.
(x) Estimates were prepared, and were transmitted in
a memorandum to Mr. Blough on April 22, of the
yield of the mandatory joint returns provision
after specified allowances, and of their combined
effect.
(y) An estimate was prepared, and was transmitted in
a memorandum to Mr. Blough on April 25, of the
portion of the excess-profits tax under the
Treasury proposal which would be considered as
compulsory savings.
(z) An estimate was prepared, and was transmitted in
a memorandum to Assistant Secretary Sullivan on
April 28, of the number of individuals affected
by the President's proposal to limit net income
after taxes to a maximum of $25,000 on two bases.
(a') A tabular exhibit was prepared, and was transmitted
under cover of a memorandum to Mr. Blough on
April 28, showing the estimated loss in revenue
from proposed individual income tax changes with
respect to three specified types of credit.
(b') Tentative estimates were prepared of the effect
of six proposed changes in corporation taxes at
five income tax rates.
Regraded Unclassified
298
- 26 -
(0') The following material was prepared, for repro-
duction in the confidential Committee print, of
data on the proposed revenue bill of 1942, sub-
mitted to the Committee on Ways and Means of the
House of Representatives:
Exhibit 1. Estimated receipts, fiscal
year 1942 and fiscal year 1943 (April 1942
revision).
Exhibit 7. Estimated excess profits net
income and excess-profits credit of corpora-
tions estimated to pay excess-profits taxes
on calendar year 1942 incomes.
Exhibit 8. Estimated revenue effect of
corporation income-tax changes proposed
by the Joint Committee on Internal Revenue
Taxation.
Exhibit 9. Estimated effect on corporation
taxes of the Robertson proposal.
Exhibit 10. Estimated revenue effect on
corporation taxes at levels of income estimated
for calendar year 1942 of the Robertson pro-
posal No. 2.
Exhibit 22. Statement entitled "Capital-stock
tax and declared value excess-profits tax data"
with four tables.
Exhibit 23. Estimated revenue effect on
corporation taxes at levels of income estimated
for calendar year 1942, of repeal of capital
stock and declared value excess-profits taxes.
Exhibit 24. Estimated revenue effect on corpora-
tion taxes at levels of income estimated for
calendar year 1942 of the Robertson proposal
No. 3.
Exhibit 27. Estimated calendar-year liabilities
for the capital-stock and declared value excess-
profits taxes.
299
- 27 -
7. Studies were completed for revising and improving
methods of estimating revenues from taxes on the
following: - (a) small cigarettes; (b) coin-operated
machines; (c) bowling alleys; and (d) matches. -
Mr. Daggit, Mr. Colclough, Mr. Saunders, Miss Smith
II. Projects or studies under way
1. Progress has been made on the analysis of each component
of the September revised estimates of miscellaneous
internal revenue, excluding capital stock, estate, and
gift taxes, for the fiscal years 1942 and 1943. -
Mr. Daggit, Miss Spiegel, Mr. Colclough, Miss Smith
2. An analysis 18 in preparation of each component of the
April revised estimates of miscellaneous internal
revenue, excluding capital stock, estate, and gift
taxes, for the fiscal years 1942 and 1943 - Mr. Daggit,
Mr. Colclough
3. In connection with the proposed revision of the revenue
laws in 1942, a number of revenue estimates, listed
below, are being prepared at the request of the Division
of Tax Research. - Mr. O'Donnell, Mr. Leahey, Mr. Kelly,
Mr. Smith, Mr. Lusk, Mr. Delcher
(a) An estimate is being made of the additional revenue
if mutual non-life insurance companies taxable
under Section 207 of the Internal Revenue Code
were made taxable as stock non-life insurance
companies taxable under Section 204, and the ex-
emption under Section 101(11) were restricted to
local mutual companies of the assessment type.
(b) An estimate 1s being made of the revenue which
would result if the Canadian corporate tax system
were substituted for the present system in this
country.
(c) An estimate 1s being made of the total revenue
and increase over the existing law which would
result from the adoption of the British individual
and corporate income and excess-profits tax structure.
(d) With reference to the excess-profits estimate
completed on January 17, a breakdown is being made
of the income and tax figures before and after the
proposed change in the excess-profits tax credit,
by detailed industrial and size classifications of
corporations.
Regraded Unclassified
300
- 28 -
(e) An estimate 1s being made of the revenue which
would result from modification of treatment of
capital gains and losses by providing that the
decedent's basis for the computation be made
the basis in the hands of the persons receiving
the property.
(f) An estimate is being made of percentage depletion.
(g) An estimate 18 being prepared of the increase in
revenue under the present and the proposed rates
from adoption of (1) the Wood Plan and (2) manda-
tory joint returns as recently proposed.
(h) An estimate 18 being prepared of the effect of
the latest estimate of revenue from mandatory
joint returns on the community property States.
(1) An estimate 1s being prepared of the number of
taxpayers under the manufacturers', wholesale,
and retail forms of sales taxes comparable with
Treasury estimates of sales tax revenue yields.
(j) Estimates are being prepared of yield from the
tax on capital gains and losses assuming modi-
fication on three bases, under a number of
variations which might be incorporated.
(k) Estimates are being prepared of the yield from
a specified withholding tax; compulsory savings tax, on
two bases; and a specified war consumption tax,
on two assumptions.
4. Studies are in process for estimating revenues from
proposed taxes on soft drinks, candy, and chewing gum.-
Mr. Daggit, Miss Spiegel, Miss Smith
5. A study 1s in process for revising and improving methods
of estimating revenues from the tax on transportation
of persons. - Mr. Daggit, Miss Spiegel, Miss Smith
Regraded Unclassified
301
- 29 -
Economic Conditions Related to Fiscal
and Revenue Matters
I. Projects or studies completed
1. Memoranda on the business situation were prepared, and
were transmitted to the Secretary on April 6, 13, 20,
and 27. - Mr. Haas, Mr. Daggit, Mr. Chevraux, Miss Ziegler
These memoranda contained in addition to analysis of
the current situation the following special studies:
(a) Percentage change in retail sales by type of
store from February 1941 to February 1942.
(Chart in memorandum of April 6.) - Mr. Daggit,
Mr. Colclough, Miss Spiegel
(b) National income payments and related components.
(Chart in memorandum of April 13.) - Mr. Daggit,
Mr. Colclough
(c) Percentage change in the FRB index of industrial
production and selected components in February and
March 1942 compared with the 1935-39 average.
(Chart in memorandum of April 27.) - Mr. Daggit,
Mr. Chevraux, Mr. Colclough
2. Monthly or weekly reports are received from 25 individual
companies, in response to the Secretary's requests giving
confidential data on new orders and sales. The data in
these reports are tabulated and charted currently for the
Secretary's information, and are also combined into an
index of new orders, which accompanies the memorandum on
the business situation. - Miss Washabaugh. Miss McLachlan
3. Memoranda on employment under the Work Projects Adminis-
tration were prepared on April 6, 13, and 20. -
Miss Washabaugh, Miss McLachlan
4. Compilations were made of daily quotations on selected
commodities, and daily and weekly figures on selected
business indexes, foreign and domestic security trans-
actions, security prices, and exchange rates, as well
as other data for the Secretary's chart book. -
Mr. Chevraux
5. In further response to the request of Mr. Leon Henderson
of July 19, 1941, copies of charts on commodity prices
were transmitted to him, as indicated below. - Mr. Daggit
Regraded Unclassified
302
- 31 -
11. The Dow-Jones composite stock averages as of the end
of each month were brought up to date as of March 31. -
Mr. Daggit, Miss Spiegel
12. A reply was prepared on April 25, for signature of
the Secretary, to a letter from Mr. R. W. Wilson,
President of the Advance Aluminum Castings Corporation,
suggesting an inventory of idle manufacturing space.
The letter was mailed on April 29. On the same date,
a letter was prepared for signature of the Secretary
to Mr. Donald Nelson, referring Mr. Wilson's letter to
the War Production Board for consideration. - Mr. Lindow
13. For use in revenue estimating, an estimate was made
of the Standard Statistics index of 420 stock prices,
unrevised, for the year 1941 and for December 1941. -
Mr. Daggit, Miss Spiegel
14. For use in revenue estimating, forecasts were made of
five basic business indexes for the fiscal years 1942
and 1943. - Mr. Daggit, Mr. Colclough, Mr. Saunders,
Miss Smith
Actuarial Problems
I. Projects or studies completed
1. At the request of Mr. Fisher, Chief, Retirement Division,
Civil Service Commission, on January 28, the Board of
Actuarieshas prepared sets of factors to determine the
immediate annuities of those eligible for retirement
under section 1(d) and section 5(a) of the Civil Service
Retirement Act, as amended on January 24. A reply to
the request was prepared, was signed by the three Board
members, and was mailed on April 11. - Mr. Reagh,
Mr. Brown, Mr. Kroll
2.
In further response to the request of Dr. Falk of the
Social Security Board on January 7, a final check was
made of the Second Annual Report of the Board of Trustees
of the Federal Old-Age and Survivors Insurance Trust Fund.
Two signed copies received from the Social Security
Board on March 27 were signed by the Secretary, and were
transmitted to both Houses of Congress on April 7. Printer's
proof was reviewed and was forwarded to the Bill Clerk of
the House of Representatives on April 25. - Mr. Reagh,
Mr. Brown, Miss Westerman
Regraded Unclassified
303
- 30 -
The movements of the BLS index of 28 basic commodities
compared with the BLS wholesale price index of 889 com-
modities were shown from 1936 to date. Four charts,
as of April 4, 11, 18, and 25, were transmitted on
April 7, 14, 21, and 28, respectively.
Four charts showed the movements of the indexes of
12 foodstuffs and 16 industrial raw materials, and
percentage changes for each commodity from August 1939
and from December 6, to current dates. These charts,
as of April 2, 10, 17, and 24, were transmitted on
April 7, 14, 21, and 28, respectively.
6. In further response to the request of the Secretary on
January 28, memoranda and charts were prepared on export
freight movements and lighterage freight in storage and
on hand for unloading in New York Harbor, as of March 27,
April 3, 10, 17, and 24, and were transmitted to him on
April 1, 8, 15, 22, and 29, respectively. Copies were
given to Mr. Kamarck in further response to his request
of December 4. - Mr. Daggit
7.
A memorandum was prepared, and was transmitted to Assist-
ant Secretary Gaston on April 3, confirming data supplied
by telephone on the BLS cost-of-living and the BLS all-
commodity indexes. - Mr. Daggit, Miss Spiegel
8.
At the request of the Secretary on April 28, a memorandum
analyzing the OPA price ceiling plan was prepared, and
was transmitted to him on April 30. - Mr. Daggit
9.
At the request of the Secretary on April 28, reports were
transmitted to him on April 30, on (a) Mr. Daggit's talk
with Mr. MacKeachie of the War Department relative to
the reaction of the OPA price ceiling order on sales, and
(b) Mr. Daggit's telephone conversation with Mr. Bofinger
of the A & P Company of New York on the same subject. -
Mr. Daggit
10. A table was prepared, and was transmitted to the Secretary
on April 3, showing the Department of Commerce series on
salaries and wages, July 1941 revision, for the years
1939, 1940, and 1941, and January 1942. - Mr. Daggit,
Miss Spiegel
Regraded Unclassified
304
- 32 -
3. At the request of Under Secretary Bell on March 19,
comments were prepared on a draft regarding taxation
of pension trusts, and a memorandum was transmitted to
him on April 2. - Mr. Reagh
II. Projects or studies under way
1. The Board of Actuaries of the Civil Service Retirement
and Disability Fund is laying out detailed plans for
tabulating and processing data for use in preparing
the regular five-year valuation of the Civil Service
Retirement Fund for the purpose of determining the
liabilities of the Government under the Civil Service
Retirement Law. Under the law, such a valuation must
be prepared as of July 1, 1940. The valuation is well
under way. - Mr. Reagh, Mr. Brown
2. Several years ago a committee was organized for the
purpose of studying ways and means to extend retirement
benefits to all Government employees regardless of,
Civil Service status. The working committee, the Sub-
committee on Retirement, has again become active. A
report has been prepared but has not yet been submitted
to the main committee. - Mr. Reagh, Mr. Brown
3. At the request of Mr. A. R. Pilkerton, Auditor of the
District of Columbia, an actuarial quinquennial valua-
tion is being made of the Policemen's and Firemen's
Pension Fund of the District of Columbia. This valua-
tion 18 being made by the Treasury Department in accord-
ance with the 1942 District of Columbia Appropriation
Act, approved July 1, 1941. Substantial progress has
been made in the basic work for the valuation. - Mr. Reagh
Mrs. Grossman
4. At the request of the Division of Tax Research, several
conferences have been attended with members of the
Division of Tax Research, the Legal Staff of the Bureau
of Internal Revenue and the Legislative Counsel regard-
ing proposed changes in the tax laws relating to pension
trusts and the taxation of insurance companies. -
Mr. Reagh
305
- 33 -
5. The Chief Counsel's office of the Bureau of Internal
Revenue requested a member of the Government Actuary's
office to appear in Dallas, Texas, on May 4, at a
hearing before the United States Board of Tax Appeals,
to testify as to whether the Austin Mutual Life In-
surance Company of Austin, Texas, can qualify as a life
insurance company for tax purposes. A member of the
staff 1s assisting in the preparation of the testimony.-
Mr. Brown
Other Projects or studies
1. Publications
(a) All the material submitted for the April issue of
the Treasury Bulletin was reviewed and edited. -
Mr. Lindow, Mr. Lynch
The following tables were revised and expanded
for the April issue:
1. Sales of United States savings bonds
since May 1941. - Mr. Lindow, Mr. Brown,
Mr. Kroll
2. Sales of Postal savings stamps since
May 1941 - Mr. Lindow, Mr. Brown, Mr. Kroll
3.
Over-the-counter closing quotations of
public marketable securities issued by
the United States Government and by
Federal agencies. - Mr. Brown, Mr. Kroll
4. The table showing offerings and maturities
of Treasury billa. - Mr. Lindow, Mr. Lynch
5.
A page was substituted for the complete
chapter on net capital movements to the
United States, 1935 through January 1942 -
Mr. Lindow
(b) For the publication Prices and Yields of Public
Marketable Securities issued by the United States
Government and by Federal Agencies, computations
were made and copy was prepared for the issue
covering the month of March. - Mr. Brown, Mr. Kroll
306
- 34 -
(c) Arrangements have been made to transmit to
Mr. Schwarz's office, for use of the Christian
Science Monitor, the weekly figure of yield on
partially tax-exempt long-term Treasury bonds. -
Mr. Brown
2. Correspondence
Replies were prepared to letters received on subjects
relating to the work of the Division, and letters
drafted elsewhere and submitted to the Division for
that purpose were reviewed. - Miss Michener, Mr. Lindow,
Mr. Foy, Miss Ziegler, and other members of the staff
in appropriate fields of work
During April 570 letters were received in the Division
and 544 were handled a.s required.
3. Charts
Charts are prepared and continuously brought up to date
for use in memoranda and in chart books on special sub-
Jects, and corresponding photographic, photostatic, and
multilith work is carried on. This 1s done in the
Graphic Section under the supervision of Mr. Banyas.
A statistical report on the work of the Graphic Section
for the month of April 1s attached.
Regraded Unclassified
307
Work completed in the Graphic Section, Division of
Research and Statistics, during April 1942.
For Division
For
Type of work
of R&S
Others
Total
chics
leg charts:
Total charts completed
46
27
73
Bond book charts completed
-
-
-
Charts brought up to date:
3
bond chart books brought up to date
26 times
-
26(t)
All other charts brought up to date
659
39
698
Miscellaneous:
Total jobs
21
18
39
raphic:
Photographs:
Total jobs
79
32
111
Number of-
Negatives
223
39
262
Contact prints
555
130
685
Enlargements
118
77
195
stortate:
Total jobs
179
63
242
Number of-
Lettersise copies
4,662
2.337
6,999
All other copies
3,414
1,622
5,036
ultilith:
Total jobs
24
5
29
Number of-
Zinc and paper plates
120
8
128
iscellaneous:
Total jobs
31
13
444
Regraded Unclassified
Beginning January 1942
:
Type of work
:
:
Jan.
:
Feb.
Mar.
:
:
:
:
:
April
May
:
June
:
:
Total
:
:
A. Graphic:
New charts completed
81
13
67
73
Charte brought up to date
764
719
748
698
Bond book charts completed
2
1
-
67
3 bond books brought up to date
26 (t)
24(t)
26(t)
26(t)
Miscellaneous
19
30
24
39
3. Photographic:
Photographs:
Total jobs
116
121
138
111
Number of-
Negatives
409
512
373
262
Contact prints
837
758
745
685
Ealargements
376
434
454
195
Photostats:
Total jobs
297
312
279
242
Number of-
Lettersise copies
9,074
11,623
8.573
6,999
All other copies
3,400
3,298
4,927
5,036
Multilith:
Total jobs
17
16
31
29
Number of-
Zinc plates
144
163
331
128
Miscellaneous:
Total jobs
31
18
19
44
308
Regraded Unclass
309
SEP 9 1942
My dear Mr. President:
I an enclosing report on our exports
to some solected countries for the period
ending August 20, 1942.
Faithfully,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
The President,
The White House.
Del. by S. S. Agent 5:40
9/9/42
Enelosure
HDW/ofe
9/8/42
How
FILE COPY
SECRET
310
September 5. 1942
Exports to Russia, Free China and selected blocked
countries as reported to the Treasury Department
during the ten-day period ending
August 20, 1942
1. Exports to Russia
Exports to Russia, as reported during the ton-day
period ending August 20, 1942, amounted to $23,325,000,
as compared with $33,940,000 and $53,799,000 during the
the military equipment exported during the period under
same periods in July and June, 1942, respectively. Among
tanks. (See Appendix 0.)
review were 18 light bombers, 36 fighter planes and 27
2. Exports to Free China
Exports to Free Chima, as reported during the period
under review, amounted to $192,000, as compared with
$590,000 and $2,707,000 during July and June, 1942,
respectively. Military equipment accounted for about
79% of the total. (See Appendix D.)
3. Experts to selected blooked countries
Experts to selected blocked countries are given in
Appendix A. Most important were experts to Sweden and
Switzerland amounting to $324,000 and $167,000, respectively.
ISF/efs
9/5/52
Regraded Unclassified
STRICTLY CONFIDENTIAL
311
SUMMARY OF UNITED STATES DOMESTIC EXPORTS to SELECTED
COUNTRIES AS REPORTED TO THE TREASURY DEPARTMENT
FROM EXPORT DECLARATIONS RECEIVED DURING
THE PERIOD INDICATED 1/
(In thousands of dollars)
Total
Total
10-Day
10-Day
Domestic Exports
Domestic Exports
Period ended
Period ended
August 1, 1942 to
July 28, 1941 to
Aug. 20, 1942
Aug. 10. 1942
August 20, 1942
July 31. 1942
3. S. R.
$23,325
$14,970
$38,295
$742,941
le China
192
208
400
97,720
in
48
30
78
2,858
tserland
167
357
524
11,537
324
260
584
18,056
tugal
5
1
6
9,743
beh North Africa 2/
1,773
29
1,802
6,305
asury Dipartment, Division of Monetary Research
September 2, 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 shijment of &
particular period.
Includes Noroeco, Algeria, and Tunisia.
JMWirl 9/2/42
Regraded Unclassified
SECRET
312
APPENDIX B
Exports from the U. 3. to Free China and U.S.B.R.
as reported to the Treasury Department
July 28, 1941 - August 20, 1942 w
(In Thousands of Dollars)
Exports to
Exports to
Free China
U.B.S.R.
July 28, 1941 - Jan. 24, 1942
$ 32,758
8 98,902
Jan. 26 - Jan. 31
6,938
9,608
Feb. 1 - Feb. io
4,889
13,325
Feb. 10 - Feb. 20
4,853
26,174
Feb. 20 - Feb. 26 3/
2,921
28,119
Mar. 1 - Mar. 10
2,879
32,502
Mar. 10 - Mar. 20
8,058
20,556
Mar. 20 - Mar. 31
y
42,435
Apr. 1 - Apr. 10
4,836
Apr. 11 - Apr. 20
5,335
66,906
Apr. 21 - Apr. 30
2,827
50,958
May 1 - May io 5/
296
28,652
May 11 - May 20
1,872
18,000
May 21 - May 31
2,533
26,180
June 1 - June 10
3,399
12,764
June 11 - June 20
2,707
53,799
June 21 - June 30
1,664
49,919
July 1 - July 10
7,900
35,657
July 11 - July 20
590
33,940
July 21 - July n y
3,066
35,669
Aug. 1 - Aug. 10
208
14,970
Aug. 11 - Aug. 20
192
23,325
Total
$ 100,723
$ 782,056
1. These figures are in part taken from copies of shipping
manifests.
2. Beginning with February 1 figures are given for 10-day
period instead of week except where otherwise indicated.
3. 8-day period.
4. 11-day period.
5. 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 September 4,1942
ISF/efe 9/4/42
Regraded Unclassified
SECRET
313
APPENDIX 0
Principal Exports from U. S. to U. s. s. R.
as reported to the Treasury Department
during the ton-day period ending
August 20, 1942
Value
Unit of
(Thousands
Quantity Quantity
of Dellars)
TOTAL EXPORTS
$ 23,325
Principal Items:
Aircraft
Light bombers (2 eng. A-20)
5,150
No.
Fighters (P-39)
18
No.
Fighters (P-40)
a
No.
15
Aircraft assessories, including
engine parts
-
-
2,449
Amounition
.30 sal.
2,261
No.
10,000,000
.32, .38 and .45 eal.
No.
.50 eal.
3,000,000
No.
2,628,000
37 m. arser piereing
No.
8,860
75 m. armer piereing and high
explosive
No.
25,497
Anti-aireraft armer piereing
No.
21,840
20 m. tracers (aireraft)
No.
15,885
20 m. high explosive (Cerlikes)
No.
45,000
Military tanks - medium (N-3)
No.
27
2,160
Military tank parts & accessories
-
-
1,242
Pork and causage
Lb.
2,703,969
1,005
Iron and steel plates, sheets
and strip
M.L.b.
7,698
860
Motor trucks
Be.
457
678
Steel bare and reds
M.Lb.
7,257
547
Treasury Department, Division of Monetary Research September 4,1942
ISF/efe 9/4/42
Regraded Unclassified
SECRET
314
APPENDIX D
Principal Exports from U. s. to Free China
as reported to the Treasury Department
during the ten-day period ending
August 20, 1942
(Thousands of Dellars)
TOTAL EXPORTS
# 192
Principal Items:
Military equipment
152
Relief supplies - drugs and bielegies
15
Aluminum plates, sheets, bare and rede
10
Scientifie instruments
6
Relief supplies - surgical and hospital
4
Treasury Department, Division of Monetary Research September 3,1943
Isf/efs 9/4/42
Regraded Unclassified
315
SEP 9 1942
My dear Mr. Secretary:
I an enclosing copy of report on our
exports to some selected countries for the
period ending August 20, 1942. (9-5) )
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
The Honorable,
The Secretary of State,
Washington, D. c.
Enelosure
Del. by Sturgis (Messenger)
5:39 9/9/42
HDW/efs 9/8/42 glow
FILE COPY
Regraded Unclassified
SECRET
316
September 5. 1942
Exports to Russia, Free China and selected blocked
countries as reported to the Treasury Department
during the ten-day period ending
August 20, 1942
1. Exports to Russia
Exports to Ruesia, as reported during the ton-day
period ending August 20, 1942, amounted to $23,325,000,
as compared with $33,940,000 and $53,799,000 during the
came periods in July and June, 1942, respectively.
Military equipment accounted for 60% of the total.
(See Appendix 0.)
2. Exports to Free Chima
Experts to Free Chima, as reported during the period
under review, amounted to $192,000, as compared with
$590,000 and $2,707,000 during July and June, 1942,
respectively. Military equipment accounted for about
79% of the total. (See Appendix D.)
3. Experts to Selected blocked countries
Exports to selected blocked countries are given
in Appendix A. Most important were exports to Sweden
and #witzerland amounting to $324,000 and $167,000,
respectively.
ISF/efs 9/5/42
Regraded Unclassified
STRICTLY CONFIDENTIAL
317
SUMMARY OF UNITED STATES DOMESTIC EXPORTS to SELECTED
COUNTRIES AS REPORTED TO THE TREASURY DEPARTMENT
FROM EXPORT DECLARATIONS RECEIVED DURYNG
THE PERIOD INDICATED w
(In thousands of dollars)
Total
Total
10-Day
10-Day
Domestic Exports
Donestic Exposition
Period ended
Period ended
August 1, 1942 to
July 28, 1941 to
Aug. 20, 1942
Aug. 10. 1962
August 20, 1942
July 11. 1942
3. 5. a.
$23,325
$14,970
$38,295
$742,941
China
192
208
400
97,720
in
48
30
78
2,858
tserland
167
357
524
11,537
den
324
260
584
18,056
tugal
5
1
6
9,743
noh North Africa 21
1,773
29
1,802
6,305
sury Department, Division of Monetary Nesearch
September 2, 1942.
Many of the export declarations are received with 4 leg of several days or more.
Therefore this compilation does not accurately represent the actual shipment of a
particular period.
Includes Morocco, Algeria, and Tumisia,
Jirl 9/2/42
Regraded Unclassified
SECRET
318
APPENDIX s
Experts free the U. s. to Free China and U.S.S.R.
as reported to the Treasury Department
July 28, 1941 - August 20, 1942
(Thrusands of Bollars)
Exports to Experts to
U.S.L.L.
July 28, 1941 - Jan. 24, 1942
$ 32,798 6 98,902
Jam. 26 - Jan.
Feb. 1 - Feb.
Feb. 10 - Feb.
Feb. 20 - Feb.
Mar. 1 - Mar.
10
Mar. 10 - Mar.
Mar. 20 -
Apr. 1 -
Apr. 11 .
Apr. n-
May 1 .
s y y 2/
May 11 -
May n .
June 1 -
June
11 -
June 21 -
July 1 -
7,900
July 11 - July
July a - July
y
3,066
Aug. 1 -
Aug. 11 - Aug.
192
Total
8 100,723 $782,096
1. These figures are in part taken from espies of shipping
manifests.
2. Beginning with February 1 figures are given for 10-day
period instead of week except where otherwise indicated.
3. S-day period.
4. 11-day period.
5. Due to changes in reporting presedure by the Department of
Commerce this report is incomplete for the period indicated.
Freasury Department, Division of Monstary Recearch September 4,1942
ISF/efe 9/4/42
Regraded Unclassified
SECRET
319
APPENDIX e
Principal Exports from U. B. to U. s. s. a.
as reported to the Treasury Department
during the tem-day period ending
August 20, 1942
(Thousands of Bellars)
TOTAL EXPORTS
8 23,325
Principal Items:
Military equipment
14,010
Pork and sanange
Irea and steel plates, sheets and strip
Motor trucks
Steel bare and reds
Tracklaying tracters
Copper wire, insulated
Burgical and medical instruments
Lathes
Aluminum and alleys, oreão
1,005 #####
Irea and steel billets
Irea and steel wire md manufactures
freasury Department, Division of Monetary Recearch September 4,1942
197/efe 9/4/42
Regraded Unclassified
SECRET
320
APPENDIX D
Principal Exports from 8. a. to Free this
as reported to the Treasury Department
during the ton-day peried ending
August 20, 1942
(Thousants of Bellars)
TOTAL EXPORTS
8 192
Principal Items:
Hilitary equipment
1
Relief supplies - drugs and biolegies
Aluminum platos, cheets, bars and reds
Scientific instruments
Relief supplies - surgical and hespital
-
Treasury Department, Division of Monetary Recearch September 3,1942
IW/efs 9/4/20
Regraded Unclassified
321
SEP 9 1942
-
Dear Doesns
I have received m. Restew's letter of
August as and the malesed draft of e sable
to the Lenden Taboury es beekkeeping prose-
dures for reciprossl aid. We have exemined
the materials, and, in view of the difficulties
of stating values at this time, - are in
agreement with the directives of the draft
cable.
Very sincerely yours,
(Signed) Henry
Secretary of the Treasury
Dear Achesem,
Assistant Secretary of State,
Washington, Do C.
Orig. File Airect to Dr. White's
Photostatic File - NMC
office
By Messenger, Sturgis, 5:35 9/9/42
JENsdal
9-2-42
Regraded Unclassified
322
SEP 9 - 1942
Dear Eds
I have received Mr. Restow's letter of
August 25 and the enclosed draft of a cable
to the London Embessy on bookkeeping prose-
dures for resiprecal aid. Be have examined
the materials, and, in view of the diffi-
culties of stating values at this time, no
are in agreement with the directives of the
draft cable.
Very sinserely yours,
(Signed) Henry
Secretary of the Treasury
Mr. E. & Stettinius, Administrator,
Office of Lend-Lease Administration,
515 - 22nd Street, N. Dog
Washington, D. C.
Orig. File direct to Dr. White's office
Photostatic File - NMC
By Messenger, Sturgis, 5:35 9/9/42
JEHsdel
9-2-42
EPPICIAL COMMUNICATIONS TVI
nel
RECRETARY or STATE
WASHINGTON, D C
DEPARTMENT OF STATE
WASHINGTON
August 25, 1942
My dear Mr. Secretary:
Mr. Acheson did not have an opportunity before he
left on vacation to discuss with you the rather troublesome
question of reporting the value of the aid our forces are
receiving from the British, Australian and New Zealand
Governments, and from the Fighting French authorities, in
various parts of the world. You may recall the cables sent
from London by Mr. Stettinius and Mr. Harriman, copies of
which are attached for convenience, expressing the view
that no records in money terms should be kept.
Mr. Acheson asked me to send you a copy of his letter
to Mr. Stettinius, and a copy of a draft cable which he
prepared, for your viewe. Mr. Stettinius will, I believe,
call a meeting soon of those most interested in this policy.
Sincerely youre,
Eugene V. Rostow
Executive Assistant to
Assistant Secretary.
Enclosures:
1. Copies of cables from
Mr. Stettinius and
Mr. Harriman
2. Letter to Mr. Stettinius
from Mr. Acheson.
3. Draft of cable.
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury
Regraded Unclassified
DEPARTMENT OF STATE
PARAPHRASE
CONFIDENTIAL
Telegram no.
4244
Dated: July 29, 1942 midnight
From:
LONDON
Rec'd: July 29, 1942 11:26 p.m.
FROM HARRIMAN AND STETTINIUS FOR ACHESON AND MORGENTHAU.
The question of requiring dollar values to be placed
on reciprocal aid received from the British by us has been
studied by us. The conclusion has b en reached by us that
it would be unwise for OLLA to require valuation and it
would present major practical difficulties. Stettinius'
cable of July 29, no. 4245 to McCabe gives our reasons
for this conclusion. In this cable Stettinius has asked
McCabe to discuss this matter with you immediately.
After much consideration this conclusion was reached
by us. In order that he can put the policy of not requir-
ing dollar values into effect as soon as possible, we
hope you agree and will advise McCabe accordingly.
Since reciprocal aid is being received in increasing vol-
ume daily, prompt action is desired.
WINANT.
DCA:MBJ
7/30/42. Copies to: Mr. Hopkins (2)
Mr. Stettinius (1)
Mr. McCabe (1) via Stettinius
Mr. Morgenthau (1) direct
Regraded Unclassified
DEPARTMENT OF STATE
PARAPHRASE
CONFIDENTIAL
Telegram no.
4244
Dated: July 29, 1942 midnight
From:
LONDON
Rec'd: July 29, 1942 11:26 p.m.
FROM HARRIMAN AND STETTINIUS FOR ACHESON AND MORGENTHAU.
The question of requiring dollar values to be placed
on reciprocal aid received from the British by us has been
studied by us. The conclusion has b en reached by us that
it would be unwise for OLLA to require valuation and it
would present major practical difficulties. Stettinius'
cable of July 29, no. 4245 to McCabe gives our reasons
for this conclusion. In this cable Stettinius has asked
McCabe to discuss this matter with you immediately.
After much consideration this conclusion was reached
by us. In order that he can put the policy of not requir-
ing dollar values into effect as soon as possible, we
hope you agree and will advise McCabe accordingly.
Since reciprocal aid is being received in increasing vol-
ume daily, prompt action is desired.
WINANT.
DCA:MBJ
7/30/42. Copies to: Mr. Hopkins (2)
Mr. Stettinius (1)
Mr. McCabe (1) via Stettinius
Mr. Morgenthau (1) direct
Regraded Unclassified
DEPARTMENT OF STATE
PARAPHRASE
CONFIDENTIAL
Telegram no. 4245
Dated: July 29, 1942 midnight
From: LONDON
Rec'd: July 30, 1942 12:30 a.m.
FROM STETTINIUS FOR MCCABE.
The question of placing dollar value on reciprocal Aid
furnished by the British has been studied by me and I have
discussed this also with British and United States officials
in London. The views which follow have the approval of Hop-
kins and Harrimon, whom I have also consulted.
One. I am convinced that major practical difficulties
would be encountered in en attempt to require dollar values
to be placed on reciprocal A10 and 88 B result of this study
I deem it unwise.
(A) Services being rendered end facilities loaned to
us by the British represent a great variety of different
types of equipment. There are not available here records
of values. Because of the acute shortage of manpower the
British do not in many cases even for their own use keep
value data, although of course they keep records of supplies.
Value data must be compiled for the particular arrangement
in the case of real estate facilities and services, etc.
The manpower necessary to prepare estimates of the value of
such services and supplies 18 not had by the British. Any
attempt to reach an agreement on values they also oppose on
policy grounds. Consequently, if we insist, weeshall have
to prepare the estimates of values ourselves. In attempting
to estimate values for these items the results would be of
questionable significance and the loss of manpower involved
would be great. Since whatever person who makes the esti-
mate will go to great lengths as a practical matter to make
and estimate what he can sustain, the difficulty 18 not
avoided by requiring values only "when readily available".
The receipts which the British prepare and ask us to
sign are very often expressed in general terms without de-
tailed supporting inventories for the reasons given above.
Under
Regraded Unclassified
DEPARTMENT OF STATE
PARAPHRASE
CONFIDENTIAL
Telegram no. 4245
Dated: July 29, 194? midnight
From: LONDON
Rec'd: July 30, 1942 12:30 a.m.
FROM STETTINIUS FOR MCCABE.
The question of placing dollar value on reciprocal Aid
furnished by the British has been studied by me and I have
discussed this also with British and United States officials
in London. The views which follow have the approval of Hop-
kins and Harriman, whom I have also consulted.
One. I Am convinced that major practical difficulties
would be encountered in an attempt to require dollar values
to be placed on reciprocal nid and as a result of this study
I deem it unwise.
(A) Services being rendered and facilities loaned to
us by the British represent a great variety of different
types of equipment. There are not available here records
of values. Because of the acute shortage of manpower the
British do not in many cases even for their own use keep
value data, although of course they keep records of supplies.
Value data must be compiled for the particular arrangement
in the case of real estate facilities and services, etc.
The manpower necessary to prepare estimates of the value of
such services and supplies 1s not had by the British. Any
attempt to reach an agreement on values they also oppose on
policy grounds. Consequently, if we insist, weeshall have
to prepare the estima tes of values ourselves. In attempting
to estimate values for these items the results would be of
questionable significance and the loss of manpower involved
would be great. Since whatever person who makes the esti-
mate will go to great lengths as a practical matter to make
and estimate what he can sustain, the difficulty is not
avoided by requiring values only "when readily available".
The receipts which the British prepare and ask us to
sign are very often expressed in general terms without de-
tailed supporting inventories for the reasons given above.
Under
Regraded Unclassified
- 2-
Under Lend Lease they are willing to rely on these records
for their credit. I am convinced that more records should
not be insisted upon by OLLA if they do, since a vast amount
of work would be involved in the compilation of them.
(B) It 1s unwise to value reciprocal 31d because the
dollar sign would be emphasized, which it has consistently
been sought to bonish from the Lend Lease picture and to
divert attention from the concept of A common pool of re-
sour ces by the President. The actual and relective (?) ex-
tent of the sacrifice represented by the Aid which the British
are providing for us cannot be adequately expressed by any
money figure. A real dialocation is represented by every
unit of labor moved to meet American needa, since British
production is 80 circumscribed by limitations of material,
transportation facilities, labor and factory and storage
space for every article provided and every bit of factory
or storage space made available.
Two. Certain difficulties such AA reporting to Congress
will be created in not having A money value TO place on re-
ciprocal .a1d received end I realize this. These difficulties
can be met, I believe, by telling the story in terms of tons
of food delivered, maintenance facilities provided for
planes and tanks and trucks, war material made available
and thousands of men transported and housed, etc. The
considerations I have set forth above in any event far
out weigh such difficulties.
Three. I am also cabling Acheson and Morgenthou. Please
show this cable to them and discuss it with them. The neces-
BARY steps to put his (7) policy decision into operation should
be taken If they agree. The release from the necessity of
wasting army manpower in the United Kingdom to estimate
value of supplies and weapons which the Army receives here
would probably be welcomed by McCloy; vill you please advise.
Without the necessity of making further independent detailed
inventories, this change of policy should permit Army to
sign such receipts 88 may be satisfactory to the British
Government and forward them to Washington.
Four. To keep records of any kind of miscellaneous
services and facilities would clearly be entirely imprac-
ticable. In the proposed reverse Lend-Lease agreement In
this has already been recognized and provided for.
OLLA's accounting instructions to them appropriate provision De-
should be made and I suggest you make this clear to the
partmen's concerned.
WINANT.
DCA:MBJ Copies to: 7/30/42. Mr. Hopkins (-); Mr. Stettinius (3); Mr. McCabe (1)
Regraded Unclassified
- 2-
Under Lend Lease they are willing to rely on these records
for their credit. I am convinced that more records should
not be insisted upon by OLLA if they do, since a vast amount
of work would be involved in the compilation of them.
(B) It is unwise to value reciprocal aid because the
dollar sign would be emphasized, which it has consistently
been sought to bonish from the Lend Lease picture and to
divert attention from the concept of A common pool of re-
sources by the President. The actual and relective (?) ex-
tent of the sacrifice represented by the Aid which the British
are providing for us cannot be adequately expressed by any
money figure. A real dialocation 19 represented by every
unit of labor moved to meet American needs, since British
production is 80 circumscribed by limitations of material,
transportation facilities, labor and factory and storage
space for every article provided and every bit of factory
or storage space made available.
Two. Certain difficulties such AA reporting to Congress
will be created in not having A money value to place on re-
iprocal ,Aid received and I realize this. These difficulties
can be met, I believe, by telling the story in terms of tons
of food delivered, maintenance facilities provided for
planes and tanks and trucks, var material made available
and thousands of men transported and housed, etc. The
considerations I have set forth above in any event far
out weigh such difficulties.
Three. I Am also cabling Acheson and Morgenthau. Please
show this cable to them and discuss 1t with them. The neces-
sary steps to put his (?) policy decision into operation should
be taken If they agree. The release from the necessity of
wasting army manpower in the United Kingdom to estimate
value of supplies and weapons which the Army receives here
would probably be welcomed by McCloy; vill you please advise.
Without the necessity of making further independent detailed
inventories, this change of policy should permit Army to
sign such receipts 88 may be satisfactory to the British
Government and forward them to Washington.
Four. To keep records of any kind of miscellaneous
services and facilities would clearly be entirely imprac-
ticable. In the proposed reverse Lend-Lease agreement In
OLLA's accounting instructions to them appropriate provision De-
this has ready been recognized and provided for.
should be made and I suggest you make this clear to the
partments concerned.
WINANT.
DCA:MBJ Copies to: 7/30/42. Mr. Hopkins (°); Mr. Stettinius (3); Mr. McCabe (1)
Regraded Unclassified
August 23, 1942
Dear Fd:
I epp interested in the cables which you and
Mr. Harriman sent from London about how to report the
receipt of 71% received by use from the British Govern-
gint on the lend-lesse bnsis. I AM in complete agree-
ment =1th your view that 19 fer prople as possible, both
on our side and on the British, be withdrawn from the
prosecution of the unr to eaguge in bookkeeping 01 this
sort.
It 1ª my view, however, that R record of quantities
should Le Att in ili CANNA of orticles receive) by us
" -10, and that the record should alvo, where
018, DA reased in monotary terms.
in the find, f.x I 903 it, regeists wight LP outsined
which inseribe " is tr naterred in sufficient detail to
Rano of value, without aking Army
or y niel in the f1eld to street to report the
of : : very :- recei A. The receipts could De
formal to = 11 etif:, elties in inston or else-
the :- considerte the resta end
31 officers, .0. 1: rogarly
:- the the LIKE in
intelligible of :- the firm 61.2 sated
Kindy of
lustion
1.=
1:1: or terretic. The - 1n or see 200.0 L.E 10:0 not
to is to pre-1 lengths to cive eati- :en of every velues, 5:
instrud
13
seek
of
tor
the
TOPPY. si--le rule of thurt for non uting Trited
::
...
in
..... -1.ht used. Lencel off revies one resided in
in
in
16
listerstion =1th the agencia: atu 1:y recet in, tt
Amorte
9. tettleius, Jr.
Vifice of Lend-Layee *ginistration
sington,
Regraded Unclassified
August 23, 1942
Dear Fd:
I CPP interested in the cables which you and
Mr. Harriman sent from London about how to report the
receipt of 010 received by us from the British Govern-
gint on the lend-lesse basis. I am in complete agree-
ment >1th your view that 29 Sex people 3.9 possible, both
on our side and on the British, be withdrawn from the
prosecution of the war to enguge in bookkeeping 01 this
sort.
It 1 ᵃ my view, however, that R record of quantities
should be *** in IL cases or articles received by us
10 -10, and that the record abruld A1-0, where
recenting DA reased in monetary terms.
In the fluid, is I Bes it, regetate night LP ottained
which tractibe -: is tr nainrred in sufficient det=il to
catim :- of value, without taking Army
y mel in the f1eld to attennt to report the
3: recei A. T:10 receipts could De
to etrf:, either in tenton or else-
110 to the end
1 2
roserly
the
LAKE
en
:- the 01/2 asted
ny
Kindy
of
1.=
1:15 or The e 12 or see 200.00 L.E. 10:0 not
to in to pre-1 lengthe to Take ext:- :en of e,sey values, 5:
of
the
si--le
rule
of
thurt
uting
-1:ed
**tee -1ght used. rusided in
in
=1th the agencias -tu 13y recel ink the
accorts
tetticlus, J1.
Iffice of Lend-Lanee einistration
ington,
Regraded Unclassified
- 2 -
Reporte from abroad provered in this way could be
the basis, if desired, of a consolic ted \regrom of book-
keeping in Washin ton which could further trinslate the
recibrocal a1d records into the value here of scuivalent
materials and services. That bookkee 1nc in turn 40 0
not aim at complete dollar value records, bet would be
directed towards the preparation of re orts which ould
be more meaningful than a room fill of the original re-
eeists for wash Jun and plane 90° lind to the trices.
niotetrotive extiune ar, er
tentative, and are designed only to illustrate the wint
of principle T vish to raise. I should B prool.by -5
views on this procesal, and on the attached draft of as
cable in 16 'y to it. Marriman. than 119 are All of one
mind on this problem, which I truct will be sonn, I
auggest that we do inform the Army and FORT, and 1.8
an appropriate revision of their instructions to field
of icers.
Sincerely yours,
DEAN acheson
Enclosure:
Draft of cable.
Regraded Unclassified
August 22, 1942
1th reference to your no. 43%, of July 2, from
atettinius one Barrison to longentinu and Acheson, and
nor no. 4245, or July no, from Stettining to HoGabe, we
eur; st this
One. All arti Я are a reed that quantitative records
are examptial lost tive 8 "er weode as onsible he energed
in keeding them; that hatever records we want should be
re ared by United States personn 1. Such records 9111
not be sub 10the for unit to the British, if they BO
Tefer, and -111 not off ct the broader issues of lend-
lease milement.
T.C. Any Havy ersonnel in the field should de
instruct C not to atten it reporting in money values,
crro here such values , a'e readily assignable.
A 0.00 Jene At one or are central offices
in ashl... ion and erha-s elsewhere, LE convenient, should
be directed to coordinate field reports and receipts of
officers into a clear picture, using money valuee where
such values can be obtained without effort, and presenting
the rogram otherwise as sug ested in paragraph two of
telegram 4345. Rule of thunb techniques for computing
values n1 ht i:e used to reach broad estimates.
Four.
Regraded Unclassified
August 22, 1942
1th ref rence to your no. 43%, of July 2, from
stettinius one Harrison :- Margenthau and Acheson, and
Aux no. 4245, of July no, from Stettining to McGabe, we
an, st this
One. All arti a re я it reed that quantitative cords
are examptial but that 8 few soble an onsible be energed
in keepin; them; that hatever records we want should be
re ared by United States personn 1. Such records 1111
no: be sub 10tre for was to the British, If they BO
Tefer, and 111 not off ct the broader issues of lend-
lease willement.
T.O. Any ano Mavy ersonnel. in the field should be
instruct C not to atter 1 re ortin in money values,
cree where such values are readily assignable.
A 1000 at one or cry central offices
in ashin in and erha 18 Glowhere, LE convenient, should
be directed to coordinate field reports and receipts of
officers into a clear picture, using money valuee where
such values can be obtained without effort, and presenting
the Togram otherwise as sug ested in paragraph two of
telegram 4245. Rule of thumb techniques for computing
values n1 ht be used to reach broad estimates.
Four.
Regraded Unclassified
- 2 -
Four. These reports could be used in Washington for
any further bookkeeping desired, and could be translated
into the dollar value of equivalent U. S. supplies and
services. It will be made clear in the next Report to
Congress that full reports on the reciprocal aid program
in monetary terms are impossible, and that the objective
in reporting will be to present as clear a picture, in
broad outline, as considerations of secrecy permit. Detailed
instructions are being prepared here with Army, Navy and
Lend-Lease officials.
Five. This cable has been approved by Messrs.
Hopkins, Morgenthau, Stettinius and McCabe.
Regraded Unclassified
331
THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA
Box 680
TELEPHONE: REPUBLIC 7860
BENJAMIN FRANKLIN STATION
WASHINGTON, D. c.
September 9th, 1942.
SECRET
Dear Dr. White:
The gold and dollar figures for August are
as follows:
Aug. 7
Aug.15
Aug.28
Aug.31
Total Gold
(incl. Belgian)
758
761
771
773
Official Dollar
Balance
158
166
170
195
Total Gold
and Dollars
916
927
941
968
Less: Belgian
Gold
110
105
110
110
Scattered Gold
168
180
182
182
Gold Reserve
against immed-
iate liabilities
10
10
10
10
AVAILABLE GOLD
AND DOLLARS.
628
632
644
666
We had a special payment of $15 million for wool
during the month.
Yours sincerely
T.K. Bewley.
Dr. H.D. White,
Director of Monetary Research,
U.S. Treasury,
donessed M
30
Washington, D. C.
332
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 312
Information received up to 7 A.M., 9th September, 1942.
1.. NAVAL
HOME WATERS. Night 7th/8th. Our light forces attacked 2 escorted
merchant ships off DIEPPE and CHERBOURG respectively. In each attack, the escorts
were damaged by gunfire, and it is possible one merchant ship was hit by torpedo.
One motor torpedo-boat and one motor gunboat slightly damaged.
MEDITERRANEAN. 7th. One of H.M. Submarines torpedoed a 9,000 ton
ship in convoy west of CRETE.
2. MILITARY
EGYPT. Night 6th/7th. Our patrols were active in Northern and
Central sectors. In the South, increased movement of enemy mechanical transport was
reported. 7th. Little activity reported.
RUSSIA. Russian attacks in Northern and Central sectors reduced. Orf
DON Front Bussians have slightly extended a bridgehead on the Southern bank north-
west of KLETSKAYA.
3. AIR OPERATIONS
WESTERN FRONT. 8th. Bostons, escorted by Spitfires, of which 2 are
missing, attacked 2 whale oil ships at HAVRE and CHERBOURG. No hits claimed. One
enemy aircraft crossed southwest coast, causing slight damage at SELCOMBE. A JU 88
WELD destroyed by Beaufighters 185 miles south-south-west of BISHOP'S ROCK.
8th/9th. 249 aircraft despatched to attack FRANKFURT, where weather
was not favourable. 7 missing and 3 crashed. 13 enemy aircraft flew over East
Anglia and Southern England. Damage slight. 2 were destroyed and one damaged by
night fighters.
EGYPT. Night 6th/7th. Wellingtons bombed TOBRUK HARBOUR and EL DABA
landing ground. 7th. Our fighters (one missing) destroyed 5 enemy fighters over
battle area. Night 7th/8th. 15 enemy aircraft flow over DELTA area. 3 shot down
by night fighters.
MEDITERRANEAN. 7th. Allied aircraft bombed a southbound convoy
southwest of CRETE. One ship was hit and near misses were obtained on others.
4. INTELLIGENCE
A movement of Japanese aircraft from Central and South China to TONKING
and BURMA is reported to have taken place during the latter part of August. It is
estimated that as a result of this, the total number of aircraft in BURMA, THAILAND
and INDO-CHINA is now about 300 and that the number in Contral and South CHINA has
been reduced to about 120.
Regraded Unclassified
333
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
AM,
DATE Sept. 9, 1942
TO
Secretary Morgenthau
FROM
Mr. Hoflich
Subject: Bombing Raids over Western Europe during August, 1942.
1. The month of August marked the beginning of U.S.
Army Air Force raids over Western Europe with Flying
Fortresses. Seven such raids were conducted in August
largely on points in occupied France, without the loss of
a single Fortress. These were all high-altitude daylight
raids. The degree of bombing accuracy is reported to
have been unusually high, due in large part to the Norden
bombsights. Eleven or twelve Flying Fortresses took part
in six of the raids, and seven were sent out to bomb
Rotterdam on August 27. Escort was provided by British
fighter planes.
2. The R.A.F. made seventeen bombing raids over
Western Europe in August, with a loss of 122 planes. The
largest raid was the one over Kassel, in which 306 planes
participated. Secret British Operations Reports give
some details on eight large-scale R.A.F. bombing raids.
In these raids the losses ranged from 3-1/2 percent to
12-1/2 percent, and averaged slightly over 7 percent
of the planes participating.
(British Operations Reports.
Official Communiques and press despatches)
- 2 -
334
Bombing Raids over Western Europe during August
R.A.F.
U.S.A.
Total
I. Raids over Western Europe
Reported during August
17
7
23
II. Bomber losses in raids over
Western Europe
122
0
122
III. Cities reported attacked
A. Germany
Amoneberg (industrial)
1
1
Coblenz (railway and industrial
center)
1
1
Duisburg (port, railway and indus-
trial center)
1
1
Dusseldorf (steel and armaments
production)
1
1
Emden (port, shipbuilding)
1
1
Flensburg (sub.building, port)
1
1
Frankfort (railway and manufacturing
center; railway and elec-
trical equipment, rubber
center)
1
1
Kassel (locomotive, aircraft and
tank manufacturing; railway
repair shops)
1
1
Mainz (motor, locomotive and chemi-
cal works)
3
3
Nuremberg (manufacturing)
1
1
Osnabrueck (rail center; steel, copper
and aluminum works)
2
2
Saarbruecken (railway center, coal
and iron industry)
1
1
West Baden
1
1
Wiesbaden (small industries)
1
1
Total reported attacks on German
cities during August
17
0
16
- 3 -
335
R.A.F.
U.S.A.
Total
III. Cities reported attacked (con.)
B. Occupied Areas
Abbeville (airfield, rail sheds,
port)
1
1
2
Amiens (railway yards)
1
1
Cherbourg (port, airport, ship-
building)
1
1
Dunkirk (3rd French port, petro-
leum refineries)
1
1
Gdynia (Baltic port)
1
1
Havre (port, shipyards, power
station).
2
2
La Pallice (port)
1
1
Le Trait (sub. building yards)
1
1
Meaulte (aircraft plants)
1
1
Rotterdam (port)
1
1
Rouen (rail center, shipyards, fuel
tanks, power stations)
1
1
Wevelghem (airdromes)
1
1
Total reported attacks on cities
in Occupied Areas during August
5
9
14
Total reported attacks on Western
European cities in August
22
9
30