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Volume 592, December 1 – December 3, 1942
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Volume 592, December 1 – December 3, 1942
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 592
December 1 - 3, 1942
- A -
Book Page
Advertising Association of America, Outdoor
See Financing, Government: War Savings Bonds
Algeria
See Poland
Aluminum Company of Canada
See Silver
American Red Cross
See also Procurement Division
Norman Davis gives resume' of and asks HMJr's comment
on program in England - 12/3/42
592 282
Arkansas - Jonesboro
See Financing, Government: War Savings Bonds
- B -
Board of Economic Warfare
Minutes of meetings held October 29 and November 12 - -
12/3/42
287
a) Discussion of
1) Axis blockade running
2) Cryptostegia
Bruere, Henry (Bowery Savings Bank)
See Financing, Government: War Savings Bonds
- C - -
Canada
See Silver
Charities and Taxes
See Revenue Revision
China
1937 arrangement - future status of: Kung views -
12/1/42
78
Hall-Patch provides certain information concerning
post-war relations between Great Britain and China - -
12/3/42
297
- D -
Defense Plant Corporation
See Silver
Doughton, Robert L.
See Revenue Revision
- F -
Financing, Government
"Funds available for new issue" Bell memorandum -
12/1/42
22
Postal Savings System: Meeting of Board of Trustees -
12/1/42
32,33
Regraded Unclassified
- , - (Continued)
Book
Page
Financing, Government (Continued)
High-grade security markets - recent developments in:
Haas memorandum - 12/1/42
592
34
1-3/4's: Publicity discussed by HMJr, Bell, and Eccles -
12/2/42
85
Federal Reserve operations in Government securities -
12/2/42
148
Non-defense Expenditures, Committee on Reduction of:
Meeting - 12/3/42
238
a) Government questionnaires discussed
War Savings Bonds:
An advertising man and one other staff member to visit
towns of 25,000 and under and talk to bankers, etc.,
recommended by HMJr - 12/1/42
2
Outdoor Advertising Association of America - HMJr's
message to - 12/1/42.
48
Sales for November - 12/1/42
49
Bruere (Bowery Savings Bank) correspondence
concerning "borrowing $9 billion from accumulated
savings and idle funds" - 12/2/42
150
Jonesboro, Arkansas: Power companies to refund
November bill in War Stamps and Bonds; Treasury
representation at celebration asked by Congressman
E. C. Gathings - 12/3/42
235
a) Further plans: See Book 593, page 12
Garner (John N.) asked to support drive in public
statement - 12/3/42
242
a) Statement: Book 593, page 17
Publicity: HMJr's telegram to chairmen of Victory Fund
Committees - results not to be released from
Washington until December 7; statements to be issued
by districts from time to time - 12/3/42
243
Kansas: Samples of advertising material used sent to
HMJr by Evan Griffith (State Administrator) -
12/3/42
245
New York Herald Tribune: Thanked for supporting
drives - 12/3/42
266
a) Mrs. Reid's reply: Book 593, page 18
Payroll Savings Plan: Association of American Railroads
thanked for support - 12/3/42
267
Foreign Funds Control
France: Operations in French france reported by Roudin;
probably for Office of Strategic Services - 12/3/42
293
France
See Foreign Funds Control
- G -
Garner, John N.
See Financing, Government: War Savings Bonds
Gathings, E. C. (Congressman, Arkansas)
See Financing, Government: War Savings Bonds
Regraded Unclassified
- G - (Continued)
Book Page
Gold
See Lend-Lease
# Poland
Great Britain
See United Kingdom
- I -
Ickes, Harold L. (Secretary of Interior)
War Manpower Commission job: HMJr urges Ickes to accept -
12/1/42
592
17
Inflation
Paul, Randolph E.: Speeches on fiscal policy and
inflation - 12/2/42
160
Compulsory lending and expansion of social security
program - White memorandum on - 12/1/42
277
Iran
Financial agreement discussed in Treasury-State-Tehran
correspondence 12/3/42
298
- J -
Jonesboro, Arkansas
See Financing, Government: War Savings Bonds
- K -
Kansas
See Financing, Government: War Savings Bonds
- L -
Lehman, Herbert H.
See Palestine
Lend-Lease
Report for week ending November 28, 1942
62
High point of British gold and dollar balances discussed
in Stettinius memorandum - 12/3/42
292
- M -
Military Reports
British operations - 12/1/42, etc
84,217,
304,305
"The War This Week, November 26 - - December 3, 1942" -
Office of Strategic Services report
308
Regraded Unclassified
- N -
Book Page
New York Herald Tribune
See Financing, Government: War Savings Bonds
- o -
Occupied Territories
Navy asked to release Treasury men stationed in
Washington - especially Lieutenant Frank A. Southard, Jr. -
12/1/42
592
51
a) Knox-HMJr conversation - 12/2/42
119
b) Release - 12/4/42: See Book 593, page 85
c) Release request withdrawn - 12/7/42: Book 594,
page 93
Outdoor Advertising Association of America
See Financing, Government: War Savings Bonds
- P -
Palestine
Lehman asked to conference at HMJr's home - 12/1/42.
14
Paul, Randolph E.
Speeches on fiscal policy and inflation - 12/2/42
160
Poland
Gold in Algeria and Polish representative there
discussed in cable from American Consulate, Algiers -
12/3/42
296
Postal Savings System
See Financing, Government
Procurement Division
American Red Cross purchases for refugee relief no
longer need signature of Secretary or Assistant
Secretary - 12/1/42
52
- R -
Revenue Revision
See also Social Security Tax
Conference; present: HMJr, Gaston, White, Paul, Sullivan,
Haas, Blough, Helvering, Atkeson, Schoeneman, Mooney,
and Mager - 12/2/42
96
a) Entire future program reviewed
Individual income tax problem - payment of: Blough
memorandum - 12/2/42
128
Charities and taxes - relationship between: To be discussed
by group outlined in Paul memorandum - 12/2/42.
142
Doughton statement on cooperation between Treasury and
Congress read to HMJr for approval - - 12/2/42
224
a) Discussion of statement by HMJr and Sullivan
228
Extension of time for filing 1942 corporation tax returns -
Surrey and Paul memoranda on - 12/3/42
275,276
Regraded Unclassified
- R - (Continued)
Book Page
Roudin, Victor
See Foreign Funds Control: France
- S -
Silver
Defense Plant Corporation: Availability of 40,000 tone
for non-consumptive use in war production
a) Canada: Use of 2,500 tons as bus bars by
Aluminum Company of Canada discussed in Paul
memorandum - 12/2/42
592 215
Social Security Tax
See also Inflation for combined Social Security program
and compulsory lending
Extension of program to be discussed by HMJr and Blough -
12/2/42
126
Southard, Frank A., Jr. - Lieutenant
See Occupied Territories
Sweden
Conference; present: HMJr, Swedish Minister, Under
Secretary of State Boheman, and White - 12/1/42
23
a) Sweden's desire to obtain imports from Germany
equivalent to exports discussed
- T - -
Taxation
See Revenue Revision
- U -
United Kingdom
See also Lend-Lease
British finance in last war and in present one - White
memorandum - 12/1/42
82
- W -
War Manpower Commission
See Ickes, Harold L. (Secretary of Interior)
War Savings Bonds
See Financing, Government
1
December 1, 1942
9:25 a.m.
GROUP
Present: Mr. Bell
Mr. Cairns
Mr. Thompson
Mr. Sullivan
Mr. Graves
Mr. Schwarz
Mr. Gaston
Mr. White
Mr. Blough
Mr. Buffington
Mr. Kuhn
Mr. Gamble
Mr. Haas
Mrs. Klotz
H.M.JR: I had a chance to see two Victory Fund
Committees in action, one at Kansas City and one in
St. Louis. I was sorry that Odegard, in notifying the
Kansas City group that I was ready to meet with them,
only had two men there. I thought I was going to have
a chance to meet the staff and talk to them, but I didn't.
MR. GRAVES: We have no office in Kansas City. Our
office is in Jefferson City, Missouri.
H.M.JR: They had time to bring people in. It is
the second time I have wanted to meet with the staff
and explain to them what is going on, and I have not
had a chance to. I think it is unfortunate. I mean,
I will have to spend an hour to an hour and a half
talking with these people at lunch Wednesday - Patterson
and those people. Those aren't the people I want to
talk to. I want to talk to the people further down.
Anyway, the Victory Fund people have got lots of
pep and enthusiasm. I told George that I think they
Regraded Unclassified
2
- 2 -
will fall down on the small towns. One thing I would
like is somebody who could go into the field and make a
study and talk to the banks. What about this fellow
who is with Douglas - Lew Douglas?
MR. BELL: Don Woodward?
H.M.JR: Yes. Do you suppose he would go on it
for two or three days.
MR. BELL: I think he would, if he is well enough.
George, you know more about his health.
MR. HAAS: I know he has been ill; but he seems
to be all right. He is here this morning.
H.M.JR: Isn't he a pretty good fellow?
MR. BELL: Very good.
H.M.JR: What I was thinking was that somebody
like that or somebody from George's--
MR. HAAS: Shields would be better, wouldn't he?
MR. BUFFINGTON: I have the names of five men
who were recommended to me, who I talked to Guy Lemmon
about yesterday.
H.M.JR: I want one advertising man to go with
him, just one. I would like them to drop into towns
of twenty-five thousand or under and just sit down and
talk to these fellows, the banks and Federal Loan to
see what they get, see what they are doing. They run
into this kind of thing. After all, what happened in
Kansas, just a few miles from the geographical heart of
America - and up to now they have been paying two
percent interest for the whole state on time deposits.
And you fellows - the pressure says we should give these
fellows special treatment. Well, they get a two and a
half percent bond, allow you to buy up to a hundred thou-
sand, and continue their two-percent time deposits. I
Regraded Unclassified
- 3 -
can't remember the exact figures, but a bank with
three million deposits - I think they only had a half
a million out on loan, not very many Governments, and
were paying two percent on time deposits. Naturally
they are going to holler.
MR. BELL: They ought to get modern and reduce it
to one.
H.M.JR: The question comes up - how many states
are there still paying two percent?
MR. BELL: We can get that. There are many states
not paying two percent.
H.M.JR: When these advertising people tell us
we really don't know our markets, I think they are
right. I was thinking if a couple of intelligent
fellows - you can't send out an army - not more than
three, would spend two or three days going through
this Mississippi Valley, or something like that, in
a car, it would be very valuable to us.
MR. BELL: All right.
H.M.JR: I think it would be very valuable to us.
Are there regulations of state banks as to how
much they pay on time deposits?
MR. BELL: Yes. Also the Banking Act of 1935 -
the Federal Reserve - lays down regulations. They
fix not in excess of two and a half percent on time
deposits. Then the states come in under that. Most
of the states have reduced their interest rate.
H.M.JR: The State of Kansas is in the process,
but up to now they are still paying, by and large,
two percent. I picked up a lot in 8. short time. Did
you realize that?
Regraded Unclassified
4
- 4 -
MR. BELL: That they were doing it?
H.M.JR: Yes.
MR. BELL: Yes, I knew there had been a cry for
us to issue a special obligation of two and a. half
and two and a quarter percent to these banks that
carry savings deposits and are paying two percent.
H.M.JR: It is silly.
MR. BELL: I think so, too. But I think you
have 8. much more serious problem in the insurance
field. The insurance people are being forced to pay
two percent on their contracts. Their past contracts
are in excess of three percent. It is a much more
serious problem in the insurance field.
H.M.JR: Anyway, it is that kind of thing.
Can I leave it with you and some of the others
to send somebody out so that they will be out, say,
not later than Wednesday - today is Wednesday - maybe
by Thursday?
MR. GASTON: Today is Tuesday.
H.M.JR: If they could spend Thursday, Friday,
and Saturday in the field--
MR. BELL: "e will try to get somebody this
morning.
H.M.JR: And get somebody from the Advertising
Council to go with them. And particularly look at
the literature they get.
There is one of the most important announcements
that has gone out from the Federal Reserve and the
Regraded Unclassified
5
- 5 -
Comptroller, and it just goes like that. (Circular
handed to Mr. Bell.)
If I were a banker I would not even read it; I
would throw it in the wastepaper basket. Who printed
that?
MR. BELL: This is probably the one that went
out from either FDIC or the State Bank Commissioners.
H.M.JR: You know that you gave these orders that
they should not get these circulars until Monday.
But they got them - I mean they got them anyway.
MR. BELL: They got them if they were members
of the Victory Fund Committee.
H.M.JR: Listen, fellow, this was picked up right
in Manhattan. There is your circular (indicating
Treasury circular).
MR. BELL: Wasn't he on 8. Victory Fund Committee?
H.M.JR: I don't know, but Nee was giving me the
schedule of trains on which he was mailing that out,
to carry out your orders. That (indicating circular)
was picked up Friday in Manhattan. He had nothing
left by eleven o'clock Saturday, and all the rest of
that.
That is the one, isn't it?
MR. BELL: They went out before the end of the
week to the members of the Victory Fund Committee.
I take it that this bank is on the Committee.
H.M.JR: There is the one the Victory Fund
sent out.
Regraded Unclassified
6
- 6 -
MR. BELL: Then they were to mail them Thursday,
Friday, and Saturday so as to be sure to reach all
banks in the first mail Monday.
H.M.JR: I am sorry; I hope I am not boring every-
body, but this is nine billion dollars, and I have got
to get it. I think the reason I want the people to go
out in the field is that - I want to know who is going
to go because I want to pass on the person. If they
will do what I could do only very superficially - after
all, we can have one announcement and advertising, and
then it gets down to reaching these people in the small
communities. I think you will find the small communities -
this man said to me, "Well, Mr. Morgenthau, these fellows
running three million or five million dollar banks just
don't know what it is all about. Nobody is taking the
trouble to explain it to them. And they still think
that owning a lot of Governments . they don't realize
that they can borrow from the Federal Reserve. They
think it is a fixed obligation, and they are going to
be criticized." He says that nobody has been around to
see them.
Now it was the same thing when we tried to do
Foreign Funds. We held schools all over New York State.
You remember the Model "T" business. As a result of
that the thing went along beautifully. We have got to
hold schools for these banks, bring them in and have
somebody go out and talk to them, Dan. And for the
ABA to send them out a handsome piece of literature,
that doesn't - I told this to these fellows over and
over again at St. Louis, "And you fellows have to use
some shoe leather. You can sit here and send all the
mail in the world, but that isn't going to do the thing,
sitting at a desk - in towns of ten thousand population -
Federal Loan saying so and so."
Regraded Unclassified
7
- 7 -
H.M.JR: It is the object of the ABA committee
to contact each of the members of their association.
H.M.JR: They admitted - Hemingway was there yes-
terday, and he admitted they have not done it.
MR. BELL: He said they did not have time to get
the people together in the two weeks they had.
H.M.JR: I am not criticizing you. The thing is
going to go; it is going to be a success. But there
is an awful lot yet to be done to make the small-town
banker conscious - what I told them was this: "I have
always thought you bankers were smart, and I still
think 80. I think you are smart enough to realize
that if you can sell these securities to somebody else
you don't have to buy them yourself." I gave them in
both places 8. fighting talk on two percent.
MR. BELL: Good.
H.M.JR: The question they asked me at Kansas City
was, "Mr. Morgenthau, if this nine billion dollar thing
fails, won't you raise the interest rate?" (Laughter)
MR. BELL: The answer, I hope, was no.
H,M.JR: So I said, "In the first place, it is
going to be & success, but win or lose, it is going to
stay at two percent, 80 you fellows might as well get
busy and go to work." (Laughter)
I did not do any speaking; I just answered ques-
tions. I think, Harold, if you had been there you
would have been quite happy to have heard this fighting
talk that I gave at both places on War Bonds and their
place in the future. If you want to know, your State
administrator from Kansas heard it.
MR. GRAVES: Griffith?
H.M.JR: Evan Griffith. Evan and Henry were very
close. (Laughter)
Regraded Unclassified
8
- 8 -
MR. GRAVES: Wonderful.
H.M.JR: A fellow from the hotel, Harry Ware,
heard that Evan Griffith was going to fly up with me
the next day, so he said to Griffith, who, incidentally,
lives in Manhattan, "How can I get on that plane with
the Secretary? I want to go up with you. Won't you
fix it 80 I can go up on the plane?" Griffith said,
"Listen, Harry, you found an excuse to go up there
every fifteen minutes to see him. You can find an ex-
cuse to ride with him. You do your own asking. You
have been bobbing in his room every fifteen minutes.
You can find out how to go there.' He is an old theater
man - motion pictures. He said he used to run a theater
in Portland. (Laughter) So he came up and we took him.
I think he is the happiest man in Kansas. He was &
scream.
Anyway, can we do that?
MR. BELL: Yes.
H.M.JR: I think, Harold, at the earliest possible
date you ought to arrange for me to make a public address
at & War Bond meeting, where you are going to present &
Treasury flag, where I can go all-out as to the future
of War Bonds and its place.
MR. GRAVES: We would like to very much.
H.M.JR: I think we need that very badly because
these fellows are sort of--
MR. GRAVES: Uncertain?
H.M.JR: Yes, uncertain, and if what I said publicly
had been listened to, I think every War Bond person would
have been satisfied. But if you find a spot for me, I
will be glad to do it.
MR. GRAVES: Fine, we would like to.
Regraded Unclassified
9
- 9 -
H.M.JR: As long as it is not too far away. They
had me jumping on and off of trains. Mrs. Morgenthau
and I were scheduled to go on the twelve o'clock train,
twenty hours and a half, and just before they left they
took us off and we came seven hundred and fifty miles
in three hours and fifteen minutes.
MR. SULLIVAN: Nice wind.
H.M.JR: We were going two hundred and fifty miles
an hour - tail wind.
The other thing that is bothering me - where is
Paul?
MR. CAIRNS: Last night he made a speech in Phila-
delphia.
H.M.JR: Will he be in tomorrow?
MR. CAIRNS: No, he is making one today in New York.
H.M.JR: I saw a little squib in the paper, some-
thing about the five percent tax and how the employer
has to notify the employee - something in this morning's
paper over my name.
MR. SULLIVAN: Yes, sir.
H.M.JR: I think, Ferdie, what I would like to
do, if they would be willing to do this thing - the
Advertising Council - take just that thing, that
ought to go out to all the Labor press through our
War Bond Labor people. But I would like very much
if the Advertising Council would come in on it, to
have them study the relationship between the Treasury
and the taxpayer.
MR. KUHN: I had a long talk with Guy Lemmon
last night about it, asking his advice and opinions
on it. I would like to go along with it today.
Regraded Unclassified
10
- 10 -
H.M.JR: I would like to study it. They had three
very smart newspapermen in St. Louis interviewing me.
The thing has gotten out all over the country that we
sort of take a relish in making it just as difficult
as possible for the taxpayer to pay instead of doing
what I explained, that we do everything we can to smooth
the way, and 80 forth. It is a public relations job,
and there is a big job to be done.
I have spent 80 much time, first on War Bonds, and
now Victory Fund, and I have not spent enough time on
this other thing.
I think there is a big public relations job, a
big story to tell, Ferdie and Herbert. I think if
these advertising people could come in and study the
thing 80 that we can go to the people, and particularly
the working man and the working woman, and explain to
them the various things that we have done - I hope you
have that memo, Roy.
MR. BLOUGH: I have a memo.
H.M.JR: Hold onto it.
MR. SULLIVAN: You say this was over your name?
H.M.JR: It is a little announcement-
MR. SCHWARZ: This morning's story on the extension
of time on the Victory Tax.
H.M.JR: It gets 80 much space. For instance,
the labor press - did you do anything with the labor
press?
MR. SCHWARZ: Yes, sir.
H.M.JR: What did you do with that?
MR. SCHWARZ: We sent it out.
Regraded Unclassified
11
- 11 -
H.M.JR: But you have been on that, Ferdie. There
is a big job to be done.
MR. KUHN: They have good ideas, and they are very
much interested in it. They regard themselves as
advisors on all phases of the Treasury's job right now.
H.M.JR: Good. Is Mr. Harold Thomas in Cleveland
and Toledo on Treasury business or his own?
MR. KUHN: I think his own, today and tomorrow.
H.M.JR: Did he get permission to attend to his
own business? (Laughter) I will not disturb him,
but if he could come down, maybe Thursday--
MR. KUHN: Would you like to see Guy Lemmon today?
H.M.JR: We will 800 how we get along.
MR. KUHN: He would be helpful.
MR. GASTON: That Ruml plan drive has been
advertising the Treasury as against pay-as-you-go.
H.M.JR: That is right. I explained to them
as best I could where we stand on this thing.
MR. GASTON: In at least one of Randolph's speeches
he was going to talk about how the Treasury has been
working to try to accomplish a genuine pay-as-you-go
plan and that we were the first in the field to try to
do that.
H.M.JR: Anything special, Dan?
MR. BELL: I would like to get an amendment to the
regulations on the Savings Bonds, changing the F, and
G from "War Savings Bonds" to just "Savings Bonds. That
is effective today.
H.M.JR: Say that again.
12
- 12 -
MR. BELL: This changes the name of War Savings
Bonds, Series F and G,to just "Savings Bonds." It
eliminates the word "War", as you had agreed upon.
(Document referred to signed by the Secretary.)
H.M.JR: Do you know what they called - I guess
you people who were at Kansas City know what they call
the E, F and G Bonds, don't you?
MR. GRAVES: I don't think I know what you mean.
H.M.JR: Eleanor, Franklin, and God. (Laughter)
MR. BELL: That is pretty good.
H.M.JR: I have to go up to this Byrd Committee.
I thought it would give me a chance to see old man
Doughton. That is what I am really going up there for,
without seeming to seek him out. If anybody has any
emergencies you can tell Stephens about them.
Have you got some stuff?
MR. BELL: No. Yesterday we got a billion two
hundred and twenty million bids on Treasury bills, and
the rate went down from three seventy to three
sixty-eight.
H.M.JR: Anybody got anything special today?
MR. THOMPSON: Mr. McReynolds is handling your
deferment cases. They are all going to be approved.
H.M.JR: Good for Mac. That shows sense, instead
of having Rosenman do it.
MR. SULLIVAN: There were forty-eight letters to
governors of the States with regard to the distribution
of this tax folder. Do you want to sign those
personally? They are written for your signature.
Regraded Unclassified
13
- 13 -
H.M.JR: He (Buffington) has forty-eight letters
to the governors, too. Have you talked with Kuhn?
MR. SULLIVAN: The program in the original instance
was cleared with Ferdie.
H.M.JR: I mean you had better talk to him again
sowe do not overlap on this governor business. On
stuff that I have to sign which has a public relations
angle, to save my time I wish you people would talk to
Kuhn before it comes to me. Now, George Buffington
had forty-eight letters all typed and we had to turn
them down.
Would you? It saves me time.
MR. SULLIVAN: Certainly.
H.M.JR: Harold, have you anything pressing?
MR. GRAVES: Mr. Gamble and I are planning to
go to Cleveland to be there Friday to meet with our
people, if that is agreeable to you.
H.M.JR: Is Odegard here today?
MR. GRAVES: He is due here today. He gets off
the train early in the morning, and he probably has
not reached here yet.
H.M.JR: All right, I will run up on the Hill.
14
December 1, 1942
12:09 p.m.
HMJr:
Hello.
Operator:
Governor Lehman in Albany.
HMJr:
Hello. Hello.
Gov.Herbert
Lehman:
Hello, Henry.
HMJr:
How are you?
L:
First rate. How are you.
HMJr:
Herbert, I'm all right and Elinor's all right.
L:
Fine.
HMJr:
Edith?
L:
She's fine. And the boys?
HMJr:
They're all right.
L:
Good.
HMJr:
And yours?
L:
I think - as far as I know, they're all right.
HMJr:
Herbert, the reason I'm calling you is this,
I don't know whether you want to do this sort
of thing, but....
L:
I - I can't get that....
HMJr:
Hello? Can you hear me?
L:
Yes, I can now.
HMJr:
Thursday night....
L:
Yes.
HMJr:
....at the suggestion of 8am Rosenman, I'm
having a few people together at my house for
supper to discuss Palestine
Regraded Unclassified
15
- 2 -
L:
I see.
HMJr:
....and what we should advise the President.
L:
Yes.
HMJr:
....and it was just five or six people - hello?
L:
Yes, sir, Henry.
HMJrr
And if you were going to be here, I'd very much
like to have you.
L:
Henry, I won't be able to be there because I've
got to see a number of people in New York
HMJr:
Oh.
L:
late on Thursday afternoon.
HMJr:
I see.
L:
I've made engagements, and I won't be down in
Washington until very late on - on Thursday night
or possibly even Friday morning.
HMJr:
Well, I'm sorry.
L:
I'm awfully sorry. I would have liked to have
sat in, and I hope to sit in on other gatherings.
HMJr:
You'll have plenty of opportunity.
L:
All right. I'm sure of that.
HMJr:
Don't worry.
L:
All right.
HMJr:
All right, Herbert.
L:
I'll be down on Friday, and I hope to see you soon
afterwards.
HMJr:
Well, I hope 80.
L:
All right. Give my love to Ellie.
Regraded Unclassified
16
- 3 -
HMJr:
Elinor sends you hers.
L:
Thanks.
Regraded Unclassified
17
December 1, 1942
12:16 p.m.
HMJr:
....west and I've been reading the papers and
hearing on the radio that they're thinking
that you're going in to take over the Manpower.
Harold
Ickes:
That's a hell of A job to....
HMJr:
And....
I:
....give me, isn't it?
HMJr:
....and the purpose of my call was to say that
I'd hoped that you take it, and this is just me.
Nobody suggested I call you up.
I:
Well, I don't want it, Henry. I
HMJr:
Well, I can imagine how....
I:
....I
don't 800 how I can....
HMJr:
Uh.
I:
take it and abandon this department to
certain other gentlemen.
HMJr:
Well, that was what I was going to - strictly
off-the-record - say. We did have & man by the
name of Senator Ball once.
I:
Yeah.
HMJr:
What?
I:
Yes, we did.
HMJr:
And....
I:
I think it's dreadful.
HMJr:
....and to turn this fellow loose in that de-
partment, I just wonder how much damage - how
much damage could he do?
I:
oh, he could do a lot.
Regraded Unclassified
18
- 2 -
HMJr:
He could do a lot.
I:
Well, we have all the physical assets except
buildings.
HMJr:
I see.
I:
The United States Government owns.
HMJr:
Yeah. Well, I - - for whatever my two bits are
worth, the Manpower thing's a mess and I know
you could straighten it out.
I:
Well, I'm not 80 sure....
HMJr:
But....
I:
.....and I've been blue as hell over the week-
end. I....
HMJr:
Have you really?
I:
Yeah.
HMJr:
Oh, I'm sorry.
I:
I'm depressed over the whole damn thing.
HMJr:
Really?
I:
Yeah.
HMJr:
Well, I'm sorry.
I:
I - - God, I didn't want this job.
HMJr:
What?
I:
I don't want that job.
HMJr:
Well....
I:
(Laughs)
HMJr:
I know it's - well, this fellow in England 1s
doing a beautiful job with it.
I:
Yeah. Yes, he 1s.
Regraded Unclassified
19
- 3 -
HMJr:
It can be done.
I:
Oh, it can be done but - look at the mess it's
in now.
HMJr:
True.
I:
Yup.
HMJr:
Would you - if you took it, I take it you insist
on having this - - the draft thing under you.
I:
Well, I haven't insisted on anything. I've had
only one talk with the President on it, and in
that talk I told him I didn't want it.
HMJr:
Oh.
I:
And I told him somewhat of what I felt about
McNutt coming over here
HMJr:
Yeah.
I:
....and I said, "Of course, if you need Interior
for McNutt, you know it's yours."
HMJr:
Yeah.
I:
But it'd be a whole lot easier for me to get out
of the administration entirely and watch McNutt
operate in Interior from the outside.
HMJr:
Well....
I:
It would be dreadful for me to be still in the
administration and watch him operate.
HMJr:
Oh. Well, I - I was glad that the President
was recognizing you, and, second, that I hoped
it was a straw in the wind that he might again
put some of the New Dealers and his real friends
back in the saddle.
I:
Yeah. (Laughs) Well, it's hopeful from that
point of view.
HMJr:
Yeah. Well, I'm sure whatever you decide will
be right, Harold.
Regraded Unclassified
20
- 4 -
I:
Well, thanks, Henry.
HMJr:
Goodbye.
I:
Goodbye.
21
December 1, 1942
12:38 p.m.
HMJr:
....business?
George
Buffington: Yes, sir.
HMJr:
Well, what's the answer?
B:
The - the comment was not in the press release.
HMJr:
It was not.
B:
It was in the original ad of the most important
announcement made by the U. S. Treasury.
HMJr:
It was in the original ad?
B:
That is, referred to as the $9 billion dollar
Victory Loan Drive.
HMJr:
But it wasn't that I turned it over - Secretary
of the Treasury.
B:
No, sir, it was not.
HMJr:
I see. Well, we'll....
B:
I have those other ads ready to show you the
progress that occurred
HMJr:
I'll see them to.. - I'll look it over with you
sometime this afternoon.
B:
Okay, sir.
HMJr:
Because I want to see what - when that cropped
in.
B:
All right, sir.
HMJr:
All right.
B:
I'll have it ready for you.
HMJr:
Thank you.
B:
Okay.
Regraded Unclassified
22
jueds AVAILABLE FOR IN ISSUE
General Post Fund, Veterans' Muinistration
fills 22 $50,000 0/C
Post Savings System:
Cash
$86,000,000
$0,000,000 09
2% Notes
55,000,000
-
Federal Deposit Insurance Corporation:
Cash
$23,000,000
10,000,000 ok
2$ Notes
95,000,000
Government Life Insurance Funds
Cash
-
-
25 Notes
26,225,000
-
Federal Housing Administration:
Natual Mortgage Insurance Pund
4,500,000 or
Unemployment Trust Fund
42,000,000 40 40th
Federal 01d Age & Survivers Insurance Trust Funds
October 31 balance
49,000,000
November receipts
227,000,000
100A
Army Notion Picture Service
None
Indian Service
-Hot available
Panama Ganal Some
500,000 ok
Comptroller of the Currency
Bone
National Park Trust Fund
ok
bleared unti
2:30pm
Dery
12/1/42 AwB
Regraded Unclassified
23
December 1, 1942.
Conference in Secretary Morgenthau's Office
December 1, 1942
3:00 P.M.
Present: Secretary Morgenthau
The Swedish Minister
Mr. Boheman, Under Secretary of State
Mr. White
Mr. Boheman stated that his Government was making every
effort in its arrangements with Germany to obtain imports to
an equivalent value of their exports. Part of the favorable
terms which they had been getting up to now in their dealings
with Germany was to obtain the coal at pre-war prices whereas
the goods Sweden was exporting to Germany were sold at cur-
rent prices. He stated Germany was objecting to that provi-
sion and wished to raise the price of coal. The present
negotiations may, he said, break down on that issue.
He stated that Sweden very much needed the oil it was
trying to get in the United States for the Swedish Navy and
Air Force - mostly heavy oil and 84 octane gasoline.
In response to a question by the Secretary, Mr. Boheman
explained that there were two Norwegian ships which Britain
wished them to release but Sweden could not see its way clear
to letting them go because of Germany's strong opposition.
He said if Sweden let the ships go he feared Germany would
not let the oil Sweden badly needed come in. He said Germany
was already annoyed at the number of Norwegian ships that had
escaped from Swedish ports.
The Secretary expressed his thanks for the brief survey
of Swedish conditions that Mr. Boheman had submitted.
H. D. White
Regraded Unclassified
24
December 1, 1942
3:27 p.m.
HMJr:
Who's been shooting off his mouth about this
$25,000 - on that investment?
Charles
Schwarz:
That United Press story and one in the A.P., I
was able to check with the United Press story
because
HMJr:
Yeah.
S:
the Treasury man wrote that one. I said
that I doubted that anybody in the Treasury had
talked about it. He said they got most of it
from the Budget, and he was able to confirm it
by talking with some Treasury people down the
line.
HMJr:
Bo he got it from the Budget?
S:
That's right.
HMJr:
I see. Well, then
8:
And - and they - they were told that the A. P. -
which - which got it first - which scooped them -
got it originally from the Budget people.
HMJr:
I see. Okay.
S:
Right, sir.
Regraded Unclassified
25
December 1, 1942
3:51 p.m.
HMJr:
Hello.
Harold
Graves:
Yes, sir.
HMJr:
Harold? Hello.
G:
Yes, sir.
HMJr:
I - after all the fuss that Roy Welch made
about those two boys
G:
Yes.
HMJr:
nobody I find ever thanked the Army for
their services.
G:
Oh, that's terrible.
HMJr:
And I'm doing it now myself.
G:
Well, I'm ashamed. I didn't know that.
HMJr:
Well, I mean I think that after all the fuss-
ing - and the boys did a good job.
G:
They certainly did.
HMJr:
Well, I'm doing it now in connection with
sending copies of their records.
G:
Yes.
HMJr:
But you can tell Roy Welch with my compliments,
it seems to me with all the fussing that he
did, he might have seen that the boys - well,
that something went into their official record.
G:
I'll do it. Yes, sir.
HMJr:
Okay, Harold.
G:
Yes, sir.
Regraded Unclassified
26
DEC 1= = 1942
Dear Sergeant Uhl:
I thought you would be interested in seeing
the enclosed promotion material and memorandum
from Mr. Callahan regarding "Ev'rybody Ev'ry
Payday". We feel sure that the nong is going to
be a great success, and are indeed grateful to
you for your untiring work on it.
My kindest regards and best wishes.
(Signed) Sincerely, H. Morgenthau, Jr.
Henry Morgenthau, Jr.
Secretary of the Treasury
Sergeant Richard Uhl
80th Division Artillery Band
Camp Forrest, Tennessee
VFC/mon
Copy in Diary
Copies to Thompson
(Promotional material &
records sent)
Regraded Unclassified
TREASURY DEPARTMENT
27
INTER OFFICE COMMUNICATION
DATE November 25, 1942
TO
Secretary Morgenthau
FROM
Vincent F. Callahan
NCV
I am attaching hereto sets of promotion
material on the song "Ev'rybody Ev'ry Payday" to be sent
to Corporal Adair and Sergeant Uhl. I have prepared cover
letters to these gentlemen for your signature.
Regraded Unclassified
28
DEC 1 1942
Dear Corporal Adair:
I thought you would be interested in seeing
the enclosed promotion material and memorandum
from Mr. Callahen regarding "Ev"rybody Ev'ry
Payday". We feel sure that the song is going to
be a great success, and are indeed grateful to
you for your untiring work on it.
My kindest regards and best wishes.
Sincerely,
(Signed) H. Morgenthau, Jr.
Henry Morgenthau, Jr.
Secretary of the Treasury
Corporal Thomas Adair
Radio Division
Post Public Relations Office
Fort Jackson, South Carolina
Copy in Diary
VFC/mon
Copies to Thompson
(Promotional material &
records sent)
Regraded Unclassified
29
December 1, 1942
4:57 p.m.
HMJr:
in here with me. He tells me we have
$800 million from the banks on the one-and-
three- quarters.
Daniel
Bell:
Uh huh.
HMJr:
Should I worry?
B:
Not yet.
HMJr:
Not yet?
B:
Not yet.
HMJr:
Uh huh.
B:
No, I don't think that - that's two days. I
suppose that's larger than we've been getting.
At least, as large.
HMJr:
Have you talked to them in New York?
B:
Yeah, and Bob Rouse said that he and Allan had
talked about it this morning, and they thought
they'd wait until this evening to see what
they're going to do - what came in, and then
if it looked as though that they weren't coming
in very good or if the mail wasn't heavy, they'd
begin to call up and ask them if they'd, in
their enthusiasm to sell these bonds outside of
the banks, had they lost track of their own
subscription.
HMJr:
(Laughs) Well, you better talk to me about it
the first thing in the morning.
B:
Yeah, yeah. Well, I - they've got it in mind.
HMJr:
Yeah.
B:
and I think they'll begin to put pressure on
tomorrow.
HMJr:
Good.
Regraded Unclassified
30
- 2 -
B:
Yeah.
HMJr:
You - I don't think I have to worry.
B:
I don't think 80. I think it's going over.
HMJr:
I gather they don't want a one-and-three-quartere.
I don't know what the hell they will take.
B:
That's right. By the way, Murray Shields is tied
up - two days that he's promised long time ago he's
got to make a speech and he says he can't get out
of it. I thought I'd send Don Woodward to Chicago....
HMJr:
Yeah.
B:
....and let Murray Shields go to Cleveland Sunday
night for three days
HMJr:
Yes.
B:
....and go through Ohio.
HMJr:
Good.
B:
Is that all right with you?
HMJr:
Okay.
B:
Swell.
HMJr:
Thank you.
Regraded Unclassified
Delivery 31
Original (and carbons) given to Heffel-
finger's secretary 12/11/42 for transmittal
to Attorney General.
Photo file in Diary
Signed) Ramsey S. Black. (Signed)Francis Biddle
of
IN REPLYING
REFER TO INITIALS AND DATE
Board of Trustees
POSTAL SAVINGS SYSTEM
Bashington
December 1, 1942
At a meeting of the Board of Trustees of the Postal Savings System
held at Washington, D. C., on this date, the following action was taken:
WHEREAS on December 1, 1942, the President authorized the Board
of Trustees of the Postal Savings System to purchase from postal-savings
funds, bonds to the aggregate amount of one hundred million dollars
($100,000,000), par value, in addition to securities already authorized
to be purchased, embracing any or all of these classes-(1) bonds or
other securities of the United States; (2) bonds of the Federal Farm
Mortgage Corporation authorized by Act of Congress approved January 31,
1934, fully guaranteed both as to principal and interest by the United
States; and (3) bonds of the Home Owners' Loan Corporation authorized
by Act of Congress approved April 27, 1934, fully guaranteed both as
to principal and interest by the United States:
RESOLVED, That pursuant to the authority conferred by the President,
the Board of Trustees hereby authorizes and empowers the Secretary of
the Treasury to invest in any or all of the securities specified above,
either by original subscription or purchase, in an aggregate amount not
exceeding one hundred million dollars ($100,000,000), par value, of
postal-savings funds, which, on being consummated, will leave no un-
executed balance under the President's authorization of December 1,
1942:
RESOLVED, That the Secretary of the Treasury is authorized to leave
the securities purchased under this resolution with the Federal Reserve
Bank of New York, to be held in safe-keeping, in coupon form, subject
to his order, for account of the Board, or to have them registered in
the name of the Board of Trustees of the Postal Savings System and de-
posited with the Treasurer of the United States as custodian for such
Board, whichever the Secretary of the Treasury may elect.
From Owerer
Postmaster General
Attest:
Mmmithan Secretary of the
swb
Agent of the Board
Attorney General
Regraded Unclassified
OFFICE DEPARTMENT
Office of the Postmaster General
STATES DATE OF
Mashington, D. C.
DEC 1 1942
The President:
The undersigned members of the Board of Trustees of the
Postal Savings System hereby respectfully request that they be
authorized to purchase bonds to the aggregate amount of one
hundred million dollars, par value, in addition to securities
already authorized to be purchased, embracing any or all of the
classes described below:
(1) Bonds or other securities of the United States.
(2) Bonds of the Federal Farm Mortgage Corporation
authorized by Act of Congress approved
January 31, 1934, fully guaranteed both
as to principal and interest by the United
States.
(3) Bonds of the Home Owners' Loan Corporation
authorized by Act of Congress approved
April 27, 1934, fully guaranteed both
as to principal and interest by the
United States.
Power to grant the authority desired is conferred upon the
President by the Act of May 18, 1916, amending the Organic Postal
Savings Act; by the Federal Farm Mortgage Corporation Act, ap-
proved January 31, 1934; and by the Home Owners' Loan Act of
1933, as amended by the Act of Congress approved April 27, 1934.
Very respectfully,
From Ownerer
Postmaster General
Secretary of the Treasury wis
Attest:
ICTORY
BUY
Attorney General
BORDS
Agent of the Board
Approved,
Regraded Unclassified
34
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE December 1,
1942
TO
FROM
Mr. Haas BA.
Secretary Mergenthau
Subject: Recent Developments in the High-grade Security Markets
SUMMARY
(1) The announcement, on November 20, of the Treasury's
December financing program set in motion a decline in
the prices of Treasury bonds, which continued up to the
eve of the financing campaign (Chart I). Partially tax-
exempt bonds suffered somewhat more than taxable bonds
(Chart II). The net increase in the Government security
portfolio of the Federal Reserve Banks in the period
November 19-28, amounted to $327 millions. Purchases of
taxable bonds in this period were confined principally
to intermediate-term bonds, with the result that price
declines were small in this range as compared with the
declines in the prices of longer issues which were, for
the most part, unsupported.
(2) Excess reserves of member banks were, at the last weekly
report date, about $2,525 millions (Chart III). It is
estimated that the effect of the increase of money in
circulation and of the growth in deposits resulting
from the sale of new Treasury securities to banks would
be to reduce excess reserves to about $1,100 millions
by the end of December, unless offset either by Federal
Reserve purchases of Governments or by a reduction of
reserve requirements.
(3) New money corporate and municipal bond offerings in the
New York market continue small. In the refunding field,
the City of Philadelphia has offered an exchange to
holders of $162 millions of bonds first callable from
1944 to 1953, at an interest saving of about $45 millions.
Insurance companies have recently been taking advantage
of the growing scarcity of tax-exempt bonds to sell some
of their holdings of municipals.
(4) The decline of commercial loans of weekly reporting
member banks in leading cities, which commenced last
March, has slackened during the past two months (Chart IV).
Regraded Unclassified
35
Secretary Morgenthau - 2
I. United States Government Securities
The reaction to the Treasury's announcement on Friday,
November 20, regarding December financing was by far the most
significant development in the market for Government securi-
ties during November. On the day of the announcement, most
outstanding Treasury bonds, both taxable and tax-exempt, lost
ground sharply; and they continued to decline through Satur-
day, November 28. There was no rally before the beginning of
the campaign for the new financing. The average decrease in
the price of Treasury bonds with 15 years or more to their
earliest call date was slightly more than 1/2 point, while
that of intermediate-term bonds was about 1/4 point (Chart I).
Partially tax-exempt bonds suffered somewhat more than taxable
bonds (Chart II). Net changes in prices of Treasury notes
were negligible.
Purchases by the Federal Reserve Banks aggregated $421
millions in the period November 19-28. They consisted of $171
millions of bills, $50 millions of certificates, $100 millions
of other taxable issues, and $100 millions of partially tax-
exempt bonds. Sales, confined solely to bills, amounted to
$78 millions and bill maturities were $16 millions, with the
result that the net increase in the combined portfolios was
$327 millions.
Federal Reserve open-market purchases were confined prin-
cipally to the intermediate bonds, with the result that their
price declines were smaller than might have been expected by
comparison with the movements of the longer issues. This is
illustrated with respect to taxable issues in the following
table:
Federal Reserve
Price change
:
purchases
November 19-28
Issue
November 19-28
(In thirty
:
(Millions of
seconds)
:
dollars)
2 2 2
percent bond 9/15/49-51
0
10
percent bond 12/15/49-51
0
15
percent bond 3/15/50-52
0
23
2-1/2 percent bond 3/15/56-58
-15
o
-12
o
2-1/2 percent bond 6/15/62-67
2-1/2 percent bond 9/15/67-72
-16
o
Regraded Unclassified
36
Secretary Morgenthau - 3
It will be remembered that the new restricted issue W&E
made a 1963-68, rather than a 1965-70, primarily in order to
make it "sweet". Sweetness, however, 18 a relative thing and
depends principally upon the position of an issue in relation
to the rest of the market. Now, as & result of the decline in
the long end of the market, a 1963-68 is no sweeter than a
1965-70 would have been two weeks ago. Thus, because of the
absence of Federal Reserve support, the principal effect of
the liberal pricing of the new issue has been to raise the
whole pattern of rates at the long end of the market, rather
than to enhance the attractiveness of the new issue.
The forthcoming offerings of the 7/8 percent certificates
of indebtedness due December 1, 1943, and the 1-3/4 percent
bonds due June 15, 1948, had no appreciable effect on outstand-
ing issues in these maturity ranges.
II. Outlook for Member Bank Reserves
During the Remainder of the Year
The December Treasury financing gives special importance
to the reserve position of member banks at the present time.
The October finanoing was the first occasion on which the banks
were asked to subscribe for more Government securities than the
amount of their excess reserves. This was, without doubt, an
important factor in the failure of the banks to make a large
oversubscription as they had done in the past. The December
financing will not pose 80 great a problem because the offering
dates for commercial banks for the 1-3/4 percent bond and the
7/8 percent certificate of indebtedness are 16 days apart. The
amount to be offered to banks is, in each case, $2.0 billions,
however, 80 it cannot be said that the problem is entirely absent.
Excess reserves of member banks are currently about $2,525
millions -- about $550 millions in New York City, $25 millions
in Chicago, and $1,950 millions in other localities (Chart III).
December 1s customarily marked by a high seasonal level of money
in circulation which has the effect of reducing 010088 reserves;
and to this must be added 8. strong upward long-time trend of cir-
culating currency. Additional reserves will be required against
the deposits created by the Treasury's borrowing from the banks.
This, too, will have the effect of reducing the excess reserves
of member banks. On the other hand, none of the factors which
tend to increase member bank reserves, except Federal Reserve
purchases of Government securities, have been active recently.
A confidential estimate of probable changes in excess re-
serves for the last six weeks of the year, making no allowance
for possible action by the Federal Reserve Bystem, prepared by
Dr. Goldenweiser for the Federal Reserve Board, has been made
Regraded Unclassified
37
Secretary Morgenthau - 4
available to the Treasury. This estimate is substantially
corroborated by Mr. Roelee of the Federal Reserve Bank of New
York. It 18 presented in tabular form below (in millions of
dollars):
Excess reserves, November 18, 1942
2,489
Net changes, November 18-December 30, 1942:
Increase of currency in circulation
765
Less decrease in required reserves
due to substitution of currency
for deposits
153
Net effect of currency increase in
reducing excess reserves
612
Increase in required reserves due
to growth of deposits
763
Reduction in reserve held due to
increase in Treasury balance
with Federal Reserve Banks
20
1,395
Excess reserves, December 30, 1942, before
allowing for Federal Reserve purchases
of Government securities
1,094
With aggregate reserves at this low level, some individual
banks would undoubtedly have lost all of their excess reserves
some time since. The fear of such B. situation tends to enforce
conservatism upon the banks when they are subscribing to Treas-
ury issues. In the interests of successful Treasury financing,
such a situation should not be permitted to exist. Excess re-
serves should be maintained at or above their present levels,
either by purchases of Government securities by the Federal
Reserve Banks or by further reductions of reserve requirements.
Of these two courses, the former would appear to be preferable
from the standpoint both of economy in financing during the war
and of postwar monetary control. As the table above indicates,
the net decrease in excess reserves which would have to be off-
set by Federal Reserve purchases of Government securities between
November 18 and December 30 is estimated to be about $1, 400 mil-
lions, or about #233 millions weekly. During the first week of
the period (November 18-25), such purchases amounted to $148
millions.
Regraded Unclassified
38
Secretary Morgenthau - 5
III. Other Recent Bond Market Developments
The volume of new bond offerings to the public in the
New York market continues small. During November, the total
was only about $6 millions, as compared with about $131 mil-
lions for the corresponding period a year ago.
In the refunding field, an outstanding event of recent
weeks has been the exchange offer made by the City of Phila-
delphia, through a nation-wide banking group, of Refunding
Bonds of 1942, to holders of $162 millions of its bonds which
are first callable between 1944 and 1953, inclusive, and which
bear coupons ranging from 4 to 5 percent. The new securities
will bear interest at the rates of the securities surrendered
in exchange until the first call date of the latter, and there-
after at 3-1/4 percent. The estimated saving to the City,
according to press reports, will be about $45 millions. The
terms of exchange and the interest saving to the City furnish
a pertinent example of the value to an issuer of optional call
dates in its obligations.
Another illustration of the disadvantage to an issuer of
having no option to call his securities before maturity 1s the
offer, on November 24, of the Bethlehem Steel Corporation to
redeem $7.5 millions of 6 percent bonds due in 1998, but not
callable prior to maturity. According to press reports, the
Corporation wishes to take advantage of the provision in the
Revenue Act of 1942 which permits corporations to take immediate
credit against the refundable portion of the excess profits tax
to the extent of 40 percent of the amount by which they reduce
their indebtedness. In order to do so, however, the Corpora-
tion has found it necessary to offer to purchase the securities
at 181! Thus the cost of redeeming $7.5 millions of securities
would be about $13.6 millions.
The small amount of new offerings and the general strength
of the State and municipal bond market have stimulated some
insurance companies to reoffer blocks of securities which they
had previously acquired. Within the past few weeks, the Pru-
dential Insurance Company has thus disposed of $14 millions of
State of New Jersey bonds, $4 millions of City of Utica, New
York, bonds, and $6 millions of Nashville, Tennessee, electric
revenue bonds. It is also reported in the press that the same
company has disposed of other blocks of tax-sxempt issues pri-
vately, and that the New York Life Insurance Company has also
been reducing its holdings of municipals.
Regraded Unclassified
39
Secretary Morgenthau - 6
Presumably, these companies, and any others which may
be following a similar policy, are placing themselves in a
position to take a larger amount of new Treasury issues than
would be possible on the basis of their normal accumulations
alone. Such a course 1s undoubtedly advantageous from their
point of view, inasmuch as the tax-exemption privilege is of
relatively little value to them and as it has been possible
to dispose of the issues at prices higher than those at which
they were acquired. This situation 18, of course, the natural
consequence of the growing scarcity of fully tax-exempt securi-
ties, and it may be expected to persist as long as any such
securities, which are most valuable to taxpayers in the upper
surtax brackets, are held by tax-exempt institutions.
IV. Commercial Loans of Member Banks
The decline in the commercial loans of weekly reporting
member banks in leading cities, which commenced last March,
has slackened during the past two months (Chart IV). Apparently,
Regulation V loans have served 60 far only partially to offset
declines of bank loans in other quarters. During the reporting
week ended November 11, the General Motors Corporation drew
against its billion-dollar Regulation V credit to the amount
of $50 millions. During the same week, commercial loans of
weekly reporting banks increased by $44 millions. In the
following two weeks, however, commercial loans declined again
by $124 millions.
New Regulation V credits reported in recent weeks include
one of $60 millions for the Lockheed Aircraft Corporation (the
first of such credits for the airplane industry), and one of
$30 millions for the Vega Aircraft Corporation. It 1s also
reported that a credit of $200 millions for the Bendix Aircraft
Corporation will be arranged soon.
Attachments
Regraded Unclassified
40
Table I
CHANGES IN THE PRICES OF U.S. SECURITIES
Points Plotted Represent the Difference from December 6, 1941 Price of Each Maturity Class
1942
1942
DEC JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV.
SEPTEMBER
OCTOBER
NOVEMBER
-
DECEMBER
POINTS
19
26
3
10
17
24
POINTS
31
7
14
21
28
5
12
19
26
(Net Change)
(Met Change)
POINTS
Saturday Quotations
(Net Change)
Daily
+2
+2
+ 1/2
+
I
+1
+1
+1
+1
NOTES
3-5 Years
+
+
+
o
0
NOTES
1-3 Years
o
o
NOTES
-1
BONDS
N Years
5-15 Years to Cell
-1 I
-1
-1
NOTES
3-5 Years
-2
-2
-1
- I
BONDS
BONDS
Over 15 Years to Call
Over 15 Years to Cell
-3
a
-3
t
-
-2
BONDS
-2
-4
4
5-15 Years to Cell
-21
-2t
-5
5
-3
-3
-6
6
-3f
- -31
-7
-7
4
-4
-8
DEC JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT OCT. NOV.
8
-4 +
4
is
26
3
10
17
24
31
7
14
21
20
5
12
19
26
1942
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
1942
Office of The Secretary of the Transury
Divise of - and
F-153-K
Regraded Unclassified
41
Table II
AVERAGE YIELDS OF LONG-TERM TREASURY AND CORPORATE BONDS
1941
MAR.
MAY
1942
JULY
SEPT.
1942
NOV.
JAN.
MAR.
MAY
-
is
-
is
"
e
26
10
24
,
a
5
e
#
is
JULY
so
is
EF
II
as
.
=
.
20
SEPT.
NOV.
SEPT.
OCT.
3
If
as
H
=
is
NOV
11
ii
as
.
ES
.
PERCENT
no
4
-
-
19
it
=
9
H
7
a
-
is
to
-
24
3
10
17
14
31
,
14
21
Inverted Scale)
PERCEN)
PERCENT
WEEKLY Saturday Quotations
(Inverted Scale)
DAILY
(Inverted Scale)
1.6
1.6
1.6
1.7
1.7
1.7
1.8
1.8
1.8
1.9
1.9
1.9
Portially tax- exempt
Treasury Bonds
2.0
2.0
2.0
Partially tax-exempt
Treasury Bonds
2.1
2.1
21
2.2
2.2
2.2
Taxable
Treasury Bonds
2.3
2.3
2.3
Taxable
Treasury Bonds
2.4
2.4
2.4
2.5
2.5
2.5
2.6
2.6
2.6
2.7
2.7
2.7
High-Grade
Corporate Bonds
2.8
2.8
High- Grade
2.8
Corporate Bonds
2.9
2.9
2.9
3.0
3.0
3.0
3.1
.
is
#
is
1
is
19
#
en
10
24
,
or
5
=
I
15
30
IS
EF
II
IS
-
==
6
20
3
IT
a
H
=
1
es
=
15
.
ES
I
so
4
3.1
3.1
JAN.
is
-
as a 24 10 24 , a 8 is
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
5 If it 16 I is 17 24 31 7 14. ail 28
MAY
JULY
SEPT.
NOV.
1941
SEPT.
OCT
1942
NOV.
1942
. Change in composition of Long-Term
reasury average
- of the Secretary of - Trumery
I ] . I 1
F-227-A-3
Regraded Unclassified
Table III
MEMBER BANK EXCESS RESERVES
42
1941
1942
NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC.
DOLLARS
DOLLARS
Billions
Billions
3.8
3.8
3.6
3.6
All Member Banks
X
3.4
3.2
3.2
3.0
3.0
2.8
2.8
2.6
2.6
2.4
2.4
2.2
2.2
1.2
1.2
New York City Banks
1.0
1.0
.8
.8
.6
.6
.4
.4
.2
.2
.4
.4
Chicago Banks
.2
.2
6
0
o
NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC.
1941
1942
*Change in reserve requirements
F-251
43
Table IV
LOANS - WEEKLY REPORTING
MEMBER BANKS
MONTHLY
WEEKLY
1929
1931
1933
1935
1937
1939
1941
1940
1941
1942
DOLLARS
Billions
DOLLARS
A $ o N D J F M A M J J A s o N D J F M A M J J A $ o N
Billions
DOLLARS
Billions
18
18
12
12
16
16
"
=
TOTAL
14
14
10
10
TOTAL
12
9
12
9
10
8
10
e
7
8
Commercial
7
6
New Series
6
Commercial
6
Commercial
6
one Berres
New Bance
6
5
4
All Other
5
4
New Series
All Other
ONE
All Other
4
New Bener
4
2
2
a
J
A
5
o
N
D
J
F
8
M
A
M
J
J
a
0
A
$
o
N
o
J
F
M
A
M
J
J
A
#
o
N
D
1929
12
1931
1983
1935
1939
o
8
1937
1941
12
7
Cities other than
New York and Chicago
7
10
10
6
6
8
Cities other than
New York and Chicago
8
5
5
6
6
4
New York City
4
4
4
3
3
2
New York City
2
I
Chicago
Chicago
I
o
1929
1931
1933
o
1935
1937
1939
1941
o
J
A 1940 5 o N D J F M A M J J A 5 o N D J F M A M J J A $ o N DI
1941
1942
- - - Servey of - -
- - - - -
F-99-C-1
Unclassifie
T
44
UWE13 96 1 EXTRA NL
capies to -
CHICAGO ILL DEC 1 1942
1
HENRY MORGENTHAU
Pull. 1942 DEC - 2 m/8.00
SECTY OF THE TREASURY
10/4/42
ALL OF US HERE AT CHICAGO METROPOLITAN AREA VICTORY FUND
DINNER EXPRESS GRATITUDE FOR YOUR THOUGHTFUL AND ENCOURAGING
MESSAGE WHICH WAS RECEIVED WITH ENTHUSIASM. WE ARE DEEPLY
CONSCIOUS OF THE IMPORTANCE OF OUR TASK AND ARE GIVING IT OUR
BEST ATTENTION AND EFFORT If PICK OUT THE BIGGEST ONE AND FIRE"
- THE ORDER GIVEN BY CAPT EDWARD N MORAN, OF THE U.S.S.
BOISE , WHO IS OUR GUEST, IS THE KEYNOTE OF OUR CAMPAIGN. WE
lots DEC 5 VW 30
ARE PICKING OUT OUR BIGGEST PROSPECTS AND FIRING, AND LIKE THE
T Y G A Y T L U T G A H A E U R E R S E R L R R P E S E
BOISE, WILL KEEP ON FIRING TO BRING US OUT ON TOP
JAY N WHIPPLE CHAIRMAN.
757AM DEC 2.
Regraded Unclassified
45
Expenses of Leans A & E
December 1, 1942
Mr. Jay N. whipple
Investment Bankers Association
135 South LaSalle Street
Chicago, Illinois.
PLEASE CONVEY TO THE GUESTS AT YOUR DINNER MY DEEP
SATISFACTION OVER THE WAY THE SECURITIES INDUSTRY HAS
JUMPED TO WORK ON THE VICTORY LOAN DRIVE. FOR WINE BILLION
DOLLARS OF FIRES. YOUR GATHERING PROVES AGAIN
THE SPLENDID MORALE OF THE HOME FRONT IN FACING THE
BIGGEST FINANCIAL TASK EVER PLACED BEFORE 17. WHEN THE
P ESIDENT BOUGHT THE FIRST OF THE VICTORY THO=AND=ONE=HALFS
BE SAID THAT WE MUST MAKE OUR DOLLARS FIGHTING DOLLARS BY
INVESTIN. THEM IN GOVERNMENT BONDS. HOTHING LESS THAN THE
FORGING OF FUNDS INTO FIGHTING WEAPONS IS INVOLVED IN THIS
DRIVE. SUCCESS IN OUR EFFORTS IS RESENTIAL TO THE CONTINUED
PERFORMANCE OF MIRACLES OF COURAGE BY OUR FIGHTING KEN ON
LAND, or SEA, AND IN THE AIR. THERE CAN BE NO SLACKENING
IN OUR EFFORTS. I KHOW I CAN COUNT ON YOU TO SEND THIS
DRIVE OVER THE TOP IN TRIUMPH.
Henry Norgenthau, Jr.
Secretary of the Treasury
FK/ogk
Regraded Unclassified
46
December 1,1942
My dear Mr. Secretary:
In furthering the War Savings Program, we have found that
the sale of War Bonds to wage earners in private industry through
the medium of payroll Savings Plans has been most efficient and
most productive. We are concentrating our efforts on this medium
of sale, particularly in connection with the sale of Bonds to en-
ployees working for contractors engaged on Government construction
projects.
Public scrutiny of the small sale of Bonds to these employees
throughout the country so far has resulted in criticism, which has
been repeatedly brought to the attention of this Department. In
order to forestall some of this unfavorable publicity, we are
exerting every effort to have the Payroll Savings Plan installed
on every Governmental construction project throughout the country.
To accomplish this, current information is necessary from the
contracting agencies of the Government to be made available to
our State offices before the project is started.
It is my understanding that District Angineers of the War
Department receive directives to proceed on construction projects
which are approved here in Washington. It will be appreciated if
the District Engineers, upon receipt of directives for projects
involving $100,000 or more, will immediately advise the Administrator
of the War Savings Staff for the State in which the project is
located. Information as to the location, duration, amount of money
involved, and the contractor to whom the contract is awarded will
be very helpful.
It will be of further assistance to this Department if the
District Engineers are advised to suggest to all contractors
awarded construction contracts by the War Department, that they
and all their sub-contractors install a Payroll Savings Plan for
the convenient and systematic sale of War Savings Bonds to their
employees.
Very truly yours,
Secretary f the Treasury.
The Honorable,
The Secretary of War,
Washington, D. C.
RHO'M:mec
Regraded Unclassified
47
Dec. 1, 1942
Dear Frank:
Last June, the Navy Department very
sindly agreed to cooporate in our War Savings
program through the placement of a placque
on ships "built" by the war Bond purchases
of cities and counties.
The practical development of this plan
has shown that the program could be very greatly
extended in scope and interest if organizations,
as well E.B cities and counties, could be included.
I have in mind such organisations as the
American Legion, certain labor unions, the
employees, as a group, of various manufacturers,
etc.
lie are, incidentally, expecting to promote
this "Sponsor a Fighting Ship" plan on a nation-
wide scale in February, and it would be most
helpful if we could include organizations in
the drive.
Sincerely,
Henry
the Nonorable,
The Secretary of the Navy.
Regraded Unclassified
48
Dec. 1, 1942
Mr. K. E. Fulton
Firector of War Activities
Outdoor Advertising Association of America
60 East 42nd Street
New York, New York
Dear Mr. Fulton:
I have read with much interest the interim report
on Outdoor Advertising activities that you submitted
at the recent meeting here at the Treasury.
The importance of & continuous, sustained endeavor
in & program such as that of the War Savings Staff can-
not be over-ostimated.
The large number of participating sponsors, the
impressive space value and the nationwide distribution
of the displays are all indicative of the high caliber
of your organization's effort ... which we trust will
continue to play the same important part for the
duration that it has in the past.
Sincerely yours,
H. Morgenthau Jr
PHO:jre
Regraded Unclassified
Sales of United States savings 49nds
CONFIDENTIAL
November 1 through November 30, 1942
Compared with sales quota for same period
(At issue price in millione of dollars)
:
Series E
:
Series F and G
:
Total
:
Actual sales
:
Quota,
:
Sales
:
Actual sales
:
Quota,
:
Sales
:
Actual sales
:
Quota,
:
Sales
Date
:
:
Nov. 1
:
Nov. 1
: to date :
:
Nov. 1
:
Nov. 1
: to date
:
:
Nov. 1
:
Nov. 1
:
to date
:
Daily
:
to
:
to
: as se of :
Daily
:
to
:
to
: as % of :
Daily
:
to
:
to
:
as X of
:
:
date
:
date
:
quota
:
:
date
:
date
:
quota
:
:
date
:
date
:
quota
Nov. 2
$ 5.2
$ 5.2
$ -3
$ .3
$ 5.5
$ 5.5
3
4.1
9.3
" ᵒ
1.1
4.9
10.4
11
11.2
20.5
6.7
7.8
17.9
28.3
our
10.8
31.3
6.9
14.7
17.7
46.0
21.8
53.1
$ 57.0
93.2%
16.7
31.4
$ 25.2
124.6%
38.5
84.5
$ 82.2
102.8%
7
9.3
62.3
80.7
77.2
2.6
34.0
31.4
108.3
11.9
96.4
112.1
86.0
9
34.0
96.4
121.1
79.6
9.9
43.9
43.6
100.7
43.9
140.3
164.7
85.2
10
14.6
111.0
141.9
78.2
5.4
49.3
50.1
98.4
20.0
160.3
192.0
83.5
11
35.5
146.5
159.4
91.9
9.5
58.8
59.2
99.3
45.0
205.3
218.6
93.9
12
15.4
161.9
188.5
85.9
5.3
64.2
68.2
94.1
20.7
226.1
256.7
88.1
13
19.2
181.1
212.6
85.2
7.2
71.4
75.8
94.2
26.4
252.5
288.4
87.6
14
7.4
188.5
226.4
83.3
2.6
74.0
78.6
94.1
10.0
262.5
305.0
86.1
16
41.6
230.1
262.4
87.7
9.3
83.2
87.5
95.1
50.8
313.3
349.9
89.5
17
11.5
241.6
276.0
87.5
5.6
88.9
90.6
98.1
17.2
330.5
366.6
90.2
18
20.7
262.3
293.8
89.3
8.3
97.2
98.3
98.9
28.9
359.4
392.1
91.7
19
25.1
287.4
324.4
88.6
7.3
104.5
106.9
97.8
32.5
391.9
431.3
90.9
20
27.2
314.6
350.7
89.7
8.7
113.2
114.9
98.5
35.9
427.8
465.6
91.9
21
12.9
327.4
365.9
89.5
3.7
116.9
118.1
99.0
16.5
444.3
484.0
91.8
23
44.3
371.8
406.5
91.5
14.2
131.0
129.8
100.9
58.5
502.8
536.3
93.8
24
18.4
390.2
421.8
92.5
5.8
136.8
134.3
101.9
24.2
527.0
556.1
94.8
25
20.3
410.5
441.9
92.9
8.3
145.1
146.1
99.3
28.6
555.6
588.0
94.5
26
18.7
429.2
476.8
90.0
6.7
151.8
160.0
94.9
25.4
581.0
636.8
91.2
27
27.0
456.2
507.9
89.8
9.7
161.5
174.0
92.8
36.7
617.7
681.9
90.6
28
26.6
482.8
541.0
89.2
10.5
172.0
189.0
91.0
37.1
654.9
730.0
89.7
30
58.7
541.6
595.0
91.0
20.9
193.0
205.0
94.1
79.7
734.5
800.0
91.8
Office of the Secretary of the Treasury, Division of Research and Statistics.
December 1, 1942.
Source: Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of
United States savings bonds. Figures have been rounded and will not necessarily add to totals.
Regraded Unclassified
PRENTISS M. BROWN
50
STATE OF MICHIGAN
United States Senate
WASHINGTON,D.C.
December 1, 1942
Dear Mr. Secretary:
I told you I would let you know about
the offer you made me.
I am not in a position yet to be defi-
nite. It is my intention to go through the
clinic at the University of Michigan immediate-
ly after January 1. I think I will be there
about a month. I want to defer making any
decision as to my future until that is over.
Again thanking you for the opportunity,
I am,
Prenties Sincerely yours, m Brown
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
51
DEC 1 1942
urgent
Deer Frank:
There are a number of former Treasury non DOV
in the Navy recently commissioned as Ensigne or
Lieutenants who are stationed in Washington. They
are, I an informed, engaged in duties pertaining to
nonsombatent service such as Intelligenee, Consership,
Accounting, and the like.
From time to time - need non with Treasury
training to send abroad either to work with the 00-
cupation forces on problems dealing with ametary,
exchange, banking and fiscal matters, or in commestion
with the new Foreign Territory Group recently set up
in the State Department to assist in civil adminis-
tration connected with the occupation.
In the past year, we have lest the services of a
number of our - and find difficulty in fulfilling
the calls made upon w. I an wondering whether you
would consider placing on the insctive list several of
the former Treasury - referred to above. For the
present, we should like particularly to have Lt. Frank
4. Southard, Jr., Reserve Officer in Naval Intelligence,
placed on the inastive list bradetailed to the Treasury
so that we could send him immediately to North Africa.
Sincerely,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
The Henorable,
The Secretary of the Havy.
CC in Diary
Copies to White 12/2/42
Del. by Harmon 5:17
12/1/42
HDW:dmh
12/1/42.
Regraded Unclassified
52
OFFICE
a
OF
TREASURY DEPARTMENT
WASHINGTON
AMOUNT SEAL E
DEC 1 1942
AMENDMENT NO. 1 OF
ORDER OF THE SECRETARY OF THE TREASURY
OF AUGUST 19, 1940
Effective as of the date hereof, paragraph 2
of the Order dated August 19, 1940, relating to
purchases of supplies pursuant to section 40 of
the Emergency Relief Appropriation Act, fiscal
year 1941, and Executive Order No. 8495 of July 26,
1940, is hereby revoked.
Minulan Secretary of the Treasury
FORDEFENSE
BUY
UNITED
STATES
SAVINGS
BONDS
-
Regraded Unclassified
53
COPY
THE SECRETARY OF THE TREASURY
Washington
August 19, 1940
ORDER OF THE SECRETARY OF THE TREASURY
1. Effective as of the date hereof, the Director of Pro-
curement and the Assistant to the Director of Procurement, each
are designated and empowered to make awards and enter into con-
tracts for the purchase and transportation of supplies, other
than agricultural supplies, for distribution by The American Red
Cross, pursuant to Section 40(a) of the Emergency Relief Appro-
priation Act for the fiscal year 1941, Public Resolution No. 88,
76th Congress, and Executive Order No. 8495 dated July 26, 1940,
and jointly with The American Red Cross to determine the supplies
to be purchased for such purpose.
2. No contract for the purchase of such supplies shall be
entered into without prior compliance with Section 3709 of the
Revised Statutes, unless such contract shall have been approved
by the Secretary of the Treasury or an Assistant Secretary
thereof.
3. The Director of Procurement is further authorized to
deliver or cause to be delivered such supplies so purchased to
The American Red Cross at such points as it shall designate and
to require such evidence of the receipt thereof by The American
Red Cross as he shall determine.
Regraded Unclassified
54
- 2 -
4. The Director of Procurement is further authorized to
utilize the services of any officer or employee of the Procure-
ment Division in carrying out the functions which he is author-
ized to perform under this order.
/a/ H. Morgenthau, Jr.
Secretary of the Treasury.
Regraded Unclassified
55
TREASURY department
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
NOV 24 1942
EMORANDUM TO THE SECRETARY:
Our purchasing for the "Red Cross" or refugee
relief program, 8.S you know, was taken on before we
got into Lend-Lease procurement and into the field
of purchasing by negotiation on & large scale. At
that time, in August, 1940, we thought it advisable
to require your approval or that of an Assistant Sec-
retary in all cases involving the purchase of refugee
relief supplies by negotiation, and a provision re-
quiring such approval was contained in paragraph 2
of your order of August 19, 1940.
How that we are handling transactions of far
greater magnitude by negotiation, it has seemed to
me that you might wish to do away with the require-
went that each negotiated purchase of refugee relief
supplies be approved by you or by an Assistant Secre-
tary, and I think that such & step might safely be
taken.
I am therefore attaching for your consideration
8. proposed order which would eliminate that require-
ment.
mont
Director of Procurement.
Attachments
PYICTORY
BUY
STATES
AND
56
DEC 1 1942
My dear Mr. Byrnest
I have your letter of November 23, 1942, asking
that I inform you as to the standards of profit con-
trol applied in my Department, as well as those which,
in my opinion, would best effectuate the purposes of
Executive Order No. 9250 with respect to the negotia-
tion and renegotiation of contracts.
Purchases by negotiation, as distinguished from
purchases made after competitive bidding, are made
under authority of Executive Order No. 9023. Such
contracts are ordinarily concluded after face to face
dealings, telephone, telegraph, or informal written
offers. The method followed and the number of
prospective contractors which are contacted will be
generally governed by the circumstances involved.
All contracts executed require the contractor to
certify his compliance with applicable price ceilings
and contain the usual covenant against contingent
fees clause.
In placing contracts by negotiation, primary
emphasis is placed upon securing deliveries or per-
formance within the time required by the war program.
Contracts are placed with concerns needing to acquire
the least amounts of new machinery, equipment, or facil-
ities for performance of the contracts. It is the
policy of the Procurement Division of the Department to
avoid contracting for the production of items or materials in
Regraded Unclassified
57
2.
communities or areas in which acute labor shortages
are known to exist whenever it is practicable to pro-
cure the needed items or materials elsewhere.
Contracts are placed so as to spread production among
as many firms as is reasonable and feasible consistent
with delivery requirements.
Awards are recommended and reviewed by officers
thoroughly familiar with the item or material being
purchased and at this point prices are considered to
ascertain whether or not they appear to be excessive.
Admittedly, the pressure of time is such that such a
scrutiny cannot in all cases be adequate to protect the
Government's interests on the price side, and this, as
we view it, is one of the considerations that led to the
renegotiation statute.
In all of the above efforts, the Procurement
Division works very closely with the War Production
Board to bring about the realization of the overabll
abjectives of the War Powers Procedure.
The Treasury Department was not authorized to re-
negotiate contracts until October 21, 1942, the date of
passage of section 801 of the Revenue Act of 1942. Prior
to that time, however, there was established within the
Procurement Division of the Treasury Department a board
known as the Contract Review Board whose functions were
to examine all negotiated contracts and all non-
negotiated contracts in excess of $10,000 and to determine,
in general, the reasonableness of prices paid by the
Procurement Division on articles it purchased. This
Board will exercise the authority conferred by the re-
negotiation law, and will work in cooperation with the
Price Adjustment Boards of the War and Navy Departments
and the United States Maritime Commission.
Inasmuch as the Department was given the renegotiation
power on October 21, 1942, it has had little occasion
58
3.
actually to renegotiate any contracts. In the only
cases which have so far arison, the contractor had
contracts in much greater amounts with other agencies,
the contracts with this Department being relatively
small. In each of these cases the agencies having
the greatest number and amount of contracts did the
actual renegotiating, and the Department, after
independent examination, approved the settlements made.
With respect to the standards of profit control
which would best effectuate the purposes of Executive
Order No. 9250, the matter is one in which the Department
is very interested and to which it is giving considerable
study. Any suggestions that you can make would be
appreciated, and the Department will be pleased to co-
operate with you in any way possible. The Department's
views on the general subject of excessive profits and
the renegotiation of contracts are set forth in the
testimony of the Treasury representatives at the hearings
before the Senate Committee on Finance on the amend-
ments to section 403 of the Sixth Supplemental National
Defense Appropriation Act and in Mr. Randolph Paul's
testimony before the House Committee on Naval Affairs
during the hearings on H. R. 6790 (see pages 2740-2757).
Copies of the aforementioned hearings containing the
relevant testimony are enclosed.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Hon. James F. Byrnes
Economic Stabilization Director
Washington, D. C.
File to Thompson
Enclosures.
Photo file in Diary
JHH:11-27-42
JJO'C.Jr:ERF/1sw
Del. by Harmon 5:17
11-28-42
12/1/42
Regraded Unclassified
TREASURY DEPARTMENT
59
INTER OFFICE COMMUNICATION
DATE
NOV 2 8 1942
TO
Secretary Morgenthau
FROM
Randolph Paul
The attached letter has been prepared for your
signature in answer to Judge Byrnes' letter to you
on the subject of negotiation and renegotiation of
contracts.
Most of the factual material was obtained
through Mr. Mack, and the letter was actually
drafted by Messrs. O'Connell and Feidler of my
office.
I discussed the incoming letter with Mr. Sullivan,
and it is his view that at this stage the matter is
not of direct concern to Revenue. For this reason
Mr. Sullivan did not think it necessary that he
participate in the drafting of the reply.
prp
Letter to Hon. James F. Byrnes
attached.
Doaradod Iied
60
Nov.25,1942
To:
Mr. Paul
Mr. Sullivan
From:
Secretary Morgenthau
Would you please collaborate on this and have
something ready for me on Monday morning.
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE FOR EMERGENCY MANAGEMENT
OFFICE OF ECONOMIC STABILIZATION
WASHINGTON, D.C.
BYRNES
November 23, 1942
gastor
My dear Mr. Secretary:
Executive Order No. 9250 charges me with the responsi-
bility for formulating and putting into effect a comprehensive
national policy with respect to profits. Furthermore, the Price
Administrator is directed to take account of excessive profits in
fixing the prices of those items now under ceiling control.
Such a comprehensive national policy must find applica-
tion in the negotiation and renegotiation of government contracts.
I should, therefore, be grateful if you could inform me
as to the standards of profit control now applied in your Depart-
ment; as well as those which, in your opinion, would best effectuate
the purposes of Executive Order No. 9250.
Jenes Sincerely yours,
Director.
Hon. Henry Morgenthau,
Secretary of the Treasury,
Washington, D. C.
Regraded Unclassified
62
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
December 1, 1942
MEMORANDUM TO THE SECRETARY:
There is submitted herewith the operating report of
Lend-Lease purchases for the week ended November 28, 1942.
Mr. Harry Hopkins, Chairman of the President's Soviet
Protocol Committee, called a meeting of the Committee on
November 25, 1942, which I attended, and it was decided
that a subcommittee consisting of representative members
of the entire Committee would undertake the determination
of supply problems affecting the Soviet program. The im-
mediate problem under consideration is the accumulation of
supplies, primarily steel products, which are in excess of
indicated available shipping. Diversion of certain of
such stocks and curtailment of production will be undertak-
en in order to maintain a stock sufficient but not in ex-
cess of scheduled shipping for the USSR.
Director of Procurement
PAYICTORY
BUY
your Clifton'E. Mack
UNITED
STATES
garam
BONDS
AND
STAMPS
Regraded Unclassified
LEND-LEASE
63
TREASURY DEPARTMENT, PROCUREMENT DIVISION
STATEMENT OF ALLOCATIONS, OBLIGATIONS (PURCHASES) AND
DELIVERIES TO FOREIGN GOVERNMENTS AT U. S. PORTS
AS OF NOVEMBER 28, 1942
(In Millions of Dollars)
Administrative
Miscellaneous &
Total
U.K.
Russia
China
Expenses
Undistributed
Allocations
$2539.3
$1247.5
$778.1
$58.2
$3.7
$451.8
(2434.3)
(1243.7)
(774.8)
(58.2)
(3.7)
(353.9)
Purchase Authoriza-
$1883.7
$1090.0
$732.7
$41.1
-
$ 19.9
tions (Requisitions)
(1849.0
(1083.4)
(704.2)
(41.3)
-
(20.1)
Requisitions Cleared
$1794.4
$1076.7
$657.0
$41.1
-
$ 19.6
for Purchase
(1772.2)
(1070.9)
(640.3)
(41.2)
-
(19.8)
Obligations
$1731.4
$1047.1
$624.2
$41.1
$2.9
$ 16.1
(Purchases)
(1715.2)
(1036.7)
(618.7)
(41.0)
(2.9)
(15.9)
Deliveries to Foreign
Governments at U. S. $ 753.7
$597.2
$131.0
$20.2
-
$ 5.3
Ports*
(739.0)
(586.7)
(126.9)
(20.2)
-
(5.2)
*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 November 21, 1942.
64
EXPLANATION OF DECREASES
The reduction in Purchase Authorizations
and Requisitions cleared for Purchase for China
is the result of the resurvey of the cost to
purchase on two requisitions.
65
DEC 1 1942
My dear Mr. President:
I an enclosing report on our exports
to come selected countries for the period
ending November 20, 1942.
Faithfully,
(Signed) H. Morgenthau, 3r.
Secretary of the Treasury.
The President,
The White House.
Enclosure
Del. by Harmon 5:17 12/1/42
File in Diary
Extra copies direct to White's
office 12/2/42
HDW/efe
HOW
11/30/48FILE COPY
SECRET
66
November 30, 1942
Exports to Russia, Free China and selected blooked
countries as reported to the Treasury Department
during the ten-day period ending
November 20, 1942
1. Exports to Russia
Exports to Russis as reported during the ten-day
period ending November 20, 1942 amounted to $45,867,000
as compared with $53,144,000 during the previous ten-day
period. Military equipment accounted for $24,452,000 of
the total and included 48 light bombers, 87 fighter planes
and 20 tanks. (See Appendix C.)
2. Exports to Free China
Exports to Free China as reported during the period
under review amounted to $2,032,000, of which military
equipment accounted for 5773,000. (See Appendix D.)
3. Exports to selected blooked countries
Exports to selected blooked countries are given in
Appendix A. Most important were exports to Ewitzerland
and Portugal emounting to $443,000 and $396,000 respectively.
ISF/efe
11/30/42
SECRET
67
APPENDIX A
Summary of United States 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
Period ended
Aug. 1, 1942 to
July 28, 1941 to
Nov. 20,1942
Nov. 10,1942
Nov. 20, 1942
July 31. 1942
U. S. S. R.
$ 45,867
$ 53,144
$ 464,866
$ 742,941
Free China
2,032
233
9,198
97,720
,sin
3
9
769
2,558
Switserland
443
2
4,694
11,537
Sweden
-
1
2,626
18,056
Portugal
396
-
1,192
9,743
French North Africa
-
-
2,068
6,305
Treasury Department, Division of Monetary Research
November 30, 1942
/ Many of the export declarations are received with a lag of several days or more.
Therefore this compilation does not accurately represent the actual shipment of
a particular period.
2/ Includes Marcece, Algeria and Tunisia.
EFM/efe 11/30/42
APPENDIX B
SECRET
68
Exports from the U. 5. to Free China and U.S.S.R.
as reported to the Treasury Department
July 28, 1941 - November 20, 1942
(Thousands of Dollars)
Exports to
Exports to
Free Ohina
U.S.S.R.
July 28, 1941 - Jan. 24, 1942
s 32,758
$ 98,902
1942
Jan. 26 - Jan. 31
6,938
9,608
Feb. 1 - Feb. 10 2/
4,889
13,315
Feb. 10 - Feb. 20
4,853
26,174
Feb. 20 - Feb. 28 3/
2,921
28,119
Mar. 1 - Mar. 10
2,879
32,509
Mar. 10 - Mar. 20
8,058
28,556
Mar. 20 - Mar. 31 4/
3
42,435
Apr. 1 - Apr. 10
4,836
51,698
Apr. 11 - Apr. 20
5,335
66,906
Apr. 21 - Apr. 30
2,827
50,958
May 1 - May 10 5/
296
28,652
May 11 - May 20
1,872
18,000
May 21 - May 31 4/
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 31 4/
3,066
35,669
Aug. 1 - Aug. 10
208
14,970
Aug. 11 - Aug. 20
192
23,325
Aug. 21 - Aug. 31 4/
2,850
112,492
Sept. 1 - Sept.10
855
24,339
Sept.11 - Sept.20
11
44,434
Sept.21 - Sept.30
902
30,947
Oct. 1 - Oct. 10
1,885
14,564
Oct. 11 - Oct. 20
30
55,083
Oct. 21 - Oct. 31 4/
--
45,701
Nov. 1 - Nov. 10
233
53,144
Nov. 11 - Nov. 20
2.032
45,867
Total
$ 109,521
$1,208,626
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 November 30,1942
ISF/efe 11/30/42
SECRET
69
APPENDIX a
Principal Exports from U. S. to U. s. s. R.
as reported to the Treasury Department
during the ten-day period ending
November 20, 1942
Value
Unit of
(Thousands
Quantity Quantity of dollars)
TOTAL EXPORTS
$ 45,867
Military Equipment ($24,452)
Aircraft
13,645
Light bombers (2 eng. A-20)
No.
46
Fighters (1 eng. P-39)
No.
70
Fighters (1 eng. P-40)
No.
17
Ammunition
-
-
4,206
Aircraft parts and accessories
-
-
2,439
Ordnance combat vehicles
1,200
Scout ears
No.
1,112
Armored cars, medium
No.
15
Ordnance combat vehicles,n.e.s.
No.
11
Explosives
-
-
1,078
Militery tanks
1,040
Light tanks (M-3, M-3A-1, M5 or 27)
No.
10
Medium tanks (M-4, A-2)
No.
10
All other
-
-
844
Non-Military Goods ($21,415)
Motor trucks, motorcycles and
auto replacement parts
-
-
4,826
Meat products
-
-
3.784
Industrial, electrical, agricultural
machinery and parts
-
-
3,415
Iron and steel manufactures and
sominamufactures
-
-
2,715
Regraded Unclassified
70
Appendix C (Continued)
Page 2
Value
Unit of
(Thousends
Quantity
Quantity
of Dollars)
Aluminum, copper, sine and
molybdenum ore
-
-
1,327
Leather and rubber manufactures
-
-
1,085
Brass and bronse and manufactures
-
-
1,009
Petroleum and products
-
-
853
Relief supplies
-
-
605
All other
-
a
1,794
Treasury Department, Division of Monetary Research November 30,1942
EFM/efe 11/30/42
Regraded Unclassified
SECRET
71
APPENDIX D
Principal Exports from U. 3. to Free China
as reported to the Treasury Department
during the ten-day period ending
November 20, 1942.
(Thousands of Dellars)
TOTAL EXPORTS
$ 2,032
Principal Items:
Printed matter
873
Military equipment
773
Electrical machinery and apparatus
139
Cameras and photographic supplies
99
Rubber and manufactures
37
Writing paper
26
Graphite electrodes
19
Wire rope and cable
18
Wheels, except automobile and car
18
Iron and steel hand tools
10
Industrial machinery and parts
7
Relief supplies
6
Treasury Department, Division of Monetary Research November 30,1942
EFM/efs 11/30/42
Regraded Unclassified
72
DEC 1 1942
My dear Mr. Secretary:
I am enclosing report on our exports
to some selected countries for the period
ending November 20, 1942.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
The Honorable,
The Secretary of State.
Enclosure
Del. by Harmon 5:17 12/1/42
File in Diary
Extra copies direct to
HDW/efs
White's office 12/2/42
11/30/42
NOW
FILE COPY
Regraded Unclassified
SECRET
73
Movember 30, 1942
Exports to Russia, Free China and selected blooked
countries as reported to the Treasury Department
during the ten-day period ending
November 20, 1942
1. Exports to Russia
Exports to Russia as reported during the ten-day
period ending November 20, 1942 amounted to $45,867,000
as compared with $53,144,000 during the previous ten-day
period. Military equipment accounted for $24,452,000 of
the total. (See Appendix C.)
2. Exports to Free China
Exports to Free China as reported during the period
under review amounted to $2,032,000, of which military
equipment accounted for $773,000. (see Appendix D.)
3. Exports to selected blocked countries
Exports to selected blocked countries are given in
Appendix A. Kont important were exports to Ewitzerland and
Portugal amounting to $443,000 and $396,000, respectively.
197/efa
11/30/42
Regraded Unclassified
SECRET
APPENDIX A
Summary of United States Exports to Selected
Countries as Reported to the Treasury Department
from Export Declarations Received
During the Period Indicated
V
(In thousands of Dollars)
Total
Total
10-day
10-day
Demestic Exports
Demostic Exports
Period ended
Period ended
Aug. 1, 1942 to
July 28, 1941 to
Nov. 20,1942
Nov. 10,1942
Nov. 20, 1942
July 31. 1942
D. S. S. R.
$ 45,867
8 53,144
8 464,866
8 742,941
free China
2,092
233
9,198
97,720
Spain
3
9
769
2,858
witserland
443
2
4,694
11,537
Breden
-
1
2,626
28,056
Portugal
396
-
1,192
9,743
French North Africa
-
-
2,088
6,305
Treasury Department, Division of Menstary Research
November 30, 1942
Many of the export declarations are received with a lag of several days or more.
Therefore this compilation dose not accurately represent the setual shipment of
a particular period.
Includes Morosce, Algeria and Tunisia.
575/efe 11/30/42
Regraded Unclassified
SECRET
APPENDIX B
75
Exports from the U. 5. to Free China and U.S.S.R.
as reported to the Treasury Department
July 28, 1941 - November 20, 1942
(Thousands of Dollars)
Exports to
Exports
to
Free Ohina
U.S.S.R.
July 28, 1941 - Jan. 24, 1942
8 32,758
$ 98,902
1942
Jan. 26 - Jan. 31
6,938
9,608
Feb. 1 - Feb. 10 2/
4,889
13,315
Feb. 10 - Feb. 20
4,853
26,174
Feb. 20 - Feb. 28 3/
2,921
28,119
Mar. 1 - Mar. 10
2,879
32,509
Mar. 10 - Mar. 20
8,058
28,556
Mar. 20 - Mar. 31 4/
4,836
W
02,435
Apr. 1 - Apr. 10
51,698
Apr. 11 - Apr. 20
5,335
66,906
Apr. 21 - Apr. 30
2,827
50,958
May 1 - May 10 5/
296
28,652
May 11 - May 20
1,872
18,000
May 21 - May 31 4/
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 31 4/
3,066
35,669
Aug. 1 - Aug. 10
208
14,970
Aug. 11 - Aug. 20
192
23,325
Aug. 21 - Aug. 31 4/
2,850
112,492
Sept. 1 - Sept.10
855
24,339
Sept.11 - Sept.20
11
44,434
Sept.21 - Sept.30
902
30,947
Oct. 1 - Oct. 10
1,885
14,564
Oct. 11 - Oct. 20
30
55,083
Oct. 21 - Oct. 31 4/
--
45,701
Nov. 1 - Nov. 10
233
53,144
Nov. 11 - Nov. 20
2,032
45,867
Total
$ 109,521
$1,208,626
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. 5-day period.
4. ll-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 November 30,1942
ISF/efs 11/30/42
Regraded Unclassified
SECRET
76
APPENDIX 0
Principal Exports from U. S. to U. 5. S. R.
as reported to the Treasury Department
during the ten-day period ending
November 20, 1942
(Thousands of Dellars)
TOTAL EXPORTS
1 45,867
Principal Items:
Military equipment
24,452
Motor trucks, motorcycles and auto
replacement parts
4,828
Industrial and agricultural machinery and parts
2,980
Iron and steel bare, plates, sheets, wire
nails, etc.
2,715
Canned sausage and pork
2,547
Ment products, n.e.s.
1,237
Brass and bronze plates, sheets, wire,
pipes and tubes
1,009
Petroleum and products
853
Aluminum and manufactures
762
Relief supplies
605
Cotton and wool manufactures
590
Rubber and manufactures
567
Copper, zine and molybdenum ore
565
Leather and manufactures
518
Electrical machinery and apparatus
435
Chemicals and related products
353
Dried "gg products
334
Tallow and lard
310
Treasury Department, Division of Monetary Research
November 30,1942
EFM/ofs 11/30/42
Regraded Unclassified
SECRET
77
APPENDIX D
Principal Exports from U. S. to Free China
as reported to the Treasury Department
during the ten-day period ending
November 20, 1942
(Thousands of Dollars)
TOTAL EXPORTS
8 2,032
Principal Items:
Printed matter
873
Military equipment
773
Electrical machinery and apparatus
139
Cemeras and photographic supplies
99
Rubber and manufactures
n
writing paper
26
Graphite electrodes
19
Wire rope and cable
18
Wheels, except automobile and oar
18
Iron and steel hand tools
10
Industrial machinery and perts
NO
7
Relief supplies
6
Tressury Department, Division of Monetary Research November 30,1942
EFM/efs 11/30/42
Regraded Unclassified
78
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE December 1, 1942
TO
Secretary Morgenthau
FROM
Mr. White
Subject: 1937 arrangement with China.
1. The enclosed cable from Dr. Kung is in reply to your
letter of November 23, 1942 to him regarding the future
status of the 1937 arrangement with China.
2. Dr. Kung expresses his appreciation of your inquiry 8.8
to his views on the future status of the arrangement.
Dr. Kung is instructing Mr. Hsi Te-mou, one of the
members of the Stabilization Board of China, who is
now in Washington, to call on you with new proposals
regarding the renewal of the 1937 arrangement.
3. You will recall that last October the Central Bank of
China paid off all outstanding debts to the United States
under the 1937 arrangement, smounting to approximately
$19 million. This, however, still left the status of
the arrangement itself undetermined.
Dearadod
mt. White 79
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, D.C.
DEPARTMENT OF STATE
WASHINGTON
reply refer to
November 30, 1942
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
copies of telegram no. 1404, dated November 30, 1942,
from the American Embassy, Chungking, China, via Karachi,
transmitting the text of a letter to Secretary Morgenthau
from Dr. Kung.
Enclosure:
From Embassy, Chungking,
no. 1404, November 30, 1942.
FORVICTORY
BUY
UNITED
STATES
SAVINGS
BONDS
AND
STAMPS
80
DM
GRAY
Chungling via Karachi
Dated November 30, 1942
Rec'd 11:46 C.M.
Secretary of State,
Washington.
IMMEDIATE
1404, November 30, 11 c.m.
FOR SECRETARY MORCENTILLU prom DOCTOR KUNG
Dear Mr. Secretary
I have the pleasure of receiving, through the
American Embassy, your message Expressing your antis-
faction for the way in which China has fulfilled her
obligations to the United States stablization fund
under the 1937 arrangement, and inquiring whether
the Chinese Government would prefer to have this
arrangement continue in Effect as otherwise it vill
automatically Expire on DECEMBER 31, 1942.
In reply, I wish to Express to you my appreciation
of your kind message and thoughtful inquiry. In view
of the spirit that motivated your good self and me to
make this agreement when I 170.8 in Washington in 1937,
I am instructing Mr.He1 TE Mou to call on you on my
behalf
Regraded Unclassified
81
-2- #1404, November 30, 11 a.m. from Chungking via Karachi
behalf with new proposals regarding its renewal.
With kindest personal regards.
Yours Sincerely,
H.H. Kung
Minister of Finance".
GAUSS
BB
Treasury Department
Division of Monetary Research
Date Dec. 1, 1942 19
Miss Chauncey
The Secretary might be
interested in glancing at this
interesting comparison of
British war financing during this
war and the last war.
H.D.W.
MR. WHITE
Branch 2058 - Room 2141
83
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE December 1, 1942
TO
Mr. White
FROM
Mr. Wood
Subject:
British Finance in the Last War and in the Present One (No. 1002,
U. S. Embassy, London, Nov. 3, 1942)
Speaking on October 20 in Commons on the Fourth Vote of Credit for
the current fiscal year, Sir Kingsley wood made some comparisons between
Government finance in the two wars.
1. During the years 1939-42 expenditure was two and a half times
that of the period 1914-17.
2. In this war taxation has raised 40 percent of expenditures
compared with 21 percent in the last war.
3. The amounts secured through borrowing were 66 percent greater
in the period 1939-42 than in the period 1914-17.
4. The small investor lent approximately 1200 million to the
Government during the last war and L1,500 million so far
during this one.
5. The average rate of interest on the increase in the debt
from 1914-17 was 5 percent, but the corresponding rate for
1939-42 was only 2 1/2 percent. The average rate for the
floating debt was 4 1/2 percent in the former period and
about 1 percent in the latter.
At the time of the speech current daily average expenditure on the
fighting services was 110.5 million compared with 19.75 million last
March.
Regraded Unclassified
84
NOT TO BE RE-TRANSMITTED
COPY NO.
BRITISH LOST SECRET
U.S. SECRET
OPTEL No. 417
Information received up to 7 A.M., lst December, 1942.
1. NAVAL
One of H.M. Trawlers shot down 8. F.W. 190 off DORSET yesterday. The
French submarines MARSOUIN and CASABLANCA arrived at ALGIERS yesterday. IRIS has been
interned at BARCELONA. Eight more submarines are reported by the Allied Naval Com-
mander to have escaped from TOULON and may arrive at North African ports.
2. MILITARY
TUNIS. 29th. Our advance in the forward area was slowed down by
heavy low flying air attacks but pressure was maintained against djedeza which was
partially in our hands by evening. Our troops have made contact with an enemy strong
point ten miles west of MATEUR. Allied parachute troops have been dropped in the
PONT DU FAHS Area, thirty miles southwest of TUNIS. The area between TEBESSA and
KAIROUAN reported clear of enemy. Our tank losses relatively light. REUNION sur-
rendered to the Fighting French at 4:45 a.m. G.M.T. yesterday.
RUSSIA. The Russians attacking from the north along the east bank
of the DON have captured VSERTYACHI and have narrowed the ring around the encircled
Germans. The KALMUK STEPPE engagements continue between mobile forces and the Rus-
sians are still pressing forward.
3. AIR OPERATIONS
WESTERN FRONT. 29th/30th. TURIN. About 28 tons of bombs dropped.
Severe icing conditions and dense haze over objective. Two bombers missing. 30th.
7 enemy aircraft shot up several localities in DEVONSHIRE, HAMPSHIRE and SUSSEX.
One was shot down. Our losses 2, nil, nil. 30th/lst. Six aircraft sent sea mining,
four to drop leaflets. One is missing.
FRENCH NORTH AFRICA. 27th. Fighter sweeps were flown and all night
Bisleys bombed EL AQUINA airfield. 28th. U.S. Bombers heavily attacked BIZERTA
docks and airfield and also objectives at SFAX. 11 enemy aircraft were destroyed on
the ground. 29th/30th. Wellingtons bombed BIZERTA docks. Casualties over above
period -- enemy 10, 2, 11. Ours 11, nil, nil. Five pilots safe.
mediterranean. 30th. Our fighters successfully attacked airfields
at GELA and COMISO. Beauforts laid mines in PALERMO Harbour. Direct hits were ob-
tained on a 1,200 ton ship near PANTELLARIA.
LIBYA. 29th. U.S. Bombers attacked TRIPOLI (L) and saw a ship on
fire.
Regraded Unclassified
85
December 2, 1942
9:55 a.m.
FINANCING
Present: Mr. Bell
MR. BELL: I am a little worried about this
publicity this morning, all these stories in the
papers.
Last night New York asked me about some publicity.
I said they ought to wait until we have the figures in
Washington. Apparently some banker outside - Perry
Hall did not talk, but apparently some banker outside
said it looked as though New York had a billion and a
half, and there was another story of nine hundred
million.
H.M.JR: You got my message about publicity?
MR. BELL: Yes. I would not have done it, any-
how.
If we give out these figures, I think it makes
it look worse.
H.M.JR: What figures?
MR. BELL: These figures I gave you last night,
seven hundred and forty-five million.
H.M.JR: Why give them out daily?
MR. BELL: You see, these boys think you ought
to have something going every day, trying to keep
people interested and enthusiastic.
Regraded Unclassified
86
- 2 -
H.M.JR: Let's do the publicity last, and I will
have the publicity men in last. Can I do that last?
MR. BELL: Sure. I didn't know you had something
else.
H.M.JR: Should we do anything about calling up
the banks, or anything? Should I speak to Eccles and
find out what he is going to do?
MR. BELL: That is part of this program. I just
talked to Bob Rouse, and I asked him what good he
thought it would do to give out the bank subscriptions
to the one and three-quarters. He thought it might be
a good thing to give out the bank subscriptions up to
this point, to show them that they had not come through
with two billion. But I don't know what explanation you
would give for it.
H.M.JR: I don't like that.
MR. BELL: We have done it before. I would like
to get across to the country that the banks have not
yet subscribed for two billion dollars. If we could
send each Federal Reserve--
H.M.JR: If the thing goes out, then it is a
failure - I wouldn't give anything out.
MR. BELL: There might be danger of that.
H.M.JR: I would not give out anything on the
banks.
MR. BELL: I tell you what we can do. We can
get the mail reports at about one o'clock from
Chicago and New York, which are the big ones, and
see how they stand. We can ask for a three o'clock
report from all the banks, and that will give us
another hour ahead.
Regraded Unclassified
87
- 3 -
I think the thing will go over, but I think we
ought to be a little surer than we were in October.
H.M.JR: You haven't got the thing by districts?
MR. BELL: I have it downstairs. Kilby has it.
I will get it.
The four o'clock report yesterday showed that it
was eight hundred and thirteen, and they think it may
be up another hundred million in New York.
H.M.JR: How much?
MR. BELL: Eight hundred and thirteen was the
four o'clock report, and it may be up another hundred
million now. Rouse thinks today's mail is going to
be heavy. We will not know that until around twelve
o'clock.
(The Secretary held a telephone conversation with
Mr. Eccles, as follows:)
Regraded Unclassified
88
December 2, 1942
10:00 a.m.
HMJr:
Hello.
Operator:
Chairman Eccles.
HMJr:
Hello?
Marriner
Eccles:
Hello.
HMJr:
Hello, Marriner.
E:
Good morning, Henry.
HMJr:
Good morning to you. Bell and I are sitting
here. We were talking over how many bonds we'd
sold yesterday to the banks.
E:
Yeah.
HMJr:
....and it's somewhere between eight and nine
hundred million.
E:
That was up to the four o'clock report, was it?
HMJr:
Well, it was eight hundred and thirteen....
E:
Yeah.
HMJr:
....and then Bell thinks another hundred million
came in late.
E:
Yes.
HMJr:
Now have you got it there by districts?
E:
No, I haven't. All I got was what Bell gave me.
You see, we don't get it. It comes in to Bell.
HMJr:
Well, what I'll have him do is to phone it over
to your secretary and she can type it down.
E:
Yeah.
HMJr:
Now what I thought was this, I thought we - just --
I'm just thinking out loud -- that we ought to
wait until the last minute. We got the third day.
Regraded Unclassified
89
- 2 -
E:
That's right.
HMJr:
And if some of the districts don't look 80 good,
I wondered if you'd like to call up the presidents
of the Fed.
E:
I'll be glad to.
HMJr:
Bee?
E:
I'm just as anxious to see 'em get it over as any-
body.
HMJr:
Now Bell says that there'll be a mail report in by
noon.
E:
Yes.
HMJr:
But I don't know whether you want to wait until
that or whether you want to start this morning on
some of them.
E:
Well, New York I think will be all right.
HMJr:
Yeah.
E:
And, of course, in the west it would be an hour.
HMJr:
Yeah, later.
E:
There - there'd be a change. It would be early
enough there, you see. It would only be - at noon
it would be ten o'clock in San Francisco, and....
HMJr:
The thing - what we'd say to them in their en-
thusiasm on this Victory Fund, they're kind of
overlooking the banks.
E:
Well....
HMJr:
I'm not worried this time, but I - - I don't
E:
I - I think - I think this, that the - they always
waited before until the....
HMJr:
Yes.
Regraded Unclassified
90
- 3 -
E:
until the last - when they had two days, they
HMJr:
Right.
E:
they always waited until the last day.
HMJr:
But we had the interest running against them, and
we thought that
E:
I - I think 1t's well to be - it's certainly well to
be a little bit cautious.
HMJr:
What I was thinking of, if you had the time to call
up some of these fellows and say, "Well, how are
things in your district? Are you worried or will
they be all right?" you know?
E:
Well, I'd like - I'd - if Bell will send that - that
over....
HMJr:
Yes.
E:
and
HMJr:
He will.
E:
then I'll - I'll take a look at it, and see how
the percentages are.
HMJr:
Good.
E:
They run - they usually have a relationship, and
it will show some of them, of course, that may be
out of line.
HMJr:
Right.
E:
Those that are out of line, why I'll be glad to
call up....
HMJr:
Now
E:
....and just as soon as you get the information on
the noon report, if you'd likewise give that to me.
HMJr:
He will. Now the - I like the ads. I was out west
in Kansas City and St. Louis. It looked good out
there to see them.
Regraded Unclassified
91
- 4 -
E:
I was up in - I was up in New York, and, of
course, they all had a full-page display, and....
HMJr:
I think they
E:
it was very simple - I mean a very clear state-
ment. Anybody could understand it.
HMJr:
Yeah, I think the Feds. did a - did us a real
service on that.
E:
Well, I - I - we were glad to do it. We - we (laughs)
didn't get much time. It certainly put - it
certainly put - after it was decided Buffington
called me up and - and I had to get it through the -
had to get it through the Board in a big hurry to
get them to send that wire out, and, of course, the
reserve banks - they all - they all came through
all right, but, of course, all they did was put up
the money.
HMJr:
Now we're not going to - we're not going to say
anything today as to how much is in.
E:
I wouldn't say anything.
HMJr:
No, because I felt it would be & mistake.
E:
I - - I see no reason.
HMJr:
No.
E:
to say anything about it, because.
HMJr:
Be time enough tomorrow night.
E:
Well, even then I'd think about it.
HMJr:
Yeah, well....
E:
Because all - all you've said is you're going to
get a - $9 billion dollars.
HMJr:
Yes.
E:
Isn't that right?
HMJr:
That's right.
Regraded Unclassified
92
- 5 -
E:
Now I - I think it might be a good time maybe to
avoid establishing a precedent and saying just
how much you get from the banks.
HMJr:
Well, I'd like to talk to you about that after we
take a look at it.
E:
Yeah.
HMJr:
And I will talk to you about it before I say any-
thing.
E:
Yeah. Well, okay then.
HMJr:
Well, thank you.
E:
All right.
93
- 4 -
H.M.JR: He agrees with me on the publicity.
(The Secretary held 8. telephone conversation
with Mr. Buffington.)
H.M.JR: Now I am going to get hold of Mr. Roy
Blough and go to school.
94
December 2, 1942
10:27 a.m.
HMJr:
Are you busy right now?
Guy T.
Helvering:
No.
HMJr:
Well, I'd like....
H:
I'm busy but it's just routine stuff.
HMJr:
Well, could you come over, and I tell you what
it's about 80 you can bring over one man with
you. I - I want to study, both from the stand-
point of the individual and the corporation,
what he's got to go through next year to make
out his income tax in the way of paper work.
H:
Yeah.
HMJr:
And also if - whatever plan we recommend, what
we can do to make it - the minimum effort, you
see - additional paper work. Hello? And who
would you bring on that? Who's your best man?
H:
Well, I've got....
HMJr:
Besides yourself.
H:
Ham?
HMJr:
Besides yourself, who's good over there?
H:
Well, this would have to do with the collectors'
offices, wouldn't it?
HMJr:
Yeah.
H:
Uh huh.
HMJr:
Who knows that stuff?
H:
You mean the....
HMJr:
Well, I mean the mechanics of what a corporation
or an individual has to go through.
H:
Yeah.
Regraded Unclassified
95
- 2 -
HMJr:
Collection of Victory Tax and all that.
H:
Yeah. Well, of course, Mr. Schoeneman 1s in
charge of the collectors' offices.
HMJr:
Yeah.
H:
But there's - George Schoeneman.
HMJr:
Does he know this stuff?
H:
Then the forms - the forms, of course, there's
another committee that handles the forms.
HMJr:
Who's that?
H:
Dr. Atkinson.
HMJr:
Never heard of him. He's got forms?
H:
Well, he - he's the man that functions on getting
up our forms for any - when we change, which we
have to change about fifty-one....
HMJr:
I see.
H:
....for these '42 taxes.
HMJr:
Dr. Atkinson?
H:
Yeah.
HMJr:
Well, bring him along.
H:
Yeah, all right.
HMJr:
Can you get over here by....
H:
Pronto, yeah.
HMJr:
Pronto.
H:
(Laughs) Yeah.
HMJr:
Good.
H:
(Laughs) All right.
HMJr:
All right.
Regraded Unclassified
96
December 2, 1942
11:00 a.m.
TAXES
Present: Mr. Gaston
Mr. White
Mr. Paul
Mr. Sullivan
Mr. Haas
Mr. Blough
Mr. Helvering
Mr. Atkeson
Mr. Schoeneman
Mr. Mooney
Mr. Mager
Mrs. Klotz
H.M.JR: The reason that I asked you people to get
together - this is the first time I have had a chance,
since I have been back from England, to begin to think
about taxes and this whole tax question. I have been
doing a lot of thinking about it, but there are two
things that have brought this to a head.
One was yesterday when Bell and .went up on the
Hill and sat in on the Byrd Committee hearing and saw
the various forms which were presented that the busi-
nessman has to fill out today, and Harold Smith sat
there and did not say that all these forms had to pass
through the Central Statistical Board and have his stamp
up in the corner. This man sat there representing the
drug interests, and he said, "I am just not going to
fill them out.
They said to him, "What will happen to you?" He
said, "I do not know, and I do not care. I am just not
going to fill them out."
He said, "We have tried for two months to get a
cost accountant and we cannot get one, and we are just
not going to fill them out." They happened to be OPA
things.
Regraded Unclassified
97
- 2 -
MR. GASTON: Weren't they WPB?
H.M.JR: No, they were OPA; they were on the ques-
tion of changing the size of a bottle of drugs, and the
ingredients. They asked this question: Of a certain
ingredient, how many of these things does your competi-
tor sell? The fellow says, "How do I know?"
Well, of course, they have got to get certain in-
formation. Where I think OPA made the mistake, they
never sat down with the drug industry and asked, "Can
you, as an industry, tell us how to get it?" - and 80
forth.
The point that was impressed on me, and I happened
to say the same thing out at Kansas City, is that it
gets to the point where the businessman will say, just
like these fellows said, flatly, "I am not going to
fill out these things; throw me in jail - go ahead and
put me in jail." As the private said to the sergeant,
This is the Army, go on and break me, I am a private."
(Laughter) It is the same thing. "Go on, put me in
jail."
Now, I do not want the Treasury to take this thing
on the nose if we can help it. Approaching whatever
we are going to do next year in taxes, I certainly want
to study the thing. What does this do to the individual?
After all, I am the hired man of the taxpayer. It is
not for me to sit here and say, "We need 80 many more
billions in taxes and to hell with the taxpayer; he can
find a way to make them out." The answer to the whole
thing is, they are not going to make them out, and they
may not pay their taxes if the thing gets too complicated.
There was not a single Senator there who - I was the
only person who spoke up. I said, "After all, Mr. Chair-
man, surely you are going to ask somebody from OPA to
come up and tell his side of the story. There are
always two sides to everything." He said, "Yes, yes,
but we have first got to hear the complaint."
Regraded Unclassified
98
- 3 -
He makes the front page, and then, by the time
that Henderson's people catch up to them and get a
chance, the damage is done in the minds of the public.
But there was not a man there but what was with indus-
try.
I had an hour with Blough, and, as I understand
it, there is nothing particularly new that anybody in
the Treasury has in mind as to how to raise these taxes.
It is a question of taking any one of four devices -
the thing that we took over across the street to
Mr. Byrnes' committee. But in starting this program
I want these people here to study the thing first.
We are the hired men. How can we get this money with
a minimum of disturbance? That is the first thing.
Now, in going over this thing from the standpoint
of the individual - what we have done - our record is
not too hot. Now, Roy gave me the whole business,
going back to when I first recommended fifteen percent
withholding, and I want that thing restudied from the
standpoint of what is going to happen to the individual
this coming year. I told Roy, when it comes to the
company making out the Victory Tax - I don't know
whether you people made any studies the way you did
originally. how many hours is it going to take for a
company employing a hundred men, or five hundred men,
to do this thing. The drug industry made studies of
how many hours it takes to fill out these things.
MR. PAUL: The Victory Tax is not our tax.
H.M.JR: Yes, but we are here - what I am trying
to do is, Paul, I am trying to do a job for the tax-
payer, and not just to drain the last drop of blood
out of him, and if Helvering's people tell me this means
so many additional hours for the businessman, and so
forth, and I have that, why can't I say, just the way
the drug man said - why can't I come out 8.8 a champion
of the businessman and say that this is impossible?
Regraded Unclassified
99
- 4 -
MR. PAUL: Our record is that we opposed it largely
on that ground.
MR. GASTON: But we have to collect it.
E.M.JR: But we have got to collect it. Schoeneman,
here, is in charge of the offices, and Sullivan is
responsible to me to keep these fellows happy. I am
putting myself on record that I want to know which of
these things are an undue burden.
But when you come in to me and say, "Well, Mr.
Morgenthau, this thing is an undue hardship in the
way of taking 80 many hours," and 80 forth; you have got
to make an alternative suggestion. You cannot just
knock off a couple of billion dollars and say, This
is no good." See?
Now, before I leave this standpoint, instead of
just going out and collecting the taxes, let's think
about the factor a little bit, and put ourselves in the
frame of mind that we are the servant of the taxpayer,
not his leech.
MR. PAUL: We have been talking along this line -
Mr. Gaston and Mr. Blough and I - - for several weeks,
and that is one of the reasons why we have been re-
studying the Ruml plan, and various things like that.
H.M.JR: Fine. I am just getting in on it. I
have been spending three weeks making plans to raise
nine billion dollars. The thing is in the works, now,
and the rest is up to the American public. Now I am
going to get in on the taxes.
MR. HELVERING: You understand that we send out no
questionnaires except to keep control of sugar rationing
and things like that, to certain people who handle that.
We send out no questionnaires to fill out other than
the tax return.
Regraded Unclassified
100
- 5 -
H.M.JR: I am not thinking of questionnaires. Look,
what I would like to have is Atkeson or somebody bring
me in 8. set of books, or take me to the factory, and
as I understand it, Atkeson passes on the form. Is
that right?
MR. ATKESON: I developed them, Mr. Morgenthau.
H.M.JR: Take me to the factory, to a department
store, or anywhere, and let me sit down, and I would
like to know what this man has to do, as far as the
Treasury is concerned, to pay his taxes. I mean, I
want to go through the operations myself. What has he
got to do? What does his Victory Tax mean? How is
the individual going to fare next year? What about
the working man who has got an income of fifteen hun-
dred to two thousand dollars - what is he going to do?
How much does he realize? My boy, Henry, said, "Why
don't you use this man in OWI that you used before to
make this survey?" What is his name?
MR. HAAS: Likert.
H.M.JR: He said, "Why don't you use Likert?" I
was talking about this thing. How do these families -
how conscious are they of this thing, and what is the
typical American - you fellows have been talking day
and night about having to get the group from two thou-
sand to three thousand to stop spending.
All right, you all sit here - including myself -
in a swivel chair, now, what is this family who has got
this thing right on him, what are they doing and how
conscious are they of this thing, outside of the cir-
cular which you have sent them? We are going to find
ourselves the butt of this whole thing, and I am not
going to be the butt - or the goat.
MR. HELVERING: Well, if it is a matter of the
various questionnaires that are sent to businessmen,
you are not guilty, as far 8.8 I know.
Regraded Unclassified
101
- 6 -
H.M.JR: That isn't it. I mean, they spoke about
one thing, the alcohol tax, to get money back on alcohol.
They described what they had to do and I interrupted
the fellow. I said, "It seems very reasonable to me
in view of the unfortunate instances we have had with
McKesson Robbins and a few other people in your industry."
I said, "That is the minimum we have got to do and we
are going to continue to do it as long as there are
crooked people in your industry."
I said, "It is too bad, but there are crooked
people in the drug industry, and the questions that we
are asking about you people using alcohol, and 80 forth,
are the minimum that we have got to ask. Somebody
said he got off on the wrong foot and he dropped it.
MR. PAUL: Our record is very good. We opposed
that differential on the very ground that you--
H.M.JR: I am going to go through it all once more.
I want to approach this thing for the coming year.
What is the status of the individual sitting at home
who is going to have to pay this tax, how prepared is
he, and how conscious of this is he?
Now, what about the businessman - what has he got
to do? How many hours is it going to take him to do
this thing. We have got people like Likert, who are
trained, to go out. Remember when we had this discussion
about the effect on the factories of compulsory saving,
we sent what's-his-name out, didn't we?
MR. PAUL: Friedman.
MR. BLOUGH: On the collection at the source we
had Mr. Atkeson, Friedman, and a bunch of others.
H.M.JR: Well, that kind of thing. Now, have I
made this point clear? As we are going into this
thing now, you will see more and more of me from now
on, as we go along. So much for the approach from the
angle of the taxpayer.
Regraded Unclassified
102
- 7 -
Now, the other thing that I want to say is this.
I don't know how many of you heard Raymond Gram Swing
and listened to this new social security program last
night on the radio. Did any of you hear him?
MR. GASTON: I didn't, last night.
H.M.JR: As a result of that, I am just wondering
whether we can't take a brand new look at the social
security thing. Now, what they are proposing in
England is not only good for today, but it is good for
the post war, and it has many advantages over straight
compulsory savings because nobody has thought out com-
pulsory savings and what it does. Every single person
in England is going to be insured. They are going to
get unemployment insurance; they are going to get sick-
ness insurance, and the whole business.
Now, the beauty of the study of the social insurance
over something else - is that on the books, Guy? You
have got your mechanics.
MR. HELVERING: Yes.
H.M.JR: It is there; it wouldn't be an additional
burden from the standpoint of machinery, and it has
got the--
MR. GASTON: Unless you go to complete coverage.
H.M.JR: We will just extend it.
MR. SULLIVAN: Expansion of already existing
machinery.
H.M.JR: The farmers would have to come in. Roy
said that you will get opposition. I said, "I don't
think, Roy, that you will get opposition on this, if,
as an alternative, you said, 'Look, gentlemen, look at
the Victory tax; this means to a man who is employing
a hundred men, or fiftymen, that he has to do so many
Regraded Unclassified
103
- 8 -
hours of bookkeeping, as opposed to this method where
he has already got it, and it just means an extension,
or any other plan which is new which has been suggested.'
Now, as I say, Mr. Swing said he didn't have the
whole thing, but to me, thinking now that the war is
not going to be a five-year war - I am willing to say
that I think we will win it in '44 - I feel quite
differently than I did when I used to think it was going
to be at least five years.
I would like to say to these people here who are
studying this tax thing - - and another thing on the
social security - I think I am right - - I think it would
hit the volunteer war bonds much less than any other
plan, and has that additional attraction. You just
can't brush the volunteer thing aside, and what they
are doing on publicity, and so forth and so on.
Incidentally, Harold, you ought to circulate that
San Francisco paper.
MR. GRAVES: We are going to do that.
H.M.JR: I mean to your own Treasury crowd.
Now, could I suggest to those people who are study-
ing it - I want you to know how I feel. I would like to
find out how much additional money we can get through
social security if we do what England has recommended -
go from the top to the bottom, and what is the maximum
that we could get out of that. I would like to see that
first.
MR. PAUL: All right.
H.M.JR: And then say, "All right" after we have
done that. - I think if you take people that are working
over there - my guess is that this would appeal to
Benjamin Cohen, and I think it would appeal to Lauch
Currie. Don't you think so, Harry?
Regraded Unclassified
104
- 9 -
MR. WHITE: Certain parts of it. I am not sure
that I--
H.M.JR: I mean the social security.
MR. WHITE: The principle of old-age pensions
is not an insurance principle. That is why I am not
certain that we are talking about the same thing.
H.M.JR: He said that twenty-five percent was con-
tributed.
MR. WHITE: But there are possibilities in that
direction.
H.M.JR: I will put it this way. If we used as
8 possibility the social security thing as a keystone,
sick benefits, unemployment, old age, and all the
other things, what would. be the very maximum that we
could get out of the thing?
MR. WHITE: I think it is a very good idea to ex-
plore the possibilities.
H.M.JR: Then, when we are through with that, how
much more do we need, and where can we get it, with
the minimum of irritation to the taxpayer?
MR. SULLIVAN: You also have the possibility that
you may be able to absorb the Victory Tax and cross that
one off the books.
H.M.JR: Yes, I said that to Roy. Roy said, "What
about the Victory?" I said, "If we make the study there
is no reason why we could not recommend that that thing
be crossed off the books."
MR. WHITE: Saving with a social purpose is what
you are after.
H.M.JR: Yes, because, Harry, the trouble with the
compulsory thing is that nobody I have met - most likely
Regraded Unclassified
105
- 10 -
somebody has the answer - but from my standpoint, nobody
has come in and said, "This is compulsory savings and
this is the way we help the fellow, as to how he should
receive it." It is just a straight hand-out sometime
after the war is over, and you can be sure, just as
sure as I am sitting here - and I am saying this only
in the room, because when I get on my feet I deny it
before an audience - that this compulsory savings -
it has already been asked - will be frozen when the war
is over and they won't get it. But if it is social
security, and you have got this vast number of old people
or sick people, Congress is going to have an awfully hard
time saying that those people should not be paid.
It is very easy if the then Secretary of the Treasury
says that it means additional taxes and this, that, and
the other thing, and somebody says, "Let's freeze it for
five years. We won't pay anybody on compulsory savings."
MR. SULLIVAN: I have been saying that all along,
Mr. Secretary.
MR. WHITE: Only if there is prosperity.
H.M.JR: The argument, Harry, is that if this thing
is broken down in six or eight different benefits, it
is very much harder to freeze that than it is the other
thing.
MR. WHITE: This is a superior objective for sav-
ing. I quite agree. If you can find something that
would call forth various savings and would be the instru-
ment of an extension of social security along all the
lines that you have spoken, I think it is preferable to
outright saving, and a return of the funds in the post-
war period. I think SO.
H.M.JR: I just wanted to throw it at the people.
I wanted Mr. Helvering and his people to have it. I
want you to think about it, talk with each other, and
then in & couple of days I want to talk with you again.
Regraded Unclassified
1
106
- 11 -
MR. WHITE: But the magnitude, Mr. Secretary -
let's bear that in mind - my horseback opinion is that
the magnitude of any scheme of social security extension
which you can have is far smaller than the magnitude of
the compulsory saving which we all feel would be necessary
if you adopted any scheme.
H.M.JR: I was talking with Roy. We were talking
about - well, it gets down to how much you can get, you
see, and all the rest of the thing, but this is just the
opening gun, that is all. I think I am throwing - at
least I am giving my own feelings as of this morning;
and I didn't want to meet with you in a week and find
that we were way, way apart. There are two things which
have happened to me. One was the reaction of the Congress
to a businessman who says, "To hell with the Government;
I am not going to make out the forms; throw me in jail,
and the leading Senators of both parties sitting there
and saying, "Wonderful, wonderful." When you get to
that point a fellow has to sit up and listen.
MR. SULLIVAN: I wanted to inform you on that very
point. There was a bill that went through the Senate
requiring all forms to go through the Director of the
Budget. A particular exemption was made for the Treasury,
and in the report some very flattering comments were
made on the way in which the Treasury had handled con-
fidential information that it received from the taxpayers.
The exemption in favor of the Treasury was stricken out
in the House, and the bill was to have gone through
Monday, but I stopped it.
Now, under the bill as it now stands the Director
of the Budget can say to Mr. Helvering, "Your corporation
income tax return will have to include twelve questions
that WPB wants answered and fifteen questions that OPA
wants answered," and we think it is ruinous. I am seeing
Senator Murray this afternoon, with a memorandum on
keeping in our exemption.
H.M.JR: After what George listened to yesterday,
I would go up there and tell George about it, because he
Regraded Unclassified
r-2
107
- 12 -
sat there yesterday at this hearing.
MR. SULLIVAN: I will be glad to.
H.M.JR: I would go and see Byrd and George.
MR. SULLIVAN: I will.
H.M.JR: You should see those two people, because
they were both there.
MR. SULLIVAN: I will be very glad to. There are
three parts of Treasury affected; first, the Bureau of
Internal Revenue, the Comptroller--
H.M.JR: I would have felt sick at the stomach
if I had been Harold Smith and had all this stuff laid
out there. He admitted that he didn't know about half
of it. He was in & - I mean, you have a central sta-
tistical organization, and this stuff - he grabs all
this stuff - the Director of the Budget wants all this
power. He has 80 much that he can't administer it.
That is his trouble; he can't administer it.
MR. SULLIVAN: He would have virtual control of
Mr. Helvering's operation if this bill went through
this way.
H.M.JR: After this lengthy speech on my part,
does anybody want to make any comments?
MR. HELVERING: Mr. Secretary, the only thing
that we do on all our tax forms is to get information
that is absolutely essential, in our opinion, to
administer the particular tax.
Now, take the Victory Tax - of course, for the
employer it means on his machine an extra column to put
on or take off the five percent. With us, though, it
means a larger job, because we have to figure all the
credits.
MR. PAUL: And you have so many more million
taxpayers, twenty-seven up to forty-six million.
Regraded Unclassified
-3
108
- 13 -
H.M.JR: Now, Guy, to what business house around
here can Blough and I go, sit down with the fellow,
it? see their books, and go over this? Could you arrange
MR. BLOUGH: You had a couple of interesting concerns
here in town that you were out on.
MR. ATKESON: The Washington Gas Light Company.
They seem to be pretty well staffed, and they have some
very capable men there who would be most helpful.
H.M.JR: What company?
MR. ATKESON: The Washington Gas Light.
H.M.JR: That is one.
MR. BLOUGH: That is a public utility and a well-
organized one. You would not get a typical picture
there. You would get a picture of what a well-organized
company would do.
MR. ATKESON: I think the revenue agent could point
out one or two.
MR. MOONEY: I think SO. I have this in mind. We
had a letter from the comptroller of Woodward and
Lothrop, President of the Association of Comptrollers.
He asked representatives of the Bureau to be present
at their meeting, to be held the other evening, so they
could discuss the Victory Tax and the work they would
have to do, what plans they would have to make in order
to pay this tax, and what bookkeeping records they would
have to keep. We did send a representative to attend
that meeting. Now, I think that Woodward and Lothrop
would be an excellent organization.
H.M.JR: He is the head of the Comptrollers'
organization?
MR. MOONEY: Yes.
Regraded Unclassified
109
- 14 -
H.M.JR: All right, we will go to the Light
Company and to Woodward and Lothrop's. I want to go
to the company. Got another suggestion? Give me
three.
MR. MOONEY: Here in Washington?
H.M.JR: It is easier. It does not have to be.
MR. BLOUGH: A factory would be good.
MR. MOONEY: I would like a little more time on
that.
H.M.JR: Give me a factory that is working on
war work.
MR. GASTON: Glenn Martin in Baltimore.
H.M.JR: We could go over to Glenn Martin.
MR. ATKESON: Mr. Secretary, might I inject this
here. You made a reference to these people with from
two to three thousand dollar incomes, and I think you
were concerned with the record work there. You will
recall, of course, our simplified form that we
developed a couple of years ago. Practically all of
the salaried people from whom these people receive
their compensation will receive a duplicate of an
information return at the beginning of the year, after
the close of the tax year; and that is practically
all the information that that type of taxpayer is
required to keep or have to make out his tax return.
In other words, the company keeps the records
for the employee and will hand him at the end of
the year a statement showing his total salaries and
wages, and he can enter that right on his little
1048 and the rest of it is fairly simple. I just
mention that to relieve your mind, if you are
worried about this two to three thousand dollar
class.
Regraded Unclassified
110
- 15 -
MR. WHITE: Mr. Secretary, I wonder, in view of
the reactions against filling in questionnaires and
other papers, which I guess I am more in sympathy with
this morning than any other time because I have to fill
in what I think is 8. completely useless thing, as far
as I can understand - tire regulations. I don't see
much sense in it. (Laughter)
H.M.JR: I'know. What started the thing with me
was when I filled out my draft one. Have you filled
that out?
MR. WHITE: Some time ago.
H.M.JR: I asked somebody last night, "Did you
fill it out?" He says, "Yes. I said, "What did you
do?" He said, "I thought I would answer every question."
But that had about eighty questions.
MR. WHITE: And despite all the questionnaires,
the Army cannot find - I don't know whether you told
me this, or somebody else - several thousand former
employees of the various telephone companies through-
out the country that they badly need for signal work.
There are all these comprehensive forms, which should
give, first of all, the information as to what you are
capable of doing, and they are unable to locate them.
They have only located about fifteen percent of them
and are badly in need of them.
H.M.JR: May I tell you a story. I have a very
good friend who has a secretary. He has had her now
for some time. Today is the second of December. This
girl left her previous employer in July, who marked
her the lowest rating, unsatisfactory - what is the very
lowest out of five, is that unsatisfactory?
MR. HELVERING: Unsatisfactory.
H.M.JR: And the rating--
MR. WHITE: We do not have any in the Treasury
80 we don't know. (Laughter)
Regraded Unclassified
111
- 16 -
H.M.JR: And that rating which she got from a
previous employer, over in OWI, just reached them
now on the first of December, that on the last job
this girl had she was marked as unsatisfactory. On
the first of December it catches up with her.
(Laughter)
MR. WHITE: I was wondering whether this thing
couldn't be approached along the lines which you
suggested some time ago, which needs to be & drastic
reorientation from the point of view of the taxpayer,
purely from the point of view of education of the
taxpayer.
There are going to be all these new taxpayers.
Why wouldn't it be possible to develop a corps of
ten or twenty thousand teachers in the United States
who will study how these forms will be filled out and
who will be in a position to give aid in their
neighboring localities, in their schoolrooms, and who
at the same time will provide an excellent medium for
the Treasury to get across to them the idea as to why
these taxes, why we are trying to simplify them. In
other words, make them at the same time agents to
interpret the Treasury's attitude toward the taxpayer,
Treasury needs, and they will be in a position to
help all these small people with their tax blanks.
I don't know how many teachers there are. I
have forgotten. But certainly it is quite possible
to select fifty thousand teachers in the United
States, and that would be their contribution toward
the war effort in addition to whatever they are doing
now. It needs to be started. It is a big program, but
I see no reason why it cannot be done.
H.M.JR: To go back, did you get the tire?
MR. WHITE: I may have to give up a tire, that
is the thing. (Laughter)
Regraded Unclassified
112
- 17 -
MR. SULLIVAN: I hope they are the same size
as mine. I need four. (Laughter)
MR. WHITE: Give me your car. (Laughter)
H.M.JR: We have to do a lot of work on education.
MR. WHITE: They have to fill these out in March.
It will take at least several months to get an
organization of that kind started.
H.M.JR: Professor Sullivan is supposed to be
the professor in charge of this, so you had better
find out what he has been doing.
MR. GASTON: There was a woman in to see me the
other day. She was sent in by Randolph Paul - a Miss
Hartshorne. She had an idea for organizing education
of taxpayers and encouraging home budgeting and thrift,
and that sort of thing. It occurred to me that we might
organize something of that kind through the War Savings
Staff as a means of decentralization to educate people
on the burdens they have to meet and how to prepare for
them. It goes back to that same idea of thrift education
as a part of the savings program, and we need it as a
part of the tax program. I think we might be able to
organize something of that kind through the War Savings
Staff.
H.M.JR: The main thing I had you people - I want
you to know how I feel as of this morning. My mind is
entirely open. I am very conscious, just the way
Mr. White is, that all of these questionnaires - I haven't
gotten to the point yet that I refuse to answer them,
but I think that in this town you at least get three
warnings. I got one yesterday, and I don't mean the
questionnaires. But you get a point where you make it
so difficult for the man to make out his taxes that he
is not going to pay them, particularly the corporation.
I mean, when a man sits there before the Joint Committee
on Taxation and says, "I don't care what the penalty is,
I am not going to make it out and I am not going to sign
it, I am not going to do it." that is a danger signal. I
Regraded Unclassified
8
113
- 18 -
am warning you all that I am going to be here this week
end, and I may ask you to meet with me some time that
would be most convenient to you over the week end.
MR. HELVERING: To clarify the thing, Mr. Secretary,
have you in mind that we make a restudy of all our tax
forms to see if they can be simplified?
H.M.JR: No, what I would like you to do is this:
I would like you to tell me in some way how long it
takes - the kind of study that we made in connection with
putting in compulsory savings, wasn't it?
MR. BLOUGH: Collection at the source.
H.M.JR: All right, let's start in. How much
additional burden is on a business man to comply with
the Victory Tax? Let's start with that.
MR. SULLIVAN: How much additional equipment, how
much additional personnel.
H.M.JR: Yes, the same kind of study as we did on
the other. Let's do that first. Then the purpose of
this meeting is this: Paul will come along, you see,
with some scheme and say, "Now, this is the way to get
another fifty billion dollars." I will say, "Fine, but
let's see what it does to the taxpayer." So I turn it
over to you fellows. I mean, is this a scheme which
he can comply with, or is he simply going to say, "It
is so difficult that I am not going to do it"? In
other words, I am going to be the advocate from now on
for simplicity, and so forth, and so on, and just to
raise the money is not going to satisfy me. It is going
to have to be workable; it has to be workable.
MR. PAUL: We approach things from that standpoint.
We constantly get in touch with Mr. Helvering on that
basis.
H.M.JR: Then what I am talking about ought to be
all the easier.
Regraded Unclassified
114
- 19 -
MR. PAUL: One thing I do think you have to keep
in mind - my sympathy is not all with the two or three-
thousand-dollar man who has a tough job making out a
return, and that sort of thing, but I have had a little
experience with the way businessmen can magnify their
problems and misrepresent the job that they have to do.
For instance, that is what they did with collection at
the source. When we got all through we found that they
did not have such an insuperable job. We have got to
watch for that tendency in the businessman. I don't
want him to have any more job than is necessary, of
course.
H.M.JR: Well, Randolph, as your representative
Mr. Blough will be at my elbow at all times, and he is
no businessman, any more than-- (Laughter)
MR. BLOUGH: Right you are.
H.M.JR:
any more than Graves - not Graves
but some of the people working with him who were so
afraid that the bad banker was going to gobble me up
all of a sudden after ten years and that I was going
to sell out the bankers and the Victory Fund. I mean,
I have got a record here of ten years, and I haven't
done it yet, and I am not going to do it in the last
two years that I have to go.
So you will be getting - what I will be looking for
over the week end, most likely from Paul, will be
recommendations on how to do this, how to raise this
money, and when I get these recommendations you fellows
will sit in and you will hear them.
MR. HELVERING: There is only one thing I would
like to suggest, Mr. Secretary, and, Mr. Paul, and that
is that the administrative problems in these proposals
for taxation ought to be submitted to us before they are
taken up on the Hill and presented as a tax feature.
MR. PAUL: I quite agree with that. It has only
failed to happen once or twice when we have been in a
Regraded Unclassified
10
115
- 20 -
terrible jam of some sort. I quite agree with you.
In fact, I think anything should be submitted to you
before we have a meeting so you are able to have a
considered reaction.
H.M.JR: The purpose of this, Guy, was to have you
sit in from the inception so you can run up a red flag
at any time.
O.K.
116
December 2, 1942
12:16 p.m.
Grace
Tully:
Mr. Secretary, how are your
HMJr:
I children. hear we're doing good business with the grand-
T:
oh, wonderful.
HMJr:
What?
T:
Yes, sir. Wasn't that a surprise? (Laughs)
HMJr:
Wonderful.
T:
Yeah. I'll let Danny Bell know about whether
they're to be sent over or whether they're to
hold them. We may just write them a letter, you
see, and leave them there for safekeeping.
HMJr:
Okay.
T:
I haven't been able to take it up with the President
yet to find out what he wants done. Mr. Secretary,
an appointment tomorrow morning at ten?
HMJr:
Wonderful.
T:
Uh huh.
HMJr;
Ten o'clock.
T:
All right, sir.
HMJr:
Ever so much obliged.
T:
Fine, Mr. Secretary. Goodbye.
116
December 2, 1942
12:16 p.m.
Grace
Tully:
Mr. Secretary, how are you?
HMJr:
I children. hear we're doing good business with the grand-
T:
Oh, wonderful.
HMJr:
What?
T:
Yes, sir. Wasn't that a surprise? (Laughs)
HMJr:
Wonderful.
T:
Yeah. I'll let Danny Bell know about whether
they're to be sent over or whether they're to
hold them. We may just write them a letter, you
see, and leave them there for safekeeping.
HMJr:
Okay.
T:
I haven't been able to take it up with the President
yet to find out what he wants done. Mr. Secretary,
an appointment tomorrow morning at ten?
HMJr:
Wonderful.
T:
Uh huh.
HMJr:
Ten o'clock.
T:
All right, sir.
HMJr:
Ever 80 much obliged.
T:
Fine, Mr. Secretary. Goodbye.
Regraded Unclassified
117
December 2, 1942
12:31 p.m.
Operator:
....on the line. Is that all right?
HMJr:
Yes.
Operator:
All right. Go ahead.
HMJr:
Hello.
Cong. Robert
Doughton:
Is that you, Henry?
HMJr:
In - yes, Bob.
D:
Bob Doughton.
HMJr:
Yes.
D:
This morning we've been afussin' around
and workin' around and debating around and
arguing around about this - President's deal
about - giving him broader powers about this
war matter, you know.
HMJr:
Yeah.
D:
You've seen & good deal about it in the paper
HMJr:
Yeah.
D:
and I was directed this morning by the full
committee to introduce a subcommittee bill,
the bill the subcommittee has agreed on, as
the basis of the hearings..
HMJr:
Yeah.
D:
....and the hearings are to begin tomorrow
at ten o'clock. I want one - our luncheon's
at one o'clock.
HMJr:
Yeah.
D:
I want to ask you this....
HMJr:
Yeah.
Regraded Unclassified
118
- 2 -
D:
....1f it would suit you at all -- how would it
suit you -- I'd just reverse this matter and you
come up and lunch with me in the committee room
up here privately at one o'clock.
HMJr:
Well, I'd love to do that.
D:
Well, now that's just - - you see, it will save me a
little time coming and going.
HMJr:
I'd love to do it.
D:
Well, that'll be fine and we'll just meet up here
in the committee - you know where the committee
room in the Capitol 18?
HMJr:
Well, I can find out.
D:
Well, it's right here next - on the second floor
....
HMJr:
Oh, yes.
D:
....right here in the. Capitol.
HMJr:
Fine.
D:
At one o'clock.
HMJr:
Fine.
D:
And we'll sit down and there won't be a soul about
us.
HMJr:
Fine.
D:
Fine. All right, thank you.
HMJr:
Thank you.
D:
You're welcome.
mr shite read 12/2/42-
119
December 2, 1942
3:13 p.m.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Hello.
Frank
Knox:
Hello, Henry.
HMJr:
In person.
K:
Frank Knox talking.
HMJr:
Yes.
K:
I have a letter from you, Henry, about the
possibility of using some of the men who have
come to us from the Treasury and now are oom-
missioned...
HMJr:
Yes.
K:
....on some work for you abroad.
HMJr:
Well
K:
It's against the orders of the Boss to return
them to an inactive status, as you suggest....
HMJr:
Yeah.
K:
but we can turn them over to you in - as
active naval officers assigned to you, and we
can do that if you want us to in this case of
Lieutenant Frank A. Southard
HMJr:
Yes.
K:
....Jr.
HMJr:
Well, that would help. We're sending him over
on - he's an economist, you see, one of the
best we had and the State Department - and have
asked us to send - lend them certain men over
there.
120
- 2 -
K:
Well, all right then. Admiral Jacobs will get out
orders at once then directing him to report to you.
HMJr:
Well....
K:
But he'll come in the status of an active officer of
the Navy
HMJr:
Well....
K:
....and wear his uniform. Will that be objectionable?
HMJr:
I don't see why. I think we'll - we'll try it any-
way.
K:
All right. ,Well, I'll have those orders issued
right away then.
HMJr:
What we want is his brains.
K:
Yeah. (Laughs)
HMJr:
What?
K:
Yeah, well, I suppose, as a matter of fact, on a
detail like this he could take his uniform off as
far as that's concerned. But he will be in the
active status of
a....
HMJr:
Could he....
K:
....of an active officer.
HMJr:
Yeah, but could he take his uniform off?
K:
Yes, yes.
HMJr:
Could he be told that?
K:
Yes.
HMJr:
What?
K:
Yup.
HMJr:
Well, I think....
Regraded Unclassified
121
- 3 -
K:
A good many of our officers in Intelligence don't
wear the uniform.
HMJr:
Well, I think if he could be told that, that would
be perfect.
K:
All right. We'll do that. Then I'll have him
ordered right over to you.
HMJr:
It was very kind of you to call me.
K:
All right, Henry.
HMJr:
Thank you.
122
December 2, 1942
3:13 p.m.
...
Frank
Knox:
How are you otherwise?
HMJr:
I'm fine.
K:
That's good.
HMJr:
When - these little squabbles around town, I
look at the war map and I say, "What the hell."
K:
Yeah. sleep. (Laughs) Well, they haven't cost me any
HMJr:
That's right.
K:
What do you hear about this shake-up business?
Is anything going to happen or is it all a flash
in the pan.
HMJr:
No, I - I don't know much except that I gather
that Harold Ickes is very loath to do it.
K:
Yeah.
HMJr:
He's very loath to do it, and I - I haven't
heard - the President hasn't mentioned it but
I think - I think the papers had it about right
because Harold talked pretty freely.
K:
Uh huh.
HMJr:
Do you mean on Manpower, I take it?
K:
Yeah, yeah. He wants to take -- according to
the newspapers, I haven't talked to Harold lately..
HMJr:
No.
K:
He wants to take the Manpower and stay where he
is.
HMJr:
Well, that I don't know. Is that what he wants
to do?
K:
Yeah, that's what the newspaper said. I haven't
talked.
Regraded Unclassified
122
December 2, 1942
3:13 p.m.
...
Frank
Knox:
How are you otherwise?
HMJr:
I'm fine.
K:
That's good.
HMJr:
When - these little squabbles around town, I
look at the war map and I say, "What the hell."
K:
Yeah. sleep. (Laughs) Well, they haven't cost me any
HMJr:
That's right.
K:
What do you hear about this shake-up business?
Is anything going to happen or is it all a flash
in the pan.
HMJr:
No, I - - I don't know much except that I gather
that Harold Ickes is very loath to do it.
K:
Yeah.
HMJr:
He's very loath to do it, and I - I haven't
heard - the President hasn't mentioned it but
I think - I think the papers had it about right
because Harold talked pretty freely.
K:
Uh huh.
HMJr:
Do you mean on Manpower, I take it?
X:
Yeah, yeah. He wants to take -- according to
the newspapers, I haven't talked to Harold lately....
HMJr:
No.
K:
He wants to take the Manpower and stay where he
is.
HMJr:
Well, that I don't know. Is that what he wants
to do?
K:
Yeah, that's what the newspaper said. I haven't
talked....
123
- 2 -
HMJr:
Well, he's very loath. I guess that's about
right, I would guess.
K:
Uh huh.
HMJr:
But he's - he's - he's awful blue, Harold is.
I don't know why.
K:
Is he?
HMJr:
Yeah, he's awful - don't say I said so, but he
needs a little bucking up, I think.
K:
Well, I'll give him a call.
HMJr:
I gave him a call and tried to buck him up a
little bit.
K:
Uh huh.
HMJr:
I never heard him talk 80 low.
K:
Is that 80?
HMJr:
That's just between us.
K:
Yeah. Well, thanks for tipping me off. I'll
call him.
HMJr:
Right.
K:
All right, Henry.
HMJr:
Goodbye.
K:
Goodbye.
Regraded Unclassified
124
December 2, 1942
5:30 p.m.
HMJr:
Hello.
Allan
Sproul:
Hello, Mr. Secretary.
Robert
Rouse:
Hello.
HMJr:
I thought I might get in on some of these words
of wisdom.
R:
(Laughs)
8:
(Laughs) Well, we were just deciding that every-
thing was all right.
HMJr:
Oh, you were.
8:
Yeah.
HMJr:
I see. Bell's coming in. How good all right
does it look?
S:
Well, it looks like just a close shave for the
two billion, which, as I said to Dan, I think
can be turned to advantage; that we - the rest
of the drive is going so well that we - all
we wanted is the minimum from the banks.
HMJr:
I see. But you think the two billion is in the
bag?
S:
I think 80 from what we have and from what Dan
has heard from the other districts.
HMJr:
Oh, yes. Well, just a minute. He's coming in
here now.
8:
Right.
HMJr:
(Talks aside: How does it look, Dan? Oh.
May I have your sheet? I see.)
How much do you think your mail will be?
S:
Well, Mr. Rouse doesn't think our mail will be 80
very heavy because we have all of our big banks
in and we have 775 out of 1000 banks outside in
(cont.)
Regraded Unclassified
125
- 2 -
S:
already 80 that we're not counting for more
(cont.)
than $25 million, say, in our mail.
HMJr:
I see.
R:
We went after the banks on - on Monday.
HMJr:
Oh, yes.
R:
Allan sent a wire to all of them....
HMJr:
Yeah.
R:
....
then again went after them yesterday.
S:
Saw the Victory Fund Committee yesterday and....
HMJr:
I see.
S:
....most of them are in.
HMJr:
Well, but I - - I should think we'd easily get the
two billion.
S:
Yes.
R:
oh, I don't think there's any question about it.
HMJr:
Okay.
R:
Okay.
HMJr:
(Talks aside: Well - do you want to say any-
thing, Dan?) He - he says he doesn't want to
say anything.
S:
All right, fine.
HMJr:
Thank you.
S:
Goodbye.
R:
Goodbye.
126
The Secretary would like to disouss
this with Roy Blough.
127
December 2, 1942
I listened last night to Raymond Gram Swing explain
the new English social security proposal, and I wondered if
we extended our own social security, wouldn't that be just
as good or better than a new withholding tax? -- first,
because we have machinery all set up and it would be no ad-
ditional work for the employers; second, we have had this
experience now for years in social security and we could
extend the benefits just the way they are in England; and,
last and most important, if we did widen social security
wouldn't that be as good a damper on inflationary tendencies
B.B. any device that we could use?
Regraded Unclassified
has 2. 1942.
128
The Problem of Individual Income Tax
Payment
I. Past experience.
The pre-war losses to the Federal Government from
uncollectible personal income taxes of small taxpayers
were negligible. No figures are available indicating
temporary delinquency or the difficulties to taxpayers,
or what the final losses to the Federal Government will
be under recent revenue acts. It is relevant, however,
that more than half the individual taxpayers did not
avail themselves of the installment payment option but
paid in full in one payment in fiscal 1942. No informa-
tion is available on postponements allowed or taken under
relief provisions for soldiers and sailors. More detailed
facts are contained in the following paragraphs:
1. Over the past 22 years (fiscal years 1921-1942)
the amounts of individual income tax assessments abated
as uncollectible have totalled 1.3 percent of the amounts
collected. In the lowest year (1921) the abatements were
0.2 percent of collections, in the highest year (1932)
4.7 percent, and in the latest year (1942) 0.3 percent.
The significance of any year's figures 1s diminished by
the fact that abatements in any year usually cover several
years' taxes.
Regraded Unclassified
129
- 2 -
2. The number of items abated as uncollectible
over the same 22 years has averaged 0.5 percent of the
returns filed and has varied between 2.4 percent (1926)
and 0.1 percent (1942). The latter figure is not repre-
sentative since the abatements relate to earlier years
and the number of returns was twice as great in 1942 as
in 1941 and over four times as great as in 1939.
3. The principal losses in terms of money were for
larger taxpayers. For example, the combined figures for
four years (1926, 1928, 1940, 1941) showed only 4 percent
of the loss in the form of uncollectible amounts of less
than $100, although nearly five-sixths of the uncollectible
items were less than $100.
4. The above figures reflect only the final loss
to the Government on taxes often assessed several years
earlier. The practice followed in making abatements
varies among collectors' offices but in general the 1942
abatements do not substantially reflect 1942 delinquencies
and perhaps not even 1941 delinquencies. Moreover, the
figures do not indicate the amount of temporary delin-
quency and do not show the extent of difficulties and
inconvenience to taxpayers. No figures reflecting the
extent of these conditions are available.
130
- 3 -
5. The use of partial (installment) payments is
increasing, but persons using installments still con-
stitute a minority. In 1939 partial payments were made
by 28.8 percent of return filers] in 1941 by 27.7 percent,
and in 1942 (through September 30) by 40.0 percent. Over
half (56.3 percent) of persons with over $3,000 of income
used partial payments in 1942, while over one-third
(36.5 percent) of persons with under $3,000 of income
did BO.
6. No figures are available on the postponements
allowed under soldiers' and sailors' relief provisions
of the law. Figures on the number of postponements applied
for are probably on record in the collectors' offices, but
the automatic postponements for soldiers and sailors who
are overseas cannot be ascertained, at least until attempts
are made to collect the taxes.
II. Circumstances affecting the difficulty of tax pay-
ment in 1943 and subsequent years.
While the information on past experience is instruc-
tive and encouraging a.s far as it goes, a number of factors
must be considered in judging the probable difficulties
facing taxpayers in 1943 and subsequent years. Among them
are the following:
Regraded Unclassified
131
- 4 -
1. The number of low income taxpayers will be
greatly increased. This has a bearing on payment prob-
lems since the lower the income subject to tax, the less
the expectation that the taxpayer will have knowledge of
the tax and ability and foresight to save to pay it.
Returns have increased in recent years from 4.0 million
filed in fiscal year 1940, 7.6 million in 1941, and
14.6 million in 1942, and there are expected to be
27 million in 1943. The increase 18 largely due to
lowering personal exemptions and credits for dependents
and thus bringing in taxpayers with smaller incomes. In
1943 it is estimated that there will be nearly 17 million
taxpayers with net income of less than $2,000 and 23 mil-
lion with less than $3,000, a ten-fold increase over 1940.
2. The effective rate of income tax on low brackets
will be much higher. This obviously has a bearing on pay-
ment because a small tax can be met more easily than a
large one, Exclusive of Victory tax, which is to be
collected at source, the tax to be paid by a single person
having a net income of $1,000, for example, will be $89
in 1943 compared to $21 in 1942, $4 in 1941, and o in 1940.
The tax to be paid by a married couple having a net income
of $2,000 with no dependents will be $140 in 1943, compared
Regraded Unclassified
132
- 5 -
with $42 in 1942, and O in 1941. The tax to be paid by
a married couple with two dependents, having a net in-
come of $2,500, will be $99 in 1943 as compared with
$12 in 1942, and 0 in 1941. The effective income tax
rate under the 1942 Act for a married person with no
dependents is 7 percent at $2,000; under the 1941 revenue
act this effective rate was not reached until almost
$5,000, and under the 1940 revenue act until about $13,000.
3. The ability of people to meet their higher taxes
will depend on the following factors, among others:
(a) Some incomes will be higher in 1943 than
in 1942. The bearing of this fact on tax payment
18 that the tax paid in 1943 will in most cases
be paid out of 1943 income and if the income 18
higher in 1943 than in 1942 the difficulties of
paying the 1942 tax will constitute less of a
burden than the tax tables show. The total income
paid out for 1942 for the country as a whole is
estimated at $115 billion, while for 1943 rough
estimates place income paid out at approximately
$125 billion.
(b) However, millions of persons will receive
less or no more income in 1943 than in 1942. A
minor factor 18 that the Victory tax will be
133
- 6 -
deducted from the paycheck. Many people have
fixed incomes which cannot be enlarged. Numerous
businesses, are expected to close. The armed
forces will be increased by numbers estimated up
to 4 million. These must either pay their taxes
out of generally reduced incomes or have a burden
of postponed tax to pay after the war.
(c) Subsequent years may show much smaller
incomes than 1942 for persons generally. Decreases
in incomes or the absence of income will make more
difficult, perhaps impossible, the collection of
income taxes at present levels under existing
payment methods.
(d) Any increase in the cost of living affects
ability to meet tax payments. The Bureau of Labor
Statistics index of cost of living increased from
108 to 118 between September 1941 and September
1942 and this did not take account of substantial
concealed increases not affecting the index.
(e) Inability to buy some kinds of goods, such
as automobiles, will release money for tax payments.
In effect this operates as an offset against increases
in living costs. Short-term consumer debt decreased
about $3 billion in the first nine months of 1942.
134
- 7 -
(f) Existence of large fixed commitments
makes tax increases particularly difficult to meet
since the increased tax must come out of the sur-
plus above the commitment.
(g) Accumulated savings will be available to
pay some of the tax increases. Series E War Savings
Bonds are being sold at a current monthly rate of
three-fourths the monthly rate at which income tax
18 accruing for payment in 1943. On February 28,
1943, there will probably be about $8 billions
Series E bonds outstanding, or about the same amount
as the individual income tax liability expected to
be due in 1943. Other sources are savings accounts,
insurance policies, etc. Accumulated savings would
not last long for most people 1f used to pay taxes
and large numbers in the lower income groups do not
have substantial savings. Moreover, payment of
income taxes out of accumulated savings would not
produce the desired anti-inflationary effects and
payment out of E bonds would not even improve the
Treasury's cash position.
(h) Saving by voluntary action 18 much more
difficult than by automatic deduction. A single
person with $21 a week left after deduction of
135
- 09. -
Victory tax would have to save a week's wages
for taxes each quarter-year, no easy problem
considering living expenses.
III. Steps taken or recommended by the Treasury to ease
payment.
A. Tax anticipation notes.
Since August 1941, the Treasury has offered for sale
tax anticipation notes designed to give the taxpayer some
interest on funds set aside for payment of tax. Two series
have been issued. Series A, with an interest rate of about
1.92 percent, is presumably designed for taxpayers in the
medium and low income classes. The amount of Series A
notes that could be turned in during any one year for pay-
ment of income tax was limited to $1,200 until September
1942, when the limit was raised to $5,000. Series B, which
have not been sold since September 12, 1942, and Series c,
sale of which began September 14, 1942, were designed
primarily for corporations and persons with relatively
large incomes. The rate of interest on Series B 18 about
0.48 percent; interest on Series C accrues monthly on a
graduated scale and equals about 1.07 percent if the note
18 held to maturity. Series A notes are sold in denomina-
tions of $25, $50, $100, $500, $1,000, and $5,000. These
notes were widely publicized by the Treasury and by banks.
Sales of Series A notes from August 1, 1941, through
September 30, 1942, totalled $116 million, of
which $92.2 million were purchased by individuals,
136
- 9 -
partnerships, and fiduciaries. These notes have probably
not been well adapted to the needs of the small taxpayer.
Only 2.6 percent of the total sold have been of the $25
denomination. The majority of taxpayers, if laying
aside money for taxes regularly, would have to seve
from four to ten or more weeks before accumulating enough
to purchase one $25 note. Moreover, the rate of interest,
which 18 much below what persons in the lower income
classes are accustomed to pay on their own borrowing, has
probably not been a significant inducement.
H.M.Sr.
B. Collection at source.
1. Withholding tax proposed in 1941.
In November 1941, the Treasury in executive
session of the Committee on Ways and Means proposed that
an additional "withholding" income tax of 15 percent
above exemptions be imposed beginning January 1, 1942.
"withholding"
For most taxpayers all or substantially all they tax
liability would have been collected at source. At that
time it was estimated that the tax would have yielded
$2.8 billion.
2. The March 3, 1942, income tax recommendations.
On March 3, 1942, the Treasury proposed that
the Secretary be allowed to institute collection at
source at a rate not to exceed 10 percent when in his
Regraded Unclassified
137
- 10 -
judgment such action was necessary as a measure for
checking inflation. For most taxpayers the result would
have been to collect at source about half of their tax
payable on 1942 income. One of the objections to this
proposal was that in the early stages it would force
taxpayers to pay more than one full year's tax in a
given year.
3. Provision of the House Bill.
As it passed the House, the Revenue Bill of
1942 provided that, in 1943, 5 percent of the regular
income tax be collected at source and that in 1944 and
thereafter 10 percent be 80 collected. The doubling up
of payment was spread over two years under this plan.
When in full operation in 1945, this plan would have
collected at source more than half of the tax due under
the proposed rates from about 90 percent of all taxpayers.
4. September 1942 Plan.
On September 9, 1942, the Treasury presented
a plan to the Senate Finance Committee, under which the
liability on 1942 income would have been 10 percentage
points below the House Bill or for most taxpayers approx-
imately the same as the amounts paid in 1942 on 1941 income.
Beginning in 1943, however, rates were to be 5 percentage
points higher than provided in the House Bill and collection
Regraded Unclassified
138
- 11 -
at source was to be at the rate of 15 percent beginning
January 1, 1943. This plan would have involved no
doubling up. Under it more than three-quarters of all
taxpayers would have had two-thirds or more of all
tax liability collected at source.
C. Delinquent installment plan.
Recently Assistant Secretary Sullivan at a press
conference suggested that individuals who are unable to
meet their income tax installments when due request their
Collector of Internal Revenue for the privilege of making
payments on a weekly, semi-monthly, or monthly basis.
Taxpayers would be required to pay 6 percent interest on
amounts overdue, but would not need to borrow from loan
companies, presumably at higher rates of interest. This
plan would help solve one of the major problems, namely,
that of timing the payments with receipt of income. How-
ever, it would not meet the problem that would arise when
incomes began to decline. Moreover, unless made an
optional tax payment method by law, it would tend to
remove the fear of punishment for delinquency in payment
of Federal tax, a fear which has been one of the most
important reasons for the excellent collection record in
the past.
Regraded Unclassified
139
- 12 -
D. Indirect aid.
Some indirect aids to tax payment have been given.
The simplified return eases the problem of compliance,
and the elimination of the oath makes it easier and
cheaper for the taxpayer to file his return. Although
these changes do not increase the financial ability of
the taxpayer to pay, they tend to reduce his inertia
and resistance to preparing and filing his return
promptly.
Division of Tax Research, Treasury Department
November 30, 1942.
140
INDIVIDUAL INCOME TAX
Effective Rates for Married Person without Dependents
1918 and Selected Taxable Years
PER
PER
CENT
CENT
90
90
I Net Liability
Post-War
Gross Liability-
Credit
80
80
1940
70
70
1936-39
1941
60
60
1942
1984-35
50
50
40
40
30
30
1930-3/
20
20
19/8
1929
10
10
0
.6
I
2
4.
6
10
20
40
60
0
100
200
400
600
1000
2000
4000
NET INCOME IN THOUSANDS OF DOLLARS
Regraded Unclas
INDIVIDUAL INCOME TAX
141
UNITED STATES, UNITED KINGDOM AND CANADA
Effective Rates for Married Person without Dependents
PER
PER
CENT
CENT
Post-Mar credit my be taken our-
rently, in
90
(1) United States:to the (stant of
90
life Ensurance presium pay unts,
not repayments of debt and at per-
chasse of war bonds;
80
(2) Canada:to the extent of life
Insurance presium payments, repay-
80
mate of sortgage debt, and -
ston contributions;
(2)Ucited Elaptos #
None.
United Kingdom
70
70
60
60
50
50
Canada
40
40
United States
Including N.Y. State
30
30
20
20
Gross Liability,
I Net Liability
Post-War
Credit
10
10
0
0
.6
I
2
4
6
10
20
40
60
100
200
400
600
1000
2000
4000
NET INCOME IN THOUSANDS OF DOLLARS
*Including Victory Tax
---
? of I f I
I
Regraded Uncla
TREASURY DEPARTMENT
142
INTER OFFICE COMMUNICATION
DATE
TO Secretary Morgenthau
December 2, 1942
FROM Randolph Paul
You may be interested to know that 8. dinner has
been arranged, Monday, December 7th, for the purpose
of discussing the relationship of taxes and charities.
Those present on behalf of the charities will be:
Arthur Ballantine
Roy Larson
Publisher of Life and Time
John Coleman
Catholic charities
Monsignor Keegan
Catholic charities
Norman Goetz
Federation for the Support
of Jewish Philanthropic
Societies of New York City.
George Medalie
11
Michael Appel
11
Joseph Willen
11
Mr. Sullivan and I will attend for the Treasury, and
possibly one or two others. Mr. Ben Cohen will also
attend.
bef
P.S. I am attaching a letter from the President of the
Federation which indicates points to be discussed.
Regraded Unclassified
FEDERATION
ORGE 1. MEDALIS
FOR THE SUPPORT OF JEWISH PHILANTHROPIC SOCIETIES
Problem
OF NEW YORK CITY
PERCY 5. STRAUS
Charres of the Buard
FEDERATION
HENRY ITTLESON
MRE BENEY C. BORG
Associate Chairmen of the Borrd
MONBOE COLDWATER
H
LOUIS L GRUMBACH
Transurer
MRS. AUTHOR LEHMAN
PAUL HUX WARSURG
THERE
JOHN ROSENTHAL
Asservate Treasurer
Via Problems
JOHN A. SHERMAN
Assisted Transurer
MAURICH a. HEXTER
71 WEST 47 STREET
RALPH E SAMUEL
Servetary
part WILLEN
TELEPHONE BRYANT 9-7110
JACOB M. PRANKEL
Visa-Providents
Assistent Secretary
At 70 Pine Street
December 1, 1942
Hon. Randolph E. Paul
General Counsel to the
Secretary of the Treasury
Treasury Department
Washington, D. C.
My dear Mr. Paul:
My colleagues of the Catholic Charities, the Greater
New York Fund, the United Hospital Fund, Community Service Organ-
izations who will join with me in our visit with you and your as-
sociates on Monday, December 7th, at the Mayflower Hotel in Wash-
ington, fully realize the grave and complex problems that are
immediately before you. We would not take this evening away from
you did we not believe that the problems which concern us are
matters of vital importance to the community.
We are faced, as all responsible American citizens must
be, with the full realization that the war effort must fall heavily
100% every section and element of our community, and know that those
950 have the responsibility for developing these programs face a
task that leaves them little choice but to ask the utmost sacrifice
from every group in the community.
We are fully aware that the Byrnes Agency created by the
President to stabilize our economy also faces extreme social and
sconomic problems and you may be certain that we would not come to
discuss with you any aspects of their decisions in this matter.
These are larger matters of national policy and not questions in
Which we, representing philanthropies, would presume in that ca-
pasity to make recommendations.
We come to you because one aspect of your recent ruling
sty
have implications of deep concern to the religious, philan-
thropie and educational life of America. And, in turn, of course,
Regraded Unclassified
Hon. Randolph E. Paul
-2-
December 1, 1942
indirectly these regulations and the implications which or
the whole morale involved and in strength of our national life are directly
we ask you again to consider.
men and women our community and it 1s because of this that we
They in have however, deeply disturbed many of the finest
and ings through Executive, through rulings of the Treasury Department,
Governments of the have always had, through acts of Congress, through rul-
come to you. By and large, the United States Federal and State
generous in the regulations and interpretations that have been
executive branches of the Government, always been most
community. bodied in our Law to encourage and safeguard these functions of em- our
deavors as a characteristic and essential part of our traditional
again and again, encouraged in written and in spoken word these time, en-
The President and his predecessor have from time to
American way of life.
of measures in our economic, political and social life in the interests
There is no doubt that we shall all be faced with emergency
of philanthropies, the educational institutions and the religious life
a final victory for which we all strive. To this extent, the
selves ready to dedicate their full efforts.
America are, of course, deeply concerned and have proven them-
We are disturbed by some possible implications of the
cent rulings that not only involve a temporary set-back for philan- re-
thropy but may indeed jeopardize their very existence and make their
and continuance almost impossible. These voluntary welfare, religious
educational expressions of our life have certainly benefited a
and tion in the income tax laws. As the tax burdens have increased, exemp- men
great deal by the encouragement given to them through the 15%
the law of the land an incentive to continue and even increase their
women have, of course, found in the encouragement given them by
gifts to these philanthropies.
this ruling, but there are implications in the regulations as an-
We realize fully that there is no change contemplated in
nounced that are disturbing.
May we also at this time take the opportunity to express
more fully many of the problems of private philanthropy in whose
behalf we write and in whose behalf we shall meet you next week.
the nature of our work. Since so much of the problem of material
In some quarters there is apparent a misconception as to
relief to the unemployed and needy has been taken care of by the
Government, there has arisen in some peoples' minds the misconcep-
tion anthrophere Quite the contrary is true. Voluntary supported priv-
is a diminishing need for the services of private
Regraded Unclassified
Ход. Randolph E. Paul
-3-
December 1, 1942
all hohpitals, clinics, health agencies have never been in greater
Irsand. Our own city alone has over 90 voluntary hospitals and
hundreds of clinics and health centers vital and necessary to the
health protection and morale building of men, women and children
th the community.
The increased cost of living, the shortage of labor, the
armed services' call for nurses, the shortage of doctors -- all this
has led to an acute problem. These institutions face mounting defi-
cits not only from their own operations but for the services they
are called upon to render to the Civilian Defense Office and to the
Army Emergency Medical Service, and the need for generous giving on
the part of the community is more vital than ever.
With millions of men in the service and millions of women
in the industrial war effort, the need for nurseries, child-care,
health and welfare agencies, recreation and character-building cen-
ters has mounted drastically and all of us live in the dread fear of
# mounting crime wave among adolescents.
In our own city there are hundreds of agencies that deal
with one phase or another of this work and play an important role in
the prevention of juvenile delinquency and in dealing with it when
It does occur. The whole program of religious education, the YMCAs,
the YMHAS, YWCAs, YWHAs, the Knights of Columbus, center groups,
etc., each deal with the great problems of the youth of our country -
problems never more serious than now, when adult life is so deeply
engaged in the war effort, when we must be eternally watchful of the
possibilities of much confusion, the destruction and falling away
from the fundamental moorings of home and church and the essentials
of the American way of life.
All these problems and a hundred more are the tasks of our
vast fabric of private social work. Temporary legislation will have
permanent effects on them. These are functions of society that will
be easy to close and exceedingly difficult to reopen.
We believe, therefore, that we have every right to ask you
so consider the memorandum we have attached to this letter indicating
in erpretations and rulings that might enable people affected by the
Byrnes' ruling dealing with the $25,000 to be willing to continue
with their philanthropies without in any way adding to their own
personal incomes.
These men not only give generously in many instances, but
Sheir gifts represent the backbone of public solicitation. Curtail-
sent on their part would be serious for the direct loss and doubly
serious for the effect on the community, since curtailment of gifts
by these leaders must inevitably affect all giving.
Regraded Unclassified
Hon. Randolph E. Paul
-4-
December 1, 1942
We are told by many who have studied this situation that
the Government would lose very little through enabling these men
to be a conduit, as it were, if they might continue to give to
their philanthropies. We are also deeply concerned by the concept
of the "customary" gift. In a large measure this would mean the
freezing of giving if this is interpreted to mean that there can
be no increased giving to philanthropy. This, as you can readily
understand, would have disastrous effects since these social agen-
cies would be precluded from any possibility of making necessary
replacements in their giving structure as former supporters pass
away.
We look forward to our meeting with you and your asso-
ciates next Monday, for we are confident that all of us are seek-
ing one object - while doing everything to insure victory, at the
same time to safeguard, sustain and continue these social agencies
which mean so much to the religious, educational and social life
of the community in peacetime and play no less a role in this time
of war.
Sincerel
Regraded Unclassified
1.
Charitable contributions should be permitted as a deduction
in computing income subject to the Victory Tax, provided,
however, that the amount of said deductible contributions
shall not exceed 15% of the Victory Tax Net Income. This re-
quires legislation.
2.
Customary contributions of an individual shall be defined only
as the aggregate amount of his contribution taken into consid-
eration and not the particular charities to which such con-
tributions were given. In other words, if an individual con-
tributed previously only to the Red Cross, United Hospital
Fund, he may now contribute to other charities also or any
substitutions thereof.
3.
The amount of customary contributions shall be deemed to be
15% of the salary and other income of the individual for 1942
regardless of whether or not the individual had previously given
15% of such amount to charity.
4. The amount which an employee shall be entitled to receive in
excess of the fixed salary of $67,200 shall be that proportion
of the amount by which his salary prior to the effective date
of the $25,000 salary limitation exceeds $67,200, which the
contributions to charitable organizations made by him during
the taxable year bears to $67,200, plus his income from sources
other than salary.
For example, if an employee is receiving a salary of $150,000
prior to the effective date of the $25,000 salary limitation
and in the year 1943 he receives $50,000 of taxable income
apart from salary, plus his maximum salary receivable of
$67,200, and makes contributions to charitable organizations
of $11,720, his employer will be permitted to match his con-
tribution by the sum of $8,280. That is, the employer is per-
mitted to match his contribution to the extent of 11,720/117,200
X ($150,000 minus $67,200) = $8,280.
The amount paid by the employer to the individual in excess of
$67,200 for the purpose of enabling him to make his customary
charitable contributions shall not be treated as taxable income
of the individual, but shall be regarded as a conduit between
the employer and the charity with the result that said amount
does not enter into the computation of his taxable income.
However, the employer making the payment shall be permitted to
deduct such payment as compensation paid.
Regraded Unclassified
148
THE
FEDERAL RESERVE OPERATIONS IN GOVERNMENT SECURITIES
Column A. shows Federal Reserve operations
Market purchases
,
Column B shows price changes is 32018 for
in millions of dollars as follows:
Market sales
all securities except certificates.
Direct purchases from Treasury
1
For certificates. Column 9 shows yield
Maturities
:
changes in decimale.
STRICTLY CONFIDENTIAL
Last Week
This Vegic
Tuesday
Wednesday
Thursday
Friday
Saturday :
NOT 21
24
25
26
Full Vonk
Index
Description
Monday #
Tuesday
Vednesday
Thursday
Friday
Saturday
27
Full Week
28
Nov. 30
Dec. 1
2
3
la
5
a
B
A
B
A
3
A
I
A
B
A
B
A
3
A
3
A
3
A
!
A
a
A
If
A
B
+14,E
-47.7
+49.6
Holiday
1. Suppary
+87.2
+98.6
-50.0
---3
*321.9
Market purchases
+64.8
---
+54.1
-94.9
-2.0
-11.4
-67.7
Market anles
-0.6
-2.4
-,9
+4139.0
+4139.0
-aló.2
Direct purchases from Treasury
+1190.0
+493.0
-4324.0
-m15.2
+47.7
*29.1
Maturities
-3.5
-41.2
+85.2
4843.0
+226.2
+377.0
Total net increase or decrease (-)
*174.2
---
+144.7
-233.9
Wednesday report of total portfolio
II. Taxable Securities
Bills all Issues combined
-
*17.6
+84.5
*114.9
Market purchases
+8.2
+93.1
-^0,0
-4.3
-2.0
-11.4
-67.7
Market sales
-20.6
-2.4
-a15.2
-.9
-m16.2
Maturities
-3.5
---
-0,3
-20.5
+15.5
+73.1
-31.0
Total net increase or decrease(-)
-72.4
-2.4
+48.7
Certificates
-5,4
+10.0
+.4
*15.9
5/86
2-1
43
+2.7 +.02%
+2.8
-.015
-.015
.65
C-
5-1
43
+1.2 - 015
-115
-.015
+20.0
+3.5
+23.5-.025
7/8
3
5-1
43
+3.9
+.5
+4.6
-,015
+5.4
+5.4-015
7/8
D. 11-1
43
+6.0
+,7
7/8
I.
12-1
43**
+4139.0
+d139.0
Special one-day certificates 2/ *d190.0
+493.0
-1324.0
Treasury notes
, 2
3/46
D. 3-15
"
-2
-2
" 9
3/4
D - 9-15
-
-1.3
+3.0
+6.6
N 11
1-1/4
C 3-15
45
$ 12
3/-
3 12-15
45
+L.3
-1
+1.3
=1
# 13
1
A 3-15 46
...
+3.1
+3.3
N 14
1-1/2
1 12-15
46
+2.3
+1.5
Treasury bonde
4,2
+2.1
+,5
+3.3
+2.1
+6.2
B 12
a
3-15 48-50
+2.5
+1,1
B 14
1-3/-
.
6-15
4"
-.8
+1,4
+2.0
+.5
+1.0
*7.5
3 17
2
- 6-15 49-51
+2.9
+,9
+1.0
the
+1.9
-5,4
*.3
+9.4
$ 18
2
- 9-15 49-51
+3.5
+1.9
+2.2
+4,7)
+3.9
+2.2
+3.0
+1.6
+14.7
19
2
- 12-15 49-51
*2.6
+3.3
+,4
+1,2
+2.3
+6.0
+6.0
+3.5
+23.0
32
2
- 3-15 50-52
+10.5
+5.9
3 27
2
- 12-15 51-55
-1
-1
-2
-1
+1.0
-1
-1
+1.0
-6
028
2-1/2
- 3-15 52-54
+1.5
+6.0
1.8
+1.0
+2.1
-1
+4.7
+8.6
-1
329
2-1/4
- 6-15 52-55
+.5
+3.2
+1.6
-1
-3
-1
-2
-2
-9
333
2-1/2
- 3-15 56-58
*1
-1
-4
-5
37
2-1/2
- 6-15 62-67
38
2-1/2
-
12-15
63-68**
-1
-1
-1
-
39
2-1/2
-
9-15
67-72
+1
Quaranteed securities
-1
-1
G 7
RFC 1-1/8%
T
7-15
43
G 5
RFC 1
W 4-15 44
G 2
ccc 1-1/8 G - 2-15 45
-1
All taxable securities
+25.2
+29.0
+34.5
+55.0
+96.6
+243.3
Market purchases
+47.1
*27.8
+65.3
-50.0
-4.3
-2.0
-11.4
-67.7
Market sales
-80.6
-2.4
-.9
+4139.0
+4139.0
Direct purchases from Treasury
+d190.0
+493.0
-4324.0
-m16.2
-m16.2
Maturities
-3.5
-21,8
*29.0
+14.0
-53.0
+224.2
+298.4
Total net increase or decrease(-)
+156.5
+118.4
-263.1
Office sf the Secretary of the Treasury. Division of Research and Statistics.
= Original figures revised.
Leas that $50,000.
Purchases and sales recorded as of day of transaction and not day of delivery. Transactions after 4 o'clock are included in the next day.
No: yet tradet.
The issue and redemption of special one-day certificates are treated net: 1.0., only the change from the day before is considered as an issue or redemption. Transactions are
entered as of the day following that to which they apply. since data are not available until the following morning.
Regraded Unclassified
148
148
FEDERAL RESERVE OPERATIONS IN GOVERNMENT SECURITIES
Column A shows Federal Reserve operations
Market purchases
Column 3 shows price changes is Hais for
is millions of dollars as follows:
Market sales y
all securities annept certificates.
Direct purchases from Treasury
+d
For certificates. Column 3 shows yiald
changes is decimals.
STRICTLY CONFIDENTIAL
Maturities,
.
last Vasit
This Yest:
Monday
Tuesday
Velnesday
Thursday
Priday
Saturday .
24
25
26
Full Vonk
Index
Description
Monday r
Tuesday
Wednesday
Thursday
Friday
Betarday
Ber. 23
27
Full Vesit
28
Nov. 30
Dec. 1
2
3
la
un
A
3
A
B
A
3
A.
3
à
a
A
3
A
»
A
3
A
3
A
B
A
a
A
3
&
D
A
-
+47.7
+49.6
1. Summary
+38.8
Holiday
*67.2
+98.6
-4.3
*321.9
Market purchases
+64.6
+54.1
+94.9
-50.0
-2.0
-11.4
-67.7
Market sales
-00.5
-2.4
-.9
+4139.0
-a16.2
+6139.0
Direct purchases from Treasury
+4190.0
+493.0
-4324.0
-=16.2
Maturities
-3.5
-11.2
+47.7
*29.1
+65.2
4843.0
+226.2
*377.0
Total not Increase or decrease (-)
+174.2
+144.7
-233.5
Velnesday report of total partfolio
-
II. Taxable Securities
Bills - all issues combined
+4.5
+4.3
+17.6
+84.5
+114.9
-4,3
Market purchases
+6.2
+53.1
-50.0
-2.0
-11.4
-67.7
Market sales
-80.6
-2.4
-.9
-m16.2
-m16.2
Maturities
-3-5
-41.5
+4.3
-20.5
+15.6
*73.1
+31.0
Total net increase or decrease(-)
-72.4
---
-2.4
+48.7
Certificates
+5.5
+10.0
+.4
+15.9
5/8% 2-1 43
+2.7
*.02%
+2.8
4,2
-.015
-.015
-.015
.65
0 - 5-1 43
+1.2
-.01%
-.015
-.01%
+20.0
+3.5
+23.5
.02%
7/8 1. 6-1 43
+3.9
+.5
+5.6
-.01%
+5.4
+5.
-015
7/8 D - 11-1 43
+6.0
+.7
7/8 1. 12-1 43**
+4139.0
+4139.0
Special one-day certificates 2/
*4190.0
+493.0
-4324.0
Treasury notes
# 2
3/4%
D - 3-15 43
&
4
" 9
3/4
D - 9-15 44
+2.3
+1.3
+3.0
+6,6
I'll
1-1/4
C 3-15 45
$ 12
3/4
3 12-15 45
+1.3
-1
+1.3
-1
#13
1
A - 3-15 46
+.1
+3,1
1.+
+3.3
N14
1-1/2 3 12-15 46
+2.3
+1.5
Treasury bonds
+,2
+2.1
+.5
+3.3
+2.1
+6.2
12
X
-
3-15
48-50
+2.5
+1.1
114
1-3/4
.
6-15
4
+.6
+3.4
+2.0
+.5
+1.0
+7.5
B 17
2
- 6-15 09-51
+2.9
+.9
+1.0
+1.8
+1.9
+5.4
+.)
+9,4
3 18
2
. 9-15 49-51
+3.5
+1.9
+2.2
44.0
+3.9
+2.2
+3.0
+1.6
+14.7
19
2
- 12-15 49-51
+2.6
+3.3
e,k
+3.2
+2.3
+6.0
+6.0
+3.5
+23.0
12
2
- 3-15 50-52
+10.5
+5.9
927
2
- 12-15 51-55
-1
-1
7
-1
+1.0
2
-1
+1.0
-6
18
2-1/2
- 3-15 52-54
+1.5
+6.0
:
+1.0
+2,1
-1
+4.7
+8.6
-1
329
2-1/4
- 6-15 52-55
+.5
+3.2
+1,6
-1
-3
-1
Y
&
-9
333
2-1/2
- 3-15 56-58
+1
-1
L
s
37
2-1/2
- 6-15 62-67
1 36
2-1/2
- 12-15 63-68**
-1
-1
-1
-1
1
39
2-1/2
. 9-15 67-72
+1
Guaranteed securities
-1
-1
07
RFC 1-1/85 T - 7-15 43
98
RFC 1
V - 4-15 %
0 2
COC
1-1/8 2-15 -
-1
All tamble securities
*26.2
+29.0
+34.5
$55.0
+96.6
+243.3
Market purchases
*67.1
+27.8
$
-50.0
-4.3
-2.0
-11.4
-67.7
Market sales
-80.6
-2.4
-.9
+4139.0
+4139.0
Direct purchases from Treasury
+d190.0
+493.0
-4324.0
-m16.2
-m16.2
Maturities
-3.5
-21.8
+29.0
+14.0
+53.0
+224.2
+298.4
Total set increase or decrease(-)
+156.5
+118,4
-263,1
Office of the Secretary of the Treasury, Division of Research and Statistics.
, Original figures revised.
. Less than $50,000.
Purchases and sales recorded as of day of transaction and not day of delivery. Transactions after . o'clock are included is the next day.
.. Not yet traded.
The Issue and redemption of special one-day certificates are treated net: 1.0., only the change free the day before is considered as an Louse or redemption. Transactions are
entered as of the day following that to which they apply. since data are not available until the following morning.
Regraded Unclassified
149
149
Page 2
FEDERAL RESERVE OPERATIONS IN GOVERNMENT SECURITIES
Column & shows Federal Reserve operations
is millions of dollars - follows:
Market purchases V
Column 3 show price changes La 32mls.
Market sales 2/
Direct purchases from Treasury
=
Maturities
,
STRICTLY CONFIDENTIAL
last Vesit
Monday
Tuesday
Velnesday
Thursday
This Wesk
Triday
Seturday
Nov. 23
Fall Week
Index
24
Description
a
26
Monday
27
Tenday
26
Valuestay
Thursday
Priday
Baturday
Nev. 30
Dec. 1
Fall Vesk
A
3
A
3
A
2
.
&
a
A
3
la
3
,
A
3
A.
3
A
3
A
3
A
3
III. Tax-sxempt securities
&
3
A
3
A
$
&
a
-1
Treasury notes
Holiday
-1
11
1-3/46 12-15 kg
-1
3
-1
1-1/8 A - 6-15 ky
-1
-1
I
&
1
-1
0 - 9-15 43
1
-1
-1
-1
+1
. 2 6
If
5
1-1/8 3 12-15 43
1
1 - 3-15 -
. 7
3/4
A - 6-15 -
. 5
1
c - 9-15 M
+1
+1
I 10
3/4
A - 3-15 45
+1
Treasury bonds
+1.1
+2.3
+3.9
-2
+7.3
4
B 1
3-3/86
-
6-15
43-47
+1.1
⑈
&
+2.2
7
+12.1
+1.7
+12.4
-2
B 2
3-1/4
- 10-15 43-45
+6.1
+,1
+2,6
+3.8
+2.3
A
+2.4
Y
+.2
+6.7
&
33
3-1/4
- 4-15 44-46
+1.1
=1
-1
+1.5
+10.4
-1
-3
:
12-15 44-54
+,2
+.1
+1.6
+1.9
35
2-3/4
- 9-15 45-47
+.5
+1.0
+5.0
+3.6
+3.1
-1
+11.7
-1
16
2-1/2
- 12-15 b5
-2
-1
7
+6.2
+1.0
-1
-1
1
17
3-3/4
- 3-15 46-56
+,1
-1
+,1
+.2
+,4
+.4
-1
38
3
- 6-15 46-48
+1.1
-1
+3.4
+,1
+1.2
-1
+,1
+5.9
11
" 9
3-1/8
- 6-15 46-49
-2
=1
=1
+.3
+,1
+.8
La
3 10
4-1/4
- 10-15 47-52
-1
-1
=2
7
-1
-2
-7
311
2
- 12-15 47
-1
=1
-1
7
-5
13
2-3/4
- 3-15 48-51
-3
&
-1
+,7
+2.3
+1.2
-1
&
Y
8 15
2-1/2
- 9-15 48
-1
-3
-1
+1.3
-2
&
-1
7
8 16
2
- 12-15 48-50
+,2
-1
-1
+,1
-2
+,6
-2
+.3
7
+,1
+,4
$1.1
-5
3 20
3-1/8
- 12-15 49-52
+.7
42.5
+,5
+3.0
-1
+2.3
-1
+1.2
+7.0
-2
3 21
2-1/2
- 12-15 49-53
+2.2
-1
+5.3
+1,3
-1
+1.9
+4,5
+3.2
+3.2
2
+12.3
2
3 23
2-1/2
- 9-15 50-52
+6.2
-1
+,6
-1
+,6
+.5
+1.2
-1
+1.1
+.3
+.3
+6,0
-3
3 24
2-3/4
. 6-15 51-54
+,1
M
-1
-1
-5
3.25
3
- 9-15 51-55
-1
+.7
+.3
7
+.5
-1
+.5
+1.7
&
326
2-1/4
- 12-15 51-53
+2.3
+2.2
+,9
of
-2
-1
-9
30
2
- 6-15 53-55
-5
7
&
-3
-12
3 31
2-1/4
- 6-15 54-56
-1
&
-3
+.8
-3
+1.2
-2
Y
dada
+,2
-2
+2.2
-12
32
2-7/8
- 3-15 55-60
+1,1
L
+,8
A
-6
-1
-15
34
2-3/4
- 9-15 56-59
+,4
-2
1
&
-3
M
-3
-16
35
2-3/4
- 6-15 58-63
+.2
-2
-3
-3
-15
36
2-3/4
- 12-15 60-65
+.5
+.6
+,6
Quaranteed securities
9 1
cco 3/4% 5-1 43
o 9
USEA 1-3/8
- 2-1 Lela
-1
-2
-1
-3
04
TIME 3
- 3-15 44-49
4.2
-1
-1
-2
o 3
FFMC 3-1/4
- 3-15 44-64
4
-1
-3
05
HOLC 3
A. - 5-1 44-52
+,1
+.2
-1
-1
&
0
6
BOLO 1-1/2 # - 6-1 105-47
All tax-axempt securities
+10.6
+18.7
+15.1
+32.2
+2.0
+78.6
Market purchases
+17.7
+26.3
+29.6
Market sales
Direct purchases free Transury
Maturities
+10.6
+18.7
+15.1
+32.2
+2.0
+78.6
Total net increase or decrease(-)
+17.7
+26.3
489.6
Office of the Secretary of the freasury. Division of Research and Statistics.
Γ Original figures revised.
Less than $50,000.
1/ Purchases and sales recorded as of day of transaction and not day of delivery. Transactions after - e'clock are included in the next day.
Regraded Unclassified
150
December 2, 1942.
Dear Henry:
I have your letter of November 30,
1942, regarding the phrase "borrowing nine
billion dollars from accumulated savings and
idle funds" which has worried the savings
banks of the country.
I was sorry that we could not change
this when it was called to our attention, but
it was too late to make it apply uniformly
throughout the country and we thought it would
do more harm to change it in one section of
the country than to let it stand. We are, how-
ever, willing to change the phrase along the
line suggested by you or some other phrase
which will eliminate the words "accumulated
savings".
I appreciate your writing me about
this matter. I also appreciate the work that
savings banks of the State of New York have
done on the F and G Bonds and the generous
subscription of the Bowery Savings Bank to the
Victory 2-1/2's.
With best wishes, I am
Sincerely yours,
(Signed) Henry
Mr. Henry Bruere
President
The Bowery Savings Bank
Photo file in Diary
110 East 42nd Street
Orig. file to Thompson
New York, New York.
DWB:ew
P.S. could not come down for
today.
Regraded Unclassified
THE BOWERY SAVINGS BANK
110 KANT 12% STREET
NEW YOUR
HENRY BRUÈRE
PRESIDENT
November 30, 1942
Honorable Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
Dear Henry:
I hesitate to thrust our problems on your attention,
but I venture to do so in this case because I believe you
would care to know that there is some anxiety in our group
lest a phrase in the advertisements in support of the
Victory Loan drive may cause heavy withdrawals from the
savings banks. We are not certain that this would be the
case but if it should happen it would mean, of course, that
we would have to sell government bonds to pay off our de-
positors.
The phrase we are worrying about is "borrowing nine bill-
ion dollars from accumulated savings and idle funds". Could
you not have the advertisements read: "borrowing nine billion
dollars from uninvested and idle funds"?
This would omit reference to savings bank deposito, life
insurance funds, thrift accounts, etc, so largely investod in
our best security.
Incidentally, I em proud to tell you that the savings banks
of the State of New York have purchased $8,700,000 "P" and "G"
bonds (nearly all "G"s) during the year, and in response to a
recent appeal I made as as proliminary to the proposed Special
"G" Bond Campaign they increased their holdings of these bonds
by $2,000,000.
For a final cheering note- The Powery Savings Bank today
has subscribed to $40,000,000 of the "tap" issue. I assume
the savings banks generally will subscribe in like menner
proportionately unless they foar heavy withdrawals.
With all good wishes,
I remain
Faithfully yours, East
HB-encl.
President
Regraded Unclassified
Schedule of Appearances of
THE BOWERY SAVINGS BANK
NE. SPAPER ADVERTISEMENT
Take A Look at Your Taxes
Wednesday
November 25
Times
Friday
II
27
World-Telegram
Monday
Il
30
Mirror
⑉
If
30
Sun
Tuesday
December 1
News
If
If
1
Journal-Americen
Wednesday
Il
Herald Tribune
"
2
Post
Dear the Secretary:
this is the first of a series of
advertexements scheduled to appear
in all my. papers between 45W
and March 1445
respection
-
Bob sparks
11/30
Regraded Unclassified
TAKE a LOOK at YOUR TAXES
and SAVE
What Taxes Will Cost You In 1943
FEDERAL INCOME AND VICTORY TAXES
Net Income
before
Single Person
Man and Wife
Man and Wife
Personal Exemption
No Dependents
No Dependents
Two Dependents
$1200
$ 153
$ 21
$ 20
1800
288
144
39
2500
446
297
159
3000
574
405
267
4000
829
647
485
5000
1105
894
730
This chart combines Federal income and Victory taxes. Starting January 1, Victory raxes will be de-
ducted from your salary-5 cents on each dollarin excess of $12 a week. Later on, part of the Victory
tax will be returned to you. The chart includ ly that part of the tax which will Not be returned.
Look above and you get a pretty fair idea of the combined Federal
income and Victory taxes whit must be paid by you in 1943.
Because of the Victory tax, your pay envelope will contain less. From
this "less," you must meet an income tax which will be far higher.
Paying that tax will be a privilege a patriotic duty! But face facts.
Paying it without bringing sudden hardships to yourself and family
will require planning in advance
saving in advance. No longer
can you wait till March to think about taxes.
The Bowery, with a 108-year background in family money manage-
ment, earnestly urges you to start saving for taxes. Realize what you
are up against. Then save. Come to The Bowery and save. And save
steadily. Unless you do save, you may be swamped with serious finan-
cial difficulties when tax payment time comes.
BOWERY SAVINGS BANK
110 East (2nd Street
130 Bowery
Fifth Avenue at 34th Street
Save for Taxes
Regraded Unclassified
154
December 2, 1942.
Dear Mr. Ambassador:
I think you will enjoy hearing
this record of & song that was written
for us by two Army boys who were de-
tailed to the Treasury for a time in
connection with the War Bond campaign.
The authors, Sergeant Richard Uhl and
Corporal Tom Adair, have now gone back
to military duty.
I feel that their song will be a
great help to us in our drive to get
thirty million Americans to set aside
at least ten percent of their pay in
War Bonds every pay day.
Sincerely yours,
(Signed) H. Morgenthan. Jr
His Excellency,
The Right Honorable
the Viscount Halifax,
British Ambassador,
Washington, D. C.
P.S. I would appreciate it if you would
forward the attached letter and record
to Prime Minister Churchill.
FK:eg
(Song - "Ev'rybody Ev'ry Payday")
Taken to Embassy by Chauffeur Branch
1:15 12/4/42.
Copies in Diary
Regraded Unclassified
155
December 2, 1942.
Dear Mr. Prime Minister:
I think you will enjoy hearing
this record of a song that was written
for us by two Army boys who were de-
tailed to the Treasury for a time in
connection with the War Bond campaign.
The authors, Sergeant Richard Uhl and
Corporal Tom Adair, have now gone back
to military duty.
I feel that their song will be a
great help to us in our drive to get
thirty million Americans to set aside
at least ten percent of their pay in
War Bonds every pay day.
With best wishes,
Sincerely yours,
(Signed) H. Morgenthau, Jr.
The Right Honorable
Winston Churchill,
(Song - "Ev'rybody Ev'ry Payday")
Prime Minister,
London, England.
Taken to Embassy by Chauffeur Branch
1:15 12/4/42
FK:eg
Copies in Diary
Regraded Unclassified
156
December 2, 1942.
Dear Harold:
I think you will enjoy hearing
this record of a song that was written
for us by two Army boys who were de-
tailed to the Treasury for a time in
connection with the War Bond campaign.
The authors, Sergeant Richard Uhl and
Corporal Tom Adair, have now gone back
to military duty.
I feel that their song will be 8.
great help to us in our drive to get
thirty million Americans to set aside
at least ten percent of their pay in
War Bonds every pay day.
Sincerely yours,
(Signed) H. Morgenthau. Jr.
Hon. Harold D. Smith,
Director, Bureau of Budget,
Washington, D. C.
FK:eg
(Song: "Ev'rybody Ev'ry Payday")
Copy in Diary
Copies to Thompson
(Del. by Schey 4:40 12/3/42)
Regraded Unclassified
157
December 2, 1942.
Dear Harry:
I think you will enjoy hearing
this record of a song that was written
for us by two Army boys who were de-
tailed to the Treasury for a time in
connection with the War Bond campaign.
The authors, Sergeant Richard Uhl and
Corporal Tom Adair, have now gone back
to military duty.
I feel that their song will be a
great help to us in our drive to get
thirty million Americans to set aside
at least ten percent of their pay in
War Bonds every pay day.
Sincerely yours,
(Signed) Henry
Hon. Harry L. Hopkins,
The White House.
FK:eg
(Song: "Ev'rybody Ev'ry
Payday")
Copy in Diary
Copies to Thompson
(Del. by Schey 4:40 12/3/42)
Regraded Unclassified
158
DEPARTMENT OF AGRICULTURE
OF 1 DEPARTMENTOR )
WASHINGTON
December 2, 1942
The Honorable
The Secretary of the Treasury
Dear Mr. Secretary:
At the present time the Secretary is out-of-town attend-
ing the Department's Regional Goals Meetings, so I wish
to thank you for sending him the record of the song
written by Sergeant Richard Uhl and Corporal Tom Adair.
I know that he will appreciate receiving the song and
will feel as you do that it will be a great help in
your War Bond Drive.
Con Hamiltan Sincerely yours
Assistant to the Secretary
Regraded Unclassified
159
December 2, 1942
Dear Henry:
Thanks so much for the record you
sent. It will undoubtedly promote the
sale of war bonds.
Sincerely yours,
haven & Sml
The Honorable Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
Regraded Unclassified
TREASURY DEPARTMENT
160
INTER OFFICE COMMUNICATION
DATE
Secretary Morgenthau
December 2, 1942
TO
FROM
Harold Mager
Here, as you requested, are two brief summaries
of Mr. Paul's speeches in Philadelphia and New York.
Has
Regraded Unclassified
161
Summary of Randolph E. Paul's Address
Before American Academy of Political and
Social Science, on November 30th, 1942.
FISCAL POLICY AND INFLATION
The battle against inflation will not be won without
the enactment of measures more fundamental than any yet
adopted. To safeguard against the chaos of inflation,
consumers must be induced to refrain from spending some
$40 billion, the difference between disposable incomes
remaining after payment of all personal taxes and the
available supply of goods at current prices -- in short,
$4 out of every $11 of income at their disposal.
Price control in itself is ineffective in closing
the inflationary gap, because while wage rates and farm
prices may be held constant, the total volume of purchasing
power that will be created will not remain constant. In
other words, the amount of disposable income depends upon
the volume of business and volume of employment which will
increase even though wage rates and farm prices remain fixed.
In waging fiscal war on inflation, additional taxes
can and must play a prominent part. The advantages of
taxation over alternative measures: 1, it reduces the need
for costly administrative controls; 2, it restricts accu-
mulation of public debt; 3, it strikes at the roots of
potential post-war inflation.
It is unrealistic, however, to rely on taxation along
traditional lines to absorb the entire excess of civilian
spending. Mr. Paul then discussed and explained a whole
series of fiscal tools that might be employed: compulsory
saving, compulsory lending, expenditure rationing, expenditure
taxation. (The same material was covered in the letter to
Mr. Byrnes.) Newspapers probably took their lead from this
provide 8. comprehensive solution to problem of inflation."
sentence: In principle, then, compulsory saving could
war tax credits which would give an incentive to all forms
"compulsory lending" Mr. Paul explained that he meant post-
In using the phrase "compulsory saving" as contrasted with
of saving and put a penalty on spending.
Regraded Unclassified
Summary of Randolph E. Paul's
162
Address before the Institute on
Federal Taxation, New York University.
December 1, 1942.
THE EFFECT OF THE WAR ON TAX ADMINISTRATION
Mr. Paul attempted to make clear that the Treasury
and the Bureau of Internal Revenue are confronted with
unprecedented problems. Tax administration problems are
of two types: 1. Field problems of the 43 offices of the
Bureau -- such as the paper work and physical labor involved
in handling and reviewing tax returns; 2. Home Office
problems -- such as determining the manner in which the
provisions of tax statutes shall be interpreted and then
applied by the field offices.
Taking the field problems first, he outlined the
effects of the war upon the Bureau's operations as follows:
(a) Increased number of returns due to reductions in
exemptions and dependency credit, Victory tax, etc.
(b) Delinquencies -- aggravated by failure to follow
out Secretary's recommendation for collection-at-
source.
(c) Loopholes -- the vast task of scrutinizing returns,
especially when every deduction will involve more
than the pre-war tax benefit.
(a) Retroactive legislation -- Extension of retroactive
relief under the 1942 Revenue Act will involve
adjustment of thousands of previously filed returns.
(e) Suspension of Statute of Limitations -- Suspension
of time limitations running against the Government
and taxpayers, where war makes impossible the timely
performance of required acts, will increase admin-
istrative burdens.
Regraded Unclassified
- 2 -
163
Next he dealt with the effect of the war on home
office problems of the Bureau, as follows:
(a) Advertising -- problems in treating it.
(b) Depreciation allowances.
(c) New types of Contracts.
(d) Frozen Inventories.
(e) Preparation of Regulations.
(f) Interpretation of Wartime Provisions.
(1) War losses.
(2) Excess Profits tax.
(8) Amortization of Emergency Facilities.
(4) Cooperation with other departments,
especially in renegotiation of contracts.
Over and above these problems is a problem common
to field offices and the home office alike: the manpower
shortage created by military needs.
Mr. Paul concluded with a plea for the cooperation
of taxpayers and their counsel; the need to adopt every
possible labor-saving device; the need for mutual trust
and confidence; concise memoranda, prompt compliance,
and frank disclosures.
Regraded Unclassified
164
TREASURY DEPARTMENT
Washington
(The following address by Randolph E. Paul, General Counsel of the Treasury,
before the American Academy of Political and Social Science, Philadelphia,
is scheduled for delivery at 8:15 P.M. Eastern War Time, Monday, November 30,
1942, and 16 for release at that time.)
FISCAL POLICY AND INFLATION
Stabilization of prices is essential to the efficient working of 8 war
economy. The rising cost of living, which is B. sign of instability, has been
8 source of mejor concern for many months. Congress has had the problem under
consideration almost continuously since the fell of 1941, Its first direct
action took the form of the First Price Control Act, under which the Office of
Price Administration established general price ceilings. The problem of
inflation was constantly in the background while the Revenue Act of 1942 was
taking form. Another frontal attack on inflation was made two months age by
Congross in its passage of the Second Price Control Act end by the President in
creating the Office of Economic Stabilization.
But the bettle against inflation will not be won without the enectment of
meesurcs more fundemental than eny yet adopted. It will not be won without
heavy reliance on fiscal weapons. Price ceilings and wage controls, by
themselves, will check, but not halt, the upward course of prices. Price and
wage controls will be successful only if they are buttressed by fiscel measures
designed to restrict civilian spending end thereby to relieve the tremendous
pressure of consumer purchasing power on prices. Such measures are en essential
pert of a comprehensive enti-inflation program.
That specific messures should be rdopted is no longer a hypothetical
question to be faced in the dim future. It is en urgent problem which is fully
upon us. The vast volume of actual and potential spending being gonerated by our
total war offort threatens to play hever with price ceilings and economic
stability. One of the most pressing problems confronting the new Congress when
it convenes a month hence will be that of drafting B. fiscal program to meet the
needs of wer. The problem before Congress will not be merely how to finence the
war, but how to do it in on equitable and anti-infletionary way. There is no
ouestion but what the war will be finenced. The all-important issue is the ways
and means of financing.
Tonight, then, I address my remarks primarily to the fiscal ways and meens of
coping with inflation. But to set the stage for that discussion, I should like
to say a few things about inflation itself. An analysis of the inflation problem
requires consideration of the process that produces inflation, of the ovile that
attend it, of the evidence that inflation existe or threatens, and, finally, of
the steps that must be taken to prevent it.
Regraded Unclassified
2 1 I
165
I need not detail the evils of inflation to this eudience. Its inequity,
its costliness both in conventional monetary end in actual economic terms, and
its disorganizing effect on our economy during end after the war, are undoubtedly
apperent to all of you. The nature of the inflationary process 10 equally cloar.
Then en excessive and growing supply of consumer purchasing power rushes to a
market having available a shrinking supply of consumer goods and services,
inflation is in the making. It may be useful, however, to cite the evidence of
that process in order to clarify the nature of the measures that must be adopted
to cope with inflation.
19
The Threst of Inflation
The megnitude of the inflationary threat for the future 1s evidenced not on
much by the X percent rise in the cost of living that has elready taken place
during the past two years as it is by the relationship between the flow of pur-
chesing power and the supply of evailable consumer goods. The most optimistic
catimates indicate that not more than $70 billion, at present prices, of con-
sumers' goods and services will be evoilable for purchase in the calendar year
1943. In the same period, consumers will receive incomes totalling $125 billion.
Personal taxes of Federal, State and local Governments, including the texes
leviéd under the Revenue Act of 1942, will take away not more than $15 billion
of this amount. Therefore individuals will have about $110 billion at their
disposal, or at present prices about $40 billion over and above the supoly of
goods and services available to meet civilian demands.
That $40 billion is the inflation potential from 1943 income. Unless much
of it is withdrawn or immobilized, the rush of spending power to the market will
break through price coilings on a bread front. Black markets will mushroom;
evasion and dealer favoritism will become commonplace; and empty shelves and
illegitimate profits will become the order of the day. In such 8 situation
distribution of the short supply of the necossities of life will be westeful
and inequitable. Competition to buy the means of living will be reduced to a
disorderly, time-consuming scramble, and goods will 80 not to those who need them
most but to those who are least bound by limits of time, money, and scruples.
Severe hardships will be suffered, especially by families in the low income
groups.
To safeguard against the cheos of infletion, consumers must be induced,
whether by additional taxation or by other messures, tn refrain from spending name
$40 billion, or $4 cut of every $11 of income at their disposal after payment of
existing taxes,
Fiscal measures are indispensable in meeting the threat of inflation,
pertly becouse they perform certain functions better than other measures, but,
more important, because they do a job that other controls cannot do. Texes and
other fiscal instruments which are tax-like in their degree of compulsion strike
at the purchasing power root of inflation. The ostablishment of price ceilings
resists the upward pressure of prices by pushing down on them from above.
Relief of the upwerd pressure itself is D vital part of the anti-inflation
program. Tage controls and fixed farm prices offer partial reIief by preventing
the creation of some purchasing power.
Regraded Unclassified
166
- 3
But constant wage rates and constant farm prices are not the same thing
as constant incomes. Farm income is a function not only of farm prices, but
also of the volume of farm goods marketed. Wage income 18 a function not
only of wage rates, but also of the total volume of employment and of the
volume at each wage level. As the volume of farm output responds to
military demands, farm income will grow apace regardless of price controls.
And the lengthening of working hours, the up-grading of workers into higher-
wage jobs, and the employment of more women in industry, will spawn greater
total wage payments even in the face of rigid wage rate controls. Direct
control of farm prices and wage rates does not prevent the creation of an
overflow of purchasing power. Taxation and related fiscal measures must
step in to impound such spending power before it flows to the market.
The role of voluntary saving
Voluntary savings will do part of the job that confronts fiscal policy,
Such savings are now being made at an unprecedented rate. During the second
cuarter of this year they were running at an estimated annual rate of $24
billion, or approximately twice the rate for the same quarter of 1941. This
rapid acceleration of savings cannot be attributed solely to the large in-
crease in individual incomes. In considerable part, it ie due to maximum
price regulations and to the inability to buy automobiles, refrigerators,
and certain other consumer goods. The hard facts of war which put many
goods out of the reach of civilians provide an almost automatic stimulus
to savings. The campaign for reduced spending carried on in connection with
the sale of war bonds has been another potent inducement to greater savings.
Incressed savings have been expressed in a growing volume of government
bond purchases, insurance premium payments, currency and deposits, debt re-
payments, and the like. Thether this volume can continue to grow during 1943
in the face of heavier taxes and the higher living costs is open to cuestion.
Without strong governmental action it is doubtful that the rate of saving in
1943 can be maintained, let alone, increased. Yet, if consumer spendings
are to be brought into line with the value of supplies available at present
prices, government action must immobilize $16 billion of consumer income in
1943 over and above the $24 billion - rate of saving. Our fincal
policy must be framed with that end in view.
Gross savings of $40 billion out of next year's incomes will, of course,
not suffice. Those consumer savings must be net, that is, they must total
$40 billion after taking account of the fact that some people will eat into
their savings to maintain current consumption. If, for example. some persons
draw down their savings to the extent of $10 billion, others will have to
save $50 billion to give us net individual savings for the economy as a.
whole, of $40 billion.
Although B. high rate of saving is an effective deterrent to inflation,
savings are not an unmixed blessing. The fund of capital assets which represent
accumulated savings is itself a dangerous pool of potential consumer purchasing
power. The $13 billion of United States Savings Bonds could be presented for
redemption on short notice. Billions of dollars of other securities in the
Regraded Unclassified
167
hands of individuals might be sold to bonks, to business firms, or to other
individuals, Bank balances and currency in circulation exce=d previous years'
holdings by many billions. Additional billions could be borrowed on insurance
policies. If consumers undertook 8 sudden and widespread conversion of their
huge fund of capital assets into a flow of purchasing power, the resulting
flash flood of spending would quickly demolish the dam of price controls.
Actually, the backlog of savings is not likely to be converted into
spendings in so dramatic B feshion. Rather, as more and more income is taken
aray by taxes or immobilized by forced lending to the Government, the reserves
of curchasing power will be increasingly tapped by persons resisting a reduction
in their standard of living. As the protective covering of bulging inventories
is removed, the shortage of consumer goods which war makes inevitable will
bedome fully apparent. A growing number of consumers will be move to
supplement their current income by drawing on assets in order to get a larger
share of the short sunply of civilian goods. Price stability will be threatened
if capital assets are used to raise consumer spending to a lovel exceeding the
aveilable supply of goods at present prices.
Fiscal measures must be drafted with en eye not only to inducing seving
bit also to discouraging dissaving. The net effect of each proposel must be
cerofully weighed. The goal for 1943 in to provent $40 billion of excess
murchasing power from reaching the market for consumer goods. Some of the
$40 billion will probably be removed by tax increases during 1943. The belance
must be added to our accumulated individual savings. Although voluntary saving
"ill do e substantial port of the job, TO cannot expect it to do the whole job.
Snme other measure, or messures, such 88 compulsory saving, compulsory lending,
expenditure retioning, and expenditure texation "111 be necessary. In using
them we must be on guard, however, against deluding ourselves. It will dn no
good merely to shift saving alroady being made from a voluntary to an enforced
status. Nor -111 compulacry lending that comes nut of scoumulated savings
contribute to the solution of the inflation problem. The net effect of such
measures "ould be zero, If 7e fail to add $40 billion in 1943 to net individual
savings and existing texes, prices will rise in either en open or D concealed way.
The Role of Toxotion
Net savings and individual taxes are closely related weapons in the bettle
against inflation. The more taxes we obtain, the less net savings it is necessary
to induce or compel. And, in general, the higher the volume of voluntary savings,
the smaller the tesk that confronte texation and other compulsory messures.
Of course, the size of the problem that taxes and reloted fiscal measures must
80170 is not measured simply by the difference between the $40 billion of
excessive purchasing power and the $24 billion of individual net seving. Part nf
any increase in taxes will morely replace savings. There are 8 number of reasons
=hy taxes are desirable, even as a mere replacement of savings. But we must
avoid weighing the morits of alternative measures in A vacuum. Each must be
appreised in full view of its impact on the others end in full view of the $10
billion goal.
Regraded Unclassified
168
- 5 -
In waging fincel war on inflation. additional taxes can and must play a
prominent part. Te can hardly have begun to reach the economic limits of
taxation and it would be sheer folly to abandon taxes in favor of its elterna-
tives. In the withdrawal of excessive purchasing power taxes have three
important advantages over alternative measures.
First, taxation reduces the need for costly administrative controls.
It is excessive money in people's hands that occasions many of those controls.
Taxes this reduce the overhead of wartime government end increase the freedom
of individuals.
Second, taxes restrict the accumulation of public debt, and thus ease the
problem of nost-war debt management. By reducing the interest burden, taxes
give the Government greater fiscal freedom to cone with the economic problems
that will arise in the post-war period.
Third, at the same time that they aid in preventing wartime inflation, taxes
strike at the roots of potential post-wer inflation. If consumers, especially
those in the middle and lower income groups. accumulate great ouentities of war
bonds and other forms of sevings, there may be B dangerous surge of purchasing
Dower immediately after the wer. People may redeem their bonds and express
their postponed demands in such volume that the rigid controls of wartime may
have to be extended into peacetime. Insofer A6 taxes facilitate the removel of
price and rationing controls at the end of the WOT, they help restore the free
economy we are fighting to retain.
Notwithstending these telling advantages, it would be highly unrealistic
to rely on texation along traditional lines to absorb the entire excess of
civilien spending which threatens runaway inflation. Even B doubling of the
present $15 billion of personal texes would fall far short of the goal, for if
anything like $15 billion of new personal taxes vere enacted, the level of
voluntary savings would surely fell below the current level of $24 billion
annually. Unsided by other fiscel measures. personal taxes would have to be
increased by more than $20 billion to complete the absorption of $40 billion of
excess spending power. Such a volume of taxes appears not tn be politicelly
feasible and may not be economically desirable. Other measures must be adopted
to restrict spending.
The restriction of spending 18, of course, e by-product of price control
end apecific commodity retioning. But, 09 we have noted, price controls cannot
aporate successfully without D diversion of purchasing power from consumer
morkets. Although eventual adoption of specific retioning on a wide scale may
be nocessery. the extension of such rationing sufficiently to cover the bulk of
consumer spending would be costly end irkeome. We must look to other measures
to achieve the necessary curtailment of consumer spending.
The Treasury has examined four general measures, any of which could centri-
bute substantially tn price stabilization and tn BR equitable distribution of
the short supply of civilien goods. Zech would elso give substantial direct or
indirect assistance to financing the war. These four measures are compulary
lending. compuleory asving, expenditure rationing, and expenditure texation,
Regraded Unclassified
169
- 6 -
which 1 should like to discuss with you tonight in that order.
Compulsory Lending and Compulsory Saving
There is a marked tendency in current discussion to use the terms
"compulsory lending", "compulsory saving", "forced loans", and "minimum savings"
06 if they were interchangeable. Actually, compulsory lending is ouite
different from compulsory saving, both in nature and in effect. The legal
obligation to lend to the Government an amount equalling e specified fraction
of income, expenditure, or other base is quite different from the legel
obligation to save D specified fraction of income. By drawing on previously
recumulated essets, en individual can lend to the Government end yet not save.
Or, he might save and yet lend nothing to the Government.
A emell-scale example of compulsory lending is the post-war credit under
the Victory tex. However, the offects egainst such londing for verious forms of
saving such as the payment of insurance promiums, the repayment of debt, and the
voluntary purchase of eligible war bonds convert the Victory tex credits very
lorgely into An example of compulsory saving. One should note, perhaps, in
citing this example that compulsory saving on 60 modest a scale 18 unlikely to do
more than replace El part of voluntary seving. Both compulsory lending and
compalsory saving can be made progressive in their incidence through the use of
exemptions end graduated retea. Assuming that income should be used as the base
for either measure, one might, for instence, set up a schedule requiring no
londing or, elternatively, no saving, for the first $1,000 of income received by
e married person without dependents; an amount equal to 20 percent of the next
$1,000, and perhaps 40 percent of the third $1,000, end 60 on, might be required
either 88 e compulsory loan to the Government, or 86 enmo type of savings if
compulsory saving were adopted. Special provision for fixed commitments or
extraordinary expenses could be made under either measure by sllowing ^ffsets
for such things es personal taxes, rents, modical expenses, dobt repayments, and
the like.
30th plane contribute to the control of inflation in much the samo way 08
taxetion, namely, by immobilizing the spending power et the disposal of consumers.
Compulsory saving 1a a more effective immobilizer than compulsory lending, AB we
shall 800 in n moment, but the two instruments enjoy certain common advantages
over texation.
The adventage most urgently claimed for both compulsory they lending and
commulsory seving is that, as compared with texotion, * preserved the incentive
to work. Workers will bo more willing tn work herder and longer if they feel
that they PTO only temporarily doprived of the fruits of their labor, end that
they may enjoy those fruits after the wer when goods ere once more abundant.
Similarly, the promise of future rewards inherent in compulsory lending or
compulsory saving justifies a greater restriction of consumption among the lower
income groups than would be justified under outright taxation. A third adventage
follows from the first two. namely, that larger total levies on all income
groups become more acceptable when e promissory note is substituted for a tax
receipt. Finelly, the compulsory lending nad saving schemes would create B
Regraded Unclassified
170
- 7
reserve of individual purchasing power for the post-war period.
In the immediate job of reducing civilion spending, compulsory lending
is likely to be considerably less effective than compulsory saving. This is
true because it 10 directed to only one segment of saving while compulsory
saving comorehends all forms of saving. To 8 considerable extent, especially
emong unner income groups, the compulsory lending obligation would be met out
of accumulated savings or out of current income that would have been saved
anywhy. Only those persons who did not normally save enything, did not have
cenital, and could not obtain credit, would be compelled to reduce spending
by nn amount corresponding to their lending. Since, in general, it 1s the
lowest income groups who save little, have few assets, and have limited credit,
it is among those groups that the real impact on consumption would be concen-
treted. It follows that any compulsory lending schedule would in practice be
less progressive in its incidence on consumption than would appear at first
glance.
Compulsory saving is more direct and positive in controlling consumer
spenting than either texation or compulsory lending. It in effect tells people
outright how much they can spend out of a given income, and can even be
graduct 4 to a point where the spending of further increments of income would
be prohibited. Te have noted that compulsory lending requiremente can be met
by liquidating cepital essets or drawing upon normal savings. Taxes can
similarly be DA14 from these sources: however, taxes, unlike forced loans, ere
not B substitute for other forms of saving: if people want to maintein their
customary rate of saving in the face of taxes, they must cut their spending.
So taxes *ill more effectively cut consumer spending then compulsory loans.
Commulsory saving, however, is not subject to the loopholes of liquidation
and substitution. It fixes n net savings requirement for each income recipient,
That requirement can be met only nut of income, not out of the arle or con-
version of pasets. The form in which the savings are held is immaterial eo
Inne es no form con be converted into current spending. The vital point is that
the REVER dollars would not be competing for goods in the market. The Government
could =1thrut fear of inflation spend an emount equal to the income impounded by
compulsory seving. Tor finance would be automatically simpliried, since
investment in war bonts would be stimulated, and the margin of taxable cepecity
woul^ be extende'.
In principle, then compulsory seving could provide a comprehensive
solution to the problem of inflation. The total amount of consumer spending
coul- be pitche to the available supply of consumer zoods end nervices. This
Tould be ¿one by requiring that the difference between total indivitual income
en' the value of available supplies be saved in one form or another.
However, commulsory soving 18 beset with n'ministrotive difficulties.
Mercly to legislate that each person with a given income shall save a specifie^
mount is not sufficient. Nor 1s e knowledge of each person's income any
guarantee of success. It 1s absolutely crucial to this plan to obtain in
addition e snapshot of each individual's capital position at the beginning an°
nt the end of the period in which he was obligated to enve. Such belance shects -
for that is what the snapshots would amount to - rould be the only means of
Regraded Unclassified
171
- 8 -
protecting the compulsory saving plan from being undermined by the use of
existing balances and credits. The compulsory savings requirement must be in
terms of net sevings, end net savings can be determined only by subtracting
sales of assets, declines in deposits, and 80 forth from the gross savings
represented by savings credits and purchases of cosete. To obtain a picture
of changes in capital position would be a new and difficult, though not an
impossible, administrative task.
Another complicating factor 1s that compulsory saving requires a certain
mount to be saved out of income concurrently with the receipt of that income.
It would not, like present income taxes, be 8 liability that falls due in the
year following the receipt of income, Quarterly returns would probably be
necessary to keep individuals posted on their savings liabilities. Even then,
unenticipated fluctuations in income or in expenditure needs might upset
people's calculations. In any case, they would not know for sure that they
hnd complied exactly with the savings requirement until after the event,
One method of enforcing the savings requirement would be to issue each
consumer a license to spend only a specified amount on consumer goods end
services: in this event, compulsory saving would become expenditure rationing.
Or, 1f a graduated schedule of penalties for spendings above an exempt minimum
were utilized, compulsory saving would become a type of expenditure toxation.
Expenditure Retioning
Expenditure rationing limits total consumer spendings by fixing the
meximum amount that every family or single individual is allowed to spend on
rationed goods. It may quite properly be thought of 85 the reciprocel of
compulsory saving, which specifies the amount which people must save. If the
amount of spending on rationed goods is fixed, saving, in effect, becomes
commulsory.
The spendings allotment, like the sevings requirement, would be fixed on
the basis of family status and current income. Rationed goods would include
almost oll consumere' goods end services that have any current cost in labor,
meterials, or facilities. Rents, tuition, medical care, end a few other
selected items might well be placed beyond the pale of the expenditure ration.
Except for those items, however, consumers' goods could be bought only with one's
retion allowance. Within the allowance the consumer would be free to allocnte
his expenditures BB he pleased. And, of course, people would be free to use
income without restriction to make gifte, pay taxes, pay insurance premiums,
buy real estate or securities, or to enve in other ways. In fact, the very
essence of expenditure rationing 16 to force diversion of income into such
non-inflationery channels.
The over-ell ration ellowonce for the entire economy during any given period
muld bo determined by the demends of price stability. The object would be to
limit the amount of rationed expenditure to the estimated value of the supply
nf rationed goods available during that period. In estimating that value, one
muld apply whatever price level it wes desired to maintain. Flexibility would
Regraded Unclassified
172
- 9 -
be a cardinal feature of the plan, for it would be relatively easy to change
the total expenditure ration as more accurate data became available or as the
expected supply position changed.
By its direct attack on the problem of excessive consumer purchasing
power through the limitation of expenditure itself, this plan 1a capable not
only of dealing inflation a body blow, but also of allocating the economic
secrifices of war in a fair and precise manner. The allotment of spending
nower to individuals or income classes cannot be very precise under 8 program
of taxntion or compulsory lending. Taking away income by taxes or enforcing
loons to the Government does not necessarily force a reduction in consumption
exponditure throughout the income scale. But direct limitation of spending
facilitates both the over-all reduction in spending that is needed and the
distribution of the reduction in the manner that is desired.
Those of us who have examined this instrument of control realize that
the plan would require elaborate administrative machinery. The ration limit
could be enforced only through the use of e license to purchase, in either
coupon or other form. The coupons would represent that part of income which
was expendable on ration goods, and might even be identified with money.
Coupon distribution would be an enormous tesk, but it could probably be
accomplished through the active cooperation of employers. ration boards, banks,
and other institutions. This brief mention of edministration is not intended
to do more than indicate that the problem has been under consideration.
If Congress wished to adont a plan for expenditure rationing and the American
people were willing to accept it, a tolerable scheme of administration could
surely be developed.
Expenditure Taxation
A plan which minimizes the administrative problems of direct control
by relying largely on inducement rather than on compulsion has been drafted end
recommended to the Congress by the Treasury. I refer to the spendings tax which
the Treasury submitted to the Sonate Finance Committee during consideration of
the Revonue Bill of 1942.
The spendings tnx base is consumption rather than income. As its name
indicates, this tex would be imposed on expenditures for consumer goods and
services. It ie not imposed on income received, and it specifically exempts
income seved. The spendings tax, in fact, looks tn the difference between
income received and income saved. Its base is arrived at by subtracting from
ench person's income his net savings BB evidenced by additions to his cepital
nssets and reduction of his debts. Further deduction, such as rent, medical
expenses, end tuition can be ellowed if desired, and the regular income tax
yould, of course, be deductible.
Except for the difference in base, the spendings tex structure strongly
resembles that of the income tax and has much in common with that of the com-
vulsory lending end compulsory savings devices we were considering a few
minutes ago, Exemptions according to family status would be provided. and
Regraded Unclassified
173
- 10 -
steeply graduated rates would be applied. For example, the first $1,000 spent
on goods and services by B married man without dependents might be exempt.
A tax penalty of 20 percent might be placed on the second $1,000 of consumption
expenditure, 30 percent on the third $1,000, and successively steeper taxes on
additional increments of spendings. Rates might rise to 100 percent or more,
depending on the desired restriction of spending. Port of the tax could be
treated AS a post-war rebate, if it were desired to combine compulsory lending
with the tax on spending.
The spendings tax would reduce spending not only by directly withdrawing
income in the form of texes, but also by powerfully stimulating saving through
its drastic penslty on spending. This penalty would not be levied indiscri-
minately on all spendere, but rather on those spenders that could best efford
to pay and on that segment of spending which could best be reduced or eliminated.
The differentiated exemption would enable persons with small incomes to obtain
basic subsistence neede free of tax, while steep graduation would bring the full
weight of the tax to bear on comforts and luxuries rother than on necessities.
The highest penelty rates would apply to those who were trying to obtain
n disproportionste share of the short supply of civilian goods. The spendings
BOX serves the interests of equity as it goos about its task of preventing
inflation.
At the como time, the spendings tax provides revenuo for wer finance both
by the revenue it collects and by the saving it stimulates. Although the sevings
induced by the spendings tax would not necessarily be paid over to the Treasury,
they nonetheless would be removed from the spending stroem and would be added
to the pool of unspent income available, directly or indirectly, to finance
the war.
The spendings tex would be administered within the fremework that exists
for the income tex. The texpayer would fill out e combined income and spendings
tax form and would pay the two taxes together. Detailed records of expenditures
would not be needed to enforce the tax. The total spendings figure on which the
tax is based yould be derived indirectly by deducting from the total amount of
available funds, the amounts devoted to purposes other than personal consumption.
To the deta elready required under the income tax yould have to be edded enough
information to determine what changes in capitel position take place during the
neriod to which the tax applies. Immediste impoct on spending could be assured
by collection at source or B. substantial pert of the tex.
Emenditure taxation is particularly well adapted to the job of coping -1th
inflation. Without imposing irksome administrative controls, and rithout itself
requiring elaborate administrative machinery, it can drastically cut spending
and can distribute that cut equitably.
Regraded Unclassified
- 11 -
174
Conclusion
I have outlined this evening a broad complex of fiscel tools with which
, forceful enti-inflation program may be fashioned. Each has its shortcomings,
but each is vastly superior to inaction. The important issue at stake is to
make a choice and to make it now. Swift action is needed to put into effect
that measure or that combination of measures which will meet the problem of
inflation four-squere. "Too late" can be just as disastrous as "too little.'
Regraded Unclassified
(T. D. 5186)
175
TITLE 29 - LABOR
CHAPTER VIII -- COMMISSIONER OF INTERNAL REVENUE
PART 1002 - STABILIZATION OF SALARIES
TREASURY DEPARTMENT,
Office of Commissioner of Internal Revenue,
Washington, D. C.
TO COLLECTORS OF INTERNAL REVENUE
AND OTHERS CONCERNED:
On October 27, 1942, the President approved regulations relating to
wages and salaries prescribed by the Economic Stabilization Director (7 F.R.
8748) under the Act of October 2, 1942, entitled "AN ACT to amend the Emor-
gency Price Control Act of 1942, to aid in proventing inflation, and for
other purposes" (Public No. 729, 77th Congress, 2d Session) and Executive
Order No. 9250, dated October 3, 1942 (7 F.R. 7871). Those regulations con-
ferred on the Commissioner of Internal Revenue authority to administer the
provisions thereof relating to the stabilization and limitation of certain
salaries. In the exercise of the authority 80 conforred on the Commissioner
of Internal Revenue, the following regulations relating to saleries are here-
by promulgated.
TABLE OF CONTENTS
SUBPART A. - DEFINITIONS
Sec. 1002.1.
General terms
1002.2.
Employee and employer
1002.3.
Executive employees
1002.4.
Administrative employees
1002.5.
Professional employees
1002.6.
Salary payments
1002.7.
Salary rate
1002.8.
Insurance and pension benefits
1002.9.
Approval by Commissioner
SUBPART B. - JURISDICTION OF COMMISSIONER
Sec. 1002.10.
Amount of salary payment
1002,11.
Conclusiveness of determination
1002.12.
Geographical scope
SUBPART C. - SALARY INCREASES
Sac. 1002.13.
Commissioner's approval required
1002.14.
Commissioner's approval not required
SUBPART D. - SALARY DECREASES
Sec. 1002.15.
Selarios under $5,000
1002.16. Salaries over $5,000
(over)
Regraded Unclassified
(T. D. 5186)
- 2 -
SUBPART E. - GOVERNMENTAL EMPLOYEES
Sec. 1002.17. State and local employees
SUBPART F. -- LIMITATIONS ON CERTAIN SALARIES
Sec. 1002.18. Basic allowance
1002.19. Charitable contributions
1002.20. Insurance premiums
1002.21.
Fixed obligations
1002.22. Federal taxes
1002.23. Multiple employers
1002.24. Limitation on 1942 salaries
1002.25. Community property
1002,26.
Taxable year
1002.27. Effective date
SUBPART G. -- EFFECT OF UNLAWFUL PAYMENTS
Sec. 1002.28. Amounts disregarded
1002,29. Criminal penalties
1002.30. Salary allowances under Code
SUBPART H. -- EXEMPTIONS
Sec. 1002.31. Exempt employers
1002.32. Statutory salaries
1002.33. Services in foreign countries
1002.34. Foreign employers
AUTHORITY: Secs. 1002.1 to 1002.84, inclusive, issued under Pub. Law
729, 77th Cong., 2d Sess.: E.O. 9250, 7 F.R. 7871: Regs. of Economic Stabili-
wation Director, dated October 27, 1942, 7 F.R. 8748.
SUBPART A-- -- DEFINITIONS
Sec. 1002.1. General terms. -- When used in these regulations, unless
otherwise distinctly expressed or manifestly incompatible with the intent
thereof --
(a) The term "Act" means the Act of October 2, 1942, (Public
No. 729, 77th Congress) entitled "AN ACT to amend the Emergency
Price Control Act of 1942, to aid in preventing inflation, and
for other purposes".
(b) The term "Board" means the National War Labor Board
237). created by Executive Order No. 9017, dated January 12, 1942 (7 F.R.
(c) The term "Commissioner" means the Commissioner of
Internal Revenue.
Regraded Unclassifie
(T. D. 5186)
176
(d) The term "Code" means the Internal Revenue Code, as amended
and supplemented.
(o) The term "person" hns the same meaning na when used in the
Code.
(f) The term "Genoral Regulations" means regulations (relating
to wages and salaries) issued by the Economic Stabilisation Director,
approved by the President on October 27, 1942 (? F.R. 8748). and as
emended or supplemented by subsequent regulations issued by the Boo-
nomic Stabilization Director relating to wages and salarios.
(g) The term "in contravention of the Act" means in contravention
of the Act of October 2, 1942 (referred to in paragraph (a) above),
Executive Order No. 9250 of October 3, 1942 (7 F.R. 7871). the General
Regulations, these regulations and other rulings and regulations pro-
mulgated under such Act.
Sec. 1002.2. Employee and Employer. - An employee, for the purposes of
those regulations, is an individual who performs services for compensation
where the relationship between him and the person for whom he performs the
services is the legal relationship of employee and employer. An employer 1s
any person for whom an individual performs any services, of whatever nature,
AS the employee of such person. The term "employer" is not limited to private
persons engaged in trade or business, but includes organizations which, under
section 101 of the Code, are exempt from income taxation, and also government
departments and agencies. The existence of the legal relationship of employer
and employee is to be ascertained in the light of the general purposes of the
Act and the General Regulations.
Generally, the legal relationship of employer and employee exists when
the person for whom services are performed has the right to control and direct
the individual who performs the services, not only na to the result to be ao-
complished by the work done, but also as to the details and means by which that
result is accomplished. An employee is generally subject to the will and cone
trol of the employer not only as to what shall be done but how it shall be done.
In this connection it is unnecessary that the employer actually direct or con-
trol the precise mantier in which the services are performed: it is sufficient
that he has the right to do 80. The right to discharge is also an important
factor indicating that the person possessing that right is an employer.
Other factors characteristic of an employer, but not nocessarily present
in every case, are the furnishing of toole and the furnishing of a place to
work to the individual who performs the services. In general, if an individ-
ual is subject to the control or direction of another meroly AS to the result
to be accomplished by the work and not na to the means and methods for accom-
plishing the result, he is an independent contractor. An individual perform-
ing services as an independent contractor is not an employee as to such serv-
ices. Physicians, lewyers, architects, contractors end others who follow an
independent trade, business or profession in which they offer their services
to the public are generally independent contractors and not employees. Whether
the relationship of employer-employee exists will be determined upon nn ex-
amination of the particular faote of each case.
(over)
Regraded Unclassified
(T. D. 5186)
- 4
If the relationship of employer and employee exists the designation or
description of the relationship by the perties as anything other than that of
employer and employee ie immatorial. If such relationship exists, it is of
no consequence that the employee is designated as a partner, do-adventurer,
agent or independent contractor. The measurement, method, or designation of
compensation 1s immaterial 1f the relationship of employer and employee thus
in fact exists.
An officer of a corporation is en employee of the corporation but a di-
rector as such is not. A director may be an employee of the corporation, how-
ever, if he performs services for the corporation other than thoso required by
attendance at and participation in meetings of the board of directors.
Sec. 1002.3. Executive employees. - An individual "employed in B bona
fide executive capacity" means any employee -
(a) whose primary duty consists of the management of the establishment
in which he 1e employed or of a customarily recognized department or sub-
division thereof, and
(b) who customarily and regularly directs the work of other 00-
ployees, and
(c) who has the authority to hire or fire other employees or whose
suggestions and recommendations as to the hiring or firing and A8 to the
advancement and promotion or any change of status of other employees will
be given particular weight, and
(d) who customarily and regularly exercises discretionary powers,
and
(e) who is compensated for his services on a salary basis at not
less than $30 per week (exclusive of board, lodging, or other facilities),
and
(f) whose hours of work of the same nature as that performed by
employees not employed in an executive, administrative or professional
capacity do not exceed 20 percent of the total number of hours worked
in the workweek by the employees under his direction; provided that
this subsection (f) shall not apply in the case of an employee who 1s
in sole charge of an independent establishment or a physically soparated
branch emtablishment.
Sec. 1002.4. Administrative employees. -- An individual "employed in a
bona fide administrative capacity" irteans any employee -
(a) who is compensated for his services on a salary or foe basis
at a rate of not less than $200 per month (exclusive of board, lodging,
or other facilities), and
(b) (1) who regularly and directly assists an employee in a
bona fide executive or administrative capacity (as such terms
are defined in those regulations), where such assistance 18
nonmenual in nature and requires the exercise of discretion
and independent judgment: or
Regraded Unclassified
(T. D. 5186)
- 5 -
177
(2) who performs under only general supervision, Te-
sponsible nonmanual office or field work, directly related
to management policies or general business operations, along
sepcialized or technical lines requiring special training,
experience, or knowledge, and which requires the exercise of
discretion and independent judgment; or
(3) whose work involves the execution under. only general
supervision of special nonmanual mesignments and tasks directly
related to management policies or general business operations
involving the exercise of discretion and independent judgment: or
(4) who is engaged in transporting goods or passengers for
hire and who performs, under only general supervision, responsible
outside work of a specialized or technical nature requiring special
training, experience, or knowledge, and whose duties require the
exercise of discretion and independent judgment.
Sec. 1002.5. Professional employees. - Any individual "employed in a
bona fide professional capacity" means any employee who is -
(a) engaged in work
(1) prodominantly intellectual and varied in character e.o
opposed to routine mental, manuel, mechanical, or physical work,
And
(2) requiring the consistent exercise of discretion and judg-
ment in its perfermance, and
(3) of such a character that the output produced or the result
accomplished cannot be standardized in relation to a given period
of time, and
(4) whose hours of work of the same nature as that performed
by employees not employed in an executive, administrative. or pro-
fessional capacity do not exceed 20 percent of the hours worked in
the workweek by such employees: provided that where such non-pro-
fessional work is an essential part of and necessarily incident to
work of a professional nature, this subsection (4) shall not apply.
and
(5) (A) requiring knowledge of an advanced type in A field
of science or learning customarily acquired by a prolonged
course of specialized intellectual instruction end study, as
distinguished from & general academic education and from an
apprenticeship, and from training in the performance of routine
mental, manual, or physical processes: or
(B) predominantly original and creative in character in a
recognized field of artistic endeavor as opposed to work which
can be produced by a person endowed with general manual or in-
tellectual ability and training, and the result of which depends
primarily on the invention, imagination, or talent of the em-
ployee, end
(over)
Regraded Unclassified
(T. D. 5186)
-
If the relationship of employer and employee exists the designation or
description of the relationship by the parties as anything other than that of
employer and employee 1e immaterial. If such relationship exists, it is of
no consequence that the employee is designated as a partner, co-adventurer,
agent or independent contractor. The measurement, method, or designation of
compensation is immaterial if the relationship of employer and employee thus
in fact oxists.
An officer of a corporation is an employee of the corporation but a di-
rector as such is not. A director may be an employee of the corporation, how-
evor, if he performs services for the corporation other than those required by
attendance at and participation in meetings of the board of directors.
Sec. 1002.3. Executive employees. - An individual "employed in a bona
fide executive capacity" means any employee -
(a) whose primary duty consists of the management of the ostablishment
in which he is employed or of B. customarily recognized department or sub-
division thereof, and
(b) who customarily and regularly directs the work of other 02-
ployees, and
(c) who has the authority to hire or fire other employees or whose
suggestions and recommendations 88 to the hiring or firing and A0 to the
advancement and promotion or any change of status of other employees will
be given particular weight, and
(d) who customarily and regularly exercises discretionary powers,
and
(e) who is compensated for his services on a salary basis at not
less than $30 per week (exclusive of board, lodging, or other facilities),
and
(f) whose hours of work of the same nature as that performed by
employees not employed in an executive, administrative or professional
capacity do not exceed 20 percent of the total number of hours worked
in the workweek by the employees under his direction; provided that
this subsection (f) shall not apply in the case of an employee who is
in sole charge of an independent establishment or a physically soparated
branch establishment.
Sec. 1002.4. Administrative employees. -- An individual "employed in a
bona fide administrative capacity" means any employee -
(a) who is componsated for his services on a salary or fee basis
at a rate of not less than $800 per month (exclusive of board, lodging,
or other facilitios), and
(b) (1) who regularly and directly assists an employee in a
bona fide executive or administrative capacity (as such terms
are defined in those regulations), where such assistance 18
nonmenuel in nature and requires the exercise of discretion
and independent judgment: or
Regraded Unclassified
(T. D. 5186)
- 5 -
177
(2) who performs under only general supervision, 10-
sponsible nonmanual office or field work, directly related
to management policies or general business operations, along
sepcialized or technical lines requiring special training,
experience, or knowledge, and which requires the exercise of
discretion and independent judgment: or
(3) whose work involves the execution under only general
supervision of special nonmanual Resignments and tasks directly
related to management policies or general business operations
involving the exercise of discretion and independent judgment: or
(4) who is engaged in transporting goods or passengare for
hire and who performs, under only general supervision, responsible
outside work of a specialized or technical nature requiring special
training, experience, or knowledge, and whose duties require the
exercise of discretion and independent judgment.
Sec. 1002.5. Professional employees. - Any individual "employed in a
bona fido professional capacity" means any employee who is -
(a) engaged in work
(1) prodominantly intellectual and varied in character as
opposed to routine mental, manual, mechanical, or physical work,
and
(2) requiring the consistent exercise of discretion and judg-
ment in its perfermance, and
(3) of such a character that the output produced or the result
accomplished cannot be standardized in relation to a given period
of time, and
(4) whose hours of work of the same nature as that performed
by employees not employed in an executive, administrative or pro-
fessional capacity do not exceed 20 percent of the hours worked in
the workweek by such employees; provided that where such non-pro-
fessional work is an essential part of and necessarily incident to
work of a professional nature, this subsection (4) shall not apply,
and
(5) (A) requiring knowledge of an advanced type in a field
of science or learning customarily acquired by & prolonged
course of specialized intellectual instruction and study. no
distinguished from a general academic education and from an
apprenticeship, and from training in the performance of routine
mental, manual, or physical processes: or
(B) predominantly original and creative in character in a
recognized field of artistic endeavor AS opposed to work which
can be produced by a person endowed with general manual or in-
tellectual ability and training, and the result of which depends
primarily on the invention, imagination, or talent of the 80-
ployee, and
(over)
Regraded Unclassified
(T. D. 5186)
- 6 -
(b) compensated for his services on a salary or fee basis at a
rate of not less than $200 per month (exclusive of board, lodging, or
other facilities); provided that this subsection (b) shall not apply in
the case of an employee who is the holder of a valid license or certifi-
date permitting the practice of law or medicine or any of their branches
and who is actually engaged in the practice thereof.
Sec. 1002.6. Salary payments. - The terms "salary" and "salary payment'
mean only such salaries over which the Commissioner has jurisdiction. (See
section 1002.10 of these regulations.) These terms are not used in any ro-
stricted, narrow or technical senso, but encompass all forms of diroct or in-
direct componsation for personal services of an employee which is computed on
a weokly, monthly, annual or other basis, other then wages (as defined in the
General Regulations and in orders or rulings of the Board). Bonuses, gifts,
loans, commissions, fees, additional compensation and any other remuneration
in any form or medium whatsoever are considered as falling within the concept
of "salary" or "salary payment". Any compensation which is not regarded P.B
wages in the commonly accepted sense of the term is salary notwithstanding
that it may be computed on an hourly, daily or piece-work basis.
Retainer fees paid to an individual, not otherwise an employee, are not
to be considered as salary. Insurance and pension benefits in a reasonable
amount (see section 1002.8) are likewise excluded from the terms "salary"
end "salary payment".
Although the terms "salary" and "salary payment" do not include any com-
pensation other than for personal services of an employee, the Commissioner
is not precluded from determining, after investigation, that amounts denom-
inated, for example, as rents or royalties are in fact salary payments subject
to the controls set forth in these regulations.
All amounts paid to, authorized to be paid to, or accrued to the ac-
count of any employee during a calender year for services rendered or to
be rendered are to be included as salary for such year.
Soc. 1002.7. Salary rate. H- The term "salary rate" means the rate
or aggregate of rates or other basis at which the salary for any particular
Regraded Unclassific
178
(T. D. 5186)
- 7 -
work or service is computed, either under the terms of a contract or agree-
ment, express or implied, or in conformity with custom or usage existing
in the employer's business establishment, For treatment of commissions
and bonuses on a percentage basis see section 1002.14.
Sec. 1002.8. Insurance and pension benofits. -- Compensation may
include insurance and pension benefits. In determining the amount of
salary of an employee, the insurance or pension benefit inuring to such
employee is not measured by what he will be entitled to receive after the
happoning of certain contingencies, but rather in terms of the amount
of contributions or promiums paid by the employer. To the extent that
an insurance and pension ben fit inuring to an employee is reasonable in
amount, such benofit 18 not considered as salary as dofined in soction
1002,6.
Soction 165(a) of the Code sote forth the conditions under which a
trust forming part of a stock bonus, ponsion or profit-sharing plan of
an employer for the exclusive benefit of his employees or their bonefic-
iarics shall not be taxable for Federal income tax purposes. Contributions
by an employer to an employees' trust or under an annuity plan, which trust
or plan meets the exemption requirements of such section 165(a) (ns of the
date the contributions are made), shall be considered as reasonable, re-
gardless of the amount of such contributions. On the other hand, con-
tributions by an employer to an employees' trust which ie subject to
Federal income taxation because it does not meet the requirements of such
section 165 (a) shall bd treated, for purposes of those regulations, as
salary.
To the extent amounts paid by an employer on account of insurance
premiums on a policy on the life of an employee are deductible by the
employer in computing not income under the conditions sot forth in sec-
tion 23 (a) of the Code (relating to doductions for ordinary and noces-
sary business expenses), such amounts are not considered as salary. The
emount of insurance premiums that will be considered as falling outsido
the concept of salary cannot exceed the amount of such pr miums doductible
by the employer for Fodoral income tax purposes, If, howover, such in-
surance promiums are includible in the gross income of the employee (for
whose benefit the insurance has been takon out), as well as deductible by
the employer, the amount which shall not be considered as salary in respect
of such employee may not exceed 5 percent of the employee's annual salary
determined without the inclusion of insurance and pension benofits.
The application of the precoding paragraph may be illustrated by the
following examples. An employer having 20 salaried employees takes out
life insurance policies on each of such employees in favor of bonoficiarios
designated by thon. The premiums paid for 10 of the employees are in each
(over)
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instance 7 percent of the employee's annual salary (exclusive of insurance
and pension bonofits). As to the remaining 10 employees the premiums in
each instance are 5 percent of the employee's annual salary (oxclusive of
insurance and pension benefits). It is assumed that with respect to each
employee the premium paid would be includible in his gross income under the
Code and would be deductible by the employer under section 23 (a) of the
Code. As to the first 10 employees 2 percent of the premiums in each
instance will be considered as salary, whereas no part of the premiums
will be considered as salary in the case of the second group of employees,
If, however none of the premiums were deductible in computing the net
income of the employer, then the entire amount of the prenium in each in-
stance would be considered as salary to the employee involved.
Promiums paid by an employer on policies of group life insurance
without cash surrender value covering the lives of his employees, or on
policios of group health or accident insurance, the beneficiaries of which
are dosignated by such employees do not constitute salary (regardless of
the amount of salary otherwise received annually by such employees) if
such premiums are deductible by the employer under section 23(a) of the
Code.
Sec. 1002.9. Approval by Commissioner. -- Wherever the terms "approyal
by the Commissioner" and "determination by the Commissioner" are used in
these regulations they shall, except as otherwise provided, include an
approvel or determination by a regional officer of the Salary Stabilization
Unit established by the Commissioner under Treasury Decision 5176, which
officer is authorized to make such determination. If an approval or deter-
mination made by such regional officer is subsequently modified or reversed
by the Commissioner, such approval or determination shall be decmed to have
been continuously in offect from its original date until the first day of
the payroll period following revorsal or modification, or until such later
date as the Commissioner may provide in his ruling.
To illustrate, an employer obtains the approval of a regional officer
of the Salary Stabilization Unit that a proposed increase in certain
salarios is permissible, The approval is given on January 2, 1943, and the
salary increase is to become effective January 15, 1943. On March 15, 1943,
the Commissioner determines that the salary increase WAS not proper and reverses
the approval given by the regional officer. The Commissioner provides in his
ruling that the increase in salary shall be discontinued after March 31, 1943.
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179
For purposes of these regulations, no part of the salary for tho period be-
tween January 15 and March 31 shall be considered to have been in contraven-
tion of the Act.
SUBPART P - JURISDICTION OF COMMISSIONER
Sec. 1002.10. Amount of Salary Payment. -- The General Regulations pro-
vide that the Commissioner shall have authority to determine, under regulations
to be prescribed by the Commissioner with the approval of the Secretary of the
Treasury, whether salary payments are made in contravention of the Act. The
Commissioner's jurisdiction is confined to -
(1) salary payments in excess of $5,000 per annum, in the case
of individuals employed in any capacity whatsoever: and
(2) salary payments of $5,000 or less per annum, in the case of
individuals (1) who are employed in bona fide executive, administrative
or professional capacities, and (11) who, in their relations with their
employer, are not represented by duly recognized or certified labor
organizations, and (111) whose services are not within the meaning of
"agricultural labor" as defined in paragraph (1) of section 4001.1 of
the General Regulations.
Other salary payments are subject either to the jurisdiction of the Board or
the Secretary of Agriculture, as prescribed in the General Regulations. If,
for example, a salary is to be increased from $4500 per annum to $5200 per
annum (and subdivision (2) is inapplicable), approval of such increase, if
required, must be obtained from the Board.
Sec. 1002,11. Conclusiveness of Determination. -- (a) Any determina-
tion by the Commissioner that a salary payment is in contravention of the Act
is conclusive in every respect upon all executive departments and agencies
of the Federal Government for the following purposes --
(1) determining costs or expenses of any employer for the pur-
pose of any law or regulation, either heretofore or hereafter enacted
or promulgated, including the Emergency Price Control Act of 1942, or
any maximum price regulation thereunder;
(2) calculating deductions under the revenue laws of the United
States: or
(3) determining costs or expenses under any contract made by or
on behalf of the United States.
(b) Any such determination of the Commissioner is final and not subject
ro review by The Tax Court of the United Statos or by any court in any civil
proceedings. Nothing herein is intended, however, to deny the right of any
employer or employee to contest in The Tax Court of the United States or in
any court of competent jurisdiction the validity of -
(1) any provision of these regulations, on the ground such
provision is not authorized by law, or
(over)
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(2) any action taken or determination made under these regular
or has not been taken or made in a manner required, by law,
tions, on the ground that such action or determination 16 not authorized,
(c) No increase in salary rate shall result in any substantial increase
of the level of costs or furnish the basis either to increase price ceilings
of the commodity or service involved or to resist otherwise justifiable re-
ductions in such price ceilings.
Sec. 1002.12. Geographical Scope. -- The provisions of these regulations
shall not apply to salaries in any Territory or possession of the United States,
except Alaska and Hawaii.
SUBPART C -- SALARY INCREASES
Sec. 1002,13. Commissioner's approval required. -- Section 1 of the Act
provides in effect that salaries, 60 far as practicable, shall be cashilized
at the levels which existed on September 15, 1942. In the case of a salary
rate of $5,000 or less per annum existing on October 27, 1942, or established
thereafter in compliance with these regulations, and in the case of a salary
rate of more than $5,000 per annum existing on October 3, 1942, or established
thereafter in compliance with these regulations, no increase shall be made by
the employer, except as provided in section 1002.14, without prior approval of
such increase by the Commissioner. Any salary increase made before the required
approval of the Commissioner is obtained is from the date of such increase in
contravention of the Act, (See sections 1002.28 and 1002.29 for the conse-
quences of a salary payment made in contravention of the Act.) The Commissionel
may, however, approve an increase in salary rate to be effective as of the date
of the application for approval.
The burden of justifying an increase in salary rate shall in every in-
stance be upon the employer seeking to make such increase. Increases in
salary ratos will not be approved unless necessary to correct maladjustments
or inequalities, or to aid in the effoctivo prosecution of the war. A promise
made by an employer to his employees prior to October 3, 1942 that salaries
would be increased in the future is generally to be ignored in determining
whether an increase after that date should be approved. The same rule 1s
applicable with respect to a promise made by an employer prior to October
27, 1942, in the case of employees whose salary rates are $5,000 or less por
annum. Assalary increasey however, may be approved, as to salaries below
$5,000 por annum, if to dony such increase would be to force the continuation
of a salary which is below the general lovel existing for the same or comparable
work in the local area on September 15, 1942.
An employer who has established a now job classification, or who has be-
gun business, after October 3, 1942, must obtain approval of the Commissioner
for the payment of salaries for such job classification or in such new business;
provided, however, that if the salary rates in question are not in excess of
those prevailing for similar job classifications within the local area, the
approval of the Commissioner is not required. An increase in a salary rate
for a job classification established after October 3, 1942, shall be subject
to the limitations provided in this Subpart.
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(T. D. 5186)
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180
A mere whether change such in the name, organization, or financial structure of
will not business sufficient for a finding that, for the purposes corporation, of these
employer, in itself be employer be an individual, partnership or an
lished after such change.
regulations, a new has been begun or new Job classification estab-
Any change in a salary rate, regardless of its effective date, which
results from an award or decision of an arbitrator or referee made after
October 3, 1942, in the case of salaries of more than $5,000 per annum, and
is subject to the provisions of these regulations notwithstanding that the
after October 27, 1942 in the case of salaries of $5,000 or less per annum,
3, 1942 or October 27, 1942, as the case may be.
agreement or order for arbitration or reference was made on or before October
Unless otherwise expressly exempted, any change in a salary rate, pro-
vided for in any agreement existing as of October 3, 1942 in the case of
salaries of more than $5,000 per annum, or as of October 27, 1942 in the case
of salaries of $5,000 or less per annum, which is to take effect at some future
date or on the happening of some future event, is subject to the provisions of
these regulations regardless of when the agreement was made.
Payment for overtime will constitute an increaso in salary rate, and thus
will require the approval of the Commissioner, unless the customary practice
of the employer has been to pay for overtime, and the rate has not been changed.
Except as may be otherwise provided from time to time by the Commissioner,
an application for the approval of a salary increase shall be filed by the em-
ployer with the regional office of the Salary Stabilization Unit of the Bureau
of Internal Revenue in whose territorial jurisdiction the main office or prin-
cipal place of business of the employer is located. Such application shall be
filed on forms prescribed by the Commissioner and shall contain such informa-
tion as may be required by the Commissioner.
Sec. 1002,14. Commissioner's approval not required. -- The Commissioner's
approval is not required where an increase in salary rate is made in accordance
with the terms of a salary agreement or salary rate schedule in effect on
October 3, 1942, or approved thereafter by the Commissioner, and is a result of--
(1) individual promotions or reclassifications,
(2) individual merit increases within established salary rate
ranges,
(3) operation of an established plan of salary increases
based on length of service,
(4) increased productivity under incentive plans,
(5) operation of a trainee system, or
(6) such other reasons or circumstances as may be proscribed in
rulings or regulations promulgated by the Commissioner from time to time.
(over)
Regraded Unclassified
(T. D. 5186)
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For purposes of this section, the term "salary agreement" or "salary rate
schedule" may include a salary policy in effect on October 3, 1942, even
though not evidenced by written contracts or written rate schedules. For
example, a salary policy may be determined from previous payroll records or
other payroll data. The existence of such policy, however, must be established
to the satisfaction of the Commissioner, and the burden of proof rests upon
the employer. In such cases, the employer in advance of making an increase in
salary rate may reduce the salary policy to writing and secure approval there-
of by the Commissioner,
A bonus or other form of additional compensation which does not exceed
in amount the bonus or other additional compensation to such employee for
the last bonus year ending before October 3, 1942 does not require approval
by the Commissioner. In addition a bonus based upon a fixed percentage of
salary where the percentage has not been changed, does not require approval
by the Commissioner even though the amount may be increased due to an authorized
increase in salary. Any other bonus or other form of additional compensation,
requires approval by the Commissioner. Where the compensation, or part there-
of, is paid on a commission basis and is based upon a fixed percentage (which
has not been changed) of sales made by the employee, a payment does not require
approval by the Commissioner even though the amount may represent an increase
due to increased sales by the employee. See, however, Subpart F of these
regulations,
The provisions of this section may be illustrated as follows:
(1) The X Corporation began business in 1940. As of July 1,
1942, pursuant to a corporate resolution duly passed in January
1942, all of its salaried employees received more than $5,000
per annum. No approval of the Commissioner is required to in-
crease the salary of an employee who is promoted in November 1942
from a salesman to general manager and who receives a salary within
the salary range paid previously to individuals occupying the posi-
tion of general manager.
(2) The X Corporation in December 1942 wishes to establish
a new salary rate schedule raising the level of compensation of
all its salaried employees. Approval by the Commissioner of such
schedule is required. Assuming that such approval has been ob-
tained, further approval by the Commissioner of any adjustment
under such schedule coming within this section is not required.
(3) The Y Corporation begins business on November 1, 1942.
The salaries paid by it to its employees are commensurate with salaries paid
Regraded Unclassified
(T. D. 5186)
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181
by other employers in comparable businesses in the same local area,
Payment of such salaries does not require the approval of the Com-
missioner. Any increase in salary rates, however, requires the ap-
proval of the Commissioner.
(4) The M.Corporation, which has manufactured furniture since
1925, is reorganized in November 1942 and emerges from the reorganiza-
tion proceedings as the N Corporation. There 1a no change in the nature
of the business although there is a substantial alteration in the finan-
cial structure of the company. The N Corporation is not to be treated
as a new employer beginning business after October 27, 1942. Conse-
quontly, any general increase in salaries over and above those paid by
the M Corporation requires the prior approval of the Commissioner.
(5) Employees of the & Corporation have customarily received a
bonus of 5 percent of their annual salary at the end of each calondar
year. If, for example, one of the employees received $6,000 in 1941
but received salary of $7,000 in 1942 due to a salary increase on July
1, 1942, a bonus of $350 may be paid to him for 1942 without prior ap-
proval of the Commissioner, notwithstanding that his bonus for 1941 was
only $300.
SUBPART D -- SALARY DECREASES
Sec. 1002,15. Salaries under $5,000. -- In the case of a salary rate ex-
isting as of the close of October 3, 1942, or established thereafter in com-
pliance with these regulations, under which an employee is paid a salary of
loss than $5,000 per annum for any particular work, the general rule is that
no decrease can be made by the employer in such salary rate below the highest
salary rate paid for such work in the local area between January 1, 1942 and
September 15, 1942. A decrease is permitted, however, with the approval of
the Commissioner, in order to correct a gross inequity in any case or to aid
in the effective prosecution of the war, Where such decrease is permitted the
salary rate may be reduced below the highest salary rate paid for the work in
question between January 1, 1942 and September 15, 1942. Except as otherwise
provided in this section, any decrease in such salary rate after October 3,
1942 shall be considered in contravention of the Act if it is made prior to
the approval thereof by the Commissioner.
Except as may be otherwise provided from time to time by the Commissioner,
an application for approval of any salary decrease shall be filed in the same
manner as in the case of an application for approval of a salary increase.
See section 1002,13 of these regulations.
The Commissioner's approval is not required, for example, in the follow-
ing Casos where salary decreases are made after October 3, 1942:
(1) The new salary rate does not fall below the highest salary rate
existing between January 1, 1942 and September 15, 1942 for the particular
work in question or for the same or comparable work in the local area.
(2) An employee has beon demoted to a lower position than that
filled by him between January 1, 1942 and September 15, 1942 and the
salary rate for such lower position is not less than the highest salary
rate existing for that position during the same period.
(over)
Regraded Unclassified
(T. D. 5186)
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(3) An employee has been relieved of substantial duties and
responsibilities.
A disparity between salaries paid by a particular employer and those paid
by employers generally in the local area does not nocessarily constitute justi-
fication for docrease in salary rates paid by such employer.
Sec. 1002.16. Salaries over $5,000. -- In the case of a salary rate ex-
isting as of the close of October 3, 1942, or established thereafter in COD-
pliance with those regulations, under which an employee is paid & salary of
more than $5,000 por annum, the employer is permitted to make, without approval
by the Commissioner, a decrease to a rate not less than $5,000 per annum, If,
Lowever, by virtue of a decrease the new salary paid to the employee 1s loss
than $5,000 per annum, then the decrease bolow $5,000 per annum is subject to
the limitations of soction 1002.15 of these regulations. To the extent that
prior approval by the Commissioner of a decrease is not required under section
1002.15 or this section, such decrease shall not be considered as being in
contravention of the Act.
SUBPART El -- GOVERNMENTAL EMPLOYEES
Sec. 1002.17. State and local employees. -- An adjustment in salaries (not
fixed by statute, see section 1002.32) may be made by a State, or any political
subdivision thereof, the District of Columbia, or any agency or instrumentality
of any of the foregoing, on certification to the Commissioner that such adjust-
ment is necessary to correct maledjustments, or to correct inequalities or
gross inequities. The certification procedure shall not apply to any adjustment
which would not otherwise require the Commissioner's approval or which would
raise salaries beyond the provailing level of compensation for similar services
in the area or community. A certificate by the official or agency authorizing
the adjustment stating the nature and amount of such adjustment, and briefly
setting forth the facts meeting the foregoing requirement, will be accepted by
the Commissioner as sufficient evidence of the propriety of the adjustment, sub-
ject to review by the Commissioner. Modification by the Commissioner of adjust-
ments made by a governmental official or agency acting pursuant hereto shall
not be retroactive.
In exceptional cases where such an adjustment is sought, and in all cases
where the agency seeks an adjustment other than by the certification procedure,
application for approval shall be filed with the appropriate regional office
of the Salary Stabilization Unit.
SUBPART F -- LIMITATIONS ON CERTAIN SALARIES
Soc. 1002.18. Pasic allowance. -- In addition to setting forth limita-
tions on increases and decreases in salary ratos, the General Regulations pro-
vide a ceiling on the amount of salary which may be paid to any employee during
a calendar year. The general rule is that no amount of salary may be paid
or authorized to be paid to or accrued to the account of any employee or
received by him during the calendar year 1943, and in each succeeding calendar
year, which, after reduction by the Federal income taxes the amount of such
deductions or credits, would exceed $25,000. Additional income and of salary
salary, computed as below without regard to other on without regard to
which may be permitted in certain circumstances are described allowances in sections 1002.19
to 1002.22, inclusive,
Regraded Unclassified
(T. D. 5186)
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182
graph shall be determined -
The amount of Federal income taxes referred to in the preceding para-
(1) by applying to the total amount of salary (but not in-
cluding any amounts allowable under sections 1002.19 to 1002.22,
inclusive, of these regulations) paid or accrued during the
calender year in question, undiminished by any deductions, the
rates of taxes imposed by Chapter 1 of the Code (except section
466 thereof relating to withholding) as if such total amount of
salary wore the not income (after the allowance of the appro-
priato credite), the surtex not income, and the Victory tax not
income, respectively; and
(2) without further allowance of any other credits against
any of such taxes.
Assume that the rates imposed under Chapter 1 of the Code, AB amended by
the Revenue Act of 1942, are applicable with respect to the calendar year
1943. Under the formula described in the preceding paragraph, the basic al-
lowance of salary for 1943 (which after reduction by the Federal income taxes
would yield $25,000) is $67,200. This latter amount is the maximum amount of
salary which An employee would be permitted to receive for 1943, provided hb
18 not entitlod to further allowances under sections 1002.19 to 1002.22, in-
clusive. If the rates of Federal income tax applicable for 1943 should be
increased Above those now cxisting in the Codo for 1942, the basic allowance
of salary will be an amount greater than $67,200.
The basic allowance of salary AB described in this section represents an
amount against which the appropriate tax rates are applied and remains tho
same regardloss of whether the employee 18 married or single or of the number
of his depondents, if any. It is likewise unaffected by the naturo or amount
of his other income (taxable or exempt) or by the extent of his deductions
allowable for tax purposes generally.
For purposes of this Subpart an amount of salary, in addition to the basic
allowance of salary, will be permitted for any expenses paid or incurred by en
employee which are ordinary and necessary for the performance of the services
for which the employee 1e compensated. No such additional amount, however,
shall be permitted for expensos which would not be deductible in computing
individual Federal income taxes.
Sec. 1002.19. Charitable contributions. - An amount of salary, in addi-
tion to the basic allowance of salary described in section 1002.18, will be
permitted in certain circumstances to allow an employee to maintain his custo-
mary contributions to charitable, educational or other organizations described
in section 23(o) of the Code. Such additional amount of salery will be per-
mitted if the employee establishes to the satisfaction of the Commissioner that
after resorting to his other income from all sources he would suffer undue
hardship in maintaining his customary contributions out of the basic allowance
of salary described in the proceding section.
For purposes of this section and sections 1002.20, 1002.21, and 1002.22,
"income from pll sources" includes income which 1s exempt under the Federal
incomo tax laws.
(over)
Regraded Unclassified
(T. D. 5186)
16 -
What constitutes Tundue hardship" for purposes. of this section and section
1002.20, 1002.21, and 1002.22, is dependent upon all the circumstances in,each
case.
Contributions- may be customary within the meaning of this section even
though in the particular year in question the organizations to which the con-
tributions, are made are different from those to whom contributions were made
in previous years.
)
Sec. 1002.20 Insurance premiums. -- An amount of salary, in addition to
the basic allowance under section 1002.18 may be permitted to an employee un-
der this section to meet certain payments during the employee! e taxable year
for insurance premiums. To be entitled to such extra allowance of salary the
employee must establish to the satisfaction of the issioner that after r6-
sorting to other income from all sources (see section 1002.19) he 1s unable,
ithout disposing of assets at a substantial financial loss resulting in undue
hardship, to meet premium payments on policies of life insurance in force and
ef fact on October 3. 1942 on his life.
The premium payments referred to in the preceding paragraph are those
which are required to be met during the calendar year in question. No allow-
ance for salary is permissible for payments of premiums which are due in
future calendar years.
If any insurance has been permitted by an employee to lapse after October
3, 1942, no allowance for salary is permissible for payments of OR
policies taken out after such date, even though the total annual premiums on
the new policies are not in excess of the total annual premiums due on policies
in effect on October 3. 1942. Renowal of policies in effect on October Zo
1042 (even- though new premiums are igher) will not preclude appli cability of
thi section to premium payments on the renewed policies. Generally, in the
case of & conversion of a policy in effect on October 3. 1942 to 8 new policy
requiring payment of higher premiums, this section is inapplicable to the
annual amount by which the new premiums exceed the premiums in effect on
October 3 1942,
As used in this section, and sections 1002.21 and 1002.22,: substantial
financial loss is not necessarily confined to B. loss suffered on disposition
of assots at depressed prices substantially below cost to the employee. The
present value in use or in production of income and the potential future value
are factors to be considered. For the purpose of this Subpart. the provisions
of the Code governing the determination of loss upon disposition of assets are
not controlling.
Sec. 1002.21 Fixed obligations. -- An amount of salary in addition to
the basic allowance under section 1002. 18 may be permitted to an employee under
thi section to make required payments during the employee's taxable year on
fixed obligations. Before any amount will be allowed under thie section the
amployee: must establish to the satisfaction of the Commi seioner that after re-
sorting to his income from all sources (see section 1002.19) he is unable,
without the necessity of disposing of assets at a substantial financial lose
resulting in. úridué Hardship, to meet required payments of fixed obligations for
which he was obligated on October 3. 1942. See section 1602.20.
Regraded Unclassified
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183
The term "fixed obligations" as used in this section means any enforce-
able liability of the employee the amount of which liability was fixed and
determined on October 3. 1942. In no event is an allowance for salary
missible under this section for the payment of any amount due in future por- years.
Sec. 1002.22. Federal taxes. -- An amount of salary in addition to the
basic allowance under section 1002.18 may be permitted to an employee. under
this section, to meet payments during the employee's taxable year of certain
Federal income taxes. To be entitled to such an additional allowance of sol-
ary the employee must establish to the satisfaction of the Commissioner that
after resorting to his income from All sources (see section 1002.19), he is
unable, without disposing of assets at A substantial financial loss resulting
in undue hardship. to meet payments of certain Federal income taxes, more
fully described below. See section 1002.20.
An allowance for additional salary is permissible in order to pay Federal
income taxes owed by the employee himself for any prior taxable year, but is
not permissible in order to pay any Federal income tax due on the basic allow-
ance of salary under section 1002.18, except as this allowance is applicable
for 1942. See section 1002.24. Thus, an amount for additional salary might
be allowable in 1943 to meet the payment of the entire Federal income tax due
on a salary received in 1942. In 1944 an amount for additional salary might
be allowable to meet the payment of Federal income tax due on additional
salary allowances permitted for 1943 under sections 1002.19, 1002.20, 1002.21
and this section for 1943; but no amount, however, would be allowable to meet
the payment of the Federal income tax due on the basic allowance under section
1002.18 for 1943.
Sec. 1002.23. Multiple employers. -- Salaries payable to an employee
from more than one employer may, for purposes of Subpart F, be treated 88 if
all such salaries were payable by a single employer. regardless of the finan-
cial or other relationship of the several employers. For example, individual
A received a salary as an employee of the X Corporation and also as an en-
ployee of its subsidiary, the Y Corporation. Both the X Corporation and the
Y Corporation are required to adjust their salary arrangements with such em-
ployee to conform with the provisions of these regulations. If individual B
is employed by the M Corporation and the N Corporation, both of whom are
owned, directly or indirectly, by the same person or persons, the M Corpora-
tion and the N Corporation must adjust their salary arrangements with 3 to
conform with the provisions of these regulations. If individual C is employed
by the R Corporation and the S Corporation and both corporations have know-
ledgo of that fact, they must adjust their salary arrangements with C to con-
form with the provisions of these regulations.
Where an individual is employed by two or more employers who, under these
regulations, are required to make salary arrangements in order to conform
with the provisions of Subpart F, such individual and employers will be deemed
to be acting in contravention of the Act and these regulations if proper sal-
ary arrangements are not made. In any event, no employee may receive any
salary in excess of that allowed under Subpart F. See section 1002.30.
Sec. 1002.24. Limitation on 1942 salaries. -- Unless payment thereof is
required under a bona fide contract in effect on October 3. 1942, no amount
of salary shall be paid or authorized to be paid to or accrued to the account
(over)
Regraded Unclassified
(T. D. 5186)
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of any employee or received by him after October 27, 1942 anc before January
1, 1943, 1f the total salary paid, authorized, accrued or received for the
calendar year 1942 exceeds the amount of salary which would otherwise be al-
lowable under section 1002.18 (but not under sections 1002.19 to 1002.22, in-
clusive) and also exceeds the total salary paid, authorized, accrued or TO-
ceived for the calondar year 1941, For purposes of this section, the term
"bona fide contract" means a longally enforceable agreement, written or oral.
Such an agreement may be evidenced by a bona fido resolution of a board of
diroctors of n corporate employer passed on or before October 3, 1942, The
amount allowable under section 1002,18 for 1942 (bofore roduction by any
Federal income taxes) is $54,428.57.
Soc: 1002.35. Community property. -- The limitations on salaries provided
for in sections 1002.18 to 1002.24, inclusivo, shall in nowise be affected by
any community property law. For example, an employee resident in the State of
R receives a salary in 1943 of $100,000. Under the lave of that State, $50,000
of that salary is doemed to be the property of the employee's wife, For pur-
posce of these regulations, the employee's salary is $100,000. not $50,000,
Soc. 1002.26. Taxable year. -- For purposes of Subparts F and G of these
regulations, the term "taxable year" of an employee shall mern the colender
year during which the salary in question is paid or authorized to be paid to
or accrued to the account of such employee or received by him. This rule is
applicable regardless of whether the employer or employee, or both, filo
Federal income tax returns for a fiscal year or report income, for Fodoral
income tax purposes, on an accrual basis or on the cash receipts and disburso-
ments basis.
Soc. 1002.27. Effective drite. -- The provisions of this Subpart, except
as provided in section 1002.24, shall be applicable to all salaries paid or
accrued after December 31, 1942, irrespective of when payment or accrual of
such salary was authorized and irrespective, also, of any contract or agree-
ment made prior to or after such date.
SUBPART G - EFFECT OF UNLAWFUL PAYMENTS
Sec. 1002,28. Amounts disregarded. -- (a) Section 5 (a) of the Act
provides in offect that the President shall prescribe the extent to which any
salary payment made in contravention of regulations promulgated under the Act
shall bo disrogarded by executive departments and other governmental agencies
in determining the costs or expenses of any employer for the purposes of any
other law or regulation. In any case where a salary payment is determined by
the Commissioner to have been made in contravention of the Act, the ontiro
amount of such payment is to be disregarded or all executive departments and
all other agencios of the Federal Government for the purposes of --
(1) dotermining costs or exp need of any employer for the
purpose of any law or regulation, either heretofore or hereafter
enacted or promulgated, including the Emergency Price Control
Act of 1942, or any maximum price regulation thereof;
(2) calculating deductions under the revonus laws of the
Unitod Statos; or
Regraded Unclassified
(T. D. 5186)
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184
(3) determining costs or expenses under any contract made
by or on behalf of the United States.
A. payment in contravention of the Act may be disregarded for more than one of
the foregoing purposes.
(b) In the case of salaries decreased in contravention of the Act, the
amount to be disregarded, às required by paragraph (a) of this section, is
the amount of the salary actually paid or accrued by the employer at the re-
duced rate. Thus, if, for example, on November 1. 1942, a weekly salary rate
of $100 has been unjustifiably reduced to $50 for the remainder of the calen-
dar year 1942, the amount to be disregarded under paragraph (a) of this sec-
tion is the total amount of salary paid at the weekly rate of $50.
(c) In the case of salaries increased in contravention of the Act, the
amount to be disregarded, as required by paragraph (a) of this section, 18
the amount of the salary actually paid or accrued by the employer at the in-
creased rate and not merely an amount representing an increase in such salary.
Thus, if, for example, on November 1, 1942 a weekly salary rate of $100 is un-
justifiably increased to $150 for the remainder of 1942, then the amount of
salary to be disregarded for purposes of paragraph (a) of this section is the
total amount paid at the weekly rate of $150. Also, if, for example, on
February 1, 1943 a weekly salary rate of $100 is increased to $150 without
prior required approval, but is restored to $100 on June 1, 1943 after formal
disapproval by the Commissioner or regional officer. then the amount of selary
to be disregarded for purposes of paragraph (A) of this section is the total
amount at the weekly rate of $150. Neither in the cases described in this
paragraph nor in the case described in paragraph (b) of this section are the
total amounts paid at the weekly rate of $100 to be disregarded for purposes
of paragraph (a) of this section. (See section 1002.31 relating to salary
allowances under section 23 (a) of the Code.)
(d) In the case of a salary in excess of the amount allowable under Sub-
part F of those regulations which is paid to, authorized to be paid to, or
accrued to the account of an employee during his taxable year (as distin-
guished from the taxable year of the employer) in contravention of the Act,
the amount to be disregarded is the full amount of such salary and not merely
the amount representing the excess over the amount allowable under such Sub-
part F of these regulations. Thus, if, for example, under such Subpart F an
employee would be entitled to receive a total salary during his taxable year
of $67,200 for services rendered in such year, but actually receives $100,000
for such services, then the entire amount of $100,000 is to be disregarded for
purposes of paragraph (a) of this section.
Sec. 1002.29. Criminal penalties. -- Section 5 (A) of the Act provides
in substance that no employer shall pay. and no employee shall receive, any
salaries in contravention of the regulations promulgated by the President un-
der the Act. Section 11 of the Act provides that any person, whether an em-
ployer or employee, who wilfully violates any provision of the Act or of any
(over)
Regraded Unclassified
(T. D. 5186)
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regulations promul gated thereunder, shall be subject, upon conviction, to A
fine of not more than $1,000. or to imprisonment for not more than one year,
or to both such fine and imprisonment.
Sec. 1002.30. Salary allowances under Code. -- Under section 23 (a) of
the Code reasonable allowances for salaries are allowed as deductions in com
puting net income. The testa which determine whether an allowance for salar-
ies paid or accrued is reasonable within the meaning of section 23 (a) of the
Code are in nowise suspended by any provision of these regulations. An em-
ployer may be exempt from the operation of these regulations yet be donied
doductions for purposes of section 23 (a) of the Code with respect to the sal-
arias paid or accrued by him. Also, a basic allowance under section 1002.18
and additional allowances under sections 1002.19 to 1002.22, inclusive, may
nevertholos be disallowed in whole or in part as deductions under section 23
(a) of the Code.
SUBPART H -- EXEMPTIONS
Soc. 1002.31. Exempt employers. -- The provisions of these regulations,
except those contained in Subparts F and G thereof, shall not apply in the
case of an employer who employs eight or loss individuals in a single busi-
noss. An employer is subject to the provisions of these regulations if at the
time a salary increase 1s to take effect he has in his employ more than eight
individuals in a single business. It is not necessary that each employee be
paid a salary provided all the individuals employed receive compensation for
their personal services. If it is subsequently determined that the number of
employees has been temporarily reduced by the employer. or that the employer
has utilized any other improper device, for the sole purpose of claiming the
exemption provided in the General Regulations and these regulations, then such
exemption shall be deemed to have been improperly obtained and of no force or
effect.
An employer may be exempt under this section notwithstending that shortly
after the effective date of A salary increase he enlarges his personnel in
good faith to more than eight employees. Any further adjustment in salary
will then be subject to the provisions of these regulations.
Sec. 1002.32. Statutory salaries. -- The provisions of these regulations
are applicable in every respect to any salary paid by the United States, any
State, Territory, or possession or political subdivision thereof, the District
of Columbia, or any agency or instrumentality of any one or more of the fore-
goins, except where the amount of such salary is fixed by statute. The torm
"statuto" for purposes of this soction does not include a municipal ordinance
or resolution enacted by A governmental unit inferior to a State, Territory,
or possession. Salaries covered by the Federal Classification Act of 1923, AB
amended, Are excluded from the operation of these regulations. Likewise, sal-
aries, for example, of public school teachers which are paid under salary
achedules fixed by a state legislature and providing for mandatory increments
are excluded from the operation of these regulations. See section 1002.17.
Sec. 1002.33. Services in foreign countries. - The provisions of these
regulations shall not be applicable in the case of any individual employer,
Regraded Unclassified
185
(T. D. 5186)
- 21 -
resident in the United States or any Territory or possession thoreof, or of a
corporate employer organized undor the laws of the United States or any State,
Torritory or possession, with respect to salaries prid by such employers to
employees for services rendered exclusively in foreign countries.
Soc. 1002.34. Foreign employers. - The provisions of those regulations
shall not be applicable in the case of nonresident foreign employers oxcopt
that if any salary is paid to an employee residing in the United States pay-
ment of such salary is subject to all the provisions of these regulations.
GUY T. HELVERING,
Commissioner of Internal Revenue.
APPROVED: December 2, 1942.
JOHN L. SULLIVAN,
Acting Secretary of the Treasury.
Regraded Unclassified
186
DEC 2 - 1942
By dear Senator:
In keeping with your letter of November 20, 1948, additional
data which you have requested with reference to the relationship
between the Treasury Department and the problems of small business,
is furnished in the order of the points as raised.
1. Directives and general policy memoranda setting forth the
plans to be followed in making further use of small plants are
attached and identified as Direster's Order No. 121 dated March 25,
1942, Supplement to the above Order issued October so, 1942 in-
structing that was contracts be placed by negotiation, and Office
Memorandum dated September 21, 1942 and Supplement So. 1 dated Sep-
tember 28, 1942 relative to the availability of labor and placement
of contracts.
Prior to the dates of the above documents, it was the
policy of the Prosurement Division to spread business to distressed
manufacturers. Perchases were recommended and awards were approved
by members of Ky staff thoroughly familier with the bread policy.
1. The Treasury Presurement Division's set up to deal with
the Smaller Mar Plants Division of the Yes Production Board, is out-
lined in letter of October 26, 1949 addressed to Mr. Orville 8.
VePherson, chief, Procurement Contract Branch, Ear Production Board.
Á copy of this correspondence is attached.
Under date of January $4, 1942 a section, under the super-
vision of Thomas C. Stephene, Special Assistant to the Director of
Procurement, was ereated to effectuate the policy of spreading the
business. Shortly after the creation of the Smaller Mar Plants Cer-
poration, Mr. Harvey 1. Malett was designated as lisison officer for
the Smaller Mar Plants Division. Mr. Stephens has been is constant
contact with Mr. Malott on matters pertinent to this relationship.
3. Since January 14, 1942, the date of Executive Order 9023,
contracts relating to war procurement have been placed by negotiation.
No records as to the actual extent to which - have been sussessful
in furthering the specific objectives of Directive No. 2 end Amendment
of October 10, 1942, have been maintained; however, we have occporated
with the Division of Purchases, War Production Board and since its
inseption, with the Smaller Har Plants Division of the War Production
Board, and have concluded purchases after proper evaluation under the
Regraded Unclassified
187
provisions of Directive No. 2 incoded. As evidence of our efforts
in furthering the objectives of Directive No. 2, there are attached
a partial resord of purchases made during the period from January
14, 1942 through October 51, 1942, including specific exemples of
instances of where the policy of spreading the business has been
applied, and a copy of & letter dated October 31, 1942, addressed
to the Director of Procurement, over the signature of Mr. Lew R.
Holland, Deputy Chairman, War Production Beard, which indicates
the extent of our cooporation. Suggestions have from time to time
been made to the Ter Production Heard to develop facilities for
the production of items such as netric tools, diesel motors, and
types of road construction machinery which have been accepted M
army standards.
4. In view of the varying problems in commestion with indi-
vidual purchases, no specific formula for the purpose of spreading
the business emong small plants have been devised. For example, a
specific procedure was adopted for resent purchases of equipment
totaling approximately $20,000,000 made for the account of Federal
Public Rousing Authority. Under this procedure and in view of the
fact that the time of delivery was the most essential feeter for
consideration, certain quantities were awarded to those manufas-
turers who were in a position to produse promptly from materials
on hand. For the purpose of distributing esstrests further the
remaining portion of the total requirement was divided emong numer-
ous contractors who had capacity for production during the latter
part of the program.
The Procurement Division of the Treasury purchases, for
the most part, finished and products ready for use, which products
oft-times involve operations all of which cannot be accomplished
in the normal small plant. The are without funds or authority to
develop or coordinate the fasilities of small plants to place them
in a position to completely manufacture an item which may require
a. multiplicity of operations. Be have been able, for the met part,
to place only contracts involving less difficult production problems
with smaller plants. No have, however, encouraged subsontrasting,
whenever practicable, as illustrated by the following example which
conserns the purchase of a relling mill without electric drive,
weighing approximately 7,576,000 pounds, from the Lewis Poundry
and Machine Company, Division of Blew-Knex, Pittsburgh, Pennsylvania,
at a cost of $2,500,000. At the direction of the Procurement Divi-
sion, the prime contractor entered into subsentracting M listed
below.
Commellaville Mfg. & Mine Supply Co., Commellsville, Pa.
Keystone Drilling Co., Beaver Falls, Pa.
Lee C. Meore Co., Neville Island, Pa.
Patterson Foundry à Machine Co., Fast Liverpool, Chie.
Items Standard Engineering Co., last Liverpool, Ohio.
Regraded Unclassified
188
C. 8. Uline Co., Bellviou, Pa.
Part Stannix Co., Remo, 3. Y.
Nerwood Engineering Co., Flarence, Mass.
0. B. Blaird Ce., Shreveport, La.
Pittsburgh Rells Division, Pittsburgh, Pa.
U. s. Seederly Co., Salem, Chie.
Rechester Machine Co., Rechester, pa.
Ingalls Stone Co., Bixferd, Ind.
Springfield Feundry à Machine Co., Springfield, these.
Treadwell Engineering co., Easten, Pm.
Birdsbers Feundry & Machine Co., Birdsbere, pa.
Sharmee Stone Ce., Bleenington, Ind.
Breden Construction Co., Cleveland, Ohio.
Carl Furst Co., Bedferd, Ind.
Riverdale Foundry & Machine ce., Pittsburgh, Pa.
Themas Machine & Foundry Co., Etna, Pa.
Barrett Machine & Tool Co., Meadville, Pas
Westinghouse Electric Co., East Pittsburgh, Pa.
Carnegie-Illineis Steel Co., South Charleston, 11. Va.
Difficulties have been experienced in obtaining delivery
within the time required from some small plants under contracts
for items outside the seepe of their normal activity. This is a
natural reaction and the difficulties have net been too objection-
able.
In order to assist in the preservation of preductive
capacities of plants and to expedite deliveries we have entered
into definite quantity contracts for electric fane, wood office
desks and files, in advance of known required irements.
5. The total of quantities of desks and files cited above
were purchased without prierity assistmes. Such assistance use
net readily obtainable inseruch as the specific using department
or agency was net known at the time of purchase. For this reason
some small plants, having no furniture woods on hand ner ACCOSE
to supplies without priority assistance, were unable to participate
in the program. A similar situation may be encountered under Om-
oral Schedule of Supplies contracts. M a general rule the major
partion of our purchasing is accomplished after receipt of a requi-
sition for a specific item, mterial, of supplies for which the
applicable prierity assistance has been predetermined and under
which run materials are equally accessible to all classes of sup-
pliers. Without e estien the shortage of raw materials impedes
the full utilisation of small plants.
Regraded Unclassified
189
6. A primary consideration in var procurement is speed in
the placing of orders to neet specified deliveries, consequently
19 10 essential that the closest collaboration be maintained
between the Smaller Var Plants Corporation and the var procurement
agencies to develop the utmost spreading of business consistent
with required deliveries. Insofar as the Procurement Division of
the Treasury Department is concerned, the major part of the par-
chasing 10 of end products and spreading of the business is, to some
extent, but temporary relief depending upon the sise of the order.
It is believed there is an opportunity for an extension of
the program to spread business through the cooperation of prime con-
tractors, particularly in those areas where there are labor shortages.
Development of subcontracting against prime orders involving produc-
tion for extended periods would be a real benefit to the small plants
in need of business. To obtain the maximus advantages requires ade-
quate provisions in contracts with prime contractors to require mb-
contracting. also complete cooperation of all concerned.
7. At the direction of the Office of Lend-Lease Administration,
and after clearance by the War Production Board, the Procurement
Division purchases under Lend-Lease all the rav materials, seai-
finished products, and sanufactured items which are required to ful-
fill the various Lend-Lease commitments, except (1) foodstuffe, which
are purchased by the Department of Agriculture, (2) ships and fittings,
which are purchased by the Maritine Commission, and (3) items of
military equipment and supply, which are purchased w the Army and
Mavy. The items purchased cover an extremely vide range of indus-
trial commodities. Broadly they say be classified under the
following general commodity classes:
(a) Ferrous and non-ferrous metals.
(b) Textiles.
(a) Abrasives.
(d) Chemicals and drugs.
(e) Heavy machinery.
(f) Mides.
(g) Lumber.
(h) Petroleum and petroleum products.
(1) Miscellaneous items.
I in accord with the efforts of your committee to utilize
practicable spread of business. You may expect the complete support
the productive - capacities of smaller plants and to achieve the widest
of the Treasury Department and the facilities of the Procurement Div-
ision in accomplishing your purpose.
Very truly yours,
(Signed) H Morgenthan, Jr.
Secretary of the Treasury
Honorable James B. Murray
(Del. by Sturgie 5:03 12/2/42. Ret'd -
United States Senate
no one in office, and del. 9:15 12/3/42
Photo file in Diary. Orig. file to Thom *BON
Regraded Unclassified
November 24, 1942
My dear Senator:
For the Secretary, I wish to acknowledge receipt
of your letter of November 20th, with reference to the
procurement aspects of our communication concerning the
relationship between the Treasury Department and the
problems of small business.
This matter will receive prompt attention and you
will be further advised.
Very truly yours,
Administrative Assistant
to the Secretary.
Honorable James E. Murray,
United States Senate.
of
Regraded Unclassified
-
a.
KANS
United States Senate
Special Committee to Study Problems of
American Small Business
November 29, 1342
Ron. Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D.C.
Dear Mr. Secretary:
Thank you for your letter of November 9, in response to
our inquiry concerning the relationship between the Treasury De-
partment and the problems of small business.
With rogard to the procurement aspects of your communi-
sation, the Committee would deeply appreciate your submitting a
further statement to include the following points:
1. All directives and general policy memoranda of the
Procurement Division of the Treasury setting forth
the plans to be followed in making further use of
smaller plants.
2. An explanation of the Treasury Procurement Division's
set-up to deal with the Smaller War Plants Division
of the War Production Board, together with an
organization chart and the names of the top personnel.
3. A report on the extent to which the Procurement Divi-
sion of the Treasury has been able to carry out the
specific plans set forth in the original directive
#2 of Donald Nelson, Chairman, War Production Board,
and of the directive as amended on October 10, 1942.
4. A brief summary of your experience in spreading war
work among smaller plants, with particular attention
to the type of work that you have been most successful
in giving to smaller plants.
5. The extent to which, in the opinion of the Procurement
Division of the Treasury, the shortage of raw materials
impedes the further utilization of smaller plants.
6. Your analysis of other obstacles in the path of further
utilization of smaller plants.
7. The role of the Treasury Department in lend-lease pur-
chases and whether or not the Treasury Department should
not take a much more active role in lend-lease procurement.
Regraded Unclassified
- 2
The Committee has been informed by many sources that
your Procurement Division is doing an outstanding job. Some small
businessmen have also suggested that your Procurement, Division
should be given much greater responsibility with regard to the
handling of war procurement. On this account, and for other
reasons, we should appreciate having the above material as soon as
possible - preferably by December 1.
Sincerely yours,
Chairman
Regraded Unclassified
193
TREASURY department
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
March 25, 1942
DIRECTOR'S ORDER NO. 121
TO: Chiefs of Branches and Divisions
The Chairman of the War Production Board has issued a Directive
in connection with the placing of supply contracts relating to war
procurement. There is quoted following the provisions of such
Directive:
"Pursuant to the authority vested in me by Executive Order No.
9040 of January 16, 1942, and Executive Order No. 9040 of January
24, 1942, the following policy is prescribed for all Departments
and Agencies now or hereafter authorized by the President to exer-
cise the powers set forth in Title II, section 201 of the First War
Powers Act, 1941 (Public No. 354, 77th Congress):
"S 904.1 Placing supply contracts. (a) Except as hereinafter
provided, all such Departments and Agencies shall place all supply
contracts relating to war procurement by negotiation: Provided,
That where consistent with the required speed of war procurement,
notofication of the proposed procurement shall be given to quali-
fied possible contractors and quotations secured from them. The
procedure provided by section 3709 of the Revised Statutes (41 U.S.C.
section 5) shall be used only upon the specific authorization of
the Director of Purchases of the War Production Board, or of such
person or persons as he may designate.
"(b) (1) In placing such contracts, particular regard shall
be paid to the following considerations:
"(1) Primary emphasis shall be upon securing delivery in the
time required by the war program.
"(11) In 80 far as it will effectuate the policy set forth
in subparagraph (1) ahove, such contracts shall be placed 60 as
to conserve, for the more difficult war production problems, the
facilities of concerns best able, by reason of engineering, mans-
gerial, and physical resources, to handle them. Accordingly, con-
tracts for standard or other items which involve relatively simple
production problems shall be placed with concerns, normally the
FORDEFENSE smaller ones, which are less able to handle the more difficult war
production problems.
BUY
UNITED
STATES
SAVINGS
BONDS
453 YTAMPS
194
-2-
"(111) Subject to the considerations stated in subparagraphs
(1) and (11). such contracts shall be placed with concerns needing
to acquire the least amounts of additional machinery and equipment
for performance of the contracts. Accordingly, 88 an esaential
part of each negotiation, procurement officials shall secure from
prospective contractors statements listing all additional machinery
and equipment which will be needed for performance of the contract.
"(2) Authority to depart from this policy may, upon specific
request, be granted by the Director of Purchases of the War Pro-
duction Board, or by such person or persons as he may designate for
this purpose."
In accordance with such Directive, effective immediately, all
contracts for the Procurement Division shall be placed as provided
for in such Directive, except as follows:
1. All Field Offices of the Procurement Division shall
continue to place contracts in accordance with exist-
ing procudure and the terms of the Directive shall
not apply to such contracts, until such time as fur-
ther instructions are issued.
2. All General Schedule contracts, until further notice,
shall be placed in accordance with existing procedure
in view of the scope of such contracts and the admin-
istrative difficulties involved in changing over to
the method provided for in such Directive. However,
compliance with such Directive as soon as possible 1s
contemplated, and when the plans for including such
contracts in the new procedure are completed a further
order will be issued in connection therewith.
(Signed) CLIFTON E. MACK
Director of Procurement
to depart from the policy established by Directive No. 2 of to the
Authority 1s hereby granted to the Director of Procurement
Chairman of the War Production Board, dated March 3, 1942,
the extent provided for in the above Order.
Dated: March 25, 1942
James MacPherson
Regraded Unclassified
195
TREASURY department
PROCUREMENT DIVISION
ICE of THE DIRECTOR
WASHINGTON
October 20, 1942
DIRECTOR'S ORDER NO. 121, SUPPLEMENT NO. 1
TO: Chiefs of Branches and Divisions,
Regional end Deputy Procurement Officers.
SUBJECT: Placing War Contracts by Negotiation,
Under date of March 3, 1942 Mr. Donald M. Nelson, Chairman,
War Production Board, issued Directive No. 2 directing the manner of
placing supply contracts relating to war procurement. The policies out-
lined by the above Directive were made the subject of Director's Order
No. 121 issued March 25, 1942. At the time of issuance, purchases by
Field Offices of the Procurement Division were exempt from the provisions
of the Directive, therefore, Director's Order No. 121 WAS not circulated
to Regional and Deputy Procurement Officers.
Directive No. 2 was amended October 10, 1942 by the Chairman
of the War Production Board and now applies to all departments and agencies
placing contracts relative to war procurement. There is quoted below the
essential provisions of the amended Directive.
"Pursuant to the authority vested in me by Executive Order No.
9024 of January 16, 1942, and Executive Order No. 9040 of January 24, 1942,
the following policies and procedures are prescribed for all departments
and agencies now or hereafter authorized by the President to exercise the
powers set forth in Title II, Section 201 of the First War Powers Act,
1942 (Pub. Law 354, 77th Congress).
"(a) Except as hereinafter provided, all such departments and
agencies shall place contracts relating to war procurement by negotiation.
Negotiation as used in this directive may include not only face-to-face
denlings, but also purchasing by securing informal written bids or tele-
phone quotations. Where consistent with the required speed of war pro-
curement, notification of the proposed procurement shall be given to a
reasonable number of qualified contractors and quotations secured from
them.
"(b) In negotisting contracts relating to war procurement the
following considerations shall governi
FORVICTORY
BUY
ENITED
STATES
(over)
BONDS
APP
STAMPS
(36633)
Regraded Unclassified
- 2 -
"(1) Primary emphasis shall be upon securing deliveries or
performance at the times required by the war program.
"(11) Subject to the considerations stated in subdivision (1)
contracts shall be placed with concerns needing to acquire the least amounts
of additional new machinery, equipment, or facilities for performance of
the contracts.
"(111) Subject to the considerations stated in subdivisions
(1) and (ii), it shall be the policy of all war procurement departments and
agencies to avoid contracting for the production of items or materials in
communities or areas in which acute labor shortages are known to exist
whenever it is practical to procure the needed items or materials elsewhere.
The War Manpower Commission shall be relied upon to certify to the war
procurement agencies, communities and areas in which acute labor shortages
exist to such. a degree that the policy stated in this subdivision 1a
applicable.
"(iv) Subject to the considerations stated in subdivision (1),
(11). and (111), such contracts shell be placed B0 as to conserve, for the
more difficult war production problems, the resources of concerns best able
by reason of engineering, managerial, and physical resources, to handle
them. Accordingly, contracts for items which involve relatively simple
production problems shall be placed with concerns, normally the smaller
ones, which are less abl'e to handle the more difficult war production
problems.
"(v) Subject to the considerations stated in subdivisions (1),
(11). (111). and (1v), and also subject to the provisions of the Production
Concentration Programs, which have been or may in the future be instituted
by the War Production Boárd, such contracts shall be placed 80 as to apread
production among as many firms as 18 reasonable and feasible.
"(c) War procurement departments and agencies are hereby authorize
and directed to pay higher prices than would otherwise be required if such
action is necessary to put into effect the policies stated in subdivisions
(1) through (v), inclusive. If all the considerations set forth in sub-
divisions (i) through (v) have been met and there 18 still need for seleo-
tion among contractors, contracts shall be so placed as to obtain the
lowest price for the Government."
There is attached a list of labor markets supplied by the War
Manpower Commission in which labor shortages exist. As labor market con-
ditions change, supplements to this order will be issued.
Directive No. 2, Amended.
Immediate steps shall be taken to effectuate the provisions of
(signed) CLIFTON E. MACK
Director of Procurement
(continued)
(3663)
Regraded Unclassified
196
AREAS EXPERIENCING ACUTE LABOR SHORTAGES, SEPTEMBER 28, 1942
ALABAMA
MARYLAND
OREGON
Mobile
Baltimore
Portland
CALIFORNIA
MASSACHUSETTS
SOUTH CAROLINA
San Diego
Holyoke
Charleston
Pittsfield
Springfield
CONNECTICUT
TEXAS
Bridgeport
Benumont
Bristol
MICHIGAN
Orange
Hartford
Detroit
Port Arthur
Meriden
Flint
Middletown
New Britain
UTAH
New Haven
NEW HAMPSHIRE
Ogden
New London
Claremont
Selt Leke City
Norwalk
Portsmouth
Stamford
Waterbury
VERMONT
NEW YORK
Springfield
DISTRICT OF COLUMBIA
Buffalo
Windsor
Washington
Elmira
Lockport
ILLINOIS
Massena
VIRGINIA
Joliet
Niagara Falls
Hampton Ronds
Rockford
Schenectady
WASHINGTON
INDIANA
NORTH CAROLINA
Bremerton
Evansville
Wilmington
Seattle
Indianapolis
Spokane
La Porte
Tecoma
Michigan City
OHIO
Dayton
Freemont
WISCONSIN
KANSAS
Hamilton
Beloit
Wichita
Kings Mills
Clintonville
Middletown
Janesville
Ravenna
Menitowoc
MAINE
Sandusky
Sturgeon Bey
Both
Warren
Portland
NOTE: It is intended to include not only the corporate limits of the com-
munities themselves, but also the surrounding territory within
feasible commuting distance.
(36633)
Regraded Unclassified
196
AREAS EXPERIENCING ACUTE LABOR SHORTAGES, SEPTEMBER 28, 1942
ALABAMA
MARYLAND
OREGON
Mobile
Baltimore
Portland
CALIFORNIA
MASSACHUSETTS
SOUTH CAROLINA
San Diego
Holyoke
Charleston
Pittsfield
Springfield
CONNECTICUT
TEXAS
Bridgeport
Benumont
Bristol
MICHIGAN
Orenge
Hartford
Detroit
Port Arthur
Meriden
Flint
Middletown
New Britain
UTAH
New Haven
NEW HAMPSHIRE
Ogden
New London
Claremont
Salt Leke City
Norwalk
Portsmouth
Stamford
Waterbury
VERMONT
NEW YORK
Springfield
DISTRICT OF COLUMBIA
Buffalo
Windsor
Washington
Elmira
Lockport
ILLINOIS
Massena
VIRGINIA
Joliet
Niagara Falls
Hempton Roads
Rockford
Schenectady
WASHINGTON
INDIANA
NORTH CAROLINA
Bremerton
Evansville
Wilmington
Senttle
Indianapolis
Spokane
La Forte
Tecoma
Michigan City
OHIO
Dayton
Freemont
WISCONSIN
KANSAS
Hamilton
Beloit
Wichitn
Kings Mills
Clintonville
Middletown
Janesville
Ravenna
Menitowoc
MAINE
Sandusky
Sturgeon Bey
Bath
Warren
Portland
NOTE: It is intended to include not only the corporate limits of the com-
munities themselves, but also the surrounding territory within
feasible commuting distance.
(36633)
Regraded Unclassified
197
TREASURY department
PROCUREMENT DIVISION
OFFI OF THE DIRECTOR
WASHINGTON
September 21, 1942
OFFICE MEMORANDUM.
TO: ALL GROUP CHIEFS AND ASSISTANT GROUP CHIFFS.
SUBJECT: Availability of Labor and the Placement of Contracts.
The growing number of communities in which shortages are at
present apparent, show that labor is becoming an increasingly scarce
resource.
Consideration of labor supply in all decisions affecting war
production has become essential. For effective utilization of the
national manpower, additional war work should be directed towards
areas with adequate labor supply and away from areas with acute labor
shortages.
Further labor demand in the shortage areas would cause excessive
migration, aggravate housing problems, increase pressure on overcrowded
transportation and other community facilities, and perhaps inability to
meet delivery dates.
Labor scarcity in many communities, despite continuing unemploy-
ment in other communities, require steps be taken to effect better
distribution of labor demand such as transfers of civilian production
from labor shortage areas and greater attention paid to labor supply in
awarding contracts.
There is attached a list of labor markets, supplied by the War
Manpower Commission, in which there exists a shortage of workers. This
list will be kept current as labor market conditions change.
The Procurement Division will endeavor to issue contracts to employers
located elsewhere then in these labor market areas. It is recognized it
will be occasionally necessary to locate contracts in some one of the
tight labor markets due to a lack of facilities elsewhere than in these
communities where those manufacturers in these communities can guarantee
much greater speed in delivery than can manufacturers elsewhere. There
might be other binding reasons that dictate the locations of contracts in
one of these communities.
POB YICTORY
BUY
(over)
WITED
STATES
BONDS
ANY
STANDS
(35690)
Regraded Unclassified
198
- 2 -
Office Memo.
9-31-42
It is understood the availability of labor is not to be
considered the sole determining factor, but a very important one
in placing contracts which involve manufacture subsequent to award.
Whenever, in the opinion of Commodity Group Chiefs or Assistant
Group Chiefs, the placement of a contract for manufacture in 8
congested labor area would have a disturbing effect, the transaction
should be discussed with either the Chief of the Purchase Division
or the Chief of the Contract and Purchase Section, prior to recommen-
dation of award.
(signed) A. J. WALSH
Deputy Director of Frocurement
(36690)
Regraded Unclassified
199
AREAS EXPERIENCING ACUTE LABOR SHORTACFS, SEPTEMBER 9, 1942
ALABAMA
MASSACHUSETTS
UTAH
Mobile
Springfield
Ogden
Salt Lake City
CALIFORNIA
MICHIGAN
San Diego
Detroit
VERMONT
Flint
Springfield
Windsor
CONNECTICUT
Bridgeport
NEW HAMPSHIRE
Bristol
Claremont
VIRGINIA
Hartford
Portsmouth
Hampton Roads
Meriden
Middletown
New Britain
NEW YORK
WASHINGTON
New Haven
Buffalo
Bremerton
New London
Elmira
Seattle
Norwalk
Lockport
Tacoma
Stamford
Massena
Waterbury
Niagara Falls
Schenectady
WISCONSIN
Beloit
DISTRICT OF COLUMBIA
Clintonville
Washington
NORTH CAROLINA
Janesville
Wilmington
Manitowoc
Sturgeon Bay
ILLINOIS
Decatur
OHIO
Joliet
Dayton
Rockford
Freemont
Springfield
Hamilton
Marion
Ravenna
INDIANA
Sandusky
Evansville
Warren
Indianapolis
Michigan City
OREGON
Portland
KANSAS
Wichita
SOUTH CAROLINA
Charleston
MAINE
Bath
Portland
TEXAS
Beaumont
Orange
MARYLAND
Port Arthur
Baltimore
(35690)
Regraded Unclassified
200
TREASURY department
PROCUREMENT DIVISION
PFICE OF THE DIRECTOR
WASHINGTON
September 28, 1942
SUPPLEMENT NO. 1 TO OFFICE MEMORALDUM DATED SEPT. 21, 1942
TO:
All Group Chiefs and Assistant Group Chiefs.
SUBJECT: Availability of Labor and the Placement of Contracts.
In order to keep current, as nearly as possible, the
list of AREAS EXPERIENCING ACUTE LABOR SHORTAGES, the following
changes should be made:
ADD to the list:
Holyoke, Massachusetts
Kings Mills, Ohio
La Porte, Indiana
Middletown, Ohio
Pittsfield, Massachusetts
Spokane, Washington
DELETE from the list:
Decatur, Illinois
Springfield, Illinois
Marion, Ohio
NOTE: It is intended to include not only the corporate limits
of the communities themselves, but also the surrounding
territory within feasible commuting distance.
(signed) A. J. WALSH
Deputy Director of Procurement
FOR YICTORY
BUY
SEPTED
STATES
BONDS
ANN
STAMPS
(35871)
Regraded Unclassified
201
COPY
October 26, 1942
Mr. Orville 8. MePherson, Chief
Procurement Contact Branch
Ner Production Board
Washington, D. C.
Dear Sir:
Receipt is acknowledged of your letter dated October 20,
1942, outlining agreements reached in preliminary discussions
regarding the matter of policy governing the activity of the
Smaller Mar Plants Division of the Mar Production Board, in oon-
nection with contracts awarded by the Procurement Division of the
Treasury Department.
It is understood the Smaller War Plants Corporation will
be apprised of purchase requirements through access to a copy of
incoming requisitions now being received by the Puschase Division
of the Mar Production Board. The following general outline will
be pursued:
1. SWPD will recommend sources of supply to be included
in negotiations along with other sources known to this Division.
2. SWPD will recommend the placement of contracts to one
or more sources with the understanding that contrasts will be made
with such designated facilities provided price and delivery dates
are acceptable.
s. SWPD will request that procurements be made by Smaller
War Plant Corporation functioning as prime contractor.
It is Ky understanding the last method will be adopted
in only those instances where the SWPD brings into being new
facilities for preduction. Provided existing facilities are to be
utilized, the objective may be accomplished by following method
No. 2.
Very truly yours
A. J. Walsh
Deputy Director of Procurement
Regraded Unclassified
202
COPY
WAR PRODUCTION BOARD
Washington, D.C.
October 31, 1942
In reply refer to:
Dear Mr. Mack:
Thank you very much for your letter of October 21,
sending me a copy of the report prepared for you by
Mr. Stephens, Special Assistant, with further specific
examples of spreading the business. I think this is very
good and take this opportunity of expressing my appreciation
for the fine cooperation we are getting from the Treasury
Department.
I an determined that our program shall go forward in
an orderly way with the least amount of friction.
We are experiencing some difficulty in securing the
services of highly qualified non to contact the various
departments of the Government. For this reason, it say be
necessary from time to time to make some changes in personnel.
If at any time you feel that our contact man is not the proper
person for the job, I would appreciate hearing from you.
with best wishes, I remain
Cordially yours,
/s/ Lou S. Holland, Deputy Chairman
Har Production Board
Mr. Clifton 3. Mack
Treasury Department
Procurement Division
Washington, Do C.
Regraded Unclassified
203
ILLUSTRATIVE EXAMPLES OF PURCHASES MADE DURING
THE PERIOD JANUARY 14 THROUGH OCTOBER 31, 1942
(SEE PAR. 8 or COVERING LETTER)
MOTOR VEHICLES
During the period involved, the Procurement Division has
purchased all motor vehicles required by the Executive Departments
and Independent Establishments of the Government and the District
of Columbia, except Har, Havy, and Maritime Commission. Every
attempt has been made to place these contrasts in the localities
in which the vehicles are to be used.
OFFICE DESKS AND FILE CABINETS
$10,724,380.00
In anticipation of sisable requirements for office desks
and file eabinets, the Procurement Division designed and made
definite quantity contracts for conservative models of these
items. The desks are referred to as "Victory" models and utilize
a minimum amount of critical materials. The over all dimension
is smaller than the conventional style desk although adequate for
the purpose intended. This desk requires less office space, less
transportation space and cost and was obtained at a cost of approx-
inately one-third that of the conventional style. It is believed
this production will not reate serious post war competition for
the business as usual product. Since April 1, 1942, 124,200 "Victory"
desks have been purchased from 24 manufacturers at a total cost of
$1,515,980.00. Purchase of 203,500 conventional type office desks
were made from 30 sources of supply, utilising rew materials on hand
and without priority assistance, at a total cost of $7,122,600.00.
During the same period a total of 67,900 conservative type wood
file cabinets have been purchased from 11 manufacturers, other than
these referred to above, at an approximate cost of $2,085,900.00.
LUMBER, FLYWOOD, AND VENEERS
(approx) $25,000,000.00
These purchases have consluded with approximately 215 suppliers.
COPPER TUBING
3 8,595,666.00
Manufasturing facilities were developed by & single purchase
of 1400 gross tons of copper tubing from 9 sontractors.
HAND TOOLS, REAMERS, AND DRILLE
8 6,144,324.79
Contracts for the above were executed with 125 suppliers.
BLANKETS
1,982,468.00
This total business was spread among 19 contrastors.
Regraded Unclassified
204
BOLTS, NUTS, SCREWS, RIVETS, AND WARNERS
$ 2,393,180.50
Awards were made favoring 36 sources of supply.
ABRASIVES
# 6,871,096.52
These materials were obtained from 38 suppliers.
-
CABLE
$ 8,975,030.19
Awards favoring 42 companies were made.
HANDLE BLANKS
8 292,389.22
These purchases were secured from 9 different contrastors.
RAZOR SLADES
$ 220,025.00
Awards were divided among 12 manufacturers.
Here detailed analysis of additional purchases follow:
HOT WATER HEATERS AND WATER STORAGE TANKS
$ 1,693,793.55
Contractor
Amount
American Boiler Foundry Co.
6,481.50
Amer. Gas Machine Co.
18,200.00
Bastian Morley Co.
90,000.00
Dowagias steel Furnace Co.
16,400.00
Duo-Therm Div. of
Motor Theel Corp.
24,675.00
Dupage Boiler Works
4,270.50
Erie Enameling Co.
31,140.00
Fowler Mfg. Co.
19,404.00
Hotstrom Heater Co.
195,692.50
Lawson Mfg. Co.
225,425.00
Lochinvar Products Div.
80,605.00
Ohio Feundry & Mfg. Co.
57,575.00
Pittsburgh Mater Heater Corp.28,840.00
Persolain Steels Inc.
156,849.00
Rhoem MSG. Co.
269,416.00
Smith, he O., Corp.
3,588.00
Wood, John, Mfg. Co., Inc.
50,000.00
Need, John MSE. Co.
15,252.05
United States Water Heater
Company
400,000.00
Regraded Unclassified
205
+
Commodity
Contractor
Amount
Total
Shoes
8 896,654.66
Allen Squire Co.
178,600.00
Brown, R. H., Shoe Co.
232,000.00
Confort Sandal Mfg. Co.
10,000.00
D. H. & G. H. Bell
15,650.00
Edmar Footwear Co.
7,906.25
Empire Shoe Co.
19,912.21
Five Star Shoe Co.
19,489.32
Poster, R. H. Shoe Co.
27,500.00
Holly Shoe Co.
18,125.00
Kreider Co., The A. S.
5,634.78
H. Jacobs à Some. Inc.
30,253.00
Hubbard Shoe Co., Inc.
8,125.00
Lenox Shoe Co. Inc.
7,812.50
Lincoln Shoe Co.
17,625.00
Medway Shoe Mfg. Corp.
43,250.00
Monarch Shoe Co.
5,404.60
Pilling, John, Shoe Co.
57,147.00
Prime Shoe Co., Inc.
51,375.00
Parkway Shoe Corp.
8,125.00
Porter Shoe Co.
14,170.00
Progress Shoe Co., Inc.
9,350.00
Remsey Shoe Co.
9,250.00
Salem Shoe Co.
51,575.00
Suffolk Shoe Co.
29,000.00
Supreme Shoe Mfg. Co.
21,375.00
Cottom Yarn
1,210,663.26
Aberfoyle Mfg. Co.
101,812.25
American Thread Co.
262,086.00
Ameskeag-Lawrence Mills
81,057.00
Bladembero Cotton Mills
4,250.00
Caldwell Cotton Mills Co.
37,500.00
Conneaut HSg. Co.
125,000.00
Cross Cotton Mills Co.
$0,670.00
Dixie Mercerising Co.
66,028.50
Hempton Co.
27,480.00
Lola Mills Inc.
52,500.00
Meyers, Clarence L. & Co.
62,500.00
Miller, L. P. Co.
66,255.00
Kyers, Claremse L. Co.
62,500.00
National Spinning Co.
55,800.00
Southern Mercerizing Co.
92,180.00
Turner Halsey Export Corp.
43,044.50
206
-
Commodity
Contractor
Amount
Total
Clothing
$ 1,626,832.50
American Clething Co.
79,000.00
Anthracite Overall Mfg. Co.
51,125.00
Barney Modell & Co., Inc.
13,750.00
Belikoff Bros.
$8,000.00
Bellgrade Mfg. Co.
45,000.00
Cohen, George
282,750.00
Cooperative Clothing
79,000.00
Dandy Mfg. Co.
158,000.00
Davidson, Larry
27,500.00
Dodourain Export Corp.
38,000.00
Rgbert, A. & Sons, Inc.
13,125.00
Garfunkel Co., J. H.
78,750.00
Gladstone Bros.
209,750.00
Kendale Mfg. Co.
23,500.00
Lakawanna Pants Mfg. Co.
73,875.00
Levinsohn, Sanders A. Inc.
15,625.00
Levinsohn Bros.
173,500.00
Malden Knitting Mills
8,370.00
Mickey Finn Clothes Inc.
27,500.00
Miller Clothing Co.
19,000.00
National Brand Co.
128,548.00
New Brunswick Pants Co.
17,171.00
New England Overall Co. Inc.
16,625.00
Regal Knitwear Co.
7,500.00
Sachs, Harry, Inc.
35,250.00
Sears Reebuck Co.
16,225.00
Somerville Initting Co.
5,200.00
Standard Overall Co.
59,812.50
Schwarts, A. J. & Co.
15,625.00
Sebwarts, Julius & Sons, Inc.
15,000.00
Standard H-S-T Mff. Co.
23,750.00
Svirsky Clothing Co.
6,750.00
Tarbro Clothes
5,500.00
Union Knitting Mills
15,912.00
Wexler Knitting Mills
5,844.00
Gloves
326,275.00
Comet Glove Corp.
32,000.00
D. C. Haber Enitting Co.
$0,800.00
Lasker & Oshonsky
67,875.00
Lasker & Weinstone
26,375.00
Royal Knitting Mills
71,225.00
Smart Set Glove Co.
98,500.00
207
COMMODITY
Contractor
Amount
Total
Tires, Tubes and Plaps
$ 20,454,936.94
Armstrong Tire à Rubber Co.
$ 942,182.00
Carlisle
-
-
-
-
70,278.71
Corduroy Rubber Co.
150,584.00
Cupples Co.
24,710.40
Dayton Rubber Mfg. Co.
659,562.30
Deman Tire & Rubber Co.
65,902.00
Dunlop
-
-
.
-
1,851,163.80
Falls Rubber Co.
272,475.87
Firestone Tire & Rubber Co.
3,602,131.36
Gates Rubber Co.
172,661.00
General Tire & Rubber Co.
519,506.00
Goodrich, The B. F. Co.
3,292,779.10
Goodrich fire & Rubber Co.
747,618.00
Goodyear fire & Rubber Co.
1,199,877.39
Inland Rubber Co.
180,843.00
Kelly-Springfield Tire Co.
208,873.40
Lake Shore fire & Rubber Co.
702,616.00
Lee Tire à Rubber Co.
1,648,742.15
Manafield Tire & Rubber Co.
732,604.76
Mohawk Rubber Co.
375,494.00
Monarch Rubber Co.
169,607.18
McCreary Tire & Rubber Co.
149,538.75
Norwalk
#
-
=
-
295,409.55
Pacific Rubber & Tire Mfg. Co.
79,181.72
Pennsylvania Rubber Co.
465,882.44
Pharis Tire &
.
-
318,111.67
Poulson Rubber Co.
60,632.60
Robbins fire & Rubber Co.
17,470.00
Schenuit, Frank G., Rubber Co.
11,878.00
Sieberling Rubber Co.
499,945.60
Star Rubber Co.
13,620.00
Tire & Rubber Co,
680.00
U, 8. Rubber Co.
1,054,174.19
7,334,042.44
Textiles
American Bleached Goods Co.
6,810.00
Atlas Wiping Cloth Co.
2,100.00
Bailey, Joshua L., & Co.
26,800.00
Batavia Mills Inc.
56,922.70
Brand & Oppenheimer
9,093.75
Calleway Mills
87,800.00
(continued on next page)
Regraded Unclassified
207
COMMODITY
Contractor
Amount
Total
Tires, Tubes and Plaps
$ 20,454,936.94
Armstrong Tire à Rubber Co.
$ 962,182.00
Carlisle
.
-
#
.
70,278.71
Corduroy Rubber Co.
150,584.00
Cupples Co.
24,710.40
Dayton Rubber Mfg. Co.
659,562.30
Demman Tire & Rubber Co.
85,902.00
Dunlop
-
#
.
.
1,851,163.80
Falls Rubber Co.
272,475.87
Firestone Tire à Rubber Co.
3,602,131.36
Gates Rubber Co.
172,661.00
General Tire & Rubber Co.
519,506.00
Geodrich, The B. F. Co.
5,292,779.10
Goodrich fire & Rubber Co.
747,618.00
Goodyear fire & Rubber Co.
1,199,877.39
Inland Rubber Co.
180,843.00
Kelly-Springfield Tire Co.
208,873.40
Lake Shore Tire & Rubber Co.
702,816.00
Lee Tire & Rubber Co.
1,548,742.15
Manafield Tire & Rubber Co.
732,604.76
Mohawk Rubber Co.
373,494.00
Monarch Rubber Co.
169,607.18
MeCreary Tire & Rubber Co.
149,538.75
Norwalk . . - -
295,409.55
Pacific Rubber & Tire Mfg. Co.
79,181.72
Pennsylvania Rubber Co.
465,882.44
Pharis Tire a
.
.
318,111.67
Poulson Rubber Co.
60,632.60
Robbins Tire & Rubber Co.
17,470.00
Schenuit, Frank G., Rubber Co.
11,878.00
Sieberling Rubber Co.
499,945.60
Star Rubber Co.
13,620.00
Tire & Rubber Co,
680.00
U. S. Rubber Co.
1,034,174.19
Textiles
7,334,042.44
American Bleached Goods Co.
6,810.00
Atlas Wiping Cloth Co.
2,100.00
Bailey, Joshua L., à Co.
25,300.00
Batavia Mills Ins.
56,922.70
Brand à Oppenheimer
9,095.75
Calleway Mills
67,800.00
(continued on next page)
Regraded Unclassified
208
COMMODITY
Contractor
Amounts
Total
Textiles (cont'd)
Cannon wills
$
7,620.00
Charles Belsky à Co.
7,965.00
Cohn-Hall-Marr Co.
341,470.00
Commander Mills Inc.
108,013.50
Catlin Farnish Co.
62,072.35
Columbus Mfg. Co.
11,202.00
Come Export à Comm. Co.
129,330.00
Drumondrille Cotton Co.
469,578.56
Eddington Fabries Corp.
12,929.30
Erlanger, N., Blungart & Co.
$3,000.00
Krwin Cotton Mills, Inc.
7,162.65
Hesslein & Co., Inc.
9,500.00
Industrial Wiping Cloth Co.
5,693.00
Kendall Mills
6,750.00
Keystone Wiper & Supply Co.
5,795.00
Kelbe, H. M. Co.
20,375.00
Kolb, H. M. Co., Inc.
10,247.50
Lane, J. H. & Co., Inc.
3,586,012.96
Livingston, B., &
82,590.75
Mainser Minton Co.
123,525.00
Marsales Co. Inc.
11,200.00
McCampbell à Co. Inc.
14,330.50
Kinst licoper & Co.
22,500.00
Morgan Cotton Hills
558,470.00
House, Hesslein Co., Inc.
37,612.50
Pacific Mille
74,323.15
Silverman, N., & Some, Inc.
6,435.50
Rosemary Inc.
40,550.92
Southeastern Cottons, Inc.
37,690.00
Southbridge Finishing Co.
55,615.44
Springs Cotton Mills
8,357.29
Stevens, J. P. & Co.
95,030.00
Superior Duok Clo. Co.
880.90
Textile Products
6,750.00
Textile Waste Supply Co.
8,260.00
Thomaston Cottom Mills
44,250.00
Turner Halsey Co.
125,485.70
Tuttle, M. P. Co.
10,250.00
U. S. Rubber Co.
257,900.00
Valentine Textile Corp.
259,397.00
Washington Mills Co.
45,587.50
Wellington Sears
195,200.00
Willingham Cettom Co.
89,000.00
Noodward, Baldwin à Co.
46,200.00
209
Commedity
Contractor
Amount
Total
Space Heaters à Furnaces
$3,533,029.02
Agricela Furnace Ce.
86,349.00
American Furnace Co.
50,673.34
American Gas Mach. Co.
61,264.50
Coloman Lamp & Steve Co.
89,465.80
Columbia Iren Works Ce.
11,375.00
Cercaire Corp. The
127,420.00
Dixie Foundry Co.
156,200.00
Dertoh Stove Works Inc.
219,595.00
Dewagias Steel Furnace Co.
85,596.00
Eagle Foundry co.
33,330.00
Empire Steve Co.
15,220.00
Gray à Dudley Ce.
274,006.78
Hayes, C. I. Inc.
15,734.60
Hevi Duty Eleo. Co.
4,060.00
International Heater Co.
21,079.50
Knox Steve Works, The
23,352.00
Lennex Purnace Co.
143,286.00
Lonergan Mfg. Co.
38,964.00
Makemb Steel Products Co.
21,252.00
Masset Steve Co.
143,650.00
Oakland Foundry Co.
395,526.20
Ohio Foundry, The
62,458.20
Olsen, C. As MR6. Co.
225,570.00
Peerless Mfg. co.
71,125.00
Phillips & Butterff Mfg. co.
221,776.00
Prenties Wabers Co.
26,664.00
Qualer Mfg. Co.
35,552.00
Reckwood Steve Works
45,450.00
Samuel Stemping & Enameling Co.
4,340.00
Security Mfg. Co.
$8,710.00
Silent Sieux
34,080.00
Southern Cosperative Foundry Ce.
62,140.00
Termessee Steve Works
140,555.00
Thatcher Furnase Co.
56,752.50
Viking Mfg. Corp.
203,296.50
Williamson Heater Co.
96,187.60
Regraded Unclassified
210
Commodity
Contractor
Amounts
Total
Lavatories, Fittings à Trim
$1,363,203.56
Alliance Percelain Products Co.
402,106.50
American Brass Nevelty Co.
45,600.00
American Sanitary Mfg. Co.
133,140.00
Brigge HEB. Co.
113,400.00
Camden Pettery
10,800.00
Crans Co.
108,802.50
Eljer Co.
48,000.00
Elwood Co.
158,000.00
Glebe Value Corp.
30,720.00
Humphreys Hfg. Co.
42,280.00
Kohler Co.
75,100.00
Maryland Senitary Mfg. Corp.
2,389.08
Richmond Radiater Co.
760.00
Rundle lifg. Co.
56,000.00
Sears Reebuck à Co.
58,483.40
Savoy Brass Mfg. Co. Inc.
36,000.00
United States Sanitary Co.
47,676.00
Water Closet Combinations
1,237,227.50
Crane Co.
223,240.00
Douglas, John Co. The
26,702.00
Eljer Co.
Kahler Co.
133,510.00
Kokeme Sanitary Pettery Corp.
470,137.50
Manefield Senitary Pottery Inc.
147,888.00
Universal Sanitary Mfg. Co.
102,500.00
Kitchen Ranges
1,715,291.00
A. B. Steves Inc.
189,800.00
Brown Steve Works
21,637.50
Calerio Gas Steve Works
$95,100.00
Dixie Foundry Co.
116,575.00
Derteh Steve Werks
75,010.00
Electromaster Inc.
58,950.00
Florence Steve Co.
21,834.00
Hardwick Steve Co.
56,875.00
!luenfold Co., The
50,347.00
Oakland Foundry Co.
21,637.50
Orben Steve Co.
100,625.00
Phillips à Butterff Mfg. Co.
45,500.00
Rose, J. à Co. Ins.
22,750.00
Slattery, J. 8. á Bro. Ins.
424,125.00
Sunray Steve Co.
102,575.00
United States Steve Co.
13,150.00
Regraded Unclassified
Commodity
211
Contracter
Amount
Total
Heed Water Cleset Seats
# 180,000.00
Beneke Corp.
25,845.40
Bilt-Rite Mfg. Co.
35,769.60
Julius Breckweldt & Sen
60,384.00
Bathtube à Fittings
2,176,785.96
Alliance Porcelain Products Co.
110,720.00
American Sanitary Mfg. Co.
81,620.00
Brigge Mfg. Ce.
217,250.00
Crans Ce.
294,273.00
Davidson Enamel Ce.
271,610.00
Eljer Co.
204,000.00
Globe Valve Corp.
46,375.00
Kehler Co.
435,960.00
Milwaukse Flush Valve Co.
55,650.00
Rundle Mfg. Co.
164,350.00
Salter, H, B. Mfg. Co.
72,365.00
Sears Reebuck Co.
165,520.96
Youngstown Pressed Steel Div.
57,090.00
Medicine Cabinets - Bathroom
143,920.00
Bilt-Rite Mfg. Co.
45,320.00
Celenial Preducts Co,
30,750.00
Heller, W. 0. à de.
10,850.00
Payne, A. 8. Ine,
16,400.00
Schumaok, C. E. Ino,
41,200.00
Refrigeraters
5,072,299.02
Coolerator Co.
419,180.00
Frigidaire Div.
566,219.01
Ied Cooling Appliance Corp.
306,200.00
Mentgemery Hard à Co.
$23.30
Nach Kelvinater
896,795.03
Sanitary Refrigerator Co.
334,620.00
Servel Inc.
75,734.80
Success Mfg. Co.
243,360.00
Sunset Eleo. Co.
856.88
Hard Refrigerator & Mfg. Co.
231,000.00
Lighting Fixtures
169,500.00
Electric Mfg. Co.
65,625.00
Lightelier Co.
56,250.00
Solar Light Co.
28,125.00
Star Lighting Fix. Co.
19,500.00
Regraded Unclassified
212
Regraded Unclassified
COMMODITY
Contractor
Amount
Total
Kitchen Sinks & Laundry Trays à Combinations, & Tria. # 2,675,765.17
Allience Percelain Products Co. 92,169.00
American Brass Nevelty Co.
157,760.00
American Sanitary Hfg. Co.
88,587.00
Auburn Central MSG. Co.
122,892.00
Brigge Mfg. Co.
190,190.00
Case, 3. 4. & Sem usg. Co.
19,950.00
Crane Co.
142,096.95
Davidson Enamel Products Co.
184,338.00
Eljer Co.
61,320.00
Ellwood Co.
30,650.00
Fords Forcelain Works
12,750.00
General Ceramics Co.
198,000.00
Kohler Co.
406,240.00
Manafield Sanitary Pettery Inc.
25,000.00
Maryland Sanitary HSg. Corp.
34,437.25
Richmond Radiater Co., Inc.
181,295.32
Schaible Foundry à Brass Works
125,575.65
United States Senitary Mfg. Co.
153,615.00
Universal Senitary Mfg. Go.
68,640.00
Youngstown Pressed Steel Div.
$82,249.00
The following companies have participated in our contracts
for steel, finished and semi-finished:
American Steel & wire Co.
Atlantic Steel Co.
Armeo International Corp.
Alan Wood steel Co.
American Rolling Mill Co., The
4. Milne & Co.
Andrews Steel Co.
Apollo Steel Co.
A. M. Byers Co.
Baldwin Locomotive Works
Brainard Steel Corp.
Baboook à Wileox Tube Co.
Blair Strip steal Co.
Bethlehem Steel Export Corp.
Brass Goods Mfg. Co.
Cahoes Rolling Mill Co.
Central Iron & Steel Co.
Clapton Mack Mfg. Co.
Crucible Steel Co. of America
Continental Steel Corp.
-11-
213
Carpenter Steel Corp.
Compressed steel Shafting Co.
Cleveland Graphite Bronse Co.
Carnegie-Illinois Steel Corp.
Copperweld Steel Co.
Cold Metal Products Co.
Colorado Fuel & Iron Corp.
Detroit Seanless Steel Tubes Co.
Davey, I. H. Steel Co.
Dresser Mfg. Co.
Disston, Henry & Sons
Empire Sheet & Timplate Co.
Elliott Ross Steel Co.
Follansbee Bros. Co.
Globe Steel Tube Co.
Granite City Steel Co.
Great Lakes Steel Corp.
Harry Harris & Co.
Inland Steel Co.
Jones & Laughlin Steel Corp.
J. R. Johnson & Co., Ltd.
Jessop Steel Co.
Keystone Steel & Wire Co.
Luken Steel Co.
Lineoln Electric Co., The
LaSalle steel Co.
Lookhart Iron & Steel Co.
Laslede Steel Co.
Moltrup Steel Prods. Co.
Michigan Seanless Tube Co.
Mercer Tube à Mfg. Co.
Mahoning Valley Steel Co., The
Mechanical Mold Machine Co.
MeLouth Steel Corp.
Newport Rolling Mill Co.
Northwestern Steel & Wire Co.
Wiles Rolling Mill Co.
North East Drawn Steel Co.
National Supply Co.
National Tube Co.
Otis Steel Co.
011 Well Supply Co.
Pittsburgh Steel Co.
Plymouth Tube Co.
Parkersburgh Iron & steel Co.
Pittsburgh Crushed Steel Co.
Phoenix Iron Co., The
Ryerson, Jos. T.
R.C.A. Mfg. Co.
Roobaling, John A., à Sons, Co.
Republic steel Corp.
Reeves Steel & Mfg. Co.
Regraded Unclassified
214
-12-
Reekwood Spindler Co.
Spang Chalfant Inc.
Sheffield Steel Corp.
Soully Steel Products Co.
Singer Mfg+ Co., The
Sharon Steel Corp.
Summerill Tubing Co.
Stanley G. Flagg & Co., Ino.
South Chester Tube Co.
Superior Steel Co.
The Timken Roller Bearing Co.
Thomas Steel Co.
Victaulie Co. of America
Worth Steel Co.
Wisconsin Steel Co.
Wheeling Steel Corp.
Wallingford Steel Co.
Wheatland Tube Co.
Weirton Steel Co.
Walworth International Co.
Wyokoff Drawn Steel Co.
Youngstown Sheet & Tube Co.
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
DEC
-
TO Secretary orgenthau
FROM Randolph Paul
On May G, 1042, a contract was entered into by you, as
Secretary of the Treasury, with the befense Plant Corporation for
making available approximately 40,000 tons of free silver to the
Defense Plant Corporation 01 non-consumptive use in war produc-
tion. Under the provisions of that contract, the Defense Plant
Corporation now proposes to supply 2,500 tons of silver for non-
consumptive uses as bus bars by the Aluminum Co spany of Canada
in Canada.
There is nothin in the contract of Day 6, 1942, or in.
the statutes on which such contract is based which indicates that
your authority or that of the Defense Plant Corporation is limited
to supplyin this silver for use within the United States. On the
contrary, the Inn unre of the contract and the language of the
statutes is sufficiently broad to permit such non-consumptive use
anywhere in the world 50 lon us the use contributes to the war
effort. All Line available statements of Treasury representatives
made to the Sonnte Special Silver Committee have been examined
and there is none which restricts the plan to use of the silver
within the United States.
11 is elear aleat the use of free silver in the production
of aluminum in Canada is just as important to the war-effort as its
use for the production of alminum in the United States. I be-
lieve, therefore, that the infense Plant Corporation should be
informed that the Treasury Department does not object to such use
pursuant to the terms and provisions of the contract of May G, 1942.
If you approve such action, will you please indicate your
approval by signin the notation at the foot hereof.
RSD
Approved:
Secretary the Treasury.
DWB
vow
Regraded Unclassified
dimy
U.S. TREASURY PICTURE
218/2/4-
1. Historical Sequence:
Hamilton must protect a peace.
2. Historical Sequence:
Gallitan must protect a war effort.
3. Historical Sequence:
McCullock must pay for a disaster.
4. The Golden Years:
Treasury as handy-man to the people of the U.S.
5. The End of the Golden Years of plenty:
(a) 1929
(b) The Bank Holiday
6. The Six Years of New Labors:
Pathfinding
7. Munich to Pearl Harbor:
Era of desperate measures
Brief Historical Episode
8. Victory in Africa:
Solomons
Lend Lease becomes clear in result.
(Emotional Climax)
9. The Issue Today:
True Climax of Picture
Regraded Unclassified
NOT TO BE RE-TRANSMITTED
217
COPY NO.
13
BRITISH OST SECRET
U.S. SECRET
OPTAL No. 419
Information received up to 7 A.M., 2nd December, 1942.
1. M.V.L.
Italian blockade runner CORTELLAZO, 5,300 tons, previously at-
tacked by our aircraft was sighted and sunk yesterday by the escorts of un outward
bound convoy 500 miles west of CAPE FINISTERRE. Early lst, during an engagement
with E-boats off DEVONSHIRE one of H.M. trawlers was torpedoed and sunk. Early
this sorning off CAPE BON a force of H.M. Cruisers and Destroyers engaged an enemy
cenvoy und sank 3 ships and 2 escorts. Further information is awaited. One of
S.A. Minelayers was torpedoed off ORAN yesterday afternoon and is in tow. A Greek
progrine is overdue and presumed lost. A merchant ship (10,800 tons) was torpedoed
yesterday off LOURENCO MARQUES, no further report received. A trensport (6,800 tons)
corrying 134 Union Defence Force and a number of Italian refugres, torpedood off
BURRN 23th November. 183 persons have been picked up by a Portuguese ship.
MILITARY
LIBYA. Patrol activity along the enemy positions by our forward
rmoured forces continues. Our main forces are moving south towards the M AGHEILA
Socition but are not yet in contact with the enemy.
TUNISIA. British parachute troops dropped at PONT DUF/HS on 23th
llovember are operating offensively together with strong reconnaissance elements in
vide area some 15 miles southwest of TUNIS. On the northern coastal road, our
advance has been temporarily held up by the enemy strong-point commanding the road
to NATEUR.
RUSSIA. The Russians have tightened the ring round the Germans
in the STALINGRAD Area. In the central sector, operations continue.
B. AIR OPERATIONS
WESTERN FRONT. 1st. Fighters carried out offensive sweeps
over Worthern France. Others attacked barges off the Dutch Coast. Enemy casualties
B, nil, 4. Ours, one missing. 5 Beaufighters are missing from patrols west of the
BAY OF BISCAY.
FRENCH NORTH AFRICA. 28th/29th. 8 Junkers 88 attacked BONE air-
field, destroying 5 aircraft on the ground. 5 of them were shot down. 29th. 15
Disleys successfully bombed BIZERTA airfiold 30th/lst.
MALTA. Wellingtons bombed BIZERTA ocks, hitting railways, work-
shops and barracks.
SICILY. Airfields on SICILY vere bombed by Wellingtons 30th/lst
nd by Spitfires 1st.
MEDITERRANEAN. 1st. 2 Beaufighters off the Tunisian Coast
ttacked a southbound ship, which WES set on fire and blew up.
Regraded Unclassified
218
December 3, 1942
11:40 a.m.
HMJr:
Hello.
Operator:
Chairman Eccles.
HMJr:
Marriner? Marriner?
Marriner
Ecoles:
Hello, Henry.
HMJr:
Good morning.
E:
How are you this morning?
HMJr:
I'm fine. I think you did a fine job for us
yesterday.
E:
What was the final result?
HMJr:
Well, as of last night, $2,073,000,000.
E:
Yeah, I got last night, but I just wondered if
we had anything later.
HMJr:
No, no - ah....
E:
I think it'll - I think you'll get around --
1 told Dan I thought two billion four to -
from two billion three to five anyway, which is
really all we want.
HMJr:
Now - that's right. Now, Marriner, I'd like to
have a little talk with you about the next one
and the quotas and all that sort of thing.
E:
You mean on the sixteenth?
HMJr:
Yes.
E:
You mean - you mean the - the certificates.
HMJr:
Yeah, but I wanted - I mean, yes. Would ten-
thirty tomorrow be at all convenient?
E:
Yeah, I think 80.
HMJr:
Is that a bad time?
Regraded Unclassified
219
- 2 -
E:
Well, it's - we have our regular meeting every
Friday.
HMJr:
What time do you have it?
E:
At ten-thirty.
HMJr:
Oh-oh. Well, I've got....
E:
Board meeting. Would the afternoon be - be all right
with you or would that - or this afternoon some time?
HMJr:
Well, this - this - this afternoon at three-thirty
would be all right.
E:
I - - well, I have an appointment
HMJr: Well....
E:
....at two-thirty. Three-thirty would be all right.
HMJr:
Want to make it a little later?
E:
Three-thirty 18 okay. Three-thirty or four.
HMJr:
Three-forty-five.
E:
Well, let's make it three-thirty.
HMJr:
All right.
E:
Three-thirty this afternoon.
HMJr:
Do you want to bring anybody with your
E:
Well, not - I don't - not necessarily because....
HMJr:
Oh.
E:
....it's a question, as I understand it - it....
HMJr:
Where do we go from here on the next one?
E:
Yeah, that's right. I'd - I'd....
HMJr:
I'd like to read a telegram which we propose to send
of the Victory Fund Committee: "We realize that in
if you think it's all right. This 1s to the Chairmen
(cont.)
Regraded Unclassified
220
- 3 -
HMJr:
order to stimulate sales and maintain the
(cont.)
present enthusiasm, it is important to make
public the results of the Victory Fund Drive
in each district. In view of the lag in the
Treasury figures, we now feel that it would be
better not to release results by districts
from Washington on December 7 as previously
planned. You are, therefore, authorized to
issue statements in your district from time to
time of results both by districts and regions.
You may include in your publicity the names
of individual subscribers where you have the
authority from such subscribers.'
E:
Yeah. That's to go to the chairmen?
HMJr:
Chairmen.
E:
And you're going to sign that?
HMJr:
Yes, sir.
E:
Do you mind reading it just once more 80 I
can
HMJr:
Not a - not B. bit - not.. - you stop me if you
want to - and then "We realize in order to
stimulate sales and maintain the present enthusi-
asm, it is important to make public the results
of the Victory Fund Drive in each district. In
view of the lag in Treasury figures, we now
feel it would be better not to release results
by districts from Washington on December 7 as
previously planned. You are, therefore,
authorized to issue statements in your district
from time to time of results both by districts
and regions. You may include in your publicity
the names of individual subscribers where you
have the authority from such subscribers."
E:
Yeah, I - I think that's a good decision.
I think
HMJr:
All right.
E:
that - I think it's best to - to do it in
the districts in any case.
Regraded Unclassified
221
- 4 -
HMJr:
Yes. Well, you see what they're doing -
they're doing it, and if we gave it out we'd
be in constant conflict with them.
E:
Yeah, because you get your figures....
HMJr:
Late.
E:
you figures wouldn't always jibe.
HMJr:
But - but did....
in
Well, I think that the fact that they can do
that gives them a - gives them a - a springboard
too. After all, it's - it's a matter of the
local interest.
HMJr:
That's right.
E:
....and it seemed to me that at some point, how-
ever, you got to release the combination of
figures from here.
HMJr:
We will.
E:
The - but - but not the individual regional
figures but the total figures for the country.
That - that's your idea, ien't it?
HMJr:
Oh, yes.
E:
Yeah.
HMJr:
But - but if - supposing we let out something
today not - the figures might vary & half a
billion dollars.
E:
Yeah, yeah, sure, because there's 8 lag.
HMJr:
Sure, New York claims two-and-a-half billion.
Well, they may have pledges but it's not in
the till.
E:
Uh huh. Well, you see now this - this - I didn't
worry about this thing getting over yesterday,
but, of course, there wasn't any use of taking
any....
HMJr:
Chances.
Regraded Unclassified
222
- 5 -
E:
chance, and BO when I got the earlier
figures in, those districts that seemed to be
behind other districts, there was five of them
HMJr:
Yeah.
E:
I - I called them up, and.
HMJr:
Yeah.
E:
and I don't know whether it helped, but I know
it did San Francisco. I put a bomb under them.
HMJr:
Well, that's what I wanted to talk to you about,
and I think we ought to have some kind of a quota
for these districts.
E:
Well, I think that we've almost - I told Dan yester-
day that I thought we had to because these fellows
are working in the dark
HMJ
Yeah.
E:
and the trouble 18, they let - they'll sit back,
you know, and - and let the other fellow do it....
HMJr:
That
E:
....unless you put 'em on the spot.
HMJr:
That's right.
E:
And I put San Francisco on the spot on that thing
yesterday, and they just simply got out and got
their quota. Of course, the quota I give them -
I give - give them all a lot of arbitrary quotas in
a way. But they didn't question it....
HMJr:
Yeah.
E:
and
HMJr:
Well, I'd like to talk to you, then also about the
A.B.A., you see, what they can do if anything.
E:
Yeah. Well, I'll be over at three-thirty.
HMJr:
Thank you.
E:
Okay. Goodbye.
Regraded Unclassified
223
December 3, 1942
2:25 p.m.
TAXES
Present: Mr. Paul
Mr. Sullivan
Mrs. Klotz
(The Secretary held a telephone conversation
with Mr. Doughton, as follows:)
Regraded Unclassified
224
December 3, 1942
2:25 p.m.
HMJr:
Hello.
Robert
Doughton:
Henry?
HMJr:
Yes, Bob.
D:
I have just dictated a brief statement here.
I'll have my stenographer read it back to you....
HMJr:
All right.
D:
....and see what you think of it, and any sug-
ges.. - suggestions you have to make or changes
or write the whole thing over.
HMJr:
Yes.
D:
I'll have it read to you just - from her notes
right now. You ready?
HMJr:
Just a second, please.
D:
Yeah.
HMJr:
Just a second.
D:
(Talks aside: If you read slow, they can take
if down if they want to.)
HMJr:
Okay.
D:
All right.
HMJr:
Go ahead, Bob.
Secretary
to Doughton:
Are you going to try to take this down, Mr.
Secretary?
HMJr:
Well, no, 1'll - I'll listen and if I don't
understand it, I'll ask you to repeat it.
Secretary:
All right, sir.
HMJr:
Go ahead.
Regraded Unclassified
225
- 2 -
Secretary:
"Representative Doughton, Chairman of the
Committee on Ways and Means, stated this
afternoon that upon the request of Secretary
Morgenthau he had lunch - they - they had
lunch together at the Capitol today.
Mr. Doughton further stated that the matter
of future legislation relating to tax matters
was discussed in a general way. He also stated
that Secretary Morgenthau had said that no
definite tax plan or program had been worked
out or agreed upon by the Treasury, but that
he was anxious to cooperate with the responsi-
ble committee or committees of the Congress in
the most helpful way possible in working out
a satisfactory tax program. The Secretary made
it very plain, so Mr. Doughton said, that he
was most anxious to work in harmony with the
committee in whatever manner it was deemed
would produce the best results with respect to
tax legislation in the new Congress."
HMJr:
Well, let me just think a minute.
Secretary:
All right, sir.
HMJr:
Do you mind doing it once more? It's kind of
hard to get it on the phone.
Secretary:
No, sir, I'll be very glad to. Do I read too
fast?
HMJr:
Well, I'm not taking it down. I just - I just
had to get it in my head.
Secretary:
All right, sir. I'll begin again.
HMJr:
Yes.
Secretary:
"Representative Doughton, Chairman of the Committee
on Ways and Means, stated this afternoon that
upon the request of Secretary Morgenthau they
had lunch together...."
HMJr:
Well, do you mind instead of saying "request"
you say "at the suggestion"?
Secretary:
Yes, sir. Be very glad to change that.
Regraded Unclassified
226
- 3 -
HMJr:
Yes.
Secretary:
"
at the suggestion
HMJr:
Yes.
Secretary:
#
of Secretary Morgenthau they had lunch
together in the Capitol today. Mr. Doughton
further stated that the matter of future
legislation relating to tax matters was dis-
cussed in a general way. He also stated that
Secretary Morgenthau had said that no definite
tax plan or program had been worked out or
agreed upon by the Treasury, but that he was
anxious to cooperate with the responsible
committee or committees of the Congress in
the most helpful way possible in working out
a satisfactory tax program. The Secretary
made it very plain, 80 Mr. Doughton said, that
he was most anxious to work in harmony with
the committee in whatever manner it was deemed
would produce the best results with respect to
tax legislation in the new Congress."
HMJr:
Instead of saying - where you say "work"in
harmony" I'd suggest "to continue to work in
harmony.
Secretary:
To continue to work in harmony. All right, sir.
HMJr:
Just ask Mr. Doughton if those couple little
suggestions of mine - whether they meet with
his approval.
Secretary:
All right, sir. He wants to speak to you any-
way in just a moment. Will you hold on?
(Talks aside: He suggests that we say instead
of that you had lunch together "at the request
of Secretary Morgenthau", say that you had
lunch together "at the suggestion of Secretary
Morgenthau." That's all right with you? Then
he suggests instead of eaying that "the Secretary
made it very plain, 80 Mr. Doughton said, that
he was most anxious to work in harmony," say
"he was most anxious to continue to work in
harmony.'
He thinks that's fine, but he wants to speak to
you anyway.
Regraded Unclassified
227
- 4 -
HMJr:
Okay.
D:
As amended by your very pertinent suggestion,
18 that satisfactory now?
HMJr:
Yeah, I think that's fine.
D:
All right. I'll just have copies made then
and give to the press this afternoon.
HMJr:
Thank you.
D:
Thank you.
HMJr:
All right.
D:
Goodbye.
Regraded Unclassified
228
- 2 -
MR. SULLIVAN: That is good.
H.M.JR: I mean, it looks as though I said, "From
now on, I am going to be a good boy, and continue to
work in harmony.
MR. SULLIVAN: Generally, I think it is a good
statement, anyway.
H.M.JR: I didn't know he was calling when I sent
for you. What I was calling you for was to tell you
about my talk with Doughton. The old boy seemed very
cool to me the last couple of times.
We had a very nice talk and what I said was that
I wanted to sit down - the Treasury wanted to sit down
with him this time and come to as near an agreement
beforehand as we could, and that the country knew what
I wanted - tax exempts, depletion, joint returns, and
all the rest of that, and if we could not agree on it,
I was not going to go up and bat my head against the
wall again.
I told him that we had a political situation to
deal with, and that '45 was not so far around the corner;
that I wanted to try to go just as far as we could to
work this thing out, and that I was going to do as much
as I could to get an agreement with the present committee
this time.
He said, "Now you are talking my language." He
mentioned only once, towards the very end, the thing
that I had been harping on. He said, "If we can't do
this, Henry, it would be better that you just say your
piece and then withdraw and let the Congress go ahead
and write the bill."
He said, "But if we approach it in this manner, I
think it would be fine. Of course, I don't want to
make any suggestions, but if I could suggest, I think
Regraded Unclassified
229
- 3 -
the Speaker should sit in on this conference and Sena-
tor Barkley should sit in on this conference."
He said, "Let's do it first with the Democrats and
agree amongst ourselves, and then pull in the Republicans
afterwards.'
"But," he said, "we have got to be cereful this
time. The tide is running against us."
Then, as I said, he only once, very briefly, said
the thing he has been saying over and over again publicly,
that the Treasury has been trying to write the tax bill.
He said, "Of course, you don't want to do it this time."
He got on to Stam, and said that Stam is losing
the people. He says that Stam is a great white-haired
boy. He said, "He is a very poor executive; he isn't
like your people. Paul comes up here with 8 half a
dozen able assistants to help him out. Stam does not
have them."
I said, "If we are going to get together, maybe we
can all pool our staffs. You don't have to worry so
much about your staff." He liked that.
MR. PAUL: He has been wanting me to come up and
have a love feast with Stam, but I have stayed away,
so far.
H.M.JR: He had been reading "PM" on social security,
and he said, "I hope the President isn't going to make
social security come first. If you do, you are not going
to have a bill until July."
I said, "Well, Bob, I don't know." He kept going
back to that three or four times because that is always
his story.
I said, "I will tell you this, Bob: I can promise
Regraded Unclassified
230
- 4 -
you that before the President does anything on social
security, he will talk to you first.
Then I had this message from the President to
him, which I gave him the first thing. I said, "The
President told me to tell you this morning, Bob, that
what you people up here on the Hill are doing is electing
a Republican President."
He took that. He said, "The President is right;
the President is right."
So he told us that Disney is very, very bitter, for
some reason. He doesn't understand why Disney is 80
bitter.
MR. PAUL: Bitter against the Treasury?
H.M.JR: The administration. lie is very, very bitter.
Then he went on to say, and this is the thing - he
said, "There is something about some kind of a thing - a
questionnaire - the Budget, or something. Stam was try-
ing to tell me about it this morning and I do not under-
stand it."
So I said, "Well, that is something that Sullivan is
worrying about. You don't want the Bureau of the Budget
fixing it up and adding 8 lot of questions on OPA, do you?"
"My Gawd, no," he said, "I don't want that."
So I said, "John will come up to see you."
He said, "Have him come up. I have been too busy;
I don't know what it is."
MR. SULLIVAN: I postponed seeing him, Mr. Secretary,
because I had sensed this coolness between you and him
that you just referred to.
Regraded Unclassified
231
- 5 -
H.M.JR: It is all over now; we are buddies.
(Laughter) And see Vandenberg, too, because Vandenberg
was very friendly to me day before yesterday. lie came
up and said, "Now, Henry, don't mind what I say; it is
nothing personal. He has been all right.
Anyway, I am moving a little fast because we have
these films - they are borrowed.
Now the other thing that will interest you, which
is quite important - and it shows that if the days were
only long enough I could do all of this - is that he
said, "Henry, I want to talk to you about this fellow
Ruml. Walter George had me come over there the other
day at two o'clock. Ruml sat around for an hour and a
half." He said, "He is a slick talker. I listened to
that fellow for about an hour and a half and I never
said a word. When he got all through do you know what I
said to myself?" I said, "No." He said, "That is
nothing but another tax avoidance scheme; I am against
it." Then he said, "That is for the fellows that have
been defeated and are worrying about how they are going
to pay the taxes on the ten thousand dollars they earned
in '42." I said, "We have got a way of taking care of
eighty-five percent of the people.'
MR. PAUL: There was B. letter to the Post on that.
I would like to send it in.
H.M.JR: He said, "I just sensed that this is another
tax avoidance. If I said, "If we are going to help anybody
out, let's help the boys in the Army." "That is right;
this is helping the fellows who need it the least, he
said, "I am not for it, and I am not going to change."
MR. SULLIVAN: I might bring that into the discussion
when I see him this afternoon.
MR. PAUL: Emphasize & little bit the other part,
that we did offer a substitute for eighty-five percent
because we have got to take that plan that way.
Regraded Unclassified
232
- 6 -
H.M.JR: I told him the eighty-five - it was one
of the best meetings I ever had. He did not resent
the message from the President, but he does not want
social security.
MR. SULLIVAN: None of them do on either side.
H.M.JR: He doesn't want it brought up. I know
when I leave Bob Doughton in a good humor and when I
don't.
The other thing he said was, "You know, I think
Walter George is one of the finest men and he is close to
me, but he gets his name in the papers too much."
(Laughter)
MR. SULLIVAN: They keep score. When George gets
in the papers in the morning, Doughton looks for something
to get his in in the evening. (Laughter)
H.M.JR: "You know, a couple of men came to me in
the committee," he said, "and asked, 'Mr. Chairman, where
did the tax bill originate anyway, in the Senate or the
House?' By the looks of it I would think it originated
with Walter George; what do you think?" I said, "In
November or December you shouldn't be saying too much
about it, I don't think." He says, "Walter George gets
his name in the papers too much." That was marvelous,
the two of them going against each other. And last, but
not least, I said this: "By the way, have any of these
self-appointed ambassadors from the White House been
up here to tell you what to do?" He said, "No, I have
had a couple of letters from the President on amendments
to child welfare or something, but outside of that I
have nothing," and he says, I don't want it. I want
them to keep away from me.
In other words, I saw the President this morning
to reaffirm what he wants us to do - to reaffirm the
whole thing. This afternoon I saw Bob Doughton, and he
has not heard - - I didn't mention Jimmy Byrnes.
Regraded Unclassified
233
- 7 -
MR. SULLIVAN: That is what you mean when you say
reaffirm the whole thing?
H.M.JR: The President said we should go on just
as we always have. I didn't say, "Has Jimmy Byrnes been
up here?" I said, "Have you heard of any of these White
House ambassadors?" He said, "No, I have had two
letters from the President."
I feel we have gained 8. little ground.
MR. SULLIVAN: That sounds very good.
Yesterday I saw Barkley, George, and Byrd, and
today Pepper and Murray on that, and they are going to
insist on what we want.
Regraded Unclassified
234
Harold Graves
December 3. 1942
Secretary Morgenthau
Please get on this right away, and let me know
tomorrow what you can do to help this community 80
that we can let the Congressman know without fail.
See Promes memo
of 12/4/42
cc-Harold Graves
235
December 3, 1942
4:34 p.m.
Operator:
Go ahead.
HMJr:
Hello.
Cong. E. C.
Gathings:
Hello. Hello, Mr. Secretary?
HMJr:
Speaking.
G:
This 1s E. C. Gathings, Representative,
First District, Arkansas.
HMJr:
Yes, Mr. Gathings.
G:
I - I received a telephone call a few
moments ago from a city in my district,
Jonesboro.
HMJr:
Yes.
G:
Now here is the situation.
HMJr:
Please.
G:
The - the different consumers of power in
that city are going to get the month of
November to December 1 bill refunded to
them in War Stamps and Bonds.
HMJr:
Yes.
G:
Now the total amount will be $30,000 for
this place of 16,000 population. Now they
want to have a celebration there on
December the 15th and want - they want to
get the cooperation of the Treasury Depart-
ment.
HMJr:
That ought to be....
G:
of course, this is one of the first - first
times that a matter of this kind has been
effectuated, I und.. - as I understand it....
HMJr:
Yes.
Regraded Unclassified
236
- 2 -
G:
....and they - they understood that your de-
partment had asked that something like that
be worked out, and they have already arranged
to - to make these payments to these consumers
in War Stamps and Bonds and urge them to make
up the difference - to purchase a larger
denomination.
HMJr:
Well, it sounds very interesting.
G:
Yes, now on December the 15th these bills will
fall due
HMJr:
Yeah.
G:
....and at that time they've planned, if possible,
to have a little celebration there in the city of
Jonesboro, and, by the way, Senator Caraway comes
from that town.
HMJr:
Oh, does she?
G:
Yes, sir. Now they are quite anxious to have
someone from your department - a - some notable
appear there to be on the program, and....
HMJr:
Well, I can....
G:
help them put it over.
HMJr:
promise you that we'll have somebody there
and assist and - and show our appreciation.
G:
Well
HMJr:
....and I'll - I'll let you know or have some-
body let you know notlater than tomorrow just
what we'll do.
G:
Well, I do appreciate that, Mr. Secretary. I
surely do, and I appreciate BO much the coopera-
tion
HMJr:
Well, it's - it's a fine thing they're doing
and we'd like to help.
G:
Well, that's fine. Thank you 80 much.
Regraded Unclassified
237
- 3 -
HMJr:
Thank you.
G:
Goodbye.
HMJr:
Goodbye.
Regraded Unclassified
238
TREASURY department
WASHINGTON
December 3, 1942.
MEMORANDUM ON MEETING OF THE JOINT
COMMITTEE ON REDUCTION OF NON-DEFENSE EXPENDITURES
A meeting was called at 10:00 A. M., Thursday, December 3,
in the Senate Finance Committee Room in the Senate Office Building.
There were present:
Senators:
Byrd
Nye
Vandenberg
McKellar
George
Bureau of the Budget:
Mr. Lawton.
The Committee recorder made a stenographic transcript
of the meeting.
Senator Byrd opened the meeting at 10:15 and said the
Committee would hear testimony in connection with the pending
resolution authorizing the Joint Committee to look into the
subject of questionnaires required by Government agencies.
Mr. Krik A. Johnson, President of the United States
Chamber of Commerce, the first witness, made B. short statement in
which he said his organization endorsed the action of the Joint
Committee in undertaking an investigation into the subject of
questionnaires. During his remarks he pointed out that the WPB
some months ago organized a Business Advisory Board made up of men
from various industries and as a result of the Board's activities
WPB eliminated 70 questionnaires and simplified 160 others used in
its operations. He also stated that a move in the right direction
was represented by the recent directive by the President whereby
all governmental agencies issuing questionnaires after January 1,
1943 must submit them to the Bureeu of the Budget for spuroval.
Senator Nye inquired whether any study had been given
ORDEFENSE to what is done with questionnaires after they are filed. Mr.
Johnson said no study had been given to this matter, but that in
BUY
most cases after the questionnaires are filed nothing further is
UNITED
TATES
heard from them.
WINCE
RUNDS
Regraded Unclassified
239
- 2 -
In reply to an inquiry by Senator Byrd, Mr. Johnson said
he did not know what the cost to business generally was in handling
Government questionnaires but he estimated in his organization the
cost ranged from 2 per cent to 2-1/2 per cent of overhead and also
required the attention of the best people in his organization, in
addition to requiring legal advice in many instances. Senator Byrd
remarked that in the final analysis the overhead cost is paid by
the Government.
Senator Nye inquired whether there was any duplication in
questionnaires from various Government agencies. Mr. Johnson said
he thought there was a great deal of duplication and pointed out all
an illustration the fact that the financial report which is required
to be filed with the Bureau of Internal Revenue once each year 18
also required to be filed monthly with the OPA.
Mr. John B. Roscoe, representing the Washington Branch of
the National Association of Manufacturers, testified and submitted
& great deal of information concerning the number of questionnaires
and reports from various governmental agencies filed by industrial
organizations. He cited the number of man hours of work required
to prepare these reports and also the costs involved. He said
business firms generally thought that at least 75 per cent of
the reports which they are required to file are unnecessary or
of doubtful value and that such firms had the following recom-
mendations to make concerning governmental reports:
1. Identity of subject matter should be more specific
2. Make the report form fit the facts
3. Eliminate superfluous requests
4. Avoid peaking reports
5. End duplication in reports.
Mr. Fred 4. Baughan, General Manager, Retail Food Dealers
Association of California, made B. statement and illustrated a
number of forms which retail food dealors in California are
required to submit in connection with the establishment of ceiling of
prices under OPA. He said in reply to his inquiry an official
OPA had stated that the purpose of requiring reports from retail
he did not think this could be accomplished by the reports required
food dealers is to prevent an increase in the cost of living and
to be filed with that organization. He also said that from observa- in
tion there tone of reports filed with local rationing boarde Mr.
California which were had been stored in warehouses and never used. in
Baughan referred to the difficulties facing retail food dealers
connection with ceilings on prices of foodstuffs, which in many
Regraded Unclassified
240
- 3 -
cases were lower than the ceilings under which wholesalers operate.
Ee pointed out that the increase in labor costs and the inex-
perienced personnel that can now be obtained is having a disastrous
effect on the small retail dealers.
Mr. H. 1. Hall, Assistant Director of Research, Washington
Office, American Farm Bureau Association, testified and voiced
objection to the forms required by ODT to be filled out by farmers
in order to obtain a certificate of war necessity under which they
would be authorized to obtain & gasoline rationing for their farm
trucks end other equipment.
Mr. Fred Brenckmann, Washington representative of
National Grange, also testified at some length, with particular
reference to the forms required to be filled out by farmers to
obtain gasoline rations for their trucks.
In addition to voicing objections to the nature of the
form required to be filled out by farmers, Mr. Brenckmann also
pointed out that the farmers were being allowed insufficient
gasoline to enable them to raise and transport the tremendous
crops which they are required to handle under the new var
program.
The meeting adjourned at 11:45 As M.
wis
Regraded Unclassified
Bill
241
CONGRESS OF THE UNITED STATES
JOINT COMMITTEE ON REDUCTION OF
NONESSENTIAL FEDERAL EXPENDITURES
There will be a meeting of the Joint Committee in
Room 314 Senate Office Bldg., on Thursday, Dec. 3.
at 10 a.m.
To hear testimony on government questionnaires.
HARRY FLOOD BYRD,
Chairman.
are 68488
12:17
242
TANDARD FORM No. 14A
APPROVED BY THE PRESIDENT
TREASURY DEPARTMENT
MARCH 10, 1926
WASHINGTON
TELEGRAM
CHARGE TREASURY DEPARTMENT, APPROPRIATION FOR
OFFICIAL BUSINESS-GOVERNMENT RATES
Expenses of Loans, A and E
(The appropriation from which payable must be stated on above line)
I el I I
3
1-1417
Honorable John L. Garner,
December x, 1942
Uvalde, Texas.
IT WOULD EE À GREAT HELP IF YOU WOULD ISSUE EITHER THROUGH THE TREASURY OR
DALLAS VICTORY FUND COMMITTEE A PUBLIC STATEMENT SUPPORTING THE VICTORY
LOAN DRIVE FOR NINE BILLION DOLLARS OF BORROWED FUNDS. WE ARE TRYING TO
RAISE THE GREATEST POSSIBLE PROPORTION OF THIS MONEY FRM INVESTORS OTHER
THAN COMMERCIAL BANKS IN ORDER TO MINIMIZE THE INFLATIONARY ASPECTS OF
BORROWING FROM BANKS. SENATOR GLASS AND GOVERNOR BRICKER HAVE ISSUED SUCH
STATEMENTS, AND OTHERS ARE EXPECTED. I WOULD APPRECIATE DEEPLY YOUR
COOPERATION IN THIS ESSENTIAL JOB. BEST REGARDS.
Henry Korgenthau, Jr.
Regraded Unclassified
TREASURY DEPARTMENT
245
TO: Mr. Me Hugh
Maintain the present
other than "create"
change by Sein
GEORGE BUFFINGTON
ANDARD FORM NO. 14
MOVED BY THE PRESIDENT
FROM
244
MARCH 10. 1926
BUREAU
TELEGRAM
CHG. APPROPRIATION Expenses of Loans A&E
OFFICIAL BUSINESS-GOVERNMENT RATES
& - name -
10-1788
December 3, 1942.
Copies to Executive Managers,
Victory Fund Committees,
Federal Reserve Banks.
Chairmen, Victory Fund Committees,
To Presidente, Federal Reserve Banks:
Boston, Mass.
Chicago, Ill.
New York, N. Y.
St. Louis, Mo.
Philadelphia, Pa.
Minneapolis, Minn.
Cleveland, Ohio
Kansas City, Mo.
Richmond, Va.
Dallas, Texas
Atlanta, Ga.
San Francisco, Calif.
maintain the present
We realize in order to stimulate sales and erate/enthusiasm it is
important to make public the results of the Victory Fund drive in each
district. In view of the lag in Treasury figures, we now feel it would
be better not to release results by districts from Washington on Decem-
ber 7, as previously planned. You are therefore authorized to issue
statements in your district from time to time of results both by districts
and regions. You may include in your publicity the names of individual
subscribers where you have authority from such subscribers.
MORGENTHAU
(Initialed by: G. B., D. W. B., G. W.)
Regraded Unclassified
245
December 3, 1943.
Dear Mr. Griffith:
I vas glad to have your letter of December 1.
enclosing copies of advertising material which
VAS distributed to the State Banks of Kansas.
I was also happy to hear that the bankers of the
State had taken hold in much a commendable vay.
Mrs. Horgenthau and I very much enjoyed our
recent visit to Kansas, and I particularly enjoyed
the opportunity to become acquainted with you.
Thank you for the P.S. to your letter.
with cordial regards,
Sincerely,
(Signed) H. Morgenthau, Jr.
Mr. Evan Griffith,
State Administrator, War Savings Staff,
Topeka, Kensas.
File in Diary
GEF/dbs
Regraded Unclassified
246
TREASURY DEPARTMENT
WAR
NECENSE SAVINGS STAFF
Topeka, Kansas
PFICE OF STATE ADMINISTRATOR
December 1, 1942
The Honorable Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
Dear Mr. Secretary:
The inclosed "Victory Fund" advertising matter will recall
our visit during the Kansas City plane trip. This publicity
material reached the State Banks of Kansas on Monday morning,
November 30, 1942.
I am glad to report that & very commendable spirit is existing
among the Bankers of Kansas upon the ave of the Nine Billion
Dollar Drive. The Kansas Bankers realize full well the true
importance of the success of this undertaking. They speak
very highly of the help and cooperation they are receiving
from the Treasury Department in Washington and from the
Federal Reserve Bank. Your Kansas City meetings were of
inestimable value.
Respectfully yours,
Evan Shiffith
EVAN GRIFFITH
State Administrator
P.S. May I say, Mr. Secretary, how much everyone in Kansas
enjoyed the visit of Mrs. Morgenthau and yourself. Since
your visit, you would be surprised in how many places we
hear comment about your son coming up in the Army the "hard
way".
I don't need to toll you that Harry Warehan's chest has been
sticking out an additional twelve inches since your visit.
POBYICTORY
2.G.
BUY
UNITED
STATES
person
BONDS
AND
STAMPS
Regraded Unclassified
247
THE SECRETARY OF THE TREASURY
WASHINGTON
November 24, 1942
To The Salesmen of the Victory Fund Committees:
I should like to send you a message of cheer and
encouragement as you move into the December Victory Fund
drive. Às you all know by now, we are going to ask the
American public to invest $9,000,000,000 in victory and
in freedom. This money will be the medium through which
the men on the battlefields receive their supplies. I feel
that you will be sustained in your campaigning by the
knowledge that you are contributing a high service to the
war effort.
Beginning November 30, we shall offer three new issues
for sale with the principal aim of enlisting accumulated
savings end idle funds. The Victory 2 1/2's must be pushed
with the utmost diligence outside the commercial banks, and
the 1 3/4 percent five and one-half year bonds and 7/8 percent
one year certificates must be sold wherever they are suitable.
The Victory Loan is a full basket of issues for all purposes,
including the A and C tax savings notes, and F & G United
States savings bonds.
Your prospects will include all private investors,
corporations, associations, societies, institutions, trusts,
estates and others who have funds available for investment
in the best securities the world affords -- United States
Government obligations. Your first assignment will be to
familiarize yourself thoroughly with the essential details
of each type of obligation. Effective work requires not only
that we sell the securities, but also that we place them
properly 80 that the real needs of the investors are satisfied.
This task well done, will bring satisfaction to us all
and assurance to those in battle.
Sincerely,
LIEVENSE
BUY
CAMED
STATES
WINGS
BUNDS
Family
Regraded Unclassified
UNITED STATES TREASURY
248
VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
November 28, 1942
Chairman
H. G. LEADY, President
Federal Reserve Bank of Kansas City
TO ALL VICTORY FUND COMMITTEEMEN
Kansas City, Missouri
TENTH FEDERAL RESERVE DISTRICT:
Executive Manager
SIGMINO Stras
directed Executive Manager
Beasick SIMONS
The enclosed letter from the Secretary of the Treasury,
1614 Federal Reserve Bank Building
Henry Morgenthau, Jr., speaks for itself.
Kansas City, Missouri
Carl W. Allendoerfer, President
We also quote from a telegram just received from George
Fint National Bank
Buffington, Assistant Secretary of the Treasury:
Kansas City, Missouri
Arthur H. Boworth, Prendent
Bowerth, Chanute, Loughridge
à Or, Derver, Colorado
"In connection with subscriptions for the new 7/8%
A. E. Brailshaw, President
National Bank of Tulsa
certificates and 1 3/4% bonds please call to the
Tulsa Oklahoma
attention of your organization that official cir-
L. Cursid, President
First National Bank
culars state 'Subscribers must agree not to sell
Webta, Kansas
Dale Clark, Provident
or otherwise dispose of their subscriptions, or
Deraha National Bank
Omba, Nebriska
of the securities which may be allotted thereon'
Walter L Cole
Bescreft, Cole & Company
prior to December 3 for 1 3/4% Treasury Bonds,
Tapeka, Karuas
and prior to December 19 for Certificates of In-
Dulin Exama, President
First National Bank
debtedness, and any subscription blanks you use
Denver. Colorado
C. Edgar Honnold
should contain that stipulation. It is important
Investment Hanker
Oklahoma City, Oklahoma
that all subscribers understand that they agree to
James M. Kemper, President
be bound by this provision in entering subscrip-
Clumer Trust Company
Kansas City, Missinari
tions."
Streat R., Kirkpatrick, President
Riskputrick Pettis Company
Omalia, Nebraska
F. W. Marble
We feel quite sure that the overwhelming majority of pur-
Pice President
Stock Gruwers National Bank
chasers are actuated solely by the desire to make the best in-
Cheyenne, Wyoming
vestment in the world, plus the fact that they are helping in
P. Peters, President
Prims Writer & Christensen,
the financing of the war and are not buying bonds for immediate
Inc., Denver, Colorado
Sigmund Stern, President
resale, and that the instructions of the Treasury Department in
Sters Brothers & Cu.
Kansas City, Missouri
regard thereto will be carried out.
Paul A.F. Walter. President
First National Bank of Santa Fe
Sunta Fe. New Mexico
You are requested to use the regular triplicate purchase
agreement blanks for all issues.
The F and G Bonds are now called United States Savings
Bonds instead of United States War Savings Bonds, and the
Victory Fund Committee is the sole distributing agency for them.
They should be sold only where the United States Treasury 2 1/2%
1963-68's do not fit into the purchasers' investment require-
ments.
Yours very truly,
4
term
Executive Manager
Regraded Unclassified
UNITED STATES TREASURY
249
VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
H. G. LEEDY, Chairman
SIGMUND STERN, Executive Manager
......
UNITED STATES SAVINGS BONDS - SERIES F and G
(for larger investors)
MOST of us can't join our sons, brothers, or friends in actual battle, but
every one of us can fight with dollars: Every dollar you do not urgently need
for food, clothing, shelter, and other absolute necessities should be invested
in United States Savings Bonds.
There are two forms of United States Savings Bonds - Series F, issued at a
discount, is commonly known as an "appreciation" bond; Series G, issued at par
is known as a "current income" bond. You may now own up to $100,000 (cost
price) of Series F or Series G, or F and G combined, issued in your name in each
calendar year, including both those in your name alone and those in your name as
co-owner. The principal features of these Bonds are outlined below:
SERIES F
SERIES G
DATE AND MATURITY:
Dated the first day of the
Dated the first day of the
month in which payment is
month in which payment is
received by issuing agent;
received by issuing agent;
due 12 years from issue date,
due 12 years from issue date.
INTEREST RATE:
Interest return is equiv-
Interest return 2.50% if held
alent to approximately 2.53%
to maturity. If redeemed prior
compounded semi-annually if
to maturity interest return is
held to maturity; lesser
smaller.
yield if redeemed at earlier
dates.
ISSUE PRICE:
Issue or cost price, 74% of
100%
maturity value. Example. a
$1,000 bond costs $740; B.
$100 bond $74.
DENOMINATIONS:
Denominations (maturity
Denominations (maturity value)
value) $25, $100, $500,
$100, $500, $1,000, $5,000 and
$1,000, $5,000 and $10,000.
$10,000.
FORM:
Registered only.
Registered only.
On first of any month, six
On first of any month, six
REDEMPTION:
months after issue date,
months after issue date, upon
upon one month's written
one month's written notice, at
notice, at redemption
redemption values stated on
values stated on each bond.
each bond.
COLLATERAL:
Not eligible as collateral
Not eligible as collateral
for loans.
for loans.
Regraded Unclassified
SERIES F
SERIES G
TAX STATUS:
Income is taxable under Federal tax laws the same as that
on any other United States Government bond issued on or
after March 1, 1941.
Taxpayer has election of
paying his tax on the
annual increase in Series
F bonds in the year it
occurs, or of having the
full appreciation taxable
to him in the year the
bond matures.
SPECIAL FEATURES:
You may now own up to $100,000 (cost price) of Series F
or Series G, or F and G combined, issued in your name in
each calendar year, including both those in your name
alone and those in your name as co-owner.
No interest, as such, is
Cash or redemption value
payable on Series F bonds.
prior to maturity is some-
Interest accrues by virtue
what less than par, but
of increases in redemption
the cash value at any time,
value after the first year
plus interest payments
and at the end of each
received, always totals
half-year period thereafter
more than purchase price.
until redemption or maturity.
WHO MAY BUY:
Bonds may be bought in the name of one person; in the
names of two persons (but not more than two) as co-owners;
in the name of one person with one other person designated
as beneficiary; in the name of a fiduciary; in the name
of a custodian of public funds, or in the name of an un-
incorporated or incorporated body, other than commercial
banks.
WHERE TO BUY:
Order through your Victory Fund Committeemen, bank,
securities dealer, broker or savings and loan associa-
tion. Or buy direct from any Federal Reserve Bank or
branch, or by mail from the Treasurer of the United
States, Washington, D. C.
Additional copies may be had from: VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
1614 FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
Regraded Unclassified
250
UNITED STATES TREASURY
VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
H. G. LEEDY, Chairman
SIGMUND STERN, Executive Manager
******
UNITED STATES SAVINGS BONDS - SERIES F and G
(for larger investors)
MOST of us can't join our sons, brothers, or friends in actual battle, but
every one of us can fight with dollars: Every dollar you do not urgently need
for food, clothing, shelter, and other absolute necessities should be invested
in United States Savings Bonds.
There are two forms of United States Savings Bonds - Series F, issued at a
discount, is commonly known as an "appreciation" bond; Series G, issued at par
is known as 8. "current income" bond. You may now own up to $100,000 (cost
price) of Series F or Series G, or F and G combined, issued in your name in each
calendar year, including both those in your name alone and those in your name as
co-owner. The principal features of these Bonds are outlined below:
SERIES F
SERIES G
DATE AND MATURITY:
Dated the first day of the
Dated the first day of the
month in which payment is
month in which payment is
received by issuing agent;
received by issuing agent;
due 12 years from issue date.
due 12 years from issue date.
INTEREST RATE:
Interest return is equiv-
Interest return 2.50% if held
alent to approximately 2.53%
to maturity. If redeemed prior
compounded semi-annually if
to maturity interest return is
held to maturity; lesser
smaller.
yield if redeemed at earlier
dates.
ISSUE PRICE:
Issue or cost price, 74% of
100%
maturity value. Example, a
$1,000 bond costs $740; a
$100 bond $74.
DENOMINATIONS:
Denominations (maturity
Denominations (maturity value)
value) $25, $100, $500,
$100, $500, $1,000, $5,000 and
$1,000, $5,000 and $10,000.
$10,000.
FORM:
Registered only.
Registered only.
REDEMPTION:
On first of any month, six
On first of any month, six
months after issue date,
months after issue date, upon
upon one month's written
one month's written notice, at
notice, at redemption
redemption values stated on
values stated on each bond.
each bond.
COLLATERAL:
Not eligible as collateral
Not eligible as collateral
for loans.
for loans,
Regraded
SERIES F
SERIES G
TAX STATUS:
Income is taxable under Federal tax laws the same as that
on any other United States Government bond issued on or
after March 1, 1941.
Taxpayer has election of
paying his tax on the
annual increase in Series
F bonds in the year it
occurs, or of having the
full appreciation taxable
to him in the year the
bond matures.
SPECIAL FEATURES:
You may now own up to $100,000 (cost price) of Series F
or Series G, or F and G combined, issued in your name in
each calendar year, including both those in your name
alone and those in your name as co-owner.
No interest, as such, is
Cash or redemption value
payable on Series F bonds.
prior to maturity is some-
Interest accrues by virtue
what less than par, but
of increases in redemption
the cash value at any time,
value after the first year
plus interest payments
and at the end of each
received, always totals
half-year period thereafter
more than purchase price.
until redemption or maturity.
WHO MAY BUY:
Bonds may be bought in the name of one person; in the
names of two persons (but not more than two) as co-owners;
in the name of one person with one other person designated
as beneficiary; in the name of a fiduciary: in the name
of a oustodian of public funds, or in the name of an un-
incorporated or incorporated body, other than commercial
banks.
WHERE TO BUY:
Order through your Victory Fund Committeemen, bank,
securities dealer, broker or savings, and loan associa-
tion. Or buy direct from any Federal Reserve Bank or
branch, or by mail from the Treasurer of the United
States, Washington, D. C.
Additional copies may be had from: VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
1614 FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
Regraded Unclassified
251
UNITED STATES TREASURY
VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
H. G. LEEDY, Chairman
SIGMUND STERN, Executive Manager
******
UNITED STATES SAVINGS BONDS - SERIES F and G
(for larger investors)
MOST of us can't join our sons, brothers, or friends in actual battle, but
every one of us can fight with dollars! Every dollar you do not urgently need
for food, clothing, shelter, and other absolute necessities should be invested
in United States Savings Bonds.
There are two forms of United States Savings Bonds - Series F, issued at a
discount, is commonly known as an "appreciation" bond; Series G, issued at par
is known as a "ourrent income" bond. You may now own up to $100,000 (cost
price) of Series F or Series G, or F and G combined, issued in your name in each
calendar year, including both those in your name alone and those in your name as
co-owner. The principal features of these Bonds are outlined below:
SERIES F
SERIES G
DATE AND MATURITY:
Dated the first day of the
Dated the first day of the
month in which payment is
month in which payment is
received by issuing agent;
received by issuing agent;
due 12 years from issue date.
due 12 years from issue date.
INTEREST RATE:
Interest return is equiv-
Interest return 2.50% if held
alent to approximately 2.53%
to maturity. If redeemed prior
compounded semi-annually if
to maturity interest return is
held to maturity; lesser
smaller.
yield if redeemed at earlier
dates.
ISSUE PRICE:
Issue or cost price, 74% of
100%
maturity value. Example, a
$1,000 bond costs $740; a
$100 bond $74.
Denominations (maturity
Denominations (maturity value)
DENOMINATIONS:
value) $25, $100, $500,
$100, $500, $1,000, $5,000 and
$1,000, $5,000 and $10,000.
$10,000.
FORM:
Registered only.
Registered only.
On first of any month, six
On first of any month, six
REDEMPTION:
months after issue date,
months after issue date, upon
upon one month's written
one month's written notice, at
notice, at redemption
redemption values stated on
values stated on each bond.
each bond.
COLLATERAL:
Not eligible as collateral
Not eligible as collateral
for loans.
for loans.
Regraded Unclassified
SERIES F
SERIES G
TAX STATUS:
Income is taxable under Federal tax laws the same as that
on any other United States Government bond issued on or
after March 1, 1941.
Taxpayer has election of
paying his tax on the
annual increase in Series
F bonds in the year it
occurs, or of having the
full appreciation taxable
to him in the year the
bond matures.
SPECIAL FEATURES:
You may now own up to $100,000 (cost price) of Series F
or Series G, or F and G combined, issued in your name in
each calendar year, including both those in your name
alone and those in your name as co-owner.
No interest, as such, is
Cash or redemption value
payable on Series F bonds.
prior to maturity is some-
Interest accrues by virtue
what less than par, but
of increases in redemption
the cash value at any time,
value after the first year
plus interest payments
and at the end of each
received, always totals
half-year period thereafter
more than purchase price.
until redemption or maturity.
WHO MAY BUY:
Bonds may be bought in the name of one person; in the
names of two persons (but not more than two) as co-owners;
in the name of one person with one other person designated
as beneficiary; in the name of a fiduciary; in the name
of a custodian of public funds, or in the name of an un-
incorporated or incorporated body, other than commercial
banks.
WHERE TO BUY:
Order through your Victory Fund Committeemen, bank,
securities dealer, broker or savings and loan associa-
tion. Or buy direct from any Federal Reserve Bank or
branch, or by mail from the Treasurer of the United
States, Washington, D. C.
Additional copies may be had from: VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
1614 FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
Regraded Unclassified
UNITED STATES TREASURY
252
VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
H. G. LEEDY, Chairman
SIGMUND STERN, Executive Manager
******
UNITED STATES SAVINGS BONDS - SERIES F and G
(for larger investors)
MOST of us can't join our sons, brothers, or friends in actual battle, but
every one of us can fight with dollars: Every dollar you do not urgently need
for food, clothing, shelter, and other absolute necessities should be invested
in United States Savings Bonds.
There are two forms of United States Savings Bonds - Series F, issued at a
discount, is commonly known as an "appreciation" bond; Series G, issued at par
is known as a "current income" bond. You may now own up to $100,000 (cost
price) of Series F or Series G, or F and G combined, issued in your name in each
calendar year, including both those in your name alone and those in your name as
co-owner. The principal features of these Bonds are outlined below:
SERIES F
SERIES G
DATE AND MATURITY:
Dated the first day of the
Dated the first day of the
month in which payment is
month in which payment is
received by issuing agent;
received by issuing agent;
due 12 years from issue date.
due 12 years from issue date.
INTEREST RATE:
Interest return is equiv-
Interest return 2.50% if held
alent to approximately 2.53%
to maturity. If redeemed prior
compounded semi-annually if
to maturity interest return is
held to maturity; lesser
smaller.
yield if redeemed at earlier
dates.
ISSUE PRICE:
Issue or cost price, 74% of
100%
maturity value. Example, a
$1,000 bond costs $740; a
$100 bond $74.
Denominations (maturity
Denominations (maturity value)
DENOMINATIONS:
value) $25, $100, $500,
$100, $500, $1,000, $5,000 and
$1,000, $5,000 and $10,000.
$10,000.
FORM:
Registered only.
Registered only.
On first of any month, six
On first of any month, six
REDEMPTION:
months after issue date,
months after issue date, upon
upon one month's written
one month's written notice, at
notice, at redemption
redemption values stated on
values stated on each bond.
each bond.
COLLATERAL:
Not eligible as collateral
Not eligible as collateral
for loans.
for loans.
Regraded
TRUBASHT BETATU CETIZO
SERIES F
SERIES G
TAX STATUS:
Income is taxable under Federal tax laws the same 6.8 that
on any other United States Government bond issued on or
after March 1, 1941.
Taxpayer has election of
paying his tax on the
annual increase in Series
F bonds in the year it
occurs, or of having the
full appreciation taxable
to him in the year the
bond matures.
SPECIAL FEATURES:
You may now own up to $100,000 (cost price) of Series F
or Series G, or F and G combined, issued in your name in
each calendar year, including both those in your name
alone and those in your name as co-owner.
No interest, as such, is
Cash or redemption value
payable on Series F bonds.
prior to maturity is some-
Interest accrues by virtue
what less than par, but
of increases in redemption
the cash value at any time,
value after the first year
plus interest payments
and at the end of each
received, always totals
half-year period thereafter
more than purchase price.
until redemption or maturity.
WHO MAY BUY:
Bonds may be bought in the name of one person; in the
names of two persons (but not more than two) as co-owners;
in the name of one person with one other person designated
as beneficiary; in the name of a fiduciary; in the name
of a oustodian of public funds, or in the name of an un-
incorporated or incorporated body, other than commercial
banks.
WHERE TO BUY:
Order through your Victory Fund Committeemen, bank,
securities dealer, broker or savings and loan associa-
tion. Or buy direct from any Federal Reserve Bank or
branch, or by mail from the Treasurer of the United
States, Washington, D. C.
Additional copies may be had from: VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
1614 FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
Regraded Unclassified
UNITED STATES TREASURY
253
VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
H. G. LEEDY, Chairman
SIGMUND STERN, Executive Manager
******
UNITED STATES SAVINGS BONDS - SERIES F and G
(for larger investors)
MOST of us can't join our sons, brothers, or friends in actual battle, but
every one of us can fight with dollars: Every dollar you do not urgently need
for food, clothing, shelter, and other absolute necessities should be invested
in United States Savings Bonds.
There are two forms of United States Savings Bonds - Series F, issued at a
discount, is commonly known as an "appreciation" bond; Series G, issued at par
is known as a. "ourrent income" bond. You may now own up to $100,000 (cost
price) of Series F or Series G, or F and G combined, issued in your name in each
calendar year, including both those in your name alone and those in your name as
co-owner. The principal features of these Bonds are outlined below:
SERIES F
SERIES G
DATE AND MATURITY:
Dated the first day of the
Dated the first day of the
month in which payment is
month in which payment is
received by issuing agent;
received by issuing agent;
due 12 years from issue date.
due 12 years from issue date.
INTEREST RATE:
Interest return is equiv-
Interest return 2.50% if held
alent to approximately 2.53%
to maturity. If redeemed prior
compounded semi-annually if
to maturity interest return is
held to maturity; lesser
smaller.
yield if redeemed at earlier
dates.
ISSUE PRICE:
Issue or cost prive, 74% of
100%
maturity value. Example, a
$1,000 bond costs $740; B.
$100 bond $74.
DENOMINATIONS:
Denominations (maturity
Denominations (maturity value)
value) $25, $100, $500,
$100, $500, $1,000, $5,000 and
$1,000, $5,000 and $10,000.
$10,000.
FORM:
Registered only.
Registered only.
REDEMPTION:
On first of any month, six
On first of any month, six
months after issue date,
months after issue date, upon
upon one month's written
one month's written notice, at
notice, at redemption
redemption values stated on
values stated on each bond.
each bond.
COLLATERAL:
Not eligible as collateral
Not eligible as collateral
for loans.
for loans.
SERIES F
SERIES G
TAX STATUS:
Income is taxable under Federal tax laws the same as that
on any other United States Government bond issued on or
after March 1, 1941.
Taxpayer has election of
paying his tax on the
annual increase in Series
F bonds in the year it
occurs, or of having the
full appreciation taxable
to him in the year the
bond matures.
SPECIAL FEATURES:
You may now own up to $100,000 (cost price) of Series F
or Series G, or F and G combined, issued in your name in
each calendar year, including both those in your name
alone and those in your name as co-owner.
No interest, as such, is
Cash or redemption value
payable on Series F bonds.
prior to maturity is some-
Interest accrues by virtue
what less than par, but
of increases in redemption
the cash value at any time,
value after the first year
plus interest payments
and at the end of each
received, always totals
half-year period thereafter
more than purchase price.
until redemption or maturity.
WHO MAY BUY:
Bonds may be bought in the name of one person; in the
names of two persons (but not more than two) as co-owners;
in the name of one person with one other person designated
0.8 beneficiary; in the name of a fiduciary; in the name
of a custodian of public funds, or in the name of an un-
incorporated or incorporated body, other than commercial
banks.
WHERE TO BUY:
Order through your Victory Fund Committeemen, bank,
securities dealer, broker or savings and loan associa-
tion. Or buy direct from any Federal Reserve Bank or
branch, or by mail from the Treasurer of the United
States, Washington, D. C.
Additional copies may be had from: VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
1614 FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
Regraded Unclassified
CASH SUBSCRIPTION FOR
254
2½ TREASURY BONDS OF 1963-68
Dated and bearing Interest from December 1, 1942
Due December 15, 1968
Interest payable June 15 and December 15
Federal Reserve Bank of Kansas City,
1942
Fiscal Agent of the United States,
Date
Kansas City, Mo.
Gentlemen:
Pursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the
undersigned hereby subscribes for bonds of the above described issue as follows:
Par Value
$
Each customer's name, address, and
Accrued Interest
$
amount of subscription should be
furnished, using space provided on
the reverse side thereof.
Total remittance
$
IMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-
companied by payment in full for the amount of bonds applied for and payments after December 1 must include
interest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank
or a Branch.
METHOD OF PAYMENT
1. By Draft Enclosed (funds available by the fame date)
$
2. By Charge to our Reserve Account
$
3. By Credit in War Loan Deposit Account* (Form K2 enclosed)
$
Total
$
Coupon
$
New Treasury bonds to be issued
*Registered
$
*Complete registration instructions given on reverse side hereof.
Total
$
INSTRUCTIONS FOR NEW COUPON TREASURY BONDS
Number
of Pieces
Denominations
Amount
MAIL TO
@
500.00
$
@
1,000.00
$
@
5,000.00
$
@
10,000.00
$
@
100,000.00
$
Total
$
It is requested that delivery of the registered bonds allotted be made to
IMPORTANT
This is
{
Original
By
Authorised Official Signature
Subscription
Confirmation
City
State
'N.B. Registered bends may not be hold to secure the War Loan Deposit account.
petup TO repun
or "John R. Jones, Trustee for
dated
THA repun the 'ssuof "I uqof" 20 'seuor "V Low TO IIIA our zepun
H
uyor erdupxo TOX 'patinuant TO ted late fied
SERIES F
SERIES G
TAX STATUS:
Income is taxable under Federal tax laws the same as that
on any other United States Government bond issued on or
after March 1, 1941.
Taxpayer has election of
paying his tax on the
annual increase in Series
F bonds in the year it
occurs, or of having the
full appreciation taxable
to him in the year the
bond ratures.
SPECIAL FEATURES:
You may now own up to $100,000 (cost price) of Series F
or Series G, or F and G combined, issued in your name in
each calendar year, including both those in your name
alone and those in your name as co-owner.
No interest, as such, is
Cash or redemption value
payable on Series F bonds.
prior to maturity is some-
Interest accrues by virtue
what less than par, but
of increases in redemption
the cash value at any time,
value after the first year
plus interest payments
and at the end of each
received, always totals
half-year period thereafter
more than purchase price.
until redemption or maturity.
WHO MAY BUY:
Bonds may be bought in the name of one person; in the
names of two persons (but not more than two) as co-owners;
in the name of one person with one other person designated
as beneficiary; in the name of a fiduciary; in the name
of a custodian of public funds, or in the name of an un-
incorporated or incorporated body, other than commercial
banks.
WHERE TO BUY:
Order through your Victory Fund Committeemen, bank,
securities dealer, broker or savings and loan associa-
tion. Or buy direct from any Federal Reserve Bank or
branch, or by mail from the Treasurer of the United
States, Washington, D. C.
Additional copies may be had from: VICTORY FUND COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
1614 FEDERAL RESERVE BANK BUILDING
KANSAS CITY, MISSOURI
Regraded Unclassified
CASH SUBSCRIPTION FOR
254
2½% TREASURY BONDS OF 1963-68
Dated and bearing interest from December 1, 1942
Due December 15, 1968
Interest payable June 15 and December 15
Federal Reserve Bank of Kansas City,
1942
Fiscal Agent of the United States,
Date
Kansas City, Mo.
Gentlemen:
Pursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the
undersigned hereby subscribes for bonds of the above described issue as follows:
Par Value
$
Each customer's name, address. and
Accrued Interest
$
amount of subscription should be
furnished, using space provided on
the reverse side thereof.
Total remittance
-
$
IMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-
companied by payment in full for the amount of bonds applied for and payments after December 1 must include
interest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank
or a Branch.
METHOD OF PAYMENT
1. By Draft Enclosed (funds available by the Issue date)
$
2. By Charge to our Reserve Account
$
8. By Credit in War Loan Deposit Account* (Form K2 enclosed)
$
Total
$
Coupon
$
New Treasury bonds to be issued
'Registered
$
*Complete registration instructions given on reverse side hereof.
Total
$
INSTRUCTIONS FOR NEW COUPON TREASURY BONDS
Number
of Pioces
Denominations
Amount
MAIL TO
@
500.00
$
@
1,000.00
$
@
5,000.00
$
@
10,000.00
$
@ 100,000.00
$
Total
$
It is requested that delivery of the registered bonds allotted be made to
IMPORTANT
Original
This is
By
Authorised Official Signature
Subscription
Confirmation
City
State
*R. Registered bonds may not be held to secure the War Loan Deposit account.
If supply of blanks may furnished be made is insufficient, by credit 530 letter and give complete instructions with the above certificate of missiption and Placel payment. Agest.
Payment, however, If sufficient collateral is deposited.
FEDERAL RESERVE BANK OF KANSAS CITY,
Bubscription checked by
Cards checked by
Subscription No
Regraded Unclassified
SCHEDULE OF CUSTOMERS' SUBSCRIPTIONS
NAME
ADDRESS
AMOUNT
of
1
%
Adj.
3
Total of Customers' Coupon Bond Subscriptions
$
(Must agree with amount on face of this application)
INSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS
NAME*
Give complete name, Including middle name or initial,
ADDRESS
or name as Inscribed on other bonda.
If carrier service, Include
Denomination
Amount
street address
Street
$
City
@
Street
-
City
Street
$
City
@
Street
$
City
@
Street
$
City
@
Street
$
City
@
Street
$
City
@
(If space is Insufficient attach
$
typewrites schedule)
TOTAL
When locade are being registered in the bame of . trustee, the trusteeship should be fully identified, as for example "John R James
Trustes under the will of Mary A. Jones, doceased", or "John R. Jones, trustee under agreement with
dated
- "John R. Jones, Trustee for
under agreement of trust dated
Regraded Unclassified
CASH SUBSCRIPTION FOR
255
2½% TREASURY BONDS OF 1963-68
Dated and bearing interest from December 1, 1942
Due December 15, 1968
Interest payable June 15 and December 15
Federal Reserve Bank of Kansas City,
1942
Fiscal Agent of the United States,
Date
Kansas City, Ma.
Gentlemen:
Pursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the
undersigned hereby subscribes for bonds of the above described issue as follows:
Par Value
$
Each customer's name, address, and
Accrued Interest
$
amount of subscription should be
fornished, using space provided on
the reverse side thereof.
Total remittance
-
$
IMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-
companied by payment in full for the amount of bonds applied for and payments after December 1 must include
interest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank
or a Branch.
METHOD OF PAYMENT
1. By Draft Enclosed (funds available by the Issue date)
$
2. By Charge to our Reserve Account
$
3. By Credit in War Loan Deposit Account* (Form K2 enclosed)
$
Total
$
{
Coupon
$
New Treasury bonds to be issued
*Registered
$
*Complete registration instructions given on reverse side hereof.
Total
$
INSTRUCTIONS FOR NEW COUPON TREASURY BONDS
Number
of Pieces
Denominations
Amount
MAIL TO
@
500.00
$
@
1,000.00
$
@
5,000.00
$
@
10,000.00
$
@
100,000.00
$
Total
$
It is requested that delivery of the registered bonds allotted be made to
IMPORTANT
Original
By
This is
Authorised Official Signature
Subscription
Confirmation
State
City
*N. 'N.B. Registered bends may not be hald to secure the War Loan Deposit account.
If supply of however, blanks may furnished be made is Insufficient. by credit If use letter and give complete instructions FEDERAL with RESERVE the above BANK certificate OF KANSAS of CITY, and Fiscal payment. Agent.
Payment, sufficient collateral la deposited.
Subscription checked by
Cards checked by
Subscription No
Regraded Unclassified
SCHEDULE OF CUSTOMERS' SUBSCRIPTIONS
NAME
ADDRESS
AMOUNT
1
%
4dj.
/
$
Total of Customers' Coupon Bond Subscriptions
$
(Must RETOS with amount on face of this application)
INSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS
NAME*
Give complete name, Including middle name or initial,
ADDRESS
or name as Inscribed on other bonds.
If carrier service, Include
Denomination
Amail
street address
Street
$
City
@
Street
8
City
@
Street
$
City
@
Street
$
City
@
Street
$
City
@
Street
$
City
@
Street
$
City
@
(If space is insufficient attach
$
typewritten schedule)
TOTAL
Where bonds are being registered in the name of = trustee, the trusteeship should be fully identified, as for example "John R. join
Trustee under the will of Mary A. Jones, deceased", or "John R. Jones, trustee under agreement with
dated
ger "John R. Jones, Trustee for
under agreement of trust dated
Regraded Unclassified
CASH SUBSCRIPTION FOR
256
2½% TREASURY BONDS OF 1963-68
Dated and bearing interest from December 1, 1942
Due December 15, 1968
Interest payable June 15 and December 15
Federal Reserve Bank of Kansas City,
1942
Fiscal Agent of the United States,
Date
Kansas City, Mo.
Gentlemen:
Pursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the
undersigned hereby subscribes for bonds of the above described issue as follows:
Par Value
$
Each customer's name, address, and
Accrued Interest
$
amount of subscription should be
furnished, using space provided on
the reverse side thereof.
Total remittance
$
IMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-
companied by payment in full for the amount of bonds applied for and payments after December 1 must Include
interest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank
or a Branch.
METHOD OF PAYMENT
1. By Draft Enclosed (funds available by the fasue date)
$
2. By Charge to our Reserve Account
$
3. By Credit in War Loan Deposit Account* (Form K2 enclosed)
$
Total
$
Coupon
$
New Treasury bonds to be issued
*Registered
$
*Complete registration Instructions given on reverse side hereof.
Total
$
INSTRUCTIONS FOR NEW COUPON TREASURY BONDS
Number
of Pieces
Denominations
Amount
MAIL TO
@
500.00
$
@
1,000.00
$
@
5,000.00
$
@
10,000.00
$
@
100,000.00
$
Total
$
It is requested that delivery of the registered bonds allotted be made to
IMPORTANT
Original
This is
By
Subscription
Authorised Official Signature
Confirmation
City
State
M.B. Registered bends may not be hold to secure the War Leen Deposit account.
If supply of Manks may furnished be made la by - letter and give complete instructions with the above certificate of mbseription and Plecal payment. Agent.
Payment, bewerer, credit If sufficient collateral is deposited.
FEDERAL RESERVE BANK OF KANSAS CITY,
Subscription checked by
Cards checked by
Subscription No
Regraded Unclassified
SCHEDULE OF CUSTOMERS' SUBSCRIPTIONS
NAME
ADDRESS
AMOUNT
Pedemal I 1
Reserved for - of
%
Adj.
s
$
Total of Customers' Coupon Bond Subscriptions
$
(Must agree with amount on face of this application)
INSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS
NAME*
Give complete name, Including middle name or initial,
ADDRESS
or name as Inscribed on other bonds.
If carrier service, Include
Denomination
Amail
street address
Street
$
City
@
Street
$
City
@
Street
$
City
@
Street
$
City
Street
$
City
Street
$
City
Street
$
City
@
(If space la Insufficient attach
$
typewritten schedule)
TOTAL
Where bonds are being registered in the name of . trustee, the trustesship should be fully identified, as for example "John R
Trustee under the will of Mary A. Jones, deceased", or "Johm 2. Jones, truntee under agreement with
dated
or "John R. Jones, Trustee for
under agreement of trust dated
Regraded Unclassified
CASH SUBSCRIPTION FOR
257
2½ TREASURY BONDS OF 1963-68
Dated and bearing Interest from December 1, 1942
Due December 15, 1968
Interest payable June 15 and December 15
Federal Reserve Bank of Kansas City,
1942
Fiscal Agent of the United States,
Date
Kansas City, Mo.
Gentlemen:
Pursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the
undersigned hereby subscribes for bonds of the above described issue as follows:
Par Value
$
Each customer's name, address, and
Accrued Interest
$
amount of subscription should be
furnished, using space provided on
the reverse side thereof.
Total remittance
$
IMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-
companied by payment in full for the amount of bonds applied for and payments after December 1 must include
interest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank
or a Branch.
METHOD OF PAYMENT
1. By Draft Enclosed (funds available by the fame date)
$
2. By Charge to our Reserve Account
$
8. By Credit in War Loan Deposit Account* (Form K2 enclosed)
$
Total
$
Coupon
$
New Treasury bonds to be issued
Registered
$
"Complete registration instructions given on reverse side hereof.
Total
$
INSTRUCTIONS FOR NEW COUPON TREASURY BONDS
Number
of Pieces
Denominations
Amount
MAIL TO
@
500.00
$
@
1,000.00
$
@
5,000.00
$
@
10,000.00
$
@
100,000.00
$
Total
$
It is requested that delivery of the registered bonds allotted be made to
IMPORTANT
Original
By
This is
Authorised Official Signature
Subscription
Confirmation
City
State
% Registered bonds may net be hold to secure the War Loan Deposit account.
If empply of however, blanks may furnished be made la insufficient, by credit if use letter and give complete Instructions with the above certificate of unherlytion CITY, and Phone payment. Agent.
Payment, sufficient collateral is deposited.
FEDERAL RESERVE BANK OF KANSAS
Subscription checked by
Cards checked by
Subscription No.
Unclassified
SCHEDULE OF CUSTOMERS' SUBSCRIPTIONS
NAME
ADDRESS
AMOUNT
of
E
%
Adj.
/
$
Total of Customers' Coupon Bond Subscriptions
$
(Must RETOO with amount on face of this application)
INSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS
NAME*
Give complete name, Including middle name or initial,
ADDRESS
or name as Inscribed on other bonds.
If carrier service, include
Denomination
Ama
street address
Street
$
City
@
Street
$
City
@
Street
$
City
@
Street
$
City
@
Street
$
City
@
Street
$
City
@
Street
$
City
@
(If space la Insufficient attach
$
typewritten schedule)
TOTAL
Where bonds - being registered to the name of . trustoe, the trusteeship should be fully identified, as for example "John &
Trustas under the will of Mary A. Jones, deceased", or "John R. Jones, trustee under agreement with
dated
or "Ma R. Trustee for
under agreement of trust dated
Regraded Unclassified
CASH SUBSCRIPTION FOR
258
2½ TREASURY BONDS OF 1963-68
Dated and bearing interest from December 1, 1942
Due December 15, 1968
Interest payable June 15 and December 15
Federal Reserve Bank of Kansas City,
1942
Fiscal Agent of the United States,
Date
Kansas City, Mo.
Gentlemen:
Pursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the
undersigned hereby subscribes for bonds of the above described issue as follows:
Par Value
$
Each customer's name, address. and
Accrued Interest
$
amount of subscription should be
furnished, using space provided on
the reverse side thereof.
Total remittance
$
IMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-
companied by payment in full for the amount of bonds applied for and payments after December 1 must include
interest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank
or a Branch.
METHOD OF PAYMENT
1. By Draft Enclosed (funds available by the Issue date)
$
2. By Charge to our Reserve Account
$
3. By Credit in War Loan Deposit Account* (Form E2 enclosed)
$
Total
$
{
Coupon
$
New Treasury bonds to be issued
*Registered
$
*Complete registration Instructions given on reverse side hereof.
Total
$
INSTRUCTIONS FOR NEW COUPON TREASURY BONDS
Number
of Pieces
Denominations
Amount
MAIL TO
@
500.00
$
@
1,000.00
$
@
5,000.00
$
@
10,000.00
$
@
100,000.00
$
Total
$
It is requested that delivery of the registered bonds allotted be made to
IMPORTANT
Original
By
This is
Authorised Official Signature
Subscription
Confirmation
State
City
'X.B. Registered bonds may net be held to secure the War Lean Deposit account.
If supply of however, blanks may furnished be made la insufficient, by credit - letter and give complete instructions with the store certificate of miscription CITY, and Phone payment. Agest.
Payment, If sufficient collateral to deposited.
FEDERAL RESERVE BANK OF KANSAS
Subscription checked by
Cards checked by
Subscription No
Regraded Unclassified
SCHEDULE OF CUSTOMERS' SUBSCRIPTIONS
ADDRESS
AMOUNT
- of
NAME
%
Adl.
¥
Total of Customers' Coupon Bond Subscriptions
$
(Must with amount on face of this application)
INSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS
NAME*
ADDRESS
Give complete name, Including middle name or initial,
If carrier service, Include
Denomination
Amt
or name as inscribed off other bonds.
street address
Street
$
@
City
Street
$
@
City
Street
$
@
City
Street
$
City
Street
$
@
City
Street
$
@
City
Street
$
@
City
$
(If space to insufficient attach
typewritten schedule)
TOTAL
*Where bonds are being registered in the name of - trustee, the trusteeship should be fully identified, as for example "John R.
under the will of Mary A. Junes, deceased", or "John R. Jones, trustee under agreement with
dated
1
Trustee for
under a presmant of trust dated
Regraded Unclassified
CASH SUBSCRIPTION FOR
259
13/4% TREASURY BONDS OF 1948
Dated and bearing Interest from December 1, 1942
Due June 15, 1948
Interest payable June 15 and December 15
Federal Reserve Bank of Kansas City,
1942
Fiscal Agent of the United States,
Date
X City, Ms.
Gentlemen: Pursuant to the provisions of Treasury Department Circular No. 702, dated November 30, 1942, the
undersigned hereby subscribes for bonds of the above described issue as follows:
Amount of
For alletment - le
Buberiptles(s)
Federal Reserved Bank
Our own cash Subscription (Bevice open November 24, December 1 and 2)
$
$
Customers' Cash Subscriptions
$
With furntabed, for which space to provided - the reverse abde bereof.
costomer's - address and amount of subscription must be
Total Subscriptions
$
Accrued Interest on $
from December 1, 1942, to
(80.048 per $1,000 per day) $.
Please note: Subscriptions for amounts up to and Including $100,000 from commercial banks and subscriptions in any
amount from all other subscribers will be allotted In full.
METHOD OF PAYMENT
1. By Draft Enclosed (Funds available by the faroe date)
2. By Charge to our Reserve Account
3. By Credit in War Loan Deposit Account (Wai furnish Form El after allotment to determined)
4. Payment to be made by
(Name of bank)
Total
$
Payment due December 1. no. except for bonds allotted to commarical banks for own account:
for this class of unbertibers payment is das December 11 with Interest from December 1.
In the event our subscription is not allotted in full you are authorized to remit or credit the overage in our remit-
for our use.
tance to
(Insurt came of bank)
Coupon
$
New Treasury bonds to be issued
*Registered
$
*Complete registration Instructions given on reverse side hereof.
Total
$
INSTRUCTIONS FOR NEW COUPON TREASURY BONDS
Humber of
HOLD-Safekeeping Department.
Plane
Desmission
Amount
(Member bests for - assount eatr)
@
500.00
$
@
1,000.00
$
HOLD-To secure War Loan Account.
@
5,000.00
$
@
10,000.00
$
MAIL TO
@
100,000.00
$
Total coupon bonds desired
$
CERTIFICATE OF SUBSCRIPTION AND PAYMENT
F. hereby certify:
That from our customers in the amounts set opposite the customers' names costomer, - the not
attached we have received applications of this subscription: that there has been paid to as by each each of the amount
subject to list withdrawal which la made until a after part allotment and payment in full for securities allotted, two percent
applied for,
F. /urther certify:
That this subscription is solely for our own account or for the account of of the our customers subscription, specified or of herein; the securities that no
arrangements which have been or will be made for closing the sale of or the other subscription disposition books; and that our customers whose respect subscrip- to
tlons are may Included be allotted herein thereon, will be prior requested to the to confirm to - their agreement to the name conditions with
their subscriptions.
R.
F,
be consideration allotted on this of subscription, the receipt by at you par on or before the date of Issue, hereon. or at par
agrees In of this subscription, to make payment in full and for the accrued entire interest amount M. which es later may
allotment. Such payment will be made by the method Indicated
IMPORTANT
Original
By
Authorised Official Bignature
This is
Additional
Subscription
Confirmation
State
City
If empoly of Marks fundred la - letter and give complete Instructions with the above certificate of unherription Planni and payment. Agent.
FEDERAL RESERVE BANK OF KANSAS CITY,
Regraded Unclassified
checked
by
Subscription No.
SCHEDULE OF CUSTOMERS' SUBSCRIPTIONS
Reserved for
NAME
ADDRESS
AMOUNT
Federal Reserve - Beat of
*
A.d.
1
$
Total of Customers' Coupon Bond Subscriptions
$
(Must RETON with amount on face of this application)
INSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS
NAME*
ADDRESS
Give complete name, Including middle name or Initial,
If carrier service, Include
Denomination
Ama
or name - Inscribed on other bonds.
street address
Street
$
@
City
Street
$
@
City
Street
$
@
City
Street
$
@
City
Street
$
@
City
Street
$
@
City
Street
$
City
@
(If space is Insufficient attach
(rpewrittes achedule)
$
TOTAL
"Where bonds are being registered in the name of a trustee, the trusteeship should be fully Identified, as for example "John 1,
Trustee under the will of Mary A. Jones, deceased", or "John R. Jones, trustee under agreement with
dated
or "John R. Jones, Trustee for
under agreement of trust dated
Regraded Unclassified
CASH SUBSCRIPTION FOR
13/4% TREASURY BONDS OF 1948
260
Dated and bearing Interest from December 1, 1942
Due June 15, 1945
Interest payable June 13 and December 15
Federal Reserve Bank of Kansas City,
1942
Fiscal Agent of the United States,
Date
Kansas City, Mo.
Gentlemen: Pursuant to the provisions of Treasury Department Circular No. 702, dated November 30, 1942, the
undersigned hereby subscribes for bonds of the above described issue as follows:
Amount of
For allotment new hgt
Suberription(s)
Faieral Reserve Bank
Our own cash Subscription (Banks open November 30, December I and 2) -
$
$
Customers' Cash Subscriptions
$
$
"Each cultomer's name, address and amount of subscription must be
furnished. for which space la provided on the reverse side hereal.
Total Subscriptions
$
$
Aeroved interest on $
from December 1, 1942, to
($0.048 per 11.000 per day) $
Please note: Subscriptions for amounts up to and Including $100,000 from commercial banks and subscriptions In any
amount from all other subscribers will be allotted in full.
METHOD OF PAYMENT
1. By Draft Enclosed (Funds available by the brue date)
$
2. By Charge to our Reserve Account
$
3. By Credit in War Loan Deposit Account (Will fornish Form K1 after allotment is determined)
$
4. Payment to be made by
$
(Name of bank)
Total
$
Parment doe December 1. 1942. escept for bunds allotted to commerical hanks for ORD account:
for this class of autoribers payment la doe December 11 with interest from Docember 1.
In the event our subscription is not allotted in full you are authorized to remit or credit the overage in our remit-
for our use,
tance to
(Insert name of hash)
Coupon
$
New Treasury bonds to be issued
Registered
$
Total
$
*Complete registration Instructions given un revene side berenf.
INSTRUCTIONS FOR NEW COUPON TREASURY BONDS
Number of
HOLD-Safekeeping Department.
Plane
Descriptions
Amount
(Member backs for own account entr)
@
500.00
$
@
1,000.00
$
HOLD-To secure War Loan Account.
©
5,000.00
$
@
10,000.00
$
MAIL TO
@
100,000.00
$
Total coupon bonds desired
$
CERTIFICATE OF SUBSCRIPTION AND PAYMENT
#: hereby
That certify: from our customers in the amounts net opposite us the customers' each such names customer. on the not
attached subject to list withdrawal which is made until a after part allotment of this and payment in full for securities allotted, two percent
we have received applications subscription; that there has been paid to by of the amount
applied for.
Fe further
That this certify: subscription in solely for our own account or for the disposition account of of the nur customers subscription, specified or of herein: the securities that no
arrangements which may be have allotted been thereon, or will prior be requested made to the for to closing the confirm sale of or to the other us subscription their agreement books: to and the that name our conditions customers with whose respect subscrip- to
tions
are
included
herein
will
be
their subscriptions.
F.
agree: In consideration of the receipt by you of this before subscription, the date to of make issue, payment or at in par full and for the accrued entire interest amount if which en later may
be allotment. allotted on Such this payment subscription, will be at made par on by or the method Indicated hereon.
IMPORTANT
Original
By
Authorized Official Signature
This la
Additional
Subscription
Confirmation
State
City
If expoly of Manks furntabed la Innefficient, - letter and give complete instructions FEDERAL RESERVE with the above BANK certificate OF KANSAS of subscription CITY, Floral and payment. Agent
Regraded Unclassified
by
SCHEDULE OF CUSTOMERS' SUBSCRIPTIONS
Reserved for - of
NAME
ADDRESS
AMOUNT
I I
.
Ad.
/
$
Total of Customers' Coupon Bond Subscriptions
$
(Mort agree with amount on face of this application)
INSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS
NAME*
ADDRESS
Give complete name, including middle name or initial,
If carrier service, Include
Denomination
Amount
or name as Inseribed on other bonds.
street address
Street
$
City
@
Street
-
City
G
Street
$
City
@
Street
$
City
Street
$
City
@
Street
$
@
City
Street
$
City
@
(If space la Insufficient attach
typewrites schedule)
TOTAL
$
*Where Trustee bonds are being registered in the name of a trustee, the trusteeship should be fully identified, as for example "John R.
or "John R. Jones, Trustee for
under the will of Mary A. Jones, deceased", or "John R. Jones, trustee under agreement with
dated
under agreement of trust dated
e*
-
Regraded Unclassified
CASH SUBSCRIPTION FOR
261
1/8% TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES E-1943
Dated and bearing interest from December 1, 1942
Maturing December 1, 1943
Federal Reserve Bank of Kansas City,
Fiscal Agent of the United States,
Kansas City, Mo.
1942
Date
Gentlemen: Pursuant to the provisions of Treasury Department Circular No. 703, dated November 30, 1942, the
undersigned hereby subscribes for certificates of the above described issue as follows:
Amount of
For alletrent use by
Bulamption(s)
Federal Enerve Bank
Our own Cash Subscription (Books open December 14. IT and 18)
$
$
Customers' Cash Subscriptions
$
$
Each customer's DATA address and amount of subscription must be
furnished for which space is provided on the revenu side bernof.
Total Subscriptions
$
$
Accrued interest on $
from December 1, 1942, to
($0,024 per $1,000 per day) $
Subscriptions will be allotted in full excepting those for amounts over $100,000 from commercial banks.
METHOD OF PAYMENT
IMPORTANT-It will gr. -ly facilitate the handling of subscriptions if . separate application la - for a bank's own
1. By Draft Enclosed (funds available by lasse date)
$
2. By Charge to our Reserve Account
$
3. By credit in War Loan Deposit Account (Will furnish Form Khaine alliment le determined)
$
4. Payment to be made by
$
(Name of bank)
Total
$
Payment due December 1, 1942. except for certificates alletted to commercial banks for own se-
earth for this class of subcribers payment das December 18 with Interest from December 1.
In the event our subscription is not allotted in full you are authorized to remit or credit the overage in our remit-
table to
for our use.
(Insert name of bank)
DELIVERY INSTRUCTIONS FOR NEW TREASURY CERTIFICATES
(These certificates are issued in crupes (bearer) form only)
HOLD-Safekeeping Department.
Number
of Pieces
Denominations
Amount
(Member banks for own account only)
subscription and its customers subscriptions.
@
1,000.00
$
HOLD-To Secure War Loan Account.
@
5,000.00
$
MAIL TO
@
10,000.00
$
@
100,000.00
$
Total
$
CERTIFICATE OF SUBSCRIPTION AND PAYMENT
IF e
That hereby certify: from our customers in the amounts set apposite the customers' names not on the subject at-
to tached withdrawal list which until is after made allotment a part and payment in full for securities allotted, two percent of the amount applied
we have received applications of this subscription; that there has been paid to us by each such customer, for.
We further
That this certify: for our account or for the account of the customers specified herein; securities that no which ar-
rangements be have been or will be the closing of the subscription books: and that our customers whose their sub- are
subscription is solely made own for the sale or other disposition of our subscription, or of the subscriptions
included may allotted herein will thereon, be requested prior to to confirm to us their agreement to the same conditions with respect to
scriptions.
IF,
agree: In consideration of this subscription, to make payment In full for the entire amount if on later which allotment. may be
allotted on this subscription, of the receipt at by par you on or before the date of issue, or at par and accrued interest
Such payment will be made by the method indicated hereon.
IMPORTANT
{
Original
This is
Additional
}
Subscription
By
Authorized Official Signature
Confirmation
ones,
SCHEDULE OF CUSTOMERS' SUBSCRIPTIONS
Reserved for the of
NAME
ADDRESS
AMOUNT
Federal Reserve Bank
%
Adj.
Allotman
$
Total of Customers' Subscriptions
$
(Must agree with amount on face of this application)
The above schedule of subscriptions must be completed to assure correct allotment.
If sufficient space is not provided, attach similar supplemental list.
CASH SUBSCRIPTION FOR
1/8% TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES E-1943
Dated and bearing interest from December 1, 1942
Maturing December 1, 1943
Federal Reserve Bank of Kansas City,
Fiscal Agent of the United States,
Kansas City, Mo.
1942
Date
Gentlemen:
Pursuant to the provisions of Treasury Department Circular No. 703, dated November 30, 1942, the
undersigned hereby subscribes for certificates of the above described issue as follows:
Amount of
Fur allotment use by
Bubscription(s)
Federal Receive Bank
Our own Cash Subscription (Books open December 16, 17 and 18)
....
$
$
Customers' Cash Subscriptions
$
$
Each customer's name, address and amount of subscription must be
furnished. for which space is provided on the reverse side hereof.
Total Subscriptions
$
$
Accrued interest on $
from December 1, 1942, to
($0.024 per $1,000 per day) $
Subscriptions will be allotted in full excepting those for amounts over $100,000 from commercial banks.
IMPORTANT-It will gr....19 facilitate the handling of subscriptions if a separate application is Used for a bank's own
METHOD OF PAYMENT
1. By Draft Enclosed (funds available by lesse date)
$
2. By Charge to our Reserve Account
$
3. By credit in War Loan Deposit Account (Will furnish Form K2 after allotment in determined)
$
4. Payment to be made by
$
(Name of bank)
Total
Payment due December 1, 1942, except for certificates allotted to commercial banks for own ac-
$
count; for this class of suberibers payment due December 28 with interest from December 1.
In the event our subscription is not allotted in full you are authorized to remit or credit the overage in our remit-
tance to
for our use.
(Insert name of bank)
DELIVERY INSTRUCTIONS FOR NEW TREASURY CERTIFICATES
(These certificates are lassed In coupon (bearer) form only)
HOLD-Safekeeping Department.
Number
of Pieces
Denominations
Amount
(Member banks for owa assocnt entr)
subscription and its customers subscriptions.
@
1,000.00
$
HOLD-To Secure War Loan Account.
@
5,000.00
$
MAIL TO
@
10,000.00
$
@
100,000.00
$
Total
$
CERTIFICATE OF SUBSCRIPTION AND PAYMENT
Fe hereby certify:
That we have received applications from our customers In the amounts set opposite the customers' names not on the subject at-
to withdrawal until after allotment a part and payment in full for securities allotted, two percent of the amount applied
tached list which is made of this subscription; that there has been paid to us by each such customer, for.
Fe further certify:
That this is solely for our own account or for the account of the customers specified herein; securities that no which ar-
rangements subscription have been will be made for the sale or other disposition of our subscription. or of the
may included herein will thereon, be requested prior to confirm to us their agreement to the same conditions with respect to
be allotted or to the closing of the subscription books; and that our customers whose subscriptions their sub- are
scriptions.
#e
In agree: consideration of the of this subscription, to make payment in full for the entire amount if later which allotment. may be
allotted on this subscription, receipt at by par you on or before the date of issue, or at par and accrued interest on
Such payment will be made by the method indicated hereon.
IMPORTANT
-
Original
This is
Additional
Subscription
By
Authorised Official Signature
Confirmation
City
State
If supply of blanks furnished la Insufficient. use letter and give complete Instructions with the above certificate of subscription April and payment.
FEDERAL RESERVE BANK OF KANSAS CITY, Yest
Subscription checked by
Cards checked by
Bubscription No.
Regraded Unclassified
SCHEDULE OF CUSTOMERS' SUBSCRIPTIONS
NAME
ADDRESS
AMOUNT
Federal Reserve Bank
Reserved for the of
%
Adj.
Allotaned
$
Total of Customers' Subscriptions
$
(Must agree with amount on face of this application)
The above schedule of subscriptions must be completed to assure correct allotment.
If sufficient space is not provided, attach similar supplemental list.
FEDERAL HESERVE BANK OF KANSAS States CITY
of the United
UNITED STATES OF AMERICA
262
1½ PERCENT TREASURY BONDS OF 1948
Dated and bearing interest from December 1, 1942
Due June 15, 1948
Interest payable June 15 and December 15
Department 1942 Circular No. 702
TREASURY DEPARTMENT,
Fiscal Service
OFFICE OF THE SECRETARY,
Bareau of the Public Debt
ashington, November 30, 1942.
I. OFFERING OF BONDS
1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended,
invites subscriptions, at par and accrued interest, from the people of the United States for bonds of the United States,
designated 13/4 percent Treasury Bonds of 1948. The amount of the offering is not specifically limited, although
allotments to commercial banks, which are defined for this purpose as banks accepting demand deposits, for their
own account will be limited to $2,000,000,000, or thereabouts. The books will be open today and until further notice
for the receipt of subscriptions from others than commercial banks for their OTUN account, and today, December 1
and December 2 for the receipt of subscriptions from commercial banks for their oten account.
II. DESCRIPTION OF BONDS
1. The bonds will be dated December 1, 1942, and will bear interest from that date at the rate of 14 percent
per annum, payable on a semiannual basis on June 15 and December 15, 1943, and therafter on June 15 and Decem-
her 15 in each year until the principal amount becomes payable. They will mature June 15, 1948, and will not be
subject to call for redemption prior to maturity.
2. The income derived from the bonds shall be subject to all Federal taxes, now or hereafter imposed. The
bonds shall be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall be
exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
3. The bonds will be acceptable to secure deposits of public moneys, but will not bear the circulation privilege
and will not be entitled to any privilege of conversion,
4. Bearer bonds with interest coupons attached will be issued in denominations of $500, $1,000, $5,000, $10,000
and $100,000. Bonds registered as to principal and interest will be issued in denominations of $5(X), $1,000. $5,000,
$10,000, $100,000 and $1,000,000. Provision will be made for the interchange of bonds of different denominations
and of coupon and registered bonds, and for the transfer of registered bonds, under rules and regulations prescribed
by the Secretary of the Treasury.
5. The bonds will be subject to the general regulations of the Treasury Department, HOW or hereafter pre-
scribed, governing United States bonds.
III. SUBSCRIPTION AND ALLOTMENT
I. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department
Washington. Subscribers must agree not to sell or otherwise dispose of their subscriptions, or of the securi
which may be allotted thereon, prior to December 3, 1942. Banking institutions and socurities dealers generally me
submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department
are authorized to act as official agencies, Others than banking institutions and securities dealers will not be permitted
to enter subscriptions except for their own account. Subscriptions from commercial banks for their own account
will be received without deposit. All other subscriptions must be accompanied by payment in full for the amount
of bonds applied for.
2. The Secretary of the Treasury reserves the right to reject any subscription, in whole or in part, to allot less
than the amount of bonds applied for, and to close the books as to any or all subscriptions at any time without
notice; and any action he may take in these respects shall be final. Subject to these reservations, subscriptions for
amounts up to and including $100,000 from commercial banks, and subscriptions in any amount from all other sub-
scribers, will be allotted in full subscriptions for amounts over $100,000 from commercial lanks will be allotted
on an equal percentage basis, to be publicly announced. Allotment notices will be sent out promptly upon allot-
ment.
IV. PAYMENT
than commercial banks par must be made on or before December 1. 1942, or on later allotment. Payment at par
1. Payment at and accrued interest, if any, for bonds allotted bereunder to or for the account of others and
accrued interest to December 11, 1942, for bonds allotted hereunder to commercial banks must be made on that date.
One day's accrued interest is $0.048 $1,000. Any qualified depositary will be permitted to make payment by
credit for bonds allotted to it for itself per and its customers up to any amount for which it shall be qualified in excess
of existing deposits, when so notified by the Federal Reserve Bank of its District.
V. GENERAL PROVISIONS
1. As fiscal of the United States, Federal Reserve Banks are authorized and requested to receive sub- the
scriptions, to make agents the basis and to the amounts indicated by the Secretary of the Treasury allotted, to
to make delivery of bonds on full-paid respective subscriptions allotted, and they may issue interim receipts pending delivery
Federal Reserve Banks allotments of the on Districts, up to issue allotment notices, to receive payment for bonds
of the definitive
2. The bonds. of the at any time, or from time to time, prescribe supplemental Federal or amenda- Reserve
tory Banks. rules and Secretary regulations governing Treasury the may offering, which will be communicated promptly to the
HENRY MORGENTHAU, JR.,
Secretary of the Treasury.
Regraded
Unclassified
FEDERAL RESERVE BANK OF KANSAS CITY
Fiscal Agent of the United States
263
UNITED STATES OF AMERICA
% PERCENT TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES E-1943
Dated and bearing interest from December 1, 1942
Due December 1. 1943
1942
Department Cuestar No. Y83
TREASURY DEPARTMENT,
OFFICE OF THE SECRETARY,
Pincel Berries
Buress of the Public Debt
Washington, November 30, 1942.
1. OFFERING OF CERTIFICATES
1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended, in-
vites subscriptions, at par and accrued interest, from the people of the United States for certificates of indebtedness
of the United States, designated % percent Treasury Certificates of Indebtedness of Series E-1943. The amount
of the offering is not specifically limited, although allotments to commercial banks, which are defined for this purpose
as banks accepting demand deposits, for their own account will be limited to $2,000,000,000, or thereabouts. The
books will be open today and until further notice for the receipt of subscriptions from others than commercial banks
for their Dan account, and on December 16, December 17 and December 18 for the receipt of subscriptions from
commercial banks for their own account.
II. DESCRIPTION OF CERTIFICATES
1. The certificates will be dated December 1, 1942, and will bear interest from that date at the rate of 3/8 per-
cent per annum, payable semiannually on June 1, and December 1, 1943. They will mature December 1, 1943, and
will not be subject to call for redemption prior to maturity.
2. The income derived from the certificates shall be subject to all Federal taxes, now or hereafter imposed.
The certificates shall be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall
be exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of
the possessions of the United States, or by any local taxing authority.
3. The certificates will be acceptable to secure deposita of public moneys. They will not be acceptable in pay-
ment of taxes and will not bear the circulation privilege.
4. Bearer certificates with two interest coupons attached will be issued in denominations of $1,000, $5,000,
$10,000 and $100,000. The certificates will not be issued in registered form.
5. The certificates will be subject to the general regulations of the Treasury Department, now or hereafter
prescribed, governing United States certificates.
III. SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department,
Washington. Subscribers must agree not to sell or otherwise dispose of their subscriptions, or of the securities
which may be allotted thereon, prior to December 19, 1942. Banking institutions and securities dealers generally
may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Depart-
ment are authorized to act as official agencies. Others than banking institutions and securities dealers will not be
permitted to enter subscriptions except for their own account. Subscriptions from commercial banks for their own
account will be received without deposit. All other subscriptions must be accompanied by payment in full for the
amount of certificates applied for.
2. The Secretary of the Treasury reserves the right to reject any subscription, in whole or in part, to allot
less than the amount of certificates applied for, and to close the books as to any or all subscriptions at any time with-
out notice; and any action he may take in these respects shall be final. Subject to these reservations, subscriptions
für amounts up to and including $100,000 from commercial banks, and subscriptions in any amount from all other
subscribers, will be allotted in full; subscriptions for amounts over $100,000 from commercial banks will be allotted
on an equal percentage basis, to be publicly announced. Allotment notices will be sent out promptly upon allotment.
IV. PAYMENT
1. Payment at par and accrued interest, if any, for certificates allotted hereunder to or for the account of others
than commercial banks must be made on or before December 1, 1942, or on later allotment. Payment at par and
accrued interest to December 28, 1942, for certificates allotted hereunder to commercial banks must be made on that
date. One day's accrued interest is $0,024 per $1,000. Any qualified depositary will be permitted to make pay-
ruent by credit for certificates allotted to it for itself and its customers up to any amount for which it shall be qualified
in excess of existing deposits, when so notified by the Federal Reserve Bank of its District.
V. GENERAL PROVISIONS
1. As fiscal agents of the United States, Federal Reserve Banks are authorized and requested to receive sub-
scriptions, to make allotments on the basis and up to the amounts indicated by the Secretary of the Treasury to the
Federal Reserve Banks of the respective Districts, to issue allotment notices, to receive payment for certificates allot-
ted. to make delivery of certificates on full-paid subscriptions allotted, and they may issue interim receipts pending
delivery of the definitive certificates,
2, The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory
rules and regulations governing the offering, which will be communicated promptly to the Federal Reserve Bank.
HENRY MORGENTHAU. JR.,
Secretary of the Treasury.
Regraded Unclassified
264
FEDERAL RESERVE BANK
OF KANSAS CITY
FISCAL AGENT OF THE UNITED STATES
November 28, 1942
NEW TREASURY OFFERING
To All Banks, Trust Companies, and Others Interested,
Federal Reserve District No. 10:
Secretary Morgenthau has issued the following statement in connection with the new Treasury
offering:
"In order to finance the war effort, which now is moving into full stride, the United States
Treasury will borrow during December the unprecedented sum of approximately $9,000,000,000
from all sources. This sum will be raised partly through the continuing sale of Savings Bonds and
Tax Savings Notes, and partly through offerings of a number of new Treasury issues designed for
every class and type of investor. Thus every American will have an opportunity to back the armed
forces with bonds.
The Victory Fund Committees will launch an intensive sales campaign on November 30 on
three series of offerings of new securities. These well organized and expanding groups of 44,000
volunteer workers, drawn largely from the securities and banking fields, will solicit subscriptions
from individual investors, corporations, savings and commercial banks, insurance companies, institu-
tions, trusts and estates. The President of the Federal Reserve Bank in each of the twelve districts
is Chairman of the Victory Fund Committee in his district.
At the same time the War Savings Staff, with its 300,000 volunteers in every community, will
intensify its drive to add at least 7,000,000 more income-earners to the ranks of those already invest-
ing regularly in Series E War Savings Bonds through the payroll savings plan.
Almost every citizen has funds in the form of currency or bank deposits which can be enlisted
in the war effort in one way or another through the purchase of Government securities.
The special offerings to be sold under the direction of the Victory Fund Committees will con-
sist of:
1. Twenty-six year 2½ percent bonds due December 15, 1968, callable December 15, 1963,
to be issued in coupon or registered form, at the option of the buyers. Commercial banks,
which are defined for this purpose as banks accepting demand deposits, will not be permitted
to hold these bonds until ten years after the date of issue. There will be no limit to the
amount of this issue, and no restrictions upon issuance excepting the temporary exclusion of
commercial banks from ownership for their own account, Subscriptions books will be open
November 30, and will remain open several weeks. The bonds will be sold in denomina-
tions from $500 to $100,000.
2. Two series intended for banks as well as other investors:
(a) 13/4 percent bonds due June 15, 1948, and
(b) ½ percent certificates of indebtedness due one year after issuance. These securities whether
will be open for subscription by banks, and also by all other classes of investors,
private, corporate or institutional.
Sales to commercial banks will be limited to $2,000,000,000. or thereabouts, of each series.
larger subscriptions on an equal percentage basis. All applications from others than will com- be
Applications from commercial banks in amounts up to $100,000 will be allotted in full, and
mercial banks will be allotted in full. The total of these securities to be issued thus
the $4,000,000,000 from commercial banks, plus the full amount subscribed by others.
(OVER)
Regraded Unclassified
For all classes of subscribers other than commercial banks, subscription books will be opened
November 30 for both series, and will remain open for several weeks. For commercial banks sub-
scription books will be opened November 30 on the 13/4 percent bonds and will remain open until
the close of business December 2, while books will be opened December 16 on the ½ percent certi-
ficates and will remain open until the close of business December 18. In the case of such bank
subscriptions, payment for the bonds must be made on December 11, and for the certificates on
December 28.
The 13/4 percent bonds will be issued in coupon or registered form, at the option of the buyers.
The ½ percent certificates will be issued in coupon form only. The bonds will be sold in denom-
inations from $500 to $100,000 and the certificates from $1,000 to $100,000.
The 2½ percent bonds, 11/4 percent bonds and ½ percent certificates of indebtedness will be
dated December 1, 1942 and will bear interest from that date. Accrued interest will be charged on
all subscriptions for which payment at a Federal Reserve Bank or at an authorized depositary is
received later than December 1.
Any bank or trust company qualified to hold war loan deposits will be permitted to make pay-
ment by credit for securities subscribed for its own account or that of its customers up to any amount
for which it shall be qualified in excess of existing deposits.
All elements of the banking and securities business will conduct a vigorous campaign to assure
the widest possible public purchases of all issues of these securities. In conjunction with weekly
sales of discount bills, these arrangements will make approximately half of the $9,000,000,000 of
Treasury borrowing in December available from non-banking investors, while the other half will
be made available by commercial banks. The widest possible public participation is essential in the
interest of sound financing out of current income and savings.
After completion of this borrowing the Treasury does not expect to do further major financing
until February. For its new money needs in January the Treasury will rely upon further sales of
Tax Savings Notes, Savings Bonds, and Treasury Bills."
For further details as to the three issues being offered please refer to the Treasury Department
circulars enclosed.
Very truly yours,
BANK OF KANSAS CITY
of the United States
265
UNITED STATES OF AMERICA
2½ PERCENT TREASURY BONDS OF 1963-68
Dated and bearing interest from December 1, 1942
Due December 15, 1968
REDEEMABLE AT THE OPTION OF THE UNITED STATES AT PAR AND ACCRUED INTEREST ON AND
AFTER DECEMBER 15, 1963
Interest payable June 15 and December 15
1942
TREASURY DEPARTMENT,
Department Circular No. 701
OFFICE OF THE SECRETARY,
Fiscal Service
Bureau of the Public Debt
Washington, November 30, 1942.
I. OFFERING OF BONDS
1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended,
invites subscriptions, at par and accrued interest, from the people of the United States for bonds of the United
States, designated 2½ percent Treasury Bonds of 1963-68. These bonds will not be available for subscription, for
their own account, by commercial banks, which are defined for this purpose as banks accepting demand deposits.
The amount of the offering is not specifically limited.
II. DESCRIPTION OF BONDS
1. The bonds will be dated December 1, 1942, and will bear interest from that date at the rate of 2½ percent
per annum, payable on a semiannual basis on June 15 and December 15, 1943, and thereafter on June 15 and
December 15 in each year until the principal amount becomes payable. They will mature December 15, 1968, but
may be redeemed at the option of the United States on and after December 15, 1963, in whole or in part, at par and
accrued interest, on any interest day or days, on 4 months' notice of redemption given in such manner as the Secre-
tary of the Treasury shall prescribe. In case of partial redemption the bonds to be redeemed will be determined by
such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in
any such notice, interest on the bonds called for redemption shall cease.
2. The income derived from the bonds shall be subject to all Federal taxes, now or hereafter imposed. The
bonds shall be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall be exempt
from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions
of the United States, or by any local taxing authority.
3. The bonds will not be acceptable to secure deposits of public moneys before December 1, 1952; they will not
bear the circulation privilege, and they will not be entitled to any privilege of conversion.
4, Bearer bonds with interest coupons attached will be issued in denominations of $500, $1,000, $5,000, $10,000
and $100,000. Bonds registered as to principal and interest will be issued in denominations of $500, $1,000, $5,000,
$10,000, $100,000 and $1,000,000. Provision will be made for the interchange of bonds of different denominations
and of coupon and registered bonds, and for the transfer of registered bonds, under rules and regulations prescribed
by the Secretary of the Treasury, except that they may not, before December 1, 1952, be transferred to or be held by
commercial banks, which are defined, for this purpose, as banks accepting demand deposits. However, the bonds
may be pledged as collateral for loans, including loans by commercial banks, but any such bank acquiring such bonds
before December 1, 1952, because of the failure of such loans to be paid at maturity will be required to dispose of
them in the same manner as they dispose of other assets not eligible to be owned by banks.
5. Any bonds issued hereunder which upon the death of the owner constitute part of his estate, will be re-
deemed at the option of the duly constituted representatives of the deceased owner's estate, at par and accrued
interest to date of payment,¹ Provided:
(a) that the bonds were actually owned by the decedent at the time of his death; and
(b) that the Secretary of the Treasury be authorized to apply the entire proceeds of redemption
to the payment of Federal estate taxes.
Registered bonds submitted for redemption hereunder must be duly assigned to "The Secretary of the Treasury for
for credit on Federal
redemption, the proceeds to be paid to the Collector of " Internal Revenue at
estate taxes due from estate of
Owing to the periodic closing of the transfer books and the
impossibility of stopping payment of interest to the registered owner during the closed period, registered bonds
tion of interest from the date of payment to the next interest payment date bonds received during the closed period
received after the closing of the books for payment during such closed period will be paid only at par with a deduc-
for payment at a date after the books reopen will be paid at par plus accrued interest from the reopening of the books
(OVER)
to the date of payment. In either case checks for the full six months interest due on the last day of the closed period
will be forwarded to the owner in due course. All bonds submitted must be accompanied by Form PD 1782,ª prop-
erly completed, signed and sworn to, and by a certificate of the appointment of the personal representatives, under
seal of the court, dated not more than 6 months prior to the submission of the bonds, which shall show that at the date
thereof the appointment was still in force and effect. Upon payment of the bonds appropriate memorandum receipt
will be forwarded to the representatives, which will be followed in due course by formal receipt from the Collector
of Internal Revenue.
6. Except as provided in the preceding paragraphs, the bonds will be subject to the general regulations of the
Treasury Department, now or hereafter prescribed, governing United States bonds.
III. SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department,
Washington. Banking institutions and securities dealers generally may submit subscriptions for account of custom-
ers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Sub-
scriptions must be accompanied by payment in full for the amount of bonds applied for.
2. The Secretary of the Treasury reserves the right to reject any subscription, in whole or in part, to allot less
than the amount of bonds applied for, and to close the books as to any or all subscriptions at any time without notice;
and any action he may take in these respects shall be final. Subject to these reservations, all subscriptions will be
allotted in full. Allotment notices will be sent out promptly upon allotment.
IV. PAYMENT
1. Payment at par and accrued interest, if any, for bonds allotted hereunder must be made on or before Decem-
ber 1, 1942, or on later allotment. One day's accrued interest is $0.068 per $1,000. Any qualified depositary will
be permitted to make payment by credit for bonds allotted to its customers up to any amount for which it shall be
qualified in excess of existing deposits, when so notified by the Federal Reserve Bank of its District.
V. GENERAL PROVISIONS
1. As fiscal agents of the United States, Federal Reserve Banks are authorized and requested to receive sub-
scriptions, to make allotments up to the amounts indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective Districts, to issue allotment notices, to receive payment for bonds allotted, to make delivery
of bonds on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive
bonds.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory
rules and regulations governing the offering, which will be communicated promptly to the Federal Reserve Banks.
HENRY MORGENTHAU, JR.,
Secretary of the Treasury.
An exact half-year's interest is computed for each full half-year period irrespective of the actual number of days in the half year. For a fractional part
of any half year, computation is on the basis of the actual number of days in such half year.
#
The transfer books are closed from May 16 to June 15, and from November 16 to December 15 (both dates inclusive) in each year.
Copies of Form PD 1782 may be obtained from any Federal Reserve Bank or from the Treasury Department, Washington, D. C.
Regraded Unclassified
vik w
266
December 3, 1942.
Dear Mrs. Reid:
This is just to tell you how much
I appreciate the wonderful support the
Herald Tribune has been giving to the
Victory Loan and War Savings campaigns,
especially in your news and editorial
columns of last Monday.
In addition, Mr. Wanders has been
of great help to me and to the Treasury
generally, and I am more than grateful
to you for having made him available at
this time.
Sincerely,
(Signed) H. Morgenthau, Jr.
Mrs. Helen Rogers Reid,
New York Herald Tribune,
230 West 41st Street,
Her ack 1214 is lated
New York, New York.
FK:cgk:eg
+
Copy in Diary
Copies to Thompson
Regraded Unclassified
267
DEC 3 - 1942
My dear Mr. Pelley:
This is just to thank you, and through you, the executives
of those carriers represented at the Payroll Savings conference
with members of my staff on November 19.
The program recommended to the Industry by the conference
has the full approval of the Treasury Department. I am con-
fident that this program, if carried out, will increase the
rate of savings in War Bonds, by railroad employees, to not
less than 10% of their aggregate pay.
The Payroll Savings Plan for the purchase of War Bonds
provides a convenient and regular method of investing in the
security of our country. Savings of this kind are especially
important because they come out of current income and thus
help to reduce pressure of excess spending on the price
structure. Payroll Savings are also important because they
make the purchase of War Bonds a first charge upon the em-
ployee's budget. They are thus to be distinguished from
investments out of large accumulated savings for which other
Treasury securities have been designed. The Payroll Savings
Plan thus permits the Treasury Department to distinguish
between the "payroll dollar" and the "investment dollar,"
which enables us to chart a comprehensive program for raising
the large sums of money necessary to bring the war to an
early and victorious conclusion.
American railroads are making an outstanding contribution
to the winning of the war by handling the heaviest load of
transportation in our history. I am sure the Industry with
its one and one-half million workers will accept the addi-
tional privilege and duty of investing 10% of the payroll
in War Savings Bonds.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Mr. John J. Pelley,
Copy in Diary
President, Association of American Railroads, Copies to Thompson
Transportation Building,
Washington, D. C.
Regraded Unclassified
268
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE 12/3/42
TO
Mr. Morgenthau
FROM
Kr. Callahan
Attached is our latest newspaper advertisement.
Regraded Unclassified
269
What's Mrs. Petrov got that you haven't got ?
Meet Mrs. Petrov, citizen of the Soviet Union
We aren't being asked to burn our homes and
Ler's change that situation-quick. If you aren't
When the Nazi Panzer Divisions approached the
destroy everything we own. Please God, we
in the Payroll Savings Plan-sign up tomorrow.
small Petrov farm in the Ukraine, she knew what
never will be.
If you're already in, but haven't bit 10% yet-
to do.
But we are being asked to join the Payroll
raise your sights. And if you can pur in more-
The whest, so near to harvest time, went up in
Savings Plan and put at least 10% of our earnings
do it.
flames. The potatoes, stored in the cellar, were
into War Bonds! We're being asked-not told-
What's Mrs. Petrov got that we haven't?
soaked with kerosene. The jars of fruits and
to loan money-not give it! And to loan this
Nothing! Let's prove it!
preserves were smashed, and. the cow, which
money at a good rate of interest and for good
had given her children so many quarts of pre-
reasons! We're being asked to buy War Bonds
cious milk, was shot.
to help win the war-to provide a nest egg for
WHAT YOU SHOULD DO:
the future-to provide pescetime jobs and peace-
After piling her two young children, . few blan-
kets and some food on the farm cart, Mrs. Petrov
time goods and a generally decent world that
If you are
did one more thing. She went back to the house
the fellows who are doing the fighting can come
1. Already investing 10% of your par in War Bonds
through the Payroll Savings Plan-boot that 10%
back to,
where she and her husband had been so happy
If you can.
where they had worked so hard to make a
That's ONT job. And it's I job that won't be done
2. Working in a plant where the Plan is installed, but
home for their family-and applied the torch.
until every mother's son of us is buying bonds
haven't signed up yet-sign up tomorrow.
Now, everybody in this country knows that
until it hurts.
3. Working in A plans where the Payroll Savings Plan
Americans are as patriotic-as capable of sacri-
There are, right now, still people who ought to
basn't been installed, talk to your union bead, fore-
fice-as grimly determined to beat Hitler as are
be buying War Bonds through the Payroll Savings
man or plant manager-and see if it can't be installed
right away. The local bank will be glad to help.
the Russians or anybody else on earth.
Plan-and aren't.
4. Unable to get in on the Payroll Savings Plan for any
But-by the Lord Harry-do we have to wait
Right now, while some of the people in the
reason, go to your local bank or wherever bonds are
till a Nazi tank comes rolling up the street
Payroll Savings Plan are setting aside more than
sold. They will be glad to help you start . Plan of
before we prove is?
10%- lot of others are investing less.
your own.
"TOP THAT 10% BY
BUY U.S. WAR BONDS
THROUGH THE
NEW YEAR'S!"
PAYROLL SAVINGS PLAN
This advertisement is a contribution to America's all-out war effort by YOUR NAME HERE
PRINTING
Regraded Unclassified
270
THE WHITE HOUSE
WASHINGTON
December 3, 1942
Dear Henry:
Many thanks for sending me that
recording of the song -- EVERYBODY, EVERY
PAY DAY -- of which Sergeant Richard Uhl
and Corporal Tom Adair are the authors. I
am very glad to have it.
With best wishes,
Very sincerely yours,
Start
STEPHEN EARLY
Secretary to the President
Honorable Henry Morgenthau,
The Secretary of the Treasury,
Washington, D. C.
271
THE SECRETARY OF STATE
WASHINGTON
December 3, 1942
Dear Henry:
Thank you very much for your note of November
thirtieth and the recording of "Everybody, Every Pay
Day" and "March for the New Infantry" by Sergeant Uhl
and Corporal Adair. It was indeed kind of you to
send it to me.
Sincerely yours,
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Regraded Unclassified
272
THE SECRETARY OF THE NAVY
WASHINGTON
December 3, 1942
Dear Henry:
I do appreciate your kindness in sending over to
me the recording that was written for the Treasury by
the two Army men in connection with the War Bond Campaign.
I know I will receive much pleasure from hearing it
played back.
Sincerely yours,
Frank Know
The Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Regraded Unclassified
273
or CORRECT
THE SECRETARY OF COMMERCE
25
w STATES of
WASHINGTON
December 3, 1942
Dear Henry:
I am glad to have the record of
"Ev'rybody Ev'ry Payday." Thanks so much
for sending it to me.
With best wishes,
Sincerely,
JustJon
Hon. Henry Morgenthau, Jr.
The Secretary of the Treasury
Washington, D.C.
Regraded Unclassified
274
STATE OF FINE BION
THE SECRETARY OF THE INTERIOR
WASHINGTON
December 3, 1942.
Dear Henry:
I appreciate your thoughtfulness in sending me the record of the song
composed by Sergeant Richard Uhl and Corporal Tom Adair, in connection with
the War Bond campaign. I share with you the earnest hope that this song
will help the drive.
I am taking the record home and will play it tonight.
Sincerely yours,
Secretary of the Interior.
Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
TREASURY department
275
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
December 3, 1942
FROM
Randolph Paul
If we want to do something concrete for the
business man, I think We should grant an automatic
extension for filing 1942 corporation tax returns.
The extension can be conditioned on a tentative
return with a payment of tax. I think we will lose
nothing and will be in effect making a virtue of
necessity. The thing may be forced on us any way
if we do not agree. If we move voluntarily we will
cultivate a great deal of good will among business
men and accountants.
For your further information I attach herewith
a copy of a memorandum from Mr. Surrey.
Ar
Attachment
276
COPY
MEMORANDUM
TO:
Mr. Paul
From: Mr. Surrey
December 3, 1942
Re:
Extensionsof time for filing 1942 corporation
tax returns
Judging from discussions I had on my recent trip,
the question of extensions of time for filing the 1942
corporation tax returns appears to be a matter of grave
concern to corporations and their tax accountants. Their
office staffs have been 80 seriously depleted by the war
that they believe it will be impossible in a great many
cases to file returns by March 15, 1943. They conse-
quently feel that a restrictive policy on the part of the
Treasury would be unfair and undesirable under these
unusual conditions. Unless a liberal policy is adopted,
they intend to ask the Congress to grant an automatic
extension of time early next year.
This question of extensions of time is one of
paramount concern to business men. It thus involves a
situation in which our cooperation would assist in
maintaining desirable relationships between the business
world and the Department. It would appear possible to
alleviate the difficulties faced by business concerns
during this period with respect to the filing of returns
and at the same time safeguard the March 15 revenue
collections and provide the necessary statistical informa-
tion. Consequently, it would seem desirable that the
tion. question of extensions of time be given serious considera-
Regraded Unclassified
277
Division of Monetary Research
December 3, 1942
Pursuant to the Secretary's suggestion that we explore the
possibilities of combining compulsory lending with expansion of
a social security program, the following plan is submitted as a
suggested approach to the problem.
It is, of course, to be referred to for discussion only
within the Treasury. Needless to say the proposal is submitted
only in the briefest outline so as to confine discussion at this
stage to essential principle. There will be ample opportunity
to formulate the proposal in greater detail if the general
principles survive preliminary discussion.
The proposal has the following objectives:
1. To raise roughly $25 billion annually in compulsory
lending as a means of reducing excess spending power during the
war, and simplifying our program of financing. (This would replace
about $8 billion of the $10 billion of present sales of war savings
bonds.)
2. To provide security during the post-war period against
unemployment, sickness, accident and aid toward exceptional
expenditures arising from death of any member of the family.
3. To help prevent a post-war depression during the period
of transition from war to peace economy, while retaining adequate
control to prevent a post-war inflation.
4. To heighten the morale of the civilian population by
giving them the assurance now that the end of war production will
not mean insecurity.
5. To reduce the pressure for continued production of
armaments after they have ceased to be necessary and to speed
up conversion to peace time production.
To accomplish the above aims, the following steps are proposed:
1. The President shall declare that the first 12 months after
the cessation of hostilities shall be named the "Year-of-Post-War-
Adjustment."
2. There shall be imposed as soon as possible & compulsory
lending program designed to yield about $25 billion. This program
shall contain sppropriate exemptions and graduations and should,
so far as feasible, be collectible at the source.
Regraded Unclassified
278
Division of Monetary
Research
- 2 -
3. During the Year-of-Post-War-Adjustment certain post-war
benefits shall be automatically payable as follows:
(These benefit payments are in the main not intended to supplant
arrangements now in force.)
a. Persons disemployed during that year shall receive
each month 1/12 part of their total contribution made under
the above compulsory lending plan, plus a flat sum at the
rate of $15 per week, these payments to continue so long as
he is unemployed, but not later than the end of the 12-month
period. (Measures will have to be taken to eliminate from
this benefit those who do not intend to accept a job if
offered. Obviously, it will be impossible to secure anything
approaching perfect segregation.)
b. Contributors and their dependents who, during the
year of post-war adjustments, incur medical (including
maternity bills), dental or hospital bills in excess of 825
shall receive 75 percent of the excess but not more than
$200.
C. Contributors who are unable to work because of
injury or illness longer than two weeks shall receive the
unemployment benefit so long as that person is deemed
incapacitated.
d. In the event of the death of a contributor during
this year, his estate should receive his entire contribution
plus $100 to cover funeral expenses.
e. In the event that a dependent of a contributor
should die, the contributor should receive $50 from his
accumilated contribution, plus $50 from the Fund to help
cover the exceptional expenses.
f. In the event a contributor marries during that
12-month period, he shall be permitted to withdraw up to
$500 of his contribution and shall receive an additional
sum of $50 to help cover wedding expenses.
4. The Secretary of the Treasury, with the approval of the
President, shall have the authority to set forth, from time to
time, categories of repayments to contributors of their accumilated
contributions justified either on the grounds of urgent individual
need or on the grounds of the general economic situation.
Regraded Unclassified
279
Division of Monetary
Research
- 3 -
The Secretary of the Treasury shall have the authority to
provide for the return of the contribution at any time in case
of special hardship. Appropriate machinery can be set up for
the purpose of meeting this requirement.
5. The interest earned on the funds accumulated under this
compulsory lending plan shall accrue to the fund and shall be
used exclusively in the payment of benefits and not added to the
amount of money of individual contribution.
6. The President shall have the power to extend the Post-
War-Adjustment Period for an additional year if, in his judgment,
the general economic situation renders such action desirable, and
during that extension the benefits which are permitted shall be
in force during the extended period.
7. Beginning one year after the 12-month period, the remain-
ing contributions shall be returned in quarterly installments.
opportunity
(At that time there would doubtless be provided appropriate/for
reinvestments in Government securities which would have terms and
conditions appropriate to the then prevailing circumstances.)
8. The compulsory lending program ceases when the President
declares the beginning of the year of Post-War Adjustment, except
where liabilities have accrued and have not been collected.
However, if there is no significant disemployment after
hostilities have ceased, the President shall have the authority
to continue the program of compulsory lending in whole or in part
for an additional year.
The period following the cessation of hostilities may be one
of considerable industrial boom because of the accumulated pur-
chasing power of the public and of deferred unsatisfied wants. It
is quite possible that this period will be one of severe curtail-
ment of employment in particular localities and industries. We
should retain the flexibility to handle this apparent paradox of
general boom and local disemployment. This could be done by
retaining the compulsory lending on a full or fractional scale
during the period of post-war adjustment while the payments for
post-war Social Security benefit will be in operation.
In view of the fact that the contributions under this
compulsory lending yield no interest, the accumulation and
distribution of the fund impose only an administrative burden
on the Government, (and what an administrative burden!) aside
Regraded Unclassified
280
Division of Monetary
Research
- 4 -
from the cost of benefits distributed. The value to the contri-
butor who receives no direct benefits rests in the over-all desira-
bility in preventing inflation and of assuring him a reserve of
purchasing power when the forces of accumulated unsatisfied demand
will have largely or wholly spent themselves.
If the year of post-war adjustment should not begin until one
year after the program were to be started, the Fund would have
accumulated by the beginning of that year about $25 billion in
principal and $375 million in interest (estimating interest at
2 1/2 percent).
It is estimated that during the Post-War Adjustment Year,
outpayments totalling $10 billion are not unlikely, probably 1/3
of which would come out of contributions, the remainder repre-
senting all interest accumulation plus additional payments from
the Government. (This assumes disemployment of 10 million persons
for an average of 40 weeks.)
The justification during the post-war adjustment period of
outpayments of that magnitude is to prevent the impact of the
transition from a post-war economy to fall on the disemployed
group and also to avoid mass decrease in purchasing power with
its concomitant economic and social consequences.
The adoption of a compulsory lending program of the above
magnitude would obviously drastically cut into the voluntary
bond purchasing plans. It would virtually cause the voluntary
wage savings plan to disappear. However, it would, in my opinion,
be a grave error to assume that the adoption of a compulsory
lending program means the cessation of voluntary bond selling pro-
grams. The scale of the bond sales program would doubtless be cut
but it would still leave ample scope for morale building and for
explaining the aims of the war and the need for sacrifice, etc.
Insofar as the objective of a voluntary bond sales program
is to help finance the war by getting people to buy bonds, then,
clearly a compulsory lending plan approaching the magnitude herein
suggested is far more effective than is the voluntary savings plan.
Insofar as the objective is the building up of morale, etc., then,
in my opinion, a voluntary savings plan unencumbered by the neces-
sity to produce results of $15 billion a year or more can do a
better job.
Regraded Unclassified
OFFICE OF CIVILIAN DEFENSE
DEC 3 1942
Ir. Henry Morgethau
Secretary of the Treasury
Mashington, D. C.
Dear Tr. Lor enthau:
Thank you again for your quick response in the matter
of the Son >: noisco Stage Door Canteen.
I have noted your letter to the Secretary of War, and
Ir. Hilton Shubert is at present on his way to California
to naire the final arrangements.
I in confident that it will be of benefit to everyone
concerned.
Sincerely yours,
Moloyn Douglas
Melvyn Douglas
5
POLVICTORY
BUY
STATES
the
Regraded Unclassified
282
December 3, 1942
Dear Norman:
When I returned from my trip
out West, I found your letter of
November 21st. I was very glad to
receive it and have read it care-
fully.
Yours sincerely,
(Signed) Henry
Honorable Norman Davis,
Chairman,
American Red Cross,
National Headquarters,
Washington, D.C.
File in Diary
Regraded Unclassified
283
house
AMERICAN RED CROSS
NATIONAL HEADQUARTERS
WASHINGTON. D. C.
November 21, 1942
My dear Henry:
I was very much interested in having your impressions con-
cerning the Red Cross activities which you saw while you were in Great
Britain and I understood from you that you had not had an opportunity to
see a. great deal of the Red Cross activities. In view of the fact that
all of the reports which have come to me from such people 8.8 Mrs. Roose-
velt, who saw a great deal of our activities, and from Arthur Sulzberger,
who made a complete and thorough survey for me during August and September,
and that your report is the first unfavorable one which has come to my
attention, I am exceedingly anxious that you should not form unfavorable
impressions on what you told me was a very superficial inspection of EL
limited number of our Red Cross clubs.
All of us who are interested in providing welfare and
recreation activities for the United States Forces abroad recognize the
fact that it will take time to perfect these activities. There are many
difficulties inherent in the problems which we are attempting to solve
since shipping space from the United States for equipment and transporta-
tion facilities for personnel have been BO limited. Last March (1942)
General Chaney, then in command of the United States Forces, asked the
Red Cross to establish a very limited number of club and recreation
centers, particularly in the larger cities in Great Britain, in order
that the men coming to those cities on leave would have 8. place to sleep,
eat and enjoy some American atmosphere. At a later date when General
Eisenhower arrived in Great Britain he asked that we embark on a con-
siderably more ambitious program and considering the limited facilities,
including the great shortage of buildings and the great problem of shipping
from the United States, everyone including General Eisenhower has been
favorably impressed with the results which we have achieved. We now have
approximately forty clubs operating in Great Britain. A few of these do
not have as yet all of the equipment which they should have and will have.
We also have in operation several clubmobiles which are visiting the small
camps in the more remote places and have established a canteen service on
the docks when troops arrive and are establishing certain facilities at
certain key railway points. By March 1 we will have 120 clubs in operation.
We have gotten these results because of a close cooperative
Regraded Unclassified
- 2 -
284
relationship with the United States Army and with the British Government.
The British have been most generous and appreciative of our problems and
have rendered us great assistance in the matter of locating buildings in
the areas where there have been great demands for the very limited space
which was not already taken for important activities. About the first of
September we reached complete agreements with the Minister of Information,
Mr. Brendan Bracken, who has been designated by the British Government to
act in the matter of hospitality to United States troops. These agree-
ments included not only facilities which the American Red Cross would set
up but facilities which the British were operating. We stated that it WILD
not only desirable but essential that British organizations should continue
to render services to our forces and that in many instances they should
expand their existing facilities and in other instances create new facil-
ities. Attached you will find a. copy of the statement of agreement be-
tween the Ministry of Information and the American Red Cross dated September 8,
1942. We are in constant contact with the Ministry of Information with
reference to the carrying out of these agreements.
We are working closely with the United States authorities in
locating new facilities and are following their advice on the order of urgency
of location of our club and recreation centers. General Eisenhower has
approved a plan agreed upon between his staff officers and the American Red
Cross and he is kept fully informed with reference to plans for the creation
of new facilities either by the American Red Cross or by British agencies.
I attach for your confidential information a statement which we have recently
received from General Eisenhower which you will note indicates his approval
of the work we are doing and expresses appreciation to the American people
for their generous support which has made possible this work of the American
Red Cross.
No one who 18 familiar with the work which we are doing in
Great Britain would say that it is perfect and all of us are conscious of
the fact that improvements can be made and improvements are in fact planned
and will be put into effect as soon as shipping facilities are available and
as soon as the British Government authorities can make more buildings avail-
able to us. All of us working with these problems are impatient to overcome
the difficulties and are cooperating to do 80.
I was quite surprised on my return to my office yesterday
afternoon after my conversation with you to hear that at 8 luncheon meeting
of the Overseas Club you made uncomplimentary reference to the work of the
Red Cross in Great Britain. I hope the above information will at least help
to make you feel better satisfied about the work of the Red Cross in Great Britain
Sincerely,
Chairman
The Honorable
Henry Morgenthau, Jr.
Secretary of the Treasury
Department of the Treasury
Washington, D. C.
Regraded Unclassified
285
P
I
STATEMENT OF LIEUTENANT GENERAL DWIGHT D. EISENHOWER, COMMANDING GENERAL
SUROPEAN THEATER OF OPERATIONS, UNITED STATES ARMY
The American Red Cross is the one agency of its kind to serve
our Armed Forces overseas. The services rendered in the European
Theater have been invaluable.
At the scores of American Red Cross Service Clubs established
throughout Great Britain our Forces, while on leave, are able to ob-
tain meals, lodgings, information and recreation; all with an American
home atmosphere.
The Red Cross serves our Forces while on duty, and is of even
greater value when men are hospitalized.
I cannot speak too highly of the benefits which have resulted
from the unselfish efforts of those engaged in the work here. On
behalf of our Forces in the European Theater I desire to express ap-
preciation to the American people for their generous support which
has made possible the operations of this great organisation.
Regraded Unclassified
28E
COFT
8/9/12 - No. 16
OF INFORMATION AND AMERICAN RED CROSS
STATEMENT OF AGREEMENT
The Minister of Information has been appointed by His Majesty's
Government to concern himself with the provision of hospitality to the
American Forces in the United Kingdom and the promotion of their walfare.
He has assumed the task of ce-ordinating the activities of all British
agencies, public and private, which offer their assistance to the American
Forces for these purposes.
The American Red Cross is the American agency designated by the
Secretary of War of the United States to serve with the American Forces
in the United Kingdom and to assist the military authorities named by the
Commanding Officer of the American Forces in the European theatre is
carrying on such activities as say be agreed upon between the Commanding
Officer of the American Ferces and the Commissioner of the American Red
Cross to the United Kingdom. The latter will maintain close contact with
the Ambassador of the United States to the United Kingdom.
The American Red Cress will collaborate fully with the Ministry of
Information and, through it, with the British Voluntary Societies and other
British agencies.
The American Red Cross is at present establishing club and recrea-
tional facilities, including dermiteries and canteen service, in the prin-
cipal cities which it is expested will be leave centres for the American
Forces. In co-operation with the British authorities through the Ministry
of Information and with the appropriate American Army authorities it will
survey the need for the establishment by the American Red Cross of additional
services of this kind in other cities, towns and villages adjacent to American
Aray camps.
At the same time it is expected that similar British facilities in all
localities will, in general be used to the fullest extent by the American
forces. The services of the Council of Voluntary War Work are being extended
to the American Forces. The British authorities say, in agreed instances,
expand through the Council of Voluntary War Work existing facilities or 18-
tablish new ones in order to meet present and growing needs.
Such recreational facilities may be supplemented by the American Red
Cross and additional facilities may be established by them wherever judged
proper by the American authorities. The active participation and oe-operation
of British organisations in these arrangements is not only welcome but essential.
The full charge of British services to the American Forces will be not
from British sources. It is neither expected nor desired that any financial
support for such activities should be derived from the United States of America.
SUBSTRY OF INFORMATION
287
BOARD OF ECONOMIC WARFARE
OFFICE OF EXECUTIVE DIRECTOR
WASHINGTON, D.C.
DEC 8 1942
The Honorable,
The Secretary of the Treasury.
Dear Mr. Secretary:
Enclosed are the minutes of the meetings of the Board
of Economic Warfare which were held on October 29 and
November 12, 1942.
If there are any corrections which you care to suggest,
please let me know.
Sincerely yours,
Mile Periums
Executive Director
Enclosures
Regraded Unclassified
SECRET
288
Minutos of the Meeting of the Board of Economic Warfare
Hold October 29, 1942 at 10:00 a. m,
A mooting of the Board of Economic Warfaro was hold in the Vico
Prosident's office in the Capitol Building at 10:00 a, m. on October 29,
1942.
Those present:
The Vice President, Chairman of the Board
Mr. Doan Acheson, representing the Secretary of State
Mr. E. M. Bernstoin, representing the Secretary of the Treasury
Mr. John L. McCloy, representing the Socretary of War
it. Charles Fahy, representing the Attornoy General
The Socretary of the Navy
ltr. John Lockwood, representing the Coordinator of Inter-Amorican
Affairs
ltr. E. R. Stottinius, Jr., Lond-Loaso Administration
In addition, the following persons were present:
Hr. Hayno Taylor, Dopartment of Commorco
Mr. W. L. Clayton, Dopartment of Commerco
ltr. Loslio Whoolor, Department of Agriculture
Mr. Harold H. Noff, War Dopartment
Mr. Thomas K. Finlotter, Stato Department
Mr. Horbort Gaston, Treasury Department
Mr. Horbort Fois, Stato Dopartment
ltr. Adlai Stevenson, Navy Department
Mr. Milo Porkins, Board of Economic Warfaro
Hr. Cass Canfiold, Board of Economic Warfaro
Mr. Hickman Price, Jr., Board of Lconomic Warfaro
Mr. Wm. T. Stono, Board of Economic Warfaro
Mr. E. W. Gaumnitz, Board of Economic \arfaro
Axis Blockndo Running.
The Vico Prosident openod the mooting indicating that tho first itom
on the Agonda was Axis Blockado Running. A statomont propared by the
Board of Economic Warfare was circulated at the mooting.
ltr. Porkins commonted briofly on tho report, indicating that Germany
and Japan had doveloped a significant means of interchango of goods by way
- 2 -
of blockado runnors, with somo twonty-fivo vosscls available for such
trado. With the ships available, it is ostimated that Gurmany and Japan
can exchango around 225,000 tons of critical material por year in cach
direction. Evidence indicates that major shortages in both countries have
boon rolieved to some extont. Continuation of the traffic would onable
Germany to bo furnishod with supplies of such important itoms as natural
rubbor, tin, tungston, fats, oils and drugs. It is likoly that Japan would
rocoivo principally machinory and finished industrial products. Contin-
untion of the traffic would strongthon both onomios and tond to offsot the
offectivenoss of the blockade and proclusivo purchasing.
Whilo it was recognized that blockade running was largely a mattor for
tho military authoritics, Mr. Porkins indicated that tho problem was brought
bofore tho Board primarily because of its offect on proclusivo buying. If
blockado running were to bo oxpanded, the policy with reference to proclu-
sivo purchases might have to bo rovisod.
Swedish Trado Policy.
Tho Vico Presidont road a lotter from tho Prosidont with reforence to
tho question of trado with Swodon. Tho Prosidont indicated his wish that
the Board submit its rocommondations on the trado policy to bo followod.
Tho Vico Prosident stated that a statement of facts on Swodish Trado, "Trado
Policy Toward Swodon" had boon circulated. Discussion thon contered on
the facts as to Sivodish trado, Swodish imports and exports from outsido tho
blockade area, and within tho Axis dominated aroa. In gonoral thoro vas
acceptance of the facts as stated in the roport.
Regraded Unclassified
289
- 3 -
It was decided to roquest the Sub-committoc on Swodish Trado to submit
its rocommondation as to trado policy, and to submit tho Swodish Report
and the Sub-committoo report to tho Joint Chiefs of Staff for such commonts
as that group might wish to mako. The ontire problom was to bo considered
furthor at tho noxt mooting.
Tho mooting adjourned at 11:15 a. m.
Regraded Unclassified
ppr
E
them of obert no 050 at GCM JI
& duthows of has where de (If 672
electring tinue 102 22.00.20 20 of Program ode And
-d 24 1151 meding out of TWO DO on
X we JM
OF STATE VII June ont
Regraded Unclassified
SECRET
290
Minutes of the Meeting of the Board of Economic Warfare
Held November 12, 1942 at 10:00 8, m.
A meeting of the Board of Economic Warfare was held in the Vice
President's office in the Capitol Building at 10:00 a.m. on November 12, 1942.
Those present:
The Vice President, Chairman of the Board
Mr. Dean Acheson, representing the Secretary of State
Mr. Harry White, representing the Secretary of the Treasury
Mr. R. P. Patterson, representing the Secretary of Tar
Mr. James V. Forrestal, representing the Secretary of the Navy
The Secretary of Agriculture
Mr. Nelson A. Rockefeller, Coordinator of Inter-American Affairs
Mr. William Batt, War Production Board
Mr. E. R. Stettinius, Jr., Lend Lease Administration
In addition, the following persons were present:
Mr. John Lockwood, Coordinator of Inter-American Affairs
Mr. Wayne Taylor, Department of Commerce
Mr. W. L. Clayton, Department of Commerce
Mr. Leslie Wheeler, Department of Agriculture
Mr. Harold H. Neff, Var Department
Mr. Thomas K. Finletter, State Department
Mr. Herbert Feis, State Department
Mr. L. W. Douglas, /ar Shipping Administration
Mr. Milo Porkins, Board of Economic Warfare
Mr. Cass Canfield, Board of Economic Warfare
Mr. Win. T. Stone, Board of Economic Warfore
Mr. Morris Rosenthal, Board of Economic Warfare
Capt. W. D. Puleston, Board of Economic Warfare
Mr. E. W. Gaumnitz, Board of Economic Warfare
Cryptostegia
The Vice President opened the mooting, indicating that the first sub-
joct for discussion was the report on Cryptostogia, copies of which had been
circulated ("Roport to the Board of Economic Tarfaro on Cryptostogia dated
November 6, 1942. Mr. Porkins was asked to comment.
Mr. Porkins reviewed briefly tho dovelopment in cryptostogia, stating
that tho plant gavo promiso of boing an important source of rubbor--scion-
tists indicating that it had great possibility -but that experiments had
not procooded far enough to know definitoly whother quality would bo
Regraded Unclassified
2
acceptable under commorcial conditions. Charactoristics of the plant itsolf
from a growing standpoint are not too clear, and tapping or harvosting mothods
are still in tho exporimental stago. At the samo timo tho scod supply is
limitod, but sufficiont sood is available to allow somo expension in plant-
ing. Duo to provioys experience in Haiti, arrangomonts have boon inde for
oxpansion of crengo in that .ro. with limitod expension olsowhore.
Mossrs. Achoson ná Rockofuller reised questions R8 to the dosirability
of some cryptostogic plantings in Contral America, mainly bocause of grow-
ing unsmployment in that area, while in H:iti the libor supply WS loss
plontiful. Mr. Porkins stated that the first expansion projects had boon
concontr tod in Hriti primarily bochuse of somo experiendo with the plant in
that area, because seed The vailable there, because land whs available for
immodiato planting and because it W.S docmod advisable to concontrato tho
first plenting so that exporimental work could bc contored. At the and of
nother 60 to 90 days, if progress wore favorable, Mr. Porkins state d that
consider tion would bo givon to expansion in other arcns. Mr. Clayton added
that ho understood 1 bor 17 8 plontiful in H iti.
The Vic. Prosidont then st tud that sinco the development of cryptostogic
nis n source of rubbor was highly questionable except under TTT conditions,
loss reporcussion would rosult 11 doro gus were scuttored in several nrons.
Swodish Trado Policy
The Vicc Prosident thon reforred to the oucstion of trado policy with
Swedon. Sinco the list mooting, the sub-committoc had m.do 1 report con-
taining its recommondations, the report boing submitted by the Board of
Economic Warfare, Stnto Dopartment, Navy Department and Whr Production Board
but with War Department dissonting. Copics of tho sub-committee roport
Regraded Unclassified
- 3 -
291
and a revised factual statement had been circulated to Board members prior
to the meeting.
In conformity with the Board decision at its meeting on October 25,
copies of the factuel statement on Swedish Trade, "Trade Policy Toward
Sweden" BL-10-Rev. 2 and the sub-committee recommendations, "Trade Policy
Toward Sweden" BL-10-b were sent to the Joint Chiefs of Staff for comments.
No comments had been received from that group as of November 12.
The Vice President asked whether the sub-committee recommendations
were agreeable to State. Mr. Acheson indicated that the report was agree-
able except the last part peragraph on Page 4 and the first part paragraph
on Page 5. It was his thought that petroleum shipment should not be made
contingent upon concessions being gained from 3weden,
There Was considerable discussion of the recommendations of the sub-
committee and particularly of the point raised by Mr. Acheson. The follow-
ing resolution was passed, with Messrs. Patterson and White reserving the
right to dissent:
'RESOLVED THAT over-seas trade with Sweden be continued, including the
shipment of petroleum products in exchange for commitments, secret or other-
wise, of the types to meet the objectives of this government set forth in
paragraphs a. to 1. of the recommondations submitted by the staff of the
Board of Economic Warfare dated November 5, 1942; and that this policy be
carriod out in consultation with the interested agencies by the Board of
Economic Varfare in colleboration with the Department of State."
It was agreed that in transmitting the Board rosolution to the
President, it should be pointed out that the Board resolution vns passed
without having available the comments of the Joint Chiefs of Staff.
The Vice President stated that copies of any letter received from the
Joint Chiofs of Steff with reference to the sub-committce report would bo
sent to Board mombers.
The meeting adjourned at 11:30 a.m.
Regraded
Unclassified
292
OFFICE OF LEND-LEASE ADMINISTRATION
FIVE-FIFTEEN 22d STREET NW.
WASHINGTON, D.C.
E.R. Stettinius. Jr.
Administrator
December 3, 1942.
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Treasury Department,
Washington, D. C.
Dear Mr. Morgenthau:
I have a memorandum from Oscar Cox dated November 23
saying "I think some serious consideration ought to be given
to how high the British gold and dollar balances should be
allowed to rise, particularly in view of the possible boomerang
from the standpoint of Congress' reactions to additional
appropriations" for Lend-Lease. I understand that your records
show that as of October 31, 1942, the United Kingdom's official
dollar balance was $237,000,000., and its so-called "available
gold" $468,000,000. with an additional so-called "scattered"
gold of $210,000,000., and that the United Kingdom's gold and
dollar position is growing increasingly strong.
In the light of these facts I think it might be well
for Dean Acheson, Milo Perkins, and me to have e. talk with you
about this situation and the possible advisability of taking
steps through Lend-Lease operations or otherwise to keep the
British combined gold and dollar position from rising materially
above its present relatively high level.
Sincerely yours,
E.
FORDEFENSE
BUY
UNITED
STATES
SAVINGS
BONDS
AND STAMPS
Regraded Unclassified
293
DEC 3 - -
Dear Victor:
I have your letter of November 25, 1942,
with respect to certain operations in French francs
which have come to your attention.
Such transactions can only be effected
under license and hence are only permitted when they
are in the interests of this Government. Under the
circumstances it would be preferable that no further
inquiry be made with respect to the transactions which
you have noticed.
Sincerely,
(Signed) H. Morgenthau, Jr.
Mr. Victor Roudin,
30 Rockefeller Plaza,
New York, New York.
Photo file in Diary
Original file direct to Paul 12/4/42
MLHoffman:mgb 12/1/42
Regraded Unclassified
294
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
DEC 3 - 1942
TO
Secretary Morgenthau
FROM
Randolph Paul
We think the transactions which came to Mr. Roudin's
attention were operations on behalf of the Office of Strategic
Services.
ASD
Regraded Unclassified
Halfin of Houdin
General the of Am
leve thank
John / Hilper
Furch 2 4640
Ticler
Educal / " John
Cable
Hephen Halter
7.77 15ᵗʰ that //
Sther " Haldenly
Hard * Hurns
Hushington 9 is
Executive 19877
November 25, 1942.
Dear Henry:
I have not replied to your letter of November 12th
before now because I tried to get as much information as I
could on the subject of the sale of French francs in French
Colonies for dollars. So far, I do not find any indication
that there have been unusual transactions. or course I am
somewhat handicapped in my efforts because my inquiries of ne-
cessity must be casual. Also, our military success in North
Africa has undoubtedly affected this exchange situation.
What has puzzled me particularly is the indication
that the purchases of French francs, payable in dollars in the
United States, are for the use of our government. The latest
rate was seventy-five francs for the dollar. If any agency or
Department of our government had made such offers, conditions
must now have removed this need. On the other hand if such re-
presentation was false, it might be interesting to learn why
the story was given that added twist and who was in the market
for the francs - the interest was only in large amounts.
If the origin of the offer or any part of the story
is of interest to your Department, I shall try to trace it as
far as possible.
Sincerely,
Hon. Henry Morgenthau,
Treasury Department,
Washington, D. C.
Regraded Unclassified
296
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate, Algiers, Algeria
DATE: December 3, 1942, 3 p.m.
NO.: 63
This is a message from Mr. Murphy.
Reference is made to telegram no. 444, sent by the
Department at 8 p.m. on November 30, 1942.
I have been informally advised by the French authorities
that the arrival of a Polish representative mentioned in
the telegram under reference would be welcomed. His
presence here would be useful from our standpoint as well.
Unofficially I have discovered that all of the gold
belonging to Poland referred to has been sent to Europe,
the same apparently being true with regard to the Belgian
gold which was stored in French Africa at one time. I
have also obtained information that most of the French
gold is still here but it is not all stored in Kayes any
longer. Apparently it has been scattered among several
different places,
COLE
Regraded Unclassified
297
PARAPHRASE OF Telegram RECEIVED
FROM: American Embassy, Chungking, China
DATE: December 3, 1942, 9 a.m.
NO.: 1425
Mr. Hall Patch, the British Financial Attaché, who is
shortly departing for London and from there will go to
Washington, gave us the following information. For some
time now negotiations for the use of the British credit of
$50,000,000 have stood still. Several proposals have been
made by the Chinese but these were not acceptable to the
British because they did not conform to the British require-
ment that this credit should be utilized for purchases made
within and only for the duration of the war. Lately
Wellington Koo "personally" approached the British Embassy,
with the knowledge of the Minister of Finance. Koo made
the following suggestions:
1. That when the war was almost at an end and the
British knew that they could spare machinery and ships
useful to China, the credit be used to finance transfers
thereof, or
2. That the credit be used to take over customs-
secured loans to China.
It seems that the British did not wish to accept either of
these plans. As yet they have not agreed on a plan to use
the loan. The Minister of Foreign Affairs, Mr. Soong,
has not been communicative about the matter but there is
hope that he may work out some practical proposition when
he makes his reported visit to London, after his return
to Washington,
GAUSS
Regraded Unclassified
298
DEC 3 - 1942
ky dear Mr. Berle:
This is in reply to your letter of November 21,
1942, concerning the inquiry of the Iranian Government
whether this Government is willing to enter into a
financial agreement with the Government of Iran whereby
our needs for rials say be met directly.
I an designating Mr. H. L. White to represent the
Treasury in discussions of the reply to be made to the
Iranian Government.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Mr. 4. 4. Berle, Jr.,
Assistant Secretary of State,
Department of State,
Washington, D. C.
(Marked "Confidential")
Photo file in Diary
Orig. file direct to White's
office 12/4/42
JWG/gre
12/2/42
Regraded Unclassified
- THE RECEPTARY
-
-
DEPARTMENT November 21. 1943
WASHINGTON
In reply refer to
My dear Mr. Secretary:
I enclose conies of 8 paraphrase of telegram no. 367,
dated November 11, 1942, from the American Legation at
Schren, Iran, station that the Prime Minister of that coun-
try has requested the American Minister to ascertain whether
the United States Government 1 P willing to enter into A
financial agreement with the Government of Iran whereby Ameri-
can neede for rials may be met directly rather than through
the British Government. I ALRO enclose copies of P memoran-
Num prepared in- this Department eummarizing relevant informa-
tion on this matter.
It 10 the feeling of this Department that it might be
to the advantage of this Government to enter into an arrange-
ment with the Government of Iran which would facilitate the
acquisition of rials for meeting American payments in that
country particularly since our need for rials appears likely
to increase steadily. It will be noted that the Iranian
Prime Minister has suppested an agreement patterned after
the British-Iranien Agreement of May 26, 1942, a copy of
which wee transmitted to the Treasury Department on July 9,
194°.
I should appreciate " If Mr. Harry White or such other
appropriate officer R.9 you may designate could come to this
Department At an early date to discuss the nature of the
reoly that should be made by this Government to the request
of the Iranian Government.
Sincerely yours,
aarshes
A. A. Berle, Jr.
Enclosures:
Assistent Secretary
Ae stated above.
PDEFENSE
The Honorable
BUY
Henry Morgenthau, Jr.,
UNITED
STATES
Secretary of the Treasury.
WINGS
BONDS
Stwin
Regraded Unclassified
PARAPHRASE OF TELEGRAM RECEIVED
300
FROM: American Legation, Tehren, Iran
DATE: November 11, 1942, 11 a.m.
NO.1 367.
The British Minister and I have been informed by the
Iranian Prime Minister that the Russian Government has
formally requested the Trantan Government to make a
financial agreement similar to the British-Iranian agree-
ment of the 26th of May of this year. It has been proposed
by the Russians that each party open and draw on a non-
interest bearing account, these accounts to be in the state
banks of each country. A settlement would be effected at
the end of each semester on the basis that balances would
be settled 60 per cent in dollars and 40 per cent in gold,
We have been advised by the Prime Minister that he objects
to the proposed Russian agreement since in effect it would
permit the Russians to make purchases in Iran on virtually
a credit basis. It may be noted that the Soviete are now
seeking to purchase 30 thousand tone of rice, 24 thousand
tons of barley and 8 thousand tons of wheat. Another reason
that the Prime Minister is opposed to the proposed agreement
is that the dollars would be at the mercy of the Soviet
Government since they would remain on deposit in Mossow.
We have been advised by the Prime Minister that it is
his intention to counter with A proposal that an agreement
be made along the lines of that between Iran and the British.
I have been requested by the Prime Minister to ascertain
whether the United States Government 10 willing to enter into
an agreement similar to that in effect between Iran and the
British in order that American needs for rials may be obtained
directly from the Iranian Government rather than through
British sources,
DREYFUS
Regraded Unclassified
301
The United Nations have been pouring considerable
amounts of foreign exchange into Iran to cover the ex-
penses of their forces and transport operations in that
country, In recent months, these expensitures have been
r usaly AS follows: Great Britain, 300,000,000 rials
monthly; Russia, 100,000,000 rials monthly; United States,
16,000,000 rials monthly. (The present rate of exchange
12 32 rials to the dollar.) Although the Department's
information is incomplete, it seems that, coupled with
a generally Fieing price level and possibly extensive
hoarding of currency, these heavy purchases of Irenian
funde have brought the rial bank note circulation once
more up to the legal limit fixed by the Majlie (--rliament)
The Majlis has been reluctant to increase the circulation
Lecause of fears of inflation and its diseatis rection at
the failure of the United Nations Governmente to provide
voe t ANG other enterials needed for the of
the Ironian economy.
It will be recealed that n sivilar Pitation prose
Inst ever.ng and UPP mettled by the onnelusion of the Angle-
financial agreement of any 26, During Cotober,
VOIDE the chart E° of currency mind, the Pritish Govern-
want brought pressure to hear to obtain fulfillment of
that agreement through authoris tier. by the Majlie of the
Legiance of two billion additional riele in currency.
after much negotistion, the Frime Minister afreed to
prots for the issume of 500,000,000 rinl in new cur-
rency, of which 150,000,000 were to be enrmarked for Allied
purchase. He also aureec to aponsor the 1980Ance of A
further 1,500,000,000 rials, provided the United States
and Great Britsin would guarantee to make un any deficiency
in Iranian grain clocks prior to the gather DC of the 1943
harvest.
The 500,000,000 rial issue wha, in fect, authorized
during the fourth week in October, but it appears that
the quantity allocated for the Allies has already been
The Department of State end the Foreign Office
have now agreed upon an undertaking vity regard t wheat
supply to Iran which It 1s expected will estisfy the Iranian
Government and which will probably be signed and made nublic
within & short time. The Foreign Office has proposed, and
the Department has agreed, that A on ition precedent to
this undertaking shall be the creation of an Iranian com-
mission to control the currency, presumably with full
power
Regraded Unclassified
302
-2-
power to increasecirculation at will, thus removing the
currency question from the hands of the Najlis and giving
greater assurance that the undertakings of the Iranian
Cabinet with respect to note issue will be fulfilled.
By a telegram dated November 11, 1942, the American
Minister at Tehran has reported that the Prime Minister
wishee to conclude a financial agreement with the United
States along the lines of the Anglo-Iranian agreement of
May 26.
Hitherto the principal Allied expenditures in Iran
have been British, nn' the currency problem has, conse-
quently, been of primary concern t the British authorities.
However, the United States 18 undertaking vastly granter
responsibilities In Iran, and it Broma probable that our
expenditures, and consequent need for Iraning currency,
vill equal or surpase these of the writish within e few
menths.
As brokgrowne information, it 18 of interest to note
the following figures on Iranian bank note circulation:
June, 1940
990,640,936 riale
August, 1 41
(Just before Anglo-
Russian occupation)
1,377,101,565 rinls
key, 1942
1,841,308,575 rials
September, 1942
(authorized)
3,000,000,000 rials
November, 1942
(authorized)
3,500,000,000 riale
Note: It may be assumed that Actual circulation is
virtually identical with authorized circulation nb the
present time.
dressess visiscoM
to notatvid
SAST ES von
Deberament
beceined
NE:JDJernegan:RED
Regraded Unclassified
303
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, Tehran, Iran
DATE: November 20, 1942, 6 p.m.
NO.: 386
4 bill was enacted last night by the Majlis under which
it surrenders its powers over currency to the currency
committee which is already in existence. The Golivery
of rials to the Allies by the Banque Lellie has been
promised by the Prime Vinister for tomorrow. There will
be an immediate mueting of the currency board to consider
additional issue of rials. Inassuch as the British now
feel that they have received satisfaction on the currency
question we are proceeding at once with the declaration
concerning wheat. The text of the currency bill enacted
by the Majlis is as follows:
Article One. From the date of the pussing of this
law authority for the issue or notes is vested in the
Note Reserve Control Committee.
Article Two. The Director General of Finances,
Doctor Misslpaugh, will become E member 01 the Note
Reserve Control Committee after 11s arrivel.
Article Three. The conditions for the lasue of notes,
authority for which is vested by this law in the Note
Reserve Control Committee, will be fixed by 8 decree of
the Council of kinisters acting on proposels put forward
by the Note Reserve Control Committee.
Article Four. Notes which are issued by virtue of
this law must possess the following becking: A. As to
603: Gold at the official rate ruling in the International
market at the present date and/or pounds and dollars con-
vertible into gold. B. AB to 4090: Pounds end dollars
guaranteed against depreciation in term of THE at today's
rate.
Article Five. The because for the noten 1.0 the value
of three thousand five hundred million ricla, authority
for the issue of which has been Liven up till this date,
will be on 8 basis of 50% gold _nd silver, velue et the
international market rate and the jewels w.lo]. were
handed over to the National Date 16 with the
lew of twenty-five Aban. 13,10,
DRIVING
Regraded Unclassified
304
NOT TO EE RE-TRANSMITTED
COPY NO.
13
BRITISH MOST SECRET
U.S. SeCRET
OPTEL No. 420
Information received up to 7 A.M., 3rd December, 1942.
1. NAVAL
It is considered that 4 enemy ships (including 2 troop
transports) end 3 destroyers were sunk during the engagement off CAPE BON
yesterday morning.
2nd. One of H.M. Destroyers was torpedoed and sunk by
vircraft off BIZERTA. One of H.M. Submarines shelled and set on fire a
small ship off East TUNICIA. 10 Germen Mr force personnel were cap-
tured. The Greek submarine PAPANICOLIS sank a 6,000 ton ship in the
Aegean. 157 survivors out of A total of 310 have been picked up from
the merchant ship reported torpedoed off LOURENCO MARQUES in OPTEL NO.
419.
2. MILITARY
LIBYA. Artillery of our advanced armoured formations
has been active in the area south of MERSA BREGA.
FRENCH ORTH AFRICA. Our parachute troops who londed
at PONT DU FAHS on 29th are reported to have ceptured OUDNA 15 miles
south of TUNIS next day.
RUSSIA. Although the Russians a car to De mointoining
their pressure both on the Central and DON Sectors they have failed to
make any definite progress. In the South this may be due to n break
in the weather regorted by the Germans who state that a thaw has set in
accompanied by heavy rain in the Don Bend. This could seriously impede
operations by both sides.
3. AIR OPERATIONS
WESTERN FRONT. 2nd. In Northern France 7 locomotives
were dumaged by our fighters, one of Which is missing.
2nd/3rd. 112 Dombers were sent to FRANKFURT and 4 to
drop leaflets. Full landing reports not repetition not yet available
but preliminary information indicates attack spoilt by considerable
clouds.
MEDITERRANEAN. lat/2nd. A Navul torpedo bonber tor-
pedoed an escorted 7,000 ton enemy tanker which was later seen stationary
off West SICILY.
2nd. MALTA based aircraft attacked a convoy off KERKENNA
ISLAND. Bursto and fires were seen.
INDO-CHINA. 28th November. Escorted U.S. bombers hit
4 power station and started fires in coal storage dumps at HONGAI and
PORT CAMPHA 40 miles east of HAIPHONG.
Regraded Unclassified
305
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 426
Following is supplementary resume of operational evente covering
period 26th November to 3rd December, 1942.
1. NAVAL
A convoy of 29 ships from RUSSIA has arrived U.K. with loss of one
ship torpedoed by U-boat and 1 ship missing. The Italian blockade runner mentioned
in OPTEL No. 419 actually surrendered but had to be sunk oring to bad weather.
MEDITERRANEAN. On the Axis supply routes to TUNISIA and TRIPOLITANIA
during the period from 1st to 4th a total of 9 supply ships were sunk and 1 large
tanker left heavily on fire as the result of our Naval, Naval Air, and R.A.F. attacks
In addition 3 destroyers and torpedo boats are known to have been sunk while escorting
those ships. Other shipping was damaged or diverted. No sign of activity on part
of Italian heavy ships or cruisers. There was very little traffic to TRIPOLI (L)
during the week. Air photographs of TOULON on 28th November showed all important
ships either scuttled or damaged except 2 6" cruisers. Three of the 19 submarin
in TOULON on 26th November now in North African ports, 1 interned in SPAIN, 4 are
known to be scuttled, 5 are unaccounted for. No evidence from photographs as to
damage to Naval dockyard, installations or oil storage at TOULON.
SUBMARINE WARFARE. U-boats still quiet both East and West of GIBRALTAR
but there are signs of greater activity in Central North Atlantic. Week ending 29th
November, 6 ships sunk by U-boat, 2 in Atlantic, 4 in Indian Ocean. 2 ocean convoys
totalling 87 ships, arrived U.K. without loss, 1 outward ocean convoy arrived without
loss. Ships were lost in two outward bound convoys. 6 promising attake on U-boats
reported. Shipping losses from enemy action during November provisionally estimated
st 631,000 tons.
TRADE. Week ending 28th November, imports in convoy into U.K. wore
341,194 tons of which 194,953 tons oil.
2. MILITARY
TUNISIA. The First Army started its eastward advance on 24th/25th
November in two columns in the direction of TEBOURBA and MATEUR with,a British/U.S.
Armoured Force in between. The initial advance was slowed up by demolitions and low
flying air attacks but on 26th the right column captured MEDJEZ EL BAB and the
Armoured Force reached B. point between TEBOURBA and MATEUR and on the following day
occupied TEBOURBA. Meanwhile the Northern column reached JEFNA about 12 miles short
of MATEUR and was there hold up by an enemy strong point, an attack on the 30th
failed to clear this obstruction and the progress of this column is still checked at
this point. The Southern column succeeded in capturing part of DJEDEIDA by evening
30th November, On 1st, a strong counter attack on the TEBOURBA area was beaten off
but the Armoured Force sustained losses in tanks and was later withdrawn and replaced
in the forward area by B. U.S. Armoured Combat Command. Our forces in this sector
have since been withdrawn to positions overlooking the TEBOURBA-CHOUIGUI area. Des-
nite successful attacks on Axis sea and air communications, reinforcements continue
to arrive spasmodically. Axis forces in TUNISIA now about 20,000 Germans and
11,500-Italians. 10th Panser Division believed in transit from Southern France to
TUNISIA but probably only first flight yet arrived. Present tank strength after
deducting battle casualties about 80-90 German and 25-35 Itelian.
LIBYA. Build up of our forces in forward area continues though
"omowhat delayed by rain and heavy going. Railway now working to TOBRUK although
not yet full capacity. Move forward of pipe water and petrol installations pro-
weeding satisfactory. Much receptured British ammunition fit for re-issue. Tank
repuir greatly helped by use of air transport of spares. Prisoners reached base by
30th November 31,802 including 8,318 Germans. Enemy supply situation still thought
precarious owing to our successful attacks on shipping.
5. AIR OPERATIONS
WESTERN FRONT. One heavy and very successful night bombing raid on
TURIN. During coastal operations, 13 attacks were made on enemy ships in the
Southern part of BAY OF BISCAY but no definite results claimed. 18 aircraft in-
cluding 9 Beaufighters from patrols off BREST Peninsula probably shot down in air
fighting.
Regraded Unclassified
306
- 2 -
FRENCH NORTH AFRICA. Object of our advance was to develop carliost
possible attack against TUNIS and BIZERTA. To this end some risks had to be run in
regard to provision of air support. In spite of maximum effort by our air forces,
difficulties of supply and maintenance, scarcity of advanced landing grounds and in-
sufficient time to build up adequate A.A. defences and a good warning system have
provented our aircraft from giving sufficient help to our troops in the face of
meny counter attacks supported by bombing. It is likely that 8. short pause will
be necessary to enable a sufficient weight of air support to be built up and main-
tained. By rapidly soizing the large and better air fields in the BIZERTA and TUNIS
areas the enemy has the advantages of greater resources close behind his positions
with e simpler and shorter supply system. Although our bombing attacks on Axis air-
fields and bases have been frequent both by day and night, the weight of them has
50 for not proved adoquate to prevent their regular use.
MEDITERRANEAN. Beaufighters and Naval aircraft from MALTA were
active against Axis shipping especially off TUNISIA. Estimated 21,000 tons of onemy
shipping sunk or seriously damaged by air attack during period.
RUSSIA. Activity on contral front severely restricted by weather.
"II DON area, Russian Air Force concontrated on transport aircraft attempting to supply
German 6th Army and destroying n large number. Russian aircraft very active in
CAUCASUS in spite of bad weather. Indications that German Air Force is inadequato
doctors. to afford more than absolute minimum support for Army except in relatively narro
4. EXTRACTS FROM PHOTOGRAPHIC AND INT.LLIGENCE REPORTS ON RESULTS OF AIR ATTACKS ON
ENEMY TERRITORY IN europe.
OSNABRUCK. Photographs 24th November show that attack October 6th
caused widespread damage mainly to industrial and railway plant. Factories of fol-
lowing types severely damaged - cotton spinning and weaving, copper, and (?wire)
(stated working on submarino parts and armour plate) metal, soap. Sawage worke and
u. barracks also heavily damaged.
TURIN. Two direct hits on main block Fiat Works, 3 buildings in rail-
way works burnt, more than half of main buildings in Viscosu burnt, 20 factories
including 3 Fiat subsidiaries severely damaged. Damage to artillery and cavalry
barracks.
ITALY. Reliably reported air raid situation serious, authorities
unable to cope satisfactorily with mass evacuation, people dissatisfied and any 30
frankly. Almost all principal firms in Northern towns have evacuated their offices.
Signs of a run on the banks. People in Northern Italy indifferent about the war,
their only concern being to "get away from the R.A.F.".
5. OPERATIONAL AIRCRAFT BATTLE CASUALTIES
METROPOLITAN AREA
Allied
Enemy
Prob.
In the Air
Dest.
Dest.
Damaged
Hombers
12
Bombers
2
Nil
2
Fighters
11
Fighters
6
1
7
Coustal
12
Miscellaneous
4
Nil
1
Army Cooperation
5
Total
12
1
10
Total
40
NORTH WEST AFRICA
Allied
Enomy
Prob.
In the Air
On the Ground
Dest.
Dest.
Damaged
Hombers
2
N11
Bombers
16
1
7
Vightors
21
14
Fighters
20
4
16
Others
Nil
9
Miscellaneous
28
13
23
Total
23
23
Total
64
18
46
Regraded Unclassified
307
- 3 -
MIDDLE EAST (Including MALTA)
Allied
Enemy
In the Air
Destroyed
Damaged
Bombers
5
Bombers
4
Nil
Fighters
9
Fighters
9
8
Total
14
Miscellaneous
1
4
One pilot is safe.
Total
14
12
FAR EAST
Allied
Enemy
Prob.
In the Air
Dest.
Dest.
Damaged
Fighters
2
Bombers
2
1
2
Others
1
Fighters
33
3
Nil
Total
3
Miscellaneous
15
Nil
Nil
Total
50
4
2
NOTE: No account is taken of enemy aircraft destroyed on the ground
in any theatre or of British Naval Aircraft casualties.
6. HOME SECURITY
Estimated casualties week ending 2nd. Killed 3, seriously wounded
15.
308
NUMBER 60
Secret
OFFICE OF STRATEGIC SERVICES
THE WAR
THIS WEEK
November 26-December 3, 1942
Printed for the Board of Analysts
Copy No. 6
The Secretary the Treasy
Regraded Unclassified
NOVEMBER 26-DECEMBER 3, 1942
SECRET
Office of Strategic Services
THE WAR THIS WEEK
Although the Soviet drive in the south has been slowed
and the precise situation in the region of the Don bend is
unclear, it appears probable that the Russians will soon relieve
Stalingrad. The end of the siege of Stalingrad, one of the
most notable defenses in military annals, would free the vital
Lower Volga waterway for transport from the Caspian in the
spring, and would unquestionably have important reper-
cussions on Russian military morale. Meanwhile the north-
ern Soviet offensive is slowly expanding salients south of
Rzhev and in the neighborhood of Velikie Luki, although this
drive has yet to develop any of the spectacular characteristics
attributed to it in the press.
Against the Tunis-Bizerte bridgehead, the Allies have
thrown three columns. Despite strong Axis resistance, it
still appears that the enemy is fighting only an important
delaying action and that he would have to defend a larger
bridgehead if he intended to hold the area indefinitely. In
the meantime, Marshal Rommel has dug in about El Agheila;
and, with lengthening supply lines, it is assumed that it may
be more than a week before the British resume their offensive
in this area.
French naval officers have been warmly criticized for short-
sightedness in failing to take the Toulon fleet to North
Africa. But the scuttling was in any event consonant with
a policy pursued ever since the Armistice of 1940-a policy
of neutrality and resistance to aggressive acts from whatever
source. Although the scuttling was hurried and incomplete
and left a few vessels afloat and apparently intact, naval
observers point out that it will be anywhere from one to two
years before the Germans can repair the ships and train
1
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crews for them. In the interim, the sunken ships will seri-
ously encumber the Toulon harbor, to the disadvantage of
defenders. This continued resistance between the Volga and
its captors.
the Don has suggested to some military observers that the
In North Africa, Darlan, whose recent elevation to power
German position there has not yet deteriorated to such an
has already occasioned widespread uneasiness, has now
extent as to warrant a desperate attempt to escape toward
assumed the position of Chief of State and "heir of Vichy".
the west.
This act implies that not only Darlan but the Vichy regime
have now been transferred to French Africa.
Significance of the Relief of Stalingrad
The relief of Stalingrad, which now appears probable,
Progress of the Soviet Pincers
would deliver to the Russians little more than a mass of ruins,
Although the progress of the Russian offensive north and
whose industrial capacity has been almost entirely destroyed
south of Stalingrad has slackened somewhat, its southern
or evacuated. It would be difficult, however, to overestimate
arm has repelled a German counterattack from Kotelnikovo
the moral importance of a successful defense which has been
and has driven almost to the east bank of the Don River-
described as surpassing the epics of Verdun and Sevastopol
below the great bend-on a broad front from Obilnoye and
and which may in a very real sense have been the turning
Nebykov to Romashkin (see map). On the west bank of
point of the whole war. Furthermore the Russian counter-
the river, other Russian units may have cut the Don bend-
offensive has already broken the anchor of the German
Stalingrad railway again at Rychkov. To the east and
advance to the south, and may even cause the Nazis to
west of the bend, fighting around Bolshoi Donshchinski
withdraw from their whole Caucasus salient-especially if a
and Peskovatka indicates the progress of the Soviet mopping-
holding attack now in progress at Voronezh should develop
up operation.
into a full-scale offensive. Such a withdrawal would mean
Details of the attack are somewhat unclear, and military
the failure of the German effort to appropriate Russia's oil
observers disagree in crediting towns captured to one column
resources in the North Caucasus. For it would come at &
or another of the Red Army. It is apparent, however, that
time when the Nazis had not even reached Groznyi or had
with steady Soviet gains in all sectors of the Don bend front,
time to reconstruct the demolished installations in the Maikop
and with both railroads to Stalingrad cut, the chances of
area.
escape for the German forces between the Don and the Volga
Should the Russians recapture Maikop, it would be many
are at least problematical. Some evidence suggests that
months before they could obtain any oil from that region.
Nazi units within the bend are withdrawing eastward to join
On the other hand, the relief of Stalingrad would reopen the
the forces in Stalingrad-a movement that can hardly be
Volga River next spring as a vital artery for the transport of
interpreted as an effort to break out of a trap. And it seems
oil and other strategic commodities from the Transcaucasus.
clear that, despite Soviet gains in the northern industrial
In 1935, the last year for which figures are available, the
suburb of Stalingrad itself, the Germans have slowed the left
Lower Volga (from Astrakhan to & little above Stalingrad)
flank of the Russian drive, which seeks to relieve the city's
carried 10,390,000 tons of freight, of which 6,873,000 were
petroleum and petroleum products, and 1,462,000 were salt.
2
3
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In the same year, Stalingrad handled 4,185,300 tons of freight.
Attack on the Tunis-Bizerte Bridgehead
At Astrakhan the Volga is closed by ice 100 days in the year,
Striking in three principal columns from the are indicated
and at Stalingrad for 150 days. By about April 20 the
on last week's map, elements of the British First Army,
Lower Volga should again be open to traffic.
supported by American and French forces, on November 24
Furthermore, if the Germans should withdraw from the
began the direct assault on the Axis bridgehead in north-
North Caucasus, the Astrakhan-Kizlyar railway would again
eastern Tunisia.
be secure. Although it would probably take several months
In the north a column advancing along the coastal road
to put the Stalingrad-Tikhoretsk line back into commission,
forced the enemy to a slow withdrawal to strongly heid posi-
this railway might eventually also be usable. The availa-
tions in the Mateur area-a road and railroad junction
bility of either or both of these lines would immensely simplify
whose capture is a preliminary to an attack on Bizerte. In
the transport of oil from Baku north, which is now burdening
the center Allied columns have driven the Germans from
the Central Asiatic railways. These latter lines are in turn
Medjez el Bab and Tebourba, and thrust a spearhead be-
already crowded with lend-lease goods from the Persian Gulf,
tween Bizerte and Tunis in the Djedeida area, cutting the
whose delivery would thus be indirectly expedited by the
railroad and one of the two connecting roads. Here Axis
clearing of the North Caucasus.
resistance has been intense. Low-flying aircraft have steadily
attacked Allied forces, and Axis armored elements are re-
The Central Offensive
ported to have led the heaviest counterattack thus far en-
countered. The Axis has reoccupied Pont du Fahs, a point
In the Kalinin-Rzhev sector, the second Soviet offensive
from which British parachutists had advanced to capture
is concentrating on the capture of the important airfield at
Oudna, 13 miles south of Tunis. Farther to the south the
Velikie Luki, which the Russians may now have partially
mixed French and American column advancing from Tebessa
surrounded. The attackers have apparently cut the railway
and Gafsa is reported by the Moroccan radio to be approaching
line to the west of the town, but the railroad from the south
the coast north of Gabès.
may be still available to the Germans, who are offering a
Air activity has been heavy and important. After a lull of
determined resistance. Other Russian units have cut the
several days, enemy planes based on Sicily and Tunisia
railway between Vyazma and Rzhev. In this sector, as
resumed attacks on Allied shipping and harbor facilities, and
around Leningrad, where Soviet forces have made another
both sides have continued their unrelenting attacks on the
effort to cross the Neva, the Russians are evidently capitaliz-
very limited number of available airdromes. Large numbers
ing on the comparatively favorable weather of early winter,
of enemy planes have been destroyed on the ground.
prior to the coming of extreme cold.
Enemy forces in Tunisia continue to be relatively small, and
Elsewhere on the front, action has been indecisive. In
were believed at the end of November to number slightly more
the Caucasus, east of Alagir, renewed Soviet attacks are
than 20,000 combat troops-over half of them German.
aiming to wipe out the recently established German salient
The core of this contingent was apparently the German 7th
toward the Georgian and Ossetian Military Highways.
Air-borne Division. The rate of reinforcement has been
estimated at about 1,000 men daily. Enemy tank strength
4
5
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was placed at about 50, while Axis plane strength in southern
Rommel has a substantial force composed of the depleted
Europe has been increased. The concentration of Axis sub-
three divisions of the Afrika Korps, two fresh Italian infantry
marines in the Western Mediterranean and the approaches
divisions, remnants of other units that escaped the Alamein
to Gibraltar has declined considerably.
battlefield, and line of supply troops picked up during the
retreat. Axis port and transport facilities are believed
Aris Defensive Strategy
adequate to sustain the forces at El Agheila, and to form
The general Axis strategy in northern Tunisia appears to
supply dumps at intervals along the Libyan highway. If
be to effect extensive demolitions and offer severe resistance
forced back from their present positions, the Axis should be
before taking final positions in the commanding hills south
able to make a series of delaying stands on the narrow coastal
and west of Bizerte and in a defensive perimeter around
strip along which, for more than 200 miles, all communications
Tunis. If the enemy limits his stand to these strongholds-
must go.
which the Allies will presumably soon isolate from each other,
and from reinforcement via Tripolitania-it will suggest
The Scuttling at Toulon
again that Axis policy in Tunisia is simply a substantial
The destruction of the French fleet at Toulon was the logical
delaying action. A larger bridgehead would appear essential
result of a consistent policy which French naval officers have
to any effort to hold the area permanently. In the south,
pursued ever since the armistice of June 1940-a policy of
Axis resistance has been passive, and the coastal points
strict neutrality and resistance to aggression from whichever
occupied are believed lightly held, primarily by Italians. A
side it came-a course followed at Oran in July 1940, at
more determined stand may later be made in the Gabès-
Dakar in September 1940, and at Casablanca last month.
border area, to which the Centauro Armored Division might
There is no conclusive evidence that the fleet at Toulon
be sent from Tripoli.
was planning an escape to join the Allies. More likely,
Hitler's swift attack aimed simply to take the ships by sur-
Halt at El Agheila
prise before they had an opportunity to do an effective job
As Axis forces dug in around El Agheila, military observers
of scuttling. Some have suggested that the Fuehrer had
predicted a halt in the rapid movement of the current Libyan
learned of careful preparations for scuttling which he wished
campaign. Having advanced 800 miles in less than a month,
to forestall. In any case, the fleet probably had sufficient oil
General Montgomery must doubtless now pause to bring up
on hand to make a break for Africa in case of necessity. But
infantry and artillery, to rest, to establish forward air bases,
the German attack came SO suddenly that the greater part of
and especially to organize supply lines and fuel and ammuni-
the vessels never had time to get up steam.
tion dumps. Tobruk and the railhead at El Adam-435
As a result, the job was hurried and incomplete. The
miles from El Agheila-will probably be the principal en-
greater part of the heavier vessels (two battleships, three
trucking points, with Benghazi presumably too vulnerable
heavy cruisers, one light cruiser, one seaplane tender) are
to enemy attack for any large-scale use. It may be a week or
reported either burned out or resting on the bottom about
more before the Eighth Army is ready to resume its offensive.
ten feet below their normal water line. The battleship
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7
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Dunkerque is flooded in drydock. One heavy cruiser, two
batteries on Cepét Peninsula and by a boom extending north-
light cruisers, five destroyer leaders, and two destroyers are
east from the western jetty on the peninsula to & narrow
"afloat and apparently intact". Six submarines remain in
passage in 70 feet of water near the south end of Great Jetty.
drydock, at least four of them undamaged. Of the 13 other
Along the north and east sides of Little Road are the
submarines previously at Toulon, one attempting to escape
buildings and docks of the fleet base. When the fleet was in
hit a mine and blew up; the Marsouin and Casabianca have
the harbor, 25 to 30 vessels were usually anchored in Little
reached Algiers; the Glorieux, after putting in at Valencia, has
FREE
arrived in Africa in a damaged state; the Iris is interned at
TOULON
Barcelona; and three more which may have escaped are as
yet unheard from. "French naval sources" at Barcelona
(presumably the crew of the Iris) state that casualties during
33
ROAD,
the scuttling were very slight-mostly on destroyers which
30
Cape Brun M
the Germans tried to board and on the submarine which blew
66
78
up. Land installations are evidently almost intact.
as
GREAT ROAD
IM
18
TOULON BAY
ist
The Balance Sheet
180
Carqueirama
GÉPETI PENINSULA
50
STALY
The Italian radio has claimed that the fleet "may be
FRANCE
or
Cope Ciger
salvaged in the future by our admirable naval engineers."
no
For the larger units, however, such an operation would
N4
probably consume the better part of a year. Furthermore,
336
Cope
naval experts suggest that it would take an additional six
Siele
198
months to a year to familiarize German crews with the
THE SITUATION OF TOULON
handling of the French ships, although the submarines in
of
SOUNDINGS IN FEET
Milse
drydock may be an exception. One can conclude that at
COMPILED AND DRAWN IN THE BRANCH OF RESEARCH AND ANALYSIS,035
least a year and perhaps two years will elapse before the
MAP NO. 430, DEC 1942
Nazis can make effective use of any considerable part of the
Road, while the remainder were docked. Anchored vessels
fleet at Toulon.
were ordinarily west of the 40-foot channel between the
The harbor will likewise be greatly encumbered. Toulon
entrance and the large dry docks at the northeast corner of
harbor is a small bay about 4,000 yards long and 475 yards
Little Road. If this was the case at the time of the scuttling,
wide called Little Road (see map). The eastern two-thirds
surface or underwater movement in the harbor will prove
is the fleet anchorage, 35 to 45 feet deep. At the southeast
very difficult during the next few months. Any vessels sunk
corner of the Bay is the single entrance, a 2,000-foot channel
in the outer bay (Great Road and Toulon Bay), which has
extending approximately a mile south and east to Great Pass.
minimum depths of 78-150 feet, would not be a serious
The latter is a 1,700-foot passage, 96 feet deep, protected by
encumbrance to navigation.
9
8
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Reactions in Africa
though Pétain nominally remains at his post "in complete
The repercussions of the events at Toulon on units of the
harmony" with Laval, press reports tell of minor officials
French fleet stationed in Africa have been mixed. At
ceasing to perform their functions, and soldiers changing into
Alexandria, French naval personnel is showing an unwonted
civilian clothes without the formalities of a discharge. One
sympathy for the Allied cause, but Admiral Godefroy is
Foreign Office official who has taken refuge in a neutral coun-
apparently still hesitating. Darlan he regards as a traitor,
try has described the almost complete cessation of activity in
and he has irritated the British with his continued indecision;
that department, with the arrest or flight of many of its
the latter may now be considering the cancellation of the
members. Reports of arrests include Herriot and General
original agreement demilitarizing the French Squadron.
Doyen, former French representative on the Armistice Com-
From Dakar, however, Governor Boisson has apparently
mission, while Reynaud and Mandel, already under detention
flown to North Africa to put at Darlan's disposal the French
by Vichy, may be tried in Germany by a "People's Court".
naval units under his control.
In France itself, special courts (not sharing the independence
of the regular French judiciary) will sit in summary judgment
Confusion in German Propaganda Regarding Toulon
on "terrorists". According to advices from Bern, Laval is in
The confusion of Berlin's propaganda concerning the sink-
Berlin, discussing the reorganization of his ministry. As for
ings at Toulon suggests that the Germans did not expect the
the French people, the vast majority of them apparently hope
French would actually scuttle their ships. The Berliner
for the organization of a unified government-in-exile.
Boersen-Zeitung comments that the last loophole by which
the Allies hoped to sneak into the back door of Europe has
A French Government-in-Exile
now been barred, and gloats over the denial to the Allies of
In North Africa Darlan has proceeded with the organiza-
the French naval force at Toulon. Elsewhere, in an apologetic
tion of an old time-server's version of such a government.
vein, the German radio expressed regret that the treachery
As the self-styled heir of Vichy, the Admiral has a strong
of French officers caused the events at Toulon, and emphasized
legal position, which he has strengthened by establishing an
that Germany bears no hatred for the French people. A
imperial advisory council and assuming authority as Chief
third reaction was blunt indignation over the fact that France
of State in French Africa. Furthermore, he has not ap-
had not "followed the call for the European task". "Never
pointed to his council refugee collaborationists and poli-
in history has the vanquished rejected the victor's hand so
ticians from Vichy like Pucheu and Flandin, but has restricted
clearly, so stupidly, so dishonorably."
its membership largely to military figures and colonial
administrators (Generals Noguès, Boisson, Bergeret, Giraud,
Vichy Disintegrates
and Governor General Chatel). The last two of these have
With the scuttling of the fleet at Toulon, and the disband-
the reputation of being pro-Ally; Bergeret (formerly Secre-
ing of the French metropolitan army, the disintegration of
tary of State for air under Darlan) came over to Africa
the Vichy administration has been proceeding apace. Al-
after having been removed from the government by Laval.
To Vichy consular and diplomatic representatives Darlan
10
11
SECRET
has likewise sent instructions to follow orders from Africa
rather than from metropolitan France.
Meantime, the British, the Russians, and pro-democratic
French have shown signs of concern that Darlan's "tempo-
rary" administration may last as long as the war. The
Fighting French and many other emigré groups are appar-
ently convinced that the Admiral's administration in Africa
can not serve as a rallying point for patriotic Frenchmen.
In the French community of Ankara current developments
have occasioned many conversions to Fighting France-but
not to Darlan's "Vichy-in-exile". The adherence of Dakar
to the Admiral has again aroused the dismay of certain pro-
Ally Frenchmen, who had been temporarily reassured by
President Roosevelt's explanation of Darlan's status. For
instance, the De Gaullists of West Africa have rejected all
cooperation with the Admiral, whom they regard as even
more treacherous than Laval; Governor Boisson, they believe,
is little better. In Cairo, Fighting French circles have ex-
pressed similar fears. One observer concludes that the orig-
inal popular enthusiasm over Allied successes in North Africa
is now changing to cynicism and disillusionment.
That the British permitted the De Gaullists to occupy the
Vichy island of Reunion without Allied help may be a clue to
the real feelings of the London government. Furthermore,
in a restrained defence of the BBC refusal to let De Gaulle
broadcast to the French people, Foreign Secretary Eden has
implied that the elevation of Darlan was primarily an Ameri-
can decision, and that the ultimate responsibility for opera-
tions in Northwest Africa rested with the United States. His
reference to the "extremely tense and serious operations now
proceeding in Tunisia" may indicate his feeling that the
conclusion of those operations would logically mean the end of
Darlan's usefulness. In Moscow, Stalin has confidentially
expressed his anxiety over the deal, and his hope that the
12
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1 E 1
savonive
AOZY to YES
Anglo-Americans in consultation with the Soviet Union would
I I
cooperate in the establishment of a satisfactory French
administration in North Africa.
1
% E I
OCTOBER 2) DECEMBER 2
SOUTH RUSSIAN FRONT
The Reinforcement of Southern Europe.
In Italy, punishment from the air has again this week
paralleled the arrival of reinforcemente from the north. As
the RAF twice more raided Turin, Prime Minister Churchill
confidently announced that "the centers of war industry in
Northern Italy are being subjected to harder treatment than
une 3
FOR 2
any of our cities experienced in the winter of 1940," and
warned that "if the enemy should
I I I CAS
SAVANGEN provus
be blasted from
the Tunisian tip
the whole of the south of Italy
will be brought under prolonged, scientific, and shattering
air attack." The Prime Minister's statement appeared to
foreshadow & concerted effort to knock Italy out of the war.
Responsible observers warn, however, that press predictions
of an Italian collapse in six months are extremely optimistic,
and that loyalty to Mussolini (whom many Italians regard
as Italy's chief bulwark against the Nazis) is still strong.
While the Duce has reiterated his assurance of an Axis
victory, his reply to Churchill was somewhat lame. "Italy,"
he declared, "is now clearing her cities of women and children
A nightly exodus must also be arranged from
cities so only fighting personnel remains.
We have
spent hundreds of millions of lire on shelters that can resist
E
the biggest bombs."
Besides sending additional troops into the Balkans, the
Nazis have apparently continued the reinforcement of Italy.
Unconfirmed reporta tell of the arrival of & new Panser
S
S
division in Milan, and of German concentrations in Calabria
E
and Sicily (where two Nasi divisions may have arrived from
Greece). Similarly, the Italians may be sending the greater
part of their units in the Po Valley to the southwestern part
18
SECRET
SECRET
of the peninsula. Current estimates give the Italians 24
no evidence of Nazi preparations against them and regard all
divisions in Italy itself, and four more in southeastern France.
troop movements as defense measures to counter the Allied
threat from Africa, according to authoritative advices. The
Spanish Activities in Morocco
reported transfer of German divisions to Bulgaria and Greece
The Spanish are regrouping their forces in Morocco,
is thus interpreted as a move simply to reinforce Greece and
according to scattered reports from the area, and troops have
its archipelagoes, and to replace Italian troops called home.
apparently been moved toward the border of French Morocco
(see Appendix III). Spanish activities may be intended
Sapru Summons the Forces of Compromise
primarily to demonstrate to the Germans Spain's determine
Despite constant checks and disappointments, Indian
tion to remain neutral. The Germans, in turn, have moved
moderate leaders are still seeking a way out of the present
no troops toward the Pyrenees frontier.
deadlock. The latest effort is that of Sir Tej Bahadur
Sapru, an old and respected liberal, who has invited Rajago-
Supply Purchase Agreement With Portugal
palachariar and representatives of the Hindu Mahasabha,
The conclusion of a general supply purchase agreement
the Sikhs, the Depressed Classes, the Indian Christians,
with Portugal on November 23, after protracted and at times
and perhaps even the Communists to meet at Allahabad on
difficult negotiations, makes possible the continuance of
December 12. If this group can come to some sort of agree-
Allied economic warfare policy in that country. When the
ment, Sapru proposes to open negotiations with Jinnah and
Portuguese signed the earlier wolfram agreement in August-
if possible with Gandhi also. But in view of the Viceroy's
through which the Allies are able to purchase from Portugal
refusal to permit Rajagopalachariar to see the imprisoned
vitally needed wolfram that might otherwise go to Germany-
Mahatma, it seems likely that a similar request from Sapru
the Portuguese Government imposed the condition that an
would likewise be rejected (The War This Week, November
agreement must also be reached for a general supply program.
12-19, pp. 15-16).
Delay in the latter negotiations, undoubtedly complicated by
Portugal's fear of offending the Axis, threatened to cause
Japan Seeks To Strengthen The Home Front
suspension of the wolfram agreement. Under the new
American victories in the Solomons, together with the
arrangement, the continuance of wolfram shipments is ensured
recent Allied successes in Africa and Russia, have apparently
and an exchange of needed commodities is provided for.
induced the Japanese Government to devote increased atten-
tion to the problems of the home front. In an effort to inject
Turks Confident Axis Will Not Attack
a new realism into Japanese thinking, the Government has
Despite persistent rumors in the eastern Mediterranean of
called for statements by ex-Ambassadors Nomura and
Axis designs on Turkey, Turkish officials do not expect any
Kurusu, whose silence since their return to Japan has indi-
invasion, at least for the winter; and the conviction is spread-
cated that they were being saved for some such major task of
ing that Germany is heading toward defeat. The Turks have
internal propaganda. Nomura, in an article in the Yomiuru
Hochi of November 22 and a speech of November 25, stresses
14
15
Regraded Unclassified
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SECRET
American production of ships and planes and the magnitude
a result of our occupation of the various areas in the south
of the American challenge. Kurusu, in an important speech
is wrong.
Thus the same government which light-
of November 26, has surveyed the whole history of Japanese-
heartedly distributed rubber balls after the fall of Singapore
American relations with the obvious purpose of convincing
is now telling its people that they cannot obtain the fruit of
the Japanese people that the war was forced upon Japan and
their conquests until the transportation problem is solved.
that Japanese existence is at stake.
Government pronouncements on food likewise bear the
Simultaneously the Government has launched a concerted
mark of sober reality. Statements have been made to dis-
campaign to bring home to the Japanese the pressing prob-
courage the people from expecting an improvement in their
lems of the economic situation. The emphasis laid on the
rations. Ino, Minister of Agriculture and Forestry, as well as
necessity of increasing industrial production is typified by an
Premier Tojo, have issued warnings on the food situation.
address of Premier Tojo's to a Gubernatorial Conference on
As if to cap the whole campaign, the Cabinet announced,
November 13. Tojo declared that Japan must renew her
November 24, that it has decided upon a program for ex-
efforts on the industrial front because Japan's enemies have
tensive use of unhulled rice, a most unpopular food.
finally attained the productive capacity necessary to attack
This entire effort to strengthen the home front becomes
Japan. President Suzuki of the Cabinet Planning Board,
most significant in view of the fact that this drive has taken
and Kishi, Minister of Commerce and Industry, echoed
place on the domestic scene with no publicity abroad, indicat-
Tojo's statements with similar pronouncements before the
ing that it is not for purposes of external propaganda.
same conference. On November 15 some 200 representatives
of business and industry were called to a Civilian and Gov-
Slow Going in New Guinea
ernment Officials Joint Conference for Increased Production.
The Industrial Patriotic Association held a conference on the
In New Guinea, the slow but intense struggle to eject the
production problem on November 18. A few days later the
Japanese from their Buna-Gona beachhead continues. After
Cabinet announced the establishment of a Committee for the
repulsing minor counterattacks, our ground forces-closely
Increase and Strengthening of Emergency Production, to be
supported both by artillery and aircraft-have succeeded in
headed by Suzuki. And on November 28 the Government
entering the outskirts of Buna and in taking the beach beyond
disclosed that it had invited 366 industrial leaders to take
Gona. They are now driving along the beach toward the
part in discussing problems of increasing production.
center of the enemy's position at Sanananda. Despite enemy
air reinforcements, we still command the air. The Japanese,
however, have not been challenged on the sea, and they may
Japanese Transportation and Food Difficulties
have had some success in running our aerial blockade at
Japanese authorities have also issued blunt statements on
night with reinforcements or supplies, despite damage in-
the difficulties of transportation. Tojo stated before the
flicted on their destroyers by our aircraft. Our difficult over-
Gubernatorial Conference that "the strength to carry out a
land supply line to Port Moresby will doubtless prove a
war is dependent upon the power of transportation," but
handicap in long-extended operations, forcing us to rely
that "our first impression that goods can be sent to Japan as
chiefly on air transport. Without air superiority, however,
16
17
Regraded Unclassified
SECRET
SECRET
the enemy's position must remain hazardous, and there is no
from time to time, and is conservatively estimated at 17, of
reason to believe that his well-prepared defenses in this area
which 12 were heavy cruisers and 5 were light cruisers. In
will not soon be overcome.
addition, 1 light cruiser is listed as possibly sunk. Ten
Elsewhere in the Southwest Pacific, there has been rela-
cruisers are thought to be out of action as a result of damage.
tively little action. Our planes have attacked enemy ship-
Estimated sinkings of battleships and aircraft carriers remain
ping in the central Solomons, where the Japanese evidently
at 1 and 6, respectively.
are attempting to reinforce forward bases from which their
troops on Guadalcanal can be supplied or augmented. But
Castillo Intervenes
both here and in the Buin-Faisi area farther north, enemy
shipping has been relatively scant. Military observers
Irked by the unexpected defeat of his gubernatorial can-
believe that another two or three weeks may be required
didate in & provincial election, President Castillo, of Argen-
before the Japanese will have regrouped their military and
tina, has ordered federal intervention in the state of Tucumán.
naval units and completed plans for a possible further attempt
Castillo's man, Dr. Alberto Piossek had been edged out by
to reconquer Guadalcanal. Large naval forces still are in
the margin of one electoral vote by Dr. Campero, who was
the vicinity of Truk and Rabaul, and ground forces available
supported both by pro-Allied General Justo and the Radical
are formidable-perhaps 60,000 in the Buin-Rabaul area
Party Candidate. Campero's technical victory, in a prov-
and 20,000 still on Guadalcanal. The possibility that
ince whose politics are traditionally controlled by large
further reinforcements are on the way is seen in confirmed
sugar interests normally favorable to Castillo, demonstrated
reports of Japanese troop movements down the Yangtze
convincingly that where the Radicals can be induced to
River toward Shanghai, whence it is believed they will
cooperate with other democratic elements, enough anti-
embark for the Southwest Pacific.
Castillo and anti-Axis sentiment can be mobilized to carry
the day. On the other hand, the government's alleged inter-
Japanese Naval Strength
vention indicates equally plainly that the Castillo party is
ready to resort to more and more openly dictatorial tactics, if
Japanese warships which are undamaged and still available
for operations are now estimated by authoritative naval
necessary to maintain itself in power.
sources to include 4 aircraft carriers, 7 or 8 battleships, 2 or
3 heavy cruisers, and 9 light cruisers. Ten cruisers, 2 car-
Uruguay at the Polls
riers, and 3 battleships are thought to be damaged and there-
In the first completely free presidential election in many
fore temporarily inoperative.
years, the Uruguayan people have given Sr. Juan José
These estimates, which were made as of November 20, take
Amézaga a thumping plurality over his pro-Axis opponent,
into account losses sustained by the Japanese during the
Senator Herrera. Moreover, constitutional reforms, abolish-
November 12-15 actions in the Solomons. The number of
ing division of the 30 senate seats equally between the major-
cruisers sunk since the war began now has evidently been
ity and leading minority parties, and ending the arbitrary
scaled down considerably from the total number reported
granting of & number of cabinet seats to the minority party,
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were also approved by the electorate. Elevation of Amézaga
to the presidency should firmly orient Uruguay within the
United Nations' orbit; and the accompanying changes in
APPENDIX I
legislative structure should destroy the legal basis for such
REPERCUSSIONS OF RAF RAIDS ON GERMANY
obstructionism as the Herreristas might otherwise have con-
tinued to exert, close observers believe. Moreover, in the
The increasing magnitude of Allied bombing operations against Germany, and
the added emphasis on incendiarism in congested civilian aress-both signalized
new Congress, in which the liberal democratic party will have
by the Cologne raid of last May-have caused correspondingly significant changes
8 large majority, women will hold seats-for the first time in
in the Nazis' Air Raid Precautions system. The most important of these changes-
Latin American history.
the entrance of the Party into the field of air-raid relief-appears to have had a
favorable effect upon civilian morale, counteracting in some measure the pay-
chological impact of the new mass raids.
Pre-Cologne Period
During and after air-raids, responsibility for maintaining order and safety,
combatting fires, repairing public utilities, clearing streets of debris, and similar
tasks is vested in the Security and Auxiliary Service of the First Order (Sicher-
heits-und Hilfadienat I. Ordnung). These functions are, in practice, carried out
by various civilian defense organizations of a semi-military character. Long
before the "thousand plane" attack on Cologne, the Security and Auxiliary
Service in any given city, though nominally under Göring's Air Ministry, was
subject to the immediate command of the Local Police Administrator, and thus
indirectly subject to Himmler and his Order Police (Ordnungs-Polise).
Backbone of the civil air-raid defense system (at least, numerically) was the
mammoth, semi-official Reich ARP association, which in 1939 numbered 13,500,-
000 members. Often regarded as corrupt and inefficient, the association cer-
tainly had as one of its original purposes the collection of funds; nor has it, since
its foundation in 1933, neglected the opening of additional sources of revenue.
If, thus far, no major scandal has developed over these financial transactions,
it is because the association does render substantial service. From its inception,
it has campaigned to make the population aware of the dangers of aerial attack-
with such success that in early stages of the war, many Germans expected far
heavier raids than actually occurred. As of 1939, the association was maintaining
some 3,800 ARP schools, with 28,000 ARP teachers. It had no dearth of pupils,
either, since nearly everyone, whether a member of the association or not, was
legally obliged to attend.
Another vital unit in the civil defense system has been the fire-fighting force.
War preparations made during the Munich crisis in 1938 apparently revealed that
this department constituted a weak link, and some weeks later a law was enacted
creating & centrally controlled, nationally organized fire-fighting force.
Drawn up according to the Führerprinzip, with Himmler in the role of Führer,
the new Fire Protection Police remained largely & paper organization until the
outbreak of hostilities in 1939. Then the threst of air-raids made action im-
perative. The professional fire-fighting forces in about 65 key cities were taken
over and incorporated in the Fire Protection Police. Uniform fire-fighting
I Based on a memorandum prepared In the Research and Analysis Branch of the Offloe of Strategic
Services.
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techniques were established, fire-fighting equipment was standardised, and unity
following a raid, the homeless families gather at this designated point. After
of command under Himmler was assured. Voluntary and Obligatory Fire
reporting to the Party leaders, the victims are provided with facilities for recover-
Brigades, which comprised fire-fighting auxiliaries organized locally, were trans-
ing from the shock of the mid. Then, in collaboration with the municipal ad-
formed into an auxiliary fire police troop (the Voluntary Fire Brigade alone had
ministration, the Party assigns the homeless to temporary quarters which, prior
numbered about 2,000,000 in the pre-war period). Despite these organizational
to the raid, have been selected through questionnaires circulated by the Party
achievements, however, the operational strength of the Fire Brigades was at &
Block Leaders.
low point by the time of the Cologne raid-owing to serious personnel loases to
Food and clothing, moreover, are doled out by the Party, or its National
the armed forces.
Socialist Welfare units. In heavier raids, field kitchens are rushed to the scene
As for the military anti-aireraft defenses, these were always under direct com-
of dissater. Extra rations of tobacco, cigarettes, coffee, mest, sugar, and aweets
mand of Göring's Air Ministry, and although their efficiency does not compare
are distributed. Offices are set up to give information about the missing as well
with that of Britain's system, they have by no means crumbled under attack.
as about elaims for damage (advances up to 1,000 RM for damaged property are
Confidence in these defenses, up to the era of the Cologne-type raids, was very
made within a week or ten days). In order that bombed-out victims may obtain
high among German civilians.
prompt service in stores, the shope selling textiles, shoes, glass, porcelain, and
household articles are instructed to sell exclusively to air-raid victims for fourteen
After Cologne
days following the attack. Those who wish to be evacuated are cared for by
The bombs that rocked Cologne shook the German ARP system almost as
the Local Party Group, which will in addition take charge of the storing or
heavily. On the day following the attack, Göring hastily transferred titular
forwarding of evacués household goods.
control of the Security and Auxiliary Service to Himmler-perhaps with the
Cities drastically bombed get more than these material services from the
desire of ridding the Air Ministry of a rather embarrassing responsibility, in view
Party: praise and solace are also distributed lavishly. Thus, the people of
of the Luftwaffe's inability either to forestall or to avenge such attacks. Güring's
Cologne were commended for their behavior and told that the Führer was the
relinquishment of control, on the other hand, Was more apparent than real: Ball
first to ask for information about the town. The Party Gauleiter in the Rhenish
indicated previously, the Security and Auxiliary Service had always been under
metropolis decorated 1,500 persons. The dead are usually buried publicly under
the de facto command of Himmler, and in the post-Cologne merger with Himmler's
Party auspices, and special transportation is supplied for the bereaved.
Order Police, immediate command of the Service was given to Göring's old friend,
Kurt Daluege.
Fire-fighting Forces Strengthened
The raids on Cologne and Essen B&W bombe dropped on German cities in ratios
The Party Steps In
of between two and three tone of incendiaries for every ton of high explosive.
Other moves of greater significance, however, stemmed from the RAF's
The resulting conflagrations threw into bold relief the necessity of further strength-
intensified bombing. The most important was, undoubtedly, the action taken
ening fire-fighting facilities. Scareely 24 hours after the Essen raid, Himmler
by the Nasi Party itself, whose prestige prior to this time had not been parti-
ordered all Fire Brigades brought up to full strength, and in vulnerable areas to 20
cularly high. Previously, although it had engaged in air-raid relief along with
percent above peace-time requirements. Fire-fighting equipment, moreover,
other governmental agencies, the Party had not wished, through publicity about
was promptly transferred from former Csechoslovakia to the Reich'e western
its activities, to emphasize the whole bombing problem. After Cologne, however,
areas, according to some reports, and mobile Fire Protection Police regiments
when there was no further possibility of minimizing the seriousness of the situation,
were created and appear to have been stationed at strategic points within the
the Party changed its tactics, It had learned, before, the political advantages of
Reich for special emergencies. Unconfirmed despatches assert that in recent
identifying itself prominently with effective relief measures and implanting in
raids Fire Protection Police units have been rushed to the aid of a bombed com-
the public's mind the idea that the Party had foreseen and prepared everything
munity from towns as far distant 85 200 miles.
down to the smallest detail. Now it moved with despatch to place itself in the
Other reports have indicated that losses of fire-fighting personnel and equipment
position of a shock-absorber between individual citizens and the German bureaue-
employed during mase raids were 80 heavy that orders have gone out to keep
racy-notorious for its exasperating lack of tact in dealing with the public.
both men and equipment under shelter until the "all-clear", despite the headstart
The Party Was already in possession of a comprehensive local organization
thus given to any conflagration. Another consequence of the large-scale RAF
built around blocks (40 to 60 households), cells (4 to 8 blocks), and Local Party
raids, which were accompanied inevitably by a certain amount of bombing of
Groups. With this advantage, it was soon able to work out an elaborate and
country districts, was to induce the Germans to frantie efforts to reinforce their
generally efficient system for "raid relief".
rural ARP system.
Operation
Effect on Morale
The Party Block Leader has been made responsible for informing the house-
Insufficient and contradictory information places any conclusions concerning
holds under his charge of the location of the concentration point selected for those
bombed out of their homes, Immediately after the "all clear" signal has sounded
German morale upon a tenuous basis. But it is at least possible to sort out, and
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to some extent to weigh, those factore in the civil defense picture detrimental to
the home front's morale, and those which tend to strengthen it.
out families in the larger dwellings of the more prosperous, the Party has been
Certainly the RAF raids have confronted German authorities with & series of
able to portray itself as the enemy of class distinctions and the friend of the
situations which have had to be managed with the utmost care. The supply of
common man.
electricity, gas, and water has often been seriously impaired; transportation
Again, by encouraging self-help and self-reliance among the people, the Party
facilities and food distribution have frequently broken down. Under these DOD-
may succeed both in raising the resourcefulness of the public and in staving off
ditions, panic is an ever-present threat and criticism of ARP authorities inevitable,
the day when Party and State aid may become inadequate to the demands upon
Mass evacuation has in several instances been necessary: after the Rostock
It. Families are requested to make mutual arrangements with friends or relatives,
raids, 80 percent of the city's population was reported evacuated; after the first
providing shelter in case one family is bombed out. And, to conserve the deplet-
big raid on Lubeck, some 42,000 were believed to have been made homeless; and &
ed stocks of clothing, the population is asked to take hats, overcoats, leather
reliable German source admitted some 60,000 families were without shelter after
shoes, and blanketa to the air-raid shelters.
Cologne's bombing. During the past two years, 1,200,000 children have been
Finally, by actually encouraging civilians within the Reich to write their men
at the front in general terms about bomb damage at home, the Party is converting
evacuated from German territories endangered by air raids, The least that can
& liability into at least a limited asset: it reasons that one of the most important
be said about these movements is that the disruption of the family cannot help
but affect the general morale.
factors in maintaining morale is the belief that the sacrifices of war are being
The housing shortage, too, will have its influence. Germany entered the war
equally shared by all. So far, the Russian campaign has demanded unprecedented
sacrifices of the German Armed Forces. If now the men in the field can be assured
deficient in housing, and since the beginning of the large-scale RAF raida a mass
that those behind the lines are meeting-and bravely-somewhat comparable
of evidence has accumulated to indicate that the housing situation has now
dangers, the danger of fissures developing between the home front and the fighting
reached an scute stage, One British estimate places the probable damage Mill a
result of 66 major raids on 22 built-up areas (March to August, 1942) at 215,000
front may be appreciably lessened.
dwellings demolished or rendered uninhabitable. Damaged dwellings needing
immediate repairs were placed at 107,000-which does not include houses re-
ceiving such superficial damage as broken windows and blasted doors.
Two less tangible factors also play their part in adversely affecting German
morale. One is the collapse of the Göring-inspired legend that German cities
would be relatively Immune from serious air attack. Since this belief had been
reinforced by nearly three years of comparative security, its sudden demise had
an effect all the more serious. The second factor is the knowledge in Party ranks
that the problem of air-raid relief may soon be growing beyond their capacity to
solve it, and that even partial failure to meet this test may seriously undermine
the Party's prestige with the people.
Qualifications
It would be a grave mistake, however, to assume from this enumeration of
adverse factors that German civilian morale is in any immediate danger of crack-
ing as a result of Allied bombing raids. On the contrary, there is ample evidence
to show that the Party's handling of air-raid relief to date has proved extremely
effective in maintaining the spirita of the public. Energetic action in the distribu-
tion of food has enabled Party units to save the situation more than once, and
the Party's general on-the-spot alertness and thorough organization have shown
no deterioration.
The drastic measures that have been taken to cope with the housing situation
have also stimulated considerable public confidence. Summary examples have
been made of "space-hoarders": one man occupying a 7-room flat in Hamburg,
for instance, was sentenced to two years' imprisonment for refusing to shelter a
bombed-out family. Office buildings, attics, and huts are being converted into
dwellings; large houses are being subdivided; and, with the aid of government
loans, temporary buildings are being erected. Moreover, by quartering bombed-
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effectively further Japanese aggression. Furthermore, the conclusion that total
APPENDIX II
food supplies in Free China are sufficient to supply normal food requirements
FOOD SUPPLIES IN FREE CHINA
of the population must not obscure the fact that acute shortages do take place in
particular areas within Free China because of the difficulties of collecting food-
Free China, as now constituted, is practically cut off from outside sources of
stuffs and distributing them from surplus to deficit regions.
foodstuffs, and must depend on her own resources to supply her needs. Fortu-
Average production of the principal crops in all China and in Free China (pre-tear)
nately, although the coastal regions, & large part of north China, and the principal
cities have been lost to the Japanese, the Chinese Government still controls the
Free China
larger portion of the total land area of pre-war China. Still more fortunately, the
All China
unconquered regions of China were normally surplus areas with respect to food-
(1,000 metrio tons)
1,000 metrie tons
Percent
stuffs. While the population of what is now Free China was only slightly more
than half (51.5 percont) of the population of all China, it normally produced 61
percent of China's total output of foodstuffs. The percentage of cereal production
Cereals:
was slightly higher (62 percent); and, although the percentage for supplementary
Rice
41,586
39,456
95
Wheat
22,287
foodatuffs was somewhat lower (57 percent), unoccupied China produced 95 per-
8, 440
38
Kaoliang
6, 877
1, 625
24
cent of the rice output of Old China (it should be added that the present unoceu-
Barley
7, 847
4, 169
53
pied area contains the bulk of Chinese rice-consuming people).
Corn
6,155
2, 976
48
The war, however, has modified this favorable situation in two respects. In
Millet
6, 632
1, 257
19
Proso-millet
1, 517
503
33
the first place, migration from the occupied areas has raised the population in the
Oats
867
148
17
present area of Free China by as much as 10 percent, i. e., from 219,000,000 to
some 240,000,000. In the second place, in spite of government efforts to maintain
Total
93,768
58,574
62
or even to increase production, the output of foodstuffs seems actually to have
declined, From 1931 to 1937 annual production of cereals and supplementary
Supplementary foodstuffs:
Sweet potatoes
17,724
10,802
61
foodstuffs for Free China amounted, on the average, to 76,000,000 metrie tons.
Soya beans
6, 283
1, 976
32
For 1941 and 1942, a Chinese Government estimate, presumably covering the
Field pess
3,165
2,065
65
same area, placed this output at 72,000,000 and 71,000,000 metric tons respec-
Broad beans
2,975
2,201
48
tively. The extent to which the decline may be attributed to shifts in boundaries
Total
30,147
17,044
57
between free and occupied areas is not known. It is assumed here, however, in
the absence of indications to the contrary, that the production data refer to the
Others:
Peanuts
2, 807
998
36
same area. Accordingly, the decrease should be attributed primarily to & decrease
Rapeseed
2, 294
1, 828
80
in the acreage under crops (due largely to land fighting and the draining of farm
Sesame seed
904
346
38
labor into the army), and to unusually bad weather conditions in certain areas.
Cotton
775
242
31
In spite of these factors, Free China's over-all food position is still relatively
Tobacco
615
464
75
comfortable. After deductions for seed, feed, and the like have been made,
Total
7, 395
3,878
52
total food supplies in Free China in 1941 and 1942 amounted to 66,000,000 and
65,000,000 metrio tons, respectively. On the assumption that the maximum
Grand total
131,310
79,496
61
increase in population indicated above has taken place, these supplies permit a
per capita consumption of 275 kilograms for 1941 and 271 kilograms for 1942.
Average production for 1931-34 for 20 provinces of China, including what is now From China.
Per espita consumption for China as a whole in the pre-war years was 267 kilo-
Average production for 1031-37 for 15 provinces now comprising Free China.
grama. In terms of this criterion, therefore, the over-all food situation in Free
China must be regarded as still satisfactory.
APPENDIX III
It must be emphasized, however, that this criterion is a relative one; it consti-
SPANISH MOROCCO¹
tutes no proof that China's population is getting the nutrition it needs to resist
Services. - Based on a memorandum prepared in the Research and Analysis Branch of the Office of Strategie
A decision by the Axis to move into Spain would call for an immediate "clarifi-
cation" of the position of Spanish Morocco in the war, for the latter is 80 placed as
. Included are 13 provinces of China proper (with the exception of some districts) and the 2 border prov-
to be of great strategic value to either side. To the Axia it would represent an
Inces of Ninghsia and Chinghai. The districts excluded consist of 64 helen In Honan, 30 Asien in Hupsh,
and 21 beien in Chekiang.
I Based on a study prepared in the Research and Analysis Branch of the Office of Strategie Bervices.
26
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African bridgehead rapidly reinforceable by convoys from southern Spain. To
the United Nations, Its occupation would mean the safeguarding of the Gibraltar
centered upon Tabarrant, runs from Insi Ifri to east of El Tsenin with the aim
Strait's southern shore and the elimination of a possible threat to the main
of preventing 8 bisection of Morocco from the French base at Yes. East of
Morocean-Algerian-Tunisian supply line.
Melilla, a complete chain of similar fortifications is believed to guard the ap-
Axis convoys could make the run from Malaga and other ports on the coast of
prosches from the Moulouya valley in French Morocco,
southeastern Spain in one night. If & sufficient force could be landed, and Spanish
troops there either proved acquiescent or actually allied themselves with the
Air Bases and Planes
invaders, the Germans could strike from the eastern and western ends of Morocco
Spanish Morocco possesses five first-class airdromes, of which the two best-
over good roads, their center being buttressed by the rugged Rif Mountains (see
equipped are those near Melilla and Tetuan; the other three are near Larache,
map at back). At the eastern end, a good road runs toward the border from
Tangler and Alhucemas. In addition, many emergency landing fields are reported
Melilla, and an improved road extends south to French Morocco. In the western
to have been laid out, and extensive construction is known to have been undertaken
sector, EL paved road leads south from Tangier, with connections eastward to
for a field at Tamarot. Seaplane bases, quite well-equipped, exist at Ceuta and
Ceuta, and Tetuan; moreover, a standard-gauge railroad connects Tangier with
Melilla, and & seaplane anchorage at Alhucemas. These various air-bases are
the French Morocean system. Morocco's central area, on the other band,
clearly designed with & view to plane reinforcements from Spain: the number of
possesses virtually no direct road connections with French territory: three poor
squadrons now in Morocco is believed to be extremely small, and most of the planes
trails cross the main Rif and Pre-Rif mountains-and snow closes these in the
are themselves obsolete.
winter.
A significant strategic fact for both sides would be the nearness to the Spanish
The Army
Morocean frontier of the railroad and highways which run through French
The High Commissioner of Morocco, General Orgas, has under his command
Morocco toward Algeria and Tunisia. At one point, south of Melilla, they come
some 150,000 troops. What proportion of these are natives la not accurately
within ten to twenty miles of the border. Axis forces, accordingly, would need to
known.
strike only & short distance to achieve major results, Allied troops, for their
The two Army Corps which make up Spanish Morocco's forces-the 9th and
part, would probably find it necessary, if they wished to defend this vital route
10th-are undoubtedly better-equipped than Franco's battalions in metropolitan
adequately, to penetrate well into the Melilla sector in the east and the Larache-
Spain; but they remain a second-rate military aggregation, ill-supplied for any
Tangier sector in the west, in order to establish a mountain battle line easy to
modern large-scale offensive. There are scarcely 2,000 trucks in the whole sone;
hold.
most of them are too old for rough campaigning, but even if they were in better
If the Allied objective were the enforced neutralization or even the complete
condition, the shortage of petroleum would keep many of them idle. Armored
conquest of Spanish Morocco, advances from the eastern and western ends of the
cars are estimated at 250, and tanks at from 180 to 250; none of these is modern
colony would be the logical course, for only the east-west highway within Spanish
and the tanks are understood to be mostly light Italian and medium Russian
Morocco gives feasible access to the central zone. Once pushed back into this
types dating from the Civil War period.
mid-sector, where the Rifs might prove unpleasant neighbors, the Axis divisions
A reorganization of several years ago was supposed to have given Orgas's Army
would find their own lines of communication or advance very poor, while the
& substantial number of 75, 105, and 155 mm. guns. Troops on the Franco-
supply routes of the Allies, stretching back into French Morocco, would be fairly
Spanish frontier are reported to possess some anti-tank guns, mortars and how-
good.
itzers; and though B few modern anti-aircraft pieces are known to have been
Portifications
imported and installed, most of the Army's anti-aireraft equipment is believed to
be antiquated. One well-informed military observer has asserted that even the
For some time, the Spanish have been concentrating on strengthening their
partially demilitarized French troops in North Africa before the Allied occupation
fixed defenses in Spanish Morocco, particularly against attack by sea. While
could have given the Spanish-Moroccan forces & bad drubbing.
the most important coastal points flanking the straits are covered by batteries
of considerable power, the Atlantic littoral and the Mediterranean strip around
Political Complexion
Melilla are somewhat sketchily defended. Opposite Gibraltar, the areas best
How Spanish Morocco would react to Axis encroachments on metropolitan
fortified are believed to be those around Alcasar-Seguir, Punta Cires, Ceuta, and
Spain would depend primarily on the comparative strength and disposition of the
south of Ceuta near Cap Negro, and Tetuan.
Allied and Axia forces, and secondarily on the attitude taken by Madrid. As each
Defenses on the Franco-Spanish Moroccan frontier are not considered very
week sees the further consolidation of British and American strength in North
formidable, Labor battalions have been reported at work in the Larache-
Africa, the likellhood of a move by Organ in the face of Allied tanks and planes
Arcila-El Ksar el Kebir area, indicating a renewed effort to build up fortifications
diminishes proportionately.
and roads, Opposite Xauen, an extensive system of trenches is understood to
Orgaz himself has made it repeatedly evident that he is by no means eager to
have been dug, and along the Franco-Rif frontier a network of light fortifications,
follow blindly the bidding of Madrid. Under last February's law (virtually
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in theory as well as in fact, upon the Ministry of Foreign Affairs.
drafted by Organ), the Moroccan general administration ceased to be dependent,
natives, is still high-whereas that of France, which backed the losers in Spain and
was then defeated itaelf, has aunk extremely low.
Orgas has sought to consolidate his proconsular position by building up
The Allies can count for support on much of the foreign population of Tangier
and on all its Jewish refugees. Some of the ex-loyalists are pro-United Nations,
strong personal following, and by ingratisting himself with those elements in &
and others, trapped in the forced-labor battalions, would welcome any oppor-
the government who seem likely in his opinion to stay in the saddle. Though
tunity to strike at Franco, whether it helped the Allies or not.
technically the head of the Falange in Morocco, he was one of those Instrumental
in bringing about the fall of Súñer He seems to retain the confidence of Franco,
Economics
and has taken pains to keep on good terms with the monarchist generals-
The economic asseta of Spanish Morocco are scarcely apt to invite an Axis or
Jordana, Queipo de Llano, Varela, Kindelan, and the rest,
Allied invasion. The area is deficient in flour, sugar, vegetable oils (other than
One fact on which the Allies could rely in believing that Organ will make no
olive oil), textiles, fuel products, cement, fertilizers, and nearly all varieties of
move against us is the High Commissioner's lukewarm attitude toward Spanish
metal manufactures. Its surpluses of iron ore, limestone and phosphate rock,
irredentist claims. Newspaper propaganda in Spain has clamored for the annets-
and antimony ore would prove no great prize to the United Nations, nor are
tion of some or all of French Morocco, and the Falange is committed to this policy.
they likely to influence & German decision either for or against invasion.
The occupation in 1940 by the Spanish of the international zone of Tangier and its
incorporation into Spanish Morocco was one step. Extremists urge further ones,
such as the formation of & solid block of Spanish territory from Tangier to Ifni and
Río de Oro. Yet Orgaz has been reported as saying that Spain wanted only
minor changes, that this was & poor time to bring this question to the fore, and that
Spain was as little likely to attack the French in North Africa as in Europe.
Giving substance to these expressions, Orgaz has maintained friendly relations
over the past year with the French General, Noguès, still in power under Darlan.
Aria and Pro-Azis Forces
Working against the generally dampening "neutral" influence of Orgaz have
been both German agents and members of the Falange. Nazi penetration in
Spanish Morocco has followed the familiar pattern. The German consulate at
Tangier has & suspiciously large staff. Gestapo agents abound-with 8 con-
veniently closer approchement with the Spanish Securidad. Fifth column activi-
ties among dissident elements are generously subsidized and guided.
The Falangistas are present in considerable strength throughout urban Morocco,
particularly in Tangier. Here a party card is prerequisite to a state job or con-
tract. Yet the key posts in the Moroccan government are held largely by Army
men who are neither pro-Allied nor pro-Axis, but fundamentally pro-Spanish and
anti-Falange.
Native and Pro-Allied Elements
Both Allied and Axis propaganda have been directed In full volume at the
natives of Spanish Morocco, with the net effect of stirring up sentimente not 80
much pro-Allied or pro-Axis as anti-Spanish. There has been discontent among
the Moors over Franco's failure to fulfill their nationalistic aspirations and over
the continuing food shortage. Though Arab nationalist groups have generally
adopted a pro-Axis line, and some of them have not hestitated to accept substantial
subsidization from the Nazis, the Rifs are understood not to care at whose side
they fight, 88 long as it is against the Spaniards.
As to the natives within the Moroccan military units, It appears likely that they
will obey whatever orders their Spanish officers give them. Franco's prestige as
a result of the victory he won in the Civil War, with the assistance of Moroccan
31
€. s. GOVERNMENT PRINTING OFFICE 1848
30
Regraded Unclassified
RESTRICTED
5
3
2
S
SPANISH MOROCCO
GIBRALTAR
PRIMARY AIRFIELD
PAVED ROAD
36
PROBABLE AIRFIELD
IMPROVED ROAD
36
Punto Cires
CEUTA
SEAPLANE BASE
RAILROAD
Aleazer Seguir
TANGIER
SEAPLANE ANCHORAGE
INTERNATIONAL BOUNDARY
o
10
no
no
40
so
Rio Martin
MILES
ARCILA
AMELILLA
VILLA ALHUCEMAS
LARACHE
Chafforine Islands
Gabe de Ages
Soldia
ELSEAR
35
35
BERKARE
OJ
OUEZZA
SOUK EL ARBA
El
Aloyn
Tosach
F
C.
o
PETITJEAN
ABUERCIF
6
4
3
5
MAP NO. 1429 DECEMBER 2, 1942
COMPILED AND DRAWN IN THE BRANCH OF RESEARCH AND ANALYSIS, 055
REPRODUCED BY THE 0.5.5. REPRO. DIV.