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    "title": "Volume 592, December 1 – December 3, 1942",
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    "ocrText": "DIARY\nBook 592\nDecember 1 - 3, 1942\n- A -\nBook Page\nAdvertising Association of America, Outdoor\nSee Financing, Government: War Savings Bonds\nAlgeria\nSee Poland\nAluminum Company of Canada\nSee Silver\nAmerican Red Cross\nSee also Procurement Division\nNorman Davis gives resume' of and asks HMJr's comment\non program in England - 12/3/42\n592 282\nArkansas - Jonesboro\nSee Financing, Government: War Savings Bonds\n- B -\nBoard of Economic Warfare\nMinutes of meetings held October 29 and November 12 - -\n12/3/42\n287\na) Discussion of\n1) Axis blockade running\n2) Cryptostegia\nBruere, Henry (Bowery Savings Bank)\nSee Financing, Government: War Savings Bonds\n- C - -\nCanada\nSee Silver\nCharities and Taxes\nSee Revenue Revision\nChina\n1937 arrangement - future status of: Kung views -\n12/1/42\n78\nHall-Patch provides certain information concerning\npost-war relations between Great Britain and China - -\n12/3/42\n297\n- D -\nDefense Plant Corporation\nSee Silver\nDoughton, Robert L.\nSee Revenue Revision\n- F -\nFinancing, Government\n\"Funds available for new issue\" Bell memorandum -\n12/1/42\n22\nPostal Savings System: Meeting of Board of Trustees -\n12/1/42\n32,33\nRegraded Unclassified\n- , - (Continued)\nBook\nPage\nFinancing, Government (Continued)\nHigh-grade security markets - recent developments in:\nHaas memorandum - 12/1/42\n592\n34\n1-3/4's: Publicity discussed by HMJr, Bell, and Eccles -\n12/2/42\n85\nFederal Reserve operations in Government securities -\n12/2/42\n148\nNon-defense Expenditures, Committee on Reduction of:\nMeeting - 12/3/42\n238\na) Government questionnaires discussed\nWar Savings Bonds:\nAn advertising man and one other staff member to visit\ntowns of 25,000 and under and talk to bankers, etc.,\nrecommended by HMJr - 12/1/42\n2\nOutdoor Advertising Association of America - HMJr's\nmessage to - 12/1/42.\n48\nSales for November - 12/1/42\n49\nBruere (Bowery Savings Bank) correspondence\nconcerning \"borrowing $9 billion from accumulated\nsavings and idle funds\" - 12/2/42\n150\nJonesboro, Arkansas: Power companies to refund\nNovember bill in War Stamps and Bonds; Treasury\nrepresentation at celebration asked by Congressman\nE. C. Gathings - 12/3/42\n235\na) Further plans: See Book 593, page 12\nGarner (John N.) asked to support drive in public\nstatement - 12/3/42\n242\na) Statement: Book 593, page 17\nPublicity: HMJr's telegram to chairmen of Victory Fund\nCommittees - results not to be released from\nWashington until December 7; statements to be issued\nby districts from time to time - 12/3/42\n243\nKansas: Samples of advertising material used sent to\nHMJr by Evan Griffith (State Administrator) -\n12/3/42\n245\nNew York Herald Tribune: Thanked for supporting\ndrives - 12/3/42\n266\na) Mrs. Reid's reply: Book 593, page 18\nPayroll Savings Plan: Association of American Railroads\nthanked for support - 12/3/42\n267\nForeign Funds Control\nFrance: Operations in French france reported by Roudin;\nprobably for Office of Strategic Services - 12/3/42\n293\nFrance\nSee Foreign Funds Control\n- G -\nGarner, John N.\nSee Financing, Government: War Savings Bonds\nGathings, E. C. (Congressman, Arkansas)\nSee Financing, Government: War Savings Bonds\nRegraded Unclassified\n- G - (Continued)\nBook Page\nGold\nSee Lend-Lease\n# Poland\nGreat Britain\nSee United Kingdom\n- I -\nIckes, Harold L. (Secretary of Interior)\nWar Manpower Commission job: HMJr urges Ickes to accept -\n12/1/42\n592\n17\nInflation\nPaul, Randolph E.: Speeches on fiscal policy and\ninflation - 12/2/42\n160\nCompulsory lending and expansion of social security\nprogram - White memorandum on - 12/1/42\n277\nIran\nFinancial agreement discussed in Treasury-State-Tehran\ncorrespondence 12/3/42\n298\n- J -\nJonesboro, Arkansas\nSee Financing, Government: War Savings Bonds\n- K -\nKansas\nSee Financing, Government: War Savings Bonds\n- L -\nLehman, Herbert H.\nSee Palestine\nLend-Lease\nReport for week ending November 28, 1942\n62\nHigh point of British gold and dollar balances discussed\nin Stettinius memorandum - 12/3/42\n292\n- M -\nMilitary Reports\nBritish operations - 12/1/42, etc\n84,217,\n304,305\n\"The War This Week, November 26 - - December 3, 1942\" -\nOffice of Strategic Services report\n308\nRegraded Unclassified\n- N -\nBook Page\nNew York Herald Tribune\nSee Financing, Government: War Savings Bonds\n- o -\nOccupied Territories\nNavy asked to release Treasury men stationed in\nWashington - especially Lieutenant Frank A. Southard, Jr. -\n12/1/42\n592\n51\na) Knox-HMJr conversation - 12/2/42\n119\nb) Release - 12/4/42: See Book 593, page 85\nc) Release request withdrawn - 12/7/42: Book 594,\npage 93\nOutdoor Advertising Association of America\nSee Financing, Government: War Savings Bonds\n- P -\nPalestine\nLehman asked to conference at HMJr's home - 12/1/42.\n14\nPaul, Randolph E.\nSpeeches on fiscal policy and inflation - 12/2/42\n160\nPoland\nGold in Algeria and Polish representative there\ndiscussed in cable from American Consulate, Algiers -\n12/3/42\n296\nPostal Savings System\nSee Financing, Government\nProcurement Division\nAmerican Red Cross purchases for refugee relief no\nlonger need signature of Secretary or Assistant\nSecretary - 12/1/42\n52\n- R -\nRevenue Revision\nSee also Social Security Tax\nConference; present: HMJr, Gaston, White, Paul, Sullivan,\nHaas, Blough, Helvering, Atkeson, Schoeneman, Mooney,\nand Mager - 12/2/42\n96\na) Entire future program reviewed\nIndividual income tax problem - payment of: Blough\nmemorandum - 12/2/42\n128\nCharities and taxes - relationship between: To be discussed\nby group outlined in Paul memorandum - 12/2/42.\n142\nDoughton statement on cooperation between Treasury and\nCongress read to HMJr for approval - - 12/2/42\n224\na) Discussion of statement by HMJr and Sullivan\n228\nExtension of time for filing 1942 corporation tax returns -\nSurrey and Paul memoranda on - 12/3/42\n275,276\nRegraded Unclassified\n- R - (Continued)\nBook Page\nRoudin, Victor\nSee Foreign Funds Control: France\n- S -\nSilver\nDefense Plant Corporation: Availability of 40,000 tone\nfor non-consumptive use in war production\na) Canada: Use of 2,500 tons as bus bars by\nAluminum Company of Canada discussed in Paul\nmemorandum - 12/2/42\n592 215\nSocial Security Tax\nSee also Inflation for combined Social Security program\nand compulsory lending\nExtension of program to be discussed by HMJr and Blough -\n12/2/42\n126\nSouthard, Frank A., Jr. - Lieutenant\nSee Occupied Territories\nSweden\nConference; present: HMJr, Swedish Minister, Under\nSecretary of State Boheman, and White - 12/1/42\n23\na) Sweden's desire to obtain imports from Germany\nequivalent to exports discussed\n- T - -\nTaxation\nSee Revenue Revision\n- U -\nUnited Kingdom\nSee also Lend-Lease\nBritish finance in last war and in present one - White\nmemorandum - 12/1/42\n82\n- W -\nWar Manpower Commission\nSee Ickes, Harold L. (Secretary of Interior)\nWar Savings Bonds\nSee Financing, Government\n1\nDecember 1, 1942\n9:25 a.m.\nGROUP\nPresent: Mr. Bell\nMr. Cairns\nMr. Thompson\nMr. Sullivan\nMr. Graves\nMr. Schwarz\nMr. Gaston\nMr. White\nMr. Blough\nMr. Buffington\nMr. Kuhn\nMr. Gamble\nMr. Haas\nMrs. Klotz\nH.M.JR: I had a chance to see two Victory Fund\nCommittees in action, one at Kansas City and one in\nSt. Louis. I was sorry that Odegard, in notifying the\nKansas City group that I was ready to meet with them,\nonly had two men there. I thought I was going to have\na chance to meet the staff and talk to them, but I didn't.\nMR. GRAVES: We have no office in Kansas City. Our\noffice is in Jefferson City, Missouri.\nH.M.JR: They had time to bring people in. It is\nthe second time I have wanted to meet with the staff\nand explain to them what is going on, and I have not\nhad a chance to. I think it is unfortunate. I mean,\nI will have to spend an hour to an hour and a half\ntalking with these people at lunch Wednesday - Patterson\nand those people. Those aren't the people I want to\ntalk to. I want to talk to the people further down.\nAnyway, the Victory Fund people have got lots of\npep and enthusiasm. I told George that I think they\nRegraded Unclassified\n2\n- 2 -\nwill fall down on the small towns. One thing I would\nlike is somebody who could go into the field and make a\nstudy and talk to the banks. What about this fellow\nwho is with Douglas - Lew Douglas?\nMR. BELL: Don Woodward?\nH.M.JR: Yes. Do you suppose he would go on it\nfor two or three days.\nMR. BELL: I think he would, if he is well enough.\nGeorge, you know more about his health.\nMR. HAAS: I know he has been ill; but he seems\nto be all right. He is here this morning.\nH.M.JR: Isn't he a pretty good fellow?\nMR. BELL: Very good.\nH.M.JR: What I was thinking was that somebody\nlike that or somebody from George's--\nMR. HAAS: Shields would be better, wouldn't he?\nMR. BUFFINGTON: I have the names of five men\nwho were recommended to me, who I talked to Guy Lemmon\nabout yesterday.\nH.M.JR: I want one advertising man to go with\nhim, just one. I would like them to drop into towns\nof twenty-five thousand or under and just sit down and\ntalk to these fellows, the banks and Federal Loan to\nsee what they get, see what they are doing. They run\ninto this kind of thing. After all, what happened in\nKansas, just a few miles from the geographical heart of\nAmerica - and up to now they have been paying two\npercent interest for the whole state on time deposits.\nAnd you fellows - the pressure says we should give these\nfellows special treatment. Well, they get a two and a\nhalf percent bond, allow you to buy up to a hundred thou-\nsand, and continue their two-percent time deposits. I\nRegraded Unclassified\n- 3 -\ncan't remember the exact figures, but a bank with\nthree million deposits - I think they only had a half\na million out on loan, not very many Governments, and\nwere paying two percent on time deposits. Naturally\nthey are going to holler.\nMR. BELL: They ought to get modern and reduce it\nto one.\nH.M.JR: The question comes up - how many states\nare there still paying two percent?\nMR. BELL: We can get that. There are many states\nnot paying two percent.\nH.M.JR: When these advertising people tell us\nwe really don't know our markets, I think they are\nright. I was thinking if a couple of intelligent\nfellows - you can't send out an army - not more than\nthree, would spend two or three days going through\nthis Mississippi Valley, or something like that, in\na car, it would be very valuable to us.\nMR. BELL: All right.\nH.M.JR: I think it would be very valuable to us.\nAre there regulations of state banks as to how\nmuch they pay on time deposits?\nMR. BELL: Yes. Also the Banking Act of 1935 -\nthe Federal Reserve - lays down regulations. They\nfix not in excess of two and a half percent on time\ndeposits. Then the states come in under that. Most\nof the states have reduced their interest rate.\nH.M.JR: The State of Kansas is in the process,\nbut up to now they are still paying, by and large,\ntwo percent. I picked up a lot in 8. short time. Did\nyou realize that?\nRegraded Unclassified\n4\n- 4 -\nMR. BELL: That they were doing it?\nH.M.JR: Yes.\nMR. BELL: Yes, I knew there had been a cry for\nus to issue a special obligation of two and a. half\nand two and a quarter percent to these banks that\ncarry savings deposits and are paying two percent.\nH.M.JR: It is silly.\nMR. BELL: I think so, too. But I think you\nhave 8. much more serious problem in the insurance\nfield. The insurance people are being forced to pay\ntwo percent on their contracts. Their past contracts\nare in excess of three percent. It is a much more\nserious problem in the insurance field.\nH.M.JR: Anyway, it is that kind of thing.\nCan I leave it with you and some of the others\nto send somebody out so that they will be out, say,\nnot later than Wednesday - today is Wednesday - maybe\nby Thursday?\nMR. GASTON: Today is Tuesday.\nH.M.JR: If they could spend Thursday, Friday,\nand Saturday in the field--\nMR. BELL: \"e will try to get somebody this\nmorning.\nH.M.JR: And get somebody from the Advertising\nCouncil to go with them. And particularly look at\nthe literature they get.\nThere is one of the most important announcements\nthat has gone out from the Federal Reserve and the\nRegraded Unclassified\n5\n- 5 -\nComptroller, and it just goes like that. (Circular\nhanded to Mr. Bell.)\nIf I were a banker I would not even read it; I\nwould throw it in the wastepaper basket. Who printed\nthat?\nMR. BELL: This is probably the one that went\nout from either FDIC or the State Bank Commissioners.\nH.M.JR: You know that you gave these orders that\nthey should not get these circulars until Monday.\nBut they got them - I mean they got them anyway.\nMR. BELL: They got them if they were members\nof the Victory Fund Committee.\nH.M.JR: Listen, fellow, this was picked up right\nin Manhattan. There is your circular (indicating\nTreasury circular).\nMR. BELL: Wasn't he on 8. Victory Fund Committee?\nH.M.JR: I don't know, but Nee was giving me the\nschedule of trains on which he was mailing that out,\nto carry out your orders. That (indicating circular)\nwas picked up Friday in Manhattan. He had nothing\nleft by eleven o'clock Saturday, and all the rest of\nthat.\nThat is the one, isn't it?\nMR. BELL: They went out before the end of the\nweek to the members of the Victory Fund Committee.\nI take it that this bank is on the Committee.\nH.M.JR: There is the one the Victory Fund\nsent out.\nRegraded Unclassified\n6\n- 6 -\nMR. BELL: Then they were to mail them Thursday,\nFriday, and Saturday so as to be sure to reach all\nbanks in the first mail Monday.\nH.M.JR: I am sorry; I hope I am not boring every-\nbody, but this is nine billion dollars, and I have got\nto get it. I think the reason I want the people to go\nout in the field is that - I want to know who is going\nto go because I want to pass on the person. If they\nwill do what I could do only very superficially - after\nall, we can have one announcement and advertising, and\nthen it gets down to reaching these people in the small\ncommunities. I think you will find the small communities -\nthis man said to me, \"Well, Mr. Morgenthau, these fellows\nrunning three million or five million dollar banks just\ndon't know what it is all about. Nobody is taking the\ntrouble to explain it to them. And they still think\nthat owning a lot of Governments . they don't realize\nthat they can borrow from the Federal Reserve. They\nthink it is a fixed obligation, and they are going to\nbe criticized.\" He says that nobody has been around to\nsee them.\nNow it was the same thing when we tried to do\nForeign Funds. We held schools all over New York State.\nYou remember the Model \"T\" business. As a result of\nthat the thing went along beautifully. We have got to\nhold schools for these banks, bring them in and have\nsomebody go out and talk to them, Dan. And for the\nABA to send them out a handsome piece of literature,\nthat doesn't - I told this to these fellows over and\nover again at St. Louis, \"And you fellows have to use\nsome shoe leather. You can sit here and send all the\nmail in the world, but that isn't going to do the thing,\nsitting at a desk - in towns of ten thousand population -\nFederal Loan saying so and so.\"\nRegraded Unclassified\n7\n- 7 -\nH.M.JR: It is the object of the ABA committee\nto contact each of the members of their association.\nH.M.JR: They admitted - Hemingway was there yes-\nterday, and he admitted they have not done it.\nMR. BELL: He said they did not have time to get\nthe people together in the two weeks they had.\nH.M.JR: I am not criticizing you. The thing is\ngoing to go; it is going to be a success. But there\nis an awful lot yet to be done to make the small-town\nbanker conscious - what I told them was this: \"I have\nalways thought you bankers were smart, and I still\nthink 80. I think you are smart enough to realize\nthat if you can sell these securities to somebody else\nyou don't have to buy them yourself.\" I gave them in\nboth places 8. fighting talk on two percent.\nMR. BELL: Good.\nH.M.JR: The question they asked me at Kansas City\nwas, \"Mr. Morgenthau, if this nine billion dollar thing\nfails, won't you raise the interest rate?\" (Laughter)\nMR. BELL: The answer, I hope, was no.\nH,M.JR: So I said, \"In the first place, it is\ngoing to be & success, but win or lose, it is going to\nstay at two percent, 80 you fellows might as well get\nbusy and go to work.\" (Laughter)\nI did not do any speaking; I just answered ques-\ntions. I think, Harold, if you had been there you\nwould have been quite happy to have heard this fighting\ntalk that I gave at both places on War Bonds and their\nplace in the future. If you want to know, your State\nadministrator from Kansas heard it.\nMR. GRAVES: Griffith?\nH.M.JR: Evan Griffith. Evan and Henry were very\nclose. (Laughter)\nRegraded Unclassified\n8\n- 8 -\nMR. GRAVES: Wonderful.\nH.M.JR: A fellow from the hotel, Harry Ware,\nheard that Evan Griffith was going to fly up with me\nthe next day, so he said to Griffith, who, incidentally,\nlives in Manhattan, \"How can I get on that plane with\nthe Secretary? I want to go up with you. Won't you\nfix it 80 I can go up on the plane?\" Griffith said,\n\"Listen, Harry, you found an excuse to go up there\nevery fifteen minutes to see him. You can find an ex-\ncuse to ride with him. You do your own asking. You\nhave been bobbing in his room every fifteen minutes.\nYou can find out how to go there.' He is an old theater\nman - motion pictures. He said he used to run a theater\nin Portland. (Laughter) So he came up and we took him.\nI think he is the happiest man in Kansas. He was &\nscream.\nAnyway, can we do that?\nMR. BELL: Yes.\nH.M.JR: I think, Harold, at the earliest possible\ndate you ought to arrange for me to make a public address\nat & War Bond meeting, where you are going to present &\nTreasury flag, where I can go all-out as to the future\nof War Bonds and its place.\nMR. GRAVES: We would like to very much.\nH.M.JR: I think we need that very badly because\nthese fellows are sort of--\nMR. GRAVES: Uncertain?\nH.M.JR: Yes, uncertain, and if what I said publicly\nhad been listened to, I think every War Bond person would\nhave been satisfied. But if you find a spot for me, I\nwill be glad to do it.\nMR. GRAVES: Fine, we would like to.\nRegraded Unclassified\n9\n- 9 -\nH.M.JR: As long as it is not too far away. They\nhad me jumping on and off of trains. Mrs. Morgenthau\nand I were scheduled to go on the twelve o'clock train,\ntwenty hours and a half, and just before they left they\ntook us off and we came seven hundred and fifty miles\nin three hours and fifteen minutes.\nMR. SULLIVAN: Nice wind.\nH.M.JR: We were going two hundred and fifty miles\nan hour - tail wind.\nThe other thing that is bothering me - where is\nPaul?\nMR. CAIRNS: Last night he made a speech in Phila-\ndelphia.\nH.M.JR: Will he be in tomorrow?\nMR. CAIRNS: No, he is making one today in New York.\nH.M.JR: I saw a little squib in the paper, some-\nthing about the five percent tax and how the employer\nhas to notify the employee - something in this morning's\npaper over my name.\nMR. SULLIVAN: Yes, sir.\nH.M.JR: I think, Ferdie, what I would like to\ndo, if they would be willing to do this thing - the\nAdvertising Council - take just that thing, that\nought to go out to all the Labor press through our\nWar Bond Labor people. But I would like very much\nif the Advertising Council would come in on it, to\nhave them study the relationship between the Treasury\nand the taxpayer.\nMR. KUHN: I had a long talk with Guy Lemmon\nlast night about it, asking his advice and opinions\non it. I would like to go along with it today.\nRegraded Unclassified\n10\n- 10 -\nH.M.JR: I would like to study it. They had three\nvery smart newspapermen in St. Louis interviewing me.\nThe thing has gotten out all over the country that we\nsort of take a relish in making it just as difficult\nas possible for the taxpayer to pay instead of doing\nwhat I explained, that we do everything we can to smooth\nthe way, and 80 forth. It is a public relations job,\nand there is a big job to be done.\nI have spent 80 much time, first on War Bonds, and\nnow Victory Fund, and I have not spent enough time on\nthis other thing.\nI think there is a big public relations job, a\nbig story to tell, Ferdie and Herbert. I think if\nthese advertising people could come in and study the\nthing 80 that we can go to the people, and particularly\nthe working man and the working woman, and explain to\nthem the various things that we have done - I hope you\nhave that memo, Roy.\nMR. BLOUGH: I have a memo.\nH.M.JR: Hold onto it.\nMR. SULLIVAN: You say this was over your name?\nH.M.JR: It is a little announcement-\nMR. SCHWARZ: This morning's story on the extension\nof time on the Victory Tax.\nH.M.JR: It gets 80 much space. For instance,\nthe labor press - did you do anything with the labor\npress?\nMR. SCHWARZ: Yes, sir.\nH.M.JR: What did you do with that?\nMR. SCHWARZ: We sent it out.\nRegraded Unclassified\n11\n- 11 -\nH.M.JR: But you have been on that, Ferdie. There\nis a big job to be done.\nMR. KUHN: They have good ideas, and they are very\nmuch interested in it. They regard themselves as\nadvisors on all phases of the Treasury's job right now.\nH.M.JR: Good. Is Mr. Harold Thomas in Cleveland\nand Toledo on Treasury business or his own?\nMR. KUHN: I think his own, today and tomorrow.\nH.M.JR: Did he get permission to attend to his\nown business? (Laughter) I will not disturb him,\nbut if he could come down, maybe Thursday--\nMR. KUHN: Would you like to see Guy Lemmon today?\nH.M.JR: We will 800 how we get along.\nMR. KUHN: He would be helpful.\nMR. GASTON: That Ruml plan drive has been\nadvertising the Treasury as against pay-as-you-go.\nH.M.JR: That is right. I explained to them\nas best I could where we stand on this thing.\nMR. GASTON: In at least one of Randolph's speeches\nhe was going to talk about how the Treasury has been\nworking to try to accomplish a genuine pay-as-you-go\nplan and that we were the first in the field to try to\ndo that.\nH.M.JR: Anything special, Dan?\nMR. BELL: I would like to get an amendment to the\nregulations on the Savings Bonds, changing the F, and\nG from \"War Savings Bonds\" to just \"Savings Bonds. That\nis effective today.\nH.M.JR: Say that again.\n12\n- 12 -\nMR. BELL: This changes the name of War Savings\nBonds, Series F and G,to just \"Savings Bonds.\" It\neliminates the word \"War\", as you had agreed upon.\n(Document referred to signed by the Secretary.)\nH.M.JR: Do you know what they called - I guess\nyou people who were at Kansas City know what they call\nthe E, F and G Bonds, don't you?\nMR. GRAVES: I don't think I know what you mean.\nH.M.JR: Eleanor, Franklin, and God. (Laughter)\nMR. BELL: That is pretty good.\nH.M.JR: I have to go up to this Byrd Committee.\nI thought it would give me a chance to see old man\nDoughton. That is what I am really going up there for,\nwithout seeming to seek him out. If anybody has any\nemergencies you can tell Stephens about them.\nHave you got some stuff?\nMR. BELL: No. Yesterday we got a billion two\nhundred and twenty million bids on Treasury bills, and\nthe rate went down from three seventy to three\nsixty-eight.\nH.M.JR: Anybody got anything special today?\nMR. THOMPSON: Mr. McReynolds is handling your\ndeferment cases. They are all going to be approved.\nH.M.JR: Good for Mac. That shows sense, instead\nof having Rosenman do it.\nMR. SULLIVAN: There were forty-eight letters to\ngovernors of the States with regard to the distribution\nof this tax folder. Do you want to sign those\npersonally? They are written for your signature.\nRegraded Unclassified\n13\n- 13 -\nH.M.JR: He (Buffington) has forty-eight letters\nto the governors, too. Have you talked with Kuhn?\nMR. SULLIVAN: The program in the original instance\nwas cleared with Ferdie.\nH.M.JR: I mean you had better talk to him again\nsowe do not overlap on this governor business. On\nstuff that I have to sign which has a public relations\nangle, to save my time I wish you people would talk to\nKuhn before it comes to me. Now, George Buffington\nhad forty-eight letters all typed and we had to turn\nthem down.\nWould you? It saves me time.\nMR. SULLIVAN: Certainly.\nH.M.JR: Harold, have you anything pressing?\nMR. GRAVES: Mr. Gamble and I are planning to\ngo to Cleveland to be there Friday to meet with our\npeople, if that is agreeable to you.\nH.M.JR: Is Odegard here today?\nMR. GRAVES: He is due here today. He gets off\nthe train early in the morning, and he probably has\nnot reached here yet.\nH.M.JR: All right, I will run up on the Hill.\n14\nDecember 1, 1942\n12:09 p.m.\nHMJr:\nHello.\nOperator:\nGovernor Lehman in Albany.\nHMJr:\nHello. Hello.\nGov.Herbert\nLehman:\nHello, Henry.\nHMJr:\nHow are you?\nL:\nFirst rate. How are you.\nHMJr:\nHerbert, I'm all right and Elinor's all right.\nL:\nFine.\nHMJr:\nEdith?\nL:\nShe's fine. And the boys?\nHMJr:\nThey're all right.\nL:\nGood.\nHMJr:\nAnd yours?\nL:\nI think - as far as I know, they're all right.\nHMJr:\nHerbert, the reason I'm calling you is this,\nI don't know whether you want to do this sort\nof thing, but....\nL:\nI - I can't get that....\nHMJr:\nHello? Can you hear me?\nL:\nYes, I can now.\nHMJr:\nThursday night....\nL:\nYes.\nHMJr:\n....at the suggestion of 8am Rosenman, I'm\nhaving a few people together at my house for\nsupper to discuss Palestine\nRegraded Unclassified\n15\n- 2 -\nL:\nI see.\nHMJr:\n....and what we should advise the President.\nL:\nYes.\nHMJr:\n....and it was just five or six people - hello?\nL:\nYes, sir, Henry.\nHMJrr\nAnd if you were going to be here, I'd very much\nlike to have you.\nL:\nHenry, I won't be able to be there because I've\ngot to see a number of people in New York\nHMJr:\nOh.\nL:\nlate on Thursday afternoon.\nHMJr:\nI see.\nL:\nI've made engagements, and I won't be down in\nWashington until very late on - on Thursday night\nor possibly even Friday morning.\nHMJr:\nWell, I'm sorry.\nL:\nI'm awfully sorry. I would have liked to have\nsat in, and I hope to sit in on other gatherings.\nHMJr:\nYou'll have plenty of opportunity.\nL:\nAll right. I'm sure of that.\nHMJr:\nDon't worry.\nL:\nAll right.\nHMJr:\nAll right, Herbert.\nL:\nI'll be down on Friday, and I hope to see you soon\nafterwards.\nHMJr:\nWell, I hope 80.\nL:\nAll right. Give my love to Ellie.\nRegraded Unclassified\n16\n- 3 -\nHMJr:\nElinor sends you hers.\nL:\nThanks.\nRegraded Unclassified\n17\nDecember 1, 1942\n12:16 p.m.\nHMJr:\n....west and I've been reading the papers and\nhearing on the radio that they're thinking\nthat you're going in to take over the Manpower.\nHarold\nIckes:\nThat's a hell of A job to....\nHMJr:\nAnd....\nI:\n....give me, isn't it?\nHMJr:\n....and the purpose of my call was to say that\nI'd hoped that you take it, and this is just me.\nNobody suggested I call you up.\nI:\nWell, I don't want it, Henry. I\nHMJr:\nWell, I can imagine how....\nI:\n....I\ndon't 800 how I can....\nHMJr:\nUh.\nI:\ntake it and abandon this department to\ncertain other gentlemen.\nHMJr:\nWell, that was what I was going to - strictly\noff-the-record - say. We did have & man by the\nname of Senator Ball once.\nI:\nYeah.\nHMJr:\nWhat?\nI:\nYes, we did.\nHMJr:\nAnd....\nI:\nI think it's dreadful.\nHMJr:\n....and to turn this fellow loose in that de-\npartment, I just wonder how much damage - how\nmuch damage could he do?\nI:\noh, he could do a lot.\nRegraded Unclassified\n18\n- 2 -\nHMJr:\nHe could do a lot.\nI:\nWell, we have all the physical assets except\nbuildings.\nHMJr:\nI see.\nI:\nThe United States Government owns.\nHMJr:\nYeah. Well, I - - for whatever my two bits are\nworth, the Manpower thing's a mess and I know\nyou could straighten it out.\nI:\nWell, I'm not 80 sure....\nHMJr:\nBut....\nI:\n.....and I've been blue as hell over the week-\nend. I....\nHMJr:\nHave you really?\nI:\nYeah.\nHMJr:\nOh, I'm sorry.\nI:\nI'm depressed over the whole damn thing.\nHMJr:\nReally?\nI:\nYeah.\nHMJr:\nWell, I'm sorry.\nI:\nI - - God, I didn't want this job.\nHMJr:\nWhat?\nI:\nI don't want that job.\nHMJr:\nWell....\nI:\n(Laughs)\nHMJr:\nI know it's - well, this fellow in England 1s\ndoing a beautiful job with it.\nI:\nYeah. Yes, he 1s.\nRegraded Unclassified\n19\n- 3 -\nHMJr:\nIt can be done.\nI:\nOh, it can be done but - look at the mess it's\nin now.\nHMJr:\nTrue.\nI:\nYup.\nHMJr:\nWould you - if you took it, I take it you insist\non having this - - the draft thing under you.\nI:\nWell, I haven't insisted on anything. I've had\nonly one talk with the President on it, and in\nthat talk I told him I didn't want it.\nHMJr:\nOh.\nI:\nAnd I told him somewhat of what I felt about\nMcNutt coming over here\nHMJr:\nYeah.\nI:\n....and I said, \"Of course, if you need Interior\nfor McNutt, you know it's yours.\"\nHMJr:\nYeah.\nI:\nBut it'd be a whole lot easier for me to get out\nof the administration entirely and watch McNutt\noperate in Interior from the outside.\nHMJr:\nWell....\nI:\nIt would be dreadful for me to be still in the\nadministration and watch him operate.\nHMJr:\nOh. Well, I - I was glad that the President\nwas recognizing you, and, second, that I hoped\nit was a straw in the wind that he might again\nput some of the New Dealers and his real friends\nback in the saddle.\nI:\nYeah. (Laughs) Well, it's hopeful from that\npoint of view.\nHMJr:\nYeah. Well, I'm sure whatever you decide will\nbe right, Harold.\nRegraded Unclassified\n20\n- 4 -\nI:\nWell, thanks, Henry.\nHMJr:\nGoodbye.\nI:\nGoodbye.\n21\nDecember 1, 1942\n12:38 p.m.\nHMJr:\n....business?\nGeorge\nBuffington: Yes, sir.\nHMJr:\nWell, what's the answer?\nB:\nThe - the comment was not in the press release.\nHMJr:\nIt was not.\nB:\nIt was in the original ad of the most important\nannouncement made by the U. S. Treasury.\nHMJr:\nIt was in the original ad?\nB:\nThat is, referred to as the $9 billion dollar\nVictory Loan Drive.\nHMJr:\nBut it wasn't that I turned it over - Secretary\nof the Treasury.\nB:\nNo, sir, it was not.\nHMJr:\nI see. Well, we'll....\nB:\nI have those other ads ready to show you the\nprogress that occurred\nHMJr:\nI'll see them to.. - I'll look it over with you\nsometime this afternoon.\nB:\nOkay, sir.\nHMJr:\nBecause I want to see what - when that cropped\nin.\nB:\nAll right, sir.\nHMJr:\nAll right.\nB:\nI'll have it ready for you.\nHMJr:\nThank you.\nB:\nOkay.\nRegraded Unclassified\n22\njueds AVAILABLE FOR IN ISSUE\nGeneral Post Fund, Veterans' Muinistration\nfills 22 $50,000 0/C\nPost Savings System:\nCash\n$86,000,000\n$0,000,000 09\n2% Notes\n55,000,000\n-\nFederal Deposit Insurance Corporation:\nCash\n$23,000,000\n10,000,000 ok\n2$ Notes\n95,000,000\nGovernment Life Insurance Funds\nCash\n-\n-\n25 Notes\n26,225,000\n-\nFederal Housing Administration:\nNatual Mortgage Insurance Pund\n4,500,000 or\nUnemployment Trust Fund\n42,000,000 40 40th\nFederal 01d Age & Survivers Insurance Trust Funds\nOctober 31 balance\n49,000,000\nNovember receipts\n227,000,000\n100A\nArmy Notion Picture Service\nNone\nIndian Service\n-Hot available\nPanama Ganal Some\n500,000 ok\nComptroller of the Currency\nBone\nNational Park Trust Fund\nok\nbleared unti\n2:30pm\nDery\n12/1/42 AwB\nRegraded Unclassified\n23\nDecember 1, 1942.\nConference in Secretary Morgenthau's Office\nDecember 1, 1942\n3:00 P.M.\nPresent: Secretary Morgenthau\nThe Swedish Minister\nMr. Boheman, Under Secretary of State\nMr. White\nMr. Boheman stated that his Government was making every\neffort in its arrangements with Germany to obtain imports to\nan equivalent value of their exports. Part of the favorable\nterms which they had been getting up to now in their dealings\nwith Germany was to obtain the coal at pre-war prices whereas\nthe goods Sweden was exporting to Germany were sold at cur-\nrent prices. He stated Germany was objecting to that provi-\nsion and wished to raise the price of coal. The present\nnegotiations may, he said, break down on that issue.\nHe stated that Sweden very much needed the oil it was\ntrying to get in the United States for the Swedish Navy and\nAir Force - mostly heavy oil and 84 octane gasoline.\nIn response to a question by the Secretary, Mr. Boheman\nexplained that there were two Norwegian ships which Britain\nwished them to release but Sweden could not see its way clear\nto letting them go because of Germany's strong opposition.\nHe said if Sweden let the ships go he feared Germany would\nnot let the oil Sweden badly needed come in. He said Germany\nwas already annoyed at the number of Norwegian ships that had\nescaped from Swedish ports.\nThe Secretary expressed his thanks for the brief survey\nof Swedish conditions that Mr. Boheman had submitted.\nH. D. White\nRegraded Unclassified\n24\nDecember 1, 1942\n3:27 p.m.\nHMJr:\nWho's been shooting off his mouth about this\n$25,000 - on that investment?\nCharles\nSchwarz:\nThat United Press story and one in the A.P., I\nwas able to check with the United Press story\nbecause\nHMJr:\nYeah.\nS:\nthe Treasury man wrote that one. I said\nthat I doubted that anybody in the Treasury had\ntalked about it. He said they got most of it\nfrom the Budget, and he was able to confirm it\nby talking with some Treasury people down the\nline.\nHMJr:\nBo he got it from the Budget?\nS:\nThat's right.\nHMJr:\nI see. Well, then\n8:\nAnd - and they - they were told that the A. P. -\nwhich - which got it first - which scooped them -\ngot it originally from the Budget people.\nHMJr:\nI see. Okay.\nS:\nRight, sir.\nRegraded Unclassified\n25\nDecember 1, 1942\n3:51 p.m.\nHMJr:\nHello.\nHarold\nGraves:\nYes, sir.\nHMJr:\nHarold? Hello.\nG:\nYes, sir.\nHMJr:\nI - after all the fuss that Roy Welch made\nabout those two boys\nG:\nYes.\nHMJr:\nnobody I find ever thanked the Army for\ntheir services.\nG:\nOh, that's terrible.\nHMJr:\nAnd I'm doing it now myself.\nG:\nWell, I'm ashamed. I didn't know that.\nHMJr:\nWell, I mean I think that after all the fuss-\ning - and the boys did a good job.\nG:\nThey certainly did.\nHMJr:\nWell, I'm doing it now in connection with\nsending copies of their records.\nG:\nYes.\nHMJr:\nBut you can tell Roy Welch with my compliments,\nit seems to me with all the fussing that he\ndid, he might have seen that the boys - well,\nthat something went into their official record.\nG:\nI'll do it. Yes, sir.\nHMJr:\nOkay, Harold.\nG:\nYes, sir.\nRegraded Unclassified\n26\nDEC 1= = 1942\nDear Sergeant Uhl:\nI thought you would be interested in seeing\nthe enclosed promotion material and memorandum\nfrom Mr. Callahan regarding \"Ev'rybody Ev'ry\nPayday\". We feel sure that the nong is going to\nbe a great success, and are indeed grateful to\nyou for your untiring work on it.\nMy kindest regards and best wishes.\n(Signed) Sincerely, H. Morgenthau, Jr.\nHenry Morgenthau, Jr.\nSecretary of the Treasury\nSergeant Richard Uhl\n80th Division Artillery Band\nCamp Forrest, Tennessee\nVFC/mon\nCopy in Diary\nCopies to Thompson\n(Promotional material &\nrecords sent)\nRegraded Unclassified\nTREASURY DEPARTMENT\n27\nINTER OFFICE COMMUNICATION\nDATE November 25, 1942\nTO\nSecretary Morgenthau\nFROM\nVincent F. Callahan\nNCV\nI am attaching hereto sets of promotion\nmaterial on the song \"Ev'rybody Ev'ry Payday\" to be sent\nto Corporal Adair and Sergeant Uhl. I have prepared cover\nletters to these gentlemen for your signature.\nRegraded Unclassified\n28\nDEC 1 1942\nDear Corporal Adair:\nI thought you would be interested in seeing\nthe enclosed promotion material and memorandum\nfrom Mr. Callahen regarding \"Ev\"rybody Ev'ry\nPayday\". We feel sure that the song is going to\nbe a great success, and are indeed grateful to\nyou for your untiring work on it.\nMy kindest regards and best wishes.\nSincerely,\n(Signed) H. Morgenthau, Jr.\nHenry Morgenthau, Jr.\nSecretary of the Treasury\nCorporal Thomas Adair\nRadio Division\nPost Public Relations Office\nFort Jackson, South Carolina\nCopy in Diary\nVFC/mon\nCopies to Thompson\n(Promotional material &\nrecords sent)\nRegraded Unclassified\n29\nDecember 1, 1942\n4:57 p.m.\nHMJr:\nin here with me. He tells me we have\n$800 million from the banks on the one-and-\nthree- quarters.\nDaniel\nBell:\nUh huh.\nHMJr:\nShould I worry?\nB:\nNot yet.\nHMJr:\nNot yet?\nB:\nNot yet.\nHMJr:\nUh huh.\nB:\nNo, I don't think that - that's two days. I\nsuppose that's larger than we've been getting.\nAt least, as large.\nHMJr:\nHave you talked to them in New York?\nB:\nYeah, and Bob Rouse said that he and Allan had\ntalked about it this morning, and they thought\nthey'd wait until this evening to see what\nthey're going to do - what came in, and then\nif it looked as though that they weren't coming\nin very good or if the mail wasn't heavy, they'd\nbegin to call up and ask them if they'd, in\ntheir enthusiasm to sell these bonds outside of\nthe banks, had they lost track of their own\nsubscription.\nHMJr:\n(Laughs) Well, you better talk to me about it\nthe first thing in the morning.\nB:\nYeah, yeah. Well, I - they've got it in mind.\nHMJr:\nYeah.\nB:\nand I think they'll begin to put pressure on\ntomorrow.\nHMJr:\nGood.\nRegraded Unclassified\n30\n- 2 -\nB:\nYeah.\nHMJr:\nYou - I don't think I have to worry.\nB:\nI don't think 80. I think it's going over.\nHMJr:\nI gather they don't want a one-and-three-quartere.\nI don't know what the hell they will take.\nB:\nThat's right. By the way, Murray Shields is tied\nup - two days that he's promised long time ago he's\ngot to make a speech and he says he can't get out\nof it. I thought I'd send Don Woodward to Chicago....\nHMJr:\nYeah.\nB:\n....and let Murray Shields go to Cleveland Sunday\nnight for three days\nHMJr:\nYes.\nB:\n....and go through Ohio.\nHMJr:\nGood.\nB:\nIs that all right with you?\nHMJr:\nOkay.\nB:\nSwell.\nHMJr:\nThank you.\nRegraded Unclassified\nDelivery 31\nOriginal (and carbons) given to Heffel-\nfinger's secretary 12/11/42 for transmittal\nto Attorney General.\nPhoto file in Diary\nSigned) Ramsey S. Black. (Signed)Francis Biddle\nof\nIN REPLYING\nREFER TO INITIALS AND DATE\nBoard of Trustees\nPOSTAL SAVINGS SYSTEM\nBashington\nDecember 1, 1942\nAt a meeting of the Board of Trustees of the Postal Savings System\nheld at Washington, D. C., on this date, the following action was taken:\nWHEREAS on December 1, 1942, the President authorized the Board\nof Trustees of the Postal Savings System to purchase from postal-savings\nfunds, bonds to the aggregate amount of one hundred million dollars\n($100,000,000), par value, in addition to securities already authorized\nto be purchased, embracing any or all of these classes-(1) bonds or\nother securities of the United States; (2) bonds of the Federal Farm\nMortgage Corporation authorized by Act of Congress approved January 31,\n1934, fully guaranteed both as to principal and interest by the United\nStates; and (3) bonds of the Home Owners' Loan Corporation authorized\nby Act of Congress approved April 27, 1934, fully guaranteed both as\nto principal and interest by the United States:\nRESOLVED, That pursuant to the authority conferred by the President,\nthe Board of Trustees hereby authorizes and empowers the Secretary of\nthe Treasury to invest in any or all of the securities specified above,\neither by original subscription or purchase, in an aggregate amount not\nexceeding one hundred million dollars ($100,000,000), par value, of\npostal-savings funds, which, on being consummated, will leave no un-\nexecuted balance under the President's authorization of December 1,\n1942:\nRESOLVED, That the Secretary of the Treasury is authorized to leave\nthe securities purchased under this resolution with the Federal Reserve\nBank of New York, to be held in safe-keeping, in coupon form, subject\nto his order, for account of the Board, or to have them registered in\nthe name of the Board of Trustees of the Postal Savings System and de-\nposited with the Treasurer of the United States as custodian for such\nBoard, whichever the Secretary of the Treasury may elect.\nFrom Owerer\nPostmaster General\nAttest:\nMmmithan Secretary of the\nswb\nAgent of the Board\nAttorney General\nRegraded Unclassified\nOFFICE DEPARTMENT\nOffice of the Postmaster General\nSTATES DATE OF\nMashington, D. C.\nDEC 1 1942\nThe President:\nThe undersigned members of the Board of Trustees of the\nPostal Savings System hereby respectfully request that they be\nauthorized to purchase bonds to the aggregate amount of one\nhundred million dollars, par value, in addition to securities\nalready authorized to be purchased, embracing any or all of the\nclasses described below:\n(1) Bonds or other securities of the United States.\n(2) Bonds of the Federal Farm Mortgage Corporation\nauthorized by Act of Congress approved\nJanuary 31, 1934, fully guaranteed both\nas to principal and interest by the United\nStates.\n(3) Bonds of the Home Owners' Loan Corporation\nauthorized by Act of Congress approved\nApril 27, 1934, fully guaranteed both\nas to principal and interest by the\nUnited States.\nPower to grant the authority desired is conferred upon the\nPresident by the Act of May 18, 1916, amending the Organic Postal\nSavings Act; by the Federal Farm Mortgage Corporation Act, ap-\nproved January 31, 1934; and by the Home Owners' Loan Act of\n1933, as amended by the Act of Congress approved April 27, 1934.\nVery respectfully,\nFrom Ownerer\nPostmaster General\nSecretary of the Treasury wis\nAttest:\nICTORY\nBUY\nAttorney General\nBORDS\nAgent of the Board\nApproved,\nRegraded Unclassified\n34\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE December 1,\n1942\nTO\nFROM\nMr. Haas BA.\nSecretary Mergenthau\nSubject: Recent Developments in the High-grade Security Markets\nSUMMARY\n(1) The announcement, on November 20, of the Treasury's\nDecember financing program set in motion a decline in\nthe prices of Treasury bonds, which continued up to the\neve of the financing campaign (Chart I). Partially tax-\nexempt bonds suffered somewhat more than taxable bonds\n(Chart II). The net increase in the Government security\nportfolio of the Federal Reserve Banks in the period\nNovember 19-28, amounted to $327 millions. Purchases of\ntaxable bonds in this period were confined principally\nto intermediate-term bonds, with the result that price\ndeclines were small in this range as compared with the\ndeclines in the prices of longer issues which were, for\nthe most part, unsupported.\n(2) Excess reserves of member banks were, at the last weekly\nreport date, about $2,525 millions (Chart III). It is\nestimated that the effect of the increase of money in\ncirculation and of the growth in deposits resulting\nfrom the sale of new Treasury securities to banks would\nbe to reduce excess reserves to about $1,100 millions\nby the end of December, unless offset either by Federal\nReserve purchases of Governments or by a reduction of\nreserve requirements.\n(3) New money corporate and municipal bond offerings in the\nNew York market continue small. In the refunding field,\nthe City of Philadelphia has offered an exchange to\nholders of $162 millions of bonds first callable from\n1944 to 1953, at an interest saving of about $45 millions.\nInsurance companies have recently been taking advantage\nof the growing scarcity of tax-exempt bonds to sell some\nof their holdings of municipals.\n(4) The decline of commercial loans of weekly reporting\nmember banks in leading cities, which commenced last\nMarch, has slackened during the past two months (Chart IV).\nRegraded Unclassified\n35\nSecretary Morgenthau - 2\nI. United States Government Securities\nThe reaction to the Treasury's announcement on Friday,\nNovember 20, regarding December financing was by far the most\nsignificant development in the market for Government securi-\nties during November. On the day of the announcement, most\noutstanding Treasury bonds, both taxable and tax-exempt, lost\nground sharply; and they continued to decline through Satur-\nday, November 28. There was no rally before the beginning of\nthe campaign for the new financing. The average decrease in\nthe price of Treasury bonds with 15 years or more to their\nearliest call date was slightly more than 1/2 point, while\nthat of intermediate-term bonds was about 1/4 point (Chart I).\nPartially tax-exempt bonds suffered somewhat more than taxable\nbonds (Chart II). Net changes in prices of Treasury notes\nwere negligible.\nPurchases by the Federal Reserve Banks aggregated $421\nmillions in the period November 19-28. They consisted of $171\nmillions of bills, $50 millions of certificates, $100 millions\nof other taxable issues, and $100 millions of partially tax-\nexempt bonds. Sales, confined solely to bills, amounted to\n$78 millions and bill maturities were $16 millions, with the\nresult that the net increase in the combined portfolios was\n$327 millions.\nFederal Reserve open-market purchases were confined prin-\ncipally to the intermediate bonds, with the result that their\nprice declines were smaller than might have been expected by\ncomparison with the movements of the longer issues. This is\nillustrated with respect to taxable issues in the following\ntable:\nFederal Reserve\nPrice change\n:\npurchases\nNovember 19-28\nIssue\nNovember 19-28\n(In thirty\n:\n(Millions of\nseconds)\n:\ndollars)\n2 2 2\npercent bond 9/15/49-51\n0\n10\npercent bond 12/15/49-51\n0\n15\npercent bond 3/15/50-52\n0\n23\n2-1/2 percent bond 3/15/56-58\n-15\no\n-12\no\n2-1/2 percent bond 6/15/62-67\n2-1/2 percent bond 9/15/67-72\n-16\no\nRegraded Unclassified\n36\nSecretary Morgenthau - 3\nIt will be remembered that the new restricted issue W&E\nmade a 1963-68, rather than a 1965-70, primarily in order to\nmake it \"sweet\". Sweetness, however, 18 a relative thing and\ndepends principally upon the position of an issue in relation\nto the rest of the market. Now, as & result of the decline in\nthe long end of the market, a 1963-68 is no sweeter than a\n1965-70 would have been two weeks ago. Thus, because of the\nabsence of Federal Reserve support, the principal effect of\nthe liberal pricing of the new issue has been to raise the\nwhole pattern of rates at the long end of the market, rather\nthan to enhance the attractiveness of the new issue.\nThe forthcoming offerings of the 7/8 percent certificates\nof indebtedness due December 1, 1943, and the 1-3/4 percent\nbonds due June 15, 1948, had no appreciable effect on outstand-\ning issues in these maturity ranges.\nII. Outlook for Member Bank Reserves\nDuring the Remainder of the Year\nThe December Treasury financing gives special importance\nto the reserve position of member banks at the present time.\nThe October finanoing was the first occasion on which the banks\nwere asked to subscribe for more Government securities than the\namount of their excess reserves. This was, without doubt, an\nimportant factor in the failure of the banks to make a large\noversubscription as they had done in the past. The December\nfinancing will not pose 80 great a problem because the offering\ndates for commercial banks for the 1-3/4 percent bond and the\n7/8 percent certificate of indebtedness are 16 days apart. The\namount to be offered to banks is, in each case, $2.0 billions,\nhowever, 80 it cannot be said that the problem is entirely absent.\nExcess reserves of member banks are currently about $2,525\nmillions -- about $550 millions in New York City, $25 millions\nin Chicago, and $1,950 millions in other localities (Chart III).\nDecember 1s customarily marked by a high seasonal level of money\nin circulation which has the effect of reducing 010088 reserves;\nand to this must be added 8. strong upward long-time trend of cir-\nculating currency. Additional reserves will be required against\nthe deposits created by the Treasury's borrowing from the banks.\nThis, too, will have the effect of reducing the excess reserves\nof member banks. On the other hand, none of the factors which\ntend to increase member bank reserves, except Federal Reserve\npurchases of Government securities, have been active recently.\nA confidential estimate of probable changes in excess re-\nserves for the last six weeks of the year, making no allowance\nfor possible action by the Federal Reserve Bystem, prepared by\nDr. Goldenweiser for the Federal Reserve Board, has been made\nRegraded Unclassified\n37\nSecretary Morgenthau - 4\navailable to the Treasury. This estimate is substantially\ncorroborated by Mr. Roelee of the Federal Reserve Bank of New\nYork. It 18 presented in tabular form below (in millions of\ndollars):\nExcess reserves, November 18, 1942\n2,489\nNet changes, November 18-December 30, 1942:\nIncrease of currency in circulation\n765\nLess decrease in required reserves\ndue to substitution of currency\nfor deposits\n153\nNet effect of currency increase in\nreducing excess reserves\n612\nIncrease in required reserves due\nto growth of deposits\n763\nReduction in reserve held due to\nincrease in Treasury balance\nwith Federal Reserve Banks\n20\n1,395\nExcess reserves, December 30, 1942, before\nallowing for Federal Reserve purchases\nof Government securities\n1,094\nWith aggregate reserves at this low level, some individual\nbanks would undoubtedly have lost all of their excess reserves\nsome time since. The fear of such B. situation tends to enforce\nconservatism upon the banks when they are subscribing to Treas-\nury issues. In the interests of successful Treasury financing,\nsuch a situation should not be permitted to exist. Excess re-\nserves should be maintained at or above their present levels,\neither by purchases of Government securities by the Federal\nReserve Banks or by further reductions of reserve requirements.\nOf these two courses, the former would appear to be preferable\nfrom the standpoint both of economy in financing during the war\nand of postwar monetary control. As the table above indicates,\nthe net decrease in excess reserves which would have to be off-\nset by Federal Reserve purchases of Government securities between\nNovember 18 and December 30 is estimated to be about $1, 400 mil-\nlions, or about #233 millions weekly. During the first week of\nthe period (November 18-25), such purchases amounted to $148\nmillions.\nRegraded Unclassified\n38\nSecretary Morgenthau - 5\nIII. Other Recent Bond Market Developments\nThe volume of new bond offerings to the public in the\nNew York market continues small. During November, the total\nwas only about $6 millions, as compared with about $131 mil-\nlions for the corresponding period a year ago.\nIn the refunding field, an outstanding event of recent\nweeks has been the exchange offer made by the City of Phila-\ndelphia, through a nation-wide banking group, of Refunding\nBonds of 1942, to holders of $162 millions of its bonds which\nare first callable between 1944 and 1953, inclusive, and which\nbear coupons ranging from 4 to 5 percent. The new securities\nwill bear interest at the rates of the securities surrendered\nin exchange until the first call date of the latter, and there-\nafter at 3-1/4 percent. The estimated saving to the City,\naccording to press reports, will be about $45 millions. The\nterms of exchange and the interest saving to the City furnish\na pertinent example of the value to an issuer of optional call\ndates in its obligations.\nAnother illustration of the disadvantage to an issuer of\nhaving no option to call his securities before maturity 1s the\noffer, on November 24, of the Bethlehem Steel Corporation to\nredeem $7.5 millions of 6 percent bonds due in 1998, but not\ncallable prior to maturity. According to press reports, the\nCorporation wishes to take advantage of the provision in the\nRevenue Act of 1942 which permits corporations to take immediate\ncredit against the refundable portion of the excess profits tax\nto the extent of 40 percent of the amount by which they reduce\ntheir indebtedness. In order to do so, however, the Corpora-\ntion has found it necessary to offer to purchase the securities\nat 181! Thus the cost of redeeming $7.5 millions of securities\nwould be about $13.6 millions.\nThe small amount of new offerings and the general strength\nof the State and municipal bond market have stimulated some\ninsurance companies to reoffer blocks of securities which they\nhad previously acquired. Within the past few weeks, the Pru-\ndential Insurance Company has thus disposed of $14 millions of\nState of New Jersey bonds, $4 millions of City of Utica, New\nYork, bonds, and $6 millions of Nashville, Tennessee, electric\nrevenue bonds. It is also reported in the press that the same\ncompany has disposed of other blocks of tax-sxempt issues pri-\nvately, and that the New York Life Insurance Company has also\nbeen reducing its holdings of municipals.\nRegraded Unclassified\n39\nSecretary Morgenthau - 6\nPresumably, these companies, and any others which may\nbe following a similar policy, are placing themselves in a\nposition to take a larger amount of new Treasury issues than\nwould be possible on the basis of their normal accumulations\nalone. Such a course 1s undoubtedly advantageous from their\npoint of view, inasmuch as the tax-exemption privilege is of\nrelatively little value to them and as it has been possible\nto dispose of the issues at prices higher than those at which\nthey were acquired. This situation 18, of course, the natural\nconsequence of the growing scarcity of fully tax-exempt securi-\nties, and it may be expected to persist as long as any such\nsecurities, which are most valuable to taxpayers in the upper\nsurtax brackets, are held by tax-exempt institutions.\nIV. Commercial Loans of Member Banks\nThe decline in the commercial loans of weekly reporting\nmember banks in leading cities, which commenced last March,\nhas slackened during the past two months (Chart IV). Apparently,\nRegulation V loans have served 60 far only partially to offset\ndeclines of bank loans in other quarters. During the reporting\nweek ended November 11, the General Motors Corporation drew\nagainst its billion-dollar Regulation V credit to the amount\nof $50 millions. During the same week, commercial loans of\nweekly reporting banks increased by $44 millions. In the\nfollowing two weeks, however, commercial loans declined again\nby $124 millions.\nNew Regulation V credits reported in recent weeks include\none of $60 millions for the Lockheed Aircraft Corporation (the\nfirst of such credits for the airplane industry), and one of\n$30 millions for the Vega Aircraft Corporation. It 1s also\nreported that a credit of $200 millions for the Bendix Aircraft\nCorporation will be arranged soon.\nAttachments\nRegraded Unclassified\n40\nTable I\nCHANGES IN THE PRICES OF U.S. SECURITIES\nPoints Plotted Represent the Difference from December 6, 1941 Price of Each Maturity Class\n1942\n1942\nDEC JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV.\nSEPTEMBER\nOCTOBER\nNOVEMBER\n-\nDECEMBER\nPOINTS\n19\n26\n3\n10\n17\n24\nPOINTS\n31\n7\n14\n21\n28\n5\n12\n19\n26\n(Net Change)\n(Met Change)\nPOINTS\nSaturday Quotations\n(Net Change)\nDaily\n+2\n+2\n+ 1/2\n+\nI\n+1\n+1\n+1\n+1\nNOTES\n3-5 Years\n+\n+\n+\no\n0\nNOTES\n1-3 Years\no\no\nNOTES\n-1\nBONDS\nN Years\n5-15 Years to Cell\n-1 I\n-1\n-1\nNOTES\n3-5 Years\n-2\n-2\n-1\n- I\nBONDS\nBONDS\nOver 15 Years to Call\nOver 15 Years to Cell\n-3\na\n-3\nt\n-\n-2\nBONDS\n-2\n-4\n4\n5-15 Years to Cell\n-21\n-2t\n-5\n5\n-3\n-3\n-6\n6\n-3f\n- -31\n-7\n-7\n4\n-4\n-8\nDEC JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT OCT. NOV.\n8\n-4 +\n4\nis\n26\n3\n10\n17\n24\n31\n7\n14\n21\n20\n5\n12\n19\n26\n1942\nSEPTEMBER\nOCTOBER\nNOVEMBER\nDECEMBER\n1942\nOffice of The Secretary of the Transury\nDivise of - and\nF-153-K\nRegraded Unclassified\n41\nTable II\nAVERAGE YIELDS OF LONG-TERM TREASURY AND CORPORATE BONDS\n1941\nMAR.\nMAY\n1942\nJULY\nSEPT.\n1942\nNOV.\nJAN.\nMAR.\nMAY\n-\nis\n-\nis\n\"\ne\n26\n10\n24\n,\na\n5\ne\n#\nis\nJULY\nso\nis\nEF\nII\nas\n.\n=\n.\n20\nSEPT.\nNOV.\nSEPT.\nOCT.\n3\nIf\nas\nH\n=\nis\nNOV\n11\nii\nas\n.\nES\n.\nPERCENT\nno\n4\n-\n-\n19\nit\n=\n9\nH\n7\na\n-\nis\nto\n-\n24\n3\n10\n17\n14\n31\n,\n14\n21\nInverted Scale)\nPERCEN)\nPERCENT\nWEEKLY Saturday Quotations\n(Inverted Scale)\nDAILY\n(Inverted Scale)\n1.6\n1.6\n1.6\n1.7\n1.7\n1.7\n1.8\n1.8\n1.8\n1.9\n1.9\n1.9\nPortially tax- exempt\nTreasury Bonds\n2.0\n2.0\n2.0\nPartially tax-exempt\nTreasury Bonds\n2.1\n2.1\n21\n2.2\n2.2\n2.2\nTaxable\nTreasury Bonds\n2.3\n2.3\n2.3\nTaxable\nTreasury Bonds\n2.4\n2.4\n2.4\n2.5\n2.5\n2.5\n2.6\n2.6\n2.6\n2.7\n2.7\n2.7\nHigh-Grade\nCorporate Bonds\n2.8\n2.8\nHigh- Grade\n2.8\nCorporate Bonds\n2.9\n2.9\n2.9\n3.0\n3.0\n3.0\n3.1\n.\nis\n#\nis\n1\nis\n19\n#\nen\n10\n24\n,\nor\n5\n=\nI\n15\n30\nIS\nEF\nII\nIS\n-\n==\n6\n20\n3\nIT\na\nH\n=\n1\nes\n=\n15\n.\nES\nI\nso\n4\n3.1\n3.1\nJAN.\nis\n-\nas a 24 10 24 , a 8 is\nMAR.\nMAY\nJULY\nSEPT.\nNOV.\nJAN.\nMAR.\n5 If it 16 I is 17 24 31 7 14. ail 28\nMAY\nJULY\nSEPT.\nNOV.\n1941\nSEPT.\nOCT\n1942\nNOV.\n1942\n. Change in composition of Long-Term\nreasury average\n- of the Secretary of - Trumery\nI ] . I 1\nF-227-A-3\nRegraded Unclassified\nTable III\nMEMBER BANK EXCESS RESERVES\n42\n1941\n1942\nNOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC.\nDOLLARS\nDOLLARS\nBillions\nBillions\n3.8\n3.8\n3.6\n3.6\nAll Member Banks\nX\n3.4\n3.2\n3.2\n3.0\n3.0\n2.8\n2.8\n2.6\n2.6\n2.4\n2.4\n2.2\n2.2\n1.2\n1.2\nNew York City Banks\n1.0\n1.0\n.8\n.8\n.6\n.6\n.4\n.4\n.2\n.2\n.4\n.4\nChicago Banks\n.2\n.2\n6\n0\no\nNOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC.\n1941\n1942\n*Change in reserve requirements\nF-251\n43\nTable IV\nLOANS - WEEKLY REPORTING\nMEMBER BANKS\nMONTHLY\nWEEKLY\n1929\n1931\n1933\n1935\n1937\n1939\n1941\n1940\n1941\n1942\nDOLLARS\nBillions\nDOLLARS\nA $ 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\nBillions\nDOLLARS\nBillions\n18\n18\n12\n12\n16\n16\n\"\n=\nTOTAL\n14\n14\n10\n10\nTOTAL\n12\n9\n12\n9\n10\n8\n10\ne\n7\n8\nCommercial\n7\n6\nNew Series\n6\nCommercial\n6\nCommercial\n6\none Berres\nNew Bance\n6\n5\n4\nAll Other\n5\n4\nNew Series\nAll Other\nONE\nAll Other\n4\nNew Bener\n4\n2\n2\na\nJ\nA\n5\no\nN\nD\nJ\nF\n8\nM\nA\nM\nJ\nJ\na\n0\nA\n$\no\nN\no\nJ\nF\nM\nA\nM\nJ\nJ\nA\n#\no\nN\nD\n1929\n12\n1931\n1983\n1935\n1939\no\n8\n1937\n1941\n12\n7\nCities other than\nNew York and Chicago\n7\n10\n10\n6\n6\n8\nCities other than\nNew York and Chicago\n8\n5\n5\n6\n6\n4\nNew York City\n4\n4\n4\n3\n3\n2\nNew York City\n2\nI\nChicago\nChicago\nI\no\n1929\n1931\n1933\no\n1935\n1937\n1939\n1941\no\nJ\nA 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\n1941\n1942\n- - - Servey of - -\n- - - - -\nF-99-C-1\nUnclassifie\nT\n44\nUWE13 96 1 EXTRA NL\ncapies to -\nCHICAGO ILL DEC 1 1942\n1\nHENRY MORGENTHAU\nPull. 1942 DEC - 2 m/8.00\nSECTY OF THE TREASURY\n10/4/42\nALL OF US HERE AT CHICAGO METROPOLITAN AREA VICTORY FUND\nDINNER EXPRESS GRATITUDE FOR YOUR THOUGHTFUL AND ENCOURAGING\nMESSAGE WHICH WAS RECEIVED WITH ENTHUSIASM. WE ARE DEEPLY\nCONSCIOUS OF THE IMPORTANCE OF OUR TASK AND ARE GIVING IT OUR\nBEST ATTENTION AND EFFORT If PICK OUT THE BIGGEST ONE AND FIRE\"\n- THE ORDER GIVEN BY CAPT EDWARD N MORAN, OF THE U.S.S.\nBOISE , WHO IS OUR GUEST, IS THE KEYNOTE OF OUR CAMPAIGN. WE\nlots DEC 5 VW 30\nARE PICKING OUT OUR BIGGEST PROSPECTS AND FIRING, AND LIKE THE\nT 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\nBOISE, WILL KEEP ON FIRING TO BRING US OUT ON TOP\nJAY N WHIPPLE CHAIRMAN.\n757AM DEC 2.\nRegraded Unclassified\n45\nExpenses of Leans A & E\nDecember 1, 1942\nMr. Jay N. whipple\nInvestment Bankers Association\n135 South LaSalle Street\nChicago, Illinois.\nPLEASE CONVEY TO THE GUESTS AT YOUR DINNER MY DEEP\nSATISFACTION OVER THE WAY THE SECURITIES INDUSTRY HAS\nJUMPED TO WORK ON THE VICTORY LOAN DRIVE. FOR WINE BILLION\nDOLLARS OF FIRES. YOUR GATHERING PROVES AGAIN\nTHE SPLENDID MORALE OF THE HOME FRONT IN FACING THE\nBIGGEST FINANCIAL TASK EVER PLACED BEFORE 17. WHEN THE\nP ESIDENT BOUGHT THE FIRST OF THE VICTORY THO=AND=ONE=HALFS\nBE SAID THAT WE MUST MAKE OUR DOLLARS FIGHTING DOLLARS BY\nINVESTIN. THEM IN GOVERNMENT BONDS. HOTHING LESS THAN THE\nFORGING OF FUNDS INTO FIGHTING WEAPONS IS INVOLVED IN THIS\nDRIVE. SUCCESS IN OUR EFFORTS IS RESENTIAL TO THE CONTINUED\nPERFORMANCE OF MIRACLES OF COURAGE BY OUR FIGHTING KEN ON\nLAND, or SEA, AND IN THE AIR. THERE CAN BE NO SLACKENING\nIN OUR EFFORTS. I KHOW I CAN COUNT ON YOU TO SEND THIS\nDRIVE OVER THE TOP IN TRIUMPH.\nHenry Norgenthau, Jr.\nSecretary of the Treasury\nFK/ogk\nRegraded Unclassified\n46\nDecember 1,1942\nMy dear Mr. Secretary:\nIn furthering the War Savings Program, we have found that\nthe sale of War Bonds to wage earners in private industry through\nthe medium of payroll Savings Plans has been most efficient and\nmost productive. We are concentrating our efforts on this medium\nof sale, particularly in connection with the sale of Bonds to en-\nployees working for contractors engaged on Government construction\nprojects.\nPublic scrutiny of the small sale of Bonds to these employees\nthroughout the country so far has resulted in criticism, which has\nbeen repeatedly brought to the attention of this Department. In\norder to forestall some of this unfavorable publicity, we are\nexerting every effort to have the Payroll Savings Plan installed\non every Governmental construction project throughout the country.\nTo accomplish this, current information is necessary from the\ncontracting agencies of the Government to be made available to\nour State offices before the project is started.\nIt is my understanding that District Angineers of the War\nDepartment receive directives to proceed on construction projects\nwhich are approved here in Washington. It will be appreciated if\nthe District Engineers, upon receipt of directives for projects\ninvolving $100,000 or more, will immediately advise the Administrator\nof the War Savings Staff for the State in which the project is\nlocated. Information as to the location, duration, amount of money\ninvolved, and the contractor to whom the contract is awarded will\nbe very helpful.\nIt will be of further assistance to this Department if the\nDistrict Engineers are advised to suggest to all contractors\nawarded construction contracts by the War Department, that they\nand all their sub-contractors install a Payroll Savings Plan for\nthe convenient and systematic sale of War Savings Bonds to their\nemployees.\nVery truly yours,\nSecretary f the Treasury.\nThe Honorable,\nThe Secretary of War,\nWashington, D. C.\nRHO'M:mec\nRegraded Unclassified\n47\nDec. 1, 1942\nDear Frank:\nLast June, the Navy Department very\nsindly agreed to cooporate in our War Savings\nprogram through the placement of a placque\non ships \"built\" by the war Bond purchases\nof cities and counties.\nThe practical development of this plan\nhas shown that the program could be very greatly\nextended in scope and interest if organizations,\nas well E.B cities and counties, could be included.\nI have in mind such organisations as the\nAmerican Legion, certain labor unions, the\nemployees, as a group, of various manufacturers,\netc.\nlie are, incidentally, expecting to promote\nthis \"Sponsor a Fighting Ship\" plan on a nation-\nwide scale in February, and it would be most\nhelpful if we could include organizations in\nthe drive.\nSincerely,\nHenry\nthe Nonorable,\nThe Secretary of the Navy.\nRegraded Unclassified\n48\nDec. 1, 1942\nMr. K. E. Fulton\nFirector of War Activities\nOutdoor Advertising Association of America\n60 East 42nd Street\nNew York, New York\nDear Mr. Fulton:\nI have read with much interest the interim report\non Outdoor Advertising activities that you submitted\nat the recent meeting here at the Treasury.\nThe importance of & continuous, sustained endeavor\nin & program such as that of the War Savings Staff can-\nnot be over-ostimated.\nThe large number of participating sponsors, the\nimpressive space value and the nationwide distribution\nof the displays are all indicative of the high caliber\nof your organization's effort ... which we trust will\ncontinue to play the same important part for the\nduration that it has in the past.\nSincerely yours,\nH. Morgenthau Jr\nPHO:jre\nRegraded Unclassified\nSales of United States savings 49nds\nCONFIDENTIAL\nNovember 1 through November 30, 1942\nCompared with sales quota for same period\n(At issue price in millione of dollars)\n:\nSeries E\n:\nSeries F and G\n:\nTotal\n:\nActual sales\n:\nQuota,\n:\nSales\n:\nActual sales\n:\nQuota,\n:\nSales\n:\nActual sales\n:\nQuota,\n:\nSales\nDate\n:\n:\nNov. 1\n:\nNov. 1\n: to date :\n:\nNov. 1\n:\nNov. 1\n: to date\n:\n:\nNov. 1\n:\nNov. 1\n:\nto date\n:\nDaily\n:\nto\n:\nto\n: as se of :\nDaily\n:\nto\n:\nto\n: as % of :\nDaily\n:\nto\n:\nto\n:\nas X of\n:\n:\ndate\n:\ndate\n:\nquota\n:\n:\ndate\n:\ndate\n:\nquota\n:\n:\ndate\n:\ndate\n:\nquota\nNov. 2\n$ 5.2\n$ 5.2\n$ -3\n$ .3\n$ 5.5\n$ 5.5\n3\n4.1\n9.3\n\" ᵒ\n1.1\n4.9\n10.4\n11\n11.2\n20.5\n6.7\n7.8\n17.9\n28.3\nour\n10.8\n31.3\n6.9\n14.7\n17.7\n46.0\n21.8\n53.1\n$ 57.0\n93.2%\n16.7\n31.4\n$ 25.2\n124.6%\n38.5\n84.5\n$ 82.2\n102.8%\n7\n9.3\n62.3\n80.7\n77.2\n2.6\n34.0\n31.4\n108.3\n11.9\n96.4\n112.1\n86.0\n9\n34.0\n96.4\n121.1\n79.6\n9.9\n43.9\n43.6\n100.7\n43.9\n140.3\n164.7\n85.2\n10\n14.6\n111.0\n141.9\n78.2\n5.4\n49.3\n50.1\n98.4\n20.0\n160.3\n192.0\n83.5\n11\n35.5\n146.5\n159.4\n91.9\n9.5\n58.8\n59.2\n99.3\n45.0\n205.3\n218.6\n93.9\n12\n15.4\n161.9\n188.5\n85.9\n5.3\n64.2\n68.2\n94.1\n20.7\n226.1\n256.7\n88.1\n13\n19.2\n181.1\n212.6\n85.2\n7.2\n71.4\n75.8\n94.2\n26.4\n252.5\n288.4\n87.6\n14\n7.4\n188.5\n226.4\n83.3\n2.6\n74.0\n78.6\n94.1\n10.0\n262.5\n305.0\n86.1\n16\n41.6\n230.1\n262.4\n87.7\n9.3\n83.2\n87.5\n95.1\n50.8\n313.3\n349.9\n89.5\n17\n11.5\n241.6\n276.0\n87.5\n5.6\n88.9\n90.6\n98.1\n17.2\n330.5\n366.6\n90.2\n18\n20.7\n262.3\n293.8\n89.3\n8.3\n97.2\n98.3\n98.9\n28.9\n359.4\n392.1\n91.7\n19\n25.1\n287.4\n324.4\n88.6\n7.3\n104.5\n106.9\n97.8\n32.5\n391.9\n431.3\n90.9\n20\n27.2\n314.6\n350.7\n89.7\n8.7\n113.2\n114.9\n98.5\n35.9\n427.8\n465.6\n91.9\n21\n12.9\n327.4\n365.9\n89.5\n3.7\n116.9\n118.1\n99.0\n16.5\n444.3\n484.0\n91.8\n23\n44.3\n371.8\n406.5\n91.5\n14.2\n131.0\n129.8\n100.9\n58.5\n502.8\n536.3\n93.8\n24\n18.4\n390.2\n421.8\n92.5\n5.8\n136.8\n134.3\n101.9\n24.2\n527.0\n556.1\n94.8\n25\n20.3\n410.5\n441.9\n92.9\n8.3\n145.1\n146.1\n99.3\n28.6\n555.6\n588.0\n94.5\n26\n18.7\n429.2\n476.8\n90.0\n6.7\n151.8\n160.0\n94.9\n25.4\n581.0\n636.8\n91.2\n27\n27.0\n456.2\n507.9\n89.8\n9.7\n161.5\n174.0\n92.8\n36.7\n617.7\n681.9\n90.6\n28\n26.6\n482.8\n541.0\n89.2\n10.5\n172.0\n189.0\n91.0\n37.1\n654.9\n730.0\n89.7\n30\n58.7\n541.6\n595.0\n91.0\n20.9\n193.0\n205.0\n94.1\n79.7\n734.5\n800.0\n91.8\nOffice of the Secretary of the Treasury, Division of Research and Statistics.\nDecember 1, 1942.\nSource: Actual sales figures are deposits with the Treasurer of the United States on account of proceeds of sales of\nUnited States savings bonds. Figures have been rounded and will not necessarily add to totals.\nRegraded Unclassified\nPRENTISS M. BROWN\n50\nSTATE OF MICHIGAN\nUnited States Senate\nWASHINGTON,D.C.\nDecember 1, 1942\nDear Mr. Secretary:\nI told you I would let you know about\nthe offer you made me.\nI am not in a position yet to be defi-\nnite. It is my intention to go through the\nclinic at the University of Michigan immediate-\nly after January 1. I think I will be there\nabout a month. I want to defer making any\ndecision as to my future until that is over.\nAgain thanking you for the opportunity,\nI am,\nPrenties Sincerely yours, m Brown\nHonorable Henry Morgenthau, Jr.\nSecretary of the Treasury\nWashington, D. C.\n51\nDEC 1 1942\nurgent\nDeer Frank:\nThere are a number of former Treasury non DOV\nin the Navy recently commissioned as Ensigne or\nLieutenants who are stationed in Washington. They\nare, I an informed, engaged in duties pertaining to\nnonsombatent service such as Intelligenee, Consership,\nAccounting, and the like.\nFrom time to time - need non with Treasury\ntraining to send abroad either to work with the 00-\ncupation forces on problems dealing with ametary,\nexchange, banking and fiscal matters, or in commestion\nwith the new Foreign Territory Group recently set up\nin the State Department to assist in civil adminis-\ntration connected with the occupation.\nIn the past year, we have lest the services of a\nnumber of our - and find difficulty in fulfilling\nthe calls made upon w. I an wondering whether you\nwould consider placing on the insctive list several of\nthe former Treasury - referred to above. For the\npresent, we should like particularly to have Lt. Frank\n4. Southard, Jr., Reserve Officer in Naval Intelligence,\nplaced on the inastive list bradetailed to the Treasury\nso that we could send him immediately to North Africa.\nSincerely,\n(Signed) H. Morgenthau, Jr.\nSecretary of the Treasury.\nThe Henorable,\nThe Secretary of the Havy.\nCC in Diary\nCopies to White 12/2/42\nDel. by Harmon 5:17\n12/1/42\nHDW:dmh\n12/1/42.\nRegraded Unclassified\n52\nOFFICE\na\nOF\nTREASURY DEPARTMENT\nWASHINGTON\nAMOUNT SEAL E\nDEC 1 1942\nAMENDMENT NO. 1 OF\nORDER OF THE SECRETARY OF THE TREASURY\nOF AUGUST 19, 1940\nEffective as of the date hereof, paragraph 2\nof the Order dated August 19, 1940, relating to\npurchases of supplies pursuant to section 40 of\nthe Emergency Relief Appropriation Act, fiscal\nyear 1941, and Executive Order No. 8495 of July 26,\n1940, is hereby revoked.\nMinulan Secretary of the Treasury\nFORDEFENSE\nBUY\nUNITED\nSTATES\nSAVINGS\nBONDS\n-\nRegraded Unclassified\n53\nCOPY\nTHE SECRETARY OF THE TREASURY\nWashington\nAugust 19, 1940\nORDER OF THE SECRETARY OF THE TREASURY\n1. Effective as of the date hereof, the Director of Pro-\ncurement and the Assistant to the Director of Procurement, each\nare designated and empowered to make awards and enter into con-\ntracts for the purchase and transportation of supplies, other\nthan agricultural supplies, for distribution by The American Red\nCross, pursuant to Section 40(a) of the Emergency Relief Appro-\npriation Act for the fiscal year 1941, Public Resolution No. 88,\n76th Congress, and Executive Order No. 8495 dated July 26, 1940,\nand jointly with The American Red Cross to determine the supplies\nto be purchased for such purpose.\n2. No contract for the purchase of such supplies shall be\nentered into without prior compliance with Section 3709 of the\nRevised Statutes, unless such contract shall have been approved\nby the Secretary of the Treasury or an Assistant Secretary\nthereof.\n3. The Director of Procurement is further authorized to\ndeliver or cause to be delivered such supplies so purchased to\nThe American Red Cross at such points as it shall designate and\nto require such evidence of the receipt thereof by The American\nRed Cross as he shall determine.\nRegraded Unclassified\n54\n- 2 -\n4. The Director of Procurement is further authorized to\nutilize the services of any officer or employee of the Procure-\nment Division in carrying out the functions which he is author-\nized to perform under this order.\n/a/ H. Morgenthau, Jr.\nSecretary of the Treasury.\nRegraded Unclassified\n55\nTREASURY department\nPROCUREMENT DIVISION\nOFFICE OF THE DIRECTOR\nWASHINGTON\nNOV 24 1942\nEMORANDUM TO THE SECRETARY:\nOur purchasing for the \"Red Cross\" or refugee\nrelief program, 8.S you know, was taken on before we\ngot into Lend-Lease procurement and into the field\nof purchasing by negotiation on & large scale. At\nthat time, in August, 1940, we thought it advisable\nto require your approval or that of an Assistant Sec-\nretary in all cases involving the purchase of refugee\nrelief supplies by negotiation, and a provision re-\nquiring such approval was contained in paragraph 2\nof your order of August 19, 1940.\nHow that we are handling transactions of far\ngreater magnitude by negotiation, it has seemed to\nme that you might wish to do away with the require-\nwent that each negotiated purchase of refugee relief\nsupplies be approved by you or by an Assistant Secre-\ntary, and I think that such & step might safely be\ntaken.\nI am therefore attaching for your consideration\n8. proposed order which would eliminate that require-\nment.\nmont\nDirector of Procurement.\nAttachments\nPYICTORY\nBUY\nSTATES\nAND\n56\nDEC 1 1942\nMy dear Mr. Byrnest\nI have your letter of November 23, 1942, asking\nthat I inform you as to the standards of profit con-\ntrol applied in my Department, as well as those which,\nin my opinion, would best effectuate the purposes of\nExecutive Order No. 9250 with respect to the negotia-\ntion and renegotiation of contracts.\nPurchases by negotiation, as distinguished from\npurchases made after competitive bidding, are made\nunder authority of Executive Order No. 9023. Such\ncontracts are ordinarily concluded after face to face\ndealings, telephone, telegraph, or informal written\noffers. The method followed and the number of\nprospective contractors which are contacted will be\ngenerally governed by the circumstances involved.\nAll contracts executed require the contractor to\ncertify his compliance with applicable price ceilings\nand contain the usual covenant against contingent\nfees clause.\nIn placing contracts by negotiation, primary\nemphasis is placed upon securing deliveries or per-\nformance within the time required by the war program.\nContracts are placed with concerns needing to acquire\nthe least amounts of new machinery, equipment, or facil-\nities for performance of the contracts. It is the\npolicy of the Procurement Division of the Department to\navoid contracting for the production of items or materials in\nRegraded Unclassified\n57\n2.\ncommunities or areas in which acute labor shortages\nare known to exist whenever it is practicable to pro-\ncure the needed items or materials elsewhere.\nContracts are placed so as to spread production among\nas many firms as is reasonable and feasible consistent\nwith delivery requirements.\nAwards are recommended and reviewed by officers\nthoroughly familiar with the item or material being\npurchased and at this point prices are considered to\nascertain whether or not they appear to be excessive.\nAdmittedly, the pressure of time is such that such a\nscrutiny cannot in all cases be adequate to protect the\nGovernment's interests on the price side, and this, as\nwe view it, is one of the considerations that led to the\nrenegotiation statute.\nIn all of the above efforts, the Procurement\nDivision works very closely with the War Production\nBoard to bring about the realization of the overabll\nabjectives of the War Powers Procedure.\nThe Treasury Department was not authorized to re-\nnegotiate contracts until October 21, 1942, the date of\npassage of section 801 of the Revenue Act of 1942. Prior\nto that time, however, there was established within the\nProcurement Division of the Treasury Department a board\nknown as the Contract Review Board whose functions were\nto examine all negotiated contracts and all non-\nnegotiated contracts in excess of $10,000 and to determine,\nin general, the reasonableness of prices paid by the\nProcurement Division on articles it purchased. This\nBoard will exercise the authority conferred by the re-\nnegotiation law, and will work in cooperation with the\nPrice Adjustment Boards of the War and Navy Departments\nand the United States Maritime Commission.\nInasmuch as the Department was given the renegotiation\npower on October 21, 1942, it has had little occasion\n58\n3.\nactually to renegotiate any contracts. In the only\ncases which have so far arison, the contractor had\ncontracts in much greater amounts with other agencies,\nthe contracts with this Department being relatively\nsmall. In each of these cases the agencies having\nthe greatest number and amount of contracts did the\nactual renegotiating, and the Department, after\nindependent examination, approved the settlements made.\nWith respect to the standards of profit control\nwhich would best effectuate the purposes of Executive\nOrder No. 9250, the matter is one in which the Department\nis very interested and to which it is giving considerable\nstudy. Any suggestions that you can make would be\nappreciated, and the Department will be pleased to co-\noperate with you in any way possible. The Department's\nviews on the general subject of excessive profits and\nthe renegotiation of contracts are set forth in the\ntestimony of the Treasury representatives at the hearings\nbefore the Senate Committee on Finance on the amend-\nments to section 403 of the Sixth Supplemental National\nDefense Appropriation Act and in Mr. Randolph Paul's\ntestimony before the House Committee on Naval Affairs\nduring the hearings on H. R. 6790 (see pages 2740-2757).\nCopies of the aforementioned hearings containing the\nrelevant testimony are enclosed.\nSincerely yours,\n(Signed) H. Morgenthau, Jr.\nSecretary of the Treasury.\nHon. James F. Byrnes\nEconomic Stabilization Director\nWashington, D. C.\nFile to Thompson\nEnclosures.\nPhoto file in Diary\nJHH:11-27-42\nJJO'C.Jr:ERF/1sw\nDel. by Harmon 5:17\n11-28-42\n12/1/42\nRegraded Unclassified\nTREASURY DEPARTMENT\n59\nINTER OFFICE COMMUNICATION\nDATE\nNOV 2 8 1942\nTO\nSecretary Morgenthau\nFROM\nRandolph Paul\nThe attached letter has been prepared for your\nsignature in answer to Judge Byrnes' letter to you\non the subject of negotiation and renegotiation of\ncontracts.\nMost of the factual material was obtained\nthrough Mr. Mack, and the letter was actually\ndrafted by Messrs. O'Connell and Feidler of my\noffice.\nI discussed the incoming letter with Mr. Sullivan,\nand it is his view that at this stage the matter is\nnot of direct concern to Revenue. For this reason\nMr. Sullivan did not think it necessary that he\nparticipate in the drafting of the reply.\nprp\nLetter to Hon. James F. Byrnes\nattached.\nDoaradod Iied\n60\nNov.25,1942\nTo:\nMr. Paul\nMr. Sullivan\nFrom:\nSecretary Morgenthau\nWould you please collaborate on this and have\nsomething ready for me on Monday morning.\nEXECUTIVE OFFICE OF THE PRESIDENT\nOFFICE FOR EMERGENCY MANAGEMENT\nOFFICE OF ECONOMIC STABILIZATION\nWASHINGTON, D.C.\nBYRNES\nNovember 23, 1942\ngastor\nMy dear Mr. Secretary:\nExecutive Order No. 9250 charges me with the responsi-\nbility for formulating and putting into effect a comprehensive\nnational policy with respect to profits. Furthermore, the Price\nAdministrator is directed to take account of excessive profits in\nfixing the prices of those items now under ceiling control.\nSuch a comprehensive national policy must find applica-\ntion in the negotiation and renegotiation of government contracts.\nI should, therefore, be grateful if you could inform me\nas to the standards of profit control now applied in your Depart-\nment; as well as those which, in your opinion, would best effectuate\nthe purposes of Executive Order No. 9250.\nJenes Sincerely yours,\nDirector.\nHon. Henry Morgenthau,\nSecretary of the Treasury,\nWashington, D. C.\nRegraded Unclassified\n62\nTREASURY DEPARTMENT\nPROCUREMENT DIVISION\nOFFICE OF THE DIRECTOR\nWASHINGTON\nDecember 1, 1942\nMEMORANDUM TO THE SECRETARY:\nThere is submitted herewith the operating report of\nLend-Lease purchases for the week ended November 28, 1942.\nMr. Harry Hopkins, Chairman of the President's Soviet\nProtocol Committee, called a meeting of the Committee on\nNovember 25, 1942, which I attended, and it was decided\nthat a subcommittee consisting of representative members\nof the entire Committee would undertake the determination\nof supply problems affecting the Soviet program. The im-\nmediate problem under consideration is the accumulation of\nsupplies, primarily steel products, which are in excess of\nindicated available shipping. Diversion of certain of\nsuch stocks and curtailment of production will be undertak-\nen in order to maintain a stock sufficient but not in ex-\ncess of scheduled shipping for the USSR.\nDirector of Procurement\nPAYICTORY\nBUY\nyour Clifton'E. Mack\nUNITED\nSTATES\ngaram\nBONDS\nAND\nSTAMPS\nRegraded Unclassified\nLEND-LEASE\n63\nTREASURY DEPARTMENT, PROCUREMENT DIVISION\nSTATEMENT OF ALLOCATIONS, OBLIGATIONS (PURCHASES) AND\nDELIVERIES TO FOREIGN GOVERNMENTS AT U. S. PORTS\nAS OF NOVEMBER 28, 1942\n(In Millions of Dollars)\nAdministrative\nMiscellaneous &\nTotal\nU.K.\nRussia\nChina\nExpenses\nUndistributed\nAllocations\n$2539.3\n$1247.5\n$778.1\n$58.2\n$3.7\n$451.8\n(2434.3)\n(1243.7)\n(774.8)\n(58.2)\n(3.7)\n(353.9)\nPurchase Authoriza-\n$1883.7\n$1090.0\n$732.7\n$41.1\n-\n$ 19.9\ntions (Requisitions)\n(1849.0\n(1083.4)\n(704.2)\n(41.3)\n-\n(20.1)\nRequisitions Cleared\n$1794.4\n$1076.7\n$657.0\n$41.1\n-\n$ 19.6\nfor Purchase\n(1772.2)\n(1070.9)\n(640.3)\n(41.2)\n-\n(19.8)\nObligations\n$1731.4\n$1047.1\n$624.2\n$41.1\n$2.9\n$ 16.1\n(Purchases)\n(1715.2)\n(1036.7)\n(618.7)\n(41.0)\n(2.9)\n(15.9)\nDeliveries to Foreign\nGovernments at U. S. $ 753.7\n$597.2\n$131.0\n$20.2\n-\n$ 5.3\nPorts*\n(739.0)\n(586.7)\n(126.9)\n(20.2)\n-\n(5.2)\n*Deliveries to foreign governments at U. S. Ports do not include the\ntonnage that is either in storage, \"in-transit\" storage, or in the\nport area for which actual receipts have not been received from the\nforeign governments.\nNote: Figures in parentheses are those shown on report of November 21, 1942.\n64\nEXPLANATION OF DECREASES\nThe reduction in Purchase Authorizations\nand Requisitions cleared for Purchase for China\nis the result of the resurvey of the cost to\npurchase on two requisitions.\n65\nDEC 1 1942\nMy dear Mr. President:\nI an enclosing report on our exports\nto come selected countries for the period\nending November 20, 1942.\nFaithfully,\n(Signed) H. Morgenthau, 3r.\nSecretary of the Treasury.\nThe President,\nThe White House.\nEnclosure\nDel. by Harmon 5:17 12/1/42\nFile in Diary\nExtra copies direct to White's\noffice 12/2/42\nHDW/efe\nHOW\n11/30/48FILE COPY\nSECRET\n66\nNovember 30, 1942\nExports to Russia, Free China and selected blooked\ncountries as reported to the Treasury Department\nduring the ten-day period ending\nNovember 20, 1942\n1. Exports to Russia\nExports to Russis as reported during the ten-day\nperiod ending November 20, 1942 amounted to $45,867,000\nas compared with $53,144,000 during the previous ten-day\nperiod. Military equipment accounted for $24,452,000 of\nthe total and included 48 light bombers, 87 fighter planes\nand 20 tanks. (See Appendix C.)\n2. Exports to Free China\nExports to Free China as reported during the period\nunder review amounted to $2,032,000, of which military\nequipment accounted for 5773,000. (See Appendix D.)\n3. Exports to selected blooked countries\nExports to selected blooked countries are given in\nAppendix A. Most important were exports to Ewitzerland\nand Portugal emounting to $443,000 and $396,000 respectively.\nISF/efe\n11/30/42\nSECRET\n67\nAPPENDIX A\nSummary of United States Exports to Selected\nCountries as Reported to the Treasury Department\nfrom Export Declarations Received\nDuring the Period Indicated\n(In thousands of Dollars)\nTotal\nTotal\n10-day\n10-day\nDomestic Exports\nDomestic Exports\nPeriod ended\nPeriod ended\nAug. 1, 1942 to\nJuly 28, 1941 to\nNov. 20,1942\nNov. 10,1942\nNov. 20, 1942\nJuly 31. 1942\nU. S. S. R.\n$ 45,867\n$ 53,144\n$ 464,866\n$ 742,941\nFree China\n2,032\n233\n9,198\n97,720\n,sin\n3\n9\n769\n2,558\nSwitserland\n443\n2\n4,694\n11,537\nSweden\n-\n1\n2,626\n18,056\nPortugal\n396\n-\n1,192\n9,743\nFrench North Africa\n-\n-\n2,068\n6,305\nTreasury Department, Division of Monetary Research\nNovember 30, 1942\n/ Many of the export declarations are received with a lag of several days or more.\nTherefore this compilation does not accurately represent the actual shipment of\na particular period.\n2/ Includes Marcece, Algeria and Tunisia.\nEFM/efe 11/30/42\nAPPENDIX B\nSECRET\n68\nExports from the U. 5. to Free China and U.S.S.R.\nas reported to the Treasury Department\nJuly 28, 1941 - November 20, 1942\n(Thousands of Dollars)\nExports to\nExports to\nFree Ohina\nU.S.S.R.\nJuly 28, 1941 - Jan. 24, 1942\ns 32,758\n$ 98,902\n1942\nJan. 26 - Jan. 31\n6,938\n9,608\nFeb. 1 - Feb. 10 2/\n4,889\n13,315\nFeb. 10 - Feb. 20\n4,853\n26,174\nFeb. 20 - Feb. 28 3/\n2,921\n28,119\nMar. 1 - Mar. 10\n2,879\n32,509\nMar. 10 - Mar. 20\n8,058\n28,556\nMar. 20 - Mar. 31 4/\n3\n42,435\nApr. 1 - Apr. 10\n4,836\n51,698\nApr. 11 - Apr. 20\n5,335\n66,906\nApr. 21 - Apr. 30\n2,827\n50,958\nMay 1 - May 10 5/\n296\n28,652\nMay 11 - May 20\n1,872\n18,000\nMay 21 - May 31 4/\n2,533\n26,180\nJune 1 - June 10\n3,399\n12,764\nJune 11 - June 20\n2,707\n53,799\nJune 21 - June 30\n1,664\n49,919\nJuly 1 - July 10\n7,900\n35,657\nJuly 11 - July 20\n590\n33,940\nJuly 21 - July 31 4/\n3,066\n35,669\nAug. 1 - Aug. 10\n208\n14,970\nAug. 11 - Aug. 20\n192\n23,325\nAug. 21 - Aug. 31 4/\n2,850\n112,492\nSept. 1 - Sept.10\n855\n24,339\nSept.11 - Sept.20\n11\n44,434\nSept.21 - Sept.30\n902\n30,947\nOct. 1 - Oct. 10\n1,885\n14,564\nOct. 11 - Oct. 20\n30\n55,083\nOct. 21 - Oct. 31 4/\n--\n45,701\nNov. 1 - Nov. 10\n233\n53,144\nNov. 11 - Nov. 20\n2.032\n45,867\nTotal\n$ 109,521\n$1,208,626\n1. These figures are in part taken from copies of shipping manifests.\n2. Beginning with February 1, figures are given for 10-day period\ninstead of week, except where otherwise indicated.\n3. 8-day period.\n4. 11-day period.\n5. Due to changes in reporting procedure by the Department of\nCommerce, this report is incomplete for the period indicated.\nTreasury Department, Division of Monetary Research November 30,1942\nISF/efe 11/30/42\nSECRET\n69\nAPPENDIX a\nPrincipal Exports from U. S. to U. s. s. R.\nas reported to the Treasury Department\nduring the ten-day period ending\nNovember 20, 1942\nValue\nUnit of\n(Thousands\nQuantity Quantity of dollars)\nTOTAL EXPORTS\n$ 45,867\nMilitary Equipment ($24,452)\nAircraft\n13,645\nLight bombers (2 eng. A-20)\nNo.\n46\nFighters (1 eng. P-39)\nNo.\n70\nFighters (1 eng. P-40)\nNo.\n17\nAmmunition\n-\n-\n4,206\nAircraft parts and accessories\n-\n-\n2,439\nOrdnance combat vehicles\n1,200\nScout ears\nNo.\n1,112\nArmored cars, medium\nNo.\n15\nOrdnance combat vehicles,n.e.s.\nNo.\n11\nExplosives\n-\n-\n1,078\nMilitery tanks\n1,040\nLight tanks (M-3, M-3A-1, M5 or 27)\nNo.\n10\nMedium tanks (M-4, A-2)\nNo.\n10\nAll other\n-\n-\n844\nNon-Military Goods ($21,415)\nMotor trucks, motorcycles and\nauto replacement parts\n-\n-\n4,826\nMeat products\n-\n-\n3.784\nIndustrial, electrical, agricultural\nmachinery and parts\n-\n-\n3,415\nIron and steel manufactures and\nsominamufactures\n-\n-\n2,715\nRegraded Unclassified\n70\nAppendix C (Continued)\nPage 2\nValue\nUnit of\n(Thousends\nQuantity\nQuantity\nof Dollars)\nAluminum, copper, sine and\nmolybdenum ore\n-\n-\n1,327\nLeather and rubber manufactures\n-\n-\n1,085\nBrass and bronse and manufactures\n-\n-\n1,009\nPetroleum and products\n-\n-\n853\nRelief supplies\n-\n-\n605\nAll other\n-\na\n1,794\nTreasury Department, Division of Monetary Research November 30,1942\nEFM/efe 11/30/42\nRegraded Unclassified\nSECRET\n71\nAPPENDIX D\nPrincipal Exports from U. 3. to Free China\nas reported to the Treasury Department\nduring the ten-day period ending\nNovember 20, 1942.\n(Thousands of Dellars)\nTOTAL EXPORTS\n$ 2,032\nPrincipal Items:\nPrinted matter\n873\nMilitary equipment\n773\nElectrical machinery and apparatus\n139\nCameras and photographic supplies\n99\nRubber and manufactures\n37\nWriting paper\n26\nGraphite electrodes\n19\nWire rope and cable\n18\nWheels, except automobile and car\n18\nIron and steel hand tools\n10\nIndustrial machinery and parts\n7\nRelief supplies\n6\nTreasury Department, Division of Monetary Research November 30,1942\nEFM/efs 11/30/42\nRegraded Unclassified\n72\nDEC 1 1942\nMy dear Mr. Secretary:\nI am enclosing report on our exports\nto some selected countries for the period\nending November 20, 1942.\nSincerely yours,\n(Signed) H. Morgenthau, Jr.\nSecretary of the Treasury.\nThe Honorable,\nThe Secretary of State.\nEnclosure\nDel. by Harmon 5:17 12/1/42\nFile in Diary\nExtra copies direct to\nHDW/efs\nWhite's office 12/2/42\n11/30/42\nNOW\nFILE COPY\nRegraded Unclassified\nSECRET\n73\nMovember 30, 1942\nExports to Russia, Free China and selected blooked\ncountries as reported to the Treasury Department\nduring the ten-day period ending\nNovember 20, 1942\n1. Exports to Russia\nExports to Russia as reported during the ten-day\nperiod ending November 20, 1942 amounted to $45,867,000\nas compared with $53,144,000 during the previous ten-day\nperiod. Military equipment accounted for $24,452,000 of\nthe total. (See Appendix C.)\n2. Exports to Free China\nExports to Free China as reported during the period\nunder review amounted to $2,032,000, of which military\nequipment accounted for $773,000. (see Appendix D.)\n3. Exports to selected blocked countries\nExports to selected blocked countries are given in\nAppendix A. Kont important were exports to Ewitzerland and\nPortugal amounting to $443,000 and $396,000, respectively.\n197/efa\n11/30/42\nRegraded Unclassified\nSECRET\nAPPENDIX A\nSummary of United States Exports to Selected\nCountries as Reported to the Treasury Department\nfrom Export Declarations Received\nDuring the Period Indicated\nV\n(In thousands of Dollars)\nTotal\nTotal\n10-day\n10-day\nDemestic Exports\nDemostic Exports\nPeriod ended\nPeriod ended\nAug. 1, 1942 to\nJuly 28, 1941 to\nNov. 20,1942\nNov. 10,1942\nNov. 20, 1942\nJuly 31. 1942\nD. S. S. R.\n$ 45,867\n8 53,144\n8 464,866\n8 742,941\nfree China\n2,092\n233\n9,198\n97,720\nSpain\n3\n9\n769\n2,858\nwitserland\n443\n2\n4,694\n11,537\nBreden\n-\n1\n2,626\n28,056\nPortugal\n396\n-\n1,192\n9,743\nFrench North Africa\n-\n-\n2,088\n6,305\nTreasury Department, Division of Menstary Research\nNovember 30, 1942\nMany of the export declarations are received with a lag of several days or more.\nTherefore this compilation dose not accurately represent the setual shipment of\na particular period.\nIncludes Morosce, Algeria and Tunisia.\n575/efe 11/30/42\nRegraded Unclassified\nSECRET\nAPPENDIX B\n75\nExports from the U. 5. to Free China and U.S.S.R.\nas reported to the Treasury Department\nJuly 28, 1941 - November 20, 1942\n(Thousands of Dollars)\nExports to\nExports\nto\nFree Ohina\nU.S.S.R.\nJuly 28, 1941 - Jan. 24, 1942\n8 32,758\n$ 98,902\n1942\nJan. 26 - Jan. 31\n6,938\n9,608\nFeb. 1 - Feb. 10 2/\n4,889\n13,315\nFeb. 10 - Feb. 20\n4,853\n26,174\nFeb. 20 - Feb. 28 3/\n2,921\n28,119\nMar. 1 - Mar. 10\n2,879\n32,509\nMar. 10 - Mar. 20\n8,058\n28,556\nMar. 20 - Mar. 31 4/\n4,836\nW\n02,435\nApr. 1 - Apr. 10\n51,698\nApr. 11 - Apr. 20\n5,335\n66,906\nApr. 21 - Apr. 30\n2,827\n50,958\nMay 1 - May 10 5/\n296\n28,652\nMay 11 - May 20\n1,872\n18,000\nMay 21 - May 31 4/\n2,533\n26,180\nJune 1 - June 10\n3,399\n12,764\nJune 11 - June 20\n2,707\n53,799\nJune 21 - June 30\n1,664\n49,919\nJuly 1 - July 10\n7,900\n35,657\nJuly 11 - July 20\n590\n33,940\nJuly 21 - July 31 4/\n3,066\n35,669\nAug. 1 - Aug. 10\n208\n14,970\nAug. 11 - Aug. 20\n192\n23,325\nAug. 21 - Aug. 31 4/\n2,850\n112,492\nSept. 1 - Sept.10\n855\n24,339\nSept.11 - Sept.20\n11\n44,434\nSept.21 - Sept.30\n902\n30,947\nOct. 1 - Oct. 10\n1,885\n14,564\nOct. 11 - Oct. 20\n30\n55,083\nOct. 21 - Oct. 31 4/\n--\n45,701\nNov. 1 - Nov. 10\n233\n53,144\nNov. 11 - Nov. 20\n2,032\n45,867\nTotal\n$ 109,521\n$1,208,626\n1. These figures are in part taken from copies of shipping manifests.\n2. Beginning with February 1, figures are given for 10-day period\ninstead of week, except where otherwise indicated.\n3. 5-day period.\n4. ll-day period.\n5. Due to changes in reporting procedure by the Department of\nCommerce, this report is incomplete for the period indicated.\nTreasury Department, Division of Monetary Research November 30,1942\nISF/efs 11/30/42\nRegraded Unclassified\nSECRET\n76\nAPPENDIX 0\nPrincipal Exports from U. S. to U. 5. S. R.\nas reported to the Treasury Department\nduring the ten-day period ending\nNovember 20, 1942\n(Thousands of Dellars)\nTOTAL EXPORTS\n1 45,867\nPrincipal Items:\nMilitary equipment\n24,452\nMotor trucks, motorcycles and auto\nreplacement parts\n4,828\nIndustrial and agricultural machinery and parts\n2,980\nIron and steel bare, plates, sheets, wire\nnails, etc.\n2,715\nCanned sausage and pork\n2,547\nMent products, n.e.s.\n1,237\nBrass and bronze plates, sheets, wire,\npipes and tubes\n1,009\nPetroleum and products\n853\nAluminum and manufactures\n762\nRelief supplies\n605\nCotton and wool manufactures\n590\nRubber and manufactures\n567\nCopper, zine and molybdenum ore\n565\nLeather and manufactures\n518\nElectrical machinery and apparatus\n435\nChemicals and related products\n353\nDried \"gg products\n334\nTallow and lard\n310\nTreasury Department, Division of Monetary Research\nNovember 30,1942\nEFM/ofs 11/30/42\nRegraded Unclassified\nSECRET\n77\nAPPENDIX D\nPrincipal Exports from U. S. to Free China\nas reported to the Treasury Department\nduring the ten-day period ending\nNovember 20, 1942\n(Thousands of Dollars)\nTOTAL EXPORTS\n8 2,032\nPrincipal Items:\nPrinted matter\n873\nMilitary equipment\n773\nElectrical machinery and apparatus\n139\nCemeras and photographic supplies\n99\nRubber and manufactures\nn\nwriting paper\n26\nGraphite electrodes\n19\nWire rope and cable\n18\nWheels, except automobile and oar\n18\nIron and steel hand tools\n10\nIndustrial machinery and perts\nNO\n7\nRelief supplies\n6\nTressury Department, Division of Monetary Research November 30,1942\nEFM/efs 11/30/42\nRegraded Unclassified\n78\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE December 1, 1942\nTO\nSecretary Morgenthau\nFROM\nMr. White\nSubject: 1937 arrangement with China.\n1. The enclosed cable from Dr. Kung is in reply to your\nletter of November 23, 1942 to him regarding the future\nstatus of the 1937 arrangement with China.\n2. Dr. Kung expresses his appreciation of your inquiry 8.8\nto his views on the future status of the arrangement.\nDr. Kung is instructing Mr. Hsi Te-mou, one of the\nmembers of the Stabilization Board of China, who is\nnow in Washington, to call on you with new proposals\nregarding the renewal of the 1937 arrangement.\n3. You will recall that last October the Central Bank of\nChina paid off all outstanding debts to the United States\nunder the 1937 arrangement, smounting to approximately\n$19 million. This, however, still left the status of\nthe arrangement itself undetermined.\nDearadod\nmt. White 79\nADDRESS OFFICIAL COMMUNICATIONS TO\nTHE SECRETARY OF STATE\nWASHINGTON, D.C.\nDEPARTMENT OF STATE\nWASHINGTON\nreply refer to\nNovember 30, 1942\nThe Secretary of State presents his compliments to\nthe Honorable the Secretary of the Treasury and encloses\ncopies of telegram no. 1404, dated November 30, 1942,\nfrom the American Embassy, Chungking, China, via Karachi,\ntransmitting the text of a letter to Secretary Morgenthau\nfrom Dr. Kung.\nEnclosure:\nFrom Embassy, Chungking,\nno. 1404, November 30, 1942.\nFORVICTORY\nBUY\nUNITED\nSTATES\nSAVINGS\nBONDS\nAND\nSTAMPS\n80\nDM\nGRAY\nChungling via Karachi\nDated November 30, 1942\nRec'd 11:46 C.M.\nSecretary of State,\nWashington.\nIMMEDIATE\n1404, November 30, 11 c.m.\nFOR SECRETARY MORCENTILLU prom DOCTOR KUNG\nDear Mr. Secretary\nI have the pleasure of receiving, through the\nAmerican Embassy, your message Expressing your antis-\nfaction for the way in which China has fulfilled her\nobligations to the United States stablization fund\nunder the 1937 arrangement, and inquiring whether\nthe Chinese Government would prefer to have this\narrangement continue in Effect as otherwise it vill\nautomatically Expire on DECEMBER 31, 1942.\nIn reply, I wish to Express to you my appreciation\nof your kind message and thoughtful inquiry. In view\nof the spirit that motivated your good self and me to\nmake this agreement when I 170.8 in Washington in 1937,\nI am instructing Mr.He1 TE Mou to call on you on my\nbehalf\nRegraded Unclassified\n81\n-2- #1404, November 30, 11 a.m. from Chungking via Karachi\nbehalf with new proposals regarding its renewal.\nWith kindest personal regards.\nYours Sincerely,\nH.H. Kung\nMinister of Finance\".\nGAUSS\nBB\nTreasury Department\nDivision of Monetary Research\nDate Dec. 1, 1942 19\nMiss Chauncey\nThe Secretary might be\ninterested in glancing at this\ninteresting comparison of\nBritish war financing during this\nwar and the last war.\nH.D.W.\nMR. WHITE\nBranch 2058 - Room 2141\n83\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE December 1, 1942\nTO\nMr. White\nFROM\nMr. Wood\nSubject:\nBritish Finance in the Last War and in the Present One (No. 1002,\nU. S. Embassy, London, Nov. 3, 1942)\nSpeaking on October 20 in Commons on the Fourth Vote of Credit for\nthe current fiscal year, Sir Kingsley wood made some comparisons between\nGovernment finance in the two wars.\n1. During the years 1939-42 expenditure was two and a half times\nthat of the period 1914-17.\n2. In this war taxation has raised 40 percent of expenditures\ncompared with 21 percent in the last war.\n3. The amounts secured through borrowing were 66 percent greater\nin the period 1939-42 than in the period 1914-17.\n4. The small investor lent approximately 1200 million to the\nGovernment during the last war and L1,500 million so far\nduring this one.\n5. The average rate of interest on the increase in the debt\nfrom 1914-17 was 5 percent, but the corresponding rate for\n1939-42 was only 2 1/2 percent. The average rate for the\nfloating debt was 4 1/2 percent in the former period and\nabout 1 percent in the latter.\nAt the time of the speech current daily average expenditure on the\nfighting services was 110.5 million compared with 19.75 million last\nMarch.\nRegraded Unclassified\n84\nNOT TO BE RE-TRANSMITTED\nCOPY NO.\nBRITISH LOST SECRET\nU.S. SECRET\nOPTEL No. 417\nInformation received up to 7 A.M., lst December, 1942.\n1. NAVAL\nOne of H.M. Trawlers shot down 8. F.W. 190 off DORSET yesterday. The\nFrench submarines MARSOUIN and CASABLANCA arrived at ALGIERS yesterday. IRIS has been\ninterned at BARCELONA. Eight more submarines are reported by the Allied Naval Com-\nmander to have escaped from TOULON and may arrive at North African ports.\n2. MILITARY\nTUNIS. 29th. Our advance in the forward area was slowed down by\nheavy low flying air attacks but pressure was maintained against djedeza which was\npartially in our hands by evening. Our troops have made contact with an enemy strong\npoint ten miles west of MATEUR. Allied parachute troops have been dropped in the\nPONT DU FAHS Area, thirty miles southwest of TUNIS. The area between TEBESSA and\nKAIROUAN reported clear of enemy. Our tank losses relatively light. REUNION sur-\nrendered to the Fighting French at 4:45 a.m. G.M.T. yesterday.\nRUSSIA. The Russians attacking from the north along the east bank\nof the DON have captured VSERTYACHI and have narrowed the ring around the encircled\nGermans. The KALMUK STEPPE engagements continue between mobile forces and the Rus-\nsians are still pressing forward.\n3. AIR OPERATIONS\nWESTERN FRONT. 29th/30th. TURIN. About 28 tons of bombs dropped.\nSevere icing conditions and dense haze over objective. Two bombers missing. 30th.\n7 enemy aircraft shot up several localities in DEVONSHIRE, HAMPSHIRE and SUSSEX.\nOne was shot down. Our losses 2, nil, nil. 30th/lst. Six aircraft sent sea mining,\nfour to drop leaflets. One is missing.\nFRENCH NORTH AFRICA. 27th. Fighter sweeps were flown and all night\nBisleys bombed EL AQUINA airfield. 28th. U.S. Bombers heavily attacked BIZERTA\ndocks and airfield and also objectives at SFAX. 11 enemy aircraft were destroyed on\nthe ground. 29th/30th. Wellingtons bombed BIZERTA docks. Casualties over above\nperiod -- enemy 10, 2, 11. Ours 11, nil, nil. Five pilots safe.\nmediterranean. 30th. Our fighters successfully attacked airfields\nat GELA and COMISO. Beauforts laid mines in PALERMO Harbour. Direct hits were ob-\ntained on a 1,200 ton ship near PANTELLARIA.\nLIBYA. 29th. U.S. Bombers attacked TRIPOLI (L) and saw a ship on\nfire.\nRegraded Unclassified\n85\nDecember 2, 1942\n9:55 a.m.\nFINANCING\nPresent: Mr. Bell\nMR. BELL: I am a little worried about this\npublicity this morning, all these stories in the\npapers.\nLast night New York asked me about some publicity.\nI said they ought to wait until we have the figures in\nWashington. Apparently some banker outside - Perry\nHall did not talk, but apparently some banker outside\nsaid it looked as though New York had a billion and a\nhalf, and there was another story of nine hundred\nmillion.\nH.M.JR: You got my message about publicity?\nMR. BELL: Yes. I would not have done it, any-\nhow.\nIf we give out these figures, I think it makes\nit look worse.\nH.M.JR: What figures?\nMR. BELL: These figures I gave you last night,\nseven hundred and forty-five million.\nH.M.JR: Why give them out daily?\nMR. BELL: You see, these boys think you ought\nto have something going every day, trying to keep\npeople interested and enthusiastic.\nRegraded Unclassified\n86\n- 2 -\nH.M.JR: Let's do the publicity last, and I will\nhave the publicity men in last. Can I do that last?\nMR. BELL: Sure. I didn't know you had something\nelse.\nH.M.JR: Should we do anything about calling up\nthe banks, or anything? Should I speak to Eccles and\nfind out what he is going to do?\nMR. BELL: That is part of this program. I just\ntalked to Bob Rouse, and I asked him what good he\nthought it would do to give out the bank subscriptions\nto the one and three-quarters. He thought it might be\na good thing to give out the bank subscriptions up to\nthis point, to show them that they had not come through\nwith two billion. But I don't know what explanation you\nwould give for it.\nH.M.JR: I don't like that.\nMR. BELL: We have done it before. I would like\nto get across to the country that the banks have not\nyet subscribed for two billion dollars. If we could\nsend each Federal Reserve--\nH.M.JR: If the thing goes out, then it is a\nfailure - I wouldn't give anything out.\nMR. BELL: There might be danger of that.\nH.M.JR: I would not give out anything on the\nbanks.\nMR. BELL: I tell you what we can do. We can\nget the mail reports at about one o'clock from\nChicago and New York, which are the big ones, and\nsee how they stand. We can ask for a three o'clock\nreport from all the banks, and that will give us\nanother hour ahead.\nRegraded Unclassified\n87\n- 3 -\nI think the thing will go over, but I think we\nought to be a little surer than we were in October.\nH.M.JR: You haven't got the thing by districts?\nMR. BELL: I have it downstairs. Kilby has it.\nI will get it.\nThe four o'clock report yesterday showed that it\nwas eight hundred and thirteen, and they think it may\nbe up another hundred million in New York.\nH.M.JR: How much?\nMR. BELL: Eight hundred and thirteen was the\nfour o'clock report, and it may be up another hundred\nmillion now. Rouse thinks today's mail is going to\nbe heavy. We will not know that until around twelve\no'clock.\n(The Secretary held a telephone conversation with\nMr. Eccles, as follows:)\nRegraded Unclassified\n88\nDecember 2, 1942\n10:00 a.m.\nHMJr:\nHello.\nOperator:\nChairman Eccles.\nHMJr:\nHello?\nMarriner\nEccles:\nHello.\nHMJr:\nHello, Marriner.\nE:\nGood morning, Henry.\nHMJr:\nGood morning to you. Bell and I are sitting\nhere. We were talking over how many bonds we'd\nsold yesterday to the banks.\nE:\nYeah.\nHMJr:\n....and it's somewhere between eight and nine\nhundred million.\nE:\nThat was up to the four o'clock report, was it?\nHMJr:\nWell, it was eight hundred and thirteen....\nE:\nYeah.\nHMJr:\n....and then Bell thinks another hundred million\ncame in late.\nE:\nYes.\nHMJr:\nNow have you got it there by districts?\nE:\nNo, I haven't. All I got was what Bell gave me.\nYou see, we don't get it. It comes in to Bell.\nHMJr:\nWell, what I'll have him do is to phone it over\nto your secretary and she can type it down.\nE:\nYeah.\nHMJr:\nNow what I thought was this, I thought we - just --\nI'm just thinking out loud -- that we ought to\nwait until the last minute. We got the third day.\nRegraded Unclassified\n89\n- 2 -\nE:\nThat's right.\nHMJr:\nAnd if some of the districts don't look 80 good,\nI wondered if you'd like to call up the presidents\nof the Fed.\nE:\nI'll be glad to.\nHMJr:\nBee?\nE:\nI'm just as anxious to see 'em get it over as any-\nbody.\nHMJr:\nNow Bell says that there'll be a mail report in by\nnoon.\nE:\nYes.\nHMJr:\nBut I don't know whether you want to wait until\nthat or whether you want to start this morning on\nsome of them.\nE:\nWell, New York I think will be all right.\nHMJr:\nYeah.\nE:\nAnd, of course, in the west it would be an hour.\nHMJr:\nYeah, later.\nE:\nThere - there'd be a change. It would be early\nenough there, you see. It would only be - at noon\nit would be ten o'clock in San Francisco, and....\nHMJr:\nThe thing - what we'd say to them in their en-\nthusiasm on this Victory Fund, they're kind of\noverlooking the banks.\nE:\nWell....\nHMJr:\nI'm not worried this time, but I - - I don't\nE:\nI - I think - I think this, that the - they always\nwaited before until the....\nHMJr:\nYes.\nRegraded Unclassified\n90\n- 3 -\nE:\nuntil the last - when they had two days, they\nHMJr:\nRight.\nE:\nthey always waited until the last day.\nHMJr:\nBut we had the interest running against them, and\nwe thought that\nE:\nI - I think 1t's well to be - it's certainly well to\nbe a little bit cautious.\nHMJr:\nWhat I was thinking of, if you had the time to call\nup some of these fellows and say, \"Well, how are\nthings in your district? Are you worried or will\nthey be all right?\" you know?\nE:\nWell, I'd like - I'd - if Bell will send that - that\nover....\nHMJr:\nYes.\nE:\nand\nHMJr:\nHe will.\nE:\nthen I'll - I'll take a look at it, and see how\nthe percentages are.\nHMJr:\nGood.\nE:\nThey run - they usually have a relationship, and\nit will show some of them, of course, that may be\nout of line.\nHMJr:\nRight.\nE:\nThose that are out of line, why I'll be glad to\ncall up....\nHMJr:\nNow\nE:\n....and just as soon as you get the information on\nthe noon report, if you'd likewise give that to me.\nHMJr:\nHe will. Now the - I like the ads. I was out west\nin Kansas City and St. Louis. It looked good out\nthere to see them.\nRegraded Unclassified\n91\n- 4 -\nE:\nI was up in - I was up in New York, and, of\ncourse, they all had a full-page display, and....\nHMJr:\nI think they\nE:\nit was very simple - I mean a very clear state-\nment. Anybody could understand it.\nHMJr:\nYeah, I think the Feds. did a - did us a real\nservice on that.\nE:\nWell, I - I - we were glad to do it. We - we (laughs)\ndidn't get much time. It certainly put - it\ncertainly put - after it was decided Buffington\ncalled me up and - and I had to get it through the -\nhad to get it through the Board in a big hurry to\nget them to send that wire out, and, of course, the\nreserve banks - they all - they all came through\nall right, but, of course, all they did was put up\nthe money.\nHMJr:\nNow we're not going to - we're not going to say\nanything today as to how much is in.\nE:\nI wouldn't say anything.\nHMJr:\nNo, because I felt it would be & mistake.\nE:\nI - - I see no reason.\nHMJr:\nNo.\nE:\nto say anything about it, because.\nHMJr:\nBe time enough tomorrow night.\nE:\nWell, even then I'd think about it.\nHMJr:\nYeah, well....\nE:\nBecause all - all you've said is you're going to\nget a - $9 billion dollars.\nHMJr:\nYes.\nE:\nIsn't that right?\nHMJr:\nThat's right.\nRegraded Unclassified\n92\n- 5 -\nE:\nNow I - I think it might be a good time maybe to\navoid establishing a precedent and saying just\nhow much you get from the banks.\nHMJr:\nWell, I'd like to talk to you about that after we\ntake a look at it.\nE:\nYeah.\nHMJr:\nAnd I will talk to you about it before I say any-\nthing.\nE:\nYeah. Well, okay then.\nHMJr:\nWell, thank you.\nE:\nAll right.\n93\n- 4 -\nH.M.JR: He agrees with me on the publicity.\n(The Secretary held 8. telephone conversation\nwith Mr. Buffington.)\nH.M.JR: Now I am going to get hold of Mr. Roy\nBlough and go to school.\n94\nDecember 2, 1942\n10:27 a.m.\nHMJr:\nAre you busy right now?\nGuy T.\nHelvering:\nNo.\nHMJr:\nWell, I'd like....\nH:\nI'm busy but it's just routine stuff.\nHMJr:\nWell, could you come over, and I tell you what\nit's about 80 you can bring over one man with\nyou. I - I want to study, both from the stand-\npoint of the individual and the corporation,\nwhat he's got to go through next year to make\nout his income tax in the way of paper work.\nH:\nYeah.\nHMJr:\nAnd also if - whatever plan we recommend, what\nwe can do to make it - the minimum effort, you\nsee - additional paper work. Hello? And who\nwould you bring on that? Who's your best man?\nH:\nWell, I've got....\nHMJr:\nBesides yourself.\nH:\nHam?\nHMJr:\nBesides yourself, who's good over there?\nH:\nWell, this would have to do with the collectors'\noffices, wouldn't it?\nHMJr:\nYeah.\nH:\nUh huh.\nHMJr:\nWho knows that stuff?\nH:\nYou mean the....\nHMJr:\nWell, I mean the mechanics of what a corporation\nor an individual has to go through.\nH:\nYeah.\nRegraded Unclassified\n95\n- 2 -\nHMJr:\nCollection of Victory Tax and all that.\nH:\nYeah. Well, of course, Mr. Schoeneman 1s in\ncharge of the collectors' offices.\nHMJr:\nYeah.\nH:\nBut there's - George Schoeneman.\nHMJr:\nDoes he know this stuff?\nH:\nThen the forms - the forms, of course, there's\nanother committee that handles the forms.\nHMJr:\nWho's that?\nH:\nDr. Atkinson.\nHMJr:\nNever heard of him. He's got forms?\nH:\nWell, he - he's the man that functions on getting\nup our forms for any - when we change, which we\nhave to change about fifty-one....\nHMJr:\nI see.\nH:\n....for these '42 taxes.\nHMJr:\nDr. Atkinson?\nH:\nYeah.\nHMJr:\nWell, bring him along.\nH:\nYeah, all right.\nHMJr:\nCan you get over here by....\nH:\nPronto, yeah.\nHMJr:\nPronto.\nH:\n(Laughs) Yeah.\nHMJr:\nGood.\nH:\n(Laughs) All right.\nHMJr:\nAll right.\nRegraded Unclassified\n96\nDecember 2, 1942\n11:00 a.m.\nTAXES\nPresent: Mr. Gaston\nMr. White\nMr. Paul\nMr. Sullivan\nMr. Haas\nMr. Blough\nMr. Helvering\nMr. Atkeson\nMr. Schoeneman\nMr. Mooney\nMr. Mager\nMrs. Klotz\nH.M.JR: The reason that I asked you people to get\ntogether - this is the first time I have had a chance,\nsince I have been back from England, to begin to think\nabout taxes and this whole tax question. I have been\ndoing a lot of thinking about it, but there are two\nthings that have brought this to a head.\nOne was yesterday when Bell and .went up on the\nHill and sat in on the Byrd Committee hearing and saw\nthe various forms which were presented that the busi-\nnessman has to fill out today, and Harold Smith sat\nthere and did not say that all these forms had to pass\nthrough the Central Statistical Board and have his stamp\nup in the corner. This man sat there representing the\ndrug interests, and he said, \"I am just not going to\nfill them out.\nThey said to him, \"What will happen to you?\" He\nsaid, \"I do not know, and I do not care. I am just not\ngoing to fill them out.\"\nHe said, \"We have tried for two months to get a\ncost accountant and we cannot get one, and we are just\nnot going to fill them out.\" They happened to be OPA\nthings.\nRegraded Unclassified\n97\n- 2 -\nMR. GASTON: Weren't they WPB?\nH.M.JR: No, they were OPA; they were on the ques-\ntion of changing the size of a bottle of drugs, and the\ningredients. They asked this question: Of a certain\ningredient, how many of these things does your competi-\ntor sell? The fellow says, \"How do I know?\"\nWell, of course, they have got to get certain in-\nformation. Where I think OPA made the mistake, they\nnever sat down with the drug industry and asked, \"Can\nyou, as an industry, tell us how to get it?\" - and 80\nforth.\nThe point that was impressed on me, and I happened\nto say the same thing out at Kansas City, is that it\ngets to the point where the businessman will say, just\nlike these fellows said, flatly, \"I am not going to\nfill out these things; throw me in jail - go ahead and\nput me in jail.\" As the private said to the sergeant,\nThis is the Army, go on and break me, I am a private.\"\n(Laughter) It is the same thing. \"Go on, put me in\njail.\"\nNow, I do not want the Treasury to take this thing\non the nose if we can help it. Approaching whatever\nwe are going to do next year in taxes, I certainly want\nto study the thing. What does this do to the individual?\nAfter all, I am the hired man of the taxpayer. It is\nnot for me to sit here and say, \"We need 80 many more\nbillions in taxes and to hell with the taxpayer; he can\nfind a way to make them out.\" The answer to the whole\nthing is, they are not going to make them out, and they\nmay not pay their taxes if the thing gets too complicated.\nThere was not a single Senator there who - I was the\nonly person who spoke up. I said, \"After all, Mr. Chair-\nman, surely you are going to ask somebody from OPA to\ncome up and tell his side of the story. There are\nalways two sides to everything.\" He said, \"Yes, yes,\nbut we have first got to hear the complaint.\"\nRegraded Unclassified\n98\n- 3 -\nHe makes the front page, and then, by the time\nthat Henderson's people catch up to them and get a\nchance, the damage is done in the minds of the public.\nBut there was not a man there but what was with indus-\ntry.\nI had an hour with Blough, and, as I understand\nit, there is nothing particularly new that anybody in\nthe Treasury has in mind as to how to raise these taxes.\nIt is a question of taking any one of four devices -\nthe thing that we took over across the street to\nMr. Byrnes' committee. But in starting this program\nI want these people here to study the thing first.\nWe are the hired men. How can we get this money with\na minimum of disturbance? That is the first thing.\nNow, in going over this thing from the standpoint\nof the individual - what we have done - our record is\nnot too hot. Now, Roy gave me the whole business,\ngoing back to when I first recommended fifteen percent\nwithholding, and I want that thing restudied from the\nstandpoint of what is going to happen to the individual\nthis coming year. I told Roy, when it comes to the\ncompany making out the Victory Tax - I don't know\nwhether you people made any studies the way you did\noriginally. how many hours is it going to take for a\ncompany employing a hundred men, or five hundred men,\nto do this thing. The drug industry made studies of\nhow many hours it takes to fill out these things.\nMR. PAUL: The Victory Tax is not our tax.\nH.M.JR: Yes, but we are here - what I am trying\nto do is, Paul, I am trying to do a job for the tax-\npayer, and not just to drain the last drop of blood\nout of him, and if Helvering's people tell me this means\nso many additional hours for the businessman, and so\nforth, and I have that, why can't I say, just the way\nthe drug man said - why can't I come out 8.8 a champion\nof the businessman and say that this is impossible?\nRegraded Unclassified\n99\n- 4 -\nMR. PAUL: Our record is that we opposed it largely\non that ground.\nMR. GASTON: But we have to collect it.\nE.M.JR: But we have got to collect it. Schoeneman,\nhere, is in charge of the offices, and Sullivan is\nresponsible to me to keep these fellows happy. I am\nputting myself on record that I want to know which of\nthese things are an undue burden.\nBut when you come in to me and say, \"Well, Mr.\nMorgenthau, this thing is an undue hardship in the\nway of taking 80 many hours,\" and 80 forth; you have got\nto make an alternative suggestion. You cannot just\nknock off a couple of billion dollars and say, This\nis no good.\" See?\nNow, before I leave this standpoint, instead of\njust going out and collecting the taxes, let's think\nabout the factor a little bit, and put ourselves in the\nframe of mind that we are the servant of the taxpayer,\nnot his leech.\nMR. PAUL: We have been talking along this line -\nMr. Gaston and Mr. Blough and I - - for several weeks,\nand that is one of the reasons why we have been re-\nstudying the Ruml plan, and various things like that.\nH.M.JR: Fine. I am just getting in on it. I\nhave been spending three weeks making plans to raise\nnine billion dollars. The thing is in the works, now,\nand the rest is up to the American public. Now I am\ngoing to get in on the taxes.\nMR. HELVERING: You understand that we send out no\nquestionnaires except to keep control of sugar rationing\nand things like that, to certain people who handle that.\nWe send out no questionnaires to fill out other than\nthe tax return.\nRegraded Unclassified\n100\n- 5 -\nH.M.JR: I am not thinking of questionnaires. Look,\nwhat I would like to have is Atkeson or somebody bring\nme in 8. set of books, or take me to the factory, and\nas I understand it, Atkeson passes on the form. Is\nthat right?\nMR. ATKESON: I developed them, Mr. Morgenthau.\nH.M.JR: Take me to the factory, to a department\nstore, or anywhere, and let me sit down, and I would\nlike to know what this man has to do, as far as the\nTreasury is concerned, to pay his taxes. I mean, I\nwant to go through the operations myself. What has he\ngot to do? What does his Victory Tax mean? How is\nthe individual going to fare next year? What about\nthe working man who has got an income of fifteen hun-\ndred to two thousand dollars - what is he going to do?\nHow much does he realize? My boy, Henry, said, \"Why\ndon't you use this man in OWI that you used before to\nmake this survey?\" What is his name?\nMR. HAAS: Likert.\nH.M.JR: He said, \"Why don't you use Likert?\" I\nwas talking about this thing. How do these families -\nhow conscious are they of this thing, and what is the\ntypical American - you fellows have been talking day\nand night about having to get the group from two thou-\nsand to three thousand to stop spending.\nAll right, you all sit here - including myself -\nin a swivel chair, now, what is this family who has got\nthis thing right on him, what are they doing and how\nconscious are they of this thing, outside of the cir-\ncular which you have sent them? We are going to find\nourselves the butt of this whole thing, and I am not\ngoing to be the butt - or the goat.\nMR. HELVERING: Well, if it is a matter of the\nvarious questionnaires that are sent to businessmen,\nyou are not guilty, as far 8.8 I know.\nRegraded Unclassified\n101\n- 6 -\nH.M.JR: That isn't it. I mean, they spoke about\none thing, the alcohol tax, to get money back on alcohol.\nThey described what they had to do and I interrupted\nthe fellow. I said, \"It seems very reasonable to me\nin view of the unfortunate instances we have had with\nMcKesson Robbins and a few other people in your industry.\"\nI said, \"That is the minimum we have got to do and we\nare going to continue to do it as long as there are\ncrooked people in your industry.\"\nI said, \"It is too bad, but there are crooked\npeople in the drug industry, and the questions that we\nare asking about you people using alcohol, and 80 forth,\nare the minimum that we have got to ask. Somebody\nsaid he got off on the wrong foot and he dropped it.\nMR. PAUL: Our record is very good. We opposed\nthat differential on the very ground that you--\nH.M.JR: I am going to go through it all once more.\nI want to approach this thing for the coming year.\nWhat is the status of the individual sitting at home\nwho is going to have to pay this tax, how prepared is\nhe, and how conscious of this is he?\nNow, what about the businessman - what has he got\nto do? How many hours is it going to take him to do\nthis thing. We have got people like Likert, who are\ntrained, to go out. Remember when we had this discussion\nabout the effect on the factories of compulsory saving,\nwe sent what's-his-name out, didn't we?\nMR. PAUL: Friedman.\nMR. BLOUGH: On the collection at the source we\nhad Mr. Atkeson, Friedman, and a bunch of others.\nH.M.JR: Well, that kind of thing. Now, have I\nmade this point clear? As we are going into this\nthing now, you will see more and more of me from now\non, as we go along. So much for the approach from the\nangle of the taxpayer.\nRegraded Unclassified\n102\n- 7 -\nNow, the other thing that I want to say is this.\nI don't know how many of you heard Raymond Gram Swing\nand listened to this new social security program last\nnight on the radio. Did any of you hear him?\nMR. GASTON: I didn't, last night.\nH.M.JR: As a result of that, I am just wondering\nwhether we can't take a brand new look at the social\nsecurity thing. Now, what they are proposing in\nEngland is not only good for today, but it is good for\nthe post war, and it has many advantages over straight\ncompulsory savings because nobody has thought out com-\npulsory savings and what it does. Every single person\nin England is going to be insured. They are going to\nget unemployment insurance; they are going to get sick-\nness insurance, and the whole business.\nNow, the beauty of the study of the social insurance\nover something else - is that on the books, Guy? You\nhave got your mechanics.\nMR. HELVERING: Yes.\nH.M.JR: It is there; it wouldn't be an additional\nburden from the standpoint of machinery, and it has\ngot the--\nMR. GASTON: Unless you go to complete coverage.\nH.M.JR: We will just extend it.\nMR. SULLIVAN: Expansion of already existing\nmachinery.\nH.M.JR: The farmers would have to come in. Roy\nsaid that you will get opposition. I said, \"I don't\nthink, Roy, that you will get opposition on this, if,\nas an alternative, you said, 'Look, gentlemen, look at\nthe Victory tax; this means to a man who is employing\na hundred men, or fiftymen, that he has to do so many\nRegraded Unclassified\n103\n- 8 -\nhours of bookkeeping, as opposed to this method where\nhe has already got it, and it just means an extension,\nor any other plan which is new which has been suggested.'\nNow, as I say, Mr. Swing said he didn't have the\nwhole thing, but to me, thinking now that the war is\nnot going to be a five-year war - I am willing to say\nthat I think we will win it in '44 - I feel quite\ndifferently than I did when I used to think it was going\nto be at least five years.\nI would like to say to these people here who are\nstudying this tax thing - - and another thing on the\nsocial security - I think I am right - - I think it would\nhit the volunteer war bonds much less than any other\nplan, and has that additional attraction. You just\ncan't brush the volunteer thing aside, and what they\nare doing on publicity, and so forth and so on.\nIncidentally, Harold, you ought to circulate that\nSan Francisco paper.\nMR. GRAVES: We are going to do that.\nH.M.JR: I mean to your own Treasury crowd.\nNow, could I suggest to those people who are study-\ning it - I want you to know how I feel. I would like to\nfind out how much additional money we can get through\nsocial security if we do what England has recommended -\ngo from the top to the bottom, and what is the maximum\nthat we could get out of that. I would like to see that\nfirst.\nMR. PAUL: All right.\nH.M.JR: And then say, \"All right\" after we have\ndone that. - I think if you take people that are working\nover there - my guess is that this would appeal to\nBenjamin Cohen, and I think it would appeal to Lauch\nCurrie. Don't you think so, Harry?\nRegraded Unclassified\n104\n- 9 -\nMR. WHITE: Certain parts of it. I am not sure\nthat I--\nH.M.JR: I mean the social security.\nMR. WHITE: The principle of old-age pensions\nis not an insurance principle. That is why I am not\ncertain that we are talking about the same thing.\nH.M.JR: He said that twenty-five percent was con-\ntributed.\nMR. WHITE: But there are possibilities in that\ndirection.\nH.M.JR: I will put it this way. If we used as\n8 possibility the social security thing as a keystone,\nsick benefits, unemployment, old age, and all the\nother things, what would. be the very maximum that we\ncould get out of the thing?\nMR. WHITE: I think it is a very good idea to ex-\nplore the possibilities.\nH.M.JR: Then, when we are through with that, how\nmuch more do we need, and where can we get it, with\nthe minimum of irritation to the taxpayer?\nMR. SULLIVAN: You also have the possibility that\nyou may be able to absorb the Victory Tax and cross that\none off the books.\nH.M.JR: Yes, I said that to Roy. Roy said, \"What\nabout the Victory?\" I said, \"If we make the study there\nis no reason why we could not recommend that that thing\nbe crossed off the books.\"\nMR. WHITE: Saving with a social purpose is what\nyou are after.\nH.M.JR: Yes, because, Harry, the trouble with the\ncompulsory thing is that nobody I have met - most likely\nRegraded Unclassified\n105\n- 10 -\nsomebody has the answer - but from my standpoint, nobody\nhas come in and said, \"This is compulsory savings and\nthis is the way we help the fellow, as to how he should\nreceive it.\" It is just a straight hand-out sometime\nafter the war is over, and you can be sure, just as\nsure as I am sitting here - and I am saying this only\nin the room, because when I get on my feet I deny it\nbefore an audience - that this compulsory savings -\nit has already been asked - will be frozen when the war\nis over and they won't get it. But if it is social\nsecurity, and you have got this vast number of old people\nor sick people, Congress is going to have an awfully hard\ntime saying that those people should not be paid.\nIt is very easy if the then Secretary of the Treasury\nsays that it means additional taxes and this, that, and\nthe other thing, and somebody says, \"Let's freeze it for\nfive years. We won't pay anybody on compulsory savings.\"\nMR. SULLIVAN: I have been saying that all along,\nMr. Secretary.\nMR. WHITE: Only if there is prosperity.\nH.M.JR: The argument, Harry, is that if this thing\nis broken down in six or eight different benefits, it\nis very much harder to freeze that than it is the other\nthing.\nMR. WHITE: This is a superior objective for sav-\ning. I quite agree. If you can find something that\nwould call forth various savings and would be the instru-\nment of an extension of social security along all the\nlines that you have spoken, I think it is preferable to\noutright saving, and a return of the funds in the post-\nwar period. I think SO.\nH.M.JR: I just wanted to throw it at the people.\nI wanted Mr. Helvering and his people to have it. I\nwant you to think about it, talk with each other, and\nthen in & couple of days I want to talk with you again.\nRegraded Unclassified\n1\n106\n- 11 -\nMR. WHITE: But the magnitude, Mr. Secretary -\nlet's bear that in mind - my horseback opinion is that\nthe magnitude of any scheme of social security extension\nwhich you can have is far smaller than the magnitude of\nthe compulsory saving which we all feel would be necessary\nif you adopted any scheme.\nH.M.JR: I was talking with Roy. We were talking\nabout - well, it gets down to how much you can get, you\nsee, and all the rest of the thing, but this is just the\nopening gun, that is all. I think I am throwing - at\nleast I am giving my own feelings as of this morning;\nand I didn't want to meet with you in a week and find\nthat we were way, way apart. There are two things which\nhave happened to me. One was the reaction of the Congress\nto a businessman who says, \"To hell with the Government;\nI am not going to make out the forms; throw me in jail,\nand the leading Senators of both parties sitting there\nand saying, \"Wonderful, wonderful.\" When you get to\nthat point a fellow has to sit up and listen.\nMR. SULLIVAN: I wanted to inform you on that very\npoint. There was a bill that went through the Senate\nrequiring all forms to go through the Director of the\nBudget. A particular exemption was made for the Treasury,\nand in the report some very flattering comments were\nmade on the way in which the Treasury had handled con-\nfidential information that it received from the taxpayers.\nThe exemption in favor of the Treasury was stricken out\nin the House, and the bill was to have gone through\nMonday, but I stopped it.\nNow, under the bill as it now stands the Director\nof the Budget can say to Mr. Helvering, \"Your corporation\nincome tax return will have to include twelve questions\nthat WPB wants answered and fifteen questions that OPA\nwants answered,\" and we think it is ruinous. I am seeing\nSenator Murray this afternoon, with a memorandum on\nkeeping in our exemption.\nH.M.JR: After what George listened to yesterday,\nI would go up there and tell George about it, because he\nRegraded Unclassified\nr-2\n107\n- 12 -\nsat there yesterday at this hearing.\nMR. SULLIVAN: I will be glad to.\nH.M.JR: I would go and see Byrd and George.\nMR. SULLIVAN: I will.\nH.M.JR: You should see those two people, because\nthey were both there.\nMR. SULLIVAN: I will be very glad to. There are\nthree parts of Treasury affected; first, the Bureau of\nInternal Revenue, the Comptroller--\nH.M.JR: I would have felt sick at the stomach\nif I had been Harold Smith and had all this stuff laid\nout there. He admitted that he didn't know about half\nof it. He was in & - I mean, you have a central sta-\ntistical organization, and this stuff - he grabs all\nthis stuff - the Director of the Budget wants all this\npower. He has 80 much that he can't administer it.\nThat is his trouble; he can't administer it.\nMR. SULLIVAN: He would have virtual control of\nMr. Helvering's operation if this bill went through\nthis way.\nH.M.JR: After this lengthy speech on my part,\ndoes anybody want to make any comments?\nMR. HELVERING: Mr. Secretary, the only thing\nthat we do on all our tax forms is to get information\nthat is absolutely essential, in our opinion, to\nadminister the particular tax.\nNow, take the Victory Tax - of course, for the\nemployer it means on his machine an extra column to put\non or take off the five percent. With us, though, it\nmeans a larger job, because we have to figure all the\ncredits.\nMR. PAUL: And you have so many more million\ntaxpayers, twenty-seven up to forty-six million.\nRegraded Unclassified\n-3\n108\n- 13 -\nH.M.JR: Now, Guy, to what business house around\nhere can Blough and I go, sit down with the fellow,\nit? see their books, and go over this? Could you arrange\nMR. BLOUGH: You had a couple of interesting concerns\nhere in town that you were out on.\nMR. ATKESON: The Washington Gas Light Company.\nThey seem to be pretty well staffed, and they have some\nvery capable men there who would be most helpful.\nH.M.JR: What company?\nMR. ATKESON: The Washington Gas Light.\nH.M.JR: That is one.\nMR. BLOUGH: That is a public utility and a well-\norganized one. You would not get a typical picture\nthere. You would get a picture of what a well-organized\ncompany would do.\nMR. ATKESON: I think the revenue agent could point\nout one or two.\nMR. MOONEY: I think SO. I have this in mind. We\nhad a letter from the comptroller of Woodward and\nLothrop, President of the Association of Comptrollers.\nHe asked representatives of the Bureau to be present\nat their meeting, to be held the other evening, so they\ncould discuss the Victory Tax and the work they would\nhave to do, what plans they would have to make in order\nto pay this tax, and what bookkeeping records they would\nhave to keep. We did send a representative to attend\nthat meeting. Now, I think that Woodward and Lothrop\nwould be an excellent organization.\nH.M.JR: He is the head of the Comptrollers'\norganization?\nMR. MOONEY: Yes.\nRegraded Unclassified\n109\n- 14 -\nH.M.JR: All right, we will go to the Light\nCompany and to Woodward and Lothrop's. I want to go\nto the company. Got another suggestion? Give me\nthree.\nMR. MOONEY: Here in Washington?\nH.M.JR: It is easier. It does not have to be.\nMR. BLOUGH: A factory would be good.\nMR. MOONEY: I would like a little more time on\nthat.\nH.M.JR: Give me a factory that is working on\nwar work.\nMR. GASTON: Glenn Martin in Baltimore.\nH.M.JR: We could go over to Glenn Martin.\nMR. ATKESON: Mr. Secretary, might I inject this\nhere. You made a reference to these people with from\ntwo to three thousand dollar incomes, and I think you\nwere concerned with the record work there. You will\nrecall, of course, our simplified form that we\ndeveloped a couple of years ago. Practically all of\nthe salaried people from whom these people receive\ntheir compensation will receive a duplicate of an\ninformation return at the beginning of the year, after\nthe close of the tax year; and that is practically\nall the information that that type of taxpayer is\nrequired to keep or have to make out his tax return.\nIn other words, the company keeps the records\nfor the employee and will hand him at the end of\nthe year a statement showing his total salaries and\nwages, and he can enter that right on his little\n1048 and the rest of it is fairly simple. I just\nmention that to relieve your mind, if you are\nworried about this two to three thousand dollar\nclass.\nRegraded Unclassified\n110\n- 15 -\nMR. WHITE: Mr. Secretary, I wonder, in view of\nthe reactions against filling in questionnaires and\nother papers, which I guess I am more in sympathy with\nthis morning than any other time because I have to fill\nin what I think is 8. completely useless thing, as far\nas I can understand - tire regulations. I don't see\nmuch sense in it. (Laughter)\nH.M.JR: I'know. What started the thing with me\nwas when I filled out my draft one. Have you filled\nthat out?\nMR. WHITE: Some time ago.\nH.M.JR: I asked somebody last night, \"Did you\nfill it out?\" He says, \"Yes. I said, \"What did you\ndo?\" He said, \"I thought I would answer every question.\"\nBut that had about eighty questions.\nMR. WHITE: And despite all the questionnaires,\nthe Army cannot find - I don't know whether you told\nme this, or somebody else - several thousand former\nemployees of the various telephone companies through-\nout the country that they badly need for signal work.\nThere are all these comprehensive forms, which should\ngive, first of all, the information as to what you are\ncapable of doing, and they are unable to locate them.\nThey have only located about fifteen percent of them\nand are badly in need of them.\nH.M.JR: May I tell you a story. I have a very\ngood friend who has a secretary. He has had her now\nfor some time. Today is the second of December. This\ngirl left her previous employer in July, who marked\nher the lowest rating, unsatisfactory - what is the very\nlowest out of five, is that unsatisfactory?\nMR. HELVERING: Unsatisfactory.\nH.M.JR: And the rating--\nMR. WHITE: We do not have any in the Treasury\n80 we don't know. (Laughter)\nRegraded Unclassified\n111\n- 16 -\nH.M.JR: And that rating which she got from a\nprevious employer, over in OWI, just reached them\nnow on the first of December, that on the last job\nthis girl had she was marked as unsatisfactory. On\nthe first of December it catches up with her.\n(Laughter)\nMR. WHITE: I was wondering whether this thing\ncouldn't be approached along the lines which you\nsuggested some time ago, which needs to be & drastic\nreorientation from the point of view of the taxpayer,\npurely from the point of view of education of the\ntaxpayer.\nThere are going to be all these new taxpayers.\nWhy wouldn't it be possible to develop a corps of\nten or twenty thousand teachers in the United States\nwho will study how these forms will be filled out and\nwho will be in a position to give aid in their\nneighboring localities, in their schoolrooms, and who\nat the same time will provide an excellent medium for\nthe Treasury to get across to them the idea as to why\nthese taxes, why we are trying to simplify them. In\nother words, make them at the same time agents to\ninterpret the Treasury's attitude toward the taxpayer,\nTreasury needs, and they will be in a position to\nhelp all these small people with their tax blanks.\nI don't know how many teachers there are. I\nhave forgotten. But certainly it is quite possible\nto select fifty thousand teachers in the United\nStates, and that would be their contribution toward\nthe war effort in addition to whatever they are doing\nnow. It needs to be started. It is a big program, but\nI see no reason why it cannot be done.\nH.M.JR: To go back, did you get the tire?\nMR. WHITE: I may have to give up a tire, that\nis the thing. (Laughter)\nRegraded Unclassified\n112\n- 17 -\nMR. SULLIVAN: I hope they are the same size\nas mine. I need four. (Laughter)\nMR. WHITE: Give me your car. (Laughter)\nH.M.JR: We have to do a lot of work on education.\nMR. WHITE: They have to fill these out in March.\nIt will take at least several months to get an\norganization of that kind started.\nH.M.JR: Professor Sullivan is supposed to be\nthe professor in charge of this, so you had better\nfind out what he has been doing.\nMR. GASTON: There was a woman in to see me the\nother day. She was sent in by Randolph Paul - a Miss\nHartshorne. She had an idea for organizing education\nof taxpayers and encouraging home budgeting and thrift,\nand that sort of thing. It occurred to me that we might\norganize something of that kind through the War Savings\nStaff as a means of decentralization to educate people\non the burdens they have to meet and how to prepare for\nthem. It goes back to that same idea of thrift education\nas a part of the savings program, and we need it as a\npart of the tax program. I think we might be able to\norganize something of that kind through the War Savings\nStaff.\nH.M.JR: The main thing I had you people - I want\nyou to know how I feel as of this morning. My mind is\nentirely open. I am very conscious, just the way\nMr. White is, that all of these questionnaires - I haven't\ngotten to the point yet that I refuse to answer them,\nbut I think that in this town you at least get three\nwarnings. I got one yesterday, and I don't mean the\nquestionnaires. But you get a point where you make it\nso difficult for the man to make out his taxes that he\nis not going to pay them, particularly the corporation.\nI mean, when a man sits there before the Joint Committee\non Taxation and says, \"I don't care what the penalty is,\nI am not going to make it out and I am not going to sign\nit, I am not going to do it.\" that is a danger signal. I\nRegraded Unclassified\n8\n113\n- 18 -\nam warning you all that I am going to be here this week\nend, and I may ask you to meet with me some time that\nwould be most convenient to you over the week end.\nMR. HELVERING: To clarify the thing, Mr. Secretary,\nhave you in mind that we make a restudy of all our tax\nforms to see if they can be simplified?\nH.M.JR: No, what I would like you to do is this:\nI would like you to tell me in some way how long it\ntakes - the kind of study that we made in connection with\nputting in compulsory savings, wasn't it?\nMR. BLOUGH: Collection at the source.\nH.M.JR: All right, let's start in. How much\nadditional burden is on a business man to comply with\nthe Victory Tax? Let's start with that.\nMR. SULLIVAN: How much additional equipment, how\nmuch additional personnel.\nH.M.JR: Yes, the same kind of study as we did on\nthe other. Let's do that first. Then the purpose of\nthis meeting is this: Paul will come along, you see,\nwith some scheme and say, \"Now, this is the way to get\nanother fifty billion dollars.\" I will say, \"Fine, but\nlet's see what it does to the taxpayer.\" So I turn it\nover to you fellows. I mean, is this a scheme which\nhe can comply with, or is he simply going to say, \"It\nis so difficult that I am not going to do it\"? In\nother words, I am going to be the advocate from now on\nfor simplicity, and so forth, and so on, and just to\nraise the money is not going to satisfy me. It is going\nto have to be workable; it has to be workable.\nMR. PAUL: We approach things from that standpoint.\nWe constantly get in touch with Mr. Helvering on that\nbasis.\nH.M.JR: Then what I am talking about ought to be\nall the easier.\nRegraded Unclassified\n114\n- 19 -\nMR. PAUL: One thing I do think you have to keep\nin mind - my sympathy is not all with the two or three-\nthousand-dollar man who has a tough job making out a\nreturn, and that sort of thing, but I have had a little\nexperience with the way businessmen can magnify their\nproblems and misrepresent the job that they have to do.\nFor instance, that is what they did with collection at\nthe source. When we got all through we found that they\ndid not have such an insuperable job. We have got to\nwatch for that tendency in the businessman. I don't\nwant him to have any more job than is necessary, of\ncourse.\nH.M.JR: Well, Randolph, as your representative\nMr. Blough will be at my elbow at all times, and he is\nno businessman, any more than-- (Laughter)\nMR. BLOUGH: Right you are.\nH.M.JR:\nany more than Graves - not Graves\nbut some of the people working with him who were so\nafraid that the bad banker was going to gobble me up\nall of a sudden after ten years and that I was going\nto sell out the bankers and the Victory Fund. I mean,\nI have got a record here of ten years, and I haven't\ndone it yet, and I am not going to do it in the last\ntwo years that I have to go.\nSo you will be getting - what I will be looking for\nover the week end, most likely from Paul, will be\nrecommendations on how to do this, how to raise this\nmoney, and when I get these recommendations you fellows\nwill sit in and you will hear them.\nMR. HELVERING: There is only one thing I would\nlike to suggest, Mr. Secretary, and, Mr. Paul, and that\nis that the administrative problems in these proposals\nfor taxation ought to be submitted to us before they are\ntaken up on the Hill and presented as a tax feature.\nMR. PAUL: I quite agree with that. It has only\nfailed to happen once or twice when we have been in a\nRegraded Unclassified\n10\n115\n- 20 -\nterrible jam of some sort. I quite agree with you.\nIn fact, I think anything should be submitted to you\nbefore we have a meeting so you are able to have a\nconsidered reaction.\nH.M.JR: The purpose of this, Guy, was to have you\nsit in from the inception so you can run up a red flag\nat any time.\nO.K.\n116\nDecember 2, 1942\n12:16 p.m.\nGrace\nTully:\nMr. Secretary, how are your\nHMJr:\nI children. hear we're doing good business with the grand-\nT:\noh, wonderful.\nHMJr:\nWhat?\nT:\nYes, sir. Wasn't that a surprise? (Laughs)\nHMJr:\nWonderful.\nT:\nYeah. I'll let Danny Bell know about whether\nthey're to be sent over or whether they're to\nhold them. We may just write them a letter, you\nsee, and leave them there for safekeeping.\nHMJr:\nOkay.\nT:\nI haven't been able to take it up with the President\nyet to find out what he wants done. Mr. Secretary,\nan appointment tomorrow morning at ten?\nHMJr:\nWonderful.\nT:\nUh huh.\nHMJr;\nTen o'clock.\nT:\nAll right, sir.\nHMJr:\nEver so much obliged.\nT:\nFine, Mr. Secretary. Goodbye.\n116\nDecember 2, 1942\n12:16 p.m.\nGrace\nTully:\nMr. Secretary, how are you?\nHMJr:\nI children. hear we're doing good business with the grand-\nT:\nOh, wonderful.\nHMJr:\nWhat?\nT:\nYes, sir. Wasn't that a surprise? (Laughs)\nHMJr:\nWonderful.\nT:\nYeah. I'll let Danny Bell know about whether\nthey're to be sent over or whether they're to\nhold them. We may just write them a letter, you\nsee, and leave them there for safekeeping.\nHMJr:\nOkay.\nT:\nI haven't been able to take it up with the President\nyet to find out what he wants done. Mr. Secretary,\nan appointment tomorrow morning at ten?\nHMJr:\nWonderful.\nT:\nUh huh.\nHMJr:\nTen o'clock.\nT:\nAll right, sir.\nHMJr:\nEver 80 much obliged.\nT:\nFine, Mr. Secretary. Goodbye.\nRegraded Unclassified\n117\nDecember 2, 1942\n12:31 p.m.\nOperator:\n....on the line. Is that all right?\nHMJr:\nYes.\nOperator:\nAll right. Go ahead.\nHMJr:\nHello.\nCong. Robert\nDoughton:\nIs that you, Henry?\nHMJr:\nIn - yes, Bob.\nD:\nBob Doughton.\nHMJr:\nYes.\nD:\nThis morning we've been afussin' around\nand workin' around and debating around and\narguing around about this - President's deal\nabout - giving him broader powers about this\nwar matter, you know.\nHMJr:\nYeah.\nD:\nYou've seen & good deal about it in the paper\nHMJr:\nYeah.\nD:\nand I was directed this morning by the full\ncommittee to introduce a subcommittee bill,\nthe bill the subcommittee has agreed on, as\nthe basis of the hearings..\nHMJr:\nYeah.\nD:\n....and the hearings are to begin tomorrow\nat ten o'clock. I want one - our luncheon's\nat one o'clock.\nHMJr:\nYeah.\nD:\nI want to ask you this....\nHMJr:\nYeah.\nRegraded Unclassified\n118\n- 2 -\nD:\n....1f it would suit you at all -- how would it\nsuit you -- I'd just reverse this matter and you\ncome up and lunch with me in the committee room\nup here privately at one o'clock.\nHMJr:\nWell, I'd love to do that.\nD:\nWell, now that's just - - you see, it will save me a\nlittle time coming and going.\nHMJr:\nI'd love to do it.\nD:\nWell, that'll be fine and we'll just meet up here\nin the committee - you know where the committee\nroom in the Capitol 18?\nHMJr:\nWell, I can find out.\nD:\nWell, it's right here next - on the second floor\n....\nHMJr:\nOh, yes.\nD:\n....right here in the. Capitol.\nHMJr:\nFine.\nD:\nAt one o'clock.\nHMJr:\nFine.\nD:\nAnd we'll sit down and there won't be a soul about\nus.\nHMJr:\nFine.\nD:\nFine. All right, thank you.\nHMJr:\nThank you.\nD:\nYou're welcome.\nmr shite read 12/2/42-\n119\nDecember 2, 1942\n3:13 p.m.\nHMJr:\nHello.\nOperator:\nGo ahead.\nHMJr:\nHello.\nFrank\nKnox:\nHello, Henry.\nHMJr:\nIn person.\nK:\nFrank Knox talking.\nHMJr:\nYes.\nK:\nI have a letter from you, Henry, about the\npossibility of using some of the men who have\ncome to us from the Treasury and now are oom-\nmissioned...\nHMJr:\nYes.\nK:\n....on some work for you abroad.\nHMJr:\nWell\nK:\nIt's against the orders of the Boss to return\nthem to an inactive status, as you suggest....\nHMJr:\nYeah.\nK:\nbut we can turn them over to you in - as\nactive naval officers assigned to you, and we\ncan do that if you want us to in this case of\nLieutenant Frank A. Southard\nHMJr:\nYes.\nK:\n....Jr.\nHMJr:\nWell, that would help. We're sending him over\non - he's an economist, you see, one of the\nbest we had and the State Department - and have\nasked us to send - lend them certain men over\nthere.\n120\n- 2 -\nK:\nWell, all right then. Admiral Jacobs will get out\norders at once then directing him to report to you.\nHMJr:\nWell....\nK:\nBut he'll come in the status of an active officer of\nthe Navy\nHMJr:\nWell....\nK:\n....and wear his uniform. Will that be objectionable?\nHMJr:\nI don't see why. I think we'll - we'll try it any-\nway.\nK:\nAll right. ,Well, I'll have those orders issued\nright away then.\nHMJr:\nWhat we want is his brains.\nK:\nYeah. (Laughs)\nHMJr:\nWhat?\nK:\nYeah, well, I suppose, as a matter of fact, on a\ndetail like this he could take his uniform off as\nfar as that's concerned. But he will be in the\nactive status of\na....\nHMJr:\nCould he....\nK:\n....of an active officer.\nHMJr:\nYeah, but could he take his uniform off?\nK:\nYes, yes.\nHMJr:\nCould he be told that?\nK:\nYes.\nHMJr:\nWhat?\nK:\nYup.\nHMJr:\nWell, I think....\nRegraded Unclassified\n121\n- 3 -\nK:\nA good many of our officers in Intelligence don't\nwear the uniform.\nHMJr:\nWell, I think if he could be told that, that would\nbe perfect.\nK:\nAll right. We'll do that. Then I'll have him\nordered right over to you.\nHMJr:\nIt was very kind of you to call me.\nK:\nAll right, Henry.\nHMJr:\nThank you.\n122\nDecember 2, 1942\n3:13 p.m.\n...\nFrank\nKnox:\nHow are you otherwise?\nHMJr:\nI'm fine.\nK:\nThat's good.\nHMJr:\nWhen - these little squabbles around town, I\nlook at the war map and I say, \"What the hell.\"\nK:\nYeah. sleep. (Laughs) Well, they haven't cost me any\nHMJr:\nThat's right.\nK:\nWhat do you hear about this shake-up business?\nIs anything going to happen or is it all a flash\nin the pan.\nHMJr:\nNo, I - I don't know much except that I gather\nthat Harold Ickes is very loath to do it.\nK:\nYeah.\nHMJr:\nHe's very loath to do it, and I - I haven't\nheard - the President hasn't mentioned it but\nI think - I think the papers had it about right\nbecause Harold talked pretty freely.\nK:\nUh huh.\nHMJr:\nDo you mean on Manpower, I take it?\nK:\nYeah, yeah. He wants to take -- according to\nthe newspapers, I haven't talked to Harold lately..\nHMJr:\nNo.\nK:\nHe wants to take the Manpower and stay where he\nis.\nHMJr:\nWell, that I don't know. Is that what he wants\nto do?\nK:\nYeah, that's what the newspaper said. I haven't\ntalked.\nRegraded Unclassified\n122\nDecember 2, 1942\n3:13 p.m.\n...\nFrank\nKnox:\nHow are you otherwise?\nHMJr:\nI'm fine.\nK:\nThat's good.\nHMJr:\nWhen - these little squabbles around town, I\nlook at the war map and I say, \"What the hell.\"\nK:\nYeah. sleep. (Laughs) Well, they haven't cost me any\nHMJr:\nThat's right.\nK:\nWhat do you hear about this shake-up business?\nIs anything going to happen or is it all a flash\nin the pan.\nHMJr:\nNo, I - - I don't know much except that I gather\nthat Harold Ickes is very loath to do it.\nK:\nYeah.\nHMJr:\nHe's very loath to do it, and I - I haven't\nheard - the President hasn't mentioned it but\nI think - I think the papers had it about right\nbecause Harold talked pretty freely.\nK:\nUh huh.\nHMJr:\nDo you mean on Manpower, I take it?\nX:\nYeah, yeah. He wants to take -- according to\nthe newspapers, I haven't talked to Harold lately....\nHMJr:\nNo.\nK:\nHe wants to take the Manpower and stay where he\nis.\nHMJr:\nWell, that I don't know. Is that what he wants\nto do?\nK:\nYeah, that's what the newspaper said. I haven't\ntalked....\n123\n- 2 -\nHMJr:\nWell, he's very loath. I guess that's about\nright, I would guess.\nK:\nUh huh.\nHMJr:\nBut he's - he's - he's awful blue, Harold is.\nI don't know why.\nK:\nIs he?\nHMJr:\nYeah, he's awful - don't say I said so, but he\nneeds a little bucking up, I think.\nK:\nWell, I'll give him a call.\nHMJr:\nI gave him a call and tried to buck him up a\nlittle bit.\nK:\nUh huh.\nHMJr:\nI never heard him talk 80 low.\nK:\nIs that 80?\nHMJr:\nThat's just between us.\nK:\nYeah. Well, thanks for tipping me off. I'll\ncall him.\nHMJr:\nRight.\nK:\nAll right, Henry.\nHMJr:\nGoodbye.\nK:\nGoodbye.\nRegraded Unclassified\n124\nDecember 2, 1942\n5:30 p.m.\nHMJr:\nHello.\nAllan\nSproul:\nHello, Mr. Secretary.\nRobert\nRouse:\nHello.\nHMJr:\nI thought I might get in on some of these words\nof wisdom.\nR:\n(Laughs)\n8:\n(Laughs) Well, we were just deciding that every-\nthing was all right.\nHMJr:\nOh, you were.\n8:\nYeah.\nHMJr:\nI see. Bell's coming in. How good all right\ndoes it look?\nS:\nWell, it looks like just a close shave for the\ntwo billion, which, as I said to Dan, I think\ncan be turned to advantage; that we - the rest\nof the drive is going so well that we - all\nwe wanted is the minimum from the banks.\nHMJr:\nI see. But you think the two billion is in the\nbag?\nS:\nI think 80 from what we have and from what Dan\nhas heard from the other districts.\nHMJr:\nOh, yes. Well, just a minute. He's coming in\nhere now.\n8:\nRight.\nHMJr:\n(Talks aside: How does it look, Dan? Oh.\nMay I have your sheet? I see.)\nHow much do you think your mail will be?\nS:\nWell, Mr. Rouse doesn't think our mail will be 80\nvery heavy because we have all of our big banks\nin and we have 775 out of 1000 banks outside in\n(cont.)\nRegraded Unclassified\n125\n- 2 -\nS:\nalready 80 that we're not counting for more\n(cont.)\nthan $25 million, say, in our mail.\nHMJr:\nI see.\nR:\nWe went after the banks on - on Monday.\nHMJr:\nOh, yes.\nR:\nAllan sent a wire to all of them....\nHMJr:\nYeah.\nR:\n....\nthen again went after them yesterday.\nS:\nSaw the Victory Fund Committee yesterday and....\nHMJr:\nI see.\nS:\n....most of them are in.\nHMJr:\nWell, but I - - I should think we'd easily get the\ntwo billion.\nS:\nYes.\nR:\noh, I don't think there's any question about it.\nHMJr:\nOkay.\nR:\nOkay.\nHMJr:\n(Talks aside: Well - do you want to say any-\nthing, Dan?) He - he says he doesn't want to\nsay anything.\nS:\nAll right, fine.\nHMJr:\nThank you.\nS:\nGoodbye.\nR:\nGoodbye.\n126\nThe Secretary would like to disouss\nthis with Roy Blough.\n127\nDecember 2, 1942\nI listened last night to Raymond Gram Swing explain\nthe new English social security proposal, and I wondered if\nwe extended our own social security, wouldn't that be just\nas good or better than a new withholding tax? -- first,\nbecause we have machinery all set up and it would be no ad-\nditional work for the employers; second, we have had this\nexperience now for years in social security and we could\nextend the benefits just the way they are in England; and,\nlast and most important, if we did widen social security\nwouldn't that be as good a damper on inflationary tendencies\nB.B. any device that we could use?\nRegraded Unclassified\nhas 2. 1942.\n128\nThe Problem of Individual Income Tax\nPayment\nI. Past experience.\nThe pre-war losses to the Federal Government from\nuncollectible personal income taxes of small taxpayers\nwere negligible. No figures are available indicating\ntemporary delinquency or the difficulties to taxpayers,\nor what the final losses to the Federal Government will\nbe under recent revenue acts. It is relevant, however,\nthat more than half the individual taxpayers did not\navail themselves of the installment payment option but\npaid in full in one payment in fiscal 1942. No informa-\ntion is available on postponements allowed or taken under\nrelief provisions for soldiers and sailors. More detailed\nfacts are contained in the following paragraphs:\n1. Over the past 22 years (fiscal years 1921-1942)\nthe amounts of individual income tax assessments abated\nas uncollectible have totalled 1.3 percent of the amounts\ncollected. In the lowest year (1921) the abatements were\n0.2 percent of collections, in the highest year (1932)\n4.7 percent, and in the latest year (1942) 0.3 percent.\nThe significance of any year's figures 1s diminished by\nthe fact that abatements in any year usually cover several\nyears' taxes.\nRegraded Unclassified\n129\n- 2 -\n2. The number of items abated as uncollectible\nover the same 22 years has averaged 0.5 percent of the\nreturns filed and has varied between 2.4 percent (1926)\nand 0.1 percent (1942). The latter figure is not repre-\nsentative since the abatements relate to earlier years\nand the number of returns was twice as great in 1942 as\nin 1941 and over four times as great as in 1939.\n3. The principal losses in terms of money were for\nlarger taxpayers. For example, the combined figures for\nfour years (1926, 1928, 1940, 1941) showed only 4 percent\nof the loss in the form of uncollectible amounts of less\nthan $100, although nearly five-sixths of the uncollectible\nitems were less than $100.\n4. The above figures reflect only the final loss\nto the Government on taxes often assessed several years\nearlier. The practice followed in making abatements\nvaries among collectors' offices but in general the 1942\nabatements do not substantially reflect 1942 delinquencies\nand perhaps not even 1941 delinquencies. Moreover, the\nfigures do not indicate the amount of temporary delin-\nquency and do not show the extent of difficulties and\ninconvenience to taxpayers. No figures reflecting the\nextent of these conditions are available.\n130\n- 3 -\n5. The use of partial (installment) payments is\nincreasing, but persons using installments still con-\nstitute a minority. In 1939 partial payments were made\nby 28.8 percent of return filers] in 1941 by 27.7 percent,\nand in 1942 (through September 30) by 40.0 percent. Over\nhalf (56.3 percent) of persons with over $3,000 of income\nused partial payments in 1942, while over one-third\n(36.5 percent) of persons with under $3,000 of income\ndid BO.\n6. No figures are available on the postponements\nallowed under soldiers' and sailors' relief provisions\nof the law. Figures on the number of postponements applied\nfor are probably on record in the collectors' offices, but\nthe automatic postponements for soldiers and sailors who\nare overseas cannot be ascertained, at least until attempts\nare made to collect the taxes.\nII. Circumstances affecting the difficulty of tax pay-\nment in 1943 and subsequent years.\nWhile the information on past experience is instruc-\ntive and encouraging a.s far as it goes, a number of factors\nmust be considered in judging the probable difficulties\nfacing taxpayers in 1943 and subsequent years. Among them\nare the following:\nRegraded Unclassified\n131\n- 4 -\n1. The number of low income taxpayers will be\ngreatly increased. This has a bearing on payment prob-\nlems since the lower the income subject to tax, the less\nthe expectation that the taxpayer will have knowledge of\nthe tax and ability and foresight to save to pay it.\nReturns have increased in recent years from 4.0 million\nfiled in fiscal year 1940, 7.6 million in 1941, and\n14.6 million in 1942, and there are expected to be\n27 million in 1943. The increase 18 largely due to\nlowering personal exemptions and credits for dependents\nand thus bringing in taxpayers with smaller incomes. In\n1943 it is estimated that there will be nearly 17 million\ntaxpayers with net income of less than $2,000 and 23 mil-\nlion with less than $3,000, a ten-fold increase over 1940.\n2. The effective rate of income tax on low brackets\nwill be much higher. This obviously has a bearing on pay-\nment because a small tax can be met more easily than a\nlarge one, Exclusive of Victory tax, which is to be\ncollected at source, the tax to be paid by a single person\nhaving a net income of $1,000, for example, will be $89\nin 1943 compared to $21 in 1942, $4 in 1941, and o in 1940.\nThe tax to be paid by a married couple having a net income\nof $2,000 with no dependents will be $140 in 1943, compared\nRegraded Unclassified\n132\n- 5 -\nwith $42 in 1942, and O in 1941. The tax to be paid by\na married couple with two dependents, having a net in-\ncome of $2,500, will be $99 in 1943 as compared with\n$12 in 1942, and 0 in 1941. The effective income tax\nrate under the 1942 Act for a married person with no\ndependents is 7 percent at $2,000; under the 1941 revenue\nact this effective rate was not reached until almost\n$5,000, and under the 1940 revenue act until about $13,000.\n3. The ability of people to meet their higher taxes\nwill depend on the following factors, among others:\n(a) Some incomes will be higher in 1943 than\nin 1942. The bearing of this fact on tax payment\n18 that the tax paid in 1943 will in most cases\nbe paid out of 1943 income and if the income 18\nhigher in 1943 than in 1942 the difficulties of\npaying the 1942 tax will constitute less of a\nburden than the tax tables show. The total income\npaid out for 1942 for the country as a whole is\nestimated at $115 billion, while for 1943 rough\nestimates place income paid out at approximately\n$125 billion.\n(b) However, millions of persons will receive\nless or no more income in 1943 than in 1942. A\nminor factor 18 that the Victory tax will be\n133\n- 6 -\ndeducted from the paycheck. Many people have\nfixed incomes which cannot be enlarged. Numerous\nbusinesses, are expected to close. The armed\nforces will be increased by numbers estimated up\nto 4 million. These must either pay their taxes\nout of generally reduced incomes or have a burden\nof postponed tax to pay after the war.\n(c) Subsequent years may show much smaller\nincomes than 1942 for persons generally. Decreases\nin incomes or the absence of income will make more\ndifficult, perhaps impossible, the collection of\nincome taxes at present levels under existing\npayment methods.\n(d) Any increase in the cost of living affects\nability to meet tax payments. The Bureau of Labor\nStatistics index of cost of living increased from\n108 to 118 between September 1941 and September\n1942 and this did not take account of substantial\nconcealed increases not affecting the index.\n(e) Inability to buy some kinds of goods, such\nas automobiles, will release money for tax payments.\nIn effect this operates as an offset against increases\nin living costs. Short-term consumer debt decreased\nabout $3 billion in the first nine months of 1942.\n134\n- 7 -\n(f) Existence of large fixed commitments\nmakes tax increases particularly difficult to meet\nsince the increased tax must come out of the sur-\nplus above the commitment.\n(g) Accumulated savings will be available to\npay some of the tax increases. Series E War Savings\nBonds are being sold at a current monthly rate of\nthree-fourths the monthly rate at which income tax\n18 accruing for payment in 1943. On February 28,\n1943, there will probably be about $8 billions\nSeries E bonds outstanding, or about the same amount\nas the individual income tax liability expected to\nbe due in 1943. Other sources are savings accounts,\ninsurance policies, etc. Accumulated savings would\nnot last long for most people 1f used to pay taxes\nand large numbers in the lower income groups do not\nhave substantial savings. Moreover, payment of\nincome taxes out of accumulated savings would not\nproduce the desired anti-inflationary effects and\npayment out of E bonds would not even improve the\nTreasury's cash position.\n(h) Saving by voluntary action 18 much more\ndifficult than by automatic deduction. A single\nperson with $21 a week left after deduction of\n135\n- 09. -\nVictory tax would have to save a week's wages\nfor taxes each quarter-year, no easy problem\nconsidering living expenses.\nIII. Steps taken or recommended by the Treasury to ease\npayment.\nA. Tax anticipation notes.\nSince August 1941, the Treasury has offered for sale\ntax anticipation notes designed to give the taxpayer some\ninterest on funds set aside for payment of tax. Two series\nhave been issued. Series A, with an interest rate of about\n1.92 percent, is presumably designed for taxpayers in the\nmedium and low income classes. The amount of Series A\nnotes that could be turned in during any one year for pay-\nment of income tax was limited to $1,200 until September\n1942, when the limit was raised to $5,000. Series B, which\nhave not been sold since September 12, 1942, and Series c,\nsale of which began September 14, 1942, were designed\nprimarily for corporations and persons with relatively\nlarge incomes. The rate of interest on Series B 18 about\n0.48 percent; interest on Series C accrues monthly on a\ngraduated scale and equals about 1.07 percent if the note\n18 held to maturity. Series A notes are sold in denomina-\ntions of $25, $50, $100, $500, $1,000, and $5,000. These\nnotes were widely publicized by the Treasury and by banks.\nSales of Series A notes from August 1, 1941, through\nSeptember 30, 1942, totalled $116 million, of\nwhich $92.2 million were purchased by individuals,\n136\n- 9 -\npartnerships, and fiduciaries. These notes have probably\nnot been well adapted to the needs of the small taxpayer.\nOnly 2.6 percent of the total sold have been of the $25\ndenomination. The majority of taxpayers, if laying\naside money for taxes regularly, would have to seve\nfrom four to ten or more weeks before accumulating enough\nto purchase one $25 note. Moreover, the rate of interest,\nwhich 18 much below what persons in the lower income\nclasses are accustomed to pay on their own borrowing, has\nprobably not been a significant inducement.\nH.M.Sr.\nB. Collection at source.\n1. Withholding tax proposed in 1941.\nIn November 1941, the Treasury in executive\nsession of the Committee on Ways and Means proposed that\nan additional \"withholding\" income tax of 15 percent\nabove exemptions be imposed beginning January 1, 1942.\n\"withholding\"\nFor most taxpayers all or substantially all they tax\nliability would have been collected at source. At that\ntime it was estimated that the tax would have yielded\n$2.8 billion.\n2. The March 3, 1942, income tax recommendations.\nOn March 3, 1942, the Treasury proposed that\nthe Secretary be allowed to institute collection at\nsource at a rate not to exceed 10 percent when in his\nRegraded Unclassified\n137\n- 10 -\njudgment such action was necessary as a measure for\nchecking inflation. For most taxpayers the result would\nhave been to collect at source about half of their tax\npayable on 1942 income. One of the objections to this\nproposal was that in the early stages it would force\ntaxpayers to pay more than one full year's tax in a\ngiven year.\n3. Provision of the House Bill.\nAs it passed the House, the Revenue Bill of\n1942 provided that, in 1943, 5 percent of the regular\nincome tax be collected at source and that in 1944 and\nthereafter 10 percent be 80 collected. The doubling up\nof payment was spread over two years under this plan.\nWhen in full operation in 1945, this plan would have\ncollected at source more than half of the tax due under\nthe proposed rates from about 90 percent of all taxpayers.\n4. September 1942 Plan.\nOn September 9, 1942, the Treasury presented\na plan to the Senate Finance Committee, under which the\nliability on 1942 income would have been 10 percentage\npoints below the House Bill or for most taxpayers approx-\nimately the same as the amounts paid in 1942 on 1941 income.\nBeginning in 1943, however, rates were to be 5 percentage\npoints higher than provided in the House Bill and collection\nRegraded Unclassified\n138\n- 11 -\nat source was to be at the rate of 15 percent beginning\nJanuary 1, 1943. This plan would have involved no\ndoubling up. Under it more than three-quarters of all\ntaxpayers would have had two-thirds or more of all\ntax liability collected at source.\nC. Delinquent installment plan.\nRecently Assistant Secretary Sullivan at a press\nconference suggested that individuals who are unable to\nmeet their income tax installments when due request their\nCollector of Internal Revenue for the privilege of making\npayments on a weekly, semi-monthly, or monthly basis.\nTaxpayers would be required to pay 6 percent interest on\namounts overdue, but would not need to borrow from loan\ncompanies, presumably at higher rates of interest. This\nplan would help solve one of the major problems, namely,\nthat of timing the payments with receipt of income. How-\never, it would not meet the problem that would arise when\nincomes began to decline. Moreover, unless made an\noptional tax payment method by law, it would tend to\nremove the fear of punishment for delinquency in payment\nof Federal tax, a fear which has been one of the most\nimportant reasons for the excellent collection record in\nthe past.\nRegraded Unclassified\n139\n- 12 -\nD. Indirect aid.\nSome indirect aids to tax payment have been given.\nThe simplified return eases the problem of compliance,\nand the elimination of the oath makes it easier and\ncheaper for the taxpayer to file his return. Although\nthese changes do not increase the financial ability of\nthe taxpayer to pay, they tend to reduce his inertia\nand resistance to preparing and filing his return\npromptly.\nDivision of Tax Research, Treasury Department\nNovember 30, 1942.\n140\nINDIVIDUAL INCOME TAX\nEffective Rates for Married Person without Dependents\n1918 and Selected Taxable Years\nPER\nPER\nCENT\nCENT\n90\n90\nI Net Liability\nPost-War\nGross Liability-\nCredit\n80\n80\n1940\n70\n70\n1936-39\n1941\n60\n60\n1942\n1984-35\n50\n50\n40\n40\n30\n30\n1930-3/\n20\n20\n19/8\n1929\n10\n10\n0\n.6\nI\n2\n4.\n6\n10\n20\n40\n60\n0\n100\n200\n400\n600\n1000\n2000\n4000\nNET INCOME IN THOUSANDS OF DOLLARS\nRegraded Unclas\nINDIVIDUAL INCOME TAX\n141\nUNITED STATES, UNITED KINGDOM AND CANADA\nEffective Rates for Married Person without Dependents\nPER\nPER\nCENT\nCENT\nPost-Mar credit my be taken our-\nrently, in\n90\n(1) United States:to the (stant of\n90\nlife Ensurance presium pay unts,\nnot repayments of debt and at per-\nchasse of war bonds;\n80\n(2) Canada:to the extent of life\nInsurance presium payments, repay-\n80\nmate of sortgage debt, and -\nston contributions;\n(2)Ucited Elaptos #\nNone.\nUnited Kingdom\n70\n70\n60\n60\n50\n50\nCanada\n40\n40\nUnited States\nIncluding N.Y. State\n30\n30\n20\n20\nGross Liability,\nI Net Liability\nPost-War\nCredit\n10\n10\n0\n0\n.6\nI\n2\n4\n6\n10\n20\n40\n60\n100\n200\n400\n600\n1000\n2000\n4000\nNET INCOME IN THOUSANDS OF DOLLARS\n*Including Victory Tax\n---\n? of I f I\nI\nRegraded Uncla\nTREASURY DEPARTMENT\n142\nINTER OFFICE COMMUNICATION\nDATE\nTO Secretary Morgenthau\nDecember 2, 1942\nFROM Randolph Paul\nYou may be interested to know that 8. dinner has\nbeen arranged, Monday, December 7th, for the purpose\nof discussing the relationship of taxes and charities.\nThose present on behalf of the charities will be:\nArthur Ballantine\nRoy Larson\nPublisher of Life and Time\nJohn Coleman\nCatholic charities\nMonsignor Keegan\nCatholic charities\nNorman Goetz\nFederation for the Support\nof Jewish Philanthropic\nSocieties of New York City.\nGeorge Medalie\n11\nMichael Appel\n11\nJoseph Willen\n11\nMr. Sullivan and I will attend for the Treasury, and\npossibly one or two others. Mr. Ben Cohen will also\nattend.\nbef\nP.S. I am attaching a letter from the President of the\nFederation which indicates points to be discussed.\nRegraded Unclassified\nFEDERATION\nORGE 1. MEDALIS\nFOR THE SUPPORT OF JEWISH PHILANTHROPIC SOCIETIES\nProblem\nOF NEW YORK CITY\nPERCY 5. STRAUS\nCharres of the Buard\nFEDERATION\nHENRY ITTLESON\nMRE BENEY C. BORG\nAssociate Chairmen of the Borrd\nMONBOE COLDWATER\nH\nLOUIS L GRUMBACH\nTransurer\nMRS. AUTHOR LEHMAN\nPAUL HUX WARSURG\nTHERE\nJOHN ROSENTHAL\nAsservate Treasurer\nVia Problems\nJOHN A. SHERMAN\nAssisted Transurer\nMAURICH a. HEXTER\n71 WEST 47 STREET\nRALPH E SAMUEL\nServetary\npart WILLEN\nTELEPHONE BRYANT 9-7110\nJACOB M. PRANKEL\nVisa-Providents\nAssistent Secretary\nAt 70 Pine Street\nDecember 1, 1942\nHon. Randolph E. Paul\nGeneral Counsel to the\nSecretary of the Treasury\nTreasury Department\nWashington, D. C.\nMy dear Mr. Paul:\nMy colleagues of the Catholic Charities, the Greater\nNew York Fund, the United Hospital Fund, Community Service Organ-\nizations who will join with me in our visit with you and your as-\nsociates on Monday, December 7th, at the Mayflower Hotel in Wash-\nington, fully realize the grave and complex problems that are\nimmediately before you. We would not take this evening away from\nyou did we not believe that the problems which concern us are\nmatters of vital importance to the community.\nWe are faced, as all responsible American citizens must\nbe, with the full realization that the war effort must fall heavily\n100% every section and element of our community, and know that those\n950 have the responsibility for developing these programs face a\ntask that leaves them little choice but to ask the utmost sacrifice\nfrom every group in the community.\nWe are fully aware that the Byrnes Agency created by the\nPresident to stabilize our economy also faces extreme social and\nsconomic problems and you may be certain that we would not come to\ndiscuss with you any aspects of their decisions in this matter.\nThese are larger matters of national policy and not questions in\nWhich we, representing philanthropies, would presume in that ca-\npasity to make recommendations.\nWe come to you because one aspect of your recent ruling\nsty\nhave implications of deep concern to the religious, philan-\nthropie and educational life of America. And, in turn, of course,\nRegraded Unclassified\nHon. Randolph E. Paul\n-2-\nDecember 1, 1942\nindirectly these regulations and the implications which or\nthe whole morale involved and in strength of our national life are directly\nwe ask you again to consider.\nmen and women our community and it 1s because of this that we\nThey in have however, deeply disturbed many of the finest\nand ings through Executive, through rulings of the Treasury Department,\nGovernments of the have always had, through acts of Congress, through rul-\ncome to you. By and large, the United States Federal and State\ngenerous in the regulations and interpretations that have been\nexecutive branches of the Government, always been most\ncommunity. bodied in our Law to encourage and safeguard these functions of em- our\ndeavors as a characteristic and essential part of our traditional\nagain and again, encouraged in written and in spoken word these time, en-\nThe President and his predecessor have from time to\nAmerican way of life.\nof measures in our economic, political and social life in the interests\nThere is no doubt that we shall all be faced with emergency\nof philanthropies, the educational institutions and the religious life\na final victory for which we all strive. To this extent, the\nselves ready to dedicate their full efforts.\nAmerica are, of course, deeply concerned and have proven them-\nWe are disturbed by some possible implications of the\ncent rulings that not only involve a temporary set-back for philan- re-\nthropy but may indeed jeopardize their very existence and make their\nand continuance almost impossible. These voluntary welfare, religious\neducational expressions of our life have certainly benefited a\nand tion in the income tax laws. As the tax burdens have increased, exemp- men\ngreat deal by the encouragement given to them through the 15%\nthe law of the land an incentive to continue and even increase their\nwomen have, of course, found in the encouragement given them by\ngifts to these philanthropies.\nthis ruling, but there are implications in the regulations as an-\nWe realize fully that there is no change contemplated in\nnounced that are disturbing.\nMay we also at this time take the opportunity to express\nmore fully many of the problems of private philanthropy in whose\nbehalf we write and in whose behalf we shall meet you next week.\nthe nature of our work. Since so much of the problem of material\nIn some quarters there is apparent a misconception as to\nrelief to the unemployed and needy has been taken care of by the\nGovernment, there has arisen in some peoples' minds the misconcep-\ntion anthrophere Quite the contrary is true. Voluntary supported priv-\nis a diminishing need for the services of private\nRegraded Unclassified\nХод. Randolph E. Paul\n-3-\nDecember 1, 1942\nall hohpitals, clinics, health agencies have never been in greater\nIrsand. Our own city alone has over 90 voluntary hospitals and\nhundreds of clinics and health centers vital and necessary to the\nhealth protection and morale building of men, women and children\nth the community.\nThe increased cost of living, the shortage of labor, the\narmed services' call for nurses, the shortage of doctors -- all this\nhas led to an acute problem. These institutions face mounting defi-\ncits not only from their own operations but for the services they\nare called upon to render to the Civilian Defense Office and to the\nArmy Emergency Medical Service, and the need for generous giving on\nthe part of the community is more vital than ever.\nWith millions of men in the service and millions of women\nin the industrial war effort, the need for nurseries, child-care,\nhealth and welfare agencies, recreation and character-building cen-\nters has mounted drastically and all of us live in the dread fear of\n# mounting crime wave among adolescents.\nIn our own city there are hundreds of agencies that deal\nwith one phase or another of this work and play an important role in\nthe prevention of juvenile delinquency and in dealing with it when\nIt does occur. The whole program of religious education, the YMCAs,\nthe YMHAS, YWCAs, YWHAs, the Knights of Columbus, center groups,\netc., each deal with the great problems of the youth of our country -\nproblems never more serious than now, when adult life is so deeply\nengaged in the war effort, when we must be eternally watchful of the\npossibilities of much confusion, the destruction and falling away\nfrom the fundamental moorings of home and church and the essentials\nof the American way of life.\nAll these problems and a hundred more are the tasks of our\nvast fabric of private social work. Temporary legislation will have\npermanent effects on them. These are functions of society that will\nbe easy to close and exceedingly difficult to reopen.\nWe believe, therefore, that we have every right to ask you\nso consider the memorandum we have attached to this letter indicating\nin erpretations and rulings that might enable people affected by the\nByrnes' ruling dealing with the $25,000 to be willing to continue\nwith their philanthropies without in any way adding to their own\npersonal incomes.\nThese men not only give generously in many instances, but\nSheir gifts represent the backbone of public solicitation. Curtail-\nsent on their part would be serious for the direct loss and doubly\nserious for the effect on the community, since curtailment of gifts\nby these leaders must inevitably affect all giving.\nRegraded Unclassified\nHon. Randolph E. Paul\n-4-\nDecember 1, 1942\nWe are told by many who have studied this situation that\nthe Government would lose very little through enabling these men\nto be a conduit, as it were, if they might continue to give to\ntheir philanthropies. We are also deeply concerned by the concept\nof the \"customary\" gift. In a large measure this would mean the\nfreezing of giving if this is interpreted to mean that there can\nbe no increased giving to philanthropy. This, as you can readily\nunderstand, would have disastrous effects since these social agen-\ncies would be precluded from any possibility of making necessary\nreplacements in their giving structure as former supporters pass\naway.\nWe look forward to our meeting with you and your asso-\nciates next Monday, for we are confident that all of us are seek-\ning one object - while doing everything to insure victory, at the\nsame time to safeguard, sustain and continue these social agencies\nwhich mean so much to the religious, educational and social life\nof the community in peacetime and play no less a role in this time\nof war.\nSincerel\nRegraded Unclassified\n1.\nCharitable contributions should be permitted as a deduction\nin computing income subject to the Victory Tax, provided,\nhowever, that the amount of said deductible contributions\nshall not exceed 15% of the Victory Tax Net Income. This re-\nquires legislation.\n2.\nCustomary contributions of an individual shall be defined only\nas the aggregate amount of his contribution taken into consid-\neration and not the particular charities to which such con-\ntributions were given. In other words, if an individual con-\ntributed previously only to the Red Cross, United Hospital\nFund, he may now contribute to other charities also or any\nsubstitutions thereof.\n3.\nThe amount of customary contributions shall be deemed to be\n15% of the salary and other income of the individual for 1942\nregardless of whether or not the individual had previously given\n15% of such amount to charity.\n4. The amount which an employee shall be entitled to receive in\nexcess of the fixed salary of $67,200 shall be that proportion\nof the amount by which his salary prior to the effective date\nof the $25,000 salary limitation exceeds $67,200, which the\ncontributions to charitable organizations made by him during\nthe taxable year bears to $67,200, plus his income from sources\nother than salary.\nFor example, if an employee is receiving a salary of $150,000\nprior to the effective date of the $25,000 salary limitation\nand in the year 1943 he receives $50,000 of taxable income\napart from salary, plus his maximum salary receivable of\n$67,200, and makes contributions to charitable organizations\nof $11,720, his employer will be permitted to match his con-\ntribution by the sum of $8,280. That is, the employer is per-\nmitted to match his contribution to the extent of 11,720/117,200\nX ($150,000 minus $67,200) = $8,280.\nThe amount paid by the employer to the individual in excess of\n$67,200 for the purpose of enabling him to make his customary\ncharitable contributions shall not be treated as taxable income\nof the individual, but shall be regarded as a conduit between\nthe employer and the charity with the result that said amount\ndoes not enter into the computation of his taxable income.\nHowever, the employer making the payment shall be permitted to\ndeduct such payment as compensation paid.\nRegraded Unclassified\n148\nTHE\nFEDERAL RESERVE OPERATIONS IN GOVERNMENT SECURITIES\nColumn A. shows Federal Reserve operations\nMarket purchases\n,\nColumn B shows price changes is 32018 for\nin millions of dollars as follows:\nMarket sales\nall securities except certificates.\nDirect purchases from Treasury\n1\nFor certificates. Column 9 shows yield\nMaturities\n:\nchanges in decimale.\nSTRICTLY CONFIDENTIAL\nLast Week\nThis Vegic\nTuesday\nWednesday\nThursday\nFriday\nSaturday :\nNOT 21\n24\n25\n26\nFull Vonk\nIndex\nDescription\nMonday #\nTuesday\nVednesday\nThursday\nFriday\nSaturday\n27\nFull Week\n28\nNov. 30\nDec. 1\n2\n3\nla\n5\na\nB\nA\nB\nA\n3\nA\nI\nA\nB\nA\nB\nA\n3\nA\n3\nA\n3\nA\n!\nA\na\nA\nIf\nA\nB\n+14,E\n-47.7\n+49.6\nHoliday\n1. Suppary\n+87.2\n+98.6\n-50.0\n---3\n*321.9\nMarket purchases\n+64.8\n---\n+54.1\n-94.9\n-2.0\n-11.4\n-67.7\nMarket anles\n-0.6\n-2.4\n-,9\n+4139.0\n+4139.0\n-aló.2\nDirect purchases from Treasury\n+1190.0\n+493.0\n-4324.0\n-m15.2\n+47.7\n*29.1\nMaturities\n-3.5\n-41.2\n+85.2\n4843.0\n+226.2\n+377.0\nTotal net increase or decrease (-)\n*174.2\n---\n+144.7\n-233.9\nWednesday report of total portfolio\nII. Taxable Securities\nBills all Issues combined\n-\n*17.6\n+84.5\n*114.9\nMarket purchases\n+8.2\n+93.1\n-^0,0\n-4.3\n-2.0\n-11.4\n-67.7\nMarket sales\n-20.6\n-2.4\n-a15.2\n-.9\n-m16.2\nMaturities\n-3.5\n---\n-0,3\n-20.5\n+15.5\n+73.1\n-31.0\nTotal net increase or decrease(-)\n-72.4\n-2.4\n+48.7\nCertificates\n-5,4\n+10.0\n+.4\n*15.9\n5/86\n2-1\n43\n+2.7 +.02%\n+2.8\n-.015\n-.015\n.65\nC-\n5-1\n43\n+1.2 - 015\n-115\n-.015\n+20.0\n+3.5\n+23.5-.025\n7/8\n3\n5-1\n43\n+3.9\n+.5\n+4.6\n-,015\n+5.4\n+5.4-015\n7/8\nD. 11-1\n43\n+6.0\n+,7\n7/8\nI.\n12-1\n43**\n+4139.0\n+d139.0\nSpecial one-day certificates 2/ *d190.0\n+493.0\n-1324.0\nTreasury notes\n, 2\n3/46\nD. 3-15\n\"\n-2\n-2\n\" 9\n3/4\nD - 9-15\n-\n-1.3\n+3.0\n+6.6\nN 11\n1-1/4\nC 3-15\n45\n$ 12\n3/-\n3 12-15\n45\n+L.3\n-1\n+1.3\n=1\n# 13\n1\nA 3-15 46\n...\n+3.1\n+3.3\nN 14\n1-1/2\n1 12-15\n46\n+2.3\n+1.5\nTreasury bonde\n4,2\n+2.1\n+,5\n+3.3\n+2.1\n+6.2\nB 12\na\n3-15 48-50\n+2.5\n+1,1\nB 14\n1-3/-\n.\n6-15\n4\"\n-.8\n+1,4\n+2.0\n+.5\n+1.0\n*7.5\n3 17\n2\n- 6-15 49-51\n+2.9\n+,9\n+1.0\nthe\n+1.9\n-5,4\n*.3\n+9.4\n$ 18\n2\n- 9-15 49-51\n+3.5\n+1.9\n+2.2\n+4,7)\n+3.9\n+2.2\n+3.0\n+1.6\n+14.7\n19\n2\n- 12-15 49-51\n*2.6\n+3.3\n+,4\n+1,2\n+2.3\n+6.0\n+6.0\n+3.5\n+23.0\n32\n2\n- 3-15 50-52\n+10.5\n+5.9\n3 27\n2\n- 12-15 51-55\n-1\n-1\n-2\n-1\n+1.0\n-1\n-1\n+1.0\n-6\n028\n2-1/2\n- 3-15 52-54\n+1.5\n+6.0\n1.8\n+1.0\n+2.1\n-1\n+4.7\n+8.6\n-1\n329\n2-1/4\n- 6-15 52-55\n+.5\n+3.2\n+1.6\n-1\n-3\n-1\n-2\n-2\n-9\n333\n2-1/2\n- 3-15 56-58\n*1\n-1\n-4\n-5\n37\n2-1/2\n- 6-15 62-67\n38\n2-1/2\n-\n12-15\n63-68**\n-1\n-1\n-1\n-\n39\n2-1/2\n-\n9-15\n67-72\n+1\nQuaranteed securities\n-1\n-1\nG 7\nRFC 1-1/8%\nT\n7-15\n43\nG 5\nRFC 1\nW 4-15 44\nG 2\nccc 1-1/8 G - 2-15 45\n-1\nAll taxable securities\n+25.2\n+29.0\n+34.5\n+55.0\n+96.6\n+243.3\nMarket purchases\n+47.1\n*27.8\n+65.3\n-50.0\n-4.3\n-2.0\n-11.4\n-67.7\nMarket sales\n-80.6\n-2.4\n-.9\n+4139.0\n+4139.0\nDirect purchases from Treasury\n+d190.0\n+493.0\n-4324.0\n-m16.2\n-m16.2\nMaturities\n-3.5\n-21,8\n*29.0\n+14.0\n-53.0\n+224.2\n+298.4\nTotal net increase or decrease(-)\n+156.5\n+118.4\n-263.1\nOffice sf the Secretary of the Treasury. Division of Research and Statistics.\n= Original figures revised.\nLeas that $50,000.\nPurchases and sales recorded as of day of transaction and not day of delivery. Transactions after 4 o'clock are included in the next day.\nNo: yet tradet.\nThe 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\nentered as of the day following that to which they apply. since data are not available until the following morning.\nRegraded Unclassified\n148\n148\nFEDERAL RESERVE OPERATIONS IN GOVERNMENT SECURITIES\nColumn A shows Federal Reserve operations\nMarket purchases\nColumn 3 shows price changes is Hais for\nis millions of dollars as follows:\nMarket sales y\nall securities annept certificates.\nDirect purchases from Treasury\n+d\nFor certificates. Column 3 shows yiald\nchanges is decimals.\nSTRICTLY CONFIDENTIAL\nMaturities,\n.\nlast Vasit\nThis Yest:\nMonday\nTuesday\nVelnesday\nThursday\nPriday\nSaturday .\n24\n25\n26\nFull Vonk\nIndex\nDescription\nMonday r\nTuesday\nWednesday\nThursday\nFriday\nBetarday\nBer. 23\n27\nFull Vesit\n28\nNov. 30\nDec. 1\n2\n3\nla\nun\nA\n3\nA\nB\nA\n3\nA.\n3\nà\na\nA\n3\nA\n»\nA\n3\nA\n3\nA\nB\nA\na\nA\n3\n&\nD\nA\n-\n+47.7\n+49.6\n1. Summary\n+38.8\nHoliday\n*67.2\n+98.6\n-4.3\n*321.9\nMarket purchases\n+64.6\n+54.1\n+94.9\n-50.0\n-2.0\n-11.4\n-67.7\nMarket sales\n-00.5\n-2.4\n-.9\n+4139.0\n-a16.2\n+6139.0\nDirect purchases from Treasury\n+4190.0\n+493.0\n-4324.0\n-=16.2\nMaturities\n-3.5\n-11.2\n+47.7\n*29.1\n+65.2\n4843.0\n+226.2\n*377.0\nTotal not Increase or decrease (-)\n+174.2\n+144.7\n-233.5\nVelnesday report of total partfolio\n-\nII. Taxable Securities\nBills - all issues combined\n+4.5\n+4.3\n+17.6\n+84.5\n+114.9\n-4,3\nMarket purchases\n+6.2\n+53.1\n-50.0\n-2.0\n-11.4\n-67.7\nMarket sales\n-80.6\n-2.4\n-.9\n-m16.2\n-m16.2\nMaturities\n-3-5\n-41.5\n+4.3\n-20.5\n+15.6\n*73.1\n+31.0\nTotal net increase or decrease(-)\n-72.4\n---\n-2.4\n+48.7\nCertificates\n+5.5\n+10.0\n+.4\n+15.9\n5/8% 2-1 43\n+2.7\n*.02%\n+2.8\n4,2\n-.015\n-.015\n-.015\n.65\n0 - 5-1 43\n+1.2\n-.01%\n-.015\n-.01%\n+20.0\n+3.5\n+23.5\n.02%\n7/8 1. 6-1 43\n+3.9\n+.5\n+5.6\n-.01%\n+5.4\n+5.\n-015\n7/8 D - 11-1 43\n+6.0\n+.7\n7/8 1. 12-1 43**\n+4139.0\n+4139.0\nSpecial one-day certificates 2/\n*4190.0\n+493.0\n-4324.0\nTreasury notes\n# 2\n3/4%\nD - 3-15 43\n&\n4\n\" 9\n3/4\nD - 9-15 44\n+2.3\n+1.3\n+3.0\n+6,6\nI'll\n1-1/4\nC 3-15 45\n$ 12\n3/4\n3 12-15 45\n+1.3\n-1\n+1.3\n-1\n#13\n1\nA - 3-15 46\n+.1\n+3,1\n1.+\n+3.3\nN14\n1-1/2 3 12-15 46\n+2.3\n+1.5\nTreasury bonds\n+,2\n+2.1\n+.5\n+3.3\n+2.1\n+6.2\n12\nX\n-\n3-15\n48-50\n+2.5\n+1.1\n114\n1-3/4\n.\n6-15\n4\n+.6\n+3.4\n+2.0\n+.5\n+1.0\n+7.5\nB 17\n2\n- 6-15 09-51\n+2.9\n+.9\n+1.0\n+1.8\n+1.9\n+5.4\n+.)\n+9,4\n3 18\n2\n. 9-15 49-51\n+3.5\n+1.9\n+2.2\n44.0\n+3.9\n+2.2\n+3.0\n+1.6\n+14.7\n19\n2\n- 12-15 49-51\n+2.6\n+3.3\ne,k\n+3.2\n+2.3\n+6.0\n+6.0\n+3.5\n+23.0\n12\n2\n- 3-15 50-52\n+10.5\n+5.9\n927\n2\n- 12-15 51-55\n-1\n-1\n7\n-1\n+1.0\n2\n-1\n+1.0\n-6\n18\n2-1/2\n- 3-15 52-54\n+1.5\n+6.0\n:\n+1.0\n+2,1\n-1\n+4.7\n+8.6\n-1\n329\n2-1/4\n- 6-15 52-55\n+.5\n+3.2\n+1,6\n-1\n-3\n-1\nY\n&\n-9\n333\n2-1/2\n- 3-15 56-58\n+1\n-1\nL\ns\n37\n2-1/2\n- 6-15 62-67\n1 36\n2-1/2\n- 12-15 63-68**\n-1\n-1\n-1\n-1\n1\n39\n2-1/2\n. 9-15 67-72\n+1\nGuaranteed securities\n-1\n-1\n07\nRFC 1-1/85 T - 7-15 43\n98\nRFC 1\nV - 4-15 %\n0 2\nCOC\n1-1/8 2-15 -\n-1\nAll tamble securities\n*26.2\n+29.0\n+34.5\n$55.0\n+96.6\n+243.3\nMarket purchases\n*67.1\n+27.8\n$\n-50.0\n-4.3\n-2.0\n-11.4\n-67.7\nMarket sales\n-80.6\n-2.4\n-.9\n+4139.0\n+4139.0\nDirect purchases from Treasury\n+d190.0\n+493.0\n-4324.0\n-m16.2\n-m16.2\nMaturities\n-3.5\n-21.8\n+29.0\n+14.0\n+53.0\n+224.2\n+298.4\nTotal set increase or decrease(-)\n+156.5\n+118,4\n-263,1\nOffice of the Secretary of the Treasury, Division of Research and Statistics.\n, Original figures revised.\n. Less than $50,000.\nPurchases and sales recorded as of day of transaction and not day of delivery. Transactions after . o'clock are included is the next day.\n.. Not yet traded.\nThe Issue and redemption of special one-day certificates are treated net: 1.0., only the change free the day before is considered as an Louse or redemption. Transactions are\nentered as of the day following that to which they apply. since data are not available until the following morning.\nRegraded Unclassified\n149\n149\nPage 2\nFEDERAL RESERVE OPERATIONS IN GOVERNMENT SECURITIES\nColumn & shows Federal Reserve operations\nis millions of dollars - follows:\nMarket purchases V\nColumn 3 show price changes La 32mls.\nMarket sales 2/\nDirect purchases from Treasury\n=\nMaturities\n,\nSTRICTLY CONFIDENTIAL\nlast Vesit\nMonday\nTuesday\nVelnesday\nThursday\nThis Wesk\nTriday\nSeturday\nNov. 23\nFall Week\nIndex\n24\nDescription\na\n26\nMonday\n27\nTenday\n26\nValuestay\nThursday\nPriday\nBaturday\nNev. 30\nDec. 1\nFall Vesk\nA\n3\nA\n3\nA\n2\n.\n&\na\nA\n3\nla\n3\n,\nA\n3\nA.\n3\nA\n3\nA\n3\nA\n3\nIII. Tax-sxempt securities\n&\n3\nA\n3\nA\n$\n&\na\n-1\nTreasury notes\nHoliday\n-1\n11\n1-3/46 12-15 kg\n-1\n3\n-1\n1-1/8 A - 6-15 ky\n-1\n-1\nI\n&\n1\n-1\n0 - 9-15 43\n1\n-1\n-1\n-1\n+1\n. 2 6\nIf\n5\n1-1/8 3 12-15 43\n1\n1 - 3-15 -\n. 7\n3/4\nA - 6-15 -\n. 5\n1\nc - 9-15 M\n+1\n+1\nI 10\n3/4\nA - 3-15 45\n+1\nTreasury bonds\n+1.1\n+2.3\n+3.9\n-2\n+7.3\n4\nB 1\n3-3/86\n-\n6-15\n43-47\n+1.1\n⑈\n&\n+2.2\n7\n+12.1\n+1.7\n+12.4\n-2\nB 2\n3-1/4\n- 10-15 43-45\n+6.1\n+,1\n+2,6\n+3.8\n+2.3\nA\n+2.4\nY\n+.2\n+6.7\n&\n33\n3-1/4\n- 4-15 44-46\n+1.1\n=1\n-1\n+1.5\n+10.4\n-1\n-3\n:\n12-15 44-54\n+,2\n+.1\n+1.6\n+1.9\n35\n2-3/4\n- 9-15 45-47\n+.5\n+1.0\n+5.0\n+3.6\n+3.1\n-1\n+11.7\n-1\n16\n2-1/2\n- 12-15 b5\n-2\n-1\n7\n+6.2\n+1.0\n-1\n-1\n1\n17\n3-3/4\n- 3-15 46-56\n+,1\n-1\n+,1\n+.2\n+,4\n+.4\n-1\n38\n3\n- 6-15 46-48\n+1.1\n-1\n+3.4\n+,1\n+1.2\n-1\n+,1\n+5.9\n11\n\" 9\n3-1/8\n- 6-15 46-49\n-2\n=1\n=1\n+.3\n+,1\n+.8\nLa\n3 10\n4-1/4\n- 10-15 47-52\n-1\n-1\n=2\n7\n-1\n-2\n-7\n311\n2\n- 12-15 47\n-1\n=1\n-1\n7\n-5\n13\n2-3/4\n- 3-15 48-51\n-3\n&\n-1\n+,7\n+2.3\n+1.2\n-1\n&\nY\n8 15\n2-1/2\n- 9-15 48\n-1\n-3\n-1\n+1.3\n-2\n&\n-1\n7\n8 16\n2\n- 12-15 48-50\n+,2\n-1\n-1\n+,1\n-2\n+,6\n-2\n+.3\n7\n+,1\n+,4\n$1.1\n-5\n3 20\n3-1/8\n- 12-15 49-52\n+.7\n42.5\n+,5\n+3.0\n-1\n+2.3\n-1\n+1.2\n+7.0\n-2\n3 21\n2-1/2\n- 12-15 49-53\n+2.2\n-1\n+5.3\n+1,3\n-1\n+1.9\n+4,5\n+3.2\n+3.2\n2\n+12.3\n2\n3 23\n2-1/2\n- 9-15 50-52\n+6.2\n-1\n+,6\n-1\n+,6\n+.5\n+1.2\n-1\n+1.1\n+.3\n+.3\n+6,0\n-3\n3 24\n2-3/4\n. 6-15 51-54\n+,1\nM\n-1\n-1\n-5\n3.25\n3\n- 9-15 51-55\n-1\n+.7\n+.3\n7\n+.5\n-1\n+.5\n+1.7\n&\n326\n2-1/4\n- 12-15 51-53\n+2.3\n+2.2\n+,9\nof\n-2\n-1\n-9\n30\n2\n- 6-15 53-55\n-5\n7\n&\n-3\n-12\n3 31\n2-1/4\n- 6-15 54-56\n-1\n&\n-3\n+.8\n-3\n+1.2\n-2\nY\ndada\n+,2\n-2\n+2.2\n-12\n32\n2-7/8\n- 3-15 55-60\n+1,1\nL\n+,8\nA\n-6\n-1\n-15\n34\n2-3/4\n- 9-15 56-59\n+,4\n-2\n1\n&\n-3\nM\n-3\n-16\n35\n2-3/4\n- 6-15 58-63\n+.2\n-2\n-3\n-3\n-15\n36\n2-3/4\n- 12-15 60-65\n+.5\n+.6\n+,6\nQuaranteed securities\n9 1\ncco 3/4% 5-1 43\no 9\nUSEA 1-3/8\n- 2-1 Lela\n-1\n-2\n-1\n-3\n04\nTIME 3\n- 3-15 44-49\n4.2\n-1\n-1\n-2\no 3\nFFMC 3-1/4\n- 3-15 44-64\n4\n-1\n-3\n05\nHOLC 3\nA. - 5-1 44-52\n+,1\n+.2\n-1\n-1\n&\n0\n6\nBOLO 1-1/2 # - 6-1 105-47\nAll tax-axempt securities\n+10.6\n+18.7\n+15.1\n+32.2\n+2.0\n+78.6\nMarket purchases\n+17.7\n+26.3\n+29.6\nMarket sales\nDirect purchases free Transury\nMaturities\n+10.6\n+18.7\n+15.1\n+32.2\n+2.0\n+78.6\nTotal net increase or decrease(-)\n+17.7\n+26.3\n489.6\nOffice of the Secretary of the freasury. Division of Research and Statistics.\nΓ Original figures revised.\nLess than $50,000.\n1/ Purchases and sales recorded as of day of transaction and not day of delivery. Transactions after - e'clock are included in the next day.\nRegraded Unclassified\n150\nDecember 2, 1942.\nDear Henry:\nI have your letter of November 30,\n1942, regarding the phrase \"borrowing nine\nbillion dollars from accumulated savings and\nidle funds\" which has worried the savings\nbanks of the country.\nI was sorry that we could not change\nthis when it was called to our attention, but\nit was too late to make it apply uniformly\nthroughout the country and we thought it would\ndo more harm to change it in one section of\nthe country than to let it stand. We are, how-\never, willing to change the phrase along the\nline suggested by you or some other phrase\nwhich will eliminate the words \"accumulated\nsavings\".\nI appreciate your writing me about\nthis matter. I also appreciate the work that\nsavings banks of the State of New York have\ndone on the F and G Bonds and the generous\nsubscription of the Bowery Savings Bank to the\nVictory 2-1/2's.\nWith best wishes, I am\nSincerely yours,\n(Signed) Henry\nMr. Henry Bruere\nPresident\nThe Bowery Savings Bank\nPhoto file in Diary\n110 East 42nd Street\nOrig. file to Thompson\nNew York, New York.\nDWB:ew\nP.S. could not come down for\ntoday.\nRegraded Unclassified\nTHE BOWERY SAVINGS BANK\n110 KANT 12% STREET\nNEW YOUR\nHENRY BRUÈRE\nPRESIDENT\nNovember 30, 1942\nHonorable Henry Morgenthau\nSecretary of the Treasury\nWashington, D. C.\nDear Henry:\nI hesitate to thrust our problems on your attention,\nbut I venture to do so in this case because I believe you\nwould care to know that there is some anxiety in our group\nlest a phrase in the advertisements in support of the\nVictory Loan drive may cause heavy withdrawals from the\nsavings banks. We are not certain that this would be the\ncase but if it should happen it would mean, of course, that\nwe would have to sell government bonds to pay off our de-\npositors.\nThe phrase we are worrying about is \"borrowing nine bill-\nion dollars from accumulated savings and idle funds\". Could\nyou not have the advertisements read: \"borrowing nine billion\ndollars from uninvested and idle funds\"?\nThis would omit reference to savings bank deposito, life\ninsurance funds, thrift accounts, etc, so largely investod in\nour best security.\nIncidentally, I em proud to tell you that the savings banks\nof the State of New York have purchased $8,700,000 \"P\" and \"G\"\nbonds (nearly all \"G\"s) during the year, and in response to a\nrecent appeal I made as as proliminary to the proposed Special\n\"G\" Bond Campaign they increased their holdings of these bonds\nby $2,000,000.\nFor a final cheering note- The Powery Savings Bank today\nhas subscribed to $40,000,000 of the \"tap\" issue. I assume\nthe savings banks generally will subscribe in like menner\nproportionately unless they foar heavy withdrawals.\nWith all good wishes,\nI remain\nFaithfully yours, East\nHB-encl.\nPresident\nRegraded Unclassified\nSchedule of Appearances of\nTHE BOWERY SAVINGS BANK\nNE. SPAPER ADVERTISEMENT\nTake A Look at Your Taxes\nWednesday\nNovember 25\nTimes\nFriday\nII\n27\nWorld-Telegram\nMonday\nIl\n30\nMirror\n⑉\nIf\n30\nSun\nTuesday\nDecember 1\nNews\nIf\nIf\n1\nJournal-Americen\nWednesday\nIl\nHerald Tribune\n\"\n2\nPost\nDear the Secretary:\nthis is the first of a series of\nadvertexements scheduled to appear\nin all my. papers between 45W\nand March 1445\nrespection\n-\nBob sparks\n11/30\nRegraded Unclassified\nTAKE a LOOK at YOUR TAXES\nand SAVE\nWhat Taxes Will Cost You In 1943\nFEDERAL INCOME AND VICTORY TAXES\nNet Income\nbefore\nSingle Person\nMan and Wife\nMan and Wife\nPersonal Exemption\nNo Dependents\nNo Dependents\nTwo Dependents\n$1200\n$ 153\n$ 21\n$ 20\n1800\n288\n144\n39\n2500\n446\n297\n159\n3000\n574\n405\n267\n4000\n829\n647\n485\n5000\n1105\n894\n730\nThis chart combines Federal income and Victory taxes. Starting January 1, Victory raxes will be de-\nducted from your salary-5 cents on each dollarin excess of $12 a week. Later on, part of the Victory\ntax will be returned to you. The chart includ ly that part of the tax which will Not be returned.\nLook above and you get a pretty fair idea of the combined Federal\nincome and Victory taxes whit must be paid by you in 1943.\nBecause of the Victory tax, your pay envelope will contain less. From\nthis \"less,\" you must meet an income tax which will be far higher.\nPaying that tax will be a privilege a patriotic duty! But face facts.\nPaying it without bringing sudden hardships to yourself and family\nwill require planning in advance\nsaving in advance. No longer\ncan you wait till March to think about taxes.\nThe Bowery, with a 108-year background in family money manage-\nment, earnestly urges you to start saving for taxes. Realize what you\nare up against. Then save. Come to The Bowery and save. And save\nsteadily. Unless you do save, you may be swamped with serious finan-\ncial difficulties when tax payment time comes.\nBOWERY SAVINGS BANK\n110 East (2nd Street\n130 Bowery\nFifth Avenue at 34th Street\nSave for Taxes\nRegraded Unclassified\n154\nDecember 2, 1942.\nDear Mr. Ambassador:\nI think you will enjoy hearing\nthis record of & song that was written\nfor us by two Army boys who were de-\ntailed to the Treasury for a time in\nconnection with the War Bond campaign.\nThe authors, Sergeant Richard Uhl and\nCorporal Tom Adair, have now gone back\nto military duty.\nI feel that their song will be a\ngreat help to us in our drive to get\nthirty million Americans to set aside\nat least ten percent of their pay in\nWar Bonds every pay day.\nSincerely yours,\n(Signed) H. Morgenthan. Jr\nHis Excellency,\nThe Right Honorable\nthe Viscount Halifax,\nBritish Ambassador,\nWashington, D. C.\nP.S. I would appreciate it if you would\nforward the attached letter and record\nto Prime Minister Churchill.\nFK:eg\n(Song - \"Ev'rybody Ev'ry Payday\")\nTaken to Embassy by Chauffeur Branch\n1:15 12/4/42.\nCopies in Diary\nRegraded Unclassified\n155\nDecember 2, 1942.\nDear Mr. Prime Minister:\nI think you will enjoy hearing\nthis record of a song that was written\nfor us by two Army boys who were de-\ntailed to the Treasury for a time in\nconnection with the War Bond campaign.\nThe authors, Sergeant Richard Uhl and\nCorporal Tom Adair, have now gone back\nto military duty.\nI feel that their song will be a\ngreat help to us in our drive to get\nthirty million Americans to set aside\nat least ten percent of their pay in\nWar Bonds every pay day.\nWith best wishes,\nSincerely yours,\n(Signed) H. Morgenthau, Jr.\nThe Right Honorable\nWinston Churchill,\n(Song - \"Ev'rybody Ev'ry Payday\")\nPrime Minister,\nLondon, England.\nTaken to Embassy by Chauffeur Branch\n1:15 12/4/42\nFK:eg\nCopies in Diary\nRegraded Unclassified\n156\nDecember 2, 1942.\nDear Harold:\nI think you will enjoy hearing\nthis record of a song that was written\nfor us by two Army boys who were de-\ntailed to the Treasury for a time in\nconnection with the War Bond campaign.\nThe authors, Sergeant Richard Uhl and\nCorporal Tom Adair, have now gone back\nto military duty.\nI feel that their song will be 8.\ngreat help to us in our drive to get\nthirty million Americans to set aside\nat least ten percent of their pay in\nWar Bonds every pay day.\nSincerely yours,\n(Signed) H. Morgenthau. Jr.\nHon. Harold D. Smith,\nDirector, Bureau of Budget,\nWashington, D. C.\nFK:eg\n(Song: \"Ev'rybody Ev'ry Payday\")\nCopy in Diary\nCopies to Thompson\n(Del. by Schey 4:40 12/3/42)\nRegraded Unclassified\n157\nDecember 2, 1942.\nDear Harry:\nI think you will enjoy hearing\nthis record of a song that was written\nfor us by two Army boys who were de-\ntailed to the Treasury for a time in\nconnection with the War Bond campaign.\nThe authors, Sergeant Richard Uhl and\nCorporal Tom Adair, have now gone back\nto military duty.\nI feel that their song will be a\ngreat help to us in our drive to get\nthirty million Americans to set aside\nat least ten percent of their pay in\nWar Bonds every pay day.\nSincerely yours,\n(Signed) Henry\nHon. Harry L. Hopkins,\nThe White House.\nFK:eg\n(Song: \"Ev'rybody Ev'ry\nPayday\")\nCopy in Diary\nCopies to Thompson\n(Del. by Schey 4:40 12/3/42)\nRegraded Unclassified\n158\nDEPARTMENT OF AGRICULTURE\nOF 1 DEPARTMENTOR )\nWASHINGTON\nDecember 2, 1942\nThe Honorable\nThe Secretary of the Treasury\nDear Mr. Secretary:\nAt the present time the Secretary is out-of-town attend-\ning the Department's Regional Goals Meetings, so I wish\nto thank you for sending him the record of the song\nwritten by Sergeant Richard Uhl and Corporal Tom Adair.\nI know that he will appreciate receiving the song and\nwill feel as you do that it will be a great help in\nyour War Bond Drive.\nCon Hamiltan Sincerely yours\nAssistant to the Secretary\nRegraded Unclassified\n159\nDecember 2, 1942\nDear Henry:\nThanks so much for the record you\nsent. It will undoubtedly promote the\nsale of war bonds.\nSincerely yours,\nhaven & Sml\nThe Honorable Henry Morgenthau\nSecretary of the Treasury\nWashington, D. C.\nRegraded Unclassified\nTREASURY DEPARTMENT\n160\nINTER OFFICE COMMUNICATION\nDATE\nSecretary Morgenthau\nDecember 2, 1942\nTO\nFROM\nHarold Mager\nHere, as you requested, are two brief summaries\nof Mr. Paul's speeches in Philadelphia and New York.\nHas\nRegraded Unclassified\n161\nSummary of Randolph E. Paul's Address\nBefore American Academy of Political and\nSocial Science, on November 30th, 1942.\nFISCAL POLICY AND INFLATION\nThe battle against inflation will not be won without\nthe enactment of measures more fundamental than any yet\nadopted. To safeguard against the chaos of inflation,\nconsumers must be induced to refrain from spending some\n$40 billion, the difference between disposable incomes\nremaining after payment of all personal taxes and the\navailable supply of goods at current prices -- in short,\n$4 out of every $11 of income at their disposal.\nPrice control in itself is ineffective in closing\nthe inflationary gap, because while wage rates and farm\nprices may be held constant, the total volume of purchasing\npower that will be created will not remain constant. In\nother words, the amount of disposable income depends upon\nthe volume of business and volume of employment which will\nincrease even though wage rates and farm prices remain fixed.\nIn waging fiscal war on inflation, additional taxes\ncan and must play a prominent part. The advantages of\ntaxation over alternative measures: 1, it reduces the need\nfor costly administrative controls; 2, it restricts accu-\nmulation of public debt; 3, it strikes at the roots of\npotential post-war inflation.\nIt is unrealistic, however, to rely on taxation along\ntraditional lines to absorb the entire excess of civilian\nspending. Mr. Paul then discussed and explained a whole\nseries of fiscal tools that might be employed: compulsory\nsaving, compulsory lending, expenditure rationing, expenditure\ntaxation. (The same material was covered in the letter to\nMr. Byrnes.) Newspapers probably took their lead from this\nprovide 8. comprehensive solution to problem of inflation.\"\nsentence: In principle, then, compulsory saving could\nwar tax credits which would give an incentive to all forms\n\"compulsory lending\" Mr. Paul explained that he meant post-\nIn using the phrase \"compulsory saving\" as contrasted with\nof saving and put a penalty on spending.\nRegraded Unclassified\nSummary of Randolph E. Paul's\n162\nAddress before the Institute on\nFederal Taxation, New York University.\nDecember 1, 1942.\nTHE EFFECT OF THE WAR ON TAX ADMINISTRATION\nMr. Paul attempted to make clear that the Treasury\nand the Bureau of Internal Revenue are confronted with\nunprecedented problems. Tax administration problems are\nof two types: 1. Field problems of the 43 offices of the\nBureau -- such as the paper work and physical labor involved\nin handling and reviewing tax returns; 2. Home Office\nproblems -- such as determining the manner in which the\nprovisions of tax statutes shall be interpreted and then\napplied by the field offices.\nTaking the field problems first, he outlined the\neffects of the war upon the Bureau's operations as follows:\n(a) Increased number of returns due to reductions in\nexemptions and dependency credit, Victory tax, etc.\n(b) Delinquencies -- aggravated by failure to follow\nout Secretary's recommendation for collection-at-\nsource.\n(c) Loopholes -- the vast task of scrutinizing returns,\nespecially when every deduction will involve more\nthan the pre-war tax benefit.\n(a) Retroactive legislation -- Extension of retroactive\nrelief under the 1942 Revenue Act will involve\nadjustment of thousands of previously filed returns.\n(e) Suspension of Statute of Limitations -- Suspension\nof time limitations running against the Government\nand taxpayers, where war makes impossible the timely\nperformance of required acts, will increase admin-\nistrative burdens.\nRegraded Unclassified\n- 2 -\n163\nNext he dealt with the effect of the war on home\noffice problems of the Bureau, as follows:\n(a) Advertising -- problems in treating it.\n(b) Depreciation allowances.\n(c) New types of Contracts.\n(d) Frozen Inventories.\n(e) Preparation of Regulations.\n(f) Interpretation of Wartime Provisions.\n(1) War losses.\n(2) Excess Profits tax.\n(8) Amortization of Emergency Facilities.\n(4) Cooperation with other departments,\nespecially in renegotiation of contracts.\nOver and above these problems is a problem common\nto field offices and the home office alike: the manpower\nshortage created by military needs.\nMr. Paul concluded with a plea for the cooperation\nof taxpayers and their counsel; the need to adopt every\npossible labor-saving device; the need for mutual trust\nand confidence; concise memoranda, prompt compliance,\nand frank disclosures.\nRegraded Unclassified\n164\nTREASURY DEPARTMENT\nWashington\n(The following address by Randolph E. Paul, General Counsel of the Treasury,\nbefore the American Academy of Political and Social Science, Philadelphia,\nis scheduled for delivery at 8:15 P.M. Eastern War Time, Monday, November 30,\n1942, and 16 for release at that time.)\nFISCAL POLICY AND INFLATION\nStabilization of prices is essential to the efficient working of 8 war\neconomy. The rising cost of living, which is B. sign of instability, has been\n8 source of mejor concern for many months. Congress has had the problem under\nconsideration almost continuously since the fell of 1941, Its first direct\naction took the form of the First Price Control Act, under which the Office of\nPrice Administration established general price ceilings. The problem of\ninflation was constantly in the background while the Revenue Act of 1942 was\ntaking form. Another frontal attack on inflation was made two months age by\nCongross in its passage of the Second Price Control Act end by the President in\ncreating the Office of Economic Stabilization.\nBut the bettle against inflation will not be won without the enectment of\nmeesurcs more fundemental than eny yet adopted. It will not be won without\nheavy reliance on fiscal weapons. Price ceilings and wage controls, by\nthemselves, will check, but not halt, the upward course of prices. Price and\nwage controls will be successful only if they are buttressed by fiscel measures\ndesigned to restrict civilian spending end thereby to relieve the tremendous\npressure of consumer purchasing power on prices. Such measures are en essential\npert of a comprehensive enti-inflation program.\nThat specific messures should be rdopted is no longer a hypothetical\nquestion to be faced in the dim future. It is en urgent problem which is fully\nupon us. The vast volume of actual and potential spending being gonerated by our\ntotal war offort threatens to play hever with price ceilings and economic\nstability. One of the most pressing problems confronting the new Congress when\nit convenes a month hence will be that of drafting B. fiscal program to meet the\nneeds of wer. The problem before Congress will not be merely how to finence the\nwar, but how to do it in on equitable and anti-infletionary way. There is no\nouestion but what the war will be finenced. The all-important issue is the ways\nand means of financing.\nTonight, then, I address my remarks primarily to the fiscal ways and meens of\ncoping with inflation. But to set the stage for that discussion, I should like\nto say a few things about inflation itself. An analysis of the inflation problem\nrequires consideration of the process that produces inflation, of the ovile that\nattend it, of the evidence that inflation existe or threatens, and, finally, of\nthe steps that must be taken to prevent it.\nRegraded Unclassified\n2 1 I\n165\nI need not detail the evils of inflation to this eudience. Its inequity,\nits costliness both in conventional monetary end in actual economic terms, and\nits disorganizing effect on our economy during end after the war, are undoubtedly\napperent to all of you. The nature of the inflationary process 10 equally cloar.\nThen en excessive and growing supply of consumer purchasing power rushes to a\nmarket having available a shrinking supply of consumer goods and services,\ninflation is in the making. It may be useful, however, to cite the evidence of\nthat process in order to clarify the nature of the measures that must be adopted\nto cope with inflation.\n19\nThe Threst of Inflation\nThe megnitude of the inflationary threat for the future 1s evidenced not on\nmuch by the X percent rise in the cost of living that has elready taken place\nduring the past two years as it is by the relationship between the flow of pur-\nchesing power and the supply of evailable consumer goods. The most optimistic\ncatimates indicate that not more than $70 billion, at present prices, of con-\nsumers' goods and services will be evoilable for purchase in the calendar year\n1943. In the same period, consumers will receive incomes totalling $125 billion.\nPersonal taxes of Federal, State and local Governments, including the texes\nleviéd under the Revenue Act of 1942, will take away not more than $15 billion\nof this amount. Therefore individuals will have about $110 billion at their\ndisposal, or at present prices about $40 billion over and above the supoly of\ngoods and services available to meet civilian demands.\nThat $40 billion is the inflation potential from 1943 income. Unless much\nof it is withdrawn or immobilized, the rush of spending power to the market will\nbreak through price coilings on a bread front. Black markets will mushroom;\nevasion and dealer favoritism will become commonplace; and empty shelves and\nillegitimate profits will become the order of the day. In such 8 situation\ndistribution of the short supply of the necossities of life will be westeful\nand inequitable. Competition to buy the means of living will be reduced to a\ndisorderly, time-consuming scramble, and goods will 80 not to those who need them\nmost but to those who are least bound by limits of time, money, and scruples.\nSevere hardships will be suffered, especially by families in the low income\ngroups.\nTo safeguard against the cheos of infletion, consumers must be induced,\nwhether by additional taxation or by other messures, tn refrain from spending name\n$40 billion, or $4 cut of every $11 of income at their disposal after payment of\nexisting taxes,\nFiscal measures are indispensable in meeting the threat of inflation,\npertly becouse they perform certain functions better than other measures, but,\nmore important, because they do a job that other controls cannot do. Texes and\nother fiscal instruments which are tax-like in their degree of compulsion strike\nat the purchasing power root of inflation. The ostablishment of price ceilings\nresists the upward pressure of prices by pushing down on them from above.\nRelief of the upwerd pressure itself is D vital part of the anti-inflation\nprogram. Tage controls and fixed farm prices offer partial reIief by preventing\nthe creation of some purchasing power.\nRegraded Unclassified\n166\n- 3\nBut constant wage rates and constant farm prices are not the same thing\nas constant incomes. Farm income is a function not only of farm prices, but\nalso of the volume of farm goods marketed. Wage income 18 a function not\nonly of wage rates, but also of the total volume of employment and of the\nvolume at each wage level. As the volume of farm output responds to\nmilitary demands, farm income will grow apace regardless of price controls.\nAnd the lengthening of working hours, the up-grading of workers into higher-\nwage jobs, and the employment of more women in industry, will spawn greater\ntotal wage payments even in the face of rigid wage rate controls. Direct\ncontrol of farm prices and wage rates does not prevent the creation of an\noverflow of purchasing power. Taxation and related fiscal measures must\nstep in to impound such spending power before it flows to the market.\nThe role of voluntary saving\nVoluntary savings will do part of the job that confronts fiscal policy,\nSuch savings are now being made at an unprecedented rate. During the second\ncuarter of this year they were running at an estimated annual rate of $24\nbillion, or approximately twice the rate for the same quarter of 1941. This\nrapid acceleration of savings cannot be attributed solely to the large in-\ncrease in individual incomes. In considerable part, it ie due to maximum\nprice regulations and to the inability to buy automobiles, refrigerators,\nand certain other consumer goods. The hard facts of war which put many\ngoods out of the reach of civilians provide an almost automatic stimulus\nto savings. The campaign for reduced spending carried on in connection with\nthe sale of war bonds has been another potent inducement to greater savings.\nIncressed savings have been expressed in a growing volume of government\nbond purchases, insurance premium payments, currency and deposits, debt re-\npayments, and the like. Thether this volume can continue to grow during 1943\nin the face of heavier taxes and the higher living costs is open to cuestion.\nWithout strong governmental action it is doubtful that the rate of saving in\n1943 can be maintained, let alone, increased. Yet, if consumer spendings\nare to be brought into line with the value of supplies available at present\nprices, government action must immobilize $16 billion of consumer income in\n1943 over and above the $24 billion - rate of saving. Our fincal\npolicy must be framed with that end in view.\nGross savings of $40 billion out of next year's incomes will, of course,\nnot suffice. Those consumer savings must be net, that is, they must total\n$40 billion after taking account of the fact that some people will eat into\ntheir savings to maintain current consumption. If, for example. some persons\ndraw down their savings to the extent of $10 billion, others will have to\nsave $50 billion to give us net individual savings for the economy as a.\nwhole, of $40 billion.\nAlthough B. high rate of saving is an effective deterrent to inflation,\nsavings are not an unmixed blessing. The fund of capital assets which represent\naccumulated savings is itself a dangerous pool of potential consumer purchasing\npower. The $13 billion of United States Savings Bonds could be presented for\nredemption on short notice. Billions of dollars of other securities in the\nRegraded Unclassified\n167\nhands of individuals might be sold to bonks, to business firms, or to other\nindividuals, Bank balances and currency in circulation exce=d previous years'\nholdings by many billions. Additional billions could be borrowed on insurance\npolicies. If consumers undertook 8 sudden and widespread conversion of their\nhuge fund of capital assets into a flow of purchasing power, the resulting\nflash flood of spending would quickly demolish the dam of price controls.\nActually, the backlog of savings is not likely to be converted into\nspendings in so dramatic B feshion. Rather, as more and more income is taken\naray by taxes or immobilized by forced lending to the Government, the reserves\nof curchasing power will be increasingly tapped by persons resisting a reduction\nin their standard of living. As the protective covering of bulging inventories\nis removed, the shortage of consumer goods which war makes inevitable will\nbedome fully apparent. A growing number of consumers will be move to\nsupplement their current income by drawing on assets in order to get a larger\nshare of the short sunply of civilian goods. Price stability will be threatened\nif capital assets are used to raise consumer spending to a lovel exceeding the\naveilable supply of goods at present prices.\nFiscal measures must be drafted with en eye not only to inducing seving\nbit also to discouraging dissaving. The net effect of each proposel must be\ncerofully weighed. The goal for 1943 in to provent $40 billion of excess\nmurchasing power from reaching the market for consumer goods. Some of the\n$40 billion will probably be removed by tax increases during 1943. The belance\nmust be added to our accumulated individual savings. Although voluntary saving\n\"ill do e substantial port of the job, TO cannot expect it to do the whole job.\nSnme other measure, or messures, such 88 compulsory saving, compulsory lending,\nexpenditure retioning, and expenditure texation \"111 be necessary. In using\nthem we must be on guard, however, against deluding ourselves. It will dn no\ngood merely to shift saving alroady being made from a voluntary to an enforced\nstatus. Nor -111 compulacry lending that comes nut of scoumulated savings\ncontribute to the solution of the inflation problem. The net effect of such\nmeasures \"ould be zero, If 7e fail to add $40 billion in 1943 to net individual\nsavings and existing texes, prices will rise in either en open or D concealed way.\nThe Role of Toxotion\nNet savings and individual taxes are closely related weapons in the bettle\nagainst inflation. The more taxes we obtain, the less net savings it is necessary\nto induce or compel. And, in general, the higher the volume of voluntary savings,\nthe smaller the tesk that confronte texation and other compulsory messures.\nOf course, the size of the problem that taxes and reloted fiscal measures must\n80170 is not measured simply by the difference between the $40 billion of\nexcessive purchasing power and the $24 billion of individual net seving. Part nf\nany increase in taxes will morely replace savings. There are 8 number of reasons\n=hy taxes are desirable, even as a mere replacement of savings. But we must\navoid weighing the morits of alternative measures in A vacuum. Each must be\nappreised in full view of its impact on the others end in full view of the $10\nbillion goal.\nRegraded Unclassified\n168\n- 5 -\nIn waging fincel war on inflation. additional taxes can and must play a\nprominent part. Te can hardly have begun to reach the economic limits of\ntaxation and it would be sheer folly to abandon taxes in favor of its elterna-\ntives. In the withdrawal of excessive purchasing power taxes have three\nimportant advantages over alternative measures.\nFirst, taxation reduces the need for costly administrative controls.\nIt is excessive money in people's hands that occasions many of those controls.\nTaxes this reduce the overhead of wartime government end increase the freedom\nof individuals.\nSecond, taxes restrict the accumulation of public debt, and thus ease the\nproblem of nost-war debt management. By reducing the interest burden, taxes\ngive the Government greater fiscal freedom to cone with the economic problems\nthat will arise in the post-war period.\nThird, at the same time that they aid in preventing wartime inflation, taxes\nstrike at the roots of potential post-wer inflation. If consumers, especially\nthose in the middle and lower income groups. accumulate great ouentities of war\nbonds and other forms of sevings, there may be B dangerous surge of purchasing\nDower immediately after the wer. People may redeem their bonds and express\ntheir postponed demands in such volume that the rigid controls of wartime may\nhave to be extended into peacetime. Insofer A6 taxes facilitate the removel of\nprice and rationing controls at the end of the WOT, they help restore the free\neconomy we are fighting to retain.\nNotwithstending these telling advantages, it would be highly unrealistic\nto rely on texation along traditional lines to absorb the entire excess of\ncivilien spending which threatens runaway inflation. Even B doubling of the\npresent $15 billion of personal texes would fall far short of the goal, for if\nanything like $15 billion of new personal taxes vere enacted, the level of\nvoluntary savings would surely fell below the current level of $24 billion\nannually. Unsided by other fiscel measures. personal taxes would have to be\nincreased by more than $20 billion to complete the absorption of $40 billion of\nexcess spending power. Such a volume of taxes appears not tn be politicelly\nfeasible and may not be economically desirable. Other measures must be adopted\nto restrict spending.\nThe restriction of spending 18, of course, e by-product of price control\nend apecific commodity retioning. But, 09 we have noted, price controls cannot\naporate successfully without D diversion of purchasing power from consumer\nmorkets. Although eventual adoption of specific retioning on a wide scale may\nbe nocessery. the extension of such rationing sufficiently to cover the bulk of\nconsumer spending would be costly end irkeome. We must look to other measures\nto achieve the necessary curtailment of consumer spending.\nThe Treasury has examined four general measures, any of which could centri-\nbute substantially tn price stabilization and tn BR equitable distribution of\nthe short supply of civilien goods. Zech would elso give substantial direct or\nindirect assistance to financing the war. These four measures are compulary\nlending. compuleory asving, expenditure rationing, and expenditure texation,\nRegraded Unclassified\n169\n- 6 -\nwhich 1 should like to discuss with you tonight in that order.\nCompulsory Lending and Compulsory Saving\nThere is a marked tendency in current discussion to use the terms\n\"compulsory lending\", \"compulsory saving\", \"forced loans\", and \"minimum savings\"\n06 if they were interchangeable. Actually, compulsory lending is ouite\ndifferent from compulsory saving, both in nature and in effect. The legal\nobligation to lend to the Government an amount equalling e specified fraction\nof income, expenditure, or other base is quite different from the legel\nobligation to save D specified fraction of income. By drawing on previously\nrecumulated essets, en individual can lend to the Government end yet not save.\nOr, he might save and yet lend nothing to the Government.\nA emell-scale example of compulsory lending is the post-war credit under\nthe Victory tex. However, the offects egainst such londing for verious forms of\nsaving such as the payment of insurance promiums, the repayment of debt, and the\nvoluntary purchase of eligible war bonds convert the Victory tex credits very\nlorgely into An example of compulsory saving. One should note, perhaps, in\nciting this example that compulsory saving on 60 modest a scale 18 unlikely to do\nmore than replace El part of voluntary seving. Both compulsory lending and\ncompalsory saving can be made progressive in their incidence through the use of\nexemptions end graduated retea. Assuming that income should be used as the base\nfor either measure, one might, for instence, set up a schedule requiring no\nlonding or, elternatively, no saving, for the first $1,000 of income received by\ne married person without dependents; an amount equal to 20 percent of the next\n$1,000, and perhaps 40 percent of the third $1,000, end 60 on, might be required\neither 88 e compulsory loan to the Government, or 86 enmo type of savings if\ncompulsory saving were adopted. Special provision for fixed commitments or\nextraordinary expenses could be made under either measure by sllowing ^ffsets\nfor such things es personal taxes, rents, modical expenses, dobt repayments, and\nthe like.\n30th plane contribute to the control of inflation in much the samo way 08\ntaxetion, namely, by immobilizing the spending power et the disposal of consumers.\nCompulsory saving 1a a more effective immobilizer than compulsory lending, AB we\nshall 800 in n moment, but the two instruments enjoy certain common advantages\nover texation.\nThe adventage most urgently claimed for both compulsory they lending and\ncommulsory seving is that, as compared with texotion, * preserved the incentive\nto work. Workers will bo more willing tn work herder and longer if they feel\nthat they PTO only temporarily doprived of the fruits of their labor, end that\nthey may enjoy those fruits after the wer when goods ere once more abundant.\nSimilarly, the promise of future rewards inherent in compulsory lending or\ncompulsory saving justifies a greater restriction of consumption among the lower\nincome groups than would be justified under outright taxation. A third adventage\nfollows from the first two. namely, that larger total levies on all income\ngroups become more acceptable when e promissory note is substituted for a tax\nreceipt. Finelly, the compulsory lending nad saving schemes would create B\nRegraded Unclassified\n170\n- 7\nreserve of individual purchasing power for the post-war period.\nIn the immediate job of reducing civilion spending, compulsory lending\nis likely to be considerably less effective than compulsory saving. This is\ntrue because it 10 directed to only one segment of saving while compulsory\nsaving comorehends all forms of saving. To 8 considerable extent, especially\nemong unner income groups, the compulsory lending obligation would be met out\nof accumulated savings or out of current income that would have been saved\nanywhy. Only those persons who did not normally save enything, did not have\ncenital, and could not obtain credit, would be compelled to reduce spending\nby nn amount corresponding to their lending. Since, in general, it 1s the\nlowest income groups who save little, have few assets, and have limited credit,\nit is among those groups that the real impact on consumption would be concen-\ntreted. It follows that any compulsory lending schedule would in practice be\nless progressive in its incidence on consumption than would appear at first\nglance.\nCompulsory saving is more direct and positive in controlling consumer\nspenting than either texation or compulsory lending. It in effect tells people\noutright how much they can spend out of a given income, and can even be\ngraduct 4 to a point where the spending of further increments of income would\nbe prohibited. Te have noted that compulsory lending requiremente can be met\nby liquidating cepital essets or drawing upon normal savings. Taxes can\nsimilarly be DA14 from these sources: however, taxes, unlike forced loans, ere\nnot B substitute for other forms of saving: if people want to maintein their\ncustomary rate of saving in the face of taxes, they must cut their spending.\nSo taxes *ill more effectively cut consumer spending then compulsory loans.\nCommulsory saving, however, is not subject to the loopholes of liquidation\nand substitution. It fixes n net savings requirement for each income recipient,\nThat requirement can be met only nut of income, not out of the arle or con-\nversion of pasets. The form in which the savings are held is immaterial eo\nInne es no form con be converted into current spending. The vital point is that\nthe REVER dollars would not be competing for goods in the market. The Government\ncould =1thrut fear of inflation spend an emount equal to the income impounded by\ncompulsory seving. Tor finance would be automatically simpliried, since\ninvestment in war bonts would be stimulated, and the margin of taxable cepecity\nwoul^ be extende'.\nIn principle, then compulsory seving could provide a comprehensive\nsolution to the problem of inflation. The total amount of consumer spending\ncoul- be pitche to the available supply of consumer zoods end nervices. This\nTould be ¿one by requiring that the difference between total indivitual income\nen' the value of available supplies be saved in one form or another.\nHowever, commulsory soving 18 beset with n'ministrotive difficulties.\nMercly to legislate that each person with a given income shall save a specifie^\nmount is not sufficient. Nor 1s e knowledge of each person's income any\nguarantee of success. It 1s absolutely crucial to this plan to obtain in\naddition e snapshot of each individual's capital position at the beginning an°\nnt the end of the period in which he was obligated to enve. Such belance shects -\nfor that is what the snapshots would amount to - rould be the only means of\nRegraded Unclassified\n171\n- 8 -\nprotecting the compulsory saving plan from being undermined by the use of\nexisting balances and credits. The compulsory savings requirement must be in\nterms of net sevings, end net savings can be determined only by subtracting\nsales of assets, declines in deposits, and 80 forth from the gross savings\nrepresented by savings credits and purchases of cosete. To obtain a picture\nof changes in capital position would be a new and difficult, though not an\nimpossible, administrative task.\nAnother complicating factor 1s that compulsory saving requires a certain\nmount to be saved out of income concurrently with the receipt of that income.\nIt would not, like present income taxes, be 8 liability that falls due in the\nyear following the receipt of income, Quarterly returns would probably be\nnecessary to keep individuals posted on their savings liabilities. Even then,\nunenticipated fluctuations in income or in expenditure needs might upset\npeople's calculations. In any case, they would not know for sure that they\nhnd complied exactly with the savings requirement until after the event,\nOne method of enforcing the savings requirement would be to issue each\nconsumer a license to spend only a specified amount on consumer goods end\nservices: in this event, compulsory saving would become expenditure rationing.\nOr, 1f a graduated schedule of penalties for spendings above an exempt minimum\nwere utilized, compulsory saving would become a type of expenditure toxation.\nExpenditure Retioning\nExpenditure rationing limits total consumer spendings by fixing the\nmeximum amount that every family or single individual is allowed to spend on\nrationed goods. It may quite properly be thought of 85 the reciprocel of\ncompulsory saving, which specifies the amount which people must save. If the\namount of spending on rationed goods is fixed, saving, in effect, becomes\ncommulsory.\nThe spendings allotment, like the sevings requirement, would be fixed on\nthe basis of family status and current income. Rationed goods would include\nalmost oll consumere' goods end services that have any current cost in labor,\nmeterials, or facilities. Rents, tuition, medical care, end a few other\nselected items might well be placed beyond the pale of the expenditure ration.\nExcept for those items, however, consumers' goods could be bought only with one's\nretion allowance. Within the allowance the consumer would be free to allocnte\nhis expenditures BB he pleased. And, of course, people would be free to use\nincome without restriction to make gifte, pay taxes, pay insurance premiums,\nbuy real estate or securities, or to enve in other ways. In fact, the very\nessence of expenditure rationing 16 to force diversion of income into such\nnon-inflationery channels.\nThe over-ell ration ellowonce for the entire economy during any given period\nmuld bo determined by the demends of price stability. The object would be to\nlimit the amount of rationed expenditure to the estimated value of the supply\nnf rationed goods available during that period. In estimating that value, one\nmuld apply whatever price level it wes desired to maintain. Flexibility would\nRegraded Unclassified\n172\n- 9 -\nbe a cardinal feature of the plan, for it would be relatively easy to change\nthe total expenditure ration as more accurate data became available or as the\nexpected supply position changed.\nBy its direct attack on the problem of excessive consumer purchasing\npower through the limitation of expenditure itself, this plan 1a capable not\nonly of dealing inflation a body blow, but also of allocating the economic\nsecrifices of war in a fair and precise manner. The allotment of spending\nnower to individuals or income classes cannot be very precise under 8 program\nof taxntion or compulsory lending. Taking away income by taxes or enforcing\nloons to the Government does not necessarily force a reduction in consumption\nexponditure throughout the income scale. But direct limitation of spending\nfacilitates both the over-all reduction in spending that is needed and the\ndistribution of the reduction in the manner that is desired.\nThose of us who have examined this instrument of control realize that\nthe plan would require elaborate administrative machinery. The ration limit\ncould be enforced only through the use of e license to purchase, in either\ncoupon or other form. The coupons would represent that part of income which\nwas expendable on ration goods, and might even be identified with money.\nCoupon distribution would be an enormous tesk, but it could probably be\naccomplished through the active cooperation of employers. ration boards, banks,\nand other institutions. This brief mention of edministration is not intended\nto do more than indicate that the problem has been under consideration.\nIf Congress wished to adont a plan for expenditure rationing and the American\npeople were willing to accept it, a tolerable scheme of administration could\nsurely be developed.\nExpenditure Taxation\nA plan which minimizes the administrative problems of direct control\nby relying largely on inducement rather than on compulsion has been drafted end\nrecommended to the Congress by the Treasury. I refer to the spendings tax which\nthe Treasury submitted to the Sonate Finance Committee during consideration of\nthe Revonue Bill of 1942.\nThe spendings tnx base is consumption rather than income. As its name\nindicates, this tex would be imposed on expenditures for consumer goods and\nservices. It ie not imposed on income received, and it specifically exempts\nincome seved. The spendings tax, in fact, looks tn the difference between\nincome received and income saved. Its base is arrived at by subtracting from\nench person's income his net savings BB evidenced by additions to his cepital\nnssets and reduction of his debts. Further deduction, such as rent, medical\nexpenses, end tuition can be ellowed if desired, and the regular income tax\nyould, of course, be deductible.\nExcept for the difference in base, the spendings tex structure strongly\nresembles that of the income tax and has much in common with that of the com-\nvulsory lending end compulsory savings devices we were considering a few\nminutes ago, Exemptions according to family status would be provided. and\nRegraded Unclassified\n173\n- 10 -\nsteeply graduated rates would be applied. For example, the first $1,000 spent\non goods and services by B married man without dependents might be exempt.\nA tax penalty of 20 percent might be placed on the second $1,000 of consumption\nexpenditure, 30 percent on the third $1,000, and successively steeper taxes on\nadditional increments of spendings. Rates might rise to 100 percent or more,\ndepending on the desired restriction of spending. Port of the tax could be\ntreated AS a post-war rebate, if it were desired to combine compulsory lending\nwith the tax on spending.\nThe spendings tax would reduce spending not only by directly withdrawing\nincome in the form of texes, but also by powerfully stimulating saving through\nits drastic penslty on spending. This penalty would not be levied indiscri-\nminately on all spendere, but rather on those spenders that could best efford\nto pay and on that segment of spending which could best be reduced or eliminated.\nThe differentiated exemption would enable persons with small incomes to obtain\nbasic subsistence neede free of tax, while steep graduation would bring the full\nweight of the tax to bear on comforts and luxuries rother than on necessities.\nThe highest penelty rates would apply to those who were trying to obtain\nn disproportionste share of the short supply of civilian goods. The spendings\nBOX serves the interests of equity as it goos about its task of preventing\ninflation.\nAt the como time, the spendings tax provides revenuo for wer finance both\nby the revenue it collects and by the saving it stimulates. Although the sevings\ninduced by the spendings tax would not necessarily be paid over to the Treasury,\nthey nonetheless would be removed from the spending stroem and would be added\nto the pool of unspent income available, directly or indirectly, to finance\nthe war.\nThe spendings tex would be administered within the fremework that exists\nfor the income tex. The texpayer would fill out e combined income and spendings\ntax form and would pay the two taxes together. Detailed records of expenditures\nwould not be needed to enforce the tax. The total spendings figure on which the\ntax is based yould be derived indirectly by deducting from the total amount of\navailable funds, the amounts devoted to purposes other than personal consumption.\nTo the deta elready required under the income tax yould have to be edded enough\ninformation to determine what changes in capitel position take place during the\nneriod to which the tax applies. Immediste impoct on spending could be assured\nby collection at source or B. substantial pert of the tex.\nEmenditure taxation is particularly well adapted to the job of coping -1th\ninflation. Without imposing irksome administrative controls, and rithout itself\nrequiring elaborate administrative machinery, it can drastically cut spending\nand can distribute that cut equitably.\nRegraded Unclassified\n- 11 -\n174\nConclusion\nI have outlined this evening a broad complex of fiscel tools with which\n, forceful enti-inflation program may be fashioned. Each has its shortcomings,\nbut each is vastly superior to inaction. The important issue at stake is to\nmake a choice and to make it now. Swift action is needed to put into effect\nthat measure or that combination of measures which will meet the problem of\ninflation four-squere. \"Too late\" can be just as disastrous as \"too little.'\nRegraded Unclassified\n(T. D. 5186)\n175\nTITLE 29 - LABOR\nCHAPTER VIII -- COMMISSIONER OF INTERNAL REVENUE\nPART 1002 - STABILIZATION OF SALARIES\nTREASURY DEPARTMENT,\nOffice of Commissioner of Internal Revenue,\nWashington, D. C.\nTO COLLECTORS OF INTERNAL REVENUE\nAND OTHERS CONCERNED:\nOn October 27, 1942, the President approved regulations relating to\nwages and salaries prescribed by the Economic Stabilization Director (7 F.R.\n8748) under the Act of October 2, 1942, entitled \"AN ACT to amend the Emor-\ngency Price Control Act of 1942, to aid in proventing inflation, and for\nother purposes\" (Public No. 729, 77th Congress, 2d Session) and Executive\nOrder No. 9250, dated October 3, 1942 (7 F.R. 7871). Those regulations con-\nferred on the Commissioner of Internal Revenue authority to administer the\nprovisions thereof relating to the stabilization and limitation of certain\nsalaries. In the exercise of the authority 80 conforred on the Commissioner\nof Internal Revenue, the following regulations relating to saleries are here-\nby promulgated.\nTABLE OF CONTENTS\nSUBPART A. - DEFINITIONS\nSec. 1002.1.\nGeneral terms\n1002.2.\nEmployee and employer\n1002.3.\nExecutive employees\n1002.4.\nAdministrative employees\n1002.5.\nProfessional employees\n1002.6.\nSalary payments\n1002.7.\nSalary rate\n1002.8.\nInsurance and pension benefits\n1002.9.\nApproval by Commissioner\nSUBPART B. - JURISDICTION OF COMMISSIONER\nSec. 1002.10.\nAmount of salary payment\n1002,11.\nConclusiveness of determination\n1002.12.\nGeographical scope\nSUBPART C. - SALARY INCREASES\nSac. 1002.13.\nCommissioner's approval required\n1002.14.\nCommissioner's approval not required\nSUBPART D. - SALARY DECREASES\nSec. 1002.15.\nSelarios under $5,000\n1002.16. Salaries over $5,000\n(over)\nRegraded Unclassified\n(T. D. 5186)\n- 2 -\nSUBPART E. - GOVERNMENTAL EMPLOYEES\nSec. 1002.17. State and local employees\nSUBPART F. -- LIMITATIONS ON CERTAIN SALARIES\nSec. 1002.18. Basic allowance\n1002.19. Charitable contributions\n1002.20. Insurance premiums\n1002.21.\nFixed obligations\n1002.22. Federal taxes\n1002.23. Multiple employers\n1002.24. Limitation on 1942 salaries\n1002.25. Community property\n1002,26.\nTaxable year\n1002.27. Effective date\nSUBPART G. -- EFFECT OF UNLAWFUL PAYMENTS\nSec. 1002.28. Amounts disregarded\n1002,29. Criminal penalties\n1002.30. Salary allowances under Code\nSUBPART H. -- EXEMPTIONS\nSec. 1002.31. Exempt employers\n1002.32. Statutory salaries\n1002.33. Services in foreign countries\n1002.34. Foreign employers\nAUTHORITY: Secs. 1002.1 to 1002.84, inclusive, issued under Pub. Law\n729, 77th Cong., 2d Sess.: E.O. 9250, 7 F.R. 7871: Regs. of Economic Stabili-\nwation Director, dated October 27, 1942, 7 F.R. 8748.\nSUBPART A-- -- DEFINITIONS\nSec. 1002.1. General terms. -- When used in these regulations, unless\notherwise distinctly expressed or manifestly incompatible with the intent\nthereof --\n(a) The term \"Act\" means the Act of October 2, 1942, (Public\nNo. 729, 77th Congress) entitled \"AN ACT to amend the Emergency\nPrice Control Act of 1942, to aid in preventing inflation, and\nfor other purposes\".\n(b) The term \"Board\" means the National War Labor Board\n237). created by Executive Order No. 9017, dated January 12, 1942 (7 F.R.\n(c) The term \"Commissioner\" means the Commissioner of\nInternal Revenue.\nRegraded Unclassifie\n(T. D. 5186)\n176\n(d) The term \"Code\" means the Internal Revenue Code, as amended\nand supplemented.\n(o) The term \"person\" hns the same meaning na when used in the\nCode.\n(f) The term \"Genoral Regulations\" means regulations (relating\nto wages and salaries) issued by the Economic Stabilisation Director,\napproved by the President on October 27, 1942 (? F.R. 8748). and as\nemended or supplemented by subsequent regulations issued by the Boo-\nnomic Stabilization Director relating to wages and salarios.\n(g) The term \"in contravention of the Act\" means in contravention\nof the Act of October 2, 1942 (referred to in paragraph (a) above),\nExecutive Order No. 9250 of October 3, 1942 (7 F.R. 7871). the General\nRegulations, these regulations and other rulings and regulations pro-\nmulgated under such Act.\nSec. 1002.2. Employee and Employer. - An employee, for the purposes of\nthose regulations, is an individual who performs services for compensation\nwhere the relationship between him and the person for whom he performs the\nservices is the legal relationship of employee and employer. An employer 1s\nany person for whom an individual performs any services, of whatever nature,\nAS the employee of such person. The term \"employer\" is not limited to private\npersons engaged in trade or business, but includes organizations which, under\nsection 101 of the Code, are exempt from income taxation, and also government\ndepartments and agencies. The existence of the legal relationship of employer\nand employee is to be ascertained in the light of the general purposes of the\nAct and the General Regulations.\nGenerally, the legal relationship of employer and employee exists when\nthe person for whom services are performed has the right to control and direct\nthe individual who performs the services, not only na to the result to be ao-\ncomplished by the work done, but also as to the details and means by which that\nresult is accomplished. An employee is generally subject to the will and cone\ntrol of the employer not only as to what shall be done but how it shall be done.\nIn this connection it is unnecessary that the employer actually direct or con-\ntrol the precise mantier in which the services are performed: it is sufficient\nthat he has the right to do 80. The right to discharge is also an important\nfactor indicating that the person possessing that right is an employer.\nOther factors characteristic of an employer, but not nocessarily present\nin every case, are the furnishing of toole and the furnishing of a place to\nwork to the individual who performs the services. In general, if an individ-\nual is subject to the control or direction of another meroly AS to the result\nto be accomplished by the work and not na to the means and methods for accom-\nplishing the result, he is an independent contractor. An individual perform-\ning services as an independent contractor is not an employee as to such serv-\nices. Physicians, lewyers, architects, contractors end others who follow an\nindependent trade, business or profession in which they offer their services\nto the public are generally independent contractors and not employees. Whether\nthe relationship of employer-employee exists will be determined upon nn ex-\namination of the particular faote of each case.\n(over)\nRegraded Unclassified\n(T. D. 5186)\n- 4\nIf the relationship of employer and employee exists the designation or\ndescription of the relationship by the perties as anything other than that of\nemployer and employee ie immatorial. If such relationship exists, it is of\nno consequence that the employee is designated as a partner, do-adventurer,\nagent or independent contractor. The measurement, method, or designation of\ncompensation 1s immaterial 1f the relationship of employer and employee thus\nin fact exists.\nAn officer of a corporation is en employee of the corporation but a di-\nrector as such is not. A director may be an employee of the corporation, how-\never, if he performs services for the corporation other than thoso required by\nattendance at and participation in meetings of the board of directors.\nSec. 1002.3. Executive employees. - An individual \"employed in B bona\nfide executive capacity\" means any employee -\n(a) whose primary duty consists of the management of the establishment\nin which he 1e employed or of a customarily recognized department or sub-\ndivision thereof, and\n(b) who customarily and regularly directs the work of other 00-\nployees, and\n(c) who has the authority to hire or fire other employees or whose\nsuggestions and recommendations as to the hiring or firing and A8 to the\nadvancement and promotion or any change of status of other employees will\nbe given particular weight, and\n(d) who customarily and regularly exercises discretionary powers,\nand\n(e) who is compensated for his services on a salary basis at not\nless than $30 per week (exclusive of board, lodging, or other facilities),\nand\n(f) whose hours of work of the same nature as that performed by\nemployees not employed in an executive, administrative or professional\ncapacity do not exceed 20 percent of the total number of hours worked\nin the workweek by the employees under his direction; provided that\nthis subsection (f) shall not apply in the case of an employee who 1s\nin sole charge of an independent establishment or a physically soparated\nbranch emtablishment.\nSec. 1002.4. Administrative employees. -- An individual \"employed in a\nbona fide administrative capacity\" irteans any employee -\n(a) who is compensated for his services on a salary or foe basis\nat a rate of not less than $200 per month (exclusive of board, lodging,\nor other facilities), and\n(b) (1) who regularly and directly assists an employee in a\nbona fide executive or administrative capacity (as such terms\nare defined in those regulations), where such assistance 18\nnonmenual in nature and requires the exercise of discretion\nand independent judgment: or\nRegraded Unclassified\n(T. D. 5186)\n- 5 -\n177\n(2) who performs under only general supervision, Te-\nsponsible nonmanual office or field work, directly related\nto management policies or general business operations, along\nsepcialized or technical lines requiring special training,\nexperience, or knowledge, and which requires the exercise of\ndiscretion and independent judgment; or\n(3) whose work involves the execution under. only general\nsupervision of special nonmanual mesignments and tasks directly\nrelated to management policies or general business operations\ninvolving the exercise of discretion and independent judgment: or\n(4) who is engaged in transporting goods or passengers for\nhire and who performs, under only general supervision, responsible\noutside work of a specialized or technical nature requiring special\ntraining, experience, or knowledge, and whose duties require the\nexercise of discretion and independent judgment.\nSec. 1002.5. Professional employees. - Any individual \"employed in a\nbona fide professional capacity\" means any employee who is -\n(a) engaged in work\n(1) prodominantly intellectual and varied in character e.o\nopposed to routine mental, manuel, mechanical, or physical work,\nAnd\n(2) requiring the consistent exercise of discretion and judg-\nment in its perfermance, and\n(3) of such a character that the output produced or the result\naccomplished cannot be standardized in relation to a given period\nof time, and\n(4) whose hours of work of the same nature as that performed\nby employees not employed in an executive, administrative. or pro-\nfessional capacity do not exceed 20 percent of the hours worked in\nthe workweek by such employees: provided that where such non-pro-\nfessional work is an essential part of and necessarily incident to\nwork of a professional nature, this subsection (4) shall not apply.\nand\n(5) (A) requiring knowledge of an advanced type in A field\nof science or learning customarily acquired by a prolonged\ncourse of specialized intellectual instruction end study, as\ndistinguished from & general academic education and from an\napprenticeship, and from training in the performance of routine\nmental, manual, or physical processes: or\n(B) predominantly original and creative in character in a\nrecognized field of artistic endeavor as opposed to work which\ncan be produced by a person endowed with general manual or in-\ntellectual ability and training, and the result of which depends\nprimarily on the invention, imagination, or talent of the em-\nployee, end\n(over)\nRegraded Unclassified\n(T. D. 5186)\n-\nIf the relationship of employer and employee exists the designation or\ndescription of the relationship by the parties as anything other than that of\nemployer and employee 1e immaterial. If such relationship exists, it is of\nno consequence that the employee is designated as a partner, co-adventurer,\nagent or independent contractor. The measurement, method, or designation of\ncompensation is immaterial if the relationship of employer and employee thus\nin fact oxists.\nAn officer of a corporation is an employee of the corporation but a di-\nrector as such is not. A director may be an employee of the corporation, how-\nevor, if he performs services for the corporation other than those required by\nattendance at and participation in meetings of the board of directors.\nSec. 1002.3. Executive employees. - An individual \"employed in a bona\nfide executive capacity\" means any employee -\n(a) whose primary duty consists of the management of the ostablishment\nin which he is employed or of B. customarily recognized department or sub-\ndivision thereof, and\n(b) who customarily and regularly directs the work of other 02-\nployees, and\n(c) who has the authority to hire or fire other employees or whose\nsuggestions and recommendations 88 to the hiring or firing and A0 to the\nadvancement and promotion or any change of status of other employees will\nbe given particular weight, and\n(d) who customarily and regularly exercises discretionary powers,\nand\n(e) who is compensated for his services on a salary basis at not\nless than $30 per week (exclusive of board, lodging, or other facilities),\nand\n(f) whose hours of work of the same nature as that performed by\nemployees not employed in an executive, administrative or professional\ncapacity do not exceed 20 percent of the total number of hours worked\nin the workweek by the employees under his direction; provided that\nthis subsection (f) shall not apply in the case of an employee who is\nin sole charge of an independent establishment or a physically soparated\nbranch establishment.\nSec. 1002.4. Administrative employees. -- An individual \"employed in a\nbona fide administrative capacity\" means any employee -\n(a) who is componsated for his services on a salary or fee basis\nat a rate of not less than $800 per month (exclusive of board, lodging,\nor other facilitios), and\n(b) (1) who regularly and directly assists an employee in a\nbona fide executive or administrative capacity (as such terms\nare defined in those regulations), where such assistance 18\nnonmenuel in nature and requires the exercise of discretion\nand independent judgment: or\nRegraded Unclassified\n(T. D. 5186)\n- 5 -\n177\n(2) who performs under only general supervision, 10-\nsponsible nonmanual office or field work, directly related\nto management policies or general business operations, along\nsepcialized or technical lines requiring special training,\nexperience, or knowledge, and which requires the exercise of\ndiscretion and independent judgment: or\n(3) whose work involves the execution under only general\nsupervision of special nonmanual Resignments and tasks directly\nrelated to management policies or general business operations\ninvolving the exercise of discretion and independent judgment: or\n(4) who is engaged in transporting goods or passengare for\nhire and who performs, under only general supervision, responsible\noutside work of a specialized or technical nature requiring special\ntraining, experience, or knowledge, and whose duties require the\nexercise of discretion and independent judgment.\nSec. 1002.5. Professional employees. - Any individual \"employed in a\nbona fido professional capacity\" means any employee who is -\n(a) engaged in work\n(1) prodominantly intellectual and varied in character as\nopposed to routine mental, manual, mechanical, or physical work,\nand\n(2) requiring the consistent exercise of discretion and judg-\nment in its perfermance, and\n(3) of such a character that the output produced or the result\naccomplished cannot be standardized in relation to a given period\nof time, and\n(4) whose hours of work of the same nature as that performed\nby employees not employed in an executive, administrative or pro-\nfessional capacity do not exceed 20 percent of the hours worked in\nthe workweek by such employees; provided that where such non-pro-\nfessional work is an essential part of and necessarily incident to\nwork of a professional nature, this subsection (4) shall not apply,\nand\n(5) (A) requiring knowledge of an advanced type in a field\nof science or learning customarily acquired by & prolonged\ncourse of specialized intellectual instruction and study. no\ndistinguished from a general academic education and from an\napprenticeship, and from training in the performance of routine\nmental, manual, or physical processes: or\n(B) predominantly original and creative in character in a\nrecognized field of artistic endeavor AS opposed to work which\ncan be produced by a person endowed with general manual or in-\ntellectual ability and training, and the result of which depends\nprimarily on the invention, imagination, or talent of the 80-\nployee, and\n(over)\nRegraded Unclassified\n(T. D. 5186)\n- 6 -\n(b) compensated for his services on a salary or fee basis at a\nrate of not less than $200 per month (exclusive of board, lodging, or\nother facilities); provided that this subsection (b) shall not apply in\nthe case of an employee who is the holder of a valid license or certifi-\ndate permitting the practice of law or medicine or any of their branches\nand who is actually engaged in the practice thereof.\nSec. 1002.6. Salary payments. - The terms \"salary\" and \"salary payment'\nmean only such salaries over which the Commissioner has jurisdiction. (See\nsection 1002.10 of these regulations.) These terms are not used in any ro-\nstricted, narrow or technical senso, but encompass all forms of diroct or in-\ndirect componsation for personal services of an employee which is computed on\na weokly, monthly, annual or other basis, other then wages (as defined in the\nGeneral Regulations and in orders or rulings of the Board). Bonuses, gifts,\nloans, commissions, fees, additional compensation and any other remuneration\nin any form or medium whatsoever are considered as falling within the concept\nof \"salary\" or \"salary payment\". Any compensation which is not regarded P.B\nwages in the commonly accepted sense of the term is salary notwithstanding\nthat it may be computed on an hourly, daily or piece-work basis.\nRetainer fees paid to an individual, not otherwise an employee, are not\nto be considered as salary. Insurance and pension benefits in a reasonable\namount (see section 1002.8) are likewise excluded from the terms \"salary\"\nend \"salary payment\".\nAlthough the terms \"salary\" and \"salary payment\" do not include any com-\npensation other than for personal services of an employee, the Commissioner\nis not precluded from determining, after investigation, that amounts denom-\ninated, for example, as rents or royalties are in fact salary payments subject\nto the controls set forth in these regulations.\nAll amounts paid to, authorized to be paid to, or accrued to the ac-\ncount of any employee during a calender year for services rendered or to\nbe rendered are to be included as salary for such year.\nSoc. 1002.7. Salary rate. H- The term \"salary rate\" means the rate\nor aggregate of rates or other basis at which the salary for any particular\nRegraded Unclassific\n178\n(T. D. 5186)\n- 7 -\nwork or service is computed, either under the terms of a contract or agree-\nment, express or implied, or in conformity with custom or usage existing\nin the employer's business establishment, For treatment of commissions\nand bonuses on a percentage basis see section 1002.14.\nSec. 1002.8. Insurance and pension benofits. -- Compensation may\ninclude insurance and pension benefits. In determining the amount of\nsalary of an employee, the insurance or pension benefit inuring to such\nemployee is not measured by what he will be entitled to receive after the\nhapponing of certain contingencies, but rather in terms of the amount\nof contributions or promiums paid by the employer. To the extent that\nan insurance and pension ben fit inuring to an employee is reasonable in\namount, such benofit 18 not considered as salary as dofined in soction\n1002,6.\nSoction 165(a) of the Code sote forth the conditions under which a\ntrust forming part of a stock bonus, ponsion or profit-sharing plan of\nan employer for the exclusive benefit of his employees or their bonefic-\niarics shall not be taxable for Federal income tax purposes. Contributions\nby an employer to an employees' trust or under an annuity plan, which trust\nor plan meets the exemption requirements of such section 165(a) (ns of the\ndate the contributions are made), shall be considered as reasonable, re-\ngardless of the amount of such contributions. On the other hand, con-\ntributions by an employer to an employees' trust which ie subject to\nFederal income taxation because it does not meet the requirements of such\nsection 165 (a) shall bd treated, for purposes of those regulations, as\nsalary.\nTo the extent amounts paid by an employer on account of insurance\npremiums on a policy on the life of an employee are deductible by the\nemployer in computing not income under the conditions sot forth in sec-\ntion 23 (a) of the Code (relating to doductions for ordinary and noces-\nsary business expenses), such amounts are not considered as salary. The\nemount of insurance premiums that will be considered as falling outsido\nthe concept of salary cannot exceed the amount of such pr miums doductible\nby the employer for Fodoral income tax purposes, If, howover, such in-\nsurance promiums are includible in the gross income of the employee (for\nwhose benefit the insurance has been takon out), as well as deductible by\nthe employer, the amount which shall not be considered as salary in respect\nof such employee may not exceed 5 percent of the employee's annual salary\ndetermined without the inclusion of insurance and pension benofits.\nThe application of the precoding paragraph may be illustrated by the\nfollowing examples. An employer having 20 salaried employees takes out\nlife insurance policies on each of such employees in favor of bonoficiarios\ndesignated by thon. The premiums paid for 10 of the employees are in each\n(over)\nRegraded Unclassified\n(T. D. 5186)\n- 8 -\ninstance 7 percent of the employee's annual salary (exclusive of insurance\nand pension bonofits). As to the remaining 10 employees the premiums in\neach instance are 5 percent of the employee's annual salary (oxclusive of\ninsurance and pension benefits). It is assumed that with respect to each\nemployee the premium paid would be includible in his gross income under the\nCode and would be deductible by the employer under section 23 (a) of the\nCode. As to the first 10 employees 2 percent of the premiums in each\ninstance will be considered as salary, whereas no part of the premiums\nwill be considered as salary in the case of the second group of employees,\nIf, however none of the premiums were deductible in computing the net\nincome of the employer, then the entire amount of the prenium in each in-\nstance would be considered as salary to the employee involved.\nPromiums paid by an employer on policies of group life insurance\nwithout cash surrender value covering the lives of his employees, or on\npolicios of group health or accident insurance, the beneficiaries of which\nare dosignated by such employees do not constitute salary (regardless of\nthe amount of salary otherwise received annually by such employees) if\nsuch premiums are deductible by the employer under section 23(a) of the\nCode.\nSec. 1002.9. Approval by Commissioner. -- Wherever the terms \"approyal\nby the Commissioner\" and \"determination by the Commissioner\" are used in\nthese regulations they shall, except as otherwise provided, include an\napprovel or determination by a regional officer of the Salary Stabilization\nUnit established by the Commissioner under Treasury Decision 5176, which\nofficer is authorized to make such determination. If an approval or deter-\nmination made by such regional officer is subsequently modified or reversed\nby the Commissioner, such approval or determination shall be decmed to have\nbeen continuously in offect from its original date until the first day of\nthe payroll period following revorsal or modification, or until such later\ndate as the Commissioner may provide in his ruling.\nTo illustrate, an employer obtains the approval of a regional officer\nof the Salary Stabilization Unit that a proposed increase in certain\nsalarios is permissible, The approval is given on January 2, 1943, and the\nsalary increase is to become effective January 15, 1943. On March 15, 1943,\nthe Commissioner determines that the salary increase WAS not proper and reverses\nthe approval given by the regional officer. The Commissioner provides in his\nruling that the increase in salary shall be discontinued after March 31, 1943.\nRegraded Unclassified\n(T. D. 5186)\n- 9 -\n179\nFor purposes of these regulations, no part of the salary for tho period be-\ntween January 15 and March 31 shall be considered to have been in contraven-\ntion of the Act.\nSUBPART P - JURISDICTION OF COMMISSIONER\nSec. 1002.10. Amount of Salary Payment. -- The General Regulations pro-\nvide that the Commissioner shall have authority to determine, under regulations\nto be prescribed by the Commissioner with the approval of the Secretary of the\nTreasury, whether salary payments are made in contravention of the Act. The\nCommissioner's jurisdiction is confined to -\n(1) salary payments in excess of $5,000 per annum, in the case\nof individuals employed in any capacity whatsoever: and\n(2) salary payments of $5,000 or less per annum, in the case of\nindividuals (1) who are employed in bona fide executive, administrative\nor professional capacities, and (11) who, in their relations with their\nemployer, are not represented by duly recognized or certified labor\norganizations, and (111) whose services are not within the meaning of\n\"agricultural labor\" as defined in paragraph (1) of section 4001.1 of\nthe General Regulations.\nOther salary payments are subject either to the jurisdiction of the Board or\nthe Secretary of Agriculture, as prescribed in the General Regulations. If,\nfor example, a salary is to be increased from $4500 per annum to $5200 per\nannum (and subdivision (2) is inapplicable), approval of such increase, if\nrequired, must be obtained from the Board.\nSec. 1002,11. Conclusiveness of Determination. -- (a) Any determina-\ntion by the Commissioner that a salary payment is in contravention of the Act\nis conclusive in every respect upon all executive departments and agencies\nof the Federal Government for the following purposes --\n(1) determining costs or expenses of any employer for the pur-\npose of any law or regulation, either heretofore or hereafter enacted\nor promulgated, including the Emergency Price Control Act of 1942, or\nany maximum price regulation thereunder;\n(2) calculating deductions under the revenue laws of the United\nStates: or\n(3) determining costs or expenses under any contract made by or\non behalf of the United States.\n(b) Any such determination of the Commissioner is final and not subject\nro review by The Tax Court of the United Statos or by any court in any civil\nproceedings. Nothing herein is intended, however, to deny the right of any\nemployer or employee to contest in The Tax Court of the United States or in\nany court of competent jurisdiction the validity of -\n(1) any provision of these regulations, on the ground such\nprovision is not authorized by law, or\n(over)\nRegraded Unclassified\n(T. D. 5186)\n- 10 -\n(2) any action taken or determination made under these regular\nor has not been taken or made in a manner required, by law,\ntions, on the ground that such action or determination 16 not authorized,\n(c) No increase in salary rate shall result in any substantial increase\nof the level of costs or furnish the basis either to increase price ceilings\nof the commodity or service involved or to resist otherwise justifiable re-\nductions in such price ceilings.\nSec. 1002.12. Geographical Scope. -- The provisions of these regulations\nshall not apply to salaries in any Territory or possession of the United States,\nexcept Alaska and Hawaii.\nSUBPART C -- SALARY INCREASES\nSec. 1002,13. Commissioner's approval required. -- Section 1 of the Act\nprovides in effect that salaries, 60 far as practicable, shall be cashilized\nat the levels which existed on September 15, 1942. In the case of a salary\nrate of $5,000 or less per annum existing on October 27, 1942, or established\nthereafter in compliance with these regulations, and in the case of a salary\nrate of more than $5,000 per annum existing on October 3, 1942, or established\nthereafter in compliance with these regulations, no increase shall be made by\nthe employer, except as provided in section 1002.14, without prior approval of\nsuch increase by the Commissioner. Any salary increase made before the required\napproval of the Commissioner is obtained is from the date of such increase in\ncontravention of the Act, (See sections 1002.28 and 1002.29 for the conse-\nquences of a salary payment made in contravention of the Act.) The Commissionel\nmay, however, approve an increase in salary rate to be effective as of the date\nof the application for approval.\nThe burden of justifying an increase in salary rate shall in every in-\nstance be upon the employer seeking to make such increase. Increases in\nsalary ratos will not be approved unless necessary to correct maladjustments\nor inequalities, or to aid in the effoctivo prosecution of the war. A promise\nmade by an employer to his employees prior to October 3, 1942 that salaries\nwould be increased in the future is generally to be ignored in determining\nwhether an increase after that date should be approved. The same rule 1s\napplicable with respect to a promise made by an employer prior to October\n27, 1942, in the case of employees whose salary rates are $5,000 or less por\nannum. Assalary increasey however, may be approved, as to salaries below\n$5,000 por annum, if to dony such increase would be to force the continuation\nof a salary which is below the general lovel existing for the same or comparable\nwork in the local area on September 15, 1942.\nAn employer who has established a now job classification, or who has be-\ngun business, after October 3, 1942, must obtain approval of the Commissioner\nfor the payment of salaries for such job classification or in such new business;\nprovided, however, that if the salary rates in question are not in excess of\nthose prevailing for similar job classifications within the local area, the\napproval of the Commissioner is not required. An increase in a salary rate\nfor a job classification established after October 3, 1942, shall be subject\nto the limitations provided in this Subpart.\nRegraded Unclassified\n(T. D. 5186)\n- 11 -\n180\nA mere whether change such in the name, organization, or financial structure of\nwill not business sufficient for a finding that, for the purposes corporation, of these\nemployer, in itself be employer be an individual, partnership or an\nlished after such change.\nregulations, a new has been begun or new Job classification estab-\nAny change in a salary rate, regardless of its effective date, which\nresults from an award or decision of an arbitrator or referee made after\nOctober 3, 1942, in the case of salaries of more than $5,000 per annum, and\nis subject to the provisions of these regulations notwithstanding that the\nafter October 27, 1942 in the case of salaries of $5,000 or less per annum,\n3, 1942 or October 27, 1942, as the case may be.\nagreement or order for arbitration or reference was made on or before October\nUnless otherwise expressly exempted, any change in a salary rate, pro-\nvided for in any agreement existing as of October 3, 1942 in the case of\nsalaries of more than $5,000 per annum, or as of October 27, 1942 in the case\nof salaries of $5,000 or less per annum, which is to take effect at some future\ndate or on the happening of some future event, is subject to the provisions of\nthese regulations regardless of when the agreement was made.\nPayment for overtime will constitute an increaso in salary rate, and thus\nwill require the approval of the Commissioner, unless the customary practice\nof the employer has been to pay for overtime, and the rate has not been changed.\nExcept as may be otherwise provided from time to time by the Commissioner,\nan application for the approval of a salary increase shall be filed by the em-\nployer with the regional office of the Salary Stabilization Unit of the Bureau\nof Internal Revenue in whose territorial jurisdiction the main office or prin-\ncipal place of business of the employer is located. Such application shall be\nfiled on forms prescribed by the Commissioner and shall contain such informa-\ntion as may be required by the Commissioner.\nSec. 1002,14. Commissioner's approval not required. -- The Commissioner's\napproval is not required where an increase in salary rate is made in accordance\nwith the terms of a salary agreement or salary rate schedule in effect on\nOctober 3, 1942, or approved thereafter by the Commissioner, and is a result of--\n(1) individual promotions or reclassifications,\n(2) individual merit increases within established salary rate\nranges,\n(3) operation of an established plan of salary increases\nbased on length of service,\n(4) increased productivity under incentive plans,\n(5) operation of a trainee system, or\n(6) such other reasons or circumstances as may be proscribed in\nrulings or regulations promulgated by the Commissioner from time to time.\n(over)\nRegraded Unclassified\n(T. D. 5186)\n- 12 -\nFor purposes of this section, the term \"salary agreement\" or \"salary rate\nschedule\" may include a salary policy in effect on October 3, 1942, even\nthough not evidenced by written contracts or written rate schedules. For\nexample, a salary policy may be determined from previous payroll records or\nother payroll data. The existence of such policy, however, must be established\nto the satisfaction of the Commissioner, and the burden of proof rests upon\nthe employer. In such cases, the employer in advance of making an increase in\nsalary rate may reduce the salary policy to writing and secure approval there-\nof by the Commissioner,\nA bonus or other form of additional compensation which does not exceed\nin amount the bonus or other additional compensation to such employee for\nthe last bonus year ending before October 3, 1942 does not require approval\nby the Commissioner. In addition a bonus based upon a fixed percentage of\nsalary where the percentage has not been changed, does not require approval\nby the Commissioner even though the amount may be increased due to an authorized\nincrease in salary. Any other bonus or other form of additional compensation,\nrequires approval by the Commissioner. Where the compensation, or part there-\nof, is paid on a commission basis and is based upon a fixed percentage (which\nhas not been changed) of sales made by the employee, a payment does not require\napproval by the Commissioner even though the amount may represent an increase\ndue to increased sales by the employee. See, however, Subpart F of these\nregulations,\nThe provisions of this section may be illustrated as follows:\n(1) The X Corporation began business in 1940. As of July 1,\n1942, pursuant to a corporate resolution duly passed in January\n1942, all of its salaried employees received more than $5,000\nper annum. No approval of the Commissioner is required to in-\ncrease the salary of an employee who is promoted in November 1942\nfrom a salesman to general manager and who receives a salary within\nthe salary range paid previously to individuals occupying the posi-\ntion of general manager.\n(2) The X Corporation in December 1942 wishes to establish\na new salary rate schedule raising the level of compensation of\nall its salaried employees. Approval by the Commissioner of such\nschedule is required. Assuming that such approval has been ob-\ntained, further approval by the Commissioner of any adjustment\nunder such schedule coming within this section is not required.\n(3) The Y Corporation begins business on November 1, 1942.\nThe salaries paid by it to its employees are commensurate with salaries paid\nRegraded Unclassified\n(T. D. 5186)\n- 13 -\n181\nby other employers in comparable businesses in the same local area,\nPayment of such salaries does not require the approval of the Com-\nmissioner. Any increase in salary rates, however, requires the ap-\nproval of the Commissioner.\n(4) The M.Corporation, which has manufactured furniture since\n1925, is reorganized in November 1942 and emerges from the reorganiza-\ntion proceedings as the N Corporation. There 1a no change in the nature\nof the business although there is a substantial alteration in the finan-\ncial structure of the company. The N Corporation is not to be treated\nas a new employer beginning business after October 27, 1942. Conse-\nquontly, any general increase in salaries over and above those paid by\nthe M Corporation requires the prior approval of the Commissioner.\n(5) Employees of the & Corporation have customarily received a\nbonus of 5 percent of their annual salary at the end of each calondar\nyear. If, for example, one of the employees received $6,000 in 1941\nbut received salary of $7,000 in 1942 due to a salary increase on July\n1, 1942, a bonus of $350 may be paid to him for 1942 without prior ap-\nproval of the Commissioner, notwithstanding that his bonus for 1941 was\nonly $300.\nSUBPART D -- SALARY DECREASES\nSec. 1002,15. Salaries under $5,000. -- In the case of a salary rate ex-\nisting as of the close of October 3, 1942, or established thereafter in com-\npliance with these regulations, under which an employee is paid a salary of\nloss than $5,000 per annum for any particular work, the general rule is that\nno decrease can be made by the employer in such salary rate below the highest\nsalary rate paid for such work in the local area between January 1, 1942 and\nSeptember 15, 1942. A decrease is permitted, however, with the approval of\nthe Commissioner, in order to correct a gross inequity in any case or to aid\nin the effective prosecution of the war, Where such decrease is permitted the\nsalary rate may be reduced below the highest salary rate paid for the work in\nquestion between January 1, 1942 and September 15, 1942. Except as otherwise\nprovided in this section, any decrease in such salary rate after October 3,\n1942 shall be considered in contravention of the Act if it is made prior to\nthe approval thereof by the Commissioner.\nExcept as may be otherwise provided from time to time by the Commissioner,\nan application for approval of any salary decrease shall be filed in the same\nmanner as in the case of an application for approval of a salary increase.\nSee section 1002,13 of these regulations.\nThe Commissioner's approval is not required, for example, in the follow-\ning Casos where salary decreases are made after October 3, 1942:\n(1) The new salary rate does not fall below the highest salary rate\nexisting between January 1, 1942 and September 15, 1942 for the particular\nwork in question or for the same or comparable work in the local area.\n(2) An employee has beon demoted to a lower position than that\nfilled by him between January 1, 1942 and September 15, 1942 and the\nsalary rate for such lower position is not less than the highest salary\nrate existing for that position during the same period.\n(over)\nRegraded Unclassified\n(T. D. 5186)\n14 -\n(3) An employee has been relieved of substantial duties and\nresponsibilities.\nA disparity between salaries paid by a particular employer and those paid\nby employers generally in the local area does not nocessarily constitute justi-\nfication for docrease in salary rates paid by such employer.\nSec. 1002.16. Salaries over $5,000. -- In the case of a salary rate ex-\nisting as of the close of October 3, 1942, or established thereafter in COD-\npliance with those regulations, under which an employee is paid & salary of\nmore than $5,000 por annum, the employer is permitted to make, without approval\nby the Commissioner, a decrease to a rate not less than $5,000 per annum, If,\nLowever, by virtue of a decrease the new salary paid to the employee 1s loss\nthan $5,000 per annum, then the decrease bolow $5,000 per annum is subject to\nthe limitations of soction 1002.15 of these regulations. To the extent that\nprior approval by the Commissioner of a decrease is not required under section\n1002.15 or this section, such decrease shall not be considered as being in\ncontravention of the Act.\nSUBPART El -- GOVERNMENTAL EMPLOYEES\nSec. 1002.17. State and local employees. -- An adjustment in salaries (not\nfixed by statute, see section 1002.32) may be made by a State, or any political\nsubdivision thereof, the District of Columbia, or any agency or instrumentality\nof any of the foregoing, on certification to the Commissioner that such adjust-\nment is necessary to correct maledjustments, or to correct inequalities or\ngross inequities. The certification procedure shall not apply to any adjustment\nwhich would not otherwise require the Commissioner's approval or which would\nraise salaries beyond the provailing level of compensation for similar services\nin the area or community. A certificate by the official or agency authorizing\nthe adjustment stating the nature and amount of such adjustment, and briefly\nsetting forth the facts meeting the foregoing requirement, will be accepted by\nthe Commissioner as sufficient evidence of the propriety of the adjustment, sub-\nject to review by the Commissioner. Modification by the Commissioner of adjust-\nments made by a governmental official or agency acting pursuant hereto shall\nnot be retroactive.\nIn exceptional cases where such an adjustment is sought, and in all cases\nwhere the agency seeks an adjustment other than by the certification procedure,\napplication for approval shall be filed with the appropriate regional office\nof the Salary Stabilization Unit.\nSUBPART F -- LIMITATIONS ON CERTAIN SALARIES\nSoc. 1002.18. Pasic allowance. -- In addition to setting forth limita-\ntions on increases and decreases in salary ratos, the General Regulations pro-\nvide a ceiling on the amount of salary which may be paid to any employee during\na calendar year. The general rule is that no amount of salary may be paid\nor authorized to be paid to or accrued to the account of any employee or\nreceived by him during the calendar year 1943, and in each succeeding calendar\nyear, which, after reduction by the Federal income taxes the amount of such\ndeductions or credits, would exceed $25,000. Additional income and of salary\nsalary, computed as below without regard to other on without regard to\nwhich may be permitted in certain circumstances are described allowances in sections 1002.19\nto 1002.22, inclusive,\nRegraded Unclassified\n(T. D. 5186)\n- 15 -\n182\ngraph shall be determined -\nThe amount of Federal income taxes referred to in the preceding para-\n(1) by applying to the total amount of salary (but not in-\ncluding any amounts allowable under sections 1002.19 to 1002.22,\ninclusive, of these regulations) paid or accrued during the\ncalender year in question, undiminished by any deductions, the\nrates of taxes imposed by Chapter 1 of the Code (except section\n466 thereof relating to withholding) as if such total amount of\nsalary wore the not income (after the allowance of the appro-\npriato credite), the surtex not income, and the Victory tax not\nincome, respectively; and\n(2) without further allowance of any other credits against\nany of such taxes.\nAssume that the rates imposed under Chapter 1 of the Code, AB amended by\nthe Revenue Act of 1942, are applicable with respect to the calendar year\n1943. Under the formula described in the preceding paragraph, the basic al-\nlowance of salary for 1943 (which after reduction by the Federal income taxes\nwould yield $25,000) is $67,200. This latter amount is the maximum amount of\nsalary which An employee would be permitted to receive for 1943, provided hb\n18 not entitlod to further allowances under sections 1002.19 to 1002.22, in-\nclusive. If the rates of Federal income tax applicable for 1943 should be\nincreased Above those now cxisting in the Codo for 1942, the basic allowance\nof salary will be an amount greater than $67,200.\nThe basic allowance of salary AB described in this section represents an\namount against which the appropriate tax rates are applied and remains tho\nsame regardloss of whether the employee 18 married or single or of the number\nof his depondents, if any. It is likewise unaffected by the naturo or amount\nof his other income (taxable or exempt) or by the extent of his deductions\nallowable for tax purposes generally.\nFor purposes of this Subpart an amount of salary, in addition to the basic\nallowance of salary, will be permitted for any expenses paid or incurred by en\nemployee which are ordinary and necessary for the performance of the services\nfor which the employee 1e compensated. No such additional amount, however,\nshall be permitted for expensos which would not be deductible in computing\nindividual Federal income taxes.\nSec. 1002.19. Charitable contributions. - An amount of salary, in addi-\ntion to the basic allowance of salary described in section 1002.18, will be\npermitted in certain circumstances to allow an employee to maintain his custo-\nmary contributions to charitable, educational or other organizations described\nin section 23(o) of the Code. Such additional amount of salery will be per-\nmitted if the employee establishes to the satisfaction of the Commissioner that\nafter resorting to his other income from all sources he would suffer undue\nhardship in maintaining his customary contributions out of the basic allowance\nof salary described in the proceding section.\nFor purposes of this section and sections 1002.20, 1002.21, and 1002.22,\n\"income from pll sources\" includes income which 1s exempt under the Federal\nincomo tax laws.\n(over)\nRegraded Unclassified\n(T. D. 5186)\n16 -\nWhat constitutes Tundue hardship\" for purposes. of this section and section\n1002.20, 1002.21, and 1002.22, is dependent upon all the circumstances in,each\ncase.\nContributions- may be customary within the meaning of this section even\nthough in the particular year in question the organizations to which the con-\ntributions, are made are different from those to whom contributions were made\nin previous years.\n)\nSec. 1002.20 Insurance premiums. -- An amount of salary, in addition to\nthe basic allowance under section 1002.18 may be permitted to an employee un-\nder this section to meet certain payments during the employee! e taxable year\nfor insurance premiums. To be entitled to such extra allowance of salary the\nemployee must establish to the satisfaction of the issioner that after r6-\nsorting to other income from all sources (see section 1002.19) he 1s unable,\nithout disposing of assets at a substantial financial loss resulting in undue\nhardship, to meet premium payments on policies of life insurance in force and\nef fact on October 3. 1942 on his life.\nThe premium payments referred to in the preceding paragraph are those\nwhich are required to be met during the calendar year in question. No allow-\nance for salary is permissible for payments of premiums which are due in\nfuture calendar years.\nIf any insurance has been permitted by an employee to lapse after October\n3, 1942, no allowance for salary is permissible for payments of OR\npolicies taken out after such date, even though the total annual premiums on\nthe new policies are not in excess of the total annual premiums due on policies\nin effect on October 3. 1942. Renowal of policies in effect on October Zo\n1042 (even- though new premiums are igher) will not preclude appli cability of\nthi section to premium payments on the renewed policies. Generally, in the\ncase of & conversion of a policy in effect on October 3. 1942 to 8 new policy\nrequiring payment of higher premiums, this section is inapplicable to the\nannual amount by which the new premiums exceed the premiums in effect on\nOctober 3 1942,\nAs used in this section, and sections 1002.21 and 1002.22,: substantial\nfinancial loss is not necessarily confined to B. loss suffered on disposition\nof assots at depressed prices substantially below cost to the employee. The\npresent value in use or in production of income and the potential future value\nare factors to be considered. For the purpose of this Subpart. the provisions\nof the Code governing the determination of loss upon disposition of assets are\nnot controlling.\nSec. 1002.21 Fixed obligations. -- An amount of salary in addition to\nthe basic allowance under section 1002. 18 may be permitted to an employee under\nthi section to make required payments during the employee's taxable year on\nfixed obligations. Before any amount will be allowed under thie section the\namployee: must establish to the satisfaction of the Commi seioner that after re-\nsorting to his income from all sources (see section 1002.19) he is unable,\nwithout the necessity of disposing of assets at a substantial financial lose\nresulting in. úridué Hardship, to meet required payments of fixed obligations for\nwhich he was obligated on October 3. 1942. See section 1602.20.\nRegraded Unclassified\n(T. D. 5186)\n- 17 -\n183\nThe term \"fixed obligations\" as used in this section means any enforce-\nable liability of the employee the amount of which liability was fixed and\ndetermined on October 3. 1942. In no event is an allowance for salary\nmissible under this section for the payment of any amount due in future por- years.\nSec. 1002.22. Federal taxes. -- An amount of salary in addition to the\nbasic allowance under section 1002.18 may be permitted to an employee. under\nthis section, to meet payments during the employee's taxable year of certain\nFederal income taxes. To be entitled to such an additional allowance of sol-\nary the employee must establish to the satisfaction of the Commissioner that\nafter resorting to his income from All sources (see section 1002.19), he is\nunable, without disposing of assets at A substantial financial loss resulting\nin undue hardship. to meet payments of certain Federal income taxes, more\nfully described below. See section 1002.20.\nAn allowance for additional salary is permissible in order to pay Federal\nincome taxes owed by the employee himself for any prior taxable year, but is\nnot permissible in order to pay any Federal income tax due on the basic allow-\nance of salary under section 1002.18, except as this allowance is applicable\nfor 1942. See section 1002.24. Thus, an amount for additional salary might\nbe allowable in 1943 to meet the payment of the entire Federal income tax due\non a salary received in 1942. In 1944 an amount for additional salary might\nbe allowable to meet the payment of Federal income tax due on additional\nsalary allowances permitted for 1943 under sections 1002.19, 1002.20, 1002.21\nand this section for 1943; but no amount, however, would be allowable to meet\nthe payment of the Federal income tax due on the basic allowance under section\n1002.18 for 1943.\nSec. 1002.23. Multiple employers. -- Salaries payable to an employee\nfrom more than one employer may, for purposes of Subpart F, be treated 88 if\nall such salaries were payable by a single employer. regardless of the finan-\ncial or other relationship of the several employers. For example, individual\nA received a salary as an employee of the X Corporation and also as an en-\nployee of its subsidiary, the Y Corporation. Both the X Corporation and the\nY Corporation are required to adjust their salary arrangements with such em-\nployee to conform with the provisions of these regulations. If individual B\nis employed by the M Corporation and the N Corporation, both of whom are\nowned, directly or indirectly, by the same person or persons, the M Corpora-\ntion and the N Corporation must adjust their salary arrangements with 3 to\nconform with the provisions of these regulations. If individual C is employed\nby the R Corporation and the S Corporation and both corporations have know-\nledgo of that fact, they must adjust their salary arrangements with C to con-\nform with the provisions of these regulations.\nWhere an individual is employed by two or more employers who, under these\nregulations, are required to make salary arrangements in order to conform\nwith the provisions of Subpart F, such individual and employers will be deemed\nto be acting in contravention of the Act and these regulations if proper sal-\nary arrangements are not made. In any event, no employee may receive any\nsalary in excess of that allowed under Subpart F. See section 1002.30.\nSec. 1002.24. Limitation on 1942 salaries. -- Unless payment thereof is\nrequired under a bona fide contract in effect on October 3. 1942, no amount\nof salary shall be paid or authorized to be paid to or accrued to the account\n(over)\nRegraded Unclassified\n(T. D. 5186)\n- 18 -\nof any employee or received by him after October 27, 1942 anc before January\n1, 1943, 1f the total salary paid, authorized, accrued or received for the\ncalendar year 1942 exceeds the amount of salary which would otherwise be al-\nlowable under section 1002.18 (but not under sections 1002.19 to 1002.22, in-\nclusive) and also exceeds the total salary paid, authorized, accrued or TO-\nceived for the calondar year 1941, For purposes of this section, the term\n\"bona fide contract\" means a longally enforceable agreement, written or oral.\nSuch an agreement may be evidenced by a bona fido resolution of a board of\ndiroctors of n corporate employer passed on or before October 3, 1942, The\namount allowable under section 1002,18 for 1942 (bofore roduction by any\nFederal income taxes) is $54,428.57.\nSoc: 1002.35. Community property. -- The limitations on salaries provided\nfor in sections 1002.18 to 1002.24, inclusivo, shall in nowise be affected by\nany community property law. For example, an employee resident in the State of\nR receives a salary in 1943 of $100,000. Under the lave of that State, $50,000\nof that salary is doemed to be the property of the employee's wife, For pur-\nposce of these regulations, the employee's salary is $100,000. not $50,000,\nSoc. 1002.26. Taxable year. -- For purposes of Subparts F and G of these\nregulations, the term \"taxable year\" of an employee shall mern the colender\nyear during which the salary in question is paid or authorized to be paid to\nor accrued to the account of such employee or received by him. This rule is\napplicable regardless of whether the employer or employee, or both, filo\nFederal income tax returns for a fiscal year or report income, for Fodoral\nincome tax purposes, on an accrual basis or on the cash receipts and disburso-\nments basis.\nSoc. 1002.27. Effective drite. -- The provisions of this Subpart, except\nas provided in section 1002.24, shall be applicable to all salaries paid or\naccrued after December 31, 1942, irrespective of when payment or accrual of\nsuch salary was authorized and irrespective, also, of any contract or agree-\nment made prior to or after such date.\nSUBPART G - EFFECT OF UNLAWFUL PAYMENTS\nSec. 1002,28. Amounts disregarded. -- (a) Section 5 (a) of the Act\nprovides in offect that the President shall prescribe the extent to which any\nsalary payment made in contravention of regulations promulgated under the Act\nshall bo disrogarded by executive departments and other governmental agencies\nin determining the costs or expenses of any employer for the purposes of any\nother law or regulation. In any case where a salary payment is determined by\nthe Commissioner to have been made in contravention of the Act, the ontiro\namount of such payment is to be disregarded or all executive departments and\nall other agencios of the Federal Government for the purposes of --\n(1) dotermining costs or exp need of any employer for the\npurpose of any law or regulation, either heretofore or hereafter\nenacted or promulgated, including the Emergency Price Control\nAct of 1942, or any maximum price regulation thereof;\n(2) calculating deductions under the revonus laws of the\nUnitod Statos; or\nRegraded Unclassified\n(T. D. 5186)\n- 19 -\n184\n(3) determining costs or expenses under any contract made\nby or on behalf of the United States.\nA. payment in contravention of the Act may be disregarded for more than one of\nthe foregoing purposes.\n(b) In the case of salaries decreased in contravention of the Act, the\namount to be disregarded, às required by paragraph (a) of this section, is\nthe amount of the salary actually paid or accrued by the employer at the re-\nduced rate. Thus, if, for example, on November 1. 1942, a weekly salary rate\nof $100 has been unjustifiably reduced to $50 for the remainder of the calen-\ndar year 1942, the amount to be disregarded under paragraph (a) of this sec-\ntion is the total amount of salary paid at the weekly rate of $50.\n(c) In the case of salaries increased in contravention of the Act, the\namount to be disregarded, as required by paragraph (a) of this section, 18\nthe amount of the salary actually paid or accrued by the employer at the in-\ncreased rate and not merely an amount representing an increase in such salary.\nThus, if, for example, on November 1, 1942 a weekly salary rate of $100 is un-\njustifiably increased to $150 for the remainder of 1942, then the amount of\nsalary to be disregarded for purposes of paragraph (a) of this section is the\ntotal amount paid at the weekly rate of $150. Also, if, for example, on\nFebruary 1, 1943 a weekly salary rate of $100 is increased to $150 without\nprior required approval, but is restored to $100 on June 1, 1943 after formal\ndisapproval by the Commissioner or regional officer. then the amount of selary\nto be disregarded for purposes of paragraph (A) of this section is the total\namount at the weekly rate of $150. Neither in the cases described in this\nparagraph nor in the case described in paragraph (b) of this section are the\ntotal amounts paid at the weekly rate of $100 to be disregarded for purposes\nof paragraph (a) of this section. (See section 1002.31 relating to salary\nallowances under section 23 (a) of the Code.)\n(d) In the case of a salary in excess of the amount allowable under Sub-\npart F of those regulations which is paid to, authorized to be paid to, or\naccrued to the account of an employee during his taxable year (as distin-\nguished from the taxable year of the employer) in contravention of the Act,\nthe amount to be disregarded is the full amount of such salary and not merely\nthe amount representing the excess over the amount allowable under such Sub-\npart F of these regulations. Thus, if, for example, under such Subpart F an\nemployee would be entitled to receive a total salary during his taxable year\nof $67,200 for services rendered in such year, but actually receives $100,000\nfor such services, then the entire amount of $100,000 is to be disregarded for\npurposes of paragraph (a) of this section.\nSec. 1002.29. Criminal penalties. -- Section 5 (A) of the Act provides\nin substance that no employer shall pay. and no employee shall receive, any\nsalaries in contravention of the regulations promulgated by the President un-\nder the Act. Section 11 of the Act provides that any person, whether an em-\nployer or employee, who wilfully violates any provision of the Act or of any\n(over)\nRegraded Unclassified\n(T. D. 5186)\n- 20 -\nregulations promul gated thereunder, shall be subject, upon conviction, to A\nfine of not more than $1,000. or to imprisonment for not more than one year,\nor to both such fine and imprisonment.\nSec. 1002.30. Salary allowances under Code. -- Under section 23 (a) of\nthe Code reasonable allowances for salaries are allowed as deductions in com\nputing net income. The testa which determine whether an allowance for salar-\nies paid or accrued is reasonable within the meaning of section 23 (a) of the\nCode are in nowise suspended by any provision of these regulations. An em-\nployer may be exempt from the operation of these regulations yet be donied\ndoductions for purposes of section 23 (a) of the Code with respect to the sal-\narias paid or accrued by him. Also, a basic allowance under section 1002.18\nand additional allowances under sections 1002.19 to 1002.22, inclusive, may\nnevertholos be disallowed in whole or in part as deductions under section 23\n(a) of the Code.\nSUBPART H -- EXEMPTIONS\nSoc. 1002.31. Exempt employers. -- The provisions of these regulations,\nexcept those contained in Subparts F and G thereof, shall not apply in the\ncase of an employer who employs eight or loss individuals in a single busi-\nnoss. An employer is subject to the provisions of these regulations if at the\ntime a salary increase 1s to take effect he has in his employ more than eight\nindividuals in a single business. It is not necessary that each employee be\npaid a salary provided all the individuals employed receive compensation for\ntheir personal services. If it is subsequently determined that the number of\nemployees has been temporarily reduced by the employer. or that the employer\nhas utilized any other improper device, for the sole purpose of claiming the\nexemption provided in the General Regulations and these regulations, then such\nexemption shall be deemed to have been improperly obtained and of no force or\neffect.\nAn employer may be exempt under this section notwithstending that shortly\nafter the effective date of A salary increase he enlarges his personnel in\ngood faith to more than eight employees. Any further adjustment in salary\nwill then be subject to the provisions of these regulations.\nSec. 1002.32. Statutory salaries. -- The provisions of these regulations\nare applicable in every respect to any salary paid by the United States, any\nState, Territory, or possession or political subdivision thereof, the District\nof Columbia, or any agency or instrumentality of any one or more of the fore-\ngoins, except where the amount of such salary is fixed by statute. The torm\n\"statuto\" for purposes of this soction does not include a municipal ordinance\nor resolution enacted by A governmental unit inferior to a State, Territory,\nor possession. Salaries covered by the Federal Classification Act of 1923, AB\namended, Are excluded from the operation of these regulations. Likewise, sal-\naries, for example, of public school teachers which are paid under salary\nachedules fixed by a state legislature and providing for mandatory increments\nare excluded from the operation of these regulations. See section 1002.17.\nSec. 1002.33. Services in foreign countries. - The provisions of these\nregulations shall not be applicable in the case of any individual employer,\nRegraded Unclassified\n185\n(T. D. 5186)\n- 21 -\nresident in the United States or any Territory or possession thoreof, or of a\ncorporate employer organized undor the laws of the United States or any State,\nTorritory or possession, with respect to salaries prid by such employers to\nemployees for services rendered exclusively in foreign countries.\nSoc. 1002.34. Foreign employers. - The provisions of those regulations\nshall not be applicable in the case of nonresident foreign employers oxcopt\nthat if any salary is paid to an employee residing in the United States pay-\nment of such salary is subject to all the provisions of these regulations.\nGUY T. HELVERING,\nCommissioner of Internal Revenue.\nAPPROVED: December 2, 1942.\nJOHN L. SULLIVAN,\nActing Secretary of the Treasury.\nRegraded Unclassified\n186\nDEC 2 - 1942\nBy dear Senator:\nIn keeping with your letter of November 20, 1948, additional\ndata which you have requested with reference to the relationship\nbetween the Treasury Department and the problems of small business,\nis furnished in the order of the points as raised.\n1. Directives and general policy memoranda setting forth the\nplans to be followed in making further use of small plants are\nattached and identified as Direster's Order No. 121 dated March 25,\n1942, Supplement to the above Order issued October so, 1942 in-\nstructing that was contracts be placed by negotiation, and Office\nMemorandum dated September 21, 1942 and Supplement So. 1 dated Sep-\ntember 28, 1942 relative to the availability of labor and placement\nof contracts.\nPrior to the dates of the above documents, it was the\npolicy of the Prosurement Division to spread business to distressed\nmanufacturers. Perchases were recommended and awards were approved\nby members of Ky staff thoroughly familier with the bread policy.\n1. The Treasury Presurement Division's set up to deal with\nthe Smaller Mar Plants Division of the Yes Production Board, is out-\nlined in letter of October 26, 1949 addressed to Mr. Orville 8.\nVePherson, chief, Procurement Contract Branch, Ear Production Board.\nÁ copy of this correspondence is attached.\nUnder date of January $4, 1942 a section, under the super-\nvision of Thomas C. Stephene, Special Assistant to the Director of\nProcurement, was ereated to effectuate the policy of spreading the\nbusiness. Shortly after the creation of the Smaller Mar Plants Cer-\nporation, Mr. Harvey 1. Malett was designated as lisison officer for\nthe Smaller Mar Plants Division. Mr. Stephens has been is constant\ncontact with Mr. Malott on matters pertinent to this relationship.\n3. Since January 14, 1942, the date of Executive Order 9023,\ncontracts relating to war procurement have been placed by negotiation.\nNo records as to the actual extent to which - have been sussessful\nin furthering the specific objectives of Directive No. 2 end Amendment\nof October 10, 1942, have been maintained; however, we have occporated\nwith the Division of Purchases, War Production Board and since its\ninseption, with the Smaller Har Plants Division of the War Production\nBoard, and have concluded purchases after proper evaluation under the\nRegraded Unclassified\n187\nprovisions of Directive No. 2 incoded. As evidence of our efforts\nin furthering the objectives of Directive No. 2, there are attached\na partial resord of purchases made during the period from January\n14, 1942 through October 51, 1942, including specific exemples of\ninstances of where the policy of spreading the business has been\napplied, and a copy of & letter dated October 31, 1942, addressed\nto the Director of Procurement, over the signature of Mr. Lew R.\nHolland, Deputy Chairman, War Production Beard, which indicates\nthe extent of our cooporation. Suggestions have from time to time\nbeen made to the Ter Production Heard to develop facilities for\nthe production of items such as netric tools, diesel motors, and\ntypes of road construction machinery which have been accepted M\narmy standards.\n4. In view of the varying problems in commestion with indi-\nvidual purchases, no specific formula for the purpose of spreading\nthe business emong small plants have been devised. For example, a\nspecific procedure was adopted for resent purchases of equipment\ntotaling approximately $20,000,000 made for the account of Federal\nPublic Rousing Authority. Under this procedure and in view of the\nfact that the time of delivery was the most essential feeter for\nconsideration, certain quantities were awarded to those manufas-\nturers who were in a position to produse promptly from materials\non hand. For the purpose of distributing esstrests further the\nremaining portion of the total requirement was divided emong numer-\nous contractors who had capacity for production during the latter\npart of the program.\nThe Procurement Division of the Treasury purchases, for\nthe most part, finished and products ready for use, which products\noft-times involve operations all of which cannot be accomplished\nin the normal small plant. The are without funds or authority to\ndevelop or coordinate the fasilities of small plants to place them\nin a position to completely manufacture an item which may require\na. multiplicity of operations. Be have been able, for the met part,\nto place only contracts involving less difficult production problems\nwith smaller plants. No have, however, encouraged subsontrasting,\nwhenever practicable, as illustrated by the following example which\nconserns the purchase of a relling mill without electric drive,\nweighing approximately 7,576,000 pounds, from the Lewis Poundry\nand Machine Company, Division of Blew-Knex, Pittsburgh, Pennsylvania,\nat a cost of $2,500,000. At the direction of the Procurement Divi-\nsion, the prime contractor entered into subsentracting M listed\nbelow.\nCommellaville Mfg. & Mine Supply Co., Commellsville, Pa.\nKeystone Drilling Co., Beaver Falls, Pa.\nLee C. Meore Co., Neville Island, Pa.\nPatterson Foundry à Machine Co., Fast Liverpool, Chie.\nItems Standard Engineering Co., last Liverpool, Ohio.\nRegraded Unclassified\n188\nC. 8. Uline Co., Bellviou, Pa.\nPart Stannix Co., Remo, 3. Y.\nNerwood Engineering Co., Flarence, Mass.\n0. B. Blaird Ce., Shreveport, La.\nPittsburgh Rells Division, Pittsburgh, Pa.\nU. s. Seederly Co., Salem, Chie.\nRechester Machine Co., Rechester, pa.\nIngalls Stone Co., Bixferd, Ind.\nSpringfield Feundry à Machine Co., Springfield, these.\nTreadwell Engineering co., Easten, Pm.\nBirdsbers Feundry & Machine Co., Birdsbere, pa.\nSharmee Stone Ce., Bleenington, Ind.\nBreden Construction Co., Cleveland, Ohio.\nCarl Furst Co., Bedferd, Ind.\nRiverdale Foundry & Machine ce., Pittsburgh, Pa.\nThemas Machine & Foundry Co., Etna, Pa.\nBarrett Machine & Tool Co., Meadville, Pas\nWestinghouse Electric Co., East Pittsburgh, Pa.\nCarnegie-Illineis Steel Co., South Charleston, 11. Va.\nDifficulties have been experienced in obtaining delivery\nwithin the time required from some small plants under contracts\nfor items outside the seepe of their normal activity. This is a\nnatural reaction and the difficulties have net been too objection-\nable.\nIn order to assist in the preservation of preductive\ncapacities of plants and to expedite deliveries we have entered\ninto definite quantity contracts for electric fane, wood office\ndesks and files, in advance of known required irements.\n5. The total of quantities of desks and files cited above\nwere purchased without prierity assistmes. Such assistance use\nnet readily obtainable inseruch as the specific using department\nor agency was net known at the time of purchase. For this reason\nsome small plants, having no furniture woods on hand ner ACCOSE\nto supplies without priority assistance, were unable to participate\nin the program. A similar situation may be encountered under Om-\noral Schedule of Supplies contracts. M a general rule the major\npartion of our purchasing is accomplished after receipt of a requi-\nsition for a specific item, mterial, of supplies for which the\napplicable prierity assistance has been predetermined and under\nwhich run materials are equally accessible to all classes of sup-\npliers. Without e estien the shortage of raw materials impedes\nthe full utilisation of small plants.\nRegraded Unclassified\n189\n6. A primary consideration in var procurement is speed in\nthe placing of orders to neet specified deliveries, consequently\n19 10 essential that the closest collaboration be maintained\nbetween the Smaller Var Plants Corporation and the var procurement\nagencies to develop the utmost spreading of business consistent\nwith required deliveries. Insofar as the Procurement Division of\nthe Treasury Department is concerned, the major part of the par-\nchasing 10 of end products and spreading of the business is, to some\nextent, but temporary relief depending upon the sise of the order.\nIt is believed there is an opportunity for an extension of\nthe program to spread business through the cooperation of prime con-\ntractors, particularly in those areas where there are labor shortages.\nDevelopment of subcontracting against prime orders involving produc-\ntion for extended periods would be a real benefit to the small plants\nin need of business. To obtain the maximus advantages requires ade-\nquate provisions in contracts with prime contractors to require mb-\ncontracting. also complete cooperation of all concerned.\n7. At the direction of the Office of Lend-Lease Administration,\nand after clearance by the War Production Board, the Procurement\nDivision purchases under Lend-Lease all the rav materials, seai-\nfinished products, and sanufactured items which are required to ful-\nfill the various Lend-Lease commitments, except (1) foodstuffe, which\nare purchased by the Department of Agriculture, (2) ships and fittings,\nwhich are purchased by the Maritine Commission, and (3) items of\nmilitary equipment and supply, which are purchased w the Army and\nMavy. The items purchased cover an extremely vide range of indus-\ntrial commodities. Broadly they say be classified under the\nfollowing general commodity classes:\n(a) Ferrous and non-ferrous metals.\n(b) Textiles.\n(a) Abrasives.\n(d) Chemicals and drugs.\n(e) Heavy machinery.\n(f) Mides.\n(g) Lumber.\n(h) Petroleum and petroleum products.\n(1) Miscellaneous items.\nI in accord with the efforts of your committee to utilize\npracticable spread of business. You may expect the complete support\nthe productive - capacities of smaller plants and to achieve the widest\nof the Treasury Department and the facilities of the Procurement Div-\nision in accomplishing your purpose.\nVery truly yours,\n(Signed) H Morgenthan, Jr.\nSecretary of the Treasury\nHonorable James B. Murray\n(Del. by Sturgie 5:03 12/2/42. Ret'd -\nUnited States Senate\nno one in office, and del. 9:15 12/3/42\nPhoto file in Diary. Orig. file to Thom *BON\nRegraded Unclassified\nNovember 24, 1942\nMy dear Senator:\nFor the Secretary, I wish to acknowledge receipt\nof your letter of November 20th, with reference to the\nprocurement aspects of our communication concerning the\nrelationship between the Treasury Department and the\nproblems of small business.\nThis matter will receive prompt attention and you\nwill be further advised.\nVery truly yours,\nAdministrative Assistant\nto the Secretary.\nHonorable James E. Murray,\nUnited States Senate.\nof\nRegraded Unclassified\n-\na.\nKANS\nUnited States Senate\nSpecial Committee to Study Problems of\nAmerican Small Business\nNovember 29, 1342\nRon. Henry Morgenthau, Jr.\nSecretary of the Treasury\nWashington, D.C.\nDear Mr. Secretary:\nThank you for your letter of November 9, in response to\nour inquiry concerning the relationship between the Treasury De-\npartment and the problems of small business.\nWith rogard to the procurement aspects of your communi-\nsation, the Committee would deeply appreciate your submitting a\nfurther statement to include the following points:\n1. All directives and general policy memoranda of the\nProcurement Division of the Treasury setting forth\nthe plans to be followed in making further use of\nsmaller plants.\n2. An explanation of the Treasury Procurement Division's\nset-up to deal with the Smaller War Plants Division\nof the War Production Board, together with an\norganization chart and the names of the top personnel.\n3. A report on the extent to which the Procurement Divi-\nsion of the Treasury has been able to carry out the\nspecific plans set forth in the original directive\n#2 of Donald Nelson, Chairman, War Production Board,\nand of the directive as amended on October 10, 1942.\n4. A brief summary of your experience in spreading war\nwork among smaller plants, with particular attention\nto the type of work that you have been most successful\nin giving to smaller plants.\n5. The extent to which, in the opinion of the Procurement\nDivision of the Treasury, the shortage of raw materials\nimpedes the further utilization of smaller plants.\n6. Your analysis of other obstacles in the path of further\nutilization of smaller plants.\n7. The role of the Treasury Department in lend-lease pur-\nchases and whether or not the Treasury Department should\nnot take a much more active role in lend-lease procurement.\nRegraded Unclassified\n- 2\nThe Committee has been informed by many sources that\nyour Procurement Division is doing an outstanding job. Some small\nbusinessmen have also suggested that your Procurement, Division\nshould be given much greater responsibility with regard to the\nhandling of war procurement. On this account, and for other\nreasons, we should appreciate having the above material as soon as\npossible - preferably by December 1.\nSincerely yours,\nChairman\nRegraded Unclassified\n193\nTREASURY department\nPROCUREMENT DIVISION\nOFFICE OF THE DIRECTOR\nWASHINGTON\nMarch 25, 1942\nDIRECTOR'S ORDER NO. 121\nTO: Chiefs of Branches and Divisions\nThe Chairman of the War Production Board has issued a Directive\nin connection with the placing of supply contracts relating to war\nprocurement. There is quoted following the provisions of such\nDirective:\n\"Pursuant to the authority vested in me by Executive Order No.\n9040 of January 16, 1942, and Executive Order No. 9040 of January\n24, 1942, the following policy is prescribed for all Departments\nand Agencies now or hereafter authorized by the President to exer-\ncise the powers set forth in Title II, section 201 of the First War\nPowers Act, 1941 (Public No. 354, 77th Congress):\n\"S 904.1 Placing supply contracts. (a) Except as hereinafter\nprovided, all such Departments and Agencies shall place all supply\ncontracts relating to war procurement by negotiation: Provided,\nThat where consistent with the required speed of war procurement,\nnotofication of the proposed procurement shall be given to quali-\nfied possible contractors and quotations secured from them. The\nprocedure provided by section 3709 of the Revised Statutes (41 U.S.C.\nsection 5) shall be used only upon the specific authorization of\nthe Director of Purchases of the War Production Board, or of such\nperson or persons as he may designate.\n\"(b) (1) In placing such contracts, particular regard shall\nbe paid to the following considerations:\n\"(1) Primary emphasis shall be upon securing delivery in the\ntime required by the war program.\n\"(11) In 80 far as it will effectuate the policy set forth\nin subparagraph (1) ahove, such contracts shall be placed 60 as\nto conserve, for the more difficult war production problems, the\nfacilities of concerns best able, by reason of engineering, mans-\ngerial, and physical resources, to handle them. Accordingly, con-\ntracts for standard or other items which involve relatively simple\nproduction problems shall be placed with concerns, normally the\nFORDEFENSE smaller ones, which are less able to handle the more difficult war\nproduction problems.\nBUY\nUNITED\nSTATES\nSAVINGS\nBONDS\n453 YTAMPS\n194\n-2-\n\"(111) Subject to the considerations stated in subparagraphs\n(1) and (11). such contracts shall be placed with concerns needing\nto acquire the least amounts of additional machinery and equipment\nfor performance of the contracts. Accordingly, 88 an esaential\npart of each negotiation, procurement officials shall secure from\nprospective contractors statements listing all additional machinery\nand equipment which will be needed for performance of the contract.\n\"(2) Authority to depart from this policy may, upon specific\nrequest, be granted by the Director of Purchases of the War Pro-\nduction Board, or by such person or persons as he may designate for\nthis purpose.\"\nIn accordance with such Directive, effective immediately, all\ncontracts for the Procurement Division shall be placed as provided\nfor in such Directive, except as follows:\n1. All Field Offices of the Procurement Division shall\ncontinue to place contracts in accordance with exist-\ning procudure and the terms of the Directive shall\nnot apply to such contracts, until such time as fur-\nther instructions are issued.\n2. All General Schedule contracts, until further notice,\nshall be placed in accordance with existing procedure\nin view of the scope of such contracts and the admin-\nistrative difficulties involved in changing over to\nthe method provided for in such Directive. However,\ncompliance with such Directive as soon as possible 1s\ncontemplated, and when the plans for including such\ncontracts in the new procedure are completed a further\norder will be issued in connection therewith.\n(Signed) CLIFTON E. MACK\nDirector of Procurement\nto depart from the policy established by Directive No. 2 of to the\nAuthority 1s hereby granted to the Director of Procurement\nChairman of the War Production Board, dated March 3, 1942,\nthe extent provided for in the above Order.\nDated: March 25, 1942\nJames MacPherson\nRegraded Unclassified\n195\nTREASURY department\nPROCUREMENT DIVISION\nICE of THE DIRECTOR\nWASHINGTON\nOctober 20, 1942\nDIRECTOR'S ORDER NO. 121, SUPPLEMENT NO. 1\nTO: Chiefs of Branches and Divisions,\nRegional end Deputy Procurement Officers.\nSUBJECT: Placing War Contracts by Negotiation,\nUnder date of March 3, 1942 Mr. Donald M. Nelson, Chairman,\nWar Production Board, issued Directive No. 2 directing the manner of\nplacing supply contracts relating to war procurement. The policies out-\nlined by the above Directive were made the subject of Director's Order\nNo. 121 issued March 25, 1942. At the time of issuance, purchases by\nField Offices of the Procurement Division were exempt from the provisions\nof the Directive, therefore, Director's Order No. 121 WAS not circulated\nto Regional and Deputy Procurement Officers.\nDirective No. 2 was amended October 10, 1942 by the Chairman\nof the War Production Board and now applies to all departments and agencies\nplacing contracts relative to war procurement. There is quoted below the\nessential provisions of the amended Directive.\n\"Pursuant to the authority vested in me by Executive Order No.\n9024 of January 16, 1942, and Executive Order No. 9040 of January 24, 1942,\nthe following policies and procedures are prescribed for all departments\nand agencies now or hereafter authorized by the President to exercise the\npowers set forth in Title II, Section 201 of the First War Powers Act,\n1942 (Pub. Law 354, 77th Congress).\n\"(a) Except as hereinafter provided, all such departments and\nagencies shall place contracts relating to war procurement by negotiation.\nNegotiation as used in this directive may include not only face-to-face\ndenlings, but also purchasing by securing informal written bids or tele-\nphone quotations. Where consistent with the required speed of war pro-\ncurement, notification of the proposed procurement shall be given to a\nreasonable number of qualified contractors and quotations secured from\nthem.\n\"(b) In negotisting contracts relating to war procurement the\nfollowing considerations shall governi\nFORVICTORY\nBUY\nENITED\nSTATES\n(over)\nBONDS\nAPP\nSTAMPS\n(36633)\nRegraded Unclassified\n- 2 -\n\"(1) Primary emphasis shall be upon securing deliveries or\nperformance at the times required by the war program.\n\"(11) Subject to the considerations stated in subdivision (1)\ncontracts shall be placed with concerns needing to acquire the least amounts\nof additional new machinery, equipment, or facilities for performance of\nthe contracts.\n\"(111) Subject to the considerations stated in subdivisions\n(1) and (ii), it shall be the policy of all war procurement departments and\nagencies to avoid contracting for the production of items or materials in\ncommunities or areas in which acute labor shortages are known to exist\nwhenever it is practical to procure the needed items or materials elsewhere.\nThe War Manpower Commission shall be relied upon to certify to the war\nprocurement agencies, communities and areas in which acute labor shortages\nexist to such. a degree that the policy stated in this subdivision 1a\napplicable.\n\"(iv) Subject to the considerations stated in subdivision (1),\n(11). and (111), such contracts shell be placed B0 as to conserve, for the\nmore difficult war production problems, the resources of concerns best able\nby reason of engineering, managerial, and physical resources, to handle\nthem. Accordingly, contracts for items which involve relatively simple\nproduction problems shall be placed with concerns, normally the smaller\nones, which are less abl'e to handle the more difficult war production\nproblems.\n\"(v) Subject to the considerations stated in subdivisions (1),\n(11). (111). and (1v), and also subject to the provisions of the Production\nConcentration Programs, which have been or may in the future be instituted\nby the War Production Boárd, such contracts shall be placed 80 as to apread\nproduction among as many firms as 18 reasonable and feasible.\n\"(c) War procurement departments and agencies are hereby authorize\nand directed to pay higher prices than would otherwise be required if such\naction is necessary to put into effect the policies stated in subdivisions\n(1) through (v), inclusive. If all the considerations set forth in sub-\ndivisions (i) through (v) have been met and there 18 still need for seleo-\ntion among contractors, contracts shall be so placed as to obtain the\nlowest price for the Government.\"\nThere is attached a list of labor markets supplied by the War\nManpower Commission in which labor shortages exist. As labor market con-\nditions change, supplements to this order will be issued.\nDirective No. 2, Amended.\nImmediate steps shall be taken to effectuate the provisions of\n(signed) CLIFTON E. MACK\nDirector of Procurement\n(continued)\n(3663)\nRegraded Unclassified\n196\nAREAS EXPERIENCING ACUTE LABOR SHORTAGES, SEPTEMBER 28, 1942\nALABAMA\nMARYLAND\nOREGON\nMobile\nBaltimore\nPortland\nCALIFORNIA\nMASSACHUSETTS\nSOUTH CAROLINA\nSan Diego\nHolyoke\nCharleston\nPittsfield\nSpringfield\nCONNECTICUT\nTEXAS\nBridgeport\nBenumont\nBristol\nMICHIGAN\nOrange\nHartford\nDetroit\nPort Arthur\nMeriden\nFlint\nMiddletown\nNew Britain\nUTAH\nNew Haven\nNEW HAMPSHIRE\nOgden\nNew London\nClaremont\nSelt Leke City\nNorwalk\nPortsmouth\nStamford\nWaterbury\nVERMONT\nNEW YORK\nSpringfield\nDISTRICT OF COLUMBIA\nBuffalo\nWindsor\nWashington\nElmira\nLockport\nILLINOIS\nMassena\nVIRGINIA\nJoliet\nNiagara Falls\nHampton Ronds\nRockford\nSchenectady\nWASHINGTON\nINDIANA\nNORTH CAROLINA\nBremerton\nEvansville\nWilmington\nSeattle\nIndianapolis\nSpokane\nLa Porte\nTecoma\nMichigan City\nOHIO\nDayton\nFreemont\nWISCONSIN\nKANSAS\nHamilton\nBeloit\nWichita\nKings Mills\nClintonville\nMiddletown\nJanesville\nRavenna\nMenitowoc\nMAINE\nSandusky\nSturgeon Bey\nBoth\nWarren\nPortland\nNOTE: It is intended to include not only the corporate limits of the com-\nmunities themselves, but also the surrounding territory within\nfeasible commuting distance.\n(36633)\nRegraded Unclassified\n196\nAREAS EXPERIENCING ACUTE LABOR SHORTAGES, SEPTEMBER 28, 1942\nALABAMA\nMARYLAND\nOREGON\nMobile\nBaltimore\nPortland\nCALIFORNIA\nMASSACHUSETTS\nSOUTH CAROLINA\nSan Diego\nHolyoke\nCharleston\nPittsfield\nSpringfield\nCONNECTICUT\nTEXAS\nBridgeport\nBenumont\nBristol\nMICHIGAN\nOrenge\nHartford\nDetroit\nPort Arthur\nMeriden\nFlint\nMiddletown\nNew Britain\nUTAH\nNew Haven\nNEW HAMPSHIRE\nOgden\nNew London\nClaremont\nSalt Leke City\nNorwalk\nPortsmouth\nStamford\nWaterbury\nVERMONT\nNEW YORK\nSpringfield\nDISTRICT OF COLUMBIA\nBuffalo\nWindsor\nWashington\nElmira\nLockport\nILLINOIS\nMassena\nVIRGINIA\nJoliet\nNiagara Falls\nHempton Roads\nRockford\nSchenectady\nWASHINGTON\nINDIANA\nNORTH CAROLINA\nBremerton\nEvansville\nWilmington\nSenttle\nIndianapolis\nSpokane\nLa Forte\nTecoma\nMichigan City\nOHIO\nDayton\nFreemont\nWISCONSIN\nKANSAS\nHamilton\nBeloit\nWichitn\nKings Mills\nClintonville\nMiddletown\nJanesville\nRavenna\nMenitowoc\nMAINE\nSandusky\nSturgeon Bey\nBath\nWarren\nPortland\nNOTE: It is intended to include not only the corporate limits of the com-\nmunities themselves, but also the surrounding territory within\nfeasible commuting distance.\n(36633)\nRegraded Unclassified\n197\nTREASURY department\nPROCUREMENT DIVISION\nOFFI OF THE DIRECTOR\nWASHINGTON\nSeptember 21, 1942\nOFFICE MEMORANDUM.\nTO: ALL GROUP CHIEFS AND ASSISTANT GROUP CHIFFS.\nSUBJECT: Availability of Labor and the Placement of Contracts.\nThe growing number of communities in which shortages are at\npresent apparent, show that labor is becoming an increasingly scarce\nresource.\nConsideration of labor supply in all decisions affecting war\nproduction has become essential. For effective utilization of the\nnational manpower, additional war work should be directed towards\nareas with adequate labor supply and away from areas with acute labor\nshortages.\nFurther labor demand in the shortage areas would cause excessive\nmigration, aggravate housing problems, increase pressure on overcrowded\ntransportation and other community facilities, and perhaps inability to\nmeet delivery dates.\nLabor scarcity in many communities, despite continuing unemploy-\nment in other communities, require steps be taken to effect better\ndistribution of labor demand such as transfers of civilian production\nfrom labor shortage areas and greater attention paid to labor supply in\nawarding contracts.\nThere is attached a list of labor markets, supplied by the War\nManpower Commission, in which there exists a shortage of workers. This\nlist will be kept current as labor market conditions change.\nThe Procurement Division will endeavor to issue contracts to employers\nlocated elsewhere then in these labor market areas. It is recognized it\nwill be occasionally necessary to locate contracts in some one of the\ntight labor markets due to a lack of facilities elsewhere than in these\ncommunities where those manufacturers in these communities can guarantee\nmuch greater speed in delivery than can manufacturers elsewhere. There\nmight be other binding reasons that dictate the locations of contracts in\none of these communities.\nPOB YICTORY\nBUY\n(over)\nWITED\nSTATES\nBONDS\nANY\nSTANDS\n(35690)\nRegraded Unclassified\n198\n- 2 -\nOffice Memo.\n9-31-42\nIt is understood the availability of labor is not to be\nconsidered the sole determining factor, but a very important one\nin placing contracts which involve manufacture subsequent to award.\nWhenever, in the opinion of Commodity Group Chiefs or Assistant\nGroup Chiefs, the placement of a contract for manufacture in 8\ncongested labor area would have a disturbing effect, the transaction\nshould be discussed with either the Chief of the Purchase Division\nor the Chief of the Contract and Purchase Section, prior to recommen-\ndation of award.\n(signed) A. J. WALSH\nDeputy Director of Frocurement\n(36690)\nRegraded Unclassified\n199\nAREAS EXPERIENCING ACUTE LABOR SHORTACFS, SEPTEMBER 9, 1942\nALABAMA\nMASSACHUSETTS\nUTAH\nMobile\nSpringfield\nOgden\nSalt Lake City\nCALIFORNIA\nMICHIGAN\nSan Diego\nDetroit\nVERMONT\nFlint\nSpringfield\nWindsor\nCONNECTICUT\nBridgeport\nNEW HAMPSHIRE\nBristol\nClaremont\nVIRGINIA\nHartford\nPortsmouth\nHampton Roads\nMeriden\nMiddletown\nNew Britain\nNEW YORK\nWASHINGTON\nNew Haven\nBuffalo\nBremerton\nNew London\nElmira\nSeattle\nNorwalk\nLockport\nTacoma\nStamford\nMassena\nWaterbury\nNiagara Falls\nSchenectady\nWISCONSIN\nBeloit\nDISTRICT OF COLUMBIA\nClintonville\nWashington\nNORTH CAROLINA\nJanesville\nWilmington\nManitowoc\nSturgeon Bay\nILLINOIS\nDecatur\nOHIO\nJoliet\nDayton\nRockford\nFreemont\nSpringfield\nHamilton\nMarion\nRavenna\nINDIANA\nSandusky\nEvansville\nWarren\nIndianapolis\nMichigan City\nOREGON\nPortland\nKANSAS\nWichita\nSOUTH CAROLINA\nCharleston\nMAINE\nBath\nPortland\nTEXAS\nBeaumont\nOrange\nMARYLAND\nPort Arthur\nBaltimore\n(35690)\nRegraded Unclassified\n200\nTREASURY department\nPROCUREMENT DIVISION\nPFICE OF THE DIRECTOR\nWASHINGTON\nSeptember 28, 1942\nSUPPLEMENT NO. 1 TO OFFICE MEMORALDUM DATED SEPT. 21, 1942\nTO:\nAll Group Chiefs and Assistant Group Chiefs.\nSUBJECT: Availability of Labor and the Placement of Contracts.\nIn order to keep current, as nearly as possible, the\nlist of AREAS EXPERIENCING ACUTE LABOR SHORTAGES, the following\nchanges should be made:\nADD to the list:\nHolyoke, Massachusetts\nKings Mills, Ohio\nLa Porte, Indiana\nMiddletown, Ohio\nPittsfield, Massachusetts\nSpokane, Washington\nDELETE from the list:\nDecatur, Illinois\nSpringfield, Illinois\nMarion, Ohio\nNOTE: It is intended to include not only the corporate limits\nof the communities themselves, but also the surrounding\nterritory within feasible commuting distance.\n(signed) A. J. WALSH\nDeputy Director of Procurement\nFOR YICTORY\nBUY\nSEPTED\nSTATES\nBONDS\nANN\nSTAMPS\n(35871)\nRegraded Unclassified\n201\nCOPY\nOctober 26, 1942\nMr. Orville 8. MePherson, Chief\nProcurement Contact Branch\nNer Production Board\nWashington, D. C.\nDear Sir:\nReceipt is acknowledged of your letter dated October 20,\n1942, outlining agreements reached in preliminary discussions\nregarding the matter of policy governing the activity of the\nSmaller Mar Plants Division of the Mar Production Board, in oon-\nnection with contracts awarded by the Procurement Division of the\nTreasury Department.\nIt is understood the Smaller War Plants Corporation will\nbe apprised of purchase requirements through access to a copy of\nincoming requisitions now being received by the Puschase Division\nof the Mar Production Board. The following general outline will\nbe pursued:\n1. SWPD will recommend sources of supply to be included\nin negotiations along with other sources known to this Division.\n2. SWPD will recommend the placement of contracts to one\nor more sources with the understanding that contrasts will be made\nwith such designated facilities provided price and delivery dates\nare acceptable.\ns. SWPD will request that procurements be made by Smaller\nWar Plant Corporation functioning as prime contractor.\nIt is Ky understanding the last method will be adopted\nin only those instances where the SWPD brings into being new\nfacilities for preduction. Provided existing facilities are to be\nutilized, the objective may be accomplished by following method\nNo. 2.\nVery truly yours\nA. J. Walsh\nDeputy Director of Procurement\nRegraded Unclassified\n202\nCOPY\nWAR PRODUCTION BOARD\nWashington, D.C.\nOctober 31, 1942\nIn reply refer to:\nDear Mr. Mack:\nThank you very much for your letter of October 21,\nsending me a copy of the report prepared for you by\nMr. Stephens, Special Assistant, with further specific\nexamples of spreading the business. I think this is very\ngood and take this opportunity of expressing my appreciation\nfor the fine cooperation we are getting from the Treasury\nDepartment.\nI an determined that our program shall go forward in\nan orderly way with the least amount of friction.\nWe are experiencing some difficulty in securing the\nservices of highly qualified non to contact the various\ndepartments of the Government. For this reason, it say be\nnecessary from time to time to make some changes in personnel.\nIf at any time you feel that our contact man is not the proper\nperson for the job, I would appreciate hearing from you.\nwith best wishes, I remain\nCordially yours,\n/s/ Lou S. Holland, Deputy Chairman\nHar Production Board\nMr. Clifton 3. Mack\nTreasury Department\nProcurement Division\nWashington, Do C.\nRegraded Unclassified\n203\nILLUSTRATIVE EXAMPLES OF PURCHASES MADE DURING\nTHE PERIOD JANUARY 14 THROUGH OCTOBER 31, 1942\n(SEE PAR. 8 or COVERING LETTER)\nMOTOR VEHICLES\nDuring the period involved, the Procurement Division has\npurchased all motor vehicles required by the Executive Departments\nand Independent Establishments of the Government and the District\nof Columbia, except Har, Havy, and Maritime Commission. Every\nattempt has been made to place these contrasts in the localities\nin which the vehicles are to be used.\nOFFICE DESKS AND FILE CABINETS\n$10,724,380.00\nIn anticipation of sisable requirements for office desks\nand file eabinets, the Procurement Division designed and made\ndefinite quantity contracts for conservative models of these\nitems. The desks are referred to as \"Victory\" models and utilize\na minimum amount of critical materials. The over all dimension\nis smaller than the conventional style desk although adequate for\nthe purpose intended. This desk requires less office space, less\ntransportation space and cost and was obtained at a cost of approx-\ninately one-third that of the conventional style. It is believed\nthis production will not reate serious post war competition for\nthe business as usual product. Since April 1, 1942, 124,200 \"Victory\"\ndesks have been purchased from 24 manufacturers at a total cost of\n$1,515,980.00. Purchase of 203,500 conventional type office desks\nwere made from 30 sources of supply, utilising rew materials on hand\nand without priority assistance, at a total cost of $7,122,600.00.\nDuring the same period a total of 67,900 conservative type wood\nfile cabinets have been purchased from 11 manufacturers, other than\nthese referred to above, at an approximate cost of $2,085,900.00.\nLUMBER, FLYWOOD, AND VENEERS\n(approx) $25,000,000.00\nThese purchases have consluded with approximately 215 suppliers.\nCOPPER TUBING\n3 8,595,666.00\nManufasturing facilities were developed by & single purchase\nof 1400 gross tons of copper tubing from 9 sontractors.\nHAND TOOLS, REAMERS, AND DRILLE\n8 6,144,324.79\nContracts for the above were executed with 125 suppliers.\nBLANKETS\n1,982,468.00\nThis total business was spread among 19 contrastors.\nRegraded Unclassified\n204\nBOLTS, NUTS, SCREWS, RIVETS, AND WARNERS\n$ 2,393,180.50\nAwards were made favoring 36 sources of supply.\nABRASIVES\n# 6,871,096.52\nThese materials were obtained from 38 suppliers.\n-\nCABLE\n$ 8,975,030.19\nAwards favoring 42 companies were made.\nHANDLE BLANKS\n8 292,389.22\nThese purchases were secured from 9 different contrastors.\nRAZOR SLADES\n$ 220,025.00\nAwards were divided among 12 manufacturers.\nHere detailed analysis of additional purchases follow:\nHOT WATER HEATERS AND WATER STORAGE TANKS\n$ 1,693,793.55\nContractor\nAmount\nAmerican Boiler Foundry Co.\n6,481.50\nAmer. Gas Machine Co.\n18,200.00\nBastian Morley Co.\n90,000.00\nDowagias steel Furnace Co.\n16,400.00\nDuo-Therm Div. of\nMotor Theel Corp.\n24,675.00\nDupage Boiler Works\n4,270.50\nErie Enameling Co.\n31,140.00\nFowler Mfg. Co.\n19,404.00\nHotstrom Heater Co.\n195,692.50\nLawson Mfg. Co.\n225,425.00\nLochinvar Products Div.\n80,605.00\nOhio Feundry & Mfg. Co.\n57,575.00\nPittsburgh Mater Heater Corp.28,840.00\nPersolain Steels Inc.\n156,849.00\nRhoem MSG. Co.\n269,416.00\nSmith, he O., Corp.\n3,588.00\nWood, John, Mfg. Co., Inc.\n50,000.00\nNeed, John MSE. Co.\n15,252.05\nUnited States Water Heater\nCompany\n400,000.00\nRegraded Unclassified\n205\n+\nCommodity\nContractor\nAmount\nTotal\nShoes\n8 896,654.66\nAllen Squire Co.\n178,600.00\nBrown, R. H., Shoe Co.\n232,000.00\nConfort Sandal Mfg. Co.\n10,000.00\nD. H. & G. H. Bell\n15,650.00\nEdmar Footwear Co.\n7,906.25\nEmpire Shoe Co.\n19,912.21\nFive Star Shoe Co.\n19,489.32\nPoster, R. H. Shoe Co.\n27,500.00\nHolly Shoe Co.\n18,125.00\nKreider Co., The A. S.\n5,634.78\nH. Jacobs à Some. Inc.\n30,253.00\nHubbard Shoe Co., Inc.\n8,125.00\nLenox Shoe Co. Inc.\n7,812.50\nLincoln Shoe Co.\n17,625.00\nMedway Shoe Mfg. Corp.\n43,250.00\nMonarch Shoe Co.\n5,404.60\nPilling, John, Shoe Co.\n57,147.00\nPrime Shoe Co., Inc.\n51,375.00\nParkway Shoe Corp.\n8,125.00\nPorter Shoe Co.\n14,170.00\nProgress Shoe Co., Inc.\n9,350.00\nRemsey Shoe Co.\n9,250.00\nSalem Shoe Co.\n51,575.00\nSuffolk Shoe Co.\n29,000.00\nSupreme Shoe Mfg. Co.\n21,375.00\nCottom Yarn\n1,210,663.26\nAberfoyle Mfg. Co.\n101,812.25\nAmerican Thread Co.\n262,086.00\nAmeskeag-Lawrence Mills\n81,057.00\nBladembero Cotton Mills\n4,250.00\nCaldwell Cotton Mills Co.\n37,500.00\nConneaut HSg. Co.\n125,000.00\nCross Cotton Mills Co.\n$0,670.00\nDixie Mercerising Co.\n66,028.50\nHempton Co.\n27,480.00\nLola Mills Inc.\n52,500.00\nMeyers, Clarence L. & Co.\n62,500.00\nMiller, L. P. Co.\n66,255.00\nKyers, Claremse L. Co.\n62,500.00\nNational Spinning Co.\n55,800.00\nSouthern Mercerizing Co.\n92,180.00\nTurner Halsey Export Corp.\n43,044.50\n206\n-\nCommodity\nContractor\nAmount\nTotal\nClothing\n$ 1,626,832.50\nAmerican Clething Co.\n79,000.00\nAnthracite Overall Mfg. Co.\n51,125.00\nBarney Modell & Co., Inc.\n13,750.00\nBelikoff Bros.\n$8,000.00\nBellgrade Mfg. Co.\n45,000.00\nCohen, George\n282,750.00\nCooperative Clothing\n79,000.00\nDandy Mfg. Co.\n158,000.00\nDavidson, Larry\n27,500.00\nDodourain Export Corp.\n38,000.00\nRgbert, A. & Sons, Inc.\n13,125.00\nGarfunkel Co., J. H.\n78,750.00\nGladstone Bros.\n209,750.00\nKendale Mfg. Co.\n23,500.00\nLakawanna Pants Mfg. Co.\n73,875.00\nLevinsohn, Sanders A. Inc.\n15,625.00\nLevinsohn Bros.\n173,500.00\nMalden Knitting Mills\n8,370.00\nMickey Finn Clothes Inc.\n27,500.00\nMiller Clothing Co.\n19,000.00\nNational Brand Co.\n128,548.00\nNew Brunswick Pants Co.\n17,171.00\nNew England Overall Co. Inc.\n16,625.00\nRegal Knitwear Co.\n7,500.00\nSachs, Harry, Inc.\n35,250.00\nSears Reebuck Co.\n16,225.00\nSomerville Initting Co.\n5,200.00\nStandard Overall Co.\n59,812.50\nSchwarts, A. J. & Co.\n15,625.00\nSebwarts, Julius & Sons, Inc.\n15,000.00\nStandard H-S-T Mff. Co.\n23,750.00\nSvirsky Clothing Co.\n6,750.00\nTarbro Clothes\n5,500.00\nUnion Knitting Mills\n15,912.00\nWexler Knitting Mills\n5,844.00\nGloves\n326,275.00\nComet Glove Corp.\n32,000.00\nD. C. Haber Enitting Co.\n$0,800.00\nLasker & Oshonsky\n67,875.00\nLasker & Weinstone\n26,375.00\nRoyal Knitting Mills\n71,225.00\nSmart Set Glove Co.\n98,500.00\n207\nCOMMODITY\nContractor\nAmount\nTotal\nTires, Tubes and Plaps\n$ 20,454,936.94\nArmstrong Tire à Rubber Co.\n$ 942,182.00\nCarlisle\n-\n-\n-\n-\n70,278.71\nCorduroy Rubber Co.\n150,584.00\nCupples Co.\n24,710.40\nDayton Rubber Mfg. Co.\n659,562.30\nDeman Tire & Rubber Co.\n65,902.00\nDunlop\n-\n-\n.\n-\n1,851,163.80\nFalls Rubber Co.\n272,475.87\nFirestone Tire & Rubber Co.\n3,602,131.36\nGates Rubber Co.\n172,661.00\nGeneral Tire & Rubber Co.\n519,506.00\nGoodrich, The B. F. Co.\n3,292,779.10\nGoodrich fire & Rubber Co.\n747,618.00\nGoodyear fire & Rubber Co.\n1,199,877.39\nInland Rubber Co.\n180,843.00\nKelly-Springfield Tire Co.\n208,873.40\nLake Shore fire & Rubber Co.\n702,616.00\nLee Tire à Rubber Co.\n1,648,742.15\nManafield Tire & Rubber Co.\n732,604.76\nMohawk Rubber Co.\n375,494.00\nMonarch Rubber Co.\n169,607.18\nMcCreary Tire & Rubber Co.\n149,538.75\nNorwalk\n#\n-\n=\n-\n295,409.55\nPacific Rubber & Tire Mfg. Co.\n79,181.72\nPennsylvania Rubber Co.\n465,882.44\nPharis Tire &\n.\n-\n318,111.67\nPoulson Rubber Co.\n60,632.60\nRobbins fire & Rubber Co.\n17,470.00\nSchenuit, Frank G., Rubber Co.\n11,878.00\nSieberling Rubber Co.\n499,945.60\nStar Rubber Co.\n13,620.00\nTire & Rubber Co,\n680.00\nU, 8. Rubber Co.\n1,054,174.19\n7,334,042.44\nTextiles\nAmerican Bleached Goods Co.\n6,810.00\nAtlas Wiping Cloth Co.\n2,100.00\nBailey, Joshua L., & Co.\n26,800.00\nBatavia Mills Inc.\n56,922.70\nBrand & Oppenheimer\n9,093.75\nCalleway Mills\n87,800.00\n(continued on next page)\nRegraded Unclassified\n207\nCOMMODITY\nContractor\nAmount\nTotal\nTires, Tubes and Plaps\n$ 20,454,936.94\nArmstrong Tire à Rubber Co.\n$ 962,182.00\nCarlisle\n.\n-\n#\n.\n70,278.71\nCorduroy Rubber Co.\n150,584.00\nCupples Co.\n24,710.40\nDayton Rubber Mfg. Co.\n659,562.30\nDemman Tire & Rubber Co.\n85,902.00\nDunlop\n-\n#\n.\n.\n1,851,163.80\nFalls Rubber Co.\n272,475.87\nFirestone Tire à Rubber Co.\n3,602,131.36\nGates Rubber Co.\n172,661.00\nGeneral Tire & Rubber Co.\n519,506.00\nGeodrich, The B. F. Co.\n5,292,779.10\nGoodrich fire & Rubber Co.\n747,618.00\nGoodyear fire & Rubber Co.\n1,199,877.39\nInland Rubber Co.\n180,843.00\nKelly-Springfield Tire Co.\n208,873.40\nLake Shore Tire & Rubber Co.\n702,816.00\nLee Tire & Rubber Co.\n1,548,742.15\nManafield Tire & Rubber Co.\n732,604.76\nMohawk Rubber Co.\n373,494.00\nMonarch Rubber Co.\n169,607.18\nMeCreary Tire & Rubber Co.\n149,538.75\nNorwalk . . - -\n295,409.55\nPacific Rubber & Tire Mfg. Co.\n79,181.72\nPennsylvania Rubber Co.\n465,882.44\nPharis Tire a\n.\n.\n318,111.67\nPoulson Rubber Co.\n60,632.60\nRobbins Tire & Rubber Co.\n17,470.00\nSchenuit, Frank G., Rubber Co.\n11,878.00\nSieberling Rubber Co.\n499,945.60\nStar Rubber Co.\n13,620.00\nTire & Rubber Co,\n680.00\nU. S. Rubber Co.\n1,034,174.19\nTextiles\n7,334,042.44\nAmerican Bleached Goods Co.\n6,810.00\nAtlas Wiping Cloth Co.\n2,100.00\nBailey, Joshua L., à Co.\n25,300.00\nBatavia Mills Ins.\n56,922.70\nBrand à Oppenheimer\n9,095.75\nCalleway Mills\n67,800.00\n(continued on next page)\nRegraded Unclassified\n208\nCOMMODITY\nContractor\nAmounts\nTotal\nTextiles (cont'd)\nCannon wills\n$\n7,620.00\nCharles Belsky à Co.\n7,965.00\nCohn-Hall-Marr Co.\n341,470.00\nCommander Mills Inc.\n108,013.50\nCatlin Farnish Co.\n62,072.35\nColumbus Mfg. Co.\n11,202.00\nCome Export à Comm. Co.\n129,330.00\nDrumondrille Cotton Co.\n469,578.56\nEddington Fabries Corp.\n12,929.30\nErlanger, N., Blungart & Co.\n$3,000.00\nKrwin Cotton Mills, Inc.\n7,162.65\nHesslein & Co., Inc.\n9,500.00\nIndustrial Wiping Cloth Co.\n5,693.00\nKendall Mills\n6,750.00\nKeystone Wiper & Supply Co.\n5,795.00\nKelbe, H. M. Co.\n20,375.00\nKolb, H. M. Co., Inc.\n10,247.50\nLane, J. H. & Co., Inc.\n3,586,012.96\nLivingston, B., &\n82,590.75\nMainser Minton Co.\n123,525.00\nMarsales Co. Inc.\n11,200.00\nMcCampbell à Co. Inc.\n14,330.50\nKinst licoper & Co.\n22,500.00\nMorgan Cotton Hills\n558,470.00\nHouse, Hesslein Co., Inc.\n37,612.50\nPacific Mille\n74,323.15\nSilverman, N., & Some, Inc.\n6,435.50\nRosemary Inc.\n40,550.92\nSoutheastern Cottons, Inc.\n37,690.00\nSouthbridge Finishing Co.\n55,615.44\nSprings Cotton Mills\n8,357.29\nStevens, J. P. & Co.\n95,030.00\nSuperior Duok Clo. Co.\n880.90\nTextile Products\n6,750.00\nTextile Waste Supply Co.\n8,260.00\nThomaston Cottom Mills\n44,250.00\nTurner Halsey Co.\n125,485.70\nTuttle, M. P. Co.\n10,250.00\nU. S. Rubber Co.\n257,900.00\nValentine Textile Corp.\n259,397.00\nWashington Mills Co.\n45,587.50\nWellington Sears\n195,200.00\nWillingham Cettom Co.\n89,000.00\nNoodward, Baldwin à Co.\n46,200.00\n209\nCommedity\nContractor\nAmount\nTotal\nSpace Heaters à Furnaces\n$3,533,029.02\nAgricela Furnace Ce.\n86,349.00\nAmerican Furnace Co.\n50,673.34\nAmerican Gas Mach. Co.\n61,264.50\nColoman Lamp & Steve Co.\n89,465.80\nColumbia Iren Works Ce.\n11,375.00\nCercaire Corp. The\n127,420.00\nDixie Foundry Co.\n156,200.00\nDertoh Stove Works Inc.\n219,595.00\nDewagias Steel Furnace Co.\n85,596.00\nEagle Foundry co.\n33,330.00\nEmpire Steve Co.\n15,220.00\nGray à Dudley Ce.\n274,006.78\nHayes, C. I. Inc.\n15,734.60\nHevi Duty Eleo. Co.\n4,060.00\nInternational Heater Co.\n21,079.50\nKnox Steve Works, The\n23,352.00\nLennex Purnace Co.\n143,286.00\nLonergan Mfg. Co.\n38,964.00\nMakemb Steel Products Co.\n21,252.00\nMasset Steve Co.\n143,650.00\nOakland Foundry Co.\n395,526.20\nOhio Foundry, The\n62,458.20\nOlsen, C. As MR6. Co.\n225,570.00\nPeerless Mfg. co.\n71,125.00\nPhillips & Butterff Mfg. co.\n221,776.00\nPrenties Wabers Co.\n26,664.00\nQualer Mfg. Co.\n35,552.00\nReckwood Steve Works\n45,450.00\nSamuel Stemping & Enameling Co.\n4,340.00\nSecurity Mfg. Co.\n$8,710.00\nSilent Sieux\n34,080.00\nSouthern Cosperative Foundry Ce.\n62,140.00\nTermessee Steve Works\n140,555.00\nThatcher Furnase Co.\n56,752.50\nViking Mfg. Corp.\n203,296.50\nWilliamson Heater Co.\n96,187.60\nRegraded Unclassified\n210\nCommodity\nContractor\nAmounts\nTotal\nLavatories, Fittings à Trim\n$1,363,203.56\nAlliance Percelain Products Co.\n402,106.50\nAmerican Brass Nevelty Co.\n45,600.00\nAmerican Sanitary Mfg. Co.\n133,140.00\nBrigge HEB. Co.\n113,400.00\nCamden Pettery\n10,800.00\nCrans Co.\n108,802.50\nEljer Co.\n48,000.00\nElwood Co.\n158,000.00\nGlebe Value Corp.\n30,720.00\nHumphreys Hfg. Co.\n42,280.00\nKohler Co.\n75,100.00\nMaryland Senitary Mfg. Corp.\n2,389.08\nRichmond Radiater Co.\n760.00\nRundle lifg. Co.\n56,000.00\nSears Reebuck à Co.\n58,483.40\nSavoy Brass Mfg. Co. Inc.\n36,000.00\nUnited States Sanitary Co.\n47,676.00\nWater Closet Combinations\n1,237,227.50\nCrane Co.\n223,240.00\nDouglas, John Co. The\n26,702.00\nEljer Co.\nKahler Co.\n133,510.00\nKokeme Sanitary Pettery Corp.\n470,137.50\nManefield Senitary Pottery Inc.\n147,888.00\nUniversal Sanitary Mfg. Co.\n102,500.00\nKitchen Ranges\n1,715,291.00\nA. B. Steves Inc.\n189,800.00\nBrown Steve Works\n21,637.50\nCalerio Gas Steve Works\n$95,100.00\nDixie Foundry Co.\n116,575.00\nDerteh Steve Werks\n75,010.00\nElectromaster Inc.\n58,950.00\nFlorence Steve Co.\n21,834.00\nHardwick Steve Co.\n56,875.00\n!luenfold Co., The\n50,347.00\nOakland Foundry Co.\n21,637.50\nOrben Steve Co.\n100,625.00\nPhillips à Butterff Mfg. Co.\n45,500.00\nRose, J. à Co. Ins.\n22,750.00\nSlattery, J. 8. á Bro. Ins.\n424,125.00\nSunray Steve Co.\n102,575.00\nUnited States Steve Co.\n13,150.00\nRegraded Unclassified\nCommodity\n211\nContracter\nAmount\nTotal\nHeed Water Cleset Seats\n# 180,000.00\nBeneke Corp.\n25,845.40\nBilt-Rite Mfg. Co.\n35,769.60\nJulius Breckweldt & Sen\n60,384.00\nBathtube à Fittings\n2,176,785.96\nAlliance Porcelain Products Co.\n110,720.00\nAmerican Sanitary Mfg. Co.\n81,620.00\nBrigge Mfg. Ce.\n217,250.00\nCrans Ce.\n294,273.00\nDavidson Enamel Ce.\n271,610.00\nEljer Co.\n204,000.00\nGlobe Valve Corp.\n46,375.00\nKehler Co.\n435,960.00\nMilwaukse Flush Valve Co.\n55,650.00\nRundle Mfg. Co.\n164,350.00\nSalter, H, B. Mfg. Co.\n72,365.00\nSears Reebuck Co.\n165,520.96\nYoungstown Pressed Steel Div.\n57,090.00\nMedicine Cabinets - Bathroom\n143,920.00\nBilt-Rite Mfg. Co.\n45,320.00\nCelenial Preducts Co,\n30,750.00\nHeller, W. 0. à de.\n10,850.00\nPayne, A. 8. Ine,\n16,400.00\nSchumaok, C. E. Ino,\n41,200.00\nRefrigeraters\n5,072,299.02\nCoolerator Co.\n419,180.00\nFrigidaire Div.\n566,219.01\nIed Cooling Appliance Corp.\n306,200.00\nMentgemery Hard à Co.\n$23.30\nNach Kelvinater\n896,795.03\nSanitary Refrigerator Co.\n334,620.00\nServel Inc.\n75,734.80\nSuccess Mfg. Co.\n243,360.00\nSunset Eleo. Co.\n856.88\nHard Refrigerator & Mfg. Co.\n231,000.00\nLighting Fixtures\n169,500.00\nElectric Mfg. Co.\n65,625.00\nLightelier Co.\n56,250.00\nSolar Light Co.\n28,125.00\nStar Lighting Fix. Co.\n19,500.00\nRegraded Unclassified\n212\nRegraded Unclassified\nCOMMODITY\nContractor\nAmount\nTotal\nKitchen Sinks & Laundry Trays à Combinations, & Tria. # 2,675,765.17\nAllience Percelain Products Co. 92,169.00\nAmerican Brass Nevelty Co.\n157,760.00\nAmerican Sanitary Hfg. Co.\n88,587.00\nAuburn Central MSG. Co.\n122,892.00\nBrigge Mfg. Co.\n190,190.00\nCase, 3. 4. & Sem usg. Co.\n19,950.00\nCrane Co.\n142,096.95\nDavidson Enamel Products Co.\n184,338.00\nEljer Co.\n61,320.00\nEllwood Co.\n30,650.00\nFords Forcelain Works\n12,750.00\nGeneral Ceramics Co.\n198,000.00\nKohler Co.\n406,240.00\nManafield Sanitary Pettery Inc.\n25,000.00\nMaryland Sanitary HSg. Corp.\n34,437.25\nRichmond Radiater Co., Inc.\n181,295.32\nSchaible Foundry à Brass Works\n125,575.65\nUnited States Senitary Mfg. Co.\n153,615.00\nUniversal Senitary Mfg. Go.\n68,640.00\nYoungstown Pressed Steel Div.\n$82,249.00\nThe following companies have participated in our contracts\nfor steel, finished and semi-finished:\nAmerican Steel & wire Co.\nAtlantic Steel Co.\nArmeo International Corp.\nAlan Wood steel Co.\nAmerican Rolling Mill Co., The\n4. Milne & Co.\nAndrews Steel Co.\nApollo Steel Co.\nA. M. Byers Co.\nBaldwin Locomotive Works\nBrainard Steel Corp.\nBaboook à Wileox Tube Co.\nBlair Strip steal Co.\nBethlehem Steel Export Corp.\nBrass Goods Mfg. Co.\nCahoes Rolling Mill Co.\nCentral Iron & Steel Co.\nClapton Mack Mfg. Co.\nCrucible Steel Co. of America\nContinental Steel Corp.\n-11-\n213\nCarpenter Steel Corp.\nCompressed steel Shafting Co.\nCleveland Graphite Bronse Co.\nCarnegie-Illinois Steel Corp.\nCopperweld Steel Co.\nCold Metal Products Co.\nColorado Fuel & Iron Corp.\nDetroit Seanless Steel Tubes Co.\nDavey, I. H. Steel Co.\nDresser Mfg. Co.\nDisston, Henry & Sons\nEmpire Sheet & Timplate Co.\nElliott Ross Steel Co.\nFollansbee Bros. Co.\nGlobe Steel Tube Co.\nGranite City Steel Co.\nGreat Lakes Steel Corp.\nHarry Harris & Co.\nInland Steel Co.\nJones & Laughlin Steel Corp.\nJ. R. Johnson & Co., Ltd.\nJessop Steel Co.\nKeystone Steel & Wire Co.\nLuken Steel Co.\nLineoln Electric Co., The\nLaSalle steel Co.\nLookhart Iron & Steel Co.\nLaslede Steel Co.\nMoltrup Steel Prods. Co.\nMichigan Seanless Tube Co.\nMercer Tube à Mfg. Co.\nMahoning Valley Steel Co., The\nMechanical Mold Machine Co.\nMeLouth Steel Corp.\nNewport Rolling Mill Co.\nNorthwestern Steel & Wire Co.\nWiles Rolling Mill Co.\nNorth East Drawn Steel Co.\nNational Supply Co.\nNational Tube Co.\nOtis Steel Co.\n011 Well Supply Co.\nPittsburgh Steel Co.\nPlymouth Tube Co.\nParkersburgh Iron & steel Co.\nPittsburgh Crushed Steel Co.\nPhoenix Iron Co., The\nRyerson, Jos. T.\nR.C.A. Mfg. Co.\nRoobaling, John A., à Sons, Co.\nRepublic steel Corp.\nReeves Steel & Mfg. Co.\nRegraded Unclassified\n214\n-12-\nReekwood Spindler Co.\nSpang Chalfant Inc.\nSheffield Steel Corp.\nSoully Steel Products Co.\nSinger Mfg+ Co., The\nSharon Steel Corp.\nSummerill Tubing Co.\nStanley G. Flagg & Co., Ino.\nSouth Chester Tube Co.\nSuperior Steel Co.\nThe Timken Roller Bearing Co.\nThomas Steel Co.\nVictaulie Co. of America\nWorth Steel Co.\nWisconsin Steel Co.\nWheeling Steel Corp.\nWallingford Steel Co.\nWheatland Tube Co.\nWeirton Steel Co.\nWalworth International Co.\nWyokoff Drawn Steel Co.\nYoungstown Sheet & Tube Co.\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE\nDEC\n-\nTO Secretary orgenthau\nFROM Randolph Paul\nOn May G, 1042, a contract was entered into by you, as\nSecretary of the Treasury, with the befense Plant Corporation for\nmaking available approximately 40,000 tons of free silver to the\nDefense Plant Corporation 01 non-consumptive use in war produc-\ntion. Under the provisions of that contract, the Defense Plant\nCorporation now proposes to supply 2,500 tons of silver for non-\nconsumptive uses as bus bars by the Aluminum Co spany of Canada\nin Canada.\nThere is nothin in the contract of Day 6, 1942, or in.\nthe statutes on which such contract is based which indicates that\nyour authority or that of the Defense Plant Corporation is limited\nto supplyin this silver for use within the United States. On the\ncontrary, the Inn unre of the contract and the language of the\nstatutes is sufficiently broad to permit such non-consumptive use\nanywhere in the world 50 lon us the use contributes to the war\neffort. All Line available statements of Treasury representatives\nmade to the Sonnte Special Silver Committee have been examined\nand there is none which restricts the plan to use of the silver\nwithin the United States.\n11 is elear aleat the use of free silver in the production\nof aluminum in Canada is just as important to the war-effort as its\nuse for the production of alminum in the United States. I be-\nlieve, therefore, that the infense Plant Corporation should be\ninformed that the Treasury Department does not object to such use\npursuant to the terms and provisions of the contract of May G, 1942.\nIf you approve such action, will you please indicate your\napproval by signin the notation at the foot hereof.\nRSD\nApproved:\nSecretary the Treasury.\nDWB\nvow\nRegraded Unclassified\ndimy\nU.S. TREASURY PICTURE\n218/2/4-\n1. Historical Sequence:\nHamilton must protect a peace.\n2. Historical Sequence:\nGallitan must protect a war effort.\n3. Historical Sequence:\nMcCullock must pay for a disaster.\n4. The Golden Years:\nTreasury as handy-man to the people of the U.S.\n5. The End of the Golden Years of plenty:\n(a) 1929\n(b) The Bank Holiday\n6. The Six Years of New Labors:\nPathfinding\n7. Munich to Pearl Harbor:\nEra of desperate measures\nBrief Historical Episode\n8. Victory in Africa:\nSolomons\nLend Lease becomes clear in result.\n(Emotional Climax)\n9. The Issue Today:\nTrue Climax of Picture\nRegraded Unclassified\nNOT TO BE RE-TRANSMITTED\n217\nCOPY NO.\n13\nBRITISH OST SECRET\nU.S. SECRET\nOPTAL No. 419\nInformation received up to 7 A.M., 2nd December, 1942.\n1. M.V.L.\nItalian blockade runner CORTELLAZO, 5,300 tons, previously at-\ntacked by our aircraft was sighted and sunk yesterday by the escorts of un outward\nbound convoy 500 miles west of CAPE FINISTERRE. Early lst, during an engagement\nwith E-boats off DEVONSHIRE one of H.M. trawlers was torpedoed and sunk. Early\nthis sorning off CAPE BON a force of H.M. Cruisers and Destroyers engaged an enemy\ncenvoy und sank 3 ships and 2 escorts. Further information is awaited. One of\nS.A. Minelayers was torpedoed off ORAN yesterday afternoon and is in tow. A Greek\nprogrine is overdue and presumed lost. A merchant ship (10,800 tons) was torpedoed\nyesterday off LOURENCO MARQUES, no further report received. A trensport (6,800 tons)\ncorrying 134 Union Defence Force and a number of Italian refugres, torpedood off\nBURRN 23th November. 183 persons have been picked up by a Portuguese ship.\nMILITARY\nLIBYA. Patrol activity along the enemy positions by our forward\nrmoured forces continues. Our main forces are moving south towards the M AGHEILA\nSocition but are not yet in contact with the enemy.\nTUNISIA. British parachute troops dropped at PONT DUF/HS on 23th\nllovember are operating offensively together with strong reconnaissance elements in\nvide area some 15 miles southwest of TUNIS. On the northern coastal road, our\nadvance has been temporarily held up by the enemy strong-point commanding the road\nto NATEUR.\nRUSSIA. The Russians have tightened the ring round the Germans\nin the STALINGRAD Area. In the central sector, operations continue.\nB. AIR OPERATIONS\nWESTERN FRONT. 1st. Fighters carried out offensive sweeps\nover Worthern France. Others attacked barges off the Dutch Coast. Enemy casualties\nB, nil, 4. Ours, one missing. 5 Beaufighters are missing from patrols west of the\nBAY OF BISCAY.\nFRENCH NORTH AFRICA. 28th/29th. 8 Junkers 88 attacked BONE air-\nfield, destroying 5 aircraft on the ground. 5 of them were shot down. 29th. 15\nDisleys successfully bombed BIZERTA airfiold 30th/lst.\nMALTA. Wellingtons bombed BIZERTA ocks, hitting railways, work-\nshops and barracks.\nSICILY. Airfields on SICILY vere bombed by Wellingtons 30th/lst\nnd by Spitfires 1st.\nMEDITERRANEAN. 1st. 2 Beaufighters off the Tunisian Coast\nttacked a southbound ship, which WES set on fire and blew up.\nRegraded Unclassified\n218\nDecember 3, 1942\n11:40 a.m.\nHMJr:\nHello.\nOperator:\nChairman Eccles.\nHMJr:\nMarriner? Marriner?\nMarriner\nEcoles:\nHello, Henry.\nHMJr:\nGood morning.\nE:\nHow are you this morning?\nHMJr:\nI'm fine. I think you did a fine job for us\nyesterday.\nE:\nWhat was the final result?\nHMJr:\nWell, as of last night, $2,073,000,000.\nE:\nYeah, I got last night, but I just wondered if\nwe had anything later.\nHMJr:\nNo, no - ah....\nE:\nI think it'll - I think you'll get around --\n1 told Dan I thought two billion four to -\nfrom two billion three to five anyway, which is\nreally all we want.\nHMJr:\nNow - that's right. Now, Marriner, I'd like to\nhave a little talk with you about the next one\nand the quotas and all that sort of thing.\nE:\nYou mean on the sixteenth?\nHMJr:\nYes.\nE:\nYou mean - you mean the - the certificates.\nHMJr:\nYeah, but I wanted - I mean, yes. Would ten-\nthirty tomorrow be at all convenient?\nE:\nYeah, I think 80.\nHMJr:\nIs that a bad time?\nRegraded Unclassified\n219\n- 2 -\nE:\nWell, it's - we have our regular meeting every\nFriday.\nHMJr:\nWhat time do you have it?\nE:\nAt ten-thirty.\nHMJr:\nOh-oh. Well, I've got....\nE:\nBoard meeting. Would the afternoon be - be all right\nwith you or would that - or this afternoon some time?\nHMJr:\nWell, this - this - this afternoon at three-thirty\nwould be all right.\nE:\nI - - well, I have an appointment\nHMJr: Well....\nE:\n....at two-thirty. Three-thirty would be all right.\nHMJr:\nWant to make it a little later?\nE:\nThree-thirty 18 okay. Three-thirty or four.\nHMJr:\nThree-forty-five.\nE:\nWell, let's make it three-thirty.\nHMJr:\nAll right.\nE:\nThree-thirty this afternoon.\nHMJr:\nDo you want to bring anybody with your\nE:\nWell, not - I don't - not necessarily because....\nHMJr:\nOh.\nE:\n....it's a question, as I understand it - it....\nHMJr:\nWhere do we go from here on the next one?\nE:\nYeah, that's right. I'd - I'd....\nHMJr:\nI'd like to read a telegram which we propose to send\nof the Victory Fund Committee: \"We realize that in\nif you think it's all right. This 1s to the Chairmen\n(cont.)\nRegraded Unclassified\n220\n- 3 -\nHMJr:\norder to stimulate sales and maintain the\n(cont.)\npresent enthusiasm, it is important to make\npublic the results of the Victory Fund Drive\nin each district. In view of the lag in the\nTreasury figures, we now feel that it would be\nbetter not to release results by districts\nfrom Washington on December 7 as previously\nplanned. You are, therefore, authorized to\nissue statements in your district from time to\ntime of results both by districts and regions.\nYou may include in your publicity the names\nof individual subscribers where you have the\nauthority from such subscribers.'\nE:\nYeah. That's to go to the chairmen?\nHMJr:\nChairmen.\nE:\nAnd you're going to sign that?\nHMJr:\nYes, sir.\nE:\nDo you mind reading it just once more 80 I\ncan\nHMJr:\nNot a - not B. bit - not.. - you stop me if you\nwant to - and then \"We realize in order to\nstimulate sales and maintain the present enthusi-\nasm, it is important to make public the results\nof the Victory Fund Drive in each district. In\nview of the lag in Treasury figures, we now\nfeel it would be better not to release results\nby districts from Washington on December 7 as\npreviously planned. You are, therefore,\nauthorized to issue statements in your district\nfrom time to time of results both by districts\nand regions. You may include in your publicity\nthe names of individual subscribers where you\nhave the authority from such subscribers.\"\nE:\nYeah, I - I think that's a good decision.\nI think\nHMJr:\nAll right.\nE:\nthat - I think it's best to - to do it in\nthe districts in any case.\nRegraded Unclassified\n221\n- 4 -\nHMJr:\nYes. Well, you see what they're doing -\nthey're doing it, and if we gave it out we'd\nbe in constant conflict with them.\nE:\nYeah, because you get your figures....\nHMJr:\nLate.\nE:\nyou figures wouldn't always jibe.\nHMJr:\nBut - but did....\nin\nWell, I think that the fact that they can do\nthat gives them a - gives them a - a springboard\ntoo. After all, it's - it's a matter of the\nlocal interest.\nHMJr:\nThat's right.\nE:\n....and it seemed to me that at some point, how-\never, you got to release the combination of\nfigures from here.\nHMJr:\nWe will.\nE:\nThe - but - but not the individual regional\nfigures but the total figures for the country.\nThat - that's your idea, ien't it?\nHMJr:\nOh, yes.\nE:\nYeah.\nHMJr:\nBut - but if - supposing we let out something\ntoday not - the figures might vary & half a\nbillion dollars.\nE:\nYeah, yeah, sure, because there's 8 lag.\nHMJr:\nSure, New York claims two-and-a-half billion.\nWell, they may have pledges but it's not in\nthe till.\nE:\nUh huh. Well, you see now this - this - I didn't\nworry about this thing getting over yesterday,\nbut, of course, there wasn't any use of taking\nany....\nHMJr:\nChances.\nRegraded Unclassified\n222\n- 5 -\nE:\nchance, and BO when I got the earlier\nfigures in, those districts that seemed to be\nbehind other districts, there was five of them\nHMJr:\nYeah.\nE:\nI - I called them up, and.\nHMJr:\nYeah.\nE:\nand I don't know whether it helped, but I know\nit did San Francisco. I put a bomb under them.\nHMJr:\nWell, that's what I wanted to talk to you about,\nand I think we ought to have some kind of a quota\nfor these districts.\nE:\nWell, I think that we've almost - I told Dan yester-\nday that I thought we had to because these fellows\nare working in the dark\nHMJ\nYeah.\nE:\nand the trouble 18, they let - they'll sit back,\nyou know, and - and let the other fellow do it....\nHMJr:\nThat\nE:\n....unless you put 'em on the spot.\nHMJr:\nThat's right.\nE:\nAnd I put San Francisco on the spot on that thing\nyesterday, and they just simply got out and got\ntheir quota. Of course, the quota I give them -\nI give - give them all a lot of arbitrary quotas in\na way. But they didn't question it....\nHMJr:\nYeah.\nE:\nand\nHMJr:\nWell, I'd like to talk to you, then also about the\nA.B.A., you see, what they can do if anything.\nE:\nYeah. Well, I'll be over at three-thirty.\nHMJr:\nThank you.\nE:\nOkay. Goodbye.\nRegraded Unclassified\n223\nDecember 3, 1942\n2:25 p.m.\nTAXES\nPresent: Mr. Paul\nMr. Sullivan\nMrs. Klotz\n(The Secretary held a telephone conversation\nwith Mr. Doughton, as follows:)\nRegraded Unclassified\n224\nDecember 3, 1942\n2:25 p.m.\nHMJr:\nHello.\nRobert\nDoughton:\nHenry?\nHMJr:\nYes, Bob.\nD:\nI have just dictated a brief statement here.\nI'll have my stenographer read it back to you....\nHMJr:\nAll right.\nD:\n....and see what you think of it, and any sug-\nges.. - suggestions you have to make or changes\nor write the whole thing over.\nHMJr:\nYes.\nD:\nI'll have it read to you just - from her notes\nright now. You ready?\nHMJr:\nJust a second, please.\nD:\nYeah.\nHMJr:\nJust a second.\nD:\n(Talks aside: If you read slow, they can take\nif down if they want to.)\nHMJr:\nOkay.\nD:\nAll right.\nHMJr:\nGo ahead, Bob.\nSecretary\nto Doughton:\nAre you going to try to take this down, Mr.\nSecretary?\nHMJr:\nWell, no, 1'll - I'll listen and if I don't\nunderstand it, I'll ask you to repeat it.\nSecretary:\nAll right, sir.\nHMJr:\nGo ahead.\nRegraded Unclassified\n225\n- 2 -\nSecretary:\n\"Representative Doughton, Chairman of the\nCommittee on Ways and Means, stated this\nafternoon that upon the request of Secretary\nMorgenthau he had lunch - they - they had\nlunch together at the Capitol today.\nMr. Doughton further stated that the matter\nof future legislation relating to tax matters\nwas discussed in a general way. He also stated\nthat Secretary Morgenthau had said that no\ndefinite tax plan or program had been worked\nout or agreed upon by the Treasury, but that\nhe was anxious to cooperate with the responsi-\nble committee or committees of the Congress in\nthe most helpful way possible in working out\na satisfactory tax program. The Secretary made\nit very plain, so Mr. Doughton said, that he\nwas most anxious to work in harmony with the\ncommittee in whatever manner it was deemed\nwould produce the best results with respect to\ntax legislation in the new Congress.\"\nHMJr:\nWell, let me just think a minute.\nSecretary:\nAll right, sir.\nHMJr:\nDo you mind doing it once more? It's kind of\nhard to get it on the phone.\nSecretary:\nNo, sir, I'll be very glad to. Do I read too\nfast?\nHMJr:\nWell, I'm not taking it down. I just - I just\nhad to get it in my head.\nSecretary:\nAll right, sir. I'll begin again.\nHMJr:\nYes.\nSecretary:\n\"Representative Doughton, Chairman of the Committee\non Ways and Means, stated this afternoon that\nupon the request of Secretary Morgenthau they\nhad lunch together....\"\nHMJr:\nWell, do you mind instead of saying \"request\"\nyou say \"at the suggestion\"?\nSecretary:\nYes, sir. Be very glad to change that.\nRegraded Unclassified\n226\n- 3 -\nHMJr:\nYes.\nSecretary:\n\"\nat the suggestion\nHMJr:\nYes.\nSecretary:\n#\nof Secretary Morgenthau they had lunch\ntogether in the Capitol today. Mr. Doughton\nfurther stated that the matter of future\nlegislation relating to tax matters was dis-\ncussed in a general way. He also stated that\nSecretary Morgenthau had said that no definite\ntax plan or program had been worked out or\nagreed upon by the Treasury, but that he was\nanxious to cooperate with the responsible\ncommittee or committees of the Congress in\nthe most helpful way possible in working out\na satisfactory tax program. The Secretary\nmade it very plain, 80 Mr. Doughton said, that\nhe was most anxious to work in harmony with\nthe committee in whatever manner it was deemed\nwould produce the best results with respect to\ntax legislation in the new Congress.\"\nHMJr:\nInstead of saying - where you say \"work\"in\nharmony\" I'd suggest \"to continue to work in\nharmony.\nSecretary:\nTo continue to work in harmony. All right, sir.\nHMJr:\nJust ask Mr. Doughton if those couple little\nsuggestions of mine - whether they meet with\nhis approval.\nSecretary:\nAll right, sir. He wants to speak to you any-\nway in just a moment. Will you hold on?\n(Talks aside: He suggests that we say instead\nof that you had lunch together \"at the request\nof Secretary Morgenthau\", say that you had\nlunch together \"at the suggestion of Secretary\nMorgenthau.\" That's all right with you? Then\nhe suggests instead of eaying that \"the Secretary\nmade it very plain, 80 Mr. Doughton said, that\nhe was most anxious to work in harmony,\" say\n\"he was most anxious to continue to work in\nharmony.'\nHe thinks that's fine, but he wants to speak to\nyou anyway.\nRegraded Unclassified\n227\n- 4 -\nHMJr:\nOkay.\nD:\nAs amended by your very pertinent suggestion,\n18 that satisfactory now?\nHMJr:\nYeah, I think that's fine.\nD:\nAll right. I'll just have copies made then\nand give to the press this afternoon.\nHMJr:\nThank you.\nD:\nThank you.\nHMJr:\nAll right.\nD:\nGoodbye.\nRegraded Unclassified\n228\n- 2 -\nMR. SULLIVAN: That is good.\nH.M.JR: I mean, it looks as though I said, \"From\nnow on, I am going to be a good boy, and continue to\nwork in harmony.\nMR. SULLIVAN: Generally, I think it is a good\nstatement, anyway.\nH.M.JR: I didn't know he was calling when I sent\nfor you. What I was calling you for was to tell you\nabout my talk with Doughton. The old boy seemed very\ncool to me the last couple of times.\nWe had a very nice talk and what I said was that\nI wanted to sit down - the Treasury wanted to sit down\nwith him this time and come to as near an agreement\nbeforehand as we could, and that the country knew what\nI wanted - tax exempts, depletion, joint returns, and\nall the rest of that, and if we could not agree on it,\nI was not going to go up and bat my head against the\nwall again.\nI told him that we had a political situation to\ndeal with, and that '45 was not so far around the corner;\nthat I wanted to try to go just as far as we could to\nwork this thing out, and that I was going to do as much\nas I could to get an agreement with the present committee\nthis time.\nHe said, \"Now you are talking my language.\" He\nmentioned only once, towards the very end, the thing\nthat I had been harping on. He said, \"If we can't do\nthis, Henry, it would be better that you just say your\npiece and then withdraw and let the Congress go ahead\nand write the bill.\"\nHe said, \"But if we approach it in this manner, I\nthink it would be fine. Of course, I don't want to\nmake any suggestions, but if I could suggest, I think\nRegraded Unclassified\n229\n- 3 -\nthe Speaker should sit in on this conference and Sena-\ntor Barkley should sit in on this conference.\"\nHe said, \"Let's do it first with the Democrats and\nagree amongst ourselves, and then pull in the Republicans\nafterwards.'\n\"But,\" he said, \"we have got to be cereful this\ntime. The tide is running against us.\"\nThen, as I said, he only once, very briefly, said\nthe thing he has been saying over and over again publicly,\nthat the Treasury has been trying to write the tax bill.\nHe said, \"Of course, you don't want to do it this time.\"\nHe got on to Stam, and said that Stam is losing\nthe people. He says that Stam is a great white-haired\nboy. He said, \"He is a very poor executive; he isn't\nlike your people. Paul comes up here with 8 half a\ndozen able assistants to help him out. Stam does not\nhave them.\"\nI said, \"If we are going to get together, maybe we\ncan all pool our staffs. You don't have to worry so\nmuch about your staff.\" He liked that.\nMR. PAUL: He has been wanting me to come up and\nhave a love feast with Stam, but I have stayed away,\nso far.\nH.M.JR: He had been reading \"PM\" on social security,\nand he said, \"I hope the President isn't going to make\nsocial security come first. If you do, you are not going\nto have a bill until July.\"\nI said, \"Well, Bob, I don't know.\" He kept going\nback to that three or four times because that is always\nhis story.\nI said, \"I will tell you this, Bob: I can promise\nRegraded Unclassified\n230\n- 4 -\nyou that before the President does anything on social\nsecurity, he will talk to you first.\nThen I had this message from the President to\nhim, which I gave him the first thing. I said, \"The\nPresident told me to tell you this morning, Bob, that\nwhat you people up here on the Hill are doing is electing\na Republican President.\"\nHe took that. He said, \"The President is right;\nthe President is right.\"\nSo he told us that Disney is very, very bitter, for\nsome reason. He doesn't understand why Disney is 80\nbitter.\nMR. PAUL: Bitter against the Treasury?\nH.M.JR: The administration. lie is very, very bitter.\nThen he went on to say, and this is the thing - he\nsaid, \"There is something about some kind of a thing - a\nquestionnaire - the Budget, or something. Stam was try-\ning to tell me about it this morning and I do not under-\nstand it.\"\nSo I said, \"Well, that is something that Sullivan is\nworrying about. You don't want the Bureau of the Budget\nfixing it up and adding 8 lot of questions on OPA, do you?\"\n\"My Gawd, no,\" he said, \"I don't want that.\"\nSo I said, \"John will come up to see you.\"\nHe said, \"Have him come up. I have been too busy;\nI don't know what it is.\"\nMR. SULLIVAN: I postponed seeing him, Mr. Secretary,\nbecause I had sensed this coolness between you and him\nthat you just referred to.\nRegraded Unclassified\n231\n- 5 -\nH.M.JR: It is all over now; we are buddies.\n(Laughter) And see Vandenberg, too, because Vandenberg\nwas very friendly to me day before yesterday. lie came\nup and said, \"Now, Henry, don't mind what I say; it is\nnothing personal. He has been all right.\nAnyway, I am moving a little fast because we have\nthese films - they are borrowed.\nNow the other thing that will interest you, which\nis quite important - and it shows that if the days were\nonly long enough I could do all of this - is that he\nsaid, \"Henry, I want to talk to you about this fellow\nRuml. Walter George had me come over there the other\nday at two o'clock. Ruml sat around for an hour and a\nhalf.\" He said, \"He is a slick talker. I listened to\nthat fellow for about an hour and a half and I never\nsaid a word. When he got all through do you know what I\nsaid to myself?\" I said, \"No.\" He said, \"That is\nnothing but another tax avoidance scheme; I am against\nit.\" Then he said, \"That is for the fellows that have\nbeen defeated and are worrying about how they are going\nto pay the taxes on the ten thousand dollars they earned\nin '42.\" I said, \"We have got a way of taking care of\neighty-five percent of the people.'\nMR. PAUL: There was B. letter to the Post on that.\nI would like to send it in.\nH.M.JR: He said, \"I just sensed that this is another\ntax avoidance. If I said, \"If we are going to help anybody\nout, let's help the boys in the Army.\" \"That is right;\nthis is helping the fellows who need it the least, he\nsaid, \"I am not for it, and I am not going to change.\"\nMR. SULLIVAN: I might bring that into the discussion\nwhen I see him this afternoon.\nMR. PAUL: Emphasize & little bit the other part,\nthat we did offer a substitute for eighty-five percent\nbecause we have got to take that plan that way.\nRegraded Unclassified\n232\n- 6 -\nH.M.JR: I told him the eighty-five - it was one\nof the best meetings I ever had. He did not resent\nthe message from the President, but he does not want\nsocial security.\nMR. SULLIVAN: None of them do on either side.\nH.M.JR: He doesn't want it brought up. I know\nwhen I leave Bob Doughton in a good humor and when I\ndon't.\nThe other thing he said was, \"You know, I think\nWalter George is one of the finest men and he is close to\nme, but he gets his name in the papers too much.\"\n(Laughter)\nMR. SULLIVAN: They keep score. When George gets\nin the papers in the morning, Doughton looks for something\nto get his in in the evening. (Laughter)\nH.M.JR: \"You know, a couple of men came to me in\nthe committee,\" he said, \"and asked, 'Mr. Chairman, where\ndid the tax bill originate anyway, in the Senate or the\nHouse?' By the looks of it I would think it originated\nwith Walter George; what do you think?\" I said, \"In\nNovember or December you shouldn't be saying too much\nabout it, I don't think.\" He says, \"Walter George gets\nhis name in the papers too much.\" That was marvelous,\nthe two of them going against each other. And last, but\nnot least, I said this: \"By the way, have any of these\nself-appointed ambassadors from the White House been\nup here to tell you what to do?\" He said, \"No, I have\nhad a couple of letters from the President on amendments\nto child welfare or something, but outside of that I\nhave nothing,\" and he says, I don't want it. I want\nthem to keep away from me.\nIn other words, I saw the President this morning\nto reaffirm what he wants us to do - to reaffirm the\nwhole thing. This afternoon I saw Bob Doughton, and he\nhas not heard - - I didn't mention Jimmy Byrnes.\nRegraded Unclassified\n233\n- 7 -\nMR. SULLIVAN: That is what you mean when you say\nreaffirm the whole thing?\nH.M.JR: The President said we should go on just\nas we always have. I didn't say, \"Has Jimmy Byrnes been\nup here?\" I said, \"Have you heard of any of these White\nHouse ambassadors?\" He said, \"No, I have had two\nletters from the President.\"\nI feel we have gained 8. little ground.\nMR. SULLIVAN: That sounds very good.\nYesterday I saw Barkley, George, and Byrd, and\ntoday Pepper and Murray on that, and they are going to\ninsist on what we want.\nRegraded Unclassified\n234\nHarold Graves\nDecember 3. 1942\nSecretary Morgenthau\nPlease get on this right away, and let me know\ntomorrow what you can do to help this community 80\nthat we can let the Congressman know without fail.\nSee Promes memo\nof 12/4/42\ncc-Harold Graves\n235\nDecember 3, 1942\n4:34 p.m.\nOperator:\nGo ahead.\nHMJr:\nHello.\nCong. E. C.\nGathings:\nHello. Hello, Mr. Secretary?\nHMJr:\nSpeaking.\nG:\nThis 1s E. C. Gathings, Representative,\nFirst District, Arkansas.\nHMJr:\nYes, Mr. Gathings.\nG:\nI - I received a telephone call a few\nmoments ago from a city in my district,\nJonesboro.\nHMJr:\nYes.\nG:\nNow here is the situation.\nHMJr:\nPlease.\nG:\nThe - the different consumers of power in\nthat city are going to get the month of\nNovember to December 1 bill refunded to\nthem in War Stamps and Bonds.\nHMJr:\nYes.\nG:\nNow the total amount will be $30,000 for\nthis place of 16,000 population. Now they\nwant to have a celebration there on\nDecember the 15th and want - they want to\nget the cooperation of the Treasury Depart-\nment.\nHMJr:\nThat ought to be....\nG:\nof course, this is one of the first - first\ntimes that a matter of this kind has been\neffectuated, I und.. - as I understand it....\nHMJr:\nYes.\nRegraded Unclassified\n236\n- 2 -\nG:\n....and they - they understood that your de-\npartment had asked that something like that\nbe worked out, and they have already arranged\nto - to make these payments to these consumers\nin War Stamps and Bonds and urge them to make\nup the difference - to purchase a larger\ndenomination.\nHMJr:\nWell, it sounds very interesting.\nG:\nYes, now on December the 15th these bills will\nfall due\nHMJr:\nYeah.\nG:\n....and at that time they've planned, if possible,\nto have a little celebration there in the city of\nJonesboro, and, by the way, Senator Caraway comes\nfrom that town.\nHMJr:\nOh, does she?\nG:\nYes, sir. Now they are quite anxious to have\nsomeone from your department - a - some notable\nappear there to be on the program, and....\nHMJr:\nWell, I can....\nG:\nhelp them put it over.\nHMJr:\npromise you that we'll have somebody there\nand assist and - and show our appreciation.\nG:\nWell\nHMJr:\n....and I'll - I'll let you know or have some-\nbody let you know notlater than tomorrow just\nwhat we'll do.\nG:\nWell, I do appreciate that, Mr. Secretary. I\nsurely do, and I appreciate BO much the coopera-\ntion\nHMJr:\nWell, it's - it's a fine thing they're doing\nand we'd like to help.\nG:\nWell, that's fine. Thank you 80 much.\nRegraded Unclassified\n237\n- 3 -\nHMJr:\nThank you.\nG:\nGoodbye.\nHMJr:\nGoodbye.\nRegraded Unclassified\n238\nTREASURY department\nWASHINGTON\nDecember 3, 1942.\nMEMORANDUM ON MEETING OF THE JOINT\nCOMMITTEE ON REDUCTION OF NON-DEFENSE EXPENDITURES\nA meeting was called at 10:00 A. M., Thursday, December 3,\nin the Senate Finance Committee Room in the Senate Office Building.\nThere were present:\nSenators:\nByrd\nNye\nVandenberg\nMcKellar\nGeorge\nBureau of the Budget:\nMr. Lawton.\nThe Committee recorder made a stenographic transcript\nof the meeting.\nSenator Byrd opened the meeting at 10:15 and said the\nCommittee would hear testimony in connection with the pending\nresolution authorizing the Joint Committee to look into the\nsubject of questionnaires required by Government agencies.\nMr. Krik A. Johnson, President of the United States\nChamber of Commerce, the first witness, made B. short statement in\nwhich he said his organization endorsed the action of the Joint\nCommittee in undertaking an investigation into the subject of\nquestionnaires. During his remarks he pointed out that the WPB\nsome months ago organized a Business Advisory Board made up of men\nfrom various industries and as a result of the Board's activities\nWPB eliminated 70 questionnaires and simplified 160 others used in\nits operations. He also stated that a move in the right direction\nwas represented by the recent directive by the President whereby\nall governmental agencies issuing questionnaires after January 1,\n1943 must submit them to the Bureeu of the Budget for spuroval.\nSenator Nye inquired whether any study had been given\nORDEFENSE to what is done with questionnaires after they are filed. Mr.\nJohnson said no study had been given to this matter, but that in\nBUY\nmost cases after the questionnaires are filed nothing further is\nUNITED\nTATES\nheard from them.\nWINCE\nRUNDS\nRegraded Unclassified\n239\n- 2 -\nIn reply to an inquiry by Senator Byrd, Mr. Johnson said\nhe did not know what the cost to business generally was in handling\nGovernment questionnaires but he estimated in his organization the\ncost ranged from 2 per cent to 2-1/2 per cent of overhead and also\nrequired the attention of the best people in his organization, in\naddition to requiring legal advice in many instances. Senator Byrd\nremarked that in the final analysis the overhead cost is paid by\nthe Government.\nSenator Nye inquired whether there was any duplication in\nquestionnaires from various Government agencies. Mr. Johnson said\nhe thought there was a great deal of duplication and pointed out all\nan illustration the fact that the financial report which is required\nto be filed with the Bureau of Internal Revenue once each year 18\nalso required to be filed monthly with the OPA.\nMr. John B. Roscoe, representing the Washington Branch of\nthe National Association of Manufacturers, testified and submitted\n& great deal of information concerning the number of questionnaires\nand reports from various governmental agencies filed by industrial\norganizations. He cited the number of man hours of work required\nto prepare these reports and also the costs involved. He said\nbusiness firms generally thought that at least 75 per cent of\nthe reports which they are required to file are unnecessary or\nof doubtful value and that such firms had the following recom-\nmendations to make concerning governmental reports:\n1. Identity of subject matter should be more specific\n2. Make the report form fit the facts\n3. Eliminate superfluous requests\n4. Avoid peaking reports\n5. End duplication in reports.\nMr. Fred 4. Baughan, General Manager, Retail Food Dealers\nAssociation of California, made B. statement and illustrated a\nnumber of forms which retail food dealors in California are\nrequired to submit in connection with the establishment of ceiling of\nprices under OPA. He said in reply to his inquiry an official\nOPA had stated that the purpose of requiring reports from retail\nhe did not think this could be accomplished by the reports required\nfood dealers is to prevent an increase in the cost of living and\nto be filed with that organization. He also said that from observa- in\ntion there tone of reports filed with local rationing boarde Mr.\nCalifornia which were had been stored in warehouses and never used. in\nBaughan referred to the difficulties facing retail food dealers\nconnection with ceilings on prices of foodstuffs, which in many\nRegraded Unclassified\n240\n- 3 -\ncases were lower than the ceilings under which wholesalers operate.\nEe pointed out that the increase in labor costs and the inex-\nperienced personnel that can now be obtained is having a disastrous\neffect on the small retail dealers.\nMr. H. 1. Hall, Assistant Director of Research, Washington\nOffice, American Farm Bureau Association, testified and voiced\nobjection to the forms required by ODT to be filled out by farmers\nin order to obtain a certificate of war necessity under which they\nwould be authorized to obtain & gasoline rationing for their farm\ntrucks end other equipment.\nMr. Fred Brenckmann, Washington representative of\nNational Grange, also testified at some length, with particular\nreference to the forms required to be filled out by farmers to\nobtain gasoline rations for their trucks.\nIn addition to voicing objections to the nature of the\nform required to be filled out by farmers, Mr. Brenckmann also\npointed out that the farmers were being allowed insufficient\ngasoline to enable them to raise and transport the tremendous\ncrops which they are required to handle under the new var\nprogram.\nThe meeting adjourned at 11:45 As M.\nwis\nRegraded Unclassified\nBill\n241\nCONGRESS OF THE UNITED STATES\nJOINT COMMITTEE ON REDUCTION OF\nNONESSENTIAL FEDERAL EXPENDITURES\nThere will be a meeting of the Joint Committee in\nRoom 314 Senate Office Bldg., on Thursday, Dec. 3.\nat 10 a.m.\nTo hear testimony on government questionnaires.\nHARRY FLOOD BYRD,\nChairman.\nare 68488\n12:17\n242\nTANDARD FORM No. 14A\nAPPROVED BY THE PRESIDENT\nTREASURY DEPARTMENT\nMARCH 10, 1926\nWASHINGTON\nTELEGRAM\nCHARGE TREASURY DEPARTMENT, APPROPRIATION FOR\nOFFICIAL BUSINESS-GOVERNMENT RATES\nExpenses of Loans, A and E\n(The appropriation from which payable must be stated on above line)\nI el I I\n3\n1-1417\nHonorable John L. Garner,\nDecember x, 1942\nUvalde, Texas.\nIT WOULD EE À GREAT HELP IF YOU WOULD ISSUE EITHER THROUGH THE TREASURY OR\nDALLAS VICTORY FUND COMMITTEE A PUBLIC STATEMENT SUPPORTING THE VICTORY\nLOAN DRIVE FOR NINE BILLION DOLLARS OF BORROWED FUNDS. WE ARE TRYING TO\nRAISE THE GREATEST POSSIBLE PROPORTION OF THIS MONEY FRM INVESTORS OTHER\nTHAN COMMERCIAL BANKS IN ORDER TO MINIMIZE THE INFLATIONARY ASPECTS OF\nBORROWING FROM BANKS. SENATOR GLASS AND GOVERNOR BRICKER HAVE ISSUED SUCH\nSTATEMENTS, AND OTHERS ARE EXPECTED. I WOULD APPRECIATE DEEPLY YOUR\nCOOPERATION IN THIS ESSENTIAL JOB. BEST REGARDS.\nHenry Korgenthau, Jr.\nRegraded Unclassified\nTREASURY DEPARTMENT\n245\nTO: Mr. Me Hugh\nMaintain the present\nother than \"create\"\nchange by Sein\nGEORGE BUFFINGTON\nANDARD FORM NO. 14\nMOVED BY THE PRESIDENT\nFROM\n244\nMARCH 10. 1926\nBUREAU\nTELEGRAM\nCHG. APPROPRIATION Expenses of Loans A&E\nOFFICIAL BUSINESS-GOVERNMENT RATES\n& - name -\n10-1788\nDecember 3, 1942.\nCopies to Executive Managers,\nVictory Fund Committees,\nFederal Reserve Banks.\nChairmen, Victory Fund Committees,\nTo Presidente, Federal Reserve Banks:\nBoston, Mass.\nChicago, Ill.\nNew York, N. Y.\nSt. Louis, Mo.\nPhiladelphia, Pa.\nMinneapolis, Minn.\nCleveland, Ohio\nKansas City, Mo.\nRichmond, Va.\nDallas, Texas\nAtlanta, Ga.\nSan Francisco, Calif.\nmaintain the present\nWe realize in order to stimulate sales and erate/enthusiasm it is\nimportant to make public the results of the Victory Fund drive in each\ndistrict. In view of the lag in Treasury figures, we now feel it would\nbe better not to release results by districts from Washington on Decem-\nber 7, as previously planned. You are therefore authorized to issue\nstatements in your district from time to time of results both by districts\nand regions. You may include in your publicity the names of individual\nsubscribers where you have authority from such subscribers.\nMORGENTHAU\n(Initialed by: G. B., D. W. B., G. W.)\nRegraded Unclassified\n245\nDecember 3, 1943.\nDear Mr. Griffith:\nI vas glad to have your letter of December 1.\nenclosing copies of advertising material which\nVAS distributed to the State Banks of Kansas.\nI was also happy to hear that the bankers of the\nState had taken hold in much a commendable vay.\nMrs. Horgenthau and I very much enjoyed our\nrecent visit to Kansas, and I particularly enjoyed\nthe opportunity to become acquainted with you.\nThank you for the P.S. to your letter.\nwith cordial regards,\nSincerely,\n(Signed) H. Morgenthau, Jr.\nMr. Evan Griffith,\nState Administrator, War Savings Staff,\nTopeka, Kensas.\nFile in Diary\nGEF/dbs\nRegraded Unclassified\n246\nTREASURY DEPARTMENT\nWAR\nNECENSE SAVINGS STAFF\nTopeka, Kansas\nPFICE OF STATE ADMINISTRATOR\nDecember 1, 1942\nThe Honorable Henry Morgenthau\nSecretary of the Treasury\nWashington, D. C.\nDear Mr. Secretary:\nThe inclosed \"Victory Fund\" advertising matter will recall\nour visit during the Kansas City plane trip. This publicity\nmaterial reached the State Banks of Kansas on Monday morning,\nNovember 30, 1942.\nI am glad to report that & very commendable spirit is existing\namong the Bankers of Kansas upon the ave of the Nine Billion\nDollar Drive. The Kansas Bankers realize full well the true\nimportance of the success of this undertaking. They speak\nvery highly of the help and cooperation they are receiving\nfrom the Treasury Department in Washington and from the\nFederal Reserve Bank. Your Kansas City meetings were of\ninestimable value.\nRespectfully yours,\nEvan Shiffith\nEVAN GRIFFITH\nState Administrator\nP.S. May I say, Mr. Secretary, how much everyone in Kansas\nenjoyed the visit of Mrs. Morgenthau and yourself. Since\nyour visit, you would be surprised in how many places we\nhear comment about your son coming up in the Army the \"hard\nway\".\nI don't need to toll you that Harry Warehan's chest has been\nsticking out an additional twelve inches since your visit.\nPOBYICTORY\n2.G.\nBUY\nUNITED\nSTATES\nperson\nBONDS\nAND\nSTAMPS\nRegraded Unclassified\n247\nTHE SECRETARY OF THE TREASURY\nWASHINGTON\nNovember 24, 1942\nTo The Salesmen of the Victory Fund Committees:\nI should like to send you a message of cheer and\nencouragement as you move into the December Victory Fund\ndrive. Às you all know by now, we are going to ask the\nAmerican public to invest $9,000,000,000 in victory and\nin freedom. This money will be the medium through which\nthe men on the battlefields receive their supplies. I feel\nthat you will be sustained in your campaigning by the\nknowledge that you are contributing a high service to the\nwar effort.\nBeginning November 30, we shall offer three new issues\nfor sale with the principal aim of enlisting accumulated\nsavings end idle funds. The Victory 2 1/2's must be pushed\nwith the utmost diligence outside the commercial banks, and\nthe 1 3/4 percent five and one-half year bonds and 7/8 percent\none year certificates must be sold wherever they are suitable.\nThe Victory Loan is a full basket of issues for all purposes,\nincluding the A and C tax savings notes, and F & G United\nStates savings bonds.\nYour prospects will include all private investors,\ncorporations, associations, societies, institutions, trusts,\nestates and others who have funds available for investment\nin the best securities the world affords -- United States\nGovernment obligations. Your first assignment will be to\nfamiliarize yourself thoroughly with the essential details\nof each type of obligation. Effective work requires not only\nthat we sell the securities, but also that we place them\nproperly 80 that the real needs of the investors are satisfied.\nThis task well done, will bring satisfaction to us all\nand assurance to those in battle.\nSincerely,\nLIEVENSE\nBUY\nCAMED\nSTATES\nWINGS\nBUNDS\nFamily\nRegraded Unclassified\nUNITED STATES TREASURY\n248\nVICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\nFEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nNovember 28, 1942\nChairman\nH. G. LEADY, President\nFederal Reserve Bank of Kansas City\nTO ALL VICTORY FUND COMMITTEEMEN\nKansas City, Missouri\nTENTH FEDERAL RESERVE DISTRICT:\nExecutive Manager\nSIGMINO Stras\ndirected Executive Manager\nBeasick SIMONS\nThe enclosed letter from the Secretary of the Treasury,\n1614 Federal Reserve Bank Building\nHenry Morgenthau, Jr., speaks for itself.\nKansas City, Missouri\nCarl W. Allendoerfer, President\nWe also quote from a telegram just received from George\nFint National Bank\nBuffington, Assistant Secretary of the Treasury:\nKansas City, Missouri\nArthur H. Boworth, Prendent\nBowerth, Chanute, Loughridge\nà Or, Derver, Colorado\n\"In connection with subscriptions for the new 7/8%\nA. E. Brailshaw, President\nNational Bank of Tulsa\ncertificates and 1 3/4% bonds please call to the\nTulsa Oklahoma\nattention of your organization that official cir-\nL. Cursid, President\nFirst National Bank\nculars state 'Subscribers must agree not to sell\nWebta, Kansas\nDale Clark, Provident\nor otherwise dispose of their subscriptions, or\nDeraha National Bank\nOmba, Nebriska\nof the securities which may be allotted thereon'\nWalter L Cole\nBescreft, Cole & Company\nprior to December 3 for 1 3/4% Treasury Bonds,\nTapeka, Karuas\nand prior to December 19 for Certificates of In-\nDulin Exama, President\nFirst National Bank\ndebtedness, and any subscription blanks you use\nDenver. Colorado\nC. Edgar Honnold\nshould contain that stipulation. It is important\nInvestment Hanker\nOklahoma City, Oklahoma\nthat all subscribers understand that they agree to\nJames M. Kemper, President\nbe bound by this provision in entering subscrip-\nClumer Trust Company\nKansas City, Missinari\ntions.\"\nStreat R., Kirkpatrick, President\nRiskputrick Pettis Company\nOmalia, Nebraska\nF. W. Marble\nWe feel quite sure that the overwhelming majority of pur-\nPice President\nStock Gruwers National Bank\nchasers are actuated solely by the desire to make the best in-\nCheyenne, Wyoming\nvestment in the world, plus the fact that they are helping in\nP. Peters, President\nPrims Writer & Christensen,\nthe financing of the war and are not buying bonds for immediate\nInc., Denver, Colorado\nSigmund Stern, President\nresale, and that the instructions of the Treasury Department in\nSters Brothers & Cu.\nKansas City, Missouri\nregard thereto will be carried out.\nPaul A.F. Walter. President\nFirst National Bank of Santa Fe\nSunta Fe. New Mexico\nYou are requested to use the regular triplicate purchase\nagreement blanks for all issues.\nThe F and G Bonds are now called United States Savings\nBonds instead of United States War Savings Bonds, and the\nVictory Fund Committee is the sole distributing agency for them.\nThey should be sold only where the United States Treasury 2 1/2%\n1963-68's do not fit into the purchasers' investment require-\nments.\nYours very truly,\n4\nterm\nExecutive Manager\nRegraded Unclassified\nUNITED STATES TREASURY\n249\nVICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\nFEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nH. G. LEEDY, Chairman\nSIGMUND STERN, Executive Manager\n......\nUNITED STATES SAVINGS BONDS - SERIES F and G\n(for larger investors)\nMOST of us can't join our sons, brothers, or friends in actual battle, but\nevery one of us can fight with dollars: Every dollar you do not urgently need\nfor food, clothing, shelter, and other absolute necessities should be invested\nin United States Savings Bonds.\nThere are two forms of United States Savings Bonds - Series F, issued at a\ndiscount, is commonly known as an \"appreciation\" bond; Series G, issued at par\nis known as a \"current income\" bond. You may now own up to $100,000 (cost\nprice) of Series F or Series G, or F and G combined, issued in your name in each\ncalendar year, including both those in your name alone and those in your name as\nco-owner. The principal features of these Bonds are outlined below:\nSERIES F\nSERIES G\nDATE AND MATURITY:\nDated the first day of the\nDated the first day of the\nmonth in which payment is\nmonth in which payment is\nreceived by issuing agent;\nreceived by issuing agent;\ndue 12 years from issue date,\ndue 12 years from issue date.\nINTEREST RATE:\nInterest return is equiv-\nInterest return 2.50% if held\nalent to approximately 2.53%\nto maturity. If redeemed prior\ncompounded semi-annually if\nto maturity interest return is\nheld to maturity; lesser\nsmaller.\nyield if redeemed at earlier\ndates.\nISSUE PRICE:\nIssue or cost price, 74% of\n100%\nmaturity value. Example. a\n$1,000 bond costs $740; B.\n$100 bond $74.\nDENOMINATIONS:\nDenominations (maturity\nDenominations (maturity value)\nvalue) $25, $100, $500,\n$100, $500, $1,000, $5,000 and\n$1,000, $5,000 and $10,000.\n$10,000.\nFORM:\nRegistered only.\nRegistered only.\nOn first of any month, six\nOn first of any month, six\nREDEMPTION:\nmonths after issue date,\nmonths after issue date, upon\nupon one month's written\none month's written notice, at\nnotice, at redemption\nredemption values stated on\nvalues stated on each bond.\neach bond.\nCOLLATERAL:\nNot eligible as collateral\nNot eligible as collateral\nfor loans.\nfor loans.\nRegraded Unclassified\nSERIES F\nSERIES G\nTAX STATUS:\nIncome is taxable under Federal tax laws the same as that\non any other United States Government bond issued on or\nafter March 1, 1941.\nTaxpayer has election of\npaying his tax on the\nannual increase in Series\nF bonds in the year it\noccurs, or of having the\nfull appreciation taxable\nto him in the year the\nbond matures.\nSPECIAL FEATURES:\nYou may now own up to $100,000 (cost price) of Series F\nor Series G, or F and G combined, issued in your name in\neach calendar year, including both those in your name\nalone and those in your name as co-owner.\nNo interest, as such, is\nCash or redemption value\npayable on Series F bonds.\nprior to maturity is some-\nInterest accrues by virtue\nwhat less than par, but\nof increases in redemption\nthe cash value at any time,\nvalue after the first year\nplus interest payments\nand at the end of each\nreceived, always totals\nhalf-year period thereafter\nmore than purchase price.\nuntil redemption or maturity.\nWHO MAY BUY:\nBonds may be bought in the name of one person; in the\nnames of two persons (but not more than two) as co-owners;\nin the name of one person with one other person designated\nas beneficiary; in the name of a fiduciary; in the name\nof a custodian of public funds, or in the name of an un-\nincorporated or incorporated body, other than commercial\nbanks.\nWHERE TO BUY:\nOrder through your Victory Fund Committeemen, bank,\nsecurities dealer, broker or savings and loan associa-\ntion. Or buy direct from any Federal Reserve Bank or\nbranch, or by mail from the Treasurer of the United\nStates, Washington, D. C.\nAdditional copies may be had from: VICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\n1614 FEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nRegraded Unclassified\n250\nUNITED STATES TREASURY\nVICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\nFEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nH. G. LEEDY, Chairman\nSIGMUND STERN, Executive Manager\n******\nUNITED STATES SAVINGS BONDS - SERIES F and G\n(for larger investors)\nMOST of us can't join our sons, brothers, or friends in actual battle, but\nevery one of us can fight with dollars: Every dollar you do not urgently need\nfor food, clothing, shelter, and other absolute necessities should be invested\nin United States Savings Bonds.\nThere are two forms of United States Savings Bonds - Series F, issued at a\ndiscount, is commonly known as an \"appreciation\" bond; Series G, issued at par\nis known as 8. \"current income\" bond. You may now own up to $100,000 (cost\nprice) of Series F or Series G, or F and G combined, issued in your name in each\ncalendar year, including both those in your name alone and those in your name as\nco-owner. The principal features of these Bonds are outlined below:\nSERIES F\nSERIES G\nDATE AND MATURITY:\nDated the first day of the\nDated the first day of the\nmonth in which payment is\nmonth in which payment is\nreceived by issuing agent;\nreceived by issuing agent;\ndue 12 years from issue date.\ndue 12 years from issue date.\nINTEREST RATE:\nInterest return is equiv-\nInterest return 2.50% if held\nalent to approximately 2.53%\nto maturity. If redeemed prior\ncompounded semi-annually if\nto maturity interest return is\nheld to maturity; lesser\nsmaller.\nyield if redeemed at earlier\ndates.\nISSUE PRICE:\nIssue or cost price, 74% of\n100%\nmaturity value. Example, a\n$1,000 bond costs $740; a\n$100 bond $74.\nDENOMINATIONS:\nDenominations (maturity\nDenominations (maturity value)\nvalue) $25, $100, $500,\n$100, $500, $1,000, $5,000 and\n$1,000, $5,000 and $10,000.\n$10,000.\nFORM:\nRegistered only.\nRegistered only.\nREDEMPTION:\nOn first of any month, six\nOn first of any month, six\nmonths after issue date,\nmonths after issue date, upon\nupon one month's written\none month's written notice, at\nnotice, at redemption\nredemption values stated on\nvalues stated on each bond.\neach bond.\nCOLLATERAL:\nNot eligible as collateral\nNot eligible as collateral\nfor loans.\nfor loans,\nRegraded\nSERIES F\nSERIES G\nTAX STATUS:\nIncome is taxable under Federal tax laws the same as that\non any other United States Government bond issued on or\nafter March 1, 1941.\nTaxpayer has election of\npaying his tax on the\nannual increase in Series\nF bonds in the year it\noccurs, or of having the\nfull appreciation taxable\nto him in the year the\nbond matures.\nSPECIAL FEATURES:\nYou may now own up to $100,000 (cost price) of Series F\nor Series G, or F and G combined, issued in your name in\neach calendar year, including both those in your name\nalone and those in your name as co-owner.\nNo interest, as such, is\nCash or redemption value\npayable on Series F bonds.\nprior to maturity is some-\nInterest accrues by virtue\nwhat less than par, but\nof increases in redemption\nthe cash value at any time,\nvalue after the first year\nplus interest payments\nand at the end of each\nreceived, always totals\nhalf-year period thereafter\nmore than purchase price.\nuntil redemption or maturity.\nWHO MAY BUY:\nBonds may be bought in the name of one person; in the\nnames of two persons (but not more than two) as co-owners;\nin the name of one person with one other person designated\nas beneficiary; in the name of a fiduciary: in the name\nof a oustodian of public funds, or in the name of an un-\nincorporated or incorporated body, other than commercial\nbanks.\nWHERE TO BUY:\nOrder through your Victory Fund Committeemen, bank,\nsecurities dealer, broker or savings, and loan associa-\ntion. Or buy direct from any Federal Reserve Bank or\nbranch, or by mail from the Treasurer of the United\nStates, Washington, D. C.\nAdditional copies may be had from: VICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\n1614 FEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nRegraded Unclassified\n251\nUNITED STATES TREASURY\nVICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\nFEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nH. G. LEEDY, Chairman\nSIGMUND STERN, Executive Manager\n******\nUNITED STATES SAVINGS BONDS - SERIES F and G\n(for larger investors)\nMOST of us can't join our sons, brothers, or friends in actual battle, but\nevery one of us can fight with dollars! Every dollar you do not urgently need\nfor food, clothing, shelter, and other absolute necessities should be invested\nin United States Savings Bonds.\nThere are two forms of United States Savings Bonds - Series F, issued at a\ndiscount, is commonly known as an \"appreciation\" bond; Series G, issued at par\nis known as a \"ourrent income\" bond. You may now own up to $100,000 (cost\nprice) of Series F or Series G, or F and G combined, issued in your name in each\ncalendar year, including both those in your name alone and those in your name as\nco-owner. The principal features of these Bonds are outlined below:\nSERIES F\nSERIES G\nDATE AND MATURITY:\nDated the first day of the\nDated the first day of the\nmonth in which payment is\nmonth in which payment is\nreceived by issuing agent;\nreceived by issuing agent;\ndue 12 years from issue date.\ndue 12 years from issue date.\nINTEREST RATE:\nInterest return is equiv-\nInterest return 2.50% if held\nalent to approximately 2.53%\nto maturity. If redeemed prior\ncompounded semi-annually if\nto maturity interest return is\nheld to maturity; lesser\nsmaller.\nyield if redeemed at earlier\ndates.\nISSUE PRICE:\nIssue or cost price, 74% of\n100%\nmaturity value. Example, a\n$1,000 bond costs $740; a\n$100 bond $74.\nDenominations (maturity\nDenominations (maturity value)\nDENOMINATIONS:\nvalue) $25, $100, $500,\n$100, $500, $1,000, $5,000 and\n$1,000, $5,000 and $10,000.\n$10,000.\nFORM:\nRegistered only.\nRegistered only.\nOn first of any month, six\nOn first of any month, six\nREDEMPTION:\nmonths after issue date,\nmonths after issue date, upon\nupon one month's written\none month's written notice, at\nnotice, at redemption\nredemption values stated on\nvalues stated on each bond.\neach bond.\nCOLLATERAL:\nNot eligible as collateral\nNot eligible as collateral\nfor loans.\nfor loans.\nRegraded Unclassified\nSERIES F\nSERIES G\nTAX STATUS:\nIncome is taxable under Federal tax laws the same as that\non any other United States Government bond issued on or\nafter March 1, 1941.\nTaxpayer has election of\npaying his tax on the\nannual increase in Series\nF bonds in the year it\noccurs, or of having the\nfull appreciation taxable\nto him in the year the\nbond matures.\nSPECIAL FEATURES:\nYou may now own up to $100,000 (cost price) of Series F\nor Series G, or F and G combined, issued in your name in\neach calendar year, including both those in your name\nalone and those in your name as co-owner.\nNo interest, as such, is\nCash or redemption value\npayable on Series F bonds.\nprior to maturity is some-\nInterest accrues by virtue\nwhat less than par, but\nof increases in redemption\nthe cash value at any time,\nvalue after the first year\nplus interest payments\nand at the end of each\nreceived, always totals\nhalf-year period thereafter\nmore than purchase price.\nuntil redemption or maturity.\nWHO MAY BUY:\nBonds may be bought in the name of one person; in the\nnames of two persons (but not more than two) as co-owners;\nin the name of one person with one other person designated\nas beneficiary; in the name of a fiduciary; in the name\nof a custodian of public funds, or in the name of an un-\nincorporated or incorporated body, other than commercial\nbanks.\nWHERE TO BUY:\nOrder through your Victory Fund Committeemen, bank,\nsecurities dealer, broker or savings and loan associa-\ntion. Or buy direct from any Federal Reserve Bank or\nbranch, or by mail from the Treasurer of the United\nStates, Washington, D. C.\nAdditional copies may be had from: VICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\n1614 FEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nRegraded Unclassified\nUNITED STATES TREASURY\n252\nVICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\nFEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nH. G. LEEDY, Chairman\nSIGMUND STERN, Executive Manager\n******\nUNITED STATES SAVINGS BONDS - SERIES F and G\n(for larger investors)\nMOST of us can't join our sons, brothers, or friends in actual battle, but\nevery one of us can fight with dollars: Every dollar you do not urgently need\nfor food, clothing, shelter, and other absolute necessities should be invested\nin United States Savings Bonds.\nThere are two forms of United States Savings Bonds - Series F, issued at a\ndiscount, is commonly known as an \"appreciation\" bond; Series G, issued at par\nis known as a \"current income\" bond. You may now own up to $100,000 (cost\nprice) of Series F or Series G, or F and G combined, issued in your name in each\ncalendar year, including both those in your name alone and those in your name as\nco-owner. The principal features of these Bonds are outlined below:\nSERIES F\nSERIES G\nDATE AND MATURITY:\nDated the first day of the\nDated the first day of the\nmonth in which payment is\nmonth in which payment is\nreceived by issuing agent;\nreceived by issuing agent;\ndue 12 years from issue date.\ndue 12 years from issue date.\nINTEREST RATE:\nInterest return is equiv-\nInterest return 2.50% if held\nalent to approximately 2.53%\nto maturity. If redeemed prior\ncompounded semi-annually if\nto maturity interest return is\nheld to maturity; lesser\nsmaller.\nyield if redeemed at earlier\ndates.\nISSUE PRICE:\nIssue or cost price, 74% of\n100%\nmaturity value. Example, a\n$1,000 bond costs $740; a\n$100 bond $74.\nDenominations (maturity\nDenominations (maturity value)\nDENOMINATIONS:\nvalue) $25, $100, $500,\n$100, $500, $1,000, $5,000 and\n$1,000, $5,000 and $10,000.\n$10,000.\nFORM:\nRegistered only.\nRegistered only.\nOn first of any month, six\nOn first of any month, six\nREDEMPTION:\nmonths after issue date,\nmonths after issue date, upon\nupon one month's written\none month's written notice, at\nnotice, at redemption\nredemption values stated on\nvalues stated on each bond.\neach bond.\nCOLLATERAL:\nNot eligible as collateral\nNot eligible as collateral\nfor loans.\nfor loans.\nRegraded\nTRUBASHT BETATU CETIZO\nSERIES F\nSERIES G\nTAX STATUS:\nIncome is taxable under Federal tax laws the same 6.8 that\non any other United States Government bond issued on or\nafter March 1, 1941.\nTaxpayer has election of\npaying his tax on the\nannual increase in Series\nF bonds in the year it\noccurs, or of having the\nfull appreciation taxable\nto him in the year the\nbond matures.\nSPECIAL FEATURES:\nYou may now own up to $100,000 (cost price) of Series F\nor Series G, or F and G combined, issued in your name in\neach calendar year, including both those in your name\nalone and those in your name as co-owner.\nNo interest, as such, is\nCash or redemption value\npayable on Series F bonds.\nprior to maturity is some-\nInterest accrues by virtue\nwhat less than par, but\nof increases in redemption\nthe cash value at any time,\nvalue after the first year\nplus interest payments\nand at the end of each\nreceived, always totals\nhalf-year period thereafter\nmore than purchase price.\nuntil redemption or maturity.\nWHO MAY BUY:\nBonds may be bought in the name of one person; in the\nnames of two persons (but not more than two) as co-owners;\nin the name of one person with one other person designated\nas beneficiary; in the name of a fiduciary; in the name\nof a oustodian of public funds, or in the name of an un-\nincorporated or incorporated body, other than commercial\nbanks.\nWHERE TO BUY:\nOrder through your Victory Fund Committeemen, bank,\nsecurities dealer, broker or savings and loan associa-\ntion. Or buy direct from any Federal Reserve Bank or\nbranch, or by mail from the Treasurer of the United\nStates, Washington, D. C.\nAdditional copies may be had from: VICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\n1614 FEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nRegraded Unclassified\nUNITED STATES TREASURY\n253\nVICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\nFEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nH. G. LEEDY, Chairman\nSIGMUND STERN, Executive Manager\n******\nUNITED STATES SAVINGS BONDS - SERIES F and G\n(for larger investors)\nMOST of us can't join our sons, brothers, or friends in actual battle, but\nevery one of us can fight with dollars: Every dollar you do not urgently need\nfor food, clothing, shelter, and other absolute necessities should be invested\nin United States Savings Bonds.\nThere are two forms of United States Savings Bonds - Series F, issued at a\ndiscount, is commonly known as an \"appreciation\" bond; Series G, issued at par\nis known as a. \"ourrent income\" bond. You may now own up to $100,000 (cost\nprice) of Series F or Series G, or F and G combined, issued in your name in each\ncalendar year, including both those in your name alone and those in your name as\nco-owner. The principal features of these Bonds are outlined below:\nSERIES F\nSERIES G\nDATE AND MATURITY:\nDated the first day of the\nDated the first day of the\nmonth in which payment is\nmonth in which payment is\nreceived by issuing agent;\nreceived by issuing agent;\ndue 12 years from issue date.\ndue 12 years from issue date.\nINTEREST RATE:\nInterest return is equiv-\nInterest return 2.50% if held\nalent to approximately 2.53%\nto maturity. If redeemed prior\ncompounded semi-annually if\nto maturity interest return is\nheld to maturity; lesser\nsmaller.\nyield if redeemed at earlier\ndates.\nISSUE PRICE:\nIssue or cost prive, 74% of\n100%\nmaturity value. Example, a\n$1,000 bond costs $740; B.\n$100 bond $74.\nDENOMINATIONS:\nDenominations (maturity\nDenominations (maturity value)\nvalue) $25, $100, $500,\n$100, $500, $1,000, $5,000 and\n$1,000, $5,000 and $10,000.\n$10,000.\nFORM:\nRegistered only.\nRegistered only.\nREDEMPTION:\nOn first of any month, six\nOn first of any month, six\nmonths after issue date,\nmonths after issue date, upon\nupon one month's written\none month's written notice, at\nnotice, at redemption\nredemption values stated on\nvalues stated on each bond.\neach bond.\nCOLLATERAL:\nNot eligible as collateral\nNot eligible as collateral\nfor loans.\nfor loans.\nSERIES F\nSERIES G\nTAX STATUS:\nIncome is taxable under Federal tax laws the same as that\non any other United States Government bond issued on or\nafter March 1, 1941.\nTaxpayer has election of\npaying his tax on the\nannual increase in Series\nF bonds in the year it\noccurs, or of having the\nfull appreciation taxable\nto him in the year the\nbond matures.\nSPECIAL FEATURES:\nYou may now own up to $100,000 (cost price) of Series F\nor Series G, or F and G combined, issued in your name in\neach calendar year, including both those in your name\nalone and those in your name as co-owner.\nNo interest, as such, is\nCash or redemption value\npayable on Series F bonds.\nprior to maturity is some-\nInterest accrues by virtue\nwhat less than par, but\nof increases in redemption\nthe cash value at any time,\nvalue after the first year\nplus interest payments\nand at the end of each\nreceived, always totals\nhalf-year period thereafter\nmore than purchase price.\nuntil redemption or maturity.\nWHO MAY BUY:\nBonds may be bought in the name of one person; in the\nnames of two persons (but not more than two) as co-owners;\nin the name of one person with one other person designated\n0.8 beneficiary; in the name of a fiduciary; in the name\nof a custodian of public funds, or in the name of an un-\nincorporated or incorporated body, other than commercial\nbanks.\nWHERE TO BUY:\nOrder through your Victory Fund Committeemen, bank,\nsecurities dealer, broker or savings and loan associa-\ntion. Or buy direct from any Federal Reserve Bank or\nbranch, or by mail from the Treasurer of the United\nStates, Washington, D. C.\nAdditional copies may be had from: VICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\n1614 FEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nRegraded Unclassified\nCASH SUBSCRIPTION FOR\n254\n2½ TREASURY BONDS OF 1963-68\nDated and bearing Interest from December 1, 1942\nDue December 15, 1968\nInterest payable June 15 and December 15\nFederal Reserve Bank of Kansas City,\n1942\nFiscal Agent of the United States,\nDate\nKansas City, Mo.\nGentlemen:\nPursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the\nundersigned hereby subscribes for bonds of the above described issue as follows:\nPar Value\n$\nEach customer's name, address, and\nAccrued Interest\n$\namount of subscription should be\nfurnished, using space provided on\nthe reverse side thereof.\nTotal remittance\n$\nIMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-\ncompanied by payment in full for the amount of bonds applied for and payments after December 1 must include\ninterest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank\nor a Branch.\nMETHOD OF PAYMENT\n1. By Draft Enclosed (funds available by the fame date)\n$\n2. By Charge to our Reserve Account\n$\n3. By Credit in War Loan Deposit Account* (Form K2 enclosed)\n$\nTotal\n$\nCoupon\n$\nNew Treasury bonds to be issued\n*Registered\n$\n*Complete registration instructions given on reverse side hereof.\nTotal\n$\nINSTRUCTIONS FOR NEW COUPON TREASURY BONDS\nNumber\nof Pieces\nDenominations\nAmount\nMAIL TO\n@\n500.00\n$\n@\n1,000.00\n$\n@\n5,000.00\n$\n@\n10,000.00\n$\n@\n100,000.00\n$\nTotal\n$\nIt is requested that delivery of the registered bonds allotted be made to\nIMPORTANT\nThis is\n{\nOriginal\nBy\nAuthorised Official Signature\nSubscription\nConfirmation\nCity\nState\n'N.B. Registered bends may not be hold to secure the War Loan Deposit account.\npetup TO repun\nor \"John R. Jones, Trustee for\ndated\nTHA repun the 'ssuof \"I uqof\" 20 'seuor \"V Low TO IIIA our zepun\nH\nuyor erdupxo TOX 'patinuant TO ted late fied\nSERIES F\nSERIES G\nTAX STATUS:\nIncome is taxable under Federal tax laws the same as that\non any other United States Government bond issued on or\nafter March 1, 1941.\nTaxpayer has election of\npaying his tax on the\nannual increase in Series\nF bonds in the year it\noccurs, or of having the\nfull appreciation taxable\nto him in the year the\nbond ratures.\nSPECIAL FEATURES:\nYou may now own up to $100,000 (cost price) of Series F\nor Series G, or F and G combined, issued in your name in\neach calendar year, including both those in your name\nalone and those in your name as co-owner.\nNo interest, as such, is\nCash or redemption value\npayable on Series F bonds.\nprior to maturity is some-\nInterest accrues by virtue\nwhat less than par, but\nof increases in redemption\nthe cash value at any time,\nvalue after the first year\nplus interest payments\nand at the end of each\nreceived, always totals\nhalf-year period thereafter\nmore than purchase price.\nuntil redemption or maturity.\nWHO MAY BUY:\nBonds may be bought in the name of one person; in the\nnames of two persons (but not more than two) as co-owners;\nin the name of one person with one other person designated\nas beneficiary; in the name of a fiduciary; in the name\nof a custodian of public funds, or in the name of an un-\nincorporated or incorporated body, other than commercial\nbanks.\nWHERE TO BUY:\nOrder through your Victory Fund Committeemen, bank,\nsecurities dealer, broker or savings and loan associa-\ntion. Or buy direct from any Federal Reserve Bank or\nbranch, or by mail from the Treasurer of the United\nStates, Washington, D. C.\nAdditional copies may be had from: VICTORY FUND COMMITTEE\nTENTH FEDERAL RESERVE DISTRICT\n1614 FEDERAL RESERVE BANK BUILDING\nKANSAS CITY, MISSOURI\nRegraded Unclassified\nCASH SUBSCRIPTION FOR\n254\n2½% TREASURY BONDS OF 1963-68\nDated and bearing interest from December 1, 1942\nDue December 15, 1968\nInterest payable June 15 and December 15\nFederal Reserve Bank of Kansas City,\n1942\nFiscal Agent of the United States,\nDate\nKansas City, Mo.\nGentlemen:\nPursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the\nundersigned hereby subscribes for bonds of the above described issue as follows:\nPar Value\n$\nEach customer's name, address. and\nAccrued Interest\n$\namount of subscription should be\nfurnished, using space provided on\nthe reverse side thereof.\nTotal remittance\n-\n$\nIMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-\ncompanied by payment in full for the amount of bonds applied for and payments after December 1 must include\ninterest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank\nor a Branch.\nMETHOD OF PAYMENT\n1. By Draft Enclosed (funds available by the Issue date)\n$\n2. By Charge to our Reserve Account\n$\n8. By Credit in War Loan Deposit Account* (Form K2 enclosed)\n$\nTotal\n$\nCoupon\n$\nNew Treasury bonds to be issued\n'Registered\n$\n*Complete registration instructions given on reverse side hereof.\nTotal\n$\nINSTRUCTIONS FOR NEW COUPON TREASURY BONDS\nNumber\nof Pioces\nDenominations\nAmount\nMAIL TO\n@\n500.00\n$\n@\n1,000.00\n$\n@\n5,000.00\n$\n@\n10,000.00\n$\n@ 100,000.00\n$\nTotal\n$\nIt is requested that delivery of the registered bonds allotted be made to\nIMPORTANT\nOriginal\nThis is\nBy\nAuthorised Official Signature\nSubscription\nConfirmation\nCity\nState\n*R. Registered bonds may not be held to secure the War Loan Deposit account.\nIf 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.\nPayment, however, If sufficient collateral is deposited.\nFEDERAL RESERVE BANK OF KANSAS CITY,\nBubscription checked by\nCards checked by\nSubscription No\nRegraded Unclassified\nSCHEDULE OF CUSTOMERS' SUBSCRIPTIONS\nNAME\nADDRESS\nAMOUNT\nof\n1\n%\nAdj.\n3\nTotal of Customers' Coupon Bond Subscriptions\n$\n(Must agree with amount on face of this application)\nINSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS\nNAME*\nGive complete name, Including middle name or initial,\nADDRESS\nor name as Inscribed on other bonda.\nIf carrier service, Include\nDenomination\nAmount\nstreet address\nStreet\n$\nCity\n@\nStreet\n-\nCity\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\n(If space is Insufficient attach\n$\ntypewrites schedule)\nTOTAL\nWhen locade are being registered in the bame of . trustee, the trusteeship should be fully identified, as for example \"John R James\nTrustes under the will of Mary A. Jones, doceased\", or \"John R. Jones, trustee under agreement with\ndated\n- \"John R. Jones, Trustee for\nunder agreement of trust dated\nRegraded Unclassified\nCASH SUBSCRIPTION FOR\n255\n2½% TREASURY BONDS OF 1963-68\nDated and bearing interest from December 1, 1942\nDue December 15, 1968\nInterest payable June 15 and December 15\nFederal Reserve Bank of Kansas City,\n1942\nFiscal Agent of the United States,\nDate\nKansas City, Ma.\nGentlemen:\nPursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the\nundersigned hereby subscribes for bonds of the above described issue as follows:\nPar Value\n$\nEach customer's name, address, and\nAccrued Interest\n$\namount of subscription should be\nfornished, using space provided on\nthe reverse side thereof.\nTotal remittance\n-\n$\nIMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-\ncompanied by payment in full for the amount of bonds applied for and payments after December 1 must include\ninterest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank\nor a Branch.\nMETHOD OF PAYMENT\n1. By Draft Enclosed (funds available by the Issue date)\n$\n2. By Charge to our Reserve Account\n$\n3. By Credit in War Loan Deposit Account* (Form K2 enclosed)\n$\nTotal\n$\n{\nCoupon\n$\nNew Treasury bonds to be issued\n*Registered\n$\n*Complete registration instructions given on reverse side hereof.\nTotal\n$\nINSTRUCTIONS FOR NEW COUPON TREASURY BONDS\nNumber\nof Pieces\nDenominations\nAmount\nMAIL TO\n@\n500.00\n$\n@\n1,000.00\n$\n@\n5,000.00\n$\n@\n10,000.00\n$\n@\n100,000.00\n$\nTotal\n$\nIt is requested that delivery of the registered bonds allotted be made to\nIMPORTANT\nOriginal\nBy\nThis is\nAuthorised Official Signature\nSubscription\nConfirmation\nState\nCity\n*N. 'N.B. Registered bends may not be hald to secure the War Loan Deposit account.\nIf 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.\nPayment, sufficient collateral la deposited.\nSubscription checked by\nCards checked by\nSubscription No\nRegraded Unclassified\nSCHEDULE OF CUSTOMERS' SUBSCRIPTIONS\nNAME\nADDRESS\nAMOUNT\n1\n%\n4dj.\n/\n$\nTotal of Customers' Coupon Bond Subscriptions\n$\n(Must RETOS with amount on face of this application)\nINSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS\nNAME*\nGive complete name, Including middle name or initial,\nADDRESS\nor name as Inscribed on other bonds.\nIf carrier service, Include\nDenomination\nAmail\nstreet address\nStreet\n$\nCity\n@\nStreet\n8\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\n(If space is insufficient attach\n$\ntypewritten schedule)\nTOTAL\nWhere bonds are being registered in the name of = trustee, the trusteeship should be fully identified, as for example \"John R. join\nTrustee under the will of Mary A. Jones, deceased\", or \"John R. Jones, trustee under agreement with\ndated\nger \"John R. Jones, Trustee for\nunder agreement of trust dated\nRegraded Unclassified\nCASH SUBSCRIPTION FOR\n256\n2½% TREASURY BONDS OF 1963-68\nDated and bearing interest from December 1, 1942\nDue December 15, 1968\nInterest payable June 15 and December 15\nFederal Reserve Bank of Kansas City,\n1942\nFiscal Agent of the United States,\nDate\nKansas City, Mo.\nGentlemen:\nPursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the\nundersigned hereby subscribes for bonds of the above described issue as follows:\nPar Value\n$\nEach customer's name, address, and\nAccrued Interest\n$\namount of subscription should be\nfurnished, using space provided on\nthe reverse side thereof.\nTotal remittance\n$\nIMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-\ncompanied by payment in full for the amount of bonds applied for and payments after December 1 must Include\ninterest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank\nor a Branch.\nMETHOD OF PAYMENT\n1. By Draft Enclosed (funds available by the fasue date)\n$\n2. By Charge to our Reserve Account\n$\n3. By Credit in War Loan Deposit Account* (Form K2 enclosed)\n$\nTotal\n$\nCoupon\n$\nNew Treasury bonds to be issued\n*Registered\n$\n*Complete registration Instructions given on reverse side hereof.\nTotal\n$\nINSTRUCTIONS FOR NEW COUPON TREASURY BONDS\nNumber\nof Pieces\nDenominations\nAmount\nMAIL TO\n@\n500.00\n$\n@\n1,000.00\n$\n@\n5,000.00\n$\n@\n10,000.00\n$\n@\n100,000.00\n$\nTotal\n$\nIt is requested that delivery of the registered bonds allotted be made to\nIMPORTANT\nOriginal\nThis is\nBy\nSubscription\nAuthorised Official Signature\nConfirmation\nCity\nState\nM.B. Registered bends may not be hold to secure the War Leen Deposit account.\nIf supply of Manks may furnished be made la by - letter and give complete instructions with the above certificate of mbseription and Plecal payment. Agent.\nPayment, bewerer, credit If sufficient collateral is deposited.\nFEDERAL RESERVE BANK OF KANSAS CITY,\nSubscription checked by\nCards checked by\nSubscription No\nRegraded Unclassified\nSCHEDULE OF CUSTOMERS' SUBSCRIPTIONS\nNAME\nADDRESS\nAMOUNT\nPedemal I 1\nReserved for - of\n%\nAdj.\ns\n$\nTotal of Customers' Coupon Bond Subscriptions\n$\n(Must agree with amount on face of this application)\nINSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS\nNAME*\nGive complete name, Including middle name or initial,\nADDRESS\nor name as Inscribed on other bonds.\nIf carrier service, Include\nDenomination\nAmail\nstreet address\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\nStreet\n$\nCity\nStreet\n$\nCity\nStreet\n$\nCity\n@\n(If space la Insufficient attach\n$\ntypewritten schedule)\nTOTAL\nWhere bonds are being registered in the name of . trustee, the trustesship should be fully identified, as for example \"John R\nTrustee under the will of Mary A. Jones, deceased\", or \"Johm 2. Jones, truntee under agreement with\ndated\nor \"John R. Jones, Trustee for\nunder agreement of trust dated\nRegraded Unclassified\nCASH SUBSCRIPTION FOR\n257\n2½ TREASURY BONDS OF 1963-68\nDated and bearing Interest from December 1, 1942\nDue December 15, 1968\nInterest payable June 15 and December 15\nFederal Reserve Bank of Kansas City,\n1942\nFiscal Agent of the United States,\nDate\nKansas City, Mo.\nGentlemen:\nPursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the\nundersigned hereby subscribes for bonds of the above described issue as follows:\nPar Value\n$\nEach customer's name, address, and\nAccrued Interest\n$\namount of subscription should be\nfurnished, using space provided on\nthe reverse side thereof.\nTotal remittance\n$\nIMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-\ncompanied by payment in full for the amount of bonds applied for and payments after December 1 must include\ninterest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank\nor a Branch.\nMETHOD OF PAYMENT\n1. By Draft Enclosed (funds available by the fame date)\n$\n2. By Charge to our Reserve Account\n$\n8. By Credit in War Loan Deposit Account* (Form K2 enclosed)\n$\nTotal\n$\nCoupon\n$\nNew Treasury bonds to be issued\nRegistered\n$\n\"Complete registration instructions given on reverse side hereof.\nTotal\n$\nINSTRUCTIONS FOR NEW COUPON TREASURY BONDS\nNumber\nof Pieces\nDenominations\nAmount\nMAIL TO\n@\n500.00\n$\n@\n1,000.00\n$\n@\n5,000.00\n$\n@\n10,000.00\n$\n@\n100,000.00\n$\nTotal\n$\nIt is requested that delivery of the registered bonds allotted be made to\nIMPORTANT\nOriginal\nBy\nThis is\nAuthorised Official Signature\nSubscription\nConfirmation\nCity\nState\n% Registered bonds may net be hold to secure the War Loan Deposit account.\nIf 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.\nPayment, sufficient collateral is deposited.\nFEDERAL RESERVE BANK OF KANSAS\nSubscription checked by\nCards checked by\nSubscription No.\nUnclassified\nSCHEDULE OF CUSTOMERS' SUBSCRIPTIONS\nNAME\nADDRESS\nAMOUNT\nof\nE\n%\nAdj.\n/\n$\nTotal of Customers' Coupon Bond Subscriptions\n$\n(Must RETOO with amount on face of this application)\nINSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS\nNAME*\nGive complete name, Including middle name or initial,\nADDRESS\nor name as Inscribed on other bonds.\nIf carrier service, include\nDenomination\nAma\nstreet address\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\nStreet\n$\nCity\n@\n(If space la Insufficient attach\n$\ntypewritten schedule)\nTOTAL\nWhere bonds - being registered to the name of . trustoe, the trusteeship should be fully identified, as for example \"John &\nTrustas under the will of Mary A. Jones, deceased\", or \"John R. Jones, trustee under agreement with\ndated\nor \"Ma R. Trustee for\nunder agreement of trust dated\nRegraded Unclassified\nCASH SUBSCRIPTION FOR\n258\n2½ TREASURY BONDS OF 1963-68\nDated and bearing interest from December 1, 1942\nDue December 15, 1968\nInterest payable June 15 and December 15\nFederal Reserve Bank of Kansas City,\n1942\nFiscal Agent of the United States,\nDate\nKansas City, Mo.\nGentlemen:\nPursuant to the provisions of Treasury Department Circular No. 701, dated November 30, 1942, the\nundersigned hereby subscribes for bonds of the above described issue as follows:\nPar Value\n$\nEach customer's name, address. and\nAccrued Interest\n$\namount of subscription should be\nfurnished, using space provided on\nthe reverse side thereof.\nTotal remittance\n$\nIMPORTANT-This issue not available to commercial banks for their own account. Subscriptions must be ac-\ncompanied by payment in full for the amount of bonds applied for and payments after December 1 must include\ninterest ($0.068 per $1,000 per day) to date remittance, in available exchange, reaches this Federal Reserve Bank\nor a Branch.\nMETHOD OF PAYMENT\n1. By Draft Enclosed (funds available by the Issue date)\n$\n2. By Charge to our Reserve Account\n$\n3. By Credit in War Loan Deposit Account* (Form E2 enclosed)\n$\nTotal\n$\n{\nCoupon\n$\nNew Treasury bonds to be issued\n*Registered\n$\n*Complete registration Instructions given on reverse side hereof.\nTotal\n$\nINSTRUCTIONS FOR NEW COUPON TREASURY BONDS\nNumber\nof Pieces\nDenominations\nAmount\nMAIL TO\n@\n500.00\n$\n@\n1,000.00\n$\n@\n5,000.00\n$\n@\n10,000.00\n$\n@\n100,000.00\n$\nTotal\n$\nIt is requested that delivery of the registered bonds allotted be made to\nIMPORTANT\nOriginal\nBy\nThis is\nAuthorised Official Signature\nSubscription\nConfirmation\nState\nCity\n'X.B. Registered bonds may net be held to secure the War Lean Deposit account.\nIf 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.\nPayment, If sufficient collateral to deposited.\nFEDERAL RESERVE BANK OF KANSAS\nSubscription checked by\nCards checked by\nSubscription No\nRegraded Unclassified\nSCHEDULE OF CUSTOMERS' SUBSCRIPTIONS\nADDRESS\nAMOUNT\n- of\nNAME\n%\nAdl.\n¥\nTotal of Customers' Coupon Bond Subscriptions\n$\n(Must with amount on face of this application)\nINSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS\nNAME*\nADDRESS\nGive complete name, Including middle name or initial,\nIf carrier service, Include\nDenomination\nAmt\nor name as inscribed off other bonds.\nstreet address\nStreet\n$\n@\nCity\nStreet\n$\n@\nCity\nStreet\n$\n@\nCity\nStreet\n$\nCity\nStreet\n$\n@\nCity\nStreet\n$\n@\nCity\nStreet\n$\n@\nCity\n$\n(If space to insufficient attach\ntypewritten schedule)\nTOTAL\n*Where bonds are being registered in the name of - trustee, the trusteeship should be fully identified, as for example \"John R.\nunder the will of Mary A. Junes, deceased\", or \"John R. Jones, trustee under agreement with\ndated\n1\nTrustee for\nunder a presmant of trust dated\nRegraded Unclassified\nCASH SUBSCRIPTION FOR\n259\n13/4% TREASURY BONDS OF 1948\nDated and bearing Interest from December 1, 1942\nDue June 15, 1948\nInterest payable June 15 and December 15\nFederal Reserve Bank of Kansas City,\n1942\nFiscal Agent of the United States,\nDate\nX City, Ms.\nGentlemen: Pursuant to the provisions of Treasury Department Circular No. 702, dated November 30, 1942, the\nundersigned hereby subscribes for bonds of the above described issue as follows:\nAmount of\nFor alletment - le\nBuberiptles(s)\nFederal Reserved Bank\nOur own cash Subscription (Bevice open November 24, December 1 and 2)\n$\n$\nCustomers' Cash Subscriptions\n$\nWith furntabed, for which space to provided - the reverse abde bereof.\ncostomer's - address and amount of subscription must be\nTotal Subscriptions\n$\nAccrued Interest on $\nfrom December 1, 1942, to\n(80.048 per $1,000 per day) $.\nPlease note: Subscriptions for amounts up to and Including $100,000 from commercial banks and subscriptions in any\namount from all other subscribers will be allotted In full.\nMETHOD OF PAYMENT\n1. By Draft Enclosed (Funds available by the faroe date)\n2. By Charge to our Reserve Account\n3. By Credit in War Loan Deposit Account (Wai furnish Form El after allotment to determined)\n4. Payment to be made by\n(Name of bank)\nTotal\n$\nPayment due December 1. no. except for bonds allotted to commarical banks for own account:\nfor this class of unbertibers payment is das December 11 with Interest from December 1.\nIn the event our subscription is not allotted in full you are authorized to remit or credit the overage in our remit-\nfor our use.\ntance to\n(Insurt came of bank)\nCoupon\n$\nNew Treasury bonds to be issued\n*Registered\n$\n*Complete registration Instructions given on reverse side hereof.\nTotal\n$\nINSTRUCTIONS FOR NEW COUPON TREASURY BONDS\nHumber of\nHOLD-Safekeeping Department.\nPlane\nDesmission\nAmount\n(Member bests for - assount eatr)\n@\n500.00\n$\n@\n1,000.00\n$\nHOLD-To secure War Loan Account.\n@\n5,000.00\n$\n@\n10,000.00\n$\nMAIL TO\n@\n100,000.00\n$\nTotal coupon bonds desired\n$\nCERTIFICATE OF SUBSCRIPTION AND PAYMENT\nF. hereby certify:\nThat from our customers in the amounts set opposite the customers' names costomer, - the not\nattached we have received applications of this subscription: that there has been paid to as by each each of the amount\nsubject to list withdrawal which la made until a after part allotment and payment in full for securities allotted, two percent\napplied for,\nF. /urther certify:\nThat this subscription is solely for our own account or for the account of of the our customers subscription, specified or of herein; the securities that no\narrangements which have been or will be made for closing the sale of or the other subscription disposition books; and that our customers whose respect subscrip- to\ntlons are may Included be allotted herein thereon, will be prior requested to the to confirm to - their agreement to the name conditions with\ntheir subscriptions.\nR.\nF,\nbe consideration allotted on this of subscription, the receipt by at you par on or before the date of Issue, hereon. or at par\nagrees In of this subscription, to make payment in full and for the accrued entire interest amount M. which es later may\nallotment. Such payment will be made by the method Indicated\nIMPORTANT\nOriginal\nBy\nAuthorised Official Bignature\nThis is\nAdditional\nSubscription\nConfirmation\nState\nCity\nIf empoly of Marks fundred la - letter and give complete Instructions with the above certificate of unherription Planni and payment. Agent.\nFEDERAL RESERVE BANK OF KANSAS CITY,\nRegraded Unclassified\nchecked\nby\nSubscription No.\nSCHEDULE OF CUSTOMERS' SUBSCRIPTIONS\nReserved for\nNAME\nADDRESS\nAMOUNT\nFederal Reserve - Beat of\n*\nA.d.\n1\n$\nTotal of Customers' Coupon Bond Subscriptions\n$\n(Must RETON with amount on face of this application)\nINSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS\nNAME*\nADDRESS\nGive complete name, Including middle name or Initial,\nIf carrier service, Include\nDenomination\nAma\nor name - Inscribed on other bonds.\nstreet address\nStreet\n$\n@\nCity\nStreet\n$\n@\nCity\nStreet\n$\n@\nCity\nStreet\n$\n@\nCity\nStreet\n$\n@\nCity\nStreet\n$\n@\nCity\nStreet\n$\nCity\n@\n(If space is Insufficient attach\n(rpewrittes achedule)\n$\nTOTAL\n\"Where bonds are being registered in the name of a trustee, the trusteeship should be fully Identified, as for example \"John 1,\nTrustee under the will of Mary A. Jones, deceased\", or \"John R. Jones, trustee under agreement with\ndated\nor \"John R. Jones, Trustee for\nunder agreement of trust dated\nRegraded Unclassified\nCASH SUBSCRIPTION FOR\n13/4% TREASURY BONDS OF 1948\n260\nDated and bearing Interest from December 1, 1942\nDue June 15, 1945\nInterest payable June 13 and December 15\nFederal Reserve Bank of Kansas City,\n1942\nFiscal Agent of the United States,\nDate\nKansas City, Mo.\nGentlemen: Pursuant to the provisions of Treasury Department Circular No. 702, dated November 30, 1942, the\nundersigned hereby subscribes for bonds of the above described issue as follows:\nAmount of\nFor allotment new hgt\nSuberription(s)\nFaieral Reserve Bank\nOur own cash Subscription (Banks open November 30, December I and 2) -\n$\n$\nCustomers' Cash Subscriptions\n$\n$\n\"Each cultomer's name, address and amount of subscription must be\nfurnished. for which space la provided on the reverse side hereal.\nTotal Subscriptions\n$\n$\nAeroved interest on $\nfrom December 1, 1942, to\n($0.048 per 11.000 per day) $\nPlease note: Subscriptions for amounts up to and Including $100,000 from commercial banks and subscriptions In any\namount from all other subscribers will be allotted in full.\nMETHOD OF PAYMENT\n1. By Draft Enclosed (Funds available by the brue date)\n$\n2. By Charge to our Reserve Account\n$\n3. By Credit in War Loan Deposit Account (Will fornish Form K1 after allotment is determined)\n$\n4. Payment to be made by\n$\n(Name of bank)\nTotal\n$\nParment doe December 1. 1942. escept for bunds allotted to commerical hanks for ORD account:\nfor this class of autoribers payment la doe December 11 with interest from Docember 1.\nIn the event our subscription is not allotted in full you are authorized to remit or credit the overage in our remit-\nfor our use,\ntance to\n(Insert name of hash)\nCoupon\n$\nNew Treasury bonds to be issued\nRegistered\n$\nTotal\n$\n*Complete registration Instructions given un revene side berenf.\nINSTRUCTIONS FOR NEW COUPON TREASURY BONDS\nNumber of\nHOLD-Safekeeping Department.\nPlane\nDescriptions\nAmount\n(Member backs for own account entr)\n@\n500.00\n$\n@\n1,000.00\n$\nHOLD-To secure War Loan Account.\n©\n5,000.00\n$\n@\n10,000.00\n$\nMAIL TO\n@\n100,000.00\n$\nTotal coupon bonds desired\n$\nCERTIFICATE OF SUBSCRIPTION AND PAYMENT\n#: hereby\nThat certify: from our customers in the amounts net opposite us the customers' each such names customer. on the not\nattached subject to list withdrawal which is made until a after part allotment of this and payment in full for securities allotted, two percent\nwe have received applications subscription; that there has been paid to by of the amount\napplied for.\nFe further\nThat this certify: subscription in solely for our own account or for the disposition account of of the nur customers subscription, specified or of herein: the securities that no\narrangements which may be have allotted been thereon, or will prior be requested made to the for to closing the confirm sale of or to the other us subscription their agreement books: to and the that name our conditions customers with whose respect subscrip- to\ntions\nare\nincluded\nherein\nwill\nbe\ntheir subscriptions.\nF.\nagree: In consideration of the receipt by you of this before subscription, the date to of make issue, payment or at in par full and for the accrued entire interest amount if which en later may\nbe allotment. allotted on Such this payment subscription, will be at made par on by or the method Indicated hereon.\nIMPORTANT\nOriginal\nBy\nAuthorized Official Signature\nThis la\nAdditional\nSubscription\nConfirmation\nState\nCity\nIf expoly of Manks furntabed la Innefficient, - letter and give complete instructions FEDERAL RESERVE with the above BANK certificate OF KANSAS of subscription CITY, Floral and payment. Agent\nRegraded Unclassified\nby\nSCHEDULE OF CUSTOMERS' SUBSCRIPTIONS\nReserved for - of\nNAME\nADDRESS\nAMOUNT\nI I\n.\nAd.\n/\n$\nTotal of Customers' Coupon Bond Subscriptions\n$\n(Mort agree with amount on face of this application)\nINSTRUCTIONS FOR NEW REGISTERED TREASURY BONDS\nNAME*\nADDRESS\nGive complete name, including middle name or initial,\nIf carrier service, Include\nDenomination\nAmount\nor name as Inseribed on other bonds.\nstreet address\nStreet\n$\nCity\n@\nStreet\n-\nCity\nG\nStreet\n$\nCity\n@\nStreet\n$\nCity\nStreet\n$\nCity\n@\nStreet\n$\n@\nCity\nStreet\n$\nCity\n@\n(If space la Insufficient attach\ntypewrites schedule)\nTOTAL\n$\n*Where Trustee bonds are being registered in the name of a trustee, the trusteeship should be fully identified, as for example \"John R.\nor \"John R. Jones, Trustee for\nunder the will of Mary A. Jones, deceased\", or \"John R. Jones, trustee under agreement with\ndated\nunder agreement of trust dated\ne*\n-\nRegraded Unclassified\nCASH SUBSCRIPTION FOR\n261\n1/8% TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES E-1943\nDated and bearing interest from December 1, 1942\nMaturing December 1, 1943\nFederal Reserve Bank of Kansas City,\nFiscal Agent of the United States,\nKansas City, Mo.\n1942\nDate\nGentlemen: Pursuant to the provisions of Treasury Department Circular No. 703, dated November 30, 1942, the\nundersigned hereby subscribes for certificates of the above described issue as follows:\nAmount of\nFor alletrent use by\nBulamption(s)\nFederal Enerve Bank\nOur own Cash Subscription (Books open December 14. IT and 18)\n$\n$\nCustomers' Cash Subscriptions\n$\n$\nEach customer's DATA address and amount of subscription must be\nfurnished for which space is provided on the revenu side bernof.\nTotal Subscriptions\n$\n$\nAccrued interest on $\nfrom December 1, 1942, to\n($0,024 per $1,000 per day) $\nSubscriptions will be allotted in full excepting those for amounts over $100,000 from commercial banks.\nMETHOD OF PAYMENT\nIMPORTANT-It will gr. -ly facilitate the handling of subscriptions if . separate application la - for a bank's own\n1. By Draft Enclosed (funds available by lasse date)\n$\n2. By Charge to our Reserve Account\n$\n3. By credit in War Loan Deposit Account (Will furnish Form Khaine alliment le determined)\n$\n4. Payment to be made by\n$\n(Name of bank)\nTotal\n$\nPayment due December 1, 1942. except for certificates alletted to commercial banks for own se-\nearth for this class of subcribers payment das December 18 with Interest from December 1.\nIn the event our subscription is not allotted in full you are authorized to remit or credit the overage in our remit-\ntable to\nfor our use.\n(Insert name of bank)\nDELIVERY INSTRUCTIONS FOR NEW TREASURY CERTIFICATES\n(These certificates are issued in crupes (bearer) form only)\nHOLD-Safekeeping Department.\nNumber\nof Pieces\nDenominations\nAmount\n(Member banks for own account only)\nsubscription and its customers subscriptions.\n@\n1,000.00\n$\nHOLD-To Secure War Loan Account.\n@\n5,000.00\n$\nMAIL TO\n@\n10,000.00\n$\n@\n100,000.00\n$\nTotal\n$\nCERTIFICATE OF SUBSCRIPTION AND PAYMENT\nIF e\nThat hereby certify: from our customers in the amounts set apposite the customers' names not on the subject at-\nto tached withdrawal list which until is after made allotment a part and payment in full for securities allotted, two percent of the amount applied\nwe have received applications of this subscription; that there has been paid to us by each such customer, for.\nWe further\nThat this certify: for our account or for the account of the customers specified herein; securities that no which ar-\nrangements be have been or will be the closing of the subscription books: and that our customers whose their sub- are\nsubscription is solely made own for the sale or other disposition of our subscription, or of the subscriptions\nincluded may allotted herein will thereon, be requested prior to to confirm to us their agreement to the same conditions with respect to\nscriptions.\nIF,\nagree: In consideration of this subscription, to make payment In full for the entire amount if on later which allotment. may be\nallotted on this subscription, of the receipt at by par you on or before the date of issue, or at par and accrued interest\nSuch payment will be made by the method indicated hereon.\nIMPORTANT\n{\nOriginal\nThis is\nAdditional\n}\nSubscription\nBy\nAuthorized Official Signature\nConfirmation\nones,\nSCHEDULE OF CUSTOMERS' SUBSCRIPTIONS\nReserved for the of\nNAME\nADDRESS\nAMOUNT\nFederal Reserve Bank\n%\nAdj.\nAllotman\n$\nTotal of Customers' Subscriptions\n$\n(Must agree with amount on face of this application)\nThe above schedule of subscriptions must be completed to assure correct allotment.\nIf sufficient space is not provided, attach similar supplemental list.\nCASH SUBSCRIPTION FOR\n1/8% TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES E-1943\nDated and bearing interest from December 1, 1942\nMaturing December 1, 1943\nFederal Reserve Bank of Kansas City,\nFiscal Agent of the United States,\nKansas City, Mo.\n1942\nDate\nGentlemen:\nPursuant to the provisions of Treasury Department Circular No. 703, dated November 30, 1942, the\nundersigned hereby subscribes for certificates of the above described issue as follows:\nAmount of\nFur allotment use by\nBubscription(s)\nFederal Receive Bank\nOur own Cash Subscription (Books open December 16, 17 and 18)\n....\n$\n$\nCustomers' Cash Subscriptions\n$\n$\nEach customer's name, address and amount of subscription must be\nfurnished. for which space is provided on the reverse side hereof.\nTotal Subscriptions\n$\n$\nAccrued interest on $\nfrom December 1, 1942, to\n($0.024 per $1,000 per day) $\nSubscriptions will be allotted in full excepting those for amounts over $100,000 from commercial banks.\nIMPORTANT-It will gr....19 facilitate the handling of subscriptions if a separate application is Used for a bank's own\nMETHOD OF PAYMENT\n1. By Draft Enclosed (funds available by lesse date)\n$\n2. By Charge to our Reserve Account\n$\n3. By credit in War Loan Deposit Account (Will furnish Form K2 after allotment in determined)\n$\n4. Payment to be made by\n$\n(Name of bank)\nTotal\nPayment due December 1, 1942, except for certificates allotted to commercial banks for own ac-\n$\ncount; for this class of suberibers payment due December 28 with interest from December 1.\nIn the event our subscription is not allotted in full you are authorized to remit or credit the overage in our remit-\ntance to\nfor our use.\n(Insert name of bank)\nDELIVERY INSTRUCTIONS FOR NEW TREASURY CERTIFICATES\n(These certificates are lassed In coupon (bearer) form only)\nHOLD-Safekeeping Department.\nNumber\nof Pieces\nDenominations\nAmount\n(Member banks for owa assocnt entr)\nsubscription and its customers subscriptions.\n@\n1,000.00\n$\nHOLD-To Secure War Loan Account.\n@\n5,000.00\n$\nMAIL TO\n@\n10,000.00\n$\n@\n100,000.00\n$\nTotal\n$\nCERTIFICATE OF SUBSCRIPTION AND PAYMENT\nFe hereby certify:\nThat we have received applications from our customers In the amounts set opposite the customers' names not on the subject at-\nto withdrawal until after allotment a part and payment in full for securities allotted, two percent of the amount applied\ntached list which is made of this subscription; that there has been paid to us by each such customer, for.\nFe further certify:\nThat this is solely for our own account or for the account of the customers specified herein; securities that no which ar-\nrangements subscription have been will be made for the sale or other disposition of our subscription. or of the\nmay included herein will thereon, be requested prior to confirm to us their agreement to the same conditions with respect to\nbe allotted or to the closing of the subscription books; and that our customers whose subscriptions their sub- are\nscriptions.\n#e\nIn agree: consideration of the of this subscription, to make payment in full for the entire amount if later which allotment. may be\nallotted on this subscription, receipt at by par you on or before the date of issue, or at par and accrued interest on\nSuch payment will be made by the method indicated hereon.\nIMPORTANT\n-\nOriginal\nThis is\nAdditional\nSubscription\nBy\nAuthorised Official Signature\nConfirmation\nCity\nState\nIf supply of blanks furnished la Insufficient. use letter and give complete Instructions with the above certificate of subscription April and payment.\nFEDERAL RESERVE BANK OF KANSAS CITY, Yest\nSubscription checked by\nCards checked by\nBubscription No.\nRegraded Unclassified\nSCHEDULE OF CUSTOMERS' SUBSCRIPTIONS\nNAME\nADDRESS\nAMOUNT\nFederal Reserve Bank\nReserved for the of\n%\nAdj.\nAllotaned\n$\nTotal of Customers' Subscriptions\n$\n(Must agree with amount on face of this application)\nThe above schedule of subscriptions must be completed to assure correct allotment.\nIf sufficient space is not provided, attach similar supplemental list.\nFEDERAL HESERVE BANK OF KANSAS States CITY\nof the United\nUNITED STATES OF AMERICA\n262\n1½ PERCENT TREASURY BONDS OF 1948\nDated and bearing interest from December 1, 1942\nDue June 15, 1948\nInterest payable June 15 and December 15\nDepartment 1942 Circular No. 702\nTREASURY DEPARTMENT,\nFiscal Service\nOFFICE OF THE SECRETARY,\nBareau of the Public Debt\nashington, November 30, 1942.\nI. OFFERING OF BONDS\n1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended,\ninvites subscriptions, at par and accrued interest, from the people of the United States for bonds of the United States,\ndesignated 13/4 percent Treasury Bonds of 1948. The amount of the offering is not specifically limited, although\nallotments to commercial banks, which are defined for this purpose as banks accepting demand deposits, for their\nown account will be limited to $2,000,000,000, or thereabouts. The books will be open today and until further notice\nfor the receipt of subscriptions from others than commercial banks for their OTUN account, and today, December 1\nand December 2 for the receipt of subscriptions from commercial banks for their oten account.\nII. DESCRIPTION OF BONDS\n1. The bonds will be dated December 1, 1942, and will bear interest from that date at the rate of 14 percent\nper annum, payable on a semiannual basis on June 15 and December 15, 1943, and therafter on June 15 and Decem-\nher 15 in each year until the principal amount becomes payable. They will mature June 15, 1948, and will not be\nsubject to call for redemption prior to maturity.\n2. The income derived from the bonds shall be subject to all Federal taxes, now or hereafter imposed. The\nbonds shall be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall be\nexempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the\npossessions of the United States, or by any local taxing authority.\n3. The bonds will be acceptable to secure deposits of public moneys, but will not bear the circulation privilege\nand will not be entitled to any privilege of conversion,\n4. Bearer bonds with interest coupons attached will be issued in denominations of $500, $1,000, $5,000, $10,000\nand $100,000. Bonds registered as to principal and interest will be issued in denominations of $5(X), $1,000. $5,000,\n$10,000, $100,000 and $1,000,000. Provision will be made for the interchange of bonds of different denominations\nand of coupon and registered bonds, and for the transfer of registered bonds, under rules and regulations prescribed\nby the Secretary of the Treasury.\n5. The bonds will be subject to the general regulations of the Treasury Department, HOW or hereafter pre-\nscribed, governing United States bonds.\nIII. SUBSCRIPTION AND ALLOTMENT\nI. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department\nWashington. Subscribers must agree not to sell or otherwise dispose of their subscriptions, or of the securi\nwhich may be allotted thereon, prior to December 3, 1942. Banking institutions and socurities dealers generally me\nsubmit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department\nare authorized to act as official agencies, Others than banking institutions and securities dealers will not be permitted\nto enter subscriptions except for their own account. Subscriptions from commercial banks for their own account\nwill be received without deposit. All other subscriptions must be accompanied by payment in full for the amount\nof bonds applied for.\n2. The Secretary of the Treasury reserves the right to reject any subscription, in whole or in part, to allot less\nthan the amount of bonds applied for, and to close the books as to any or all subscriptions at any time without\nnotice; and any action he may take in these respects shall be final. Subject to these reservations, subscriptions for\namounts up to and including $100,000 from commercial banks, and subscriptions in any amount from all other sub-\nscribers, will be allotted in full subscriptions for amounts over $100,000 from commercial lanks will be allotted\non an equal percentage basis, to be publicly announced. Allotment notices will be sent out promptly upon allot-\nment.\nIV. PAYMENT\nthan commercial banks par must be made on or before December 1. 1942, or on later allotment. Payment at par\n1. Payment at and accrued interest, if any, for bonds allotted bereunder to or for the account of others and\naccrued interest to December 11, 1942, for bonds allotted hereunder to commercial banks must be made on that date.\nOne day's accrued interest is $0.048 $1,000. Any qualified depositary will be permitted to make payment by\ncredit for bonds allotted to it for itself per and its customers up to any amount for which it shall be qualified in excess\nof existing deposits, when so notified by the Federal Reserve Bank of its District.\nV. GENERAL PROVISIONS\n1. As fiscal of the United States, Federal Reserve Banks are authorized and requested to receive sub- the\nscriptions, to make agents the basis and to the amounts indicated by the Secretary of the Treasury allotted, to\nto make delivery of bonds on full-paid respective subscriptions allotted, and they may issue interim receipts pending delivery\nFederal Reserve Banks allotments of the on Districts, up to issue allotment notices, to receive payment for bonds\nof the definitive\n2. The bonds. of the at any time, or from time to time, prescribe supplemental Federal or amenda- Reserve\ntory Banks. rules and Secretary regulations governing Treasury the may offering, which will be communicated promptly to the\nHENRY MORGENTHAU, JR.,\nSecretary of the Treasury.\nRegraded\nUnclassified\nFEDERAL RESERVE BANK OF KANSAS CITY\nFiscal Agent of the United States\n263\nUNITED STATES OF AMERICA\n% PERCENT TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES E-1943\nDated and bearing interest from December 1, 1942\nDue December 1. 1943\n1942\nDepartment Cuestar No. Y83\nTREASURY DEPARTMENT,\nOFFICE OF THE SECRETARY,\nPincel Berries\nBuress of the Public Debt\nWashington, November 30, 1942.\n1. OFFERING OF CERTIFICATES\n1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended, in-\nvites subscriptions, at par and accrued interest, from the people of the United States for certificates of indebtedness\nof the United States, designated % percent Treasury Certificates of Indebtedness of Series E-1943. The amount\nof the offering is not specifically limited, although allotments to commercial banks, which are defined for this purpose\nas banks accepting demand deposits, for their own account will be limited to $2,000,000,000, or thereabouts. The\nbooks will be open today and until further notice for the receipt of subscriptions from others than commercial banks\nfor their Dan account, and on December 16, December 17 and December 18 for the receipt of subscriptions from\ncommercial banks for their own account.\nII. DESCRIPTION OF CERTIFICATES\n1. The certificates will be dated December 1, 1942, and will bear interest from that date at the rate of 3/8 per-\ncent per annum, payable semiannually on June 1, and December 1, 1943. They will mature December 1, 1943, and\nwill not be subject to call for redemption prior to maturity.\n2. The income derived from the certificates shall be subject to all Federal taxes, now or hereafter imposed.\nThe certificates shall be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall\nbe exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of\nthe possessions of the United States, or by any local taxing authority.\n3. The certificates will be acceptable to secure deposita of public moneys. They will not be acceptable in pay-\nment of taxes and will not bear the circulation privilege.\n4. Bearer certificates with two interest coupons attached will be issued in denominations of $1,000, $5,000,\n$10,000 and $100,000. The certificates will not be issued in registered form.\n5. The certificates will be subject to the general regulations of the Treasury Department, now or hereafter\nprescribed, governing United States certificates.\nIII. SUBSCRIPTION AND ALLOTMENT\n1. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department,\nWashington. Subscribers must agree not to sell or otherwise dispose of their subscriptions, or of the securities\nwhich may be allotted thereon, prior to December 19, 1942. Banking institutions and securities dealers generally\nmay submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Depart-\nment are authorized to act as official agencies. Others than banking institutions and securities dealers will not be\npermitted to enter subscriptions except for their own account. Subscriptions from commercial banks for their own\naccount will be received without deposit. All other subscriptions must be accompanied by payment in full for the\namount of certificates applied for.\n2. The Secretary of the Treasury reserves the right to reject any subscription, in whole or in part, to allot\nless than the amount of certificates applied for, and to close the books as to any or all subscriptions at any time with-\nout notice; and any action he may take in these respects shall be final. Subject to these reservations, subscriptions\nfür amounts up to and including $100,000 from commercial banks, and subscriptions in any amount from all other\nsubscribers, will be allotted in full; subscriptions for amounts over $100,000 from commercial banks will be allotted\non an equal percentage basis, to be publicly announced. Allotment notices will be sent out promptly upon allotment.\nIV. PAYMENT\n1. Payment at par and accrued interest, if any, for certificates allotted hereunder to or for the account of others\nthan commercial banks must be made on or before December 1, 1942, or on later allotment. Payment at par and\naccrued interest to December 28, 1942, for certificates allotted hereunder to commercial banks must be made on that\ndate. One day's accrued interest is $0,024 per $1,000. Any qualified depositary will be permitted to make pay-\nruent by credit for certificates allotted to it for itself and its customers up to any amount for which it shall be qualified\nin excess of existing deposits, when so notified by the Federal Reserve Bank of its District.\nV. GENERAL PROVISIONS\n1. As fiscal agents of the United States, Federal Reserve Banks are authorized and requested to receive sub-\nscriptions, to make allotments on the basis and up to the amounts indicated by the Secretary of the Treasury to the\nFederal Reserve Banks of the respective Districts, to issue allotment notices, to receive payment for certificates allot-\nted. to make delivery of certificates on full-paid subscriptions allotted, and they may issue interim receipts pending\ndelivery of the definitive certificates,\n2, The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory\nrules and regulations governing the offering, which will be communicated promptly to the Federal Reserve Bank.\nHENRY MORGENTHAU. JR.,\nSecretary of the Treasury.\nRegraded Unclassified\n264\nFEDERAL RESERVE BANK\nOF KANSAS CITY\nFISCAL AGENT OF THE UNITED STATES\nNovember 28, 1942\nNEW TREASURY OFFERING\nTo All Banks, Trust Companies, and Others Interested,\nFederal Reserve District No. 10:\nSecretary Morgenthau has issued the following statement in connection with the new Treasury\noffering:\n\"In order to finance the war effort, which now is moving into full stride, the United States\nTreasury will borrow during December the unprecedented sum of approximately $9,000,000,000\nfrom all sources. This sum will be raised partly through the continuing sale of Savings Bonds and\nTax Savings Notes, and partly through offerings of a number of new Treasury issues designed for\nevery class and type of investor. Thus every American will have an opportunity to back the armed\nforces with bonds.\nThe Victory Fund Committees will launch an intensive sales campaign on November 30 on\nthree series of offerings of new securities. These well organized and expanding groups of 44,000\nvolunteer workers, drawn largely from the securities and banking fields, will solicit subscriptions\nfrom individual investors, corporations, savings and commercial banks, insurance companies, institu-\ntions, trusts and estates. The President of the Federal Reserve Bank in each of the twelve districts\nis Chairman of the Victory Fund Committee in his district.\nAt the same time the War Savings Staff, with its 300,000 volunteers in every community, will\nintensify its drive to add at least 7,000,000 more income-earners to the ranks of those already invest-\ning regularly in Series E War Savings Bonds through the payroll savings plan.\nAlmost every citizen has funds in the form of currency or bank deposits which can be enlisted\nin the war effort in one way or another through the purchase of Government securities.\nThe special offerings to be sold under the direction of the Victory Fund Committees will con-\nsist of:\n1. Twenty-six year 2½ percent bonds due December 15, 1968, callable December 15, 1963,\nto be issued in coupon or registered form, at the option of the buyers. Commercial banks,\nwhich are defined for this purpose as banks accepting demand deposits, will not be permitted\nto hold these bonds until ten years after the date of issue. There will be no limit to the\namount of this issue, and no restrictions upon issuance excepting the temporary exclusion of\ncommercial banks from ownership for their own account, Subscriptions books will be open\nNovember 30, and will remain open several weeks. The bonds will be sold in denomina-\ntions from $500 to $100,000.\n2. Two series intended for banks as well as other investors:\n(a) 13/4 percent bonds due June 15, 1948, and\n(b) ½ percent certificates of indebtedness due one year after issuance. These securities whether\nwill be open for subscription by banks, and also by all other classes of investors,\nprivate, corporate or institutional.\nSales to commercial banks will be limited to $2,000,000,000. or thereabouts, of each series.\nlarger subscriptions on an equal percentage basis. All applications from others than will com- be\nApplications from commercial banks in amounts up to $100,000 will be allotted in full, and\nmercial banks will be allotted in full. The total of these securities to be issued thus\nthe $4,000,000,000 from commercial banks, plus the full amount subscribed by others.\n(OVER)\nRegraded Unclassified\nFor all classes of subscribers other than commercial banks, subscription books will be opened\nNovember 30 for both series, and will remain open for several weeks. For commercial banks sub-\nscription books will be opened November 30 on the 13/4 percent bonds and will remain open until\nthe close of business December 2, while books will be opened December 16 on the ½ percent certi-\nficates and will remain open until the close of business December 18. In the case of such bank\nsubscriptions, payment for the bonds must be made on December 11, and for the certificates on\nDecember 28.\nThe 13/4 percent bonds will be issued in coupon or registered form, at the option of the buyers.\nThe ½ percent certificates will be issued in coupon form only. The bonds will be sold in denom-\ninations from $500 to $100,000 and the certificates from $1,000 to $100,000.\nThe 2½ percent bonds, 11/4 percent bonds and ½ percent certificates of indebtedness will be\ndated December 1, 1942 and will bear interest from that date. Accrued interest will be charged on\nall subscriptions for which payment at a Federal Reserve Bank or at an authorized depositary is\nreceived later than December 1.\nAny bank or trust company qualified to hold war loan deposits will be permitted to make pay-\nment by credit for securities subscribed for its own account or that of its customers up to any amount\nfor which it shall be qualified in excess of existing deposits.\nAll elements of the banking and securities business will conduct a vigorous campaign to assure\nthe widest possible public purchases of all issues of these securities. In conjunction with weekly\nsales of discount bills, these arrangements will make approximately half of the $9,000,000,000 of\nTreasury borrowing in December available from non-banking investors, while the other half will\nbe made available by commercial banks. The widest possible public participation is essential in the\ninterest of sound financing out of current income and savings.\nAfter completion of this borrowing the Treasury does not expect to do further major financing\nuntil February. For its new money needs in January the Treasury will rely upon further sales of\nTax Savings Notes, Savings Bonds, and Treasury Bills.\"\nFor further details as to the three issues being offered please refer to the Treasury Department\ncirculars enclosed.\nVery truly yours,\nBANK OF KANSAS CITY\nof the United States\n265\nUNITED STATES OF AMERICA\n2½ PERCENT TREASURY BONDS OF 1963-68\nDated and bearing interest from December 1, 1942\nDue December 15, 1968\nREDEEMABLE AT THE OPTION OF THE UNITED STATES AT PAR AND ACCRUED INTEREST ON AND\nAFTER DECEMBER 15, 1963\nInterest payable June 15 and December 15\n1942\nTREASURY DEPARTMENT,\nDepartment Circular No. 701\nOFFICE OF THE SECRETARY,\nFiscal Service\nBureau of the Public Debt\nWashington, November 30, 1942.\nI. OFFERING OF BONDS\n1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended,\ninvites subscriptions, at par and accrued interest, from the people of the United States for bonds of the United\nStates, designated 2½ percent Treasury Bonds of 1963-68. These bonds will not be available for subscription, for\ntheir own account, by commercial banks, which are defined for this purpose as banks accepting demand deposits.\nThe amount of the offering is not specifically limited.\nII. DESCRIPTION OF BONDS\n1. The bonds will be dated December 1, 1942, and will bear interest from that date at the rate of 2½ percent\nper annum, payable on a semiannual basis on June 15 and December 15, 1943, and thereafter on June 15 and\nDecember 15 in each year until the principal amount becomes payable. They will mature December 15, 1968, but\nmay be redeemed at the option of the United States on and after December 15, 1963, in whole or in part, at par and\naccrued interest, on any interest day or days, on 4 months' notice of redemption given in such manner as the Secre-\ntary of the Treasury shall prescribe. In case of partial redemption the bonds to be redeemed will be determined by\nsuch method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in\nany such notice, interest on the bonds called for redemption shall cease.\n2. The income derived from the bonds shall be subject to all Federal taxes, now or hereafter imposed. The\nbonds shall be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall be exempt\nfrom all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions\nof the United States, or by any local taxing authority.\n3. The bonds will not be acceptable to secure deposits of public moneys before December 1, 1952; they will not\nbear the circulation privilege, and they will not be entitled to any privilege of conversion.\n4, Bearer bonds with interest coupons attached will be issued in denominations of $500, $1,000, $5,000, $10,000\nand $100,000. Bonds registered as to principal and interest will be issued in denominations of $500, $1,000, $5,000,\n$10,000, $100,000 and $1,000,000. Provision will be made for the interchange of bonds of different denominations\nand of coupon and registered bonds, and for the transfer of registered bonds, under rules and regulations prescribed\nby the Secretary of the Treasury, except that they may not, before December 1, 1952, be transferred to or be held by\ncommercial banks, which are defined, for this purpose, as banks accepting demand deposits. However, the bonds\nmay be pledged as collateral for loans, including loans by commercial banks, but any such bank acquiring such bonds\nbefore December 1, 1952, because of the failure of such loans to be paid at maturity will be required to dispose of\nthem in the same manner as they dispose of other assets not eligible to be owned by banks.\n5. Any bonds issued hereunder which upon the death of the owner constitute part of his estate, will be re-\ndeemed at the option of the duly constituted representatives of the deceased owner's estate, at par and accrued\ninterest to date of payment,¹ Provided:\n(a) that the bonds were actually owned by the decedent at the time of his death; and\n(b) that the Secretary of the Treasury be authorized to apply the entire proceeds of redemption\nto the payment of Federal estate taxes.\nRegistered bonds submitted for redemption hereunder must be duly assigned to \"The Secretary of the Treasury for\nfor credit on Federal\nredemption, the proceeds to be paid to the Collector of \" Internal Revenue at\nestate taxes due from estate of\nOwing to the periodic closing of the transfer books and the\nimpossibility of stopping payment of interest to the registered owner during the closed period, registered bonds\ntion of interest from the date of payment to the next interest payment date bonds received during the closed period\nreceived after the closing of the books for payment during such closed period will be paid only at par with a deduc-\nfor payment at a date after the books reopen will be paid at par plus accrued interest from the reopening of the books\n(OVER)\nto the date of payment. In either case checks for the full six months interest due on the last day of the closed period\nwill be forwarded to the owner in due course. All bonds submitted must be accompanied by Form PD 1782,ª prop-\nerly completed, signed and sworn to, and by a certificate of the appointment of the personal representatives, under\nseal of the court, dated not more than 6 months prior to the submission of the bonds, which shall show that at the date\nthereof the appointment was still in force and effect. Upon payment of the bonds appropriate memorandum receipt\nwill be forwarded to the representatives, which will be followed in due course by formal receipt from the Collector\nof Internal Revenue.\n6. Except as provided in the preceding paragraphs, the bonds will be subject to the general regulations of the\nTreasury Department, now or hereafter prescribed, governing United States bonds.\nIII. SUBSCRIPTION AND ALLOTMENT\n1. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department,\nWashington. Banking institutions and securities dealers generally may submit subscriptions for account of custom-\ners, but only the Federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Sub-\nscriptions must be accompanied by payment in full for the amount of bonds applied for.\n2. The Secretary of the Treasury reserves the right to reject any subscription, in whole or in part, to allot less\nthan the amount of bonds applied for, and to close the books as to any or all subscriptions at any time without notice;\nand any action he may take in these respects shall be final. Subject to these reservations, all subscriptions will be\nallotted in full. Allotment notices will be sent out promptly upon allotment.\nIV. PAYMENT\n1. Payment at par and accrued interest, if any, for bonds allotted hereunder must be made on or before Decem-\nber 1, 1942, or on later allotment. One day's accrued interest is $0.068 per $1,000. Any qualified depositary will\nbe permitted to make payment by credit for bonds allotted to its customers up to any amount for which it shall be\nqualified in excess of existing deposits, when so notified by the Federal Reserve Bank of its District.\nV. GENERAL PROVISIONS\n1. As fiscal agents of the United States, Federal Reserve Banks are authorized and requested to receive sub-\nscriptions, to make allotments up to the amounts indicated by the Secretary of the Treasury to the Federal Reserve\nBanks of the respective Districts, to issue allotment notices, to receive payment for bonds allotted, to make delivery\nof bonds on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive\nbonds.\n2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory\nrules and regulations governing the offering, which will be communicated promptly to the Federal Reserve Banks.\nHENRY MORGENTHAU, JR.,\nSecretary of the Treasury.\nAn 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\nof any half year, computation is on the basis of the actual number of days in such half year.\n#\nThe transfer books are closed from May 16 to June 15, and from November 16 to December 15 (both dates inclusive) in each year.\nCopies of Form PD 1782 may be obtained from any Federal Reserve Bank or from the Treasury Department, Washington, D. C.\nRegraded Unclassified\nvik w\n266\nDecember 3, 1942.\nDear Mrs. Reid:\nThis is just to tell you how much\nI appreciate the wonderful support the\nHerald Tribune has been giving to the\nVictory Loan and War Savings campaigns,\nespecially in your news and editorial\ncolumns of last Monday.\nIn addition, Mr. Wanders has been\nof great help to me and to the Treasury\ngenerally, and I am more than grateful\nto you for having made him available at\nthis time.\nSincerely,\n(Signed) H. Morgenthau, Jr.\nMrs. Helen Rogers Reid,\nNew York Herald Tribune,\n230 West 41st Street,\nHer ack 1214 is lated\nNew York, New York.\nFK:cgk:eg\n+\nCopy in Diary\nCopies to Thompson\nRegraded Unclassified\n267\nDEC 3 - 1942\nMy dear Mr. Pelley:\nThis is just to thank you, and through you, the executives\nof those carriers represented at the Payroll Savings conference\nwith members of my staff on November 19.\nThe program recommended to the Industry by the conference\nhas the full approval of the Treasury Department. I am con-\nfident that this program, if carried out, will increase the\nrate of savings in War Bonds, by railroad employees, to not\nless than 10% of their aggregate pay.\nThe Payroll Savings Plan for the purchase of War Bonds\nprovides a convenient and regular method of investing in the\nsecurity of our country. Savings of this kind are especially\nimportant because they come out of current income and thus\nhelp to reduce pressure of excess spending on the price\nstructure. Payroll Savings are also important because they\nmake the purchase of War Bonds a first charge upon the em-\nployee's budget. They are thus to be distinguished from\ninvestments out of large accumulated savings for which other\nTreasury securities have been designed. The Payroll Savings\nPlan thus permits the Treasury Department to distinguish\nbetween the \"payroll dollar\" and the \"investment dollar,\"\nwhich enables us to chart a comprehensive program for raising\nthe large sums of money necessary to bring the war to an\nearly and victorious conclusion.\nAmerican railroads are making an outstanding contribution\nto the winning of the war by handling the heaviest load of\ntransportation in our history. I am sure the Industry with\nits one and one-half million workers will accept the addi-\ntional privilege and duty of investing 10% of the payroll\nin War Savings Bonds.\nSincerely yours,\n(Signed) H. Morgenthau, Jr.\nMr. John J. Pelley,\nCopy in Diary\nPresident, Association of American Railroads, Copies to Thompson\nTransportation Building,\nWashington, D. C.\nRegraded Unclassified\n268\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE 12/3/42\nTO\nMr. Morgenthau\nFROM\nKr. Callahan\nAttached is our latest newspaper advertisement.\nRegraded Unclassified\n269\nWhat's Mrs. Petrov got that you haven't got ?\nMeet Mrs. Petrov, citizen of the Soviet Union\nWe aren't being asked to burn our homes and\nLer's change that situation-quick. If you aren't\nWhen the Nazi Panzer Divisions approached the\ndestroy everything we own. Please God, we\nin the Payroll Savings Plan-sign up tomorrow.\nsmall Petrov farm in the Ukraine, she knew what\nnever will be.\nIf you're already in, but haven't bit 10% yet-\nto do.\nBut we are being asked to join the Payroll\nraise your sights. And if you can pur in more-\nThe whest, so near to harvest time, went up in\nSavings Plan and put at least 10% of our earnings\ndo it.\nflames. The potatoes, stored in the cellar, were\ninto War Bonds! We're being asked-not told-\nWhat's Mrs. Petrov got that we haven't?\nsoaked with kerosene. The jars of fruits and\nto loan money-not give it! And to loan this\nNothing! Let's prove it!\npreserves were smashed, and. the cow, which\nmoney at a good rate of interest and for good\nhad given her children so many quarts of pre-\nreasons! We're being asked to buy War Bonds\ncious milk, was shot.\nto help win the war-to provide a nest egg for\nWHAT YOU SHOULD DO:\nthe future-to provide pescetime jobs and peace-\nAfter piling her two young children, . few blan-\nkets and some food on the farm cart, Mrs. Petrov\ntime goods and a generally decent world that\nIf you are\ndid one more thing. She went back to the house\nthe fellows who are doing the fighting can come\n1. Already investing 10% of your par in War Bonds\nthrough the Payroll Savings Plan-boot that 10%\nback to,\nwhere she and her husband had been so happy\nIf you can.\nwhere they had worked so hard to make a\nThat's ONT job. And it's I job that won't be done\n2. Working in a plant where the Plan is installed, but\nhome for their family-and applied the torch.\nuntil every mother's son of us is buying bonds\nhaven't signed up yet-sign up tomorrow.\nNow, everybody in this country knows that\nuntil it hurts.\n3. Working in A plans where the Payroll Savings Plan\nAmericans are as patriotic-as capable of sacri-\nThere are, right now, still people who ought to\nbasn't been installed, talk to your union bead, fore-\nfice-as grimly determined to beat Hitler as are\nbe buying War Bonds through the Payroll Savings\nman or plant manager-and see if it can't be installed\nright away. The local bank will be glad to help.\nthe Russians or anybody else on earth.\nPlan-and aren't.\n4. Unable to get in on the Payroll Savings Plan for any\nBut-by the Lord Harry-do we have to wait\nRight now, while some of the people in the\nreason, go to your local bank or wherever bonds are\ntill a Nazi tank comes rolling up the street\nPayroll Savings Plan are setting aside more than\nsold. They will be glad to help you start . Plan of\nbefore we prove is?\n10%- lot of others are investing less.\nyour own.\n\"TOP THAT 10% BY\nBUY U.S. WAR BONDS\nTHROUGH THE\nNEW YEAR'S!\"\nPAYROLL SAVINGS PLAN\nThis advertisement is a contribution to America's all-out war effort by YOUR NAME HERE\nPRINTING\nRegraded Unclassified\n270\nTHE WHITE HOUSE\nWASHINGTON\nDecember 3, 1942\nDear Henry:\nMany thanks for sending me that\nrecording of the song -- EVERYBODY, EVERY\nPAY DAY -- of which Sergeant Richard Uhl\nand Corporal Tom Adair are the authors. I\nam very glad to have it.\nWith best wishes,\nVery sincerely yours,\nStart\nSTEPHEN EARLY\nSecretary to the President\nHonorable Henry Morgenthau,\nThe Secretary of the Treasury,\nWashington, D. C.\n271\nTHE SECRETARY OF STATE\nWASHINGTON\nDecember 3, 1942\nDear Henry:\nThank you very much for your note of November\nthirtieth and the recording of \"Everybody, Every Pay\nDay\" and \"March for the New Infantry\" by Sergeant Uhl\nand Corporal Adair. It was indeed kind of you to\nsend it to me.\nSincerely yours,\nThe Honorable\nHenry Morgenthau, Jr.,\nSecretary of the Treasury,\nWashington, D. C.\nRegraded Unclassified\n272\nTHE SECRETARY OF THE NAVY\nWASHINGTON\nDecember 3, 1942\nDear Henry:\nI do appreciate your kindness in sending over to\nme the recording that was written for the Treasury by\nthe two Army men in connection with the War Bond Campaign.\nI know I will receive much pleasure from hearing it\nplayed back.\nSincerely yours,\nFrank Know\nThe Honorable Henry Morgenthau, Jr.\nSecretary of the Treasury\nWashington, D. C.\nRegraded Unclassified\n273\nor CORRECT\nTHE SECRETARY OF COMMERCE\n25\nw STATES of\nWASHINGTON\nDecember 3, 1942\nDear Henry:\nI am glad to have the record of\n\"Ev'rybody Ev'ry Payday.\" Thanks so much\nfor sending it to me.\nWith best wishes,\nSincerely,\nJustJon\nHon. Henry Morgenthau, Jr.\nThe Secretary of the Treasury\nWashington, D.C.\nRegraded Unclassified\n274\nSTATE OF FINE BION\nTHE SECRETARY OF THE INTERIOR\nWASHINGTON\nDecember 3, 1942.\nDear Henry:\nI appreciate your thoughtfulness in sending me the record of the song\ncomposed by Sergeant Richard Uhl and Corporal Tom Adair, in connection with\nthe War Bond campaign. I share with you the earnest hope that this song\nwill help the drive.\nI am taking the record home and will play it tonight.\nSincerely yours,\nSecretary of the Interior.\nHon. Henry Morgenthau, Jr.,\nSecretary of the Treasury,\nWashington, D. C.\nTREASURY department\n275\nINTER OFFICE COMMUNICATION\nDATE\nTO\nSecretary Morgenthau\nDecember 3, 1942\nFROM\nRandolph Paul\nIf we want to do something concrete for the\nbusiness man, I think We should grant an automatic\nextension for filing 1942 corporation tax returns.\nThe extension can be conditioned on a tentative\nreturn with a payment of tax. I think we will lose\nnothing and will be in effect making a virtue of\nnecessity. The thing may be forced on us any way\nif we do not agree. If we move voluntarily we will\ncultivate a great deal of good will among business\nmen and accountants.\nFor your further information I attach herewith\na copy of a memorandum from Mr. Surrey.\nAr\nAttachment\n276\nCOPY\nMEMORANDUM\nTO:\nMr. Paul\nFrom: Mr. Surrey\nDecember 3, 1942\nRe:\nExtensionsof time for filing 1942 corporation\ntax returns\nJudging from discussions I had on my recent trip,\nthe question of extensions of time for filing the 1942\ncorporation tax returns appears to be a matter of grave\nconcern to corporations and their tax accountants. Their\noffice staffs have been 80 seriously depleted by the war\nthat they believe it will be impossible in a great many\ncases to file returns by March 15, 1943. They conse-\nquently feel that a restrictive policy on the part of the\nTreasury would be unfair and undesirable under these\nunusual conditions. Unless a liberal policy is adopted,\nthey intend to ask the Congress to grant an automatic\nextension of time early next year.\nThis question of extensions of time is one of\nparamount concern to business men. It thus involves a\nsituation in which our cooperation would assist in\nmaintaining desirable relationships between the business\nworld and the Department. It would appear possible to\nalleviate the difficulties faced by business concerns\nduring this period with respect to the filing of returns\nand at the same time safeguard the March 15 revenue\ncollections and provide the necessary statistical informa-\ntion. Consequently, it would seem desirable that the\ntion. question of extensions of time be given serious considera-\nRegraded Unclassified\n277\nDivision of Monetary Research\nDecember 3, 1942\nPursuant to the Secretary's suggestion that we explore the\npossibilities of combining compulsory lending with expansion of\na social security program, the following plan is submitted as a\nsuggested approach to the problem.\nIt is, of course, to be referred to for discussion only\nwithin the Treasury. Needless to say the proposal is submitted\nonly in the briefest outline so as to confine discussion at this\nstage to essential principle. There will be ample opportunity\nto formulate the proposal in greater detail if the general\nprinciples survive preliminary discussion.\nThe proposal has the following objectives:\n1. To raise roughly $25 billion annually in compulsory\nlending as a means of reducing excess spending power during the\nwar, and simplifying our program of financing. (This would replace\nabout $8 billion of the $10 billion of present sales of war savings\nbonds.)\n2. To provide security during the post-war period against\nunemployment, sickness, accident and aid toward exceptional\nexpenditures arising from death of any member of the family.\n3. To help prevent a post-war depression during the period\nof transition from war to peace economy, while retaining adequate\ncontrol to prevent a post-war inflation.\n4. To heighten the morale of the civilian population by\ngiving them the assurance now that the end of war production will\nnot mean insecurity.\n5. To reduce the pressure for continued production of\narmaments after they have ceased to be necessary and to speed\nup conversion to peace time production.\nTo accomplish the above aims, the following steps are proposed:\n1. The President shall declare that the first 12 months after\nthe cessation of hostilities shall be named the \"Year-of-Post-War-\nAdjustment.\"\n2. There shall be imposed as soon as possible & compulsory\nlending program designed to yield about $25 billion. This program\nshall contain sppropriate exemptions and graduations and should,\nso far as feasible, be collectible at the source.\nRegraded Unclassified\n278\nDivision of Monetary\nResearch\n- 2 -\n3. During the Year-of-Post-War-Adjustment certain post-war\nbenefits shall be automatically payable as follows:\n(These benefit payments are in the main not intended to supplant\narrangements now in force.)\na. Persons disemployed during that year shall receive\neach month 1/12 part of their total contribution made under\nthe above compulsory lending plan, plus a flat sum at the\nrate of $15 per week, these payments to continue so long as\nhe is unemployed, but not later than the end of the 12-month\nperiod. (Measures will have to be taken to eliminate from\nthis benefit those who do not intend to accept a job if\noffered. Obviously, it will be impossible to secure anything\napproaching perfect segregation.)\nb. Contributors and their dependents who, during the\nyear of post-war adjustments, incur medical (including\nmaternity bills), dental or hospital bills in excess of 825\nshall receive 75 percent of the excess but not more than\n$200.\nC. Contributors who are unable to work because of\ninjury or illness longer than two weeks shall receive the\nunemployment benefit so long as that person is deemed\nincapacitated.\nd. In the event of the death of a contributor during\nthis year, his estate should receive his entire contribution\nplus $100 to cover funeral expenses.\ne. In the event that a dependent of a contributor\nshould die, the contributor should receive $50 from his\naccumilated contribution, plus $50 from the Fund to help\ncover the exceptional expenses.\nf. In the event a contributor marries during that\n12-month period, he shall be permitted to withdraw up to\n$500 of his contribution and shall receive an additional\nsum of $50 to help cover wedding expenses.\n4. The Secretary of the Treasury, with the approval of the\nPresident, shall have the authority to set forth, from time to\ntime, categories of repayments to contributors of their accumilated\ncontributions justified either on the grounds of urgent individual\nneed or on the grounds of the general economic situation.\nRegraded Unclassified\n279\nDivision of Monetary\nResearch\n- 3 -\nThe Secretary of the Treasury shall have the authority to\nprovide for the return of the contribution at any time in case\nof special hardship. Appropriate machinery can be set up for\nthe purpose of meeting this requirement.\n5. The interest earned on the funds accumulated under this\ncompulsory lending plan shall accrue to the fund and shall be\nused exclusively in the payment of benefits and not added to the\namount of money of individual contribution.\n6. The President shall have the power to extend the Post-\nWar-Adjustment Period for an additional year if, in his judgment,\nthe general economic situation renders such action desirable, and\nduring that extension the benefits which are permitted shall be\nin force during the extended period.\n7. Beginning one year after the 12-month period, the remain-\ning contributions shall be returned in quarterly installments.\nopportunity\n(At that time there would doubtless be provided appropriate/for\nreinvestments in Government securities which would have terms and\nconditions appropriate to the then prevailing circumstances.)\n8. The compulsory lending program ceases when the President\ndeclares the beginning of the year of Post-War Adjustment, except\nwhere liabilities have accrued and have not been collected.\nHowever, if there is no significant disemployment after\nhostilities have ceased, the President shall have the authority\nto continue the program of compulsory lending in whole or in part\nfor an additional year.\nThe period following the cessation of hostilities may be one\nof considerable industrial boom because of the accumulated pur-\nchasing power of the public and of deferred unsatisfied wants. It\nis quite possible that this period will be one of severe curtail-\nment of employment in particular localities and industries. We\nshould retain the flexibility to handle this apparent paradox of\ngeneral boom and local disemployment. This could be done by\nretaining the compulsory lending on a full or fractional scale\nduring the period of post-war adjustment while the payments for\npost-war Social Security benefit will be in operation.\nIn view of the fact that the contributions under this\ncompulsory lending yield no interest, the accumulation and\ndistribution of the fund impose only an administrative burden\non the Government, (and what an administrative burden!) aside\nRegraded Unclassified\n280\nDivision of Monetary\nResearch\n- 4 -\nfrom the cost of benefits distributed. The value to the contri-\nbutor who receives no direct benefits rests in the over-all desira-\nbility in preventing inflation and of assuring him a reserve of\npurchasing power when the forces of accumulated unsatisfied demand\nwill have largely or wholly spent themselves.\nIf the year of post-war adjustment should not begin until one\nyear after the program were to be started, the Fund would have\naccumulated by the beginning of that year about $25 billion in\nprincipal and $375 million in interest (estimating interest at\n2 1/2 percent).\nIt is estimated that during the Post-War Adjustment Year,\noutpayments totalling $10 billion are not unlikely, probably 1/3\nof which would come out of contributions, the remainder repre-\nsenting all interest accumulation plus additional payments from\nthe Government. (This assumes disemployment of 10 million persons\nfor an average of 40 weeks.)\nThe justification during the post-war adjustment period of\noutpayments of that magnitude is to prevent the impact of the\ntransition from a post-war economy to fall on the disemployed\ngroup and also to avoid mass decrease in purchasing power with\nits concomitant economic and social consequences.\nThe adoption of a compulsory lending program of the above\nmagnitude would obviously drastically cut into the voluntary\nbond purchasing plans. It would virtually cause the voluntary\nwage savings plan to disappear. However, it would, in my opinion,\nbe a grave error to assume that the adoption of a compulsory\nlending program means the cessation of voluntary bond selling pro-\ngrams. The scale of the bond sales program would doubtless be cut\nbut it would still leave ample scope for morale building and for\nexplaining the aims of the war and the need for sacrifice, etc.\nInsofar as the objective of a voluntary bond sales program\nis to help finance the war by getting people to buy bonds, then,\nclearly a compulsory lending plan approaching the magnitude herein\nsuggested is far more effective than is the voluntary savings plan.\nInsofar as the objective is the building up of morale, etc., then,\nin my opinion, a voluntary savings plan unencumbered by the neces-\nsity to produce results of $15 billion a year or more can do a\nbetter job.\nRegraded Unclassified\nOFFICE OF CIVILIAN DEFENSE\nDEC 3 1942\nIr. Henry Morgethau\nSecretary of the Treasury\nMashington, D. C.\nDear Tr. Lor enthau:\nThank you again for your quick response in the matter\nof the Son >: noisco Stage Door Canteen.\nI have noted your letter to the Secretary of War, and\nIr. Hilton Shubert is at present on his way to California\nto naire the final arrangements.\nI in confident that it will be of benefit to everyone\nconcerned.\nSincerely yours,\nMoloyn Douglas\nMelvyn Douglas\n5\nPOLVICTORY\nBUY\nSTATES\nthe\nRegraded Unclassified\n282\nDecember 3, 1942\nDear Norman:\nWhen I returned from my trip\nout West, I found your letter of\nNovember 21st. I was very glad to\nreceive it and have read it care-\nfully.\nYours sincerely,\n(Signed) Henry\nHonorable Norman Davis,\nChairman,\nAmerican Red Cross,\nNational Headquarters,\nWashington, D.C.\nFile in Diary\nRegraded Unclassified\n283\nhouse\nAMERICAN RED CROSS\nNATIONAL HEADQUARTERS\nWASHINGTON. D. C.\nNovember 21, 1942\nMy dear Henry:\nI was very much interested in having your impressions con-\ncerning the Red Cross activities which you saw while you were in Great\nBritain and I understood from you that you had not had an opportunity to\nsee a. great deal of the Red Cross activities. In view of the fact that\nall of the reports which have come to me from such people 8.8 Mrs. Roose-\nvelt, who saw a great deal of our activities, and from Arthur Sulzberger,\nwho made a complete and thorough survey for me during August and September,\nand that your report is the first unfavorable one which has come to my\nattention, I am exceedingly anxious that you should not form unfavorable\nimpressions on what you told me was a very superficial inspection of EL\nlimited number of our Red Cross clubs.\nAll of us who are interested in providing welfare and\nrecreation activities for the United States Forces abroad recognize the\nfact that it will take time to perfect these activities. There are many\ndifficulties inherent in the problems which we are attempting to solve\nsince shipping space from the United States for equipment and transporta-\ntion facilities for personnel have been BO limited. Last March (1942)\nGeneral Chaney, then in command of the United States Forces, asked the\nRed Cross to establish a very limited number of club and recreation\ncenters, particularly in the larger cities in Great Britain, in order\nthat the men coming to those cities on leave would have 8. place to sleep,\neat and enjoy some American atmosphere. At a later date when General\nEisenhower arrived in Great Britain he asked that we embark on a con-\nsiderably more ambitious program and considering the limited facilities,\nincluding the great shortage of buildings and the great problem of shipping\nfrom the United States, everyone including General Eisenhower has been\nfavorably impressed with the results which we have achieved. We now have\napproximately forty clubs operating in Great Britain. A few of these do\nnot have as yet all of the equipment which they should have and will have.\nWe also have in operation several clubmobiles which are visiting the small\ncamps in the more remote places and have established a canteen service on\nthe docks when troops arrive and are establishing certain facilities at\ncertain key railway points. By March 1 we will have 120 clubs in operation.\nWe have gotten these results because of a close cooperative\nRegraded Unclassified\n- 2 -\n284\nrelationship with the United States Army and with the British Government.\nThe British have been most generous and appreciative of our problems and\nhave rendered us great assistance in the matter of locating buildings in\nthe areas where there have been great demands for the very limited space\nwhich was not already taken for important activities. About the first of\nSeptember we reached complete agreements with the Minister of Information,\nMr. Brendan Bracken, who has been designated by the British Government to\nact in the matter of hospitality to United States troops. These agree-\nments included not only facilities which the American Red Cross would set\nup but facilities which the British were operating. We stated that it WILD\nnot only desirable but essential that British organizations should continue\nto render services to our forces and that in many instances they should\nexpand their existing facilities and in other instances create new facil-\nities. Attached you will find a. copy of the statement of agreement be-\ntween the Ministry of Information and the American Red Cross dated September 8,\n1942. We are in constant contact with the Ministry of Information with\nreference to the carrying out of these agreements.\nWe are working closely with the United States authorities in\nlocating new facilities and are following their advice on the order of urgency\nof location of our club and recreation centers. General Eisenhower has\napproved a plan agreed upon between his staff officers and the American Red\nCross and he is kept fully informed with reference to plans for the creation\nof new facilities either by the American Red Cross or by British agencies.\nI attach for your confidential information a statement which we have recently\nreceived from General Eisenhower which you will note indicates his approval\nof the work we are doing and expresses appreciation to the American people\nfor their generous support which has made possible this work of the American\nRed Cross.\nNo one who 18 familiar with the work which we are doing in\nGreat Britain would say that it is perfect and all of us are conscious of\nthe fact that improvements can be made and improvements are in fact planned\nand will be put into effect as soon as shipping facilities are available and\nas soon as the British Government authorities can make more buildings avail-\nable to us. All of us working with these problems are impatient to overcome\nthe difficulties and are cooperating to do 80.\nI was quite surprised on my return to my office yesterday\nafternoon after my conversation with you to hear that at 8 luncheon meeting\nof the Overseas Club you made uncomplimentary reference to the work of the\nRed Cross in Great Britain. I hope the above information will at least help\nto make you feel better satisfied about the work of the Red Cross in Great Britain\nSincerely,\nChairman\nThe Honorable\nHenry Morgenthau, Jr.\nSecretary of the Treasury\nDepartment of the Treasury\nWashington, D. C.\nRegraded Unclassified\n285\nP\nI\nSTATEMENT OF LIEUTENANT GENERAL DWIGHT D. EISENHOWER, COMMANDING GENERAL\nSUROPEAN THEATER OF OPERATIONS, UNITED STATES ARMY\nThe American Red Cross is the one agency of its kind to serve\nour Armed Forces overseas. The services rendered in the European\nTheater have been invaluable.\nAt the scores of American Red Cross Service Clubs established\nthroughout Great Britain our Forces, while on leave, are able to ob-\ntain meals, lodgings, information and recreation; all with an American\nhome atmosphere.\nThe Red Cross serves our Forces while on duty, and is of even\ngreater value when men are hospitalized.\nI cannot speak too highly of the benefits which have resulted\nfrom the unselfish efforts of those engaged in the work here. On\nbehalf of our Forces in the European Theater I desire to express ap-\npreciation to the American people for their generous support which\nhas made possible the operations of this great organisation.\nRegraded Unclassified\n28E\nCOFT\n8/9/12 - No. 16\nOF INFORMATION AND AMERICAN RED CROSS\nSTATEMENT OF AGREEMENT\nThe Minister of Information has been appointed by His Majesty's\nGovernment to concern himself with the provision of hospitality to the\nAmerican Forces in the United Kingdom and the promotion of their walfare.\nHe has assumed the task of ce-ordinating the activities of all British\nagencies, public and private, which offer their assistance to the American\nForces for these purposes.\nThe American Red Cross is the American agency designated by the\nSecretary of War of the United States to serve with the American Forces\nin the United Kingdom and to assist the military authorities named by the\nCommanding Officer of the American Forces in the European theatre is\ncarrying on such activities as say be agreed upon between the Commanding\nOfficer of the American Ferces and the Commissioner of the American Red\nCross to the United Kingdom. The latter will maintain close contact with\nthe Ambassador of the United States to the United Kingdom.\nThe American Red Cress will collaborate fully with the Ministry of\nInformation and, through it, with the British Voluntary Societies and other\nBritish agencies.\nThe American Red Cross is at present establishing club and recrea-\ntional facilities, including dermiteries and canteen service, in the prin-\ncipal cities which it is expested will be leave centres for the American\nForces. In co-operation with the British authorities through the Ministry\nof Information and with the appropriate American Army authorities it will\nsurvey the need for the establishment by the American Red Cross of additional\nservices of this kind in other cities, towns and villages adjacent to American\nAray camps.\nAt the same time it is expected that similar British facilities in all\nlocalities will, in general be used to the fullest extent by the American\nforces. The services of the Council of Voluntary War Work are being extended\nto the American Forces. The British authorities say, in agreed instances,\nexpand through the Council of Voluntary War Work existing facilities or 18-\ntablish new ones in order to meet present and growing needs.\nSuch recreational facilities may be supplemented by the American Red\nCross and additional facilities may be established by them wherever judged\nproper by the American authorities. The active participation and oe-operation\nof British organisations in these arrangements is not only welcome but essential.\nThe full charge of British services to the American Forces will be not\nfrom British sources. It is neither expected nor desired that any financial\nsupport for such activities should be derived from the United States of America.\nSUBSTRY OF INFORMATION\n287\nBOARD OF ECONOMIC WARFARE\nOFFICE OF EXECUTIVE DIRECTOR\nWASHINGTON, D.C.\nDEC 8 1942\nThe Honorable,\nThe Secretary of the Treasury.\nDear Mr. Secretary:\nEnclosed are the minutes of the meetings of the Board\nof Economic Warfare which were held on October 29 and\nNovember 12, 1942.\nIf there are any corrections which you care to suggest,\nplease let me know.\nSincerely yours,\nMile Periums\nExecutive Director\nEnclosures\nRegraded Unclassified\nSECRET\n288\nMinutos of the Meeting of the Board of Economic Warfare\nHold October 29, 1942 at 10:00 a. m,\nA mooting of the Board of Economic Warfaro was hold in the Vico\nProsident's office in the Capitol Building at 10:00 a, m. on October 29,\n1942.\nThose present:\nThe Vice President, Chairman of the Board\nMr. Doan Acheson, representing the Secretary of State\nMr. E. M. Bernstoin, representing the Secretary of the Treasury\nMr. John L. McCloy, representing the Socretary of War\nit. Charles Fahy, representing the Attornoy General\nThe Socretary of the Navy\nltr. John Lockwood, representing the Coordinator of Inter-Amorican\nAffairs\nltr. E. R. Stottinius, Jr., Lond-Loaso Administration\nIn addition, the following persons were present:\nHr. Hayno Taylor, Dopartment of Commorco\nMr. W. L. Clayton, Dopartment of Commerco\nltr. Loslio Whoolor, Department of Agriculture\nMr. Harold H. Noff, War Dopartment\nMr. Thomas K. Finlotter, Stato Department\nMr. Horbort Gaston, Treasury Department\nMr. Horbort Fois, Stato Dopartment\nltr. Adlai Stevenson, Navy Department\nMr. Milo Porkins, Board of Economic Warfaro\nHr. Cass Canfiold, Board of Economic Warfaro\nMr. Hickman Price, Jr., Board of Lconomic Warfaro\nMr. Wm. T. Stono, Board of Economic Warfaro\nMr. E. W. Gaumnitz, Board of Economic \\arfaro\nAxis Blockndo Running.\nThe Vico Prosident openod the mooting indicating that tho first itom\non the Agonda was Axis Blockado Running. A statomont propared by the\nBoard of Economic Warfare was circulated at the mooting.\nltr. Porkins commonted briofly on tho report, indicating that Germany\nand Japan had doveloped a significant means of interchango of goods by way\n- 2 -\nof blockado runnors, with somo twonty-fivo vosscls available for such\ntrado. With the ships available, it is ostimated that Gurmany and Japan\ncan exchango around 225,000 tons of critical material por year in cach\ndirection. Evidence indicates that major shortages in both countries have\nboon rolieved to some extont. Continuation of the traffic would onable\nGermany to bo furnishod with supplies of such important itoms as natural\nrubbor, tin, tungston, fats, oils and drugs. It is likoly that Japan would\nrocoivo principally machinory and finished industrial products. Contin-\nuntion of the traffic would strongthon both onomios and tond to offsot the\noffectivenoss of the blockade and proclusivo purchasing.\nWhilo it was recognized that blockade running was largely a mattor for\ntho military authoritics, Mr. Porkins indicated that tho problem was brought\nbofore tho Board primarily because of its offect on proclusivo buying. If\nblockado running were to bo oxpanded, the policy with reference to proclu-\nsivo purchases might have to bo rovisod.\nSwedish Trado Policy.\nTho Vico Presidont road a lotter from tho Prosidont with reforence to\ntho question of trado with Swodon. Tho Prosidont indicated his wish that\nthe Board submit its rocommondations on the trado policy to bo followod.\nTho Vico Prosident stated that a statement of facts on Swodish Trado, \"Trado\nPolicy Toward Swodon\" had boon circulated. Discussion thon contered on\nthe facts as to Sivodish trado, Swodish imports and exports from outsido tho\nblockade area, and within tho Axis dominated aroa. In gonoral thoro vas\nacceptance of the facts as stated in the roport.\nRegraded Unclassified\n289\n- 3 -\nIt was decided to roquest the Sub-committoc on Swodish Trado to submit\nits rocommondation as to trado policy, and to submit tho Swodish Report\nand the Sub-committoo report to tho Joint Chiefs of Staff for such commonts\nas that group might wish to mako. The ontire problom was to bo considered\nfurthor at tho noxt mooting.\nTho mooting adjourned at 11:15 a. m.\nRegraded Unclassified\nppr\nE\nthem of obert no 050 at GCM JI\n& duthows of has where de (If 672\nelectring tinue 102 22.00.20 20 of Program ode And\n-d 24 1151 meding out of TWO DO on\nX we JM\nOF STATE VII June ont\nRegraded Unclassified\nSECRET\n290\nMinutes of the Meeting of the Board of Economic Warfare\nHeld November 12, 1942 at 10:00 8, m.\nA meeting of the Board of Economic Warfare was held in the Vice\nPresident's office in the Capitol Building at 10:00 a.m. on November 12, 1942.\nThose present:\nThe Vice President, Chairman of the Board\nMr. Dean Acheson, representing the Secretary of State\nMr. Harry White, representing the Secretary of the Treasury\nMr. R. P. Patterson, representing the Secretary of Tar\nMr. James V. Forrestal, representing the Secretary of the Navy\nThe Secretary of Agriculture\nMr. Nelson A. Rockefeller, Coordinator of Inter-American Affairs\nMr. William Batt, War Production Board\nMr. E. R. Stettinius, Jr., Lend Lease Administration\nIn addition, the following persons were present:\nMr. John Lockwood, Coordinator of Inter-American Affairs\nMr. Wayne Taylor, Department of Commerce\nMr. W. L. Clayton, Department of Commerce\nMr. Leslie Wheeler, Department of Agriculture\nMr. Harold H. Neff, Var Department\nMr. Thomas K. Finletter, State Department\nMr. Herbert Feis, State Department\nMr. L. W. Douglas, /ar Shipping Administration\nMr. Milo Porkins, Board of Economic Warfare\nMr. Cass Canfield, Board of Economic Warfare\nMr. Win. T. Stone, Board of Economic Warfore\nMr. Morris Rosenthal, Board of Economic Warfare\nCapt. W. D. Puleston, Board of Economic Warfare\nMr. E. W. Gaumnitz, Board of Economic Warfare\nCryptostegia\nThe Vice President opened the mooting, indicating that the first sub-\njoct for discussion was the report on Cryptostogia, copies of which had been\ncirculated (\"Roport to the Board of Economic Tarfaro on Cryptostogia dated\nNovember 6, 1942. Mr. Porkins was asked to comment.\nMr. Porkins reviewed briefly tho dovelopment in cryptostogia, stating\nthat tho plant gavo promiso of boing an important source of rubbor--scion-\ntists indicating that it had great possibility -but that experiments had\nnot procooded far enough to know definitoly whother quality would bo\nRegraded Unclassified\n2\nacceptable under commorcial conditions. Charactoristics of the plant itsolf\nfrom a growing standpoint are not too clear, and tapping or harvosting mothods\nare still in tho exporimental stago. At the samo timo tho scod supply is\nlimitod, but sufficiont sood is available to allow somo expension in plant-\ning. Duo to provioys experience in Haiti, arrangomonts have boon inde for\noxpansion of crengo in that .ro. with limitod expension olsowhore.\nMossrs. Achoson ná Rockofuller reised questions R8 to the dosirability\nof some cryptostogic plantings in Contral America, mainly bocause of grow-\ning unsmployment in that area, while in H:iti the libor supply WS loss\nplontiful. Mr. Porkins stated that the first expansion projects had boon\nconcontr tod in Hriti primarily bochuse of somo experiendo with the plant in\nthat area, because seed The vailable there, because land whs available for\nimmodiato planting and because it W.S docmod advisable to concontrato tho\nfirst plenting so that exporimental work could bc contored. At the and of\nnother 60 to 90 days, if progress wore favorable, Mr. Porkins state d that\nconsider tion would bo givon to expansion in other arcns. Mr. Clayton added\nthat ho understood 1 bor 17 8 plontiful in H iti.\nThe Vic. Prosidont then st tud that sinco the development of cryptostogic\nnis n source of rubbor was highly questionable except under TTT conditions,\nloss reporcussion would rosult 11 doro gus were scuttored in several nrons.\nSwodish Trado Policy\nThe Vicc Prosident thon reforred to the oucstion of trado policy with\nSwedon. Sinco the list mooting, the sub-committoc had m.do 1 report con-\ntaining its recommondations, the report boing submitted by the Board of\nEconomic Warfare, Stnto Dopartment, Navy Department and Whr Production Board\nbut with War Department dissonting. Copics of tho sub-committee roport\nRegraded Unclassified\n- 3 -\n291\nand a revised factual statement had been circulated to Board members prior\nto the meeting.\nIn conformity with the Board decision at its meeting on October 25,\ncopies of the factuel statement on Swedish Trade, \"Trade Policy Toward\nSweden\" BL-10-Rev. 2 and the sub-committee recommendations, \"Trade Policy\nToward Sweden\" BL-10-b were sent to the Joint Chiefs of Staff for comments.\nNo comments had been received from that group as of November 12.\nThe Vice President asked whether the sub-committee recommendations\nwere agreeable to State. Mr. Acheson indicated that the report was agree-\nable except the last part peragraph on Page 4 and the first part paragraph\non Page 5. It was his thought that petroleum shipment should not be made\ncontingent upon concessions being gained from 3weden,\nThere Was considerable discussion of the recommendations of the sub-\ncommittee and particularly of the point raised by Mr. Acheson. The follow-\ning resolution was passed, with Messrs. Patterson and White reserving the\nright to dissent:\n'RESOLVED THAT over-seas trade with Sweden be continued, including the\nshipment of petroleum products in exchange for commitments, secret or other-\nwise, of the types to meet the objectives of this government set forth in\nparagraphs a. to 1. of the recommondations submitted by the staff of the\nBoard of Economic Warfare dated November 5, 1942; and that this policy be\ncarriod out in consultation with the interested agencies by the Board of\nEconomic Varfare in colleboration with the Department of State.\"\nIt was agreed that in transmitting the Board rosolution to the\nPresident, it should be pointed out that the Board resolution vns passed\nwithout having available the comments of the Joint Chiefs of Staff.\nThe Vice President stated that copies of any letter received from the\nJoint Chiofs of Steff with reference to the sub-committce report would bo\nsent to Board mombers.\nThe meeting adjourned at 11:30 a.m.\nRegraded\nUnclassified\n292\nOFFICE OF LEND-LEASE ADMINISTRATION\nFIVE-FIFTEEN 22d STREET NW.\nWASHINGTON, D.C.\nE.R. Stettinius. Jr.\nAdministrator\nDecember 3, 1942.\nThe Honorable Henry Morgenthau, Jr.,\nSecretary of the Treasury,\nTreasury Department,\nWashington, D. C.\nDear Mr. Morgenthau:\nI have a memorandum from Oscar Cox dated November 23\nsaying \"I think some serious consideration ought to be given\nto how high the British gold and dollar balances should be\nallowed to rise, particularly in view of the possible boomerang\nfrom the standpoint of Congress' reactions to additional\nappropriations\" for Lend-Lease. I understand that your records\nshow that as of October 31, 1942, the United Kingdom's official\ndollar balance was $237,000,000., and its so-called \"available\ngold\" $468,000,000. with an additional so-called \"scattered\"\ngold of $210,000,000., and that the United Kingdom's gold and\ndollar position is growing increasingly strong.\nIn the light of these facts I think it might be well\nfor Dean Acheson, Milo Perkins, and me to have e. talk with you\nabout this situation and the possible advisability of taking\nsteps through Lend-Lease operations or otherwise to keep the\nBritish combined gold and dollar position from rising materially\nabove its present relatively high level.\nSincerely yours,\nE.\nFORDEFENSE\nBUY\nUNITED\nSTATES\nSAVINGS\nBONDS\nAND STAMPS\nRegraded Unclassified\n293\nDEC 3 - -\nDear Victor:\nI have your letter of November 25, 1942,\nwith respect to certain operations in French francs\nwhich have come to your attention.\nSuch transactions can only be effected\nunder license and hence are only permitted when they\nare in the interests of this Government. Under the\ncircumstances it would be preferable that no further\ninquiry be made with respect to the transactions which\nyou have noticed.\nSincerely,\n(Signed) H. Morgenthau, Jr.\nMr. Victor Roudin,\n30 Rockefeller Plaza,\nNew York, New York.\nPhoto file in Diary\nOriginal file direct to Paul 12/4/42\nMLHoffman:mgb 12/1/42\nRegraded Unclassified\n294\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE\nDEC 3 - 1942\nTO\nSecretary Morgenthau\nFROM\nRandolph Paul\nWe think the transactions which came to Mr. Roudin's\nattention were operations on behalf of the Office of Strategic\nServices.\nASD\nRegraded Unclassified\nHalfin of Houdin\nGeneral the of Am\nleve thank\nJohn / Hilper\nFurch 2 4640\nTicler\nEducal / \" John\nCable\nHephen Halter\n7.77 15ᵗʰ that //\nSther \" Haldenly\nHard * Hurns\nHushington 9 is\nExecutive 19877\nNovember 25, 1942.\nDear Henry:\nI have not replied to your letter of November 12th\nbefore now because I tried to get as much information as I\ncould on the subject of the sale of French francs in French\nColonies for dollars. So far, I do not find any indication\nthat there have been unusual transactions. or course I am\nsomewhat handicapped in my efforts because my inquiries of ne-\ncessity must be casual. Also, our military success in North\nAfrica has undoubtedly affected this exchange situation.\nWhat has puzzled me particularly is the indication\nthat the purchases of French francs, payable in dollars in the\nUnited States, are for the use of our government. The latest\nrate was seventy-five francs for the dollar. If any agency or\nDepartment of our government had made such offers, conditions\nmust now have removed this need. On the other hand if such re-\npresentation was false, it might be interesting to learn why\nthe story was given that added twist and who was in the market\nfor the francs - the interest was only in large amounts.\nIf the origin of the offer or any part of the story\nis of interest to your Department, I shall try to trace it as\nfar as possible.\nSincerely,\nHon. Henry Morgenthau,\nTreasury Department,\nWashington, D. C.\nRegraded Unclassified\n296\nPARAPHRASE OF TELEGRAM RECEIVED\nFROM: American Consulate, Algiers, Algeria\nDATE: December 3, 1942, 3 p.m.\nNO.: 63\nThis is a message from Mr. Murphy.\nReference is made to telegram no. 444, sent by the\nDepartment at 8 p.m. on November 30, 1942.\nI have been informally advised by the French authorities\nthat the arrival of a Polish representative mentioned in\nthe telegram under reference would be welcomed. His\npresence here would be useful from our standpoint as well.\nUnofficially I have discovered that all of the gold\nbelonging to Poland referred to has been sent to Europe,\nthe same apparently being true with regard to the Belgian\ngold which was stored in French Africa at one time. I\nhave also obtained information that most of the French\ngold is still here but it is not all stored in Kayes any\nlonger. Apparently it has been scattered among several\ndifferent places,\nCOLE\nRegraded Unclassified\n297\nPARAPHRASE OF Telegram RECEIVED\nFROM: American Embassy, Chungking, China\nDATE: December 3, 1942, 9 a.m.\nNO.: 1425\nMr. Hall Patch, the British Financial Attaché, who is\nshortly departing for London and from there will go to\nWashington, gave us the following information. For some\ntime now negotiations for the use of the British credit of\n$50,000,000 have stood still. Several proposals have been\nmade by the Chinese but these were not acceptable to the\nBritish because they did not conform to the British require-\nment that this credit should be utilized for purchases made\nwithin and only for the duration of the war. Lately\nWellington Koo \"personally\" approached the British Embassy,\nwith the knowledge of the Minister of Finance. Koo made\nthe following suggestions:\n1. That when the war was almost at an end and the\nBritish knew that they could spare machinery and ships\nuseful to China, the credit be used to finance transfers\nthereof, or\n2. That the credit be used to take over customs-\nsecured loans to China.\nIt seems that the British did not wish to accept either of\nthese plans. As yet they have not agreed on a plan to use\nthe loan. The Minister of Foreign Affairs, Mr. Soong,\nhas not been communicative about the matter but there is\nhope that he may work out some practical proposition when\nhe makes his reported visit to London, after his return\nto Washington,\nGAUSS\nRegraded Unclassified\n298\nDEC 3 - 1942\nky dear Mr. Berle:\nThis is in reply to your letter of November 21,\n1942, concerning the inquiry of the Iranian Government\nwhether this Government is willing to enter into a\nfinancial agreement with the Government of Iran whereby\nour needs for rials say be met directly.\nI an designating Mr. H. L. White to represent the\nTreasury in discussions of the reply to be made to the\nIranian Government.\nSincerely yours,\n(Signed) H. Morgenthau, Jr.\nSecretary of the Treasury.\nMr. 4. 4. Berle, Jr.,\nAssistant Secretary of State,\nDepartment of State,\nWashington, D. C.\n(Marked \"Confidential\")\nPhoto file in Diary\nOrig. file direct to White's\noffice 12/4/42\nJWG/gre\n12/2/42\nRegraded Unclassified\n- THE RECEPTARY\n-\n-\nDEPARTMENT November 21. 1943\nWASHINGTON\nIn reply refer to\nMy dear Mr. Secretary:\nI enclose conies of 8 paraphrase of telegram no. 367,\ndated November 11, 1942, from the American Legation at\nSchren, Iran, station that the Prime Minister of that coun-\ntry has requested the American Minister to ascertain whether\nthe United States Government 1 P willing to enter into A\nfinancial agreement with the Government of Iran whereby Ameri-\ncan neede for rials may be met directly rather than through\nthe British Government. I ALRO enclose copies of P memoran-\nNum prepared in- this Department eummarizing relevant informa-\ntion on this matter.\nIt 10 the feeling of this Department that it might be\nto the advantage of this Government to enter into an arrange-\nment with the Government of Iran which would facilitate the\nacquisition of rials for meeting American payments in that\ncountry particularly since our need for rials appears likely\nto increase steadily. It will be noted that the Iranian\nPrime Minister has suppested an agreement patterned after\nthe British-Iranien Agreement of May 26, 1942, a copy of\nwhich wee transmitted to the Treasury Department on July 9,\n194°.\nI should appreciate \" If Mr. Harry White or such other\nappropriate officer R.9 you may designate could come to this\nDepartment At an early date to discuss the nature of the\nreoly that should be made by this Government to the request\nof the Iranian Government.\nSincerely yours,\naarshes\nA. A. Berle, Jr.\nEnclosures:\nAssistent Secretary\nAe stated above.\nPDEFENSE\nThe Honorable\nBUY\nHenry Morgenthau, Jr.,\nUNITED\nSTATES\nSecretary of the Treasury.\nWINGS\nBONDS\nStwin\nRegraded Unclassified\nPARAPHRASE OF TELEGRAM RECEIVED\n300\nFROM: American Legation, Tehren, Iran\nDATE: November 11, 1942, 11 a.m.\nNO.1 367.\nThe British Minister and I have been informed by the\nIranian Prime Minister that the Russian Government has\nformally requested the Trantan Government to make a\nfinancial agreement similar to the British-Iranian agree-\nment of the 26th of May of this year. It has been proposed\nby the Russians that each party open and draw on a non-\ninterest bearing account, these accounts to be in the state\nbanks of each country. A settlement would be effected at\nthe end of each semester on the basis that balances would\nbe settled 60 per cent in dollars and 40 per cent in gold,\nWe have been advised by the Prime Minister that he objects\nto the proposed Russian agreement since in effect it would\npermit the Russians to make purchases in Iran on virtually\na credit basis. It may be noted that the Soviete are now\nseeking to purchase 30 thousand tone of rice, 24 thousand\ntons of barley and 8 thousand tons of wheat. Another reason\nthat the Prime Minister is opposed to the proposed agreement\nis that the dollars would be at the mercy of the Soviet\nGovernment since they would remain on deposit in Mossow.\nWe have been advised by the Prime Minister that it is\nhis intention to counter with A proposal that an agreement\nbe made along the lines of that between Iran and the British.\nI have been requested by the Prime Minister to ascertain\nwhether the United States Government 10 willing to enter into\nan agreement similar to that in effect between Iran and the\nBritish in order that American needs for rials may be obtained\ndirectly from the Iranian Government rather than through\nBritish sources,\nDREYFUS\nRegraded Unclassified\n301\nThe United Nations have been pouring considerable\namounts of foreign exchange into Iran to cover the ex-\npenses of their forces and transport operations in that\ncountry, In recent months, these expensitures have been\nr usaly AS follows: Great Britain, 300,000,000 rials\nmonthly; Russia, 100,000,000 rials monthly; United States,\n16,000,000 rials monthly. (The present rate of exchange\n12 32 rials to the dollar.) Although the Department's\ninformation is incomplete, it seems that, coupled with\na generally Fieing price level and possibly extensive\nhoarding of currency, these heavy purchases of Irenian\nfunde have brought the rial bank note circulation once\nmore up to the legal limit fixed by the Majlie (--rliament)\nThe Majlis has been reluctant to increase the circulation\nLecause of fears of inflation and its diseatis rection at\nthe failure of the United Nations Governmente to provide\nvoe t ANG other enterials needed for the of\nthe Ironian economy.\nIt will be recealed that n sivilar Pitation prose\nInst ever.ng and UPP mettled by the onnelusion of the Angle-\nfinancial agreement of any 26, During Cotober,\nVOIDE the chart E° of currency mind, the Pritish Govern-\nwant brought pressure to hear to obtain fulfillment of\nthat agreement through authoris tier. by the Majlie of the\nLegiance of two billion additional riele in currency.\nafter much negotistion, the Frime Minister afreed to\nprots for the issume of 500,000,000 rinl in new cur-\nrency, of which 150,000,000 were to be enrmarked for Allied\npurchase. He also aureec to aponsor the 1980Ance of A\nfurther 1,500,000,000 rials, provided the United States\nand Great Britsin would guarantee to make un any deficiency\nin Iranian grain clocks prior to the gather DC of the 1943\nharvest.\nThe 500,000,000 rial issue wha, in fect, authorized\nduring the fourth week in October, but it appears that\nthe quantity allocated for the Allies has already been\nThe Department of State end the Foreign Office\nhave now agreed upon an undertaking vity regard t wheat\nsupply to Iran which It 1s expected will estisfy the Iranian\nGovernment and which will probably be signed and made nublic\nwithin & short time. The Foreign Office has proposed, and\nthe Department has agreed, that A on ition precedent to\nthis undertaking shall be the creation of an Iranian com-\nmission to control the currency, presumably with full\npower\nRegraded Unclassified\n302\n-2-\npower to increasecirculation at will, thus removing the\ncurrency question from the hands of the Najlis and giving\ngreater assurance that the undertakings of the Iranian\nCabinet with respect to note issue will be fulfilled.\nBy a telegram dated November 11, 1942, the American\nMinister at Tehran has reported that the Prime Minister\nwishee to conclude a financial agreement with the United\nStates along the lines of the Anglo-Iranian agreement of\nMay 26.\nHitherto the principal Allied expenditures in Iran\nhave been British, nn' the currency problem has, conse-\nquently, been of primary concern t the British authorities.\nHowever, the United States 18 undertaking vastly granter\nresponsibilities In Iran, and it Broma probable that our\nexpenditures, and consequent need for Iraning currency,\nvill equal or surpase these of the writish within e few\nmenths.\nAs brokgrowne information, it 18 of interest to note\nthe following figures on Iranian bank note circulation:\nJune, 1940\n990,640,936 riale\nAugust, 1 41\n(Just before Anglo-\nRussian occupation)\n1,377,101,565 rinls\nkey, 1942\n1,841,308,575 rials\nSeptember, 1942\n(authorized)\n3,000,000,000 rials\nNovember, 1942\n(authorized)\n3,500,000,000 riale\nNote: It may be assumed that Actual circulation is\nvirtually identical with authorized circulation nb the\npresent time.\ndressess visiscoM\nto notatvid\nSAST ES von\nDeberament\nbeceined\nNE:JDJernegan:RED\nRegraded Unclassified\n303\nPARAPHRASE OF TELEGRAM RECEIVED\nFROM: American Legation, Tehran, Iran\nDATE: November 20, 1942, 6 p.m.\nNO.: 386\n4 bill was enacted last night by the Majlis under which\nit surrenders its powers over currency to the currency\ncommittee which is already in existence. The Golivery\nof rials to the Allies by the Banque Lellie has been\npromised by the Prime Vinister for tomorrow. There will\nbe an immediate mueting of the currency board to consider\nadditional issue of rials. Inassuch as the British now\nfeel that they have received satisfaction on the currency\nquestion we are proceeding at once with the declaration\nconcerning wheat. The text of the currency bill enacted\nby the Majlis is as follows:\nArticle One. From the date of the pussing of this\nlaw authority for the issue or notes is vested in the\nNote Reserve Control Committee.\nArticle Two. The Director General of Finances,\nDoctor Misslpaugh, will become E member 01 the Note\nReserve Control Committee after 11s arrivel.\nArticle Three. The conditions for the lasue of notes,\nauthority for which is vested by this law in the Note\nReserve Control Committee, will be fixed by 8 decree of\nthe Council of kinisters acting on proposels put forward\nby the Note Reserve Control Committee.\nArticle Four. Notes which are issued by virtue of\nthis law must possess the following becking: A. As to\n603: Gold at the official rate ruling in the International\nmarket at the present date and/or pounds and dollars con-\nvertible into gold. B. AB to 4090: Pounds end dollars\nguaranteed against depreciation in term of THE at today's\nrate.\nArticle Five. The because for the noten 1.0 the value\nof three thousand five hundred million ricla, authority\nfor the issue of which has been Liven up till this date,\nwill be on 8 basis of 50% gold _nd silver, velue et the\ninternational market rate and the jewels w.lo]. were\nhanded over to the National Date 16 with the\nlew of twenty-five Aban. 13,10,\nDRIVING\nRegraded Unclassified\n304\nNOT TO EE RE-TRANSMITTED\nCOPY NO.\n13\nBRITISH MOST SECRET\nU.S. SeCRET\nOPTEL No. 420\nInformation received up to 7 A.M., 3rd December, 1942.\n1. NAVAL\nIt is considered that 4 enemy ships (including 2 troop\ntransports) end 3 destroyers were sunk during the engagement off CAPE BON\nyesterday morning.\n2nd. One of H.M. Destroyers was torpedoed and sunk by\nvircraft off BIZERTA. One of H.M. Submarines shelled and set on fire a\nsmall ship off East TUNICIA. 10 Germen Mr force personnel were cap-\ntured. The Greek submarine PAPANICOLIS sank a 6,000 ton ship in the\nAegean. 157 survivors out of A total of 310 have been picked up from\nthe merchant ship reported torpedoed off LOURENCO MARQUES in OPTEL NO.\n419.\n2. MILITARY\nLIBYA. Artillery of our advanced armoured formations\nhas been active in the area south of MERSA BREGA.\nFRENCH ORTH AFRICA. Our parachute troops who londed\nat PONT DU FAHS on 29th are reported to have ceptured OUDNA 15 miles\nsouth of TUNIS next day.\nRUSSIA. Although the Russians a car to De mointoining\ntheir pressure both on the Central and DON Sectors they have failed to\nmake any definite progress. In the South this may be due to n break\nin the weather regorted by the Germans who state that a thaw has set in\naccompanied by heavy rain in the Don Bend. This could seriously impede\noperations by both sides.\n3. AIR OPERATIONS\nWESTERN FRONT. 2nd. In Northern France 7 locomotives\nwere dumaged by our fighters, one of Which is missing.\n2nd/3rd. 112 Dombers were sent to FRANKFURT and 4 to\ndrop leaflets. Full landing reports not repetition not yet available\nbut preliminary information indicates attack spoilt by considerable\nclouds.\nMEDITERRANEAN. lat/2nd. A Navul torpedo bonber tor-\npedoed an escorted 7,000 ton enemy tanker which was later seen stationary\noff West SICILY.\n2nd. MALTA based aircraft attacked a convoy off KERKENNA\nISLAND. Bursto and fires were seen.\nINDO-CHINA. 28th November. Escorted U.S. bombers hit\n4 power station and started fires in coal storage dumps at HONGAI and\nPORT CAMPHA 40 miles east of HAIPHONG.\nRegraded Unclassified\n305\nNOT TO BE RE-TRANSMITTED\nCOPY NO. 13\nBRITISH MOST SECRET\nU.S. SECRET\nOPTEL No. 426\nFollowing is supplementary resume of operational evente covering\nperiod 26th November to 3rd December, 1942.\n1. NAVAL\nA convoy of 29 ships from RUSSIA has arrived U.K. with loss of one\nship torpedoed by U-boat and 1 ship missing. The Italian blockade runner mentioned\nin OPTEL No. 419 actually surrendered but had to be sunk oring to bad weather.\nMEDITERRANEAN. On the Axis supply routes to TUNISIA and TRIPOLITANIA\nduring the period from 1st to 4th a total of 9 supply ships were sunk and 1 large\ntanker left heavily on fire as the result of our Naval, Naval Air, and R.A.F. attacks\nIn addition 3 destroyers and torpedo boats are known to have been sunk while escorting\nthose ships. Other shipping was damaged or diverted. No sign of activity on part\nof Italian heavy ships or cruisers. There was very little traffic to TRIPOLI (L)\nduring the week. Air photographs of TOULON on 28th November showed all important\nships either scuttled or damaged except 2 6\" cruisers. Three of the 19 submarin\nin TOULON on 26th November now in North African ports, 1 interned in SPAIN, 4 are\nknown to be scuttled, 5 are unaccounted for. No evidence from photographs as to\ndamage to Naval dockyard, installations or oil storage at TOULON.\nSUBMARINE WARFARE. U-boats still quiet both East and West of GIBRALTAR\nbut there are signs of greater activity in Central North Atlantic. Week ending 29th\nNovember, 6 ships sunk by U-boat, 2 in Atlantic, 4 in Indian Ocean. 2 ocean convoys\ntotalling 87 ships, arrived U.K. without loss, 1 outward ocean convoy arrived without\nloss. Ships were lost in two outward bound convoys. 6 promising attake on U-boats\nreported. Shipping losses from enemy action during November provisionally estimated\nst 631,000 tons.\nTRADE. Week ending 28th November, imports in convoy into U.K. wore\n341,194 tons of which 194,953 tons oil.\n2. MILITARY\nTUNISIA. The First Army started its eastward advance on 24th/25th\nNovember in two columns in the direction of TEBOURBA and MATEUR with,a British/U.S.\nArmoured Force in between. The initial advance was slowed up by demolitions and low\nflying air attacks but on 26th the right column captured MEDJEZ EL BAB and the\nArmoured Force reached B. point between TEBOURBA and MATEUR and on the following day\noccupied TEBOURBA. Meanwhile the Northern column reached JEFNA about 12 miles short\nof MATEUR and was there hold up by an enemy strong point, an attack on the 30th\nfailed to clear this obstruction and the progress of this column is still checked at\nthis point. The Southern column succeeded in capturing part of DJEDEIDA by evening\n30th November, On 1st, a strong counter attack on the TEBOURBA area was beaten off\nbut the Armoured Force sustained losses in tanks and was later withdrawn and replaced\nin the forward area by B. U.S. Armoured Combat Command. Our forces in this sector\nhave since been withdrawn to positions overlooking the TEBOURBA-CHOUIGUI area. Des-\nnite successful attacks on Axis sea and air communications, reinforcements continue\nto arrive spasmodically. Axis forces in TUNISIA now about 20,000 Germans and\n11,500-Italians. 10th Panser Division believed in transit from Southern France to\nTUNISIA but probably only first flight yet arrived. Present tank strength after\ndeducting battle casualties about 80-90 German and 25-35 Itelian.\nLIBYA. Build up of our forces in forward area continues though\n\"omowhat delayed by rain and heavy going. Railway now working to TOBRUK although\nnot yet full capacity. Move forward of pipe water and petrol installations pro-\nweeding satisfactory. Much receptured British ammunition fit for re-issue. Tank\nrepuir greatly helped by use of air transport of spares. Prisoners reached base by\n30th November 31,802 including 8,318 Germans. Enemy supply situation still thought\nprecarious owing to our successful attacks on shipping.\n5. AIR OPERATIONS\nWESTERN FRONT. One heavy and very successful night bombing raid on\nTURIN. During coastal operations, 13 attacks were made on enemy ships in the\nSouthern part of BAY OF BISCAY but no definite results claimed. 18 aircraft in-\ncluding 9 Beaufighters from patrols off BREST Peninsula probably shot down in air\nfighting.\nRegraded Unclassified\n306\n- 2 -\nFRENCH NORTH AFRICA. Object of our advance was to develop carliost\npossible attack against TUNIS and BIZERTA. To this end some risks had to be run in\nregard to provision of air support. In spite of maximum effort by our air forces,\ndifficulties of supply and maintenance, scarcity of advanced landing grounds and in-\nsufficient time to build up adequate A.A. defences and a good warning system have\nprovented our aircraft from giving sufficient help to our troops in the face of\nmeny counter attacks supported by bombing. It is likely that 8. short pause will\nbe necessary to enable a sufficient weight of air support to be built up and main-\ntained. By rapidly soizing the large and better air fields in the BIZERTA and TUNIS\nareas the enemy has the advantages of greater resources close behind his positions\nwith e simpler and shorter supply system. Although our bombing attacks on Axis air-\nfields and bases have been frequent both by day and night, the weight of them has\n50 for not proved adoquate to prevent their regular use.\nMEDITERRANEAN. Beaufighters and Naval aircraft from MALTA were\nactive against Axis shipping especially off TUNISIA. Estimated 21,000 tons of onemy\nshipping sunk or seriously damaged by air attack during period.\nRUSSIA. Activity on contral front severely restricted by weather.\n\"II DON area, Russian Air Force concontrated on transport aircraft attempting to supply\nGerman 6th Army and destroying n large number. Russian aircraft very active in\nCAUCASUS in spite of bad weather. Indications that German Air Force is inadequato\ndoctors. to afford more than absolute minimum support for Army except in relatively narro\n4. EXTRACTS FROM PHOTOGRAPHIC AND INT.LLIGENCE REPORTS ON RESULTS OF AIR ATTACKS ON\nENEMY TERRITORY IN europe.\nOSNABRUCK. Photographs 24th November show that attack October 6th\ncaused widespread damage mainly to industrial and railway plant. Factories of fol-\nlowing types severely damaged - cotton spinning and weaving, copper, and (?wire)\n(stated working on submarino parts and armour plate) metal, soap. Sawage worke and\nu. barracks also heavily damaged.\nTURIN. Two direct hits on main block Fiat Works, 3 buildings in rail-\nway works burnt, more than half of main buildings in Viscosu burnt, 20 factories\nincluding 3 Fiat subsidiaries severely damaged. Damage to artillery and cavalry\nbarracks.\nITALY. Reliably reported air raid situation serious, authorities\nunable to cope satisfactorily with mass evacuation, people dissatisfied and any 30\nfrankly. Almost all principal firms in Northern towns have evacuated their offices.\nSigns of a run on the banks. People in Northern Italy indifferent about the war,\ntheir only concern being to \"get away from the R.A.F.\".\n5. OPERATIONAL AIRCRAFT BATTLE CASUALTIES\nMETROPOLITAN AREA\nAllied\nEnemy\nProb.\nIn the Air\nDest.\nDest.\nDamaged\nHombers\n12\nBombers\n2\nNil\n2\nFighters\n11\nFighters\n6\n1\n7\nCoustal\n12\nMiscellaneous\n4\nNil\n1\nArmy Cooperation\n5\nTotal\n12\n1\n10\nTotal\n40\nNORTH WEST AFRICA\nAllied\nEnomy\nProb.\nIn the Air\nOn the Ground\nDest.\nDest.\nDamaged\nHombers\n2\nN11\nBombers\n16\n1\n7\nVightors\n21\n14\nFighters\n20\n4\n16\nOthers\nNil\n9\nMiscellaneous\n28\n13\n23\nTotal\n23\n23\nTotal\n64\n18\n46\nRegraded Unclassified\n307\n- 3 -\nMIDDLE EAST (Including MALTA)\nAllied\nEnemy\nIn the Air\nDestroyed\nDamaged\nBombers\n5\nBombers\n4\nNil\nFighters\n9\nFighters\n9\n8\nTotal\n14\nMiscellaneous\n1\n4\nOne pilot is safe.\nTotal\n14\n12\nFAR EAST\nAllied\nEnemy\nProb.\nIn the Air\nDest.\nDest.\nDamaged\nFighters\n2\nBombers\n2\n1\n2\nOthers\n1\nFighters\n33\n3\nNil\nTotal\n3\nMiscellaneous\n15\nNil\nNil\nTotal\n50\n4\n2\nNOTE: No account is taken of enemy aircraft destroyed on the ground\nin any theatre or of British Naval Aircraft casualties.\n6. HOME SECURITY\nEstimated casualties week ending 2nd. Killed 3, seriously wounded\n15.\n308\nNUMBER 60\nSecret\nOFFICE OF STRATEGIC SERVICES\nTHE WAR\nTHIS WEEK\nNovember 26-December 3, 1942\nPrinted for the Board of Analysts\nCopy No. 6\nThe Secretary the Treasy\nRegraded Unclassified\nNOVEMBER 26-DECEMBER 3, 1942\nSECRET\nOffice of Strategic Services\nTHE WAR THIS WEEK\nAlthough the Soviet drive in the south has been slowed\nand the precise situation in the region of the Don bend is\nunclear, it appears probable that the Russians will soon relieve\nStalingrad. The end of the siege of Stalingrad, one of the\nmost notable defenses in military annals, would free the vital\nLower Volga waterway for transport from the Caspian in the\nspring, and would unquestionably have important reper-\ncussions on Russian military morale. Meanwhile the north-\nern Soviet offensive is slowly expanding salients south of\nRzhev and in the neighborhood of Velikie Luki, although this\ndrive has yet to develop any of the spectacular characteristics\nattributed to it in the press.\nAgainst the Tunis-Bizerte bridgehead, the Allies have\nthrown three columns. Despite strong Axis resistance, it\nstill appears that the enemy is fighting only an important\ndelaying action and that he would have to defend a larger\nbridgehead if he intended to hold the area indefinitely. In\nthe meantime, Marshal Rommel has dug in about El Agheila;\nand, with lengthening supply lines, it is assumed that it may\nbe more than a week before the British resume their offensive\nin this area.\nFrench naval officers have been warmly criticized for short-\nsightedness in failing to take the Toulon fleet to North\nAfrica. But the scuttling was in any event consonant with\na policy pursued ever since the Armistice of 1940-a policy\nof neutrality and resistance to aggressive acts from whatever\nsource. Although the scuttling was hurried and incomplete\nand left a few vessels afloat and apparently intact, naval\nobservers point out that it will be anywhere from one to two\nyears before the Germans can repair the ships and train\n1\nRegraded Unclassi\nSECRET\nSECRET\ncrews for them. In the interim, the sunken ships will seri-\nously encumber the Toulon harbor, to the disadvantage of\ndefenders. This continued resistance between the Volga and\nits captors.\nthe Don has suggested to some military observers that the\nIn North Africa, Darlan, whose recent elevation to power\nGerman position there has not yet deteriorated to such an\nhas already occasioned widespread uneasiness, has now\nextent as to warrant a desperate attempt to escape toward\nassumed the position of Chief of State and \"heir of Vichy\".\nthe west.\nThis act implies that not only Darlan but the Vichy regime\nhave now been transferred to French Africa.\nSignificance of the Relief of Stalingrad\nThe relief of Stalingrad, which now appears probable,\nProgress of the Soviet Pincers\nwould deliver to the Russians little more than a mass of ruins,\nAlthough the progress of the Russian offensive north and\nwhose industrial capacity has been almost entirely destroyed\nsouth of Stalingrad has slackened somewhat, its southern\nor evacuated. It would be difficult, however, to overestimate\narm has repelled a German counterattack from Kotelnikovo\nthe moral importance of a successful defense which has been\nand has driven almost to the east bank of the Don River-\ndescribed as surpassing the epics of Verdun and Sevastopol\nbelow the great bend-on a broad front from Obilnoye and\nand which may in a very real sense have been the turning\nNebykov to Romashkin (see map). On the west bank of\npoint of the whole war. Furthermore the Russian counter-\nthe river, other Russian units may have cut the Don bend-\noffensive has already broken the anchor of the German\nStalingrad railway again at Rychkov. To the east and\nadvance to the south, and may even cause the Nazis to\nwest of the bend, fighting around Bolshoi Donshchinski\nwithdraw from their whole Caucasus salient-especially if a\nand Peskovatka indicates the progress of the Soviet mopping-\nholding attack now in progress at Voronezh should develop\nup operation.\ninto a full-scale offensive. Such a withdrawal would mean\nDetails of the attack are somewhat unclear, and military\nthe failure of the German effort to appropriate Russia's oil\nobservers disagree in crediting towns captured to one column\nresources in the North Caucasus. For it would come at &\nor another of the Red Army. It is apparent, however, that\ntime when the Nazis had not even reached Groznyi or had\nwith steady Soviet gains in all sectors of the Don bend front,\ntime to reconstruct the demolished installations in the Maikop\nand with both railroads to Stalingrad cut, the chances of\narea.\nescape for the German forces between the Don and the Volga\nShould the Russians recapture Maikop, it would be many\nare at least problematical. Some evidence suggests that\nmonths before they could obtain any oil from that region.\nNazi units within the bend are withdrawing eastward to join\nOn the other hand, the relief of Stalingrad would reopen the\nthe forces in Stalingrad-a movement that can hardly be\nVolga River next spring as a vital artery for the transport of\ninterpreted as an effort to break out of a trap. And it seems\noil and other strategic commodities from the Transcaucasus.\nclear that, despite Soviet gains in the northern industrial\nIn 1935, the last year for which figures are available, the\nsuburb of Stalingrad itself, the Germans have slowed the left\nLower Volga (from Astrakhan to & little above Stalingrad)\nflank of the Russian drive, which seeks to relieve the city's\ncarried 10,390,000 tons of freight, of which 6,873,000 were\npetroleum and petroleum products, and 1,462,000 were salt.\n2\n3\nRegraded Unclassified\nSECRET\nSECRET\nIn the same year, Stalingrad handled 4,185,300 tons of freight.\nAttack on the Tunis-Bizerte Bridgehead\nAt Astrakhan the Volga is closed by ice 100 days in the year,\nStriking in three principal columns from the are indicated\nand at Stalingrad for 150 days. By about April 20 the\non last week's map, elements of the British First Army,\nLower Volga should again be open to traffic.\nsupported by American and French forces, on November 24\nFurthermore, if the Germans should withdraw from the\nbegan the direct assault on the Axis bridgehead in north-\nNorth Caucasus, the Astrakhan-Kizlyar railway would again\neastern Tunisia.\nbe secure. Although it would probably take several months\nIn the north a column advancing along the coastal road\nto put the Stalingrad-Tikhoretsk line back into commission,\nforced the enemy to a slow withdrawal to strongly heid posi-\nthis railway might eventually also be usable. The availa-\ntions in the Mateur area-a road and railroad junction\nbility of either or both of these lines would immensely simplify\nwhose capture is a preliminary to an attack on Bizerte. In\nthe transport of oil from Baku north, which is now burdening\nthe center Allied columns have driven the Germans from\nthe Central Asiatic railways. These latter lines are in turn\nMedjez el Bab and Tebourba, and thrust a spearhead be-\nalready crowded with lend-lease goods from the Persian Gulf,\ntween Bizerte and Tunis in the Djedeida area, cutting the\nwhose delivery would thus be indirectly expedited by the\nrailroad and one of the two connecting roads. Here Axis\nclearing of the North Caucasus.\nresistance has been intense. Low-flying aircraft have steadily\nattacked Allied forces, and Axis armored elements are re-\nThe Central Offensive\nported to have led the heaviest counterattack thus far en-\ncountered. The Axis has reoccupied Pont du Fahs, a point\nIn the Kalinin-Rzhev sector, the second Soviet offensive\nfrom which British parachutists had advanced to capture\nis concentrating on the capture of the important airfield at\nOudna, 13 miles south of Tunis. Farther to the south the\nVelikie Luki, which the Russians may now have partially\nmixed French and American column advancing from Tebessa\nsurrounded. The attackers have apparently cut the railway\nand Gafsa is reported by the Moroccan radio to be approaching\nline to the west of the town, but the railroad from the south\nthe coast north of Gabès.\nmay be still available to the Germans, who are offering a\nAir activity has been heavy and important. After a lull of\ndetermined resistance. Other Russian units have cut the\nseveral days, enemy planes based on Sicily and Tunisia\nrailway between Vyazma and Rzhev. In this sector, as\nresumed attacks on Allied shipping and harbor facilities, and\naround Leningrad, where Soviet forces have made another\nboth sides have continued their unrelenting attacks on the\neffort to cross the Neva, the Russians are evidently capitaliz-\nvery limited number of available airdromes. Large numbers\ning on the comparatively favorable weather of early winter,\nof enemy planes have been destroyed on the ground.\nprior to the coming of extreme cold.\nEnemy forces in Tunisia continue to be relatively small, and\nElsewhere on the front, action has been indecisive. In\nwere believed at the end of November to number slightly more\nthe Caucasus, east of Alagir, renewed Soviet attacks are\nthan 20,000 combat troops-over half of them German.\naiming to wipe out the recently established German salient\nThe core of this contingent was apparently the German 7th\ntoward the Georgian and Ossetian Military Highways.\nAir-borne Division. The rate of reinforcement has been\nestimated at about 1,000 men daily. Enemy tank strength\n4\n5\nSECRET\nSECRET\nwas placed at about 50, while Axis plane strength in southern\nRommel has a substantial force composed of the depleted\nEurope has been increased. The concentration of Axis sub-\nthree divisions of the Afrika Korps, two fresh Italian infantry\nmarines in the Western Mediterranean and the approaches\ndivisions, remnants of other units that escaped the Alamein\nto Gibraltar has declined considerably.\nbattlefield, and line of supply troops picked up during the\nretreat. Axis port and transport facilities are believed\nAris Defensive Strategy\nadequate to sustain the forces at El Agheila, and to form\nThe general Axis strategy in northern Tunisia appears to\nsupply dumps at intervals along the Libyan highway. If\nbe to effect extensive demolitions and offer severe resistance\nforced back from their present positions, the Axis should be\nbefore taking final positions in the commanding hills south\nable to make a series of delaying stands on the narrow coastal\nand west of Bizerte and in a defensive perimeter around\nstrip along which, for more than 200 miles, all communications\nTunis. If the enemy limits his stand to these strongholds-\nmust go.\nwhich the Allies will presumably soon isolate from each other,\nand from reinforcement via Tripolitania-it will suggest\nThe Scuttling at Toulon\nagain that Axis policy in Tunisia is simply a substantial\nThe destruction of the French fleet at Toulon was the logical\ndelaying action. A larger bridgehead would appear essential\nresult of a consistent policy which French naval officers have\nto any effort to hold the area permanently. In the south,\npursued ever since the armistice of June 1940-a policy of\nAxis resistance has been passive, and the coastal points\nstrict neutrality and resistance to aggression from whichever\noccupied are believed lightly held, primarily by Italians. A\nside it came-a course followed at Oran in July 1940, at\nmore determined stand may later be made in the Gabès-\nDakar in September 1940, and at Casablanca last month.\nborder area, to which the Centauro Armored Division might\nThere is no conclusive evidence that the fleet at Toulon\nbe sent from Tripoli.\nwas planning an escape to join the Allies. More likely,\nHitler's swift attack aimed simply to take the ships by sur-\nHalt at El Agheila\nprise before they had an opportunity to do an effective job\nAs Axis forces dug in around El Agheila, military observers\nof scuttling. Some have suggested that the Fuehrer had\npredicted a halt in the rapid movement of the current Libyan\nlearned of careful preparations for scuttling which he wished\ncampaign. Having advanced 800 miles in less than a month,\nto forestall. In any case, the fleet probably had sufficient oil\nGeneral Montgomery must doubtless now pause to bring up\non hand to make a break for Africa in case of necessity. But\ninfantry and artillery, to rest, to establish forward air bases,\nthe German attack came SO suddenly that the greater part of\nand especially to organize supply lines and fuel and ammuni-\nthe vessels never had time to get up steam.\ntion dumps. Tobruk and the railhead at El Adam-435\nAs a result, the job was hurried and incomplete. The\nmiles from El Agheila-will probably be the principal en-\ngreater part of the heavier vessels (two battleships, three\ntrucking points, with Benghazi presumably too vulnerable\nheavy cruisers, one light cruiser, one seaplane tender) are\nto enemy attack for any large-scale use. It may be a week or\nreported either burned out or resting on the bottom about\nmore before the Eighth Army is ready to resume its offensive.\nten feet below their normal water line. The battleship\n6\n7\nSECRET\nSECRET\nDunkerque is flooded in drydock. One heavy cruiser, two\nbatteries on Cepét Peninsula and by a boom extending north-\nlight cruisers, five destroyer leaders, and two destroyers are\neast from the western jetty on the peninsula to & narrow\n\"afloat and apparently intact\". Six submarines remain in\npassage in 70 feet of water near the south end of Great Jetty.\ndrydock, at least four of them undamaged. Of the 13 other\nAlong the north and east sides of Little Road are the\nsubmarines previously at Toulon, one attempting to escape\nbuildings and docks of the fleet base. When the fleet was in\nhit a mine and blew up; the Marsouin and Casabianca have\nthe harbor, 25 to 30 vessels were usually anchored in Little\nreached Algiers; the Glorieux, after putting in at Valencia, has\nFREE\narrived in Africa in a damaged state; the Iris is interned at\nTOULON\nBarcelona; and three more which may have escaped are as\nyet unheard from. \"French naval sources\" at Barcelona\n(presumably the crew of the Iris) state that casualties during\n33\nROAD,\nthe scuttling were very slight-mostly on destroyers which\n30\nCape Brun M\nthe Germans tried to board and on the submarine which blew\n66\n78\nup. Land installations are evidently almost intact.\nas\nGREAT ROAD\nIM\n18\nTOULON BAY\nist\nThe Balance Sheet\n180\nCarqueirama\nGÉPETI PENINSULA\n50\nSTALY\nThe Italian radio has claimed that the fleet \"may be\nFRANCE\nor\nCope Ciger\nsalvaged in the future by our admirable naval engineers.\"\nno\nFor the larger units, however, such an operation would\nN4\nprobably consume the better part of a year. Furthermore,\n336\nCope\nnaval experts suggest that it would take an additional six\nSiele\n198\nmonths to a year to familiarize German crews with the\nTHE SITUATION OF TOULON\nhandling of the French ships, although the submarines in\nof\nSOUNDINGS IN FEET\nMilse\ndrydock may be an exception. One can conclude that at\nCOMPILED AND DRAWN IN THE BRANCH OF RESEARCH AND ANALYSIS,035\nleast a year and perhaps two years will elapse before the\nMAP NO. 430, DEC 1942\nNazis can make effective use of any considerable part of the\nRoad, while the remainder were docked. Anchored vessels\nfleet at Toulon.\nwere ordinarily west of the 40-foot channel between the\nThe harbor will likewise be greatly encumbered. Toulon\nentrance and the large dry docks at the northeast corner of\nharbor is a small bay about 4,000 yards long and 475 yards\nLittle Road. If this was the case at the time of the scuttling,\nwide called Little Road (see map). The eastern two-thirds\nsurface or underwater movement in the harbor will prove\nis the fleet anchorage, 35 to 45 feet deep. At the southeast\nvery difficult during the next few months. Any vessels sunk\ncorner of the Bay is the single entrance, a 2,000-foot channel\nin the outer bay (Great Road and Toulon Bay), which has\nextending approximately a mile south and east to Great Pass.\nminimum depths of 78-150 feet, would not be a serious\nThe latter is a 1,700-foot passage, 96 feet deep, protected by\nencumbrance to navigation.\n9\n8\nSECRET\nSECRET\nReactions in Africa\nthough Pétain nominally remains at his post \"in complete\nThe repercussions of the events at Toulon on units of the\nharmony\" with Laval, press reports tell of minor officials\nFrench fleet stationed in Africa have been mixed. At\nceasing to perform their functions, and soldiers changing into\nAlexandria, French naval personnel is showing an unwonted\ncivilian clothes without the formalities of a discharge. One\nsympathy for the Allied cause, but Admiral Godefroy is\nForeign Office official who has taken refuge in a neutral coun-\napparently still hesitating. Darlan he regards as a traitor,\ntry has described the almost complete cessation of activity in\nand he has irritated the British with his continued indecision;\nthat department, with the arrest or flight of many of its\nthe latter may now be considering the cancellation of the\nmembers. Reports of arrests include Herriot and General\noriginal agreement demilitarizing the French Squadron.\nDoyen, former French representative on the Armistice Com-\nFrom Dakar, however, Governor Boisson has apparently\nmission, while Reynaud and Mandel, already under detention\nflown to North Africa to put at Darlan's disposal the French\nby Vichy, may be tried in Germany by a \"People's Court\".\nnaval units under his control.\nIn France itself, special courts (not sharing the independence\nof the regular French judiciary) will sit in summary judgment\nConfusion in German Propaganda Regarding Toulon\non \"terrorists\". According to advices from Bern, Laval is in\nThe confusion of Berlin's propaganda concerning the sink-\nBerlin, discussing the reorganization of his ministry. As for\nings at Toulon suggests that the Germans did not expect the\nthe French people, the vast majority of them apparently hope\nFrench would actually scuttle their ships. The Berliner\nfor the organization of a unified government-in-exile.\nBoersen-Zeitung comments that the last loophole by which\nthe Allies hoped to sneak into the back door of Europe has\nA French Government-in-Exile\nnow been barred, and gloats over the denial to the Allies of\nIn North Africa Darlan has proceeded with the organiza-\nthe French naval force at Toulon. Elsewhere, in an apologetic\ntion of an old time-server's version of such a government.\nvein, the German radio expressed regret that the treachery\nAs the self-styled heir of Vichy, the Admiral has a strong\nof French officers caused the events at Toulon, and emphasized\nlegal position, which he has strengthened by establishing an\nthat Germany bears no hatred for the French people. A\nimperial advisory council and assuming authority as Chief\nthird reaction was blunt indignation over the fact that France\nof State in French Africa. Furthermore, he has not ap-\nhad not \"followed the call for the European task\". \"Never\npointed to his council refugee collaborationists and poli-\nin history has the vanquished rejected the victor's hand so\nticians from Vichy like Pucheu and Flandin, but has restricted\nclearly, so stupidly, so dishonorably.\"\nits membership largely to military figures and colonial\nadministrators (Generals Noguès, Boisson, Bergeret, Giraud,\nVichy Disintegrates\nand Governor General Chatel). The last two of these have\nWith the scuttling of the fleet at Toulon, and the disband-\nthe reputation of being pro-Ally; Bergeret (formerly Secre-\ning of the French metropolitan army, the disintegration of\ntary of State for air under Darlan) came over to Africa\nthe Vichy administration has been proceeding apace. Al-\nafter having been removed from the government by Laval.\nTo Vichy consular and diplomatic representatives Darlan\n10\n11\nSECRET\nhas likewise sent instructions to follow orders from Africa\nrather than from metropolitan France.\nMeantime, the British, the Russians, and pro-democratic\nFrench have shown signs of concern that Darlan's \"tempo-\nrary\" administration may last as long as the war. The\nFighting French and many other emigré groups are appar-\nently convinced that the Admiral's administration in Africa\ncan not serve as a rallying point for patriotic Frenchmen.\nIn the French community of Ankara current developments\nhave occasioned many conversions to Fighting France-but\nnot to Darlan's \"Vichy-in-exile\". The adherence of Dakar\nto the Admiral has again aroused the dismay of certain pro-\nAlly Frenchmen, who had been temporarily reassured by\nPresident Roosevelt's explanation of Darlan's status. For\ninstance, the De Gaullists of West Africa have rejected all\ncooperation with the Admiral, whom they regard as even\nmore treacherous than Laval; Governor Boisson, they believe,\nis little better. In Cairo, Fighting French circles have ex-\npressed similar fears. One observer concludes that the orig-\ninal popular enthusiasm over Allied successes in North Africa\nis now changing to cynicism and disillusionment.\nThat the British permitted the De Gaullists to occupy the\nVichy island of Reunion without Allied help may be a clue to\nthe real feelings of the London government. Furthermore,\nin a restrained defence of the BBC refusal to let De Gaulle\nbroadcast to the French people, Foreign Secretary Eden has\nimplied that the elevation of Darlan was primarily an Ameri-\ncan decision, and that the ultimate responsibility for opera-\ntions in Northwest Africa rested with the United States. His\nreference to the \"extremely tense and serious operations now\nproceeding in Tunisia\" may indicate his feeling that the\nconclusion of those operations would logically mean the end of\nDarlan's usefulness. In Moscow, Stalin has confidentially\nexpressed his anxiety over the deal, and his hope that the\n12\nRegraded\nSECRET\n1 E 1\nsavonive\nAOZY to YES\nAnglo-Americans in consultation with the Soviet Union would\nI I\ncooperate in the establishment of a satisfactory French\nadministration in North Africa.\n1\n% E I\nOCTOBER 2) DECEMBER 2\nSOUTH RUSSIAN FRONT\nThe Reinforcement of Southern Europe.\nIn Italy, punishment from the air has again this week\nparalleled the arrival of reinforcemente from the north. As\nthe RAF twice more raided Turin, Prime Minister Churchill\nconfidently announced that \"the centers of war industry in\nNorthern Italy are being subjected to harder treatment than\nune 3\nFOR 2\nany of our cities experienced in the winter of 1940,\" and\nwarned that \"if the enemy should\nI I I CAS\nSAVANGEN provus\nbe blasted from\nthe Tunisian tip\nthe whole of the south of Italy\nwill be brought under prolonged, scientific, and shattering\nair attack.\" The Prime Minister's statement appeared to\nforeshadow & concerted effort to knock Italy out of the war.\nResponsible observers warn, however, that press predictions\nof an Italian collapse in six months are extremely optimistic,\nand that loyalty to Mussolini (whom many Italians regard\nas Italy's chief bulwark against the Nazis) is still strong.\nWhile the Duce has reiterated his assurance of an Axis\nvictory, his reply to Churchill was somewhat lame. \"Italy,\"\nhe declared, \"is now clearing her cities of women and children\nA nightly exodus must also be arranged from\ncities so only fighting personnel remains.\nWe have\nspent hundreds of millions of lire on shelters that can resist\nE\nthe biggest bombs.\"\nBesides sending additional troops into the Balkans, the\nNazis have apparently continued the reinforcement of Italy.\nUnconfirmed reporta tell of the arrival of & new Panser\nS\nS\ndivision in Milan, and of German concentrations in Calabria\nE\nand Sicily (where two Nasi divisions may have arrived from\nGreece). Similarly, the Italians may be sending the greater\npart of their units in the Po Valley to the southwestern part\n18\nSECRET\nSECRET\nof the peninsula. Current estimates give the Italians 24\nno evidence of Nazi preparations against them and regard all\ndivisions in Italy itself, and four more in southeastern France.\ntroop movements as defense measures to counter the Allied\nthreat from Africa, according to authoritative advices. The\nSpanish Activities in Morocco\nreported transfer of German divisions to Bulgaria and Greece\nThe Spanish are regrouping their forces in Morocco,\nis thus interpreted as a move simply to reinforce Greece and\naccording to scattered reports from the area, and troops have\nits archipelagoes, and to replace Italian troops called home.\napparently been moved toward the border of French Morocco\n(see Appendix III). Spanish activities may be intended\nSapru Summons the Forces of Compromise\nprimarily to demonstrate to the Germans Spain's determine\nDespite constant checks and disappointments, Indian\ntion to remain neutral. The Germans, in turn, have moved\nmoderate leaders are still seeking a way out of the present\nno troops toward the Pyrenees frontier.\ndeadlock. The latest effort is that of Sir Tej Bahadur\nSapru, an old and respected liberal, who has invited Rajago-\nSupply Purchase Agreement With Portugal\npalachariar and representatives of the Hindu Mahasabha,\nThe conclusion of a general supply purchase agreement\nthe Sikhs, the Depressed Classes, the Indian Christians,\nwith Portugal on November 23, after protracted and at times\nand perhaps even the Communists to meet at Allahabad on\ndifficult negotiations, makes possible the continuance of\nDecember 12. If this group can come to some sort of agree-\nAllied economic warfare policy in that country. When the\nment, Sapru proposes to open negotiations with Jinnah and\nPortuguese signed the earlier wolfram agreement in August-\nif possible with Gandhi also. But in view of the Viceroy's\nthrough which the Allies are able to purchase from Portugal\nrefusal to permit Rajagopalachariar to see the imprisoned\nvitally needed wolfram that might otherwise go to Germany-\nMahatma, it seems likely that a similar request from Sapru\nthe Portuguese Government imposed the condition that an\nwould likewise be rejected (The War This Week, November\nagreement must also be reached for a general supply program.\n12-19, pp. 15-16).\nDelay in the latter negotiations, undoubtedly complicated by\nPortugal's fear of offending the Axis, threatened to cause\nJapan Seeks To Strengthen The Home Front\nsuspension of the wolfram agreement. Under the new\nAmerican victories in the Solomons, together with the\narrangement, the continuance of wolfram shipments is ensured\nrecent Allied successes in Africa and Russia, have apparently\nand an exchange of needed commodities is provided for.\ninduced the Japanese Government to devote increased atten-\ntion to the problems of the home front. In an effort to inject\nTurks Confident Axis Will Not Attack\na new realism into Japanese thinking, the Government has\nDespite persistent rumors in the eastern Mediterranean of\ncalled for statements by ex-Ambassadors Nomura and\nAxis designs on Turkey, Turkish officials do not expect any\nKurusu, whose silence since their return to Japan has indi-\ninvasion, at least for the winter; and the conviction is spread-\ncated that they were being saved for some such major task of\ning that Germany is heading toward defeat. The Turks have\ninternal propaganda. Nomura, in an article in the Yomiuru\nHochi of November 22 and a speech of November 25, stresses\n14\n15\nRegraded Unclassified\nSECRET\nSECRET\nAmerican production of ships and planes and the magnitude\na result of our occupation of the various areas in the south\nof the American challenge. Kurusu, in an important speech\nis wrong.\nThus the same government which light-\nof November 26, has surveyed the whole history of Japanese-\nheartedly distributed rubber balls after the fall of Singapore\nAmerican relations with the obvious purpose of convincing\nis now telling its people that they cannot obtain the fruit of\nthe Japanese people that the war was forced upon Japan and\ntheir conquests until the transportation problem is solved.\nthat Japanese existence is at stake.\nGovernment pronouncements on food likewise bear the\nSimultaneously the Government has launched a concerted\nmark of sober reality. Statements have been made to dis-\ncampaign to bring home to the Japanese the pressing prob-\ncourage the people from expecting an improvement in their\nlems of the economic situation. The emphasis laid on the\nrations. Ino, Minister of Agriculture and Forestry, as well as\nnecessity of increasing industrial production is typified by an\nPremier Tojo, have issued warnings on the food situation.\naddress of Premier Tojo's to a Gubernatorial Conference on\nAs if to cap the whole campaign, the Cabinet announced,\nNovember 13. Tojo declared that Japan must renew her\nNovember 24, that it has decided upon a program for ex-\nefforts on the industrial front because Japan's enemies have\ntensive use of unhulled rice, a most unpopular food.\nfinally attained the productive capacity necessary to attack\nThis entire effort to strengthen the home front becomes\nJapan. President Suzuki of the Cabinet Planning Board,\nmost significant in view of the fact that this drive has taken\nand Kishi, Minister of Commerce and Industry, echoed\nplace on the domestic scene with no publicity abroad, indicat-\nTojo's statements with similar pronouncements before the\ning that it is not for purposes of external propaganda.\nsame conference. On November 15 some 200 representatives\nof business and industry were called to a Civilian and Gov-\nSlow Going in New Guinea\nernment Officials Joint Conference for Increased Production.\nThe Industrial Patriotic Association held a conference on the\nIn New Guinea, the slow but intense struggle to eject the\nproduction problem on November 18. A few days later the\nJapanese from their Buna-Gona beachhead continues. After\nCabinet announced the establishment of a Committee for the\nrepulsing minor counterattacks, our ground forces-closely\nIncrease and Strengthening of Emergency Production, to be\nsupported both by artillery and aircraft-have succeeded in\nheaded by Suzuki. And on November 28 the Government\nentering the outskirts of Buna and in taking the beach beyond\ndisclosed that it had invited 366 industrial leaders to take\nGona. They are now driving along the beach toward the\npart in discussing problems of increasing production.\ncenter of the enemy's position at Sanananda. Despite enemy\nair reinforcements, we still command the air. The Japanese,\nhowever, have not been challenged on the sea, and they may\nJapanese Transportation and Food Difficulties\nhave had some success in running our aerial blockade at\nJapanese authorities have also issued blunt statements on\nnight with reinforcements or supplies, despite damage in-\nthe difficulties of transportation. Tojo stated before the\nflicted on their destroyers by our aircraft. Our difficult over-\nGubernatorial Conference that \"the strength to carry out a\nland supply line to Port Moresby will doubtless prove a\nwar is dependent upon the power of transportation,\" but\nhandicap in long-extended operations, forcing us to rely\nthat \"our first impression that goods can be sent to Japan as\nchiefly on air transport. Without air superiority, however,\n16\n17\nRegraded Unclassified\nSECRET\nSECRET\nthe enemy's position must remain hazardous, and there is no\nfrom time to time, and is conservatively estimated at 17, of\nreason to believe that his well-prepared defenses in this area\nwhich 12 were heavy cruisers and 5 were light cruisers. In\nwill not soon be overcome.\naddition, 1 light cruiser is listed as possibly sunk. Ten\nElsewhere in the Southwest Pacific, there has been rela-\ncruisers are thought to be out of action as a result of damage.\ntively little action. Our planes have attacked enemy ship-\nEstimated sinkings of battleships and aircraft carriers remain\nping in the central Solomons, where the Japanese evidently\nat 1 and 6, respectively.\nare attempting to reinforce forward bases from which their\ntroops on Guadalcanal can be supplied or augmented. But\nCastillo Intervenes\nboth here and in the Buin-Faisi area farther north, enemy\nshipping has been relatively scant. Military observers\nIrked by the unexpected defeat of his gubernatorial can-\nbelieve that another two or three weeks may be required\ndidate in & provincial election, President Castillo, of Argen-\nbefore the Japanese will have regrouped their military and\ntina, has ordered federal intervention in the state of Tucumán.\nnaval units and completed plans for a possible further attempt\nCastillo's man, Dr. Alberto Piossek had been edged out by\nto reconquer Guadalcanal. Large naval forces still are in\nthe margin of one electoral vote by Dr. Campero, who was\nthe vicinity of Truk and Rabaul, and ground forces available\nsupported both by pro-Allied General Justo and the Radical\nare formidable-perhaps 60,000 in the Buin-Rabaul area\nParty Candidate. Campero's technical victory, in a prov-\nand 20,000 still on Guadalcanal. The possibility that\nince whose politics are traditionally controlled by large\nfurther reinforcements are on the way is seen in confirmed\nsugar interests normally favorable to Castillo, demonstrated\nreports of Japanese troop movements down the Yangtze\nconvincingly that where the Radicals can be induced to\nRiver toward Shanghai, whence it is believed they will\ncooperate with other democratic elements, enough anti-\nembark for the Southwest Pacific.\nCastillo and anti-Axis sentiment can be mobilized to carry\nthe day. On the other hand, the government's alleged inter-\nJapanese Naval Strength\nvention indicates equally plainly that the Castillo party is\nready to resort to more and more openly dictatorial tactics, if\nJapanese warships which are undamaged and still available\nfor operations are now estimated by authoritative naval\nnecessary to maintain itself in power.\nsources to include 4 aircraft carriers, 7 or 8 battleships, 2 or\n3 heavy cruisers, and 9 light cruisers. Ten cruisers, 2 car-\nUruguay at the Polls\nriers, and 3 battleships are thought to be damaged and there-\nIn the first completely free presidential election in many\nfore temporarily inoperative.\nyears, the Uruguayan people have given Sr. Juan José\nThese estimates, which were made as of November 20, take\nAmézaga a thumping plurality over his pro-Axis opponent,\ninto account losses sustained by the Japanese during the\nSenator Herrera. Moreover, constitutional reforms, abolish-\nNovember 12-15 actions in the Solomons. The number of\ning division of the 30 senate seats equally between the major-\ncruisers sunk since the war began now has evidently been\nity and leading minority parties, and ending the arbitrary\nscaled down considerably from the total number reported\ngranting of & number of cabinet seats to the minority party,\n18\n19\nRegraded Unclassified\nSECRET\nSECRET\nwere also approved by the electorate. Elevation of Amézaga\nto the presidency should firmly orient Uruguay within the\nUnited Nations' orbit; and the accompanying changes in\nAPPENDIX I\nlegislative structure should destroy the legal basis for such\nREPERCUSSIONS OF RAF RAIDS ON GERMANY\nobstructionism as the Herreristas might otherwise have con-\ntinued to exert, close observers believe. Moreover, in the\nThe increasing magnitude of Allied bombing operations against Germany, and\nthe added emphasis on incendiarism in congested civilian aress-both signalized\nnew Congress, in which the liberal democratic party will have\nby the Cologne raid of last May-have caused correspondingly significant changes\n8 large majority, women will hold seats-for the first time in\nin the Nazis' Air Raid Precautions system. The most important of these changes-\nLatin American history.\nthe entrance of the Party into the field of air-raid relief-appears to have had a\nfavorable effect upon civilian morale, counteracting in some measure the pay-\nchological impact of the new mass raids.\nPre-Cologne Period\nDuring and after air-raids, responsibility for maintaining order and safety,\ncombatting fires, repairing public utilities, clearing streets of debris, and similar\ntasks is vested in the Security and Auxiliary Service of the First Order (Sicher-\nheits-und Hilfadienat I. Ordnung). These functions are, in practice, carried out\nby various civilian defense organizations of a semi-military character. Long\nbefore the \"thousand plane\" attack on Cologne, the Security and Auxiliary\nService in any given city, though nominally under Göring's Air Ministry, was\nsubject to the immediate command of the Local Police Administrator, and thus\nindirectly subject to Himmler and his Order Police (Ordnungs-Polise).\nBackbone of the civil air-raid defense system (at least, numerically) was the\nmammoth, semi-official Reich ARP association, which in 1939 numbered 13,500,-\n000 members. Often regarded as corrupt and inefficient, the association cer-\ntainly had as one of its original purposes the collection of funds; nor has it, since\nits foundation in 1933, neglected the opening of additional sources of revenue.\nIf, thus far, no major scandal has developed over these financial transactions,\nit is because the association does render substantial service. From its inception,\nit has campaigned to make the population aware of the dangers of aerial attack-\nwith such success that in early stages of the war, many Germans expected far\nheavier raids than actually occurred. As of 1939, the association was maintaining\nsome 3,800 ARP schools, with 28,000 ARP teachers. It had no dearth of pupils,\neither, since nearly everyone, whether a member of the association or not, was\nlegally obliged to attend.\nAnother vital unit in the civil defense system has been the fire-fighting force.\nWar preparations made during the Munich crisis in 1938 apparently revealed that\nthis department constituted a weak link, and some weeks later a law was enacted\ncreating & centrally controlled, nationally organized fire-fighting force.\nDrawn up according to the Führerprinzip, with Himmler in the role of Führer,\nthe new Fire Protection Police remained largely & paper organization until the\noutbreak of hostilities in 1939. Then the threst of air-raids made action im-\nperative. The professional fire-fighting forces in about 65 key cities were taken\nover and incorporated in the Fire Protection Police. Uniform fire-fighting\nI Based on a memorandum prepared In the Research and Analysis Branch of the Offloe of Strategic\nServices.\n20\n21\nRegraded Unclassified\nSECRET\nSECRET\ntechniques were established, fire-fighting equipment was standardised, and unity\nfollowing a raid, the homeless families gather at this designated point. After\nof command under Himmler was assured. Voluntary and Obligatory Fire\nreporting to the Party leaders, the victims are provided with facilities for recover-\nBrigades, which comprised fire-fighting auxiliaries organized locally, were trans-\ning from the shock of the mid. Then, in collaboration with the municipal ad-\nformed into an auxiliary fire police troop (the Voluntary Fire Brigade alone had\nministration, the Party assigns the homeless to temporary quarters which, prior\nnumbered about 2,000,000 in the pre-war period). Despite these organizational\nto the raid, have been selected through questionnaires circulated by the Party\nachievements, however, the operational strength of the Fire Brigades was at &\nBlock Leaders.\nlow point by the time of the Cologne raid-owing to serious personnel loases to\nFood and clothing, moreover, are doled out by the Party, or its National\nthe armed forces.\nSocialist Welfare units. In heavier raids, field kitchens are rushed to the scene\nAs for the military anti-aireraft defenses, these were always under direct com-\nof dissater. Extra rations of tobacco, cigarettes, coffee, mest, sugar, and aweets\nmand of Göring's Air Ministry, and although their efficiency does not compare\nare distributed. Offices are set up to give information about the missing as well\nwith that of Britain's system, they have by no means crumbled under attack.\nas about elaims for damage (advances up to 1,000 RM for damaged property are\nConfidence in these defenses, up to the era of the Cologne-type raids, was very\nmade within a week or ten days). In order that bombed-out victims may obtain\nhigh among German civilians.\nprompt service in stores, the shope selling textiles, shoes, glass, porcelain, and\nhousehold articles are instructed to sell exclusively to air-raid victims for fourteen\nAfter Cologne\ndays following the attack. Those who wish to be evacuated are cared for by\nThe bombs that rocked Cologne shook the German ARP system almost as\nthe Local Party Group, which will in addition take charge of the storing or\nheavily. On the day following the attack, Göring hastily transferred titular\nforwarding of evacués household goods.\ncontrol of the Security and Auxiliary Service to Himmler-perhaps with the\nCities drastically bombed get more than these material services from the\ndesire of ridding the Air Ministry of a rather embarrassing responsibility, in view\nParty: praise and solace are also distributed lavishly. Thus, the people of\nof the Luftwaffe's inability either to forestall or to avenge such attacks. Güring's\nCologne were commended for their behavior and told that the Führer was the\nrelinquishment of control, on the other hand, Was more apparent than real: Ball\nfirst to ask for information about the town. The Party Gauleiter in the Rhenish\nindicated previously, the Security and Auxiliary Service had always been under\nmetropolis decorated 1,500 persons. The dead are usually buried publicly under\nthe de facto command of Himmler, and in the post-Cologne merger with Himmler's\nParty auspices, and special transportation is supplied for the bereaved.\nOrder Police, immediate command of the Service was given to Göring's old friend,\nKurt Daluege.\nFire-fighting Forces Strengthened\nThe raids on Cologne and Essen B&W bombe dropped on German cities in ratios\nThe Party Steps In\nof between two and three tone of incendiaries for every ton of high explosive.\nOther moves of greater significance, however, stemmed from the RAF's\nThe resulting conflagrations threw into bold relief the necessity of further strength-\nintensified bombing. The most important was, undoubtedly, the action taken\nening fire-fighting facilities. Scareely 24 hours after the Essen raid, Himmler\nby the Nasi Party itself, whose prestige prior to this time had not been parti-\nordered all Fire Brigades brought up to full strength, and in vulnerable areas to 20\ncularly high. Previously, although it had engaged in air-raid relief along with\npercent above peace-time requirements. Fire-fighting equipment, moreover,\nother governmental agencies, the Party had not wished, through publicity about\nwas promptly transferred from former Csechoslovakia to the Reich'e western\nits activities, to emphasize the whole bombing problem. After Cologne, however,\nareas, according to some reports, and mobile Fire Protection Police regiments\nwhen there was no further possibility of minimizing the seriousness of the situation,\nwere created and appear to have been stationed at strategic points within the\nthe Party changed its tactics, It had learned, before, the political advantages of\nReich for special emergencies. Unconfirmed despatches assert that in recent\nidentifying itself prominently with effective relief measures and implanting in\nraids Fire Protection Police units have been rushed to the aid of a bombed com-\nthe public's mind the idea that the Party had foreseen and prepared everything\nmunity from towns as far distant 85 200 miles.\ndown to the smallest detail. Now it moved with despatch to place itself in the\nOther reports have indicated that losses of fire-fighting personnel and equipment\nposition of a shock-absorber between individual citizens and the German bureaue-\nemployed during mase raids were 80 heavy that orders have gone out to keep\nracy-notorious for its exasperating lack of tact in dealing with the public.\nboth men and equipment under shelter until the \"all-clear\", despite the headstart\nThe Party Was already in possession of a comprehensive local organization\nthus given to any conflagration. Another consequence of the large-scale RAF\nbuilt around blocks (40 to 60 households), cells (4 to 8 blocks), and Local Party\nraids, which were accompanied inevitably by a certain amount of bombing of\nGroups. With this advantage, it was soon able to work out an elaborate and\ncountry districts, was to induce the Germans to frantie efforts to reinforce their\ngenerally efficient system for \"raid relief\".\nrural ARP system.\nOperation\nEffect on Morale\nThe Party Block Leader has been made responsible for informing the house-\nInsufficient and contradictory information places any conclusions concerning\nholds under his charge of the location of the concentration point selected for those\nbombed out of their homes, Immediately after the \"all clear\" signal has sounded\nGerman morale upon a tenuous basis. But it is at least possible to sort out, and\n23\n22\nRegraded Unclassified\nSECRET\nSECRET\nto some extent to weigh, those factore in the civil defense picture detrimental to\nthe home front's morale, and those which tend to strengthen it.\nout families in the larger dwellings of the more prosperous, the Party has been\nCertainly the RAF raids have confronted German authorities with & series of\nable to portray itself as the enemy of class distinctions and the friend of the\nsituations which have had to be managed with the utmost care. The supply of\ncommon man.\nelectricity, gas, and water has often been seriously impaired; transportation\nAgain, by encouraging self-help and self-reliance among the people, the Party\nfacilities and food distribution have frequently broken down. Under these DOD-\nmay succeed both in raising the resourcefulness of the public and in staving off\nditions, panic is an ever-present threat and criticism of ARP authorities inevitable,\nthe day when Party and State aid may become inadequate to the demands upon\nMass evacuation has in several instances been necessary: after the Rostock\nIt. Families are requested to make mutual arrangements with friends or relatives,\nraids, 80 percent of the city's population was reported evacuated; after the first\nproviding shelter in case one family is bombed out. And, to conserve the deplet-\nbig raid on Lubeck, some 42,000 were believed to have been made homeless; and &\ned stocks of clothing, the population is asked to take hats, overcoats, leather\nreliable German source admitted some 60,000 families were without shelter after\nshoes, and blanketa to the air-raid shelters.\nCologne's bombing. During the past two years, 1,200,000 children have been\nFinally, by actually encouraging civilians within the Reich to write their men\nat the front in general terms about bomb damage at home, the Party is converting\nevacuated from German territories endangered by air raids, The least that can\n& liability into at least a limited asset: it reasons that one of the most important\nbe said about these movements is that the disruption of the family cannot help\nbut affect the general morale.\nfactors in maintaining morale is the belief that the sacrifices of war are being\nThe housing shortage, too, will have its influence. Germany entered the war\nequally shared by all. So far, the Russian campaign has demanded unprecedented\nsacrifices of the German Armed Forces. If now the men in the field can be assured\ndeficient in housing, and since the beginning of the large-scale RAF raida a mass\nthat those behind the lines are meeting-and bravely-somewhat comparable\nof evidence has accumulated to indicate that the housing situation has now\ndangers, the danger of fissures developing between the home front and the fighting\nreached an scute stage, One British estimate places the probable damage Mill a\nresult of 66 major raids on 22 built-up areas (March to August, 1942) at 215,000\nfront may be appreciably lessened.\ndwellings demolished or rendered uninhabitable. Damaged dwellings needing\nimmediate repairs were placed at 107,000-which does not include houses re-\nceiving such superficial damage as broken windows and blasted doors.\nTwo less tangible factors also play their part in adversely affecting German\nmorale. One is the collapse of the Göring-inspired legend that German cities\nwould be relatively Immune from serious air attack. Since this belief had been\nreinforced by nearly three years of comparative security, its sudden demise had\nan effect all the more serious. The second factor is the knowledge in Party ranks\nthat the problem of air-raid relief may soon be growing beyond their capacity to\nsolve it, and that even partial failure to meet this test may seriously undermine\nthe Party's prestige with the people.\nQualifications\nIt would be a grave mistake, however, to assume from this enumeration of\nadverse factors that German civilian morale is in any immediate danger of crack-\ning as a result of Allied bombing raids. On the contrary, there is ample evidence\nto show that the Party's handling of air-raid relief to date has proved extremely\neffective in maintaining the spirita of the public. Energetic action in the distribu-\ntion of food has enabled Party units to save the situation more than once, and\nthe Party's general on-the-spot alertness and thorough organization have shown\nno deterioration.\nThe drastic measures that have been taken to cope with the housing situation\nhave also stimulated considerable public confidence. Summary examples have\nbeen made of \"space-hoarders\": one man occupying a 7-room flat in Hamburg,\nfor instance, was sentenced to two years' imprisonment for refusing to shelter a\nbombed-out family. Office buildings, attics, and huts are being converted into\ndwellings; large houses are being subdivided; and, with the aid of government\nloans, temporary buildings are being erected. Moreover, by quartering bombed-\n24\n25\nRegraded Unclassified\nSECRET\nSECRET\neffectively further Japanese aggression. Furthermore, the conclusion that total\nAPPENDIX II\nfood supplies in Free China are sufficient to supply normal food requirements\nFOOD SUPPLIES IN FREE CHINA\nof the population must not obscure the fact that acute shortages do take place in\nparticular areas within Free China because of the difficulties of collecting food-\nFree China, as now constituted, is practically cut off from outside sources of\nstuffs and distributing them from surplus to deficit regions.\nfoodstuffs, and must depend on her own resources to supply her needs. Fortu-\nAverage production of the principal crops in all China and in Free China (pre-tear)\nnately, although the coastal regions, & large part of north China, and the principal\ncities have been lost to the Japanese, the Chinese Government still controls the\nFree China\nlarger portion of the total land area of pre-war China. Still more fortunately, the\nAll China\nunconquered regions of China were normally surplus areas with respect to food-\n(1,000 metrio tons)\n1,000 metrie tons\nPercent\nstuffs. While the population of what is now Free China was only slightly more\nthan half (51.5 percont) of the population of all China, it normally produced 61\npercent of China's total output of foodstuffs. The percentage of cereal production\nCereals:\nwas slightly higher (62 percent); and, although the percentage for supplementary\nRice\n41,586\n39,456\n95\nWheat\n22,287\nfoodatuffs was somewhat lower (57 percent), unoccupied China produced 95 per-\n8, 440\n38\nKaoliang\n6, 877\n1, 625\n24\ncent of the rice output of Old China (it should be added that the present unoceu-\nBarley\n7, 847\n4, 169\n53\npied area contains the bulk of Chinese rice-consuming people).\nCorn\n6,155\n2, 976\n48\nThe war, however, has modified this favorable situation in two respects. In\nMillet\n6, 632\n1, 257\n19\nProso-millet\n1, 517\n503\n33\nthe first place, migration from the occupied areas has raised the population in the\nOats\n867\n148\n17\npresent area of Free China by as much as 10 percent, i. e., from 219,000,000 to\nsome 240,000,000. In the second place, in spite of government efforts to maintain\nTotal\n93,768\n58,574\n62\nor even to increase production, the output of foodstuffs seems actually to have\ndeclined, From 1931 to 1937 annual production of cereals and supplementary\nSupplementary foodstuffs:\nSweet potatoes\n17,724\n10,802\n61\nfoodstuffs for Free China amounted, on the average, to 76,000,000 metrie tons.\nSoya beans\n6, 283\n1, 976\n32\nFor 1941 and 1942, a Chinese Government estimate, presumably covering the\nField pess\n3,165\n2,065\n65\nsame area, placed this output at 72,000,000 and 71,000,000 metric tons respec-\nBroad beans\n2,975\n2,201\n48\ntively. The extent to which the decline may be attributed to shifts in boundaries\nTotal\n30,147\n17,044\n57\nbetween free and occupied areas is not known. It is assumed here, however, in\nthe absence of indications to the contrary, that the production data refer to the\nOthers:\nPeanuts\n2, 807\n998\n36\nsame area. Accordingly, the decrease should be attributed primarily to & decrease\nRapeseed\n2, 294\n1, 828\n80\nin the acreage under crops (due largely to land fighting and the draining of farm\nSesame seed\n904\n346\n38\nlabor into the army), and to unusually bad weather conditions in certain areas.\nCotton\n775\n242\n31\nIn spite of these factors, Free China's over-all food position is still relatively\nTobacco\n615\n464\n75\ncomfortable. After deductions for seed, feed, and the like have been made,\nTotal\n7, 395\n3,878\n52\ntotal food supplies in Free China in 1941 and 1942 amounted to 66,000,000 and\n65,000,000 metrio tons, respectively. On the assumption that the maximum\nGrand total\n131,310\n79,496\n61\nincrease in population indicated above has taken place, these supplies permit a\nper capita consumption of 275 kilograms for 1941 and 271 kilograms for 1942.\nAverage production for 1931-34 for 20 provinces of China, including what is now From China.\nPer espita consumption for China as a whole in the pre-war years was 267 kilo-\nAverage production for 1031-37 for 15 provinces now comprising Free China.\ngrama. In terms of this criterion, therefore, the over-all food situation in Free\nChina must be regarded as still satisfactory.\nAPPENDIX III\nIt must be emphasized, however, that this criterion is a relative one; it consti-\nSPANISH MOROCCO¹\ntutes no proof that China's population is getting the nutrition it needs to resist\nServices. - Based on a memorandum prepared in the Research and Analysis Branch of the Office of Strategie\nA decision by the Axis to move into Spain would call for an immediate \"clarifi-\ncation\" of the position of Spanish Morocco in the war, for the latter is 80 placed as\n. Included are 13 provinces of China proper (with the exception of some districts) and the 2 border prov-\nto be of great strategic value to either side. To the Axia it would represent an\nInces of Ninghsia and Chinghai. The districts excluded consist of 64 helen In Honan, 30 Asien in Hupsh,\nand 21 beien in Chekiang.\nI Based on a study prepared in the Research and Analysis Branch of the Office of Strategie Bervices.\n26\n27\nRegraded Unclassified\nSECRET\nSECRET\nAfrican bridgehead rapidly reinforceable by convoys from southern Spain. To\nthe United Nations, Its occupation would mean the safeguarding of the Gibraltar\ncentered upon Tabarrant, runs from Insi Ifri to east of El Tsenin with the aim\nStrait's southern shore and the elimination of a possible threat to the main\nof preventing 8 bisection of Morocco from the French base at Yes. East of\nMorocean-Algerian-Tunisian supply line.\nMelilla, a complete chain of similar fortifications is believed to guard the ap-\nAxis convoys could make the run from Malaga and other ports on the coast of\nprosches from the Moulouya valley in French Morocco,\nsoutheastern Spain in one night. If & sufficient force could be landed, and Spanish\ntroops there either proved acquiescent or actually allied themselves with the\nAir Bases and Planes\ninvaders, the Germans could strike from the eastern and western ends of Morocco\nSpanish Morocco possesses five first-class airdromes, of which the two best-\nover good roads, their center being buttressed by the rugged Rif Mountains (see\nequipped are those near Melilla and Tetuan; the other three are near Larache,\nmap at back). At the eastern end, a good road runs toward the border from\nTangler and Alhucemas. In addition, many emergency landing fields are reported\nMelilla, and an improved road extends south to French Morocco. In the western\nto have been laid out, and extensive construction is known to have been undertaken\nsector, EL paved road leads south from Tangier, with connections eastward to\nfor a field at Tamarot. Seaplane bases, quite well-equipped, exist at Ceuta and\nCeuta, and Tetuan; moreover, a standard-gauge railroad connects Tangier with\nMelilla, and & seaplane anchorage at Alhucemas. These various air-bases are\nthe French Morocean system. Morocco's central area, on the other band,\nclearly designed with & view to plane reinforcements from Spain: the number of\npossesses virtually no direct road connections with French territory: three poor\nsquadrons now in Morocco is believed to be extremely small, and most of the planes\ntrails cross the main Rif and Pre-Rif mountains-and snow closes these in the\nare themselves obsolete.\nwinter.\nA significant strategic fact for both sides would be the nearness to the Spanish\nThe Army\nMorocean frontier of the railroad and highways which run through French\nThe High Commissioner of Morocco, General Orgas, has under his command\nMorocco toward Algeria and Tunisia. At one point, south of Melilla, they come\nsome 150,000 troops. What proportion of these are natives la not accurately\nwithin ten to twenty miles of the border. Axis forces, accordingly, would need to\nknown.\nstrike only & short distance to achieve major results, Allied troops, for their\nThe two Army Corps which make up Spanish Morocco's forces-the 9th and\npart, would probably find it necessary, if they wished to defend this vital route\n10th-are undoubtedly better-equipped than Franco's battalions in metropolitan\nadequately, to penetrate well into the Melilla sector in the east and the Larache-\nSpain; but they remain a second-rate military aggregation, ill-supplied for any\nTangier sector in the west, in order to establish a mountain battle line easy to\nmodern large-scale offensive. There are scarcely 2,000 trucks in the whole sone;\nhold.\nmost of them are too old for rough campaigning, but even if they were in better\nIf the Allied objective were the enforced neutralization or even the complete\ncondition, the shortage of petroleum would keep many of them idle. Armored\nconquest of Spanish Morocco, advances from the eastern and western ends of the\ncars are estimated at 250, and tanks at from 180 to 250; none of these is modern\ncolony would be the logical course, for only the east-west highway within Spanish\nand the tanks are understood to be mostly light Italian and medium Russian\nMorocco gives feasible access to the central zone. Once pushed back into this\ntypes dating from the Civil War period.\nmid-sector, where the Rifs might prove unpleasant neighbors, the Axis divisions\nA reorganization of several years ago was supposed to have given Orgas's Army\nwould find their own lines of communication or advance very poor, while the\n& substantial number of 75, 105, and 155 mm. guns. Troops on the Franco-\nsupply routes of the Allies, stretching back into French Morocco, would be fairly\nSpanish frontier are reported to possess some anti-tank guns, mortars and how-\ngood.\nitzers; and though B few modern anti-aircraft pieces are known to have been\nPortifications\nimported and installed, most of the Army's anti-aireraft equipment is believed to\nbe antiquated. One well-informed military observer has asserted that even the\nFor some time, the Spanish have been concentrating on strengthening their\npartially demilitarized French troops in North Africa before the Allied occupation\nfixed defenses in Spanish Morocco, particularly against attack by sea. While\ncould have given the Spanish-Moroccan forces & bad drubbing.\nthe most important coastal points flanking the straits are covered by batteries\nof considerable power, the Atlantic littoral and the Mediterranean strip around\nPolitical Complexion\nMelilla are somewhat sketchily defended. Opposite Gibraltar, the areas best\nHow Spanish Morocco would react to Axis encroachments on metropolitan\nfortified are believed to be those around Alcasar-Seguir, Punta Cires, Ceuta, and\nSpain would depend primarily on the comparative strength and disposition of the\nsouth of Ceuta near Cap Negro, and Tetuan.\nAllied and Axia forces, and secondarily on the attitude taken by Madrid. As each\nDefenses on the Franco-Spanish Moroccan frontier are not considered very\nweek sees the further consolidation of British and American strength in North\nformidable, Labor battalions have been reported at work in the Larache-\nAfrica, the likellhood of a move by Organ in the face of Allied tanks and planes\nArcila-El Ksar el Kebir area, indicating a renewed effort to build up fortifications\ndiminishes proportionately.\nand roads, Opposite Xauen, an extensive system of trenches is understood to\nOrgaz himself has made it repeatedly evident that he is by no means eager to\nhave been dug, and along the Franco-Rif frontier a network of light fortifications,\nfollow blindly the bidding of Madrid. Under last February's law (virtually\n28\n29\nRegraded Unclassified\nSECRET\nSECRET\nin theory as well as in fact, upon the Ministry of Foreign Affairs.\ndrafted by Organ), the Moroccan general administration ceased to be dependent,\nnatives, is still high-whereas that of France, which backed the losers in Spain and\nwas then defeated itaelf, has aunk extremely low.\nOrgas has sought to consolidate his proconsular position by building up\nThe Allies can count for support on much of the foreign population of Tangier\nand on all its Jewish refugees. Some of the ex-loyalists are pro-United Nations,\nstrong personal following, and by ingratisting himself with those elements in &\nand others, trapped in the forced-labor battalions, would welcome any oppor-\nthe government who seem likely in his opinion to stay in the saddle. Though\ntunity to strike at Franco, whether it helped the Allies or not.\ntechnically the head of the Falange in Morocco, he was one of those Instrumental\nin bringing about the fall of Súñer He seems to retain the confidence of Franco,\nEconomics\nand has taken pains to keep on good terms with the monarchist generals-\nThe economic asseta of Spanish Morocco are scarcely apt to invite an Axis or\nJordana, Queipo de Llano, Varela, Kindelan, and the rest,\nAllied invasion. The area is deficient in flour, sugar, vegetable oils (other than\nOne fact on which the Allies could rely in believing that Organ will make no\nolive oil), textiles, fuel products, cement, fertilizers, and nearly all varieties of\nmove against us is the High Commissioner's lukewarm attitude toward Spanish\nmetal manufactures. Its surpluses of iron ore, limestone and phosphate rock,\nirredentist claims. Newspaper propaganda in Spain has clamored for the annets-\nand antimony ore would prove no great prize to the United Nations, nor are\ntion of some or all of French Morocco, and the Falange is committed to this policy.\nthey likely to influence & German decision either for or against invasion.\nThe occupation in 1940 by the Spanish of the international zone of Tangier and its\nincorporation into Spanish Morocco was one step. Extremists urge further ones,\nsuch as the formation of & solid block of Spanish territory from Tangier to Ifni and\nRío de Oro. Yet Orgaz has been reported as saying that Spain wanted only\nminor changes, that this was & poor time to bring this question to the fore, and that\nSpain was as little likely to attack the French in North Africa as in Europe.\nGiving substance to these expressions, Orgaz has maintained friendly relations\nover the past year with the French General, Noguès, still in power under Darlan.\nAria and Pro-Azis Forces\nWorking against the generally dampening \"neutral\" influence of Orgaz have\nbeen both German agents and members of the Falange. Nazi penetration in\nSpanish Morocco has followed the familiar pattern. The German consulate at\nTangier has & suspiciously large staff. Gestapo agents abound-with 8 con-\nveniently closer approchement with the Spanish Securidad. Fifth column activi-\nties among dissident elements are generously subsidized and guided.\nThe Falangistas are present in considerable strength throughout urban Morocco,\nparticularly in Tangier. Here a party card is prerequisite to a state job or con-\ntract. Yet the key posts in the Moroccan government are held largely by Army\nmen who are neither pro-Allied nor pro-Axis, but fundamentally pro-Spanish and\nanti-Falange.\nNative and Pro-Allied Elements\nBoth Allied and Axis propaganda have been directed In full volume at the\nnatives of Spanish Morocco, with the net effect of stirring up sentimente not 80\nmuch pro-Allied or pro-Axis as anti-Spanish. There has been discontent among\nthe Moors over Franco's failure to fulfill their nationalistic aspirations and over\nthe continuing food shortage. Though Arab nationalist groups have generally\nadopted a pro-Axis line, and some of them have not hestitated to accept substantial\nsubsidization from the Nazis, the Rifs are understood not to care at whose side\nthey fight, 88 long as it is against the Spaniards.\nAs to the natives within the Moroccan military units, It appears likely that they\nwill obey whatever orders their Spanish officers give them. Franco's prestige as\na result of the victory he won in the Civil War, with the assistance of Moroccan\n31\n€. s. GOVERNMENT PRINTING OFFICE 1848\n30\nRegraded Unclassified\nRESTRICTED\n5\n3\n2\nS\nSPANISH MOROCCO\nGIBRALTAR\nPRIMARY AIRFIELD\nPAVED ROAD\n36\nPROBABLE AIRFIELD\nIMPROVED ROAD\n36\nPunto Cires\nCEUTA\nSEAPLANE BASE\nRAILROAD\nAleazer Seguir\nTANGIER\nSEAPLANE ANCHORAGE\nINTERNATIONAL BOUNDARY\no\n10\nno\nno\n40\nso\nRio Martin\nMILES\nARCILA\nAMELILLA\nVILLA ALHUCEMAS\nLARACHE\nChafforine Islands\nGabe de Ages\nSoldia\nELSEAR\n35\n35\nBERKARE\nOJ\nOUEZZA\nSOUK EL ARBA\nEl\nAloyn\nTosach\nF\nC.\no\nPETITJEAN\nABUERCIF\n6\n4\n3\n5\nMAP NO. 1429 DECEMBER 2, 1942\nCOMPILED AND DRAWN IN THE BRANCH OF RESEARCH AND ANALYSIS, 055\nREPRODUCED BY THE 0.5.5. REPRO. DIV."
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